What changed in this filing

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Item 1. Financial Statements

2023-11-06 compared with 2023-08-04 · 247 added, 267 removed, 1406 unchanged (27% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

2023 December 31, 2022

3 unchanged sentences

Net loans 16,967,082 16,152,995

Loans held for sale (including $ 1,566,000 and $ — of residential mortgage loans carried at fair value at June 30, 2023 and December 31, 2022, respectively)

Loans held for sale (including $ 366,000 and $ — of residential mortgage loans carried at fair value at September 30, 2023 and December 31, 2022, respectively)

Investment securities:

Available for sale debt, at fair value (amortized cost of $ 11,457,305,000 and $ 13,738,206,000 at

June 30, 2023 and December 31, 2022, respectively, and allowance for credit losses of $ —

at both June 30, 2023 and December 31, 2022)

September 30, 2023 and December 31, 2022, respectively, and allowance for credit losses of $ —

at both September 30, 2023 and December 31, 2022)

9,860,828 12,238,316

25 unchanged sentences

Common stock, $ 5 par value

Authorized 190,000,000 at June 30, 2023 and 140,000,000 at December 31, 2022;

issued 125,863,879 shares at June 30, 2023 and December 31, 2022

Authorized 190,000,000 at September 30, 2023 and 140,000,000 at December 31, 2022;

issued 125,863,879 shares at September 30, 2023 and December 31, 2022

629,319 629,319

1 unchanged sentence

Retained earnings 298,297 31,620

Treasury stock of 868,125 shares at June 30, 2023

Treasury stock of 1,233,706 shares at September 30, 2023

and 605,142 shares at December 31, 2022, at cost

10 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended June 30 For the Six Months Ended June 30

For the Three Months Ended September 30 For the Nine Months Ended September 30

(In thousands, except per share data) 2023 2022 2023 2022

50 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended June 30 For the Six Months Ended June 30

For the Three Months Ended September 30 For the Nine Months Ended September 30

(In thousands) 2023 2022 2023 2022

13 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended June 30, 2023 and 2022

Three Months Ended September 30, 2023 and 2022

Commerce Bancshares, Inc.

1 unchanged sentence

Common Stock Capital Surplus Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Non-Controlling Interest Total

Balance March 31, 2023

Balance June 30, 2023

$ 629,319 $ 2,921,365 $ 211,358 $ ( 58,389 ) $ ( 1,036,295 ) $ 17,870 $ 2,685,228

3 unchanged sentences

Purchases of treasury stock ( 19,978 ) ( 19,978 )

Sale of non-controlling interest of subsidiary 8 ( 8 ) —

Issuance under stock purchase and equity

4 unchanged sentences

( 33,657 ) ( 33,657 )

Balance June 30, 2023

Balance September 30, 2023

$ 629,319 $ 2,924,211 $ 298,297 $ ( 76,888 ) $ ( 1,193,534 ) $ 17,861 $ 2,599,266

Balance March 31, 2022

Balance June 30, 2022

$ 610,804 $ 2,682,161 $ 262,363 $ ( 129,588 ) $ ( 766,894 ) $ 16,467 $ 2,675,313

9 unchanged sentences

( 31,740 ) ( 31,740 )

Balance June 30, 2022

Balance September 30, 2022

$ 610,804 $ 2,683,631 $ 353,446 $ ( 176,943 ) $ ( 1,119,344 ) $ 19,513 $ 2,371,107

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Six Months Ended June 30, 2023 and 2022

Nine Months Ended September 30, 2023 and 2022

Commerce Bancshares, Inc.

12 unchanged sentences

( 101,160 ) ( 101,160 )

Balance June 30, 2023

Balance September 30, 2023

$ 629,319 $ 2,924,211 $ 298,297 $ ( 76,888 ) $ ( 1,193,534 ) $ 17,861 $ 2,599,266

9 unchanged sentences

( 95,818 ) ( 95,818 )

Balance June 30, 2022

Balance September 30, 2022

$ 610,804 $ 2,683,631 $ 353,446 $ ( 176,943 ) $ ( 1,119,344 ) $ 19,513 $ 2,371,107

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30

For the Nine Months Ended September 30

(In thousands) 2023 2022

10 unchanged sentences

Net (increase) decrease in trading debt securities, excluding unsettled transactions 14,354 14,080

Purchase of interest rate floor ( 25,900 ) —

Purchase of interest rate floor derivative contracts ( 54,449 ) ( 16,849 )

Stock-based compensation 12,594 12,641

24 unchanged sentences

Purchases of treasury stock ( 56,541 ) ( 163,321 )

Issuance of stock under equity compensation plans — 448

Cash dividends paid on common stock ( 101,160 ) ( 95,818 )

Other, net — 447

Net cash provided by (used in) financing activities ( 775,399 ) ( 3,510,501 )

1 unchanged sentence

Cash, cash equivalents and restricted cash at beginning of year 897,801 4,296,954

Cash, cash equivalents and restricted cash at June 30

Cash, cash equivalents and restricted cash at September 30

$ 2,208,516 $ 1,009,076

5 unchanged sentences

Restricted cash is comprised of cash collateral posted by the Company to secure interest rate swap agreements.

This balance is included in other assets in the consolidated balance sheets and totaled $ 200 thousand at June 30, 2023 and $ 5.4 million at June 30, 2022.

This balance is included in other assets in the consolidated balance sheets and totaled $ 130 thousand at September 30, 2023 and $ 7.9 million at September 30, 2022.

Commerce Bancshares, Inc.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023 (Unaudited)

September 30, 2023 (Unaudited)

Principles of Consolidation and Presentation

9 unchanged sentences

Management has evaluated subsequent events for potential recognition or disclosure.

The results of operations for the six month period ended June 30, 2023 are not necessarily indicative of results to be attained for the full year or any other interim period.

The results of operations for the nine month period ended September 30, 2023 are not necessarily indicative of results to be attained for the full year or any other interim period.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission.

25 unchanged sentences

Loans and Allowance for Credit Losses

Major classifications within the Company’s held for investment loan portfolio at June 30, 2023 and December 31, 2022 are as follows:

Major classifications within the Company’s held for investment loan portfolio at September 30, 2023 and December 31, 2022 are as follows:

(In thousands)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Business $ 5,908,330 $ 5,661,725

8 unchanged sentences

Total loans $ 17,129,326 $ 16,303,131

Accrued interest receivable totaled $ 63.9 million and $ 55.5 million at June 30, 2023 and December 31, 2022, respectively, and was included within other assets on the consolidated balance sheets.

For the three months ended June 30, 2023, the Company wrote-off accrued interest by reversing interest income of $ 43 thousand and $ 1.1 million in the Commercial and Personal Banking portfolios, respectively.

Similarly, for the six months ended June 30, 2023, the Company wrote-off accrued interest of $ 77 thousand and $ 2.2 million in the Commercial and Personal Banking portfolios, respectively.

For the three months ended June 30, 2022, the Company reversed interest income of $ 26 thousand and $ 762 thousand in the Commercial and Personal Banking portfolios, respectively, and in the six months ended June 30, 2022, reversed $ 55 thousand and $ 1.7 million in the Commercial and Personal Banking portfolios.

At June 30, 2023, loans of $ 3.3 billion were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits.

Accrued interest receivable totaled $ 72.5 million and $ 55.5 million at September 30, 2023 and December 31, 2022, respectively, and was included within other assets on the consolidated balance sheets.

For the three months ended September 30, 2023, the Company wrote-off accrued interest by reversing interest income of $ 237 thousand and $ 1.2 million in the Commercial and Personal Banking portfolios, respectively.

Similarly, for the nine months ended September 30, 2023, the Company wrote-off accrued interest of $ 313 thousand and $ 3.4 million in the Commercial and Personal Banking portfolios, respectively.

