ASB 10-Q Quarterly Report Sept. 30, 2021

ASSOCIATED BANC-CORP

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asb-20210930

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, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to

Commission file number: 001-31343

Associated Banc-Corp

(Exact name of registrant as specified in its charter)


Wisconsin									39-1098068
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)


433 Main Street
Green Bay,	Wisconsin	54301
(Address of principal executive offices)		(Zip Code)

( 920 ) 491-7500

(Registrant’s telephone number, including area code )

(not applicable)

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the act:


Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, par value $0.01 per share	ASB	New York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.875% Non-Cum. Perp Pref Stock, Srs E	ASB PrE	New York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.625% Non-Cum. Perp Pref Stock, Srs F	ASB PrF	New York Stock Exchange

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 ☑ No ☐

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 ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

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 ☑

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of registrant’s common stock, par value $0.01 per share, at October 25, 2021 was 150,074,324 .


ASSOCIATED BANC-CORP
Table of Contents


		Page
PART I. Financial Information

	Item 1. Financial Statements (Unaudited):	5

	Consolidated Balance Sheets	5

	Consolidated Statements of Income	6

	Consolidated Statements of Comprehensive Income	7

	Consolidated Statements of Changes in Stockholders’ Equity	8

	Consolidated Statements of Cash Flows	10

	Notes to Consolidated Financial Statements	12

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	52

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	77

	Item 4. Controls and Procedures	78

PART II. Other Information

	Item 1. Legal Proceedings	79

	Item 1A. Risk Factors	79

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	81

	Item 6. Exhibits	82

	Signatures	83


ASSOCIATED BANC-CORP
Commonly Used Acronyms and Abbreviations
The following listing provides a reference of common acronyms and abbreviations used throughout the document:


ABRC			Associated Benefits & Risk Consulting, the Corporation's insurance division which was sold on June 30, 2020


ACLL			Allowance for Credit Losses on Loans

AFS			Available for Sale
ALCO			Asset / Liability Committee
ARRC			Alternative Reference Rate Committee
ASC			Accounting Standards Codification
Associated / Corporation / our / we			Associated Banc-Corp collectively with all of its subsidiaries and affiliates
Associated Bank / the Bank			Associated Bank, National Association
ASU			Accounting Standards Update

Basel III			International framework established by the Basel Committee on Banking Supervision for the regulation of capital and liquidity
bp			basis point(s)
CARES Act			Coronavirus Aid, Relief, and Economic Security Act
CDs			Certificates of Deposit
CDIs			Core Deposit Intangibles
CECL			Current Expected Credit Losses
CET1			Common Equity Tier 1


CRA			Community Reinvestment Act
CRE			Commercial Real Estate

EAR			Earnings at Risk
Economic Aid Act			Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act

Exchange Act			Securities Exchange Act of 1934, as amended
FASB			Financial Accounting Standards Board
FDIC			Federal Deposit Insurance Corporation
Federal Reserve			Board of Governors of the Federal Reserve System
FFELP			Federal Family Education Loan Program
FHLB			Federal Home Loan Bank
FHLMC			Federal Home Loan Mortgage Corporation
FICO			Fair Isaac Corporation, provider of a broad-based risk score to aid in credit decisions
First Staunton			First Staunton Bancshares, Incorporated
FNMA			Federal National Mortgage Association

FTEs			Full-time equivalent employees
FTP			Funds Transfer Pricing
GAAP			Generally Accepted Accounting Principles
GNMA			Government National Mortgage Association
GSEs			Government-Sponsored Enterprises
HTM			Held to Maturity



IT			Information Technology
LIBOR			London Interbank Offered Rate
LTV			Loan-to-Value


MSRs			Mortgage Servicing Rights
MVE			Market Value of Equity
Net Free Funds			Noninterest-bearing sources of funds


NII			Net Interest Income
NPAs			Nonperforming Assets


OREO			Other Real Estate Owned
Parent Company			Associated Banc-Corp individually
PCD			Purchased Credit Deteriorated
PPP			Paycheck Protection Program
PPPLF			Paycheck Protection Program Liquidity Facility
RAP			Retirement Account Plan - the Corporation's noncontributory defined benefit retirement plan
Repurchase Agreements			Securities sold under agreements to repurchase
Restricted Stock Awards			Restricted common stock and restricted common stock units to certain key employees
Retirement Eligible Colleagues			Colleagues whose retirement meets the early retirement or normal retirement definitions under the applicable equity compensation plan
Rockefeller			Rockefeller Capital Management
S&P			Standard & Poor's
SBA			Small Business Administration
SEC			U.S. Securities and Exchange Commission
Series C Preferred Stock			The Corporation's 6.125% Non-Cumulative Perpetual Preferred Stock, Series C, liquidation preference $1,000 per share
Series D Preferred Stock			The Corporation's 5.375% Non-Cumulative Perpetual Preferred Stock, Series D, liquidation preference $1,000 per share
Series E Preferred Stock			The Corporation's 5.875% Non-Cumulative Perpetual Preferred Stock, Series E, liquidation preference $1,000 per share
Series F Preferred Stock			The Corporation's 5.625% Non-Cumulative Perpetual Preferred Stock, Series F, liquidation preference $1,000 per share
SOFR			Secured Overnight Finance Rate

TDR			Troubled Debt Restructuring
USI			USI Insurance Services LLC
Whitnell			Whitnell & Co.
YTD			Year-to-Date

Table of Contents


PART I - FINANCIAL INFORMATION

ITEM 1.			Financial Statements:

ASSOCIATED BANC-CORP

Consolidated Balance Sheets


	Sep 30, 2021		Dec 31, 2020
(In Thousands, except share and per share data)	(Unaudited)		(Audited)
Assets
Cash and due from banks	$	378,927	$	416,154
Interest-bearing deposits in other financial institutions	1,281,916		298,759
Federal funds sold and securities purchased under agreements to resell	25,000		1,135
Investment securities AFS, at fair value	3,893,379		3,085,441
Investment securities HTM, net, at amortized cost	1,929,735		1,878,938
Equity securities	17,939		15,106
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost	168,281		168,280
Residential loans held for sale	158,202		129,158

Loans	23,621,673		24,451,724
Allowance for loan losses	( 290,997 )		( 383,702 )
Loans, net	23,330,676		24,068,022
Tax credit and other investments	301,490		297,232

Premises and equipment, net	383,131		418,914
Bank and corporate owned life insurance	683,610		679,647
Goodwill	1,104,992		1,109,300
Other intangible assets, net	60,296		68,254
Mortgage servicing rights, net	50,329		41,961

Interest receivable	79,011		90,263
Other assets	592,753		653,219
Total assets	$	34,439,666	$	33,419,783
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits	$	8,170,105	$	7,661,728
Interest-bearing deposits	19,681,161		18,820,753
Total deposits	27,851,266		26,482,481
Federal funds purchased and securities sold under agreements to repurchase	267,943		192,971
Commercial paper	54,553		59,346

FHLB advances	1,620,880		1,632,723
Other long-term funding	249,160		549,465

Allowance for unfunded commitments	41,276		47,776
Accrued expenses and other liabilities	359,626		364,088
Total liabilities	30,444,705		29,328,850
Stockholders’ Equity
Preferred equity	193,195		353,512
Common equity
Common stock	1,752		1,752
Surplus	1,711,867		1,720,329
Retained earnings	2,628,421		2,458,920
Accumulated other comprehensive income (loss)	( 10,813 )		12,618
Treasury stock, at cost	( 529,461 )		( 456,198 )
Total common equity	3,801,766		3,737,421
Total stockholders’ equity	3,994,961		4,090,933
Total liabilities and stockholders’ equity	$	34,439,666	$	33,419,783
Preferred shares authorized (par value $ 1.00 per share)	750,000		750,000
Preferred shares issued and outstanding	200,000		364,458
Common shares authorized (par value $ 0.01 per share)	250,000,000		250,000,000
Common shares issued	175,216,409		175,216,409
Common shares outstanding	149,961,231		153,540,224

Numbers may not sum due to rounding.

See accompanying notes to consolidated financial statements.

Table of Contents

Item 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Income (Unaudited)


	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
(In Thousands, except per share data)	2021		2020		2021		2020
Interest income
Interest and fees on loans	$	174,643	$	182,625	$	522,920	$	599,306
Interest and dividends on investment securities
Taxable	8,745		13,689		24,600		50,064
Tax-exempt	14,613		14,523		43,141		44,021
Other interest	2,281		2,238		5,802		7,774
Total interest income	200,282		213,075		596,462		701,165
Interest expense
Interest on deposits	4,427		10,033		14,945		59,877
Interest on federal funds purchased and securities sold under agreements to repurchase	48		34		103		454
Interest on other short-term funding	8		5		21		46
Interest on PPPLF	—		899		—		1,574
Interest on FHLB advances	8,962		14,375		27,979		47,471
Interest on long-term funding	3,163		5,580		14,323		16,780
Total interest expense	16,607		30,925		57,371		126,201
Net interest income	183,675		182,150		539,092		574,964
Provision for credit losses	( 24,010 )		43,009		( 82,018 )		157,009
Net interest income after provision for credit losses	207,685		139,141		621,110		417,954
Noninterest income
Wealth management fees	22,110		21,152		67,229		62,884
Service charges and deposit account fees	16,962		14,283		47,366		40,989
Card-based fees	11,113		10,195		31,838		28,685
Other fee-based revenue	3,929		4,968		12,769		14,240
Capital markets, net	7,114		7,222		20,928		22,067
Mortgage banking, net	10,657		12,636		42,710		31,043
Bank and corporate owned life insurance	2,760		3,074		8,551		9,793
Insurance commissions and fees	88		114		250		45,153
Asset gains (losses), net (a)	5,228		( 339 )		10,024		156,945
Investment securities gains (losses), net	—		7		( 16 )		9,222
Gains on sale of branches, net (b)	—		—		1,038		—
Other	2,116		2,232		8,176		7,321
Total noninterest income	82,076		75,545		250,862		428,342
Noninterest expense
Personnel	107,880		108,567		318,900		334,117
Technology	19,927		19,666		60,902		61,639
Occupancy	15,814		17,854		46,649		48,386
Business development and advertising	6,156		3,626		15,522		13,007
Equipment	5,200		5,399		16,199		16,150
Legal and professional	4,304		5,591		17,495		15,809
Loan and foreclosure costs	1,616		2,118		6,508		8,842
FDIC assessment	5,000		3,900		13,350		14,650
Other intangible amortization	2,203		2,253		6,642		7,939
Loss on prepayments of FHLB advances	—		44,650		—		44,650
Other	9,793		13,963		25,547		37,993
Total noninterest expense	177,892		227,587		527,713		603,184
Income (loss) before income taxes	111,870		( 12,900 )		344,259		243,112
Income tax expense (benefit)	23,060		( 58,114 )		70,142		3,342
Net income	88,809		45,214		274,117		239,769
Preferred stock dividends	4,155		5,207		14,236		13,152
Net income available to common equity	$	84,655	$	40,007	$	259,880	$	226,618
Earnings per common share
Basic	$	0.56	$	0.26	$	1.70	$	1.47
Diluted	$	0.56	$	0.26	$	1.69	$	1.46
Average common shares outstanding
Basic	150,046		152,440		151,473		153,175
Diluted	151,143		153,194		152,701		153,914

Numbers may not sum due to rounding.

(a) The nine months ended September 30, 2020 include a gain of $ 163 million from the sale of ABRC.

(b) Includes the deposit premium on the sale of branches net of miscellaneous costs to sell. See Note 2 Acquisitions and Dispositions for additional details on the branch sales.

See accompanying notes to consolidated financial statements.

Table of Contents

Item 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020

Net income	$	88,809	$	45,214	$	274,117	$	239,769
Other comprehensive income (loss), net of tax
Investment securities AFS
Net unrealized gains (losses)	( 19,827 )		5,840		( 35,829 )		53,900
Amortization of net unrealized (gains) losses on AFS securities transferred to HTM securities	172		1,296		1,335		2,628
Reclassification adjustment for net losses (gains) realized in net income	—		( 7 )		16		( 9,222 )


Income tax (expense) benefit	4,975		( 1,786 )		8,548		( 11,852 )
Other comprehensive income (loss) on investment securities AFS	( 14,681 )		5,342		( 25,930 )		35,454
Defined benefit pension and postretirement obligations
Amortization of prior service cost	( 37 )		( 36 )		( 111 )		( 111 )
Amortization of actuarial loss (gain)	1,346		1,313		3,446		2,923

Income tax (expense) benefit	( 330 )		( 703 )		( 836 )		( 1,088 )
Other comprehensive income (loss) on pension and postretirement obligations	979		573		2,498		1,724
Total other comprehensive income (loss)	( 13,702 )		5,916		( 23,431 )		37,178
Comprehensive income	$	75,107	$	51,130	$	250,685	$	276,948

Numbers may not sum due to rounding.

See accompanying notes to consolidated financial statements.

Table of Contents

Item 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)


(In Thousands, except per share data)	Preferred Equity		Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, December 31, 2020	$	353,512	$	1,752	$	1,720,329	$	2,458,920	$	12,618	$	( 456,198 )	$	4,090,933


Comprehensive income
Net income	—		—		—		94,301		—		—		94,301
Other comprehensive income (loss)	—		—		—		—		( 16,811 )		—		( 16,811 )
Comprehensive income													77,490
Common stock issued
Stock-based compensation plans, net	—		—		( 16,986 )		—		—		27,542		10,556


Purchase of treasury stock, open market purchases	—		—		—		—		—		( 17,973 )		( 17,973 )
Purchase of treasury stock, stock-based compensation plans	—		—		—		—		—		( 3,593 )		( 3,593 )
Cash dividends
Common stock, $0.18 per share	—		—		—		( 27,870 )		—		—		( 27,870 )
Preferred stock (a)	—		—		—		( 5,207 )		—		—		( 5,207 )




Stock-based compensation expense, net	—		—		3,444		—		—		—		3,444




Balance, March 31, 2021	$	353,512	$	1,752	$	1,706,786	$	2,520,144	$	( 4,193 )	$	( 450,222 )	$	4,127,780

Comprehensive income:
Net income	—		—		—		91,007		—		—		91,007
Other comprehensive income (loss)	—		—		—		—		7,082		—		7,082
Comprehensive income													98,088
Common stock issued:
Stock-based compensation plans, net	—		—		( 3,632 )		—		—		11,250		7,618
Purchase of treasury stock, open market purchases	—		—		—		—		—		( 29,972 )		( 29,972 )
Purchase of treasury stock, stock-based compensation plans	—		—		—		—		—		( 856 )		( 856 )
Cash dividends:
Common stock, $0.18 per share	—		—		—		( 27,822 )		—		—		( 27,822 )
Preferred stock (b)	—		—		—		( 4,875 )		—		—		( 4,875 )

Redemption of preferred stock	( 63,313 )		—		—		( 1,687 )		—		—		( 65,000 )
Stock-based compensation expense, net	—		—		5,092		—		—		—		5,092
Balance, June 30, 2021	$	290,200	$	1,752	$	1,708,246	$	2,576,766	$	2,889	$	( 469,801 )	$	4,110,052
Comprehensive income:
Net income	—		—		—		88,809		—		—		88,809
Other comprehensive income (loss)	—		—		—		—		( 13,702 )		—		( 13,702 )
Comprehensive income													75,107
Common stock issued:
Stock-based compensation plans, net	—		—		6		—		—		449		455
Purchase of treasury stock, open market purchases	—		—		—		—		—		( 59,998 )		( 59,998 )
Purchase of treasury stock, stock-based compensation plans	—		—		—		—		—		( 112 )		( 112 )
Cash dividends:
Common stock, $0.20 per share	—		—		—		( 30,546 )		—		—		( 30,546 )
Preferred stock (c)	—		—		—		( 4,155 )		—		—		( 4,155 )

Redemption of preferred stock	( 97,004 )		—		—		( 2,454 )		—		—		( 99,458 )
Stock-based compensation expense, net	—		—		3,616		—		—		—		3,616
Balance, September 30, 2021	$	193,195	$	1,752	$	1,711,867	$	2,628,421	$	( 10,813 )	$	( 529,461 )	$	3,994,961

Numbers may not sum due to rounding.

(a) Series C, $ 0.3828125 per share; Series D, $ 0.3359375 per share; Series E, $ 0.3671875 per share; and Series F, $ 0.3515625 per share.

(b) Series C, $ 0.3197115 per share; Series D, $ 0.3359375 per share; Series E, $ 0.3671875 per share; and Series F, $ 0.3515625 per share.

Table of Contents


(In Thousands, except per share data)	Preferred Equity		Common Stock		Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Balance, December 31, 2019	$	256,716	$	1,752	$	1,716,431	$	2,380,867	$	( 33,183 )	$	( 400,460 )	$	3,922,124
Cumulative effect of ASU 2016-13 adoption (CECL)	—		—		—		( 98,337 )		—		—		( 98,337 )
Total shareholder's equity at beginning of period, as adjusted	256,716		1,752		1,716,431		2,282,530		( 33,183 )		( 400,460 )		3,823,787
Comprehensive income
Net income	—		—		—		45,838		—		—		45,838
Other comprehensive income (loss)	—		—		—		—		16,209		—		16,209

Comprehensive income													62,046
Common stock issued
Stock-based compensation plans, net	—		—		( 20,659 )		—		—		23,555		2,896


Purchase of treasury stock, open market purchases	—		—		—		—		—		( 71,255 )		( 71,255 )
Purchase of treasury stock, stock-based compensation plans	—		—		—		—		—		( 5,555 )		( 5,555 )
Cash dividends
Common stock, $0.18 per share	—		—		—		( 28,392 )		—		—		( 28,392 )
Preferred stock (a)	—		—		—		( 3,801 )		—		—		( 3,801 )


Stock-based compensation expense, net	—		—		10,744		—		—		—		10,744



Balance, March 31, 2020	$	256,716	$	1,752	$	1,706,516	$	2,296,176	$	( 16,974 )	$	( 453,714 )	$	3,790,471

Comprehensive income:
Net income	—		—		—		148,718		—		—		148,718
Other comprehensive income (loss)	—		—		—		—		15,054		—		15,054
Comprehensive income													163,772
Common stock issued:
Stock-based compensation plans, net	—		—		1,523		—		—		( 1,350 )		173



Purchase of treasury stock, stock-based compensation plans	—		—		—		—		—		7		7
Cash dividends:
Common stock, $0.18 per share	—		—		—		( 27,889 )		—		—		( 27,889 )
Preferred stock (b)	—		—		—		( 4,144 )		—		—		( 4,144 )
Issuance of preferred stock	97,129		—		—		—		—		—		97,129



Stock-based compensation expense, net	—		—		4,939		—		—		—		4,939

Balance, June 30, 2020	$	353,846	$	1,752	$	1,712,978	$	2,412,859	$	( 1,920 )	$	( 455,057 )	$	4,024,457
Comprehensive income:
Net income	—		—		—		45,214		—		—		45,214
Other comprehensive income (loss)	—		—		—		—		5,916		—		5,916
Comprehensive income													51,130
Common stock issued:
Stock-based compensation plans, net	—		—		706		—		—		( 610 )		95

Purchase of treasury stock, stock-based compensation plans	—		—		—		—		—		( 462 )		( 462 )
Cash dividends:
Common stock, $0.18 per share	—		—		—		( 27,875 )		—		—		( 27,875 )
Preferred stock (c)	—		—		—		( 5,207 )		—		—		( 5,207 )
Issuance of preferred stock	( 208 )		—		—		—		—		—		( 208 )
Stock-based compensation expense, net	—		—		3,502		—		—		—		3,502
Balance, September 30, 2020	$	353,637	$	1,752	$	1,717,186	$	2,424,992	$	3,995	$	( 456,129 )	$	4,045,433

Numbers may not sum due to rounding.

(a) Series C, $ 0.3828125 per share; Series D, $ 0.3359375 per share; and Series E, $ 0.3671875 per share.

(b) Series C, $ 0.3828125 per share; Series D, $ 0.3359375 per share; Series E, $ 0.3671875 per share; and Series F, $ 0.0849931 per share.

(c) Series C, $ 0.3828125 per share; Series D, $ 0.3359375 per share; Series E, $ 0.3671875 per share; and Series F, $ 0.3515625 per share.

See accompanying notes to consolidated financial statements.

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Item 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended Sep 30,
($ in Thousands)	2021		2020
Cash Flow From Operating Activities
Net income	$	274,117	$	239,769
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Provision for credit losses	( 82,018 )		157,009
Depreciation and amortization	36,109		38,707
Addition to (recovery of) valuation allowance on mortgage servicing rights, net	( 12,231 )		18,481
Amortization of mortgage servicing rights	15,624		16,416
Amortization of other intangible assets	6,642		7,939
Amortization and accretion on earning assets, funding, and other, net	12,184		21,748
Net amortization of tax credit investments	25,196		18,988
Losses (gains) on sales of investment securities, net	16		( 9,222 )
Asset (gains) losses, net	( 10,024 )		( 156,945 )
(Gains) losses on sale of branch, net	( 1,038 )		—
(Gain) loss on mortgage banking activities, net	( 32,304 )		( 43,889 )
Mortgage loans originated and acquired for sale	( 1,345,158 )		( 1,319,034 )
Proceeds from sales of mortgage loans held for sale	1,348,006		1,620,777

Changes in certain assets and liabilities
(Increase) decrease in interest receivable	11,252		( 415 )
Increase (decrease) in interest payable	( 13,287 )		( 12,735 )
Increase (decrease) in expense payable	24,509		( 32,892 )
(Increase) decrease in net derivative position	82,122		( 133,165 )
(Increase) decrease in net income tax position	( 19,940 )		( 58,002 )
Net change in other assets and other liabilities	44,366		49,525
Net cash provided by (used in) operating activities	364,141		423,060
Cash Flow From Investing Activities
Net decrease (increase) in loans	804,497		( 2,170,320 )
Purchases of
AFS securities	( 1,985,700 )		( 1,368,124 )
HTM securities	( 250,259 )		( 109,824 )
Federal Home Loan Bank and Federal Reserve Bank stocks and equity securities	( 9 )		( 84,152 )
Premises, equipment, and software, net of disposals	( 34,337 )		( 34,440 )
Other intangibles	—		( 200 )
Proceeds from
Sales of securities	158,743		626,283

Sale of Federal Home Loan Bank and Federal Reserve Bank stocks	—		144,000
Prepayments, calls, and maturities of AFS investment securities	927,053		893,157
Prepayments, calls, and maturities of HTM investment securities	243,063		323,175
Sales, prepayments, calls, and maturities of other assets	18,149		18,457
Net cash received in business segment sale	2,415		256,511
Net change in tax credit and alternative investments	( 45,655 )		( 35,630 )
Net cash (paid) received in acquisition	—		( 31,518 )
Net cash provided by (used in) investing activities	( 162,040 )		( 1,572,625 )
Cash Flow From Financing Activities
Net increase (decrease) in deposits	1,400,162		2,495,229
Net decrease in deposits due to branch sales	( 31,083 )		—
Net increase (decrease) in short-term funding	70,179		( 284,655 )
Net increase (decrease) in short-term FHLB advances	—		( 520,000 )
Repayment of long-term FHLB advances	( 18,276 )		( 966,777 )
Proceeds from long-term FHLB advances	6,576		4,000


Proceeds from PPPLF	—		1,022,217
(Repayment) proceeds of finance lease principal	( 1,056 )		( 1,044 )
Repayment of senior notes	( 300,000 )		—
Proceeds from issuance of preferred shares	—		96,921
Proceeds from issuance of common stock for stock-based compensation plans	18,629		3,165
Redemption of preferred shares	( 164,458 )		—



Purchase of treasury stock, open market purchases	( 107,943 )		( 71,255 )
Purchase of treasury stock, stock-based compensation plans	( 4,562 )		( 6,010 )
Cash dividends on common stock	( 86,238 )		( 84,156 )
Cash dividends on preferred stock	( 14,236 )		( 13,152 )
Net cash provided by (used in) financing activities	767,695		1,674,484
Net increase (decrease) in cash and cash equivalents	969,796		524,918
Cash and cash equivalents at beginning of period	716,048		588,744
Cash and cash equivalents at end of period (a)	$	1,685,843	$	1,113,663

Numbers may not sum due to rounding.

(a) No restricted cash due to the Federal Reserve reducing the required reserve ratio to zero

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ASSOCIATED BANC-CORP

Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
($ in Thousands)	2021		2020
Supplemental disclosures of cash flow information
Cash paid for interest	$	69,470	$	137,423
Cash paid for (received from) income and franchise taxes	56,262		17,682
Loans and bank premises transferred to OREO	33,794		12,599
Capitalized mortgage servicing rights	11,761		11,495
Loans transferred into held for sale from portfolio, net	10,071		260,856
Unsettled trades to purchase securities	9,855		1,000
Acquisition
Fair value of assets acquired, including cash and cash equivalents	—		457,878
Fair value ascribed to goodwill and intangible assets	—		22,150
Fair value of liabilities assumed	—		480,028

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Item 1. Financial Statements Continued:

ASSOCIATED BANC-CORP

Notes to Consolidated Financial Statements

These interim consolidated financial statements have been prepared according to the rules and regulations of the SEC and, therefore, certain information and footnote disclosures normally presented in accordance with GAAP have been omitted or abbreviated. The information contained on the consolidated financial statements and footnotes in Associated Banc-Corp's 2020 Annual Report on Form 10-K should be referred to in connection with the reading of these unaudited interim consolidated financial statements.

Note 1 Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and comprehensive income, changes in stockholders’ equity, and cash flows of the Corporation and Parent Company for the periods presented, and all such adjustments are of a normal recurring nature. The consolidated financial statements include the accounts of all subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes.

Note 2 Acquisitions and Dispositions

Acquisitions:

The Corporation has not had any acquisitions during the first nine months of 2021.

2020

First Staunton Acquisition

On February 14, 2020 , the Corporation completed its acquisition of First Staunton . The purchase price was based on an assumed 4% deposit premium at announcement. The conversion of the branches was completed simultaneously with the close of the transaction, expanding the Bank's presence into nine new Metro-East St. Louis communities. As a result of the acquisition and other consolidations, a net of seven branch locations were added.

The Corporation recorded $ 15 million in goodwill related to the First Staunton acquisition. Goodwill created by the acquisition is not tax deductible.

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The following table presents the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date related to the First Staunton acquisition:


($ in Thousands)	Purchase Accounting Adjustments		February 14, 2020
Assets
Cash and cash equivalents	$	—	$	44,782
Investment securities AFS	( 24 )		98,743
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost	—		781
Loans	( 4,808 )		369,741
Premises and equipment, net	( 3,005 )		4,865
Bank owned life insurance	9		6,770
Goodwill			14,812
Core deposit intangibles (included in other intangible assets, net on the face of the consolidated balance sheets)	7,379		7,379
OREO (included in other assets on the face of the consolidated balance sheets)	670		762
Other assets	2,795		7,692
Total assets			$	556,328
Liabilities
Deposits	$	1,285	$	438,684
Other borrowings	61		34,613
Accrued expenses and other liabilities	179		6,730
Total liabilities			$	480,028
Total consideration paid			$	76,300

For a description of methods used to determine the fair value of significant assets and liabilities presented on the balance sheet above, see Assumptions section of this Note.

The Corporation has purchased loans with the First Staunton acquisition, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination (PCD). The carrying amount of those loans is as follows:


($ in Thousands)	February 14, 2020
Purchase price of loans at acquisition	$	77,221
Allowance for credit losses at acquisition	3,504
Non-credit discount/(premium) at acquisition	( 951 )
Par value of acquired loans at acquisition	$	79,774

The Corporation acquired no PCD securities in connection with the acquisition.

