Commerce Bancshares 10Q 2024 Q3 Quarterly report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

________________________________________________________

For the quarterly period ended September 30, 2024


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

____________________________________________________________

For the transition period from to

Commission File No. 001-36502


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


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

(816) 234-2000

(Registrant’s telephone number, including area code)


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

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

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

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

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

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

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

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

As of October 31, 2024, the registrant had outstanding 128,227,542 shares of its $5 par value common stock, registrant’s only class of common stock.

Commerce Bancshares, Inc. and Subsidiaries

Form 10-Q


			Page
INDEX
Part I	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023	3
		Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	4
		Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	5
		Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	6
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (unaudited)	8
		Notes to Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	50
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	76
	Item 4.	Controls and Procedures	76

Part II	Other Information
	Item 1.	Legal Proceedings	77
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77
	Item 5.	Other Information	77
	Item 6.	Exhibits	77
Signatures			78

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PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS


	September 30, 2024		December 31, 2023
	(Unaudited)
	(In thousands)
ASSETS
Loans	$	17,090,000	$	17,205,479
Allowance for credit losses on loans	(160,839)		(162,395)
Net loans	16,929,161		17,043,084
Loans held for sale (including $1,605,000 and $1,585,000 of residential mortgage loans carried at fair value at September 30, 2024 and December 31, 2023, respectively)	1,707		4,177
Investment securities:
Available for sale debt, at fair value (amortized cost of $9,954,054,000 and $10,904,765,000 at
September 30, 2024 and December 31, 2023, respectively, and allowance for credit losses of $—
at both September 30, 2024 and December 31, 2023)	9,167,681		9,684,760
Trading debt	42,645		28,830
Equity	57,115		12,701
Other	216,543		222,473
Total investment securities	9,483,984		9,948,764
Federal funds sold	10		5,025
Securities purchased under agreements to resell	475,000		450,000
Interest earning deposits with banks	2,642,048		2,239,010
Cash and due from banks	507,941		443,147
Premises and equipment – net	469,986		469,059
Goodwill	146,539		146,539
Other intangible assets – net	13,722		14,179
Other assets	823,494		938,077
Total assets	$	31,493,592	$	31,701,061
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing	$	7,396,153	$	7,975,935
Savings, interest checking and money market	15,216,557		14,512,273
Certificates of deposit of less than $100,000	1,113,962		930,432
Certificates of deposit of $100,000 and over	1,511,120		1,945,258
Total deposits	25,237,792		25,363,898
Federal funds purchased and securities sold under agreements to repurchase	2,182,229		2,908,815
Other borrowings	10,201		1,404
Other liabilities	609,831		462,714
Total liabilities	28,040,053		28,736,831
Commerce Bancshares, Inc. stockholders’ equity:



Common stock, $5 par value
Authorized 190,000,000; issued 131,064,418 shares at both September 30, 2024 and December 31, 2023	655,322		655,322
Capital surplus	3,154,300		3,162,622
Retained earnings	338,512		53,183
Treasury stock of 2,425,152 shares at September 30, 2024
and 611,546 shares at December 31, 2023, at cost	(139,149)		(35,599)
Accumulated other comprehensive income (loss)	(576,904)		(891,412)
Total Commerce Bancshares, Inc. stockholders' equity	3,432,081		2,944,116
Non-controlling interest	21,458		20,114
Total equity	3,453,539		2,964,230
Total liabilities and equity	$	31,493,592	$	31,701,061

See accompanying notes to consolidated financial statements.

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Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME


	For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands, except per share data)	2024		2023		2024		2023
	(Unaudited)
INTEREST INCOME
Interest and fees on loans	$	270,086	$	256,242	$	802,226	$	721,385
Interest and fees on loans held for sale	39		152		125		448
Interest on investment securities	62,694		69,245		199,398		214,091
Interest on federal funds sold	—		45		37		639
Interest on securities purchased under agreements to resell	4,215		3,740		8,270		11,791
Interest on deposits with banks	35,034		31,738		90,096		70,328
Total interest income	372,068		361,162		1,100,152		1,018,682
INTEREST EXPENSE
Interest on deposits:
Savings, interest checking and money market	58,177		43,795		170,586		93,992
Certificates of deposit of less than $100,000	11,073		15,499		31,787		27,049
Certificates of deposit of $100,000 and over	16,603		18,942		51,591		39,985
Interest on federal funds purchased	2,792		6,833		10,780		18,816
Interest on securities sold under agreements to repurchase	21,066		18,431		61,797		52,940
Interest on other borrowings	6		9,115		12		36,192
Total interest expense	109,717		112,615		326,553		268,974
Net interest income	262,351		248,547		773,599		749,708
Provision for credit losses	9,140		11,645		19,395		29,572
Net interest income after credit losses	253,211		236,902		754,204		720,136
NON-INTEREST INCOME
Trust fees	54,689		49,207		158,085		141,800
Bank card transaction fees	47,570		46,899		141,977		143,278
Deposit account charges and other fees	25,380		23,090		74,856		67,475
Capital market fees	5,995		3,524		14,647		9,831
Consumer brokerage services	4,619		3,820		13,505		13,582
Loan fees and sales	3,444		2,966		10,016		8,290
Other	17,328		13,443		47,031		43,910
Total non-interest income	159,025		142,949		460,117		428,166





INVESTMENT SECURITIES GAINS (LOSSES), NET	3,872		4,298		6,846		7,384
NON-INTEREST EXPENSE
Salaries and employee benefits	153,122		146,805		454,043		436,607
Data processing and software	32,194		30,744		94,876		87,617
Net occupancy	13,411		13,948		39,529		39,702
Professional and other services	8,830		8,293		26,095		26,979
Marketing	7,278		6,167		16,670		18,006
Equipment	5,286		4,697		15,387		14,411
Supplies and communication	4,963		4,963		14,343		14,178
Deposit insurance	2,930		4,029		13,301		12,859
Other	9,586		8,364		41,267		29,369
Total non-interest expense	237,600		228,010		715,511		679,728
Income before income taxes	178,508		156,139		505,656		475,958
Less income taxes	38,245		33,439		108,499		102,242
Net income	140,263		122,700		397,157		373,716
Less non-controlling interest expense (income)	2,256		2,104		6,934		5,879
Net income attributable to Commerce Bancshares, Inc.	$	138,007	$	120,596	$	390,223	$	367,837


Net income per common share — basic	$	1.07	$	.92	$	3.01	$	2.80
Net income per common share — diluted	$	1.07	$	.92	$	3.00	$	2.80

See accompanying notes to consolidated financial statements.

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Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands)	2024		2023		2024		2023
	(Unaudited)
Net income	$	140,263	$	122,700	$	397,157	$	373,716
Other comprehensive income (loss), net of tax:


Net unrealized gains (losses) on available for sale debt securities	215,550		(133,024)		325,225		(72,440)
Change in pension loss	100		199		453		738
Unrealized gains (losses) on cash flow hedge derivatives	15,263		(24,414)		(11,170)		(34,968)
Other comprehensive income (loss), net of tax	230,913		(157,239)		314,508		(106,670)
Comprehensive income (loss)	371,176		(34,539)		711,665		267,046
Less non-controlling interest (income) expense	2,256		2,104		6,934		5,879
Comprehensive income (loss) attributable to Commerce Bancshares, Inc.	$	368,920	$	(36,643)	$	704,731	$	261,167

See accompanying notes to consolidated financial statements.

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Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended September 30, 2024 and 2023


	Commerce Bancshares, Inc. Shareholders
(In thousands, except per share data)	Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total
	(Unaudited)
Balance June 30, 2024	$	655,322	$	3,153,107	$	235,299	$	(98,176)	$	(807,817)	$	20,600	$	3,158,335
Net income					138,007						2,256		140,263
Other comprehensive income (loss)									230,913				230,913
Distributions to non-controlling interest											(1,398)		(1,398)
Purchases of treasury stock							(44,060)						(44,060)


Issuance under stock purchase and equity compensation plans			(3,087)				3,087						—
Stock-based compensation			4,280										4,280
Cash dividends paid on common stock ($0.270 per share)					(34,794)								(34,794)

Balance September 30, 2024	$	655,322	$	3,154,300	$	338,512	$	(139,149)	$	(576,904)	$	21,458	$	3,453,539
Balance June 30, 2023	$	629,319	$	2,921,365	$	211,358	$	(58,389)	$	(1,036,295)	$	17,870	$	2,685,228

Net Income					120,596						2,104		122,700
Other comprehensive income (loss)									(157,239)				(157,239)
Distributions to non-controlling interest											(2,105)		(2,105)
Purchases of treasury stock							(19,978)						(19,978)
Sale of non-controlling interest of subsidiary			8								(8)		—
Issuance under stock purchase and equity compensation plans			(1,479)				1,479						—
Stock-based compensation			4,317										4,317
Cash dividends paid on common stock ($.257 per share)					(33,657)								(33,657)

Balance September 30, 2023	$	629,319	$	2,924,211	$	298,297	$	(76,888)	$	(1,193,534)	$	17,861	$	2,599,266

See accompanying notes to consolidated financial statements.

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Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Nine Months Ended September 30, 2024 and 2023


	Commerce Bancshares, Inc. Shareholders
(In thousands, except per share data)	Common Stock		Capital Surplus		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest		Total
	(Unaudited)
Balance December 31, 2023	$	655,322	$	3,162,622	$	53,183	$	(35,599)	$	(891,412)	$	20,114	$	2,964,230


Net income					390,223						6,934		397,157
Other comprehensive income (loss)									314,508				314,508
Distributions to non-controlling interest											(5,590)		(5,590)

Purchases of treasury stock							(124,603)						(124,603)

Issuance under stock purchase and equity compensation plans			(21,053)				21,053						—
Stock-based compensation			12,731										12,731
Cash dividends paid on common stock ($.810 per share)					(104,894)								(104,894)

Balance September 30, 2024	$	655,322	$	3,154,300	$	338,512	$	(139,149)	$	(576,904)	$	21,458	$	3,453,539
Balance December 31, 2022	$	629,319	$	2,932,959	$	31,620	$	(41,743)	$	(1,086,864)	$	16,286	$	2,481,577



Net income					367,837						5,879		373,716
Other comprehensive income (loss)									(106,670)				(106,670)
Distributions to non-controlling interest											(4,250)		(4,250)
Purchases of treasury stock							(56,541)						(56,541)
Sale of non-controlling interest of subsidiary			54								(54)		—
Issuance under stock purchase and equity compensation plans			(21,396)				21,396						—
Stock-based compensation			12,594										12,594
Cash dividends paid on common stock ($.771 per share)					(101,160)								(101,160)

Balance September 30, 2023	$	629,319	$	2,924,211	$	298,297	$	(76,888)	$	(1,193,534)	$	17,861	$	2,599,266

See accompanying notes to consolidated financial statements.

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Commerce Bancshares, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Nine Months Ended September 30
(In thousands)	2024		2023
	(Unaudited)
OPERATING ACTIVITIES:
Net income	$	397,157	$	373,716
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	19,395		29,572
Provision for depreciation and amortization	40,513		36,661
Amortization of investment security premiums, net	2,781		13,345
Investment securities (gains) losses, net (A)	(6,846)		(7,384)
Net (gains) losses on sales of loans held for sale	(1,823)		(705)
Originations of loans held for sale	(73,502)		(40,470)
Proceeds from sales of loans held for sale	77,468		40,775
Net (increase) decrease in trading debt securities, excluding unsettled transactions	(25,771)		14,354
Purchase of interest rate floor derivative contracts	—		(54,449)
Stock-based compensation	12,731		12,594
(Increase) decrease in interest receivable	(4,878)		(7,861)
Increase (decrease) in interest payable	(2,564)		41,622
Increase (decrease) in income taxes payable	16,791		(52)


Other changes, net	263,062		(83,973)
Net cash provided by (used in) operating activities	714,514		367,745
INVESTING ACTIVITIES:
Cash paid in acquisition, net of cash received	—		(6,365)

Distributions received from equity-method investment	—		1,434
Proceeds from sales of investment securities (A)	1,272,927		1,141,949
Proceeds from maturities/pay downs of investment securities (A)	1,753,061		1,315,175
Purchases of investment securities (A)	(2,095,180)		(190,637)
Net (increase) decrease in loans	86,128		(849,375)
Securities purchased under agreements to resell	(350,000)		—
Repayments of securities purchased under agreements to resell	325,000		375,000
Purchases of premises and equipment	(32,114)		(72,563)
Sales of premises and equipment	8,858		3,751
Net cash provided by (used in) investing activities	968,680		1,718,369
FINANCING ACTIVITIES:
Net increase (decrease) in non-interest bearing, savings, interest checking and money market deposits	(17,928)		(2,995,739)
Net increase (decrease) in certificates of deposit	(250,608)		1,980,677


Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase	(726,586)		(96,553)


FHLB short-term borrowings	—		2,250,000
Repayments of FHLB borrowings	—		(1,750,000)
Net increase (decrease) in other borrowings	8,797		(6,083)

Purchases of treasury stock	(123,558)		(56,541)



Cash dividends paid on common stock and distributions to non-controlling interest	(110,484)		(101,160)


Net cash provided by (used in) financing activities	(1,220,367)		(775,399)
Increase (decrease) in cash, cash equivalents and restricted cash	462,827		1,310,715
Cash, cash equivalents and restricted cash at beginning of year	2,687,283		897,801
Cash, cash equivalents and restricted cash at September 30	$	3,150,110	$	2,208,516
Income tax payments, net	$	86,048	$	97,018
Interest paid on deposits and borrowings	$	329,117	$	227,352
Loans transferred to foreclosed real estate	$	1,138	$	133

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

See accompanying notes to consolidated financial statements.

Restricted cash is comprised of cash collateral posted by the Company to secure interest rate swap agreements. This balance is included in other assets in the consolidated balance sheets and totaled $111 thousand at September 30, 2024. The Company had $130 thousand in restricted cash at September 30, 2023.

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Commerce Bancshares, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 (Unaudited)

1. Principles of Consolidation and Presentation

The accompanying consolidated financial statements include the accounts of Commerce Bancshares, Inc. and all majority-owned subsidiaries (the Company). Most of the Company's operations are conducted by its subsidiary bank, Commerce Bank (the Bank). The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments necessary to present fairly the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications were made to 2023 data to conform to current year presentation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and revenues and expenses for the periods. Actual results could differ significantly from those estimates. Management has evaluated subsequent events for potential recognition or disclosure. The results of operations for the nine month period ended September 30, 2024 are not necessarily indicative of results to be attained for the full year or any other interim period.

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

2. Loans and Allowance for Credit Losses

Major classifications within the Company’s held for investment loan portfolio at September 30, 2024 and December 31, 2023 are as follows:


(In thousands)	September 30, 2024		December 31, 2023
Commercial:
Business	$	6,048,328	$	6,019,036
Real estate – construction and land	1,381,607		1,446,764
Real estate – business	3,586,999		3,719,306
Personal Banking:
Real estate – personal	3,043,391		3,026,041
Consumer	2,108,281		2,077,723
Revolving home equity	342,376		319,894
Consumer credit card	574,746		589,913
Overdrafts	4,272		6,802
Total loans	$	17,090,000	$	17,205,479

Accrued interest receivable totaled $75.9 million and $71.9 million at September 30, 2024 and December 31, 2023, respectively, and was included within other assets on the consolidated balance sheets. For the three months ended September 30, 2024, the Company wrote-off accrued interest by reversing interest income of $56 thousand and $1.5 million in the Commercial and Personal Banking portfolios, respectively. Similarly, for the nine months ended September 30, 2024, the Company wrote off accrued interest of $491 thousand and $4.6 million in the Commercial and Personal Banking portfolios, respectively. For the three months ended September 30, 2023, the Company reversed interest income of $237 thousand and $1.2 million in the Commercial and Personal Banking portfolios, respectively, and in the nine months ended September 30, 2023, reversed $313 thousand and $3.4 million in the Commercial and Personal Banking portfolios, respectively.

At September 30, 2024, loans of $3.6 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 $2.8 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings.

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Allowance for credit losses

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

For loans evaluated for credit losses on a collective basis, average historical loss rates are calculated for each pool using the Company’s historical net charge-offs (combined charge-offs and recoveries by observable historical reporting period) and outstanding loan balances during a lookback period. Lookback periods can be different based on the individual pool and represent management’s credit expectations for the pool of loans over the remaining contractual life. In certain loan pools, if the Company’s own historical loss rate is not reflective of the loss expectations, the historical loss rate is augmented by industry and peer data. The calculated average net charge-off rate is then adjusted for current conditions and reasonable and supportable forecasts. These adjustments increase or decrease the average historical loss rate to reflect expectations of future losses given a single path economic forecast of key macroeconomic variables including GDP, disposable income, various interest rates, unemployment rate, consumer price index (CPI) inflation rate, housing price index (HPI), commercial real estate price index (CREPI) and market volatility. The adjustments are based on results from various regression models projecting the impact of the macroeconomic variables to loss rates. The forecast is used for a reasonable and supportable period before reverting back to historical averages using a straight-line method. The forecast-adjusted loss rate is applied to the amortized cost of loans over the remaining contractual lives, adjusted for expected prepayments. The contractual term excludes expected extensions (except for contractual extensions at the option of the customer), renewals and modifications. 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.

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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 September 30, 2024 and June 30, 2024 are discussed below.


Key Assumption	September 30, 2024	June 30, 2024

Overall economic forecast	•Economic growth expected to remain steady with only a slight rise in unemployment rate •Inflation expected to move closer to the Federal Reserve's 2% target •Expected the Federal Reserve will cut rates every other meeting in 2025	•Economic growth expected to slightly cool with no significant rise in layoffs or unemployment rate •Inflation expected to moderate •Expectations the Federal Reserve will start cutting rates in September 2024
Reasonable and supportable period and related reversion period	•Reasonable and supportable period of one year •Reversion to historical average loss rates within two quarters using a straight-line method	•Reasonable and supportable period of one year •Reversion to historical average loss rates within two quarters using a straight-line method
Forecasted macro-economic variables	•Unemployment rate is 4.3% during the supportable forecast period •Real GDP growth ranges from 1.8% to 2.2% •BBB corporate yield from 4.9% to 5.0% •Housing Price Index from 320.5 to 328.1	•Unemployment rate ranges from 4.0% to 4.2% during the reasonable and supportable forecast period •Real GDP growth ranges from 1.7% to 2.2% •BBB corporate yield from 5.0% to 5.4% •Housing Price Index from 321.2 to 327.1
Prepayment assumptions	Commercial loans •Pools ranging from 0% to 5% Personal banking loans •Ranging from 7.9% to 22.9% for most loan pools •Consumer credit cards 66.6%	Commercial loans •Pools ranging from 0% to 5% Personal banking loans •Ranging from 7.7% to 22.7% for most loan pools •Consumer credit cards 66.6%
Qualitative factors	Added qualitative factors related to: •Changes in the composition of the loan portfolios •Certain industries experiencing stress or emerging concerns within the portfolio •Loans downgraded to special mention, substandard, or non-accrual status •Certain portfolios where the model assumptions do not capture all identified loss risk	Added qualitative factors related to: •Changes in the composition of the loan portfolios •Certain industries experiencing stress or emerging concerns within the portfolio •Certain portfolios sensitive to unusually high rate of inflation and supply chain issues •Loans downgraded to special mention, substandard, or non-accrual status •Certain portfolios where the model assumptions do not capture all identified loss risk

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

Sensitivity in the Allowance for Credit Loss model

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

The current forecast projects continued low unemployment. It is expected that the Federal Reserve will cut rates at every other meeting next year.

Updated information on inflation and labor market trends could impact the Federal Reserve's decision on the timing and degree of rate reductions. The market's response to these events along with other economic, political, and social developments regionally, nationally, and even globally could significantly modify economic projections used in the estimation of the allowance for credit losses. The upcoming presidential election could result in policy changes that might also impact the estimation of the allowance for credit losses.

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Potential changes in any one economic variable may or may not affect the overall allowance because a variety of economic variables and inputs are considered in estimating the allowance, and changes in those variables and inputs may not occur at the same rate, may not be consistent across product types, and may have offsetting impacts to other changing variables and inputs.

A summary of the activity in the allowance for credit losses on loans and the liability for unfunded lending commitments for the three and nine months ended September 30, 2024 and 2023, respectively, follows:


	For the Three Months Ended September 30, 2024						For the Nine Months Ended September 30, 2024
(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total
ALLOWANCE FOR CREDIT LOSSES ON LOANS


Balance at beginning of period	$	107,217	$	51,340	$	158,557	$	108,201	$	54,194	$	162,395
Provision for credit losses on loans	(63)		11,924		11,861		(551)		27,208		26,657
Deductions:
Loans charged off	362		11,395		11,757		1,528		33,262		34,790
Less recoveries on loans	255		1,923		2,178		925		5,652		6,577
Net loan charge-offs (recoveries)	107		9,472		9,579		603		27,610		28,213
Balance September 30, 2024	$	107,047	$	53,792	$	160,839	$	107,047	$	53,792	$	160,839
LIABILITY FOR UNFUNDED LENDING COMMITMENTS


Balance at beginning of period	$	19,363	$	1,342	$	20,705	$	23,909	$	1,337	$	25,246
Provision for credit losses on unfunded lending commitments	(2,715)		(6)		(2,721)		(7,261)		(1)		(7,262)
Balance September 30, 2024	$	16,648	$	1,336	$	17,984	$	16,648	$	1,336	$	17,984
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	123,695	$	55,128	$	178,823	$	123,695	$	55,128	$	178,823


	For the Three Months Ended September 30, 2023						For the Nine Months Ended September 30, 2023
(In thousands)	Commercial		Personal Banking		Total		Commercial		Personal Banking		Total
ALLOWANCE FOR CREDIT LOSSES ON LOANS


Balance at beginning of period	$	108,024	$	50,661	$	158,685	$	103,293	$	46,843	$	150,136
Provision for credit losses on loans	5,201		8,142		13,343		10,203		24,952		35,155
Deductions:
Loans charged off	2,664		9,262		11,926		3,263		26,549		29,812
Less recoveries on loans	66		2,076		2,142		394		6,371		6,765
Net loan charge-offs (recoveries)	2,598		7,186		9,784		2,869		20,178		23,047
Balance September 30, 2023	$	110,627	$	51,617	$	162,244	$	110,627	$	51,617	$	162,244
LIABILITY FOR UNFUNDED LENDING COMMITMENTS


Balance at beginning of period	$	27,842	$	1,393	$	29,235	$	31,743	$	1,377	$	33,120
Provision for credit losses on unfunded lending commitments	(1,724)		26		(1,698)		(5,625)		42		(5,583)
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

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Delinquent and non-accrual loans

The Company considers loans past due on the day following the contractual repayment date, if the contractual repayment was not received by the Company as of the end of the business day. The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at September 30, 2024 and December 31, 2023.