For the three months ended September 30, 2022, the Company reversed interest income of $ 48 thousand and $ 699 thousand in the Commercial and Personal Banking portfolios, respectively, and in the nine months ended September 30, 2022, reversed $ 103 thousand and $ 2.4 million in the Commercial and Personal Banking portfolios.

At September 30, 2023, loans of $ 3.5 billion were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits.

Additional loans of $ 3.1 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings.

12 unchanged sentences

The forecast adjusted loss rate is applied to the amortized cost of loans over the remaining contractual lives, adjusted for expected prepayments.

The contractual term excludes expected extensions (except for contractual extensions at the option of the customer), renewals and modifications unless there is a reasonable expectation

that a troubled debt restructuring will be executed.

Credit cards and certain similar consumer lines of credit do not have stated maturities and therefore, for these loan classes, remaining contractual lives are determined by estimating future cash flows expected to be received from customers until payments have been fully allocated to outstanding balances.

The contractual term excludes expected extensions (except for contractual extensions at the option of the customer), renewals and modifications.

Credit cards and certain similar consumer

lines of credit do not have stated maturities and therefore, for these loan classes, remaining contractual lives are determined by estimating future cash flows expected to be received from customers until payments have been fully allocated to outstanding balances.

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

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 June 30, 2023 and March 31, 2023 are discussed below.

Key Assumption June 30, 2023 March 31, 2023

Overall economic forecast • Mild recession in the second half of 2023

The assumptions utilized in estimating the Company’s allowance for credit losses at September 30, 2023 and June 30, 2023 are discussed below.

Key Assumption September 30, 2023 June 30, 2023

Overall economic forecast • Mild recession starting in the fourth quarter of 2023

• Risks remain tilted toward another rate hike if progress on inflation and labor markets reverse course

• Consumer spending is expected to be short lived, and growth is expected to fall

• Mild recession in the second half of 2023

• Assume the Federal Reserve will pause increasing interest rates through year end

• Mild recession is expected to weaken employment

• Mild recession to start 3rd quarter of 2023

• Assume the Federal Reserve will continue raising interest rates

• Mild recession is expected to weaken employment

Reasonable and supportable period and related reversion period • Reasonable and supportable period of one year

27 unchanged sentences

• Changes in the composition of the loan portfolios

• Certain portfolios sensitive to pandemic economic uncertainties

• Certain stressed industries within the portfolio

• Certain portfolios sensitive to unusually high rate of inflation and supply chain issues

4 unchanged sentences

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

The current forecast projects a mild recession in the second half of 2023 as the economy continues to face high inflation, higher interest rates and a weaker job market.

The current forecast projects a mild recession starting in the fourth quarter of 2023 as the economy continues to face high inflation, higher interest rates and a weaker job market.

The impacts of the market's response to unusual events or trends including high inflation, supply chain stresses, trends in health conditions and changes in the geopolitical environment could significantly modify economic projections used in the estimation of the allowance for credit losses.

A summary of the activity in the allowance for credit losses on loans and the liability for unfunded lending commitments during the three and six months ended June 30, 2023 and 2022, respectively, follows:

For the Three Months Ended June 30, 2023

For the Six Months Ended June 30, 2023

A summary of the activity in the allowance for credit losses on loans and the liability for unfunded lending commitments during the three and nine months ended September 30, 2023 and 2022, respectively, follows:

For the Three Months Ended September 30, 2023

For the Nine Months Ended September 30, 2023

(In thousands) Commercial Personal Banking

6 unchanged sentences

Net loan charge-offs (recoveries) 2,598 7,186 9,784 2,869 20,178 23,047

Balance June 30, 2023 $ 108,024 $ 50,661 $ 158,685 $ 108,024 $ 50,661 $ 158,685

Balance September 30, 2023 $ 110,627 $ 51,617 $ 162,244 $ 110,627 $ 51,617 $ 162,244

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

1 unchanged sentence

Provision for credit losses on unfunded lending commitments ( 1,724 ) 26 ( 1,698 ) ( 5,625 ) 42 ( 5,583 )

Balance June 30, 2023 $ 27,842 $ 1,393 $ 29,235 $ 27,842 $ 1,393 $ 29,235

Balance September 30, 2023 $ 26,118 $ 1,419 $ 27,537 $ 26,118 $ 1,419 $ 27,537

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS $ 136,745 $ 53,036 $ 189,781 $ 136,745 $ 53,036 $ 189,781

For the Three Months Ended June 30, 2022

For the Six Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

For the Nine Months Ended September 30, 2022

(In thousands) Commercial Personal Banking

6 unchanged sentences

Net loan charge-offs (recoveries) 453 4,359 4,812 541 12,877 13,418

Balance June 30, 2022 $ 99,525 $ 38,514 $ 138,039 $ 99,525 $ 38,514 $ 138,039

Balance September 30, 2022 $ 103,086 $ 40,291 $ 143,377 $ 103,086 $ 40,291 $ 143,377

LIABILITY FOR UNFUNDED LENDING COMMITMENTS

1 unchanged sentence

Provision for credit losses on unfunded lending commitments 5,182 ( 42 ) 5,140 5,528 315 5,843

Balance June 30, 2022 $ 23,617 $ 1,290 $ 24,907 $ 23,617 $ 1,290 $ 24,907

Balance September 30, 2022 $ 28,799 $ 1,248 $ 30,047 $ 28,799 $ 1,248 $ 30,047

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS $ 131,885 $ 41,539 $ 173,424 $ 131,885 $ 41,539 $ 173,424

1 unchanged sentence

The Company considers loans past due on the day following the contractual repayment date, if the contractual repayment was not received by the Company as of the end of the business day.

The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at June 30, 2023 and December 31, 2022.

The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at September 30, 2023 and December 31, 2022.

(In thousands)

2 unchanged sentences

90 Days Past Due and Still Accruing Non-accrual

June 30, 2023

September 30, 2023

Business $ 5,899,303 $ 1,726 $ 699 $ 6,602 $ 5,908,330

19 unchanged sentences

Total $ 16,229,187 $ 49,808 $ 15,830 $ 8,306 $ 16,303,131

At June 30, 2023, the Company had $ 2.9 million in non-accrual business loans that had no allowance for credit loss, compared to $ 3.8 million in non-accrual business loans that had no allowance for credit loss at December 31, 2022.

The Company did not record any interest income on non-accrual loans during the six months ended June 30, 2023 and 2022, respectively.

At September 30, 2023, the Company had $ 2.6 million in non-accrual business loans that had no allowance for credit loss, compared to $ 3.8 million in non-accrual business loans that had no allowance for credit loss at December 31, 2022.

The Company did not record any interest income on non-accrual loans during the nine months ended September 30, 2023 and 2022, respectively.

Credit quality indicators

15 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 June 30, 2023 and December 31, 2022 are as follows:

The risk category of loans in the Commercial portfolio as of September 30, 2023 and December 31, 2022 are as follows:

Term Loans Amortized Cost Basis by Origination Year

(In thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

June 30, 2023

September 30, 2023

Pass $ 1,277,612 $ 944,231 $ 585,620 $ 302,672 $ 281,949 $ 281,170 $ 2,101,284 $ 5,774,538

4 unchanged sentences

$ 1,299,990 $ 956,943 $ 617,519 $ 324,694 $ 282,696 $ 297,042 $ 2,129,446 $ 5,908,330

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ — $ 2,241 $ 56 $ 41 $ — $ — $ 924 $ 3,262

5 unchanged sentences

$ 348,509 $ 642,958 $ 467,912 $ 46,827 $ 469 $ 2,984 $ 29,907 $ 1,539,566

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ — $ — $ — $ — $ — $ — $ — $ —

6 unchanged sentences

$ 614,381 $ 1,156,781 $ 543,531 $ 475,991 $ 352,717 $ 431,876 $ 71,891 $ 3,647,168

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ — $ — $ — $ — $ — $ 1 $ — $ 1

6 unchanged sentences

$ 2,262,880 $ 2,756,682 $ 1,628,962 $ 847,512 $ 635,882 $ 731,902 $ 2,231,244 $ 11,095,064

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ — $ 2,241 $ 56 $ 41 $ — $ 1 $ 924 $ 3,263

28 unchanged sentences

$ 3,096,706 $ 2,060,412 $ 1,219,682 $ 834,144 $ 393,625 $ 566,436 $ 2,258,796 $ 10,429,801

The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided as of June 30, 2023 and December 31, 2022 below.

