What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-02 compared with 2021-08-03 · 160 added, 161 removed, 1046 unchanged (23% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

(Dollars in thousands, unaudited) June 30, 2021 December 31, 2020

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

Cash and due from banks $ 337,450 $ 362,048

Overnight investments 9,875,063 4,347,336

Investment in marketable equity securities (cost of $ 84,297 at June 30, 2021 and $ 84,837 at December 31, 2020)

Investment in marketable equity securities (cost of $ 85,554 at September 30, 2021 and $ 84,837 at December 31, 2020)

123,147 91,680

Investment securities available for sale (cost of $ 7,335,745 at June 30, 2021 and $ 6,911,965 at December 31, 2020)

Investment securities available for sale (cost of $ 7,345,143 at September 30, 2021 and $ 6,911,965 at December 31, 2020)

7,371,129 7,014,243

Investment securities held to maturity (fair value of $ 3,377,085 at June 30, 2021 and $ 2,838,499 at December 31, 2020)

Investment securities held to maturity (fair value of $ 3,353,078 at September 30, 2021 and $ 2,838,499 at December 31, 2020)

3,381,078 2,816,982

23 unchanged sentences

Class A - $ 1 par value ( 16,000,000 shares authorized;

8,811,220 shares issued and outstanding at June 30, 2021 and December 31, 2020)

8,811,220 shares issued and outstanding at September 30, 2021 and December 31, 2020)

Class B - $ 1 par value ( 2,000,000 shares authorized;

1,005,185 shares issued and outstanding at June 30, 2021 and December 31, 2020)

1,005,185 shares issued and outstanding at September 30, 2021 and December 31, 2020)

Preferred stock - $ 0.01 par value ( 10,000,000 shares authorized;

345,000 shares issued and outstanding at June 30, 2021 and December 31, 2020;

345,000 shares issued and outstanding at September 30, 2021 and December 31, 2020;

$ 1,000 per share liquidity preference)

8 unchanged sentences

Consolidated Statements of Income

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

(Dollars in thousands, except per share data, unaudited) 2021 2020 2021 2020

18 unchanged sentences

Cardholder services, net 22,879 19,756 65,310 55,503

Mortgage income 5,929 9,811 18,920 15,035

Merchant services, net 8,532 5,363 17,449 11,251

Other service charges and fees 9,205 7,892 26,653 22,829

Merchant services, net 8,409 6,763 25,858 18,014

Mortgage income 6,106 13,106 25,026 28,141

Insurance commissions 4,000 3,576 11,702 10,453

ATM income 1,481 1,537 4,534 4,354

Marketable equity securities gains, net 11,654 64,570 27,665 13,162

Realized gains on investment securities available for sale, net 8,082 21,425 33,119 54,972

Marketable equity securities gains (losses), net 3,350 ( 2,701 ) 31,015 10,461

Other 2,639 2,008 6,363 5,330

22 unchanged sentences

Consolidated Statements of Comprehensive Income

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

(Dollars in thousands, unaudited) 2021 2020 2021 2020

1 unchanged sentence

Other comprehensive income

Unrealized gains (losses) on securities available for sale:

Unrealized gains (losses) on securities available for sale arising during the period

Unrealized (losses) gains on securities available for sale:

Unrealized (losses) gains on securities available for sale arising during the period

( 11,270 ) 9,781 ( 43,173 ) 182,690

2 unchanged sentences

Tax effect 1,858 4,928 7,617 12,644

Unrealized gains (losses) on securities available for sale arising during the period, net of tax

Unrealized (losses) gains on securities available for sale arising during the period, net of tax

( 14,901 ) ( 8,967 ) ( 58,745 ) 98,343

7 unchanged sentences

Total change in pension obligation, net of tax 5,215 4,875 15,646 14,624

Other comprehensive income (loss) 11,551 15,948 ( 34,383 ) 117,059

Other comprehensive (loss) income ( 10,017 ) ( 4,092 ) ( 44,400 ) 112,967

Total comprehensive income $ 114,056 $ 138,592 $ 379,777 $ 466,606

3 unchanged sentences

Consolidated Statements of Changes in Shareholders’ Equity

Three months ended June 30

Three months ended September 30

(Dollars in thousands, unaudited) Class A

6 unchanged sentences

Shareholders’

Balance at March 31, 2020 $ 9,275 $ 1,005 $ 339,958 $ — $ 3,632,894 $ ( 25,612 ) $ 3,957,520

Cumulative effect of adoption of ASC 326 — — — — — — —

Balance at June 30, 2020 $ 8,929 $ 1,005 $ 339,937 $ — $ 3,651,237 $ ( 9,664 ) $ 3,991,444

Net income — — — — 142,684 — 142,684

Other comprehensive income, net of tax — — — — — 15,948 15,948

Other comprehensive loss, net of tax — — — — — ( 4,092 ) ( 4,092 )

Issuance of preferred stock — — — — — — —

5 unchanged sentences

Preferred stock dividends declared — — — — ( 4,636 ) — ( 4,636 )

Balance at September 30, 2020 $ 8,811 $ 1,005 $ 339,937 $ — $ 3,738,417 $ ( 13,756 ) $ 4,074,414

Balance at June 30, 2021 $ 8,811 $ 1,005 $ 339,937 $ — $ 4,148,857 $ ( 22,120 ) $ 4,476,490

Balance at March 31, 2021 $ 8,811 $ 1,005 $ 339,937 $ — $ 4,005,318 $ ( 33,671 ) $ 4,321,400

Net income — — — — 124,073 — 124,073

Other comprehensive income, net of tax — — — — — 11,551 11,551

Other comprehensive loss, net of tax — — — — — ( 10,017 ) ( 10,017 )

Cash dividends declared ($ 0.47 per common share)

2 unchanged sentences

Preferred stock dividends declared — — — — ( 4,636 ) — ( 4,636 )

