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 ~~June~~September 30, 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. 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 ~~August~~November 3, 2021, the registrant had outstanding ~~116,804,211~~116,171,392 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 ~~June~~September 30, 2021 (unaudited) and December 31, 2020	3
		Consolidated Statements of Income for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020 (unaudited)	4
		Consolidated Statements of Comprehensive Income for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020 (unaudited)	5
		Consolidated Statements of Changes in Equity for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020 (unaudited)	6
		Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020 (unaudited)	8
		Notes to Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6768
	Item 4.	Controls and Procedures	6869

Part II	Other Information
	Item 1.	Legal Proceedings	6970
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6970
	Item 6.	Exhibits	6970
Signatures			7071

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
		(In thousands)					(In thousands)
ASSETS	ASSETS					ASSETS
Loans	Loans	$	15,640,264	$	16,329,641	Loans	$	15,148,390	$	16,329,641
Allowance for credit losses on loans	Allowance for credit losses on loans	(172,395)		(220,834)		Allowance for credit losses on loans	(162,775)		(220,834)
Net loans	Net loans	15,467,869		16,108,807		Net loans	14,985,615		16,108,807
Loans held for sale (including $17,374,000 and $39,396,000 of residential mortgage loans carried at fair value at June 30, 2021 and December 31, 2020, respectively)		23,697		45,089
Loans held for sale (including $11,982,000 and $39,396,000 of residential mortgage loans carried at fair value at September 30, 2021 and December 31, 2020, respectively)						Loans held for sale (including $11,982,000 and $39,396,000 of residential mortgage loans carried at fair value at September 30, 2021 and December 31, 2020, respectively)	16,043		45,089
Investment securities:	Investment securities:					Investment securities:
Available for sale debt, at fair value (amortized cost of $13,077,042,000 and $12,097,533,000 and
allowance for credit losses of $0 at June 30, 2021 and December 31, 2020, respectively)		13,291,506		12,449,264
Available for sale debt, at fair value (amortized cost of $14,027,284,000 and $12,097,533,000 and						Available for sale debt, at fair value (amortized cost of $14,027,284,000 and $12,097,533,000 and
allowance for credit losses of $— at September 30, 2021 and December 31, 2020, respectively)						allowance for credit losses of $— at September 30, 2021 and December 31, 2020, respectively)	14,165,656		12,449,264
Trading debt	Trading debt	29,002		35,321		Trading debt	40,114		35,321
Equity	Equity	8,678		4,363		Equity	9,174		4,363
Other	Other	176,439		156,745		Other	184,450		156,745
Total investment securities	Total investment securities	13,505,625		12,645,693		Total investment securities	14,399,394		12,645,693
Federal funds sold and short-term securities purchased under agreements to resell		5,945		0
Long-term securities purchased under agreements to resell		1,300,000		850,000

Securities purchased under agreements to resell						Securities purchased under agreements to resell	1,750,000		850,000
Interest earning deposits with banks	Interest earning deposits with banks	2,161,644		1,747,363		Interest earning deposits with banks	1,888,545		1,747,363
Cash and due from banks	Cash and due from banks	358,122		437,563		Cash and due from banks	344,460		437,563
Premises and equipment – net	Premises and equipment – net	371,989		371,083		Premises and equipment – net	377,476		371,083
Goodwill	Goodwill	138,921		138,921		Goodwill	138,921		138,921
Other intangible assets – net	Other intangible assets – net	14,148		11,207		Other intangible assets – net	14,458		11,207
Other assets	Other assets	508,202		567,248		Other assets	582,631		567,248
Total assets	Total assets	$	33,856,162	$	32,922,974	Total assets	$	34,497,543	$	32,922,974
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Deposits:	Deposits:					Deposits:
Non-interest bearing	Non-interest bearing	$	11,085,286	$	10,497,598	Non-interest bearing	$	11,622,855	$	10,497,598
Savings, interest checking and money market	Savings, interest checking and money market	14,654,696		14,604,456		Savings, interest checking and money market	14,907,654		14,604,456
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	478,838		529,802		Certificates of deposit of less than $100,000	452,432		529,802
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	1,267,417		1,314,889		Certificates of deposit of $100,000 and over	1,163,343		1,314,889
Total deposits	Total deposits	27,486,237		26,946,745		Total deposits	28,146,284		26,946,745
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	2,318,228		2,098,383		Federal funds purchased and securities sold under agreements to repurchase	2,253,753		2,098,383
Other borrowings	Other borrowings	2,194		802		Other borrowings	4,006		802
Other liabilities	Other liabilities	555,673		477,072		Other liabilities	602,279		477,072
Total liabilities	Total liabilities	30,362,332		29,523,002		Total liabilities	31,006,322		29,523,002
Commerce Bancshares, Inc. stockholders’ equity:	Commerce Bancshares, Inc. stockholders’ equity:					Commerce Bancshares, Inc. stockholders’ equity:

Common stock, $5 par value	Common stock, $5 par value					Common stock, $5 par value
Authorized 140,000,000; issued 117,870,372 shares	Authorized 140,000,000; issued 117,870,372 shares	589,352		589,352		Authorized 140,000,000; issued 117,870,372 shares	589,352		589,352
Capital surplus	Capital surplus	2,424,157		2,436,288		Capital surplus	2,427,544		2,436,288
Retained earnings	Retained earnings	304,739		73,000		Retained earnings	396,655		73,000
Treasury stock of 742,784 shares at June 30, 2021
Treasury stock of 1,303,270 shares at September 30, 2021						Treasury stock of 1,303,270 shares at September 30, 2021
and 497,413 shares at December 31, 2020, at cost	and 497,413 shares at December 31, 2020, at cost	(53,018)		(32,970)		and 497,413 shares at December 31, 2020, at cost	(92,047)		(32,970)
Accumulated other comprehensive income	Accumulated other comprehensive income	220,390		331,377		Accumulated other comprehensive income	159,166		331,377
Total Commerce Bancshares, Inc. stockholders' equity	Total Commerce Bancshares, Inc. stockholders' equity	3,485,620		3,397,047		Total Commerce Bancshares, Inc. stockholders' equity	3,480,670		3,397,047
Non-controlling interest	Non-controlling interest	8,210		2,925		Non-controlling interest	10,551		2,925
Total equity	Total equity	3,493,830		3,399,972		Total equity	3,491,221		3,399,972
Total liabilities and equity	Total liabilities and equity	$	33,856,162	$	32,922,974	Total liabilities and equity	$	34,497,543	$	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 June 30				For the Six Months Ended June 30					For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands, except per share data)	(In thousands, except per share data)	2021		2020		2021		2020		(In thousands, except per share data)	2021		2020		2021		2020
		(Unaudited)									(Unaudited)
INTEREST INCOME	INTEREST INCOME									INTEREST INCOME
Interest and fees on loans	Interest and fees on loans	$	144,584	$	151,545	$	290,922	$	310,692	Interest and fees on loans	$	142,887	$	150,808	$	433,809	$	461,500
Interest and fees on loans held for sale	Interest and fees on loans held for sale	245		127		549		324		Interest and fees on loans held for sale	187		264		736		588
Interest on investment securities	Interest on investment securities	55,143		50,472		106,700		103,857		Interest on investment securities	63,904		60,534		170,604		164,391
Interest on federal funds sold and short-term securities purchased under
agreements to resell		2		0		2		2
Interest on long-term securities purchased under agreements to resell		10,416		10,736		21,544		18,198
Interest on federal funds sold										Interest on federal funds sold	1		—		3		2
Interest on securities purchased under agreements to resell										Interest on securities purchased under agreements to resell	9,007		11,247		30,551		29,445
Interest on deposits with banks	Interest on deposits with banks	743		443		1,113		1,735		Interest on deposits with banks	995		261		2,108		1,996
Total interest income	Total interest income	211,133		213,323		420,830		434,808		Total interest income	216,981		223,114		637,811		657,922
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	1,844		3,977		3,947		12,286		Savings, interest checking and money market	1,817		3,206		5,764		15,492
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	327		1,393		800		3,168		Certificates of deposit of less than $100,000	206		1,028		1,006		4,196
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	661		3,610		1,723		8,845		Certificates of deposit of $100,000 and over	450		2,512		2,173		11,357
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	320		585		632		5,355		agreements to repurchase	480		406		1,112		5,761
Interest on other borrowings	Interest on other borrowings	(1)		701		(2)		1,032		Interest on other borrowings	(9)		—		(11)		1,032
Total interest expense	Total interest expense	3,151		10,266		7,100		30,686		Total interest expense	2,944		7,152		10,044		37,838
Net interest income	Net interest income	207,982		203,057		413,730		404,122		Net interest income	214,037		215,962		627,767		620,084
Provision for credit losses	Provision for credit losses	(45,655)		80,539		(51,887)		138,492		Provision for credit losses	(7,385)		3,101		(59,272)		141,593
Net interest income after credit losses	Net interest income after credit losses	253,637		122,518		465,617		265,630		Net interest income after credit losses	221,422		212,861		687,039		478,491
NON-INTEREST INCOME	NON-INTEREST INCOME									NON-INTEREST INCOME
Bank card transaction fees	Bank card transaction fees	42,608		33,745		80,303		73,945		Bank card transaction fees	42,815		37,873		123,118		111,818
Trust fees	Trust fees	46,257		37,942		90,384		77,907		Trust fees	48,950		40,769		139,334		118,676
Deposit account charges and other fees	Deposit account charges and other fees	23,988		22,279		46,563		45,956		Deposit account charges and other fees	25,161		23,107		71,724		69,063
Capital market fees	Capital market fees	3,327		3,772		8,308		7,562		Capital market fees	3,794		3,194		12,102		10,756
Consumer brokerage services	Consumer brokerage services	4,503		3,011		8,584		7,088		Consumer brokerage services	4,900		4,011		13,484		11,099
Loan fees and sales	Loan fees and sales	7,446		4,649		17,630		7,884		Loan fees and sales	6,842		9,769		24,472		17,653
Other	Other	11,014		12,117		23,416		20,836		Other	5,044		10,849		28,460		31,685
Total non-interest income	Total non-interest income	139,143		117,515		275,188		241,178		Total non-interest income	137,506		129,572		412,694		370,750

INVESTMENT SECURITIES GAINS (LOSSES), NET	INVESTMENT SECURITIES GAINS (LOSSES), NET	16,804		(4,129)		26,657		(17,430)		INVESTMENT SECURITIES GAINS (LOSSES), NET	13,108		16,155		39,765		(1,275)
NON-INTEREST EXPENSE	NON-INTEREST EXPENSE									NON-INTEREST EXPENSE
Salaries and employee benefits	Salaries and employee benefits	130,751		126,759		259,784		255,696		Salaries and employee benefits	132,824		127,308		392,608		383,004
Net occupancy	Net occupancy	11,527		11,269		23,548		23,017		Net occupancy	12,329		12,058		35,877		35,075
Equipment	Equipment	4,605		4,755		8,958		9,576		Equipment	4,440		4,737		13,398		14,313
Supplies and communication	Supplies and communication	4,033		4,427		8,158		9,085		Supplies and communication	4,530		4,141		12,688		13,226
Data processing and software	Data processing and software	24,954		23,837		50,417		47,392		Data processing and software	25,598		23,610		76,015		71,002
Marketing	Marketing	5,680		3,801		10,838		9,780		Marketing	5,623		4,926		16,461		14,706
Other	Other	16,576		12,664		28,996		26,664		Other	26,276		14,078		55,272		40,742
Total non-interest expense	Total non-interest expense	198,126		187,512		390,699		381,210		Total non-interest expense	211,620		190,858		602,319		572,068
Income before income taxes	Income before income taxes	211,458		48,392		376,763		108,168		Income before income taxes	160,416		167,730		537,179		275,898
Less income taxes	Less income taxes	45,209		9,661		77,285		19,834		Less income taxes	34,662		34,375		111,947		54,209
Net income	Net income	166,249		38,731		299,478		88,334		Net income	125,754		133,355		425,232		221,689
Less non-controlling interest expense (income)	Less non-controlling interest expense (income)	3,923		(1,132)		6,180		(3,386)		Less non-controlling interest expense (income)	3,193		907		9,373		(2,479)
Net income attributable to Commerce Bancshares, Inc.	Net income attributable to Commerce Bancshares, Inc.	162,326		39,863		293,298		91,720		Net income attributable to Commerce Bancshares, Inc.	122,561		132,448		415,859		224,168
Less preferred stock dividends	Less preferred stock dividends	0		2,250		0		4,500		Less preferred stock dividends	—		7,466		—		11,966
Net income available to common shareholders	Net income available to common shareholders	$	162,326	$	37,613	$	293,298	$	87,220	Net income available to common shareholders	$	122,561	$	124,982	$	415,859	$	212,202
Net income per common share — basic	Net income per common share — basic	$	1.38	$	.32	$	2.50	$	.74	Net income per common share — basic	$	1.05	$	1.06	$	3.55	$	1.80
Net income per common share — diluted	Net income per common share — diluted	$	1.38	$	.32	$	2.49	$	.74	Net income per common share — diluted	$	1.05	$	1.06	$	3.54	$	1.80

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 June 30				For the Six Months Ended June 30					For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2021		2020		2021		2020
		(Unaudited)									(Unaudited)
Net income	Net income	$	166,249	$	38,731	$	299,478	$	88,334	Net income	$	125,754	$	133,355	$	425,232	$	221,689
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):

Net unrealized gains (losses) on available for sale debt securities	Net unrealized gains (losses) on available for sale debt securities	55,725		86,462		(102,951)		165,134		Net unrealized gains (losses) on available for sale debt securities	(57,068)		330		(160,019)		165,464
Pension loss amortization	Pension loss amortization	438		355		875		711		Pension loss amortization	451		327		1,326		1,038
Unrealized gains (losses) on cash flow hedge derivatives	Unrealized gains (losses) on cash flow hedge derivatives	(4,525)		9,308		(8,911)		72,972		Unrealized gains (losses) on cash flow hedge derivatives	(4,607)		(6,483)		(13,518)		66,489
Other comprehensive income (loss)	Other comprehensive income (loss)	51,638		96,125		(110,987)		238,817		Other comprehensive income (loss)	(61,224)		(5,826)		(172,211)		232,991
Comprehensive income	Comprehensive income	217,887		134,856		188,491		327,151		Comprehensive income	64,530		127,529		253,021		454,680
Less non-controlling interest expense (income)	Less non-controlling interest expense (income)	3,923		(1,132)		6,180		(3,386)		Less non-controlling interest expense (income)	3,193		907		9,373		(2,479)
Comprehensive income attributable to Commerce Bancshares, Inc.	Comprehensive income attributable to Commerce Bancshares, Inc.	$	213,964	$	135,988	$	182,311	$	330,537	Comprehensive income attributable to Commerce Bancshares, Inc.	$	61,337	$	126,622	$	243,648	$	457,159

See accompanying notes to consolidated financial statements.

Table of Contents

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended ~~June~~September 30, 2021 and 2020


				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 March 31, 2021		$	0	$	589,352	$	2,420,393	$	173,173	$	(39,080)	$	168,752	$	4,795	$	3,317,385
Balance June 30, 2021																		Balance June 30, 2021	$	—	$	589,352	$	2,424,157	$	304,739	$	(53,018)	$	220,390	$	8,210	$	3,493,830

Net income	Net income							162,326						3,923		166,249		Net income							122,561						3,193		125,754
Other comprehensive loss	Other comprehensive loss											51,638				51,638		Other comprehensive loss											(61,224)				(61,224)
Distributions to non-controlling interest	Distributions to non-controlling interest													(508)		(508)		Distributions to non-controlling interest													(193)		(193)

Purchases of treasury stock	Purchases of treasury stock									(13,964)						(13,964)		Purchases of treasury stock									(40,165)						(40,165)

Sale of non-controlling interest of subsidiary																		Sale of non-controlling interest of subsidiary					659								(659)		—
Issuance of stock under purchase and equity compensation plans	Issuance of stock under purchase and equity compensation plans					(26)				26						0		Issuance of stock under purchase and equity compensation plans					(1,137)				1,136						(1)
Stock-based compensation	Stock-based compensation					3,790										3,790		Stock-based compensation					3,865										3,865
Cash dividends paid on common stock ($0.263 per share)	Cash dividends paid on common stock ($0.263 per share)							(30,760)								(30,760)		Cash dividends paid on common stock ($0.263 per share)							(30,645)								(30,645)

Balance June 30, 2021		$	0	$	589,352	$	2,424,157	$	304,739	$	(53,018)	$	220,390	$	8,210	$	3,493,830
Balance March 31, 2020		$	144,784	$	563,978	$	2,133,623	$	224,643	$	(69,149)	$	253,136	$	1,449	$	3,252,464
Balance September 30, 2021																		Balance September 30, 2021	$	—	$	589,352	$	2,427,544	$	396,655	$	(92,047)	$	159,166	$	10,551	$	3,491,221
Balance June 30, 2020																		Balance June 30, 2020	$	144,784	$	563,978	$	2,136,874	$	232,082	$	(69,112)	$	349,261	$	302	$	3,358,169

Net income	Net income							39,863						(1,132)		38,731		Net income							132,448						907		133,355
Other comprehensive income												96,125				96,125
Other comprehensive loss																		Other comprehensive loss											(5,826)				(5,826)
Distributions to non-controlling interest	Distributions to non-controlling interest													(15)		(15)		Distributions to non-controlling interest													(608)		(608)

Redemption of preferred stock																		Redemption of preferred stock	(144,784)						(5,216)								(150,000)
Purchases of treasury stock	Purchases of treasury stock									(448)						(448)		Purchases of treasury stock									(167)						(167)
Issuance of stock under purchase and equity compensation plans	Issuance of stock under purchase and equity compensation plans					(488)				485						(3)		Issuance of stock under purchase and equity compensation plans					(229)				229						—
Stock-based compensation	Stock-based compensation					3,739										3,739		Stock-based compensation					3,765										3,765
Cash dividends paid on common stock ($0.257 per share)								(30,174)								(30,174)
Cash dividends paid on preferred stock ($0.375 per depositary share)								(2,250)								(2,250)
Balance June 30, 2020		$	144,784	$	563,978	$	2,136,874	$	232,082	$	(69,112)	$	349,261	$	302	$	3,358,169
Cash dividends paid on common stock ($.257 per share)																		Cash dividends paid on common stock ($.257 per share)							(30,174)								(30,174)
Cash dividends paid on preferred stock ($.375 per depositary share)																		Cash dividends paid on preferred stock ($.375 per depositary share)							(2,250)								(2,250)
Balance September 30, 2020																		Balance September 30, 2020	$	—	$	563,978	$	2,140,410	$	326,890	$	(69,050)	$	343,435	$	601	$	3,306,264

See accompanying notes to consolidated financial statements.

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Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020


				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	Balance December 31, 2020	$	—	$	589,352	$	2,436,288	$	73,000	$	(32,970)	$	331,377	$	2,925	$	3,399,972

Net income	Net income							293,298						6,180		299,478		Net income							415,859						9,373		425,232
Other comprehensive loss	Other comprehensive loss											(110,987)				(110,987)		Other comprehensive loss											(172,211)				(172,211)
Distributions to non-controlling interest	Distributions to non-controlling interest													(895)		(895)		Distributions to non-controlling interest													(1,088)		(1,088)

Purchases of treasury stock	Purchases of treasury stock									(39,887)						(39,887)		Purchases of treasury stock									(80,052)						(80,052)
Sale of non-controlling interest of subsidiary																		Sale of non-controlling interest of subsidiary					659								(659)		—
Issuance of stock under purchase and equity compensation plans	Issuance of stock under purchase and equity compensation plans					(19,854)				19,839						(15)		Issuance of stock under purchase and equity compensation plans					(20,991)				20,975						(16)
Stock-based compensation	Stock-based compensation					7,723										7,723		Stock-based compensation					11,588										11,588
Cash dividends on common stock ($0.525 per share)								(61,559)								(61,559)
Cash dividends on common stock ($.788 per share)																		Cash dividends on common stock ($.788 per share)							(92,204)								(92,204)

Balance June 30, 2021		$	0	$	589,352	$	2,424,157	$	304,739	$	(53,018)	$	220,390	$	8,210	$	3,493,830
Balance September 30, 2021																		Balance September 30, 2021	$	—	$	589,352	$	2,427,544	$	396,655	$	(92,047)	$	159,166	$	10,551	$	3,491,221
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							91,720						(3,386)		88,334		Net income							224,168						(2,479)		221,689
Other comprehensive income	Other comprehensive income											238,817				238,817		Other comprehensive income											232,991				232,991
Distributions to non-controlling interest	Distributions to non-controlling interest													(100)		(100)		Distributions to non-controlling interest													(708)		(708)

Redemption of preferred stock																		Redemption of preferred stock	(144,784)						(5,216)								(150,000)
Purchases of treasury stock	Purchases of treasury stock									(53,593)						(53,593)		Purchases of treasury stock									(53,760)						(53,760)
Issuance of stock under purchase and equity compensation plans	Issuance of stock under purchase and equity compensation plans					(22,056)				22,029						(27)		Issuance of stock under purchase and equity compensation plans					(22,285)				22,258						(27)
Stock-based compensation	Stock-based compensation					7,466										7,466		Stock-based compensation					11,231										11,231
Cash dividends on common stock ($0.514 per share)								(60,466)								(60,466)
Cash dividends on preferred stock ($0.750 per depositary share)								(4,500)								(4,500)
Balance June 30, 2020		144,784		563,978		2,136,874		232,082		(69,112)		349,261		302		3,358,169
Cash dividends on common stock ($.771 per share)																		Cash dividends on common stock ($.771 per share)							(90,640)								(90,640)
Cash dividends on preferred stock ($1.125 per depositary share)																		Cash dividends on preferred stock ($1.125 per depositary share)							(6,750)								(6,750)
Balance September 30, 2020																		Balance September 30, 2020	$	—	$	563,978	$	2,140,410	$	326,890	$	(69,050)	$	343,435	$	601	$	3,306,264

See accompanying notes to consolidated financial statements.

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Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS


		For the Six Months Ended June 30					For the Nine Months Ended September 30
(In thousands)	(In thousands)	2021		2020		(In thousands)	2021		2020
		(Unaudited)					(Unaudited)
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net income	Net income	$	299,478	$	88,334	Net income	$	425,232	$	221,689
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	(51,887)		138,492		Provision for credit losses	(59,272)		141,593
Provision for depreciation and amortization	Provision for depreciation and amortization	22,525		21,320		Provision for depreciation and amortization	33,554		32,462
Amortization of investment security premiums, net	Amortization of investment security premiums, net	41,270		25,665		Amortization of investment security premiums, net	51,822		37,623
Investment securities (gains) losses, net (A)	Investment securities (gains) losses, net (A)	(26,657)		17,430		Investment securities (gains) losses, net (A)	(39,765)		1,275
Net gains on sales of loans held for sale	Net gains on sales of loans held for sale	(13,677)		(1,826)		Net gains on sales of loans held for sale	(18,849)		(8,267)
Originations of loans held for sale	Originations of loans held for sale	(325,714)		(41,167)		Originations of loans held for sale	(442,853)		(169,774)
Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	356,559		43,877		Proceeds from sales of loans held for sale	485,231		152,825
Net decrease in trading debt securities		1,287		5,249
Net (increase) decrease in trading debt securities						Net (increase) decrease in trading debt securities	(9,093)		5,636
Stock-based compensation	Stock-based compensation	7,723		7,466		Stock-based compensation	11,588		11,231
(Increase) decrease in interest receivable	(Increase) decrease in interest receivable	6,688		(3,672)		(Increase) decrease in interest receivable	11,449		(11,012)
Decrease in interest payable	Decrease in interest payable	(2,809)		(5,145)		Decrease in interest payable	(3,168)		(7,670)
Increase in income taxes payable		19,095		12,842
Increase (decrease) in income taxes payable						Increase (decrease) in income taxes payable	19,831		(7,942)

Proceeds from terminated interest rate floors						Proceeds from terminated interest rate floors	—		110,640
Other changes, net	Other changes, net	(6,632)		(79,137)		Other changes, net	20,418		(37,926)
Net cash provided by operating activities	Net cash provided by operating activities	327,249		229,728		Net cash provided by operating activities	486,125		472,383
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:

Disbursements received from equity-method investment						Disbursements received from equity-method investment	13,540		—
Proceeds from sales of investment securities (A)	Proceeds from sales of investment securities (A)	10,060		174,597		Proceeds from sales of investment securities (A)	10,060		574,376
Proceeds from maturities/pay downs of investment securities (A)	Proceeds from maturities/pay downs of investment securities (A)	1,789,405		1,224,190		Proceeds from maturities/pay downs of investment securities (A)	2,571,116		1,856,780
Purchases of investment securities (A)	Purchases of investment securities (A)	(2,707,024)		(2,648,074)		Purchases of investment securities (A)	(4,457,716)		(5,135,211)
Net (increase) decrease in loans	Net (increase) decrease in loans	678,554		(1,676,552)		Net (increase) decrease in loans	1,166,769		(1,710,009)
Long-term securities purchased under agreements to resell		(450,000)		0
Securities purchased under agreements to resell						Securities purchased under agreements to resell	(900,000)		—

Purchases of premises and equipment	Purchases of premises and equipment	(21,944)		(13,677)		Purchases of premises and equipment	(37,385)		(29,192)
Sales of premises and equipment	Sales of premises and equipment	4,786		21		Sales of premises and equipment	4,786		313
Net cash used in investing activities	Net cash used in investing activities	(696,163)		(2,939,495)		Net cash used in investing activities	(1,628,830)		(4,442,943)
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
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	685,582		3,824,235		Net increase in non-interest bearing, savings, interest checking and money market deposits	1,428,561		5,138,314
Net increase (decrease) in certificates of deposit		(98,436)		25,701
Net decrease in certificates of deposit						Net decrease in certificates of deposit	(228,916)		(17,565)

Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase	Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase	219,845		(110,334)		Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase	155,370		(197,708)

Net increase (decrease) in short-term borrowings	Net increase (decrease) in short-term borrowings	1,392		(943)		Net increase (decrease) in short-term borrowings	3,204		(1,636)

Preferred stock redemption						Preferred stock redemption	—		(150,000)
Purchases of treasury stock	Purchases of treasury stock	(39,887)		(53,593)		Purchases of treasury stock	(80,052)		(53,760)

Issuance of stock under equity compensation plans		(15)		(27)
Issuance of stock under purchase and equity compensation plans						Issuance of stock under purchase and equity compensation plans	(16)		(27)

Cash dividends paid on common stock	Cash dividends paid on common stock	(61,559)		(60,466)		Cash dividends paid on common stock	(92,204)		(90,640)
Cash dividends paid on preferred stock	Cash dividends paid on preferred stock	0		(4,500)		Cash dividends paid on preferred stock	—		(6,750)
Net cash provided by financing activities	Net cash provided by financing activities	706,922		3,620,073		Net cash provided by financing activities	1,185,947		4,620,228
Increase in cash, cash equivalents and restricted cash	Increase in cash, cash equivalents and restricted cash	338,008		910,306		Increase in cash, cash equivalents and restricted cash	43,242		649,668
Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	2,208,328		907,808		Cash, cash equivalents and restricted cash at beginning of year	2,208,328		907,808
Cash, cash equivalents and restricted cash at June 30		$	2,546,336	$	1,818,114
Cash, cash equivalents and restricted cash at September 30						Cash, cash equivalents and restricted cash at September 30	$	2,251,570	$	1,557,476

Income tax payments, net	Income tax payments, net	$	55,440	$	4,833	Income tax payments, net	$	87,989	$	58,750
Interest paid on deposits and borrowings	Interest paid on deposits and borrowings	$	9,909	$	35,832	Interest paid on deposits and borrowings	$	13,213	$	45,508
Loans transferred to foreclosed real estate	Loans transferred to foreclosed real estate	$	172	$	57	Loans transferred to foreclosed real estate	$	172	$	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 ~~$20.6~~$18.6 million and ~~$21.9~~$25.9 million at ~~June~~September 30, 2021 and 2020, respectively.

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Commerce Bancshares, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~June~~September 30, 2021 (Unaudited)

1. Principles of Consolidation and Presentation

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 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 ~~six~~nine month periods ended ~~June~~September 30, 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.

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2. Loans and Allowance for Credit Losses

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


(In thousands)	(In thousands)	June 30, 2021		December 31, 2020		(In thousands)	September 30, 2021		December 31, 2020
Commercial:	Commercial:					Commercial:
Business	Business	$	5,803,760	$	6,546,087	Business	$	5,277,850	$	6,546,087
Real estate – construction and land	Real estate – construction and land	1,103,661		1,021,595		Real estate – construction and land	1,257,836		1,021,595
Real estate – business	Real estate – business	3,017,560		3,026,117		Real estate – business	2,937,852		3,026,117
Personal Banking:	Personal Banking:					Personal Banking:
Real estate – personal	Real estate – personal	2,793,213		2,820,030		Real estate – personal	2,769,292		2,820,030
Consumer	Consumer	2,049,166		1,950,502		Consumer	2,049,559		1,950,502
Revolving home equity	Revolving home equity	283,568		307,083		Revolving home equity	281,442		307,083
Consumer credit card	Consumer credit card	586,358		655,078		Consumer credit card	569,976		655,078
Overdrafts	Overdrafts	2,978		3,149		Overdrafts	4,583		3,149
Total loans	Total loans	$	15,640,264	$	16,329,641	Total loans	$	15,148,390	$	16,329,641

Accrued interest receivable totaled ~~$37.2~~$33.0 million and $41.9 million at ~~June~~September 30, 2021 and December 31, 2020, respectively, and was included within other assets on the consolidated balance sheets. For the three months ended ~~June~~September 30, 2021, the Company wrote-off accrued interest by reversing interest income of ~~$36~~$27 thousand and ~~$1.1 million~~$781 thousand in the Commercial and Personal Banking portfolios, respectively. Similarly, for the ~~six~~nine months ended ~~June~~September 30, 2021, the Company wrote-off accrued interest of ~~$161~~$188 thousand and ~~$3.1~~$3.9 million in the Commercial and Personal Banking portfolios, respectively.

At ~~June~~September 30, 2021, loans of $3.5 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 ~~$1.4~~$1.3 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings.

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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 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. 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 ~~June~~September 30, 2021 and ~~March 31,~~June 30, 2021 are discussed below.


