What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-23 compared with 2021-02-24 · 342 added, 352 removed, 2484 unchanged (22% of the section changed)

8 unchanged sentences

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

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We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws, the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

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Assessment of the allowance for loan losses related to loans collectively evaluated for impairment

As discussed in Note 1 to the consolidated financial statements, the Company adopted ASU No.

2016-13, Financial Instruments – Credit Losses (ASC Topic 326) as of January 1, 2020.

The total allowance for credit losses as of January 1, 2020 was $139.6 million, of which $139.2 million related to the allowance for credit losses on loans and leases evaluated on a collective basis (the January 1, 2020 collective ACL).

As discussed in Notes 1 and 2 to the consolidated financial statements, the allowance for credit losses related to loans evaluated on a collective basis (the December 31, 2020 collective ACL) was $216.7 million of a total allowance for credit losses of $220.8 million as of December 31, 2020.

As discussed in Notes 1 and 2 to the consolidated financial statements, the allowance for credit losses related to loans evaluated on a collective basis (the December 31, 2021 collective ACL) was $149.9 million of a total allowance for credit losses of $150.0 million as December 31, 2021.

The allowance for credit losses on loans and leases is measured on a collective (pool) basis whereas loans are aggregated into pools based on similar risk characteristics.

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The allowance is further adjusted for certain qualitative factors not included in historical loss rates or the macroeconomic forecast, which include changes in portfolio composition and characteristics, underwriting practices, watchlist trends, or significant unique events or conditions.

We identified the assessment of the January 1, 2020 collective ACL and the December 31, 2020 collective ACL as a critical audit matter.

We identified the assessment of the December 31, 2021 collective ACL as a critical audit matter.

A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to significant measurement uncertainty.

Specifically, this assessment encompassed the evaluation of the conceptual soundness of the average historical loss model used to estimate the collective ACL, including the following key factors and assumptions (1) historical losses, (2) prepayment assumptions and the reasonable and supportable forecast period, and (3) the development and evaluation of qualitative adjustments.

Specifically, this assessment encompassed the evaluation of the conceptual soundness of the average historical loss model used to estimate the collective ACL, including the following key factors and assumptions (1) historical losses, (2) the reasonable and supportable forecast period, and (3) the development and evaluation of qualitative adjustments.

In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

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• evaluating the collective ACL methodology and model for conceptual soundness by inspecting the methodology and model documentation to determine whether the methodology and model are suitable for intended use

• testing the historical losses period and the reasonable and supportable forecast period by comparing it to the Company’s business environment and relevant industry practices

• testing the historical losses period and the reasonable and supportable forecast period by comparing them to the Company’s business environment and relevant industry practices

• evaluating the methodology used to develop the qualitative factors and the effect of those factors on the collective ACL compared with changes in the nature and volume of the entity’s financial assets and identified limitations of the underlying quantitative model.

We assessed the sufficiency of the audit evidence obtained related to the Company’s January 1, 2020 and December 31, 2020 collective ACL by evaluating the cumulative results of the audit procedures, qualitative aspects of the Company’s accounting practices and potential bias in the accounting estimates.

We assessed the sufficiency of the audit evidence obtained related to the Company’s December 31, 2021 collective ACL by evaluating the cumulative results of the audit procedures, qualitative aspects of the Company’s accounting practices and potential bias in the accounting estimates.

We have served as the Company’s auditor since 1971.

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Loans held for sale (including $ 5,570,000 and $ 39,396,000 of residential mortgage loans carried at fair value at December 31, 2021 and 2020, respectively)

45,089 13,809

Investment securities:

Available for sale debt, at fair value (amortized cost of $ 12,097,533,000 and allowance for credit losses of $ — at December 31, 2020)

Available for sale debt, at fair value (amortized cost of $ 14,419,133,000 and $ 12,097,533,000 at December 31, 2021 and 2020, respectively, and allowance for credit losses of $ — at both December 31, 2021 and 2020)

14,450,027 12,449,264

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14,699,511 12,645,693

Long-term securities purchased under agreements to resell

Federal funds sold

Securities purchased under agreements to resell

1,625,000 850,000

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506,862 567,248

$ 36,689,088 $ 32,922,974

LIABILITIES AND STOCKHOLDERS’ EQUITY

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stockholders’ equity:

Preferred stock, $ 1 par value

Authorized 2,000,000 shares;

issued none at December 31, 2020 and 6,000 shares at December 31, 2019

Common stock, $ 5 par value

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236,278 216,793 237,487

Interest on federal funds sold and short-term securities purchased under agreements to resell

Interest on long-term securities purchased under agreements to resell

Interest on federal funds sold

Interest on securities purchased under agreements to resell

37,377 40,647 15,898

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Interest on other borrowings

( 24 ) 1,014 952

Total interest expense

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560,393 505,867 524,703

INVESTMENT SECURITIES GAINS (LOSSES), NET

INVESTMENT SECURITIES GAINS, NET

30,059 11,032 3,626

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4,450 ( 3,178 ) 1,167

Unrealized gains on cash flow hedge derivatives

62,383 23,456 6,855

Unrealized gains (losses) on cash flow hedge derivatives ( 18,120 ) 62,383 23,456

Other comprehensive income (loss)

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Comprehensive income 286,293 574,818 597,825

Less non-controlling interest expense (income) ( 172 ) 1,481 4,672

Less non-controlling interest (income) loss 9,825 ( 172 ) 1,481

Comprehensive income attributable to Commerce Bancshares, Inc.

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Balance at December 31, 2018

Adoption of ASU 2018-02

$ 144,784 $ 559,432 $ 2,084,824 $ 241,163 $ ( 34,236 ) $ ( 64,669 ) $ 5,851 $ 2,937,149

Adoption of ASU 2016-01

33,320 ( 33,320 ) —

Balance December 31, 2017, adjusted 144,784 535,407 1,815,360 251,762 ( 14,473 ) ( 16,280 ) 1,624 2,718,184

Net income 421,231 1,481 422,712

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Purchases of treasury stock ( 134,904 ) ( 134,904 )

Accelerated share repurchase agreements ( 150,000 ) ( 150,000 )

Cash dividends paid on common stock ($ .898 per share)

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144,784 563,978 2,151,464 201,562 ( 37,548 ) 110,444 3,788 3,138,472

Adoption of ASU 2016-13

Adjusted Balance December 31, 2019

144,784 563,978 2,151,464 205,328 (37,548) 110,444 3,788 3,142,238

354,057 ( 172 ) 353,885

Other comprehensive income 220,933 220,933

Distributions to non-controlling interest ( 691 ) ( 691 )

Redemption of preferred stock ( 144,784 ) ( 5,216 ) ( 150,000 )

Purchases of treasury stock ( 54,163 ) ( 54,163 )

Accelerated share repurchase agreement ( 150,000 ) ( 150,000 )

Cash dividends paid on common stock ($ .980 per share)

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Balance at December 31, 2020

Adoption of ASU 2016-13

Balance December 31, 2019, adjusted 144,784 563,978 2,151,464 205,328 ( 37,548 ) 110,444 3,788 3,142,238

— 589,352 2,436,288 73,000 ( 32,970 ) 331,377 2,925 3,399,972

Net income 530,765 9,825 540,590

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Purchases of treasury stock ( 129,361 ) ( 129,361 )

Redemption of preferred stock ( 144,784 ) ( 5,216 ) ( 150,000 )

Sale of non-controlling interest of subsidiary 659 ( 659 ) —

Cash dividends paid on common stock ($ 1.000 per share)

( 122,693 ) ( 122,693 )

Cash dividends paid on preferred stock ($ 1.125 per depositary share)

( 6,750 ) ( 6,750 )

Stock-based compensation 15,415 15,415

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Balance at December 31, 2021

$ — $ 610,804 $ 2,689,894 $ 92,493 $ ( 32,973 ) $ 77,080 $ 11,026 $ 3,448,324

See accompanying notes to consolidated financial statements.

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Deferred income tax (benefit) expense 25,613 ( 19,540 ) 14,195

Investment securities (gains) losses, net (A) ( 11,032 ) ( 3,626 ) 488

Investment securities gains, net (A) ( 30,059 ) ( 11,032 ) ( 3,626 )

Net gains on sales of loans held for sale ( 22,641 ) ( 16,406 ) ( 10,127 )

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Increase (decrease) in interest payable ( 3,179 ) ( 9,444 ) 5,586

Increase in income taxes payable 12,345 14,465 12,288

Increase (decrease) in income taxes payable ( 5,175 ) 12,345 14,465

Gain on sale of Corporate Trust business — — ( 11,472 )

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INVESTING ACTIVITIES

Distributions received from equity-method investment

Proceeds from sales of investment securities (A)

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( 5,947,891 ) ( 6,991,460 ) ( 1,863,180 )

Net increase in loans

Net (increase) decrease in loans

1,134,533 ( 1,643,775 ) ( 647,890 )

Long-term securities purchased under agreements to resell

Securities purchased under agreements to resell

( 900,000 ) — ( 150,000 )

Repayments of long-term securities purchased under agreements to resell

Repayments of securities purchased under agreements to resell

Purchases of premises and equipment

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The Company also maintains commercial banking offices in Dallas, Houston, Cincinnati, Nashville, Des Moines, Indianapolis, and Grand Rapids and operates a commercial payments business with sales representatives covering the continental U.S.

Basis of Presentation

Basis of Presentation, Use of Estimates, and Subsequent Events

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries.

All material inter-company transactions have been eliminated through consolidation.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Such reclassifications had no effect on net income or total assets.

The Company follows accounting principles generally accepted in the United States of America (GAAP) and reporting practices applicable to the banking industry.

The preparation of financial statements under GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and notes.

The preparation of financial statements under GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and notes.

These estimates are based on information available to management at the time the estimates are made.

While the consolidated financial statements reflect management’s best estimates and judgments, actual results could differ from those estimates.

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries (after elimination of all material intercompany balances and transactions).

Certain prior year amounts have been reclassified to conform to the current year presentation.

Such reclassifications had no effect on net income or total assets.

Management has evaluated subsequent events for potential recognition or disclosure through the date these consolidated financial statements were issued.

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These interests include certain investments in entities accounted for using the equity method of accounting, as well as affordable housing limited partnership interests, holdings in its investment portfolio of various asset and mortgage-backed bonds that are issued by securitization trusts, and managed discretionary trust assets that are not included in the accompanying consolidated balance sheets.

Adoption of ASU 2016-13

The Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326):

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Results for reporting periods beginning on or after January 1, 2020 are presented under CECL, while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Company recorded a net increase to retained earnings of $ 3.8 million as of January 1, 2020 for the cumulative effect of adopting CECL.

Company recorded a net increase to retained earnings of $ 3.8 million as of January 1, 2020 for the cumulative effect of adopting CECL.

The transition adjustment included a decrease to the allowance for credit losses of $ 29.7 million related to the commercial loan portfolio, an increase to the allowance for credit losses of $ 8.7 million related to the personal banking loan portfolio, an increase to the liability for unfunded commitments of $ 16.1 million, and a tax impact of $ 1.2 million.

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Restricted cash is included in other assets in the consolidated balance sheets and totaled $ 17.4 million and $ 23.4 million at December 31, 2021 and 2020, respectively.

During the year, the Federal Reserve System, which historically required the Bank to maintain cash balances at the Federal Reserve Bank, reduced the reserve requirement ratios to zero percent effective March 26, 2020.

