UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, ~~2021~~2022


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

For the transition period from to

Commission File No. 001-36502


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


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

(816) 234-2000

(Registrant’s telephone number, including area code)


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

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

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

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

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

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

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

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

As of November ~~3, 2021,~~2, 2022, the registrant had outstanding ~~116,171,392~~119,352,570 shares of its $5 par value common stock, registrant’s only class of common stock.

Commerce Bancshares, Inc. and Subsidiaries

Form 10-Q


			Page
INDEX
Part I	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of September 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021	3
		Consolidated Statements of Income for the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	4
		Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	5
		Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	6
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	8
		Notes to Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4445
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6869
	Item 4.	Controls and Procedures	6970

Part II	Other Information
	Item 1.	Legal Proceedings	7071
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7071
	Item 6.	Exhibits	7071
Signatures			7172

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
		(Unaudited)					(Unaudited)
		(In thousands)					(In thousands)
ASSETS	ASSETS					ASSETS
Loans	Loans	$	15,148,390	$	16,329,641	Loans	$	15,898,958	$	15,176,359
Allowance for credit losses on loans	Allowance for credit losses on loans	(162,775)		(220,834)		Allowance for credit losses on loans	(143,377)		(150,044)
Net loans	Net loans	14,985,615		16,108,807		Net loans	15,755,581		15,026,315
Loans held for sale (including $11,982,000 and $39,396,000 of residential mortgage loans carried at fair value at September 30, 2021 and December 31, 2020, respectively)		16,043		45,089
Loans held for sale (including $1,426,000 and $5,570,000 of residential mortgage loans carried at fair value at September 30, 2022 and December 31, 2021, respectively)						Loans held for sale (including $1,426,000 and $5,570,000 of residential mortgage loans carried at fair value at September 30, 2022 and December 31, 2021, respectively)	8,062		8,615
Investment securities:	Investment securities:					Investment securities:
Available for sale debt, at fair value (amortized cost of $14,027,284,000 and $12,097,533,000 and
allowance for credit losses of $— at September 30, 2021 and December 31, 2020, respectively)		14,165,656		12,449,264
Available for sale debt, at fair value (amortized cost of $14,176,324,000 and $14,419,133,000 at						Available for sale debt, at fair value (amortized cost of $14,176,324,000 and $14,419,133,000 at
September 30, 2022 and December 31, 2021, respectively, and allowance for credit losses of $—						September 30, 2022 and December 31, 2021, respectively, and allowance for credit losses of $—
at both September 30, 2022 and December 31, 2021)						at both September 30, 2022 and December 31, 2021)	12,632,510		14,450,027
Trading debt	Trading debt	40,114		35,321		Trading debt	39,222		46,235
Equity	Equity	9,174		4,363		Equity	8,954		9,202
Other	Other	184,450		156,745		Other	222,742		194,047
Total investment securities	Total investment securities	14,399,394		12,645,693		Total investment securities	12,903,428		14,699,511

Federal funds sold						Federal funds sold	14,020		2,800
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,750,000		850,000		Securities purchased under agreements to resell	1,275,000		1,625,000
Interest earning deposits with banks	Interest earning deposits with banks	1,888,545		1,747,363		Interest earning deposits with banks	642,943		3,971,217
Cash and due from banks	Cash and due from banks	344,460		437,563		Cash and due from banks	344,178		305,539
Premises and equipment – net	Premises and equipment – net	377,476		371,083		Premises and equipment – net	407,833		388,738
Goodwill	Goodwill	138,921		138,921		Goodwill	138,921		138,921
Other intangible assets – net	Other intangible assets – net	14,458		11,207		Other intangible assets – net	15,599		15,570
Other assets	Other assets	582,631		567,248		Other assets	1,097,031		506,862
Total assets	Total assets	$	34,497,543	$	32,922,974	Total assets	$	32,602,596	$	36,689,088
LIABILITIES AND EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY						LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:	Deposits:					Deposits:
Non-interest bearing	Non-interest bearing	$	11,622,855	$	10,497,598	Non-interest bearing	$	10,468,591	$	11,772,374
Savings, interest checking and money market	Savings, interest checking and money market	14,907,654		14,604,456		Savings, interest checking and money market	16,014,487		16,598,085
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	452,432		529,802		Certificates of deposit of less than $100,000	391,145		435,960
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	1,163,343		1,314,889		Certificates of deposit of $100,000 and over	597,093		1,006,654
Total deposits	Total deposits	28,146,284		26,946,745		Total deposits	27,471,316		29,813,073
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	2,253,753		2,098,383		Federal funds purchased and securities sold under agreements to repurchase	2,314,590		3,022,967
Other borrowings	Other borrowings	4,006		802		Other borrowings	1,831		12,560
Other liabilities	Other liabilities	602,279		477,072		Other liabilities	443,752		392,164
Total liabilities	Total liabilities	31,006,322		29,523,002		Total liabilities	30,231,489		33,240,764
Commerce Bancshares, Inc. stockholders’ equity:	Commerce Bancshares, Inc. stockholders’ equity:					Commerce Bancshares, Inc. stockholders’ equity:

Common stock, $5 par value	Common stock, $5 par value					Common stock, $5 par value
Authorized 140,000,000; issued 117,870,372 shares		589,352		589,352
Authorized 140,000,000; issued 122,160,705 shares at September 30, 2022 and December 31, 2021						Authorized 140,000,000; issued 122,160,705 shares at September 30, 2022 and December 31, 2021	610,804		610,804
Capital surplus	Capital surplus	2,427,544		2,436,288		Capital surplus	2,683,631		2,689,894
Retained earnings	Retained earnings	396,655		73,000		Retained earnings	353,446		92,493
Treasury stock of 1,303,270 shares at September 30, 2021
and 497,413 shares at December 31, 2020, at cost		(92,047)		(32,970)
Treasury stock of 2,553,242 shares at September 30, 2022						Treasury stock of 2,553,242 shares at September 30, 2022
and 476,392 shares at December 31, 2021, at cost						and 476,392 shares at December 31, 2021, at cost	(176,943)		(32,973)
Accumulated other comprehensive income	Accumulated other comprehensive income	159,166		331,377		Accumulated other comprehensive income	(1,119,344)		77,080
Total Commerce Bancshares, Inc. stockholders' equity	Total Commerce Bancshares, Inc. stockholders' equity	3,480,670		3,397,047		Total Commerce Bancshares, Inc. stockholders' equity	2,351,594		3,437,298
Non-controlling interest	Non-controlling interest	10,551		2,925		Non-controlling interest	19,513		11,026
Total equity	Total equity	3,491,221		3,399,972		Total equity	2,371,107		3,448,324
Total liabilities and equity	Total liabilities and equity	$	34,497,543	$	32,922,974	Total liabilities and equity	$	32,602,596	$	36,689,088

See accompanying notes to consolidated financial statements.

Table of Contents

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands, except per share data)	(In thousands, except per share data)	2021		2020		2021		2020		(In thousands, except per share data)	2022		2021		2022		2021
		(Unaudited)									(Unaudited)
INTEREST INCOME	INTEREST INCOME									INTEREST INCOME
Interest and fees on loans	Interest and fees on loans	$	142,887	$	150,808	$	433,809	$	461,500	Interest and fees on loans	$	171,272	$	142,887	$	445,873	$	433,809
Interest and fees on loans held for sale	Interest and fees on loans held for sale	187		264		736		588		Interest and fees on loans held for sale	159		187		470		736
Interest on investment securities	Interest on investment securities	63,904		60,534		170,604		164,391		Interest on investment securities	79,586		63,904		241,326		170,604
Interest on federal funds sold	Interest on federal funds sold	1		—		3		2		Interest on federal funds sold	94		1		114		3
Interest on securities purchased under agreements to resell	Interest on securities purchased under agreements to resell	9,007		11,247		30,551		29,445		Interest on securities purchased under agreements to resell	5,984		9,007		15,669		30,551
Interest on deposits with banks	Interest on deposits with banks	995		261		2,108		1,996		Interest on deposits with banks	5,571		995		9,150		2,108
Total interest income	Total interest income	216,981		223,114		637,811		657,922		Total interest income	262,666		216,981		712,602		637,811
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Interest on deposits:	Interest on deposits:									Interest on deposits:
Savings, interest checking and money market	Savings, interest checking and money market	1,817		3,206		5,764		15,492		Savings, interest checking and money market	7,545		1,817		11,583		5,764
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	206		1,028		1,006		4,196		Certificates of deposit of less than $100,000	411		206		755		1,006
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	450		2,512		2,173		11,357		Certificates of deposit of $100,000 and over	871		450		1,768		2,173
Interest on federal funds purchased and securities sold under	Interest on federal funds purchased and securities sold under									Interest on federal funds purchased and securities sold under
agreements to repurchase	agreements to repurchase	480		406		1,112		5,761		agreements to repurchase	7,891		480		11,506		1,112
Interest on other borrowings	Interest on other borrowings	(9)		—		(11)		1,032		Interest on other borrowings	(425)		(9)		(554)		(11)
Total interest expense	Total interest expense	2,944		7,152		10,044		37,838		Total interest expense	16,293		2,944		25,058		10,044
Net interest income	Net interest income	214,037		215,962		627,767		620,084		Net interest income	246,373		214,037		687,544		627,767
Provision for credit losses	Provision for credit losses	(7,385)		3,101		(59,272)		141,593		Provision for credit losses	15,290		(7,385)		12,594		(59,272)
Net interest income after credit losses	Net interest income after credit losses	221,422		212,861		687,039		478,491		Net interest income after credit losses	231,083		221,422		674,950		687,039
NON-INTEREST INCOME	NON-INTEREST INCOME									NON-INTEREST INCOME
Trust fees										Trust fees	45,406		48,950		140,009		139,334
Bank card transaction fees	Bank card transaction fees	42,815		37,873		123,118		111,818		Bank card transaction fees	45,638		42,815		131,556		123,118
Trust fees		48,950		40,769		139,334		118,676
Deposit account charges and other fees	Deposit account charges and other fees	25,161		23,107		71,724		69,063		Deposit account charges and other fees	24,521		25,161		72,392		71,724
Consumer brokerage services										Consumer brokerage services	5,085		4,900		14,599		13,484
Capital market fees	Capital market fees	3,794		3,194		12,102		10,756		Capital market fees	3,393		3,794		10,845		12,102
Consumer brokerage services		4,900		4,011		13,484		11,099
Loan fees and sales	Loan fees and sales	6,842		9,769		24,472		17,653		Loan fees and sales	3,094		6,842		10,575		24,472
Other	Other	5,044		10,849		28,460		31,685		Other	11,377		5,044		29,734		28,460
Total non-interest income	Total non-interest income	137,506		129,572		412,694		370,750		Total non-interest income	138,514		137,506		409,710		412,694

INVESTMENT SECURITIES GAINS (LOSSES), NET		13,108		16,155		39,765		(1,275)
INVESTMENT SECURITIES GAINS, NET										INVESTMENT SECURITIES GAINS, NET	3,410		13,108		11,602		39,765
NON-INTEREST EXPENSE	NON-INTEREST EXPENSE									NON-INTEREST EXPENSE
Salaries and employee benefits	Salaries and employee benefits	132,824		127,308		392,608		383,004		Salaries and employee benefits	137,393		132,824		415,589		392,608
Data processing and software										Data processing and software	28,050		25,598		82,701		76,015
Net occupancy	Net occupancy	12,329		12,058		35,877		35,075		Net occupancy	12,544		12,329		37,343		35,877
Equipment	Equipment	4,440		4,737		13,398		14,313		Equipment	5,036		4,440		14,338		13,398
Supplies and communication	Supplies and communication	4,530		4,141		12,688		13,226		Supplies and communication	4,581		4,530		13,655		12,688
Data processing and software		25,598		23,610		76,015		71,002
Marketing	Marketing	5,623		4,926		16,461		14,706		Marketing	6,228		5,623		18,408		16,461
Other	Other	26,276		14,078		55,272		40,742		Other	19,052		26,276		50,003		55,272
Total non-interest expense	Total non-interest expense	211,620		190,858		602,319		572,068		Total non-interest expense	212,884		211,620		632,037		602,319
Income before income taxes	Income before income taxes	160,416		167,730		537,179		275,898		Income before income taxes	160,123		160,416		464,225		537,179
Less income taxes	Less income taxes	34,662		34,375		111,947		54,209		Less income taxes	33,936		34,662		97,859		111,947
Net income	Net income	125,754		133,355		425,232		221,689		Net income	126,187		125,754		366,366		425,232
Less non-controlling interest expense (income)		3,193		907		9,373		(2,479)
Less non-controlling interest expense										Less non-controlling interest expense	3,364		3,193		9,595		9,373
Net income attributable to Commerce Bancshares, Inc.	Net income attributable to Commerce Bancshares, Inc.	122,561		132,448		415,859		224,168		Net income attributable to Commerce Bancshares, Inc.	$	122,823	$	122,561	$	356,771	$	415,859
Less preferred stock dividends		—		7,466		—		11,966
Net income available to common shareholders		$	122,561	$	124,982	$	415,859	$	212,202

Net income per common share — basic	Net income per common share — basic	$	1.05	$	1.06	$	3.55	$	1.80	Net income per common share — basic	$	1.03	$	1.00	$	2.96	$	3.38
Net income per common share — diluted	Net income per common share — diluted	$	1.05	$	1.06	$	3.54	$	1.80	Net income per common share — diluted	$	1.02	$	.99	$	2.95	$	3.37

See accompanying notes to consolidated financial statements.

Table of Contents

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2022		2021		2022		2021
		(Unaudited)									(Unaudited)
Net income	Net income	$	125,754	$	133,355	$	425,232	$	221,689	Net income	$	126,187	$	125,754	$	366,366	$	425,232
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):

Net unrealized gains (losses) on available for sale debt securities		(57,068)		330		(160,019)		165,464
Net unrealized losses on available for sale debt securities										Net unrealized losses on available for sale debt securities	(345,565)		(57,068)		(1,181,031)		(160,019)
Pension loss amortization	Pension loss amortization	451		327		1,326		1,038		Pension loss amortization	302		451		947		1,326
Unrealized gains (losses) on cash flow hedge derivatives		(4,607)		(6,483)		(13,518)		66,489
Unrealized losses on cash flow hedge derivatives										Unrealized losses on cash flow hedge derivatives	(7,187)		(4,607)		(16,340)		(13,518)
Other comprehensive income (loss)	Other comprehensive income (loss)	(61,224)		(5,826)		(172,211)		232,991		Other comprehensive income (loss)	(352,450)		(61,224)		(1,196,424)		(172,211)
Comprehensive income		64,530		127,529		253,021		454,680
Less non-controlling interest expense (income)		3,193		907		9,373		(2,479)
Comprehensive income attributable to Commerce Bancshares, Inc.		$	61,337	$	126,622	$	243,648	$	457,159
Comprehensive income (loss)										Comprehensive income (loss)	(226,263)		64,530		(830,058)		253,021
Less non-controlling interest expense										Less non-controlling interest expense	3,364		3,193		9,595		9,373
Comprehensive income (loss) attributable to Commerce Bancshares, Inc.										Comprehensive income (loss) attributable to Commerce Bancshares, Inc.	$	(229,627)	$	61,337	$	(839,653)	$	243,648

See accompanying notes to consolidated financial statements.

Table of Contents

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021


				Commerce Bancshares, Inc. Shareholders															Commerce Bancshares, Inc. Shareholders
(In thousands, except per share data)	(In thousands, except per share data)	Preferred Stock		Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total		(In thousands, except per share data)	Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total
		(Unaudited)																	(Unaudited)
Balance June 30, 2021		$	—	$	589,352	$	2,424,157	$	304,739	$	(53,018)	$	220,390	$	8,210	$	3,493,830

Balance June 30, 2022																		Balance June 30, 2022	$	610,804	$	2,682,161	$	262,363	$	(129,588)	$	(766,894)	$	16,467	$	2,675,313
Net income	Net income							122,561						3,193		125,754		Net income					122,823						3,364		126,187
Other comprehensive loss	Other comprehensive loss											(61,224)				(61,224)		Other comprehensive loss									(352,450)				(352,450)
Distributions to non-controlling interest	Distributions to non-controlling interest													(193)		(193)		Distributions to non-controlling interest											(318)		(318)

Purchases of treasury stock	Purchases of treasury stock									(40,165)						(40,165)		Purchases of treasury stock							(50,116)						(50,116)

Issuance of stock under purchase and equity compensation plans																		Issuance of stock under purchase and equity compensation plans			(2,762)				2,761						(1)
Stock-based compensation																		Stock-based compensation			4,232										4,232
Cash dividends paid on common stock ($0.265 per share)																		Cash dividends paid on common stock ($0.265 per share)					(31,740)								(31,740)

Balance September 30, 2022																		Balance September 30, 2022	$	610,804	$	2,683,631	$	353,446	$	(176,943)	$	(1,119,344)	$	19,513	$	2,371,107
Balance June 30, 2021																		Balance June 30, 2021	$	589,352	$	2,424,157	$	304,739	$	(53,018)	$	220,390	$	8,210	$	3,493,830

Net Income																		Net Income					122,561						3,193		125,754
Other comprehensive loss																		Other comprehensive loss									(61,224)				(61,224)
Distributions to non-controlling interest																		Distributions to non-controlling interest											(193)		(193)
Purchases of treasury stock																		Purchases of treasury stock							(40,165)						(40,165)
Sale of non-controlling interest of subsidiary	Sale of non-controlling interest of subsidiary					659								(659)		—		Sale of non-controlling interest of subsidiary			659								(659)		—
Issuance of stock under purchase and equity compensation plans	Issuance of stock under purchase and equity compensation plans					(1,137)				1,136						(1)		Issuance of stock under purchase and equity compensation plans			(1,137)				1,136						(1)
Stock-based compensation	Stock-based compensation					3,865										3,865		Stock-based compensation			3,865										3,865
Cash dividends paid on common stock ($0.263 per share)								(30,645)								(30,645)
Cash dividends paid on common stock ($.250 per share)																		Cash dividends paid on common stock ($.250 per share)					(30,645)								(30,645)

Balance September 30, 2021	Balance September 30, 2021	$	—	$	589,352	$	2,427,544	$	396,655	$	(92,047)	$	159,166	$	10,551	$	3,491,221	Balance September 30, 2021	$	589,352	$	2,427,544	$	396,655	$	(92,047)	$	159,166	$	10,551	$	3,491,221
Balance June 30, 2020		$	144,784	$	563,978	$	2,136,874	$	232,082	$	(69,112)	$	349,261	$	302	$	3,358,169

Net income								132,448						907		133,355
Other comprehensive loss												(5,826)				(5,826)
Distributions to non-controlling interest														(608)		(608)
Redemption of preferred stock		(144,784)						(5,216)								(150,000)
Purchases of treasury stock										(167)						(167)
Issuance of stock under purchase and equity compensation plans						(229)				229						—
Stock-based compensation						3,765										3,765
Cash dividends paid on common stock ($.257 per share)								(30,174)								(30,174)
Cash dividends paid on preferred stock ($.375 per depositary share)								(2,250)								(2,250)
Balance September 30, 2020		$	—	$	563,978	$	2,140,410	$	326,890	$	(69,050)	$	343,435	$	601	$	3,306,264

See accompanying notes to consolidated financial statements.

Table of Contents

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021


				Commerce Bancshares, Inc. Shareholders															Commerce Bancshares, Inc. Shareholders
(In thousands, except per share data)	(In thousands, except per share data)	Preferred Stock		Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total		(In thousands, except per share data)	Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total
		(Unaudited)																	(Unaudited)
Balance December 31, 2020		$	—	$	589,352	$	2,436,288	$	73,000	$	(32,970)	$	331,377	$	2,925	$	3,399,972
Balance December 31, 2021																		Balance December 31, 2021	$	610,804	$	2,689,894	$	92,493	$	(32,973)	$	77,080	$	11,026	$	3,448,324

Net income	Net income							415,859						9,373		425,232		Net income					356,771						9,595		366,366
Other comprehensive loss	Other comprehensive loss											(172,211)				(172,211)		Other comprehensive loss									(1,196,424)				(1,196,424)
Distributions to non-controlling interest	Distributions to non-controlling interest													(1,088)		(1,088)		Distributions to non-controlling interest											(1,108)		(1,108)

Purchases of treasury stock	Purchases of treasury stock									(80,052)						(80,052)		Purchases of treasury stock							(163,321)						(163,321)

Issuance of stock under purchase and equity compensation plans																		Issuance of stock under purchase and equity compensation plans			(18,904)				19,351						447
Stock-based compensation																		Stock-based compensation			12,641										12,641
Cash dividends on common stock ($.795 per share)																		Cash dividends on common stock ($.795 per share)					(95,818)								(95,818)

Balance September 30, 2022																		Balance September 30, 2022	$	610,804	$	2,683,631	$	353,446	$	(176,943)	$	(1,119,344)	$	19,513	$	2,371,107
Balance December 31, 2020																		Balance December 31, 2020	$	589,352	$	2,436,288	$	73,000	$	(32,970)	$	331,377	$	2,925	$	3,399,972

Net income																		Net income					415,859						9,373		425,232
Other comprehensive loss																		Other comprehensive loss									(172,211)				(172,211)
Distributions to non-controlling interest																		Distributions to non-controlling interest											(1,088)		(1,088)
Purchases of treasury stock																		Purchases of treasury stock							(80,052)						(80,052)
Sale of non-controlling interest of subsidiary	Sale of non-controlling interest of subsidiary					659								(659)		—		Sale of non-controlling interest of subsidiary			659								(659)		—
Issuance of stock under purchase and equity compensation plans	Issuance of stock under purchase and equity compensation plans					(20,991)				20,975						(16)		Issuance of stock under purchase and equity compensation plans			(20,991)				20,975						(16)
Stock-based compensation	Stock-based compensation					11,588										11,588		Stock-based compensation			11,588										11,588
Cash dividends on common stock ($.788 per share)								(92,204)								(92,204)
Cash dividends on common stock ($.750 per share)																		Cash dividends on common stock ($.750 per share)					(92,204)								(92,204)

Balance September 30, 2021	Balance September 30, 2021	$	—	$	589,352	$	2,427,544	$	396,655	$	(92,047)	$	159,166	$	10,551	$	3,491,221	Balance September 30, 2021	$	589,352	$	2,427,544	$	396,655	$	(92,047)	$	159,166	$	10,551	$	3,491,221
Balance December 31, 2019		$	144,784	$	563,978	$	2,151,464	$	201,562	$	(37,548)	$	110,444	$	3,788	$	3,138,472

Adoption of ASU 2016-13								3,766								3,766
Balance December 31, 2019, adjusted		144,784		563,978		2,151,464		205,328		(37,548)		110,444		3,788		3,142,238
Net income								224,168						(2,479)		221,689
Other comprehensive income												232,991				232,991
Distributions to non-controlling interest														(708)		(708)
Redemption of preferred stock		(144,784)						(5,216)								(150,000)
Purchases of treasury stock										(53,760)						(53,760)
Issuance of stock under purchase and equity compensation plans						(22,285)				22,258						(27)
Stock-based compensation						11,231										11,231
Cash dividends on common stock ($.771 per share)								(90,640)								(90,640)
Cash dividends on preferred stock ($1.125 per depositary share)								(6,750)								(6,750)
Balance September 30, 2020		$	—	$	563,978	$	2,140,410	$	326,890	$	(69,050)	$	343,435	$	601	$	3,306,264

See accompanying notes to consolidated financial statements.

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Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS


		For the Nine Months Ended September 30					For the Nine Months Ended September 30
(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
		(Unaudited)					(Unaudited)
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net income	Net income	$	425,232	$	221,689	Net income	$	366,366	$	425,232
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	Provision for credit losses	(59,272)		141,593		Provision for credit losses	12,594		(59,272)
Provision for depreciation and amortization	Provision for depreciation and amortization	33,554		32,462		Provision for depreciation and amortization	35,350		33,554
Amortization of investment security premiums, net	Amortization of investment security premiums, net	51,822		37,623		Amortization of investment security premiums, net	8,565		51,822
Investment securities (gains) losses, net (A)		(39,765)		1,275
Investment securities gains, net (A)						Investment securities gains, net (A)	(11,602)		(39,765)
Net gains on sales of loans held for sale	Net gains on sales of loans held for sale	(18,849)		(8,267)		Net gains on sales of loans held for sale	(2,607)		(18,849)
Originations of loans held for sale	Originations of loans held for sale	(442,853)		(169,774)		Originations of loans held for sale	(114,765)		(442,853)
Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	485,231		152,825		Proceeds from sales of loans held for sale	116,421		485,231
Net (increase) decrease in trading debt securities		(9,093)		5,636
Net (increase) decrease in trading debt securities, excluding unsettled transactions						Net (increase) decrease in trading debt securities, excluding unsettled transactions	14,080		(9,093)
Purchase of interest rate floor						Purchase of interest rate floor	(16,849)		—
Stock-based compensation	Stock-based compensation	11,588		11,231		Stock-based compensation	12,641		11,588
(Increase) decrease in interest receivable	(Increase) decrease in interest receivable	11,449		(11,012)		(Increase) decrease in interest receivable	(21,959)		11,449
Decrease in interest payable		(3,168)		(7,670)
Increase (decrease) in income taxes payable		19,831		(7,942)
Increase (decrease) in interest payable						Increase (decrease) in interest payable	1,097		(3,168)
Increase in income taxes payable						Increase in income taxes payable	168		19,831

Proceeds from terminated interest rate floors		—		110,640

Other changes, net	Other changes, net	20,418		(37,926)		Other changes, net	70,285		20,418
Net cash provided by operating activities	Net cash provided by operating activities	486,125		472,383		Net cash provided by operating activities	469,785		486,125
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:

Disbursements received from equity-method investment		13,540		—
Distributions received from equity-method investment						Distributions received from equity-method investment	400		13,540
Proceeds from sales of investment securities (A)	Proceeds from sales of investment securities (A)	10,060		574,376		Proceeds from sales of investment securities (A)	55,690		10,060
Proceeds from maturities/pay downs of investment securities (A)	Proceeds from maturities/pay downs of investment securities (A)	2,571,116		1,856,780		Proceeds from maturities/pay downs of investment securities (A)	2,079,939		2,571,116
Purchases of investment securities (A)	Purchases of investment securities (A)	(4,457,716)		(5,135,211)		Purchases of investment securities (A)	(1,951,694)		(4,457,716)
Net (increase) decrease in loans	Net (increase) decrease in loans	1,166,769		(1,710,009)		Net (increase) decrease in loans	(736,474)		1,166,769
Securities purchased under agreements to resell	Securities purchased under agreements to resell	(900,000)		—		Securities purchased under agreements to resell	(200,000)		(900,000)

Repayments of securities purchased under agreements to resell						Repayments of securities purchased under agreements to resell	550,000		—
Purchases of premises and equipment	Purchases of premises and equipment	(37,385)		(29,192)		Purchases of premises and equipment	(46,636)		(37,385)
Sales of premises and equipment	Sales of premises and equipment	4,786		313		Sales of premises and equipment	1,613		4,786
Net cash used in investing activities	Net cash used in investing activities	(1,628,830)		(4,442,943)		Net cash used in investing activities	(247,162)		(1,628,830)
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
Net increase in non-interest bearing, savings, interest checking and money market deposits		1,428,561		5,138,314
Net increase (decrease) in non-interest bearing, savings, interest checking and money market deposits						Net increase (decrease) in non-interest bearing, savings, interest checking and money market deposits	(2,078,327)		1,428,561
Net decrease in certificates of deposit	Net decrease in certificates of deposit	(228,916)		(17,565)		Net decrease in certificates of deposit	(454,376)		(228,916)

Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase	Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase	155,370		(197,708)		Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase	(708,377)		155,370

Net increase (decrease) in short-term borrowings		3,204		(1,636)
Preferred stock redemption		—		(150,000)
Net increase (decrease) in other borrowings						Net increase (decrease) in other borrowings	(10,729)		3,204

Purchases of treasury stock	Purchases of treasury stock	(80,052)		(53,760)		Purchases of treasury stock	(163,321)		(80,052)

Issuance of stock under purchase and equity compensation plans		(16)		(27)
Issuance of stock under equity compensation plans						Issuance of stock under equity compensation plans	447		(16)

Cash dividends paid on common stock	Cash dividends paid on common stock	(92,204)		(90,640)		Cash dividends paid on common stock	(95,818)		(92,204)
Cash dividends paid on preferred stock		—		(6,750)
Net cash provided by financing activities		1,185,947		4,620,228
Increase in cash, cash equivalents and restricted cash		43,242		649,668

Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(3,510,501)		1,185,947
Increase (decrease) in cash, cash equivalents and restricted cash						Increase (decrease) in cash, cash equivalents and restricted cash	(3,287,878)		43,242
Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	2,208,328		907,808		Cash, cash equivalents and restricted cash at beginning of year	4,296,954		2,208,328
Cash, cash equivalents and restricted cash at September 30	Cash, cash equivalents and restricted cash at September 30	$	2,251,570	$	1,557,476	Cash, cash equivalents and restricted cash at September 30	$	1,009,076	$	2,251,570

Income tax payments, net	Income tax payments, net	$	87,989	$	58,750	Income tax payments, net	$	92,646	$	87,989
Interest paid on deposits and borrowings	Interest paid on deposits and borrowings	$	13,213	$	45,508	Interest paid on deposits and borrowings	$	23,961	$	13,213
Loans transferred to foreclosed real estate	Loans transferred to foreclosed real estate	$	172	$	57	Loans transferred to foreclosed real estate	$	457	$	172

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

See accompanying notes to consolidated financial statements.

Restricted cash is comprised of cash collateral posted by the Company to secure interest rate swap agreements. This balance is included in other assets in the consolidated balance sheets and totaled ~~$18.6~~$7.9 million and ~~$25.9~~$18.6 million at September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

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Commerce Bancshares, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2021~~2022 (Unaudited)

1. Principles of Consolidation and Presentation

The accompanying consolidated financial statements include the accounts of Commerce Bancshares, Inc. and all majority-owned subsidiaries (the Company). Most of the Company's operations are conducted by its subsidiary bank, Commerce Bank (the Bank). The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments necessary to present fairly the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications were made to ~~2020~~2021 data to conform to current year presentation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance ~~sheet~~sheets and revenues and expenses for the ~~period.~~periods. Actual results could differ significantly from those estimates. Management has evaluated subsequent events for potential recognition or disclosure. The results of operations for the ~~three and~~ nine month ~~periods~~period ended September 30, ~~2021~~2022 are not necessarily indicative of results to be attained for the full year or any other interim period.

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

2. Loans and Allowance for Credit Losses

Major classifications within the Company’s held for investment loan portfolio at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows:


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	September 30, 2022		December 31, 2021
Commercial:	Commercial:					Commercial:
Business	Business	$	5,277,850	$	6,546,087	Business	$	5,528,895	$	5,303,535
Real estate – construction and land	Real estate – construction and land	1,257,836		1,021,595		Real estate – construction and land	1,206,955		1,118,266
Real estate – business	Real estate – business	2,937,852		3,026,117		Real estate – business	3,331,627		3,058,837
Personal Banking:	Personal Banking:					Personal Banking:
Real estate – personal	Real estate – personal	2,769,292		2,820,030		Real estate – personal	2,862,519		2,805,401
Consumer	Consumer	2,049,559		1,950,502		Consumer	2,116,371		2,032,225
Revolving home equity	Revolving home equity	281,442		307,083		Revolving home equity	286,026		275,945
Consumer credit card	Consumer credit card	569,976		655,078		Consumer credit card	563,349		575,410
Overdrafts	Overdrafts	4,583		3,149		Overdrafts	3,216		6,740
Total loans	Total loans	$	15,148,390	$	16,329,641	Total loans	$	15,898,958	$	15,176,359

Accrued interest receivable totaled ~~$33.0~~$46.2 million and ~~$41.9~~$25.9 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and was included within other assets on the consolidated balance sheets. For the three months ended September 30, ~~2021,~~2022, the Company wrote-off accrued interest by reversing interest income of ~~$27~~$48 thousand and ~~$781~~$699 thousand in the Commercial and Personal Banking portfolios, respectively. Similarly, for the nine months ended September 30, ~~2021,~~2022, the Company wrote-off accrued interest of ~~$188~~$103 thousand and ~~$3.9~~$2.4 million in the Commercial and Personal Banking portfolios, respectively.

At September 30, ~~2021,~~2022, loans of ~~$3.5~~$3.1 billion were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. Additional loans of $1.3 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings.

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Allowance for credit losses

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

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

Table of Contents

Key ~~model~~ assumptions in the Company’s allowance for credit loss model include the economic forecast, the reasonable and supportable period, forecasted macro-economic variables, prepayment assumptions and qualitative factors applied for portfolio composition changes, underwriting practices, or significant unique events or conditions. The assumptions utilized in estimating the Company’s allowance for credit losses at September 30, ~~2021~~2022 and June 30, ~~2021~~2022 are discussed below.


Key Assumption	September 30, ~~2021~~2022	June 30, ~~2021~~2022

Overall economic forecast	•~~An optimistic recovery from the Global Coronavirus Recession (GCR) continues~~ •~~Assumes improving health conditions~~ •~~Assumes gradual easing~~High inflation, rising interest rates, supply chain difficulties and a weaker job market create an expectation of ~~supply constraints~~a mild recession in 2023 •Continued ~~uncertainty regarding the assumptions related~~monetary policy tightening to ~~the health crisis~~ •~~Uncertainty regarding rising~~rein in inflation	•~~An optimistic recovery from the GCR continues~~ •~~Assumes improving health conditions~~Positive economic momentum faced with continued COVID challenges, supply constraints and ~~expanding vaccine distribution~~ •~~Further fiscal stimulus assumed~~high inflation •Continued ~~uncertainty regarding the assumptions related~~monetary policy tightening to ~~the health crisis~~rein in inflation •~~Uncertainty regarding rising inflation~~Uncertainties related to supply chain issues and the timing and likelihood of a recession
Reasonable and supportable period and related reversion period	•One year for commercial and personal banking loans •Reversion to historical average loss rates within two quarters using straight-line method	•One year for commercial and personal banking loans •Reversion to historical average loss rates within two quarters using straight-line method
Forecasted macro-economic variables	•Unemployment rate ranging from ~~4.5%~~3.7% to ~~4.0%~~4.6% during the supportable forecast period •Real GDP growth ranging from ~~5.7%~~(.3)% to ~~3.6%~~.2% •Prime rate ~~of 3.25%~~from 6.6% to 7.0% •BBB corporate yield from 5.03% to 5.7%	•Unemployment rate ranging from ~~4.6%~~3.5% to ~~4.0%~~3.7% during the supportable forecast period •Real GDP growth ranging from ~~10.7%~~1.5% to ~~1.7%~~2.7% •Prime rate ~~of 3.25%~~from 4.9% to 6.2%
Prepayment assumptions	Commercial loans •5% for most loan pools Personal banking loans •Ranging from ~~26.9%~~16.5% to ~~16.5%~~28.1% for most loan pools •~~62.2%~~67.7% for consumer credit cards	Commercial loans •5% for most loan pools Personal banking loans •Ranging from ~~25.4%~~16.5% to ~~16.5%~~28.5% for most loan pools •~~60.1%~~67.0% for consumer credit cards
Qualitative factors	Added ~~net reserves using~~ qualitative ~~processes~~factors related to: •~~Loans originated in our expansion markets, loans that are designated as shared national credits, and certain~~Certain portfolios ~~considered~~sensitive to ~~be COVID-19 impacted~~pandemic economic uncertainties •Changes in the composition of the loan portfolios •Uncertainty related to unusually high rate of inflation, geopolitical environment, and supply chain issues •Loans downgraded to special mention, substandard, or non-accrual status	Added ~~net reserves using~~ qualitative ~~processes~~factors related to: •~~Loans originated in our expansion markets, loans that are designated as shared national credits, and certain~~Certain portfolios ~~considered~~sensitive to ~~be COVID-19 impacted~~pandemic economic uncertainties •Changes in the composition of the loan portfolios •Uncertainty related to unusually high rate of inflation, geopolitical environment, and supply chain issues •Loans downgraded to special mention, substandard, or non-accrual status

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

Sensitivity in the Allowance for Credit Loss model

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

The current forecast projects a ~~continued recovery~~mild recession in 2023 due to high inflation, rising interest rates, supply chain difficulties and a weaker job market. The Russian invasion of Ukraine created additional uncertainty as the ~~COVID-19 pandemic induced recession. This pandemic is unprecedented and information that could be used in~~world responds to the ~~estimation of the allowance for credit losses changes frequently. Trends~~economic impact. The geopolitical environment, trends in health conditions and ~~vaccine distribution~~impacted supply constraints could significantly modify economic projections used in the estimation of the allowance for credit ~~losses.~~losses and liability for unfunded lending commitments.