Balance at June 30, 2021 $ 8,811 $ 1,005 $ 339,937 $ — $ 4,148,857 $ ( 22,120 ) $ 4,476,490

Six months ended June 30

Balance at September 30, 2021 $ 8,811 $ 1,005 $ 339,937 $ — $ 4,263,679 $ ( 32,137 ) $ 4,581,295

Nine months ended September 30

(Dollars in thousands, unaudited) Class A

16 unchanged sentences

Preferred stock dividends declared — — — — ( 9,426 ) — ( 9,426 )

Balance at June 30, 2020 $ 8,929 $ 1,005 $ 339,937 $ — $ 3,651,237 $ ( 9,664 ) $ 3,991,444

Balance at September 30, 2020 $ 8,811 $ 1,005 $ 339,937 $ — $ 3,738,417 $ ( 13,756 ) $ 4,074,414

Balance at December 31, 2020 $ 8,811 $ 1,005 $ 339,937 $ — $ 3,867,252 $ 12,263 $ 4,229,268

5 unchanged sentences

Preferred stock dividends declared — — — — ( 13,908 ) — ( 13,908 )

Balance at June 30, 2021 $ 8,811 $ 1,005 $ 339,937 $ — $ 4,148,857 $ ( 22,120 ) $ 4,476,490

Balance at September 30, 2021 $ 8,811 $ 1,005 $ 339,937 $ — $ 4,263,679 $ ( 32,137 ) $ 4,581,295

See accompanying Notes to Unaudited Consolidated Financial Statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Six months ended June 30

Nine months ended September 30

(Dollars in thousands, unaudited) 2021 2020

4 unchanged sentences

Deferred tax expense 9,266 16,227

Net (increase) decrease in prepaid and current tax receivable ( 805,084 ) 12,122

Net increase in prepaid and current tax receivable ( 774,212 ) ( 38,878 )

Depreciation and amortization 80,293 81,169

44 unchanged sentences

Cash and due from banks at end of period $ 337,450 $ 352,419

See accompanying Notes to Unaudited Consolidated Financial Statements.

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

5 unchanged sentences

Dividends declared but not paid — 3,926

Unsettled call of investment securities 15,000 —

Loans held for sale exchanged for investment securities 177,301 —

1 unchanged sentence

Transfers of premises and equipment to other real estate 8,593 8,133

Unsettled common stock repurchases — 3,772

See accompanying Notes to Unaudited Consolidated Financial Statements.

16 unchanged sentences

Share Repurchases

BancShares did not repurchase shares of Class A common stock during the first half of 2021 .

During the second quarter of 2020, BancShares purchased a total of 346,000 shares of Class A common stock for $ 127.0 million at an average cost per share of $ 367.03 .

During the six months ended June 30, 2020, BancShares purchased a total of 695,390 shares of Class A common stock for $ 286.7 million at an average cost per share of $ 412.28 .

BancShares did not repurchase shares of Class A common stock during the nine-month period ended September 30, 2021 .

During the third quarter of 2020, BancShares repurchased a total of 117,700 shares of Class A common stock for $ 47.1 million at an average cost per share of $ 399.82 .

During the nine months ended September 30, 2020, BancShares repurchased a total of 813,090 shares of Class A common stock for $ 333.8 million at an average cost per share of $ 410.48 .

During 2020, share repurchases included 45,000 shares of Class A common stock purchased from Ella Ann Holding, as trustee of her revocable trust.

8 unchanged sentences

The SBA began processing forgiveness payments during the fourth quarter of 2020.

The Consolidated Appropriations Act 2021 was signed into law during the fourth quarter of 2020 and contained provisions for a second round of funding of SBA-PPP loans and during the first half of 2021, BancShares originated approximately 12,000 SBA-PPP loans totaling approximately $ 1.2 billion.

The Consolidated Appropriations Act 2021 was signed into law during the fourth quarter of 2020 and contained provisions for a second round of funding of SBA-PPP loans and during the first nine months of 2021, BancShares originated approximately 12,000 SBA-PPP loans totaling approximately $ 1.2 billion.

Due to the unique nature of these provisions, SBA-PPP loans have been disclosed as a separate loan class.

1 unchanged sentence

The deferred fee income, net of origination costs, is recognized over the life of the loans as an adjustment to yield using the effective interest method.

As of June 30, 2021, SBA-PPP loans outstanding were $ 1.7 billion.

As of September 30, 2021, SBA-PPP loans outstanding were $ 1.1 billion.

Recently Issued Accounting Pronouncements

There were no Accounting Standards Updates (“ASUs”) issued during the second quarter of 2021 by the Financial Accounting Standards Board (“FASB”) that will have a material impact on BancShares’ consolidated financial statements.

There were no Accounting Standards Updates (“ASUs”) issued during the third quarter of 2021 by the Financial Accounting Standards Board (“FASB”) that will have a material impact on BancShares’ consolidated financial statements.

NOTE B - BUSINESS COMBINATIONS

6 unchanged sentences

The transaction was approved by the shareholders of both companies and has received regulatory approval from the North Carolina Commissioner of Banks and the Federal Deposit Insurance Corporation (“FDIC”).

Completion of the proposed merger remains subject to approval from the Board of Governors of the Federal Reserve System and closing is expected in the third quarter of 2021, subject to such approval and the satisfaction or waiver of other customary closing conditions.

On September 30, 2021, the parties entered into an amendment to the merger agreement pursuant to which the parties mutually agreed to extend until March 1, 2022 the date after which either party may elect to terminate the merger agreement if the merger has not yet been completed.

Completion of the proposed merger remains subject to approval from the Board of Governors of the Federal Reserve System.

Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the First-Step Merger (the “Effective Time”), each share of CIT common stock, par value $ 0.01 per share, issued and outstanding immediately prior to the Effective Time (“CIT Common Stock”), except for certain shares of CIT Common Stock owned by CIT or BancShares, will be converted into the right to receive 0.06200 shares of BancShares Class A common stock, par value $ 1.00 per share.

2 unchanged sentences

NOTE C - INVESTMENTS

The amortized cost and fair value of investment securities at June 30, 2021 and December 31, 2020, were as follows:

June 30, 2021

The amortized cost and fair value of investment securities at September 30, 2021 and December 31, 2020, were as follows:

September 30, 2021

(Dollars in thousands) Amortized cost (1)

44 unchanged sentences

BancShares continues to monitor the trading activity in Visa Class B common stock and the status of the resolution of certain litigation matters at Visa that would trigger the conversion of the Visa Class B common stock into Visa Class A common stock.

BancShares held FHLB stock of $ 40.5 million and $ 45.4 million and other non-marketable equity securities of $ 11.7 million and $ 11.6 million at June 30, 2021 and December 31, 2020, respectively.

BancShares held Federal Housing Loan Bank (“ FHLB”) stock of $ 40.5 million and $ 45.4 million and other non-marketable equity securities of $ 9.6 million and $ 11.6 million at September 30, 2021 and December 31, 2020, respectively.

These securities are recorded at cost within other assets.

As of June 30, 2021 and December 31, 2020, no ACL was required for available for sale and held to maturity debt securities.

As of September 30, 2021 and December 31, 2020, no ACL was required for available for sale and held to maturity debt securities.

Accrued interest receivables for available for sale and held to maturity debt securities were excluded from the estimate for credit losses.

At June 30, 2021, accrued interest receivables for available for sale and held to maturity debt securities were $ 18.0 million and $ 6.1 million, respectively.

At September 30, 2021, accrued interest receivables for available for sale and held to maturity debt securities were $ 21.1 million and $ 6.0 million, respectively.

At December 31, 2020, accrued interest receivables for available for sale and held to maturity debt securities were $ 17.6 million and $ 5.4 million, respectively.

During the three and six months ended June 30, 2021 and 2020, no accrued interest was deemed uncollectible and written off against interest income.

During the three and nine months ended September 30, 2021 and 2020, no accrued interest was deemed uncollectible and written off against interest income.

The following table provides the amortized cost and fair value by contractual maturity for investment securities available for sale and held to maturity.

1 unchanged sentence

Residential and commercial mortgage-backed and government agency securities are stated separately as they are not due at a single maturity date.

June 30, 2021 December 31, 2020

(Dollars in thousands) Amortized cost Fair

value Amortized cost Fair

September 30, 2021 December 31, 2020

(Dollars in thousands) Amortized cost (1)

value Amortized cost (1)

Investment securities available for sale

15 unchanged sentences

Total investment securities held to maturity $ 3,381,078 $ 3,353,078 $ 2,816,982 $ 2,838,499

The following table provides the gross realized gains and losses on the sales of investment securities available for sale for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30 Six months ended June 30

(1) Amortized cost includes any recorded ACL.

The following table provides the gross realized gains and losses on the sales of investment securities available for sale for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30 Nine months ended September 30

(Dollars in thousands) 2021 2020 2021 2020

2 unchanged sentences

Net realized gains on sales of investment securities available for sale $ 8,082 $ 21,425 $ 33,119 $ 54,972

The following table provides the realized and unrealized gains and losses on marketable equity securities for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30 Six months ended June 30

The following table provides the realized and unrealized gains and losses on marketable equity securities for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30 Nine months ended September 30

(Dollars in thousands) 2021 2020 2021 2020

Marketable equity securities gains, net $ 11,654 $ 64,570 $ 27,665 $ 13,162

Marketable equity securities gains (losses), net $ 3,350 $ ( 2,701 ) $ 31,015 $ 10,461

Less net gains recognized on marketable equity securities sold — 2,568 263 39,884

Unrealized gains (losses) recognized on marketable equity securities held $ 3,350 $ ( 5,269 ) $ 30,752 $ ( 29,423 )

The following table provides information regarding securities with unrealized losses as of June 30, 2021 and December 31, 2020:

June 30, 2021

The following table provides information regarding securities with unrealized losses as of September 30, 2021 and December 31, 2020:

September 30, 2021

Less than 12 months 12 months or more Total

20 unchanged sentences

Total $ 760,153 $ 6,466 $ 351,841 $ 2,445 $ 1,111,994 $ 8,911

As of June 30, 2021, there were 39 investment securities available for sale with continuous losses for more than 12 months, of which 36 were government sponsored enterprise-issued mortgage-backed securities or government agency securities and three were corporate bonds.

None of the unrealized losses identified as of June 30, 2021, or December 31, 2020, relate to the issuer’s ability to honor redemption obligations.

As of September 30, 2021, there were 36 investment securities available for sale with continuous losses for more than 12 months, of which 34 were government sponsored enterprise-issued mortgage-backed securities or government agency securities and two were corporate bonds.

None of the unrealized losses identified as of September 30, 2021, or December 31, 2020, relate to the issuer’s ability to honor redemption obligations.

Rather, the unrealized losses relate to changes in interest rates relative to when the investment securities were purchased, and do not indicate credit-related impairment.

2 unchanged sentences

BancShares has the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses.

Investment securities having an aggregate carrying value of $ 5.4 billion at June 30, 2021, and $ 4.6 billion at December 31, 2020, were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.

Investment securities having an aggregate carrying value of $ 5.5 billion at September 30, 2021, and $ 4.6 billion at December 31, 2020, were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.

BancShares’ portfolio of held to maturity debt securities consists of mortgage-backed securities issued by government agencies and government sponsored entities.

3 unchanged sentences

Treasury or losses reported on securities issued by government agencies and government sponsored entities, BancShares will reevaluate its determination of zero expected credit losses on held to maturity debt securities.