During 2020, the Federal Reserve System, which historically required the Bank to maintain cash balances at the Federal Reserve Bank, reduced the reserve requirement ratios to zero percent effective March 26, 2020.

Other interest earning cash balances held at the Federal Reserve Bank totaled $ 4.0 billion at December 31, 2021.

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Origination fee income received on loans and amounts representing the estimated direct costs of origination are deferred and amortized to interest income over the life of the loan using the interest method.

Loans are presented net of the allowance for credit losses on loans.

Interest on loans is accrued based upon the principal amount outstanding.

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The Company has also made the election that all interest accrued but ultimately not received is reversed against interest income.

Loan and commitment fees, net of costs, are deferred and recognized in income over the term of the loan or commitment as an adjustment of yield.

Annual fees charged on credit card loans are capitalized to principal and amortized over 12 months to loan fees and sales.

Loan and commitment fees, net of costs, are deferred and recognized in interest income over the term of the loan or commitment as an adjustment of yield.

Annual fees charged on credit card loans are capitalized to principal and amortized over

12 months to loan fees and sales.

Other credit card fees, such as cash advance fees and late payment fees, are recognized in income as an adjustment of yield when charged to the cardholder’s account.

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Loans are placed on non-accrual status when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment.

Business, construction real estate, business real estate, and personal real estate loans that are contractually 90 days past due as to principal and/or interest payments are generally placed on non-accrual, unless they are both well-secured and in the process of collection.

Business, construction real estate, business real estate, and personal real estate loans that are contractually 90 days past due as to principal and/or interest payments are generally placed on non-accrual status, unless they are both well-secured and in the process of collection.

Consumer, revolving home equity and credit card loans are exempt under regulatory rules from being classified as non-accrual.

When a loan is placed on non-accrual status, any interest previously accrued but not collected is reversed against current income, and the loan is charged off to the extent uncollectible.

When a loan is placed on non-accrual status, any interest previously accrued but not collected is reversed against current interest income, and the loan is charged off to the extent uncollectible.

Principal and interest payments received on non-accrual loans are generally applied to principal.

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Troubled debt restructurings that are performing under their contractual terms continue to accrue interest, which is recognized in current earnings.

The Company follows the guidance under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which was signed into law on March 27, 2020 and provided financial institutions the option to suspend the requirement to categorize certain modifications related to the global Coronavirus Disease 2019 (COVID-19) pandemic as troubled debt restructurings.

The 2021 Consolidated Appropriations Act signed December 27, 2020 extends this temporary suspension through January 1, 2022.

Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which was signed into law on March 27, 2020, provided financial institutions an option to suspend the requirement to categorize certain loan modifications related to the global Coronavirus Disease 2019 (COVID-19) pandemic as troubled debt restructurings.

The 2021 Consolidated Appropriations Act signed on December 27, 2020 extends this temporary suspension through January 1, 2022.

The Company elected such option from March 27, 2020 through December 31, 2021.

Refer to Note 2 for additional information.

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The allowance for credit losses on loans is measured using relevant information about past events, including historical credit loss experience on loans with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the loans.

An allowance will be created upon origination or acquisition

of a loan and is updated at subsequent reporting dates.

An allowance will be created upon origination or acquisition of a loan and is updated at subsequent reporting dates.

The methodology is applied consistently for each reporting period and reflects management’s current expectations of credit losses.

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Purchase premiums and discounts are amortized to interest income using a level yield method over the estimated lives of the securities.

For certain callable debt securities purchased at a premium, the amortization is instead recorded to the earliest call date.

For certain callable debt securities purchased at a premium, the amortization is recorded to the earliest call date.

For mortgage and asset-backed securities, prepayment experience is evaluated quarterly to determine if a change in a bond's estimated remaining life is necessary.

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Accrued interest receivable on available for sale debt securities is reported in other assets on the consolidated balance sheet.

The Company has elected the practical expedient to exclude the accrued interest from all required disclosures of amortized cost.

The Company has elected the practical expedient to exclude the accrued interest from all required disclosures of amortized cost of debt securities.

Additionally, an election was made not to measure an allowance for credit losses for accrued interest receivables.

Interest accrued but not received is reversed against interest income.

Equity securities include common and preferred stock with readily determinable fair values.

These are also carried at fair value.

Equity securities include common and preferred stock and are carried at fair value.

Certain equity securities do not have readily determinable fair values.

The Company has elected under ASU 2016-01 to measure these equity securities without a readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer.

The Company has not recorded any impairment or other adjustments to the carrying amount of these equity investments without readily determinable fair values.

Other securities include Federal Reserve Bank stock and Federal Home Loan Bank stock, which are held for debt and regulatory purposes.

They are carried at cost and periodically evaluated for impairment.

Also included are equity method investments held by the Bank and investments in portfolio concerns, which consist of both debt and equity instruments, held by the Company’s private equity subsidiary.

The Company has not recorded any impairment or other adjustments to the carrying amount of these equity securities without readily determinable fair values.

Other securities include the Company's investments in Federal Reserve Bank stock and Federal Home Loan Bank stock, equity method investments, and private equity investments.

Federal Reserve Bank stock and Federal Home Loan Bank stock are held for debt and regulatory purposes, are carried at cost and are periodically evaluated for impairment.

The Company's equity method investments are carried at cost, adjusted to reflect the Company's portion of income, loss, or dividends of the investee.

The Company's private equity investments are carried at fair value in accordance with ASC 946-10-15, with changes in fair value reported in current earnings.

The Company's private equity investments in portfolio concerns, consisting of both debt and equity instruments, are held by the Company’s private equity subsidiary, which is a small business investment company licensed by the Small Business Administration.

The Company's private equity investments are carried at fair value in accordance with investment company accounting guidance (ASC 946-10-15), with changes in fair value reported in current income.

In the absence of readily ascertainable market values, fair value is estimated using internally developed methods.

Changes in fair value which are recognized in current earnings and gains and losses from sales are included in investment securities gains (losses), net in the consolidated statements of income.

Changes in fair value which are recognized in current income and gains and losses from sales are included in investment securities gains (losses), net, in the consolidated statements of income.

Trading account securities, which are debt securities bought and held principally for the purpose of resale in the near term, are carried at fair value.

1 unchanged sentence

Purchases and sales of securities are recognized on a trade date basis.

A receivable or payable is recognized for pending transaction settlements.

A receivable or payable is recognized for transaction pending settlements.

Allowance for Credit Losses on Available for Sale Debt Securities

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These valuation adjustments, in addition to gains and losses realized on sales and net operating expenses, are recorded in other non-interest expense.

Foreclosed assets are included in other assets on the consolidated balance sheets.

Goodwill and Intangible Assets

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A valuation allowance has been established, through a charge to earnings, to the extent the amortized cost exceeds the estimated fair value.

However, the Company has not recorded other-than-temporary impairment losses on either of these types of intangible assets.

However, the Company has not recorded other-than-temporary impairment losses on its intangible assets.

Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws.

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The Company monetized its interest rate floors that had previously been designated and qualified as cash flow hedges.

The resulting unrealized gain is recorded in accumulated other comprehensive income and recognized in interest and fees on loans in the accompanying income statements as the underlying forecasted transactions impact earnings through the original maturity dates of the monetized interest rate floors.

The resulting

unrealized gain is initially recorded in accumulated other comprehensive income and reclassified into interest and fees on loans in the accompanying consolidated income statements as the underlying forecasted transactions impact earnings through the original maturity dates of the monetized interest rate floors.

The Company has master netting arrangements with various counterparties but does not offset derivative assets and liabilities under these arrangements in its consolidated balance sheets.

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In accordance with ASU 2017-07, the Company has reported the service cost component of net periodic pension cost in salaries and employee benefits in the accompanying consolidated statements of income, while the other components are reported in other non-interest expense.

The funded status of the plan is recognized as an asset or liability in the consolidated balance sheets, and changes in that funded status are recognized in the year in which the changes occur through other comprehensive income.

The funded status of the plan is recognized as an other asset or other liability in the consolidated balance sheets, and changes in that funded status are recognized in the year in which the changes occur through other comprehensive income.

Plan assets and benefit obligations are measured as of the fiscal year end of the plan.

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Stock-Based Compensation

The Company’s stock-based employee compensation plan is described in Note 11, Stock-Based Compensation and Directors Stock Purchase Plan.

The Company’s stock-based compensation plan is described in Note 11, Stock-Based Compensation and Directors Stock Purchase Plan.

In accordance with the requirements of ASC 718-10-30-3 and 35-2, the Company measures the cost of stock-based compensation based on the grant-date fair value of the award, recognizing the cost over the requisite service period, which is generally the vesting period.

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There were no outstanding loans at December 31, 2021 to principal holders (over 10% ownership) of the Company’s common stock.

The Company’s lending activity is generally centered in Missouri, Kansas, Illinois and other nearby states including Oklahoma, Colorado, Iowa, Ohio, Texas, and others.

The Company’s lending activity is generally centered in Missouri, Kansas, Illinois and other nearby states including Oklahoma, Colorado, Iowa, Ohio, and Texas.

The Company maintains a diversified portfolio with limited industry concentrations of credit risk.

Loans and loan commitments are extended under the Company’s normal credit standards, controls, and monitoring features.

Loans and loan commitments are extended under the Company’s normal credit standards, controls, and monitoring procedures.

Most loan commitments are short or intermediate term in nature.

Commercial loan maturities generally range from one to seven years.

Collateral is commonly required and would include such assets as marketable securities and cash equivalent assets, accounts receivable and inventory, equipment, other forms of personal property, and real estate.

Collateral is commonly required and would include such assets as marketable securities, cash equivalent assets, accounts receivable, inventory, equipment, other forms of personal property, and real estate.

At December 31, 2021, unfunded loan commitments totaled $ 13.3 billion (which included $ 5.0 billion in unused approved lines of credit related to credit card loan agreements) which could be drawn by customers subject to certain review and terms of agreement.

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The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts.

These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given a single path economic forecast of key macroeconomic variables including GDP, disposable income, unemployment rate, various interest rates, CPI inflation rate, HPI, CREPI and market volatility.

These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given a single path economic forecast of key macroeconomic variables including GDP, disposable income, unemployment rate, various interest rates, consumer price index (CPI) inflation rate, housing price index (HPI), commercial real estate price index (CREPI) and market volatility.

The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates.

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Additionally, the allowance for credit losses considers other qualitative factors not included in historical loss rates or macroeconomic forecast such as changes in portfolio composition, underwriting practices, or significant unique events or conditions.

Key model assumptions in the Company’s allowance for credit loss model include the economic forecast, the reasonable and supportable period, prepayment assumptions and qualitative factors applied for portfolio composition changes, underwriting practices, or significant unique events or conditions.

The assumptions utilized in estimating the Company’s allowance for credit losses at December 31, 2020 and January 1, 2020 are discussed below.

Key Assumption December 31, 2020 January 1, 2020 (implementation)

Overall economic forecast • The recovery from the Global Coronavirus Recession (GCR) continues to be gradual throughout 2021 and 2022

Key assumptions in the Company’s allowance for credit loss model include the economic forecast, the reasonable and supportable period, forecasted macro-economic variables, prepayment assumptions and qualitative factors applied for portfolio composition changes, underwriting practices, or significant unique events or conditions.