The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided as of September 30, 2023 and December 31, 2022 below.

Term Loans Amortized Cost Basis by Origination Year

(In thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

June 30, 2023

September 30, 2023

Real estate-personal

4 unchanged sentences

$ 384,591 $ 463,587 $ 547,959 $ 729,357 $ 266,838 $ 623,644 $ 8,663 $ 3,024,639

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ — $ 18 $ — $ — $ — $ 23 $ — $ 41

3 unchanged sentences

$ 453,024 $ 369,289 $ 279,852 $ 144,023 $ 66,283 $ 59,844 $ 753,489 $ 2,125,804

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ 392 $ 1,968 $ 1,541 $ 658 $ 310 $ 297 $ 788 $ 5,954

4 unchanged sentences

$ — $ — $ — $ — $ — $ — $ 305,237 $ 305,237

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ — $ — $ — $ — $ — $ — $ 11 $ 11

4 unchanged sentences

$ — $ — $ — $ — $ — $ — $ 574,829 $ 574,829

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ — $ — $ — $ — $ — $ — $ 17,602 $ 17,602

2 unchanged sentences

$ 3,753 $ — $ — $ — $ — $ — $ — $ 3,753

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ 2,941 $ — $ — $ — $ — $ — $ — $ 2,941

5 unchanged sentences

$ 841,368 $ 832,876 $ 827,811 $ 873,380 $ 333,121 $ 683,488 $ 1,642,218 $ 6,034,262

Gross write-offs for the six months ended June 30, 2023

Gross write-offs for the nine months ended September 30, 2023

$ 3,333 $ 1,986 $ 1,541 $ 658 $ 310 $ 320 $ 18,401 $ 26,549

35 unchanged sentences

The Company requires that collateral-dependent loans are either over-collateralized or carry collateral equal to the amortized cost of the loan.

The following table presents the amortized cost basis of collateral-dependent loans as of June 30, 2023 and December 31, 2022.

The following table presents the amortized cost basis of collateral-dependent loans as of September 30, 2023 and December 31, 2022.

(In thousands) Business Assets Oil & Gas Assets Total

June 30, 2023

September 30, 2023

Business $ 3,792 $ 1,345 $ 5,137

6 unchanged sentences

This is a published credit score designed to measure the risk of default by taking into account various factors from a borrower's financial history and is considered supplementary information utilized by the Company, as management does not consider this information in evaluating the allowance for credit losses on loans.

The Bank normally obtains a FICO score at the loan's origination and renewal dates, and updates are obtained on a quarterly basis.

Excluded from the table below are certain personal real estate

loans for which FICO scores are not obtained because the loans generally pertain to commercial customer activities and are often underwritten with other collateral considerations.

These loans totaled $ 173.0 million at June 30, 2023 and $ 179.2 million at December 31, 2022.

The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled $ 198.7 million at June 30, 2023 and $ 197.5 million at December 31, 2022.

The Bank normally obtains a FICO score at the loan's origination and

renewal dates, and updates are obtained on a quarterly basis.

Excluded from the table below are certain personal real estate loans for which FICO scores are not obtained because the loans generally pertain to commercial customer activities and are often underwritten with other collateral considerations.

These loans totaled $ 170.2 million at September 30, 2023 and $ 179.2 million at December 31, 2022.

The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled $ 210.0 million at September 30, 2023 and $ 197.5 million at December 31, 2022.

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

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

For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at June 30, 2023 and December 31, 2022 by FICO score.

For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at September 30, 2023 and December 31, 2022 by FICO score.

Personal Banking Loans

1 unchanged sentence

Real Estate - Personal Consumer Revolving Home Equity Consumer Credit Card

June 30, 2023

September 30, 2023

Under 600 1.8 % 2.8 % 1.8 % 4.4 %

18 unchanged sentences

Other consumer loans modified to borrowers experiencing financial difficulty consist of various other workout arrangements with consumer customers.

The following tables present the amortized cost at June 30, 2023 of loans that were modified during the three and six months ended June 30, 2023.

For the Three Months Ended June 30, 2023

The following tables present the amortized cost at September 30, 2023 of loans that were modified during the three and nine months ended September 30, 2023.

For the Three Months Ended September 30, 2023

(Dollars in thousands)

1 unchanged sentence

Total % of Total Loan Category

June 30, 2023

September 30, 2023

Business $ 3,792 $ — $ — $ — $ — $ 3,792 0.1 %

5 unchanged sentences

Total $ 60,389 $ 773 $ 984 $ 72 $ 31 $ 62,249 0.4 %

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

(Dollars in thousands)

1 unchanged sentence

Total % of Total Loan Category

June 30, 2023

September 30, 2023

Business $ 16,705 $ — $ — $ — $ — $ 16,705 0.3 %

13 unchanged sentences

If an accruing loan made to a borrower experiencing financial difficulty is modified and subsequently deemed uncollectible, 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 following tables summarize the financial impact of loan modifications and payment deferrals during the three and six months ended June 30, 2023.

The qualitative impact of forbearance and repayment plans is the deferral of payments for 3 months up to 30 years, and therefore, those modifications are excluded from the tables below.

The following tables summarize the financial impact of loan modifications and payment deferrals during the three and nine months ended September 30, 2023.

Term Extension

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Business Added a weighted average of 9 months to the life of loans.

Added a weighted average of 9 months to the life of loans.

Real estate – business Added a weighted average of 12 months to the life of loans.

Added a weighted average of 14 months to the life of loans.

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Business Extended maturity by a weighted average of 3 months.

Extended maturity by a weighted average of 8 months.

Real estate – business Extended maturity by a weighted average of 12 months.

Extended maturity by a weighted average of 13 months.

Personal Banking:

Real estate – personal Added a weighted average of 7 months to the life of loans.

Added a weighted average of 7 months to the life of loans.

Consumer Added 10 years to the life of loans.

Added 10 years to the life of loans.

Real estate – personal Extended maturity by a weighted average of 6 months.

Extended maturity by a weighted average of 7 months.

Consumer Extended maturity by 10 years.

Payment Delay

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Personal Banking:

2 unchanged sentences

Consumer Deferred certain payments by a weighted average of 71 months .

Deferred certain payments by a weighted average of 71 months .

Interest Rate Reduction

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Personal Banking:

4 unchanged sentences

Forgiveness of Interest/Fees

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Personal Banking:

1 unchanged sentence

Approximately $33 thousand of interest and fees forgiven.

The Company had commitments of $ 6.3 million at June 30, 2023 to lend additional funds to borrowers experiencing financial difficulty and for whom the Company has modified the terms of loans in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension during the current reporting period.

The following table provides the amortized cost basis of loans to borrowers experiencing financial difficulty that had a payment default during the three and six months ended June 30, 2023 and were modified on or after January 1, 2023 (the date we adopted ASU 2022-02) through June 30, 2023.

