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Bbva Usa Bancshares

Filed: 4 May 21, 11:02am

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2021
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                     to  
Commission File Number: 000-55106
BBVA USA Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Texas20-8948381
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2200 Post Oak Blvd. Houston, Texas77056
(Address of principal executive offices)(Zip Code)
(205) 297-3000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically, 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 ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer ☑ (Do not check if a smaller reporting company)
Smaller reporting company ☐Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding as of April 26, 2021
Common Stock (par value $0.01 per share)222,963,891 shares

Explanatory Note
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this report with certain reduced disclosures as permitted by those instructions.




TABLE OF CONTENTS







Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:
AFSAvailable For Sale
ASCAccounting Standards Codification
ASC 326
ASU 2016-13, Financial Instruments - Credit Losses
ASUAccounting Standards Update
Basel IIIGlobal regulatory framework developed by the Basel Committee on Banking Supervision
BankBBVA USA
BBVABanco Bilbao Vizcaya Argentaria, S.A.
BBVA GroupBBVA and its consolidated subsidiaries
BOLIBank Owned Life Insurance
BSIBBVA Securities Inc.
Cash Flow HedgeA hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability
CD    Certificate of Deposit and/or time deposits
CET1Common Equity Tier 1
CET1 Risk-Based Capital RatioRatio of Common Equity Tier 1 capital to risk-weighted assets
CFPB    Consumer Financial Protection Bureau
CompanyBBVA USA Bancshares, Inc. and its subsidiaries
CRACommunity Reinvestment Act
ERMEnterprise Risk Management
EVEEconomic Value of Equity
Exchange ActSecurities and Exchange Act of 1934, as amended
Fair Value HedgeA hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment
FASB    Financial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
Federal Reserve BoardBoard of Governors of the Federal Reserve System
FHCFinancial holding company
FHLB    Federal Home Loan Bank
FICOFair Isaac Corporation
FitchFitch Ratings
FNMA    Federal National Mortgage Association
HTMHeld To Maturity
IHCTop-tier U.S. intermediate holding company
Large FBOForeign Banking Organization with $100 billion or more in global total consolidated assets
LCRLiquidity Coverage Ratio
Leverage RatioRatio of Tier 1 capital to quarterly average on-balance sheet assets
Moody'sMoody's Investor Services, Inc.
MRAMaster Repurchase Agreement
MSRMortgage Servicing Rights
OREOOther Real Estate Owned
OISOvernight Index Swap
ParentBBVA USA Bancshares, Inc.
PNCPNC Financial Services Group, Inc.
PPPPaycheck Protection Program
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Potential Problem LoansCommercial loans rated substandard or below, which do not meet the definition of nonaccrual, TDR, or 90 days past due and still accruing
SBASmall Business Administration
SBICSmall Business Investment Company
SECSecurities and Exchange Commission
Series A Preferred StockFloating Non-Cumulative Perpetual Preferred Stock, Series A
SOFRSecured Overnight Financing Rate
S&PStandard and Poor's Rating Services
Tailoring RulesRules adopted by the Federal Reserve Board on October 10, 2019 that adjust the thresholds at which certain enhanced prudential standards apply to bank holding companies and rules adopted jointly by the Federal Reserve Board, OCC and FDIC that adjust the thresholds at which certain capital and liquidity requirements apply to bank holding companies.
TBATo be announced
TDRTroubled Debt Restructuring
Tier 1 Risk-Based Capital RatioRatio of Tier 1 capital to risk-weighted assets
Total Risk-Based Capital RatioRatio of Total capital (the sum of Tier 1 capital and Tier 2 capital) to risk-weighted assets
U.S.United States of America
U.S. TreasuryUnited States Department of the Treasury
U.S. GAAPAccounting principles generally accepted in the U.S.

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Unless otherwise specified, the terms “we,” “us,” “our,” and the “Company” are used to refer to BBVA USA Bancshares, Inc. and its subsidiaries, or any one or more of them, as the context may require. The term “Parent” refers to BBVA USA Bancshares, Inc. The term “BBVA” refers to Banco Bilbao Vizcaya Argentaria, S.A., the parent company of BBVA USA Bancshares, Inc.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements about the Company and its industry that involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company's future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to the Company, are forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following:
Market and Liquidity Risks:
the COVID-19 pandemic has adversely impacted the Company's business and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted or modelled precisely, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic;
national, regional and local economic conditions may be less favorable than expected, resulting in, among other things, increased charge-offs of loans, higher provisions for credit losses and/or reduced demand for the Company's services;
decline in real estate values or overall economic weakness could also have an adverse impact upon the value of real estate or other assets which the Company owns as a result of foreclosing a loan and its ability to realize value on such assets;
changes in interest rates which could affect interest rate spreads and net interest income;
expected replacement of LIBOR may adversely affect the Company's business;
disruptions to the credit and financial markets, either nationally or globally;
the fiscal and monetary policies of the federal government and its agencies;
volatile or declining oil prices could adversely affect the Company’s performance;
disruptions in the Company's ability to access capital markets, which may adversely affect its capital resources and liquidity;
Credit Risks:
changes in the creditworthiness of customers;
downgrades to the Company's credit ratings;
changes in the Company's accounting policies or in accounting standards which could materially affect how the Company reports financial results and condition;
Operating Risks:
the Company is subject to certain risks related to originating and selling mortgages. It may be required to repurchase mortgage loans or indemnify mortgage loan purchases as a result of breaches of representations and warranties, borrower fraud or certain breaches of its servicing agreements, and this could harm the Company's liquidity, results of operations and financial condition;
the Company's financial reporting controls and procedures may not prevent or detect all errors or fraud;
a failure by the Company to effectively manage the risks the Company faces, including credit, operational and cyber security risks;
the Company's heavy reliance on communications and information systems to conduct its business and reliance on third parties and affiliates to provide key components of its business infrastructure, any disruptions of which could interrupt the Company's operations or increase the costs of doing business;
the Company's dependence on the accuracy and completeness of information about clients and counterparties;
failure to control concentration risk such as loan type, industry segment, borrower type or location of the borrower or collateral;
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increased loan losses or impairment of goodwill;
the Company depends on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, operations may suffer;
the Company may not be able to hire or retain additional qualified personnel and recruiting and compensation costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact the Company's ability to implement the Company's business strategies;
unpredictable natural or other disasters, which could impact the Company's customers or operations;
Regulatory and Compliance Risks:
legislative, regulatory or accounting changes, which may adversely affect our business and/or competitive position, impose additional costs on the Company or cause us to change our business practices;
costs and effects of litigation, regulatory investigations or similar matters;
if the Bank's CRA rating were to decline, that could result in certain restrictions on the Company's activities;
the impact of consumer protection regulations, including the CFPB's residential mortgage and other regulations, which could adversely affect the Company's business, financial condition or results of operations;
the failure to satisfy capital adequacy and liquidity guidelines applicable to the Company;
Strategic and Reputational Risks:
increased pressures from competitors (both banks and non-banks) and/or an inability by the Company to remain competitive in the financial services industry, particularly in the markets which the Company serves, and keep pace with technological changes;
a loss of customer deposits, which could increase the Company's funding costs;
negative public opinion, which could damage the Company's reputation and adversely impact business and revenues;
the Company’s rebranding strategy may not produce the benefits expected, may involve substantial costs and may not be favorably received by Customers;
Risks Relating to the Company's Securities:
the Company is a subsidiary of the BBVA Group and activities across the BBVA Group could adversely affect the Company’s business and results of operations;
the Company’s Parent is a holding company and depends on its subsidiaries for liquidity in the form of dividends, distributions and other payments;
Risks Relating to the Merger:
the inability to complete the merger with PNC due to the failure to satisfy conditions to completion of the merger, including receipt of required regulatory and other approvals;
the Company will be subject to business uncertainties and contractual restrictions while the Merger is pending; and
failure to complete the Merger could negatively impact the Company.
The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the time they are made and do not necessarily reflect the Company’s outlook at any other point in time. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or for any other reason. However, readers should carefully review the risk factors set forth in other reports or documents the Company files periodically with the SEC.
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PART I FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)
BBVA USA BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 2021December 31, 2020
(In Thousands)
Assets:
Cash and due from banks$1,044,788 $1,249,954 
Federal funds sold, securities purchased under agreements to resell and interest bearing deposits14,097,936 13,357,954 
Cash and cash equivalents15,142,724 14,607,908 
Trading account assets561,187 762,449 
Debt securities available for sale5,408,087 5,744,919 
Debt securities held to maturity, net of allowance for debt securities held to maturity losses of $1,969 and $2,178 at March 31, 2021 and December 31, 2020, respectively (fair value of $12,497,012 and $10,809,461 at March 31, 2021 and December 31, 2020, respectively)12,339,994 10,549,945 
Loans held for sale, at fair value295,570 236,586 
Loans63,960,242 65,559,767 
Allowance for loan losses(1,498,909)(1,679,474)
Net loans62,461,333 63,880,293 
Premises and equipment, net1,028,385 1,055,525 
Bank owned life insurance759,219 757,943 
Goodwill2,328,296 2,328,296 
Other assets3,658,603 2,832,339 
Total assets$103,983,398 $102,756,203 
Liabilities:
Deposits:
Noninterest bearing$29,543,118 $27,791,421 
Interest bearing56,427,836 58,066,960 
Total deposits85,970,954 85,858,381 
FHLB and other borrowings3,517,567 3,548,492 
Federal funds purchased and securities sold under agreements to repurchase966,336 184,478 
Accrued expenses and other liabilities1,509,486 1,473,490 
Total liabilities91,964,343 91,064,841 
Shareholder’s Equity:
Series A Preferred stock — $0.01 par value, liquidation preference $200,000 per share
Authorized — 30,000,000 shares
Issued — 1,150 shares at both March 31, 2021 and December 31, 2020229,475 229,475 
Common stock — $0.01 par value:
Authorized — 300,000,000 shares
Issued — 222,963,891 shares at both March 31, 2021 and December 31, 20202,230 2,230 
Surplus14,039,261 14,032,205 
Accumulated deficit(2,546,271)(2,931,151)
Accumulated other comprehensive income264,206 329,105 
Total BBVA USA Bancshares, Inc. shareholder’s equity11,988,901 11,661,864 
Noncontrolling interests30,154 29,498 
Total shareholder’s equity12,019,055 11,691,362 
Total liabilities and shareholder’s equity$103,983,398 $102,756,203 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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BBVA USA BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended March 31,
20212020
(In Thousands)
Interest income:
Interest and fees on loans$606,407 $715,476 
Interest on debt securities available for sale24,437 (1,492)
Interest on debt securities held to maturity63,060 41,102 
Interest on trading account assets1,021 1,122 
Interest and dividends on other earning assets5,169 42,175 
Total interest income700,094 798,383 
Interest expense:
Interest on deposits20,345 164,742 
Interest on FHLB and other borrowings14,516 21,176 
Interest on federal funds purchased and securities sold under agreements to repurchase576 22,658 
Interest on other short-term borrowings389 352 
Total interest expense35,826 208,928 
Net interest income664,268 589,455 
Total provision (credit) for credit losses(120,142)356,991 
Net interest income after provision (credit) for credit losses784,410 232,464 
Noninterest income:
Service charges on deposit accounts54,874 61,531 
Card and merchant processing fees49,245 50,091 
Money transfer income32,040 24,548 
Investment services sales fees29,446 34,407 
Investment banking and advisory fees26,783 26,731 
Mortgage banking14,692 17,451 
Corporate and correspondent investment sales13,683 10,717 
Asset management fees12,587 11,904 
Bank owned life insurance4,691 4,625 
Investment securities gains, net19,139 
Other65,660 73,098 
Total noninterest income303,701 334,242 
Noninterest expense:
Salaries, benefits and commissions338,695 310,136 
Professional services82,002 70,220 
Equipment67,334 64,681 
Net occupancy40,903 39,843 
Money transfer expense23,332 17,136 
Goodwill impairment2,185,000 
Other66,724 122,044 
Total noninterest expense618,990 2,809,060 
Net income (loss) before income tax expense (benefit)469,121 (2,242,354)
Income tax expense (benefit)83,660 (5,069)
Net income (loss)385,461 (2,237,285)
Less: net income attributable to noncontrolling interests581 501 
Net income (loss) attributable to BBVA USA Bancshares, Inc.384,880 (2,237,786)
Less: preferred stock dividends3,143 4,155 
Net income (loss) attributable to common shareholder$381,737 $(2,241,941)
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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BBVA USA BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended March 31,
20212020
(In Thousands)
Net income (loss)$385,461 $(2,237,285)
Other comprehensive income (loss), net of tax:
Net unrealized (losses) gains arising during period from debt securities available for sale(18,139)99,699 
Less: reclassification adjustment for net gains on sale of debt securities available for sale in net income14,572 
Net change in net unrealized holding (losses) gains on debt securities available for sale(18,139)85,127 
Change in unamortized net holding gains on debt securities held to maturity1,900 1,575 
Change in unamortized non-credit related impairment on debt securities held to maturity140 118 
Net change in unamortized holding gains on debt securities held to maturity2,040 1,693 
Unrealized holding (losses) gains arising during period from cash flow hedge instruments(46,089)274,837 
Change in defined benefit plans(2,711)1,754 
Other comprehensive (loss) income, net of tax(64,899)363,411 
Comprehensive income (loss)320,562 (1,873,874)
Less: comprehensive income attributable to noncontrolling interests581 501 
Comprehensive income (loss) attributable to BBVA USA Bancshares, Inc.$319,981 $(1,874,375)
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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BBVA USA BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(Unaudited)