The assumptions utilized in estimating the Company’s allowance for credit losses at December 31, 2021 and 2020 are discussed below.

Key Assumption December 31, 2021 December 31, 2020

Overall economic forecast • Continued recovery from the Global Coronavirus Recession (GCR)

• Assumes improving health conditions

• Assumes gradual easing of supply constraints

• Continued uncertainty regarding the health crisis

• Uncertainty regarding rising inflation

• The recovery from the Global Coronavirus Recession (GCR) continues to be gradual throughout 2021 and 2022

• Assumes no additional systemic lockdown measures

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• Continued uncertainty regarding the health crisis

Stable economic environment with slight positive growth projections in overall economic indicators, short-term and long-term, reflecting low unemployment in a late-stage economic cycle.

Reasonable and supportable period and related reversion period • Two years for both commercial and personal banking loans

Reasonable and supportable period and related reversion period • One year for both commercial and personal banking loans

• Reversion to historical average loss rates within two quarters using a straight-line method

• One year for commercial loans

• Two years for personal banking loans

• Two years for both commercial and personal banking loans

• Reversion to historical average loss rates within two quarters using a straight-line method

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• Real GDP growth ranges from 5.0% to 3.4%

• Prime rate of 3.25%

• Prime rate of 3.25% through the second quarter of 2022, increasing to 3.5% by the end of 2022

• Unemployment rate ranging from 6.5% to 5.2% during the supportable forecast period

• Real GDP growth ranges from 3.7% to 2.2%

• Prime rate ranges of 4.6% to 4.8%

• See "Qualitative factors" below for qualitative adjustments made to the forecasted macro-economic variables stated herein

• Prime rate of 3.25%

Prepayment assumptions Commercial loans

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Qualitative factors Added net reserves using qualitative processes related to:

• Loans originated in our expansion markets, loans that are designated as shared national credits, and certain portfolios considered to be COVID-19 impacted.

• Loans originated in our expansion markets, loans that are designated as shared national credits, and certain portfolios sensitive to pandemic economic uncertainties

• Changes in the composition of the loan portfolios

• Loans downgraded to special mention, substandard, or non-accrual status

Added reserves using qualitative processes related to:

• Loans originated in our expansion markets

• Loans that are designated as shared national credits

Added net reserves using qualitative processes related to:

• Loans originated in our expansion markets, loans that are designated as shared national credits, and certain portfolios considered to be COVID-19 impacted

• Changes in the composition of the loan portfolios

• Loans downgraded to special mention, substandard, or non-accrual status

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The allowance for credit losses is an estimate that requires significant judgment including projections of the macro-economic environment.

The forecasted macro-economic environment continuously changes which can cause fluctuations in estimated expected losses.

The current forecast projects a recovery from the 2020 recession over the next two years.

The forecasted macro-economic environment continuously changes which can cause fluctuations in estimated expected credit losses.

The current forecast used in the model projects a continued recovery of the COVID pandemic-induced recession.

This pandemic is unprecedented and information that could be used in the estimation of the allowance for credit losses changes frequently.

Events such as the timing of governmental required business lock downs or possible additional waves of infection could prolong and deepen the projected recession.

A summary of the activity in the allowance for credit losses on loans and the liability for unfunded lending commitments during the year ended December 31, 2020 follows:

Trends in health conditions, vaccine distribution, and supply constraints could significantly impact economic projections used in the estimation of the allowance for credit losses and liability for unfunded lending commitments.

A summary of the activity in the allowance for credit losses on loans and the liability for unfunded lending commitments during the years ended December 31, 2021 and 2020 follows:

For the Year Ended December 31

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ALLOWANCE FOR CREDIT LOSSES ON LOANS

Balance at December 31, 2019 $ 91,760 $ 68,922 $ 160,682

Balance December 31, 2020 $ 121,549 $ 99,285 $ 220,834

Provision for credit losses on loans ( 28,594 ) ( 23,629 ) ( 52,223 )

Loans charged off 968 34,659 35,627

Less recoveries on loans 5,789 11,271 17,060

Net loan charge-offs (recoveries) ( 4,821 ) 23,388 18,567

Balance December 31, 2021 $ 97,776 $ 52,268 $ 150,044

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

Balance December 31, 2020 $ 37,259 $ 1,048 $ 38,307

Provision for credit losses on unfunded lending commitments ( 13,988 ) ( 115 ) ( 14,103 )

Balance December 31, 2021 $ 23,271 $ 933 $ 24,204

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS $ 121,047 $ 53,201 $ 174,248

ALLOWANCE FOR CREDIT LOSSES ON LOANS

Balance December 31, 2019 $ 91,760 $ 68,922 $ 160,682

Adoption of ASU 2016-13 ( 29,711 ) 8,672 ( 21,039 )

5 unchanged sentences

Balance December 31, 2020

$ 121,549 $ 99,285 $ 220,834

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

Balance at December 31, 2019 $ 399 $ 676 $ 1,075

Balance December 31, 2019 $ 399 $ 676 $ 1,075

Adoption of ASU 2016-13 16,057 33 16,090

2 unchanged sentences

Balance December 31, 2020

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS $ 158,808 $ 100,333 $ 259,141

$ 37,259 $ 1,048 $ 38,307

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND UNFUNDED LENDING COMMITMENTS $ 158,808 $ 100,333 $ 259,141

Allowance for loan losses

In the table below is a summary of the activity in the allowance for loan losses during the previous two years, calculated in accordance with the incurred loss methodology applicable to the Company prior to its adoption of CECL on January 1, 2020.

In the table below is a summary of the activity in the allowance for loan losses during 2019, calculated in accordance with the incurred loss methodology applicable to the Company prior to its adoption of CECL on January 1, 2020.

The allowance for loan losses under the incurred loss method estimated probable loan losses inherent in the portfolio as of the balance sheet date, and using this methodology, groups of similar loans were evaluated collectively for impairment and certain specific loans were evaluated for impairment individually.

3 unchanged sentences

Balance at December 31, 2018

Provision for loan losses 254 42,440 42,694

Loans charged off 3,164 52,657 55,821

Less recoveries 2,075 11,452 13,527

Net loans charged off 1,089 41,205 42,294

Balance at December 31, 2018 92,869 67,063 159,932

$ 92,869 $ 67,063 $ 159,932

Provision for loan losses 2,816 47,622 50,438

3 unchanged sentences

Balance at December 31, 2019

91,760 68,922 160,682

Delinquent and non-accrual loans

53 unchanged sentences

In addition to the regular monitoring performed by the lending personnel and credit committees, loans are subject to review by a credit review department which verifies the appropriateness of the risk ratings for the loans chosen as part of its risk-based review plan.

The risk category of loans in the Commercial portfolio as of December 31, 2020 are as follows:

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

Term Loans Amortized Cost Basis by Origination Year

(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2021

Pass $ 1,473,869 $ 704,157 $ 554,759 $ 248,739 $ 159,238 $ 270,454 $ 1,795,073 $ 5,206,289

24 unchanged sentences

$ 2,917,439 $ 1,869,035 $ 1,223,303 $ 555,494 $ 408,432 $ 593,927 $ 1,913,008 $ 9,480,638

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

Commercial Loans

(In thousands) Business Real Estate -Construction Real Estate - Business Total

Term Loans Amortized Cost Basis by Origination Year

(In thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2020

1 unchanged sentence

Special mention 28,612 26,746 14,102 1,781 5,091 1,664 41,749 119,745

Substandard 17,246 21,985 5,076 2,675 3,578 13,390 68,976 132,926

Non-accrual 12,619 1 5,327 391 502 3,659 25 22,524

Total Business:

$ 2,530,896 $ 1,014,800 $ 463,062 $ 334,054 $ 172,528 $ 300,317 $ 1,730,430 $ 6,546,087

Real estate-construction

Pass $ 483,302 $ 330,480 $ 56,747 $ 3,021 $ 24,426 $ 1,692 $ 27,356 $ 927,024

Special mention 29,692 — 1,022 34,532 — — — 65,246

Substandard 1,154 — 14,989 13,182 — — — 29,325

Total Real estate-construction:

$ 514,148 $ 330,480 $ 72,758 $ 50,735 $ 24,426 $ 1,692 $ 27,356 $ 1,021,595

Real estate- business

Pass $ 890,740 $ 666,399 $ 336,850 $ 241,656 $ 313,691 $ 199,534 $ 67,796 $ 2,716,666

Special mention 8,936 21,734 49,580 6,597 17,504 1,309 3,002 108,662

Substandard 46,882 1,037 4,061 81,435 17,538 45,014 2,592 198,559

Non-accrual 478 188 1,480 — — 84 — 2,230

Total Real-estate business:

$ 947,036 $ 689,358 $ 391,971 $ 329,688 $ 348,733 $ 245,941 $ 73,390 $ 3,026,117

Commercial loans

Pass $ 3,846,461 $ 1,962,947 $ 832,154 $ 573,884 $ 501,474 $ 482,830 $ 1,714,832 $ 9,914,582

Special mention 67,240 48,480 64,704 42,910 22,595 2,973 44,751 293,653

Substandard 65,282 23,022 24,126 97,292 21,116 58,404 71,568 360,810

Non-accrual 13,097 189 6,807 391 502 3,743 25 24,754

Total Commercial loans:

$ 3,992,080 $ 2,034,638 $ 927,791 $ 714,477 $ 545,687 $ 547,950 $ 1,831,176 $ 10,593,799

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

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

Term Loans Amortized Cost Basis by Origination Year

(In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2021

Real estate-personal

27 unchanged sentences

$ 1,268,784 $ 1,238,890 $ 547,174 $ 237,855 $ 196,963 $ 632,236 $ 1,573,819 $ 5,695,721

Term Loans Amortized Cost Basis by Origination Year

(In thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2020

Real estate-personal

Current to 90 days past due $ 1,123,918 $ 488,379 $ 218,390 $ 201,971 $ 227,265 $ 544,008 $ 11,476 $ 2,815,407

Over 90 days past due 534 375 281 411 388 848 — 2,837

Non-accrual 29 191 116 45 65 1,340 — 1,786

Total Real estate-personal:

$ 1,124,481 $ 488,945 $ 218,787 $ 202,427 $ 227,718 $ 546,196 $ 11,476 $ 2,820,030

Current to 90 days past due $ 536,799 $ 337,431 $ 161,337 $ 115,886 $ 75,769 $ 86,831 $ 633,186 $ 1,947,239

Over 90 days past due 212 358 328 220 174 397 1,574 3,263

Total Consumer:

$ 537,011 $ 337,789 $ 161,665 $ 116,106 $ 75,943 $ 87,228 $ 634,760 $ 1,950,502

Revolving home equity

Current to 90 days past due $ — $ — $ — $ — $ — $ — $ 306,693 $ 306,693

Over 90 days past due — — — — — — 390 390

Total Revolving home equity:

$ — $ — $ — $ — $ — $ — $ 307,083 $ 307,083

Consumer credit card

Current to 90 days past due $ — $ — $ — $ — $ — $ — $ 642,860 $ 642,860

Over 90 days past due — — — — — — 12,218 12,218

Total Consumer credit card:

$ — $ — $ — $ — $ — $ — $ 655,078 $ 655,078

Current to 90 days past due $ 3,149 $ — $ — $ — $ — $ — $ — $ 3,149

Total Overdrafts:

$ 3,149 $ — $ — $ — $ — $ — $ — $ 3,149

Personal banking loans

Current to 90 days past due $ 1,663,866 $ 825,810 $ 379,727 $ 317,857 $ 303,034 $ 630,839 $ 1,594,215 $ 5,715,348

Over 90 days past due 746 733 609 631 562 1,245 14,182 18,708

Non-accrual 29 191 116 45 65 1,340 — 1,786

Total Personal banking loans:

$ 1,664,641 $ 826,734 $ 380,452 $ 318,533 $ 303,661 $ 633,424 $ 1,608,397 $ 5,735,842

Collateral-dependent loans

2 unchanged sentences

The following table presents the amortized cost basis of collateral-dependent loans as of December 31, 2021.