The Company had commitments of $ 9.1 million at September 30, 2023 to lend additional funds to borrowers experiencing financial difficulty and for whom the Company has modified the terms of loans in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension during the current reporting period.

The following table provides the amortized cost basis of loans to borrowers experiencing financial difficulty that had a payment default during the three and nine months ended September 30, 2023 and were modified on or after January 1, 2023 (the date we adopted ASU 2022-02) through September 30, 2023.

For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal.

In addition to the loans below, the Company charged off $ 78 thousand of consumer credit card loans during the six months ended June 30, 2023 that were modified during the period.

For the Three Months Ended June 30, 2023 For the Six Months Ended June 30, 2023

In addition to the loans below, the Company charged off $ 2.2 million and $ 327 thousand of business and consumer credit card loans, respectively, during the nine months ended September 30, 2023 that were modified during the period.

For the Three Months Ended September 30, 2023 For the Nine Months Ended September 30, 2023

(Dollars in thousands)

Payment Delay Interest Rate Reduction Interest/Fees Forgiven Total Payment Delay Interest Rate Reduction Interest/Fees Forgiven Total

June 30, 2023

September 30, 2023

Personal Banking:

3 unchanged sentences

Total $ 802 $ 254 $ 157 $ 1,213 $ 1,007 $ 304 $ 158 $ 1,469

The following table presents the amortized cost basis at June 30, 2023 of loans that have been modified on or after January 1, 2023 (the date we adopted ASU 2022-02) through June 30, 2023.

The following table presents the amortized cost basis at September 30, 2023 of loans that have been modified on or after January 1, 2023 (the date we adopted ASU 2022-02) through September 30, 2023.

(In thousands)

1 unchanged sentence

90 Days Past Due Total

June 30, 2023

September 30, 2023

Business $ 16,705 $ — $ — $ 16,705

56 unchanged sentences

The loans are primarily sold to Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA).

At June 30, 2023, the fair value of these loans was $ 1.6 million, and the unpaid principal balance was $ 1.6 million.

At September 30, 2023, the fair value of these loans was $ 366 thousand, and the unpaid principal balance was $ 360 thousand.

The Company also designates certain student loan originations as held for sale.

1 unchanged sentence

The loans are intended to be sold in the secondary market, and the Company maintains contracts with Sallie Mae to sell the loans within 210 days after the last disbursement to the student.

These loans are carried at lower of cost or fair value, which at June 30, 2023 totaled $ 4.9 million.

At June 30, 2023, none of the loans held for sale were on non-accrual status or 90 days past due and still accruing interest.

These loans are carried at lower of cost or fair value, which at September 30, 2023 totaled $ 4.5 million.

At September 30, 2023, none of the loans held for sale were on non-accrual status or 90 days past due and still accruing interest.

Foreclosed real estate/repossessed assets

The Company’s holdings of foreclosed real estate totaled $ 94 thousand and $ 96 thousand at June 30, 2023 and December 31, 2022, respectively, and included in those amounts were $ 94 thousand and $ 96 thousand at June 30, 2023 and December 31, 2022, respectively, of foreclosed residential real estate properties held as a result of obtaining physical possession.

Personal property acquired in repossession, generally autos, totaled $ 1.9 million and $ 1.6 million at June 30, 2023 and December 31, 2022, respectively.

The Company’s holdings of foreclosed real estate totaled $ 114 thousand and $ 96 thousand at September 30, 2023 and December 31, 2022, respectively, and included in those amounts were $ 114 thousand and $ 96 thousand at September 30, 2023 and December 31, 2022, respectively, of foreclosed residential real estate properties held as a result of obtaining physical possession.

Personal property acquired in repossession, generally autos, totaled $ 1.6 million at both September 30, 2023 and December 31, 2022.

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 consisted of the following at June 30, 2023 and December 31, 2022.

(In thousands) June 30, 2023 December 31, 2022

Investment securities consisted of the following at September 30, 2023 and December 31, 2022.

(In thousands) September 30, 2023 December 31, 2022

Available for sale debt securities $ 9,860,828 $ 12,238,316

9 unchanged sentences

$ 10,139,396 $ 12,519,177

(1) Accrued interest receivable totaled $ 29.8 million and $ 38.8 million at June 30, 2023 and December 31, 2022, respectively, and was included within other assets on the consolidated balance sheets.

(1) Accrued interest receivable totaled $ 29.4 million and $ 38.8 million at September 30, 2023 and December 31, 2022, respectively, and was included within other assets on the consolidated balance sheets.

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

This portfolio includes the Company's holdings of Visa Class B shares, which have a carrying value of zero , as there have not been observable price changes in orderly transactions for identical or similar investments of the same issuer.

During the six months ended June 30, 2023, the Company did not record any impairment or other adjustments to the carrying amount of its portfolio of equity securities with no readily determinable fair value.

During the nine months ended September 30, 2023, the Company did not record any impairment or other adjustments to the carrying amount of its portfolio of equity securities with no readily determinable fair value.

Other investment securities include Federal Reserve Bank (FRB) stock, Federal Home Loan Bank (FHLB) stock, equity method investments, and investments in portfolio concerns held by the Company's private equity subsidiary.

6 unchanged sentences

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

A summary of the available for sale debt securities by maturity groupings as of June 30, 2023 is shown below.

The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as FHLMC, FNMA, and Government National Mortgage Association (GNMA), in addition to non-agency mortgage-backed securities, which have no guarantee but are collateralized by commercial and residential mortgages.

Also included are certain other asset-backed securities, which are primarily

collateralized by credit cards, automobiles, student loans, and commercial loans.

A summary of the available for sale debt securities by maturity groupings as of September 30, 2023 is shown below.

collateralized by commercial and residential mortgages.

Also included are certain other asset-backed securities, which are primarily collateralized by credit cards, automobiles, student loans, and commercial loans.

These securities differ from traditional debt securities primarily in that they may have uncertain maturity dates and are priced based on estimated prepayment rates on the underlying collateral.

29 unchanged sentences

government and federal agency obligations include U.S.

Treasury inflation-protected securities, which totaled $ 395.4 million, at fair value, at June 30, 2023.

Treasury inflation-protected securities, which totaled $ 391.7 million, at fair value, at September 30, 2023.

Interest earned on these securities increases with inflation and decreases with deflation, as measured by the non-seasonally adjusted Consumer Price Index (CPI-U).

7 unchanged sentences

Securities not analyzed using the cash flow model are analyzed by reviewing risk ratings, credit support agreements, and industry knowledge to project future cash flows and any possible credit impairment.

At June 30, 2023, the fair value of securities on this watch list was $ 1.6 billion compared to $ 1.3 billion at December 31, 2022.

At September 30, 2023, the fair value of securities on this watch list was $ 2.8 billion compared to $ 1.3 billion at December 31, 2022.

The majority of the securities included on the Company's watch list in the current quarter were experiencing unrealized loss positions due to the significant increase in interest rates and were analyzed outside of the cash flow model.

At June 30, 2023, the securities on the Company's watch list that were not deemed to be solely related to increasing interest rates were securities backed by government-guaranteed student loans and are expected to perform as contractually required.

As of June 30, 2023, the Company did not identify any securities for which a credit loss exists, and for the six months ended June 30, 2023 and 2022, the Company did not recognize a credit loss expense on any available for sale debt securities.

The table below summarizes debt securities available for sale in an unrealized loss position, aggregated by length of loss period, for which an allowance for credit losses has not been recorded at June 30, 2023 and December 31, 2022.

At September 30, 2023, the securities on the Company's watch list that were not deemed to be solely related to increasing interest rates were securities backed by government-guaranteed student loans and are expected to perform as contractually required.

As of September 30, 2023, the Company did not identify any securities for which a credit loss exists, and for the nine months ended September 30, 2023 and 2022, the Company did not recognize a credit loss expense on any available for sale debt securities.

