UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
			SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2020~~March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
			SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. ~~0-2989~~001-36502


			COMMERCE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)


Missouri		43-0889454
(State of Incorporation)		(IRS Employer Identification No.)
1000 Walnut
Kansas City,	MO	64106
(Address of principal executive offices)		(Zip Code)

(816) 234-2000

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:

Title of class	Trading symbol(s)	Name of exchange on which registered
$5 Par Value Common Stock	CBSH	NASDAQ Global Select Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company ☐ Emerging growth company ☐

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

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

As of ~~November 2, 2020,~~April 30, 2021, the registrant had outstanding ~~111,544,176~~117,034,676 shares of its $5 par value common stock, registrant’s only class of common stock.

Commerce Bancshares, Inc. and Subsidiaries

Form 10-Q


			Page
INDEX
Part I	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of ~~September~~March ~~30, 2020~~3 1 , 20 2 1 (unaudited) and December 31, ~~2019~~20 20	3
		Consolidated Statements of Income for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~March ~~30, 2020~~3 1 , 202 1 and ~~2019~~20 20 (unaudited)	4
		Consolidated Statements of Comprehensive Income for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~March 3 ~~30, 2020~~1 , 202 1 and ~~2019~~20 20 (unaudited)	5
		Consolidated Statements of Changes in Equity for the Three ~~and~~ ~~Nine~~Months Ended ~~September~~March ~~30, 2020~~3 1 , 202 1 and ~~2019~~20 20 (unaudited)	6
		Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September~~March ~~30, 2020~~3 1 , 202 1 and ~~2019~~20 20 (unaudited)	87
		Notes to Consolidated Financial Statements	98
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4743
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7565
	Item 4.	Controls and Procedures	7666

Part II	Other Information
	Item 1.	Legal Proceedings	7767
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7867
	Item 6.	Exhibits	7867
Signatures			8068

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
		(In thousands)					(In thousands)
ASSETS	ASSETS					ASSETS
Loans	Loans	$	16,420,927	$	14,737,817	Loans	$	16,392,071	$	16,329,641
Allowance for credit losses on loans	Allowance for credit losses on loans	(236,360)		(160,682)		Allowance for credit losses on loans	(200,527)		(220,834)
Net loans	Net loans	16,184,567		14,577,135		Net loans	16,191,544		16,108,807
Loans held for sale (including $35,076,000 and $9,181,000 of residential mortgage loans carried at fair value at September 30, 2020 and December 31, 2019, respectively)		39,483		13,809
Loans held for sale (including $30,505,000 and $39,396,000 of residential mortgage loans carried at fair value at March 31, 2021 and December 31, 2020, respectively)						Loans held for sale (including $30,505,000 and $39,396,000 of residential mortgage loans carried at fair value at March 31, 2021 and December 31, 2020, respectively)	38,076		45,089
Investment securities:	Investment securities:					Investment securities:
Available for sale debt, at fair value (amortized cost of $11,182,348,000 and allowance for credit
losses of $0 at September 30, 2020)		11,539,061		8,571,626
Available for sale debt, at fair value (amortized cost of $12,388,041,000 and $12,097,533,000 and						Available for sale debt, at fair value (amortized cost of $12,388,041,000 and $12,097,533,000 and
allowance for credit losses of $0 at March 31, 2021 and December 31, 2020, respectively)						allowance for credit losses of $0 at March 31, 2021 and December 31, 2020, respectively)	12,528,203		12,449,264
Trading debt	Trading debt	25,805		28,161		Trading debt	26,925		35,321
Equity	Equity	4,203		4,209		Equity	4,337		4,363
Other	Other	122,532		137,892		Other	155,913		156,745
Total investment securities	Total investment securities	11,691,601		8,741,888		Total investment securities	12,715,378		12,645,693
Federal funds sold and short-term securities purchased under agreements to resell	Federal funds sold and short-term securities purchased under agreements to resell	2,275		0		Federal funds sold and short-term securities purchased under agreements to resell	500		0
Long-term securities purchased under agreements to resell	Long-term securities purchased under agreements to resell	850,000		850,000		Long-term securities purchased under agreements to resell	850,000		850,000
Interest earning deposits with banks	Interest earning deposits with banks	1,171,697		395,850		Interest earning deposits with banks	2,017,128		1,747,363
Cash and due from banks	Cash and due from banks	357,616		491,615		Cash and due from banks	338,666		437,563
Premises and equipment, net		377,853		370,637
Premises and equipment – net						Premises and equipment – net	371,737		371,083
Goodwill	Goodwill	138,921		138,921		Goodwill	138,921		138,921
Other intangible assets, net		7,183		9,534
Other intangible assets – net						Other intangible assets – net	13,098		11,207
Other assets	Other assets	632,621		476,400		Other assets	594,738		567,248
Total assets	Total assets	$	31,453,817	$	26,065,789	Total assets	$	33,269,786	$	32,922,974
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Deposits:	Deposits:					Deposits:
Non-interest bearing	Non-interest bearing	$	10,727,827	$	6,890,687	Non-interest bearing	$	11,076,556	$	10,497,598
Savings, interest checking and money market	Savings, interest checking and money market	12,983,505		11,621,716		Savings, interest checking and money market	14,572,378		14,604,456
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	556,870		626,157		Certificates of deposit of less than $100,000	504,472		529,802
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	1,433,577		1,381,855		Certificates of deposit of $100,000 and over	1,267,219		1,314,889
Total deposits	Total deposits	25,701,779		20,520,415		Total deposits	27,420,625		26,946,745
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	1,653,064		1,850,772		Federal funds purchased and securities sold under agreements to repurchase	1,938,110		2,098,383
Other borrowings	Other borrowings	782		2,418		Other borrowings	3,791		802
Other liabilities	Other liabilities	791,928		553,712		Other liabilities	589,875		477,072
Total liabilities	Total liabilities	28,147,553		22,927,317		Total liabilities	29,952,401		29,523,002
Commerce Bancshares, Inc. stockholders’ equity:	Commerce Bancshares, Inc. stockholders’ equity:					Commerce Bancshares, Inc. stockholders’ equity:
Preferred stock, $1 par value
Authorized 2,000,000 shares; issued 6,000 shares at December 31, 2019
and NaN at September 30, 2020		0		144,784

Common stock, $5 par value	Common stock, $5 par value					Common stock, $5 par value
Authorized 140,000,000; issued 112,795,605 shares		563,978		563,978
Authorized 140,000,000; issued 117,870,372 shares						Authorized 140,000,000; issued 117,870,372 shares	589,352		589,352
Capital surplus	Capital surplus	2,140,410		2,151,464		Capital surplus	2,420,393		2,436,288
Retained earnings	Retained earnings	326,890		201,562		Retained earnings	173,173		73,000
Treasury stock of 1,040,557 shares at September 30, 2020
and 445,952 shares at December 31, 2019, at cost		(69,050)		(37,548)
Treasury stock of 560,185 shares at March 31, 2021						Treasury stock of 560,185 shares at March 31, 2021
and 497,413 shares at December 31, 2020, at cost						and 497,413 shares at December 31, 2020, at cost	(39,080)		(32,970)
Accumulated other comprehensive income	Accumulated other comprehensive income	343,435		110,444		Accumulated other comprehensive income	168,752		331,377
Total Commerce Bancshares, Inc. stockholders' equity	Total Commerce Bancshares, Inc. stockholders' equity	3,305,663		3,134,684		Total Commerce Bancshares, Inc. stockholders' equity	3,312,590		3,397,047
Non-controlling interest	Non-controlling interest	601		3,788		Non-controlling interest	4,795		2,925
Total equity	Total equity	3,306,264		3,138,472		Total equity	3,317,385		3,399,972
Total liabilities and equity	Total liabilities and equity	$	31,453,817	$	26,065,789	Total liabilities and equity	$	33,269,786	$	32,922,974

See accompanying notes to consolidated financial statements.

Table of Contents

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended March 31
(In thousands, except per share data)	(In thousands, except per share data)	2020		2019		2020		2019		(In thousands, except per share data)		2021		2020
		(Unaudited)										(Unaudited)
INTEREST INCOME	INTEREST INCOME									INTEREST INCOME
Interest and fees on loans	Interest and fees on loans	$	150,808	$	167,959	$	461,500	$	502,100	Interest and fees on loans		$	146,338	$	159,147
Interest and fees on loans held for sale	Interest and fees on loans held for sale	264		308		588		1,003		Interest and fees on loans held for sale		304		197
Interest on investment securities	Interest on investment securities	60,534		58,607		164,391		178,687		Interest on investment securities		51,557		53,385
Interest on federal funds sold and short-term securities purchased under	Interest on federal funds sold and short-term securities purchased under									Interest on federal funds sold and short-term securities purchased under
agreements to resell	agreements to resell	0		7		2		51		agreements to resell		0		2
Interest on long-term securities purchased under agreements to resell	Interest on long-term securities purchased under agreements to resell	11,247		3,621		29,445		11,066		Interest on long-term securities purchased under agreements to resell		11,128		7,462
Interest on deposits with banks	Interest on deposits with banks	261		1,241		1,996		5,113		Interest on deposits with banks		370		1,292
Total interest income	Total interest income	223,114		231,743		657,922		698,020		Total interest income		209,697		221,485
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Interest on deposits:	Interest on deposits:									Interest on deposits:
Savings, interest checking and money market	Savings, interest checking and money market	3,206		10,225		15,492		30,081		Savings, interest checking and money market		2,103		8,309
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	1,028		1,740		4,196		4,530		Certificates of deposit of less than $100,000		473		1,775
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	2,512		7,540		11,357		20,473		Certificates of deposit of $100,000 and over		1,062		5,235
Interest on federal funds purchased and securities sold under	Interest on federal funds purchased and securities sold under									Interest on federal funds purchased and securities sold under
agreements to repurchase	agreements to repurchase	406		8,273		5,761		23,839		agreements to repurchase		312		4,770
Interest on other borrowings	Interest on other borrowings	0		453		1,032		463		Interest on other borrowings		(1)		331
Total interest expense	Total interest expense	7,152		28,231		37,838		79,386		Total interest expense		3,949		20,420
Net interest income	Net interest income	215,962		203,512		620,084		618,634		Net interest income		205,748		201,065
Provision for credit losses	Provision for credit losses	3,101		10,963		141,593		35,232		Provision for credit losses		(6,232)		57,953
Net interest income after credit losses	Net interest income after credit losses	212,861		192,549		478,491		583,402		Net interest income after credit losses		211,980		143,112
NON-INTEREST INCOME	NON-INTEREST INCOME									NON-INTEREST INCOME
Bank card transaction fees	Bank card transaction fees	37,873		44,510		111,818		126,800		Bank card transaction fees		37,695		40,200
Trust fees	Trust fees	40,769		39,592		118,676		115,223		Trust fees		44,127		39,965
Deposit account charges and other fees	Deposit account charges and other fees	23,107		24,032		69,063		71,009		Deposit account charges and other fees		22,575		23,677
Capital market fees	Capital market fees	3,194		1,787		10,756		5,610		Capital market fees		4,981		3,790
Consumer brokerage services	Consumer brokerage services	4,011		4,030		11,099		11,665		Consumer brokerage services		4,081		4,077
Loan fees and sales	Loan fees and sales	9,769		4,755		17,653		12,302		Loan fees and sales		10,184		3,235
Other	Other	10,849		14,037		31,685		38,633		Other		12,402		8,719
Total non-interest income	Total non-interest income	129,572		132,743		370,750		381,242		Total non-interest income		136,045		123,663

INVESTMENT SECURITIES GAINS (LOSSES), NET	INVESTMENT SECURITIES GAINS (LOSSES), NET	16,155		4,909		(1,275)		3,874		INVESTMENT SECURITIES GAINS (LOSSES), NET		9,853		(13,301)
NON-INTEREST EXPENSE	NON-INTEREST EXPENSE									NON-INTEREST EXPENSE
Salaries and employee benefits	Salaries and employee benefits	127,308		123,836		383,004		366,026		Salaries and employee benefits		129,033		128,937
Net occupancy	Net occupancy	12,058		12,293		35,075		34,939		Net occupancy		12,021		11,748
Equipment	Equipment	4,737		4,941		14,313		14,202		Equipment		4,353		4,821
Supplies and communication	Supplies and communication	4,141		5,106		13,226		15,543		Supplies and communication		4,125		4,658
Data processing and software	Data processing and software	23,610		23,457		71,002		68,965		Data processing and software		25,463		23,555
Marketing	Marketing	4,926		6,048		14,706		17,963		Marketing		5,158		5,979

Other	Other	14,078		15,339		40,742		54,586		Other		12,420		14,000
Total non-interest expense	Total non-interest expense	190,858		191,020		572,068		572,224		Total non-interest expense		192,573		193,698
Income before income taxes	Income before income taxes	167,730		139,181		275,898		396,294		Income before income taxes		165,305		59,776
Less income taxes	Less income taxes	34,375		29,101		54,209		80,860		Less income taxes		32,076		10,173
Net income	Net income	133,355		110,080		221,689		315,434		Net income		133,229		49,603
Less non-controlling interest expense (income)	Less non-controlling interest expense (income)	907		838		(2,479)		1,083		Less non-controlling interest expense (income)		2,257		(2,254)
Net income attributable to Commerce Bancshares, Inc.	Net income attributable to Commerce Bancshares, Inc.	132,448		109,242		224,168		314,351		Net income attributable to Commerce Bancshares, Inc.		130,972		51,857
Less preferred stock dividends	Less preferred stock dividends	7,466		2,250		11,966		6,750		Less preferred stock dividends		0		2,250
Net income available to common shareholders	Net income available to common shareholders	$	124,982	$	106,992	$	212,202	$	307,601	Net income available to common shareholders		$	130,972	$	49,607
Net income per common share — basic	Net income per common share — basic	$	1.12	$	.93	$	1.90	$	2.65	Net income per common share — basic		$	1.12	$	.42
Net income per common share — diluted	Net income per common share — diluted	$	1.11	$	.93	$	1.89	$	2.65	Net income per common share — diluted		$	1.11	$	.42

See accompanying notes to consolidated financial statements.

Table of Contents

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended March 31
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)		2021		2020
		(Unaudited)										(Unaudited)
Net income	Net income	$	133,355	$	110,080	$	221,689	$	315,434	Net income		$	133,229	$	49,603
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):

Net unrealized losses on securities for which a portion of an other-than-temporary impairment has been recorded in earnings		0		(245)		0		(432)
Net unrealized gains on other securities		330		21,030		165,464		171,421

Net unrealized gains (losses) on available for sale debt securities										Net unrealized gains (losses) on available for sale debt securities		(158,676)		78,672
Pension loss amortization	Pension loss amortization	327		389		1,038		1,166		Pension loss amortization		437		356
Unrealized gains (losses) on cash flow hedge derivatives	Unrealized gains (losses) on cash flow hedge derivatives	(6,483)		14,101		66,489		36,687		Unrealized gains (losses) on cash flow hedge derivatives		(4,386)		63,664
Other comprehensive income (loss)	Other comprehensive income (loss)	(5,826)		35,275		232,991		208,842		Other comprehensive income (loss)		(162,625)		142,692
Comprehensive income		127,529		145,355		454,680		524,276
Comprehensive income (loss)										Comprehensive income (loss)		(29,396)		192,295
Less non-controlling interest expense (income)	Less non-controlling interest expense (income)	907		838		(2,479)		1,083		Less non-controlling interest expense (income)		2,257		(2,254)
Comprehensive income attributable to Commerce Bancshares, Inc.		$	126,622	$	144,517	$	457,159	$	523,193
Comprehensive income (loss) attributable to Commerce Bancshares, Inc.										Comprehensive income (loss) attributable to Commerce Bancshares, Inc.		$	(31,653)	$	194,549

See accompanying notes to consolidated financial statements.

Table of Contents

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~

Commerce Bancshares, Inc. Shareholders

(In thousands, except per share data)
Preferred Stock Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Non-Controlling Interest Total
(Unaudited)
Balance June 30, 2020 $ 144,784 $ 563,978 $ 2,136,874 $ 232,082 $ (69,112) $ 349,261 $ 302 $ 3,358,169
Net income 132,448 907 133,355
Other comprehensive loss (5,826) (5,826)
Distributions to non-controlling interest (608) (608)
Purchases of treasury stock (167) (167)
Redemption of preferred stock (144,784) (5,216) (150,000)
Issuance of stock under purchase and equity compensation plans (229) 229 0
Stock-based compensation 3,765 3,765
Cash dividends paid on common stock ($0.270 per share) (30,174) (30,174)
Cash dividends paid on preferred stock ($0.375 per depositary share) (2,250) (2,250)
Balance September 30, 2020 $ 0 $ 563,978 $ 2,140,410 $ 326,890 $ (69,050) $ 343,435 $ 601 $ 3,306,264
Balance June 30, 2019 $ 144,784 $ 559,432 $ 2,077,491 $ 384,232 $ (106,106) $ 108,898 $ 2,632 $ 3,171,363
Net income 109,242 838 110,080
Other comprehensive income 35,275 35,275
Distributions to non-controlling interest (56) (56)
Purchases of treasury stock (33,891) (33,891)
Accelerated share repurchase agreement (37,500) (112,500) (150,000)
Issuance of stock under purchase and equity compensation plans (834) 834 0
Stock-based compensation 3,486 3,486
Cash dividends paid on common stock ($0.248 per share) (27,993) (27,993)
Cash dividends paid on preferred stock ($0.375 per depositary share) (2,250) (2,250)
Balance September 30, 2019 $ 144,784 $ 559,432 $ 2,042,643 $ 463,231 $ (251,663) $ 144,173 $ 3,414 $ 3,106,014

~~See accompanying notes to consolidated financial statements.~~

~~Table of Contents~~

~~Commerce Bancshares, Inc. and Subsidiaries~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY~~

~~Nine Months Ended September 30, 2020 and 2019~~


				Commerce Bancshares, Inc. Shareholders																	Commerce Bancshares, Inc. Shareholders
(In thousands, except per share data)	(In thousands, except per share data)	Preferred Stock		Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total		(In thousands, except per share data)	Preferred Stock		Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total
		(Unaudited)																	(Unaudited)
Balance December 31, 2020																		Balance December 31, 2020	$	0	$	589,352	$	2,436,288	$	73,000	$	(32,970)	$	331,377	$	2,925	$	3,399,972

Net income																		Net income							130,972						2,257		133,229
Other comprehensive loss																		Other comprehensive loss											(162,625)				(162,625)
Distributions to non-controlling interest																		Distributions to non-controlling interest													(387)		(387)

Purchases of treasury stock																		Purchases of treasury stock									(25,923)						(25,923)

Issuance of stock under purchase and equity compensation plans																		Issuance of stock under purchase and equity compensation plans					(19,828)				19,813						(15)

Stock-based compensation																		Stock-based compensation					3,933										3,933
Cash dividends on common stock ($0.263 per share)																		Cash dividends on common stock ($0.263 per share)							(30,799)								(30,799)

Balance March 31, 2021																		Balance March 31, 2021	$	0	$	589,352	$	2,420,393	$	173,173	$	(39,080)	$	168,752	$	4,795	$	3,317,385
Balance December 31, 2019	Balance December 31, 2019	$	144,784	$	563,978	$	2,151,464	$	201,562	$	(37,548)	$	110,444	$	3,788	$	3,138,472	Balance December 31, 2019	$	144,784	$	563,978	$	2,151,464	$	201,562	$	(37,548)	$	110,444	$	3,788	$	3,138,472

Adoption of ASU 2016-13	Adoption of ASU 2016-13							3,766								3,766		Adoption of ASU 2016-13							3,766								3,766
Balance December 31, 2019, adjusted	Balance December 31, 2019, adjusted	$	144,784	$	563,978	$	2,151,464	$	205,328	$	(37,548)	$	110,444	$	3,788	$	3,142,238	Balance December 31, 2019, adjusted	144,784		563,978		2,151,464		205,328		(37,548)		110,444		3,788		3,142,238
Net income	Net income							224,168						(2,479)		221,689		Net income							51,857						(2,254)		49,603
Other comprehensive income	Other comprehensive income											232,991				232,991		Other comprehensive income											142,692				142,692
Distributions to non-controlling interest	Distributions to non-controlling interest													(708)		(708)		Distributions to non-controlling interest													(85)		(85)

Purchases of treasury stock	Purchases of treasury stock									(53,760)						(53,760)		Purchases of treasury stock									(53,145)						(53,145)

Redemption of preferred stock		(144,784)						(5,216)								(150,000)
Issuance of stock under purchase and equity compensation plans	Issuance of stock under purchase and equity compensation plans					(22,285)				22,258						(27)		Issuance of stock under purchase and equity compensation plans					(21,570)				21,544						(26)

Stock-based compensation	Stock-based compensation					11,231										11,231		Stock-based compensation					3,729										3,729
Cash dividends on common stock ($0.810 per share)								(90,640)								(90,640)
Cash dividends on preferred stock ($1.125 per depositary share)								(6,750)								(6,750)
Balance September 30, 2020		$	0	$	563,978	$	2,140,410	$	326,890	$	(69,050)	$	343,435	$	601	$	3,306,264
Balance December 31, 2018		$	144,784	$	559,432	$	2,084,824	$	241,163	$	(34,236)	$	(64,669)	$	5,851	$	2,937,149

Net income								314,351						1,083		315,434
Other comprehensive income												208,842				208,842
Distributions to non-controlling interest														(3,520)		(3,520)

Purchases of treasury stock										(119,970)						(119,970)
Accelerated share repurchase agreement						(37,500)				(112,500)						(150,000)

Issuance of stock under purchase and equity compensation plans						(15,046)				15,043						(3)

Stock-based compensation						10,365										10,365
Cash dividends on common stock ($0.744 per share)								(85,533)								(85,533)
Cash dividends on preferred stock ($1.125 per depositary share)								(6,750)								(6,750)
Balance September 30, 2019		$	144,784	$	559,432	$	2,042,643	$	463,231	$	(251,663)	$	144,173	$	3,414	$	3,106,014
Cash dividends on common stock ($0.257 per share)																		Cash dividends on common stock ($0.257 per share)							(30,292)								(30,292)
Cash dividends on preferred stock ($0.375 per depositary share)																		Cash dividends on preferred stock ($0.375 per depositary share)							(2,250)								(2,250)
Balance March 31, 2020																		Balance March 31, 2020	$	144,784	$	563,978	$	2,133,623	$	224,643	$	(69,149)	$	253,136	$	1,449	$	3,252,464

See accompanying notes to consolidated financial statements.

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Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS


		For the Nine Months Ended September 30					For the Three Months Ended March 31
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020
		(Unaudited)					(Unaudited)
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net income	Net income	$	221,689	$	315,434	Net income	$	133,229	$	49,603
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	Provision for credit losses	141,593		35,232		Provision for credit losses	(6,232)		57,953
Provision for depreciation and amortization	Provision for depreciation and amortization	32,462		30,729		Provision for depreciation and amortization	11,379		10,581
Amortization of investment security premiums, net	Amortization of investment security premiums, net	37,623		20,436		Amortization of investment security premiums, net	22,079		10,362
Investment securities (gains) losses, net (A)	Investment securities (gains) losses, net (A)	1,275		(3,874)		Investment securities (gains) losses, net (A)	(9,853)		13,301
Net gains on sales of loans held for sale	Net gains on sales of loans held for sale	(8,267)		(7,881)		Net gains on sales of loans held for sale	(7,381)		(1,793)
Originations of loans held for sale	Originations of loans held for sale	(169,774)		(187,792)		Originations of loans held for sale	(172,435)		(33,351)
Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	152,825		194,344		Proceeds from sales of loans held for sale	184,155		42,221
Net (increase) decrease in trading debt securities	Net (increase) decrease in trading debt securities	5,636		(428)		Net (increase) decrease in trading debt securities	4,872		(16,107)
Stock-based compensation	Stock-based compensation	11,231		10,365		Stock-based compensation	3,933		3,729
(Increase) decrease in interest receivable	(Increase) decrease in interest receivable	(11,012)		229		(Increase) decrease in interest receivable	444		(1,681)
Increase (decrease) in interest payable		(7,670)		5,938
Increase (decrease) in income taxes payable		(7,942)		23,530
Decrease in interest payable						Decrease in interest payable	(1,804)		(2,161)
Increase in income taxes payable						Increase in income taxes payable	28,105		7,992

Other changes, net	Other changes, net	72,714		(58,928)		Other changes, net	11,178		(60,881)
Net cash provided by operating activities	Net cash provided by operating activities	472,383		377,334		Net cash provided by operating activities	201,669		79,768
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:

Proceeds from sales of investment securities (A)	Proceeds from sales of investment securities (A)	574,376		379,641		Proceeds from sales of investment securities (A)	9,292		2
Proceeds from maturities/pay downs of investment securities (A)	Proceeds from maturities/pay downs of investment securities (A)	1,856,780		1,007,553		Proceeds from maturities/pay downs of investment securities (A)	938,527		641,950
Purchases of investment securities (A)	Purchases of investment securities (A)	(5,135,211)		(1,306,607)		Purchases of investment securities (A)	(1,194,891)		(569,079)
Net increase in loans	Net increase in loans	(1,710,009)		(357,438)		Net increase in loans	(72,497)		(346,910)
Long-term securities purchased under agreements to resell		0		(150,000)

Purchases of premises and equipment	Purchases of premises and equipment	(29,192)		(29,441)		Purchases of premises and equipment	(10,730)		(7,574)
Sales of premises and equipment	Sales of premises and equipment	313		2,029		Sales of premises and equipment	2,568		17
Net cash used in investing activities	Net cash used in investing activities	(4,442,943)		(454,263)		Net cash used in investing activities	(327,731)		(281,594)
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
Net increase (decrease) in non-interest bearing, savings, interest checking and money market deposits		5,138,314		(230,229)
Net increase (decrease) in certificates of deposit		(17,565)		411,098
Net increase in non-interest bearing, savings, interest checking and money market deposits						Net increase in non-interest bearing, savings, interest checking and money market deposits	585,579		181,625
Net decrease in certificates of deposit						Net decrease in certificates of deposit	(73,000)		(233,664)

Net decrease in federal funds purchased and securities sold under agreements to repurchase	Net decrease in federal funds purchased and securities sold under agreements to repurchase	(197,708)		(315,115)		Net decrease in federal funds purchased and securities sold under agreements to repurchase	(160,273)		(422,759)
Repayment of long-term borrowings		0		(163)

Net increase (decrease) in short-term borrowings		(1,636)		248,734
Preferred stock redemption		(150,000)		0

Net increase in short-term borrowings						Net increase in short-term borrowings	2,989		754,043

Purchases of treasury stock	Purchases of treasury stock	(53,760)		(119,970)		Purchases of treasury stock	(25,923)		(53,145)
Accelerated share repurchase agreement		0		(150,000)

Issuance of stock under equity compensation plans	Issuance of stock under equity compensation plans	(27)		(3)		Issuance of stock under equity compensation plans	(15)		(26)

Cash dividends paid on common stock	Cash dividends paid on common stock	(90,640)		(85,533)		Cash dividends paid on common stock	(30,799)		(30,292)
Cash dividends paid on preferred stock	Cash dividends paid on preferred stock	(6,750)		(6,750)		Cash dividends paid on preferred stock	0		(2,250)
Net cash provided by (used in) financing activities		4,620,228		(247,931)
Net cash provided by financing activities						Net cash provided by financing activities	298,558		193,532
Increase (decrease) in cash, cash equivalents and restricted cash	Increase (decrease) in cash, cash equivalents and restricted cash	649,668		(324,860)		Increase (decrease) in cash, cash equivalents and restricted cash	172,496		(8,294)
Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	907,808		1,209,240		Cash, cash equivalents and restricted cash at beginning of year	2,208,328		907,808
Cash, cash equivalents and restricted cash at September 30		$	1,557,476	$	884,380
Cash, cash equivalents and restricted cash at March 31						Cash, cash equivalents and restricted cash at March 31	$	2,380,824	$	899,514

Income tax payments, net	Income tax payments, net	$	58,750	$	54,161	Income tax payments, net	$	2,510	$	1,170
Interest paid on deposits and borrowings	Interest paid on deposits and borrowings	$	45,508	$	73,448	Interest paid on deposits and borrowings	$	5,753	$	22,581
Loans transferred to foreclosed real estate	Loans transferred to foreclosed real estate	$	57	$	558	Loans transferred to foreclosed real estate	$	115	$	57

(A) Available for sale debt securities, equity securities, and other securities.

See accompanying notes to consolidated financial statements.

Restricted cash is comprised of cash collateral posted by the Company to secure interest rate swap agreements. This balance is included in other assets in the consolidated balance sheets and totaled ~~$25.9~~$24.5 million and ~~$25.1~~$23.8 million at ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

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Commerce Bancshares, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021 (Unaudited)

1. Principles of Consolidation and Presentation ~~and Significant Accounting Policies~~

The accompanying consolidated financial statements include the accounts of Commerce Bancshares, Inc. and all majority-owned subsidiaries (the Company). Most of the Company's operations are conducted by its subsidiary bank, Commerce Bank (the Bank). The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments necessary to present fairly the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications were made to ~~2019~~2020 data to conform to current year presentation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Management has evaluated subsequent events for potential recognition or disclosure. The results of operations for the three ~~and nine~~ month ~~periods~~period ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of results to be attained for the full year or any other interim period.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company's most recent Annual Report on Form 10-K, containing the latest audited consolidated financial statements and notes thereto.

On January 1, 2020, the Company adopted several FASB Accounting Standards Updates (ASUs). The Company's adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and its related amendments, resulted in changes to former accounting policies as described in Note 1 to the consolidated financial statements in the 2019 Annual Report on Form 10-K. Further discussion of the impact of adoption is included below, as well as in Note 2, Loans and Allowance for Credit Losses, and Note 3, Investment Securities. Significant accounting policies that were modified as a result of the adoption of ASU 2016-13 are included below.

The Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and its related amendments on January 1, 2020. Known as the current expected credit loss (CECL), the standard replaced the incurred loss methodology. The new measurement approach requires the calculation of expected lifetime credit losses and is applied to financial assets measured at amortized cost, including loans and held-to-maturity securities, as well as certain off-balance sheet credit exposures such as unfunded lending commitments. The standard also changed the impairment model of available for sale debt securities.

The Company adopted CECL using the modified retrospective method for all financial assets measured at amortized cost and for unfunded lending commitments. Results for reporting periods beginning on or after January 1, 2020 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net increase to retained earnings of $3.8 million as of January 1, 2020 for the cumulative effect of adopting CECL. The transition adjustment includes a decrease to the allowance for credit losses of $29.7 million related to the commercial loan portfolio, an increase to the allowance for credit losses of $8.7 million related to the personal banking loan portfolio, an increase to the liability for unfunded commitments of $16.1 million, and a tax impact of $1.2 million.

~~Table of Contents~~

~~The table below illustrates the adoption impact of ASU 2016-13 on the Company's allowance for credit losses.~~

December 31, 2019 January 1, 2020
(In thousands) Allowance for loan losses ending balance CECL Adjustment Allowance for credit losses beginning balance
Commercial:
   Business $ 44,268 $ (6,328) $ 37,940
   Real estate - construction and land 21,589 (12,385) 9,204
   Real estate - business 25,903 (10,998) 14,905
     Total Commercial: 91,760 (29,711) 62,049
Personal Banking:
   Real estate - personal 3,125 1,730 4,855
   Consumer 15,932 (1,414) 14,518
   Revolving home equity 638 986 1,624
   Consumer credit card 47,997 8,498 56,495
   Overdrafts 1,230 (1,128) 102
      Total Personal Banking: 68,922 8,672 77,594
Allowance for credit losses on loans 160,682 (21,039) 139,643
Liability for unfunded lending commitments 1,075 16,090 17,165
Total allowance for credit losses $ 161,757 $ (4,949) $ 156,808

~~The following significant accounting policies have been updated since the Company's 2019 Annual Report on Form 10-K to reflect the adoption of ASU 2016-13.~~

~~Loans and Related Earnings~~

The Company's portfolio of held-for-investment loans includes a net investment in direct financing and sales type leases to commercial and industrial and tax-exempt entities, and collectively, the Company's portfolio of loans and leases is referred to as its "loan portfolio" or "loans". Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at amortized cost, excluding accrued interest receivable. Amortized cost is the outstanding principal balance, net of any deferred fees and costs on originated loans. Origination fee income received on loans and amounts representing the estimated direct costs of origination are deferred and amortized to interest income over the life of the loan using the interest method. Loans are presented net of the allowance for credit losses on loans.

Interest on loans is accrued based upon the principal amount outstanding. The Company has elected the practical expedient to exclude all accrued interest receivable from all required disclosures of amortized cost. Additionally, an election was made not to measure an allowance for credit losses for accrued interest receivables. The Company has also made the election that all interest accrued but not received is reversed against interest income.

Loan and commitment fees, net of costs, are deferred and recognized in income over the term of the loan or commitment as an adjustment of yield. Annual fees charged on credit card loans are capitalized to principal and amortized over 12 months to loan fees and sales. Other credit card fees, such as cash advance fees and late payment fees, are recognized in income as an adjustment of yield when charged to the cardholder’s account.

~~Past Due Loans~~

Management reports loans as past due on the day following the contractual repayment date if payment was not received by end of the business day. Loans, or portions of loans, are charged off to the extent deemed uncollectible. Loan charge-offs reduce the allowance for credit losses on loans, and recoveries of loans previously charged off are added back to the allowance. Business, business real estate, construction and land real estate, and personal real estate loans are generally charged down to estimated collectible balances when they are placed on non-accrual status. Consumer loans and related accrued interest are normally charged down to the fair value of related collateral (or are charged off in full if not collateralized) once the loans are more than 120 to 180 days delinquent, depending on the type of loan. Revolving home equity loans are charged down to the fair value of the related collateral once the loans are more than 180 days past due. Credit card loans are charged off against the allowance for credit losses when the receivable is more than 180 days past due.

~~Table of Contents~~

~~Troubled Debt Restructurings~~

A loan is accounted for as a troubled debt restructuring if the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider. A troubled debt restructuring typically involves (1) modification of terms such as a reduction of the stated interest rate, loan principal, or accrued interest, (2) a loan renewal at a stated interest rate lower than the current market rate for a new loan with similar risk, or (3) debt that was not reaffirmed in bankruptcy. Business, business real estate, construction and land real estate and personal real estate troubled debt restructurings with impairment charges are placed on non-accrual status. The Company measures the impairment loss of a troubled debt restructuring at the time of modification based on the present value of expected future cash flows. Subsequent to modification, troubled debt restructurings are subject to the Company’s allowance for credit loss model, which is discussed below and in Note 2, Loans and Allowance for Credit Losses. Troubled debt restructurings that are performing under their contractual terms continue to accrue interest, which is recognized in current earnings.

Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law on March 27, 2020 and provides financial institutions the option to suspend the requirement to categorize certain modifications related to the global Coronavirus Disease 2019 (COVID-19) pandemic as troubled debt restructurings. Additionally, bank regulatory agencies issued additional guidance on implementing the provisions of the CARES Act. The Company follows the guidance under the CARES Act. Refer to Note 2 for additional information.

~~Allowance for Credit Losses on Loans~~

The allowance for credit losses on loans is a valuation amount that is deducted from the amortized cost basis of loans not held at fair value to present the net amount expected to be collected over the contractual term of the loans. The allowance for credit losses on loans is measured using relevant information about past events, including historical credit loss experience on loans with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. An allowance will be created upon origination or acquisition of a loan and is updated at subsequent reporting dates. The methodology is applied consistently for each reporting period and reflects management’s current expectations of credit losses. Changes to the allowance for credit losses on loans resulting from periodic evaluations are recorded through increases or decreases to the credit loss expense for loans, which is recorded in provision for credit losses on the consolidated statements of income. Loans that are deemed to be uncollectible are charged off against the related allowance for credit losses on loans.

The allowance for credit losses on loans is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics including borrower type, collateral type and expected credit loss patterns. The allowance for credit losses on a troubled debt restructuring which continues to accrue interest is also measured on a collective basis. Loans that do not share similar risk characteristics, primarily large loans on non-accrual status, are evaluated on an individual basis. The allowance related to these large non-accrual loans is measured using the fair value of the collateral (less selling cost, if applicable) as most of these loans are collateral dependent and the borrower is facing financial difficulty.

~~As noted above, the allowance for credit losses on loans does not include an allowance for accrued interest.~~

~~Liability for Unfunded Lending Commitments~~

The Company’s unfunded lending commitments are primarily unfunded loan commitments and letters of credit. Expected credit losses for these unfunded lending commitments are calculated over the contractual period during which the Company is exposed to the credit risk. The methodology used to measure credit losses for unfunded lending commitments is the same as the methodology used for loans, however, the estimate of credit risk for unfunded lending commitments takes into consideration the likelihood that funding will occur. The liability for unfunded lending commitments excludes any exposures that are unconditionally cancellable by the Company. The loss estimate is recorded within other liabilities on the consolidated balance sheet. Changes to the liability for unfunded lending commitments are recorded through increases or decreases to the provision for credit losses on the consolidated statements of income.

~~Investments in Debt and Equity Securities~~

The majority of the Company's investment portfolio is comprised of debt securities that are classified as available for sale. From time to time, the Company sells securities and utilizes the proceeds to reduce borrowings, fund loan growth, or modify its interest rate profile. Securities classified as available for sale are carried at fair value. Changes in fair value are reported in other comprehensive income (loss), a component of stockholders’ equity. Securities are periodically evaluated for credit losses in accordance with the guidance provided in ASC 326. Further discussion of this evaluation is provided in "~~Allowance for Credit Losses on Available for Sale Debt Securities"~~ below. Gains and losses realized upon sales of securities are calculated using the specific identification method and are included in investment securities gains (losses), net, in the consolidated statements of income. Purchase premiums and discounts are amortized to interest income using a level yield method over the

~~Table of Contents~~

estimated lives of the securities. For certain callable debt securities purchased at a premium, the amortization is instead recorded to the earliest call date. For mortgage and asset-backed securities, prepayment experience is evaluated quarterly to determine if a change in a bond's estimated remaining life is necessary. A corresponding adjustment is then made in the related amortization of premium or discount accretion.

Accrued interest receivable on available for sale debt securities is reported in other assets on the consolidated balance sheet. The Company has elected the practical expedient to exclude the accrued interest from all required disclosures of amortized cost. Additionally, an election was made not to measure an allowance for credit losses for accrued interest receivables. Interest accrued but not received is reversed against interest income.

Equity securities include common and preferred stock with readily determinable fair values. These are also carried at fair value. Certain equity securities do not have readily determinable fair values. The Company has elected under ASU 2016-01 to measure these equity securities without a readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer. The Company has not recorded any impairment or other adjustments to the carrying amount of these equity investments without readily determinable fair values.

Other securities include Federal Reserve Bank stock and Federal Home Loan Bank stock, which are held for debt and regulatory purposes. They are carried at cost and periodically evaluated for impairment. Also included are investments in portfolio concerns held by the Company’s private equity subsidiaries, which consist of both debt and equity instruments. Private equity investments are carried at fair value in accordance with ASC 946-10-15, with changes in fair value reported in current earnings. In the absence of readily ascertainable market values, fair value is estimated using internally developed methods. Changes in fair value which are recognized in current earnings and gains and losses from sales are included in investment securities gains (losses), net in the consolidated statements of income.

Trading account securities, which are debt securities bought and held principally for the purpose of resale in the near term, are carried at fair value. Gains and losses, both realized and unrealized, are recorded in non-interest income.

~~Purchases and sales of securities are recognized on a trade date basis. A receivable or payable is recognized for pending transaction settlements.~~

~~Allowance for Credit Losses on Available for Sale Debt Securities~~

For available for sale debt securities in an unrealized loss position, the entire loss in fair value is required to be recognized in current earnings if the Company intends to sell the securities or believes it more likely than not that it will be required to sell the security before the anticipated recovery. If neither condition is met, and the Company does not expect to recover the amortized cost basis, the Company determines whether the decline in fair value resulted from credit losses or other factors. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss has occurred, and an allowance for credit losses is recorded. The allowance for credit losses is limited by the amount that the fair value is less than the amortized cost basis. Any impairment not recorded through the provision for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit losses on the consolidated statements of income. Losses are charged against the allowance for credit losses on securities when management believes the uncollectibility of an available for sale security is confirmed or when either of the conditions regarding intent or requirement to sell is met.

~~Accrued interest receivable on available for sale debt securities is excluded from the estimate of credit losses.~~

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2. Loans and Allowance for Credit Losses

Major classifications within the Company’s held for investment loan portfolio at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are as follows:


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		(In thousands)	March 31, 2021		December 31, 2020
Commercial:	Commercial:					Commercial:
Business	Business	$	6,683,413	$	5,565,449	Business	$	6,624,209	$	6,546,087
Real estate – construction and land	Real estate – construction and land	1,009,729		899,377		Real estate – construction and land	1,073,036		1,021,595
Real estate – business	Real estate – business	2,993,192		2,833,554		Real estate – business	3,017,242		3,026,117
Personal Banking:	Personal Banking:					Personal Banking:
Real estate – personal	Real estate – personal	2,753,867		2,354,760		Real estate – personal	2,828,418		2,820,030
Consumer	Consumer	2,006,360		1,964,145		Consumer	1,966,833		1,950,502
Revolving home equity	Revolving home equity	324,203		349,251		Revolving home equity	285,261		307,083
Consumer credit card	Consumer credit card	647,893		764,977		Consumer credit card	593,833		655,078
Overdrafts	Overdrafts	2,270		6,304		Overdrafts	3,239		3,149
Total loans ~~(1)~~	Total loans ~~(1)~~	$	16,420,927	$	14,737,817	Total loans ~~(1)~~	$	16,392,071	$	16,329,641

~~(1)~~

Accrued interest receivable totaled ~~$41.3~~$42.9 million and $41.9 million at ~~September 30,~~March 31, 2021 and December 31, 2020, respectively, and was included within other assets on the consolidated balance ~~sheet.~~sheets. For the three months ended ~~September 30, 2020,~~March 31, 2021, the Company wrote-off accrued interest by reversing interest income of ~~$89~~$125 thousand and ~~$1.7~~$2.0 million in the Commercial and Personal Banking portfolios, respectively. Similarly, for the ~~nine~~three months ended ~~September 30,~~March 31, 2020, the Company wrote-off accrued interest of ~~$258~~$54 thousand and ~~$4.4~~$1.9 million in the Commercial and Personal Banking portfolios, respectively.

At ~~September 30, 2020,~~March 31, 2021, loans of ~~$4.1~~$3.6 billion were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. Additional loans of ~~$1.5~~$1.4 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings.

Allowance for credit losses

The allowance for credit losses is measured using an average historical loss model which incorporates relevant information about past events ~~including~~(including historical credit loss experience on loans with similar risk ~~characteristics,~~characteristics), current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans. The allowance for credit losses is measured on a collective (pool) basis. Loans are aggregated into pools based on similar risk characteristics including borrower type, collateral type and expected credit loss patterns. Loans that do not share similar risk characteristics, primarily large loans on non-accrual status, are evaluated on an individual basis.