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

Overall economic forecast	•An optimistic recovery from the Global Coronavirus Recession (GCR) continues •Assumes improving health conditions •Assumes gradual easing of supply constraints •Continued uncertainty regarding the assumptions related to the health crisis •Uncertainty regarding rising inflation	•An optimistic recovery from the GCR continues •Assumes improving health conditions and expanding vaccine distribution •Further fiscal stimulus assumed •Continued uncertainty regarding the assumptions related to the health crisis •Uncertainty regarding rising inflation	•~~The recovery from the GCR continues~~ •~~Assumes improving health conditions and expanding vaccine distribution~~ •~~Considers government stimulus~~ •~~Continued uncertainty regarding the assumptions related to the health crisis~~
Reasonable and supportable period and related reversion period	•One year for commercial and personal banking loans •Reversion to historical average loss rates within two quarters using straight-line method	•One year for commercial and personal banking loans •Reversion to historical average loss rates within two quarters using straight-line method
Forecasted macro-economic variables	•Unemployment rate ranging from 4.5% to 4.0% during the supportable forecast period •Real GDP growth ranging from 5.7% to 3.6% •Prime rate of 3.25%	•Unemployment rate ranging from 4.6% to 4.0% during the supportable forecast period •Real GDP growth ranging from 10.7% to 1.7% •~~Prime rate of 3.25%~~	•~~Unemployment rate ranging from 5.8% to 4.5% during the supportable forecast period~~ •~~Real GDP growth ranges from 11.1% to 1.0%~~ •Prime rate of 3.25%
Prepayment assumptions	Commercial loans •5% for most loan pools Personal banking loans •Ranging from ~~25.4%~~26.9% to 16.5% for most loan pools •~~60.1%~~62.2% for consumer credit cards	Commercial loans •5% for most loan pools Personal banking loans •Ranging from ~~26.4%~~25.4% to ~~23.6%~~16.5% for most loan pools •~~58.5%~~60.1% for consumer credit cards
Qualitative factors	Added net reserves using qualitative processes related to: •Loans originated in our expansion markets, 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	Added net reserves using qualitative processes related to: •Loans originated in our expansion markets, 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 continued recovery of the COVID-19 pandemic induced recession. This pandemic is unprecedented and information that could be used in the estimation of the allowance for credit losses changes frequently. Trends in health conditions and vaccine distribution could significantly modify economic projections used in the estimation of the 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 ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively, follows:


		For the Three Months Ended June 30, 2021						For the Six Months Ended June 30, 2021							For the Three Months Ended September 30, 2021						For the Nine Months Ended September 30, 2021
(In thousands)	(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total		(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total
ALLOWANCE FOR CREDIT LOSSES ON LOANS	ALLOWANCE FOR CREDIT LOSSES ON LOANS													ALLOWANCE FOR CREDIT LOSSES ON LOANS

Balance at beginning of period	Balance at beginning of period	$	119,623	$	80,904	$	200,527	$	121,549	$	99,285	$	220,834	Balance at beginning of period	$	98,038	$	74,357	$	172,395	$	121,549	$	99,285	$	220,834
Provision for credit losses on loans	Provision for credit losses on loans	(26,579)		(854)		(27,433)		(28,488)		(9,300)		(37,788)		Provision for credit losses on loans	186		(6,147)		(5,961)		(28,302)		(15,447)		(43,749)
Deductions:	Deductions:													Deductions:
Loans charged off	Loans charged off	270		8,598		8,868		502		21,307		21,809		Loans charged off	190		6,387		6,577		692		27,694		28,386
Less recoveries on loans	Less recoveries on loans	5,264		2,905		8,169		5,479		5,679		11,158		Less recoveries on loans	130		2,788		2,918		5,609		8,467		14,076
Net loan charge-offs (recoveries)	Net loan charge-offs (recoveries)	(4,994)		5,693		699		(4,977)		15,628		10,651		Net loan charge-offs (recoveries)	60		3,599		3,659		(4,917)		19,227		14,310
Balance June 30, 2021		$	98,038	$	74,357	$	172,395	$	98,038	$	74,357	$	172,395
Balance September 30, 2021														Balance September 30, 2021	$	98,164	$	64,611	$	162,775	$	98,164	$	64,611	$	162,775
LIABILITY FOR UNFUNDED LENDING COMMITMENTS	LIABILITY FOR UNFUNDED LENDING COMMITMENTS													LIABILITY FOR UNFUNDED LENDING COMMITMENTS

Balance at beginning of period	Balance at beginning of period	$	41,513	$	917	$	42,430	$	37,259	$	1,048	$	38,307	Balance at beginning of period	$	23,350	$	858	$	24,208	$	37,259	$	1,048	$	38,307
Provision for credit losses on unfunded lending commitments	Provision for credit losses on unfunded lending commitments	(18,163)		(59)		(18,222)		(13,909)		(190)		(14,099)		Provision for credit losses on unfunded lending commitments	(1,564)		140		(1,424)		(15,473)		(50)		(15,523)
Balance June 30, 2021		$	23,350	$	858	$	24,208	$	23,350	$	858	$	24,208
Balance September 30, 2021														Balance September 30, 2021	$	21,786	$	998	$	22,784	$	21,786	$	998	$	22,784
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	121,388	$	75,215	$	196,603	$	121,388	$	75,215	$	196,603	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	119,950	$	65,609	$	185,559	$	119,950	$	65,609	$	185,559


		For the Three Months Ended June 30, 2020						For the Six Months Ended June 30, 2020							For the Three Months Ended September 30, 2020						For the Nine Months Ended September 30, 2020
(In thousands)	(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total		(In thousands)	Commercial		Personal Banking		Total		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	Balance at end of prior period	$	83,551	$	88,102	$	171,653	$	91,760	$	68,922	$	160,682	Balance at end of prior period	$	130,553	$	110,191	$	240,744	$	91,760	$	68,922	$	160,682
Adoption of ASU 2016-13	Adoption of ASU 2016-13	0		0		0		(29,711)		8,672		(21,039)		Adoption of ASU 2016-13	—		—		—		(29,711)		8,672		(21,039)
Balance at beginning of period	Balance at beginning of period	$	83,551	$	88,102	$	171,653	$	62,049	$	77,594	$	139,643	Balance at beginning of period	$	130,553	$	110,191	$	240,744	$	62,049	$	77,594	$	139,643
Provision for credit losses on loans	Provision for credit losses on loans	50,245		27,246		77,491		71,353		49,006		120,359		Provision for credit losses on loans	(1,935)		5,135		3,200		69,418		54,141		123,559
Deductions:	Deductions:													Deductions:
Loans charged off	Loans charged off	3,386		7,859		11,245		3,802		21,835		25,637		Loans charged off	357		10,292		10,649		4,159		32,127		36,286
Less recoveries on loans	Less recoveries on loans	143		2,702		2,845		953		5,426		6,379		Less recoveries on loans	163		2,902		3,065		1,116		8,328		9,444
Net loan charge-offs	Net loan charge-offs	3,243		5,157		8,400		2,849		16,409		19,258		Net loan charge-offs	194		7,390		7,584		3,043		23,799		26,842
Balance June 30, 2020		$	130,553	$	110,191	$	240,744	$	130,553	$	110,191	$	240,744
Balance September 30, 2020														Balance September 30, 2020	$	128,424	$	107,936	$	236,360	$	128,424	$	107,936	$	236,360
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	$	31,061	$	1,189	$	32,250	$	399	$	676	$	1,075	Balance at end of prior period	$	34,052	$	1,247	$	35,299	$	399	$	676	$	1,075
Adoption of ASU 2016-13	Adoption of ASU 2016-13	0		0		0		16,057		33		16,090		Adoption of ASU 2016-13	—		—		—		16,057		33		16,090
Balance at beginning of period	Balance at beginning of period	$	31,061	$	1,189	$	32,250	$	16,456	$	709	$	17,165	Balance at beginning of period	$	34,052	$	1,247	$	35,299	$	16,456	$	709	$	17,165
Provision for credit losses on unfunded lending commitments	Provision for credit losses on unfunded lending commitments	2,991		58		3,049		17,596		538		18,134		Provision for credit losses on unfunded lending commitments	(60)		(39)		(99)		17,536		499		18,035
Balance June 30, 2020		$	34,052	$	1,247	$	35,299	$	34,052	$	1,247	$	35,299
Balance September 30, 2020														Balance September 30, 2020	$	33,992	$	1,208	$	35,200	$	33,992	$	1,208	$	35,200
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	164,605	$	111,438	$	276,043	$	164,605	$	111,438	$	276,043	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	162,416	$	109,144	$	271,560	$	162,416	$	109,144	$	271,560

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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 ~~June~~September 30, 2021 and December 31, 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
June 30, 2021
September 30, 2021												September 30, 2021
Commercial:	Commercial:											Commercial:
Business	Business	$	5,777,100	$	17,547	$	274	$	8,839	$	5,803,760	Business	$	5,266,174	$	3,029	$	354	$	8,293	$	5,277,850
Real estate – construction and land	Real estate – construction and land	1,101,716		1,728		217		0		1,103,661		Real estate – construction and land	1,257,836		—		—		—		1,257,836
Real estate – business	Real estate – business	3,012,063		3,032		1,810		655		3,017,560		Real estate – business	2,935,233		2,042		—		577		2,937,852
Personal Banking:	Personal Banking:											Personal Banking:
Real estate – personal	Real estate – personal	2,783,135		5,683		2,723		1,672		2,793,213		Real estate – personal	2,762,146		3,029		2,566		1,551		2,769,292
Consumer	Consumer	2,028,740		18,690		1,736		0		2,049,166		Consumer	2,029,109		18,147		2,303		—		2,049,559
Revolving home equity	Revolving home equity	281,679		1,115		774		0		283,568		Revolving home equity	279,410		1,202		830		—		281,442
Consumer credit card	Consumer credit card	577,576		3,978		4,804		0		586,358		Consumer credit card	560,685		4,848		4,443		—		569,976
Overdrafts	Overdrafts	2,786		192		0		0		2,978		Overdrafts	4,294		289		—		—		4,583
Total	Total	$	15,564,795	$	51,965	$	12,338	$	11,166	$	15,640,264	Total	$	15,094,887	$	32,586	$	10,496	$	10,421	$	15,148,390
December 31, 2020	December 31, 2020											December 31, 2020
Commercial:	Commercial:											Commercial:
Business	Business	$	6,517,838	$	2,252	$	3,473	$	22,524	$	6,546,087	Business	$	6,517,838	$	2,252	$	3,473	$	22,524	$	6,546,087
Real estate – construction and land	Real estate – construction and land	1,021,592		0		3		0		1,021,595		Real estate – construction and land	1,021,592		—		3		—		1,021,595
Real estate – business	Real estate – business	3,016,215		7,666		6		2,230		3,026,117		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	2,808,886		6,521		2,837		1,786		2,820,030		Real estate – personal	2,808,886		6,521		2,837		1,786		2,820,030
Consumer	Consumer	1,921,822		25,417		3,263		0		1,950,502		Consumer	1,921,822		25,417		3,263		—		1,950,502
Revolving home equity	Revolving home equity	305,037		1,656		390		0		307,083		Revolving home equity	305,037		1,656		390		—		307,083
Consumer credit card	Consumer credit card	635,770		7,090		12,218		0		655,078		Consumer credit card	635,770		7,090		12,218		—		655,078
Overdrafts	Overdrafts	2,896		253		0		0		3,149		Overdrafts	2,896		253		—		—		3,149
Total	Total	$	16,230,056	$	50,855	$	22,190	$	26,540	$	16,329,641	Total	$	16,230,056	$	50,855	$	22,190	$	26,540	$	16,329,641

At ~~June~~September 30, 2021, the Company had ~~$8.0~~$5.5 million in non-accrual business loans that had no allowance for credit loss. At December 31, 2020, the Company had $9.4 million in 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 ~~six~~nine months ended ~~June~~September 30, 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 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 ~~June~~September 30, 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)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
June 30, 2021
September 30, 2021																		September 30, 2021
Business	Business																	Business
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	977,576	$	1,388,657	$	803,333	$	345,101	$	216,034	$	342,506	$	1,574,367	$	5,647,574	Pass	$	1,134,349	$	857,499	$	719,076	$	287,921	$	184,147	$	316,405	$	1,662,395	$	5,161,792
Special mention	Special mention	611		568		24,203		14,099		669		6,029		16,815		62,994		Special mention	1,360		742		22,078		19,893		612		3,430		13,958		62,073
Substandard	Substandard	2,652		10,286		16,848		4,275		1,833		13,078		35,381		84,353		Substandard	3,489		9,371		7,961		4,124		5		11,444		9,298		45,692
Non-accrual	Non-accrual	485		0		1		2,387		110		5,831		25		8,839		Non-accrual	446		—		1		2,057		110		5,655		24		8,293
Total Business:	Total Business:	$	981,324	$	1,399,511	$	844,385	$	365,862	$	218,646	$	367,444	$	1,626,588	$	5,803,760	Total Business:	$	1,139,644	$	867,612	$	749,116	$	313,995	$	184,874	$	336,934	$	1,685,675	$	5,277,850
Real estate-construction	Real estate-construction																	Real estate-construction
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	231,955	$	478,413	$	180,706	$	54,210	$	2,723	$	25,091	$	25,353	$	998,451	Pass	$	448,441	$	465,051	$	141,423	$	43,814	$	2,691	$	24,807	$	27,175	$	1,153,402
Special mention	Special mention	15,469		28,020		0		1,004		19,474		0		0		63,967		Special mention	15,474		28,037		—		995		19,499		—		—		64,005
Substandard	Substandard	305		12,377		0		15,364		13,197		0		0		41,243		Substandard	239		11,767		—		15,226		13,197		—		—		40,429

Total Real estate-construction:	Total Real estate-construction:	$	247,729	$	518,810	$	180,706	$	70,578	$	35,394	$	25,091	$	25,353	$	1,103,661	Total Real estate-construction:	$	464,154	$	504,855	$	141,423	$	60,035	$	35,387	$	24,807	$	27,175	$	1,257,836
Real estate-business	Real estate-business																	Real estate-business
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	318,815	$	832,940	$	631,352	$	266,537	$	210,149	$	362,561	$	60,090	$	2,682,444	Pass	$	424,347	$	749,037	$	577,966	$	272,536	$	209,234	$	324,869	$	57,801	$	2,615,790
Special mention	Special mention	2,484		31,269		10,328		23,036		3,354		4,255		74		74,800		Special mention	1,080		29,998		10,980		22,751		2,117		5,853		2		72,781
Substandard	Substandard	17,019		63,023		12,027		32,963		77,441		54,132		3,056		259,661		Substandard	17,021		64,197		11,834		30,993		68,664		52,183		3,812		248,704
Non-accrual	Non-accrual	245		65		87		221		0		37		0		655		Non-accrual	198		65		76		205		—		33		—		577
Total Real estate-business:	Total Real estate-business:	$	338,563	$	927,297	$	653,794	$	322,757	$	290,944	$	420,985	$	63,220	$	3,017,560	Total Real estate-business:	$	442,646	$	843,297	$	600,856	$	326,485	$	280,015	$	382,938	$	61,615	$	2,937,852
Commercial loans	Commercial loans																	Commercial loans
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	1,528,346	$	2,700,010	$	1,615,391	$	665,848	$	428,906	$	730,158	$	1,659,810	$	9,328,469	Pass	$	2,007,137	$	2,071,587	$	1,438,465	$	604,271	$	396,072	$	666,081	$	1,747,371	$	8,930,984
Special mention	Special mention	18,564		59,857		34,531		38,139		23,497		10,284		16,889		201,761		Special mention	17,914		58,777		33,058		43,639		22,228		9,283		13,960		198,859
Substandard	Substandard	19,976		85,686		28,875		52,602		92,471		67,210		38,437		385,257		Substandard	20,749		85,335		19,795		50,343		81,866		63,627		13,110		334,825
Non-accrual	Non-accrual	730		65		88		2,608		110		5,868		25		9,494		Non-accrual	644		65		77		2,262		110		5,688		24		8,870
Total Commercial loans:	Total Commercial loans:	$	1,567,616	$	2,845,618	$	1,678,885	$	759,197	$	544,984	$	813,520	$	1,715,161	$	9,924,981	Total Commercial loans:	$	2,046,444	$	2,215,764	$	1,491,395	$	700,515	$	500,276	$	744,679	$	1,774,465	$	9,473,538

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

Total Real estate-construction:	Total Real estate-construction:	$	514,148	$	330,480	$	72,758	$	50,735	$	24,426	$	1,692	$	27,356	$	1,021,595	Total Real estate-construction:	$	514,148	$	330,480	$	72,758	$	50,735	$	24,426	$	1,692	$	27,356	$	1,021,595
Real estate- business	Real estate- business																	Real estate- business
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	890,740	$	666,399	$	336,850	$	241,656	$	313,691	$	199,534	$	67,796	$	2,716,666	Pass	$	890,740	$	666,399	$	336,850	$	241,656	$	313,691	$	199,534	$	67,796	$	2,716,666
Special mention	Special mention	8,936		21,734		49,580		6,597		17,504		1,309		3,002		108,662		Special mention	8,936		21,734		49,580		6,597		17,504		1,309		3,002		108,662
Substandard	Substandard	46,882		1,037		4,061		81,435		17,538		45,014		2,592		198,559		Substandard	46,882		1,037		4,061		81,435		17,538		45,014		2,592		198,559
Non-accrual	Non-accrual	478		188		1,480		0		0		84		0		2,230		Non-accrual	478		188		1,480		—		—		84		—		2,230
Total Real-estate business:	Total Real-estate business:	$	947,036	$	689,358	$	391,971	$	329,688	$	348,733	$	245,941	$	73,390	$	3,026,117	Total Real-estate business:	$	947,036	$	689,358	$	391,971	$	329,688	$	348,733	$	245,941	$	73,390	$	3,026,117
Commercial loans	Commercial loans																	Commercial loans
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	3,846,461	$	1,962,947	$	832,154	$	573,884	$	501,474	$	482,830	$	1,714,832	$	9,914,582	Pass	$	3,846,461	$	1,962,947	$	832,154	$	573,884	$	501,474	$	482,830	$	1,714,832	$	9,914,582
Special mention	Special mention	67,240		48,480		64,704		42,910		22,595		2,973		44,751		293,653		Special mention	67,240		48,480		64,704		42,910		22,595		2,973		44,751		293,653
Substandard	Substandard	65,282		23,022		24,126		97,292		21,116		58,404		71,568		360,810		Substandard	65,282		23,022		24,126		97,292		21,116		58,404		71,568		360,810
Non-accrual	Non-accrual	13,097		189		6,807		391		502		3,743		25		24,754		Non-accrual	13,097		189		6,807		391		502		3,743		25		24,754
Total Commercial loans:	Total Commercial loans:	$	3,992,080	$	2,034,638	$	927,791	$	714,477	$	545,687	$	547,950	$	1,831,176	$	10,593,799	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 ~~June~~September 30, 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)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
June 30, 2021
September 30, 2021																		September 30, 2021
Real estate-personal	Real estate-personal																	Real estate-personal
Current to 90 days past due	Current to 90 days past due	$	366,723	$	1,002,972	$	409,449	$	183,822	$	170,790	$	645,716	$	9,346	$	2,788,818	Current to 90 days past due	$	509,080	$	941,728	$	379,912	$	170,651	$	158,655	$	595,786	$	9,363	$	2,765,175
Over 90 days past due	Over 90 days past due	0		701		0		171		628		1,223		0		2,723		Over 90 days past due	86		663		—		188		167		1,462		—		2,566
Non-accrual	Non-accrual	0		19		186		113		0		1,354		0		1,672		Non-accrual	—		—		185		111		—		1,255		—		1,551
Total Real estate-personal:	Total Real estate-personal:	$	366,723	$	1,003,692	$	409,635	$	184,106	$	171,418	$	648,293	$	9,346	$	2,793,213	Total Real estate-personal:	$	509,166	$	942,391	$	380,097	$	170,950	$	158,822	$	598,503	$	9,363	$	2,769,292
Consumer	Consumer																	Consumer
Current to 90 days past due	Current to 90 days past due	$	311,909	$	440,654	$	255,969	$	115,496	$	75,121	$	113,662	$	734,619	$	2,047,430	Current to 90 days past due	$	441,146	$	391,312	$	221,490	$	96,086	$	59,935	$	93,205	$	744,082	$	2,047,256
Over 90 days past due	Over 90 days past due	24		175		96		206		69		398		768		1,736		Over 90 days past due	54		310		250		230		27		253		1,179		2,303

Total Consumer:	Total Consumer:	$	311,933	$	440,829	$	256,065	$	115,702	$	75,190	$	114,060	$	735,387	$	2,049,166	Total Consumer:	$	441,200	$	391,622	$	221,740	$	96,316	$	59,962	$	93,458	$	745,261	$	2,049,559
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	$	282,794	$	282,794	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	280,612	$	280,612
Over 90 days past due	Over 90 days past due	0		0		0		0		0		0		774		774		Over 90 days past due	—		—		—		—		—		—		830		830

Total Revolving home equity:	Total Revolving home equity:	$	0	$	0	$	0	$	0	$	0	$	0	$	283,568	$	283,568	Total Revolving home equity:	$	—	$	—	$	—	$	—	$	—	$	—	$	281,442	$	281,442
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	$	581,554	$	581,554	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	565,533	$	565,533
Over 90 days past due	Over 90 days past due	0		0		0		0		0		0		4,804		4,804		Over 90 days past due	—		—		—		—		—		—		4,443		4,443

Total Consumer credit card:	Total Consumer credit card:	$	0	$	0	$	0	$	0	$	0	$	0	$	586,358	$	586,358	Total Consumer credit card:	$	—	$	—	$	—	$	—	$	—	$	—	$	569,976	$	569,976
Overdrafts	Overdrafts																	Overdrafts
Current to 90 days past due	Current to 90 days past due	$	2,978	$	0	$	0	$	0	$	0	$	0	$	0	$	2,978	Current to 90 days past due	$	4,583	$	—	$	—	$	—	$	—	$	—	$	—	$	4,583

Total Overdrafts:	Total Overdrafts:	$	2,978	$	0	$	0	$	0	$	0	$	0	$	0	$	2,978	Total Overdrafts:	$	4,583	$	—	$	—	$	—	$	—	$	—	$	—	$	4,583
Personal banking loans	Personal banking loans																	Personal banking loans
Current to 90 days past due	Current to 90 days past due	$	681,610	$	1,443,626	$	665,418	$	299,318	$	245,911	$	759,378	$	1,608,313	$	5,703,574	Current to 90 days past due	$	954,809	$	1,333,040	$	601,402	$	266,737	$	218,590	$	688,991	$	1,599,590	$	5,663,159
Over 90 days past due	Over 90 days past due	24		876		96		377		697		1,621		6,346		10,037		Over 90 days past due	140		973		250		418		194		1,715		6,452		10,142
Non-accrual	Non-accrual	0		19		186		113		0		1,354		0		1,672		Non-accrual	—		—		185		111		—		1,255		—		1,551
Total Personal banking loans:	Total Personal banking loans:	$	681,634	$	1,444,521	$	665,700	$	299,808	$	246,608	$	762,353	$	1,614,659	$	5,715,283	Total Personal banking loans:	$	954,949	$	1,334,013	$	601,837	$	267,266	$	218,784	$	691,961	$	1,606,042	$	5,674,852

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

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

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

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

Total Overdrafts:	Total Overdrafts:	$	3,149	$	0	$	0	$	0	$	0	$	0	$	0	$	3,149	Total Overdrafts:	$	3,149	$	—	$	—	$	—	$	—	$	—	$	—	$	3,149
Personal banking loans	Personal banking loans																	Personal banking loans
Current to 90 days past due	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	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	Over 90 days past due	746		733		609		631		562		1,245		14,182		18,708		Over 90 days past due	746		733		609		631		562		1,245		14,182		18,708
Non-accrual	Non-accrual	29		191		116		45		65		1,340		0		1,786		Non-accrual	29		191		116		45		65		1,340		—		1,786
Total Personal banking loans:	Total Personal banking loans:	$	1,664,641	$	826,734	$	380,452	$	318,533	$	303,661	$	633,424	$	1,608,397	$	5,735,842	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 ~~June~~September 30, 2021 and December 31, 2020.


(In thousands)	(In thousands)	Business Assets		Business Real Estate		Oil & Gas Assets		Total		(In thousands)	Business Assets		Business Real Estate		Oil & Gas Assets		Total
June 30, 2021
September 30, 2021										September 30, 2021
Commercial:	Commercial:									Commercial:
Business	Business	$	0	$	0	$	2,578	$	2,578	Business	$	2,056	$	—	$	2,518	$	4,574

Total	Total	$	0	$	0	$	2,578	$	2,578	Total	$	2,056	$	—	$	2,518	$	4,574
December 31, 2020	December 31, 2020									December 31, 2020
Commercial:	Commercial:									Commercial:
Business	Business	$	13,109	$	0	$	2,695	$	15,804	Business	$	13,109	$	—	$	2,695	$	15,804

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

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

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

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renewal dates, and updates are obtained on a quarterly basis. Excluded from the table below are certain personal real estate

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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 ~~$187.4~~$186.0 million at ~~June~~September 30, 2021 and $191.1 million at December 31, 2020. The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled ~~$187.8~~$189.6 million at ~~June~~September 30, 2021 and $188.1 million at December 31, 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 ~~June~~September 30, 2021 and December 31, 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
June 30, 2021
September 30, 2021										September 30, 2021
FICO score:	FICO score:									FICO score:
Under 600	Under 600	.8	%	1.7	%	1.2	%	3.4	%	Under 600	.9	%	1.7	%	0.9	%	3.3	%
600 - 659	600 - 659	1.8		3.6		1.8		11.1		600 - 659	2.0		3.8		2.3		11.3
660 - 719	660 - 719	7.7		13.5		8.5		30.8		660 - 719	7.8		14.2		9.2		30.8
720 - 779	720 - 779	23.4		23.9		22.9		28.5		720 - 779	24.4		25.0		21.0		28.5
780 and over	780 and over	66.3		57.3		65.6		26.2		780 and over	64.9		55.3		66.6		26.1
Total	Total	100.0	%	100.0	%	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%
December 31, 2020	December 31, 2020									December 31, 2020
FICO score:	FICO score:									FICO score:
Under 600	Under 600	.8	%	2.3	%	1.3	%	5.0	%	Under 600	.8	%	2.3	%	1.3	%	5.0	%
600 - 659	600 - 659	1.9		4.2		2.4		12.3		600 - 659	1.9		4.2		2.4		12.3
660 - 719	660 - 719	8.8		14.1		8.6		31.2		660 - 719	8.8		14.1		8.6		31.2
720 - 779	720 - 779	24.5		23.9		22.2		28.0		720 - 779	24.5		23.9		22.2		28.0
780 and over	780 and over	64.0		55.5		65.5		23.5		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	%

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.


(In thousands)	(In thousands)		June 30, 2021		December 31, 2020		(In thousands)		September 30, 2021		December 31, 2020
Accruing restructured loans:	Accruing restructured loans:						Accruing restructured loans:
		Commercial	$	97,761	$	117,740		Commercial	$	110,583	$	117,740
		Assistance programs	7,301		7,804			Assistance programs	6,789		7,804
		Consumer bankruptcy	2,554		2,841			Consumer bankruptcy	2,327		2,841
		Other consumer	2,484		2,353			Other consumer	2,293		2,353
Non-accrual loans	Non-accrual loans		8,319		9,889		Non-accrual loans		7,866		9,889
Total troubled debt restructurings	Total troubled debt restructurings		$	118,419	$	140,627	Total troubled debt restructurings		$	129,858	$	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. The Company follows the guidance under the CARES Act when determining if a

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customer’s modification is subject to troubled debt restructuring classification. If it is deemed the modification is not ~~short-~~

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~~term,~~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.

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 through the end of 2021 the 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 ~~June~~September 30, 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)	June 30, 2021		Balance 90 days past due at any time during previous 12 months		(In thousands)	September 30, 2021		Balance 90 days past due at any time during previous 12 months
Commercial:	Commercial:					Commercial:
Business	Business	$	40,947	$	577	Business	$	53,850	$	347
Real estate - construction and land	Real estate - construction and land	10,105		0		Real estate - construction and land	10,104		—
Real estate - business	Real estate - business	53,734		0		Real estate - business	53,240		198
Personal Banking:	Personal Banking:					Personal Banking:
Real estate - personal	Real estate - personal	3,258		316		Real estate - personal	3,131		483
Consumer	Consumer	3,222		230		Consumer	2,865		177
Revolving home equity	Revolving home equity	25		0		Revolving home equity	23		—
Consumer credit card	Consumer credit card	7,128		378		Consumer credit card	6,645		368
Total troubled debt restructurings	Total troubled debt restructurings	$	118,419	$	1,501	Total troubled debt restructurings	$	129,858	$	1,573

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 ~~$867~~$815 thousand 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 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 begin.

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The Company had commitments of $~~745~~245 thousand at ~~June~~September 30, 2021 to lend additional funds to borrowers with restructured loans. Additionally, the Company had commitments at ~~June~~September 30, 2021 of $24.0 million related to letters of credit with an internal risk rating below substandard.

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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~~Federal Home Loan Mortgage Corporation (FHLMC) and ~~FHLMC.~~Federal National Mortgage Association (FNMA). At ~~June~~September 30, 2021, the fair value of these loans was ~~$17.4~~$12.0 million, and the unpaid principal balance was ~~$16.9~~$11.6 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 ~~June~~September 30, 2021 totaled ~~$6.3~~$4.1 million.

At ~~June~~September 30, 2021, ~~NaN~~none 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 ~~$229~~$115 thousand and $93 thousand at ~~June~~September 30, 2021 and December 31, 2020, respectively. Personal property acquired in repossession, generally autos, ~~marine and recreational vehicles (RV),~~ totaled ~~$1.1~~$1.0 million and $1.4 million at ~~June~~September 30, 2021 and December 31, 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.

