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Table of Contents

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, 2022
OR

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

____________________________________________________________
For the transition period from to
Commission File 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 November 2, 2022, the registrant had outstanding 119,352,570 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, 2022 (unaudited) and December 31, 2021 | 3
|  | Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) | 4
|  | Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) | 5
|  | Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) | 6
|  | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited) | 8
|  | Notes to Consolidated Financial Statements | 9
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 45
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 69
| Item 4. | Controls and Procedures | 70
Part II | Other Information |
| Item 1. | Legal Proceedings | 71
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 71
| Item 6. | Exhibits | 71
Signatures |  |  | 72

2

Table of Contents
PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS

| September 30, 2022 |  | December 31, 2021
| (Unaudited) |  |
| (In thousands)
ASSETS |  |  |
Loans | $ | 15,898,958 |  |  | $ | 15,176,359 |
Allowance for credit losses on loans | (143,377) |  |  | (150,044) |
Net loans | 15,755,581 |  |  | 15,026,315 |
Loans held for sale (including $1,426,000 and $5,570,000 of residential mortgage loans carried at fair value at September 30, 2022 and December 31, 2021, respectively) | 8,062 |  |  | 8,615 |
Investment securities: |  |  |
Available for sale debt, at fair value (amortized cost of $14,176,324,000 and $14,419,133,000 at |  |  |
September 30, 2022 and December 31, 2021, respectively, and allowance for credit losses of $— |  |  |
at both September 30, 2022 and December 31, 2021) | 12,632,510 |  |  | 14,450,027 |
Trading debt | 39,222 |  |  | 46,235 |
Equity | 8,954 |  |  | 9,202 |
Other | 222,742 |  |  | 194,047 |
Total investment securities | 12,903,428 |  |  | 14,699,511 |
Federal funds sold | 14,020 |  |  | 2,800 |
Securities purchased under agreements to resell | 1,275,000 |  |  | 1,625,000 |
Interest earning deposits with banks | 642,943 |  |  | 3,971,217 |
Cash and due from banks | 344,178 |  |  | 305,539 |
Premises and equipment – net | 407,833 |  |  | 388,738 |
Goodwill | 138,921 |  |  | 138,921 |
Other intangible assets – net | 15,599 |  |  | 15,570 |
Other assets | 1,097,031 |  |  | 506,862 |
Total assets | $ | 32,602,596 |  |  | $ | 36,689,088 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
Deposits: |  |  |
Non-interest bearing | $ | 10,468,591 |  |  | $ | 11,772,374 |
Savings, interest checking and money market | 16,014,487 |  |  | 16,598,085 |
Certificates of deposit of less than $100,000 | 391,145 |  |  | 435,960 |
Certificates of deposit of $100,000 and over | 597,093 |  |  | 1,006,654 |
Total deposits | 27,471,316 |  |  | 29,813,073 |
Federal funds purchased and securities sold under agreements to repurchase | 2,314,590 |  |  | 3,022,967 |
Other borrowings | 1,831 |  |  | 12,560 |
Other liabilities | 443,752 |  |  | 392,164 |
Total liabilities | 30,231,489 |  |  | 33,240,764 |
Commerce Bancshares, Inc. stockholders’ equity: |  |  |
Common stock, $5 par value |  |  |
Authorized 140,000,000; issued 122,160,705 shares at September 30, 2022 and December 31, 2021 | 610,804 |  |  | 610,804 |
Capital surplus | 2,683,631 |  |  | 2,689,894 |
Retained earnings | 353,446 |  |  | 92,493 |
Treasury stock of 2,553,242 shares at September 30, 2022 |  |  |
and 476,392 shares at December 31, 2021, at cost | (176,943) |  |  | (32,973) |
Accumulated other comprehensive income | (1,119,344) |  |  | 77,080 |
Total Commerce Bancshares, Inc. stockholders' equity | 2,351,594 |  |  | 3,437,298 |
Non-controlling interest | 19,513 |  |  | 11,026 |
Total equity | 2,371,107 |  |  | 3,448,324 |
Total liabilities and equity | $ | 32,602,596 |  |  | $ | 36,689,088 |

See accompanying notes to consolidated financial statements.
3

Table of Contents
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) | 2022 | 2021 |  | 2022 | 2021
| (Unaudited)
INTEREST INCOME |  |  |  |  |
Interest and fees on loans | $ | 171,272 |  | $ | 142,887 |  |  | $ | 445,873 |  | $ | 433,809 |
Interest and fees on loans held for sale | 159 |  | 187 |  |  | 470 |  | 736 |
Interest on investment securities | 79,586 |  | 63,904 |  |  | 241,326 |  | 170,604 |
Interest on federal funds sold | 94 |  | 1 |  |  | 114 |  | 3 |
Interest on securities purchased under agreements to resell | 5,984 |  | 9,007 |  |  | 15,669 |  | 30,551 |
Interest on deposits with banks | 5,571 |  | 995 |  |  | 9,150 |  | 2,108 |
Total interest income | 262,666 |  | 216,981 |  |  | 712,602 |  | 637,811 |
INTEREST EXPENSE |  |  |  |  |
Interest on deposits: |  |  |  |  |
Savings, interest checking and money market | 7,545 |  | 1,817 |  |  | 11,583 |  | 5,764 |
Certificates of deposit of less than $100,000 | 411 |  | 206 |  |  | 755 |  | 1,006 |
Certificates of deposit of $100,000 and over | 871 |  | 450 |  |  | 1,768 |  | 2,173 |
Interest on federal funds purchased and securities sold under |  |  |  |  |
agreements to repurchase | 7,891 |  | 480 |  |  | 11,506 |  | 1,112 |
Interest on other borrowings | (425) |  | (9) |  |  | (554) |  | (11) |
Total interest expense | 16,293 |  | 2,944 |  |  | 25,058 |  | 10,044 |
Net interest income | 246,373 |  | 214,037 |  |  | 687,544 |  | 627,767 |
Provision for credit losses | 15,290 |  | (7,385) |  |  | 12,594 |  | (59,272) |
Net interest income after credit losses | 231,083 |  | 221,422 |  |  | 674,950 |  | 687,039 |
NON-INTEREST INCOME |  |  |  |  |
Trust fees | 45,406 |  | 48,950 |  |  | 140,009 |  | 139,334 |
Bank card transaction fees | 45,638 |  | 42,815 |  |  | 131,556 |  | 123,118 |
Deposit account charges and other fees | 24,521 |  | 25,161 |  |  | 72,392 |  | 71,724 |
Consumer brokerage services | 5,085 |  | 4,900 |  |  | 14,599 |  | 13,484 |
Capital market fees | 3,393 |  | 3,794 |  |  | 10,845 |  | 12,102 |
Loan fees and sales | 3,094 |  | 6,842 |  |  | 10,575 |  | 24,472 |
Other | 11,377 |  | 5,044 |  |  | 29,734 |  | 28,460 |
Total non-interest income | 138,514 |  | 137,506 |  |  | 409,710 |  | 412,694 |
INVESTMENT SECURITIES GAINS, NET | 3,410 |  | 13,108 |  |  | 11,602 |  | 39,765 |
NON-INTEREST EXPENSE |  |  |  |  |
Salaries and employee benefits | 137,393 |  | 132,824 |  |  | 415,589 |  | 392,608 |
Data processing and software | 28,050 |  | 25,598 |  |  | 82,701 |  | 76,015 |
Net occupancy | 12,544 |  | 12,329 |  |  | 37,343 |  | 35,877 |
Equipment | 5,036 |  | 4,440 |  |  | 14,338 |  | 13,398 |
Supplies and communication | 4,581 |  | 4,530 |  |  | 13,655 |  | 12,688 |
Marketing | 6,228 |  | 5,623 |  |  | 18,408 |  | 16,461 |
Other | 19,052 |  | 26,276 |  |  | 50,003 |  | 55,272 |
Total non-interest expense | 212,884 |  | 211,620 |  |  | 632,037 |  | 602,319 |
Income before income taxes | 160,123 |  | 160,416 |  |  | 464,225 |  | 537,179 |
Less income taxes | 33,936 |  | 34,662 |  |  | 97,859 |  | 111,947 |
Net income | 126,187 |  | 125,754 |  |  | 366,366 |  | 425,232 |
Less non-controlling interest expense | 3,364 |  | 3,193 |  |  | 9,595 |  | 9,373 |
Net income attributable to Commerce Bancshares, Inc. | $ | 122,823 |  | $ | 122,561 |  |  | $ | 356,771 |  | $ | 415,859 |
Net income per common share — basic | $ | 1.03 |  | $ | 1.00 |  |  | $ | 2.96 |  | $ | 3.38 |
Net income per common share — diluted | $ | 1.02 |  | $ | .99 |  |  | $ | 2.95 |  | $ | 3.37 |

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) | 2022 | 2021 |  | 2022 | 2021
| (Unaudited)
Net income | $ | 126,187 |  | $ | 125,754 |  |  | $ | 366,366 |  | $ | 425,232 |
Other comprehensive income (loss): |  |  |  |  |
Net unrealized losses on available for sale debt securities | (345,565) |  | (57,068) |  |  | (1,181,031) |  | (160,019) |
Pension loss amortization | 302 |  | 451 |  |  | 947 |  | 1,326 |
Unrealized losses on cash flow hedge derivatives | (7,187) |  | (4,607) |  |  | (16,340) |  | (13,518) |
Other comprehensive income (loss) | (352,450) |  | (61,224) |  |  | (1,196,424) |  | (172,211) |
Comprehensive income (loss) | (226,263) |  | 64,530 |  |  | (830,058) |  | 253,021 |
Less non-controlling interest expense | 3,364 |  | 3,193 |  |  | 9,595 |  | 9,373 |
Comprehensive income (loss) attributable to Commerce Bancshares, Inc. | $ | (229,627) |  | $ | 61,337 |  |  | $ | (839,653) |  | $ | 243,648 |

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, 2022 and 2021

|  | 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, 2022 |  | $ | 610,804 |  | $ | 2,682,161 |  | $ | 262,363 |  | $ | (129,588) |  | $ | (766,894) |  | $ | 16,467 |  | $ | 2,675,313 |
Net income |  |  |  | 122,823 |  |  |  | 3,364 |  | 126,187 |
Other comprehensive loss |  |  |  |  |  | (352,450) |  |  | (352,450) |
Distributions to non-controlling interest |  |  |  |  |  |  | (318) |  | (318) |
Purchases of treasury stock |  |  |  |  | (50,116) |  |  |  | (50,116) |
Issuance of stock under purchase and equity compensation plans |  |  | (2,762) |  |  | 2,761 |  |  |  | (1) |
Stock-based compensation |  |  | 4,232 |  |  |  |  |  | 4,232 |
Cash dividends paid on common stock ($0.265 per share) |  |  |  | (31,740) |  |  |  |  | (31,740) |
Balance September 30, 2022 |  | $ | 610,804 |  | $ | 2,683,631 |  | $ | 353,446 |  | $ | (176,943) |  | $ | (1,119,344) |  | $ | 19,513 |  | $ | 2,371,107 |
Balance June 30, 2021 |  | $ | 589,352 |  | $ | 2,424,157 |  | $ | 304,739 |  | $ | (53,018) |  | $ | 220,390 |  | $ | 8,210 |  | $ | 3,493,830 |
Net Income |  |  |  | 122,561 |  |  |  | 3,193 |  | 125,754 |
Other comprehensive loss |  |  |  |  |  | (61,224) |  |  | (61,224) |
Distributions to non-controlling interest |  |  |  |  |  |  | (193) |  | (193) |
Purchases of treasury stock |  |  |  |  | (40,165) |  |  |  | (40,165) |
Sale of non-controlling interest of subsidiary |  |  | 659 |  |  |  |  | (659) |  | — |
Issuance of stock under purchase and equity compensation plans |  |  | (1,137) |  |  | 1,136 |  |  |  | (1) |
Stock-based compensation |  |  | 3,865 |  |  |  |  |  | 3,865 |
Cash dividends paid on common stock ($.250 per share) |  |  |  | (30,645) |  |  |  |  | (30,645) |
Balance September 30, 2021 |  | $ | 589,352 |  | $ | 2,427,544 |  | $ | 396,655 |  | $ | (92,047) |  | $ | 159,166 |  | $ | 10,551 |  | $ | 3,491,221 |

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, 2022 and 2021

|  | 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, 2021 |  | $ | 610,804 |  | $ | 2,689,894 |  | $ | 92,493 |  | $ | (32,973) |  | $ | 77,080 |  | $ | 11,026 |  | $ | 3,448,324 |  |
Net income |  |  |  | 356,771 |  |  |  | 9,595 |  | 366,366 |  |
Other comprehensive loss |  |  |  |  |  | (1,196,424) |  |  | (1,196,424) |  |
Distributions to non-controlling interest |  |  |  |  |  |  | (1,108) |  | (1,108) |  |
Purchases of treasury stock |  |  |  |  | (163,321) |  |  |  | (163,321) |  |
Issuance of stock under purchase and equity compensation plans |  |  | (18,904) |  |  | 19,351 |  |  |  | 447 |  |
Stock-based compensation |  |  | 12,641 |  |  |  |  |  | 12,641 |  |
Cash dividends on common stock ($.795 per share) |  |  |  | (95,818) |  |  |  |  | (95,818) |  |
Balance September 30, 2022 |  | $ | 610,804 |  | $ | 2,683,631 |  | $ | 353,446 |  | $ | (176,943) |  | $ | (1,119,344) |  | $ | 19,513 |  | $ | 2,371,107 |  |
Balance December 31, 2020 |  | $ | 589,352 |  | $ | 2,436,288 |  | $ | 73,000 |  | $ | (32,970) |  | $ | 331,377 |  | $ | 2,925 |  | $ | 3,399,972 |  |
Net income |  |  |  | 415,859 |  |  |  | 9,373 |  | 425,232 |  |
Other comprehensive loss |  |  |  |  |  | (172,211) |  |  | (172,211) |  |
Distributions to non-controlling interest |  |  |  |  |  |  | (1,088) |  | (1,088) |  |
Purchases of treasury stock |  |  |  |  | (80,052) |  |  |  | (80,052) |  |
Sale of non-controlling interest of subsidiary |  |  | 659 |  |  |  |  | (659) |  | — |  |
Issuance of stock under purchase and equity compensation plans |  |  | (20,991) |  |  | 20,975 |  |  |  | (16) |  |
Stock-based compensation |  |  | 11,588 |  |  |  |  |  | 11,588 |  |
Cash dividends on common stock ($.750 per share) |  |  |  | (92,204) |  |  |  |  | (92,204) |  |
Balance September 30, 2021 |  | $ | 589,352 |  | $ | 2,427,544 |  | $ | 396,655 |  | $ | (92,047) |  | $ | 159,166 |  | $ | 10,551 |  | $ | 3,491,221 |  |

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) | 2022 |  | 2021
| (Unaudited)
OPERATING ACTIVITIES: |  |  |
Net income | $ | 366,366 |  |  | $ | 425,232 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Provision for credit losses | 12,594 |  |  | (59,272) |
Provision for depreciation and amortization | 35,350 |  |  | 33,554 |
Amortization of investment security premiums, net | 8,565 |  |  | 51,822 |
Investment securities gains, net (A) | (11,602) |  |  | (39,765) |
Net gains on sales of loans held for sale | (2,607) |  |  | (18,849) |
Originations of loans held for sale | (114,765) |  |  | (442,853) |
Proceeds from sales of loans held for sale | 116,421 |  |  | 485,231 |
Net (increase) decrease in trading debt securities, excluding unsettled transactions | 14,080 |  |  | (9,093) |
Purchase of interest rate floor | (16,849) |  |  | — |
Stock-based compensation | 12,641 |  |  | 11,588 |
(Increase) decrease in interest receivable | (21,959) |  |  | 11,449 |
Increase (decrease) in interest payable | 1,097 |  |  | (3,168) |
Increase in income taxes payable | 168 |  |  | 19,831 |
Other changes, net | 70,285 |  |  | 20,418 |
Net cash provided by operating activities | 469,785 |  |  | 486,125 |
INVESTING ACTIVITIES: |  |  |
Distributions received from equity-method investment | 400 |  |  | 13,540 |
Proceeds from sales of investment securities (A) | 55,690 |  |  | 10,060 |
Proceeds from maturities/pay downs of investment securities (A) | 2,079,939 |  |  | 2,571,116 |
Purchases of investment securities (A) | (1,951,694) |  |  | (4,457,716) |
Net (increase) decrease in loans | (736,474) |  |  | 1,166,769 |
Securities purchased under agreements to resell | (200,000) |  |  | (900,000) |
Repayments of securities purchased under agreements to resell | 550,000 |  |  | — |
Purchases of premises and equipment | (46,636) |  |  | (37,385) |
Sales of premises and equipment | 1,613 |  |  | 4,786 |
Net cash used in investing activities | (247,162) |  |  | (1,628,830) |
FINANCING ACTIVITIES: |  |  |
Net increase (decrease) in non-interest bearing, savings, interest checking and money market deposits | (2,078,327) |  |  | 1,428,561 |
Net decrease in certificates of deposit | (454,376) |  |  | (228,916) |
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase | (708,377) |  |  | 155,370 |
Net increase (decrease) in other borrowings | (10,729) |  |  | 3,204 |
Purchases of treasury stock | (163,321) |  |  | (80,052) |
Issuance of stock under equity compensation plans | 447 |  |  | (16) |
Cash dividends paid on common stock | (95,818) |  |  | (92,204) |
Net cash provided by (used in) financing activities | (3,510,501) |  |  | 1,185,947 |
Increase (decrease) in cash, cash equivalents and restricted cash | (3,287,878) |  |  | 43,242 |
Cash, cash equivalents and restricted cash at beginning of year | 4,296,954 |  |  | 2,208,328 |
Cash, cash equivalents and restricted cash at September 30 | $ | 1,009,076 |  |  | $ | 2,251,570 |
Income tax payments, net | $ | 92,646 |  |  | $ | 87,989 |
Interest paid on deposits and borrowings | $ | 23,961 |  |  | $ | 13,213 |
Loans transferred to foreclosed real estate | $ | 457 |  |  | $ | 172 |

(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 $7.9 million and $18.6 million at September 30, 2022 and 2021, respectively.
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Commerce Bancshares, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022 (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 2021 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, 2022 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, 2022 and December 31, 2021 are as follows:

(In thousands) | September 30, 2022 |  | December 31, 2021
Commercial: |  |  |
Business | $ | 5,528,895 |  |  | $ | 5,303,535 |
Real estate – construction and land | 1,206,955 |  |  | 1,118,266 |
Real estate – business | 3,331,627 |  |  | 3,058,837 |
Personal Banking: |  |  |
Real estate – personal | 2,862,519 |  |  | 2,805,401 |
Consumer | 2,116,371 |  |  | 2,032,225 |
Revolving home equity | 286,026 |  |  | 275,945 |
Consumer credit card | 563,349 |  |  | 575,410 |
Overdrafts | 3,216 |  |  | 6,740 |
Total loans | $ | 15,898,958 |  |  | $ | 15,176,359 |

Accrued interest receivable totaled $46.2 million and $25.9 million at September 30, 2022 and December 31, 2021, respectively, and was included within other assets on the consolidated balance sheets. For the three months ended September 30, 2022, the Company wrote-off accrued interest by reversing interest income of $48 thousand and $699 thousand in the Commercial and Personal Banking portfolios, respectively. Similarly, for the nine months ended September 30, 2022, the Company wrote-off accrued interest of $103 thousand and $2.4 million in the Commercial and Personal Banking portfolios, respectively.
At September 30, 2022, loans of $3.1 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 $1.3 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 unless there is a reasonable expectation that a troubled debt restructuring will be executed. Credit cards and certain similar consumer lines of credit do not have stated maturities and therefore, for these loan classes, remaining contractual lives are determined by estimating future cash flows expected to be received from customers until payments have been fully allocated to outstanding balances. 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, 2022 and June 30, 2022 are discussed below.

Key Assumption | September 30, 2022 | June 30, 2022
Overall economic forecast | •High inflation, rising interest rates, supply chain difficulties and a weaker job market create an expectation of a mild recession in 2023 •Continued monetary policy tightening to rein in inflation | •Positive economic momentum faced with continued COVID challenges, supply constraints and high inflation •Continued monetary policy tightening to rein in inflation •Uncertainties related to supply chain issues and the timing and likelihood of a recession
Reasonable and supportable period and related reversion period | •One year for commercial and personal banking loans •Reversion to historical average loss rates within two quarters using straight-line method | •One year for commercial and personal banking loans •Reversion to historical average loss rates within two quarters using straight-line method
Forecasted macro-economic variables | •Unemployment rate ranging from 3.7% to 4.6% during the supportable forecast period •Real GDP growth ranging from (.3)% to .2% •Prime rate from 6.6% to 7.0% •BBB corporate yield from 5.03% to 5.7% | •Unemployment rate ranging from 3.5% to 3.7% during the supportable forecast period •Real GDP growth ranging from 1.5% to 2.7% •Prime rate from 4.9% to 6.2%
Prepayment assumptions | Commercial loans •5% for most loan pools Personal banking loans •Ranging from 16.5% to 28.1% for most loan pools •67.7% for consumer credit cards | Commercial loans •5% for most loan pools Personal banking loans •Ranging from 16.5% to 28.5% for most loan pools •67.0% for consumer credit cards
Qualitative factors | Added qualitative factors related to: •Certain portfolios sensitive to pandemic economic uncertainties •Changes in the composition of the loan portfolios •Uncertainty related to unusually high rate of inflation, geopolitical environment, and supply chain issues •Loans downgraded to special mention, substandard, or non-accrual status | Added qualitative factors related to: •Certain portfolios sensitive to pandemic economic uncertainties •Changes in the composition of the loan portfolios •Uncertainty related to unusually high rate of inflation, geopolitical environment, and supply chain issues •Loans downgraded to special mention, substandard, or non-accrual status

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 estimated expected credit losses.
The current forecast projects a mild recession in 2023 due to high inflation, rising interest rates, supply chain difficulties and a weaker job market. The Russian invasion of Ukraine created additional uncertainty as the world responds to the economic impact. The geopolitical environment, trends in health conditions and impacted supply constraints could significantly modify economic projections used in the estimation of the allowance for credit losses and liability for unfunded lending commitments.
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A summary of the activity in the allowance for credit losses on loans and the liability for unfunded lending commitments during the three and nine months ended September 30, 2022 and 2021, respectively, follows:

| For the Three Months Ended September 30, 2022 |  | For the Nine Months Ended September 30, 2022
(In thousands) | Commercial | Personal Banking | Total |  | Commercial | Personal Banking | Total
ALLOWANCE FOR CREDIT LOSSES ON LOANS |  |  |  |  |  |  |
Balance at beginning of period | $ | 99,525 |  | $ | 38,514 |  | $ | 138,039 |  |  | $ | 97,776 |  | $ | 52,268 |  | $ | 150,044 |
Provision for credit losses on loans | 4,014 |  | 6,136 |  | 10,150 |  |  | 5,851 |  | 900 |  | 6,751 |
Deductions: |  |  |  |  |  |  |
Loans charged off | 509 |  | 6,721 |  | 7,230 |  |  | 893 |  | 20,539 |  | 21,432 |
Less recoveries on loans | 56 |  | 2,362 |  | 2,418 |  |  | 352 |  | 7,662 |  | 8,014 |
Net loan charge-offs | 453 |  | 4,359 |  | 4,812 |  |  | 541 |  | 12,877 |  | 13,418 |
Balance September 30, 2022 | $ | 103,086 |  | $ | 40,291 |  | $ | 143,377 |  |  | $ | 103,086 |  | $ | 40,291 |  | $ | 143,377 |
LIABILITY FOR UNFUNDED LENDING COMMITMENTS |  |  |  |  |  |  |
Balance at beginning of period | $ | 23,617 |  | $ | 1,290 |  | $ | 24,907 |  |  | $ | 23,271 |  | $ | 933 |  | $ | 24,204 |
Provision for credit losses on unfunded lending commitments | 5,182 |  | (42) |  | 5,140 |  |  | 5,528 |  | 315 |  | 5,843 |
Balance September 30, 2022 | $ | 28,799 |  | $ | 1,248 |  | $ | 30,047 |  |  | $ | 28,799 |  | $ | 1,248 |  | $ | 30,047 |
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $ | 131,885 |  | $ | 41,539 |  | $ | 173,424 |  |  | $ | 131,885 |  | $ | 41,539 |  | $ | 173,424 |

| For the Three Months Ended September 30, 2021 |  | For the Nine Months Ended September 30, 2021
(In thousands) | Commercial | Personal Banking | Total |  | Commercial | Personal Banking | Total
ALLOWANCE FOR CREDIT LOSSES ON LOANS |  |  |  |  |  |  |
Balance at beginning of period | $ | 98,038 |  | $ | 74,357 |  | $ | 172,395 |  |  | $ | 121,549 |  | $ | 99,285 |  | $ | 220,834 |
Provision for credit losses on loans | 186 |  | (6,147) |  | (5,961) |  |  | (28,302) |  | (15,447) |  | (43,749) |
Deductions: |  |  |  |  |  |  |
Loans charged off | 190 |  | 6,387 |  | 6,577 |  |  | 692 |  | 27,694 |  | 28,386 |
Less recoveries on loans | 130 |  | 2,788 |  | 2,918 |  |  | 5,609 |  | 8,467 |  | 14,076 |
Net loan charge-offs (recoveries) | 60 |  | 3,599 |  | 3,659 |  |  | (4,917) |  | 19,227 |  | 14,310 |
Balance September 30, 2021 | $ | 98,164 |  | $ | 64,611 |  | $ | 162,775 |  |  | $ | 98,164 |  | $ | 64,611 |  | $ | 162,775 |
LIABILITY FOR UNFUNDED LENDING COMMITMENTS |  |  |  |  |  |  |
Balance at beginning of period | $ | 23,350 |  | $ | 858 |  | $ | 24,208 |  |  | $ | 37,259 |  | $ | 1,048 |  | $ | 38,307 |
Provision for credit losses on unfunded lending commitments | (1,564) |  | 140 |  | (1,424) |  |  | (15,473) |  | (50) |  | (15,523) |
Balance September 30, 2021 | $ | 21,786 |  | $ | 998 |  | $ | 22,784 |  |  | $ | 21,786 |  | $ | 998 |  | $ | 22,784 |
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $ | 119,950 |  | $ | 65,609 |  | $ | 185,559 |  |  | $ | 119,950 |  | $ | 65,609 |  | $ | 185,559 |

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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, 2022 and December 31, 2021.