For loans evaluated for credit losses on a collective basis, average historical loss rates are calculated for each pool using the Company’s historical net charge-offs (combined charge-offs and recoveries by observable historical reporting period) and outstanding loan balances during a lookback period. Lookback periods can be different based on the individual pool and represent management’s credit expectations for the pool of loans over the remaining contractual life. In certain loan pools, if the Company’s own historical loss rate is not reflective of the loss expectations, the historical loss rate is augmented by industry and peer data. The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts. These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given a single path economic forecast of key macroeconomic variables including GDP, disposable income, unemployment rate, various interest rates, CPI inflation rate, HPI, CREPI and market volatility. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting back to historical averages using a straight-line method. The forecast adjusted loss rate is applied to the amortized cost of loans over the remaining contractual lives, adjusted for expected prepayments. The contractual term excludes expected extensions (except for contractual extensions at the option of the customer), renewals and modifications unless there is a reasonable expectation that a troubled debt restructuring will be executed. Credit cards and certain similar consumer lines of credit do not have stated maturities and therefore, for these loan classes, remaining contractual lives are determined by estimating future cash flows expected to be received from customers until payments have been fully allocated to outstanding balances. Additionally, the allowance for credit losses considers other qualitative factors not included in historical loss rates or macroeconomic forecast such as changes in portfolio composition, underwriting practices, or significant unique events or conditions.

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Key model assumptions in the Company’s allowance for credit loss model include the economic forecast, the reasonable and supportable period, prepayment assumptions and qualitative factors applied for portfolio composition changes, underwriting practices, or significant unique events or conditions. The assumptions utilized in estimating the Company’s allowance for credit losses at ~~September 30, 2020~~March 31, 2021 and ~~June 30,~~December 31, 2020 are discussed below.


Key Assumption	~~September 30, 2020~~March 31, 2021	~~June 30,~~December 31, 2020

Overall economic forecast	•The recovery from the Global Coronavirus Recession (GCR) continues •Assumes improving health conditions and expanding vaccine distribution •Considers government stimulus •Continued uncertainty regarding the assumptions related to the health crisis	•The recovery from the Global Coronavirus Recession (GCR) continues to be gradual throughout 2021 and 2022 •Assumes no additional systemic lockdown measures •~~Gradual recovery~~Considers government stimulus in ~~late~~the beginning of 2021 ~~and into 2022~~ •~~Significant~~Continued uncertainty regarding the ~~pandemic and its impact on economy~~	•~~The recovery from the Global Coronavirus Recession (GCR) is gradual~~ •~~Assumes no second wave of contagion and states continue to loosen lockdown measures~~ •~~Gradual recovery in late 2021 and into 2022~~ •~~Significant uncertainty regarding the pandemic and its impact on economy~~health crisis
Reasonable and supportable period and related reversion period	•~~Two years~~One year for ~~both~~ commercial and personal banking loans •Reversion to historical average loss rates within two quarters using a straight-line method	•Two years for both commercial and personal banking loans •Reversion to historical average loss rates within two quarters using a straight-line method
Forecasted macro-economic variables	•Unemployment rate ranging from ~~8.8%~~5.8% to ~~5.3%~~4.5% during the supportable forecast period •Real GDP growth ranges from ~~4.4%~~11.1% to ~~2.4%~~1.0% •Prime rate of 3.25%	•Unemployment rate ranging from ~~10.9%~~6.5% to ~~5.7%~~5.2% during the supportable forecast period •Real GDP growth ranges from ~~3.0%~~3.7% to ~~25.7%~~2.2% •Prime rate of 3.25%
Prepayment assumptions	Commercial loans •5% for most loan pools Personal banking loans •Ranging from ~~21.6%~~26.4% to ~~23.5%~~23.6% for most loan pools •~~58.0%~~58.5% for consumer credit cards	Commercial loans •5% for most loan pools Personal banking loans •Ranging from ~~18.7%~~23.1% to 23.3% for most loan pools •58.0% for consumer credit cards
Qualitative factors	Added net reserves using qualitative processes related to: •Loans originated in our ~~recent~~ expansion markets, loans that are designated as shared national credits, and certain portfolios considered to be COVID-19 ~~deferral program loans.~~impacted •Changes in the composition of the loan portfolios •Loans downgraded to special mention, substandard, or non-accrual status	Added net reserves using qualitative processes related to: •Loans originated in our ~~recent~~ expansion markets, ~~and~~ loans that are designated as shared national credits, and certain portfolios considered to be COVID-19 impacted •Changes in the composition of the loan portfolios •Loans downgraded to special mention, substandard, or non-accrual status

The liability for unfunded lending commitments utilizes the same model as the allowance for credit losses on loans, however, the liability for unfunded lending commitments incorporates an assumption for the portion of unfunded commitments that are expected to be funded.

Sensitivity in the Allowance for Credit Loss model

The allowance for credit losses is an estimate that requires significant judgment including projections of the macro-economic environment. The forecasted macro-economic environment continuously changes which can cause fluctuations in estimated expected losses.

The current forecast projects a ~~sharp recession with a~~continued recovery ~~in the next two years as a result~~ of the COVID-19 ~~outbreak.~~pandemic induced recession. This pandemic is unprecedented and information that could be used in the estimation of the allowance for credit losses changes frequently. ~~Events such as~~Trends in health conditions and vaccine distribution could significantly modify economic projections used in the ~~timing~~estimation of ~~governmental required business lock downs or possible additional waves of infection could prolong and deepen~~ the ~~projected recession.~~allowance for credit losses.

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A summary of the activity in the allowance for credit losses on loans and the liability for unfunded lending commitments during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, respectively, follows:


		For the Three Months Ended September 30						For the Nine Months Ended September 30							For the Three Months Ended March 31, 2021
(In thousands)	(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total		(In thousands)		Commercial		Personal Banking		Total
ALLOWANCE FOR CREDIT LOSSES ON LOANS	ALLOWANCE FOR CREDIT LOSSES ON LOANS													ALLOWANCE FOR CREDIT LOSSES ON LOANS
Balance at end of prior period		$	130,553	$	110,191	$	240,744	$	91,760	$	68,922	$	160,682
Adoption of ASU 2016-13		0		0		0		(29,711)		8,672		(21,039)

Balance at beginning of period	Balance at beginning of period	$	130,553	$	110,191	$	240,744	$	62,049	$	77,594	$	139,643	Balance at beginning of period		$	121,549	$	99,285	$	220,834
Provision for credit losses on loans	Provision for credit losses on loans	(1,935)		5,135		3,200		69,418		54,141		123,559		Provision for credit losses on loans		(1,909)		(8,446)		(10,355)
Deductions:	Deductions:													Deductions:
Loans charged off	Loans charged off	357		10,292		10,649		4,159		32,127		36,286		Loans charged off		232		12,709		12,941
Less recoveries on loans	Less recoveries on loans	163		2,902		3,065		1,116		8,328		9,444		Less recoveries on loans		215		2,774		2,989
Net loan charge-offs	Net loan charge-offs	194		7,390		7,584		3,043		23,799		26,842		Net loan charge-offs		17		9,935		9,952
Balance September 30, 2020		$	128,424	$	107,936	$	236,360	$	128,424	$	107,936	$	236,360
Balance March 31, 2021														Balance March 31, 2021		$	119,623	$	80,904	$	200,527
LIABILITY FOR UNFUNDED LENDING COMMITMENTS	LIABILITY FOR UNFUNDED LENDING COMMITMENTS													LIABILITY FOR UNFUNDED LENDING COMMITMENTS
Balance at end of prior period		$	34,052	$	1,247	$	35,299	$	399	$	676	$	1,075
Adoption of ASU 2016-13		0		0		0		16,057		33		16,090

Balance at beginning of period	Balance at beginning of period	$	34,052	$	1,247	$	35,299	$	16,456	$	709	$	17,165	Balance at beginning of period		$	37,259	$	1,048	$	38,307
Provision for credit losses on unfunded lending commitments	Provision for credit losses on unfunded lending commitments	(60)		(39)		(99)		17,536		499		18,035		Provision for credit losses on unfunded lending commitments		4,254		(131)		4,123
Balance September 30, 2020		$	33,992	$	1,208	$	35,200	$	33,992	$	1,208	$	35,200
Balance March 31, 2021														Balance March 31, 2021		$	41,513	$	917	$	42,430
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	162,416	$	109,144	$	271,560	$	162,416	$	109,144	$	271,560	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS		$	161,136	$	81,821	$	242,957

~~Allowance for loan losses~~

~~A summary of the activity in the allowance for loan losses during the three and nine months ended September 30, 2019 follows:~~


		For the Three Months Ended September 30						For the Nine Months Ended September 30							For the Three Months Ended March 31, 2020
(In thousands)	(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total		(In thousands)		Commercial		Personal Banking		Total
ALLOWANCE FOR CREDIT LOSSES ON LOANS														ALLOWANCE FOR CREDIT LOSSES ON LOANS
Balance at end of prior period														Balance at end of prior period		$	91,760	$	68,922	$	160,682
Adoption of ASU 2016-13														Adoption of ASU 2016-13		(29,711)		8,672		(21,039)
Balance at beginning of period	Balance at beginning of period	$	91,808	$	69,374	$	161,182	$	92,869	$	67,063	$	159,932	Balance at beginning of period		$	62,049	$	77,594	$	139,643

Provision for loan losses		553		10,410		10,963		55		35,177		35,232
Provision for credit losses on loans														Provision for credit losses on loans		21,108		21,760		42,868
Deductions:	Deductions:													Deductions:
Loans charged off	Loans charged off	490		13,990		14,480		1,436		42,233		43,669		Loans charged off		416		13,976		14,392
Less recoveries on loans	Less recoveries on loans	199		2,818		3,017		582		8,605		9,187		Less recoveries on loans		810		2,724		3,534
Net loan charge-offs		291		11,172		11,463		854		33,628		34,482
Balance September 30, 2019		$	92,070	$	68,612	$	160,682	$	92,070	$	68,612	$	160,682
Net loan charge-offs (recoveries)														Net loan charge-offs (recoveries)		(394)		11,252		10,858
Balance March 31, 2020														Balance March 31, 2020		$	83,551	$	88,102	$	171,653
LIABILITY FOR UNFUNDED LENDING COMMITMENTS														LIABILITY FOR UNFUNDED LENDING COMMITMENTS
Balance at end of prior period														Balance at end of prior period		$	399	$	676	$	1,075
Adoption of ASU 2016-13														Adoption of ASU 2016-13		16,057		33		16,090
Balance at beginning of period														Balance at beginning of period		$	16,456	$	709	$	17,165
Provision for credit losses on unfunded lending commitments														Provision for credit losses on unfunded lending commitments		14,605		480		15,085
Balance March 31, 2020														Balance March 31, 2020		$	31,061	$	1,189	$	32,250
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS														ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS		$	114,612	$	89,291	$	203,903

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Delinquent and non-accrual loans

The Company considers loans past due on the day following the contractual repayment date, if the contractual repayment was not received by the Company as of the end of the business day. The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.


(In thousands)	(In thousands)	Current or Less Than 30 Days Past Due		30 – 89 Days Past Due		90 Days Past Due and Still Accruing		Non-accrual		Total		(In thousands)	Current or Less Than 30 Days Past Due		30 – 89 Days Past Due		90 Days Past Due and Still Accruing		Non-accrual		Total
September 30, 2020
March 31, 2021												March 31, 2021
Commercial:	Commercial:											Commercial:
Business	Business	$	6,636,383	$	7,106	$	2,629	$	37,295	$	6,683,413	Business	$	6,601,246	$	2,384	$	364	$	20,215	$	6,624,209
Real estate – construction and land	Real estate – construction and land	991,404		18,320		4		1		1,009,729		Real estate – construction and land	1,069,805		3,231		0		0		1,073,036
Real estate – business	Real estate – business	2,987,992		4,137		0		1,063		2,993,192		Real estate – business	3,013,518		2,146		6		1,572		3,017,242
Personal Banking:	Personal Banking:											Personal Banking:
Real estate – personal	Real estate – personal	2,743,260		6,029		2,667		1,911		2,753,867		Real estate – personal	2,820,687		3,592		2,420		1,719		2,828,418
Consumer	Consumer	1,983,820		20,329		2,211		0		2,006,360		Consumer	1,940,997		15,439		10,397		0		1,966,833
Revolving home equity	Revolving home equity	322,572		1,237		394		0		324,203		Revolving home equity	282,967		1,567		727		0		285,261
Consumer credit card	Consumer credit card	629,181		12,181		6,531		0		647,893		Consumer credit card	581,216		5,019		7,598		0		593,833
Overdrafts	Overdrafts	2,080		190		0		0		2,270		Overdrafts	3,123		116		0		0		3,239
Total	Total	$	16,296,692	$	69,529	$	14,436	$	40,270	$	16,420,927	Total	$	16,313,559	$	33,494	$	21,512	$	23,506	$	16,392,071
December 31, 2019
December 31, 2020												December 31, 2020
Commercial:	Commercial:											Commercial:
Business	Business	$	5,545,104	$	12,064	$	792	$	7,489	$	5,565,449	Business	$	6,517,838	$	2,252	$	3,473	$	22,524	$	6,546,087
Real estate – construction and land	Real estate – construction and land	882,826		13,046		3,503		2		899,377		Real estate – construction and land	1,021,592		0		3		0		1,021,595
Real estate – business	Real estate – business	2,830,494		2,030		0		1,030		2,833,554		Real estate – business	3,016,215		7,666		6		2,230		3,026,117
Personal Banking:	Personal Banking:											Personal Banking:
Real estate – personal	Real estate – personal	2,345,243		6,129		1,689		1,699		2,354,760		Real estate – personal	2,808,886		6,521		2,837		1,786		2,820,030
Consumer	Consumer	1,928,082		34,053		2,010		0		1,964,145		Consumer	1,921,822		25,417		3,263		0		1,950,502
Revolving home equity	Revolving home equity	347,258		1,743		250		0		349,251		Revolving home equity	305,037		1,656		390		0		307,083
Consumer credit card	Consumer credit card	742,659		10,703		11,615		0		764,977		Consumer credit card	635,770		7,090		12,218		0		655,078
Overdrafts	Overdrafts	5,972		332		0		0		6,304		Overdrafts	2,896		253		0		0		3,149
Total	Total	$	14,627,638	$	80,100	$	19,859	$	10,220	$	14,737,817	Total	$	16,230,056	$	50,855	$	22,190	$	26,540	$	16,329,641

At ~~September 30,~~March 31, 2021, the Company had $8.2 million and $908 thousand of non-accrual business and business real estate loans, respectively, that had no allowance for credit loss. At December 31, 2020, the Company had ~~$20.6~~$9.4 million of non-accrual business loans that had no allowance for credit loss. The Company did not record any interest income on non-accrual loans during the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021 and 2020, respectively.

Credit quality indicators

The following table provides information about the credit quality of the Commercial loan portfolio. The Company utilizes an internal risk rating system comprised of a series of grades to categorize loans according to perceived risk associated with the expectation of debt repayment based on borrower specific information including but not limited to current financial information, historical payment experience, industry information, collateral levels and collateral types. The “pass” category consists of a range of loan grades that reflect increasing, though still acceptable, risk. A loan is assigned the risk rating at origination and then monitored throughout the contractual term for possible risk rating changes. Movement of risk through the various grade levels in the “pass” category is monitored for early identification of credit deterioration. The “special mention” rating is applied to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten its capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. It is a transitional grade that is closely monitored for improvement or deterioration. The “substandard” rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment.

All loans are analyzed for risk rating updates annually. For larger loans, rating assessments may be more frequent if relevant information is obtained earlier through debt covenant monitoring or overall relationship management. Smaller loans

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are monitored as identified by the loan officer based on the risk profile of the individual borrower or if the loan becomes past

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due related to credit issues. Loans rated Special Mention, Substandard or Non-accrual are subject to quarterly review and monitoring processes. In addition to the regular monitoring performed by the lending personnel and credit committees, loans are subject to review by a credit review department which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based review plan.

The risk category of loans in the Commercial portfolio as of ~~September 30,~~March 31, 2021 and December 31, 2020 are as follows:


		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
March 31, 2021																		March 31, 2021
Business	Business																	Business
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	2,394,434	$	1,097,498	$	518,966	$	356,416	$	186,992	$	307,681	$	1,535,511	$	6,397,498	Pass	$	639,977	$	2,123,717	$	895,233	$	387,726	$	312,324	$	382,995	$	1,663,896	$	6,405,868
Special mention	Special mention	29,620		28,518		17,532		1,120		5,773		1,843		63,973		148,379		Special mention	3,043		2,571		29,853		14,932		1,281		7,949		23,925		83,554
Substandard	Substandard	16,118		26,401		2,139		2,849		3,608		13,879		35,247		100,241		Substandard	2,609		11,282		17,824		4,676		2,142		13,489		62,550		114,572
Non-accrual	Non-accrual	19,948		0		2,065		16		125		3,845		11,296		37,295		Non-accrual	1,079		10,419		1		2,512		115		6,065		24		20,215
Total Business:	Total Business:	$	2,460,120	$	1,152,417	$	540,702	$	360,401	$	196,498	$	327,248	$	1,646,027	$	6,683,413	Total Business:	$	646,708	$	2,147,989	$	942,911	$	409,846	$	315,862	$	410,498	$	1,750,395	$	6,624,209
Real estate-construction	Real estate-construction																	Real estate-construction
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	407,465	$	323,632	$	131,606	$	49,040	$	24,660	$	682	$	32,865	$	969,950	Pass	$	73,104	$	542,446	$	244,604	$	55,775	$	2,807	$	25,804	$	26,432	$	970,972
Special mention	Special mention	0		0		10,107		14,555		0		0		0		24,662		Special mention	0		28,003		0		1,013		34,539		0		0		63,555
Substandard	Substandard	1,354		0		593		13,169		0		0		0		15,116		Substandard	13,191		10,030		0		15,288		0		0		0		38,509
Non-accrual		1		0		0		0		0		0		0		1

Total Real estate-construction:	Total Real estate-construction:	$	408,820	$	323,632	$	142,306	$	76,764	$	24,660	$	682	$	32,865	$	1,009,729	Total Real estate-construction:	$	86,295	$	580,479	$	244,604	$	72,076	$	37,346	$	25,804	$	26,432	$	1,073,036
Real estate- business
Real estate-business																		Real estate-business
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	713,079	$	698,287	$	384,214	$	283,843	$	329,613	$	238,663	$	46,224	$	2,693,923	Pass	$	167,100	$	807,967	$	676,478	$	297,800	$	224,394	$	421,617	$	64,817	$	2,660,173
Special mention	Special mention	24,660		11,959		45,547		6,943		20,837		1,285		2		111,233		Special mention	136		33,108		10,493		24,124		5,942		6,706		74		80,583
Substandard	Substandard	57,938		6,099		11,228		57,364		17,306		33,472		3,566		186,973		Substandard	47,015		37,505		11,646		33,645		79,997		56,933		8,173		274,914
Non-accrual	Non-accrual	1		285		624		0		0		153		0		1,063		Non-accrual	0		285		93		1,145		0		49		0		1,572
Total Real-estate business:		$	795,678	$	716,630	$	441,613	$	348,150	$	367,756	$	273,573	$	49,792	$	2,993,192
Total Real estate-business:																		Total Real estate-business:	$	214,251	$	878,865	$	698,710	$	356,714	$	310,333	$	485,305	$	73,064	$	3,017,242
Commercial loans	Commercial loans																	Commercial loans
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	3,514,978	$	2,119,417	$	1,034,786	$	689,299	$	541,265	$	547,026	$	1,614,600	$	10,061,371	Pass	$	880,181	$	3,474,130	$	1,816,315	$	741,301	$	539,525	$	830,416	$	1,755,145	$	10,037,013
Special mention	Special mention	54,280		40,477		73,186		22,618		26,610		3,128		63,975		284,274		Special mention	3,179		63,682		40,346		40,069		41,762		14,655		23,999		227,692
Substandard	Substandard	75,410		32,500		13,960		73,382		20,914		47,351		38,813		302,330		Substandard	62,815		58,817		29,470		53,609		82,139		70,422		70,723		427,995
Non-accrual	Non-accrual	19,950		285		2,689		16		125		3,998		11,296		38,359		Non-accrual	1,079		10,704		94		3,657		115		6,114		24		21,787
Total Commercial loans:	Total Commercial loans:	$	3,664,618	$	2,192,679	$	1,124,621	$	785,315	$	588,914	$	601,503	$	1,728,684	$	10,686,334	Total Commercial loans:	$	947,254	$	3,607,333	$	1,886,225	$	838,636	$	663,541	$	921,607	$	1,849,891	$	10,714,487

~~Information about the credit quality of the Commercial loan portfolio as of December 31, 2019 follows:~~

Commercial Loans

(In thousands)

Business
Real
Estate-Construction
Real
Estate-
Business

Total
December 31, 2019
Pass $ 5,393,928 $ 856,364 $ 2,659,827 $ 8,910,119
Special mention 80,089 42,541 92,626 215,256
Substandard 83,943 470 80,071 164,484
Non-accrual 7,489 2 1,030 8,521
Total $ 5,565,449 $ 899,377 $ 2,833,554 $ 9,298,380

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	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
December 31, 2020
Business
Risk Rating:
Pass	$	2,472,419	$	966,068	$	438,557	$	329,207	$	163,357	$	281,604	$	1,619,680	$	6,270,892
Special mention	28,612		26,746		14,102		1,781		5,091		1,664		41,749		119,745
Substandard	17,246		21,985		5,076		2,675		3,578		13,390		68,976		132,926
Non-accrual	12,619		1		5,327		391		502		3,659		25		22,524
Total Business:	$	2,530,896	$	1,014,800	$	463,062	$	334,054	$	172,528	$	300,317	$	1,730,430	$	6,546,087
Real estate-construction
Risk Rating:
Pass	$	483,302	$	330,480	$	56,747	$	3,021	$	24,426	$	1,692	$	27,356	$	927,024
Special mention	29,692		0		1,022		34,532		0		0		0		65,246
Substandard	1,154		0		14,989		13,182		0		0		0		29,325

Total Real estate-construction:	$	514,148	$	330,480	$	72,758	$	50,735	$	24,426	$	1,692	$	27,356	$	1,021,595
Real estate- business
Risk Rating:
Pass	$	890,740	$	666,399	$	336,850	$	241,656	$	313,691	$	199,534	$	67,796	$	2,716,666
Special mention	8,936		21,734		49,580		6,597		17,504		1,309		3,002		108,662
Substandard	46,882		1,037		4,061		81,435		17,538		45,014		2,592		198,559
Non-accrual	478		188		1,480		0		0		84		0		2,230
Total Real-estate business:	$	947,036	$	689,358	$	391,971	$	329,688	$	348,733	$	245,941	$	73,390	$	3,026,117
Commercial loans
Risk Rating:
Pass	$	3,846,461	$	1,962,947	$	832,154	$	573,884	$	501,474	$	482,830	$	1,714,832	$	9,914,582
Special mention	67,240		48,480		64,704		42,910		22,595		2,973		44,751		293,653
Substandard	65,282		23,022		24,126		97,292		21,116		58,404		71,568		360,810
Non-accrual	13,097		189		6,807		391		502		3,743		25		24,754
Total Commercial loans:	$	3,992,080	$	2,034,638	$	927,791	$	714,477	$	545,687	$	547,950	$	1,831,176	$	10,593,799

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The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided as of ~~September 30,~~March 31, 2021 and December 31, 2020 below:


		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
March 31, 2021																		March 31, 2021
Real estate-personal	Real estate-personal																	Real estate-personal
Current to 90 days past due	Current to 90 days past due	$	897,007	$	532,003	$	238,092	$	227,499	$	247,754	$	595,713	$	11,221	$	2,749,289	Current to 90 days past due	$	219,663	$	1,063,039	$	443,537	$	199,212	$	186,744	$	702,872	$	9,212	$	2,824,279
Over 90 days past due	Over 90 days past due	273		394		422		361		357		860		0		2,667		Over 90 days past due	0		563		463		275		343		776		0		2,420
Non-accrual	Non-accrual	0		195		129		45		121		1,421		0		1,911		Non-accrual	0		24		187		114		45		1,349		0		1,719
Total Real estate-personal:	Total Real estate-personal:	$	897,280	$	532,592	$	238,643	$	227,905	$	248,232	$	597,994	$	11,221	$	2,753,867	Total Real estate-personal:	$	219,663	$	1,063,626	$	444,187	$	199,601	$	187,132	$	704,997	$	9,212	$	2,828,418
Consumer	Consumer																	Consumer
Current to 90 days past due	Current to 90 days past due	$	446,909	$	380,399	$	188,186	$	137,253	$	90,236	$	104,466	$	656,700	$	2,004,149	Current to 90 days past due	$	148,812	$	489,710	$	295,133	$	136,567	$	93,905	$	134,996	$	657,313	$	1,956,436
Over 90 days past due	Over 90 days past due	76		337		158		176		162		278		1,024		2,211		Over 90 days past due	0		113		136		306		85		376		9,381		10,397

Total Consumer:	Total Consumer:	$	446,985	$	380,736	$	188,344	$	137,429	$	90,398	$	104,744	$	657,724	$	2,006,360	Total Consumer:	$	148,812	$	489,823	$	295,269	$	136,873	$	93,990	$	135,372	$	666,694	$	1,966,833
Revolving home equity	Revolving home equity																	Revolving home equity
Current to 90 days past due	Current to 90 days past due	$	0	$	0	$	0	$	0	$	0	$	0	$	323,809	$	323,809	Current to 90 days past due	$	0	$	0	$	0	$	0	$	0	$	0	$	284,534	$	284,534
Over 90 days past due	Over 90 days past due	0		0		0		0		0		0		394		394		Over 90 days past due	0		0		0		0		0		0		727		727

Total Revolving home equity:	Total Revolving home equity:	$	0	$	0	$	0	$	0	$	0	$	0	$	324,203	$	324,203	Total Revolving home equity:	$	0	$	0	$	0	$	0	$	0	$	0	$	285,261	$	285,261
Consumer credit card	Consumer credit card																	Consumer credit card
Current to 90 days past due	Current to 90 days past due	$	0	$	0	$	0	$	0	$	0	$	0	$	641,362	$	641,362	Current to 90 days past due	$	0	$	0	$	0	$	0	$	0	$	0	$	586,235	$	586,235
Over 90 days past due	Over 90 days past due	0		0		0		0		0		0		6,531		6,531		Over 90 days past due	0		0		0		0		0		0		7,598		7,598

Total Consumer credit card:	Total Consumer credit card:	$	0	$	0	$	0	$	0	$	0	$	0	$	647,893	$	647,893	Total Consumer credit card:	$	0	$	0	$	0	$	0	$	0	$	0	$	593,833	$	593,833
Overdrafts	Overdrafts																	Overdrafts
Current to 90 days past due	Current to 90 days past due	$	2,270	$	0	$	0	$	0	$	0	$	0	$	0	$	2,270	Current to 90 days past due	$	3,239	$	0	$	0	$	0	$	0	$	0	$	0	$	3,239
Over 90 days past due		0		0		0		0		0		0		0		0

Total Overdrafts:	Total Overdrafts:	$	2,270	$	0	$	0	$	0	$	0	$	0	$	0	$	2,270	Total Overdrafts:	$	3,239	$	0	$	0	$	0	$	0	$	0	$	0	$	3,239
Personal banking loans	Personal banking loans																	Personal banking loans
Current to 90 days past due	Current to 90 days past due	$	1,346,186	$	912,402	$	426,278	$	364,752	$	337,990	$	700,179	$	1,633,092	$	5,720,879	Current to 90 days past due	$	371,714	$	1,552,749	$	738,670	$	335,779	$	280,649	$	837,868	$	1,537,294	$	5,654,723
Over 90 days past due	Over 90 days past due	349		731		580		537		519		1,138		7,949		11,803		Over 90 days past due	0		676		599		581		428		1,152		17,706		21,142
Non-accrual	Non-accrual	0		195		129		45		121		1,421		0		1,911		Non-accrual	0		24		187		114		45		1,349		0		1,719
Total Personal banking loans:	Total Personal banking loans:	$	1,346,535	$	913,328	$	426,987	$	365,334	$	338,630	$	702,738	$	1,641,041	$	5,734,593	Total Personal banking loans:	$	371,714	$	1,553,449	$	739,456	$	336,474	$	281,122	$	840,369	$	1,555,000	$	5,677,584

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	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
December 31, 2020
Real estate-personal
Current to 90 days past due	$	1,123,918	$	488,379	$	218,390	$	201,971	$	227,265	$	544,008	$	11,476	$	2,815,407
Over 90 days past due	534		375		281		411		388		848		0		2,837
Non-accrual	29		191		116		45		65		1,340		0		1,786
Total Real estate-personal:	$	1,124,481	$	488,945	$	218,787	$	202,427	$	227,718	$	546,196	$	11,476	$	2,820,030
Consumer
Current to 90 days past due	$	536,799	$	337,431	$	161,337	$	115,886	$	75,769	$	86,831	$	633,186	$	1,947,239
Over 90 days past due	212		358		328		220		174		397		1,574		3,263

Total Consumer:	$	537,011	$	337,789	$	161,665	$	116,106	$	75,943	$	87,228	$	634,760	$	1,950,502
Revolving home equity
Current to 90 days past due	$	0	$	0	$	0	$	0	$	0	$	0	$	306,693	$	306,693
Over 90 days past due	0		0		0		0		0		0		390		390

Total Revolving home equity:	$	0	$	0	$	0	$	0	$	0	$	0	$	307,083	$	307,083
Consumer credit card
Current to 90 days past due	$	0	$	0	$	0	$	0	$	0	$	0	$	642,860	$	642,860
Over 90 days past due	0		0		0		0		0		0		12,218		12,218

Total Consumer credit card:	$	0	$	0	$	0	$	0	$	0	$	0	$	655,078	$	655,078
Overdrafts
Current to 90 days past due	$	3,149	$	0	$	0	$	0	$	0	$	0	$	0	$	3,149


Total Overdrafts:	$	3,149	$	0	$	0	$	0	$	0	$	0	$	0	$	3,149
Personal banking loans
Current to 90 days past due	$	1,663,866	$	825,810	$	379,727	$	317,857	$	303,034	$	630,839	$	1,594,215	$	5,715,348
Over 90 days past due	746		733		609		631		562		1,245		14,182		18,708
Non-accrual	29		191		116		45		65		1,340		0		1,786
Total Personal banking loans:	$	1,664,641	$	826,734	$	380,452	$	318,533	$	303,661	$	633,424	$	1,608,397	$	5,735,842

Collateral-dependent loans

The Company's collateral-dependent loans are comprised of large loans on non-accrual status. The Company requires that collateral-dependent loans are either over-collateralized or carry collateral equal to the amortized cost of the loan. The following table presents the amortized cost basis of collateral-dependent loans as of ~~September 30,~~March 31, 2021 and December 31, 2020.


(In thousands)	(In thousands)	Business Assets		Future Revenue Streams		Energy		Total		(In thousands)	Business Assets		Future Revenue Streams		Oil & Gas Assets		Total
March 31, 2021										March 31, 2021
Commercial:	Commercial:									Commercial:
Business	Business	$	18,843	$	3,616	$	14,276	$	36,734	Business	$	0	$	0	$	13,687	$	13,687

Real estate - business										Real estate - business	0		908		0		908

Total	Total	$	18,843	$	3,616	$	14,276	$	36,734	Total	$	0	$	908	$	13,687	$	14,595
December 31, 2020										December 31, 2020
Commercial:										Commercial:
Business										Business	$	13,109	$	0	$	2,695	$	15,804

Real estate - business										Real estate - business	0		986		0		986

Total										Total	$	13,109	$	986	$	2,695	$	16,790

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Other Personal Banking loan information

As noted above, the credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided in the table in the above section on "Credit quality indicators." In addition, FICO scores are obtained and updated on a quarterly basis for most of the loans in the Personal Banking portfolio. This is a published credit score designed to measure the risk of default by taking into account various factors from a borrower's financial history and is considered supplementary information utilized by the Company, as management does not consider this information in evaluating the allowance for credit losses on loans. The Bank normally obtains a FICO score at the loan's origination and renewal dates, and updates are obtained on a quarterly basis. Excluded from the table below are certain personal real estate loans for which FICO scores are not obtained because the loans generally pertain to commercial customer activities and are often underwritten with other collateral considerations. These loans totaled ~~$183.3~~$188.6 million at ~~September 30, 2020~~March 31, 2021 and ~~$198.2~~$191.1 million at December 31, ~~2019.~~2020. The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled ~~$193.2~~$179.8 million at ~~September 30, 2020~~March 31, 2021 and ~~$199.2~~$188.1 million at December 31, ~~2019.~~2020. As the healthcare loans are guaranteed by the hospital, customer FICO scores are not obtained for these loans. The personal real estate loans and consumer loans excluded below totaled less than 7% of the Personal Banking portfolio. For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 by FICO score.


Personal Banking Loans	Personal Banking Loans									Personal Banking Loans
		% of Loan Category									% of Loan Category
		Real Estate - Personal		Consumer		Revolving Home Equity		Consumer Credit Card			Real Estate - Personal		Consumer		Revolving Home Equity		Consumer Credit Card
September 30, 2020
March 31, 2021										March 31, 2021
FICO score:	FICO score:									FICO score:
Under 600	Under 600	1.0	%	2.4	%	1.4	%	5.2	%	Under 600	0.9	%	2.2	%	1.3	%	4.3	%
600 - 659	600 - 659	2.1		3.9		2.5		12.9		600 - 659	2.1		3.9		2.3		11.7
660 - 719	660 - 719	8.5		14.5		7.3		32.2		660 - 719	8.1		14.4		9.1		32.9
720 - 779	720 - 779	25.7		25.6		22.6		27.5		720 - 779	22.9		25.4		22.8		28.0
780 and over	780 and over	62.7		53.6		66.2		22.2		780 and over	66.0		54.1		64.5		23.1
Total	Total	100.0	%	100.0	%	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%
December 31, 2019
December 31, 2020										December 31, 2020
FICO score:	FICO score:									FICO score:
Under 600	Under 600	1.0	%	3.0	%	1.7	%	5.6	%	Under 600	0.8	%	2.3	%	1.3	%	5.0	%
600 - 659	600 - 659	1.9		5.2		1.9		14.3		600 - 659	1.9		4.2		2.4		12.3
660 - 719	660 - 719	9.2		15.4		9.0		32.2		660 - 719	8.8		14.1		8.6		31.2
720 - 779	720 - 779	25.7		27.0		21.5		26.6		720 - 779	24.5		23.9		22.2		28.0
780 and over	780 and over	62.2		49.4		65.9		21.3		780 and over	64.0		55.5		65.5		23.5
Total	Total	100.0	%	100.0	%	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%

~~Table of Contents~~

Troubled debt restructurings

Restructured loans are those extended to borrowers who are experiencing financial difficulty and who have been granted a concession. Restructured loans are placed on non-accrual status if the Company does not believe it probable that amounts due under the contractual terms will be collected. Commercial performing restructured loans are primarily comprised of certain business, construction and business real estate loans classified as substandard but renewed at rates judged to be non-market. These loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. Troubled debt restructurings also include certain credit card and other small consumer loans under various debt management and assistance programs. Modifications to these loans generally involve removing the available line of credit, placing loans on amortizing status, and lowering the contractual interest rate. Certain personal real estate, revolving home equity, and consumer loans were classified as consumer bankruptcy troubled debt restructurings because they were not reaffirmed by the borrower in bankruptcy proceedings. Interest on these loans is being recognized on an accrual basis, as the borrowers are continuing to make payments. Other consumer loans classified as troubled debt restructurings consist of various other workout arrangements with consumer customers.

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(In thousands)		March 31, 2021		December 31, 2020
Accruing restructured loans:
	Commercial	$	118,515	$	117,740
	Assistance programs	6,881		7,804
	Consumer bankruptcy	2,716		2,841
	Other consumer	2,301		2,353
Non-accrual loans		9,158		9,889
Total troubled debt restructurings		$	139,571	$	140,627

Section 4013 of the CARES Act was signed into law on March 27, 2020, and includes a provision that short-term modifications are not troubled debt restructurings, if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to December 31, 2019. In addition to the CARES Act, bank regulatory agencies issued interagency guidance stating suspending the troubled debt restructuring classification would be appropriate if the borrower was less than 30 days past due at the time the modification program is implemented. The guidance also provides that loans generally will not be adversely classified if the short-term modification is related to COVID-19 relief programs. The Company follows the guidance under the CARES Act when determining if a customer’s modification is subject to troubled debt restructuring classification. If it is deemed the modification is not short-term, not COVID-19 related or the customer does not meet the criteria under the guidance to be scoped out of troubled debt restructuring classification, the Company will evaluate the loan modifications under its existing framework which requires modifications that result in a concession to a borrower experiencing financial difficulty be accounted for as a troubled debt restructuring.

(In thousands) September 30, 2020 December 31, 2019
Accruing restructured loans:
Commercial $ 50,921 $ 55,934
Assistance programs 8,208 8,365
Consumer bankruptcy 3,101 3,592
Other consumer 2,418 3,621
Non-accrual loans 8,513 7,938
Total troubled debt restructurings $ 73,161 $ 79,450
The initial guidance issued under the CARES Act was due to expire on December 31, 2020. During January 2021, the Consolidated Appropriations Act, 2021 was enacted and extended relief offered under the CARES Act related to the accounting and disclosure requirements for troubled debt restructurings as a result of COVID-19. The Company elected to adopt the extension of this guidance.

The table below shows the balance of troubled debt restructurings by loan classification at ~~September 30, 2020,~~March 31, 2021, in addition to the outstanding balances of these restructured loans which the Company considers to have been in default at any time during the past twelve months. For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal.


(In thousands)	(In thousands)	September 30, 2020		Balance 90 days past due at any time during previous 12 months		(In thousands)	March 31, 2021		Balance 90 days past due at any time during previous 12 months
Commercial:	Commercial:					Commercial:
Business	Business	$	17,696	$	674	Business	$	62,384	$	630
Real estate - construction and land	Real estate - construction and land	41		0		Real estate - construction and land	10,107		0
Real estate - business	Real estate - business	40,596		0		Real estate - business	54,024		908
Personal Banking:	Personal Banking:					Personal Banking:
Real estate - personal	Real estate - personal	3,278		252		Real estate - personal	3,153		308
Consumer	Consumer	3,530		103		Consumer	3,176		213
Revolving home equity	Revolving home equity	56		0		Revolving home equity	27		0
Consumer credit card	Consumer credit card	7,964		257		Consumer credit card	6,700		506
Total troubled debt restructurings	Total troubled debt restructurings	$	73,161	$	1,286	Total troubled debt restructurings	$	139,571	$	2,565

~~Table of Contents~~

For those loans on non-accrual status also classified as restructured, the modification did not create any further financial effect on the Company as those loans were already recorded at net realizable value. For those performing commercial loans classified as restructured, there were no concessions involving forgiveness of principal or interest and, therefore, there was no financial impact to the Company as a result of modification to these loans. No financial impact resulted from those performing loans where the debt was not reaffirmed in bankruptcy, as no changes to loan terms occurred in that process. However, the effects of modifications to loans under various debt management and assistance programs were estimated to decrease interest income by approximately ~~$1.1~~$1.0 million on an annual, pre-tax basis, compared to amounts contractually owed. Other modifications to consumer loans mainly involve extensions and other small modifications that did not include the forgiveness of principal or interest.

The allowance for credit losses related to troubled debt restructurings on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as troubled debt restructurings. Those performing loans classified as troubled debt restructurings are accruing loans which

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management expects to collect under contractual terms. Performing commercial loans having no other concessions granted other than being renewed at non-market interest rates are judged to have similar risk characteristics as non-troubled debt commercial loans and are collectively evaluated based on internal risk rating, loan type, delinquency, historical experience and current economic factors. Performing personal banking loans classified as troubled debt restructurings resulted from the borrower not reaffirming the debt during bankruptcy and have had no other concession granted, other than the Bank's future limitations on collecting payment deficiencies or in pursuing foreclosure actions. As such, they have similar risk characteristics as non-troubled debt personal banking loans and are evaluated collectively based on loan type, delinquency, historical experience and current economic factors.

If a troubled debt restructuring defaults and is already on non-accrual status, the allowance for credit losses continues to be based on individual evaluation, using discounted expected cash flows or the fair value of collateral. If an accruing troubled debt restructuring defaults, the loan's risk rating is downgraded to non-accrual status and the loan's related allowance for credit losses is determined based on individual evaluation, or if necessary, the loan is charged off and collection efforts ~~begun.~~begin.

The Company had commitments of ~~$13.1~~$30.7 million at ~~September 30, 2020~~March 31, 2021 to lend additional funds to borrowers with restructured loans.

~~Impaired loans~~

~~The following Impaired loans disclosures were superceded by ASC 2016-13.~~

~~The table below shows the Company’s balances~~ Included in these commitments at March 31, 2021 are $27.7 million of ~~impaired loans at December 31, 2019. These loans consist~~letters of ~~all loans on non-accrual status and other~~credit with borrowers with restructured loans whose terms have been modified and classified as troubled debt restructurings. These restructured loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. They are discussed further in the ~~"Troubled debt restructurings"~~ ~~section above.~~loans.

~~(In thousands)~~

~~Dec. 31, 2019~~

~~Non-accrual loans~~

~~10,220~~

~~Restructured loans (accruing)~~

~~71,512~~

~~Total impaired loans~~

~~81,732~~

The following table shows the balance in the allowance for loan losses and the related loan balance at December 31, 2019, disaggregated on the basis of impairment methodology. Impaired loans evaluated under Accounting Standards Codification (ASC) 310-10-35 include loans on non-accrual status, which are individually evaluated for impairment, and other impaired loans deemed to have similar risk characteristics, which are collectively evaluated. All other loans are collectively evaluated for impairment under ASC 450-20.

Impaired Loans All Other Loans

(In thousands)
Allowance for Loan Losses Loans Outstanding Allowance for Loan Losses Loans Outstanding
December 31, 2019
Commercial $ 1,629 $ 64,500 $ 90,131 $ 9,233,880
Personal Banking 1,117 17,232 67,805 5,422,205
Total $ 2,746 $ 81,732 $ 157,936 $ 14,656,085

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The following table provides additional information about impaired loans held by the Company at December 31, 2019, segregated between loans for which an allowance for credit losses has been provided and loans for which no allowance has been provided.