Preferred StockCommon StockSurplusAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Non-Controlling InterestsTotal Shareholder’s Equity
(In Thousands)
Three Months Ended March 31,
Balance, December 31, 2019$229,475 $2,230 $14,043,727 $(917,227)$(1,072)$29,456 $13,386,589 
Cumulative effect adjustment related to ASC 326 adoption
— — — (150,213)— — (150,213)
Balance, January 1, 2020$229,475 $2,230 $14,043,727 $(1,067,440)$(1,072)$29,456 $13,236,376 
Net (loss) income— — — (2,237,786)— 501 (2,237,285)
Other comprehensive income, net of tax— — — — 363,411 — 363,411 
Preferred stock dividends— — (4,155)— — — (4,155)
Capital contribution— — — — — 
Balance, March 31, 2020$229,475 $2,230 $14,039,572 $(3,305,226)$362,339 $29,964 $11,358,354 
Balance, December 31, 2020$229,475 $2,230 $14,032,205 $(2,931,151)$329,105 $29,498 $11,691,362 
Net income— — — 384,880 — 581 385,461 
Other comprehensive loss, net of tax— — — — (64,899)— (64,899)
Preferred stock dividends— — (3,143)— — — (3,143)
Capital contribution— — 10,199 — — 75 10,274 
Balance, March 31, 2021$229,475 $2,230 $14,039,261 $(2,546,271)$264,206 $30,154 $12,019,055 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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BBVA USA BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
20212020
(In Thousands)
Operating Activities:
Net income (loss)$385,461 $(2,237,285)
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization59,032 104,267 
Goodwill impairment2,185,000 
Accretion of discount, loan fees and purchase market adjustments, net(12,868)(8,070)
(Credit) provision for credit losses(120,142)356,991 
Net change in trading account assets201,262 (535,154)
Net change in trading account liabilities(4,685)124,326 
Originations and purchases of mortgage loans held for sale(406,497)(209,524)
Sale of mortgage loans held for sale365,860 212,605 
Deferred tax expense (benefit)58,622 (66,187)
Investment securities gains, net(19,139)
Net loss (gain) on sale of premises and equipment1,726 (483)
Gain on sale of mortgage loans held for sale(18,347)(8,775)
Net loss on sale of other real estate and other assets94 625 
Increase in other assets(867,468)(7,625)
Increase (decrease) in other liabilities729 111,425 
Net cash (used in) provided by operating activities(357,221)2,997 
Investing Activities:
Proceeds from sales of debt securities available for sale607,655 
Proceeds from prepayments, maturities and calls of debt securities available for sale1,116,757 1,137,698 
Purchases of debt securities available for sale(806,301)(769,621)
Proceeds from prepayments, maturities and calls of debt securities held to maturity713,534 204,481 
Purchases of debt securities held to maturity(2,512,520)(1,298,774)
Proceeds from sales of equity securities16,479 
Purchases of equity securities(11,312)(883)
Net change in loan portfolio1,550,024 (3,702,303)
Purchases of premises and equipment(18,075)(25,811)
Proceeds from sales of premises and equipment20 1,377 
Proceeds from settlement of BOLI policies3,490 442 
Proceeds from sales of other real estate owned2,166 5,301 
Net cash provided by (used in) investing activities37,783 (3,823,959)
Financing Activities:
Net increase in total deposits112,852 2,251,788 
Net increase in federal funds purchased and securities sold under agreements to repurchase781,858 236,756 
Proceeds from FHLB and other borrowings1,000 
Repayment of FHLB and other borrowings(61)(1,057)
Capital contribution10,274 
Preferred dividends paid(3,143)(4,155)
Net cash provided by financing activities901,780 2,484,339 
Net increase (decrease) in cash, cash equivalents and restricted cash582,342 (1,336,623)
Cash, cash equivalents and restricted cash at beginning of year14,945,395 7,156,689 
Cash, cash equivalents and restricted cash at end of period$15,527,737 $5,820,066 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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BBVA USA BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation
General
The accounting and reporting policies of the Company and the methods of applying those policies that materially affect the consolidated financial statements conform with U.S. GAAP and with general financial services industry practices. The accompanying unaudited consolidated financial statements include the accounts of BBVA USA Bancshares, Inc. and its subsidiaries and have been prepared in conformity with U.S. GAAP for interim financial information and in accordance with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements have been included. Operating results for the three months ended March 31, 2021, are not necessarily indicative of the results that may be expected for the year ended December 31, 2021. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The Company has evaluated subsequent events for potential recognition and disclosure through the filing date of this Quarterly Report on Form 10-Q to determine if either recognition or disclosure of significant events or transactions is required.
Proposed Acquisition by PNC
On November 15, 2020, PNC entered into a Stock Purchase Agreement with BBVA for the purchase by PNC of 100% of the issued and outstanding shares of the Company for $11.6 billion in cash on hand in a fixed price structure. PNC is not acquiring BSI, Propel Venture Partners Fund I, L.P. and BBVA Processing Services, Inc. Immediately following the closing of the stock purchase, PNC intends to merge the Parent with and into PNC, with PNC continuing as the surviving entity. Post-closing, PNC intends to merge BBVA USA with and into PNC Bank, National Association, an indirect wholly owned subsidiary of PNC, with PNC Bank continuing as the surviving entity. The transaction is subject to regulatory approvals and certain other customary closing conditions.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, the most significant of which relate to the allowance for credit losses and goodwill impairment. Actual results could differ from those estimates. The extent to which the COVID-19 pandemic impacts the results of operations and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted.
Recently Adopted Accounting Standards
Income Taxes
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes. This ASU is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years. The adoption of this standard did not have a material impact on the financial condition and results of operations of the Company.
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments in this ASU provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if
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certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.
This ASU is effective as of March 12, 2020 through December 31, 2022. The adoption of this standard had no impact as the Company has not modified any contracts, hedging relationships, or other transactions.
(2) Debt Securities Available for Sale and Debt Securities Held to Maturity
The following tables present the adjusted cost and approximate fair value of debt securities available for sale and debt securities held to maturity.
March 31, 2021
Gross Unrealized
Amortized CostGainsLossesFair Value
(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies$2,041,182 $37,301 $14,273 $2,064,210 
Agency mortgage-backed securities774,456 25,452 2,104 797,804 
Agency collateralized mortgage obligations2,503,150 42,993 631 2,545,512 
States and political subdivisions545 16 561 
Total$5,319,333 $105,762 $17,008 $5,408,087 
Debt securities held to maturity:
U.S. Treasury and other U.S. government agencies$2,550,157 $93,298 $23,886 $2,619,569 
Agency mortgage-backed securities921,354 17,323 904,031 
Collateralized mortgage obligations:
Agency8,353,460 125,129 44,685 8,433,904 
Non-agency27,319 6,047 53 33,313 
Asset-backed securities and other45,437 1,472 419 46,490 
States and political subdivisions (1)444,236 16,387 918 459,705 
Total$12,341,963 $242,333 $87,284 $12,497,012 
(1)The Company recorded an allowance of $2 million at March 31, 2021, related to state and political subdivisions, which is not included in the table above.
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December 31, 2020
Gross Unrealized
Amortized CostGainsLossesFair Value
(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies$2,115,915 $45,168 $14,179 $2,146,904 
Agency mortgage-backed securities834,640 32,103 1,095 865,648 
Agency collateralized mortgage obligations2,681,210 50,811 290 2,731,731 
States and political subdivisions617 19 636 
Total$5,632,382 $128,101 $15,564 $5,744,919 
Debt securities held to maturity:
U.S. Treasury and other U.S. government agencies$1,291,900 $112,968 $$1,404,868 
Agency mortgage-backed securities570,115 2,491 572,606 
Collateralized mortgage obligations:
Agency8,144,522 147,176 27,234 8,264,464 
Non-agency29,186 5,972 209 34,949 
Asset-backed securities and other48,790 1,217 2,681 47,326 
States and political subdivisions (1)467,610 21,047 3,409 485,248 
Total$10,552,123 $290,871 $33,533 $10,809,461 
(1)The Company recorded an allowance of $2 million at December 31, 2020, related to state and political subdivisions, which is not included in the table above.
The investments held within the states and political subdivision caption of debt securities held to maturity relate to private placement transactions underwritten as loans by the Company but that meet the definition of a security within ASC Topic 320, Investments – Debt Securities.
The following tables disclose the fair value and the gross unrealized losses of the Company’s available for sale debt securities that were in a loss position at March 31, 2021 and December 31, 2020, for which an allowance for credit losses has not been recorded. This information is aggregated by investment category and the length of time the individual securities have been in an unrealized loss position.
March 31, 2021
Securities in a loss position for less than 12 monthsSecurities in a loss position for 12 months or longerTotal
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies$28,410 $790 $319,805 $13,483 $348,215 $14,273 
Agency mortgage-backed securities32,699 1,286 34,710 818 67,409 2,104 
Agency collateralized mortgage obligations416,524 501 102,578 130 519,102 631 
Total$477,633 $2,577 $457,093 $14,431 $934,726 $17,008 
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December 31, 2020
Securities in a loss position for less than 12 monthsSecurities in a loss position for 12 months or longerTotal
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies$6,041 $60 $335,296 $14,119 $341,337 $14,179 
Agency mortgage-backed securities25,710 299 35,326 796 61,036 1,095 
Agency collateralized mortgage obligations96,498 114 162,028 176 258,526 290 
Total$128,249 $473 $532,650 $15,091 $660,899 $15,564 
As indicated in the previous tables, at March 31, 2021 and December 31, 2020, the Company held debt securities in unrealized loss positions. The Company has not recognized the unrealized losses into income for its securities because they are all backed by the U.S. government or government agencies and management does not intend to sell and it is likely that management will not be required to sell these securities before their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The fair value is expected to recover as the securities approach maturity.
The following table presents the activity in the allowance for debt securities held to maturity losses.
Three Months Ended March 31,
20212020
(In Thousands)
Allowance for debt securities held to maturity losses:
Balance at beginning of period$2,178 $
Impact of adopting ASC 326— 1,847 
Beginning balance, after adoption of ASC 3262,178 1,847 
(Credit) provision for credit losses(209)45 
Securities charged off
Recoveries
Balance at end of period$1,969 $1,892 
The Company regularly evaluates each held to maturity debt security for credit losses on a quarterly basis. The Company has not recorded a provision for credit loss related to its agency securities because they are all backed by the U.S. government or government agencies and have been deemed to have zero expected credit loss as of March 31, 2021 and December 31, 2020. These securities are evaluated quarterly to determine if they still qualify as a zero credit loss security. The Company has non-agency securities that have unrealized losses at March 31, 2021 and December 31, 2020. The Company considers such factors as the extent to which the fair value has been below cost and the financial condition of the issuer.
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The Company monitors the credit quality of its HTM debt securities through credit ratings. The following tables present the amortized cost of HTM debt securities, aggregated by credit quality indicator.
March 31, 2021
Range of Ratings
AAAAA+ / A -BBB+ / B-CCC+ / CDNRTotal
(In Thousands)
Debt securities held to maturity:
U.S. Treasury and other U.S. government agencies$2,550,157 $$$$$$2,550,157 
Agency mortgage-backed securities921,354921,354 
Collateralized mortgage obligations:
Agency8,353,460 8,353,460 
Non-agency224 6,357 9,770 3,144 771 7,053 27,319 
Asset-backed securities and other44,870 183 384 45,437 
States and political subdivisions (1)236,151 208,085 444,236 
$11,825,195 $287,378 $218,038 $3,528 $771 $7,053 $12,341,963 
(1)The Company recorded an allowance of $2 million at March 31, 2021, related to state and political subdivisions, which is not included in the table above.
December 31, 2020
Range of Ratings
AAAAA+ / A -BBB+ / B-CCC+ / CDNRTotal
(In Thousands)
Debt securities held to maturity:
U.S. Treasury and other U.S. government agencies$1,291,900 $$$$$$1,291,900 
Agency mortgage-backed securities570,115 570,115 
Collateralized mortgage obligations:
Agency8,144,522 8,144,522 
Non-agency278 6,840 10,517 5,462 2,533 3,556 29,186 
Asset-backed securities and other48,127 200 463 48,790 
States and political subdivisions (1)246,210 221,400 467,610 
$10,006,815 $301,177 $232,117 $5,925 $2,533 $3,556 $10,552,123 
(1)The Company recorded an allowance of $2 million at December 31, 2020, related to state and political subdivisions, which is not included in the table above.
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The contractual maturities of the securities portfolios are presented in the following table.
March 31, 2021Amortized CostFair Value
(In Thousands)
Debt securities available for sale:
Maturing within one year$250,000 $250,000 
Maturing after one but within five years1,394,623 1,430,793 
Maturing after five but within ten years4,755 4,828 
Maturing after ten years392,349 379,150 
2,041,727 2,064,771 
Agency mortgage-backed securities and agency collateralized mortgage obligations3,277,606 3,343,316 
Total$5,319,333 $5,408,087 
Debt securities held to maturity:
Maturing within one year$11,240 $11,265 
Maturing after one but within five years1,392,538 1,486,375 
Maturing after five but within ten years1,546,716 1,537,655 
Maturing after ten years89,336 90,469 
3,039,830 3,125,764 
Agency mortgage-backed securities and agency and non-agency collateralized mortgage obligations9,302,133 9,371,248 
Total$12,341,963 $12,497,012 
The gross realized gains and losses recognized on sales of debt securities available for sale are shown in the table below.
Three Months Ended March 31,
20212020
(In Thousands)
Gross gains$$19,139 
Gross losses
Net realized gains$$19,139 

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(3) Loans and Allowance for Loan Losses
The following table presents the composition of the loan portfolio.
March 31, 2021December 31, 2020
(In Thousands)
Commercial loans:
Commercial, financial and agricultural$25,969,245 $26,605,142 
Real estate – construction2,396,004 2,498,331 
Commercial real estate – mortgage13,412,272 13,565,314 
Total commercial loans41,777,521 42,668,787 
Consumer loans:
Residential real estate – mortgage12,823,641 13,327,774 
Equity lines of credit2,318,208 2,394,894 
Equity loans165,209 179,762 
Credit card812,242 881,702 
Consumer direct1,797,085 1,929,723 
Consumer indirect4,266,336 4,177,125 
Total consumer loans22,182,721 22,890,980 
Total loans$63,960,242 $65,559,767 

Accrued interest receivable totaling $213 million and $224 million at March 31, 2021 and December 31, 2020, respectively, was reported in other assets on the Company's Unaudited Condensed Balance Sheets and is excluded from the related footnote disclosures.
Allowance for Loan Losses and Credit Quality
The following table, which excludes loans held for sale, presents a summary of the activity in the allowance for loan losses. The portion of the allowance that has not been identified by the Company as related to specific loan categories has been allocated to the individual loan categories on a pro rata basis for purposes of the table below:
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Commercial, Financial and AgriculturalCommercial Real Estate (1)Residential Real Estate (2)Consumer (3)Total
(In Thousands)
Three months ended March 31, 2021
Allowance for loan losses:
Beginning balance$658,228 $311,092 $214,469 $495,685 $1,679,474 
Provision (credit) for loan losses(84,950)(30,150)(15,382)10,549 (119,933)
Loans charged-off(12,942)(44)(1,747)(76,628)(91,361)
Loan recoveries11,735 177 1,093 17,724 30,729 
Net (charge-offs) recoveries(1,207)133 (654)(58,904)(60,632)
Ending balance$572,071 $281,075 $198,433 $447,330 $1,498,909 
Three Months Ended March 31, 2020
Allowance for loan losses:
Beginning balance, prior to adoption of ASC 326$408,197 $118,633 $99,089 $295,074 $920,993 
Impact of adopting ASC 32618,389 (35,034)47,390 154,186 184,931 
Beginning balance, after adoption of ASC 326426,586 83,599 146,479 449,260 1,105,924 
Provision for loan losses140,413 24,548 7,032 184,953 356,946 
Loan charge-offs(24,207)(87)(1,999)(115,866)(142,159)
Loan recoveries5,193 173 1,423 23,572 30,361 
Net (charge-offs) recoveries(19,014)86 (576)(92,294)(111,798)
Ending balance$547,985 $108,233 $152,935 $541,919 $1,351,072 
(1)Includes commercial real estate – mortgage and real estate – construction loans.
(2)Includes residential real estate – mortgage, equity lines of credit and equity loans.
(3)Includes credit card, consumer direct and consumer indirect loans.
For the three months ended March 31, 2021, the decrease in the allowance for loan losses was primarily driven by the recognition of the updated macroeconomic scenario, which showed substantial improvement in the outlook for the macroeconomy as well as net negative loan growth.
The following table presents information on nonaccrual loans, by loan class at March 31, 2021 and December 31, 2020.
March 31, 2021December 31, 2020
NonaccrualNonaccrual With No Recorded AllowanceNonaccrualNonaccrual With No Recorded Allowance
Commercial, financial and agricultural$529,703 $172,832 $540,741 $93,614 
Real estate – construction25,265 25,316 
Commercial real estate – mortgage418,935 88,910 442,137 77,629 
Residential real estate – mortgage235,441 235,463 
Equity lines of credit45,744 42,606 
Equity loans8,844 10,167 
Credit card
Consumer direct13,098 10,087 
Consumer indirect23,852 24,713 
Total loans$1,300,882 $261,742 $1,331,230 $171,243 

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The Company monitors the credit quality of its commercial portfolio using an internal dual risk rating, which considers both the obligor and the facility. The obligor risk ratings are defined by ranges of default probabilities of the borrowers, through internally assigned letter grades (AAA through D2) and the facility risk ratings are defined by ranges of the loss given default. The combination of those two approaches results in the assessment of the likelihood of loss and it is mapped to the regulatory classifications. The Company assigns internal risk ratings at loan origination and at regular intervals subsequent to origination. Loan review intervals are dependent on the size and risk grade of the loan, and are generally conducted at least annually. Additional reviews are conducted when information affecting the loan’s risk grade becomes available. The general characteristics of the risk grades are as follows:
The Company’s internally assigned letter grades “AAA” through “B-” correspond to the regulatory classification “Pass.” These loans do not have any identified potential or well-defined weaknesses and have a high likelihood of orderly repayment. Exceptions exist when either the facility is fully secured by a CD and held at the Company or the facility is secured by properly margined and controlled marketable securities.
Internally assigned letter grades “CCC+” through “CCC” correspond to the regulatory classification “Special Mention.” Loans within this classification have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.
Internally assigned letter grades “CCC-” through “D1” correspond to the regulatory classification “Substandard.” A loan classified as substandard is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the loan. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
The internally assigned letter grade “D2” corresponds to the regulatory classification “Doubtful.” Loans classified as doubtful have all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable or improbable.
The Company considers payment history as the best indicator of credit quality for the consumer portfolio. Nonperforming loans in the tables below include loans classified as nonaccrual, loans 90 days or more past due and loans modified in a TDR 90 days or more past due.