(In thousands) Business Assets Future Revenue Streams Oil & Gas Assets Total

(In thousands) Business Assets Oil & Gas Assets Total

Business $ 1,604 $ 2,459 $ 4,063

Real estate - business — 986 — 986

Total $ 1,604 $ 2,459 $ 4,063

7 unchanged sentences

As the healthcare loans are guaranteed by the hospital, customer FICO scores are not obtained for these loans.

The personal real estate loans and

consumer loans excluded below totaled less than 7 % of the Personal Banking portfolio.

For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at December 31, 2020 and 2019 by FICO score.

The personal real estate loans and consumer loans excluded below totaled less than 7 % of the Personal Banking portfolio.

For the remainder of loans in the

Personal Banking portfolio, the table below shows the percentage of balances outstanding at December 31, 2021 and 2020 by FICO score.

Personal Banking Loans

26 unchanged sentences

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

The Company follows the guidance under the CARES Act when determining if a customer’s modification is subject to troubled debt restructuring classification.

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

The Company elected such option under the CARES Act when determining if a customer’s modification is subject to troubled debt restructuring classification.

If it is deemed the modification is not short-term, not COVID-19 related or the customer does not meet the criteria under the guidance to be scoped out of troubled debt restructuring classification, the Company will evaluate the loan modifications under its existing framework and account for the modification as a troubled debt restructuring.

The initial guidance issued under the CARES Act was due to expire on December 31, 2020.

During January 2021, the Consolidated Appropriations Act, 2021 was enacted and extended relief offered under the CARES Act related to the accounting and disclosure requirements for troubled debt restructurings as a result of COVID-19.

The Company elected to adopt the extension of this guidance.

The Company elected to extend its application of this guidance through December 31, 2021.

The table below shows the balances of troubled debt restructurings by accrual status at December 31, 2021 and 2020.

(In thousands) 2021 2020

2 unchanged sentences

Assistance programs

Consumer bankruptcy

Other consumer

5 unchanged sentences

(In thousands) December 31, 2021 Balance 90 days past due at any time during previous 12 months

$ 71,088 $ 664

Real estate – construction and land

8 unchanged sentences

For those performing commercial loans classified as restructured, there were no concessions involving forgiveness of principal or interest and, therefore, there was no financial impact to the Company as a result of modification to these loans.

No financial impact resulted from those performing loans where the debt was not reaffirmed in bankruptcy, as no changes to loan terms occurred in that process.

However, the effects of modifications to loans under various debt management and assistance programs were estimated to decrease interest income by approximately $ 784 thousand on an annual, pre-tax basis, compared to amounts contractually owed.

Performing consumer loans where the debt was not reaffirmed in bankruptcy did not result in a concession, as no changes to loan terms occurred in that process.

Other modifications to consumer loans mainly involve extensions and other small modifications that did not include the forgiveness of principal or interest.

5 unchanged sentences

If a troubled debt restructuring defaults and is already on non-accrual status, the allowance for credit losses continues to be based on individual evaluation, using discounted expected cash flows or the fair value of collateral.

If an accruing, troubled

debt restructuring defaults, the loan's risk rating is downgraded to non-accrual status and the loan's related allowance for credit losses is determined based on individual evaluation, or if necessary, the loan is charged off and collection efforts begin.

The Company had commitments of $ 10.7 million at December 31, 2020 to lend additional funds to borrowers with restructured loans, compared to $ 4.7 million at December 31, 2019.

Impaired loans

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

The table below shows the Company’s balances of impaired loans at December 31, 2019.

These loans consist of all loans on non-accrual status and other restructured loans whose terms have been modified and classified as troubled debt restructurings.

These restructured loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis.

They are discussed further in the "Troubled debt restructurings" section above.

(In thousands) Dec.

Non-accrual loans

Restructured loans (accruing) 71,512

Total impaired loans

The following table shows the balance in the allowance for loan losses and the related loan balance at December 31, 2019 disaggregated on the basis of impairment methodology.

Impaired loans evaluated under ASC 310-10-35 include loans on non-accrual status which are individually evaluated for impairment and other impaired loans deemed to have similar risk characteristics, which are collectively evaluated.

All other loans are collectively evaluated for impairment under ASC 450-20.

Impaired Loans All Other Loans

(In thousands)

Allowance for Loan Losses Loans Outstanding Allowance for Loan Losses Loans Outstanding

December 31, 2019

Commercial $ 1,629 $ 64,500 $ 90,131 $ 9,233,880

Personal Banking 1,117 17,232 67,805 5,422,205

Total $ 2,746 $ 81,732 $ 157,936 $ 14,656,085

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

(In thousands)

Recorded Investment Unpaid Principal Balance

Related Allowance

December 31, 2019

With no related allowance recorded:

$ 7,054 $ 13,738 $ —

With an allowance recorded:

$ 30,437 $ 30,487 $ 837

Real estate – construction and land

Real estate – business

26,963 27,643 791

Real estate – personal

4,729 5,968 258

4,421 4,421 35

Revolving home equity

Consumer credit card

8,047 8,047 823

$ 74,678 $ 76,652 $ 2,746

$ 81,732 $ 90,390 $ 2,746

Total average impaired loans during 2019 are shown in the table below.

(In thousands)

Commercial Personal Banking Total

Average impaired loans:

Non-accrual loans $ 9,892 $ 2,031 $ 11,923

Restructured loans (accruing) 49,544 15,667 65,211

Total $ 59,436 $ 17,698 $ 77,134

The table below shows interest income recognized during the years ended December 31, 2019 and 2018 for impaired loans held at the end of each respective period.

This interest all relates to accruing restructured loans, as discussed in the "Troubled debt restructurings" section above.

Years Ended December 31

(In thousands) 2019 2018

Interest income recognized on impaired loans:

Business $ 1,329 $ 2,219

Real estate – construction and land 2 25

Real estate – business 1,456 558

Real estate – personal 136 139

Consumer 286 305

Revolving home equity 3 3

Consumer credit card 828 746

Total $ 4,040 $ 3,995

If an accruing, troubled debt restructuring defaults, the loan's risk rating is downgraded to non-accrual status and the loan's related allowance for credit losses is determined based on individual evaluation, or if necessary, the loan is charged off and collection efforts begin.

The Company had no commitments at December 31, 2021 to lend additional funds to borrowers with restructured loans, compared to commitments of $ 10.7 million at December 31, 2020.

Loans held for sale

10 unchanged sentences

The Company’s holdings of foreclosed real estate totaled $ 115 thousand and $ 93 thousand at December 31, 2021 and 2020, respectively.

Personal property acquired in repossession, generally autos and marine and recreational vehicles (RV), totaled $ 1.4 million and $ 5.5 million at December 31, 2020 and 2019, respectively.

Personal property acquired in repossession, generally autos, marine and recreational vehicles (RV), totaled $ 1.1 million and $ 1.4 million at December 31, 2021 and 2020, respectively.

Upon acquisition, these assets are recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis.

1 unchanged sentence

Investment Securities

Investment securities, at fair value, consisted of the following at December 31, 2020 and 2019:

Investment securities consisted of the following at December 31, 2021 and 2020:

(In thousands)

10 unchanged sentences

$ 14,699,511 $ 12,645,693

(1) Accrued interest receivable totaled $41.5 million at December 31, 2020 and was included within other assets on the consolidated balance sheet.

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

The Company has elected to measure equity securities with no readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer.

4 unchanged sentences

Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is tied to the level of borrowings from the FHLB.

These holdings are carried at cost.

The Company's equity method investments are carried at cost, adjusted to reflect the Company's portion of income, loss, or dividends of the investee.

The private equity investments, in the absence of readily ascertainable market values, are carried at estimated fair value.

The majority of the Company’s investment portfolio is comprised of available for sale debt securities, which are carried at fair value with changes in fair value reported in accumulated other comprehensive income (AOCI).

These holdings are carried at

Additionally, the Company's equity method investments are carried at cost, adjusted to reflect the Company's portion of income, loss, or dividends of the investee.

These adjustments are included in non-interest income on the Company's consolidated statements of income.

The private equity investments are carried at estimated fair value.

The majority of the Company’s investment portfolio is comprised of available for sale debt securities, which are carried at fair value with changes in fair value reported in other comprehensive income (OCI).

A summary of the available for sale debt securities by maturity groupings as of December 31, 2021 is shown in the following table.

14 unchanged sentences

Government-sponsored enterprise obligations:

Within 1 year 14,993 14,916 2.15

After 10 years 50,773 51,755 2.32

37 unchanged sentences

These securities are placed on a watch list and cash flow analyses are prepared on an individual security basis.

Credit impairment is determined using input factors such as cash flow projections, contractual payments required, expected delinquency rates, credit support from other tranches, prepayment speeds, collateral loss severity rates (including loan to values), and various other information related to

the underlying collateral.

At December 31, 2021, the fair value of securities on this watch list was $ 13.4 million compared to $ 31.0 million at December 31, 2020.

1 unchanged sentence

As of December 31, 2021, the Company did not identify any securities for which a credit loss exists.

The table below summarizes debt securities available for sale in an unrealized loss position, aggregated by length of impairment period, for which an allowance for credit losses has not been recorded at December 31, 2020.

The table below summarizes debt securities available for sale in an unrealized loss position, aggregated by length of loss period, for which an allowance for credit losses has not been recorded at December 31, 2021 and 2020.

Unrealized losses on these available for sale securities have not been recognized into income because after review, the securities were deemed not to be impaired.

7 unchanged sentences

December 31, 2021

government and federal agency obligations $ 296,492 $ 2,241 $ — $ — $ 296,492 $ 2,241

Government-sponsored enterprise obligations — — 18,899 919 18,899 919

9 unchanged sentences

$ 8,581,829 $ 118,680 $ 465,833 $ 14,249 $ 9,047,662 $ 132,929

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

Less than 12 months 12 months or longer Total

(In thousands)

Unrealized Losses

December 31, 2020

government and federal agency obligations $ 31,787 $ 21 $ 25,405 $ 21 $ 57,192 $ 42

Government-sponsored enterprise obligations $ 19,720 $ 98 $ — $ — $ 19,720 $ 98

7 unchanged sentences

Total $ 694,458 $ 3,741 $ 253,734 $ 2,617 $ 948,192 $ 6,358

The entire available for sale debt portfolio included $ 948.2 million of securities that were in a loss position at December 31, 2020, compared to $ 1.7 billion at December 31, 2019.

The total amount of unrealized loss on these securities was $ 6.4 million at December 31, 2020, a decrease of $ 6.5 million compared to the loss at December 31, 2019.

