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~~

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

For the quarterly period ended September 30, ~~2017~~2023

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

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

For the transition period from to ____

Commission file number~~000-04887~~001-38481

UMB FINANCIAL ~~CORPORATION~~CORPORATION

(Exact name of registrant as specified in its charter)


Missouri		43-0903811
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)


1010 Grand Boulevard, Kansas City, Missouri		64106
(Address of principal executive offices)		(Zip Code)

(Registrant's telephone number, including area code): (816)860-7000

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 Par Value	UMBF	The 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☒ No ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	☒		Accelerated filer	☐
Non- accelerated filer	☐	~~(Do not check if a smaller reporting company)~~	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. ~~Yes~~ ☐ No ☐

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

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

As of October ~~26, 2017,~~23, 2023, UMB Financial Corporation had ~~49,867,273~~48,530,798 shares of common stock outstanding.

UMB FINANCIAL CORPORATION

FORM 10-Q

INDEX


PART I – FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	3
CONSOLIDATED BALANCE SHEETS		3
CONSOLIDATED STATEMENTS OF INCOME		4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		65
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY		76
CONSOLIDATED STATEMENTS OF CASH FLOWS		87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		109
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3757
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5377
ITEM 4.	CONTROLS AND PROCEDURES	5882

PART II - OTHER INFORMATION		5983

ITEM 1.	LEGAL PROCEEDINGS	5983
ITEM 1A.	RISK FACTORS	5983
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	5983
ITEM 3.6.	~~DEFAULTS UPON SENIOR SECURITIES~~EXHIBITS	59
~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~	59
~~ITEM 5.~~	~~OTHER INFORMATION~~	59
~~ITEM 6.~~	~~EXHIBITS~~	6084
SIGNATURES		6185

PART I – ~~FINANCI~~ALFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UMB FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share and per share data)


	September 30,			December 31,
	2023			2022
	(unaudited)			(audited)
ASSETS
Loans	$	22,881,689		$	21,031,189
Allowance for credit losses on loans		(221,462	)		(191,836	)
Net loans		22,660,227			20,839,353
Loans held for sale		2,824			1,978
Securities:
Available for sale (amortized cost of $7,248,525 and $7,777,950, respectively)		6,330,699			7,006,347
Held to maturity, net of allowance for credit losses of $2,886 and $2,407, respectively (fair value of $4,856,466 and $5,280,659, respectively)		5,729,697			5,859,192
Trading securities		24,509			17,980
Other securities		473,255			349,758
Total securities		12,558,160			13,233,277
Federal funds sold and securities purchased under agreements to resell		248,203			958,597
Interest-bearing due from banks		3,556,076			1,179,105
Cash and due from banks		454,705			500,682
Premises and equipment, net		249,037			263,649
Accrued income		208,594			189,231
Goodwill		207,385			207,385
Other intangibles, net		73,060			78,724
Other assets		1,246,411			1,060,480
Total assets	$	41,464,682		$	38,512,461

LIABILITIES
Deposits:
Noninterest-bearing demand	$	11,254,885		$	13,260,363
Interest-bearing demand and savings		18,833,614			18,461,632
Time deposits under $250,000		2,834,181			379,087
Time deposits of $250,000 or more		509,072			538,051
Total deposits		33,431,752			32,639,133
Federal funds purchased and repurchase agreements		1,757,602			2,222,167
Short-term debt		2,300,000			—
Long-term debt		382,768			381,311
Accrued expenses and taxes		319,283			239,624
Other liabilities		466,618			363,133
Total liabilities		38,658,023			35,845,368

SHAREHOLDERS' EQUITY
Common stock, $1.00 par value; 80,000,000 shares authorized; 55,056,730 shares issued, 48,529,097 and 48,319,404 shares outstanding, respectively		55,057			55,057
Capital surplus		1,128,239			1,125,949
Retained earnings		2,759,415			2,536,086
Accumulated other comprehensive loss, net		(792,371	)		(702,735	)
Treasury stock, 6,527,633 and 6,737,326 shares, at cost, respectively		(343,681	)		(347,264	)
Total shareholders' equity		2,806,659			2,667,093
Total liabilities and shareholders' equity	$	41,464,682		$	38,512,461

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, dollars in thousands, except share and per share data)

September 30,

December 31,

2017

2016

ASSETS

Loans:

$
10,997,028

$
10,540,383

Allowance for loan losses

(98,389
)

(91,649
)
Net loans

10,898,639

10,448,734

Loans held for sale

4,525

5,279

Investment securities:

Available for sale

5,848,960

6,466,334

Held to maturity (fair value of $1,181,747 and $1,106,027, respectively)

1,276,252

1,115,932

Trading securities

60,660

39,536

Other securities

63,543

68,306

Total investment securities

7,249,415

7,690,108

Federal funds sold and securities purchased under agreements to resell

244,436

324,327

Interest-bearing due from banks

221,856

715,823

Cash and due from banks

366,169

422,117

Premises and equipment, net

277,454

289,007

Accrued income

103,076

99,045

Goodwill

180,867

180,867

Other intangibles, net

23,477

26,630

Other assets

655,846

425,205

Discontinued assets – goodwill and other intangibles, net

53,743

55,390

Total assets

$
20,279,503

$
20,682,532

LIABILITIES

Deposits:

Noninterest-bearing demand

$
5,812,117

$
6,654,584

Interest-bearing demand and savings

9,063,079

8,780,309

Time deposits under $250,000

576,035

613,589

Time deposits of $250,000 or more

548,373

522,132

Total deposits

15,999,604

16,570,614

Federal funds purchased and repurchase agreements

1,856,837

1,856,937

Long-term debt

76,071

76,772

Accrued expenses and taxes

193,978

172,967

Other liabilities

51,470

42,858

Total liabilities

18,177,960

18,720,148

SHAREHOLDERS' EQUITY

Common stock, $1.00 par value; 80,000,000 shares authorized; 55,056,730
shares issued; and 49,862,453 and 49,673,056 shares outstanding, respectively

55,057

55,057

Capital surplus

1,042,022

1,033,419

Retained earnings

1,239,865

1,142,887

Accumulated other comprehensive loss, net

(22,668
)

(57,542
)
Treasury stock, 5,194,277 and 5,383,674 shares, at cost, respectively

(212,733
)

(211,437
)
Total shareholders' equity

2,101,543

1,962,384

Total liabilities and shareholders' equity

$
20,279,503

$
20,682,532


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2023		2022			2023			2022
INTEREST INCOME
Loans	$	367,485	$	216,970		$	1,018,920		$	536,359
Securities:
Taxable interest		53,455		50,003			161,091			140,680
Tax-exempt interest		25,704		24,692			76,560			72,085
Total securities income		79,159		74,695			237,651			212,765
Federal funds and resell agreements		4,567		6,056			14,107			12,003
Interest-bearing due from banks		20,551		2,545			70,923			9,209
Trading securities		214		73			502			372
Total interest income		471,976		300,339			1,342,103			770,708
INTEREST EXPENSE
Deposits		191,919		48,457			490,368			70,069
Federal funds and repurchase agreements		23,076		14,709			71,123			21,855
Other		34,694		3,688			91,018			10,153
Total interest expense		249,689		66,854			652,509			102,077
Net interest income		222,287		233,485			689,594			668,631
Provision for credit losses		4,977		22,000			41,227			28,900
Net interest income after provision for credit losses		217,310		211,485			648,367			639,731
NONINTEREST INCOME
Trust and securities processing		66,668		59,586			190,616			178,000
Trading and investment banking		3,771		5,387			13,879			17,950
Service charges on deposit accounts		21,080		19,932			63,620			65,409
Insurance fees and commissions		272		375			771			879
Brokerage fees		13,400		13,840			40,680			29,687
Bankcard fees		19,296		19,379			56,047			53,854
Investment securities gains (losses), net		271		(1,345	)		(4,153	)		58,853
Other		8,559		11,569			40,139			24,104
Total noninterest income		133,317		128,723			401,599			428,736
NONINTEREST EXPENSE
Salaries and employee benefits		133,380		136,467			419,190			388,491
Occupancy, net		12,283		12,231			36,206			36,439
Equipment		17,204		18,811			52,139			55,290
Supplies and services		3,213		3,139			11,283			9,893
Marketing and business development		6,631		6,671			19,090			16,911
Processing fees		26,016		20,901			75,828			58,682
Legal and consulting		7,230		10,255			21,574			28,431
Bankcard		8,852		6,551			24,292			18,998
Amortization of other intangible assets		2,124		1,092			6,539			3,388
Regulatory fees		6,153		4,200			17,827			11,146
Other		8,355		11,078			25,198			32,632
Total noninterest expense		231,441		231,396			709,166			660,301
Income before income taxes		119,186		108,812			340,800			408,166
Income tax expense		22,632		20,822			61,699			76,657
NET INCOME	$	96,554	$	87,990		$	279,101		$	331,509

PER SHARE DATA
Net income – basic	$	1.99	$	1.82		$	5.76		$	6.86
Net income – diluted		1.98		1.81			5.73			6.80
Dividends		0.38		0.37			1.14			1.11
Weighted average shares outstanding – basic		48,525,776		48,300,129			48,492,022			48,351,007
Weighted average shares outstanding – diluted		48,762,696		48,648,804			48,737,065			48,723,572

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, dollars in ~~thousands, except share and per share data)~~thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017
��

2016

2017

2016

INTEREST INCOME

Loans

$
119,132

$
98,820

$
338,416

$
283,313

Securities:

Taxable interest

17,720

17,012

55,351

55,221

Tax-exempt interest

18,893

14,797

54,372

41,377

Total securities income

36,613

31,809

109,723

96,598

Federal funds and resell agreements

1,008

790

2,638

1,939

Interest-bearing due from banks

753

445

1,884

1,772

Trading securities

389

174

1,135

399

Total interest income

157,895

132,038

453,796

384,021

INTEREST EXPENSE

Deposits

10,181

4,626

23,982

12,817

Federal funds and repurchase agreements

5,811

1,894

14,274

4,750

Other

1,045

753

2,973

2,587

Total interest expense

17,037

7,273

41,229

20,154

Net interest income

140,858

124,765

412,567

363,867

Provision for loan losses

11,500

13,000

35,000

25,000

Net interest income after provision for loan losses

129,358

111,765

377,567

338,867

NONINTEREST INCOME

Trust and securities processing

45,060

41,812

132,412

123,984

Trading and investment banking

4,453

6,114

18,168

16,382

Service charges on deposit accounts

21,510

21,832

66,316

65,713

Insurance fees and commissions

425

698

1,584

3,355

Brokerage fees

5,815

4,712

17,081

13,159

Bankcard fees

17,427

17,086

55,413

52,636

Gain on sales of securities available for sale, net

2,390

2,978

4,138

8,509

Equity (losses) earnings on alternative investments

(584
)

1,594

(1,393
)

2,191

Other

7,810

6,716

23,810

18,352

Total noninterest income

104,306

103,542

317,529

304,281

NONINTEREST EXPENSE

Salaries and employee benefits

99,749

99,403

306,174

293,294

Occupancy, net

11,285

11,224

33,314

32,996

Equipment

17,880

16,029

53,318

48,807

Supplies and services

4,076

4,472

12,962

13,875

Marketing and business development

5,056

5,090

14,929

15,273

Processing fees

11,151

9,084

31,093

27,118

Legal and consulting

5,844

4,437

17,361

14,107

Bankcard

5,130

5,015

15,066

16,199

Amortization of other intangible assets

1,715

2,088

5,685

6,644

Regulatory fees

3,798

3,370

11,702

10,491

Other

6,137

4,999

20,966

20,094

Total noninterest expense

171,821

165,211

522,570

498,898

Income before income taxes

61,843

50,096

172,526

144,250

Income tax expense

12,971

10,674

36,907

34,016

Income from continuing operations

48,872

39,422

135,619

110,234

Discontinued Operations

(Loss) income from discontinued operations before income taxes

(1,030
)

3,834

(722
)

8,792

Income tax (benefit) expense

(300
)

1,310

(247
)

3,159

(Loss) income from discontinued operations

(730
)

2,524

(475
)

5,633

NET INCOME

$
48,142

$
41,946

$
135,144

$
115,867

PER SHARE DATA

Basic:

Income from continuing operations

$
0.99

$
0.81

$
2.76

$
2.26

(Loss) income from discontinued operations

(0.01
)

0.05

(0.01
)

0.11

Net income – basic

0.98

0.86

2.75

2.37

Diluted:

Income from continuing operations

0.98

0.80

2.72

2.24

(Loss) income from discontinued operations

(0.01
)

0.05

(0.01
)

0.12

Net income - diluted

0.97

0.85

2.71

2.36

Dividends

0.255

0.245

0.765

0.735

Weighted average shares outstanding - basic

49,283,322

48,849,251

49,221,629

48,792,419

Weighted average shares outstanding - diluted

49,833,141

49,284,280

49,838,619

49,162,200


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net income	$	96,554		$	87,990		$	279,101		$	331,509
Other comprehensive loss, before tax:
Unrealized gains and losses on debt securities:
Change in unrealized holding gains and losses, net		(151,753	)		(271,079	)		(145,601	)		(1,202,341	)
Less: Reclassification adjustment for net (gains) losses included in net income		(154	)		—			279			—
Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity		10,268			12,587			30,563			25,708
Change in unrealized gains and losses on debt securities		(141,639	)		(258,492	)		(114,759	)		(1,176,633	)
Unrealized gains and losses on derivative hedges:
Change in unrealized gains and losses on derivative hedges, net		3,927			3,321			4,248			12,438
Less: Reclassification adjustment for net gains included in net income		(2,844	)		(1,470	)		(8,065	)		(3,411	)
Change in unrealized gains and losses on derivative hedges		1,083			1,851			(3,817	)		9,027
Other comprehensive loss, before tax		(140,556	)		(256,641	)		(118,576	)		(1,167,606	)
Income tax benefit		34,016			62,184			28,940			282,032
Other comprehensive loss		(106,540	)		(194,457	)		(89,636	)		(885,574	)
Comprehensive (loss) income	$	(9,986	)	$	(106,467	)	$	189,465		$	(554,065	)

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(unaudited, dollars in thousands)~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Net Income

$
48,142

$
41,946

$
135,144

$
115,867

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on securities:

Change in unrealized holding gains (losses), net

5,064

(16,946
)

62,646

90,639

Less: Reclassification adjustment for gains
included in net income

(2,390
)

(2,978
)

(4,138
)

(8,509
)
Change in unrealized gains (losses) on securities during the period

2,674

(19,924
)

58,508

82,130

Change in unrealized losses on derivative hedges

(169
)

(643
)

(1,080
)

(7,677
)
Income tax (expense) benefit

(1,548
)

7,784

(22,554
)

(28,223
)
Other comprehensive income (loss)

957

(12,783
)

34,874

46,230

Comprehensive income

$
49,099

$
29,163

$
170,018

$
162,097

~~See Notes to Consolidated Financial Statements.~~

~~UMB FINANCIAL CORPORATION~~

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(unaudited, dollars in thousands, except per share data)

Common
Stock

Capital
Surplus

Retained
Earnings

Accumulated
Other
Comprehensive
(Loss) Income

Treasury
Stock

Total

Balance - January 1, 2016

$
55,057

$
1,019,889

$
1,033,990

$
(3,718
)

$
(211,524
)

$
1,893,694

Total comprehensive income

—

—

115,867

46,230

—

162,097

Cash dividends ($0.735 per share)

—

—

(36,388
)

—

—

(36,388
)
Purchase of treasury stock

—

—

—

—

(14,189
)

(14,189
)
Issuance of equity awards

—

(3,373
)

—

—

3,802

429

Recognition of equity-based
compensation

—

8,253

—

—

—

8,253

Sale of treasury stock

—

362

—

—

474

836

Exercise of stock options

—

2,400

—

—

7,014

9,414

Cumulative effect adjustment⁽¹⁾

—

1,338

(856
)

—

—

482

Balance - September 30, 2016

$
55,057

$
1,028,869

$
1,112,613

$
42,512

$
(214,423
)

$
2,024,628

Balance - January 1, 2017

$
55,057

$
1,033,419

$
1,142,887

$
(57,542
)

$
(211,437
)

$
1,962,384

Total comprehensive income

—

—

135,144

34,874

—

170,018

Cash dividends ($0.765 per share)

—

—

(38,166
)

—

—

(38,166
)
Purchase of treasury stock

—

—

—

—

(14,369
)

(14,369
)
Issuance of equity awards

—

(3,364
)

—

—

3,835

471

Recognition of equity-based
compensation

—

9,576

—

—

—

9,576

Sale of treasury stock

—

468

—

—

381

849

Exercise of stock options

—

1,923

—

—

8,857

10,780

Balance - September 30, 2017

$
55,057

$
1,042,022

$
1,239,865

$
(22,668
)

$
(212,733
)

$
2,101,543


	Common Stock		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balance – July 1, 2022	$	55,057	$	1,115,504		$	2,384,454		$	(564,803	)	$	(347,324	)	$	2,642,888
Total comprehensive income (loss)		—		—			87,990			(194,457	)		—			(106,467	)
Dividends ($0.37 per share)		—		—			(18,022	)		—			—			(18,022	)
Purchase of treasury stock		—		—			—			—			—			—
Issuances of equity awards, net of forfeitures		—		—			—			—			—			—
Recognition of equity-based compensation		—		4,839			—			—			—			4,839
Sale of treasury stock		—		83			—			—			61			144
Exercise of stock options		—		63			—			—			100			163
Balance – September 30, 2022	$	55,057	$	1,120,489		$	2,454,422		$	(759,260	)	$	(347,163	)	$	2,523,545

Balance – July 1, 2023	$	55,057	$	1,124,977		$	2,681,448		$	(685,831	)	$	(344,023	)	$	2,831,628
Total comprehensive income (loss)		—		—			96,554			(106,540	)		—			(9,986	)
Dividends ($0.38 per share)		—		—			(18,587	)		—			—			(18,587	)
Purchase of treasury stock		—		—			—			—			(194	)		(194	)
Issuances of equity awards, net of forfeitures		—		(351	)		—			—			351			—
Recognition of equity-based compensation		—		3,528			—			—			—			3,528
Sale of treasury stock		—		52			—			—			76			128
Exercise of stock options		—		33			—			—			109			142
Balance – September 30, 2023	$	55,057	$	1,128,239		$	2,759,415		$	(792,371	)	$	(343,681	)	$	2,806,659

~~(1)~~

~~See Note 3, “New Accounting Pronouncements,” for a discussion of the adoption of Accounting Standards Update (ASU) 2016-09.~~


	Common Stock		Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balance – January 1, 2022	$	55,057	$	1,110,520		$	2,176,998		$	126,314		$	(323,465	)	$	3,145,424
Total comprehensive income (loss)		—		—			331,509			(885,574	)		—			(554,065	)
Dividends ($1.11 per share)		—		—			(54,085	)		—			—			(54,085	)
Purchase of treasury stock		—		—			—			—			(31,806	)		(31,806	)
Issuances of equity awards, net of forfeitures		—		(6,630	)		—			—			7,309			679
Recognition of equity-based compensation		—		16,062			—			—			—			16,062
Sale of treasury stock		—		257			—			—			172			429
Exercise of stock options		—		280			—			—			627			907
Balance – September 30, 2022	$	55,057	$	1,120,489		$	2,454,422		$	(759,260	)	$	(347,163	)	$	2,523,545

Balance – January 1, 2023	$	55,057	$	1,125,949		$	2,536,086		$	(702,735	)	$	(347,264	)	$	2,667,093
Total comprehensive income (loss)		—		—			279,101			(89,636	)		—			189,465
Dividends ($1.14 per share)		—		—			(55,772	)		—			—			(55,772	)
Purchase of treasury stock		—		—			—			—			(8,096	)		(8,096	)
Issuances of equity awards, net of forfeitures		—		(10,115	)		—			—			10,834			719
Recognition of equity-based compensation		—		11,983			—			—			—			11,983
Sale of treasury stock		—		167			—			—			216			383
Exercise of stock options		—		255			—			—			629			884
Balance – September 30, 2023	$	55,057	$	1,128,239		$	2,759,415		$	(792,371	)	$	(343,681	)	$	2,806,659

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, dollars in thousands)

For the Nine Months Ended

September 30,

2017

2016

Operating Activities

Net income

$
135,144

$
115,867

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan losses

35,000

25,000

Net accretion of premiums and discounts from acquisition

(1,810
)

(1,711
)
Depreciation and amortization

41,538

40,949

Deferred income tax expense

1,555

911

Net increase in trading securities

(17,680
)

(30,635
)
Gains on sales of securities available for sale, net

(4,138
)

(8,509
)
Gains on sales of assets

(484
)

(136
)
Amortization of securities premiums, net of discount accretion

36,571

43,467

Originations of loans held for sale

(53,207
)

(71,726
)
Gains on sales of loans held for sale, net

(1,188
)

(1,281
)
Proceeds from sales of loans held for sale

55,149

61,716

Equity-based compensation

10,047

8,682

Net tax benefit (expense) related to equity compensation plans

3,149

(261
)
Changes in:

Accrued income

(4,031
)

(2,889
)
Accrued expenses and taxes

21,011

4,789

Other assets and liabilities, net

(12,336
)

(14,466
)
Net cash provided by operating activities

244,290

169,767

Investing Activities

Proceeds from maturities of securities held to maturity

64,079

29,757

Proceeds from sales of securities available for sale

573,062

951,263

Proceeds from maturities of securities available for sale

1,005,585

1,300,372

Purchases of securities held to maturity

(225,445
)

(373,520
)
Purchases of securities available for sale

(1,107,842
)

(1,689,198
)
Net increase in loans

(481,593
)

(876,784
)
Net decrease (increase) in fed funds sold and resell agreements

79,891

(71,264
)
Net cash activity from acquisitions and branch sales

(2,532
)

—

Net increase in interest bearing balances due from other financial institutions

34,164

65,203

Purchases of premises and equipment

(24,748
)

(38,950
)
Proceeds from sales of premises and equipment

1,650

2,164

Increase in COLI/BOLI cash surrender value

(62,800
)

(7,095
)
Net cash used in investing activities

(146,529
)

(708,052
)
Financing Activities

Net (decrease) increase in demand and savings deposits

(559,697
)

460,129

Net decrease in time deposits

(11,313
)

(173,783
)
Net (decrease) increase in fed funds purchased and repurchase agreements

(100
)

203,061

Net decrease in short-term debt

—

(5,000
)
Repayment of long-term debt

(1,491
)

(11,285
)
Payment of contingent consideration on acquisitions

—

(3,031
)
Cash dividends paid

(38,171
)

(36,385
)
Proceeds from exercise of stock options and sales of treasury shares

11,629

10,250

Purchases of treasury stock

(14,369
)

(14,189
)
Net cash (used in) provided by financing activities

(613,512
)

429,767

Decrease in cash and cash equivalents

(515,751
)

(108,518
)
Cash and cash equivalents at beginning of period

1,063,967

819,112

Cash and cash equivalents at end of period

$
548,216

$
710,594

Supplemental Disclosures:

Income taxes paid

$
37,109

$
30,995

Total interest paid

40,245

20,555


	For the Nine Months Ended
	September 30,
	2023			2022
OPERATING ACTIVITIES
Net income	$	279,101		$	331,509
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		41,227			28,900
Net amortization of premiums and discounts from acquisition		800			1,057
Depreciation and amortization		44,576			39,751
Amortization of debt issuance costs		657			338
Deferred income tax benefit		(11,437	)		(6,332	)
Net (increase) decrease in trading securities and other earning assets		(6,529	)		17,485
Losses (gains) on investment securities, net		4,153			(58,853	)
Gains on sales of assets		(4,301	)		(3,206	)
Amortization of securities premiums, net of discount accretion		32,516			34,617
Originations of loans held for sale		(49,300	)		(34,340	)
Gains on sales of loans held for sale, net		(1,218	)		(910	)
Proceeds from sales of loans held for sale		49,672			33,657
Equity-based compensation		12,702			16,741
Changes in:
Accrued income		(19,363	)		(22,756	)
Accrued expenses and taxes		77,577			(38,518	)
Other assets and liabilities, net		(63,208	)		285,969
Net cash provided by operating activities		387,625			625,109
INVESTING ACTIVITIES
Securities held to maturity:
Maturities, calls and principal repayments		336,216			350,282
Purchases		(186,010	)		(946,974	)
Securities available for sale:
Sales		22,193			—
Maturities, calls and principal repayments		1,005,538			935,626
Purchases		(522,134	)		(1,128,812	)
Equity securities with readily determinable fair values:
Sales		—			28,417
Purchases		(194	)		(1,019	)
Equity securities without readily determinable fair values:
Sales		4,883			13
Maturities, calls and principal repayments		314,881			148
Purchases		(397,752	)		(22,529	)
Payment on low-income housing tax credit investment commitments		(31,251	)		(30,238	)
Net increase in loans		(1,859,649	)		(2,802,349	)
Net decrease in fed funds sold and resell agreements		710,394			499,808
Net cash activity from acquisitions and divestitures		(793	)		257,767
Net decrease (increase) in interest-bearing balances due from other financial institutions		38,552			(20,653	)
Purchases of premises and equipment		(23,132	)		(34,346	)
Proceeds from sales of premises and equipment		4,075			6,432
Net cash used in investing activities		(584,183	)		(2,908,427	)


FINANCING ACTIVITIES
Net decrease in demand and savings deposits		(1,633,496	)		(4,038,619	)
Net increase in time deposits		2,426,115			18,326
Net decrease in fed funds purchased and repurchase agreements		(464,565	)		(924,267	)
Proceeds from short-term debt		32,856,000			—
Repayment of short-term debt		(30,556,000	)		—
Proceeds from long-term debt		—			110,000
Payment of debt issuance costs		—			(2,032	)
Cash dividends paid		(55,312	)		(53,666	)
Proceeds from exercise of stock options and sales of treasury shares		1,267			1,336
Purchases of treasury stock		(8,096	)		(31,806	)
Net cash provided by (used in) financing activities		2,565,913			(4,920,728	)
Increase (decrease) in cash and cash equivalents		2,369,355			(7,204,046	)
Cash and cash equivalents at beginning of period		1,557,874			9,214,564
Cash and cash equivalents at end of period	$	3,927,229		$	2,010,518


Supplemental disclosures:
Income tax payments	$	67,372		$	80,053
Total interest payments		577,907			91,564
Noncash disclosures:
Acquisition of low-income housing tax credit investments	$	56,922		$	28,409
Commitment to fund low-income housing tax credit investments		56,922			28,409
Transfer of loans to other real estate owned		—			12,381
Transfer of securities from available-for-sale to held-to-maturity		—			3,741,208

See Notes to Consolidated Financial Statements.

UMB FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~THREE AND~~ NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~2023 (UNAUDITED)

1. Financial Statement Presentation

The Consolidated Financial Statements include the accounts of UMB Financial Corporation and its subsidiaries (collectively, the Company) after the elimination of all intercompany transactions. In the opinion of management of the Company, all adjustments relating to items that are of a normal recurring nature and necessary for a fair presentation of the financial position and results of operations have been made. The results of operations and cash flows for the interim periods presented may not be indicative of the results of the full year ending December 31, ~~2017.~~2023. The financial statements should be read in conjunction with “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations” within this Quarterly Report on Form 10-Q (the Form 10-Q) and in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2022, filed with the Securities and Exchange Commission (SEC) on February 23, ~~2017~~2023 (the Form 10-K).

On April 20, 2017, the Company announced the execution of an agreement to sell all of the outstanding stock of Scout Investments, Inc. (Scout), its institutional investment management subsidiary, for $172.5 million in cash, subject to customary purchase price adjustments at closing, which is expected to occur in the fourth quarter of 2017. See Items 1.01 and 5.02 in the Company’s Current Report on Form 8-K that was filed April 20, 2017. In accordance with Accounting Standards Codification (ASC) Topic 205-20, ~~Discontinued Operations~~, the results of Scout have been presented separately as (Loss) income from discontinued operations in the Company’s Consolidated Statements of Income and Scout’s assets have been presented separately as Discontinued assets – goodwill and other intangibles, net in the Company’s Consolidated Balance Sheets.

~~2. Summary of Significant Accounting Policies~~

The Company is a financial holding company, which offers a wide range of banking and other financial services to its customers through its branches and offices. The Company’s national bank, UMB Bank, National Association (the Bank), has its principal office in Missouri and also has branches in Arizona, Colorado, Illinois, Kansas, Nebraska, Oklahoma, and Texas. The Company also has offices in ~~Missouri, Kansas, Colorado, Illinois, Oklahoma, Texas, Arizona, Nebraska,~~California, Delaware, Indiana, Iowa, Minnesota, New York, Pennsylvania, South Dakota, ~~Indiana,~~ Utah, ~~Minnesota, California,~~ and Wisconsin.

2. Summary of Significant Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also impact reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A summary of the significant accounting policies to assist the reader in understanding the financial presentation is provided in the Notes to Consolidated Financial Statements in the Form 10-K.

Cash and cash equivalents

Cash and cash equivalents ~~include~~includes Cash and due from banks and amounts due from the Federal Reserve ~~Bank.~~Bank (FRB). Cash on hand, cash items in the process of collection, and amounts due from correspondent banks are included in Cash and due from banks. Amounts due from the ~~Federal Reserve Bank~~FRB are interest-bearing for all periods presented and are included in the Interest-bearing due from banks line on the Company’s Consolidated Balance Sheets.

This table provides a summary of cash and cash equivalents as presented on the Consolidated Statements of Cash Flows as of September 30, ~~2017~~2023 and September 30, ~~2016~~ ~~(in~~2022 (in thousands):

	September 30,
	2017		2016		September 30,
Due from the Federal Reserve Bank	$	182,047	$	356,410
					2023		2022
Due from the FRB					$	3,472,524	$	1,639,182
Cash and due from banks		366,169		354,184		454,705		371,336
Cash and cash equivalents at end of period	$	548,216	$	710,594	$	3,927,229	$	2,010,518

Also included in the Interest-bearing due from banks, but not considered cash and cash equivalents, are interest-bearing accounts held at other financial institutions, which totaled ~~$39.8~~$82.0 million and ~~$96.8~~$126.1 million at September 30, ~~2017~~2023 and September 30, ~~2016,~~2022, respectively.

Per Share Data

Basic net income per share is computed based on the weighted average number of shares of common stock outstanding during each period. Diluted quarter-to-date net income per share includes the dilutive effect of ~~549,819~~236,920 and ~~435,029~~348,675 shares issuable upon the exercise of stock options and nonvested restricted stock units granted by the Company and outstanding at September 30, ~~2017~~2023 and ~~2016,~~2022, respectively. Diluted year-to-date net income per share includes the dilutive effect of ~~616,990~~245,043 and ~~369,781~~372,565 shares issuable upon the exercise of stock options and nonvested restricted stock units granted by the Company and outstanding at September 30, ~~2017~~2023 and ~~2016,~~2022, respectively.

~~Options~~Certain options and restricted stock units issued under employee benefits plans ~~to purchase 150,739 shares of common stock~~ were ~~outstanding at September 30, 2017, but were not included in~~excluded from the computation of ~~quarter-to-date and year-to-date~~ diluted ~~EPS~~earnings per share because ~~the options~~they were anti-dilutive. ~~Options issued under employee benefits plans to purchase 394,863 shares~~Outstanding stock options and restricted stock units of ~~common stock were outstanding at~~57,883 and 209,245 for the three months ended September 30, ~~2016, but~~2023 and the nine months ended September 30, 2023, respectively, were ~~not included in~~excluded from the computation of ~~quarter-to-date~~ diluted ~~EPS~~income per share because their inclusion would have been anti-dilutive. For the ~~options were anti-dilutive. Options issued under employee benefits plans to purchase 628,698 shares of common stock were outstanding at~~three months ended September 30, ~~2016, but~~2022, there were ~~not included in~~48,416 outstanding stock options and restricted stock units excluded from the computation of ~~year-to-date~~ diluted ~~EPS because~~income per share. For the nine months ended September 30, 2022, there were no outstanding stock options ~~were anti-dilutive.~~ or restricted stock units excluded from the computation of diluted income per share.

Derivatives

The Company records all derivatives on the Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Currently, two of the Company’s derivatives are designated in qualifying hedging relationships. However, the remainder of the Company’s derivatives are not designated in qualifying hedging relationships, as the derivatives are not used to manage risks within the Company’s assets or liabilities. All changes in fair value of the Company’s non-designated derivatives and fair value hedges are recognized directly in earnings. Changes in fair value of the Company’s cash flow hedges are recognized in accumulated other comprehensive income (AOCI) and are reclassified to earnings when the hedged transaction affects earnings.

3. New Accounting Pronouncements

~~Revenue Recognition~~ Troubled Debt RestructuringsIn ~~May 2014,~~March 2022, the ~~Financial~~FASB issued Accounting Standards ~~Board (FASB) issued ASU~~Update (ASU) No. ~~2014-09, “Revenue from Contracts with Customers.~~2022-02, “Financial Instruments – Credit Losses: Troubled Debt Restructurings and Vintage Disclosures.” The ASU ~~will replace most existing revenue recognition~~eliminated the accounting guidance for troubled debt restructurings (TDR) by creditors and enhanced disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amendments also added requirements to disclose current-period gross write-offs by year of origination for financing receivables and net investments in ~~U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date~~leases, disclosed by credit-quality indicator and class of ASU No. 2014-09 to annual reporting periods that begin after December 15, 2017. In March, April, and May 2016, the FASB issued implementation amendments to the May 2014 ASU (collectively, the amended guidance). The amended guidance affects any entity that enters into contracts with customers to transfer goods and services, unless those contracts are within the scope of other standards. The amended guidance specifically excludes interest income, as well as other revenues associated with financial assets and liabilities, including loans, leases, securities, and derivatives. The amended guidance permits the use of either the full retrospective approach or a modified retrospective approach. The Company plans to adopt the amended guidance using the modified retrospective approach on January 1, 2018. The Company is progressing in implementing the amended guidance. The Company has assessed its revenue streams and identified those contracts that are specifically excluded from the scope of the amended guidance and those that may be subject to the amended guidance. Subsequent to this initial scoping, the Company selected a representative sample of contracts from the in-scope revenue streams for review under the amended guidance (key contracts). Upon completion of the review of the key contracts, the Company grouped the remaining contracts based on the conclusions reached through the key contract review and evaluated specific contracts that could not be grouped. Based on the evaluation of key contracts performed, the adoption of this accounting pronouncement is not expected to have a significant impact on the Company’s Consolidated Financial Statements. The Company continues to evaluate the impact the amended guidance will have on its related disclosures.

~~Financial Instruments~~ In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendment is intended to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.financing receivable. The amendments in this update are effective for interim and annual periods beginning after December 15, 2017. The standard requires the use of the cumulative effect transition method as of the beginning of the year of adoption. Except for certain provisions, early adoption is not permitted. The Company is currently evaluating the impact that this standard will havewere adopted prospectively on ~~its Consolidated Financial Statements.~~

~~Leases~~ In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The amendment changes the accounting treatment of leases, in that lessees will recognize most leases on-balance sheet. This will increase reported assets and liabilities, as lessees will be required to recognize a right-of-use asset along with a lease liability, measured on a discounted basis. Lessees are allowed to account for short-term leases (those with a term of twelve months or less) off-balance sheet. The amendments in this update are effective for fiscal years beginning after December 15, 2018,

including interim periods within those fiscal years. The standard requires the use of the modified retrospective transition method. Early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its Consolidated Financial Statements.

~~Extinguishments of Liabilities~~ In March 2016, the FASB issued ASU No. 2016-04, “Recognition of Breakage for Certain Prepaid Stored-Value Products.” The amendment is intended to reduce the diversity in practice related to the recognition of breakage. Breakage refers to the portion of a prepaid stored-value product, such as a gift card, that goes unused wholly or partially for an indefinite period of time. This amendment requires that breakage be accounted for consistent with the breakage guidance within ASU No. 2014-09, “Revenue from Contracts with Customers.” The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The standard permits the use of either the modified retrospective or full retrospective transition method. Early adoption is permitted. The Company will adopt ASU No. 2016-04 in conjunction with its adoption of ASU No. 2014-09.January 1, 2023. The adoption of ~~this accounting pronouncement is not expected to have a significant~~the amendments had no impact on the ~~Company’s~~ Consolidated Financial ~~Statements.~~

~~Equity-Based Compensation~~ ~~In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The amendment is part of the FASB’s simplification initiative~~Statements aside from additional and is intended to simplify the accounting around share-based payment award transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendment requires different transition methods for various components of the standard. The amendments in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted.

In September 2016, the Company early adopted ASU No. 2016-09 with an effective date of January 1, 2016. As part of the adoption of this standard, the Company made an accounting policy election to account for forfeitures on an actual basis and discontinued the use of an estimated forfeiture approach. Additionally, the Company selected the retrospective transition method for the reclassification of the “Net tax benefit related to equity compensation plans” from the financing section to the operating section of the Company’s Consolidated Statement of Cash Flows. The impact to the Company’s Consolidated Statements of Income for adopting all provisions of the standard was an increase to net income of $158 thousand for the three-month period ended March 31, 2016 and an increase to net income of $220 thousand for the three-month period ended June 30, 2016. Upon adoption, the Company recorded a cumulative effect adjustment to the Company’s Consolidated Balance Sheets of $482 thousand as an increase to total equity.

~~Credit Losses~~ In September 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This update replaces the current incurred loss methodology for recognizing credit losses with a current expected credit loss model, which requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This amendment broadens the information that an entity must consider in developing its expected credit loss estimates. Additionally, the update amends the accounting for credit losses for available-for-sale debt securities and purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. This update requires enhanced disclosures to help investors and otherrevised financial statement ~~users better understand significant estimates~~disclosures. See Note 4, “Loans and ~~judgments used in estimating credit losses, as well as the credit quality and underwriting standards of a company’s loan portfolio. The amendments in this update are effective~~Allowance for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption in fiscal years beginning after December 15, 2018 is permitted. The amendment requires the use of the modified retrospective approachCredit Losses” for ~~adoption. The Company is currently evaluating the impact that this standard will have on its Consolidated Financial Statements.~~related disclosures.