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The following tables, which exclude loans held for sale, illustrate the credit quality indicators associated with the Company’s loans, by loan class.
Commercial
March 31, 2021
Recorded Investment of Term Loans by Origination Year
20212020201920182017PriorRecorded Investment of Revolving LoansRecorded Investment of Revolving Loans Converted to Term LoansTotal
(In Thousands)
Commercial, financial and agricultural
Pass$1,050,720 $5,353,169 $2,656,762 $1,832,641 $2,817,125 $3,598,179 $6,359,264 $$23,667,860 
Special Mention63,645 15,593 98,900 216,057 86,212 125,224 471,135 1,076,766 
Substandard4,893 68,342 99,186 81,450 71,320 215,564 548,331 1,089,086 
Doubtful21,308 11,726 1,789 23,150 34,609 42,951 135,533 
Total commercial, financial and agricultural$1,119,258 $5,458,412 $2,866,574 $2,131,937 $2,997,807 $3,973,576 $7,421,681 $$25,969,245 
Real estate - construction
Pass$56,927 $554,067 $755,562 $584,592 $151,696 $75,301 $149,250 $$2,327,395 
Special Mention5,199 8,395 19,506 297 33,397 
Substandard6,218 6,121 726 18,020 4,127 35,212 
Doubtful
Total real estate - construction$56,927 $560,285 $766,882 $593,713 $189,222 $79,725 $149,250 $$2,396,004 
Commercial real estate - mortgage
Pass$237,099 $1,535,357 $2,708,280 $3,347,413 $1,423,688 $2,606,898 $178,890 $$12,037,625 
Special Mention28,911 113,096 192,868 35,808 260,781 30,461 661,925 
Substandard58,450 105,425 114,971 103,119 312,068 12,949 706,982 
Doubtful1,836 3,904 5,740 
Total commercial real estate - mortgage$237,099 $1,622,718 $2,926,801 $3,655,252 $1,564,451 $3,183,651 $222,300 $$13,412,272 
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Commercial
December 31, 2020
Recorded Investment of Term Loans by Origination Year
20202019201820172016PriorRecorded Investment of Revolving LoansRecorded Investment of Revolving Loans Converted to Term LoansTotal
(In Thousands)
Commercial, financial and agricultural
Pass$5,784,167 $2,691,532 $1,986,737 $3,003,653 $754,848 $3,030,800 $6,861,548 $$24,113,285 
Special Mention78,988 166,896 193,552 107,194 26,025 102,208 685,822 1,360,685 
Substandard38,516 66,725 69,752 96,059 82,947 179,285 499,317 1,032,601 
Doubtful16,286 12,248 5,476 709 7,395 5,085 51,372 98,571 
Total commercial, financial and agricultural$5,917,957 $2,937,401 $2,255,517 $3,207,615 $871,215 $3,317,378 $8,098,059 $$26,605,142 
Real estate - construction
Pass$429,483 $785,835 $710,403 $271,229 $44,565 $38,470 $125,184 $$2,405,169 
Special Mention9,015 8,414 24,059 301 18,223 60,012 
Substandard3,973 6,210 551 18,152 4,264 33,150 
Doubtful
Total real estate - construction$433,456 $801,060 $719,368 $289,381 $68,624 $43,035 $143,407 $$2,498,331 
Commercial real estate - mortgage
Pass$1,571,217 $2,796,409 $3,430,264 $1,371,053 $777,906 $2,113,980 $222,864 $$12,283,693 
Special Mention40,501 131,400 190,140 36,834 147,037 110,279 3,996 660,187 
Substandard44,201 34,749 106,067 114,290 112,976 195,821 6,630 614,734 
Doubtful2,758 3,942 6,700 
Total commercial real estate - mortgage$1,655,919 $2,962,558 $3,726,471 $1,522,177 $1,040,677 $2,424,022 $233,490 $$13,565,314 



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Consumer
March 31, 2021
Recorded Investment of Term Loans by Origination Year
20212020201920182017PriorRecorded Investment of Revolving LoansRecorded Investment of Revolving Loans Converted to Term LoansTotal
(In Thousands)
Residential real estate - mortgage
Performing$802,011 $3,776,523 $1,717,121 $740,423 $805,765 $4,704,304 $$$12,546,147 
Nonperforming5,313 24,607 22,101 23,232 202,241 277,494 
Total residential real estate - mortgage$802,011 $3,781,836 $1,741,728 $762,524 $828,997 $4,906,545 $$$12,823,641 
Equity lines of credit
Performing$$$$$$$2,260,999 $9,493 $2,270,492 
Nonperforming— 47,569 147 47,716 
Total equity lines of credit$$$$$$$2,308,568 $9,640 $2,318,208 
Equity loans
Performing$5,681 $10,588 $9,130 $7,946 $3,545 $119,168 $$$156,058 
Nonperforming55 107 516 133 8,340 9,151 
Total equity loans$5,681 $10,643 $9,237 $8,462 $3,678 $127,508 $$$165,209 
Credit card
Performing$$$$$$$789,395 $$789,395 
Nonperforming22,847 22,847 
Total credit card$$$$$$$812,242 $$812,242 
Consumer direct
Performing$156,787 $462,219 $351,468 $283,514 $79,054 $43,284 $399,322 $$1,775,648 
Nonperforming4,694 4,131 6,495 1,912 757 3,448 21,437 
Total consumer direct$156,787 $466,913 $355,599 $290,009 $80,966 $44,041 $402,770 $$1,797,085 
Consumer indirect
Performing$568,797 $1,667,436 $979,931 $640,659 $259,239 $121,830 $$$4,237,892 
Nonperforming2,841 6,991 9,376 4,968 4,268 28,444 
Total consumer indirect$568,797 $1,670,277 $986,922 $650,035 $264,207 $126,098 $$$4,266,336 

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Consumer
December 31, 2020
Recorded Investment of Term Loans by Origination Year
20202019201820172016PriorRecorded Investment of Revolving LoansRecorded Investment of Revolving Loans Converted to Term LoansTotal
(In Thousands)
Residential real estate - mortgage
Performing$3,881,274 $2,013,356 $883,919 $956,310 $1,109,560 $4,201,849 $$$13,046,268 
Nonperforming4,468 21,702 21,424 21,167 24,964 187,781 281,506 
Total residential real estate - mortgage$3,885,742 $2,035,058 $905,343 $977,477 $1,134,524 $4,389,630 $$$13,327,774 
Equity lines of credit
Performing$$$$$$$2,338,907 $10,757 $2,349,664 
Nonperforming45,079 151 45,230 
Total equity lines of credit$$$$$$$2,383,986 $10,908 $2,394,894 
Equity loans
Performing$11,894 $10,684 $8,624 $3,960 $3,242 $130,600 $$$169,004 
Nonperforming789 375 484 134 8,976 10,758 
Total equity loans$12,683 $11,059 $9,108 $4,094 $3,242 $139,576 $$$179,762 
Credit card
Performing$$$$$$$859,749 $$859,749 
Nonperforming21,953 21,953 
Total credit card$$$$$$$881,702 $$881,702 
Consumer direct
Performing$547,417 $426,921 $349,518 $97,085 $43,170 $14,617 $432,167 $$1,910,895 
Nonperforming1,220 3,878 7,995 2,325 642 189 2,579 18,828 
Total consumer direct$548,637 $430,799 $357,513 $99,410 $43,812 $14,806 $434,746 $$1,929,723 
Consumer indirect
Performing$1,817,720 $1,112,510 $745,483 $305,658 $92,924 $73,051 $$$4,147,346 
Nonperforming1,821 6,759 10,116 5,791 3,076 2,216 29,779 
Total consumer indirect$1,819,541 $1,119,269 $755,599 $311,449 $96,000 $75,267 $$$4,177,125 

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The following tables present an aging analysis of the Company’s past due loans, excluding loans classified as held for sale.
March 31, 2021
30-59 Days Past Due60-89 Days Past Due90 Days or More Past DueNonaccrualAccruing TDRsTotal Past Due, Nonaccrual or TDRNot Past Due, Nonaccrual or TDRTotal
(In Thousands)
Commercial, financial and agricultural$17,433 $19,078 $12,609 $529,703 $77,466 $656,289 $25,312,956 $25,969,245 
Real estate – construction2,538 532 25,265 142 28,477 2,367,527 2,396,004 
Commercial real estate – mortgage703 253 7,790 418,935 26,746 454,427 12,957,845 13,412,272 
Residential real estate – mortgage40,315 19,696 41,590 235,441 53,568 390,610 12,433,031 12,823,641 
Equity lines of credit8,325 2,642 1,972 45,744 58,683 2,259,525 2,318,208 
Equity loans665 223 134 8,844 19,326 29,192 136,017 165,209 
Credit card8,378 6,442 22,847 37,667 774,575 812,242 
Consumer direct17,028 9,438 8,339 13,098 23,041 70,944 1,726,141 1,797,085 
Consumer indirect30,024 8,513 4,592 23,852 66,981 4,199,355 4,266,336 
Total loans$125,409 $66,285 $100,405 $1,300,882 $200,289 $1,793,270 $62,166,972 $63,960,242 
December 31, 2020
30-59 Days Past Due60-89 Days Past Due90 Days or More Past DueNonaccrualAccruing TDRsTotal Past Due, Nonaccrual or TDRNot Past Due, Nonaccrual or TDRTotal
(In Thousands)
Commercial, financial and agricultural$15,862 $22,569 $35,472 $540,741 $17,686 $632,330 $25,972,812 $26,605,142 
Real estate – construction3,595 174 532 25,316 145 29,762 2,468,569 2,498,331 
Commercial real estate – mortgage2,113 2,004 1,104 442,137 910 448,268 13,117,046 13,565,314 
Residential real estate – mortgage49,445 20,694 45,761 235,463 53,380 404,743 12,923,031 13,327,774 
Equity lines of credit11,108 4,305 2,624 42,606 60,643 2,334,251 2,394,894 
Equity loans1,417 243 317 10,167 19,606 31,750 148,012 179,762 
Credit card12,147 10,191 21,953 44,291 837,411 881,702 
Consumer direct24,076 17,550 8,741 10,087 23,163 83,617 1,846,106 1,929,723 
Consumer indirect47,174 14,951 5,066 24,713 91,904 4,085,221 4,177,125 
Total loans$166,937 $92,681 $121,570 $1,331,230 $114,890 $1,827,308 $63,732,459 $65,559,767 
It is the Company’s policy to classify TDRs that are not accruing interest as nonaccrual loans. It is also the Company’s policy to classify TDR past due loans that are accruing interest as TDRs and not according to their past due status. The tables above reflect this policy.
In response to the COVID-19 pandemic, beginning in March 2020, the Company began providing financial hardship relief in the form of payment deferrals and forbearances to consumer and commercial customers across a wide array of lending products, as well as the suspension of vehicle repossessions and home foreclosures. The payment deferrals and forbearances generally cover periods of three to six months. In most cases as allowed under the CARES Act, these offers are not classified as TDRs and do not result in loans being placed on nonaccrual status. For loans that receive a payment deferral or forbearance under these hardship relief programs, the Company continues to accrue interest and recognize interest income during the period of the deferral. Depending on the terms of each program, all or a portion of this accrued interest may be paid directly by the borrower (either during the relief period, at the end of the relief period or at maturity of the loan). For certain programs, the maturity date of the
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loan may also be extended by the number of payments deferred. Interest income will continue to be recognized at the original contractual interest rate unless that rate is concurrently modified upon entering the relief program (in which case, the modified rate would be used to recognize interest). At March 31, 2021, the Company had deferrals on approximately 3000 loans with an amortized cost of $279 million.
Modifications to borrowers' loan agreements are considered TDRs if a concession is granted for economic or legal reasons related to a borrower’s financial difficulties that otherwise would not be considered. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. During the three months ended March 31, 2021, $7.8 million of TDR modifications included an interest rate concession and $325.1 million of TDR modifications resulted from modifications to the loan’s structure. During the three months ended March 31, 2020, $5.2 million of TDR modifications included an interest rate concession and $43.6 million of TDR modifications resulted from modifications to the loan’s structure.
The following table presents an analysis of the types of loans that were restructured and classified as TDRs, excluding loans classified as held for sale.
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Number of ContractsPost-Modification Outstanding Recorded InvestmentNumber of ContractsPost-Modification Outstanding Recorded Investment
(Dollars in Thousands)
Commercial, financial and agricultural10 $109,107 10 $41,238 
Real estate – construction18,056 
Commercial real estate – mortgage10 196,993 1,740 
Residential real estate – mortgage21 6,542 844 
Equity lines of credit154 36 
Equity loans554 192 
Credit card
Consumer direct37 1,527 89 4,762 
Consumer indirect
The impact to the allowance for loan losses related to modifications classified as TDRs was approximately $(3.3) million and $5.3 million for the three months ended March 31, 2021 and 2020, respectively.
The Company considers TDRs aged 90 days or more past due, charged off or classified as nonaccrual subsequent to modification, where the loan was not classified as a nonperforming loan at the time of modification, as subsequently defaulted.
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The following table provides a summary of initial subsequent defaults that occurred within one year of the restructure date. The tables exclude loans classified as held for sale as of period-end and includes loans no longer in default as of period-end.
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Number of ContractsRecorded Investment at DefaultNumber of ContractsRecorded Investment at Default
(Dollars in Thousands)
Commercial, financial and agricultural$$
Real estate – construction
Commercial real estate – mortgage
Residential real estate – mortgage855 84 
Equity lines of credit
Equity loans43 
Credit card
Consumer direct217 
Consumer indirect
At March 31, 2021 and December 31, 2020, there were $175.6 million and $132.5 million, respectively, of commitments to lend additional funds to borrowers whose terms have been modified in a TDR.
Foreclosure Proceedings
OREO totaled $11 million at both March 31, 2021 and December 31, 2020. OREO included $6 million of foreclosed residential real estate properties at both March 31, 2021 and December 31, 2020. As of March 31, 2021 and December 31, 2020, there were $26 million and $29 million, respectively, of loans secured by residential real estate properties for which formal foreclosure proceedings were in process.
(4) Loan Sales and Servicing
Loans held for sale were $296 million and $237 million at March 31, 2021 and December 31, 2020, respectively, and were comprised entirely of residential real estate - mortgage loans.
There were 0 loans transferred from held for investment to held for sale during the three months ended March 31, 2021 and 2020. Additionally, excluding loans originated for sale in the secondary market, there were 0 loans or loans held for sale sold during the three months ended March 31, 2021 and 2020.
The following table summarizes the Company's sales of loans originated for sale in the secondary market.
Three Months Ended March 31,
20212020
(In Thousands)
Residential real estate loans originated for sale in the secondary market sold (1)$347,513 $203,830 
Net gains recognized on sales of residential real estate loans originated for sale in the secondary market (2)18,347 8,775 
Servicing fees recognized (2)2,434 2,608 
(1)The Company has retained servicing responsibilities for all loans sold that were originated for sale in the secondary market.
(2)Recorded as a component of mortgage banking income in the Company's Unaudited Condensed Consolidated Statements of Income.
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The following table provides the recorded balance of loans sold with retained servicing and the related MSRs.
March 31, 2021December 31, 2020
(In Thousands)
Recorded balance of residential real estate mortgage loans sold with retained servicing (1)$4,338,556 $4,425,180 
MSRs (2)41,432 30,665 
(1)These loans are not included in loans on the Company's Unaudited Condensed Consolidated Balance Sheets.
(2)Recorded under the fair value method and included in other assets on the Company's Unaudited Condensed Consolidated Balance Sheets.
The fair value of MSRs is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining rates, the fair value of MSRs declines due to increasing prepayments attributable to increased mortgage-refinance activity. During periods of rising interest rates, the fair value of MSRs generally increases due to reduced refinance activity. The Company maintains a non-qualifying hedging strategy to manage a portion of the risk associated with changes in the fair value of the MSR portfolio.  This strategy includes the purchase of various trading securities.  The interest income, mark-to-market adjustments and gain or loss from sale activities associated with these securities are expected to economically hedge a portion of the change in the fair value of the MSR portfolio.
The following table is an analysis of the activity in the Company’s MSRs.
Three Months Ended March 31,
20212020
(In Thousands)
Carrying value, at beginning of period$30,665 $42,022 
Additions3,985 1,671 
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions9,832 (10,140)
Due to other changes in fair value (1)(3,050)(2,321)
Carrying value, at end of period$41,432 $31,232 
(1)Represents the realization of expected net servicing cash flows, expected borrower repayments and the passage of time.
See Note 8, Fair Value Measurements, for additional disclosures related to the assumptions and estimates used in determining fair value of MSRs.
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At March 31, 2021 and December 31, 2020, the sensitivity of the current fair value of the residential MSRs to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table:
March 31, 2021December 31, 2020
(Dollars in Thousands)
Fair value of MSRs$41,432 $30,665 
Composition of residential loans serviced for others:
Fixed rate mortgage loans98.7 %98.5 %
Adjustable rate mortgage loans1.3 1.5 
Total100.0 %100.0 %
Weighted average life (in years)4.43.6
Prepayment speed:29.0 %30.4 %
Effect on fair value of a 10% increase$(1,687)$(1,620)
Effect on fair value of a 20% increase(3,797)(3,585)
Weighted average option adjusted spread:6.2 %6.2 %
Effect on fair value of a 10% increase$(1,009)$(656)
Effect on fair value of a 20% increase(1,974)(1,285)
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one assumption may result in changes to another, which may magnify or counteract the effect of the change.
(5) Derivatives and Hedging
The Company is a party to derivative instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates and foreign currency exchange rates. The Company has made an accounting policy decision not to offset derivative fair value amounts under master netting agreements. See Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, for additional information on the Company's accounting policies related to derivative instruments and hedging activities. For derivatives cleared through central clearing houses the variation margin payments made are legally characterized as settlements of the derivatives. As a result, these variation margin payments are netted against the fair value of the respective derivative contracts in the balance sheet and related disclosures and there is no fair value presented for
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these contracts. The following table reflects the notional amount and fair value of derivative instruments included on the Company’s Unaudited Condensed Consolidated Balance Sheets on a gross basis.
March 31, 2021December 31, 2020
Fair ValueFair Value
Notional AmountDerivative Assets (1)Derivative Liabilities (2)Notional AmountDerivative Assets (1)Derivative Liabilities (2)
(In Thousands)
Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate swaps related to long-term debt$3,496,086 $9,656 $375 $3,496,086 $11,635 $748 
Total fair value hedges9,656 375 11,635 748 
Cash flow hedges:
Interest rate contracts:
Swaps related to commercial loans10,000,000 10,000,000 
Swaps related to FHLB advances120,000 1,181 120,000 2,108 
Foreign currency contracts:
Forwards related to currency fluctuations3,088 64 4,102 19 
Total cash flow hedges1,245 2,127 
Total derivatives designated as hedging instruments$9,656 $1,620 $11,635 $2,875 
Free-standing derivatives not designated as hedging instruments:
Interest rate contracts:
Forward contracts related to held for sale mortgages$834,280 $7,726 $573 $861,061 $1,184 $5,193 
Interest rate lock commitments421,906 8,091 151 520,481 17,897 
Equity contracts:
Purchased equity option related to equity-linked CDs30,219 304 40,253 574 
Written equity option related to equity-linked CDs24,259 244 32,507 468 
Foreign exchange contracts:
Forwards and swaps related to commercial loans471,739 5,881 1,746 578,484 1,635 7,424 
Spots related to commercial loans79,755 24 34 47,564 124 38 
Swap associated with sale of Visa, Inc. Class B shares183,292 6,408 189,352 6,517 
Futures contracts (3)200,000 
Trading account assets and liabilities:
Interest rate contracts for customers37,158,642 422,427 123,551 38,305,700 616,566 128,831 
Foreign exchange contracts for customers1,664,768 37,221 35,193 1,448,123 36,741 34,598 
Total trading account assets and liabilities459,648 158,744 653,307 163,429 
Total free-standing derivative instruments not designated as hedging instruments$481,674 $167,900 $674,721 $183,069 
(1)Derivative assets, except for trading account assets that are recorded as a component of trading account assets on the Company's Unaudited Condensed Consolidated Balance Sheets, are recorded in other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets.
(2)Derivative liabilities are recorded in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets.
(3)Changes in fair value are cash settled daily; therefore, there is no ending balance at any given reporting period.
Hedging Derivatives
The Company uses derivative instruments to manage the risk of earnings fluctuations caused by interest rate volatility. For those financial instruments that qualify and are designated as a hedging relationship, either a fair value hedge or cash flow hedge, the effect of interest rate movements on the hedged assets or liabilities will generally be offset by change in fair value of the derivative instrument.
Fair Value Hedges
The Company enters into fair value hedging relationships using interest rate swaps to mitigate the Company’s exposure to losses in value as interest rates change. Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps that relate to the pricing of specific balance sheet assets and liabilities.
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Interest rate swaps are used to convert the Company’s fixed rate long-term debt to a variable rate. The critical terms of the interest rate swaps match the terms of the corresponding hedged items. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness.
The Company recognized 0 gains or losses for the three months ended March 31, 2021 and 2020, related to hedged firm commitments no longer qualifying as a fair value hedge. At March 31, 2021, the fair value hedges had a weighted average expected remaining term of 2.2 years.
Cash Flow Hedges
The Company enters into cash flow hedging relationships using interest rate swaps and options, such as caps and floors, to mitigate exposure to the variability in future cash flows or other forecasted transactions associated with its floating rate assets and liabilities. The Company uses interest rate swaps and options to hedge the repricing characteristics of its floating rate commercial loans and FHLB advances. The Company also uses foreign currency forward contracts to hedge its exposure to fluctuations in foreign currency exchange rates due to a portion of money transfer expense being denominated in foreign currency. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. The initial assessment of expected hedge effectiveness is based on regression analysis. The ongoing periodic measures of hedge ineffectiveness are based on the expected change in cash flows of the hedged item caused by changes in the benchmark interest rate. There were 0 gains or losses reclassified from other comprehensive income because of the discontinuance of cash flow hedges related to certain forecasted transactions that are probable of not occurring for the three months ended March 31, 2021 and 2020.
At March 31, 2021, cash flow hedges not terminated had a net fair value of $(1) million and a weighted average life of 1.9 years. Net gains of $175.8 million are expected to be reclassified to income over the next 12 months as net settlements occur. The maximum length of time over which the entity is hedging its exposure to the variability in future cash flows for forecasted transactions is 2.9 years.
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The following table presents the effect of hedging derivative instruments on the Company’s Unaudited Condensed Consolidated Statements of Income.
Interest IncomeInterest Expense
Interest and fees on loansInterest on FHLB and other borrowings
(In Thousands)
Three Months Ended March 31, 2021
Total amounts presented in the unaudited condensed consolidated statements of income$606,407 $14,516 
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements and amortization on derivatives$$13,188 
Recognized on derivatives(33,159)
Recognized on hedged items32,074 
Net income (expense) recognized on fair value hedges$$12,103 
Gain (losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI into net income (2)$44,774 $(914)
Net income (expense) recognized on cash flow hedges$44,774 $(914)
Three Months Ended March 31, 2020
Total amounts presented in the unaudited condensed consolidated statements of income$715,476 $21,176 
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements and amortization on derivatives$$3,365 
Recognized on derivatives105,944 
Recognized on hedged items(99,171)
Net income (expense) recognized on fair value hedges$$10,138 
Gain (losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized losses reclassified from AOCI into net income (2)$5,459 $(419)
Net income (expense) recognized on cash flow hedges$5,459 $(419)
(1)See Note 9, Comprehensive Income, for gain or loss recognized for cash flow hedges in accumulated other comprehensive income.
(2)Pre-tax