3. Investment Securities

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

(In thousands) June 30, 2021 December 31, 2020
Available for sale debt securities $ 13,291,506 $ 12,449,264
Trading debt securities 29,002 35,321
Equity securities:
Readily determinable fair value 6,981 2,966
No readily determinable fair value 1,697 1,397
Other:
Federal Reserve Bank stock 34,222 34,070
Federal Home Loan Bank stock 10,135 10,307
Equity method investments 15,836 18,000
Private equity investments 116,246 94,368
Total investment securities (1)
$ 13,505,625 $ 12,645,693


(In thousands)	September 30, 2021		December 31, 2020
Available for sale debt securities	$	14,165,656	$	12,449,264
Trading debt securities	40,114		35,321
Equity securities:
Readily determinable fair value	7,118		2,966
No readily determinable fair value	2,056		1,397
Other:
Federal Reserve Bank stock	34,379		34,070
Federal Home Loan Bank stock	10,185		10,307
Equity method investments	1,834		18,000
Private equity investments	138,052		94,368
Total investment securities (1)	$	14,399,394	$	12,645,693

(1)Accrued interest receivable totaled ~~$39.7~~$39.4 million and $41.5 million at ~~June~~September 30, 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 its portfolio of equity securities 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 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 adjustments are included in non-interest income on the Company's income

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statement. 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 ~~June~~September 30, 2021 is shown below. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as ~~the~~ FHLMC, FNMA, and ~~GNMA,~~Government National Mortgage Association (GNMA), in addition to ~~non-~~

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~~agency~~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, 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 $ 29,454 $ 30,159
After 1 but within 5 years 500,689 529,808
After 5 but within 10 years 194,424 220,185
Total U.S. government and federal agency obligations 724,567 780,152
Government-sponsored enterprise obligations:
After 10 years 50,788 52,978
Total government-sponsored enterprise obligations 50,788 52,978
State and municipal obligations:
Within 1 year 140,856 141,924
After 1 but within 5 years 808,293 840,159
After 5 but within 10 years 655,198 674,067
After 10 years 396,484 395,880
Total state and municipal obligations 2,000,831 2,052,030
Mortgage and asset-backed securities:
  Agency mortgage-backed securities 5,995,967 6,071,295
  Non-agency mortgage-backed securities 825,175 825,608
  Asset-backed securities 2,870,004 2,891,799
Total mortgage and asset-backed securities 9,691,146 9,788,702
Other debt securities:
Within 1 year 93,051 94,391
After 1 but within 5 years 239,124 245,719
After 5 but within 10 years 258,100 258,294
After 10 years 19,435 19,240
Total other debt securities 609,710 617,644
Total available for sale debt securities $ 13,077,042 $ 13,291,506


(In thousands)	Amortized Cost		Fair Value
U.S. government and federal agency obligations:
Within 1 year	$	79,731	$	81,194
After 1 but within 5 years	454,372		479,137
After 5 but within 10 years	198,011		223,859

Total U.S. government and federal agency obligations	732,114		784,190
Government-sponsored enterprise obligations:



After 10 years	50,781		51,941
Total government-sponsored enterprise obligations	50,781		51,941
State and municipal obligations:
Within 1 year	170,006		171,558
After 1 but within 5 years	785,942		813,597
After 5 but within 10 years	752,596		764,446
After 10 years	410,023		405,475
Total state and municipal obligations	2,118,567		2,155,076
Mortgage and asset-backed securities:
Agency mortgage-backed securities	5,943,839		5,974,802
Non-agency mortgage-backed securities	1,228,509		1,225,091
Asset-backed securities	3,342,935		3,359,915
Total mortgage and asset-backed securities	10,515,283		10,559,808
Other debt securities:
Within 1 year	113,944		115,321
After 1 but within 5 years	222,106		226,915
After 5 but within 10 years	255,052		253,271
After 10 years	19,437		19,134
Total other debt securities	610,539		614,641
Total available for sale debt securities	$	14,027,284	$	14,165,656

Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled ~~$381.5~~$387.1 million, at fair value, at ~~June~~September 30, 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

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 ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company did not recognize a credit loss expense on any available for sale debt securities.

The Company’s model for establishing its allowance for credit losses uses cash flows projected to be received over the estimated life of 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 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

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watch list and cash flow analyses are prepared on an individual security basis. 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. At ~~June~~September 30, 2021, the fair value of securities on this watch list was ~~$14.0~~$13.7 million compared to $31.0 million at December 31, 2020.

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Significant inputs to the cash flow model used at ~~June~~September 30, 2021 to quantify credit losses were primarily credit support agreements, as the securities on the Company's watch list at ~~June~~September 30, 2021 were securities backed by government-guaranteed student loans and are expected to perform as contractually required. As of ~~June~~September 30, 2021, the Company did not identify any securities for which a credit loss exists.

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 ~~June~~September 30, 2021 and December 31, 2020. Unrealized losses on these available for sale securities have not been recognized into income because after review, the securities were deemed not to be impaired. The unrealized losses on these securities are primarily attributable to changes in interest rates and 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.

Less than 12 months 12 months or longer Total

(In thousands)
   Fair Value Unrealized
Losses Fair Value Unrealized
Losses Fair Value Unrealized
Losses
June 30, 2021
Government-sponsored enterprise obligations $ 19,506 $ 312 $ 0 $ 0 $ 19,506 $ 312
State and municipal obligations 454,235 5,130 1,453 7 455,688 5,137
Mortgage and asset-backed securities:
   Agency mortgage-backed securities 2,326,148 26,833 17,535 180 2,343,683 27,013
   Non-agency mortgage-backed securities 364,857 1,407 0 0 364,857 1,407
   Asset-backed securities 580,334 1,714 129,636 882 709,970 2,596
Total mortgage and asset-backed securities 3,271,339 29,954 147,171 1,062 3,418,510 31,016
Other debt securities 229,295 4,320 0 0 229,295 4,320
Total $ 3,974,375 $ 39,716 $ 148,624 $ 1,069 $ 4,122,999 $ 40,785
December 31, 2020
Government-sponsored enterprise obligations $ 19,720 $ 98 $ 0 $ 0 $ 19,720 $ 98
State and municipal obligations 45,622 230 0 0 45,622 230
Mortgage and asset-backed securities:
   Agency mortgage-backed securities 470,373 2,802 0 0 470,373 2,802
   Non-agency mortgage-backed securities 112,861 380 0 0 112,861 380
   Asset-backed securities 21,360 56 253,734 2,617 275,094 2,673
Total mortgage and asset-backed securities 604,594 3,238 253,734 2,617 858,328 5,855
Other debt securities 24,522 175 0 0 24,522 175
Total $ 694,458 $ 3,741 $ 253,734 $ 2,617 $ 948,192 $ 6,358


	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, 2021

Government-sponsored enterprise obligations	$	19,249	$	569	$	—	$	—	$	19,249	$	569
State and municipal obligations	757,283		9,795		14,385		436		771,668		10,231
Mortgage and asset-backed securities:
Agency mortgage-backed securities	3,076,674		44,140		38,993		1,968		3,115,667		46,108
Non-agency mortgage-backed securities	911,825		5,020		—		—		911,825		5,020
Asset-backed securities	1,024,409		3,609		107,526		705		1,131,935		4,314
Total mortgage and asset-backed securities	5,012,908		52,769		146,519		2,673		5,159,427		55,442
Other debt securities	233,200		4,475		23,375		1,326		256,575		5,801
Total	$	6,022,640	$	67,608	$	184,279	$	4,435	$	6,206,919	$	72,043
December 31, 2020

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

The entire available for sale debt portfolio included ~~$4.1~~$6.2 billion of securities that were in a loss position at ~~June~~September 30, 2021, compared to $948.2 million at December 31, 2020. The total amount of unrealized loss on these securities was ~~$40.8~~$72.0 million at ~~June~~September 30, 2021, an increase of ~~$34.4~~$65.7 million compared to the loss at December 31, 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 tables show the amortized cost, fair value, and allowance for credit losses of securities available for sale at ~~June~~September 30, 2021 and December 31, 2020, 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 Allowance for Credit Losses Fair Value
June 30, 2021
U.S. government and federal agency obligations $ 724,567 $ 55,585 $ 0 $ 0 $ 780,152
Government-sponsored enterprise obligations 50,788 2,502 (312) 0 52,978
State and municipal obligations 2,000,831 56,336 (5,137) 0 2,052,030
Mortgage and asset-backed securities:
  Agency mortgage-backed securities 5,995,967 102,341 (27,013) 0 6,071,295
  Non-agency mortgage-backed securities 825,175 1,840 (1,407) 0 825,608
  Asset-backed securities 2,870,004 24,391 (2,596) 0 2,891,799
Total mortgage and asset-backed securities 9,691,146 128,572 (31,016) 0 9,788,702
Other debt securities 609,710 12,254 (4,320) 0 617,644
Total $ 13,077,042 $ 255,249 $ (40,785) $ 0 $ 13,291,506
December 31, 2020
U.S. government and federal agency obligations $ 775,592 $ 62,467 $ 0 $ 0 $ 838,059
Government-sponsored enterprise obligations 50,803 3,780 (98) 0 54,485
State and municipal obligations 1,968,006 77,323 (230) 0 2,045,099
Mortgage and asset-backed securities:
  Agency mortgage-backed securities 6,557,098 157,789 (2,802) 0 6,712,085
  Non-agency mortgage-backed securities 358,074 3,380 (380) 0 361,074
  Asset-backed securities 1,853,791 31,125 (2,673) 0 1,882,243
Total mortgage and asset-backed securities 8,768,963 192,294 (5,855) 0 8,955,402
Other debt securities 534,169 22,225 (175) 0 556,219
Total $ 12,097,533 $ 358,089 $ (6,358) $ 0 $ 12,449,264


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
September 30, 2021
U.S. government and federal agency obligations	$	732,114	$	52,076	$	—	$	—	$	784,190
Government-sponsored enterprise obligations	50,781		1,729		(569)		—		51,941
State and municipal obligations	2,118,567		46,740		(10,231)		—		2,155,076
Mortgage and asset-backed securities:
Agency mortgage-backed securities	5,943,839		77,071		(46,108)		—		5,974,802
Non-agency mortgage-backed securities	1,228,509		1,602		(5,020)		—		1,225,091
Asset-backed securities	3,342,935		21,294		(4,314)		—		3,359,915
Total mortgage and asset-backed securities	10,515,283		99,967		(55,442)		—		10,559,808
Other debt securities	610,539		9,903		(5,801)		—		614,641
Total	$	14,027,284	$	210,415	$	(72,043)	$	—	$	14,165,656
December 31, 2020
U.S. government and federal agency obligations	$	775,592	$	62,467	$	—	$	—	$	838,059
Government-sponsored enterprise obligations	50,803		3,780		(98)		—		54,485
State and municipal obligations	1,968,006		77,323		(230)		—		2,045,099
Mortgage and asset-backed securities:
Agency mortgage-backed securities	6,557,098		157,789		(2,802)		—		6,712,085
Non-agency mortgage-backed securities	358,074		3,380		(380)		—		361,074
Asset-backed securities	1,853,791		31,125		(2,673)		—		1,882,243
Total mortgage and asset-backed securities	8,768,963		192,294		(5,855)		—		8,955,402
Other debt securities	534,169		22,225		(175)		—		556,219
Total	$	12,097,533	$	358,089	$	(6,358)	$	—	$	12,449,264

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 Six Months Ended June 30
(In thousands) 2021 2020
Proceeds from sales of securities:
Available for sale debt securities $ 0 $ 174,595
Equity securities 0 2
Other 10,060 0
Total proceeds $ 10,060 $ 174,597
Investment securities gains (losses), net:
Available for sale debt securities:
Gains realized on sales $ 0 $ 3,291
Equity securities:
Gains realized on sales 0 2
Fair value adjustments, net 15 (218)
Other:
Gains realized on sales 1,611 0
Fair value adjustments, net 25,031 (20,505)
Total investment securities gains (losses), net $ 26,657 $ (17,430)


	For the Nine Months Ended September 30
(In thousands)	2021		2020
Proceeds from sales of securities:
Available for sale debt securities	$	—	$	574,374
Equity securities	—		2
Other	10,060		—
Total proceeds	$	10,060	$	574,376

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

Gains realized on sales	$	—	$	16,965


Equity securities:

Gains realized on sales	—		2

Fair value adjustments, net	152		(126)
Other:
Gains realized on sales	1,611		—

Fair value adjustments, net	38,002		(18,116)
Total investment securities gains (losses), net	$	39,765	$	(1,275)

Net gains on investment securities for the ~~six~~nine months ended ~~June~~September 30, 2021 were mainly comprised of gains of $1.6 million realized on the sale of a private equity investment and net gains in fair value of ~~$25.0~~$38.0 million on private equity investments due to fair value adjustments.

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At ~~June~~September 30, 2021, securities totaling ~~$5.6~~$5.7 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, compared to $4.8 billion at December 31, 2020. Securities pledged under agreements pursuant to which the collateral may be sold or re-pledged by the secured parties approximated ~~$215.3~~$213.1 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, 0no 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.

June 30, 2021 December 31, 2020

(In thousands)
Gross Carrying Amount Accumulated Amortization Valuation Allowance Net Amount Gross Carrying Amount Accumulated Amortization Valuation Allowance Net Amount
Amortizable intangible assets:
Core deposit premium $ 31,270 $ (30,098) $ 0 $ 1,172 $ 31,270 $ (29,912) $ 0 $ 1,358
Mortgage servicing rights 18,576 (8,396) (804) 9,376 15,238 (6,886) (2,103) 6,249
Total $ 49,846 $ (38,494) $ (804) $ 10,548 $ 46,508 $ (36,798) $ (2,103) $ 7,607


	September 30, 2021								December 31, 2020
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount		Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount
Amortizable intangible assets:
Core deposit premium	$	31,270	$	(30,186)	$	—	$	1,084	$	31,270	$	(29,912)	$	—	$	1,358
Mortgage servicing rights	19,747		(8,990)		(983)		9,774		15,238		(6,886)		(2,103)		6,249
Total	$	51,017	$	(39,176)	$	(983)	$	10,858	$	46,508	$	(36,798)	$	(2,103)	$	7,607

Aggregate amortization expense on intangible assets was ~~$745~~$682 thousand and ~~$442~~$859 thousand for the three month periods ended ~~June~~September 30, 2021 and 2020, respectively, and ~~$1.7~~$2.4 million and ~~$710 thousand~~$1.6 million for the ~~six~~nine month periods ended ~~June~~September 30, 2021 and 2020, 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 ~~June~~September 30, 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)
2021 $ 2,661
2022 1,646
2023 1,377
2024 1,149
2025 952


(In thousands)
2021	$	2,929
2022	1,799
2023	1,498
2024	1,244
2025	1,027

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

(In thousands) Goodwill Easement Core Deposit Premium Mortgage Servicing Rights
Balance January 1, 2021 $ 138,921 $ 3,600 $ 1,358 $ 6,249
Originations 0 0 0 3,338
Amortization 0 0 (186) (1,510)
Impairment reversal 0 0 0 1,299
Balance June 30, 2021 $ 138,921 $ 3,600 $ 1,172 $ 9,376


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

Originations	—		—		—		4,509
Amortization	—		—		(274)		(2,104)
Impairment reversal	—		—		—		1,120
Balance September 30, 2021	$	138,921	$	3,600	$	1,084	$	9,774

Goodwill allocated to the Company’s operating segments at ~~June~~September 30, 2021 and December 31, 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 ~~June~~September 30, 2021, that net liability was ~~$2.9~~$3.1 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 ~~$412.7~~$423.6 million at ~~June~~September 30, 2021.

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 ~~June~~September 30, 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 1115 years. At ~~June~~September 30, 2021, the fair value of the Company's guarantee liabilities for RPAs was ~~$333~~$283 thousand, and the notional amount of the underlying swaps was ~~$265.6~~$268.1 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 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 ~~1 month~~3 months to 6 years.

The following table provides the components of lease income.

For the Three Months Ended June 30 For the Six Months Ended June 30
(in thousands) 2021 2020 2021 2020
Direct financing and sales-type leases $ 5,795 $ 6,304 $ 11,916 $ 12,662
Operating leases(a)
1,930 2,160 4,004 4,221
Total lease income $ 7,725 $ 8,464 $ 15,920 $ 16,883


	For the Three Months Ended September 30				For the Nine Months Ended September 30
(in thousands)	2021		2020		2021		2020
Direct financing and sales-type leases	$	5,482	$	6,437	$	17,398	$	19,099
Operating leases(a)	1,717		2,270		5,721		6,491
Total lease income	$	7,199	$	8,707	$	23,119	$	25,590

(a) Includes rent from Tower Properties Company, a related party, of $19 thousand for the three month periods ended ~~June~~September 30, 2021 and 2020, and ~~$38~~$57 thousand for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

7. Pension

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

For the Three Months Ended June 30 For the Six Months Ended June 30
(In thousands) 2021 2020 2021 2020
Service cost - benefits earned during the period $ 94 $ 101 $ 189 $ 202
Interest cost on projected benefit obligation 556 823 1,112 1,645
Expected return on plan assets (1,124) (1,297) (2,248) (2,594)
Amortization of prior service cost (68) (68) (136) (136)
Amortization of unrecognized net loss 651 542 1,302 1,084
Net periodic pension cost $ 109 $ 101 $ 219 $ 201


	For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands)	2021		2020		2021		2020
Service cost - benefits earned during the period	$	95	$	93	$	284	$	295
Interest cost on projected benefit obligation	514		818		1,626		2,463
Expected return on plan assets	(1,151)		(1,317)		(3,399)		(3,911)
Amortization of prior service cost	(67)		(67)		(203)		(203)
Amortization of unrecognized net loss	669		503		1,971		1,587
Net periodic pension cost	$	60	$	30	$	279	$	231

All benefits accrued under the Company’s defined benefit pension plan have been frozen since January 1, 2011. During the first ~~six~~nine months of 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 pay nonforfeitable 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 June 30 For the Six Months Ended June 30
(In thousands, except per share data) 2021 2020 2021 2020
Basic income per common share:
Net income attributable to Commerce Bancshares, Inc. $ 162,326 $ 39,863 $ 293,298 $ 91,720
Less preferred stock dividends 0 2,250 0 4,500
Net income available to common shareholders 162,326 37,613 293,298 87,220
Less income allocated to nonvested restricted stock 1,478 353 2,678 823
  Net income allocated to common stock $ 160,848 $ 37,260 $ 290,620 $ 86,397
Weighted average common shares outstanding 116,163 116,242 116,211 116,458
   Basic income per common share $ 1.38 $ .32 $ 2.50 $ .74
Diluted income per common share:
Net income available to common shareholders $ 162,326 $ 37,613 $ 293,298 $ 87,220
Less income allocated to nonvested restricted stock 1,475 354 2,673 823
  Net income allocated to common stock $ 160,851 $ 37,259 $ 290,625 $ 86,397
Weighted average common shares outstanding 116,163 116,242 116,211 116,458
  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 287 200 301 235
  Weighted average diluted common shares outstanding 116,450 116,442 116,512 116,693
    Diluted income per common share $ 1.38 $ .32 $ 2.49 $ .74


	For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands, except per share data)	2021		2020		2021		2020
Basic income per common share:
Net income attributable to Commerce Bancshares, Inc.	$	122,561	$	132,448	$	415,859	$	224,168
Less preferred stock dividends	—		7,466		—		11,966
Net income available to common shareholders	122,561		124,982		415,859		212,202
Less income allocated to nonvested restricted stock	1,114		1,173		3,792		1,996
Net income allocated to common stock	$	121,447	$	123,809	$	412,067	$	210,206
Weighted average common shares outstanding	115,836		116,256		116,085		116,391
Basic income per common share	$	1.05	$	1.06	$	3.55	$	1.80
Diluted income per common share:
Net income available to common shareholders	$	122,561	$	124,982	$	415,859	$	212,202
Less income allocated to nonvested restricted stock	1,112		1,170		3,785		1,993
Net income allocated to common stock	$	121,449	$	123,812	$	412,074	$	210,209
Weighted average common shares outstanding	115,836		116,256		116,085		116,391
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	241		188		280		219
Weighted average diluted common shares outstanding	116,077		116,444		116,365		116,610
Diluted income per common share	$	1.05	$	1.06	$	3.54	$	1.80

Unexercised stock appreciation rights of 7294 thousand and ~~321~~413 thousand for the three month periods ended ~~June~~September 30, 2021 and 2020, respectively, and 5158 thousand and ~~276~~295 thousand for the ~~six~~nine month periods ended ~~June~~September 30, 2021 and 2020, 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).

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

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)
Balance January 1, 2021 $ 263,801 $ (25,118) $ 92,694 $ 331,377
Other comprehensive loss before reclassifications to current earnings (137,270) 0 0 (137,270)
Amounts reclassified to current earnings from accumulated other comprehensive income 0 1,166 (11,881) (10,715)
Current period other comprehensive income (loss), before tax (137,270) 1,166 (11,881) (147,985)
Income tax (expense) benefit 34,319 (291) 2,970 36,998
Current period other comprehensive income (loss), net of tax (102,951) 875 (8,911) (110,987)
Balance June 30, 2021 $ 160,850 $ (24,243) $ 83,783 $ 220,390
Balance January 1, 2020 $ 102,073 $ (21,940) $ 30,311 $ 110,444
Other comprehensive income before reclassifications to current earnings 223,470 0 99,183 322,653
Amounts reclassified to current earnings from accumulated other comprehensive income (3,292) 948 (1,887) (4,231)
Current period other comprehensive income, before tax 220,178 948 97,296 318,422
Income tax expense (55,044) (237) (24,324) (79,605)
Current period other comprehensive income, net of tax 165,134 711 72,972 238,817
Balance June 30, 2020 $ 267,207 $ (21,229) $ 103,283 $ 349,261


	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)

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


Other comprehensive loss before reclassifications to current earnings	(213,362)		—		—		(213,362)
Amounts reclassified to current earnings from accumulated other comprehensive income	—		1,768		(18,024)		(16,256)
Current period other comprehensive income (loss), before tax	(213,362)		1,768		(18,024)		(229,618)
Income tax (expense) benefit	53,343		(442)		4,506		57,407
Current period other comprehensive income (loss), net of tax	(160,019)		1,326		(13,518)		(172,211)

Balance September 30, 2021	$	103,782	$	(23,792)	$	79,176	$	159,166
Balance January 1, 2020	$	102,073	$	(21,940)	$	30,311	$	110,444


Other comprehensive income before reclassifications to current earnings	237,583		—		94,702		332,285
Amounts reclassified to current earnings from accumulated other comprehensive income	(16,965)		1,384		(6,050)		(21,631)
Current period other comprehensive income, before tax	220,618		1,384		88,652		310,654
Income tax expense	(55,154)		(346)		(22,163)		(77,663)
Current period other comprehensive income, net of tax	165,464		1,038		66,489		232,991

Balance September 30, 2020	$	267,537	$	(20,902)	$	96,800	$	343,435

(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.

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~~155 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/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 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.

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The following table presents selected financial information by segment and reconciliations of combined segment totals to consolidated totals. There were 0no material intersegment revenues 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 June 30, 2021
Three Months Ended September 30, 2021														Three Months Ended September 30, 2021
Net interest income	Net interest income	$	80,809	$	114,640	$	17,654	$	213,103	$	(5,121)	$	207,982	Net interest income	$	80,411	$	115,536	$	18,075	$	214,022	$	15	$	214,037
Provision for credit losses	Provision for credit losses	(5,664)		4,952		(4)		(716)		46,371		45,655		Provision for credit losses	(3,557)		(69)		9		(3,617)		11,002		7,385
Non-interest income	Non-interest income	36,905		52,259		52,505		141,669		(2,526)		139,143		Non-interest income	35,758		52,092		55,241		143,091		(5,585)		137,506
Investment securities gains, net	Investment securities gains, net	0		0		0		0		16,804		16,804		Investment securities gains, net	—		—		—		—		13,108		13,108
Non-interest expense	Non-interest expense	(73,949)		(82,617)		(34,048)		(190,614)		(7,512)		(198,126)		Non-interest expense	(75,823)		(84,604)		(34,286)		(194,713)		(16,907)		(211,620)
Income before income taxes	Income before income taxes	$	38,101	$	89,234	$	36,107	$	163,442	$	48,016	$	211,458	Income before income taxes	$	36,789	$	82,955	$	39,039	$	158,783	$	1,633	$	160,416
Six Months Ended June 30, 2021
Nine Months Ended September 30, 2021														Nine Months Ended September 30, 2021
Net interest income	Net interest income	$	158,748	$	224,809	$	35,111	$	418,668	$	(4,938)	$	413,730	Net interest income	$	239,159	$	340,345	$	53,186	$	632,690	$	(4,923)	$	627,767
Provision for credit losses	Provision for credit losses	(15,565)		4,925		1		(10,639)		62,526		51,887		Provision for credit losses	(19,122)		4,856		10		(14,256)		73,528		59,272
Non-interest income	Non-interest income	75,153		102,987		103,490		281,630		(6,442)		275,188		Non-interest income	110,911		155,079		158,731		424,721		(12,027)		412,694
Investment securities gains, net	Investment securities gains, net	0		0		0		0		26,657		26,657		Investment securities gains, net	—		—		—		—		39,765		39,765
Non-interest expense	Non-interest expense	(144,453)		(161,898)		(67,091)		(373,442)		(17,257)		(390,699)		Non-interest expense	(220,276)		(246,502)		(101,377)		(568,155)		(34,164)		(602,319)
Income before income taxes	Income before income taxes	$	73,883	$	170,823	$	71,511	$	316,217	$	60,546	$	376,763	Income before income taxes	$	110,672	$	253,778	$	110,550	$	475,000	$	62,179	$	537,179
Three Months Ended June 30, 2020
Three Months Ended September 30, 2020														Three Months Ended September 30, 2020
Net interest income	Net interest income	$	81,270	$	102,878	$	13,424	$	197,572	$	5,485	$	203,057	Net interest income	$	80,944	$	111,527	$	15,303	$	207,774	$	8,188	$	215,962
Provision for loan losses	Provision for loan losses	(5,025)		(3,278)		0		(8,303)		(72,236)		(80,539)		Provision for loan losses	(7,654)		(200)		13		(7,841)		4,740		(3,101)
Non-interest income	Non-interest income	36,293		45,939		44,590		126,822		(9,307)		117,515		Non-interest income	37,115		47,920		47,701		132,736		(3,164)		129,572
Investment securities losses, net		0		0		0		0		(4,129)		(4,129)
Investment securities gains, net														Investment securities gains, net	—		—		—		—		16,155		16,155
Non-interest expense	Non-interest expense	(75,304)		(78,230)		(30,213)		(183,747)		(3,765)		(187,512)		Non-interest expense	(73,075)		(78,277)		(30,933)		(182,285)		(8,573)		(190,858)
Income before income taxes	Income before income taxes	$	37,234	$	67,309	$	27,801	$	132,344	$	(83,952)	$	48,392	Income before income taxes	$	37,330	$	80,970	$	32,084	$	150,384	$	17,346	$	167,730
Six Months Ended June 30, 2020
Nine Months Ended September 30, 2020														Nine Months Ended September 30, 2020
Net interest income	Net interest income	$	160,251	$	188,774	$	26,383	$	375,408	$	28,714	$	404,122	Net interest income	$	241,195	$	300,301	$	41,686	$	583,182	$	36,902	$	620,084
Provision for credit losses	Provision for credit losses	(16,231)		(2,922)		(3)		(19,156)		(119,336)		(138,492)		Provision for credit losses	(23,885)		(3,122)		10		(26,997)		(114,596)		(141,593)
Non-interest income	Non-interest income	70,374		95,826		91,999		258,199		(17,021)		241,178		Non-interest income	107,489		143,746		139,700		390,935		(20,185)		370,750
Investment securities losses, net	Investment securities losses, net	0		0		0		0		(17,430)		(17,430)		Investment securities losses, net	—		—		—		—		(1,275)		(1,275)
Non-interest expense	Non-interest expense	(152,716)		(159,050)		(61,982)		(373,748)		(7,462)		(381,210)		Non-interest expense	(225,791)		(237,327)		(92,915)		(556,033)		(16,035)		(572,068)
Income before income taxes	Income before income taxes	$	61,678	$	122,628	$	56,397	$	240,703	$	(132,535)	$	108,168	Income before income taxes	$	99,008	$	203,598	$	88,481	$	391,087	$	(115,189)	$	275,898

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) 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 ~~June~~September 30, 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)
June 30, 2021 December 31, 2020
Interest rate swaps $ 2,270,249 $ 2,367,017
Interest rate caps 185,643 103,028
Credit risk participation agreements 386,484 381,170
Foreign exchange contracts 4,662 7,431
Mortgage loan commitments 59,054 67,543
Mortgage loan forward sale contracts 8,701 0
Forward TBA contracts 62,500 89,000
Total notional amount $ 2,977,293 $ 3,015,189


(In thousands)	September 30, 2021		December 31, 2020
Interest rate swaps	$	2,236,974	$	2,367,017

Interest rate caps	185,177		103,028
Credit risk participation agreements	372,661		381,170
Foreign exchange contracts	7,566		7,431
Mortgage loan commitments	44,233		67,543
Mortgage loan forward sale contracts	6,987		—
Forward TBA contracts	37,000		89,000
Total notional amount	$	2,890,598	$	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.

During the year ended December 31, 2020, the Company monetized three interest rate floors that were previously classified as cash flow hedges with a combined notional balance of $1.5 billion and an asset fair value of $163.2 million. 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. As of ~~June~~September 30, 2021, the total realized gains on the monetized cash flow hedges remaining in AOCI was ~~$111.7~~$105.6 million (pre-tax), which will be reclassified into interest income over the next ~~5.5~~5.2 years.

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.

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 2020 Annual Report on Form 10-K.

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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 ~~June~~September 30, 2021 in the table below, the positive fair values of cleared swaps were reduced by ~~$207~~$224 thousand and the negative fair values of cleared swaps were reduced by ~~$46.6~~$41.2 million. At December 31, 2020, there were 0no reductions to the positive fair values of cleared swaps and the negative fair values of cleared swaps were reduced by $69.2 million.