~~Statement of Cash Flows~~ ~~In August 2016, the FASB issued ASU 2016-15~~, “Classification of Certain Receipts and Cash Payments.” This amendment adds to and clarifies existing guidance regarding the classification of certain cash receipts and payments in the statement of cash flows with the intent of reducing diversity in practice with respect to eight types of cash flows. The amendments in this update require full retrospective adoption and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption

~~is permitted. The Company is currently evaluating the impact that this standard will have on its Consolidated Statements of Cash Flows.~~

~~Derivatives and Hedging~~ In August 2017, the FASB issued ASU No. 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” The purpose of this updated guidance is to better align financial reporting for hedging activities with the economic objectives of those activities. The amendments in this update are effective for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. The standard requires the modified retrospective transition approach as of the date of adoption. The Company is currently evaluating the impact that this standard will have on its Consolidated Financial Statements.

4. Loans and Allowance for ~~Loan~~Credit Losses

Loan Origination/Risk Management

The Company has certain lending policies and procedures in place that are designed to minimize the level of risk within the loan portfolio. Diversification of the loan portfolio manages the risk associated with fluctuations in economic conditions. Authority levels are established for the extension of credit to ensure consistency throughout the Company. It is necessary that policies, processes, and practices implemented to control the risks of individual credit transactions and portfolio segments are sound and adhered to. The Company maintains an independent loan review department that reviews and validates the risk assessment on a continual basis. Management regularly evaluates the results of the loan reviews. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Commercial loans are made based on the identified cash flows of the borrower and on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts from its customers. ~~Commercial credit cards are generally unsecured and are underwritten with criteria similar to commercial~~

Specialty lending loans ~~including an analysis of the borrower’s cash flow, available business capital, and overall credit-worthiness of the borrower.~~

include Asset-based loans, which are offered primarily in the form of revolving lines of credit to commercial borrowers that do not generally qualify for traditional bank financing. Asset-based loans are underwritten based primarily upon the value of the collateral pledged to secure the loan, rather than on the borrower’s general financial condition. The Company utilizes pre-loan due diligence techniques, monitoring disciplines, and loan management practices common within the asset-based lending industry to underwrite loans to these borrowers.

Factoring loans provide working capital through the purchase and/or financing of accounts receivable to borrowers in the transportation industry and to commercial borrowers that do not generally qualify for traditional bank financing.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. The Company requires that an appraisal of the collateral be made at origination and on an as-needed basis, in conformity with current market conditions and regulatory requirements. The underwriting standards address both owner and ~~non-owner occupied~~non-owner-occupied real estate.

Also included in Commercial real estate are Construction loans that are underwritten using feasibility studies, independent appraisal reviews, sensitivity analysis or absorption and lease rates, and financial analysis of the developers and property owners. Construction loans are based upon estimates of costs and value associated with the complete project. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans, sales of developed

property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their repayment being sensitive to interest rate changes, governmental regulation of real property, economic conditions, completion of the construction project, and the availability of long-term financing.

~~Underwriting standards for~~Consumer real estate loans, including residential real estate and home equity loans, are underwritten based on the borrower’s loan-to-value percentage, collection remedies, and overall credit history.

Consumer loans are underwritten based on the borrower’s repayment ability. The Company monitors delinquencies on all of its consumer loans and ~~leases and periodically reviews the distribution of FICO scores relative to historical periods to monitor credit risk on its credit card loans.~~leases. The underwriting and review practices combined with the relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Consumer loans and leases that are 90 days past due or more are considered non-performing.

Credit cards include both commercial and consumer credit cards. Commercial credit cards are generally unsecured and are underwritten with criteria similar to commercial loans, including an analysis of the borrower’s cash flow, available business capital, and overall creditworthiness of the borrower. Consumer credit cards are underwritten based on the borrower’s repayment ability. The Company monitors delinquencies on all of its consumer credit cards and periodically reviews the distribution of credit scores relative to historical periods to monitor credit risk on its consumer credit card loans.

Credit risk is a potential loss resulting from nonpayment of either the primary or secondary exposure. Credit risk is mitigated with formal risk management practices and a thorough initial credit-granting process including consistent underwriting standards and approval process. Control factors or techniques to minimize credit risk include knowing the client, understanding total exposure, analyzing the client and debtor’s financial capacity, and monitoring the client’s activities. Credit risk and portions of the portfolio risk are managed through concentration considerations, average risk ratings, and other aggregate characteristics.

Loan Aging Analysis

This table provides a summary of loan classes and an aging of past due loans at September 30, ~~2017~~2023 and December 31, ~~2016~~ 2022 (in thousands):

September 30, 2017

30-89
Days Past
Due and
Accruing

Greater than
90 Days Past
Due and
Accruing

Non-
Accrual
Loans

Total
Past Due

Current

Total Loans

Loans

Commercial:

Commercial

$
15,092

$
59

$
39,107

$
54,258

$
4,367,307

$
4,421,565

Asset-based

—

—

—

—

310,030

310,030

Factoring

—

—

—

—

195,882

195,882

Commercial – credit card

325

98

—

423

174,359

174,782

Real estate:

Real estate – construction

547

4

93

644

809,416

810,060

Real estate – commercial

4,522

—

10,769

15,291

3,345,936

3,361,227

Real estate – residential

943

157

745

1,845

612,751

614,596

Real estate – HELOC

397

—

3,138

3,535

658,456

661,991

Consumer:

Consumer – credit card

1,913

1,721

357

3,991

239,744

243,735

Consumer – other

613

49

22

684

178,031

178,715

Leases

—

—

—

—

24,445

24,445

Total loans

$
24,352

$
2,088

$
54,231

$
80,671

$
10,916,357

$
10,997,028


	September 30, 2023
	30-89 Days Past Due and Accruing		Greater than 90 Days Past Due and Accruing		Nonaccrual Loans		Total Past Due		Current		Total Loans
Loans
Commercial and industrial	$	11,748	$	76	$	8,784	$	20,608	$	9,769,077	$	9,789,685
Specialty lending		—		—		—		—		522,419		522,419
Commercial real estate		4,298		—		2,324		6,622		8,772,016		8,778,638
Consumer real estate		286		—		5,706		5,992		2,918,523		2,924,515
Consumer		181		—		37		218		143,503		143,721
Credit cards		4,613		2,968		191		7,772		442,792		450,564
Leases and other		—		—		—		—		272,147		272,147
Total loans	$	21,126	$	3,044	$	17,042	$	41,212	$	22,840,477	$	22,881,689


	December 31, 2022
	30-89 Days Past Due and Accruing		Greater than 90 Days Past Due and Accruing		Nonaccrual Loans		Total Past Due		Current		Total Loans
Loans
Commercial and industrial	$	2,456	$	2	$	11,356	$	13,814	$	9,192,172	$	9,205,986
Specialty lending		—		—		—		—		602,706		602,706
Commercial real estate		2,167		191		2,505		4,863		7,611,223		7,616,086
Consumer real estate		10		—		4,882		4,892		2,718,377		2,723,269
Consumer		613		20		61		694		144,972		145,666
Credit cards		3,529		1,404		441		5,374		426,298		431,672
Leases and other		—		—		24		24		305,780		305,804
Total loans	$	8,775	$	1,617	$	19,269	$	29,661	$	21,001,528	$	21,031,189

December 31, 2016

30-89
Days Past
Due and
Accruing

Greater than
90 Days Past
Due and
Accruing

Non-
Accrual
Loans

Total
Past Due

PCI
Loans

Current

Total Loans

Loans

Commercial:

Commercial

$
3,285

$
49

$
35,777

$
39,111

$
—

$
4,371,695

$
4,410,806

Asset-based

—

—

—

—

—

225,878

225,878

Factoring

—

—

—

—

—

139,902

139,902

Commercial – credit card

612

10

8

630

—

146,105

146,735

Real estate:

Real estate – construction

3

—

181

184

—

741,620

741,804

Real estate – commercial

1,303

1,004

16,423

18,730

—

3,147,192

3,165,922

Real estate – residential

1,034

6

1,344

2,384

—

545,966

548,350

Real estate – HELOC

588

—

4,736

5,324

—

706,470

711,794

Consumer:

Consumer – credit card

2,228

2,115

475

4,818

—

265,280

270,098

Consumer – other

1,061

181

11,315

12,557

800

126,205

139,562

Leases

—

—

—

—

—

39,532

39,532

Total loans

$
10,114

$
3,365

$
70,259

$
83,738

$
800

$
10,455,845

$
10,540,383

The Company had total purchased credit impaired (PCI) loans from its acquisition of Marquette Financial Companies (Marquette) of $800 thousand as of December 31, 2016. The PCI loans are accounted for in accordance with ASC Topic 310-30, ~~Loans and Debt Securities Purchased with Deteriorated Credit Quality.~~ All of the PCI loans were considered to be performing based on payment activity as of December 31, 2016. Of this amount, $713 thousand were current with their payment terms and $87 thousand were between 30-89 days past due.

The Company sold ~~residential~~consumer real estate loans with proceeds of ~~$55.1~~$49.7 million and ~~$61.7~~$33.7 million in the secondary market without recourse during the nine months ended September 30, ~~2017~~2023 and ~~September 30, 2016,~~2022, respectively.

The Company has ceased the recognition of interest on loans with a carrying value of ~~$54.2~~$17.0 million and ~~$70.3~~$19.3 million at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively. Restructured loans totaled ~~$49.2~~$3.2 million and ~~$52.5~~$5.2 million at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively. Loans 90 days past due and still accruing interest amounted to ~~$2.1~~$3.0 million and ~~$3.4~~$1.6 million at September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. There was an insignificant amount of interest ~~recognized~~reversed related to loans on ~~impaired~~nonaccrual during 2023 and 2022. Nonaccrual loans ~~during 2017~~with no related allowance for credit losses totaled $14.6 million and ~~2016.~~$16.7 million at September 30, 2023 and December 31, 2022, respectively.

The following tables provide the amortized cost of nonaccrual loans with no related allowance for credit losses by loan class at September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023
	Nonaccrual Loans		Amortized Cost of Nonaccrual Loans with no related Allowance
Loans
Commercial and industrial	$	8,784	$	8,175
Specialty lending		—		—
Commercial real estate		2,324		467
Consumer real estate		5,706		5,706
Consumer		37		37
Credit cards		191		191
Leases and other		—		—
Total loans	$	17,042	$	14,576


	December 31, 2022
	Nonaccrual Loans		Amortized Cost of Nonaccrual Loans with no related Allowance
Loans
Commercial and industrial	$	11,356	$	9,447
Specialty lending		—		—
Commercial real estate		2,505		2,505
Consumer real estate		4,882		4,226
Consumer		61		61
Credit cards		441		441
Leases and other		24		24
Total loans	$	19,269	$	16,704

Amortized Cost

The following tables provide a summary of the amortized cost balance of each of the Company’s loan classes disaggregated by collateral type and origination year as of September 30, 2023 and December 31, 2022, as well as the gross charge-offs by loan class and origination year for the nine months ended September 30, 2023 (in thousands):


	September 30, 2023
	Amortized Cost Basis by Origination Year - Term Loans
Loan Segment and Type	2023		2022		2021		2020		2019		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
Commercial and industrial:
Equipment/Accounts Receivable/Inventory	$	1,250,651	$	1,882,547	$	1,222,414	$	455,865	$	225,610	$	102,859	$	4,457,511	$	8,011	$	9,605,468
Agriculture		11,901		5,983		4,234		1,189		1,630		280		141,554		325		167,096
Overdrafts		—		—		—		—		—		—		17,121		—		17,121
Total Commercial and industrial		1,262,552		1,888,530		1,226,648		457,054		227,240		103,139		4,616,186		8,336		9,789,685
Current period charge-offs		41		—		883		—		—		456		3,347		—		4,727
Specialty lending:
Asset-based lending		14,344		17,221		36,530		35,164		—		—		419,160		—		522,419
Total Specialty lending		14,344		17,221		36,530		35,164		—		—		419,160		—		522,419
Current period charge-offs		—		—		—		—		—		—		762		—		762
Commercial real estate:
Owner-occupied		243,215		658,830		513,044		344,082		162,097		225,211		5,211		—		2,151,690
Non-owner-occupied		497,181		988,386		804,805		518,112		303,913		218,155		33,455		—		3,364,007
Farmland		56,787		76,085		44,625		199,827		22,252		20,649		94,270		—		514,495
5+ Multi-family		831		27,690		208,264		32,209		18,363		5,697		8,214		—		301,268
1-4 Family construction		63,788		40,097		—		—		—		—		5,275		—		109,160
General construction		347,154		1,205,620		694,726		4,262		663		135		85,458		—		2,338,018
Total Commercial real estate		1,208,956		2,996,708		2,265,464		1,098,492		507,288		469,847		231,883		—		8,778,638
Current period charge-offs		—		—		—		—		—		21		—		—		21
Consumer real estate:
HELOC		—		651		—		517		52		5,145		342,092		1,121		349,578
First lien: 1-4 family		353,966		591,744		697,900		563,668		161,053		170,537		2		—		2,538,870
Junior lien: 1-4 family		7,419		12,516		7,569		4,318		2,225		1,857		163		—		36,067
Total Consumer real estate		361,385		604,911		705,469		568,503		163,330		177,539		342,257		1,121		2,924,515
Current period charge-offs		—		22		—		—		11		1,120		—		—		1,153
Consumer:
Revolving line		—		—		—		—		—		—		53,858		30		53,888
Auto		9,408		6,643		4,556		2,657		1,422		200		—		—		24,886
Other		4,881		23,088		26,433		622		454		1,256		8,213		—		64,947
Total Consumer		14,289		29,731		30,989		3,279		1,876		1,456		62,071		30		143,721
Current period charge-offs		67		11		20		2		6		15		813		—		934
Credit cards:
Consumer		—		—		—		—		—		—		198,508		—		198,508
Commercial		—		—		—		—		—		—		252,056		—		252,056
Total Credit cards		—		—		—		—		—		—		450,564		—		450,564
Current period charge-offs		—		—		—		—		—		—		6,181		—		6,181
Leases and other:
Leases		—		—		—		—		610		1,123		—		—		1,733
Other		30,836		94,246		17,419		17,395		29,916		14,000		66,580		22		270,414
Total Leases and other		30,836		94,246		17,419		17,395		30,526		15,123		66,580		22		272,147
Current period charge-offs		—		—		—		—		—		—		—		—		—
Total loans	$	2,892,362	$	5,631,347	$	4,282,519	$	2,179,887	$	930,260	$	767,104	$	6,188,701	$	9,509	$	22,881,689


	December 31, 2022
	Amortized Cost Basis by Origination Year - Term Loans
Loan Segment and Type	2022		2021		2020		2019		2018		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
Commercial and industrial:
Equipment/Accounts Receivable/Inventory	$	2,140,609	$	1,562,527	$	642,649	$	267,444	$	96,916	$	86,787	$	4,223,358	$	3,926	$	9,024,216
Agriculture		13,630		5,415		2,046		1,985		396		541		149,266		562		173,841
Overdrafts		—		—		—		—		—		—		7,929		—		7,929
Total Commercial and industrial		2,154,239		1,567,942		644,695		269,429		97,312		87,328		4,380,553		4,488		9,205,986
Specialty lending:
Asset-based lending		18,084		55,469		36,040		—		—		—		493,113		—		602,706
Total Specialty lending		18,084		55,469		36,040		—		—		—		493,113		—		602,706
Commercial real estate:
Owner-occupied		656,860		593,861		388,519		180,786		136,499		167,628		8,685		—		2,132,838
Non-owner-occupied		1,128,978		855,508		568,489		368,203		64,915		229,826		28,679		—		3,244,598
Farmland		94,989		47,092		220,796		24,057		15,963		24,162		121,054		—		548,113
5+ Multi-family		30,920		35,869		68,996		18,978		1,334		5,776		4,908		—		166,781
1-4 Family construction		61,943		15,217		—		—		—		—		19		—		77,179
General construction		628,820		719,437		43,166		15,492		—		395		39,267		—		1,446,577
Total Commercial real estate		2,602,510		2,266,984		1,289,966		607,516		218,711		427,787		202,612		—		7,616,086
Consumer real estate:
HELOC		237		—		618		224		654		5,389		339,066		981		347,169
First lien: 1-4 family		628,703		748,362		607,105		173,466		45,907		140,443		12		—		2,343,998
Junior lien: 1-4 family		13,490		8,445		5,107		2,529		940		1,504		87		—		32,102
Total Consumer real estate		642,430		756,807		612,830		176,219		47,501		147,336		339,165		981		2,723,269
Consumer:
Revolving line		467		584		—		—		—		—		58,133		1,403		60,587
Auto		9,124		6,543		4,455		2,743		335		159		—		—		23,359
Other		26,306		27,751		1,096		876		1,133		591		3,967		—		61,720
Total Consumer		35,897		34,878		5,551		3,619		1,468		750		62,100		1,403		145,666
Credit cards:
Consumer		—		—		—		—		—		—		200,348		—		200,348
Commercial		—		—		—		—		—		—		231,324		—		231,324
Total Credit cards		—		—		—		—		—		—		431,672		—		431,672
Leases and other:
Leases		—		—		—		712		—		1,224		—		—		1,936
Other		125,095		34,282		22,552		32,055		17,764		1,066		71,054		—		303,868
Total Leases and other		125,095		34,282		22,552		32,767		17,764		2,290		71,054		—		305,804
Total loans	$	5,578,255	$	4,716,362	$	2,611,634	$	1,089,550	$	382,756	$	665,491	$	5,980,269	$	6,872	$	21,031,189

Accrued interest on loans totaled $115.7 million and $90.6 million as of September 30, 2023 and December 31, 2022, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost basis of loans presented above. Further, the Company has elected not to measure an allowance for credit losses for accrued interest receivable.

Credit Quality Indicators

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans, net charge-offs, non-performing loans, and general economic conditions.

The Company utilizes a risk grading matrix to assign a rating to each of its commercial, commercial real estate, and construction real estate loans. Changes in credit risk are monitored on a continuous basis and changes in risk ratings are made when identified. The loan ratings are summarized into the following categories: Non-watch list, Watch, Special Mention, Substandard, and ~~Substandard.~~Doubtful. Any loan not classified in one of the categories described below is considered to be a Non-watch list loan. A description of the general characteristics of the loan rating categories is as follows:

•

~~Watch~~ ~~– This rating represents credit exposure that presents higher than average risk and warrants greater than routine attention by Company personnel due to conditions affecting the borrower, the~~

•

Watch – This rating represents credit exposure that presents higher than average risk and warrants greater than routine attention by Company personnel due to conditions affecting the borrower, the borrower’s industry, or the economic environment. These conditions have resulted in some degree of uncertainty that results in higher-than-average credit risk. These loans are considered pass-rated credits.

•

~~borrower’s industry or the economic environment. These conditions have resulted in some degree of uncertainty that results in higher than average credit risk.~~

Special Mention – This rating reflects a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or the borrower’s credit position at some future date. The rating is not adversely classified and does not expose an institution to sufficient risk to warrant adverse classification.

•

Substandard – This rating represents an asset inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans in this category are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.

•

Doubtful – This ~~category may include loans where~~rating represents an asset that has all the weaknesses inherent in an asset classified as substandard, with the added characteristic that the weaknesses make collection ofor liquidation in full, ~~principal is doubtful or remote.~~

~~All other classes of loans are generally evaluated and monitored~~ based on ~~payment activity. Non-performing loans~~currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage of strengthening the asset, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include ~~restructured loans on non-accrual~~proposed merger, acquisition, liquidation procedures, capital injection, or perfecting liens.

Commercial and ~~all other non-accrual loans.~~industrial

~~This table provides an analysis~~A discussion of the credit quality indicators that impact each type of collateral securing Commercial and industrial loans is included below:

Equipment, accounts receivable, and inventory General commercial and industrial loans are secured by working capital assets and non-real estate assets. The general purpose of these loans is for financing capital expenditures and current operations for commercial and industrial entities. These assets are short-term in nature. In the case of accounts receivable and inventories, the repayment of debt is reliant upon converting assets into cash or through goods and services being sold and collected. Collateral-based risk ~~profile~~is due to aged short-term assets, which can be indicative of underlying issues with the borrower and lead to the value of the collateral being overstated.

Agriculture Agricultural loans are secured by non-real estate agricultural assets. These include shorter-term assets such as equipment, crops, and livestock. The risks associated with loans to finance crops or livestock include the borrower’s ability to successfully raise and market the commodity. Adverse weather conditions and other natural perils can dramatically affect farmers’ or ranchers’ production and ability to service debt. Volatile commodity prices present another significant risk for agriculture borrowers. Market price volatility and production cost volatility can affect both revenues and expenses.

Overdrafts Commercial overdrafts are typically short-term and unsecured. Some commercial borrowers tie their overdraft obligation to their line of credit, so any draw on the line of credit will satisfy the overdraft.

Based on the factors noted above for each ~~loan class excluded from ASC 310-30 at~~type of collateral, the Company assigns risk ratings to borrowers based on their most recently assessed financial position.

The following tables provide a summary of the amortized cost balance by collateral type and risk rating as of September 30, ~~2017~~2023 and December 31, ~~2016 (in~~2022 (in thousands):

~~Credit Exposure~~


	September 30, 2023
	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2023		2022		2021		2020		2019		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
Equipment/Accounts Receivable/Inventory
Non-watch list – Pass	$	1,218,812	$	1,794,147	$	1,162,035	$	449,097	$	204,893	$	97,679	$	4,110,311	$	3,121	$	9,040,095
Watch – Pass		12,512		75,936		49,138		5,554		11,585		1,618		227,734		—		384,077
Special Mention		3,487		5,543		5,311		249		—		1,252		34,874		—		50,716
Substandard		12,983		6,921		5,930		965		9,132		2,310		84,592		4,890		127,723
Doubtful		2,857		—		—		—		—		—		—		—		2,857
Total Equipment/Accounts Receivable/Inventory	$	1,250,651	$	1,882,547	$	1,222,414	$	455,865	$	225,610	$	102,859	$	4,457,511	$	8,011	$	9,605,468
Agriculture
Non-watch list – Pass	$	11,009	$	5,226	$	4,090	$	1,048	$	1,630	$	280	$	136,879	$	—	$	160,162
Watch – Pass		—		—		—		—		—		—		3,400		—		3,400
Special Mention		—		66		144		—		—		—		795		325		1,330
Substandard		892		691		—		141		—		—		480		—		2,204
Doubtful		—		—		—		—		—		—		—		—		—
Total Agriculture	$	11,901	$	5,983	$	4,234	$	1,189	$	1,630	$	280	$	141,554	$	325	$	167,096

~~Credit Risk Profile by Risk Rating~~

Commercial

Asset-based

Factoring

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

2017

2016

2017

2016

2017

2016

Non-watch list

$
3,987,758

$
4,043,704

$
270,418

$
198,695

$
193,264

$
139,358

Watch

69,066

99,815

—

—

—

—

Special Mention

110,140

32,240

39,612

24,809

2,224

129

Substandard

254,601

235,047

—

2,374

394

415

Total

$
4,421,565

$
4,410,806

$
310,030

$
225,878

$
195,882

$
139,902


	December 31, 2022
	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2022		2021		2020		2019		2018		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
Equipment/Accounts Receivable/Inventory
Non-watch list – Pass	$	2,079,002	$	1,466,120	$	588,562	$	246,387	$	90,656	$	83,054	$	3,879,709	$	3,633	$	8,437,123
Watch – Pass		28,570		78,523		52,696		7,493		3,617		2,275		213,871		—		387,045
Special Mention		4,072		5,637		1,178		—		1,817		899		34,631		—		48,234
Substandard		26,698		12,247		213		13,564		826		559		92,352		293		146,752
Doubtful		2,267		—		—		—		—		—		2,795		—		5,062
Total Equipment/Accounts Receivable/Inventory	$	2,140,609	$	1,562,527	$	642,649	$	267,444	$	96,916	$	86,787	$	4,223,358	$	3,926	$	9,024,216
Agriculture
Non-watch list – Pass	$	12,252	$	5,351	$	1,693	$	1,985	$	396	$	541	$	137,759	$	—	$	159,977
Watch – Pass		550		—		206		—		—		—		8,512		562		9,830
Special Mention		828		64		147		—		—		—		1,539		—		2,578
Substandard		—		—		—		—		—		—		1,456		—		1,456
Doubtful		—		—		—		—		—		—		—		—		—
Total Agriculture	$	13,630	$	5,415	$	2,046	$	1,985	$	396	$	541	$	149,266	$	562	$	173,841

Real estate – construction

Real estate – commercial

September 30,

December 31,

September 30,

December 31,

2017

2016

2017

2016

Non-watch list

$
804,932

$
741,022

$
3,233,122

$
3,071,804

Watch

1,445

149

48,898

43,015

Special Mention

3,281

—

33,901

5,140

Substandard

402

633

45,306

45,963

Total

$
810,060

$
741,804

$
3,361,227

$
3,165,922

~~Credit Exposure~~Specialty lending

~~Credit Risk Profile Based on Payment Activity~~

Commercial – credit card

Real estate – residential

Real estate – HELOC

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

2017

2016

2017

2016

2017

2016

Performing

$
174,782

$
146,727

$
613,851

$
547,006

$
658,853

$
707,058

Non-performing

—

8

745

1,344

3,138

4,736

Total

$
174,782

$
146,735

$
614,596

$
548,350

$
661,991

$
711,794

Consumer – credit card

Consumer – other

Leases

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

2017

2016

2017

2016

2017

2016

Performing

$
243,378

$
269,623

$
178,693

$
127,447

$
24,445

$
39,532

Non-performing

357

475

22

11,315

—

—

Total

$
243,735

$
270,098

$
178,715

$
138,762

$
24,445

$
39,532

~~Allowance for Loan Losses~~

The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s judgment of inherent probable losses within the Company’s loan portfolio asA discussion of the ~~balance sheet date.~~credit quality indicators that impact each type of collateral securing Specialty loans is included below:

Asset-based lending General asset-based loans are secured by accounts receivable, inventory, equipment, and real estate. The ~~allowance~~purpose of these loans is ~~necessary~~for financing current operations for commercial customers. The repayment of debt is reliant upon collection of the accounts receivable within 30 to ~~reserve for estimated loan losses~~90 days or converting assets into cash or through goods and ~~risks inherent in the loan portfolio. Accordingly, the methodology is~~services being sold and collected. The Company tracks each individual borrower credit risk based on ~~historical loss trends. The Company’s process for determining the appropriate level of the allowance for~~their loan ~~losses is designed~~ to account for credit deterioration as it occurs. The provision for probable loan losses reflects loan quality trends, including the levels of, and trends related to, non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors.

The level of the allowance reflects management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and estimated losses inherent in the current loan portfolio. Portions of the allowance may be allocated for specific loans; however, the entire allowance is available for any loan that, in management’s judgment, should be charged off. While management utilizes its best judgment and information available at the time, the adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including, among other things, the performance of the Company’s loan portfolio, the economy, changes in interest rates and changes in the regulatory environment.

The Company’s allowance for loan losses consists of specific valuation allowances and general valuation allowances based on historical loan loss experience for similar loans with similar characteristics and trends, general economic conditions and other qualitative risk factors both internal and external to the Company.

The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of impaired loans. Loans are classified based on an internal risk grading process that evaluates the obligor’s ability to repay,collateral position. Any borrower position where the underlying value of collateral ~~if any, and~~is below the ~~economic environment and industry in which~~fair value of the ~~borrower operates. When a~~ loan is considered ~~impaired, the loan is analyzed to determine the need, if any, to specifically allocate~~out-of-margin and inherently higher risk.

The following table provides a ~~portion~~summary of the ~~allowance~~amortized cost balance by risk rating for asset-based loans as of September 30, 2023 and December 31, 2022 (in thousands):


	Asset-based lending
Risk	September 30, 2023		December 31, 2022
In-margin	$	522,419	$	602,706
Out-of-margin		—		—
Total	$	522,419	$	602,706

Commercial real estate

A discussion of the credit quality indicators that impact each type of collateral securing Commercial real estate loans is included below:

Owner-occupied Owner-occupied loans are secured by commercial real estate. These loans are often longer tenured and susceptible to multiple economic cycles. The loans rely on the owner-occupied operations to service

debt which cover a broad spectrum of industries. Real estate debt can carry a significant amount of leverage for a borrower to maintain.

Non-owner-occupied Non-owner-occupied loans are secured by commercial real estate. These loans are often longer tenured and susceptible to multiple economic cycles. The key element of risk in this type of lending is the cyclical nature of real estate markets. Although national conditions affect the overall real estate industry, the effect of national conditions on local markets is equally important. Factors such as unemployment rates, consumer demand, household formation, and the level of economic activity can vary widely from state to state and among metropolitan areas. In addition to geographic considerations, markets can be defined by property type. While all sectors are influenced by economic conditions, some sectors are more sensitive to certain economic factors than others.

Farmland Farmland loans are secured by real estate used for agricultural purposes such as crop and livestock production. Assets used as collateral are long-term assets that carry the ability to have longer amortizations and maturities. Longer terms carry the risk of added susceptibility to market conditions. The limited purpose of some Agriculture-related collateral affects credit risk because such collateral may have limited or no other uses to support values when loan ~~losses~~repayment problems emerge.

5+ Multi-family 5+ multi-family loans are secured by a multi-family residential property. The primary risks associated with this type of collateral are largely driven by economic conditions. The national and local market conditions can change with unemployment rates or competing supply of multi-family housing. Tenants may not be able to ~~the loan. Specific valuation allowances are determined by analyzing~~afford their housing or have better options and this can result in increased vacancy. Rents may need to be lowered to fill apartment units. Increased vacancy and lower rental rates not only drive the borrower’s ability to repay ~~amounts owed,~~debt but also contribute to how the collateral ~~deficiencies, the relative risk rating of the loan~~is valued.

1-4 Family construction 1-4 family construction loans are secured by 1-4 family residential real estate and ~~economic conditions affecting the borrower’s industry.~~

~~General valuation allowances~~ are calculated based on the historical loss experience of specific types of loans including an evaluation of the time span and volume of the actual charge-off. The Company calculates historical loss ratios for pools of similar loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the ~~pool.~~process of construction or improvements being made. The ~~historical loss ratios~~predominant risk inherent to this portfolio is the risk associated with a borrower’s ability to successfully complete a project on time and within budget. Market conditions also play an important role in understanding the risk profile. Risk from adverse changes in market conditions from the start of development to completion can result in deflated collateral values.

General construction General construction loans are updated based on actual charge-off experience. A valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio, time span to charge-off, and the total dollar amount of the loans in the pool. The Company’s pools of similar loans include similarly risk-graded groups of commercial loans,secured by commercial real estate ~~loans, commercial~~in process of construction or improvements being made and their repayment is dependent on the collateral’s completion. Construction lending presents unique risks not encountered in term financing of existing real estate. The predominant risk inherent to this portfolio is the risk associated with a borrower’s ability to successfully complete a project on time and within budget. Commercial properties under construction are susceptible to market and economic conditions. Demand from prospective customers may erode after construction begins because of a general economic slowdown or an increase in the supply of competing properties.

Based on the factors noted above for each type of collateral, the Company assigns risk ratings to borrowers based on their most recently assessed financial position.

The following tables provide a summary of the amortized cost balance by collateral type and risk rating as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023
	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2023		2022		2021		2020		2019		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
Owner-occupied
Non-watch list – Pass	$	241,234	$	634,235	$	477,304	$	328,982	$	141,367	$	212,147	$	4,610	$	—	$	2,039,879
Watch – Pass		1,740		7,279		21,942		8,104		10,337		2,411		—		—		51,813
Special Mention		—		14,914		13,025		6,981		4,083		6,731		601		—		46,335
Substandard		241		2,402		773		15		6,310		3,922		—		—		13,663
Doubtful		—		—		—		—		—		—		—		—		—
Total Owner-occupied	$	243,215	$	658,830	$	513,044	$	344,082	$	162,097	$	225,211	$	5,211	$	—	$	2,151,690
Non-owner-occupied
Non-watch list – Pass	$	447,122	$	796,544	$	728,283	$	518,112	$	216,245	$	208,309	$	33,455	$	—	$	2,948,070
Watch – Pass		50,059		167,308		51,971		—		87,668		—		—		—		357,006
Special Mention		—		24,534		24,551		—		—		—		—		—		49,085
Substandard		—		—		—		—		—		9,846		—		—		9,846
Doubtful		—		—		—		—		—		—		—		—		—
Total Non-owner-occupied	$	497,181	$	988,386	$	804,805	$	518,112	$	303,913	$	218,155	$	33,455	$	—	$	3,364,007
Farmland
Non-watch list – Pass	$	43,340	$	62,189	$	35,087	$	198,770	$	16,029	$	19,677	$	86,946	$	—	$	462,038
Watch – Pass		—		1,413		4,089		—		—		436		50		—		5,988
Special Mention		—		432		1,643		—		—		536		—		—		2,611
Substandard		13,447		12,051		3,806		1,057		6,223		—		7,274		—		43,858
Doubtful		—		—		—		—		—		—		—		—		—
Total Farmland	$	56,787	$	76,085	$	44,625	$	199,827	$	22,252	$	20,649	$	94,270	$	—	$	514,495
5+ Multi-family
Non-watch list – Pass	$	831	$	27,690	$	208,264	$	32,209	$	18,363	$	5,697	$	8,214	$	—	$	301,268
Watch – Pass		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total 5+ Multi-family	$	831	$	27,690	$	208,264	$	32,209	$	18,363	$	5,697	$	8,214	$	—	$	301,268
1-4 Family construction
Non-watch list – Pass	$	63,788	$	40,097	$	—	$	—	$	—	$	—	$	5,275	$	—	$	109,160
Watch – Pass		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total 1-4 Family construction	$	63,788	$	40,097	$	—	$	—	$	—	$	—	$	5,275	$	—	$	109,160
General construction
Non-watch list – Pass	$	344,494	$	1,205,620	$	686,692	$	4,262	$	648	$	121	$	85,458	$	—	$	2,327,295
Watch – Pass		1,148		—		—		—		15		—		—		—		1,163
Special Mention		1,431		—		—		—		—		—		—		—		1,431
Substandard		—		—		8,034		—		—		14		—		—		8,048
Doubtful		81		—		—		—		—		—		—		—		81
Total General construction	$	347,154	$	1,205,620	$	694,726	$	4,262	$	663	$	135	$	85,458	$	—	$	2,338,018


	December 31, 2022
	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2022		2021		2020		2019		2018		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
Owner-occupied
Non-watch list – Pass	$	628,858	$	559,067	$	364,760	$	149,183	$	133,339	$	162,412	$	7,850	$	—	$	2,005,469
Watch – Pass		19,405		32,581		17,061		9,785		2,664		2,121		—		—		83,617
Special Mention		5,435		2,213		5,120		18,946		—		—		835		—		32,549
Substandard		3,162		—		1,578		2,872		496		3,095		—		—		11,203
Doubtful		—		—		—		—		—		—		—		—		—
Total Owner-occupied	$	656,860	$	593,861	$	388,519	$	180,786	$	136,499	$	167,628	$	8,685	$	—	$	2,132,838
Non-owner-occupied
Non-watch list – Pass	$	1,075,444	$	810,926	$	568,489	$	356,896	$	64,915	$	214,635	$	28,679	$	—	$	3,119,984
Watch – Pass		53,534		44,582		—		11,307		—		5,071		—		—		114,494
Special Mention		—		—		—		—		—		10,109		—		—		10,109
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		11		—		—		11
Total Non-owner-occupied	$	1,128,978	$	855,508	$	568,489	$	368,203	$	64,915	$	229,826	$	28,679	$	—	$	3,244,598
Farmland
Non-watch list – Pass	$	62,357	$	36,698	$	218,704	$	17,563	$	2,830	$	20,285	$	113,385	$	—	$	471,822
Watch – Pass		20,327		6,454		1,055		101		—		2,559		395		—		30,891
Special Mention		5,505		—		1,001		—		—		—		—		—		6,506
Substandard		6,800		3,940		36		6,393		13,133		1,318		7,274		—		38,894
Doubtful		—		—		—		—		—		—		—		—		—
Total Farmland	$	94,989	$	47,092	$	220,796	$	24,057	$	15,963	$	24,162	$	121,054	$	—	$	548,113
5+ Multi-family
Non-watch list – Pass	$	30,920	$	35,869	$	68,996	$	18,978	$	1,334	$	5,776	$	4,908	$	—	$	166,781
Watch – Pass		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total 5+ Multi-family	$	30,920	$	35,869	$	68,996	$	18,978	$	1,334	$	5,776	$	4,908	$	—	$	166,781
1-4 Family construction
Non-watch list – Pass	$	61,943	$	15,217	$	—	$	—	$	—	$	—	$	19	$	—	$	77,179
Watch – Pass		—		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total 1-4 Family construction	$	61,943	$	15,217	$	—	$	—	$	—	$	—	$	19	$	—	$	77,179
General construction
Non-watch list – Pass	$	628,479	$	699,698	$	43,166	$	15,384	$	—	$	380	$	39,267	$	—	$	1,426,374
Watch – Pass		341		—		—		22		—		—		—		—		363
Special Mention		—		8,340		—		—		—		—		—		—		8,340
Substandard		—		11,399		—		—		—		15		—		—		11,414
Doubtful		—		—		—		86		—		—		—		—		86
Total General construction	$	628,820	$	719,437	$	43,166	$	15,492	$	—	$	395	$	39,267	$	—	$	1,446,577

Consumer real estate

A discussion of the credit ~~card, home equity loans, consumer~~quality indicators that impact each type of collateral securing Consumer real estate loans is included below:

HELOC HELOC loans are revolving lines of credit secured by 1-4 family residential property. The primary risk is the borrower’s inability to repay debt. Revolving notes are often associated with HELOCs that can be secured by real estate without a 1st lien priority. Collateral is susceptible to market volatility impacting home values or economic downturns.

First lien: 1-4 family First lien 1-4 family loans are secured by a first lien on 1-4 family residential property. These term loans carry longer maturities and ~~consumer~~amortizations. The longer tenure exposes the borrower to multiple economic cycles, coupled with longer amortizations that result in smaller principal reduction early in the life of the loan. Collateral is susceptible to market volatility impacting home values.

Junior lien: 1-4 family Junior lien 1-4 family loans are secured by a junior lien on 1-4 family residential property. The Company’s primary risk is the borrower’s inability to repay debt and ~~other loans. The~~not being in a first lien position. Collateral is susceptible to market volatility impacting home values or economic downturns.