The following table presents the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities on the Company's Unaudited Condensed Consolidated Balance Sheets in fair value hedging relationships.
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Liabilities
Carrying Amount of Hedged LiabilitiesHedged Items Currently DesignatedHedged Items No Longer Designated
(In Thousands)
March 31, 2021
FHLB and other borrowings$3,261,916 $74,942 $1,113 
December 31, 2020
FHLB and other borrowings$3,260,644 $107,023 $1,168 
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Derivatives Not Designated As Hedges
Derivatives not designated as hedges include those that are entered into as either economic hedges to facilitate client needs or as part of the Company’s overall risk management strategy. Economic hedges are those that do not qualify to be treated as a fair value hedge, cash flow hedge or foreign currency hedge for accounting purposes, but are necessary to economically manage the risk exposure associated with the assets and liabilities of the Company. The Company holds a portfolio of futures, forwards and interest rate lock commitments as well as options related to its equity-linked CDs to mitigate its economic risk exposure. The Company also enters into a variety of interest rate contracts and foreign exchange contracts in its trading activities. See Note 13, Derivatives and Hedging, in the Notes to the December 31, 2020, Consolidated Financial Statements for a description of the Company's derivatives not designated as hedges.
The net gains and losses recorded in the Company's Unaudited Condensed Consolidated Statements of Income from free-standing derivative instruments not designated as hedging instruments are summarized in the following table.
Gain (Loss) for the
Condensed ConsolidatedThree Months Ended March 31,
Statements of Income Caption20212020
(In Thousands)
Futures contracts
Mortgage banking income
 and corporate and correspondent investment sales
$$(793)
Interest rate contracts:
Interest rate lock commitmentsMortgage banking income(9,957)9,322 
Option contracts related to mortgage servicing rightsMortgage banking income1,528 
Forward contracts related to residential mortgage loans held for saleMortgage banking income11,162 (5,907)
Interest rate contracts for customersCorporate and correspondent investment sales7,395 4,137 
Equity contracts:
Purchased equity option related to equity-linked CDsOther expense(270)(1,888)
Written equity option related to equity-linked CDsOther expense224 1,624 
Foreign currency contracts:
Forward and swap contracts related to commercial loansOther income7,095 25,981 
Spot contracts related to commercial loansOther income(2,179)771 
Foreign currency exchange contracts for customersCorporate and correspondent investment sales6,082 4,701 
Derivatives Credit and Market Risks
By using derivative instruments, the Company is exposed to credit and market risk. If the counterparty fails to perform, credit risk is equal to the extent of the Company’s fair value gain in a derivative. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty owes the Company and, therefore, creates a credit risk for the Company. When the fair value of a derivative instrument contract is negative, the Company owes the counterparty and, therefore, it has no credit risk. The Company minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically. Credit losses are also mitigated through collateral agreements and other contract provisions with derivative counterparties.
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Market risk is the adverse effect that a change in interest rates or implied volatility rates has on the value of a financial instrument. The Company manages the market risk associated with interest rate contracts by establishing and monitoring limits as to the types and degree of risk that may be undertaken.
The Company’s derivatives activities are monitored by its Asset/Liability Committee as part of its risk-management oversight. The Company’s Asset/Liability Committee is responsible for mandating various hedging strategies that are developed through its analysis of data from financial simulation models and other internal and industry sources. The resulting hedging strategies are then incorporated into the Company’s overall interest rate risk management and trading strategies.
Entering into interest rate swap agreements and options involves not only the risk of dealing with counterparties and their ability to meet the terms of the contracts but also interest rate risk associated with unmatched positions. At March 31, 2021, interest rate swap agreements and options classified as trading were substantially matched. The Company had credit risk of $460 million related to derivative instruments in the trading account portfolio, which does not take into consideration master netting arrangements or the value of the collateral. There were 0 credit losses associated with derivative instruments classified as trading for the three months ended March 31, 2021 and 2020. At March 31, 2021 and December 31, 2020, there were no material nonperforming derivative positions classified as trading.
The Company’s derivative positions designated as hedging instruments are primarily executed in the over-the-counter market. These positions at March 31, 2021, have credit risk of $10 million, which does not take into consideration master netting arrangements or the value of the collateral.
There were 0 credit losses associated with derivative instruments classified as nontrading for the three months ended March 31, 2021 and 2020. At March 31, 2021 and December 31, 2020, there were no nonperforming derivative positions classified as nontrading.
As of March 31, 2021 and December 31, 2020, the Company had recorded the right to reclaim cash collateral of $163 million and $199 million, respectively, within other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets. As of March 31, 2021 and December 31, 2020, the Company had recorded the obligation to return cash collateral of $23 million and $14 million, respectively, within deposits on the Company’s Unaudited Condensed Consolidated Balance Sheets.
Contingent Features
Certain of the Company’s derivative instruments contain provisions that require the Company’s debt maintain a certain credit rating from each of the major credit rating agencies. If the Company’s debt were to fall below this rating, it would be in violation of these provisions, and the counterparties to the derivative instruments could demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on March 31, 2021, was $50 million for which the Company has collateral requirements of $48 million in the normal course of business. If the credit risk-related contingent features underlying these agreements had been triggered on March 31, 2021, the Company’s collateral requirements to its counterparties would increase by $2 million. The aggregate fair value of all derivative instruments with credit risk-related contingent features that were in a liability position on December 31, 2020, was $66 million for which the Company had collateral requirements of $64 million in the normal course of business. If the credit risk-related contingent features underlying these agreements had been triggered on December 31, 2020, the Company’s collateral requirements to its counterparties would have increased by $2 million.
Netting of Derivative Instruments
The Company is party to master netting arrangements with its financial institution counterparties for some of its derivative and hedging activities. The Company does not offset assets and liabilities under these master netting arrangements for financial statement presentation purposes. The master netting arrangements provide for single net settlement of all derivative instrument arrangements, as well as collateral, in the event of default with respect to, or termination of, any one contract with the respective counterparties. Cash collateral is usually posted by the counterparty with a net liability position in accordance with contract thresholds.
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The following table represents the Company’s total gross derivative instrument assets and liabilities subject to an enforceable master netting arrangement. The derivative instruments the Company has with its customers are not subject to an enforceable master netting arrangement.
Gross Amounts RecognizedGross Amounts Offset in the Condensed Consolidated Balance SheetsNet Amount Presented in the Condensed Consolidated Balance SheetsFinancial Instruments Collateral Received/Pledged (1)Cash Collateral Received/ Pledged (1)Net Amount
(In Thousands)
March 31, 2021
Derivative financial assets:
Subject to a master netting arrangement$46,117 $$46,117 $$13,195 $32,922 
Not subject to a master netting arrangement445,213 — 445,213 — — 445,213 
Total derivative financial assets$491,330 $$491,330 $$13,195 $478,135 
Derivative financial liabilities:
Subject to a master netting arrangement$112,079 $$112,079 $$112,079 $
Not subject to a master netting arrangement57,441 — 57,441 — — 57,441 
Total derivative financial liabilities$169,520 $$169,520 $$112,079 $57,441 
December 31, 2020
Derivative financial assets:
Subject to a master netting arrangement$38,554 $$38,554 $$3,771 $34,783 
Not subject to a master netting arrangement647,802 — 647,802 — — 647,802 
Total derivative financial assets$686,356 $$686,356 $$3,771 $682,585 
Derivative financial liabilities:
Subject to a master netting arrangement$153,524 $$153,524 $$153,524 $
Not subject to a master netting arrangement32,420 — 32,420 — — 32,420 
Total derivative financial liabilities$185,944 $$185,944 $$153,524 $32,420 
(1)The actual amount of collateral received/pledged is limited to the asset/liability balance and does not include excess collateral received/pledged. When excess collateral exists, the collateral shown in the table above has been allocated based on the percentage of the actual amount of collateral posted.
(6) Securities Financing Activities
Netting of Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase
The Company has various financial assets and liabilities that are subject to enforceable master netting agreements or similar agreements. The Company's derivatives that are subject to enforceable master netting agreements or similar transactions are discussed in Note 5, Derivatives and Hedging. The Company enters into agreements under which it purchases or sells securities subject to an obligation to resell or repurchase the same or similar securities. Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and recorded at the amounts at which the securities were purchased or sold plus accrued interest. The securities pledged as collateral are generally U.S. Treasury securities and other U.S. government agency securities and mortgage-backed securities.
Securities purchased under agreements to resell and securities sold under agreements to repurchase are governed by a MRA. Under the terms of the MRA, all transactions between the Company and the counterparty constitute a single business relationship such that in the event of default, the nondefaulting party is entitled to set off claims and apply property held by that party in respect of any transaction against obligations owed. Any payments, deliveries, or other transfers may be applied against each other and netted. These amounts are limited to the contract asset/liability balance, and accordingly, do not include excess collateral received or pledged. The Company offsets the
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assets and liabilities under netting arrangements for the balance sheet presentation of securities purchased under agreements to resell and securities sold under agreements to repurchase provided certain criteria are met that permit balance sheet netting.
Gross Amounts RecognizedGross Amounts Offset in the Condensed Consolidated Balance SheetsNet Amount Presented in the Condensed Consolidated Balance SheetsFinancial Instruments Collateral Received/Pledged (1)Cash Collateral Received/ Pledged (1)Net Amount
(In Thousands)
March 31, 2021
Securities purchased under agreements to resell:
Subject to a master netting arrangement$3,367,186 $2,400,665 $966,521 $966,521 $— $
Securities sold under agreements to repurchase:
Subject to a master netting arrangement$3,367,001 $2,400,665 $966,336 $966,336 $— $
December 31, 2020
Securities purchased under agreements to resell:
Subject to a master netting arrangement$986,290 $798,097 $188,193 $188,193 $— $
Securities sold under agreements to repurchase:
Subject to a master netting arrangement$982,575 $798,097 $184,478 $184,478 $— $
(1)The actual amount of collateral received/pledged is limited to the asset/liability balance and does not include excess collateral received/pledged. When excess collateral exists, the collateral shown in the table above has been allocated based on the percentage of the actual amount of collateral posted.
Collateral Associated with Securities Financing Activities
Securities sold under agreements to repurchase are accounted for as secured borrowings. The following table presents the Company's related activity, by collateral type and remaining contractual maturity.
Remaining Contractual Maturity of the Agreements
Overnight and ContinuousUp to 30 days30 - 90 daysGreater Than 90 daysTotal
(In Thousands)
March 31, 2021
Securities sold under agreements to repurchase:
U.S. Treasury and other U.S. government agencies$1,128,705 $872,063 $296,875 $960,795 $3,258,438 
Mortgage-backed securities108,563 108,563 
Total$1,237,268 $872,063 $296,875 $960,795 $3,367,001 
December 31, 2020
Securities sold under agreements to repurchase:
U.S. Treasury and other U.S. government agencies$880,200 $$102,375 $$982,575 
Mortgage-backed securities
Total$880,200 $$102,375 $$982,575 
In the event of a significant decline in fair value of the collateral pledged for the securities sold under agreements to repurchase, the Company would be required to provide additional collateral. The Company minimizes the risk by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions.
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At March 31, 2021, the fair value of collateral received related to securities purchased under agreements to resell was $3.3 billion and the fair value of collateral pledged for securities sold under agreements to repurchase was $3.3 billion. At December 31, 2020, the fair value of collateral received related to securities purchased under agreements to resell was $966 million and the fair value of collateral pledged for securities sold under agreements to repurchase was $960 million.
(7) Commitments, Contingencies and Guarantees
Commitments to Extend Credit & Standby and Commercial Letters of Credit
The following represents the Company’s commitments to extend credit, standby letters of credit and commercial letters of credit:
March 31, 2021December 31, 2020
(In Thousands)
Commitments to extend credit$28,216,551 $28,251,150 
Standby and commercial letters of credit836,442 853,450 
Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Standby and commercial letters of credit are commitments issued by the Company to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions, and expire in decreasing amounts with terms ranging from one to four years.
The credit risk involved in issuing letters of credit and commitments is essentially the same as that involved in extending loan facilities to customers. The fair value of the letters of credit and commitments typically approximates the fee received from the customer for issuing such commitments. These fees are deferred and are recognized over the commitment period. At both March 31, 2021 and December 31, 2020, the recorded amount of these deferred fees was $7 million, respectively. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary. At March 31, 2021, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit was $836 million. At March 31, 2021 and December 31, 2020, the Company had allowance for credit losses related to letters of credit and unfunded commitments recorded in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheet of $134 million and $150 million, respectively.
Loan Sale Recourse
The Company has potential recourse related to specific FNMA securitizations. At both March 31, 2021 and December 31, 2020, the amount of potential recourse was $18 million of which the Company had reserved $693 thousand which is recorded in accrued expenses and other liabilities on the Company's Unaudited Condensed Consolidated Balance Sheets for the respective periods.
The Company also issues standard representations and warranties related to mortgage loan sales to government-sponsored agencies. Although these agreements often do not specify limitations, the Company does not believe that any payments related to these representations and warranties would materially change the financial condition or results of operations of the Company. At March 31, 2021 and December 31, 2020, the Company had $3.0 million and $2.7 million, respectively, of reserves in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets related to potential losses from loans sold.
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Legal and Regulatory Proceedings
In the ordinary course of business, the Company is subject to legal proceedings, including claims, litigation, investigations and administrative proceedings, all of which are considered incidental to the normal conduct of business. The Company believes it has substantial defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to defend itself vigorously. Set forth below are descriptions of certain of the Company’s legal proceedings.