(In thousands)	Current or Less Than 30 Days Past Due		30 – 89 Days Past Due		90 Days Past Due and Still Accruing		Non-accrual		Total
September 30, 2024
Commercial:
Business	$	6,041,090	$	6,388	$	496	$	354	$	6,048,328
Real estate – construction and land	1,381,108		499		—		—		1,381,607
Real estate – business	3,563,683		8,372		—		14,944		3,586,999
Personal Banking:
Real estate – personal	3,016,598		17,048		8,601		1,144		3,043,391
Consumer	2,076,058		28,424		3,799		—		2,108,281
Revolving home equity	337,653		1,711		1,035		1,977		342,376
Consumer credit card	559,056		7,635		8,055		—		574,746
Overdrafts	4,030		242		—		—		4,272
Total	$	16,979,276	$	70,319	$	21,986	$	18,419	$	17,090,000
December 31, 2023
Commercial:
Business	$	5,985,713	$	29,087	$	614	$	3,622	$	6,019,036
Real estate – construction and land	1,446,764		—		—		—		1,446,764
Real estate – business	3,714,579		4,582		85		60		3,719,306
Personal Banking:
Real estate – personal	2,999,988		14,841		9,559		1,653		3,026,041
Consumer	2,036,353		38,217		3,153		—		2,077,723
Revolving home equity	315,483		1,564		870		1,977		319,894
Consumer credit card	574,805		7,525		7,583		—		589,913
Overdrafts	6,553		249		—		—		6,802
Total	$	17,080,238	$	96,065	$	21,864	$	7,312	$	17,205,479

At September 30, 2024, the Company had $2.0 million in non-accrual loans that had no allowance for credit loss, compared to $4.3 million in non-accrual loans that had no allowance for credit loss at December 31, 2023. The Company did not record any interest income on non-accrual loans during the nine months ended September 30, 2024 and 2023, respectively.

Credit quality indicators

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

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

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

The risk category of loans in the Commercial portfolio as of September 30, 2024 and December 31, 2023 are as follows:


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Total
September 30, 2024
Business
Risk Rating:
Pass	$	978,443	$	1,039,903	$	689,744	$	436,950	$	184,997	$	390,233	$	2,081,711	$	5,801,981
Special mention	17,777		10,098		9,521		21,123		156		2,187		65,461		126,323
Substandard	2,922		15,055		11,514		2,563		6,100		8,974		72,542		119,670
Non-accrual	1		80		1		—		—		272		—		354
Total Business:	$	999,143	$	1,065,136	$	710,780	$	460,636	$	191,253	$	401,666	$	2,219,714	$	6,048,328
Gross write-offs for the nine months ended September 30, 2024	$	200	$	245	$	40	$	—	$	—	$	17	$	1,026	$	1,528
Real estate-construction
Risk Rating:
Pass	$	261,113	$	440,772	$	546,057	$	92,990	$	3,240	$	2,821	$	29,463	$	1,376,456

Substandard	2,414		2,737		—		—		—		—		—		5,151

Total Real estate-construction:	$	263,527	$	443,509	$	546,057	$	92,990	$	3,240	$	2,821	$	29,463	$	1,381,607
Gross write-offs for the nine months ended September 30, 2024	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate-business
Risk Rating:
Pass	$	504,562	$	676,908	$	811,977	$	460,716	$	378,939	$	398,500	$	94,064	$	3,325,666
Special mention	681		15,500		18,047		14,351		2,217		1,522		—		52,318
Substandard	1,294		24,735		32,143		16,342		4,041		115,414		102		194,071
Non-accrual	—		—		—		—		14,872		72		—		14,944
Total Real estate-business:	$	506,537	$	717,143	$	862,167	$	491,409	$	400,069	$	515,508	$	94,166	$	3,586,999
Gross write-offs for the nine months ended September 30, 2024	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial loans
Risk Rating:
Pass	$	1,744,118	$	2,157,583	$	2,047,778	$	990,656	$	567,176	$	791,554	$	2,205,238	$	10,504,103
Special mention	18,458		25,598		27,568		35,474		2,373		3,709		65,461		178,641
Substandard	6,630		42,527		43,657		18,905		10,141		124,388		72,644		318,892
Non-accrual	1		80		1		—		14,872		344		—		15,298
Total Commercial loans:	$	1,769,207	$	2,225,788	$	2,119,004	$	1,045,035	$	594,562	$	919,995	$	2,343,343	$	11,016,934
Gross write-offs for the nine months ended September 30, 2024	$	200	$	245	$	40	$	—	$	—	$	17	$	1,026	$	1,528

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	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
December 31, 2023
Business
Risk Rating:
Pass	$	1,609,685	$	839,511	$	555,991	$	273,138	$	215,988	$	257,177	$	2,096,108	$	5,847,598
Special mention	19,639		3,412		19,489		643		412		2,485		43,054		89,134
Substandard	5,256		8,666		6,891		20,854		1,422		10,235		25,358		78,682
Non-accrual	—		130		1,184		—		—		2,308		—		3,622
Total Business:	$	1,634,580	$	851,719	$	583,555	$	294,635	$	217,822	$	272,205	$	2,164,520	$	6,019,036
Gross write-offs for the year ended December 31, 2023	$	—	$	2,260	$	57	$	41	$	—	$	—	$	1,393	$	3,751
Real estate-construction
Risk Rating:
Pass	$	476,489	$	579,933	$	295,841	$	41,418	$	498	$	2,834	$	31,670	$	1,428,683
Special mention	3,068		15,013		—		—		—		—		—		18,081


Total Real estate-construction:	$	479,557	$	594,946	$	295,841	$	41,418	$	498	$	2,834	$	31,670	$	1,446,764
Gross write-offs for the year ended December 31, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Real estate- business
Risk Rating:
Pass	$	807,631	$	1,063,189	$	510,397	$	433,030	$	311,457	$	325,738	$	94,432	$	3,545,874
Special mention	16,650		8,619		451		884		9,253		733		—		36,590
Substandard	2,952		18,463		27,914		17,430		11,636		58,387		—		136,782
Non-accrual	—		—		—		—		—		60		—		60
Total Real-estate business:	$	827,233	$	1,090,271	$	538,762	$	451,344	$	332,346	$	384,918	$	94,432	$	3,719,306
Gross write-offs for the year ended December 31, 2023	$	—	$	—	$	—	$	—	$	—	$	134	$	—	$	134
Commercial loans
Risk Rating:
Pass	$	2,893,805	$	2,482,633	$	1,362,229	$	747,586	$	527,943	$	585,749	$	2,222,210	$	10,822,155
Special mention	39,357		27,044		19,940		1,527		9,665		3,218		43,054		143,805
Substandard	8,208		27,129		34,805		38,284		13,058		68,622		25,358		215,464
Non-accrual	—		130		1,184		—		—		2,368		—		3,682
Total Commercial loans:	$	2,941,370	$	2,536,936	$	1,418,158	$	787,397	$	550,666	$	659,957	$	2,290,622	$	11,185,106
Gross write-offs for the year ended December 31, 2023	$	—	$	2,260	$	57	$	41	$	—	$	134	$	1,393	$	3,885

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The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided as of September 30, 2024 and December 31, 2023 below.


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Total
September 30, 2024
Real estate-personal
Current to 90 days past due	$	289,567	$	400,647	$	417,239	$	493,672	$	658,047	$	763,703	$	10,771	$	3,033,646
Over 90 days past due	73		1,343		1,545		1,883		1,795		1,962		—		8,601
Non-accrual	—		—		85		113		—		946		—		1,144
Total Real estate-personal:	$	289,640	$	401,990	$	418,869	$	495,668	$	659,842	$	766,611	$	10,771	$	3,043,391
Gross write-offs for the nine months ended September 30, 2024	$	—	$	82	$	96	$	83	$	—	$	22	$	—	$	283
Consumer
Current to 90 days past due	$	331,707	$	408,155	$	255,740	$	184,678	$	84,094	$	67,457	$	772,651	$	2,104,482
Over 90 days past due	585		383		513		161		116		285		1,756		3,799

Total Consumer:	$	332,292	$	408,538	$	256,253	$	184,839	$	84,210	$	67,742	$	774,407	$	2,108,281
Gross write-offs for the nine months ended September 30, 2024	$	482	$	2,173	$	2,089	$	1,017	$	408	$	214	$	1,722	$	8,105
Revolving home equity
Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	339,364	$	339,364
Over 90 days past due	—		—		—		—		—		—		1,035		1,035
Non-accrual	—		—		—		—		—		—		1,977		$	1,977
Total Revolving home equity:	$	—	$	—	$	—	$	—	$	—	$	—	$	342,376	$	342,376
Gross write-offs for the nine months ended September 30, 2024	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer credit card
Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	566,691	$	566,691
Over 90 days past due	—		—		—		—		—		—		8,055		8,055

Total Consumer credit card:	$	—	$	—	$	—	$	—	$	—	$	—	$	574,746	$	574,746
Gross write-offs for the nine months ended September 30, 2024	$	—	$	—	$	—	$	—	$	—	$	—	$	22,790	$	22,790
Overdrafts
Current to 90 days past due	$	4,272	$	—	$	—	$	—	$	—	$	—	$	—	$	4,272


Total Overdrafts:	$	4,272	$	—	$	—	$	—	$	—	$	—	$	—	$	4,272
Gross write-offs for the nine months ended September 30, 2024	$	2,084	$	—	$	—	$	—	$	—	$	—	$	—	$	2,084
Personal banking loans
Current to 90 days past due	$	625,546	$	808,802	$	672,979	$	678,350	$	742,141	$	831,160	$	1,689,477	$	6,048,455
Over 90 days past due	658		1,726		2,058		2,044		1,911		2,247		10,846		21,490
Non-accrual	—		—		85		113		—		946		1,977		3,121
Total Personal banking loans:	$	626,204	$	810,528	$	675,122	$	680,507	$	744,052	$	834,353	$	1,702,300	$	6,073,066
Gross write-offs for the nine months ended September 30, 2024	$	2,566	$	2,255	$	2,185	$	1,100	$	408	$	236	$	24,512	$	33,262

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	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
December 31, 2023
Real estate-personal
Current to 90 days past due	$	455,703	$	452,153	$	533,313	$	711,442	$	257,159	$	596,439	$	8,620	$	3,014,829
Over 90 days past due	3,319		1,650		2,222		834		44		1,490		—		9,559
Non-accrual	—		261		167		—		157		1,068		—		1,653
Total Real estate-personal:	$	459,022	$	454,064	$	535,702	$	712,276	$	257,360	$	598,997	$	8,620	$	3,026,041
Gross write-offs for the year ended December 31, 2023	$	—	$	18	$	—	$	—	$	—	$	23	$	—	$	41
Consumer
Current to 90 days past due	$	518,619	$	340,104	$	258,348	$	127,208	$	56,394	$	51,302	$	722,595	$	2,074,570
Over 90 days past due	391		210		194		24		54		421		1,859		3,153

Total Consumer:	$	519,010	$	340,314	$	258,542	$	127,232	$	56,448	$	51,723	$	724,454	$	2,077,723
Gross write-offs for the year ended December 31, 2023	$	926	$	2,891	$	1,939	$	770	$	376	$	370	$	1,051	$	8,323
Revolving home equity
Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	317,047	$	317,047
Over 90 days past due	—		—		—		—		—		—		870		870
Non-accrual	—		—		—		—		—		—		1,977		$	1,977
Total Revolving home equity:	$	—	$	—	$	—	$	—	$	—	$	—	$	319,894	$	319,894
Gross write-offs for the year ended December 31, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	11	$	11
Consumer credit card
Current to 90 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	582,330	$	582,330
Over 90 days past due	—		—		—		—		—		—		7,583		7,583

Total Consumer credit card:	$	—	$	—	$	—	$	—	$	—	$	—	$	589,913	$	589,913
Gross write-offs for the year ended December 31, 2023	$	—	$	—	$	—	$	—	$	—	$	—	$	24,105	$	24,105
Overdrafts
Current to 90 days past due	$	6,802	$	—	$	—	$	—	$	—	$	—	$	—	$	6,802


Total Overdrafts:	$	6,802	$	—	$	—	$	—	$	—	$	—	$	—	$	6,802
Gross write-offs for the year ended December 31, 2023	$	3,803	$	—	$	—	$	—	$	—	$	—	$	—	$	3,803
Personal banking loans
Current to 90 days past due	$	981,124	$	792,257	$	791,661	$	838,650	$	313,553	$	647,741	$	1,630,592	$	5,995,578
Over 90 days past due	3,710		1,860		2,416		858		98		1,911		10,312		21,165
Non-accrual	—		261		167		—		157		1,068		1,977		3,630
Total Personal banking loans:	$	984,834	$	794,378	$	794,244	$	839,508	$	313,808	$	650,720	$	1,642,881	$	6,020,373
Gross write-offs for the year ended December 31, 2023	$	4,729	$	2,909	$	1,939	$	770	$	376	$	393	$	25,167	$	36,283

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Collateral-dependent loans

The Company's collateral-dependent loans are comprised of large loans on non-accrual status. The Company requires that collateral-dependent loans are either over-collateralized or carry collateral equal to the amortized cost of the loan. The following table presents the amortized cost basis of collateral-dependent loans as of September 30, 2024 and December 31, 2023.


(In thousands)	Business Assets		Real Estate		Oil & Gas Assets		Total
September 30, 2024
Commercial:


Real estate - business	$	—	$	14,872	$	—	$	14,872
Personal Banking:


Revolving home equity	—		1,977		—		1,977


Total	$	—	$	16,849	$	—	$	16,849
December 31, 2023
Commercial:
Business	$	1,183	$	—	$	1,238	$	2,421


Personal Banking:


Revolving home equity	—		1,977		—		1,977


Total	$	1,183	$	1,977	$	1,238	$	4,398

Other Personal Banking loan information

As noted above, the credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided in the table in the above section on "Credit quality indicators." In addition, FICO scores are obtained and updated on a quarterly basis for most of the loans in the Personal Banking portfolio. This is a published credit score designed to measure the risk of default by taking into account various factors from a borrower's financial history and is considered supplementary information utilized by the Company, as management does not consider this information in evaluating the allowance for credit losses on loans. The Bank normally obtains a FICO score at the loan's origination and 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 $167.7 million at September 30, 2024 and $168.9 million at December 31, 2023. The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled $225.2 million at September 30, 2024 and $211.3 million at December 31, 2023. As the healthcare loans are guaranteed by the hospital, customer FICO scores are not obtained for these loans. The personal real estate loans and consumer loans excluded below totaled less than 7% of the Personal Banking portfolio. For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at September 30, 2024 and December 31, 2023 by FICO score.

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Personal Banking Loans
	% of Loan Category
	Real Estate - Personal		Consumer		Revolving Home Equity		Consumer Credit Card
September 30, 2024
FICO score:
Under 600	2.3	%	2.4	%	2.0	%	5.0	%
600 - 659	2.3		3.9		3.1		12.1
660 - 719	7.8		13.4		10.3		29.0
720 - 779	20.7		22.3		23.9		26.7
780 and over	66.9		58.0		60.7		27.2
Total	100.0	%	100.0	%	100.0	%	100.0	%
December 31, 2023
FICO score:
Under 600	2.0	%	2.5	%	1.9	%	4.7	%
600 - 659	2.3		4.3		3.3		12.1
660 - 719	8.5		12.9		10.9		29.2
720 - 779	21.9		28.2		22.4		27.0
780 and over	65.3		52.1		61.5		27.0
Total	100.0	%	100.0	%	100.0	%	100.0	%

Modifications for borrowers experiencing financial difficulty

The Company's modifications of loans to borrowers experiencing financial difficulty are generally in the form of term extensions, repayment plans, payment deferrals, forbearance agreements, interest rate reductions, forgiveness of interest and/or fees, or any combination thereof. Commercial loans modified to borrowers experiencing financial difficulty are primarily loans that are substandard or non-accrual, where the maturity date was extended. Modifications on personal real estate loans are primarily those placed on forbearance plans, repayment plans, or deferral plans where monthly payments are suspended for a period of time or past due amounts are paid off over a certain period of time in the future or set up as a balloon payment at maturity. Modifications to certain credit card and other small consumer loans are often modified under debt counseling programs that can reduce the contractual rate or, in certain instances, forgive certain fees and interest charges. Other consumer loans modified to borrowers experiencing financial difficulty consist of various other workout arrangements with consumer customers.

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The following tables present the amortized cost at September 30, 2024 of loans that were modified during the three and nine months ended September 30, 2024 and the amortized cost of 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, 2024
(Dollars in thousands)	Term Extension		Payment Delay		Interest Rate Reduction		Interest/Fees Forgiven		Other		Total		% of Total Loan Category
September 30, 2024
Commercial:
Business	$	36,892	$	—	$	—	$	—	$	—	$	36,892	0.6	%
Real estate – construction and land	1,915		—		—		—		—		1,915		0.1
Real estate – business	70,091		—		—		—		—		70,091		2.0
Personal Banking:
Real estate – personal	42		4,024		—		—		—		4,066		0.1
Consumer	—		720		30		—		—		750		—

Consumer credit card	—		—		931		—		—		931		0.2

Total	$	108,940	$	4,744	$	961	$	—	$	—	$	114,645	0.7	%

	For the Nine Months Ended September 30, 2024
September 30, 2024
Commercial:
Business	$	54,608	$	—	$	—	$	—	$	—	$	54,608	0.9	%
Real estate – construction and land	1,915		—		—		—		—		1,915		0.1
Real estate – business	117,718		—		—		—		—		117,718		3.3
Personal Banking:
Real estate – personal	42		6,586		—		—		—		6,628		0.2
Consumer	—		720		84		—		44		848		—

Consumer credit card	—		—		2,642		—		—		2,642		0.5

Total	$	174,283	$	7,306	$	2,726	$	—	$	44	$	184,359	1.1	%


	For the Three Months Ended September 30, 2023
(Dollars in thousands)	Term Extension		Payment Delay		Interest Rate Reduction		Interest/Fees Forgiven		Other		Total		% of Total Loan Category
September 30, 2023
Commercial:
Business	$	3,792	$	—	$	—	$	—	$	—	$	3,792	0.1	%

Real estate – business	56,552		—		—		—		—		56,552		1.6
Personal Banking:
Real estate – personal	45		773		—		—		—		818		—
Consumer	—		—		49		—		31		80		—

Consumer credit card	—		—		935		72		—		1,007		0.2

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

	For the Nine Months Ended September 30, 2023
September 30, 2023
Commercial:
Business	$	16,705	$	—	$	—	$	—	$	—	$	16,705	0.3	%

Real estate – business	106,034		—		—		—		—		106,034		2.9
Personal Banking:
Real estate – personal	289		3,313		—		—		—		3,602		0.1
Consumer	30		70		69		—		86		255		—

Consumer credit card	—		—		1,967		485		—		2,452		0.4

Total	$	123,058	$	3,383	$	2,036	$	485	$	86	$	129,048	0.8	%

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The estimate of lifetime expected losses utilized in the allowance for credit losses model is developed using average historical experience on loans with similar risk characteristics, which includes losses from modifications of loans to borrowers experiencing financial difficulty. As a result, a change to the allowance for credit losses is generally not recorded upon modification. For modifications to loans made to borrowers experiencing financial difficulty that are placed on non-accrual status, the Company determines the allowance for credit losses on an individual evaluation, using the same process that it utilizes for other loans on non-accrual status. Modifications made to commercial loans which are not on non-accrual status for borrowers experiencing financial difficulty are collectively evaluated based on internal risk rating, loan type, delinquency, historical experience, and current economic factors. Modifications made to borrowers experiencing financial difficulty for personal banking loans which are not on non-accrual status are collectively evaluated based on loan type, delinquency, historical experience, and current economic factors.

If a loan to a borrower experiencing financial difficulty is modified and subsequently deemed uncollectible, the allowance for credit losses continues to be based on individual evaluation, if that loan is already on non-accrual status. For those loans, the allowance for credit losses is estimated using discounted expected cash flows or the fair value of collateral. 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 nine months ended September 30, 2024 and September 30, 2023.


	Term Extension
	Three Months Ended September 30, 2024	Three Months Ended September 30, 2023
Commercial:
Business	Extended maturity by a weighted average of 5 months.	Extended maturity by a weighted average of 3 months.
Real estate – construction and land	Extended maturity by a weighted average of 2 months.
Real estate – business	Extended maturity by a weighted average of 11 months.	Extended maturity by a weighted average of 12 months.
Personal Banking:
Real estate – personal	Extended maturity by a weighted average of 2 months.	Extended maturity by a weighted average of 6 months.





	Nine Months Ended September 30, 2024	Nine Months Ended September 30, 2023
Commercial:
Business	Extended maturity by a weighted average of 5 months.	Extended maturity by a weighted average of 8 months.
Real estate – construction and land	Extended maturity by a weighted average of 2 months.
Real estate – business	Extended maturity by a weighted average of 11 months.	Extended maturity by a weighted average of 13 months.
Personal Banking:
Real estate – personal	Extended maturity by a weighted average of 5 months.	Extended maturity by a weighted average of 7 months.
Consumer		Extended maturity by 10 years.

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	Payment Delay
	Three Months Ended September 30, 2024	Three Months Ended September 30, 2023




Personal Banking:
Real estate – personal	Deferred certain payments by a weighted average of 15 years.	Deferred certain payments by a weighted average of 22 years.
Consumer	Deferred certain payments by a weighted average of 19 years.



	Nine Months Ended September 30, 2024	Nine Months Ended September 30, 2023





Real estate – personal	Deferred certain payments by a weighted average of 10 years.	Deferred certain payments by a weighted average of 20 years.
Consumer	Deferred certain payments by a weighted average of 19 years.	Deferred certain payments by a weighted average of 71 months.


	Interest Rate Reduction
	Three Months Ended September 30, 2024	Three Months Ended September 30, 2023




Personal Banking:

Consumer	Reduced contractual interest rate from average 21% to 6%.	Reduced contractual interest rate from average 21% to 6%.

Consumer credit card	Reduced contractual interest rate from average 21% to 6%.	Reduced contractual interest rate from average 21% to 6%.


	Nine Months Ended September 30, 2024	Nine Months Ended September 30, 2023




Personal Banking:

Consumer	Reduced contractual interest rate from average 21% to 6%.	Reduced contractual interest rate from average 21% to 6%.

Consumer credit card	Reduced contractual interest rate from average 21% to 6%.	Reduced contractual interest rate from average 21% to 6%.


						Forgiveness of Interest/Fees
						Three Months Ended September 30, 2023




Personal Banking:



Consumer credit card						Approximately $5 thousand of interest and fees forgiven.


						Nine Months Ended September 30, 2023




Personal Banking:



Consumer credit card						Approximately $33 thousand of interest and fees forgiven.

The Company had commitments of $9.4 million and $28.4 million at September 30, 2024 and December 31, 2023, respectively, to lend additional funds to borrowers experiencing financial difficulty and for whom the Company has modified the terms of loans in the form of an interest rate reduction; an other-than-insignificant payment delay; forgiveness of principal, interest, or fees; or a term extension during the current reporting period.