There were no debt securities held to maturity on nonaccrual status as of June 30, 2021.

There were no debt securities held to maturity on nonaccrual status as of September 30, 2021.

A security is considered past due once it is 30 days contractually past due under the terms of the agreement.

There were no securities past due as of June 30, 2021.

There were no securities past due as of September 30, 2021.

NOTE D - LOANS AND LEASES

3 unchanged sentences

At the date of acquisition, all acquired loans are recorded at fair value.

Loans and leases outstanding included the following at June 30, 2021 and December 31, 2020:

(Dollars in thousands) June 30, 2021 December 31, 2020

Loans and leases outstanding included the following at September 30, 2021 and December 31, 2020:

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

Construction and land development $ 1,247,680 $ 985,424

12 unchanged sentences

Total loans and leases $ 32,516,189 $ 32,791,975

At June 30, 2021 and December 31, 2020, accrued interest receivable on loans was $ 91.0 million and $ 107.7 million, respectively, and was excluded from the estimate of credit losses.

At September 30, 2021 and December 31, 2020, accrued interest receivable on loans was $ 88.1 million and $ 107.7 million, respectively, and was excluded from the estimate of credit losses.

Certain residential real estate loans are originated to be sold to investors.

2 unchanged sentences

At that time, portfolio loans are transferred to loans held for sale at the lower of cost or market value.

Loans held for sale totaled $ 107.8 million and $ 124.8 million at June 30, 2021 and December 31, 2020, respectively.

Loans held for sale totaled $ 98.5 million and $ 124.8 million at September 30, 2021 and December 31, 2020, respectively.

The following table presents selected components of the amortized cost of loans.

(Dollars in thousands) June 30, 2021 December 31, 2020

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

Deferred fees, including unearned fees and unamortized costs on non-PCD loans

6 unchanged sentences

Total $ 45,973 $ 64,727

The aging of the outstanding loans and leases, by class, at June 30, 2021 and December 31, 2020 is provided in the tables below.

The aging of the outstanding loans and leases, by class, at September 30, 2021 and December 31, 2020 is provided in the tables below.

Loans and leases past due less than 30 days are considered current as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the loan agreement.

June 30, 2021

September 30, 2021

(Dollars in thousands) 30-59 days

35 unchanged sentences

Total loans and leases $ 121,499 $ 26,043 $ 97,943 $ 245,485 $ 32,546,490 $ 32,791,975

The amortized cost, by class, of loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at June 30, 2021 and December 31, 2020, were as follows:

June 30, 2021 December 31, 2020

The amortized cost, by class, of loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at September 30, 2021 and December 31, 2020, were as follows:

September 30, 2021 December 31, 2020

(Dollars in thousands) Nonaccrual

34 unchanged sentences

Ungraded – Ungraded loans represent loans that are not included in the individual credit grading process due to their relatively small balances or borrower type.

The majority of ungraded loans at June 30, 2021 relate to business credit cards.

The majority of ungraded loans at September 30, 2021 relate to business credit cards.

Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit.

2 unchanged sentences

As the borrower becomes more delinquent, the likelihood of loss increases.

The following tables represent current credit quality indicators by origination year as of June 30, 2021.

June 30, 2021

The following tables represent current credit quality indicators by origination year as of September 30, 2021.

September 30, 2021

Commercial Loans Amortized Cost Basis by Origination Year

137 unchanged sentences

Total loans and leases $ 11,172,270 $ 5,690,922 $ 3,749,427 $ 2,812,829 $ 2,215,777 $ 3,458,369 $ 3,500,512 $ 191,869 $ 32,791,975

The following table provides information regarding loans pledged as collateral for borrowing capacity through the FHLB of Atlanta and the Federal Reserve Bank (“FRB”) as of June 30, 2021 and December 31, 2020:

(Dollars in thousands) June 30, 2021 December 31, 2020

The following table provides information regarding loans pledged as collateral for borrowing capacity through the FHLB of Atlanta and the Federal Reserve Bank (“FRB”) as of September 30, 2021 and December 31, 2020:

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

FHLB of Atlanta

8 unchanged sentences

The ACL is calculated using a variety of factors, including, but not limited to, charge-off and recovery activity, loan growth, changes in macroeconomic factors, collateral type, estimated loan life and changes in credit quality.

For the period ended June 30, 2021, the ACL change since December 31, 2020 was driven by improvement in macroeconomic factors, continued strong credit performance and low net charge-offs.

For the period ended September 30, 2021, the ACL change since December 31, 2020 was driven by continued strong credit performance, low net charge-offs, and improvement in macroeconomic factors.

Forecasted economic conditions are developed using third party macroeconomic scenarios adjusted based on management’s expectations over a forecast period of two years .

2 unchanged sentences

Significant macroeconomic factors used in estimating the expected losses include unemployment, gross domestic product, home price index and commercial real estate index.

BancShares’ ACL forecast considers a range of economic scenarios from an upside scenario to a severely adverse scenario, but the June 30, 2021 ACL forecast was calculated using the consensus baseline scenario.

BancShares’ ACL forecast considers a range of economic scenarios from an upside scenario to a severely adverse scenario, but the September 30, 2021 ACL forecast was calculated using the consensus baseline scenario.

This scenario showed improvements in the most significant economic factors compared to what was used to generate the December 31, 2020 ACL.

These loss estimates were also influenced by BancShares’ strong credit quality, low net charge-offs.

These loss estimates were also influenced by BancShares’ strong credit quality and low net charge-offs.