(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, 2022 |  |  |  |  |
Commercial: |  |  |  |  |
Business | $ | 5,513,234 |  | $ | 9,480 |  | $ | 536 |  | $ | 5,645 |  | $ | 5,528,895 |
Real estate – construction and land | 1,206,395 |  | 560 |  | — |  | — |  | 1,206,955 |
Real estate – business | 3,307,921 |  | 23,557 |  | — |  | 149 |  | 3,331,627 |
Personal Banking: |  |  |  |  |
Real estate – personal | 2,847,665 |  | 10,506 |  | 2,958 |  | 1,390 |  | 2,862,519 |
Consumer | 2,091,670 |  | 21,135 |  | 3,566 |  | — |  | 2,116,371 |
Revolving home equity | 284,595 |  | 541 |  | 890 |  | — |  | 286,026 |
Consumer credit card | 553,815 |  | 4,989 |  | 4,545 |  | — |  | 563,349 |
Overdrafts | 2,830 |  | 343 |  | 43 |  | — |  | 3,216 |
Total | $ | 15,808,125 |  | $ | 71,111 |  | $ | 12,538 |  | $ | 7,184 |  | $ | 15,898,958 |
December 31, 2021 |  |  |  |  |
Commercial: |  |  |  |  |
Business | $ | 5,292,125 |  | $ | 3,621 |  | $ | 477 |  | $ | 7,312 |  | $ | 5,303,535 |
Real estate – construction and land | 1,117,434 |  | 832 |  | — |  | — |  | 1,118,266 |
Real estate – business | 3,058,566 |  | 57 |  | — |  | 214 |  | 3,058,837 |
Personal Banking: |  |  |  |  |
Real estate – personal | 2,796,662 |  | 4,125 |  | 2,983 |  | 1,631 |  | 2,805,401 |
Consumer | 2,005,556 |  | 24,458 |  | 2,211 |  | — |  | 2,032,225 |
Revolving home equity | 274,372 |  | 772 |  | 801 |  | — |  | 275,945 |
Consumer credit card | 565,335 |  | 4,821 |  | 5,254 |  | — |  | 575,410 |
Overdrafts | 6,425 |  | 315 |  | — |  | — |  | 6,740 |
Total | $ | 15,116,475 |  | $ | 39,001 |  | $ | 11,726 |  | $ | 9,157 |  | $ | 15,176,359 |

At September 30, 2022, the Company had $4.1 million in non-accrual business loans that had no allowance for credit loss. At December 31, 2021, the Company had $5.3 million in non-accrual business loans that had no allowance for credit loss. The Company did not record any interest income on non-accrual loans during the three and nine months ended September 30, 2022 and 2021, 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, 2022 and December 31, 2021 are as follows:

| Term Loans Amortized Cost Basis by Origination Year |  |
(In thousands) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Revolving Loans Amortized Cost Basis | Total
September 30, 2022 |  |  |  |  |  |  |  |
Business |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |
Pass | $ | 1,167,741 |  | $ | 902,680 |  | $ | 519,179 |  | $ | 396,052 |  | $ | 188,319 |  | $ | 255,455 |  | $ | 2,041,998 |  | $ | 5,471,424 |
Special mention | 2,205 |  | 5,535 |  | 224 |  | 635 |  | 70 |  | 7,994 |  | 1,923 |  | 18,586 |
Substandard | 6,600 |  | 5,409 |  | 794 |  | 3,690 |  | 2,817 |  | 10,064 |  | 3,866 |  | 33,240 |
Non-accrual | 430 |  | 55 |  | 60 |  | 51 |  | 956 |  | 4,093 |  | — |  | 5,645 |
Total Business: | $ | 1,176,976 |  | $ | 913,679 |  | $ | 520,257 |  | $ | 400,428 |  | $ | 192,162 |  | $ | 277,606 |  | $ | 2,047,787 |  | $ | 5,528,895 |
Real estate-construction |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |
Pass | $ | 399,880 |  | $ | 560,930 |  | $ | 140,643 |  | $ | 26,840 |  | $ | 1,362 |  | $ | 2,208 |  | $ | 17,474 |  | $ | 1,149,337 |
Special mention | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |
Substandard | — |  | 19,500 |  | 9,999 |  | — |  | 14,926 |  | 13,193 |  | — |  | 57,618 |
Total Real estate-construction: | $ | 399,880 |  | $ | 580,430 |  | $ | 150,642 |  | $ | 26,840 |  | $ | 16,288 |  | $ | 15,401 |  | $ | 17,474 |  | $ | 1,206,955 |
Real estate-business |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |
Pass | $ | 876,470 |  | $ | 641,482 |  | $ | 576,752 |  | $ | 468,588 |  | $ | 167,190 |  | $ | 292,556 |  | $ | 90,112 |  | $ | 3,113,150 |
Special mention | 2,854 |  | 3,447 |  | 632 |  | 9,854 |  | 985 |  | 526 |  | — |  | 18,298 |
Substandard | — |  | 30,992 |  | 61,356 |  | 11,437 |  | 33,977 |  | 62,268 |  | — |  | 200,030 |
Non-accrual | — |  | — |  | — |  | — |  | 140 |  | 9 |  | — |  | 149 |
Total Real estate-business: | $ | 879,324 |  | $ | 675,921 |  | $ | 638,740 |  | $ | 489,879 |  | $ | 202,292 |  | $ | 355,359 |  | $ | 90,112 |  | $ | 3,331,627 |
Commercial loans |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |
Pass | $ | 2,444,091 |  | $ | 2,105,092 |  | $ | 1,236,574 |  | $ | 891,480 |  | $ | 356,871 |  | $ | 550,219 |  | $ | 2,149,584 |  | $ | 9,733,911 |
Special mention | 5,059 |  | 8,982 |  | 856 |  | 10,489 |  | 1,055 |  | 8,520 |  | 1,923 |  | 36,884 |
Substandard | 6,600 |  | 55,901 |  | 72,149 |  | 15,127 |  | 51,720 |  | 85,525 |  | 3,866 |  | 290,888 |
Non-accrual | 430 |  | 55 |  | 60 |  | 51 |  | 1,096 |  | 4,102 |  | — |  | 5,794 |
Total Commercial loans: | $ | 2,456,180 |  | $ | 2,170,030 |  | $ | 1,309,639 |  | $ | 917,147 |  | $ | 410,742 |  | $ | 648,366 |  | $ | 2,155,373 |  | $ | 10,067,477 |

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| Term Loans Amortized Cost Basis by Origination Year |  |
(In thousands) | 2021 | 2020 | 2019 | 2018 | 2017 | Prior | Revolving Loans Amortized Cost Basis | Total
December 31, 2021 |  |  |  |  |  |  |  |
Business |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |
Pass | $ | 1,473,869 |  | $ | 704,157 |  | $ | 554,759 |  | $ | 248,739 |  | $ | 159,238 |  | $ | 270,454 |  | $ | 1,795,073 |  | $ | 5,206,289 |
Special mention | 1,785 |  | 126 |  | 17,576 |  | 12,050 |  | 1,490 |  | 3,232 |  | 16,545 |  | 52,804 |
Substandard | 836 |  | 1,191 |  | 8,855 |  | 4,936 |  | 1 |  | 10,775 |  | 10,536 |  | 37,130 |
Non-accrual | 430 |  | — |  | 1 |  | 1,549 |  | — |  | 5,332 |  | — |  | 7,312 |
Total Business: | $ | 1,476,920 |  | $ | 705,474 |  | $ | 581,191 |  | $ | 267,274 |  | $ | 160,729 |  | $ | 289,793 |  | $ | 1,822,154 |  | $ | 5,303,535 |
Real estate-construction |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |
Pass | $ | 598,734 |  | $ | 346,507 |  | $ | 66,985 |  | $ | 2,110 |  | $ | 2,655 |  | $ | 2,252 |  | $ | 13,230 |  | $ | 1,032,473 |
Special mention | 44,649 |  | — |  | — |  | 985 |  | — |  | — |  | — |  | 45,634 |
Substandard | 485 |  | 11,620 |  | — |  | 14,896 |  | 13,158 |  | — |  | — |  | 40,159 |
Total Real estate-construction: | $ | 643,868 |  | $ | 358,127 |  | $ | 66,985 |  | $ | 17,991 |  | $ | 15,813 |  | $ | 2,252 |  | $ | 13,230 |  | $ | 1,118,266 |
Real estate- business |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |
Pass | $ | 775,561 |  | $ | 712,173 |  | $ | 551,697 |  | $ | 230,138 |  | $ | 170,888 |  | $ | 254,489 |  | $ | 76,641 |  | $ | 2,771,587 |
Special mention | 4,011 |  | 30,322 |  | 10,500 |  | 37,576 |  | 2,068 |  | 2,103 |  | 1 |  | 86,581 |
Substandard | 17,079 |  | 62,939 |  | 12,930 |  | 2,326 |  | 58,934 |  | 45,265 |  | 982 |  | 200,455 |
Non-accrual | — |  | — |  | — |  | 189 |  | — |  | 25 |  | — |  | 214 |
Total Real-estate business: | $ | 796,651 |  | $ | 805,434 |  | $ | 575,127 |  | $ | 270,229 |  | $ | 231,890 |  | $ | 301,882 |  | $ | 77,624 |  | $ | 3,058,837 |
Commercial loans |  |  |  |  |  |  |  |
Risk Rating: |  |  |  |  |  |  |  |
Pass | $ | 2,848,164 |  | $ | 1,762,837 |  | $ | 1,173,441 |  | $ | 480,987 |  | $ | 332,781 |  | $ | 527,195 |  | $ | 1,884,944 |  | $ | 9,010,349 |
Special mention | 50,445 |  | 30,448 |  | 28,076 |  | 50,611 |  | 3,558 |  | 5,335 |  | 16,546 |  | 185,019 |
Substandard | 18,400 |  | 75,750 |  | 21,785 |  | 22,158 |  | 72,093 |  | 56,040 |  | 11,518 |  | 277,744 |
Non-accrual | 430 |  | — |  | 1 |  | 1,738 |  | — |  | 5,357 |  | — |  | 7,526 |
Total Commercial loans: | $ | 2,917,439 |  | $ | 1,869,035 |  | $ | 1,223,303 |  | $ | 555,494 |  | $ | 408,432 |  | $ | 593,927 |  | $ | 1,913,008 |  | $ | 9,480,638 |

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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, 2022 and December 31, 2021 below:

| Term Loans Amortized Cost Basis by Origination Year |  |
(In thousands) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Revolving Loans Amortized Cost Basis | Total
September 30, 2022 |  |  |  |  |  |  |  |
Real estate-personal |  |  |  |  |  |  |  |
Current to 90 days past due | $ | 422,198 |  | $ | 602,071 |  | $ | 795,233 |  | $ | 299,702 |  | $ | 138,681 |  | $ | 590,278 |  | $ | 10,008 |  | $ | 2,858,171 |
Over 90 days past due | 198 |  | 617 |  | 907 |  | 71 |  | 114 |  | 1,051 |  | — |  | 2,958 |
Non-accrual | — |  | — |  | — |  | 172 |  | 104 |  | 1,114 |  | — |  | 1,390 |
Total Real estate-personal: | $ | 422,396 |  | $ | 602,688 |  | $ | 796,140 |  | $ | 299,945 |  | $ | 138,899 |  | $ | 592,443 |  | $ | 10,008 |  | $ | 2,862,519 |
Consumer |  |  |  |  |  |  |  |
Current to 90 days past due | $ | 449,631 |  | $ | 409,063 |  | $ | 228,612 |  | $ | 122,966 |  | $ | 44,230 |  | $ | 71,452 |  | $ | 786,851 |  | $ | 2,112,805 |
Over 90 days past due | 50 |  | 344 |  | 784 |  | 183 |  | 325 |  | 274 |  | 1,606 |  | 3,566 |
Total Consumer: | $ | 449,681 |  | $ | 409,407 |  | $ | 229,396 |  | $ | 123,149 |  | $ | 44,555 |  | $ | 71,726 |  | $ | 788,457 |  | $ | 2,116,371 |
Revolving home equity |  |  |  |  |  |  |  |
Current to 90 days past due | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 285,136 |  | $ | 285,136 |
Over 90 days past due | — |  | — |  | — |  | — |  | — |  | — |  | 890 |  | 890 |
Total Revolving home equity: | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 286,026 |  | $ | 286,026 |
Consumer credit card |  |  |  |  |  |  |  |
Current to 90 days past due | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 558,804 |  | $ | 558,804 |
Over 90 days past due | — |  | — |  | — |  | — |  | — |  | — |  | 4,545 |  | 4,545 |
Total Consumer credit card: | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 563,349 |  | $ | 563,349 |
Overdrafts |  |  |  |  |  |  |  |
Current to 90 days past due | $ | 3,173 |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 3,173 |
Over 90 days past due | 43 |  | — |  | — |  | — |  | — |  | — |  | — |  | 43 |
Total Overdrafts: | $ | 3,216 |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 3,216 |
Personal banking loans |  |  |  |  |  |  |  |
Current to 90 days past due | $ | 875,002 |  | $ | 1,011,134 |  | $ | 1,023,845 |  | $ | 422,668 |  | $ | 182,911 |  | $ | 661,730 |  | $ | 1,640,799 |  | $ | 5,818,089 |
Over 90 days past due | 291 |  | 961 |  | 1,691 |  | 254 |  | 439 |  | 1,325 |  | 7,041 |  | 12,002 |
Non-accrual | — |  | — |  | — |  | 172 |  | 104 |  | 1,114 |  | — |  | 1,390 |
Total Personal banking loans: | $ | 875,293 |  | $ | 1,012,095 |  | $ | 1,025,536 |  | $ | 423,094 |  | $ | 183,454 |  | $ | 664,169 |  | $ | 1,647,840 |  | $ | 5,831,481 |

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| Term Loans Amortized Cost Basis by Origination Year |  |
(In thousands) | 2021 | 2020 | 2019 | 2018 | 2017 | Prior | Revolving Loans Amortized Cost Basis | Total
December 31, 2021 |  |  |  |  |  |  |  |
Real estate-personal |  |  |  |  |  |  |  |
Current to 90 days past due | $ | 690,058 |  | $ | 888,631 |  | $ | 354,292 |  | $ | 157,485 |  | $ | 149,391 |  | $ | 551,460 |  | $ | 9,470 |  | $ | 2,800,787 |
Over 90 days past due | 133 |  | 1,150 |  | 298 |  | 124 |  | 97 |  | 1,181 |  | — |  | 2,983 |
Non-accrual | 115 |  | — |  | 251 |  | 109 |  | — |  | 1,156 |  | — |  | 1,631 |
Total Real estate-personal: | $ | 690,306 |  | $ | 889,781 |  | $ | 354,841 |  | $ | 157,718 |  | $ | 149,488 |  | $ | 553,797 |  | $ | 9,470 |  | $ | 2,805,401 |
Consumer |  |  |  |  |  |  |  |
Current to 90 days past due | $ | 571,455 |  | $ | 348,774 |  | $ | 192,076 |  | $ | 79,887 |  | $ | 47,401 |  | $ | 78,088 |  | $ | 712,333 |  | $ | 2,030,014 |
Over 90 days past due | 283 |  | 335 |  | 257 |  | 250 |  | 74 |  | 351 |  | 661 |  | 2,211 |
Total Consumer: | $ | 571,738 |  | $ | 349,109 |  | $ | 192,333 |  | $ | 80,137 |  | $ | 47,475 |  | $ | 78,439 |  | $ | 712,994 |  | $ | 2,032,225 |
Revolving home equity |  |  |  |  |  |  |  |
Current to 90 days past due | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 275,144 |  | $ | 275,144 |
Over 90 days past due | — |  | — |  | — |  | — |  | — |  | — |  | 801 |  | 801 |
Total Revolving home equity: | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 275,945 |  | $ | 275,945 |
Consumer credit card |  |  |  |  |  |  |  |
Current to 90 days past due | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 570,156 |  | $ | 570,156 |
Over 90 days past due | — |  | — |  | — |  | — |  | — |  | — |  | 5,254 |  | 5,254 |
Total Consumer credit card: | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 575,410 |  | $ | 575,410 |
Overdrafts |  |  |  |  |  |  |  |
Current to 90 days past due | $ | 6,740 |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 6,740 |
Total Overdrafts: | $ | 6,740 |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 6,740 |
Personal banking loans |  |  |  |  |  |  |  |
Current to 90 days past due | $ | 1,268,253 |  | $ | 1,237,405 |  | $ | 546,368 |  | $ | 237,372 |  | $ | 196,792 |  | $ | 629,548 |  | $ | 1,567,103 |  | $ | 5,682,841 |
Over 90 days past due | 416 |  | 1,485 |  | 555 |  | 374 |  | 171 |  | 1,532 |  | 6,716 |  | 11,249 |
Non-accrual | 115 |  | — |  | 251 |  | 109 |  | — |  | 1,156 |  | — |  | 1,631 |
Total Personal banking loans: | $ | 1,268,784 |  | $ | 1,238,890 |  | $ | 547,174 |  | $ | 237,855 |  | $ | 196,963 |  | $ | 632,236 |  | $ | 1,573,819 |  | $ | 5,695,721 |

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, 2022 and December 31, 2021.

(In thousands) | Business Assets |  |  | Oil & Gas Assets | Total
September 30, 2022 |  |  |  |  |
Commercial: |  |  |  |  |
Business | $ | 1,156 |  |  |  | $ | 1,966 |  | $ | 3,122 |
Total | $ | 1,156 |  |  |  | $ | 1,966 |  | $ | 3,122 |
December 31, 2021 |  |  |  |  |
Commercial: |  |  |  |  |
Business | $ | 1,604 |  |  |  | $ | 2,459 |  | $ | 4,063 |
Total | $ | 1,604 |  |  |  | $ | 2,459 |  | $ | 4,063 |

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
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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 $186.8 million at September 30, 2022 and $185.6 million at December 31, 2021. The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled $197.7 million at September 30, 2022 and $186.6 million at December 31, 2021. 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, 2022 and December 31, 2021 by FICO score.

Personal Banking Loans
| % of Loan Category
| Real Estate - Personal | Consumer | Revolving Home Equity | Consumer Credit Card
September 30, 2022 |  |  |  |
FICO score: |  |  |  |
Under 600 | 1.3 | % | 1.8 | % | 1.5 | % | 3.6 | %
600 - 659 | 2.5 |  | 3.9 |  | 3.4 |  | 11.8 |
660 - 719 | 8.1 |  | 13.2 |  | 9.1 |  | 30.2 |
720 - 779 | 23.5 |  | 23.8 |  | 22.4 |  | 27.9 |
780 and over | 64.6 |  | 57.3 |  | 63.6 |  | 26.5 |
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | %
December 31, 2021 |  |  |  |
FICO score: |  |  |  |
Under 600 | 1.0 | % | 1.9 | % | 0.9 | % | 3.4 | %
600 - 659 | 2.4 |  | 3.9 |  | 2.6 |  | 11.3 |
660 - 719 | 7.4 |  | 13.8 |  | 9.4 |  | 29.9 |
720 - 779 | 25.2 |  | 25.3 |  | 20.4 |  | 28.2 |
780 and over | 64.0 |  | 55.1 |  | 66.7 |  | 27.2 |
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | %

Troubled debt restructurings
Restructured loans are those extended to borrowers who are experiencing financial difficulty and who have been granted a concession. Restructured loans are placed on non-accrual status if the Company does not believe it probable that amounts due under the contractual terms will be collected. Commercial performing restructured loans are primarily comprised of certain business, construction and business real estate loans classified as substandard but renewed at rates judged to be non-market. These loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. Troubled debt restructurings also include certain credit card and other small consumer loans under various debt management and assistance programs. Modifications to these loans generally involve removing the available line of credit, placing loans on amortizing status, and lowering the contractual interest rate. Certain personal real estate, revolving home equity, and consumer loans were classified as consumer bankruptcy troubled debt restructurings because they were not reaffirmed by the borrower in bankruptcy proceedings. Interest on these loans is being recognized on an accrual basis, as the borrowers are continuing to make payments. Other consumer loans classified as troubled debt restructurings consist of various other workout arrangements with consumer customers.

(In thousands) | September 30, 2022 | December 31, 2021
Accruing restructured loans: |  |
| Commercial | $ | 140,564 |  | $ | 46,867 |
| Assistance programs | 5,218 |  | 6,146 |
| Other consumer | 4,289 |  | 4,787 |
Non-accrual loans | 5,510 |  | 7,087 |
Total troubled debt restructurings | $ | 155,581 |  | $ | 64,887 |

Section 4013 of the CARES Act was signed into law on March 27, 2020, and included a provision that short-term modifications are not troubled debt restructurings, if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to December 31, 2019. The Company elected such option under the CARES Act when determining if a customer’s modification is subject to troubled debt restructuring classification. The initial guidance issued under the CARES Act was due to expire on December 31, 2020. During January 2021, the Consolidated Appropriations Act, 2021 was enacted
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and extended through the end of 2021 the relief offered under the CARES Act related to the accounting and disclosure requirements for troubled debt restructurings as a result of COVID-19. The Company elected to extend its application of this guidance through December 31, 2021. During the period covered by the CARES Act, if it was deemed that the loan modification was not short-term, not COVID-19 related or the customer does not meet the criteria under the guidance to be scoped out of troubled debt restructuring classification, the Company evaluated the loan modifications under its existing framework and accounted for the modification as a troubled debt restructuring.
The table below shows the balance of troubled debt restructurings by loan classification at September 30, 2022, in addition to the outstanding balances of these restructured loans which the Company considers to have been in default at any time during the past twelve months. For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal.