The following tables provide the amortized cost basis at September 30, 2024 of loans to borrowers experiencing financial difficulty that had a payment default during the three and nine months ended September 30, 2024 and were modified within the 12 months preceding the payment default, as well as the amortized cost basis at September 30, 2023 of loans to borrowers experiencing financial difficulty that had a payment default during the three and nine months ended September 30, 2023 and had been modified on or after January 1, 2023 (the date we adopted ASU 2022-02). For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal.

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	For the Three Months Ended September 30, 2024										For the Nine Months Ended September 30, 2024
(Dollars in thousands)	Term Extension		Payment Delay		Interest Rate Reduction		Interest/Fees Forgiven		Total			Term Extension		Payment Delay		Interest Rate Reduction		Interest/Fees Forgiven		Total
September 30, 2024
Commercial:
Business	$	14,872	$	—	$	—	$	—	$	14,872		$	14,872	$	—	$	—	$	—	$	14,872


Personal Banking:
Real estate – personal	—		2,600		—		—		2,600			—		3,728		—		—		3,728
Consumer	—		—		13		—		13			—		—		24		—		24

Consumer credit card	—		—		251		—		251			—		—		536		20		556

Total	$	14,872	$	2,600	$	264	$	—	$	17,736		$	14,872	$	3,728	$	560	$	20	$	19,180

	For the Three Months Ended September 30, 2023										For the Nine Months Ended September 30, 2023
(Dollars in thousands)	Term Extension		Payment Delay		Interest Rate Reduction		Interest/Fees Forgiven		Total			Term Extension		Payment Delay		Interest Rate Reduction		Interest/Fees Forgiven		Total
September 30, 2023




Personal Banking:
Real estate – personal	$	—	$	802	$	—	$	—	$	802		$	—	$	1,007	$	—	$	—	$	1,007
Consumer	—		—		19		—		19			—		—		30		—		30

Consumer credit card	—		—		235		157		392			—		—		274		158		432

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

The following tables present the amortized cost basis at September 30, 2024 of loans to borrowers experiencing financial difficulty that had been modified within the previous 12 months as well as the amortized cost basis at September 30, 2023 of loans to borrowers experiencing financial difficulty that had been modified on or after January 1, 2023 (the date we adopted ASU 2022-02) through September 30, 2023.


(In thousands)	Current		30-89 Days Past Due		90 Days Past Due		Total
September 30, 2024
Commercial:
Business	$	56,517	$	86	$	—	$	56,603
Real estate – construction and land	1,915		—		—		1,915
Real estate – business	102,846		—		14,872		117,718
Personal Banking:
Real estate – personal	3,220		1,151		2,601		6,972
Consumer	844		18		12		874

Consumer credit card	2,380		510		237		3,127

Total	$	167,722	$	1,765	$	17,722	$	187,209


(In thousands)	Current		30-89 Days Past Due		90 Days Past Due		Total
September 30, 2023
Commercial:
Business	$	16,705	$	—	$	—	$	16,705

Real estate – business	106,034		—		—		106,034
Personal Banking:
Real estate – personal	2,203		597		802		3,602
Consumer	209		27		19		255

Consumer credit card	1,534		526		392		2,452

Total	$	126,685	$	1,150	$	1,213	$	129,048

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Loans held for sale

The Company designates certain long-term fixed rate personal real estate loans as held for sale, and the Company has elected the fair value option for these loans. The election of the fair value option aligns the accounting for these loans with the related economic hedges discussed in Note 11. The loans are primarily sold to Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA). At September 30, 2024, the fair value of these loans was $1.6 million, and the unpaid principal balance was $1.6 million.

At September 30, 2024, 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 $1.0 million and $270 thousand at September 30, 2024 and December 31, 2023, respectively, and included in those amounts were $792 thousand and $270 thousand at September 30, 2024 and December 31, 2023, respectively, of foreclosed residential real estate properties held as a result of obtaining physical possession. Personal property acquired in repossession, generally autos, totaled $2.3 million and $1.8 million at September 30, 2024 and December 31, 2023. Upon acquisition, these assets are recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. They are subsequently carried at the lower of this cost basis or fair value less estimated selling costs.

3. Investment Securities

Investment securities consisted of the following at September 30, 2024 and December 31, 2023.


(In thousands)	September 30, 2024		December 31, 2023
Available for sale debt securities	$	9,167,681	$	9,684,760
Trading debt securities	42,645		28,830
Equity securities:
Readily determinable fair value	48,262		5,723
No readily determinable fair value	8,853		6,978
Other:
Federal Reserve Bank stock	35,451		35,166
Federal Home Loan Bank stock	10,119		10,640

Private equity investments	170,973		176,667
Total investment securities (1)	$	9,483,984	$	9,948,764

(1)Accrued interest receivable totaled $29.7 million and $28.9 million at September 30, 2024 and December 31, 2023, respectively, and was included within other assets on the consolidated balance sheets.

Most of the Company’s investment securities are classified as available for sale debt securities, and this portfolio is discussed in more detail below. The Company’s equity securities are also discussed below. Other investment securities include Federal Reserve Bank (FRB) stock, Federal Home Loan Bank (FHLB) stock, and investments in portfolio concerns held by the Company’s private equity subsidiary. FRB stock and FHLB stock are held for debt and regulatory purposes. Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is tied to the asset size of the borrowing bank and the level of borrowings from the FHLB. These holdings are carried at cost. The Company’s private equity investments are carried at estimated fair value.

Equity Securities

The Company’s equity securities portfolio includes mutual funds, common stock, and preferred stock with readily determinable fair values as well as equity securities with no readily determinable fair value. 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. At March 31, 2024, this portfolio included the Company’s 823,447 shares of Visa Inc. (“Visa”) Class B-1 common stock (formerly Class B common stock), which were held by Commerce Bancshares, Inc. The Company’s Visa Class B-1 shares had a carrying value of zero at March 31, 2024, as there had not been observable price changes in orderly transactions for identical or similar investments of the same issuer.

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On April 8, 2024, Visa announced the commencement of a public offering to permit the exchange of its Class B-1 common stock for a combination of shares of its Class B-2 common stock and its Class C common stock (“Exchange Offer”). The Company tendered all of its Visa Class B-1 shares pursuant to the Exchange Offer. On May 3, 2024, the Exchange Offer closed, and in exchange for its 823,447 shares of Visa Class B-1 common stock, the Company received 411,723 shares of Visa Class B-2 common stock (which will be convertible under certain circumstances, as further described below, into Visa’s publicly traded Class A common stock at an initial rate of 1.5875 shares of Class A common for each share of Class B-2 common stock, subject to adjustment) and 163,404 shares of Visa Class C common stock which will automatically convert into four shares of Visa's Class A common stock (subject to future adjustments for any stock splits, recapitalizations or similar transactions) upon any transfer to a person other than a Visa member or an affiliate of a Visa member.

As a condition of participating in the exchange, the Company entered into a Makewhole Agreement with Visa that provides for cash payments to Visa to the extent (if any) that future adjustments to the conversion ratio for the Visa Class B-2 common stock to Class A common stock cause such ratio to fall below zero. Changes to the conversion ratio occur when Visa deposits funds to a litigation escrow established by Visa to pay settlements for certain covered litigation that pre-dated Visa’s initial public offering, for which Visa has been effectively indemnified by Visa USA members through reductions to the conversion ratio for its Class B-1 common stock. The purpose of the Makewhole Agreement is to preserve the economic benefit of these adjustments to the Class B-1 conversion ratio for the benefit of Visa’s Class A and Class C common stockholders following the exchange. As further described in Visa’s related Issuer Tender Offer Statement on Schedule TO and Prospectus, each dated April 8, 2024, publicly filed with the U. S. Securities and Exchange Commission, both the Makewhole Agreement and the related escrow fund and transfer restrictions on Visa’s Class B-1 common stock and the new Class B-2 common stock will terminate whenever the covered litigation is ultimately resolved, at which future date outstanding shares of Visa Class B-2 common stock will be convertible into shares of its Class A common stock at the then-applicable conversion ratio.

As a result of the exchange, the Company elected the measurement alternative approach for its Visa Class C common stock and marked the stock to fair value, recording a gain based on the conversion privilege of the Visa Class C common stock and the closing price of Visa Class A common stock. During the second quarter of 2024, the Company sold 436 thousand shares of Visa Class A common stock at an average price of $274.91, resulting in proceeds of $119.8 million. During the third quarter of 2024, the Company sold 218 thousand Visa Class A shares at an average price of $260.56, resulting of proceeds of $56.8 million. As of September 30, 2024, the Company has sold all of the Visa Class C shares it received from the Visa Exchange Offer. The Company’s Visa Class B-2 common stock will continue to be carried at cost of $0 as the Company elected the measurement alternative approach for these shares as well, and there are not observable price changes in orderly transactions for identical or similar investments of the same issuer for the Visa Class B-2 shares held by the Company.

Changes in equity investments with no readily determinable fair value for each period were as follows:


	Three Months Ended September 30		Nine Months Ended September 30
(In thousands)	2024			2024
Balance at beginning of period	$	65,780		$	6,978
Observable upward price adjustments	—			178,227
Observable downward price adjustments	(416)			(416)
Impairment charges	—			—
Sales of securities and other activity	(56,511)			(175,936)
Balance at end of period	$	8,853		$	8,853

Net gains and losses for the Company's equity securities portfolio during the nine months ended September 30, 2024 were as follows:


	Nine Months Ended September 30
(In thousands)		2024
Net gains (losses) recognized during the period on equity securities		$	178,098
Less: Net gains (losses) recognized during the period on equity securities sold during the period		(176,755)
Net unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date		$	1,343

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Available for sale debt securities portfolio

The majority of the Company’s investment portfolio is comprised of available for sale debt securities, which are carried at fair value with changes in fair value reported in accumulated other comprehensive income (AOCI). A summary of the available for sale debt securities by maturity groupings as of September 30, 2024 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. These securities differ from traditional debt securities primarily in that they may have uncertain maturity dates and are priced based on estimated prepayment rates on the underlying collateral.


(In thousands)	Amortized Cost		Fair Value
U.S. government and federal agency obligations:
Within 1 year	$	351,471	$	351,904
After 1 but within 5 years	1,409,595		1,421,048
After 5 but within 10 years	627,728		633,888

Total U.S. government and federal agency obligations	2,388,794		2,406,840
Government-sponsored enterprise obligations:


After 5 but within 10 years	4,747		4,493
After 10 years	50,686		41,006
Total government-sponsored enterprise obligations	55,433		45,499
State and municipal obligations:
Within 1 year	79,170		78,140
After 1 but within 5 years	362,816		344,045
After 5 but within 10 years	287,859		258,797
After 10 years	119,682		101,400
Total state and municipal obligations	849,527		782,382
Mortgage and asset-backed securities:
Agency mortgage-backed securities	4,295,653		3,673,971
Non-agency mortgage-backed securities	663,426		609,344
Asset-backed securities	1,484,628		1,444,597
Total mortgage and asset-backed securities	6,443,707		5,727,912
Other debt securities:
Within 1 year	74,972		74,027
After 1 but within 5 years	81,414		76,980
After 5 but within 10 years	49,207		43,786
After 10 years	11,000		10,255
Total other debt securities	216,593		205,048
Total available for sale debt securities	$	9,954,054	$	9,167,681

Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled $411.0 million, at fair value, at September 30, 2024. Interest earned on these securities increases with inflation and decreases with deflation, as measured by the non-seasonally adjusted Consumer Price Index (CPI-U). At maturity, the principal paid is the greater of an inflation-adjusted principal or the original principal.

Allowance for credit losses on available for sale debt securities

Securities for which fair value is less than amortized cost are reviewed for impairment. Special emphasis is placed on securities whose credit rating has fallen below Baa3 (Moody's) or BBB- (Standard & Poor's), whose fair values have fallen more than 20% below purchase price, or those which have been identified based on management’s judgment. These securities are placed on a watch list and cash flow analyses are prepared on an individual security basis. Certain securities are analyzed using a projected cash flow model, discounted to present value, and compared to the current amortized cost bases of the securities. The model uses input factors such as cash flow projections, contractual payments required, expected delinquency rates, credit support from other tranches, prepayment speeds, collateral loss severity rates (including loan to values), and various other information related to the underlying collateral. Securities not analyzed using the cash flow model are analyzed by reviewing credit ratings, credit support agreements, and industry knowledge to project future cash flows and any possible credit impairment.

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At September 30, 2024, the fair value of securities on this watch list was $814.5 million compared to $1.2 billion at December 31, 2023. Almost all 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 September 30, 2024, 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, 2024, the Company did not identify any securities for which a credit loss exists, and for the nine months ended September 30, 2024 and 2023, the Company did not recognize a credit loss expense on any available for sale debt securities.

The table below summarizes debt securities available for sale in an unrealized loss position, aggregated by length of loss period, for which an allowance for credit losses has not been recorded at September 30, 2024 and December 31, 2023. 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 September 30, 2024, 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
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2024
U.S. government and federal agency obligations	$	359,913	$	851	$	357,083	$	12,528	$	716,996	$	13,379
Government-sponsored enterprise obligations	—		—		45,499		9,934		45,499		9,934
State and municipal obligations	7,676		476		756,489		66,715		764,165		67,191
Mortgage and asset-backed securities:
Agency mortgage-backed securities	314		1		3,636,235		622,281		3,636,549		622,282
Non-agency mortgage-backed securities	27		—		604,980		54,228		605,007		54,228
Asset-backed securities	28,052		1,078		1,273,016		39,177		1,301,068		40,255
Total mortgage and asset-backed securities	28,393		1,079		5,514,231		715,686		5,542,624		716,765
Other debt securities	—		—		205,048		11,545		205,048		11,545
Total	$	395,982	$	2,406	$	6,878,350	$	816,408	$	7,274,332	$	818,814
December 31, 2023
U.S. government and federal agency obligations	$	51,585	$	809	$	714,400	$	24,025	$	765,985	$	24,834
Government-sponsored enterprise obligations	—		—		43,962		11,696		43,962		11,696
State and municipal obligations	24,022		760		1,167,607		148,478		1,191,629		149,238
Mortgage and asset-backed securities:
Agency mortgage-backed securities	4,382		59		3,875,432		720,649		3,879,814		720,708
Non-agency mortgage-backed securities	—		—		1,152,045		173,526		1,152,045		173,526
Asset-backed securities	19,086		156		2,081,293		93,076		2,100,379		93,232
Total mortgage and asset-backed securities	23,468		215		7,108,770		987,251		7,132,238		987,466
Other debt securities	—		—		460,136		47,250		460,136		47,250
Total	$	99,075	$	1,784	$	9,494,875	$	1,218,700	$	9,593,950	$	1,220,484

The entire available for sale debt portfolio included $7.3 billion of securities that were in a loss position at September 30, 2024, compared to $9.6 billion at December 31, 2023. The total amount of unrealized loss on these securities was $818.8 million at September 30, 2024, a decrease of $401.7 million compared to the unrealized loss at December 31, 2023. Securities with significant unrealized losses are discussed in the "Allowance for credit losses on available for sale debt securities" section above.

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For debt securities classified as available for sale, the following table shows the amortized cost, fair value, and allowance for credit losses of securities available for sale at September 30, 2024 and December 31, 2023, and the corresponding amounts of gross unrealized gains and losses (pre-tax) in AOCI, by security type.


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
September 30, 2024
U.S. government and federal agency obligations	$	2,388,794	$	31,425	$	(13,379)	$	—	$	2,406,840
Government-sponsored enterprise obligations	55,433		—		(9,934)		—		45,499
State and municipal obligations	849,527		46		(67,191)		—		782,382
Mortgage and asset-backed securities:
Agency mortgage-backed securities	4,295,653		600		(622,282)		—		3,673,971
Non-agency mortgage-backed securities	663,426		146		(54,228)		—		609,344
Asset-backed securities	1,484,628		224		(40,255)		—		1,444,597
Total mortgage and asset-backed securities	6,443,707		970		(716,765)		—		5,727,912
Other debt securities	216,593		—		(11,545)		—		205,048
Total	$	9,954,054	$	32,441	$	(818,814)	$	—	$	9,167,681
December 31, 2023
U.S. government and federal agency obligations	$	841,267	$	81	$	(24,834)	$	—	$	816,514
Government-sponsored enterprise obligations	55,658		—		(11,696)		—		43,962
State and municipal obligations	1,346,633		24		(149,238)		—		1,197,419
Mortgage and asset-backed securities:
Agency mortgage-backed securities	4,621,821		233		(720,708)		—		3,901,346
Non-agency mortgage-backed securities	1,331,288		136		(173,526)		—		1,157,898
Asset-backed securities	2,200,712		5		(93,232)		—		2,107,485
Total mortgage and asset-backed securities	8,153,821		374		(987,466)		—		7,166,729
Other debt securities	507,386		—		(47,250)		—		460,136
Total	$	10,904,765	$	479	$	(1,220,484)	$	—	$	9,684,760

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 Nine Months Ended September 30
(In thousands)	2024		2023
Proceeds from sales of securities:
Available for sale debt securities	$	1,057,589	$	1,101,782
Equity securities	176,780		—
Other investments	38,558		40,167
Total proceeds	$	1,272,927	$	1,141,949

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

Gains realized on sales	$	—	$	143
Losses realized on sales	(192,938)		(8,587)

Equity securities:




Gains (losses) on equity securities, net	178,098		(757)
Other:
Gains realized on sales	3,082		884
Losses realized on sales	(1,601)		(1,245)
Fair value adjustments, net	20,205		16,946
Total investment securities gains (losses), net	$	6,846	$	7,384

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Net gains on investment securities for the nine months ended September 30, 2024 were mainly comprised of net gains of $178.1 million on equity investments and net gains in fair value of $20.2 million recorded on private equity investments. These gains were largely offset by net losses of $192.9 million on sales of available for sale securities.

Subsequent to the successful close of the Exchange Offer in early May 2024, the Company approved and executed a plan to reposition a portion of its available for sale debt securities portfolio during the second quarter of 2024 through the sale of securities with an amortized cost of $1.2 billion. The securities that the Company sold had a yield of approximately 2.1%, which resulted in a loss of $179.1 million, and the Company reinvested $928.8 million of the proceeds into U.S. Treasury securities yielding approximately 4.6%.

Pledged securities

At September 30, 2024, securities totaling $6.2 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 $7.5 billion at December 31, 2023. Except for obligations of various government-sponsored enterprises such as FNMA, FHLB and FHLMC, no investment in a single issuer exceeded 10% of stockholders’ equity.

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4. Goodwill and Other Intangible Assets

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


	September 30, 2024								December 31, 2023
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount		Gross Carrying Amount		Accumulated Amortization		Valuation Allowance		Net Amount
Amortizable intangible assets:
Core deposit premium	$	5,550	$	(5,246)	$	—	$	304	$	5,550	$	(5,092)	$	—	$	458
Mortgage servicing rights	13,588		(3,770)		—		9,818		13,723		(3,602)		—		10,121
Total	$	19,138	$	(9,016)	$	—	$	10,122	$	19,273	$	(8,694)	$	—	$	10,579

Aggregate amortization expense on intangible assets was $318 thousand and $344 thousand for the three month periods ended September 30, 2024 and 2023, respectively, and $969 thousand and $1.1 million for the nine month periods ended September 30, 2024 and 2023, respectively. The following table shows the estimated annual amortization expense for the next five fiscal years. This expense is based on existing asset balances and the interest rate environment as of September 30, 2024. The Company’s actual amortization expense in any given period may be different from the estimated amounts depending upon the acquisition of intangible assets, changes in mortgage interest rates, prepayment rates and other market conditions.


(In thousands)
2024	$	1,279
2025	1,264
2026	1,094
2027	937
2028	808

Changes in the carrying amount of goodwill and other intangible assets for the nine month period ended September 30, 2024 are as follows:


(In thousands)	Goodwill		Easement		Core Deposit Premium		Mortgage Servicing Rights
Balance January 1, 2024	$	146,539	$	3,600	$	458	$	10,121

Originations, net of disposals	—		—		—		512
Amortization	—		—		(154)		(815)

Balance September 30, 2024	$	146,539	$	3,600	$	304	$	9,818

Goodwill allocated to the Company’s operating segments at September 30, 2024 and December 31, 2023 is shown below.


(In thousands)	September 30, 2024		December 31, 2023
Consumer segment	$	70,721	$	70,721
Commercial segment	75,072		75,072
Wealth segment	746		746
Total goodwill	$	146,539	$	146,539

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5. Guarantees

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

Upon issuance of standby letters of credit, the Company recognizes a liability for the fair value of the obligation undertaken, which is estimated to be equivalent to the amount of fees received from the customer over the life of the agreement. At September 30, 2024, that net liability was $3.9 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 $627.0 million at September 30, 2024.

The Company periodically enters into credit risk participation agreements (RPAs) as a guarantor to other financial institutions, in order to mitigate those institutions’ credit risk associated with interest rate swaps with third parties. The RPA stipulates that, in the event of default by the third party on the interest rate swap, the Company will reimburse a portion of the loss borne by the financial institution. These interest rate swaps are normally collateralized (generally with real property, inventories and equipment) by the third party, which limits the credit risk associated with the Company’s RPAs. The third parties usually have other borrowing relationships with the Company. The Company monitors overall borrower collateral and at September 30, 2024, believes sufficient collateral is available to cover potential swap losses. The RPAs are carried at fair value throughout their term with all changes in fair value, including those due to a change in the third party’s creditworthiness, recorded in current earnings. The terms of the RPAs, which correspond to the terms of the underlying swaps, range from 2 years to 15 years. At September 30, 2024, the fair value of the Company's guarantee liabilities for RPAs was $141 thousand, and the notional amount of the underlying swaps was $434.4 million. The maximum potential future payment guaranteed by the Company cannot be readily estimated but is dependent upon the fair value of the interest rate swaps at the time of default.

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6. Leases

The Company has net investments in direct financing and sales-type leases to commercial, industrial, and tax-exempt entities. These leases are included within business loans on the Company's consolidated balance sheets. The Company primarily leases various types of equipment, trucks and trailers, and office furniture and fixtures. Lease agreements may include options for the lessee to renew or purchase the leased equipment at the end of the lease term. The Company has elected to adopt the lease component expedient in which the lease and nonlease components are combined into the total lease receivable. The Company also leases office space to third parties, and these leases are classified as operating leases. The leases may include options to renew or expand the leased space, and currently the leases have remaining terms of 1 month to 14 years.

The following table provides the components of lease income.


	For the Three Months Ended September 30				For the Nine Months Ended September 30
(in thousands)	2024		2023		2024		2023
Direct financing and sales-type leases	$	9,409	$	8,160	$	27,464	$	22,456
Operating leases(a)	4,249		3,399		12,641		9,215
Total lease income	$	13,658	$	11,559	$	40,105	$	31,671

(a) Includes rent from Tower Properties Company, a related party, of $20 thousand and $19 thousand for the three month periods ended September 30, 2024 and 2023, respectively, and $58 thousand for both the nine month periods ended September 30, 2024 and 2023.