Table of Contents

A summary of the activity in the allowance for credit losses on loans and the liability for unfunded lending commitments during the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, follows:


		For the Three Months Ended September 30, 2021						For the Nine Months Ended September 30, 2021							For the Three Months Ended September 30, 2022						For the Nine Months Ended September 30, 2022
(In thousands)	(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total		(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total
ALLOWANCE FOR CREDIT LOSSES ON LOANS	ALLOWANCE FOR CREDIT LOSSES ON LOANS													ALLOWANCE FOR CREDIT LOSSES ON LOANS

Balance at beginning of period	Balance at beginning of period	$	98,038	$	74,357	$	172,395	$	121,549	$	99,285	$	220,834	Balance at beginning of period	$	99,525	$	38,514	$	138,039	$	97,776	$	52,268	$	150,044
Provision for credit losses on loans	Provision for credit losses on loans	186		(6,147)		(5,961)		(28,302)		(15,447)		(43,749)		Provision for credit losses on loans	4,014		6,136		10,150		5,851		900		6,751
Deductions:	Deductions:													Deductions:
Loans charged off	Loans charged off	190		6,387		6,577		692		27,694		28,386		Loans charged off	509		6,721		7,230		893		20,539		21,432
Less recoveries on loans	Less recoveries on loans	130		2,788		2,918		5,609		8,467		14,076		Less recoveries on loans	56		2,362		2,418		352		7,662		8,014
Net loan charge-offs (recoveries)		60		3,599		3,659		(4,917)		19,227		14,310
Balance September 30, 2021		$	98,164	$	64,611	$	162,775	$	98,164	$	64,611	$	162,775
Net loan charge-offs														Net loan charge-offs	453		4,359		4,812		541		12,877		13,418
Balance September 30, 2022														Balance September 30, 2022	$	103,086	$	40,291	$	143,377	$	103,086	$	40,291	$	143,377
LIABILITY FOR UNFUNDED LENDING COMMITMENTS	LIABILITY FOR UNFUNDED LENDING COMMITMENTS													LIABILITY FOR UNFUNDED LENDING COMMITMENTS

Balance at beginning of period	Balance at beginning of period	$	23,350	$	858	$	24,208	$	37,259	$	1,048	$	38,307	Balance at beginning of period	$	23,617	$	1,290	$	24,907	$	23,271	$	933	$	24,204
Provision for credit losses on unfunded lending commitments	Provision for credit losses on unfunded lending commitments	(1,564)		140		(1,424)		(15,473)		(50)		(15,523)		Provision for credit losses on unfunded lending commitments	5,182		(42)		5,140		5,528		315		5,843
Balance September 30, 2021		$	21,786	$	998	$	22,784	$	21,786	$	998	$	22,784
Balance September 30, 2022														Balance September 30, 2022	$	28,799	$	1,248	$	30,047	$	28,799	$	1,248	$	30,047
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	119,950	$	65,609	$	185,559	$	119,950	$	65,609	$	185,559	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	131,885	$	41,539	$	173,424	$	131,885	$	41,539	$	173,424


		For the Three Months Ended September 30, 2020						For the Nine Months Ended September 30, 2020							For the Three Months Ended September 30, 2021						For the Nine Months Ended September 30, 2021
(In thousands)	(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total		(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total
ALLOWANCE FOR CREDIT LOSSES ON LOANS	ALLOWANCE FOR CREDIT LOSSES ON LOANS													ALLOWANCE FOR CREDIT LOSSES ON LOANS
Balance at end of prior period		$	130,553	$	110,191	$	240,744	$	91,760	$	68,922	$	160,682
Adoption of ASU 2016-13		—		—		—		(29,711)		8,672		(21,039)

Balance at beginning of period	Balance at beginning of period	$	130,553	$	110,191	$	240,744	$	62,049	$	77,594	$	139,643	Balance at beginning of period	$	98,038	$	74,357	$	172,395	$	121,549	$	99,285	$	220,834
Provision for credit losses on loans	Provision for credit losses on loans	(1,935)		5,135		3,200		69,418		54,141		123,559		Provision for credit losses on loans	186		(6,147)		(5,961)		(28,302)		(15,447)		(43,749)
Deductions:	Deductions:													Deductions:
Loans charged off	Loans charged off	357		10,292		10,649		4,159		32,127		36,286		Loans charged off	190		6,387		6,577		692		27,694		28,386
Less recoveries on loans	Less recoveries on loans	163		2,902		3,065		1,116		8,328		9,444		Less recoveries on loans	130		2,788		2,918		5,609		8,467		14,076
Net loan charge-offs		194		7,390		7,584		3,043		23,799		26,842
Balance September 30, 2020		$	128,424	$	107,936	$	236,360	$	128,424	$	107,936	$	236,360
Net loan charge-offs (recoveries)														Net loan charge-offs (recoveries)	60		3,599		3,659		(4,917)		19,227		14,310
Balance September 30, 2021														Balance September 30, 2021	$	98,164	$	64,611	$	162,775	$	98,164	$	64,611	$	162,775
LIABILITY FOR UNFUNDED LENDING COMMITMENTS	LIABILITY FOR UNFUNDED LENDING COMMITMENTS													LIABILITY FOR UNFUNDED LENDING COMMITMENTS
Balance at end of prior period		$	34,052	$	1,247	$	35,299	$	399	$	676	$	1,075
Adoption of ASU 2016-13		—		—		—		16,057		33		16,090

Balance at beginning of period	Balance at beginning of period	$	34,052	$	1,247	$	35,299	$	16,456	$	709	$	17,165	Balance at beginning of period	$	23,350	$	858	$	24,208	$	37,259	$	1,048	$	38,307
Provision for credit losses on unfunded lending commitments	Provision for credit losses on unfunded lending commitments	(60)		(39)		(99)		17,536		499		18,035		Provision for credit losses on unfunded lending commitments	(1,564)		140		(1,424)		(15,473)		(50)		(15,523)
Balance September 30, 2020		$	33,992	$	1,208	$	35,200	$	33,992	$	1,208	$	35,200
Balance September 30, 2021														Balance September 30, 2021	$	21,786	$	998	$	22,784	$	21,786	$	998	$	22,784
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	162,416	$	109,144	$	271,560	$	162,416	$	109,144	$	271,560	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	119,950	$	65,609	$	185,559	$	119,950	$	65,609	$	185,559

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Delinquent and non-accrual loans

The Company considers loans past due on the day following the contractual repayment date, if the contractual repayment was not received by the Company as of the end of the business day. The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.


(In thousands)	(In thousands)	Current or Less Than 30 Days Past Due		30 – 89 Days Past Due		90 Days Past Due and Still Accruing		Non-accrual		Total		(In thousands)	Current or Less Than 30 Days Past Due		30 – 89 Days Past Due		90 Days Past Due and Still Accruing		Non-accrual		Total
September 30, 2021
September 30, 2022												September 30, 2022
Commercial:	Commercial:											Commercial:
Business	Business	$	5,266,174	$	3,029	$	354	$	8,293	$	5,277,850	Business	$	5,513,234	$	9,480	$	536	$	5,645	$	5,528,895
Real estate – construction and land	Real estate – construction and land	1,257,836		—		—		—		1,257,836		Real estate – construction and land	1,206,395		560		—		—		1,206,955
Real estate – business	Real estate – business	2,935,233		2,042		—		577		2,937,852		Real estate – business	3,307,921		23,557		—		149		3,331,627
Personal Banking:	Personal Banking:											Personal Banking:
Real estate – personal	Real estate – personal	2,762,146		3,029		2,566		1,551		2,769,292		Real estate – personal	2,847,665		10,506		2,958		1,390		2,862,519
Consumer	Consumer	2,029,109		18,147		2,303		—		2,049,559		Consumer	2,091,670		21,135		3,566		—		2,116,371
Revolving home equity	Revolving home equity	279,410		1,202		830		—		281,442		Revolving home equity	284,595		541		890		—		286,026
Consumer credit card	Consumer credit card	560,685		4,848		4,443		—		569,976		Consumer credit card	553,815		4,989		4,545		—		563,349
Overdrafts	Overdrafts	4,294		289		—		—		4,583		Overdrafts	2,830		343		43		—		3,216
Total	Total	$	15,094,887	$	32,586	$	10,496	$	10,421	$	15,148,390	Total	$	15,808,125	$	71,111	$	12,538	$	7,184	$	15,898,958
December 31, 2020
December 31, 2021												December 31, 2021
Commercial:	Commercial:											Commercial:
Business	Business	$	6,517,838	$	2,252	$	3,473	$	22,524	$	6,546,087	Business	$	5,292,125	$	3,621	$	477	$	7,312	$	5,303,535
Real estate – construction and land	Real estate – construction and land	1,021,592		—		3		—		1,021,595		Real estate – construction and land	1,117,434		832		—		—		1,118,266
Real estate – business	Real estate – business	3,016,215		7,666		6		2,230		3,026,117		Real estate – business	3,058,566		57		—		214		3,058,837
Personal Banking:	Personal Banking:											Personal Banking:
Real estate – personal	Real estate – personal	2,808,886		6,521		2,837		1,786		2,820,030		Real estate – personal	2,796,662		4,125		2,983		1,631		2,805,401
Consumer	Consumer	1,921,822		25,417		3,263		—		1,950,502		Consumer	2,005,556		24,458		2,211		—		2,032,225
Revolving home equity	Revolving home equity	305,037		1,656		390		—		307,083		Revolving home equity	274,372		772		801		—		275,945
Consumer credit card	Consumer credit card	635,770		7,090		12,218		—		655,078		Consumer credit card	565,335		4,821		5,254		—		575,410
Overdrafts	Overdrafts	2,896		253		—		—		3,149		Overdrafts	6,425		315		—		—		6,740
Total	Total	$	16,230,056	$	50,855	$	22,190	$	26,540	$	16,329,641	Total	$	15,116,475	$	39,001	$	11,726	$	9,157	$	15,176,359

At September 30, ~~2021,~~2022, the Company had ~~$5.5~~$4.1 million in non-accrual business loans that had no allowance for credit loss. At December 31, ~~2020,~~2021, the Company had ~~$9.4~~$5.3 million in non-accrual business loans that had no allowance for credit loss. The Company did not record any interest income on non-accrual loans during the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Credit quality indicators

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

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

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

The risk category of loans in the Commercial portfolio as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows:


		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
September 30, 2021
September 30, 2022																		September 30, 2022
Business	Business																	Business
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	1,134,349	$	857,499	$	719,076	$	287,921	$	184,147	$	316,405	$	1,662,395	$	5,161,792	Pass	$	1,167,741	$	902,680	$	519,179	$	396,052	$	188,319	$	255,455	$	2,041,998	$	5,471,424
Special mention	Special mention	1,360		742		22,078		19,893		612		3,430		13,958		62,073		Special mention	2,205		5,535		224		635		70		7,994		1,923		18,586
Substandard	Substandard	3,489		9,371		7,961		4,124		5		11,444		9,298		45,692		Substandard	6,600		5,409		794		3,690		2,817		10,064		3,866		33,240
Non-accrual	Non-accrual	446		—		1		2,057		110		5,655		24		8,293		Non-accrual	430		55		60		51		956		4,093		—		5,645
Total Business:	Total Business:	$	1,139,644	$	867,612	$	749,116	$	313,995	$	184,874	$	336,934	$	1,685,675	$	5,277,850	Total Business:	$	1,176,976	$	913,679	$	520,257	$	400,428	$	192,162	$	277,606	$	2,047,787	$	5,528,895
Real estate-construction	Real estate-construction																	Real estate-construction
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	448,441	$	465,051	$	141,423	$	43,814	$	2,691	$	24,807	$	27,175	$	1,153,402	Pass	$	399,880	$	560,930	$	140,643	$	26,840	$	1,362	$	2,208	$	17,474	$	1,149,337
Special mention	Special mention	15,474		28,037		—		995		19,499		—		—		64,005		Special mention	—		—		—		—		—		—		—		—
Substandard	Substandard	239		11,767		—		15,226		13,197		—		—		40,429		Substandard	—		19,500		9,999		—		14,926		13,193		—		57,618

Total Real estate-construction:	Total Real estate-construction:	$	464,154	$	504,855	$	141,423	$	60,035	$	35,387	$	24,807	$	27,175	$	1,257,836	Total Real estate-construction:	$	399,880	$	580,430	$	150,642	$	26,840	$	16,288	$	15,401	$	17,474	$	1,206,955
Real estate-business	Real estate-business																	Real estate-business
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	424,347	$	749,037	$	577,966	$	272,536	$	209,234	$	324,869	$	57,801	$	2,615,790	Pass	$	876,470	$	641,482	$	576,752	$	468,588	$	167,190	$	292,556	$	90,112	$	3,113,150
Special mention	Special mention	1,080		29,998		10,980		22,751		2,117		5,853		2		72,781		Special mention	2,854		3,447		632		9,854		985		526		—		18,298
Substandard	Substandard	17,021		64,197		11,834		30,993		68,664		52,183		3,812		248,704		Substandard	—		30,992		61,356		11,437		33,977		62,268		—		200,030
Non-accrual	Non-accrual	198		65		76		205		—		33		—		577		Non-accrual	—		—		—		—		140		9		—		149
Total Real estate-business:	Total Real estate-business:	$	442,646	$	843,297	$	600,856	$	326,485	$	280,015	$	382,938	$	61,615	$	2,937,852	Total Real estate-business:	$	879,324	$	675,921	$	638,740	$	489,879	$	202,292	$	355,359	$	90,112	$	3,331,627
Commercial loans	Commercial loans																	Commercial loans
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	2,007,137	$	2,071,587	$	1,438,465	$	604,271	$	396,072	$	666,081	$	1,747,371	$	8,930,984	Pass	$	2,444,091	$	2,105,092	$	1,236,574	$	891,480	$	356,871	$	550,219	$	2,149,584	$	9,733,911
Special mention	Special mention	17,914		58,777		33,058		43,639		22,228		9,283		13,960		198,859		Special mention	5,059		8,982		856		10,489		1,055		8,520		1,923		36,884
Substandard	Substandard	20,749		85,335		19,795		50,343		81,866		63,627		13,110		334,825		Substandard	6,600		55,901		72,149		15,127		51,720		85,525		3,866		290,888
Non-accrual	Non-accrual	644		65		77		2,262		110		5,688		24		8,870		Non-accrual	430		55		60		51		1,096		4,102		—		5,794
Total Commercial loans:	Total Commercial loans:	$	2,046,444	$	2,215,764	$	1,491,395	$	700,515	$	500,276	$	744,679	$	1,774,465	$	9,473,538	Total Commercial loans:	$	2,456,180	$	2,170,030	$	1,309,639	$	917,147	$	410,742	$	648,366	$	2,155,373	$	10,067,477

Table of Contents


		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
December 31, 2020
December 31, 2021																		December 31, 2021
Business	Business																	Business
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	2,472,419	$	966,068	$	438,557	$	329,207	$	163,357	$	281,604	$	1,619,680	$	6,270,892	Pass	$	1,473,869	$	704,157	$	554,759	$	248,739	$	159,238	$	270,454	$	1,795,073	$	5,206,289
Special mention	Special mention	28,612		26,746		14,102		1,781		5,091		1,664		41,749		119,745		Special mention	1,785		126		17,576		12,050		1,490		3,232		16,545		52,804
Substandard	Substandard	17,246		21,985		5,076		2,675		3,578		13,390		68,976		132,926		Substandard	836		1,191		8,855		4,936		1		10,775		10,536		37,130
Non-accrual	Non-accrual	12,619		1		5,327		391		502		3,659		25		22,524		Non-accrual	430		—		1		1,549		—		5,332		—		7,312
Total Business:	Total Business:	$	2,530,896	$	1,014,800	$	463,062	$	334,054	$	172,528	$	300,317	$	1,730,430	$	6,546,087	Total Business:	$	1,476,920	$	705,474	$	581,191	$	267,274	$	160,729	$	289,793	$	1,822,154	$	5,303,535
Real estate-construction	Real estate-construction																	Real estate-construction
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	483,302	$	330,480	$	56,747	$	3,021	$	24,426	$	1,692	$	27,356	$	927,024	Pass	$	598,734	$	346,507	$	66,985	$	2,110	$	2,655	$	2,252	$	13,230	$	1,032,473
Special mention	Special mention	29,692		—		1,022		34,532		—		—		—		65,246		Special mention	44,649		—		—		985		—		—		—		45,634
Substandard	Substandard	1,154		—		14,989		13,182		—		—		—		29,325		Substandard	485		11,620		—		14,896		13,158		—		—		40,159

Total Real estate-construction:	Total Real estate-construction:	$	514,148	$	330,480	$	72,758	$	50,735	$	24,426	$	1,692	$	27,356	$	1,021,595	Total Real estate-construction:	$	643,868	$	358,127	$	66,985	$	17,991	$	15,813	$	2,252	$	13,230	$	1,118,266
Real estate- business	Real estate- business																	Real estate- business
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	890,740	$	666,399	$	336,850	$	241,656	$	313,691	$	199,534	$	67,796	$	2,716,666	Pass	$	775,561	$	712,173	$	551,697	$	230,138	$	170,888	$	254,489	$	76,641	$	2,771,587
Special mention	Special mention	8,936		21,734		49,580		6,597		17,504		1,309		3,002		108,662		Special mention	4,011		30,322		10,500		37,576		2,068		2,103		1		86,581
Substandard	Substandard	46,882		1,037		4,061		81,435		17,538		45,014		2,592		198,559		Substandard	17,079		62,939		12,930		2,326		58,934		45,265		982		200,455
Non-accrual	Non-accrual	478		188		1,480		—		—		84		—		2,230		Non-accrual	—		—		—		189		—		25		—		214
Total Real-estate business:	Total Real-estate business:	$	947,036	$	689,358	$	391,971	$	329,688	$	348,733	$	245,941	$	73,390	$	3,026,117	Total Real-estate business:	$	796,651	$	805,434	$	575,127	$	270,229	$	231,890	$	301,882	$	77,624	$	3,058,837
Commercial loans	Commercial loans																	Commercial loans
Risk Rating:	Risk Rating:																	Risk Rating:
Pass	Pass	$	3,846,461	$	1,962,947	$	832,154	$	573,884	$	501,474	$	482,830	$	1,714,832	$	9,914,582	Pass	$	2,848,164	$	1,762,837	$	1,173,441	$	480,987	$	332,781	$	527,195	$	1,884,944	$	9,010,349
Special mention	Special mention	67,240		48,480		64,704		42,910		22,595		2,973		44,751		293,653		Special mention	50,445		30,448		28,076		50,611		3,558		5,335		16,546		185,019
Substandard	Substandard	65,282		23,022		24,126		97,292		21,116		58,404		71,568		360,810		Substandard	18,400		75,750		21,785		22,158		72,093		56,040		11,518		277,744
Non-accrual	Non-accrual	13,097		189		6,807		391		502		3,743		25		24,754		Non-accrual	430		—		1		1,738		—		5,357		—		7,526
Total Commercial loans:	Total Commercial loans:	$	3,992,080	$	2,034,638	$	927,791	$	714,477	$	545,687	$	547,950	$	1,831,176	$	10,593,799	Total Commercial loans:	$	2,917,439	$	1,869,035	$	1,223,303	$	555,494	$	408,432	$	593,927	$	1,913,008	$	9,480,638

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The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 below:


		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
September 30, 2021
September 30, 2022																		September 30, 2022
Real estate-personal	Real estate-personal																	Real estate-personal
Current to 90 days past due	Current to 90 days past due	$	509,080	$	941,728	$	379,912	$	170,651	$	158,655	$	595,786	$	9,363	$	2,765,175	Current to 90 days past due	$	422,198	$	602,071	$	795,233	$	299,702	$	138,681	$	590,278	$	10,008	$	2,858,171
Over 90 days past due	Over 90 days past due	86		663		—		188		167		1,462		—		2,566		Over 90 days past due	198		617		907		71		114		1,051		—		2,958
Non-accrual	Non-accrual	—		—		185		111		—		1,255		—		1,551		Non-accrual	—		—		—		172		104		1,114		—		1,390
Total Real estate-personal:	Total Real estate-personal:	$	509,166	$	942,391	$	380,097	$	170,950	$	158,822	$	598,503	$	9,363	$	2,769,292	Total Real estate-personal:	$	422,396	$	602,688	$	796,140	$	299,945	$	138,899	$	592,443	$	10,008	$	2,862,519
Consumer	Consumer																	Consumer
Current to 90 days past due	Current to 90 days past due	$	441,146	$	391,312	$	221,490	$	96,086	$	59,935	$	93,205	$	744,082	$	2,047,256	Current to 90 days past due	$	449,631	$	409,063	$	228,612	$	122,966	$	44,230	$	71,452	$	786,851	$	2,112,805
Over 90 days past due	Over 90 days past due	54		310		250		230		27		253		1,179		2,303		Over 90 days past due	50		344		784		183		325		274		1,606		3,566

Total Consumer:	Total Consumer:	$	441,200	$	391,622	$	221,740	$	96,316	$	59,962	$	93,458	$	745,261	$	2,049,559	Total Consumer:	$	449,681	$	409,407	$	229,396	$	123,149	$	44,555	$	71,726	$	788,457	$	2,116,371
Revolving home equity	Revolving home equity																	Revolving home equity
Current to 90 days past due	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	280,612	$	280,612	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	285,136	$	285,136
Over 90 days past due	Over 90 days past due	—		—		—		—		—		—		830		830		Over 90 days past due	—		—		—		—		—		—		890		890

Total Revolving home equity:	Total Revolving home equity:	$	—	$	—	$	—	$	—	$	—	$	—	$	281,442	$	281,442	Total Revolving home equity:	$	—	$	—	$	—	$	—	$	—	$	—	$	286,026	$	286,026
Consumer credit card	Consumer credit card																	Consumer credit card
Current to 90 days past due	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	565,533	$	565,533	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	558,804	$	558,804
Over 90 days past due	Over 90 days past due	—		—		—		—		—		—		4,443		4,443		Over 90 days past due	—		—		—		—		—		—		4,545		4,545

Total Consumer credit card:	Total Consumer credit card:	$	—	$	—	$	—	$	—	$	—	$	—	$	569,976	$	569,976	Total Consumer credit card:	$	—	$	—	$	—	$	—	$	—	$	—	$	563,349	$	563,349
Overdrafts	Overdrafts																	Overdrafts
Current to 90 days past due	Current to 90 days past due	$	4,583	$	—	$	—	$	—	$	—	$	—	$	—	$	4,583	Current to 90 days past due	$	3,173	$	—	$	—	$	—	$	—	$	—	$	—	$	3,173

Over 90 days past due																		Over 90 days past due	43		—		—		—		—		—		—		43

Total Overdrafts:	Total Overdrafts:	$	4,583	$	—	$	—	$	—	$	—	$	—	$	—	$	4,583	Total Overdrafts:	$	3,216	$	—	$	—	$	—	$	—	$	—	$	—	$	3,216
Personal banking loans	Personal banking loans																	Personal banking loans
Current to 90 days past due	Current to 90 days past due	$	954,809	$	1,333,040	$	601,402	$	266,737	$	218,590	$	688,991	$	1,599,590	$	5,663,159	Current to 90 days past due	$	875,002	$	1,011,134	$	1,023,845	$	422,668	$	182,911	$	661,730	$	1,640,799	$	5,818,089
Over 90 days past due	Over 90 days past due	140		973		250		418		194		1,715		6,452		10,142		Over 90 days past due	291		961		1,691		254		439		1,325		7,041		12,002
Non-accrual	Non-accrual	—		—		185		111		—		1,255		—		1,551		Non-accrual	—		—		—		172		104		1,114		—		1,390
Total Personal banking loans:	Total Personal banking loans:	$	954,949	$	1,334,013	$	601,837	$	267,266	$	218,784	$	691,961	$	1,606,042	$	5,674,852	Total Personal banking loans:	$	875,293	$	1,012,095	$	1,025,536	$	423,094	$	183,454	$	664,169	$	1,647,840	$	5,831,481

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		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total		(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
December 31, 2020
December 31, 2021																		December 31, 2021
Real estate-personal	Real estate-personal																	Real estate-personal
Current to 90 days past due	Current to 90 days past due	$	1,123,918	$	488,379	$	218,390	$	201,971	$	227,265	$	544,008	$	11,476	$	2,815,407	Current to 90 days past due	$	690,058	$	888,631	$	354,292	$	157,485	$	149,391	$	551,460	$	9,470	$	2,800,787
Over 90 days past due	Over 90 days past due	534		375		281		411		388		848		—		2,837		Over 90 days past due	133		1,150		298		124		97		1,181		—		2,983
Non-accrual	Non-accrual	29		191		116		45		65		1,340		—		1,786		Non-accrual	115		—		251		109		—		1,156		—		1,631
Total Real estate-personal:	Total Real estate-personal:	$	1,124,481	$	488,945	$	218,787	$	202,427	$	227,718	$	546,196	$	11,476	$	2,820,030	Total Real estate-personal:	$	690,306	$	889,781	$	354,841	$	157,718	$	149,488	$	553,797	$	9,470	$	2,805,401
Consumer	Consumer																	Consumer
Current to 90 days past due	Current to 90 days past due	$	536,799	$	337,431	$	161,337	$	115,886	$	75,769	$	86,831	$	633,186	$	1,947,239	Current to 90 days past due	$	571,455	$	348,774	$	192,076	$	79,887	$	47,401	$	78,088	$	712,333	$	2,030,014
Over 90 days past due	Over 90 days past due	212		358		328		220		174		397		1,574		3,263		Over 90 days past due	283		335		257		250		74		351		661		2,211

Total Consumer:	Total Consumer:	$	537,011	$	337,789	$	161,665	$	116,106	$	75,943	$	87,228	$	634,760	$	1,950,502	Total Consumer:	$	571,738	$	349,109	$	192,333	$	80,137	$	47,475	$	78,439	$	712,994	$	2,032,225
Revolving home equity	Revolving home equity																	Revolving home equity
Current to 90 days past due	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	306,693	$	306,693	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	275,144	$	275,144
Over 90 days past due	Over 90 days past due	—		—		—		—		—		—		390		390		Over 90 days past due	—		—		—		—		—		—		801		801

Total Revolving home equity:	Total Revolving home equity:	$	—	$	—	$	—	$	—	$	—	$	—	$	307,083	$	307,083	Total Revolving home equity:	$	—	$	—	$	—	$	—	$	—	$	—	$	275,945	$	275,945
Consumer credit card	Consumer credit card																	Consumer credit card
Current to 90 days past due	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	642,860	$	642,860	Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	570,156	$	570,156
Over 90 days past due	Over 90 days past due	—		—		—		—		—		—		12,218		12,218		Over 90 days past due	—		—		—		—		—		—		5,254		5,254

Total Consumer credit card:	Total Consumer credit card:	$	—	$	—	$	—	$	—	$	—	$	—	$	655,078	$	655,078	Total Consumer credit card:	$	—	$	—	$	—	$	—	$	—	$	—	$	575,410	$	575,410
Overdrafts	Overdrafts																	Overdrafts
Current to 90 days past due	Current to 90 days past due	$	3,149	$	—	$	—	$	—	$	—	$	—	$	—	$	3,149	Current to 90 days past due	$	6,740	$	—	$	—	$	—	$	—	$	—	$	—	$	6,740

Total Overdrafts:	Total Overdrafts:	$	3,149	$	—	$	—	$	—	$	—	$	—	$	—	$	3,149	Total Overdrafts:	$	6,740	$	—	$	—	$	—	$	—	$	—	$	—	$	6,740
Personal banking loans	Personal banking loans																	Personal banking loans
Current to 90 days past due	Current to 90 days past due	$	1,663,866	$	825,810	$	379,727	$	317,857	$	303,034	$	630,839	$	1,594,215	$	5,715,348	Current to 90 days past due	$	1,268,253	$	1,237,405	$	546,368	$	237,372	$	196,792	$	629,548	$	1,567,103	$	5,682,841
Over 90 days past due	Over 90 days past due	746		733		609		631		562		1,245		14,182		18,708		Over 90 days past due	416		1,485		555		374		171		1,532		6,716		11,249
Non-accrual	Non-accrual	29		191		116		45		65		1,340		—		1,786		Non-accrual	115		—		251		109		—		1,156		—		1,631
Total Personal banking loans:	Total Personal banking loans:	$	1,664,641	$	826,734	$	380,452	$	318,533	$	303,661	$	633,424	$	1,608,397	$	5,735,842	Total Personal banking loans:	$	1,268,784	$	1,238,890	$	547,174	$	237,855	$	196,963	$	632,236	$	1,573,819	$	5,695,721

Collateral-dependent loans

The Company's collateral-dependent loans are comprised of large loans on non-accrual status. The Company requires that collateral-dependent loans are either over-collateralized or carry collateral equal to the amortized cost of the loan. The following table presents the amortized cost basis of collateral-dependent loans as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.


(In thousands)	(In thousands)	Business Assets		Business Real Estate		Oil & Gas Assets		Total		(In thousands)	Business Assets		Oil & Gas Assets		Total
September 30, 2021
September 30, 2022										September 30, 2022
Commercial:	Commercial:									Commercial:
Business	Business	$	2,056	$	—	$	2,518	$	4,574	Business	$	1,156	$	1,966	$	3,122

Total	Total	$	2,056	$	—	$	2,518	$	4,574	Total	$	1,156	$	1,966	$	3,122
December 31, 2020
December 31, 2021										December 31, 2021
Commercial:	Commercial:									Commercial:
Business	Business	$	13,109	$	—	$	2,695	$	15,804	Business	$	1,604	$	2,459	$	4,063

Real estate - business		—		986		—		986

Total	Total	$	13,109	$	986	$	2,695	$	16,790	Total	$	1,604	$	2,459	$	4,063

Other Personal Banking loan information

As noted above, the credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided in the table in the above section on "Credit quality indicators." In addition, FICO scores are obtained and updated on a quarterly basis for most of the loans in the Personal Banking portfolio. This is a published credit score designed to measure the risk of default by taking into account various factors from a borrower's financial history and is considered supplementary information utilized by the Company, as management does not consider this information in evaluating the allowance for credit losses on loans. The Bank normally obtains a FICO score at the loan's origination and

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

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loans for which FICO scores are not obtained because the loans generally pertain to commercial customer activities and are often underwritten with other collateral considerations. These loans totaled ~~$186.0~~$186.8 million at September 30, ~~2021~~2022 and ~~$191.1~~$185.6 million at December 31, ~~2020.~~2021. The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled ~~$189.6~~$197.7 million at September 30, ~~2021~~2022 and ~~$188.1~~$186.6 million at December 31, ~~2020.~~2021. As the healthcare loans are guaranteed by the hospital, customer FICO scores are not obtained for these loans. The personal real estate loans and consumer loans excluded below totaled less than 7% of the Personal Banking portfolio. For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 by FICO score.


Personal Banking Loans	Personal Banking Loans									Personal Banking Loans
		% of Loan Category									% of Loan Category
		Real Estate - Personal		Consumer		Revolving Home Equity		Consumer Credit Card			Real Estate - Personal		Consumer		Revolving Home Equity		Consumer Credit Card
September 30, 2021
September 30, 2022										September 30, 2022
FICO score:	FICO score:									FICO score:
Under 600	Under 600	.9	%	1.7	%	0.9	%	3.3	%	Under 600	1.3	%	1.8	%	1.5	%	3.6	%
600 - 659	600 - 659	2.0		3.8		2.3		11.3		600 - 659	2.5		3.9		3.4		11.8
660 - 719	660 - 719	7.8		14.2		9.2		30.8		660 - 719	8.1		13.2		9.1		30.2
720 - 779	720 - 779	24.4		25.0		21.0		28.5		720 - 779	23.5		23.8		22.4		27.9
780 and over	780 and over	64.9		55.3		66.6		26.1		780 and over	64.6		57.3		63.6		26.5
Total	Total	100.0	%	100.0	%	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%
December 31, 2020
December 31, 2021										December 31, 2021
FICO score:	FICO score:									FICO score:
Under 600	Under 600	.8	%	2.3	%	1.3	%	5.0	%	Under 600	1.0	%	1.9	%	0.9	%	3.4	%
600 - 659	600 - 659	1.9		4.2		2.4		12.3		600 - 659	2.4		3.9		2.6		11.3
660 - 719	660 - 719	8.8		14.1		8.6		31.2		660 - 719	7.4		13.8		9.4		29.9
720 - 779	720 - 779	24.5		23.9		22.2		28.0		720 - 779	25.2		25.3		20.4		28.2
780 and over	780 and over	64.0		55.5		65.5		23.5		780 and over	64.0		55.1		66.7		27.2
Total	Total	100.0	%	100.0	%	100.0	%	100.0	%	Total	100.0	%	100.0	%	100.0	%	100.0	%

Troubled debt restructurings

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


(In thousands)	(In thousands)		September 30, 2021		December 31, 2020		(In thousands)		September 30, 2022		December 31, 2021
Accruing restructured loans:	Accruing restructured loans:						Accruing restructured loans:
		Commercial	$	110,583	$	117,740		Commercial	$	140,564	$	46,867
		Assistance programs	6,789		7,804			Assistance programs	5,218		6,146
		Consumer bankruptcy	2,327		2,841
		Other consumer	2,293		2,353			Other consumer	4,289		4,787
Non-accrual loans	Non-accrual loans		7,866		9,889		Non-accrual loans		5,510		7,087
Total troubled debt restructurings	Total troubled debt restructurings		$	129,858	$	140,627	Total troubled debt restructurings		$	155,581	$	64,887

Section 4013 of the CARES Act was signed into law on March 27, 2020, and ~~includes~~included a provision that short-term modifications are not troubled debt restructurings, if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to December 31, 2019. The Company ~~follows the guidance~~elected such option under the CARES Act when determining if a

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customer’s modification is subject to troubled debt restructuring classification. If it is deemed the modification is not short-term, not COVID-19 related or the customer does not meet the criteria under the guidance to be scoped out of troubled debt restructuring classification, the Company will evaluate the loan modifications under its existing framework which requires modifications that result in a concession to a borrower experiencing financial difficulty be accounted for as a troubled debt restructuring.

The initial guidance issued under the CARES Act was due to expire on December 31, 2020. During January 2021, the Consolidated Appropriations Act, 2021 was enacted

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and extended through the end of 2021 the relief offered under the CARES Act related to the accounting and disclosure requirements for troubled debt restructurings as a result of COVID-19. The Company elected to ~~adopt the extension~~extend its application of this ~~guidance.~~guidance through December 31, 2021. During the period covered by the CARES Act, if it was deemed that the loan modification was not short-term, not COVID-19 related or the customer does not meet the criteria under the guidance to be scoped out of troubled debt restructuring classification, the Company evaluated the loan modifications under its existing framework and accounted for the modification as a troubled debt restructuring.

The table below shows the balance of troubled debt restructurings by loan classification at September 30, ~~2021,~~2022, in addition to the outstanding balances of these restructured loans which the Company considers to have been in default at any time during the past twelve months. For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal.


(In thousands)	(In thousands)	September 30, 2021		Balance 90 days past due at any time during previous 12 months		(In thousands)	September 30, 2022		Balance 90 days past due at any time during previous 12 months
Commercial:	Commercial:					Commercial:
Business	Business	$	53,850	$	347	Business	$	10,958	$	—
Real estate - construction and land	Real estate - construction and land	10,104		—		Real estate - construction and land	10,054		—
Real estate - business	Real estate - business	53,240		198		Real estate - business	124,046		—
Personal Banking:	Personal Banking:					Personal Banking:
Real estate - personal	Real estate - personal	3,131		483		Real estate - personal	2,894		653
Consumer	Consumer	2,865		177		Consumer	18		—
Revolving home equity	Revolving home equity	23		—		Revolving home equity	2,394		270
Consumer credit card	Consumer credit card	6,645		368		Consumer credit card	5,217		364
Total troubled debt restructurings	Total troubled debt restructurings	$	129,858	$	1,573	Total troubled debt restructurings	$	155,581	$	1,287

For those loans on non-accrual status also classified as restructured, the modification did not create any further financial effect on the Company as those loans were already recorded at net realizable value. For those performing commercial loans classified as restructured, there were no concessions involving forgiveness of principal or interest and, therefore, there was no financial impact to the Company as a result of modification to these loans. ~~No financial impact resulted from those performing loans where the debt was not reaffirmed in bankruptcy, as no changes to loan terms occurred in that process.~~ However, the effects of modifications to loans under various debt management and assistance programs were estimated to decrease interest income by approximately ~~$815~~$663 thousand on an annual, pre-tax basis, compared to amounts contractually owed. Other modifications to consumer loans mainly involve extensions and other small modifications that did not include the forgiveness of principal or interest.

The allowance for credit losses related to troubled debt restructurings on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as troubled debt restructurings. Those performing loans classified as troubled debt restructurings are accruing loans which management expects to collect under contractual terms. Performing commercial loans having no other concessions granted other than being renewed at non-market interest rates are judged to have similar risk characteristics as non-troubled debt commercial loans and are collectively evaluated based on internal risk rating, loan type, delinquency, historical experience and current economic factors. Performing personal banking loans classified as troubled debt restructurings resulted from the borrower not reaffirming the debt during bankruptcy and have had no other concession granted, other than the Bank's future limitations on collecting payment deficiencies or in pursuing foreclosure actions. As such, they have similar risk characteristics as non-troubled debt personal banking loans and are evaluated collectively based on loan type, delinquency, historical experience and current economic factors.

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

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The Company had commitments of $~~245 thousand~~22.0 million at September 30, ~~2021~~2022 to lend additional funds to borrowers with restructured loans. Additionally, the Company had commitments at September 30, ~~2021~~2022 of $24.0 million related to letters of credit with an internal risk rating below substandard.

Loans held for sale

The Company designates certain long-term fixed rate personal real estate loans as held for sale, and the Company has elected the fair value option for these loans. The election of the fair value option aligns the accounting for these loans with the

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related economic hedges discussed in Note 11. The loans are primarily sold to Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA). At September 30, ~~2021,~~2022, the fair value of these loans was ~~$12.0~~$1.4 million, and the unpaid principal balance was ~~$11.6~~$1.5 million.

The Company also designates certain student loan originations as held for sale. The borrowers are credit-worthy students who are attending colleges and universities. The loans are intended to be sold in the secondary market, and the Company maintains contracts with Sallie Mae to sell the loans within 210 days after the last disbursement to the student. These loans are carried at lower of cost or fair value, which at September 30, ~~2021~~2022 totaled ~~$4.1~~$6.6 million.

At September 30, ~~2021,~~2022, none of the loans held for sale were on non-accrual status or 90 days past due and still ~~accruing.~~accruing interest.

Foreclosed real estate/repossessed assets

The Company’s holdings of foreclosed real estate totaled ~~$115~~$354 thousand and ~~$93~~$115 thousand at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Personal property acquired in repossession, generally autos, totaled ~~$1.0~~$1.7 million and ~~$1.4~~$1.1 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Upon acquisition, these assets are recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. They are subsequently carried at the lower of this cost basis or fair value less estimated selling costs.

3. Investment Securities

Investment securities consisted of the following at September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	September 30, 2022		December 31, 2021
Available for sale debt securities	Available for sale debt securities	$	14,165,656	$	12,449,264	Available for sale debt securities	$	12,632,510	$	14,450,027
Trading debt securities	Trading debt securities	40,114		35,321		Trading debt securities	39,222		46,235
Equity securities:	Equity securities:					Equity securities:
Readily determinable fair value	Readily determinable fair value	7,118		2,966		Readily determinable fair value	6,106		7,153
No readily determinable fair value	No readily determinable fair value	2,056		1,397		No readily determinable fair value	2,848		2,049
Other:	Other:					Other:
Federal Reserve Bank stock	Federal Reserve Bank stock	34,379		34,070		Federal Reserve Bank stock	34,707		34,379
Federal Home Loan Bank stock	Federal Home Loan Bank stock	10,185		10,307		Federal Home Loan Bank stock	10,260		10,428
Equity method investments	Equity method investments	1,834		18,000		Equity method investments	1,434		1,834
Private equity investments	Private equity investments	138,052		94,368		Private equity investments	176,341		147,406
Total investment securities (1)	Total investment securities (1)	$	14,399,394	$	12,645,693	Total investment securities (1)	$	12,903,428	$	14,699,511

(1)Accrued interest receivable totaled ~~$39.4~~$39.6 million and ~~$41.5~~$39.5 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and was included within other assets on the consolidated balance ~~sheet.~~sheets.