Activity in the ACL by portfolio segment is summarized as follows:

Three months ended June 30, 2021

Three months ended September 30, 2021

(Dollars in thousands) Commercial Consumer PCD Total

Allowance for credit losses:

Balance at April 1 $ 74,864 $ 112,852 $ 22,935 $ 210,651

Balance at July 1 $ 76,082 $ 94,272 $ 18,740 $ 189,094

Provision (credit) 975 ( 223 ) ( 1,872 ) ( 1,120 )

1 unchanged sentence

Recoveries 1,594 2,330 2,369 6,293

Balance at June 30 $ 76,082 $ 94,272 $ 18,740 $ 189,094

Three months ended June 30, 2020

Balance at September 30 $ 72,684 $ 92,072 $ 18,438 $ 183,194

Three months ended September 30, 2020

(Dollars in thousands) Commercial Consumer PCD Total

Balance at April 1 $ 72,410 $ 109,933 $ 26,916 $ 209,259

Balance at July 1 $ 76,177 $ 119,345 $ 26,928 $ 222,450

Provision (credit) 4,793 1,874 ( 2,625 ) 4,042

1 unchanged sentence

Recoveries 2,338 2,719 1,319 6,376

Balance at June 30 $ 76,177 $ 119,345 $ 26,928 $ 222,450

Six months ended June 30, 2021

Balance at September 30 $ 79,980 $ 118,829 $ 25,127 $ 223,936

Nine months ended September 30, 2021

(Dollars in thousands) Commercial Consumer PCD Total

3 unchanged sentences

Recoveries 3,852 8,599 5,290 17,741

Balance at June 30 $ 76,082 $ 94,272 $ 18,740 $ 189,094

Six months ended June 30, 2020

Balance at September 30 $ 72,684 $ 92,072 $ 18,438 $ 183,194

Nine months ended September 30, 2020

(Dollars in thousands) Commercial Consumer PCD Total

6 unchanged sentences

Recoveries 5,023 7,433 5,378 17,834

Balance at June 30 $ 76,177 $ 119,345 $ 26,928 $ 222,450

Balance at September 30 $ 79,980 $ 118,829 $ 25,127 $ 223,936

BancShares records an allowance for credit losses on unfunded commitments within other liabilities.

Activity in the allowance for credit losses for unfunded commitments is summarized as follows:

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

(Dollars in thousands) 2021 2020 2021 2020

8 unchanged sentences

Commercial and industrial loans and leases are collateralized by business assets, while the remaining loan classes are collateralized by real property.

The following table presents information on collateral-dependent loans by class and includes the amortized cost of collateral-dependent loans and leases, the net realizable value of the collateral, the extent to which collateral secures collateral-dependent loans and the associated ACL as of June 30, 2021 and December 31, 2020 were as follows:

June 30, 2021

(Dollars in thousands) Collateral-Dependant Loans Net Realizable Value of Collateral Collateral Coverage Allowance for Credit Losses

Commercial loans:

The following table presents information on collateral-dependent loans by class and includes the amortized cost of collateral-dependent loans and leases, the net realizable value of the collateral, the extent to which collateral secures collateral-dependent loans and the associated ACL as of September 30, 2021 and December 31, 2020 were as follows:

September 30, 2021

(Dollars in thousands) Collateral-Dependent Loans Net Realizable Value of Collateral Collateral Coverage Allowance for Credit Losses

Construction and land development $ 1,424 $ 1,964 137.9 % $ —

9 unchanged sentences

December 31, 2020

(Dollars in thousands) Collateral-Dependant Loans Net Realizable Value of Collateral Collateral Coverage Allowance for Credit Losses

Commercial loans:

(Dollars in thousands) Collateral-Dependent Loans Net Realizable Value of Collateral Collateral Coverage Allowance for Credit Losses

Construction and land development $ 1,424 $ 1,795 126.1 % $ —

5 unchanged sentences

Total collateral-dependent loans $ 58,825 $ 81,272 138.2 % $ 131

Collateral-dependent nonaccrual loans with no recorded allowance totaled $ 59.2 million and $ 57.5 million as of June 30, 2021 and December 31, 2020, respectively.

Collateral-dependent nonaccrual loans with no recorded allowance totaled $ 45.5 million and $ 57.5 million as of September 30, 2021 and December 31, 2020, respectively.

All other nonaccrual loans have a recorded allowance.

10 unchanged sentences

The following tables provides a summary of total TDRs by accrual status:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(Dollars in thousands) Accruing Nonaccruing Total Accruing Nonaccruing Total

Commercial loans:

Construction and land development $ 346 $ 33 $ 379 $ 578 $ 54 $ 632

11 unchanged sentences

Total loans $ 152,017 $ 60,958 $ 212,975 $ 157,364 $ 50,816 $ 208,180

The following table provides the types of modifications designated as TDRs during the three and six months ended June 30, 2021 and 2020.

Three months ended June 30, 2021 Three months ended June 30, 2020

The following table provides the types of modifications designated as TDRs during the three and nine months ended September 30, 2021 and 2020.

Three months ended September 30, 2021 Three months ended September 30, 2020

All restructurings All restructurings

6 unchanged sentences

Total restructurings 116 $ 21,919 145 $ 25,078

Six months ended June 30, 2021 Six months ended June 30, 2020

Nine months ended September 30, 2021 Nine months ended September 30, 2020

All restructurings All restructurings

6 unchanged sentences

Total restructurings 387 $ 67,710 462 $ 76,497

For the six months ended June 30, 2021 and 2020, the pre-modification and post-modification outstanding amortized cost of loans modified as TDRs were not materially different.

For the nine months ended September 30, 2021 and 2020, the pre-modification and post-modification outstanding amortized cost of loans modified as TDRs were not materially different.