Asset Derivatives Liability Derivatives
June 30, 2021 Dec. 31, 2020 June 30, 2021 Dec. 31, 2020
(In thousands)
  Fair Value   Fair Value
Derivative instruments:
   Interest rate swaps $ 59,170 $ 86,389 $ (12,793) $ (17,199)
   Interest rate caps 94 1 (94) (1)
   Credit risk participation agreements 142 216 (333) (701)
   Foreign exchange contracts 62 57 (43) (103)
   Mortgage loan commitments 1,820 3,226 0 0
   Mortgage loan forward sale contracts 29 0 (1) 0
   Forward TBA contracts 41 0 (85) (671)
Total $ 61,358 $ 89,889 $ (13,349) $ (18,675)


	Asset Derivatives				Liability Derivatives
	Sept. 30, 2021		Dec. 31, 2020		Sept. 30, 2021		Dec. 31, 2020
(In thousands)	Fair Value				Fair Value



Derivative instruments:
Interest rate swaps	$	53,020	$	86,389	$	(12,001)	$	(17,199)
Interest rate caps	78		1		(78)		(1)
Credit risk participation agreements	113		216		(283)		(701)
Foreign exchange contracts	108		57		(92)		(103)
Mortgage loan commitments	1,510		3,226		—		—
Mortgage loan forward sale contracts	27		—		(9)		—
Forward TBA contracts	209		—		(3)		(671)

Total	$	55,065	$	89,889	$	(12,466)	$	(18,675)

The pre-tax effects of derivative instruments on the consolidated statements of income are shown in the tables 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
(In thousands) Total Included Component Excluded Component Total Included Component Excluded Component
For the Three Months Ended June 30, 2020
Derivatives in cash flow hedging relationships:
Interest rate floors $ 14,566 $ 18,087 $ (3,521) Interest and fees on loans $ 2,155 $ 3,186 $ (1,031)
Total $ 14,566 $ 18,087 $ (3,521) Total $ 2,155 $ 3,186 $ (1,031)
For the Six Months Ended June 30, 2020
Derivatives in cash flow hedging relationships:
Interest rate floors $ 99,183 $ 125,708 $ (26,525) Interest and fees on loans $ 1,887 $ 3,949 $ (2,062)
Total $ 99,183 $ 125,708 $ (26,525) Total $ 1,887 $ 3,949 $ (2,062)


	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)	Total		Included Component		Excluded Component			Total		Included Component		Excluded Component








For the Three Months Ended September 30, 2020
Derivatives in cash flow hedging relationships:
Interest rate floors	$	(4,481)	$	(4,087)	$	(394)	Interest and fees on loans	$	4,163	$	5,509	$	(1,346)
Total	$	(4,481)	$	(4,087)	$	(394)	Total	$	4,163	$	5,509	$	(1,346)
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)


		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 June 30				For the Six Months Ended June 30						For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands)	(In thousands)		2021		2020		2021		2020		(In thousands)		2021		2020		2021		2020

Derivative instruments:	Derivative instruments:										Derivative instruments:
Interest rate swaps	Interest rate swaps	Other non-interest income	$	875	$	22	$	1,950	$	288	Interest rate swaps	Other non-interest income	$	24	$	81	$	1,974	$	369
Interest rate caps	Interest rate caps	Other non-interest income	0		0		15		19		Interest rate caps	Other non-interest income	—		1		15		20
Credit risk participation agreements	Credit risk participation agreements	Other non-interest income	(385)		267		(20)		240		Credit risk participation agreements	Other non-interest income	47		(87)		27		153
Foreign exchange contracts	Foreign exchange contracts	Other non-interest income	(12)		(44)		84		(82)		Foreign exchange contracts	Other non-interest income	(22)		—		62		(82)
Mortgage loan commitments	Mortgage loan commitments	Loan fees and sales	(35)		2,548		(1,407)		2,089		Mortgage loan commitments	Loan fees and sales	(309)		589		(1,716)		2,678
Mortgage loan forward sale contracts	Mortgage loan forward sale contracts	Loan fees and sales	(11)		3		28		(1)		Mortgage loan forward sale contracts	Loan fees and sales	(10)		20		18		19
Forward TBA contracts	Forward TBA contracts	Loan fees and sales	(1,046)		(153)		1,860		227		Forward TBA contracts	Loan fees and sales	(184)		(709)		1,676		(482)
Total	Total		$	(614)	$	2,643	$	2,510	$	2,780	Total		$	(454)	$	(105)	$	2,056	$	2,675

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

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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.

While the Company is party to master netting arrangements with most of 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
(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
June 30, 2021
Assets:
Derivatives subject to master netting agreements $ 59,371 $ 0 $ 59,371 $ (187) $ 0 $ 59,184
Derivatives not subject to master netting agreements 1,987 0 1,987
Total derivatives $ 61,358 $ 0 $ 61,358
Liabilities:
Derivatives subject to master netting agreements $ 13,237 $ 0 $ 13,237 $ (187) $ (11,896) $ 1,154
Derivatives not subject to master netting agreements 112 0 112
Total derivatives $ 13,349 $ 0 $ 13,349
December 31, 2020
Assets:
Derivatives subject to master netting agreements $ 86,497 $ 0 $ 86,497 $ (108) $ 0 $ 86,389
Derivatives not subject to master netting agreements 3,392 0 3,392
Total derivatives $ 89,889 $ 0 $ 89,889
Liabilities:
Derivatives subject to master netting agreements $ 18,420 $ 0 $ 18,420 $ (108) $ (16,738) $ 1,574
Derivatives not subject to master netting agreements 255 0 255
Total derivatives $ 18,675 $ 0 $ 18,675


							Gross Amounts Not Offset in the Balance Sheet
(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, 2021
Assets:
Derivatives subject to master netting agreements	$	53,373	$	—	$	53,373	$	(144)	$	—	$	53,229
Derivatives not subject to master netting agreements	1,692		—		1,692
Total derivatives	$	55,065	$	—	$	55,065
Liabilities:
Derivatives subject to master netting agreements	$	12,354	$	—	$	12,354	$	(144)	$	(11,275)	$	935
Derivatives not subject to master netting agreements	112		—		112
Total derivatives	$	12,466	$	—	$	12,466
December 31, 2020
Assets:
Derivatives subject to master netting agreements	$	86,497	$	—	$	86,497	$	(108)	$	—	$	86,389
Derivatives not subject to master netting agreements	3,392		—		3,392
Total derivatives	$	89,889	$	—	$	89,889
Liabilities:
Derivatives subject to master netting agreements	$	18,420	$	—	$	18,420	$	(108)	$	(16,738)	$	1,574
Derivatives not subject to master netting agreements	255		—		255
Total derivatives	$	18,675	$	—	$	18,675

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.

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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.

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 ~~June~~September 30, 2021 and December 31, 2020. At ~~June~~September 30, 2021, the Company had posted collateral of ~~$203.5~~$202.5 million in marketable securities, consisting of agency mortgage-backed bonds, and had accepted ~~$209.2~~$209.1 million in agency mortgage-backed bonds.


							Gross Amounts Not Offset in the Balance Sheet
(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, 2021
Total resale agreements, subject to master netting arrangements	$	1,950,000	$	(200,000)	$	1,750,000	$	—	$	(1,750,000)	$	—
Total repurchase agreements, subject to master netting arrangements	2,442,408		(200,000)		2,242,408		—		(2,242,408)		—
December 31, 2020
Total resale agreements, subject to master netting arrangements	$	1,050,000	$	(200,000)	$	850,000	$	—	$	(850,000)	$	—
Total repurchase agreements, subject to master netting arrangements	2,256,113		(200,000)		2,056,113		—		(2,056,113)		—

The table below shows the remaining contractual maturities of repurchase agreements outstanding at ~~June~~September 30, 2021 and December 31, 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
(In thousands) Overnight and continuous Up to 90 days Greater than 90 days Total
June 30, 2021
Repurchase agreements, secured by:
  U.S. government and federal agency obligations $ 215,729 $ 31,799 $ 8,059 $ 255,587
  Agency mortgage-backed securities 1,712,923 54,972 222,475 1,990,370
  Non-agency mortgage-backed securities 42,656 0 0 42,656
  Asset-backed securities 183,979 0 0 183,979
  Other debt securities 33,301 0 0 33,301
   Total repurchase agreements, gross amount recognized $ 2,188,588 $ 86,771 $ 230,534 $ 2,505,893
December 31, 2020
Repurchase agreements, secured by:
  U.S. government and federal agency obligations $ 150,305 $ 0 $ 0 $ 150,305
  Agency mortgage-backed securities 1,598,614 34,018 220,849 1,853,481
  Non-agency mortgage-backed securities 62,742 0 0 62,742
  Asset-backed securities 155,917 0 0 155,917
  Other debt securities 33,668 0 0 33,668
   Total repurchase agreements, gross amount recognized $ 2,001,246 $ 34,018 $ 220,849 $ 2,256,113


	Remaining Contractual Maturity of the Agreements
(In thousands)	Overnight and continuous		Up to 90 days		Greater than 90 days		Total
September 30, 2021
Repurchase agreements, secured by:
U.S. government and federal agency obligations	$	273,267	$	25,106	$	19,942	$	318,315


Agency mortgage-backed securities	1,640,466		3,775		209,759		1,854,000
Non-agency mortgage-backed securities	31,217		—		—		31,217
Asset-backed securities	205,729		—		—		205,729
Other debt securities	33,147		—		—		33,147
Total repurchase agreements, gross amount recognized	$	2,183,826	$	28,881	$	229,701	$	2,442,408
December 31, 2020
Repurchase agreements, secured by:
U.S. government and federal agency obligations	$	150,305	$	—	$	—	$	150,305


Agency mortgage-backed securities	1,598,614		34,018		220,849		1,853,481
Non-agency mortgage-backed securities	62,742		—		—		62,742
Asset-backed securities	155,917		—		—		155,917
Other debt securities	33,668		—		—		33,668
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~~Historically, most of the awards ~~are~~have been 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 ~~$3.7~~$3.8 million in the three months ended ~~June~~September 30, 2021 and 2020, respectively, and ~~$7.7~~$11.6 million and ~~$7.5~~$11.2 million in the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, 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 ~~June~~September 30, 2021, and changes during the ~~six~~nine month period then ended, is presented below.

Shares Weighted Average Grant Date Fair Value
Nonvested at January 1, 2021 1,099,866 $52.11
Granted 202,202 72.09
Vested (227,590) 43.30
Forfeited (12,982) 56.84
Nonvested at June 30, 2021 1,061,496 $57.74


	Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2021	1,099,866	$52.11
Granted	224,336	71.90
Vested	(242,139)	43.45
Forfeited	(20,297)	58.68

Nonvested at September 30, 2021	1,061,766	$58.14

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	$16.78
Assumptions:
Dividend yield	1.4	%
Volatility	28.2	%
Risk-free interest rate	.7	%
Expected term	5.7 years

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

(Dollars in thousands, except per share data)
Rights Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Outstanding at January 1, 2021 1,005,896 $44.95
Granted 72,416 72.91
Forfeited (3,906) 59.19
Expired (280) 57.95
Exercised (214,271) 39.59
Outstanding at June 30, 2021 859,855 $48.57 6.3 years $ 22,356


(Dollars in thousands, except per share data)	Rights	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2021	1,005,896	$	44.95
Granted	72,416	72.91
Forfeited	(6,363)	58.63
Expired	(280)	57.95
Exercised	(214,651)	39.59
Outstanding at September 30, 2021	857,018	$	48.55	6.0 years	$	18,372

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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 ~~six~~nine months ended ~~June~~September 30, 2021, approximately 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.

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

Three Months Ended June 30 Six Months Ended June 30
(In thousands) 2021 2020 2021 2020
Bank card transaction fees $ 42,608 $ 33,745 $ 80,303 $ 73,945
Trust fees 46,257 37,942 90,384 77,907
Deposit account charges and other fees 23,988 22,279 46,563 45,956
Consumer brokerage services 4,503 3,011 8,584 7,088
Other non-interest income 6,962 7,443 14,658 16,152
Total non-interest income from contracts with customers 124,318 104,420 240,492 221,048
Other non-interest income (1)
14,825 13,095 34,696 20,130
Total non-interest income $ 139,143 $ 117,515 $ 275,188 $ 241,178


	Three Months Ended September 30				Nine Months Ended September 30
(In thousands)	2021		2020		2021		2020
Bank card transaction fees	$	42,815	$	37,873	$	123,118	$	111,818
Trust fees	48,950		40,769		139,334		118,676
Deposit account charges and other fees	25,161		23,107		71,724		69,063
Consumer brokerage services	4,900		4,011		13,484		11,099
Other non-interest income	2,510		7,566		17,168		23,718
Total non-interest income from contracts with customers	124,336		113,326		364,828		334,374
Other non-interest income (1)	13,170		16,246		47,866		36,376
Total non-interest income	$	137,506	$	129,572	$	412,694	$	370,750

(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 consumer brokerage services income are earned in the Wealth segment.

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

(In thousands) June 30, 2021 December 31, 2020 June 30, 2020 December 31, 2019
Bank card transaction fees $ 13,248 $ 14,199 $ 10,655 $ 13,915
Trust fees 2,253 2,071 2,147 2,093
Deposit account charges and other fees 6,616 6,933 6,564 6,523
Consumer brokerage services 355 432 476 596


(In thousands)	September 30, 2021		December 31, 2020		September 30, 2020		December 31, 2019
Bank card transaction fees	$	13,349	$	14,199	$	11,501	$	13,915
Trust fees	2,211		2,071		2,122		2,093
Deposit account charges and other fees	5,969		6,933		5,839		6,523
Consumer brokerage services	513		432		476		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 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 ~~June~~September 30, 2021 and December 31, 2020 carrying values of assets and liabilities measured at fair value on a recurring basis. There were no transfers among levels during the first ~~six~~nine months of 2021 or the year ended December 31, 2020.

Fair Value Measurements Using
(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)
June 30, 2021
Assets:
  Residential mortgage loans held for sale $ 17,374 $ 0 $ 17,374 $ 0
  Available for sale debt securities:
     U.S. government and federal agency obligations 780,152 780,152 0 0
     Government-sponsored enterprise obligations 52,978 0 52,978 0
     State and municipal obligations 2,052,030 0 2,044,039 7,991
     Agency mortgage-backed securities 6,071,295 0 6,071,295 0
     Non-agency mortgage-backed securities 825,608 0 825,608 0
     Asset-backed securities 2,891,799 0 2,891,799 0
     Other debt securities 617,644 0 617,644 0
  Trading debt securities 29,002 0 29,002 0
  Equity securities 6,981 6,981 0 0
  Private equity investments 116,246 0 0 116,246
  Derivatives * 61,358 0 59,396 1,962
  Assets held in trust for deferred compensation plan 20,969 20,969 0 0
  Total assets 13,543,436 808,102 12,609,135 126,199
Liabilities:
  Derivatives *
13,349 0 13,016 333
Liabilities held in trust for deferred compensation plan 20,969 20,969 0 0
  Total liabilities $ 34,318 $ 20,969 $ 13,016 $ 333
December 31, 2020
Assets:
  Residential mortgage loans held for sale $ 39,396 $ 0 $ 39,396 $ 0
  Available for sale debt securities:
     U.S. government and federal agency obligations 838,059 838,059 0 0
     Government-sponsored enterprise obligations 54,485 0 54,485 0
     State and municipal obligations 2,045,099 0 2,037,131 7,968
     Agency mortgage-backed securities 6,712,085 0 6,712,085 0
     Non-agency mortgage-backed securities 361,074 0 361,074 0
     Asset-backed securities 1,882,243 0 1,882,243 0
     Other debt securities 556,219 0 556,219 0
  Trading debt securities 35,321 0 35,321 0
  Equity securities 2,966 2,966 0 0
  Private equity investments 94,368 0 0 94,368
  Derivatives * 89,889 0 86,447 3,442
  Assets held in trust for deferred compensation plan 19,278 19,278 0 0
  Total assets 12,730,482 860,303 11,764,401 105,778
Liabilities:
  Derivatives *
18,675 0 17,974 701
Liabilities held in trust for deferred compensation plan 19,278 19,278 0 0
  Total liabilities $ 37,953 $ 19,278 $ 17,974 $ 701


			Fair Value Measurements Using
(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, 2021
Assets:
Residential mortgage loans held for sale	$	11,982	$	—	$	11,982	$	—
Available for sale debt securities:
U.S. government and federal agency obligations	784,190		784,190		—		—
Government-sponsored enterprise obligations	51,941		—		51,941		—
State and municipal obligations	2,155,076		—		2,153,081		1,995
Agency mortgage-backed securities	5,974,802		—		5,974,802		—
Non-agency mortgage-backed securities	1,225,091		—		1,225,091		—
Asset-backed securities	3,359,915		—		3,359,915		—
Other debt securities	614,641		—		614,641		—
Trading debt securities	40,114		—		40,114		—
Equity securities	7,118		7,118		—		—
Private equity investments	138,052		—		—		138,052
Derivatives *	55,065		—		53,442		1,623
Assets held in trust for deferred compensation plan	20,880		20,880		—		—
Total assets	14,438,867		812,188		13,485,009		141,670
Liabilities:
Derivatives *	12,466		—		12,183		283
Liabilities held in trust for deferred compensation plan	20,880		20,880		—		—
Total liabilities	$	33,346	$	20,880	$	12,183	$	283
December 31, 2020
Assets:
Residential mortgage loans held for sale	$	39,396	$	—	$	39,396	$	—
Available for sale debt securities:
U.S. government and federal agency obligations	838,059		838,059		—		—
Government-sponsored enterprise obligations	54,485		—		54,485		—
State and municipal obligations	2,045,099		—		2,037,131		7,968
Agency mortgage-backed securities	6,712,085		—		6,712,085		—
Non-agency mortgage-backed securities	361,074		—		361,074		—
Asset-backed securities	1,882,243		—		1,882,243		—
Other debt securities	556,219		—		556,219		—
Trading debt securities	35,321		—		35,321		—
Equity securities	2,966		2,966		—		—
Private equity investments	94,368		—		—		94,368
Derivatives *	89,889		—		86,447		3,442
Assets held in trust for deferred compensation plan	19,278		19,278		—		—
Total assets	12,730,482		860,303		11,764,401		105,778
Liabilities:
Derivatives *	18,675		—		17,974		701
Liabilities held in trust for deferred compensation plan	19,278		19,278		—		—
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)									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 June 30, 2021
Balance March 31, 2021		$	7,970	$	94,257	$	1,636	$	103,863
For the three months ended September 30, 2021										For the three months ended September 30, 2021
Balance June 30, 2021										Balance June 30, 2021	$	7,991	$	116,246	$	1,629	$	125,866
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		16,666		(420)		16,246		Included in earnings	—		12,971		(262)		12,709
Included in other comprehensive income *	Included in other comprehensive income *	18		0		0		18		Included in other comprehensive income *	(175)		—		—		(175)

Investment securities called										Investment securities called	(6,000)		—		—		(6,000)
Discount accretion	Discount accretion	3		0		0		3		Discount accretion	179		—		—		179
Purchases of private equity investments	Purchases of private equity investments	0		5,656		0		5,656		Purchases of private equity investments	—		8,835		—		8,835
Sale/pay down of private equity investments		0		(356)		0		(356)
Capitalized interest/dividends		0		23		0		23
Purchase of risk participation agreement		0		0		445		445

Sale of risk participation agreements	Sale of risk participation agreements	0		0		(32)		(32)		Sale of risk participation agreements	—		—		(27)		(27)
Balance June 30, 2021		$	7,991	$	116,246	$	1,629	$	125,866
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 June 30, 2021		$	0	$	16,666	$	1,434	$	18,100
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 June 30, 2021		$	18	$	0	$	0	$	18
For the six months ended June 30, 2021
Balance September 30, 2021										Balance September 30, 2021	$	1,995	$	138,052	$	1,340	$	141,387
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, 2021										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, 2021	$	—	$	12,971	$	1,557	$	14,528
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, 2021										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, 2021	$	2	$	—	$	—	$	2
For the nine months ended September 30, 2021										For the nine months ended September 30, 2021
Balance January 1, 2021	Balance January 1, 2021	$	7,968	$	94,368	$	2,741	$	105,077	Balance January 1, 2021	$	7,968	$	94,368	$	2,741	$	105,077
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		25,031		(1,427)		23,604		Included in earnings	—		38,002		(1,689)		36,313
Included in other comprehensive income *	Included in other comprehensive income *	17		0		0		17		Included in other comprehensive income *	(158)		—		—		(158)

Investment securities called										Investment securities called	(6,000)		—		—		(6,000)
Discount accretion	Discount accretion	6		0		0		6		Discount accretion	185		—		—		185
Purchases of private equity investments	Purchases of private equity investments	0		5,656		0		5,656		Purchases of private equity investments	—		14,491		—		14,491
Sale/pay down of private equity investments	Sale/pay down of private equity investments	0		(8,832)		0		(8,832)		Sale/pay down of private equity investments	—		(8,832)		—		(8,832)
Capitalized interest/dividends	Capitalized interest/dividends	0		23		0		23		Capitalized interest/dividends	—		23		—		23
Purchase of risk participation agreement	Purchase of risk participation agreement	0		0		445		445		Purchase of risk participation agreement	—		—		445		445
Sale of risk participation agreement	Sale of risk participation agreement	0		0		(130)		(130)		Sale of risk participation agreement	—		—		(157)		(157)
Balance June 30, 2021		$	7,991	$	116,246	$	1,629	$	125,866
Total gains or losses for the six months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2021		$	0	$	25,031	$	1,629	$	26,660
Total gains or losses for the six months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2021		$	17	$	0	$	0	$	17
Balance September 30, 2021										Balance September 30, 2021	$	1,995	$	138,052	$	1,340	$	141,387
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, 2021										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, 2021	$	—	$	38,002	$	1,367	$	39,369
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, 2021										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, 2021	$	23	$	—	$	—	$	23

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		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 June 30, 2020
Balance March 31, 2020		$	8,362	$	81,159	$	(557)	$	88,964
For the three months ended September 30, 2020										For the three months ended September 30, 2020
Balance June 30, 2020										Balance June 30, 2020	$	9,490	$	73,846	$	1,888	$	85,224
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		(7,497)		2,814		(4,683)		Included in earnings	—		2,389		504		2,893
Included in other comprehensive income *	Included in other comprehensive income *	1,123		0		0		1,123		Included in other comprehensive income *	271		—		—		271

Investment securities called										Investment securities called	(2,000)		—		—		(2,000)
Discount accretion	Discount accretion	5		0		0		5		Discount accretion	105		—		—		105
Purchases of private equity investments	Purchases of private equity investments	0		155		0		155		Purchases of private equity investments	—		2,522		—		2,522
Sale/pay down of private equity investments										Sale/pay down of private equity investments	—		(295)		—		(295)

Capitalized interest/dividends		0		29		0		29

Sale of risk participation agreement		0		0		(369)		(369)
Balance June 30, 2020		$	9,490	$	73,846	$	1,888	$	85,224
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 June 30, 2020		$	0	$	(7,497)	$	2,815	$	(4,682)
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 June 30, 2020		$	1,123	$	0	$	0	$	1,123
For the six months ended June 30, 2020

Balance September 30, 2020										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										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	$	—	$	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										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	$	—	$	—	$	258
For the nine months ended September 30, 2020										For the nine months ended September 30, 2020
Balance January 1, 2020	Balance January 1, 2020	$	9,853	$	94,122	$	369	$	104,344	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		(20,505)		2,328		(18,177)		Included in earnings	—		(18,116)		2,832		(15,284)
Included in other comprehensive income *	Included in other comprehensive income *	(372)		0		0		(372)		Included in other comprehensive income *	(101)		—		—		(101)

Investment securities called										Investment securities called	(2,000)		—		—		(2,000)
Discount accretion	Discount accretion	9		0		0		9		Discount accretion	114		—		—		114
Purchases of private equity investments	Purchases of private equity investments	0		269		0		269		Purchases of private equity investments	—		2,791		—		2,791
Sale/pay down of private equity investments	Sale/pay down of private equity investments	0		(69)		0		(69)		Sale/pay down of private equity investments	—		(364)		—		(364)
Capitalized interest/dividends	Capitalized interest/dividends	0		29		0		29		Capitalized interest/dividends	—		29		—		29

Sale of risk participation agreement	Sale of risk participation agreement	0		0		(809)		(809)		Sale of risk participation agreement	—		—		(809)		(809)
Balance June 30, 2020		$	9,490	$	73,846	$	1,888	$	85,224
Total gains or losses for the six months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2020		$	0	$	(20,505)	$	2,759	$	(17,746)
Total gains or losses for the six months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2020		$	(372)	$	0	$	0	$	(372)
Balance September 30, 2020										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										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	$	—	$	(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										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)	$	—	$	—	$	(52)

* 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 June 30, 2021
Total gains or losses included in earnings $ (35) $ (385) $ 16,666 $ 16,246
Change in unrealized gains or losses relating to assets still held at June 30, 2021 $ 1,820 $ (386) $ 16,666 $ 18,100
For the six months ended June 30, 2021
Total gains or losses included in earnings $ (1,407) $ (20) $ 25,031 $ 23,604
Change in unrealized gains or losses relating to assets still held at June 30, 2021 $ 1,820 $ (191) $ 25,031 $ 26,660
For the three months ended June 30, 2020
Total gains or losses included in earnings $ 2,547 $ 267 $ (7,497) $ (4,683)
Change in unrealized gains or losses relating to assets still held at June 30, 2020 $ 2,547 $ 268 $ (7,497) $ (4,682)
For the six months ended June 30, 2020
Total gains or losses included in earnings $ 2,088 $ 240 $ (20,505) $ (18,177)
Change in unrealized gains or losses relating to assets still held at June 30, 2020 $ 2,547 $ 212 $ (20,505) $ (17,746)


(In thousands)	Loan Fees and Sales		Other Non-Interest Income		Investment Securities Gains (Losses), Net		Total
For the three months ended September 30, 2021
Total gains or losses included in earnings	$	(309)	$	47	$	12,971	$	12,709
Change in unrealized gains or losses relating to assets still held at September 30, 2021	$	1,510	$	47	$	12,971	$	14,528
For the nine months ended September 30, 2021
Total gains or losses included in earnings	$	(1,716)	$	27	$	38,002	$	36,313
Change in unrealized gains or losses relating to assets still held at September 30, 2021	$	1,510	$	(143)	$	38,002	$	39,369
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)

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 ~~$8.0~~$2.0 million at ~~June~~September 30, 2021, while private equity investments, included in other securities, totaled ~~$116.2~~$138.1 million.

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*
Auction rate securities Discounted cash flow Estimated market recovery period 5 years 5 years
Estimated market rate 1.1% - 1.4% 1.2%
Private equity investments Market comparable companies EBITDA multiple 4.0 - 6.0 5.3
Mortgage loan commitments Discounted cash flow Probability of funding 68.3% - 100.0% 86.7%
Embedded servicing value .7% - 1.1% 1.0%


Quantitative Information about Level 3 Fair Value Measurements						Weighted
	Valuation Technique	Unobservable Input	Range			Average*
Auction rate securities	Discounted cash flow	Estimated market recovery period			5 years	5 years
		Estimated market rate	1.1%	-	1.3%	1.2%
Private equity investments	Market comparable companies	EBITDA multiple	4.0	-	6.0	5.3
Mortgage loan commitments	Discounted cash flow	Probability of funding	67.2%	-	100.0%	87.0%
		Embedded servicing value	.8%	-	1.2%	1.0%

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

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Instruments Measured at Fair Value on a Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the first ~~six~~nine months of 2021 and 2020, and still held as of ~~June~~September 30, 2021 and 2020, 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 ~~June~~September 30, 2021 and 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 Six Months Ended June 30
June 30, 2021
  Mortgage servicing rights $ 9,376 $ 0 $ 0 $ 9,376 $ 1,299
  Long-lived assets 984 0 0 984 (276)
June 30, 2020
  Collateral dependent loans $ 12,066 $ 0 $ 0 $ 12,066 $ (3,079)
  Mortgage servicing rights 5,625 0 0 5,625 (1,851)
  Long-lived assets 348 0 0 348 (5)


			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, 2021
Collateral dependent loans	$	2,057	$	—	$	—	$	2,057	$	(349)

Mortgage servicing rights	9,774		—		—		9,774		1,120

Long-lived assets	1,393		—		—		1,393		(726)

September 30, 2020
Collateral dependent loans	$	11,772	$	—	$	—	$	11,772	$	(3,214)

Mortgage servicing rights	5,731		—		—		5,731		(1,823)

~~Table of Contents~~

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 9.02 % - 9.34 % 9.17 %
Prepayment speeds (CPR)* 10.46 % - 13.21 % 12.11 %
Loan servicing costs - annually per loan
    Performing loans $ 70 - $ 72 $ 71
    Delinquent loans $ 200 - $ 750
    Loans in foreclosure $ 1,000


Quantitative Information about Level 3 Fair Value Measurements										Weighted
	Valuation Technique	Unobservable Input	Range							Average*
Mortgage servicing rights	Discounted cash flow	Discount rate	9.02		%	-	9.35		%	9.15		%
		Prepayment speeds (CPR)*	11.46		%	-	14.21		%	12.55		%
		Loan servicing costs - annually per loan
		Performing loans	$	70		-	$	72		$	71
		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.