Assumptions

Investment Securities: The fair value of investments on the date of acquisition was determined utilizing an external third party broker opinion of the market value.

Loans: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. For the non-credit (interest and liquidity) premium, loans were grouped together according to similar characteristics when applying various valuation techniques. For the credit discount, loans were also grouped based on whether they had more than insignificant deterioration in credit since origination.

CDIs: This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative cost of funds, and the interest costs associated with customer deposits. The CDIs are being amortized on a straight-line basis over 10 years.

Time Deposits: The fair value for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.

FHLB Borrowings: The fair value of FHLB advances is estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.

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Dispositions:

2021

On March 1, 2021, the Corporation closed on the sale of its wealth management subsidiary, Whitnell, to Rockefeller for a purchase price of $ 8 million. Associated reported a first quarter 2021 pre-tax gain of $ 2 million, included in asset gains (losses), net on the consolidated statements of income, in conjunction with the sale.

On February 26, 2021, the Bank completed the sale of one branch located in Monroe, Wisconsin to Summit Credit Union. Under the terms of the transaction, Associated Bank sold $ 31 million in total deposits and no loans. Associated Bank received an approximately 4% purchase premium on deposits transferred.

2020

On June 30, 2020, the Corporation completed the sale of ABRC to USI for $ 266 million in cash. Associated recorded a second quarter 2020 pre-tax book gain of $ 163 million in conjunction with the sale.

On December 11, 2020, the Bank completed the sale of five branches in Peoria, Illinois to Morton Community Bank. Under the terms of the transaction, the Bank sold $ 180 million in total deposits and no loans. Associated Bank received a 4% purchase premium on deposits transferred . With the sale of these branches, the Bank exited the Peoria market.

On December 11, 2020, the Bank completed the sale of two branches in southwest Wisconsin to Royal Bank. Under the terms of the transaction, Associated Bank sold $ 53 million in total deposits and no loans. Associated Bank received a 4% purchase premium on deposits transferred in the Prairie du Chien and Richland Center branches.

Note 3 Summary of Significant Accounting Policies

The accounting and reporting policies of the Corporation conform to U.S. GAAP and to general practice within the financial services industry. A discussion of these policies can be found in Note 1 Summary of Significant Accounting Policies included in the Corporation’s 2020 Annual Report on Form 10-K. There have been no changes to the Corporation's significant accounting policies since December 31, 2020.

New Accounting Pronouncements Adopted

Standard

Description

Date of adoption

Effect on financial statements

ASU 2019-12
Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes

The FASB issued this amendment to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendment also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this Update were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendment was permitted.

1st Quarter 2021

Adoption of this amendment did not have a material impact on the Corporation's results of operation, financial position or liquidity.

ASU 2020-08 Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs

The FASB issued this amendment to clarify that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. The amendments in this Update were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments was not permitted.

1st Quarter 2021

Adoption of this amendment did not have a material impact on the Corporation's results of operation, financial position or liquidity.

Future Accounting Pronouncements

There are no applicable material accounting pronouncements recently issued that have not yet been adopted by the Corporation.

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Note 4 Earnings Per Common Share

Earnings per common share are calculated utilizing the two-class method. Basic earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding adjusted for the dilutive effect of common stock awards (outstanding stock options and unvested restricted stock awards). Presented below are the calculations for basic and diluted earnings per common share:


	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
(In Thousands, except per share data)	2021		2020			2021		2020
Net income	$	88,809	$	45,214		$	274,117	$	239,769
Preferred stock dividends	( 4,155 )		( 5,207 )			( 14,236 )		( 13,152 )
Net income available to common equity	$	84,655	$	40,007		$	259,880	$	226,618
Common shareholder dividends	( 30,323 )		( 27,676 )			( 85,604 )		( 83,607 )
Unvested share-based payment awards	( 222 )		( 199 )			( 634 )		( 549 )
Undistributed earnings	$	54,109	$	12,133		$	173,642	$	142,462
Undistributed earnings allocated to common shareholders	$	53,716	$	12,045		$	172,436	$	141,426
Undistributed earnings allocated to unvested share-based payment awards	393		87			1,206		1,036
Undistributed earnings	$	54,109	$	12,133		$	173,642	$	142,462
Basic
Distributed earnings to common shareholders	$	30,323	$	27,676		$	85,604	$	83,607
Undistributed earnings allocated to common shareholders	53,716		12,045			172,436		141,426
Total common shareholders earnings, basic	$	84,039	$	39,721		$	258,040	$	225,032
Diluted
Distributed earnings to common shareholders	$	30,323	$	27,676		$	85,604	$	83,607
Undistributed earnings allocated to common shareholders	53,716		12,045			172,436		141,426
Total common shareholders earnings, diluted	$	84,039	$	39,721		$	258,040	$	225,032
Weighted average common shares outstanding	150,046		152,440			151,473		153,175
Effect of dilutive common stock awards	1,096		754			1,228		739

Diluted weighted average common shares outstanding	151,143		153,194			152,701		153,914
Basic earnings per common share	$	0.56	$	0.26		$	1.70	$	1.47
Diluted earnings per common share	$	0.56	$	0.26		$	1.69	$	1.46

Non-dilutive common stock options of approximately 3 million and 8 million for the three months ended September 30, 2021 and 2020, respectively, and 3 million and 7 million for the nine months ended September 30, 2021 and 2020, respectively, were excluded from the earnings per common share calculation.

Note 5 Stock-Based Compensation

The fair values of stock options and restricted stock awards (including restricted stock units) are amortized as compensation expense on a straight-line basis over the vesting period of the grants. For colleagues who meet the definition of retirement eligible under the 2017 Incentive Compensation Plan and the 2020 Incentive Compensation Plan, expenses related to stock options and restricted stock awards are fully recognized on the date the colleague meets the definition of normal or early retirement. Compensation expense recognized is included in personnel expense on the consolidated statements of income.

Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock option represents the period of time stock options are expected to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the implied volatility of the Corporation’s stock.

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The Corporation did not grant stock options in the first nine months of 2021. The following assumptions were used in estimating the fair value for options granted for the full year 2020:


	2020
Dividend yield	3.50	%
Risk-free interest rate	1.60	%
Weighted average expected volatility	21.00	%
Weighted average expected life	5.75 years
Weighted average per share fair value of options	$ 2.39

A summary of the Corporation’s stock option activity for the nine months ended September 30, 2021 is presented below:


Stock Options	Shares (a)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (a)
Outstanding at December 31, 2020	6,473	$	19.77	6.23 years	$	2,005

Exercised	1,116	16.36
Forfeited or expired	97	22.61
Outstanding at September 30, 2021	5,260	$	20.44	6.01 years	$	11,044
Options Exercisable at September 30, 2021	3,694	$	20.58	5.19 years	$	8,062

(a) In thousands

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option. For the nine months ended September 30, 2021, the intrinsic value of stock options exercised was $ 6 million compared to less than $ 1 million for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, the total fair value of stock options vested was $ 3 million compared to $ 4 million for the nine months ended September 30, 2020.

The Corporation recognized compensation expense for the vesting of stock options of $ 1 million for the nine months ended September 30, 2021, compared to $ 3 million for the nine months ended September 30, 2020. Included in compensation expense for 2021 was approximately $ 65 ,000 for the accelerated vesting of stock options granted to retirement eligible colleagues. At September 30, 2021, the Corporation had $ 2 million of unrecognized compensation expense related to stock options that is expected to be recognized over the remaining requisite service periods that extend predominately through the first quarter of 2024 .

The Corporation also has issued time-based and performance-based restricted stock awards under the 2017 Incentive Compensation Plan and subsequent 2020 Incentive Compensation Plan. Performance awards are based on performance goals of earnings per share and total shareholder return with vesting ranging from a minimum of 0 % to a maximum of 150 % of the target award. Performance awards are valued utilizing a Monte Carlo simulation model to estimate fair value of the awards at the grant date.

The following table summarizes information about the Corporation’s restricted stock awards activity for the nine months ended September 30, 2021:


Restricted Stock Awards	Shares (a)	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2020	2,293	$	20.70
Granted	1,212	20.00
Vested	797	21.23
Forfeited	52	22.39
Outstanding at September 30, 2021	2,656	$	19.86

(a) In thousands

The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period specified in the grant's award agreement. Performance-based restricted stock awards granted during 2020 and 2021 will cliff-vest after the three year performance period has ended. Service-based restricted stock awards granted during 2020 and 2021 will vest ratably over a period of four years . Expense for restricted stock awards issued of $ 11 million was recorded for the nine months ended September 30, 2021 and $ 15 million was recorded for the nine months ended September 30, 2020. Included in compensation expense for the first nine months of 2021 was $ 2 million of expense for the accelerated vesting of restricted stock awards granted to retirement eligible colleagues. The Corporation had $ 24 million of unrecognized compensation costs related to restricted stock awards at September 30, 2021 that are expected to be recognized over the remaining requisite service periods that extend predominately through the first quarter of 2025 .

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The Corporation has the ability to issue shares from treasury or new shares upon the exercise of stock options or the granting of restricted stock awards. The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock in the market, to be made available for issuance in connection with the Corporation’s employee incentive plans and for other corporate purposes. The repurchase of shares, if any, will be based on market and investment opportunities, capital levels, growth prospects, and regulatory constraints. Such repurchases may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchase programs, or similar facilities.

Note 6 Investment Securities

Investment securities are classified as AFS, HTM, or equity on the consolidated balance sheets at the time of purchase. The amortized cost and fair values of securities AFS and HTM at September 30, 2021 were as follows:


($ in Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value


Investment securities AFS
U. S. Treasury securities	$	124,253	$	46	$	( 319 )	$	123,981
Agency securities	15,000		—		( 2 )		14,998
Obligations of state and political subdivisions (municipal securities)	394,310		19,709		—		414,020
Residential mortgage-related securities
FNMA / FHLMC	2,377,335		9,216		( 9,144 )		2,377,408
GNMA	77,199		2,497		—		79,696
Private-label	76,033		—		—		76,033
Commercial mortgage-related securities
FNMA / FHLMC	357,837		2,230		( 6,892 )		353,175
GNMA	227,622		3,474		—		231,096
Asset backed securities
FFELP	212,378		890		( 471 )		212,797
SBA	7,182		44		( 48 )		7,179

Other debt securities	3,000		—		( 1 )		2,999
Total investment securities AFS	$	3,872,150	$	38,106	$	( 16,877 )	$	3,893,379
Investment securities HTM
U. S. Treasury securities	$	1,000	$	7	$	—	$	1,007
Obligations of state and political subdivisions (municipal securities)	1,541,443		106,181		( 3,996 )		1,643,628
Residential mortgage-related securities
FNMA / FHLMC	37,318		2,129		—		39,447
GNMA	54,900		2,328		—		57,228
Commercial mortgage-related securities
FNMA/FHLMC	170,739		248		( 4,002 )		166,985
GNMA	124,383		3,202		( 22 )		127,562
Total investment securities HTM	$	1,929,783	$	114,095	$	( 8,019 )	$	2,035,858

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The amortized cost and fair values of securities AFS and HTM at December 31, 2020 were as follows:


($ in Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value


Investment securities AFS
U. S. Treasury securities	$	26,436	$	95	$	—	$	26,531
Agency securities	24,985		53		—		25,038
Obligations of state and political subdivisions (municipal securities)	425,057		25,605		—		450,662
Residential mortgage-related securities
FNMA / FHLMC	1,448,806		12,935		( 500 )		1,461,241
GNMA	231,364		4,176		( 3 )		235,537

Commercial mortgage-related securities
FNMA / FHLMC	19,654		3,250		—		22,904
GNMA	511,429		13,327		—		524,756
Asset backed securities
FFELP	329,030		1,172		( 3,013 )		327,189
SBA	8,637		—		( 53 )		8,584
Other debt securities	3,000		—		—		3,000
Total investment securities AFS	$	3,028,399	$	60,612	$	( 3,570 )	$	3,085,441
Investment securities HTM
U. S. Treasury securities	$	999	$	25	$	—	$	1,024
Obligations of state and political subdivisions (municipal securities)	1,441,900		133,544		—		1,575,445
Residential mortgage-related securities
FNMA / FHLMC	54,599		2,891		—		57,490
GNMA	114,553		4,260		—		118,813
Commercial mortgage-related securities
FNMA / FHLMC	11,211		—		—		11,211
GNMA	255,742		9,218		—		264,960
Total investment securities HTM	$	1,879,005	$	149,938	$	—	$	2,028,943

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The expected maturities of investment securities AFS and HTM at September 30, 2021, are shown below:


	AFS					HTM
($ in Thousands)	Amortized Cost		Fair Value			Amortized Cost		Fair Value
Due in one year or less	$	7,987	$	7,996		$	27,797	$	27,982
Due after one year through five years	75,545		75,970			39,029		40,265
Due after five years through ten years	415,467		430,634			181,911		189,290
Due after ten years	37,565		41,396			1,293,705		1,387,099
Total debt securities	536,564		555,997			1,542,442		1,644,635
Residential mortgage-related securities
FNMA / FHLMC	2,377,335		2,377,408			37,318		39,447
GNMA	77,199		79,696			54,900		57,228
Private-label	76,033		76,033			—		—
Commercial mortgage-related securities
FNMA / FHLMC	357,837		353,175			170,739		166,985
GNMA	227,622		231,096			124,383		127,562
Asset backed securities
FFELP	212,378		212,797			—		—
SBA	7,182		7,179			—		—

Total investment securities	$	3,872,150	$	3,893,379		$	1,929,783	$	2,035,858
Ratio of fair value to amortized cost			100.5		%			105.5		%

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On a quarterly basis, the Corporation refreshes the credit quality of each HTM security. The following table summarizes the credit quality indicators of HTM securities at amortized cost at September 30, 2021:


($ in Thousands)	AAA		AA		A		Not Rated		Total
U. S. Treasury securities	$	1,000	$	—	$	—	$	—	$	1,000
Obligations of state and political subdivisions (municipal securities)	683,098		847,641		10,511		194		1,541,443
Residential mortgage-related securities
FNMA / FHLMC	37,318		—		—		—		37,318
GNMA	54,900		—		—		—		54,900
Commercial mortgage-related securities
FNMA / FHLMC	170,739		—		—		—		170,739
GNMA	124,383		—		—		—		124,383
Total HTM securities	$	1,071,438	$	847,641	$	10,511	$	194	$	1,929,783

The following table summarizes the credit quality indicators of HTM securities at amortized cost at December 31, 2020:


($ in Thousands)	AAA		AA		A		Total
U. S. Treasury securities	$	999	$	—	$	—	$	999
Obligations of state and political subdivisions (municipal securities)	567,252		860,607		14,041		1,441,900
Residential mortgage-related securities
FNMA / FHLMC	54,599		—		—		54,599
GNMA	114,553		—		—		114,553
Commercial mortgage-related securities
FNMA / FHLMC	11,211		—		—		11,211
GNMA	255,742		—		—		255,742
Total HTM securities	$	1,004,357	$	860,607	$	14,041	$	1,879,005

Investment securities gains (losses), net includes proceeds from the sale of investment securities as well as any applicable write-ups or write-downs of investment securities. The proceeds from the sale of investment securities for the three and nine months ended September 30, 2021 and 2020, are shown below:


	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020
Gross gains on AFS securities	$	—	$	7	$	421	$	9,312


Gross (losses) on AFS securities	—		—		( 437 )		( 90 )



Investment securities gains (losses), net	$	—	$	7	$	( 16 )	$	9,222
Proceeds from sales of investment securities	$	—	$	8	$	158,708	$	626,283

During the second quarter of 2021, the Corporation sold $107 million of lower yielding FFELP student loan asset backed securities at a slight gain and reinvested the proceeds into higher yielding mortgage backed securities. During the first quarter of 2021, the Corporation sold $ 51 million of lower yielding U.S. Treasury and Agency securities at a slight loss to take advantage of the steeper yield curve by reinvesting the proceeds into similar but higher yielding, longer duration securities.

During the second quarter of 2020, the Corporation sold $ 261 million of less liquid securities at a gain of $ 3 million, reinvesting the proceeds into more liquid securities in order to further improve portfolio liquidity. During the first quarter of 2020, the Corporation sold $ 281 million of primarily prepayment sensitive mortgage-related securities at a gain of $ 6 million. Additionally, in February 2020, the Corporation sold $ 84 million of certain securities acquired in the First Staunton acquisition that did not fit the parameters of the Corporation's current investment strategy.

Investment securities with a carrying value of $ 2.2 billion and $ 1.6 billion at September 30, 2021 and December 31, 2020, respectively, were pledged to secure certain deposits or for other purposes as required or permitted by law.

Accrued interest receivable on HTM securities totaled $ 12 million and $ 14 million at September 30, 2021 and December 31, 2020, respectively. Accrued interest receivable on AFS securities totaled $ 9 million and $ 8 million at September 30, 2021 and December 31, 2020, respectively. Accrued interest receivable on both HTM and AFS securities is included in interest receivable on the consolidated balance sheets. There was no interest income reversed for investments going into nonaccrual at both September 30, 2021 and 2020.

A security is considered past due once it is 30 days past due under the terms of the agreement. At both September 30, 2021 and December 31, 2020, the Corporation had no past due HTM securities.

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The allowance for credit losses on HTM securities was approximately $ 49 ,000 at September 30, 2021 and approximately $ 67 ,000 at December 31, 2020, attributable entirely to the Corporation's municipal securities, included in investment securities HTM, net, at amortized cost on the consolidated balance sheets. The Corporation also holds U.S. Treasury, municipal and mortgage-related securities issued by the U.S. government or a GSE which are backed by the full faith and credit of the U.S. government and, as a result, no allowance for credit losses has been recorded related to these securities.

The following represents gross unrealized losses and the related fair value of investment securities AFS and HTM, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at September 30, 2021:


	Less than 12 months					12 months or more					Total
($ in Thousands)	Number of Securities	Unrealized (Losses)		Fair Value		Number of Securities	Unrealized (Losses)		Fair Value		Unrealized (Losses)		Fair Value
Investment securities AFS
U.S. Treasury securities	4	$	( 319 )	$	84,071	—	—		$	—	$	( 319 )	$	84,071
Agency securities	1	( 2 )		14,998		—	—		—		( 2 )		14,998

Residential mortgage-related securities
FNMA / FHLMC	33	( 9,144 )		1,170,981		—	—		—		( 9,144 )		1,170,981
GNMA	1	—		69		—	—		—		—		69


FNMA / FHLMC commercial mortgage-related securities	19	( 6,892 )		331,504		—	—		—		( 6,892 )		331,504

Asset backed securities
FFELP	1	( 124 )		34,876		8	( 347 )		65,002		( 471 )		99,878
SBA	—	—		—		9	( 48 )		4,229		( 48 )		4,229
Other debt securities	1	( 1 )		999		—	—		—		( 1 )		999

Total	60	$	( 16,482 )	$	1,637,498	17	$	( 395 )	$	69,231	$	( 16,877 )	$	1,706,729
Investment securities HTM
Obligations of state and political subdivisions (municipal securities)	62	$	( 3,996 )	$	151,216	—	$	—	$	—	$	( 3,996 )	$	151,216



Commercial mortgage-related securities
FNMA / FHLMC	11	( 4,002 )		146,248		—	—		—		( 4,002 )		146,248
GNMA	1	( 22 )		15,631		—	—		—		( 22 )		15,631
Total	74	$	( 8,019 )	$	313,096	—	$	—	$	—	$	( 8,019 )	$	313,096

For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities AFS and HTM, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2020:


	Less than 12 months					12 months or more					Total
($ in Thousands)	Number of Securities	Unrealized (Losses)		Fair Value		Number of Securities	Unrealized (Losses)		Fair Value		Unrealized (Losses)		Fair Value
Investment securities AFS


Residential mortgage-related securities
FNMA / FHLMC	7	$	( 500 )	$	163,002	—	$	—	$	—	$	( 500 )	$	163,002
GNMA	2	( 3 )		9,784		—	—		—		( 3 )		9,784

GNMA commercial mortgage-related securities	1	—		287		—	—		—		—		287
Asset backed securities
FFELP	1	( 129 )		9,267		16	( 2,885 )		178,681		( 3,013 )		187,948
SBA	14	( 53 )		8,379		—	—		—		( 53 )		8,379
Other debt securities	2	—		2,000		—	—		—		—		2,000

Total	27	$	( 685 )	$	192,720	16	$	( 2,885 )	$	178,681	$	( 3,570 )	$	371,400
Investment securities HTM



GNMA residential mortgage-related securities	1	$	—	$	325	—	$	—	$	—	$	—	$	325

Total	1	$	—	$	325	—	$	—	$	—	$	—	$	325

The Corporation reviews the AFS investment securities portfolio on a quarterly basis to monitor its credit exposure. A determination as to whether a security’s decline in fair value is the result of credit risk takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors the Corporation may consider in this impairment analysis include the extent to which the security has been in an unrealized loss position, the change in security

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rating, financial condition and near-term prospects of the issuer, as well as the security and industry specific economic conditions.

Based on the Corporation’s evaluation, management does not believe any unrealized losses at September 30, 2021 represent credit deterioration as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions. The U.S. Treasury 3 year and 5 year rates increased by 36 bp and 62 bp, respectively, from December 31, 2020. The Corporation does not intend to sell nor does it believe that it will be required to sell the securities in an unrealized loss position before recovery of their amortized cost basis.

FHLB and Federal Reserve Bank stocks: The Corporation is required to maintain Federal Reserve Bank stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. The Corporation had FHLB stock of $ 82 million at both September 30, 2021 and December 31, 2020. The Corporation had Federal Reserve Bank stock of $ 87 million at both September 30, 2021 and December 31, 2020. Accrued interest receivable on FHLB stock totaled approximately $ 974 ,000 and $ 972 ,000 at September 30, 2021 and December 31, 2020, respectively. There was $ 327 ,000 accrued interest receivable on Federal Reserve Bank stock at September 30, 2021 and none at December 31, 2020. Accrued interest receivable on both FHLB stock and Federal Reserve Bank stock is included in interest receivable on the consolidated balance sheets.

Equity Securities

Equity securities with readily determinable fair values: The Corporation's portfolio of equity securities with readily determinable fair values is primarily comprised of CRA Qualified Investment mutual funds and a money market mutual fund. At September 30, 2021 and December 31, 2020, the Corporation had equity securities with readily determinable fair values of $ 4 million and $ 2 million, respectively.

Equity securities without readily determinable fair values: The Corporation's portfolio of equity securities without readily determinable fair values primarily consists of 77,996 Visa Class B restricted shares, 77,000 of which the Corporation received in 2008 as part of Visa's initial public offering and carried at fair value after the Corporation donated 42,039 Visa Class B restricted shares to the Corporation's Charitable Remainder Trust during the second quarter of 2019, with the subsequent sale of those shares resulting in an observable market price after the shares were previously carried at a zero cost basis. During the first quarter of 2020, the Corporation acquired 996 Visa Class B restricted shares from the acquisition of First Staunton, and those shares are carried at a zero cost basis due to the lack of an observable market price since the time of acquisition. The Corporation had equity securities without readily determinable fair values of $ 14 million at September 30, 2021 and $ 13 million at December 31, 2020 .

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Note 7 Loans

The period end loan composition was as follows:


($ in Thousands)	Sep 30, 2021		Dec 31, 2020
PPP	$	182,121	$	767,757
Commercial and industrial	7,927,459		7,701,422
Commercial real estate — owner occupied	879,554		900,912
Commercial and business lending	8,989,133		9,370,091
Commercial real estate — investor	4,296,489		4,342,584
Real estate construction	1,834,871		1,840,417
Commercial real estate lending	6,131,360		6,183,001
Total commercial	15,120,493		15,553,091
Residential mortgage	7,590,895		7,878,324
Home equity	608,566		707,255
Other consumer	294,979		301,876
Auto	6,739		11,177
Total consumer	8,501,180		8,898,632
Total loans	$	23,621,673	$	24,451,724

Accrued interest receivable on loans totaled $ 57 million at September 30, 2021, and $ 66 million at December 31, 2020, and is included in interest receivable on the consolidated balance sheets. Interest accrued but not received for loans placed on nonaccrual is reversed against interest income. The amount of accrued interest reversed totaled approximately $ 91 ,000 and $ 329 ,000 for the three and nine months ended September 30, 2021, respectively, and $ 1 million and $ 2 million for the three and nine months ended September 30, 2020, respectively.