(In thousands) | September 30, 2022 | Balance 90 days past due at any time during previous 12 months
Commercial: |  |
Business | $ | 10,958 |  | $ | — |
Real estate - construction and land | 10,054 |  | — |
Real estate - business | 124,046 |  | — |
Personal Banking: |  |
Real estate - personal | 2,894 |  | 653 |
Consumer | 18 |  | — |
Revolving home equity | 2,394 |  | 270 |
Consumer credit card | 5,217 |  | 364 |
Total troubled debt restructurings | $ | 155,581 |  | $ | 1,287 |

For those loans on non-accrual status also classified as restructured, the modification did not create any further financial effect on the Company as those loans were already recorded at net realizable value. For those performing commercial loans classified as restructured, there were no concessions involving forgiveness of principal or interest and, therefore, there was no financial impact to the Company as a result of modification to these loans. However, the effects of modifications to loans under various debt management and assistance programs were estimated to decrease interest income by approximately $663 thousand on an annual, pre-tax basis, compared to amounts contractually owed. Other modifications to consumer loans mainly involve extensions and other small modifications that did not include the forgiveness of principal or interest.
The allowance for credit losses related to troubled debt restructurings on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as troubled debt restructurings. Those performing loans classified as troubled debt restructurings are accruing loans which management expects to collect under contractual terms. Performing commercial loans having no other concessions granted other than being renewed at non-market interest rates are judged to have similar risk characteristics as non-troubled debt commercial loans and are collectively evaluated based on internal risk rating, loan type, delinquency, historical experience and current economic factors. Performing personal banking loans classified as troubled debt restructurings resulted from the borrower not reaffirming the debt during bankruptcy and have had no other concession granted, other than the Bank's future limitations on collecting payment deficiencies or in pursuing foreclosure actions. As such, they have similar risk characteristics as non-troubled debt personal banking loans and are evaluated collectively based on loan type, delinquency, historical experience and current economic factors.
If a troubled debt restructuring defaults and is already on non-accrual status, the allowance for credit losses continues to be based on individual evaluation, using discounted expected cash flows or the fair value of collateral. If an accruing troubled debt restructuring defaults, the loan's risk rating is downgraded to non-accrual status and the loan's related allowance for credit losses is determined based on individual evaluation, or if necessary, the loan is charged off and collection efforts begin.
The Company had commitments of $22.0 million at September 30, 2022 to lend additional funds to borrowers with restructured loans. Additionally, the Company had commitments at September 30, 2022 of $24.0 million related to letters of credit with an internal risk rating below substandard.
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
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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, 2022, the fair value of these loans was $1.4 million, and the unpaid principal balance was $1.5 million.
The Company also designates certain student loan originations as held for sale. The borrowers are credit-worthy students who are attending colleges and universities. The loans are intended to be sold in the secondary market, and the Company maintains contracts with Sallie Mae to sell the loans within 210 days after the last disbursement to the student. These loans are carried at lower of cost or fair value, which at September 30, 2022 totaled $6.6 million.
At September 30, 2022, 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 $354 thousand and $115 thousand at September 30, 2022 and December 31, 2021, respectively. Personal property acquired in repossession, generally autos, totaled $1.7 million and $1.1 million at September 30, 2022 and December 31, 2021, respectively. 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, 2022 and December 31, 2021.

(In thousands) | September 30, 2022 | December 31, 2021
Available for sale debt securities | $ | 12,632,510 |  | $ | 14,450,027 |
Trading debt securities | 39,222 |  | 46,235 |
Equity securities: |  |
Readily determinable fair value | 6,106 |  | 7,153 |
No readily determinable fair value | 2,848 |  | 2,049 |
Other: |  |
Federal Reserve Bank stock | 34,707 |  | 34,379 |
Federal Home Loan Bank stock | 10,260 |  | 10,428 |
Equity method investments | 1,434 |  | 1,834 |
Private equity investments | 176,341 |  | 147,406 |
Total investment securities (1) | $ | 12,903,428 |  | $ | 14,699,511 |

(1)Accrued interest receivable totaled $39.6 million and $39.5 million at September 30, 2022 and December 31, 2021, respectively, and was included within other assets on the consolidated balance sheets.
The Company has elected to measure equity securities with no readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer. This portfolio includes the Company's holdings of Visa Class B shares, which have a carrying value of zero, as there have not been observable price changes in orderly transactions for identical or similar investments of the same issuer. During the nine months ended September 30, 2022, the Company did not record any impairment or other adjustments to the carrying amount of its portfolio of equity securities with no readily determinable fair value.
Other investment securities include Federal Reserve Bank (FRB) stock, Federal Home Loan Bank (FHLB) stock, equity method investments, and investments in portfolio concerns held by the Company's private equity subsidiary. 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. Additionally, the Company's equity method investments are carried at cost, adjusted to reflect the Company's portion of income, loss, or dividends of the investee. These adjustments are included in non-interest income on the Company's consolidated statements of income. The Company's private equity investments are carried at estimated fair value.
The majority of the Company’s investment portfolio is comprised of available for sale debt securities, which are carried at fair value with changes in fair value reported in accumulated other comprehensive income (AOCI). A summary of the available for sale debt securities by maturity groupings as of September 30, 2022 is shown below. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as FHLMC, FNMA, and Government National
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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 | $ | 159,019 |  | $ | 158,319 |
After 1 but within 5 years | 735,831 |  | 705,287 |
After 5 but within 10 years | 190,134 |  | 172,719 |
Total U.S. government and federal agency obligations | 1,084,984 |  | 1,036,325 |
Government-sponsored enterprise obligations: |  |
After 5 but within 10 years | 4,987 |  | 4,545 |
After 10 years | 50,750 |  | 38,630 |
Total government-sponsored enterprise obligations | 55,737 |  | 43,175 |
State and municipal obligations: |  |
Within 1 year | 197,465 |  | 196,380 |
After 1 but within 5 years | 666,078 |  | 636,464 |
After 5 but within 10 years | 936,136 |  | 787,205 |
After 10 years | 221,305 |  | 183,204 |
Total state and municipal obligations | 2,020,984 |  | 1,803,253 |
Mortgage and asset-backed securities: |  |
Agency mortgage-backed securities | 5,230,550 |  | 4,445,519 |
Non-agency mortgage-backed securities | 1,449,021 |  | 1,235,584 |
Asset-backed securities | 3,755,855 |  | 3,558,287 |
Total mortgage and asset-backed securities | 10,435,426 |  | 9,239,390 |
Other debt securities: |  |
Within 1 year | 50,783 |  | 50,639 |
After 1 but within 5 years | 272,029 |  | 249,688 |
After 5 but within 10 years | 247,121 |  | 202,706 |
After 10 years | 9,260 |  | 7,334 |
Total other debt securities | 579,193 |  | 510,367 |
Total available for sale debt securities | $ | 14,176,324 |  | $ | 12,632,510 |

Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled $368.7 million, at fair value, at September 30, 2022. Interest paid 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 who 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 risk ratings, credit support agreements, and industry knowledge to project future cash flows and any possible credit impairment.
At September 30, 2022, the fair value of securities on this watch list was $1.3 billion compared to $13.4 million at December 31, 2021. The majority of the securities included on the Company's watch list in the current quarter were experiencing unrealized loss positions due to the significant increase in interest rates and were analyzed outside of the cash flow model. At September 30, 2022, 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, 2022, the Company did not identify any securities for which a credit loss exists,
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and for the nine months ended September 30, 2022 and 2021, 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, 2022 and December 31, 2021. 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. Additionally, management does not intend to sell the securities, and it is more likely than not that management will not be required to sell the securities prior to their anticipated recovery.

| 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, 2022 |  |  |  |  |  |  |  |
U.S. government and federal agency obligations | $ | 695,272 |  | $ | 33,081 |  |  | $ | 283,593 |  | $ | 15,579 |  |  | $ | 978,865 |  | $ | 48,660 |
Government-sponsored enterprise obligations | 29,954 |  | 5,964 |  |  | 13,221 |  | 6,598 |  |  | 43,175 |  | 12,562 |
State and municipal obligations | 1,101,122 |  | 72,473 |  |  | 673,390 |  | 145,337 |  |  | 1,774,512 |  | 217,810 |
Mortgage and asset-backed securities: |  |  |  |  |  |  |  |
Agency mortgage-backed securities | 1,970,947 |  | 241,074 |  |  | 2,450,227 |  | 544,264 |  |  | 4,421,174 |  | 785,338 |
Non-agency mortgage-backed securities | 417,434 |  | 63,282 |  |  | 811,318 |  | 150,299 |  |  | 1,228,752 |  | 213,581 |
Asset-backed securities | 2,145,330 |  | 92,243 |  |  | 1,381,680 |  | 105,368 |  |  | 3,527,010 |  | 197,611 |
Total mortgage and asset-backed securities | 4,533,711 |  | 396,599 |  |  | 4,643,225 |  | 799,931 |  |  | 9,176,936 |  | 1,196,530 |
Other debt securities | 297,155 |  | 25,979 |  |  | 210,212 |  | 42,847 |  |  | 507,367 |  | 68,826 |
Total | $ | 6,657,214 |  | $ | 534,096 |  |  | $ | 5,823,641 |  | $ | 1,010,292 |  |  | $ | 12,480,855 |  | $ | 1,544,388 |
December 31, 2021 |  |  |  |  |  |  |  |
U.S. government and federal agency obligations | $ | 296,492 |  | $ | 2,241 |  |  | $ | — |  | $ | — |  |  | $ | 296,492 |  | $ | 2,241 |
Government-sponsored enterprise obligations | — |  | — |  |  | 18,899 |  | 919 |  |  | 18,899 |  | 919 |
State and municipal obligations | 876,691 |  | 15,874 |  |  | 32,684 |  | 1,049 |  |  | 909,375 |  | 16,923 |
Mortgage and asset-backed securities: |  |  |  |  |  |  |  |
Agency mortgage-backed securities | 3,333,691 |  | 59,044 |  |  | 265,835 |  | 8,720 |  |  | 3,599,526 |  | 67,764 |
Non-agency mortgage-backed securities | 1,285,611 |  | 17,222 |  |  | 1,948 |  | 19 |  |  | 1,287,559 |  | 17,241 |
Asset-backed securities | 2,518,935 |  | 19,201 |  |  | 87,893 |  | 525 |  |  | 2,606,828 |  | 19,726 |
Total mortgage and asset-backed securities | 7,138,237 |  | 95,467 |  |  | 355,676 |  | 9,264 |  |  | 7,493,913 |  | 104,731 |
Other debt securities | 270,409 |  | 5,098 |  |  | 58,574 |  | 3,017 |  |  | 328,983 |  | 8,115 |
Total | $ | 8,581,829 |  | $ | 118,680 |  |  | $ | 465,833 |  | $ | 14,249 |  |  | $ | 9,047,662 |  | $ | 132,929 |

The entire available for sale debt portfolio included $12.5 billion of securities that were in a loss position at September 30, 2022, compared to $9.0 billion at December 31, 2021. The total amount of unrealized loss on these securities was $1.5 billion at September 30, 2022, an increase of $1.4 billion compared to the unrealized loss at December 31, 2021. 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, 2022 and December 31, 2021, 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, 2022 |  |  |  |  |
U.S. government and federal agency obligations | $ | 1,084,984 |  | $ | 1 |  | $ | (48,660) |  | $ | — |  | $ | 1,036,325 |
Government-sponsored enterprise obligations | 55,737 |  | — |  | (12,562) |  | — |  | 43,175 |
State and municipal obligations | 2,020,984 |  | 79 |  | (217,810) |  | — |  | 1,803,253 |
Mortgage and asset-backed securities: |  |  |  |  |
Agency mortgage-backed securities | 5,230,550 |  | 307 |  | (785,338) |  | — |  | 4,445,519 |
Non-agency mortgage-backed securities | 1,449,021 |  | 144 |  | (213,581) |  | — |  | 1,235,584 |
Asset-backed securities | 3,755,855 |  | 43 |  | (197,611) |  | — |  | 3,558,287 |
Total mortgage and asset-backed securities | 10,435,426 |  | 494 |  | (1,196,530) |  | — |  | 9,239,390 |
Other debt securities | 579,193 |  | — |  | (68,826) |  | — |  | 510,367 |
Total | $ | 14,176,324 |  | $ | 574 |  | $ | (1,544,388) |  | $ | — |  | $ | 12,632,510 |
December 31, 2021 |  |  |  |  |
U.S. government and federal agency obligations | $ | 1,035,477 |  | $ | 47,484 |  | $ | (2,241) |  | $ | — |  | $ | 1,080,720 |
Government-sponsored enterprise obligations | 50,773 |  | 1,901 |  | (919) |  | — |  | 51,755 |
State and municipal obligations | 2,072,210 |  | 41,540 |  | (16,923) |  | — |  | 2,096,827 |
Mortgage and asset-backed securities: |  |  |  |  |
Agency mortgage-backed securities | 5,698,088 |  | 52,676 |  | (67,764) |  | — |  | 5,683,000 |
Non-agency mortgage-backed securities | 1,383,037 |  | 681 |  | (17,241) |  | — |  | 1,366,477 |
Asset-backed securities | 3,546,024 |  | 12,921 |  | (19,726) |  | — |  | 3,539,219 |
Total mortgage and asset-backed securities | 10,627,149 |  | 66,278 |  | (104,731) |  | — |  | 10,588,696 |
Other debt securities | 633,524 |  | 6,620 |  | (8,115) |  | — |  | 632,029 |
Total | $ | 14,419,133 |  | $ | 163,823 |  | $ | (132,929) |  | $ | — |  | $ | 14,450,027 |

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) | 2022 | 2021
Proceeds from sales of securities: |  |
Available for sale debt securities | $ | 85,023 |  | $ | — |
Other investments | 3,907 |  | 10,060 |
Total proceeds | $ | 88,930 |  | $ | 10,060 |
Investment securities gains (losses), net: |  |
Available for sale debt securities: |  |
Losses realized on sales | $ | (20,274) |  | $ | — |
Equity securities: |  |
Fair value adjustments, net | (1,048) |  | 152 |
Other: |  |
Gains realized on sales | 104 |  | 1,611 |
Losses realized on sales | (4,313) |  | — |
Fair value adjustments, net | 37,133 |  | 38,002 |
Total investment securities gains, net | $ | 11,602 |  | $ | 39,765 |

Net gains on investment securities for the nine months ended September 30, 2022 were mainly comprised of losses of $20.3 million on sales of available for sale securities, net losses of $4.3 million on sales of private equity investments, and net losses in fair value of $1.0 million on equity investments, offset by net gains in fair value of $37.1 million on private equity investments, due to fair value adjustments.
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At September 30, 2022, securities totaling $4.8 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 $6.4 billion at December 31, 2021. Securities pledged under agreements pursuant to which the collateral may be sold or re-pledged by the secured parties approximated $208.3 million, while the remaining securities were pledged under agreements pursuant to which the secured parties may not sell or re-pledge the collateral. Except for obligations of the U.S. Treasury and various government-sponsored enterprises such as FNMA, FHLB and FHLMC, no investment in a single issuer exceeded 10% of stockholders’ equity.
4. Goodwill and Other Intangible Assets
The following table presents information about the Company's intangible assets which have estimable useful lives.

| September 30, 2022 |  | December 31, 2021
(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 | $ | 31,270 |  | $ | (30,499) |  | $ | — |  | $ | 771 |  |  | $ | 31,270 |  | $ | (30,266) |  | $ | — |  | $ | 1,004 |
Mortgage servicing rights | 22,161 |  | (10,933) |  | — |  | 11,228 |  |  | 20,870 |  | (9,600) |  | (304) |  | 10,966 |
Total | $ | 53,431 |  | $ | (41,432) |  | $ | — |  | $ | 11,999 |  |  | $ | 52,140 |  | $ | (39,866) |  | $ | (304) |  | $ | 11,970 |

Aggregate amortization expense on intangible assets was $456 thousand and $682 thousand for the three month periods ended September 30, 2022 and 2021, respectively, and $1.6 million and $2.4 million for the nine month periods ended September 30, 2022 and 2021, 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, 2022. 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) |
2022 | $ | 1,945 |
2023 | 1,389 |
2024 | 1,242 |
2025 | 1,098 |
2026 | 960 |

Changes in the carrying amount of goodwill and other intangible assets for the nine month period ended September 30, 2022 are as follows:

(In thousands) | Goodwill | Easement | Core Deposit Premium | Mortgage Servicing Rights
Balance January 1, 2022 | $ | 138,921 |  | $ | 3,600 |  | $ | 1,004 |  | $ | 10,966 |
Originations, net of disposals | — |  | — |  | — |  | 1,291 |
Amortization | — |  | — |  | (233) |  | (1,333) |
Impairment recovery | — |  | — |  | — |  | 304 |
Balance September 30, 2022 | $ | 138,921 |  | $ | 3,600 |  | $ | 771 |  | $ | 11,228 |

Goodwill allocated to the Company’s operating segments at September 30, 2022 and December 31, 2021 is shown below.

(In thousands) |  |
Consumer segment |  | $ | 70,721 |
Commercial segment |  | 67,454 |
Wealth segment |  | 746 |
Total goodwill |  | $ | 138,921 |

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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, 2022, that net liability was $3.6 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 $516.2 million at September 30, 2022.
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, 2022, 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, 2022, the fair value of the Company's guarantee liabilities for RPAs was $94 thousand, and the notional amount of the underlying swaps was $376.4 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 6 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) | 2022 | 2021 |  | 2022 | 2021
Direct financing and sales-type leases | $ | 5,477 |  | $ | 5,482 |  |  | $ | 15,838 |  | $ | 17,398 |
Operating leases(a) | 2,175 |  | 1,717 |  |  | 6,517 |  | 5,721 |
Total lease income | $ | 7,652 |  | $ | 7,199 |  |  | $ | 22,355 |  | $ | 23,119 |

(a) Includes rent from Tower Properties Company, a related party, of $19 thousand for the three month periods ended September 30, 2022 and 2021, and $57 thousand for the nine months ended September 30, 2022 and 2021.
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) | 2022 | 2021 |  | 2022 | 2021
Service cost - benefits earned during the period | $ | 128 |  | $ | 95 |  |  | $ | 391 |  | $ | 284 |
Interest cost on projected benefit obligation | 713 |  | 514 |  |  | 2,043 |  | 1,626 |
Expected return on plan assets | (1,135) |  | (1,151) |  |  | (3,386) |  | (3,399) |
Amortization of prior service cost | (68) |  | (67) |  |  | (203) |  | (203) |
Amortization of unrecognized net loss | 470 |  | 669 |  |  | 1,465 |  | 1,971 |
Net periodic pension cost | $ | 108 |  | $ | 60 |  |  | $ | 310 |  | $ | 279 |

All benefits accrued under the Company’s defined benefit pension plan have been frozen since January 1, 2011. During the first nine months of 2022, 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) | 2022 | 2021 |  | 2022 | 2021
Basic income per common share: |  |  |  |  |
Net income attributable to Commerce Bancshares, Inc. | $ | 122,823 |  | $ | 122,561 |  |  | $ | 356,771 |  | $ | 415,859 |
Less income allocated to nonvested restricted stock | 1,119 |  | 1,114 |  |  | 3,241 |  | 3,792 |
Net income allocated to common stock | $ | 121,704 |  | $ | 121,447 |  |  | $ | 353,530 |  | $ | 412,067 |
Weighted average common shares outstanding | 118,895 |  | 121,628 |  |  | 119,619 |  | 121,889 |
Basic income per common share | $ | 1.03 |  | $ | 1.00 |  |  | $ | 2.96 |  | $ | 3.38 |
Diluted income per common share: |  |  |  |  |
Net income attributable to Commerce Bancshares, Inc. | $ | 122,823 |  | $ | 122,561 |  |  | $ | 356,771 |  | $ | 415,859 |
Less income allocated to nonvested restricted stock | 1,118 |  | 1,112 |  |  | 3,236 |  | 3,785 |
Net income allocated to common stock | $ | 121,705 |  | $ | 121,449 |  |  | $ | 353,535 |  | $ | 412,074 |
Weighted average common shares outstanding | 118,895 |  | 121,628 |  |  | 119,619 |  | 121,889 |
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 | 264 |  | 253 |  |  | 274 |  | 294 |
Weighted average diluted common shares outstanding | 119,159 |  | 121,881 |  |  | 119,893 |  | 122,183 |
Diluted income per common share | $ | 1.02 |  | $ | .99 |  |  | $ | 2.95 |  | $ | 3.37 |

Unexercised stock appreciation rights of 167 thousand and 99 thousand for the three month periods ended September 30, 2022 and 2021, respectively, and 152 thousand and 61 thousand for the nine month periods ended September 30, 2022 and 2021, 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 2021.
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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, 2022 |  |  | $ | 23,174 |  | $ | (20,668) |  | $ | 74,574 |  | $ | 77,080 |
Other comprehensive loss before reclassifications to current earnings |  |  | (1,594,981) |  | — |  | (3,464) |  | (1,598,445) |
Amounts reclassified to current earnings from accumulated other comprehensive income |  |  | 20,274 |  | 1,262 |  | (18,322) |  | 3,214 |
Current period other comprehensive income (loss), before tax |  |  | (1,574,707) |  | 1,262 |  | (21,786) |  | (1,595,231) |
Income tax (expense) benefit |  |  | 393,676 |  | (315) |  | 5,446 |  | 398,807 |
Current period other comprehensive income (loss), net of tax |  |  | (1,181,031) |  | 947 |  | (16,340) |  | (1,196,424) |
Balance September 30, 2022 |  |  | $ | (1,157,857) |  | $ | (19,721) |  | $ | 58,234 |  | $ | (1,119,344) |
Balance January 1, 2021 |  |  | $ | 263,801 |  | $ | (25,118) |  | $ | 92,694 |  | $ | 331,377 |
Other comprehensive loss before reclassifications to current earnings |  |  | (213,362) |  | — |  | — |  | (213,362) |
Amounts reclassified to current earnings from accumulated other comprehensive income |  |  | — |  | 1,768 |  | (18,024) |  | (16,256) |
Current period other comprehensive income (loss), before tax |  |  | (213,362) |  | 1,768 |  | (18,024) |  | (229,618) |
Income tax (expense) benefit |  |  | 53,343 |  | (442) |  | 4,506 |  | 57,407 |
Current period other comprehensive income (loss), net of tax |  |  | (160,019) |  | 1,326 |  | (13,518) |  | (172,211) |
Balance September 30, 2021 |  |  | $ | 103,782 |  | $ | (23,792) |  | $ | 79,176 |  | $ | 159,166 |

(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 150 locations. This segment also includes indirect and other consumer loan financing businesses, along with debit and credit card loan and fee businesses. Residential mortgage origination, sales and servicing functions are included in this Consumer segment, but residential mortgage loans retained by the Company are not considered part of this segment and are instead included in the Other/Elimination column. The Commercial segment provides corporate lending (including the Small Business Banking product line within the branch network), leasing, and international services, along with business and governmental deposit products and commercial cash management services. This segment also includes both merchant and commercial bank card products as well as the Capital Markets Group, which sells fixed income securities and provides securities safekeeping and accounting services to its business and correspondent bank customers. The Wealth segment provides traditional trust and estate planning, advisory and discretionary investment management, and brokerage services. 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.

(In thousands) | Consumer | Commercial | Wealth | Segment Totals | Other/Elimination | Consolidated Totals
Three Months Ended September 30, 2022 |  |  |  |  |  |
Net interest income | $ | 86,232 |  | $ | 114,087 |  | $ | 18,637 |  | $ | 218,956 |  | $ | 27,417 |  | $ | 246,373 |
Provision for credit losses | (4,305) |  | (506) |  | 5 |  | (4,806) |  | (10,484) |  | (15,290) |
Non-interest income | 30,264 |  | 57,115 |  | 53,862 |  | 141,241 |  | (2,727) |  | 138,514 |
Investment securities gains, net | — |  | — |  | — |  | — |  | 3,410 |  | 3,410 |
Non-interest expense | (76,832) |  | (91,372) |  | (36,194) |  | (204,398) |  | (8,486) |  | (212,884) |
Income before income taxes | $ | 35,359 |  | $ | 79,324 |  | $ | 36,310 |  | $ | 150,993 |  | $ | 9,130 |  | $ | 160,123 |
Nine Months Ended September 30, 2022 |  |  |  |  |  |
Net interest income | $ | 249,761 |  | $ | 333,263 |  | $ | 56,731 |  | $ | 639,755 |  | $ | 47,789 |  | $ | 687,544 |
Provision for credit losses | (12,727) |  | (651) |  | 2 |  | (13,376) |  | 782 |  | (12,594) |
Non-interest income | 89,542 |  | 167,581 |  | 161,051 |  | 418,174 |  | (8,464) |  | 409,710 |
Investment securities gains, net | — |  | — |  | — |  | — |  | 11,602 |  | 11,602 |
Non-interest expense | (225,232) |  | (272,224) |  | (108,967) |  | (606,423) |  | (25,614) |  | (632,037) |
Income before income taxes | $ | 101,344 |  | $ | 227,969 |  | $ | 108,817 |  | $ | 438,130 |  | $ | 26,095 |  | $ | 464,225 |
Three Months Ended September 30, 2021 |  |  |  |  |  |
Net interest income | $ | 80,411 |  | $ | 115,529 |  | $ | 18,075 |  | $ | 214,015 |  | $ | 22 |  | $ | 214,037 |
Provision for loan losses | (3,557) |  | (69) |  | 9 |  | (3,617) |  | 11,002 |  | 7,385 |
Non-interest income | 35,758 |  | 52,092 |  | 55,241 |  | 143,091 |  | (5,585) |  | 137,506 |
Investment securities gains, net | — |  | — |  | — |  | — |  | 13,108 |  | 13,108 |
Non-interest expense | (75,996) |  | (84,601) |  | (34,285) |  | (194,882) |  | (16,738) |  | (211,620) |
Income before income taxes | $ | 36,616 |  | $ | 82,951 |  | $ | 39,040 |  | $ | 158,607 |  | $ | 1,809 |  | $ | 160,416 |
Nine Months Ended September 30, 2021 |  |  |  |  |  |
Net interest income | $ | 239,157 |  | $ | 340,279 |  | $ | 53,186 |  | $ | 632,622 |  | $ | (4,855) |  | $ | 627,767 |
Provision for credit losses | (19,122) |  | 4,856 |  | 10 |  | (14,256) |  | 73,528 |  | 59,272 |
Non-interest income | 110,911 |  | 155,079 |  | 158,731 |  | 424,721 |  | (12,027) |  | 412,694 |
Investment securities gains, net | — |  | — |  | — |  | — |  | 39,765 |  | 39,765 |
Non-interest expense | (220,280) |  | (246,501) |  | (101,377) |  | (568,158) |  | (34,161) |  | (602,319) |
Income before income taxes | $ | 110,666 |  | $ | 253,713 |  | $ | 110,550 |  | $ | 474,929 |  | $ | 62,250 |  | $ | 537,179 |

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.
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.
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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. At September 30, 2022, the Company’s derivative instruments are accounted for as free-standing derivatives, and changes in their fair value are recorded in current earnings.