A borrower is considered non-performing if the Company ~~also considers~~has ceased the recognition of interest and the loan is placed on non-accrual. Charge-offs and borrower performance are tracked on a loan ~~migration analysis for criticized loans. This analysis includes an assessment~~origination vintage basis. Certain vintages, based on their maturation cycle, could be at higher risk due to collateral-based risk factors.

The following tables provide a summary of the ~~probability~~amortized cost balance by collateral type and risk rating as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023
	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2023		2022		2021		2020		2019		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
HELOC
Performing	$	—	$	474	$	—	$	485	$	52	$	3,772	$	342,092	$	407	$	347,282
Non-performing		—		177		—		32		—		1,373		—		714		2,296
Total HELOC	$	—	$	651	$	—	$	517	$	52	$	5,145	$	342,092	$	1,121	$	349,578
First lien: 1-4 family
Performing	$	353,857	$	590,201	$	697,573	$	563,541	$	160,852	$	169,530	$	2	$	—	$	2,535,556
Non-performing		109		1,543		327		127		201		1,007		—		—		3,314
Total First lien: 1-4 family	$	353,966	$	591,744	$	697,900	$	563,668	$	161,053	$	170,537	$	2	$	—	$	2,538,870
Junior lien: 1-4 family
Performing	$	7,419	$	12,470	$	7,569	$	4,318	$	2,225	$	1,808	$	163	$	—	$	35,972
Non-performing		—		46		—		—		—		49		—		—		95
Total Junior lien: 1-4 family	$	7,419	$	12,516	$	7,569	$	4,318	$	2,225	$	1,857	$	163	$	—	$	36,067


	December 31, 2022
	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2022		2021		2020		2019		2018		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
HELOC
Performing	$	120	$	—	$	592	$	90	$	148	$	3,919	$	338,979	$	759	$	344,607
Non-performing		117		—		26		134		506		1,470		87		222		2,562
Total HELOC	$	237	$	—	$	618	$	224	$	654	$	5,389	$	339,066	$	981	$	347,169
First lien: 1-4 family
Performing	$	628,678	$	748,269	$	607,055	$	173,061	$	45,907	$	138,764	$	12	$	—	$	2,341,746
Non-performing		25		93		50		405		—		1,679		—		—		2,252
Total First lien: 1-4 family	$	628,703	$	748,362	$	607,105	$	173,466	$	45,907	$	140,443	$	12	$	—	$	2,343,998
Junior lien: 1-4 family
Performing	$	13,490	$	8,445	$	5,107	$	2,529	$	940	$	1,437	$	87	$	—	$	32,035
Non-performing		—		—		—		—		—		67		—		—		67
Total Junior lien: 1-4 family	$	13,490	$	8,445	$	5,107	$	2,529	$	940	$	1,504	$	87	$	—	$	32,102

Consumer

A discussion of the credit quality indicators that impact each type of collateral securing Consumer loans is included below:

Revolving line Consumer Revolving lines of credit are secured by consumer assets other than real estate. The primary risk associated with this collateral is related to market volatility and the value of the underlying financial assets.

Auto Direct consumer auto loans are secured by new and used consumer vehicles. The primary risk with this collateral class is the rate at which the collateral depreciates.

Other This category includes Other consumer loans made to an individual. The primary risk for this category is for those loans where the loan is unsecured. This collateral type also includes other unsecured lending such as consumer overdrafts.

A borrower is considered non-performing if the Company has ceased the recognition of interest and the loan is placed on non-accrual. Charge-offs and borrower performance are tracked on a loan ~~will move to a loss position~~origination vintage basis. Certain vintages, based on ~~its~~their maturation cycle, could be at higher risk ~~rating.~~ due to collateral-based risk factors.

The following tables provide a summary of the amortized cost balance by collateral type and risk rating as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023
	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2023		2022		2021		2020		2019		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
Revolving line
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	53,858	$	30	$	53,888
Non-performing		—		—		—		—		—		—		—		—		—
Total Revolving line	$	—	$	—	$	—	$	—	$	—	$	—	$	53,858	$	30	$	53,888
Auto
Performing	$	9,408	$	6,643	$	4,541	$	2,652	$	1,422	$	200	$	—	$	—	$	24,866
Non-performing		—		—		15		5		—		—		—		—		20
Total Auto	$	9,408	$	6,643	$	4,556	$	2,657	$	1,422	$	200	$	—	$	—	$	24,886
Other
Performing	$	4,881	$	23,073	$	26,433	$	622	$	451	$	1,256	$	8,213	$	—	$	64,929
Non-performing		—		15		—		—		3		—		—		—		18
Total Other	$	4,881	$	23,088	$	26,433	$	622	$	454	$	1,256	$	8,213	$	—	$	64,947


	December 31, 2022
	Amortized Cost Basis by Origination Year - Term Loans
Risk by Collateral	2022		2021		2020		2019		2018		Prior		Amortized Cost - Revolving Loans		Amortized Cost - Revolving Loans Converted to Term Loans		Total
Revolving line
Performing	$	467	$	584	$	—	$	—	$	—	$	—	$	58,133	$	1,403	$	60,587
Non-performing		—		—		—		—		—		—		—		—		—
Total Revolving line	$	467	$	584	$	—	$	—	$	—	$	—	$	58,133	$	1,403	$	60,587
Auto
Performing	$	9,124	$	6,498	$	4,454	$	2,743	$	335	$	159	$	—	$	—	$	23,313
Non-performing		—		45		1		—		—		—		—		—		46
Total Auto	$	9,124	$	6,543	$	4,455	$	2,743	$	335	$	159	$	—	$	—	$	23,359
Other
Performing	$	26,291	$	27,751	$	1,096	$	876	$	1,133	$	591	$	3,967	$	—	$	61,705
Non-performing		15		—		—		—		—		—		—		—		15
Total Other	$	26,306	$	27,751	$	1,096	$	876	$	1,133	$	591	$	3,967	$	—	$	61,720

Credit cards

A discussion of the credit quality indicators that impact Credit card loans is included below:

Consumer Consumer credit card loans are revolving loans made to individuals. The primary risk associated with this collateral class is credit card debt is generally unsecured; therefore, repayment depends primarily on a borrower’s willingness and capacity to repay. The highly competitive environment for credit card lending provides consumers with ample opportunity to hold several credit cards from different issuers and to pay only minimum monthly payments on outstanding balances. In such an environment, borrowers may become over-extended and unable to repay, particularly in times of an economic downturn or a personal catastrophic event.

The consumer credit card ~~pool~~portfolio is ~~evaluated~~segmented by borrower payment activity. Transactors are defined as accounts that pay off their balance by the end of each statement cycle. Revolvers are defined as an account that carries a balance from statement cycle to the next. These accounts incur monthly finance charges, and, sometimes, late fees. Revolvers are inherently higher risk and are tracked by credit score.

Commercial Commercial credit card loans are revolving loans made to small and commercial businesses. The primary risk associated with this collateral class is credit card debt is generally unsecured; therefore, repayment depends primarily on a borrower’s willingness and capacity to repay. Borrowers may become over-extended and unable to repay, particularly in times of an economic downturn or a catastrophic event.

The commercial credit card portfolio is segmented by current and past due payment status. A borrower is past due after 30 days. In general, commercial credit card customers do not have incentive to hold a balance resulting in paying interest on credit card debt as commercial customers will typically have other debt obligations with lower interest rates in which they can utilize for capital.

The following table provides a summary of the amortized cost balance of consumer credit cards by risk rating as of September 30, 2023 and December 31, 2022 (in thousands):


	Consumer
Risk	September 30, 2023		December 31, 2022
Transactor accounts	$	73,749	$	73,670
Revolver accounts (by credit score):
Less than 600		6,311		4,684
600-619		3,120		2,515
620-639		5,718		4,959
640-659		8,992		8,655
660-679		10,006		9,593
680-699		11,591		12,023
700-719		14,052		14,098
720-739		13,240		15,036
740-759		12,634		13,638
760-779		13,140		13,768
780-799		12,664		13,172
800-819		8,575		9,257
820-839		3,923		4,363
840+		793		917
Total	$	198,508	$	200,348

The following table provides a summary of the amortized cost balance of commercial credit cards by risk rating as of September 30, 2023 and December 31, 2022 (in thousands):


	Commercial
Risk	September 30, 2023		December 31, 2022
Current	$	228,184	$	219,558
Past Due		23,872		11,766
Total	$	252,056	$	231,324

Leases and other

A discussion of the credit quality indicators that impact each type of collateral securing Leases and other loans is included below:

Leases Leases are either loans to individuals for household, family and other personal expenditures or are loans related to all other direct financing and leveraged leases on property for leasing to lessees other than for household, family and other personal expenditure purposes. All leases are secured by the lease between the lessor and the lessee. These assignments grant the creditor a security interest in the rent stream from any lease, an important source of cash to pay the note in case of the borrower’s default.

Other Other loans are loans that are obligations of states and political subdivisions in the U.S., loans to non-depository financial institutions, loans for purchasing or carrying securities, or all other non-consumer loans. Risk associated with other loans is tied to the underlying collateral by each type of loan. Collateral is generally equipment, accounts receivable, inventory, 1-4 family residential construction and susceptible to the same risks mentioned with those collateral types previously. Other risks consist of collateral that is secured by the stock of a non-depository financial institution, which can be unlisted stock with a limited market for the stock, or volatility of asset values driven by market performance.

Based on the factors noted above for each type of collateral, the Company assigns risk ratings to borrowers based on ~~delinquencies~~their most recently assessed financial position.

The following table provides a summary of the amortized cost balance by collateral type and risk rating as of September 30, 2023 and December 31, 2022 (in thousands):


	Leases				Other
Risk	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Non-watch list – Pass	$	1,733	$	1,936	$	255,703	$	303,107
Watch – Pass		—		—		14,686		737
Special Mention		—		—		—		—
Substandard		—		—		25		24
Doubtful		—		—		—		—
Total	$	1,733	$	1,936	$	270,414	$	303,868

Allowance for Credit Losses

The allowance for credit losses (ACL) is a valuation account that is deducted from loans’ and held-to-maturity (HTM) securities’ amortized cost bases to present the net amount expected to be collected on the instrument. Loans and HTM securities are charged off against the ACL when management believes the balance has become uncollectible. Expected recoveries are included in the allowance and do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable economic forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses and is tracked over an economic cycle to capture a ‘through the cycle’ loss history. Adjustments to historical loss information are made for

differences in current loan-specific risk characteristics such as differences in portfolio industry-based segmentation, risk rating and credit ~~scores. In addition,~~score changes, average prepayment rates, changes in environmental conditions, or other relevant factors. For economic forecasts, the Company uses the Moody’s baseline scenario. The Company has developed a ~~portion~~dynamic reasonable and supportable forecast period that ranges from one to three years and changes based on economic conditions. Due to current economic conditions, the Company’s reasonable and supportable forecast period is one year. After the reasonable and supportable forecast period, the Company reverts to historical losses. The reversion method applied to each portfolio can either be cliff or straight-line over four quarters.

The ACL is measured on a collective (pool) basis when similar risk characteristics exists. The ACL also incorporates qualitative factors which represent adjustments to historical credit loss experience for items such as concentrations of credit and results of internal loan review. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods. The Company’s portfolio segmentation consists of Commercial and industrial, Specialty lending, Commercial real estate, Consumer real estate, Consumer, Credit cards, Leases and other, and Held-to-maturity securities. Multiple modeling techniques are used to measure credit losses based on the portfolio.

The ACL for Commercial and industrial and Leases and other segments are measured using a probability of default and loss given default method. Primary risk drivers within the segment are risk ratings of the ~~allowance~~individual loans along with changes of macro-economic variables. The economic variables utilized are typically comprised of leading and lagging indicators. The ACL for Commercial and industrial loans is ~~determined~~calculated by ~~a review~~modeling probability of ~~qualitative factors~~default (PD) over future periods multiplied by ~~management.~~ historical loss given default rates (LGD) multiplied by contractual exposure at default minus any estimated prepayments and charge offs.

~~Generally,~~Collateral positions for Specialty lending loans are continuously monitored by the ~~unsecured portion of a commercial or commercial real estate loan is charged off when, after analyzing the borrower’s financial condition, it is determined that~~Company and the borrower is ~~incapable~~required to continually adjust the amount of ~~servicing~~collateral securing the ~~debt, little or no~~ ~~prospect~~loan. Credit losses are measured for ~~near term improvement exists, and no realistic and significant strengthening action~~any position where the amortized cost basis is ~~pending. For collateral dependent commercial or commercial real estate loans, an analysis is completed regarding~~greater than the ~~Company’s collateral position to determine if the amounts due from the borrower are in excess of the calculated current~~ fair value of the collateral. ~~Specific allocations~~The ACL for specialty lending loans is calculated by using a bottom-up approach comparing collateral values to outstanding balances.

The ACL for the Commercial real estate segment is measured using a PD and LGD method. Primary risk characteristics within the segment are risk ratings of the ~~allowance~~individual loans, along with changes of macro-economic variables, such as interest rates, CRE price index, median household income, construction activity, farm income, and vacancy rates. The ACL for ~~loan~~Commercial real estate loans is calculated by modeling PD over future periods based on peer bank data. The PD loss rate is then multiplied by historical LGD multiplied by contractual exposure at default minus any estimated prepayments and charge offs.

The ACL for the Consumer real estate and Consumer segments are measured using an origination vintage loss rate method applied to the loans’ amortized cost balance. The primary risk driver within the segments is year of origination along with changes of macro-economic variables such as unemployment and the home price index.

The Credit card segment contains both consumer and commercial credit cards. The ACL for Consumer credit cards is measured using a PD and LGD method for Revolvers and average historical loss rates across a defined lookback period for Transactors. The PD and LGD method used for Revolvers is similar in nature to the method used in the Commercial and industrial and Commercial real estate segments. Primary risk drivers within the segment are credit ratings of the individual card holders along with changes of macro-economic variables such as unemployment and retail sales. The ACL for Commercial credit cards is measured using roll-rate loss rate method based on days past due.

The ACL for the State and political HTM securities segment is measured using a loss rate method based on historical bond rating transitions. Primary risk drivers within the segment are bond ratings in the portfolio along with changes of macro-economic conditions. There is no ACL for the U.S. Agency and GSE mortgage-backed HTM securities portfolios as they are considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. For further discussion on these securities, including the aging and amortized cost balance of HTM securities, see Note 5, “Securities.”

See the credit quality indicators presented previously for a summary of current risk in the Company’s portfolio. Changes in economic forecasts will affect all portfolio segments, updated financial records from

borrowers will affect portfolio segments by risk rating, updated credit scores will affect consumer credit cards, payment performance will affect consumer and commercial credit card portfolio segments, and updated bond credit ratings will affect held-to-maturity securities. The Company actively monitors all credit quality indicators for risk changes that will influence the current estimate.

Expected credit losses are ~~made~~estimated over the contractual term of the loans, adjusted for ~~any collateral deficiency. If~~prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a ~~collateral deficiency is ultimately deemed~~reasonable expectation at the reporting date that a concessionary loan term has been granted to a borrower experiencing financial difficulty or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancelable by the Company.

Credit card receivables do not have stated maturities. In determining the estimated life of a credit card receivable, management first estimates the future cash flows expected to be ~~uncollectible,~~received and then applies those expected future cash flows to the credit card balance. Expected credit losses for credit cards are determined by estimating the amount and timing of principal payments expected to be received as payment for the balance outstanding as of the reporting period until the expected payments have been fully allocated. The ACL is ~~charged off. Revolving commercial~~recorded for the excess of the balance outstanding as of the reporting period over the expected principal payments.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually include loans ~~(such~~on nonaccrual, loans that include modifications deemed concessionary and not temporary made to borrowers experiencing financial difficulty, or any loans specifically identified, and are excluded from the collective evaluation. When it is determined that payment of interest or recovery of all principal is questionable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for undiscounted selling costs as ~~commercial credit cards) which are past due 90 cumulative days~~appropriate. All loans are classified as ~~a loss and charged off.~~collateral dependent if placed on non-accrual or include modifications made to borrowers experiencing financial difficulty.

Generally, a consumer loan, or a portion thereof, is charged off in accordance with regulatory guidelines which provide that such loans be charged off when the Company becomes aware of the loss, such as from a triggering event that may include, but is not limited to, new information about a borrower’s intent and ability to repay the loan, bankruptcy, fraud, or death. However, the charge-off timeframe should not exceed the specified delinquency time frames, which state that closed-end retail loans (such as real estate mortgages, home equity loans and consumer installment loans) that become past due 120 cumulative days and open-end retail loans (such as home equity lines of credit and consumer credit cards) that become past due 180 cumulative days are classified as a loss and charged off.

ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES AND RECORDED INVESTMENT IN LOANS

This table provides a rollforward of the allowance for ~~loan~~credit losses by portfolio segment for the three and nine months ended September 30, ~~2017~~2023 and September 30, 2022 (in thousands):

	Three Months Ended September 30, 2017
	Commercial			Real estate			Consumer			Leases			Total				Three Months Ended September 30, 2023
Allowance for loan losses:
																	Commercial and industrial			Specialty lending			Commercial real estate		Consumer real estate			Consumer			Credit cards			Leases and other			Total - Loans			HTM			Total
Allowance for credit losses:																Allowance for credit losses:
Beginning balance	$	76,858		$	11,905		$	8,961		$	73		$	97,797			$	163,810		$	—		$	42,192	$	6,527		$	417		$	7,231		$	1,984		$	222,161		$	2,828		$	224,989
Charge-offs		(9,151	)		(439	)		(2,281	)		—			(11,871	)			(1,908	)		(762	)		—		(11	)		(254	)		(2,511	)		—			(5,446	)		—			(5,446	)
Recoveries		190			201			572			—			963				445			—			—		6			32			345			—			828			—			828
Provision		8,166			1,844			1,495			(5	)		11,500				(4,129	)		762			3,524		304			303			2,651			504			3,919			58			3,977
Ending balance	$	76,063		$	13,511		$	8,747		$	68		$	98,389
Ending balance - ACL																	$	158,218		$	—		$	45,716	$	6,826		$	498		$	7,716		$	2,488		$	221,462		$	2,886		$	224,348
Allowance for credit losses on off-balance sheet credit exposures:																Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance																	$	3,079		$	186		$	430	$	119		$	12		$	—		$	177		$	4,003		$	85		$	4,088
Provision																		1,013			—			30		(2	)		(3	)		—			(17	)		1,021			(21	)		1,000
Ending balance - ACL on off-balance sheet																	$	4,092		$	186		$	460	$	117		$	9		$	—		$	160		$	5,024		$	64		$	5,088


	Three Months Ended September 30, 2022
	Commercial and industrial		Specialty lending			Commercial real estate		Consumer real estate		Consumer			Credit cards			Leases and other			Total - Loans			HTM		Total
Allowance for credit losses:
Beginning balance	$	112,942	$	1,133		$	37,240	$	4,565	$	863		$	5,579		$	2,024		$	164,346		$	2,259	$	166,605
Charge-offs		—		—			—		—		(241	)		(1,852	)		—			(2,093	)		—		(2,093	)
Recoveries		29		429			—		11		29			422			—			920			—		920
Provision		20,134		(1,562	)		909		422		(223	)		2,426			(366	)		21,740			260		22,000
Ending balance - ACL	$	133,105	$	—		$	38,149	$	4,998	$	428		$	6,575		$	1,658		$	184,913		$	2,519	$	187,432
Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance	$	2,178	$	186		$	418	$	124	$	13		$	—		$	62		$	2,981		$	107	$	3,088
Provision		—		—			—		—		—			—			—			—			—		—
Ending balance - ACL on off-balance sheet	$	2,178	$	186		$	418	$	124	$	13		$	—		$	62		$	2,981		$	107	$	3,088


	Nine Months Ended September 30, 2023
	Commercial and industrial			Specialty lending			Commercial real estate			Consumer real estate			Consumer			Credit cards			Leases and other		Total - Loans			HTM			Total
Allowance for credit losses:
Beginning balance	$	136,737		$	—		$	39,370		$	6,148		$	494		$	6,866		$	2,221	$	191,836		$	2,407		$	194,243
Charge-offs		(4,727	)		(762	)		(21	)		(1,153	)		(934	)		(6,181	)		—		(13,778	)		—			(13,778	)
Recoveries		3,331			1			21			24			154			1,125			—		4,656			—			4,656
Provision		22,877			761			6,346			1,807			784			5,906			267		38,748			479			39,227
Ending balance - ACL	$	158,218		$	—		$	45,716		$	6,826		$	498		$	7,716		$	2,488	$	221,462		$	2,886		$	224,348
Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance	$	2,178		$	186		$	418		$	124		$	13		$	—		$	62	$	2,981		$	107		$	3,088
Provision		1,914			—			42			(7	)		(4	)		—			98		2,043			(43	)		2,000
Ending balance - ACL on off-balance sheet	$	4,092		$	186		$	460		$	117		$	9		$	—		$	160	$	5,024		$	64		$	5,088


	Nine Months Ended September 30, 2022
	Commercial and industrial			Specialty lending			Commercial real estate			Consumer real estate			Consumer			Credit cards			Leases and other			Total - Loans			HTM		Total
Allowance for credit losses:
Beginning balance	$	123,732		$	1,738		$	56,265		$	3,921		$	845		$	6,075		$	2,195		$	194,771		$	1,940	$	196,711
Charge-offs		(36,217	)		—			—			(57	)		(560	)		(4,785	)		—			(41,619	)		—		(41,619	)
Recoveries		1,419			430			385			121			89			1,496			—			3,940			—		3,940
Provision		44,171			(2,168	)		(18,501	)		1,013			54			3,789			(537	)		27,821			579		28,400
Ending balance - ACL	$	133,105		$	—		$	38,149		$	4,998		$	428		$	6,575		$	1,658		$	184,913		$	2,519	$	187,432
Allowance for credit losses on off-balance sheet credit exposures:
Beginning balance	$	1,739		$	160		$	480		$	106		$	—		$	—		$	15		$	2,500		$	88	$	2,588
Provision		439			26			(62	)		18			13			—			47			481			19		500
Ending balance - ACL on off-balance sheet	$	2,178		$	186		$	418		$	124		$	13		$	—		$	62		$	2,981		$	107	$	3,088

Nine Months Ended September 30, 2017

Commercial

Real estate

Consumer

Leases

Total

Allowance for loan losses:

Beginning balance

$
71,657

$
10,569

$
9,311

$
112

$
91,649

Charge-offs

(24,734
)

(888
)

(7,442
)

—

(33,064
)
Recoveries

2,519

620

1,665

—

4,804

Provision

26,621

3,210

5,213

(44
)

35,000

Ending balance

$
76,063

$
13,511

$
8,747

$
68

$
98,389

Ending balance: individually evaluated for impairment

$
3,060

$
125

$
—

$
—

$
3,185

Ending balance: collectively evaluated for impairment

73,003

13,386

8,747

68

95,204

Loans:

Ending balance: loans

$
5,102,259

$
5,447,874

$
422,450

$
24,445

$
10,997,028

Ending balance: individually evaluated for impairment

62,872

8,310

—

—

71,182

Ending balance: collectively evaluated for impairment

5,039,387

5,439,564

422,450

24,445

10,925,846

~~This table provides a rollforward~~The allowance for credit losses on off-balance sheet credit exposures is recorded in the Accrued expenses and taxes line of the ~~allowance~~Company’s Consolidated Balance Sheets. See Note 10 “Commitments, Contingencies and Guarantees.”

Collateral Dependent Financial Assets

The following tables provide the amortized cost balance of financial assets considered collateral dependent as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023
Loan Segment and Type	Amortized Cost of Collateral Dependent Assets		Related Allowance for Credit Losses		Amortized Cost of Collateral Dependent Assets with no related Allowance
Commercial and industrial:
Equipment/Accounts Receivable/Inventory	$	9,282	$	610	$	8,673
Agriculture		—		—		—
Total Commercial and industrial		9,282		610		8,673
Specialty lending:
Asset-based lending		15,230		—		15,230
Total Specialty lending		15,230		—		15,230
Commercial real estate:
Owner-occupied		2,201		1,857		344
Non-owner-occupied		—		—		—
Farmland		195		—		195
5+ Multi-family		—		—		—
1-4 Family construction		—		—		—
General construction		95		—		95
Total Commercial real estate		2,491		1,857		634
Consumer real estate:
HELOC		2,296		—		2,296
First lien: 1-4 family		3,315		—		3,315
Junior lien: 1-4 family		95		—		95
Total Consumer real estate		5,706		—		5,706
Consumer:
Revolving line		—		—		—
Auto		20		—		20
Other		17		—		17
Total Consumer		37		—		37
Leases and other:
Leases		—		—		—
Other		—		—		—
Total Leases and other		—		—		—
Total loans	$	32,746	$	2,467	$	30,280


	December 31, 2022
Loan Segment and Type	Amortized Cost of Collateral Dependent Assets		Related Allowance for Credit Losses		Amortized Cost of Collateral Dependent Assets with no related Allowance
Commercial and industrial:
Equipment/Accounts Receivable/Inventory	$	13,972	$	713	$	11,534
Agriculture		—		—		—
Total Commercial and industrial		13,972		713		11,534
Specialty lending:
Asset-based lending		—		—		—
Total Specialty lending		—		—		—
Commercial real estate:
Owner-occupied		2,204		—		2,204
Non-owner-occupied		—		—		—
Farmland		374		—		374
5+ Multi-family		—		—		—
1-4 Family construction		—		—		—
General construction		101		—		101
Total Commercial real estate		2,679		—		2,679
Consumer real estate:
HELOC		2,562		—		2,562
First lien: 1-4 family		2,253		6		1,597
Junior lien: 1-4 family		67		—		67
Total Consumer real estate		4,882		6		4,226
Consumer:
Revolving line		—		—		—
Auto		46		—		46
Other		15		—		15
Total Consumer		61		—		61
Leases and other:
Leases		—		—		—
Other		24		—		24
Total Leases and other		24		—		24
Total loans	$	21,618	$	719	$	18,524

Modifications made to Borrowers Experiencing Financial Difficulty

In the normal course of business, the Company may execute loan modifications with borrowers. These modifications are analyzed to determine whether the modification is considered concessionary, long term and made to a borrower experiencing financial difficulty. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the borrower short-term cash relief to allow them to improve their financial condition. If a loan modification is determined to be made to a borrower experiencing financial difficulty, the loan is considered collateral dependent and evaluated as part of the ACL as described above in the Allowance for ~~loan losses by portfolio segment for~~Credit Losses section of this note.

For the three and nine months ended September 30, ~~2016~~ ~~(in thousands):~~2023, the Company did not modify any loans made to borrowers experiencing financial difficulty.

Three Months Ended September 30, 2016

Commercial

Real estate

Consumer

Leases

Total

Allowance for loan losses:

Beginning balance

$
64,561

$
10,683

$
9,319

$
103

$
84,666

Charge-offs

(5,667
)

(142
)

(2,335
)

—

(8,144
)
Recoveries

129

209

544

—

882

Provision

4,844

6,280

1,888

(12
)

13,000

Ending balance

$
63,867

$
17,030

$
9,416

$
91

$
90,404

Nine Months Ended September 30, 2016

Commercial

Real estate

Consumer

Leases

Total

Allowance for loan losses:

Beginning balance

$
63,847

$
8,220

$
8,949

$
127

$
81,143

Charge-offs

(11,542
)

(2,938
)

(6,951
)

—

(21,431
)
Recoveries

3,477

540

1,675

—

5,692

Provision

8,085

11,208

5,743

(36
)

25,000

Ending balance

$
63,867

$
17,030

$
9,416

$
91

$
90,404

Ending balance: individually evaluated for impairment

$
1,759

$
4,726

$
—

$
—

$
6,485

Ending balance: collectively evaluated for impairment

62,108

12,304

9,416

91

83,919

Loans:

Ending balance: loans

$
4,948,341

$
4,926,253

$
387,371

$
31,529

$
10,293,494

Ending balance: individually evaluated for impairment

80,769

16,122

2,158

—

99,049

Ending balance: collectively evaluated for impairment

4,867,572

4,910,131

384,178

31,529

10,193,410

Ending balance: PCI Loans

—

—

1,035

—

1,035

~~Impaired Loans~~

~~This table provides~~31

The Company had no commitments to lend to borrowers experiencing financial difficulty for which the Company has modified an ~~analysis~~existing loan as of ~~impaired loans by class at~~ September 30, ~~2017~~2023. The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and ~~December 31, 2016~~ ~~(in thousands):~~their ability to generate positive cash flows during the loan term. For the three and nine months ended September 30, 2023, the Company had no loan modifications made to borrowers experiencing financial difficulty for which there was a payment default within the 12 months following the modification date.

As of September 30, 2017

Unpaid
Principal
Balance

Recorded
Investment with
No Allowance

Recorded
Investment
with Allowance

Total
Recorded
Investment

Related
Allowance

Average
Recorded
Investment

Commercial:

Commercial

$
83,289

$
42,987

$
19,885

$
62,872

$
3,060

$
68,724

Asset-based

—

—

—

—

—

—

Factoring

—

—

—

—

—

—

Commercial – credit card

—

—

—

—

—

—

Real estate:

Real estate – construction

108

93

—

93

—

199

Real estate – commercial

11,586

6,825

1,173

7,998

51

10,592

Real estate – residential

223

121

98

219

74

174

Real estate – HELOC

—

—

—

—

—

—

Consumer:

Consumer – credit card

—

—

—

—

—

—

Consumer – other

—

—

—

—

—

8

Leases

—

—

—

—

—

—

Total

$
95,206

$
50,026

$
21,156

$
71,182

$
3,185

$
79,697

As of December 31, 2016

Unpaid
Principal
Balance

Recorded
Investment with
No Allowance

Recorded
Investment
with Allowance

Total
Recorded
Investment

Related
Allowance

Average
Recorded
Investment

Commercial:

Commercial

$
80,405

$
43,260

$
31,091

$
74,351

$
7,866

$
69,776

Asset-based

—

—

—

—

—

—

Factoring

—

—

—

—

—

—

Commercial – credit card

—

—

—

—

—

—

Real estate:

Real estate – construction

510

181

113

294

68

405

Real estate – commercial

18,107

12,303

487

12,790

—

8,956

Real estate – residential

231

230

—

230

—

520

Real estate – HELOC

—

—

—

—

—

79

Consumer:

Consumer – credit card

—

—

—

—

—

—

Consumer – other

—

—

—

—

—

1,981

Leases

—

—

—

—

—

—

Total

$
99,253

$
55,974
��

$
31,691

$
87,665

$
7,934

$
81,717

Troubled Debt Restructurings

The prior period disclosures below are presented in accordance with previously applicable GAAP. A loan modification is considered a ~~troubled debt restructuring (TDR)~~TDR when a concession has been granted to a debtor experiencing financial difficulties. The Company’s modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the debtor short-term cash relief to allow them to improve their financial condition. The Company’s restructured loans are ~~individually evaluated for impairment~~considered collateral dependent and evaluated as part of the allowance for ~~loan~~credit loss as described above in the Allowance for ~~Loan~~Credit Losses section of this note.

The Company had ~~$2.4 million and $148 thousand in~~no commitments to lend to borrowers with loan modifications classified as TDRs as of September 30, ~~2017 and September 30, 2016, respectively.~~2022. The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term.

For the three ~~month period~~months ended September 30, ~~2017,~~2022, the Company had one residential real estate TDR with a pre-modification loan balance of $97 thousand and a post-modification loan balance of $98 thousand. For the three month period ended September 30, 2016, the Company had one one commercial TDR with a pre- and post-modification loan balance of $12.7 million.no new TDRs. For the nine months ended September 30, ~~2017,~~2022, the Company had ~~one~~two commercial ~~and one residential real estate TDR~~TDRs with a ~~pre-~~pre-modification loan balance of $5.1 million and a post-modification loan balance of ~~$7.3~~$4.3 million. For the three and nine months ended September 30, ~~2016,~~2022, the Company had ~~three commercial~~no TDRs ~~with~~for which there was a ~~pre- and post-modification balance of $24.8 million.~~payment default within the 12 months following the restructure date.

5. Securities

Securities Available for Sale

This table provides detailed information about securities available for sale at September 30, ~~2017~~2023 and December 31, ~~2016~~2022 (in thousands):


September 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	797,238	$	—	$	(17,863	)	$	779,375
U.S. Agencies		178,037		—		(4,687	)		173,350
Mortgage-backed		4,175,240		—		(695,289	)		3,479,951
State and political subdivisions		1,367,097		51		(160,492	)		1,206,656
Corporates		382,914		—		(38,013	)		344,901
Collateralized loan obligations		347,999		536		(2,069	)		346,466
Total	$	7,248,525	$	587	$	(918,413	)	$	6,330,699


December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	804,158	$	58	$	(27,146	)	$	777,070
U.S. Agencies		178,261		—		(6,965	)		171,296
Mortgage-backed		4,574,905		92		(592,875	)		3,982,122
State and political subdivisions		1,465,598		1,608		(104,799	)		1,362,407
Corporates		401,059		—		(33,559	)		367,500
Collateralized loan obligations		353,969		32		(8,049	)		345,952
Total	$	7,777,950	$	1,790	$	(773,393	)	$	7,006,347

September 30, 2017

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

U.S. Treasury

$
40,090

$
10

$
(1,159
)

$
38,941

U.S. Agencies

14,758

—

(1
)

14,757

Mortgage-backed

3,267,134

3,336

(47,048
)

3,223,422

State and political subdivisions

2,542,275

20,584

(9,595
)

2,553,264

Corporates

18,586

1

(11
)

18,576

Total

$
5,882,843

$
23,931

$
(57,814
)

$
5,848,960

December 31, 2016

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

U.S. Treasury

$
95,315

$
37

$
(1,526
)

$
93,826

U.S. Agencies

198,158

67

(48
)

198,177

Mortgage-backed

3,773,090

7,069

(68,460
)

3,711,699

State and political subdivisions

2,425,155

7,391

(36,789
)

2,395,757

Corporates

66,997

5

(127
)

66,875

Total

$
6,558,715

$
14,569

$
(106,950
)

$
6,466,334

The following table presents contractual maturity information for securities available for sale at September 30, ~~2017~~2023 (in thousands):


	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in 1 year or less	$	282,095	$	282,264	$	833,933	$	821,161
Due after 1 year through 5 years		1,128,049		1,136,754		1,017,582		966,945
Due after 5 years through 10 years		846,560		849,476		713,019		649,262
Due after 10 years		359,005		357,044		508,751		413,380
Total		2,615,709		2,625,538		3,073,285		2,850,748
Mortgage-backed securities		3,267,134		3,223,422		4,175,240		3,479,951
Total securities available for sale	$	5,882,843	$	5,848,960	$	7,248,525	$	6,330,699

Securities may be disposed of before contractual maturities due to sales by the Company or because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

For the nine months ended September 30, ~~2017,~~2023, there were $22.2 million in proceeds from the sales of securities available for ~~sale~~sale. For the nine months ended September 30, 2022, there were ~~$573.1 million compared to $951.3 million~~no sales of securities available for ~~the same period in 2016.~~sale. Securities transactions resulted in gross realized gains of ~~$4.1 million~~$154 thousand and ~~$8.5 million~~gross realized losses of $2 thousand for the nine months ended September 30, ~~2017 and 2016, respectively.~~2023. There were no gross realized gains or losses for the nine months ended September 30, ~~2017~~2022.

There were $8.5 billion and ~~gross realized losses~~$10.3 billion of ~~$1 thousand for the nine months ended September 30, 2016.~~

~~Securities available for sale with a market value of $4.9 billion at September 30, 2017 and $5.7 billion at December 31, 2016 were~~securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase ~~agreements. Of this amount, securities with a market value of $1.8 billion~~agreements at ~~both~~ September 30, ~~2017~~2023 and December 31, ~~2016 were pledged at the Federal Reserve Discount Window but were unencumbered~~2022, respectively.

Accrued interest on securities available for sale totaled $28.2 million and $32.1 million as of ~~those dates.~~September 30, 2023 and December 31, 2022, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of available-for-sale securities presented above. Further, the Company has elected not to measure an ACL for accrued interest receivable.

The following table shows the Company’s ~~available for sale~~available-for-sale investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, ~~2017~~2023 and December 31, ~~2016~~2022 (in thousands):

September 30, 2017	Less than 12 months					12 months or more					Total

																Less than 12 months							12 months or more							Total
September 30, 2023																Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	—	$	—		$	29,026	$	(1,159	)	$	29,026	$	(1,159	)		6	$	42,600	$	(322	)		63	$	736,775	$	(17,541	)		69	$	779,375	$	(17,863	)
U.S. Agencies		11,184		(1	)		—		—			11,184		(1	)		—		—		—			29		173,350		(4,687	)		29		173,350		(4,687	)
Mortgage-backed		1,680,656		(14,636	)		1,113,725		(32,412	)		2,794,381		(47,048	)		18		27,783		(1,595	)		856		3,452,081		(693,694	)		874		3,479,864		(695,289	)
State and political subdivisions		512,368		(2,532	)		369,661		(7,063	)		882,029		(9,595	)		617		332,747		(18,712	)		1,517		864,436		(141,780	)		2,134		1,197,183		(160,492	)
Corporates		16,361		(11	)		—		—			16,361		(11	)		—		—		—			267		344,901		(38,013	)		267		344,901		(38,013	)
Collateralized loan obligations																	1		4,245		(5	)		34		231,032		(2,064	)		35		235,277		(2,069	)
Total	$	2,220,569	$	(17,180	)	$	1,512,412	$	(40,634	)	$	3,732,981	$	(57,814	)		642	$	407,375	$	(20,634	)		2,766	$	5,802,575	$	(897,779	)		3,408	$	6,209,950	$	(918,413	)


	Less than 12 months							12 months or more							Total
December 31, 2022	Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses
Description of Securities
U.S. Treasury		61	$	688,208	$	(22,731	)		4	$	55,314	$	(4,415	)		65	$	743,522	$	(27,146	)
U.S. Agencies		27		140,877		(4,734	)		2		30,419		(2,231	)		29		171,296		(6,965	)
Mortgage-backed		687		1,415,169		(102,881	)		205		2,557,035		(489,994	)		892		3,972,204		(592,875	)
State and political subdivisions		1,744		936,865		(51,427	)		273		233,679		(53,372	)		2,017		1,170,544		(104,799	)
Corporates		86		146,615		(8,783	)		189		216,885		(24,776	)		275		363,500		(33,559	)
Collateralized loan obligations		41		326,659		(7,820	)		1		4,785		(229	)		42		331,444		(8,049	)
Total		2,646	$	3,654,393	$	(198,376	)		674	$	3,098,117	$	(575,017	)		3,320	$	6,752,510	$	(773,393	)

December 31, 2016

Less than 12 months

12 months or more

Total

Description of Securities

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

U.S. Treasury

$
48,678

$
(1,526
)

$
—

$
—

$
48,678

$
(1,526
)
U.S. Agencies

103,979

(34
)

9,989

(14
)

113,968

(48
)
Mortgage-backed

2,735,868

(55,035
)

269,637

(13,425
)

3,005,505

(68,460
)
State and political subdivisions

1,748,922

(36,639
)

8,565

(150
)

1,757,487

(36,789
)
Corporates

41,966

(90
)

17,982

(37
)

59,948

(127
)
Total

$
4,679,413

$
(93,324
)

$
306,173

$
(13,626
)

$
4,985,586

$
(106,950
)

The unrealized losses in the Company’s investments ~~in U.S. treasury obligations, U.S. government agencies, Government Sponsored Entity (GSE) mortgage-backed securities, municipal securities, and corporates~~ were caused by changes in interest ~~rates.~~rates, and not from a decline in credit of the underlying issuers. The U.S. Treasury, U.S. Agency, and GSE mortgage-backed securities are all considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. The changes in fair value in the agency-backed portfolios are solely driven by change in interest rates caused by changing economic conditions. The Company ~~does~~has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates.