(In thousands)
Recorded Investment
Unpaid Principal
Balance
Related
Allowance
December 31, 2019
With no related allowance recorded:
Business $ 7,054 $ 13,738 $ 0
$ 7,054 $ 13,738 $ 0
With an allowance recorded:
Business $ 30,437 $ 30,487 $ 837
Real estate – construction and land 46 51 1
Real estate – business 26,963 27,643 791
Real estate – personal 4,729 5,968 258
Consumer 4,421 4,421 35
Revolving home equity 35 35 1
Consumer credit card 8,047 8,047 823
$ 74,678 $ 76,652 $ 2,746
Total $ 81,732 $ 90,390 $ 2,746

~~Total average impaired loans for the three and nine month periods ended September 30, 2019 are shown in the table below.~~

(In thousands)
Commercial Personal Banking Total
Average Impaired Loans:
For the three months ended September 30, 2019
Non-accrual loans $ 9,655 $ 1,903 $ 11,558
Restructured loans (accruing) 53,517 15,644 69,161
Total $ 63,172 $ 17,547 $ 80,719
For the nine months ended September 30, 2019
Non-accrual loans $ 9,881 $ 2,074 $ 11,955
Restructured loans (accruing) 48,248 15,605 63,853
Total $ 58,129 $ 17,679 $ 75,808

The table below shows interest income recognized during the three and nine month periods ended September 30, 2019, respectively, for impaired loans held at the end of each period. This interest all relates to accruing restructured loans, as discussed in the ~~"Troubled debt restructurings"~~ ~~section above.~~

For the Three Months Ended September 30 For the Nine Months Ended September 30
(In thousands) 2019 2019
Interest income recognized on impaired loans:
Business $ 222 $ 665
Real estate – construction and land 1 2
Real estate – business 363 1,088
Real estate – personal 31 92
Consumer 76 227
Revolving home equity 1 2
Consumer credit card 181 542
Total $ 875 $ 2,618

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Loans held for sale

The Company designates certain long-term fixed rate personal real estate loans as held for sale, and the Company has elected the fair value option for these loans. The election of the fair value option aligns the accounting for these loans with the related economic hedges discussed in Note 11. The loans are primarily sold to FNMA ~~FHLMC,~~ and ~~GNMA.~~FHLMC. At ~~September 30, 2020,~~March 31, 2021, the fair value of these loans was ~~$35.1~~$30.5 million, and the unpaid principal balance was ~~$33.3~~$30.0 million

The Company also designates certain student loan originations as held for sale. The borrowers are credit-worthy students who are attending colleges and universities. The loans are intended to be sold in the secondary market, and the Company maintains contracts with Sallie Mae to sell the loans within 210 days after the last disbursement to the student. These loans are carried at lower of cost or fair value, which at ~~September 30, 2020~~March 31, 2021 totaled ~~$4.4~~$7.6 million.

At ~~September 30, 2020,~~March 31, 2021, NaN of the loans held for sale were on non-accrual status or 90 days past due and still accruing.

Foreclosed real estate/repossessed assets

The Company’s holdings of foreclosed real estate totaled ~~$57~~$208 thousand and ~~$365~~$93 thousand at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Personal property acquired in repossession, generally autos, marine and recreational vehicles (RV), totaled ~~$1.3~~$1.8 million and ~~$5.5~~$1.4 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Upon acquisition, these assets are recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. They are subsequently carried at the lower of this cost basis or fair value less estimated selling costs.

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3. Investment Securities

Investment securities consisted of the following at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		(In thousands)	March 31, 2021		December 31, 2020
Available for sale debt securities	Available for sale debt securities	$	11,539,061	$	8,571,626	Available for sale debt securities	$	12,528,203	$	12,449,264
Trading debt securities	Trading debt securities	25,805		28,161		Trading debt securities	26,925		35,321
Equity securities:	Equity securities:					Equity securities:
Readily determinable fair value	Readily determinable fair value	2,803		2,929		Readily determinable fair value	2,931		2,966
No readily determinable fair value	No readily determinable fair value	1,400		1,280		No readily determinable fair value	1,406		1,397
Other:	Other:					Other:
Federal Reserve Bank stock	Federal Reserve Bank stock	34,070		33,770		Federal Reserve Bank stock	34,222		34,070
Federal Home Loan Bank stock	Federal Home Loan Bank stock	10,000		10,000		Federal Home Loan Bank stock	10,125		10,307
Equity method investments						Equity method investments	17,309		18,000
Private equity investments	Private equity investments	78,462		94,122		Private equity investments	94,257		94,368
Total investment securities (1)	Total investment securities (1)	$	11,691,601	$	8,741,888	Total investment securities (1)	$	12,715,378	$	12,645,693

(1)Accrued interest receivable totaled ~~$39.7~~$39.8 million and $41.5 million at ~~September 30,~~March 31, 2021 and December 31, 2020, respectively,and was included within other assets on the consolidated balance sheet.

The Company has elected to measure equity securities with no readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer. This portfolio includes the Company's holdings of Visa Class B shares, which have a carrying value of zero, as there have not been observable price changes in orderly transactions for identical or similar investments of the same issuer. During the period, the Company did not record any impairment or other adjustments to the carrying amount of ~~these~~its portfolio of equity securities ~~without a~~with no readily determinable fair value.

Other investment securities include Federal Reserve Bank (FRB) stock, Federal Home Loan Bank (FHLB) stock, equity method investments, and investments in portfolio concerns held by the Company's private equity ~~subsidiaries.~~subsidiary. FRB stock and FHLB stock are held for debt and regulatory purposes. Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is tied to the level of borrowings from the FHLB. These holdings are carried at cost. Additionally, the Company's equity method investments are carried at cost, adjusted to reflect the Company's portion of income, loss, or dividends of the investee. These holdings are carried at cost. The Company's private equity investments, in the absence of readily ascertainable market values, are carried at estimated fair value.

The majority of the Company’s investment portfolio is comprised of available for sale debt securities, which are carried at fair value with changes in fair value reported in accumulated other comprehensive income (AOCI). A summary of the available for sale debt securities by maturity groupings as of ~~September 30, 2020~~March 31, 2021 is shown below. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as the FHLMC, FNMA, and GNMA, in addition to non-agency mortgage-backed securities, which have no guarantee but are collateralized by commercial and residential mortgages. Also included are certain other asset-backed securities, which are primarily collateralized by credit cards,

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automobiles, student loans, and commercial loans. These securities differ from traditional debt securities primarily in that they may have uncertain maturity dates and are priced based on estimated prepayment rates on the underlying collateral.

(In thousands) Amortized
Cost Fair
Value
U.S. government and federal agency obligations:
Within 1 year $ 59,367 $ 59,706
After 1 but within 5 years 489,042 521,797
After 5 but within 10 years 225,159 253,555
Total U.S. government and federal agency obligations 773,568 835,058
Government-sponsored enterprise obligations:
Within 1 year 55,185 54,770
After 10 years 35,818 40,531
Total government-sponsored enterprise obligations 91,003 95,301
State and municipal obligations:
Within 1 year 68,787 69,179
After 1 but within 5 years 764,831 803,168
After 5 but within 10 years 597,276 624,525
After 10 years 464,375 472,272
Total state and municipal obligations 1,895,269 1,969,144
Mortgage and asset-backed securities:
  Agency mortgage-backed securities 5,919,500 6,081,802
  Non-agency mortgage-backed securities 324,266 332,970
  Asset-backed securities 1,633,988 1,658,579
Total mortgage and asset-backed securities 7,877,754 8,073,351
Other debt securities:
Within 1 year 23,565 23,701
After 1 but within 5 years 252,180 264,096
After 5 but within 10 years 240,814 249,136
After 10 years 28,195 29,274
Total other debt securities 544,754 566,207
Total available for sale debt securities $ 11,182,348 $ 11,539,061

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(In thousands)	Amortized Cost		Fair Value
U.S. government and federal agency obligations:
Within 1 year	$	28,829	$	29,556
After 1 but within 5 years	497,629		529,644
After 5 but within 10 years	191,156		214,390

Total U.S. government and federal agency obligations	717,614		773,590
Government-sponsored enterprise obligations:
Within 1 year	14,993		14,065


After 10 years	35,803		36,751
Total government-sponsored enterprise obligations	50,796		50,816
State and municipal obligations:
Within 1 year	91,179		92,217
After 1 but within 5 years	839,094		872,047
After 5 but within 10 years	619,310		631,678
After 10 years	397,103		384,869
Total state and municipal obligations	1,946,686		1,980,811
Mortgage and asset-backed securities:
Agency mortgage-backed securities	6,296,555		6,327,450
Non-agency mortgage-backed securities	358,400		358,498
Asset-backed securities	2,418,692		2,436,885
Total mortgage and asset-backed securities	9,073,647		9,122,833
Other debt securities:
Within 1 year	46,537		47,170
After 1 but within 5 years	278,766		286,310
After 5 but within 10 years	258,563		251,640
After 10 years	15,432		15,033
Total other debt securities	599,298		600,153
Total available for sale debt securities	$	12,388,041	$	12,528,203

Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled ~~$429.8~~$372.9 million, at fair value, at ~~September 30, 2020.~~March 31, 2021. Interest paid on these securities increases with inflation and decreases with deflation, as measured by the Consumer Price Index. At maturity, the principal paid is the greater of an inflation-adjusted principal or the original principal.

Allowance for credit losses on available for sale debt securities

~~As described in Note 1, the~~The Company adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, on January 1, 2020. The adoption of ASU 2016-13 had no impact to the Company's available for sale securities reported in its consolidated financial statements at January 1, 2020. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, the Company did not recognize a credit loss expense on any available for sale debt securities.

The Company’s ~~impairment policy requires a review~~model for establishing its allowance for credit losses uses cash flows projected to be received over the estimated life of ~~all~~the securities, discounted to present value, and compared to the current amortized cost bases of the securities. Securities for which fair value is less than amortized ~~cost.~~cost are reviewed for impairment. Special emphasis is placed on securities whose credit rating has fallen below Baa3 (Moody's) or BBB- (Standard & Poor's), whose fair values have fallen more than 20% below purchase price, or who have been identified based on management’s judgment. These securities are placed on a watch list and cash flow analyses are prepared on an individual security basis. ~~Inputs to these models include~~Credit impairment is determined using input factors such as cash flow projections, contractual payments required, expected delinquency rates, credit support from other tranches, prepayment speeds, collateral loss severity rates (including loan to values), and various other information related to the underlying collateral. ~~Stress tests are performed at varying levels of delinquency rates, prepayment speeds and loss severities in order to gauge probable ranges of credit loss.~~ At ~~September 30, 2020,~~March 31, 2021, the fair value of securities on this watch list was ~~$53.3~~$25.6 million compared to ~~$51.6~~$31.0 million at December 31, ~~2019.~~

2020.

2421

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~~The Company's~~Significant inputs to the cash flow model ~~for establishing its allowance for~~used at March 31, 2021 to quantify credit losses ~~uses cash flows projected to be received over the estimated life of~~were primarily credit support agreements, as the securities ~~discounted~~on the Company's watch list at March 31, 2021 were securities backed by government-guaranteed student loans and are expected to ~~present value, and compared to the current amortized cost bases of the securities.~~perform as contractually required. As of ~~September 30, 2020,~~March 31, 2021, the Company did not identify any securities for which a credit loss exists. ~~Significant inputs to the cash flow models used at September 30, 2020 to quantify credit losses included the following:~~

Significant Inputs Range
Prepayment CPR 0% - 25%
Projected cumulative default 13% - 54%
Credit support 0% - 20%
Loss severity 7% - 63%

The table below summarizes debt securities available for sale in an unrealized loss position, aggregated by length of loss period, for which an allowance for credit losses has not been recorded at ~~September 30,~~March 31, 2021 and December 31, 2020. Unrealized losses on these available for sale securities have not been recognized into income because after review, the ~~issuers' bonds~~securities were deemed not to be impaired. The unrealized losses on these securities are ~~of investment grade quality (rated Baa3, BBB- or higher), their fair values have not fallen more than 20% below purchase price,~~primarily attributable to changes in interest rates and ~~they have not been identified by management as a security needing a more detailed review.~~current market conditions. Additionally, management does not intend to sell the securities, and it is more likely than not that management will not be required to sell the securities prior to their anticipated recovery. The cash flow analyses prepared for securities included on the watch list discussed above did not identify any instances where the present value of expected cash flows were less than the amortized cost basis of the security.

The following table summarizes debt securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded at September 30, 2020, aggregated by major security type and length of impairment period.

Less than 12 months 12 months or longer Total

(In thousands)
   Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
September 30, 2020
Government-sponsored enterprise obligations $ 14,489 $ 503 $ 0 $ 0 $ 14,489 $ 503
State and municipal obligations 84,876 578 0 0 84,876 578
Mortgage and asset-backed securities:
   Agency mortgage-backed securities 287,620 5,402 0 0 287,620 5,402
   Non-agency mortgage-backed securities 68,513 234 1,069 45 69,582 279
   Asset-backed securities 97,592 1,100 245,198 6,196 342,790 7,296
Total mortgage and asset-backed securities 453,725 6,736 246,267 6,241 699,992 12,977
Other debt securities 43,600 493 0 0 43,600 493
Total $ 596,690 $ 8,310 $ 246,267 $ 6,241 $ 842,957 $ 14,551

~~Debt securities available for sale in an unrealized loss position, aggregated by major security type and length of impairment period, are as follows:~~


		Less than 12 months				12 months or longer				Total					Less than 12 months				12 months or longer				Total
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2019
U.S. government and federal agency obligations		$	31,787	$	21	$	25,405	$	21	$	57,192	$	42
March 31, 2021														March 31, 2021

Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	6,155		187		0		0		6,155		187		Government-sponsored enterprise obligations	$	18,535	$	1,283	$	0	$	0	$	18,535	$	1,283
State and municipal obligations	State and municipal obligations	6,700		31		1,554		1		8,254		32		State and municipal obligations	653,549		20,627		2,851		34		656,400		20,661
Mortgage and asset-backed securities:	Mortgage and asset-backed securities:													Mortgage and asset-backed securities:
Agency mortgage-backed securities	Agency mortgage-backed securities	652,352		5,306		147,653		867		800,005		6,173		Agency mortgage-backed securities	3,373,029		64,787		3,630		17		3,376,659		64,804
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	102,931		254		189,747		451		292,678		705		Non-agency mortgage-backed securities	162,080		2,063		0		0		162,080		2,063
Asset-backed securities	Asset-backed securities	330,876		3,610		152,461		2,108		483,337		5,718		Asset-backed securities	657,219		4,939		192,697		1,351		849,916		6,290
Total mortgage and asset-backed securities	Total mortgage and asset-backed securities	1,086,159		9,170		489,861		3,426		1,576,020		12,596		Total mortgage and asset-backed securities	4,192,328		71,789		196,327		1,368		4,388,655		73,157
Other debt securities	Other debt securities	5,496		4		997		3		6,493		7		Other debt securities	263,768		10,325		0		0		263,768		10,325
Total	Total	$	1,136,297	$	9,413	$	517,817	$	3,451	$	1,654,114	$	12,864	Total	$	5,128,180	$	104,024	$	199,178	$	1,402	$	5,327,358	$	105,426
December 31, 2020														December 31, 2020

Government-sponsored enterprise obligations														Government-sponsored enterprise obligations	$	19,720	$	98	$	0	$	0	$	19,720	$	98
State and municipal obligations														State and municipal obligations	45,622		230		0		0		45,622		230
Mortgage and asset-backed securities:														Mortgage and asset-backed securities:
Agency mortgage-backed securities														Agency mortgage-backed securities	470,373		2,802		0		0		470,373		2,802
Non-agency mortgage-backed securities														Non-agency mortgage-backed securities	112,861		380		0		0		112,861		380
Asset-backed securities														Asset-backed securities	21,360		56		253,734		2,617		275,094		2,673
Total mortgage and asset-backed securities														Total mortgage and asset-backed securities	604,594		3,238		253,734		2,617		858,328		5,855
Other debt securities														Other debt securities	24,522		175		0		0		24,522		175
Total														Total	$	694,458	$	3,741	$	253,734	$	2,617	$	948,192	$	6,358

The entire available for sale debt portfolio included ~~$843.0 million~~$5.3 billion of securities that were in a loss position at ~~September 30, 2020,~~March 31, 2021, compared to ~~$1.7 billion~~$948.2 million at December 31, ~~2019.~~2020. The total amount of unrealized loss on these securities was ~~$14.6~~$105.4 million

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at ~~September 30, 2020,~~March 31, 2021, an increase of ~~$1.7~~$99.1 million compared to the loss at December 31, ~~2019.~~2020. Securities with significant unrealized losses are discussed in the "Allowance for credit losses on available for sale debt securities" section above.

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For debt securities classified as available for sale, the following ~~table shows~~tables show the amortized cost, fair value, and allowance for credit losses of securities available for sale at ~~September 30,~~March 31, 2021 and December 31, 2020, and the corresponding amounts of gross unrealized gains and losses (pre-tax) in AOCI, by security type.


(In thousands)	(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value		(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
September 30, 2020
March 31, 2021												March 31, 2021
U.S. government and federal agency obligations	U.S. government and federal agency obligations	$	773,568	$	61,490	$	0	$	0	$	835,058	U.S. government and federal agency obligations	$	717,614	$	55,976	$	0	$	0	$	773,590
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	91,003		4,801		(503)		0		95,301		Government-sponsored enterprise obligations	50,796		1,303		(1,283)		0		50,816
State and municipal obligations	State and municipal obligations	1,895,269		74,453		(578)		0		1,969,144		State and municipal obligations	1,946,686		54,786		(20,661)		0		1,980,811
Mortgage and asset-backed securities:	Mortgage and asset-backed securities:											Mortgage and asset-backed securities:
Agency mortgage-backed securities	Agency mortgage-backed securities	5,919,500		167,704		(5,402)		0		6,081,802		Agency mortgage-backed securities	6,296,555		95,699		(64,804)		0		6,327,450
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	324,266		8,983		(279)		0		332,970		Non-agency mortgage-backed securities	358,400		2,161		(2,063)		0		358,498
Asset-backed securities	Asset-backed securities	1,633,988		31,887		(7,296)		0		1,658,579		Asset-backed securities	2,418,692		24,483		(6,290)		0		2,436,885
Total mortgage and asset-backed securities	Total mortgage and asset-backed securities	7,877,754		208,574		(12,977)		0		8,073,351		Total mortgage and asset-backed securities	9,073,647		122,343		(73,157)		0		9,122,833
Other debt securities	Other debt securities	544,754		21,946		(493)		0		566,207		Other debt securities	599,298		11,180		(10,325)		0		600,153
Total	Total	$	11,182,348	$	371,264	$	(14,551)	$	0	$	11,539,061	Total	$	12,388,041	$	245,588	$	(105,426)	$	0	$	12,528,203

December 31, 2020												December 31, 2020
U.S. government and federal agency obligations												U.S. government and federal agency obligations	$	775,592	$	62,467	$	0	$	0	$	838,059
Government-sponsored enterprise obligations												Government-sponsored enterprise obligations	50,803		3,780		(98)		0		54,485
State and municipal obligations												State and municipal obligations	1,968,006		77,323		(230)		0		2,045,099
Mortgage and asset-backed securities:												Mortgage and asset-backed securities:
Agency mortgage-backed securities												Agency mortgage-backed securities	6,557,098		157,789		(2,802)		0		6,712,085
Non-agency mortgage-backed securities												Non-agency mortgage-backed securities	358,074		3,380		(380)		0		361,074
Asset-backed securities												Asset-backed securities	1,853,791		31,125		(2,673)		0		1,882,243
Total mortgage and asset-backed securities												Total mortgage and asset-backed securities	8,768,963		192,294		(5,855)		0		8,955,402
Other debt securities												Other debt securities	534,169		22,225		(175)		0		556,219
Total												Total	$	12,097,533	$	358,089	$	(6,358)	$	0	$	12,449,264

For debt securities classified as available for sale, the following table shows the amortized cost and fair value of securities available-for-sale at December 31, 2019 and the corresponding amounts of gross unrealized gains and losses (pre-tax) in AOCI, by security type.

(In thousands)
Amortized Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
December 31, 2019
U.S. government and federal agency obligations $ 827,861 $ 23,957 $ (42) $ 851,776
Government-sponsored enterprise obligations 138,734 730 (187) 139,277
State and municipal obligations 1,225,532 42,427 (32) 1,267,927
Mortgage and asset-backed securities:
  Agency mortgage-backed securities 3,893,247 50,890 (6,173) 3,937,964
  Non-agency mortgage-backed securities 796,451 14,036 (705) 809,782
  Asset-backed securities 1,228,151 11,056 (5,718) 1,233,489
Total mortgage and asset-backed securities 5,917,849 75,982 (12,596) 5,981,235
Other debt securities 325,555 5,863 (7) 331,411
Total $ 8,435,531 $ 148,959 $ (12,864) $ 8,571,626

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The following tables present proceeds from sales of securities and the components of investment securities gains and losses which have been recognized in earnings.


		For the Nine Months Ended September 30					For the Three Months Ended March 31
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020
Proceeds from sales of securities:	Proceeds from sales of securities:					Proceeds from sales of securities:
Available for sale debt securities		$	574,374	$	368,939

Equity securities	Equity securities	2		3,459		Equity securities	$	0	$	2
Other	Other	0		7,243		Other	9,292		0
Total proceeds	Total proceeds	$	574,376	$	379,641	Total proceeds	$	9,292	$	2

Investment securities gains (losses), net:	Investment securities gains (losses), net:					Investment securities gains (losses), net:
Available for sale debt securities:

Gains realized on sales		$	16,965	$	2,287
Losses realized on sales		0		(1,559)
Other-than-temporary impairment recognized on debt securities		0		(133)

Equity securities:	Equity securities:					Equity securities:

Gains realized on sales	Gains realized on sales	2		2,865		Gains realized on sales	$	0	$	2

Fair value adjustments, net	Fair value adjustments, net	(126)		318		Fair value adjustments, net	(35)		(295)
Other:	Other:					Other:
Gains realized on sales	Gains realized on sales	0		1,094		Gains realized on sales	1,523		0

Fair value adjustments, net	Fair value adjustments, net	(18,116)		(998)		Fair value adjustments, net	8,365		(13,008)
Total investment securities gains (losses), net	Total investment securities gains (losses), net	$	(1,275)	$	3,874	Total investment securities gains (losses), net	$	9,853	$	(13,301)

Net gains ~~and losses~~ on investment securities for the ~~nine~~three months ended ~~September 30, 2020 included net~~March 31, 2021 were mainly comprised of gains of ~~$17.0~~$1.5 million realized on ~~sales~~the sale of ~~available for sale debt securities as well as~~a private equity investment and net ~~losses~~gains in fair value of ~~$126 thousand and $18.1~~$8.4 million on ~~equity securities and~~ private equity investments, ~~respectively,~~ due to fair value adjustments.

At ~~September 30, 2020,~~March 31, 2021, securities totaling ~~$4.5~~$4.7 billion in fair value were pledged to secure public fund deposits, securities sold under agreements to repurchase, trust funds, and borrowings at the FRB and ~~FHLB.~~FHLB, compared to $4.8 billion at December 31,

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2020. Securities pledged under agreements pursuant to which the collateral may be sold or re-pledged by the secured parties approximated ~~$218.0~~$209.1 million, while the remaining securities were pledged under agreements pursuant to which the secured parties may not sell or re-pledge the collateral. Except for obligations of various government-sponsored enterprises such as FNMA, FHLB and FHLMC, 0 investment in a single issuer exceeded 10% of stockholders’ equity.

4. Goodwill and Other Intangible Assets

The following table presents information about the Company's intangible assets which have estimable useful lives.


		September 30, 2020								December 31, 2019									March 31, 2021								December 31, 2020
(In thousands)	(In thousands)	Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount		Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount		(In thousands)	Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount		Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount
Amortizable intangible assets:	Amortizable intangible assets:																	Amortizable intangible assets:
Core deposit premium	Core deposit premium	$	31,270	$	(29,818)	$	0	$	1,452	$	31,270	$	(29,485)	$	0	$	1,785	Core deposit premium	$	31,270	$	(30,006)	$	0	$	1,264	$	31,270	$	(29,912)	$	0	$	1,358
Mortgage servicing rights	Mortgage servicing rights	13,983		(6,102)		(2,150)		5,731		12,942		(4,866)		(327)		7,749		Mortgage servicing rights	17,025		(7,743)		(1,048)		8,234		15,238		(6,886)		(2,103)		6,249
Total	Total	$	45,253	$	(35,920)	$	(2,150)	$	7,183	$	44,212	$	(34,351)	$	(327)	$	9,534	Total	$	48,295	$	(37,749)	$	(1,048)	$	9,498	$	46,508	$	(36,798)	$	(2,103)	$	7,607

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Aggregate amortization expense on intangible assets was ~~$859~~$951 thousand and ~~$395~~$268 thousand for the three month periods ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $1.6 million and $1.1 million for the nine month periods ended September 30, 2020 and 2019,~~ respectively. The following table shows the estimated annual amortization expense for the next five fiscal years. This expense is based on existing asset balances and the interest rate environment as of ~~September 30, 2020.~~March 31, 2021. The Company’s actual amortization expense in any given period may be different from the estimated amounts depending upon the acquisition of intangible assets, changes in mortgage interest rates, prepayment rates and other market conditions.


(In thousands)	(In thousands)			(In thousands)
2020		$	2,143
2021	2021	1,243		2021	$	2,198
2022	2022	1,013		2022	1,437
2023	2023	834		2023	1,194
2024	2024	689		2024	991
2025				2025	817

Changes in the carrying amount of goodwill and net other intangible assets for the ~~nine~~three month period ended ~~September 30, 2020~~March 31, 2021 are as follows:


(In thousands)	(In thousands)	Goodwill		Core Deposit Premium		Mortgage Servicing Rights		(In thousands)	Goodwill		Easement		Core Deposit Premium		Mortgage Servicing Rights
Balance January 1, 2020		$	138,921	$	1,785	$	7,749
Balance January 1, 2021								Balance January 1, 2021	$	138,921	$	3,600	$	1,358	$	6,249

Originations	Originations	0		0		1,041		Originations	0						1,787
Amortization	Amortization	0		(333)		(1,236)		Amortization	0				(94)		(857)
Impairment		0		0		(1,823)
Balance September 30, 2020		$	138,921	$	1,452	$	5,731
Impairment reversal								Impairment reversal	0						1,055
Balance March 31, 2021								Balance March 31, 2021	$	138,921	$	3,600	$	1,264	$	8,234

Goodwill allocated to the Company’s operating segments at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 is shown below.


(In thousands)
Consumer segment	$	70,721
Commercial segment	67,454
Wealth segment	746
Total goodwill	$	138,921

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5. Guarantees

The Company, as a provider of financial services, routinely issues financial guarantees in the form of financial and performance standby letters of credit. Standby letters of credit are contingent commitments issued by the Company generally to guarantee the payment or performance obligation of a customer to a third party. While these represent a potential outlay by the Company, a significant amount of the commitments may expire without being drawn upon. The Company has recourse against the customer for any amount it is required to pay to a third party under a standby letter of credit. The letters of credit are subject to the same credit policies, underwriting standards and approval process as loans made by the Company. Most of the standby letters of credit are secured, and in the event of nonperformance by customers, the Company has rights to the underlying collateral, which could include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities.

Upon issuance of standby letters of credit, the Company recognizes a liability for the fair value of the obligation undertaken, which is estimated to be equivalent to the amount of fees received from the customer over the life of the agreement. At ~~September 30, 2020,~~March 31, 2021, that net liability was ~~$3.3~~$3.0 million, which will be accreted into income over the remaining life of the respective commitments. The contractual amount of these letters of credit, which represents the maximum potential future payments guaranteed by the Company, was ~~$318.0~~$440.4 million at ~~September 30, 2020.~~March 31, 2021.

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The Company periodically enters into credit risk participation agreements (RPAs) as a guarantor to other financial institutions, in order to mitigate those institutions’ credit risk associated with interest rate swaps with third parties. The RPA stipulates that, in the event of default by the third party on the interest rate swap, the Company will reimburse a portion of the loss borne by the financial institution. These interest rate swaps are normally collateralized (generally with real property, inventories and equipment) by the third party, which limits the credit risk associated with the Company’s RPAs. The third parties usually have other borrowing relationships with the Company. The Company monitors overall borrower collateral and at ~~September 30, 2020,~~March 31, 2021, believes sufficient collateral is available to cover potential swap losses. The RPAs are carried at fair value throughout their term with all changes in fair value, including those due to a change in the third party’s creditworthiness, recorded in current earnings. The terms of the RPAs, which correspond to the terms of the underlying swaps, range from 2 years to 11 years. At ~~September 30, 2020,~~March 31, 2021, the fair value of the Company's guarantee liabilities for RPAs was ~~$1.2 million,~~$339 thousand, and the notional amount of the underlying swaps was ~~$272.8~~$272.0 million. The maximum potential future payment guaranteed by the Company cannot be readily estimated but is dependent upon the fair value of the interest rate swaps at the time of default.

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6. Leases

The Company has net investments in direct financing and sales-type leases to commercial, industrial, and tax-exempt entities. These leases are included within business loans on the Company's consolidated balance sheets. The Company primarily leases various types of equipment, trucks and trailers, and office furniture and fixtures. Lease agreements may include options ~~to renew or~~ for the lessee to renew or purchase the leased equipment at the end of the lease term. The Company has elected to adopt the lease component expedient in which the lease and nonlease components are combined into the total lease receivable. The Company also leases office space to third parties, and these leases are classified as operating leases. The leases may include options to renew or expand the leased space, and currently the leases have remaining terms of 64 months to 7 years.

The following table provides the components of lease income.


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended March 31
(in thousands)	(in thousands)	2020		2019		2020		2019		(in thousands)		2021		2020
Direct financing and sales-type leases	Direct financing and sales-type leases	$	6,437	$	6,092	$	19,099	$	17,988	Direct financing and sales-type leases		$	6,121	$	6,358
Operating leases(a)	Operating leases(a)	2,270		1,984		6,491		5,816		Operating leases(a)		2,074		2,061
Total lease income	Total lease income	$	8,707	$	8,076	$	25,590	$	23,804	Total lease income		$	8,195	$	8,419

(a) Includes rent from Tower Properties Company, a related party, of $19 thousand for the three ~~month periods ended September 30, 2020 and 2019, and $57 thousand and $56 thousand, respectively, for the nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

7. Pension

The amount of net pension cost is shown in the table below:


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended March 31
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)		2021		2020
Service cost - benefits earned during the period	Service cost - benefits earned during the period	$	93	$	159	$	295	$	477	Service cost - benefits earned during the period		$	95	$	101
Interest cost on projected benefit obligation	Interest cost on projected benefit obligation	818		1,065		2,463		3,195		Interest cost on projected benefit obligation		556		822
Expected return on plan assets	Expected return on plan assets	(1,317)		(1,196)		(3,911)		(3,589)		Expected return on plan assets		(1,124)		(1,297)
Amortization of prior service cost	Amortization of prior service cost	(67)		(68)		(203)		(203)		Amortization of prior service cost		(68)		(68)
Amortization of unrecognized net loss	Amortization of unrecognized net loss	503		586		1,587		1,757		Amortization of unrecognized net loss		651		542
Net periodic pension cost	Net periodic pension cost	$	30	$	546	$	231	$	1,637	Net periodic pension cost		$	110	$	100

All benefits accrued under the Company’s defined benefit pension plan have been frozen since January 1, 2011. During the first ~~nine~~three months of ~~2020,~~2021, the Company made 0 funding contributions to its defined benefit pension plan and made minimal funding contributions to a supplemental executive retirement plan (the CERP), which carries no segregated assets.

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8. Common Stock *

Presented below is a summary of the components used to calculate basic and diluted income per share. The Company applies the two-class method of computing income per share, as nonvested share-based awards that ~~contain~~pay nonforfeitable ~~rights to~~common stock dividends are considered securities which participate in undistributed earnings with common stock. The two-class method requires the calculation of separate income per share amounts for the nonvested share-based awards and for common stock. Income per share attributable to common stock is shown in the table below. Nonvested share-based awards are further discussed in Note 13.


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended March 31
(In thousands, except per share data)	(In thousands, except per share data)	2020		2019		2020		2019		(In thousands, except per share data)		2021		2020
Basic income per common share:	Basic income per common share:									Basic income per common share:
Net income attributable to Commerce Bancshares, Inc.	Net income attributable to Commerce Bancshares, Inc.	$	132,448	$	109,242	$	224,168	$	314,351	Net income attributable to Commerce Bancshares, Inc.		$	130,972	$	51,857
Less preferred stock dividends	Less preferred stock dividends	7,466		2,250		11,966		6,750		Less preferred stock dividends		0		2,250
Net income available to common shareholders	Net income available to common shareholders	124,982		106,992		212,202		307,601		Net income available to common shareholders		130,972		49,607
Less income allocated to nonvested restricted stock	Less income allocated to nonvested restricted stock	1,173		1,040		1,996		2,996		Less income allocated to nonvested restricted stock		1,200		470
Net income allocated to common stock	Net income allocated to common stock	$	123,809	$	105,952	$	210,206	$	304,605	Net income allocated to common stock		$	129,772	$	49,137
Weighted average common shares outstanding	Weighted average common shares outstanding	110,720		112,982		110,848		114,475		Weighted average common shares outstanding		116,260		116,674
Basic income per common share	Basic income per common share	$	1.12	$	.93	$	1.90	$	2.65	Basic income per common share		$	1.12	$	.42
Diluted income per common share:	Diluted income per common share:									Diluted income per common share:
Net income available to common shareholders	Net income available to common shareholders	$	124,982	$	106,992	$	212,202	$	307,601	Net income available to common shareholders		$	130,972	$	49,607
Less income allocated to nonvested restricted stock	Less income allocated to nonvested restricted stock	1,170		1,039		1,993		2,991		Less income allocated to nonvested restricted stock		1,198		469
Net income allocated to common stock	Net income allocated to common stock	$	123,812	$	105,953	$	210,209	$	304,610	Net income allocated to common stock		$	129,774	$	49,138
Weighted average common shares outstanding	Weighted average common shares outstanding	110,720		112,982		110,848		114,475		Weighted average common shares outstanding		116,260		116,674
Net effect of the assumed exercise of stock-based awards - based on	Net effect of the assumed exercise of stock-based awards - based on									Net effect of the assumed exercise of stock-based awards - based on
the treasury stock method using the average market price for the respective periods	the treasury stock method using the average market price for the respective periods	179		267		209		284		the treasury stock method using the average market price for the respective periods		313		271
Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	110,899		113,249		111,057		114,759		Weighted average diluted common shares outstanding		116,573		116,945
Diluted income per common share	Diluted income per common share	$	1.11	$	.93	$	1.89	$	2.65	Diluted income per common share		$	1.11	$	.42

Unexercised stock appreciation rights of ~~394~~52 thousand and ~~378~~241 thousand for the three month periods ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and 281 thousand and 351 thousand for the nine month periods ended September 30, 2020 and 2019,~~ respectively, were excluded from the computation of diluted income per common share because their inclusion would have been anti-dilutive.

On September 1, 2020, the Company redeemed all outstanding shares of its 6.00% Series B Non-Cumulative Perpetual Preferred Stock, $1.00 par value per share (Series B Preferred Stock) and the corresponding depositary shares representing fractional interests in the Series B Preferred Stock (Series B Depositary Shares). The 6,000,000 depositary shares, each representing a 1/1,000th interest in a share of Series B Preferred Stock, were redeemed simultaneously with the redemption of the Series B Preferred Stock at a redemption price of $25 per depositary share. Regular dividends on the outstanding shares of the Series B Preferred Stock were paid separately on September 1, 2020 to all holders of record as of August 14, 2020, in the customary manner, and future dividends ceased to accrue. For the nine month period ended September 30, 2020, preferred stock dividends totaled $12.0 million, and included $5.2 million related to the preferred stock redemption, which is the excess of the redemption costs over the book value of the preferred stock.

* All prior year share and per share amounts in this note have been restated for the 5% common stock dividend distributed in December ~~2019.~~2020.

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9. Accumulated Other Comprehensive Income

The table below shows the activity and accumulated balances for components of other comprehensive income. The largest component is the unrealized holding gains and losses on available for sale debt securities. Another component is the amortization from other comprehensive income of losses associated with pension benefits, which occurs as the losses are included in current net periodic pension cost. The remaining component is gains and losses in fair value on certain interest rate floors that have been designated as cash flow hedging instruments. The interest rate floors were terminated during 2020, and the realized gains will be amortized into interest income through the original maturity dates of the interest rate floors. Information about unrealized gains and losses on securities can be found in Note 3, and information about unrealized gains and losses on cash flow hedge derivatives is located in Note 11.

The Company adopted ASU 2016-13 (CECL) on January 1, 2020, which changed the impairment model for available for sale debt securities. The new standard requires an allowance for credit losses when the present value of the cash flows expected to be collected is less than the security's amortized cost basis. See further discussion of the Company's CECL adoption in Note 1 and Note 3 to the consolidated financial statements. Further, the new standard superceded the guidance related to other-than-temporary impairment (OTTI), including the requirement to separately disclose the unrealized gains and losses on securities with OTTI. Prior to the Company's adoption of CECL, unrealized gains and losses on debt securities for which an OTTI has been recorded in current earnings were shown separately below. As a result of adopting CECL, the table below will separately disclose unrealized gains and losses on debt securities for which an allowance for credit losses has been recorded. During the first nine months of 2020, there were no securities for which an allowance for credit losses was recorded.


		Unrealized Gains (Losses) on Securities (1)				Pension Loss		Unrealized Gains (Losses) on Cash Flow Hedge Derivatives (2)		Total Accumulated Other Comprehensive Income (Loss)			Unrealized Gains (Losses) on Securities (1)		Pension Loss		Unrealized Gains (Losses) on Cash Flow Hedge Derivatives (2)		Total Accumulated Other Comprehensive Income (Loss)
(In thousands)	(In thousands)	OTTI		Other								(In thousands)

Balance January 1, 2021												Balance January 1, 2021	$	263,801	$	(25,118)	$	92,694	$	331,377

Other comprehensive loss before reclassifications to current earnings												Other comprehensive loss before reclassifications to current earnings	(211,569)		0		0		(211,569)
Amounts reclassified to current earnings from accumulated other comprehensive income												Amounts reclassified to current earnings from accumulated other comprehensive income	0		583		(5,848)		(5,265)
Current period other comprehensive income (loss), before tax												Current period other comprehensive income (loss), before tax	(211,569)		583		(5,848)		(216,834)
Income tax (expense) benefit												Income tax (expense) benefit	52,893		(146)		1,462		54,209
Current period other comprehensive income (loss), net of tax												Current period other comprehensive income (loss), net of tax	(158,676)		437		(4,386)		(162,625)

Balance March 31, 2021												Balance March 31, 2021	$	105,125	$	(24,681)	$	88,308	$	168,752
Balance January 1, 2020	Balance January 1, 2020	$	3,264	$	98,809	$	(21,940)	$	30,311	$	110,444	Balance January 1, 2020	$	102,073	$	(21,940)	$	30,311	$	110,444

Adoption of ASU 2016-13		(3,264)		3,264		0		0		0
Balance January 1, 2020, adjusted		0		102,073		(21,940)		30,311		110,444

Other comprehensive income before reclassifications to current earnings	Other comprehensive income before reclassifications to current earnings	0		237,583		0		94,702		332,285		Other comprehensive income before reclassifications to current earnings	104,942		0		84,617		189,559
Amounts reclassified to current earnings from accumulated other comprehensive income	Amounts reclassified to current earnings from accumulated other comprehensive income	0		(16,965)		1,384		(6,050)		(21,631)		Amounts reclassified to current earnings from accumulated other comprehensive income	(46)		474		268		696
Current period other comprehensive income, before tax	Current period other comprehensive income, before tax	0		220,618		1,384		88,652		310,654		Current period other comprehensive income, before tax	104,896		474		84,885		190,255
Income tax expense	Income tax expense	0		(55,154)		(346)		(22,163)		(77,663)		Income tax expense	(26,224)		(118)		(21,221)		(47,563)
Current period other comprehensive income, net of tax	Current period other comprehensive income, net of tax	0		165,464		1,038		66,489		232,991		Current period other comprehensive income, net of tax	78,672		356		63,664		142,692

Balance September 30, 2020		$	0	$	267,537	$	(20,902)	$	96,800	$	343,435
Balance January 1, 2019		$	3,861	$	(52,278)	$	(23,107)	$	6,855	$	(64,669)

Other comprehensive income (loss) before reclassifications to current earnings		(709)		229,288		0		46,165		274,744
Amounts reclassified to current earnings from accumulated other comprehensive income		133		(728)		1,554		2,751		3,710
Current period other comprehensive income (loss), before tax		(576)		228,560		1,554		48,916		278,454
Income tax (expense) benefit		144		(57,139)		(388)		(12,229)		(69,612)
Current period other comprehensive income (loss), net of tax		(432)		171,421		1,166		36,687		208,842
Transfer of unrealized gain on securities for which impairment was not previously recognized		35		(35)		0		0		0
Balance September 30, 2019		$	3,464	$	119,108	$	(21,941)	$	43,542	$	144,173
Balance March 31, 2020												Balance March 31, 2020	$	180,745	$	(21,584)	$	93,975	$	253,136

(1) The pre-tax amounts reclassified from accumulated other comprehensive income to current earnings are included in "investment securities gains (losses), net" in the consolidated statements of income.

(2) The pre-tax amounts reclassified from accumulated other comprehensive income to current earnings are included in "interest and fees on loans" in the consolidated statements of income.

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10. Segments

The Company segregates financial information for use in assessing its performance and allocating resources among 3 operating segments: Consumer, Commercial and Wealth. The Consumer segment consists of various consumer loan and deposit products offered through its retail branch network of approximately 160 locations. This segment also includes indirect and other consumer loan financing businesses, along with debit and credit card loan and fee businesses. Residential mortgage origination, sales and servicing functions are included in this Consumer segment, but residential mortgage loans retained by the Company are not considered part of this segment and are instead included in the ~~Other segment.~~Other/Elimination column. The Commercial segment provides corporate lending (including the Small Business Banking product line within the branch network), leasing, and international services, along with business and governmental deposit products and commercial cash management services. This segment also includes both merchant and commercial bank card ~~products. It also~~

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~~includes~~products as well as the Capital Markets Group, which sells fixed income securities and provides securities safekeeping and accounting services to its business and correspondent bank customers. The Wealth segment provides traditional trust and estate planning, advisory and discretionary investment management, and brokerage services. This segment also provides various loan and deposit related services to its private banking customers.

The following table presents selected financial information by segment and reconciliations of combined segment totals to consolidated totals. There were 0 material intersegment revenues ~~among~~between the three segments. Management periodically makes changes to methods of assigning costs and income to its business segments to better reflect operating results. If appropriate, these changes are reflected in prior year information presented below.