(In thousands) | September 30, 2022 | December 31, 2021
Interest rate swaps | $ | 1,980,368 |  | $ | 2,229,419 |
Interest rate floors | 500,000 |  | — |
Interest rate caps | 152,784 |  | 152,058 |
Credit risk participation agreements | 536,188 |  | 485,633 |
Foreign exchange contracts | 7,435 |  | 5,119 |
Mortgage loan commitments | 984 |  | 21,787 |
Mortgage loan forward sale contracts | 669 |  | 1,165 |
Forward TBA contracts | 1,000 |  | 21,000 |
Total notional amount | $ | 3,179,428 |  | $ | 2,916,181 |

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.
During the third quarter of 2022, the Company entered into an interest rate floor contract of $500.0 million to hedge the risk of declining interest rates on certain floating rate commercial loans. The premium paid for this floor totaled $16.8 million and is forward starting beginning on January 1, 2024. The interest rate floor matures on January 1, 2030. The interest rate floor qualified and was designated as a cash flow hedge and was assessed for effectiveness using regression analysis. The change in the fair value of the interest rate floor is recorded in AOCI, net of the amortization of the premium paid, which is recorded against fees on loans in the consolidated statements of income. As of September 30, 2022, net deferred losses on the interest rate floor totaled $3.5 million (pre-tax) and was recorded in AOCI in the consolidated balance sheet. As of September 30, 2022, over the next twelve months, it is expected that $2.3 million (pre-tax), representing the floor premium amortization, will be reclassified from AOCI into earnings.
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, 2022, the total realized gains on the monetized cash flow hedges remaining in AOCI was $81.0 million (pre-tax), which will be reclassified into interest income over the next 4.2 years. The estimated amount of net gains related to the cash flow hedges remaining in AOCI at September 30, 2022 that is expected to be reclassified into income within the next 12 months is $23.9 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 to purchase or deliver foreign currencies for customers at specific future dates.
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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 17 on Fair Value Measurements in the 2021 Annual Report on Form 10-K.
The Company's policy is to present its derivative assets and derivative liabilities on a gross basis in its consolidated balance sheets, and these are reported in other assets and other liabilities. Certain collateral posted to and from the Company's clearing counterparty has been applied to the fair values of the cleared swaps, such that at September 30, 2022 in the table below, the positive fair values of cleared swaps were reduced by $30.7 million. At December 31, 2021, positive fair values of cleared swaps were reduced by $587 thousand and the negative fair values of cleared swaps were reduced by $29.7 million.

| Asset Derivatives |  | Liability Derivatives
| Sept. 30, 2022 | Dec. 31, 2021 |  | Sept. 30, 2022 | Dec. 31, 2021
(In thousands) | Fair Value |  | Fair Value
Derivatives designated as hedging instruments: |  |  |  |  |
Interest rate floors | $ | 13,385 |  | $ | — |  |  | $ | — |  | $ | — |
Total derivatives designated as hedging instruments | $ | 13,385 |  | $ | — |  |  | $ | — |  | $ | — |
Derivative instruments not designated as hedging instruments: |  |  |  |
Interest rate swaps | $ | 22,256 |  | $ | 40,752 |  |  | $ | (52,989) |  | $ | (11,606) |
Interest rate caps | 2,524 |  | 147 |  |  | (2,524) |  | (147) |
Credit risk participation agreements | 36 |  | 84 |  |  | (94) |  | (277) |
Foreign exchange contracts | 191 |  | 77 |  |  | (156) |  | (45) |
Mortgage loan commitments | 5 |  | 764 |  |  | (5) |  | — |
Mortgage loan forward sale contracts | 5 |  | 5 |  |  | — |  | (1) |
Forward TBA contracts | 58 |  | 13 |  |  | — |  | (25) |
Total derivatives not designated as hedging instruments | $ | 25,075 |  | $ | 41,842 |  |  | $ | (55,768) |  | $ | (12,101) |
Total | $ | 38,460 |  | $ | 41,842 |  |  | $ | (55,768) |  | $ | (12,101) |

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The pre-tax effects of derivative instruments on the consolidated statements of income and consolidated statements of comprehensive income are shown in the tables 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, 2022
Derivatives in cash flow hedging relationships:
Interest rate floors | $ | (3,464) |  | $ | — |  | $ | (3,464) |  |  | Interest and fees on loans | $ | (6,118) |  | $ | (7,745) |  | $ | 1,627 |
Total | $ | (3,464) |  | $ | — |  | $ | (3,464) |  |  | Total | $ | (6,118) |  | $ | (7,745) |  | $ | 1,627 |
For the Nine Months Ended September 30, 2022
Derivatives in cash flow hedging relationships:
Interest rate floors | $ | (3,464) |  | $ | — |  | $ | (3,464) |  |  | Interest and fees on loans | $ | (18,322) |  | $ | (22,998) |  | $ | 4,676 |
Total | $ | (3,464) |  | $ | — |  | $ | (3,464) |  |  | Total | $ | (18,322) |  | $ | (22,998) |  | $ | 4,676 |
For the Three Months Ended September 30, 2021
Derivatives in cash flow hedging relationships:
Interest rate floors | $ | — |  | $ | — |  | $ | — |  |  | Interest and fees on loans | $ | (6,141) |  | $ | (7,691) |  | $ | 1,550 |
Total | $ | — |  | $ | — |  | $ | — |  |  | Total | $ | (6,141) |  | $ | (7,691) |  | $ | 1,550 |
For the Nine Months Ended September 30, 2021
Derivatives in cash flow hedging relationships:
Interest rate floors | $ | — |  | $ | — |  | $ | — |  |  | Interest and fees on loans | $ | (18,024) |  | $ | (22,623) |  | $ | 4,599 |
Total | $ | — |  | $ | — |  | $ | — |  |  | Total | $ | (18,024) |  | $ | (22,623) |  | $ | 4,599 |

| 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) |  | 2022 | 2021 |  | 2022 | 2021
Derivative instruments: |  |  |  |  |  |
Interest rate swaps | Other non-interest income | $ | 88 |  | $ | 24 |  |  | $ | 1,770 |  | $ | 1,974 |
Interest rate caps | Other non-interest income | — |  | — |  |  | 16 |  | 15 |
Credit risk participation agreements | Other non-interest income | 122 |  | 47 |  |  | 30 |  | 27 |
Foreign exchange contracts | Other non-interest income | 3 |  | (22) |  |  | 3 |  | 62 |
Mortgage loan commitments | Loan fees and sales | (230) |  | (309) |  |  | (764) |  | (1,716) |
Mortgage loan forward sale contracts | Loan fees and sales | 5 |  | (10) |  |  | 1 |  | 18 |
Forward TBA contracts | Loan fees and sales | 117 |  | (184) |  |  | 1,783 |  | 1,676 |
Total |  | $ | 105 |  | $ | (454) |  |  | $ | 2,839 |  | $ | 2,056 |

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 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
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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, 2022 |  |  |  |  |  |
Assets: |  |  |  |  |  |
Derivatives subject to master netting agreements | $ | 38,357 |  | $ | — |  | $ | 38,357 |  | $ | (113) |  | $ | (35,763) |  | $ | 2,481 |
Derivatives not subject to master netting agreements | 103 |  | — |  | 103 |  |  |  |
Total derivatives | $ | 38,460 |  | $ | — |  | $ | 38,460 |  |  |  |
Liabilities: |  |  |  |  |  |
Derivatives subject to master netting agreements | $ | 55,681 |  | $ | — |  | $ | 55,681 |  | $ | (113) |  | $ | — |  | $ | 55,568 |
Derivatives not subject to master netting agreements | 87 |  | — |  | 87 |  |  |  |
Total derivatives | $ | 55,768 |  | $ | — |  | $ | 55,768 |  |  |  |
December 31, 2021 |  |  |  |  |  |
Assets: |  |  |  |  |  |
Derivatives subject to master netting agreements | $ | 40,970 |  | $ | — |  | $ | 40,970 |  | $ | (347) |  | $ | — |  | $ | 40,623 |
Derivatives not subject to master netting agreements | 872 |  | — |  | 872 |  |  |  |
Total derivatives | $ | 41,842 |  | $ | — |  | $ | 41,842 |  |  |  |
Liabilities: |  |  |  |  |  |
Derivatives subject to master netting agreements | $ | 12,019 |  | $ | — |  | $ | 12,019 |  | $ | (347) |  | $ | (10,146) |  | $ | 1,526 |
Derivatives not subject to master netting agreements | 82 |  | — |  | 82 |  |  |  |
Total derivatives | $ | 12,101 |  | $ | — |  | $ | 12,101 |  |  |  |

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 Company is party to agreements commonly known as collateral swaps. These agreements involve the exchange of collateral under simultaneous repurchase and resale agreements with the same financial institution counterparty. These repurchase and resale agreements have the same principal amounts, inception dates, and maturity dates and have been offset against each other in the consolidated balance sheets, as permitted under the netting provisions of ASC 210-20-45. The collateral swaps totaled $200.0 million at September 30, 2022 and $400.0 million at December 31, 2021.
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, 2022 |  |  |  |  |  |
Total resale agreements, subject to master netting arrangements | $ | 1,475,000 |  | $ | (200,000) |  | $ | 1,275,000 |  | $ | — |  | $ | (1,275,000) |  | $ | — |
Total repurchase agreements, subject to master netting arrangements | 2,203,390 |  | (200,000) |  | 2,003,390 |  | — |  | (2,003,390) |  | — |
December 31, 2021 |  |  |  |  |  |
Total resale agreements, subject to master netting arrangements | $ | 2,025,000 |  | $ | (400,000) |  | $ | 1,625,000 |  | $ | — |  | $ | (1,625,000) |  | $ | — |
Total repurchase agreements, subject to master netting arrangements | 3,379,582 |  | (400,000) |  | 2,979,582 |  | — |  | (2,979,582) |  | — |

The table below shows the remaining contractual maturities of repurchase agreements outstanding at September 30, 2022 and December 31, 2021, 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, 2022 |  |  |  |
Repurchase agreements, secured by: |  |  |  |
U.S. government and federal agency obligations | $ | 420,541 |  | $ | 8,759 |  | $ | 21,828 |  | $ | 451,128 |
Agency mortgage-backed securities | 1,178,459 |  | 20,721 |  | 202,859 |  | 1,402,039 |
Non-agency mortgage-backed securities | 42,141 |  | — |  | — |  | 42,141 |
Asset-backed securities | 296,075 |  | — |  | — |  | 296,075 |
Other debt securities | 12,007 |  | — |  | — |  | 12,007 |
Total repurchase agreements, gross amount recognized | $ | 1,949,223 |  | $ | 29,480 |  | $ | 224,687 |  | $ | 2,203,390 |
December 31, 2021 |  |  |  |
Repurchase agreements, secured by: |  |  |  |
U.S. government and federal agency obligations | $ | 600,866 |  | $ | 33,373 |  | $ | 9,259 |  | $ | 643,498 |
Agency mortgage-backed securities | 1,844,652 |  | 3,908 |  | 400,250 |  | 2,248,810 |
Non-agency mortgage-backed securities | 32,299 |  | — |  | — |  | 32,299 |
Asset-backed securities | 422,525 |  | — |  | — |  | 422,525 |
Other debt securities | 32,450 |  | — |  | — |  | 32,450 |
Total repurchase agreements, gross amount recognized | $ | 2,932,792 |  | $ | 37,281 |  | $ | 409,509 |  | $ | 3,379,582 |

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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 $4.2 million and $3.9 million in the three months ended September 30, 2022 and 2021, respectively, and $12.6 million and $11.6 million in the nine months ended September 30, 2022 and 2021, 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, 2022, and changes during the nine month period then ended, is presented below.

| Shares | Weighted Average Grant Date Fair Value
Nonvested at January 1, 2022 | 1,120,491 |  | $55.58
Granted | 263,497 |  | 70.76
Vested | (262,579) |  | 47.78
Forfeited | (23,145) |  | 60.08
Nonvested at September 30, 2022 | 1,098,264 |  | $61.00

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 | $17.42 |
Assumptions: |
Dividend yield | 1.5 | %
Volatility | 28.4 | %
Risk-free interest rate | 1.6 | %
Expected term | 5.7 years

A summary of SAR activity during the first nine months of 2022 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, 2022 | 896,348 |  | $ | 46.21 |  |  |
Granted | 96,318 |  | 70.64 |  |  |
Forfeited | (8,135) |  | 61.68 |  |  |
Expired | (2,350) |  | 56.68 |  |  |
Exercised | (66,608) |  | 40.54 |  |  |
Outstanding at September 30, 2022 | 915,573 |  | $ | 49.02 |  | 5.5 years | $ | 16,367 |

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14. Revenue from Contracts with Customers
ASC 606 "Revenue from Contracts with Customers" 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, 2022, 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 non-interest income subject to ASC 606 by major product line.

| Three Months Ended September 30 |  | Nine Months Ended September 30
(In thousands) | 2022 | 2021 |  | 2022 | 2021
Bank card transaction fees | $ | 45,638 |  | $ | 42,815 |  |  | $ | 131,556 |  | $ | 123,118 |
Trust fees | 45,406 |  | 48,950 |  |  | 140,009 |  | 139,334 |
Deposit account charges and other fees | 24,521 |  | 25,161 |  |  | 72,392 |  | 71,724 |
Consumer brokerage services | 5,085 |  | 4,900 |  |  | 14,599 |  | 13,484 |
Other non-interest income | 9,360 |  | 2,510 |  |  | 24,605 |  | 17,168 |
Total non-interest income from contracts with customers | 130,010 |  | 124,336 |  |  | 383,161 |  | 364,828 |
Other non-interest income (1) | 8,504 |  | 13,170 |  |  | 26,549 |  | 47,866 |
Total non-interest income | $ | 138,514 |  | $ | 137,506 |  |  | $ | 409,710 |  | $ | 412,694 |

(1) This revenue is not within the scope of ASC 606, and includes fees relating to capital market 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 contribute approximately 41% and 58%, respectively, of the Company's deposit account charge revenue. All trust fees and nearly all consumer brokerage services income are earned in the Wealth segment.
The following table presents the opening and closing receivable balances for the nine month periods ended September 30, 2022 and 2021 for the Company’s significant revenue categories subject to ASC 606.

(In thousands) | September 30, 2022 | December 31, 2021 | September 30, 2021 | December 31, 2020
Bank card transaction fees | $ | 14,167 |  | $ | 16,424 |  | $ | 13,349 |  | $ | 14,199 |
Trust fees | 2,073 |  | 2,222 |  | 2,211 |  | 2,071 |
Deposit account charges and other fees | 5,658 |  | 6,702 |  | 5,969 |  | 6,933 |
Consumer brokerage services | 632 |  | 391 |  | 513 |  | 432 |

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 2021 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, 2022 and December 31, 2021 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 2022 or the year ended December 31, 2021.

|  | 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, 2022 |  |  |  |
Assets: |  |  |  |
Residential mortgage loans held for sale | $ | 1,426 |  | $ | — |  | $ | 1,426 |  | $ | — |
Available for sale debt securities: |  |  |  |
U.S. government and federal agency obligations | 1,036,325 |  | 1,036,325 |  | — |  | — |
Government-sponsored enterprise obligations | 43,175 |  | — |  | 43,175 |  | — |
State and municipal obligations | 1,803,253 |  | — |  | 1,801,395 |  | 1,858 |
Agency mortgage-backed securities | 4,445,519 |  | — |  | 4,445,519 |  | — |
Non-agency mortgage-backed securities | 1,235,584 |  | — |  | 1,235,584 |  | — |
Asset-backed securities | 3,558,287 |  | — |  | 3,558,287 |  | — |
Other debt securities | 510,367 |  | — |  | 510,367 |  | — |
Trading debt securities | 39,222 |  | — |  | 39,222 |  | — |
Equity securities | 6,106 |  | 6,106 |  | — |  | — |
Private equity investments | 176,341 |  | — |  | — |  | 176,341 |
Derivatives * | 38,460 |  | — |  | 38,419 |  | 41 |
Assets held in trust for deferred compensation plan | 16,588 |  | 16,588 |  | — |  | — |
Total assets | 12,910,653 |  | 1,059,019 |  | 11,673,394 |  | 178,240 |
Liabilities: |  |  |  |
Derivatives * | 55,768 |  | — |  | 55,669 |  | 99 |
Liabilities held in trust for deferred compensation plan | 16,588 |  | 16,588 |  | — |  | — |
Total liabilities | $ | 72,356 |  | $ | 16,588 |  | $ | 55,669 |  | $ | 99 |
December 31, 2021 |  |  |  |
Assets: |  |  |  |
Residential mortgage loans held for sale | $ | 5,570 |  | $ | — |  | $ | 5,570 |  | $ | — |
Available for sale debt securities: |  |  |  |
U.S. government and federal agency obligations | 1,080,720 |  | 1,080,720 |  | — |  | — |
Government-sponsored enterprise obligations | 51,755 |  | — |  | 51,755 |  | — |
State and municipal obligations | 2,096,827 |  | — |  | 2,094,843 |  | 1,984 |
Agency mortgage-backed securities | 5,683,000 |  | — |  | 5,683,000 |  | — |
Non-agency mortgage-backed securities | 1,366,477 |  | — |  | 1,366,477 |  | — |
Asset-backed securities | 3,539,219 |  | — |  | 3,539,219 |  | — |
Other debt securities | 632,029 |  | — |  | 632,029 |  | — |
Trading debt securities | 46,235 |  | — |  | 46,235 |  | — |
Equity securities | 7,153 |  | 7,153 |  | — |  | — |
Private equity investments | 147,406 |  | — |  | — |  | 147,406 |
Derivatives * | 41,842 |  | — |  | 40,994 |  | 848 |
Assets held in trust for deferred compensation plan | 21,794 |  | 21,794 |  | — |  | — |
Total assets | 14,720,027 |  | 1,109,667 |  | 13,460,122 |  | 150,238 |
Liabilities: |  |  |  |
Derivatives * | 12,101 |  | — |  | 11,824 |  | 277 |
Liabilities held in trust for deferred compensation plan | 21,794 |  | 21,794 |  | — |  | — |
Total liabilities | $ | 33,895 |  | $ | 21,794 |  | $ | 11,824 |  | $ | 277 |

* The fair value of each class of derivative is shown in Note 11.
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The changes in 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 | Derivatives | Total
For the three months ended September 30, 2022 |  |  |  |
Balance June 30, 2022 | $ | 1,816 |  | $ | 161,771 |  | $ | 154 |  | $ | 163,741 |
Total gains or losses (realized/unrealized): |  |  |  |
Included in earnings | — |  | 14,050 |  | (108) |  | 13,942 |
Included in other comprehensive income * | 40 |  | — |  | — |  | 40 |
Discount accretion | 2 |  | — |  | — |  | 2 |
Purchases of private equity investments | — |  | 899 |  | — |  | 899 |
Sale/pay down of private equity investments | — |  | (423) |  | — |  | (423) |
Capitalized interest/dividends | — |  | 44 |  | — |  | 44 |
Sale of risk participation agreements | — |  | — |  | (104) |  | (104) |
Balance September 30, 2022 | $ | 1,858 |  | $ | 176,341 |  | $ | (58) |  | $ | 178,141 |
Total gains or losses for the three months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022 | $ | — |  | $ | 14,050 |  | $ | 122 |  | $ | 14,172 |
*Total gains or losses for the three months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022 | $ | 40 |  | $ | — |  | $ | — |  | $ | 40 |
For the nine months ended September 30, 2022 |  |  |  |
Balance January 1, 2022 | $ | 1,984 |  | $ | 147,406 |  | $ | 571 |  | $ | 149,961 |
Total gains or losses (realized/unrealized): |  |  |  |
Included in earnings | — |  | 37,133 |  | (734) |  | 36,399 |
Included in other comprehensive income * | (130) |  | — |  | — |  | (130) |
Discount accretion | 4 |  | — |  | — |  | 4 |
Purchases of private equity investments | — |  | 2,021 |  | — |  | 2,021 |
Sale/pay down of private equity investments | — |  | (10,263) |  | — |  | (10,263) |
Capitalized interest/dividends | — |  | 44 |  | — |  | 44 |
Purchase of risk participation agreement | — |  | — |  | 459 |  | 459 |
Sale of risk participation agreement | — |  | — |  | (354) |  | (354) |
Balance September 30, 2022 | $ | 1,858 |  | $ | 176,341 |  | $ | (58) |  | $ | 178,141 |
Total gains or losses for the nine months included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022 | $ | — |  | $ | 37,083 |  | $ | 28 |  | $ | 37,111 |
*Total gains or losses for the nine months included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2022 | $ | (130) |  | $ | — |  | $ | — |  | $ | (130) |

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| Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In thousands) | State and Municipal Obligations | Private Equity Investments | Derivatives | Total
For the three months ended September 30, 2021 |  |  |  |
Balance June 30, 2021 | $ | 7,991 |  | $ | 116,246 |  | $ | 1,629 |  | $ | 125,866 |
Total gains or losses (realized/unrealized): |  |  |  |
Included in earnings | — |  | 12,971 |  | (262) |  | 12,709 |
Included in other comprehensive income * | (175) |  | — |  | — |  | (175) |
Investment securities called | (6,000) |  | — |  | — |  | (6,000) |
Discount accretion | 179 |  | — |  | — |  | 179 |
Purchases of private equity investments | — |  | 8,835 |  | — |  | 8,835 |
Sale of risk participation agreement | — |  | — |  | (27) |  | (27) |
Balance September 30, 2021 | $ | 1,995 |  | $ | 138,052 |  | $ | 1,340 |  | $ | 141,387 |
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, 2021 | $ | — |  | $ | 12,971 |  | $ | 1,557 |  | $ | 14,528 |
*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, 2021 | $ | 2 |  | $ | — |  | $ | — |  | $ | 2 |
For the nine months ended September 30, 2021 |  |  |  |
Balance January 1, 2021 | $ | 7,968 |  | $ | 94,368 |  | $ | 2,741 |  | $ | 105,077 |
Total gains or losses (realized/unrealized): |  |  |  |
Included in earnings | — |  | 38,002 |  | (1,689) |  | 36,313 |
Included in other comprehensive income * | (158) |  | — |  | — |  | (158) |
Investment securities called | (6,000) |  | — |  | — |  | (6,000) |
Discount accretion | 185 |  | — |  | — |  | 185 |
Purchases of private equity investments | — |  | 14,491 |  | — |  | 14,491 |
Sale/pay down of private equity investments | — |  | (8,832) |  | — |  | (8,832) |
Capitalized interest/dividends | — |  | 23 |  | — |  | 23 |
Purchase of risk participation agreement | — |  | — |  | 445 |  | 445 |
Sale of risk participation agreement | — |  | — |  | (157) |  | (157) |
Balance September 30, 2021 | $ | 1,995 |  | $ | 138,052 |  | $ | 1,340 |  | $ | 141,387 |
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, 2021 | $ | — |  | $ | 38,002 |  | $ | 1,367 |  | $ | 39,369 |
*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, 2021 | $ | 23 |  | $ | — |  | $ | — |  | $ | 23 |