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 ~~June~~September 30, 2021 and December 31, 2020:

Carrying Amount Estimated Fair Value at June 30, 2021

(In thousands)

Level 1 Level 2 Level 3 Total
Financial Assets
Loans:
Business $ 5,803,760 $ 0 $ 0 $ 5,750,743 $ 5,750,743
Real estate - construction and land 1,103,661 0 0 1,080,298 1,080,298
Real estate - business 3,017,560 0 0 3,014,609 3,014,609
Real estate - personal 2,793,213 0 0 2,796,020 2,796,020
Consumer 2,049,166 0 — 2,048,176 2,048,176
Revolving home equity 283,568 0 0 281,395 281,395
Consumer credit card 586,358 0 0 542,235 542,235
Overdrafts 2,978 0 0 2,789 2,789
Total loans 15,640,264 0 0 15,516,265 15,516,265
Loans held for sale 23,697 0 23,697 0 23,697
Investment securities 13,488,092 787,133 12,532,365 168,594 13,488,092
Federal funds sold 5,945 5,945 0 0 5,945
Securities purchased under agreements to resell 1,300,000 0 0 1,320,677 1,320,677
Interest earning deposits with banks 2,161,644 2,161,644 0 0 2,161,644
Cash and due from banks 358,122 358,122 0 0 358,122
Derivative instruments 61,358 0 59,396 1,962 61,358
Assets held in trust for deferred compensation plan 20,969 20,969 0 0 20,969
Total $ 33,060,091 $ 3,333,813 $ 12,615,458 $ 17,007,498 $ 32,956,769
Financial Liabilities
Non-interest bearing deposits $ 11,085,286 $ 11,085,286 $ 0 $ 0 $ 11,085,286
Savings, interest checking and money market deposits 14,654,696 14,654,696 0 0 14,654,696
Certificates of deposit 1,746,255 0 0 1,748,788 1,748,788
Federal funds purchased 12,335 12,335 0 0 12,335
Securities sold under agreements to repurchase 2,305,893 0 0 2,305,957 2,305,957
Other borrowings 1,411 0 1,411 0 1,411
Derivative instruments 13,349 0 13,016 333 13,349
Liabilities held in trust for deferred compensation plan 20,969 20,969 0 0 20,969
Total $ 29,840,194 $ 25,773,286 $ 14,427 $ 4,055,078 $ 29,842,791


	Carrying Amount		Estimated Fair Value at September 30, 2021
(In thousands)			Level 1		Level 2		Level 3		Total
Financial Assets
Loans:
Business	$	5,277,850	$	—	$	—	$	5,220,005	$	5,220,005
Real estate - construction and land	1,257,836		—		—		1,238,620		1,238,620
Real estate - business	2,937,852		—		—		2,936,476		2,936,476
Real estate - personal	2,769,292		—		—		2,772,259		2,772,259
Consumer	2,049,559		—		—		2,046,338		2,046,338
Revolving home equity	281,442		—		—		279,165		279,165
Consumer credit card	569,976		—		—		529,617		529,617
Overdrafts	4,583		—		—		4,236		4,236
Total loans	15,148,390		—		—		15,026,716		15,026,716
Loans held for sale	16,043		—		16,043		—		16,043




Investment securities	14,395,504		791,308		13,419,585		184,611		14,395,504

Securities purchased under agreements to resell	1,750,000		—		—		1,757,410		1,757,410
Interest earning deposits with banks	1,888,545		1,888,545		—		—		1,888,545
Cash and due from banks	344,460		344,460		—		—		344,460
Derivative instruments	55,065		—		53,442		1,623		55,065
Assets held in trust for deferred compensation plan	20,880		20,880		—		—		20,880
Total	$	33,618,887	$	3,045,193	$	13,489,070	$	16,970,360	$	33,504,623
Financial Liabilities
Non-interest bearing deposits	$	11,622,855	$	11,622,855	$	—	$	—	$	11,622,855
Savings, interest checking and money market deposits	14,907,654		14,907,654		—		—		14,907,654
Certificates of deposit	1,615,775		—		—		1,617,580		1,617,580
Federal funds purchased	11,345		11,345		—		—		11,345
Securities sold under agreements to repurchase	2,242,408		—		—		2,242,486		2,242,486
Other borrowings	3,949		—		3,949		—		3,949
Derivative instruments	12,466		—		12,183		283		12,466
Liabilities held in trust for deferred compensation plan	20,880		20,880		—		—		20,880
Total	$	30,437,332	$	26,562,734	$	16,132	$	3,860,349	$	30,439,215

Table of Contents


		Carrying Amount		Estimated Fair Value at December 31, 2020									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	$	6,546,087	$	0	$	0	$	6,467,572	$	6,467,572	Business	$	6,546,087	$	—	$	—	$	6,467,572	$	6,467,572
Real estate - construction and land	Real estate - construction and land	1,021,595		0		0		995,873		995,873		Real estate - construction and land	1,021,595		—		—		995,873		995,873
Real estate - business	Real estate - business	3,026,117		0		0		3,016,576		3,016,576		Real estate - business	3,026,117		—		—		3,016,576		3,016,576
Real estate - personal	Real estate - personal	2,820,030		0		0		2,830,521		2,830,521		Real estate - personal	2,820,030		—		—		2,830,521		2,830,521
Consumer	Consumer	1,950,502		0		0		1,953,217		1,953,217		Consumer	1,950,502		—		—		1,953,217		1,953,217
Revolving home equity	Revolving home equity	307,083		0		0		304,434		304,434		Revolving home equity	307,083		—		—		304,434		304,434
Consumer credit card	Consumer credit card	655,078		0		0		576,320		576,320		Consumer credit card	655,078		—		—		576,320		576,320
Overdrafts	Overdrafts	3,149		0		0		3,068		3,068		Overdrafts	3,149		—		—		3,068		3,068
Total loans	Total loans	16,329,641		0		0		16,147,581		16,147,581		Total loans	16,329,641		—		—		16,147,581		16,147,581
Loans held for sale	Loans held for sale	45,089		0		45,089		0		45,089		Loans held for sale	45,089		—		45,089		—		45,089

Investment securities	Investment securities	12,626,296		841,025		11,638,558		146,713		12,626,296		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		894,338		894,338		Securities purchased under agreements to resell	850,000		—		—		894,338		894,338
Interest earning deposits with banks	Interest earning deposits with banks	1,747,363		1,747,363		0		0		1,747,363		Interest earning deposits with banks	1,747,363		1,747,363		—		—		1,747,363
Cash and due from banks	Cash and due from banks	437,563		437,563		0		0		437,563		Cash and due from banks	437,563		437,563		—		—		437,563
Derivative instruments	Derivative instruments	89,889		0		86,447		3,442		89,889		Derivative instruments	89,889		—		86,447		3,442		89,889
Assets held in trust for deferred compensation plan	Assets held in trust for deferred compensation plan	19,278		19,278		0		0		19,278		Assets held in trust for deferred compensation plan	19,278		19,278		—		—		19,278
Total	Total	$	32,145,119	$	3,045,229	$	11,770,094	$	17,192,074	$	32,007,397	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	$	10,497,598	$	10,497,598	$	0	$	0	$	10,497,598	Non-interest bearing deposits	$	10,497,598	$	10,497,598	$	—	$	—	$	10,497,598
Savings, interest checking and money market deposits	Savings, interest checking and money market deposits	14,604,456		14,604,456		0		0		14,604,456		Savings, interest checking and money market deposits	14,604,456		14,604,456		—		—		14,604,456
Certificates of deposit	Certificates of deposit	1,844,691		0		0		1,847,277		1,847,277		Certificates of deposit	1,844,691		—		—		1,847,277		1,847,277
Federal funds purchased	Federal funds purchased	42,270		42,270		0		0		42,270		Federal funds purchased	42,270		42,270		—		—		42,270
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	2,056,113		0		0		2,056,173		2,056,173		Securities sold under agreements to repurchase	2,056,113		—		—		2,056,173		2,056,173

Derivative instruments	Derivative instruments	18,675		0		17,974		701		18,675		Derivative instruments	18,675		—		17,974		701		18,675
Liabilities held in trust for deferred compensation plan	Liabilities held in trust for deferred compensation plan	19,278		19,278		0		0		19,278		Liabilities held in trust for deferred compensation plan	19,278		19,278		—		—		19,278
Total	Total	$	29,083,081	$	25,163,602	$	17,974	$	3,904,151	$	29,085,727	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 ~~June~~September 30, 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.

Table of Contents

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 2020 Annual Report on Form 10-K. Results of operations for the three and ~~six~~nine month periods ended ~~June~~September 30, 2021 are not necessarily indicative of results to be attained for any other period.

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 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 ~~June~~September 30, 2021, there were no material changes to the Risk Factors disclosed in the Company's 2020 Annual Report on Form 10-K.

Critical Accounting Policies

The Company has identified ~~several~~certain 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 2020 Annual Report on Form 10-K. There have been no changes in the Company's application of critical accounting policies since December 31, 2020.

Table of Contents

Selected Financial Data


		Three Months Ended June 30						Six Months Ended June 30							Three Months Ended September 30						Nine Months Ended September 30
		2021			2020			2021			2020				2021			2020			2021			2020
Per Share Data	Per Share Data													Per Share Data
Net income per common share — basic	Net income per common share — basic	$	1.38		$	.32	*	$	2.50		$	.74	*	Net income per common share — basic	$	1.05		$	1.06	*	$	3.55		$	1.80	*
Net income per common share — diluted	Net income per common share — diluted	1.38			.32		*	2.49			.74		*	Net income per common share — diluted	1.05			1.06		*	3.54			1.80		*
Cash dividends on common stock	Cash dividends on common stock	.263			.257		*	.525			.514		*	Cash dividends on common stock	.263			.257		*	.788			.771		*
Book value per common share	Book value per common share							29.89			27.44		*	Book value per common share							30.01			28.23		*
Market price	Market price							74.56			56.64		*	Market price							69.68			53.61		*
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)	57.78		%	69.22		%	59.73		%	70.78		%	Loans to deposits (1)	54.44		%	66.23		%	57.91		%	69.12		%
Non-interest bearing deposits to total deposits	Non-interest bearing deposits to total deposits	40.09			37.88			39.76			35.44			Non-interest bearing deposits to total deposits	40.90			39.61			40.15			36.96
Equity to loans (1)	Equity to loans (1)	21.26			20.52			20.97			21.19			Equity to loans (1)	23.17			20.54			21.68			20.96
Equity to deposits	Equity to deposits	12.29			14.20			12.53			15.00			Equity to deposits	12.62			13.60			12.56			14.49
Equity to total assets	Equity to total assets	10.07			11.14			10.22			11.71			Equity to total assets	10.22			10.90			10.22			11.42
Return on total assets	Return on total assets	1.93			.54			1.78			.66			Return on total assets	1.40			1.71			1.65			1.04

Return on common equity	Return on common equity	19.12			4.77			17.42			5.61			Return on common equity	13.74			15.21			16.14			8.93
(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)	40.08			36.66			39.94			37.37			Non-interest income to revenue (2)	39.11			37.50			39.66			37.42
Efficiency ratio (3)	Efficiency ratio (3)	56.90			58.10			56.64			58.64			Efficiency ratio (3)	59.95			55.00			57.76			57.37
Tier I common risk-based capital ratio	Tier I common risk-based capital ratio							14.20			13.30			Tier I common risk-based capital ratio							14.02			13.45
Tier I risk-based capital ratio	Tier I risk-based capital ratio							14.20			14.00			Tier I risk-based capital ratio							14.02			13.45
Total risk-based capital ratio	Total risk-based capital ratio							15.07			15.22			Total risk-based capital ratio							14.83			14.62
Tangible common equity to tangible assets ratio (4)	Tangible common equity to tangible assets ratio (4)							9.91			10.12			Tangible common equity to tangible assets ratio (4)							9.71			10.11
Tier I leverage ratio	Tier I leverage ratio							9.36			9.88			Tier I leverage ratio							9.31			9.39

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

June 30
(Dollars in thousands) 2021 2020
Total equity $ 3,493,830 $ 3,358,169
Less non-controlling interest 8,210 302
Less preferred stock — 144,784
Less goodwill 138,921 138,921
Less core deposit premium 4,772 1,554
Total tangible common equity (a) $ 3,341,927 $ 3,072,608
Total assets $ 33,856,162 $ 30,496,121
Less goodwill 138,921 138,921
Less core deposit premium 4,772 1,554
Total tangible assets (b) $ 33,712,469 $ 30,355,646
Tangible common equity to tangible assets ratio (a)/(b) 9.91 % 10.12 %


	September 30
(Dollars in thousands)	2021			2020
Total equity	$	3,491,221		$	3,306,264
Less non-controlling interest	10,551			601

Less goodwill	138,921			138,921
Less core deposit premium	4,684			1,452
Total tangible common equity (a)	$	3,337,065		$	3,165,290
Total assets	$	34,497,543		$	31,453,817
Less goodwill	138,921			138,921
Less core deposit premium	4,684			1,452
Total tangible assets (b)	$	34,353,938		$	31,313,444
Tangible common equity to tangible assets ratio (a)/(b)	9.71		%	10.11		%

Table of Contents

Results of Operations

Summary


		Three Months Ended June 30						Six Months Ended June 30						Three Months Ended September 30								Nine Months Ended September 30
(Dollars in thousands)	(Dollars in thousands)	2021		2020		% change			2021		2020		% change		(Dollars in thousands)	2021		2020		% change			2021		2020		% change
Net interest income	Net interest income	$	207,982	$	203,057	2.4	%		$	413,730	$	404,122	2.4	%	Net interest income	$	214,037	$	215,962	(.9	%)		$	627,767	$	620,084	1.2	%
Provision for credit losses	Provision for credit losses	45,655		(80,539)		(156.7)			51,887		(138,492)		(137.5)		Provision for credit losses	7,385		(3,101)		(338.1)			59,272		(141,593)		(141.9)
Non-interest income	Non-interest income	139,143		117,515		18.4			275,188		241,178		14.1		Non-interest income	137,506		129,572		6.1			412,694		370,750		11.3
Investment securities gains (losses), net	Investment securities gains (losses), net	16,804		(4,129)		N.M.			26,657		(17,430)		N.M.		Investment securities gains (losses), net	13,108		16,155		(18.9)			39,765		(1,275)		N.M.
Non-interest expense	Non-interest expense	(198,126)		(187,512)		5.7			(390,699)		(381,210)		2.5		Non-interest expense	(211,620)		(190,858)		10.9			(602,319)		(572,068)		5.3
Income taxes	Income taxes	(45,209)		(9,661)		368.0			(77,285)		(19,834)		289.7		Income taxes	(34,662)		(34,375)		.8			(111,947)		(54,209)		106.5
Non-controlling interest income (expense)	Non-controlling interest income (expense)	(3,923)		1,132		N.M.			(6,180)		3,386		N.M.		Non-controlling interest income (expense)	(3,193)		(907)		N.M.			(9,373)		2,479		N.M.
Net income attributable to Commerce Bancshares, Inc.	Net income attributable to Commerce Bancshares, Inc.	162,326		39,863		307.2			293,298		91,720		219.8		Net income attributable to Commerce Bancshares, Inc.	122,561		132,448		(7.5)			415,859		224,168		85.5
Preferred stock dividends	Preferred stock dividends	—		(2,250)		(100.0)			—		(4,500)		(100.0)		Preferred stock dividends	—		(7,466)		(100.0)			—		(11,966)		(100.0)
Net income available to common shareholders	Net income available to common shareholders	$	162,326	$	37,613	331.6	%		$	293,298	$	87,220	236.3	%	Net income available to common shareholders	$	122,561	$	124,982	(1.9	%)		$	415,859	$	212,202	96.0	%

N.M. - Not meaningful

For the quarter ended ~~June~~September 30, 2021, net income attributable to Commerce Bancshares, Inc. (net income) amounted to ~~$162.3~~$122.6 million, ~~an increase~~a decrease of ~~$122.5~~$9.9 million, or ~~307.2%~~7.5%, compared to the ~~second~~third quarter of the previous year. For the current quarter, the annualized return on average assets was ~~1.93%~~1.40%, the annualized return on average equity was ~~19.12%~~13.74%, and the efficiency ratio was ~~56.90%~~59.95%. Diluted earnings per common share was ~~$1.38, an increase~~$1.05, a decrease of ~~331.3%~~.9% compared to ~~$.32~~$1.06 per share in the ~~second~~third quarter of 2020, and ~~increased 24.3%~~decreased 23.9% compared to ~~$1.11~~$1.38 per share in the previous quarter.

Compared to the ~~second~~third quarter of last year, net interest income ~~increased $4.9~~decreased $1.9 million, or ~~2.4%~~.9%, mainly due to decreases in loan interest and interest on securities purchased under agreements to resell of $7.9 million and $2.2 million, respectively. These decreases were partly offset by a decline of ~~$7.1~~$4.2 million in interest expense on deposits and borrowings, coupled with an increase of ~~$4.7~~$3.4 million in interest income on investment securities. ~~These increases to net interest income were partly offset by a decrease of $6.8 million in interest income on loans.~~ The provision for credit losses declined ~~$126.2~~$10.5 million due to a decrease in the estimate of the allowance for credit losses on loans and unfunded commitments and lower net loan charge-offs. Non-interest income increased ~~$21.6~~$7.9 million, or ~~18.4%~~6.1%, compared to the ~~second~~third quarter of 2020, mainly due to growth in trust fees, net bank card fees ~~trust~~and deposit account fees, ~~and loan fees and sales,~~ partly offset by lower ~~cash sweep fees.~~loan fees and sales. Investment securities net gains totaled ~~$16.8~~$13.1 million in the current quarter compared to net ~~losses~~gains of ~~$4.1~~$16.2 million in the same quarter last year. Net securities gains in the current quarter primarily resulted from unrealized fair value gains of ~~$16.7~~$13.0 million in the Company's private equity portfolio. Non-interest expense increased ~~$10.6~~$20.8 million, or ~~5.7%~~10.9%, over the ~~second~~third quarter of 2020 mainly due to ~~lower deferred loan origination costs,~~non-recurring litigation settlement expense, higher salaries and benefits expense and ~~higher marketing~~data processing and software expense.

Net income for the first ~~six~~nine months of 2021 was ~~$293.3~~$415.9 million, an increase of ~~$201.6~~$191.7 million, or ~~219.8%~~85.5%, over the same period last year. Diluted earnings per common shares was ~~$2.49,~~$3.54, an increase of ~~236.5%~~96.7% compared to ~~$.74~~$1.80 per share in the same period last year. For the first ~~six~~nine months of 2021, the annualized return on average assets was ~~1.78%~~1.65%, the annualized return on average equity was ~~17.42%~~16.14%, and the efficiency ratio was ~~56.64%~~57.76%. Net interest income increased ~~$9.6~~$7.7 million, or ~~2.4%~~1.2%, over the same period last year. This growth was ~~largely~~ due to a decrease of ~~$23.6~~$27.8 million in deposits and borrowings interest expense and growth of $6.2 million in interest income on investment securities, partly offset by a ~~$19.5~~$27.5 million decrease in interest income on loans. The provision for credit losses was a ~~recovery~~benefit of ~~$51.9~~$59.3 million for the first ~~six~~nine months of 2021, compared to provision expense of ~~$138.5~~$141.6 million in the same period last year, resulting in a decrease of ~~$190.4~~$200.9 million. Non-interest income increased ~~$34.0~~$41.9 million, or ~~14.1%~~11.3%, over the first ~~six month~~nine months of last year mainly due to higher trust fees, net bank card fees and loan fees and sales. Non-interest expense increased ~~$9.5~~$30.3 million, or ~~2.5%~~5.3%, over the first ~~six~~nine months of last year due to increases in salaries and benefits and data processing and software expense, as well as lower deferred loan origination costs. ~~These increases to expense were partly offset by lower travel and entertainment expense and a reduction in impairment expense on the Company's mortgage servicing rights.~~

Table of Contents

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 June 30, 2021 vs. 2020						Six Months Ended June 30, 2021 vs. 2020							Three Months Ended September 30, 2021 vs. 2020						Nine Months Ended September 30, 2021 vs. 2020
		Change due to						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		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	$	(3,965)	$	3,917	$	(48)	$	3,933	$	(2,148)	$	1,785	Business	$	(9,486)	$	6,838	$	(2,648)	$	(6,101)	$	5,238	$	(863)
Real estate - construction and land	Real estate - construction and land	1,899		(1,029)		870		3,908		(4,481)		(573)		Real estate - construction and land	1,831		(672)		1,159		5,745		(5,159)		586
Real estate - business	Real estate - business	489		(1,566)		(1,077)		2,165		(6,533)		(4,368)		Real estate - business	(61)		(459)		(520)		2,026		(6,914)		(4,888)
Real estate - personal	Real estate - personal	2,041		(2,595)		(554)		6,127		(5,761)		366		Real estate - personal	479		(1,959)		(1,480)		6,517		(7,631)		(1,114)
Consumer	Consumer	674		(3,149)		(2,475)		660		(7,019)		(6,359)		Consumer	517		(2,436)		(1,919)		1,193		(9,471)		(8,278)
Revolving home equity	Revolving home equity	(490)		(42)		(532)		(1,078)		(972)		(2,050)		Revolving home equity	(395)		129		(266)		(1,470)		(846)		(2,316)
Consumer credit card	Consumer credit card	(2,586)		(725)		(3,311)		(6,175)		(2,847)		(9,022)		Consumer credit card	(2,292)		(109)		(2,401)		(8,454)		(2,969)		(11,423)
Overdrafts	Overdrafts	—		—		—		—		—		—		Overdrafts	—		—		—		—		—		—
Total interest on loans	Total interest on loans	(1,938)		(5,189)		(7,127)		9,540		(29,761)		(20,221)		Total interest on loans	(9,407)		1,332		(8,075)		(544)		(27,752)		(28,296)
Loans held for sale	Loans held for sale	193		(75)		118		405		(180)		225		Loans held for sale	(74)		(3)		(77)		287		(139)		148
Investment securities:	Investment securities:													Investment securities:
U.S. government and federal agency securities	U.S. government and federal agency securities	(65)		9,090		9,025		(427)		9,826		9,399		U.S. government and federal agency securities	(400)		3,736		3,336		(918)		13,653		12,735
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	(558)		(147)		(705)		(1,416)		(392)		(1,808)		Government-sponsored enterprise obligations	(284)		19		(265)		(1,672)		(401)		(2,073)
State and municipal obligations	State and municipal obligations	5,051		(2,721)		2,330		10,678		(5,908)		4,770		State and municipal obligations	1,737		(915)		822		11,888		(6,296)		5,592
Mortgage-backed securities	Mortgage-backed securities	7,356		(17,674)		(10,318)		20,660		(34,607)		(13,947)		Mortgage-backed securities	4,205		(7,351)		(3,146)		24,116		(41,209)		(17,093)
Asset-backed securities	Asset-backed securities	7,356		(6,616)		740		13,361		(13,218)		143		Asset-backed securities	7,218		(6,263)		955		20,737		(19,639)		1,098
Other securities	Other securities	1,545		2,105		3,650		3,424		890		4,314		Other securities	2,197		(700)		1,497		5,354		457		5,811
Total interest on investment securities	Total interest on investment securities	20,685		(15,963)		4,722		46,280		(43,409)		2,871		Total interest on investment securities	14,673		(11,474)		3,199		59,505		(53,435)		6,070
Federal funds sold and short-term securities
purchased under agreements to resell		1		1		2		4		(4)		—
Long-term securities purchased under agreements
to resell		1,107		(1,427)		(320)		939		2,407		3,346
Federal funds sold														Federal funds sold	1		—		1		4		(3)		1
Securities purchased under agreements to resell														Securities purchased under agreements to resell	10,384		(12,624)		(2,240)		10,149		(9,043)		1,106
Interest earning deposits with banks	Interest earning deposits with banks	242		58		300		1,380		(2,002)		(622)		Interest earning deposits with banks	398		336		734		2,059		(1,947)		112
Total interest income	Total interest income	20,290		(22,595)		(2,305)		58,548		(72,949)		(14,401)		Total interest income	15,975		(22,433)		(6,458)		71,460		(92,319)		(20,859)
Interest expense:	Interest expense:													Interest expense:
Deposits:	Deposits:													Deposits:
Savings	Savings	81		(52)		29		185		(142)		43		Savings	66		(46)		20		258		(195)		63
Interest checking and money market	Interest checking and money market	709		(2,871)		(2,162)		2,250		(10,632)		(8,382)		Interest checking and money market	428		(1,837)		(1,409)		2,550		(12,341)		(9,791)
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	(287)		(779)		(1,066)		(595)		(1,773)		(2,368)		Certificates of deposit of less than $100,000	(210)		(612)		(822)		(813)		(2,377)		(3,190)
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	(255)		(2,694)		(2,949)		(635)		(6,487)		(7,122)		Certificates of deposit of $100,000 and over	(236)		(1,826)		(2,062)		(1,158)		(8,026)		(9,184)
Total interest on deposits	Total interest on deposits	248		(6,396)		(6,148)		1,205		(19,034)		(17,829)		Total interest on deposits	48		(4,321)		(4,273)		837		(22,939)		(22,102)
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	101		(366)		(265)		257		(4,980)		(4,723)		agreements to repurchase	117		(43)		74		486		(5,135)		(4,649)
Other borrowings	Other borrowings	(701)		2		(699)		(1,028)		—		(1,028)		Other borrowings	—		1		1		(1,030)		3		(1,027)
Total interest expense	Total interest expense	(352)		(6,760)		(7,112)		434		(24,014)		(23,580)		Total interest expense	165		(4,363)		(4,198)		293		(28,071)		(27,778)
Net interest income, tax equivalent basis	Net interest income, tax equivalent basis	$	20,642	$	(15,835)	$	4,807	$	58,114	$	(48,935)	$	9,179	Net interest income, tax equivalent basis	$	15,810	$	(18,070)	$	(2,260)	$	71,167	$	(64,248)	$	6,919

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Net interest income in the ~~second~~third quarter of 2021 was ~~$208.0~~$214.0 million, ~~an increase~~a decrease of ~~$4.9~~$1.9 million ~~over~~from the ~~second~~third quarter of 2020. On a tax equivalent (T/E) basis, net interest income totaled ~~$211.1~~$216.9 million in the ~~second~~third quarter of 2021, ~~up $4.8~~down $2.3 million ~~over~~from the same period last year and up ~~$2.3~~$5.8 million over the previous quarter. The ~~increase~~decrease in net interest income

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compared to the ~~second~~third quarter of 2020 was mainly due to lower interest income earned on loans (T/E) of $8.1 million and securities purchased under agreements to resell of $2.2 million, partly offset by higher interest income earned on investment securities (T/E) of ~~$4.7~~$3.2 million and lower interest expense on interest bearing deposits ~~and borrowings~~ of ~~$7.1 million, partly offset by lower~~$4.3 million. The decrease in total interest ~~income~~ earned on loans (T/E) was mainly the result of ~~$7.1 million.~~a decline in average balances, partly offset by growth in the average rate earned. The increase in ~~total~~ interest earned on investment securities (T/E) was mainly ~~the result of growth in~~due to higher average balances, partly offset by ~~a decline in~~lower rates earned, while the ~~average rate earned. The~~ decrease in expense on interest bearing deposits ~~and borrowings~~ was a result of a decline in the average rate ~~paid, while the decrease in interest earned on loans (T/E) was mainly the result of lower yields on most loan products.~~paid. The Company's net yield on earning assets (T/E) was ~~2.60%~~2.58% in the current quarter compared to ~~2.94%~~2.97% in the ~~second~~third quarter of 2020.

Total interest income (T/E) decreased ~~$2.3~~$6.5 million from the ~~second~~third quarter of 2020. Interest income on loans (T/E) was ~~$145.6~~$143.9 million during the ~~second~~third quarter of 2021, a decrease of ~~$7.1~~$8.1 million, or ~~4.7%~~5.3%, from the same quarter last year. The decrease in interest income from the same quarter last year was primarily due to a ~~decrease~~decline of 15$1.1 billion, or 6.8%, in average loan balances, partly offset by an increase of five basis points in the average rate ~~earned, coupled with a decline of $164.8 million, or 1.0%, in average loan balances.~~earned. Most of the decrease in interest income occurred in the business, consumer credit card, consumer, and ~~business~~personal real estate loan categories. ~~Interest income on personal real estate and revolving home equity loans also decreased.~~ These decreases were partly offset by an increase in interest income in the construction and land loan category. Business loan interest income decreased $2.6 million due to a decline of $1.3 billion in average balances, partly offset by an increase of 48 basis points in the average rate earned. The decline in business loan average balances was mainly due to a decrease of $930.8 million in Paycheck Protection Program (PPP) loans, while the increase in the yield was partly due to an increase in the PPP loan yield, which was 7.73% in the third quarter of 2021. Consumer credit card loan interest decreased ~~$3.3~~$2.4 million mainly due to a decline of ~~$88.2~~$79.8 million in average ~~balances, coupled with a 54 basis point decline in the average rate earned.~~balances. Consumer loan interest declined ~~$2.5~~$1.9 million due to a decrease of 6448 basis points in the average rate earned, partly offset by ana $48.9 million, or 2.5%, increase ~~of $60.4 million~~ in average ~~balances, or 3.1%. Business~~balances. Personal real estate loan interest income fell ~~$1.1~~$1.5 million due to a 2229 basis point decrease in the average rate earned, partly offset by higher average balances of ~~$52.9~~$53.3 million, or ~~1.8%~~2.0%. Personal real estate loan interest fell $554 thousand from the same quarter last year due to a 38 basis point decline in the average rate earned, partly offset by growth of $221.9 million, or 8.6%, in average balances, and revolving home equity interest income declined $532 thousand due to a decline of $56.2 million in average volume and a 7 basis point decrease in the average rate earned. Business loan interest income declined slightly from the same quarter last year mainly due to a $549.2 million decrease in average loan balances, mostly offset by a 24 basis point increase in the average rate earned. The increase in the yield on business loans was primarily driven by an increase in the yield on Paycheck Protection Program (PPP) loans, which was 3.77% in the second quarter of 2021. These decreases to interest income (T/E) were partly offset by an increase of ~~$870 thousand~~$1.2 million in interest earned on construction and land loans, mostly due to growth of ~~$192.8~~$194.2 million, or ~~21.5%~~19.9%, in average loan balances, partly offset by a decline of 3923 basis points in the average rate earned.

Interest income on investment securities (T/E) was ~~$57.2~~$65.7 million during the ~~second~~third quarter of 2021, which was an increase of ~~$4.7~~$3.2 million over the same quarter last year. The increase in interest income occurred mainly in interest earned on U.S. government and federal agency obligations, which grew ~~$9.0~~$3.3 million mainly due to 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, increased ~~$9.1~~$3.4 million over the same quarter last year. Interest earned on ~~state and municipal obligations~~other securities grew ~~$2.3~~$1.5 million mainly due to distributions from investments in the Company's private equity portfolio. Interest on asset-backed securities rose $955 thousand as a result of ~~growth~~a $1.5 billion increase in the average balance, ~~of $681.2 million, or 53.0%,~~ partly offset by ~~a 56~~an 82 basis point decline in the average rate earned. In addition, interest earned on ~~asset-backed securities rose $740~~state and municipal obligations grew $822 thousand as a result of ~~a $1.3 billion increase~~growth in the average balance of $272.4 million, or 15.4%, partly offset by ~~a 100~~an 18 basis point decline in the average rate earned. ~~Interest earned on other securities grew $3.7 million mainly due to the receipt of a dividend and other distributions from investments in the Company's private equity portfolio.~~ These increases to interest income on investment securities (T/E) were partly offset by a decline in interest earned on mortgage-backed securities, which fell ~~$10.3~~$3.1 million due to a ~~106~~42 basis point decline in the average rate earned, partly offset by an increase of ~~$1.4 billion,~~$855.5 million, or ~~25.5%~~13.7%, in the average balance. At ~~June~~September 30, 2021, the Company recorded a ~~$1.9~~$5.0 million adjustment to premium amortization, which ~~decreased~~increased interest income this quarter to reflect ~~an acceleration in forward~~moderately slower prepayment speed estimates on mortgage-backed securities due to falling interest rates during the quarter. In addition, interest income on government-sponsored enterprise obligations decreased $705 thousand and resulted from a decline in the average balance of $63.7 million and a decrease of 118 basis points in the average rate earned.securities. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was ~~$12.9~~$13.8 billion in the ~~second~~third quarter of 2021, compared to ~~$9.4~~$11.1 billion in the ~~second~~third quarter of 2020.

Interest income on ~~long-term~~ securities purchased under agreements to resell decreased ~~$320 thousand~~$2.2 million from the same quarter last year, due to a decrease of 62307 basis points in the average rate ~~earned.~~earned, partly offset by growth of $783.2 million in the average balance. In ~~May~~the third quarter of 2021, ~~$75~~$250.0 million of securities purchased under agreements to resell (resell agreements), which had been earning interest at an average rate of ~~5.5%~~4.7%, ~~matured. These securities~~matured and were replaced ~~during the second quarter of 2021~~ with ~~$525~~$700.0 million of ~~securities~~resell agreements earning approximately ~~0.29%~~.28%. An additional $250 million, $75 million, and $250 million of securities purchased under agreements to resell will mature in August 2021, November 2021, and February 2022, and these instruments are currently earning interest at average rates of 4.7%, 5.5%, and 6.4%, respectively. Interest income on balances at the Federal Reserve grew ~~$300~~$734 thousand ~~mainly~~ due to an increase of ~~$969.7 million~~$1.6 billion in the average balance ~~invested.~~invested and an increase of five basis points in the average rate earned.

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The average tax equivalent yield on total interest earning assets was ~~2.64%~~2.62% in the ~~second~~third quarter of 2021, down from ~~3.09%~~3.07% in the ~~second~~third quarter of 2020.