7. Pension

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


	For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands)	2024		2023		2024		2023
Service cost	$	97	$	120	$	290	$	352
Interest cost on projected benefit obligation	1,062		1,146		3,287		3,461
Expected return on plan assets	(1,066)		(1,035)		(3,104)		(3,037)
Amortization of prior service cost	(45)		(68)		(136)		(203)
Amortization of unrecognized net loss (gain)	177		332		739		1,186
Net periodic pension cost	$	225	$	495	$	1,076	$	1,759

All benefits accrued under the Company’s defined benefit pension plan have been frozen since January 1, 2011. During the first nine months of 2024, 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.

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8. Common Stock *

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


	For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands, except per share data)	2024		2023		2024		2023
Basic income per common share:
Net income attributable to Commerce Bancshares, Inc.	$	138,007	$	120,596	$	390,223	$	367,837
Less income allocated to nonvested restricted stock	1,289		1,073		3,646		3,257
Net income allocated to common stock	$	136,718	$	119,523	$	386,577	$	364,580
Weighted average common shares outstanding	127,826		129,904		128,440		130,061
Basic income per common share	$	1.07	$	.92	$	3.01	$	2.80
Diluted income per common share:
Net income attributable to Commerce Bancshares, Inc.	$	138,007	$	120,596	$	390,223	$	367,837
Less income allocated to nonvested restricted stock	1,288		1,072		3,643		3,254
Net income allocated to common stock	$	136,719	$	119,524	$	386,580	$	364,583
Weighted average common shares outstanding	127,826		129,904		128,440		130,061

Net effect of the assumed exercise of stock-based awards - based on the treasury stock method using the average market price for the respective periods	169		105		155		167
Weighted average diluted common shares outstanding	127,995		130,009		128,595		130,228
Diluted income per common share	$	1.07	$	.92	$	3.00	$	2.80

Unexercised stock appreciation rights of 361 thousand and 565 thousand for the three month periods ended September 30, 2024 and 2023, respectively, and 391 thousand and 359 thousand for the nine month periods ended September 30, 2024 and 2023, respectively, were excluded from the computation of diluted income per common share because their inclusion would have been anti-dilutive.

* All prior year share and per share amounts in this note have been restated for the 5% common stock dividend distributed in December 2023.

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9. Accumulated Other Comprehensive Income

The table below shows the activity and accumulated balances for components of other comprehensive income. Information about unrealized gains and losses on securities can be found in Note 3, and information about unrealized gains and losses on cash flow hedge derivatives is located in Note 11.


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

Balance January 1, 2024	$	(915,001)	$	(13,596)	$	37,185	$	(891,412)


Other comprehensive income (loss) before reclassifications to current earnings	240,695		—		(6,199)		234,496
Amounts reclassified to current earnings from accumulated other comprehensive income	192,938		603		(8,693)		184,848
Current period other comprehensive income (loss), before tax	433,633		603		(14,892)		419,344
Income tax (expense) benefit	(108,408)		(150)		3,722		(104,836)
Current period other comprehensive income (loss), net of tax	325,225		453		(11,170)		314,508

Balance September 30, 2024	$	(589,776)	$	(13,143)	$	26,015	$	(576,904)
Balance January 1, 2023	$	(1,124,915)	$	(17,186)	$	55,237	$	(1,086,864)


Other comprehensive income (loss) before reclassifications to current earnings	(105,030)		—		(34,530)		(139,560)
Amounts reclassified to current earnings from accumulated other comprehensive income	8,444		983		(12,093)		(2,666)
Current period other comprehensive income (loss), before tax	(96,586)		983		(46,623)		(142,226)
Income tax (expense) benefit	24,146		(245)		11,655		35,556
Current period other comprehensive income (loss), net of tax	(72,440)		738		(34,968)		(106,670)

Balance September 30, 2023	$	(1,197,355)	$	(16,448)	$	20,269	$	(1,193,534)

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

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

10. Segments

The Company segregates financial information for use in assessing its performance and allocating resources among three operating segments: Consumer, Commercial and Wealth. The Consumer segment consists of various consumer loan and deposit products offered through its retail branch network of approximately 140 locations. This segment also includes indirect and other consumer loan financing businesses, along with debit and credit card loan and fee businesses. The Commercial segment provides corporate lending (including the Small Business Banking product line within the branch network), leasing, and international services, along with business and governmental deposit products and commercial cash management services. This segment also includes both merchant and commercial bank card products as well as the Commercial Tradable Products division, which sells fixed income securities, underwrites municipal bonds, and provides securities safekeeping and accounting services to its business and correspondent bank customers. The Wealth segment provides traditional trust and estate planning, advisory and discretionary investment management, and brokerage services. This segment also provides various loan and deposit related services to its private banking customers.

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The following table presents selected financial information by segment and reconciliations of combined segment totals to consolidated totals. There were no material intersegment revenues between the three segments. Management periodically makes changes to methods of assigning costs and income to its business segments to better reflect operating results. If appropriate, these changes are reflected in prior year information presented below. Net interest income allocated among the segments prior to 2024 has been restated to reflect a funds transfer pricing methodology change implemented on January 1, 2024 for all deposit types, except certificates of deposit. The new methodology moves from a rolling pool to a profitability range methodology. The new methodology more accurately reflects the profitability of affected deposits relative to current rates and removes most interest rate risk from business segments.


(In thousands)	Consumer		Commercial		Wealth		Other/Elimination		Consolidated Totals
Three Months Ended September 30, 2024
Net interest income	$	130,309	$	135,511	$	20,966	$	(24,435)	$	262,351
Provision for credit losses	(9,526)		(186)		146		426		(9,140)
Non-interest income	26,256		64,547		61,841		6,381		159,025
Investment securities gains (losses), net	—		—		—		3,872		3,872
Non-interest expense	(85,952)		(101,767)		(40,059)		(9,822)		(237,600)
Income before income taxes	$	61,087	$	98,105	$	42,894	$	(23,578)	$	178,508
Nine Months Ended September 30, 2024
Net interest income	$	384,700	$	387,387	$	66,390	$	(64,878)	$	773,599
Provision for credit losses	(27,451)		(952)		150		8,858		(19,395)
Non-interest income	76,591		193,501		179,840		10,185		460,117
Investment securities gains (losses), net	—		—		—		6,846		6,846
Non-interest expense	(248,478)		(301,341)		(118,512)		(47,180)		(715,511)
Income before income taxes	$	185,362	$	278,595	$	127,868	$	(86,169)	$	505,656
Three Months Ended September 30, 2023
Net interest income	$	135,632	$	128,173	$	23,389	$	(38,647)	$	248,547
Provision for loan losses	(7,048)		(2,723)		(1)		(1,873)		(11,645)
Non-interest income	24,939		61,195		55,378		1,437		142,949
Investment securities gains (losses), net	—		—		—		4,298		4,298
Non-interest expense	(82,322)		(98,859)		(38,912)		(7,917)		(228,010)
Income before income taxes	$	71,201	$	87,786	$	39,854	$	(42,702)	$	156,139
Nine Months Ended September 30, 2023
Net interest income	$	421,327	$	393,318	$	76,807	$	(141,744)	$	749,708
Provision for credit losses	(19,784)		(3,206)		(14)		(6,568)		(29,572)
Non-interest income	74,773		184,288		162,835		6,270		428,166
Investment securities gains (losses), net	—		—		—		7,384		7,384
Non-interest expense	(243,004)		(290,953)		(119,019)		(26,752)		(679,728)
Income before income taxes	$	233,312	$	283,447	$	120,609	$	(161,410)	$	475,958

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

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

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

11. Derivative Instruments

The notional amounts of the Company’s derivative instruments are shown in the table below. These contractual amounts, along with other terms of the derivative, are used to determine amounts to be exchanged between counterparties and are not a measure of loss exposure. The Company's derivatives are not accounted for as accounting hedges except for the interest rate floors, as discussed below.


(In thousands)	September 30, 2024		December 31, 2023
Interest rate swaps	$	2,059,186	$	2,166,393
Interest rate floors	2,000,000		2,000,000
Interest rate caps	183,899		336,682
Credit risk participation agreements	618,186		653,887
Foreign exchange contracts	17,798		30,401
Mortgage loan commitments	9,788		3,004
Mortgage loan forward sale contracts	368		1,349
Forward TBA contracts	9,000		3,000
Total notional amount	$	4,898,225	$	5,194,716

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

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

As of September 30, 2024, 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. At September 30, 2024, the maximum length of time over which the Company is hedging its exposure to lower rates is approximately 6.8 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 September 30, 2024, net deferred gains on the interest rate floors totaled $117.8 thousand (pre-tax) and were recorded in AOCI in the consolidated balance sheet. As of September 30,

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2024, it is expected that $10.7 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 September 30, 2024, the total realized gains on the monetized cash flow hedges remaining in AOCI was $34.6 million (pre-tax), which will be reclassified into interest income over the next 2.2 years. The estimated amount of net gains related to the cash flow hedges remaining in AOCI at September 30, 2024 that is expected to be reclassified into income within the next 12 months is $20.8 million.

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

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

The fair values of the Company's derivative instruments, whose notional amounts are listed above, are shown in the table below. Information about the valuation methods used to determine fair value is provided in Note 15 on Fair Value Measurements.

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. In prior years, certain collateral posted to and from the Company's clearing counterparty has been applied to the fair values of the cleared swap. There was no reduction to positive or negative fair values of cleared swaps at September 30, 2024 and December 31, 2023.


	Asset Derivatives				Liability Derivatives
	Sept. 30, 2024		Dec. 31, 2023		Sept. 30, 2024		Dec. 31, 2023
(In thousands)	Fair Value				Fair Value
Derivatives designated as hedging instruments:
Interest rate floors	$	72,761	$	78,960	$	—	$	—
Total derivatives designated as hedging instruments	$	72,761	$	78,960	$	—	$	—
Derivative instruments not designated as hedging instruments:
Interest rate swaps	$	26,288	$	35,816	$	(26,288)	$	(35,816)
Interest rate caps	87		1,391		(87)		(1,391)
Credit risk participation agreements	105		77		(141)		(194)
Foreign exchange contracts	403		534		(369)		(479)
Mortgage loan commitments	192		89		—		(1)
Mortgage loan forward sale contracts	10		8		—		—
Forward TBA contracts	16		1		(11)		(18)
Total derivatives not designated as hedging instruments	$	27,101	$	37,916	$	(26,896)	$	(37,899)
Total	$	99,862	$	116,876	$	(26,896)	$	(37,899)

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The Company made an election to exclude the initial premiums paid on the interest rate floors from the hedge effectiveness measurement. Those initial premiums are amortized over the periods between the premium payment month and the contract maturity month. The pre-tax effects of the gains and losses (both the included and excluded amounts for hedge effectiveness assessment) recognized in the other comprehensive income from the cash flow hedging instruments and the amounts reclassified from accumulated other comprehensive income into income (both included and excluded amounts for hedge effectiveness measurement) are shown in the table below.


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

(In thousands)	Total		Included Component		Excluded Component			Total		Included Component		Excluded Component
For the Three Months Ended September 30, 2024
Derivatives in cash flow hedging relationships:
Interest rate floors	$	23,168	$	13,673	$	9,495	Interest and fees on loans	$	2,816	$	7,072	$	(4,256)
Total	$	23,168	$	13,673	$	9,495	Total	$	2,816	$	7,072	$	(4,256)
For the Nine Months Ended September 30, 2024
Derivatives in cash flow hedging relationships:
Interest rate floors	$	(6,199)	$	3,565	$	(9,764)	Interest and fees on loans	$	8,693	$	21,369	$	(12,676)
Total	$	(6,199)	$	3,565	$	(9,764)	Total	$	8,693	$	21,369	$	(12,676)
For the Three Months Ended September 30, 2023
Derivatives in cash flow hedging relationships:
Interest rate floors	$	(29,007)	$	—	$	(29,007)	Interest and fees on loans	$	3,543	$	7,459	$	(3,916)
Total	$	(29,007)	$	—	$	(29,007)	Total	$	3,543	$	7,459	$	(3,916)
For the Nine Months Ended September 30, 2023
Derivatives in cash flow hedging relationships:
Interest rate floors	$	(34,530)	$	—	$	(34,530)	Interest and fees on loans	$	12,093	$	22,358	$	(10,265)
Total	$	(34,530)	$	—	$	(34,530)	Total	$	12,093	$	22,358	$	(10,265)

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


	Location of Gain or (Loss) Recognized in Consolidated Statements of Income	Amount of Gain or (Loss) Recognized in Income on Derivatives
		For the Three Months Ended September 30				For the Nine Months Ended September 30
(In thousands)		2024		2023		2024		2023



Derivative instruments:
Interest rate swaps	Other non-interest income	$	239	$	365	$	1,562	$	2,861
Interest rate caps	Other non-interest income	—		23		—		23
Credit risk participation agreements	Other non-interest income	—		123		(214)		107
Foreign exchange contracts	Other non-interest income	(42)		122		(21)		93
Mortgage loan commitments	Loan fees and sales	52		(23)		105		35
Mortgage loan forward sale contracts	Loan fees and sales	1		—		1		—
Forward TBA contracts	Loan fees and sales	(141)		63		(127)		113
Total		$	109	$	673	$	1,306	$	3,232

The following table shows the extent to which assets and liabilities relating to derivative instruments have been offset in the consolidated balance sheets. It also provides information about these instruments which are subject to an enforceable master netting arrangement, irrespective of whether they are offset, and the extent to which the instruments could potentially be offset. Also shown is collateral received or pledged in the form of other financial instruments, which is generally cash or marketable securities. The collateral amounts in this table are limited to the outstanding balances of the related asset or liability (after

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netting is applied); thus, amounts of excess collateral are not shown. Most of the derivatives in the following table were transacted under master netting arrangements that contain a conditional right of offset, such as close-out netting, upon default.

While the Company is party to master netting arrangements with most of its swap derivative counterparties, the Company does not offset derivative assets and liabilities under these agreements on its consolidated balance sheets. Collateral exchanged between the Company and dealer bank counterparties is generally subject to thresholds and transfer minimums, and usually consists of marketable securities. By contract, these may be sold or re-pledged by the secured party until recalled at a subsequent valuation date by the pledging party. For those swap transactions requiring central clearing, the Company posts cash or securities to its clearing agent. Collateral positions are valued daily, and adjustments to amounts received and pledged by the Company are made as appropriate to maintain proper collateralization for these transactions. Swap derivative transactions with customers are generally secured by rights to non-financial collateral, such as real and personal property, which is not shown in the table below.


							Gross Amounts Not Offset in the Balance Sheet
(In thousands)	Gross Amount Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments Available for Offset		Collateral Received/ Pledged		Net Amount
September 30, 2024
Assets:
Derivatives subject to master netting agreements	$	99,544	$	—	$	99,544	$	(10,865)	$	(76,526)	$	12,153
Derivatives not subject to master netting agreements	318		—		318
Total derivatives	$	99,862	$	—	$	99,862
Liabilities:
Derivatives subject to master netting agreements	$	26,435	$	—	$	26,435	$	(10,865)	$	—	$	15,570
Derivatives not subject to master netting agreements	461		—		461
Total derivatives	$	26,896	$	—	$	26,896
December 31, 2023
Assets:
Derivatives subject to master netting agreements	$	116,702	$	—	$	116,702	$	(3,930)	$	(107,492)	$	5,280
Derivatives not subject to master netting agreements	174		—		174
Total derivatives	$	116,876	$	—	$	116,876
Liabilities:
Derivatives subject to master netting agreements	$	37,300	$	—	$	37,300	$	(3,930)	$	—	$	33,370
Derivatives not subject to master netting agreements	599		—		599
Total derivatives	$	37,899	$	—	$	37,899

12. Resale and Repurchase Agreements

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

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The following table shows the extent to which resale agreement assets and repurchase agreement liabilities with the same counterparty have been offset on the consolidated balance sheets, in addition to the extent to which they could potentially be offset. Also shown is collateral received or pledged, which consists of marketable securities. The collateral amounts in the table are limited to the outstanding balances of the related asset or liability (after offsetting is applied); thus amounts of excess collateral are not shown.


							Gross Amounts Not Offset in the Balance Sheet
(In thousands)	Gross Amount Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments Available for Offset		Securities Collateral Received/Pledged		Unsecured Amount
September 30, 2024
Total resale agreements, subject to master netting arrangements	$	475,000	$	—	$	475,000	$	—	$	(475,000)	$	—
Total repurchase agreements, subject to master netting arrangements	2,068,599		—		2,068,599		—		(2,068,599)		—
December 31, 2023
Total resale agreements, subject to master netting arrangements	$	450,000	$	—	$	450,000	$	—	$	(450,000)	$	—
Total repurchase agreements, subject to master netting arrangements	2,647,510		—		2,647,510		—		(2,647,510)		—

The table below shows the remaining contractual maturities of repurchase agreements outstanding at September 30, 2024 and December 31, 2023, 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
September 30, 2024
Repurchase agreements, secured by:
U.S. government and federal agency obligations	$	164,610	$	—	$	—	$	164,610
Government-sponsored enterprise obligations	10,744		—		—		10,744

Agency mortgage-backed securities	1,347,933		10,600		19,950		1,378,483
Non-agency mortgage-backed securities	10,186		—		—		10,186
Asset-backed securities	392,358		19,904		28,458		440,720
Other debt securities	63,856		—		—		63,856
Total repurchase agreements, gross amount recognized	$	1,989,687	$	30,504	$	48,408	$	2,068,599
December 31, 2023
Repurchase agreements, secured by:
U.S. government and federal agency obligations	$	170,293	$	—	$	—	$	170,293
Government-sponsored enterprise obligations	8,749		—		—		8,749

Agency mortgage-backed securities	1,833,840		27,264		17,200		1,878,304
Non-agency mortgage-backed securities	10,566		—		—		10,566
Asset-backed securities	516,726		9,606		20,000		546,332
Other debt securities	33,265		—		—		33,265
Total repurchase agreements, gross amount recognized	$	2,573,439	$	36,870	$	37,200	$	2,647,509

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13. Stock-Based Compensation

The Company issues stock-based compensation in the form of nonvested restricted stock and stock appreciation rights (SARs). Historically, most of the awards have been issued during the first quarter of each year. The stock-based compensation expense charged against income was $4.3 million in the three months ended September 30, 2024 and 2023 respectively, and $12.7 million and $12.6 million in the nine months ended September 30, 2024 and 2023, respectively.

Nonvested stock awards granted generally vest in 4 to 7 years and contain restrictions as to transferability, sale, pledging, or assigning, among others, prior to the end of the vesting period. Dividend and voting rights are conferred upon grant. A summary of the status of the Company’s nonvested share awards as of September 30, 2024, and changes during the nine month period then ended, is presented below.


	Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2024	1,166,335	$58.48
Granted	333,949	52.33
Vested	(260,038)	52.10
Forfeited	(43,968)	59.06

Nonvested at September 30, 2024	1,196,278	$58.13

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


Weighted per share average fair value at grant date	$14.88
Assumptions:
Dividend yield	2.1	%
Volatility	29.3	%
Risk-free interest rate	4.2	%
Expected term	6.0 years

A summary of SAR activity during the first nine months of 2024 is presented below.


(Dollars in thousands, except per share data)	Rights	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2024	1,023,321	$47.10
Granted	117,974	52.00
Forfeited	(5,950)	59.15
Expired	(6,864)	50.17
Exercised	(232,179)	37.82
Outstanding at September 30, 2024	896,302	$50.05	5.3 years	$9,399

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14. Revenue from Contracts with Customers

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 nine months ended September 30, 2024, approximately 63% of the Company’s total revenue was comprised of net interest income, which is not within the scope of this guidance. Of the remaining revenue, those items that were subject to this guidance mainly included fees for bank card, trust, deposit account services and consumer brokerage services.

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


	Three Months Ended September 30				Nine Months Ended September 30
(In thousands)	2024		2023		2024		2023
Trust fees	$	54,689	$	49,207	$	158,085	$	141,800
Bank card transaction fees	47,570		46,899		141,977		143,278
Deposit account charges and other fees	25,380		23,090		74,856		67,475
Consumer brokerage services	4,619		3,820		13,505		13,582
Other non-interest income	14,496		11,912		37,337		29,737
Total non-interest income from contracts with customers	146,754		134,928		425,760		395,872
Other non-interest income (1)	12,271		8,021		34,357		32,294
Total non-interest income	$	159,025	$	142,949	$	460,117	$	428,166

(1) This revenue is not within the scope of ASC 606, and includes fees relating to bond trading activities, loan fees and sales, derivative instruments, standby letters of credit and various other transactions.

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 contributed approximately 30% and 69%, 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, 2024 and 2023 for the Company’s significant revenue from contracts with customers.


(In thousands)	September 30, 2024		December 31, 2023		September 30, 2023		December 31, 2022
Bank card transaction fees	$	15,701	$	18,069	$	15,160	$	17,254
Trust fees	2,198		1,764		1,886		2,038
Deposit account charges and other fees	6,813		6,588		5,762		6,631
Consumer brokerage services	—		8		74		949

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

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15. Fair Value Measurements

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

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

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

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

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

The valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis are described in the Fair Value Measurements note in the Company's 2023 Annual Report on Form 10-K. There have been no significant changes in these methodologies since then.

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Instruments Measured at Fair Value on a Recurring Basis

The table below presents the September 30, 2024 and December 31, 2023 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 2024 or the year ended December 31, 2023.