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T he following table presents commercial and consumer loans by credit quality indicator by vintage year at September 30, 2021:


					Term Loans Amortized Cost Basis by Origination Year (a)
($ in Thousands)	Rev Loans Converted to Term (a)		Rev Loans Amortized Cost Basis		YTD 2021		2020		2019		2018		2017		Prior		Total
PPP: (b)
Risk rating:
Pass	$	—	$	—	$	147,568	$	29,900	$	—	$	—	$	—	$	—	$	177,467
Special Mention	—		—		212		281		—		—		—		—		493
Potential Problem	—		—		4,160		—		—		—		—		—		4,160

PPP	$	—	$	—	$	151,940	$	30,180	$	—	$	—	$	—	$	—	$	182,121
Commercial and industrial:
Risk rating:
Pass	$	2,085	$	2,278,181	$	1,664,130	$	1,046,760	$	1,092,662	$	802,214	$	249,129	$	621,500	$	7,754,575
Special Mention	—		1,396		5,900		193		28,918		—		—		2,990		39,397
Potential Problem	2,825		27,948		1,933		5,555		46,997		21,286		20,111		1,160		124,990
Nonaccrual	—		—		17		166		108		7,248		—		959		8,497
Commercial and industrial	$	4,910	$	2,307,525	$	1,671,979	$	1,052,674	$	1,168,685	$	830,748	$	269,240	$	626,609	$	7,927,459
Commercial real estate - owner occupied:
Risk rating:
Pass	$	11,667	$	22,430	$	143,911	$	173,396	$	193,463	$	114,618	$	61,713	$	133,641	$	843,173
Special Mention	—		211		—		3,303		11,368		—		—		250		15,132
Potential Problem	—		487		6,182		5,969		686		748		2,640		4,529		21,241
Nonaccrual	—		—		—		—		—		—		—		7		7
Commercial real estate - owner occupied	$	11,667	$	23,127	$	150,094	$	182,668	$	205,518	$	115,366	$	64,353	$	138,427	$	879,554
Commercial and business lending:
Risk rating:
Pass	$	13,752	$	2,300,611	$	1,955,609	$	1,250,056	$	1,286,125	$	916,832	$	310,842	$	755,141	$	8,775,216
Special Mention	—		1,606		6,112		3,777		40,287		—		—		3,240		55,022
Potential Problem	2,825		28,435		12,275		11,524		47,683		22,034		22,751		5,688		150,391
Nonaccrual	—		—		17		166		108		7,248		—		966		8,504
Commercial and business lending	$	16,577	$	2,330,652	$	1,974,013	$	1,265,523	$	1,374,203	$	946,114	$	333,593	$	765,036	$	8,989,133
Commercial real estate - investor:
Risk rating:
Pass	$	38,041	$	85,353	$	878,373	$	957,478	$	1,034,119	$	474,770	$	178,270	$	335,168	$	3,943,532
Special Mention	—		—		57,100		67,285		74,040		5,973		1,259		6,836		212,491
Potential Problem	—		—		5,474		25,720		4,074		24,259		4,730		14,705		78,962
Nonaccrual	—		—		23,973		8,412		9,690		19,222		—		207		61,504
Commercial real estate - investor	$	38,041	$	85,353	$	964,920	$	1,058,894	$	1,121,923	$	524,225	$	184,259	$	356,916	$	4,296,489
Real estate construction:
Risk rating:
Pass	$	—	$	26,560	$	581,257	$	731,505	$	328,020	$	93,893	$	21,154	$	13,227	$	1,795,616
Special Mention	—		—		—		—		3,894		15,885		41		—		19,820
Potential Problem	—		—		8		124		18,968		—		—		87		19,187
Nonaccrual	—		—		—		5		—		—		—		242		247
Real estate construction	$	—	$	26,560	$	581,265	$	731,634	$	350,881	$	109,778	$	21,195	$	13,556	$	1,834,871
Commercial real estate lending:
Risk rating:
Pass	$	38,041	$	111,913	$	1,459,630	$	1,688,983	$	1,362,139	$	568,663	$	199,424	$	348,395	$	5,739,148
Special Mention	—		—		57,100		67,285		77,934		21,858		1,300		6,836		232,312
Potential Problem	—		—		5,483		25,844		23,041		24,259		4,730		14,792		98,150
Nonaccrual	—		—		23,973		8,417		9,690		19,222		—		448		61,751
Commercial real estate lending	$	38,041	$	111,913	$	1,546,185	$	1,790,529	$	1,472,804	$	634,002	$	205,454	$	370,472	$	6,131,360

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					Term Loans Amortized Cost Basis by Origination Year (a)
($ in Thousands)	Rev Loans Converted to Term (a)		Rev Loans Amortized Cost Basis		YTD 2021		2020		2019		2018		2017		Prior		Total
Total commercial:
Risk rating:
Pass	$	51,793	$	2,412,524	$	3,415,239	$	2,939,040	$	2,648,264	$	1,485,495	$	510,266	$	1,103,537	$	14,514,363
Special Mention	—		1,606		63,212		71,061		118,220		21,858		1,300		10,076		287,333
Potential Problem	2,825		28,435		17,758		37,367		70,725		46,294		27,481		20,481		248,541
Nonaccrual	—		—		23,989		8,584		9,798		26,470		—		1,415		70,256
Total commercial	$	54,618	$	2,442,565	$	3,520,198	$	3,056,052	$	2,847,007	$	1,580,116	$	539,047	$	1,135,508	$	15,120,493
Residential mortgage:
Risk rating:
Pass	$	—	$	—	$	1,404,558	$	2,040,914	$	1,048,656	$	460,120	$	722,589	$	1,854,629	$	7,531,466
Special Mention	—		—		—		—		—		—		—		377		377
Potential Problem	—		—		538		340		409		326		82		679		2,374
Nonaccrual	—		—		1,721		2,032		4,483		4,979		7,304		36,160		56,678
Residential mortgage	$	—	$	—	$	1,406,816	$	2,043,286	$	1,053,548	$	465,425	$	729,974	$	1,891,844	$	7,590,895
Home equity:
Risk rating:
Pass	$	4,992	$	504,747	$	773	$	1,617	$	8,850	$	9,952	$	8,538	$	65,577	$	600,053
Special Mention	74		17		—		—		1		110		—		375		503
Potential Problem	10		—		10		—		—		15		—		146		171
Nonaccrual	582		4		56		25		227		288		303		6,936		7,838
Home equity	$	5,658	$	504,767	$	839	$	1,643	$	9,078	$	10,364	$	8,841	$	73,034	$	608,566
Other consumer:
Risk rating:
Pass	$	402	$	168,534	$	7,455	$	6,730	$	6,232	$	1,940	$	815	$	109,253	$	300,959
Special Mention	64		387		—		—		13		66		—		4		470

Nonaccrual	4		164		—		12		56		20		20		18		290
Other consumer	$	471	$	169,084	$	7,455	$	6,743	$	6,300	$	2,026	$	835	$	109,275	$	301,718
Total consumer:
Risk rating:
Pass	$	5,394	$	673,281	$	1,412,786	$	2,049,262	$	1,063,738	$	472,012	$	731,942	$	2,029,458	$	8,432,478
Special Mention	138		403		—		—		14		176		—		756		1,350
Potential Problem	10		—		548		340		409		341		82		825		2,546
Nonaccrual	586		167		1,776		2,070		4,765		5,287		7,627		43,114		64,806
Total consumer	$	6,128	$	673,852	$	1,415,110	$	2,051,672	$	1,068,927	$	477,816	$	739,650	$	2,074,153	$	8,501,180
Total loans:
Risk rating:
Pass (c)	$	57,187	$	3,085,805	$	4,828,025	$	4,988,301	$	3,712,002	$	1,957,507	$	1,242,208	$	3,132,995	$	22,946,842
Special Mention	138		2,010		63,212		71,061		118,234		22,034		1,300		10,832		288,683
Potential Problem	2,836		28,435		18,306		37,707		71,134		46,635		27,563		21,305		251,087
Nonaccrual	586		167		25,766		10,653		14,563		31,756		7,627		44,529		135,062
Total loans	$	60,747	$	3,116,417	$	4,935,308	$	5,107,723	$	3,915,934	$	2,057,932	$	1,278,698	$	3,209,661	$	23,621,673

(a) Revolving loans converted to term loans are also reported in their year of origination.

(b) The Corporation’s policy is to assign risk ratings at the borrower level. PPP loans are 100% guaranteed by the SBA and therefore the Corporation considers these loans to have a risk profile similar to pass rated loans.

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The following table presents commercial and consumer loans by credit quality indicator by vintage year at December 31, 2020:


					Term Loans Amortized Cost Basis by Origination Year (a)
($ in Thousands)	Rev Loans Converted to Term (a)		Rev Loans Amortized Cost Basis		2020		2019		2018		2017		2016		Prior		Total
PPP: (b)
Risk rating:
Pass	$	—	$	—	$	745,767	$	—	$	—	$	—	$	—	$	—	$	745,767
Special Mention	—		—		3,988		—		—		—		—		—		3,988
Potential Problem	—		—		18,002		—		—		—		—		—		18,002

PPP	$	—	$	—	$	767,757	$	—	$	—	$	—	$	—	$	—	$	767,757
Commercial and industrial:
Risk rating:
Pass	$	4,628	$	2,177,138	$	1,389,260	$	1,435,519	$	1,182,302	$	483,957	$	305,998	$	453,734	$	7,427,908
Special Mention	—		10,159		2,719		39,854		37,042		113		215		67		90,169
Potential Problem	2,565		7,237		19,331		28,413		56,580		2,269		6,477		1,179		121,487
Nonaccrual	16,852		—		6,238		5,789		17,014		16,623		8,781		7,414		61,859
Commercial and industrial	$	24,045	$	2,194,534	$	1,417,548	$	1,509,575	$	1,292,938	$	502,962	$	321,471	$	462,394	$	7,701,422
Commercial real estate - owner occupied:
Risk rating:
Pass	$	1,150	$	18,022	$	185,861	$	209,069	$	128,360	$	99,546	$	147,366	$	79,111	$	867,335
Special Mention	—		113		1,882		3,122		300		658		264		—		6,339
Potential Problem	—		3,486		4,104		8,916		—		1,490		4,437		3,747		26,179
Nonaccrual	—		—		—		—		—		318		—		740		1,058
Commercial real estate - owner occupied	$	1,150	$	21,621	$	191,847	$	221,107	$	128,660	$	102,012	$	152,067	$	83,598	$	900,912
Commercial and business lending:
Risk rating:
Pass	$	5,778	$	2,195,160	$	2,320,888	$	1,644,588	$	1,310,662	$	583,503	$	453,364	$	532,845	$	9,041,009
Special Mention	—		10,272		8,589		42,976		37,342		771		479		67		100,496
Potential Problem	2,565		10,723		41,437		37,329		56,580		3,759		10,915		4,926		165,668
Nonaccrual	16,852		—		6,238		5,789		17,014		16,941		8,781		8,154		62,917
Commercial and business lending	$	25,195	$	2,216,154	$	2,377,152	$	1,730,682	$	1,421,598	$	604,974	$	473,539	$	545,992	$	9,370,091
Commercial real estate - investor:
Risk rating:
Pass	$	10,971	$	171,497	$	1,249,644	$	976,332	$	720,237	$	271,987	$	341,658	$	211,360	$	3,942,714
Special Mention	—		—		90,235		97,333		12,339		—		21,882		8,465		230,254
Potential Problem	—		838		16,343		13,575		30,911		2,279		239		27,209		91,396
Nonaccrual	19,803		—		10,141		53,056		446		14,267		—		309		78,220
Commercial real estate - investor	$	30,774	$	172,335	$	1,366,364	$	1,140,297	$	763,933	$	288,533	$	363,779	$	247,343	$	4,342,584
Real estate construction:
Risk rating:
Pass	$	776	$	47,880	$	645,925	$	738,561	$	294,910	$	25,219	$	2,420	$	16,768	$	1,771,682
Special Mention	—		—		487		494		48,283		42		—		30		49,336
Potential Problem	—		—		135		—		18,803		—		93		15		19,046
Nonaccrual	—		—		—		—		—		16		—		338		353
Real estate construction	$	776	$	47,880	$	646,547	$	739,055	$	361,996	$	25,277	$	2,513	$	17,150	$	1,840,417
Commercial real estate lending:
Risk rating:
Pass	$	11,746	$	219,377	$	1,895,569	$	1,714,893	$	1,015,146	$	297,205	$	344,078	$	228,127	$	5,714,396
Special Mention	—		—		90,722		97,827		60,622		42		21,882		8,494		279,590
Potential Problem	—		838		16,479		13,575		49,714		2,279		332		27,224		110,442
Nonaccrual	19,803		—		10,141		53,056		446		14,283		—		647		78,573
Commercial real estate lending	$	31,549	$	220,215	$	2,012,911	$	1,879,352	$	1,125,929	$	313,810	$	366,292	$	264,493	$	6,183,001

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					Term Loans Amortized Cost Basis by Origination Year (a)
($ in Thousands)	Rev Loans Converted to Term (a)		Rev Loans Amortized Cost Basis		2020		2019		2018		2017		2016		Prior		Total
Total commercial:
Risk rating:
Pass	$	17,524	$	2,414,537	$	4,216,457	$	3,359,482	$	2,325,808	$	880,708	$	797,441	$	760,973	$	14,755,405
Special Mention	—		10,272		99,311		140,803		97,964		813		22,361		8,562		380,086
Potential Problem	2,565		11,561		57,916		50,905		106,295		6,038		11,247		32,150		276,111
Nonaccrual	36,655		—		16,379		58,845		17,460		31,224		8,781		8,801		141,490
Total commercial	$	56,745	$	2,436,370	$	4,390,063	$	3,610,033	$	2,547,526	$	918,783	$	839,831	$	810,485	$	15,553,091
Residential mortgage:
Risk rating:
Pass	$	—	$	—	$	2,185,240	$	1,490,589	$	615,118	$	998,072	$	911,797	$	1,612,971	$	7,813,788
Special Mention	—		—		—		355		330		102		126		537		1,450
Potential Problem	—		—		1,200		689		652		—		179		1,028		3,749
Nonaccrual	—		—		1,478		2,271		5,882		7,116		11,003		31,587		59,337
Residential mortgage	$	—	$	—	$	2,187,918	$	1,493,903	$	621,983	$	1,005,290	$	923,105	$	1,646,124	$	7,878,324
Home equity:
Risk rating:
Pass	$	10,224	$	569,389	$	2,057	$	12,968	$	15,792	$	11,594	$	5,803	$	76,165	$	693,767
Special Mention	596		631		—		39		14		39		4		804		1,532
Potential Problem	—		1,922		—		—		—		—		—		146		2,068
Nonaccrual	1,600		100		965		134		410		319		711		7,249		9,888
Home equity	$	12,421	$	572,041	$	3,022	$	13,141	$	16,216	$	11,952	$	6,518	$	84,364	$	707,255
Other consumer:
Risk rating:
Pass	$	70	$	165,114	$	9,525	$	10,309	$	3,987	$	1,872	$	1,185	$	120,425	$	312,416
Special Mention	5		438		13		16		11		4		7		8		498

Nonaccrual	5		33		9		49		21		10		—		18		140
Other consumer	$	81	$	165,585	$	9,547	$	10,374	$	4,019	$	1,886	$	1,192	$	120,451	$	313,054
Total consumer:
Risk rating:
Pass	$	10,294	$	734,502	$	2,196,822	$	1,513,865	$	634,897	$	1,011,539	$	918,785	$	1,809,561	$	8,819,971
Special Mention	602		1,069		13		410		356		145		137		1,349		3,480
Potential Problem	—		1,922		1,200		689		652		—		179		1,174		5,817
Nonaccrual	1,605		133		2,452		2,454		6,313		7,445		11,714		38,854		69,364
Total consumer	$	12,501	$	737,626	$	2,200,487	$	1,517,417	$	642,218	$	1,019,128	$	930,816	$	1,850,939	$	8,898,632
Total loans:
Risk rating:
Pass (c)	$	27,819	$	3,149,039	$	6,413,278	$	4,873,347	$	2,960,705	$	1,892,247	$	1,716,226	$	2,570,534	$	23,575,376
Special Mention	602		11,341		99,324		141,213		98,320		958		22,498		9,911		383,566
Potential Problem	2,565		13,483		59,116		51,593		106,947		6,038		11,426		33,324		281,928
Nonaccrual	38,260		133		18,831		61,298		23,773		38,669		20,496		47,655		210,854
Total loans	$	69,246	$	3,173,996	$	6,590,550	$	5,127,451	$	3,189,745	$	1,937,912	$	1,770,647	$	2,661,424	$	24,451,724

(a) Revolving loans converted to term loans are also reported in their year of origination.

Factors that are important to managing overall credit quality are sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, and appropriate policies for allowance for loan losses, allowance for unfunded commitments, nonaccrual loans, and charge offs.

For commercial loans, management has determined the pass credit quality indicator to include credits exhibiting acceptable financial statements, cash flow, and leverage. If any risk exists, it is mitigated by the loan structure, collateral, monitoring, or control. For consumer loans, performing loans include credits performing in accordance with the original contractual terms.

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Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Special mention credits have potential weaknesses that warrant specific attention from management. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit. Potential problem loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These loans generally have a well-defined weakness, or weaknesses, which may jeopardize liquidation of the debt, and are characterized by the distinct possibility the Corporation will sustain some loss if the deficiencies are not corrected. Management has determined commercial loan relationships in nonaccrual status, and commercial and consumer loan relationships with their terms restructured in a TDR, meet the criteria to be individually evaluated. Commercial loans classified as special mention, potential problem, and nonaccrual are reviewed at a minimum on a quarterly basis, while pass credits, which are performing rated credits, are generally reviewed on an annual basis or more frequently if the loan renewal is less than one year or if otherwise warranted.

The following table presents loans by past due status at September 30, 2021:


	Accruing
($ in Thousands)	Current (a)		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Nonaccrual (b)(c)		Total
PPP	$	181,552	$	485	$	83	$	—	$	—	$	182,121
Commercial and industrial	7,917,635		1,121		108		98		8,497		7,927,459
Commercial real estate - owner occupied	879,516		30		—		—		7		879,554
Commercial and business lending	8,978,704		1,636		191		98		8,504		8,989,133
Commercial real estate - investor	4,217,965		17,021		—		—		61,504		4,296,489
Real estate construction	1,834,623		—		—		—		247		1,834,871
Commercial real estate lending	6,052,588		17,021		—		—		61,751		6,131,360
Total commercial	15,031,292		18,657		191		98		70,256		15,120,493
Residential mortgage	7,526,996		6,996		99		126		56,678		7,590,895
Home equity	597,776		2,428		503		21		7,838		608,566
Other consumer	292,700		724		549		785		222		294,979
Auto	6,662		10		—		—		67		6,739
Total consumer	8,424,134		10,158		1,150		932		64,806		8,501,180
Total loans	$	23,455,426	$	28,815	$	1,341	$	1,029	$	135,062	$	23,621,673

(a) Any loans deferred in connection with the COVID-19 pandemic are considered current in accordance with Section 4013 of the CARES Act.

(b) Of the total nonaccrual loans, $ 83 million, or 62 %, were current with respect to payment at September 30, 2021.

(c) No interest income was recognized on nonaccrual loans for the three and nine months ended September 30, 2021. In addition, there were $ 11 million of nonaccrual loans for which there was no related ACLL at September 30, 2021.

The following table presents loans by past due status at December 31, 2020:


	Accruing
($ in Thousands)	Current (a)		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Nonaccrual (b)(c)		Total
PPP	$	767,757	$	—	$	—	$	—	$	—	$	767,757
Commercial and industrial	7,633,269		2,819		3,300		175		61,859		7,701,422
Commercial real estate - owner occupied	899,480		158		215		—		1,058		900,912
Commercial and business lending	9,300,506		2,977		3,516		175		62,917		9,370,091
Commercial real estate - investor	4,251,571		1,024		11,769		—		78,220		4,342,584
Real estate construction	1,839,073		991		—		—		353		1,840,417
Commercial real estate lending	6,090,644		2,015		11,769		—		78,573		6,183,001
Total commercial	15,391,150		4,992		15,284		175		141,490		15,553,091
Residential mortgage	7,808,294		8,975		1,410		308		59,337		7,878,324
Home equity	692,565		3,071		1,731		—		9,888		707,255
Other consumer	299,128		998		545		1,115		91		301,876
Auto	11,072		41		15		—		49		11,177
Total consumer	8,811,060		13,085		3,701		1,423		69,364		8,898,632
Total loans	$	24,202,209	$	18,077	$	18,985	$	1,598	$	210,854	$	24,451,724

(a) Any loans deferred in connection with the COVID-19 pandemic are considered current in accordance with Section 4013 of the CARES Act.

(b) Of the total nonaccrual loans, $ 128 million, or 61 %, were current with respect to payment at December 31, 2020.

(c) No interest income was recognized on nonaccrual loans for the year ended December 31, 2020. In addition, there were $ 28 million of nonaccrual loans for which there was no related ACLL at December 31, 2020.

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Troubled Debt Restructurings

Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty.

The following table presents nonaccrual and performing restructured loans by loan portfolio:


	Sep 30, 2021				Dec 31, 2020
($ in Thousands)	Performing Restructured Loans		Nonaccrual Restructured Loans (a)		Performing Restructured Loans		Nonaccrual Restructured Loans (a)

Commercial and industrial	$	11,067	$	959	$	12,713	$	6,967
Commercial real estate — owner occupied	1,031		—		1,711		—
Commercial real estate — investor	13,236		207		26,435		225
Real estate construction	248		107		260		111
Residential mortgage	15,253		13,235		7,825		11,509
Home equity	2,787		718		1,957		1,379
Other consumer	877		—		1,191		—
Total restructured loans (b)	$	44,499	$	15,226	$	52,092	$	20,190

(a) Nonaccrual restructured loans have been included within nonaccrual loans.
(b) Does not include any restructured loans related to the COVID-19 pandemic in accordance with Section 4013 of the CARES Act.

The Corporation had a recorded investment of $ 14 million in loans modified as TDRs during the nine months ended September 30, 2021, of which $ 7 million were in accrual status, included in pass or special mention based on their risk rating within the credit quality tables, and $ 7 million were in nonaccrual within the credit quality tables, pending a sustained period of repayment. Short-term loan modifications made in good faith to help ease the adverse effects of the COVID-19 pandemic are not categorized as TDRs in accordance with the CARES Act. The following table provides the number of loans modified in a TDR by loan portfolio, the recorded investment, and unpaid principal balance for the nine months ended September 30, 2021 and 2020:


	Nine months ended Sep 30, 2021					Nine months ended Sep 30, 2020
($ in Thousands)	Number of Loans	Recorded Investment (a)		Unpaid Principal Balance (b)		Number of Loans	Recorded Investment (a)		Unpaid Principal Balance (b)

Commercial and industrial	4	$	638	$	638	3	$	1,250	$	1,324
Commercial real estate — owner occupied	—	—		—		2	453		751
Commercial real estate — investor	4	1,682		1,682		1	530		530
Real estate construction	—	—		—		1	102		102
Residential mortgage	55	10,434		10,460		32	5,789		5,870
Home equity	7	916		963		18	676		702

Total loans modified	70	$	13,670	$	13,744	57	$	8,800	$	9,280

(a) Represents post-modification outstanding recorded investment.
(b) Represents pre-modification outstanding recorded investment.

Restructured loan modifications may include payment schedule modifications, interest rate concessions, maturity date extensions, modification of note structure (A/B Note), non-reaffirmed Chapter 7 bankruptcies, principal reduction, or some combination of these concessions. During the nine months ended September 30, 2021, restructured loan modifications of commercial loans primarily included maturity date extensions and payment schedule modifications. Restructured loan modifications of consumer loans primarily included maturity date extensions, interest rate concessions, non-reaffirmed Chapter 7 bankruptcies, or a combination of these concessions for the nine months ended September 30, 2021.

The following table provides the number of loans modified in a TDR during the previous twelve months which subsequently defaulted during the nine months ended September 30, 2021 and 2020, and the recorded investment in these restructured loans as of September 30, 2021 and 2020:


	Nine months ended Sep 30, 2021			Nine months ended Sep 30, 2020
($ in Thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment





Residential mortgage	2	$	200	5	$	1,036
Home equity	—	—		4	208

Total loans modified	2	$	200	9	$	1,244

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All loans modified in a TDR are individually evaluated for impairment. The nature and extent of the impairment of restructured loans, including those which have experienced a subsequent payment default, are considered in the determination of an appropriate level of the ACLL.

The Corporation analyzes loans for classification as a probable TDR. This analysis includes identifying customers that are showing possible liquidity issues in the near term without reasonable access to alternative sources of capital. At September 30, 2021, the Corporation had $ 17 million in loans meeting this classification compared to $ 68 million at December 31, 2020. Of the loans classified as probable TDRs at September 30, 2021, the entire $ 17 million was related to the oil and gas portfolio.

Allowance for Credit Losses on Loans

The ACLL is comprised of the allowance for loan losses and the allowance for unfunded commitments. The level of the ACLL represents management’s estimate of an amount appropriate to provide for expected lifetime credit losses in the loan portfolio at the balance sheet date. The expected lifetime credit losses are the product of multiplying the Corporation's estimates of probability of default, loss given default, and the individual loan level exposure at default on an undiscounted basis. A main factor in the determination of the ACLL is the economic forecast. The Corporation utilized Moody's baseline forecast, updated during September 2021, in the allowance model. The forecast is applied over a 2 year reasonable and supportable period with straight-line reversion to the historical losses over the second year of the period. The allowance for unfunded commitments is maintained at a level believed by management to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit). See Note 12 for additional information on the change in the allowance for unfunded commitments.

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The following table presents a summary of the changes in the ACLL by portfolio segment for the nine months ended September 30, 2021:


($ in Thousands)	Dec 31, 2020		Charge offs		Recoveries		Net Charge offs		Provision for credit losses		Sep 30, 2021		ACLL / Loans
Allowance for loan losses
PPP	$	531	$	—	$	—	$	—	$	( 406 )	$	125
Commercial and industrial	142,793		( 13,773 )		7,415		( 6,358 )		( 47,324 )		89,111
Commercial real estate — owner occupied	11,274		—		115		115		634		12,022
Commercial and business lending	154,598		( 13,773 )		7,530		( 6,242 )		( 47,096 )		101,259
Commercial real estate — investor	93,435		( 14,340 )		3,046		( 11,293 )		( 680 )		81,461
Real estate construction	59,193		( 5 )		74		69		( 18,298 )		40,965
Commercial real estate lending	152,629		( 14,344 )		3,120		( 11,224 )		( 18,978 )		122,426
Total commercial	307,226		( 28,117 )		10,650		( 17,467 )		( 66,074 )		223,685
Residential mortgage	42,996		( 732 )		700		( 32 )		( 1,344 )		41,620
Home equity	18,849		( 600 )		2,240		1,640		( 6,172 )		14,317
Other consumer	14,456		( 2,331 )		965		( 1,366 )		( 1,836 )		11,253
Auto	174		( 4 )		24		20		( 74 )		120
Total consumer	76,475		( 3,667 )		3,928		262		( 9,426 )		67,311
Total loans	$	383,702	$	( 31,784 )	$	14,579	$	( 17,205 )	$	( 75,500 )	$	290,997
Allowance for unfunded commitments

Commercial and industrial	$	22,311	$	—	$	—	$	—	$	( 2,910 )	$	19,402
Commercial real estate — owner occupied	266		—		—		—		43		309
Commercial and business lending	22,577		—		—		—		( 2,867 )		19,711
Commercial real estate — investor	636		—		—		—		85		721
Real estate construction	18,887		—		—		—		( 3,411 )		15,476
Commercial real estate lending	19,523		—		—		—		( 3,326 )		16,197
Total commercial	42,101		—		—		—		( 6,193 )		35,908

Home equity	3,118		—		—		—		( 87 )		3,031
Other consumer	2,557		—		—		—		( 220 )		2,337
Total consumer	5,675		—		—		—		( 307 )		5,368
Total loans	$	47,776	$	—	$	—	$	—	$	( 6,500 )	$	41,276
Allowance for credit losses on loans
PPP	$	531	$	—	$	—	$	—	$	( 406 )	$	125	0.07	%
Commercial and industrial	165,105		( 13,773 )		7,415		( 6,358 )		( 50,233 )		108,513		1.37	%
Commercial real estate — owner occupied	11,539		—		115		115		677		12,331		1.40	%
Commercial and business lending	177,175		( 13,773 )		7,530		( 6,242 )		( 49,963 )		120,970		1.35	%
Commercial real estate — investor	94,071		( 14,340 )		3,046		( 11,293 )		( 595 )		82,182		1.91	%
Real estate construction	78,080		( 5 )		74		69		( 21,709 )		56,441		3.08	%
Commercial real estate lending	172,152		( 14,344 )		3,120		( 11,224 )		( 22,304 )		138,623		2.26	%
Total commercial	349,327		( 28,117 )		10,650		( 17,467 )		( 72,267 )		259,593		1.72	%
Residential mortgage	42,996		( 732 )		700		( 32 )		( 1,344 )		41,620		0.55	%
Home equity	21,967		( 600 )		2,240		1,640		( 6,259 )		17,348		2.85	%
Other consumer	17,013		( 2,331 )		965		( 1,366 )		( 2,056 )		13,591		4.61	%
Auto	174		( 4 )		24		20		( 74 )		120		1.79	%
Total consumer	82,150		( 3,667 )		3,928		262		( 9,733 )		72,679		0.85	%
Total loans	$	431,478	$	( 31,784 )	$	14,579	$	( 17,205 )	$	( 82,000 )	$	332,273	1.41	%

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The following table presents a summary of the changes in the ACLL by portfolio segment for the year ended December 31, 2020:


($ in Thousands)	Dec 31, 2019		Cumulative effect of ASU 2016-13 adoption (CECL)		Jan 1, 2020		Charge offs		Recoveries		Net Charge offs		Gross up of allowance for PCD loans at acquisition		Provision recorded at acquisition		Provision for credit losses		Dec 31, 2020		ACLL / Loans
Allowance for loan losses
PPP	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	531	$	531
Commercial and industrial	91,133		52,919		144,052		( 80,320 )		7,004		( 73,316 )		293		408		71,355		142,793
Commercial real estate — owner occupied	10,284		( 1,851 )		8,433		( 419 )		147		( 272 )		890		255		1,967		11,274
Commercial and business lending	101,417		51,068		152,485		( 80,739 )		7,151		( 73,588 )		1,183		663		73,853		154,598
Commercial real estate — investor	40,514		2,041		42,555		( 22,920 )		643		( 22,277 )		753		472		71,933		93,435
Real estate construction	24,915		7,467		32,382		( 19 )		49		31		435		492		25,854		59,193
Commercial real estate lending	65,428		9,508		74,937		( 22,938 )		692		( 22,246 )		1,188		964		97,787		152,629
Total commercial	166,846		60,576		227,422		( 103,677 )		7,844		( 95,834 )		2,371		1,627		171,641		307,226
Residential mortgage	16,960		33,215		50,175		( 1,867 )		500		( 1,367 )		651		403		( 6,864 )		42,996
Home equity	10,926		11,649		22,575		( 1,719 )		1,978		259		422		374		( 4,781 )		18,849
Other consumer (a)	6,639		7,016		13,655		( 4,790 )		1,101		( 3,689 )		61		140		4,462		14,630
Total consumer	34,525		51,880		86,405		( 8,376 )		3,579		( 4,797 )		1,134		917		( 7,183 )		76,475
Total loans	$	201,371	$	112,457	$	313,828	$	( 112,053 )	$	11,422	$	( 100,631 )	$	3,504	$	2,543	$	164,457	$	383,702
Allowance for unfunded commitments

Commercial and industrial	$	12,276	$	( 3,998 )	$	8,278	$	—	$	—	$	—	$	—	$	61	$	13,972	$	22,311
Commercial real estate — owner occupied	127		—		127		—		—		—		—		4		135		266
Commercial and business lending	12,403		( 3,998 )		8,405		—		—		—		—		65		14,108		22,577
Commercial real estate — investor	530		246		776		—		—		—		—		2		( 141 )		636
Real estate construction	7,532		18,347		25,879		—		—		—		—		45		( 7,038 )		18,887
Commercial real estate lending	8,062		18,593		26,655		—		—		—		—		47		( 7,179 )		19,523
Total commercial	20,465		14,595		35,060		—		—		—		—		112		6,929		42,101

Home equity	1,038		2,591		3,629		—		—		—		—		66		( 577 )		3,118
Other consumer	405		1,504		1,909		—		—		—		—		—		649		2,557
Total consumer	1,443		4,095		5,538		—		—		—		—		66		72		5,675
Total loans	$	21,907	$	18,690	$	40,597	$	—	$	—	$	—	$	—	$	179	$	7,000	$	47,776
Allowance for credit losses on loans
PPP	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	531	$	531	0.07	%
Commercial and industrial	103,409		48,921		152,330		( 80,320 )		7,004		( 73,316 )		293		469		85,327		165,105		2.14	%
Commercial real estate — owner occupied	10,411		( 1,851 )		8,560		( 419 )		147		( 272 )		890		259		2,102		11,539		1.28	%
Commercial and business lending	113,820		47,070		160,890		( 80,739 )		7,151		( 73,588 )		1,183		728		87,961		177,175		1.89	%
Commercial real estate — investor	41,044		2,287		43,331		( 22,920 )		643		( 22,277 )		753		474		71,792		94,071		2.17	%
Real estate construction	32,447		25,814		58,261		( 19 )		49		31		435		537		18,816		78,080		4.24	%
Commercial real estate lending	73,490		28,101		101,591		( 22,938 )		692		( 22,246 )		1,188		1,011		90,608		172,152		2.78	%
Total commercial	187,311		75,171		262,482		( 103,677 )		7,844		( 95,834 )		2,371		1,739		178,569		349,327		2.25	%
Residential mortgage	16,960		33,215		50,175		( 1,867 )		500		( 1,367 )		651		403		( 6,864 )		42,996		0.55	%
Home equity	11,964		14,240		26,204		( 1,719 )		1,978		259		422		440		( 5,358 )		21,967		3.11	%
Other consumer (a)	7,044		8,520		15,564		( 4,790 )		1,101		( 3,689 )		61		140		5,111		17,187		5.49	%
Total consumer	35,968		55,975		91,943		( 8,376 )		3,579		( 4,797 )		1,134		983		( 7,112 )		82,150		0.92	%
Total loans	$	223,278	$	131,147	$	354,425	$	( 112,053 )	$	11,422	$	( 100,631 )	$	3,504	$	2,722	$	171,457	$	431,478	1.76	%

(a) Includes auto

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Loans Acquired in Acquisitions

Loans acquired in a business combination after January 1, 2020 are recorded in accordance with ASC Topic 326. See Note 2 for more information on loans acquired in a business combination. After January 1, 2020, acquired loans were segregated into two types:

• Non-PCD loans are accounted for in accordance with ASC Topic 310-20 "Nonrefundable Fees and Other Costs" as these loans do not show evidence of credit deterioration since origination. The allowance for loan losses on these loans is recorded through provision for credit losses on the consolidated statements of income at acquisition.

• PCD loans are loans demonstrating more than insignificant credit deterioration and are accounted for in accordance with ASC Topic 326-30. Under this guidance, the credit mark on acquired assets grosses up the ACLL and the amortized cost of the loan.

Note 8 Goodwill and Other Intangible Assets

Goodwill

Goodwill is not amortized but is instead subject to impairment tests on at least an annual basis, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The Corporation conducted its most recent annual impairment testing in May 2021, utilizing a qualitative assessment. Factors that management considered in this assessment included macroeconomic conditions, industry and market considerations, overall financial performance of the Corporation and each reporting unit (both current and projected), changes in management strategy, and changes in the composition or carrying amount of net assets. In addition, management considered the changes in both the Corporation's common stock price and in the overall bank common stock index (based on the S&P 400 Regional Bank Sub-Industry Index), as well as the Corporation's earnings per common share trend over the past year. Based on these assessments, management concluded that it is more likely than not that the estimated fair value exceeded the carrying value (including goodwill) for each reporting unit. Therefore a step one quantitative analysis was not required. There have been no events since the May 2021 impairment test that have changed the Corporation's impairment assessment conclusion. There were no impairment charges recorded in 2020 or the first nine months of 2021.

At both September 30, 2021 and December 31, 2020, the Corporation had goodwill of $ 1.1 billion. During the first quarter of 2021, there was a reduction of $ 4 million of goodwill related to the sale of Whitnell.

Other Intangible Assets

The Corporation has other intangible assets that are amortized, consisting of CDIs and MSRs. For CDIs and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows:


($ in Thousands)	Nine months ended Sep 30, 2021		Year Ended Dec 31, 2020
Core deposit intangibles
Gross carrying amount at the beginning of period	$	88,109	$	80,730
Additions during the period	—		7,379
Accumulated amortization	( 27,814 )		( 21,205 )
Net book value	$	60,296	$	66,904
Amortization during the period	$	6,608	$	8,749
Other intangibles
Gross carrying amount at the beginning of period	$	2,000	$	38,970
Additions during the period	—		200
Reductions due to sale	( 1,317 )		( 17,435 )
Accumulated amortization	( 683 )		( 20,385 )
Net book value	$	—	$	1,350
Amortization during the period	$	33	$	1,443

Mortgage Servicing Rights

The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. MSRs are amortized in proportion to and over the period of estimated net servicing income and assessed for impairment at each reporting date.

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The Corporation evaluates its MSRs asset for impairment at minimum on a quarterly basis. Impairment is assessed based on fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates fall, prepayment speeds are usually faster and the value of the MSRs asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the MSRs asset generally increases, requiring less valuation reserve. A valuation allowance is established, through a charge to earnings, to the extent the amortized cost of the MSRs exceeds the estimated fair value by stratification. An other-than-temporary impairment (i.e., recoverability is considered remote when considering interest rates and loan pay off activity) is recognized as a write-down of the MSRs asset and the related valuation allowance (to the extent a valuation allowance is available) and then against earnings. A direct write-down permanently reduces the carrying value of the MSRs asset and valuation allowance, precluding subsequent recoveries. See Note 12 for a discussion of the recourse provisions on sold residential mortgage loans. See Note 13 which further discusses fair value measurement relative to the MSRs asset.

A summary of changes in the balance of the MSRs asset and the MSRs valuation allowance is as follows:


($ in Thousands)	Nine months ended Sep 30, 2021			Year Ended Dec 31, 2020
Mortgage servicing rights
Mortgage servicing rights at beginning of period	$	59,967		$	67,607
Additions from acquisition	—			1,357
Additions	11,761			13,667
Amortization	( 15,624 )			( 22,664 )
Mortgage servicing rights at end of period	$	56,104		$	59,967
Valuation allowance at beginning of period	$	( 18,006 )		$	( 302 )
(Additions) recoveries, net	12,231			( 17,704 )
Valuation allowance at end of period	$	( 5,775 )		$	( 18,006 )
Mortgage servicing rights, net	$	50,329		$	41,961
Fair value of mortgage servicing rights	$	50,373		$	41,990
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)	$	7,057,130		$	7,743,956
Mortgage servicing rights, net to servicing portfolio	0.71		%	0.54		%
Mortgage servicing rights expense (a)	$	3,393		$	40,369

(a) Includes the amortization of mortgage servicing rights and additions / recoveries to the valuation allowance of mortgage servicing rights, and is a component of mortgage banking, net on the consolidated statements of income .

The projections of amortization expense are based on existing asset balances, the current interest rate environment, and prepayment speeds as of September 30, 2021. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable. The following table shows the estimated future amortization expense for amortizing intangible assets:


($ in Thousands)	Core Deposit Intangibles		Mortgage Servicing Rights
Three Months Ending December 31, 2021	$	2,203	$	2,945
2022	8,811		10,898
2023	8,811		8,500
2024	8,811		6,795
2025	8,811		5,499
2026	8,811		4,489
Beyond 2026	14,038		16,978
Total Estimated Amortization Expense	$	60,296	$	56,104

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Note 9 Short and Long-Term Funding

The following table presents the components of short-term funding (funding with original contractual maturities of one year or less) and long-term funding (funding with original contractual maturities greater than one year):


($ in Thousands)	Sep 30, 2021		Dec 31, 2020
Short-Term Funding
Federal funds purchased	$	415	$	7,070
Securities sold under agreements to repurchase	267,528		185,901
Federal funds purchased and securities sold under agreements to repurchase	267,943		192,971
Commercial paper	54,553		59,346
Total short-term funding	$	322,496	$	252,317
Long-Term Funding

Bank senior notes, at par, due 2021	$	—	$	300,000
Corporation subordinated notes, at par, due 2025	250,000		250,000

Finance leases	72		1,128
Capitalized costs	( 912 )		( 1,663 )

FHLB advances	1,620,880		1,632,723
Total long-term funding	1,870,040		2,182,188




Total short and long-term funding	$	2,192,536	$	2,434,505

Securities Sold Under Agreements to Repurchase

The Corporation enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Corporation may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Corporation to repurchase the assets. The obligation to repurchase the securities is reflected as a liability on the Corporation’s consolidated balance sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts (i.e., there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities).

The Corporation utilizes securities sold under agreements to repurchase to facilitate the needs of its customers. As of September 30, 2021, the Corporation pledged agency mortgage-related securities with a fair value of $ 364 million as collateral for the repurchase agreements. Securities pledged as collateral under repurchase agreements are maintained with the Corporation's safekeeping agents and are monitored on a daily basis due to the market risk of fair value changes in the underlying securities. The Corporation generally pledges excess securities to ensure there is sufficient collateral to satisfy short-term fluctuations in both the repurchase agreement balances and the fair value of the underlying securities.

The remaining contractual maturity of the securities sold under agreements to repurchase on the consolidated balance sheets as of September 30, 2021 and December 31, 2020 are presented in the following table:


	Remaining Contractual Maturity of the Agreements
($ in Thousands)	Overnight and Continuous		Up to 30 days		30-90 days		Greater than 90 days		Total
September 30, 2021
Repurchase agreements
Agency mortgage-related securities	$	267,528	$	—	$	—	$	—	$	267,528
Total	$	267,528	$	—	$	—	$	—	$	267,528
December 31, 2020
Repurchase agreements
Agency mortgage-related securities	$	185,901	$	—	$	—	$	—	$	185,901
Total	$	185,901	$	—	$	—	$	—	$	185,901

Long-Term Funding

Senior Notes

In August 2018 , the Bank issued $ 300 million of senior notes, due August 2021 , and callable July 2021 . The senior notes had a fixed coupon interest rate of 3.50 % and were issued at a discount. The Bank redeemed all of the senior notes on July 13, 2021 , the initial redemption date under the terms of the notes.

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Subordinated Notes

In November 2014 , the Corporation issued $ 250 million of 10 -year subordinated notes, due January 2025 , and callable October 2024 . The subordinated notes have a fixed coupon interest rate of 4.25 % and were issued at a discount.

Finance Leases

In connection with the construction of a new branch in Oshkosh, Wisconsin, the Corporation entered into a land lease with the option to purchase the underlying land for a fixed price, which the Corporation now expects to exercise. The finance lease has a fixed interest rate of 1.07 %. See Note 18 for additional disclosure regarding the Corporation’s leases.

Note 10 Derivative and Hedging Activities

The Corporation is exposed to certain risk arising from both its business operations and economic conditions. The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Corporation enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Corporation's derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation's known or expected cash receipts and its known or expected cash payments principally related to the Corporation's assets.

The contract or notional amount of a derivative is used to determine, along with the other terms of the derivative, the amounts to be exchanged between the counterparties. The Corporation is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. To mitigate the counterparty risk, contracts generally contain language outlining collateral pledging requirements for each counterparty. For non-centrally cleared derivatives, collateral must be posted when the market value exceeds certain mutually agreed upon threshold limits. Securities and cash are often pledged as collateral. The Corporation pledged $ 78 million and $ 72 million of investment securities as collateral at September 30, 2021, and December 31, 2020, respectively. At September 30, 2021, the Corporation posted $ 18 million of cash collateral compared to $ 31 million at December 31, 2020.

Federal regulations require the Corporation to clear all LIBOR interest rate swaps through a clearing house, if possible. For derivatives cleared through central clearing houses, the variation margin payments are legally characterized as daily settlements of the derivative rather than collateral. The Corporation's clearing agent for interest rate derivative contracts that are centrally cleared through the Chicago Mercantile Exchange (CME) and the London Clearing House (LCH) settles the variation margin daily. As a result, the variation margin payment and the related derivative instruments are considered a single unit of account for accounting and financial reporting purposes. Depending on the net position, the fair value is reported in other assets or accrued expenses and other liabilities on the consolidated balance sheets. The daily settlement of the derivative exposure does not change or reset the contractual terms of the instrument.

Derivatives to Accommodate Customer Needs

The Corporation facilitates customer borrowing activity by entering into various derivative contracts which are designated as free standing derivative contracts. Free standing derivative products are entered into primarily for the benefit of commercial customers seeking to manage their exposures to interest rate risk, foreign currency, and commodity prices. These derivative contracts are not designated against specific assets and liabilities on the consolidated balance sheets or forecasted transactions and, therefore, do not qualify for hedge accounting treatment. Such derivative contracts are carried at fair value in other assets and accrued expenses and other liabilities on the consolidated balance sheets with changes in the fair value recorded as a component of capital markets, net, and typically include interest rate-related instruments (swaps and caps), foreign currency exchange forwards, and commodity contracts. See Note 11 for additional information and disclosures on balance sheet offsetting.

Interest rate-related instruments: The Corporation provides interest rate risk management services to commercial customers, primarily forward interest rate swaps and caps. The Corporation’s market risk from unfavorable movements in interest rates related to these derivative contracts is generally economically hedged by concurrently entering into offsetting derivative contracts. The offsetting derivative contracts have identical notional values, terms, and indices.

Foreign currency exchange forwards: The Corporation provides foreign currency exchange services to customers, primarily forward contracts. The Corporation's customers enter into a foreign currency exchange forward with the Corporation as a means

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for them to mitigate exchange rate risk. The Corporation mitigates its risk by then entering into an offsetting foreign currency exchange derivative contract.

Commodity contracts: Commodity contracts are entered into primarily for the benefit of commercial customers seeking to manage their exposure to fluctuating commodity prices. The Corporation mitigates its risk by then entering into an offsetting commodity derivative contract.

Mortgage Derivatives

Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded in other assets and accrued expenses and other liabilities on the consolidated balance sheets with the changes in fair value recorded as a component of mortgage banking, net on the consolidated statements of income.

The following table presents the total notional amounts and gross fair values of the Company’s derivatives, as well as the balance sheet netting adjustments as of September 30, 2021 and December 31, 2020. The derivative assets and liabilities are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after the variation margin payments with central clearing organizations have been applied as settlement, as applicable. Total derivative assets and liabilities are adjusted to take into consideration the effects of legally enforceable master netting agreements and cash collateral received or paid as of September 30, 2021 and December 31, 2020. The resulting net derivative asset and liability fair values are included in other assets and accrued expenses and other liabilities, respectively, on the consolidated balance sheets.


	Sep 30, 2021								Dec 31, 2020
	Asset				Liability				Asset				Liability
($ in Thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value
Not designated as hedging instruments
Interest rate-related instruments	$	3,889,911	$	110,898	$	3,889,911	$	24,322	$	3,639,679	$	192,518	$	3,639,679	$	25,680
Foreign currency exchange forwards	496,215		4,637		483,949		4,454		411,292		4,909		398,890		4,836
Commodity contracts	16,231		6,546		16,307		6,471		87,547		12,486		83,214		11,155
Mortgage banking (a)(b)	253,663		6,159		390,000		—		226,818		9,624		335,500		2,046

Gross derivatives before netting			$	128,240			$	35,247			$	219,537			$	43,716
Less: Legally enforceable master netting agreements	3,302				3,302				1,936				1,936
Less: Cash collateral pledged/received	3,143				18,595				10,879				25,625
Total derivative instruments, after netting	$	121,795			$	13,351			$	206,722			$	16,155

(a) Mortgage derivative assets include interest rate lock commitments and mortgage derivative liabilities include forward commitments.
(b) Includes approximately $972,000 forward commitment fair value.

The Corporation terminated its $ 500 million fair value hedge during the fourth quarter of 2019. At September 30, 2021, the amortized cost basis of the closed portfolios which had previously been used in the terminated hedging relationship was $ 446 million and is included in loans on the consolidated balance sheets. This amount includes $ 2 million of hedging adjustments on the discontinued hedging relationships.

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The table below identifies the effect of fair value hedge accounting on the Corporation's consolidated statements of income for the three and nine months ended September 30, 2021 and 2020:


	Location and Amount of Gain or (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
	Three months ended Sep 30,								Nine months ended Sep 30,
	2021				2020				2021				2020
($ in Thousands)	Interest Income		Other Income (Expense)		Interest Income		Other Income (Expense)		Interest Income		Other Income (Expense)		Interest Income		Other Income (Expense)
Total amounts of income and expense line items presented on the consolidated statements of income in which the effects of the fair value hedge is recorded	$	( 292 )	$	—	$	( 481 )	$	—	$	( 1,128 )	$	—	$	( 1,345 )	$	( 262 )
The effects of fair value hedging: Gain or (loss) on fair value hedging relationships in Subtopic 815-20
Interest contracts
Hedged items	( 292 )		—		( 481 )		—		( 1,128 )		—		( 1,345 )		( 262 )

The table below identifies the effect of derivatives not designated as hedging instruments on the Corporation's consolidated statements of income for the three and nine months ended September 30, 2021 and 2020:


	Consolidated Statements of Income Category of Gain / (Loss) Recognized in Income	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)		2021		2020		2021		2020
Derivative Instruments
Interest rate-related instruments — customer and mirror, net	Capital markets, net	$	557	$	507	$	2,546	$	( 2,648 )
Foreign currency exchange forwards	Capital markets, net	( 8 )		49		109		( 31 )
Commodity contracts	Capital markets, net	( 124 )		( 86 )		( 1,256 )		555
Interest rate lock commitments (mortgage)	Mortgage banking, net	( 1,356 )		( 4,948 )		( 4,438 )		5,361
Forward commitments (mortgage)	Mortgage banking, net	( 1,402 )		1,293		( 3,017 )		710

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Note 11 Balance Sheet Offsetting

Interest Rate-Related Instruments, Commodity Contracts, and Foreign Exchange Forwards (“Interest, Commodity, and Foreign Exchange Agreements”)

The Corporation enters into interest rate-related instruments to facilitate the interest rate risk management strategies of commercial customers, commodity contracts to manage commercial customers' exposure to fluctuating commodity prices, and foreign exchange forwards to manage customers' exposure to fluctuating foreign exchange rates. The Corporation mitigates these risks by entering into equal and offsetting agreements with highly rated third-party financial institutions. The Corporation is party to master netting arrangements with its financial institution counterparties that create single net settlements of all legal claims or obligations to pay or receive the net amount of settlement of the individual interest, commodity, and foreign exchange agreements. Collateral, usually in the form of investment securities and cash, is posted by the counterparty with net liability positions in accordance with contract thresholds. Derivatives subject to a legally enforceable master netting agreement are reported on a net basis, net of cash collateral, in other assets and accrued expenses and other liabilities, on the face of the consolidated balance sheets. See Note 10 for additional information on the Corporation’s derivative and hedging activities. The following table presents the interest rate, commodity, and foreign exchange assets and liabilities subject to an enforceable master netting arrangement. The interest, commodity and foreign exchange agreements the Corporation has with its commercial customers are not subject to an enforceable master netting arrangement and are therefore excluded from this table:


	Gross Amounts Recognized		Gross Amounts Subject to Master Netting Arrangements Offset on the Consolidated Balance Sheets				Net Amounts Presented on the Consolidated Balance Sheets
($ in Thousands)			Derivative Liabilities Offset		Cash Collateral Received
Derivative assets
September 30, 2021	$	6,719	$	( 3,302 )	$	( 3,143 )	$	273
December 31, 2020	13,441		( 1,936 )		( 10,879 )		626

	Gross Amounts Recognized		Gross Amounts Subject to Master Netting Arrangements Offset on the Consolidated Balance Sheets				Net Amounts Presented on the Consolidated Balance Sheets
($ in Thousands)			Derivative Assets Offset		Cash Collateral Pledged
Derivative liabilities
September 30, 2021	$	23,489	$	( 3,302 )	$	( 18,595 )	$	1,592
December 31, 2020	27,951		( 1,936 )		( 25,625 )		390

Note 12 Commitments, Off-Balance Sheet Arrangements, Legal Proceedings and Regulatory Matters


($ in Thousands)	Sep 30, 2021		Dec 31, 2020
Commitments to extend credit, excluding commitments to originate residential mortgage loans held for sale (a)(b)	$	10,618,161	$	10,010,492
Commercial letters of credit (a)	6,309		3,642
Standby letters of credit (c)	264,123		278,798

(a) These off-balance sheet financial instruments are exercisable at the market rate prevailing at the date the underlying transaction will be completed and, thus, are deemed to have no
current fair value, or the fair value is based on fees currently charged to enter into similar agreements and was not material at September 30, 2021 or December 31, 2020.
(b) Interest rate lock commitments to originate residential mortgage loans held for sale are considered derivative instruments and are disclosed in Note 10.
(c) The Corporation has established a liability of $ 3 million for both September 30, 2021 and December 31, 2020, as an estimate of the fair value of these financial instruments.

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Lending-related Commitments

As a financial services provider, the Corporation routinely enters into commitments to extend credit. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Corporation, with each customer’s creditworthiness evaluated on a case-by-case basis. The commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to these financial instruments is represented by the contractual amount of those instruments. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the customer. Since a significant portion of commitments to extend credit are subject to specific restrictive loan covenants or may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements. An allowance for unfunded commitments is maintained at a level believed by management to be sufficient to absorb expected lifetime losses related to unfunded commitments (including unfunded loan commitments and letters of credit). The following table presents a summary of the changes in the allowance for unfunded commitments:


($ in Thousands)	Nine months ended Sep 30, 2021		Year Ended Dec 31, 2020
Allowance for Unfunded Commitments
Balance at beginning of period	$	47,776	$	21,907
Cumulative effect of ASU 2016-13 adoption (CECL)	N/A		18,690
Balance at beginning of period, adjusted	47,776		40,597
Provision for unfunded commitments	( 6,500 )		7,000
Amount recorded at acquisition	N/A		179
Balance at end of period	$	41,276	$	47,776

Lending-related commitments include commitments to extend credit, commitments to originate residential mortgage loans held for sale, commercial letters of credit, and standby letters of credit. Commitments to extend credit are legally binding agreements to lend to customers at predetermined interest rates, as long as there is no violation of any condition established in the contracts. Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded in other assets and accrued expenses and other liabilities on the consolidated balance sheets. The Corporation’s derivative and hedging activity is further described in Note 10. Commercial and standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party, while standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.

Other Commitments

The Corporation invests in qualified affordable housing projects, federal and state historic projects, new market projects, and opportunity zone funds for the purpose of community reinvestment and obtaining tax credits and other tax benefits. Return on the Corporation's investment in these projects and funds comes in the form of the tax credits and tax losses that pass through to the Corporation, and deferral or elimination of capital gain recognition for tax purposes. The aggregate carrying value of these investments at September 30, 2021 was $ 277 million, compared to $ 272 million at December 31, 2020, included in tax credit and other investments on the consolidated balance sheets. The Corporation utilizes the proportional amortization method to account for investments in qualified affordable housing projects.

Under the proportional amortization method, the Corporation amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits. The Corporation recognized additional income tax expense attributable to the amortization of investments in qualified affordable housing projects of $ 24 million and $ 18 million for the nine months ended September 30, 2021 and 2020, respectively, and $ 8 million and $ 6 million for the three months ended September 30, 2021 and 2020, respectively. The Corporation's remaining investment in qualified affordable housing projects accounted for under the proportional amortization method totaled $ 270 million at September 30, 2021 and $ 268 million at December 31, 2020.

The Corporation’s unfunded equity contributions relating to investments in federal and state qualified affordable housing and federal and state historic projects are recorded in accrued expenses and other liabilities on the consolidated balance sheets. The Corporation’s remaining unfunded equity contributions totaled $ 101 million and $ 118 million at September 30, 2021 and December 31, 2020, respectively.

For the nine months ended September 30, 2021 and the year ended December 31, 2020, the Corporation did no t record any impairment related to qualified affordable housing investments.

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The Corporation has principal investment commitments to provide capital-based financing to private and public companies through either direct investment in specific companies or through investment funds and partnerships. The timing of future cash requirements to fund such principal investment commitments is generally dependent on the investment cycle, whereby privately held companies are funded by private equity investors and ultimately sold, merged, or taken public through an initial offering, which can vary based on overall market conditions, as well as the nature and type of industry in which the companies operate. The Corporation also invests in loan pools that support CRA loans. The timing of future cash requirements to fund these pools is dependent upon loan demand, which can vary over time. The aggregate carrying value of these investments was $ 24 million and $ 25 million at September 30, 2021 and December 31, 2020, respectively, included in tax credit and other investments on the consolidated balance sheets.

Legal Proceedings

The Corporation is party to various pending and threatened claims and legal proceedings arising in the normal course of business activities, some of which involve claims for substantial amounts. Although there can be no assurance as to the ultimate outcomes, the Corporation believes it has meritorious defenses to the claims asserted against it in its currently outstanding matters and intends to continue to defend itself vigorously with respect to such legal proceedings. The Corporation will consider settlement of cases when, in management’s judgment, it is in the best interests of the Corporation and its shareholders.

On at least a quarterly basis, the Corporation assesses its liabilities and contingencies in connection with all pending or threatened claims and litigation, utilizing the most recent information available. On a matter by matter basis, an accrual for loss is established for those matters which the Corporation believes it is probable that a loss may be incurred and that the amount of such loss can be reasonably estimated. Once established, each accrual is adjusted as appropriate to reflect any subsequent developments. Accordingly, management’s estimate will change from time to time, and actual losses may be more or less than the current estimate. For matters where a loss is not probable, or the amount of the loss cannot be estimated, no accrual is established.