The Company has elected to measure equity securities with no readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer. This portfolio includes the Company's holdings of Visa Class B shares, which have a carrying value of zero, as there have not been observable price changes in orderly transactions for identical or similar investments of the same issuer. During the ~~period,~~nine months ended September 30, 2022, the Company did not record any impairment or other adjustments to the carrying amount of its portfolio of equity securities with no readily determinable fair value.

Other investment securities include Federal Reserve Bank (FRB) stock, Federal Home Loan Bank (FHLB) stock, equity method investments, and investments in portfolio concerns held by the Company's private equity subsidiary. FRB stock and FHLB stock are held for debt and regulatory purposes. Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is tied to the asset size of the borrowing bank and the level of borrowings from the FHLB. These holdings are carried at cost. Additionally, the Company's equity method investments are carried at cost, adjusted to reflect the Company's portion of income, loss, or dividends of the investee. These adjustments are included in non-interest income on the Company's ~~income~~

~~Table~~consolidated statements of ~~Contents~~

~~statement.~~income. The Company's private equity investments ~~in the absence of readily ascertainable market values,~~ are carried at estimated fair value.

The majority of the Company’s investment portfolio is comprised of available for sale debt securities, which are carried at fair value with changes in fair value reported in accumulated other comprehensive income (AOCI). A summary of the available for sale debt securities by maturity groupings as of September 30, ~~2021~~2022 is shown below. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as FHLMC, FNMA, and Government National

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Mortgage Association (GNMA), in addition to non-agency mortgage-backed securities, which have no guarantee but are collateralized by commercial and residential mortgages. Also included are certain other asset-backed securities, which are primarily collateralized by credit cards, automobiles, student loans, and commercial loans. These securities differ from traditional debt securities primarily in that they may have uncertain maturity dates and are priced based on estimated prepayment rates on the underlying collateral.


(In thousands)	(In thousands)	Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value
U.S. government and federal agency obligations:	U.S. government and federal agency obligations:					U.S. government and federal agency obligations:
Within 1 year	Within 1 year	$	79,731	$	81,194	Within 1 year	$	159,019	$	158,319
After 1 but within 5 years	After 1 but within 5 years	454,372		479,137		After 1 but within 5 years	735,831		705,287
After 5 but within 10 years	After 5 but within 10 years	198,011		223,859		After 5 but within 10 years	190,134		172,719

Total U.S. government and federal agency obligations	Total U.S. government and federal agency obligations	732,114		784,190		Total U.S. government and federal agency obligations	1,084,984		1,036,325
Government-sponsored enterprise obligations:	Government-sponsored enterprise obligations:					Government-sponsored enterprise obligations:

After 5 but within 10 years						After 5 but within 10 years	4,987		4,545
After 10 years	After 10 years	50,781		51,941		After 10 years	50,750		38,630
Total government-sponsored enterprise obligations	Total government-sponsored enterprise obligations	50,781		51,941		Total government-sponsored enterprise obligations	55,737		43,175
State and municipal obligations:	State and municipal obligations:					State and municipal obligations:
Within 1 year	Within 1 year	170,006		171,558		Within 1 year	197,465		196,380
After 1 but within 5 years	After 1 but within 5 years	785,942		813,597		After 1 but within 5 years	666,078		636,464
After 5 but within 10 years	After 5 but within 10 years	752,596		764,446		After 5 but within 10 years	936,136		787,205
After 10 years	After 10 years	410,023		405,475		After 10 years	221,305		183,204
Total state and municipal obligations	Total state and municipal obligations	2,118,567		2,155,076		Total state and municipal obligations	2,020,984		1,803,253
Mortgage and asset-backed securities:	Mortgage and asset-backed securities:					Mortgage and asset-backed securities:
Agency mortgage-backed securities	Agency mortgage-backed securities	5,943,839		5,974,802		Agency mortgage-backed securities	5,230,550		4,445,519
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	1,228,509		1,225,091		Non-agency mortgage-backed securities	1,449,021		1,235,584
Asset-backed securities	Asset-backed securities	3,342,935		3,359,915		Asset-backed securities	3,755,855		3,558,287
Total mortgage and asset-backed securities	Total mortgage and asset-backed securities	10,515,283		10,559,808		Total mortgage and asset-backed securities	10,435,426		9,239,390
Other debt securities:	Other debt securities:					Other debt securities:
Within 1 year	Within 1 year	113,944		115,321		Within 1 year	50,783		50,639
After 1 but within 5 years	After 1 but within 5 years	222,106		226,915		After 1 but within 5 years	272,029		249,688
After 5 but within 10 years	After 5 but within 10 years	255,052		253,271		After 5 but within 10 years	247,121		202,706
After 10 years	After 10 years	19,437		19,134		After 10 years	9,260		7,334
Total other debt securities	Total other debt securities	610,539		614,641		Total other debt securities	579,193		510,367
Total available for sale debt securities	Total available for sale debt securities	$	14,027,284	$	14,165,656	Total available for sale debt securities	$	14,176,324	$	12,632,510

Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled ~~$387.1~~$368.7 million, at fair value, at September 30, ~~2021.~~2022. Interest paid on these securities increases with inflation and decreases with deflation, as measured by the non-seasonally adjusted Consumer Price ~~Index.~~Index (CPI-U). At maturity, the principal paid is the greater of an inflation-adjusted principal or the original principal.

Allowance for credit losses on available for sale debt securities

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

The Company’s model for establishing its allowance for credit losses uses cash flows projected to be received over the estimated life of the securities, discounted to present value, and compared to the current amortized cost bases of the securities. Securities for which fair value is less than amortized cost are reviewed for impairment. Special emphasis is placed on securities whose credit rating has fallen below Baa3 (Moody's) or BBB- (Standard & Poor's), whose fair values have fallen more than 20% below purchase price, or who have been identified based on management’s judgment. These securities are placed on a

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watch list and cash flow analyses are prepared on an individual security basis. ~~Credit impairment is determined~~Certain securities are analyzed using a projected cash flow model, discounted to present value, and compared to the current amortized cost bases of the securities. The model uses input factors such as cash flow projections, contractual payments required, expected delinquency rates, credit support from other tranches, prepayment speeds, collateral loss severity rates (including loan to values), and various other information related to the underlying collateral. Securities not analyzed using the cash flow model are analyzed by reviewing risk ratings, credit support agreements, and industry knowledge to project future cash flows and any possible credit impairment.

At September 30, ~~2021,~~2022, the fair value of securities on this watch list was ~~$13.7 million~~$1.3 billion compared to ~~$31.0~~$13.4 million at December 31, ~~2020.~~

~~Significant inputs~~2021. The majority of the securities included on the Company's watch list in the current quarter were experiencing unrealized loss positions due to the significant increase in interest rates and were analyzed outside of the cash flow ~~model used at~~model. At September 30, ~~2021 to quantify credit losses were primarily credit support agreements, as~~2022, the securities on the Company's watch list ~~at September 30, 2021~~that were not deemed to be solely related to increasing interest rates were securities backed by government-guaranteed student loans and are expected to perform as contractually required. As of September 30, ~~2021,~~2022, the Company did not identify any securities for which a credit loss ~~exists.~~exists,

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and for the nine months ended September 30, 2022 and 2021, the Company did not recognize a credit loss expense on any available for sale debt securities.

The table below summarizes debt securities available for sale in an unrealized loss position, aggregated by length of loss period, for which an allowance for credit losses has not been recorded at September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Unrealized losses on these available for sale securities have not been recognized into income because after review, the securities were deemed not to be impaired. The unrealized losses on these securities are primarily attributable to changes in interest rates and current market conditions. Additionally, management does not intend to sell the securities, and it is more likely than not that management will not be required to sell the securities prior to their anticipated recovery.


		Less than 12 months				12 months or longer				Total					Less than 12 months				12 months or longer				Total
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2021

September 30, 2022														September 30, 2022
U.S. government and federal agency obligations														U.S. government and federal agency obligations	$	695,272	$	33,081	$	283,593	$	15,579	$	978,865	$	48,660
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	$	19,249	$	569	$	—	$	—	$	19,249	$	569	Government-sponsored enterprise obligations	29,954		5,964		13,221		6,598		43,175		12,562
State and municipal obligations	State and municipal obligations	757,283		9,795		14,385		436		771,668		10,231		State and municipal obligations	1,101,122		72,473		673,390		145,337		1,774,512		217,810
Mortgage and asset-backed securities:	Mortgage and asset-backed securities:													Mortgage and asset-backed securities:
Agency mortgage-backed securities	Agency mortgage-backed securities	3,076,674		44,140		38,993		1,968		3,115,667		46,108		Agency mortgage-backed securities	1,970,947		241,074		2,450,227		544,264		4,421,174		785,338
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	911,825		5,020		—		—		911,825		5,020		Non-agency mortgage-backed securities	417,434		63,282		811,318		150,299		1,228,752		213,581
Asset-backed securities	Asset-backed securities	1,024,409		3,609		107,526		705		1,131,935		4,314		Asset-backed securities	2,145,330		92,243		1,381,680		105,368		3,527,010		197,611
Total mortgage and asset-backed securities	Total mortgage and asset-backed securities	5,012,908		52,769		146,519		2,673		5,159,427		55,442		Total mortgage and asset-backed securities	4,533,711		396,599		4,643,225		799,931		9,176,936		1,196,530
Other debt securities	Other debt securities	233,200		4,475		23,375		1,326		256,575		5,801		Other debt securities	297,155		25,979		210,212		42,847		507,367		68,826
Total	Total	$	6,022,640	$	67,608	$	184,279	$	4,435	$	6,206,919	$	72,043	Total	$	6,657,214	$	534,096	$	5,823,641	$	1,010,292	$	12,480,855	$	1,544,388
December 31, 2020

December 31, 2021														December 31, 2021
U.S. government and federal agency obligations														U.S. government and federal agency obligations	$	296,492	$	2,241	$	—	$	—	$	296,492	$	2,241
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	$	19,720	$	98	$	—	$	—	$	19,720	$	98	Government-sponsored enterprise obligations	—		—		18,899		919		18,899		919
State and municipal obligations	State and municipal obligations	45,622		230		—		—		45,622		230		State and municipal obligations	876,691		15,874		32,684		1,049		909,375		16,923
Mortgage and asset-backed securities:	Mortgage and asset-backed securities:													Mortgage and asset-backed securities:
Agency mortgage-backed securities	Agency mortgage-backed securities	470,373		2,802		—		—		470,373		2,802		Agency mortgage-backed securities	3,333,691		59,044		265,835		8,720		3,599,526		67,764
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	112,861		380		—		—		112,861		380		Non-agency mortgage-backed securities	1,285,611		17,222		1,948		19		1,287,559		17,241
Asset-backed securities	Asset-backed securities	21,360		56		253,734		2,617		275,094		2,673		Asset-backed securities	2,518,935		19,201		87,893		525		2,606,828		19,726
Total mortgage and asset-backed securities	Total mortgage and asset-backed securities	604,594		3,238		253,734		2,617		858,328		5,855		Total mortgage and asset-backed securities	7,138,237		95,467		355,676		9,264		7,493,913		104,731
Other debt securities	Other debt securities	24,522		175		—		—		24,522		175		Other debt securities	270,409		5,098		58,574		3,017		328,983		8,115
Total	Total	$	694,458	$	3,741	$	253,734	$	2,617	$	948,192	$	6,358	Total	$	8,581,829	$	118,680	$	465,833	$	14,249	$	9,047,662	$	132,929

The entire available for sale debt portfolio included ~~$6.2~~$12.5 billion of securities that were in a loss position at September 30, ~~2021,~~2022, compared to ~~$948.2 million~~$9.0 billion at December 31, ~~2020.~~2021. The total amount of unrealized loss on these securities was ~~$72.0 million~~$1.5 billion at September 30, ~~2021,~~2022, an increase of ~~$65.7 million~~$1.4 billion compared to the unrealized loss at December 31, ~~2020.~~2021. Securities with significant unrealized losses are discussed in the "Allowance for credit losses on available for sale debt securities" section above.

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For debt securities classified as available for sale, the following ~~tables show~~table shows the amortized cost, fair value, and allowance for credit losses of securities available for sale at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, and the corresponding amounts of gross unrealized gains and losses (pre-tax) in AOCI, by security type.


(In thousands)	(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value		(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
September 30, 2021
September 30, 2022												September 30, 2022
U.S. government and federal agency obligations	U.S. government and federal agency obligations	$	732,114	$	52,076	$	—	$	—	$	784,190	U.S. government and federal agency obligations	$	1,084,984	$	1	$	(48,660)	$	—	$	1,036,325
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	50,781		1,729		(569)		—		51,941		Government-sponsored enterprise obligations	55,737		—		(12,562)		—		43,175
State and municipal obligations	State and municipal obligations	2,118,567		46,740		(10,231)		—		2,155,076		State and municipal obligations	2,020,984		79		(217,810)		—		1,803,253
Mortgage and asset-backed securities:	Mortgage and asset-backed securities:											Mortgage and asset-backed securities:
Agency mortgage-backed securities	Agency mortgage-backed securities	5,943,839		77,071		(46,108)		—		5,974,802		Agency mortgage-backed securities	5,230,550		307		(785,338)		—		4,445,519
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	1,228,509		1,602		(5,020)		—		1,225,091		Non-agency mortgage-backed securities	1,449,021		144		(213,581)		—		1,235,584
Asset-backed securities	Asset-backed securities	3,342,935		21,294		(4,314)		—		3,359,915		Asset-backed securities	3,755,855		43		(197,611)		—		3,558,287
Total mortgage and asset-backed securities	Total mortgage and asset-backed securities	10,515,283		99,967		(55,442)		—		10,559,808		Total mortgage and asset-backed securities	10,435,426		494		(1,196,530)		—		9,239,390
Other debt securities	Other debt securities	610,539		9,903		(5,801)		—		614,641		Other debt securities	579,193		—		(68,826)		—		510,367
Total	Total	$	14,027,284	$	210,415	$	(72,043)	$	—	$	14,165,656	Total	$	14,176,324	$	574	$	(1,544,388)	$	—	$	12,632,510
December 31, 2020
December 31, 2021												December 31, 2021
U.S. government and federal agency obligations	U.S. government and federal agency obligations	$	775,592	$	62,467	$	—	$	—	$	838,059	U.S. government and federal agency obligations	$	1,035,477	$	47,484	$	(2,241)	$	—	$	1,080,720
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	50,803		3,780		(98)		—		54,485		Government-sponsored enterprise obligations	50,773		1,901		(919)		—		51,755
State and municipal obligations	State and municipal obligations	1,968,006		77,323		(230)		—		2,045,099		State and municipal obligations	2,072,210		41,540		(16,923)		—		2,096,827
Mortgage and asset-backed securities:	Mortgage and asset-backed securities:											Mortgage and asset-backed securities:
Agency mortgage-backed securities	Agency mortgage-backed securities	6,557,098		157,789		(2,802)		—		6,712,085		Agency mortgage-backed securities	5,698,088		52,676		(67,764)		—		5,683,000
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	358,074		3,380		(380)		—		361,074		Non-agency mortgage-backed securities	1,383,037		681		(17,241)		—		1,366,477
Asset-backed securities	Asset-backed securities	1,853,791		31,125		(2,673)		—		1,882,243		Asset-backed securities	3,546,024		12,921		(19,726)		—		3,539,219
Total mortgage and asset-backed securities	Total mortgage and asset-backed securities	8,768,963		192,294		(5,855)		—		8,955,402		Total mortgage and asset-backed securities	10,627,149		66,278		(104,731)		—		10,588,696
Other debt securities	Other debt securities	534,169		22,225		(175)		—		556,219		Other debt securities	633,524		6,620		(8,115)		—		632,029
Total	Total	$	12,097,533	$	358,089	$	(6,358)	$	—	$	12,449,264	Total	$	14,419,133	$	163,823	$	(132,929)	$	—	$	14,450,027

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


		For the Nine Months Ended September 30					For the Nine Months Ended September 30
(In thousands)	(In thousands)	2021		2020		(In thousands)	2022		2021
Proceeds from sales of securities:	Proceeds from sales of securities:					Proceeds from sales of securities:
Available for sale debt securities	Available for sale debt securities	$	—	$	574,374	Available for sale debt securities	$	85,023	$	—
Equity securities		—		2
Other		10,060		—

Other investments						Other investments	3,907		10,060
Total proceeds	Total proceeds	$	10,060	$	574,376	Total proceeds	$	88,930	$	10,060

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

Gains realized on sales		$	—	$	16,965

Losses realized on sales						Losses realized on sales	$	(20,274)	$	—

Equity securities:	Equity securities:					Equity securities:

Gains realized on sales		—		2

Fair value adjustments, net	Fair value adjustments, net	152		(126)		Fair value adjustments, net	(1,048)		152
Other:	Other:					Other:
Gains realized on sales	Gains realized on sales	1,611		—		Gains realized on sales	104		1,611

Losses realized on sales						Losses realized on sales	(4,313)		—
Fair value adjustments, net	Fair value adjustments, net	38,002		(18,116)		Fair value adjustments, net	37,133		38,002
Total investment securities gains (losses), net		$	39,765	$	(1,275)
Total investment securities gains, net						Total investment securities gains, net	$	11,602	$	39,765

Net gains on investment securities for the nine months ended September 30, ~~2021~~2022 were mainly comprised of ~~gains~~losses of ~~$1.6~~$20.3 million ~~realized~~ on ~~the~~sales of available for sale securities, net losses of a$4.3 million on sales of private equity ~~investment~~investments, and net losses in fair value of $1.0 million on equity investments, offset by net gains in fair value of ~~$38.0~~$37.1 million on private equity investments, due to fair value adjustments.

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At September 30, ~~2021,~~2022, securities totaling ~~$5.7~~$4.8 billion in fair value were pledged to secure public fund deposits, securities sold under agreements to repurchase, trust funds, and borrowings at the FRB and FHLB, compared to ~~$4.8~~$6.4 billion at December 31, ~~2020.~~2021. Securities pledged under agreements pursuant to which the collateral may be sold or re-pledged by the secured parties approximated ~~$213.1~~$208.3 million, while the remaining securities were pledged under agreements pursuant to which the secured parties may not sell or re-pledge the collateral. Except for obligations of the U.S. Treasury and various government-sponsored enterprises such as FNMA, FHLB and FHLMC, no investment in a single issuer exceeded 10% of stockholders’ equity.

4. Goodwill and Other Intangible Assets

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


		September 30, 2021								December 31, 2020									September 30, 2022								December 31, 2021
(In thousands)	(In thousands)	Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount		Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount		(In thousands)	Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount		Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount
Amortizable intangible assets:	Amortizable intangible assets:																	Amortizable intangible assets:
Core deposit premium	Core deposit premium	$	31,270	$	(30,186)	$	—	$	1,084	$	31,270	$	(29,912)	$	—	$	1,358	Core deposit premium	$	31,270	$	(30,499)	$	—	$	771	$	31,270	$	(30,266)	$	—	$	1,004
Mortgage servicing rights	Mortgage servicing rights	19,747		(8,990)		(983)		9,774		15,238		(6,886)		(2,103)		6,249		Mortgage servicing rights	22,161		(10,933)		—		11,228		20,870		(9,600)		(304)		10,966
Total	Total	$	51,017	$	(39,176)	$	(983)	$	10,858	$	46,508	$	(36,798)	$	(2,103)	$	7,607	Total	$	53,431	$	(41,432)	$	—	$	11,999	$	52,140	$	(39,866)	$	(304)	$	11,970

Aggregate amortization expense on intangible assets was ~~$682~~$456 thousand and ~~$859~~$682 thousand for the three month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$2.4~~$1.6 million and ~~$1.6~~$2.4 million for the nine month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The following table shows the estimated annual amortization expense for the next five fiscal years. This expense is based on existing asset balances and the interest rate environment as of September 30, ~~2021.~~2022. The Company’s actual amortization expense in any given period may be different from the estimated amounts depending upon the acquisition of intangible assets, changes in mortgage interest rates, prepayment rates and other market conditions.


(In thousands)	(In thousands)			(In thousands)
2021		$	2,929
2022	2022	1,799		2022	$	1,945
2023	2023	1,498		2023	1,389
2024	2024	1,244		2024	1,242
2025	2025	1,027		2025	1,098
2026				2026	960

Changes in the carrying amount of goodwill and ~~net~~ other intangible assets for the nine month period ended September 30, ~~2021~~2022 are as follows:

(In thousands) Goodwill Easement Core Deposit Premium Mortgage Servicing Rights
Balance January 1, 2021 $ 138,921 $ 3,600 $ 1,358 $ 6,249
Originations — — — 4,509
Amortization — — (274) (2,104)
Impairment reversal — — — 1,120
Balance September 30, 2021 $ 138,921 $ 3,600 $ 1,084 $ 9,774


(In thousands)	Goodwill		Easement		Core Deposit Premium		Mortgage Servicing Rights
Balance January 1, 2022	$	138,921	$	3,600	$	1,004	$	10,966

Originations, net of disposals	—		—		—		1,291
Amortization	—		—		(233)		(1,333)
Impairment recovery	—		—		—		304
Balance September 30, 2022	$	138,921	$	3,600	$	771	$	11,228

Goodwill allocated to the Company’s operating segments at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 is shown below.


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

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5. Guarantees

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

Upon issuance of standby letters of credit, the Company recognizes a liability for the fair value of the obligation undertaken, which is estimated to be equivalent to the amount of fees received from the customer over the life of the agreement. At September 30, ~~2021,~~2022, that net liability was ~~$3.1~~$3.6 million, which will be accreted into income over the remaining life of the respective commitments. The contractual amount of these letters of credit, which represents the maximum potential future payments guaranteed by the Company, was ~~$423.6~~$516.2 million at September 30, ~~2021.~~2022.

The Company periodically enters into credit risk participation agreements (RPAs) as a guarantor to other financial institutions, in order to mitigate those institutions’ credit risk associated with interest rate swaps with third parties. The RPA stipulates that, in the event of default by the third party on the interest rate swap, the Company will reimburse a portion of the loss borne by the financial institution. These interest rate swaps are normally collateralized (generally with real property, inventories and equipment) by the third party, which limits the credit risk associated with the Company’s RPAs. The third parties usually have other borrowing relationships with the Company. The Company monitors overall borrower collateral and at September 30, ~~2021,~~2022, believes sufficient collateral is available to cover potential swap losses. The RPAs are carried at fair value throughout their term with all changes in fair value, including those due to a change in the third party’s creditworthiness, recorded in current earnings. The terms of the RPAs, which correspond to the terms of the underlying swaps, range from 2 years to 15 years. At September 30, ~~2021,~~2022, the fair value of the Company's guarantee liabilities for RPAs was ~~$283~~$94 thousand, and the notional amount of the underlying swaps was ~~$268.1~~$376.4 million. The maximum potential future payment guaranteed by the Company cannot be readily estimated but is dependent upon the fair value of the interest rate swaps at the time of default.

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6. Leases

The Company has net investments in direct financing and sales-type leases to commercial, industrial, and tax-exempt entities. These leases are included within business loans on the Company's consolidated balance sheets. The Company primarily leases various types of equipment, trucks and trailers, and office furniture and fixtures. Lease agreements may include options for the lessee to renew or purchase the leased equipment at the end of the lease term. The Company has elected to adopt the lease component expedient in which the lease and nonlease components are combined into the total lease receivable. The Company also leases office space to third parties, and these leases are classified as operating leases. The leases may include options to renew or expand the leased space, and currently the leases have remaining terms of ~~3 months~~1 month to 6 years.

The following table provides the components of lease income.


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended September 30				For the Nine Months Ended September 30
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Direct financing and sales-type leases	Direct financing and sales-type leases	$	5,482	$	6,437	$	17,398	$	19,099	Direct financing and sales-type leases	$	5,477	$	5,482	$	15,838	$	17,398
Operating leases(a)	Operating leases(a)	1,717		2,270		5,721		6,491		Operating leases(a)	2,175		1,717		6,517		5,721
Total lease income	Total lease income	$	7,199	$	8,707	$	23,119	$	25,590	Total lease income	$	7,652	$	7,199	$	22,355	$	23,119

(a) Includes rent from Tower Properties Company, a related party, of $19 thousand for the three month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, and $57 thousand for the nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

7. Pension

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


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2022		2021		2022		2021
Service cost - benefits earned during the period	Service cost - benefits earned during the period	$	95	$	93	$	284	$	295	Service cost - benefits earned during the period	$	128	$	95	$	391	$	284
Interest cost on projected benefit obligation	Interest cost on projected benefit obligation	514		818		1,626		2,463		Interest cost on projected benefit obligation	713		514		2,043		1,626
Expected return on plan assets	Expected return on plan assets	(1,151)		(1,317)		(3,399)		(3,911)		Expected return on plan assets	(1,135)		(1,151)		(3,386)		(3,399)
Amortization of prior service cost	Amortization of prior service cost	(67)		(67)		(203)		(203)		Amortization of prior service cost	(68)		(67)		(203)		(203)
Amortization of unrecognized net loss	Amortization of unrecognized net loss	669		503		1,971		1,587		Amortization of unrecognized net loss	470		669		1,465		1,971
Net periodic pension cost	Net periodic pension cost	$	60	$	30	$	279	$	231	Net periodic pension cost	$	108	$	60	$	310	$	279

All benefits accrued under the Company’s defined benefit pension plan have been frozen since January 1, 2011. During the first nine months of ~~2021,~~2022, the Company made 0no funding contributions to its defined benefit pension plan and made minimal funding contributions to a supplemental executive retirement plan (the CERP), which carries no segregated assets.

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8. Common Stock *

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


		For the Three Months Ended September 30				For the Nine Months Ended September 30					For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands, except per share data)	(In thousands, except per share data)	2021		2020		2021		2020		(In thousands, except per share data)	2022		2021		2022		2021
Basic income per common share:	Basic income per common share:									Basic income per common share:
Net income attributable to Commerce Bancshares, Inc.	Net income attributable to Commerce Bancshares, Inc.	$	122,561	$	132,448	$	415,859	$	224,168	Net income attributable to Commerce Bancshares, Inc.	$	122,823	$	122,561	$	356,771	$	415,859
Less preferred stock dividends		—		7,466		—		11,966
Net income available to common shareholders		122,561		124,982		415,859		212,202
Less income allocated to nonvested restricted stock	Less income allocated to nonvested restricted stock	1,114		1,173		3,792		1,996		Less income allocated to nonvested restricted stock	1,119		1,114		3,241		3,792
Net income allocated to common stock	Net income allocated to common stock	$	121,447	$	123,809	$	412,067	$	210,206	Net income allocated to common stock	$	121,704	$	121,447	$	353,530	$	412,067
Weighted average common shares outstanding	Weighted average common shares outstanding	115,836		116,256		116,085		116,391		Weighted average common shares outstanding	118,895		121,628		119,619		121,889
Basic income per common share	Basic income per common share	$	1.05	$	1.06	$	3.55	$	1.80	Basic income per common share	$	1.03	$	1.00	$	2.96	$	3.38
Diluted income per common share:	Diluted income per common share:									Diluted income per common share:
Net income available to common shareholders		$	122,561	$	124,982	$	415,859	$	212,202
Net income attributable to Commerce Bancshares, Inc.										Net income attributable to Commerce Bancshares, Inc.	$	122,823	$	122,561	$	356,771	$	415,859
Less income allocated to nonvested restricted stock	Less income allocated to nonvested restricted stock	1,112		1,170		3,785		1,993		Less income allocated to nonvested restricted stock	1,118		1,112		3,236		3,785
Net income allocated to common stock	Net income allocated to common stock	$	121,449	$	123,812	$	412,074	$	210,209	Net income allocated to common stock	$	121,705	$	121,449	$	353,535	$	412,074
Weighted average common shares outstanding	Weighted average common shares outstanding	115,836		116,256		116,085		116,391		Weighted average common shares outstanding	118,895		121,628		119,619		121,889
Net effect of the assumed exercise of stock-based awards - based on the
treasury stock method using the average market price for the respective periods		241		188		280		219

Net effect of the assumed exercise of stock-based awards - based on the treasury stock method using the average market price for the respective periods										Net effect of the assumed exercise of stock-based awards - based on the treasury stock method using the average market price for the respective periods	264		253		274		294
Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	116,077		116,444		116,365		116,610		Weighted average diluted common shares outstanding	119,159		121,881		119,893		122,183
Diluted income per common share	Diluted income per common share	$	1.05	$	1.06	$	3.54	$	1.80	Diluted income per common share	$	1.02	$	.99	$	2.95	$	3.37

Unexercised stock appreciation rights of 94167 thousand and ~~413~~99 thousand for the three month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and 58152 thousand and ~~295~~61 thousand for the nine month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, were excluded from the computation of diluted income per common share because their inclusion would have been anti-dilutive.

On September 1, 2020, the Company redeemed all outstanding shares of its 6.00% Series B Non-Cumulative Perpetual Preferred Stock, $1.00 par value per share (Series B Preferred Stock) and the corresponding depositary shares representing fractional interests in the Series B Preferred Stock (Series B Depositary Shares).

* All prior year share and per share amounts in this note have been restated for the 5% common stock dividend distributed in December ~~2020.~~2021.

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9. Accumulated Other Comprehensive Income

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


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

Balance January 1, 2022										Balance January 1, 2022						$	23,174	$	(20,668)	$	74,574	$	77,080

Other comprehensive loss before reclassifications to current earnings										Other comprehensive loss before reclassifications to current earnings						(1,594,981)		—		(3,464)		(1,598,445)
Amounts reclassified to current earnings from accumulated other comprehensive income										Amounts reclassified to current earnings from accumulated other comprehensive income						20,274		1,262		(18,322)		3,214
Current period other comprehensive income (loss), before tax										Current period other comprehensive income (loss), before tax						(1,574,707)		1,262		(21,786)		(1,595,231)
Income tax (expense) benefit										Income tax (expense) benefit						393,676		(315)		5,446		398,807
Current period other comprehensive income (loss), net of tax										Current period other comprehensive income (loss), net of tax						(1,181,031)		947		(16,340)		(1,196,424)

Balance September 30, 2022										Balance September 30, 2022						$	(1,157,857)	$	(19,721)	$	58,234	$	(1,119,344)
Balance January 1, 2021	Balance January 1, 2021	$	263,801							$	(25,118)	$	92,694	$	331,377		Balance January 1, 2021					$	263,801	$	(25,118)	$	92,694	$	331,377

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

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

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

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

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

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

10. Segments

The Company segregates financial information for use in assessing its performance and allocating resources among 3three operating segments: Consumer, Commercial and Wealth. The Consumer segment consists of various consumer loan and deposit products offered through its retail branch network of approximately ~~155~~150 locations. This segment also includes indirect and other consumer loan financing businesses, along with debit and credit card loan and fee businesses. Residential mortgage origination, sales and servicing functions are included in this Consumer segment, but residential mortgage loans retained by the Company are not considered part of this segment and are instead included in the Other/Elimination column. The Commercial segment provides corporate lending (including the Small Business Banking product line within the branch network), leasing, and international services, along with business and governmental deposit products and commercial cash management services. This segment also includes both merchant and commercial bank card products as well as the Capital Markets Group, which sells fixed income securities and provides securities safekeeping and accounting services to its business and correspondent bank customers. The Wealth segment provides traditional trust and estate planning, advisory and discretionary investment management, and brokerage services. This segment also provides various loan and deposit related services to its private banking customers.

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The following table presents selected financial information by segment and reconciliations of combined segment totals to consolidated totals. There were no material intersegment revenues between the three segments. Management periodically makes changes to methods of assigning costs and income to its business segments to better reflect operating results. If appropriate, these changes are reflected in prior year information presented below.


(In thousands)	(In thousands)	Consumer		Commercial		Wealth		Segment Totals		Other/Elimination		Consolidated Totals		(In thousands)	Consumer		Commercial		Wealth		Segment Totals		Other/Elimination		Consolidated Totals
Three Months Ended September 30, 2022														Three Months Ended September 30, 2022
Net interest income														Net interest income	$	86,232	$	114,087	$	18,637	$	218,956	$	27,417	$	246,373
Provision for credit losses														Provision for credit losses	(4,305)		(506)		5		(4,806)		(10,484)		(15,290)
Non-interest income														Non-interest income	30,264		57,115		53,862		141,241		(2,727)		138,514
Investment securities gains, net														Investment securities gains, net	—		—		—		—		3,410		3,410
Non-interest expense														Non-interest expense	(76,832)		(91,372)		(36,194)		(204,398)		(8,486)		(212,884)
Income before income taxes														Income before income taxes	$	35,359	$	79,324	$	36,310	$	150,993	$	9,130	$	160,123
Nine Months Ended September 30, 2022														Nine Months Ended September 30, 2022
Net interest income														Net interest income	$	249,761	$	333,263	$	56,731	$	639,755	$	47,789	$	687,544
Provision for credit losses														Provision for credit losses	(12,727)		(651)		2		(13,376)		782		(12,594)
Non-interest income														Non-interest income	89,542		167,581		161,051		418,174		(8,464)		409,710
Investment securities gains, net														Investment securities gains, net	—		—		—		—		11,602		11,602
Non-interest expense														Non-interest expense	(225,232)		(272,224)		(108,967)		(606,423)		(25,614)		(632,037)
Income before income taxes														Income before income taxes	$	101,344	$	227,969	$	108,817	$	438,130	$	26,095	$	464,225
Three Months Ended September 30, 2021	Three Months Ended September 30, 2021													Three Months Ended September 30, 2021
Net interest income	Net interest income	$	80,411	$	115,536	$	18,075	$	214,022	$	15	$	214,037	Net interest income	$	80,411	$	115,529	$	18,075	$	214,015	$	22	$	214,037
Provision for credit losses		(3,557)		(69)		9		(3,617)		11,002		7,385
Provision for loan losses														Provision for loan losses	(3,557)		(69)		9		(3,617)		11,002		7,385
Non-interest income	Non-interest income	35,758		52,092		55,241		143,091		(5,585)		137,506		Non-interest income	35,758		52,092		55,241		143,091		(5,585)		137,506
Investment securities gains, net	Investment securities gains, net	—		—		—		—		13,108		13,108		Investment securities gains, net	—		—		—		—		13,108		13,108
Non-interest expense	Non-interest expense	(75,823)		(84,604)		(34,286)		(194,713)		(16,907)		(211,620)		Non-interest expense	(75,996)		(84,601)		(34,285)		(194,882)		(16,738)		(211,620)
Income before income taxes	Income before income taxes	$	36,789	$	82,955	$	39,039	$	158,783	$	1,633	$	160,416	Income before income taxes	$	36,616	$	82,951	$	39,040	$	158,607	$	1,809	$	160,416
Nine Months Ended September 30, 2021	Nine Months Ended September 30, 2021													Nine Months Ended September 30, 2021
Net interest income	Net interest income	$	239,159	$	340,345	$	53,186	$	632,690	$	(4,923)	$	627,767	Net interest income	$	239,157	$	340,279	$	53,186	$	632,622	$	(4,855)	$	627,767
Provision for credit losses	Provision for credit losses	(19,122)		4,856		10		(14,256)		73,528		59,272		Provision for credit losses	(19,122)		4,856		10		(14,256)		73,528		59,272
Non-interest income	Non-interest income	110,911		155,079		158,731		424,721		(12,027)		412,694		Non-interest income	110,911		155,079		158,731		424,721		(12,027)		412,694
Investment securities gains, net	Investment securities gains, net	—		—		—		—		39,765		39,765		Investment securities gains, net	—		—		—		—		39,765		39,765
Non-interest expense	Non-interest expense	(220,276)		(246,502)		(101,377)		(568,155)		(34,164)		(602,319)		Non-interest expense	(220,280)		(246,501)		(101,377)		(568,158)		(34,161)		(602,319)
Income before income taxes	Income before income taxes	$	110,672	$	253,778	$	110,550	$	475,000	$	62,179	$	537,179	Income before income taxes	$	110,666	$	253,713	$	110,550	$	474,929	$	62,250	$	537,179
Three Months Ended September 30, 2020
Net interest income		$	80,944	$	111,527	$	15,303	$	207,774	$	8,188	$	215,962
Provision for loan losses		(7,654)		(200)		13		(7,841)		4,740		(3,101)
Non-interest income		37,115		47,920		47,701		132,736		(3,164)		129,572
Investment securities gains, net		—		—		—		—		16,155		16,155
Non-interest expense		(73,075)		(78,277)		(30,933)		(182,285)		(8,573)		(190,858)
Income before income taxes		$	37,330	$	80,970	$	32,084	$	150,384	$	17,346	$	167,730
Nine Months Ended September 30, 2020
Net interest income		$	241,195	$	300,301	$	41,686	$	583,182	$	36,902	$	620,084
Provision for credit losses		(23,885)		(3,122)		10		(26,997)		(114,596)		(141,593)
Non-interest income		107,489		143,746		139,700		390,935		(20,185)		370,750
Investment securities losses, net		—		—		—		—		(1,275)		(1,275)
Non-interest expense		(225,791)		(237,327)		(92,915)		(556,033)		(16,035)		(572,068)
Income before income taxes		$	99,008	$	203,598	$	88,481	$	391,087	$	(115,189)	$	275,898

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

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

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

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11. Derivative Instruments

The notional amounts of the Company’s derivative instruments are shown in the table below. These contractual amounts, along with other terms of the derivative, are used to determine amounts to be exchanged between counterparties and are not a measure of loss exposure. At September 30, ~~2021,~~2022, the Company’s derivative instruments are accounted for as free-standing derivatives, and changes in their fair value are recorded in current earnings.