(In thousands)	(In thousands)	Consumer		Commercial		Wealth		Segment Totals		Other/Elimination		Consolidated Totals		(In thousands)	Consumer		Commercial		Wealth		Segment Totals		Other/Elimination		Consolidated Totals
Three Months Ended September 30, 2020

Three Months Ended March 31, 2021														Three Months Ended March 31, 2021
Net interest income	Net interest income	$	80,944	$	111,807	$	15,310	$	208,061	$	7,901	$	215,962	Net interest income	$	77,939	$	110,169	$	17,457	$	205,565	$	183	$	205,748
Provision for credit losses	Provision for credit losses	(7,654)		(200)		13		(7,841)		4,740		(3,101)		Provision for credit losses	(9,901)		(27)		5		(9,923)		16,155		6,232
Non-interest income	Non-interest income	37,116		47,920		47,701		132,737		(3,165)		129,572		Non-interest income	38,248		50,728		50,985		139,961		(3,916)		136,045
Investment securities gains, net	Investment securities gains, net	0		0		0		0		16,155		16,155		Investment securities gains, net	0		0		0		0		9,853		9,853
Non-interest expense	Non-interest expense	(73,074)		(78,283)		(31,013)		(182,370)		(8,488)		(190,858)		Non-interest expense	(70,504)		(79,281)		(33,043)		(182,828)		(9,745)		(192,573)
Income before income taxes	Income before income taxes	$	37,332	$	81,244	$	32,011	$	150,587	$	17,143	$	167,730	Income before income taxes	$	35,782	$	81,589	$	35,404	$	152,775	$	12,530	$	165,305
Nine Months Ended September 30, 2020

Three Months Ended March 31, 2020														Three Months Ended March 31, 2020
Net interest income	Net interest income	$	241,195	$	300,307	$	41,686	$	583,188	$	36,896	$	620,084	Net interest income	$	78,981	$	85,896	$	12,959	$	177,836	$	23,229	$	201,065
Provision for credit losses	Provision for credit losses	(23,885)		(3,122)		10		(26,997)		(114,596)		(141,593)		Provision for credit losses	(11,206)		356		(3)		(10,853)		(47,100)		(57,953)
Non-interest income	Non-interest income	107,492		143,747		139,700		390,939		(20,189)		370,750		Non-interest income	34,081		49,887		47,409		131,377		(7,714)		123,663
Investment securities losses, net	Investment securities losses, net	0		0		0		0		(1,275)		(1,275)		Investment securities losses, net	0		0		0		0		(13,301)		(13,301)
Non-interest expense	Non-interest expense	(225,791)		(237,350)		(93,156)		(556,297)		(15,771)		(572,068)		Non-interest expense	(77,412)		(80,820)		(31,769)		(190,001)		(3,697)		(193,698)
Income before income taxes	Income before income taxes	$	99,011	$	203,582	$	88,240	$	390,833	$	(114,935)	$	275,898	Income before income taxes	$	24,444	$	55,319	$	28,596	$	108,359	$	(48,583)	$	59,776
Three Months Ended September 30, 2019
Net interest income		$	80,111	$	85,402	$	11,525	$	177,038	$	26,474	$	203,512
Provision for loan losses		(10,757)		(345)		(197)		(11,299)		336		(10,963)
Non-interest income		36,049		53,462		45,721		135,232		(2,489)		132,743
Investment securities gains, net		0		0		0		0		4,909		4,909
Non-interest expense		(73,872)		(76,105)		(30,248)		(180,225)		(10,795)		(191,020)
Income before income taxes		$	31,531	$	62,414	$	26,801	$	120,746	$	18,435	$	139,181
Nine Months Ended September 30, 2019
Net interest income		$	236,215	$	256,649	$	35,662	$	528,526	$	90,108	$	618,634
Provision for loan losses		(33,061)		(1,053)		(165)		(34,279)		(953)		(35,232)
Non-interest income		98,840		151,655		133,556		384,051		(2,809)		381,242
Investment securities gains, net		0		0		0		0		3,874		3,874
Non-interest expense		(223,355)		(231,790)		(91,708)		(546,853)		(25,371)		(572,224)
Income before income taxes		$	78,639	$	175,461	$	77,345	$	331,445	$	64,849	$	396,294

The information presented above was derived from the internal profitability reporting system used by management to monitor and manage the financial performance of the Company. This information is based on internal management accounting procedures and methods, which have been developed to reflect the underlying economics of the businesses. The methodologies are applied in connection with funds transfer pricing and assignment of overhead costs among segments. Funds transfer pricing was used in the determination of net interest income by assigning a standard cost (credit) for funds used ~~(provided) by~~(provided by) assets and liabilities based on their maturity, prepayment and/or repricing characteristics.

The segment activity, as shown above, includes both direct and allocated items. Amounts in the “Other/Elimination” column include activity not related to the segments, such as that relating to administrative functions, the investment securities portfolio, and the effect of certain expense allocations to the segments. The provision for credit losses in this category contains the difference between net loan charge-offs assigned directly to the segments and the recorded provision for credit loss expense. Included in this category’s net interest income are earnings of the investment portfolio, which are not allocated to a segment.

The performance measurement of the operating segments is based on the management structure of the Company and is not necessarily comparable with similar information for any other financial institution. The information is also not necessarily indicative of the segments' financial condition and results of operations if they were independent entities.

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11. Derivative Instruments

The notional amounts of the Company’s derivative instruments are shown in the table below. These contractual amounts, along with other terms of the derivative, are used to determine amounts to be exchanged between counterparties and are not a measure of loss exposure. At ~~September 30, 2020, with the exception of the interest rate floor (discussed below),~~March 31, 2021, the Company’s derivative instruments are accounted for as free-standing derivatives, and changes in their fair value are recorded in current earnings.


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		(In thousands)	March 31, 2021		December 31, 2020
Interest rate swaps	Interest rate swaps	$	2,425,837	$	2,606,181	Interest rate swaps	$	2,297,174	$	2,367,017
Interest rate floors		500,000		1,500,000

Interest rate caps	Interest rate caps	113,495		59,316		Interest rate caps	186,110		103,028
Credit risk participation agreements	Credit risk participation agreements	365,611		316,225		Credit risk participation agreements	352,107		381,170
Foreign exchange contracts	Foreign exchange contracts	9,293		10,936		Foreign exchange contracts	4,514		7,431
Mortgage loan commitments	Mortgage loan commitments	60,311		13,755		Mortgage loan commitments	72,668		67,543
Mortgage loan forward sale contracts	Mortgage loan forward sale contracts	9,451		1,943		Mortgage loan forward sale contracts	13,671		0
Forward TBA contracts	Forward TBA contracts	64,500		17,500		Forward TBA contracts	68,000		89,000
Total notional amount	Total notional amount	$	3,548,498	$	4,525,856	Total notional amount	$	2,994,244	$	3,015,189

The largest group of notional amounts relate to interest rate swap contracts sold to commercial customers who wish to modify their interest rate sensitivity. The customers are engaged in a variety of businesses, including real estate, manufacturing, retail product distribution, education, and retirement communities. These customer swaps are offset by matching contracts purchased by the Company from other financial dealer institutions. Contracts with dealers that require central clearing are novated to a clearing agency who becomes the Company's counterparty. Because of the matching terms of the offsetting contracts, in addition to collateral provisions which mitigate the impact of non-performance risk, changes in fair value subsequent to initial recognition have a minimal effect on earnings.

Many of the Company’s interest rate swap contracts with large financial institutions contain contingent features relating to debt ratings or capitalization levels. Under these provisions, if the Company’s debt rating falls below investment grade or if the Company ceases to be “well-capitalized” under risk-based capital guidelines, certain counterparties can require immediate and ongoing collateralization on interest rate swaps in net liability positions or instant settlement of the contracts. The Company maintains debt ratings and capital well above these minimum requirements.

As of September 30, 2020, the Company has entered into one interest rate floor with a notional value of $500.0 million, to hedge the risk of declining interest rates on certain floating rate commercial loans indexed to one month LIBOR. The interest rate floor has a purchased strike rate of 2.00% and is effective on December 15, 2020 and matures on December 15, 2026. The premium paid for the floor totaled $10.7 million. As of September 30, 2020, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is approximately 6.2 years. The interest rate floor qualified and was designated as a cash flow hedge, and was assessed for effectiveness using regression analysis. The change in the fair value of the interest rate floor is recorded in AOCI, net of the amortization of the premium paid, which is recorded against interest and fees on loans in the consolidated statements of income. As of September 30, 2020, net deferred gains on the interest rate floor totaled $38.7 million (pre-tax) and was recorded in AOCI in the consolidated balance sheet. As of September 30, 2020, it is expected that $1.4 million (pre-tax) of interest rate floor premium amortization will be reclassified from AOCI into earnings over the next twelve months.

During the ~~quarter~~year ended ~~September 30,~~December 31, 2020, the Company monetized ~~two~~three interest rate floors that were previously classified as cash flow hedges with a combined notional balance of ~~$1.0~~$1.5 billion and an asset fair value of ~~$115.9~~$163.2 million. As of ~~September 30, 2020,~~March 31, 2021, the total ~~unrealized~~realized gains on the monetized cash flow hedges remaining in AOCI was ~~$90.4~~$117.7 million (pre-tax). The unrealized gains will be reclassified into interest income as the underlying forecasted transactions impact earnings through the original maturity dates of the hedged forecasted transactions, or approximately 5.7 years.

In October 2020, the Company monetized the above interest rate floor that is effective on December 15, 2020 and will amortize a gain of $37.6 million into earnings through December 15, 2026, the original maturity date.

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The Company also contracts with other financial institutions, as a guarantor or beneficiary, to share credit risk associated with certain interest rate swaps through risk participation agreements. The Company’s risks and responsibilities as guarantor are further discussed in Note 5 on Guarantees. In addition, the Company enters into foreign exchange contracts, which are mainly comprised of contracts to purchase or deliver foreign currencies for customers at specific future dates.

Under its program to sell residential mortgage loans in the secondary market, the Company designates certain newly-originated residential mortgage loans as held for sale. Derivative instruments arising from this activity include mortgage loan commitments and forward loan sale contracts. Changes in the fair values of the loan commitments and funded loans prior to sale that are due to changes in interest rates are economically hedged with forward contracts to sell residential mortgage-backed securities in the to-be-announced (TBA) market. These forward TBA contracts are also considered to be derivatives and are settled in cash at the security settlement date.

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The fair values of the Company's derivative instruments, whose notional amounts are listed above, are shown in the table below. Information about the valuation methods used to determine fair value is provided in Note 17 on Fair Value Measurements in the ~~2019~~2020 Annual Report on Form 10-K.

The Company's policy is to present its derivative assets and derivative liabilities on a gross basis in its consolidated balance sheets and these are reported in other assets and other liabilities. Certain collateral posted to and from the Company's clearing counterparty has been applied to the fair values of the cleared swaps, such that at ~~September 30, 2020~~March 31, 2021 in the table below, the positive fair values of cleared swaps were reduced by $312 thousand and the negative fair values of cleared swaps were reduced by $46.9 million. At December 31, 2020, there were 0 reductions to the positive fair values of cleared swaps and the negative fair values of cleared swaps were reduced by ~~$77.8 million. At December 31, 2019, the positive fair values of cleared swaps were reduced by $617 thousand and the negative fair values of cleared swaps were reduced by $28.5~~$69.2 million.


		Asset Derivatives				Liability Derivatives					Asset Derivatives				Liability Derivatives
		Sept. 30, 2020		Dec. 31, 2019		Sept. 30, 2020		Dec. 31, 2019			Mar. 31, 2021		Dec. 31, 2020		Mar. 31, 2021		Dec. 31, 2020
(In thousands)	(In thousands)	Fair Value				Fair Value				(In thousands)	Fair Value				Fair Value
Derivatives designated as hedging instruments:
Interest rate floors		$	47,306	$	67,192	$	0	$	0
Total derivatives designated as hedging instruments		$	47,306	$	67,192	$	0	$	0
Derivative instruments not designated as hedging instruments:

Derivative instruments:										Derivative instruments:
Interest rate swaps	Interest rate swaps	$	96,866	$	37,774	$	(18,981)	$	(9,916)	Interest rate swaps	$	59,620	$	86,389	$	(13,047)	$	(17,199)
Interest rate caps	Interest rate caps	1		4		(1)		(4)		Interest rate caps	92		1		(92)		(1)
Credit risk participation agreements	Credit risk participation agreements	440		140		(1,185)		(230)		Credit risk participation agreements	120		216		(339)		(701)
Foreign exchange contracts	Foreign exchange contracts	32		97		(50)		(32)		Foreign exchange contracts	62		57		(12)		(103)
Mortgage loan commitments	Mortgage loan commitments	3,137		459		0		0		Mortgage loan commitments	1,876		3,226		(21)		0
Mortgage loan forward sale contracts	Mortgage loan forward sale contracts	29		6		(6)		(2)		Mortgage loan forward sale contracts	39		0		0		0
Forward TBA contracts	Forward TBA contracts	39		2		(147)		(35)		Forward TBA contracts	978		0		(1)		(671)
Total derivatives not designated as hedging instruments		$	100,544	$	38,482	$	(20,370)	$	(10,219)

Total	Total	$	147,850	$	105,674	$	(20,370)	$	(10,219)	Total	$	62,787	$	89,889	$	(13,512)	$	(18,675)

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The pre-tax effects of derivative instruments on the consolidated statements of income are shown in the ~~tables~~table below.


		Amount of Gain or (Loss) Recognized in OCI						Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income							Amount of Gain or (Loss) Recognized in OCI						Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income

(In thousands)	(In thousands)	Total		Included Component		Excluded Component			Total		Included Component		Excluded Component		(In thousands)	Total		Included Component		Excluded Component			Total		Included Component		Excluded Component
For the Three Months Ended September 30, 2020

For the Three Months Ended March 31, 2020															For the Three Months Ended March 31, 2020
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:														Derivatives in cash flow hedging relationships:
Interest rate floors	Interest rate floors	$	(4,481)	$	(4,087)	$	(394)	Interest and fees on loans	$	4,163	$	5,509	$	(1,346)	Interest rate floors	$	84,617	$	107,621	$	(23,004)	Interest and fees on loans	$	(268)	$	763	$	(1,031)
Total	Total	$	(4,481)	$	(4,087)	$	(394)	Total	$	4,163	$	5,509	$	(1,346)	Total	$	84,617	$	107,621	$	(23,004)	Total	$	(268)	$	763	$	(1,031)
For the Nine Months Ended September 30, 2020
Derivatives in cash flow hedging relationships:
Interest rate floors		$	94,702	$	121,621	$	(26,919)	Interest and fees on loans	$	6,050	$	9,458	$	(3,408)
Total		$	94,702	$	121,621	$	(26,919)	Total	$	6,050	$	9,458	$	(3,408)
For the Three Months Ended September 30, 2019
Derivatives in cash flow hedging relationships:
Interest rate floors		$	17,760	$	31,422	$	(13,662)	Interest and fees on loans	$	(1,042)	$	0	$	(1,042)
Total		$	17,760	$	31,422	$	(13,662)	Total	$	(1,042)	$	0	$	(1,042)
For the Nine Months Ended September 30, 2019
Derivatives in cash flow hedging relationships:
Interest rate floors		$	46,165	$	77,559	$	(31,394)	Interest and fees on loans	$	(2,751)	$	0	$	(2,751)
Total		$	46,165	$	77,559	$	(31,394)	Total	$	(2,751)	$	0	$	(2,751)


		Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives									Location of Gain or (Loss) Recognized in Income on Derivatives		Amount of Gain or (Loss) Recognized in Income on Derivatives
			For the Three Months Ended September 30				For the Nine Months Ended September 30						For the Three Months Ended March 31
(In thousands)	(In thousands)		2020		2019		2020		2019		(In thousands)			2021		2020

Derivative instruments:	Derivative instruments:										Derivative instruments:
Interest rate swaps	Interest rate swaps	Other non-interest income	$	81	$	1,519	$	369	$	2,646	Interest rate swaps	Other non-interest income		$	1,075	$	266
Interest rate caps	Interest rate caps	Other non-interest income	1		0		20		0		Interest rate caps	Other non-interest income		15		19
Credit risk participation agreements	Credit risk participation agreements	Other non-interest income	(87)		37		153		78		Credit risk participation agreements	Other non-interest income		365		(27)
Foreign exchange contracts	Foreign exchange contracts	Other non-interest income	0		(5)		(82)		(2)		Foreign exchange contracts	Other non-interest income		96		(38)
Mortgage loan commitments	Mortgage loan commitments	Loan fees and sales	589		(112)		2,678		287		Mortgage loan commitments	Loan fees and sales		(1,372)		(459)
Mortgage loan forward sale contracts	Mortgage loan forward sale contracts	Loan fees and sales	20		(2)		19		1		Mortgage loan forward sale contracts	Loan fees and sales		39		(4)
Forward TBA contracts	Forward TBA contracts	Loan fees and sales	(709)		(1,412)		(482)		(819)		Forward TBA contracts	Loan fees and sales		2,906		380
Total	Total		$	(105)	$	25	$	2,675	$	2,191	Total			$	3,124	$	137

The following table shows the extent to which assets and liabilities relating to derivative instruments have been offset in the consolidated balance sheets. It also provides information about these instruments which are subject to an enforceable master

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netting arrangement, irrespective of whether they are offset, and the extent to which the instruments could potentially be offset. Also shown is collateral received or pledged in the form of other financial instruments, which is generally cash or marketable securities. The collateral amounts in this table are limited to the outstanding balances of the related asset or liability (after netting is applied); thus, amounts of excess collateral are not shown. Most of the derivatives in the following table were transacted under master netting arrangements that contain a conditional right of offset, such as close-out netting, upon default.

~~Table~~While the Company is party to master netting arrangements with most of ~~Contents~~

its swap derivative counterparties, the Company does not offset derivative assets and liabilities under these agreements on its consolidated balance sheet. Collateral exchanged between the Company and dealer bank counterparties is generally subject to thresholds and transfer minimums, and usually consists of marketable securities. By contract, these may be sold or re-pledged by the secured party until recalled at a subsequent valuation date by the pledging party. For those swap transactions requiring central clearing, the Company posts cash or securities to its clearing agent. Collateral positions are valued daily, and adjustments to amounts received and pledged by the Company are made as appropriate to maintain proper collateralization for these transactions. Swap derivative transactions with customers are generally secured by rights to non-financial collateral, such as real and personal property, which is not shown in the table below.


								Gross Amounts Not Offset in the Balance Sheet													Gross Amounts Not Offset in the Balance Sheet
(In thousands)	(In thousands)	Gross Amount Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments Available for Offset		Collateral Received/Pledged		Net Amount		(In thousands)	Gross Amount Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments Available for Offset		Collateral Received/Pledged		Net Amount
September 30, 2020
March 31, 2021														March 31, 2021
Assets:	Assets:													Assets:
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	144,440	$	0	$	144,440	$	(9,933)	$	(37,441)	$	97,066	Derivatives subject to master netting agreements	$	60,782	$	0	$	60,782	$	(183)	$	0	$	60,599
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	3,410		0		3,410								Derivatives not subject to master netting agreements	2,005		0		2,005
Total derivatives	Total derivatives	$	147,850	$	0	$	147,850							Total derivatives	$	62,787	$	0	$	62,787
Liabilities:	Liabilities:													Liabilities:
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	19,915	$	0	$	19,915	$	(9,933)	$	(8,719)	$	1,263	Derivatives subject to master netting agreements	$	13,399	$	0	$	13,399	$	(183)	$	(12,153)	$	1,063
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	455		0		455								Derivatives not subject to master netting agreements	113		0		113
Total derivatives	Total derivatives	$	20,370	$	0	$	20,370							Total derivatives	$	13,512	$	0	$	13,512
December 31, 2019
December 31, 2020														December 31, 2020
Assets:	Assets:													Assets:
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	105,147	$	0	$	105,147	$	(8,104)	$	(59,525)	$	37,518	Derivatives subject to master netting agreements	$	86,497	$	0	$	86,497	$	(108)	$	0	$	86,389
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	527		0		527								Derivatives not subject to master netting agreements	3,392		0		3,392
Total derivatives	Total derivatives	$	105,674	$	0	$	105,674							Total derivatives	$	89,889	$	0	$	89,889
Liabilities:	Liabilities:													Liabilities:
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	10,083	$	0	$	10,083	$	(8,104)	$	(437)	$	1,542	Derivatives subject to master netting agreements	$	18,420	$	0	$	18,420	$	(108)	$	(16,738)	$	1,574
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	136		0		136								Derivatives not subject to master netting agreements	255		0		255
Total derivatives	Total derivatives	$	10,219	$	0	$	10,219							Total derivatives	$	18,675	$	0	$	18,675

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12. Resale and Repurchase Agreements

The following table shows the extent to which assets and liabilities relating to securities purchased under agreements to resell (resale agreements) and securities sold under agreements to repurchase (repurchase agreements) have been offset in the consolidated balance sheets, in addition to the extent to which they could potentially be offset. Also shown is collateral received or pledged, which consists of marketable securities. The collateral amounts in the table are limited to the outstanding balances of the related asset or liability (after netting is applied); thus, amounts of excess collateral are not shown. The agreements in the following table were transacted under master netting arrangements that contain a conditional right of offset, such as close-out netting, upon default.

Resale and repurchase agreements are agreements to purchase/sell securities subject to an obligation to resell/repurchase the same or similar securities. They are accounted for as collateralized financing transactions, not as sales and purchases of the securities portfolio. The securities collateral accepted or pledged in resale and repurchase agreements with other financial institutions also may be sold or re-pledged by the secured party but is usually delivered to and held by third party trustees. The Company generally retains custody of securities pledged for repurchase agreements with customers.

~~Table of Contents~~

The Company is party to agreements commonly known as collateral swaps. These agreements involve the exchange of collateral under simultaneous repurchase and resale agreements with the same financial institution counterparty. These repurchase and resale agreements have the same principal amounts, inception dates, and maturity dates and have been offset against each other in the consolidated balance sheets, as permitted under the netting provisions of ASC 210-20-45. The collateral swaps totaled $200.0 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. At ~~September 30, 2020,~~March 31, 2021, the Company had posted collateral of ~~$209.6~~$203.2 million in marketable securities, consisting of agency mortgage-backed bonds, and had accepted ~~$209.0~~$209.3 million in agency mortgage-backed bonds.


								Gross Amounts Not Offset in the Balance Sheet													Gross Amounts Not Offset in the Balance Sheet
(In thousands)	(In thousands)	Gross Amount Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments Available for Offset		Securities Collateral Received/Pledged		Net Amount		(In thousands)	Gross Amount Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments Available for Offset		Securities Collateral Received/Pledged		Net Amount
September 30, 2020
March 31, 2021														March 31, 2021
Total resale agreements, subject to master netting arrangements	Total resale agreements, subject to master netting arrangements	$	1,050,000	$	(200,000)	$	850,000	$	0	$	(850,000)	$	0	Total resale agreements, subject to master netting arrangements	$	1,050,000	$	(200,000)	$	850,000	$	0	$	(850,000)	$	0
Total repurchase agreements, subject to master netting arrangements	Total repurchase agreements, subject to master netting arrangements	1,846,294		(200,000)		1,646,294		0		(1,646,294)		0		Total repurchase agreements, subject to master netting arrangements	2,109,620		(200,000)		1,909,620		0		(1,909,620)		0
December 31, 2019
December 31, 2020														December 31, 2020
Total resale agreements, subject to master netting arrangements	Total resale agreements, subject to master netting arrangements	$	1,050,000	$	(200,000)	$	850,000	$	0	$	(850,000)	$	0	Total resale agreements, subject to master netting arrangements	$	1,050,000	$	(200,000)	$	850,000	$	0	$	(850,000)	$	0
Total repurchase agreements, subject to master netting arrangements	Total repurchase agreements, subject to master netting arrangements	2,030,737		(200,000)		1,830,737		0		(1,830,737)		0		Total repurchase agreements, subject to master netting arrangements	2,256,113		(200,000)		2,056,113		0		(2,056,113)		0

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The table below shows the remaining contractual maturities of repurchase agreements outstanding at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, in addition to the various types of marketable securities that have been pledged by the Company as collateral for these borrowings.


		Remaining Contractual Maturity of the Agreements									Remaining Contractual Maturity of the Agreements
(In thousands)	(In thousands)	Overnight and continuous		Up to 90 days		Greater than 90 days		Total		(In thousands)	Overnight and continuous		Up to 90 days		Greater than 90 days		Total
September 30, 2020
March 31, 2021										March 31, 2021
Repurchase agreements, secured by:	Repurchase agreements, secured by:									Repurchase agreements, secured by:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	$	146,935	$	0	$	0	$	146,935	U.S. government and federal agency obligations	$	10,158	$	24,241	$	29,940	$	64,339
Government-sponsored enterprise obligations		21,386		0		0		21,386

Agency mortgage-backed securities	Agency mortgage-backed securities	1,167,467		58,729		214,896		1,441,092		Agency mortgage-backed securities	1,562,951		10,774		247,023		1,820,748
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	98,651		0		0		98,651		Non-agency mortgage-backed securities	39,295		0		0		39,295
Asset-backed securities	Asset-backed securities	103,861		0		0		103,861		Asset-backed securities	151,469		0		0		151,469
Other debt securities	Other debt securities	34,369		0		0		34,369		Other debt securities	33,769		0		0		33,769
Total repurchase agreements, gross amount recognized	Total repurchase agreements, gross amount recognized	$	1,572,669	$	58,729	$	214,896	$	1,846,294	Total repurchase agreements, gross amount recognized	$	1,797,642	$	35,015	$	276,963	$	2,109,620
December 31, 2019
December 31, 2020										December 31, 2020
Repurchase agreements, secured by:	Repurchase agreements, secured by:									Repurchase agreements, secured by:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	$	526,283	$	0	$	0	$	526,283	U.S. government and federal agency obligations	$	150,305	$	0	$	0	$	150,305
Government-sponsored enterprise obligations		32,575		0		0		32,575

Agency mortgage-backed securities	Agency mortgage-backed securities	973,774		48,517		227,802		1,250,093		Agency mortgage-backed securities	1,598,614		34,018		220,849		1,853,481
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	71,399		0		0		71,399		Non-agency mortgage-backed securities	62,742		0		0		62,742
Asset-backed securities	Asset-backed securities	60,012		40,000		0		100,012		Asset-backed securities	155,917		0		0		155,917
Other debt securities	Other debt securities	50,375		0		0		50,375		Other debt securities	33,668		0		0		33,668
Total repurchase agreements, gross amount recognized	Total repurchase agreements, gross amount recognized	$	1,714,418	$	88,517	$	227,802	$	2,030,737	Total repurchase agreements, gross amount recognized	$	2,001,246	$	34,018	$	220,849	$	2,256,113

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13. Stock-Based Compensation

The Company issues stock-based compensation in the form of nonvested restricted stock and stock appreciation rights (SARs). Most of the awards are issued during the first quarter of each year. The stock-based compensation expense that has been charged against income was ~~$3.8~~$3.9 million and ~~$3.5~~$3.7 million in the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $11.2 million and $10.4 million in the nine months ended September 30, 2020 and 2019,~~ respectively.

Nonvested stock awards granted generally vest in 4 to 7 years and contain restrictions as to transferability, sale, pledging, or assigning, among others, prior to the end of the vesting period. Dividend and voting rights are conferred upon grant. A summary of the status of the Company’s nonvested share awards as of ~~September 30, 2020,~~March 31, 2021, and changes during the ~~nine~~three month period then ended, is presented below.


		Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2020		1,104,211	$47.57
Nonvested at January 1, 2021				Nonvested at January 1, 2021	1,099,866	$52.11
Granted	Granted	218,257	64.22	Granted	197,191	71.97
Vested	Vested	(275,070)	33.97	Vested	(219,705)	43.20
Forfeited	Forfeited	(6,730)	55.42	Forfeited	(4,037)	56.66

Nonvested at September 30, 2020		1,040,668	$54.61
Nonvested at March 31, 2021				Nonvested at March 31, 2021	1,073,315	$57.56

SARs are granted with exercise prices equal to the market price of the Company’s stock at the date of grant. SARs vest ratably over 4 years of continuous service and have contractual terms of 10 years. All SARs must be settled in stock under provisions of the plan. In determining compensation cost, the Black-Scholes option-pricing model is used to estimate the fair value of SARs on date of grant. The current year per share average fair value and the model assumptions are shown in the table below.


Weighted per share average fair value at grant date	$~~10.12~~16.78
Assumptions:
Dividend yield	~~1.7~~1.4	%
Volatility	~~20.2~~28.2	%
Risk-free interest rate	~~1.0~~.7	%
Expected term	~~5.8~~5.7 years

A summary of SAR activity during the first ~~nine~~three months of ~~2020~~2021 is presented below.


(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	Rights	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		(Dollars in thousands, except per share data)	Rights	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2020		1,049,816	$43.55
Outstanding at January 1, 2021							Outstanding at January 1, 2021	1,005,896	$44.95
Granted	Granted	103,210	63.18				Granted	72,416	72.91
Forfeited	Forfeited	(5,600)	58.15				Forfeited	(738)	57.04
Expired	Expired	(150)	57.07				Expired	(36)	57.17
Exercised	Exercised	(150,029)	34.52				Exercised	(208,436)	39.48
Outstanding at September 30, 2020		997,247	$46.86	6.4 years	$	10,582
Outstanding at March 31, 2021							Outstanding at March 31, 2021	869,102	$48.58	6.5 years	$	24,362

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14. Revenue from Contracts with Customers

The core principle of ASU 2014-09, "Revenue from Contracts with Customers," is that an entity should recognize revenue to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, approximately ~~63%~~60% of the Company’s total revenue was comprised of net interest income, which is not within the scope of this guidance. Of the remaining revenue, those items that were subject to this guidance mainly included fees for bank card, trust, deposit account services and consumer brokerage services.

~~Table of Contents~~

The following table disaggregates non-interest income subject to ASU 2014-09 by major product line.


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended March 31
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)		2021		2020
Bank card transaction fees	Bank card transaction fees	$	37,873	$	44,510	$	111,818	$	126,800	Bank card transaction fees		$	37,695	$	40,200
Trust fees	Trust fees	40,769		39,592		118,676		115,223		Trust fees		44,127		39,965
Deposit account charges and other fees	Deposit account charges and other fees	23,107		24,032		69,063		71,009		Deposit account charges and other fees		22,575		23,677
Consumer brokerage services	Consumer brokerage services	4,011		4,030		11,099		11,665		Consumer brokerage services		4,081		4,077
Other non-interest income	Other non-interest income	7,566		9,809		23,718		27,003		Other non-interest income		7,696		8,709
Total non-interest income from contracts with customers	Total non-interest income from contracts with customers	113,326		121,973		334,374		351,700		Total non-interest income from contracts with customers		116,174		116,628
Other non-interest income (1)	Other non-interest income (1)	16,246		10,770		36,376		29,542		Other non-interest income (1)		19,871		7,035
Total non-interest income	Total non-interest income	$	129,572	$	132,743	$	370,750	$	381,242	Total non-interest income		$	136,045	$	123,663

(1) This revenue is not within the scope of ASU 2014-09, and includes fees relating to capital market activities, loan fees and sales, derivative instruments, standby letters of credit and various other transactions.

For bank card transaction fees, the majority of debit and credit card fees are earned in the Consumer segment, while corporate card and merchant fees are earned in the Commercial segment. The Consumer and Commercial segments each contribute approximately half of the Company's deposit account charge revenue. All trust fees and ~~nearly all of the~~ consumer brokerage services income are earned in the Wealth segment.

The following table presents the opening and closing receivable balances for the ~~nine~~three month periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ for the Company’s significant revenue categories subject to ASU 2014-09.


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		September 30, 2019		December 31, 2018		(In thousands)	March 31, 2021		December 31, 2020		March 31, 2020		December 31, 2019
Bank card transaction fees	Bank card transaction fees	$	11,501	$	13,915	$	10,871	$	13,035	Bank card transaction fees	$	12,437	$	14,199	$	9,692	$	13,915
Trust fees	Trust fees	2,122		2,093		2,666		2,721		Trust fees	2,017		2,071		2,625		2,093
Deposit account charges and other fees	Deposit account charges and other fees	5,839		6,523		5,154		6,107		Deposit account charges and other fees	5,281		6,933		5,002		6,523
Consumer brokerage services	Consumer brokerage services	476		596		655		559		Consumer brokerage services	323		432		1,029		596

For these revenue categories, none of the transaction price has been allocated to performance obligations that are unsatisfied as of the end of a reporting period.

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15. Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain financial and nonfinancial assets and liabilities and to determine fair value disclosures. Various financial instruments such as available for sale debt securities, equity securities, trading debt securities, certain investments relating to private equity activities, and derivatives are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets and liabilities on a nonrecurring basis, such as mortgage servicing rights and certain other investment securities. These nonrecurring fair value adjustments typically involve lower of cost or fair value accounting or write-downs of individual assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value. For accounting disclosure purposes, a three-level valuation hierarchy of fair value measurements has been established. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

•Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and inputs that are observable for the assets or liabilities, either directly or indirectly (such as interest rates, yield curves, and prepayment speeds).

•Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. These may be internally developed, using the Company’s best information and assumptions that a market participant would consider.

The valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis are described in the Fair Value Measurements note in the Company's ~~2019~~2020 Annual Report on Form 10-K. There have been no significant changes in these methodologies since then.

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Instruments Measured at Fair Value on a Recurring Basis

The table below presents the ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 carrying values of assets and liabilities measured at fair value on a recurring basis. There were no transfers among levels during the first ~~nine~~three months of ~~2020~~2021 or the year ended December 31, ~~2019.~~2020.


				Fair Value Measurements Using									Fair Value Measurements Using
(In thousands)	(In thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(In thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2020
March 31, 2021										March 31, 2021
Assets:	Assets:									Assets:
Residential mortgage loans held for sale	Residential mortgage loans held for sale	$	35,076	$	0	$	35,076	$	0	Residential mortgage loans held for sale	$	30,505	$	0	$	30,505	$	0
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	835,058		835,058		0		0		U.S. government and federal agency obligations	773,590		773,590		0		0
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	95,301		0		95,301		0		Government-sponsored enterprise obligations	50,816		0		50,816		0
State and municipal obligations	State and municipal obligations	1,969,144		0		1,961,278		7,866		State and municipal obligations	1,980,811		0		1,972,841		7,970
Agency mortgage-backed securities	Agency mortgage-backed securities	6,081,802		0		6,081,802		0		Agency mortgage-backed securities	6,327,450		0		6,327,450		0
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	332,970		0		332,970		0		Non-agency mortgage-backed securities	358,498		0		358,498		0
Asset-backed securities	Asset-backed securities	1,658,579		0		1,658,579		0		Asset-backed securities	2,436,885		0		2,436,885		0
Other debt securities	Other debt securities	566,207		0		566,207		0		Other debt securities	600,153		0		600,153		0
Trading debt securities	Trading debt securities	25,805		0		25,805		0		Trading debt securities	26,925		0		26,925		0
Equity securities	Equity securities	2,803		2,803		0		0		Equity securities	2,931		2,931		0		0
Private equity investments	Private equity investments	78,462		0		0		78,462		Private equity investments	94,257		0		0		94,257
Derivatives *	Derivatives *	147,850		0		144,273		3,577		Derivatives *	62,787		0		60,791		1,996
Assets held in trust for deferred compensation plan	Assets held in trust for deferred compensation plan	17,294		17,294		0		0		Assets held in trust for deferred compensation plan	19,848		19,848		0		0
Total assets	Total assets	11,846,351		855,155		10,901,291		89,905		Total assets	12,765,456		796,369		11,864,864		104,223
Liabilities:	Liabilities:									Liabilities:
Derivatives *	Derivatives *	20,370		0		19,185		1,185		Derivatives *	13,512		0		13,152		360
Liabilities held in trust for deferred compensation plan	Liabilities held in trust for deferred compensation plan	17,294		17,294		0		0		Liabilities held in trust for deferred compensation plan	19,848		19,848		0		0
Total liabilities	Total liabilities	$	37,664	$	17,294	$	19,185	$	1,185	Total liabilities	$	33,360	$	19,848	$	13,152	$	360
December 31, 2019
December 31, 2020										December 31, 2020
Assets:	Assets:									Assets:
Residential mortgage loans held for sale	Residential mortgage loans held for sale	$	9,181	$	0	$	9,181	$	0	Residential mortgage loans held for sale	$	39,396	$	0	$	39,396	$	0
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	851,776		851,776		0		0		U.S. government and federal agency obligations	838,059		838,059		0		0
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	139,277		0		139,277		0		Government-sponsored enterprise obligations	54,485		0		54,485		0
State and municipal obligations	State and municipal obligations	1,267,927		0		1,258,074		9,853		State and municipal obligations	2,045,099		0		2,037,131		7,968
Agency mortgage-backed securities	Agency mortgage-backed securities	3,937,964		0		3,937,964		0		Agency mortgage-backed securities	6,712,085		0		6,712,085		0
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	809,782		0		809,782		0		Non-agency mortgage-backed securities	361,074		0		361,074		0
Asset-backed securities	Asset-backed securities	1,233,489		0		1,233,489		0		Asset-backed securities	1,882,243		0		1,882,243		0
Other debt securities	Other debt securities	331,411		0		331,411		0		Other debt securities	556,219		0		556,219		0
Trading debt securities	Trading debt securities	28,161		0		28,161		0		Trading debt securities	35,321		0		35,321		0
Equity securities	Equity securities	2,929		2,929		0		0		Equity securities	2,966		2,966		0		0
Private equity investments	Private equity investments	94,122		0		0		94,122		Private equity investments	94,368		0		0		94,368
Derivatives *	Derivatives *	105,674		0		105,075		599		Derivatives *	89,889		0		86,447		3,442
Assets held in trust for deferred compensation plan	Assets held in trust for deferred compensation plan	16,518		16,518		0		0		Assets held in trust for deferred compensation plan	19,278		19,278		0		0
Total assets	Total assets	8,828,211		871,223		7,852,414		104,574		Total assets	12,730,482		860,303		11,764,401		105,778
Liabilities:	Liabilities:									Liabilities:
Derivatives *	Derivatives *	10,219		0		9,989		230		Derivatives *	18,675		0		17,974		701
Liabilities held in trust for deferred compensation plan	Liabilities held in trust for deferred compensation plan	16,518		16,518		0		0		Liabilities held in trust for deferred compensation plan	19,278		19,278		0		0
Total liabilities	Total liabilities	$	26,737	$	16,518	$	9,989	$	230	Total liabilities	$	37,953	$	19,278	$	17,974	$	701

* The fair value of each class of derivative is shown in Note 11.

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The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:

Fair Value Measurements Using
Significant Unobservable Inputs
(Level 3)

(In thousands)
State and Municipal Obligations
Private Equity
Investments
Derivatives Total
For the three months ended September 30, 2020
Balance June 30, 2020 $ 9,490 $ 73,846 $ 1,888 $ 85,224
Total gains or losses (realized/unrealized):
   Included in earnings 0 2,389 504 2,893
   Included in other comprehensive income * 271 0 0 271
Investment securities called (2,000) 0 0 (2,000)
Discount accretion 105 0 0 105
Purchases of private equity investments 0 2,522 0 2,522
Sale/pay down of private equity investments 0 (295) 0 (295)
Balance September 30, 2020 $ 7,866 $ 78,462 $ 2,392 $ 88,720
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020 $ 0 $ 2,409 $ 3,050 $ 5,459
Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020 $ 258 $ 0 $ 0 $ 258
For the nine months ended September 30, 2020
Balance January 1, 2020 $ 9,853 $ 94,122 $ 369 $ 104,344
Total gains or losses (realized/unrealized):
   Included in earnings 0 (18,116) 2,832 (15,284)
   Included in other comprehensive income * (101) 0 0 (101)
Investment securities called (2,000) 0 0 (2,000)
Discount accretion 114 0 0 114
Purchases of private equity investments 0 2,791 0 2,791
Sale/pay down of private equity investments 0 (364) 0 (364)
Capitalized interest/dividends 0 29 0 29
Sale of risk participation agreement 0 0 (809) (809)
Balance September 30, 2020 $ 7,866 $ 78,462 $ 2,392 $ 88,720
Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020 $ 0 $ (18,096) $ 3,262 $ (14,834)
Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020 $ (52) $ 0 $ 0 $ (52)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	State and Municipal Obligations		Private Equity Investments		Derivatives		Total















For the three months ended March 31, 2021
Balance January 1, 2021	$	7,968	$	94,368	$	2,741	$	105,077
Total gains or losses (realized/unrealized):
Included in earnings	0		8,365		(1,007)		7,358
Included in other comprehensive income *	(1)		0		0		(1)

Discount accretion	3		0		0		3

Sale/pay down of private equity investments	0		(8,476)		0		(8,476)


Sale of risk participation agreement	0		0		(98)		(98)
Balance March 31, 2021	$	7,970	$	94,257	$	1,636	$	103,863
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at March 31, 2021	$	0	$	8,365	$	2,050	$	10,415
Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at March 31, 2021	$	(1)	$	0	$	0	$	(1)

~~Table of Contents~~


		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)									Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	(In thousands)	State and Municipal Obligations		Private Equity Investments		Derivatives		Total		(In thousands)	State and Municipal Obligations		Private Equity Investments		Derivatives		Total
For the three months ended September 30, 2019
Balance June 30, 2019		$	11,641	$	86,411	$	883	$	98,935

For the three months ended March 31, 2020										For the three months ended March 31, 2020
Balance January 1, 2020										Balance January 1, 2020	$	9,853	$	94,122	$	369	$	104,344
Total gains or losses (realized/unrealized):	Total gains or losses (realized/unrealized):									Total gains or losses (realized/unrealized):
Included in earnings	Included in earnings	0		2,020		(75)		1,945		Included in earnings	0		(13,008)		(486)		(13,494)
Included in other comprehensive income *	Included in other comprehensive income *	(65)		0		0		(65)		Included in other comprehensive income *	(1,495)		0		0		(1,495)
Investment securities called		(1,715)		0		0		(1,715)
Discount accretion		36		0		0		36
Purchases of private equity investments		0		5,010		0		5,010

Purchase of risk participation agreement		0		0		200		200
Sale of risk participation agreement		0		0		(241)		(241)
Balance September 30, 2019		$	9,897	$	93,441	$	767	$	104,105
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2019		$	0	$	2,020	$	860	$	2,880

For the nine months ended September 30, 2019
Balance January 1, 2019		$	14,158	$	85,659	$	490	$	100,307
Total gains or losses (realized/unrealized):
Included in earnings		0		(998)		365		(633)
Included in other comprehensive income *		294		0		0		294
Investment securities called		(4,635)		0		0		(4,635)
Discount accretion	Discount accretion	80		0		0		80		Discount accretion	4		0		0		4
Purchases of private equity investments	Purchases of private equity investments	0		14,899		0		14,899		Purchases of private equity investments	0		114		0		114
Sale/pay down of private equity investments	Sale/pay down of private equity investments	0		(6,150)		0		(6,150)		Sale/pay down of private equity investments	0		(69)		0		(69)
Capitalized interest/dividends		0		31		0		31
Purchase of risk participation agreement		0		0		226		226

Sale of risk participation agreement	Sale of risk participation agreement	0		0		(314)		(314)		Sale of risk participation agreement	0		0		(440)		(440)
Balance September 30, 2019		$	9,897	$	93,441	$	767	$	104,105
Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2019		$	0	$	(2,448)	$	916	$	(1,532)

Balance March 31, 2020										Balance March 31, 2020	$	8,362	$	81,159	$	(557)	$	88,964
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at March 31, 2020										Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at March 31, 2020	$	0	$	(13,008)	$	(55)	$	(13,063)
Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at March 31, 2020										Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at March 31, 2020	$	(1,495)	$	0	$	0	$	(1,495)

* Included in "net unrealized gains (losses) on other securities" in the consolidated statements of comprehensive income.

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Gains and losses included in earnings for the Level 3 assets and liabilities in the previous table are reported in the following line items in the consolidated statements of income:

(In thousands) Loan Fees and Sales Other Non-Interest Income Investment Securities Gains (Losses), Net Total
For the three months ended September 30, 2020
Total gains or losses included in earnings $ 591 $ (87) $ 2,389 $ 2,893
Change in unrealized gains or losses relating to assets still held at September 30, 2020 $ 3,137 $ (87) $ 2,409 $ 5,459
For the nine months ended September 30, 2020
Total gains or losses included in earnings $ 2,679 $ 153 $ (18,116) $ (15,284)
Change in unrealized gains or losses relating to assets still held at September 30, 2020 $ 3,137 $ 125 $ (18,096) $ (14,834)
For the three months ended September 30, 2019
Total gains or losses included in earnings $ (112) $ 37 $ 2,020 $ 1,945
Change in unrealized gains or losses relating to assets still held at September 30, 2019 $ 823 $ 37 $ 2,020 $ 2,880
For the nine months ended September 30, 2019
Total gains or losses included in earnings $ 287 $ 78 $ (998) $ (633)
Change in unrealized gains or losses relating to assets still held at September 30, 2019 $ 823 $ 93 $ (2,448) $ (1,532)


(In thousands)	Loan Fees and Sales		Other Non-Interest Income		Investment Securities Gains (Losses), Net		Total



For the three months ended March 31, 2021
Total gains or losses included in earnings	$	(1,372)	$	365	$	8,365	$	7,358
Change in unrealized gains or losses relating to assets still held at March 31, 2021	$	1,855	$	195	$	8,365	$	10,415



For the three months ended March 31, 2020
Total gains or losses included in earnings	$	(459)	$	(27)	$	(13,008)	$	(13,494)
Change in unrealized gains or losses relating to assets still held at March 31, 2020	$	0	$	(55)	$	(13,008)	$	(13,063)

Level 3 Inputs

The Company's significant Level 3 measurements, which employ unobservable inputs that are readily quantifiable, pertain to auction rate securities (ARS), investments in portfolio concerns held by the Company's private equity subsidiaries, and held for sale residential mortgage loan commitments. ARS are included in state and municipal securities and totaled ~~$7.9~~$8.0 million at ~~September 30, 2020,~~March 31, 2021, while private equity investments, included in other securities, totaled ~~$78.5~~$94.3 million.