Resolution of legal claims is inherently unpredictable, and in many legal proceedings various factors exacerbate this inherent unpredictability, including where the damages sought are unsubstantiated or indeterminate, it is unclear whether a case brought as a class action will be allowed to proceed on that basis, discovery is not complete, the proceeding is not yet in its final stages, the matters present legal uncertainties, there are significant facts in dispute, there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants), or there is a wide range of potential results.

A lawsuit, Evans et al v. Associated Banc-Corp et al , was filed in the United States District Court for the Eastern District of Wisconsin - Green Bay Division on January 13, 2021 by one current and one former participant in the Associated Banc-Corp 401(k) and Employee Stock Ownership Plan (the “Plan”) as representatives of a putative class. The plaintiffs alleged that Associated Banc-Corp, the Associated Banc-Corp Plan Administrative Committee, and current and past members of such committee during the relevant time period (the “Defendants”) breached their fiduciary duties with respect to the Plan in violation of Employee Retirement Income Security Act of 1974, as amended, by applying an imprudent and inappropriate preference for products associated with Associated Banc-Corp within the Plan, and that the Defendants failed to monitor or control the recordkeeping expenses paid to Associated Trust Company, N.A. On March 18, 2021, the Defendants filed a motion to dismiss. On April 8, 2021, the plaintiffs filed an amended complaint which dropped the record keeping claim, added Associated Trust Company N.A. and Kellogg Asset Management, LLC as defendants, and alleged various breaches of fiduciary duty related to the selection and monitoring of, and the fees charged by, proprietary collective investment trusts. The plaintiffs, in part, seek an accounting and disgorgement of certain profits, as well as certain equitable restitution and equitable monetary relief. The Corporation intends to vigorously defend against this lawsuit. It is not possible for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss at this time with respect to this lawsuit.

Regulatory Matters

A variety of consumer products, including mortgage and deposit products, and certain fees and charges related to such products, have come under increased regulatory scrutiny. It is possible that regulatory authorities could bring enforcement actions, including civil money penalties, or take other actions against the Corporation and the Bank in regard to these consumer products. The Bank could also determine of its own accord, or be required by regulators, to refund or otherwise make remediation payments to customers in connection with these products. It is not possible at this time for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss related to such matters.

Mortgage Repurchase Reserve

The Corporation sells residential mortgage loans to investors in the normal course of business. Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages originated under the Corporation's usual underwriting

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procedures, and are most often sold on a nonrecourse basis, primarily to the GSEs. The Corporation’s agreements to sell residential mortgage loans in the normal course of business usually require certain representations and warranties on the underlying loans sold, related to credit information, loan documentation, collateral, and insurability. Subsequent to being sold, if a material underwriting deficiency or documentation defect is discovered, the Corporation may be obligated to repurchase the loan or reimburse the GSEs for losses incurred (collectively, “make whole requests”). The make whole requests and any related risk of loss under the representations and warranties are largely driven by borrower performance. Additionally, beginning in the third quarter of 2021, qualifying residential mortgage loans guaranteed by U.S. government agencies have been sold into GNMA pools.

As a result of make whole requests, the Corporation has repurchased loans with aggregate principal balances of $ 6 million and $ 10 million for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. There were approximately $ 114 ,000 of loss reimbursement and settlement claims paid for the nine months ended September 30, 2021 and there were no such claims for the year ended December 31, 2020. Make whole requests during 2020 and the first nine months of 2021 generally arose from loans sold during the period of January 1, 2012 to December 31, 2020. Since January 1, 2012, loans sold totaled $ 15.7 billion at the time of sale, and consisted primarily of loans sold to GSEs. As of September 30, 2021, $ 6.5 billion of these sold loans remain outstanding.

The balance in the mortgage repurchase reserve at the balance sheet date reflects the estimated amount of potential loss the Corporation could incur from repurchasing a loan, as well as loss reimbursements, indemnifications, and other settlement resolutions. The mortgage repurchase reserve, included in accrued expenses and other liabilities on the consolidated balance sheets, was $ 1 million as of September 30, 2021 and $ 2 million as of December 31, 2020.

The Corporation may also sell residential mortgage loans with limited recourse (limited in that the recourse period ends prior to the loan’s maturity, usually after certain time and / or loan paydown criteria have been met), whereby repurchase could be required if the loan had defined delinquency issues during the limited recourse periods. At September 30, 2021 and December 31, 2020, there were $ 27 million and $ 36 million, respectively, of residential mortgage loans sold with such recourse risk. There have been limited instances and immaterial historical losses on repurchases for recourse under the limited recourse criteria.

The Corporation has a subordinate position to the FHLB in the credit risk on residential mortgage loans it sold to the FHLB in exchange for a monthly credit enhancement fee. The Corporation has not sold loans to the FHLB with such credit risk retention since February 2005. At September 30, 2021 and December 31, 2020, there were $ 26 million and $ 33 million, respectively, of such residential mortgage loans with credit risk recourse, upon which there have been negligible historical losses to the Corporation.

Note 13 Fair Value Measurements

Fair value represents the estimated price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (i.e., an exit price concept).

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 Corporation’s 2020 Annual Report on Form 10-K.

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The table below presents the Corporation’s financial instruments measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall:


($ in Thousands)	Fair Value Hierarchy	Sep 30, 2021		Dec 31, 2020
Assets
Investment securities AFS
U.S. Treasury securities	Level 1	$	123,981	$	26,531
Agency securities	Level 2	14,998		25,038
Obligations of state and political subdivisions (municipal securities)	Level 2	414,020		450,662
Residential mortgage-related securities
FNMA / FHLMC	Level 2	2,377,408		1,461,241
GNMA	Level 2	79,696		235,537
Private-label	Level 2	76,033		—
Commercial mortgage-related securities
FNMA / FHLMC	Level 2	353,175		22,904
GNMA	Level 2	231,096		524,756
Asset backed securities
FFELP	Level 2	212,797		327,189
SBA	Level 2	7,179		8,584
Other debt securities	Level 2	2,999		3,000

Total investment securities AFS	Level 1	$	123,981	$	26,531
Total investment securities AFS	Level 2	3,769,399		3,058,910

Equity securities with readily determinable fair values	Level 1	4,109		1,661
Residential loans held for sale	Level 2	158,202		129,158
Interest rate-related instruments (a)	Level 2	110,898		192,518
Foreign currency exchange forwards (a)	Level 2	4,637		4,909

Commodity contracts (a)	Level 2	6,546		12,486


Interest rate lock commitments to originate residential mortgage loans held for sale	Level 3	5,187		9,624
Forward commitments to sell residential mortgage loans	Level 3	972		—
Liabilities
Interest rate-related instruments (a)	Level 2	$	24,322	$	25,680
Foreign currency exchange forwards (a)	Level 2	4,454		4,836
Commodity contracts (a)	Level 2	6,471		11,155


Forward commitments to sell residential mortgage loans	Level 3	—		2,046

The table below presents a rollforward of the consolidated balance sheets amounts for the nine months ended September 30, 2021 and the year ended December 31, 2020, for the Corporation's mortgage derivatives measured on a recurring basis and classified within Level 3 of the fair value hierarchy:


($ in Thousands)	Interest rate lock commitments to originate residential mortgage loans held for sale		Forward commitments to sell residential mortgage loans		Total
Balance December 31, 2019	$	2,527	$	710	$	1,817
New production	72,659		( 3,505 )		76,164
Closed loans / settlements	( 76,001 )		( 12,587 )		( 63,414 )
Other	10,439		17,427		( 6,988 )
Mortgage derivative gain (loss)	7,097		1,335		5,762

Balance December 31, 2020	$	9,624	$	2,046	$	7,579
New production	$	45,586	$	( 2,496 )	$	48,082
Closed loans / settlements	( 44,543 )		217		( 44,760 )
Other	( 5,481 )		( 739 )		( 4,742 )
Mortgage derivative gain (loss)	( 4,437 )		( 3,017 )		( 1,420 )

Balance September 30, 2021	$	5,187	$	( 972 )	$	6,159

The closing ratio on interest rate lock commitments to originate residential mortgage loans held for sale is a Level 3 measurement, and was 82 % at September 30, 2021.

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The following table presents the carrying value of equity securities without readily determinable fair values still held as of September 30, 2021 that are measured under the measurement alternative and the related adjustments recorded during the periods presented for those securities with observable price changes. These securities are included in the nonrecurring fair value tables when applicable price changes are observable. Also shown are the cumulative upward and downward adjustments for the Corporation's equity securities without readily determinable fair values as of September 30, 2021:


($ in Thousands)
Equity securities without readily determinable fair values
Carrying value as of December 31, 2020	$	13,444

Additions	552
Sales	( 33 )
Donations	( 134 )
Carrying value as of September 30, 2021	$	13,830

Cumulative upward carrying value changes between January 1, 2018 and September 30, 2021	$	13,444
Cumulative downward carrying value changes/impairment between January 1, 2018 and September 30, 2021	$	—

The table below presents the Corporation’s assets measured at fair value on a nonrecurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall:

Consolidated Statements of Income
Category of Adjustment
Recognized in Income

($ in Thousands)

Fair Value Hierarchy

Fair Value

Adjustment Recognized on the Consolidated Statements of Income (c)

September 30, 2021

Assets

Individually evaluated loans (a)

Level 3

78,139

Provision for credit losses

( 4,227 )

OREO (b)

Level 2

21,847

Other noninterest expense / provision for credit losses (d)

6,449

Mortgage servicing rights

Level 3

50,373

Mortgage banking, net

12,231

December 31, 2020

Assets

Individually evaluated loans (a)

Level 3

138,752

Provision for credit losses

97,519

OREO (b)

Level 2

6,125

Other noninterest expense

3,747

Mortgage servicing rights

Level 3

41,990

Mortgage banking, net

( 17,704 )

(a) Includes probable TDRs which are individually analyzed, net of the related allowance for credit losses.
(b) If the fair value of the collateral exceeds the carrying amount of the asset, no charge off or adjustment is necessary, the asset is not considered to be carried at fair value, and is therefore not included in the table.
(c) Includes the full year impact on the consolidated statements of income
(d) When a property's value is written down at the time it is transferred to OREO, the charge off is booked to the provision for credit losses. When a property is already in OREO and subsequently written down, the charge off is booked to other noninterest expense.

Certain nonfinancial assets and nonfinancial liabilities measured at fair value on a nonrecurring basis include the fair value analysis in the goodwill impairment test as well as intangible assets and other nonfinancial long-lived assets measured at fair value for the purpose of impairment assessment.

The Corporation's significant Level 3 measurements which employ unobservable inputs that are readily quantifiable pertain to MSRs and individually evaluated loans.

The table below presents information about these inputs and further discussion is found above:


September 30, 2021	Valuation Technique	Significant Unobservable Input	Range of Inputs			Weighted Average Input Applied
Mortgage servicing rights	Discounted cash flow	Discount rate	9 %	-	15 %	9 %
Mortgage servicing rights	Discounted cash flow	Constant prepayment rate	8 %	-	40 %	15 %
Individually evaluated loans	Appraisals / Discounted cash flow	Collateral / Discount factor	33 %	-	51 %	36 %

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Fair Value of Financial Instruments

The Corporation is required to disclose estimated fair values for its financial instruments.

Fair value estimates are set forth below for the Corporation’s financial instruments:


		Sep 30, 2021				Dec 31, 2020
($ in Thousands)	Fair Value Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Financial assets
Cash and due from banks	Level 1	$	378,927	$	378,927	$	416,154	$	416,154
Interest-bearing deposits in other financial institutions	Level 1	1,281,916		1,281,916		298,759		298,759
Federal funds sold and securities purchased under agreements to resell	Level 1	25,000		25,000		1,135		1,135
Investment securities AFS	Level 1	123,981		123,981		26,531		26,531
Investment securities AFS	Level 2	3,769,399		3,769,399		3,058,910		3,058,910
Investment securities HTM, net	Level 1	1,000		1,007		999		1,024
Investment securities HTM, net	Level 2	1,928,735		2,034,803		1,877,939		2,027,852

Equity securities with readily determinable fair values	Level 1	4,109		4,109		1,661		1,661
Equity securities without readily determinable fair values	Level 3	13,830		13,830		13,444		13,444
FHLB and Federal Reserve Bank stocks	Level 2	168,281		168,281		168,280		168,280
Residential loans held for sale	Level 2	158,202		158,202		129,158		129,158

Loans, net	Level 3	23,330,676		23,447,728		24,068,022		24,012,738
Bank and corporate owned life insurance	Level 2	683,610		683,610		679,647		679,647

Derivatives (other assets) (a)	Level 2	122,082		122,082		209,913		209,913
Interest rate lock commitments to originate residential mortgage loans held for sale (other assets)	Level 3	5,187		5,187		9,624		9,624
Forward commitments to sell residential mortgage loans (other assets)	Level 3	972		972		—		—
Financial liabilities
Noninterest-bearing demand, savings, interest-bearing demand, and money market accounts	Level 3	$	26,440,380	$	26,440,380	$	24,725,451	$	24,725,451
Brokered CDs and other time deposits (b)	Level 2	1,410,886		1,412,950		1,757,030		1,766,200
Short-term funding	Level 2	322,496		322,486		252,317		252,303
FHLB advances	Level 2	1,620,880		1,701,512		1,632,723		1,760,727
Other long-term funding	Level 2	249,160		270,526		549,465		578,233

Standby letters of credit (c)	Level 2	2,549		2,549		2,731		2,731

Derivatives (accrued expenses and other liabilities) (a)	Level 2	35,247		35,247		41,671		41,671
Forward commitments to sell residential mortgage loans (accrued expenses and other liabilities)	Level 3	—		—		2,046		2,046

(a) Figures are presented gross before netting. See Note 10 and Note 11 for information relating to the impact of offsetting derivative assets and liabilities and cash collateral with the
same counterparty where there is a legally enforceable master netting agreement in place.
(b) When the estimated fair value is less than the carrying value, the carrying value is reported as the fair value.
(c) The commitment on standby letters of credit was $ 264 million at September 30, 2021 and $ 279 million at December 31, 2020. See Note 12 for additional information on the standby letters of credit and for information on the fair value of lending-related commitments.

Note 14 Retirement Plans

The Corporation has a noncontributory defined benefit RAP, covering substantially all employees who meet participation requirements. The benefits are based primarily on years of service and the employee’s compensation paid. Employees of acquired entities generally participate in the RAP after consummation of the business combinations. Any retirement plans of acquired entities are typically merged into the RAP after completion of the mergers, and credit is usually given to employees for years of service at the acquired institution for vesting and eligibility purposes.

The Corporation also provides legacy healthcare access to a limited group of retired employees from a previous acquisition in the Postretirement Plan. There are no other active retiree healthcare plans.

The First Staunton acquisition closed on February 14, 2020 , and the employees who met the required criteria became eligible to participate in the RAP on February 15, 2020 , with their vesting service credit based on their prior hours of service with First Staunton. See Note 2 for additional information on the First Staunton acquisition.

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The components of net periodic pension cost and net periodic benefit cost for the RAP and Postretirement Plan for the three and nine months ended September 30, 2021 and 2020 were as follows:


	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020
Components of Net Periodic Benefit Cost
RAP
Service cost	$	1,684	$	1,853	$	5,835	$	6,183
Interest cost	1,682		2,124		4,927		6,139
Expected return on plan assets	( 6,395 )		( 6,386 )		( 19,256 )		( 19,196 )
Amortization of prior service cost	( 19 )		( 18 )		( 55 )		( 55 )
Amortization of actuarial loss (gain)	1,346		1,313		3,446		2,923
Total net periodic pension cost	$	( 1,701 )	$	( 1,114 )	$	( 5,103 )	$	( 4,006 )







Postretirement Plan
Interest cost	$	13	$	20	$	39	$	59
Amortization of prior service cost	( 19 )		( 19 )		( 56 )		( 56 )

Total net periodic benefit cost	$	( 6 )	$	1	$	( 17 )	$	2

The components of net periodic pension cost and net periodic benefit cost, other than the service cost component, are included in the line item other of noninterest expense on the consolidated statements of income. The service cost components are included in personnel on the consolidated statements of income.

The Corporation’s funding policy is to pay at least the minimum amount required by federal law and regulations, with consideration given to the maximum funding amounts allowed. The Corporation regularly reviews the funding of its RAP. There were no contributions during the nine months ended September 30, 2021 and 2020.

Note 15 Segment Reporting

The Corporation utilizes a risk-based internal profitability measurement system to provide strategic business unit reporting. The profitability measurement system is based on internal management methodologies designed to produce consistent results and reflect the underlying economics of the units. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer, and the distribution of those products and services are similar. The three reportable segments are Corporate and Commercial Specialty; Community, Consumer, and Business; and Risk Management and Shared Services. The financial information of the Corporation’s segments has been compiled utilizing the accounting policies described in the Corporation’s 2020 Annual Report on Form 10-K with certain exceptions. The more significant of these exceptions are described herein.

The reportable segment results are presented based on the Corporation's internal management accounting process. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to U.S. GAAP. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in previously reported segment financial data. Additionally, the information presented is not indicative of how the segments would perform if they operated as independent entities.

To determine financial performance of each segment, the Corporation allocates FTP assignments, the provision for credit losses, certain noninterest expenses, income taxes, and equity to each segment. Allocation methodologies are subject to periodic adjustment as the internal management accounting system is revised, the interest rate environment evolves, and business or product lines within the segments change. Also, because the development and application of these methodologies is a dynamic process, the financial results presented may be periodically reviewed.

The Corporation allocates net interest income using an internal FTP methodology that charges users of funds (assets) and credits providers of funds (liabilities, primarily deposits) based on the maturity, prepayment and / or re-pricing characteristics of the assets and liabilities. The net effect of this allocation is offset in the Risk Management and Shared Services segment to ensure consolidated totals reflect the Corporation's net interest income. The net FTP allocation is reflected as net intersegment interest income (expense) in the accompanying tables.

A provision for credit losses is allocated to segments based on the expected long-term annual net charge off rates attributable to the credit risk of loans managed by the segment during the period. In contrast, the level of the consolidated provision for credit losses is determined based on an ACLL model using the methodologies described in the Corporation’s 2020 Annual Report on

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Form 10-K. The net effect of the credit provision is recorded in Risk Management and Shared Services. Indirect expenses incurred by certain centralized support areas are allocated to segments based on actual usage (for example, volume measurements) and other criteria. Certain types of administrative expense and bank-wide expense accruals (including amortization of CDIs and other intangible assets associated with acquisitions, acquisition-related costs, and asset gains on disposed business units) are generally not allocated to segments. Income taxes are allocated to segments based on the Corporation’s estimated effective tax rate, with certain segments adjusted for any tax-exempt income or non-deductible expenses. Equity is allocated to the segments based on regulatory capital requirements and in proportion to an assessment of the inherent risks associated with the business of the segment (including interest, credit and operating risk).

A brief description of each business segment is presented below. A more in-depth discussion of these segments can be found in the Segment Reporting note in the Corporation’s 2020 Annual Report on Form 10-K.

The Corporate and Commercial Specialty segment serves a wide range of customers including larger businesses, developers, not-for-profits, municipalities, and financial institutions by providing lending and deposit solutions as well as the support to deliver, fund, and manage such banking solutions. In addition, this segment provides a variety of investment, fiduciary, and retirement planning products and services to individuals and small to mid-sized businesses. During the first quarter of 2021, the Corporation sold its wealth management subsidiary Whitnell. The Community, Consumer, and Business segment serves individuals, as well as small and mid-sized businesses, by providing lending and deposit solutions. In addition, until June 30, 2020, the Corporation offered insurance and risk consulting services. The Risk Management and Shared Services segment includes key shared operational functions and also includes residual revenue and expenses, representing the difference between actual amounts incurred and the amounts allocated to operating segments, including interest rate risk residuals (FTP mismatches) and credit risk and provision residuals (long-term credit charge mismatches).

Information about the Corporation’s segments is presented below:


	Corporate and Commercial Specialty
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020
Net interest income	$	93,768	$	92,033	$	280,295	$	298,611
Net intersegment interest income (expense)	5,884		6,937		18,962		3,123
Segment net interest income	99,652		98,970		299,257		301,734
Noninterest income (a)	43,228		37,405		124,847		111,254
Total revenue	142,881		136,376		424,104		412,987
Provision for credit losses	14,864		15,572		48,803		41,456
Noninterest expense	58,652		52,635		172,781		160,899
Income (loss) before income taxes	69,364		68,169		202,521		210,633
Income tax expense (benefit)	12,617		12,497		37,213		39,161
Net income	$	56,747	$	55,672	$	165,307	$	171,472






Allocated goodwill					$	525,836	$	530,144


	Community, Consumer, and Business
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020
Net interest income	$	70,860	$	73,644	$	209,285	$	221,691
Net intersegment interest income (expense)	12,907		9,231		39,705		42,213
Segment net interest income	83,767		82,875		248,990		263,904
Noninterest income	35,771		32,958		113,558		140,442
Total revenue	119,538		115,833		362,548		404,345
Provision for credit losses	4,233		5,758		13,897		16,296
Noninterest expense	94,762		102,139		290,443		335,675
Income (loss) before income taxes	20,543		7,936		58,209		52,374
Income tax expense (benefit)	4,314		1,667		12,224		10,999
Net income	$	16,230	$	6,269	$	45,985	$	41,376






Allocated goodwill					$	579,156	$	577,758

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	Risk Management and Shared Services
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020
Net interest income	$	19,047	$	16,472	$	49,511	$	54,662
Net intersegment interest income (expense)	( 18,791 )		( 16,167 )		( 58,666 )		( 45,336 )
Segment net interest income	256		305		( 9,155 )		9,326
Noninterest income (b)	3,077		5,182		12,457		176,646
Total revenue	3,333		5,487		3,301		185,973
Provision for credit losses	( 43,107 )		21,679		( 144,717 )		99,257
Noninterest expense	24,478		72,813		64,490		106,610
Income (loss) before income taxes	21,962		( 89,005 )		83,529		( 19,895 )
Income tax expense (benefit)	6,129		( 72,278 )		20,705		( 46,817 )
Net income	$	15,833	$	( 16,727 )	$	62,824	$	26,922






Allocated goodwill					$	—	$	—


	Consolidated Total
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020
Net interest income	$	183,675	$	182,150	$	539,092	$	574,964
Net intersegment interest income (expense)	—		—		—		—
Segment net interest income	183,675		182,150		539,092		574,964
Noninterest income (a)(b)	82,076		75,545		250,862		428,342
Total revenue	265,752		257,695		789,954		1,003,305
Provision for credit losses	( 24,010 )		43,009		( 82,018 )		157,009
Noninterest expense	177,892		227,587		527,713		603,184
Income (loss) before income taxes	111,870		( 12,900 )		344,259		243,112
Income tax expense (benefit)	23,060		( 58,114 )		70,142		3,342
Net income	$	88,809	$	45,214	$	274,117	$	239,769






Allocated goodwill					$	1,104,992	$	1,107,902

(a) For the nine months ended September 30, 2021, the Corporation recognized a $ 2 million pre-tax gain on sale of Whitnell.
(b) For the nine months ended September 30, 2020, the Corporation recognized a $ 163 million pre-tax gain related to the sale of ABRC.

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Note 16 Accumulated Other Comprehensive Income (Loss)

The following tables summarize the components of accumulated other comprehensive income (loss) at September 30, 2021 and 2020, including changes during the preceding three and nine month periods as well as any reclassifications out of accumulated other comprehensive income (loss):


($ in Thousands)	Investment Securities AFS		Defined Benefit Pension and Postretirement Obligations		Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2020	$	41,325	$	( 28,707 )	$	12,618
Other comprehensive income (loss) before reclassifications	( 35,829 )		—		( 35,829 )
Amounts reclassified from accumulated other comprehensive income (loss)
Investment securities losses (gains), net	16		—		16
Personnel expense	—		( 111 )		( 111 )

Other expense	—		3,446		3,446


Interest income	1,335		—		1,335
Income tax (expense) benefit	8,548		( 836 )		7,712
Net other comprehensive income (loss) during period	( 25,930 )		2,498		( 23,431 )
Balance September 30, 2021	$	15,395	$	( 26,209 )	$	( 10,813 )

Balance December 31, 2019	$	3,989	$	( 37,172 )	$	( 33,183 )
Other comprehensive income (loss) before reclassifications	53,900		—		53,900
Amounts reclassified from accumulated other comprehensive income (loss)
Investment securities losses (gains), net	( 9,222 )		—		( 9,222 )
Personnel expense	—		( 111 )		( 111 )
Other expense	—		2,923		2,923


Interest income	2,628		—		2,628
Income tax (expense) benefit	( 11,852 )		( 1,088 )		( 12,939 )
Net other comprehensive income (loss) during period	35,454		1,724		37,178
Balance September 30, 2020	$	39,443	$	( 35,448 )	$	3,995


($ in Thousands)	Investments Securities AFS		Defined Benefit Pension and Post Retirement Obligations		Accumulated Other Comprehensive Income (Loss)
Balance June 30, 2021	$	30,076	$	( 27,187 )	$	2,889
Other comprehensive income (loss) before reclassifications	( 19,827 )		—		( 19,827 )
Amounts reclassified from accumulated other comprehensive income (loss)
Investment securities losses (gains), net	—		—		—
Personnel expense	—		( 37 )		( 37 )
Other expense	—		1,346		1,346


Interest income	172		—		172
Income tax (expense) benefit	4,975		( 330 )		4,644
Net other comprehensive income (loss) during period	( 14,681 )		979		( 13,702 )
Balance September 30, 2021	$	15,395	$	( 26,209 )	$	( 10,813 )

Balance June 30, 2020	$	34,101	$	( 36,021 )	$	( 1,920 )
Other comprehensive income (loss) before reclassifications	5,840		—		5,840
Amounts reclassified from accumulated other comprehensive income (loss)
Investment securities losses (gains), net	( 7 )		—		( 7 )
Personnel expense	—		( 36 )		( 36 )
Other expense	—		1,313		1,313


Interest income	1,296		—		1,296
Income tax (expense) benefit	( 1,786 )		( 703 )		( 2,489 )
Net other comprehensive income (loss) during period	5,342		573		5,916
Balance September 30, 2020	$	39,443	$	( 35,448 )	$	3,995

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Note 17 Revenue from Contracts with Customers

Revenue from contracts with customers is recognized when obligations under the terms of a contract with the Corporation's customer are satisfied. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. We do not have any material significant payment terms as payment is received at or shortly after the satisfaction of the performance obligation.