Total interest expense decreased ~~$7.1~~$4.2 million compared to the ~~second~~third quarter of 2020 due to a ~~$6.1~~$4.3 million decrease in interest expense on interest bearing deposits, ~~and~~slightly offset by a ~~$964~~$75 thousand ~~decrease~~increase in interest expense on borrowings. The decrease in deposit interest expense resulted mainly from ~~an 18~~a 12 basis point decline in the overall average rate paid. Interest expense on certificates of deposit (CD's) declined ~~$4.0~~$2.9 million due to ~~an 82~~a 55 basis point decrease in the average rate paid, coupled with a decrease of ~~$105.1~~$267.1 million in the average balance. Interest expense on interest checking and money market accounts declined ~~$2.2~~$1.4 million, due to ~~an eight~~a five basis point decrease in the average rate paid, ~~slightly~~partly offset by higher average balances of ~~$1.8~~$1.6 billion.

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Interest expense on borrowings ~~decreased~~increased slightly due to ~~lower rates paid, mainly on customer repurchase agreements, coupled with lower~~higher average balances of ~~other borrowings.~~customer repurchase agreements. The overall average rate incurred on all interest bearing liabilities was ~~.07%~~.06% and ~~.25%~~.17% in the ~~second~~third quarters of 2021 and 2020, respectively.

Net interest income (T/E) for the first ~~six~~nine months of 2021 was ~~$419.8~~$636.7 million compared to ~~$410.7~~$629.8 million for the same period in 2020. For the first ~~six~~nine months of 2021, the net interest margin was ~~2.65%~~2.63% compared to ~~3.12%~~3.07% for the same period in 2020.

Total interest income (T/E) for the first ~~six~~nine months of 2021 ~~increased $9.2~~decreased $20.9 million ~~over~~from the same period last year mainly due to lower interest ~~expense on interest bearing deposits and borrowings, partly offset by lower interest~~ income on loans (T/E)~~. Interest income~~, partly offset by higher interest earned on investment securities (T/E) ~~was also higher in the first six months of 2021 than in the same period last year.~~. Loan interest income (T/E) declined ~~$20.2~~$28.3 million, or ~~6.5%~~6.1%, due to a 4227 basis point decline in the average rate ~~earned, partly offset by a $735.9 million increase in total average loan balances.~~earned. The decrease in loan interest occurred mainly in consumer credit card ~~and revolving home equity~~ loans due to lower average loan balances, coupled with lower average rates. In addition, business real estate, consumer and ~~consumer~~personal real estate loan interest declined due to lower average rates, partly offset by higher average balances, while ~~business loan~~ interest ~~increased as a result of higher~~on home equity loans declined due to lower average balances ~~partly offset by lower~~and rates.

Interest income on investment securities (T/E) grew ~~$2.9~~$6.1 million, mainly due to an increase of ~~$3.8~~$3.4 billion in the average ~~balance.~~balance, partly offset by a decrease of 55 basis points in the average rate earned. Interest earned on U.S. government and federal agency obligations grew ~~$9.4~~$12.7 million, mainly due to higher TIPS interest income. Interest earned on state and municipal obligations increased ~~$4.8~~$5.6 million due to higher average balances, partly offset by lower average rates earned. Interest earned on other securities increased partly due to the receipt of distributions from investments in the Company's private equity portfolio. Interest earned on asset-backed securities also increased over the prior year as a result of higher average balances, partly offset by lower rates earned. Partly offsetting these increases was a decrease in interest earned on mortgage-backed securities, which declined ~~$13.9~~$17.1 million as a result of lower average rates earned, partly offset by higher average balances. Interest earned on government sponsored enterprise obligations also decreased due to declines in both the average balance and the average rate earned.

Interest income on ~~long-term~~ securities purchased under agreements to resell increased ~~$3.3~~$1.1 million due to higher average ~~rates and balances.~~balances, partly offset by lower average rates. Interest earned on balances at the Federal Reserve ~~decreased $622 thousand~~increased slightly due to a 19$1.1 billion increase in the average balance invested, partly offset by a 12 basis point decline in the average rate ~~earned, partly offset by a $927.8 million increase in the average balance invested.~~earned.

Total interest expense for the first ~~six~~nine months of 2021 decreased ~~$23.6~~$27.8 million compared to the same period last year. Interest expense on interest bearing deposits decreased ~~$17.8~~$22.1 million, mainly due to a 2722 basis point decrease in the overall rate paid. Interest expense on interest checking and money market account balances decreased ~~$8.4~~$9.8 million mainly due to a 1612 basis point decrease in rates paid, partly offset by higher average balances. Interest expense on ~~jumbo~~ CD's declined ~~$7.1~~$12.4 million due to ~~a 107~~an 81 basis point decline in rates ~~paid.~~ paid, coupled with lower average balances.

Interest expense on borrowings decreased ~~$5.8~~$5.7 million, mainly due to lower rates paid on customer repurchase agreements. The overall cost of total interest bearing liabilities decreased to ~~.08%~~.07% compared to ~~.38%~~.31% 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.

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Non-Interest Income


		Three Months Ended June 30								Six Months Ended June 30								Three Months Ended September 30										Nine Months Ended September 30
(Dollars in thousands)	(Dollars in thousands)	2021			2020			% change			2021			2020			% change		(Dollars in thousands)	2021			2020			% change			2021			2020			% change
Bank card transaction fees	Bank card transaction fees	$	42,608		$	33,745		26.3	%		$	80,303		$	73,945		8.6	%	Bank card transaction fees	$	42,815		$	37,873		13.0	%		$	123,118		$	111,818		10.1	%
Trust fees	Trust fees	46,257			37,942			21.9			90,384			77,907			16.0		Trust fees	48,950			40,769			20.1			139,334			118,676			17.4
Deposit account charges and other fees	Deposit account charges and other fees	23,988			22,279			7.7			46,563			45,956			1.3		Deposit account charges and other fees	25,161			23,107			8.9			71,724			69,063			3.9
Capital market fees	Capital market fees	3,327			3,772			(11.8)			8,308			7,562			9.9		Capital market fees	3,794			3,194			18.8			12,102			10,756			12.5
Consumer brokerage services	Consumer brokerage services	4,503			3,011			49.6			8,584			7,088			21.1		Consumer brokerage services	4,900			4,011			22.2			13,484			11,099			21.5
Loan fees and sales	Loan fees and sales	7,446			4,649			60.2			17,630			7,884			123.6		Loan fees and sales	6,842			9,769			(30.0)			24,472			17,653			38.6
Other	Other	11,014			12,117			(9.1)			23,416			20,836			12.4		Other	5,044			10,849			(53.5)			28,460			31,685			(10.2)
Total non-interest income	Total non-interest income	$	139,143		$	117,515		18.4	%		$	275,188		$	241,178		14.1	%	Total non-interest income	$	137,506		$	129,572		6.1	%		$	412,694		$	370,750		11.3	%
Non-interest income as a % of total revenue*	Non-interest income as a % of total revenue*	40.1		%	36.7		%				39.9		%	37.4		%			Non-interest income as a % of total revenue*	39.1		%	37.5		%				39.7		%	37.4		%

* 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 ~~six~~nine month periods ended ~~June~~September 30, 2021 and 2020.

Three Months Ended June 30 Six Months Ended June 30
(Dollars in thousands) 2021 2020 % change 2021 2020 % change
Net debit card fees $ 10,505 $ 8,820 19.1 % $ 19,872 $ 18,142 9.5 %
Net credit card fees 4,105 2,903 41.4 7,526 6,390 17.8
Net merchant fees 4,895 4,226 15.8 9,509 8,614 10.4
Net corporate card fees 23,103 17,796 29.8 43,396 40,799 6.4
Total bank card transaction fees $ 42,608 $ 33,745 26.3 % $ 80,303 $ 73,945 8.6 %


	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in thousands)	2021		2020		% change		2021		2020		% change
Net debit card fees	$	10,402	$	9,721	7.0	%	$	30,274	$	27,863	8.7	%
Net credit card fees	3,863		3,359		15.0		11,389		9,749		16.8
Net merchant fees	5,202		4,551		14.3		14,711		13,165		11.7
Net corporate card fees	23,348		20,242		15.3		66,744		61,041		9.3
Total bank card transaction fees	$	42,815	$	37,873	13.0	%	$	123,118	$	111,818	10.1	%

For the ~~second~~third quarter of 2021, total non-interest income amounted to ~~$139.1~~$137.5 million compared to ~~$117.5~~$129.6 million in the same quarter last year, which was an increase of ~~$21.6~~$7.9 million, or ~~18.4%~~6.1%. The increase was mainly due to higher trust fees and net bank card ~~fees and trust~~ fees. Additionally, ~~loan fees and sales,~~ deposit account fees, ~~and~~ consumer brokerage fees and capital market fees grew compared to the same quarter last year, but were partly offset by lower ~~capital market~~loan fees and sales and other non-interest income. Bank card transaction fees for the current quarter grew ~~$8.9~~$4.9 million, or ~~26.3%~~13.0%, over the same period last year, due to growth of ~~$5.3~~$3.1 million in net corporate card fees, ~~$1.7 million~~$681 thousand in net debit card fees, ~~$1.2 million~~$651 thousand in net merchant fees, and $504 thousand in net credit card ~~fees, and $669 thousand in net merchant~~ fees. The growth in net corporate card fees and net credit card fees was mainly due to higher interchange income, partly offset by higher rewards expense. The growth in net debit card fees was mainly due to higher interchange income, while the growth in net merchant fees was mostly due to higher merchant fees, partly offset by higher network expense. Trust fees for the quarter increased ~~$8.3~~$8.2 million, or ~~21.9%~~20.1%, over the same quarter last year, resulting from higher private client and institutional trust fees, which were up ~~23.3%~~22.9% and ~~18.3%~~11.2%, respectively. Compared to the same period last year, deposit account fees increased ~~$1.7~~$2.1 million, or ~~7.7%~~8.9%, mainly due to higher overdraft and return item fees and corporate cash management fees. Capital market fees ~~decreased $445~~increased $600 thousand, or ~~11.8%~~18.8%, while ~~loan fees and sales increased $2.8 million, or 60.2%, due to higher mortgage banking revenue. Consumer~~consumer brokerage service fees increased ~~$1.5~~$889 thousand, or 22.2%, due to growth in annuity and advisory fees. Loan fees and sales decreased $2.9 million, or ~~49.6%~~30.0%, compared to the same quarter last year, mainly due to ~~growth~~a decline in ~~annuity and advisory fees.~~mortgage banking revenue. Other non-interest income decreased ~~$1.1~~$5.8 million, or ~~9.1%~~53.5%, mainly due to ~~a decline of $2.8 million in~~lower cash sweep commissions ~~partly offset by increases of $773 thousand and $443 thousand in check sales and wire fees~~ and tax credit sales fees ~~respectively. In addition, gains on asset sales increased $431 thousand mainly due to a $1.3~~of $1.6 million ~~gain on the sale of a branch location, partly offset by a~~and $1.1 million, ~~lease impairment.~~respectively. Additionally a $2.0 million loss on an equity method investment was recorded this quarter.

Non-interest income for the first ~~six~~nine months of 2021 was ~~$275.2~~$412.7 million compared to ~~$241.2~~$370.8 million in 2020, resulting in an increase of ~~$34.0~~$41.9 million, or ~~14.1%~~11.3%. Bank card fees increased ~~$6.4~~$11.3 million, or ~~8.6%~~10.1%, due to growth of ~~$2.6~~$5.7 million in net corporate card fees, ~~$1.7~~$2.4 million in net debit card fees, ~~$1.1~~$1.6 million in net credit card fees, and ~~$895 thousand~~$1.5 million in net merchant fees. Trust fee income increased ~~$12.5~~$20.7 million, or ~~16.0%~~17.4%, as a result of growth in private client and institutional trust fee income. Deposit account fees increased ~~$607 thousand~~$2.7 million due to higher corporate cash management fees ~~partly offset by lower~~and overdraft and return item fees, ~~and~~partly offset by lower personal account deposit fees. For the ~~six~~nine months ended ~~June~~September 30, 2021, corporate cash management fees comprised ~~52.9%~~51.9% of total deposit fees, while overdraft fees comprised ~~22.6%~~23.9% of total deposit fees. Capital market fees increased ~~$746 thousand,~~$1.3 million, while consumer brokerage service fees grew ~~$1.5~~$2.4 million, or ~~21.1%~~21.5%, as a result of higher annuity and advisory fees. Loan fees and sales increased ~~$9.7~~$6.8 million, or ~~123.6%~~38.6%, mainly due to growth in mortgage banking revenue. Other income ~~increased $2.6~~decreased $3.2 million, mainly due to lower cash sweep commissions, tax credit sales fees and a $2.6 million loss on an equity method investment. These decreases were partly offset by gains recorded on branch sales and higher interest rate swap fees, check sales and wire fees ~~interest rate swap fees~~ and ~~tax credit sales~~international fees. In addition, 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, increased $2.4 million over the same period last year,

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~~affecting both other income and other expense. These increases were partly offset by lower cash sweep commissions and a lease impairment.~~

Investment Securities Gains (Losses), Net


		Three Months Ended June 30				Six Months Ended June 30					Three Months Ended September 30				Nine Months Ended September 30
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2021		2020		2021		2020
Net gains on sales of available for sale debt securities	Net gains on sales of available for sale debt securities	$	—	$	3,291	$	—	$	3,291	Net gains on sales of available for sale debt securities	$	—	$	13,674	$	—	$	16,965
Net gains on sales of equity securities	Net gains on sales of equity securities	—		—		—		2		Net gains on sales of equity securities	—		—		—		2
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	16,754		(7,497)		26,642		(20,505)		Net gains (losses) on sales and fair value adjustments of private equity investments	12,971		2,389		39,613		(18,116)

Fair value adjustments on equity securities, net	Fair value adjustments on equity securities, net	50		77		15		(218)		Fair value adjustments on equity securities, net	137		92		152		(126)

Total investment securities gains (losses), net	Total investment securities gains (losses), net	$	16,804	$	(4,129)	$	26,657	$	(17,430)	Total investment securities gains (losses), net	$	13,108	$	16,155	$	39,765	$	(1,275)

Net gains and losses on investment securities, which were recognized in earnings during the three months ended ~~June~~September 30, 2021 and 2020, are shown in the table above. Net securities gains of ~~$16.8~~$13.1 million were reported in the ~~second~~third quarter of 2021, compared to net ~~losses~~gains of ~~$4.1~~$16.2 million in the same period last year. The net gains in the ~~second~~third quarter of 2021 were primarily comprised of ~~$16.7~~$13.0 million of net gains in fair value on the Company’s private equity investments. The net ~~losses~~gains on investment securities for the same quarter last year were mainly comprised of ~~$7.5~~net gains of $13.7 million realized on sales of available for sale debt securities and $2.4 million of net ~~losses~~gains in fair value on the Company’s private equity investments, as the economic conditions resulting from the COVID-19 pandemic negatively impacted investment valuations, partly offset by gains of $3.3 million on sales of available for sale debt securities.investments.

Net gains on investment securities of ~~$26.7~~$39.8 million were recognized in earnings for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to net losses of ~~$17.4~~$1.3 million for the same period in 2020. Net gains in the first ~~half~~nine months of 2021 were mainly comprised of a gain of $1.6 million realized on the sale of a private equity investment and ~~$25.0~~$38.0 million of net gains in fair value on private equity investments. Net losses in the first ~~half~~nine months of 2020 were mainly comprised of fair value adjustments on private equity investments, ~~partly~~which were largely offset by net gains realized on sales of available for sale debt securities. 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 expense of ~~$5.2~~$7.7 million during the first ~~six~~nine months of 2021 and income of ~~$3.7~~$3.2 million during the first ~~six~~nine months of 2020.

Non-Interest Expense


		Three Months Ended June 30						Six Months Ended June 30							Three Months Ended September 30								Nine Months Ended September 30
(Dollars in thousands)	(Dollars in thousands)	2021		2020		% change			2021		2020		% change			(Dollars in thousands)	2021		2020		% change			2021		2020		% change
Salaries and employee benefits	Salaries and employee benefits	$	130,751	$	126,759	3.1	%		$	259,784	$	255,696	1.6	%		Salaries and employee benefits	$	132,824	$	127,308	4.3	%		$	392,608	$	383,004	2.5	%
Net occupancy	Net occupancy	11,527		11,269		2.3			23,548		23,017		2.3			Net occupancy	12,329		12,058		2.2			35,877		35,075		2.3
Equipment	Equipment	4,605		4,755		(3.2)			8,958		9,576		(6.5)			Equipment	4,440		4,737		(6.3)			13,398		14,313		(6.4)
Supplies and communication	Supplies and communication	4,033		4,427		(8.9)			8,158		9,085		(10.2)			Supplies and communication	4,530		4,141		9.4			12,688		13,226		(4.1)
Data processing and software	Data processing and software	24,954		23,837		4.7			50,417		47,392		6.4			Data processing and software	25,598		23,610		8.4			76,015		71,002		7.1
Marketing	Marketing	5,680		3,801		49.4			10,838		9,780		10.8			Marketing	5,623		4,926		14.1			16,461		14,706		11.9
Other	Other	16,576		12,664		30.9			28,996		26,664		8.7			Other	26,276		14,078		86.6			55,272		40,742		35.7
Total non-interest expense	Total non-interest expense	$	198,126	$	187,512	5.7	%		$	390,699	$	381,210	2.5	%		Total non-interest expense	$	211,620	$	190,858	10.9	%		$	602,319	$	572,068	5.3	%

Non-interest expense for the ~~second~~third quarter of 2021 amounted to ~~$198.1~~$211.6 million, an increase of ~~$10.6~~$20.8 million, or ~~5.7%~~10.9%, compared to expense of ~~$187.5~~$190.9 million in the ~~second~~third quarter of last year. The increase in expense was mainly due to ~~lower deferred origination costs,~~non-recurring litigation settlement expense and higher salaries and benefits expense and ~~higher marketing~~data processing and software expense. Salaries and employee benefits expense increased ~~$1.3~~$5.5 million, or ~~1.2%~~4.3%, ~~driven by growth in~~mostly due to higher incentive compensation, partly offset by declines in full and part-time salaries and overtime pay expense. Employee benefits expense totaled $19.0 million, reflecting an increase of $2.7 million, or 16.5%, mainly as a result of higher healthcare expense, partly offset by lower payroll taxes and other benefits expense. compensation. Full-time equivalent employees totaled ~~4,590~~4,582 at ~~June~~September 30, 2021, compared to ~~4,856~~4,825 at ~~June~~September 30, 2020. Occupancy ~~expense grew $258 thousand, while~~and supplies and communication expense grew $271 thousand and $389 thousand, respectively, while equipment expense declined ~~$394 thousand and $150 thousand, respectively.~~$297 thousand. Data processing and software expense increased ~~$1.1~~$2.0 million, or ~~4.7%~~8.4%, due to higher bank card processing fees and increased cost for service providers, while marketing expense grew ~~$1.9 million,~~$696 thousand, or ~~49.4%, in support of strategic initiatives and to grow the customer base.~~14.1%. Other non-interest expense increased ~~$3.9~~$12.2 million, ~~or 30.9%,~~ mainly due to ~~lower deferred loan origination costs of $4.0~~$8.2 million ~~higher FDIC insurance expense of $502 thousand, community service expense of $410 thousand~~in non-recurring litigation settlement costs. Additionally, legal and professional fees and travel and entertainment expense ~~of $476 thousand. These increases to expense were partly offset by a $1.0~~increased $1.3 million ~~reduction in impairment expense on mortgage servicing rights.~~and $1.1 million, respectively.

~~Table of Contents~~

Non-interest expense amounted to ~~$390.7~~$602.3 million for the first ~~six~~nine months of 2021, an increase of ~~$9.5~~$30.3 million, or ~~2.5%~~5.3%, over the first ~~six~~nine months of 2020. Salaries and benefits expense increased ~~$4.1~~$9.6 million, or ~~1.6%~~2.5%, mainly due to higher costs for incentive compensation and healthcare expense, partly offset by lower full and part-time salaries ~~expense and other benefits~~ expense. Occupancy expense increased ~~$531~~$802 thousand, ~~or 2.3%,~~ while ~~equipment expense decreased $618 thousand, or 6.5%. Supplies~~supplies and communication expense ~~declined $927~~decreased $538 thousand. Equipment expense decreased $915 thousand ~~or 10.2%,~~ mainly due to lower ~~office supplies~~depreciation and ~~postage~~service contract expense. Data processing expense increased ~~$3.0~~$5.0 million, or ~~6.4%~~7.1%, mostly due to higher costs for service providers, while marketing expense grew ~~$1.1~~$1.8 million, or ~~10.8%~~11.9%.

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Other non-interest expense increased ~~$2.3~~$14.5 million, ~~or 8.7%,~~ mainly due to the non-recurring litigation settlement mentioned above, lower deferred loan origination costs and higher FDIC insurance ~~expense, in addition to the previously mentioned fair value equity adjustments of $2.4 million on the Company's deferred compensation plan assets.~~and legal fees expense. These increases to expense were partly offset by lower travel and entertainment expense and a reduction in impairment expense on the Company's mortgage servicing rights.

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


		Three Months Ended						Six Months Ended June 30					Three Months Ended						Nine Months Ended September 30
		June 30, 2021		Mar. 31, 2021		June 30, 2020		2021		2020			Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		2021		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	$	200,527	$	220,834	$	171,653	$	220,834	$	160,682	Balance at end of prior period	$	172,395	$	200,527	$	240,744	$	220,834	$	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	$	200,527	$	220,834	$	171,653	$	220,834	$	139,643	Balance at beginning of period	$	172,395	$	200,527	$	240,744	$	220,834	$	139,643
Provision for credit losses on loans	Provision for credit losses on loans	(27,433)		(10,355)		77,491		$	(37,788)	$	120,359	Provision for credit losses on loans	(5,961)		(27,433)		3,200		$	(43,749)	$	123,559
Net loan charge-offs (recoveries):	Net loan charge-offs (recoveries):											Net loan charge-offs (recoveries):
Commercial:	Commercial:											Commercial:
Business	Business	(4,909)		(4)		3,249		(4,913)		2,876		Business	65		(4,909)		208		(4,848)		3,084
Real estate-construction and land	Real estate-construction and land	—		1		—		1		—		Real estate-construction and land	—		—		(1)		1		(1)
Real estate-business	Real estate-business	(85)		20		(6)		(65)		(27)		Real estate-business	(5)		(85)		(13)		(70)		(40)
Commercial net loan charge-offs (recoveries)	Commercial net loan charge-offs (recoveries)	(4,994)		17		3,243		(4,977)		2,849		Commercial net loan charge-offs (recoveries)	60		(4,994)		194		(4,917)		3,043
Personal Banking:	Personal Banking:											Personal Banking:
Real estate-personal	Real estate-personal	(16)		15		(71)		(1)		(75)		Real estate-personal	(26)		(16)		(198)		(27)		(273)
Consumer	Consumer	378		763		1,362		1,141		3,073		Consumer	496		378		211		1,637		3,284
Revolving home equity	Revolving home equity	28		23		(34)		51		(72)		Revolving home equity	(22)		28		(86)		29		(158)
Consumer credit card	Consumer credit card	5,155		8,981		3,584		14,136		12,741		Consumer credit card	2,908		5,155		7,263		17,044		20,004
Overdrafts	Overdrafts	148		153		316		301		742		Overdrafts	243		148		200		544		942
Personal banking net loan charge-offs	Personal banking net loan charge-offs	5,693		9,935		5,157		15,628		16,409		Personal banking net loan charge-offs	3,599		5,693		7,390		19,227		23,799
Total net loan charge-offs	Total net loan charge-offs	699		9,952		8,400		10,651		19,258		Total net loan charge-offs	3,659		699		7,584		14,310		26,842
Balance at end of period	Balance at end of period	$	172,395	$	200,527	$	240,744	$	172,395	$	240,744	Balance at end of period	$	162,775	$	172,395	$	236,360	$	162,775	$	236,360
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	$	42,430	$	38,307	$	32,250	$	38,307	$	1,075	Balance at end of prior period	$	24,208	$	42,430	$	35,299	$	38,307	$	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	42,430		38,307		32,250		38,307		17,165		Balance at beginning of period	24,208		42,430		35,299		38,307		17,165
Provision for credit losses on unfunded lending commitments	Provision for credit losses on unfunded lending commitments	(18,222)		4,123		3,049		(14,099)		18,134		Provision for credit losses on unfunded lending commitments	(1,424)		(18,222)		(99)		(15,523)		18,035
Balance at end of period	Balance at end of period	24,208		42,430		35,299		24,208		35,299		Balance at end of period	22,784		24,208		35,200		22,784		35,200
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	196,603	$	242,957	$	276,043	$	196,603	$	276,043	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	185,559	$	196,603	$	271,560	$	185,559	$	271,560

Three Months Ended Six Months Ended June 30
June 30, 2021 Mar. 31, 2021 June 30, 2020 2021 2020
Annualized net loan charge-offs (recoveries)*:
Commercial:
  Business (.32 %) — % .19 % (.16 %) .09 %
  Real estate-construction and land — — — — —
  Real estate-business (.01) — — — —
Commercial net loan charge-offs (recoveries) (.19) — .12 (.10) .06
Personal Banking:
  Real estate-personal — — (.01) — (.01)
  Consumer .08 .16 .28 .12 .32
  Revolving home equity .04 .03 (.04) .04 (.04)
  Consumer credit card 3.59 5.98 2.17 4.81 3.68
  Overdrafts 15.89 17.50 43.65 16.67 42.90
Personal banking net loan charge-offs .40 .71 .37 .55 .60
Total annualized net loan charge-offs .02 % .25 % .21 % .13 % .25 %

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	Three Months Ended						Nine Months Ended September 30
	Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		2021		2020
Annualized net loan charge-offs (recoveries)*:
Commercial:
Business	—	%	(.32	%)	.01	%	(.11	%)	.07	%
Real estate-construction and land	—		—		—		—		—
Real estate-business	—		(.01)		—		—		—
Commercial net loan charge-offs (recoveries)	—		(.19)		.01		(.06)		.04
Personal Banking:
Real estate-personal	—		—		(.03)		—		(.01)
Consumer	.10		.08		.04		.11		.22
Revolving home equity	(.03)		.04		(.10)		.01		(.06)
Consumer credit card	2.04		3.59		4.47		3.91		3.93
Overdrafts	18.87		15.89		29.59		17.59		39.16
Personal banking net loan charge-offs	.25		.40		.52		.45		.57
Total annualized net loan charge-offs	.10	%	.02	%	.18	%	.12	%	.23	%

* 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 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 7 of the 2020 Annual Report on Form 10-K.

Net loan charge-offs in the ~~second~~third quarter of 2021 amounted to ~~$699 thousand,~~$3.7 million, compared to ~~$10.0 million~~$699 thousand in the prior quarter and ~~$8.4~~$7.6 million in the ~~second~~third quarter of last year. During the ~~second~~third quarter of 2021, the Company recorded net ~~recoveries~~charge-offs on commercial loans of ~~$5.0 million,~~$60 thousand, compared to net ~~charge-offs~~recoveries of ~~$17 thousand~~$5.0 million in the prior quarter. ~~Net~~Commercial loan net recoveries ~~on commercial loans~~in the prior quarter resulted from recoveries on two business ~~loans in the current quarter.~~ ~~In addition to commercial~~loans. Consumer credit card loan net ~~recoveries, net~~ charge-offs ~~on consumer credit card loans declined $3.8~~decreased $2.2 million in the ~~second~~third quarter of 2021, compared to the prior quarter. The decrease in consumer credit card net charge-offs compared to prior quarter was mainly due to higher charge-offs in the first quarter of 2021 that resulted from the expiration of a COVID-related relief program. The program, offered during 2020, 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 ~~second~~third quarter of 2021 decreased ~~$7.7~~$3.9 million. The decrease in net charge-offs during the ~~second~~third quarter of 2021 compared to the same quarter last year was driven by ~~$4.9~~a $4.4 million decrease in ~~net recoveries on business loans and $984 thousand in lower net charge-offs on consumer loans, partly offset by $1.6 million in higher~~ net charge-offs on consumer credit card loans.

For the three months ended ~~June~~September 30, 2021, annualized net charge-offs on average consumer credit card loans totaled ~~3.59%~~2.04%, compared to ~~5.98%~~3.59% in the previous quarter and ~~2.17%~~4.47% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to ~~.08%~~.10%, compared to ~~.16%~~.08% in the prior quarter and ~~.28%~~.04% in the same period last year. In the ~~second~~third quarter of 2021, total annualized net loan charge-offs were ~~.02%~~.10%, compared to ~~.25%~~.02% in the previous quarter and ~~.21%~~.18% in the same period last year.

The provision for credit losses, which includes the provision for loans and unfunded lending commitments, was a benefit of $45.7 million for the second quarter of 2021, compared to a benefit of $6.2 million in the first quarter of 2021 and an expense of $80.5 million in the second quarter of 2020. In the current quarter, the provision for credit losses on loans was a benefit of $27.4 million, which was a $17.1 million increase over the $10.4 million benefit in the prior quarter. The provision for credit losses on loans in the current quarter decreased $104.9 million compared to the provision expense in the second quarter of 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 2021. As a result, the ~~first~~provision for credit losses, which includes the provision for loans and unfunded lending commitments, was a benefit of $7.4 million for the third quarter of 2021, compared to a benefit of $45.7 million in the second ~~quarters~~quarter of ~~2021.~~2021 and expense of $3.1 million in the third quarter of 2020. In the current quarter, the provision for credit losses on loans was a benefit of $6.0 million, which was a $21.5 million decrease from the $27.4 million benefit recorded in the prior quarter. The provision for credit losses on loans in the current quarter decreased $9.2 million compared to the provision expense in the third quarter of 2020.

For the ~~six~~nine months ended ~~June~~September 30, 2021, net loan charge-offs totaled ~~$10.7~~$14.3 million, compared to ~~$19.3~~$26.8 million in the same period last year. During the first ~~six~~nine months of 2021, the Company recorded net recoveries of ~~$5.0~~$4.9 million on commercial loans, compared to net loan charge-offs of ~~$2.8~~$3.0 million in the first ~~six~~nine months of 2020. In addition, consumer

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loan net charge-offs declined ~~$1.9~~$1.6 million ~~while~~and consumer credit card loan net charge-offs ~~increased $1.4~~declined $3.0 million in the first ~~six~~nine months of 2021, compared to the ~~first six months of the prior~~same period last year. The provision for credit losses on loans for the first ~~six~~nine months of 2021 was a benefit of ~~$37.8 million. In~~$43.8 million, reducing the ~~same period last year,~~allowance for credit losses on loans. The allowance for credit losses on loans as of September 30, 2020 was $236.4 million, and the provision expense ~~totaled $120.4 million and exceeded net loan charge-offs by $101.1~~for the nine months ended September 30, 2020 was $123.6 million.