Information about these inputs is presented in the table below.


Quantitative Information about Level 3 Fair Value Measurements	Quantitative Information about Level 3 Fair Value Measurements						Weighted	Quantitative Information about Level 3 Fair Value Measurements						Weighted
		Valuation Technique	Unobservable Input	Range			Average*		Valuation Technique	Unobservable Input	Range			Average*
Auction rate securities	Auction rate securities	Discounted cash flow	Estimated market recovery period			5 years	5 years	Auction rate securities	Discounted cash flow	Estimated market recovery period			5 years	5 years
			Estimated market rate	1.9%	-	2.3%	1.9%			Estimated market rate	1.4%	-	1.7%	1.4%
Private equity investments	Private equity investments	Market comparable companies	EBITDA multiple	4.0	-	6.0	5.3	Private equity investments	Market comparable companies	EBITDA multiple	4.0	-	6.0	5.3
Mortgage loan commitments	Mortgage loan commitments	Discounted cash flow	Probability of funding	58.7%	-	99.8%	84.1%	Mortgage loan commitments	Discounted cash flow	Probability of funding	69.4%	-	100.0%	88.8%
			Embedded servicing value	.6%	-	1.0%	0.9%			Embedded servicing value	.6%	-	1.2%	1.0%

* Unobservable inputs were weighted by the relative fair value of the instruments.

~~Table of Contents~~

Instruments Measured at Fair Value on a Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the first ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, and still held as of ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the following table provides the adjustments to fair value recognized during the respective periods, the level of valuation inputs used to determine each adjustment, and the carrying value of the related individual assets or portfolios at ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

Fair Value Measurements Using
(In thousands)

Fair Value
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total Gains (Losses) Recognized During the Nine Months Ended September 30
September 30, 2020
  Collateral dependent impaired loans $ 11,772 $ 0 $ 0 $ 11,772 $ (3,214)
  Mortgage servicing rights 5,731 0 0 5,731 (1,823)
September 30, 2019
  Collateral dependent impaired loans $ 171 $ 0 $ 0 $ 171 $ (139)
  Mortgage servicing rights 7,235 0 0 7,235 (404)
  Long-lived assets 820 0 0 820 (318)


			Fair Value Measurements Using
(In thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Three Months Ended March 31
March 31, 2021
Collateral dependent loans	$	11,233	$	0	$	0	$	11,233	$	(2,926)

Mortgage servicing rights	8,234		0		0		8,234		1,055



March 31, 2020
Collateral dependent loans	$	124	$	0	$	0	$	124	$	(16)

Mortgage servicing rights	6,768		0		0		6,768		(1,056)

The Company's significant Level 3 measurements that are measured on a nonrecurring basis pertain to the Company's mortgage servicing rights retained on certain fixed rate personal real estate loan originations. Mortgage servicing rights are included in other assets on the consolidated balance sheet, and information about these inputs is presented in the table below.

Quantitative Information about Level 3 Fair Value Measurements Weighted
Valuation Technique Unobservable Input Range Average*
Mortgage servicing rights Discounted cash flow Discount rate 9.16 % - 9.30 % 9.28 %
Prepayment speeds (CPR)* 13.22 % - 14.80 % 14.58 %
Loan servicing costs - annually per loan
    Performing loans $ 71 - $ 72 $ 72
    Delinquent loans $ 200 - $ 750
    Loans in foreclosure $ 1,000

Table of Contents


Quantitative Information about Level 3 Fair Value Measurements										Weighted
	Valuation Technique	Unobservable Input	Range							Average*
Mortgage servicing rights	Discounted cash flow	Discount rate	9.03		%	-	9.36		%	9.21		%
		Prepayment speeds (CPR)*	10.35		%	-	14.11		%	12.42		%
		Loan servicing costs - annually per loan
		Performing loans	$	70		-	$	73		$	72
		Delinquent loans	$	200		-	$	750
		Loans in foreclosure	$	1,000

*Ranges and weighted averages based on interest rate tranches.

The significant unobservable inputs used in the fair value measurement of the Company’s mortgage servicing rights are updated periodically for changes in market conditions. Actual rates may differ from our estimates. Increases in prepayment speed and discount rates negatively impact the fair value of our mortgage servicing rights.

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16. Fair Value of Financial Instruments

The carrying amounts and estimated fair values of financial instruments held by the Company are set forth below. Fair value estimates are made at a specific point in time based on relevant market information. They do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for many of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, risk characteristics and economic conditions. These estimates are subjective, involve uncertainties, and cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

~~Table of Contents~~

The estimated fair values of the Company’s financial instruments and the classification of their fair value measurement within the valuation hierarchy are as follows at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


		Carrying Amount		Estimated Fair Value at September 30, 2020									Carrying Amount		Estimated Fair Value at March 31, 2021
(In thousands)	(In thousands)			Level 1		Level 2		Level 3		Total		(In thousands)			Level 1		Level 2		Level 3		Total
Financial Assets	Financial Assets											Financial Assets
Loans:	Loans:											Loans:
Business	Business	$	6,683,413	$	0	$	0	$	6,623,709	$	6,623,709	Business	$	6,624,209	$	0	$	0	$	6,552,890	$	6,552,890
Real estate - construction and land	Real estate - construction and land	1,009,729		0		0		978,403		978,403		Real estate - construction and land	1,073,036		0		0		1,044,188		1,044,188
Real estate - business	Real estate - business	2,993,192		0		0		2,986,961		2,986,961		Real estate - business	3,017,242		0		0		3,009,811		3,009,811
Real estate - personal	Real estate - personal	2,753,867		0		0		2,766,421		2,766,421		Real estate - personal	2,828,418		0		0		2,834,405		2,834,405
Consumer	Consumer	2,006,360		0		0		1,990,589		1,990,589		Consumer	1,966,833		0		0		1,965,384		1,965,384
Revolving home equity	Revolving home equity	324,203		0		0		320,264		320,264		Revolving home equity	285,261		0		0		282,849		282,849
Consumer credit card	Consumer credit card	647,893		0		0		576,898		576,898		Consumer credit card	593,833		0		0		546,154		546,154
Overdrafts	Overdrafts	2,270		0		0		2,227		2,227		Overdrafts	3,239		0		0		2,970		2,970
Total loans	Total loans	16,420,927		0		0		16,245,472		16,245,472		Total loans	16,392,071		0		0		16,238,651		16,238,651
Loans held for sale	Loans held for sale	39,483		0		39,483		0		39,483		Loans held for sale	38,076		0		38,076		0		38,076

Investment securities	Investment securities	11,691,601		837,861		10,721,942		131,798		11,691,601		Investment securities	12,696,663		776,521		11,773,568		146,574		12,696,663
Federal funds sold	Federal funds sold	2,275		2,275		0		0		2,275		Federal funds sold	500		500		0		0		500
Securities purchased under agreements to resell	Securities purchased under agreements to resell	850,000		0		0		903,772		903,772		Securities purchased under agreements to resell	850,000		0		0		881,377		881,377
Interest earning deposits with banks	Interest earning deposits with banks	1,171,697		1,171,697		0		0		1,171,697		Interest earning deposits with banks	2,017,128		2,017,128		0		0		2,017,128
Cash and due from banks	Cash and due from banks	357,616		357,616		0		0		357,616		Cash and due from banks	338,666		338,666		0		0		338,666
Derivative instruments	Derivative instruments	147,850		0		144,273		3,577		147,850		Derivative instruments	62,787		0		60,791		1,996		62,787
Assets held in trust for deferred compensation plan	Assets held in trust for deferred compensation plan	17,294		17,294		0		0		17,294		Assets held in trust for deferred compensation plan	19,848		19,848		0		0		19,848
Total	Total	$	30,698,743	$	2,386,743	$	10,905,698	$	17,284,619	$	30,577,060	Total	$	32,415,739	$	3,152,663	$	11,872,435	$	17,268,598	$	32,293,696
Financial Liabilities	Financial Liabilities											Financial Liabilities
Non-interest bearing deposits	Non-interest bearing deposits	$	10,727,827	$	10,727,827	$	0	$	0	$	10,727,827	Non-interest bearing deposits	$	11,076,556	$	11,076,556	$	0	$	0	$	11,076,556
Savings, interest checking and money market deposits	Savings, interest checking and money market deposits	12,983,505		12,983,505		0		0		12,983,505		Savings, interest checking and money market deposits	14,572,378		14,572,378		0		0		14,572,378
Certificates of deposit	Certificates of deposit	1,990,447		0		0		2,002,118		2,002,118		Certificates of deposit	1,771,691		0		0		1,775,795		1,775,795
Federal funds purchased	Federal funds purchased	6,770		6,770		0		0		6,770		Federal funds purchased	28,490		28,490		0		0		28,490
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	1,646,294		0		0		1,646,338		1,646,338		Securities sold under agreements to repurchase	1,909,620		0		0		1,909,673		1,909,673

Other borrowings												Other borrowings	2,999		0		2,999		0		2,999
Derivative instruments	Derivative instruments	20,370		0		19,185		1,185		20,370		Derivative instruments	13,512		0		13,152		360		13,512
Liabilities held in trust for deferred compensation plan	Liabilities held in trust for deferred compensation plan	17,294		17,294		0		0		17,294		Liabilities held in trust for deferred compensation plan	19,848		19,848		0		0		19,848
Total	Total	$	27,392,507	$	23,735,396	$	19,185	$	3,649,641	$	27,404,222	Total	$	29,395,094	$	25,697,272	$	16,151	$	3,685,828	$	29,399,251

4642

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		Carrying Amount		Estimated Fair Value at December 31, 2019									Carrying Amount		Estimated Fair Value at December 31, 2020
(In thousands)	(In thousands)			Level 1		Level 2		Level 3		Total		(In thousands)			Level 1		Level 2		Level 3		Total
Financial Assets	Financial Assets											Financial Assets
Loans:	Loans:											Loans:
Business	Business	$	5,565,449	$	0	$	0	$	5,526,303	$	5,526,303	Business	$	6,546,087	$	0	$	0	$	6,467,572	$	6,467,572
Real estate - construction and land	Real estate - construction and land	899,377		0		0		898,152		898,152		Real estate - construction and land	1,021,595		0		0		995,873		995,873
Real estate - business	Real estate - business	2,833,554		0		0		2,849,213		2,849,213		Real estate - business	3,026,117		0		0		3,016,576		3,016,576
Real estate - personal	Real estate - personal	2,354,760		0		0		2,333,002		2,333,002		Real estate - personal	2,820,030		0		0		2,830,521		2,830,521
Consumer	Consumer	1,964,145		0		0		1,938,505		1,938,505		Consumer	1,950,502		0		0		1,953,217		1,953,217
Revolving home equity	Revolving home equity	349,251		0		0		344,424		344,424		Revolving home equity	307,083		0		0		304,434		304,434
Consumer credit card	Consumer credit card	764,977		0		0		708,209		708,209		Consumer credit card	655,078		0		0		576,320		576,320
Overdrafts	Overdrafts	6,304		0		0		4,478		4,478		Overdrafts	3,149		0		0		3,068		3,068
Total loans	Total loans	14,737,817		0		0		14,602,286		14,602,286		Total loans	16,329,641		0		0		16,147,581		16,147,581
Loans held for sale	Loans held for sale	13,809		0		13,809		0		13,809		Loans held for sale	45,089		0		45,089		0		45,089

Investment securities	Investment securities	8,741,888		854,705		7,738,158		149,025		8,741,888		Investment securities	12,626,296		841,025		11,638,558		146,713		12,626,296

Securities purchased under agreements to resell	Securities purchased under agreements to resell	850,000		0		0		869,592		869,592		Securities purchased under agreements to resell	850,000		0		0		894,338		894,338
Interest earning deposits with banks	Interest earning deposits with banks	395,850		395,850		0		0		395,850		Interest earning deposits with banks	1,747,363		1,747,363		0		0		1,747,363
Cash and due from banks	Cash and due from banks	491,615		491,615		0		0		491,615		Cash and due from banks	437,563		437,563		0		0		437,563
Derivative instruments	Derivative instruments	105,674		0		105,075		599		105,674		Derivative instruments	89,889		0		86,447		3,442		89,889
Assets held in trust for deferred compensation plan	Assets held in trust for deferred compensation plan	16,518		16,518		0		0		16,518		Assets held in trust for deferred compensation plan	19,278		19,278		0		0		19,278
Total	Total	$	25,353,171	$	1,758,688	$	7,857,042	$	15,621,502	$	25,237,232	Total	$	32,145,119	$	3,045,229	$	11,770,094	$	17,192,074	$	32,007,397
Financial Liabilities	Financial Liabilities											Financial Liabilities
Non-interest bearing deposits	Non-interest bearing deposits	$	6,890,687	$	6,890,687	$	0	$	0	$	6,890,687	Non-interest bearing deposits	$	10,497,598	$	10,497,598	$	0	$	0	$	10,497,598
Savings, interest checking and money market deposits	Savings, interest checking and money market deposits	11,621,716		11,621,716		0		0		11,621,716		Savings, interest checking and money market deposits	14,604,456		14,604,456		0		0		14,604,456
Certificates of deposit	Certificates of deposit	2,008,012		0		0		2,022,629		2,022,629		Certificates of deposit	1,844,691		0		0		1,847,277		1,847,277
Federal funds purchased	Federal funds purchased	20,035		20,035		0		0		20,035		Federal funds purchased	42,270		42,270		0		0		42,270
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	1,830,737		0		0		1,831,518		1,831,518		Securities sold under agreements to repurchase	2,056,113		0		0		2,056,173		2,056,173
Other borrowings		988		0		988		0		988

Derivative instruments	Derivative instruments	10,219		0		9,989		230		10,219		Derivative instruments	18,675		0		17,974		701		18,675
Liabilities held in trust for deferred compensation plan	Liabilities held in trust for deferred compensation plan	16,518		16,518		0		0		16,518		Liabilities held in trust for deferred compensation plan	19,278		19,278		0		0		19,278
Total	Total	$	22,398,912	$	18,548,956	$	10,977	$	3,854,377	$	22,414,310	Total	$	29,083,081	$	25,163,602	$	17,974	$	3,904,151	$	29,085,727

17. Legal and Regulatory Proceedings

The Company has various legal proceedings pending at ~~September 30, 2020,~~March 31, 2021, arising in the normal course of business. While some matters pending against the Company specify damages claimed by plaintiffs, others do not seek a specified amount of damages or are at early stages of the legal process. The Company records a loss accrual for all legal and regulatory matters for which it deems a loss is probable and can be reasonably estimated. Some matters, which are in the early stages, have not yet progressed to the point where a loss amount can be determined to be probable and estimable.

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company's ~~2019~~2020 Annual Report on Form 10-K. Results of operations for the three and ~~nine~~three month periods ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of results to be attained for any other period.

~~Table of Contents~~

Forward-Looking Information

This report may contain "forward-looking statements" that are subject to risks and uncertainties and include information about possible or assumed future results of operations. Many possible events or factors could affect the future financial results and performance of the Company. This could cause results or performance to differ materially from those expressed in the forward-looking statements. Words such as "expects", "anticipates", "believes", "estimates", variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed throughout this report. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. Such possible events or factors include: changes in economic conditions in the Company's market area, the effects of the COVID-19 pandemic, changes in policies by regulatory agencies, governmental legislation and regulation, fluctuations in interest rates, changes in liquidity requirements, demand for loans in the Company's market area, changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats, and such other factors as discussed in Part I Item 1A - "Risk Factors" and Part II Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's ~~2019~~2020 Annual Report on Form 10-K and in Part II Item 1A of this Quarterly Report on Form 10-Q. Except as set forth in Part II, Item 1A, during the quarter ended ~~September 30, 2020,~~March 31, 2021, there were no material changes to the Risk Factors disclosed in the Company's ~~2019~~2020 Annual Report on Form 10-K.

Critical Accounting Policies

The Company has identified several policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the allowance for credit losses and the valuation of certain investment securities. A discussion of these policies can be found in the sections captioned "Critical Accounting Policies" and "Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments" in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's ~~2019~~2020 Annual Report on Form 10-K. ~~On January 1, 2020, the Company adopted ASU 2016-13 (CECL), and as a result, the Company's "Allowance for Loan Losses" accounting policy has been replaced by its "Allowance for Credit Losses" policy.~~ There have been no ~~other~~ changes in the Company's application of critical accounting policies since December 31, ~~2019.~~2020.

~~Allowance for Credit Losses~~

The Company’s Allowance for Credit Losses policy covers the collectability of its loan portfolio, the exposure of its unfunded lending commitments, and the potential for credit losses in its available for sale investment portfolio.The Company performs periodic and systematic detailed reviews of its loan portfolio and unfunded lending commitments to assess overall collectability. The level of the allowance for credit losses on loans and unfunded lending commitments reflects the Company's estimate of the losses inherent in the loan portfolio and unfunded lending commitments at any point in time. While these estimates are based on substantive methods for determining allowance requirements, actual outcomes may differ significantly from estimated results, especially when determining allowances for business, construction and business real estate loans, as well as for their related unfunded lending commitments. These loans and commitments are normally larger and more complex, and their collection rates are harder to predict. Personal banking loans, including personal real estate, credit card and consumer loans, are individually smaller and perform in a more homogenous manner, making loss estimates more predictable. Additionally, the allowance for credit losses requires the calculation of expected lifetime credit losses utilizing a forward-looking forecast of macroeconomic conditions, which may differ significantly from actual results. Further discussion of the methodology used in establishing the allowance is provided in the Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments section of Item 2 and in Note 1 to the consolidated financial statements.

The level of the allowance for credit losses on available for sale securities reflects the Company’s estimate of the losses inherent in the available for sale debt security portfolio. In order to estimate the allowance for credit losses on available for sale debt securities, the Company performs quarterly reviews of its investment portfolio to identify securities in an unrealized loss position. If the unrealized loss is not expected to be recovered, the Company performs further analyses to determine whether any portion of the unrealized loss indicates that a credit loss exists. Further discussion of the methodology used in establishing the allowance for credit losses on available for sale securities is provided in Note 1 to the consolidated financial statements.

4844

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Selected Financial Data


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended March 31
		2020			2019			2020			2019					2021			2020
Per Share Data	Per Share Data													Per Share Data
Net income per common share — basic	Net income per common share — basic	$	1.12		$	.93	*	$	1.90		$	2.65	*	Net income per common share — basic		$	1.12		$	.42	*
Net income per common share — diluted	Net income per common share — diluted	1.11			.93		*	1.89			2.65		*	Net income per common share — diluted		1.11			.42		*
Cash dividends on common stock	Cash dividends on common stock	.270			.248		*	.810			.744		*	Cash dividends on common stock		.263			.257		*
Book value per common share	Book value per common share							29.64			26.27		*	Book value per common share		28.34			26.54		*
Market price	Market price							56.29			57.76		*	Market price		76.61			47.95		*
Selected Ratios	Selected Ratios													Selected Ratios
(Based on average balance sheets)	(Based on average balance sheets)													(Based on average balance sheets)
Loans to deposits (1)	Loans to deposits (1)	66.23		%	72.48		%	69.12		%	71.47		%	Loans to deposits (1)		61.79		%	72.57		%
Non-interest bearing deposits to total deposits	Non-interest bearing deposits to total deposits	39.61			31.85			36.96			31.86			Non-interest bearing deposits to total deposits		39.41			32.64
Equity to loans (1)	Equity to loans (1)	20.54			21.88			20.96			21.58			Equity to loans (1)		20.68			21.93
Equity to deposits	Equity to deposits	13.60			15.86			14.49			15.43			Equity to deposits		12.78			15.91
Equity to total assets	Equity to total assets	10.90			12.41			11.42			12.21			Equity to total assets		10.37			12.35
Return on total assets	Return on total assets	1.71			1.72			1.04			1.68			Return on total assets		1.63			.80

Return on common equity	Return on common equity	15.21			14.21			8.93			14.11			Return on common equity		15.69			6.48
(Based on end-of-period data)	(Based on end-of-period data)													(Based on end-of-period data)
Non-interest income to revenue (2)	Non-interest income to revenue (2)	37.50			39.48			37.42			38.13			Non-interest income to revenue (2)		39.80			38.08
Efficiency ratio (3)	Efficiency ratio (3)	55.00			56.66			57.37			57.08			Efficiency ratio (3)		56.37			59.17
Tier I common risk-based capital ratio	Tier I common risk-based capital ratio							13.45			13.76			Tier I common risk-based capital ratio		13.76			13.52
Tier I risk-based capital ratio	Tier I risk-based capital ratio							13.45			14.50			Tier I risk-based capital ratio		13.76			14.24
Total risk-based capital ratio	Total risk-based capital ratio							14.62			15.33			Total risk-based capital ratio		14.79			15.21
Tangible common equity to tangible assets ratio (4)	Tangible common equity to tangible assets ratio (4)							10.11			10.95			Tangible common equity to tangible assets ratio (4)		9.57			11.13
Tier I leverage ratio	Tier I leverage ratio							9.39			11.32			Tier I leverage ratio		9.38			11.13

* Restated for the 5% stock dividend distributed in December ~~2019.~~2020.

(1) Includes loans held for sale.

(2) Revenue includes net interest income and non-interest income.

(3) The efficiency ratio is calculated as non-interest expense (excluding intangibles amortization) as a percent of revenue.

(4) The tangible common equity to tangible assets ratio is a measurement which management believes is a useful indicator of capital adequacy and utilization. It provides a meaningful basis for period to period and company to company comparisons, and also assists regulators, investors and analysts in analyzing the financial position of the Company. Tangible common equity and tangible assets are non-GAAP measures and should not be viewed as substitutes for, or superior to, data prepared in accordance with GAAP.

The following table is a reconciliation of the GAAP financial measures of total equity and total assets to the non-GAAP measures of total tangible common equity and total tangible assets.


		September 30							March 31
(Dollars in thousands)	(Dollars in thousands)	2020			2019			(Dollars in thousands)	2021			2020
Total equity	Total equity	$	3,306,264		$	3,106,014		Total equity	$	3,317,385		$	3,252,464
Less non-controlling interest	Less non-controlling interest	601			3,414			Less non-controlling interest	4,795			1,449
Less preferred stock	Less preferred stock	—			144,784			Less preferred stock	—			144,784
Less goodwill	Less goodwill	138,921			138,921			Less goodwill	138,921			138,921
Less core deposit premium	Less core deposit premium	1,452			1,904			Less core deposit premium	4,864			1,665
Total tangible common equity (a)	Total tangible common equity (a)	$	3,165,290		$	2,816,991		Total tangible common equity (a)	$	3,168,805		$	2,965,645
Total assets	Total assets	$	31,453,817		$	25,876,479		Total assets	$	33,269,786		$	26,793,017
Less goodwill	Less goodwill	138,921			138,921			Less goodwill	138,921			138,921
Less core deposit premium	Less core deposit premium	1,452			1,904			Less core deposit premium	4,864			1,665
Total tangible assets (b)	Total tangible assets (b)	$	31,313,444		$	25,735,654		Total tangible assets (b)	$	33,126,001		$	26,652,431
Tangible common equity to tangible assets ratio (a)/(b)	Tangible common equity to tangible assets ratio (a)/(b)	10.11		%	10.95		%	Tangible common equity to tangible assets ratio (a)/(b)	9.57		%	11.13		%

4945

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Results of Operations

Summary


		Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31				Increase (Decrease)
(Dollars in thousands)	(Dollars in thousands)	2020		2019		% change			2020		2019		% change		(Dollars in thousands)	2021		2020		Amount		% change
Net interest income	Net interest income	$	215,962	$	203,512	6.1	%		$	620,084	$	618,634	.2	%	Net interest income	$	205,748	$	201,065	$	4,683	2.3	%
Provision for credit losses	Provision for credit losses	(3,101)		(10,963)		(71.7)			(141,593)		(35,232)		N.M.		Provision for credit losses	6,232		(57,953)		(64,185)		(110.8)
Non-interest income	Non-interest income	129,572		132,743		(2.4)			370,750		381,242		(2.8)		Non-interest income	136,045		123,663		12,382		10.0
Investment securities gains (losses), net	Investment securities gains (losses), net	16,155		4,909		N.M.			(1,275)		3,874		N.M.		Investment securities gains (losses), net	9,853		(13,301)		23,154		(174.1)
Non-interest expense	Non-interest expense	(190,858)		(191,020)		(0.1)			(572,068)		(572,224)		—		Non-interest expense	(192,573)		(193,698)		(1,125)		(0.6)
Income taxes	Income taxes	(34,375)		(29,101)		18.1			(54,209)		(80,860)		(33.0)		Income taxes	(32,076)		(10,173)		21,903		215.3
Non-controlling interest income (expense)	Non-controlling interest income (expense)	(907)		(838)		8.2			2,479		(1,083)		N.M.		Non-controlling interest income (expense)	(2,257)		2,254		4,511		N.M.
Net income attributable to Commerce Bancshares, Inc.	Net income attributable to Commerce Bancshares, Inc.	132,448		109,242		21.2			224,168		314,351		(28.7)		Net income attributable to Commerce Bancshares, Inc.	130,972		51,857		79,115		152.6
Preferred stock dividends	Preferred stock dividends	(7,466)		(2,250)		N.M.			(11,966)		(6,750)		77.3		Preferred stock dividends	—		(2,250)		2,250		(100.0)
Net income available to common shareholders	Net income available to common shareholders	$	124,982	$	106,992	16.8	%		$	212,202	$	307,601	(31.0)	%	Net income available to common shareholders	$	130,972	$	49,607	81,365		164.0	%

N.M. - Not meaningful.

For the quarter ended ~~September 30, 2020,~~March 31, 2021, net income attributable to Commerce Bancshares, Inc. (net income) amounted to ~~$132.4~~$131.0 million, an increase of ~~$23.2~~$79.1 million, or ~~21.2%~~152.6%, compared to the ~~third~~first quarter of the previous year. For the current quarter, the annualized return on average assets was ~~1.71%~~1.63%, the annualized return on average ~~common~~ equity was ~~15.21%~~15.69%, and the efficiency ratio was ~~55.00%~~56.37%. Diluted earnings per common share was $1.11 ~~an increase of 19.4%~~in both the current and previous quarters, and increased 164.3% compared to ~~$.93~~$.42 per share in the ~~third~~first quarter of ~~2019, and increased 226.5% compared to $.34 per share in the previous quarter.~~2020.

Compared to the ~~third~~first quarter of last year, net interest income increased ~~$12.5~~$4.7 million, or ~~6.1%~~2.3%, mainly due to a decline of ~~$21.1~~$16.5 million in interest expense on deposits and borrowings and ~~increases~~an increase of $3.7 million in interest income on long-term securities purchased under agreements to ~~resell and investment securities of $7.6 million and $1.9 million, respectively.~~resell. These increases to net interest income were partly offset by a decrease of ~~$17.2~~$12.7 million in interest income on loans. The provision for credit losses ~~totaled $3.1 million for~~during the current quarter ~~representing~~was a recovery of $6.2 million, reflecting a decrease in the estimate of ~~$7.8~~the allowance for credit losses on loans in the current quarter. As a result, the provision for credit losses in the current quarter was $64.2 million ~~from~~lower than the ~~third~~provision for the first quarter of ~~2019.~~2020. Non-interest income ~~decreased $3.2~~increased $12.4 million, or ~~2.4%~~10.0%, compared to the ~~third~~first quarter of ~~2019,~~2020, mainly due to ~~lower net bank card fees, partly offset by~~ growth in loan fees and ~~sales.~~sales, trust fees and capital market fees, and a gain on the sale of a branch location. These increases were partly offset by lower net bank card and deposit account fees. Net investment securities gains totaled ~~$16.2~~$9.9 million in the current quarter compared to ~~gains~~losses of ~~$4.9~~$13.3 million in the same quarter last year. Net securities gains in the current quarter primarily resulted from $8.4 million in unrealized fair value gains and $1.5 million from the sale of ~~$13.4 million on the sales of mortgage-backed securities coupled with unrealized gains of $2.4 million~~an investment in the Company's private equity investment portfolio. Non-interest expense decreased ~~$162 thousand,~~$1.1 million from the ~~third~~first quarter of ~~2019~~2020 mainly due to lower travel and entertainment ~~marketing~~expense, higher deferred origination costs and ~~supplies and communication~~a reduction in impairment expense on mortgage servicing rights, partly offset by higher ~~salaries~~data processing and ~~employee benefits~~software expense.

Net income for the first nine months of 2020 was $224.2 million, a decrease of $90.2 million, or 28.7%, from the same period last year. Diluted earnings per common share was $1.89, a decrease of 28.7% compared to $2.65 per share in the same period last year. For the first nine months of 2020, the annualized return on average assets was 1.04%, the annualized return on average common equity was 8.93% and the efficiency ratio was 57.37%. Net interest income increased $1.5 million over the same period last year. This increase was largely due to an increase of $18.4 million in interest income on long-term securities purchased under agreements to resell and a decrease of $41.5 million in interest expense on deposits and borrowings, partly offset by decreases in interest income on loans and investment securities of $41.0 million and $14.3 million, respectively. The provision for credit losses was $141.6 million for the first nine months of 2020, up $106.4 million over the same period last year. Non-interest income decreased $10.5 million, or 2.8%, from the first nine months of last year due to lower net bank card fees and swap fees, partly offset by growth in loan fees and sales, capital market fees and trust fees. Non-interest expense was flat with the prior year as higher salaries and benefits expense of $17.0 million was offset by lower marketing and travel and entertainment expense and higher deferred origination costs.

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Net Interest Income

The following table summarizes the changes in net interest income on a fully taxable equivalent basis, by major category of interest earning assets and interest bearing liabilities, identifying changes related to volumes and rates. Changes not solely due to volume or rate changes are allocated to rate.

Analysis of Changes in Net Interest Income


		Three Months Ended September 30, 2020 vs. 2019						Nine Months Ended September 30, 2020 vs. 2019							Three Months Ended March 31, 2021 vs. 2020
		Change due to						Change due to								Change due to
(In thousands)	(In thousands)	Average Volume		Average Rate		Total		Average Volume		Average Rate		Total		(In thousands)			Average Volume		Average Rate		Total
Interest income, fully taxable equivalent basis:	Interest income, fully taxable equivalent basis:													Interest income, fully taxable equivalent basis:
Loans:	Loans:													Loans:
Business	Business	$	14,850	$	(16,241)	$	(1,391)	$	36,880	$	(44,164)	$	(7,284)	Business			$	9,240	$	(7,407)	$	1,833
Real estate - construction and land	Real estate - construction and land	743		(4,245)		(3,502)		817		(10,102)		(9,285)		Real estate - construction and land			1,979		(3,422)		(1,443)
Real estate - business	Real estate - business	1,181		(6,787)		(5,606)		2,149		(16,376)		(14,227)		Real estate - business			1,737		(5,028)		(3,291)
Real estate - personal	Real estate - personal	5,378		(2,488)		2,890		12,521		(5,131)		7,390		Real estate - personal			4,112		(3,192)		920
Consumer	Consumer	833		(3,493)		(2,660)		1,504		(4,517)		(3,013)		Consumer			(37)		(3,847)		(3,884)
Revolving home equity	Revolving home equity	(321)		(1,574)		(1,895)		(825)		(3,489)		(4,314)		Revolving home equity			(578)		(940)		(1,518)
Consumer credit card	Consumer credit card	(3,659)		(1,722)		(5,381)		(8,390)		(2,407)		(10,797)		Consumer credit card			(3,592)		(2,119)		(5,711)
Overdrafts	Overdrafts	—		—		—		—		—		—		Overdrafts			—		—		—
Total interest on loans	Total interest on loans	19,005		(36,550)		(17,545)		44,656		(86,186)		(41,530)		Total interest on loans			12,861		(25,955)		(13,094)
Loans held for sale	Loans held for sale	12		(56)		(44)		(310)		(105)		(415)		Loans held for sale			228		(121)		107
Investment securities:	Investment securities:													Investment securities:
U.S. government and federal agency securities	U.S. government and federal agency securities	(327)		2,606		2,279		(1,463)		(2,760)		(4,223)		U.S. government and federal agency securities			(398)		772		374
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	(535)		(137)		(672)		(1,402)		815		(587)		Government-sponsored enterprise obligations			(863)		(240)		(1,103)
State and municipal obligations	State and municipal obligations	4,704		(2,754)		1,950		4,772		(3,660)		1,112		State and municipal obligations			5,638		(3,198)		2,440
Mortgage-backed securities	Mortgage-backed securities	10,152		(10,492)		(340)		17,380		(22,036)		(4,656)		Mortgage-backed securities			13,515		(17,144)		(3,629)
Asset-backed securities	Asset-backed securities	1,572		(3,480)		(1,908)		(1,276)		(5,384)		(6,660)		Asset-backed securities			5,855		(6,452)		(597)
Other securities	Other securities	899		(177)		722		1,675		(969)		706		Other securities			1,926		(1,262)		664
Total interest on investment securities	Total interest on investment securities	16,465		(14,434)		2,031		19,686		(33,994)		(14,308)		Total interest on investment securities			25,673		(27,524)		(1,851)
Federal funds sold and short-term securities purchased under	Federal funds sold and short-term securities purchased under													Federal funds sold and short-term securities purchased under
agreements to resell	agreements to resell	(5)		(2)		(7)		(46)		(3)		(49)		agreements to resell			(2)		—		(2)
Long-term securities purchased under agreements to resell	Long-term securities purchased under agreements to resell	692		6,934		7,626		2,289		16,090		18,379		Long-term securities purchased under agreements to resell			—		3,666		3,666
Interest earning deposits with banks	Interest earning deposits with banks	4,352		(5,332)		(980)		14,693		(17,810)		(3,117)		Interest earning deposits with banks			1,864		(2,786)		(922)
Total interest income	Total interest income	40,521		(49,440)		(8,919)		80,968		(122,008)		(41,040)		Total interest income			40,624		(52,720)		(12,096)
Interest expense:	Interest expense:													Interest expense:
Deposits:	Deposits:													Deposits:
Savings	Savings	74		(68)		6		139		(116)		23		Savings			103		(89)		14
Interest checking and money market	Interest checking and money market	1,255		(8,280)		(7,025)		1,937		(16,549)		(14,612)		Interest checking and money market			1,661		(7,881)		(6,220)
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	(131)		(581)		(712)		(151)		(183)		(334)		Certificates of deposit of less than $100,000			(302)		(1,000)		(1,302)
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	(244)		(4,784)		(5,028)		(217)		(8,899)		(9,116)		Certificates of deposit of $100,000 and over			(393)		(3,780)		(4,173)
Total interest on deposits	Total interest on deposits	954		(13,713)		(12,759)		1,708		(25,747)		(24,039)		Total interest on deposits			1,069		(12,750)		(11,681)
Federal funds purchased and securities sold under	Federal funds purchased and securities sold under													Federal funds purchased and securities sold under
agreements to repurchase	agreements to repurchase	(624)		(7,243)		(7,867)		1,107		(19,185)		(18,078)		agreements to repurchase			162		(4,620)		(4,458)
Other borrowings	Other borrowings	(444)		(9)		(453)		2,464		(1,895)		569		Other borrowings			(328)		(1)		(329)
Total interest expense	Total interest expense	(114)		(20,965)		(21,079)		5,279		(46,827)		(41,548)		Total interest expense			903		(17,371)		(16,468)
Net interest income, tax equivalent basis	Net interest income, tax equivalent basis	$	40,635	$	(28,475)	$	12,160	$	75,689	$	(75,181)	$	508	Net interest income, tax equivalent basis			$	39,721	$	(35,349)	$	4,372

Net interest income in the ~~third~~first quarter of ~~2020~~2021 was ~~$216.0~~$205.7 million, an increase of ~~$12.5~~$4.7 million over the ~~third~~first quarter of ~~2019.~~2020. On a tax equivalent (T/E) basis, net interest income totaled ~~$219.1~~$208.8 million in the ~~third~~first quarter of ~~2020,~~2021, up ~~$12.2~~$4.4 million over the same period last year and ~~up $12.9~~down $4.2 million ~~over~~from the previous quarter. The increase in net interest income compared to the ~~third~~first quarter of ~~2019~~2020 was mainly due to lower interest expense on interest bearing deposits and borrowings of ~~$21.1~~$16.5 million and higher interest income on long-term securities purchased under agreements to resell of ~~$7.6 million and investment securities (T/E) of $2.0~~$3.7 million, partly offset by lower interest income on loans (T/E) of ~~$17.5~~$13.1 million. The decrease in interest

~~Table of Contents~~

earned on loans (T/E) was mainly the result of lower yields on all loan products, especially commercial loans, many of which have variable ~~rates, partly offset by higher business and personal real estate loan balances.~~rates. Total interest income on

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investment securities (T/E) ~~increased $2.0~~decreased $1.9 million ~~over~~from the ~~third~~first quarter of last year ~~mainly~~ due to a decline in the average rate earned, but growth in average balances ~~while~~largely offset the decline in interest income driven by lower rates. The decrease in expense on interest bearing deposits and borrowings was a result of a decline in the average rate paid. The Company's net yield on earning assets (T/E) was ~~2.97%~~2.71% in the current quarter compared to ~~3.43%~~3.33% in the ~~third~~first quarter of ~~2019.~~2020.

Total interest income (T/E) decreased ~~$8.9~~$12.1 million from the ~~third~~first quarter of ~~2019.~~2020. Interest income on loans (T/E) was ~~$152.0~~$147.4 million during the ~~third~~first quarter of ~~2020,~~2021, and decreased ~~$17.5~~$13.1 million, or ~~10.4%~~8.2%, from the same quarter last year. The decrease in interest income from the same quarter last year was primarily due to a decline of ~~102~~73 basis points in the average rate earned, partly offset by growth of ~~$2.1~~$1.6 billion, or ~~14.5%~~11.2%, in average loan balances. Most of the decrease in interest income occurred in the ~~business,~~consumer credit card, consumer, business real estate, ~~consumer~~revolving home equity and construction and land loan categories. Consumer credit card ~~construction, and consumer loan categories. Business~~ loan interest decreased ~~$1.4~~$5.7 million ~~mainly~~ due to a 90decline of $118.8 million in average balances, coupled with a 129 basis point decline in the average rate ~~earned, partly offset by growth~~earned. Consumer loan interest declined $3.9 million due to a decrease of ~~$1.4 billion in average balances. The growth in average balances was mainly the result of Paycheck Protection Plan (PPP) loans secured for customers~~76 basis points in the ~~second quarter of 2020 as part of the program sponsored by the Small Business Administration ("SBA").~~average rate earned. Business real estate loan interest income fell ~~$5.6~~$3.3 million due to ~~an 89~~a 64 basis point decrease in the average rate earned, partly offset by higher average balances of ~~$106.3~~$169.3 million, or ~~3.7%~~5.9%. ~~Consumer credit card~~Revolving home equity loan interest declined ~~$5.4~~$1.5 million due to a decrease of 123 basis points in the average rate earned, coupled with a decline of $50.9 million, or 14.5%, in average balances. Construction and land loan interest decreased $1.4 million due to a decline of ~~$117.2 million, or 15.4%, in average balances, coupled with a decrease of 102 basis points in the average rate earned. Construction loan interest decreased $3.5 million due to a decline of 172~~124 basis points in the average rate earned, partly offset by growth in the average balance of ~~$54.1~~$167.9 million. ~~Consumer loan interest declined $2.7 million due to a decrease of 69 basis points in the average rate earned, partly offset by growth in the average balance of $67.9 million, or 3.5%.~~ These decreases to interest income (T/E) were partly offset by an increase of ~~$2.9~~$1.8 million in interest income on ~~personal real estate~~business loans, due to growth of ~~$547.1 million,~~$1.0 billion, or ~~25.2%~~18.9%, in average balances, while the average rate earned on these loans declined 3541 basis points. The growth in average balances was mainly the result of Paycheck Protection Program (PPP) loans secured for customers as part of the program sponsored by the Small Business Administration (SBA). Personal real estate loan interest grew $920 thousand over same quarter last year due to growth of $435.4 million in average balances, partly offset by a 43 basis point decline in the average rate earned.

Interest income on investment securities (T/E) was ~~$62.5~~$53.5 million during the ~~third~~first quarter of ~~2020,~~2021, which was ~~an increase~~a decrease of ~~$2.0~~$1.9 million ~~over~~from the same quarter last year. The ~~increase~~decrease in interest income occurred mainly in interest earned on mortgage-backed securities, which fell $3.6 million due to a 98 basis point decline in the average rate earned, partly offset by an increase of $2.3 billion in the average balance. An adjustment to premium amortization of $4.1 million was recorded in the current quarter to reflect a slowdown in forward prepayment speed estimates on mortgage-backed securities due to rising interest rates during the quarter. This adjustment mostly offset higher premium amortization recorded on these securities during the quarter due to the recent surge in mortgage refinancing. In addition, interest on asset-backed securities declined $597 thousand as a result of a 124 basis point decline in the average rate earned, partly offset by an increase of $902.9 million in the average balance. Interest income on government-sponsored enterprise obligations decreased $1.1 million and resulted from a decline in the average balance of $83.5 million, or 62.2%, and a decrease of 183 basis points in the average rate earned. These decreases to interest income on investment securities (T/E) were partly offset by an increase of $2.4 million in interest earned on state and municipal obligations. This increase was a result of growth in the average balance of $736.0 million, partly offset by a 65 basis point decline in the average rate earned. Interest on U.S. government &and federal agency obligations ~~which~~ grew ~~$2.3 million~~$374 thousand mainly due to ~~higher~~an increase in inflation income on the Company's U.S. Treasury inflation-protected securities (TIPS). Interest income related to TIPS, which is tied to the Consumer Price Index, ~~grew $2.3 million~~increased $486 thousand over the same quarter last year. In addition, interest income on state and municipal obligations increased $2.0 million and resulted from growth in the average balance of $595.3 million, or 50.8%, partly offset by a 61 basis point decrease in the average rate earned. These increases to interest income on investment securities (T/E) was partly offset by a decline in interest income on asset-backed securities of $1.9 million, mainly due to a decline in the average rate earned of 90 basis points, partly offset by higher average balances of $223.3 million. Interest earned on mortgage-backed securities declined slightly by $340 thousand due to a 66 basis point decline in the average rate earned offset by an increase of $1.5 billion in the average balance. Adjustments to premium amortization, due to faster prepayment speeds on various mortgage-backed and asset-backed securities, increased interest income $1.0 million in the current quarter, compared to a $368 thousand decrease in the same quarter last year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was ~~$11.1~~$12.6 billion in the ~~third~~first quarter of ~~2020,~~2021, compared to ~~$8.7~~$8.5 billion in the ~~third~~first quarter of ~~2019.~~2020.