The Corporation's disaggregated revenue by major source is presented below:


	Corporate and Commercial Specialty
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020
Wealth management fees	$	22,110	$	21,152	$	67,229	$	61,496
Service charges and deposit account fees	4,539		4,458		13,898		12,316
Card-based fees (a)	541		474		1,367		1,216
Insurance commissions and fees	36		57		98		179
Other revenue	772		1,400		2,619		2,481
Noninterest income (in-scope of Topic 606)	$	27,998	$	27,540	$	85,212	$	77,690
Noninterest income (out-of-scope of Topic 606) (b)	15,230		9,866		39,635		33,564
Total noninterest income	$	43,228	$	37,405	$	124,847	$	111,254



	Community, Consumer, and Business
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020
Wealth management fees	$	—	$	—	$	—	$	1,387
Service charges and deposit account fees	12,417		9,816		33,441		28,653
Card-based fees (a)	10,600		9,699		30,538		27,392
Insurance commissions and fees	50		55		146		44,965
Other revenue	1,945		2,168		7,459		7,315
Noninterest income (in-scope of Topic 606)	$	25,012	$	21,739	$	71,583	$	109,713
Noninterest income (out-of-scope of Topic 606)	10,758		11,219		41,976		30,728
Total noninterest income	$	35,771	$	32,958	$	113,558	$	140,442


	Risk Management and Shared Services
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020

Service charges and deposit account fees	$	5	$	10	$	27	$	19
Card-based fees (a)	6		34		15		127
Insurance commissions and fees	2		2		6		8
Other revenue	76		( 82 )		1,540		( 33 )
Noninterest income (in-scope of Topic 606)	$	89	$	( 36 )	$	1,588	$	121
Noninterest income (out-of-scope of Topic 606) (c)	2,989		5,218		10,868		176,525
Total noninterest income	$	3,077	$	5,182	$	12,457	$	176,646



	Consolidated Total
	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020

Wealth management fees	$	22,110	$	21,152	$	67,229	$	62,884
Service charges and deposit account fees	16,962		14,283		47,366		40,989
Card-based fees (a)	11,147		10,207		31,920		28,736
Insurance commissions and fees	88		114		250		45,153
Other revenue	2,792		3,487		11,618		9,764
Noninterest income (in-scope of Topic 606)	$	53,099	$	49,243	$	158,383	$	187,524
Noninterest income (out-of-scope of Topic 606) (b)(c)	28,977		26,303		92,479		240,818
Total noninterest income	$	82,076	$	75,545	$	250,862	$	428,342

(a) Certain card-based fees are out-of-scope of Topic 606.

(b) For the nine months ended September 30, 2021, the Corporation recognized a $ 2 million pre-tax gain on the sale of Whitnell.

(c) For the nine months ended September 30, 2020, the Corporation recognized a $ 163 million pre-tax gain on the sale of ABRC.

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Below is a listing of performance obligations for the Corporation's main revenue streams:


Revenue Stream						Noninterest income in-scope of Topic 606

Service charges and deposit account fees						Service charges and deposit account fees consist of monthly service fees (i.e. business analyzed fees and consumer service charges) and other deposit account related fees. The Corporation's performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Other deposit account related fees are largely transactional based, and therefore, the Corporation's performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges and deposit account fees is primarily received immediately or in the following month through a direct charge to customers’ accounts.
Card-based fees (a)						Card-based fees are primarily comprised of debit and credit card income, ATM fees, and merchant services income. Debit and credit card income is primarily comprised of interchange fees earned whenever the Corporation's debit and credit cards are processed through card payment networks. ATM and merchant fees are largely transactional based, and therefore, the Corporation's performance obligation is satisfied, and related revenue recognized, at a point in time. Payment is typically received immediately or in the following month.
Trust and asset management fees (b)						Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Corporation's performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to the customers’ accounts. The Corporation's performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.
Brokerage and advisory fees (b)						Brokerage and advisory fees primarily consist of investment advisory, brokerage, retirement services, and annuities. The Corporation's performance obligation for investment advisory services and retirement services is generally satisfied, and the related revenue recognized, over the period in which the services are provided. The performance obligation for annuities is satisfied upon sale of the annuity, and therefore, the related revenue is primarily recognized at the time of sale. Payment for these services are typically received immediately or in advance of the service.

(a) Certain card-based fees are out-of-scope of Topic 606.

(b) Trust and asset management fees and brokerage and advisory fees are included in wealth management fees.

Note 18 Leases

The Corporation has operating leases for retail and corporate offices, land, and equipment. The Corporation also has a finance lease for land.

These leases have original terms of 1 year or longer with remaining maturities up to 41 years, some of which include options to extend the lease term. An analysis of the lease options has been completed and any purchase options or optional periods that the Corporation is reasonably likely to extend have been included in the capitalization.

The discount rate used to capitalize the operating leases is the Corporation's FHLB borrowing rate on the date of lease commencement. When determining the rate to discount specific lease obligations, the repayment period and term are considered.

Operating and finance lease costs and cash flows resulting from these leases are presented below:


	Three Months Ended Sep 30,				Nine Months Ended Sep 30,
($ in Thousands)	2021		2020		2021		2020
Operating lease costs	$	2,367	$	3,970	$	6,850	$	9,224
Finance lease costs	17		39		76		115
Operating lease cash flows	2,858		2,871		8,598		8,303
Finance lease cash flows	21		40		101		82

The lease classifications on the consolidated balance sheets were as follows:


($ in Thousands)	Consolidated Balance Sheets Category	Sep 30, 2021		Dec 31, 2020
Operating lease right-of-use asset	Premises and equipment	$	29,527	$	31,994
Finance lease right-of-use asset	Other assets	59		962
Operating lease liability	Accrued expenses and other liabilities	33,066		36,425
Finance lease liability	Other long-term funding	72		1,128

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The lease payment obligations, weighted-average remaining lease term, and weighted-average original discount rate were as follows:


	Sep 30, 2021					Dec 31, 2020
($ in Thousands)	Lease payments		Weighted-average lease term (in years)	Weighted-average discount rate		Lease payments		Weighted-average lease term (in years)	Weighted-average discount rate
Operating leases
Equipment	$	192	1.74	0.46	%	$	386	2.49	0.46	%
Retail and corporate offices	30,756		5.55	3.24	%	34,036		6.04	3.33	%
Land	5,747		8.48	3.11	%	6,385		8.99	3.09	%
Total operating leases	$	36,696	5.97	3.21	%	$	40,806	6.45	3.27	%
Finance leases
Land	$	73	0.92	1.07	%	$	1,145	1.65	1.05	%
Total finance leases	$	73	0.92	1.07	%	$	1,145	1.65	1.05	%

Contractual lease payment obligations for each of the next five years and thereafter, in addition to a reconciliation to the Corporation’s lease liability, were as follows:


($ in Thousands)	Operating Leases		Finance Leases		Total Leases
Three Months Ending December 31, 2021	$	2,326	$	21	$	2,348
2022	8,061		51		8,112
2023	6,108		—		6,108
2024	5,317		—		5,317
2025	4,076		—		4,076
Beyond 2025	10,807		—		10,807
Total lease payments	$	36,696	$	73	$	36,768
Less: interest	3,630		—		3,630
Present value of lease payments	$	33,066	$	72	$	33,138

As of September 30, 2021 and December 31, 2020, additional operating leases, primarily retail and corporate offices, that had not yet commenced totaled $ 16 million and $ 17 million, respectively. The leases that had not yet commenced as of September 30, 2021, will commence between October 2021 and October 2023 with lease terms of 1 year to 6 years.

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ITEM 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

This report contains statements that may constitute forward-looking statements within the meaning of the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, such as statements other than historical facts contained or incorporated by reference into this report. These forward-looking statements include statements with respect to the Corporation’s financial condition, results of operations, plans, objectives, future performance and business, including statements preceded by, followed by or that include the words “believes,” “expects,” or “anticipates,” references to estimates or similar expressions. Future filings by the Corporation with the SEC, and future statements other than historical facts contained in written material, press releases and oral statements issued by, or on behalf of the Corporation may also constitute forward-looking statements.

All forward-looking statements contained in this report or which may be contained in future statements made for or on behalf of the Corporation are based upon information available at the time the statement is made and the Corporation assumes no obligation to update any forward-looking statements, except as required by federal securities law. Forward-looking statements are subject to significant risks and uncertainties, and the Corporation’s actual results may differ materially from the expected results discussed in such forward-looking statements. Factors that might cause actual results to differ from the results discussed in forward-looking statements include, but are not limited to, the risk factors in Item 1A, Risk Factors, in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020, in the Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, in Item 1A of Part 2 herein, and as may be described from time to time in the Corporation’s subsequent SEC filings.

Overview

The following discussion and analysis is presented to assist in the understanding and evaluation of the Corporation’s financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements, footnotes, and supplemental financial data appearing elsewhere in this Quarterly Report on Form 10-Q and should be read in conjunction therewith. Management continually evaluates strategic acquisition opportunities and various other strategic alternatives that could involve the sale or acquisition of branches or other assets, or the consolidation or creation of subsidiaries. Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes.

On September 9, 2021, the Corporation presented a new growth focused and digital forward strategic vision which included taking the following actions or committing to future actions:

Expanding our Lending Capabilities :

• Diversifying our consumer portfolio by growing auto finance

• Broadening current asset-based lending capabilities

• Launching equipment finance vertical in our commercial business

Growing our Core Businesses :

• Accelerating core commercial middle market lending growth

• Enhancing small business, consumer direct and home equity line of credit lending

• Retooling our mass affluent strategy

Investing in our Digital Transformation :

• Redirecting $50 million of investment over the next five years to digital with incremental costs expected to be funded by the annual run-rate savings from the planned branch consolidations, back-office facilities consolidations, and the transformation of legacy IT infrastructure

• Preparing to deploy new mobile and online systems in the next six months

• Transforming our legacy IT infrastructure to deliver greater differentiation

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Optimizing Capital Proactively:

• Optimizing tangible common equity to accelerate return on average tangible common equity expansion

• Paying a dividend commensurate with performance

• Reducing our preferred capital layers

Performance Summary

• Average loans of $24.1 billion decreased $343 million, or 1%, compared to the first nine months of 2020. The Corporation expects 2021 commercial loan growth, excluding PPP, of approximately 2%.

• Average deposits of $27.5 billion increased $1.7 billion, or 7%, from the first nine months of 2020, driven primarily by government stimulus related inflows and changing savings habits by customers in response to the pandemic.

• Net interest income of $539 million decreased $36 million, or 6%, from the first nine months of 2020, and n et interest margin was 2.38% compared to 2.54% for the first nine months of 2020. Both decreases were primarily due to a lower interest rate environment. The Corporation expects a full year margin of approximately 2.40%.

• Provision for credit losses had a release of $82 million , compared to provision expense of $157 million for the first nine months of 2020. The Corporation expects fourth quarter provision to adjust with changes to risk grade, economic conditions, other indications of credit quality, and loan volume.

• Noninterest income of $251 million decreased $177 million, or 41%, from the first nine months of 2020, primarily driven by the $163 million gain on the sale of ABRC in 2020 and the resulting reduction in related insurance revenues. The Corporation expects 2021 noninterest income to be at the upper end of the $315 million to $325 million range.

• Noninterest expense of $528 million decreased $75 million , or 13%, from the first nine months of 2020, primarily due to a $45 million loss on prepayment of FHLB advances incurred during 2020 and a decrease in personnel expense of $15 million , or 5%, from 2020 which was primarily due to having fewer employees partially offset by an increase in funding for the management incentive plan. The Corporation expects 2021 noninterest expense of approximately $705 million to $711 million, including initiatives and proposed facilities exit costs.

Table 1 Summary Results of Operations: Trends


	Nine months ended						Three months ended
($ in Thousands, except per share data)	Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020
Net income	$	274,117		$	239,769		$	88,809		$	91,007		$	94,301		$	67,002		$	45,214
Net income available to common equity	259,880			226,618			84,655			86,131			89,094			61,795			40,007
Earnings per common share - basic	1.70			1.47			0.56			0.56			0.58			0.40			0.26
Earnings per common share - diluted	1.69			1.46			0.56			0.56			0.58			0.40			0.26
Effective tax rate	20.37		%	1.37		%	20.61		%	19.81		%	20.69		%	20.10		%	N/M

N/M = Not Meaningful

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Income Statement Analysis

Net Interest Income

Table 2 Net Interest Income Analysis


	Nine months ended Sep 30,
	2021						2020
($ in Thousands)	Average Balance		Interest Income / Expense		Average Yield / Rate		Average Balance		Interest Income / Expense		Average Yield / Rate
Assets
Earning assets
Loans (a)(b)(c)
Commercial PPP lending	$	592,571	$	28,582	6.45	%	$	624,305	$	11,012	2.36	%
Commercial and business lending (excl PPP loans)	8,561,822		162,075		2.53	%	8,774,616		201,265		3.06	%
Commercial real estate lending	6,163,684		133,314		2.89	%	5,695,281		147,909		3.47	%
Total commercial	15,318,077		323,971		2.83	%	15,094,201		360,187		3.19	%
Residential mortgage	7,879,992		166,146		2.81	%	8,244,116		194,521		3.15	%
Retail	948,449		33,947		4.78	%	1,150,916		45,621		5.29	%
Total loans	24,146,518		524,065		2.90	%	24,489,234		600,329		3.27	%
Investment securities
Taxable	3,152,994		24,600		1.04	%	3,343,083		50,064		2.00	%
Tax-exempt (a)	1,961,528		54,357		3.69	%	1,939,968		55,026		3.78	%
Other short-term investments	1,662,571		5,802		0.47	%	1,095,555		7,774		0.95	%
Investments and other	6,777,093		84,759		1.67	%	6,378,606		112,864		2.36	%
Total earning assets	30,923,610		$	608,824	2.63	%	30,867,840		$	713,193	3.08	%
Other assets, net	3,354,657						3,460,967
Total assets	$	34,278,268					$	34,328,806
Liabilities and Stockholders' Equity
Interest-bearing liabilities
Interest-bearing deposits
Savings	$	4,061,728	$	1,066	0.04	%	$	3,198,244	$	2,610	0.11	%
Interest-bearing demand	5,981,295		3,596		0.08	%	5,530,482		11,281		0.27	%
Money market	6,956,591		3,101		0.06	%	6,499,965		14,152		0.29	%
Network transaction deposits	960,308		880		0.12	%	1,502,449		5,750		0.51	%
Time deposits	1,533,466		6,302		0.55	%	2,412,985		26,083		1.44	%
Total interest-bearing deposits	19,493,387		14,945		0.10	%	19,144,126		59,877		0.42	%
Federal funds purchased and securities sold under agreements to repurchase	177,875		103		0.08	%	179,615		454		0.34	%
Commercial paper	51,330		21		0.05	%	38,064		35		0.12	%
PPPLF	—		—		—	%	599,368		1,574		0.35	%
Other short-term funding	—		—		—	%	5,645		11		0.25	%
FHLB advances	1,624,320		27,979		2.30	%	2,829,680		47,471		2.24	%
Long-term funding	461,390		14,323		4.14	%	549,088		16,780		4.07	%
Total short and long-term funding	2,314,915		42,425		2.45	%	4,201,461		66,325		2.11	%
Total interest-bearing liabilities	21,808,303		$	57,371	0.35	%	23,345,586		$	126,201	0.72	%
Noninterest-bearing demand deposits	7,961,119						6,618,058
Other liabilities	403,925						457,195
Stockholders’ equity	4,104,921						3,907,966
Total liabilities and stockholders’ equity	$	34,278,268					$	34,328,806
Interest rate spread					2.28	%					2.36	%
Net free funds					0.10	%					0.18	%
Fully tax-equivalent net interest income and net interest margin ("NIM")			$	551,453	2.38	%			$	586,992	2.54	%
Fully tax-equivalent adjustment			12,362						12,028
Net interest income			$	539,092					$	574,964

(a) The yield on tax-exempt loans and securities is computed on a fully tax-equivalent basis using a tax rate of 21% and is net of the effects of certain disallowed interest deductions.(b) Nonaccrual loans and loans held for sale have been included in the average balances.
(c) Interest income includes amortization of net deferred loan origination costs and net accreted purchase loan discount.

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Table 2 Net Interest Income Analysis


	Three Months Ended
	Sep 30, 2021						Jun 30, 2021						Sep 30, 2020
($ in Thousands)	Average Balance		Interest Income / Expense		Average Yield / Rate		Average Balance		Interest Income / Expense		Average Yield / Rate		Average Balance		Interest Income / Expense		Average Yield / Rate
Assets
Earning assets
Loans (a)(b)(c)
Commercial PPP lending	$	275,414	$	9,633	13.88	%	$	701,440	$	10,048	5.75	%	$	1,019,808	$	6,172	2.41	%
Commercial and business lending (excl PPP loans)	8,708,659		54,099		2.47	%	8,437,624		53,886		2.56	%	8,751,083		56,951		2.59	%
Commercial real estate lending	6,160,241		44,859		2.89	%	6,159,728		44,139		2.87	%	6,032,308		44,354		2.93	%
Total commercial	15,144,314		108,591		2.85	%	15,298,792		108,073		2.83	%	15,803,199		107,476		2.71	%
Residential mortgage	7,817,737		55,305		2.83	%	7,861,139		55,337		2.82	%	8,058,283		61,701		3.06	%
Retail	921,906		11,120		4.81	%	938,682		11,197		4.78	%	1,101,589		13,780		4.99	%
Total loans	23,883,957		175,016		2.92	%	24,098,614		174,607		2.90	%	24,963,071		182,957		2.92	%
Investment securities
Taxable	3,258,587		8,745		1.07	%	3,220,825		8,840		1.10	%	3,438,858		13,689		1.59	%
Tax-exempt (a)	2,029,126		18,412		3.63	%	1,953,696		18,101		3.71	%	1,923,445		18,154		3.78	%
Other short-term investments	2,215,805		2,281		0.41	%	1,766,615		1,826		0.41	%	1,788,471		2,238		0.50	%
Investments and other	7,503,518		29,439		1.57	%	6,941,135		28,767		1.66	%	7,150,775		34,081		1.90	%
Total earning assets	31,387,475		$	204,455	2.59	%	31,039,749		$	203,375	2.62	%	32,113,847		$	217,038	2.70	%
Other assets, net	3,372,013						3,339,898						3,436,512
Total assets	$	34,759,489					$	34,379,647					$	35,550,359
Liabilities and Stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
Savings	$	4,248,493	$	377	0.04	%	$	4,121,553	$	357	0.03	%	$	3,462,942	$	382	0.04	%
Interest-bearing demand	6,344,504		1,361		0.09	%	5,879,173		1,057		0.07	%	5,835,597		1,085		0.07	%
Money market	7,011,075		1,019		0.06	%	6,981,482		1,023		0.06	%	6,464,784		1,444		0.09	%
Network transaction deposits	893,991		290		0.13	%	908,869		264		0.12	%	1,528,199		609		0.16	%
Time deposits	1,434,588		1,379		0.38	%	1,509,705		1,909		0.51	%	2,135,870		6,513		1.21	%
Total interest-bearing deposits	19,932,650		4,427		0.09	%	19,400,781		4,609		0.10	%	19,427,392		10,033		0.21	%
Federal funds purchased and securities sold under agreements to repurchase	238,735		48		0.08	%	157,619		30		0.08	%	140,321		34		0.10	%
Commercial paper	55,864		8		0.05	%	55,209		7		0.05	%	42,338		5		0.05	%
PPPLF	—		—		—	%	—		—		—	%	1,018,994		899		0.35	%

FHLB advances	1,620,790		8,962		2.19	%	1,620,397		9,524		2.36	%	2,450,344		14,375		2.33	%
Long-term funding	288,236		3,163		4.39	%	549,222		5,575		4.06	%	549,042		5,580		4.06	%
Total short and long-term funding	2,203,625		12,180		2.20	%	2,382,446		15,136		2.55	%	4,201,039		20,892		1.98	%
Total interest-bearing liabilities	22,136,276		$	16,607	0.30	%	21,783,227		$	19,745	0.36	%	23,628,431		$	30,925	0.52	%
Noninterest-bearing demand deposits	8,141,723						8,069,851						7,412,186
Other liabilities	401,077						395,950						475,310
Stockholders’ Equity	4,080,413						4,130,618						4,034,432
Total liabilities and stockholders’ equity	$	34,759,489					$	34,379,647					$	35,550,359
Interest rate spread					2.29	%					2.26	%					2.18	%
Net free funds					0.09	%					0.11	%					0.13	%
Fully tax-equivalent net interest income and net interest margin ("NIM")			$	187,848	2.38	%			$	183,629	2.37	%			$	186,112	2.31	%
Fully tax-equivalent adjustment			4,172						4,115						3,963
Net interest income			$	183,675					$	179,515					$	182,150

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Notable Contributions to the Change in Net Interest Income

• Net interest income on the consolidated statements of income (which excludes the fully tax-equivalent adjustment) was $539 million for the first nine months of 2021 compared to $575 million for the first nine months of 2020. Fully tax-equivalent net interest income of $551 million for the first nine months of 2021 was $36 million, or 6%, lower than the first nine months of 2020. The net interest margin for the first nine months of 2021 was 2.38% compared to 2.54% for the first nine months of 2020. The decreases were attributable to a lower interest rate environment and increased liquidity being held in lower yielding interest-bearing deposits in other financial institutions. See sections Interest Rate Risk and Quantitative and Qualitative Disclosures about Market Risk for a discussion of interest rate risk and market risk.

• Average interest-bearing liabilities of $21.8 billion for the first nine months of 2021 were down $1.5 billion, or 7%, compared to the first nine months of 2020. On average, FHLB advances decreased $1.2 billion, or 43%, primarily driven by the Corporation's prepayment of $950 million in FHLB advances during the third quarter of 2020. Interest-bearing deposits increased $349 million, or 2%, primarily driven by an increase in low cost deposits partially offset by decreases in higher cost deposits. Average noninterest-bearing demand deposits of $8.0 billion for the first nine months of 2021 were up $1.3 billion, or 20%, versus the first nine months of 2020.

• The cost of interest-bearing liabilities was 0.35% for the first nine months of 2021, which was a 37 bp drop from the first nine months of 2020, primarily attributable to the federal funds rate decreases which occurred in March 2020.

• The Federal Reserve lowered the federal funds target interest to a range of 0.00% to 0.25% in March 2020, which has remained constant through the end of the third quarter of 2021.

Provision for Credit Losses

The provision for credit losses is predominantly a function of the Corporation’s reserving methodology and judgments as to other qualitative and quantitative factors used to determine the appropriate level of the ACLL, which focuses on changes in the size and character of the loan portfolio, changes in levels of individually evaluated and other nonaccrual loans, historical losses and delinquencies in each portfolio category, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing economic conditions and economic forecasts, the fair value of underlying collateral, and other factors which could affect potential credit losses. The forecast the Corporation used for September 30, 2021 was the Moody's baseline scenario from September 2021 over a 2 year reasonable and supportable period with straight-line reversion to historical losses over the second year of the period. See additional discussion under the sections titled, Loans, Credit Risk, Nonperforming Assets, and Allowance for Credit Losses on Loans.

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Noninterest Income

Table 3 Noninterest Income


	Nine months ended						Three months ended										Changes vs
($ in Thousands, except as noted)	Sep 30, 2021		Sep 30, 2020		YTD % Change		Sep 30, 2021		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Jun 30, 2021		Sep 30, 2020
Wealth management fees	$	67,229	$	62,884	7	%	$	22,110	$	22,706	$	22,414	$	22,073	$	21,152	(3)	%	5	%
Service charges and deposit account fees	47,366		40,989		16	%	16,962		15,549		14,855		15,318		14,283		9	%	19	%
Card-based fees	31,838		28,685		11	%	11,113		10,982		9,743		9,848		10,195		1	%	9	%
Other fee-based revenue	12,769		14,240		(10)	%	3,929		4,244		4,596		4,998		4,968		(7)	%	(21)	%
Total fee-based revenue	159,203		146,798		8	%	54,113		53,480		51,608		52,237		50,598		1	%	7	%
Capital markets, net	20,928		22,067		(5)	%	7,114		5,696		8,118		5,898		7,222		25	%	(1)	%
Mortgage servicing fees, net (a)	(1,230)		324		N/M		323		(155)		(1,397)		(973)		(957)		N/M		N/M
Gains and fair value adjustments on loans held for sale	31,709		45,267		(30)	%	8,341		8,623		14,744		14,733		14,536		(3)	%	(43)	%
Fair value adjustment on portfolio loans transferred to held for sale	—		3,932		(100)	%	—		—		—		—		509		N/M		(100)	%
Mortgage servicing rights (impairment) recovery	12,231		(18,481)		N/M		1,993		(340)		10,578		776		(1,451)		N/M		N/M
Mortgage banking, net	42,710		31,043		38	%	10,657		8,128		23,925		14,537		12,636		31	%	(16)	%
Bank and corporate owned life insurance	8,551		9,793		(13)	%	2,760		3,088		2,702		3,978		3,074		(11)	%	(10)	%
Insurance commissions and fees	250		45,153		(99)	%	88		86		76		92		114		2	%	(23)	%
Other	8,176		7,321		12	%	2,116		2,918		3,141		2,879		2,232		(27)	%	(5)	%
Subtotal	239,817		262,175		(9)	%	76,848		73,397		89,570		79,621		75,877		5	%	1	%
Asset gains (losses), net	10,024		156,945		(94)	%	5,228		(14)		4,809		(1,356)		(339)		N/M		N/M
Investment securities gains(losses), net	(16)		9,222		N/M		—		24		(39)		—		7		(100)	%	(100)	%
Gain on the sale of branches, net	1,038		—		N/M		—		36		1,002		7,449		—		(100)	%	N/M
Total noninterest income	$	250,862	$	428,342	(41)	%	$	82,076	$	73,443	$	95,343	$	85,714	$	75,545	12	%	9	%
Mortgage loans originated for sale during period	$	1,345,158	$	1,319,034	2	%	$	455,842	$	476,670	$	412,645	$	323,101	$	458,361	(4)	%	(1)	%
Mortgage loan settlements during period	1,348,006		1,620,777		(17)	%	463,425		484,446		400,135		338,794		598,509		(4)	%	(23)	%
Mortgage portfolio loans transferred to held for sale during period	—		269,119		(100)	%	—		—		—		—		69,532		N/M		(100)	%
Assets under management, at market value (b)							13,148		13,141		12,553		13,314		12,195		—	%	8	%

N/M = Not Meaningful
(a) Includes mortgage origination and servicing fees, net of mortgage servicing rights amortization.
(b) $ in millions. Excludes assets held in brokerage accounts.

Notable Contributions to the Change in Noninterest Income

• Mortgage banking, net increased $12 million from the first nine months of 2020 due to a $12 million recovery of MSRs impairment during 2021 as a result of market rates recovering, compared to impairment of $18 million during the first nine months of 2020 offset by decreased gains on sold loans due to lower mortgage settlements as well as contracting margins on the loans sold.

• Asset gains (losses), net decreased $147 million from the first nine months of 2020, driven by a gain of $163 million from the sale of ABRC during the second quarter of 2020, offset by a gain of $2 million from the sale of Whitnell and higher gains from private equity investments during the first nine months of 2021.

• Insurance commissions and fees decreased $45 million from the first nine months of 2020, driven by the sale of ABRC during the second quarter of 2020 which largely eliminated the source of noninterest income.

• Service charges and deposit account fees increased $6 million from the first nine months of 2020 as a result of service charges that were waived during 2020 in response to the COVID-19 pandemic.