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

The unrealized losses on these securities are primarily attributable to changes in interest rates and current market conditions.

At June 30, 2023, the Company does not intend to sell the securities, nor is it anticipated that it would be required to sell any of these securities at a loss.

At September 30, 2023, the Company does not intend to sell the securities, nor is it anticipated that it would be required to sell any of these securities at a loss.

Less than 12 months 12 months or longer Total

3 unchanged sentences

Losses Fair Value Unrealized

June 30, 2023

September 30, 2023

government and federal agency obligations $ 48,996 $ 2,838 $ 898,980 $ 37,361 $ 947,976 $ 40,199

19 unchanged sentences

Total $ 4,402,724 $ 250,660 $ 7,625,021 $ 1,249,972 $ 12,027,745 $ 1,500,632

The entire available for sale debt portfolio included $ 10.4 billion of securities that were in a loss position at June 30, 2023, compared to $ 12.0 billion at December 31, 2022.

The total amount of unrealized loss on these securities was $ 1.4 billion at June 30, 2023, a decrease of $ 81.2 million compared to the unrealized loss at December 31, 2022.

The entire available for sale debt portfolio included $ 9.8 billion of securities that were in a loss position at September 30, 2023, compared to $ 12.0 billion at December 31, 2022.

The total amount of unrealized loss on these securities was $ 1.6 billion at September 30, 2023, an increase of $ 96.1 million compared to the unrealized loss at December 31, 2022.

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 June 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022, and the corresponding amounts of gross unrealized gains and losses (pre-tax) in AOCI, by security type.

(In thousands)

1 unchanged sentence

Losses Allowance for Credit Losses Fair Value

June 30, 2023

September 30, 2023

government and federal agency obligations $ 988,175 $ — $ ( 40,199 ) $ — $ 947,976

20 unchanged sentences

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

For the Six Months Ended June 30

For the Nine Months Ended September 30

(In thousands) 2023 2022

14 unchanged sentences

Losses realized on sales

( 1,245 ) ( 4,313 )

Fair value adjustments, net 16,946 37,133

Total investment securities gains (losses), net $ 7,384 $ 11,602

Net losses on investment securities for the six months ended June 30, 2023 were mainly comprised of net losses of $ 8.4 million on sales of available for sale securities, and net losses in fair value of $ 690 thousand on equity investments, offset by net gains in private equity securities due to sales and fair value adjustments of $ 879 thousand and $ 11.3 million, respectively.

At June 30, 2023, securities totaling $ 8.1 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 $ 4.7 billion at December 31, 2022.

Net losses on investment securities for the nine months ended September 30, 2023 were mainly comprised of net losses of $ 8.4 million on sales of available for sale securities, net losses in fair value of $ 757 thousand on equity investments, and net

losses of $ 361 thousand on sales of private equity securities, offset by net gains in private equity securities due to fair value adjustments of $ 16.9 million.

At September 30, 2023, securities totaling $ 7.6 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 $ 4.7 billion at December 31, 2022.

Securities pledged under agreements pursuant to which the collateral may be sold or re-pledged by the secured parties approximated $ 207.1 million, while the remaining securities were pledged under agreements pursuant to which the secured parties may not sell or re-pledge the collateral.

3 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In thousands)

4 unchanged sentences

Total $ 27,988 $ ( 17,156 ) $ — $ 10,832 $ 53,457 $ ( 41,823 ) $ — $ 11,634

Aggregate amortization expense on intangible assets was $ 353 thousand and $ 501 thousand for the three month periods ended June 30, 2023 and 2022, respectively, and $ 709 thousand and $ 1.1 million for the six month periods ended June 30, 2023 and 2022, respectively.

Aggregate amortization expense on intangible assets was $ 344 thousand and $ 456 thousand for the three month periods ended September 30, 2023 and 2022, respectively, and $ 1.1 million and $ 1.6 million for the nine month periods ended September 30, 2023 and 2022, respectively.

The following table shows the estimated annual amortization expense for the next five fiscal years.

This expense is based on existing asset balances and the interest rate environment as of June 30, 2023.

This expense is based on existing asset balances and the interest rate environment as of September 30, 2023.

The Company’s actual amortization expense in any given period may be different from the estimated amounts depending upon the acquisition of intangible assets, changes in mortgage interest rates, prepayment rates and other market conditions.

3 unchanged sentences

Hart & Company, a municipal bond underwriter and advisor, and the acquisition resulted in goodwill of $ 7.6 million.

C hanges in the carrying amount of goodwill and other intangible assets for the six month period ended June 30, 2023 are as follows:

Changes in the carrying amount of goodwill and other intangible assets for the nine month period ended September 30, 2023 are as follows:

(In thousands) Goodwill Easement Core Deposit Premium Mortgage Servicing Rights

4 unchanged sentences

Amortization — — ( 194 ) ( 859 )

Balance June 30, 2023 $ 146,371 $ 3,600 $ 573 $ 10,493

Goodwill allocated to the Company’s operating segments at June 30, 2023 and December 31, 2022 is shown below.

(In thousands) June 30, 2023 December 31, 2022

Balance September 30, 2023 $ 146,539 $ 3,600 $ 511 $ 10,321

Goodwill allocated to the Company’s operating segments at September 30, 2023 and December 31, 2022 is shown below.

(In thousands) September 30, 2023 December 31, 2022

Consumer segment $ 70,721 $ 70,721

9 unchanged sentences

Upon issuance of standby letters of credit, the Company recognizes a liability for the fair value of the obligation undertaken, which is estimated to be equivalent to the amount of fees received from the customer over the life of the agreement.

At June 30, 2023, that net liability was $ 4.2 million, which will be accreted into income over the remaining life of the respective commitments.

The contractual amount of these letters of credit, which represents the maximum potential future payments guaranteed by the Company, was $ 601.2 million at June 30, 2023.

At September 30, 2023, that net liability was $ 3.4 million, which will be accreted into income over the remaining life of the respective commitments.

The contractual amount of these letters of credit, which represents the maximum potential future payments guaranteed by the Company, was $ 594.2 million at September 30, 2023.

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.

2 unchanged sentences

The third parties usually have other borrowing relationships with the Company.

The Company monitors overall borrower collateral and at June 30, 2023, believes sufficient collateral is available to cover potential swap losses.

The Company monitors overall borrower collateral and at September 30, 2023, believes sufficient collateral is available to cover potential swap losses.

The RPAs are carried at fair value throughout their term with all changes in fair value, including those due to a change in the third party’s creditworthiness, recorded in current earnings.

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

At June 30, 2023, the fair value of the Company's guarantee liabilities for RPAs was $ 88 thousand, and the notional amount of the underlying swaps was $ 411.6 million.

At September 30, 2023, the fair value of the Company's guarantee liabilities for RPAs was $ 44 thousand, and the notional amount of the underlying swaps was $ 446.2 million.

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

7 unchanged sentences

The following table provides the components of lease income.

For the Three Months Ended June 30 For the Six Months Ended June 30

For the Three Months Ended September 30 For the Nine Months Ended September 30

(in thousands) 2023 2022 2023 2022

3 unchanged sentences

Total lease income $ 11,559 $ 7,652 $ 31,671 $ 22,355

(a) Includes rent from Tower Properties Company, a related party, of $ 19 thousand for both of the three month periods ended June 30, 2023 and 2022 and $38 thousand for both the six month periods ended June 30, 2023 and 2022.

(a) Includes rent from Tower Properties Company, a related party, of $ 19 thousand for both of the three month periods ended September 30, 2023 and 2022 and $ 58 thousand for both of the nine month periods ended September 30, 2023 and 2022.