Interest income on long-term securities purchased under agreements to resell increased ~~$7.6~~$3.7 million over the same quarter last year, due to an increase of ~~325~~178 basis points in the average rate earned, as these assets were structured with floor spreads to protect against falling rates. Of the ~~$850~~$850.0 million in securities purchased under agreements to resell held by the Company, ~~throughout 2020, $450~~$450.0 million of those agreements will mature throughout 2021. Interest income on balances at the Federal Reserve declined ~~$980~~$922 thousand mainly due to a ~~207~~76 basis point decrease in the average rate earned, partly offset by ~~a $797.9~~an $878.9 million increase in the average balance invested.

The average tax equivalent yield on total interest earning assets was ~~3.07%~~2.76% in the ~~third~~first quarter of ~~2020,~~2021, down from ~~3.90%~~3.66% in the ~~third~~first quarter of ~~2019.~~2020.

Total interest expense decreased ~~$21.1~~$16.5 million compared to the ~~third~~first quarter of ~~2019~~2020 due to a ~~$12.8~~$11.7 million decrease in interest expense on interest bearing deposits and ~~an $8.3~~a $4.8 million decrease in interest expense on borrowings. The decrease in deposit interest expense resulted mainly from a 4036 basis point decline in the overall average rate paid, slightly offset by higher average balances of ~~$1.5~~$2.4 billion. Interest expense on interest checking and money market accounts declined ~~$7.0~~$6.2 million, due to a 2824 basis point decrease in the average rate paid, ~~while interest~~slightly offset by higher average balances of $2.2 billion. Interest expense on ~~jumbo~~ certificates of deposit ~~(CD)~~ declined ~~$5.0~~$5.5 million due to a ~~130~~111 basis point decrease in the average rate paid. Interest expense on

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borrowings decreased due to lower rates paid, mainly on customer repurchase agreements. The overall average rate incurred on all interest bearing liabilities was ~~.17%~~.09% and ~~.73%~~.52% in the ~~third~~first quarters of ~~2020~~2021 and ~~2019,~~2020, respectively.

~~Table of Contents~~

Net interest income (T/E) for the first nine months of 2020 was $629.8 million compared to $629.3 million for the same period in 2019. For the first nine months of 2020, the net interest margin was 3.07% compared to 3.52% for the same period in 2019.

Total interest income (T/E) for the first nine months of 2020 decreased $41.0 million from the same period last year mainly due to lower interest income on loans. Loan interest income (T/E) declined $41.5 million, or 8.2%, due to an 84 basis point decline in the average rate earned, partly offset by a $1.6 billion increase in total average loan balances. Interest rates were impacted by actions taken by the Federal Reserve during the first quarter of 2020 to lower short-term interest rates. Most of the decrease in loan interest occurred in business real estate, construction and business loans, due to lower interest rates, partly offset by higher average loan balances in these categories. Consumer credit card loan interest decreased due to declines in both the average balance and rate. These decreases to income were partly offset by an increase in interest income on personal real estate loans of $7.4 million due to higher average balances, partly offset by a decline in the average rate earned. Interest income on investment securities (T/E) declined $14.3 million mainly due to a 47 basis point decline in the average rate earned, partly offset by an increase of $935.1 million in average balances. Interest earned on asset-backed securities declined $6.7 million due to lower average balances and rates, while interest earned on mortgage-backed securities declined $4.7 million due to lower average rates earned, partly offset by higher average balances. U.S. government and federal agency obligations declined $4.2 million, mainly due to lower TIPS interest income of $3.6 million. Interest income on balances at the Federal Reserve decreased $3.1 million due to a 211 basis point decline in the average rate earned, partly offset by an $835.2 million increase in the average balance invested. These decreases to interest income were partly offset by an increase of $18.4 million in interest income earned on long-term securities purchased under agreements to resell due to higher average balances and rates.

Total interest expense for the first nine months of 2020 decreased $41.5 million compared to the same period last year. Interest expense on interest bearing deposits decreased $24.0 million, mainly due to a 26 basis point decrease in the overall rate paid. Interest expense on interest checking and money market account balances decreased $14.6 million due to a 20 basis point decrease in rates paid. Interest expense on jumbo CD's declined $9.1 million due to an 87 basis point decline in rates paid. Interest expense on borrowings decreased $17.5 million, mainly due to lower rates paid on customer repurchase agreements. The overall cost of total interest bearing liabilities decreased to .31% compared to .69% in the same period last year.

Summaries of average assets and liabilities and the corresponding average rates earned/paid appear on the last page of this discussion.

Non-Interest Income


		Three Months Ended September 30								Nine Months Ended September 30								Three Months Ended March 31	Increase (Decrease)
(Dollars in thousands)	(Dollars in thousands)	2020			2019			% change			2020			2019			% change			(Dollars in thousands)	2021			2020			Amount		% change
Bank card transaction fees	Bank card transaction fees	$	37,873		$	44,510		(14.9)	%		$	111,818		$	126,800		(11.8)	%		Bank card transaction fees	$	37,695		$	40,200		$	(2,505)	(6.2)	%
Trust fees	Trust fees	40,769			39,592			3.0			118,676			115,223			3.0			Trust fees	44,127			39,965			4,162		10.4
Deposit account charges and other fees	Deposit account charges and other fees	23,107			24,032			(3.8)			69,063			71,009			(2.7)			Deposit account charges and other fees	22,575			23,677			(1,102)		(4.7)
Capital market fees	Capital market fees	3,194			1,787			78.7			10,756			5,610			91.7			Capital market fees	4,981			3,790			1,191		31.4
Consumer brokerage services	Consumer brokerage services	4,011			4,030			(0.5)			11,099			11,665			(4.9)			Consumer brokerage services	4,081			4,077			4		.1
Loan fees and sales	Loan fees and sales	9,769			4,755			105.4			17,653			12,302			43.5			Loan fees and sales	10,184			3,235			6,949		214.8
Other	Other	10,849			14,037			(22.7)			31,685			38,633			(18.0)			Other	12,402			8,719			3,683		42.2
Total non-interest income	Total non-interest income	$	129,572		$	132,743		(2.4)	%		$	370,750		$	381,242		(2.8)	%		Total non-interest income	$	136,045		$	123,663		$	12,382	10.0	%
Non-interest income as a % of total revenue*	Non-interest income as a % of total revenue*	37.5		%	39.5		%				37.4		%	38.1		%				Non-interest income as a % of total revenue*	39.8		%	38.1		%

* Total revenue includes net interest income and non-interest income.

The table below is a summary of net bank card transaction fees for the three ~~and nine~~ month periods ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended March 31
(Dollars in thousands)	(Dollars in thousands)	2020		2019		% change		2020		2019		% change		(Dollars in thousands)	2021		2020		% change
Net debit card fees	Net debit card fees	$	9,721	$	10,490	(7.3)	%	$	27,863	$	29,605	(5.9)	%	Net debit card fees	$	9,367	$	9,322	.5	%
Net credit card fees	Net credit card fees	3,359		3,642		(7.8)		9,749		10,667		(8.6)		Net credit card fees	3,421		3,487		(1.9)
Net merchant fees	Net merchant fees	4,551		4,495		1.2		13,165		14,249		(7.6)		Net merchant fees	4,614		4,388		5.2
Net corporate card fees	Net corporate card fees	20,242		25,883		(21.8)		61,041		72,279		(15.5)		Net corporate card fees	20,293		23,003		(11.8)
Total bank card transaction fees	Total bank card transaction fees	$	37,873	$	44,510	(14.9)	%	$	111,818	$	126,800	(11.8)	%	Total bank card transaction fees	$	37,695	$	40,200	(6.2)	%

~~Table of Contents~~

For the ~~third~~first quarter of ~~2020,~~2021, total non-interest income amounted to ~~$129.6~~$136.0 million compared ~~with $132.7~~to $123.7 million in the same quarter last year, which was ~~a decrease~~an increase of ~~$3.2~~$12.4 million, or ~~2.4%~~10.0%. The ~~decrease~~increase was mainly due to ~~lower net bank card~~higher loan fees and sales, trust fees, capital market fees and other non-interest income, partly offset by ~~higher loan~~lower net bank card fees and ~~sales.~~deposit account fees. Bank card transaction fees for the current quarter declined ~~$6.6~~$2.5 million, or ~~14.9%~~6.2%, from the same period last year, mostly due to lower net corporate card fees of ~~$5.6~~$2.7 million, partly offset by higher net ~~debit card~~merchant fees of ~~$769 thousand and net credit card fees of $283~~$226 thousand. The decline in net corporate card fees from the same quarter last year was mainly due to lower ~~transaction volume, while the decrease~~fee income, partly offset by lower rewards expense. The growth in net ~~debit and credit card~~merchant fees was mainly due to ~~lower~~higher discount fees, partly offset by higher interchange ~~income.~~expense. Trust fees for the quarter increased ~~$1.2~~$4.2 million, or ~~3.0%~~10.4%, over the same quarter last year, resulting ~~mainly~~ from higher private client ~~fees,~~and institutional trust fee income, which were up ~~3.5%.~~11.4% and 6.1%, respectively. Compared to the same period last year, deposit account fees decreased ~~$925 thousand,~~$1.1 million, or ~~3.8%~~4.7%, mainly due to lower overdraft and return item fees, partly offset by an increase in corporate cash management fees. Capital market fees increased ~~$1.4~~$1.2 million, or ~~78.7%~~31.4%, while ~~consumer brokerage service fees decreased slightly from the same quarter last year. Loan~~loan fees and sales increased ~~$5.0~~$6.9 million ~~or 105.4%,~~ due to higher mortgage banking revenue. Other non-interest income ~~decreased $3.2~~increased $3.7 million, or ~~22.7%~~42.2%, mainly due ~~to lower~~gains of $2.4 million recorded in the current quarter on the sale of a branch location and growth of $1.2 million in interest rate swap ~~fees, cash sweep commissions and gains on sales of leased assets to customers upon termination. These decreases were partly offset by growth in tax credit sales income.~~

Non-interest income for the first nine months of 2020 was $370.8 million compared to $381.2 million last year, resulting in a decrease of $10.5 million, or 2.8%. Bank card fees decreased $15.0 million, or 11.8%, due to declines in net corporate card fees of $11.2 million, net debit card fees of $1.7 million, net merchant fees of $1.1 million and net credit card fees of $918 thousand. Trust fee income increased $3.5 million, or 3.0%, as a result of growth in private client trust fees, partly offset by a decline in corporate trust fee income. Deposit account fees decreased $1.9 million due to lower overdraft and return item fees of $6.0 million, partly offset by higher corporate cash management fees of $4.1 million. Capital market fees increased $5.1 million, or 91.7%, as a result of higher sales volume, while consumer brokerage fees declined $566 thousand, or 4.9%. Loan fees and sales increased $5.4 million, or 43.5%, due to higher mortgage banking revenue. Other non-interest income decreased $6.9 million, mainly due to lower swap fees and lower gains on sales of leased assets. In addition, fairfees. Fair value adjustments on the Company's deferred compensation plan assets, which are held in a trust and recorded as both an asset and a liability, ~~decreased $1.4~~increased $3.4 million ~~from~~over the same ~~period~~quarter last year, affecting both other income and other expense. These ~~decreases~~increases were partly offset by ~~an increase~~a decline of $2.8 million in ~~tax credit sales income.~~cash sweep commissions.

Table of Contents

Investment Securities Gains (Losses), Net


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended March 31
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020
Net gains on sales of available for sale debt securities		$	13,674	$	38	$	16,965	$	728

Net gains on sales of equity securities	Net gains on sales of equity securities	—		2,865		2		2,865		Net gains on sales of equity securities	$	—	$	2
Net losses on sales and fair value adjustments of private equity investments		2,389		2,020		(18,116)		96
Net gains (losses) on sales and fair value adjustments of private equity investments										Net gains (losses) on sales and fair value adjustments of private equity investments	9,888		(13,008)

Fair value adjustments on equity securities, net	Fair value adjustments on equity securities, net	92		56		(126)		318		Fair value adjustments on equity securities, net	(35)		(295)
Other		—		(70)		—		(133)

Total investment securities gains (losses), net	Total investment securities gains (losses), net	$	16,155	$	4,909	$	(1,275)	$	3,874	Total investment securities gains (losses), net	$	9,853	$	(13,301)

Net gains and losses on investment securities, which were recognized in earnings during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ are shown in the table above. Net securities gains of ~~$16.2~~$9.9 million were reported in the ~~third~~first quarter of ~~2020,~~2021, compared to net ~~gains~~losses of ~~$4.9~~$13.3 million in the same period last year. The net gains in the ~~third~~first quarter of ~~2020~~2021 were primarily comprised of a net ~~gains~~gain of ~~$13.7~~$1.5 million on ~~sales~~the sale of ~~available for sale debt securities~~a private equity investment and ~~$2.4~~$8.4 million of net gains in fair value on the Company’s private equity investments. The net ~~gains~~losses on investment securities for the same quarter last year were mainly comprised of ~~a gain~~$295 thousand of ~~$2.9 million~~net losses in fair value on ~~the sale of an~~ equity ~~investment~~investments and ~~$2.0~~$13.0 million of net ~~gains~~losses in fair value on the Company’s private equity ~~investments.~~

~~Net losses on~~investments, as the economic conditions resulting from the COVID-19 pandemic negatively impacted investment securities of $1.3 million were recognized in earnings for the nine months ended September 30, 2020, compared to net gains of $3.9 million for the same period in 2019. Net losses in the first nine months of 2020 were mainly comprised of fair value adjustments on private equity investments partly offset by net gains on the sales of available for sale debt securities. Net gains in the first nine months of 2019 were mainly comprised of net gains on the sales of available for sale debt securities and equity securities.valuations. The portion of private equity activity attributable to minority interests is reported as non-controlling interest in the consolidated statements of income and resulted in ~~income~~expense of ~~$3.2~~$2.0 million during the first ~~nine~~three months of ~~2020~~2021 and ~~expense~~income of ~~$291 thousand~~$2.5 million during the first ~~nine~~three months of ~~2019.~~2020.

~~Table of Contents~~

Non-Interest Expense


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended March 31				Increase (Decrease)
(Dollars in thousands)	(Dollars in thousands)	2020		2019		% change			2020		2019		% change			(Dollars in thousands)	2021		2020		Amount		% change
Salaries and employee benefits	Salaries and employee benefits	$	127,308	$	123,836	2.8	%		$	383,004	$	366,026	4.6	%		Salaries and employee benefits	$	129,033	$	128,937	$	96	.1	%
Net occupancy	Net occupancy	12,058		12,293		(1.9)			35,075		34,939		.4			Net occupancy	12,021		11,748		273		2.3
Equipment	Equipment	4,737		4,941		(4.1)			14,313		14,202		.8			Equipment	4,353		4,821		(468)		(9.7)
Supplies and communication	Supplies and communication	4,141		5,106		(18.9)			13,226		15,543		(14.9)			Supplies and communication	4,125		4,658		(533)		(11.4)
Data processing and software	Data processing and software	23,610		23,457		.7			71,002		68,965		3.0			Data processing and software	25,463		23,555		1,908		8.1
Marketing	Marketing	4,926		6,048		(18.6)			14,706		17,963		(18.1)			Marketing	5,158		5,979		(821)		(13.7)
Other	Other	14,078		15,339		(8.2)			40,742		54,586		(25.4)			Other	12,420		14,000		(1,580)		(11.3)
Total non-interest expense	Total non-interest expense	$	190,858	$	191,020	(.1)	%		$	572,068	$	572,224	—	%		Total non-interest expense	$	192,573	$	193,698	$	(1,125)	(.6)	%

Non-interest expense for the ~~third~~first quarter of ~~2020~~2021 amounted to ~~$190.9~~$192.6 million, a decrease of ~~$162 thousand,~~$1.1 million, or ~~.1%~~.6%, compared to expense of ~~$191.0~~$193.7 million in the ~~third~~first quarter of last year. The decrease in expense was ~~primarily~~ due to lower expenses in most areas, particularly in travel and entertainment ~~marketing, and supplies and communication~~ expense, partly offset by higher costs for ~~salaries~~data processing and ~~employee benefits.~~software. Salaries expense increased ~~$2.9~~$1.9 million, or ~~2.8%~~1.8%, driven by growth in incentive compensation, partly offset by a decline in full-time salary ~~costs and incentive compensation.~~costs. Employee benefits expense totaled ~~$18.7~~$21.7 million, reflecting ~~an increase~~a decrease of ~~$559 thousand,~~$1.8 million, or ~~3.1%~~7.6%, mainly as a result of ~~higher~~lower healthcare expense. Full-time equivalent employees totaled ~~4,825~~4,619 at ~~September 30, 2020,~~March 31, 2021, compared to ~~4,873~~4,854 at ~~September 30, 2019.~~March 31, 2020. Supplies and communication expense declined ~~$965~~$533 thousand, or ~~18.9%~~11.4%, due to lower supplies and postage expense, and ~~bank card issuance~~equipment expense declined $468 thousand, or 9.7%. Data processing and software expense increased $1.9 million, or 8.1%, which reflects a continuing investment in technology, while marketing expense declined ~~$1.1 million,~~$821 thousand, or ~~18.6%~~13.7%. Other non-interest expense decreased ~~$1.3~~$1.6 million, or 11.3% mainly due to a lower travel and entertainment expense ~~partly offset by an increase in FDIC insurance expense, resulting from higher deposit account balances during the current quarter than in the third quarter~~ of ~~2019.~~

Non-interest expense amounted to $572.1 million for the first nine months of 2020, a decrease of $156 thousand compared to expense of $572.2 million in the same period last year. Salaries and benefits expense increased $17.0 million, or 4.6%, mainly due to higher costs for full-time salaries and incentive compensation. Supplies and communication expense declined $2.3 million, or 14.9%, mainly due to lower debit and credit card reissuance expense. Data processing expense increased $2.0 million, or 3.0%, mostly due to higher costs for service providers, partly offset by lower bank card processing expense, while marketing expense declined $3.3 million, or 18.1%. Other non-interest expense decreased $13.8 million, or 25.4%, mainly due to lower travel and entertainment expense and higher deferred origination costs of $1.1 million, and a $2.1 million reduction in ~~addition to~~impairment expense on mortgage servicing rights. These decreases were partly offset by the previously mentioned fair value equity adjustments of ~~$1.4~~$3.4 million on the Company's deferred compensation plan assets. ~~These decreases to expense were partly offset by a $1.4 million increase in impairment expense on the Company's mortgage servicing rights and an increase in FDIC insurance expense.~~

5550

Table of Contents

Provision and Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments


		Three Months Ended						Nine Months Ended September 30					Three Months Ended
		Sept. 30, 2020		June 30, 2020		Sept. 30, 2019		2020		2019			Mar. 31, 2021		Dec. 31, 2020		Mar. 31, 2020
ALLOWANCE FOR CREDIT LOSSES ON LOANS	ALLOWANCE FOR CREDIT LOSSES ON LOANS											ALLOWANCE FOR CREDIT LOSSES ON LOANS
Balance at end of prior period	Balance at end of prior period	$	240,744	$	171,653	$	161,182	$	160,682	$	159,932	Balance at end of prior period	$	220,834	$	236,360	$	160,682
Adoption of ASU 2016-13	Adoption of ASU 2016-13	—		—		—		(21,039)		—		Adoption of ASU 2016-13	—		—		(21,039)
Balance at beginning of period	Balance at beginning of period	$	240,744	$	171,653	$	161,182	$	139,643	$	159,932	Balance at beginning of period	$	220,834	$	236,360	$	139,643
Provision for credit losses on loans	Provision for credit losses on loans	3,200		77,491		10,963		$	123,559	$	35,232	Provision for credit losses on loans	(10,355)		(7,510)		42,868
Net loan charge-offs (recoveries):	Net loan charge-offs (recoveries):											Net loan charge-offs (recoveries):
Commercial:	Commercial:											Commercial:
Business	Business	208		3,249		335		3,084		1,066		Business	(4)		581		(373)
Real estate-construction and land	Real estate-construction and land	(1)		—		—		(1)		(117)		Real estate-construction and land	1		(2)		—
Real estate-business	Real estate-business	(13)		(6)		(44)		(40)		(95)		Real estate-business	20		(7)		(21)
Commercial net loan charge-offs		194		3,243		291		3,043		854
Commercial net loan charge-offs (recoveries)												Commercial net loan charge-offs (recoveries)	17		572		(394)
Personal Banking:	Personal Banking:											Personal Banking:
Real estate-personal	Real estate-personal	(198)		(71)		(30)		(273)		50		Real estate-personal	15		(18)		(4)
Consumer	Consumer	211		1,362		2,069		3,284		5,716		Consumer	763		1,160		1,711
Revolving home equity	Revolving home equity	(86)		(34)		119		(158)		254		Revolving home equity	23		(8)		(38)
Consumer credit card	Consumer credit card	7,263		3,584		8,568		20,004		26,592		Consumer credit card	8,981		5,975		9,157
Overdrafts	Overdrafts	200		316		446		942		1,016		Overdrafts	153		335		426
Personal banking net loan charge-offs	Personal banking net loan charge-offs	7,390		5,157		11,172		23,799		33,628		Personal banking net loan charge-offs	9,935		7,444		11,252
Total net loan charge-offs	Total net loan charge-offs	7,584		8,400		11,463		26,842		34,482		Total net loan charge-offs	9,952		8,016		10,858
Balance at end of period	Balance at end of period	$	236,360	$	240,744	$	160,682	$	236,360	$	160,682	Balance at end of period	$	200,527	$	220,834	$	171,653
LIABILITY FOR UNFUNDED LENDING COMMITMENTS	LIABILITY FOR UNFUNDED LENDING COMMITMENTS											LIABILITY FOR UNFUNDED LENDING COMMITMENTS
Balance at end of prior period	Balance at end of prior period	$	35,299	$	32,250	$	1,075	$	1,075	$	1,075	Balance at end of prior period	$	38,307	$	35,200	$	1,075
Adoption of ASU 2016-13	Adoption of ASU 2016-13	—		—		—		16,090		—		Adoption of ASU 2016-13	—		—		16,090
Balance at beginning of period	Balance at beginning of period	35,299		32,250		1,075		17,165		1,075		Balance at beginning of period	38,307		35,200		17,165
Provision for credit losses on unfunded lending commitments	Provision for credit losses on unfunded lending commitments	(99)		3,049		—		18,035		—		Provision for credit losses on unfunded lending commitments	4,123		3,107		15,085
Balance at end of period	Balance at end of period	35,200		35,299		1,075		35,200		1,075		Balance at end of period	42,430		38,307		32,250
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	271,560	$	276,043	$	161,757	$	271,560	$	161,757	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	242,957	$	259,141	$	203,903

~~Table of Contents~~


		Three Months Ended						Nine Months Ended September 30					Three Months Ended
		Sept. 30, 2020		June 30, 2020		Sept. 30, 2019		2020		2019			Mar. 31, 2021		Dec. 31, 2020		Mar. 31, 2020
Annualized net loan charge-offs (recoveries)*:	Annualized net loan charge-offs (recoveries)*:											Annualized net loan charge-offs (recoveries)*:
Commercial:	Commercial:											Commercial:
Business	Business	.01	%	.19	%	.03	%	.07	%	.03	%	Business	—	%	.04	%	(.03)	%
Real estate-construction and land	Real estate-construction and land	—		—		—		—		(.02)		Real estate-construction and land	—		—		—
Real estate-business	Real estate-business	—		—		(.01)		—		—		Real estate-business	—		—		—
Commercial net loan charge-offs		.01		.12		.01		.04		.01
Commercial net loan charge-offs (recoveries)												Commercial net loan charge-offs (recoveries)	—		.02		(.02)
Personal Banking:	Personal Banking:											Personal Banking:
Real estate-personal	Real estate-personal	(.03)		(.01)		(.01)		(.01)		—		Real estate-personal	—		—		—
Consumer	Consumer	.04		.28		.43		.22		.40		Consumer	.16		.23		.35
Revolving home equity	Revolving home equity	(.10)		(.04)		.13		(.06)		.09		Revolving home equity	.03		(.01)		(.04)
Consumer credit card	Consumer credit card	4.47		2.17		4.45		3.93		4.62		Consumer credit card	5.98		3.72		5.06
Overdrafts	Overdrafts	29.59		43.65		19.15		39.16		22.16		Overdrafts	17.50		35.43		42.37
Personal banking net loan charge-offs	Personal banking net loan charge-offs	.52		.37		.85		.57		.86		Personal banking net loan charge-offs	.71		.52		.83
Total annualized net loan charge-offs	Total annualized net loan charge-offs	.18	%	.21	%	.32	%	.23	%	.33	%	Total annualized net loan charge-offs	.25	%	.19	%	.30	%

* as a percentage of average loans (excluding loans held for sale)

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The Company has an established process to determine the amount of the allowance for credit losses on loans and the liability for unfunded lending commitments, which assesses the risks and losses ~~inherent~~expected in its portfolios. This process provides an allowance based on estimates of allowances for pools of loans and unfunded lending commitments, as well as a second, smaller component based on certain individually evaluated loans and unfunded lending commitments. The Company's policies and processes for determining the allowance for credit losses on loans and the liability for unfunded lending commitments are discussed in Note 1 to the consolidated financial statements and in the "Allowance for Credit Losses" discussion within Critical Accounting Policies in Item ~~2 above.~~7 of the 2020 Annual Report on Form 10-K.

Net loan charge-offs in the ~~third~~first quarter of ~~2020~~2021 amounted to ~~$7.6~~$10.0 million, compared to ~~$8.4~~$8.0 million in the prior quarter and ~~$11.5~~$10.9 million in the ~~third~~first quarter of last year. During the ~~third~~first quarter of ~~2020,~~2021, the Company recorded net charge-offs on commercial loans of ~~$194~~$17 thousand, compared to net charge-offs of ~~$3.2 million~~$572 thousand in the prior quarter. The decrease in commercial loan net charge-offs was primarily driven by a ~~$3.0 million~~$585 thousand decrease in net charge-offs on business loans this quarter, compared to the ~~second quarter of 2020.~~prior quarter. In addition to the decrease in commercial net loan charge-offs, net charge-offs on consumer loans decreased ~~$1.2 million~~$397 thousand in the ~~third~~first quarter of ~~2020~~2021 compared to the prior quarter. These decreases were ~~partially~~ offset by an increase of ~~$3.7~~$3.0 million in net charge-offs on consumer credit card loans in the ~~third~~first quarter of ~~2020~~2021 compared to the prior quarter. The increase in consumer credit card net charge-offs compared to prior quarter was a result of a COVID-related relief program offered during 2020 that caused the past due and charge-off process on some loans to not advance for several months. As the short-term relief expired, those loans progressed into past due stages during the fourth quarter of 2020 and were ultimately charged-off during the first quarter of 2021. Compared to the same period last year, net loan charge-offs in the ~~third~~first quarter of ~~2020~~2021 decreased ~~$3.9 million.~~$906 thousand. The decrease in net charge-offs during the ~~third~~first quarter of ~~2020~~2021 compared to the same quarter last year was driven by lower net charge-offs on consumer, ~~loans~~overdraft, and consumer credit card loans of ~~$1.9 million~~$948 thousand, $273 thousand, and ~~$1.3 million, respectively. These decreases were primarily the result~~$176 thousand, respectively, partly offset by lower net recoveries on business loans of ~~various COVID-19 relief programs that allowed customers to defer loan payments without advancing in past due or charge-off status.~~$369 thousand.

For the three months ended ~~September 30, 2020,~~March 31, 2021, annualized net charge-offs on average consumer credit card loans totaled ~~4.47%~~5.98%, compared to ~~2.17%~~3.72% in the previous quarter and ~~4.45%~~5.06% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to ~~.04%~~.16%, compared to ~~.28%~~.23% in the prior quarter and ~~.43%~~.35% in the same period last year. In the ~~third~~first quarter of ~~2020,~~2021, total annualized net loan charge-offs were ~~.18%~~.25%, compared to ~~.21%~~.19% in the previous quarter, and ~~.32%~~.30% in the same period last year.

As noted in Note 1, the Company adopted ASU 2016-13, known as CECL, on January 1, 2020. Upon adoption, the allowance for credit losses on loans was reduced $21.0 million and the liability for unfunded lending commitments increased $16.1 million. The decrease in the allowance for credit losses on loans was significantly influenced by the forecasted economic environment used in the estimation process as required by CECL, which was forecasted to be stable in both the short term and the long term, characterized by low unemployment. As the estimation model for credit losses on lending commitments became governed by CECL, the Company increased the related liability for unfunded lending commitments, mostly related to construction lending as the Company expected to fully fund the commitments under these contracts.

In the current quarter, the provision for credit losses on loans ~~totaled $3.2~~was a recovery of $10.4 million, which was a ~~$74.3~~$2.8 million ~~decrease~~increase from the recovery on the provision of ~~$77.5~~$7.5 million in the prior quarter. The provision for credit losses on loans in the current quarter ~~and~~ decreased ~~$7.8~~$53.2 million compared to the ~~third~~provision expense in the first quarter of ~~2019.~~ 2020. The continued recovery of the provision for credit losses on loans is the result of an improved forecast coupled with lower than projected net charge-offs. The allowance for credit losses significantly increased during the first half of 2020 due to the pandemic-induced recession. The economic forecast utilized in the first half of 2020 captured extreme uncertainty with high unemployment rates, but through various governmental stimulus programs, improvements in the public health crisis due to the development and increasing availability of a COVID-19 vaccine, the projected net charge-offs were not realized and the economic forecast improved, thus allowing the release of the allowance for credit losses during the fourth quarter of 2020 and the first quarter of 2021.

In the current quarter, ~~there was a recovery on~~ the provision for credit losses on unfunded lending commitments totaled $4.1 million, a $1.0 million increase over the provision of ~~$99 thousand, compared to provision expense of $3.0~~$3.1 million in the prior ~~quarter. The economic forecast used~~quarter, and decreased $11.0 million compared to ~~estimate~~the first quarter of 2020.

For the quarter ended March 31, 2021, the allowance for credit losses in

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September was slightly more optimistic than the forecast utilized in June, which resulted in no additional increase to the allowance for credit losses as of September 30, 2020, and significantly decreased the provision for credit losses this quarter, compared to the prior quarter.

~~For the quarter ended September 30, 2020, the allowance for credit losses related to commercial~~on loans decreased ~~$2.1 million and the allowance for credit losses related to personal banking loans decreased $2.3~~$20.3 million, compared to the allowance for credit losses on loans as of ~~June 30,~~December 31, 2020. The decrease was primarily due to the ~~slight improvement in the forecasted~~improved economic ~~environment compared to the forecast as of June 30, 2020. Due to the pandemic induced recession that started during the first quarter of 2020, the allowance for credit losses increased in the 1~~st ~~and 2~~nd quarters of 2020 to capture the expected losses over the life of loans using projections of how the pandemic will impact the economic environment along with other data and assumptions. At September 30, 2020 the projected economic environment was similar to the projected environment at June 30, 2020, just slightly improved. As such, additional reserves were not needed to estimate the expected losses over the life of the loans. Businesses continue to experience disruptions caused by COVID-19 even though state and local governments have partially reopened non-essential businesses throughout the country. Consumer spending has been negatively impacted by the sudden and dramatic increase in unemployment in addition to health risks associated with the virus.forecast. The allowance for credit losses related to business loans decreased $11.0 million due to slight decreases in loan balances coupled with the slight improvement in the economic forecast and was partially offset by an increase in the allowance for credit losses on business real estate loans of $8.1 million, primarily related to certain loans with a potential to be impacted by the pandemic. Additionally, the allowance for credit losses on personal banking loans decreased $2.3 million compared to June 30, 2020, primarily related to the slightly improved forecast projections.

For the nine months ended September 30, 2020, net loan charge-offs totaled $26.8 million, compared to $34.5 million in the same period last year. During the first nine months of 2020, the Company recorded net charge-offs of $3.0 million on commercial loans, compared to net charge-offs of $854 thousand in the first nine months of 2019. Offsetting the increase in commercial loan net charge-offs, consumer credit card loan and consumer loan net charge-offs decreased $6.6 million and $2.4 million, respectively, in the first nine months of 2020, compared to the first nine months of the prior year. The provision for credit losses on loans for the first nine months of 2020 was $123.6 million and exceeded net loan charge-offs for the period by $96.7 million. In the same period last year, provision expense totaled $35.2 million and exceeded net loan charge-offs by $750 thousand.

At September 30, 2020, the allowance for credit losses on loans amounted to $236.4 million, an increase of $96.8 million compared to $139.6 million at January 1, 2020, the adoption date of CECL. Additionally, the liability for unfunded lending commitments increased $18.0 million from $17.2 million at January 1, 2020 to $35.2 million at September 30, 2020. The allowance for credit losses related to commercial loans increased $66.4 million, due to increases in the allowance on business, construction and business real estate loans of $40.7 million, $9.3 million, and $16.4 million, respectively. Compared to January 1, 2020, the allowance for credit losses on consumer credit card loans decreased $14.5 million as a result of the improved economic forecast combined with lower loan balances and lower than expected net charge-offs. Additionally, the allowance for credit losses related to personal ~~real estate, and~~banking loans, excluding consumer credit card loans, ~~increased $22.7 million,~~decreased $3.9 million, ~~and $3.6 million, respectively. These large increases resulted from~~while the ~~sudden entrance into a sharp recession brought~~allowance for credit losses on ~~by an unprecedented pandemic. The economic outlook quickly shifted from a stable economy with low unemployment at~~commercial loans decreased $1.9 million. While the ~~beginning of~~forecast continued to improve, the year to an uncertain economic projection at September 30, 2020, defined by high unemployment, periods of governmental shut down of non-essential businesses, and other business and personal disruptions caused by COVID-19. Givenallowance considers the ~~significant~~ uncertainty of future potential COVID-19 disruptions on both the ~~economic projections of a pandemic induced recession, the estimate uses a short reasonable~~consumer and supportable forecasted period. As the length and depth of the current recession becomes more certain in the coming months, key assumptions utilized in the Company's CECL model may be modified. See Note 2 for explanations of the various model assumptions utilized in this estimate. Traditional credit quality indicators, such as net charge-off experience, greater than 90 days delinquent statistics and decreases in the internal risk rating to special mention or substandard ratings, are lagging credit quality indicators and do not yet reflect the expected impacts of this crisis. Changes in these indicators are delayed as the Company offered certain assistance programs to impacted customers as allowed by various regulations and as customers are able to participate in various governmental support programs. See Note 2 for further discussion of the credit quality indicators, and refer to ~~Risk Elements of the Loan Portfolio, Loans with Special Risk Characteristics~~ ~~for further information about the assistance programs offered by the Company to its customers.~~commercial portfolios.

The allowance for credit losses on loans and the liability for unfunded lending commitments are estimates that require significant judgment including projections of the macro-economic environment. The Company utilizes a third-party macro-economic forecast that continuously changes due to economic conditions and events. These changes in the forecast cause fluctuations in the allowance for credit losses on loans and the liability for unfunded lending commitments. The Company used its best judgment to assess the macro-economic forecast and internal loss data in estimating the allowance for credit losses on

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loans and the liability for unfunded lending commitments. These estimates are subject to periodic refinement based on changes in the underlying external and internal data. ~~Events such as the timing of governmental required business lock downs or possible additional waves of infection could prolong and deepen the projected recession. Alternatively, events such as~~

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~~additional government stimulus payments or the development of a vaccine to cure the virus could shorten the projected recession and accelerate a recovery.~~

~~The table below shows the composition of the allowance by loan class at January 1, 2020 (at the adoption of CECL), June 30, 2020, and September 30, 2020.~~

January 1, 2020 (Implementation) June 30, 2020 September 30, 2020
(Dollars in thousands) Allowance for Credit Losses ACL as a % of Loans Allowance for Credit Losses ACL as a % of Loans Allowance for Credit Losses ACL as a % of Loans
Commercial:
  Business $ 37,940 .68 % $ 89,706 1.31 % $ 78,659 1.18 %
  RE - construction and land 9,204 1.02 17,594 1.89 18,455 1.83
  RE - business 14,905 .53 23,253 .79 31,310 1.05
62,049 .67 130,553 1.22 128,424 1.20
Personal Banking:
  RE - personal 4,855 .21 7,712 .29 8,725 .32
  Consumer 14,518 .74 24,341 1.24 18,140 .90
  Revolving home equity 1,624 .46 2,087 .62 1,783 .55
  Consumer credit card 56,495 7.39 75,953 11.39 79,230 12.23
  Overdrafts 102 1.62 98 1.89 58 2.56
77,594 1.43 110,191 1.95 107,936 1.88
Total $ 139,643 .95 % $ 240,744 1.47 % $ 236,360 1.44 %

At ~~September 30, 2020,~~March 31, 2021, the allowance for credit losses on loans amounted to ~~$236.4~~$200.5 million, compared to ~~$240.7 million and $139.6~~$220.8 million at ~~June 30,~~December 31, 2020, and ~~January 1, 2020, respectively,~~was 1.22% and ~~was 1.44%, 1.47% and .95%~~1.35% of total loans at ~~September 30, 2020, June 30, 2020~~March 31, 2021 and ~~January 1,~~December 31, 2020, respectively. The Company considers the allowance for credit losses and the liability for unfunded commitments adequate to cover losses expected in the loan portfolio, including unfunded commitments, at ~~September 30, 2020.~~March 31, 2021.

Risk Elements of Loan Portfolio

The following table presents non-performing assets and loans which are past due 90 days and still accruing interest. Non-performing assets include non-accruing loans and foreclosed real estate. Loans are placed on non-accrual status when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment. Loans that are 90 days past due as to principal and/or interest payments are generally placed on non-accrual, unless they are both well-secured and in the process of collection, or they are personal banking loans that are exempt under regulatory rules from being classified as non-accrual. During 2020, Section 4013 of the CARES Act was signed into law and provided financial institutions the option to suspend the requirement to categorize modifications related to the COVID-19 pandemic as troubled debt restructurings. The 2021 Consolidated Appropriations Act signed on December 27, 2020 extends this temporary suspension through January 1, 2022. The Company follows the guidance under the CARES Act when determining if a customer's modification is subject to troubled debt restructuring classification. Refer to Note 2 for additional information.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2020			December 31, 2019			(Dollars in thousands)	March 31, 2021			December 31, 2020

Non-accrual loans	Non-accrual loans	$	40,270		$	10,220		Non-accrual loans	$	23,506		$	26,540
Foreclosed real estate	Foreclosed real estate	57			365			Foreclosed real estate	208			93
Total non-performing assets	Total non-performing assets	$	40,327		$	10,585		Total non-performing assets	$	23,714		$	26,633
Non-performing assets as a percentage of total loans	Non-performing assets as a percentage of total loans	.25		%	.07		%	Non-performing assets as a percentage of total loans	.14		%	.16		%
Non-performing assets as a percentage of total assets	Non-performing assets as a percentage of total assets	.13		%	.04		%	Non-performing assets as a percentage of total assets	.07		%	.08		%

Total loans past due 90 days and still accruing interest	Total loans past due 90 days and still accruing interest	$	14,436		$	19,859		Total loans past due 90 days and still accruing interest	$	21,512		$	22,190

Non-accrual loans totaled ~~$40.3~~$23.5 million at ~~September 30, 2020, an increase~~March 31, 2021, a decrease of ~~$30.1~~$3.0 million from the balance at December 31, ~~2019.~~2020. The ~~increase~~decrease occurred mainly in business loans which ~~increased $29.8~~decreased $2.3 million. At ~~September 30, 2020,~~March 31, 2021, non-accrual loans were comprised mainly of business ~~(92.6%~~(86.0%), personal real estate ~~(4.8%~~(7.3%), and business real estate ~~(2.6%~~(6.7%) loans. Foreclosed real estate totaled $208 thousand at March 31, 2021, an increase of $115 thousand when compared to December 31, 2020. Total loans past due 90 days or more and still accruing interest were ~~$14.4~~$21.5 million as of ~~September 30, 2020,~~March 31, 2021, a decrease of ~~$5.4 million~~$678 thousand from December 31, ~~2019.~~2020. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section in Note 2 to the consolidated financial statements.

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In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled ~~$304.2~~$429.1 million at ~~September 30, 2020~~March 31, 2021 compared with ~~$164.8~~$361.8 million at December 31, ~~2019,~~2020, resulting in an increase of ~~$139.5~~$67.4 million, or ~~84.6%~~18.6%.


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		(In thousands)	March 31, 2021		December 31, 2020
Potential problem loans:	Potential problem loans:					Potential problem loans:
Business	Business	$	100,241	$	83,943	Business	$	114,656	$	133,039
Real estate – construction and land	Real estate – construction and land	15,116		470		Real estate – construction and land	38,586		29,378
Real estate – business	Real estate – business	186,973		80,071		Real estate – business	275,204		198,666
Real estate – personal	Real estate – personal	1,911		283		Real estate – personal	661		670

Total potential problem loans	Total potential problem loans	$	304,241	$	164,767	Total potential problem loans	$	429,107	$	361,753

At ~~September 30, 2020,~~March 31, 2021, the Company had ~~$73.2~~$139.6 million of loans whose terms have been modified or restructured under a troubled debt restructuring. These loans have been extended to borrowers who are experiencing financial difficulty and who have been granted a concession, as defined by accounting guidance, and are further discussed in the "Troubled debt

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restructurings" section in Note 2 to the consolidated financial statements. This balance includes certain commercial loans totaling ~~$50.9~~$118.5 million which are classified as substandard and included in the table above because of this classification.

Loans with Special Risk Characteristics

Management relies primarily on an internal risk rating system, in addition to delinquency status, to assess risk in the loan portfolio, and these statistics are presented in Note 2 to the consolidated financial statements. However, certain types of loans are considered at high risk of loss due to their terms, location, or special conditions. Additional information about the major types of loans in these categories and their risk features are provided below. Information based on loan-to-value (LTV) ratios was generally calculated with valuations at loan origination date. The Company normally obtains an updated appraisal or valuation at the time a loan is renewed or modified, or if the loan becomes significantly delinquent or is in the process of being foreclosed upon.