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Noninterest Expense

Table 4 Noninterest Expense


	Nine months ended						Three months ended										Change vs
($ in Thousands)	Sep 30, 2021		Sep 30, 2020		YTD % Change		Sep 30, 2021		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Jun 30, 2021		Sep 30, 2020
Personnel	$	318,900	$	334,117	(5)	%	$	107,880	$	106,994	$	104,026	$	98,033	$	108,567	1	%	(1)	%
Technology	60,902		61,639		(1)	%	19,927		20,236		20,740		19,574		19,666		(2)	%	1	%
Occupancy	46,649		48,386		(4)	%	15,814		14,679		16,156		15,678		17,854		8	%	(11)	%
Business development and advertising	15,522		13,007		19	%	6,156		4,970		4,395		5,421		3,626		24	%	70	%
Equipment	16,199		16,150		—	%	5,200		5,481		5,518		5,555		5,399		(5)	%	(4)	%
Legal and professional	17,495		15,809		11	%	4,304		6,661		6,530		5,737		5,591		(35)	%	(23)	%
Loan and foreclosure costs	6,508		8,842		(26)	%	1,616		2,671		2,220		3,758		2,118		(39)	%	(24)	%
FDIC assessment	13,350		14,650		(9)	%	5,000		3,600		4,750		5,700		3,900		39	%	28	%
Other intangible amortization	6,642		7,939		(16)	%	2,203		2,203		2,236		2,253		2,253		—	%	(2)	%
Loss on prepayments of FHLB advances	—		44,650		(100)	%	—		—		—		—		44,650		N/M		(100)	%
Other	25,547		37,993		(33)	%	9,793		6,979		8,775		11,141		13,963		40	%	(30)	%
Total noninterest expense	$	527,713	$	603,184	(13)	%	$	177,892	$	174,475	$	175,347	$	172,850	$	227,587	2	%	(22)	%
Average FTEs (a)	4,006		4,568		(12)	%	4,010		3,990		4,020		4,134		4,374		1	%	(8)	%

N/M = Not Meaningful
(a) Average FTEs without overtime

Notable Contributions to the Change in Noninterest Expense

• Personnel expense decreased $15 million from the first nine months of 2020, primarily due to having fewer employees as a result of the sales of ABRC and Whitnell, corporate restructurings, and branch sales, partially offset by an increase in funding for the management incentive plan.

• Business development and advertising expenses increased $3 million in the first nine months of 2021 as travel and advertising activity has resumed and begun to normalize from the pandemic lows.

• During the third quarter of 2020, the Corporation prepaid $950 million of long-term FHLB advances and incurred a loss of $45 million on the prepayment.

Income Taxes

The Corporation recognized income tax expense of $70 million for the nine months ended September 30, 2021, compared to income tax expense of $3 million for the nine months ended September 30, 2020. The Corporation's effective tax rate was 20.37% for the first nine months of 2021, compared to an effective tax rate of 1.37% for the first nine months of 2020. The increases in the effective tax rate and income tax expense during the first nine months of 2021 were primarily driven by tax planning strategies which occurred during the third quarter of 2020. The Corporation expects a full year effective tax rate of 19% to 21%, assuming no change in the statutory corporate tax rate.

Income tax expense recorded on the consolidated statements of income involves the interpretation and application of certain accounting pronouncements and federal and state tax laws and regulations, and is, therefore, considered a critical accounting policy. The Corporation is subject to examination by various taxing authorities. Examination by taxing authorities may impact the amount of tax expense and / or reserve for uncertainty in income taxes if their interpretations differ from those of management, based on their judgments about information available to them at the time of their examinations. See section Critical Accounting Policies, in the Corporation’s 2020 Annual Report on Form 10-K for additional information on income taxes.

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Balance Sheet Analysis

• At September 30, 2021, total assets were $34.4 billion, up $1.0 billion, or 3%, from December 31, 2020 and down $259 million, or 1%, from September 30, 2020.

• Interest bearing deposits in other financial institutions were $1.3 billion at September 30, 2021, up $983 million from December 31, 2020 and up $570 million, or 80%, from September 30, 2020, due to excess reserves being held at the Federal Reserve Bank.

• Investment securities AFS, at fair value were $3.9 billion at September 30, 2021, up $808 million, or 26%, from December 31, 2020, and up $635 million, or 19%, from September 30, 2020, driven by the deployment of cash into higher yielding assets. See Note 6 Investment Securities for additional details.

• Lo ans of $23.6 billion at September 30, 2021 were down $830 million , or 3%, from December 31, 2020 and down $1.4 billion, or 6%, from September 30, 2020 . See Note 7 Loans for additional details.

• At September 30, 2021, total deposits of $27.9 billion were up $1.4 billion, or 5%, from December 31, 2020 and were up $1.1 billion , or 4%, from September 30, 2020. Government stimulus programs and changed savings habits have led to customers holding higher deposit balances. See section Deposits and Customer Funding for additional information on deposits.

• Other long-term funding was $249 million at September 30, 2021, down $300 million, or 55%, from both December 31, 2020 and September 30, 2020, primarily driven by the redemption of the Bank's senior notes on July 13, 2021. See Note 9 Short and Long-Term Funding for additional details.

• Preferred equity was $193 million at September 30, 2021, down $160 million, or 45%, from both December 31, 2020 and September 30, 2020, as a result of the redemption of the Corporation's Series C Preferred Stock during the second quarter of 2021 and the redemption of the Corporation's Series D Preferred Stock during the third quarter of 2021.

Loans

Table 5 Period End Loan Composition


	Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020
($ in Thousands)	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
PPP	$	182,121	1	%	$	405,482	2	%	$	836,566	3	%	$	767,757	3	%	$	1,022,217	4	%
Commercial and industrial	7,927,459		34	%	7,909,119		33	%	7,664,501		32	%	7,701,422		31	%	7,933,404		32	%
Commercial real estate — owner occupied	879,554		4	%	880,755		4	%	883,237		4	%	900,912		4	%	904,997		4	%
Commercial and business lending	8,989,133		38	%	9,195,355		38	%	9,384,303		39	%	9,370,091		38	%	9,860,618		39	%
Commercial real estate — investor	4,296,489		18	%	4,300,651		18	%	4,260,706		18	%	4,342,584		18	%	4,320,926		17	%
Real estate construction	1,834,871		8	%	1,880,897		8	%	1,882,299		8	%	1,840,417		8	%	1,859,609		7	%
Commercial real estate lending	6,131,360		26	%	6,181,549		26	%	6,143,004		25	%	6,183,001		25	%	6,180,536		25	%
Total commercial	15,120,493		64	%	15,376,904		64	%	15,527,307		64	%	15,553,091		64	%	16,041,154		64	%
Residential mortgage	7,590,895		32	%	7,638,372		32	%	7,685,218		32	%	7,878,324		32	%	7,885,523		32	%


Home equity	608,566		3	%	631,783		3	%	651,647		3	%	707,255		3	%	761,593		3	%
Other consumer	294,979		1	%	292,660		1	%	288,990		1	%	301,876		1	%	302,603		1	%
Auto	6,739		—	%	7,817		—	%	9,165		—	%	11,177		—	%	12,879		—	%
Total consumer	8,501,180		36	%	8,570,632		36	%	8,635,020		36	%	8,898,632		36	%	8,962,599		36	%
Total loans	$	23,621,673	100	%	$	23,947,536	100	%	$	24,162,328	100	%	$	24,451,724	100	%	$	25,003,753	100	%

The Corporation has long-term guidelines relative to the proportion of Commercial and Business, CRE, and Consumer loan commitments within the overall loan portfolio, with each targeted to represent 30 to 40% of the overall loan portfolio. The targeted long-term guidelines were unchanged during 2020 and the first nine months of 2021. Furthermore, certain sub-asset classes within the respective portfolios are further defined and dollar limitations are placed on these sub-portfolios. These guidelines and limits are reviewed quarterly and approved annually by the Enterprise Risk Committee of the Corporation’s Board of Directors. These guidelines and limits are designed to create balance and diversification within the loan portfolios.

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The Corporation’s loan distribution and interest rate sensitivity as of September 30, 2021 are summarized in the following table:

Table 6 Loan Distribution and Interest Rate Sensitivity


($ in Thousands)	Within 1 Year (a)		1-5 Years		After 5 Years		Total		% of Total
PPP	$	29,587	$	152,534	$	—	$	182,121	1	%
Commercial and industrial	7,329,486		484,329		113,643		7,927,459		34	%
Commercial real estate — owner occupied	496,010		233,530		150,013		879,554		4	%
Commercial real estate — investor	3,935,037		274,474		86,978		4,296,489		18	%
Real estate construction	1,790,893		32,050		11,928		1,834,871		8	%
Residential mortgage - Adjustable (b)	459,613		719,223		1,551,978		2,730,814		12	%
Residential mortgage - Fixed	31,378		83,511		4,745,193		4,860,082		21	%
Home equity	27,490		74,463		506,613		608,566		3	%
Other consumer	47,919		51,028		196,031		294,979		1	%
Auto	340		6,291		108		6,739		—	%
Total loans	$	14,147,754	$	2,111,433	$	7,362,486	$	23,621,673	100	%
Fixed rate	$	5,666,603	$	1,192,969	$	5,273,871	$	12,133,444	51	%
Floating or adjustable rate	8,481,151		918,464		2,088,614		11,488,229		49	%
Total	$	14,147,754	$	2,111,433	$	7,362,486	$	23,621,673	100	%

(a) Demand loans, past due loans, overdrafts, and credit cards are reported in the “Within 1 Year” category.
(b) Based on contractual loan terms for adjustable rate mortgages; does not factor in early prepayments or amortization.

At September 30, 2021, $17.2 billion, or 73%, of the loans outstanding were floating rate, adjustable rate, re-pricing within one year, or maturing within one year.

Credit Risk

An active credit risk management process is used for commercial loans to ensure that sound and consistent credit decisions are made. Credit risk is controlled by detailed underwriting procedures, comprehensive loan administration, and periodic review of borrowers’ outstanding loans and commitments. Borrower relationships are formally reviewed and graded on an ongoing basis for early identification of potential problems. Further analysis by customer, industry, and geographic location are performed to monitor trends, financial performance, and concentrations. See Note 7 Loans of the notes to consolidated financial statements for additional information on managing overall credit quality.

The loan portfolio is widely diversified by types of borrowers, industry groups, and market areas within the Corporation's branch footprint. Significant loan concentrations are considered to exist when there are amounts loaned to numerous borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At September 30, 2021, no significant concentrations existed in the Corporation’s portfolio in excess of 10% of total loans.

Commercial and business lending: The commercial and business lending classification primarily includes commercial loans to large corporations, middle market companies, small businesses, and lease financing.

Table 7 Largest Commercial and Business Lending Industry Group Exposures


September 30, 2021	% of Total Loans		% of Total Commercial and Business Lending
Utilities	7	%	19	%
Finance and Insurance	7	%	18	%
Manufacturing and Wholesale Trade	7	%	18	%
Real Estate	6	%	15	%

The remaining commercial and business lending portfolio is spread over a diverse range of industries, none of which exceed 2% of total loans.

The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any.

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Commercial real estate - investor: CRE-investor is comprised of loans secured by various non-owner occupied or investor income producing property types.

Table 8 Largest Commercial Real Estate Investor Property Type Exposures


September 30, 2021	% of Total Loans		% of Total Commercial Real Estate - Investor
Multi-Family	6	%	32	%
Office	4	%	23	%
Industrial	3	%	18	%
Retail	3	%	17	%

The remaining CRE-investor portfolio is spread over various other property types, none of which exceed 2% of total loans.

Credit risk is managed in a similar manner to commercial and business lending by employing sound underwriting guidelines, lending primarily to borrowers in local markets and businesses, periodically evaluating the underlying collateral, and formally reviewing the borrower’s financial soundness and relationship on an ongoing basis.

Real estate construction: Real estate construction loans are primarily short-term or interim loans that provide financing for the acquisition or development of commercial income properties, multi-family projects, or residential development, both single family and condominium. Real estate construction loans are made to developers and project managers who are generally well known to the Corporation and have prior successful project experience. The credit risk associated with real estate construction loans is generally confined to specific geographic areas but is also influenced by general economic conditions. The Corporation controls the credit risk on these types of loans by making loans in familiar markets to developers, reviewing the merits of individual projects, controlling loan structure, and monitoring project progress and construction advances.

Table 9 Largest Real Estate Construction Property Type Exposures


September 30, 2021	% of Total Loans		% of Total Real Estate Construction
Multi-Family	3	%	32	%

The remaining real estate construction portfolio is spread over various other property types, none of which exceed 2% of total loans.

The Corporation’s current lending standards for CRE and real estate construction lending are determined by property type and specifically address many criteria, including: maximum loan amounts, maximum LTV, requirements for pre-leasing and / or presales, minimum borrower equity, and maximum loan-to-cost. Currently, the maximum standard for LTV is 80%, with lower limits established for certain higher risk types, such as raw land that has a 50% LTV maximum. The Corporation’s LTV guidelines are in compliance with regulatory supervisory limits. In most cases, for real estate construction loans, the loan amounts include interest reserves, which are built into the loans and sized to fund loan payments through construction and lease up and / or sell out.

Residential mortgages: Residential mortgage loans are primarily first lien home mortgages with a maximum loan-to-collateral value without credit enhancement (e.g. private mortgage insurance) of 80%. The residential mortgage portfolio is focused primarily in the Corporation's three-state branch footprint, with approximately 87% of the outstanding loan balances in the Corporation's branch footprint at September 30, 2021. The majority of the on balance sheet residential mortgage portfolio consists of LIBOR or constant maturity treasury based, hybrid, adjustable rate mortgage loans with initial fixed rate terms of 3, 5, 7, or 10 years. The rates on these mortgages adjust based upon the movement in the underlying index which is then added to a margin and rounded to the nearest 0.125%. That result is then subjected to any periodic caps to produce the borrower's interest rate for the coming term.

In 2014, the Financial Stability Oversight Council and Financial Stability Board raised concerns about the reliability and robustness of LIBOR and called for the development of alternative interest rate benchmarks. The ARRC, through authority from the Federal Reserve, have selected the SOFR as the alternative rate and developed a paced transition plan which addresses the risk that LIBOR may not exist beyond the end of 2021. There are still many components of this plan which have not been fully decided or implemented in the industry. As a result, the Corporation is reaching out to certain borrowers offering an opportunity to refinance or modify their loans to avoid any uncertainty around the LIBOR transition. Performing borrowers can modify or refinance to a fixed interest rate or an adjustable rate mortgage tied to the one-year treasury adjusted to a constant maturity of one-year with an appropriate margin. This provides the Bank and borrower with greater certainty around the loan structure. The Bank has not booked a LIBOR adjustable rate mortgage since the first quarter of 2020.

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The Corporation generally retains certain fixed-rate residential real estate mortgages in its loan portfolio, including retail and private banking jumbo mortgages and CRA-related mortgages. As part of management’s historical practice of originating and servicing residential mortgage loans, generally the Corporation’s 30 year, agency conforming, fixed-rate residential real estate mortgage loans have been sold in the secondary market with servicing rights retained. Subject to management’s analysis of the current interest rate environment, among other market factors, the Corporation may choose to retain 30 year mortgage loan production on its balance sheet. See section Loans for additional information on loans.

The Corporation’s underwriting and risk-based pricing guidelines for residential mortgage loans include minimum borrower FICO and maximum LTV of the property securing the loan. Residential mortgage products generally are underwritten using FHLMC and FNMA secondary marketing guidelines.

Home equity: Home equity consists of both home equity lines of credit and closed-end home equity loans. The Corporation’s credit risk monitoring guidelines for home equity is based on an ongoing review of loan delinquency status, as well as a quarterly review of FICO score deterioration and property devaluation. The Corporation does not routinely obtain appraisals on performing loans to update LTV ratios after origination; however, the Corporation monitors the local housing markets by reviewing the various home price indices and incorporates the impact of the changing market conditions in its ongoing credit monitoring process. For junior lien home equity loans, the Corporation is unable to track the performance of the first lien loan if it does not own or service the first lien loan. However, the Corporation obtains a refreshed FICO score on a quarterly basis and monitors this as part of its assessment of the home equity portfolio.

The Corporation’s underwriting and risk-based pricing guidelines for home equity lines of credit and loans consist of a combination of both borrower FICO and the original cumulative LTV against the property securing the loan. Currently, the Corporation's policy sets the maximum acceptable LTV at 90% and the minimum acceptable FICO at 670. The Corporation's current home equity line of credit offering is priced based on floating rate indices and generally allows 10 years of interest-only payments followed by a 20-year amortization of the outstanding balance. The loans in the Corporation's portfolio generally have an original term of 20 years with principal and interest payments required. See section Loans for additional information on loans.

Other consumer: Other consumer consists of student loans, short-term personal installment loans, and credit cards. The Corporation had $107 million and $118 million of student loans at September 30, 2021 and December 31, 2020, respectively, the majority of which are government guaranteed. As a result of the COVID-19 pandemic and the passage of the CARES Act, and subsequent executive orders, the federal student loan relief was extended through January 31, 2022. Credit risk for non-government guaranteed student loans, short-term personal installment loans, and credit cards is influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral. Risks of loss are generally on smaller average balances per loan spread over many borrowers. Once charged off, there is usually less opportunity for recovery of these smaller consumer loans. Credit risk is primarily controlled by reviewing the creditworthiness of the borrowers, monitoring payment histories, and taking appropriate collateral and guarantee positions. The student loan portfolio is in run-off and no new student loans are being originated.

SBA Loans under the PPP:

The Corporation began submitting PPP forgiveness applications on behalf of our customers on September 14, 2020. On December 27, 2020, the Economic Aid Act was signed into law, which included another round of PPP funding. The Corporation began originating the new round of PPP loans in January 2021 until the statutory end of the program in May 2021.

The following table summarizes the balance segmentation of the PPP loans and associated deferred fees as of September 30, 2021:

Table 10 Paycheck Protection Program Loan Segmentation


	Round 1 & 2					Round 3					Total
	Originated Loans	Originated Balance		Outstanding Balance		Originated Loans	Originated Balance		Outstanding Balance		Outstanding Balance
($ in Thousands)
>=$2,000,000	99	$	335,534	$	23,667	11	$	22,000	$	20,000	$	43,667
< $2,000,000 And > $350,000	485	386,245		2,454		158	118,491		62,153		64,607
<=$350,000	7,495	344,032		4,059		5,332	188,514		69,787		73,846
Total	8,079	$	1,065,811	$	30,180	5,501	$	329,004	$	151,940	$	182,121
Deferred fees				$	196				$	6,360	$	6,556

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Nonperforming Assets

Management is committed to a proactive nonaccrual and problem loan identification philosophy. This philosophy is implemented through the ongoing monitoring and review of all pools of risk in the loan portfolio to ensure that problem loans are identified quickly and the risk of loss is minimized. Table 11 provides detailed information regarding NPAs, which include nonaccrual loans, OREO, and other NPAs:

Table 11 Nonperforming Assets


($ in Thousands)	Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020
Nonperforming assets

Commercial and industrial	$	8,497		$	18,380		$	33,192		$	61,859		$	105,899
Commercial real estate — owner occupied	7			7			7			1,058			2,043
Commercial and business lending	8,504			18,387			33,200			62,917			107,941
Commercial real estate — investor	61,504			63,003			58,485			78,220			50,458
Real estate construction	247			247			327			353			392
Commercial real estate lending	61,751			63,250			58,813			78,573			50,850
Total commercial	70,256			81,637			92,012			141,490			158,792
Residential mortgage	56,678			56,795			61,256			59,337			62,331
Home equity	7,838			8,517			9,792			9,888			10,277
Other consumer	222			131			195			91			158
Auto	67			56			36			49			33
Total consumer	64,806			65,498			71,280			69,364			72,798
Total nonaccrual loans	135,062			147,135			163,292			210,854			231,590
Commercial real estate owned	1,005			1,318			2,092			2,185			2,113
Residential real estate owned	2,126			2,438			1,501			1,194			1,535
Bank properties real estate owned	30,724			20,244			20,995			10,889			15,335
OREO	33,855			24,000			24,588			14,269			18,983
Other nonperforming assets	—			—			—			—			909
Total nonperforming assets	$	168,917		$	171,135		$	187,880		$	225,123		$	251,481








Accruing loans past due 90 days or more
Commercial	$	98		$	203		$	190		$	175		$	763
Consumer	932			1,099			1,485			1,423			1,091
Total accruing loans past due 90 days or more	$	1,029		$	1,302		$	1,675		$	1,598		$	1,854
Restructured loans (accruing) (a)
Commercial	$	25,582		$	26,353		$	27,356		$	41,119		$	18,407
Consumer	18,917			15,582			13,464			10,973			8,485
Total restructured loans (accruing)	$	44,499		$	41,935		$	40,820		$	52,092		$	26,891
Nonaccrual restructured loans (included in nonaccrual loans)	$	15,226		$	17,237		$	17,624		$	20,190		$	23,844
Ratios
Nonaccrual loans to total loans	0.57		%	0.61		%	0.68		%	0.86		%	0.93		%
NPAs to total loans plus OREO	0.71		%	0.71		%	0.78		%	0.92		%	1.01		%
NPAs to total assets	0.49		%	0.50		%	0.54		%	0.67		%	0.72		%

Allowance for credit losses on loans to nonaccrual loans	246.02		%	247.45		%	247.23		%	204.63		%	190.85		%

(a) Does not include any restructured loans related to COVID-19 in accordance with Section 4013 of the CARES Act.

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Table 11 Nonperforming Assets (continued)


($ in Thousands)	Sep 30, 2021		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020
Accruing loans 30-89 days past due
PPP	$	568	$	—	$	—	$	—	$	—
Commercial and industrial	1,229		258		526		6,119		298
Commercial real estate — owner occupied	30		47		—		373		870
Commercial and business lending	1,827		306		526		6,492		1,167
Commercial real estate — investor	17,021		391		5,999		12,793		409
Real estate construction	—		117		977		991		111
Commercial real estate lending	17,021		509		6,976		13,784		520
Total commercial	18,848		814		7,502		20,276		1,687
Residential mortgage	7,095		5,015		3,973		10,385		6,185


Home equity	2,931		2,472		2,352		4,802		5,609
Other consumer	1,272		1,036		1,246		1,543		1,322
Auto	10		38		24		57		29
Total consumer	11,308		8,562		7,594		16,786		13,144
Total accruing loans 30-89 days past due	$	30,156	$	9,376	$	15,097	$	37,062	$	14,831








Potential problem loans
PPP (a)	$	4,160	$	8,695	$	22,398	$	18,002	$	19,161
Commercial and industrial	124,990		77,064		122,143		121,487		144,159
Commercial real estate — owner occupied	21,241		17,828		15,965		26,179		22,808
Commercial and business lending	150,391		103,587		160,506		165,668		186,129
Commercial real estate — investor	78,962		71,613		85,752		91,396		100,459
Real estate construction	19,187		16,465		13,977		19,046		2,178
Commercial real estate lending	98,150		88,078		99,728		110,442		102,637
Total commercial	248,541		191,665		260,234		276,111		288,766
Residential mortgage	2,374		3,024		2,524		3,749		2,396
Home equity	171		1,558		1,729		2,068		1,632

Total consumer	2,546		4,583		4,254		5,817		4,028
Total potential problem loans	$	251,087	$	196,248	$	264,488	$	281,928	$	292,794

(a) The Corporation’s policy is to assign risk ratings at the borrower level. PPP loans are 100% guaranteed by the SBA and therefore the Corporation considers these loans to have a
risk profile similar to pass rated loans.

Nonaccrual loans: Nonaccrual loans are considered to be one indicator of potential future loan losses. See Note 7 Loans of the notes to consolidated financial statements for additional nonaccrual loan disclosures. See also sections Credit Risk and Allowance for Credit Losses on Loans.

Accruing loans past due 90 days or more: Loans past due 90 days or more but still accruing interest are classified as such where the underlying loans are both well secured (the collateral value is sufficient to cover principal and accrued interest) and are in the process of collection.

Restructured loans: Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty. See also Note 7 Loans of the notes to consolidated financial statements for additional restructured loans disclosures.

Potential problem loans: The level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in determining the appropriate level of the ACLL. Potential problem loans are generally defined by management to include loans rated as substandard by management that are collectively evaluated (not nonaccrual loans or accruing TDRs); however, there are circumstances present to create doubt as to the ability of the borrower to comply with present repayment terms. The decision of management to include performing loans in potential problem loans does not necessarily mean that the Corporation expects losses to occur, but that management recognizes a higher degree of risk associated with these loans.

OREO: Management actively seeks to ensure OREO properties held are monitored to minimize the Corporation’s risk of loss.

Other nonperforming assets: During 2020, the Corporation wrote off the ownership interest in an oil and gas limited liability company it had received in partial settlement of a debt.

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Allowance for Credit Losses on Loans

Credit risks within the loan portfolio are inherently different for each loan type. Credit risk is controlled and monitored through the use of lending standards, a thorough review of potential borrowers, and ongoing review of loan payment performance. Active asset quality administration, including early problem loan identification and timely resolution of problems, aids in the management of credit risk and the minimization of loan losses. Credit risk management for each loan type is discussed in the section entitled Credit Risk. See Note 7 Loans of the notes to consolidated financial statements for additional disclosures on the ACLL.

To assess the appropriateness of the ACLL, the Corporation focuses on the evaluation of many factors, including but not limited to: evaluation of facts and issues related to specific loans, management’s ongoing review and grading of the loan portfolio, credit report refreshes, consideration of historical loan loss and delinquency experience on each portfolio category, trends in past due and nonaccrual loans, the level of potential problem loans, the risk characteristics of the various classifications of loan segments, changes in the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions and economic forecasts, the fair value of underlying collateral, funding assumptions on lines, and other qualitative and quantitative factors which could affect potential credit losses. The Corporation utilized the Moody's baseline forecast for September 2021 in the allowance model. The forecast is applied over a 2 year reasonable and supportable period with straight-line reversion to historical losses over the second year of the period. Assessing these factors involves significant judgment. Because each of the criteria used is subject to change, the ACLL is not necessarily indicative of the trend of future credit losses on loans in any particular segment. Therefore, management considers the ACLL a critical accounting policy, see section Critical Accounting Policies for additional information on the ACLL. See section Nonperforming Assets for a detailed discussion on asset quality. See also Note 7 Loans of the notes to consolidated financial statements for additional ACLL disclosures. Table 5 provides information on loan growth and period end loan composition, Table 11 provides additional information regarding NPAs, and Table 12 and Table 13 provide additional information regarding activity in the ACLL.

The loan segmentation used in calculating the ACLL at September 30, 2021 and December 31, 2020 was generally comparable. The methodology to calculate the ACLL consists of the following components: a valuation allowance estimate is established for commercial and consumer loans determined by the Corporation to be individually evaluated, using discounted cash flows, estimated fair value of underlying collateral, and/or other data available. Loans are segmented for criticized loan pools by loan type as well as for non-criticized loan pools by loan type, primarily based on historical loss rates after considering loan type, historical loss and delinquency experience, credit quality, and industry classifications. Loans that have been criticized are considered to have a higher risk of default than non-criticized loans, as circumstances were present to support the lower loan grade, warranting higher loss factors. The loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in historical loss levels or other risks. Additionally, management allocates ACLL to absorb losses that may not be provided for by the other components due to qualitative factors evaluated by management, such as limitations within the credit risk grading process, known current economic or business conditions that may not yet show in trends, industry or other concentrations with current issues that impose higher inherent risks than are reflected in the loss factors, and other relevant considerations. The total allowance is available to absorb losses from any segment of the loan portfolio.