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

For the Three Months Ended June 30 For the Six Months Ended June 30

For the Three Months Ended September 30 For the Nine Months Ended September 30

(In thousands) 2023 2022 2023 2022

6 unchanged sentences

All benefits accrued under the Company’s defined benefit pension plan have been frozen since January 1, 2011.

During the first six months of 2023, the Company made no funding contributions to its defined benefit pension plan and made minimal funding contributions to a supplemental executive retirement plan (the CERP), which carries no segregated assets.

During the first nine months of 2023, the Company made no funding contributions to its defined benefit pension plan and made minimal funding contributions to a supplemental executive retirement plan (the CERP), which carries no segregated assets.

Common Stock *

4 unchanged sentences

Nonvested share-based awards are further discussed in Note 13.

For the Three Months Ended June 30 For the Six Months Ended June 30

For the Three Months Ended September 30 For the Nine Months Ended September 30

(In thousands, except per share data) 2023 2022 2023 2022

15 unchanged sentences

Diluted income per common share $ .96 $ .97 $ 2.93 $ 2.81

Unexercised stock appreciation rights of 427 thousand and 177 thousand for the three month periods ended June 30, 2023 and 2022, respectively, and 264 thousand and 151 thousand for the six month periods ended June 30, 2023 and 2022, respectively, were excluded from the computation of diluted income per common share because their inclusion would have been anti-dilutive.

Unexercised stock appreciation rights of 539 thousand and 175 thousand for the three month periods ended September 30, 2023 and 2022, respectively, and 342 thousand and 159 thousand for the nine month periods ended September 30, 2023 and 2022, respectively, were excluded from the computation of diluted income per common share because their inclusion would have been anti-dilutive.

In the Annual Meeting of the Shareholders, held on April 19, 2023, a proposal to increase the shares of the Company's common stock authorized for issuance under its articles of incorporation was approved.

13 unchanged sentences

Current period other comprehensive income (loss), net of tax ( 72,440 ) 738 ( 34,968 ) ( 106,670 )

Balance June 30, 2023

Balance September 30, 2023

$ ( 1,197,355 ) $ ( 16,448 ) $ 20,269 $ ( 1,193,534 )

6 unchanged sentences

Current period other comprehensive income (loss), net of tax ( 1,181,031 ) 947 ( 16,340 ) ( 1,196,424 )

Balance June 30, 2022

Balance September 30, 2022

$ ( 1,157,857 ) $ ( 19,721 ) $ 58,234 $ ( 1,119,344 )

18 unchanged sentences

Consumer Commercial Wealth Segment Totals Other/Elimination Consolidated Totals

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Net interest income $ 106,453 $ 123,062 $ 19,629 $ 249,144 $ ( 597 ) $ 248,547

4 unchanged sentences

Income before income taxes $ 42,110 $ 82,626 $ 36,099 $ 160,835 $ ( 4,696 ) $ 156,139

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Net interest income $ 304,859 $ 355,690 $ 54,193 $ 714,742 $ 34,966 $ 749,708

4 unchanged sentences

Income before income taxes $ 116,857 $ 245,814 $ 97,999 $ 460,670 $ 15,288 $ 475,958

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Net interest income $ 93,182 $ 114,135 $ 18,640 $ 225,957 $ 20,416 $ 246,373

4 unchanged sentences

Income before income taxes $ 37,347 $ 79,347 $ 36,319 $ 153,013 $ 7,110 $ 160,123

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Net interest income $ 270,561 $ 333,270 $ 56,731 $ 660,562 $ 26,982 $ 687,544

20 unchanged sentences

(In thousands)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Interest rate swaps $ 2,199,242 $ 1,981,821

14 unchanged sentences

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

As of June 30, 2023, the Company holds three interest rate floors with a combined notional value of $ 1.5 billion to hedge the risk of declining interest rates on certain floating rate commercial loans.

The first floor was purchased during the third quarter of 2022, has a purchased strike rate of 2.50%, is forward-starting beginning on January 1, 2024 and matures on January 1, 2030.

In the event that the index rate falls below zero, the maximum rate spread the Company can earn on the notional amount is limited to 2.50%.

The second floor was purchased during the fourth quarter of 2022, has a purchased strike rate of 3.00%, is forward-starting beginning on April 1, 2024 and matures on April 1, 2030.

In the event that the index rate falls below zero, the maximum rate the Company can earn on the notional amount is limited to 3.00%.

The third floor was purchased during the first quarter of 2023, has a purchased strike rate of 3.50%, is forward-starting beginning on July 1, 2024 and matures on July 1, 2030.

In the event that the index rate falls below zero, the maximum rate the Company can earn on the notional amount is limited to 3.50%.

The premium paid for these floors totaled $ 61.7 million.

As of June 30, 2023, the maximum length of time over which the Company is hedging its exposure to lower rates is approximately 6.5 years.

As of September 30, 2023, the Company held four interest rate floors indexed to 1-month SOFR to hedge the risk of declining interest rates on certain floating rate commercial loans.

The floors have a combined notional value of $2.0 billion and are forward-starting.

Each of the four interest rate floors has a six-year term and a notional amount of $500.0 million.

In the event that the index rate falls below zero, the maximum rate that the Company can earn on the notional amount of each floor is limited to the strike rate.

Information about the floors is provided in the table below.

Strike Rate Effective Date Maturity Date

3.50 % July 1, 2024 July 1, 2030

3.25 % November 1, 2024 November 1, 2030

3.00 % March 1, 2025 March 1, 2031

2.75 % July 1, 2025 July 1, 2031

The premium paid for the floors totaled $ 90.2 million, which includes a $ 28.5 million premium paid during the third quarter of 2023 and $ 25.9 million paid during the first six months ended June 30, 2023.

The maximum length of time over which the Company is hedging its exposure to lower rates is approximately 7 years.

These interest rate floors qualified and were designated as cash flow hedges and were assessed for effectiveness using regression analysis.

The change in the fair value of these interest rate floors is recorded in AOCI, net of the amortization of the premiums paid, which are recorded against interest and fees on loans in the consolidated statements of income.

As of June 30, 2023, net deferred losses on the interest rate floors totaled $ 8.0 million (pre-tax) and were recorded in AOCI in the consolidated balance sheet.

As of June 30, 2023, it is expected that $ 7.4 million (pre-tax) interest rate floor premium amortization will be reclassified from AOCI into earnings over the next 12 months.

As of September 30, 2023, net deferred losses on the interest rate floors totaled $ 30.1 million (pre-tax) and were recorded in AOCI in the consolidated balance sheet.

As of September 30, 2023, it is expected that $ 10.8 million (pre-tax) interest rate floor premium amortization will be reclassified from AOCI into earnings over the next 12 months for the outstanding interest rate floors.

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 June 30, 2023, the total realized gains on the monetized cash flow hedges remaining in AOCI was $ 63.1 million (pre-tax), which will be reclassified into interest income over the next 3.5 years.

The estimated amount of net gains related to the cash flow hedges remaining in AOCI at June 30, 2023 that is expected to be reclassified into income within the next 12 months is $ 23.0 million.

September 30, 2023, the total realized gains on the monetized cash flow hedges remaining in AOCI was $ 57.1 million (pre-tax), which will be reclassified into interest income over the next 3.2 years.

The estimated amount of net gains related to the cash flow hedges remaining in AOCI at September 30, 2023 that is expected to be reclassified into income within the next 12 months is $ 22.6 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.

9 unchanged sentences

Information about the valuation methods used to determine fair value is provided in Note 15 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 applied to the fair values of the cleared swaps, such that at June 30, 2023 in the table below, the positive fair values of cleared swaps were reduced by $ 878 thousand.

At December 31, 2022, positive fair values of cleared swaps were reduced by $ 27.8 million.