			Fair Value Measurements Using
(In thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2024
Assets:
Residential mortgage loans held for sale	$	1,605	$	—	$	1,605	$	—
Available for sale debt securities:
U.S. government and federal agency obligations	2,406,840		2,406,840		—		—
Government-sponsored enterprise obligations	45,499		—		45,499		—
State and municipal obligations	782,382		—		781,431		951
Agency mortgage-backed securities	3,673,971		—		3,673,971		—
Non-agency mortgage-backed securities	609,344		—		609,344		—
Asset-backed securities	1,444,597		—		1,444,597		—
Other debt securities	205,048		—		205,048		—
Trading debt securities	42,645		—		42,645		—
Equity securities	48,262		48,262		—		—
Private equity investments	170,973		—		—		170,973
Derivatives *	99,862		—		99,565		297
Assets held in trust for deferred compensation plan	21,989		21,989		—		—
Total assets	9,553,017		2,477,091		6,903,705		172,221
Liabilities:
Derivatives *	26,896		—		26,755		141
Liabilities held in trust for deferred compensation plan	21,989		21,989		—		—
Total liabilities	$	48,885	$	21,989	$	26,755	$	141
December 31, 2023
Assets:
Residential mortgage loans held for sale	$	1,585	$	—	$	1,585	$	—
Available for sale debt securities:
U.S. government and federal agency obligations	816,514		816,514		—		—
Government-sponsored enterprise obligations	43,962		—		43,962		—
State and municipal obligations	1,197,419		—		1,196,472		947
Agency mortgage-backed securities	3,901,346		—		3,901,346		—
Non-agency mortgage-backed securities	1,157,898		—		1,157,898		—
Asset-backed securities	2,107,485		—		2,107,485		—
Other debt securities	460,136		—		460,136		—
Trading debt securities	28,830		—		28,830		—
Equity securities	5,723		5,723		—		—
Private equity investments	176,667		—		—		176,667
Derivatives *	116,876		—		116,710		166
Assets held in trust for deferred compensation plan	20,538		20,538		—		—
Total assets	10,034,979		842,775		9,014,424		177,780
Liabilities:
Derivatives *	37,899		—		37,704		195
Liabilities held in trust for deferred compensation plan	20,538		20,538		—		—
Total liabilities	$	58,437	$	20,538	$	37,704	$	195

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

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


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	State and Municipal Obligations		Private Equity Investments		Total
For the three months ended September 30, 2024
Balance June 30, 2024	$	953	$	178,321	$	179,274
Total gains or losses (realized/unrealized):
Included in earnings	—		7,428		7,428
Included in other comprehensive income *	(2)		—		(2)


Purchases of private equity investments	—		375		375
Sale/pay down of private equity investments	—		(15,139)		(15,139)
Capitalized interest/dividends	—		(12)		(12)


Balance at September 30, 2024	$	951	$	170,973	$	171,924
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, 2024	$	—	$	7,428	$	7,428
*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, 2024	$	(2)	$	—	$	(2)
For the nine months ended September 30, 2024
Balance January 1, 2024	$	947	$	176,667	$	177,614
Total gains or losses (realized/unrealized):
Included in earnings	—		20,205		20,205
Included in other comprehensive income *	3		—		3

Discount accretion	1		—		1
Purchases of private equity investments	—		11,322		11,322
Sale/pay down of private equity investments	—		(37,103)		(37,103)
Capitalized interest/dividends	—		(118)		(118)


Balance at September 30, 2024	$	951	$	170,973	$	171,924
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, 2024	$	—	$	10,480	$	10,480
*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, 2024	$	3	$	—	$	3

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	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands)	State and Municipal Obligations		Private Equity Investments		Total
For the three months ended September 30, 2023
Balance at June 30, 2023	$	920	$	172,732	$	173,652
Total gains or losses (realized/unrealized):
Included in earnings	—		5,605		5,605
Included in other comprehensive income *	18		—		18



Sale/pay down of private equity investments	—		(13,342)		(13,342)
Capitalized interest/dividends	—		327		327


Balance at 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 September 30, 2023	$	17	$	—	$	17
For the nine months ended September 30, 2023
Balance January 1, 2023	$	1,841	$	178,127	$	179,968
Total gains or losses (realized/unrealized):
Included in earnings	—		16,946		16,946
Included in other comprehensive income *	49		—		49
Investment securities called	(1,000)		—		(1,000)
Discount accretion	48		—		48
Purchases of private equity investments	—		10,756		10,756
Sale/pay down of private equity investments	—		(40,834)		(40,834)
Capitalized interest/dividends	—		327		327


Balance at 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 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

* 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 Company's 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, 2024
Total gains or losses included in earnings	$	7,428
Change in unrealized gains or losses relating to assets still held at September 30, 2024	$	7,428
For the nine months ended September 30, 2024
Total gains or losses included in earnings	$	20,205
Change in unrealized gains or losses relating to assets still held at September 30, 2024	$	10,480
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 September 30, 2023	$	5,605
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 September 30, 2023	$	17,446

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Level 3 Inputs

The Company's Level 3 measurements at September 30, 2024, 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.

Quantitative Information about Level 3 Fair Value Measurements

Weighted

Valuation Technique

Unobservable Input

Range

Average*

Private equity investments

Market comparable companies

EBITDA multiple

3.8

6.0

5.1

* 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 nine months of 2024 and 2023, and still held as of September 30, 2024 and 2023, 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, 2024 and 2023.


			Fair Value Measurements Using
(In thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses) Recognized During the Nine Months Ended September 30
September 30, 2024
Collateral dependent loans	$	14,872	$	—	$	—	$	14,872	$	(2,646)






September 30, 2023
Collateral dependent loans	$	4,029	$	—	$	—	$	4,029	$	(2,059)



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

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16. Fair Value of Financial Instruments

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

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, 2024 and December 31, 2023:


	Carrying Amount		Estimated Fair Value at September 30, 2024
(In thousands)			Level 1		Level 2		Level 3		Total
Financial Assets
Loans:
Business	$	6,048,328	$	—	$	—	$	5,943,194	$	5,943,194
Real estate - construction and land	1,381,607		—		—		1,355,750		1,355,750
Real estate - business	3,586,999		—		—		3,497,040		3,497,040
Real estate - personal	3,043,391		—		—		2,673,302		2,673,302
Consumer	2,108,281		—		—		2,073,335		2,073,335
Revolving home equity	342,376		—		—		339,322		339,322
Consumer credit card	574,746		—		—		531,160		531,160
Overdrafts	4,272		—		—		4,160		4,160
Total loans	17,090,000		—		—		16,417,263		16,417,263
Loans held for sale	1,707		—		1,707		—		1,707




Investment securities	9,475,131		2,455,102		6,802,535		217,494		9,475,131
Federal funds sold	10		10		—		—		10
Securities purchased under agreements to resell	475,000		—		—		488,935		488,935
Interest earning deposits with banks	2,642,048		2,642,048		—		—		2,642,048
Cash and due from banks	507,941		507,941		—		—		507,941
Derivative instruments	99,862		—		99,565		297		99,862
Assets held in trust for deferred compensation plan	21,989		21,989		—		—		21,989
Total	$	30,313,688	$	5,627,090	$	6,903,807	$	17,123,989	$	29,654,886
Financial Liabilities
Non-interest bearing deposits	$	7,396,153	$	7,396,153	$	—	$	—	$	7,396,153
Savings, interest checking and money market deposits	15,216,557		15,216,557		—		—		15,216,557
Certificates of deposit	2,625,082		—		—		2,670,740		2,670,740
Federal funds purchased	113,630		113,630		—		—		113,630
Securities sold under agreements to repurchase	2,068,599		—		—		2,071,881		2,071,881
Other borrowings	10,178		2,436		7,742		—		10,178
Derivative instruments	26,896		—		26,755		141		26,896
Liabilities held in trust for deferred compensation plan	21,989		21,989		—		—		21,989
Total	$	27,479,084	$	22,750,765	$	34,497	$	4,742,762	$	27,528,024

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	Carrying Amount		Estimated Fair Value at December 31, 2023
(In thousands)			Level 1		Level 2		Level 3		Total
Financial Assets
Loans:
Business	$	6,019,036	$	—	$	—	$	5,873,549	$	5,873,549
Real estate - construction and land	1,446,764		—		—		1,420,522		1,420,522
Real estate - business	3,719,306		—		—		3,594,834		3,594,834
Real estate - personal	3,026,041		—		—		2,568,026		2,568,026
Consumer	2,077,723		—		—		2,016,334		2,016,334
Revolving home equity	319,894		—		—		317,013		317,013
Consumer credit card	589,913		—		—		550,464		550,464
Overdrafts	6,802		—		—		6,649		6,649
Total loans	17,205,479		—		—		16,347,391		16,347,391
Loans held for sale	4,177		—		4,177		—		4,177




Investment securities	9,941,786		822,237		8,896,129		223,420		9,941,786
Federal funds sold	5,025		5,025		—		—		5,025
Securities purchased under agreements to resell	450,000		—		—		444,448		444,448
Interest earning deposits with banks	2,239,010		2,239,010		—		—		2,239,010
Cash and due from banks	443,147		443,147		—		—		443,147
Derivative instruments	116,876		—		116,710		166		116,876
Assets held in trust for deferred compensation plan	20,538		20,538		—		—		20,538
Total	$	30,426,038	$	3,529,957	$	9,017,016	$	17,015,425	$	29,562,398
Financial Liabilities
Non-interest bearing deposits	$	7,975,935	$	7,975,935	$	—	$	—	$	7,975,935
Savings, interest checking and money market deposits	14,512,273		14,512,273		—		—		14,512,273
Certificates of deposit	2,875,690		—		—		2,916,627		2,916,627
Federal funds purchased	261,305		261,305		—		—		261,305
Securities sold under agreements to repurchase	2,647,510		—		—		2,650,951		2,650,951
Other borrowings	1,366		—		1,366		—		1,366
Derivative instruments	37,899		—		37,704		195		37,899
Liabilities held in trust for deferred compensation plan	20,538		20,538		—		—		20,538
Total	$	28,332,516	$	22,770,051	$	39,070	$	5,567,773	$	28,376,894

17. Legal and Regulatory Proceedings

The Company has various legal proceedings pending at September 30, 2024, arising in the normal course of business. While some matters pending against the Company specify damages claimed by plaintiffs, others do not seek a specified amount of damages or are at early stages of the legal process. The Company records a loss accrual for all legal and regulatory matters for which it deems a loss is probable and can be reasonably estimated. Some matters, which are in the early stages, have not yet progressed to the point where a loss amount can be determined to be probable and estimable.

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

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company's 2023 Annual Report on Form 10-K. Results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of results to be attained for any other period.

Forward-Looking Information

This report may contain "forward-looking statements" that are subject to risks and uncertainties and include information about possible or assumed future results of operations. Many possible events or factors could affect the future financial results and performance of the Company. This could cause results or performance to differ materially from those expressed in the forward-looking statements. Words such as "expects", "anticipates", "believes", "estimates", variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Readers should not rely solely on the forward-looking statements and should consider all uncertainties and risks discussed throughout this report. Forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events. Such possible events or factors include: changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, governmental legislation and regulation, fluctuations in interest rates, changes in liquidity requirements, demand for loans in the Company's market area, changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats, and such other factors as discussed in Part I Item 1A - "Risk Factors" and Part II Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2023 Annual Report on Form 10-K. During the quarter ended September 30, 2024, there were no material changes to the Risk Factors disclosed in the Company's 2023 Annual Report on Form 10-K.

Critical Accounting Estimates and Related Policies

The Company has identified certain policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These estimates and related policies are the Company's allowance for credit losses and fair value measurement policies. A discussion of these estimates and related policies can be found in the sections captioned "Critical Accounting Policies" and "Allowance for Credit Losses on Loans and Liability for Unfunded Lending Commitments" in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's 2023 Annual Report on Form 10-K. There have been no changes in the Company's application of critical accounting policies since December 31, 2023.

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Selected Financial Data


	Three Months Ended September 30						Nine Months Ended September 30
	2024			2023			2024			2023
Per Share Data
Net income per common share — basic	$	1.07		$	.92	*	$	3.01		$	2.80	*
Net income per common share — diluted	1.07			.92		*	3.00			2.80		*
Cash dividends on common stock	.270			.257		*	.810			.771		*
Book value per common share							26.90			19.90		*
Market price							59.40			45.70		*
Selected Ratios
(Based on average balance sheets)
Loans to deposits (1)	69.93		%	66.39		%	70.17		%	65.85		%
Non-interest bearing deposits to total deposits	29.92			31.05			29.98			33.23
Equity to loans (1)	19.18			15.90			18.02			16.00
Equity to deposits	13.41			10.55			12.65			10.53
Equity to total assets	10.68			8.40			10.11			8.31
Return on total assets	1.80			1.49			1.71			1.53

Return on equity	16.81			17.73			16.92			18.42
(Based on end-of-period data)
Non-interest income to revenue (2)	37.74			36.51			37.30			36.35
Efficiency ratio (3)	56.31			58.15			57.92			57.62
Tier I common risk-based capital ratio							16.70			15.11
Tier I risk-based capital ratio							16.70			15.11
Total risk-based capital ratio							17.47			15.90
Tangible common equity to tangible assets ratio (4)							10.47			7.78
Tier I leverage ratio							12.31			10.87

* Restated for the 5% stock dividend distributed in December 2023.

(1) Includes loans held for sale.

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

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

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

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

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


	September 30
(Dollars in thousands)	2024			2023
Total equity	$	3,453,539		$	2,599,266
Less non-controlling interest	21,458			17,861

Less goodwill	146,539			146,539
Less intangible assets*	3,904			4,111
Total tangible common equity (a)	$	3,281,638		$	2,430,755
Total assets	$	31,493,592		$	31,376,692
Less goodwill	146,539			146,539
Less intangible assets*	3,904			4,111
Total tangible assets (b)	$	31,343,149		$	31,226,042
Tangible common equity to tangible assets ratio (a)/(b)	10.47		%	7.78		%

* Intangible assets other than mortgage servicing rights.

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Results of Operations

Summary


	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in thousands)	2024		2023		% change			2024		2023		% change
Net interest income (expense)	$	262,351	$	248,547	5.6	%		$	773,599	$	749,708	3.2	%
Provision for credit losses	(9,140)		(11,645)		(21.5)			(19,395)		(29,572)		(34.4)
Non-interest income	159,025		142,949		11.2			460,117		428,166		7.5
Investment securities gains (losses), net	3,872		4,298		(9.9)			6,846		7,384		(7.3)
Non-interest expense	(237,600)		(228,010)		4.2			(715,511)		(679,728)		5.3
Income taxes	(38,245)		(33,439)		14.4			(108,499)		(102,242)		6.1
Non-controlling interest income (expense)	(2,256)		(2,104)		7.2			(6,934)		(5,879)		17.9
Net income attributable to Commerce Bancshares, Inc.	$	138,007	$	120,596	14.4	%		$	390,223	$	367,837	6.1	%

For the quarter ended September 30, 2024, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $138.0 million, an increase of $17.4 million, or 14.4%, compared to the third quarter of the previous year. For the current quarter, the annualized return on average assets was 1.80%, the annualized return on average equity was 16.81%, and the efficiency ratio was 56.31%. Diluted earnings per common share was $1.07 per share in the current quarter, an increase of 16.3% compared to $.92 per share in the third quarter of 2023, and did not change compared to $1.07 per share in the previous quarter.

Compared to the third quarter of last year, net interest income increased $13.8 million, or 5.6%, mainly due to an increase in interest income on loans of $13.8 million and a $10.5 million decrease in interest expense on borrowings. This increase in interest income was partly offset by an increase of $7.6 million in interest expense on deposits. The provision for credit losses decreased $2.5 million, or 21.5%, compared to the same quarter in the prior year. Non-interest income increased $16.1 million, or 11.2%, compared to the third quarter of 2023, mainly due to an increase in trust fees, gains on sales of real estate, capital market fees, and deposit account fees. Net gains on investment securities totaled $3.9 million in the current quarter compared to net gains of $4.3 million in the same quarter of last year. Securities gains in the current quarter primarily resulted from net gains of $2.0 million on sales of private equity investments and net gains in fair value of $7.4 million recorded on private equity investments. These gains were partly offset by net losses of $5.4 million on sales of available for sale debt securities. Non-interest expense increased $9.6 million, or 4.2%, over the third quarter of 2023, mainly due to increases in salaries and benefits expense, data processing and software expense, and marketing expense, partly offset by lower deposit insurance expense.

Net income for the first nine months of 2024 was $390.2 million, an increase of $22.4 million, or 6.1%, from the same period last year. Diluted earnings per common share was $3.00, an increase of 7.1% compared to $2.80 per share in the same period last year. For the first nine months of 2024, the annualized return on average assets was 1.71%, the annualized return on average equity was 16.92%, and the efficiency ratio was 57.92%. Net interest income increased $23.9 million, or 3.2%, over the same period last year. This growth was largely due to an increase of $80.8 million in interest income on loans, an increase of $19.8 million in interest earned on deposits with banks, and a $35.4 million decrease in interest expense on borrowings, partly offset by a $92.9 million increase in interest expense on deposits. The provision for credit losses was $19.4 million for the first nine months of 2024, compared to a provision of $29.6 million in the same period last year. Non-interest income increased $32.0 million, or 7.5%, from the first nine months of last year mainly due to higher trust fees, deposit account fees, and capital market fees. Non-interest expense increased $35.8 million, or 5.3%, over the first nine months of last year mainly due to increases in salaries expense, data processing and software expense, and litigation settlement expense.

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Net Interest Income

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

Analysis of Changes in Net Interest Income


	Three Months Ended September 30, 2024 vs. 2023						Nine Months Ended September 30, 2024 vs. 2023
	Change due to						Change due to
(In thousands)	Average Volume		Average Rate		Total		Average Volume		Average Rate		Total
Interest income, fully taxable equivalent basis:
Loans:
Business	$	1,764	$	5,603	$	7,367	$	7,256	$	25,458	$	32,714
Real estate - construction and land	(2,224)		858		(1,366)		(524)		6,369		5,845
Real estate - business	(944)		1,236		292		4,588		9,767		14,355
Real estate - personal	516		2,760		3,276		2,161		8,255		10,416
Consumer	408		3,481		3,889		1,003		14,176		15,179
Revolving home equity	620		(77)		543		1,537		590		2,127
Consumer credit card	(160)		287		127		(35)		1,253		1,218
Overdrafts	—		—		—		—		—		—
Total interest on loans	(20)		14,148		14,128		15,986		65,868		81,854
Loans held for sale	(97)		(16)		(113)		(307)		(16)		(323)
Investment securities:
U.S. government and federal agency securities	5,242		6,486		11,728		5,255		11,952		17,207
Government-sponsored enterprise obligations	(1)		1		—		(214)		(146)		(360)
State and municipal obligations	(2,622)		116		(2,506)		(7,643)		(836)		(8,479)
Mortgage-backed securities	(5,589)		(1,397)		(6,986)		(12,374)		532		(11,842)
Asset-backed securities	(5,685)		1,744		(3,941)		(16,765)		5,621		(11,144)
Other securities	2,439		(7,742)		(5,303)		6,994		(8,408)		(1,414)
Total interest on investment securities	(6,216)		(792)		(7,008)		(24,747)		8,715		(16,032)
Federal funds sold	(45)		—		(45)		(610)		8		(602)
Securities purchased under agreements to resell	(1,242)		1,717		475		(6,192)		2,671		(3,521)
Interest earning deposits with banks	3,082		214		3,296		14,978		4,790		19,768
Total interest income	(4,538)		15,271		10,733		(892)		82,036		81,144
Interest expense:
Deposits:
Savings	(17)		37		20		(67)		99		32
Interest checking and money market	1,518		12,844		14,362		3,345		73,217		76,562
Certificates of deposit of less than $100,000	(4,340)		(86)		(4,426)		1,734		3,004		4,738
Certificates of deposit of $100,000 and over	(3,046)		707		(2,339)		5,067		6,539		11,606
Total interest on deposits	(5,885)		13,502		7,617		10,079		82,859		92,938
Federal funds purchased	(4,049)		8		(4,041)		(8,867)		831		(8,036)
Securities sold under agreements to repurchase	554		2,081		2,635		1,621		7,236		8,857
Other borrowings	(9,140)		(14)		(9,154)		(37,024)		11		(37,013)
Total interest expense	(18,520)		15,577		(2,943)		(34,191)		$	90,937	$	56,746
Net interest income, fully taxable-equivalent basis	$	13,982	$	(306)	$	13,676	$	33,299	$	(8,901)	$	24,398

Net interest income in the third quarter of 2024 was $262.4 million, an increase of $13.8 million over the third quarter of 2023. On a fully taxable-equivalent (FTE) basis, net interest income totaled $264.6 million in the third quarter of 2024, up $13.7 million over the same period last year and up $60 thousand over the previous quarter. The increase in net interest income

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compared to the third quarter of 2023 was mainly due to higher interest income earned on loans (FTE) of $14.1 million and lower interest expense on borrowings of $10.6 million, partly offset by higher deposit interest expense of $7.6 million and lower investment securities interest income of $7.0 million. The increase in total interest earned on loans (FTE) was mainly the result of higher loan yields on most loan products, especially commercial loans, many of which have variable rates. Interest income on investment securities declined mainly due to lower average balances. Interest expense on borrowings decreased mainly due to lower average balances, while the increase in deposit interest expense was due to higher average rates paid, partly offset by lower average balances. The Company's net yield on earning assets (FTE) was 3.50% in the current quarter compared to 3.11% in the third quarter of 2023.

Total interest income (FTE) increased $10.7 million over the third quarter of 2023. Interest income on loans (FTE) was $271.8 million during the third quarter of 2024, an increase of $14.1 million, or 5.5%, over the same quarter last year. The increase in interest income over the same quarter of last year was primarily due to an increase of 33 basis points in the average rate earned and growth of $57.6 million in average loan balances. Most of the increase in interest income occurred in the business, personal real estate and consumer loan categories. The largest increase to interest income occurred in business loan interest, which grew $7.4 million due to a 40 basis point increase in the average rate earned, coupled with growth in average balances of $117.6 million, or 2.0%. Personal real estate loan interest income increased $3.3 million due to an increase of 37 basis points in the average rate earned and higher average balances of $55.1 million, or 1.8%. Consumer loan interest income grew $3.9 million due to a 67 basis point increase in the average rate earned and higher average balances of $27.2 million, or 1.3%. Business real estate loan interest income grew $292 thousand due to a 15 basis point increase in the average rate earned, partly offset by a decrease of $61.2 million, or 1.7%, in average loan balances. These increases in interest income were partly offset by a decrease in construction and land loan interest income of $1.4 million due to a decline of $108.3 million, or 7.2%, in average loan balances, partly offset by a 27 basis point increase in the average rate earned.

Interest income on investment securities (FTE) was $63.3 million during the third quarter of 2024, which was a decrease of $7.0 million from the same quarter last year. The decrease in interest income occurred mainly in interest earned on mortgage-backed securities which declined $7.0 million due to a $1.1 billion, or 17.5%, decrease in average balances and an 11 basis point decline in the average rate earned. In addition, the Company recorded a $286 thousand adjustment to premium amortization at September 30, 2024, which decreased income and reflected slightly faster forward prepayment speed estimates on mortgage-backed securities. This was lower than the $1.3 million adjustment increasing income in the same quarter last year. Interest income earned on asset-backed securities declined $3.9 million due to lower average balances of $1.0 billion, or 40.3%, partly offset by a 46 basis point increase in the average rate earned. Interest income earned on state and municipal obligations declined $2.5 million mainly due to a $534.9 million, or 38.4%, decrease in average balances. Interest earned on other securities decreased $5.3 million, mainly due to a $2.3 million dividend from a private equity investment received in the third quarter of 2023, coupled with a decline of $290.3 million, or 56.4%, in average balances of debt securities. These decreases to interest income were partly offset by growth in interest income on U.S. government and federal agency obligations of $11.7 million, driven by a 137 basis point increase in the average rate earned and higher average balances of $902.7 million, or 91.5%. Interest income related to the Company's U.S. Treasury inflation-protected securities, which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), decreased $1.8 million from the same quarter last year. Additionally, the average rate earned on investment securities during the three months ended September 30, 2024 increased 19 basis points over the same period in the prior year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.0 billion in the third quarter of 2024, compared to $11.9 billion in the third quarter of 2023.