In January 2014, the Bank was named as a defendant in a lawsuit filed in the District Court of Dallas County, Texas, David Bagwell, individually and as Trustee of the David S. Bagwell Trust, et al. v. BBVA USA, et al., wherein the plaintiffs (who are the borrowers and guarantors of the underlying loans) allege that BBVA USA wrongfully sold their loans to a third party after representing that it would not do so. The plaintiffs seek unspecified monetary relief. Following trial in December 2017, the jury rendered a verdict in favor of the plaintiffs totaling $98 million. On June 27, 2018, the court entered a judgment in favor of the plaintiffs in the amount of $96 million, which includes prejudgment interest. The Bank appealed and on December 14, 2020, the appellate court issued an opinion reversing the jury verdict and entering a plaintiffs take nothing judgment in the Company’s favor on all claims. Plaintiffs are seeking further review of the appellate court’s decision. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In October 2016, BSI was named as a defendant in a putative class action lawsuit filed in the District Court of Harris County, Texas, St. Lucie County Fire District Firefighters' Pension Trust, individually and on behalf of all others similarly situated v. Southwestern Energy Company, et al., wherein the plaintiffs allege that Southwestern Energy Company, its officers and directors, and the underwriting defendants (including BSI) made inaccurate and misleading statements in the registration statement and prospectus related to a securities offering. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In March 2019, the Company and its subsidiary, Simple Finance Technology Corp., were named as defendants in a putative class action lawsuit filed in the United States District Court for the Northern District of California, Amitahbo Chattopadhyay v. BBVA USA Bancshares, Inc., et al. Plaintiff claims that Simple and the Company only permit United States citizens to open Simple accounts (which are exclusively originated through online channels). Plaintiff later amended the complaint to also take issue with BBVA USA’s practice of directing non-citizen applicants to complete the online account origination processes in a physical branch location. Plaintiff alleges that these practices constitute alienage discrimination and violations of California's Unruh Act. BBVA USA’s motion to dismiss was granted on November 2, 2020 and the plaintiffs are pursuing an appeal of that ruling. The Company believes that there are substantial defenses to these claims and intends to defend them vigorously.

In July 2019, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Alabama, Ferguson v. BBVA USA Bancshares, Inc., wherein the plaintiffs allege certain investment options within the Company’s employee retirement plan violate provisions of ERISA. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In April 2020, the Bank was named in a putative class action lawsuit filed in the District Court of Bexar County, Texas styled Zamora-Orduna Realty Group LLC v. BBVA USA, wherein plaintiffs allege the Bank tortiously failed to process certain loan requests submitted in connection with the federal Paycheck Protection Program. The plaintiffs seek an amount not less than $10 million along with other demands for unspecified monetary relief. The court recently entered an order granting the Company’s motion to dismiss with prejudice. Appellate options for the plaintiffs currently exist. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In April 2020, BBVA USA was named as a defendant in a lawsuit filed in the United States District Court for the Eastern District of Texas, Marshall Division originally styled Estech Systems, Inc. v. BBVA USA Bancshares, Inc., alleging that BBVA USA has violated intellectual property rights owned by the plaintiff in connection with various patents regarding voice-over-internet protocols (VoIP). The plaintiff alleges that BBVA USA’s use of certain phone
38

systems and technologies violate its claimed patent rights. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In June 2020, BBVA USA was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Southern District of California styled Sarah Hill v. BBVA USA, challenging BBVA USA’s assessment of certain overdraft fees. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In July 2020, BSI was named as a defendant in a putative class action lawsuit filed in the Supreme Court of the State of New York, County of New York, City of Miami Fire Fighters’ and Police Officers’ Retirement Trust, individually and on behalf of all others similarly situated v. Occidental Petroleum Corporation, et al., wherein the plaintiffs allege that Occidental Petroleum Corporation, its officers and directors, and the underwriting defendants (including BSI) made inaccurate and misleading statements in the registration statement and prospectus related to a securities offering. The plaintiffs seek unspecified monetary relief. The court recently entered an order granting the Company’s motion to dismiss. Appellate options for the plaintiffs currently exist. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In October 2020, BBVA USA was joined in a Delaware state court action styled Yatra Online v. Ebix, et al., alleging breach of contract and tortious interference with a prospective transaction between Yatra Online and Ebix. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In December 2020, BBVA USA was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Southern District of California styled Eisenberg v. BBVA USA, challenging BBVA USA’s assessment of certain overdraft fees. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In December 2020, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Alabama, Drake v. BBVA USA Bancshares, Inc., et al., wherein the plaintiff alleges certain investment options within the Company’s employee retirement plan violate provisions of ERISA. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

The Company is or may become involved from time to time in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding the Company’s business. Such matters may result in material adverse consequences, including without limitation adverse judgments, settlements, fines, penalties, orders, injunctions, alterations in the Company’s business practices or other actions, and could result in additional expenses and collateral costs, including reputational damage, which could have a material adverse impact on the Company’s business, consolidated financial position, results of operations or cash flows.

The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments. Where a loss is not probable or the amount of a probable loss is not reasonably estimable, the Company does not accrue legal reserves. At March 31, 2021, the Company had accrued legal reserves in the amount of $3 million. Additionally, for those matters where a loss is reasonably possible and the amount of loss is reasonably estimable, the Company estimates the amount of losses that it could incur beyond the accrued legal reserves, if any. Under U.S. GAAP, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote" if “the chance of the future event or events occurring is slight.” Based on information available at March 31, 2021, management estimates no reasonably possible losses in excess of related reserves. The matters underlying this estimate will change from time to time, and the actual results may vary significantly from this estimate. Those matters for which an estimate is not possible are not included within this estimate; therefore, this estimate does not represent the Company’s maximum loss exposure.
39

While the outcome of legal proceedings and the timing of the ultimate resolution are inherently difficult to predict, based on information currently available, advice of counsel and available insurance coverage, the Company believes that it has established adequate legal reserves. Further, based upon available information, the Company is of the opinion that these legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company’s financial condition or results of operations. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to the Company’s results of operations for any particular period, depending, in part, upon the size of the loss or liability imposed and the operating results for the applicable period.
Income Tax Review
The Company is subject to review and examination from various tax authorities. The Company is currently under examination by the IRS for the tax year 2018 and a number of states, and has received notices of proposed adjustments related to state income taxes due for prior years. Management believes that adequate provisions for income taxes have been recorded.
40

(8) Fair Value Measurements
See Note 19, Fair Value Measurements, in the Notes to the December 31, 2020, Consolidated Financial Statements for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.
The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis.
Fair Value Measurements at the End of the Reporting Period Using
Fair ValueQuoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable Inputs
March 31, 2021(Level 1)(Level 2)(Level 3)
(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies$101,539 $101,539 $$— 
Interest rate contracts422,427 — 422,427 — 
Foreign exchange contracts37,221 — 37,221 — 
Total trading account assets561,187 101,539 459,648 
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies2,064,210 1,637,944 426,266 — 
Mortgage-backed securities797,804 — 797,804 — 
Collateralized mortgage obligations2,545,512 — 2,545,512 — 
States and political subdivisions561 — 561 — 
Total debt securities available for sale5,408,087 1,637,944 3,770,143 
Loans held for sale295,570 — 295,570 — 
Derivative assets:
Interest rate contracts25,473 17,382 8,091 
Equity contracts304 — 304 — 
Foreign exchange contracts5,905 — 5,905 — 
Total derivative assets31,682 23,591 8,091 
Other assets:
Equity securities16,473 16,473 — — 
MSR41,432 — — 41,432 
SBIC198,200 — — 198,200 
Liabilities:
Trading account liabilities:
Interest rate contracts$123,551 $— $123,551 $— 
Foreign exchange contracts35,193 — 35,193 — 
Total trading account liabilities158,744 158,744 — 
Derivative liabilities:
Interest rate contracts2,280 — 2,129 151 
Equity contracts244 — 244 — 
Foreign exchange contracts1,844 — 1,844 — 
Total derivative liabilities4,368 — 4,217 151 

41

Fair Value Measurements at the End of the Reporting Period Using
Fair ValueQuoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable Inputs
December 31, 2020(Level 1)(Level 2)(Level 3)
(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies$109,142 $109,142 $— $— 
Interest rate contracts616,566 — 616,566 — 
Foreign exchange contracts36,741 — 36,741 — 
Total trading account assets762,449 109,142 653,307 
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies2,146,904 1,694,160 452,744 — 
Mortgage-backed securities865,648 — 865,648 — 
Collateralized mortgage obligations2,731,731 — 2,731,731 — 
States and political subdivisions636 — 636 — 
Total debt securities available for sale5,744,919 1,694,160 4,050,759 
Loans held for sale236,586 — 236,586 — 
Derivative assets:
Interest rate contracts30,716 12,819 17,897 
Equity contracts574 — 574 — 
Foreign exchange contracts1,759 — 1,759 — 
Total derivative assets33,049 15,152 17,897 
Other assets:
Equity securities14,032 14,032 — — 
MSR30,665 — — 30,665 
SBIC162,578 — — 162,578 
Liabilities:
Trading account liabilities:
Interest rate contracts$128,831 $— $128,831 $— 
Foreign exchange contracts34,598 — 34,598 — 
Total trading account liabilities163,429 163,429 — 
Derivative liabilities:
Interest rate contracts8,049 — 8,049 
Equity contracts468 — 468 — 
Foreign exchange contracts7,481 — 7,481 — 
Total derivative liabilities15,998 — 15,998 
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The following tables reconcile the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended March 31,Interest Rate Contracts, netOther Assets - MSROther Assets - SBIC
(In Thousands)
Balance, December 31, 2019$3,088 $42,022 $119,475 
Transfers into Level 3— — — 
Transfers out of Level 3— — — 
Total gains or losses (realized/unrealized):
Included in earnings (1)9,322 (12,461)27,658 
Included in other comprehensive income— — — 
Purchases, issuances, sales and settlements:
Purchases— — 9,267 
Issuances— 1,671 — 
Sales— — — 
Settlements— — — 
Balance, March 31, 2020$12,410 $31,232 $156,400 
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2020$9,322 $(12,461)$27,658 
Balance, December 31, 2020$17,897 $30,665 $162,578 
Transfers into Level 3— — — 
Transfers out of Level 3— — — 
Total gains or losses (realized/unrealized):
Included in earnings (1)(9,957)6,782 21,376 
Included in other comprehensive income— — — 
Purchases, issuances, sales and settlements:
Purchases— — 14,246 
Issuances— 3,985 — 
Sales— — — 
Settlements— — — 
Balance, March 31, 2021$7,940 $41,432 $198,200 
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2021$(9,957)$6,782 $21,376 
(1)Included in noninterest income in the Unaudited Condensed Consolidated Statements of Income.

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Assets Measured at Fair Value on a Nonrecurring Basis
Periodically, certain assets may be recorded at fair value on a non-recurring basis. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets due to impairment. The following tables represent those assets that were subject to fair value adjustments during the three months ended March 31, 2021 and 2020, and still held as of the end of the period, and the related gains and losses from fair value adjustments on assets sold during the period as well as assets still held as of the end of the period.
Fair Value Measurements at the End of the Reporting Period Using
Fair ValueQuoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable InputsTotal Gains (Losses)
March 31, 2021(Level 1)(Level 2)(Level 3)Three Months Ended March 31, 2021
(In Thousands)
Nonrecurring fair value measurements
Assets:
OREO$10,965 $— $— $10,965 $(450)
Fair Value Measurements at the End of the Reporting Period Using
Fair ValueQuoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsSignificant Unobservable InputsTotal Gains (Losses)
March 31, 2020(Level 1)(Level 2)(Level 3)Three Months Ended March 31, 2020
(In Thousands)
Nonrecurring fair value measurements
Assets:
OREO$21,392 $— $— $21,392 $(707)

The following is a description of the methodologies applied for valuing these assets:
OREO – OREO is recorded at the lower of recorded balance or fair value, which is based on appraisals and third-party price opinions, less estimated costs to sell. The fair value is classified as Level 3.
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The tables below present information about the significant unobservable inputs for material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring and nonrecurring basis.
Quantitative Information about Level 3 Fair Value Measurements
Fair Value atRange of Unobservable Inputs
March 31, 2021Valuation TechniqueUnobservable Input(s)(Weighted Average)
(In Thousands)
Recurring fair value measurements:
Interest rate contracts, net$7,940 Discounted cash flowClosing ratios (pull-through)4.8% - 99.8% (64.4%)
Cap grids0.5% - 2.5% (1.2%)
Other assets - MSRs41,432 Discounted cash flowOption adjusted spread6.0% - 8.3% (6.2%)
Constant prepayment rate or life speed0.1% - 97.1% (13.6%)
Cost to service$65 - $4,000 ($100)
Other assets - SBIC investments198,200 Transaction priceTransaction priceN/A
Nonrecurring fair value measurements:
OREO10,965 Appraised valueAppraised value8.0% (1)
(1)Represents discount to appraised value for estimated costs to sell.
Quantitative Information about Level 3 Fair Value Measurements
Fair Value atRange of Unobservable Inputs
December 31, 2020Valuation TechniqueUnobservable Input(s)(Weighted Average)
(In Thousands)
Recurring fair value measurements:
Interest rate contracts, net$17,897 Discounted cash flowClosing ratios (pull-through)18.2% - 100.0% (62.5%)
Cap grids0.3% - 2.6% (1.0%)
Other assets - MSRs30,665 Discounted cash flowOption adjusted spread6.0% - 8.3% (6.2%)
Constant prepayment rate or life speed3.5% - 90.3% (19.9%)
Cost to service$65 - $4,000 ($100)
Other assets - SBIC investments162,578 Transaction priceTransaction priceN/A
Nonrecurring fair value measurements:
OREO11,448 Appraised valueAppraised value8.0% (1)
(1)Represents discount to appraised value for estimated costs to sell.
The following provides a description of the sensitivity of the valuation technique to changes in unobservable inputs for recurring fair value measurements.
Recurring Fair Value Measurements Using Significant Unobservable Inputs
Interest Rate Contracts - Interest Rate Lock Commitments
Significant unobservable inputs used in the valuation of interest rate contracts are pull-through and cap grids. Increases or decreases in the pull-through or cap grids will have a corresponding impact in the value of interest rate contracts.
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Other Assets - MSRs
The significant unobservable inputs used in the fair value measurement of MSRs are option-adjusted spreads, constant prepayment rate or life speed, and cost to service assumptions. The impact of prepayments and changes in the option-adjusted spread are based on a variety of underlying inputs. Increases or decreases to the underlying cash flow inputs will have a corresponding impact on the value of the MSR asset. The impact of the costs to service assumption will have a directionally opposite change in the fair value of the MSR asset.
Other Assets - SBIC Investments
The significant unobservable inputs used in the fair value measurement of SBIC Investments are initially based upon transaction price. Increases or decreases in valuation factors such as recent or proposed purchase or sale of debt or equity of the issuer, pricing by other dealers in similar securities, size of position held, liquidity of the market will have a corresponding impact in the value of SBIC investments.
Fair Value of Financial Instruments
The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments, excluding financial instruments measured at fair value on a recurring basis, are as follows:
March 31, 2021
Carrying AmountEstimated Fair ValueLevel 1Level 2Level 3
(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents$15,142,724 $15,142,724 $15,142,724 $— $— 
Debt securities held to maturity12,341,963 12,497,012 2,619,569 9,337,935 539,508 
Loans63,960,242 62,435,802 — — 62,435,802 
Liabilities:
Deposits$85,970,954 $85,979,097 $— $85,979,097 $— 
FHLB and other borrowings3,517,567 3,512,568 — 3,512,568 — 
Federal funds purchased and securities sold under agreements to repurchase966,336 966,336 — 966,336 — 
December 31, 2020
Carrying AmountEstimated Fair ValueLevel 1Level 2Level 3
(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents$14,607,908 $14,607,908 $14,607,908 $— $— 
Debt securities held to maturity10,552,123 10,809,461 1,404,868 8,837,070 567,523 
Loans65,559,767 64,459,914 — — 64,459,914 
Liabilities:
Deposits$85,858,381 $85,872,252 $— $85,872,252 $— 
FHLB and other borrowings3,548,492 3,489,951 — 3,489,951 — 
Federal funds purchased and securities sold under agreements to repurchase184,478 184,478 — 184,478 — 
Fair Value Option
The Company has elected to apply the fair value option for single family real estate mortgage loans originated for resale in the secondary market. The election allows for a more effective offset of the changes in fair values of the
46

loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. The Company has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments.
At both March 31, 2021 and December 31, 2020, no loans held for sale for which the fair value option was elected were 90 days or more past due or were in nonaccrual. Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest and fees on loans in the Company's Unaudited Condensed Consolidated Statements of Income. Net gains (losses) of $(6.3) million and $2.6 million resulting from changes in fair value of these loans were recorded in noninterest income during the three months ended March 31, 2021 and 2020, respectively.
The Company also had fair value changes on forward contracts related to residential mortgage loans held for sale of approximately $11.2 million and $(5.9) million for the three months ended March 31, 2021 and 2020, respectively. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for residential mortgage loans measured at fair value.
Aggregate Fair ValueAggregate Unpaid Principal BalanceDifference
(In Thousands)
March 31, 2021
Residential mortgage loans held for sale$295,570 $289,222 $6,348 
December 31, 2020
Residential mortgage loans held for sale$236,586 $223,929 $12,657 