NOTE F - OTHER REAL ESTATE OWNED

The following table explains changes in other real estate owned (“OREO”) during the six months ended June 30, 2021 and 2020:

The following table explains changes in other real estate owned (“OREO”) during the nine months ended September 30, 2021 and 2020:

(Dollars in thousands) OREO

3 unchanged sentences

Write-downs/losses ( 2,384 )

Balance at June 30, 2021 $ 43,685

Balance at September 30, 2021 $ 40,649

Balance at December 31, 2019 $ 46,591

3 unchanged sentences

Write-downs/losses ( 3,398 )

Balance at June 30, 2020 $ 53,850

At June 30, 2021 and December 31, 2020, BancShares had $ 6.1 million and $ 5.8 million, respectively, of foreclosed residential real estate property in OREO.

The recorded investment in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure was $ 27.1 million and $ 29.4 million at June 30, 2021 and December 31, 2020, respectively.

Net gains recorded on the sale of OREO properties were $ 3.8 million for the six months ended June 30, 2021.

Net losses recorded on the sale of OREO properties were $ 0.2 million for the six months ended June 30, 2020 .

Balance at September 30, 2020 $ 52,789

At September 30, 2021 and December 31, 2020, BancShares had $ 3.0 million and $ 5.8 million, respectively, of foreclosed residential real estate property in OREO.

The recorded investment in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure was $ 19.6 million and $ 29.4 million at September 30, 2021 and December 31, 2020, respectively.

Net gains recorded on the sale of OREO properties were $ 5.2 million for the nine months ended September 30, 2021.

Net gains recorded on the sale of OREO properties were $ 1.0 million for the nine months ended September 30, 2020 .

NOTE G - MORTGAGE SERVICING RIGHTS

BancShares originates certain residential mortgages loans to sell in the secondary market.

BancShares’ portfolio of residential mortgage loans serviced for third parties was $ 3.4 billion as of June 30, 2021 and December 31, 2020.

BancShares’ portfolio of residential mortgage loans serviced for third parties was $ 3.3 billion as of September 30, 2021 and December 31, 2020.

These loans are originated and sold to third parties on a non-recourse basis with servicing rights retained.

2 unchanged sentences

Mortgage servicing rights are initially recorded at fair value and then carried at the lower of amortized cost or fair value.

Contractually specified mortgage servicing fees, late fees and ancillary fees earned were $ 2.1 million for each of the three month periods ended June 30, 2021 and 2020, and are reported in mortgage income.

For the six months ended June 30, 2021 and 2020, mortgage servicing fees, late fees and ancillary fees earned were $ 4.2 million and $ 4.3 million, respectively.

The following table presents changes in the servicing asset during the three and six months ended June 30, 2021 and 2020:

Three months ended June 30 Six months ended June 30

Contractually specified mortgage servicing fees, late fees and ancillary fees earned were $ 2.1 million for each of the three month periods ended September 30, 2021 and 2020, and are reported in mortgage income.

For the nine months ended September 30, 2021 and 2020, mortgage servicing fees, late fees and ancillary fees earned were each $ 6.4 million.

The following table presents changes in the servicing asset during the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30 Nine months ended September 30

(Dollars in thousands) 2021 2020 2021 2020

2 unchanged sentences

Amortization ( 2,180 ) ( 2,208 ) ( 6,505 ) ( 6,150 )

Valuation allowance decrease (increase) ( 1,784 ) ( 1,069 ) 1,339 ( 4,036 )

Valuation allowance (increase) decrease — ( 305 ) 1,339 ( 4,341 )

Ending balance $ 21,696 $ 18,145 $ 21,696 $ 18,145

The following table presents the activity in the servicing asset valuation allowance for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30 Six months ended June 30

The following table presents the activity in the servicing asset valuation allowance for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30 Nine months ended September 30

(Dollars in thousands) 2021 2020 2021 2020

Beginning balance $ 3,026 $ 4,258 $ 4,365 $ 222

Valuation allowance (decrease) increase 1,784 1,069 ( 1,339 ) 4,036

Valuation allowance increase (decrease) — 305 ( 1,339 ) 4,341

Ending balance $ 3,026 $ 4,563 $ 3,026 $ 4,563

1 unchanged sentence

Key economic assumptions used to value mortgage servicing rights were as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Discount rate - conventional fixed loans 8.49 % 7.92 %

15 unchanged sentences

Securities pledged as collateral under repurchase agreements are maintained with safekeeping agents.

The carrying value of investment securities pledged as collateral under repurchase agreements was $ 778.4 million and $ 689.3 million at June 30, 2021 and December 31, 2020, respectively.

At June 30, 2021, BancShares held $ 692.6 million of securities sold under agreements to repurchase, with overnight and continuous remaining contractual maturities, including $ 544.2 million collateralized by government agency securities and $ 148.4 million collateralized by commercial mortgage-backed securities.

The carrying value of investment securities pledged as collateral under repurchase agreements was $ 685.9 million and $ 689.3 million at September 30, 2021 and December 31, 2020, respectively.

At September 30, 2021, BancShares held $ 663.6 million of securities sold under agreements to repurchase, with overnight and continuous remaining contractual maturities, including $ 571.6 million collateralized by government agency securities and $ 92.0 million collateralized by commercial mortgage-backed securities.

At December 31, 2020, BancShares held securities sold under agreements to repurchase of $ 641.5 million, with overnight and continuous remaining contractual maturities, including $ 432.8 million collateralized by government agency securities and $ 208.7 million collateralized by commercial mortgage-backed securities.

1 unchanged sentence

For certain FDIC-assisted transactions, the related shared-loss agreement included a provision requiring a payment owed to the FDIC at the termination of the agreement.

As of June 30, 2021, these agreements have been satisfied following a $ 16.1 million payment made to the FDIC related to the final active agreement.

As of September 30, 2021, these agreements have been satisfied following a $ 16.1 million payment made to the FDIC during the first quarter of 2021 related to the final active agreement.