Interest income on securities purchased under agreements to resell increased $475 thousand over the same quarter last year, due to an increase of 145 basis points in the average rate earned, partly offset by a decline of $237.5 million, or 33.3%, in the average balance. Interest income on deposits at the Federal Reserve increased $3.3 million mainly due to an increase of $227.4 million, or 9.7%, in average deposit balances.

The average fully taxable-equivalent yield on total interest earning assets was 4.96% in the third quarter of 2024, up from 4.51% in the third quarter of 2023.

Total interest expense decreased $2.9 million compared to the third quarter of 2023 due to a decrease of $10.6 million in interest expense on borrowings, partly offset by a $7.6 million increase in interest expense on interest bearing deposits. Interest expense on other borrowings decreased $9.2 million due to a decrease of $684.8 million in average Federal Home Loan Bank (FHLB) borrowings. In addition, interest expense on federal funds purchased decreased $4.0 million mainly due to a $302.2 million decrease in the average balance, while interest expense on customer repurchase agreements increased $2.6 million mainly due to a 36 basis point increase in the average rate paid. The increase in deposit interest expense resulted mainly from an increase of $14.4 million in interest expense on interest checking and money market deposit accounts due to a 41 basis point increase in the average rate paid and an increase of $194.2 million, or 1.5%, in average balances. This increase was partly offset

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by a decrease in interest expense on certificates of deposit of $6.8 million mainly due to a $622.3 million, or 19.8%, decrease in average balances. The overall rate paid on total deposits increased 24 basis over the same quarter last year. The overall average rate incurred on all interest bearing liabilities was 2.22% and 2.12% in the third quarters of 2024 and 2023, respectively.

Net interest income (FTE) for the first nine months of 2024 was $780.5 million compared to $756.1 million for the same period in 2023. For the first nine months of 2024, the net interest margin was 3.46% compared to 3.16% for the same period in 2023.

Total interest income (FTE) for the first nine months of 2024 increased $81.1 million over the same period last year mainly due to higher interest income on loans (FTE) and balances at the Federal Reserve, partly offset by lower interest income on investment securities (FTE). Loan interest income (FTE) increased $81.9 million, or 11.3%, due to a 50 basis point increase in the average rate earned and a $410.7 million, or 2.5%, increase in average loan balances. Most of the increase occurred in the business, business real estate and consumer loan categories, but interest income in all loan categories increased mostly due to higher average rates earned. Interest income on investment securities (FTE) decreased $16.0 million due to a $2.2 billion decrease in average balances, partly offset by a 28 basis point increase in the average rate earned. Interest earned on mortgage-backed and asset-backed securities decreased $11.8 million and $11.1 million, respectively, due to lower average balances, partly offset by increases in the average rate earned. Interest earned on state and municipal obligations decreased $8.5 million due to declines in both the average balance and the average rate earned. These decreases in interest income on investment securities were partly offset by an increase in interest earned on U.S. government and federal agency obligations of $17.2 million, due to increases in both the average balance and the average rate earned. Interest income on securities purchased under agreements to resell decreased $3.5 million due to lower average balances, partly offset by higher average rates earned. Interest income on deposits at the Federal Reserve increased $19.8 million due to higher average balances and average rates earned.

Total interest expense for the first nine months of 2024 increased $56.7 million compared to the same period last year. Interest expense on deposits increased $92.9 million, due to a 72 basis point increase in the average rate paid and a $138.3 million increase in average balances. Interest expense on borrowings decreased $36.2 million, mainly due lower FHLB borrowings of $950.9 million. In addition, interest expense on federal funds purchased declined mainly due to lower average balances, while interest expense on customer repurchase agreements increased due to higher average rates and average balances. The overall cost of total interest bearing liabilities increased to 2.21% compared to 1.74% in the same period last year.

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

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Non-Interest Income


	Three Months Ended September 30						Increase (Decrease)				Nine Months Ended September 30						Increase (Decrease)
(Dollars in thousands)	2024			2023			Amount		% change		2024			2023			Amount		% change
Trust fees	$	54,689		$	49,207		$	5,482	11.1	%	$	158,085		$	141,800		$	16,285	11.5	%
Bank card transaction fees	47,570			46,899			671		1.4		141,977			143,278			(1,301)		(.9)
Deposit account charges and other fees	25,380			23,090			2,290		9.9		74,856			67,475			7,381		10.9
Consumer brokerage services	4,619			3,820			799		20.9		13,505			13,582			(77)		(.6)
Capital market fees	5,995			3,524			2,471		70.1		14,647			9,831			4,816		49.0
Loan fees and sales	3,444			2,966			478		16.1		10,016			8,290			1,726		20.8
Other	17,328			13,443			3,885		28.9		47,031			43,910			3,121		7.1
Total non-interest income	$	159,025		$	142,949		$	16,076	11.2	%	$	460,117		$	428,166		$	31,951	7.5	%
Non-interest income as a % of total revenue*	37.7		%	36.5		%					37.3		%	36.4		%

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

The table below is a summary of net bank card transaction fees for the nine month periods ended September 30, 2024 and 2023.


	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in thousands)	2024		2023		$ change		% change		2024		2023		$ change		% change
Net debit card fees	$	11,377	$	11,089	$	288	2.6	%	$	33,165	$	32,716	$	449	1.4	%
Net credit card fees	3,957		3,430		527		15.4		11,762		10,916		846		7.8
Net merchant fees	5,481		5,859		(378)		(6.5)		16,593		16,569		24		.1
Net corporate card fees	26,755		26,521		234		.9		80,457		83,077		(2,620)		(3.2)
Total bank card transaction fees	$	47,570	$	46,899	$	671	1.4	%	$	141,977	$	143,278	$	(1,301)	(.9)	%

For the third quarter of 2024, total non-interest income amounted to $159.0 million compared to $142.9 million in the same quarter last year, which was an increase of $16.1 million, or 11.2%. The increase was mainly due to higher trust fees, capital market fees, deposit account fees and gains on the sales of real estate. Trust fees increased $5.5 million, or 11.1%, mainly due to growth of $4.5 million in private client trust fees. Bank card transaction fees for the current quarter grew $671 thousand, or 1.4%, over the same period last year. Net credit card fees increased $527 thousand and debit card fees increased $288 thousand mainly due to higher interchange fees and lower rewards expense. Net corporate card fees grew $234 thousand mainly due to lower rewards expense, while net merchant fees decreased $378 thousand mainly due to higher network expense. Compared to the third quarter of last year, deposit account fees increased $2.3 million, or 9.9%, mainly due to higher corporate cash management fees of $2.1 million. Consumer brokerage fees increased $799 thousand, mainly due to higher annuity fees, while capital market fees increased $2.5 million, or 70.1%, mainly due to higher trading securities income. Other non-interest income increased $3.9 million, or 28.9%, mainly due to an increase of $3.4 million in gains on the sales of real estate and an increase of $1.8 million in fair value adjustments was recorded on the Company's deferred compensation plan, which is held in a trust and recorded as both an asset and liability, affecting both other income and other expense. These increases were partly offset by lower tax credit sales income of $1.4 million.

Non-interest income for the first nine months of 2024 was $460.1 million compared to $428.2 million in the first nine months of 2023, which was an increase of $32.0 million, or 7.5%. The increase was mainly due to higher trust fees, deposit account fees and capital market fees. Trust fees increased $16.3 million, or 11.5%, mainly due to higher private client and institutional trust fees. Bank card transaction fees for the current year declined $1.3 million, or .9%, from the same period last year, mainly due to a decrease of $2.6 million in net corporate card fees, partly offset by an increase in net credit card fees of $846 thousand. Deposit account fees increased $7.4 million, or 10.9%, mainly due to higher corporate cash management fees. Capital market fees increased $4.8 million, or 49.0%, mainly due to higher trading securities and underwriting income, while loan fees and sales increased $1.7 million mainly due to higher loan commitment fees and mortgage banking revenue. Other non-interest income increased $3.1 million, or 7.1%, mainly due to higher gains on the sales of assets of $3.3 million and an increase of $1.9 million in cash sweep commissions. These increases were partly offset by declines in letter of credit fees of $2.3 million and swap fees of $1.6 million.

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Investment Securities Gains (Losses), Net


	Three Months Ended September 30				Nine Months Ended September 30
(In thousands)	2024		2023		2024		2023
Net gains (losses) on sales of available for sale debt securities	$	(5,395)	$	—	$	(192,938)	$	(8,444)


Net gains (losses) on equity securities	(208)		(67)		178,098		(757)
Net gains (losses) on sales of private equity investments	2,047		(1,240)		1,481		(361)
Fair value adjustments on private equity investments	7,428		5,605		20,205		16,946



Total investment securities gains (losses), net	$	3,872	$	4,298	$	6,846	$	7,384

Net gains on investment securities, which were recognized in earnings during the three months ended September 30, 2024 and 2023, are shown in the table above. Net securities gains of $3.9 million were reported in the third quarter of 2024, compared to net gains of $4.3 million in the same period last year. The net gains in the third quarter of 2024 were mainly comprised of net gains in fair value of $7.4 million recorded on private equity investments and net gains of $2.0 million on the sales of private equity investments. These gains were partly offset by net losses of $5.4 million on sales of available for sale debt securities. The net gains on investment securities for the same quarter last year were primarily comprised of $5.6 million of net gains in fair value on the Company’s private equity investments, partially offset by a loss of $1.2 million on the sale of private equity investments.

Net gains on investment securities of $6.8 million were recognized in earnings for the nine months ended September 30, 2024, compared to net gains of $7.4 million for the same period in 2023. Net gains in the first nine months of 2024 were mainly comprised of net gains of $178.1 million on equity investments and net gains in fair value of $20.2 million recorded on private equity investments, largely offset by net losses of $192.9 million on sales of available for sale securities. Net gains in the first nine months of 2023 were mainly comprised of net gains in fair value of $16.9 million on private equity investments, due to fair value adjustments, partially offset by losses of $8.4 million on sales of available for sale debt securities. The portion of private equity activity attributable to minority interests is reported as non-controlling interest in the consolidated statements of income and resulted in expense of $3.4 million during the first nine months of 2024 and expense of $3.3 million during the first nine months of 2023.

The Company's significant gains in equity securities for the three and nine months ended September 30, 2024 primarily relate to gains recorded on its shares of Visa, as described in Note 3, Investment Securities. Likewise, the $192.9 million losses realized on the Company's available for sale debt securities portfolio mainly relate to the successful execution of its planned available for sale debt security portfolio repositioning, in which the Company sold bonds with an amortized cost of $1.2 billion and subsequently reinvested the proceeds into higher yielding available for sale debt securities. Additional information about the Company's available for sale debt portfolio repositioning transactions is discussed in Note 3, Investment Securities.

Non-Interest Expense


	Three Months Ended September 30				Increase (Decrease)				Nine Months Ended September 30				Increase (Decrease)
(Dollars in thousands)	2024		2023		Amount		% change		2024		2023		Amount		% change
Salaries and employee benefits	$	153,122	$	146,805	$	6,317	4.3	%	$	454,043	$	436,607	$	17,436	4.0	%
Data processing and software	32,194		30,744		1,450		4.7		94,876		87,617		7,259		8.3
Net occupancy	13,411		13,948		(537)		(3.9)		39,529		39,702		(173)		(.4)
Professional and other services	8,830		8,293		537		6.5		26,095		26,979		(884)		(3.3)
Equipment	5,286		4,697		589		12.5		15,387		14,411		976		6.8
Marketing	7,278		6,167		1,111		18.0		16,670		18,006		(1,336)		(7.4)
Supplies and communication	4,963		4,963		—		—		14,343		14,178		165		1.2
Deposit insurance	2,930		4,029		(1,099)		(27.3)		13,301		12,859		442		3.4
Other	9,586		8,364		1,222		14.6		41,267		29,369		11,898		40.5
Total non-interest expense	$	237,600	$	228,010	$	9,590	4.2	%	$	715,511	$	679,728	$	35,783	5.3	%

Non-interest expense for the third quarter of 2024 amounted to $237.6 million, an increase of $9.6 million, or 4.2%, compared to expense of $228.0 million in the third quarter of last year. The increase in expense over the same period last year was mainly due to higher salaries and benefits expense, data processing and software expense and marketing expense, partly offset by lower deposit insurance expense. Salaries and employee benefits expense increased $6.3 million, or 4.3%, mainly due

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to higher full-time salaries expense of $3.5 million and incentive compensation expense of $2.2 million. Full-time equivalent employees totaled 4,711 at September 30, 2024, compared to 4,714 at September 30, 2023. Data processing and software expense increased $1.5 million, or 4.7%, mainly due to increased costs for service providers, and marketing expense increased $1.1 million, or 18.0%. Deposit insurance expense decreased $1.1 million which was partly the result of a $525 thousand accrual adjustment in the current quarter to the FDIC's special assessment. Other non-interest expense increased $1.2 million, or 14.6%, mainly due to an increase of $1.8 million in fair value adjustments recorded on the Company's deferred compensation plan.

Non-interest expense amounted to $715.5 million for the first nine months of 2024, an increase of $35.8 million, or 5.3%, over the first nine months of 2023. Salaries and benefits expense increased $17.4 million, or 4.0%, mainly due to higher full-time salaries expense, incentive compensation and payroll taxes. Data processing and software expense increased $7.3 million, or 8.3%, due to increased costs for service providers and higher bank card processing fees. Equipment expense increased $976 thousand, or 6.8%, mainly due to higher depreciation expense, while marketing expense decreased $1.3 million, or 7.4%. Other non-interest expense increased $11.9 million, or 40.5%, mainly due to litigation settlement expense of $10.0 million, net of insurance, and a $5.0 million donation to a related charitable foundation, both recorded in 2024, partly offset by deconversion expense of $2.1 million recorded in 2023.

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


	Three Months Ended						Nine Months Ended September 30
(In thousands)	Sept. 30, 2024		June 30, 2024		Sept. 30, 2023		2024		2023
ALLOWANCE FOR CREDIT LOSSES ON LOANS


Balance at beginning of period	$	158,557	$	160,465	$	158,685	$	162,395	$	150,136
Provision for credit losses on loans	11,861		7,849		13,343		$	26,657	$	35,155
Net loan charge-offs (recoveries):
Commercial:
Business	114		622		2,613		759		3,008
Real estate-construction and land	—		—		—		—		(115)
Real estate-business	(7)		(8)		(15)		(156)		(24)
Commercial net loan charge-offs (recoveries)	107		614		2,598		603		2,869
Personal Banking:
Real estate-personal	128		79		(9)		231		(26)
Consumer	2,759		1,804		1,797		6,546		4,345
Revolving home equity	(152)		(7)		(1)		(163)		(47)
Consumer credit card	6,273		6,746		4,716		19,454		13,728
Overdrafts	464		521		683		1,542		2,178
Personal banking net loan charge-offs (recoveries)	9,472		9,143		7,186		27,610		20,178
Total net loan charge-offs (recoveries)	9,579		9,757		9,784		28,213		23,047
Balance at end of period	$	160,839	$	158,557	$	162,244	$	160,839	$	162,244
LIABILITY FOR UNFUNDED LENDING COMMITMENTS


Balance at beginning of period	$	20,705	$	23,086	$	29,235	$	25,246	$	33,120
Provision for credit losses on unfunded lending commitments	(2,721)		(2,381)		(1,698)		(7,262)		(5,583)
Balance at end of period	17,984		20,705		27,537		17,984		27,537
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS	$	178,823	$	179,262	$	189,781	$	178,823	$	189,781


	Three Months Ended						Nine Months Ended September 30
	Sept. 30, 2024		June 30, 2024		Sept. 30, 2023		2024		2023
Annualized net loan charge-offs (recoveries)*:
Commercial:
Business	.01	%	.04	%	.18	%	.02	%	.07	%
Real estate-construction and land	—		—		—		—		(.01)
Real estate-business	—		—		—		(.01)		—
Commercial net loan charge-offs (recoveries)	—		.02		.09		.01		.04
Personal Banking:
Real estate-personal	.02		.01		—		.01		—
Consumer	.52		.34		.34		.41		.28
Revolving home equity	(.18)		(.01)		—		(.07)		(.02)
Consumer credit card	4.46		4.91		3.32		4.65		3.28
Overdrafts	33.81		43.15		50.73		34.32		60.54
Personal banking net loan charge-offs (recoveries)	.62		.61		.48		.61		.46
Total annualized net loan charge-offs (recoveries)	.22	%	.23	%	.23	%	.22	%	.18	%

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

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The following schedule provides a breakdown of the allowance for credit losses on loans (ACL) by loan class and the percentage of the allowance for credit losses to the related loan class at period end.


(Dollars in thousands)	Sept. 30, 2024				June 30, 2024				Sept. 30, 2023
	Credit Loss Allowance Allocation		% of ACL to Loan Category		Credit Loss Allowance Allocation		% of ACL to Loan Category		Credit Loss Allowance Allocation		% of ACL to Loan Category
Business	$	43,710	.72	%	$	45,060	.74	%	$	48,030	.81	%
RE — construction and land	29,736		2.15		29,920		2.14		32,383		2.10
RE — business	33,601		.94		32,237		.90		30,214		.83
RE — personal	10,426		.34		9,109		.30		10,882		.36
Consumer	11,309		.54		11,086		.52		11,426		.54
Revolving home equity	1,859		.54		1,789		.54		1,648		.54

Consumer credit card	30,047		5.23		29,201		5.15		27,536		4.79
Overdrafts	151		3.53		155		3.70		125		3.33

Total	$	160,839	.94	%	$	158,557	.92	%	$	162,244	.95	%

To determine the amount of the allowance for credit losses on loans and the liability for unfunded lending commitments, the Company has an established process which assesses the risks and losses expected in its portfolios. This process provides an allowance based on estimates of allowances for pools of loans and unfunded lending commitments, as well as a second, smaller component based on certain individually evaluated loans and unfunded lending commitments. The Company's policies and processes for determining the allowance for credit losses on loans and the liability for unfunded lending commitments are discussed in Note 1 to the consolidated financial statements and in the "Allowance for Credit Losses" discussion within Critical Accounting Estimates and Related Policies in Item 7 of the 2023 Annual Report on Form 10-K.

Net loan charge-offs in the third quarter of 2024 amounted to $9.6 million, compared to $9.8 million in the prior quarter and $9.8 million in the third quarter of last year. Compared to the same period last year, total net loan charge-offs in the third quarter of 2024 decreased $205 thousand and decreased $178 thousand from the previous quarter. The decrease over the prior year was mainly driven by a $2.5 million decrease in net charge-offs on business loans, partly offset by higher net charge-offs of $1.6 million and $962 thousand on consumer credit card and consumer loans, respectively. The decrease from the previous quarter was driven by decreases in net charge-offs on consumer credit card and business loans, partly offset by an increase in net charge-offs on consumer loans.

For the three months ended September 30, 2024, annualized net charge-offs on average consumer credit card loans were 4.46%, compared to 4.91% in the previous quarter and 3.32% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .52%, compared to .34% in the prior quarter and .34% in the same period last year. In the third quarter of 2024, total annualized net loan charge-offs were .22%, compared to .23% in the previous quarter and .23% in the same period last year.

The provision for credit losses on loans was $11.9 million, which was a $1.5 million decrease over the $13.3 million provision recorded in the same period last year and a $4.0 million increase over the $7.8 million provision recorded at June 30, 2024. The decrease in the provision for credit losses on loans during the third quarter of 2024 over the same period last year was due to growth in the allowance for credit losses on loans in the third quarter of 2023.

For the nine months ended September 30, 2024, net loan charge-offs amounted to $28.2 million, which was a $5.2 million increase over the first nine months of 2023. The increase in net charge-offs on loans during the first nine months of 2024 was primarily driven by an increase in net charge-offs on consumer credit card and consumer loans, partly offset by lower net charge-offs on business loans. For the nine months ended September 30, 2024, annualized net loan charge-offs on consumer credit card and consumer loans were 4.65% and .41%, respectively, compared to 3.28% and .28%, respectively, for the same period last year. The annualized net charge-offs on loans for the nine months ended September 30, 2024 and 2023, respectively, were .22% and .18%.

For the nine months ended September 30, 2024, the provision for credit losses on loans was $26.7 million, which was an $8.5 million decrease from the $35.2 million provision recorded in the same period last year. Changes in the provision are driven by changes in the estimate for the allowance for credit losses on loans. The decrease in the provision for credit losses on loans in the first nine months of 2024 compared to the same period last year was primarily due to a reduction of the allowance for credit losses on loans during 2024, caused in part by an improving economic forecast in 2024, whereas the allowance for

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credit losses on loans in the first nine months of 2023 was increasing due to a weakening economic forecast which included a mild recession. The decrease in the provision for credit losses on loans during the first nine months of 2024 compared to the same period in the prior year was partly offset by higher net charge-offs recorded in the nine months ended September 30, 2024 compared to the first nine months of 2023.

For the nine months ended September 30, 2024, the allowance for credit losses on loans decreased by $1.6 million, compared to the allowance for credit losses on loans at December 31, 2023. During the nine months ended September 30, 2024, the allowance for credit losses on commercial loans decreased by $1.2 million, while the allowance for credit losses related to personal banking loans, including consumer credit card loans, decreased $402 thousand. The decrease in the allowance for credit losses on loans during the first nine months of 2024 was primarily the result of a slightly more optimistic economic forecast at September 30, 2024 and a decrease in outstanding loan balances, partially offset by an increase in the allowance related to loans risk-rated special mention, substandard, or non-accrual. The allowance for credit losses on loans was $160.8 million at September 30, 2024 and was .94%, .94% and .95% of total loans at September 30, 2024, December 31, 2023 and September 30, 2023, respectively.

In the current quarter, the provision for credit losses on unfunded lending commitments was a benefit of $2.7 million, compared to a benefit of $1.7 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, the provision for credit losses on unfunded commitments was a benefit of $7.3 million compared to a benefit of $5.6 million in the first nine months of 2023. At September 30, 2024, the liability for unfunded lending commitments was $18.0 million, compared to $25.2 million at December 31, 2023 and $27.5 million at September 30, 2023. The liability decreased primarily due to decreases in unfunded lending commitment balances, coupled with improvement in loss rate assumptions for the Company's construction loans. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 2 for further discussion of the model inputs utilized in the Company's estimate of credit losses.

The Company considers the allowance for credit losses on loans and the liability for unfunded commitments adequate to cover losses expected in the loan portfolio, including unfunded commitments, at September 30, 2024.