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	September 30, 2022		December 31, 2021
Interest rate swaps	Interest rate swaps	$	2,236,974	$	2,367,017	Interest rate swaps	$	1,980,368	$	2,229,419

Interest rate floors						Interest rate floors	500,000		—
Interest rate caps	Interest rate caps	185,177		103,028		Interest rate caps	152,784		152,058
Credit risk participation agreements	Credit risk participation agreements	372,661		381,170		Credit risk participation agreements	536,188		485,633
Foreign exchange contracts	Foreign exchange contracts	7,566		7,431		Foreign exchange contracts	7,435		5,119
Mortgage loan commitments	Mortgage loan commitments	44,233		67,543		Mortgage loan commitments	984		21,787
Mortgage loan forward sale contracts	Mortgage loan forward sale contracts	6,987		—		Mortgage loan forward sale contracts	669		1,165
Forward TBA contracts	Forward TBA contracts	37,000		89,000		Forward TBA contracts	1,000		21,000
Total notional amount	Total notional amount	$	2,890,598	$	3,015,189	Total notional amount	$	3,179,428	$	2,916,181

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

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

During the third quarter of 2022, the Company entered into an interest rate floor contract of $500.0 million to hedge the risk of declining interest rates on certain floating rate commercial loans. The premium paid for this floor totaled $16.8 million and is forward starting beginning on January 1, 2024. The interest rate floor matures on January 1, 2030. The interest rate floor qualified and was designated as a cash flow hedge and was assessed for effectiveness using regression analysis. The change in the fair value of the interest rate floor is recorded in AOCI, net of the amortization of the premium paid, which is recorded against fees on loans in the consolidated statements of income. As of September 30, 2022, net deferred losses on the interest rate floor totaled $3.5 million (pre-tax) and was recorded in AOCI in the consolidated balance sheet. As of September 30, 2022, over the next twelve months, it is expected that $2.3 million (pre-tax), representing the floor premium amortization, will be reclassified from AOCI into earnings.

During the year ended December 31, 2020, the Company monetized three interest rate floors that were previously classified as cash flow hedges with a combined notional balance of $1.5 billion and an asset fair value of $163.2 million. ~~The unrealized gains will be reclassified into interest income as the underlying forecasted transactions impact earnings through the original maturity dates of the hedged forecasted transactions.~~ As of September 30, ~~2021,~~2022, the total realized gains on the monetized cash flow hedges remaining in AOCI was ~~$105.6~~$81.0 million (pre-tax), which will be reclassified into interest income over the next ~~5.2~~4.2 years. The estimated amount of net gains related to the cash flow hedges remaining in AOCI at September 30, 2022 that is expected to be reclassified into income within the next 12 months is $23.9 million.

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

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

The fair values of the Company's derivative instruments, whose notional amounts are listed above, are shown in the table below. Information about the valuation methods used to determine fair value is provided in Note 17 on Fair Value Measurements in the ~~2020~~2021 Annual Report on Form 10-K.

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The Company's policy is to present its derivative assets and derivative liabilities on a gross basis in its consolidated balance sheets, and these are reported in other assets and other liabilities. Certain collateral posted to and from the Company's clearing counterparty has been applied to the fair values of the cleared swaps, such that at September 30, ~~2021~~2022 in the table below, the positive fair values of cleared swaps were reduced by ~~$224~~$30.7 million. At December 31, 2021, positive fair values of cleared swaps were reduced by $587 thousand and the negative fair values of cleared swaps were reduced by ~~$41.2 million. At December 31, 2020, there were no reductions to the positive fair values of cleared swaps and the negative fair values of cleared swaps were reduced by $69.2~~$29.7 million.


		Asset Derivatives				Liability Derivatives					Asset Derivatives				Liability Derivatives
		Sept. 30, 2021		Dec. 31, 2020		Sept. 30, 2021		Dec. 31, 2020			Sept. 30, 2022		Dec. 31, 2021		Sept. 30, 2022		Dec. 31, 2021
(In thousands)	(In thousands)	Fair Value				Fair Value				(In thousands)	Fair Value				Fair Value

Derivative instruments:
Derivatives designated as hedging instruments:										Derivatives designated as hedging instruments:
Interest rate floors										Interest rate floors	$	13,385	$	—	$	—	$	—
Total derivatives designated as hedging instruments										Total derivatives designated as hedging instruments	$	13,385	$	—	$	—	$	—
Derivative instruments not designated as hedging instruments:										Derivative instruments not designated as hedging instruments:
Interest rate swaps	Interest rate swaps	$	53,020	$	86,389	$	(12,001)	$	(17,199)	Interest rate swaps	$	22,256	$	40,752	$	(52,989)	$	(11,606)
Interest rate caps	Interest rate caps	78		1		(78)		(1)		Interest rate caps	2,524		147		(2,524)		(147)
Credit risk participation agreements	Credit risk participation agreements	113		216		(283)		(701)		Credit risk participation agreements	36		84		(94)		(277)
Foreign exchange contracts	Foreign exchange contracts	108		57		(92)		(103)		Foreign exchange contracts	191		77		(156)		(45)
Mortgage loan commitments	Mortgage loan commitments	1,510		3,226		—		—		Mortgage loan commitments	5		764		(5)		—
Mortgage loan forward sale contracts	Mortgage loan forward sale contracts	27		—		(9)		—		Mortgage loan forward sale contracts	5		5		—		(1)
Forward TBA contracts	Forward TBA contracts	209		—		(3)		(671)		Forward TBA contracts	58		13		—		(25)

Total derivatives not designated as hedging instruments										Total derivatives not designated as hedging instruments	$	25,075	$	41,842	$	(55,768)	$	(12,101)
Total	Total	$	55,065	$	89,889	$	(12,466)	$	(18,675)	Total	$	38,460	$	41,842	$	(55,768)	$	(12,101)

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


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

(In thousands)	(In thousands)	Total		Included Component		Excluded Component			Total		Included Component		Excluded Component		(In thousands)	Total		Included Component		Excluded Component			Total		Included Component		Excluded Component

For the Three Months Ended September 30, 2020
For the Three Months Ended September 30, 2022															For the Three Months Ended September 30, 2022
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:														Derivatives in cash flow hedging relationships:
Interest rate floors	Interest rate floors	$	(4,481)	$	(4,087)	$	(394)	Interest and fees on loans	$	4,163	$	5,509	$	(1,346)	Interest rate floors	$	(3,464)	$	—	$	(3,464)	Interest and fees on loans	$	(6,118)	$	(7,745)	$	1,627
Total	Total	$	(4,481)	$	(4,087)	$	(394)	Total	$	4,163	$	5,509	$	(1,346)	Total	$	(3,464)	$	—	$	(3,464)	Total	$	(6,118)	$	(7,745)	$	1,627
For the Nine Months Ended September 30, 2020
For the Nine Months Ended September 30, 2022															For the Nine Months Ended September 30, 2022
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:														Derivatives in cash flow hedging relationships:
Interest rate floors	Interest rate floors	$	94,702	$	121,621	$	(26,919)	Interest and fees on loans	$	6,050	$	9,458	$	(3,408)	Interest rate floors	$	(3,464)	$	—	$	(3,464)	Interest and fees on loans	$	(18,322)	$	(22,998)	$	4,676
Total	Total	$	94,702	$	121,621	$	(26,919)	Total	$	6,050	$	9,458	$	(3,408)	Total	$	(3,464)	$	—	$	(3,464)	Total	$	(18,322)	$	(22,998)	$	4,676
For the Three Months Ended September 30, 2021															For the Three Months Ended September 30, 2021
Derivatives in cash flow hedging relationships:															Derivatives in cash flow hedging relationships:
Interest rate floors															Interest rate floors	$	—	$	—	$	—	Interest and fees on loans	$	(6,141)	$	(7,691)	$	1,550
Total															Total	$	—	$	—	$	—	Total	$	(6,141)	$	(7,691)	$	1,550
For the Nine Months Ended September 30, 2021															For the Nine Months Ended September 30, 2021
Derivatives in cash flow hedging relationships:															Derivatives in cash flow hedging relationships:
Interest rate floors															Interest rate floors	$	—	$	—	$	—	Interest and fees on loans	$	(18,024)	$	(22,623)	$	4,599
Total															Total	$	—	$	—	$	—	Total	$	(18,024)	$	(22,623)	$	4,599


		Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives									Location of Gain or (Loss) Recognized in Consolidated Statements of Income	Amount of Gain or (Loss) Recognized in Income on Derivatives
			For the Three Months Ended September 30				For the Nine Months Ended September 30						For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands)	(In thousands)		2021		2020		2021		2020		(In thousands)		2022		2021		2022		2021

Derivative instruments:	Derivative instruments:										Derivative instruments:
Interest rate swaps	Interest rate swaps	Other non-interest income	$	24	$	81	$	1,974	$	369	Interest rate swaps	Other non-interest income	$	88	$	24	$	1,770	$	1,974
Interest rate caps	Interest rate caps	Other non-interest income	—		1		15		20		Interest rate caps	Other non-interest income	—		—		16		15
Credit risk participation agreements	Credit risk participation agreements	Other non-interest income	47		(87)		27		153		Credit risk participation agreements	Other non-interest income	122		47		30		27
Foreign exchange contracts	Foreign exchange contracts	Other non-interest income	(22)		—		62		(82)		Foreign exchange contracts	Other non-interest income	3		(22)		3		62
Mortgage loan commitments	Mortgage loan commitments	Loan fees and sales	(309)		589		(1,716)		2,678		Mortgage loan commitments	Loan fees and sales	(230)		(309)		(764)		(1,716)
Mortgage loan forward sale contracts	Mortgage loan forward sale contracts	Loan fees and sales	(10)		20		18		19		Mortgage loan forward sale contracts	Loan fees and sales	5		(10)		1		18
Forward TBA contracts	Forward TBA contracts	Loan fees and sales	(184)		(709)		1,676		(482)		Forward TBA contracts	Loan fees and sales	117		(184)		1,783		1,676
Total	Total		$	(454)	$	(105)	$	2,056	$	2,675	Total		$	105	$	(454)	$	2,839	$	2,056

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

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

While the Company is party to master netting arrangements with most of its swap derivative counterparties, the Company does not offset derivative assets and liabilities under these agreements on its consolidated balance ~~sheet.~~sheets. Collateral exchanged between the Company and dealer bank counterparties is generally subject to thresholds and transfer minimums, and usually consists of marketable securities. By contract, these may be sold or re-pledged by the secured party until recalled at a

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subsequent valuation date by the pledging party. For those swap transactions requiring central clearing, the Company posts cash or securities to its clearing agent. Collateral positions are valued daily, and adjustments to amounts received and pledged by the Company are made as appropriate to maintain proper collateralization for these transactions. Swap derivative transactions with customers are generally secured by rights to non-financial collateral, such as real and personal property, which is not shown in the table below.


								Gross Amounts Not Offset in the Balance Sheet													Gross Amounts Not Offset in the Balance Sheet
(In thousands)	(In thousands)	Gross Amount Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments Available for Offset		Collateral Received/ Pledged		Net Amount		(In thousands)	Gross Amount Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments Available for Offset		Collateral Received/ Pledged		Net Amount
September 30, 2021
September 30, 2022														September 30, 2022
Assets:	Assets:													Assets:
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	53,373	$	—	$	53,373	$	(144)	$	—	$	53,229	Derivatives subject to master netting agreements	$	38,357	$	—	$	38,357	$	(113)	$	(35,763)	$	2,481
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	1,692		—		1,692								Derivatives not subject to master netting agreements	103		—		103
Total derivatives	Total derivatives	$	55,065	$	—	$	55,065							Total derivatives	$	38,460	$	—	$	38,460
Liabilities:	Liabilities:													Liabilities:
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	12,354	$	—	$	12,354	$	(144)	$	(11,275)	$	935	Derivatives subject to master netting agreements	$	55,681	$	—	$	55,681	$	(113)	$	—	$	55,568
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	112		—		112								Derivatives not subject to master netting agreements	87		—		87
Total derivatives	Total derivatives	$	12,466	$	—	$	12,466							Total derivatives	$	55,768	$	—	$	55,768
December 31, 2020
December 31, 2021														December 31, 2021
Assets:	Assets:													Assets:
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	86,497	$	—	$	86,497	$	(108)	$	—	$	86,389	Derivatives subject to master netting agreements	$	40,970	$	—	$	40,970	$	(347)	$	—	$	40,623
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	3,392		—		3,392								Derivatives not subject to master netting agreements	872		—		872
Total derivatives	Total derivatives	$	89,889	$	—	$	89,889							Total derivatives	$	41,842	$	—	$	41,842
Liabilities:	Liabilities:													Liabilities:
Derivatives subject to master netting agreements	Derivatives subject to master netting agreements	$	18,420	$	—	$	18,420	$	(108)	$	(16,738)	$	1,574	Derivatives subject to master netting agreements	$	12,019	$	—	$	12,019	$	(347)	$	(10,146)	$	1,526
Derivatives not subject to master netting agreements	Derivatives not subject to master netting agreements	255		—		255								Derivatives not subject to master netting agreements	82		—		82
Total derivatives	Total derivatives	$	18,675	$	—	$	18,675							Total derivatives	$	12,101	$	—	$	12,101

12. Resale and Repurchase Agreements

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

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with its own customers. Resale and repurchase agreements are agreements to purchase/sell securities subject to an obligation to resell/repurchase the same or similar securities. They are accounted for as secured lending and collateralized borrowing (e.g. financing ~~transactions,~~transactions), not as true sales and purchases of the ~~securities portfolio.~~underlying collateral securities. Some of the resale and repurchase agreements were transacted under master netting arrangements that contain a conditional right of offset, such as close-out netting, upon default. The ~~securities~~security collateral accepted or pledged in resale and repurchase agreements with other financial institutions ~~also~~ may be sold or re-pledged by the secured party, but is usually delivered to and held by third party trustees. The Company generally retains custody of securities pledged for repurchase agreements with its customers.

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The Company is party to agreements commonly known as collateral swaps. These agreements involve the exchange of collateral under simultaneous repurchase and resale agreements with the same financial institution counterparty. These repurchase and resale agreements have the same principal amounts, inception dates, and maturity dates and have been offset against each other in the consolidated balance sheets, as permitted under the netting provisions of ASC 210-20-45. The collateral swaps totaled $200.0 million at September 30, ~~2021~~2022 and $400.0 million at December 31, 2020. At September 30, 2021, the Company had posted collateral of $202.5 million in marketable securities, consisting of agency mortgage-backed bonds, and had accepted $209.1 million in agency mortgage-backed bonds.2021.

Gross Amounts Not Offset in the Balance Sheet
(In thousands) Gross Amount Recognized Gross Amounts Offset in the Balance Sheet Net Amounts Presented in the Balance Sheet Financial Instruments Available for Offset Securities Collateral Received/Pledged Net Amount
September 30, 2021
Total resale agreements, subject to master netting arrangements $ 1,950,000 $ (200,000) $ 1,750,000 $ — $ (1,750,000) $ —
Total repurchase agreements, subject to master netting arrangements 2,442,408 (200,000) 2,242,408 — (2,242,408) —
December 31, 2020
Total resale agreements, subject to master netting arrangements $ 1,050,000 $ (200,000) $ 850,000 $ — $ (850,000) $ —
Total repurchase agreements, subject to master netting arrangements 2,256,113 (200,000) 2,056,113 — (2,056,113) —
The following table shows the extent to which resale agreement assets and repurchase agreement liabilities with the same counterparty have been offset on the consolidated balance sheets, in addition to the extent to which they could potentially be offset. Also shown is collateral received or pledged, which consists of marketable securities. The collateral amounts in the table are limited to the outstanding balances of the related asset or liability (after offsetting is applied); thus amounts of excess collateral are not shown.


							Gross Amounts Not Offset in the Balance Sheet
(In thousands)	Gross Amount Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments Available for Offset		Securities Collateral Received/Pledged		Unsecured Amount
September 30, 2022
Total resale agreements, subject to master netting arrangements	$	1,475,000	$	(200,000)	$	1,275,000	$	—	$	(1,275,000)	$	—
Total repurchase agreements, subject to master netting arrangements	2,203,390		(200,000)		2,003,390		—		(2,003,390)		—
December 31, 2021
Total resale agreements, subject to master netting arrangements	$	2,025,000	$	(400,000)	$	1,625,000	$	—	$	(1,625,000)	$	—
Total repurchase agreements, subject to master netting arrangements	3,379,582		(400,000)		2,979,582		—		(2,979,582)		—

The table below shows the remaining contractual maturities of repurchase agreements outstanding at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, in addition to the various types of marketable securities that have been pledged by the Company as collateral for these borrowings.


		Remaining Contractual Maturity of the Agreements									Remaining Contractual Maturity of the Agreements
(In thousands)	(In thousands)	Overnight and continuous		Up to 90 days		Greater than 90 days		Total		(In thousands)	Overnight and continuous		Up to 90 days		Greater than 90 days		Total
September 30, 2021
September 30, 2022										September 30, 2022
Repurchase agreements, secured by:	Repurchase agreements, secured by:									Repurchase agreements, secured by:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	$	273,267	$	25,106	$	19,942	$	318,315	U.S. government and federal agency obligations	$	420,541	$	8,759	$	21,828	$	451,128

Agency mortgage-backed securities	Agency mortgage-backed securities	1,640,466		3,775		209,759		1,854,000		Agency mortgage-backed securities	1,178,459		20,721		202,859		1,402,039
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	31,217		—		—		31,217		Non-agency mortgage-backed securities	42,141		—		—		42,141
Asset-backed securities	Asset-backed securities	205,729		—		—		205,729		Asset-backed securities	296,075		—		—		296,075
Other debt securities	Other debt securities	33,147		—		—		33,147		Other debt securities	12,007		—		—		12,007
Total repurchase agreements, gross amount recognized	Total repurchase agreements, gross amount recognized	$	2,183,826	$	28,881	$	229,701	$	2,442,408	Total repurchase agreements, gross amount recognized	$	1,949,223	$	29,480	$	224,687	$	2,203,390
December 31, 2020
December 31, 2021										December 31, 2021
Repurchase agreements, secured by:	Repurchase agreements, secured by:									Repurchase agreements, secured by:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	$	150,305	$	—	$	—	$	150,305	U.S. government and federal agency obligations	$	600,866	$	33,373	$	9,259	$	643,498

Agency mortgage-backed securities	Agency mortgage-backed securities	1,598,614		34,018		220,849		1,853,481		Agency mortgage-backed securities	1,844,652		3,908		400,250		2,248,810
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	62,742		—		—		62,742		Non-agency mortgage-backed securities	32,299		—		—		32,299
Asset-backed securities	Asset-backed securities	155,917		—		—		155,917		Asset-backed securities	422,525		—		—		422,525
Other debt securities	Other debt securities	33,668		—		—		33,668		Other debt securities	32,450		—		—		32,450
Total repurchase agreements, gross amount recognized	Total repurchase agreements, gross amount recognized	$	2,001,246	$	34,018	$	220,849	$	2,256,113	Total repurchase agreements, gross amount recognized	$	2,932,792	$	37,281	$	409,509	$	3,379,582

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13. Stock-Based Compensation

The Company issues stock-based compensation in the form of nonvested restricted stock and stock appreciation rights (SARs). Historically, most of the awards have been issued during the first quarter of each year. The stock-based compensation expense ~~that has been~~ charged against income was ~~$3.9~~$4.2 million and ~~$3.8~~$3.9 million in the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$11.6~~$12.6 million and ~~$11.2~~$11.6 million in the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Nonvested stock awards granted generally vest in 4 to 7 years and contain restrictions as to transferability, sale, pledging, or assigning, among others, prior to the end of the vesting period. Dividend and voting rights are conferred upon grant. A summary of the status of the Company’s nonvested share awards as of September 30, ~~2021,~~2022, and changes during the nine month period then ended, is presented below.


		Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2021		1,099,866	$52.11
Nonvested at January 1, 2022				Nonvested at January 1, 2022	1,120,491	$55.58
Granted	Granted	224,336	71.90	Granted	263,497	70.76
Vested	Vested	(242,139)	43.45	Vested	(262,579)	47.78
Forfeited	Forfeited	(20,297)	58.68	Forfeited	(23,145)	60.08

Nonvested at September 30, 2021		1,061,766	$58.14
Nonvested at September 30, 2022				Nonvested at September 30, 2022	1,098,264	$61.00

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


Weighted per share average fair value at grant date	$~~16.78~~17.42
Assumptions:
Dividend yield	~~1.4~~1.5	%
Volatility	~~28.2~~28.4	%
Risk-free interest rate	.71.6	%
Expected term	5.7 years

A summary of SAR activity during the first nine months of ~~2021~~2022 is presented below.


(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	Rights	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		(Dollars in thousands, except per share data)	Rights	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2021		1,005,896	$	44.95
Outstanding at January 1, 2022								Outstanding at January 1, 2022	896,348	$	46.21
Granted	Granted	72,416	72.91					Granted	96,318	70.64
Forfeited	Forfeited	(6,363)	58.63					Forfeited	(8,135)	61.68
Expired	Expired	(280)	57.95					Expired	(2,350)	56.68
Exercised	Exercised	(214,651)	39.59					Exercised	(66,608)	40.54
Outstanding at September 30, 2021		857,018	$	48.55	6.0 years	$	18,372
Outstanding at September 30, 2022								Outstanding at September 30, 2022	915,573	$	49.02	5.5 years	$	16,367

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14. Revenue from Contracts with Customers

~~The core principle of ASU 2014-09,~~ASC 606 "Revenue from Contracts with ~~Customers," is that an entity should recognize~~Customers" requires revenue ~~to reflect~~recognition for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For the nine months ended September 30, ~~2021,~~2022, approximately ~~60%~~63% of the Company’s total revenue was comprised of net interest income, which is not within the scope of this guidance. Of the remaining revenue, those items that were subject to this guidance mainly included fees for bank card, trust, deposit account services and consumer brokerage services.

The following table disaggregates non-interest income subject to ~~ASU 2014-09~~ASC 606 by major product line.


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended September 30				Nine Months Ended September 30
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2022		2021		2022		2021
Bank card transaction fees	Bank card transaction fees	$	42,815	$	37,873	$	123,118	$	111,818	Bank card transaction fees	$	45,638	$	42,815	$	131,556	$	123,118
Trust fees	Trust fees	48,950		40,769		139,334		118,676		Trust fees	45,406		48,950		140,009		139,334
Deposit account charges and other fees	Deposit account charges and other fees	25,161		23,107		71,724		69,063		Deposit account charges and other fees	24,521		25,161		72,392		71,724
Consumer brokerage services	Consumer brokerage services	4,900		4,011		13,484		11,099		Consumer brokerage services	5,085		4,900		14,599		13,484
Other non-interest income	Other non-interest income	2,510		7,566		17,168		23,718		Other non-interest income	9,360		2,510		24,605		17,168
Total non-interest income from contracts with customers	Total non-interest income from contracts with customers	124,336		113,326		364,828		334,374		Total non-interest income from contracts with customers	130,010		124,336		383,161		364,828
Other non-interest income (1)	Other non-interest income (1)	13,170		16,246		47,866		36,376		Other non-interest income (1)	8,504		13,170		26,549		47,866
Total non-interest income	Total non-interest income	$	137,506	$	129,572	$	412,694	$	370,750	Total non-interest income	$	138,514	$	137,506	$	409,710	$	412,694

(1) This revenue is not within the scope of ~~ASU 2014-09,~~ASC 606, and includes fees relating to capital market activities, loan fees and sales, derivative instruments, standby letters of credit and various other transactions.

For bank card transaction fees, ~~the majority~~nearly all of debit and credit card fees are earned in the Consumer segment, while corporate card and merchant fees are earned in the Commercial segment. The Consumer and Commercial segments ~~each~~ contribute approximately ~~half~~41% and 58%, respectively, of the Company's deposit account charge revenue. All trust fees and nearly all consumer brokerage services income are earned in the Wealth segment.

The following table presents the opening and closing receivable balances for the nine month periods ended September 30, ~~2021~~2022 and ~~2020~~2021 for the Company’s significant revenue categories subject to ~~ASU 2014-09.~~ASC 606.


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		September 30, 2020		December 31, 2019		(In thousands)	September 30, 2022		December 31, 2021		September 30, 2021		December 31, 2020
Bank card transaction fees	Bank card transaction fees	$	13,349	$	14,199	$	11,501	$	13,915	Bank card transaction fees	$	14,167	$	16,424	$	13,349	$	14,199
Trust fees	Trust fees	2,211		2,071		2,122		2,093		Trust fees	2,073		2,222		2,211		2,071
Deposit account charges and other fees	Deposit account charges and other fees	5,969		6,933		5,839		6,523		Deposit account charges and other fees	5,658		6,702		5,969		6,933
Consumer brokerage services	Consumer brokerage services	513		432		476		596		Consumer brokerage services	632		391		513		432

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

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15. Fair Value Measurements

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

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

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

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

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

The valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis are described in the Fair Value Measurements note in the Company's ~~2020~~2021 Annual Report on Form 10-K. There have been no significant changes in these methodologies since then.

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Instruments Measured at Fair Value on a Recurring Basis

The table below presents the September 30, ~~2021~~2022 and December 31, ~~2020~~2021 carrying values of assets and liabilities measured at fair value on a recurring basis. There were no transfers among levels during the first nine months of ~~2021~~2022 or the year ended December 31, ~~2020.~~2021.


				Fair Value Measurements Using									Fair Value Measurements Using
(In thousands)	(In thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(In thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2021
September 30, 2022										September 30, 2022
Assets:	Assets:									Assets:
Residential mortgage loans held for sale	Residential mortgage loans held for sale	$	11,982	$	—	$	11,982	$	—	Residential mortgage loans held for sale	$	1,426	$	—	$	1,426	$	—
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	784,190		784,190		—		—		U.S. government and federal agency obligations	1,036,325		1,036,325		—		—
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	51,941		—		51,941		—		Government-sponsored enterprise obligations	43,175		—		43,175		—
State and municipal obligations	State and municipal obligations	2,155,076		—		2,153,081		1,995		State and municipal obligations	1,803,253		—		1,801,395		1,858
Agency mortgage-backed securities	Agency mortgage-backed securities	5,974,802		—		5,974,802		—		Agency mortgage-backed securities	4,445,519		—		4,445,519		—
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	1,225,091		—		1,225,091		—		Non-agency mortgage-backed securities	1,235,584		—		1,235,584		—
Asset-backed securities	Asset-backed securities	3,359,915		—		3,359,915		—		Asset-backed securities	3,558,287		—		3,558,287		—
Other debt securities	Other debt securities	614,641		—		614,641		—		Other debt securities	510,367		—		510,367		—
Trading debt securities	Trading debt securities	40,114		—		40,114		—		Trading debt securities	39,222		—		39,222		—
Equity securities	Equity securities	7,118		7,118		—		—		Equity securities	6,106		6,106		—		—
Private equity investments	Private equity investments	138,052		—		—		138,052		Private equity investments	176,341		—		—		176,341
Derivatives *	Derivatives *	55,065		—		53,442		1,623		Derivatives *	38,460		—		38,419		41
Assets held in trust for deferred compensation plan	Assets held in trust for deferred compensation plan	20,880		20,880		—		—		Assets held in trust for deferred compensation plan	16,588		16,588		—		—
Total assets	Total assets	14,438,867		812,188		13,485,009		141,670		Total assets	12,910,653		1,059,019		11,673,394		178,240
Liabilities:	Liabilities:									Liabilities:
Derivatives *	Derivatives *	12,466		—		12,183		283		Derivatives *	55,768		—		55,669		99
Liabilities held in trust for deferred compensation plan	Liabilities held in trust for deferred compensation plan	20,880		20,880		—		—		Liabilities held in trust for deferred compensation plan	16,588		16,588		—		—
Total liabilities	Total liabilities	$	33,346	$	20,880	$	12,183	$	283	Total liabilities	$	72,356	$	16,588	$	55,669	$	99
December 31, 2020
December 31, 2021										December 31, 2021
Assets:	Assets:									Assets:
Residential mortgage loans held for sale	Residential mortgage loans held for sale	$	39,396	$	—	$	39,396	$	—	Residential mortgage loans held for sale	$	5,570	$	—	$	5,570	$	—
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	838,059		838,059		—		—		U.S. government and federal agency obligations	1,080,720		1,080,720		—		—
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	54,485		—		54,485		—		Government-sponsored enterprise obligations	51,755		—		51,755		—
State and municipal obligations	State and municipal obligations	2,045,099		—		2,037,131		7,968		State and municipal obligations	2,096,827		—		2,094,843		1,984
Agency mortgage-backed securities	Agency mortgage-backed securities	6,712,085		—		6,712,085		—		Agency mortgage-backed securities	5,683,000		—		5,683,000		—
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	361,074		—		361,074		—		Non-agency mortgage-backed securities	1,366,477		—		1,366,477		—
Asset-backed securities	Asset-backed securities	1,882,243		—		1,882,243		—		Asset-backed securities	3,539,219		—		3,539,219		—
Other debt securities	Other debt securities	556,219		—		556,219		—		Other debt securities	632,029		—		632,029		—
Trading debt securities	Trading debt securities	35,321		—		35,321		—		Trading debt securities	46,235		—		46,235		—
Equity securities	Equity securities	2,966		2,966		—		—		Equity securities	7,153		7,153		—		—
Private equity investments	Private equity investments	94,368		—		—		94,368		Private equity investments	147,406		—		—		147,406
Derivatives *	Derivatives *	89,889		—		86,447		3,442		Derivatives *	41,842		—		40,994		848
Assets held in trust for deferred compensation plan	Assets held in trust for deferred compensation plan	19,278		19,278		—		—		Assets held in trust for deferred compensation plan	21,794		21,794		—		—
Total assets	Total assets	12,730,482		860,303		11,764,401		105,778		Total assets	14,720,027		1,109,667		13,460,122		150,238
Liabilities:	Liabilities:									Liabilities:
Derivatives *	Derivatives *	18,675		—		17,974		701		Derivatives *	12,101		—		11,824		277
Liabilities held in trust for deferred compensation plan	Liabilities held in trust for deferred compensation plan	19,278		19,278		—		—		Liabilities held in trust for deferred compensation plan	21,794		21,794		—		—
Total liabilities	Total liabilities	$	37,953	$	19,278	$	17,974	$	701	Total liabilities	$	33,895	$	21,794	$	11,824	$	277

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

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


		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)									Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	(In thousands)	State and Municipal Obligations		Private Equity Investments		Derivatives		Total		(In thousands)	State and Municipal Obligations		Private Equity Investments		Derivatives		Total
For the three months ended September 30, 2021
Balance June 30, 2021		$	7,991	$	116,246	$	1,629	$	125,866
For the three months ended September 30, 2022										For the three months ended September 30, 2022
Balance June 30, 2022										Balance June 30, 2022	$	1,816	$	161,771	$	154	$	163,741
Total gains or losses (realized/unrealized):	Total gains or losses (realized/unrealized):									Total gains or losses (realized/unrealized):
Included in earnings	Included in earnings	—		12,971		(262)		12,709		Included in earnings	—		14,050		(108)		13,942
Included in other comprehensive income *	Included in other comprehensive income *	(175)		—		—		(175)		Included in other comprehensive income *	40		—		—		40
Investment securities called		(6,000)		—		—		(6,000)

Discount accretion	Discount accretion	179		—		—		179		Discount accretion	2		—		—		2
Purchases of private equity investments	Purchases of private equity investments	—		8,835		—		8,835		Purchases of private equity investments	—		899		—		899

Sale/pay down of private equity investments										Sale/pay down of private equity investments	—		(423)		—		(423)
Capitalized interest/dividends										Capitalized interest/dividends	—		44		—		44

Sale of risk participation agreements	Sale of risk participation agreements	—		—		(27)		(27)		Sale of risk participation agreements	—		—		(104)		(104)
Balance September 30, 2021		$	1,995	$	138,052	$	1,340	$	141,387
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021		$	—	$	12,971	$	1,557	$	14,528
Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021		$	2	$	—	$	—	$	2
For the nine months ended September 30, 2021
Balance January 1, 2021		$	7,968	$	94,368	$	2,741	$	105,077
Balance September 30, 2022										Balance September 30, 2022	$	1,858	$	176,341	$	(58)	$	178,141
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022										Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022	$	—	$	14,050	$	122	$	14,172
*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022										*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022	$	40	$	—	$	—	$	40
For the nine months ended September 30, 2022										For the nine months ended September 30, 2022
Balance January 1, 2022										Balance January 1, 2022	$	1,984	$	147,406	$	571	$	149,961
Total gains or losses (realized/unrealized):	Total gains or losses (realized/unrealized):									Total gains or losses (realized/unrealized):
Included in earnings	Included in earnings	—		38,002		(1,689)		36,313		Included in earnings	—		37,133		(734)		36,399
Included in other comprehensive income *	Included in other comprehensive income *	(158)		—		—		(158)		Included in other comprehensive income *	(130)		—		—		(130)
Investment securities called		(6,000)		—		—		(6,000)

Discount accretion	Discount accretion	185		—		—		185		Discount accretion	4		—		—		4
Purchases of private equity investments	Purchases of private equity investments	—		14,491		—		14,491		Purchases of private equity investments	—		2,021		—		2,021
Sale/pay down of private equity investments	Sale/pay down of private equity investments	—		(8,832)		—		(8,832)		Sale/pay down of private equity investments	—		(10,263)		—		(10,263)
Capitalized interest/dividends	Capitalized interest/dividends	—		23		—		23		Capitalized interest/dividends	—		44		—		44
Purchase of risk participation agreement	Purchase of risk participation agreement	—		—		445		445		Purchase of risk participation agreement	—		—		459		459
Sale of risk participation agreement	Sale of risk participation agreement	—		—		(157)		(157)		Sale of risk participation agreement	—		—		(354)		(354)
Balance September 30, 2021		$	1,995	$	138,052	$	1,340	$	141,387
Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021		$	—	$	38,002	$	1,367	$	39,369
Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021		$	23	$	—	$	—	$	23
Balance September 30, 2022										Balance September 30, 2022	$	1,858	$	176,341	$	(58)	$	178,141
Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022										Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022	$	—	$	37,083	$	28	$	37,111
*Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022										*Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022	$	(130)	$	—	$	—	$	(130)

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		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)									Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	(In thousands)	State and Municipal Obligations		Private Equity Investments		Derivatives		Total		(In thousands)	State and Municipal Obligations		Private Equity Investments		Derivatives		Total
For the three months ended September 30, 2020
Balance June 30, 2020		$	9,490	$	73,846	$	1,888	$	85,224
For the three months ended September 30, 2021										For the three months ended September 30, 2021
Balance June 30, 2021										Balance June 30, 2021	$	7,991	$	116,246	$	1,629	$	125,866
Total gains or losses (realized/unrealized):	Total gains or losses (realized/unrealized):									Total gains or losses (realized/unrealized):
Included in earnings	Included in earnings	—		2,389		504		2,893		Included in earnings	—		12,971		(262)		12,709
Included in other comprehensive income *	Included in other comprehensive income *	271		—		—		271		Included in other comprehensive income *	(175)		—		—		(175)
Investment securities called	Investment securities called	(2,000)		—		—		(2,000)		Investment securities called	(6,000)		—		—		(6,000)
Discount accretion	Discount accretion	105		—		—		105		Discount accretion	179		—		—		179
Purchases of private equity investments	Purchases of private equity investments	—		2,522		—		2,522		Purchases of private equity investments	—		8,835		—		8,835
Sale/pay down of private equity investments		—		(295)		—		(295)

Balance September 30, 2020		$	7,866	$	78,462	$	2,392	$	88,720
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020		$	—	$	2,409	$	3,050	$	5,459
Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020		$	258	$	—	$	—	$	258
For the nine months ended September 30, 2020
Balance January 1, 2020		$	9,853	$	94,122	$	369	$	104,344
Sale of risk participation agreement										Sale of risk participation agreement	—		—		(27)		(27)
Balance September 30, 2021										Balance September 30, 2021	$	1,995	$	138,052	$	1,340	$	141,387
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021										Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021	$	—	$	12,971	$	1,557	$	14,528
*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021										*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021	$	2	$	—	$	—	$	2
For the nine months ended September 30, 2021										For the nine months ended September 30, 2021
Balance January 1, 2021										Balance January 1, 2021	$	7,968	$	94,368	$	2,741	$	105,077
Total gains or losses (realized/unrealized):	Total gains or losses (realized/unrealized):									Total gains or losses (realized/unrealized):
Included in earnings	Included in earnings	—		(18,116)		2,832		(15,284)		Included in earnings	—		38,002		(1,689)		36,313
Included in other comprehensive income *	Included in other comprehensive income *	(101)		—		—		(101)		Included in other comprehensive income *	(158)		—		—		(158)
Investment securities called	Investment securities called	(2,000)		—		—		(2,000)		Investment securities called	(6,000)		—		—		(6,000)
Discount accretion	Discount accretion	114		—		—		114		Discount accretion	185		—		—		185
Purchases of private equity investments	Purchases of private equity investments	—		2,791		—		2,791		Purchases of private equity investments	—		14,491		—		14,491
Sale/pay down of private equity investments	Sale/pay down of private equity investments	—		(364)		—		(364)		Sale/pay down of private equity investments	—		(8,832)		—		(8,832)
Capitalized interest/dividends	Capitalized interest/dividends	—		29		—		29		Capitalized interest/dividends	—		23		—		23

Purchase of risk participation agreement										Purchase of risk participation agreement	—		—		445		445
Sale of risk participation agreement	Sale of risk participation agreement	—		—		(809)		(809)		Sale of risk participation agreement	—		—		(157)		(157)
Balance September 30, 2020		$	7,866	$	78,462	$	2,392	$	88,720
Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020		$	—	$	(18,096)	$	3,262	$	(14,834)
Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020		$	(52)	$	—	$	—	$	(52)
Balance September 30, 2021										Balance September 30, 2021	$	1,995	$	138,052	$	1,340	$	141,387
Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021										Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021	$	—	$	38,002	$	1,367	$	39,369
*Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021										*Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2021	$	23	$	—	$	—	$	23

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

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


(In thousands)	(In thousands)	Loan Fees and Sales		Other Non-Interest Income		Investment Securities Gains (Losses), Net		Total		(In thousands)	Loan Fees and Sales		Other Non-Interest Income		Investment Securities Gains (Losses), Net		Total
For the three months ended September 30, 2022										For the three months ended September 30, 2022
Total gains or losses included in earnings										Total gains or losses included in earnings	$	(230)	$	122	$	14,050	$	13,942
Change in unrealized gains or losses relating to assets still held at September 30, 2022										Change in unrealized gains or losses relating to assets still held at September 30, 2022	$	—	$	122	$	14,050	$	14,172
For the nine months ended September 30, 2022										For the nine months ended September 30, 2022
Total gains or losses included in earnings										Total gains or losses included in earnings	$	(764)	$	30	$	37,133	$	36,399
Change in unrealized gains or losses relating to assets still held at September 30, 2022										Change in unrealized gains or losses relating to assets still held at September 30, 2022	$	—	$	28	$	37,083	$	37,111
For the three months ended September 30, 2021	For the three months ended September 30, 2021									For the three months ended September 30, 2021
Total gains or losses included in earnings	Total gains or losses included in earnings	$	(309)	$	47	$	12,971	$	12,709	Total gains or losses included in earnings	$	(309)	$	47	$	12,971	$	12,709
Change in unrealized gains or losses relating to assets still held at September 30, 2021	Change in unrealized gains or losses relating to assets still held at September 30, 2021	$	1,510	$	47	$	12,971	$	14,528	Change in unrealized gains or losses relating to assets still held at September 30, 2021	$	1,510	$	47	$	12,971	$	14,528
For the nine months ended September 30, 2021	For the nine months ended September 30, 2021									For the nine months ended September 30, 2021
Total gains or losses included in earnings	Total gains or losses included in earnings	$	(1,716)	$	27	$	38,002	$	36,313	Total gains or losses included in earnings	$	(1,716)	$	27	$	38,002	$	36,313
Change in unrealized gains or losses relating to assets still held at September 30, 2021	Change in unrealized gains or losses relating to assets still held at September 30, 2021	$	1,510	$	(143)	$	38,002	$	39,369	Change in unrealized gains or losses relating to assets still held at September 30, 2021	$	1,510	$	(143)	$	38,002	$	39,369
For the three months ended September 30, 2020
Total gains or losses included in earnings		$	591	$	(87)	$	2,389	$	2,893
Change in unrealized gains or losses relating to assets still held at September 30, 2020		$	3,137	$	(87)	$	2,409	$	5,459
For the nine months ended September 30, 2020
Total gains or losses included in earnings		$	2,679	$	153	$	(18,116)	$	(15,284)
Change in unrealized gains or losses relating to assets still held at September 30, 2020		$	3,137	$	125	$	(18,096)	$	(14,834)

Level 3 Inputs

The Company's significant Level 3 measurements, which employ unobservable inputs that are readily quantifiable, pertain to auction rate securities (ARS), investments in portfolio concerns held by the Company's private equity subsidiaries, and held for sale residential mortgage loan commitments. ARS are included in state and municipal securities and totaled ~~$2.0~~$1.9 million at September 30, ~~2021,~~2022, while private equity investments, included in other securities, totaled ~~$138.1~~$176.3 million.