The following table provides changes in the FDIC shared-loss payable since December 31, 2020:

3 unchanged sentences

Payment made to the FDIC to settle shared-loss agreement ( 16,103 )

Balance at June 30, 2021 $ —

Balance at September 30, 2021 $ —

NOTE J - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Accumulated other comprehensive (loss) income included the following as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

Accumulated other comprehensive (loss) income included the following as of September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

(Dollars in thousands) Accumulated

14 unchanged sentences

Total $ ( 41,736 ) $ ( 9,599 ) $ ( 32,137 ) $ 15,926 $ 3,663 $ 12,263

The following table highlights changes in accumulated other comprehensive (loss) income by component for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30, 2021

The following table highlights changes in accumulated other comprehensive (loss) income by component for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30, 2021

(Dollars in thousands, net of tax) Unrealized gains (losses) on securities available for sale Unrealized gains on securities available for sale transferred to held to maturity Defined benefit pension items Total

Beginning balance $ 34,910 $ 3,187 $ ( 60,217 ) $ ( 22,120 )

Net unrealized gains arising during period 18,940 — — 18,940

Net unrealized losses arising during period ( 8,677 ) — — ( 8,677 )

Amounts reclassified from accumulated other comprehensive loss ( 6,224 ) ( 331 ) 5,215 ( 1,340 )

1 unchanged sentence

Ending balance $ 20,009 $ 2,856 $ ( 55,002 ) $ ( 32,137 )

Three months ended June 30, 2020

Three months ended September 30, 2020

4 unchanged sentences

Ending balance $ 104,135 $ — $ ( 117,891 ) $ ( 13,756 )

Six months ended June 30, 2021

Nine months ended September 30, 2021

(Dollars in thousands, net of tax) Unrealized gains on securities available for sale Unrealized gains on securities available for sale transferred to held to maturity Defined benefit pension items Total

4 unchanged sentences

Ending balance $ 20,009 $ 2,856 $ ( 55,002 ) $ ( 32,137 )

Six months ended June 30, 2020

Nine months ended September 30, 2020

4 unchanged sentences

Ending balance $ 104,135 $ — $ ( 117,891 ) $ ( 13,756 )

The following table presents the amounts reclassified from accumulated other comprehensive (loss) income and the line item affected in the statement where net income is presented for the three and six months ended June 30, 2021 and 2020:

(Dollars in thousands) Three months ended June 30, 2021

(Dollars in thousands) Three months ended September 30, 2021

Details about accumulated other comprehensive income (loss) Amounts reclassified from accumulated other comprehensive income (loss) Affected line item in the statement where net income is presented

6 unchanged sentences

Total reclassifications for the period $ 1,340

(Dollars in thousands) Three months ended June 30, 2020

(Dollars in thousands) Three months ended September 30, 2020

Details about accumulated other comprehensive income (loss) Amounts reclassified from accumulated other comprehensive income (loss) Affected line item in the statement where net income is presented

4 unchanged sentences

Total reclassifications for the period $ 11,622

Six months ended June 30, 2021

(Dollars in thousands) Nine months ended September 30, 2021

Details about accumulated other comprehensive income (loss) Amounts reclassified from accumulated other comprehensive income (loss) Affected line item in the statement where net income is presented

6 unchanged sentences

Total reclassifications for the period $ 11,157

Six months ended June 30, 2020

(Dollars in thousands) Nine months ended September 30, 2020

Details about accumulated other comprehensive income (loss) Amounts reclassified from accumulated other comprehensive income (loss) Affected line item in the statement where net income is presented

65 unchanged sentences

These amounts are not material to BancShares’ financial position.

For all other financial assets and liabilities, the carrying value is a reasonable estimate of the fair value as of June 30, 2021 and December 31, 2020.

For all other financial assets and liabilities, the carrying value is a reasonable estimate of the fair value as of September 30, 2021 and December 31, 2020.

The carrying value and fair value for these assets and liabilities are equivalent because they are relatively short term in nature and there is no interest rate or credit risk that would cause the fair value to differ from the carrying value.

1 unchanged sentence

Overnight investments, income earned not collected, securities sold under customer repurchase agreements, and accrued interest payable are considered Level 2.

The table presents the carrying values and estimated fair values for financial instruments as of June 30, 2021 and December 31, 2020:

(Dollars in thousands) June 30, 2021 December 31, 2020

The table presents the carrying values and estimated fair values for financial instruments as of September 30, 2021 and December 31, 2020:

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

Carrying value Fair value Carrying value Fair value

17 unchanged sentences

Accrued interest payable 6,560 6,560 9,414 9,414

For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of June 30, 2021 and December 31, 2020:

June 30, 2021

For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of September 30, 2021 and December 31, 2020:

September 30, 2021

Fair value measurements using:

24 unchanged sentences

Corporate bonds

Three months ended June 30 Six months ended June 30

Three months ended September 30 Nine months ended September 30

(Dollars in thousands) 2021 2020 2021 2020

6 unchanged sentences

Ending balance $ 308,135 $ 250,714 $ 308,135 $ 250,714

During the three months ended June 30, 2021 and 2020, there were no transfers between levels.

During the six months ended June 30, 2021 there were no transfers from Level 2 to Level 3, compared to $ 1.8 million for the same period of 2020.

During the three months ended September 30, 2021 and 2020, there were no transfers between levels.

During the nine months ended September 30, 2021 there were no transfers from Level 2 to Level 3, compared to $ 1.8 million for the same period of 2020.

The transfers were due to a lack of observable inputs and trade activity for those securities.

The following table presents quantitative information about Level 3 fair value measurements for fair value on a recurring basis at June 30, 2021:

(Dollars in thousands) June 30, 2021

The following table presents quantitative information about Level 3 fair value measurements for fair value on a recurring basis at September 30, 2021:

(Dollars in thousands) September 30, 2021

Level 3 assets Valuation technique Significant unobservable input Fair Value

3 unchanged sentences

This election reduces certain timing differences in the Consolidated Statement of Income and better aligns with the management of the portfolio from a business perspective.