Real Estate – Construction and Land Loans

The Company's portfolio of construction and land loans, as shown in the table below, amounted to ~~6.1%~~6.5% of total loans outstanding at ~~September 30, 2020.~~March 31, 2021. The largest component of construction and land loans was commercial construction, which increased ~~$124.0~~$50.1 million during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. At ~~September 30, 2020,~~March 31, 2021, multi-family residential construction loans totaled approximately ~~$259.1~~$218.9 million, or ~~32.6%~~24.9%, of the commercial construction loan portfolio, compared to ~~$213.4~~$238.0 million, or ~~31.8%~~28.8%, at December 31, ~~2019.~~2020.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2020		% of Total		% of Total Loans		December 31, 2019		% of Total		% of Total Loans		(Dollars in thousands)	March 31, 2021		% of Total		% of Total Loans		December 31, 2020		% of Total		% of Total Loans
Commercial construction														Commercial construction	$	877,636	81.8	%	5.4	%	$	827,546	81.0	%	5.1	%
Residential construction														Residential construction	97,091		9.0		.5		94,729		9.3		.6
Residential land and land development	Residential land and land development	$	58,381	5.7	%	.4	%	$	65,687	7.3	%	.4	%	Residential land and land development	56,463		5.3		.3		59,299		5.8		.4
Residential construction		114,839		11.4		.6		128,575		14.3		.9
Commercial land and land development	Commercial land and land development	41,934		4.2		.3		34,525		3.8		.2		Commercial land and land development	41,846		3.9		.3		40,021		3.9		.2
Commercial construction		794,575		78.7		4.8		670,590		74.6		4.6
Total real estate - construction and land loans	Total real estate - construction and land loans	$	1,009,729	100.0	%	6.1	%	$	899,377	100.0	%	6.1	%	Total real estate - construction and land loans	$	1,073,036	100.0	%	6.5	%	$	1,021,595	100.0	%	6.3	%

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Real Estate – Business Loans

Total business real estate loans were $3.0 billion at ~~September 30, 2020~~March 31, 2021 and comprised ~~18.2%~~18.4% of the Company's total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. At ~~September 30, 2020, 36.3%~~March 31, 2021, 36.9% of business real estate loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2020		% of Total		% of Total Loans		December 31, 2019		% of Total		% of Total Loans		(Dollars in thousands)	March 31, 2021		% of Total		% of Total Loans		December 31, 2020		% of Total		% of Total Loans
Owner-occupied	Owner-occupied	$	1,087,880	36.3	%	6.6	%	$	1,048,716	37.0	%	7.1	%	Owner-occupied	$	1,113,863	36.9	%	6.8	%	$	1,145,862	37.9	%	7.0	%
Office														Office	388,519		12.9		2.4		385,392		12.7		2.4
Multi-family	Multi-family	341,374		11.4		2.1		306,577		10.8		2.1		Multi-family	362,846		12.0		2.2		301,161		10.0		1.8
Office		340,801		11.4		2.1		297,278		10.5		2.0
Retail	Retail	355,359		11.9		2.2		383,234		13.5		2.6		Retail	341,857		11.3		2.1		349,461		11.5		2.1
Hotels	Hotels	265,819		8.9		1.6		210,557		7.4		1.4		Hotels	269,929		8.9		1.6		271,189		9.0		1.7
Senior living														Senior living	171,982		5.7		1.0		195,800		6.5		1.2
Farm	Farm	178,441		6.0		1.1		177,669		6.3		1.2		Farm	168,219		5.6		1.0		169,692		5.6		1.0
Senior living		192,887		6.4		1.2		164,000		5.8		1.1
Industrial	Industrial	97,824		3.3		.6		108,285		3.8		.7		Industrial	72,097		2.4		.4		78,341		2.6		.5
Other	Other	132,807		4.4		.7		137,238		4.9		1.0		Other	127,930		4.3		.9		129,219		4.2		.8
Total real estate - business loans	Total real estate - business loans	$	2,993,192	100.0	%	18.2	%	$	2,833,554	100.0	%	19.2	%	Total real estate - business loans	$	3,017,242	100.0	%	18.4	%	$	3,026,117	100.0	%	18.5	%

Revolving Home Equity Loans

The Company had ~~$324.2~~$285.3 million in revolving home equity loans at ~~September 30, 2020~~March 31, 2021 that were generally collateralized by residential real estate. Most of these loans (93.1%) are written with terms requiring interest only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As of ~~September 30, 2020,~~March 31, 2021, the outstanding principal of loans with an original LTV higher than 80% was ~~$34.1~~$29.0 million, or ~~10.5%~~10.2% of the portfolio, compared to ~~$41.1~~$32.1 million as of December 31, ~~2019.~~2020. Total revolving home equity loan balances over 30 days past due ~~or on non-accrual status~~ were ~~$1.6~~$2.3 million at ~~September 30, 2020~~

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March 31, 2021 compared to $2.0 million at December 31, ~~2019.~~2020, and there were no revolving home equity loans on non-accrual status at March 31, 2021 or December 31, 2020. The weighted average FICO score for the total current portfolio balance is ~~794.~~792. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of ~~2020~~2021 through ~~2022,~~2023, approximately ~~12.8%~~15.1% of the Company's current outstanding balances are expected to mature. Of these balances, approximately ~~94%~~91% have a FICO score of 700 or higher. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.

Consumer Loans

Within the consumer loan portfolio are several direct and indirect product lines, which include loans for the purchase of automobiles, motorcycles, marine and RVs. ~~Outstanding~~Auto loans comprised 44% of the consumer loan portfolio at March 31, 2021, and outstanding balances for auto loans were ~~$901.3~~$871.7 million and ~~$908.3~~$879.9 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The balances over 30 days past due amounted to ~~$7.5~~$5.5 million at ~~September 30, 2020~~March 31, 2021 compared to ~~$13.2~~$9.2 million at December 31, ~~2019,~~2020, and comprised ~~.8%~~.6% and ~~1.5%~~1.0% of the outstanding balances of these loans at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. For the ~~nine~~three months ended ~~September 30, 2020, $321.1~~March 31, 2021, $106.2 million of new auto loans were originated, compared to ~~$311.2~~$100.0 million during the first ~~nine~~three months of ~~2019.~~2020. At ~~September 30, 2020,~~March 31, 2021, the automobile loan portfolio had a weighted average FICO score of ~~759.~~

~~Outstanding balances for motorcycle~~757, and net charge-offs on auto loans were $70.9 million at September 30, 2020, compared to $71.9 million at December 31, 2019. The balances over 30 days past due amounted to $766 thousand and $1.3 million at September 30, 2020 and December 31, 2019, respectively, and comprised 1.1%.20% of ~~the outstanding balance of these~~average auto loans at ~~September 30, 2020, compared to 1.9% at December~~March 31, ~~2019. During the first nine months of 2020, new motorcycle loan originations totaled $28.3 million compared to $19.8 million during the first nine months of 2019.~~2021.

The Company's ~~balance~~consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 12% of the consumer loan portfolio at March 31, 2021. Losses on these loans have historically been low, and the Company saw a small recovery in 2021. Private banking loans comprised 26% of the consumer loan portfolio at March 31, 2021. The Company's private banking loans are generally well-collateralized and at March 31, 2021 were secured primarily by assets held by the Company's trust department. The remaining portion of the Company's consumer loan portfolio is comprised of health services financing, motorcycles, marine and RV loans. Net charge-offs on private banking, health services financing, motorcycle and marine and RV loans totaled $27.3 million at September 30, 2020, compared to $35.4 million at December 31, 2019, and the balances over 30 days past due amounted to $810 thousand and $1.5 million at September 30, 2020 and December 31, 2019, respectively. The net charge-offs on marine and RV loans decreased from $216$345 thousand in the first ~~nine~~three months of ~~2019 to $86 thousand in~~2021 and were .17% of the ~~first nine months~~average balances of ~~2020.~~these loans at March 31, 2021.

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Consumer Credit Card Loans

The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at ~~September 30, 2020~~March 31, 2021 of ~~$647.9~~$593.8 million in consumer credit card loans outstanding, approximately ~~$98.3~~$99.4 million, or ~~15.2%~~16.7%, carried a low promotional rate. Within the next six months, ~~$42.1~~$30.0 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card product, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.

Oil and Gas Energy Lending

The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled ~~$169.9~~$194.6 million, or ~~1.0%~~1.2% of total loans at ~~September 30,~~March 31, 2021, an increase of $15.9 million from year end 2020, ~~and $197.4 million at December 31, 2019, a decrease of $27.5 million.~~as shown in the table below.


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		Unfunded commitments at September 30, 2020		(In thousands)	March 31, 2021		December 31, 2020		Unfunded commitments at March 31, 2021
Extraction	Extraction	$	153,013	$	177,903	$	35,330	Extraction	$	144,790	$	133,866	$	66,543
Mid-stream shipping and storage	Mid-stream shipping and storage	4,400		4,763		58,603		Mid-stream shipping and storage	17,064		15,634		81,687
Support activities								Support activities	17,022		10,864		15,089
Downstream distribution and refining	Downstream distribution and refining	5,201		7,168		35,269		Downstream distribution and refining	15,707		18,365		26,592
Support activities		7,288		7,598		13,919
Total energy lending portfolio	Total energy lending portfolio	$	169,902	$	197,432	$	143,121	Total energy lending portfolio	$	194,583	$	178,729	$	189,911

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Information about the credit quality of the Company's energy lending portfolio as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 is provided in the table below.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2020		% of Energy Lending		December 31, 2019		% of Energy Lending		(Dollars in thousands)	March 31, 2021		% of Energy Lending		December 31, 2020		% of Energy Lending
Pass	Pass	$	107,083	63.0	%	$	170,938	86.6	%	Pass	$	146,547	75.3	%	$	126,380	70.7	%
Special mention	Special mention	18,351		10.8		6,961		3.5		Special mention	18,518		9.5		17,978		10.1
Substandard	Substandard	30,193		17.8		16,600		8.4		Substandard	26,881		13.8		31,676		17.7
Non-accrual	Non-accrual	14,275		8.4		2,933		1.5		Non-accrual	2,637		1.4		2,695		1.5
Total	Total	$	169,902	100.0	%	$	197,432	100.0	%	Total	$	194,583	100.0	%	$	178,729	100.0	%

Energy lending balances classified as substandard and non-accrual represented ~~17.8%~~13.8% and ~~8.4%~~1.4% respectively, of total energy lending loan balances at ~~September 30, 2020.~~March 31, 2021. The Company ~~recorded $3.0 million of net loan charge-offs~~saw a small recovery on energy loans during the ~~nine~~three months ended ~~September 30, 2020. There were no~~March 31, 2021. The Company recorded $15 thousand of net loan charge-offs on energy loans for the year ended December 31, ~~2019.~~2020.

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Pandemic-Sensitive Industry Lending

As a result of the ongoing COVID-19 global pandemic, the United States economy is currently in an unprecedented state of uncertainty. While nearly every industry has been impacted to some degree by business disruptions, the Company identified the following industries and lending exposures, excluding PPP loans, within its loan portfolio at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.


(In thousands)	(In thousands)	September 30, 2020		% of Loan Portfolio at September 30, 2020		December 31, 2019		Unfunded commitments at September 30, 2020		(In thousands)	March 31, 2021		% of Loan Portfolio at March 31, 2021		December 31, 2020		Unfunded commitments at March 31, 2021
Hospitals		$	757,728	5.1	%	$	678,466	$	1,709,338
Multifamily and student housing		608,334		4.1		528,280		260,066
Commercial real estate - retail	Commercial real estate - retail	388,619		2.6		405,795		28,062		Commercial real estate - retail	$	387,753	2.6	%	$	386,939	$	11,694
Hotels										Hotels	308,968		2.1		302,606		31,294
Senior living	Senior living	310,012		2.1		301,441		95,932		Senior living	306,749		2.0		310,771		90,088
Hotels		291,131		2.0		256,512		50,673
Energy	Energy	149,617		1.0		198,162		143,121		Energy	185,889		1.2		172,533		198,605
Retail stores	Retail stores	141,012		.9		147,223		155,050		Retail stores	118,400		.8		111,126		195,873
Restaurants	Restaurants	66,935		.4		82,398		21,541		Restaurants	63,552		.4		67,247		81,174
Total	Total	$	2,713,388	18.2	%	$	2,598,277	$	2,463,783	Total	$	1,371,311	9.1	%	$	1,351,222	$	608,728

Due to the significant deterioration of the U.S. economy resulting from the COVID-19 pandemic, the Company saw an increase in loan payment deferral requests through the end of the second ~~quarter.~~quarter of 2020. Loans on active deferral decreased significantly in the third ~~quarter.~~quarter of 2020. A summary of loan balances related to active loan payment deferral requests as of ~~September 30, 2020~~March 31, 2021 are shown in the table below.


(Dollars in thousands)	(Dollars in thousands)	Number of Payment Deferral Requests (1)	Loan Balance Outstanding at September 30, 2020		% of Portfolio - based on September 30, 2020 Loan Balance		(Dollars in thousands)	Number of Payment Deferral Requests (1)	Loan Balance Outstanding at March 31, 2021		% of Loan Class - based on March 31, 2021 Loan Balance
Commercial (2)	Commercial (2)	11	$	48,148	.5	%	Commercial (2)	8	$	116,947	1.1	%
Real estate - personal	Real estate - personal	111	$	24,847	.9	%	Real estate - personal	55	12,246		.4
Consumer credit card	Consumer credit card	73	$	496	.1	%	Consumer credit card	18	122		—
Consumer	Consumer	629	$	11,044	.6	%	Consumer	299	4,127		.2
Total	Total	824	$	84,535	.5	%	Total	380	$	133,442	.8	%

(1) Excludes deferrals offered through the Company's skip pay program.

(2) Excludes commercial card payment deferral requests.

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Active payment deferral requests on commercial loans as of ~~September 30, 2020,~~March 31, 2021, categorized by industry, are listed ~~below:~~

(Dollars in thousands) Number of Payment Deferral Requests Loan Balance Outstanding at September 30, 2020
Nursing and residential care facilities 2 $ 30,237
Hotels 3 16,842
Merchant wholesalers, equipment and appliances 2 472
Real estate developer/owner 1 337
Personal and laundry services 1 136
Restaurants and dining 1 87
Truck transportation 1 37
Total (1)
11 $ 48,148

~~(1)~~ Asbelow. All of ~~October 21, 2020, $43.5 million of commercial requests~~the loans have been deferred more than 90 days.

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(Dollars in thousands)	Number of Payment Deferral Requests	Loan Balance Outstanding at March 31, 2021
Hotels	4	$	73,371
Multifamily	1	28,223
Nursing and residential care facilities	1	15,129
Real estate developer/owner	1	212
Restaurants and dining	1	12



Total	8	$	116,947

Small Business Lending

During April 2020, in response to the COVID-19 crisis, the federal government created the ~~Paycheck Protection Program,~~PPP, sponsored by the Small Business Administration ("SBA"), under the CARES Act. As a participating lender under the program, the Company funded loans of $1.5 billion for 7,618 customers during 2020 (round 1), with a median loan size of ~~$34~~$33 thousand. The balance of PPP loans at March 31, 2021 was $1.4 billion, which was an increase of $66.7 million compared to December 31, 2020. The growth in PPP loan balances reflected $331.4 million of loan balances originated during the first quarter of 2021 (round 2), partially offset by a decline of $264.7 million in loan balances from December 31, 2020 (round 1).

The Company understands that the loans are fully guaranteed by the SBA. Therefore, there was no increase in the allowance for credit losses on loans related to these loans as there is no expectation of credit loss. The maximum term of the loans ~~range from two to~~is five years, however, the Company believes that the majority of the loan balances are expected to be forgiven by the SBA. The process of loan forgiveness began during the third quarter of 2020, and the Company believes the majority of loan balances will be forgiven in 2021.

Shared National Credits

The Company participates in credits of large, publicly traded companies which are defined by regulation as shared national credits, or SNCs. Regulations define SNCs as loans exceeding $100 million that are shared by three or more financial institutions. The Company typically participates in these loans when business operations are maintained in the local communities or regional markets and opportunities to provide other banking services are present. The balance of SNC loans totaled $1.0 billion at ~~September 30, 2020, compared to $1.1 billion at~~March 31, 2021 and December 31, ~~2019.~~2020. Additional unfunded commitments at ~~September 30, 2020~~March 31, 2021 totaled ~~$1.7~~$1.9 billion. During the quarter ended September 30, 2020, the Company placed a SNC loan on non-accrual status of approximately $16.1 million. The SNC loan had additional unfunded commitments of $15.4 million as of September 30, 2020.

Income Taxes

Income tax expense was ~~$34.4~~$32.1 million in the ~~third~~first quarter of ~~2020,~~2021, compared to ~~$9.7~~$33.1 million in the ~~second~~fourth quarter of 2020 and ~~$29.1~~$10.2 million in the ~~third~~first quarter of ~~2019.~~2020. The Company's effective tax rate, including the effect of non-controlling interest, was ~~20.6%~~19.7% in the ~~third~~first quarter of ~~2020,~~2021, compared to ~~19.5%~~20.3% in the ~~second~~fourth quarter of 2020 and ~~21.0%~~16.4% in the ~~third~~first quarter of ~~2019. For~~2020. The effective tax rate in the ~~nine months ended September 30, 2020,~~first quarter has historically been lower than other quarters due to the recognition of share-based excess tax benefits as a reduction to income tax ~~expense was $54.2 million, compared~~expense. These benefits result from transactions relating to ~~$80.9 million for~~equity award vesting, most of which occur in the ~~same period during the previous year, resulting in effective tax rates~~first quarter of ~~19.5% and 20.5%, respectively.~~each year.

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Financial Condition

Balance Sheet

Total assets of the Company were ~~$31.5~~$33.3 billion at ~~September 30, 2020~~March 31, 2021 and ~~$26.1~~$32.9 billion at December 31, ~~2019.~~2020. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on debt securities) amounted to ~~$28.8~~$31.9 billion at ~~September 30, 2020~~March 31, 2021 and ~~$24.6~~$31.3 billion at December 31, ~~2019,~~2020, and consisted of ~~55%~~52% in loans and ~~38%~~39% in investment securities at ~~September 30, 2020.~~March 31, 2021.

~~At September 30, 2020, total~~During the first quarter of 2021, average loans ~~increased~~totaled $16.3 billion, a decrease of $28.3 million from the prior quarter, and an increase of $1.6 billion, or 11.2%, over the same quarter last year. Period-end loans increased $62.4 million compared ~~with~~to the prior quarter. Compared to the previous quarter, average balances of business, consumer, consumer credit card, and revolving home equity loans declined $47.4 million, $33.7 million, $29.4 million, and $17.5 million, respectively. The period-end balance of PPP loans (included in business loans) increased $66.7 million during the first quarter and totaled $1.4 billion at ~~December~~March 31, ~~2019.~~2021. This ~~increase~~growth reflected $331.4 million of loan balances originated this quarter, partly offset by a decline of $264.7 million in loan balances from year end. Average PPP loan balances declined $102.3 million compared to the prior quarter. Partially offsetting the declines in average loan balances listed above were increases in the average balances of construction and land and personal real estate loans, which grew $59.1 million and $47.7 million, respectively. Growth in personal real estate loan balances was ~~mainly~~ due to ~~growth~~continued strong demand for residential mortgage loans this quarter. During the current quarter, the Company sold certain fixed rate personal real estate loans totaling $177.8 million, compared to $136.0 million in ~~business loans of $1.1 billion. Growth~~the prior quarter.

Total average available for sale debt securities increased $532.3 million over the previous quarter to $12.7 billion, at fair value. The increase in ~~business loans~~investment securities was mainly the result of ~~increased commercial~~growth in mortgage-backed and ~~industrial lending activities for PPP loans. Lease and commercial card lending also grew, offset by lower tax free loans.~~asset-backed securities. During the nine months ended September 30, 2020, personal real estate loans grew $339.1 million, business real estate loans grew $159.6 million, and construction loans increased $110.4 million. These increases were partially offset by decreases of $117.1 million in consumer card loans and $25.0 million in revolving home equity loans. Consumer loans, which includes automobile, marine and RV, fixed rate home equity and other consumers loans, increased $42.2 million compared to balances at December 31, 2019, primarily due to growth in other consumer loans of $88.0 million, partly offset by lower automobile, marine and RV, and fixed rate home equity loans.

~~Available for sale investment securities, excluding fair value adjustments, increased $2.7 billion at September 30, 2020 compared to December 31, 2019. Purchases~~current quarter, purchases of securities ~~during this period~~ totaled ~~$5.2~~$1.3 billion ~~offset by sales, maturities,~~with a weighted average yield of approximately .93%. Maturities and pay downs of $2.4 billion. The largest increases in outstanding balances occurred in agency mortgage-backed securities, state and municipal obligations, and asset-backed securities which increased $2.0 billion, $669.7 million, and $405.8 million, respectively. These increases were ~~partially offset by a decrease in non-agency mortgage-backed securities of $472.2 million at September 30, 2020 compared to December~~$939.6 million. At March 31, ~~2019. At September 30, 2020,~~2021, the duration of the investment portfolio was ~~3.4~~3.9 years, and maturities and pay downs of approximately ~~$1.7~~$2.3 billion are expected to occur during the next 12 months.

Total average deposits ~~at September 30, 2020 amounted to $25.7 billion, an increase of $5.2 billion~~increased $898.6 million this quarter compared to ~~December 31, 2019.~~the previous quarter. The increase in deposits ~~largely~~ resulted from ~~increases~~growth in ~~demand deposits, mainly business demand deposits (increase of $3.2~~

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~~billion)~~interest checking and money market ($771.7 million) and savings deposits ~~(increase~~($98.7 million), partly offset by a decline in certificates of ~~$786.3~~deposit ($134.7 million). ~~Savings and interest checking~~Average demand deposits also increased ~~$575.5~~$162.9 million ~~at September 30, 2020 compared~~over the previous quarter. Compared to ~~balances at December 31, 2019.~~the previous quarter, total average consumer and wealth deposits (including private banking) grew $570.2 million and $305.2 million, respectively, while average commercial deposits declined $49.2 million. The ~~Company’s~~average loans to deposits ratio was 61.79% in the current quarter and 64.05% in the prior quarter. The Company's average borrowings, ~~totaled $1.7 billion at September 30, 2020, a decrease of $199.3 million from balances at December 31, 2019, mainly due to a decline in~~which includes customer repurchase ~~agreements.~~agreements, were $2.2 billion in the first quarter of 2021 and $2.0 billion in the prior quarter.

Liquidity and Capital Resources

Liquidity Management

The Company’s most liquid assets are comprised of available for sale debt securities, federal funds sold, securities purchased under agreements to resell (resale agreements), and balances at the Federal Reserve Bank, as follows:


(In thousands)	(In thousands)	September 30, 2020		June 30, 2020		December 31, 2019		(In thousands)	March 31, 2021		March 31, 2020		December 31, 2020
Liquid assets:	Liquid assets:							Liquid assets:
Available for sale debt securities	Available for sale debt securities	$	11,539,061	$	10,317,427	$	8,571,626	Available for sale debt securities	$	12,528,203	$	8,678,586	$	12,449,264
Federal funds sold	Federal funds sold	2,275		—		—		Federal funds sold	500		400		—
Long-term securities purchased under agreements to resell	Long-term securities purchased under agreements to resell	850,000		850,000		850,000		Long-term securities purchased under agreements to resell	850,000		850,000		850,000
Balances at the Federal Reserve Bank	Balances at the Federal Reserve Bank	1,171,697		1,404,968		395,850		Balances at the Federal Reserve Bank	2,017,128		474,156		1,747,363
Total	Total	$	13,563,033	$	12,572,395	$	9,817,476	Total	$	15,395,831	$	10,003,142	$	15,046,627

Federal funds sold, which are funds lent to the Company's correspondent bank customers with overnight maturities, totaled ~~$2.3 million~~$500 thousand as of ~~September 30, 2020.~~March 31, 2021. Long-term resale agreements, maturing through 2023, totaled $850.0 million at ~~September 30, 2020.~~March 31, 2021. Under these agreements, the Company lends funds to upstream financial institutions and holds marketable securities, safe-kept by a third-party custodian, as collateral. This collateral totaled ~~$896.9~~$895.2 million in fair value at ~~September 30, 2020.~~March 31, 2021. Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity

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purposes, totaled ~~$1.2~~$2.0 billion at ~~September 30, 2020.~~March 31, 2021. The fair value of the available for sale debt portfolio was ~~$11.5~~$12.5 billion at ~~September 30, 2020~~March 31, 2021 and included an unrealized net gain of ~~$356.7~~$140.2 million. The total net unrealized gain included net gains of ~~$195.6 million on mortgage-backed and asset-backed securities, $73.9 million on state and municipal obligations, $61.5~~$56.0 million on U.S. government and federal agency obligations, ~~$21.4~~$49.2 million on ~~other debt~~mortgage-backed and asset-backed securities, and ~~$4.3~~$34.1 million on ~~government-sponsored enterprise~~state and municipal obligations.

Approximately ~~$1.7~~$2.3 billion of the available for sale debt portfolio is expected to mature or pay down during the next 12 months, and these funds offer substantial resources to meet new loan demand or help offset potential reductions in the Company's deposit funding base. The Company pledges portions of its investment securities portfolio to secure public fund deposits, securities sold under agreements to repurchase, trust funds, letters of credit issued by the FHLB, and borrowing capacity at the Federal Reserve Bank. Total investment securities pledged for these purposes were as follows:


(In thousands)	(In thousands)	September 30, 2020		June 30, 2020		December 31, 2019		(In thousands)	March 31, 2021		March 31, 2020		December 31, 2020
Investment securities pledged for the purpose of securing:	Investment securities pledged for the purpose of securing:							Investment securities pledged for the purpose of securing:
Federal Reserve Bank borrowings	Federal Reserve Bank borrowings	$	41,568	$	44,039	$	48,304	Federal Reserve Bank borrowings	$	39,586	$	44,660	$	40,792
FHLB borrowings and letters of credit	FHLB borrowings and letters of credit	5,873		6,462		7,637		FHLB borrowings and letters of credit	4,874		7,072		5,376
Securities sold under agreements to repurchase *	Securities sold under agreements to repurchase *	1,905,050		1,958,464		2,083,716		Securities sold under agreements to repurchase *	2,170,744		1,662,630		2,322,941
Other deposits and swaps	Other deposits and swaps	2,529,873		2,542,103		2,149,575		Other deposits and swaps	2,477,132		2,146,632		2,438,628
Total pledged securities	Total pledged securities	4,482,364		4,551,068		4,289,232		Total pledged securities	4,692,336		3,860,994		4,807,737
Unpledged and available for pledging	Unpledged and available for pledging	5,602,707		4,119,554		3,029,268		Unpledged and available for pledging	6,490,351		3,459,988		6,310,907
Ineligible for pledging	Ineligible for pledging	1,453,990		1,646,805		1,253,126		Ineligible for pledging	1,345,516		1,357,604		1,330,620
Total available for sale debt securities, at fair value	Total available for sale debt securities, at fair value	$	11,539,061	$	10,317,427	$	8,571,626	Total available for sale debt securities, at fair value	$	12,528,203	$	8,678,586	$	12,449,264

* Includes securities pledged for collateral swaps, as discussed in Note 12 to the consolidated financial statements.

Liquidity is also available from the Company's large base of core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts. At ~~September 30, 2020,~~March 31, 2021, such deposits totaled ~~$23.7~~$25.6 billion and represented ~~92.3%~~93.5% of total deposits. These core deposits are normally less volatile, as they are often with customer relationships tied to other products offered by the Company, promoting long lasting relationships and stable funding sources. Certificates of deposit of $100,000 and over totaled ~~$1.4~~$1.3 billion at ~~September 30, 2020.~~March 31, 2021. These accounts are normally considered more volatile and higher costing and comprised ~~5.6%~~4.6% of total deposits at ~~September 30, 2020.~~

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March 31, 2021.


(In thousands)	(In thousands)	September 30, 2020		June 30, 2020		December 31, 2019		(In thousands)	March 31, 2021		March 31, 2020		December 31, 2020
Core deposit base:	Core deposit base:							Core deposit base:
Non-interest bearing	Non-interest bearing	$	10,727,827	$	9,700,261	$	6,890,687	Non-interest bearing	$	11,076,556	$	6,952,236	$	10,497,598
Interest checking	Interest checking	1,926,133		1,812,871		2,130,591		Interest checking	2,180,434		2,032,642		2,402,272
Savings and money market	Savings and money market	11,057,372		10,980,122		9,491,125		Savings and money market	12,391,944		10,016,637		12,202,184
Total	Total	$	23,711,332	$	22,493,254	$	18,512,403	Total	$	25,648,934	$	19,001,515	$	25,102,054

Other important components of liquidity are the level of borrowings from ~~third-party~~third party sources and the availability of future credit. The Company's outside borrowings are mainly comprised of federal funds purchased and repurchase agreements, as follows:


(In thousands)	(In thousands)	September 30, 2020		June 30, 2020		December 31, 2019		(In thousands)	March 31, 2021		March 31, 2020		December 31, 2020
Borrowings:	Borrowings:							Borrowings:
Federal funds purchased	Federal funds purchased	$	6,770	$	36,965	$	20,035	Federal funds purchased	$	28,490	$	18,720	$	42,270
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	1,646,294		1,703,473		1,830,737		Securities sold under agreements to repurchase	1,909,620		1,409,293		2,056,113

FHLB advances								FHLB advances	—		750,000		—
Other debt	Other debt	782		1,475		2,418		Other debt	3,791		6,461		802
Total	Total	$	1,653,846	$	1,741,913	$	1,853,190	Total	$	1,941,901	$	2,184,474	$	2,099,185

Federal funds purchased are unsecured overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved lines of credit. Repurchase agreements are collateralized by securities in the Company's investment portfolio and are comprised of non-insured customer funds totaling ~~$1.6~~$1.9 billion, which generally mature overnight. The Company also borrows on a secured basis through advances from the FHLB. The advances are generally short-term, fixed interest rate borrowings. There were no advances outstanding from the FHLB at ~~September 30, 2020.~~March 31, 2021.

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The Company pledges certain assets, including loans and investment securities, to both the Federal Reserve Bank and the FHLB as security to establish lines of credit and borrow from these entities. Based on the amount and type of collateral pledged, the FHLB establishes a collateral value from which the Company may draw advances against the collateral. Also, this collateral is used to enable the FHLB to issue letters of credit in favor of public fund depositors of the Company. The Federal Reserve Bank also establishes a collateral value of assets pledged and permits borrowings from the discount window. The following table reflects the collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at ~~September 30, 2020.~~March 31, 2021.


		September 30, 2020							March 31, 2021
(In thousands)	(In thousands)	FHLB		Federal Reserve		Total		(In thousands)	FHLB		Federal Reserve		Total
Collateral value pledged	Collateral value pledged	$	2,736,771	$	1,175,780	$	3,912,551	Collateral value pledged	$	2,198,055	$	1,140,797	$	3,338,852

Letters of credit issued	Letters of credit issued	(121,445)		—		(121,445)		Letters of credit issued	(127,665)		—		(127,665)
Available for future advances	Available for future advances	$	2,615,326	$	1,175,780	$	3,791,106	Available for future advances	$	2,070,390	$	1,140,797	$	3,211,187

In addition to those mentioned above, several other sources of liquidity are available. No commercial paper has been issued or outstanding during the past ten years. The Company has no subordinated debt or hybrid instruments which could affect future borrowing capacity. Because of its lack of significant long-term debt, the Company believes that it could generate additional liquidity through its Capital Markets Group from sources such as jumbo certificates of deposit or privately placed corporate debt. The Company receives strong outside rankings from both Standard & Poor's and Moody's on both the consolidated company level and its subsidiary bank, Commerce Bank, which would support future financing efforts, should the need arise. These ratings are as follows:

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	Standard & Poor’s	Moody’s
Commerce Bancshares, Inc.
Issuer rating	A-

Rating outlook	Stable	~~Stable~~
~~Preferred stock(1)~~	~~BBB-~~	~~Baa1~~
Commerce Bank
Issuer rating	A	A2
Baseline credit assessment		a1
Short-term rating	A-1	P-1
Rating outlook	Stable	Stable

(1)~~Ratings at time of preferred stock redemption.~~

The cash flows from the operating, investing and financing activities of the Company resulted in a net increase in cash, cash equivalents and restricted cash of ~~$649.7~~$172.5 million during the first ~~nine~~three months of ~~2020,~~2021, as reported in the consolidated statements of cash flows in this report. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of ~~$472.4~~$201.7 million and has historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, used cash of ~~$4.4 billion.~~$327.7 million. Activity in the investment securities portfolio used cash of ~~$2.7 billion~~$247.1 million from purchases (net of sales, maturities and pay downs), while growth in the loan portfolio used cash of ~~$1.7 billion.~~$72.5 million. Financing activities provided cash of ~~$4.6 billion,~~$298.6 million, largely resulting from an increase in deposits of ~~$5.1 billion~~$512.6 million partially offset by a decrease of ~~$197.7~~$160.3 million in federal funds purchased and securities sold under agreements to repurchase, ~~preferred stock redemption of $150.0 million,~~ dividend payments of ~~$97.4~~$30.8 million on common ~~and preferred~~ stock, and treasury stock purchases of ~~$53.8~~$25.9 million. While the future short-term liquidity needs arising from daily operations might vary more than the prior few years due to the COVID-19 pandemic, the Company believes it will be able to meet these cash flow needs.

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Capital Management

The Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, as shown in the following table.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2020			December 31, 2019			Minimum Ratios under Capital Adequacy Guidelines		Minimum Ratios for Well-Capitalized Banks *		(Dollars in thousands)	March 31, 2021			December 31, 2020			Minimum Ratios under Capital Adequacy Guidelines		Minimum Ratios for Well-Capitalized Banks *
Risk-adjusted assets	Risk-adjusted assets	$	21,217,792		$	19,713,813						Risk-adjusted assets	$	21,991,816		$	21,516,461
Tier I common risk-based capital	Tier I common risk-based capital	2,853,960			2,745,538							Tier I common risk-based capital	3,025,279			2,950,926
Tier I risk-based capital	Tier I risk-based capital	2,853,960			2,890,322							Tier I risk-based capital	3,025,279			2,950,926
Total risk-based capital	Total risk-based capital	3,101,780			3,052,079							Total risk-based capital	3,251,646			3,189,432
Tier I common risk-based capital ratio	Tier I common risk-based capital ratio	13.45		%	13.93		%	7.00	%	6.50	%	Tier I common risk-based capital ratio	13.76		%	13.71		%	7.00	%	6.50	%
Tier I risk-based capital ratio	Tier I risk-based capital ratio	13.45		%	14.66		%	8.50	%	8.00	%	Tier I risk-based capital ratio	13.76		%	13.71		%	8.50	%	8.00	%
Total risk-based capital ratio	Total risk-based capital ratio	14.62		%	15.48		%	10.50	%	10.00	%	Total risk-based capital ratio	14.79		%	14.82		%	10.50	%	10.00	%
Tier I leverage ratio	Tier I leverage ratio	9.39		%	11.38		%	4.00	%	5.00	%	Tier I leverage ratio	9.38		%	9.45		%	4.00	%	5.00	%

*under Prompt Corrective Action requirements

The Company is subject to a 2.5% capital conservation buffer, which is an amount above the minimum ratios under capital adequacy guidelines, and is required under Basel III. The capital conservation buffer is intended to absorb losses during periods of economic stress. Failure to maintain the buffer will result in constraints on dividends, share repurchases, and executive compensation.

In the first quarter of 2020, the interim final rule of the Federal Reserve Bank and other U.S. banking agencies became effective, providing banks that adopt CECL (ASU 2016-13) during the 2020 calendar year the option to delay recognizing the estimated impact on regulatory capital until after a two year deferral period, followed by a three year transition period. In connection with the adoption of CECL on January 1, 2020, the Company has elected to utilize this option. As a result, the two-year deferral period for the Company extends through December 31, 2021. Beginning on January 1, 2022, the Company will be required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025.

The Company maintains a treasury stock buyback program under authorizations by its Board of Directors (the Board) and normally purchases stock in the open market. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company purchased

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~~880,419~~ 354,181 shares at an average price of ~~$61.06~~$73.19 in open market purchases and through stock-based compensation transactions. At ~~September 30, 2020, 3,550,539~~March 31, 2021, 3,190,398 shares remained available for purchase under the Board authorization.

The Company's common stock dividend policy reflects its earnings outlook, desired payout ratios, the need to maintain adequate capital and liquidity levels, and alternative investment options. The Company paid a ~~$.27~~$.263 per share cash dividend on its common stock in the ~~third~~first quarter of ~~2020,~~2021, which was an ~~8.9%~~2.1% increase compared to its ~~2019~~2020 quarterly dividend.

On September 1, 2020, the Company redeemed all 6,000 outstanding shares of its 6.00% Series B Non-Cumulative Perpetual Preferred Stock and the corresponding depositary shares representing fractional interests in the Series B Preferred Stock at a redemption price of $25 per depositary share (equivalent to $1,000 per share of preferred stock). Regular dividends on the outstanding shares of the Series B Preferred Stock were paid separately on September 1, 2020 to holders of record as of the close of business on August 14, 2020, in the customary manner. On and after the September 1, 2020, all dividends on the shares of Series B Preferred Stock ceased to accrue.

Commitments, Off-Balance Sheet Arrangements and Contingencies

In the normal course of business, various commitments and contingent liabilities arise which are not required to be recorded on the balance sheet. The most significant of these are loan commitments, which at ~~September 30, 2020~~March 31, 2021 totaled ~~$12.8~~$13.3 billion (including $4.9 billion in unused, approved credit card lines). In addition, the Company enters into standby and commercial letters of credit. These contracts totaled ~~$318.0~~$440.4 million and ~~$30.4~~$4.5 million, respectively, at ~~September 30, 2020.~~March 31, 2021. As many commitments expire unused or only partially used, these totals do not necessarily reflect future cash requirements. The carrying value of the guarantee obligations associated with the standby letters of credit, which has been recorded as a liability on the consolidated balance sheet, amounted to ~~$3.3~~$3.0 million at ~~September 30, 2020. In conjunction with its adoption of ASU 2016-13, the Company recorded an increase to the~~March 31, 2021. The allowance for ~~credit losses on~~ these ~~unfunded lending commitments. The allowance~~commitments is recorded in the Company’s liability for unfunded lending commitments within other liabilities on its consolidated balance sheet. At ~~September 30, 2020,~~March 31, 2021, the liability for unfunded commitments totaled ~~$35.2~~$42.4 million. See further discussion of the liability for unfunded lending commitments in Note ~~1 and Note~~ 2 to the consolidated financial statements.

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During the third quarter of 2020, the Company signed a $106.6 million agreement with U.S. Capital Development to develop a 280,000 square foot commercial office building in a two building complex in Clayton, ~~Missouri.~~Missouri, which is expected to be completed near the end of 2022. As of March 31, 2021, the Company has made payments totaling $25.1 million. While the Company intends to occupy a portion of the office building for executive offices, a 15 year lease agreement has been signed by an anchor tenant to lease approximately 40% of the office building.

The Company regularly purchases various state tax credits arising from ~~third-party~~third party property redevelopment. These credits are either resold to ~~third-parties~~third parties at a profit or retained for use by the Company. During the first ~~nine~~three months of ~~2020,~~2021, purchases and sales of tax credits amounted to ~~$121.6~~$19.8 million and ~~$116.6~~$28.1 million, respectively. Fees from sales of tax credits were ~~$3.7~~$1.2 million for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$2.7~~$1.1 million in the same period last year. At ~~September 30, 2020,~~March 31, 2021, the Company expected to fund outstanding purchase commitments of ~~$62.0~~$129.8 million during the remainder of ~~2020 and $120.3 million in~~ 2021.

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Segment Results

The table below is a summary of segment pre-tax income results for the first ~~nine~~three months of ~~2020~~2021 and ~~2019.~~2020.


(Dollars in thousands)	(Dollars in thousands)	Consumer			Commercial			Wealth			Segment Totals			Other/ Elimination		Consolidated Totals			(Dollars in thousands)	Consumer			Commercial			Wealth			Segment Totals			Other/ Elimination			Consolidated Totals
Nine Months Ended September 30, 2020
Three Months Ended March 31, 2021																			Three Months Ended March 31, 2021
Net interest income																			Net interest income	$	77,939		$	110,169		$	17,457		$	205,565		$	183		$	205,748
Provision for credit losses																			Provision for credit losses	(9,901)			(27)			5			(9,923)			16,155			6,232
Non-interest income																			Non-interest income	38,248			50,728			50,985			139,961			(3,916)			136,045
Investment securities gains, net																			Investment securities gains, net	—			—			—			—			9,853			9,853
Non-interest expense																			Non-interest expense	(70,504)			(79,281)			(33,043)			(182,828)			(9,745)			(192,573)
Income before income taxes																			Income before income taxes	$	35,782		$	81,589		$	35,404		$	152,775		$	12,530		$	165,305
Three Months Ended March 31, 2020																			Three Months Ended March 31, 2020
Net interest income	Net interest income	$	241,195		$	300,307		$	41,686		$	583,188		$	36,896	$	620,084		Net interest income	$	78,981		$	85,896		$	12,959		$	177,836		$	23,229		$	201,065
Provision for credit losses	Provision for credit losses	(23,885)			(3,122)			10			(26,997)			(114,596)		(141,593)			Provision for credit losses	(11,206)			356			(3)			(10,853)			(47,100)			(57,953)
Non-interest income	Non-interest income	107,492			143,747			139,700			390,939			(20,189)		370,750			Non-interest income	34,081			49,887			47,409			131,377			(7,714)			123,663
Investment securities losses, net	Investment securities losses, net	—			—			—			—			(1,275)		(1,275)			Investment securities losses, net	—			—			—			—			(13,301)			(13,301)
Non-interest expense	Non-interest expense	(225,791)			(237,350)			(93,156)			(556,297)			(15,771)		(572,068)			Non-interest expense	(77,412)			(80,820)			(31,769)			(190,001)			(3,697)			(193,698)
Income before income taxes	Income before income taxes	$	99,011		$	203,582		$	88,240		$	390,833		$	(114,935)	$	275,898		Income before income taxes	$	24,444		$	55,319		$	28,596		$	108,359		$	(48,583)		$	59,776
Nine Months Ended September 30, 2019
Net interest income		$	236,215		$	256,649		$	35,662		$	528,526		$	90,108	$	618,634
Provision for loan losses		(33,061)			(1,053)			(165)			(34,279)			(953)		(35,232)
Non-interest income		98,840			151,655			133,556			384,051			(2,809)		381,242
Investment securities losses, net		—			—			—			—			3,874		3,874
Non-interest expense		(223,355)			(231,790)			(91,708)			(546,853)			(25,371)		(572,224)
Income before income taxes		$	78,639		$	175,461		$	77,345		$	331,445		$	64,849	$	396,294
Increase (decrease) in income before income taxes:
Increase in income before income taxes:																			Increase in income before income taxes:
Amount	Amount	$	20,372		$	28,121		$	10,895		$	59,388		$	(179,784)	$	(120,396)		Amount	$	11,338		$	26,270		$	6,808		$	44,416		$	61,113		$	105,529
Percent	Percent	25.9		%	16.0		%	14.1		%	17.9		%	N.M.		(30.4		%)	Percent	46.4		%	47.5		%	23.8		%	41.0		%	125.8		%	176.5		%

Consumer

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, income before income taxes for the Consumer segment increased ~~$20.4~~$11.3 million, or ~~25.9%~~46.4%, compared to the first ~~nine~~three months of ~~2019.~~2020. This increase in income before income taxes was mainly due to growth in ~~net interest income of $5.0 million, or 2.1%,~~ non-interest income of ~~$8.7~~$4.2 million, or ~~8.8%~~12.2%, lower non-interest expense of $6.9 million, or 8.9%, and a decrease in the provision for credit losses of ~~$9.2~~$1.3 million. These increases to income were partly offset by ~~higher non-interest expense~~lower net-interest income of ~~$2.4~~$1.0 million, or ~~1.1%~~1.3%. Net interest income ~~increased~~decreased due to an $8.3 million decrease to loan interest income, partly offset by a ~~$15.5~~$2.8 million increase in net allocated funding credits ~~assigned to the Consumer segment's loan~~ and ~~deposit portfolios, partly offset by~~ a ~~$13.6~~$4.5 million decrease in ~~loan~~deposit interest ~~income.~~expense. Non-interest income increased mainly due to growth in mortgage banking revenue, partly offset by ~~decreases~~a decrease in deposit account fees (mainly overdraft and return item fees) ~~and net credit and debit card fees (mainly lower interchange fees, partly offset by lower rewards expense)~~. Non-interest expense ~~increased over~~decreased from the same period in the previous year due to ~~higher~~lower salaries expense, lower allocated service and ~~allocated~~ support costs ~~for~~(mainly bank card servicing, mortgage operations, information technology and anonline banking), and a reduction in impairment expense on mortgage servicing rights. ~~These increases were partly offset by lower supplies and communication expense and allocated support costs for marketing expense.~~ The provision for credit losses totaled ~~$23.9~~$9.9 million, a ~~$9.2~~$1.3 million decrease from the first ~~nine~~three months of ~~2019,~~2020, mainly due to lower personal, overdraft, and credit card ~~and personal~~ loan net charge-offs.