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

Risk Elements of Loan Portfolio

The following table presents non-performing assets and loans which are past due 90 days and still accruing interest. Non-performing assets include non-accruing loans and foreclosed real estate. Loans are placed on non-accrual status when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment. Loans that are 90 days past due as to principal and/or interest payments are generally placed on non-accrual, unless they are both well-secured and in the process of collection, or they are personal banking loans that are exempt under regulatory rules from being classified as non-accrual.


(Dollars in thousands)	September 30, 2024			December 31, 2023







Non-accrual loans	$	18,419		$	7,312
Foreclosed real estate	1,050			270
Total non-performing assets	$	19,469		$	7,582
Non-performing assets as a percentage of total loans	.11		%	.04		%
Non-performing assets as a percentage of total assets	.06		%	.02		%








Total loans past due 90 days and still accruing interest	$	21,986		$	21,864

Non-accrual loans totaled $18.4 million at September 30, 2024, an increase of $11.1 million from the balance at December 31, 2023. The increase occurred mainly in business real estate non-accrual loans, which increased $14.9 million. The increase was partly offset by a $3.3 million decrease in business non-accrual loans. At September 30, 2024, non-accrual loans

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were comprised of business real estate (81.1%), revolving home equity (10.7%), personal real estate (6.2%), and business (1.9%) loans. Foreclosed real estate totaled $1.0 million at September 30, 2024, an increase of $780 thousand compared to December 31, 2023. Total loans past due 90 days or more and still accruing interest totaled $22.0 million as of September 30, 2024, an increase of $122 thousand from December 31, 2023. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section in Note 2 to the consolidated financial statements.

In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $319.4 million at September 30, 2024 compared with $216.4 million at December 31, 2023, resulting in an increase of $103.0 million, or 47.6%.


(In thousands)	September 30, 2024		December 31, 2023
Potential problem loans:
Business	$	119,784	$	74,760
Real estate – construction and land	5,151		—
Real estate – business	194,369		140,800
Real estate – personal	102		827

Total potential problem loans	$	319,406	$	216,387

When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company. At September 30, 2024, the Company held $184.4 million of loans that had been modified during the nine months ended September 30, 2024. These loans are further discussed in the "Modifications for borrowers experiencing financial difficulty" section in Note 2 to the consolidated financial statements.

Loans with Special Risk Characteristics

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

Real Estate – Construction and Land Loans

The Company's portfolio of construction and land loans, as shown in the table below, amounted to 8.1% of total loans outstanding at September 30, 2024. The largest component of construction and land loans was commercial construction, which decreased $53.8 million during the nine months ended September 30, 2024. At September 30, 2024, multi-family residential construction loans totaled approximately $459.1 million, or 39.3%, of the commercial construction loan portfolio, compared to $414.6 million, or 33.9%, at December 31, 2023.


(Dollars in thousands)	September 30, 2024		% of Total		% of Total Loans		December 31, 2023		% of Total		% of Total Loans
Commercial construction	$	1,169,189	84.6	%	6.8	%	$	1,222,961	84.5	%	7.1	%
Residential construction	111,225		8.1		.7		110,687		7.7		.6
Residential land and land development	58,032		4.2		.3		62,417		4.3		.4
Commercial land and land development	43,161		3.1		.3		50,699		3.5		.3
Total real estate - construction and land loans	$	1,381,607	100.0	%	8.1	%	$	1,446,764	100.0	%	8.4	%

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Real Estate – Business Loans

Total business real estate loans were $3.6 billion at September 30, 2024 and comprised 21.0% of the Company's total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. At September 30, 2024, 33.4% of business real estate loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.


(Dollars in thousands)	September 30, 2024		% of Total		% of Total Loans		December 31, 2023		% of Total		% of Total Loans
Owner-occupied	$	1,196,519	33.4	%	7.0	%	$	1,175,476	31.6	%	6.8	%
Office	523,253		14.6		3.1		489,320		13.2		2.8
Industrial	463,220		12.9		2.7		630,713		17.0		3.7
Hotels	312,371		8.7		1.8		292,941		7.9		1.7
Multi-family	310,255		8.6		1.8		256,657		6.9		1.5
Retail	309,622		8.6		1.8		366,693		9.9		2.1
Farm	188,781		5.3		1.1		195,981		5.3		1.1
Senior living	187,832		5.2		1.1		183,778		4.9		1.1
Other	95,146		2.7		.6		127,747		3.3		.8
Total real estate - business loans	$	3,586,999	100.0	%	21.0	%	$	3,719,306	100.0	%	21.6	%

Information about the credit quality of the Company's business real estate loan portfolio as of September 30, 2024 and December 31, 2023 is provided in the table below.


(Dollars in thousands)	Pass		Special Mention		Substandard		Non-Accrual		Total
September 30, 2024
Owner-occupied	$	1,159,348	$	6,974	$	30,125	$	72	$	1,196,519
Office	453,360		17,641		52,252		—		523,253
Industrial	463,220		—		—		—		463,220
Hotels	312,371		—		—		—		312,371
Multi-family	298,141		10,986		1,128		—		310,255
Retail	294,122		15,500		—		—		309,622
Farm	184,531		1,002		3,248		—		188,781
Senior living	65,642		—		107,318		14,872		187,832
Other	94,931		215		—		—		95,146
Total	$	3,325,666	$	52,318	$	194,071	$	14,944	$	3,586,999
December 31, 2023
Owner-occupied	$	1,146,112	$	10,376	$	18,928	$	60	$	1,175,476
Office	489,320		—		—		—		489,320
Industrial	630,644		69		—		—		630,713
Hotels	282,105		9,253		1,583		—		292,941
Multi-family	255,507		1,150		—		—		256,657
Retail	349,321		15,500		1,872		—		366,693
Farm	195,981		—		—		—		195,981
Senior living	69,379		—		114,399		—		183,778
Other	127,505		242		—		—		127,747
Total	$	3,545,874	$	36,590	$	136,782	$	60	$	3,719,306

Revolving Home Equity Loans

The Company had $342.4 million in revolving home equity loans at September 30, 2024 that were collateralized by residential real estate. Most of these loans (92.0%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As of September 30, 2024, the

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outstanding principal of loans with an original LTV higher than 80% was $30.7 million, or 9.0% of the portfolio, compared to $32.3 million as of December 31, 2023. Total revolving home equity loan balances over 30 days past due were $4.7 million at September 30, 2024 and $4.4 million at December 31, 2023, and the outstanding balance of revolving home equity loans on non-accrual status was $2.0 million at both September 30, 2024 and December 31, 2023. The weighted average FICO score for the total portfolio balance at September 30, 2024 is 785. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of 2024 through 2026, approximately 11% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 82% have a FICO score of 700 or higher. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.

Consumer Loans

Within the consumer loan portfolio are several direct and indirect product lines, which include loans for the purchase of automobiles, motorcycles, marine and RVs. Auto loans comprised 37.9% of the consumer loan portfolio at September 30, 2024, and outstanding balances for auto loans were $799.7 million and $820.3 million at September 30, 2024 and December 31, 2023, respectively. The balances over 30 days past due amounted to $11.1 million at September 30, 2024 and $9.5 million at December 31, 2023, respectively, and comprised 1.4% of the outstanding balances of these loans at September 30, 2024 and 1.2% at December 31, 2023. For the nine months ended September 30, 2024, $260.6 million of new auto loans were originated, compared to $290.3 million during the first nine months of 2023. At September 30, 2024, the automobile loan portfolio had a weighted average FICO score of 754, and net charge-offs on auto loans were .6% of average auto loans.

The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 10.8% of the consumer loan portfolio at September 30, 2024. Losses on these loans have historically been low, and the Company saw net recoveries of $78 thousand for the first nine months of 2024. Private banking loans comprised 34.6% of the consumer loan portfolio at September 30, 2024. The Company's private banking loans are generally well-collateralized, and at September 30, 2024 were secured primarily by assets held by the Company's trust department. The remaining portion of the Company's consumer loan portfolio is comprised of health services financing, motorcycles, marine and RV loans. Net charge-offs on private banking, health services financing, motorcycle and marine and RV loans totaled $3.2 million in the first nine months of 2024 and were .4% of the average balances of these loans at September 30, 2024.

Consumer Credit Card Loans

The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at September 30, 2024 of $574.7 million in consumer credit card loans outstanding, approximately $116.0 million, or 20.2%, carried a low promotional rate. Within the next six months, $48.2 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card product, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.

Oil and Gas Energy Lending

The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled $262.2 million, or 1.5% of total loans at September 30, 2024, a decrease of $9.8 million from December 31, 2023, as shown in the table below.


(In thousands)	September 30, 2024		December 31, 2023		Unfunded commitments at September 30, 2024
Extraction	$	199,521	$	219,828	$	150,218
Mid-stream shipping and storage	37,993		35,505		85,448
Downstream distribution and refining	8,151		8,890		39,620
Support activities	16,565		7,811		8,155
Total energy lending portfolio	$	262,230	$	272,034	$	283,441

Shared National Credits

The Company participates in credits of large, publicly traded companies which are defined by regulation as shared national credits, or SNCs. Regulations define SNCs as loans exceeding $100 million that are shared by three or more financial institutions. The Company typically participates in these loans when business operations are maintained in the local

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communities or regional markets and opportunities to provide other banking services are present. The balance of SNC loans totaled $1.6 billion and $1.5 billion at September 30, 2024 and December 31, 2023, respectively. Additional unfunded commitments at September 30, 2024 totaled $2.4 billion.

Income Taxes

Income tax expense was $38.2 million in the third quarter of 2024, compared to $38.6 million in the second quarter of 2024 and $33.4 million in the third quarter of 2023. The Company's effective tax rate, including the effect of non-controlling interest, was 21.7% in the third quarter of 2024, unchanged from both the previous quarter, and the third quarter of 2023.

Financial Condition

Balance Sheet

Total assets of the Company were $31.5 billion at September 30, 2024 and $31.7 billion at December 31, 2023. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on debt securities) amounted to $30.5 billion at September 30, 2024 and $31.1 billion at December 31, 2023, and consisted of 56% in loans and 34% in investment securities at September 30, 2024.

At September 30, 2024, total loans decreased $115.5 million or .7%, compared to balances at December 31, 2023. The decrease was mainly due to declines in business real estate, construction and consumer credit card loans of $132.3 million, $65.2 million, and $15.2 million, respectively. These decreases were partly offset by an increase of $29.3 million in business loans, mainly due to growth in commercial and industrial lending and tax-free loan balances. In addition, personal real estate loans increased $17.4 million, while consumer loans, which includes automobile, private banking, health services financing, fixed rate home equity and other consumer loans, increased $30.6 million. Growth in consumer loans was mainly due to increases in private banking and health services financing loans, partially offset by a decline in auto loan balances.

Total available for sale debt securities, excluding fair value adjustments, decreased $950.7 million at September 30, 2024 compared to December 31, 2023. Purchases of available for sale debt securities during this period totaled $2.1 billion, offset by available for sale debt security sales, maturities and pay downs of $3.0 billion. The decline in available for sale debit securities was mainly the result of lower balances of mortgage-backed securities, asset-backed securities and state and municipal obligations, which decreased $326.2 million, $716.1 million, and $497.1 million, respectively, at September 30, 2024 compared to December 31, 2023. These decreases were partly offset by an increase of $1.5 billion in balances of U.S. government and federal agency obligations. At September 30, 2024, the duration of the available for sale investment portfolio was 4.0 years, and maturities and pay downs of approximately $1.6 billion are expected to occur during the next 12 months. The Company does not have any investment securities classified as held-to-maturity.

Total deposits at September 30, 2024 amounted to $25.2 billion, a decrease of $126.1 million compared to December 31, 2023. The decline in deposits largely resulted from a decrease in demand deposits, mainly in business demand deposits (decrease of $550.2 million). Additionally, certificate of deposit balances decreased $250.6 million while interest checking balances increased $723.2 million over balances at December 31, 2023. The Company’s borrowings totaled $2.2 billion at September 30, 2024, a decrease of $717.8 million from balances at December 31, 2023, mainly due to a decline in securities sold under agreements to repurchase.

Liquidity and Capital Resources

Liquidity Management

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


(In thousands)	September 30, 2024		September 30, 2023		December 31, 2023
Liquid assets:
Balances at the Federal Reserve Bank	$	2,642,048	$	1,847,641	$	2,239,010
Federal funds sold	10		2,735		5,025
Available for sale debt securities	9,167,681		9,860,828		9,684,760
Securities purchased under agreements to resell	475,000		450,000		450,000
Total	$	12,284,739	$	12,161,204	$	12,378,795

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Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity purposes, totaled $2.6 billion at September 30, 2024 and increased $403.0 million from December 31, 2023. Federal funds sold, which are funds lent to the Company's correspondent bank customers with overnight maturities, totaled $10 thousand as of September 30, 2024. The fair value of the available for sale debt portfolio was $9.2 billion at September 30, 2024 and included an unrealized net loss of $786.4 million. The total net unrealized loss included net losses of $716.8 million on mortgage-backed and asset-backed securities and $67.2 million on state and municipal obligations.

Resale agreements totaled $475.0 million at September 30, 2024, with $125.0 million to mature in the next 12 months and the remaining amount to mature through 2029. Under these agreements, the Company lends funds to upstream financial institutions and holds marketable securities, safe-kept by a third-party custodian, as collateral. This collateral totaled $502.0 million in fair value at September 30, 2024.

The Company's available for sale debt securities portfolio has a diverse mix of high quality and liquid investment securities with a duration of 4.0 years at September 30, 2024. Approximately $1.6 billion of the Company's available for sale debt portfolio is expected to mature or pay down during the next 12 months, and these funds offer substantial resources to meet either new loan demand or offset potential reductions in the Company's deposit funding base. The Company pledges portions of its investment securities portfolio to secure public fund deposits, securities sold under agreements to repurchase, trust funds, letters of credit issued by the FHLB, and borrowing capacity at the FHLB and the Federal Reserve Bank. Total investment securities pledged for these purposes were as follows:


(In thousands)	September 30, 2024		September 30, 2023		December 31, 2023
Investment securities pledged for the purpose of securing:
Federal Reserve Bank borrowings	$	917,340	$	2,700,426	$	2,636,523
FHLB borrowings and letters of credit	1,238,975		301,406		301,617
Securities sold under agreements to repurchase *	2,122,196		2,500,400		2,710,616
Other deposits and swaps	1,876,968		2,082,807		1,818,092
Total pledged securities	6,155,479		7,585,039		7,466,848
Unpledged and available for pledging	2,986,267		2,264,732		2,211,243
Ineligible for pledging	25,935		11,057		6,669
Total available for sale debt securities, at fair value	$	9,167,681	$	9,860,828	$	9,684,760

* Includes securities pledged for collateral swaps outstanding at September 30, 2023.

The average loans to deposits ratio is a measure of a bank's liquidity, and the Company’s average loans to deposits ratio was 70.2% for the nine months ended September 30, 2024. Core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts totaled $22.6 billion and represented 89.6% of the Company's total deposits at September 30, 2024. These core deposits are normally less volatile, as they are often with customer relationships tied to other products offered by the Company, promoting long lasting relationships and stable funding sources. Core deposits increased $124.5 million at September 30, 2024 compared to December 31, 2023, primarily due to an increase in commercial deposits of $675.9 million, partly offset by decreases in consumer and wealth deposits of $286.1 million and $197.4 million, respectively. While the Company considers core consumer and wealth management deposits less volatile, corporate deposits could decline if interest rates increase significantly, encouraging corporate customers to increase investing activities, or if the economy deteriorates and companies experience lower cash inflows, reducing deposit balances. If these corporate deposits decline, the Company's funding needs may be met by liquidity supplied by investment security maturities and pay downs expected to total $1.6 billion over the next year, as noted above. In addition, as shown in the table of collateral available for future advances below, the Company has borrowing capacity of $6.4 billion through advances from the FHLB and the Federal Reserve.

Certificates of deposit of $100,000 or greater totaled $1.5 billion at September 30, 2024. These deposits are normally considered more volatile and higher costing, and comprised 6.0% of total deposits at September 30, 2024.


(In thousands)	September 30, 2024		September 30, 2023		December 31, 2023
Core deposit base:
Non-interest bearing	$	7,396,153	$	7,961,402	$	7,975,935
Interest checking	7,761,976		6,656,356		7,020,134
Savings and money market	7,454,581		7,497,919		7,492,139
Total	$	22,612,710	$	22,115,677	$	22,488,208

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Amid the banking sector's period of uncertainty during the second quarter of 2023, the Company issued several tranches of short-term brokered certificates of deposit totaling $1.2 billion, which all matured by December 31, 2023. During the third quarter of 2024, the Company issued $100.0 million of brokered certificates of deposit that mature in three months. The Company may occasionally issue brokered certificates of deposit to test the reliability of this potential funding source. While it is not clear how many brokered certificates of deposit the market would allow the Company to issue, the Company believes brokered certificates of deposits may be an additional, reliable source of liquidity during periods of stress in the banking industry.

Other important components of liquidity are the level of borrowings from third party sources and the availability of future credit. During 2024, the Company's outside borrowings have mainly been comprised of federal funds purchased and repurchase agreements, as follows:


(In thousands)	September 30, 2024		September 30, 2023		December 31, 2023
Borrowings:
Federal funds purchased	$	113,630	$	506,355	$	261,305
Securities sold under agreements to repurchase	2,068,599		2,238,826		2,647,510
FHLB advances	—		500,000		—
Other debt	10,201		3,589		1,404
Total	$	2,192,430	$	3,248,770	$	2,910,219

Federal funds purchased, which totaled $113.6 million at September 30, 2024, are unsecured overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved lines of credit. At September 30, 2024, the Company had approved lines of credit totaling $3.7 billion. Since these borrowings are unsecured and limited by market trading activity, their availability may be less certain than collateralized sources of borrowings. Retail repurchase agreements are offered to customers wishing to earn interest in highly liquid balances and are used by the Company as a funding source considered to be stable, but short-term in nature. Repurchase agreements are collateralized by securities in the Company's investment portfolio. Total repurchase agreements at September 30, 2024 were comprised of non-insured customer funds totaling $2.1 billion, and securities pledged as collateral for these retail agreements totaled $2.1 billion at September 30, 2024. The Company also borrows on a secured basis through advances from the FHLB. The advances are generally short-term, fixed interest rate borrowings. There were no advances outstanding from the FHLB at September 30, 2024.

The Company pledges certain assets, including loans and investment securities, to both the FRB and the FHLB as security to establish lines of credit and borrow from these entities. Based on the amount and type of collateral pledged, the FHLB establishes a collateral value from which the Company may draw advances against the collateral. Additionally, this collateral is used to enable the FHLB to issue letters of credit in favor of public fund depositors of the Company. The FRB also establishes a collateral value of assets pledged and permits borrowings from the discount window. The following table reflects the collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company at September 30, 2024.


	September 30, 2024
(In thousands)	FHLB		Federal Reserve		Total
Total collateral value established by FHLB and FRB	$	3,400,935	$	3,160,817	$	6,561,752

Letters of credit issued	(118,465)		—		(118,465)
Available for future advances	$	3,282,470	$	3,160,817	$	6,443,287

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The Company receives outside ratings from both Standard & Poor’s and Moody’s on both the consolidated company and its subsidiary bank, Commerce Bank. These ratings are as follows:


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

Rating outlook	Stable

Commerce Bank
Issuer rating	A	A3
Baseline credit assessment		a2
Short-term rating	A-1	P-1
Rating outlook	Stable	Stable

The Company considers these ratings to be indications of a sound capital base and strong liquidity and believes that these ratings would help ensure the ready marketability of its commercial paper, should the need arise. No commercial paper has been outstanding during the past ten years. The Company has no subordinated or hybrid debt instruments which would affect future borrowing capacity. Because of its lack of significant long-term debt, the Company believes that through its Commercial Tradable Products division or in other public debt markets, it could generate additional liquidity from sources such as jumbo certificates of deposit, privately placed corporate notes or other forms of debt.

The cash flows from the operating, investing and financing activities of the Company resulted in a net increase in cash, cash equivalents and restricted cash of $462.8 million during the first nine months of 2024, as reported in the consolidated statements of cash flows in this report. Operating activities, consisting mainly of net income adjusted for certain non-cash items, provided cash flow of $714.5 million and have historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, provided cash of $968.7 million. Activity in the investment securities portfolio provided cash of $930.8 million from sales, maturities, and pay downs (net of purchases). This increase in investing cash flows was further supported by shrinking in the loan portfolio, which provided cash of $86.1 million. These increases were partly offset by purchases of securities under agreements to resell (net of repayments), which used cash of $25.0 million. Investing activities are somewhat unique to financial institutions in that, while large sums of cash flow are normally used to fund growth in investment securities, loans, or other bank assets, they are normally dependent on the financing activities described below. Financing activities used cash of $1.2 billion, largely resulting from a net decrease of $726.6 million in federal funds purchased and securities sold under agreements to repurchase along with net decreases in deposits of $268.5 million during the first nine months of 2024. Additionally, purchases of treasury stock and cash dividends (including distributions to non-controlling interest) used cash of $123.6 million and $110.5 million, respectively.

Capital Management

The Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions at September 30, 2024 and December 31, 2023, as shown in the following table.


(Dollars in thousands)	September 30, 2024			December 31, 2023			Minimum Capital Requirement		Capital Conservation Buffer		Minimum Ratios Requirement including Capital Conservation Buffer		Minimum Ratios for Well-Capitalized Banks *
Risk-adjusted assets	$	23,155,678		$	24,216,527
Tier I common risk-based capital	3,866,554			3,693,089
Tier I risk-based capital	3,866,554			3,693,089
Total risk-based capital	4,045,526			3,881,024
Tier I common risk-based capital ratio	16.70		%	15.25		%	4.50	%	2.50	%	7.00	%	6.50	%
Tier I risk-based capital ratio	16.70			15.25			6.00		2.50		8.50		8.00
Total risk-based capital ratio	17.47			16.03			8.00		2.50		10.50		10.00
Tier I leverage ratio	12.31			11.25			4.00		N/A		4.00		5.00

*Under Prompt Corrective Action requirements

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

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

The Company maintains a treasury stock buyback program under authorizations by its Board of Directors (the Board) and periodically purchases stock in the open market. In April 2024, the Board approved the purchase of additional shares, bringing the total shares authorized for purchase to 5,000,000 at April 17, 2024. During the nine months ended September 30, 2024, the Company purchased 2,191,821 shares at an average price of $56.37 in open market purchases and through stock-based compensation transactions. At September 30, 2024, 3,615,176 shares remained available for purchase under the current Board authorization.

The Company's common stock dividend policy reflects its earnings outlook, desired payout ratios, the need to maintain adequate capital levels and alternative investment options. The Company paid a $.270 per share cash dividend on its common stock in the third quarter of 2024, which was a 5.1% increase compared to its 2023 quarterly dividend.