The changes in fair value were recorded as a component of mortgage income and included gains of $ 0.4 million and $ 2.4 million for the three months ended June 30, 2021 and 2020, respectively.

The changes in fair value included a loss of $ 2.3 million and a gain of $ 3.6 million for six months ended June 30, 2021 and 2020, respectively.

The changes in fair value were recorded as a component of mortgage income and included losses of $ 0.6 million and gains of $ 0.6 million for the three months ended September 30, 2021 and 2020, respectively.

The changes in fair value included a loss of $ 2.9 million and a gain of $ 4.2 million for nine months ended September 30, 2021 and 2020, respectively.

Interest earned on loans held for sale is recorded within interest income on loans and leases in the consolidated statements of income.

The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for residential real estate originated for sale measured at fair value as of June 30, 2021 and December 31, 2020:

June 30, 2021

September 30, 2021

(Dollars in thousands) Fair value Aggregate unpaid principal balance Difference

3 unchanged sentences

Originated loans held for sale $ 124,837 $ 118,902 $ 5,935

No originated loans held for sale were 90 or more days past due or on nonaccrual status as of June 30, 2021 or December 31, 2020.

No originated loans held for sale were 90 or more days past due or on nonaccrual status as of September 30, 2021 or December 31, 2020.

BancShares may be required to measure certain financial assets at fair value on a nonrecurring basis.

7 unchanged sentences

Asset valuations are determined by using appraisals or other third-party value estimates of the subject property with discounts generally between 6 % and 15 % applied for estimated selling costs and other external factors that may impact the marketability of the property.

At June 30, 2021, the weighted average discount applied was 6 %.

At September 30, 2021, the weighted average discount applied was 8 %.

Changes to the value of the assets between scheduled valuation dates are monitored through continued communication with brokers and monthly reviews by the asset manager assigned to each asset.

If there are any significant changes in the market or the subject property, valuations are adjusted or new appraisals ordered to ensure the reported values reflect the most current information.

For financial assets and liabilities carried at fair value on a nonrecurring basis, the following table provides fair value information as of June 30, 2021 and December 31, 2020:

June 30, 2021

For financial assets and liabilities carried at fair value on a nonrecurring basis, the following table provides fair value information as of September 30, 2021 and December 31, 2020:

September 30, 2021

Fair value measurements using:

9 unchanged sentences

Mortgage servicing rights 16,966 — — 16,966

No financial liabilities were carried at fair value on a nonrecurring basis as of June 30, 2021 and December 31, 2020.

No financial liabilities were carried at fair value on a nonrecurring basis as of September 30, 2021 and December 31, 2020.

NOTE L - EMPLOYEE BENEFIT PLANS

1 unchanged sentence

The service cost component of net periodic benefit cost is included in salaries and wages while all other non-service cost components are included in other noninterest expense.

For the three and six months ended June 30, 2021 and 2020, the components of net periodic benefit cost are as follows:

Three months ended June 30 Six months ended June 30

For the three and nine months ended September 30, 2021 and 2020, the components of net periodic benefit cost are as follows:

Three months ended September 30 Nine months ended September 30

(Dollars in thousands) 2021 2020 2021 2020

4 unchanged sentences

Net periodic (benefit) cost $ ( 1,530 ) $ 2,028 $ ( 4,591 ) $ 6,084

No discretionary contribution was made to the pension plans during the six months ended June 30, 2021.

A discretionary contribution of $100.0 million was made to the pension plans during the six months ended June 30, 2020.

No discretionary contribution was made to the pension plans during the nine months ended September 30, 2021.

A discretionary contribution of $ 100.0 million was made to the pension plans during the nine months ended September 30, 2020.

The funding policy of the pension plans is to contribute an amount each year to meet all Employee Retirement Income Security Act minimum requirements, including amounts to meet quarterly funding requirements, avoid “at-risk” status and avoid any benefit restrictions.

2 unchanged sentences

NOTE M - LEASES

The following table presents right-of-use lease assets and liabilities as of June 30, 2021 and December 31, 2020:

(Dollars in thousands) Classification June 30, 2021 December 31, 2020

The following table presents right-of-use lease assets and liabilities as of September 30, 2021 and December 31, 2020:

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

Operating Other assets $ 62,214 $ 68,048

16 unchanged sentences

The credit risk related to the issuance of these letters of credit is essentially the same as in extending loans to clients and, therefore, these letters of credit are collateralized when necessary.

The following table presents the commitments to extend credit and standby letters of credit as of June 30, 2021 and December 31, 2020:

(Dollars in thousands) June 30, 2021 December 31, 2020

The following table presents the commitments to extend credit and standby letters of credit as of September 30, 2021 and December 31, 2020:

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

Unused commitments to extend credit $ 12,775,929 $ 12,098,417

1 unchanged sentence

BancShares has investments in qualified affordable housing projects primarily for the purposes of fulfilling Community Reinvestment Act requirements and obtaining tax credits.

Affordable housing project investments were $ 167.9 million and $ 163.9 million as of June 30, 2021 and December 31, 2020, respectively, and were recorded in other assets.

Unfunded commitments to fund future investments in affordable housing projects totaled $ 54.7 million and $ 53.7 million as of June 30, 2021 and December 31, 2020, respectively, and were recorded in other liabilities.

Affordable housing project investments were $ 162.3 million and $ 163.9 million as of September 30, 2021 and December 31, 2020, respectively, and were recorded in other assets.

Unfunded commitments to fund future investments in affordable housing projects totaled $ 49.8 million and $ 53.7 million as of September 30, 2021 and December 31, 2020, respectively, and were recorded in other liabilities.

BancShares and various subsidiaries have been named as defendants in legal actions arising from their normal business activities in which damages in various amounts were claimed.

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