* Included in "net unrealized gains (losses) on available for sale debt securities" in the consolidated statements of comprehensive income.
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Gains and losses included in earnings for the Level 3 assets and liabilities in the previous table are reported in the following line items in the consolidated statements of income:

(In thousands) | Loan Fees and Sales | Other Non-Interest Income | Investment Securities Gains (Losses), Net | Total
For the three months ended September 30, 2022 |  |  |  |
Total gains or losses included in earnings | $ | (230) |  | $ | 122 |  | $ | 14,050 |  | $ | 13,942 |
Change in unrealized gains or losses relating to assets still held at September 30, 2022 | $ | — |  | $ | 122 |  | $ | 14,050 |  | $ | 14,172 |
For the nine months ended September 30, 2022 |  |  |  |
Total gains or losses included in earnings | $ | (764) |  | $ | 30 |  | $ | 37,133 |  | $ | 36,399 |
Change in unrealized gains or losses relating to assets still held at September 30, 2022 | $ | — |  | $ | 28 |  | $ | 37,083 |  | $ | 37,111 |
For the three months ended September 30, 2021 |  |  |  |
Total gains or losses included in earnings | $ | (309) |  | $ | 47 |  | $ | 12,971 |  | $ | 12,709 |
Change in unrealized gains or losses relating to assets still held at September 30, 2021 | $ | 1,510 |  | $ | 47 |  | $ | 12,971 |  | $ | 14,528 |
For the nine months ended September 30, 2021 |  |  |  |
Total gains or losses included in earnings | $ | (1,716) |  | $ | 27 |  | $ | 38,002 |  | $ | 36,313 |
Change in unrealized gains or losses relating to assets still held at September 30, 2021 | $ | 1,510 |  | $ | (143) |  | $ | 38,002 |  | $ | 39,369 |

Level 3 Inputs
The Company's significant Level 3 measurements, which employ unobservable inputs that are readily quantifiable, pertain to auction rate securities (ARS), investments in portfolio concerns held by the Company's private equity subsidiaries, and held for sale residential mortgage loan commitments. ARS are included in state and municipal securities and totaled $1.9 million at September 30, 2022, while private equity investments, included in other securities, totaled $176.3 million.
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*
Auction rate securities | Discounted cash flow | Estimated market recovery period |  |  | 5 years |  | 5 years
|  | Estimated market rate | 5.8% | - | 6.5% |  | 6.1%
Private equity investments | Market comparable companies | EBITDA multiple | 4.0 | - | 7.0 |  | 5.5
Mortgage loan commitments | Discounted cash flow | Probability of funding | 87.7% | - | 100.0% |  | 91.1%
|  | Embedded servicing value | 1.0% | - | 1.5% |  | 1.3%

* Unobservable inputs were weighted by the relative fair value of the instruments.
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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 2022 and 2021, and still held as of September 30, 2022 and 2021, 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, 2022 and 2021.

|  | 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, 2022 |  |  |  |  |
Collateral dependent loans | $ | 200 |  | $ | — |  | $ | — |  | $ | 200 |  | $ | (394) |
Mortgage servicing rights | 11,228 |  | — |  | — |  | 11,228 |  | 304 |
Long-lived assets | 480 |  | — |  | — |  | 480 |  | (965) |
September 30, 2021 |  |  |  |  |
Collateral dependent loans | $ | 2,057 |  | $ | — |  | $ | — |  | $ | 2,057 |  | $ | (349) |
Mortgage servicing rights | 9,774 |  | — |  | — |  | 9,774 |  | 1,120 |
Long- lived assets | 1,393 |  | — |  | — |  | 1,393 |  | (726) |

The Company's significant Level 3 measurements that are measured on a nonrecurring basis pertain to the Company's mortgage servicing rights retained on certain fixed rate personal real estate loan originations. Mortgage servicing rights are included in other intangible assets-net on the consolidated balance sheets, and information about these inputs at September 30, 2022 is presented in the table below.

Quantitative Information about Level 3 Fair Value Measurements |  |  |  | Weighted
| Valuation Technique | Unobservable Input | Range |  | Average*
Mortgage servicing rights | Discounted cash flow | Discount rate | 9.51 | % | - | 9.81 | % |  | 9.61 | %
|  | Prepayment speeds (CPR)* | 6.25 | % | - | 6.53 | % |  | 6.32 | %
|  | Loan servicing costs - annually per loan |  |  |  |  |
|  | Performing loans | $ | 70 |  | - | $ | 72 |  |  | $ | 71 |
|  | Delinquent loans | $ | 200 |  | - | $ | 750 |  |  |
|  | Loans in foreclosure | $ | 1,000 |  |  |  |  |

*Ranges and weighted averages based on interest rate tranches.
The significant unobservable inputs used in the fair value measurement of the Company’s mortgage servicing rights are updated periodically for changes in market conditions. Actual rates may differ from our estimates. Increases in prepayment speed and discount rates negatively impact the fair value of our mortgage servicing rights.
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.
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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, 2022 and December 31, 2021:

| Carrying Amount |  | Estimated Fair Value at September 30, 2022
(In thousands) |  | Level 1 | Level 2 | Level 3 | Total
Financial Assets |  |  |  |  |  |
Loans: |  |  |  |  |  |
Business | $ | 5,528,895 |  |  | $ | — |  | $ | — |  | $ | 5,384,563 |  | $ | 5,384,563 |
Real estate - construction and land | 1,206,955 |  |  | — |  | — |  | 1,191,317 |  | 1,191,317 |
Real estate - business | 3,331,627 |  |  | — |  | — |  | 3,214,321 |  | 3,214,321 |
Real estate - personal | 2,862,519 |  |  | — |  | — |  | 2,628,213 |  | 2,628,213 |
Consumer | 2,116,371 |  |  | — |  | — |  | 2,072,740 |  | 2,072,740 |
Revolving home equity | 286,026 |  |  | — |  | — |  | 282,993 |  | 282,993 |
Consumer credit card | 563,349 |  |  | — |  | — |  | 525,940 |  | 525,940 |
Overdrafts | 3,216 |  |  | — |  | — |  | 3,160 |  | 3,160 |
Total loans | 15,898,958 |  |  | — |  | — |  | 15,303,247 |  | 15,303,247 |
Loans held for sale | 8,062 |  |  | — |  | 8,062 |  | — |  | 8,062 |
Investment securities | 12,899,146 |  |  | 1,042,431 |  | 11,633,549 |  | 223,166 |  | 12,899,146 |
Federal funds sold | 14,020 |  |  | 14,020 |  | — |  | — |  | 14,020 |
Securities purchased under agreements to resell | 1,275,000 |  |  | — |  | — |  | 1,243,913 |  | 1,243,913 |
Interest earning deposits with banks | 642,943 |  |  | 642,943 |  | — |  | — |  | 642,943 |
Cash and due from banks | 344,178 |  |  | 344,178 |  | — |  | — |  | 344,178 |
Derivative instruments | 38,460 |  |  | — |  | 38,419 |  | 41 |  | 38,460 |
Assets held in trust for deferred compensation plan | 16,588 |  |  | 16,588 |  | — |  | — |  | 16,588 |
Total | $ | 31,137,355 |  |  | $ | 2,060,160 |  | $ | 11,680,030 |  | $ | 16,770,367 |  | $ | 30,510,557 |
Financial Liabilities |  |  |  |  |  |
Non-interest bearing deposits | $ | 10,468,591 |  |  | $ | 10,468,591 |  | $ | — |  | $ | — |  | $ | 10,468,591 |
Savings, interest checking and money market deposits | 16,014,487 |  |  | 16,014,487 |  | — |  | — |  | 16,014,487 |
Certificates of deposit | 988,238 |  |  | — |  | — |  | 972,605 |  | 972,605 |
Federal funds purchased | 311,200 |  |  | 311,200 |  | — |  | — |  | 311,200 |
Securities sold under agreements to repurchase | 2,003,390 |  |  | — |  | — |  | 2,004,755 |  | 2,004,755 |
Other borrowings | 985 |  |  | — |  | 985 |  | — |  | 985 |
Derivative instruments | 55,768 |  |  | — |  | 55,669 |  | 99 |  | 55,768 |
Liabilities held in trust for deferred compensation plan | 16,588 |  |  | 16,588 |  | — |  | — |  | 16,588 |
Total | $ | 29,859,247 |  |  | $ | 26,810,866 |  | $ | 56,654 |  | $ | 2,977,459 |  | $ | 29,844,979 |

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| Carrying Amount |  | Estimated Fair Value at December 31, 2021
(In thousands) |  | Level 1 | Level 2 | Level 3 | Total
Financial Assets |  |  |  |  |  |
Loans: |  |  |  |  |  |
Business | $ | 5,303,535 |  |  | $ | — |  | $ | — |  | $ | 5,229,153 |  | $ | 5,229,153 |
Real estate - construction and land | 1,118,266 |  |  | — |  | — |  | 1,099,747 |  | 1,099,747 |
Real estate - business | 3,058,837 |  |  | — |  | — |  | 3,054,481 |  | 3,054,481 |
Real estate - personal | 2,805,401 |  |  | — |  | — |  | 2,809,490 |  | 2,809,490 |
Consumer | 2,032,225 |  |  | — |  | — |  | 2,031,408 |  | 2,031,408 |
Revolving home equity | 275,945 |  |  | — |  | — |  | 273,450 |  | 273,450 |
Consumer credit card | 575,410 |  |  | — |  | — |  | 536,468 |  | 536,468 |
Overdrafts | 6,740 |  |  | — |  | — |  | 6,458 |  | 6,458 |
Total loans | 15,176,359 |  |  | — |  | — |  | 15,040,655 |  | 15,040,655 |
Loans held for sale | 8,615 |  |  | — |  | 8,615 |  | — |  | 8,615 |
Investment securities | 14,695,628 |  |  | 1,087,873 |  | 13,413,558 |  | 194,197 |  | 14,695,628 |
Federal funds sold | 2,800 |  |  | 2,800 |  | — |  | — |  | 2,800 |
Securities purchased under agreements to resell | 1,625,000 |  |  | — |  | — |  | 1,623,856 |  | 1,623,856 |
Interest earning deposits with banks | 3,971,217 |  |  | 3,971,217 |  | — |  | — |  | 3,971,217 |
Cash and due from banks | 305,539 |  |  | 305,539 |  | — |  | — |  | 305,539 |
Derivative instruments | 41,842 |  |  | — |  | 40,994 |  | 848 |  | 41,842 |
Assets held in trust for deferred compensation plan | 21,794 |  |  | 21,794 |  | — |  | — |  | 21,794 |
Total | $ | 35,848,794 |  |  | $ | 5,389,223 |  | $ | 13,463,167 |  | $ | 16,859,556 |  | $ | 35,711,946 |
Financial Liabilities |  |  |  |  |  |
Non-interest bearing deposits | $ | 11,772,374 |  |  | $ | 11,772,374 |  | $ | — |  | $ | — |  | $ | 11,772,374 |
Savings, interest checking and money market deposits | 16,598,085 |  |  | 16,598,085 |  | — |  | — |  | 16,598,085 |
Certificates of deposit | 1,442,614 |  |  | — |  | — |  | 1,438,919 |  | 1,438,919 |
Federal funds purchased | 43,385 |  |  | 43,385 |  | — |  | — |  | 43,385 |
Securities sold under agreements to repurchase | 2,979,582 |  |  | — |  | — |  | 2,979,677 |  | 2,979,677 |
Other borrowings | 12,514 |  |  | — |  | 12,514 |  | — |  | 12,514 |
Derivative instruments | 12,101 |  |  | — |  | 11,824 |  | 277 |  | 12,101 |
Liabilities held in trust for deferred compensation plan | 21,794 |  |  | 21,794 |  | — |  | — |  | 21,794 |
Total | $ | 32,882,449 |  |  | $ | 28,435,638 |  | $ | 24,338 |  | $ | 4,418,873 |  | $ | 32,878,849 |

17. Legal and Regulatory Proceedings
The Company has various legal proceedings pending at September 30, 2022, 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 2021 Annual Report on Form 10-K. Results of operations for the nine month periods ended September 30, 2022 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, the effects of the COVID-19 pandemic, 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 2021 Annual Report on Form 10-K. During the quarter ended September 30, 2022, there were no material changes to the Risk Factors disclosed in the Company's 2021 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 2021 Annual Report on Form 10-K. There have been no changes in the Company's application of critical accounting policies since December 31, 2021.
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Selected Financial Data

| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2022 | 2021 |  | 2022 | 2021
Per Share Data |  |  |  |  |
Net income per common share — basic | $ | 1.03 |  | $ | 1.00 | * |  | $ | 2.96 |  | $ | 3.38 | *
Net income per common share — diluted | 1.02 |  | .99 | * |  | 2.95 |  | 3.37 | *
Cash dividends on common stock | .265 |  | .250 | * |  | .795 |  | .750 | *
Book value per common share |  |  |  | 19.86 |  | 28.58 | *
Market price |  |  |  | 66.16 |  | 66.36 | *
Selected Ratios |  |  |  |  |
(Based on average balance sheets) |  |  |  |  |
Loans to deposits (1) | 56.40 | % | 54.44 | % |  | 54.05 | % | 57.91 | %
Non-interest bearing deposits to total deposits | 38.76 |  | 40.90 |  |  | 39.04 |  | 40.15 |
Equity to loans (1) | 17.45 |  | 23.17 |  |  | 19.19 |  | 21.68 |
Equity to deposits | 9.84 |  | 12.62 |  |  | 10.37 |  | 12.56 |
Equity to total assets | 8.31 |  | 10.22 |  |  | 8.66 |  | 10.22 |
Return on total assets | 1.48 |  | 1.40 |  |  | 1.39 |  | 1.65 |
Return on equity | 17.84 |  | 13.74 |  |  | 16.08 |  | 16.14 |
(Based on end-of-period data) |  |  |  |  |
Non-interest income to revenue (2) | 35.99 |  | 39.11 |  |  | 37.34 |  | 39.66 |
Efficiency ratio (3) | 55.19 |  | 59.95 |  |  | 57.48 |  | 57.76 |
Tier I common risk-based capital ratio |  |  |  | 13.97 |  | 14.02 |
Tier I risk-based capital ratio |  |  |  | 13.97 |  | 14.02 |
Total risk-based capital ratio |  |  |  | 14.69 |  | 14.83 |
Tangible common equity to tangible assets ratio (4) |  |  |  | 6.80 |  | 9.71 |
Tier I leverage ratio |  |  |  | 9.87 |  | 9.31 |

* Restated for the 5% stock dividend distributed in December 2021.
(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) | 2022 | 2021
Total equity | $ | 2,371,107 |  | $ | 3,491,221 |
Less non-controlling interest | 19,513 |  | 10,551 |
Less goodwill | 138,921 |  | 138,921 |
Less intangible assets* | 4,371 |  | 4,684 |
Total tangible common equity (a) | $ | 2,208,302 |  | $ | 3,337,065 |
Total assets | $ | 32,602,596 |  | $ | 34,497,543 |
Less goodwill | 138,921 |  | 138,921 |
Less intangible assets* | 4,371 |  | 4,684 |
Total tangible assets (b) | $ | 32,459,304 |  | $ | 34,353,938 |
Tangible common equity to tangible assets ratio (a)/(b) | 6.80 | % | 9.71 | %

* 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) | 2022 | 2021 | % change |  |  |  | 2022 | 2021 | % change |  |
Net interest income | $ | 246,373 |  | $ | 214,037 |  | 15.1 | % |  |  |  | $ | 687,544 |  | $ | 627,767 |  | 9.5 | % |  |
Provision for credit losses | (15,290) |  | 7,385 |  | 307.0 |  |  |  |  | (12,594) |  | 59,272 |  | 121.2 |  |  |
Non-interest income | 138,514 |  | 137,506 |  | .7 |  |  |  |  | 409,710 |  | 412,694 |  | (.7) |  |  |
Investment securities gains, net | 3,410 |  | 13,108 |  | (74.0) |  |  |  |  | 11,602 |  | 39,765 |  | (70.8) |  |  |
Non-interest expense | (212,884) |  | (211,620) |  | .6 |  |  |  |  | (632,037) |  | (602,319) |  | 4.9 |  |  |
Income taxes | (33,936) |  | (34,662) |  | (2.1) |  |  |  |  | (97,859) |  | (111,947) |  | (12.6) |  |  |
Non-controlling interest expense | (3,364) |  | (3,193) |  | 5.4 |  |  |  |  | (9,595) |  | (9,373) |  | 2.4 |  |  |
Net income attributable to Commerce Bancshares, Inc. | $ | 122,823 |  | $ | 122,561 |  | .2 | % |  |  |  | $ | 356,771 |  | $ | 415,859 |  | (14.2 | %) |  |

For the quarter ended September 30, 2022, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $122.8 million, an increase of $262 thousand, or .2%, compared to the third quarter of the previous year. For the current quarter, the annualized return on average assets was 1.48%, the annualized return on average equity was 17.84%, and the efficiency ratio was 55.19%. Diluted earnings per common share was $1.02, an increase of 3.0% compared to $0.99 per share in the third quarter of 2021, and increased 6.3% compared to $.96 per share in the previous quarter.
Compared to the third quarter of last year, net interest income increased $32.3 million, or 15.1%, mainly due to increases of $28.4 million in interest income on loans and $15.7 million in interest income on investment securities, partly offset by an increase in deposits and borrowings interest expense of $13.3 million. The provision for credit losses increased $22.7 million due to an increase in the estimate of the allowance for credit losses on loans and unfunded lending commitments and higher net loan charge-offs, coupled with the release of allowances associated with certain pandemic-related estimates in the third quarter of 2021. Non-interest income increased $1.0 million, or .7%, compared to the third quarter of 2021, mainly due to increases in net bank card fees and cash sweep commissions, partly offset by lower loan fees and sales and trust fees. Net gains on investment securities totaled $3.4 million in the current quarter compared to net gains of $13.1 million in the same quarter of last year. Net securities gains in the current quarter primarily resulted from net fair value gains of $14.1 million in the Company's private equity investment portfolio, partly offset by a loss of $10.7 million on the sale of an available for sale security. Non-interest expense increased $1.3 million, or .6%, over the third quarter of 2021 mainly due to higher salaries expense, data processing and software expense and travel and entertainment expense, partly offset by $8.2 million in litigation settlement costs recorded in 2021.
Net income for the first nine months of 2022 was $356.8 million, a decrease of $59.1 million, or 14.2%, from the same period last year. Diluted earnings per common share was $2.95, a decrease of 12.5% compared to $3.37 per share in the same period last year. For the first nine months of 2022, the annualized return on average assets was 1.39%, the annualized return on average equity was 16.08%, and the efficiency ratio was 57.48%. Net interest income increased $59.8 million, or 9.5%, over the same period last year. This growth was due to increases of $70.7 million in interest income on investment securities, $11.8 million in interest income on loans and $7.0 million in interest earned on balances with the Federal Reserve, partly offset by a decrease in interest income on securities purchased under agreements to resell of $14.9 million and an increase in deposits and borrowings interest expense of $15.0 million. The provision for credit losses was expense of $12.6 million for the first nine months of 2022, compared to a recovery of $59.3 million in the same period last year, resulting in an increase in provision expense of $71.9 million. Non-interest income decreased $3.0 million, or .7%, from the first nine months of last year mainly due to lower loan fees and sales, partly offset by higher net bank card fees. Non-interest expense increased $29.7 million, or 4.9%, over the first nine months of last year mainly due to increases in salaries and benefits expense and data processing and software 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, 2022 vs. 2021 |  | Nine Months Ended September 30, 2022 vs. 2021
| 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 | $ | (851) |  | $ | 6,632 |  | $ | 5,781 |  |  | $ | (17,148) |  | $ | 5,205 |  | $ | (11,943) |
Real estate - construction and land | 1,063 |  | 5,744 |  | 6,807 |  |  | 2,655 |  | 7,955 |  | 10,610 |
Real estate - business | 2,401 |  | 7,693 |  | 10,094 |  |  | 4,334 |  | 8,267 |  | 12,601 |
Real estate - personal | 567 |  | 644 |  | 1,211 |  |  | 612 |  | (523) |  | 89 |
Consumer | 564 |  | 2,461 |  | 3,025 |  |  | 2,100 |  | (776) |  | 1,324 |
Revolving home equity | (7) |  | 964 |  | 957 |  |  | (348) |  | 1,209 |  | 861 |
Consumer credit card | (465) |  | 1,064 |  | 599 |  |  | (3,384) |  | 1,716 |  | (1,668) |
Overdrafts | — |  | — |  | — |  |  | — |  | — |  | — |
Total interest on loans | 3,272 |  | 25,202 |  | 28,474 |  |  | (11,179) |  | 23,053 |  | 11,874 |
Loans held for sale | (70) |  | 42 |  | (28) |  |  | (413) |  | 147 |  | (266) |
Investment securities: |  |  |  |  |  |  |
U.S. government and federal agency securities | 5,583 |  | (3,444) |  | 2,139 |  |  | 13,376 |  | (2,604) |  | 10,772 |
Government-sponsored enterprise obligations | 29 |  | 8 |  | 37 |  |  | 64 |  | 13 |  | 77 |
State and municipal obligations | 77 |  | (381) |  | (304) |  |  | 1,742 |  | (1,866) |  | (124) |
Mortgage-backed securities | (1,032) |  | 6,894 |  | 5,862 |  |  | 1,740 |  | 33,031 |  | 34,771 |
Asset-backed securities | 2,294 |  | 5,283 |  | 7,577 |  |  | 12,360 |  | 4,424 |  | 16,784 |
Other securities | 379 |  | (130) |  | 249 |  |  | 3,374 |  | 4,489 |  | 7,863 |
Total interest on investment securities | 7,330 |  | 8,230 |  | 15,560 |  |  | 32,656 |  | 37,487 |  | 70,143 |
Federal funds sold | 18 |  | 75 |  | 93 |  |  | 23 |  | 88 |  | 111 |
Securities purchased under agreements to resell | (1,401) |  | (1,622) |  | (3,023) |  |  | 12,316 |  | (27,198) |  | (14,882) |
Interest earning deposits with banks | (613) |  | 5,189 |  | 4,576 |  |  | (599) |  | 7,641 |  | 7,042 |
Total interest income | 8,536 |  | 37,116 |  | 45,652 |  |  | 32,804 |  | 41,218 |  | 74,022 |
Interest expense: |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |
Savings | 22 |  | (134) |  | (112) |  |  | 95 |  | (426) |  | (331) |
Interest checking and money market | 183 |  | 5,657 |  | 5,840 |  |  | 720 |  | 5,430 |  | 6,150 |
Certificates of deposit of less than $100,000 | (30) |  | 235 |  | 205 |  |  | (163) |  | (88) |  | (251) |
Certificates of deposit of $100,000 and over | (156) |  | 577 |  | 421 |  |  | (269) |  | (136) |  | (405) |
Total interest on deposits | 19 |  | 6,335 |  | 6,354 |  |  | 383 |  | 4,780 |  | 5,163 |
Federal funds purchased | 10 |  | 302 | 312 |  | 17 |  | 518 |  | 535 |
Securities sold under agreements to repurchase | (30) |  | 7,129 |  | 7,099 |  |  | 95 |  | 9,764 |  | 9,859 |
Other borrowings | 5 |  | 3 |  | 8 |  |  | 9 |  | 8 |  | 17 |
Total interest expense | 4 |  | 13,769 |  | 13,773 |  |  | 504 |  | 15,070 |  | 15,574 |
Net interest income, tax equivalent basis | $ | 8,532 |  | $ | 23,347 |  | $ | 31,879 |  |  | $ | 32,300 |  | $ | 26,148 |  | $ | 58,448 |