For the State and political subdivision portfolio, the majority of the Company’s holdings are in general obligation bonds, which have a very low historical default rate due to issuers generally having unlimited taxing authority to service the ~~intent to sell these securities~~debt. For the State and ~~does not believe it is more likely than not that~~political, Corporate, and Collateralized loan obligations portfolios, the Company ~~will be required to sell these securities before~~has a ~~recovery of amortized cost.~~robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase credit reviews and analysis. The Company ~~expects~~monitors credit ratings of all bond issuers in these segments and reviews available financial data, including market and sector trends.

During the nine months ended September 30, 2023, the Company recorded a $4.9 million impairment on one Corporate available-for-sale security.

As of September 30, 2023 and December 31, 2022, there was no ACL related to ~~recover its cost basis~~the Company’s available-for-sale securities as the decline in ~~the~~fair value did not result from credit issues.

Securities Held to Maturity

The following table provides detailed information about securities ~~and does not consider these investments~~held to ~~be other-than-temporarily impaired~~maturity at September 30, ~~2017.~~2023 and December 31, 2022, respectively (in thousands):

~~Securities Held to Maturity~~


September 30, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Allowance for Credit Losses			Net Carrying Amount
U.S. Agencies	$	123,180	$	—	$	(4,228	)	$	118,952	$	—		$	123,180
Mortgage-backed		2,790,103		—		(512,431	)		2,277,672		—			2,790,103
State and political subdivisions		2,819,300		6,834		(366,292	)		2,459,842		(2,886	)		2,816,414
Total	$	5,732,583	$	6,834	$	(882,951	)	$	4,856,466	$	(2,886	)	$	5,729,697


December 31, 2022	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Allowance for Credit Losses			Net Carrying Amount
U.S. Agencies	$	123,091	$	—	$	(4,567	)	$	118,524	$	—		$	123,091
Mortgage-backed		2,965,586		11		(392,530	)		2,573,067		—			2,965,586
State and political subdivisions		2,772,922		17,618		(201,472	)		2,589,068		(2,407	)		2,770,515
Total	$	5,861,599	$	17,629	$	(598,569	)	$	5,280,659	$	(2,407	)	$	5,859,192

The following table ~~shows the Company’s~~presents contractual maturity information for securities held to maturity ~~investments’ amortized cost, fair value, and gross unrealized gains and losses~~ at September 30, ~~2017 and December 31, 2016, respectively~~ ~~(in~~2023 (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Fair
September 30, 2017	Cost		Gains		Losses			Value
State and political subdivisions:
										Cost		Value
Due in 1 year or less	$	4,674	$	3	$	(11	)	$	4,666	$	84,409	$	83,964
Due after 1 year through 5 years		103,885		2,756		(2,652	)		103,989		328,485		317,451
Due after 5 years through 10 years		375,612		5,040		(21,040	)		359,612		824,540		757,544
Due after 10 years		792,081		5,816		(84,417	)		713,480		1,705,046		1,419,835
Total state and political subdivisions	$	1,276,252	$	13,615	$	(108,120	)	$	1,181,747
Total											2,942,480		2,578,794
Mortgage-backed securities											2,790,103		2,277,672
Total securities held to maturity										$	5,732,583	$	4,856,466

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

December 31, 2016

Cost

Gains

Losses

Value

State and political subdivisions:

Due in 1 year or less

$
6,077

$
5

$
(947
)

$
5,135

Due after 1 year through 5 years

82,650

2,376

(1,474
)

83,552

Due after 5 years through 10 years

341,741

8,854

(3,021
)

347,574

Due after 10 years

685,464

15,717

(31,415
)

669,766

Total state and political subdivisions

$
1,115,932

$
26,952

$
(36,857
)

$
1,106,027

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

There were no sales of securities held to maturity during the nine months ended September 30, ~~2017~~2023 or ~~2016.~~2022.

During the year ended December 31, 2022, securities with an amortized cost of $4.1 billion and a fair value of $3.8 billion were transferred from the available-for-sale classification to the held-to-maturity classification as the Company has the positive intent and ability to hold these securities to maturity. The transfers of securities were made at fair value at the time of transfer. The unrealized holding loss at the time of transfer is retained in AOCI and will be amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses were recognized at the time of the transfers. The amortized cost balance of securities held to maturity in the tables above includes a net unamortized unrealized loss of $216.5 million at September 30, 2023.

Accrued interest on securities held to maturity totaled $23.5 million and $27.0 million as of September 30, 2023 and December 31, 2022, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of held-to-maturity securities presented above. Further, the Company has elected not to measure an ACL for accrued interest receivable.

The following table shows the Company’s held-to-maturity investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022, respectively (in thousands):


	Less than 12 months							12 months or more							Total
September 30, 2023	Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses
U.S. Agencies		—	$	—	$	—			11	$	118,952	$	(4,228	)		11	$	118,952	$	(4,228	)
Mortgage-backed		8		7,460		(435	)		261		2,270,212		(511,996	)		269		2,277,672		(512,431	)
State and political subdivisions		186		527,731		(53,443	)		1,382		1,688,475		(312,849	)		1,568		2,216,206		(366,292	)
Total		194	$	535,191	$	(53,878	)		1,654	$	4,077,639	$	(829,073	)		1,848	$	4,612,830	$	(882,951	)


	Less than 12 months							12 months or more							Total
December 31, 2022	Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses
U.S. Agency		11	$	118,524	$	(4,567	)		—	$	—	$	—			11	$	118,524	$	(4,567	)
Mortgage-backed		254		2,342,656		(346,611	)		11		228,079		(45,919	)		265		2,570,735		(392,530	)
State and political subdivisions		1,403		1,543,692		(177,957	)		61		617,805		(23,515	)		1,464		2,161,497		(201,472	)
Total		1,668	$	4,004,872	$	(529,135	)		72	$	845,884	$	(69,434	)		1,740	$	4,850,756	$	(598,569	)

The unrealized losses in the Company’s held-to-maturity portfolio were caused by changes in the interest rate environment. The U.S. Agency and GSE mortgage-backed securities are considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. Therefore, the Company’s expected lifetime loss for these portfolios is zero and there is no ACL recorded for these portfolios. The Company has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates.

For the State and political subdivision portfolio, the Company’s holdings are in general obligation bonds as well as private placement bonds, which have very low historical default rates due to issuers generally having unlimited taxing authority to service the debt. The Company has a robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase credit reviews and analysis. The Company monitors credit ratings of all bond issuers in these segments and reviews available financial data, including market and sector trends. The underlying bonds are evaluated for credit losses in conjunction with management’s estimate of the ACL based on credit rating.

The following tables show the amortized cost basis by credit rating of the Company’s held-to-maturity investments at September 30, 2023 and December 31, 2022 (in thousands):


	Amortized Cost Basis by Credit Rating - HTM Debt Securities
September 30, 2023	AAA		AA		A		BBB		BB		B		CCC-C		Total
State and political subdivisions:
Competitive	$	—	$	6,588	$	460,569	$	645,173	$	14,490	$	16,170	$	2,721	$	1,145,711
Utilities		757,467		795,802		91,160		28,554		606		—		—		1,673,589
Total state and political subdivisions	$	757,467	$	802,390	$	551,729	$	673,727	$	15,096	$	16,170	$	2,721	$	2,819,300


	Amortized Cost Basis by Credit Rating - HTM Debt Securities
December 31, 2022	AAA		AA		A		BBB		BB		CCC-C		Total
State and political subdivisions:
Competitive	$	—	$	—	$	435,953	$	618,517	$	17,120	$	2,934	$	1,074,524
Utilities		759,539		824,386		84,293		29,599		581		—		1,698,398
Total state and political subdivisions	$	759,539	$	824,386	$	520,246	$	648,116	$	17,701	$	2,934	$	2,772,922

Competitive held-to-maturity securities include not-for-profit enterprises that provide public functions such as housing, higher education or healthcare, but do so in a competitive environment. It also includes project financings that can have relatively high enterprise risk, such as deals backed by revenues from sports or convention facilities or start-up transportation ventures.

Utilities and general obligation are public enterprises providing essential services with a monopoly or near-monopoly over the service area. This includes environmental utilities (water, sewer, solid waste), power utilities (electric distribution and generation, gas), and transportation utilities (airports, parking, toll roads, mass transit, ports).

All held-to-maturity securities were current and not past due at September 30, 2023 and at December 31, 2022.

Trading Securities

~~The~~There were net unrealized losses on trading securities of $248 thousand and net unrealized gains of $33 thousand at September 30, ~~2017 were $214 thousand~~2023 and ~~the net unrealized gains on trading securities at September 30, 2016 were $14 thousand. These~~2022, respectively. Net unrealized gains and losses ~~were~~are included in trading and

investment banking income on the Company’s Consolidated Statements of Income. In order to offset interest rate risk exposure within the trading portfolio, the Company has begun short selling U.S. Treasury and Corporate securities in which the Company enters into agreements to sell securities at a fixed price on a fixed date prior to purchasing the related securities. Securities sold not yet purchased totaled ~~$3.3~~$9.7 million and $3.5 million at September 30, ~~2017~~2023 and isDecember 31, 2022, respectively, and are classified within the Other liabilities line of the Company’s Consolidated Balance Sheets.

Other Securities

The table below provides detailed information for ~~Federal Reserve Bank (FRB) stock and Federal Home Loan Bank (FHLB) stock and other~~Other securities at September 30, ~~2017~~2023 and December 31, ~~2016~~ 2022 (in thousands):

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

September 30, 2017

Cost

Gains

Losses

Value

FRB and FHLB stock

$
33,262

$
—

$
—

$
33,262

Other securities – marketable

3

5,167

—

5,170

Other securities – non-marketable

23,328

1,783

—

25,111

Total Other securities

$
56,593

$
6,950

$
—

$
63,543

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

December 31, 2016

Cost

Gains

Losses

Value

FRB and FHLB stock

$
33,262

$
—

$
—

$
33,262

Other securities – marketable

4

9,948

—

9,952

Other securities – non-marketable

24,272

820

—

25,092

Total Other securities

$
57,538

$
10,768

$
—

$
68,306


	September 30, 2023		December 31, 2022
FRB and FHLB stock	$	102,672	$	41,472
Equity securities with readily determinable fair values		10,780		10,782
Equity securities without readily determinable fair values		359,803		297,504
Total	$	473,255	$	349,758

Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is mainly tied to the level of borrowings from the FHLB. These holdings are carried at cost. ~~Other marketable~~Equity securities with readily determinable fair values are generally traded on an exchange and ~~non-marketable~~market prices are readily available. Equity securities without readily determinable fair values include ~~Prairie Capital Management (PCM) alternative~~equity investments which are held by a subsidiary qualified as a Small Business Investment Company, as well as investments in hedge funds and private equity funds, which are accounted for as equity-method investments. The fair value of other marketable securities includes alternative investment securities of $5.2 million at September 30, 2017 and $10.0 million at December 31, 2016. The fair value of other non-marketable securities includes alternative investment securities of $3.0 million at September 30, 2017 and $2.0 million at December 31, 2016.low-income housing partnerships within the areas the Company serves. Unrealized gains or losses on ~~alternative investments~~equity securities with and without readily determinable fair values are recognized in the ~~Equity (losses) earnings~~Investment securities gains, net line ~~on alternative investments~~ of the Company’s Consolidated Statements of Income.

Investment Securities Gains, Net

The table below presents the components of Investments securities gains (losses), net for the three and nine months ended September 30, 2023 and September 30, 2022 (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Investment securities gain (losses), net
Available-for-sale debt securities:
Gains realized on sales	$	154		$	—		$	154		$	—
Losses realized on sales		—			—			(2	)		—
Impairment of AFS security		—			—			(4,925	)		—
Equity securities with readily determinable fair values:
Fair value adjustments, net		(223	)		(1,441	)		(197	)		(8,570	)
Equity securities without readily determinable fair values:
Fair value adjustments, net		340			96			817			1,261
Sales		—			—			—			66,162
Total investment securities gains (losses), net	$	271		$	(1,345	)	$	(4,153	)	$	58,853

During June 2022, the Company sold the entirety of its Visa Inc. Class B common shares in a cash transaction which resulted in a pre-tax gain of $66.2 million. Prior to the sale, the Visa Inc. Class B shares had no carrying value on the Company’s Consolidated Balance Sheets as the Company had no historical cost basis in the shares.

6. Goodwill and Other Intangibles

Changes in the carrying amount of goodwill for the periods ended September 30, ~~2017~~2023 and December 31, ~~2016~~2022 by reportable segment are as follows (in thousands):


	Commercial Banking		Institutional Banking		Personal Banking		Total
Balances as of January 1, 2023	$	63,113	$	76,492	$	67,780	$	207,385
Balances as of September 30, 2023	$	63,113	$	76,492	$	67,780	$	207,385


Balances as of January 1, 2022	$	59,419	$	51,332	$	63,767	$	174,518
Healthcare savings account business acquisition		—		25,160		—		25,160
Branch acquisition		3,694		—		4,013		7,707
Balances as of December 31, 2022	$	63,113	$	76,492	$	67,780	$	207,385

Bank

Institutional
Investment
Management

Asset
Servicing

Total

Balances as of January 1, 2017

$
161,391

$
47,529

$
19,476

$
228,396

Discontinued assets

—

(47,529
)

—

(47,529
)
Balances as of September 30, 2017

$
161,391

$
—

$
19,476

$
180,867

Balances as of January 1, 2016

$
161,341

$
47,529

$
19,476

$
228,346

Acquisition of Marquette

50

—

—

50

Discontinued assets

—

(47,529
)

—

(47,529
)
Balances as of December 31, 2016

$
161,391

$
—

$
19,476

$
180,867

The following table lists the finite-lived intangible assets that continue to be subject to amortization as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 (in thousands):


	As of September 30, 2023
	Core Deposit Intangible Assets		Customer Relationships		Total
Gross carrying amount	$	14,130	$	115,853	$	129,983
Accumulated amortization		12,776		44,147		56,923
Net carrying amount	$	1,354	$	71,706	$	73,060


	As of December 31, 2022
	Core Deposit Intangible Assets		Customer Relationships		Total
Gross carrying amount	$	16,661	$	114,978	$	131,639
Accumulated amortization		14,827		38,088		52,915
Net carrying amount	$	1,834	$	76,890	$	78,724

On November 18, 2022, the Company acquired a healthcare savings account business, which included $383.0 million of deposits. The purchase resulted in recognition of $25.2 million of goodwill and a $67.0 million customer relationship intangible asset.

On March 28, 2022, the Company acquired a bank branch. Included in the branch acquisition were $43.0 million in loans and $226.8 million of deposits. The purchase resulted in recognition of $7.7 million of goodwill and a $2.3 million core deposit intangible asset.

As of September 30, 2017

Core Deposit
Intangible
Assets

Customer Relationships

Other
Intangible
Assets

Total

Gross carrying amount

$
50,059

$
74,243

$
3,254

$
127,556

Accumulated amortization

41,424

59,401

3,254

104,079

Net carrying amount

$
8,635

$
14,842

$
—

$
23,477

As of December 31, 2016

Core Deposit
Intangible
Assets

Customer Relationships

Other
Intangible
Assets

Total

Gross carrying amount

$
47,527

$
74,243

$
3,254

$
125,024

Accumulated amortization

39,040

56,352

3,002

98,394

Net carrying amount

$
8,487

$
17,891

$
252

$
26,630

The following table has the aggregate amortization expense recognized in each period (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Aggregate amortization expense	$	2,124	$	1,092	$	6,539	$	3,388

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Aggregate amortization expense

$
1,715

$
2,088

$
5,685

$
6,644

The following table lists estimated amortization expense of intangible assets in future periods (in thousands):


For the three months ending December 31, 2023	$	2,048
For the year ending December 31, 2024		7,694
For the year ending December 31, 2025		7,487
For the year ending December 31, 2026		6,628
For the year ending December 31, 2027		4,655

~~For the three months ending December 31, 2017~~		$	~~1,679~~
~~For the year ending December 31, 2018~~	��		~~6,126~~
~~For the year ending December 31, 2019~~			~~5,063~~
~~For the year ending December 31, 2020~~			~~4,044~~
~~For the year ending December 31, 2021~~			~~2,975~~
~~For the year ending December 31, 2022~~			~~1,971~~

7. Borrowed Funds

The components of the Company's short-term and long-term debt are as follows (in thousands):


	September 30, 2023		December 31, 2022
Short-term debt:
Federal Home Loan Bank 5.04% due 2024	$	1,000,000	$	—
Federal Home Loan Bank 5.47% due 2023		500,000		—
Federal Reserve Bank Term Funding Program 4.70% due 2023		800,000		—
Total short-term debt		2,300,000		—
Long-term debt:
Trust Preferred Securities:
Marquette Capital Trust I Subordinated Debentures 6.36% due 2036		18,538		18,319
Marquette Capital Trust II Subordinated Debentures 6.36% due 2036		19,067		18,863
Marquette Capital Trust III Subordinated Debentures 7.16% due 2036		7,492		7,415
Marquette Capital Trust IV Subordinated Debentures 7.27% due 2036		30,256		29,956
Subordinated notes 3.70% due 2030, net of issuance costs		199,118		198,781
Subordinated notes 6.25% due 2032, net issuance costs		108,297		107,977
Total long-term debt		382,768		381,311
Total borrowed funds	$	2,682,768	$	381,311

The Company assumed long-term debt obligations from the acquisition of Marquette Financial Companies (Marquette) consisting of debt obligations payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that previously issued trust preferred securities. These long-term debt obligations had an aggregate contractual balance of $103.1 million and had a carrying value of $75.4 million as of September 30, 2023. Interest rates on trust preferred securities are tied to the three-month term Secured Overnight Financing Rate (SOFR) with spreads ranging from 133 basis points to 160 basis points and reset quarterly. The trust preferred securities have maturity dates ranging from January 2036 to September 2036.

~~7. Securities Sold Under Agreements~~In September 2020, the Company issued $200.0 million of 3.70% fixed-to-fixed rate subordinated notes that mature on September 17, 2030. The notes bear interest at the rate of 3.70% per annum, payable semi-annually on each March 17 and September 17. The Company may redeem the notes, in whole or in part, on September 17, 2025, or on any interest payment date thereafter. Unamortized debt issuance costs related to ~~Repurchase~~these notes totaled $0.9 million as of September 30, 2023. Proceeds from the issuance of the notes were used for general corporate purposes, including contributing Tier 1 capital into the Bank.

In September 2022, the Company issued $110.0 million of 6.25% fixed-to-fixed rate subordinated notes that mature on September 28, 2032. The notes bear interest at the rate of 6.25% per annum, payable semi-annually on each March 28 and September 28. The Company may redeem the notes, in whole or in part, on September 28, 2027, or on any interest payment date thereafter. Unamortized debt issuance costs related to these notes totaled $1.7 million as of September 30, 2023. Proceeds from the issuance of the notes were used for general corporate purposes, including contributing Tier 1 capital into the Bank.

The Company is a member bank of the FHLB of Des Moines. Through this relationship, the Company purchased $70.2 million of FHLB stock and has access to additional liquidity and funding sources through FHLB

advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB. The Company had two short-term advances of $1.0 billion and $500.0 million outstanding at FHLB of Des Moines as of September 30, 2023. Additionally, in 2023, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. This letter of credit will expire in January 2024. The Company’s borrowing capacity with the FHLB was $436.7 million as of September 30, 2023.

The Company had an $800.0 million short-term borrowing outstanding with the Federal Reserve Bank's Bank Term Funding Program (BTFP) as of September 30, 2023. The Company’s remaining borrowing capacity with the BTFP was $20.0 million and its remaining borrowing capacity at the Federal Reserve Discount Window was $10.2 billion as of September 30, 2023.

The Company has a revolving line of credit with Wells Fargo Bank, N.A. which allows the Company to borrow up to $30.0 million for general working capital purposes. The interest rate applied to borrowed balances will be at the Company’s option either 1.40% above Term SOFR or 1.75% below the prime rate on the date of an advance. The Company pays a 0.4% unused commitment fee for unused portions of the line of credit. The Company currently has no outstanding balance on this line of credit.

The Company enters into sales of securities with simultaneous agreements to repurchase (repurchase agreements). The Company utilizes repurchase agreements to facilitate the needs of customers and to facilitate secured short-term funding needs. Repurchase agreements are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with the Company’s safekeeping agents.

The table below presents the remaining contractual maturities of repurchase agreements outstanding at September 30, ~~2017,~~2023 and December 31, 2022, in addition to the various types of marketable securities that have been pledged as collateral for these borrowings (in thousands):


	As of September 30, 2023
	Remaining Contractual Maturities of the Agreements
	2-29 Days		30-90 Days		Over 90 Days		Total
Repurchase agreements, secured by:
U.S. Treasury	$	36,312	$	—	$	43,440	$	79,752
U.S. Agencies		1,411,134		171,442		46,060		1,628,636
Total repurchase agreements	$	1,447,446	$	171,442	$	89,500	$	1,708,388


	As of December 31, 2022
	Remaining Contractual Maturities of the Agreements
	2-29 Days		30-90 Days		Total
Repurchase agreements, secured by:
U.S. Treasury	$	33,888	$	—	$	33,888
U.S. Agencies		1,835,298		290,501		2,125,799
Total repurchase agreements	$	1,869,186	$	290,501	$	2,159,687

As of September 30, 2017

Remaining Contractual Maturities of the Agreements

Repurchase agreements, secured by:

On Demand

2-29 Days

Over 90 Days

Total

U.S. Treasury

$
—

$
13,376

$
—

$
13,376

U.S. Agencies

2,500

1,019,353

800

1,022,653

Total repurchase agreements

$
2,500

$
1,032,729

$
800

$
1,036,029

8. Business Segment Reporting

The Company has strategically aligned its operations into the following ~~two~~three reportable ~~segments~~segments: Commercial Banking, Institutional Banking, and Personal Banking (collectively, the Business ~~Segments): Bank~~Segments, and ~~Asset Servicing. Senior~~each, a Business Segment). The Company’s senior executive officers regularly evaluate ~~business segment~~the Business Segment financial results produced by the Company’s internal reporting system in deciding how to allocate resources and assess performance for individual Business Segments. Previously, the Company had the following three Business Segments: Bank, Institutional Investment Management, and Asset Servicing. On April 20, 2017, the Company announced the execution of an agreement to sell all of the outstanding stock of Scout, its institutional investment management subsidiary. As the operations of Scout are now included in discontinued operations, the Company no longer presents this segment’s operations as one of its business segments. The Company’s reportable segments include certain corporate overhead, technology and service costs that are allocated based on methodologies that are applied consistently between periods. For comparability purposes, amounts in all periods are based on methodologies in effect at September 30, ~~2017.~~2023. Previously reported results have been reclassified in this ~~filing~~Form 10-Q to conform to the Company’s current organizational structure.

The following summaries provide information about the activities of each ~~segment:~~Business Segment:

~~The~~ ~~Bank~~ ~~provides~~Commercial Banking serves the commercial banking and treasury management needs of the Company’s small to middle-market businesses through a ~~full range~~variety of products and services. Such services include commercial loans, commercial real estate financing, commercial credit cards, letters of credit, loan syndication services, and consultative services. In addition, the Company’s specialty lending group offers a variety of business solutions including asset-based lending, mezzanine debt and minority equity investments. Treasury management services include depository services, account reconciliation and cash management tools such as, accounts payable and receivable solutions, electronic funds transfer and automated payments, controlled disbursements, lockbox services and remote deposit capture services.

Institutional Banking is a combination of banking services, fund services, asset management services and healthcare services provided to ~~commercial,~~institutional clients. This segment also provides fixed income sales, trading and underwriting, corporate trust and escrow services, as well as institutional custody. Institutional Banking includes UMB Fund Services, Inc., which provides fund administration and accounting, transfer agency services, and other services to mutual fund and alternative investment groups. Healthcare services provides healthcare payment solutions including custodial services for health savings accounts (HSAs) and private label, multipurpose debit cards to insurance carriers, third-party administrators, software companies, employers, and financial institutions.

Personal Banking combines consumer banking and wealth management services offered to clients and delivered through personal relationships and the Company’s bank branches, ATM network and internet banking. Products offered include deposit accounts, retail ~~government~~credit cards, installment loans, home equity lines of credit, and ~~correspondent bank~~residential mortgages. The range of client services extends from a basic checking account to estate planning and trust services and includes private banking, brokerage services, and insurance services in addition to a full spectrum of investment advisory, trust, and custody services.

Business Segment Information

Business Segment financial results for the three and nine months ended September 30, 2023 and September 30, 2022 were as follows (in thousands):


	Three Months Ended September 30, 2023
	Commercial Banking		Institutional Banking		Personal Banking			Total
Net interest income	$	148,666	$	43,133	$	30,488		$	222,287
Provision for credit losses		3,010		423		1,544			4,977
Noninterest income		23,091		86,521		23,705			133,317
Noninterest expense		81,767		87,502		62,172			231,441
Income (loss) before taxes		86,980		41,729		(9,523	)		119,186
Income tax expense (benefit)		16,311		7,866		(1,545	)		22,632
Net income (loss)	$	70,669	$	33,863	$	(7,978	)	$	96,554
Average assets	$	20,838,000	$	12,232,000	$	6,454,000		$	39,524,000


	Three Months Ended September 30, 2022
	Commercial Banking		Institutional Banking		Personal Banking			Total
Net interest income	$	150,080	$	43,382	$	40,023		$	233,485
Provision for credit losses		20,156		162		1,682			22,000
Noninterest income		16,785		89,386		22,552			128,723
Noninterest expense		87,120		82,073		62,203			231,396
Income (loss) before taxes		59,589		50,533		(1,310	)		108,812
Income tax expense		12,859		7,735		228			20,822
Net income (loss)	$	46,730	$	42,798	$	(1,538	)	$	87,990
Average assets	$	17,658,000	$	11,999,000	$	6,653,000		$	36,310,000


	Nine Months Ended September 30, 2023
	Commercial Banking		Institutional Banking		Personal Banking			Total
Net interest income	$	444,083	$	148,615	$	96,896		$	689,594
Provision for credit losses		35,110		754		5,363			41,227
Noninterest income		71,658		257,573		72,368			401,599
Noninterest expense		251,667		268,464		189,035			709,166
Income (loss) before taxes		228,964		136,970		(25,134	)		340,800
Income tax expense (benefit)		41,114		24,558		(3,973	)		61,699
Net income (loss)	$	187,850	$	112,412	$	(21,161	)	$	279,101
Average assets	$	20,425,000	$	12,476,000	$	6,571,000		$	39,472,000


	Nine Months Ended September 30, 2022
	Commercial Banking		Institutional Banking		Personal Banking		Total
Net interest income	$	444,176	$	104,615	$	119,840	$	668,631
Provision for credit losses		25,183		402		3,315		28,900
Noninterest income		100,379		243,740		84,617		428,736
Noninterest expense		246,230		234,185		179,886		660,301
Income before taxes		273,142		113,768		21,256		408,166
Income tax expense		52,001		22,353		2,303		76,657
Net income	$	221,141	$	91,415	$	18,953	$	331,509
Average assets	$	17,122,000	$	13,396,000	$	7,148,000	$	37,666,000

9. Revenue Recognition

The following is a description of the principal activities from which the Company generates revenue that are within the scope of ASC Topic 606, Revenue from Contracts with Customers:

Trust and securities processing – Trust and securities processing income consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and wealth management services, and mutual fund and alternative asset servicing. The performance obligations related to this revenue include items such as performing full bond trustee service administration, investment advisory services, custody and record-keeping services, and fund administrative and accounting services. These fees are part of long-term contractual agreements and the performance obligations are satisfied upon completion of service and fees are generally a fixed flat monthly rate or based on a percentage of the account’s market value per the contract with the customer. These fees are primarily recorded within the Company’s Institutional and Personal Banking segments.

Trading and investment banking – Trading and investment banking income consists of income earned related to the Company’s trading securities portfolio, including futures hedging, dividends, bond underwriting, and other securities incomes. The vast majority of this revenue is recognized in accordance with ASC 320, Debt and Equity Securities, and is out of the scope of ASC 606. A portion of trading and investment banking represents fees earned for management fees, commissions, and underwriting of corporate bond issuances. The performance obligations related to these fees include reviewing the credit worthiness of the customer, ensuring appropriate regulatory approval and participating in due diligence. The fees are fixed per the bond prospectus and the performance obligations are satisfied upon registration approval of the bonds by the applicable regulatory agencies. Revenue is recognized at the point in time upon completion of service and when approval is granted by the regulators.

Service charges on deposits – Service charges on deposit accounts represent monthly analysis fees recognized for the services related to customer deposit accounts, including account maintenance and depository transactions processing fees. Commercial Banking and Institutional Banking depository accounts charge fees in accordance with the customer’s pricing schedule while Personal Banking account holders are generally charged a flat service fee per month. Deposit service charges for the healthcare accounts included in the Institutional Banking segment are priced according to either standard pricing schedules with individual account holders or according to service agreements

between the Company and employer groups or third-party administrators. The Company satisfies the performance obligation related to providing depository accounts monthly as transactions are processed and deposit service charge revenue is recorded monthly. These fees are recognized within all Business Segments.

Insurance fees and commissions – Insurance fees and commissions includes all insurance-related fees earned, including commissions for individual life, variable life, group life, health, group health, fixed annuity, and variable annuity insurance contracts. The performance obligations related to these revenues primarily represent the placement of insurance policies with the insurance company partners. The fees are based on the contracts with insurance company partners and the performance obligations are satisfied when the terms of the policy have been agreed to and the insurance policy becomes effective.

Brokerage fees – Brokerage fees represent income earned related to providing brokerage transaction services, including commissions on equity and commodity trades, and fees for investment management, advisory and administration. The performance obligations related to transaction services are executing the specified trade and are priced according to the customer’s fee schedule. Such income is recognized at a point in time as the trade occurs and the performance obligation is fulfilled. The performance obligations related to investment management, advisory and administration include allocating customer assets across a wide range of mutual funds and other investments, on-going account monitoring and re-balancing of the portfolio. These performance obligations are satisfied over time and the related revenue is calculated monthly based on the assets under management of each customer. All material performance obligations are satisfied as of the end of each accounting period.

Bankcard fees – Bankcard fees primarily represent income earned from interchange revenue from MasterCard and Visa for the Company’s processing of debit, credit, HSA, and flexible spending account transactions. Additionally, the Company earns income and incentives related to various referrals of customers to card programs. The performance obligation for interchange revenue is the processing of each transaction through the Company’s branches, call center, internet banking, and ATM network. Services include traditional commercial and consumer banking, treasury management, leasing, foreign exchange, consumer and commercial credit and debit card, prepaid debit card solutions, healthcare services, institutional cash management, merchant bankcard, wealth management, brokerage, insurance, capital markets, investment banking, corporate trust, and correspondent banking.

~~Asset Servicing~~ ~~provides services~~access to the ~~asset management industry, supporting~~banking system. This performance obligation is completed for each individual transaction and income is recognized per transaction in accordance with interchange rates established by MasterCard and Visa. The performance obligations for various referral and incentive programs include either referring customers to certain card products or issuing exclusively branded cards for certain customer segments. The pricing of these incentive and referral programs are in accordance with the agreement with the individual card partner. These performance obligations are completed as the referrals are made or over a ~~range~~period of ~~investment products,~~time when the Company is exclusively issuing branded cards. For the three months ended September 30, 2023 and September 30, 2022, the Company had $9.6 million and $8.8 million of expense, respectively, recorded within the Bankcard fees line on the Company’s Consolidated Income Statements related to rebates and rewards programs that are outside of the scope of ASC 606. For the nine months ended September 30, 2023 and September 30, 2022, the Company had $30.3 million and $26.5 million of expense, respectively, related to these rebates and rewards programs. All material performance obligations are satisfied as of the end of each accounting period.

Investment securities gains, net – In the regular course of business, the Company recognizes gains and losses on the sale of available-for-sale securities. Additionally, the Company recognizes gains and losses on equity securities with readily determinable fair values and equity securities without readily determinable fair values. These gains and losses are recognized in accordance with ASC 321, Equity Securities, and are outside of the scope of ASC 606.

Other income – The Company recognizes other miscellaneous income through a variety of other revenue streams, the most material of which include letter of credit fees, certain loan origination fees, gains on the sale of assets, derivative income, and bank-owned and company-owned life insurance income. These revenue streams are outside of the scope of ASC 606 and are recognized in accordance with the applicable U.S. GAAP. The remainder of Other income is primarily earned through transactions with personal banking customers, including ~~mutual funds, alternative investments~~wire transfer service charges, stop payment charges, and ~~managed accounts. Services include fund administration, fund accounting, investor services, transfer agency, distribution, marketing, custody, alternative investment services,~~fees for items like money orders and ~~collective~~cashier’s checks. The performance obligations of these types of fees are satisfied as transactions are completed and ~~multiple-series trust services.~~revenue is recognized upon transaction execution according to established fee schedules with the customers.

The Company had no material contract assets, contract liabilities, or remaining performance obligations as of September 30, 2023. Total receivables from revenue recognized under the scope of ASC 606 were $84.3 million

and $76.1 million as of September 30, 2023 and December 31, 2022, respectively. These receivables are included as part of the Other assets line on the Company’s Consolidated Balance Sheets.

The following table depicts the disaggregation of noninterest income according to revenue stream and Business Segment ~~Information~~for the three and nine months ended September 30, 2023 and September 30, 2022. As stated in Note 8, “Business Segment Reporting,” for comparability purposes, amounts in all periods are based on methodologies in effect at September 30, 2023 and previously reported results have been reclassified in this Form 10-Q to conform to the Company’s current organizational structure.

~~Segment financial results were~~Disaggregated revenue is as follows ~~(in~~(in thousands):


	Three Months Ended September 30, 2023
NONINTEREST INCOME	Commercial Banking		Institutional Banking		Personal Banking		Revenue (Expense) out of Scope of ASC 606			Total
Trust and securities processing	$	—	$	52,939	$	13,729	$	—		$	66,668
Trading and investment banking		—		118		—		3,653			3,771
Service charges on deposit accounts		9,845		9,917		1,292		26			21,080
Insurance fees and commissions		—		—		272		—			272
Brokerage fees		69		11,353		1,978		—			13,400
Bankcard fees		16,763		6,337		5,483		(9,287	)		19,296
Investment securities gains, net		—		—		—		271			271
Other		223		839		653		6,844			8,559
Total Noninterest income	$	26,900	$	81,503	$	23,407	$	1,507		$	133,317


	Three Months Ended September 30, 2022
NONINTEREST INCOME	Commercial Banking		Institutional Banking			Personal Banking		Revenue (Expense) out of Scope of ASC 606			Total
Trust and securities processing	$	—	$	46,385		$	13,201	$	—		$	59,586
Trading and investment banking		—		(38	)		—		5,425			5,387
Service charges on deposit accounts		8,357		9,564			1,978		33			19,932
Insurance fees and commissions		—		—			375		—			375
Brokerage fees		66		11,904			1,870		—			13,840
Bankcard fees		16,656		5,350			5,951		(8,578	)		19,379
Investment securities losses, net		—		—			—		(1,345	)		(1,345	)
Other		202		477			694		10,196			11,569
Total Noninterest income	$	25,281	$	73,642		$	24,069	$	5,731		$	128,723


	Nine Months Ended September 30, 2023
NONINTEREST INCOME	Commercial Banking		Institutional Banking		Personal Banking		Revenue (Expense) out of Scope of ASC 606			Total
Trust and securities processing	$	—	$	150,531	$	40,085	$	—		$	190,616
Trading and investment banking		—		431		—		13,448			13,879
Service charges on deposit accounts		28,150		30,815		4,587		68			63,620
Insurance fees and commissions		—		—		771		—			771
Brokerage fees		197		34,835		5,648		—			40,680
Bankcard fees		49,263		19,677		16,775		(29,668	)		56,047
Investment securities losses, net		—		—		—		(4,153	)		(4,153	)
Other		613		1,817		1,971		35,738			40,139
Total Noninterest income	$	78,223	$	238,106	$	69,837	$	15,433		$	401,599


	Nine Months Ended September 30, 2022
NONINTEREST INCOME	Commercial Banking		Institutional Banking		Personal Banking		Revenue (Expense) out of Scope of ASC 606			Total
Trust and securities processing	$	—	$	137,225	$	40,775	$	—		$	178,000
Trading and investment banking		—		178		—		17,772			17,950
Service charges on deposit accounts		25,998		33,704		5,554		153			65,409
Insurance fees and commissions		—		—		879		—			879
Brokerage fees		174		23,738		5,775		—			29,687
Bankcard fees		46,387		16,234		17,083		(25,850	)		53,854
Investment securities gains, net		—		—		—		58,853			58,853
Other		598		1,380		2,073		20,053			24,104
Total Noninterest income	$	73,157	$	212,459	$	72,139	$	70,981		$	428,736

Three Months Ended September 30, 2017

Bank

Asset Servicing

Total

Net interest income

$
137,331

$
3,527

$
140,858

Provision for loan losses

11,500

—

11,500

Noninterest income

79,759

24,547

104,306

Noninterest expense

150,057

21,764

171,821

Income before taxes

55,533

6,310

61,843

Income tax expense

11,649

1,322

12,971

Income from continuing operations

$
43,884

$
4,988

$
48,872

Average assets

$
19,542,050

$
770,950

$
20,313,000

Three Months Ended September 30, 2016

Bank

Asset Servicing

Total

Net interest income

$
121,963

$
2,802

$
124,765

Provision for loan losses

13,000

—

13,000

Noninterest income

80,540

23,002

103,542

Noninterest expense

144,450

20,761

165,211

Income before taxes

45,053

5,043

50,096

Income tax expense

9,560

1,114

10,674

Income from continuing operations

$
35,493

$
3,929

$
39,422

Average assets

$
18,441,950

$
1,250,050

$
19,692,000

Nine Months Ended September 30, 2017

Bank

Asset Servicing

Total

Net interest income

$
403,450

$
9,117

$
412,567

Provision for loan losses

35,000

—

35,000

Noninterest income

245,583

71,946

317,529

Noninterest expense

456,680

65,890

522,570

Income before taxes

157,353

15,173

172,526

Income tax expense

33,733

3,174

36,907

Income from continuing operations

$
123,620

$
11,999

$
135,619

Average assets

$
19,501,000

$
787,000

$
20,288,000

Nine Months Ended September 30, 2016

Bank

Asset Servicing

Total

Net interest income

$
355,847

$
8,020

$
363,867

Provision for loan losses

25,000

—

25,000

Noninterest income

234,643

69,638

304,281

Noninterest expense

435,708

63,190

498,898

Income before taxes

129,782

14,468

144,250

Income tax expense

30,478

3,538

34,016

Income from continuing operations

$
99,304

$
10,930

$
110,234

Average assets

$
18,205,900

$
1,282,100

$
19,488,000

9.10. Commitments, Contingencies and Guarantees

In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk in order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, commercial letters of credit, standby letters of credit, forward foreign exchange contracts and spot foreign exchange contracts. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Consolidated Balance Sheets. The contractual or notional amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments. Many of the commitments expire without being drawn upon; therefore, the total amount of these commitments does not necessarily represent the future cash requirements of the Company.

The Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instruments for commitments to extend credit, commercial letters of credit, and standby letters of credit is represented by the contract or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

The following table summarizes the Company’s off-balance sheet financial ~~instruments.~~instruments (in thousands):

~~Contract~~


	Contract or Notional Amount
	September 30,		December 31,
	2023		2022
Commitments to extend credit for loans (excluding credit card loans)	$	12,954,573	$	12,988,231
Commitments to extend credit under credit card loans		4,714,358		4,008,386
Commercial letters of credit		1,091		3,334
Standby letters of credit		407,996		436,965
Forward contracts		71,158		32,552
Spot foreign exchange contracts		5,535		5,112

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancelable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate is based on expected utilization rates by portfolio segment. Utilization rates are influenced by historical trends and current conditions. The expected utilization rates are applied to the total commitment to determine the expected amount to be funded. The allowance for off-balance sheet credit exposure is calculated by applying portfolio segment expected credit loss rates to the expected amount to be funded.

The following categories of off-balance sheet credit exposures have been identified:

Revolving Lines of Credit: includes commercial, construction, agriculture, personal, and home-equity. Risks inherent to revolving lines of credit often are related to the susceptibility of an individual or ~~Notional Amount~~ (business experiencing unpredictable cash flow or financial troubles, thus leading to payment default. During these financial troubles, the borrower could have less than desirable assets collateralizing the revolving line of credit. The financial strain the borrower is experiencing could lead to drawing against the line without the ability to pay the line down.

Non-Revolving Lines of Credit: includes commercial and personal. Lines that do not carry a revolving feature are generally associated with a specific expenditure or project, such as to purchase equipment or the construction of real estate. The predominate risk associated with non-revolving lines is the diversion of funds for other expenditures. If funds get diverted, the contributory value to collateral suffers.

Letters of Credit: includes standby letters of credit. Generally, a standby letter of credit is established to provide assurance to the beneficiary that the applicant will perform certain obligations arising out of a separate transaction between the beneficiary and applicant. These obligations might be the performance of a service or delivery of a product. If the obligations are not met, it gives the beneficiary, the right to draw on the letter of credit.

The ACL for off-balance sheet credit exposures was $5.1 million and $3.1 million at September 30, 2023 and December 31, 2022, respectively, and was recorded in ~~thousands):~~the Accrued expenses and taxes line of the Company’s Consolidated Balance Sheets. For the three months ended September 30, 2023, provision of $1.0 million was recorded for off-balance sheet credit exposures. There was no provision for off-balance sheet credit exposures recorded for the three months ended September 30, 2022. For the nine months ended September 30, 2023 and 2022, provision of $2.0 million and $500 thousand, respectively, was recorded for off-balance sheet exposures. Provision for off-balance sheet credit exposure is recorded in the Provision for credit losses line of the Company’s Consolidated Statements of Income.

September 30,

December 31,

2017

2016

Commitments to extend credit for loans (excluding credit card loans)

$
6,451,746

$
6,471,404

Commitments to extend credit under credit card loans

2,952,064

2,798,433

Commercial letters of credit

659

1,098

Standby letters of credit

305,756

376,617

Forward contracts

46,793

49,352

Spot foreign exchange contracts

1,185

3,725

~~10.~~11. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through

management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to ~~certain fixed rate assets~~the Company’s loans and ~~liabilities.~~borrowings. The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk of the Company’s assets or liabilities. The Company has entered into an offsetting position for each of these derivative instruments with a matching instrument from another financial institution in order to minimize its net risk exposure resulting from such transactions.

Fair Values of Derivative Instruments on the Consolidated Balance Sheets

The table below presents the fair value of the Company’s derivative financial instruments as of September 30, ~~2017~~2023 and December 31, ~~2016.~~2022. The Company’s derivative assets and derivative liabilities are located within Other assets and Other liabilities, respectively, on the Company’s Consolidated Balance Sheets.

Derivative fair values are determined using valuation techniques including discounted cash flow analysis on the expected cash flows from each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

This table provides a summary of the fair value of the Company’s derivative assets and liabilities as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 (in thousands):


	Derivative Assets				Derivative Liabilities				Derivative Assets				Derivative Liabilities
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
Fair Value	2017		2016		2017		2016		2023		2022		2023		2022
Interest Rate Products:
Derivatives not designated as hedging instruments	$	11,692	$	10,555	$	7,276	$	10,581	$	144,310	$	47,638	$	151,477	$	126,231
Derivatives designated as hedging instruments		102		318		1,608		748		—		483		50		103
Total	$	11,794	$	10,873	$	8,884	$	11,329	$	144,310	$	48,121	$	151,527	$	126,334

Fair Value Hedges of Interest Rate Risk

The Company is exposed to changes in the fair value of certain of its ~~fixed rate~~fixed-rate assets and liabilities due to changes in ~~the benchmark~~ interest ~~rate, LIBOR.~~rates. Interest rate swaps designated as fair value hedges involve ~~either~~ making fixed rate payments to a counterparty in exchange for the Company receiving variable ~~rate payments, or making variable rate payments to a counterparty in exchange for the Company receiving fixed~~ rate payments over the life of the agreements without the exchange of the underlying notional amount. As of ~~September 30, 2017,~~December 31, 2022, the Company had ~~two~~three interest rate swaps ~~with a notional amount of $15.6 million~~ that were designated as fair value hedges of interest rate risk associated with the Company’s ~~fixed rate loan assets and brokered time deposits.~~ municipal bond securities with an aggregate notional amount of $254.6 million. During the nine months ended September 30, 2023, the Company terminated three fair value hedges. In connection with these terminated hedges, $11.5 million of hedging adjustments will be amortized through the contractual maturity date of each respective hedged item.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in ~~earnings. The Company includes the gain or loss on the hedged items~~Interest income in the ~~same line item as the offsetting loss or gain on the related derivatives.~~Consolidated Statements of Income.

Cash Flow Hedges of Interest Rate Risk

The Company’s objective in using interest rate derivatives is to manage its exposure to interest rate movements. To accomplish this objective, the Company ~~is exposed to changes in the fair value of certain~~primarily uses interest rate swaps and floors as part of its ~~variable-rate liabilities due to changes in the benchmark~~ interest rate ~~LIBOR.~~risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of September 30, ~~2017,~~2023 and December 31, 2022, the Company had two interest rate swaps ~~with a notional amount of $51.5 million~~ that were designated as cash flow hedges of interest rate risk associated with the Company’s ~~variable rate~~variable-rate subordinated debentures issued by Marquette Capital Trusts III and IV. These swaps had an aggregate notional amount of $51.5 million at both September 30, 2023 and December 31, 2022. Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an upfront premium. On August 28, 2020, the Company terminated an interest rate floor with a notional amount of $750.0 million. At the date of termination, the interest rate floor had a net asset fair value of $34.1 million. The gross unrealized gain on the terminated interest rate floor remaining in AOCI was $3.7 million, or $2.8 million net of tax, and $7.4 million, or $5.6 million net of tax, as of September 30, 2023 and December 31, 2022, respectively. The unrealized gain will be reclassified into Interest income as the underlying forecasted transactions impact earnings through the original maturity of the hedged forecasted transactions. The total remaining term over which the unrealized gain will be reclassified into earnings is 0.9 years.

For derivatives designated and that qualify as cash flow hedges ~~the effective portion~~ of changes in fair value is recorded in accumulated other comprehensive income (AOCI) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly into earnings forinterest rate risk, the gain or loss on the derivative ~~as well as~~is recorded in AOCI and is subsequently reclassified into interest expense and interest income in the ~~offsetting loss or gain on~~period during which the hedged item attributable to the hedged risk. During the three and nine months ended September 30, 2017, the Company recognized net losses of $169 thousand and $1.1 million, respectively, in AOCI for the effective portion of the change in fair value of these cash flow hedges. During the three and nine months ended September 30, 2016, the Company recognized net losses of $643 thousand and $7.7 million, respectively, in AOCI for the effective portion of the change in fair value of these cash flow hedges. During the three and nine months ended September 30, 2017 and September 30, 2016, the Company did not record any hedge ineffectiveness inforecasted transaction affects earnings. Amounts reported in AOCI related to interest rate swap derivatives will be reclassified to Interest expense as interest payments are received or paid on the Company’s ~~derivatives.~~hedged items. Amounts reported in AOCI related to interest rate floor derivatives will be reclassified to Interest income as interest payments are received or paid on the Company’s items. The Company ~~does not expect~~expects to reclassify ~~any amounts~~$1.4 million from AOCI as a reduction to Interest expense and $3.7 million from AOCI to Interest ~~expense~~income during the next 12 ~~months as the Company’s derivatives are effective after December 2018.~~months. As of September 30, ~~2017,~~2023, the Company is hedging its exposure to the variability in future cash flows for forecasted transactions over a maximum period of ~~19.0~~13.0 years.

Non-designated Hedges

The remainder of the Company’s derivatives are not designated in qualifying hedging relationships. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously offset by interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of both the customer swaps and the offsetting swaps are recognized in Other noninterest expense in the Consolidated Statements of Income. As of September 30, ~~2017,~~2023, the Company had 76250 interest rate swaps with an aggregate notional amount of ~~$947.3 million~~$4.0 billion related to this program. ~~During the three and nine months ended September 30, 2017,~~As of December 31, 2022, the Company ~~recognized $140 thousand and $656 thousand~~had 230 interest rate swaps with an aggregate notional amount of net losses, respectively, related to changes in fair value of these swaps. During the three and nine months ended September 30, 2016, the Company recognized $76 thousand and $868 thousand of net losses, respectively, related to changes in the fair value of these swaps.$3.5 billion.

Effect of Derivative Instruments on the Consolidated Statements of Income and Accumulated Other Comprehensive Income

This table provides a summary of the amount of gain or loss recognized in ~~other~~Interest income and Other noninterest expense in the Consolidated Statements of Income related to the Company’s derivative assets and liabilities for the three and nine months ended September 30, ~~2017~~2023 and September 30, ~~2016~~ 2022 (in thousands):


	Amount of Gain (Loss) Recognized
	For the Three Months Ended						For the Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2023			2022			2023			2022
Interest Rate Products
Derivatives not designated as hedging instruments	$	82		$	51		$	60		$	425
Total	$	82		$	51		$	60		$	425
Interest Rate Products
Derivatives designated as hedging instruments:
Fair value adjustments on derivatives	$	55		$	24,605		$	904		$	77,316
Fair value adjustments on hedged items		(55	)		(24,631	)		(902	)		(76,795	)
Total	$	—		$	(26	)	$	2		$	521

Amount of Gain (Loss) Recognized

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

September 30,

September 30,

2017

2016

2017

2016

Interest Rate Products

Derivatives not designated as hedging instruments

$
(140
)

$
(76
)

$
(656
)

$
(868
)
Total

$
(140
)

$
(76
)

$
(656
)

$
(868
)
Interest Rate Products

Derivatives designated as hedging instruments:

Fair value adjustments on derivatives

$
(56
)

$
(64
)

$
(188
)

$
(395
)
Fair value adjustments on hedged items

55

63

189

392

Total

$
(1
)

$
(1
)

$
1

$
(3
)

~~This table provides~~These tables provide a summary of the ~~amount~~effect of ~~gain or loss recognized in~~hedges on AOCI in the Consolidated Statements of Comprehensive Income related to the Company’s derivative assets and liabilities ~~as of~~for the three and nine months ended September 30, ~~2017~~2023 and September 30, ~~2016~~ 2022 (in thousands):

	Amount of Loss Recognized in Other Comprehensive Income on Derivatives (Effective Portion)
	For the Three Months Ended						For the Nine Months Ended
	September 30,			September 30,			September 30,			September 30,			For the Three Months Ended September 30, 2023
Derivatives in Cash Flow Hedging Relationships	2017			2016			2017			2016			Gain Recognized in OCI on Derivative		Gain Recognized in OCI Included Component		Gain Recognized in OCI Excluded Component		Gain Reclassified from AOCI into Earnings		Gain Reclassified from AOCI into Earnings Included Component		Loss Reclassified from AOCI into Earnings Excluded Component
Interest Rate Products
Derivatives designated as cash flow hedging instruments	$	(169	)	$	(643	)	$	(1,080	)	$	(7,677	)
Interest rate floor													$	—	$	—	$	—	$	1,164	$	1,731	$	(567	)
Interest rate swaps														3,927		3,927		—		371		371		—
Total	$	(169	)	$	(643	)	$	(1,080	)	$	(7,677	)	$	3,927	$	3,927	$	—	$	1,535	$	2,102	$	(567	)


	For the Three Months Ended September 30, 2022
Derivatives in Cash Flow Hedging Relationships	Gain Recognized in OCI on Derivative		Gain Recognized in OCI Included Component		Gain Recognized in OCI Excluded Component		Gain (Loss) Reclassified from AOCI into Earnings			Gain (Loss) Reclassified from AOCI into Earnings Included Component			Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floor	$	—	$	—	$	—	$	1,297		$	1,864		$	(567	)
Interest rate swaps		3,321		3,321		—		(80	)		(80	)		—
Total	$	3,321	$	3,321	$	—	$	1,217		$	1,784		$	(567	)


	For the Nine Months Ended September 30, 2023
Derivatives in Cash Flow Hedging Relationships	Gain Recognized in OCI on Derivative		Gain Recognized in OCI Included Component		Gain Recognized in OCI Excluded Component		Gain Reclassified from AOCI into Earnings		Gain Reclassified from AOCI into Earnings Included Component		Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floor	$	—	$	—	$	—	$	3,600	$	5,283	$	(1,683	)
Interest rate swaps		4,248		4,248		—		931		931		—
Total	$	4,248	$	4,248	$	—	$	4,531	$	6,214	$	(1,683	)


	For the Nine Months Ended September 30, 2022
Derivatives in Cash Flow Hedging Relationships	Gain Recognized in OCI on Derivative		Gain Recognized in OCI Included Component		Gain Recognized in OCI Excluded Component		Gain (Loss) Reclassified from AOCI into Earnings			Gain (Loss) Reclassified from AOCI into Earnings Included Component			Loss Reclassified from AOCI into Earnings Excluded Component
Interest rate floor	$	—	$	—	$	—	$	3,710		$	5,393		$	(1,683	)
Interest rate swaps		12,438		12,438		—		(616	)		(616	)		—
Total	$	12,438	$	12,438	$	—	$	3,094		$	4,777		$	(1,683	)

Credit-risk-related Contingent Features

The Company has agreements with certain of its derivative counterparties that contain a provision that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

~~As of September 30, 2017, the termination value of derivatives in a net liability position, which includes accrued interest, related to these agreements was $10.7 million.~~ The Company has minimum collateral posting thresholds with certain of its derivative counterparties. At September 30, ~~2017~~2023, the Company had not posted ~~$557 thousand of collateral.~~any collateral as there were no derivatives in a net liability position. If the Company had breached any of these provisions at September 30, ~~2017,~~2023, it could have been required to settle its obligations under the agreements at the termination value.

~~11.~~12. Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2017,~~2023, and December 31, 2022, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

Fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets and liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the hierarchy. In such cases, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2017~~2023 and December 31, ~~2016~~ 2022(in thousands):


	Fair Value Measurement at September 30, 2017								Fair Value Measurement at September 30, 2023
Description	September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		September 30, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
U.S. Treasury	$	25	$	25	$	—	$	—	$	878	$	878	$	—	$	—
U.S. Agencies		6,255		—		6,255		—		4,582		—		4,582		—
Mortgage-backed		2,555		—		2,555		—		480		—		480		—
State and political subdivisions		36,192		—		36,192		—		10,256		—		10,256		—
Corporates		3,294		3,294		—		—		8,046		8,046		—		—
Trading – other		12,339		11,766		573		—		267		267		—		—
Trading securities		60,660		15,085		45,575		—		24,509		9,191		15,318		—
U.S. Treasury		38,941		38,941		—		—		779,375		779,375		—		—
U.S. Agencies		14,757		—		14,757		—		173,350		—		173,350		—
Mortgage-backed		3,223,422		—		3,223,422		—		3,479,951		—		3,479,951		—
State and political subdivisions		2,553,264		—		2,553,264		—		1,206,656		—		1,206,656		—
Corporates		18,576		18,576		—		—		344,901		344,901		—		—
Available for sale securities		5,848,960		57,517		5,791,443		—
Collateralized loan obligations										346,466		—		346,466		—
Available-for-sale securities										6,330,699		1,124,276		5,206,423		—
Equity securities with readily determinable fair values										10,780		10,780		—		—
Company-owned life insurance		59,431		—		59,431		—		63,428		—		63,428		—
Bank-owned life insurance		264,741		—		264,741		—		520,344		—		520,344		—
Derivatives		11,794		—		11,794		—		144,310		—		144,310		—
Total	$	6,245,586	$	72,602	$	6,172,984	$	—	$	7,094,070	$	1,144,247	$	5,949,823	$	—
Liabilities
Deferred compensation	$	57,048	$	57,048	$	—	$	—
Derivatives		8,884		—		8,884		—	$	151,527	$	—	$	151,527	$	—
Securities sold not yet purchased		3,266		—		3,266		—		9,731		—		9,731		—
Total	$	69,198	$	57,048	$	12,150	$	—	$	161,258	$	—	$	161,258	$	—


	Fair Value Measurement at December 31, 2022
Description	December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
U.S. Treasury	$	580	$	580	$	—	$	—
U.S. Agencies		7,558		—		7,558		—
State and political subdivisions		8,038		—		8,038		—
Corporates		1,024		1,024		—		—
Trading – other		780		780		—		—
Trading securities		17,980		2,384		15,596		—
U.S. Treasury		777,070		777,070		—		—
U.S. Agencies		171,296		—		171,296		—
Mortgage-backed		3,982,122		—		3,982,122		—
State and political subdivisions		1,362,407		—		1,362,407		—
Corporates		367,500		367,500		—		—
Collateralized loan obligations		345,952		—		345,952		—
Available for sale securities		7,006,347		1,144,570		5,861,777		—
Equity securities with readily determinable fair values		10,782		10,782		—		—
Company-owned life insurance		56,769		—		56,769		—
Bank-owned life insurance		510,293		—		510,293		—
Derivatives		48,121		—		48,121		—
Total	$	7,650,292	$	1,157,736	$	6,492,556	$	—
Liabilities
Derivatives	$	126,334	$	—	$	126,334	$	—
Securities sold not yet purchased		3,503		—		3,503		—
Total	$	129,837	$	—	$	129,837	$	—

Fair Value Measurement at December 31, 2016

Description

December 31, 2016

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets

U.S. Treasury

$
—

$
—

$
—

$
—

U.S. Agencies

1,306

—

1,306

—

Mortgage-backed

313

—

313

—

State and political subdivisions

9,295

—

9,295

—

Trading – other

28,622

28,495

127

—

Trading securities

39,536

28,495

11,041

—

U.S. Treasury

93,826

93,826

—

—

U.S. Agencies

198,177

—

198,177

—

Mortgage-backed

3,711,699

—

3,711,699

—

State and political subdivisions

2,395,757

—

2,395,757

—

Corporates

66,875

66,875

—

—

Available for sale securities

6,466,334

160,701

6,305,633

—

Company-owned life insurance

41,333

—

41,333

—

Bank-owned life insurance

209,686

—

209,686

—

Derivatives

10,873

—

10,873

—

Total

$
6,767,762

$
189,196

$
6,578,566

$
—

Liabilities

Deferred compensation

$
42,797

$
42,797

$
—

$
—

Derivatives

11,329

—

11,329

—

Total

$
54,126

$
42,797

$
11,329

$
—

Valuation methods for instruments measured at fair value on a recurring basis

The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a recurring basis:

Trading Securities Fair values for trading securities (including financial futures), are based on quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices for similar securities.

Available-for-Sale Securities ~~Available for Sale~~ Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs. On an annual basis, the Company compares a sample of these prices to other independent sources for the same securities. Additionally, throughout the year, if securities are sold, comparisons are made between the pricing services prices and the market prices at which the securities were sold. Variances are analyzed, and, if appropriate, additional research is conducted with the third-party pricing services. Based on this research, the pricing services may affirm or revise their quoted price. No significant adjustments have been made to the prices provided by the pricing services. The pricing services also provide documentation on an ongoing basis that includes reference data, inputs and methodology by asset class, which is reviewed to ensure that security placement within the fair value hierarchy is appropriate.

Equity securities with readily determinable fair values Fair values are based on quoted market prices.

Company-owned Life Insurance Fair value is equal to the cash surrender value of the life insurance policies.

Bank-owned Life Insurance Fair value is equal to the cash surrender value of the life insurance policies.

Derivatives Fair values are determined using valuation techniques including discounted cash flow analysis on the expected cash flows from each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

~~Deferred Compensation~~ ~~Fair values are based on quoted market prices.~~

Securities sold not yet purchased Fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs.

Assets measured at fair value on a non-recurring basis as of September 30, ~~2017~~2023 and December 31, ~~2016~~ 2022(in thousands):


	Fair Value Measurement at September 30, 2017 Using										Fair Value Measurement at September 30, 2023 Using
Description	September 30, 2017		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, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses Recognized During the Nine Months Ended September 30
Impaired loans	$	17,971	$	—	$	—	$	17,971	$	4,749
Collateral dependent assets											$	5,347	$	—	$	—	$	5,347	$	(2,126	)
Other real estate owned		712		—		—		712		—		—		—		—		—		—
Total	$	18,683	$	—	$	—	$	18,683	$	4,749	$	5,347	$	—	$	—	$	5,347	$	(2,126	)


	Fair Value Measurement at December 31, 2022 Using
Description	December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses Recognized During the Twelve Months Ended December 31
Collateral dependent assets	$	4,373	$	—	$	—	$	4,373	$	(2,998	)
Other real estate owned		68		—		—		68		—
Total	$	4,441	$	—	$	—	$	4,441	$	(2,998	)

Fair Value Measurement at December 31, 2016 Using

Description

December 31, 2016

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 Twelve
Months Ended
December 31

Impaired loans

$
23,757

$
—

$
—

$
23,757

$
(2,070
)
Other real estate owned

89

—

—

89

—

Total

$
23,846

$
—

$
—

$
23,846

$
(2,070
)

Valuation methods for instruments measured at fair value on a ~~nonrecurring~~non-recurring basis

The following methods and assumptions were used to estimate the fair value of each class of financial instruments measured on a non-recurring basis:

~~Impaired loans~~ ~~While~~Collateral Dependent Assets Collateral dependent assets are assets evaluated as part of the ~~overall loan portfolio~~ACL on an individual basis. Those assets for which there is ~~not carried~~an associated allowance are considered financial assets measured at fair value ~~adjustments~~on a non-recurring basis. Adjustments are recorded on certain ~~loans~~assets to reflect write-downs that are based on the external appraised value of the underlying collateral. The external appraisals are generally based on recent sales of comparable properties which are then adjusted for the unique characteristics of the property being valued. In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise of

internal specialists within the Company’s property management group and the Company’s credit department. The ~~valuation~~valuations of the ~~impaired loans is~~ collateral dependent assets are

reviewed on a quarterly basis. Because many of these inputs are not observable, the measurements are classified as Level 3.

Other real estate owned Other real estate owned consists of loan collateral which has been repossessed through foreclosure. This collateral is comprised of commercial and residential real estate and other non-real estate property, including auto, recreational and marine vehicles. Other real estate owned is recorded as held for sale initially at the ~~lower of the loan balance or~~ fair value of the ~~collateral.~~collateral less estimated selling costs. The initial valuation of the foreclosed property is obtained through an appraisal process similar to the process described in the impaired loans paragraph above. Subsequent to foreclosure, valuations are reviewed quarterly and updated periodically, and the assets may be marked down further, reflecting a new cost basis. Fair value measurements may be based upon appraisals, third-party price opinions, or internally developed pricing methods and those measurements are classified as Level 3.

~~Goodwill~~ Valuation of goodwill to determine impairment is performed annually, or more frequently if there is an event or circumstance that would indicate impairment may have occurred. The process involves calculations to determine the fair value of each reporting unit on a stand-alone basis. A combination of formulas using current market multiples, based on recent sales of financial institutions within the Company’s geographic marketplace, is used to estimate the fair value of each reporting unit. That fair value is compared to the carrying amount of the reporting unit, including its recorded goodwill. Impairment is considered to have occurred if the fair value of the reporting unit is lower than the carrying amount of the reporting unit. The fair value of the Company’s common stock relative to its computed book value per share is also considered as part of the overall evaluation. These measurements are classified as Level 3.

Fair value disclosures require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.

The estimated fair value of the Company’s financial instruments at September 30, ~~2017~~2023 and December 31, ~~2016~~2022 are as follows (in thousands):


	Fair Value Measurement at September 30, 2017 Using										Fair Value Measurement at September 30, 2023 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Estimated Fair Value		Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Estimated Fair Value
FINANCIAL ASSETS
Cash and short-term investments	$	832,461	$	591,172	$	241,289	$	—	$	832,461	$	4,258,984	$	4,012,781	$	246,203	$	—	$	4,258,984
Securities available for sale		5,848,960		57,517		5,791,443		—		5,848,960		6,330,699		1,124,276		5,206,423		—		6,330,699
Securities held to maturity		1,276,252		—		1,181,747		—		1,181,747
Securities held to maturity (exclusive of allowance for credit losses)												5,732,583		—		4,856,466		—		4,856,466
Trading securities		60,660		15,085		45,575		—		60,660		24,509		9,191		15,318		—		24,509
Other securities		63,543		—		63,543		—		63,543		473,255		10,780		462,475		—		473,255
Loans (exclusive of allowance for loan loss)		11,001,553		—		11,052,253		—		11,052,253
Loans (exclusive of allowance for credit losses)												22,884,513		—		22,631,666		—		22,631,666
Derivatives		11,794		—		11,794		—		11,794		144,310		—		144,310		—		144,310
FINANCIAL LIABILITIES
Demand and savings deposits		14,875,196		14,875,196		—		—		14,875,196		30,088,499		30,088,499		—		—		30,088,499
Time deposits		1,124,408		—		1,124,408		—		1,124,408		3,343,253		—		3,343,253		—		3,343,253
Other borrowings		1,856,837		820,808		1,036,029		—		1,856,837		4,057,602		49,213		4,008,389		—		4,057,602
Long-term debt		76,071		—		76,330		—		76,330		382,768		—		411,792		—		411,792
Derivatives		8,884		—		8,884		—		8,884		151,527		—		151,527		—		151,527
OFF-BALANCE SHEET ARRANGEMENTS
Commitments to extend credit for loans										5,140										8,250
Commitments to extend resell agreements																				83
Commercial letters of credit										97										83
Standby letters of credit										1,887										3,112


	Fair Value Measurement at December 31, 2022 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Estimated Fair Value
FINANCIAL ASSETS
Cash and short-term investments	$	2,638,384	$	1,686,787	$	951,597	$	—	$	2,638,384
Securities available for sale		7,006,347		1,144,570		5,861,777		—		7,006,347
Securities held to maturity (exclusive of allowance for credit losses)		5,861,599		—		5,280,659		—		5,280,659
Trading securities		17,980		2,384		15,596		—		17,980
Other securities		349,758		10,782		338,976		—		349,758
Loans (exclusive of allowance for credit losses)		21,033,167		—		20,816,899		—		20,816,899
Derivatives		48,121		—		48,121		—		48,121
FINANCIAL LIABILITIES
Demand and savings deposits		31,721,995		31,721,995		—		—		31,721,995
Time deposits		917,138		—		917,138		—		917,138
Other borrowings		2,222,167		62,480		2,159,687		—		2,222,167
Long-term debt		381,311		—		418,737		—		418,737
Derivatives		126,334		—		126,334		—		126,334
OFF-BALANCE SHEET ARRANGEMENTS
Commitments to extend credit for loans										9,260
Commercial letters of credit										185
Standby letters of credit										3,982

Fair Value Measurement at December 31, 2016 Using

Carrying
Amount

Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total
Estimated
Fair Value

FINANCIAL ASSETS

Cash and short-term investments

$
1,462,267

$
1,138,850

$
323,417

$
—

$
1,462,267

Securities available for sale

6,466,334

160,701

6,305,633

—

6,466,334

Securities held to maturity

1,115,932

—

1,106,027

—

1,106,027

Trading securities

39,536

28,495

11,041

—

39,536

Other securities

68,306

—

68,306

—

68,306

Loans (exclusive of allowance for loan loss)

10,545,662

—

10,572,292

—

10,572,292

Derivatives

10,873

—

10,873

—

10,873

FINANCIAL LIABILITIES

Demand and savings deposits

15,434,893

15,434,893

—

—

15,434,893

Time deposits

1,135,721

—

1,135,721

—

1,135,721

Other borrowings

1,856,937

419,843

1,437,094

—

1,856,937

Long-term debt

76,772

—

77,025

—

77,025

Derivatives

11,329

—

11,329

—

11,329

OFF-BALANCE SHEET ARRANGEMENTS

Commitments to extend credit for loans

5,604

Commercial letters of credit

142

Standby letters of credit

2,527

Cash and short-term investments The carrying amounts of cash and due from banks, federal funds sold and resell agreements are reasonable estimates of their fair values.

Securities held to maturity ~~Fair~~For U.S. Agency and mortgage-backed securities, as well as general obligation bonds in the State and political subdivision portfolio, fair values are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Prices are provided by third-party pricing services and are based on observable market inputs. On an annual basis, the Company compares a sample of ~~held-to-maturity securities~~these prices to other independent sources for the same securities. Variances are analyzed, and, if appropriate, additional research is conducted with the third-party pricing services. Based on this research, the pricing services may affirm or revise their quoted price. No significant adjustments have been made to the prices provided by the pricing services. The pricing services also provide documentation on an ongoing basis that includes reference data, inputs and methodology by asset class, which is reviewed to ensure that security placement within the fair value hierarchy is appropriate. For private placement bonds in the State and political subdivision portfolio, fair values are estimated by discounting the future cash flows using current market rates.

Other securities Amount consists of FRB and FHLB stock held by the Company, ~~PCM~~equity securities with readily determinable fair values, and equity securities without readily determinable fair values, including equity-method investments and other miscellaneous investments. The carrying amount of the FRB and FHLB stock equals its fair value because the shares can only be redeemed by the FRB and FHLB at their carrying amount. ~~The~~Equity securities with readily determinable fair values are measured at fair value ~~of PCM marketable equity-method investments are based on~~using quoted market prices used to estimate the value of the underlying investment. For non-marketable equity-method investments, the Company’s proportionate share of the income or loss is recognized on a one-quarter lag based on the valuation of the underlying investment(s).prices. Equity securities without readily determinable fair values are carried at cost, which approximates fair value.

Loans Fair values are estimated for portfolios with similar financial characteristics. Loans are segregated by type, such as commercial, real estate, consumer, and credit card. Each loan category is further segmented into fixed and variable interest rate categories. The fair value of loans isare estimated by discounting the future cash ~~flows~~flows. The discount rates used are estimated using comparable market rates for similar types of instruments adjusted to be commensurate with the ~~current rates at which similar loans would be made to borrowers with similar~~ credit ~~ratings~~risk, overhead costs, and ~~for the same remaining maturities.~~optionality of such instruments.

Demand and savings deposits The fair value of demand deposits and savings accounts is the amount payable on demand at September 30, ~~2017~~2023 and December 31, ~~2016.~~2022.

Time deposits The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates that are currently offered for deposits of similar remaining maturities.

Other borrowings The carrying amounts of federal funds purchased, repurchase agreements and other short-term debt are reasonable estimates of their fair value because of the short-term nature of their maturities. Federal funds purchased are classified as Level 1 based on availability of quoted market prices and repurchase agreements and other short-term debt are classified as Level 2.

Long-term debt Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Other off-balance sheet instruments The fair value of loan commitments and letters of credit are determined based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present creditworthiness of the counterparties. Neither the fees earned during the year on these instruments nor their fair value at period-end are significant to the Company’s consolidated financial position.

~~12. Discontinued Operations~~56

On April 20, 2017, the Company announced the execution of an agreement to sell all of the outstanding stock of Scout, its institutional investment management subsidiary, for $172.5 million in cash, subject to customary purchase price adjustments at closing. The Company plans to use the proceeds from the transaction for general corporate purposes and to support its continued organic growth in the commercial, consumer, private wealth, institutional banking, healthcare, and asset servicing businesses.

This table summarizes the components of (loss) income from discontinued operations, net of taxes, for the three and nine months ended September 30, 2017 and September 30, 2016 presented in the Consolidated Statements of Income are as follows ~~(in thousands)~~:

For the Three Months Ended

For the Nine Months Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Total noninterest income

$
18,193

$
18,406

$
53,912

$
55,464

Total noninterest expense

19,223

14,572

54,634

46,672

(Loss) income from discontinued operations

(1,030
)

3,834

(722
)

8,792

Income tax (benefit) expense

(300
)

1,310

(247
)

3,159

Net (loss) income on discontinued operations

$
(730
)

$
2,524

$
(475
)

$
5,633

~~The discontinued assets of Scout included on the Consolidated Balance Sheets are as follows~~ ~~(in thousands)~~:

September 30,

December 31,

2017

2016

Goodwill

$
47,529

$
47,529

Other intangibles, net

6,214

7,861

Discontinued assets – goodwill and other intangibles, net

$
53,743

$
55,390

~~The components of net cash provided by operating activities of discontinued operations included in the Consolidated Statements of Cash Flows are as follows~~ ~~(in thousands)~~:

Nine Months

Ended September 30,

2017

2016

(Loss) income from discontinued operations

$
(475
)

$
5,633

Depreciation and amortization

1,647

2,719

Net cash provided by operating activities of discontinued operations

$
1,172

$
8,352

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations highlights the material changes in the results of operations and changes in financial condition of the Company for the ~~three-month~~three and ~~nine-month periods~~nine months ended September 30, ~~2017.~~2023. It should be read in conjunction with the accompanying ~~consolidated financial statements, notes~~Consolidated Financial Statements, Notes to ~~consolidated financial statements~~Consolidated Financial Statements and other financial information appearing elsewhere in this Form 10-Q and the Form 10-K. Results of operations for the periods included in this review are not necessarily indicative of results to be attained during any future period.

CAUTIONARY NOTICE ABOUT FORWARD-LOOKING STATEMENTS

From time to time the Company has made, and in the future will make, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast,” “target,” “trend,” “plan,” “goal,” or other words of comparable meaning or future-tense or conditional verbs such as “may,” “will,” “should,” “would,” or “could.” Forward-looking statements convey the Company’s expectations, intentions, or forecasts about future events, circumstances, results, or ~~aspirations.~~aspirations, in each case as of the date such forward-looking statements are made.

This ~~report,~~Form 10-Q, including any information incorporated by reference in this ~~report,~~Form 10-Q, contains forward-looking statements. The Company also may make forward-looking statements in other documents that are filed or furnished with the Securities and Exchange ~~Commission (SEC).~~Commission. In addition, the Company may make forward-looking statements orally or in writing to investors, analysts, members of the media, or others.