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

Certain collateral posted to and from the Company's clearing counterparty has been applied to the fair values of the cleared swaps, such that in the table below, the positive fair values of cleared swaps were reduced by $ 27.8 million at December 31, 2022.

There was no reduction to positive fair values of cleared swaps at September 30, 2023.

Asset Derivatives Liability Derivatives

June 30, 2023 Dec.

31, 2022 June 30, 2023 Dec.

30, 2023 Dec.

31, 2022 Sept.

30, 2023 Dec.

(In thousands )

18 unchanged sentences

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

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Derivatives in cash flow hedging relationships:

1 unchanged sentence

Total $ ( 29,007 ) $ — $ ( 29,007 ) Total $ 3,543 $ 7,459 $ ( 3,916 )

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Derivatives in cash flow hedging relationships:

1 unchanged sentence

Total $ ( 34,530 ) $ — $ ( 34,530 ) Total $ 12,093 $ 22,358 $ ( 10,265 )

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Derivatives in cash flow hedging relationships:

1 unchanged sentence

Total $ ( 3,464 ) $ — $ ( 3,464 ) Total $ 6,118 $ 7,745 $ ( 1,627 )

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Derivatives in cash flow hedging relationships:

3 unchanged sentences

Location of Gain or (Loss) Recognized in Consolidated Statements of Income Amount of Gain or (Loss) Recognized in Income on Derivatives

For the Three Months Ended June 30 For the Six Months Ended June 30

For the Three Months Ended September 30 For the Nine Months Ended September 30

(In thousands) 2023 2022 2023 2022

24 unchanged sentences

Pledged Net Amount

June 30, 2023

September 30, 2023

Derivatives subject to master netting agreements

26 unchanged sentences

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

The collateral swaps totaled $ 200.0 million at June 30, 2023 and December 31, 2022.

At June 30, 2023, the Company had posted collateral of $ 206.2 million in marketable securities, consisting of agency mortgage-backed bonds, and had accepted $ 209.7 million in agency mortgage-backed bonds.

The collateral swaps totaled $ 200.0 million at September 30, 2023 and December 31, 2022.

At September 30, 2023, the Company had posted collateral of $ 206.9 million in marketable securities, consisting of agency mortgage-backed bonds, and had accepted $ 209.8 million in agency mortgage-backed bonds.

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.

4 unchanged sentences

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

June 30, 2023

September 30, 2023

Total resale agreements, subject to master netting arrangements

7 unchanged sentences

2,881,874 ( 200,000 ) 2,681,874 — ( 2,681,874 ) —

The table below shows the remaining contractual maturities of repurchase agreements outstanding at June 30, 2023 and December 31, 2022, in addition to the various types of marketable securities that have been pledged by the Company as collateral for these borrowings.

The table below shows the remaining contractual maturities of repurchase agreements outstanding at September 30, 2023 and December 31, 2022, in addition to the various types of marketable securities that have been pledged by the Company as collateral for these borrowings.

Remaining Contractual Maturity of the Agreements

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

June 30, 2023

September 30, 2023

Repurchase agreements, secured by:

16 unchanged sentences

Historically, most of the awards have been issued during the first quarter of each year.

The stock-based compensation expense charged against income was $ 3.9 million and $ 4.2 million in the three months ended June 30, 2023 and 2022 respectively, and $ 8.3 million and $ 8.4 million in the six months ended June 30, 2023 and 2022, respectively.

The stock-based compensation expense charged against income was $ 4.3 million and $ 4.2 million in the three months ended September 30, 2023 and 2022 respectively, and $ 12.6 million in the nine months ended September 30, 2023 and 2022, respectively.

Nonvested stock awards granted generally vest in 4 to 7 years and contain restrictions as to transferability, sale, pledging, or assigning, among others, prior to the end of the vesting period.

Dividend and voting rights are conferred upon grant.

A summary of the status of the Company’s nonvested share awards as of June 30, 2023, and changes during the six month period then ended, is presented below.

A summary of the status of the Company’s nonvested share awards as of September 30, 2023, and changes during the nine month period then ended, is presented below.

Shares Weighted Average Grant Date Fair Value

3 unchanged sentences

Forfeited ( 25,539 ) 60.44

Nonvested at June 30, 2023 1,109,542 $ 61.59

Nonvested at September 30, 2023 1,118,848 $ 61.41

SARs are granted with exercise prices equal to the market price of the Company’s stock at the date of grant.

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Expected term

A summary of SAR activity during the first six months of 2023 is presented below.

A summary of SAR activity during the first nine months of 2023 is presented below.

(Dollars in thousands, except per share data)

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Exercised ( 49,866 ) 26.83

Outstanding at June 30, 2023

Outstanding at September 30, 2023

978,572 $ 49.46 5.1 years $ 4,468

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Revenue from contracts with customers, Accounting Standard Codification 606 ("ASC 606"), requires revenue recognition for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

For the six months ended June 30, 2023, approximately 64 % of the Company’s total revenue was comprised of net interest income, which is not within the scope of this guidance.

For the nine months ended September 30, 2023, approximately 64 % of the Company’s total revenue was comprised of net interest income, which is not within the scope of this guidance.

Of the remaining revenue, those items that were subject to this guidance mainly included fees for bank card, trust, deposit account services and consumer brokerage services.

The following table disaggregates revenue from contracts with customers by major product line.

Three Months Ended June 30 Six Months Ended June 30

Three Months Ended September 30 Nine Months Ended September 30

(In thousands) 2023 2022 2023 2022

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For bank card transaction fees, nearly all of debit and credit card fees are earned in the Consumer segment, while corporate card and merchant fees are earned in the Commercial segment.

The Consumer and Commercial segments contribute approximately 33 % and 67 %, respectively, of the Company's deposit account charge revenue.

All trust fees and nearly all consumer brokerage services income are earned in the Wealth segment.

The following table presents the opening and closing receivable balances for the six month periods ended June 30, 2023 and 2022 for the Company’s significant revenue from contracts with customers.

(In thousands) June 30, 2023 December 31, 2022 June 30, 2022 December 31, 2021

The Consumer and Commercial segments contributed approximately 33 % and 67 %, respectively, of the Company's deposit account charge revenue.

All trust fees and nearly all consumer brokerage services income were earned in the Wealth segment.

The following table presents the opening and closing receivable balances for the nine month periods ended September 30, 2023 and 2022 for the Company’s significant revenue from contracts with customers.

(In thousands) September 30, 2023 December 31, 2022 September 30, 2022 December 31, 2021

Bank card transaction fees $ 15,160 $ 17,254 $ 14,167 $ 16,424

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Instruments Measured at Fair Value on a Recurring Basis

The table below presents the June 30, 2023 and December 31, 2022 carrying values of assets and liabilities measured at fair value on a recurring basis.

There were no transfers among levels during the first six months of 2023 or the year ended December 31, 2022.

The table below presents the September 30, 2023 and December 31, 2022 carrying values of assets and liabilities measured at fair value on a recurring basis.

There were no transfers among levels during the first nine months of 2023 or the year ended December 31, 2022.