In the current quarter, the provision for credit losses on unfunded lending commitments was a benefit of ~~$18.2~~$1.4 million, reflecting a ~~$22.3~~$16.8 million ~~decrease from~~increase over the provision ~~of $4.1 million~~ in the prior quarter (which was a benefit of $18.2 million), and decreased ~~$21.3~~$1.3 million compared to the ~~second~~third quarter of 2020. At ~~June~~September 30, 2021, the liability for unfunded lending commitments was ~~$24.2~~$22.8 million, compared to ~~$42.4~~$24.2 million at ~~March 31,~~June 30, 2021 and ~~$35.3~~$35.2 million at ~~June~~September 30, 2020. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 2 for further discussion of the model inputs utilized in the Company's estimate of credit losses.

For the quarter ended ~~June~~September 30, 2021, the allowance for credit losses on loans decreased ~~$28.1~~$9.6 million, compared to the allowance for credit losses on loans as of ~~March 31,~~June 30, 2021. The decrease was primarily due to the improved economic forecast.

~~Table of Contents~~

The allowance for credit losses on commercial loans ~~decreased $21.6 million as a result of the improved economic forecast and lower than expected net charge-offs. Additionally,~~increased slightly by $126 thousand, while the allowance for credit losses related to personal banking loans, including consumer credit card loans, decreased ~~$6.5~~$9.7 million. While the forecast continued to improve, the allowance considered the uncertainty of future potential COVID-19 disruptions on both the consumer and commercial portfolios. At ~~June~~September 30, 2021, the allowance for credit losses on loans amounted to ~~$172.4~~$162.8 million, compared to $172.4 million and $200.5 million at June 30, 2021 and ~~$220.8 million at~~ March 31, 2021, ~~and December 31, 2020,~~ respectively, and was ~~1.10%~~1.07%, ~~1.22%~~1.10% and ~~1.35%~~1.22% of total loans at September 30, 2021, June 30, 2021 and March 31, 2021, ~~and December 31, 2020,~~ respectively.

The Company considers the allowance for credit losses on loans and the liability for unfunded commitments adequate to cover losses expected in the loan portfolio, including unfunded commitments, at ~~June~~September 30, 2021.

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 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.

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) June 30, 2021 December 31, 2020
Non-accrual loans $ 11,166 $ 26,540
Foreclosed real estate 229 93
Total non-performing assets $ 11,395 $ 26,633
Non-performing assets as a percentage of total loans .07 % .16 %
Non-performing assets as a percentage of total assets .03 % .08 %
Total loans past due 90 days and still accruing interest $ 12,338 $ 22,190


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







Non-accrual loans	$	10,421		$	26,540
Foreclosed real estate	115			93
Total non-performing assets	$	10,536		$	26,633
Non-performing assets as a percentage of total loans	.07		%	.16		%
Non-performing assets as a percentage of total assets	.03		%	.08		%








Total loans past due 90 days and still accruing interest	$	10,496		$	22,190

Non-accrual loans totaled ~~$11.2~~$10.4 million at ~~June~~September 30, 2021, a decrease of ~~$15.4~~$16.1 million from the balance at December 31, 2020. The decrease occurred mainly in business loans which decreased ~~$13.7~~$14.2 million. At ~~June~~September 30, 2021,

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non-accrual loans were comprised of business ~~(79.1%~~(79.6%), personal real estate ~~(15.0%~~(14.9%), and business real estate ~~(5.9%~~(5.5%) loans. Foreclosed real estate totaled ~~$229~~$115 thousand at ~~June~~September 30, 2021, an increase of ~~$136~~$22 thousand when compared to December 31, 2020. Total loans past due 90 days or more and still accruing interest were ~~$12.3~~$10.5 million as of ~~June~~September 30, 2021, a decrease of ~~$9.9~~$11.7 million from December 31, 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 ~~$386.2~~$335.7 million at ~~June~~September 30, 2021 compared with $361.8 million at December 31, 2020, resulting in ~~an increase~~a decrease of ~~$24.5~~$26.1 million, or ~~6.8%~~7.2%.

(In thousands)
June 30, 2021 December 31, 2020
Potential problem loans:
  Business $ 84,410 $ 133,039
  Real estate – construction and land 41,393 29,378
  Real estate – business 260,039 198,666
  Real estate – personal 389 670
Total potential problem loans $ 386,231 $ 361,753


(In thousands)	September 30, 2021		December 31, 2020
Potential problem loans:
Business	$	45,710	$	133,039
Real estate – construction and land	40,553		29,378
Real estate – business	249,017		198,666
Real estate – personal	414		670

Total potential problem loans	$	335,694	$	361,753

At ~~June~~September 30, 2021, the Company had ~~$118.4~~$129.9 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 restructurings" section in Note 2 to the consolidated financial statements. This balance includes certain commercial loans totaling ~~$97.8~~$110.6 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 ~~7.1%~~8.3% of total loans outstanding at ~~June~~September 30, 2021. The largest component of construction and land loans was commercial construction, which increased ~~$92.1~~$231.6 million during the ~~six~~nine months ended ~~June~~September 30, 2021. At ~~June~~September 30, 2021, multi-family residential construction loans totaled approximately ~~$234.2~~$294.4 million, or ~~25.5%~~27.7%, of the commercial construction loan portfolio, compared to $238.0 million, or 28.8%, at December 31, 2020.

(Dollars in thousands) June 30,
2021

% of Total
% of
Total
Loans
December 31, 2020

% of Total
% of
Total
Loans
Commercial construction $ 919,621 83.3 % 5.9 % $ 827,546 81.0 % 5.1 %
Residential construction 104,245 9.4 .7 94,729 9.3 .6
Residential land and land development 42,252 3.9 .3 59,299 5.8 .4
Commercial land and land development 37,543 3.4 .2 40,021 3.9 .2
Total real estate - construction and land loans $ 1,103,661 100.0 % 7.1 % $ 1,021,595 100.0 % 6.3 %


(Dollars in thousands)	September 30, 2021		% of Total		% of Total Loans		December 31, 2020		% of Total		% of Total Loans
Commercial construction	$	1,059,113	84.2	%	7.0	%	$	827,546	81.0	%	5.1	%
Residential construction	103,825		8.3		.7		94,729		9.3		.6
Commercial land and land development	48,754		3.9		.3		40,021		3.9		.2
Residential land and land development	46,144		3.6		.3		59,299		5.8		.4
Total real estate - construction and land loans	$	1,257,836	100.0	%	8.3	%	$	1,021,595	100.0	%	6.3	%

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Real Estate – Business Loans

Total business real estate loans were ~~$3.0~~$2.9 billion at ~~June~~September 30, 2021 and comprised ~~19.3%~~19.4% 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 ~~June~~September 30, 2021, ~~37.4%~~38.0% 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.

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(Dollars in thousands)	(Dollars in thousands)	June 30, 2021		% of Total		% of Total Loans		December 31, 2020		% of Total		% of Total Loans		(Dollars in thousands)	September 30, 2021		% of Total		% of Total Loans		December 31, 2020		% of Total		% of Total Loans
Owner-occupied	Owner-occupied	$	1,127,827	37.4	%	7.2	%	$	1,145,862	37.9	%	7.0	%	Owner-occupied	$	1,115,184	38.0	%	7.4	%	$	1,145,862	37.9	%	7.0	%
Office	Office	365,937		12.1		2.3		385,392		12.7		2.4		Office	362,440		12.3		2.4		385,392		12.7		2.4
Retail														Retail	321,768		11.0		2.1		349,461		11.5		2.1
Multi-family	Multi-family	351,734		11.7		2.2		301,161		10.0		1.8		Multi-family	301,734		10.3		2.0		301,161		10.0		1.8
Retail		328,674		10.9		2.1		349,461		11.5		2.1
Hotels	Hotels	268,013		8.9		1.7		271,189		9.0		1.7		Hotels	265,247		9.0		1.8		271,189		9.0		1.7
Senior living	Senior living	184,603		6.1		1.2		195,800		6.5		1.2		Senior living	185,116		6.3		1.2		195,800		6.5		1.2
Farm	Farm	166,003		5.5		1.1		169,692		5.6		1.0		Farm	162,660		5.5		1.1		169,692		5.6		1.0
Industrial	Industrial	102,636		3.4		.7		78,341		2.6		.5		Industrial	98,369		3.3		.6		78,341		2.6		.5
Other	Other	122,133		4.0		.8		129,219		4.2		.8		Other	125,334		4.3		.8		129,219		4.2		.8
Total real estate - business loans	Total real estate - business loans	$	3,017,560	100.0	%	19.3	%	$	3,026,117	100.0	%	18.5	%	Total real estate - business loans	$	2,937,852	100.0	%	19.4	%	$	3,026,117	100.0	%	18.5	%

Revolving Home Equity Loans

The Company had ~~$283.6~~$281.4 million in revolving home equity loans at ~~June~~September 30, 2021 that were generally collateralized by residential real estate. Most of these loans ~~(93.2%~~(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 ~~June~~September 30, 2021, the outstanding principal of loans with an original LTV higher than 80% was ~~$31.2~~$31.3 million, or ~~11.0%~~11.1% of the portfolio, compared to $32.1 million as of December 31, 2020. Total revolving home equity loan balances over 30 days past due were ~~$1.9~~$2.0 million at ~~June~~September 30, 2021 ~~compared to $2.0 million at~~and December 31, 2020, and there were no revolving home equity loans on non-accrual status at ~~June~~September 30, 2021 or December 31, 2020. The weighted average FICO score for the total current portfolio balance is ~~793.~~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 2021 through 2023, approximately ~~15.9%~~15% of the Company's current outstanding balances are expected to mature. Of these balances, approximately ~~92%~~93% 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. Auto loans comprised 43% of the consumer loan portfolio at ~~June~~September 30, 2021, and outstanding balances for auto loans were ~~$884.9~~$874.2 million and $879.9 million at ~~June~~September 30, 2021 and December 31, 2020, respectively. The balances over 30 days past due amounted to ~~$6.4~~$6.9 million at ~~June~~September 30, 2021 compared to $9.2 million at December 31, 2020, and comprised ~~.7%~~.8% and 1.0% of the outstanding balances of these loans at ~~June~~September 30, 2021 and December 31, 2020, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2021, ~~$228.5~~$324.5 million of new auto loans were originated, compared to ~~$206.5~~$321.1 million during the first ~~six~~nine months of 2020. At ~~June~~September 30, 2021, the automobile loan portfolio had a weighted average FICO score of ~~760,~~758, and net charge-offs on auto loans were ~~.11%~~.1% of average auto loans at ~~June~~September 30, 2021.

The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 11% of the consumer loan portfolio at ~~June~~September 30, 2021. Losses on these loans have historically been low, and the Company saw a ~~small~~net charge-off of $24 thousand in 2021. Private banking loans comprised 28% of the consumer loan portfolio at ~~June~~September 30, 2021. The Company's private banking loans are generally well-collateralized and at ~~June~~September 30, 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 ~~$673~~$958 thousand in the first ~~six~~nine months of 2021 and were ~~.2%~~.1% of the average balances of these loans at ~~June~~September 30, 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 ~~June~~September 30, 2021 of ~~$586.4~~$570.0 million in consumer credit card loans outstanding, approximately ~~$96.9~~$92.9 million, or ~~16.5%~~16.3%, carried a low promotional rate. Within the next six months, ~~$39.0~~$39.9 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.

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Oil and Gas Energy Lending

The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled ~~$238.8~~$230.4 million, or 1.5% of total loans at ~~June~~September 30, 2021, an increase of ~~$60.1~~$51.6 million from year end 2020, as shown in the table below.

(In thousands) June 30, 2021 December 31, 2020 Unfunded commitments at June 30, 2021
Extraction $ 157,050 $ 133,866 $ 130,827
Mid-stream shipping and storage 44,075 15,634 64,848
Downstream distribution and refining 23,482 18,365 17,738
Support activities 14,236 10,864 15,495
Total energy lending portfolio $ 238,843 $ 178,729 $ 228,908


(In thousands)	September 30, 2021		December 31, 2020		Unfunded commitments at September 30, 2021
Extraction	$	165,883	$	133,866	$	147,581
Mid-stream shipping and storage	38,355		15,634		69,398
Downstream distribution and refining	13,488		18,365		25,710
Support activities	12,638		10,864		16,099
Total energy lending portfolio	$	230,364	$	178,729	$	258,788

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

(Dollars in thousands) June 30, 2021 % of Energy Lending December 31, 2020 % of Energy Lending
Pass $ 215,904 90.4 % $ 126,380 70.7 %
Special mention 1,999 0.8 17,978 10.1
Substandard 18,362 7.7 31,676 17.7
Non-accrual 2,578 1.1 2,695 1.5
Total $ 238,843 100.0 % $ 178,729 100.0 %


(Dollars in thousands)	September 30, 2021		% of Energy Lending		December 31, 2020		% of Energy Lending
Pass	$	216,674	94.0	%	$	126,380	70.7	%
Special mention	1,999		.9		17,978		10.1
Substandard	9,172		4.0		31,676		17.7
Non-accrual	2,519		1.1		2,695		1.5
Total	$	230,364	100.0	%	$	178,729	100.0	%

Energy lending balances classified as substandard and non-accrual represented ~~7.7%~~4.0% and 1.1% respectively, of total energy lending loan balances at ~~June~~September 30, 2021. The Company saw a small recovery on energy loans during the ~~six~~nine months ended ~~June~~September 30, 2021. The Company recorded $15 thousand of net loan charge-offs on energy loans for the year ended December 31, 2020.

Small Business Lending

During April 2020, in response to the COVID-19 crisis, the federal government created the 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 during 2020 (round 1) and $402.1 million during 2021 (round 2). The balance of PPP loans at ~~June~~September 30, 2021 was ~~$854.3~~$307.9 million, a decrease of ~~$572.6~~$546.4 million compared to balances at ~~March 31,~~June 30, 2021. The change in PPP loan balances reflected a decline of ~~$639.5~~$407.6 million in loan balances from ~~March 31,~~June 30, 2021 (round 1), ~~partially offset by~~along with a ~~$67.0~~decline of $138.8 million ~~net increase of~~in loan balances ~~during the second quarter of~~from June 30, 2021 (round 2). Since the start of the PPP, the Company has recognized ~~$40.5~~$51.4 million of a total of ~~$60.2~~$60.4 million of PPP fees as of ~~June~~September 30, 2021, including ~~$9.8~~$10.9 million during the ~~second~~third quarter of 2021.

The Company understands that the PPP 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 is five years, however, the Company believes that almost all of the loan balances are expected to be forgiven by the SBA. As of September 30, 2021, 97% of round 1 and 35% of round 2 PPP loan balances have been forgiven. The process of loan forgiveness began during the third quarter of 2020, and the Company believes most of the remaining PPP loan balances will be forgiven ~~during~~in the ~~remainder~~fourth quarter of 2021.

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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 ~~June~~September 30, 2021 and December 31, 2020. Additional unfunded commitments at ~~June~~September 30, 2021 totaled ~~$1.7~~$1.6 billion.

Income Taxes

Income tax expense was $34.7 million in the third quarter of 2021, compared to $45.2 million in the second quarter of 2021 ~~compared to $32.1~~and $34.4 million in the ~~first quarter of 2021 and $9.7 million in the second~~third quarter of 2020. The Company's effective tax rate, including the effect of non-controlling interest, was 22.1% in the third quarter of 2021, compared to 21.8% in the second quarter of 2021 ~~compared to 19.7%~~and 20.6% in the ~~first quarter of 2021 and 19.5% in the second~~third quarter of 2020. For the ~~six~~nine months ended ~~June~~September 30, 2021, income tax expense was ~~$77.3~~$111.9 million, compared to ~~$19.8~~$54.2 million for

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the same period during the previous year, resulting in effective tax rates of ~~20.9%~~21.2% and ~~17.8%~~19.5%, respectively. ~~The increase in the effective tax rate in the current quarter compared to the prior quarter and the same quarter last year is primarily due to the mix of taxable and nontaxable income and expenses.~~

Financial Condition

Balance Sheet

Total assets of the Company were ~~$33.9~~$34.5 billion at ~~June~~September 30, 2021 and $32.9 billion at December 31, 2020. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on debt securities) amounted to ~~$32.4~~$33.1 billion at ~~June~~September 30, 2021 and $31.3 billion at December 31, 2020, and consisted of ~~48%~~46% in loans and ~~41%~~43% in investment securities at ~~June~~September 30, 2021.

At ~~June~~September 30, 2021, total loans decreased ~~$710.8 million,~~$1.2 billion, or ~~4.3%~~7.4%, compared to balances at December 31, 2020. Business loans decreased ~~$742.3 million,~~$1.3 billion, primarily due to a decline in Paycheck Protection Plan (PPP) ~~loans. Consumer~~loan balances. As of September 30, 2021, 97% of round 1 and 35% of round 2 PPP loan balances have been forgiven. Business real estate, consumer credit card ~~loans~~ and personal real estate loans also decreased ~~$68.7~~$88.2 million, $85.1 million and ~~$26.8~~$50.7 million, respectively. These decreases were ~~partially~~partly offset by growth in construction and consumer banking loans ~~and construction loans~~ of ~~$98.7~~$236.2 million and ~~$82.1~~$99.1 million, respectively. Consumer loans, which include automobile, marine and RV, fixed rate home equity, and other consumer loans, increased mainly due to growth in private banking loans.

Available for sale investment securities, excluding fair value adjustments, increased ~~$979.5 million~~$1.9 billion at ~~June~~September 30, 2021 compared to December 31, 2020. Purchases of securities during this period totaled ~~$2.8~~$4.5 billion, partly offset by maturities and pay downs of ~~$1.7~~$2.6 billion. The largest ~~increases~~growth in outstanding balances occurred in asset-backed securities and non-agency mortgage back securities, which ~~increased $1.0~~grew $1.5 billion and ~~$467.1~~$870.4 million, respectively. These increases were partially offset by a ~~decrease~~decline in agency mortgage-backed securities of ~~$561.1~~$613.3 million at ~~June~~September 30, 2021 compared to December 31, 2020. At ~~June~~September 30, 2021, the duration of the investment portfolio was ~~3.4~~3.5 years, and maturities and pay downs of approximately ~~$2.6~~$2.8 billion are expected to occur during the next 12 months.

Total deposits at ~~June~~September 30, 2021 amounted to ~~$27.5~~$28.1 billion, an increase of ~~$539.5 million~~$1.2 billion compared to December 31, 2020. The increase in deposits largely resulted from ~~increases~~growth in demand deposits, mainly in business demand deposits (increase of ~~$396.7~~$903.5 million) and personal demand deposits (increase of ~~$164.5~~$149.4 million). Additionally, savings and money market deposits increased ~~$214.5 million.~~$238.1 million and $264.9 million, respectively. These increases were partially offset by decreases of ~~$209.3~~$228.9 million in certificate of deposit balances and $199.9 million in interest checking ~~deposits and $98.4 million in certificates of~~ deposit balances at ~~June~~September 30, 2021 compared to balances at December 31, 2020. The Company's borrowings totaled $2.3 billion at ~~June~~September 30, 2021, an increase of ~~$221.2~~$158.6 million ~~from~~over balances at December 31, 2020, mainly due to an increase in customer repurchase agreements.

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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)	June 30, 2021		March 31, 2021		December 31, 2020		(In thousands)	September 30, 2021		June 30, 2021		December 31, 2020
Liquid assets:	Liquid assets:							Liquid assets:
Available for sale debt securities	Available for sale debt securities	$	13,291,506	$	12,528,203	$	12,449,264	Available for sale debt securities	$	14,165,656	$	13,291,506	$	12,449,264
Federal funds sold	Federal funds sold	5,945		500		—		Federal funds sold	—		5,945		—
Long-term securities purchased under agreements to resell		1,300,000		850,000		850,000
Securities purchased under agreements to resell								Securities purchased under agreements to resell	1,750,000		1,300,000		850,000
Balances at the Federal Reserve Bank	Balances at the Federal Reserve Bank	2,161,644		2,017,128		1,747,363		Balances at the Federal Reserve Bank	1,888,545		2,161,644		1,747,363
Total	Total	$	16,759,095	$	15,395,831	$	15,046,627	Total	$	17,804,201	$	16,759,095	$	15,046,627

~~Federal~~There were no federal funds sold at September 30, 2021, which are funds lent to the Company's correspondent bank customers with overnight ~~maturities, totaled $5.9 million as of June 30, 2021. Long-term resale~~maturities. Resale agreements, maturing through 2023, totaled ~~$1.3~~$1.8 billion at ~~June~~September 30, 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 ~~$1.4~~$1.8 billion in fair value at ~~June~~September 30, 2021. Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity purposes, totaled ~~$2.2~~$1.9 billion at ~~June~~September 30, 2021. The fair value of the available for sale debt portfolio was ~~$13.3~~$14.2 billion at ~~June~~September 30, 2021 and included an unrealized net gain of ~~$214.5~~$138.4 million. The total net unrealized gain included net gains of ~~$97.6~~$44.5 million on mortgage-backed and asset-backed securities, ~~$55.6~~$52.1 million on U.S. government and federal agency obligations, and ~~$51.2~~$36.5 million on state and municipal obligations.

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Approximately ~~$2.6~~$2.8 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)	June 30, 2021		March 31, 2021		December 31, 2020		(In thousands)	September 30, 2021		June 30, 2021		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	$	25,179	$	39,586	$	40,792	Federal Reserve Bank borrowings	$	18,566	$	25,179	$	40,792
FHLB borrowings and letters of credit	FHLB borrowings and letters of credit	4,296		4,874		5,376		FHLB borrowings and letters of credit	3,736		4,296		5,376
Securities sold under agreements to repurchase *	Securities sold under agreements to repurchase *	2,573,314		2,170,744		2,322,941		Securities sold under agreements to repurchase *	2,511,891		2,573,314		2,322,941
Other deposits and swaps	Other deposits and swaps	2,982,225		2,477,132		2,438,628		Other deposits and swaps	3,210,326		2,982,225		2,438,628
Total pledged securities	Total pledged securities	5,585,014		4,692,336		4,807,737		Total pledged securities	5,744,519		5,585,014		4,807,737
Unpledged and available for pledging	Unpledged and available for pledging	6,369,604		6,490,351		6,310,907		Unpledged and available for pledging	7,123,799		6,369,604		6,310,907
Ineligible for pledging	Ineligible for pledging	1,336,888		1,345,516		1,330,620		Ineligible for pledging	1,297,338		1,336,888		1,330,620
Total available for sale debt securities, at fair value	Total available for sale debt securities, at fair value	$	13,291,506	$	12,528,203	$	12,449,264	Total available for sale debt securities, at fair value	$	14,165,656	$	13,291,506	$	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 ~~June~~September 30, 2021, such deposits totaled ~~$25.7~~$26.5 billion and represented ~~93.6%~~94.3% 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 ~~$1.3~~$1.2 billion at ~~June~~September 30, 2021. These accounts are normally considered more volatile and higher costing and comprised ~~4.6%~~4.1% of total deposits at ~~June~~September 30, 2021.


(In thousands)	(In thousands)	June 30, 2021		March 31, 2021		December 31, 2020		(In thousands)	September 30, 2021		June 30, 2021		December 31, 2020
Core deposit base:	Core deposit base:							Core deposit base:
Non-interest bearing	Non-interest bearing	$	11,085,286	$	11,076,556	$	10,497,598	Non-interest bearing	$	11,622,855	$	11,085,286	$	10,497,598
Interest checking	Interest checking	2,192,932		2,180,434		2,402,272		Interest checking	2,202,422		2,192,932		2,402,272
Savings and money market	Savings and money market	12,461,764		12,391,944		12,202,184		Savings and money market	12,705,232		12,461,764		12,202,184
Total	Total	$	25,739,982	$	25,648,934	$	25,102,054	Total	$	26,530,509	$	25,739,982	$	25,102,054

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Other important components of liquidity are the level of borrowings from 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)	June 30, 2021		March 31, 2021		December 31, 2020		(In thousands)	September 30, 2021		June 30, 2021		December 31, 2020
Borrowings:	Borrowings:							Borrowings:
Federal funds purchased	Federal funds purchased	$	12,335	$	28,490	$	42,270	Federal funds purchased	$	11,345	$	12,335	$	42,270
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	2,305,893		1,909,620		2,056,113		Securities sold under agreements to repurchase	2,242,408		2,305,893		2,056,113

Other debt	Other debt	2,194		3,791		802		Other debt	4,006		2,194		802
Total	Total	$	2,320,422	$	1,941,901	$	2,099,185	Total	$	2,257,759	$	2,320,422	$	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 $2.3 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 ~~June~~September 30, 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 ~~June~~September 30, 2021.


		June 30, 2021							September 30, 2021
(In thousands)	(In thousands)	FHLB		Federal Reserve		Total		(In thousands)	FHLB		Federal Reserve		Total
Collateral value pledged	Collateral value pledged	$	2,154,427	$	1,077,169	$	3,231,596	Collateral value pledged	$	2,120,480	$	1,039,017	$	3,159,497

Letters of credit issued	Letters of credit issued	(136,620)		—		(136,620)		Letters of credit issued	(184,710)		—		(184,710)
Available for future advances	Available for future advances	$	2,017,807	$	1,077,169	$	3,094,976	Available for future advances	$	1,935,770	$	1,039,017	$	2,974,787

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 through its Capital Markets Group or in other public debt markets, it could generate additional liquidity from sources such as jumbo certificates of deposit or privately placed corporate notes or other forms of 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:


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

Rating outlook	Stable

Commerce Bank
Issuer rating	A	A2
Baseline credit assessment		a1
Short-term rating	A-1	P-1
Rating outlook	Stable	Stable

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 ~~$338.0~~$43.2 million during the first ~~six~~nine months of 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 ~~$327.2~~$486.1 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 ~~$696.2 million.~~$1.6 billion. Activity in the investment securities portfolio used cash of ~~$907.6 million~~

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$1.9 billion from purchases (net of sales, maturities and pay downs), ~~while growth~~and securities purchased under agreements to resell used cash of $900 million. These investing cash outflows were partially offset by pay downs in the loan portfolio, which provided cash of ~~$678.6 million.~~$1.2 billion. Financing activities provided cash of ~~$706.9 million,~~$1.2 billion, largely resulting from an increase in deposits of ~~$587.1 million~~$1.2 billion paired with an increase of ~~$219.8~~$155.4 million in federal funds purchased and securities sold under agreements to repurchase, partially offset by dividend payments of ~~$61.6~~$92.2 million on common stock and treasury stock purchases of ~~$39.9~~$80.1 million.

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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 ~~June~~September 30, 2021 and December 31, 2020, as shown in the following table.


(Dollars in thousands)	(Dollars in thousands)	June 30, 2021			December 31, 2020			Minimum Ratios under Capital Adequacy Guidelines		Minimum Ratios for Well-Capitalized Banks *		(Dollars in thousands)	September 30, 2021			December 31, 2020			Minimum Ratios under Capital Adequacy Guidelines		Minimum Ratios for Well-Capitalized Banks *
Risk-adjusted assets	Risk-adjusted assets	$	22,079,166		$	21,516,461						Risk-adjusted assets	$	22,738,255		$	21,516,461
Tier I common risk-based capital	Tier I common risk-based capital	3,135,310			2,950,926							Tier I common risk-based capital	3,189,015			2,950,926
Tier I risk-based capital	Tier I risk-based capital	3,135,310			2,950,926							Tier I risk-based capital	3,189,015			2,950,926
Total risk-based capital	Total risk-based capital	3,326,913			3,189,432							Total risk-based capital	3,372,335			3,189,432
Tier I common risk-based capital ratio	Tier I common risk-based capital ratio	14.20		%	13.71		%	7.00	%	6.50	%	Tier I common risk-based capital ratio	14.02		%	13.71		%	7.00	%	6.50	%
Tier I risk-based capital ratio	Tier I risk-based capital ratio	14.20			13.71			8.50		8.00		Tier I risk-based capital ratio	14.02			13.71			8.50		8.00
Total risk-based capital ratio	Total risk-based capital ratio	15.07			14.82			10.50		10.00		Total risk-based capital ratio	14.83			14.82			10.50		10.00
Tier I leverage ratio	Tier I leverage ratio	9.36			9.45			4.00		5.00		Tier I leverage ratio	9.31			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 ~~six~~nine months ended ~~June~~September 30, 2021, the Company purchased ~~535,433~~1,110,890 shares at an average price of ~~$74.50~~$72.06 in open market purchases and through stock-based compensation transactions. At ~~June~~September 30, 2021, ~~3,009,146~~2,433,689 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 $.263 per share cash dividend on its common stock in the ~~second~~third quarter of 2021, which was a ~~2.1%~~2.3% increase compared to its 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).

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 ~~June~~September 30, 2021 totaled ~~$13.2~~$13.3 billion (including ~~$4.9~~$5.0 billion in unused, approved credit card lines). In addition, the Company enters into standby and commercial letters of credit. These contracts totaled ~~$412.7~~$423.6 million and ~~$9.5~~$2.5 million, respectively, at ~~June~~September 30, 2021. As many commitments expire unused or only partially used, these totals do not necessarily reflect future cash requirements. The carrying

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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 ~~$2.9~~$3.1 million at ~~June~~September 30, 2021. The allowance for these commitments is recorded in the Company’s liability for unfunded lending commitments within other liabilities on its consolidated balance sheet. At ~~June~~September 30, 2021, the liability for unfunded commitments totaled ~~$24.2~~$22.8 million. See further discussion of the liability for unfunded lending commitments in 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, which is expected to be completed near the end of 2022. As of ~~June~~September 30, 2021, the Company has made payments totaling ~~$33.0~~$43.7 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 property redevelopment. These credits are either resold to third parties at a profit or retained for use by the Company. During the first ~~six~~nine months of 2021, purchases and sales of tax credits amounted to ~~$62.5~~$77.2 million and ~~$58.9~~$70.8 million, respectively. Fees from sales of tax credits were ~~$2.6~~$3.2 million for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to ~~$2.1~~$3.7 million in the same period last year. At ~~June~~September 30, 2021, the Company expected to fund outstanding purchase commitments of ~~$125.0~~$42.3 million during the remainder of 2021.