Information about these inputs is presented in the table below.


Quantitative Information about Level 3 Fair Value Measurements	Quantitative Information about Level 3 Fair Value Measurements						Weighted	Quantitative Information about Level 3 Fair Value Measurements						Weighted
		Valuation Technique	Unobservable Input	Range			Average*		Valuation Technique	Unobservable Input	Range			Average*
Auction rate securities	Auction rate securities	Discounted cash flow	Estimated market recovery period			5 years	5 years	Auction rate securities	Discounted cash flow	Estimated market recovery period			5 years	5 years
			Estimated market rate	1.1%	-	1.3%	1.2%			Estimated market rate	5.8%	-	6.5%	6.1%
Private equity investments	Private equity investments	Market comparable companies	EBITDA multiple	4.0	-	6.0	5.3	Private equity investments	Market comparable companies	EBITDA multiple	4.0	-	7.0	5.5
Mortgage loan commitments	Mortgage loan commitments	Discounted cash flow	Probability of funding	67.2%	-	100.0%	87.0%	Mortgage loan commitments	Discounted cash flow	Probability of funding	87.7%	-	100.0%	91.1%
			Embedded servicing value	.8%	-	1.2%	1.0%			Embedded servicing value	1.0%	-	1.5%	1.3%

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

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Instruments Measured at Fair Value on a Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the first nine months of ~~2021~~2022 and ~~2020,~~2021, and still held as of September 30, ~~2021~~2022 and ~~2020,~~2021, the following table provides the adjustments to fair value recognized during the respective periods, the level of valuation inputs used to determine each adjustment, and the carrying value of the related individual assets or portfolios at September 30, ~~2021~~2022 and ~~2020.~~2021.


				Fair Value Measurements Using											Fair Value Measurements Using
(In thousands)	(In thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Nine Months Ended September 30		(In thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Nine Months Ended September 30
September 30, 2021
September 30, 2022												September 30, 2022
Collateral dependent loans	Collateral dependent loans	$	2,057	$	—	$	—	$	2,057	$	(349)	Collateral dependent loans	$	200	$	—	$	—	$	200	$	(394)

Mortgage servicing rights	Mortgage servicing rights	9,774		—		—		9,774		1,120		Mortgage servicing rights	11,228		—		—		11,228		304

Long-lived assets	Long-lived assets	1,393		—		—		1,393		(726)		Long-lived assets	480		—		—		480		(965)

September 30, 2020
September 30, 2021												September 30, 2021
Collateral dependent loans	Collateral dependent loans	$	11,772	$	—	$	—	$	11,772	$	(3,214)	Collateral dependent loans	$	2,057	$	—	$	—	$	2,057	$	(349)

Mortgage servicing rights	Mortgage servicing rights	5,731		—		—		5,731		(1,823)		Mortgage servicing rights	9,774		—		—		9,774		1,120

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

The Company's significant Level 3 measurements that are measured on a nonrecurring basis pertain to the Company's mortgage servicing rights retained on certain fixed rate personal real estate loan originations. Mortgage servicing rights are included in other ~~assets~~intangible assets-net on the consolidated balance ~~sheet,~~sheets, and information about these inputs at September 30, 2022 is presented in the table below.


Quantitative Information about Level 3 Fair Value Measurements	Quantitative Information about Level 3 Fair Value Measurements										Weighted			Quantitative Information about Level 3 Fair Value Measurements										Weighted
		Valuation Technique	Unobservable Input	Range							Average*				Valuation Technique	Unobservable Input	Range							Average*
Mortgage servicing rights	Mortgage servicing rights	Discounted cash flow	Discount rate	9.02		%	-	9.35		%	9.15		%	Mortgage servicing rights	Discounted cash flow	Discount rate	9.51		%	-	9.81		%	9.61		%
			Prepayment speeds (CPR)*	11.46		%	-	14.21		%	12.55		%			Prepayment speeds (CPR)*	6.25		%	-	6.53		%	6.32		%
			Loan servicing costs - annually per loan													Loan servicing costs - annually per loan
			Performing loans	$	70		-	$	72		$	71				Performing loans	$	70		-	$	72		$	71
			Delinquent loans	$	200		-	$	750							Delinquent loans	$	200		-	$	750
			Loans in foreclosure	$	1,000											Loans in foreclosure	$	1,000

*Ranges and weighted averages based on interest rate tranches.

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

~~Table of Contents~~

16. Fair Value of Financial Instruments

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

Table of Contents

The estimated fair values of the Company’s financial instruments and the classification of their fair value measurement within the valuation hierarchy are as follows at September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		Carrying Amount		Estimated Fair Value at September 30, 2021									Carrying Amount		Estimated Fair Value at September 30, 2022
(In thousands)	(In thousands)			Level 1		Level 2		Level 3		Total		(In thousands)			Level 1		Level 2		Level 3		Total
Financial Assets	Financial Assets											Financial Assets
Loans:	Loans:											Loans:
Business	Business	$	5,277,850	$	—	$	—	$	5,220,005	$	5,220,005	Business	$	5,528,895	$	—	$	—	$	5,384,563	$	5,384,563
Real estate - construction and land	Real estate - construction and land	1,257,836		—		—		1,238,620		1,238,620		Real estate - construction and land	1,206,955		—		—		1,191,317		1,191,317
Real estate - business	Real estate - business	2,937,852		—		—		2,936,476		2,936,476		Real estate - business	3,331,627		—		—		3,214,321		3,214,321
Real estate - personal	Real estate - personal	2,769,292		—		—		2,772,259		2,772,259		Real estate - personal	2,862,519		—		—		2,628,213		2,628,213
Consumer	Consumer	2,049,559		—		—		2,046,338		2,046,338		Consumer	2,116,371		—		—		2,072,740		2,072,740
Revolving home equity	Revolving home equity	281,442		—		—		279,165		279,165		Revolving home equity	286,026		—		—		282,993		282,993
Consumer credit card	Consumer credit card	569,976		—		—		529,617		529,617		Consumer credit card	563,349		—		—		525,940		525,940
Overdrafts	Overdrafts	4,583		—		—		4,236		4,236		Overdrafts	3,216		—		—		3,160		3,160
Total loans	Total loans	15,148,390		—		—		15,026,716		15,026,716		Total loans	15,898,958		—		—		15,303,247		15,303,247
Loans held for sale	Loans held for sale	16,043		—		16,043		—		16,043		Loans held for sale	8,062		—		8,062		—		8,062

Investment securities	Investment securities	14,395,504		791,308		13,419,585		184,611		14,395,504		Investment securities	12,899,146		1,042,431		11,633,549		223,166		12,899,146

Federal funds sold												Federal funds sold	14,020		14,020		—		—		14,020
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,750,000		—		—		1,757,410		1,757,410		Securities purchased under agreements to resell	1,275,000		—		—		1,243,913		1,243,913
Interest earning deposits with banks	Interest earning deposits with banks	1,888,545		1,888,545		—		—		1,888,545		Interest earning deposits with banks	642,943		642,943		—		—		642,943
Cash and due from banks	Cash and due from banks	344,460		344,460		—		—		344,460		Cash and due from banks	344,178		344,178		—		—		344,178
Derivative instruments	Derivative instruments	55,065		—		53,442		1,623		55,065		Derivative instruments	38,460		—		38,419		41		38,460
Assets held in trust for deferred compensation plan	Assets held in trust for deferred compensation plan	20,880		20,880		—		—		20,880		Assets held in trust for deferred compensation plan	16,588		16,588		—		—		16,588
Total	Total	$	33,618,887	$	3,045,193	$	13,489,070	$	16,970,360	$	33,504,623	Total	$	31,137,355	$	2,060,160	$	11,680,030	$	16,770,367	$	30,510,557
Financial Liabilities	Financial Liabilities											Financial Liabilities
Non-interest bearing deposits	Non-interest bearing deposits	$	11,622,855	$	11,622,855	$	—	$	—	$	11,622,855	Non-interest bearing deposits	$	10,468,591	$	10,468,591	$	—	$	—	$	10,468,591
Savings, interest checking and money market deposits	Savings, interest checking and money market deposits	14,907,654		14,907,654		—		—		14,907,654		Savings, interest checking and money market deposits	16,014,487		16,014,487		—		—		16,014,487
Certificates of deposit	Certificates of deposit	1,615,775		—		—		1,617,580		1,617,580		Certificates of deposit	988,238		—		—		972,605		972,605
Federal funds purchased	Federal funds purchased	11,345		11,345		—		—		11,345		Federal funds purchased	311,200		311,200		—		—		311,200
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	2,242,408		—		—		2,242,486		2,242,486		Securities sold under agreements to repurchase	2,003,390		—		—		2,004,755		2,004,755
Other borrowings	Other borrowings	3,949		—		3,949		—		3,949		Other borrowings	985		—		985		—		985
Derivative instruments	Derivative instruments	12,466		—		12,183		283		12,466		Derivative instruments	55,768		—		55,669		99		55,768
Liabilities held in trust for deferred compensation plan	Liabilities held in trust for deferred compensation plan	20,880		20,880		—		—		20,880		Liabilities held in trust for deferred compensation plan	16,588		16,588		—		—		16,588
Total	Total	$	30,437,332	$	26,562,734	$	16,132	$	3,860,349	$	30,439,215	Total	$	29,859,247	$	26,810,866	$	56,654	$	2,977,459	$	29,844,979

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		Carrying Amount		Estimated Fair Value at December 31, 2020									Carrying Amount		Estimated Fair Value at December 31, 2021
(In thousands)	(In thousands)			Level 1		Level 2		Level 3		Total		(In thousands)			Level 1		Level 2		Level 3		Total
Financial Assets	Financial Assets											Financial Assets
Loans:	Loans:											Loans:
Business	Business	$	6,546,087	$	—	$	—	$	6,467,572	$	6,467,572	Business	$	5,303,535	$	—	$	—	$	5,229,153	$	5,229,153
Real estate - construction and land	Real estate - construction and land	1,021,595		—		—		995,873		995,873		Real estate - construction and land	1,118,266		—		—		1,099,747		1,099,747
Real estate - business	Real estate - business	3,026,117		—		—		3,016,576		3,016,576		Real estate - business	3,058,837		—		—		3,054,481		3,054,481
Real estate - personal	Real estate - personal	2,820,030		—		—		2,830,521		2,830,521		Real estate - personal	2,805,401		—		—		2,809,490		2,809,490
Consumer	Consumer	1,950,502		—		—		1,953,217		1,953,217		Consumer	2,032,225		—		—		2,031,408		2,031,408
Revolving home equity	Revolving home equity	307,083		—		—		304,434		304,434		Revolving home equity	275,945		—		—		273,450		273,450
Consumer credit card	Consumer credit card	655,078		—		—		576,320		576,320		Consumer credit card	575,410		—		—		536,468		536,468
Overdrafts	Overdrafts	3,149		—		—		3,068		3,068		Overdrafts	6,740		—		—		6,458		6,458
Total loans	Total loans	16,329,641		—		—		16,147,581		16,147,581		Total loans	15,176,359		—		—		15,040,655		15,040,655
Loans held for sale	Loans held for sale	45,089		—		45,089		—		45,089		Loans held for sale	8,615		—		8,615		—		8,615

Investment securities	Investment securities	12,626,296		841,025		11,638,558		146,713		12,626,296		Investment securities	14,695,628		1,087,873		13,413,558		194,197		14,695,628

Federal funds sold												Federal funds sold	2,800		2,800		—		—		2,800
Securities purchased under agreements to resell	Securities purchased under agreements to resell	850,000		—		—		894,338		894,338		Securities purchased under agreements to resell	1,625,000		—		—		1,623,856		1,623,856
Interest earning deposits with banks	Interest earning deposits with banks	1,747,363		1,747,363		—		—		1,747,363		Interest earning deposits with banks	3,971,217		3,971,217		—		—		3,971,217
Cash and due from banks	Cash and due from banks	437,563		437,563		—		—		437,563		Cash and due from banks	305,539		305,539		—		—		305,539
Derivative instruments	Derivative instruments	89,889		—		86,447		3,442		89,889		Derivative instruments	41,842		—		40,994		848		41,842
Assets held in trust for deferred compensation plan	Assets held in trust for deferred compensation plan	19,278		19,278		—		—		19,278		Assets held in trust for deferred compensation plan	21,794		21,794		—		—		21,794
Total	Total	$	32,145,119	$	3,045,229	$	11,770,094	$	17,192,074	$	32,007,397	Total	$	35,848,794	$	5,389,223	$	13,463,167	$	16,859,556	$	35,711,946
Financial Liabilities	Financial Liabilities											Financial Liabilities
Non-interest bearing deposits	Non-interest bearing deposits	$	10,497,598	$	10,497,598	$	—	$	—	$	10,497,598	Non-interest bearing deposits	$	11,772,374	$	11,772,374	$	—	$	—	$	11,772,374
Savings, interest checking and money market deposits	Savings, interest checking and money market deposits	14,604,456		14,604,456		—		—		14,604,456		Savings, interest checking and money market deposits	16,598,085		16,598,085		—		—		16,598,085
Certificates of deposit	Certificates of deposit	1,844,691		—		—		1,847,277		1,847,277		Certificates of deposit	1,442,614		—		—		1,438,919		1,438,919
Federal funds purchased	Federal funds purchased	42,270		42,270		—		—		42,270		Federal funds purchased	43,385		43,385		—		—		43,385
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	2,056,113		—		—		2,056,173		2,056,173		Securities sold under agreements to repurchase	2,979,582		—		—		2,979,677		2,979,677

Other borrowings												Other borrowings	12,514		—		12,514		—		12,514
Derivative instruments	Derivative instruments	18,675		—		17,974		701		18,675		Derivative instruments	12,101		—		11,824		277		12,101
Liabilities held in trust for deferred compensation plan	Liabilities held in trust for deferred compensation plan	19,278		19,278		—		—		19,278		Liabilities held in trust for deferred compensation plan	21,794		21,794		—		—		21,794
Total	Total	$	29,083,081	$	25,163,602	$	17,974	$	3,904,151	$	29,085,727	Total	$	32,882,449	$	28,435,638	$	24,338	$	4,418,873	$	32,878,849

17. Legal and Regulatory Proceedings

The Company has various legal proceedings pending at September 30, ~~2021,~~2022, arising in the normal course of business. While some matters pending against the Company specify damages claimed by plaintiffs, others do not seek a specified amount of damages or are at early stages of the legal process. The Company records a loss accrual for all legal and regulatory matters for which it deems a loss is probable and can be reasonably estimated. Some matters, which are in the early stages, have not yet progressed to the point where a loss amount can be determined to be probable and estimable.

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

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company's ~~2020~~2021 Annual Report on Form 10-K. Results of operations for the ~~three and~~ nine month periods ended September 30, ~~2021~~2022 are not necessarily indicative of results to be attained for any other period.

Forward-Looking Information

This report may contain "forward-looking statements" that are subject to risks and uncertainties and include information about possible or assumed future results of operations. Many possible events or factors could affect the future financial results and performance of the Company. This could cause results or performance to differ materially from those expressed in the forward-looking statements. Words such as "expects", "anticipates", "believes", "estimates", variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed throughout this report. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. Such possible events or factors include: changes in economic conditions in the Company's market area, the effects of the COVID-19 pandemic, changes in policies by regulatory agencies, governmental legislation and regulation, fluctuations in interest rates, changes in liquidity requirements, demand for loans in the Company's market area, changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats, and such other factors as discussed in Part I Item 1A - "Risk Factors" and Part II Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's ~~2020~~2021 Annual Report on Form ~~10-K and in Part II Item 1A of this Quarterly Report on Form 10-Q. Except as set forth in Part II, Item 1A, during~~10-K. During the quarter ended September 30, ~~2021,~~2022, there were no material changes to the Risk Factors disclosed in the Company's ~~2020~~2021 Annual Report on Form 10-K.

Critical Accounting Estimates and Related Policies

The Company has identified certain policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These estimates and related policies ~~relate to~~are the Company's allowance for credit losses and ~~the valuation of certain investment securities.~~fair value measurement policies. A discussion of these estimates and related policies can be found in the sections captioned "Critical Accounting Policies" and "Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments" in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's ~~2020~~2021 Annual Report on Form 10-K. There have been no changes in the Company's application of critical accounting policies since December 31, ~~2020.~~2021.

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Selected Financial Data


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended September 30						Nine Months Ended September 30
		2021			2020			2021			2020				2022			2021			2022			2021
Per Share Data	Per Share Data													Per Share Data
Net income per common share — basic	Net income per common share — basic	$	1.05		$	1.06	*	$	3.55		$	1.80	*	Net income per common share — basic	$	1.03		$	1.00	*	$	2.96		$	3.38	*
Net income per common share — diluted	Net income per common share — diluted	1.05			1.06		*	3.54			1.80		*	Net income per common share — diluted	1.02			.99		*	2.95			3.37		*
Cash dividends on common stock	Cash dividends on common stock	.263			.257		*	.788			.771		*	Cash dividends on common stock	.265			.250		*	.795			.750		*
Book value per common share	Book value per common share							30.01			28.23		*	Book value per common share							19.86			28.58		*
Market price	Market price							69.68			53.61		*	Market price							66.16			66.36		*
Selected Ratios	Selected Ratios													Selected Ratios
(Based on average balance sheets)	(Based on average balance sheets)													(Based on average balance sheets)
Loans to deposits (1)	Loans to deposits (1)	54.44		%	66.23		%	57.91		%	69.12		%	Loans to deposits (1)	56.40		%	54.44		%	54.05		%	57.91		%
Non-interest bearing deposits to total deposits	Non-interest bearing deposits to total deposits	40.90			39.61			40.15			36.96			Non-interest bearing deposits to total deposits	38.76			40.90			39.04			40.15
Equity to loans (1)	Equity to loans (1)	23.17			20.54			21.68			20.96			Equity to loans (1)	17.45			23.17			19.19			21.68
Equity to deposits	Equity to deposits	12.62			13.60			12.56			14.49			Equity to deposits	9.84			12.62			10.37			12.56
Equity to total assets	Equity to total assets	10.22			10.90			10.22			11.42			Equity to total assets	8.31			10.22			8.66			10.22
Return on total assets	Return on total assets	1.40			1.71			1.65			1.04			Return on total assets	1.48			1.40			1.39			1.65

Return on common equity		13.74			15.21			16.14			8.93
Return on equity														Return on equity	17.84			13.74			16.08			16.14
(Based on end-of-period data)	(Based on end-of-period data)													(Based on end-of-period data)
Non-interest income to revenue (2)	Non-interest income to revenue (2)	39.11			37.50			39.66			37.42			Non-interest income to revenue (2)	35.99			39.11			37.34			39.66
Efficiency ratio (3)	Efficiency ratio (3)	59.95			55.00			57.76			57.37			Efficiency ratio (3)	55.19			59.95			57.48			57.76
Tier I common risk-based capital ratio	Tier I common risk-based capital ratio							14.02			13.45			Tier I common risk-based capital ratio							13.97			14.02
Tier I risk-based capital ratio	Tier I risk-based capital ratio							14.02			13.45			Tier I risk-based capital ratio							13.97			14.02
Total risk-based capital ratio	Total risk-based capital ratio							14.83			14.62			Total risk-based capital ratio							14.69			14.83
Tangible common equity to tangible assets ratio (4)	Tangible common equity to tangible assets ratio (4)							9.71			10.11			Tangible common equity to tangible assets ratio (4)							6.80			9.71
Tier I leverage ratio	Tier I leverage ratio							9.31			9.39			Tier I leverage ratio							9.87			9.31

* Restated for the 5% stock dividend distributed in December ~~2020.~~2021.

(1) Includes loans held for sale.

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

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

(4) The tangible common equity to tangible assets ratio is a measurement which management believes is a useful indicator of capital adequacy and utilization.

It provides a meaningful basis for period to period and company to company comparisons, and also assists regulators, investors and analysts in analyzing the financial position of the Company. Tangible common equity and tangible assets are non-GAAP measures and should not be viewed as substitutes for, or superior to, data prepared in accordance with GAAP.

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


		September 30							September 30
(Dollars in thousands)	(Dollars in thousands)	2021			2020			(Dollars in thousands)	2022			2021
Total equity	Total equity	$	3,491,221		$	3,306,264		Total equity	$	2,371,107		$	3,491,221
Less non-controlling interest	Less non-controlling interest	10,551			601			Less non-controlling interest	19,513			10,551

Less goodwill	Less goodwill	138,921			138,921			Less goodwill	138,921			138,921
Less core deposit premium		4,684			1,452
Less intangible assets*								Less intangible assets*	4,371			4,684
Total tangible common equity (a)	Total tangible common equity (a)	$	3,337,065		$	3,165,290		Total tangible common equity (a)	$	2,208,302		$	3,337,065
Total assets	Total assets	$	34,497,543		$	31,453,817		Total assets	$	32,602,596		$	34,497,543
Less goodwill	Less goodwill	138,921			138,921			Less goodwill	138,921			138,921
Less core deposit premium		4,684			1,452
Less intangible assets*								Less intangible assets*	4,371			4,684
Total tangible assets (b)	Total tangible assets (b)	$	34,353,938		$	31,313,444		Total tangible assets (b)	$	32,459,304		$	34,353,938
Tangible common equity to tangible assets ratio (a)/(b)	Tangible common equity to tangible assets ratio (a)/(b)	9.71		%	10.11		%	Tangible common equity to tangible assets ratio (a)/(b)	6.80		%	9.71		%

* Intangible assets other than mortgage servicing rights.

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Results of Operations

Summary

Three Months Ended September 30 Nine Months Ended September 30
(Dollars in thousands) 2021 2020 % change 2021 2020 % change
Net interest income $ 214,037 $ 215,962 (.9 %) $ 627,767 $ 620,084 1.2 %
Provision for credit losses 7,385 (3,101) (338.1) 59,272 (141,593) (141.9)
Non-interest income 137,506 129,572 6.1 412,694 370,750 11.3
Investment securities gains (losses), net 13,108 16,155 (18.9) 39,765 (1,275) N.M.
Non-interest expense (211,620) (190,858) 10.9 (602,319) (572,068) 5.3
Income taxes (34,662) (34,375) .8 (111,947) (54,209) 106.5
Non-controlling interest income (expense) (3,193) (907) N.M. (9,373) 2,479 N.M.
Net income attributable to Commerce Bancshares, Inc. 122,561 132,448 (7.5) 415,859 224,168 85.5
Preferred stock dividends — (7,466) (100.0) — (11,966) (100.0)
Net income available to common shareholders $ 122,561 $ 124,982 (1.9 %) $ 415,859 $ 212,202 96.0 %

~~N.M. - Not meaningful~~


	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in thousands)	2022		2021		% change			2022		2021		% change
Net interest income	$	246,373	$	214,037	15.1	%		$	687,544	$	627,767	9.5	%
Provision for credit losses	(15,290)		7,385		307.0			(12,594)		59,272		121.2
Non-interest income	138,514		137,506		.7			409,710		412,694		(.7)
Investment securities gains, net	3,410		13,108		(74.0)			11,602		39,765		(70.8)
Non-interest expense	(212,884)		(211,620)		.6			(632,037)		(602,319)		4.9
Income taxes	(33,936)		(34,662)		(2.1)			(97,859)		(111,947)		(12.6)
Non-controlling interest expense	(3,364)		(3,193)		5.4			(9,595)		(9,373)		2.4
Net income attributable to Commerce Bancshares, Inc.	$	122,823	$	122,561	.2	%		$	356,771	$	415,859	(14.2	%)

For the quarter ended September 30, ~~2021,~~2022, net income attributable to Commerce Bancshares, Inc. (net income) amounted to ~~$122.6~~$122.8 million, ~~a decrease~~an increase of ~~$9.9 million,~~$262 thousand, or ~~7.5%~~.2%, compared to the third quarter of the previous year. For the current quarter, the annualized return on average assets was ~~1.40%~~1.48%, the annualized return on average equity was ~~13.74%~~17.84%, and the efficiency ratio was ~~59.95%~~55.19%. Diluted earnings per common share was ~~$1.05, a decrease~~$1.02, an increase of ~~.9%~~3.0% compared to ~~$1.06~~$0.99 per share in the third quarter of ~~2020,~~2021, and ~~decreased 23.9%~~increased 6.3% compared to ~~$1.38~~$.96 per share in the previous quarter.

Compared to the third quarter of last year, net interest income ~~decreased $1.9~~increased $32.3 million, or ~~.9%~~15.1%, mainly due to ~~decreases in loan interest and interest on securities purchased under agreements to resell~~increases of ~~$7.9 million and $2.2 million, respectively. These decreases were partly offset by a decline of $4.2~~$28.4 million in interest ~~expense~~income on ~~deposits~~loans and ~~borrowings, coupled with an increase of $3.4~~$15.7 million in interest income on investment ~~securities.~~securities, partly offset by an increase in deposits and borrowings interest expense of $13.3 million. The provision for credit losses ~~declined $10.5~~increased $22.7 million due to ~~a decrease~~an increase in the estimate of the allowance for credit losses on loans and unfunded lending commitments and ~~lower~~higher net loan ~~charge-offs.~~ charge-offs, coupled with the release of allowances associated with certain pandemic-related estimates in the third quarter of 2021.Non-interest income increased ~~$7.9~~$1.0 million, or ~~6.1%~~.7%, compared to the third quarter of ~~2020,~~2021, mainly due to ~~growth~~increases in ~~trust fees,~~ net bank card fees and ~~deposit account fees,~~cash sweep commissions, partly offset by lower loan fees and ~~sales. Investment~~sales and trust fees. Net gains on investment securities ~~net gains~~ totaled ~~$13.1~~$3.4 million in the current quarter compared to net gains of ~~$16.2~~$13.1 million in the same quarter of last year. Net securities gains in the current quarter primarily resulted from ~~unrealized~~net fair value gains of ~~$13.0~~$14.1 million in the Company's private equity ~~portfolio.~~investment portfolio, partly offset by a loss of $10.7 million on the sale of an available for sale security. Non-interest expense increased ~~$20.8~~$1.3 million, or ~~10.9%~~.6%, over the third quarter of ~~2020~~2021 mainly due to ~~non-recurring litigation settlement expense,~~ higher salaries ~~and benefits~~ expense, ~~and~~ data processing and software ~~expense.~~expense and travel and entertainment expense, partly offset by $8.2 million in litigation settlement costs recorded in 2021.

Net income for the first nine months of ~~2021~~2022 was ~~$415.9~~$356.8 million, ~~an increase~~a decrease of ~~$191.7~~$59.1 million, or ~~85.5%~~14.2%, ~~over~~from the same period last year. Diluted earnings per common ~~shares~~share was ~~$3.54, an increase~~$2.95, a decrease of ~~96.7%~~12.5% compared to ~~$1.80~~$3.37 per share in the same period last year. For the first nine months of ~~2021,~~2022, the annualized return on average assets was ~~1.65%~~1.39%, the annualized return on average equity was ~~16.14%~~16.08%, and the efficiency ratio was ~~57.76%~~57.48%. Net interest income increased ~~$7.7~~$59.8 million, or ~~1.2%~~9.5%, over the same period last year. This growth was due to ~~a decrease~~increases of ~~$27.8 million in deposits and borrowings interest expense and growth of $6.2~~$70.7 million in interest income on investment securities, $11.8 million in interest income on loans and $7.0 million in interest earned on balances with the Federal Reserve, partly offset by a ~~$27.5 million~~ decrease in interest income on ~~loans.~~securities purchased under agreements to resell of $14.9 million and an increase in deposits and borrowings interest expense of $15.0 million. The provision for credit losses was ~~a benefit~~expense of ~~$59.3~~$12.6 million for the first nine months of ~~2021,~~2022, compared to ~~provision expense~~a recovery of ~~$141.6~~$59.3 million in the same period last year, resulting in ~~a decrease~~an increase in provision expense of ~~$200.9~~$71.9 million. Non-interest income ~~increased $41.9~~decreased $3.0 million, or ~~11.3%~~.7%, from the first nine months of last year mainly due to lower loan fees and sales, partly offset by higher net bank card fees. Non-interest expense increased $29.7 million, or 4.9%, over the first nine months of last year mainly due to ~~higher trust fees, net bank card fees and loan fees and sales. Non-interest expense increased $30.3 million, or 5.3%, over the first nine months of last year due to~~ increases in salaries and benefits expense and data processing and software ~~expense, as well as lower deferred loan origination costs.~~

expense.

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Net Interest Income

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

Analysis of Changes in Net Interest Income


		Three Months Ended September 30, 2021 vs. 2020						Nine Months Ended September 30, 2021 vs. 2020							Three Months Ended September 30, 2022 vs. 2021						Nine Months Ended September 30, 2022 vs. 2021
		Change due to						Change due to							Change due to						Change due to
(In thousands)	(In thousands)	Average Volume		Average Rate		Total		Average Volume		Average Rate		Total		(In thousands)	Average Volume		Average Rate		Total		Average Volume		Average Rate		Total
Interest income, fully taxable equivalent basis:	Interest income, fully taxable equivalent basis:													Interest income, fully taxable equivalent basis:
Loans:	Loans:													Loans:
Business	Business	$	(9,486)	$	6,838	$	(2,648)	$	(6,101)	$	5,238	$	(863)	Business	$	(851)	$	6,632	$	5,781	$	(17,148)	$	5,205	$	(11,943)
Real estate - construction and land	Real estate - construction and land	1,831		(672)		1,159		5,745		(5,159)		586		Real estate - construction and land	1,063		5,744		6,807		2,655		7,955		10,610
Real estate - business	Real estate - business	(61)		(459)		(520)		2,026		(6,914)		(4,888)		Real estate - business	2,401		7,693		10,094		4,334		8,267		12,601
Real estate - personal	Real estate - personal	479		(1,959)		(1,480)		6,517		(7,631)		(1,114)		Real estate - personal	567		644		1,211		612		(523)		89
Consumer	Consumer	517		(2,436)		(1,919)		1,193		(9,471)		(8,278)		Consumer	564		2,461		3,025		2,100		(776)		1,324
Revolving home equity	Revolving home equity	(395)		129		(266)		(1,470)		(846)		(2,316)		Revolving home equity	(7)		964		957		(348)		1,209		861
Consumer credit card	Consumer credit card	(2,292)		(109)		(2,401)		(8,454)		(2,969)		(11,423)		Consumer credit card	(465)		1,064		599		(3,384)		1,716		(1,668)
Overdrafts	Overdrafts	—		—		—		—		—		—		Overdrafts	—		—		—		—		—		—
Total interest on loans	Total interest on loans	(9,407)		1,332		(8,075)		(544)		(27,752)		(28,296)		Total interest on loans	3,272		25,202		28,474		(11,179)		23,053		11,874
Loans held for sale	Loans held for sale	(74)		(3)		(77)		287		(139)		148		Loans held for sale	(70)		42		(28)		(413)		147		(266)
Investment securities:	Investment securities:													Investment securities:
U.S. government and federal agency securities	U.S. government and federal agency securities	(400)		3,736		3,336		(918)		13,653		12,735		U.S. government and federal agency securities	5,583		(3,444)		2,139		13,376		(2,604)		10,772
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	(284)		19		(265)		(1,672)		(401)		(2,073)		Government-sponsored enterprise obligations	29		8		37		64		13		77
State and municipal obligations	State and municipal obligations	1,737		(915)		822		11,888		(6,296)		5,592		State and municipal obligations	77		(381)		(304)		1,742		(1,866)		(124)
Mortgage-backed securities	Mortgage-backed securities	4,205		(7,351)		(3,146)		24,116		(41,209)		(17,093)		Mortgage-backed securities	(1,032)		6,894		5,862		1,740		33,031		34,771
Asset-backed securities	Asset-backed securities	7,218		(6,263)		955		20,737		(19,639)		1,098		Asset-backed securities	2,294		5,283		7,577		12,360		4,424		16,784
Other securities	Other securities	2,197		(700)		1,497		5,354		457		5,811		Other securities	379		(130)		249		3,374		4,489		7,863
Total interest on investment securities	Total interest on investment securities	14,673		(11,474)		3,199		59,505		(53,435)		6,070		Total interest on investment securities	7,330		8,230		15,560		32,656		37,487		70,143
Federal funds sold	Federal funds sold	1		—		1		4		(3)		1		Federal funds sold	18		75		93		23		88		111
Securities purchased under agreements to resell	Securities purchased under agreements to resell	10,384		(12,624)		(2,240)		10,149		(9,043)		1,106		Securities purchased under agreements to resell	(1,401)		(1,622)		(3,023)		12,316		(27,198)		(14,882)
Interest earning deposits with banks	Interest earning deposits with banks	398		336		734		2,059		(1,947)		112		Interest earning deposits with banks	(613)		5,189		4,576		(599)		7,641		7,042
Total interest income	Total interest income	15,975		(22,433)		(6,458)		71,460		(92,319)		(20,859)		Total interest income	8,536		37,116		45,652		32,804		41,218		74,022
Interest expense:	Interest expense:													Interest expense:
Deposits:	Deposits:													Deposits:
Savings	Savings	66		(46)		20		258		(195)		63		Savings	22		(134)		(112)		95		(426)		(331)
Interest checking and money market	Interest checking and money market	428		(1,837)		(1,409)		2,550		(12,341)		(9,791)		Interest checking and money market	183		5,657		5,840		720		5,430		6,150
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	(210)		(612)		(822)		(813)		(2,377)		(3,190)		Certificates of deposit of less than $100,000	(30)		235		205		(163)		(88)		(251)
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	(236)		(1,826)		(2,062)		(1,158)		(8,026)		(9,184)		Certificates of deposit of $100,000 and over	(156)		577		421		(269)		(136)		(405)
Total interest on deposits	Total interest on deposits	48		(4,321)		(4,273)		837		(22,939)		(22,102)		Total interest on deposits	19		6,335		6,354		383		4,780		5,163
Federal funds purchased and securities sold under
agreements to repurchase		117		(43)		74		486		(5,135)		(4,649)
Federal funds purchased														Federal funds purchased	10		302		312		17		518		535
Securities sold under agreements to repurchase														Securities sold under agreements to repurchase	(30)		7,129		7,099		95		9,764		9,859
Other borrowings	Other borrowings	—		1		1		(1,030)		3		(1,027)		Other borrowings	5		3		8		9		8		17
Total interest expense	Total interest expense	165		(4,363)		(4,198)		293		(28,071)		(27,778)		Total interest expense	4		13,769		13,773		504		15,070		15,574
Net interest income, tax equivalent basis	Net interest income, tax equivalent basis	$	15,810	$	(18,070)	$	(2,260)	$	71,167	$	(64,248)	$	6,919	Net interest income, tax equivalent basis	$	8,532	$	23,347	$	31,879	$	32,300	$	26,148	$	58,448

Net interest income in the third quarter of ~~2021~~2022 was ~~$214.0~~$246.4 million, ~~a decrease~~an increase of ~~$1.9~~$32.3 million ~~from~~over the third quarter of ~~2020.~~2021. On a ~~tax equivalent (T/E)~~fully taxable-equivalent (FTE) basis, net interest income totaled ~~$216.9~~$248.7 million in the third quarter of ~~2021, down $2.3~~2022, up $31.9 million ~~from~~over the same period last year and up ~~$5.8~~$13.7 million over the previous quarter. The ~~decrease~~increase in net interest income

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compared to the third quarter of ~~2020~~2021 was mainly due to ~~lower~~higher interest income earned on loans ~~(T/E)~~(FTE) of ~~$8.1~~$28.5 million and investment securities ~~purchased under agreements to resell~~(FTE) of ~~$2.2~~$15.6 million, partly offset by higher interest ~~income earned on investment securities (T/E) of $3.2 million and lower interest~~ expense on ~~interest bearing~~ deposits and borrowings of ~~$4.3~~$13.8 million. The ~~decrease~~increase in total interest earned on loans ~~(T/E)~~(FTE) was ~~mainly~~ the result of ~~a decline in~~higher loan yields on all loan products, especially commercial loans, many of which have variable rates, coupled with higher average ~~balances, partly offset by growth in the average rate earned.~~balances. The increase in interest ~~earned~~ on investment securities ~~(T/E)~~(FTE) was ~~mainly~~the result of higher average rates earned and average balances, while the increase in interest expense was due to higher ~~average balances, partly offset by lower~~ rates ~~earned, while the decrease in expense~~paid on ~~interest bearing~~ deposits ~~was a result of a decline in the average rate paid.~~and borrowings. The Company's net yield on earning assets ~~(T/E)~~(FTE) was ~~2.58%~~3.01% in the current quarter compared to ~~2.97%~~2.58% in the third quarter of ~~2020.~~2021.