Net interest income in the third quarter of 2022 was $246.4 million, an increase of $32.3 million over the third quarter of 2021. On a fully taxable-equivalent (FTE) basis, net interest income totaled $248.7 million in the third quarter of 2022, up $31.9 million over the same period last year and up $13.7 million over the previous quarter. The increase in net interest income
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compared to the third quarter of 2021 was mainly due to higher interest income earned on loans (FTE) of $28.5 million and investment securities (FTE) of $15.6 million, partly offset by higher interest expense on deposits and borrowings of $13.8 million. The increase in total interest earned on loans (FTE) was the result of higher loan yields on all loan products, especially commercial loans, many of which have variable rates, coupled with higher average balances. The increase in interest on investment securities (FTE) was the result of higher average rates earned and average balances, while the increase in interest expense was due to higher rates paid on deposits and borrowings. The Company's net yield on earning assets (FTE) was 3.01% in the current quarter compared to 2.58% in the third quarter of 2021.
Total interest income (FTE) increased $45.7 million over the third quarter of 2021. Interest income on loans (FTE) was $172.4 million during the third quarter of 2022, an increase of $28.5 million, or 19.8%, over the same quarter last year. The increase in interest income over the same quarter last year was primarily due to an increase of 63 basis points in the average rate earned and growth of $386.9 million, or 2.5%, in average loan balances. Most of the increase in interest income occurred in the business, business real estate, construction and consumer loan categories. The largest increase to interest income occurred in business real estate loan interest, which grew $10.1 million due to a 94 basis point increase in the average rate earned, coupled with growth in average balances of $275.3 million, or 9.2%. Business loan interest income increased $5.8 million due to an increase of 51 basis points in the average rate earned, partly offset by a decline of $119.8 million in average balances. Construction and land loan interest grew $6.8 million due to a 176 basis point increase in the average rate earned and growth of $120.2 million, or 10.3%, in average loan balances. Consumer loan interest increased $3.0 million due to an increase of 46 basis points in the average rate earned and growth in average balances of $60.4 million, or 3.0%.
Interest income on investment securities (FTE) was $81.3 million during the third quarter of 2022, which was an increase of $15.6 million over the same quarter last year. The increase in interest income occurred mainly in interest earned on asset-backed securities, which rose $7.6 million due to an increase of 54 basis points in the average rate earned, coupled with higher average balances of $842.9 million, or 27.8%. Interest income earned on mortgage-backed securities increased $5.9 million due to an increase in the average rate earned of 40 basis points, partly offset by a decline of $267.5 million, or 3.8%, in the average balance. In addition, a $1.5 million increase in premium amortization, reflecting slower forward prepayment speed estimates was recorded in the current quarter, compared to a premium amortization adjustment increase of $5.0 million in the prior year. Interest on U.S. government and federal agency obligations grew $2.1 million mainly due to higher average balances of $385.9 million, or 53.0%, and an increase in inflation income on the Company's U.S. Treasury inflation-protected securities (TIPS), while a decrease of 123 basis points in the average rate earned partly offset these increases in income. Interest income related to TIPS, which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), increased $1.8 million over the same quarter last year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $14.8 billion in the third quarter of 2022, compared to $13.8 billion in the third quarter of 2021.
Interest income on securities purchased under agreements to resell decreased $3.0 million from the same quarter last year, due to a decrease of 47 basis points in the average rate earned and a decline of $253.9 million in the average balance. Interest income on balances at the Federal Reserve grew $4.6 million due to an increase of 210 basis points in the average rate earned, partly offset by a decrease of $1.6 billion in the average balance invested.
The average fully taxable-equivalent yield on total interest earning assets was 3.21% in the third quarter of 2022, up from 2.62% in the third quarter of 2021.
Total interest expense increased $13.8 million compared to the third quarter of 2021 due to increases in interest expense of $6.4 million on interest bearing deposits and $7.4 million on borrowings. The increase in deposit interest expense resulted mainly from an increase of $5.8 million in interest expense on interest checking and money market deposit accounts due to a 15 basis point increase in the average rate paid and higher average balances of $1.1 billion. Interest expense on borrowings was higher due to an increase of 129 basis points in the average rate paid on customer repurchase agreements. The overall average rate incurred on all interest bearing liabilities was .34% and .06% in the third quarters of 2022 and 2021, respectively.
Net interest income (FTE) for the first nine months of 2022 was $695.1 million compared to $636.7 million for the same period in 2021. For the first nine months of 2022, the net interest margin was 2.75% compared to 2.63% for the same period in 2021.
Total interest income (FTE) for the first nine months of 2022 increased $58.4 million over the same period last year mainly due to higher interest income on investment securities (FTE) and loans (FTE), partly offset by lower interest earned on securities purchased under agreements to resell and higher interest expense. Loan interest income (FTE) grew $11.9 million, or 2.7%, due to a 20 basis point increase in the average rate earned, partly offset by a $403.8 million decrease in average loan balances. Most of the increase in loan interest occurred in the business real estate and construction loan categories due to
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higher average rates and balances. In addition, consumer loan interest increased due to higher average balances, partly offset by lower rates earned. These increases were partly offset by lower interest earned on business and credit card loans due to lower average balances, partly offset by higher rates earned. Interest income on investment securities (T/E) increased $70.1 million due to a 37 basis point increase in the average rate earned and a $2.1 billion increase in average balances. Interest earned on U.S. government and federal agency obligations increased $10.8 million, mainly due to higher TIPS interest income. Interest earned on mortgage-backed securities increased $34.8 million mainly due to higher average rates earned, while interest on asset-backed securities increased $16.8 million due to higher average balances and average rates earned. Interest earned on other securities increased $7.9 million mainly due to the receipt of $6.5 million in non-accrual interest on the sale of a private equity investment in the second quarter of 2022. Interest income on securities purchased under agreements to resell decreased $14.9 million due to lower rates earned, partly offset by higher average balances, while interest income on balances at the Federal Reserve increased $7.0 million due to higher average rates earned.
Total interest expense for the first nine months of 2022 increased $15.6 million compared to the same period last year. Interest on deposits increased $5.2 million, mainly due to a four basis point increase in the overall rate. Interest expense on interest checking and money market accounts increased $6.2 million due to a five basis point increase in the average rate and higher average balances. Interest expense on borrowings increased $10.4 million, mainly due to higher rates paid on customer repurchase agreements. The overall cost of total interest bearing liabilities increased to .17% compared to .07% 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) | 2022 | 2021 |  | Amount | % change |  |  |  |  | 2022 | 2021 | Amount | % change |  |  |
Trust fees | $ | 45,406 | $ | 48,950 |  | (3,544) |  | (7.2) | % |  |  |  |  | $ | 140,009 | $ | 139,334 | 675 |  | .5 | % |  |  |
Bank card transaction fees | 45,638 | 42,815 |  | 2,823 |  | 6.6 |  |  |  |  |  | 131,556 | 123,118 | 8,438 |  | 6.9 |  |  |  |
Deposit account charges and other fees | 24,521 | 25,161 |  | (640) |  | (2.5) |  |  |  |  |  | 72,392 | 71,724 | 668 |  | .9 |  |  |  |
Consumer brokerage services | 5,085 | 4,900 |  | 185 |  | 3.8 |  |  |  |  |  | 14,599 | 13,484 | 1,115 |  | 8.3 |  |  |  |
Capital market fees | 3,393 | 3,794 |  | (401) |  | (10.6) |  |  |  |  |  | 10,845 | 12,102 | (1,257) |  | (10.4) |  |  |  |
Loan fees and sales | 3,094 | 6,842 |  | (3,748) |  | (54.8) |  |  |  |  |  | 10,575 | 24,472 | (13,897) |  | (56.8) |  |  |  |
Other | 11,377 | 5,044 |  | 6,333 |  | 125.6 |  |  |  |  |  | 29,734 | 28,460 | 1,274 |  | 4.5 |  |  |  |
Total non-interest income | $ | 138,514 | $ | 137,506 |  | $ | 1,008 |  | .7 | % |  |  |  |  | $ | 409,710 | $ | 412,694 | (2,984) |  | (.7 | %) |  |  |
Non-interest income as a % of total revenue* | 36.0 | % | 39.1 | % |  |  |  |  |  |  |  | 37.3 | % | 39.7 | % |  |  |  |  |

* Total revenue includes net interest income and non-interest income.
The table below is a summary of net bank card transaction fees for the three and nine month periods ended September 30, 2022 and 2021.

| Three Months Ended September 30 |  |  |  | Nine Months Ended September 30 |  |  |
(Dollars in thousands) | 2022 | 2021 | $ change | % change |  |  |  | 2022 | 2021 | $ change | % change |  |  |
Net debit card fees | $ | 10,508 |  | $ | 10,402 |  | $ | 106 |  | 1.0 | % |  |  |  | $ | 30,593 |  | $ | 30,274 |  | $ | 319 |  | 1.1 | % |  |  |
Net credit card fees | 3,597 |  | 3,863 |  | (266) |  | (6.9) |  |  |  |  | 11,031 |  | 11,389 |  | (358) |  | (3.1) |  |  |  |
Net merchant fees | 5,232 |  | 5,202 |  | 30 |  | .6 |  |  |  |  | 15,146 |  | 14,711 |  | 435 |  | 3.0 |  |  |  |
Net corporate card fees | 26,301 |  | 23,348 |  | 2,953 |  | 12.6 |  |  |  |  | 74,786 |  | 66,744 |  | 8,042 |  | 12.0 |  |  |  |
Total bank card transaction fees | $ | 45,638 |  | $ | 42,815 |  | $ | 2,823 |  | 6.6 | % |  |  |  | $ | 131,556 |  | $ | 123,118 |  | $ | 8,438 |  | 6.9 | % |  |  |

For the third quarter of 2022, total non-interest income amounted to $138.5 million compared to $137.5 million in the same quarter last year, which was an increase of $1.0 million, or .7%. The increase was mainly due to higher bank card and other non-interest income, partly offset by lower trust fees and loan fees and sales. Bank card transaction fees for the current quarter grew $2.8 million, or 6.6%, over the same period last year, mainly due to growth of $3.0 million in net corporate card fees. The growth in net corporate card fees was mainly due to higher interchange income, partly offset by higher rewards expense. Trust fees for the quarter decreased $3.5 million, or 7.2%, from the same quarter last year, resulting from lower private client fees and institutional trust fees. Compared to the third quarter of last year, deposit account fees decreased $640 thousand, or 2.5%, mainly due to lower overdraft and return item fees. In September 2022, the Company implemented enhancements to consumer checking accounts that eliminate return item fees and are expected to lower overdraft fees for our customers. Consumer brokerage service fees increased $185 thousand, or 3.8%, due to growth in annuity and mutual fund fees, while loan fees and sales decreased $3.7 million, or 54.8%, due to a decline in mortgage banking revenue. Other non-interest income increased $6.3 million, or 125.6%, mainly due to higher cash sweep commissions and tax credit sales fees of $3.4 million and $1.1 million, respectively. Additionally, a $2.0 million loss on an equity method investment was recorded in the third quarter of 2021.
Non-interest income for the first nine months of 2022 was $409.7 million, compared to $412.7 million in the first nine months of 2021, resulting in a decrease of $3.0 million, or .7%. Bank card fees increased $8.4 million, or 6.9%, mainly due to growth of $8.0 million in net corporate card fees. Trust fees increased $675 thousand, or .5%, mainly due to growth in private client trust fees, partly offset by lower institutional trust fees. Deposit account fees increased $668 thousand, or .9%, mainly due to higher corporate cash management fees, partly offset by lower personal account deposit fees. Capital market fees declined $1.3 million, or 10.4%, while consumer brokerage service fees increased $1.1 million, or 8.3%, due to higher annuity and mutual fund fees, partly offset by lower advisory fees. Loan fees and sales decreased $13.9 million, or 56.8%, due to lower mortgage banking revenue. Other income increased $1.3 million, or 4.5%, mainly due to higher cash sweep commissions of $5.3 million and tax credit sales fees of $1.2 million, income of $2.2 million from a life insurance death benefit recorded in the second quarter of 2022, a $2.6 million loss on an equity method investment recorded in 2021 and a lease impairment of $1.1 million recorded in 2021. These increases were partly offset by gains of $3.7 million recorded on branch sales last year coupled with a write-down of $965 thousand on a branch location recorded in the first quarter of 2022. In addition, a decrease of $6.8 million in fair value adjustments was recorded on the Company's deferred compensation plan assets, which are held in a trust, recorded as both an asset and a liability, and affect both other income and other expense.
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Investment Securities Gains (Losses), Net

| Three Months Ended September 30 |  | Nine Months Ended September 30
(In thousands) | 2022 | 2021 |  | 2022 | 2021
Net losses on sales of available for sale debt securities | $ | (10,692) |  | $ | — |  |  | $ | (20,274) |  | $ | — |
Fair value adjustments on equity securities, net | (25) |  | 137 |  |  | (1,048) |  | 152 |
Net gains (losses) on sales of private equity investments | 77 |  | — |  |  | (4,209) |  | 1,611 |
Fair value adjustments on private equity investments | 14,050 |  | 12,971 |  |  | 37,133 |  | 38,002 |
Total investment securities gains, net | $ | 3,410 |  | $ | 13,108 |  |  | $ | 11,602 |  | $ | 39,765 |

Net gains on investment securities, which were recognized in earnings during the three months ended September 30, 2022 and 2021, are shown in the table above. Net securities gains of $3.4 million were reported in the third quarter of 2022, compared to net gains of $13.1 million in the same period last year. The net gains in the third quarter of 2022 were primarily comprised of $14.1 million of net gains in fair value on the Company’s private equity investments, partially offset by a loss of $10.7 million on the sale of an available for sale security. The net gains on investment securities for the same quarter last year were mainly comprised of $13.0 million of net gains in fair value on the Company’s private equity investments.
Net gains on investment securities of $11.6 million were recognized in earnings for the nine months ended September 30, 2022, compared to net gains of $39.8 million for the same period in 2021. Net gains in the first nine months of 2022 were mainly comprised of net gains of $37.1 million on private equity investments, due to fair value adjustments, offset by losses of $20.3 million on sales of available for sale securities, net losses of $4.2 million on sales of private equity investments, and net losses in fair value of $1.0 million on equity investments. Net gains in the first nine months of 2021 were mainly comprised of a gain of $1.6 million on the sale of a private equity investment and $38.0 million of net gains in fair value on private equity investments. 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 $6.6 million during the first nine months of 2022 and expense of $7.7 million during the first nine months of 2021.
Non-Interest Expense

| Three Months Ended September 30 |  | Increase (Decrease) |  |  |  |  |  | Nine Months Ended September 30 | Increase (Decrease) |  |  |  |
(Dollars in thousands) | 2022 | 2021 |  | Amount | % change |  |  |  |  | 2022 | 2021 | Amount | % change |  |  |
Salaries and employee benefits | $ | 137,393 |  | $ | 132,824 |  |  | $ | 4,569 |  | 3.4 | % |  |  |  |  | $ | 415,589 |  | $ | 392,608 |  | $ | 22,981 |  | 5.9 | % |  |  |
Data processing and software | 28,050 |  | 25,598 |  |  | 2,452 |  | 9.6 |  |  |  |  |  | 82,701 |  | 76,015 |  | 6,686 |  | 8.8 |  |  |  |
Net occupancy | 12,544 |  | 12,329 |  |  | 215 |  | 1.7 |  |  |  |  |  | 37,343 |  | 35,877 |  | 1,466 |  | 4.1 |  |  |  |
Equipment | 5,036 |  | 4,440 |  |  | 596 |  | 13.4 |  |  |  |  |  | 14,338 |  | 13,398 |  | 940 |  | 7.0 |  |  |  |
Supplies and communication | 4,581 |  | 4,530 |  |  | 51 |  | 1.1 |  |  |  |  |  | 13,655 |  | 12,688 |  | 967 |  | 7.6 |  |  |  |
Marketing | 6,228 |  | 5,623 |  |  | 605 |  | 10.8 |  |  |  |  |  | 18,408 |  | 16,461 |  | 1,947 |  | 11.8 |  |  |  |
Other | 19,052 |  | 26,276 |  |  | (7,224) |  | (27.5) |  |  |  |  |  | 50,003 |  | 55,272 |  | (5,269) |  | (9.5) |  |  |  |
Total non-interest expense | $ | 212,884 |  | $ | 211,620 |  |  | $ | 1,264 |  | .6 | % |  |  |  |  | $ | 632,037 |  | $ | 602,319 |  | $ | 29,718 |  | 4.9 | % |  |  |

Non-interest expense for the third quarter of 2022 amounted to $212.9 million, an increase of $1.3 million, or .6%, compared to expense of $211.6 million in the third quarter of last year. The increase in expense over the same period last year was mainly due to higher salaries expense and data processing and software expense, partly offset by lower other non-interest expense. Salaries and benefits expense increased $4.6 million, or 3.4%, due to higher full-time salaries expense of $5.6 million, or 6.4%, partly offset by lower incentive compensation expense of $2.5 million. Full-time equivalent employees totaled 4,595 at September 30, 2022, compared to 4,582 at September 30, 2021. Data processing and software expense increased $2.5 million, or 9.6%, due to higher software amortization, bank card processing fees and increased costs for service providers. Occupancy expense increased $215 thousand, or 1.7%, and equipment expense increased $596 thousand, or 13.4%, mainly due to higher equipment repair expense and depreciation expense. Marketing expense increased $605 thousand, or 10.8%, while other non-interest expense decreased $7.2 million, or 27.5%. This decrease was mainly due to $8.2 million in litigation settlement costs recorded in the third quarter of 2021, lower legal and professional fees of $1.1 million and higher deferred loan origination costs of $755 thousand. These decreases to expense were partly offset by increases in travel and entertainment expense of $1.5 million and insurance expense of $619 thousand.
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Non-interest expense amounted to $632.0 million for the first nine months of 2022, an increase of $29.7 million, or 4.9%, over the first nine months of 2021. Salaries and benefits expense increased $23.0 million, or 5.9%, mainly due to higher costs for salaries, incentive compensation, payroll taxes and 401(k) expense. Salaries expense included expense of $5.4 million for special bonuses paid to non-incentivized full-time and part-time employees in the second half of 2022. Data processing and software expense increased $6.7 million, or 8.8%, due to higher costs for service providers, software amortization and bank card processing fees. Occupancy expense increased $1.5 million, or 4.1%, mainly due to higher rent and outside services expense. Equipment expense increased $940 thousand, or 7.0%, mainly due to higher equipment repair and depreciation expense. Supplies and communication expense increased $967 thousand, or 7.6%, mainly due to higher bank card reissuance fees and courier expense, while marketing expense increased $1.9 million, or 11.8%. Other non-interest expense decreased $5.3 million, or 9.5%, mainly due to the litigation settlement mentioned above, coupled with a decline of $6.8 million in fair value equity adjustments on the Company's deferred compensation plan assets. These decreases were partly offset by increases in travel and entertainment expense of $3.9 million and insurance expense of $1.2 million.
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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
| Sept. 30, 2022 | June 30, 2022 | Sept. 30, 2021 |  | 2022 | 2021
ALLOWANCE FOR CREDIT LOSSES ON LOANS |  |  |  |  |  |
Balance at beginning of period | $ | 138,039 |  | $ | 134,710 |  | $ | 172,395 |  |  | $ | 150,044 |  | $ | 220,834 |
Provision for credit losses on loans | 10,150 |  | 7,287 |  | (5,961) |  |  | $ | 6,751 |  | $ | (43,749) |
Net loan charge-offs (recoveries): |  |  |  |  |  |
Commercial: |  |  |  |  |  |
Business | 461 |  | 19 |  | 65 |  |  | 557 |  | (4,848) |
Real estate-construction and land | — |  | — |  | — |  |  | — |  | 1 |
Real estate-business | (8) |  | (1) |  | (5) |  |  | (16) |  | (70) |
Commercial net loan charge-offs (recoveries) | 453 |  | 18 |  | 60 |  |  | 541 |  | (4,917) |
Personal Banking: |  |  |  |  |  |
Real estate-personal | (15) |  | (41) |  | (26) |  |  | (34) |  | (27) |
Consumer | 827 |  | 633 |  | 496 |  |  | 2,268 |  | 1,637 |
Revolving home equity | (38) |  | (14) |  | (22) |  |  | (34) |  | 29 |
Consumer credit card | 2,882 |  | 2,937 |  | 2,908 |  |  | 9,191 |  | 17,044 |
Overdrafts | 703 |  | 425 |  | 243 |  |  | 1,486 |  | 544 |
Personal banking net loan charge-offs | 4,359 |  | 3,940 |  | 3,599 |  |  | 12,877 |  | 19,227 |
Total net loan charge-offs | 4,812 |  | 3,958 |  | 3,659 |  |  | 13,418 |  | 14,310 |
Balance at end of period | $ | 143,377 |  | $ | 138,039 |  | $ | 162,775 |  |  | $ | 143,377 |  | $ | 162,775 |
LIABILITY FOR UNFUNDED LENDING COMMITMENTS |  |  |  |  |  |
Balance at beginning of period | 24,907 |  | 25,032 |  | 24,208 |  |  | 24,204 |  | 38,307 |
Provision for credit losses on unfunded lending commitments | 5,140 |  | (125) |  | (1,424) |  |  | 5,843 |  | (15,523) |
Balance at end of period | 30,047 |  | 24,907 |  | 22,784 |  |  | 30,047 |  | 22,784 |
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LIABILITY FOR UNFUNDED LENDING COMMITMENTS | $ | 173,424 |  | $ | 162,946 |  | $ | 185,559 |  |  | $ | 173,424 |  | $ | 185,559 |

| Three Months Ended |  | Nine Months Ended September 30
| Sept. 30, 2022 | June 30, 2022 | Sept. 30, 2021 |  | 2022 | 2021
Annualized net loan charge-offs (recoveries)*: |  |  |  |  |  |
Commercial: |  |  |  |  |  |
Business | .03 | % | — | % | — | % |  | .01 | % | (.11 | %)
Real estate-construction and land | — |  | — |  | — |  |  | — |  | — |
Real estate-business | — |  | — |  | — |  |  | — |  | — |
Commercial net loan charge-offs (recoveries) | .02 |  | — |  | — |  |  | .01 |  | (.06) |
Personal Banking: |  |  |  |  |  |
Real estate-personal | — |  | (.01) |  | — |  |  | — |  | — |
Consumer | .16 |  | .12 |  | .10 |  |  | .15 |  | .11 |
Revolving home equity | (.05) |  | (.02) |  | (.03) |  |  | (.02) |  | .01 |
Consumer credit card | 2.08 |  | 2.19 |  | 2.04 |  |  | 2.26 |  | 3.91 |
Overdrafts | 62.85 |  | 30.86 |  | 18.87 |  |  | 39.39 |  | 17.59 |
Personal banking net loan charge-offs | .30 |  | .28 |  | .25 |  |  | .30 |  | .45 |
Total annualized net loan charge-offs | .12 | % | .10 | % | .10 | % |  | .12 | % | .12 | %

* as a percentage of average loans (excluding loans held for sale)
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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 2021 Annual Report on Form 10-K.
Net loan charge-offs in the third quarter of 2022 amounted to $4.8 million, compared to $4.0 million in the prior quarter and $3.7 million in the third quarter of last year. During the third quarter of 2022, the Company recorded net charge-offs on commercial loans of $453 thousand, compared to net charge-offs of $18 thousand in the prior quarter and $60 thousand in the third quarter of 2021. Business loan net charge-offs increased $442 thousand in the third quarter of 2022, compared to the prior quarte r. Comp ared to the same period last year, total net loan charge-offs in the third quarter of 2022 increased $1.2 million. This increase was driven by increases in net charge-offs on overdraft, business, and consumer loans.
For the three months ended September 30, 2022, annualized net charge-offs on average consumer credit card loans totaled 2.08%, compared to 2.19% in the previous quarter and 2.04% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .16%, compared to .12% in the prior quarter and .10% in the same period last year. In the third quarter of 2022, total annualized net loan charge-offs were .12%, compared to .10% in the previous quarter and .10% in the same period last year.
For the nine months ended September 30, 2022, net loan charge-offs amounted to $13.4 million, compared to $14.3 million during the same period in the prior year. The decrease in net loan charge-offs in the nine months ended September 30, 2022 was primarily due to a $7.9 million decline in net charge-offs on consumer credit card loans, which was mostly offset by a $5.4 million increase in net charge-offs on business loans driven by two large non-recurring recoveries in 2021. Net charge-offs on overdraft and consumer loans also increased $942 thousand and $631 thousand, respectively. For the nine months ended September 30, 2022, annualized net charge-offs on average consumer credit card loans totaled 2.26%, compared to 3.91% during the same period last year, while consumer loan annualized net charge-offs in the nine months ended September 30, 2022 amounted to .15%, compared to .11% during the same period last year. During first nine months of 2022, total annualized net loan charge-offs were .12%, unchanged from the same period last year.
The provision for credit losses on loans was $10.2 million in the current quarter, which was a $2.9 million increase over the $7.3 million provision recorded in the prior quarter and a $16.1 million increase over the $6.0 million benefit recorded for the nine months ended September 30, 2021. The increase in the provision from the prior quarter was due to a slightly less optimistic forecast, which includes a mild recession in the first half of 2023. The provision for credit losses on loans for the third quarter of the prior year reflected lower than projected net charge-offs and an improved forecast at that point in time, resulting in the release of reserves established for uncertainties related to the pandemic during that quarter. For the nine months ended September 30, 2022, the provision for credit losses on loans was $6.8 million, compared to a recovery of $43.7 million during the same period in the prior year.
For the nine months ended September 30, 2022, the allowance for credit losses on loans decreased $6.7 million, compared to the allowance for credit losses on loans as of December 31, 2021. The decrease was primarily the net result of reducing the allowance as pandemic economic concerns lessened compared to December 31, 2021, slightly offset by an emerging mild recession uncertainty related to the geopolitical environment, high inflation, and supply constraints on the economy. The allowance for credit losses on commercial loans increased by $5.3 million, while the allowance for credit losses related to personal banking loans, including consumer credit card loans, decreased $12.0 million, mostly related to decreases in consumer credit card loans experienced in the first quarter of 2022.
At September 30, 2022, the allowance for credit losses on loans amounted to $143.4 million, compared to $138.0 million at June 30, 2022. This increase in the allowance for credit losses on loans compared to the prior quarter is due to a less optimistic forecast with a mild recession in the first half of 2023. The current period estimation for credit losses continues to consider the uncertainty in the economy as inflation rises and supply chain issues continue. The allowance for credit losses on loans was $162.8 million at September 30, 2021, reflecting pandemic uncertainties and the economic forecast at that point in time, and was .90%, .88% and 1.07% of total loans at September 30, 2022, June 30, 2022 and September 30, 2021, respectively.
In the current quarter, the provision for credit losses on unfunded lending commitments was $5.1 million, compared to a benefit of $125 thousand in the prior quarter and a benefit of $1.4 million in the third quarter of 2021. For the nine months ended September 30, 2022, the provision for credit losses on unfunded lending commitments was $5.8 million, compared to a benefit of $15.5 million during the same period in the prior year. At September 30, 2022, the liability for unfunded lending
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commitments was $30.0 million, compared to $24.9 million at June 30, 2022 and $22.8 million at September 30, 2021. 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, 2022.
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 its best 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.
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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, 2022 | December 31, 2021
Non-accrual loans | $ | 7,184 |  | $ | 9,157 |
Foreclosed real estate | 354 |  | 115 |
Total non-performing assets | $ | 7,538 |  | $ | 9,272 |
Non-performing assets as a percentage of total loans | .05 | % | .06 | %
Non-performing assets as a percentage of total assets | .02 | % | .03 | %
Total loans past due 90 days and still accruing interest | $ | 12,538 |  | $ | 11,726 |

Non-accrual loans totaled $7.2 million at September 30, 2022, a decrease of $2.0 million from the balance at December 31, 2021. The decrease occurred mainly in business loans which decreased $1.7 million. At September 30, 2022, non-accrual loans were comprised of business (78.6%), personal real estate (19.3%), and business real estate (2.1%) loans. Foreclosed real estate totaled $354 thousand at September 30, 2022, an increase of $239 thousand when compared to December 31, 2021. Total loans past due 90 days or more and still accruing interest were $12.5 million as of September 30, 2022, an increase of $812 thousand from December 31, 2021. 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 $292.5 million at September 30, 2022 compared with $278.7 million at December 31, 2021, resulting in an increase of $13.8 million, or 4.9%.