Segment Results

The table below is a summary of segment pre-tax income results for the first ~~six~~nine months of 2021 and 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
Six Months Ended June 30, 2021
Nine Months Ended September 30, 2021																				Nine Months Ended September 30, 2021
Net interest income	Net interest income	$	158,748		$	224,809		$	35,111		$	418,668		$	(4,938)		$	413,730		Net interest income	$	239,159		$	340,345		$	53,186		$	632,690		$	(4,923)		$	627,767
Provision for credit losses	Provision for credit losses	(15,565)			4,925			1			(10,639)			62,526			51,887			Provision for credit losses	(19,122)			4,856			10			(14,256)			73,528			59,272
Non-interest income	Non-interest income	75,153			102,987			103,490			281,630			(6,442)			275,188			Non-interest income	110,911			155,079			158,731			424,721			(12,027)			412,694
Investment securities gains, net	Investment securities gains, net	—			—			—			—			26,657			26,657			Investment securities gains, net	—			—			—			—			39,765			39,765
Non-interest expense	Non-interest expense	(144,453)			(161,898)			(67,091)			(373,442)			(17,257)			(390,699)			Non-interest expense	(220,276)			(246,502)			(101,377)			(568,155)			(34,164)			(602,319)
Income before income taxes	Income before income taxes	$	73,883		$	170,823		$	71,511		$	316,217		$	60,546		$	376,763		Income before income taxes	$	110,672		$	253,778		$	110,550		$	475,000		$	62,179		$	537,179
Six Months Ended June 30, 2020
Nine Months Ended September 30, 2020																				Nine Months Ended September 30, 2020
Net interest income	Net interest income	$	160,251		$	188,774		$	26,383		$	375,408		$	28,714		$	404,122		Net interest income	$	241,195		$	300,301		$	41,686		$	583,182		$	36,902		$	620,084
Provision for credit losses	Provision for credit losses	(16,231)			(2,922)			(3)			(19,156)			(119,336)			(138,492)			Provision for credit losses	(23,885)			(3,122)			10			(26,997)			(114,596)			(141,593)
Non-interest income	Non-interest income	70,374			95,826			91,999			258,199			(17,021)			241,178			Non-interest income	107,489			143,746			139,700			390,935			(20,185)			370,750
Investment securities losses, net	Investment securities losses, net	—			—			—			—			(17,430)			(17,430)			Investment securities losses, net	—			—			—			—			(1,275)			(1,275)
Non-interest expense	Non-interest expense	(152,716)			(159,050)			(61,982)			(373,748)			(7,462)			(381,210)			Non-interest expense	(225,791)			(237,327)			(92,915)			(556,033)			(16,035)			(572,068)
Income before income taxes	Income before income taxes	$	61,678		$	122,628		$	56,397		$	240,703		$	(132,535)		$	108,168		Income before income taxes	$	99,008		$	203,598		$	88,481		$	391,087		$	(115,189)		$	275,898
Increase in income before income taxes:	Increase in income before income taxes:																			Increase in income before income taxes:
Amount	Amount	$	12,205		$	48,195		$	15,114		$	75,514		$	193,081		$	268,595		Amount	$	11,664		$	50,180		$	22,069		$	83,913		$	177,368		$	261,281
Percent	Percent	19.8		%	39.3		%	26.8		%	31.4		%	145.7		%	248.3		%	Percent	11.8		%	24.6		%	24.9		%	21.5		%	154.0		%	94.7		%

Consumer

For the ~~six~~nine months ended ~~June~~September 30, 2021, income before income taxes for the Consumer segment increased ~~$12.2~~$11.7 million, or ~~19.8%~~11.8%, compared to the first ~~six~~nine months of 2020. This increase in income before income taxes was mainly due to growth in non-interest income of ~~$4.8~~$3.4 million, or ~~6.8%~~3.2%, lower non-interest expense of ~~$8.3~~$5.5 million, or ~~5.4%~~2.4%, and a decrease in the provision for credit losses of ~~$666 thousand.~~$4.8 million. These increases to income were partly offset by lower net interest income of ~~$1.5~~$2.0 million, or ~~.9%~~.8%. Net interest income decreased due to a ~~$13.3~~$17.4 million decline in loan interest income, partly offset by a ~~$4.2~~$5.5 million ~~increase~~decrease in net allocated funding credits assigned to the Consumer segment's loan and deposit portfolios, and a ~~$7.6~~$9.9 million decrease in deposit interest expense. Non-interest income increased mainly due to growth in ~~mortgage banking revenue and increases in~~ net credit and debit card fees (mainly higher interchange fees, partly offset by higher rewards expense) and check sales and wire fees. These increases were partly offset by a decrease in ~~deposit account fees (mainly overdraft and return item fees and deposit account service charge fees).~~mortgage banking revenue. Non-interest expense decreased from the same period in the previous year mainly due to lower salaries and benefits expense, ~~lower~~occupancy expense, allocated ~~service~~servicing costs for mortgage operations and a reduction in impairment expense on mortgage servicing rights. These decreases were partly offset by ~~growth in~~higher marketing ~~expense.~~expense and allocated support and servicing costs for information technology. The provision for credit

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losses totaled ~~$15.6~~$19.1 million, a ~~$666 thousand~~$4.8 million decrease from the first ~~six~~nine months of 2020, mainly due to lower ~~personal~~credit card and ~~overdraft loan net charge-offs, partly offset by higher credit card~~personal loan net charge-offs.

Commercial

For the ~~six~~nine months ended ~~June~~September 30, 2021, income before income taxes for the Commercial segment increased ~~$48.2~~$50.2 million, or ~~39.3%~~24.6%, compared to the same period in the previous year. This increase was mainly due to higher net interest income and non-interest income and a decrease in the provision for ~~loan~~credit losses, partly offset by higher non-interest expense. Net interest income increased ~~$36.0~~$40.0 million, or ~~19.1%~~13.3%, due to a ~~$40.3~~$48.2 million increase in net allocated funding credits and a decrease in

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deposit and borrowings interest expense of ~~$11.6~~$12.6 million. These increases to income were partly offset by a ~~$15.9~~$20.7 million decrease in loan interest income. Non-interest income increased ~~$7.2~~$11.3 million, or ~~7.5%~~7.9%, over the previous year mainly due to growth in net bank card fees (mainly corporate card and merchant fees), ~~interest rate swap fees and~~ deposit account fees (mainly corporate cash management fees)., capital market fees and interest rate swap fees. These increases were partly offset by a decline in cash sweep commissions. Non-interest expense increased ~~$2.8~~$9.2 million, or ~~1.8%~~3.9%, mainly due to higher salaries and benefits expense (mainly incentive compensation), data processing and software expense, allocated support costs for information technology and commercial banking, and lower deferred origination ~~costs,~~costs. These increases to income were partly offset by lower ~~travel and entertainment expense and~~ allocated service costs (mainly ~~teller and bank card servicing)~~lockbox). The provision for credit losses decreased ~~$7.8~~$8.0 million from the same period last year, mainly due to net recoveries recorded on business ~~loans and lower net charge-offs on commercial card loans, partly offset by recoveries recorded on lease loans in the prior year.~~loans.

Wealth

Wealth segment pre-tax profitability for the ~~six~~nine months ended ~~June~~September 30, 2021 increased ~~$15.1~~$22.1 million, or ~~26.8%~~24.9%, over the same period in the previous year. Net interest income increased ~~$8.7~~$11.5 million, or ~~33.1%~~27.6%, mainly due to ~~an $8.1~~a $9.8 million increase in net allocated funding credits and lower deposit interest expense of ~~$2.6~~$3.5 million, partly offset by a ~~$2.0~~$1.8 million decrease in loan interest income. Non-interest income increased ~~$11.5~~$19.0 million, or ~~12.5%~~13.6%, over the prior year largely due to higher trust fees (mainly private client trust fees and institutional trust fees), brokerage fees and mortgage banking revenue, partly offset by lower cash sweep commissions. Non-interest expense increased ~~$5.1~~$8.5 million, or ~~8.2%~~9.1%, mainly due to a higher salaries expense (mainly incentive compensation) and allocated support costs ~~(mainly~~for information ~~technology and online banking). The~~technology. There was no change in the provision for credit losses ~~decreased slightly from~~compared to the same period last year.

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 higher than in the same period last year by ~~$193.1~~$177.4 million. This increase was partly due to higher non-interest income of ~~$10.6~~$8.2 million, partly offset by lower net interest income of ~~$33.7~~$41.8 million and an increase in non-interest expense of ~~$9.8~~$18.1 million. Unallocated securities gains were ~~$26.7~~$39.8 million in the first ~~six~~nine months of 2021 compared to losses of ~~$17.4~~$1.3 million in 2020. Also, the unallocated provision for credit losses decreased ~~$181.9~~$188.1 million, as the provision was ~~$48.4~~$58.1 million less than net charge-offs in the first ~~six~~nine months of 2021, while the provision was ~~$101.1~~$96.7 million in excess of net charge-offs during the first ~~six~~nine months of 2020. For management reporting purposes, net charge-offs are allocated to the segments when incurred. Additionally, the Company's provision for credit losses on unfunded lending commitments, which is not allocated to the segments for management reporting, was a benefit of ~~$14.1~~$15.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021.

Impact of Recently Issued Accounting Standards

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 were effective January 1, 2021, and the Company adopted them on that date. The adoption 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 evaluate whether a callable debt security that has multiple call dates may consider estimates of future principal prepayments when applying the interest method. The guidance was effective January 1, 2021, and the Company adopted it on that date. The adoption did not 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, 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

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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 into or evaluated after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022. The guidance is effective as of March 12, 2020 through December 31, 2022, and the Company is in the process of evaluating and applying, as applicable, the optional expedients and exceptions for eligible contracts and transaction available through December 31, 2022.

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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS

Three Months Ended ~~June~~September 30, 2021 and 2020


		Second Quarter 2021						Second Quarter 2020							Third Quarter 2021						Third 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)	$	6,211,610	$	48,844	3.15	%	$	6,760,827	$	48,892	2.91	%	Business(A)	$	5,437,498	$	47,032	3.43	%	$	6,709,200	$	49,680	2.95	%
Real estate — construction and land	Real estate — construction and land	1,088,433		9,670		3.56		895,648		8,800		3.95		Real estate — construction and land	1,168,566		10,326		3.51		974,346		9,167		3.74
Real estate — business	Real estate — business	3,014,955		26,223		3.49		2,962,076		27,300		3.71		Real estate — business	2,982,847		26,027		3.46		2,989,652		26,547		3.53
Real estate — personal	Real estate — personal	2,804,388		23,163		3.31		2,582,484		23,717		3.69		Real estate — personal	2,775,638		22,854		3.27		2,722,300		24,334		3.56
Consumer	Consumer	2,004,625		19,178		3.84		1,944,265		21,653		4.48		Consumer	2,041,263		19,085		3.71		1,992,314		21,004		4.19
Revolving home equity	Revolving home equity	287,031		2,455		3.43		343,210		2,987		3.50		Revolving home equity	281,689		2,456		3.46		329,361		2,722		3.29
Consumer credit card	Consumer credit card	575,725		16,101		11.22		663,911		19,412		11.76		Consumer credit card	566,406		16,112		11.29		646,185		18,513		11.40
Overdrafts	Overdrafts	3,735		—		—		2,912		—		—		Overdrafts	5,110		—		—		2,689		—		—
Total loans	Total loans	15,990,502		145,634		3.65		16,155,333		152,761		3.80		Total loans	15,259,017		143,892		3.74		16,366,047		151,967		3.69
Loans held for sale	Loans held for sale	23,389		245		4.20		6,363		127		8.03		Loans held for sale	16,021		187		4.63		24,728		264		4.25
Investment securities:	Investment securities:													Investment securities:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	719,849		9,912		5.52		776,240		887		.46		U.S. government and federal agency obligations	727,566		10,525		5.74		770,361		7,189		3.71
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	50,793		295		2.33		114,518		1,000		3.51		Government-sponsored enterprise obligations	50,785		295		2.30		102,749		560		2.17
State and municipal obligations(A)	State and municipal obligations(A)	1,966,673		11,834		2.41		1,285,427		9,504		2.97		State and municipal obligations(A)	2,039,942��		12,062		2.35		1,767,526		11,240		2.53
Mortgage-backed securities	Mortgage-backed securities	6,685,407		18,464		1.11		5,325,720		28,782		2.17		Mortgage-backed securities	7,115,419		27,461		1.53		6,259,926		30,607		1.95
Asset-backed securities	Asset-backed securities	2,653,928		8,262		1.25		1,342,518		7,522		2.25		Asset-backed securities	3,028,076		8,205		1.08		1,520,988		7,250		1.90
Other debt securities	Other debt securities	605,772		3,118		2.06		406,665		2,516		2.49		Other debt securities	608,642		3,125		2.04		514,166		3,036		2.35
Trading debt securities(A)	Trading debt securities(A)	34,955		104		1.19		31,981		233		2.93		Trading debt securities(A)	32,238		82		1.01		27,267		114		1.66
Equity securities(A)	Equity securities(A)	4,914		528		43.10		4,137		498		48.42		Equity securities(A)	8,756		528		23.92		4,193		497		47.15
Other securities(A)	Other securities(A)	156,984		4,657		11.90		139,250		1,510		4.36		Other securities(A)	183,397		3,447		7.46		120,253		2,038		6.74
Total investment securities	Total investment securities	12,879,275		57,174		1.78		9,426,456		52,452		2.24		Total investment securities	13,794,821		65,730		1.89		11,087,429		62,531		2.24
Federal funds sold and short-term securities
purchased under agreements to resell		1,338		2		.60		92		—		—
Long-term securities purchased
under agreements to resell		937,372		10,416		4.46		850,000		10,736		5.08
Federal funds sold														Federal funds sold	792		1		.50		337		—		—
Securities purchased under agreements to resell														Securities purchased under agreements to resell	1,633,205		9,007		2.19		849,994		11,247		5.26
Interest earning deposits with banks	Interest earning deposits with banks	2,724,782		743		.11		1,755,068		443		.10		Interest earning deposits with banks	2,602,896		995		.15		1,024,435		261		.10
Total interest earning assets	Total interest earning assets	32,556,658		214,214		2.64		28,193,312		216,519		3.09		Total interest earning assets	33,306,752		219,812		2.62		29,352,970		226,270		3.07
Allowance for credit losses on loans	Allowance for credit losses on loans	(200,801)						(171,616)						Allowance for credit losses on loans	(172,112)						(240,286)
Unrealized gain on debt securities	Unrealized gain on debt securities	197,124						281,457						Unrealized gain on debt securities	230,058						368,154
Cash and due from banks	Cash and due from banks	329,366						358,186						Cash and due from banks	329,129						326,030
Premises and equipment, net	Premises and equipment, net	403,810						394,795						Premises and equipment, net	408,966						404,144
Other assets	Other assets	525,813						708,547						Other assets	523,182						659,509
Total assets	Total assets	$	33,811,970					$	29,764,681					Total assets	$	34,625,975					$	30,870,521
LIABILITIES AND EQUITY:	LIABILITIES AND EQUITY:													LIABILITIES AND EQUITY:
Interest bearing deposits:	Interest bearing deposits:													Interest bearing deposits:
Savings	Savings	$	1,474,391	277		.08		$	1,111,397	248		.09		Savings	$	1,484,923	289		.08		$	1,193,079	269		.09
Interest checking and money market	Interest checking and money market	13,283,481		1,567		.05		11,441,694		3,729		.13		Interest checking and money market	13,343,180		1,528		.05		11,731,494		2,937		.10
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	491,446		327		.27		605,136		1,393		.93		Certificates of deposit of less than $100,000	464,367		206		.18		573,207		1,028		.71
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	1,354,685		661		.20		1,346,069		3,610		1.08		Certificates of deposit of $100,000 and over	1,289,665		450		.14		1,447,968		2,512		.69
Total interest bearing deposits	Total interest bearing deposits	16,604,003		2,832		.07		14,504,296		8,980		.25		Total interest bearing deposits	16,582,135		2,473		.06		14,945,748		6,746		.18
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	2,165,696		320		.06		1,991,971		585		.12		under agreements to repurchase	2,360,876		480		.08		1,855,971		406		.09
Other borrowings	Other borrowings	978		2		.82		345,162		701		.82		Other borrowings	347		1		1.14		1,225		—		—
Total borrowings	Total borrowings	2,166,674		322		.06		2,337,133		1,286		.22		Total borrowings	2,361,223		481		.08		1,857,196		406		.09
Total interest bearing liabilities	Total interest bearing liabilities	18,770,677		3,154		.07	%	16,841,429		10,266		.25	%	Total interest bearing liabilities	18,943,358		2,954		.06	%	16,802,944		7,152		.17	%
Non-interest bearing deposits	Non-interest bearing deposits	11,109,198						8,843,408						Non-interest bearing deposits	11,475,113						9,801,562
Other liabilities	Other liabilities	527,401						763,524						Other liabilities	667,786						899,890
Equity	Equity	3,404,694						3,316,320						Equity	3,539,718						3,366,125
Total liabilities and equity	Total liabilities and equity	$	33,811,970					$	29,764,681					Total liabilities and equity	$	34,625,975					$	30,870,521
Net interest margin (T/E)	Net interest margin (T/E)			$	211,060					$	206,253			Net interest margin (T/E)			$	216,858					$	219,118
Net yield on interest earning assets	Net yield on interest earning assets					2.60	%					2.94	%	Net yield on interest earning assets					2.58	%					2.97	%

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

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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS

~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020


		Six Months 2021						Six Months 2020							Nine Months 2021						Nine Months 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)	$	6,371,378	$	98,542	3.12	%	$	6,127,242	$	96,757	3.18	%	Business(A)	$	6,056,664	$	145,574	3.21	%	$	6,322,644	$	146,437	3.09	%
Real estate — construction and land	Real estate — construction and land	1,090,191		19,212		3.55		909,867		19,785		4.37		Real estate — construction and land	1,116,603		29,538		3.54		931,517		28,952		4.15
Real estate — business	Real estate — business	3,018,945		52,467		3.50		2,907,854		56,835		3.93		Real estate — business	3,006,780		78,494		3.49		2,935,319		83,382		3.79
Real estate — personal	Real estate — personal	2,815,190		46,861		3.36		2,486,600		46,495		3.76		Real estate — personal	2,801,861		69,715		3.33		2,565,740		70,829		3.69
Consumer	Consumer	1,976,132		38,482		3.93		1,947,378		44,841		4.63		Consumer	1,998,081		57,567		3.85		1,962,466		65,845		4.48
Revolving home equity	Revolving home equity	293,167		4,950		3.40		346,733		7,000		4.06		Revolving home equity	289,299		7,406		3.42		340,900		9,722		3.81
Consumer credit card	Consumer credit card	592,145		32,567		11.09		695,740		41,589		12.02		Consumer credit card	583,471		48,679		11.15		679,101		60,102		11.82
Overdrafts	Overdrafts	3,641		—		—		3,478		—		—		Overdrafts	4,136		—		—		3,213		—		—
Total loans	Total loans	16,160,789		293,081		3.66		15,424,892		313,302		4.08		Total loans	15,856,895		436,973		3.68		15,740,900		465,269		3.95
Loans held for sale	Loans held for sale	29,567		549		3.74		9,619		324		6.77		Loans held for sale	25,002		736		3.94		14,692		588		5.35
Investment securities:	Investment securities:													Investment securities:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	722,593		14,454		4.03		789,398		5,055		1.29		U.S. government and federal agency obligations	724,269		24,979		4.61		783,006		12,244		2.09
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	50,797		590		2.34		124,407		2,398		3.88		Government-sponsored enterprise obligations	50,793		885		2.33		117,135		2,958		3.37
State and municipal obligations(A)	State and municipal obligations(A)	1,962,677		23,717		2.44		1,254,011		18,947		3.04		State and municipal obligations(A)	1,988,715		35,779		2.41		1,426,432		30,187		2.83
Mortgage-backed securities	Mortgage-backed securities	6,841,099		42,463		1.25		5,005,751		56,410		2.27		Mortgage-backed securities	6,933,544		69,924		1.35		5,426,861		87,017		2.14
Asset-backed securities	Asset-backed securities	2,371,280		15,389		1.31		1,262,537		15,246		2.43		Asset-backed securities	2,592,618		23,594		1.22		1,349,316		22,496		2.23
Other debt securities	Other debt securities	588,042		6,138		2.10		364,199		4,871		2.69		Other debt securities	594,984		9,263		2.08		414,553		7,907		2.55
Trading debt securities(A)	Trading debt securities(A)	33,645		190		1.14		33,018		446		2.72		Trading debt securities(A)	33,171		272		1.10		31,087		560		2.41
Equity securities(A)	Equity securities(A)	4,619		1,056		46.10		4,205		995		47.58		Equity securities(A)	6,013		1,584		35.22		4,201		1,492		47.44
Other securities(A)	Other securities(A)	155,515		6,654		8.63		141,673		3,412		4.84		Other securities(A)	164,911		10,101		8.19		134,481		5,450		5.41
Total investment securities	Total investment securities	12,730,267		110,651		1.75		8,979,199		107,780		2.41		Total investment securities	13,089,018		176,381		1.80		9,687,072		170,311		2.35
Federal funds sold and short-term securities
purchased under agreements to resell		676		2		.60		209		2		1.92
Long-term securities purchased
under agreements to resell		893,927		21,544		4.86		850,000		18,198		4.31
Federal funds sold														Federal funds sold	715		3		.56		252		2		1.06
Securities purchased under agreements to resell														Securities purchased under agreements to resell	1,143,061		30,551		3.57		849,998		29,445		4.63
Interest earning deposits with banks	Interest earning deposits with banks	2,105,994		1,113		.11		1,178,244		1,735		.30		Interest earning deposits with banks	2,273,448		2,108		.12		1,126,600		1,996		.24
Total interest earning assets	Total interest earning assets	31,921,220		426,940		2.70		26,442,163		441,341		3.36		Total interest earning assets	32,388,139		646,752		2.67		27,419,514		667,611		3.25
Allowance for credit losses on loans	Allowance for credit losses on loans	(210,602)						(155,549)						Allowance for credit losses on loans	(197,631)						(184,001)
Unrealized gain on debt securities	Unrealized gain on debt securities	240,079						236,366						Unrealized gain on debt securities	236,702						280,616
Cash and due from banks	Cash and due from banks	341,898						364,277						Cash and due from banks	337,595						351,435
Premises and equipment, net	Premises and equipment, net	402,527						393,529						Premises and equipment, net	404,697						397,093
Other assets	Other assets	538,986						657,190						Other assets	533,660						657,969
Total assets	Total assets	$	33,234,108					$	27,937,976					Total assets	$	33,703,162					$	28,922,626
LIABILITIES AND EQUITY:	LIABILITIES AND EQUITY:													LIABILITIES AND EQUITY:
Interest bearing deposits:	Interest bearing deposits:													Interest bearing deposits:
Savings	Savings	$	1,404,174	554		.08		$	1,032,053	511		.10		Savings	$	1,431,386	843		.08		$	1,086,120	780		.10
Interest checking and money market	Interest checking and money market	13,127,919		3,393		.05		11,109,547		11,775		.21		Interest checking and money market	13,200,461		4,921		.05		11,318,376		14,712		.17
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	504,017		800		.32		613,988		3,168		1.04		Certificates of deposit of less than $100,000	490,655		1,006		.27		600,295		4,196		.93
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	1,292,724		1,723		.27		1,322,756		8,845		1.34		Certificates of deposit of $100,000 and over	1,291,693		2,173		.22		1,364,798		11,357		1.11
Total interest bearing deposits	Total interest bearing deposits	16,328,834		6,470		.08		14,078,344		24,299		.35		Total interest bearing deposits	16,414,195		8,943		.07		14,369,589		31,045		.29
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	2,165,883		632		.06		1,991,011		5,355		.54		under agreements to repurchase	2,231,595		1,112		.07		1,945,669		5,761		.40
Other borrowings	Other borrowings	905		4		.89		253,430		1,032		.82		Other borrowings	717		5		.93		168,748		1,032		.82
Total borrowings	Total borrowings	2,166,788		636		.06		2,244,441		6,387		.57		Total borrowings	2,232,312		1,117		.07		2,114,417		6,793		.43
Total interest bearing liabilities	Total interest bearing liabilities	18,495,622		7,106		.08	%	16,322,785		30,686		.38	%	Total interest bearing liabilities	18,646,507		10,060		.07	%	16,484,006		37,838		.31	%
Non-interest bearing deposits	Non-interest bearing deposits	10,775,770						7,729,258						Non-interest bearing deposits	11,011,446						8,425,068
Other liabilities	Other liabilities	567,584						615,252						Other liabilities	601,352						710,824
Equity	Equity	3,395,132						3,270,681						Equity	3,443,857						3,302,728
Total liabilities and equity	Total liabilities and equity	$	33,234,108					$	27,937,976					Total liabilities and equity	$	33,703,162					$	28,922,626
Net interest margin (T/E)	Net interest margin (T/E)			$	419,834					$	410,655			Net interest margin (T/E)			$	636,692					$	629,773
Net yield on interest earning assets	Net yield on interest earning assets					2.65	%					3.12	%	Net yield on interest earning assets					2.63	%					3.07	%

(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 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.

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 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	June 30, 2021						March 31, 2021						Simulation A	September 30, 2021						June 30, 2021
(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	$	97.4	13.10	%	$	—	$	73.6	9.46	%	$	(558.6)	300 basis points rising	$	101.1	13.87	%	$	—	$	97.4	13.10	%	$	—
200 basis points rising	200 basis points rising	73.2		9.85		—		59.8		7.68		(387.8)		200 basis points rising	73.1		10.02		—		73.2		9.85		—
100 basis points rising	100 basis points rising	38.4		5.16		—		32.6		4.19		(200.5)		100 basis points rising	37.7		5.17		—		38.4		5.16		—


Simulation B	Simulation B	June 30, 2021						March 31, 2021						Simulation B	September 30, 2021						June 30, 2021
(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	$	65.4	8.79	%	$	(1,438.7)	$	41.6	5.34	%	$	(1,847.4)	300 basis points rising	$	67.6	9.27	%	$	(1,430.9)	$	65.4	8.79	%	$	(1,438.7)
200 basis points rising	200 basis points rising	55.4		7.45		(855.9)		31.2		4.01		(1,686.5)		200 basis points rising	54.8		7.51		(849.1)		55.4		7.45		(855.9)
100 basis points rising	100 basis points rising	33.9		4.56		(241.5)		7.9		1.01		(1,517.6)		100 basis points rising	33.2		4.55		(237.5)		33.9		4.56		(241.5)

Under Simulation A, in the three rising rate scenarios, interest rate risk is slightly more asset sensitive than the previous quarter, which primarily resulted from ~~increases~~an increase in ~~interest bearing deposits at the Federal Reserve and long-term~~ securities purchased under agreements to ~~resell, as well as from removing deposit~~resell. Deposit attrition was removed from the ~~simulation.~~simulation in both the current and previous quarters. The Company did not model a 100 basis point falling scenario due to the already low interest rate environment.

In Simulation B, the assumed levels of deposit attrition were modeled to capture the results of a shrinking balance sheet. Under this Simulation, in the three rising rate scenarios, interest rate risk is slightly more asset sensitive than the previous quarter, which primarily resulted from ~~increases~~an increase in interest bearing deposits at the Federal Reserve and long-term securities purchased under agreements to resell, coupled with the implementation of new non-maturity deposit run-off assumptions. These assumptions result in faster deposit run-off as rates increase. Compared to the previous quarter, income in the 100 basis point rising scenario increased primarily due to less deposit run-off, while income in the 300 basis point rising scenario increased due to changes in balances of interest bearing deposits at the Federal Reserve and long-term securities purchased under agreements to resell.

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

~~Table of Contents~~

considered its susceptibility to both rising and falling rates and has adopted strategies which minimize the impact of interest rate risk.

Table of Contents

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 ~~June~~September 30, 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 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
April 1 - 30, 2021 44,271 $ 76.77 44,271 3,146,127
May 1 - 31, 2021 73,059 $ 78.75 73,059 3,073,068
June 1 - 30, 2021 63,922 $ 75.28 63,922 3,009,146
Total 181,252 $ 77.05 181,252 3,009,146


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, 2021	59,404		$	72.05	59,404	2,949,742
August 1 - 31, 2021	314,225		$	70.20	314,225	2,635,517
September 1 - 30, 2021	201,828		$	68.50	201,828	2,433,689
Total	575,457		$	69.80	575,457	2,433,689

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, ~~3,009,146~~2,433,689 shares remained available for purchase at ~~June~~September 30, 2021.

Item 6. EXHIBITS

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

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)

6970

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
Date: ~~August~~November 5, 2021		Senior Vice President & Secretary


	By	/s/ PAUL A. STEINER
		Paul A. Steiner
		Controller
Date: ~~August~~November 5, 2021		(Chief Accounting Officer)

7071


	Carrying Amount		Estimated Fair Value at June 30, 2021
(In thousands)			Level 1		Level 2		Level 3		Total
Financial Assets
Loans:
Business	$	5,803,760	$	0	$	0	$	5,750,743	$	5,750,743
Real estate - construction and land	1,103,661		0		0		1,080,298		1,080,298
Real estate - business	3,017,560		0		0		3,014,609		3,014,609
Real estate - personal	2,793,213		0		0		2,796,020		2,796,020
Consumer	2,049,166		0		—		2,048,176		2,048,176
Revolving home equity	283,568		0		0		281,395		281,395
Consumer credit card	586,358		0		0		542,235		542,235
Overdrafts	2,978		0		0		2,789		2,789
Total loans	15,640,264		0		0		15,516,265		15,516,265
Loans held for sale	23,697		0		23,697		0		23,697




Investment securities	13,488,092		787,133		12,532,365		168,594		13,488,092
Federal funds sold	5,945		5,945		0		0		5,945
Securities purchased under agreements to resell	1,300,000		0		0		1,320,677		1,320,677
Interest earning deposits with banks	2,161,644		2,161,644		0		0		2,161,644
Cash and due from banks	358,122		358,122		0		0		358,122
Derivative instruments	61,358		0		59,396		1,962		61,358
Assets held in trust for deferred compensation plan	20,969		20,969		0		0		20,969
Total	$	33,060,091	$	3,333,813	$	12,615,458	$	17,007,498	$	32,956,769
Financial Liabilities
Non-interest bearing deposits	$	11,085,286	$	11,085,286	$	0	$	0	$	11,085,286
Savings, interest checking and money market deposits	14,654,696		14,654,696		0		0		14,654,696
Certificates of deposit	1,746,255		0		0		1,748,788		1,748,788
Federal funds purchased	12,335		12,335		0		0		12,335
Securities sold under agreements to repurchase	2,305,893		0		0		2,305,957		2,305,957
Other borrowings	1,411		0		1,411		0		1,411
Derivative instruments	13,349		0		13,016		333		13,349
Liabilities held in trust for deferred compensation plan	20,969		20,969		0		0		20,969
Total	$	29,840,194	$	25,773,286	$	14,427	$	4,055,078	$	29,842,791


	June 30
(Dollars in thousands)	2021			2020
Total equity	$	3,493,830		$	3,358,169
Less non-controlling interest	8,210			302
Less preferred stock	—			144,784
Less goodwill	138,921			138,921
Less core deposit premium	4,772			1,554
Total tangible common equity (a)	$	3,341,927		$	3,072,608
Total assets	$	33,856,162		$	30,496,121
Less goodwill	138,921			138,921
Less core deposit premium	4,772			1,554
Total tangible assets (b)	$	33,712,469		$	30,355,646
Tangible common equity to tangible assets ratio (a)/(b)	9.91		%	10.12		%