Fair Value Measurements Using

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(Level 2) Significant Unobservable Inputs

June 30, 2023

September 30, 2023

Residential mortgage loans held for sale $ 366 $ — $ 366 $ —

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

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

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

Fair Value Measurements Using

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State and Municipal Obligations Private Equity

Derivatives Total

For the three months ended June 30, 2023

Balance March 31, 2023

For the three months ended September 30, 2023

Balance June 30, 2023

$ 920 $ 172,732 $ 173,652

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Included in other comprehensive income * 18 — 18

Discount accretion 1 — — 1

Purchases of private equity investments — 224 — 224

Purchase of risk participation agreement — — 61 61

Sale of risk participation agreement — — ( 13 ) ( 13 )

Balance June 30, 2023 $ 920 $ 172,732 $ 5 $ 173,657

Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2023

Sale/pay down of private equity investments — ( 13,342 ) ( 13,342 )

Capitalized interest/dividends — 327 327

Balance September 30, 2023 $ 938 $ 165,322 $ 166,260

Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2023

$ — $ 5,605 $ 5,605

*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2023

*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2023

$ 17 $ — $ 17

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Balance January 1, 2023

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Sale/pay down of private equity investments — ( 40,834 ) ( 40,834 )

Purchase of risk participation agreement — — 61 61

Sale of risk participation agreement — — ( 13 ) ( 13 )

Balance June 30, 2023 $ 920 $ 172,732 $ 5 $ 173,657

Total gains or losses for the six months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2023

Capitalized interest/dividends — 327 327

Balance September 30, 2023 $ 938 $ 165,322 $ 166,260

Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2023

$ — $ 17,446 $ 17,446

*Total gains or losses for the six months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2023

*Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2023

$ 27 $ — $ 27

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State and Municipal Obligations Private Equity

Derivatives Total

For the three months ended June 30, 2022

Balance March 31, 2022

For the three months ended September 30, 2022

Balance June 30, 2022

$ 1,816 $ 161,771 $ 163,587

5 unchanged sentences

Sale/pay down of private equity investments — ( 423 ) ( 423 )

Purchase of risk participation agreement — — 314 314

Sale of risk participation agreement — — ( 250 ) ( 250 )

Balance June 30, 2022

Capitalized interest/dividends — 44 44

Balance September 30, 2022

$ 1,858 $ 176,341 $ 178,199

Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2022

Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022

$ — $ 14,050 $ 14,050

*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2022

*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022

$ 40 $ — $ 40

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

Balance January 1, 2022

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Sale/pay down of private equity investments — ( 10,263 ) ( 10,263 )

Purchase of risk participation agreement — — 459 459

Sale of risk participation agreement — — ( 250 ) ( 250 )

Balance June 30, 2022

Capitalized interest/dividends — 44 44

Balance September 30, 2022

$ 1,858 $ 176,341 $ 178,199

Total gains or losses for the six months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2022

Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022

$ — $ 37,083 $ 37,083

*Total gains or losses for the six months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at June 30, 2022

*Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022

$ ( 130 ) $ — $ ( 130 )

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

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

(In thousands) Loan Fees and Sales Other Non-Interest Income Investment Securities Gains (Losses), Net Total

For the three months ended June 30, 2023

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

(In thousands) Investment Securities Gains (Losses), Net

For the three months ended September 30, 2023

Total gains or losses included in earnings $ 5,605

Change in unrealized gains or losses relating to assets still held at June 30, 2023

$ 58 $ 3 $ 9,090 $ 9,151

For the six months ended June 30, 2023

Change in unrealized gains or losses relating to assets still held at September 30, 2023

For the nine months ended September 30, 2023

Total gains or losses included in earnings $ 16,946

Change in unrealized gains or losses relating to assets still held at June 30, 2023

$ 58 $ ( 16 ) $ 11,341 $ 11,383

For the three months ended June 30, 2022

Change in unrealized gains or losses relating to assets still held at September 30, 2023

For the three months ended September 30, 2022

Total gains or losses included in earnings $ 14,050

Change in unrealized gains or losses relating to assets still held at June 30, 2022

$ 230 $ ( 82 ) $ 15,633 $ 15,781

For the six months ended June 30, 2022

Change in unrealized gains or losses relating to assets still held at September 30, 2022

For the nine months ended September 30, 2022

Total gains or losses included in earnings $ 37,133

Change in unrealized gains or losses relating to assets still held at June 30, 2022

$ 230 $ ( 94 ) $ 23,033 $ 23,169

Change in unrealized gains or losses relating to assets still held at September 30, 2022

Level 3 Inputs

The Company's significant Level 3 measurements, which employ unobservable inputs that are readily quantifiable, pertain to investments in portfolio concerns held by the Company's private equity subsidiaries and held for sale residential mortgage loan commitments.

The Company's significant Level 3 measurements at September 30, 2023, which employ unobservable inputs that are readily quantifiable, pertain to investments in portfolio concerns held by the Company's private equity subsidiaries.

Information about these inputs is presented in the table below.

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Private equity investments Market comparable companies EBITDA multiple 4.0 - 6.0 5.1

Mortgage loan commitments Discounted cash flow Probability of funding 64.5 % - 100.0 % 81.2 %

Embedded servicing value .7 % - 1.5 % 1.1 %

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

Instruments Measured at Fair Value on a Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the first six months of 2023 and 2022, and still held as of June 30, 2023 and 2022, the following table provides the adjustments to fair value recognized during the respective periods, the level of valuation inputs used to determine each adjustment, and the carrying value of the related individual assets or portfolios at June 30, 2023 and 2022.

For assets measured at fair value on a nonrecurring basis during the first nine months of 2023 and 2022, and still held as of September 30, 2023 and 2022, the following table provides the adjustments to fair value recognized during the respective periods, the level of valuation inputs used to determine each adjustment, and the carrying value of the related individual assets or portfolios at September 30, 2023 and 2022.

Fair Value Measurements Using

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Significant Unobservable Inputs

Total Gains (Losses) Recognized During the Six Months Ended June 30

June 30, 2023

Total Gains (Losses) Recognized During the Nine Months Ended September 30

September 30, 2023

Collateral dependent loans $ 4,029 $ — $ — $ 4,029 $ ( 2,059 )

June 30, 2022

Long-lived assets 1,894 — — 1,894 ( 164 )

September 30, 2022

Collateral dependent loans $ 200 $ — $ — $ 200 $ ( 394 )

Mortgage servicing rights 11,228 — — 11,228 304

Long- lived assets 480 — — 480 ( 965 )

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 intangible assets-net on the consolidated balance sheets, and information about these inputs at June 30, 2023 is presented in the table below.

Quantitative Information about Level 3 Fair Value Measurements Weighted

Valuation Technique Unobservable Input Range Average*

Mortgage servicing rights Discounted cash flow Discount rate 9.51 % - 9.71 % 9.58 %

Prepayment speeds (CPR)* 6.43 % - 7.79 % 6.65 %

Loan servicing costs - annually per loan

Performing loans $ 70 - $ 72 $ 71

Delinquent loans $ 200 - $ 750

Loans in foreclosure $ 1,000

*Ranges and weighted averages based on interest rate tranches .

The significant unobservable inputs used in the fair value measurement of the Company’s mortgage servicing rights are updated periodically for changes in market conditions.

Actual rates may differ from our estimates.

Increases in prepayment speed and discount rates negatively impact the fair value of our mortgage servicing rights.

Fair Value of Financial Instruments

5 unchanged sentences

Changes in assumptions could significantly affect the estimates.

The estimated fair values of the Company’s financial instruments and the classification of their fair value measurement within the valuation hierarchy are as follows at June 30, 2023 and December 31, 2022:

Carrying Amount Estimated Fair Value at June 30, 2023

The estimated fair values of the Company’s financial instruments and the classification of their fair value measurement within the valuation hierarchy are as follows at September 30, 2023 and December 31, 2022:

Carrying Amount Estimated Fair Value at September 30, 2023

(In thousands)

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Legal and Regulatory Proceedings

The Company has various legal proceedings pending at June 30, 2023, arising in the normal course of business.

The Company has various legal proceedings pending at September 30, 2023, arising in the normal course of business.

While some matters pending against the Company specify damages claimed by plaintiffs, others do not seek a specified amount of damages or are at early stages of the legal process.

2 unchanged sentences

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-Q

Item 1. Financial Statements