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(9) Comprehensive Income
Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances arising from nonowner sources. The following summarizes the change in the components of other comprehensive income.
Three Months Ended March 31,
20212020
PretaxTax Expense/ (Benefit)After-taxPretaxTax Expense/ (Benefit)After-tax
(In Thousands)
Other comprehensive income:
Unrealized holding (losses) gains arising during period from debt securities available for sale$(23,783)$(5,644)$(18,139)$130,943 $31,244 $99,699 
Less: reclassification adjustment for net gains on sale of debt securities in net income19,139 4,567 14,572 
Net change in unrealized (losses) gains on debt securities available for sale(23,783)(5,644)(18,139)111,804 26,677 85,127 
Change in unamortized net holding gains on debt securities held to maturity2,492 592 1,900 2,069 494 1,575 
Change in unamortized non-credit related impairment on debt securities held to maturity183 43 140 155 37 118 
Net change in unamortized holding gains on debt securities held to maturity2,675 635 2,040 2,224 531 1,693 
Unrealized holding (losses) gains arising during period from cash flow hedge instruments(60,428)(14,339)(46,089)360,963 86,126 274,837 
Change in defined benefit plans(3,553)(842)(2,711)2,301 547 1,754 
Other comprehensive (loss) income$(85,089)$(20,190)$(64,899)$477,292 $113,881 $363,411 
Activity in accumulated other comprehensive income (loss), net of tax was as follows:
Unrealized Gains (Losses) on Debt Securities Available for Sale and Transferred to Held to MaturityAccumulated Gains (Losses) on Cash Flow Hedging InstrumentsDefined Benefit Plan AdjustmentUnamortized Impairment Losses on Debt Securities Held to MaturityTotal
(In Thousands)
Balance, December 31, 2019$(40,080)$91,445 $(46,666)$(5,771)$(1,072)
Other comprehensive income before reclassifications99,699 278,675 378,374 
Amounts reclassified from accumulated other comprehensive (loss) income(12,997)(3,838)1,754 118 (14,963)
Net current period other comprehensive income86,702 274,837 1,754 118 363,411 
Balance, March 31, 2020$46,622 $366,282 $(44,912)$(5,653)$362,339 
Balance, December 31, 2020$64,542 $306,310 $(36,450)$(5,297)$329,105 
Other comprehensive loss before reclassifications(18,139)(12,637)(30,776)
Amounts reclassified from accumulated other comprehensive (loss) income1,900 (33,452)(2,711)140 (34,123)
Net current period other comprehensive income (loss)(16,239)(46,089)(2,711)140 (64,899)
Balance, March 31, 2021$48,303 $260,221 $(39,161)$(5,157)$264,206 

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The following table presents information on reclassifications out of accumulated other comprehensive income (loss).
Details About Accumulated Other Comprehensive Income (Loss) Components
Amounts Reclassified From Accumulated Other Comprehensive Income (Loss) (1)
Condensed Consolidated Statements of Income Caption
Three Months Ended March 31,
20212020
(In Thousands)
Unrealized Gains (Losses) on Debt Securities Available for Sale and Transferred to Held to Maturity$$19,139 Investment securities gains, net
(2,492)(2,069)Interest on debt securities held to maturity
(2,492)17,070 
592 (4,073)Income tax (expense) benefit
$(1,900)$12,997 Net of tax
Accumulated Gains (Losses) on Cash Flow Hedging Instruments$44,774 $5,459 Interest and fees on loans
(914)(419)Interest on FHLB and other borrowings
43,860 5,040 
(10,408)(1,202)Income tax expense
$33,452 $3,838 Net of tax
Defined Benefit Plan Adjustment$3,553 $(2,301)(2)
(842)547 Income tax (expense) benefit
$2,711 $(1,754)Net of tax
Unamortized Impairment Losses on Debt Securities Held to Maturity$(183)$(155)Interest on debt securities held to maturity
43 37 Income tax benefit
$(140)$(118)Net of tax
(1)Amounts in parentheses indicate debits to the Unaudited Condensed Consolidated Statements of Income.
(2)These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 17, Benefit Plans, in the Notes to the December 31, 2020, Consolidated Financial Statements for additional details).
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(10) Supplemental Disclosure for Statement of Cash Flows
The following table presents the Company’s supplemental disclosures for statement of cash flows.
Three Months Ended March 31,
20212020
(In Thousands)
Supplemental disclosures of cash flow information:
Interest paid$9,992 $207,334 
Net income taxes (refunded) paid(1,955)7,208 
Operating cash flows from operating leases12,923 12,499 
Operating cash flows from finance leases119 140 
Financing cash flows from finance leases444 414 
Supplemental schedule of noncash activities:
Transfer of loans and loans held for sale to OREO$1,789 $5,735 
Right-of-use assets obtained in exchange for lease obligations- operating leases5,145 17,568 
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company’s Unaudited Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Company's Unaudited Condensed Consolidated Statements of Cash Flows.
Three Months Ended March 31,
20212020
(In Thousands)
Cash and cash equivalents$15,142,724 $5,513,268 
Restricted cash in other assets385,013 306,798 
Total cash, cash equivalents and restricted cash shown in the statement of cash flows$15,527,737 $5,820,066 
Restricted cash primarily represents cash collateral related to the Company's derivatives as well as amounts restricted for regulatory purposes related to BSI and BBVA Transfer Holdings, Inc. Restricted cash is included in other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets.
(11) Segment Information
The Company’s operating segments are based on the Company’s organizational structure. Each segment reflects the manner in which financial information is evaluated by management. The operating segment results include certain overhead allocations and intercompany transactions. All intercompany transactions have been eliminated to determine the consolidated balances. The Company operates primarily in the United States, and, accordingly, revenue and assets outside the United States are not material. There are no individual customers whose attributable revenues exceed 10% of consolidated revenue.
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The following tables present the segment information for the Company’s existing segments.
Three Months Ended March 31, 2021
Commercial Banking and WealthRetail BankingCorporate and Investment BankingTreasuryCorporate Support and OtherConsolidated
(In Thousands)
Net interest income (expense)$312,218 $256,937 $39,204 $113,769 $(57,860)$664,268 
Allocated (credit) provision for credit losses(62,903)(3,980)(40,987)39 (12,311)(120,142)
Noninterest income65,563 115,713 43,081 8,212 71,132 303,701 
Noninterest expense149,943 307,550 49,465 4,558 107,474 618,990 
Net income (loss) before income tax expense (benefit)290,741 69,080 73,807 117,384 (81,891)469,121 
Income tax expense (benefit)61,056 14,507 15,499 24,651 (32,053)83,660 
Net income (loss)229,685 54,573 58,308 92,733 (49,838)385,461 
Less: net income attributable to noncontrolling interests179 387 15 581 
Net income (loss) attributable to BBVA USA Bancshares, Inc.$229,506 $54,573 $58,308 $92,346 $(49,853)$384,880 
Average assets$42,593,214 $17,472,177 $7,636,021 $31,172,166 $6,266,623 $105,140,201 
Three Months Ended March 31, 2020
Commercial Banking and WealthRetail BankingCorporate and Investment BankingTreasuryCorporate Support and OtherConsolidated
(In Thousands)
Net interest income (expense)$291,282 $265,462 $33,828 $(17,691)$16,574 $589,455 
Allocated provision (credit) for credit losses130,982 129,140 83,132 (195)13,932 356,991 
Noninterest income68,535 130,702 40,135 26,202 68,668 334,242 
Noninterest expense174,101 305,257 61,395 4,046 2,264,261 2,809,060 
Net income (loss) before income tax expense (benefit)54,734 (38,233)(70,564)4,660 (2,192,951)(2,242,354)
Income tax expense (benefit)11,494 (8,029)(14,819)979 5,306 (5,069)
Net income (loss)43,240 (30,204)(55,745)3,681 (2,198,257)(2,237,285)
Less: net income (loss) attributable to noncontrolling interests116 396 (11)501 
Net income (loss) attributable to BBVA USA Bancshares, Inc.$43,124 $(30,204)$(55,745)$3,285 $(2,198,246)$(2,237,786)
Average assets$41,090,411 $18,632,122 $8,272,714 $20,254,258 $8,106,608 $96,356,113 
The financial information presented 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 policies that have been developed to reflect the underlying economics of the businesses. These policies address the methodologies applied and include policies related to funds transfer pricing, cost allocations and capital allocations.
Funds transfer pricing was used in the determination of net interest income earned primarily on loans and deposits. The method employed for funds transfer pricing is a matched funding concept whereby lines of business which are fund providers are credited and those that are fund users are charged based on maturity, prepayment and/or repricing characteristics applied on an instrument level. Provision for loan losses is allocated to each segment based on internal management accounting policies for the allowance for loan losses and the related provision which
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differs from the policies for consolidated purposes. The difference between the consolidated provision for credit losses and the segments' provision for credit losses is reflected in Corporate Support and Other and reflects a current year revision in policy. Costs for centrally managed operations are generally allocated to the lines of business based on the utilization of services provided or other appropriate indicators. Revenue is recorded in the business segment responsible for the related product or service. Fee sharing is recorded to allocate portions of such revenue to other business segments involved in selling to, or providing services to, customers. Results of operations for the business segments reflect these fee sharing allocations. Capital is allocated to the lines of business based upon the underlying risks in each business considering economic and regulatory capital standards.
The development and application of these methodologies is a dynamic process. Accordingly, prior period financial results have been revised to reflect management accounting enhancements and changes in the Company's organizational structure. The 2020 segment information has been revised to conform to the 2021 presentation. In addition, unlike financial accounting, there is no authoritative literature for management accounting similar to U.S. GAAP. Consequently, reported results are not necessarily comparable with those presented by other financial institutions.
(12) Related Party Transactions
The Company enters into various transactions with BBVA that affect the Company’s business and operations. The following discloses the significant transactions between the Company and BBVA during 2021 and 2020.
The Company believes all of the transactions entered into between the Company and BBVA were transacted on terms that were no more or less beneficial to the Company than similar transactions entered into with unrelated market participants, including interest rates and transaction costs. The Company foresees executing similar transactions with BBVA in the future.
Derivatives
The Company has entered into various derivative contracts as noted below with BBVA as the upstream counterparty. The total notional amount of outstanding derivative contracts between the Company and BBVA are $3.1 billion and $3.2 billion as of March 31, 2021 and December 31, 2020, respectively. The net fair value of outstanding derivative contracts between the Company and BBVA are detailed below.
March 31, 2021December 31, 2020
(In Thousands)
Derivative contracts:
Fair value hedges$(375)$(748)
Cash flow hedges(64)(19)
Free-standing derivatives not designated as hedging instruments(29,565)(44,958)
Securities Purchased Under Agreements to Resell/ Securities Sold Under Agreements to Repurchase
The Company enters into agreements with BBVA as the counterparty under which it purchases/sells securities subject to an obligation to resell/repurchase the same or similar securities. The following represents the amount of securities purchased under agreement to resell and securities sold under agreement to repurchase where BBVA is the counterparty.
March 31, 2021December 31, 2020
(In Thousands)
Securities purchased under agreements to resell$928,235 $186,568 
Securities sold under agreements to repurchase3,291 6,426 
Borrowings
BSI, a wholly owned subsidiary of the Company, had a $420 million revolving note and cash subordination agreement with BBVA that was executed on March 16, 2012, with an original maturity date of March 16, 2018. On
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March 16, 2017, the agreement was amended to increase the available amount to $450 million and the maturity date was extended to March 16, 2023. On March 16, 2017, BSI entered into an uncommitted demand facility agreement with BBVA for a revolving loan facility up to $1 billion to be used for trade settlement purposes. BSI has not drawn against this facility in 2021. At both March 31, 2021 and December 31, 2020 there was 0 amount outstanding under the revolving note and cash subordination agreement. There was $29 thousand in interest expense related to these agreements for the three months ended March 31, 2021 and $55 thousand interest expense for the three months ended March 31, 2020 and are included in interest on other short-term borrowings within the Company's Unaudited Condensed Consolidated Statements of Income.
Service and Referral Agreements
The Company and its affiliates entered into or were subject to various service and referral agreements with BBVA and its affiliates. Each of the agreements was done in the ordinary course of business and on market terms. Income associated with these agreements was $5.0 million and $4.1 million for the three months ended March 31, 2021 and 2020, respectively, and is recorded as a component of noninterest income within the Company's Unaudited Condensed Consolidated Statements of Income. Expenses associated with these agreements was $10.5 million and $9.9 million for the three months ended March 31, 2021 and 2020, respectively, and is recorded as a component of noninterest expense within the Company's Unaudited Condensed Consolidated Statements of Income.
Series A Preferred Stock
BBVA is the sole holder of the Series A Preferred Stock that the Company issued in December 2015. At both March 31, 2021 and December 31, 2020, the carrying amount of the Series A Preferred Stock was approximately $229 million. During the three months ended March 31, 2021 and 2020, the Company paid $3.1 million and $4.2 million, respectively, of preferred stock dividends to BBVA.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies
The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices within the banking industry. The Company’s critical accounting policies relate to the allowance for loan losses and goodwill impairment. These critical accounting policies require the use of estimates, assumptions and judgments which are based on information available as of the date of the financial statements. Accordingly, as this information changes, future financial statements could reflect the use of different estimates, assumptions and judgments. Certain determinations inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. The Company’s significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in detail in Note 1 in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Additional disclosures regarding the effects of new accounting pronouncements are included in Note 1, Basis of Presentation, in the Notes to the Unaudited Condensed Consolidated Financial Statements, included herein.
Executive Overview
Financial Performance
Consolidated net income (loss) attributable to the Company for the three months ended March 31, 2021 was $384.9 million compared to $(2.2) billion during the three months ended March 31, 2020. 2020 results included $2.2 billion of goodwill impairment. The Company’s results of operations for the three months ended March 31, 2021, reflected higher net interest income, lower provision for credit losses and lower noninterest expense offset by lower noninterest income.
Net interest income totaled $664.3 million for the three months ended March 31, 2021 compared to $589.5 million for the three months ended March 31, 2020. Net interest income for the three months ended March 31, 2021 reflected the efforts to reduce deposit costs and manage the lower interest rate environment. The net interest margin for the three months ended March 31, 2021 was 2.83%, compared to 2.80% for the three months ended March 31, 2020.
For the three months ended March 31, 2021, the Company recorded $120.1 million of credit for credit losses compared to $357.0 million provision for credit losses for the three months ended March 31, 2020. For the three months ended March 31, 2021, provision for credit losses was comprised of $119.9 million of credit for loan losses and $209 thousand of credit for HTM security losses.
For the three months ended March 31, 2021, the Company recorded $119.9 million of credit for loan losses compared to $357.0 million provision for loan losses for the three months ended March 31, 2020. Credit for loan losses for the three months ended March 31, 2021 reflected improvements in macroeconomic factors and forecasts as well as the impact of net charge-offs recorded during the three months ended March 31, 2021.
Net charge-offs for the three months ended March 31, 2021 totaled $60.6 million compared to $111.8 million for the three months ended March 31, 2020. The decrease in net charge-offs for the three months ended March 31, 2021, as compared to the corresponding period in 2020, was primarily driven by a $17.8 million decrease in commercial, financial and agricultural net charge-offs, a $21.6 million decrease in consumer direct net charge-offs, and a $10.2 million decrease in consumer indirect net charge-offs.
Noninterest income decreased to $303.7 million for the three months ended March 31, 2021 compared to $334.2 million for the three months ended March 31, 2020. The primary drivers of the decrease was a $6.7 million decrease in service charges on deposit accounts, a $5.0 million decrease in investment services sales fees, a $2.8 million decrease in mortgage banking income, a $19.1 million decrease in investment securities gains, and a $7.4 million decrease in other noninterest income due to a decrease in gains on sales of fixed assets and a decrease in fair value adjustments on the SBIC investments. Offsetting these decreases was a $7.5 million increase in money transfer income.
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Noninterest expense decreased $2.2 billion to $619.0 million for the three months ended March 31, 2021 compared to $2.8 billion for the three months ended March 31, 2020. The decrease was primarily driven by $2.2 billion of goodwill impairment recorded during the three months ended March 31, 2020 and a $55.3 million decrease in other noninterest expense primarily attributable to a decrease in provision for unfunded commitments. Offsetting these decreases was a $28.6 million increase in salaries, benefits and commissions, an $11.8 million increase in professional services, and a $6.2 million increase in money transfer expense.
Income tax expense (benefit) was $83.7 million for the three months ended March 31, 2021 compared to $(5.1) million for the three months ended March 31, 2020. This resulted in an effective tax rate of 17.8% for the three months ended March 31, 2021 and 0.2% for three months ended March 31, 2020. The increase in tax rate was primarily due to an unfavorable permanent difference related to goodwill impairment during the three months ended March 31, 2020.
The Company's total assets at March 31, 2021 were $104.0 billion, an increase of $1.2 billion from December 31, 2020 levels. Total loans, excluding loans held for sale, were $64.0 billion at March 31, 2021, a decrease of $1.6 billion or 2.4% from year-end December 31, 2020 levels.
Total shareholder's equity at March 31, 2021 was $12.0 billion, an increase of $328 million compared to December 31, 2020.
The COVID-19 pandemic has caused and continues to cause significant, unprecedented disruption around the world that has affected daily living and negatively impacted the global economy. The pandemic has resulted in temporary closures of many businesses and the institution of social distancing and shelter in place requirements in many states and communities, which has increased unemployment levels and caused extreme volatility in the financial markets. As further discussed in “Analysis of Results of Operations,” during the current year, the Company observed the impact of the pandemic on its business. The reduction in interest rates had the most immediate, negative impacts on the Company’s performance. Though the Company is unable to estimate the extent of the impact, the continuing pandemic and related global economic crisis will adversely impact the Company’s future operating results.
The Company is continuing to participate in the PPP, and the PPP has been expanded and extended by recent legislation. The American Rescue Plan Act of 2021, which was enacted on March 11, 2021, provides additional funding to the PPP and expands eligibility for PPP loans. In addition, the PPP Extension Act of 2021, which was enacted on March 30, 2021, extends the PPP application deadline to May 31, 2021 and extends authorization of the PPP through June 30, 2021 to provide the SBA additional time to process applications received by the application deadline.
Capital
Under the Basel III final rule, the Company's Tier 1 and CET1 ratios were 14.58% and 14.23%, respectively, at March 31, 2021 compared to 13.61% and 13.28%, respectively, at December 31, 2020.
The Company has elected the ‘five-year transition’ for the ASC 326 accounting standard from the banking agencies’ final rule announced allows banking organizations to defer certain effects of the ASC 326 accounting standard on their regulatory capital. Specifically, this interim final rule allows for 25% of the cumulative increase in the allowance for credit losses since the adoption of ASC 326 and 100% of the day-one impact of ASC 326 adoption to be deferred for a two-year period. This two-year period will be followed by a three-year transition period to phase-in the impact of the deferred amounts on regulatory capital.
Liquidity
The Company’s sources of liquidity include customers’ interest-bearing and noninterest-bearing deposit accounts, loan principal and interest payments, investment securities, short-term investments and borrowings. As a holding company, the Parent’s primary source of liquidity is dividends from the Bank. Due to the net earnings restrictions on dividend distributions under Alabama law, the Bank must obtain regulatory approval prior to paying any dividends.
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Any dividends paid by the Parent must be set forth as capital actions in the Company's capital plan and must be made in accordance with the relevant banking law and Federal Reserve Board regulations and policy. The Company has paid no common dividends to BBVA during 2021.
Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth.