All forward-looking statements, by their nature, are subject to assumptions, risks, and uncertainties, which may change over time and many of which are beyond the Company’s control. You should not rely on any forward-looking statement as a prediction or guarantee about the future. Actual future objectives, strategies, plans, prospects, performance, conditions, or results may differ materially from those set forth in any forward-looking statement. While no list of assumptions, risks, or uncertainties could be complete, some of the factors that may cause actual results or other future events, circumstances, or aspirations to differ from those in forward-looking statements include:

•

local, regional, national, or international business, economic, or political conditions or events;

•

changes in laws or the regulatory environment, including as a result of financial-services legislation or regulation;

•

changes in monetary, fiscal, or trade laws or policies, including as a result of actions by central banks or supranational authorities;

•

changes in accounting standards or policies;

•

shifts in investor sentiment or behavior in the securities, capital, or other financial markets, including changes in market liquidity or volatility or changes in interest or currency rates;

•

changes in spending, borrowing, or saving by businesses or households;

•

the Company’s ability to effectively manage capital or liquidity or to effectively attract or deploy deposits;

•

changes in any credit rating assigned to the Company or its affiliates;

•

adverse publicity or other reputational harm to the Company;

•

changes in the Company’s corporate strategies, the composition of its assets, or the way in which it funds those assets;

•

the Company’s ability to develop, maintain, or market products or services or to absorb unanticipated costs or liabilities associated with those products or services;

•

the Company’s ability to innovate to anticipate the needs of current or future customers, to successfully compete in its chosen business lines, to increase or hold market share in changing competitive environments, or to deal with pricing or other competitive pressures;

•

changes in the credit, liquidity, or other condition of the Company’s customers, counterparties, or competitors;

•

the Company’s ability to effectively deal with economic, business, or market slowdowns or disruptions;

•

judicial, regulatory, or administrative investigations, proceedings, disputes, or rulings that create uncertainty for, or are adverse to, the Company or the financial-services industry;

•

the Company’s ability to address ~~stricter~~changing or ~~heightened~~stricter regulatory or other governmental supervision or requirements;

•

the Company’s ability to maintain secure and functional financial, accounting, technology, data processing, or other operating systems or facilities, including its capacity to withstand cyber-attacks;

•

the adequacy of the Company’s corporate governance, risk-management framework, compliance programs, or internal controls, including its ability to control lapses or deficiencies in financial reporting or to effectively mitigate or manage operational risk;

•

the efficacy of the Company’s methods or models in assessing business strategies or opportunities or in valuing, measuring, monitoring, or managing positions or risk;

•

the Company’s ability to keep pace with changes in technology that affect the Company or its customers, counterparties, or competitors;

•

mergers, acquisitions, or dispositions, including the Company’s ability to integrate acquisitions and divest assets;

•

the adequacy of the Company’s succession planning for key executives or other personnel;

•

the Company’s ability to grow revenue, control expenses, or attract and retain qualified employees;

•

natural disasters, war or ~~man-made disasters, calamities, or conflicts,~~terrorist activities, including ~~terrorist events; or~~

instability in the Middle East and Russia's military action in Ukraine, pandemics, and their effects on economic and business environments in which the Company operates;

•

macroeconomic and adverse developments and uncertainties related to the collateral effects of the collapse of, and challenges for, domestic and international banks, including the impacts to the U.S. and global economies; or

•

other assumptions, risks, or uncertainties described in the Notes to Consolidated Financial Statements (Item 1) and Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 2) in this Form 10-Q, in the Risk Factors (Item 1A) in the Form 10-K, or in any of the Company’s quarterly or current reports.

Any forward-looking statement made by the Company or on its behalf speaks only as of the date that it was made. The Company does not undertake to update any forward-looking statement to reflect the impact of events, circumstances, or results that arise after the date that the statement was made, except ~~to the extent~~as required by applicable securities laws. You, however, should consult further disclosures (including disclosures of a forward-looking nature) that the Company ~~makes~~may make in any subsequent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, or Current Report on Form 8-K.

Overview

The rapid rise in interest rates during 2022 and in the first nine months of 2023, the resulting industry-wide reduction in the fair value of securities portfolios, and the recent bank runs that led to the failures of some financial institutions in March of 2023, among other events, have resulted in a current state of volatility and uncertainty with respect to the health of the U.S. banking system. There is heightened awareness around liquidity, uninsured deposits,

deposit composition, unrecognized investment losses, and capital. See further discussion around these items in the remaining sections of the Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Company focuses on the following four core ~~strategic~~financial objectives. Management believes these ~~strategies~~objectives will guide ~~our~~its efforts to achieve ~~our~~its vision, to deliver the ~~unparalleled customer experience,~~ Unparalleled Customer Experience, all while ~~maintaining a focus~~seeking to improve net income and strengthen the balance ~~sheet.~~sheet while undertaking prudent risk management.

The first ~~strategic~~financial objective is ~~a focus on improving~~to continuously improve operating efficiencies. The Company has focused on identifying efficiencies that simplify our organizational and reporting structures, streamline ~~back office~~back-office functions, and take advantage of synergies and newer technologies among various platforms and distribution networks. The Company has identified and expects to continue identifying ongoing efficiencies through the normal course of business that, when combined with increased revenue, will contribute to improved operating leverage. During the third quarter of ~~2017,~~2023, total revenue ~~increased 7.4 percent~~decreased $6.6 million, or 1.8%, as compared to the third quarter of ~~2016,~~2022, while noninterest

expense ~~increased 4.0 percent.~~was flat for the same period. As part of ~~this~~the initiative to improve operating efficiencies, the Company continues to invest in technological advances that it believes will help management drive operating leverage in the future through improved data analysis and automation. The Company also continues to evaluate core systems and will invest in enhancements that it believes will yield operating efficiencies.

The second ~~strategic~~financial objective is ~~a focus on~~to increase net interest income through profitable loan and deposit growth and the optimization of the balance sheet. During the third quarter of ~~2017,~~2023, the Company ~~continued to make progress on this strategy as illustrated by an increase~~had a decrease in net interest income of ~~$16.1~~$11.2 million, or ~~12.9 percent,~~4.8%, from the same period in ~~2016.~~2022. The ~~Company has shown increased~~change in net interest income ~~through~~was driven by higher interest expense due to an unfavorable mix shift in the ~~effects~~composition of liabilities, partially offset by increased ~~rates, volume and mix of average earning assets and a low cost of funds in its Consolidated Balance Sheets. Average~~ loan ~~balances increased $729.3 million, or 7.2 percent~~growth. These changes are driven by the higher interest rate environment compared to the ~~same period~~third quarter of 2022. The increase in ~~2016.~~interest income was driven by a $3.5 billion, or 18.0% increase in average loans, driven by organic loan growth, coupled with the impact of higher short-term and long-term interest rates. The funding for these assets was driven primarily by a ~~4.1 percent~~25.0% increase in average interest-bearing ~~liabilities.~~liabilities, including an increase in average borrowed funds of $2.3 billion compared to the same period in 2022. Net interest margin, on a tax-equivalent basis, ~~increased 29~~decreased 33 basis points compared to the same period in ~~2016.~~2022, primarily due to increased cost and mix of interest-bearing liabilities, partially offset by increased loan volumes, repricing of earning assets, and the benefit of interest free funds. Net interest spread contracted by 99 basis points during the same period. The Company expects to see continued volatility in the economic markets resulting from governmental responses to inflation and recessionary signs in the economy. These changing conditions could have impacts on the balance sheet and income statement of the Company for the remainder of the year.

The third ~~strategic~~financial objective is to grow the Company’s revenue from noninterest sources. The Company ~~has continued~~seeks to ~~emphasize its diverse operations~~grow noninterest revenues throughout all economic ~~cycles. This strategy has provided revenue diversity, helped to reduce the impact of sustained low~~and interest ~~rates and positioned the Company~~rate cycles, while positioning itself to benefit in periods of economic growth. Noninterest income increased ~~$0.8~~$4.6 million, or ~~0.7 percent,~~3.6%, to ~~$104.3~~$133.3 million for the three months ended September 30, ~~2017,~~2023, compared to the same period in ~~2016. This change is discussed in~~2022. See greater detail below under Noninterest Income. The Company continues to emphasize its asset management, brokerage, bankcard services, healthcare services, and treasury management businesses. AtFor the three months ended September 30, ~~2017,~~2023, noninterest income represented ~~42.5 percent~~37.5% of total ~~revenues,~~revenue, compared to ~~45.4 percent at September 30, 2016.~~35.5% for the same period in 2022. The recent economic changes have impacted fee income, especially those with assets tied to market values and interest rates.

The fourth ~~strategic~~financial objective is ~~a focus on~~effective capital management. The Company places a significant emphasis on maintaining a strong capital position, which management believes promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities. The Company continues to maximize shareholder value through a mix of reinvesting in organic growth, evaluating acquisition opportunities that complement the Company’s strategies, increasing dividends over time, and ~~properly~~appropriately utilizing a share repurchase program. At September 30, ~~2017,~~2023, the Company had ~~$2.1~~$2.8 billion in total shareholders’ equity. This is an increase of ~~$76.9~~$283.1 million, or ~~3.8 percent,~~11.2%, compared to total shareholders’ equity at September 30, ~~2016.~~2022. At September 30, ~~2017,~~2023, the Company had a total risk-based capital ratio of ~~13.26 percent.~~12.68%. The Company ~~repurchased 148,398~~did not repurchase shares of common stock ~~at an average price of $67.99 per share~~ during the third quarter of ~~2017.~~2023.

Earnings Summary

The following is a summary regarding the Company’s earnings for the third quarter of ~~2017.~~2023. The changes identified in the summary are explained in greater detail below. The Company recorded net income ~~from continuing operations~~ of ~~$48.9~~$96.6 million for the three-month period ended September 30, ~~2017,~~2023, compared to ~~$39.4~~net income of $88.0 million for the same period a year earlier. ~~This represents a 24.0 percent increase over the three-month period ended September 30, 2016.~~ Basic earnings per share ~~from continuing operations~~ for the third quarter of ~~2017 was $0.99~~2023 were $1.99 per share ($~~0.98~~1.98 per share fully-diluted) compared to ~~$0.81~~$1.82 per share ($~~0.80~~1.81 per share fully-diluted) for the third quarter of ~~2016.~~2022. Return on average assets and return on average common shareholders’ equity for the three-month period ended September 30, ~~2017~~2023 were ~~0.95~~0.97% and ~~9.17 percent,~~13.25%, respectively, compared to ~~0.80~~0.96% and ~~7.76 percent,~~12.90%, respectively, for the three-month period ended September 30, ~~2016.~~ 2022.

The Company recorded net income ~~from continuing operations~~ of ~~$135.6~~$279.1 million for the nine-month period ended September 30, ~~2017,~~2023, compared to ~~$110.2~~net income of $331.5 million for the same period a year earlier. ~~This represents a 23.0 percent increase over the nine-month period ended September 30, 2016.~~ Basic earnings per share for the nine-month period ended September 30, ~~2017~~2023 were ~~$2.76~~$5.76 per share ($~~2.72~~5.73 per share fully-diluted) compared to ~~$2.26~~$6.86 per share ($~~2.24~~6.80 per share fully-diluted) for the same period in ~~2016.~~2022. Return on average assets and return on average common shareholders’ equity for the nine-month period ended September 30, ~~2017~~2023 were ~~0.89~~0.95% and ~~8.82 percent,~~13.18%, respectively, compared to ~~0.76~~1.18% and ~~7.43 percent~~16.05%, respectively, for the ~~same~~nine-month period ~~in 2016.~~ended September 30, 2022.

Net interest income for the three and nine-month periods ended September 30, ~~2017 increased $16.1~~2023 decreased $11.2 million, or ~~12.9 percent,~~4.8%, and ~~$48.7~~increased $21.0 million, or ~~13.4 percent,~~3.1%, respectively, compared to the same periods in ~~2016.~~2022. For the

three-month period ended September 30, ~~2017,~~2023, average earning assets increased by ~~$572.4 million,~~$2.9 billion, or ~~3.1 percent,~~8.5%, and for the nine-month period ended September 30, ~~2017,~~2023, they increased by ~~$754.2 million,~~$1.5 billion, or ~~4.2 percent,~~4.2%, compared to the same periods in ~~2016.~~2022. Net interest margin, on a tax-equivalent basis, ~~increased~~decreased to ~~3.16 percent~~2.43% and ~~3.12 percent~~to 2.54% for the three and nine-month periods ended September 30, ~~2017,~~2023, respectively, compared to ~~2.87 percent~~2.76% and ~~2.84 percent~~2.56% for the same periods in ~~2016.~~2022.

The provision for ~~loan~~credit losses decreased by ~~$1.5 million to $11.5~~$17.0 million for the three-month period ended September 30, ~~2017,~~2023 and increased by ~~$10.0 million to $35.0~~$12.3 million for the nine-month period ended September 30, ~~2017,~~2023, as compared to the same periods in ~~2016.~~2022. These changes ~~are~~were driven by loan growth, portfolio credit metric changes, and changes in macro-economic metrics in the ~~result of applying~~current period as compared to the ~~Company’s methodology for computing the allowance for loan losses.~~prior periods. The Company’s nonperforming loans decreased ~~$25.4~~$2.8 million to ~~$54.2~~$17.0 million at September 30, ~~2017,~~2023, compared to September 30, ~~2016, and decreased $16.0 million, compared to December 31, 2016.~~2022. The ~~allowance for loan losses~~ACL on loans as a percentage of total loans increased to ~~0.89 percent~~0.97% as of September 30, ~~2017,~~2023, compared to ~~0.88 percent~~0.93% at September 30, ~~2016.~~2022. For a description of the Company’s methodology for computing the ~~allowance for loan losses,~~ACL, please see the summary discussion ofin the “Provision and Allowance for ~~Loan Losses within the Critical Accounting Policies and Estimates subsection of the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K.~~Credit Losses” section included below.

Noninterest income increased by ~~$0.8~~$4.6 million, or ~~0.7 percent,~~3.6%, for the three-month period ended September 30, ~~2017,~~2023, and ~~increased~~decreased by ~~$13.2~~$27.1 million, or ~~4.4 percent,~~6.3%, for the nine-month period ended September 30, ~~2017,~~2023, compared to the same periods in ~~2016.~~2022. These changes are discussed in greater detail below under Noninterest Income.

Noninterest expense ~~increased by $6.6 million, or 4.0 percent,~~was flat for the three-month period ended September 30, ~~2017,~~2023, and increased by ~~$23.7~~$48.9 million, or ~~4.7 percent,~~7.4%, for the nine-month period ended September 30, ~~2017,~~2023, compared to the same periods in ~~2016.~~2022. These changes are discussed in greater detail below under Noninterest Expense.

Net Interest Income

Net interest income is a significant source of the Company’s earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities. The volume of interest-earning assets and the related funding sources, the overall mix of these assets and liabilities, and the rates paid on each affect net interest income. Net interest income for the three and nine-month periods ended September 30, ~~2017 increased $16.1~~2023 decreased $11.2 million, or ~~12.9 percent,~~4.8%, and ~~$48.7~~increased $21.0 million, or ~~13.4 percent, respectively,~~3.1%, compared to the same periods in ~~2016.~~ 2022.

Table 1 shows the impact of earning asset rate changes compared to changes in the cost of interest-bearing liabilities. As illustrated in this table, net interest spread ~~and~~for the three months ended September 30, 2023 decreased 99 basis points as compared to the same period in 2022. Net interest margin for the three months ended September 30, ~~2017 increased by 19 and 29~~2023 decreased 33 basis points ~~respectively,~~ compared to the same period in ~~2016.~~2022. Net interest spread ~~and margin~~ for the ~~nine months~~nine-month period ended September 30, ~~2017 increased~~2023 decreased by ~~21 and 28~~88 basis points ~~respectively,~~as compared to the same period in ~~2016. These increases~~2022. Net interest margin for the nine-month period ended September 30, 2023 decreased by two basis points compared to the

same period in 2022. The changes are primarily due to ~~favorable interest rate~~increased cost and ~~volume variances on loans. These interest rate variances have led to an increase in interest income~~mix of interest-bearing liabilities, partially offset by ~~an increase in~~increased loan volumes, repricing of earning assets, and the benefit of interest ~~expense, resulting in an increase~~free funds. The impact of the increased cost and mix of interest-bearing liabilities had a significant impact in the ~~Company’s net interest income during 2017 as compared to results~~third quarter of 2023. The cost of interest-bearing liabilities increased 254 basis points from the third quarter of 2023 and 281 basis points for the ~~same periods~~nine-month period ended September 30, 2023. Earning asset balance increases have been primarily driven by higher average loan balances. The Company expects to see continued volatility in ~~2016.~~the economic markets and governmental responses to changes in the economy. These changing conditions could have impacts on the balance sheet and income statement of the Company the remainder of the year. For the impact of the contribution from free funds, see the Analysis of Net Interest Margin within Table 2 below. Table 2 also illustrates how the changes in volume and interest rates have resulted in an increase in net interest income.

Table 1

AVERAGE ~~BALANCES/~~BALANCE SHEETS/YIELDS AND RATES(tax-equivalent basis) (unaudited, dollars in thousands)

The following table presents, for the periods indicated, the average earning assets and resulting yields, as well as the average interest-bearing liabilities and resulting yields, expressed in both dollars and rates. All average balances are daily average balances. The average yield on earning assets without the ~~tax equivalent~~tax-equivalent basis adjustment would have been ~~3.31 percent~~5.01% for the three-month period ended September 30, ~~2017~~2023, and ~~2.86 percent~~3.46% for the same period in ~~2016.~~2022. The average yield on earning assets without the ~~tax equivalent~~tax-equivalent basis adjustment would have been ~~3.21 percent~~4.80% for the nine-month period ended September 30, ~~2017~~2023, and ~~2.83 percent~~2.87% for the same period in ~~2016.~~2022.

	Three Months Ended September 30,
	2017						2016						Three Months Ended September 30,
	Average			Average			Average			Average			2023						2022
	Balance			Yield/Rate			Balance			Yield/Rate			Average			Average			Average			Average
Assets
													Balance			Yield/Rate			Balance			Yield/Rate
ASSETS
Loans, net of unearned interest	$	10,911,154			4.33	%	$	10,181,819			3.86	%	$	22,751,467			6.41	%	$	19,284,262			4.46	%
Securities:
Taxable		3,794,074			1.85			4,449,485			1.52			8,964,467			2.37			9,796,212			2.03
Tax-exempt		3,746,540			3.06			3,158,966			2.86			3,783,890			3.37			3,885,333			3.18
Total securities		7,540,614			2.46			7,608,451			2.08			12,748,357			2.66			13,681,545			2.35
Federal funds and resell agreements		190,036			2.10			217,287			1.45			303,864			5.96			848,844			2.83
Interest-bearing due from banks		254,702			1.17			314,619			0.56			1,548,867			5.26			632,595			1.60
Other earning assets		49,396			3.95			51,280			1.75			17,327			5.31			5,651			5.69
Total earning assets		18,945,902			3.52			18,373,456			3.03			37,369,882			5.08			34,452,897			3.53
Allowance for loan losses		(99,954	)					(86,368	)
Allowance for credit losses														(227,878	)					(167,939	)
Other assets		1,467,273						1,405,152						2,381,496						2,025,193
Total assets	$	20,313,221					$	19,692,240					$	39,523,500					$	36,310,151
Liabilities and Shareholders' Equity
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits	$	9,951,600			0.41	%	$	9,431,253			0.20	%	$	21,315,761			3.57	%	$	17,403,199			1.10	%
Federal funds and repurchase agreements		2,234,666			1.03			2,261,863			0.33			2,027,382			4.52			3,055,164			1.91
Borrowed funds		76,159			5.44			82,340			3.64			2,605,897			5.28			294,739			4.96
Total interest-bearing liabilities		12,262,425			0.55			11,775,456			0.25			25,949,040			3.82			20,753,102			1.28
Noninterest-bearing demand deposits		5,728,145						5,690,838						10,014,686						12,394,251
Other liabilities		207,417						203,953						667,920						456,992
Shareholders' equity		2,115,234						2,021,993						2,891,854						2,705,806
Total liabilities and shareholders' equity	$	20,313,221					$	19,692,240					$	39,523,500					$	36,310,151
Net interest spread					2.97	%					2.78	%					1.26	%					2.25	%
Net interest margin					3.16						2.87						2.43						2.76

Nine Months Ended September 30,

2017

2016

Average

Average

Average

Average

Balance

Yield/Rate

Balance

Yield/Rate

Assets

Loans, net of unearned interest

$
10,762,401

4.20
%

$
9,874,298

3.83
%
Securities:

Taxable

3,995,441

1.85

4,650,111

1.59

Tax-exempt

3,625,727

3.07

2,984,538

2.85

Total securities

7,621,168

2.43

7,634,649

2.08

Federal funds and resell agreements

192,817

1.83

181,854

1.42

Interest-bearing due from banks

271,799

0.93

425,155

0.56

Other earning assets

61,604

3.06

39,588

1.70

Total earning assets

18,909,789

3.42

18,155,544

2.99

Allowance for loan losses

(96,181
)

(82,975
)

Other assets

1,474,177

1,415,325

Total assets

$
20,287,785

$
19,487,894

Liabilities and Shareholders' Equity

Interest-bearing deposits

$
9,777,717

0.33
%

$
9,392,435

0.18
%
Federal funds and repurchase agreements

2,321,144

0.82

2,041,369

0.31

Borrowed funds

76,192

5.22

88,621

3.90

Total interest-bearing liabilities

12,175,053

0.45

11,522,425

0.23

Noninterest-bearing demand deposits

5,853,905

5,809,398

Other liabilities

203,037

174,873

Shareholders' equity

2,055,790

1,981,198

Total liabilities and shareholders' equity

$
20,287,785

$
19,487,894

Net interest spread

2.97
%

2.76
%
Net interest margin

3.12

2.84


	Nine Months Ended September 30,
	2023						2022
	Average			Average			Average			Average
	Balance			Yield/Rate			Balance			Yield/Rate
ASSETS
Loans, net of unearned interest	$	22,076,977			6.17	%	$	18,328,139			3.91	%
Securities:
Taxable		9,179,230			2.35			9,695,499			1.94
Tax-exempt		3,816,122			3.36			3,912,590			3.11
Total securities		12,995,352			2.64			13,608,089			2.28
Federal funds and resell agreements		343,297			5.49			1,070,319			1.50
Interest-bearing due from banks		1,935,029			4.90			2,841,510			0.43
Other earning assets		13,071			5.56			12,170			4.86
Total earning assets		37,363,726			4.87			35,860,227			2.94
Allowance for credit losses		(213,744	)					(182,647	)
Other assets		2,322,171						1,988,189
Total assets	$	39,472,153					$	37,665,769
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits	$	20,638,982			3.18	%	$	17,775,016			0.53	%
Federal funds and repurchase agreements		2,273,826			4.18			2,896,021			1.01
Borrowed funds		2,319,652			5.25			279,659			4.85
Total interest-bearing liabilities		25,232,460			3.46			20,950,696			0.65
Noninterest-bearing demand deposits		10,816,120						13,537,023
Other liabilities		591,919						416,492
Shareholders' equity		2,831,654						2,761,558
Total liabilities and shareholders' equity	$	39,472,153					$	37,665,769
Net interest spread					1.41	%					2.29	%
Net interest margin					2.54						2.56

Table 2 presents the dollar amount of change in net interest income and margin due to volume and rate. Table 2 also reflects the effect that interest-free funds have on net interest margin. The average balance of interest-free funds (total earning assets less interest-bearing liabilities) ~~increased $85.5 million~~decreased $2.3 billion and $2.8 billion for the ~~three-month period~~three and ~~$101.6 million for the~~ nine-month ~~period~~periods ended September 30, ~~2017~~2023, respectively, compared to the same periods in ~~2016.~~2022. The benefit from ~~interest free~~interest-free funds increased ~~by ten~~66 and 86 basis points in the ~~three-month~~three and ~~seven basis points~~nine-month periods ended September 30, 2023, respectively, compared to the same periods in ~~the nine-month periods~~2022, primarily due to increased ~~yields on earning assets, offset by an increase in~~short-term interest ~~rates of interest-bearing liabilities.~~rates.

Table 2

ANALYSIS OF CHANGES IN NET INTEREST INCOME AND MARGIN(unaudited, dollars in thousands)

ANALYSIS OF CHANGES IN NET INTEREST INCOME


	Three Months Ended							Nine Months Ended							Three Months Ended									Nine Months Ended
	September 30, 2017 and 2016							September 30, 2017 and 2016							September 30, 2023 and 2022									September 30, 2023 and 2022
	Volume			Rate		Total		Volume			Rate		Total		Volume			Rate			Total			Volume			Rate		Total
Change in interest earned on:
Loans	$	7,519		$	12,793	$	20,312	$	26,522		$	28,581	$	55,103	$	43,972		$	106,543		$	150,515		$	126,254		$	356,307	$	482,561
Securities:
Taxable		(2,715	)		3,423		708		(8,385	)		8,515		130		(4,485	)		7,937			3,452			(7,809	)		28,220		20,411
Tax-exempt		2,973			1,123		4,096		9,476			3,519		12,995		(844	)		1,856			1,012			(2,392	)		6,867		4,475
Federal funds sold and resell agreements		(108	)		326		218		122			577		699		(5,468	)		3,979			(1,489	)		(12,566	)		14,670		2,104
Interest-bearing due from banks		(99	)		407		308		(789	)		901		112		6,961			11,045			18,006			(3,847	)		65,561		61,714
Trading		(10	)		225		215		303			433		736		147			(6	)		141			44			86		130
Interest income		7,560			18,297		25,857		27,249			42,526		69,775		40,283			131,354			171,637			99,684			471,711		571,395
Change in interest incurred on:
Interest-bearing deposits		270			5,285		5,555		545			10,620		11,165		13,119			130,343			143,462			13,053			407,246		420,299
Federal funds purchased and repurchase agreements		(23	)		3,940		3,917		732			8,792		9,524		(6,283	)		14,650			8,367			(5,639	)		54,907		49,268
Other borrowed funds		(60	)		352		292		(399	)		785		386		30,755			251			31,006			79,979			886		80,865
Interest expense		187			9,577		9,764		878			20,197		21,075		37,591			145,244			182,835			87,393			463,039		550,432
Net interest income	$	7,373		$	8,720	$	16,093	$	26,371		$	22,329	$	48,700	$	2,692		$	(13,890	)	$	(11,198	)	$	12,291		$	8,672	$	20,963

ANALYSIS OF NET INTEREST MARGIN


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended September 30,									Nine Months Ended September 30,
	2017			2016			Change			2017			2016			Change			2023			2022			Change			2023			2022			Change
Average earning assets	$	18,945,902		$	18,373,456		$	572,446		$	18,909,789		$	18,155,544		$	754,245		$	37,369,882		$	34,452,897		$	2,916,985		$	37,363,726		$	35,860,227		$	1,503,499
Interest-bearing liabilities		12,262,425			11,775,456			486,969			12,175,053			11,522,425			652,628			25,949,040			20,753,102			5,195,938			25,232,460			20,950,696			4,281,764
Interest-free funds	$	6,683,477		$	6,598,000		$	85,477		$	6,734,736		$	6,633,119		$	101,617		$	11,420,842		$	13,699,795		$	(2,278,953	)	$	12,131,266		$	14,909,531		$	(2,778,265	)
Free funds ratio (free funds to earning assets)		35.28	%		35.91	%		(0.63	)%		35.62	%		36.53	%		(0.91	)%
Free funds ratio (interest free funds to average earning assets)																				30.56	%		39.76	%		(9.20	)%		32.47	%		41.58	%		(9.11	)%
Tax-equivalent yield on earning assets		3.52			3.03			0.49			3.42			2.99			0.43			5.08			3.53			1.55			4.87			2.94			1.93
Cost of interest-bearing liabilities		0.55			0.25			0.30			0.45			0.23			0.22			3.82			1.28			2.54			3.46			0.65			2.81
Net interest spread		2.97			2.78			0.19			2.97			2.76			0.21			1.26			2.25			(0.99	)		1.41			2.29			(0.88	)
Benefit of interest-free funds		0.19			0.09			0.10			0.15			0.08			0.07			1.17			0.51			0.66			1.13			0.27			0.86
Net interest margin		3.16			2.87			0.29			3.12			2.84			0.28			2.43	%		2.76	%		(0.33	)%		2.54	%		2.56	%		(0.02	)%

Provision and Allowance for ~~Loan~~Credit Losses

The ~~allowance for loan losses (ALL)~~ACL represents management’s judgment of the total expected losses ~~inherent~~included in the Company’s loan portfolio as of the balance sheet date. ~~An analysis~~The Company’s process for recording the ACL is ~~performed quarterly to determine~~based on the ~~appropriate balance~~evaluation of the ~~ALL. This analysis considers items such as~~Company’s lifetime historical loss ~~trends,~~experience, management’s understanding of the credit quality inherent in the loan portfolio, and the impact of the current economic environment, coupled with reasonable and supportable economic forecasts.

A mathematical calculation of an estimate is made to assist in determining the adequacy and reasonableness of management’s recorded ACL. To develop the estimate, the Company follows the guidelines in ASC Topic 326,

Financial Instruments – Credit Losses. The estimate reserves for assets held at amortized cost and any related credit deterioration in the Company’s available-for-sale debt security portfolio. Assets held at amortized cost include the Company’s loan book and held-to-maturity security portfolio.

The process involves the consideration of quantitative and qualitative factors relevant to the specific segmentation of loans. These factors have been established over decades of financial institution experience and include economic observation and loan loss characteristics. This process is designed to produce a ~~review~~lifetime estimate of ~~individual loans, migration analysis,~~the losses, at a reporting date, that includes evaluation of historical loss experience, current economic conditions, reasonable and supportable forecasts, and the qualitative framework outlined by the Office of the Comptroller of the Currency in the published 2020 Interagency Policy Statement. This process allows management to take a holistic view of the recorded ACL reserve and ensure that all significant and pertinent information is considered.

The Company considers a variety of factors to ensure the safety and soundness of its estimate including a strong internal control framework, extensive methodology documentation, credit underwriting standards which encompass the Company’s desired risk profile, model validation, and ratio analysis. If the Company’s total ACL estimate, as determined in accordance with the approved ACL methodology, is either outside a reasonable range based on review of economic indicators or by comparison of historical ratio analysis, the ACL estimate is an outlier and management will investigate the underlying reason(s). Based on that investigation, issues or factors that previously had not been considered may be identified in the estimation process, which may warrant adjustments to estimated credit losses.

The ending result of this process is a recorded consolidated ACL that represents management’s best estimate of the total expected losses included in the loan ~~growth~~portfolio, held-to-maturity securities, and characteristics, industry or segment concentration and other factors. After the balance sheet analysis is performed for the ALL, the provision for loan losses is computed as the amount required to adjust the ALL to the appropriate level.credit deterioration in available-for-sale securities.

Based on the factors above, management of the Company recorded ~~$11.5 million and $35.0~~$5.0 million as provision for ~~loan~~credit losses for the ~~three and nine-month periods~~three-month period ended September 30, ~~2017,~~2023, as compared to ~~$13.0 million and $25.0~~$22.0 million for the same ~~periods~~period in ~~2016, respectively.~~2022. For the nine-month period ended September 30, 2023, management of the Company recorded $41.2 million as provision for credit losses, as compared to $28.9 million for the same period in 2022. These changes are the result of applying the methodology for computing the ACL, coupled with the impacts of the current and forecasted economic environment. As illustrated in Table 3 below, the ~~ALL~~ACL on loans increased to

~~0.89 percent~~ 0.97% of total loans as of September 30, ~~2017,~~2023, compared to ~~0.88 percent~~0.93% of total loans as of ~~the same period in 2016.~~ September 30, 2022.

Table 3 presents a summary of the Company’s ~~ALL~~ACL for the ~~nine months~~nine-month periods ended September 30, ~~2017~~2023 and ~~2016,~~2022, and for the year ended December 31, ~~2016.~~2022. Net charge-offs were ~~$28.3~~$9.1 million for the ~~nine months~~nine-month period ended September 30, ~~2017,~~2023, compared to ~~$15.7~~$37.7 million for the same period in ~~2016.~~2022. See “Credit Risk Management” under “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this report for information relating to nonaccrual loans, past due loans, restructured loans and other credit risk matters.

Table 3

ANALYSIS OF ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES (unaudited, dollars in thousands)

Nine Months Ended

Year Ended

September 30,

December 31,

2017

2016

2016

Allowance-January 1

$
91,649

$
81,143

$
81,143

Provision for loan losses

35,000

25,000

32,500

Charge-offs:

Commercial

(24,734
)

(11,542
)

(12,788
)
Consumer:

Credit card

(6,753
)

(6,348
)

(8,436
)
Other

(689
)

(603
)

(843
)
Real estate

(888
)

(2,938
)

(6,756
)
Total charge-offs

(33,064
)

(21,431
)

(28,823
)
Recoveries:

Commercial

2,519

3,477

3,596

Consumer:

Credit card

1,224

1,334

1,730

Other

441

341

518

Real estate

620

540

985

Total recoveries

4,804

5,692

6,829

Net charge-offs

(28,260
)

(15,739
)

(21,994
)
Allowance-end of period

$
98,389

$
90,404

$
91,649

Average loans, net of unearned interest

$
10,760,079

$
9,868,033

$
9,986,151

Loans at end of period, net of unearned interest

10,997,028

10,293,494

10,540,383

Allowance to loans at end of period

0.89
%

0.88
%

0.87
%
Allowance as a multiple of net charge-offs

2.60x

4.30x

4.17x

Net charge-offs to:

Provision for loan losses

80.74
%

62.96
%

67.67
%
Average loans

0.35

0.21

0.22


	Nine Months Ended						Year Ended
	September 30,						December 31,
	2023			2022			2022
Allowance – January 1	$	194,243		$	196,711		$	196,711
Provision for credit losses		39,227			28,400			37,400
Charge-offs:
Commercial and industrial		(4,727	)		(36,217	)		(37,269	)
Specialty lending		(762	)		—			—
Commercial real estate		(21	)		—			(29	)
Consumer real estate		(1,153	)		(57	)		(57	)
Consumer		(934	)		(560	)		(800	)
Credit cards		(6,181	)		(4,785	)		(6,150	)
Leases and other		—			—			—
Total charge-offs		(13,778	)		(41,619	)		(44,305	)
Recoveries:
Commercial and industrial		3,331			1,419			1,550
Specialty lending		1			430			433
Commercial real estate		21			385			385
Consumer real estate		24			121			131
Consumer		154			89			126
Credit cards		1,125			1,496			1,812
Leases and other		—			—			—
Total recoveries		4,656			3,940			4,437
Net charge-offs		(9,122	)		(37,679	)		(39,868	)
Allowance for credit losses – end of period	$	224,348		$	187,432		$	194,243
Allowance for credit losses on loans	$	221,462		$	184,913		$	191,836
Allowance for credit losses on held-to-maturity securities		2,886			2,519			2,407
Loans at end of period, net of unearned interest		22,881,689			19,883,573			21,031,189
Held-to-maturity securities at end of period		5,732,583			5,837,706			5,861,599
Total assets at amortized cost		28,614,272			25,721,279			26,892,788
Average loans, net of unearned interest		22,074,844			18,326,871			18,822,416
Allowance for credit losses on loans to loans at end of period		0.97	%		0.93	%		0.91	%
Allowance for credit losses – end of period to total assets at amortized cost		0.78	%		0.73	%		0.72	%
Allowance as a multiple of net charge-offs	18.40x			3.72x			4.87x
Net charge-offs to average loans		0.06	%		0.27	%		0.21	%

Noninterest Income

A key objective of the Company is the growth of noninterest income to ~~enhance profitability and~~ provide ~~steady income. This income is~~a diverse source of revenue not directly tied to interest rates. Fee-based services are typically non-credit related and are not generally affected by fluctuations in interest rates.

The ~~Company’s noninterest income provides the opportunity to offer~~Company offers multiple fee-based products and services, which management believes will more closely align ~~the~~with customer ~~with the Company.~~demands. The Company ~~generates noninterest income from~~is currently emphasizing fee-based products and services including trust and securities processing, bankcard, securities trading and brokerage, ~~health care services,~~and cash and treasury management. Management believes that it can offer these products and services both efficiently and profitably, as most have common platforms and support structures.

Table 4

SUMMARY OF NONINTEREST INCOME(unaudited, dollars in thousands)


	Three Months Ended					Dollar			Percent			Three Months Ended					Dollar			Percent
	September 30,					Change			Change			September 30,					Change			Change
	2017			2016		17-16			17-16			2023		2022			23-22			23-22
Trust and securities processing	$	45,060		$	41,812	$	3,248			7.8	%	$	66,668	$	59,586		$	7,082			11.9	%
Trading and investment banking		4,453			6,114		(1,661	)		(27.2	)		3,771		5,387			(1,616	)		(30.0	)
Service charges on deposits		21,510			21,832		(322	)		(1.5	)		21,080		19,932			1,148			5.8
Insurance fees and commissions		425			698		(273	)		(39.1	)		272		375			(103	)		(27.5	)
Brokerage fees		5,815			4,712		1,103			23.4			13,400		13,840			(440	)		(3.2	)
Bankcard fees		17,427			17,086		341			2.0			19,296		19,379			(83	)		(0.4	)
Gains on sales of securities available for sale, net		2,390			2,978		(588	)		(19.7	)
Equity (losses) earnings on alternative investments		(584	)		1,594		(2,178	)	(>100.0)
Investment securities gains (losses), net													271		(1,345	)		1,616			120.1
Other		7,810			6,716		1,094			16.3			8,559		11,569			(3,010	)		(26.0	)
Total noninterest income	$	104,306		$	103,542	$	764			0.7	%	$	133,317	$	128,723		$	4,594			3.6	%


	Nine Months Ended					Dollar			Percent			Nine Months Ended					Dollar			Percent
	September 30,					Change			Change			September 30,					Change			Change
	2017			2016		17-16			17-16			2023			2022		23-22			23-22
Trust and securities processing	$	132,412		$	123,984	$	8,428			6.8	%	$	190,616		$	178,000	$	12,616			7.1	%
Trading and investment banking		18,168			16,382		1,786			10.9			13,879			17,950		(4,071	)		(22.7	)
Service charges on deposits		66,316			65,713		603			0.9			63,620			65,409		(1,789	)		(2.7	)
Insurance fees and commissions		1,584			3,355		(1,771	)		(52.8	)		771			879		(108	)		(12.3	)
Brokerage fees		17,081			13,159		3,922			29.8			40,680			29,687		10,993			37.0
Bankcard fees		55,413			52,636		2,777			5.3			56,047			53,854		2,193			4.1
Gains on sales of securities available for sale, net		4,138			8,509		(4,371	)		(51.4	)
Equity (losses) earnings on alternative investments		(1,393	)		2,191		(3,584	)	(>100)
Investment securities (losses) gains, net													(4,153	)		58,853		(63,006	)		(107.1	)
Other		23,810			18,352		5,458			29.7			40,139			24,104		16,035			66.5
Total noninterest income	$	317,529		$	304,281	$	13,248			4.4	%	$	401,599		$	428,736	$	(27,137	)		(6.3	)%

Noninterest income ~~(summarized in Table 4),~~ increased by ~~$0.8~~$4.6 million, or ~~0.7 percent,~~3.6%, during the ~~three months~~three-month period ended September 30, ~~2017,~~2023, and ~~increased by $13.2~~decreased $27.1 million, or ~~4.4 percent,~~6.3%, during the ~~nine months~~nine-month period ended September 30, ~~2017,~~2023, compared to the same periods in ~~2016.~~2022. Table 4 above summarizes the components of noninterest income and the respective year-over-year comparison for each category.