The entire available for sale debt securities portfolio included $ 9.0 billion of securities that were in a loss position at December 31, 2021, compared to $ 948.2 million at December 31, 2020.

The total amount of unrealized loss on these securities was $ 132.9 million at December 31, 2021, an increase of $ 126.6 million compared to the unrealized loss at December 31, 2020.

Securities with significant unrealized losses are discussed in the " Allowance for credit losses on available for sale debt securities " section above.

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

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

(In thousands)

13 unchanged sentences

$ 14,419,133 $ 163,823 $ ( 132,929 ) $ — $ 14,450,027

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

(In thousands)

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

December 31, 2020

28 unchanged sentences

Gains realized on sales — 2 3,262

Losses realized on sales

— — ( 8,917 )

Fair value adjustments, net

Gains realized on sales

1,611 — 1,094

Losses realized on sales

Fair value adjustments, net 31,704 ( 10,103 ) ( 727 )

Total investment securities gains (losses), net $ 30,059 $ 11,032 $ 3,626

Net gains and losses on investment securities for the year ended December 31, 2020 included net gains of $ 21.1 million realized on sales of available for sale debt securities and net losses in fair value of $ 10.1 million on private equity investments due to fair value adjustments.

At December 31, 2021, securities totaling $ 6.4 billion in fair value were pledged to secure public fund deposits, securities sold under agreements to repurchase, trust funds, and borrowings at the FRB and FHLB, compared to $ 4.8 billion at December 31, 2020.

15 unchanged sentences

Repairs and maintenance expense of $ 16.0 million, $ 16.4 million and $ 17.8 million for 2021, 2020 and 2019, respectively, was included in occupancy expense and equipment expense.

Interest expense capitalized on constructions projects totaled $ 14 thousand in 2020.

There was no interest expense capitalized on constructions projects in 2019 or 2018.

Interest expense capitalized on constructions projects totaled $ 29 thousand and $ 14 thousand in 2021 and 2020, respectively.

There was no interest expense capitalized on constructions projects in 2019.

Right of use leased assets are comprised mainly of operating leases for branches, office space, ATM locations, and certain equipment, as described in Note 6.

26 unchanged sentences

The easement, which grants the Company access to all portions of the parking facility and terrace garden, is perpetual and will be assessed for impairment at least annually, or whenever events or circumstances indicate an impairment may have occurred.

No impairment was identified at December 31, 2021.

(In thousands)

2 unchanged sentences

Balance at December 31, 2019

Originations — — — 2,603

$ 138,921 $ — $ 1,785 $ 7,749

Originations, net of disposals — 3,600 — 2,296

Amortization — — ( 427 ) ( 2,020 )

1 unchanged sentence

Balance at December 31, 2020

Originations — 3,600 — 2,296

138,921 3,600 1,358 6,249

Originations, net of disposals — — — 5,632

Amortization — — ( 354 ) ( 2,714 )

Impairment — — — ( 1,776 )

Impairment recovery — — — 1,799

Balance at December 31, 2021

$ 138,921 $ 3,600 $ 1,004 $ 10,966

Mortgage servicing rights (MSRs) are initially recorded at fair value and subsequently amortized over the period of estimated servicing income.

1 unchanged sentence

Temporary impairment, including impairment recovery, is effected through a change in a valuation allowance.

At December 31, 2020, temporary impairment of $ 2.1 million had been recognized.

At December 31, 2021, temporary impairment of $ 304 thousand had been recognized.

The fair value of the MSRs is based on the present value of expected future cash flows, as further discussed in Note 17 on Fair Value Measurements.

3 unchanged sentences

(In thousands)

The Company adopted ASU 2016-02, "Leases", and its related amendments on January 1, 2019 using a modified retrospective approach.

The Company's leasing activities include leasing certain real estate and equipment, providing lease financing to commercial customers, and leasing office space to third parties.

The Company adopted the package of practical expedients permitted within the standard, along with the lease component expedient for all lease classes and the disclosure expedient.

The Company uses the FHLB fixed-advance rate at lease commencement or at any subsequent remeasurement event date based on the remaining lease term to calculate the liability for each lease.

2 unchanged sentences

Total lease cost for the year ended December 31, 2021 was $ 7.7 million, compared to $ 7.4 million for the year ended December 31, 2020.

For leases with a term of 12 months or less, an election was made not to recognize lease assets and lease liabilities

for all asset classes, and to recognize lease expense for these leases on a straight-line basis over the lease term.

For leases with a term of 12 months or less, an election was made not to recognize lease assets and lease liabilities for all asset classes, and to recognize lease expense for these leases on a straight-line basis over the lease term.

The Company's leases have remaining terms of 1 month to 32 years, most of which contain renewal options.

5 unchanged sentences

Present value of lease liabilities $ 27,195

(1) Excludes $ 2.9 million of legally binding minimum lease payments for operating leases signed but not yet commenced.

(1) Calculated using the interest rate for each lease.

8 unchanged sentences

Leased assets obtained in exchange for new lease liabilities $ 4,407 7,482

The Company adopted the lease standard using the effective date as the date of initial application as noted above, and as required, the table below provides the disclosure for periods prior to adoption.

Under ASC Topic 840, Leases , rent expense amounted to $7.7 million in 2018.

Future minimum lease payments as of December 31, 2018 are shown below, which include leases that have not yet commenced.

(in thousands)

Year Ended December 31 Total

Total minimum lease payments $ 36,667

The Company has net investments in direct financing and sales-type leases to commercial, industrial, and tax-exempt entities.

4 unchanged sentences

The Company also leases office space to third parties, and these leases are classified as operating leases.

The leases may include options to renew or to expand the leased space, and currently the leases have remaining terms of 3 months to 7 years.

The leases may include options to renew or to expand the leased space, and currently the leases have remaining terms of 1 month to 6 years.

The following table provides the components of lease income.

4 unchanged sentences

Total lease income $ 30,224 $ 33,969

(1) Includes rent from Tower Properties, a related party, of $ 76 thousand and $ 75 thousand for the year ended December 31, 2020 and 2019, respectively.

(1) Includes rent from Tower Properties, a related party, of $ 76 thousand for the years ended December 31, 2021 and 2020.

The following table presents the components of the net investments in direct financing and sales-type leases.

23 unchanged sentences

Due in 2026 29,677

Thereafter 57

Total $ 1,442,614

The following table shows a detailed breakdown of the maturities of certificates of deposit, by size category, at December 31, 2020.

(In thousands)

Certificates of Deposit under $100,000 Certificates of Deposit over $100,000 Total

Due in 3 months or less $ 118,161 $ 638,346 $ 756,507

Due in over 3 through 6 months 118,141 381,740 499,881

Due in over 6 through 12 months 166,576 204,888 371,464

Due in over 12 months 126,924 89,915 216,839

Total $ 529,802 $ 1,314,889 $ 1,844,691

The aggregate amount of certificates of deposit that exceeded the $250,000 FDIC insurance limit totaled $ 1.0 billion at December 31, 2020.

The aggregate amount of certificates of deposit that exceeded the $250,000 FDIC insurance limit totaled $ 810.4 million at December 31, 2021.

At December 31, 2021, the Company's borrowings primarily consisted of federal funds purchased and securities sold under agreements to repurchase (repurchase agreements).

7 unchanged sentences

Federal funds purchased and repurchase agreements comprised the majority of the Company's short-term borrowings (borrowings with an original maturity of less than one year at December 31, 2021), and $ 3.0 billion of these borrowings were repurchase agreements, which generally have one day maturities and are mainly comprised of non-insured customer funds secured by a portion of the Company's investment portfolio.

Additional information about the securities pledged for repurchase agreements is provided in Note 20 on Resale and Repurchase Agreements.

Additional information about the securities pledged for repurchase agreements and repurchase agreement maturity are provided in Note 20 on Resale and Repurchase Agreements.

The Bank is a member of the Des Moines FHLB and has access to term financing from the FHLB.

16 unchanged sentences

Total $ 94,879 $ 14,195 $ 109,074

The components of income tax (benefit) expense recorded directly to stockholders’ equity for the years ended December 31, 2020, 2019 and 2018 were as follows:

The components of income tax (benefit) expense recorded directly to stockholders’ equity for the years ended 2021, 2020 and 2019 were as follows:

(In thousands) 2021 2020 2019

6 unchanged sentences

Adoption of ASU 2016-13

$ 1,183 $ — $ —

Income tax (benefit) expense allocated to stockholders’ equity

4 unchanged sentences

Loans, principally due to allowance for credit losses $ 41,507 $ 62,849

Equity-based compensation 7,870 7,554

Deferred compensation 7,777 7,173

Equity-based compensation 7,348 7,870

Accrued expenses 6,340 5,569

4 unchanged sentences

Deferred tax liabilities:

Unrealized gain on securities available for sale 87,933 34,024

Equipment lease financing 74,827 74,538

1 unchanged sentence

Land, buildings, and equipment 18,728 20,114

Intangibles 7,015 6,491

Unrealized gain on available for sale debt securities 7,724 87,933

Intangible assets 7,459 7,015

Other 11,430 7,895

3 unchanged sentences

$ ( 72,287 ) $ ( 131,439 )

Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the total deferred tax assets.

Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the total deferred tax assets, therefore, no valuation allowance is needed for the deferred tax assets at year end.

A reconciliation between the expected federal income tax expense using the federal statutory tax rate of 21 %, and the Company's actual income tax expense for 2021, 2020, and 2019 is provided below.

10 unchanged sentences

$ 145,711 $ 87,293 $ 109,074

The gross amount of unrecognized tax benefits was $ 1.3 million and $ 1.4 million at December 31, 2020 and 2019, respectively, and the total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $ 1.1 million at both December 31, 2020 and 2019 .

The gross amount of unrecognized tax benefits was $ 1.3 million at both December 31, 2021 and 2020, and the total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $ 1.0 million and $ 1.1 million at December 31, 2021 and 2020, respectively.

The activity in the accrued liability for unrecognized tax benefits for the years ended December 31, 2021 and 2020 was as follows:

51 unchanged sentences

Actuarial (gain) loss

( 1,247 ) 9,634

Projected benefit obligation at valuation date

11 unchanged sentences

$ ( 11,931 ) $ ( 17,548 )

The pension benefit obligation decreased from the prior year primarily due to an increase in the discount rate from 2.25 % to 2.58 %, which decreased the pension benefit liability by approximately $ 4.1 million.

This decrease was partially offset by updates to lump sum payment assumptions, which increased the pension obligation by approximately $ 1.0 million, and the mortality scale.

The Company utilizes mortality tables published by the Society of Actuaries to incorporate mortality assumptions into the measurement of the pension benefit obligation.

At December 31, 2021, the Company utilized an updated mortality projection scale, which increased the pension benefit obligation on that date by approximately $ 300 thousand.

The accumulated benefit obligation, which represents the liability of a plan using only benefits as of the measurement date, was $ 121.7 million and $ 127.2 million for the combined plans on December 31, 2021 and 2020, respectively.

9 unchanged sentences

$ ( 11,931 ) $ ( 17,548 )

Net loss arising during period

Net gain (loss) arising during period

3,627 ( 6,104 )

2 unchanged sentences

( 271 ) ( 271 )

Total recognized in other comprehensive income

Total recognized in other comprehensive income (loss)

$ 5,934 $ ( 4,237 )

Total expense recognized in net periodic pension cost and other comprehensive income

Total income (expense) recognized in net periodic pension cost and other comprehensive income

$ 5,602 $ ( 4,582 )

59 unchanged sentences

(d) This category represents investments in individual common stocks and equity funds.