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

The Company's material cash requirements include commitments for contractual obligations (both short-term and long-term), commitments to extend credit, and off-balance sheet arrangements. The Company's material cash requirements for the next 12 months are primarily to fund loan growth. Additionally, the Company will utilize cash to fund deposit maturities and withdrawals that may occur in the next 12 months. Other contractual obligations, purchase commitments, lease obligations, and unfunded commitments may require cash payments by the Company within the next 12 months, and these are further discussed in the Company's 2023 Annual Report on Form 10-K. Further discussion of the Company's longer-term material cash obligations and sources for fulfilling those obligations is below.

In the normal course of business, various commitments and contingent liabilities arise that are not required to be recorded on the balance sheet. The most significant of these are loan commitments, which at September 30, 2024 totaled $15.0 billion (including $5.8 billion in unused, approved credit card lines). In addition, the Company enters into standby and commercial letters of credit. The contractual amount of standby and commercial letters of credit totaled $614.6 million and $3.5 million, respectively, at September 30, 2024. As many commitments expire unused or only partially used, these totals do not necessarily reflect future cash requirements. The allowance for these commitments is recorded in the Company’s liability for unfunded lending commitments within other liabilities on its consolidated balance sheets. At September 30, 2024, the liability for unfunded lending commitments totaled $18.0 million. See further discussion of the liability for unfunded lending commitments in Note 2 to the consolidated financial statements.

The Company regularly purchases various state tax credits arising from third party property redevelopment. These credits are either resold to third parties at a profit or retained for use by the Company. During the first nine months of 2024, purchases and sales of tax credits amounted to $89.8 million and $76.1 million, respectively. Fees from sales of tax credits were $3.5 million for the nine months ended September 30, 2024, compared to $3.0 million in the same period last year. At September 30, 2024, the Company expected to fund outstanding purchase commitments of $72.5 million during the remainder of 2024 and had purchase commitments of $495.2 million that it expects to fund from 2025 through 2030.

The Company continued to maintain a strong liquidity position throughout the first nine months of 2024. Through the various sources of liquidity described above, the Company maintains a liquidity position that it believes will adequately satisfy its financial obligations.

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Segment Results

The table below is a summary of segment pre-tax income results for the first nine months of 2024 and 2023.


(Dollars in thousands)	Consumer			Commercial			Wealth			Segment Totals			Other/ Elimination			Consolidated Totals
Nine Months Ended September 30, 2024
Net interest income	$	384,700		$	387,387		$	66,390		$	838,477		$	(64,878)		$	773,599
Provision for credit losses	(27,451)			(952)			150			(28,253)			8,858			(19,395)
Non-interest income	76,591			193,501			179,840			449,932			10,185			460,117
Investment securities gains (losses), net	—			—			—			—			6,846			6,846
Non-interest expense	(248,478)			(301,341)			(118,512)			(668,331)			(47,180)			(715,511)
Income before income taxes	$	185,362		$	278,595		$	127,868		$	591,825		$	(86,169)		$	505,656
Nine Months Ended September 30, 2023
Net interest income	$	421,327		$	393,318		$	76,807		$	891,452		$	(141,744)		$	749,708
Provision for credit losses	(19,784)			(3,206)			(14)			(23,004)			(6,568)			(29,572)
Non-interest income	74,773			184,288			162,835			421,896			6,270			428,166
Investment securities gains (losses), net	—			—			—			—			7,384			7,384
Non-interest expense	(243,004)			(290,953)			(119,019)			(652,976)			(26,752)			(679,728)
Income before income taxes	$	233,312		$	283,447		$	120,609		$	637,368		$	(161,410)		$	475,958
Increase (decrease) in income before income taxes:
Amount	$	(47,950)		$	(4,852)		$	7,259		$	(45,543)		$	75,241		$	29,698
Percent	(20.6)		%	(1.7)		%	6.0		%	(7.1)		%	(46.6)		%	6.2		%

Consumer

For the nine months ended September 30, 2024, income before income taxes for the Consumer segment decreased $48.0 million, or 20.6%, compared to the first nine months of 2023. The decrease in income before income taxes was mainly due to a decline in net interest income of $36.6 million, or 8.7%, and increases in non-interest expense of $5.5 million, or 2.3%, and the provision for credit losses of $7.7 million. Net interest income declined mainly due to a $60.8 million increase in deposit interest expense. This decrease was partly offset by higher loan interest income of $18.1 million and a $6.3 million increase in net allocated funding credits assigned to the Consumer segment's loan and deposit portfolios. Non-interest income increased $1.8 million, or 2.4%, mainly due to higher net bank card fees (mainly credit and debit card fees), deposit account fees and mortgage banking revenue. Non-interest expense increased over the same period in the previous year mainly due to higher miscellaneous losses and allocated support costs for information technology and retail operations, partly offset by lower allocated management support costs. The increase in the provision for credit losses over the first nine months of 2023 was mainly due to higher consumer credit card and auto loan net charge-offs, partly offset by lower other vehicle and equipment loan net charge-offs.

Commercial

For the nine months ended September 30, 2024, income before income taxes for the Commercial segment decreased $4.9 million, or 1.7%, compared to the same period in the previous year. This decrease was mainly due to lower net interest income and higher non-interest expense, partly offset by higher non-interest income and a decrease in the provision for credit losses. Net interest income decreased $5.9 million, or 1.5%, mainly due to lower net allocated funding credits of $27.4 million, coupled with higher interest expense on deposits and customer repurchase agreements of $28.3 million and $9.1 million, respectively. These decreases to income were partly offset by higher loan interest income of $58.4 million. Non-interest income increased $9.2 million, or 5.0%, over the previous year mainly due to growth in deposit account fees (mainly corporate cash management fees), capital market fees and loan commitment fees. These increases were partly offset by decreases in net bank card fees (mainly corporate card fees), letter of credit fees and swap fees. Non-interest expense increased $10.4 million, or 3.6%, mainly due to higher salaries and benefits expense and allocated servicing and support costs for commercial banking sales and administration, management and bank operations. These increases were partly offset by lower allocated commercial sales and payment support costs. The provision for credit losses declined $2.3 million from the same period last year, mainly due to lower commercial and industrial loan net charge-offs.

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Wealth

Wealth segment pre-tax profitability for the nine months ended September 30, 2024 increased $7.3 million, or 6.0%, over the same period in the previous year. Net interest income decreased $10.4 million, or 13.6%, mainly due to a $19.2 million increase in deposit interest expense. This decrease was partly offset by an $8.0 million increase in loan interest income and an $852 thousand increase in net allocated funding credits. Non-interest income increased $17.0 million, or 10.4%, over the prior year largely due to higher private client and institutional trust fees and cash sweep commissions. Non-interest expense decreased $507 thousand, or .4%, mainly due to deconversion expense recorded in the prior year, partly offset by higher salaries and benefits expense. The provision for credit losses decreased $164 thousand from the same period last year due to lower revolving home equity loan net charge-offs.

The Other/Elimination category in the preceding table includes the activity of various support and overhead operating units of the Company, in addition to the investment securities portfolio and other items not allocated to the segments. In accordance with the Company’s transfer pricing procedures, the difference between the total provision for credit losses and total net charge-offs/recoveries is not allocated to a business segment and is included in this category. The pre-tax profitability in this category was $75.2 million higher than in the same period last year. Unallocated securities gains were $6.8 million in the first nine months of 2024 compared to gains of $7.4 million in 2023. Also, the unallocated provision for credit losses decreased $15.4 million, primarily driven by decreases in the provision for credit losses on loans and the liability for unfunded lending commitments, which are both not allocated to the segments for management reporting purposes. Net charge-offs are allocated to the segments when incurred for management reporting purposes. The provision for credit losses on loans in the first nine months of 2024 was $26.7 million, or $1.6 million lower than net charge-offs, due to a decrease in the allowance for credit losses on loans. In the comparable period last year, the provision for credit losses on loans was $35.2 million, or $12.1 million higher than net charge-offs, due to an increase in the allowance for credit losses on loans. For the nine months ended September 30, 2024, the Company's provision on unfunded lending commitments was a benefit of $7.3 million. Additionally, net interest income increased $76.9 million and non-interest income increased $3.9 million. The increase in net interest income was driven by decreases in interest expense on borrowings and deposits of $44.2 million and $15.4 million, respectively, and a $20.2 million decrease in net allocated funding credits. These increases to pre-tax profitability were partly offset by higher non-interest expense of $20.4 million.

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Regulatory Changes

Deposit Insurance

On November 16, 2023, Federal Deposit Insurance Corporation (“FDIC”) issued a final rule to impose a special assessment to recover losses to the FDIC’s Deposit Insurance Fund following the failure of two financial institutions. The rule applies to all insured depository institutions and states that the special assessment would be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods. Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC could:

•Cease collection early, if it has collected enough to recover actual or estimated losses;

•Extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period, if actual or estimated losses exceed the amounts collected; and

•Impose a final shortfall special assessment on a one-time basis after the receiverships for certain failed banks terminate, if actual losses exceed the amounts collected.

During the first quarter of 2024, the FDIC increased its estimate of losses to the Deposit Insurance Fund and in turn increased its estimated special assessment, announcing that the special assessment would come in the form of a June 2024 invoice based on its March 31, 2024 estimate loss in the Deposit Insurance Fund. The Company paid $2.0 million towards the special assessment in both June and September 2024 and has an accrual of $14.3 million at September 30, 2024 for FDIC special assessment liabilities.

SEC Climate Disclosure Rule

On March 6, 2024, the Securities and Exchange Commission adopted rules to enhance and standardize climate-related disclosures by public companies and in public offerings. This climate-related disclosure rule will have significant disclosure impact to the public companies affected, including the Company. Among many other items, this rule requires companies to disclose:

•Climate-related risks that have had or are reasonably likely to have a material impact on the registrant’s business strategy, results of operations, or financial condition;

•The actual and potential material impacts of any identified climate-related risks on the registrant’s strategy, business model, and outlook;

•If, as part of its strategy, a registrant has undertaken activities to mitigate or adapt to a material climate-related risk, a quantitative and qualitative description of material expenditures incurred and material impacts on financial estimates and assumptions that directly result from such mitigation or adaptation activities;

•Specified disclosures regarding a registrant’s activities, if any, to mitigate or adapt to a material climate-related risk including the use, if any, of transition plans, scenario analysis, or internal carbon prices;

•Scope 1 and Scope 2 greenhouse gas (GHG) emissions, when material; and

•Capitalized costs, expenditures, charges, and losses incurred as a result of severe weather events or other natural conditions.

However, in April 2024, the SEC issued an order to stay the rules pending judicial review, due to legal challenges to this mandate. The SEC has not issued an update since April 2024.

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Impact of Recently Issued Accounting Standards

Segment Reporting The FASB issued ASU 2023-07, "Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures", in November 2023. The amendments require disclosure of significant segment expenses and other segment items on an annual and interim basis. Public entities are required to disclose significant expense categories and amounts for each reportable segment, as well as the amount and a description of the composition of other segment items. Significant expense categories are derived from expenses that are regularly provided to an entity’s chief operating decision-maker (“CODM”), and included in a segment’s reported measures of profit or loss. Public entities are also required to disclose the title and position of the CODM and explain how the CODM uses the reported measures of profit or loss in assessing segment performance and deciding how to allocate resources. This Update requires interim disclosures of certain segment-related disclosures that previously were only required annually. This Update requires annual disclosures for fiscal years beginning January 1, 2024 and interim disclosures for fiscal years beginning January 1, 2025. Early adoption is permitted. The Company is required to apply the amendments in this Update retrospectively to all prior periods presented in the financial statements. Other than the inclusion of additional disclosures, the adoption of this ASU is not expected to have a significant effect on the Company's consolidated financial statements.

Income Taxes The FASB issued ASU 2023-09, "Income Taxes (Topic 740) - Improvements to Income Tax Disclosures", in December 2023. The amendments in this Update require additional disclosures regarding the rate reconciliation and income taxes paid. This Update also removed certain existing disclosure requirements. This Update is effective for annual periods beginning January 1, 2025. Early adoption is permitted. The amendments in this Update should be applied on a prospective basis, though retrospective application is permitted. Other than the inclusion of additional disclosures, the adoption is not expected to have a significant effect on the Company's consolidated financial statements.

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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS

Three Months Ended September 30, 2024 and 2023


	Third Quarter 2024						Third Quarter 2023
(Dollars in thousands)	Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid
ASSETS:
Loans:
Business(A)	$	5,966,797	$	92,471	6.17	%	$	5,849,227	$	85,104	5.77	%
Real estate — construction and land	1,400,563		29,704		8.44		1,508,850		31,070		8.17
Real estate — business	3,580,772		56,528		6.28		3,642,010		56,236		6.13
Real estate — personal	3,047,563		31,402		4.10		2,992,500		28,126		3.73
Consumer	2,129,483		35,519		6.64		2,102,281		31,630		5.97
Revolving home equity	335,817		6,490		7.69		304,055		5,947		7.76
Consumer credit card	559,410		19,697		14.01		564,039		19,570		13.77
Overdrafts	5,460		—		—		5,341		—		—
Total loans	17,025,865		271,811		6.35		16,968,303		257,683		6.02
Loans held for sale	2,448		39		6.34		5,714		152		10.55
Investment securities:
U.S. government and federal agency obligations	1,888,985		17,478		3.68		986,284		5,750		2.31
Government-sponsored enterprise obligations	55,583		331		2.37		55,676		331		2.36
State and municipal obligations(A)	856,620		4,317		2.00		1,391,541		6,823		1.95
Mortgage-backed securities	5,082,091		24,956		1.95		6,161,348		31,942		2.06
Asset-backed securities	1,525,593		10,188		2.66		2,553,562		14,129		2.20
Other debt securities	224,528		1,166		2.07		514,787		2,268		1.75
Trading debt securities(A)	47,440		539		4.52		35,044		451		5.11
Equity securities(A)	85,118		951		4.44		12,230		711		23.06
Other securities(A)	217,377		3,330		6.09		237,518		7,859		13.13
Total investment securities	9,983,335		63,256		2.52		11,947,990		70,264		2.33
Federal funds sold	12		—		—		2,722		45		6.56
Securities purchased under agreements to resell	474,997		4,215		3.53		712,472		3,740		2.08
Interest earning deposits with banks	2,565,188		35,034		5.43		2,337,744		31,738		5.39
Total interest earning assets	30,051,845		374,355		4.96		31,974,945		363,622		4.51
Allowance for credit losses on loans	(158,003)						(158,335)
Unrealized gain (loss) on debt securities	(961,695)						(1,458,141)
Cash and due from banks	361,854						295,711
Premises and equipment, net	481,301						463,828
Other assets	805,166						990,683
Total assets	$	30,580,468					$	32,108,691
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings	$	1,303,675	214		.07		$	1,436,149	194		.05
Interest checking and money market	13,242,398		57,963		1.74		13,048,199		43,601		1.33
Certificates of deposit of less than $100,000	1,055,683		11,073		4.17		1,423,965		15,499		4.32
Certificates of deposit of $100,000 and over	1,464,143		16,603		4.51		1,718,126		18,942		4.37
Total interest bearing deposits	17,065,899		85,853		2.00		17,626,439		78,236		1.76
Borrowings:
Federal funds purchased	$	206,644	$	2,792	5.38		508,851		$	6,833	5.33
Securities sold under agreements to repurchase	2,351,870		21,066		3.56		2,283,020		18,431		3.20
Other borrowings(B)	496		6		4.81		685,222		9,160		5.30
Total borrowings	2,559,010		23,864		3.71		3,477,093		34,424		3.93
Total interest bearing liabilities	19,624,909		109,717		2.22	%	21,103,532		112,660		2.12	%
Non-interest bearing deposits	7,284,834						7,939,190
Other liabilities	405,490						367,741
Equity	3,265,235						2,698,228
Total liabilities and equity	$	30,580,468					$	32,108,691
Net interest margin (FTE)			$	264,638					$	250,962
Net yield on interest earning assets					3.50	%					3.11	%

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

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

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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS

Nine Months Ended September 30, 2024 and 2023



	Nine Months 2024						Nine Months 2023
(Dollars in thousands)	Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid		Average Balance		Interest Income/Expense		Avg. Rates Earned/Paid
ASSETS:
Loans:
Business(A)	$	5,940,326	$	271,895	6.11	%	$	5,754,947	$	239,181	5.56	%
Real estate — construction and land	1,448,033		91,046		8.40		1,456,986		85,201		7.82
Real estate — business	3,657,875		171,661		6.27		3,554,347		157,306		5.92
Real estate — personal	3,041,256		91,767		4.03		2,962,619		81,351		3.67
Consumer	2,113,267		103,323		6.53		2,089,524		88,144		5.64
Revolving home equity	328,060		18,881		7.69		300,502		16,754		7.45
Consumer credit card	558,403		58,633		14.03		558,741		57,415		13.74
Overdrafts	6,002		—		—		4,810		—		—
Total loans	17,093,222		807,206		6.31		16,682,476		725,352		5.81
Loans held for sale	2,351		125		7.10		5,793		448		10.34
Investment securities:
U.S. government and federal agency obligations	1,316,296		36,937		3.75		1,039,921		19,730		2.54
Government-sponsored enterprise obligations	55,623		992		2.38		66,056		1,352		2.74
State and municipal obligations(A)	1,084,951		16,147		1.99		1,571,132		24,626		2.10
Mortgage-backed securities	5,511,120		85,860		2.08		6,309,586		97,702		2.07
Asset-backed securities	1,797,750		33,692		2.50		2,869,252		44,836		2.09
Other debt securities	363,677		5,402		1.98		521,187		7,204		1.85
Trading debt securities(A)	44,839		1,645		4.90		42,392		1,494		4.71
Equity securities(A)	75,193		2,658		4.72		12,340		2,140		23.19
Other securities(A)	222,473		18,016		10.82		247,019		18,297		9.90
Total investment securities	10,471,922		201,349		2.57		12,678,885		217,381		2.29
Federal funds sold	738		37		6.70		16,262		639		5.25
Securities purchased under agreements to resell	373,544		8,270		2.96		787,070		11,791		2.00
Interest earning deposits with banks	2,202,444		90,096		5.46		1,816,210		70,328		5.18
Total interest earning assets	30,144,221		1,107,083		4.91		31,986,696		1,025,939		4.29
Allowance for credit losses on loans	(159,888)						(155,870)
Unrealized gain (loss) on debt securities	(1,168,558)						(1,392,373)
Cash and due from banks	303,877						306,441
Premises and equipment, net	479,544						448,168
Other assets	888,441						936,131
Total assets	$	30,487,637					$	32,129,193
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings	$	1,322,148	605		.06		$	1,500,666	573		.05
Interest checking and money market	13,206,726		169,981		1.72		13,076,565		93,419		.96
Certificates of deposit of less than $100,000	1,012,254		31,787		4.19		975,175		27,049		3.71
Certificates of deposit of $100,000 and over	1,517,154		51,591		4.54		1,367,560		39,985		3.91
Total interest bearing deposits	17,058,282		253,964		1.99		16,919,966		161,026		1.27
Borrowings:
Federal funds purchased	$	266,415	$	10,780	5.40		$	503,301	18,816		5.00
Securities sold under agreements to repurchase	2,372,816		61,797		3.48		2,302,289		52,940		3.07
Other borrowings(B)	470		14		3.98		951,971		37,027		5.20
Total borrowings	2,639,701		72,591		3.67		3,757,561		108,783		3.87
Total interest bearing liabilities	19,697,983		326,555		2.21	%	20,677,527		269,809		1.74	%
Non-interest bearing deposits	7,303,728						8,421,754
Other liabilities	404,962						360,506
Equity	3,080,964						2,669,406
Total liabilities and equity	$	30,487,637					$	32,129,193
Net interest margin (FTE)			$	780,528					$	756,130
Net yield on interest earning assets					3.46	%					3.16	%

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

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

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk management focuses on maintaining consistent growth in net interest income within Board-approved policy limits. The Company primarily uses earnings simulation models to analyze net interest income sensitivity to movement in interest rates. The Company performs monthly simulations that model interest rate movements and risk in accordance with changes to its balance sheet composition. For further discussion of the Company’s market risk, see the Interest Rate Sensitivity section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2023 Annual Report on Form 10-K.

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

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


	September 30, 2024				June 30, 2024
(Dollars in millions)	$ Change in Net Interest Income		% Change in Net Interest Income			$ Change in Net Interest Income		% Change in Net Interest Income
300 basis points rising	$	13.8	1.29	%		$	(7.2)	(.67)	%
200 basis points rising	15.1		1.43			(9.0)		(.84)
100 basis points rising	14.6		1.37			(5.1)		(.47)
100 basis points falling	$	(19.8)	(1.86)	%		$	(9.3)	(.86)	%
200 basis points falling	(42.5)		(4.00)			(26.1)		(2.44)
300 basis points falling	(62.0)		(5.83)			(44.6)		(4.16)

Under the simulation, in the three rising rate scenarios and three falling rate scenarios, interest rate risk is more asset sensitive when compared to the scenarios in the previous quarter. This change was primarily due to actions taken by the Federal Reserve to reduce short-term interest rates by 50 basis points. As short-term rates fall, deposit rates become less sensitive which resulted in larger declines in interest income in the falling rate scenarios and growth in interest income in the rising rate scenarios.

The comparison above provides insight into potential effects of changes in rates on net interest income. The Company believes that its approach to interest rate risk has appropriately considered its susceptibility to both rising and falling rates and has adopted strategies which minimize the impact of interest rate risk.

Item 4. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2024. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There were no changes in the Company's internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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

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

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


Period	Total Number of Shares Purchased	Average Price Paid per Share			Total Number of Shares Purchased as part of Publicly Announced Program	Maximum Number that May Yet Be Purchased Under the Program
July 1 - 31, 2024	128,289		$	64.55	128,289	4,186,806
August 1 - 31, 2024	311,882		$	61.73	311,882	3,874,924
September 1 - 30, 2024	259,748		$	62.11	259,748	3,615,176
Total	699,919		$	62.39	699,919	3,615,176

The Company's stock purchases shown above were made under authorizations by the Board of Directors. Under the most recent authorization in April 2024 of 5,000,000 shares, 3,615,176 shares remained available for purchase at September 30, 2024.

Item 5. OTHER INFORMATION

During the three months ended September 30, 2024, none of the officers or directors of the Company adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Item 6. EXHIBITS

The exhibits filed as part of this report and exhibits incorporated herein by reference to other documents are listed below.

3 - By -Laws , as amended , were filed in current report on Form 8-K (Commission file number 1-36502) dated October 30, 2024, and the same is here by incorporated by reference.

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

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

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

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

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

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SIGNATURES

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


	COMMERCE BANCSHARES, INC.



	By	/s/ MARGARET M. ROWE
		Margaret M. Rowe
Date: November 6, 2024		Vice President & Secretary


	By	/s/ PAUL A. STEINER
		Paul A. Steiner
		Controller
Date: November 6, 2024		(Chief Accounting Officer)

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Commerce Bancshares (CBSH) 10-Q2024 Q3 Quarterly report

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