Commercial

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, income before income taxes for the Commercial segment increased ~~$28.1~~$26.3 million, or ~~16.0%~~47.5%, compared to the same period in the previous year. This increase was mainly due to higher net interest ~~income, partly offset by lower non-interest income and increases in non-interest expense and the provision for credit losses.~~income. Net interest income increased ~~$43.7~~$24.3 million, or ~~17.0%~~28.3%, due to a ~~$49.4~~$25.4 million increase in net allocated funding credits and ~~decreases~~a decrease in deposit and borrowings interest expense ~~on deposits and customer repurchase agreements~~ of ~~$19.7 million and $14.6 million, respectively.~~$9.5 million. These increases to income were partly offset by a ~~$40.0~~

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$10.5 million decrease in loan interest income. Non-interest income ~~decreased $7.9 million,~~increased $841 thousand, or ~~5.2%~~1.7%, ~~from~~over the previous year mainly due to ~~lower net corporate card fees (driven by lower transaction volume), swap fees and gains on sales of leased assets. These decreases were partly offset by~~ higher capital market, interest rate swap and deposit account fees (mainly corporate cash management fees). ~~Non-interest expense increased $5.6 million, or 2.4%, mainly due to growth in salaries expense and allocated support costs for information technology.~~ These increases were partly offset by a decline in net corporate card fees (driven by lower transaction volume) and cash sweep commissions. Non-interest expense decreased $1.5 million, or 1.9%, mainly due to higher deferred origination costs, lower travel and entertainment expense and lower allocated ~~teller services costs.~~support costs (mainly information technology and commercial payments). These decreases were partly offset by higher incentive compensation expense. The

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provision for credit losses increased ~~$2.1 million~~$383 thousand over the same period last year, mainly due to ~~higher~~net recoveries recorded on lease loans in the prior year, partly offset by lower net charge-offs on ~~business loans, partly offset by net recoveries on lease and~~ commercial card loans.

Wealth

Wealth segment pre-tax profitability for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 increased ~~$10.9~~$6.8 million, or ~~14.1%~~23.8%, over the same period in the previous year. Net interest income increased ~~$6.0~~$4.5 million, or ~~16.9%~~34.7%, mainly due to a ~~$9.9~~$4.8 million increase in net allocated funding credits and lower deposit interest expense of ~~$1.3~~$1.5 million, partly offset by a ~~$5.2~~$1.8 million decrease in loan interest income. Non-interest income increased ~~$6.1~~$3.6 million, or ~~4.6%~~7.5%, over the prior year largely due to higher trust ~~fee income~~fees (mainly private client trust fees) and mortgage banking ~~revenue.~~revenue, partly offset by lower cash sweep commissions. Non-interest expense increased ~~$1.4~~$1.3 million, or ~~1.6%~~4.0%, mainly due to a miscellaneous recovery recorded in the prior year, coupled with higher salaries and benefits expense and allocated servicing and support costs (mainly mortgage ~~loan processing~~operations and ~~information technology),~~online banking). These increases were partly offset by lower travel and entertainment expense. The provision for credit losses decreased ~~$175~~$8 thousand from the same period last year ~~mainly~~ due to net recoveries on overdrafts and revolving home equity loans.

The Other/Elimination category in the preceding table includes the activity of various support and overhead operating units of the Company, in addition to the investment securities portfolio and other items not allocated to the segments. In accordance with the Company’s transfer pricing procedures, the difference between the total provision for credit losses and total net charge-offs/recoveries is not allocated to a business segment and is included in this category. The pre-tax profitability of this category was ~~lower~~higher than in the same period last year by ~~$179.8~~$61.1 million. This ~~decrease~~increase was partly due to higher non-interest income of $3.8 million, partly offset by lower net interest income of ~~$53.2~~$23.0 million and ~~a decrease~~an increase in ~~non-interest income of $17.4 million, partly offset by lower~~ non-interest expense of ~~$9.6~~$6.0 million. Unallocated securities ~~losses~~gains were ~~$1.3~~$9.9 million in the first ~~nine~~three months of ~~2020~~2021 compared to ~~gains~~losses of ~~$3.9~~$13.3 million in ~~2019.~~2020. Also, the unallocated provision for credit losses ~~increased $113.6~~decreased $63.3 million, ~~primarily driven by an increase~~as the provision was $20.3 million less than net charge-offs in the ~~allowance for credit losses on loans and~~first three months of 2021, while the ~~liability for unfunded lending commitments, which is not allocated to segments for management reporting purposes.~~provision was $32.0 million in excess of net charge-offs during the first three months of 2020. Net charge-offs are allocated to the segments when incurred for management reporting purposes. ~~At September 30, 2020,~~Additionally, the Company's provision for credit losses on unfunded lending commitments, which is not allocated to the segments for management reporting, was ~~$18.0 million. Additionally,~~$4.1 million for the ~~provision for credit losses on loans was $96.7 million in excess of net charge-offs in the first nine~~three months ~~of 2020, while the provision was $750 thousand in excess of net charge-offs during the first nine months of 2019.~~ended March 31, 2021.

Impact of Recently Issued Accounting Standards

~~Financial Instruments~~ ASU 2016-13, "Measurement of Credit Losses on Financial Instruments", known as the current expected credit loss (CECL) model, was issued in June 2016, and has been followed by additional clarifying guidance on specified implementation issues. This new standard is effective for fiscal years beginning after December 15, 2019 and was adopted by the Company on January 1, 2020 using the modified retrospective method.

This new measurement approach requires the calculation of expected lifetime credit losses and is applied to financial assets measured at amortized cost, including loans and held-to-maturity securities as well as certain unfunded lending commitments such as loan commitments. The standard also changes the impairment model of available for sale debt securities.

The allowance for loan losses under the previously required incurred loss model that is reported on the Company's consolidated balance sheet is different under the requirements of the CECL model. At adoption, a cumulative-effect adjustment for the change in the allowance for credit losses increased retained earnings by $3.8 million. The cumulative-effect adjustment to retained earnings, net of taxes, was comprised of the impact to the allowance for credit losses on outstanding loans and the impact to the liability for unfunded lending commitments. There is no implementation impact on held-to-maturity debt securities as the Company does not hold any held-to-maturity debt securities.

The new accounting standard does not require the use of a specific loss estimation method for purposes of determining the allowance for credit losses. The Company selected a methodology that uses historical net charge-off rates, adjusted by the impacts of a reasonable and supportable forecast and the impacts of other qualitative factors to determine the expected credit losses. Key assumptions include the application of historical loss rates, prepayment speeds, forecast results of a reasonable and supportable period, the period to revert to historical loss rates, and qualitative factors. The forecast is determined using projections of certain macroeconomic variables, such as, unemployment rate, prime rate, BBB corporate yield, and house price index. The model design and methodology requires management judgment.

The allowance for credit losses on the commercial portfolio decreased due to the relatively short contractual lives of the commercial loan portfolios coupled with an economic forecast predicting stable macroeconomic factors similar to the current environment at adoption. The allowance for credit losses on the personal banking portfolio increased due to the relatively longer contractual lives of certain portfolios, primarily those collateralized with personal real estate. Because the commercial loan portfolio represented 63% of total loans at December 31, 2019, the change in its allowance for credit losses had a more

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significant impact on the total allowance for credit losses, and resulted in a net reduction in the allowance for credit losses. The Company's allowance for loan losses to total loans ratio declined from 1.09% at December 31, 2019, to .95% at adoption. Offsetting the overall reduction in the allowance for credit losses for outstanding loans was an increase in the liability for unfunded lending commitments. The liability increased as the loss estimation was required to be expanded over the contractual commitment period. The adoption also resulted in an immaterial adjustment to retained earnings at January 1, 2020. Further discussion of the accounting impact of the Company's adoption is included in Note 1 to the consolidated financial statements.

Additionally, the Company elected to phase the estimated impact of CECL into regulatory capital in accordance with the interim final rule of the Federal Reserve Bank and other U.S. banking agencies. Further discussion of the impact of this election is discussed in ~~Capital Management~~ ~~within~~ ~~Liquidity and Capital Resources~~.

~~Intangible Assets~~ The FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment", in January 2017. Under current guidance, a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill by following procedures that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under the new amendments, the goodwill impairment test compares the fair value of a reporting unit with its carrying amount and an impairment charge is measured as the amount by which the carrying amount exceeds the reporting unit's fair value. The amendments were effective for impairment tests beginning January 1, 2020 and did not have a significant effect on the Company's consolidated financial statements.

~~Financial Instruments~~ The FASB issued ASU 2018-13, "Changes to the Disclosure Requirements of Fair Value Measurement", in August 2018. The amendments in the ASU eliminate or modify certain disclosure requirements for fair value measurements in Topic 820, ~~Fair Value Measurement~~. In addition, the amendments in the ASU also require the addition of new disclosure requirements on fair value measurement, including the disclosure of changes in unrealized gains and losses for the period included in AOCI for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The guidance was effective January 1, 2020 and did not have a significant effect on the Company's consolidated financial statements.

~~Retirement Benefits~~ The FASB issued ASU 2018-14, "Compensation - Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20)", in August 2018. The amendments in the ASU eliminate disclosures that are no longer considered cost beneficial and clarify specific requirements of disclosures. In addition, the amendments in the ASU also add new disclosures, including the explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments were effective January 1, 2020 and did not have a significant effect on the Company's consolidated financial statements.

~~Intangible Assets~~ The FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract", in August 2018. Under current guidance, the accounting for implementation costs of a hosting arrangement that is a service contract is not specifically addressed. Under the new amendments, the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract are aligned with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software or hosting arrangements that include internal-use software license. The guidance was effective January 1, 2020 and did not have a significant effect on the Company's consolidated financial statements.

Income Taxes The FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes", in December 2019. The amendments in the ASU eliminate certain exceptions under current guidance for investments, intraperiod allocations, and the methodology for calculating interim income tax. In addition, the amendments also add new guidance to simplify accounting for income taxes. The amendments ~~are~~were effective January 1, 2021, ~~but early~~and the Company adopted them on that date. The adoption ~~is permitted. The Company is still assessing the impact~~did not have a significant effect on the Company's consolidated financial statements.

Investment Securities The FASB issued ASU 2020-08, "Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs", in October 2020. The amendments in the ASU clarify that for each reporting period an entity should ~~reevaluate~~evaluate whether a callable debt security ~~is within~~that has multiple call dates may consider estimates of future principal prepayments when applying the ~~scope of paragraph 310-20-35-33.~~interest method. The guidance iswas effective January 1, 2021, and isthe Company adopted it on that date. The adoption did not ~~expected to~~ have a significant effect on the Company's consolidated financial statements.

Reference Rate Reform The FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting", in March ~~2020.~~2020, and has been followed by additional clarifying guidance related to derivatives that are modified as a result of reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if they reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Further, the guidance applies to derivative instruments that are affected by the discounting transition. The expedients and exceptions provided by the new guidance do not apply to contract modifications made and hedging relationships entered

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into or evaluated after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022. The ~~Company has established a LIBOR Transition Program, which~~guidance is led by the LIBOR Transition Steering Committee (Committee) whose purpose is to guide the overall transition process for the Company. The Committee is an internal, cross-functional team with representatives from all relevant business lines, support functions and legal counsel. An initial LIBOR impact and risk assessment has been performed,effective as of March 12, 2020 through December 31, 2022, and the ~~Committee has developed and prioritized action items. Changes to the Company's systems have been identified and~~Company is in the process of ~~installing~~evaluating and ~~testing code has started. All financial~~applying, as applicable, the optional expedients and exceptions for eligible contracts ~~that reference LIBOR have been identified~~ and are being monitored on an ongoing basis. Remediation of these contracts is expected to be consistent with industry timing. LIBOR fallback language has been included in key loan provisions of new and renewed loans in preparation for transition from LIBOR to the new benchmark rate when such transition occurs.

transaction available through December 31, 2022.

7263

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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS

Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~


		Third Quarter 2020						Third Quarter 2019							First Quarter 2021						First Quarter 2020
(Dollars in thousands)	(Dollars in thousands)	Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		(Dollars in thousands)	Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid
ASSETS:	ASSETS:													ASSETS:
Loans:	Loans:													Loans:
Business(A)	Business(A)	$	6,709,200	$	49,680	2.95	%	$	5,263,312	$	51,071	3.85	%	Business(A)	$	6,532,921	$	49,698	3.09	%	$	5,493,657	$	47,865	3.50	%
Real estate — construction and land	Real estate — construction and land	974,346		9,167		3.74		920,206		12,669		5.46		Real estate — construction and land	1,091,969		9,542		3.54		924,086		10,985		4.78
Real estate — business	Real estate — business	2,989,652		26,547		3.53		2,883,379		32,153		4.42		Real estate — business	3,022,979		26,244		3.52		2,853,632		29,535		4.16
Real estate — personal	Real estate — personal	2,722,300		24,334		3.56		2,175,156		21,444		3.91		Real estate — personal	2,826,112		23,698		3.40		2,390,716		22,778		3.83
Consumer	Consumer	1,992,314		21,004		4.19		1,924,434		23,664		4.88		Consumer	1,947,322		19,304		4.02		1,950,491		23,188		4.78
Revolving home equity	Revolving home equity	329,361		2,722		3.29		354,040		4,617		5.17		Revolving home equity	299,371		2,495		3.38		350,256		4,013		4.61
Consumer credit card	Consumer credit card	646,185		18,513		11.40		763,377		23,894		12.42		Consumer credit card	608,747		16,466		10.97		727,569		22,177		12.26
Overdrafts	Overdrafts	2,689		—		—		9,240		—		—		Overdrafts	3,546		—		—		4,044		—		—
Total loans	Total loans	16,366,047		151,967		3.69		14,293,144		169,512		4.71		Total loans	16,332,967		147,447		3.66		14,694,451		160,541		4.39
Loans held for sale	Loans held for sale	24,728		264		4.25		19,882		308		6.15		Loans held for sale	35,814		304		3.44		12,875		197		6.15
Investment securities:	Investment securities:													Investment securities:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	770,361		7,189		3.71		825,544		4,910		2.36		U.S. government and federal agency obligations	725,367		4,542		2.54		802,556		4,168		2.09
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	102,749		560		2.17		181,929		1,232		2.69		Government-sponsored enterprise obligations	50,801		295		2.36		134,296		1,398		4.19
State and municipal obligations(A)	State and municipal obligations(A)	1,767,526		11,240		2.53		1,172,259		9,290		3.14		State and municipal obligations(A)	1,958,637		11,883		2.46		1,222,595		9,443		3.11
Mortgage-backed securities	Mortgage-backed securities	6,259,926		30,607		1.95		4,712,508		30,947		2.61		Mortgage-backed securities	6,998,521		23,999		1.39		4,685,782		27,628		2.37
Asset-backed securities	Asset-backed securities	1,520,988		7,250		1.90		1,297,685		9,158		2.80		Asset-backed securities	2,085,491		7,127		1.39		1,182,556		7,724		2.63
Other debt securities	Other debt securities	514,166		3,036		2.35		334,218		2,217		2.63		Other debt securities	570,115		3,020		2.15		321,733		2,355		2.94
Trading debt securities(A)	Trading debt securities(A)	27,267		114		1.66		29,622		217		2.91		Trading debt securities(A)	32,320		86		1.08		34,055		213		2.52
Equity securities(A)	Equity securities(A)	4,193		497		47.15		4,705		423		35.67		Equity securities(A)	4,321		528		49.56		4,273		497		46.78
Other securities(A)	Other securities(A)	120,253		2,038		6.74		134,896		2,106		6.19		Other securities(A)	154,030		1,997		5.26		144,096		1,902		5.31
Total investment securities	Total investment securities	11,087,429		62,531		2.24		8,693,366		60,500		2.76		Total investment securities	12,579,603		53,477		1.72		8,531,942		55,328		2.61
Federal funds sold and short-term securities	Federal funds sold and short-term securities													Federal funds sold and short-term securities
purchased under agreements to resell	purchased under agreements to resell	337		—		—		1,080		7		2.57		purchased under agreements to resell	7		—		—		326		2		2.47
Long-term securities purchased	Long-term securities purchased													Long-term securities purchased
under agreements to resell	under agreements to resell	849,994		11,247		5.26		713,030		3,621		2.01		under agreements to resell	849,999		11,128		5.31		850,000		7,462		3.53
Interest earning deposits with banks	Interest earning deposits with banks	1,024,435		261		.10		226,582		1,241		2.17		Interest earning deposits with banks	1,480,331		370		.10		601,420		1,292		.86
Total interest earning assets	Total interest earning assets	29,352,970		226,270		3.07		23,947,084		235,189		3.90		Total interest earning assets	31,278,721		212,726		2.76		24,691,014		224,822		3.66
Allowance for credit losses on loans	Allowance for credit losses on loans	(240,286)						(160,387)						Allowance for credit losses on loans	(220,512)						(139,482)
Unrealized gain on debt securities	Unrealized gain on debt securities	368,154						152,706						Unrealized gain on debt securities	283,511						191,275
Cash and due from banks	Cash and due from banks	326,030						367,005						Cash and due from banks	354,569						370,368
Premises and equipment, net	Premises and equipment, net	404,144						380,198						Premises and equipment, net	401,230						392,263
Other assets	Other assets	659,509						544,988						Other assets	552,306						605,833
Total assets	Total assets	$	30,870,521					$	25,231,594					Total assets	$	32,649,825					$	26,111,271
LIABILITIES AND EQUITY:	LIABILITIES AND EQUITY:													LIABILITIES AND EQUITY:
Interest bearing deposits:	Interest bearing deposits:													Interest bearing deposits:
Savings	Savings	$	1,193,079	269		.09		$	924,581	263		.11		Savings	$	1,333,177	277		.08		$	952,709	263		.11
Interest checking and money market	Interest checking and money market	11,731,494		2,937		.10		10,409,111		9,962		.38		Interest checking and money market	12,970,629		1,826		.06		10,777,400		8,046		.30
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	573,207		1,028		.71		620,138		1,740		1.11		Certificates of deposit of less than $100,000	516,728		473		.37		622,840		1,775		1.15
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	1,447,968		2,512		.69		1,503,805		7,540		1.99		Certificates of deposit of $100,000 and over	1,230,075		1,062		.35		1,299,443		5,235		1.62
Total interest bearing deposits	Total interest bearing deposits	14,945,748		6,746		.18		13,457,635		19,505		.58		Total interest bearing deposits	16,050,609		3,638		.09		13,652,392		15,319		.45
Borrowings:	Borrowings:													Borrowings:
Federal funds purchased and securities sold	Federal funds purchased and securities sold													Federal funds purchased and securities sold
under agreements to repurchase	under agreements to repurchase	1,855,971		406		.09		1,884,939		8,273		1.74		under agreements to repurchase	2,166,072		312		.06		1,990,051		4,770		.96
Other borrowings	Other borrowings	1,225		—		—		77,248		453		2.33		Other borrowings	831		2		.98		161,698		331		.82
Total borrowings	Total borrowings	1,857,196		406		.09		1,962,187		8,726		1.76		Total borrowings	2,166,903		314		.06		2,151,749		5,101		.95
Total interest bearing liabilities	Total interest bearing liabilities	16,802,944		7,152		.17	%	15,419,822		28,231		.73	%	Total interest bearing liabilities	18,217,512		3,952		.09	%	15,804,141		20,420		.52	%
Non-interest bearing deposits	Non-interest bearing deposits	9,801,562						6,290,036						Non-interest bearing deposits	10,438,637						6,615,108
Other liabilities	Other liabilities	899,890						390,560						Other liabilities	608,212						466,980
Equity	Equity	3,366,125						3,131,176						Equity	3,385,464						3,225,042
Total liabilities and equity	Total liabilities and equity	$	30,870,521					$	25,231,594					Total liabilities and equity	$	32,649,825					$	26,111,271
Net interest margin (T/E)	Net interest margin (T/E)			$	219,118					$	206,958			Net interest margin (T/E)			$	208,774					$	204,402
Net yield on interest earning assets	Net yield on interest earning assets					2.97	%					3.43	%	Net yield on interest earning assets					2.71	%					3.33	%

(A) Stated on a tax equivalent basis using a federal income tax rate of 21%.

~~Table of Contents~~

~~AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS~~

~~Nine Months Ended September 30, 2020 and 2019~~

Nine Months 2020 Nine Months 2019
(Dollars in thousands) Average Balance Interest Income/Expense Avg. Rates Earned/Paid Average Balance Interest Income/Expense Avg. Rates Earned/Paid
ASSETS:
Loans:
Business(A)
$ 6,322,644 $ 146,437 3.09 % $ 5,164,329 $ 153,721 3.98 %
Real estate — construction and land 931,517 28,952 4.15 912,063 38,237 5.61
Real estate — business 2,935,319 83,382 3.79 2,872,090 97,609 4.54
Real estate — personal 2,565,740 70,829 3.69 2,143,394 63,439 3.96
Consumer 1,962,466 65,845 4.48 1,920,521 68,858 4.79
Revolving home equity 340,900 9,722 3.81 362,163 14,036 5.18
Consumer credit card 679,101 60,102 11.82 770,143 70,899 12.31
Overdrafts 3,213 — — 6,130 — —
Total loans 15,740,900 465,269 3.95 14,150,833 506,799 4.79
Loans held for sale 14,692 588 5.35 19,660 1,003 6.82
Investment securities:
U.S. government and federal agency obligations 783,006 12,244 2.09 859,354 16,467 2.56
Government-sponsored enterprise obligations 117,135 2,958 3.37 193,574 3,545 2.45
State and municipal obligations(A)
1,426,432 30,187 2.83 1,225,465 29,075 3.17
Mortgage-backed securities 5,426,861 87,017 2.14 4,563,836 91,673 2.69
Asset-backed securities 1,349,316 22,496 2.23 1,411,085 29,156 2.76
Other debt securities 414,553 7,907 2.55 333,758 6,659 2.67
Trading debt securities(A)
31,087 560 2.41 28,416 656 3.09
Equity securities(A)
4,201 1,492 47.44 4,664 1,269 36.38
Other securities(A)
134,481 5,450 5.41 131,813 6,119 6.21
Total investment securities 9,687,072 170,311 2.35 8,751,965 184,619 2.82
Federal funds sold and short-term securities
purchased under agreements to resell 252 2 1.06 2,479 51 2.75
Long-term securities purchased
under agreements to resell 849,998 29,445 4.63 704,391 11,066 2.10
Interest earning deposits with banks 1,126,600 1,996 .24 291,417 5,113 2.35
Total interest earning assets 27,419,514 667,611 3.25 23,920,745 708,651 3.96
Allowance for credit losses on loans (184,001) (160,359)
Unrealized gain (loss) on debt securities 280,616 49,335
Cash and due from banks 351,435 367,747
Premises and equipment, net 397,093 377,953
Other assets 657,969 501,650
Total assets $ 28,922,626 $ 25,057,071
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings $ 1,086,120 780 .10 $ 917,081 757 .11
Interest checking and money market 11,318,376 14,712 .17 10,603,476 29,324 .37
Certificates of deposit of less than $100,000 600,295 4,196 .93 605,369 4,530 1.00
Certificates of deposit of $100,000 and over 1,364,798 11,357 1.11 1,384,106 20,473 1.98
Total interest bearing deposits 14,369,589 31,045 .29 13,510,032 55,084 .55
Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 1,945,669 5,761 .40 1,817,082 23,839 1.75
Other borrowings 168,748 1,032 .82 26,883 463 2.30
Total borrowings 2,114,417 6,793 .43 1,843,965 24,302 1.76
Total interest bearing liabilities 16,484,006 37,838 .31 % 15,353,997 79,386 .69 %
Non-interest bearing deposits 8,425,068 6,316,671
Other liabilities 710,824 327,727
Equity 3,302,728 3,058,676
Total liabilities and equity $ 28,922,626 $ 25,057,071
Net interest margin (T/E) $ 629,773 $ 629,265
Net yield on interest earning assets 3.07 % 3.52 %

~~(A) Stated on a tax equivalent basis using a federal income tax rate of 21%.~~

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk management focuses on maintaining consistent growth in net interest income within Board-approved policy limits. The Company primarily uses earnings simulation models to analyze net interest income sensitivity to movement in interest rates. The Company performs monthly simulations that model interest rate movements and risk in accordance with changes to its balance sheet composition. For further discussion of the Company’s market risk, see the Interest Rate Sensitivity section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s ~~2019~~2020 Annual Report on Form 10-K.

The tables below show the effects of gradual shifts in interest rates over a twelve month period on the Company’s net interest income versus the Company's net interest income in a flat rate scenario. Simulation A presents three rising rate scenarios and in each scenario, rates are assumed to change evenly over 12 months. In these scenarios, the balance sheet remains flat with the exception of deposit balances, which may fluctuate based on changes in rates. For instance, the Company may experience deposit disintermediation if the spread between market rates and bank deposit rates widens as rates rise.

The sensitivity of deposit balances to changes in rates is particularly difficult to estimate in exceptionally low rate environments. Since the future effects of changes in rates on deposit balances cannot be known with certainty, the Company conservatively models alternate scenarios with greater deposit attrition as rates rise. Simulation B illustrates results from these higher attrition scenarios to provide added perspective on potential effects of higher rates.

The Company utilizes these simulations both for monitoring interest rate risk and for liquidity planning purposes. While the future effects of rising rates on deposit balances cannot be known, the Company maintains a practice of running multiple rate scenarios to better understand interest rate risk and its effect on the Company’s performance.


Simulation A	Simulation A	September 30, 2020						June 30, 2020						Simulation A	March 31, 2021						December 31, 2020
(Dollars in millions)	(Dollars in millions)	$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		(Dollars in millions)	$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth
300 basis points rising	300 basis points rising	$	53.8	7.03	%	$	(513.5)	$	51.9	6.49	%	$	(503.1)	300 basis points rising	$	73.6	9.46	%	$	(558.6)	$	85.4	11.47	%	$	(560.6)
200 basis points rising	200 basis points rising	$	47.3	6.18	%	$	(360.4)	$	44.8	5.60	%	$	(349.7)	200 basis points rising	59.8		7.68		(387.8)		69.5		9.33		(392.5)
100 basis points rising	100 basis points rising	$	29.3	3.83	%	$	(188.4)	$	28.8	3.60	%	$	(182.4)	100 basis points rising	32.6		4.19		(200.5)		38.9		5.23		(204.7)


Simulation B	Simulation B	September 30, 2020						June 30, 2020						Simulation B	March 31, 2021						December 31, 2020
(Dollars in millions)	(Dollars in millions)	$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		(Dollars in millions)	$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth
300 basis points rising	300 basis points rising	$	39.4	5.15	%	$	(1,214.8)	$	38.7	4.83	%	$	(1,078.2)	300 basis points rising	$	41.6	5.34	%	$	(1,847.4)	$	57.5	7.73	%	$	(1,940.3)
200 basis points rising	200 basis points rising	$	34.6	4.53	%	$	(1,069.6)	$	33.0	4.12	%	$	(931.8)	200 basis points rising	31.2		4.01		(1,686.5)		45.3		6.09		(1,782.8)
100 basis points rising	100 basis points rising	$	18.6	2.44	%	$	(911.8)	$	18.6	2.32	%	$	(777.3)	100 basis points rising	7.9		1.01		(1,517.6)		18.9		2.54		(1,614.7)

Under Simulation A, in the three rising ~~rates push~~rate scenarios, interest ~~income up more quickly~~rate risk is less asset sensitive than ~~funding costs. This is predominately due~~the previous quarter, which primarily resulted from the addition of PPP loans to ~~interest earning deposits with~~ the ~~Federal Reserve~~simulation in the current quarter. In the previous quarter, PPP loans were not included in the simulation and ~~variable rate loans repricing up with market rates, while~~contributed to higher deposit ~~rates only partially reprice higher. Deposits~~balances at the Federal ~~Reserve declined during~~Reserve. For the quarter ended March 31, 2021, the addition of the PPP loans to the simulation extended the maturity of the portfolio, causing the assets in the simulation to reprice more gradually, which ~~typically results~~resulted in a ~~less sensitive balance sheet, but this was offset by the monetization of off-balance sheet floors, which no longer lose income~~smaller increase in ~~rising rate scenarios.~~interest income. The Company did not model a 100 basis point falling scenario due to the already low interest rate environment.

In Simulation B, the assumed higher levels of deposit attrition were modeled to capture the results of a shrinking balance sheet.

Projecting deposit activity in a period of historically low interest rates is difficult, and the Company cannot predict how deposits will actually react to shifting rates. The comparisons above provide insight into potential effects of changes in rates and deposit levels on net interest income. The Company believes that its approach to interest rate risk has appropriately considered its susceptibility to both rising and falling rates and has adopted strategies which minimize the impact of interest rate risk.

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Item 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of ~~September 30, 2020.~~March 31, 2021. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There were no changes in the Company's internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The information required by this item is set forth in Part I, Item 1 under Note 17, Legal and Regulatory Proceedings.

~~Item 1A. RISK FACTORS~~

The section titled "Risk Factors" in Part I, Item 1A of the Company's 2019 Annual Report on Form 10-K includes a discussion of the many risks and uncertainties the Company faces, any one or more of which could have a material adverse effect on its business, results of operations, financial condition (including capital and liquidity), or prospects or the value of or return on an investment. The information presented below provides an update to, and should be read in conjunction with, the risk factors and other information contained in the Company's 2019 Annual Report on Form 10-K. Except as presented below, there have been no material changes to the risk factors described in the Company's 2019 Annual Report on Form 10-K.

~~Public health threats or outbreaks of communicable diseases has adversely affected, and is expected to continue to adversely effect on the Company's operations and financial results~~

The Company may face risks related to public health threats or outbreaks of communicable diseases. A widespread healthcare crisis, such as an outbreak of a communicable disease could adversely affect the global economy and the Company’s financial performance. For example, the ongoing global COVID-19 pandemic has destabilized the financial markets in which the Company operates, and likely will continue to cause significant disruption in the global economies and financial markets, including the Company's local markets. The Company is dependent upon the willingness and ability of its customers to conduct banking and other financial transactions. In reaction to and as preventative measure to attempt to slow the spread of the pandemic, government authorities have in many states and municipalities implemented mandatory closures, shelter-in-place orders, and social distancing protocols, including orders within many of the geographic areas that the Company operates. Although the Company is considered an essential business, access to its branches and office locations have been restricted, for the safety of its employees and customers. Limiting customers' access to the Company's physical business has prevented some customers from transacting with the Company and lower demand for lending and other services offered by the Company, adversely affecting its cash flows, financial condition, results of operations, profitability and asset quality and could continue to do so for an indefinite period of time. This could have a material adverse effect on the Company’s results of operations, financial condition, and liquidity. In particular, the continued spread of COVID-19 and efforts to contain the virus could:

•~~continue to impact customer demand of the Company’s lending and related services, leading to lower revenue;~~

•~~cause the Company to experience an increase in costs as a result of the Company implementing operational changes to accommodate its newly-remote workforce;~~

•~~cause delayed payments from customers and uncollectible accounts, defaults, foreclosures, and declining collateral values, resulting in losses to the Company;~~

•~~result in losses on the Company's investment portfolio, due to volatility in the markets and lower trading volume driven by economic uncertainty;~~

•~~cause market interest rates to continue to decline, which could adversely affect the Company's net interest income and profitability;~~

•~~cause the Company's credit losses to grow substantially;~~

•~~impact availability of qualified personnel; and~~

•~~cause other unpredictable events.~~

The situation surrounding COVID-19 remains uncertain and the potential for a material impact on the Company’s results of operations, financial condition, and liquidity increases the longer the virus impacts activity levels in the United States and globally. The ultimate extent of the impact on our business, financial condition, liquidity, results of operations and cash flows will depend on future developments, which are highly uncertain and cannot be predicted. The Company continues to adapt to the changing dynamics of the COVID-19 impacts to the economy, needs of our employees and customers, and authoritative measures mandated by federal, state, and local governments. However, there is no assurance that our business continuity and disaster recovery program can adequately mitigate the risks of such business disruptions and interruptions. New information regarding the severity of the COVID-19 pandemic and ongoing reactions to the pandemic by customers and government authorities will continue to impact access to the Company's business, as well as the economies and markets in which the Company operates. T~~he COVID-19 pandemic may cause prolonged global or national recessionary economic conditions or~~

~~Table of Contents~~

~~longer lasting effects on economic conditions than currently exist, which could have a material adverse effect on the Company's business, results of operations and financial condition.~~ Beyond the current COVID-19 pandemic, the potential impacts of epidemics, pandemics, or other outbreaks of an illness, disease, or virus could therefore materially and adversely affect the Company's business, revenue, operations, financial condition, liquidity and cash flows.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth information about the Company's purchases of its $5 par value common stock, its only class of common stock registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

Period
Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as part of Publicly Announced Program Maximum Number that May Yet Be Purchased Under the Program
July 1 - 31, 2020 609 $ 57.29 609 3,552,792
August 1 - 31, 2020 1,757 $ 60.02 1,757 3,551,035
September 1 - 30, 2020 496 $ 55.83 496 3,550,539
Total 2,862 $ 58.71 2,862 3,550,539


Period	Total Number of Shares Purchased	Average Price Paid per Share			Total Number of Shares Purchased as part of Publicly Announced Program	Maximum Number that May Yet Be Purchased Under the Program
January 1 - 31, 2021	57,637		$	69.05	57,637	3,486,942
February 1 - 28, 2021	184,645		$	72.01	184,645	3,302,297
March 1 - 31, 2021	111,899		$	77.27	111,899	3,190,398
Total	354,181		$	73.19	354,181	3,190,398

The Company's stock purchases shown above were made under authorizations by the Board of Directors. Under the most recent authorization in November 2019 of 5,000,000 shares, ~~3,550,539~~3,190,398 shares remained available for purchase at ~~September 30, 2020.~~March 31, 2021.

Item 6. EXHIBITS

3.1 — Termination of Certificate of Designation of 6.00% Series B Non-Cumulative Perpetual Preferred Stock of Commerce Bancshares, Inc. was filed in current report on Form 8-K (Commission file number 0-2989) dated September 1, 2020, and the same is hereby incorporated by reference.

~~10.~~1 —~~Development Services Agreement~~ *

~~10.~~2 — ~~Development Services Agreement Amendment 1~~*

~~10.~~3 — ~~Development Services Agreement Amendment~~ 2

~~10.~~4 — ~~Development Services Agreement Amendment 3~~

~~10.~~5 — ~~Development Services Agreement Amendment 4~~

~~10.~~6 — ~~Development Services Agreement Amendment 5~~

~~10.~~7 — ~~Development Services Agreement Amendment 6~~

~~10.~~8 — ~~Development Services Agreement Amendment 7~~

~~10.~~9 — ~~Development Services Agreement Amendment 8~~

~~10.~~10 — ~~Development Services Agreement Amendment 9~~

~~10.~~11 — ~~Development Services Agreement Amendment 10~~

~~10.~~1 ~~2 —~~ ~~Development Services Agreement Amendment 11~~*

31.1 — Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 — Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~Table of Contents~~

32 — Certifications of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 — Interactive data files in Inline XBRL pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

104 — Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* In accordance with Item 601(a)(5) of Regulation S-K, certain schedules and exhibits to this exhibit have been omitted from this filing. The Company will furnish a copy of any omitted schedule or exhibit to the Securities and Exchange Commission or its staff upon request. In accordance with Item 601(b)(10)(iv) of Regulation S-K, certain portions of this exhibit have been redacted because they are both (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. The Company will provide an unredacted copy of the exhibit on a supplemental basis to the Securities and Exchange Commission or its staff upon request.

Table of Contents

SIGNATURES

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


COMMERCE BANCSHARES, INC.

By			/s/ THOMAS J. NOACK
			Thomas J. Noack
			Senior Vice President & Secretary

Date: ~~November 5, 2020~~May 6, 2021


By			/s/ PAUL A. STEINER
			Paul A. Steiner
			Controller
			(Chief Accounting Officer)

Date: ~~November 5, 2020~~May 6, 2021

8068


	December 31, 2019		January 1, 2020
(In thousands)	Allowance for loan losses ending balance		CECL Adjustment		Allowance for credit losses beginning balance
Commercial:
Business	$	44,268	$	(6,328)	$	37,940
Real estate - construction and land	21,589		(12,385)		9,204
Real estate - business	25,903		(10,998)		14,905
Total Commercial:	91,760		(29,711)		62,049
Personal Banking:
Real estate - personal	3,125		1,730		4,855
Consumer	15,932		(1,414)		14,518
Revolving home equity	638		986		1,624
Consumer credit card	47,997		8,498		56,495
Overdrafts	1,230		(1,128)		102
Total Personal Banking:	68,922		8,672		77,594
Allowance for credit losses on loans	160,682		(21,039)		139,643
Liability for unfunded lending commitments	1,075		16,090		17,165
Total allowance for credit losses	$	161,757	$	(4,949)	$	156,808


	Impaired Loans				All Other Loans
(In thousands)	Allowance for Loan Losses		Loans Outstanding		Allowance for Loan Losses		Loans Outstanding
December 31, 2019
Commercial	$	1,629	$	64,500	$	90,131	$	9,233,880
Personal Banking	1,117		17,232		67,805		5,422,205
Total	$	2,746	$	81,732	$	157,936	$	14,656,085


(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance



















December 31, 2019
With no related allowance recorded:
Business	$	7,054	$	13,738	$	0





	$	7,054	$	13,738	$	0
With an allowance recorded:
Business	$	30,437	$	30,487	$	837
Real estate – construction and land	46		51		1
Real estate – business	26,963		27,643		791
Real estate – personal	4,729		5,968		258
Consumer	4,421		4,421		35
Revolving home equity	35		35		1
Consumer credit card	8,047		8,047		823
	$	74,678	$	76,652	$	2,746
Total	$	81,732	$	90,390	$	2,746


Significant Inputs	Range
Prepayment CPR	0%	-	25%
Projected cumulative default	13%	-	54%
Credit support	0%	-	20%
Loss severity	7%	-	63%


	January 1, 2020 (Implementation)				June 30, 2020			September 30, 2020
(Dollars in thousands)	Allowance for Credit Losses		ACL as a % of Loans			Allowance for Credit Losses		ACL as a % of Loans		Allowance for Credit Losses		ACL as a % of Loans
Commercial:
Business	$	37,940	.68	%		$	89,706	1.31	%	$	78,659	1.18	%
RE - construction and land	9,204		1.02			17,594		1.89		18,455		1.83
RE - business	14,905		.53			23,253		.79		31,310		1.05
	62,049		.67			130,553		1.22		128,424		1.20
Personal Banking:
RE - personal	4,855		.21			7,712		.29		8,725		.32
Consumer	14,518		.74			24,341		1.24		18,140		.90
Revolving home equity	1,624		.46			2,087		.62		1,783		.55
Consumer credit card	56,495		7.39			75,953		11.39		79,230		12.23
Overdrafts	102		1.62			98		1.89		58		2.56
	77,594		1.43			110,191		1.95		107,936		1.88
Total	$	139,643	.95	%		$	240,744	1.47	%	$	236,360	1.44	%



	Nine Months 2020						Nine Months 2019
(Dollars in thousands)	Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid
ASSETS:
Loans:
Business(A)	$	6,322,644	$	146,437	3.09	%	$	5,164,329	$	153,721	3.98	%
Real estate — construction and land	931,517		28,952		4.15		912,063		38,237		5.61
Real estate — business	2,935,319		83,382		3.79		2,872,090		97,609		4.54
Real estate — personal	2,565,740		70,829		3.69		2,143,394		63,439		3.96
Consumer	1,962,466		65,845		4.48		1,920,521		68,858		4.79
Revolving home equity	340,900		9,722		3.81		362,163		14,036		5.18
Consumer credit card	679,101		60,102		11.82		770,143		70,899		12.31
Overdrafts	3,213		—		—		6,130		—		—
Total loans	15,740,900		465,269		3.95		14,150,833		506,799		4.79
Loans held for sale	14,692		588		5.35		19,660		1,003		6.82
Investment securities:
U.S. government and federal agency obligations	783,006		12,244		2.09		859,354		16,467		2.56
Government-sponsored enterprise obligations	117,135		2,958		3.37		193,574		3,545		2.45
State and municipal obligations(A)	1,426,432		30,187		2.83		1,225,465		29,075		3.17
Mortgage-backed securities	5,426,861		87,017		2.14		4,563,836		91,673		2.69
Asset-backed securities	1,349,316		22,496		2.23		1,411,085		29,156		2.76
Other debt securities	414,553		7,907		2.55		333,758		6,659		2.67
Trading debt securities(A)	31,087		560		2.41		28,416		656		3.09
Equity securities(A)	4,201		1,492		47.44		4,664		1,269		36.38
Other securities(A)	134,481		5,450		5.41		131,813		6,119		6.21
Total investment securities	9,687,072		170,311		2.35		8,751,965		184,619		2.82
Federal funds sold and short-term securities
purchased under agreements to resell	252		2		1.06		2,479		51		2.75
Long-term securities purchased
under agreements to resell	849,998		29,445		4.63		704,391		11,066		2.10
Interest earning deposits with banks	1,126,600		1,996		.24		291,417		5,113		2.35
Total interest earning assets	27,419,514		667,611		3.25		23,920,745		708,651		3.96
Allowance for credit losses on loans	(184,001)						(160,359)
Unrealized gain (loss) on debt securities	280,616						49,335
Cash and due from banks	351,435						367,747
Premises and equipment, net	397,093						377,953
Other assets	657,969						501,650
Total assets	$	28,922,626					$	25,057,071
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings	$	1,086,120	780		.10		$	917,081	757		.11
Interest checking and money market	11,318,376		14,712		.17		10,603,476		29,324		.37
Certificates of deposit of less than $100,000	600,295		4,196		.93		605,369		4,530		1.00
Certificates of deposit of $100,000 and over	1,364,798		11,357		1.11		1,384,106		20,473		1.98
Total interest bearing deposits	14,369,589		31,045		.29		13,510,032		55,084		.55
Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase	1,945,669		5,761		.40		1,817,082		23,839		1.75
Other borrowings	168,748		1,032		.82		26,883		463		2.30
Total borrowings	2,114,417		6,793		.43		1,843,965		24,302		1.76
Total interest bearing liabilities	16,484,006		37,838		.31	%	15,353,997		79,386		.69	%
Non-interest bearing deposits	8,425,068						6,316,671
Other liabilities	710,824						327,727
Equity	3,302,728						3,058,676
Total liabilities and equity	$	28,922,626					$	25,057,071
Net interest margin (T/E)			$	629,773					$	629,265
Net yield on interest earning assets					3.07	%					3.52	%