Analysis of Results of Operations
Consolidated net income (loss) attributable to the Company totaled $384.9 million and $(2.2) billion for the three months ended March 31, 2021 and 2020, respectively. The Company’s results of operations for the three months ended March 31, 2021, reflected higher net interest income, lower provision for credit losses, and lower noninterest expense offset by lower noninterest income.
Net Interest Income and Net Interest Margin
Net interest income is the principal component of the Company’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates as well as changes in the volume and mix of earning assets and interest bearing liabilities can impact net interest income. The following discussion of net interest income is presented on a fully taxable equivalent basis, unless otherwise noted, to facilitate performance comparisons among various taxable and tax-exempt assets.
Three Months Ended March 31, 2021 and 2020
Net interest income totaled $664.3 million for the three months ended March 31, 2021 compared to $589.5 million for the three months ended March 31, 2020.
Net interest income on a fully taxable equivalent basis totaled $674.7 million for the three months ended March 31, 2021, an increase of $73.2 million compared with $601.5 million for the three months ended March 31, 2020. The increase in net interest income was primarily the result of an increase in interest income on AFS and HTM debt securities and by decreases in interest expense on interest bearing deposits, FHLB and other borrowings and Federal funds purchased and securities sold under agreements to repurchase offset by a decrease in interest income on loans.
Net interest margin was 2.83% for the three months ended March 31, 2021 compared to 2.80% for the three months ended March 31, 2020. The 3 basis point increase in net interest margin was primarily driven by a reduction in deposit costs.
The fully taxable equivalent yield for the three months ended March 31, 2021, on the loan portfolio was 3.84% compared to 4.50% for the same period in 2020. The 66 basis point decrease was primarily driven by the timing of the Federal Reserve Board's decrease of benchmark rates.
The fully taxable equivalent yield on the investment securities portfolio was 2.15% for the three months ended March 31, 2021 compared to 1.18% for the three months ended March 31, 2020. The increase was a result of lower levels of premium amortization for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.
The average rate paid on interest bearing deposits was 0.15% for the three months ended March 31, 2021 compared to 1.21% for the three months ended March 31, 2020 and reflects the impact of lower funding costs on interest bearing deposit offerings including savings, money market and CD products.
The average rate paid on FHLB and other borrowings for the three months ended March 31, 2021 was 1.67% compared to 2.28% for the corresponding period in 2020.
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The following table sets forth the major components of net interest income and the related annualized yields and rates.
Table 1
Consolidated Average Balance and Yield/ Rate Analysis
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Average BalanceIncome/ExpenseYield/ RateAverage BalanceIncome/ ExpenseYield/Rate
(Dollars in Thousands)
Assets:
Interest earning assets:
Loans (1) (2) (3)$65,153,535 $616,137 3.84 %$64,875,095 $726,532 4.50 %
Debt securities – AFS5,232,378 24,437 1.89 6,669,560 (1,492)(0.09)
Debt securities – HTM (tax exempt) (3)447,685 3,428 3.11 541,954 4,690 3.48 
Debt securities – HTM (taxable)10,962,813 60,351 2.23 6,650,211 37,390 2.26 
Total debt securities - HTM11,410,498 63,779 2.27 7,192,165 42,080 2.35 
Trading account securities (3)116,989 1,021 3.54 167,070 1,122 2.70 
Securities purchased under agreements to resell (4)1,369,539 448 0.13 1,424,296 22,629 6.39 
Other (5)13,554,792 4,721 0.14 6,144,692 19,546 1.28 
Total earning assets96,837,731 710,543 2.98 86,472,878 810,417 3.77 
Noninterest earning assets:
Cash and due from banks1,064,938 537,961 
Allowance for credit losses(1,666,293)(1,064,750)
Net unrealized gain on investment securities available for sale103,693 31,630 
Other noninterest earning assets8,800,132 10,378,394 
Total assets$105,140,201 $96,356,113 
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits$15,392,159 6,173 0.16 $11,698,488 24,551 0.84 
Savings and money market accounts37,195,313 8,095 0.09 31,978,293 84,792 1.07 
Certificates and other time deposits4,168,571 6,077 0.59 10,911,541 55,399 2.04 
Total interest bearing deposits56,756,043 20,345 0.15 54,588,322 164,742 1.21 
FHLB and other borrowings3,534,609 14,516 1.67 3,736,201 21,176 2.28 
Federal funds purchased and securities sold under agreements to repurchase (4)1,358,857 576 0.17 1,451,501 22,658 6.28 
Other short-term borrowings4,413 389 35.75 20,037 352 7.07 
Total interest bearing liabilities61,653,922 35,826 0.24 59,796,061 208,928 1.41 
Noninterest bearing deposits28,497,062 20,293,503 
Other noninterest bearing liabilities3,190,828 2,765,934 
Total liabilities93,341,812 82,855,498 
Shareholder’s equity11,798,389 13,500,615 
Total liabilities and shareholder’s equity$105,140,201 $96,356,113 
Net interest income/net interest spread$674,717 2.74 %$601,489 2.36 %
Net interest margin2.83 %2.80 %
Taxable equivalent adjustment10,449 12,034 
Net interest income$664,268 $589,455 
(1)Loans include loans held for sale and nonaccrual loans.
(2)Interest income includes loan fees for rate calculation purposes.
(3)Yields are stated on a fully taxable equivalent basis assuming the tax rate in effect for each period presented.
(4)Yield/rate reflects impact of balance sheet offsetting. See Note 6, Securities Financing Activities, in the notes to the financial statements.
(5)Includes federal funds sold, interest bearing deposits, and other earning assets.