These holdings are diversified, largely across the technology services, electronic technology, financial services, healthcare, and consumer non-durables industries.

These holdings are diversified, largely across the technology services, financial services, electronic technology, healthcare, and process industries.

The investment policy of the pension plan is designed for growth in principal, within limits designed to safeguard against significant losses within the portfolio.

12 unchanged sentences

The Company expects to incur pension expense of $ 405 thousand in 2022, compared to $ 332 thousand in 2021.

The pension benefit obligation increased from the prior year primarily due to a decrease in the discount rate from 3.07 % to 2.25 %, which increased the pension benefit liability by approximately $ 10.4 million.

Additionally, the Company utilizes mortality tables published by the Society of Actuaries to incorporate mortality assumptions into the measurement of the pension benefit obligation.

At December 31, 2020, the Company utilized an updated mortality projection scale, which decreased the pension benefit obligation on that date by approximately $ 900 thousand.

The following future benefit payments are expected to be paid:

31 unchanged sentences

( 226,486 ) 37.73

( 195,978 ) 33.43

Outstanding at December 31, 2020 1,005,896 $ 44.95 6.2 years $ 20,875

Exercisable at December 31, 2020 600,469 $ 38.30 5.0 years $ 16,452

Outstanding at December 31, 2021

896,348 $ 46.21 5.7 years $ 20,327

Exercisable at December 31, 2021

582,072 $ 40.18 4.7 years $ 16,624

In determining compensation cost, the Black-Scholes option-pricing model is used to estimate the fair value of SARs on date of grant.

14 unchanged sentences

5.7 years 5.8 years 6.0 years

Additional information about stock options and SARs exercised is presented below.

Additional information about SARs exercised is presented below.

(In thousands) 2021 2020 2019

Intrinsic value of options and SARs exercised

Intrinsic value of SARs exercised

$ 7,664 $ 6,278 $ 7,109

Tax benefit realized from options and SARs exercised

Tax benefit realized SARs exercised

$ 1,488 $ 1,252 $ 1,385

4 unchanged sentences

Remaining shares available for issuance under this plan were 755 at December 31, 2021.

During February 2022, shares authorized for issuance under the plan were increased to 150,000 .

In 2021, 13,388 shares were purchased at an average price of $ 69.15 , and in 2020, 22,904 shares were purchased at an average price of $ 57.67 .

4 unchanged sentences

Another component is the amortization from other comprehensive income of losses associated with pension benefits, which occurs as the losses are included in current net periodic pension cost.

The remaining component is gains in fair value on certain interest rate floors that have been designated as cash flow hedging instruments.

The remaining component is gains in fair value on certain interest rate floors that have been designated as cash flow hedges.

The interest rate floors were terminated during 2020, and the realized gains will be amortized into interest income through the original maturity dates of the interest rate floors.

Information about unrealized gains and losses on securities can be found in Note 3, and information about unrealized gains on cash flow hedge derivatives is located in Note 19.

Information about unrealized gains and losses on pension plans can be found in Note 10.

The Company adopted ASU 2016-13 (CECL) on January 1, 2020, which changed the impairment model for available for sale debt securities.

The new standard requires an allowance for credit losses when the present value of the cash flows expected to be collected is less than the security's amortized cost basis.

See further discussion of the Company's CECL adoption in Note 1 and Note 3 to the consolidated financial statements.

Further, the new standard superseded the guidance related to other-than-temporary impairment (OTTI), including the requirement to separately disclose the unrealized gains and losses on securities with OTTI.

CECL requires an allowance for credit losses when the present value of the cash flows expected to be collected is less than the security's amortized cost basis and superseded the guidance related to other-than-temporary impairment (OTTI), including the requirement to separately disclose the unrealized gains and losses on securities with OTTI.

Prior to the Company's adoption of CECL, unrealized gains and losses on debt securities for which an OTTI has been recorded in current earnings were shown separately below.

As a result of adopting CECL, the table below will separately disclose unrealized gains and losses on debt securities for which an allowance for credit losses has been recorded.

During the year ended December 31, 2020, there were no securities for which an allowance for credit losses was recorded.

During the years ended December 31, 2021 and 2020, there were no securities for which an allowance for credit losses was recorded.

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

1 unchanged sentence

Balance January 1, 2021

Adoption of ASU 2016-13 ( 3,264 ) 3,264 — — —

Balance January 1, 2020, adjusted $ — $ 102,073 $ ( 21,940 ) $ 30,311 $ 110,444

$ — $ 263,801 $ ( 25,118 ) $ 92,694 $ 331,377

Other comprehensive income (loss) before reclassifications — ( 324,122 ) 3,627 — ( 320,495 )

6 unchanged sentences

Balance December 31, 2021

$ — $ 23,174 $ ( 20,668 ) $ 74,574 $ 77,080

Balance January 1, 2020

$ 3,264 $ 98,809 $ ( 21,940 ) $ 30,311 $ 110,444

Adoption of ASU 2016-13 ( 3,264 ) 3,264 — — —

Balance January 1, 2020, adjusted $ — $ 102,073 $ (21,940) $ 30,311 $ 110,444

Other comprehensive income (loss) before reclassifications — 236,733 ( 6,104 ) 93,497 324,126

5 unchanged sentences

— 161,728 ( 3,178 ) 62,383 220,933

Transfer of unrealized gain on securities for which impairment was not previously recognized

35 ( 35 ) — — —

Balance December 31, 2020

$ — $ 263,801 $ ( 25,118 ) $ 92,694 $ 331,377

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

2 unchanged sentences

Consumer, Commercial, and Wealth.

The Consumer segment includes the consumer portion of the retail branch network (loans, deposits and other personal banking services), indirect and other consumer financing, and consumer debit and credit card loan and fee businesses.

Residential mortgage origination, sales and servicing functions are included in this consumer segment, but residential mortgage loans retained by the Company are not considered part of this segment.

The Commercial segment provides corporate lending (including the Small Business Banking product line within the branch network), leasing, international services, and business, government deposit, and related commercial cash management services, as well as merchant and commercial bank card products.

The Commercial segment also includes the Capital Markets Group, which sells fixed income securities and provides securities safekeeping and bond accounting services.

The Consumer segment consists of various consumer loan and deposit products offered through its retail branch network of approximately 150 locations.

This segment also includes indirect and other consumer loan financing businesses, along with debit and credit card loan and fee businesses.

Residential mortgage origination, sales and servicing functions are included in this Consumer segment, but residential mortgage loans retained by the Company are not considered part of this segment and are instead included in the Other segment.

The Commercial segment provides corporate lending (including the Small Business Banking product line within the branch network), leasing, and international services, along with business and governmental deposit products and commercial cash management services.

This segment also includes both merchant and commercial bank card products as well as the Capital Markets Group, which sells fixed income securities and provides securities safekeeping and accounting services to its business and correspondent bank customers.

The Wealth segment provides traditional trust and estate planning, advisory and discretionary investment management, and brokerage services.

52 unchanged sentences

135,257 203,952 180,836 520,045 4,658 524,703

Investment securities losses, net

Investment securities gains, net

— — — — 3,626 3,626

70 unchanged sentences

The Company entered into an accelerated share repurchase program in 2019 for $ 150.0 million.

Final settlement of the program occurred at the end of 2019, and a total of 2,432,336 shares of common stock were received by the Company under the program.

Shares purchased under this program were part of the Company's stock repurchase program, as authorized by its Board of Directors The most recent authorization in November 2019 approved future purchases of 5,000,000 shares of the Company's common stock.

Final settlement of the program occurred at the end of 2019, and a total of 2,432,336 shares of common stock were received by the Company under the

Shares purchased under this program were part of the Company's stock repurchase program, as authorized by its Board of Directors.

The most recent authorization in November 2019 approved future purchases of 5,000,000 shares of the Company's common stock.

At December 31, 2021, 1,737,322 shares of common stock remained available for purchase under the current authorization.

12 unchanged sentences

121,436 117,138 112,132

* Except as noted in the above table, all share and per share amounts in this note have been restated for the 5% common stock dividend distributed in 2020.

* Except as noted in the above table, all share and per share amounts in this footnote have been restated for the 5% common stock dividend distributed in 2021.

Regulatory Capital Requirements

117 unchanged sentences

These expenses are recorded net of the card fees earned.

Consumer credit card products offer cardholders rewards that can be later redeemed for cash or goods or services to encourage card usage.

Consumer credit card products offer cardholders rewards that can be later redeemed for cash, goods or services to encourage card usage.

Reward programs must meet network requirements based on the type of card issued.

31 unchanged sentences

Providing trust services is considered to be a single performance obligation that is satisfied on a monthly basis, involving the monthly custody of customer assets, statement rendering, periodic investment advice where applicable, and other specialized services as needed.

As such, performance obligations are considered to be satisfied at the conclusion of each month while trust fee income is also recorded monthly.

As such, performance obligations are considered to be satisfied at the conclusion of each month while trust fee income is also recognized monthly.

Deposit Account Charges and Other Fees

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The Company maintains unit prices for each type of service, and the customer is billed based on transaction volumes processed monthly.

The customer is usually billed either monthly or quarterly, however, some customers may be billed semi-annually or annually.

The customer may pay for the cash management services provided either by paying in cash or using the value of deposit balances (formula provided to the customer) held at the

The customer is usually billed either monthly or

quarterly, however, some customers may be billed semi-annually or annually.

The customer may pay for the cash management services either by paying in cash or using the value of deposit balances (formula provided to the customer) held at the Company.

The Company’s performance obligation for corporate cash management services is the processing of items over a monthly term, and the obligations are satisfied at the conclusion of each month.

34 unchanged sentences

Various financial instruments such as available for sale debt securities, equity securities, trading debt securities, certain investments relating to private equity activities, and derivatives are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company may be required to record at fair value other assets and liabilities on a nonrecurring basis, such as mortgage servicing rights and certain other investment securities.

Additionally, from time to time, the Company may be required to record other assets and liabilities at fair value on a nonrecurring basis, such as mortgage servicing rights and certain other investment securities.

These nonrecurring fair value adjustments typically involve lower of cost or fair value accounting, or write-downs of individual assets.

82 unchanged sentences

No significant adjustments have been made to the prices provided by the pricing service.

The pricing service also provides documentation on an ongoing basis that includes reference data, inputs and methodology by asset class, which is reviewed to ensure that security placement within the fair value hierarchy is appropriate.

The pricing service also provides documentation on an ongoing basis that includes reference data, inputs and methodology by asset class, which is reviewed by the Company to ensure that security placement within the fair value hierarchy is appropriate.

Valuation methods and inputs, by class of security:

21 unchanged sentences

The spreads and models use yield curves, terms and conditions of the bonds, and any special features (e.g., call or put options and redemption features).

• Auction rate securities

The available for sale portfolio includes certain auction rate securities.

2 unchanged sentences

Because many of the inputs significant to the measurement are not observable, these measurements are classified as Level 3 measurements.

Trading debt securities

The securities in the Company’s trading portfolio are priced by averaging several broker quotes for similar instruments and are classified as Level 2 measurements.

Equity securities with readily determinable fair values

2 unchanged sentences

Stocks which trade infrequently are classified as Level 2.