Total interest income ~~(T/E) decreased $6.5~~(FTE) increased $45.7 million ~~from~~over the third quarter of ~~2020.~~2021. Interest income on loans ~~(T/E)~~(FTE) was ~~$143.9~~$172.4 million during the third quarter of ~~2021, a decrease~~2022, an increase of ~~$8.1~~$28.5 million, or ~~5.3%~~19.8%, ~~from~~over the same quarter last year. The ~~decrease~~increase in interest income ~~from~~over the same quarter last year was primarily due to ~~a decline of $1.1 billion, or 6.8%, in average loan balances, partly offset by~~ an increase of ~~five~~63 basis points in the average rate ~~earned.~~earned and growth of $386.9 million, or 2.5%, in average loan balances. Most of the ~~decrease~~increase in interest income occurred in the business, business real estate, construction and consumer ~~credit card, consumer, and personal~~loan categories. The largest increase to interest income occurred in business real estate loan ~~categories. These decreases were partly offset by an~~interest, which grew $10.1 million due to a 94 basis point increase in ~~interest income~~the average rate earned, coupled with growth in ~~the construction and land loan category.~~average balances of $275.3 million, or 9.2%. Business loan interest income ~~decreased $2.6~~increased $5.8 million due to a decline of $1.3 billion in average balances, partly offset by an increase of 48 basis points in the average rate earned. The decline in business loan average balances was mainly due to a decrease of $930.8 million in Paycheck Protection Program (PPP) loans, while the increase in the yield was partly due to an increase ~~in the PPP loan yield, which was 7.73% in the third quarter~~ of ~~2021. Consumer credit card loan interest decreased $2.4 million mainly due to a decline of $79.8 million in average balances. Consumer loan interest declined $1.9 million due to a decrease of 48~~51 basis points in the average rate earned, partly offset by a ~~$48.9~~decline of $119.8 million ~~or 2.5%, increase~~ in average balances. ~~Personal real estate~~Construction and land loan interest ~~income fell $1.5~~grew $6.8 million due to a 29176 basis point ~~decrease~~increase in the average rate earned ~~partly offset by higher average balances~~and growth of ~~$53.3~~$120.2 million, or ~~2.0%. These decreases to interest income (T/E) were partly offset by an increase of $1.2 million in interest earned on construction and land loans, mostly due to growth of $194.2 million, or 19.9%~~10.3%, in average loan ~~balances, partly offset by a decline~~balances. Consumer loan interest increased $3.0 million due to an increase of 2346 basis points in the average rate ~~earned.~~earned and growth in average balances of $60.4 million, or 3.0%.

Interest income on investment securities ~~(T/E)~~(FTE) was ~~$65.7~~$81.3 million during the third quarter of ~~2021,~~2022, which was an increase of ~~$3.2~~$15.6 million over the same quarter last year. The increase in interest income occurred mainly in interest earned on asset-backed securities, which rose $7.6 million due to an increase of 54 basis points in the average rate earned, coupled with higher average balances of $842.9 million, or 27.8%. Interest income earned on mortgage-backed securities increased $5.9 million due to an increase in the average rate earned of 40 basis points, partly offset by a decline of $267.5 million, or 3.8%, in the average balance. In addition, a $1.5 million increase in premium amortization, reflecting slower forward prepayment speed estimates was recorded in the current quarter, compared to a premium amortization adjustment increase of $5.0 million in the prior year. Interest on U.S. government and federal agency obligations ~~which~~ grew ~~$3.3~~$2.1 million mainly due to higher average balances of $385.9 million, or 53.0%, and an increase in inflation income on the Company's U.S. Treasury inflation-protected securities (TIPS)., while a decrease of 123 basis points in the average rate earned partly offset these increases in income. Interest income related to TIPS, which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), increased ~~$3.4~~$1.8 million over the same quarter last year. Interest earned on other securities grew $1.5 million mainly due to distributions from investments in the Company's private equity portfolio. Interest on asset-backed securities rose $955 thousand as a result of a $1.5 billion increase in the average balance, partly offset by an 82 basis point decline in the average rate earned. In addition, interest earned on state and municipal obligations grew $822 thousand as a result of growth in the average balance of $272.4 million, or 15.4%, partly offset by an 18 basis point decline in the average rate earned. These increases to interest income on investment securities (T/E) were partly offset by a decline in interest earned on mortgage-backed securities, which fell $3.1 million due to a 42 basis point decline in the average rate earned, partly offset by an increase of $855.5 million, or 13.7%, in the average balance. At September 30, 2021, the Company recorded a $5.0 million adjustment to premium amortization, which increased interest income this quarter to reflect moderately slower prepayment speed estimates on mortgage-backed securities. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $14.8 billion in the third quarter of 2022, compared to $13.8 billion in the third quarter of ~~2021, compared to $11.1 billion in the third quarter of 2020.~~2021.

Interest income on securities purchased under agreements to resell decreased ~~$2.2~~$3.0 million from the same quarter last year, due to a decrease of ~~307~~47 basis points in the average rate earned and a decline of $253.9 million in the average balance. Interest income on balances at the Federal Reserve grew $4.6 million due to an increase of 210 basis points in the average rate earned, partly offset by growth of $783.2 million in the average balance. In the third quarter of 2021, $250.0 million of securities purchased under agreements to resell (resell agreements), which had been earning interest at an average rate of 4.7%, matured and were replaced with $700.0 million of resell agreements earning approximately .28%. Interest income on balances at the Federal Reserve grew $734 thousand due to an increasea decrease of $1.6 billion in the average balance ~~invested and an increase of five basis points in the average rate earned.~~invested.

The average ~~tax equivalent~~fully taxable-equivalent yield on total interest earning assets was 3.21% in the third quarter of 2022, up from 2.62% in the third quarter of ~~2021, down from 3.07% in the third quarter of 2020.~~2021.

Total interest expense ~~decreased $4.2~~increased $13.8 million compared to the third quarter of ~~2020~~2021 due to ~~a $4.3 million decrease~~increases in interest expense of $6.4 million on interest bearing deposits ~~slightly offset by a $75 thousand increase in interest expense~~and $7.4 million on borrowings. The ~~decrease~~increase in deposit interest expense resulted mainly from ~~a 12 basis point decline in the overall average rate paid. Interest expense on certificates~~an increase of ~~deposit (CD's) declined $2.9 million due to a 55 basis point decrease in the average rate paid, coupled with a decrease of $267.1~~$5.8 million in ~~the average balance. Interest~~interest expense on interest checking and money market deposit accounts ~~declined $1.4 million,~~ due to a ~~five~~15 basis point ~~decrease~~increase in the average rate paid ~~partly offset by~~and higher average balances of ~~$1.6~~$1.1 billion.

~~Table of Contents~~

Interest expense on borrowings ~~increased slightly~~was higher due to ~~higher~~an increase of 129 basis points in the average ~~balances of~~rate paid on customer repurchase agreements. The overall average rate incurred on all interest bearing liabilities was ~~.06%~~.34% and ~~.17%~~.06% in the third quarters of ~~2021~~2022 and ~~2020,~~2021, respectively.

Net interest income ~~(T/E)~~(FTE) for the first nine months of ~~2021~~2022 was ~~$636.7~~$695.1 million compared to ~~$629.8~~$636.7 million for the same period in ~~2020.~~2021. For the first nine months of ~~2021,~~2022, the net interest margin was ~~2.63%~~2.75% compared to ~~3.07%~~2.63% for the same period in ~~2020.~~2021.

Total interest income ~~(T/E)~~(FTE) for the first nine months of ~~2021 decreased $20.9~~2022 increased $58.4 million ~~from~~over the same period last year mainly due to ~~lower~~higher interest income on investment securities (FTE) and loans ~~(T/E)~~(FTE), partly offset by ~~higher~~lower interest earned on ~~investment~~ securities ~~(T/E).~~purchased under agreements to resell and higher interest expense. Loan interest income ~~(T/E) declined $28.3~~(FTE) grew $11.9 million, or ~~6.1%~~2.7%, due to a 2720 basis point ~~decline~~increase in the average rate ~~earned. The~~earned, partly offset by a $403.8 million decrease in average loan balances. Most of the increase in loan interest occurred ~~mainly~~ in the business real estate and construction loan categories due to

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higher average rates and balances. In addition, consumer loan interest increased due to higher average balances, partly offset by lower rates earned. These increases were partly offset by lower interest earned on business and credit card loans due to lower average ~~loan~~ balances, ~~coupled with lower average rates. In addition, business real estate, consumer and personal real estate loan interest declined due to lower average rates,~~ partly offset by higher ~~average balances, while interest on home equity loans declined due to lower average balances and rates.~~

rates earned. Interest income on investment securities (T/E) ~~grew $6.1~~increased $70.1 million ~~mainly~~ due to ana 37 basis point increase ~~of $3.4 billion in the average balance, partly offset by a decrease of 55 basis points~~ in the average rate ~~earned.~~earned and a $2.1 billion increase in average balances. Interest earned on U.S. government and federal agency obligations ~~grew $12.7~~increased $10.8 million, mainly due to higher TIPS interest income. Interest earned on ~~state and municipal obligations~~mortgage-backed securities increased ~~$5.6~~$34.8 million mainly due to higher average rates earned, while interest on asset-backed securities increased $16.8 million due to higher average balances ~~partly offset by lower~~and average rates earned. Interest earned on other securities increased ~~partly~~$7.9 million mainly due to the receipt of ~~distributions from investments~~$6.5 million in non-accrual interest on the sale of a private equity investment in the ~~Company's private equity portfolio. Interest earned on asset-backed securities also increased over the prior year as a result~~second quarter of higher average balances, partly offset by lower rates earned. Partly offsetting these increases was a decrease in interest earned on mortgage-backed securities, which declined $17.1 million as a result of lower average rates earned, partly offset by higher average balances. Interest earned on government sponsored enterprise obligations also decreased due to declines in both the average balance and the average rate earned.

2022. Interest income on securities purchased under agreements to resell ~~increased $1.1~~decreased $14.9 million due to lower rates earned, partly offset by higher average balances, ~~partly offset by lower average rates. Interest earned~~while interest income on balances at the Federal Reserve increased ~~slightly~~$7.0 million due to ~~a $1.1 billion increase in the~~higher average ~~balance invested, partly offset by a 12 basis point decline in the average rate~~rates earned.

Total interest expense for the first nine months of ~~2021 decreased $27.8~~2022 increased $15.6 million compared to the same period last year. Interest ~~expense~~ on ~~interest bearing~~ deposits ~~decreased $22.1~~increased $5.2 million, mainly due to a 22four basis point ~~decrease~~increase in the overall ~~rate paid.~~rate. Interest expense on interest checking and money market ~~account balances decreased $9.8~~accounts increased $6.2 million ~~mainly~~ due to a 12five basis point ~~decrease~~increase in ~~rates paid, partly offset by~~the average rate and higher average balances. Interest expense on ~~CD's declined $12.4 million due to an 81 basis point decline in rates paid, coupled with lower average balances.~~

~~Interest expense on~~ borrowings ~~decreased $5.7~~increased $10.4 million, mainly due to ~~lower~~higher rates paid on customer repurchase agreements. The overall cost of total interest bearing liabilities ~~decreased~~increased to ~~.07%~~.17% compared to ~~.31%~~.07% in the same period last year.

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

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Non-Interest Income


		Three Months Ended September 30								Nine Months Ended September 30								Three Months Ended September 30	Increase (Decrease)												Nine Months Ended September 30	Increase (Decrease)
(Dollars in thousands)	(Dollars in thousands)	2021			2020			% change			2021			2020			% change			(Dollars in thousands)	2022			2021			Amount		% change				2022			2021			Amount	% change
Trust fees																				Trust fees	$	45,406		$	48,950		(3,544)		(7.2)	%			$	140,009		$	139,334		675	.5	%
Bank card transaction fees	Bank card transaction fees	$	42,815		$	37,873		13.0	%		$	123,118		$	111,818		10.1	%		Bank card transaction fees	45,638			42,815			2,823		6.6				131,556			123,118			8,438	6.9
Trust fees		48,950			40,769			20.1			139,334			118,676			17.4
Deposit account charges and other fees	Deposit account charges and other fees	25,161			23,107			8.9			71,724			69,063			3.9			Deposit account charges and other fees	24,521			25,161			(640)		(2.5)				72,392			71,724			668	.9
Consumer brokerage services																				Consumer brokerage services	5,085			4,900			185		3.8				14,599			13,484			1,115	8.3
Capital market fees	Capital market fees	3,794			3,194			18.8			12,102			10,756			12.5			Capital market fees	3,393			3,794			(401)		(10.6)				10,845			12,102			(1,257)	(10.4)
Consumer brokerage services		4,900			4,011			22.2			13,484			11,099			21.5
Loan fees and sales	Loan fees and sales	6,842			9,769			(30.0)			24,472			17,653			38.6			Loan fees and sales	3,094			6,842			(3,748)		(54.8)				10,575			24,472			(13,897)	(56.8)
Other	Other	5,044			10,849			(53.5)			28,460			31,685			(10.2)			Other	11,377			5,044			6,333		125.6				29,734			28,460			1,274	4.5
Total non-interest income	Total non-interest income	$	137,506		$	129,572		6.1	%		$	412,694		$	370,750		11.3	%		Total non-interest income	$	138,514		$	137,506		$	1,008	.7	%			$	409,710		$	412,694		(2,984)	(.7	%)
Non-interest income as a % of total revenue*	Non-interest income as a % of total revenue*	39.1		%	37.5		%				39.7		%	37.4		%				Non-interest income as a % of total revenue*	36.0		%	39.1		%							37.3		%	39.7		%

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

The table below is a summary of net bank card transaction fees for the three and nine month periods ended September 30, ~~2021~~2022 and ~~2020.~~2021.


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended September 30								Nine Months Ended September 30
(Dollars in thousands)	(Dollars in thousands)	2021		2020		% change		2021		2020		% change		(Dollars in thousands)	2022		2021		$ change		% change		2022		2021		$ change		% change
Net debit card fees	Net debit card fees	$	10,402	$	9,721	7.0	%	$	30,274	$	27,863	8.7	%	Net debit card fees	$	10,508	$	10,402	$	106	1.0	%	$	30,593	$	30,274	$	319	1.1	%
Net credit card fees	Net credit card fees	3,863		3,359		15.0		11,389		9,749		16.8		Net credit card fees	3,597		3,863		(266)		(6.9)		11,031		11,389		(358)		(3.1)
Net merchant fees	Net merchant fees	5,202		4,551		14.3		14,711		13,165		11.7		Net merchant fees	5,232		5,202		30		.6		15,146		14,711		435		3.0
Net corporate card fees	Net corporate card fees	23,348		20,242		15.3		66,744		61,041		9.3		Net corporate card fees	26,301		23,348		2,953		12.6		74,786		66,744		8,042		12.0
Total bank card transaction fees	Total bank card transaction fees	$	42,815	$	37,873	13.0	%	$	123,118	$	111,818	10.1	%	Total bank card transaction fees	$	45,638	$	42,815	$	2,823	6.6	%	$	131,556	$	123,118	$	8,438	6.9	%

For the third quarter of ~~2021,~~2022, total non-interest income amounted to ~~$137.5~~$138.5 million compared to ~~$129.6~~$137.5 million in the same quarter last year, which was an increase of ~~$7.9~~$1.0 million, or ~~6.1%~~.7%. The increase was mainly due to higher ~~trust fees and net~~ bank card ~~fees. Additionally, deposit account fees, consumer brokerage fees~~ and ~~capital market fees grew compared to the same quarter last year, but were~~other non-interest income, partly offset by lower trust fees and loan fees and ~~sales and other non-interest income.~~sales. Bank card transaction fees for the current quarter grew ~~$4.9~~$2.8 million, or ~~13.0%~~6.6%, over the same period last year, mainly due to growth of ~~$3.1~~$3.0 million in net corporate ~~card fees, $681 thousand in net debit card fees, $651 thousand in net merchant fees, and $504 thousand in net credit~~ card fees. The growth in net corporate ~~card fees and net credit~~ card fees was mainly due to higher interchange income, partly offset by higher rewards expense. ~~The growth in net debit card fees was mainly due to higher interchange income, while the growth in net merchant fees was mostly due to higher merchant fees, partly offset by higher network expense.~~ Trust fees for the quarter ~~increased $8.2~~decreased $3.5 million, or ~~20.1%~~7.2%, ~~over~~from the same quarter last year, resulting from ~~higher~~lower private client fees and institutional trust ~~fees, which were up 22.9% and 11.2%, respectively.~~fees. Compared to the ~~same period~~third quarter of last year, deposit account fees ~~increased $2.1 million,~~decreased $640 thousand, or ~~8.9%~~2.5%, mainly due to ~~higher~~lower overdraft and return item fees. In September 2022, the Company implemented enhancements to consumer checking accounts that eliminate return item fees and ~~corporate cash management fees. Capital market~~are expected to lower overdraft fees ~~increased $600 thousand, or 18.8%, while consumer~~for our customers. Consumer brokerage service fees increased ~~$889~~$185 thousand, or ~~22.2%~~3.8%, due to growth in annuity and ~~advisory fees. Loan~~mutual fund fees, while loan fees and sales decreased ~~$2.9~~$3.7 million, or ~~30.0%~~54.8%, ~~compared to the same quarter last year, mainly~~ due to a decline in mortgage banking revenue. Other non-interest income ~~decreased $5.8~~increased $6.3 million, or ~~53.5%~~125.6%, mainly due to ~~lower~~higher cash sweep commissions and tax credit sales fees of ~~$1.6~~$3.4 million and $1.1 million, respectively. Additionally, a $2.0 million loss on an equity method investment was recorded ~~this quarter.~~in the third quarter of 2021.

Non-interest income for the first nine months of ~~2021~~2022 was ~~$412.7~~$409.7 million, compared to ~~$370.8~~$412.7 million in ~~2020,~~the first nine months of 2021, resulting in ~~an increase~~a decrease of ~~$41.9~~$3.0 million, or ~~11.3%~~.7%. Bank card fees increased ~~$11.3~~$8.4 million, or ~~10.1%~~6.9%, mainly due to growth of ~~$5.7~~$8.0 million in net corporate card ~~fees, $2.4 million in net debit card fees, $1.6 million in net credit card fees, and $1.5 million in net merchant~~ fees. Trust ~~fee income~~fees increased ~~$20.7 million,~~$675 thousand, or ~~17.4%~~.5%, ~~as a result of~~mainly due to growth in private client ~~and~~trust fees, partly offset by lower institutional trust ~~fee income.~~fees. Deposit account fees increased ~~$2.7 million~~$668 thousand, or .9%, mainly due to higher corporate cash management ~~fees and overdraft and return item~~ fees, partly offset by lower personal account deposit fees. ~~For the nine months ended September 30, 2021, corporate cash management fees comprised 51.9% of total deposit fees, while overdraft fees comprised 23.9% of total deposit fees.~~ Capital market fees ~~increased~~declined $1.3 million, or 10.4%, while consumer brokerage service fees ~~grew $2.4~~increased $1.1 million, or ~~21.5%~~8.3%, ~~as a result of~~due to higher annuity and mutual fund fees, partly offset by lower advisory fees. Loan fees and sales ~~increased $6.8~~decreased $13.9 million, or ~~38.6%~~56.8%, ~~mainly~~ due to ~~growth in~~lower mortgage banking revenue. Other income ~~decreased $3.2~~increased $1.3 million, or 4.5%, mainly due to ~~lower~~higher cash sweep commissions of $5.3 million and tax credit sales fees ~~and~~of $1.2 million, income of $2.2 million from a life insurance death benefit recorded in the second quarter of 2022, a $2.6 million loss on an equity method ~~investment.~~investment recorded in 2021 and a lease impairment of $1.1 million recorded in 2021. These ~~decreases~~increases were partly offset by gains of $3.7 million recorded on branch sales last year coupled with a write-down of $965 thousand on a branch location recorded in the first quarter of 2022. In addition, a decrease of $6.8 million in fair value adjustments was recorded on the Company's deferred compensation plan assets, which are held in a trust, recorded as both an asset and ~~higher interest rate swap fees, check sales~~a liability, and ~~wire fees~~affect both other income and ~~international fees.~~other expense.

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Investment Securities Gains (Losses), Net

Three Months Ended September 30 Nine Months Ended September 30
(In thousands) 2021 2020 2021 2020
Net gains on sales of available for sale debt securities $ — $ 13,674 $ — $ 16,965
Net gains on sales of equity securities — — — 2
Net gains (losses) on sales and fair value adjustments of private equity investments 12,971 2,389 39,613 (18,116)
Fair value adjustments on equity securities, net 137 92 152 (126)
Total investment securities gains (losses), net $ 13,108 $ 16,155 $ 39,765 $ (1,275)


	Three Months Ended September 30				Nine Months Ended September 30
(In thousands)	2022		2021		2022		2021
Net losses on sales of available for sale debt securities	$	(10,692)	$	—	$	(20,274)	$	—

Fair value adjustments on equity securities, net	(25)		137		(1,048)		152
Net gains (losses) on sales of private equity investments	77		—		(4,209)		1,611
Fair value adjustments on private equity investments	14,050		12,971		37,133		38,002



Total investment securities gains, net	$	3,410	$	13,108	$	11,602	$	39,765

Net gains ~~and losses~~ on investment securities, which were recognized in earnings during the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, are shown in the table above. Net securities gains of ~~$13.1~~$3.4 million were reported in the third quarter of ~~2021,~~2022, compared to net gains of ~~$16.2~~$13.1 million in the same period last year. The net gains in the third quarter of ~~2021~~2022 were primarily comprised of ~~$13.0~~$14.1 million of net gains in fair value on the Company’s private equity ~~investments.~~investments, partially offset by a loss of $10.7 million on the sale of an available for sale security. The net gains on investment securities for the same quarter last year were mainly comprised of ~~net gains of $13.7 million realized on sales of available for sale debt securities and $2.4~~$13.0 million of net gains in fair value on the Company’s private equity investments.

Net gains on investment securities of ~~$39.8~~$11.6 million were recognized in earnings for the nine months ended September 30, ~~2021,~~2022, compared to net ~~losses~~gains of ~~$1.3~~$39.8 million for the same period in ~~2020.~~2021. Net gains in the first nine months of 2022 were mainly comprised of net gains of $37.1 million on private equity investments, due to fair value adjustments, offset by losses of $20.3 million on sales of available for sale securities, net losses of $4.2 million on sales of private equity investments, and net losses in fair value of $1.0 million on equity investments. Net gains in the first nine months of 2021 were mainly comprised of a gain of $1.6 million ~~realized~~ on the sale of a private equity investment and $38.0 million of net gains in fair value on private equity investments. Net losses in the first nine months of 2020 were mainly comprised of fair value adjustments on private equity investments, which were largely offset by net gains realized on sales of available for sale debt securities. The portion of private equity activity attributable to minority interests is reported as non-controlling interest in the consolidated statements of income and resulted in expense of $6.6 million during the first nine months of 2022 and expense of $7.7 million during the first nine months of ~~2021 and income of $3.2 million during the first nine months of 2020.~~2021.

Non-Interest Expense


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended September 30						Increase (Decrease)					Nine Months Ended September 30			Increase (Decrease)
(Dollars in thousands)	(Dollars in thousands)	2021		2020		% change			2021		2020		% change			(Dollars in thousands)	2022		2021			Amount		% change			2022		2021		Amount		% change
Salaries and employee benefits	Salaries and employee benefits	$	132,824	$	127,308	4.3	%		$	392,608	$	383,004	2.5	%		Salaries and employee benefits	$	137,393	$	132,824		$	4,569	3.4	%		$	415,589	$	392,608	$	22,981	5.9	%
Data processing and software																Data processing and software	28,050		25,598			2,452		9.6			82,701		76,015		6,686		8.8
Net occupancy	Net occupancy	12,329		12,058		2.2			35,877		35,075		2.3			Net occupancy	12,544		12,329			215		1.7			37,343		35,877		1,466		4.1
Equipment	Equipment	4,440		4,737		(6.3)			13,398		14,313		(6.4)			Equipment	5,036		4,440			596		13.4			14,338		13,398		940		7.0
Supplies and communication	Supplies and communication	4,530		4,141		9.4			12,688		13,226		(4.1)			Supplies and communication	4,581		4,530			51		1.1			13,655		12,688		967		7.6
Data processing and software		25,598		23,610		8.4			76,015		71,002		7.1
Marketing	Marketing	5,623		4,926		14.1			16,461		14,706		11.9			Marketing	6,228		5,623			605		10.8			18,408		16,461		1,947		11.8
Other	Other	26,276		14,078		86.6			55,272		40,742		35.7			Other	19,052		26,276			(7,224)		(27.5)			50,003		55,272		(5,269)		(9.5)
Total non-interest expense	Total non-interest expense	$	211,620	$	190,858	10.9	%		$	602,319	$	572,068	5.3	%		Total non-interest expense	$	212,884	$	211,620		$	1,264	.6	%		$	632,037	$	602,319	$	29,718	4.9	%

Non-interest expense for the third quarter of ~~2021~~2022 amounted to ~~$211.6~~$212.9 million, an increase of ~~$20.8~~$1.3 million, or ~~10.9%~~.6%, compared to expense of ~~$190.9~~$211.6 million in the third quarter of last year. The increase in expense over the same period last year was mainly due to ~~non-recurring litigation settlement expense and~~ higher salaries ~~and benefits~~ expense and data processing and software expense, partly offset by lower other non-interest expense. Salaries and ~~employee~~ benefits expense increased ~~$5.5~~$4.6 million, or ~~4.3%~~3.4%, ~~mostly~~ due to higher full-time salaries expense of $5.6 million, or 6.4%, partly offset by lower incentive ~~compensation.~~compensation expense of $2.5 million. Full-time equivalent employees totaled 4,595 at September 30, 2022, compared to 4,582 at September 30, ~~2021, compared to 4,825 at September 30, 2020. Occupancy and supplies and communication expense grew $271 thousand and $389 thousand, respectively, while equipment expense declined $297 thousand.~~2021. Data processing and software expense increased ~~$2.0~~$2.5 million, or ~~8.4%~~9.6%, due to higher software amortization, bank card processing fees and increased ~~cost~~costs for service ~~providers, while marketing~~providers. Occupancy expense ~~grew $696~~increased $215 thousand, or ~~14.1%. Other~~1.7%, and equipment expense increased $596 thousand, or 13.4%, mainly due to higher equipment repair expense and depreciation expense. Marketing expense increased $605 thousand, or 10.8%, while other non-interest expense ~~increased $12.2~~decreased $7.2 million, or 27.5%. This decrease was mainly due to $8.2 million in ~~non-recurring~~ litigation settlement ~~costs. Additionally,~~costs recorded in the third quarter of 2021, lower legal and professional fees of $1.1 million and higher deferred loan origination costs of $755 thousand. These decreases to expense were partly offset by increases in travel and entertainment expense ~~increased $1.3~~of $1.5 million and ~~$1.1 million, respectively.~~insurance expense of $619 thousand.

Non-interest expense amounted to $602.3 million for the first nine months of 2021, an increase of $30.3 million, or 5.3%, over the first nine months of 2020. Salaries and benefits expense increased $9.6 million, or 2.5%, mainly due to higher costs for incentive compensation and healthcare expense, partly offset by lower full and part-time salaries expense. Occupancy expense increased $802 thousand, while supplies and communication expense decreased $538 thousand. Equipment expense decreased $915 thousand mainly due to lower depreciation and service contract expense. Data processing expense increased $5.0 million, or 7.1%, mostly due to higher costs for service providers, while marketing expense grew $1.8 million, or 11.9%.

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Non-interest expense amounted to $632.0 million for the first nine months of 2022, an increase of $29.7 million, or 4.9%, over the first nine months of 2021. Salaries and benefits expense increased $23.0 million, or 5.9%, mainly due to higher costs for salaries, incentive compensation, payroll taxes and 401(k) expense. Salaries expense included expense of $5.4 million for special bonuses paid to non-incentivized full-time and part-time employees in the second half of 2022. Data processing and software expense increased $6.7 million, or 8.8%, due to higher costs for service providers, software amortization and bank card processing fees. Occupancy expense increased $1.5 million, or 4.1%, mainly due to higher rent and outside services expense. Equipment expense increased $940 thousand, or 7.0%, mainly due to higher equipment repair and depreciation expense. Supplies and communication expense increased $967 thousand, or 7.6%, mainly due to higher bank card reissuance fees and courier expense, while marketing expense increased $1.9 million, or 11.8%. Other non-interest expense ~~increased $14.5~~decreased $5.3 million, or 9.5%, mainly due to the ~~non-recurring~~ litigation settlement mentioned above, ~~lower~~coupled with a decline of $6.8 million in fair value equity adjustments on the Company's deferred ~~loan origination costs and higher FDIC insurance and legal fees expense.~~compensation plan assets. These ~~increases to expense~~decreases were partly offset by ~~lower~~increases in travel and entertainment expense of $3.9 million and ~~a reduction in impairment~~insurance expense ~~on the Company's mortgage servicing rights.~~of $1.2 million.

5253

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


		Three Months Ended						Nine Months Ended September 30					Three Months Ended						Nine Months Ended September 30
		Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		2021		2020			Sept. 30, 2022		June 30, 2022		Sept. 30, 2021		2022		2021
ALLOWANCE FOR CREDIT LOSSES ON LOANS	ALLOWANCE FOR CREDIT LOSSES ON LOANS											ALLOWANCE FOR CREDIT LOSSES ON LOANS
Balance at end of prior period		$	172,395	$	200,527	$	240,744	$	220,834	$	160,682
Adoption of ASU 2016-13		—		—		—		—		(21,039)

Balance at beginning of period	Balance at beginning of period	$	172,395	$	200,527	$	240,744	$	220,834	$	139,643	Balance at beginning of period	$	138,039	$	134,710	$	172,395	$	150,044	$	220,834
Provision for credit losses on loans	Provision for credit losses on loans	(5,961)		(27,433)		3,200		$	(43,749)	$	123,559	Provision for credit losses on loans	10,150		7,287		(5,961)		$	6,751	$	(43,749)
Net loan charge-offs (recoveries):	Net loan charge-offs (recoveries):											Net loan charge-offs (recoveries):
Commercial:	Commercial:											Commercial:
Business	Business	65		(4,909)		208		(4,848)		3,084		Business	461		19		65		557		(4,848)
Real estate-construction and land	Real estate-construction and land	—		—		(1)		1		(1)		Real estate-construction and land	—		—		—		—		1
Real estate-business	Real estate-business	(5)		(85)		(13)		(70)		(40)		Real estate-business	(8)		(1)		(5)		(16)		(70)
Commercial net loan charge-offs (recoveries)	Commercial net loan charge-offs (recoveries)	60		(4,994)		194		(4,917)		3,043		Commercial net loan charge-offs (recoveries)	453		18		60		541		(4,917)
Personal Banking:	Personal Banking:											Personal Banking:
Real estate-personal	Real estate-personal	(26)		(16)		(198)		(27)		(273)		Real estate-personal	(15)		(41)		(26)		(34)		(27)
Consumer	Consumer	496		378		211		1,637		3,284		Consumer	827		633		496		2,268		1,637
Revolving home equity	Revolving home equity	(22)		28		(86)		29		(158)		Revolving home equity	(38)		(14)		(22)		(34)		29
Consumer credit card	Consumer credit card	2,908		5,155		7,263		17,044		20,004		Consumer credit card	2,882		2,937		2,908		9,191		17,044
Overdrafts	Overdrafts	243		148		200		544		942		Overdrafts	703		425		243		1,486		544
Personal banking net loan charge-offs	Personal banking net loan charge-offs	3,599		5,693		7,390		19,227		23,799		Personal banking net loan charge-offs	4,359		3,940		3,599		12,877		19,227
Total net loan charge-offs	Total net loan charge-offs	3,659		699		7,584		14,310		26,842		Total net loan charge-offs	4,812		3,958		3,659		13,418		14,310
Balance at end of period	Balance at end of period	$	162,775	$	172,395	$	236,360	$	162,775	$	236,360	Balance at end of period	$	143,377	$	138,039	$	162,775	$	143,377	$	162,775
LIABILITY FOR UNFUNDED LENDING COMMITMENTS	LIABILITY FOR UNFUNDED LENDING COMMITMENTS											LIABILITY FOR UNFUNDED LENDING COMMITMENTS
Balance at end of prior period		$	24,208	$	42,430	$	35,299	$	38,307	$	1,075
Adoption of ASU 2016-13		—		—		—		—		16,090

Balance at beginning of period	Balance at beginning of period	24,208		42,430		35,299		38,307		17,165		Balance at beginning of period	24,907		25,032		24,208		24,204		38,307
Provision for credit losses on unfunded lending commitments	Provision for credit losses on unfunded lending commitments	(1,424)		(18,222)		(99)		(15,523)		18,035		Provision for credit losses on unfunded lending commitments	5,140		(125)		(1,424)		5,843		(15,523)
Balance at end of period	Balance at end of period	22,784		24,208		35,200		22,784		35,200		Balance at end of period	30,047		24,907		22,784		30,047		22,784
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	185,559	$	196,603	$	271,560	$	185,559	$	271,560	ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	173,424	$	162,946	$	185,559	$	173,424	$	185,559

~~Table of Contents~~


		Three Months Ended						Nine Months Ended September 30					Three Months Ended						Nine Months Ended September 30
		Sept. 30, 2021		June 30, 2021		Sept. 30, 2020		2021		2020			Sept. 30, 2022		June 30, 2022		Sept. 30, 2021		2022		2021
Annualized net loan charge-offs (recoveries)*:	Annualized net loan charge-offs (recoveries)*:											Annualized net loan charge-offs (recoveries)*:
Commercial:	Commercial:											Commercial:
Business	Business	—	%	(.32	%)	.01	%	(.11	%)	.07	%	Business	.03	%	—	%	—	%	.01	%	(.11	%)
Real estate-construction and land	Real estate-construction and land	—		—		—		—		—		Real estate-construction and land	—		—		—		—		—
Real estate-business	Real estate-business	—		(.01)		—		—		—		Real estate-business	—		—		—		—		—
Commercial net loan charge-offs (recoveries)	Commercial net loan charge-offs (recoveries)	—		(.19)		.01		(.06)		.04		Commercial net loan charge-offs (recoveries)	.02		—		—		.01		(.06)
Personal Banking:	Personal Banking:											Personal Banking:
Real estate-personal	Real estate-personal	—		—		(.03)		—		(.01)		Real estate-personal	—		(.01)		—		—		—
Consumer	Consumer	.10		.08		.04		.11		.22		Consumer	.16		.12		.10		.15		.11
Revolving home equity	Revolving home equity	(.03)		.04		(.10)		.01		(.06)		Revolving home equity	(.05)		(.02)		(.03)		(.02)		.01
Consumer credit card	Consumer credit card	2.04		3.59		4.47		3.91		3.93		Consumer credit card	2.08		2.19		2.04		2.26		3.91
Overdrafts	Overdrafts	18.87		15.89		29.59		17.59		39.16		Overdrafts	62.85		30.86		18.87		39.39		17.59
Personal banking net loan charge-offs	Personal banking net loan charge-offs	.25		.40		.52		.45		.57		Personal banking net loan charge-offs	.30		.28		.25		.30		.45
Total annualized net loan charge-offs	Total annualized net loan charge-offs	.10	%	.02	%	.18	%	.12	%	.23	%	Total annualized net loan charge-offs	.12	%	.10	%	.10	%	.12	%	.12	%

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

~~The Company has an established process to~~Table of Contents

To determine the amount of the allowance for credit losses on loans and the liability for unfunded lending commitments, the Company has an established process which assesses the risks and losses expected in its portfolios. This process provides an allowance based on estimates of allowances for pools of loans and unfunded lending commitments, as well as a second, smaller component based on certain individually evaluated loans and unfunded lending commitments. The Company's policies and processes for determining the allowance for credit losses on loans and the liability for unfunded lending commitments are discussed in Note 1 to the consolidated financial statements and in the "Allowance for Credit Losses" discussion within Critical Accounting Estimates and Related Policies in Item 7 of the ~~2020~~2021 Annual Report on Form 10-K.

Net loan charge-offs in the third quarter of ~~2021~~2022 amounted to ~~$3.7~~$4.8 million, compared to ~~$699 thousand~~$4.0 million in the prior quarter and ~~$7.6~~$3.7 million in the third quarter of last year. During the third quarter of ~~2021,~~2022, the Company recorded net charge-offs on commercial loans of ~~$60~~$453 thousand, compared to net ~~recoveries~~charge-offs of ~~$5.0 million in the prior quarter. Commercial loan net recoveries~~$18 thousand in the prior quarter ~~resulted from recoveries on two business loans. Consumer credit card~~and $60 thousand in the third quarter of 2021. Business loan net charge-offs ~~decreased $2.2 million~~increased $442 thousand in the third quarter of ~~2021,~~2022, compared to the prior quarter. Compared to the same period last year, total net loan charge-offs in the third quarter of ~~2021 decreased $3.9~~2022 increased $1.2 million. ~~The decrease in net charge-offs during the third quarter of 2021 compared to the same quarter last year~~This increase was driven by ~~a $4.4 million decrease~~increases in net charge-offs on overdraft, business, and consumer ~~credit card~~ loans.