Trust and securities processing income consists of fees earned on personal and corporate trust accounts, custody of securities services, trust investments and ~~investment~~wealth management services, ~~and servicing of~~ mutual fund ~~assets.~~assets, and alternative asset servicing. The increase in these fees for the three and nine-month periods compared to the same periods last year was primarily due to improvements in wealth management and fund services revenues. Wealth management revenues increased by $1.0 million, or 6.2 percent, and $4.3 million, or 9.4 percent, and fund services revenues increased $1.7 million, or 7.9 percent, and $2.8 million, or 4.2 percent,ended September 30, 2023, compared to the same periods in ~~2016.~~2022, was primarily due to an increase in fund services and corporate trust revenues. For the three-month period ended September 30, 2023, fund services revenue increased $4.1 million, or 12.2%, and corporate trust revenue increased $2.4 million, or 19.6%, compared to the same period in 2022. For the nine-month period ended September 30, 2023, corporate trust revenue increased $5.8 million, or 16.0%, and fund services revenue increased $7.3 million, or 7.3%, compared to the same period in 2022. The recent volatile markets have impacted the income in this category. Since trust and securities processing fees are primarily asset-based, which are highly correlated to the change in market value of the assets, the related income for the remainder of the year will be affected by changes in the securities markets. Management continues to emphasize sales of services to both new and existing clients as well as increasing and improving the distribution channels.

Trading and investment banking fees for the ~~three and nine-month periods~~three-month period ended September 30, ~~2017~~2023 decreased ~~$1.7~~$1.6 million, or ~~27.2 percent,~~30.0%, and ~~increased $1.8~~decreased $4.1 million, or ~~10.9 percent, respectively. A $1.2 million decrease and $0.8 million increase in the Company’s seed investments in certain Scout Funds contributed to these variances~~22.7%, for the ~~three and~~ nine-month ~~periods~~period ended September 30, ~~2017, respectively.~~2023 compared to the same periods in 2022. These changes were primarily driven by the volatile market’s impact on trading volume. The income in this category is market driven and impacted by general increases or decreases in trading volume.

Service charges on deposit accounts for the three-month period ended September 30, 2023 increased $1.1 million, or 5.8%, and decreased $1.8 million, or 2.7%, for the nine-month period ended September 30, 2023. The

increase for the three-month period was driven by increased corporate service charge income. The decrease for the nine-month period was driven by lower healthcare income.

Brokerage fees for the ~~three~~three-month period ended September 30, 2023 decreased $0.4 million, or 3.2%, compared to the same period in 2022. For the nine-month period ended September 30, 2023, brokerage fees increased $11.0 million, or 37.0%, compared to the same period in 2022. The changes in the three-month and nine-month periods ~~ended September 30, 2017, increased $1.1 million, or 23.4 percent, and increased $3.9 million, or 29.8 percent, respectively. These increases~~ were driven by ~~higher~~12b-1 fees and money market ~~balances and the related 12b-1 fees.~~income.

Bankcard fees for the three and nine-month periods ended September 30, ~~2017,~~2023 were flat and increased ~~$0.3~~$2.2 million, or ~~2.0 percent, and increased $2.8 million, or 5.3 percent, respectively. These increases were~~4.1%, respectively, as compared to the same periods in 2022. The increase was driven by ~~decreases in retail and commercial card program~~increased interchange income, partially offset by higher rewards and ~~rebates expense and increases in interchange income.~~rebate costs.

~~During~~Investment securities gains, net for the three and nine-month periods ended September 30, ~~2017, $2.4~~2023 increased $1.6 million, or 120.1%, and ~~$4.1~~decreased $63.0 million, ~~in pre-tax gains were recognized on the sales of securities available for sale,~~or 107.1%, respectively, compared to ~~$3.0 million and $8.5 million for~~ the same periods in ~~2016.~~2022. The increase for the three-month period ended September 30, 2023, was driven by an increase in the value of the Company's marketable securities as compared to the same periods in 2022. The decrease for the nine-month period was driven by a $66.2 million gain realized on the sale of the Company’s Visa Inc. Class B common shares in the second quarter of 2022. This decrease was coupled with an impairment loss on an available-for-sale subordinated debt security recorded in 2023, and partially offset by an increase in the value of the Company's marketable securities as compared to the same period in 2022. The income in this category is highly correlated to the change in market value of the assets, and the related income for the remainder of the year will be affected by changes in the securities markets. The Company’s investment portfolio is continually evaluated for opportunities to improve its performance and risk profile relative to market conditions and the Company’s interest rate expectations. This can result in differences from quarter to quarter in the amount of realized ~~gains.~~gains or losses on this portfolio.

Other noninterest income for the ~~three and nine-month~~three-month period ended September 30, ~~2017, increased $1.1~~2023, decreased $3.0 million, or ~~16.3 percent, and $5.5 million, or 29.7 percent, respectively, primarily~~26.0%, compared to the same period in 2022, driven by ~~increases~~decreases of $2.7 million in company-owned life insurance and $1.3 million in derivative income. For the nine-month period, other noninterest income increased $16.0 million, or 66.5%, compared to the same period in 2022, primarily driven by a $15.2 million increase in company-owned life insurance and an increase of $1.2 million in bank-owned life insurance.

Table 5

SUMMARY OF NONINTEREST EXPENSE(unaudited, dollars in thousands)


	Three Months Ended				Dollar			Percent			Three Months Ended				Dollar			Percent
	September 30,				Change			Change			September 30,				Change			Change
	2017		2016		17-16			17-16			2023		2022		23-22			23-22
Salaries and employee benefits	$	99,749	$	99,403	$	346			0.3	%	$	133,380	$	136,467	$	(3,087	)		(2.3	)%
Occupancy, net		11,285		11,224		61			0.5			12,283		12,231		52			0.4
Equipment		17,880		16,029		1,851			11.5			17,204		18,811		(1,607	)		(8.5	)
Supplies and services		4,076		4,472		(396	)		(8.9	)		3,213		3,139		74			2.4
Marketing and business development		5,056		5,090		(34	)		(0.7	)		6,631		6,671		(40	)		(0.6	)
Processing fees		11,151		9,084		2,067			22.8			26,016		20,901		5,115			24.5
Legal and consulting		5,844		4,437		1,407			31.7			7,230		10,255		(3,025	)		(29.5	)
Bankcard		5,130		5,015		115			2.3			8,852		6,551		2,301			35.1
Amortization of other intangible assets		1,715		2,088		(373	)		(17.9	)		2,124		1,092		1,032			94.5
Regulatory fees		3,798		3,370		428			12.7			6,153		4,200		1,953			46.5
Other		6,137		4,999		1,138			22.8			8,355		11,078		(2,723	)		(24.6	)
Total noninterest expense	$	171,821	$	165,211	$	6,610			4.0	%	$	231,441	$	231,396	$	45			0.0	%

Nine Months Ended

Dollar

Percent

September 30,

Change

Change

2017

2016

17-16

17-16

Salaries and employee benefits

$
306,174

$
293,294

$
12,880

4.4
%
Occupancy, net

33,314

32,996

318

1.0

Equipment

53,318

48,807

4,511

9.2

Supplies and services

12,962

13,875

(913
)

(6.6
)
Marketing and business development

14,929

15,273

(344
)

(2.3
)
Processing fees

31,093

27,118

3,975

14.7

Legal and consulting

17,361

14,107

3,254

23.1

Bankcard

15,066

16,199

(1,133
)

(7.0
)
Amortization of other intangible assets

5,685

6,644

(959
)

(14.4
)
Regulatory fees

11,702

10,491

1,211

11.5

Other

20,966

20,094

872

4.3

Total noninterest expense

$
522,570

$
498,898

$
23,672

4.7
%


	Nine Months Ended				Dollar			Percent
	September 30,				Change			Change
	2023		2022		23-22			23-22
Salaries and employee benefits	$	419,190	$	388,491	$	30,699			7.9	%
Occupancy, net		36,206		36,439		(233	)		(0.6	)
Equipment		52,139		55,290		(3,151	)		(5.7	)
Supplies and services		11,283		9,893		1,390			14.1
Marketing and business development		19,090		16,911		2,179			12.9
Processing fees		75,828		58,682		17,146			29.2
Legal and consulting		21,574		28,431		(6,857	)		(24.1	)
Bankcard		24,292		18,998		5,294			27.9
Amortization of other intangible assets		6,539		3,388		3,151			93.0
Regulatory fees		17,827		11,146		6,681			59.9
Other		25,198		32,632		(7,434	)		(22.8	)
Total noninterest expense	$	709,166	$	660,301	$	48,865			7.4	%

Noninterest expense was flat and increased ~~by $6.6~~$48.9 million, or ~~4.0 percent,~~7.4%, for the three ~~months~~and nine-month periods ended September 30, ~~2017 and increased $23.7 million, or 4.7 percent, for the nine months ended September 30, 2017,~~2023, respectively, compared to the same periods in ~~2016.~~2022. Table 5 above summarizes the components of noninterest expense and the respective year-over-year comparison for each category.

Salaries and employee benefits ~~increased~~decreased by ~~$0.3~~$3.1 million, or ~~0.3 percent,~~2.3%, and increased ~~$12.9~~$30.7 million, or ~~4.4 percent,~~7.9%, for the three and ~~nine months~~nine-month periods ended September 30, ~~2017,~~2023, respectively, compared to the same periods in ~~2016.~~2022. Salaries and wages expense increased ~~$1.1~~$3.0 million, or ~~1.8 percent,~~3.7%, and increased $23.1 million, or 10.0%, for the three ~~months~~and nine-month periods ended September 30, ~~2017~~2023, respectively, compared to the same periods in 2022. Bonus and commission expense decreased $4.6 million, or 13.8%, and decreased $10.2 million, or 10.6%, for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022. Employee benefits expense decreased $1.5 million, or 6.8%, and increased ~~$7.1~~$17.8 million, or ~~3.8 percent,~~29.7%, for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022, driven by changes in deferred compensation expense.

Equipment expense decreased $1.6 million, or 8.5%, and $3.2 million, or 5.7%, for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022, primarily due to decreased software expense.

Marketing and business development expense was flat, and increased $2.2 million, or 12.9%, for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022. The increase in the nine-month period was primarily due to the timing of multiple marketing initiatives, as well as increased travel and entertainment expense.

Processing fees increased $5.1 million, or 24.5%, and $17.1 million, or 29.2%, for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022, primarily due to increased software subscription costs.

Legal and consulting expense decreased $3.0 million, or 29.5%, and $6.9 million, or 24.1%, for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022, primarily due to the timing of multiple projects.

Bankcard expense increased $2.3 million, or 35.1%, and $5.3 million, or 27.9%, for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022 primarily driven by higher administrative expense.

Regulatory fees increased $2.0 million, or 46.5%, and $6.7 million, or 59.9%, for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022 primarily driven by higher deposit insurance expense.

Other expense decreased $2.7 million, or 24.6%, and $7.4 million, or 22.8%, for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods in 2022. For the three-month period the decrease was driven by lower operational losses. For the nine-month period ended September 30, 2023, this decrease was due to lower charitable contribution expense.

Income Tax Expense

The Company’s effective tax rate was 18.1% for the nine months ended September 30, ~~2017, respectively,~~2023, compared to the same periods in 2016. Commissions and bonuses decreased $1.5 million, or 7.8 percent, and increased $0.5 million, or 0.9 percent, for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016. Employee benefits expense increased $0.7 million, or 4.7 percent, and $5.2 million, or 10.2 percent, for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016, due to an increase in the fair value of the Company’s deferred compensation plan and increased health insurance expense.

Equipment expense increased $1.9 million, or 11.5 percent, and $4.5 million, or 9.2 percent, for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016 primarily due to software and hardware costs related to investments for regulatory requirements, cyber security, and the ongoing modernization of the Company’s core systems.

Processing fees expense increased $2.1 million, or 22.8 percent, and $4.0 million, or 14.7 percent, for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016 primarily due to higher processing expenses in healthcare, fund servicing, and institutional businesses.

Legal and consulting expense increased $1.4 million, or 31.7 percent, and $3.3 million, or 23.1 percent, for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016. The increases are primarily due to the use of consulting services related to investments for regulatory requirements, cyber security, and the ongoing modernization of the Company’s core systems.

~~Income Tax Expense~~

~~For the nine months ended September 30, 2017, the company’s effective tax rate decreased to 21.4 percent compared to 23.6 percent~~18.8% for the same period ~~a year earlier.~~in 2022. The decrease in the effective tax rate for 2023 is primarily attributable to a larger portion of income being earned from tax-exempt municipal ~~securities and an increase in excess tax benefits associated with stock compensation recorded through the third quarter of 2017.~~securities.

Strategic Lines of Business

The Company has strategically aligned its operations into the following three reportable Business Segments: Commercial Banking, Institutional Banking, and Personal Banking. The Company’s senior executive officers regularly evaluate Business Segment financial results produced by the Company’s internal reporting system in deciding how to allocate resources and assess performance for individual Business Segments. For comparability purposes, amounts in all periods are based on methodologies in effect at September 30, 2023. Previously reported results have been reclassified in this Form 10-Q to conform to the Company’s current organizational structure.

Table 6

~~Bank~~Commercial Banking Operating Results(unaudited, dollars in thousands)


	Three Months Ended				Dollar			Percent			Three Months Ended				Dollar			Percent
	September 30,				Change			Change			September 30,				Change			Change
	2017		2016		17-16			17-16			2023		2022		23-22			23-22
Net interest income	$	137,331	$	121,963	$	15,368			12.6	%	$	148,666	$	150,080	$	(1,414	)		(0.9	)%
Provision for loan losses		11,500		13,000		(1,500	)		(11.5	)
Provision for credit losses												3,010		20,156		(17,146	)		(85.1	)
Noninterest income		79,759		80,540		(781	)		(1.0	)		23,091		16,785		6,306			37.6
Noninterest expense		150,057		144,450		5,607			3.9			81,767		87,120		(5,353	)		(6.1	)
Income before taxes		55,533		45,053		10,480			23.3			86,980		59,589		27,391			46.0
Income tax expense		11,649		9,560		2,089			21.9			16,311		12,859		3,452			26.8
Income from continuing operations	$	43,884	$	35,493	$	8,391			23.6	%
Net income											$	70,669	$	46,730	$	23,939			51.2	%


	Nine Months Ended				Dollar		Percent			Nine Months Ended				Dollar			Percent
	September 30,				Change		Change			September 30,				Change			Change
	2017		2016		17-16		17-16			2023		2022		23-22			23-22
Net interest income	$	403,450	$	355,847	$	47,603		13.4	%	$	444,083	$	444,176	$	(93	)		0.0	%
Provision for loan losses		35,000		25,000		10,000		40.0
Provision for credit losses											35,110		25,183		9,927			39.4
Noninterest income		245,583		234,643		10,940		4.7			71,658		100,379		(28,721	)		(28.6	)
Noninterest expense		456,680		435,708		20,972		4.8			251,667		246,230		5,437			2.2
Income before taxes		157,353		129,782		27,571		21.2			228,964		273,142		(44,178	)		(16.2	)
Income tax expense		33,733		30,478		3,255		10.7			41,114		52,001		(10,887	)		(20.9	)
Income from continuing operations	$	123,620	$	99,304	$	24,316		24.5	%
Net income										$	187,850	$	221,141	$	(33,291	)		(15.1	)%

~~Bank~~For the nine-month period ended September 30, 2023, Commercial Banking net income ~~from continuing operations increased by $24.3~~decreased $33.3 million, or ~~24.5 percent,~~15.1%, to ~~$123.6~~$187.9 million, as compared to the same period in 2022. Net interest income was flat for the nine-month period ended September 30, 2023, compared to the same period in 2022, driven by increased interest expense due to the unfavorable changes in the mix of interest-bearing liabilities and higher interest rates, but offset by strong loan growth and increased loan yields. Provision for credit losses increased $9.9 million for the period, driven by loan growth, portfolio metric changes, and changes in macro-economic metrics in 2023 as compared to 2022. Noninterest income decreased $28.7 million, or 28.6%, compared to the same period in 2022, primarily due to an allocated portion of the gain on the sale of Visa Inc. Class B common shares recorded in the second quarter of 2022, as well as a decrease of $5.3 million in other income due to reduced derivative income and the gain on sale of

the Company’s factoring loan portfolio recorded in the first quarter of 2022. Noninterest expense increased $5.4 million, or 2.2%, to $251.7 million for the nine-month period ended September 30, ~~2017,~~2023, compared to the same period in ~~2016. Net interest income increased $47.6 million, or 13.4 percent, for the nine-month period ended September 30, 2017, compared to the same period in 2016 primarily~~2022. This increase was driven by strong loan growth, increased interest rates, and mix changes. Provision for loan losses increased by $10.0 million, consistent with our methodology, which considers the inherent risk in our loan portfolio, as well as other qualitative factors, such as macroeconomic conditions, loan growth, increased impaired loans, and increased net charge-offs. Noninterest income increased $10.9 million, or 4.7 percent, over the same period in 2016 primarily driven by the following increases: wealth management revenue of $4.3 million, corporate trust income of $1.3 million, brokerage and mutual fund income ofa $3.9 million ~~due to an~~ increase in ~~12b-1 fees, card services income of $2.8~~salary and benefits expense, a $3.0 million driven by higher interchange revenue and lower rewards costs, company-owned life insurance income of $3.2 million, and derivative income of $1.5 million. These increases were offset by decreases of $4.4 million in gains on securities available for sale and $3.6 million on equity earnings on alternative investments.

~~Noninterest expense increased $21.0 million, or 4.8 percent, to $456.7 million for the nine-month period ended September 30, 2017, compared to the same period in 2016. The~~ increase in ~~noninterest expense is due to the following increases: $14.8~~regulatory fees, a $1.7 million increase in processing fees, and a $1.7 million increase in technology, service, and overhead expenses due to the ongoing modernization of our core systems, $5.2 million in salary and benefit expense primarily from deferred compensation expense of $2.8 million, $2.1 million in regulatory expense, $1.8 million in processing fees, $1.1 million in legal and consulting expense, and 0.9 million in losses on the sale of other real estate owned.expenses. These increases were partially offset by a decrease of ~~$1.1~~$4.5 million in ~~bankcard expense~~legal and ~~a decrease of $1.1 million in marketing and business development~~consulting expense.

Table 7

~~Asset Servicing~~Institutional Banking Operating Results (unaudited, dollars in thousands)


	Three Months Ended				Dollar		Percent			Three Months Ended				Dollar			Percent
	September 30,				Change		Change			September 30,				Change			Change
	2017		2016		17-16		17-16			2023		2022		23-22			23-22
Net interest income	$	3,527	$	2,802	$	725		25.9	%	$	43,133	$	43,382	$	(249	)		(0.6	)%
Provision for loan losses		—		—		—		—
Provision for credit losses											423		162		261			161.1
Noninterest income		24,547		23,002		1,545		6.7			86,521		89,386		(2,865	)		(3.2	)
Noninterest expense		21,764		20,761		1,003		4.8			87,502		82,073		5,429			6.6
Income before taxes		6,310		5,043		1,267		25.1			41,729		50,533		(8,804	)		(17.4	)
Income tax expense		1,322		1,114		208		18.7			7,866		7,735		131			1.7
Income from continuing operations	$	4,988	$	3,929	$	1,059		27.0	%
Net income										$	33,863	$	42,798	$	(8,935	)		(20.9	)%


	Nine Months Ended				Dollar			Percent			Nine Months Ended				Dollar		Percent
	September 30,				Change			Change			September 30,				Change		Change
	2017		2016		17-16			17-16			2023		2022		23-22		23-22
Net interest income	$	9,117	$	8,020	$	1,097			13.7	%	$	148,615	$	104,615	$	44,000		42.1	%
Provision for loan losses		—		—		—			—
Provision for credit losses												754		402		352		87.6
Noninterest income		71,946		69,638		2,308			3.3			257,573		243,740		13,833		5.7
Noninterest expense		65,890		63,190		2,700			4.3			268,464		234,185		34,279		14.6
Income before taxes		15,173		14,468		705			4.9			136,970		113,768		23,202		20.4
Income tax expense		3,174		3,538		(364	)		(10.3	)		24,558		22,353		2,205		9.9
Income from continuing operations	$	11,999	$	10,930	$	1,069			9.8	%
Net income											$	112,412	$	91,415	$	20,997		23.0	%

For the ~~nine months~~nine-month period ended September 30, ~~2017, Asset Servicing~~2023, Institutional Banking net income ~~from continuing operations~~ increased ~~$1.1~~$21.0 million, or ~~9.8 percent~~23.0%, compared to the same period last year. Net interest income increased ~~$1.1~~$44.0 million, or ~~13.7 percent,~~42.1%, compared to the same period last ~~year.~~year, driven by an increase in funds transfer pricing due to the increase in interest rates. Noninterest income increased ~~$2.3~~$13.8 million, or ~~3.3 percent,~~5.7%, primarily due to ~~higher alternative investment fee income. Assets under administration stood at $207.9 billion at~~increases of $13.3 million in trust and securities processing and $11.1 million in brokerage fees, partially offset by a decrease in income related to the allocated portion of the gain on the sale of Visa Inc. Class B common shares recorded in the second quarter of 2022. Noninterest expense increased $34.3 million, or 14.6%, primarily driven by increases of $15.7 million in salary and employee benefits expense, $3.6 million in bankcard expense, $3.6 million in operational losses, $3.1 million in intangible amortization, $2.6 million in software expense, $2.2 million in processing fees, $2.1 million in regulatory fees, and $1.0 million in technology, service, and overhead expenses.

Table 8

Personal Banking Operating Results(unaudited, dollars in thousands)


	Three Months Ended						Dollar			Percent
	September 30,						Change			Change
	2023			2022			23-22			23-22
Net interest income	$	30,488		$	40,023		$	(9,535	)		(23.8	)%
Provision for credit losses		1,544			1,682			(138	)		(8.2	)
Noninterest income		23,705			22,552			1,153			5.1
Noninterest expense		62,172			62,203			(31	)		(0.0	)
Loss before taxes		(9,523	)		(1,310	)		(8,213	)		(626.9	)
Income tax (benefit) expense		(1,545	)		228			(1,773	)		(777.6	)
Net loss	$	(7,978	)	$	(1,538	)	$	(6,440	)		(418.7	)%


	Nine Months Ended					Dollar			Percent
	September 30,					Change			Change
	2023			2022		23-22			23-22
Net interest income	$	96,896		$	119,840	$	(22,944	)		(19.1	)%
Provision for credit losses		5,363			3,315		2,048			61.8
Noninterest income		72,368			84,617		(12,249	)		(14.5	)
Noninterest expense		189,035			179,886		9,149			5.1
(Loss) income before taxes		(25,134	)		21,256		(46,390	)		(218.2	)
Income tax (benefit) expense		(3,973	)		2,303		(6,276	)		(272.5	)
Net (loss) income	$	(21,161	)	$	18,953	$	(40,114	)		(211.6	)%

For the nine-month period ended September 30, ~~2017,~~2023, Personal Banking net income decreased $40.1 million, or 211.6%, to a net loss of $21.2 million, as compared to ~~$186.2 billion at September 30, 2016. These increases were~~the same period in 2022. Net interest income decreased $22.9 million, or 19.1%, compared to the same period last year due to higher deposit interest expense driven by the increase in short-term interest rates. Provision for credit losses increased $2.0 million for the period, driven by loan growth, portfolio metric changes, and changes in macro-economic metrics in 2023 as compared to 2022. Noninterest income decreased $12.2 million, or 14.5%, for the same period primarily due to an allocated portion of the gain on the sale of Visa Inc. Class B common shares recorded in the second quarter of 2022, partially offset by an increase of $2.3 million in ~~noninterest~~other income driven by the gain on sale of other assets during the second quarter of 2023. Noninterest expense ~~of $2.7~~increased $9.1 million, or ~~4.3 percent,~~5.1%, primarily due to increases of $2.6 million in salaries and benefits expense, $2.3 million in operational losses, $1.6 million in regulatory fees, $1.2 million in marketing and business development expense, $0.9 million in supplies expense, and $0.6 million in processing fees.

Balance Sheet Analysis

Total assets of the Company increased $3.0 billion, or 7.7%, as of September 30, 2023, compared to December 31, 2022, primarily due to an increase of ~~$2.2 million~~$2.4 billion, or 201.6%, in ~~salary~~interest-bearing due from banks and ~~benefit expense.~~

~~Balance Sheet Analysis~~

~~Total assets~~an increase of ~~the Company decreased~~$1.9 billion, or 8.8% in loan balances. These increases were partially offset by ~~$403.0~~a decrease of $674.6 million, or ~~1.9 percent, as of September 30, 2017, compared to December 31, 2016, primarily due to a decrease~~5.1%, in ~~available-for-sale (AFS)~~total securities, ~~of $617.4 million, or 9.5 percent,~~ and a decrease ~~in Federal Reserve account balances~~ of ~~$459.8~~$710.4 million, or ~~71.6 percent, offset by an increase~~74.1%, in ~~loan balances of $456.6 million, or 4.3 percent.~~federal funds and securities purchased under agreements to resell.

Total assets of the Company increased ~~$553.4 million~~$3.9 billion, or 10.3%, as of September 30, ~~2017, or 2.8 percent,~~2023, compared to September 30, ~~2016,~~2022, primarily due to an increase in loan balances of ~~$703.5 million,~~$3.0 billion, or ~~6.8 percent,~~15.1% and an increase of $1.8 billion, or 101.1%, in ~~held-to-maturity (HTM) securities of $267.1 million, or 26.5 percent, which~~interest-bearing due from banks. These increases were partially offset by a decrease in ~~AFS~~total securities of ~~$446.7~~$753.1 million, or ~~7.1 percent.~~5.7%, and a decrease of $468.3 million, or 65.4%, in federal funds and securities purchased under agreements to resell.

Table 89

SELECTED FINANCIAL INFORMATION (unaudited, dollars in thousands)


	September 30,				December 31,		September 30,				December 31,
	2017		2016		2016		2023		2022		2022
Total assets	$	20,279,503	$	19,726,146	$	20,682,532	$	41,464,682	$	37,581,062	$	38,512,461
Loans, net of unearned interest		11,001,553		10,305,374		10,545,662		22,884,513		19,886,443		21,033,167
Total investment securities		7,249,415		7,429,719		7,690,108
Total securities								12,561,046		13,314,105		13,235,684
Interest-bearing due from banks		221,856		453,189		715,823		3,556,076		1,768,008		1,179,105
Total earning assets		18,618,871		18,342,769		19,184,271		39,249,838		35,685,105		36,406,553
Total deposits		15,999,604		15,378,249		16,570,614		33,431,752		31,806,388		32,639,133
Total borrowed funds		1,932,908		2,096,541		1,933,709		4,440,370		2,695,711		2,603,478

Loans represent the Company’s largest source of interest income. In addition to growing the commercial loan portfolio, management believes its middle market commercial business and its consumer business, including home equity and credit card loan products, are the market niches that represent its best opportunity to cross-sell fee-related services and generate additional noninterest income for the Company.

Actual loan balances totaled ~~$11.0~~$22.9 billion as of September 30, ~~2017,~~2023, and increased ~~$456.6 million,~~$1.9 billion, or ~~4.3 percent,~~8.8%, compared to December 31, ~~2016~~2022, and increased ~~$703.5 million,~~$3.0 billion, or ~~6.8 percent,~~15.1%, compared to September 30, ~~2016.~~2022. Compared to December 31, ~~2016,~~2022, commercial real estate loans increased ~~$195.3~~$1.2 billion, or 15.3%, commercial and industrial loans increased $583.7 million, or ~~6.2 percent, asset based loans increased $84.2 million, or 37.3 percent, construction~~6.3%, and consumer real estate loans increased ~~$68.3~~$201.2 million, or ~~9.2 percent, and residential real estate loans of $66.2 million, or 12.1 percent.~~7.4%. Compared to September 30, ~~2016,~~2022, commercial real estate loans increased ~~$350.7 million,~~$1.7 billion, or ~~11.6 percent, construction~~23.6%, commercial and industrial loans increased $1.0 billion, or 11.4%, and consumer real estate loans increased ~~$127.4~~$290.0 million, or ~~18.7 percent, residential real estate loans increased $103.5 million, or 20.2 percent,~~11.0%. See further information in Note 4, “Loans and ~~factoring loans increased $88.1 million, or 81.8 percent. The increase~~Allowance for Credit Losses” in ~~total loans is driven by~~ the ~~Company’s focus on generating higher-yielding earning assets by shifting assets from the securities portfolio~~Notes to ~~the loan portfolio.~~Consolidated Financial Statements.

Nonaccrual, past due and restructured loans are discussed under “Credit Risk Management” within “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this report.

Investment Securities

The Company’s investment portfolio contains trading, AFS, and HTM securities, as well as FRB stock, FHLB stock, and other miscellaneous investments. Investment securities totaled ~~$7.2~~$12.6 billion as of September 30, ~~2017~~2023, and ~~$7.7~~$13.2 billion as of December 31, ~~2016~~2022, and comprised ~~38.9 percent~~32.0% and ~~40.1 percent~~36.5% of the Company’s earning assets, respectively, as of those dates.

The Company’s AFS securities portfolio comprised ~~80.7 percent~~50.4% of the Company’s ~~investment~~total securities portfolio at September 30, ~~2017, compared to 84.1 percent~~2023 and 52.9% at December 31, ~~2016.~~2022. The Company’s AFS securities portfolio provides liquidity as a result of the composition and average life of the underlying securities. This liquidity can be used to fund loan growth or to offset the outflow of traditional funding sources. The average life of the AFS securities portfolio ~~increased from 52.7~~was 61.7 months at September 30, ~~2017,~~2023, compared to ~~54.3~~62.3 months at December 31, ~~2016,~~2022, and ~~45.0~~69.7 months at September 30, ~~2016.~~2022. In addition to providing a potential source of liquidity, the AFS securities portfolio can be used as a tool to manage interest rate sensitivity. The Company’s goal in the management of its AFS securities portfolio is to maximize return within the Company’s parameters of liquidity goals, interest rate risk, and credit risk.

Management expects collateral pledging requirements for public funds, loan demand, and deposit funding to be the primary factors impacting changes in the level of AFS securities. There were ~~$4.9~~$8.5 billion and $10.3 billion of ~~AFS~~ securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at September 30, ~~2017. Of this amount, securities with a market value of $1.8 billion at September 30, 2017 were pledged at the Federal Reserve Discount Window but were unencumbered as of that date.~~2023 and December 31, 2022, respectively.

The Company’s HTM securities portfolio consists of U.S. agency-backed securities, mortgage-backed securities, general obligation bonds, and private placement ~~bonds, which are issued primarily to refinance existing revenue bonds in the healthcare and education sectors.~~bonds. The HTM portfolio, net of the ACL, totaled ~~$1.3~~$5.7 billion ~~as of~~and $5.9 billion at September 30, ~~2017, an increase of $160.3 million, or 14.4 percent, from~~2023 and December 31, ~~2016.~~2022, respectively. The average life of the HTM portfolio was ~~7.3~~9.5 years at September 30, ~~2017,~~2023, compared to ~~7.4~~9.3 years at December 31, ~~2016.~~2022, and 9.0 years at September 30, 2022.

The securities portfolio generates the Company’s second largest component of interest income. The securities portfolio achieved an average yield on a tax-equivalent basis of ~~2.43 percent~~2.64% for the ~~nine months~~nine-month period ended September 30, ~~2017,~~2023, compared to ~~2.08 percent~~2.28% for the same period in ~~2016.~~2022.

~~Deposits and Borrowed Funds~~

~~Deposits decreased $571.0~~At September 30, 2023, the unrealized pre-tax net loss on the AFS securities portfolio was $917.8 million, or 3.4 percent, from December 31, 2016 to September 30, 2017 and increased $621.4 million, or 4.0 percent, from September 30, 2016 to September 30, 2017. Total non-interest bearing deposits decreased $842.5 million, which was partially offset by12.7% of the $7.2 billion amortized cost value, an increase ~~in interest-bearing deposits~~ of ~~$271.5~~$146.2 million as compared to December 31, ~~2016.~~2022. At September 30, 2023, the unrealized pre-tax net loss on the securities designated as HTM was $876.1 million, or 15.3% of amortized cost value, compared to $580.9 million at December 31, 2022. During 2022, the Company transferred securities with an amortized cost balance of $4.1 billion and a fair value of $3.8 billion from the AFS category to the HTM category. The transfer of securities was made at fair value at the time of transfer. The remaining balance of unrealized pre-tax losses related to transferred securities was $216.5 million as of September 30, 2023, and $247.0 million as of December 31, 2022, and was included in the amortized cost balance of HTM securities. See further information in Note 5, “Securities” in the Notes to Consolidated Financial Statements.

Deposits and Borrowed Funds

Deposits increased $792.6 million, or 2.4%, from December 31, 2022 to September 30, 2023 and increased $1.6 billion, or 5.1%, from September 30, 2022 to September 30, 2023. Total interest-bearing balances increased $2.8 billion, partially offset by a decrease of $2.0 billion in noninterest-bearing deposits from December 31, 2022 to September 30, 2023. Total interest-bearing deposits increased ~~$817.6 million and~~$4.2 billion, partially offset by a decrease of $2.6 billion in noninterest-bearing deposits ~~decreased $196.2 million~~ from September 30, ~~2016.~~2022 to September 30, 2023. Deposits can fluctuate at quarter-end due to the operational nature of our commercial and institutional clients. The shift from noninterest-bearing to interest-bearing deposits is related to the recent increases in short-term and long-term interest rates, as well as recent industry volatility. Noninterest-bearing deposits were 33.7%, 40.6%, and 43.6% of total deposits at September 30, 2023, December 31, 2022, and September 30, 2022, respectively.

Deposits represent the Company’s primary funding source for its asset base. In addition to the core deposits garnered by the Company’s retail branch structure, the Company continues to focus on its cash management services, as well as its trust and ~~mutual fund~~investment company servicing ~~segments,~~businesses, in order to attract and retain additional ~~core~~

deposits. Management believes a strong core deposit composition is one of the Company’s key strengths given its competitive product mix.

As of September 30, 2023, there were an estimated $20.7 billion of uninsured deposits, a decrease of $3.9 billion as compared to December 31, 2022, and a decrease of $2.9 billion as compared to September 30, 2022. Estimated uninsured deposits comprised approximately 62.0%, 75.5%, and 74.4% of total deposits as of September 30, 2023, December 31, 2022, and September 30, 2022, respectively. A portion of these uninsured deposits represent affiliate deposits and collateralized deposits. Affiliate deposits represent deposit accounts owned by the wholly owned subsidiaries of UMB Financial Corporation that are on deposit at UMB Bank, n.a. Collateralized deposits are public fund deposits or corporate trust deposits that are collateralized by high quality securities within the investment portfolio. Excluding affiliate deposits of $1.5 billion and collateralized deposits of $4.9 billion, the adjusted estimated uninsured deposits were $14.2 billion as of September 30, 2023. The adjusted ratio of estimated uninsured deposits, excluding affiliate and collateralized deposits, as a percentage of total deposits was approximately 42.6% as of September 30, 2023. The adjusted ratio of estimated uninsured deposits, excluding affiliate and collateralized deposits, as a percentage of total deposits was approximately 51.0% as of December 31, 2022, and 51.4% as of September 30, 2022.

The Company participates in the IntraFi Cash Service program, which allows its customers to place deposits into the program to receive reciprocal FDIC insurance coverage. As of September 30, 2023, the Company had $1.3 billion of deposits in the program.

Long-term debt totaled ~~$76.1~~$382.8 million atas of September 30, ~~2017,~~2023, compared to ~~$76.8~~$381.3 million as of December 31, ~~2016,~~2022, and ~~$75.4~~$381.5 million as of September 30, ~~2016.~~2022. In September 2022, the Company issued $110.0 million in aggregate subordinated notes due in September 2032. The ~~majority~~Company received $107.9 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank. The

subordinated notes were issued with a fixed-to-fixed rate of 6.25% and an effective rate of 6.64%, due to issuance costs, with an interest rate reset date of September 2027.

In September 2020, the Company issued $200.0 million in aggregate subordinated notes due in September 2030. The Company received $197.7 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank. The subordinated notes were issued with a fixed-to-fixed rate of 3.70% and an effective rate of 3.93%, due to issuance costs, with an interest rate reset date of September 2025.

The remainder of the Company’s long-term debt was assumed from the acquisition of Marquette Financial Companies (Marquette) and consists of debt obligations payable to four unconsolidated trusts (Marquette Capital Trust I, Marquette Capital Trust II, Marquette Capital Trust III, and Marquette Capital Trust IV) that previously issued trust preferred securities. These long-term debt obligations ~~had~~have an aggregate contractual balance of $103.1 ~~million and had an aggregate carrying value of $68.0 million as of September 30, 2017.~~million. Interest rates on trust preferred securities are tied to the three-month ~~London Interbank Offered Rate (LIBOR) rate~~term SOFR with spreads ranging from 133 basis points to 160 basis points and reset quarterly. The trust preferred securities have maturity dates ranging from January 2036 to September 2036.

The Company has a revolving line of credit with Wells Fargo Bank, N.A. which allows the Company to borrow up to $30.0 million for general working capital purposes. The interest rate applied to borrowed balances will be at the Company’s option either 1.40% above SOFR or 1.75% below the prime rate on the date of an advance. The Company pays a 0.4% unused commitment fee for unused portions of the revolving line of credit. As of September 30, 2023, the Company had no advances outstanding on this revolving line of credit.

Short-term debt totaled $2.3 billion as September 30, 2023 and consisted of two short-term borrowings with the FHLB of Des Moines totaling $1.5 billion and an $800.0 million borrowing with the BTFP. One FHLB borrowing has a principal balance of $500.0 million and an interest rate of 5.47% and is due in the fourth quarter of 2023, while the other has a principal balance of $1.0 billion and an interest rate of 5.04% and is due in the second quarter of 2024. The BTFP borrowing has a rate of 4.70% and is due in the fourth quarter of 2023. The level of borrowings could be impacted by earning asset mix changes in the Company’s balance sheet from the impacts of recent industry volatility. See further information in Note 7, “Borrowed Funds” in the Notes to Consolidated Financial Statements.