Trading debt securities

The securities in the Company’s trading portfolio are priced by averaging several broker quotes for similar instruments and are classified as Level 2 measurements.

Private equity investments

2 unchanged sentences

These fair value measurements, which are discussed in the Level 3 Inputs section of this note, are classified as Level 3.

The Company’s derivative instruments include interest rate swaps and floors, foreign exchange forward contracts, and certain credit risk guarantee agreements.

The Company’s derivative instruments include interest rate swaps, foreign exchange forward contracts, and certain credit risk guarantee agreements.

When appropriate, the impact of credit standing as well as any potential credit enhancements, such as collateral, has been considered in the fair value measurement.

6 unchanged sentences

The Company's clearing counterparty characterizes a component of this collateral, known as variation margin, as a legal settlement of the derivative contract exposure, and as a result, the variation margin is considered in determining the fair value of the derivative.

Valuations for interest rate floors are also derived from a proprietary model whose significant inputs are readily observable market parameters, primarily yield curves and volatility surfaces.

The model uses market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below the strike rates of the floors.

The model also incorporates credit valuation adjustments of both the Company's and the counterparties' non-performance risk.

The credit valuation adjustment component is not significant compared to the overall fair value of the floors.

The fair value measurements of interest rate swaps and floors are classified as Level 2 due to the observable nature of the significant inputs utilized.

The fair value measurements of interest rate swaps are classified as Level 2 due to the observable nature of the significant inputs utilized.

• Fair value measurements for foreign exchange contracts are derived from a model whose primary inputs are quotations from global market makers and are classified as Level 2.

8 unchanged sentences

The fair value measurement of TBA contracts is based on security prices published on trading platforms and is classified as Level 2.

Assets held in trust

Assets held in trust for deferred compensation plan

Assets held in an outside trust for the Company’s deferred compensation plan consist of investments in mutual funds.

9 unchanged sentences

Balance at January 1, 2021

$ 7,968 $ 94,368 $ 2,741 $ 105,077

Total gains or losses (realized/unrealized):

9 unchanged sentences

Capitalized interest/dividends

— 1,768 — 1,768

Purchase of risk participation agreement

2 unchanged sentences

Balance at December 31, 2021

$ 1,984 $ 147,406 $ 571 $ 149,961

Total gains or losses for the year included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2021

$ — $ 28,654 $ 475 $ 29,129

Total gains or losses for the year included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2021

$ 11 $ — $ — $ 11

Year ended December 31, 2020:

Balance at January 1, 2020

$ 9,853 $ 94,122 $ 369 $ 104,344

Total gains or losses (realized/unrealized):

6 unchanged sentences

Capitalized interest/dividends — 29 — 29

Purchase of risk participation agreement — — 439 439

Sale of risk participation agreement — — ( 809 ) ( 809 )

Balance at December 31, 2020

$ 7,968 $ 94,368 $ 2,741 $ 105,077

Total gains or losses for the year included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2020

$ — $ ( 10,083 ) $ 3,611 $ ( 6,472 )

Total gains or losses for the year included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2020

$ 44 $ — $ — $ 44

Gains and losses on the Level 3 assets and liabilities in the table above are reported in the following income categories:

4 unchanged sentences

Change in unrealized gains or losses relating to assets still held at December 31, 2021

$ 764 $ ( 289 ) $ 28,654 $ 29,129

Year ended December 31, 2020:

1 unchanged sentence

Change in unrealized gains or losses relating to assets still held at December 31, 2020

$ 3,226 $ 385 $ ( 10,083 ) $ ( 6,472 )

Level 3 Inputs

54 unchanged sentences

The Company's significant Level 3 measurements that are measured on a nonrecurring basis pertain to the Company's mortgage servicing rights retained on certain fixed rate personal real estate loan originations.

Mortgage servicing rights are included in other assets on the consolidated balance sheet, and information about these inputs is presented in the table below.

Mortgage servicing rights are included in other intangible assets on the consolidated balance sheets, and information about these inputs is presented in the table below.

Quantitative Information about Level 3 Fair Value Measurements Weighted

61 unchanged sentences

Investment securities 14,695,628 1,087,873 13,413,558 194,197 14,695,628

Federal funds sold 2,800 2,800 — — 2,800

Securities purchased under agreements to resell 1,625,000 — — 1,623,856 1,623,856

10 unchanged sentences

Securities sold under agreements to repurchase 2,979,582 — — 2,979,677 2,979,677

Other borrowings 12,514 — 12,514 — 12,514

Derivative instruments 12,101 — 11,824 277 12,101

30 unchanged sentences

Securities sold under agreements to repurchase 2,056,113 — — 2,056,173 2,056,173

Other borrowings 988 — 988 — 988

Derivative instruments 18,675 — 17,974 701 18,675

7 unchanged sentences

Interest rate swaps $ 2,229,419 $ 2,367,017

Interest rate floors — 1,500,000

Interest rate caps 152,058 103,028

6 unchanged sentences

The largest group of notional amounts relate to interest rate swap contracts sold to commercial customers who wish to modify their interest rate sensitivity.

The customers are engaged in a variety of businesses, including real estate, manufacturing, retail product distribution, education, and retirement communities.

These customer swaps are offset by matching contracts purchased by the Company from other financial dealer institutions.

Those customers are engaged in a variety of businesses, including real estate, manufacturing, retail product distribution, education, and retirement communities.

These interest rate swap contracts with customers are offset by matching interest rate swap contracts purchased by the Company from other financial institutions (dealers).

Contracts with dealers that require central clearing are novated to a clearing agency who becomes the Company's counterparty.

2 unchanged sentences

Under these provisions, if the Company’s debt rating falls below investment grade or if the Company ceases to be “well-capitalized” under risk-based capital guidelines, certain counterparties can require immediate and ongoing collateralization on interest rate swaps in net liability positions or instant settlement of the contracts.

The Company maintains debt ratings and capital well above these minimum requirements.

The Company maintains debt ratings and capital well above those minimum requirements.

During the year ended December 31, 2020, the Company monetized three interest rate floors that were previously classified as cash flow hedges with a combined notional balance of $ 1.5 billion and an asset fair value of $ 163.2 million.

As of December 31, 2021, the total unrealized gains on the monetized cash flow hedges remaining in AOCI was $ 99.4 million (pre-tax).

The unrealized gains will be reclassified into interest income as the underlying forecasted transactions impact earnings through the original maturity dates of the hedged forecasted transactions, or approximately 6.0 years.

The estimated amount of net gains related to the cash flow hedges remaining in AOCI at December 31, 2021 that is expected to be reclassified into income within the next 12 months is $ 24.5 million.

The Company also contracts with other financial institutions, as a guarantor or beneficiary, to share credit risk associated with certain interest rate swaps through risk participation agreements.

The Company’s risks and responsibilities as guarantor are further discussed in Note 21 on Commitments, Contingencies and Guarantees.

In addition, the Company enters into foreign exchange contracts, which are mainly comprised of contracts to purchase or deliver foreign currencies for customers at specific future dates.

In addition, the Company enters into foreign exchange contracts, which are mainly comprised of contracts with customers to purchase or deliver specific foreign currencies at specific future dates.

Under its program to sell residential mortgage loans in the secondary market, the Company designates certain newly-originated residential mortgage loans as held for sale.

2 unchanged sentences

These forward TBA contracts are also considered to be derivatives and are settled in cash at the security settlement date.

T he fair values of the Company’s derivative instruments, whose notional amounts are listed above, are shown in the table below.

The fair values of the Company’s derivative instruments, whose notional amounts are listed above, are shown in the table below.

Information about the valuation methods used to determine fair value is provided in Note 17 on Fair Value Measurements.

The Company's policy is to present its derivative assets and derivative liabilities on a gross basis in its consolidated balance sheets and these are reported in other assets and other liabilities.

Certain collateral posted to and from the Company's clearing counterparty has been offset against the fair values of cleared swaps, such that at December 31, 2020 in the table below, there were no reductions to the positive fair values of cleared swaps and the negative fair values of cleared swaps were reduced by $ 69.2 million.

At December 31, 2019, the positive fair values of cleared swaps were reduced by $ 617 thousand and the negative fair values of cleared swaps were reduced by $ 28.5 million.

The Company presents derivative assets and derivative liabilities on a gross basis, as other assets and other liabilities, on its consolidated balance sheets.

Asset Derivatives Liability Derivatives

2 unchanged sentences

(In thousands )

Derivatives designated as hedging instruments:

Interest rate floors $ — $ 67,192 $ — $ —

Total derivatives designated as hedging instruments $ — $ 67,192 $ — $ —

Derivatives not designated as hedging instruments:

8 unchanged sentences

Total $ 41,842 $ 89,889 $ ( 12,101 ) $ ( 18,675 )

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

* Certain collateral was posted to and from the Company's clearing party and has been applied to the fair values of the cleared swaps.

As a result, these values are net of variation margin of $ 587 thousand and $ 0 for interest rate swaps in an asset position, and $ 29.7 million and $ 69.2 million for interest rate swaps in a liability position, at December 31, 2021 and 2020, respectively.

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

Amount of Gain or (Loss) Recognized in OCI

13 unchanged sentences

Total $ 27,481 $ 50,327 $ ( 22,846 ) Total $ ( 3,793 ) $ — $ ( 3,793 )

Location of Gain or (Loss) Recognized in Income on Derivative Amount of Gain or (Loss) Recognized in Income on Derivative

The gain and loss recognized through various derivative instruments on the consolidated statements of income are shown in the table below.

Location of Gain/(Loss) Recognized in the Consolidated Statements of Income Amount of Gain/(Loss) Recognized in Income on Derivative

For the Years

5 unchanged sentences

Credit risk participation agreements Other non-interest income ( 187 ) 413 ( 16 )

Foreign exchange contracts:

Other non-interest income ( 111 ) 53 31

Foreign exchange contracts Other non-interest income 78 ( 111 ) 53

Mortgage loan commitments Loan fees and sales ( 2,463 ) 2,768 ( 77 )

8 unchanged sentences

Most of the derivatives in the following table were transacted under master netting arrangements that contain a conditional right of offset, such as close-out netting, upon default.

While the Company is party to master netting arrangements with most of its swap derivative counterparties, the Company does not offset derivative assets and liabilities under these arrangements on its consolidated balance sheet.

While the Company is party to master netting arrangements with most of its swap counterparties, the Company does not offset derivative assets and liabilities under these arrangements on its consolidated balance sheets.

Collateral exchanged between the Company and dealer bank counterparties is generally subject to thresholds and transfer minimums, and usually consist of marketable securities.

By contract, these may be sold or re-pledged by the secured party until recalled at a subsequent valuation date by the pledging party.

By contract, this collateral may be sold or re-pledged by the secured party until recalled at a subsequent valuation date by the pledging party.

For those swap transactions requiring central clearing, the Company posts cash or securities to its clearing agent.

18 unchanged sentences

Resale and Repurchase Agreements

The following table shows the extent to which assets and liabilities relating to securities purchased under agreements to resell (resale agreements) and securities sold under agreements to repurchase (repurchase agreements) have been offset in the consolidated balance sheets, in addition to the extent to which they could potentially be offset.

Also shown is collateral received or pledged, which consists of marketable securities.

The collateral amounts in the table are limited to the outstanding balances of the related asset or liability (after netting is applied);

thus amounts of excess collateral are not shown.