For the three months ended September 30, ~~2021,~~2022, annualized net charge-offs on average consumer credit card loans totaled ~~2.04%~~2.08%, compared to ~~3.59%~~2.19% in the previous quarter and ~~4.47%~~2.04% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to ~~.10%~~.16%, compared to ~~.08%~~.12% in the prior quarter and ~~.04%~~.10% in the same period last year. In the third quarter of ~~2021,~~2022, total annualized net loan charge-offs were ~~.10%~~.12%, compared to ~~.02%~~.10% in the previous quarter and ~~.18%~~.10% in the same period last year.

~~The continued recovery of~~For the ~~provision for credit losses on loans is the result of an improved forecast coupled with lower than projected~~nine months ended September 30, 2022, net ~~charge-offs. The allowance for credit losses significantly increased~~loan charge-offs amounted to $13.4 million, compared to $14.3 million during the ~~first half of 2020~~same period in the prior year. The decrease in net loan charge-offs in the nine months ended September 30, 2022 was primarily due to a $7.9 million decline in net charge-offs on consumer credit card loans, which was mostly offset by a $5.4 million increase in net charge-offs on business loans driven by two large non-recurring recoveries in 2021. Net charge-offs on overdraft and consumer loans also increased $942 thousand and $631 thousand, respectively. For the ~~pandemic-induced recession. The economic forecast utilized~~nine months ended September 30, 2022, annualized net charge-offs on average consumer credit card loans totaled 2.26%, compared to 3.91% during the same period last year, while consumer loan annualized net charge-offs in the nine months ended September 30, 2022 amounted to .15%, compared to .11% during the same period last year. During first ~~half~~nine months of 2020 captured extreme uncertainty with high unemployment rates, but through various governmental stimulus programs, improvements in the public health crisis due to the development and increasing availability of a COVID-19 vaccine, the projected2022, total annualized net loan charge-offs were ~~not realized and~~.12%, unchanged from the economic forecast improved, thus allowing the release of the allowance for credit losses during 2021. As a result, the provision for credit losses, which includes the provision for loans and unfunded lending commitments, was a benefit of $7.4 million for the third quarter of 2021, compared to a benefit of $45.7 million in the second quarter of 2021 and expense of $3.1 million in the third quarter of 2020. same period last year.

~~In the current quarter, the~~

The provision for credit losses on loans was ~~a benefit of $6.0~~$10.2 million in the current quarter, which was a ~~$21.5~~$2.9 million ~~decrease from~~increase over the ~~$27.4~~$7.3 million ~~benefit~~provision recorded in the prior ~~quarter. The provision~~quarter and a $16.1 million increase over the $6.0 million benefit recorded for ~~credit losses on loans in the current quarter decreased $9.2 million compared to the provision expense in the third quarter of 2020~~.

~~For~~ the nine months ended September 30, ~~2021, net loan charge-offs totaled $14.3 million, compared to $26.8 million~~2021. The increase in the ~~same period last year. During~~provision from the ~~first nine months of 2021, the Company recorded net recoveries of $4.9 million on commercial loans, compared~~prior quarter was due to ~~net loan charge-offs of $3.0 million~~a slightly less optimistic forecast, which includes a mild recession in the first ~~nine months~~half of ~~2020. In addition, consumer~~

~~Table of Contents~~

~~loan net charge-offs declined $1.6 million and consumer credit card loan net charge-offs declined $3.0 million in the first nine months of 2021, compared to the same period last year.~~2023. The provision for credit losses on loans for the ~~first~~third quarter of the prior year reflected lower than projected net charge-offs and an improved forecast at that point in time, resulting in the release of reserves established for uncertainties related to the pandemic during that quarter. For the nine months ended September 30, 2022, the provision for credit losses on loans was $6.8 million, compared to a recovery of ~~2021 was a benefit of $43.8~~$43.7 million ~~reducing~~during the same period in the prior year.

For the nine months ended September 30, 2022, the allowance for credit losses on ~~loans. The~~loans decreased $6.7 million, compared to the allowance for credit losses on loans as of December 31, 2021. The decrease was primarily the net result of reducing the allowance as pandemic economic concerns lessened compared to December 31, 2021, slightly offset by an emerging mild recession uncertainty related to the geopolitical environment, high inflation, and supply constraints on the economy. The allowance for credit losses on commercial loans increased by $5.3 million, while the allowance for credit losses related to personal banking loans, including consumer credit card loans, decreased $12.0 million, mostly related to decreases in consumer credit card loans experienced in the first quarter of 2022.

At September 30, ~~2020~~2022, the allowance for credit losses on loans amounted to $143.4 million, compared to $138.0 million at June 30, 2022. This increase in the allowance for credit losses on loans compared to the prior quarter is due to a less optimistic forecast with a mild recession in the first half of 2023. The current period estimation for credit losses continues to consider the uncertainty in the economy as inflation rises and supply chain issues continue. The allowance for credit losses on loans was ~~$236.4~~$162.8 million at September 30, 2021, reflecting pandemic uncertainties and the ~~provision expense for the nine months ended~~economic forecast at that point in time, and was .90%, .88% and 1.07% of total loans at September 30, ~~2020 was $123.6 million.~~2022, June 30, 2022 and September 30, 2021, respectively.

In the current quarter, the provision for credit losses on unfunded lending commitments was $5.1 million, compared to a benefit of $125 thousand in the prior quarter and a benefit of $1.4 million ~~reflecting a $16.8 million increase over the provision~~ in ~~the prior quarter (which was a benefit of $18.2 million), and decreased $1.3 million compared to~~ the third quarter of ~~2020.~~2021. For the nine months ended September 30, 2022, the provision for credit losses on unfunded lending commitments was $5.8 million, compared to a benefit of $15.5 million during the same period in the prior year. At September 30, ~~2021,~~2022, the liability for unfunded lending

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commitments was ~~$22.8~~$30.0 million, compared to ~~$24.2~~$24.9 million at June 30, ~~2021~~2022 and ~~$35.2~~$22.8 million at September 30, ~~2020.~~2021. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 2 for further discussion of the model inputs utilized in the Company's estimate of credit losses.

For the quarter ended September 30, 2021, the allowance for credit losses on loans decreased $9.6 million, compared to the allowance for credit losses on loans as of June 30, 2021. The decrease was primarily due to the improved economic forecast. The allowance for credit losses on commercial loans increased slightly by $126 thousand, while the allowance for credit losses related to personal banking loans, including consumer credit card loans, decreased $9.7 million. While the forecast continued to improve, the allowance considered the uncertainty of future potential COVID-19 disruptions on both the consumer and commercial portfolios. At September 30, 2021, the allowance for credit losses on loans amounted to $162.8 million, compared to $172.4 million and $200.5 million at June 30, 2021 and March 31, 2021, respectively, and was 1.07%, 1.10% and 1.22% of total loans at September 30, 2021, June 30, 2021 and March 31, 2021, respectively.

The Company considers the allowance for credit losses on loans and the liability for unfunded commitments adequate to cover losses expected in the loan portfolio, including unfunded commitments, at September 30, ~~2021.~~2022.

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

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Risk Elements of Loan Portfolio

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


(Dollars in thousands)	(Dollars in thousands)	September 30, 2021			December 31, 2020			(Dollars in thousands)	September 30, 2022			December 31, 2021

Non-accrual loans	Non-accrual loans	$	10,421		$	26,540		Non-accrual loans	$	7,184		$	9,157
Foreclosed real estate	Foreclosed real estate	115			93			Foreclosed real estate	354			115
Total non-performing assets	Total non-performing assets	$	10,536		$	26,633		Total non-performing assets	$	7,538		$	9,272
Non-performing assets as a percentage of total loans	Non-performing assets as a percentage of total loans	.07		%	.16		%	Non-performing assets as a percentage of total loans	.05		%	.06		%
Non-performing assets as a percentage of total assets	Non-performing assets as a percentage of total assets	.03		%	.08		%	Non-performing assets as a percentage of total assets	.02		%	.03		%

Total loans past due 90 days and still accruing interest	Total loans past due 90 days and still accruing interest	$	10,496		$	22,190		Total loans past due 90 days and still accruing interest	$	12,538		$	11,726

Non-accrual loans totaled ~~$10.4~~$7.2 million at September 30, ~~2021,~~2022, a decrease of ~~$16.1~~$2.0 million from the balance at December 31, ~~2020.~~2021. The decrease occurred mainly in business loans which decreased ~~$14.2~~$1.7 million. At September 30, ~~2021,~~

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2022, non-accrual loans were comprised of business ~~(79.6%~~(78.6%), personal real estate ~~(14.9%~~(19.3%), and business real estate ~~(5.5%~~(2.1%) loans. Foreclosed real estate totaled ~~$115~~$354 thousand at September 30, ~~2021,~~2022, an increase of ~~$22~~$239 thousand when compared to December 31, ~~2020.~~2021. Total loans past due 90 days or more and still accruing interest were ~~$10.5~~$12.5 million as of September 30, ~~2021, a decrease~~2022, an increase of ~~$11.7 million~~$812 thousand from December 31, ~~2020.~~2021. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section in Note 2 to the consolidated financial statements.

In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled ~~$335.7~~$292.5 million at September 30, ~~2021~~2022 compared with ~~$361.8~~$278.7 million at December 31, ~~2020,~~2021, resulting in ~~a decrease~~an increase of ~~$26.1~~$13.8 million, or ~~7.2%~~4.9%.


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	September 30, 2022		December 31, 2021
Potential problem loans:	Potential problem loans:					Potential problem loans:
Business	Business	$	45,710	$	133,039	Business	$	33,249	$	37,143
Real estate – construction and land	Real estate – construction and land	40,553		29,378		Real estate – construction and land	57,647		40,259
Real estate – business	Real estate – business	249,017		198,666		Real estate – business	200,418		200,766
Real estate – personal	Real estate – personal	414		670		Real estate – personal	1,140		526

Total potential problem loans	Total potential problem loans	$	335,694	$	361,753	Total potential problem loans	$	292,454	$	278,694

At September 30, ~~2021,~~2022, the Company had ~~$129.9~~$155.6 million of loans whose terms have been modified or restructured under a troubled debt restructuring. These loans have been extended to borrowers who are experiencing financial difficulty and who have been granted a concession, as defined by accounting guidance, and are further discussed in the "Troubled debt restructurings" section in Note 2 to the consolidated financial statements. This balance includes certain commercial loans totaling ~~$110.6~~$140.6 million which are classified as substandard and included in the table above because of this classification.

Loans with Special Risk Characteristics

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

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Real Estate – Construction and Land Loans

The Company's portfolio of construction and land loans, as shown in the table below, amounted to ~~8.3%~~7.6% of total loans outstanding at September 30, ~~2021.~~2022. The largest component of construction and land loans was commercial construction, which increased ~~$231.6~~$55.1 million during the nine months ended September 30, ~~2021.~~2022. At September 30, ~~2021,~~2022, multi-family residential construction loans totaled approximately ~~$294.4~~$247.4 million, or ~~27.7%~~25.3%, of the commercial construction loan portfolio, compared to ~~$238.0~~$155.9 million, or ~~28.8%~~16.9%, at December 31, ~~2020.~~2021.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2021		% of Total		% of Total Loans		December 31, 2020		% of Total		% of Total Loans		(Dollars in thousands)	September 30, 2022		% of Total		% of Total Loans		December 31, 2021		% of Total		% of Total Loans
Commercial construction	Commercial construction	$	1,059,113	84.2	%	7.0	%	$	827,546	81.0	%	5.1	%	Commercial construction	$	977,771	81.0	%	6.1	%	$	922,654	82.5	%	6.1	%
Residential construction	Residential construction	103,825		8.3		.7		94,729		9.3		.6		Residential construction	138,799		11.5		.9		96,618		8.6		.7
Commercial land and land development	Commercial land and land development	48,754		3.9		.3		40,021		3.9		.2		Commercial land and land development	50,145		4.2		.3		48,481		4.3		.3
Residential land and land development	Residential land and land development	46,144		3.6		.3		59,299		5.8		.4		Residential land and land development	40,240		3.3		.3		50,513		4.6		.3
Total real estate - construction and land loans	Total real estate - construction and land loans	$	1,257,836	100.0	%	8.3	%	$	1,021,595	100.0	%	6.3	%	Total real estate - construction and land loans	$	1,206,955	100.0	%	7.6	%	$	1,118,266	100.0	%	7.4	%

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Real Estate – Business Loans

Total business real estate loans were ~~$2.9~~$3.3 billion at September 30, ~~2021~~2022 and comprised ~~19.4%~~21.0% of the Company's total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. At September 30, ~~2021, 38.0%~~2022, 35.7% of business real estate loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2021		% of Total		% of Total Loans		December 31, 2020		% of Total		% of Total Loans		(Dollars in thousands)	September 30, 2022		% of Total		% of Total Loans		December 31, 2021		% of Total		% of Total Loans
Owner-occupied	Owner-occupied	$	1,115,184	38.0	%	7.4	%	$	1,145,862	37.9	%	7.0	%	Owner-occupied	$	1,188,189	35.7	%	7.5	%	$	1,188,469	38.9	%	7.8	%
Office	Office	362,440		12.3		2.4		385,392		12.7		2.4		Office	512,752		15.4		3.2		380,101		12.4		2.5
Retail	Retail	321,768		11.0		2.1		349,461		11.5		2.1		Retail	330,033		9.9		2.1		339,874		11.1		2.2
Multi-family	Multi-family	301,734		10.3		2.0		301,161		10.0		1.8		Multi-family	313,740		9.4		2.0		354,282		11.6		2.3
Industrial														Industrial	313,230		9.4		2.0		99,800		3.3		.7
Hotels	Hotels	265,247		9.0		1.8		271,189		9.0		1.7		Hotels	218,319		6.6		1.4		234,673		7.7		1.5
Farm														Farm	198,864		6.0		1.3		178,780		5.8		1.2
Senior living	Senior living	185,116		6.3		1.2		195,800		6.5		1.2		Senior living	147,455		4.4		.9		174,871		5.7		1.2
Farm		162,660		5.5		1.1		169,692		5.6		1.0
Industrial		98,369		3.3		.6		78,341		2.6		.5
Other	Other	125,334		4.3		.8		129,219		4.2		.8		Other	109,045		3.2		.6		107,987		3.5		.8
Total real estate - business loans	Total real estate - business loans	$	2,937,852	100.0	%	19.4	%	$	3,026,117	100.0	%	18.5	%	Total real estate - business loans	$	3,331,627	100.0	%	21.0	%	$	3,058,837	100.0	%	20.2	%

Revolving Home Equity Loans

The Company had ~~$281.4~~$286.0 million in revolving home equity loans at September 30, ~~2021~~2022 that were generally collateralized by residential real estate. Most of these loans ~~(93.1%~~(91.7%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As of September 30, ~~2021,~~2022, the outstanding principal of loans with an original LTV higher than 80% was ~~$31.3~~$30.1 million, or ~~11.1%~~10.5% of the portfolio, compared to ~~$32.1~~$30.9 million as of December 31, ~~2020.~~2021. Total revolving home equity loan balances over 30 days past due were ~~$2.0~~$1.4 million at September 30, ~~2021~~2022 and $1.6 million at December 31, ~~2020,~~2021, and there were no revolving home equity loans on non-accrual status at September 30, ~~2021~~2022 or December 31, ~~2020.~~2021. The weighted average FICO score for the total current portfolio balance is ~~792.~~788. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of ~~2021~~2022 through ~~2023,~~2024, approximately ~~15%~~12% of the Company's current outstanding balances are expected to mature. Of these balances, approximately ~~93%~~85% have a FICO score of 700 or higher. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.

Consumer Loans

Within the consumer loan portfolio are several direct and indirect product lines, which include loans for the purchase of automobiles, motorcycles, marine and RVs. Auto loans comprised ~~43%~~38.1% of the consumer loan portfolio at September 30, ~~2021,~~2022, and outstanding balances for auto loans were ~~$874.2~~$805.6 million and ~~$879.9~~$855.4 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~

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2021, respectively. The balances over 30 days past due amounted to ~~$6.9~~$7.4 million at September 30, ~~2021 compared to $9.2~~2022 and $9.0 million at December 31, ~~2020,~~2021, respectively and comprised ~~.8% and 1.0%~~0.9% of the outstanding balances of these loans at September 30, ~~2021~~2022 and 1.1% at December 31, ~~2020,~~2021, respectively. For the nine months ended September 30, ~~2021, $324.5~~2022, $257.5 million of new auto loans were originated, compared to ~~$321.1~~$324.5 million during the first nine months of ~~2020.~~2021. At September 30, ~~2021,~~2022, the automobile loan portfolio had a weighted average FICO score of ~~758,~~756, and net charge-offs on auto loans were ~~.1%~~.2% of average auto ~~loans at September 30, 2021.~~loans.

The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised ~~11%~~10.9% of the consumer loan portfolio at September 30, ~~2021.~~2022. Losses on these loans have historically been low, and the Company saw a net ~~charge-off~~recoveries of ~~$24~~$29 thousand ~~in 2021.~~for the first nine months of 2022. Private banking loans comprised ~~28%~~33.5% of the consumer loan portfolio at September 30, ~~2021.~~2022. The Company's private banking loans are generally well-collateralized, and at September 30, ~~2021~~2022 were secured primarily by assets held by the Company's trust department. The remaining portion of the Company's consumer loan portfolio is comprised of health services financing, motorcycles, marine and RV loans. Net charge-offs on private banking, health services financing, motorcycle and marine and RV loans totaled ~~$958 thousand~~$1.1 million in the first nine months of ~~2021~~2022 and were ~~.1%~~0.1% of the average balances of these loans at September 30, ~~2021.~~2022.

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Consumer Credit Card Loans

The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at September 30, ~~2021~~2022 of ~~$570.0~~$563.3 million in consumer credit card loans outstanding, approximately ~~$92.9~~$95.7 million, or ~~16.3%~~17.0%, carried a low promotional rate. Within the next six months, ~~$39.9~~$32.2 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card product, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.

Oil and Gas Energy Lending

The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled ~~$230.4~~$279.6 million, or ~~1.5%~~1.8% of total loans at September 30, ~~2021,~~2022, an increase of ~~$51.6~~$18.9 million from year end ~~2020,~~2021, as shown in the table below.


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		Unfunded commitments at September 30, 2021		(In thousands)	September 30, 2022		December 31, 2021		Unfunded commitments at September 30, 2022
Extraction	Extraction	$	165,883	$	133,866	$	147,581	Extraction	$	215,919	$	184,840	$	136,194
Mid-stream shipping and storage	Mid-stream shipping and storage	38,355		15,634		69,398		Mid-stream shipping and storage	42,080		36,850		94,749
Downstream distribution and refining	Downstream distribution and refining	13,488		18,365		25,710		Downstream distribution and refining	11,662		24,915		19,844
Support activities	Support activities	12,638		10,864		16,099		Support activities	9,916		14,039		9,749
Total energy lending portfolio	Total energy lending portfolio	$	230,364	$	178,729	$	258,788	Total energy lending portfolio	$	279,577	$	260,644	$	260,536

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

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

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

~~Small Business Lending~~

During April 2020, in response to the COVID-19 crisis, the federal government created the PPP, sponsored by the Small Business Administration ("SBA"), under the CARES Act. As a participating lender under the program, the Company funded loans of $1.5 billion during 2020 (round 1) and $402.1 million during 2021 (round 2). The balance of PPP loans at September 30, 2021 was $307.9 million, a decrease of $546.4 million compared to balances at June 30, 2021. The change in PPP loan balances reflected a decline of $407.6 million in loan balances from June 30, 2021 (round 1), along with a decline of $138.8 million in loan balances from June 30, 2021 (round 2).~~Since the start of the PPP, the Company has recognized $51.4 million of a total of $60.4 million of PPP fees as of September 30, 2021, including $10.9 million during the third quarter of 2021.~~

The Company understands that the PPP loans are fully guaranteed by the SBA. Therefore, there was no increase in the allowance for credit losses on loans related to these loans as there is no expectation of credit loss. The maximum term of the loans is five years, however, the Company believes that almost all of the loan balances are expected to be forgiven by the SBA. As of September 30, 2021, 97% of round 1 and 35% of round 2 PPP loan balances have been forgiven. The process of loan forgiveness began during the third quarter of 2020, and the Company believes most of the remaining PPP loan balances will be forgiven in the fourth quarter of 2021.

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Shared National Credits

The Company participates in credits of large, publicly traded companies which are defined by regulation as shared national credits, or SNCs. Regulations define SNCs as loans exceeding $100 million that are shared by three or more financial institutions. The Company typically participates in these loans when business operations are maintained in the local communities or regional markets and opportunities to provide other banking services are present. The balance of SNC loans totaled ~~$1.0~~$1.3 billion at September 30, ~~2021 and~~2022, compared to $1.2 billion at December 31, ~~2020.~~2021. Additional unfunded commitments at September 30, ~~2021~~2022 totaled ~~$1.6~~$1.7 billion.

Income Taxes

Income tax expense was $33.9 million in the third quarter of 2022, compared to $32.0 million in the second quarter of 2022 and $34.7 million in the third quarter of ~~2021, compared to $45.2 million in the second quarter of 2021 and $34.4 million in the third quarter of 2020.~~2021. The Company's effective tax rate, including the effect of non-controlling interest, was 21.7% in the third quarter of 2022, compared to 21.7% in the second quarter of 2022 and 22.1% in the third quarter of ~~2021, compared to 21.8% in the second quarter of 2021 and 20.6% in the third quarter of 2020.~~2021. For the nine months ended September 30, ~~2021,~~2022, income tax expense was ~~$111.9~~$97.9 million, compared to ~~$54.2~~$111.9 million for the same period during the previous year, resulting in effective tax rates of ~~21.2%~~21.5% and ~~19.5%~~21.2%, respectively.

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Financial Condition

Balance Sheet

Total assets of the Company were ~~$34.5~~$32.6 billion at September 30, ~~2021~~2022 and ~~$32.9~~$36.7 billion at December 31, ~~2020.~~2021. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on debt securities) amounted to ~~$33.1~~$32.3 billion at September 30, ~~2021~~2022 and ~~$31.3~~$35.5 billion at December 31, ~~2020,~~2021, and consisted of ~~46%~~49% in loans and ~~43%~~45% in investment securities at September 30, ~~2021.~~2022.

At September 30, ~~2021,~~2022, total loans ~~decreased $1.2 billion,~~increased $722.6 million, or ~~7.4%~~4.8%, compared to balances at December 31, ~~2020. Business~~2021. The increase was mainly due to growth in business real estate, business, and construction loans ~~decreased $1.3 billion, primarily due to~~of $272.8 million, $225.4 million, and $88.7 million, respectively. The growth in business loans was mainly the result of increased commercial and industrial, lease and commercial card lending, partly offset by a decline in ~~Paycheck Protection Plan (PPP) loan balances. As of September 30, 2021, 97% of round 1 and 35% of round 2 PPP loan balances have been forgiven. Business real estate, consumer credit card and personal~~tax free loans. Personal real estate loans also decreased $88.2 million, $85.1 million and $50.7 million, respectively. These decreases were partly offset by growth in construction and consumer banking loans of $236.2 million and $99.1 million, respectively.increased $57.1 million. Consumer loans, which ~~include~~includes automobile, marine and RV, fixed rate home equity and other consumer loans, increased ~~mainly due to~~$84.1 million, as growth in ~~private banking~~other consumer loans was partly offset by a decline in auto loans. These increases in loan balances were partly offset by a decline in consumer credit card loans of $12.1 million.

Available for sale ~~investment~~debt securities, excluding fair value adjustments, ~~increased $1.9 billion~~decreased $242.8 million at September 30, ~~2021~~2022 compared to December 31, ~~2020.~~2021. Purchases of securities during this period totaled ~~$4.5~~$1.9 billion, ~~partly~~ offset by sales, maturities and pay downs of ~~$2.6~~$2.2 billion. The largest ~~growth~~declines in outstanding balances occurred in agency mortgage-backed securities, state and municipal obligations, and other debt securities, which decreased $467.5 million, $51.2 million, and $54.3 million, respectively. These decreases were partially offset by increases in asset-backed securities and non-agency ~~mortgage back~~mortgage-backed securities, which ~~grew $1.5 billion~~increased $209.8 million and ~~$870.4~~$66.0 million, ~~respectively. These increases were partially offset by a decline in agency mortgage-backed securities of $613.3 million~~respectively, at September 30, ~~2021~~2022 compared to December 31, ~~2020.~~2021. At September 30, ~~2021,~~2022, the duration of the investment portfolio was ~~3.5~~3.9 years, and maturities and pay downs of approximately ~~$2.8~~$2.4 billion are expected to occur during the next 12 months.

Total deposits at September 30, ~~2021~~2022 amounted to ~~$28.1~~$27.5 billion, ~~an increase~~a decrease of ~~$1.2~~$2.3 billion compared to December 31, ~~2020.~~2021. The ~~increase~~decline in deposits largely resulted from ~~growth~~a decrease in demand deposits, mainly in business demand deposits ~~(increase~~(decrease of ~~$903.5 million) and personal demand deposits (increase of $149.4 million)~~$1.7 billion). Additionally, ~~savings~~certificates of deposit decreased $454.4 million and money market deposits ~~increased $238.1~~decreased $650.3 million. These decreases were partly offset by growth in government demand deposits of $325.4 million and ~~$264.9 million, respectively. These increases were partially offset by decreases of $228.9 million in certificate of deposit balances and $199.9 million in~~ interest checking ~~deposit balances~~deposits of $58.4 million at September 30, ~~2021~~2022 compared to balances at December 31, ~~2020.~~2021. The Company's borrowings totaled $2.3 billion at September 30, ~~2021, an increase~~2022, a decrease of ~~$158.6~~$719.1 million ~~over~~from balances at December 31, ~~2020,~~2021, mainly due to a decline in customer repurchase agreements, partly offset by an increase in ~~customer repurchase agreements.~~federal funds purchased.

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Liquidity and Capital Resources

Liquidity Management

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


(In thousands)	(In thousands)	September 30, 2021		June 30, 2021		December 31, 2020		(In thousands)	September 30, 2022		September 30, 2021		December 31, 2021
Liquid assets:	Liquid assets:							Liquid assets:
Available for sale debt securities	Available for sale debt securities	$	14,165,656	$	13,291,506	$	12,449,264	Available for sale debt securities	$	12,632,510	$	14,165,656	$	14,450,027
Federal funds sold	Federal funds sold	—		5,945		—		Federal funds sold	14,020		—		2,800
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,750,000		1,300,000		850,000		Securities purchased under agreements to resell	1,275,000		1,750,000		1,625,000
Balances at the Federal Reserve Bank	Balances at the Federal Reserve Bank	1,888,545		2,161,644		1,747,363		Balances at the Federal Reserve Bank	642,943		1,888,545		3,971,217
Total	Total	$	17,804,201	$	16,759,095	$	15,046,627	Total	$	14,564,473	$	17,804,201	$	20,049,044

~~There were no federal~~Federal funds sold, ~~at September 30, 2021,~~ which are funds lent to the Company's correspondent bank customers with overnight ~~maturities.~~maturities, totaled $14.0 million as of September 30, 2022. Resale agreements, maturing through ~~2023,~~2025, totaled ~~$1.8~~$1.3 billion at September 30, ~~2021.~~2022. Under these agreements, the Company lends funds to upstream financial institutions and holds marketable securities, safe-kept by a third-party custodian, as collateral. This collateral totaled ~~$1.8~~$1.3 billion in fair value at September 30, ~~2021.~~2022. Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity purposes, totaled ~~$1.9 billion~~$642.9 million at September 30, ~~2021.~~2022. The fair value of the available for sale debt portfolio was ~~$14.2~~$12.6 billion at September 30, ~~2021~~2022 and included an unrealized net ~~gain~~loss of ~~$138.4 million. The total net unrealized gain included net gains~~$1.5 billion.

Table of ~~$44.5 million on mortgage-backed and asset-backed securities, $52.1 million on U.S. government and federal agency obligations, and $36.5 million on state and municipal obligations.~~Contents

Approximately ~~$2.8~~$2.4 billion of the available for sale debt portfolio is expected to mature or pay down during the next 12 months, and these funds offer substantial resources to meet new loan demand or help offset potential reductions in the Company's deposit funding base. The Company pledges portions of its investment securities portfolio to secure public fund deposits, securities sold under agreements to repurchase, trust funds, letters of credit issued by the FHLB, and borrowing capacity at the Federal Reserve Bank. Total investment securities pledged for these purposes were as follows:


(In thousands)	(In thousands)	September 30, 2021		June 30, 2021		December 31, 2020		(In thousands)	September 30, 2022		September 30, 2021		December 31, 2021
Investment securities pledged for the purpose of securing:	Investment securities pledged for the purpose of securing:							Investment securities pledged for the purpose of securing:
Federal Reserve Bank borrowings	Federal Reserve Bank borrowings	$	18,566	$	25,179	$	40,792	Federal Reserve Bank borrowings	$	13,446	$	18,566	$	17,465
FHLB borrowings and letters of credit	FHLB borrowings and letters of credit	3,736		4,296		5,376		FHLB borrowings and letters of credit	2,033		3,736		3,218
Securities sold under agreements to repurchase *	Securities sold under agreements to repurchase *	2,511,891		2,573,314		2,322,941		Securities sold under agreements to repurchase *	2,275,924		2,511,891		3,475,589
Other deposits and swaps	Other deposits and swaps	3,210,326		2,982,225		2,438,628		Other deposits and swaps	2,483,636		3,210,326		2,897,576
Total pledged securities	Total pledged securities	5,744,519		5,585,014		4,807,737		Total pledged securities	4,775,039		5,744,519		6,393,848
Unpledged and available for pledging	Unpledged and available for pledging	7,123,799		6,369,604		6,310,907		Unpledged and available for pledging	6,905,006		7,123,799		6,913,721
Ineligible for pledging	Ineligible for pledging	1,297,338		1,336,888		1,330,620		Ineligible for pledging	952,465		1,297,338		1,142,458
Total available for sale debt securities, at fair value	Total available for sale debt securities, at fair value	$	14,165,656	$	13,291,506	$	12,449,264	Total available for sale debt securities, at fair value	$	12,632,510	$	14,165,656	$	14,450,027

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

Liquidity is also available from the Company's large base of core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts. At September 30, ~~2021,~~2022, such deposits totaled $26.5 billion and represented ~~94.3%~~96.4% of total deposits. These core deposits are normally less volatile, as they are often with customer relationships tied to other products offered by the Company, promoting long lasting relationships and stable funding sources. Certificates of deposit of $100,000 and over totaled ~~$1.2 billion~~$597.1 million at September 30, ~~2021.~~2022. These accounts are normally considered more volatile ~~and~~with higher ~~costing~~cost and comprised ~~4.1%~~2.2% of total deposits at September 30, ~~2021.~~2022.


(In thousands)	(In thousands)	September 30, 2021		June 30, 2021		December 31, 2020		(In thousands)	September 30, 2022		September 30, 2021		December 31, 2021
Core deposit base:	Core deposit base:							Core deposit base:
Non-interest bearing	Non-interest bearing	$	11,622,855	$	11,085,286	$	10,497,598	Non-interest bearing	$	10,468,591	$	11,622,855	$	11,772,374
Interest checking	Interest checking	2,202,422		2,192,932		2,402,272		Interest checking	3,236,160		2,202,422		3,227,822
Savings and money market	Savings and money market	12,705,232		12,461,764		12,202,184		Savings and money market	12,778,327		12,705,232		13,370,263
Total	Total	$	26,530,509	$	25,739,982	$	25,102,054	Total	$	26,483,078	$	26,530,509	$	28,370,459

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


(In thousands)	(In thousands)	September 30, 2021		June 30, 2021		December 31, 2020		(In thousands)	September 30, 2022		September 30, 2021		December 31, 2021
Borrowings:	Borrowings:							Borrowings:
Federal funds purchased	Federal funds purchased	$	11,345	$	12,335	$	42,270	Federal funds purchased	$	311,200	$	11,345	$	43,385
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	2,242,408		2,305,893		2,056,113		Securities sold under agreements to repurchase	2,003,390		2,242,408		2,979,582

Other debt	Other debt	4,006		2,194		802		Other debt	1,831		4,006		12,560
Total	Total	$	2,257,759	$	2,320,422	$	2,099,185	Total	$	2,316,421	$	2,257,759	$	3,035,527

Federal funds purchased are unsecured overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved lines of credit. Repurchase agreements are borrowings by the Company from its customers in the form of securities sold under agreements to repurchase. These repurchase agreements, which generally mature overnight, are comprised of non-insured customer funds totaling $2.0 billion at September 30, 2022 and are collateralized by securities in the Company's investment ~~portfolio and are comprised~~portfolio. At September 30, 2022, the value of ~~non-insured customer funds totaling $2.3 billion, which generally mature overnight.~~the collateral pledged for the benefit of customers was $2.0 billion. The Company also borrows on a secured basis through advances from the FHLB. The advances are generally short-term, fixed interest rate borrowings. There were no advances outstanding from the FHLB at September 30, ~~2021.~~2022.

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The Company pledges certain assets, including loans and investment securities, to both the Federal Reserve Bank and the FHLB as security to establish lines of credit and borrow from these entities. Based on the amount and type of collateral pledged, the FHLB establishes a collateral value from which the Company may draw advances against the collateral. Also, this collateral is used to enable the FHLB to issue letters of credit in favor of public fund depositors of the Company. The Federal Reserve Bank also establishes a collateral value of assets pledged and permits borrowings from the discount window. The following table reflects the collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at September 30, ~~2021.~~2022.


		September 30, 2021							September 30, 2022
(In thousands)	(In thousands)	FHLB		Federal Reserve		Total		(In thousands)	FHLB		Federal Reserve		Total
Collateral value pledged		$	2,120,480	$	1,039,017	$	3,159,497
Total collateral value established by FHLB and FRB								Total collateral value established by FHLB and FRB	$	1,905,444	$	957,517	$	2,862,961

Letters of credit issued	Letters of credit issued	(184,710)		—		(184,710)		Letters of credit issued	(259,470)		—		(259,470)
Available for future advances	Available for future advances	$	1,935,770	$	1,039,017	$	2,974,787	Available for future advances	$	1,645,974	$	957,517	$	2,603,491

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


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

Rating outlook	Stable

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

The cash flows from the operating, investing and financing activities of the Company resulted in a net ~~increase~~decrease in cash, cash equivalents and restricted cash of ~~$43.2 million~~$3.3 billion during the first nine months of ~~2021,~~2022, as reported in the consolidated statements of cash flows in this report. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of ~~$486.1~~$469.8 million and has historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, used cash of ~~$1.6 billion.~~$247.2 million. Activity in the investment securities portfolio ~~used~~provided cash of

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~~$1.9 billion~~ $183.9 million from purchases (net of sales, maturities and pay downs), ~~and~~ securities purchased under agreements to resell used cash of ~~$900~~$200.0 million, and an increase in the loan portfolio used cash of $736.5 million. These ~~investing~~ cash outflows were partially offset by ~~pay downs in the loan portfolio,~~repayments related to securities purchased under agreements to resell, which provided cash of ~~$1.2 billion.~~$550.0 million. Financing activities ~~provided~~used cash of ~~$1.2~~$3.5 billion, largely resulting from ~~an increase~~a a decrease in deposits of ~~$1.2~~$2.5 billion, paired with ~~an increase of $155.4 million~~a decrease in federal funds purchased and securities sold under agreements to repurchase ~~partially offset by dividend payments~~ of ~~$92.2 million on common stock and treasury stock purchases of $80.1~~$708.4 million.

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Capital Management

The Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, as shown in the following table.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2021			December 31, 2020			Minimum Ratios under Capital Adequacy Guidelines		Minimum Ratios for Well-Capitalized Banks *		(Dollars in thousands)	September 30, 2022			December 31, 2021			Minimum Ratios under Capital Adequacy Guidelines		Minimum Ratios for Well-Capitalized Banks *
Risk-adjusted assets	Risk-adjusted assets	$	22,738,255		$	21,516,461						Risk-adjusted assets	$	23,885,207		$	22,483,748
Tier I common risk-based capital	Tier I common risk-based capital	3,189,015			2,950,926							Tier I common risk-based capital	3,335,957			3,225,044
Tier I risk-based capital	Tier I risk-based capital	3,189,015			2,950,926							Tier I risk-based capital	3,335,957			3,225,044
Total risk-based capital	Total risk-based capital	3,372,335			3,189,432							Total risk-based capital	3,509,822			3,399,880
Tier I common risk-based capital ratio	Tier I common risk-based capital ratio	14.02		%	13.71		%	7.00	%	6.50	%	Tier I common risk-based capital ratio	13.97		%	14.34		%	7.00	%	6.50	%
Tier I risk-based capital ratio	Tier I risk-based capital ratio	14.02			13.71			8.50		8.00		Tier I risk-based capital ratio	13.97			14.34			8.50		8.00
Total risk-based capital ratio	Total risk-based capital ratio	14.83			14.82			10.50		10.00		Total risk-based capital ratio	14.69			15.12			10.50		10.00
Tier I leverage ratio	Tier I leverage ratio	9.31			9.45			4.00		5.00		Tier I leverage ratio	9.87			9.13			4.00		5.00

*Under Prompt Corrective Action requirements

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

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

The Company maintains a treasury stock buyback program under authorizations by its Board of Directors (the Board) and normally purchases stock in the open market. During the nine months ended September 30, ~~2021,~~2022, the Company purchased ~~1,110,890~~2,352,489 shares at an average price of ~~$72.06~~$69.42 in open market purchases and through stock-based compensation transactions. At September 30, ~~2021, 2,433,689~~2022, 3,444,236 shares remained available for purchase under the current Board authorization.

The Company's common stock dividend policy reflects its earnings outlook, desired payout ratios, the need to maintain adequate capital and liquidity levels, and alternative investment options. The Company paid a ~~$.263~~$.265 per share cash dividend on its common stock in the third quarter of ~~2021,~~2022, which was a ~~2.3%~~6.0% increase compared to its ~~2020~~2021 quarterly dividend.

On September 1, 2020, the Company redeemed all 6,000 outstanding shares of its 6.00% Series B Non-Cumulative Perpetual Preferred Stock and the corresponding depositary shares representing fractional interests in the Series B Preferred Stock at a redemption price of $25 per depositary share (equivalent to $1,000 per share of preferred stock).