(In thousands) | September 30, 2022 | December 31, 2021
Potential problem loans: |  |
Business | $ | 33,249 |  | $ | 37,143 |
Real estate – construction and land | 57,647 |  | 40,259 |
Real estate – business | 200,418 |  | 200,766 |
Real estate – personal | 1,140 |  | 526 |
Total potential problem loans | $ | 292,454 |  | $ | 278,694 |

At September 30, 2022, the Company had $155.6 million of loans whose terms have been modified or restructured under a troubled debt restructuring. These loans have been extended to borrowers who are experiencing financial difficulty and who have been granted a concession, as defined by accounting guidance, and are further discussed in the "Troubled debt restructurings" section in Note 2 to the consolidated financial statements. This balance includes certain commercial loans totaling $140.6 million which are classified as substandard and included in the table above because of this classification.
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.
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Real Estate – Construction and Land Loans
The Company's portfolio of construction and land loans, as shown in the table below, amounted to 7.6% of total loans outstanding at September 30, 2022. The largest component of construction and land loans was commercial construction, which increased $55.1 million during the nine months ended September 30, 2022. At September 30, 2022, multi-family residential construction loans totaled approximately $247.4 million, or 25.3%, of the commercial construction loan portfolio, compared to $155.9 million, or 16.9%, at December 31, 2021.

(Dollars in thousands) | September 30, 2022 | % of Total | % of Total Loans | December 31, 2021 | % of Total | % of Total Loans
Commercial construction | $ | 977,771 |  | 81.0 | % | 6.1 | % | $ | 922,654 |  | 82.5 | % | 6.1 | %
Residential construction | 138,799 |  | 11.5 |  | .9 |  | 96,618 |  | 8.6 |  | .7 |
Commercial land and land development | 50,145 |  | 4.2 |  | .3 |  | 48,481 |  | 4.3 |  | .3 |
Residential land and land development | 40,240 |  | 3.3 |  | .3 |  | 50,513 |  | 4.6 |  | .3 |
Total real estate - construction and land loans | $ | 1,206,955 |  | 100.0 | % | 7.6 | % | $ | 1,118,266 |  | 100.0 | % | 7.4 | %

Real Estate – Business Loans
Total business real estate loans were $3.3 billion at September 30, 2022 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, 2022, 35.7% 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, 2022 | % of Total | % of Total Loans | December 31, 2021 | % of Total | % of Total Loans
Owner-occupied | $ | 1,188,189 |  | 35.7 | % | 7.5 | % | $ | 1,188,469 |  | 38.9 | % | 7.8 | %
Office | 512,752 |  | 15.4 |  | 3.2 |  | 380,101 |  | 12.4 |  | 2.5 |
Retail | 330,033 |  | 9.9 |  | 2.1 |  | 339,874 |  | 11.1 |  | 2.2 |
Multi-family | 313,740 |  | 9.4 |  | 2.0 |  | 354,282 |  | 11.6 |  | 2.3 |
Industrial | 313,230 |  | 9.4 |  | 2.0 |  | 99,800 |  | 3.3 |  | .7 |
Hotels | 218,319 |  | 6.6 |  | 1.4 |  | 234,673 |  | 7.7 |  | 1.5 |
Farm | 198,864 |  | 6.0 |  | 1.3 |  | 178,780 |  | 5.8 |  | 1.2 |
Senior living | 147,455 |  | 4.4 |  | .9 |  | 174,871 |  | 5.7 |  | 1.2 |
Other | 109,045 |  | 3.2 |  | .6 |  | 107,987 |  | 3.5 |  | .8 |
Total real estate - business loans | $ | 3,331,627 |  | 100.0 | % | 21.0 | % | $ | 3,058,837 |  | 100.0 | % | 20.2 | %

Revolving Home Equity Loans
The Company had $286.0 million in revolving home equity loans at September 30, 2022 that were generally collateralized by residential real estate. Most of these loans (91.7%) 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, 2022, the outstanding principal of loans with an original LTV higher than 80% was $30.1 million, or 10.5% of the portfolio, compared to $30.9 million as of December 31, 2021. Total revolving home equity loan balances over 30 days past due were $1.4 million at September 30, 2022 and $1.6 million at December 31, 2021, and there were no revolving home equity loans on non-accrual status at September 30, 2022 or December 31, 2021. The weighted average FICO score for the total current portfolio balance is 788. 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 2022 through 2024, approximately 12% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 85% 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 38.1% of the consumer loan portfolio at September 30, 2022, and outstanding balances for auto loans were $805.6 million and $855.4 million at September 30, 2022 and December 31,
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2021, respectively. The balances over 30 days past due amounted to $7.4 million at September 30, 2022 and $9.0 million at December 31, 2021, respectively and comprised 0.9% of the outstanding balances of these loans at September 30, 2022 and 1.1% at December 31, 2021, respectively. For the nine months ended September 30, 2022, $257.5 million of new auto loans were originated, compared to $324.5 million during the first nine months of 2021. At September 30, 2022, the automobile loan portfolio had a weighted average FICO score of 756, and net charge-offs on auto loans were .2% 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 10.9% of the consumer loan portfolio at September 30, 2022. Losses on these loans have historically been low, and the Company saw net recoveries of $29 thousand for the first nine months of 2022. Private banking loans comprised 33.5% of the consumer loan portfolio at September 30, 2022. The Company's private banking loans are generally well-collateralized, and at September 30, 2022 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 $1.1 million in the first nine months of 2022 and were 0.1% of the average balances of these loans at September 30, 2022.
Consumer Credit Card Loans
The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at September 30, 2022 of $563.3 million in consumer credit card loans outstanding, approximately $95.7 million, or 17.0%, carried a low promotional rate. Within the next six months, $32.2 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 $279.6 million, or 1.8% of total loans at September 30, 2022, an increase of $18.9 million from year end 2021, as shown in the table below.

(In thousands) | September 30, 2022 | December 31, 2021 |  | Unfunded commitments at September 30, 2022
Extraction | $ | 215,919 |  | $ | 184,840 |  |  | $ | 136,194 |
Mid-stream shipping and storage | 42,080 |  | 36,850 |  |  | 94,749 |
Downstream distribution and refining | 11,662 |  | 24,915 |  |  | 19,844 |
Support activities | 9,916 |  | 14,039 |  |  | 9,749 |
Total energy lending portfolio | $ | 279,577 |  | $ | 260,644 |  |  | $ | 260,536 |

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 communities or regional markets and opportunities to provide other banking services are present. The balance of SNC loans totaled $1.3 billion at September 30, 2022, compared to $1.2 billion at December 31, 2021. Additional unfunded commitments at September 30, 2022 totaled $1.7 billion.
Income Taxes
Income tax expense was $33.9 million in the third quarter of 2022, compared to $32.0 million in the second quarter of 2022 and $34.7 million in the third quarter of 2021. The Company's effective tax rate, including the effect of non-controlling interest, was 21.7% in the third quarter of 2022, compared to 21.7% in the second quarter of 2022 and 22.1% in the third quarter of 2021. For the nine months ended September 30, 2022, income tax expense was $97.9 million, compared to $111.9 million for the same period during the previous year, resulting in effective tax rates of 21.5% and 21.2%, respectively.
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Financial Condition
Balance Sheet
Total assets of the Company were $32.6 billion at September 30, 2022 and $36.7 billion at December 31, 2021. Earning assets (excluding the allowance for credit losses on loans and fair value adjustments on debt securities) amounted to $32.3 billion at September 30, 2022 and $35.5 billion at December 31, 2021, and consisted of 49% in loans and 45% in investment securities at September 30, 2022.
At September 30, 2022, total loans increased $722.6 million, or 4.8%, compared to balances at December 31, 2021. The increase was mainly due to growth in business real estate, business, and construction loans of $272.8 million, $225.4 million, and $88.7 million, respectively. The growth in business loans was mainly the result of increased commercial and industrial, lease and commercial card lending, partly offset by a decline in tax free loans. Personal real estate loans increased $57.1 million. Consumer loans, which includes automobile, marine and RV, fixed rate home equity and other consumer loans, increased $84.1 million, as growth in other consumer loans was partly offset by a decline in auto loans. These increases in loan balances were partly offset by a decline in consumer credit card loans of $12.1 million.
Available for sale debt securities, excluding fair value adjustments, decreased $242.8 million at September 30, 2022 compared to December 31, 2021. Purchases of securities during this period totaled $1.9 billion, offset by sales, maturities and pay downs of $2.2 billion. The largest declines in outstanding balances occurred in agency mortgage-backed securities, state and municipal obligations, and other debt securities, which decreased $467.5 million, $51.2 million, and $54.3 million, respectively. These decreases were partially offset by increases in asset-backed securities and non-agency mortgage-backed securities, which increased $209.8 million and $66.0 million, respectively, at September 30, 2022 compared to December 31, 2021. At September 30, 2022, the duration of the investment portfolio was 3.9 years, and maturities and pay downs of approximately $2.4 billion are expected to occur during the next 12 months.
Total deposits at September 30, 2022 amounted to $27.5 billion, a decrease of $2.3 billion compared to December 31, 2021. The decline in deposits largely resulted from a decrease in demand deposits, mainly in business demand deposits (decrease of $1.7 billion). Additionally, certificates of deposit decreased $454.4 million and money market deposits decreased $650.3 million. These decreases were partly offset by growth in government demand deposits of $325.4 million and interest checking deposits of $58.4 million at September 30, 2022 compared to balances at December 31, 2021. The Company's borrowings totaled $2.3 billion at September 30, 2022, a decrease of $719.1 million from balances at December 31, 2021, mainly due to a decline in customer repurchase agreements, partly offset by an increase in federal funds purchased.
Liquidity and Capital Resources
Liquidity Management
The Company’s most liquid assets are comprised of available for sale debt securities, federal funds sold, securities purchased under agreements to resell (resale agreements), and balances at the Federal Reserve Bank, as follows:

(In thousands) |  | September 30, 2022 |  |  |  | September 30, 2021 |  | December 31, 2021
Liquid assets: |  |  |  |  |  |  |  |
Available for sale debt securities |  | $ | 12,632,510 |  |  |  |  | $ | 14,165,656 |  |  | $ | 14,450,027 |
Federal funds sold |  | 14,020 |  |  |  |  | — |  |  | 2,800 |
Securities purchased under agreements to resell |  | 1,275,000 |  |  |  |  | 1,750,000 |  |  | 1,625,000 |
Balances at the Federal Reserve Bank |  | 642,943 |  |  |  |  | 1,888,545 |  |  | 3,971,217 |
Total |  | $ | 14,564,473 |  |  |  |  | $ | 17,804,201 |  |  | $ | 20,049,044 |

Federal funds sold, which are funds lent to the Company's correspondent bank customers with overnight maturities, totaled $14.0 million as of September 30, 2022. Resale agreements, maturing through 2025, totaled $1.3 billion at September 30, 2022. 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 $1.3 billion in fair value at September 30, 2022. Interest earning balances at the Federal Reserve Bank, which have overnight maturities and are used for general liquidity purposes, totaled $642.9 million at September 30, 2022. The fair value of the available for sale debt portfolio was $12.6 billion at September 30, 2022 and included an unrealized net loss of $1.5 billion.
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Approximately $2.4 billion of the 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 new loan demand or help 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 Federal Reserve Bank. Total investment securities pledged for these purposes were as follows:

(In thousands) | September 30, 2022 |  | September 30, 2021 | December 31, 2021
Investment securities pledged for the purpose of securing: |  |  |  |
Federal Reserve Bank borrowings | $ | 13,446 |  |  | $ | 18,566 |  | $ | 17,465 |
FHLB borrowings and letters of credit | 2,033 |  |  | 3,736 |  | 3,218 |
Securities sold under agreements to repurchase * | 2,275,924 |  |  | 2,511,891 |  | 3,475,589 |
Other deposits and swaps | 2,483,636 |  |  | 3,210,326 |  | 2,897,576 |
Total pledged securities | 4,775,039 |  |  | 5,744,519 |  | 6,393,848 |
Unpledged and available for pledging | 6,905,006 |  |  | 7,123,799 |  | 6,913,721 |
Ineligible for pledging | 952,465 |  |  | 1,297,338 |  | 1,142,458 |
Total available for sale debt securities, at fair value | $ | 12,632,510 |  |  | $ | 14,165,656 |  | $ | 14,450,027 |

* Includes securities pledged for collateral swaps, as discussed in Note 12 to the consolidated financial statements.
Liquidity is also available from the Company's large base of core customer deposits, defined as non-interest bearing, interest checking, savings, and money market deposit accounts. At September 30, 2022, such deposits totaled $26.5 billion and represented 96.4% of total deposits. 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. Certificates of deposit of $100,000 and over totaled $597.1 million at September 30, 2022. These accounts are normally considered more volatile with higher cost and comprised 2.2% of total deposits at September 30, 2022.

(In thousands) | September 30, 2022 |  | September 30, 2021 | December 31, 2021
Core deposit base: |  |  |  |
Non-interest bearing | $ | 10,468,591 |  |  | $ | 11,622,855 |  | $ | 11,772,374 |
Interest checking | 3,236,160 |  |  | 2,202,422 |  | 3,227,822 |
Savings and money market | 12,778,327 |  |  | 12,705,232 |  | 13,370,263 |
Total | $ | 26,483,078 |  |  | $ | 26,530,509 |  | $ | 28,370,459 |

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

(In thousands) | September 30, 2022 |  | September 30, 2021 | December 31, 2021
Borrowings: |  |  |  |
Federal funds purchased | $ | 311,200 |  |  | $ | 11,345 |  | $ | 43,385 |
Securities sold under agreements to repurchase | 2,003,390 |  |  | 2,242,408 |  | 2,979,582 |
Other debt | 1,831 |  |  | 4,006 |  | 12,560 |
Total | $ | 2,316,421 |  |  | $ | 2,257,759 |  | $ | 3,035,527 |

Federal funds purchased are unsecured overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved lines of credit. Repurchase agreements are borrowings by the Company from its customers in the form of securities sold under agreements to repurchase. These repurchase agreements, which generally mature overnight, are comprised of non-insured customer funds totaling $2.0 billion at September 30, 2022 and are collateralized by securities in the Company's investment portfolio. At September 30, 2022, the value of the collateral pledged for the benefit of customers was $2.0 billion. 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, 2022.
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The Company pledges certain assets, including loans and investment securities, to both the Federal Reserve Bank 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. Also, this collateral is used to enable the FHLB to issue letters of credit in favor of public fund depositors of the Company. The Federal Reserve Bank 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, 2022.

| September 30, 2022
(In thousands) | FHLB | Federal Reserve | Total
Total collateral value established by FHLB and FRB | $ | 1,905,444 |  | $ | 957,517 |  | $ | 2,862,961 |
Letters of credit issued | (259,470) |  | — |  | (259,470) |
Available for future advances | $ | 1,645,974 |  | $ | 957,517 |  | $ | 2,603,491 |

In addition to those mentioned above, several other sources of liquidity are available. No commercial paper has been issued or outstanding during the past ten years. The Company has no subordinated debt or hybrid instruments which could affect future borrowing capacity. Because of its lack of significant long-term debt, the Company believes that through its Capital Markets Group or in other public debt markets, it could generate additional liquidity from sources such as jumbo certificates of deposit or privately placed corporate notes or other forms of debt. The Company receives strong outside rankings from both Standard & Poor's and Moody's on both the consolidated company level and its subsidiary bank, Commerce Bank, which would support future financing efforts, should the need arise. These ratings are as follows:

| Standard & Poor’s | Moody’s
Commerce Bancshares, Inc. |  |
Issuer rating | A- |
Rating outlook | Stable |
Commerce Bank |  |
Issuer rating | A | A2
Baseline credit assessment |  | a1
Short-term rating | A-1 | P-1
Rating outlook | Stable | Stable

The cash flows from the operating, investing and financing activities of the Company resulted in a net decrease in cash, cash equivalents and restricted cash of $3.3 billion during the first nine months of 2022, 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 $469.8 million and has historically been a stable source of funds. Investing activities, which occur mainly in the loan and investment securities portfolios, used cash of $247.2 million. Activity in the investment securities portfolio provided cash of $183.9 million from purchases (net of sales, maturities and pay downs), securities purchased under agreements to resell used cash of $200.0 million, and an increase in the loan portfolio used cash of $736.5 million. These cash outflows were partially offset by repayments related to securities purchased under agreements to resell, which provided cash of $550.0 million. Financing activities used cash of $3.5 billion, largely resulting from a a decrease in deposits of $2.5 billion, paired with a decrease in federal funds purchased and securities sold under agreements to repurchase of $708.4 million.
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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, 2022 and December 31, 2021, as shown in the following table.

(Dollars in thousands) | September 30, 2022 | December 31, 2021 | Minimum Ratios under Capital Adequacy Guidelines | Minimum Ratios for Well-Capitalized Banks *
Risk-adjusted assets | $ | 23,885,207 |  | $ | 22,483,748 |  |  |
Tier I common risk-based capital | 3,335,957 |  | 3,225,044 |  |  |
Tier I risk-based capital | 3,335,957 |  | 3,225,044 |  |  |
Total risk-based capital | 3,509,822 |  | 3,399,880 |  |  |
Tier I common risk-based capital ratio | 13.97 | % | 14.34 | % | 7.00 | % | 6.50 | %
Tier I risk-based capital ratio | 13.97 |  | 14.34 |  | 8.50 |  | 8.00 |
Total risk-based capital ratio | 14.69 |  | 15.12 |  | 10.50 |  | 10.00 |
Tier I leverage ratio | 9.87 |  | 9.13 |  | 4.00 |  | 5.00 |

*Under Prompt Corrective Action requirements
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 required under Basel III. The capital conservation buffer 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 adopt 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 began 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 normally purchases stock in the open market. During the nine months ended September 30, 2022, the Company purchased 2,352,489 shares at an average price of $69.42 in open market purchases and through stock-based compensation transactions. At September 30, 2022, 3,444,236 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 and liquidity levels, and alternative investment options. The Company paid a $.265 per share cash dividend on its common stock in the third quarter of 2022, which was a 6.0% increase compared to its 2021 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, and these are further discussed in the Company's 2021 Annual Report on Form 10-K. There have been no changes in the Company's material cash requirements since December 31, 2021. Further discussion of the Company's longer-term material cash obligations is below.
In the normal course of business, various commitments and contingent liabilities arise which are not required to be recorded on the balance sheet. The most significant of these are loan commitments, which at September 30, 2022 totaled $13.9 billion (including $5.1 billion in unused, approved credit card lines). In addition, the Company enters into standby and commercial letters of credit. These contracts totaled $516.2 million and $1.2 million, respectively, at September 30, 2022. As many commitments expire unused or only partially used, these totals do not necessarily reflect future cash requirements. The carrying value of the guarantee obligations associated with the standby letters of credit, which has been recorded as a liability on the consolidated balance sheet, amounted to $3.6 million at September 30, 2022. The allowance for these commitments is recorded
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in the Company’s liability for unfunded lending commitments within other liabilities on its consolidated balance sheets. At September 30, 2022, the liability for unfunded commitments totaled $30.0 million. See further discussion of the liability for unfunded lending commitments in Note 2 to the consolidated financial statements.
During the third quarter of 2020, the Company signed a $106.7 million agreement with U.S. Capital Development to develop a 280,000 square foot commercial office building in a two building complex in Clayton, Missouri, which is expected to be completed in January 2023. As of September 30, 2022, the Company has made payments totaling $83.8 million. While the Company intends to occupy a portion of the office building for executive offices, a 15 year lease agreement has been signed by an anchor tenant to lease approximately 50% of the office building.
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 2022, purchases and sales of tax credits amounted to $95.7 million and $99.9 million, respectively. Fees from sales of tax credits were $4.4 million for the nine months ended September 30, 2022, compared to $3.2 million in the same period last year. At September 30, 2022, the Company expected to fund outstanding purchase commitments of $12.0 million during the remainder of 2022.
The Company's sound equity base, along with its long-term low debt level, common and preferred stock availability, and excellent debt ratings, provide several alternatives for future financing. Future acquisitions may utilize partial funding through one or more of these options. Through the various sources of liquidity described above, the Company maintains a liquidity position that it believes will adequately satisfy its financial obligations. The Company is not aware of any trends, events, or commitments that are reasonably likely to increase or decrease its liquidity in a material way.
Segment Results
The table below is a summary of segment pre-tax income results for the first nine months of 2022 and 2021.