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Provision for Credit Losses
The provision for credit losses is the charge to earnings that management determines to be necessary to maintain the allowance for credit losses at a sufficient level reflecting management's estimate of expected losses over the life of the portfolio.
Three Months Ended March 31, 2021 and 2020
For the three months ended March 31, 2021, the Company recorded $120.1 million of credit for credit losses compared to $357.0 million provision for credit losses for the three months ended March 31, 2020. For the three months ended March 31, 2021, provision for credit losses was comprised of $119.9 million of credit for loan losses and $209 thousand of credit for HTM security losses.
For the three months ended March 31, 2021, the Company recorded $119.9 million of credit for loan losses compared to $357.0 million provision for loan losses for the three months ended March 31, 2020. Credit for loan losses for the three months ended March 31, 2021 reflected improvements in macroeconomic factors and forecasts as well as the impact of net charge-offs recorded during the three months ended March 31, 2021.
Net charge-offs for the three months ended March 31, 2021 totaled $60.6 million compared to $111.8 million for the three months ended March 31, 2020. The decrease in net charge-offs for the three months ended March 31, 2021, as compared to the corresponding period in 2020, was primarily driven by a $17.8 million decrease in commercial, financial and agricultural net charge-offs, a $21.6 million decrease in consumer direct net charge-offs, and a $10.2 million decrease in consumer indirect net charge-offs.
Net charge-offs were 0.38% of average loans for the three months ended March 31, 2021 compared to 0.69% of average loans for the three months ended March 31, 2020.
For further discussion and analysis of the allowance for loan losses, refer to the discussion of lending activities found later in this section. Also, refer to Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosures.
Noninterest Income
The following table presents the components of noninterest income.
Table 2
Noninterest Income
Three Months Ended March 31,
20212020
(In Thousands)
Service charges on deposit accounts$54,874 $61,531 
Card and merchant processing fees49,245 50,091 
Money transfer income32,040 24,548 
Investment services sales fees29,446 34,407 
Investment banking and advisory fees26,783 26,731 
Mortgage banking14,692 17,451 
Corporate and correspondent investment sales13,683 10,717 
Asset management fees12,587 11,904 
Bank owned life insurance4,691 4,625 
Investment securities gains, net— 19,139 
Other65,660 73,098 
Total noninterest income$303,701 $334,242 
Three Months Ended March 31, 2021 and 2020
Noninterest income was $303.7 million for the three months ended March 31, 2021, compared to $334.2 million for the three months ended March 31, 2020. The decrease in noninterest income was primarily driven by decreases
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in service charges on deposit accounts, investment services sales fees, mortgage banking income, investment securities gains and other noninterest income offset by an increases in money transfer income.
Service charges on deposit accounts represent the Company's largest category of noninterest revenue. Service charges on deposit accounts decreased to $54.9 million for the three months ended March 31, 2021, compared to $61.5 million for the three months ended March 31, 2020 driven by a general decline in consumer spending activity associated with the COVID-19 pandemic as well as the bank implementing fee waivers to offer relief for those customers impacted by the COVID-19 pandemic.
Money transfer income represents income from the Parent's wholly owned subsidiary, BBVA Transfer Holdings, Inc., which engages in money transfer services, including money transmission and foreign exchange services. Income from money transfer services increased to $32.0 million for the three months ended March 31, 2021 compared to $24.5 million for the three months ended March 31, 2020 driven by an increase in transaction volumes.
Investment services sales fees is comprised of mutual fund and annuity sales income and insurance sales fees. Income from investment services sales fees was $29.4 million for the three months ended March 31, 2021, compared to $34.4 million for the three months ended March 31, 2020 driven by a $2.3 million decline in fixed income commission fees and a $2.0 million decline in life and disability fee income.
Mortgage banking is comprised of servicing income, guarantee fees and gains on sales of mortgage loans as well as fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking income decreased $2.8 million for three months ended March 31, 2021 compared to the three months ended March 31, 2020. The decrease in mortgage banking income was primarily due to a $3.0 million decline in the MSR valuation.
Investment securities gains, net were $19.1 million for the three months ended March 31, 2020 and there were no gains for the three months ended March 31, 2021. See, “—Debt Securities” for more information related to the debt securities sales.
Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes various fees associated with letters of credit, syndications, ATMS and foreign exchange. Other noninterest income decreased to $65.7 million for the three months ended March 31, 2021, compared to $73.1 million for the three months ended March 31, 2020, was primarily due to a $6.5 million decrease in fair value adjustments on the SBIC investments and a $2.4 million decrease in gains on sales of fixed assets.
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Noninterest Expense
The following table presents the components of noninterest expense.
Table 3
Noninterest Expense
Three Months Ended March 31,
20212020
(In Thousands)
Salaries, benefits and commissions$338,695 $310,136 
Professional services82,002 70,220 
Equipment67,334 64,681 
Net occupancy40,903 39,843 
Money transfer expense23,332 17,136 
Goodwill impairment— 2,185,000 
Other66,724 122,044 
Total noninterest expense$618,990 $2,809,060 
Three Months Ended March 31, 2021 and 2020
Noninterest expense was $619.0 million for the three months ended March 31, 2021, a decrease of $2.2 billion compared to $2.8 billion for the three months ended March 31, 2020. The decrease in noninterest expense was primarily driven by a decrease in goodwill impairment and other noninterest expense, partially offset by increases in salaries, benefits and commissions, professional services and money transfer expense.
Salaries, benefits and commissions expense increased to $338.7 million for the three months ended March 31, 2021 compared to $310.1 million for the three months ended March 31, 2020 due primarily to increases in incentive and variable compensation expense.
Professional services expense represents fees incurred for the various support functions, which includes legal, consulting, outsourcing and other professional related fees. Professional services increased during the three months ended March 31, 2021, to $82.0 million compared to $70.2 million for the corresponding period in 2020 primarily due to a $7.9 million increase in contractor and other professional services and a $4.0 million increase in bankcard fees and credit recording fees.
Money transfer expense represents expense from the Parent's wholly owned subsidiary, BBVA Transfer Holdings, Inc., which engages in money transfer services, including money transmission and foreign exchange services. Money transfer expense increased to $23.3 million during the three months ended March 31, 2021, compared to $17.1 million during the three months ended March 31, 2020 driven by an increase in transaction volume.
Goodwill impairment for the three months ended March 31, 2020 was $2.2 billion compared to no goodwill impairment for the three months ended March 31, 2021.
Other noninterest expense includes FDIC insurance, marketing, communications, postage, supplies, subscriptions, provision for unfunded commitments and gains and losses on the sales and write-downs of OREO. Other noninterest expense decreased $55.3 million during the three months ended March 31, 2021, to $66.7 million compared to $122.0 million for the three months ended March 31, 2020, primarily attributable to a $40.7 million decrease in provision for unfunded commitments, a $6.0 million decrease in marketing expense, and a $2.9 million decrease in travel expense.
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Income Tax Expense
Three Months Ended March 31, 2021 and 2020
The Company’s income tax expense (benefit) totaled $83.7 million and $(5.1) million for the three months ended March 31, 2021 and 2020, respectively. The effective tax rate was 17.8% for the three months ended March 31, 2021 and 0.2% for the three months ended March 31, 2020. The higher tax rate for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 was primarily due to an unfavorable permanent difference related to goodwill impairment during the three months ended March 31, 2020.
Analysis of Financial Condition
A review of the Company’s major balance sheet categories is presented below.
Federal Funds Sold, Securities Purchased Under Agreements to Resell and Interest Bearing Deposits
Federal funds sold, securities purchased under agreements to resell and interest bearing deposits totaled $14.1 billion at March 31, 2021, compared to $13.4 billion at December 31, 2020. The increase was primarily driven by a $672 million increase in interest bearing deposits with the Federal Reserve.
Trading Account Assets
Trading account assets totaled $561 million at March 31, 2021, compared to $762 million at December 31, 2020. The decrease in trading account assets primarily related to decreases in the fair value of interest rate derivative contracts for customers.
Debt Securities
At March 31, 2021, the securities portfolio included $5.4 billion in available for sale debt securities and $12.3 billion in held to maturity debt securities for a total debt securities portfolio of $17.8 billion, an increase of $1.5 billion compared with December 31, 2020.
During the three months ended March 31, 2021, the Company purchased approximately $2.5 billion of U.S. treasury and other U.S. government agencies, agency mortgage-backed securities and agency collateralized mortgage obligations that were classified as held to maturity.
Lending Activities
The Company groups its loans into portfolio segments based on internal classifications reflecting the manner in which the allowance for loan losses is established and how credit risk is measured, monitored and reported. Commercial loans are comprised of commercial, financial and agricultural, real estate — construction, and commercial real estate–mortgage loans. Consumer loans are comprised of residential real estate — mortgage, equity lines of credit, equity loans, credit cards, consumer direct and consumer indirect loans.
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The following table presents the composition of the loan portfolio.
Table 4
Loan Portfolio
March 31, 2021December 31, 2020
(In Thousands)
Commercial loans:
Commercial, financial and agricultural$25,969,245 $26,605,142 
Real estate – construction2,396,004 2,498,331 
Commercial real estate – mortgage13,412,272 13,565,314 
Total commercial loans$41,777,521 $42,668,787 
Consumer loans:
Residential real estate – mortgage$12,823,641 $13,327,774 
Equity lines of credit2,318,208 2,394,894 
Equity loans165,209 179,762 
Credit card812,242 881,702 
Consumer direct1,797,085 1,929,723 
Consumer indirect4,266,336 4,177,125 
Total consumer loans$22,182,721 $22,890,980 
Total loans$63,960,242 $65,559,767 
Loans held for sale295,570 236,586 
Total loans and loans held for sale$64,255,812 $65,796,353 
Loans and loans held for sale, net of unearned income, totaled $64.3 billion at March 31, 2021, a decrease of $1.5 billion from December 31, 2020.
See Note 3, Loans and Allowance for Loan Losses, and Note 4, Loan Sales and Servicing, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional discussion.
Asset Quality
Nonperforming assets, which includes nonaccrual loans, nonaccrual loans held for sale, accruing loans 90 days past due, accruing TDRs 90 days past due, foreclosed real estate and other repossessed assets, totaled $1.4 billion at March 31, 2021, a decrease of $53 million, compared to $1.5 billion at December 31, 2020. The decrease in nonperforming assets was primarily driven by an $11 million decrease in commercial, financial and agricultural nonaccrual loans as well as a $23 million decrease in commercial real estate - mortgage. As a percentage of total loans and loans held for sale, foreclosed real estate and other repossessed assets, nonperforming assets were 2.21% at March 31, 2021 compared with 2.23% at December 31, 2020.
The Company defines potential problem loans as commercial loans rated substandard or doubtful that do not meet the definition of nonaccrual, TDR or 90 days past due and still accruing. See Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information on the Company’s credit grade categories, which are derived from standard regulatory rating definitions. The following table provides a summary of potential problem loans.
Table 5
Potential Problem Loans
March 31, 2021December 31, 2020
(In Thousands)
Commercial, financial and agricultural$585,584 $566,800 
Real estate – construction9,405 7,298 
Commercial real estate – mortgage261,751 179,316 
$856,740 $753,414 
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The following table summarizes asset quality information and includes loans held for sale.
Table 6
Asset Quality
March 31, 2021December 31, 2020
(In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural$529,703 $540,741 
Real estate – construction25,265 25,316 
Commercial real estate – mortgage418,935 442,137 
Residential real estate – mortgage235,441 235,463 
Equity lines of credit45,744 42,606 
Equity loans8,844 10,167 
Credit card— — 
Consumer direct13,098 10,087 
Consumer indirect23,852 24,713 
Total nonaccrual loans1,300,882 1,331,230 
Nonaccrual loans held for sale— — 
Total nonaccrual loans and loans held for sale$1,300,882 $1,331,230 
Accruing TDRs: (1)
Commercial, financial and agricultural$77,466 $17,686 
Real estate – construction142 145 
Commercial real estate – mortgage26,746 910 
Residential real estate – mortgage53,568 53,380 
Equity lines of credit— — 
Equity loans19,326 19,606 
Credit card— — 
Consumer direct23,041 23,163 
Consumer indirect— — 
 Total Accruing TDRs200,289 114,890 
Accruing TDRs classified as loans held for sale— — 
 Total Accruing TDRs (loans and loans held for sale)$200,289 $114,890 
Loans 90 days past due and accruing:
Commercial, financial and agricultural$12,609 $35,472 
Real estate – construction532 532 
Commercial real estate – mortgage7,790 1,104 
Residential real estate – mortgage41,590 45,761 
Equity lines of credit1,972 2,624 
Equity loans134 317 
Credit card22,847 21,953 
Consumer direct8,339 8,741 
Consumer indirect4,592 5,066 
Total loans 90 days past due and accruing100,405 121,570 
Loans held for sale 90 days past due and accruing— — 
Total loans and loans held for sale 90 days past due and accruing$100,405 $121,570 
Foreclosed real estate$10,965 $11,448 
Other repossessed assets$4,712 $5,846 
(1)TDR totals include accruing loans 90 days past due classified as TDR.
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Nonperforming assets, which include loans held for sale, are detailed in the following tables.
Table 7
Nonperforming Assets
March 31, 2021December 31, 2020
(In Thousands)
Nonaccrual loans$1,300,882 $1,331,230 
Loans 90 days or more past due and accruing (1)100,405 121,570 
TDRs 90 days or more past due and accruing636 556 
Nonperforming loans1,401,923 1,453,356 
Foreclosed real estate10,965 11,448 
Other repossessed assets4,712 5,846 
Total nonperforming assets$1,417,600 $1,470,650 
(1)Excludes loans classified as TDR.
Table 8
Asset Quality Ratios
March 31, 2021December 31, 2020
Asset Quality Ratios:
Nonperforming loans and loans held for sale as a percentage of loans and loans held for sale (1)2.18 %2.21 %
Nonperforming assets as a percentage of total loans and loans held for sale, foreclosed real estate, and other repossessed assets (2)2.21 2.23 
Allowance for loan losses as a percentage of loans2.34 2.56 
Allowance for loan losses as a percentage of nonperforming loans (3)106.92 115.56 
(1)Nonperforming loans include nonaccrual loans and loans held for sale (including nonaccrual loans classified as TDR), accruing loans 90 days past due and accruing TDRs 90 days past due.
(2)Nonperforming assets include nonperforming loans, foreclosed real estate and other repossessed assets.
(3)Nonperforming loans include nonaccrual loans (including nonaccrual loans classified as TDR), accruing loans 90 days past due and accruing TDRs 90 days past due.
The following table provides a rollforward of nonaccrual loans and loans held for sale.
Table 9
Rollforward of Nonaccrual Loans
Three Months Ended March 31,
20212020
(In Thousands)
Balance at beginning of period,$1,331,230 $606,843 
Additions146,617 200,156 
Returns to accrual(16,390)(18,779)
Loan sales— — 
Payments and paydowns(135,491)(68,185)
Transfers to foreclosed real estate(1,789)(5,825)
Charge-offs(23,295)(37,494)
Balance at end of period$1,300,882 $676,716 
When borrowers are experiencing financial difficulties, the Company, in order to assist the borrowers in repaying the principal and interest owed to the Company, may make certain modifications to the loan agreement. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted resulting in a classification of the loan as a TDR. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan term. The financial effects of TDRs are reflected in the components that comprise the allowance for loan losses in either the amount of charge-offs or loan loss provision and period-end allowance levels. All TDRs are considered to be
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impaired loans. Refer to Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.
The following table provides a rollforward of TDR activity, excluding loans held for sale.
Table 10
Rollforward of TDR Activity
Three Months Ended March 31,
20212020
(In Thousands)
Balance at beginning period$301,610 $215,481 
New TDRs332,933 48,812 
Payments/Payoffs(25,068)(13,259)
Charge-offs(2,007)(743)
Transfers to foreclosed real estate— — 
Balance at end of period$607,468 $250,291 
The Company’s aggregate recorded investment in loans modified through TDRs was $607 million at March 31, 2021 compared to $302 million at December 31, 2020. Included in these amounts are $200 million at March 31, 2021 and $115 million at December 31, 2020 of accruing TDRs. Accruing TDRs are not considered nonperforming because they are performing in accordance with the restructured terms.
In response to the COVID-19 pandemic, beginning in March 2020 the Company began providing financial hardship relief in the form of payment deferrals and forbearances to consumer and commercial customers across a wide array of lending products, as well as the suspension of vehicle repossessions and home foreclosures. The payment deferrals and forbearances are currently expected to cover periods of three to six months. In most cases, if the loans have been restructured for COVID-19 related hardships and meet certain criteria under the CARES Act they are not classified as TDRs and do not result in loans being placed on nonaccrual status.  At March 31, 2021, the Company had outstanding deferrals on approximately three thousand loans with an amortized cost of $279 million compared to approximately seven thousand loans with an amortized cost basis of $448 million at December 31, 2020.
Allowance for Loan Losses
Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb expected losses over the life of the loan portfolio. The Company adopted ASC 326 effective January 1, 2020. See Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosures regarding the allowance for loan losses.
The total allowance for loan losses decreased to $1.5 billion at March 31, 2021, from $1.7 billion at December 31, 2020.
The decrease in the allowance for loan losses during the three months ended March 31, 2021, reflected a decrease in expected losses over the life of the loan portfolio. The most significant driver of this decrease is related to the recognition of the updated macroeconomic scenario, which showed substantial improvement in the outlook for the macroeconomy as well as net negative loan growth. The macroeconomic forecast utilized as of March 31, 2021, represented the best information available at the end of the reporting period, and included the following considerations:
Steep economic contraction in 2020, with a strong recovery beginning in the latter half of 2020 and continuing throughout the near term.
As compared to the prior quarter, the updated forecast includes general improvement in the forecast as compared to Q4, with GDP showing the largest improvement, reflecting a better 3rd quarter than expected, and slightly better unemployment rate outlook.
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Updated BBB spread to reflect a more positive economic outlook.
Although management’s overall economic outlook improved at March 31, 2021 from the prior quarters, risks to the downside remained. Due to this remaining downside risk, management continued to include a downside scenario adjustment.
Management recognized a qualitative factor adjustment in 2020, separately from the baseline scenario considerations as oil prices are not a significant driver of the econometric models used in the baseline allowance calculation. This qualitative factor adjustment remained in place as of March 31, 2021, due to concerns around continued volatility in oil prices.
The ratio of the allowance for loan losses to total loans was 2.34% at March 31, 2021 compared to 2.56% at December 31, 2020. Nonperforming loans were $1.4 billion at March 31, 2021 compared to $1.5 billion at December 31, 2020.
Net charge-offs were 0.38% of average loans for the three months ended March 31, 2021 compared to 0.69% of average loans for the three months ended March 31, 2020. The decrease in net charge-offs for the three months ended March 31, 2021, as compared to the corresponding period in 2020, was primarily driven by a $17.8 million decrease in commercial, financial and agricultural net charge-offs, a $21.6 million decrease in consumer direct net charge-offs, and a $10.2 million decrease in consumer indirect net charge-offs.
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The following table sets forth information with respect to the Company’s loans, excluding loans held for sale, and the allowance for loan losses.
Table 11
Summary of Loan Loss Experience
Three Months Ended March 31,
20212020
(Dollars in Thousands)
Average loans outstanding during the period$64,931,186 $64,792,123 
Allowance for loan losses, beginning of period, prior to adoption of ASC 3261,679,474 920,993 
Impact of adopting ASC 326— 184,931 
Allowance for loan losses, beginning of period, after adoption of ASC 3261,679,474 1,105,924 
Charge-offs:
Commercial, financial and agricultural12,942 24,207 
Real estate – construction— 27 
Commercial real estate – mortgage44 60 
Residential real estate – mortgage735 464 
Equity lines of credit352 1,155 
Equity loans660 380 
Credit card20,412 21,430 
Consumer direct36,365 58,931 
Consumer indirect19,851 35,505 
Total charge-offs91,361 142,159 
Recoveries:
Commercial, financial and agricultural11,735 5,193 
Real estate – construction151 40 
Commercial real estate – mortgage26 133 
Residential real estate – mortgage312 636 
Equity lines of credit580 619 
Equity loans201 168 
Credit card2,480 1,913 
Consumer direct6,206 7,205 
Consumer indirect9,038 14,454 
Total recoveries30,729 30,361 
Net charge-offs60,632 111,798 
Total (credit) provision for loan losses(119,933)356,946 
Allowance for loan losses, end of period$1,498,909 $1,351,072 
Net charge-offs to average loans0.38 %0.69 %

Concentrations
The following tables provide further details regarding the Company’s commercial, financial and agricultural, commercial real estate, residential real estate and consumer portfolio segments as of March 31, 2021 and December 31, 2020.
Commercial, Financial and Agricultural
In accordance with the Company's lending policy, each commercial loan undergoes a detailed underwriting
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process, which incorporates the Company's risk tolerance, credit policy and procedures. In addition, the Company has a graduated approval process which accounts for the quality, loan type and total exposure of the borrower. The Company has also adopted an internal exposure-based limit which is based on a variety of risk factors, including but not limited to the borrower industry.
The commercial, financial and agricultural portfolio segment totaled $26.0 billion at March 31, 2021 compared to $26.6 billion at December 31, 2020. This segment consists primarily of large national and international companies and small to mid-sized companies. This portfolio segment also contains owner occupied commercial real estate loans. Loans in this portfolio are generally underwritten individually and are secured with the assets of the company, and/or the personal guarantees of the business owners. The Company minimizes the risk associated with this portfolio segment by various means, including maintaining prudent advance rates, financial covenants, and obtaining personal guarantees from the principals of the borrower.
The following table provides details related to the commercial, financial, and agricultural portfolio segment.
Table 12
Commercial, Financial and Agricultural
March 31, 2021December 31, 2020
IndustryRecorded InvestmentNonaccrualAccruing TDRsAccruing Greater Than 90 Days Past DueRecorded InvestmentNonaccrualAccruing TDRsAccruing Greater Than 90 Days Past Due
(In Thousands)
Autos, Components and Durable Goods$1,795,143 $16,935 $21,601 $$1,856,157 $34,560 $16,464 $3,233 
Basic Materials555,314 928 — 496,824 903 — 
Capital Goods & Industrial Services2,398,554 7,565 419 — 2,215,646 4,643 451 — 
Construction & Construction Materials828,132 24,163 — — 706,978 30,837 — — 
Consumer570,380 37,905 — 5,502 646,965 25,627 — — 
Healthcare3,243,235 33,994 277 — 3,064,991 7,966 285 — 
Energy2,056,417 240,256 54,716 — 2,388,611 244,001 — — 
Financial Services900,434 31,747 — 1,555 958,893 44,824 — 5,345 
General Corporates1,776,004 17,873 — 2,407 2,214,504 24,315 — 24,591 
Institutions3,471,469 12,209 — — 3,442,650 12,755 — — 
Leisure and Consumer Services3,633,209 101,735 278 3,132 3,709,817 105,688 296 — 
Real Estate1,344,520 — — — 1,525,687 — — — 
Retail542,176 3,281 175 — 475,655 2,521 190 — 
Telecoms, Technology & Media1,407,459 1,027 — — 1,454,105 2,045 — — 
Transportation972,915 85 — — 983,699 56 — 2,299 
Utilities473,884 — — — 463,960 — — — 
Total Commercial, Financial and Agricultural$25,969,245 $529,703 $77,466 $12,609 $26,605,142 $540,741 $17,686 $35,472 
Commercial Real Estate
The commercial real estate portfolio segment includes the commercial real estate and real estate - construction loan portfolios. Commercial real estate loans totaled $13.4 billion and $13.6 billion at March 31, 2021 and December 31, 2020, respectively, and real estate — construction loans totaled $2.4 billion and $2.5 billion at March 31, 2021 and December 31, 2020, respectively.
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This portfolio segment consists primarily of extensions of credits to real estate developers and investors for the financing of land and buildings, whereby the repayment is generated from the sale of the real estate or the income generated by the real estate property. The Company attempts to minimize risk on commercial real estate properties by various means, including requiring collateral with values that exceed the loan amount, adequate cash flow to service the debt, and the personal guarantees of principals of the borrowers. In order to minimize risk on the construction portfolio, the Company has established an operations group outside of the lending staff which is responsible for loan disbursements during the construction process.
The following tables present the geographic distribution for the commercial real estate and real estate — construction portfolios.
Table 13
Commercial Real Estate
March 31, 2021December 31, 2020
StateRecorded InvestmentNonaccrualAccruing TDRsAccruing Greater Than 90 Days Past DueRecorded InvestmentNonaccrualAccruing TDRsAccruing Greater Than 90 Days Past Due
(In Thousands)
Alabama$420,397 $18,568 $$— $416,431 $19,215 $11 $192 
Arizona1,023,228 74,009 — 692 1,030,026 77,739 — — 
California1,808,443 53,052 — 1,657 1,958,178 52,730 — 28 
Colorado746,986 9,327 — — 751,921 9,579 — — 
Florida1,186,018 6,745 — 926 1,189,742 6,972 — — 
New Mexico95,890 2,974 — — 98,356 3,104 — 580 
Texas3,756,210 103,126 881 4,515 3,783,877 101,907 899 304 
Other4,375,100 151,134 25,864 — 4,336,783 170,891 — — 
$13,412,272 $418,935 $26,746 $7,790 $13,565,314 $442,137 $910 $1,104 
Table 14
Real Estate – Construction
March 31, 2021December 31, 2020
StateRecorded InvestmentNonaccrualAccruing TDRsAccruing Greater Than 90 Days Past DueRecorded InvestmentNonaccrualAccruing TDRsAccruing Greater Than 90 Days Past Due
(In Thousands)
Alabama$71,384 $— $— $115 $86,622 $— $— $115 
Arizona180,317 — —