The agreements in the following table were transacted under master netting arrangements that contain a conditional right of offset, such as close-out netting, upon default.

The Company regularly enters into resale and repurchase agreement transactions with other financial institutions and with its own customers.

Resale and repurchase agreements are agreements to purchase/sell securities subject to an obligation to resell/repurchase the same or similar securities.

They are accounted for as collateralized financing transactions, not as sales and purchases of the securities portfolio.

The securities collateral accepted or pledged in resale and repurchase agreements with other financial institutions also may be sold or re-pledged by the secured party, but is usually delivered to and held by third party trustees.

The Company generally retains custody of securities pledged for repurchase agreements with customers.

They are accounted for as secured lending and collateralized borrowing (e.g.

financing transactions), not as true sales and purchases of the underlying collateral securities.

Some of the resale and repurchase agreements were transacted under master netting arrangements that contain a conditional right of offset, such as close-out netting, upon default.

The security collateral accepted or pledged in resale and repurchase agreements with other financial institutions may be sold or re-pledged by the secured party, but is usually delivered to and held by third party trustees.

The Company generally retains custody of securities pledged for repurchase agreements with its customers.

Additional information about the Company's repurchase agreements is included in Note 8.

The Company is party to agreements commonly known as collateral swaps.

1 unchanged sentence

These repurchase and resale agreements have the same principal amounts, inception dates, and maturity dates and have been offset against each other in the consolidated balance sheets, as permitted under the netting provisions of ASC 210-20-45.

The collateral swaps totaled $ 200.0 million at December 31, 2020 and December 31, 2019.

At December 31, 2020, the Company had posted collateral of $ 206.9 million in marketable securities, consisting of agency mortgage-backed bonds, and had accepted $ 209.0 million in agency mortgage-backed bonds.

The collateral swaps totaled $ 400.0 million at December 31, 2021 and $ 200.0 million at December 31, 2020.

The following table shows the extent to which resale agreement assets and repurchase agreement liabilities with the same counterparty have been offset on the consolidated balance sheets, in addition to the extent to which they could potentially be offset.

Also shown is collateral received or pledged, which consists of marketable securities.

The collateral amounts in the table are limited to the outstanding balances of the related asset or liability (after offsetting is applied);

thus amounts of excess collateral are not shown.

Gross Amounts Not Offset in the Balance Sheet

(In thousands) Gross Amount Recognized Gross Amounts Offset in the Balance Sheet Net Amounts Presented in the Balance Sheet Financial Instruments Available for Offset Securities Collateral Received/Pledged Net Amount

(In thousands) Gross Amount Recognized Gross Amounts Offset on the Balance Sheet Net Amounts Presented on the Balance Sheet Financial Instruments Available for Offset Securities Collateral Received/Pledged Unsecured amount

December 31, 2021

6 unchanged sentences

Remaining Contractual Maturity of the Agreements

(In thousands)

Overnight and continuous Up to 90 days Greater than 90 days Total

(In thousands) Overnight and continuous Up to 90 days Greater than 90 days Total

December 31, 2021

9 unchanged sentences

government and federal agency obligations $ 150,305 $ — $ — $ 150,305

Government-sponsored enterprise obligations 32,575 — — 32,575

Agency mortgage-backed securities 1,598,614 34,018 220,849 1,853,481

11 unchanged sentences

Other 8,319,715 8,033,222

Standby letters of credit, net of participations 357,087 377,338

Standby letters of credit, net of conveyance to other financial institutions 418,328 357,087

Commercial letters of credit 5,304 3,117

2 unchanged sentences

Refer to Note 2 on Loans and Allowance for Credit Losses for further discussion.

Commercial letters of credit act as a means of ensuring payment to a seller upon shipment of goods to a buyer.

The majority of commercial letters of credit issued are used to settle payments in international trade.

Typically, letters of credit require presentation of documents which describe the commercial transaction, evidence shipment, and transfer title.

The Company, as a provider of financial services, routinely issues financial guarantees in the form of financial and performance standby letters of credit.

Standby letters of credit are contingent commitments issued by the Company generally to guarantee the payment or performance obligation of a customer to a third party.

While these represent a potential outlay by the Company, a significant amount of the commitments may expire without being drawn upon.

While these represent a potential cash outflow by the Company, a significant amount of the commitments may expire without being drawn upon.

To mitigate the potential loss exposure, the Company involves other financial institutions to participate in certain standby letters of credit.

Even with such participation, the Company remains liable for the full amount of the standby letters of credit to the third party.

The Company has recourse against the customer for any amount it is required to pay to a third party under a standby letter of credit.

The letters of credit are subject to the same credit policies, underwriting standards and approval process as loans made by the Company.

The standby letters of credit are subject to the same credit policies, underwriting standards and approval process as loans made by the Company.

Most of the standby letters of credit are secured, and in the event of nonperformance by the customer, the Company has rights to the underlying collateral, which could include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities.

At December 31, 2020, the Company had recorded a liability in the amount of $ 3.3 million, representing the carrying value of the guarantee obligations associated with the standby letters of credit.

At December 31, 2021, the Company had recorded a liability of $ 2.9 million, representing the carrying value of the guarantee obligations associated with the standby letters of credit.

This amount will be accreted into income over the remaining life of the respective commitments.

Commitments outstanding under these letters of credit, which represent the maximum potential future payments guaranteed by the Company, were $ 418.3 million at December 31, 2021.

Commercial letters of credit act as a means of ensuring payment to a seller upon shipment of goods to a buyer.

The majority of commercial letters of credit issued are used to settle payments in international trade.

Typically, letters of credit require presentation of documents which describe the commercial transaction, evidence shipment, and transfer title.

The Company regularly purchases various state tax credits arising from third-party property redevelopment.

These credits are either resold to third parties or retained for use by the Company.

During 2020, purchases and sales of tax credits amounted to $ 151.2 million and $ 131.4 million, respectively.

These tax credits are either resold to third parties for a profit or retained for use by the Company.

During 2021, the Company purchased and sold state tax credits amounting to $ 113.5 million and $ 108.1 million, respectively.

At December 31, 2021, the Company had outstanding purchase commitments totaling $ 186.0 million that it expects to fund in 2022.

The Company periodically enters into risk participation agreements (RPAs) as a guarantor to other financial institutions, in order to mitigate those institutions’ credit risk associated with interest rate swaps with third parties.

The remaining purchase commitments amount to $ 306.5 million and are expected to be funded from 2023 through 2029.

The Company periodically enters into credit risk participation agreements (RPAs) as a guarantor to other financial institutions, in order to mitigate those institutions’ credit risk associated with interest rate swaps with third parties.

The RPA stipulates that, in the event of default by the third party on the interest rate swap, the Company will reimburse a portion of the loss borne by the financial institution.

4 unchanged sentences

The terms of the RPAs, which correspond to the terms of the underlying swaps, range from 2 to 15 years.

At December 31, 2020, the fair value of the Company's guarantee liability RPAs was $ 701 thousand, and the notional amount of the underlying swaps was $ 288.7 million.

At December 31, 2021, the fair value of the Company's guarantee liability RPAs was $ 277 thousand, and the notional

amount of the underlying swaps was $ 366.4 million.

The maximum potential future payment guaranteed by the Company cannot be readily estimated and is dependent upon the fair value of the interest rate swaps at the time of default.

1 unchanged sentence

Capital Development to develop a 280,000 square foot commercial office building in a two building complex in Clayton, Missouri.

While the Company

intends to occupy a portion of the office building for executive offices, a 15 year lease has been signed by an anchor tenant to lease approximately 40 % of the office building.

As of December 31, 2021, the Company has made payments totaling $ 55.2 million.

While the Company intends to occupy a portion of the office building for executive offices, a 15 year lease has been signed by an anchor tenant to lease approximately 50 % of the office building.

The Company has various legal proceedings pending at December 31, 2021, arising in the normal course of business.

19 unchanged sentences

There were no borrowings under this line during 2021, and no balance outstanding at December 31, 2021.

There were no borrowings during 2019 and 2018.

There was no balance outstanding at December 31, 2019 or 2018.

Interest paid on borrowings during the last three years was not significant.

There were no borrowings during 2020 and 2019, and there was no balance outstanding at December 31, 2020 or 2019.

Letters of credit may be collateralized under this line of credit;

6 unchanged sentences

Such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other unrelated persons and did not involve more than the normal risk of collectability.

See Note 2 Loans and Allowance for Credit Losses for additional information for loans to directors and executive officers of the Company and the Bank, and to their affiliates.

As discussed in Note 21 on Commitments, Contingencies and Guarantees, the Company regularly purchases various state tax credits arising from third-party property redevelopment and resells the credits to third parties.

During 2020, the Company sold state tax credits to its Executive Chairman, its former Vice Chairman, and its Chief Executive Officer in the amount of $ 603 thousand, $ 551 thousand, and $ 223 thousand, respectively, for personal tax planning.

During 2019, the Company sold state tax credits to its Executive Chairman, its former Vice Chairman, its Chief Executive Officer, and its Chief Credit Officer in the amount of $ 865 thousand, $ 663 thousand, $ 166 thousand, and $ 83 thousand respectively.

During 2018, the Company sold state tax credits to its Executive Chairman, its former Vice Chairman, and its Chief Executive Officer in the amount of $ 831 thousand, $ 759 thousand, and $ 119 thousand, respectively.

During 2021, the Company

sold state tax credits to its Executive Chairman, its former Vice Chairman, and its Chief Executive Officer in the amount of $ 772 thousand, $ 619 thousand, and $ 291 thousand, respectively, for personal tax planning.

During 2019, the Company sold state tax credits to its Executive Chairman, its former Vice Chairman, its Chief Executive Officer, and its former Chief Credit Officer in the amount of $ 865 thousand, $ 663 thousand, $ 166 thousand, and $ 83 thousand, respectively.

The terms of the sales and the amounts paid were the same as the terms and amounts paid for similar tax credits by persons not related to the Company.

During the year ended December 31, 2020, the Company incurred project consulting fees of $ 335 thousand payable to Tower Properties for services rendered on the Clayton building project.

Parent Company Condensed Financial Statements

35 unchanged sentences

36,310 33,472 36,776

Investment securities gains (losses)

53 3,572 ( 4,581 )

Investment securities gains

Net interest income on advances and note to subsidiaries

1 unchanged sentence

581,991 398,278 468,313

398,278 468,313 481,279

Salaries and employee benefits

24 unchanged sentences

Proceeds from sales of investment securities

— 3,856 41,638

Proceeds from maturities/pay downs of investment securities

6 unchanged sentences

( 28 ) ( 94 ) ( 235 )

Net cash provided by (used in) investing activities

Net cash used in investing activities

( 13,404 ) ( 9,354 ) ( 1,534 )

32 unchanged sentences

The Parent has not borrowed under this line during the past three years.

At December 31, 2020, the fair value of the investment securities held by the Parent consisted of investments of $ 4.8 million in corporate bonds and $ 2.8 million in preferred stock with readily determinable fair values, and $ 300 thousand in equity securities that do not have readily determinable fair values.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

At December 31, 2021, the fair value of the investment securities held by the Parent consisted of investments of $ 4.8 million in corporate bonds and $ 6.9 million in preferred and common stock with readily determinable fair values, and $ 1.1 million in equity securities that do not have readily determinable fair values.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants on accounting and financial disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data