(Dollars in thousands) | Consumer | Commercial | Wealth | Segment Totals | Other/ Elimination | Consolidated Totals
Nine Months Ended September 30, 2022 |  |  |  |  |  |
Net interest income | $ | 249,761 |  | $ | 333,263 |  | $ | 56,731 |  | $ | 639,755 |  | $ | 47,789 |  | $ | 687,544 |
Provision for credit losses | (12,727) |  | (651) |  | 2 |  | (13,376) |  | 782 |  | (12,594) |
Non-interest income | 89,542 |  | 167,581 |  | 161,051 |  | 418,174 |  | (8,464) |  | 409,710 |
Investment securities gains, net | — |  | — |  | — |  | — |  | 11,602 |  | 11,602 |
Non-interest expense | (225,232) |  | (272,224) |  | (108,967) |  | (606,423) |  | (25,614) |  | (632,037) |
Income before income taxes | $ | 101,344 |  | $ | 227,969 |  | $ | 108,817 |  | $ | 438,130 |  | $ | 26,095 |  | $ | 464,225 |
Nine Months Ended September 30, 2021 |  |  |  |  |  |
Net interest income | $ | 239,157 |  | $ | 340,279 |  | $ | 53,186 |  | $ | 632,622 |  | $ | (4,855) |  | $ | 627,767 |
Provision for credit losses | (19,122) |  | 4,856 |  | 10 |  | (14,256) |  | 73,528 |  | 59,272 |
Non-interest income | 110,911 |  | 155,079 |  | 158,731 |  | 424,721 |  | (12,027) |  | 412,694 |
Investment securities gains, net | — |  | — |  | — |  | — |  | 39,765 |  | 39,765 |
Non-interest expense | (220,280) |  | (246,501) |  | (101,377) |  | (568,158) |  | (34,161) |  | (602,319) |
Income before income taxes | $ | 110,666 |  | $ | 253,713 |  | $ | 110,550 |  | $ | 474,929 |  | $ | 62,250 |  | $ | 537,179 |
Decrease in income before income taxes: |  |  |  |  |  |
Amount | $ | (9,322) |  | $ | (25,744) |  | $ | (1,733) |  | $ | (36,799) |  | $ | (36,155) |  | $ | (72,954) |
Percent | (8.4 | %) | (10.1 | %) | (1.6 | %) | (7.7 | %) | (58.1 | %) | (13.6 | %)

Consumer
For the nine months ended September 30, 2022, income before income taxes for the Consumer segment decreased $9.3 million, or 8.4%, compared to the first nine months of 2021. The decrease in income before income taxes was mainly due to a decline in non-interest income of $21.4 million, or 19.3%, and higher non-interest expense of $5.0 million, or 2.2%. These decreases to income were partly offset by growth in net interest income of $10.6 million, or 4.4%, and a decrease in the provision for credit losses of $6.4 million, or 33.4%. Net interest income increased due to a $13.0 million increase in net allocated funding credits assigned to the Consumer segment's loan and deposit portfolios and a $1.6 million decrease in deposit interest expense. These increases to income were partly offset by a $4.0 million decline in loan interest income. Non-interest income decreased mainly due to a decline of $19.6 million in mortgage banking revenue. Non-interest expense increased over
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the same period in the previous year mainly due to higher salaries expense, marketing expense, and allocated service and support costs (mainly bank card fraud operations and information technology), partly offset by lower allocated service costs for branch employees and mortgage operations. The provision for credit losses totaled $12.7 million, a $6.4 million decrease from the first nine months of 2021, mainly due to lower credit card loan net charge-offs.
Commercial
For the nine months ended September 30, 2022, income before income taxes for the Commercial segment decreased $25.7 million, or 10.1%, compared to the same period in the previous year. This decrease was mainly due to an increase in non-interest expense and a decline in net interest income, partly offset by an increase in non-interest income. Net interest income decreased $7.0 million, or 2.1%, due higher interest expense on customer repurchase agreements and deposits of $10.0 million and $7.3 million, respectively. These decreases to income were partly offset by a $9.4 million increase in loan interest income. Non-interest income increased $12.5 million, or 8.1%, over the previous year mainly due to growth in net bank card fees (mainly corporate card fees), deposit account fees (mainly corporate cash management fees) and cash sweep commissions, partly offset by a decline in capital market fees. Non-interest expense increased $25.7 million, or 10.4%, mainly due to higher salaries and benefits expense, travel and entertainment expense, and allocated service and support costs (mainly bank operations, branch employees, information technology and commercial payments). The provision for credit losses increased $5.5 million over the same period last year, mainly due to net charge-offs on business loans in the current year compared to net recoveries in the prior year.
Wealth
Wealth segment pre-tax profitability for the nine months ended September 30, 2022 decreased $1.7 million, or 1.6%, from the same period in the previous year. Net interest income increased $3.5 million, or 6.7%, mainly due to an $8.4 million increase in loan interest income, partly offset by a $5.3 million decrease in net allocated funding credits assigned to the Wealth segment's loan and deposit portfolios. Non-interest income increased $2.3 million, or 1.5%, over the prior year largely due to higher cash sweep commissions, private client trust fees, and brokerage fees. These increases were partly offset by lower mortgage banking revenue and institutional trust fees. Non-interest expense increased $7.6 million, or 7.5%, mainly due to higher salaries and benefits expense, travel and entertainment expense, and marketing expense. The provision for credit losses increased $8 thousand over the same period last year, due to higher overdraft 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 of this category was lower than in the same period last year by $36.2 million. Unallocated securities gains were $11.6 million in the first nine months of 2022 compared to gains of $39.8 million in 2021. Also, the unallocated provision for credit losses increased by $72.7 million, primarily driven by increases in the liability for unfunded lending commitments and in the provision for credit losses on loans, 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 was $6.7 million lower than net charge-offs in 2022, while the provision was $58.1 million lower than net charge-offs, as the provision was a benefit in 2021. For the nine months ended September 30, 2022, the Company's provision on unfunded lending commitments was expense of $5.8 million. These decreases to pre-tax profitability were partly offset by higher net interest income of $52.6 million, non-interest income of $3.6 million, and lower non-interest expense of $8.5 million.
Impact of Recently Issued Accounting Standards
Reference Rate Reform The Financial Accounting Standards Board ("FASB") issued ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting", in March 2020, and has been followed by additional clarifying guidance related to derivatives that are modified as a result of reference rate reform. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if they reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Further, the guidance applies to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The expedients and exceptions provided by the new guidance do not apply to contract modifications made and hedging relationships entered into or evaluated for effectiveness after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022. In April 2022, the FASB proposed extending the sunset date under Topic 848 to December 31, 2024. The change is to align the temporary accounting relief guidance with the expected cessation date of LIBOR, which was postponed by administrators earlier this year to June 2023, a year after the current sunset date of ASU 2020-04.
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In order to assess the impact of transition and ensure a successful transition process, the Company established a LIBOR Transition Program led by the LIBOR Transition Steering Committee (the Committee), which is an internal, cross-functional team with representatives from all relevant business lines, support functions and legal counsel. A LIBOR impact and risk assessment has been performed, and the Committee has developed and prioritized action items. All financial contracts that reference LIBOR have been identified and LIBOR fallback language has been included in key loan provisions of new and renewed loans in preparation from transition from LIBOR. The Company ceased originating new loans with LIBOR as a reference rate at the end of 2021 and is actively working with customers to modify existing loans that reference LIBOR to a new reference rate. The Company plans to finish transitioning the impacted loans by late spring of 2023.
Credit Losses The FASB issued ASU 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures", in March 2022. This ASU eliminates the troubled debt restructuring recognition and measurement guidance and, instead, requires that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The amendments require that an entity disclose current period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. The guidance is effective January 1, 2023. The Company expects no material impact to its consolidated financial statements from adoption of this ASU.
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AVERAGE BALANCE SHEETS — AVERAGE RATES AND YIELDS
Three Months Ended September 30, 2022 and 2021

| Third Quarter 2022 |  | Third Quarter 2021
(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) | $ | 5,317,696 |  | $ | 52,813 |  | 3.94 | % |  | $ | 5,437,498 |  | $ | 47,032 |  | 3.43 | %
Real estate — construction and land | 1,288,721 |  | 17,133 |  | 5.27 |  |  | 1,168,566 |  | 10,326 |  | 3.51 |
Real estate — business | 3,258,128 |  | 36,121 |  | 4.40 |  |  | 2,982,847 |  | 26,027 |  | 3.46 |
Real estate — personal | 2,844,376 |  | 24,065 |  | 3.36 |  |  | 2,775,638 |  | 22,854 |  | 3.27 |
Consumer | 2,101,622 |  | 22,110 |  | 4.17 |  |  | 2,041,263 |  | 19,085 |  | 3.71 |
Revolving home equity | 280,923 |  | 3,413 |  | 4.82 |  |  | 281,689 |  | 2,456 |  | 3.46 |
Consumer credit card | 550,058 |  | 16,711 |  | 12.05 |  |  | 566,406 |  | 16,112 |  | 11.29 |
Overdrafts | 4,438 |  | — |  | — |  |  | 5,110 |  | — | —
Total loans | 15,645,962 |  | 172,366 |  | 4.37 |  |  | 15,259,017 |  | 143,892 |  | 3.74 |
Loans held for sale | 7,170 |  | 159 |  | 8.80 |  |  | 16,021 |  | 187 |  | 4.63 |
Investment securities: |  |  |  |  |  |  |
U.S. government and federal agency obligations | 1,113,442 |  | 12,664 |  | 4.51 |  |  | 727,566 |  | 10,525 |  | 5.74 |
Government-sponsored enterprise obligations | 55,753 |  | 332 |  | 2.36 |  |  | 50,785 |  | 295 |  | 2.30 |
State and municipal obligations(A) | 2,052,908 |  | 11,758 |  | 2.27 |  |  | 2,039,942 |  | 12,062 |  | 2.35 |
Mortgage-backed securities | 6,847,912 |  | 33,323 |  | 1.93 |  |  | 7,115,419 |  | 27,461 |  | 1.53 |
Asset-backed securities | 3,870,953 |  | 15,782 |  | 1.62 |  |  | 3,028,076 |  | 8,205 |  | 1.08 |
Other debt securities | 587,026 |  | 2,852 |  | 1.93 |  |  | 608,642 |  | 3,125 |  | 2.04 |
Trading debt securities(A) | 35,621 |  | 246 |  | 2.74 |  |  | 32,238 |  | 82 |  | 1.01 |
Equity securities(A) | 8,838 |  | 604 |  | 27.11 |  |  | 8,756 |  | 528 |  | 23.92 |
Other securities(A) | 208,708 |  | 3,729 |  | 7.09 |  |  | 183,397 |  | 3,447 |  | 7.46 |
Total investment securities | 14,781,161 |  | 81,290 |  | 2.18 |  |  | 13,794,821 |  | 65,730 |  | 1.89 |
Federal funds sold | 13,486 |  | 94 |  | 2.77 |  |  | 792 |  | 1 |  | .50 |
Securities purchased under agreements to resell | 1,379,341 |  | 5,984 |  | 1.72 |  |  | 1,633,205 |  | 9,007 |  | 2.19 |
Interest earning deposits with banks | 980,273 |  | 5,571 |  | 2.25 |  |  | 2,602,896 |  | 995 |  | .15 |
Total interest earning assets | 32,807,393 |  | 265,464 |  | 3.21 |  |  | 33,306,752 |  | 219,812 |  | 2.62 |
Allowance for credit losses on loans | (137,833) |  |  |  |  | (172,112) |  |  |
Unrealized gain (loss) on debt securities | (1,064,534) |  |  |  |  | 230,058 |  |  |
Cash and due from banks | 310,713 |  |  |  |  | 329,129 |  |  |
Premises and equipment, net | 408,884 |  |  |  |  | 408,966 |  |  |
Other assets | 536,901 |  |  |  |  | 523,182 |  |  |
Total assets | $ | 32,861,524 |  |  |  |  | $ | 34,625,975 |  |  |
LIABILITIES AND EQUITY: |  |  |  |  |  |  |
Interest bearing deposits: |  |  |  |  |  |  |
Savings | $ | 1,595,857 |  | 177 |  | .04 |  |  | $ | 1,484,923 |  | 289 |  | .08 |
Interest checking and money market | 14,423,713 |  | 7,368 |  | .20 |  |  | 13,343,180 |  | 1,528 |  | .05 |
Certificates of deposit of less than $100,000 | 397,071 |  | 411 |  | .41 |  |  | 464,367 |  | 206 |  | .18 |
Certificates of deposit of $100,000 and over | 578,158 |  | 871 |  | .60 |  |  | 1,289,665 |  | 450 |  | .14 |
Total interest bearing deposits | 16,994,799 |  | 8,827 |  | .21 |  |  | 16,582,135 |  | 2,473 |  | .06 |
Borrowings: |  |  |  |  |  |  |
Federal funds purchased | $ | 51,929 |  | $ | 315 |  | 2.41 |  |  | 13,606 |  | $ | 3 |  | .10 |
Securities sold under agreements to repurchase | 2,199,866 |  | 7,576 |  | 1.37 |  |  | 2,347,270 |  | 477 |  | .08 |
Other borrowings(B) | 2,010 |  | 9 |  | 1.78 |  |  | 347 |  | 1 |  | 1.14 |
Total borrowings | 2,253,805 |  | 7,900 |  | 1.39 |  |  | 2,361,223 |  | 481 |  | .08 |
Total interest bearing liabilities | 19,248,604 |  | 16,727 |  | .34 | % |  | 18,943,358 |  | 2,954 |  | .06 | %
Non-interest bearing deposits | 10,758,353 |  |  |  |  | 11,475,113 |  |  |
Other liabilities | 123,691 |  |  |  |  | 667,786 |  |  |
Equity | 2,730,876 |  |  |  |  | 3,539,718 |  |  |
Total liabilities and equity | $ | 32,861,524 |  |  |  |  | $ | 34,625,975 |  |  |
Net interest margin (FTE) |  | $ | 248,737 |  |  |  |  | $ | 216,858 |  |
Net yield on interest earning assets |  |  | 3.01 | % |  |  |  | 2.58 | %

(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, 2022 and 2021

| Nine Months 2022 |  | Nine Months 2021
(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) | $ | 5,342,326 |  | $ | 133,631 |  | 3.34 | % |  | $ | 6,056,664 |  | $ | 145,574 |  | 3.21 | %
Real estate — construction and land | 1,216,860 |  | 40,148 |  | 4.41 |  |  | 1,116,603 |  | 29,538 |  | 3.54 |
Real estate — business | 3,172,832 |  | 91,095 |  | 3.84 |  |  | 3,006,780 |  | 78,494 |  | 3.49 |
Real estate — personal | 2,826,441 |  | 69,804 |  | 3.30 |  |  | 2,801,861 |  | 69,715 |  | 3.33 |
Consumer | 2,071,019 |  | 58,891 |  | 3.80 |  |  | 1,998,081 |  | 57,567 |  | 3.85 |
Revolving home equity | 275,713 |  | 8,267 |  | 4.01 |  |  | 289,299 |  | 7,406 |  | 3.42 |
Consumer credit card | 542,895 |  | 47,011 |  | 11.58 |  |  | 583,471 |  | 48,679 |  | 11.15 |
Overdrafts | 5,044 |  | — |  | — |  |  | 4,136 |  | — |  | — |
Total loans | 15,453,130 |  | 448,847 |  | 3.88 |  |  | 15,856,895 |  | 436,973 |  | 3.68 |
Loans held for sale | 8,154 |  | 470 |  | 7.71 |  |  | 25,002 |  | 736 |  | 3.94 |
Investment securities: |  |  |  |  |  |  |
U.S. government and federal agency obligations | 1,112,201 |  | 35,751 |  | 4.30 |  |  | 724,269 |  | 24,979 |  | 4.61 |
Government-sponsored enterprise obligations | 54,443 |  | 962 |  | 2.36 |  |  | 50,793 |  | 885 |  | 2.33 |
State and municipal obligations(A) | 2,085,539 |  | 35,655 |  | 2.29 |  |  | 1,988,715 |  | 35,779 |  | 2.41 |
Mortgage-backed securities | 7,105,874 |  | 104,695 |  | 1.97 |  |  | 6,933,544 |  | 69,924 |  | 1.35 |
Asset-backed securities | 3,947,148 |  | 40,378 |  | 1.37 |  |  | 2,592,618 |  | 23,594 |  | 1.22 |
Other debt securities | 622,065 |  | 9,143 |  | 1.97 |  |  | 594,984 |  | 9,263 |  | 2.08 |
Trading debt securities(A) | 40,052 |  | 700 |  | 2.34 |  |  | 33,171 |  | 272 |  | 1.10 |
Equity securities(A) | 9,141 |  | 1,823 |  | 26.66 |  |  | 6,013 |  | 1,584 |  | 35.22 |
Other securities(A) | 198,763 |  | 17,417 |  | 11.72 |  |  | 164,911 |  | 10,101 |  | 8.19 |
Total investment securities | 15,175,226 |  | 246,524 |  | 2.17 |  |  | 13,089,018 |  | 176,381 |  | 1.80 |
Federal funds sold | 6,315 |  | 114 |  | 2.41 |  |  | 715 |  | 3 |  | .56 |
Securities purchased under agreements to resell | 1,604,300 |  | 15,669 |  | 1.31 |  |  | 1,143,061 |  | 30,551 |  | 3.57 |
Interest earning deposits with banks | 1,606,452 |  | 9,150 |  | .76 |  |  | 2,273,448 |  | 2,108 |  | .12 |
Total interest earning assets | 33,853,577 |  | 720,774 |  | 2.85 |  |  | 32,388,139 |  | 646,752 |  | 2.67 |
Allowance for credit losses on loans | (140,686) |  |  |  |  | (197,631) |  |  |
Unrealized gain (loss) on debt securities | (699,908) |  |  |  |  | 236,702 |  |  |
Cash and due from banks | 321,994 |  |  |  |  | 337,595 |  |  |
Premises and equipment, net | 405,856 |  |  |  |  | 404,697 |  |  |
Other assets | 538,438 |  |  |  |  | 533,660 |  |  |
Total assets | $ | 34,279,271 |  |  |  |  | $ | 33,703,162 |  |  |
LIABILITIES AND EQUITY: |  |  |  |  |  |  |
Interest bearing deposits: |  |  |  |  |  |  |
Savings | $ | 1,589,668 |  | 512 |  | .04 |  |  | $ | 1,431,386 |  | 843 |  | .08 |
Interest checking and money market | 14,738,322 |  | 11,071 |  | .10 |  |  | 13,200,461 |  | 4,921 |  | .05 |
Certificates of deposit of less than $100,000 | 412,739 |  | 755 |  | .24 |  |  | 490,655 |  | 1,006 |  | .27 |
Certificates of deposit of $100,000 and over | 695,332 |  | 1,768 |  | .34 |  |  | 1,291,693 |  | 2,173 |  | .22 |
Total interest bearing deposits | 17,436,061 |  | 14,106 |  | .11 |  |  | 16,414,195 |  | 8,943 |  | .07 |
Borrowings: |  |  |  |  |  |  |
Federal funds purchased | $ | 62,909 |  | $ | 546 |  | 1.16 |  |  | $ | 24,558 |  | 11 |  | .06 |
Securities sold under agreements to repurchase | 2,388,295 |  | 10,960 |  | .61 |  |  | 2,207,037 |  | 1,101 |  | .07 |
Other borrowings(B) | 1,607 |  | 22 |  | 1.83 |  |  | 717 |  | 5 |  | .93 |
Total borrowings | 2,452,811 |  | 11,528 |  | .63 |  |  | 2,232,312 |  | 1,117 |  | .07 |
Total interest bearing liabilities | 19,888,872 |  | 25,634 |  | .17 | % |  | 18,646,507 |  | 10,060 |  | .07 | %
Non-interest bearing deposits | 11,168,031 |  |  |  |  | 11,011,446 |  |  |
Other liabilities | 255,041 |  |  |  |  | 601,352 |  |  |
Equity | 2,967,327 |  |  |  |  | 3,443,857 |  |  |
Total liabilities and equity | $ | 34,279,271 |  |  |  |  | $ | 33,703,162 |  |  |
Net interest margin (FTE) |  | $ | 695,140 |  |  |  |  | $ | 636,692 |  |
Net yield on interest earning assets |  |  | 2.75 | % |  |  |  | 2.63 | %

(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 2021 Annual Report on Form 10-K.
The tables below show 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. Simulation A presents three rising rate scenarios and three falling rate scenarios, and in each scenario, rates are assumed to change evenly over 12 months. In these scenarios, the balance sheet remains flat.
The sensitivity of deposit balances to changes in rates is particularly difficult to estimate in low interest rate environments. Since the future effects of changes in rates on deposit balances cannot be known with certainty, the Company conservatively models alternate scenarios with deposit attrition as rates rise. Simulation B illustrates results from these higher attrition scenarios to provide added perspective on potential effects of higher rates.
The Company utilizes these simulations 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 to better understand interest rate risk and its effect on the Company’s performance.

Simulation A | September 30, 2022 |  | June 30, 2022
(Dollars in millions) | $ Change in Net Interest Income | % Change in Net Interest Income |  | Assumed Deposit (Attrition)/Growth |  | $ Change in Net Interest Income | % Change in Net Interest Income |  | Assumed Deposit (Attrition)/Growth
300 basis points rising | $ | 3.3 |  | .32 | % |  | $ | — |  |  | $ | 45.2 |  | 4.91 | % |  | $ | — |
200 basis points rising | 7.7 |  | .75 |  |  | — |  |  | 36.9 |  | 4.01 |  |  | — |
100 basis points rising | 9.9 |  | .97 |  |  | — |  |  | 23.5 |  | 2.55 |  |  | — |
100 basis points falling | (28.5) |  | (2.80) |  |  | — |  |  | (35.3) |  | (3.83) |  |  | — |
200 basis points falling | (62.5) |  | (6.14) |  |  | — |  |  | — |  | — |  |  | — |
300 basis points falling | (101.1) |  | (9.94) |  |  | — |  |  | — |  | — |  |  | — |

Simulation B | September 30, 2022 |  | June 30, 2022
(Dollars in millions) | $ Change in Net Interest Income | % Change in Net Interest Income |  | Assumed Deposit (Attrition)/Growth |  | $ Change in Net Interest Income | % Change in Net Interest Income |  | Assumed Deposit (Attrition)/Growth
300 basis points rising | $ | (49.4) |  | (5.06) | % |  | $ | (848.9) |  |  | $ | (35.2) |  | (4.01 | %) |  | $ | (1,770.5) |
200 basis points rising | (34.5) |  | (3.54) |  |  | (716.2) |  |  | (14.2) |  | (1.62) |  |  | (1,208.0) |
100 basis points rising | (14.0) |  | (1.43) |  |  | (405.7) |  |  | (2.7) |  | (.31) |  |  | (612.5) |
100 basis points falling | (6.0) |  | (.62) |  |  | 403.2 |  |  | (2.7) |  | (.31) |  |  | 1,086.4 |
200 basis points falling | (26.5) |  | (2.72) |  |  | 849.4 |  |  | — |  | — |  |  | — |
300 basis points falling | (58.7) |  | (6.02) |  |  | 1,446.4 |  |  | — |  | — |  |  | — |

Under Simulation A, in the three rising rate scenarios and three falling rate scenarios, interest rate risk is less asset sensitive than the previous quarter, primarily due to an increase in the Federal funds rate, which increases non-maturity deposit rates. Deposit attrition was removed from the simulation in both the current and previous quarters.
In Simulation B, the assumed levels of deposit attrition were modeled to capture the results of a shrinking balance sheet. Under this Simulation, in the three rising rate scenarios and three falling rate scenarios, interest rate risk is more liability sensitive than in the previous quarter. This was primarily due to an increase in the Federal funds rate, which impacts surge deposit runoff and puts upward pressure on non-maturity deposit rates.
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Projecting deposit activity in a period of historically low interest rates is difficult, and the Company cannot predict how deposits will actually react to shifting rates. The comparisons above provide insight into potential effects of changes in rates and deposit levels 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, 2022. 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, 2022 | 96,180 |  |  | $ | 69.16 |  | 96,180 |  | 4,058,935 |
August 1 - 31, 2022 | 388,724 |  |  | $ | 71.32 |  | 388,724 |  | 3,670,211 |
September 1 - 30, 2022 | 225,975 |  |  | $ | 69.65 |  | 225,975 |  | 3,444,236 |
Total | 710,879 |  |  | $ | 70.50 |  | 710,879 |  | 3,444,236 |

The Company's stock purchases shown above were made under authorizations by the Board of Directors. Under the most recent authorization in April 2022 of 5,000,000 shares, 3,444,236 shares remained available for purchase at September 30, 2022.
Item 6. EXHIBITS
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.

|  | C OMMERCE B ANCSHARES, I NC.
|  | By | /s/ M ARGARET M. R OWE
|  |  | Margaret M. Rowe
Date: November 4, 2022 |  |  | Vice President & Secretary

|  | By | /s/ PAUL A. STEINER
|  |  | Paul A. Steiner
|  |  | Controller
Date: November 4, 2022 |  |  | (Chief Accounting Officer)

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