Federal funds purchased and securities sold under ~~agreement~~agreements to repurchase totaled ~~$1.9~~$1.8 billion as of September 30, 2023, $2.2 billion at December 31, 2022, and $2.3 billion at September 30, ~~2017 and at December 31, 2016, and $2.0 billion at September 30, 2016.~~2022. Repurchase agreements are transactions involving the exchange of investment funds by the customer for securities by the Company under an agreement to repurchase the same or similar issues at an agreed-upon price and date. The level of borrowings could be impacted by earning asset mix changes in the Company’s balance sheet from the impacts of recent industry volatility.

Capital and Liquidity

The Company places a significant emphasis on the maintenance of a strong capital position, which promotes investor confidence, provides access to funding sources under favorable terms, and enhances the Company’s ability to capitalize on business growth and acquisition opportunities. Higher levels of liquidity, however, bear corresponding costs, measured in terms of lower yields on short-term, more liquid earning assets and higher expenses for extended liability maturities. The Company manages capital for each subsidiary based upon the subsidiary’s respective risks and growth opportunities as well as regulatory requirements.

Total shareholders’ equity was ~~$2.1~~$2.8 billion at September 30, ~~2017,~~2023, a ~~$139.2~~$139.6 million increase as compared to December 31, ~~2016,~~2022, and a ~~$76.9~~$283.1 million increase compared to September 30, ~~2016.~~ 2022.

The Company’s Board of Directors authorized, at its April ~~25, 2017~~26, 2022 and April ~~26, 2016~~27, 2021 meetings, the repurchase of up to two million shares of the Company’s common stock during the twelve months following each meeting (each a Repurchase Authorization). On July 25, 2023, the ~~meeting.~~Company's Board of Directors approved the repurchase of up to one million shares of the Company's common stock, which will terminate on April 30, 2024.

The Company did not repurchase shares of common stock during 2023 pursuant to any of its announced repurchased plans. During the ~~nine months~~nine-month period ended September 30, ~~2017 and 2016,~~2022, the Company acquired ~~204,607 shares and 292,624~~330,999 shares of its common stock ~~under~~pursuant to the ~~2017 and 2016 repurchase plans, respectively. The Company has not made any repurchase of its securities other than through these plans.~~applicable Repurchase Authorization.

At the Company’s quarterly board meeting, the Board of Directors declared a ~~$0.275~~$0.39 per share quarterly cash dividend payable on January 2, ~~2018,~~2024, to shareholders of record at the close of business on December ~~8, 2017.~~11, 2023.

Through the Company’s relationship with the FHLB of Des Moines, the Company owns ~~$10.0~~$70.2 million of FHLB stock and has access to additional liquidity and funding sources through FHLB advances. The Company’s borrowing capacity is dependent upon the amount of collateral the Company places at the FHLB. The ~~Company’s borrowing capacity with the FHLB was $1.2 billion as of September 30, 2017. The~~ Company had notwo short-term advances totaling $1.5 billion outstanding ~~FHLB advances~~ at FHLB of Des Moines as of September 30, ~~2017.~~2023. Additionally, in 2023, the FHLB of Des Moines issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. This letter of credit will expire in January 2024. The Company’s remaining borrowing capacity with the FHLB was $436.7 million as of September 30, 2023.

The Company had an $800.0 million short-term borrowing outstanding with the Federal Reserve Bank's BTFP as of September 30, 2023. As of September 30, 2023, the Company’s remaining borrowing capacity with the BTFP was $20.0 million and its remaining borrowing capacity at the Federal Reserve Discount Window was $10.2 billion.

In addition to borrowing capacity with the FHLB and at the Federal Reserve Discount Window as described above, the Company had additional liquidity of $7.4 billion available via cash, unpledged bond collateral, the federal funds market, and the IntraFi Cash Service program as of September 30, 2023.

Risk-based capital guidelines established by regulatory agencies set minimum capital standards based on the level of risk associated with a financial institution’s assets. The Company has implemented the Basel III regulatory capital rules adopted by the FRB. Basel III capital rules include a minimum ratio of common equity tier 1 capital to risk-weighted assets of ~~4.5 percent~~4.5% and a minimum tier 1 risk-based capital ratio of ~~6 percent.~~6%. A financial institution’s total capital is also required to equal at least ~~8 percent~~8% of risk-weighted assets. At least half of that 8 percent must consist of tier 1 core capital, and the remainder may be tier 2 supplementary capital. The Basel III regulatory capital rules include transitional periods for various components of the rules that require full compliance for the Company by January 1, 2019, including a capital conservation buffer requirement of 2.5 percent of risk-weighted assets for which the transitional period began on January 1, 2016.

The risk-based capital guidelines indicate the specific risk weightings by type of asset. Certain off-balance sheet items (such as standby letters of credit and binding loan commitments) are multiplied by credit conversion factors to translate them into balance sheet equivalents before assigning them specific risk weightings. The Company is also required to maintain a leverage ratio equal to or greater than ~~4 percent.~~4%. The leverage ratio is calculated as the ratio of tier 1 core capital to total average assets, less goodwill and intangibles.

U.S. banking agencies in December 2018 approved a final rule to address the impact of CECL on regulatory capital by allowing banking organizations the option to phase in the day-one impact of CECL until the first quarter of 2023. In March 2020, the U.S. banking agencies issued an interim final rule that provides banking organizations with an alternative option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. The Company elected this alternative option instead of the one described in the December 2018 rule.

The Company's capital position as of September 30, ~~2017~~2023 is summarized in the table below and exceeded regulatory requirements.

Table 910


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
RATIOS	2017			2016			2017			2016			2023			2022			2023			2022
Common equity tier 1 capital ratio		12.18	%		11.75	%		12.18	%		11.75	%		10.77	%		11.18	%		10.77	%		11.18	%
Tier 1 risk-based capital ratio		12.18			11.75			12.18			11.75			10.77			11.18			10.77			11.18
Total risk-based capital ratio		13.26			12.82			13.26			12.82			12.68			13.13			12.68			13.13
Leverage ratio		9.43			8.99			9.43			8.99			8.55			8.66			8.55			8.66
Return on average assets		0.95			0.80			0.89			0.76			0.97			0.96			0.95			1.18
Return on average equity		9.17			7.76			8.82			7.43			13.25			12.90			13.18			16.05
Average equity to assets		10.41			10.27			10.13			10.17			7.32			7.45			7.17			7.33

The Company's per share data is summarized in the table below.


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
Per Share Data	2017			2016			2017			2016			2023			2022			2023			2022
Earnings from continuing operations basic	$	0.99		$	0.81		$	2.76		$	2.26
Earnings from continuing operations diluted		0.98			0.80			2.72			2.24
Earnings – basic													$	1.99		$	1.82		$	5.76		$	6.86
Earnings – diluted														1.98			1.81			5.73			6.80
Cash dividends		0.255			0.245			0.765			0.735			0.38			0.37			1.14			1.11
Dividend payout ratio		25.76	%		30.25	%		27.72	%		32.52	%		19.1	%		20.3	%		19.8	%		16.2	%
Book value	$	42.15		$	40.86		$	42.15		$	40.86		$	57.83		$	52.24		$	57.83		$	52.24

Off-balance Sheet Arrangements

The Company’s main off-balance sheet arrangements are loan commitments, commercial and standby letters of credit, futures contracts and forward exchange contracts, which have maturity dates rather than payment due dates. ~~Please see~~See Note 9,10, “Commitments, Contingencies and Guarantees” in the Notes to Consolidated Financial Statements for detailed information on these arrangements. The level of the outstanding commitments could be impacted by volatility in the economic markets and governmental responses to inflation, geopolitical tensions, and supply chain constraints. These changing conditions could have impacts on the consolidated balance sheets of the Company for the remainder of the year

Critical Accounting Policies and Estimates

The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. On an ~~on-going~~ongoing basis, management evaluates its estimates and judgments, including those related to customers and suppliers, allowance for ~~loan~~credit losses, bad debts, investments, financing operations, long-lived assets, taxes, other contingencies, and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which have formed the basis for making such judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Under different assumptions or conditions, actual results may differ from the recorded estimates.

A summary of critical accounting policies is listed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Form 10-K.

ITEM 3. QUANTITATIVE AND ~~QUALITATI~~VEQUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange prices, commodity prices, or equity prices. Financial instruments that are subject to market risk can be classified either as held for trading or held for purposes other than trading.

The Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading. The following discussion of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.

Interest Rate Risk

In the banking industry, a major risk exposure is changing interest rates. To minimize the effect of interest rate changes to net interest income and exposure levels to economic losses, the Company manages its exposure to changes in interest rates through asset and liability management within guidelines established by its Asset Liability Committee (ALCO) and approved by the Board. The ALCO is responsible for approving and ensuring compliance with asset/liability management policies, including interest rate exposure. The Company’s primary method for measuring and analyzing consolidated interest rate risk is the Net Interest Income Simulation Analysis. The Company also uses a Net Portfolio Value model to measure market value risk under various rate change scenarios and a gap analysis to measure maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time. On a limited basis, the Company uses hedges such as swaps, rate floors, and futures contracts to manage interest rate risk on certain loans, ~~trading~~ securities, and trust preferred ~~securities, and deposits.~~securities. See further information in Note 1011 “Derivatives and Hedging Activities” in the Notes to the Consolidated Financial Statements.

Overall, the Company manages interest rate risk by positioning the balance sheet to maximize net interest income while maintaining an acceptable level of interest rate and credit risk, remaining mindful of the relationship among profitability, liquidity, interest rate risk, and credit risk.

Net Interest Income Modeling

The Company’s primary interest rate risk tool, the Net Interest Income Simulation Analysis, measures interest rate risk and the effect of interest rate changes on net interest income and net interest margin. This analysis incorporates all of the Company’s assets and liabilities together with assumptions that reflect the current interest rate environment. Through these simulations, management estimates the impact on net interest income of a ~~300 basis point~~200-basis-point upward or a ~~100 basis point~~200-basis-point downward gradual change (e.g. ramp) and immediate change (e.g. shock) of market interest rates over a two year period. In ramp scenarios, rates change gradually for a ~~one year~~one-year period and remain constant in year two. In shock scenarios, rates change immediately and the change is sustained for the remainder of the ~~two year~~two-year scenario horizon. Assumptions are made to project rates for new loans and deposits based on historical analysis, management outlook and repricing strategies. Asset prepayments and other market risks are developed from industry estimates of prepayment speeds and other market changes. The results of these simulations can be significantly influenced by assumptions utilized and management evaluates the sensitivity of the simulation results on a regular basis.

Table 1011 shows the net interest income increase or decrease over the next ~~twelve months~~two years as of September 30, ~~2017~~2023 and ~~2016~~2022 based on hypothetical changes in interest rates and a constant sized balance sheet with runoff being replaced.

Table 1011

MARKET RISK (unaudited)

	Hypothetical change in interest rate – Rate Ramp
	Year One						Year Two						Hypothetical change in interest rate – Rate Ramp
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			Year One						Year Two
(basis points)	Percentage change			Percentage change			Percentage change			Percentage change
300		0.6	%		3.7	%		6.3	%		9.7	%
													September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Change in basis points													Percentage change			Percentage change			Percentage change			Percentage change
200		(0.2	)		2.3			3.5			6.3			(2.1	)%		(1.4	)%		2.4	%		5.6	%
100		(1.0	)		0.8			0.7			2.9			(1.0	)		(0.6	)		1.2			2.9
Static		—			—			—			—			—			—			—			—
(100)		(0.9	)	N/A				(5.7	)	N/A				1.1			0.4			(1.3	)		(3.2	)
(200)														2.4		n/a				(2.2	)	n/a

	Hypothetical change in interest rate – Rate Shock
	Year One						Year Two						Hypothetical change in interest rate – Rate Shock
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			Year One						Year Two
(basis points)	Percentage change			Percentage change			Percentage change			Percentage change
300		4.2	%		10.0	%		9.3	%		14.4	%
													September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Change in basis points													Percentage change			Percentage change			Percentage change			Percentage change
200		2.2			6.5			5.5			9.5			1.2	%		1.9	%		5.6	%		7.6	%
100		0.2			2.9			1.7			4.5			0.6			1.0			2.8			3.9
Static		—			—			—			—			—			—			—			—
(100)		(4.4	)	N/A				(8.6	)	N/A				(0.6	)		(1.3	)		(2.9	)		(4.2	)
(200)														(0.7	)	n/a				(5.7	)	n/a

The Company is positioned relatively neutral ~~over~~to changes in interest rates in the next ~~year in a rising rate environment.~~year. Net interest income is ~~expected~~predicted to ~~be slightly lower~~decrease in ~~the up 100 basis point~~all upward rate ramp ~~scenario~~scenarios and ~~higher~~increase in ~~the up 300 basis points~~all upward rate shock scenarios. In down rate scenarios, net interest income is predicted to increase in rate ramp ~~scenario.~~scenarios and decrease in rate shock scenarios. The largest change in net interest income relative to base in either rate ramp or shock scenarios is approximately 2% or less in year one. In year two, net interest income is ~~projected~~predicted to ~~increase~~rise in ~~rising interest~~all increasing rate scenarios ~~due to expected increases~~and decrease in ~~earning asset yields at a pace that is greater and earlier than the impacts on cost of interest bearing liabilities.~~falling rate scenarios. The Company’s level of sensitivity has declined over the past year due primarily to: 1) balance sheet changes and recent rate increases which have significantly increased actual and projected static net interest income, resultingability to price deposits consistent with its historical approach is a key assumption in ~~a larger base net interest income and 2) the Company’s modeling assumptions that deposit pricing will revert to higher levels under~~ these scenarios. These assumptions are based upon analysis of the Company’s deposit pricing during the last rate cycle. Since actual sensitivity on deposit pricing has been lower than projected to date, the Company’s modeling continues to assume a reversion of expected deposit re-pricing to historical norms.

Trading Account

The Company carries securities in a trading account that is maintained according to Board-approved policy and procedures. The policy limits the amount and type of securities that can be carried in the trading account, ~~and~~ requires compliance with any limits under applicable law and regulations, and mandates the use of a value-at-risk methodology to manage price volatility risks within financial parameters. The risk associated with the carrying of trading securities is offset by utilizing financial instruments including exchange-traded financial futures as well as short sales of U.S. Treasury and Corporate securities. The trading securities and related hedging instruments are marked-to-market daily. The trading account had a balance of ~~$60.7~~$24.5 million as of September 30, ~~2017, $39.5~~2023, $18.0 million as of December 31, ~~2016,~~2022, and ~~$58.1~~$14.4 million as of September 30, ~~2016.~~2022. Securities sold not yet purchased (i.e., short positions) totaled ~~$3.3~~$9.7 million at September 30, ~~2017~~2023, $3.5 million as of December 31, 2022, and is$4.0 million at September 30, 2022 and are classified within the Other liabilities line of the Company’s Consolidated Balance Sheets.

The Company is subject to market risk primarily through the effect of changes in interest rates of its assets held for purposes other than trading. The discussion in Table 1011 above of interest rate risk, however, combines instruments held for trading and instruments held for purposes other than trading, because the instruments held for trading represent such a small portion of the Company’s portfolio that the interest rate risk associated with them is immaterial.

Other Market Risk

The Company ~~does have~~has minimal foreign currency risk ~~that it does not consider material~~ as a result of foreign exchange contracts. See Note 910 “Commitments, Contingencies and Guarantees” in the notes to the Consolidated Financial Statements.

Credit Risk Management

Credit risk represents the risk that a customer or counterparty may not perform in accordance with contractual terms. The Company utilizes a centralized credit administration function, which provides information on the Bank’s risk levels, delinquencies, an internal ~~rating~~ranking system and overall credit exposure. Loan requests are centrally reviewed to ensure the consistent application of the loan policy and standards. In addition, the Company has an internal loan review staff that operates independently of the Bank. This review team performs periodic examinations of the ~~bank’s~~Bank’s loans for credit quality, documentation and loan administration. The respective regulatory authorities governing the Bank also review loan portfolios.

A primary indicator of credit quality and risk management is the level of nonperforming loans. Nonperforming loans include both nonaccrual loans and restructured loans on nonaccrual. The Company’s nonperforming loans decreased ~~$25.4~~$2.8 million to ~~$54.2~~$17.0 million at September 30, ~~2017,~~2023, compared to September 30, ~~2016,~~2022, and decreased ~~$16.0~~$2.2 million, compared to December 31, ~~2016.~~ 2022.

The Company had ~~$0.7 million, $0.3 million, and $0.2 million~~$68 thousand of other real estate owned as of both September 30, ~~2017 and 2016,~~2022, and December 31, ~~2016, respectively.~~2022. Loans past due more than 90 days and still accruing interest totaled ~~$2.1~~$3.0 million as of September 30, ~~2017,~~2023, compared to ~~$2.7~~$2.5 million at September 30, ~~2016~~2022 and ~~$3.4~~$1.6 million as of December 31, ~~2016.~~2022.

A loan is generally placed on nonaccrual status when payments are past due 90 days or more and/or when management has considerable doubt about the borrower’s ability to repay on the terms originally contracted. The accrual of interest is discontinued and recorded thereafter only when ~~actually~~ received in cash.

Certain loans are restructured to provide a reduction or deferral of interest or principal due to deterioration in the financial condition of the respective borrowers. The Company had ~~$49.2~~$3.2 million of restructured loans at September 30, ~~2017, $54.4~~2023, $5.5 million at September 30, ~~2016,~~2022, and ~~$52.5~~$5.2 million at December 31, ~~2016.~~2022.

Table 1112

LOAN QUALITY(unaudited, dollars in thousands)


	September 30,						December 31,			September 30,						December 31,
	2017			2016			2016			2023			2022			2022
Nonaccrual loans	$	26,101		$	50,711		$	41,765		$	14,519		$	17,384		$	16,838
Restructured loans on nonaccrual		28,130			28,909			28,494			2,523			2,433			2,431
Total nonperforming loans		54,231			79,620			70,259			17,042			19,817			19,269
Other real estate owned		712			290			194			—			68			68
Total nonperforming assets	$	54,943		$	79,910		$	70,453		$	17,042		$	19,885		$	19,337
Loans past due 90 days or more	$	2,088		$	2,678		$	3,365		$	3,044		$	2,513		$	1,617
Restructured loans accruing		21,091			25,464			24,013			665			3,109			2,790
Allowance for loan losses		98,389			90,404			91,649
Ratios
Allowance for credit losses on loans											221,462			184,913			191,836
Ratios:
Nonperforming loans as a percent of loans		0.49	%		0.77	%		0.67	%		0.07	%		0.10	%		0.09	%
Nonperforming assets as a percent of loans plus other real estate owned		0.50			0.78			0.67			0.07			0.10			0.09
Nonperforming assets as a percent of total assets		0.27			0.41			0.34			0.04			0.05			0.05
Loans past due 90 days or more as a percent of loans		0.02			0.03			0.03			0.01			0.01			0.01
Allowance for loan losses as a percent of loans		0.89			0.88			0.87
Allowance for loan losses as a multiple of nonperforming loans	1.81x			1.14x			1.30x
Allowance for credit losses on loans as a percent of loans											0.97			0.93			0.91
Allowance for credit losses on loans as a multiple of nonperforming loans										13.00x			9.33x			9.96x

Liquidity Risk

Liquidity represents the Company’s ability to meet financial commitments through the maturity and sale of existing assets or availability of additional funds. The Company believes that the most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of a large, stable supply of core deposits and wholesale funds. Ultimately, the Company believes public confidence is generated through profitable operations, sound credit quality and a strong capital position. The primary source of liquidity for the Company is regularly scheduled payments on and maturity of assets, which include ~~$5.8~~$6.3 billion of high-quality securities available for ~~sale.~~sale as of September 30, 2023. The liquidity of the Company and the Bank is also enhanced by its activity in the federal funds market and by its core deposits. Additionally, management believes it can raise debt or equity capital ~~on favorable terms~~ in the future, should the need arise.

Another factor affecting liquidity is the amount of deposits and customer repurchase agreements that have pledging requirements. All customer repurchase agreements require collateral in the form of a security. The U.S. Government, other public entities, and certain trust depositors require the Company to pledge securities if their deposit balances are greater than the FDIC-insured deposit limitations. These pledging requirements affect liquidity risk in that the related security cannot otherwise be disposed of due to the pledging restriction. ~~At September 30, 2017, $4.9~~There were $8.5 billion ~~or 83.2 percent,~~and $10.3 billion of ~~the~~ securities ~~available-for-sale were~~ pledged ~~or used as collateral, compared~~ to ~~$5.7 billion, or 88.6 percent, at December 31, 2016. However of these amounts, securities with a market value of $1.8 billion~~secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at September 30, ~~2017~~2023 and ~~$1.8 billion at~~ December 31, ~~2016 were pledged at the Federal Reserve Discount Window but were unencumbered as of those dates.~~2022, respectively.

The Company also has other commercial commitments that may impact liquidity. These commitments include unused commitments to extend credit, standby letters of credit and financial guarantees, and commercial letters of credit. The total amount of these commercial commitments at September 30, ~~2017~~2023 was ~~$9.7~~$18.1 billion. Since many of these commitments expire without being drawn upon, the total amount of these commercial commitments does not necessarily represent the future cash requirements of the Company.

The Company’s cash requirements consist primarily of dividends to shareholders, debt service, operating expenses, and treasury stock purchases. Management fees and dividends received from bank and non-bank subsidiaries traditionally have been sufficient to satisfy these requirements and are expected to be sufficient in the future. The Bank is subject to various rules regarding payment of dividends to the Company. For the most part, the Bank can pay dividends at least equal to its current year’s earnings without seeking prior regulatory approval. The

Company also uses cash to inject capital into its bank and non-bank subsidiaries to maintain adequate capital as well as fund strategic initiatives.

In September 2022, the Company issued $110.0 million in aggregate subordinated notes due in September 2032. The Company received $107.9 million, after deducting underwriting discounts and commissions and offering expenses, and used the proceeds from the offering for general corporate purposes, including, among other uses, contributing Tier 1 capital into the Bank. The subordinated notes were issued with a fixed-to-fixed rate of 6.25% and an effective rate of 6.64%, due to issuance costs, with an interest rate reset date of September 2027.

To enhance general working capital needs, the Company has a revolving line of credit with Wells Fargo Bank, N.A., which allows the Company to borrow up to ~~$75.0~~$30.0 million for general working capital purposes. The interest rate applied to borrowed balances will be at the Company’s option, either ~~1.00 percent~~1.4% above ~~LIBOR~~SOFR or ~~1.75 percent~~1.75% below the prime rate on the date of an advance. The Company pays a ~~0.3 percent~~0.4% unused commitment fee for unused portions of the line of credit. The Company had no advances outstanding atas of September 30, ~~2017.~~2023.

The Company is a member bank of the FHLB. The Company owns ~~$10.0~~$70.2 million of FHLB stock and has access to additional liquidity and funding sources through FHLB advances. ~~Additionally,~~The Company’s borrowing capacity is dependent upon the amount of collateral the Company ~~has access to borrow up to $1.2~~places at the FHLB. The Company had a $1.0 billion ~~through advances~~and a $500.0 million short-term advance outstanding at FHLB of Des Moines as of September 30, 2023 at interest rates of 5.04% and 5.47%, respectively. Additionally, in 2023, the FHLB of Des Moines ~~but had no outstanding~~issued a letter of credit for $150.0 million on behalf of the Company to secure deposits. This letter of credit will expire in January 2024. The Company’s remaining borrowing capacity with the FHLB ~~Des Moines advances~~was $436.7 million as of September 30, ~~2017.~~2023.

The Company had an $800.0 million short-term borrowing outstanding with the Federal Reserve Bank's BTFP as of September 30, 2023 at an interest rate of 4.70%. As of September 30, 2023, the Company’s remaining borrowing capacity with the BTFP was $20.0 million and its remaining borrowing capacity at the Federal Reserve Discount Window was $10.2 billion.

Operational Risk

Operational risk generally refers to the risk of loss resulting from the Company’s operations, including those operations performed for the Company by third parties. This would include but is not limited to the risk of fraud by employees or persons outside the Company, the execution of unauthorized transactions by employees or others, errors relating to transaction processing, breaches of the internal control system and compliance requirements, and unplanned interruptions in service. This risk of loss also includes the potential legal or regulatory actions that could arise as a result of an operational deficiency, or as a result of noncompliance with applicable regulatory standards. The Company must comply with a number of legal and regulatory ~~requirements, including those under the Sarbanes-Oxley Act of 2002, as amended.~~requirements.

The Company operates in many markets and relies on the ability of its employees and systems to properly process a high number of transactions. In the event of a breakdown in internal control systems, improper operation of systems or improper employee actions, the Company could suffer financial loss, face regulatory action and suffer damage to its reputation. In order to address this risk, management maintains a system of internal controls with the objective of providing proper transaction authorization and execution, safeguarding of assets from misuse or theft, and ensuring the reliability of financial and other data.

The Company maintains systems of internal controls that provide management with timely and accurate information about the Company’s operations. These systems have been designed to manage operational risk at appropriate levels given the Company’s financial strength, the environment in which it operates, and considering factors such as competition and regulation. The Company has also established procedures that are designed to ensure that policies relating to conduct, ethics, and business practices are followed on a uniform basis. In certain cases, the Company has experienced losses from operational risk. Such losses have included the effects of operational errors that the Company has discovered and included as expense in the statement of income. While there can be no assurance that the Company will not suffer such losses in the future, management continually monitors and works to improve its internal controls, systems, and corporate-wide processes and procedures.

ITEM 4. CONTROLS AND PROCEDURES

The Sarbanes-Oxley Act of 2002, as amended, requires the Chief Executive Officer and the Chief Financial Officer to make certain certifications under this Form 10-Q with respect ~~to this report and~~ to the Company’s disclosure controls and procedures and internal control over financial reporting. The Company has a Code of Ethics that expresses the values that drive employee behavior and maintains the Company’s commitment to the highest standards of ethics.

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, ~~has~~ evaluated the effectiveness of the Company's ~~"disclosure~~“disclosure controls and ~~procedures"~~procedures” (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this ~~report.~~Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by ~~the report,~~this Form 10-Q, the Company’s disclosure controls and procedures were effective for ensuring that the Company’s SEC filings are recorded, processed, summarized, and reported within the time period required and that information required to be disclosed by the Company is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the ~~three months~~nine-month period ended September 30, ~~2017~~2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – ~~OTHE~~ROTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, the Company and its subsidiaries are named defendants in various legal proceedings. In the opinion of management, after consultation with legal counsel, none of these lawsuits are expected to have a materially adverse effect on the financial position, results of operations, or cash flows of the Company.

ITEM 1A. RISK FACTORS

There were no material changes to the risk factors as previously disclosed in response to Item 1A to Part 1I of the Company’s Annual Report on Form ~~10-K.~~10-K for the fiscal year ended December 31, 2022.

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

The table below sets forth the information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock during the ~~three months~~three-month period ended September 30, ~~2017.~~2023.

ISSUER PURCHASE OF EQUITY SECURITIES

Period

(a)
Total Number of Shares (or Units) Purchased

(b)
Average Price Paid per Share (or Unit)

(c)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs

(d)
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs

July 1 – July 31, 2017

580

74.26

580

1,995,922

August 1 – August 31, 2017

147,799

67.97

147,799

1,848,123

September 1 - September 30, 2017

19

66.81

19

1,848,104

Total

148,398

$
67.99

148,398


Period	Total Number of Shares (or Units) Purchased (1)		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be PurchasedUnder the Plans or Programs
July 1 - July 24, 2023		—	$	—		—		—
July 25 - July 31, 2023		—		—		—		1,000,000
August 1 - August 31, 2023		—		—		—		1,000,000
September 1 - September 30, 2023		—		—		—		1,000,000
Total		—	$	—		—

(1) Includes shares acquired pursuant to the Company's share-based incentive programs. Under the terms of the Company's share-based incentive programs, the Company accepts previously owned shares of common stock surrendered to satisfy tax withholding obligations associated with equity compensation. These purchases do not count against the maximum value of shares remaining available for purchase under Repurchase Authorizations.

(2) Includes shares acquired under the Board of Directors approved Repurchase Authorization(s).

On April 26, ~~2016,~~2022, the Company announced a plan to repurchase up to two million shares of common stock, which terminated on April 25, ~~2017.~~2023. On ~~April~~July 25, ~~2017,~~2023, the Company announced a plan to repurchase up to ~~two~~one million shares of common stock, which will terminate on April ~~24, 2018. The Company has not made any repurchases other than through these plans.~~30, 2024. All ~~open market~~ share purchases ~~under~~pursuant to the ~~share repurchase plan~~Repurchase Authorizations are intended to be within the scope of Rule 10b-18 promulgated under the Exchange ~~Act.~~Act and any other applicable rules and regulations. Rule 10b-18 provides a safe harbor for purchases in a given day if the Company satisfies the manner, timing and volume conditions of the rule when purchasing its own shares of common ~~shares.~~ stock.

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~83

~~ITEM 4. MINE SAFETY DISCLOSURES~~

~~None.~~

~~ITEM 5. OTHER INFORMATION~~

~~Not applicable.~~

ITEM 6. EXHIBITS


~~3.1~~
3.1		Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 ~~which was~~and filed with the Commission on May 9, 2006).

3.2		Bylaws, amended as of ~~October 28, 2014 incorporated~~April 13, 2023 (incorporated by reference to Exhibit ~~3.2 to~~3.1 of the Company’s ~~Quarterly~~Current Report on Form ~~10-Q for the quarter ended September 30, 2016 which was~~8-K dated April 13, 2023 and filed with the Commission on ~~August 2, 2016.~~April 13, 2023).

31.1		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith.

31.2		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act filed herewith.

32.1		CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act filed herewith.

32.2		CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act filed herewith.

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101.SCH		Inline XBRL Taxonomy Extension Schema Document filed herewith.

101.CAL		Inline XBRL Taxonomy Extension Calculation Document filed herewith.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document filed herewith.

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101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document filed herewith.

104		The cover page of our Form 10-Q for the quarter ended September 30, 2023, formatted in iXBRL.

~~SIGNATURES~~

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 hereunto duly authorized.

UMB FINANCIAL CORPORATION

/s/ ~~Brian J. Walker~~David C. Odgers

~~Brian J. Walker~~David C. Odgers

Chief Accounting Officer

Date: ~~November 2, 2017~~October 26, 2023

6185

PER SHARE DATA
Basic:
Income from continuing operations	$	0.99		$	0.81	$	2.76		$	2.26
(Loss) income from discontinued operations		(0.01	)		0.05		(0.01	)		0.11
Net income – basic		0.98			0.86		2.75			2.37
Diluted:
Income from continuing operations		0.98			0.80		2.72			2.24
(Loss) income from discontinued operations		(0.01	)		0.05		(0.01	)		0.12
Net income - diluted		0.97			0.85		2.71			2.36
Dividends		0.255			0.245		0.765			0.735
Weighted average shares outstanding - basic		49,283,322			48,849,251		49,221,629			48,792,419
Weighted average shares outstanding - diluted		49,833,141			49,284,280		49,838,619			49,162,200

Supplemental Disclosures:
Income taxes paid	$	37,109	$	30,995
Total interest paid		40,245		20,555

	December 31, 2016
	30-89 Days Past Due and Accruing		Greater than 90 Days Past Due and Accruing		Non- Accrual Loans		Total Past Due		PCI Loans		Current		Total Loans
Loans
Commercial:
Commercial	$	3,285	$	49	$	35,777	$	39,111	$	—	$	4,371,695	$	4,410,806
Asset-based		—		—		—		—		—		225,878		225,878
Factoring		—		—		—		—		—		139,902		139,902
Commercial – credit card		612		10		8		630		—		146,105		146,735
Real estate:
Real estate – construction		3		—		181		184		—		741,620		741,804
Real estate – commercial		1,303		1,004		16,423		18,730		—		3,147,192		3,165,922
Real estate – residential		1,034		6		1,344		2,384		—		545,966		548,350
Real estate – HELOC		588		—		4,736		5,324		—		706,470		711,794
Consumer:
Consumer – credit card		2,228		2,115		475		4,818		—		265,280		270,098
Consumer – other		1,061		181		11,315		12,557		800		126,205		139,562
Leases		—		—		—		—		—		39,532		39,532
Total loans	$	10,114	$	3,365	$	70,259	$	83,738	$	800	$	10,455,845	$	10,540,383

	Nine Months Ended September 30, 2017
	Commercial			Real estate			Consumer			Leases			Total
Allowance for loan losses:
Beginning balance	$	71,657		$	10,569		$	9,311		$	112		$	91,649
Charge-offs		(24,734	)		(888	)		(7,442	)		—			(33,064	)
Recoveries		2,519			620			1,665			—			4,804
Provision		26,621			3,210			5,213			(44	)		35,000
Ending balance	$	76,063		$	13,511		$	8,747		$	68		$	98,389
Ending balance: individually evaluated for impairment	$	3,060		$	125		$	—		$	—		$	3,185
Ending balance: collectively evaluated for impairment		73,003			13,386			8,747			68			95,204
Loans:
Ending balance: loans	$	5,102,259		$	5,447,874		$	422,450		$	24,445		$	10,997,028
Ending balance: individually evaluated for impairment		62,872			8,310			—			—			71,182
Ending balance: collectively evaluated for impairment		5,039,387			5,439,564			422,450			24,445			10,925,846

	Three Months Ended September 30, 2016
	Commercial			Real estate			Consumer			Leases			Total
Allowance for loan losses:
Beginning balance	$	64,561		$	10,683		$	9,319		$	103		$	84,666
Charge-offs		(5,667	)		(142	)		(2,335	)		—			(8,144	)
Recoveries		129			209			544			—			882
Provision		4,844			6,280			1,888			(12	)		13,000
Ending balance	$	63,867		$	17,030		$	9,416		$	91		$	90,404

	Nine Months Ended September 30, 2016
	Commercial			Real estate			Consumer			Leases			Total
Allowance for loan losses:
Beginning balance	$	63,847		$	8,220		$	8,949		$	127		$	81,143
Charge-offs		(11,542	)		(2,938	)		(6,951	)		—			(21,431	)
Recoveries		3,477			540			1,675			—			5,692
Provision		8,085			11,208			5,743			(36	)		25,000
Ending balance	$	63,867		$	17,030		$	9,416		$	91		$	90,404
Ending balance: individually evaluated for impairment	$	1,759		$	4,726		$	—		$	—		$	6,485
Ending balance: collectively evaluated for impairment		62,108			12,304			9,416			91			83,919
Loans:
Ending balance: loans	$	4,948,341		$	4,926,253		$	387,371		$	31,529		$	10,293,494
Ending balance: individually evaluated for impairment		80,769			16,122			2,158			—			99,049
Ending balance: collectively evaluated for impairment		4,867,572			4,910,131			384,178			31,529			10,193,410
Ending balance: PCI Loans		—			—			1,035			—			1,035

	As of September 30, 2017
	Unpaid Principal Balance		Recorded Investment with No Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial:
Commercial	$	83,289	$	42,987	$	19,885	$	62,872	$	3,060	$	68,724
Asset-based		—		—		—		—		—		—
Factoring		—		—		—		—		—		—
Commercial – credit card		—		—		—		—		—		—
Real estate:
Real estate – construction		108		93		—		93		—		199
Real estate – commercial		11,586		6,825		1,173		7,998		51		10,592
Real estate – residential		223		121		98		219		74		174
Real estate – HELOC		—		—		—		—		—		—
Consumer:
Consumer – credit card		—		—		—		—		—		—
Consumer – other		—		—		—		—		—		8
Leases		—		—		—		—		—		—
Total	$	95,206	$	50,026	$	21,156	$	71,182	$	3,185	$	79,697

	As of December 31, 2016
	Unpaid Principal Balance		Recorded Investment with No Allowance			Recorded Investment with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial:
Commercial	$	80,405	$	43,260		$	31,091	$	74,351	$	7,866	$	69,776
Asset-based		—		—			—		—		—		—
Factoring		—		—			—		—		—		—
Commercial – credit card		—		—			—		—		—		—
Real estate:
Real estate – construction		510		181			113		294		68		405
Real estate – commercial		18,107		12,303			487		12,790		—		8,956
Real estate – residential		231		230			—		230		—		520
Real estate – HELOC		—		—			—		—		—		79
Consumer:
Consumer – credit card		—		—			—		—		—		—
Consumer – other		—		—			—		—		—		1,981
Leases		—		—			—		—		—		—
Total	$	99,253	$	55,974	��	$	31,691	$	87,665	$	7,934	$	81,717

	Bank		Institutional Investment Management			Asset Servicing		Total
Balances as of January 1, 2017	$	161,391	$	47,529		$	19,476	$	228,396
Discontinued assets		—		(47,529	)		—		(47,529	)
Balances as of September 30, 2017	$	161,391	$	—		$	19,476	$	180,867

Balances as of January 1, 2016	$	161,341	$	47,529		$	19,476	$	228,346
Acquisition of Marquette		50		—			—		50
Discontinued assets		—		(47,529	)		—		(47,529	)
Balances as of December 31, 2016	$	161,391	$	—		$	19,476	$	180,867

	As of September 30, 2017
	Core Deposit Intangible Assets		Customer Relationships		Other Intangible Assets		Total
Gross carrying amount	$	50,059	$	74,243	$	3,254	$	127,556
Accumulated amortization		41,424		59,401		3,254		104,079
Net carrying amount	$	8,635	$	14,842	$	—	$	23,477

	Three Months Ended September 30, 2017
	Bank		Asset Servicing		Total
Net interest income	$	137,331	$	3,527	$	140,858
Provision for loan losses		11,500		—		11,500
Noninterest income		79,759		24,547		104,306
Noninterest expense		150,057		21,764		171,821
Income before taxes		55,533		6,310		61,843
Income tax expense		11,649		1,322		12,971
Income from continuing operations	$	43,884	$	4,988	$	48,872
Average assets	$	19,542,050	$	770,950	$	20,313,000

	Nine Months
	Ended September 30,
	2017			2016
(Loss) income from discontinued operations	$	(475	)	$	5,633
Depreciation and amortization		1,647			2,719
Net cash provided by operating activities of discontinued operations	$	1,172		$	8,352

Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1 – July 31, 2017		580		74.26		580		1,995,922
August 1 – August 31, 2017		147,799		67.97		147,799		1,848,123
September 1 - September 30, 2017		19		66.81		19		1,848,104
Total		148,398	$	67.99		148,398