Material Cash Requirements, Commitments, Off-Balance Sheet Arrangements and Contingencies

The Company's material cash requirements include commitments for contractual obligations (both short-term and long-term), commitments to extend credit, and off-balance sheet arrangements. The Company's material cash requirements for the next 12 months are primarily to fund loan growth. Additionally, the Company will utilize cash to fund deposit maturities and withdrawals that may occur in the next 12 months. Other contractual obligations, purchase commitments, lease obligations, and unfunded commitments may require cash payments by the Company, and these are further discussed in the Company's 2021 Annual Report on Form 10-K. There have been no changes in the Company's material cash requirements since December 31, 2021. Further discussion of the Company's longer-term material cash obligations is below.

In the normal course of business, various commitments and contingent liabilities arise which are not required to be recorded on the balance sheet. The most significant of these are loan commitments, which at September 30, ~~2021~~2022 totaled ~~$13.3~~$13.9 billion (including ~~$5.0~~$5.1 billion in unused, approved credit card lines). In addition, the Company enters into standby and commercial letters of credit. These contracts totaled ~~$423.6~~$516.2 million and ~~$2.5~~$1.2 million, respectively, at September 30, ~~2021.~~2022. As many commitments expire unused or only partially used, these totals do not necessarily reflect future cash requirements. The carrying

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value of the guarantee obligations associated with the standby letters of credit, which has been recorded as a liability on the consolidated balance sheet, amounted to ~~$3.1~~$3.6 million at September 30, ~~2021.~~2022. The allowance for these commitments is recorded

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in the Company’s liability for unfunded lending commitments within other liabilities on its consolidated balance ~~sheet.~~sheets. At September 30, ~~2021,~~2022, the liability for unfunded commitments totaled ~~$22.8~~$30.0 million. See further discussion of the liability for unfunded lending commitments in Note 2 to the consolidated financial statements.

During the third quarter of 2020, the Company signed a ~~$106.6~~$106.7 million agreement with U.S. Capital Development to develop a 280,000 square foot commercial office building in a two building complex in Clayton, Missouri, which is expected to be completed ~~near the end of 2022.~~in January 2023. As of September 30, ~~2021,~~2022, the Company has made payments totaling ~~$43.7~~$83.8 million. While the Company intends to occupy a portion of the office building for executive offices, a 15 year lease agreement has been signed by an anchor tenant to lease approximately ~~40%~~50% of the office building.

The Company regularly purchases various state tax credits arising from third party property redevelopment. These credits are either resold to third parties at a profit or retained for use by the Company. During the first nine months of ~~2021,~~2022, purchases and sales of tax credits amounted to ~~$77.2~~$95.7 million and ~~$70.8~~$99.9 million, respectively. Fees from sales of tax credits were ~~$3.2~~$4.4 million for the nine months ended September 30, ~~2021,~~2022, compared to ~~$3.7~~$3.2 million in the same period last year. At September 30, ~~2021,~~2022, the Company expected to fund outstanding purchase commitments of ~~$42.3~~$12.0 million during the remainder of ~~2021.~~2022.

The Company's sound equity base, along with its long-term low debt level, common and preferred stock availability, and excellent debt ratings, provide several alternatives for future financing. Future acquisitions may utilize partial funding through one or more of these options. Through the various sources of liquidity described above, the Company maintains a liquidity position that it believes will adequately satisfy its financial obligations. The Company is not aware of any trends, events, or commitments that are reasonably likely to increase or decrease its liquidity in a material way.

Segment Results

The table below is a summary of segment pre-tax income results for the first nine months of ~~2021~~2022 and ~~2020.~~2021.


(Dollars in thousands)	(Dollars in thousands)	Consumer			Commercial			Wealth			Segment Totals			Other/ Elimination			Consolidated Totals			(Dollars in thousands)	Consumer			Commercial			Wealth			Segment Totals			Other/ Elimination			Consolidated Totals
Nine Months Ended September 30, 2022																				Nine Months Ended September 30, 2022
Net interest income																				Net interest income	$	249,761		$	333,263		$	56,731		$	639,755		$	47,789		$	687,544
Provision for credit losses																				Provision for credit losses	(12,727)			(651)			2			(13,376)			782			(12,594)
Non-interest income																				Non-interest income	89,542			167,581			161,051			418,174			(8,464)			409,710
Investment securities gains, net																				Investment securities gains, net	—			—			—			—			11,602			11,602
Non-interest expense																				Non-interest expense	(225,232)			(272,224)			(108,967)			(606,423)			(25,614)			(632,037)
Income before income taxes																				Income before income taxes	$	101,344		$	227,969		$	108,817		$	438,130		$	26,095		$	464,225
Nine Months Ended September 30, 2021	Nine Months Ended September 30, 2021																			Nine Months Ended September 30, 2021
Net interest income	Net interest income	$	239,159		$	340,345		$	53,186		$	632,690		$	(4,923)		$	627,767		Net interest income	$	239,157		$	340,279		$	53,186		$	632,622		$	(4,855)		$	627,767
Provision for credit losses	Provision for credit losses	(19,122)			4,856			10			(14,256)			73,528			59,272			Provision for credit losses	(19,122)			4,856			10			(14,256)			73,528			59,272
Non-interest income	Non-interest income	110,911			155,079			158,731			424,721			(12,027)			412,694			Non-interest income	110,911			155,079			158,731			424,721			(12,027)			412,694
Investment securities gains, net	Investment securities gains, net	—			—			—			—			39,765			39,765			Investment securities gains, net	—			—			—			—			39,765			39,765
Non-interest expense	Non-interest expense	(220,276)			(246,502)			(101,377)			(568,155)			(34,164)			(602,319)			Non-interest expense	(220,280)			(246,501)			(101,377)			(568,158)			(34,161)			(602,319)
Income before income taxes	Income before income taxes	$	110,672		$	253,778		$	110,550		$	475,000		$	62,179		$	537,179		Income before income taxes	$	110,666		$	253,713		$	110,550		$	474,929		$	62,250		$	537,179
Nine Months Ended September 30, 2020
Net interest income		$	241,195		$	300,301		$	41,686		$	583,182		$	36,902		$	620,084
Provision for credit losses		(23,885)			(3,122)			10			(26,997)			(114,596)			(141,593)
Non-interest income		107,489			143,746			139,700			390,935			(20,185)			370,750
Investment securities losses, net		—			—			—			—			(1,275)			(1,275)
Non-interest expense		(225,791)			(237,327)			(92,915)			(556,033)			(16,035)			(572,068)
Income before income taxes		$	99,008		$	203,598		$	88,481		$	391,087		$	(115,189)		$	275,898
Increase in income before income taxes:
Decrease in income before income taxes:																				Decrease in income before income taxes:
Amount	Amount	$	11,664		$	50,180		$	22,069		$	83,913		$	177,368		$	261,281		Amount	$	(9,322)		$	(25,744)		$	(1,733)		$	(36,799)		$	(36,155)		$	(72,954)
Percent	Percent	11.8		%	24.6		%	24.9		%	21.5		%	154.0		%	94.7		%	Percent	(8.4		%)	(10.1		%)	(1.6		%)	(7.7		%)	(58.1		%)	(13.6		%)

Consumer

For the nine months ended September 30, ~~2021,~~2022, income before income taxes for the Consumer segment ~~increased $11.7~~decreased $9.3 million, or ~~11.8%~~8.4%, compared to the first nine months of ~~2020. This increase~~2021. The decrease in income before income taxes was mainly due to ~~growth~~a decline in non-interest income of ~~$3.4~~$21.4 million, or ~~3.2%~~19.3%, ~~lower~~and higher non-interest expense of ~~$5.5~~$5.0 million, or ~~2.4%~~2.2%. These decreases to income were partly offset by growth in net interest income of $10.6 million, or 4.4%, and a decrease in the provision for credit losses of ~~$4.8 million. These increases to income were partly offset by lower net interest income of $2.0~~$6.4 million, or ~~.8%~~33.4%. Net interest income ~~decreased~~increased due to a ~~$17.4~~$13.0 million ~~decline in loan interest income, partly offset by a $5.5 million decrease~~increase in net allocated funding credits assigned to the Consumer segment's loan and deposit portfolios and a ~~$9.9~~$1.6 million decrease in deposit interest expense. ~~Non-interest income increased mainly due to growth in net credit and debit card fees (mainly higher interchange fees, partly offset by higher rewards expense) and check sales and wire fees.~~ These increases to income were partly offset by a ~~decrease~~$4.0 million decline in loan interest income. Non-interest income decreased mainly due to a decline of $19.6 million in mortgage banking revenue. Non-interest expense ~~decreased from~~ increased over

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the same period in the previous year mainly due to ~~lower~~higher salaries ~~and benefits~~ expense, ~~occupancy expense, allocated servicing costs for mortgage operations and a reduction in impairment expense on mortgage servicing rights. These decreases were partly offset by higher~~ marketing expense, and allocated service and support costs (mainly bank card fraud operations and ~~servicing~~information technology), partly offset by lower allocated service costs for ~~information technology.~~branch employees and mortgage operations. The provision for credit

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losses totaled ~~$19.1~~$12.7 million, a ~~$4.8~~$6.4 million decrease from the first nine months of ~~2020,~~2021, mainly due to lower credit card ~~and personal~~ loan net charge-offs.

Commercial

For the nine months ended September 30, ~~2021,~~2022, income before income taxes for the Commercial segment ~~increased $50.2~~decreased $25.7 million, or ~~24.6%~~10.1%, compared to the same period in the previous year. This ~~increase~~decrease was mainly due to ~~higher~~an increase in non-interest expense and a decline in net interest income, ~~and non-interest income and a decrease in the provision for credit losses,~~ partly offset by ~~higher~~an increase in non-interest ~~expense.~~income. Net interest income ~~increased $40.0~~decreased $7.0 million, or ~~13.3%~~2.1%, due ~~to a $48.2 million increase in net allocated funding credits and a decrease in deposit and borrowings~~higher interest expense on customer repurchase agreements and deposits of ~~$12.6 million.~~$10.0 million and $7.3 million, respectively. These ~~increases~~decreases to income were partly offset by a ~~$20.7~~$9.4 million ~~decrease~~increase in loan interest income. Non-interest income increased ~~$11.3~~$12.5 million, or ~~7.9%~~8.1%, over the previous year mainly due to growth in net bank card fees (mainly corporate card ~~and merchant~~ fees), deposit account fees (mainly corporate cash management fees)~~, capital market fees~~ and ~~interest rate swap fees. These increases were~~cash sweep commissions, partly offset by a decline in ~~cash sweep commissions.~~capital market fees. Non-interest expense increased ~~$9.2~~$25.7 million, or ~~3.9%~~10.4%, mainly due to higher salaries and benefits expense, ~~(mainly incentive compensation), data processing~~travel and ~~software~~entertainment expense, and allocated service and support costs ~~for~~(mainly bank operations, branch employees, information technology and commercial ~~banking, and lower deferred origination costs. These increases to income were partly offset by lower allocated service costs (mainly lockbox)~~payments). The provision for credit losses ~~decreased $8.0~~increased $5.5 million ~~from~~over the same period last year, mainly due to net ~~recoveries recorded~~charge-offs on business ~~loans.~~loans in the current year compared to net recoveries in the prior year.

Wealth

Wealth segment pre-tax profitability for the nine months ended September 30, ~~2021 increased $22.1~~2022 decreased $1.7 million, or ~~24.9%~~1.6%, ~~over~~from the same period in the previous year. Net interest income increased ~~$11.5~~$3.5 million, or ~~27.6%~~6.7%, mainly due to ~~a $9.8~~an $8.4 million increase in loan interest income, partly offset by a $5.3 million decrease in net allocated funding credits assigned to the Wealth segment's loan and ~~lower~~ deposit ~~interest expense of $3.5 million, partly offset by a $1.8 million decrease in loan interest income.~~portfolios. Non-interest income increased ~~$19.0~~$2.3 million, or ~~13.6%~~1.5%, over the prior year largely due to higher ~~trust fees (mainly~~cash sweep commissions, private client trust fees, and ~~institutional trust fees),~~ brokerage ~~fees and mortgage banking revenue,~~fees. These increases were partly offset by lower ~~cash sweep commissions.~~mortgage banking revenue and institutional trust fees. Non-interest expense increased ~~$8.5~~$7.6 million, or ~~9.1%~~7.5%, mainly due to higher salaries and benefits expense, ~~(mainly incentive compensation)~~travel and ~~allocated support costs for information technology. There was no change in the~~entertainment expense, and marketing expense. The provision for credit losses ~~compared to~~increased $8 thousand over the same period last ~~year.~~year, due to higher overdraft loan net charge-offs.

The Other/Elimination category in the preceding table includes the activity of various support and overhead operating units of the Company, in addition to the investment securities portfolio and other items not allocated to the segments. In accordance with the Company’s transfer pricing procedures, the difference between the total provision for credit losses and total net charge-offs/recoveries is not allocated to a business segment and is included in this category. The pre-tax profitability of this category was ~~higher~~lower than in the same period last year by ~~$177.4~~$36.2 million. ~~This increase was partly due to higher non-interest income of $8.2 million, partly offset by lower net interest income of $41.8 million and an increase in non-interest expense of $18.1 million.~~ Unallocated securities gains were ~~$39.8~~$11.6 million in the first nine months of ~~2021~~2022 compared to ~~losses~~gains of ~~$1.3~~$39.8 million in ~~2020.~~2021. Also, the unallocated provision for credit losses ~~decreased $188.1~~increased by $72.7 million, ~~as the provision was $58.1 million less than net charge-offs~~primarily driven by increases in the ~~first nine months of 2021, while~~liability for unfunded lending commitments and in the provision was $96.7 million in excess of net charge-offs during the first nine months of 2020. For management reporting purposes, net charge-offs are allocated to the segments when incurred. Additionally, the Company's provision for credit losses on ~~unfunded lending commitments,~~loans, which isare both not allocated to the segments for management reporting purposes. Net charge-offs are allocated to the segments when incurred for management reporting purposes. The provision for credit losses on loans was $6.7 million lower than net charge-offs in 2022, while the provision was $58.1 million lower than net charge-offs, as the provision was a benefit ~~of $15.5 million for~~in 2021. For the nine months ended September 30, ~~2021.~~2022, the Company's provision on unfunded lending commitments was expense of $5.8 million. These decreases to pre-tax profitability were partly offset by higher net interest income of $52.6 million, non-interest income of $3.6 million, and lower non-interest expense of $8.5 million.

Impact of Recently Issued Accounting Standards

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

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

Reference Rate ReformThe ~~FASB~~Financial Accounting Standards Board ("FASB") issued ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting", in March 2020, and has been followed by additional clarifying guidance related to derivatives that are modified as a result of reference rate reform. The ~~new~~ guidance provides optional expedients and

~~Table of Contents~~

exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if they reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Further, the guidance applies to derivative instruments that ~~are affected by the~~use an interest rate for margining, discounting, ~~transition.~~or contract price alignment that is modified as a result of reference rate reform. The expedients and exceptions provided by the new guidance do not apply to contract modifications made and hedging relationships entered into or evaluated for effectiveness after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022. In April 2022, the FASB proposed extending the sunset date under Topic 848 to December 31, 2024. The change is to align the temporary accounting relief guidance with the expected cessation date of LIBOR, which was postponed by administrators earlier this year to June 2023, a year after the current sunset date of ASU 2020-04.

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In order to assess the impact of transition and ensure a successful transition process, the Company established a LIBOR Transition Program led by the LIBOR Transition Steering Committee (the Committee), which is an internal, cross-functional team with representatives from all relevant business lines, support functions and legal counsel. A LIBOR impact and risk assessment has been performed, and the Committee has developed and prioritized action items. All financial contracts that reference LIBOR have been identified and LIBOR fallback language has been included in key loan provisions of new and renewed loans in preparation from transition from LIBOR. The Company ceased originating new loans with LIBOR as a reference rate at the end of 2021 and is actively working with customers to modify existing loans that reference LIBOR to a new reference rate. The Company plans to finish transitioning the impacted loans by late spring of 2023.

Credit Losses The FASB issued ASU 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures", in March 2022. This ASU eliminates the troubled debt restructuring recognition and measurement guidance and, instead, requires that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The amendments require that an entity disclose current period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. The guidance is effective asJanuary 1, 2023. The Company expects no material impact to its consolidated financial statements from adoption of March 12, 2020 through December 31, 2022, and the Company is in the process of evaluating and applying, as applicable, the optional expedients and exceptions for eligible contracts and transaction available through December 31, 2022.this ASU.

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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS

Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021


		Third Quarter 2021						Third Quarter 2020							Third Quarter 2022						Third Quarter 2021
(Dollars in thousands)	(Dollars in thousands)	Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		(Dollars in thousands)	Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid
ASSETS:	ASSETS:													ASSETS:
Loans:	Loans:													Loans:
Business(A)	Business(A)	$	5,437,498	$	47,032	3.43	%	$	6,709,200	$	49,680	2.95	%	Business(A)	$	5,317,696	$	52,813	3.94	%	$	5,437,498	$	47,032	3.43	%
Real estate — construction and land	Real estate — construction and land	1,168,566		10,326		3.51		974,346		9,167		3.74		Real estate — construction and land	1,288,721		17,133		5.27		1,168,566		10,326		3.51
Real estate — business	Real estate — business	2,982,847		26,027		3.46		2,989,652		26,547		3.53		Real estate — business	3,258,128		36,121		4.40		2,982,847		26,027		3.46
Real estate — personal	Real estate — personal	2,775,638		22,854		3.27		2,722,300		24,334		3.56		Real estate — personal	2,844,376		24,065		3.36		2,775,638		22,854		3.27
Consumer	Consumer	2,041,263		19,085		3.71		1,992,314		21,004		4.19		Consumer	2,101,622		22,110		4.17		2,041,263		19,085		3.71
Revolving home equity	Revolving home equity	281,689		2,456		3.46		329,361		2,722		3.29		Revolving home equity	280,923		3,413		4.82		281,689		2,456		3.46
Consumer credit card	Consumer credit card	566,406		16,112		11.29		646,185		18,513		11.40		Consumer credit card	550,058		16,711		12.05		566,406		16,112		11.29
Overdrafts	Overdrafts	5,110		—		—		2,689		—		—		Overdrafts	4,438		—		—		5,110		—		—
Total loans	Total loans	15,259,017		143,892		3.74		16,366,047		151,967		3.69		Total loans	15,645,962		172,366		4.37		15,259,017		143,892		3.74
Loans held for sale	Loans held for sale	16,021		187		4.63		24,728		264		4.25		Loans held for sale	7,170		159		8.80		16,021		187		4.63
Investment securities:	Investment securities:													Investment securities:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	727,566		10,525		5.74		770,361		7,189		3.71		U.S. government and federal agency obligations	1,113,442		12,664		4.51		727,566		10,525		5.74
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	50,785		295		2.30		102,749		560		2.17		Government-sponsored enterprise obligations	55,753		332		2.36		50,785		295		2.30
State and municipal obligations(A)	State and municipal obligations(A)	2,039,942��		12,062		2.35		1,767,526		11,240		2.53		State and municipal obligations(A)	2,052,908		11,758		2.27		2,039,942		12,062		2.35
Mortgage-backed securities	Mortgage-backed securities	7,115,419		27,461		1.53		6,259,926		30,607		1.95		Mortgage-backed securities	6,847,912		33,323		1.93		7,115,419		27,461		1.53
Asset-backed securities	Asset-backed securities	3,028,076		8,205		1.08		1,520,988		7,250		1.90		Asset-backed securities	3,870,953		15,782		1.62		3,028,076		8,205		1.08
Other debt securities	Other debt securities	608,642		3,125		2.04		514,166		3,036		2.35		Other debt securities	587,026		2,852		1.93		608,642		3,125		2.04
Trading debt securities(A)	Trading debt securities(A)	32,238		82		1.01		27,267		114		1.66		Trading debt securities(A)	35,621		246		2.74		32,238		82		1.01
Equity securities(A)	Equity securities(A)	8,756		528		23.92		4,193		497		47.15		Equity securities(A)	8,838		604		27.11		8,756		528		23.92
Other securities(A)	Other securities(A)	183,397		3,447		7.46		120,253		2,038		6.74		Other securities(A)	208,708		3,729		7.09		183,397		3,447		7.46
Total investment securities	Total investment securities	13,794,821		65,730		1.89		11,087,429		62,531		2.24		Total investment securities	14,781,161		81,290		2.18		13,794,821		65,730		1.89
Federal funds sold	Federal funds sold	792		1		.50		337		—		—		Federal funds sold	13,486		94		2.77		792		1		.50
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,633,205		9,007		2.19		849,994		11,247		5.26		Securities purchased under agreements to resell	1,379,341		5,984		1.72		1,633,205		9,007		2.19
Interest earning deposits with banks	Interest earning deposits with banks	2,602,896		995		.15		1,024,435		261		.10		Interest earning deposits with banks	980,273		5,571		2.25		2,602,896		995		.15
Total interest earning assets	Total interest earning assets	33,306,752		219,812		2.62		29,352,970		226,270		3.07		Total interest earning assets	32,807,393		265,464		3.21		33,306,752		219,812		2.62
Allowance for credit losses on loans	Allowance for credit losses on loans	(172,112)						(240,286)						Allowance for credit losses on loans	(137,833)						(172,112)
Unrealized gain on debt securities		230,058						368,154
Unrealized gain (loss) on debt securities														Unrealized gain (loss) on debt securities	(1,064,534)						230,058
Cash and due from banks	Cash and due from banks	329,129						326,030						Cash and due from banks	310,713						329,129
Premises and equipment, net	Premises and equipment, net	408,966						404,144						Premises and equipment, net	408,884						408,966
Other assets	Other assets	523,182						659,509						Other assets	536,901						523,182
Total assets	Total assets	$	34,625,975					$	30,870,521					Total assets	$	32,861,524					$	34,625,975
LIABILITIES AND EQUITY:	LIABILITIES AND EQUITY:													LIABILITIES AND EQUITY:
Interest bearing deposits:	Interest bearing deposits:													Interest bearing deposits:
Savings	Savings	$	1,484,923	289		.08		$	1,193,079	269		.09		Savings	$	1,595,857	177		.04		$	1,484,923	289		.08
Interest checking and money market	Interest checking and money market	13,343,180		1,528		.05		11,731,494		2,937		.10		Interest checking and money market	14,423,713		7,368		.20		13,343,180		1,528		.05
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	464,367		206		.18		573,207		1,028		.71		Certificates of deposit of less than $100,000	397,071		411		.41		464,367		206		.18
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	1,289,665		450		.14		1,447,968		2,512		.69		Certificates of deposit of $100,000 and over	578,158		871		.60		1,289,665		450		.14
Total interest bearing deposits	Total interest bearing deposits	16,582,135		2,473		.06		14,945,748		6,746		.18		Total interest bearing deposits	16,994,799		8,827		.21		16,582,135		2,473		.06
Borrowings:	Borrowings:													Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase		2,360,876		480		.08		1,855,971		406		.09
Federal funds purchased														Federal funds purchased	$	51,929	$	315	2.41		13,606		$	3	.10
Securities sold under agreements to repurchase														Securities sold under agreements to repurchase	2,199,866		7,576		1.37		2,347,270		477		.08
Other borrowings(B)	Other borrowings(B)	347		1		1.14		1,225		—		—		Other borrowings(B)	2,010		9		1.78		347		1		1.14
Total borrowings	Total borrowings	2,361,223		481		.08		1,857,196		406		.09		Total borrowings	2,253,805		7,900		1.39		2,361,223		481		.08
Total interest bearing liabilities	Total interest bearing liabilities	18,943,358		2,954		.06	%	16,802,944		7,152		.17	%	Total interest bearing liabilities	19,248,604		16,727		.34	%	18,943,358		2,954		.06	%
Non-interest bearing deposits	Non-interest bearing deposits	11,475,113						9,801,562						Non-interest bearing deposits	10,758,353						11,475,113
Other liabilities	Other liabilities	667,786						899,890						Other liabilities	123,691						667,786
Equity	Equity	3,539,718						3,366,125						Equity	2,730,876						3,539,718
Total liabilities and equity	Total liabilities and equity	$	34,625,975					$	30,870,521					Total liabilities and equity	$	32,861,524					$	34,625,975
Net interest margin (T/E)				$	216,858					$	219,118
Net interest margin (FTE)														Net interest margin (FTE)			$	248,737					$	216,858
Net yield on interest earning assets	Net yield on interest earning assets					2.58	%					2.97	%	Net yield on interest earning assets					3.01	%					2.58	%

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

(B) Interest expense capitalized on construction projects is not deducted from the interest expense shown above.

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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS

Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021


		Nine Months 2021						Nine Months 2020							Nine Months 2022						Nine Months 2021
(Dollars in thousands)	(Dollars in thousands)	Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		(Dollars in thousands)	Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid
ASSETS:	ASSETS:													ASSETS:
Loans:	Loans:													Loans:
Business(A)	Business(A)	$	6,056,664	$	145,574	3.21	%	$	6,322,644	$	146,437	3.09	%	Business(A)	$	5,342,326	$	133,631	3.34	%	$	6,056,664	$	145,574	3.21	%
Real estate — construction and land	Real estate — construction and land	1,116,603		29,538		3.54		931,517		28,952		4.15		Real estate — construction and land	1,216,860		40,148		4.41		1,116,603		29,538		3.54
Real estate — business	Real estate — business	3,006,780		78,494		3.49		2,935,319		83,382		3.79		Real estate — business	3,172,832		91,095		3.84		3,006,780		78,494		3.49
Real estate — personal	Real estate — personal	2,801,861		69,715		3.33		2,565,740		70,829		3.69		Real estate — personal	2,826,441		69,804		3.30		2,801,861		69,715		3.33
Consumer	Consumer	1,998,081		57,567		3.85		1,962,466		65,845		4.48		Consumer	2,071,019		58,891		3.80		1,998,081		57,567		3.85
Revolving home equity	Revolving home equity	289,299		7,406		3.42		340,900		9,722		3.81		Revolving home equity	275,713		8,267		4.01		289,299		7,406		3.42
Consumer credit card	Consumer credit card	583,471		48,679		11.15		679,101		60,102		11.82		Consumer credit card	542,895		47,011		11.58		583,471		48,679		11.15
Overdrafts	Overdrafts	4,136		—		—		3,213		—		—		Overdrafts	5,044		—		—		4,136		—		—
Total loans	Total loans	15,856,895		436,973		3.68		15,740,900		465,269		3.95		Total loans	15,453,130		448,847		3.88		15,856,895		436,973		3.68
Loans held for sale	Loans held for sale	25,002		736		3.94		14,692		588		5.35		Loans held for sale	8,154		470		7.71		25,002		736		3.94
Investment securities:	Investment securities:													Investment securities:
U.S. government and federal agency obligations	U.S. government and federal agency obligations	724,269		24,979		4.61		783,006		12,244		2.09		U.S. government and federal agency obligations	1,112,201		35,751		4.30		724,269		24,979		4.61
Government-sponsored enterprise obligations	Government-sponsored enterprise obligations	50,793		885		2.33		117,135		2,958		3.37		Government-sponsored enterprise obligations	54,443		962		2.36		50,793		885		2.33
State and municipal obligations(A)	State and municipal obligations(A)	1,988,715		35,779		2.41		1,426,432		30,187		2.83		State and municipal obligations(A)	2,085,539		35,655		2.29		1,988,715		35,779		2.41
Mortgage-backed securities	Mortgage-backed securities	6,933,544		69,924		1.35		5,426,861		87,017		2.14		Mortgage-backed securities	7,105,874		104,695		1.97		6,933,544		69,924		1.35
Asset-backed securities	Asset-backed securities	2,592,618		23,594		1.22		1,349,316		22,496		2.23		Asset-backed securities	3,947,148		40,378		1.37		2,592,618		23,594		1.22
Other debt securities	Other debt securities	594,984		9,263		2.08		414,553		7,907		2.55		Other debt securities	622,065		9,143		1.97		594,984		9,263		2.08
Trading debt securities(A)	Trading debt securities(A)	33,171		272		1.10		31,087		560		2.41		Trading debt securities(A)	40,052		700		2.34		33,171		272		1.10
Equity securities(A)	Equity securities(A)	6,013		1,584		35.22		4,201		1,492		47.44		Equity securities(A)	9,141		1,823		26.66		6,013		1,584		35.22
Other securities(A)	Other securities(A)	164,911		10,101		8.19		134,481		5,450		5.41		Other securities(A)	198,763		17,417		11.72		164,911		10,101		8.19
Total investment securities	Total investment securities	13,089,018		176,381		1.80		9,687,072		170,311		2.35		Total investment securities	15,175,226		246,524		2.17		13,089,018		176,381		1.80
Federal funds sold	Federal funds sold	715		3		.56		252		2		1.06		Federal funds sold	6,315		114		2.41		715		3		.56
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,143,061		30,551		3.57		849,998		29,445		4.63		Securities purchased under agreements to resell	1,604,300		15,669		1.31		1,143,061		30,551		3.57
Interest earning deposits with banks	Interest earning deposits with banks	2,273,448		2,108		.12		1,126,600		1,996		.24		Interest earning deposits with banks	1,606,452		9,150		.76		2,273,448		2,108		.12
Total interest earning assets	Total interest earning assets	32,388,139		646,752		2.67		27,419,514		667,611		3.25		Total interest earning assets	33,853,577		720,774		2.85		32,388,139		646,752		2.67
Allowance for credit losses on loans	Allowance for credit losses on loans	(197,631)						(184,001)						Allowance for credit losses on loans	(140,686)						(197,631)
Unrealized gain on debt securities		236,702						280,616
Unrealized gain (loss) on debt securities														Unrealized gain (loss) on debt securities	(699,908)						236,702
Cash and due from banks	Cash and due from banks	337,595						351,435						Cash and due from banks	321,994						337,595
Premises and equipment, net	Premises and equipment, net	404,697						397,093						Premises and equipment, net	405,856						404,697
Other assets	Other assets	533,660						657,969						Other assets	538,438						533,660
Total assets	Total assets	$	33,703,162					$	28,922,626					Total assets	$	34,279,271					$	33,703,162
LIABILITIES AND EQUITY:	LIABILITIES AND EQUITY:													LIABILITIES AND EQUITY:
Interest bearing deposits:	Interest bearing deposits:													Interest bearing deposits:
Savings	Savings	$	1,431,386	843		.08		$	1,086,120	780		.10		Savings	$	1,589,668	512		.04		$	1,431,386	843		.08
Interest checking and money market	Interest checking and money market	13,200,461		4,921		.05		11,318,376		14,712		.17		Interest checking and money market	14,738,322		11,071		.10		13,200,461		4,921		.05
Certificates of deposit of less than $100,000	Certificates of deposit of less than $100,000	490,655		1,006		.27		600,295		4,196		.93		Certificates of deposit of less than $100,000	412,739		755		.24		490,655		1,006		.27
Certificates of deposit of $100,000 and over	Certificates of deposit of $100,000 and over	1,291,693		2,173		.22		1,364,798		11,357		1.11		Certificates of deposit of $100,000 and over	695,332		1,768		.34		1,291,693		2,173		.22
Total interest bearing deposits	Total interest bearing deposits	16,414,195		8,943		.07		14,369,589		31,045		.29		Total interest bearing deposits	17,436,061		14,106		.11		16,414,195		8,943		.07
Borrowings:	Borrowings:													Borrowings:
Federal funds purchased and securities sold
under agreements to repurchase		2,231,595		1,112		.07		1,945,669		5,761		.40
Federal funds purchased														Federal funds purchased	$	62,909	$	546	1.16		$	24,558	11		.06
Securities sold under agreements to repurchase														Securities sold under agreements to repurchase	2,388,295		10,960		.61		2,207,037		1,101		.07
Other borrowings(B)	Other borrowings(B)	717		5		.93		168,748		1,032		.82		Other borrowings(B)	1,607		22		1.83		717		5		.93
Total borrowings	Total borrowings	2,232,312		1,117		.07		2,114,417		6,793		.43		Total borrowings	2,452,811		11,528		.63		2,232,312		1,117		.07
Total interest bearing liabilities	Total interest bearing liabilities	18,646,507		10,060		.07	%	16,484,006		37,838		.31	%	Total interest bearing liabilities	19,888,872		25,634		.17	%	18,646,507		10,060		.07	%
Non-interest bearing deposits	Non-interest bearing deposits	11,011,446						8,425,068						Non-interest bearing deposits	11,168,031						11,011,446
Other liabilities	Other liabilities	601,352						710,824						Other liabilities	255,041						601,352
Equity	Equity	3,443,857						3,302,728						Equity	2,967,327						3,443,857
Total liabilities and equity	Total liabilities and equity	$	33,703,162					$	28,922,626					Total liabilities and equity	$	34,279,271					$	33,703,162
Net interest margin (T/E)				$	636,692					$	629,773
Net interest margin (FTE)														Net interest margin (FTE)			$	695,140					$	636,692
Net yield on interest earning assets	Net yield on interest earning assets					2.63	%					3.07	%	Net yield on interest earning assets					2.75	%					2.63	%

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

(B) Interest expense capitalized on construction projects is not deducted from the interest expense shown above.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk management focuses on maintaining consistent growth in net interest income within Board-approved policy limits. The Company primarily uses earnings simulation models to analyze net interest income sensitivity to movement in interest rates. The Company performs monthly simulations that model interest rate movements and risk in accordance with changes to its balance sheet composition. For further discussion of the Company’s market risk, see the Interest Rate Sensitivity section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s ~~2020~~2021 Annual Report on Form 10-K.

The tables below show the effects of gradual shifts in interest rates over a twelve month period on the Company’s net interest income versus the Company's net interest income in a flat rate scenario. Simulation A presents three rising rate scenarios and three falling rate scenarios, and in each scenario, rates are assumed to change evenly over 12 months. In these scenarios, the balance sheet remains flat.

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

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


Simulation A	Simulation A	September 30, 2021						June 30, 2021						Simulation A	September 30, 2022						June 30, 2022
(Dollars in millions)	(Dollars in millions)	$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		(Dollars in millions)	$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth
300 basis points rising	300 basis points rising	$	101.1	13.87	%	$	—	$	97.4	13.10	%	$	—	300 basis points rising	$	3.3	.32	%	$	—	$	45.2	4.91	%	$	—
200 basis points rising	200 basis points rising	73.1		10.02		—		73.2		9.85		—		200 basis points rising	7.7		.75		—		36.9		4.01		—
100 basis points rising	100 basis points rising	37.7		5.17		—		38.4		5.16		—		100 basis points rising	9.9		.97		—		23.5		2.55		—
100 basis points falling														100 basis points falling	(28.5)		(2.80)		—		(35.3)		(3.83)		—
200 basis points falling														200 basis points falling	(62.5)		(6.14)		—		—		—		—
300 basis points falling														300 basis points falling	(101.1)		(9.94)		—		—		—		—


Simulation B	Simulation B	September 30, 2021						June 30, 2021						Simulation B	September 30, 2022						June 30, 2022
(Dollars in millions)	(Dollars in millions)	$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		(Dollars in millions)	$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth		$ Change in Net Interest Income		% Change in Net Interest Income		Assumed Deposit (Attrition)/Growth
300 basis points rising	300 basis points rising	$	67.6	9.27	%	$	(1,430.9)	$	65.4	8.79	%	$	(1,438.7)	300 basis points rising	$	(49.4)	(5.06)	%	$	(848.9)	$	(35.2)	(4.01	%)	$	(1,770.5)
200 basis points rising	200 basis points rising	54.8		7.51		(849.1)		55.4		7.45		(855.9)		200 basis points rising	(34.5)		(3.54)		(716.2)		(14.2)		(1.62)		(1,208.0)
100 basis points rising	100 basis points rising	33.2		4.55		(237.5)		33.9		4.56		(241.5)		100 basis points rising	(14.0)		(1.43)		(405.7)		(2.7)		(.31)		(612.5)
100 basis points falling														100 basis points falling	(6.0)		(.62)		403.2		(2.7)		(.31)		1,086.4
200 basis points falling														200 basis points falling	(26.5)		(2.72)		849.4		—		—		—
300 basis points falling														300 basis points falling	(58.7)		(6.02)		1,446.4		—		—		—

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

In Simulation B, the assumed levels of deposit attrition were modeled to capture the results of a shrinking balance sheet. Under this Simulation, in the three rising rate scenarios and three falling rate scenarios, interest rate risk is ~~slightly~~ more ~~asset~~liability sensitive than in the previous ~~quarter, which~~quarter. This was primarily ~~resulted from~~due to an increase in ~~securities purchased under agreements to resell.~~the Federal funds rate, which impacts surge deposit runoff and puts upward pressure on non-maturity deposit rates.

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

~~Table of Contents~~

Item 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, ~~2021.~~2022. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There were no changes in the Company's internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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

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

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

Period
Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as part of Publicly Announced Program Maximum Number that May Yet Be Purchased Under the Program
July 1 - 31, 2021 59,404 $ 72.05 59,404 2,949,742
August 1 - 31, 2021 314,225 $ 70.20 314,225 2,635,517
September 1 - 30, 2021 201,828 $ 68.50 201,828 2,433,689
Total 575,457 $ 69.80 575,457 2,433,689


Period	Total Number of Shares Purchased	Average Price Paid per Share			Total Number of Shares Purchased as part of Publicly Announced Program	Maximum Number that May Yet Be Purchased Under the Program
July 1 - 31, 2022	96,180		$	69.16	96,180	4,058,935
August 1 - 31, 2022	388,724		$	71.32	388,724	3,670,211
September 1 - 30, 2022	225,975		$	69.65	225,975	3,444,236
Total	710,879		$	70.50	710,879	3,444,236

The Company's stock purchases shown above were made under authorizations by the Board of Directors. Under the most recent authorization in ~~November 2019~~April 2022 of 5,000,000 shares, ~~2,433,689~~3,444,236 shares remained available for purchase at September 30, ~~2021.~~2022.

Item 6. EXHIBITS

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

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

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

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

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

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SIGNATURES

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


	COMMERCE BANCSHARES, INC.



	By	/s/ TM~~HOMAS~~ARGARET M. J.RN~~OACK~~OWE
		~~Thomas J. Noack~~Margaret M. Rowe
Date: November ~~5, 2021~~4, 2022		~~Senior~~ Vice President & Secretary


	By	/s/ PAUL A. STEINER
		Paul A. Steiner
		Controller
Date: November ~~5, 2021~~4, 2022		(Chief Accounting Officer)

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