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Table 12 Allowance for Credit Losses on Loans


	YTD				Quarter Ended
($ in Thousands)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 30, 2020			Sep 30, 2020
Allowance for Loan Losses
Balance at beginning of period	$	383,702	$	201,371	$	318,811		$	352,938		$	383,702		$	384,711		$	363,803
Cumulative effect of ASU 2016-13 adoption (CECL)	N/A		112,457		N/A			N/A			N/A			N/A			N/A
Balance at beginning of period, adjusted	383,702		313,828		318,811			352,938			383,702			384,711			363,803
Provision for loan losses	(75,500)		137,957		(20,000)			(29,500)			(26,000)			26,500			50,500
Provision for loan losses recorded at acquisition	N/A		2,543		N/A			N/A			N/A			N/A			N/A
Gross up of allowance for PCD loans at acquisition	N/A		3,504		N/A			N/A			N/A			N/A			N/A
Charge offs	(31,784)		(81,738)		(10,929)			(7,681)			(13,174)			(30,315)			(34,079)
Recoveries	14,579		8,617		3,115			3,054			8,410			2,805			4,488
Net (charge offs) recoveries	(17,205)		(73,121)		(7,814)			(4,628)			(4,764)			(27,510)			(29,592)
Balance at end of period	$	290,997	$	384,711	$	290,997		$	318,811		$	352,938		$	383,702		$	384,711
Allowance for Unfunded Commitments
Balance at beginning of period	$	47,776	$	21,907	$	45,276		$	50,776		$	47,776		$	57,276		$	64,776
Cumulative effect of ASU 2016-13 adoption (CECL)	N/A		18,690		N/A			N/A			N/A			N/A			N/A
Balance at beginning of period, adjusted	47,776		40,597		45,276			50,776			47,776			57,276			64,776
Provision for unfunded commitments	(6,500)		16,500		(4,000)			(5,500)			3,000			(9,500)			(7,500)
Amount recorded at acquisition	—		179		—			—			—			—			—
Balance at end of period	$	41,276	$	57,276	$	41,276		$	45,276		$	50,776		$	47,776		$	57,276
Allowance for credit losses on loans	$	332,273	$	441,988	$	332,273		$	364,087		$	403,714		$	431,478		$	441,988
Provision for credit losses on loans	(82,000)		157,000		(24,000)			(35,000)			(23,000)			17,000			43,000
Net loan (charge offs) recoveries

Commercial and industrial	$	(6,358)	$	(64,802)	$	(9,057)		$	1,333		$	1,367		$	(8,514)		$	(24,834)
Commercial real estate — owner occupied	115		(415)		106			5			4			143			(416)
Commercial and business lending	(6,242)		(65,216)		(8,951)			1,338			1,370			(8,371)			(25,249)
Commercial real estate — investor	(11,293)		(3,581)		181			(5,589)			(5,886)			(18,696)			(3,609)
Real estate construction	69		(12)		18			23			29			43			(21)
Commercial real estate lending	(11,224)		(3,593)		199			(5,566)			(5,857)			(18,653)			(3,630)
Total commercial	(17,467)		(68,810)		(8,752)			(4,228)			(4,487)			(27,024)			(28,879)
Residential mortgage	(32)		(1,206)		300			(223)			(109)			(162)			(79)


Home equity	1,640		(76)		959			337			344			335			156
Other consumer	(1,366)		(3,039)		(329)			(517)			(521)			(668)			(797)
Auto	20		10		8			3			9			9			8
Total consumer	262		(4,311)		938			(400)			(277)			(486)			(712)
Total net (charge offs) recoveries	$	(17,205)	$	(73,121)	$	(7,814)		$	(4,628)		$	(4,764)		$	(27,510)		$	(29,592)








Ratios

Allowance for credit losses on loans to total loans					1.41		%	1.52		%	1.67		%	1.76		%	1.77		%

Allowance for credit losses on loans to net charge offs (annualized)	14.4x		4.5x		10.7x			19.6x			20.9x			3.9x			3.8x
Loan Evaluation Method for ACLL
Individually evaluated for impairment					$	19,913		$	29,352		$	43,262		$	79,831		$	88,030
Collectively evaluated for impairment					312,359			334,734			360,452			351,646			353,957
Total ACLL					$	332,273		$	364,087		$	403,714		$	431,478		$	441,988
Loan Balance
Individually evaluated for impairment					$	131,484		$	141,817		$	180,006		$	259,497		$	256,536
Collectively evaluated for impairment					23,490,189			23,805,719			23,982,321			24,192,227			24,747,216
Total loan balance					$	23,621,673		$	23,947,536		$	24,162,328		$	24,451,724		$	25,003,753

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Table 13 Annualized Net (Charge Offs) Recoveries (a)


	YTD		Quarter Ended
(In basis points)	Sep 30, 2021	Sep 30, 2020	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 30, 2020	Sep 30, 2020
Net loan (charge offs) recoveries

Commercial and industrial	(11)	(110)	(46)	7	7	(45)	(126)
Commercial real estate — owner occupied	2	(6)	5	—	—	6	(18)
Commercial and business lending	(9)	(93)	(40)	6	6	(35)	(103)
Commercial real estate — investor	(35)	(12)	2	(52)	(55)	(173)	(34)
Real estate construction	—	—	—	1	1	1	—
Commercial real estate lending	(24)	(8)	1	(36)	(38)	(121)	(24)
Total commercial	(15)	(61)	(23)	(11)	(12)	(69)	(73)
Residential mortgage	—	(2)	2	(1)	(1)	(1)	—
Home equity	34	(1)	61	21	21	18	8
Other consumer	(62)	(126)	(44)	(72)	(72)	(88)	(103)
Auto	31	9	43	15	37	29	22
Total consumer	—	(6)	4	(2)	(1)	(2)	(3)
Total net (charge offs) recoveries	(10)	(40)	(13)	(8)	(8)	(44)	(47)

(a) Annualized ratio of net charge offs to average loans by loan type.

Notable Contributions to the Change in the Allowance for Credit Losses on Loans

• Potential problem loans decreased $31 million, or 11%, from December 31, 2020, and decreased $42 million, or 14%, from September 30, 2020. The decrease from December 31, 2020 was primarily driven by PPP loans, as they have been forgiven, along with a decrease in CRE-investor lending. The decrease from September 30, 2020 was primarily driven by decreases in CRE-investor, commercial and industrial lending, and PPP loans. These decreases were partially offset by an increase in real estate construction. See Table 11 for additional information regarding potential problem loans.

• Total nonaccrual loans decreased $76 million, or 36%, from December 31, 2020, and decreased $97 million, or 42%, from September 30, 2020. The decrease from December 31, 2020 was primarily due to decreases in commercial and industrial lending along with CRE-investor lending. The decrease from September 30, 2020 was primarily driven by a decrease in commercial and industrial lending. As economic conditions trended downward in 2020, due to the COVID-19 pandemic, nonaccrual loans increased. As economic conditions have been improving throughout 2021, nonaccrual loans have decreased. See Note 7 Loans of the notes to consolidated financial statements and Table 11 for additional disclosures on the changes in asset quality.

• YTD net charge offs decreased $56 million, or 76%, from September 30, 2020, primarily driven by decreased charge off amounts in commercial and industrial loans, partially offset by higher charge off amounts in CRE-investor lending due to COVID-19 related impacts in that industry. See Table 12 and Table 13 for additional information on the activity in the ACLL.

Management believes the level of ACLL to be appropriate at September 30, 2021.

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Deposits and Customer Funding

The following table summarizes the composition of our deposits and customer funding:

Table 14 Period End Deposit and Customer Funding Composition


	Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020
($ in Thousands)	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Noninterest-bearing demand	$	8,170,105	29	%	$	7,999,143	29	%	$	8,496,194	31	%	$	7,661,728	29	%	$	7,489,048	28	%
Savings	4,278,453		15	%	4,182,651		15	%	4,032,830		15	%	3,650,085		14	%	3,529,423		13	%
Interest-bearing demand	6,407,844		23	%	5,969,285		22	%	5,748,353		21	%	6,090,869		23	%	5,979,449		22	%
Money market	7,583,978		27	%	7,640,825		28	%	7,838,437		28	%	7,322,769		28	%	7,687,775		29	%
Time deposits	1,410,886		5	%	1,472,395		5	%	1,561,352		6	%	1,757,030		7	%	2,026,852		8	%

Total deposits	$	27,851,266	100	%	$	27,264,299	100	%	$	27,677,166	100	%	$	26,482,481	100	%	$	26,712,547	100	%
Customer funding (a)	322,081				226,160				182,228				245,247				198,741
Total deposits and customer funding	$	28,173,348			$	27,490,459			$	27,859,394			$	26,727,727			$	26,911,289
Network transaction deposits (b)	$	929,174			$	871,603			$	1,054,634			$	1,197,093			$	1,390,778

Net deposits and customer funding (total deposits and customer funding, excluding network transaction deposits)	$	27,244,174			$	26,618,856			$	26,804,761			$	25,530,634			$	25,520,511

Time deposits of more than $250,000	$	223,075			$	232,035			$	246,037			$	341,068			$	463,739

(a) Securities sold under agreement to repurchase and commercial paper.
(b) Included above in interest-bearing demand and money market.

• Total deposits, which are the Corporation's largest source of funds, increased $1.4 billion, or 5%, from December 31, 2020, and increased $1.1 billion, or 4%, from September 30, 2020, as government stimulus related inflows and customer savings habits have changed in response to the pandemic.

• Time deposits decreased $346 million, or 20%, from December 31, 2020, and decreased $616 million, or 30%, from September 30, 2020, due to higher priced time deposits rolling off as they mature.

• Included in the above amounts were $929 million of network deposits, primarily sourced from other financial institutions and intermediaries. These represented 3% of the Corporation's total deposits at September 30, 2021. Network deposits decreased $268 million, or 22%, from December 31, 2020, and decreased $462 million, or 33%, from September 30, 2020.

Liquidity

The objective of liquidity risk management is to ensure that the Corporation has the ability to generate sufficient cash or cash equivalents in a timely and cost effective manner to satisfy the cash flow requirements of depositors and borrowers and to meet its other commitments as they become due. The Corporation’s liquidity risk management process is designed to identify, measure, and manage the Corporation’s funding and liquidity risk to meet its daily funding needs in the ordinary course of business, as well as to address expected and unexpected changes in its funding requirements. The Corporation engages in various activities to manage its liquidity risk, including diversifying its funding sources, stress testing, and holding readily-marketable assets which can be used as a source of liquidity, if needed.

The Corporation performs dynamic scenario analysis in accordance with industry best practices. Measures have been established to ensure the Corporation has sufficient high quality short-term liquidity to meet cash flow requirements under stressed scenarios. In addition, the Corporation also reviews static measures such as deposit funding as a percentage of total assets and liquid asset levels. Strong capital ratios, credit quality, and core earnings are also essential to maintaining cost effective access to wholesale funding markets. At September 30, 2021, the Corporation was in compliance with its internal liquidity objectives and had sufficient asset-based liquidity to meet its obligations under a stressed scenario.

The Corporation maintains diverse and readily available liquidity sources, including:

• Investment securities, which are an important tool to the Corporation’s liquidity objective and can be pledged or sold to enhance liquidity, if necessary. See Note 6 Investment Securities of the notes to consolidated financial statements for additional information on the Corporation's investment securities portfolio, including pledged investment securities.

• Pledgeable loan collateral, which is eligible collateral with both the Federal Reserve Bank and the FHLB under established lines of credit. Based on the amount of collateral pledged, the FHLB established a collateral value from which the Bank may draw advances, and issue letters of credit in favor of public fund depositors, against the collateral. As of September 30, 2021, the Bank had $5.1 billion available for future funding. The Federal Reserve Bank also establishes a

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collateral value of assets to support borrowings from the discount window. As of September 30, 2021, the Bank had $731 million available for discount window borrowings.

• A $200 million Parent Company commercial paper program, of which $55 million was outstanding as of September 30, 2021.

• Dividends and service fees from subsidiaries, as well as the proceeds from issuance of capital are also funding sources for the Parent Company.

• Acquisition related equity issuances by the Parent Company; the Corporation has filed a shelf registration statement with the SEC under which the Parent Company may, from time to time, offer shares of the Corporation’s common stock in connection with acquisitions of businesses, assets, or securities of other companies.

• Other issuances by the Parent Company; the Corporation maintains on file with the SEC a universal shelf registration statement, under which the Parent Company may offer the following securities, either separately or in units: debt securities, preferred stock, depositary shares, common stock, and warrants.

• Bank issuances; the Bank may also issue institutional CDs, network transaction deposits, and brokered CDs.

• Global Bank Note Program issuances; the Bank has implemented a program pursuant to which it may from time to time offer up to $2.0 billion aggregate principal amount of its unsecured senior and subordinated notes.

Credit ratings relate to the Corporation’s ability to issue debt securities and the cost to borrow money, and should not be viewed as an indication of future stock performance or a recommendation to buy, sell, or hold securities. Adverse changes in these factors could result in a negative change in credit ratings and impact not only the ability to raise funds in the capital markets but also the cost of these funds. The credit ratings of the Parent Company and the Bank at September 30, 2021 are displayed below:

Table 15 Credit Ratings


	Moody’s	S&P
Bank short-term deposits	P-1	-
Bank long-term deposits/issuer	A1	BBB+
Corporation commercial paper	P-2	-
Corporation long-term senior debt/issuer	Baa1	BBB
Outlook	Negative	Stable

For the nine months ended September 30, 2021, net cash provided by operating activities and financing activities was $364 million and $768 million, respectively, while net cash used in investing activities was $162 million for a net increase in cash and cash equivalents of $970 million since year-end 2020. At September 30, 2021, assets of $34.4 billion increased $1.0 billion, or 3%, from year-end 2020, primarily driven by a $983 million increase in interest-bearing deposits in other financial institutions and an increase of $808 million, or 26%, in investment securities AFS, at fair value, partially offset by a $830 million, or 3%, decrease in loans. On the funding side, deposits of $27.9 billion increased $1.4 billion, or 5%, from year-end related to deposit inflows from government stimulus programs and changing customer savings habits.

For the nine months ended September 30, 2020, net cash provided by operating and financing activities was $423 million and $1.7 billion, respectively, while net cash used in investing activities was $1.6 billion, for a net increase in cash and cash equivalents of $525 million from year-end 2019. At September 30, 2020, assets of $34.7 billion increased $2.3 billion, or 7%, from year-end 2019, primarily due to a $2.2 billion, or 10%, increase in loans, driven by the Corporation adding $1.0 billion in PPP loans and customers drawing on their lines to enhance their liquidity in response to the uncertainty surrounding the COVID-19 pandemic. Additionally, on February 14, 2020, the Corporation added $370 million in loans from the First Staunton acquisition. On the funding side, deposits of $26.7 billion increased $2.9 billion, or 12%, from year-end 2019 as advances on customer's loans were deposited into their deposit accounts, increasing their liquidity. Additionally, on February 14, 2020, the Corporation assumed $439 million of deposits from the First Staunton acquisition.

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Quantitative and Qualitative Disclosures about Market Risk

Market risk and interest rate risk are managed centrally. Market risk is the potential for loss arising from adverse changes in the fair value of fixed income securities, equity securities, other earning assets and derivative financial instruments as a result of changes in interest rates or other factors. Interest rate risk is the potential for reduced net interest income resulting from adverse changes in the level of interest rates. As a financial institution that engages in transactions involving an array of financial products, the Corporation is exposed to both market risk and interest rate risk. In addition to market risk, interest rate risk is measured and managed through a number of methods. The Corporation uses financial modeling simulation techniques that measure the sensitivity of future earnings due to changing rate environments to measure interest rate risk.

Policies established by the Corporation’s ALCO and approved by the Board of Directors are intended to limit these risks. The Board has delegated day-to-day responsibility for managing market and interest rate risk to ALCO. The primary objectives of market risk management are to minimize any adverse effect that changes in market risk factors may have on net interest income and to offset the risk of price changes for certain assets recorded at fair value.

Interest Rate Risk

The primary goal of interest rate risk management is to control exposure to interest rate risk within policy limits approved by the Board of Directors. These limits and guidelines reflect the Corporation's risk appetite for interest rate risk over both short-term and long-term horizons. No interest rate limit breaches occurred during the first nine months of 2021.

The major sources of the Corporation's non-trading interest rate risk are timing differences in the maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, and the potential exercise of explicit or embedded options. We measure these risks and their impact by identifying and quantifying exposures through the use of sophisticated simulation and valuation models which are employed by management to understand NII at risk, interest rate sensitive EAR, and MVE at risk. The Corporation’s interest rate risk profile is such that a higher or steeper yield curve adds to income while a flatter yield curve is relatively neutral, and a lower or inverted yield curve generally has a negative impact on earnings. The Corporation's EAR profile is asset sensitive at September 30, 2021.

For further discussion of the Corporation's interest rate risk and corresponding key assumptions, see the Interest Rate Risk section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Corporation’s 2020 Annual Report on Form 10-K.

The sensitivity analysis included below is measured as a percentage change in NII and EAR due to gradual moves in benchmark interest rates from a baseline scenario over 12 months. We evaluate the sensitivity using: 1) a dynamic forecast incorporating expected growth in the balance sheet, and 2) a static forecast where the current balance sheet is held constant.

While a gradual shift in interest rates was used in this analysis to provide an estimate of exposure under a probable scenario, an instantaneous shift in interest rates would have a much more significant impact.

Table 16 Estimated % Change in Rate Sensitive Earnings at Risk Over 12 Months


	Sep 30, 2021				Dec 31, 2020
	Dynamic Forecast		Static Forecast		Dynamic Forecast		Static Forecast
Gradual Rate Change
100 bp increase in interest rates	5.8	%	5.5	%	6.2	%	6.3	%
200 bp increase in interest rates	12.1	%	11.0	%	12.8	%	12.7	%

At September 30, 2021, the MVE profile indicates a decrease in net balance sheet value due to instantaneous upward changes in rates.

Table 17 Market Value of Equity Sensitivity


	Sep 30, 2021		Dec 31, 2020
Instantaneous Rate Change
100 bp increase in interest rates	(1.2)	%	1.9	%
200 bp increase in interest rates	(2.6)	%	2.8	%

Since MVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in MVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year). Further, MVE does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changes in product spreads that could mitigate the adverse impact of changes in interest rates.

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The above NII, EAR, and MVE measures do not include all actions that management may undertake to manage this risk in response to anticipated changes in interest rates.

Contractual Obligations, Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities

The following table summarizes significant contractual obligations and other commitments at September 30, 2021, at those amounts contractually due to the recipient, including any unamortized premiums or discounts, hedge basis adjustments, or other similar carrying value adjustments.

Table 18 Contractual Obligations and Other Commitments


($ in Thousands)	One Year or Less		One to Three Years		Three to Five Years		Over Five Years		Total
Time deposits	$	1,078,578	$	282,826	$	49,477	$	5	$	1,410,886
Short-term funding	322,496		—		—		—		322,496
FHLB advances	11,899		2,920		1,001,806		604,254		1,620,880

Other long-term funding	72		—		249,088		—		249,160

Operating leases	7,611		10,739		7,107		7,609		33,066
Commitments to extend credit	5,574,678		3,620,518		1,600,138		212,827		11,008,161
Total	$	6,995,335	$	3,917,003	$	2,907,616	$	824,695	$	14,644,649

The Corporation utilizes a variety of financial instruments in the normal course of business to meet the financial needs of its customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include lending-related commitments and derivative instruments. A discussion of the Corporation’s derivative instruments at September 30, 2021 is included in Note 10 Derivative and Hedging Activities of the notes to consolidated financial statements. A discussion of the Corporation’s lending-related commitments is included in Note 12 Commitments, Off-Balance Sheet Arrangements, Legal Proceedings and Regulatory Matters of the notes to consolidated financial statements. See Note 9 Short and Long-Term Funding of the notes to consolidated financial statements for additional information on the Corporation’s short-term funding, FHLB advances, and long-term funding. See also Note 18 Leases of the notes to consolidated financial statements for additional information on the Corporation's operating leases.

Capital

Management actively reviews capital strategies for the Corporation and each of its subsidiaries in light of perceived business risks, future growth opportunities, industry standards, and compliance with regulatory requirements. The assessment of overall capital adequacy depends on a variety of factors, including asset quality, liquidity, stability of earnings, changing competitive forces, economic condition in markets served, and strength of management. At September 30, 2021, the capital ratios of the Corporation and its banking subsidiaries were in excess of regulatory minimum requirements. The Corporation’s capital ratios are summarized in the following table.

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Table 19 Capital Ratios


	YTD				Quarter Ended
($ in Thousands)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020
Risk-based Capital (a)
CET1					$	2,779,943		$	2,790,392		$	2,759,473		$	2,706,010		$	2,671,739
Tier 1 capital					2,972,622			3,080,015			3,112,239			3,058,809			3,024,710
Total capital					3,550,556			3,655,411			3,682,720			3,632,807			3,601,705
Total risk-weighted assets					26,303,703			26,072,881			25,640,395			25,903,415			26,141,710
Modified CECL transitional amount					92,822			100,776			110,683			117,624			120,251
CET1 capital ratio					10.57		%	10.70		%	10.76		%	10.45		%	10.22		%
Tier 1 capital ratio					11.30		%	11.81		%	12.14		%	11.81		%	11.57		%
Total capital ratio					13.50		%	14.02		%	14.36		%	14.02		%	13.78		%
Tier 1 leverage ratio					8.81		%	9.23		%	9.53		%	9.37		%	9.02		%
Selected Equity and Performance Ratios
Total stockholders’ equity / assets					11.60		%	12.03		%	11.94		%	12.24		%	11.66		%
Dividend payout ratio (b)	32.94	%	36.73	%	35.71		%	32.14		%	31.03		%	45.00		%	69.23		%
Return on average assets	1.07	%	0.93	%	1.01		%	1.06		%	1.14		%	0.78		%	0.51		%
Annualized noninterest expense / average assets	2.06	%	2.35	%	2.03		%	2.04		%	2.11		%	2.02		%	2.55		%

(a) The Federal Reserve establishes regulatory capital requirements, including well-capitalized standards for the Corporation. The Corporation follows Basel III, subject to certain
transition provisions. These regulatory capital measurements are used by management, regulators, investors, and analysts to assess, monitor and compare the quality and
composition of the Corporation's capital with the capital of other financial services companies.
(b) Ratio is based upon basic earnings per common share.

See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, for information on the shares repurchased during the third quarter of 2021.

During the second quarter of 2021, the Corporation redeemed all outstanding Series C Preferred Stock, for $65 million.

During the third quarter of 2021, the Corporation redeemed all outstanding Series D Preferred Stock, for $99 million.

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Non-GAAP Measures

Table 20 Non-GAAP Measures


	YTD						Quarter Ended
($ in Thousands)	Sep 30, 2021			Sep 30, 2020			Sep 30, 2021			Jun 30, 2021			Mar 31, 2021			Dec 31, 2020			Sep 30, 2020
Selected equity and performance ratios (a)(b)
Tangible common equity / tangible assets							7.92		%	8.04		%	7.80		%	7.94		%	7.50		%
Return on average equity	8.93		%	8.20		%	8.63		%	8.84		%	9.32		%	6.58		%	4.46		%
Return on average tangible common equity	13.30		%	12.79		%	12.72		%	13.19		%	14.03		%	9.75		%	6.36		%
Return on average CET1	12.62		%	11.97		%	12.11		%	12.51		%	13.25		%	9.16		%	5.98		%

Return on average tangible assets	1.11		%	0.97		%	1.05		%	1.10		%	1.18		%	0.81		%	0.52		%
Average stockholders' equity / average assets	11.98		%	11.38		%	11.74		%	12.01		%	12.18		%	11.90		%	11.35		%
Tangible common equity reconciliation (a)
Common equity							$	3,801,766		$	3,819,852		$	3,774,268		$	3,737,421		$	3,691,796
Goodwill and other intangible assets, net							(1,165,288)			(1,167,491)			(1,169,694)			(1,177,554)			(1,178,409)
Tangible common equity							$	2,636,478		$	2,652,361		$	2,604,575		$	2,559,867		$	2,513,387
Tangible Assets Reconciliation (a)
Total assets							$	34,439,666		$	34,152,625		$	34,575,255		$	33,419,783		$	34,698,746
Goodwill and other intangible assets, net							(1,165,288)			(1,167,491)			(1,169,694)			(1,177,554)			(1,178,409)
Tangible assets							$	33,274,378		$	32,985,134		$	33,405,561		$	32,242,230		$	33,520,337
Average tangible common equity and average CET1 reconciliation (a)(b)
Common equity	$	3,782,141		$	3,610,864		$	3,807,083		$	3,788,237		$	3,750,479		$	3,699,957		$	3,680,687
Goodwill and other intangible assets, net	(1,169,964)			(1,244,147)			(1,166,589)			(1,168,774)			(1,174,617)			(1,178,165)			(1,179,796)
Tangible common equity	2,612,177			2,366,717			2,640,494			2,619,464			2,575,862			2,521,792			2,500,891
Modified CECL transitional amount	106,277			112,441			97,420			105,961			115,649			122,828			120,228
Accumulated other comprehensive loss (income)	(4,589)			4,762			(5,320)			(3,111)			(5,337)			(3,668)			(3,682)
Deferred tax assets (liabilities), net	40,135			44,516			39,893			39,915			40,608			41,578			42,183
Average CET1	$	2,754,000		$	2,528,436		$	2,772,487		$	2,762,229		$	2,726,782		$	2,682,530		$	2,659,620
Average tangible assets reconciliation (a)
Total assets	$	34,278,268		$	34,328,806		$	34,759,489		$	34,379,647		$	33,684,143		$	34,075,792		$	35,550,359
Goodwill and other intangible assets, net	(1,169,964)			(1,244,147)			(1,166,589)			(1,168,774)			(1,174,617)			(1,178,165)			(1,179,796)
Tangible assets	$	33,108,304		$	33,084,660		$	33,592,900		$	33,210,873		$	32,509,526		$	32,897,626		$	34,370,563




Efficiency ratio reconciliation (c)
Federal Reserve efficiency ratio	65.98		%	62.34		%	65.43		%	66.81		%	65.74		%	59.68		%	85.41		%
Fully tax-equivalent adjustment	(1.02)		%	(0.75)		%	(1.01)		%	(1.07)		%	(0.97)		%	(0.84)		%	(1.29)		%
Other intangible amortization	(0.84)		%	(0.80)		%	(0.83)		%	(0.87)		%	(0.82)		%	(0.82)		%	(0.87)		%
Fully tax-equivalent efficiency ratio	64.13		%	60.80		%	63.61		%	64.88		%	63.96		%	58.02		%	83.25		%

Provision for unfunded commitments adjustment	0.81		%	(1.64)		%	1.48		%	2.14		%	(1.09)		%	3.42		%	2.87		%
Asset gains (losses), net adjustment	0.82		%	10.89		%	1.29		%	—		%	1.12		%	(0.30)		%	(0.11)		%

Acquisitions, branch sales, and initiatives	(0.22)		%	(7.31)		%	(0.91)		%	0.01		%	0.22		%	1.68		%	(22.99)		%
Adjusted efficiency ratio	65.54		%	62.74		%	65.46		%	67.02		%	64.21		%	62.83		%	63.02		%

(a) The ratio tangible common equity to tangible assets excludes goodwill and other intangible assets, net. This financial measure has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength.

(b) These capital measurements are used by management, regulators, investors, and analysts to assess, monitor and compare the quality and composition of our capital with the capital of other financial services companies.

(c) The efficiency ratio as defined by the Federal Reserve guidance is noninterest expense (which includes the provision for unfunded commitments) divided by the sum of net interest income plus noninterest income, excluding investment securities gains / losses, net. The fully tax-equivalent efficiency ratio is noninterest expense (which includes the provision for unfunded commitments), excluding other intangible amortization, divided by the sum of fully tax-equivalent net interest income plus noninterest income, excluding investment securities gains / losses, net. The adjusted efficiency ratio is noninterest expense, which excludes the provision for unfunded commitments, other intangible amortization, acquisition related costs, and announced initiatives, divided by the sum of fully tax-equivalent net interest income plus noninterest income, excluding investment securities gains (losses), net, asset gains (losses), net, and gain on sale of branches, net. Management believes the adjusted efficiency ratio is a meaningful measure as it enhances the comparability of net interest income arising from taxable and tax-exempt sources and provides a better measure as to how the Corporation is managing its income and expenses by adjusting for acquisition related costs, provision for unfunded commitments, asset gains (losses), net, branch sales, and announced initiatives.

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Sequential Quarter Results

The Corporation reported net income of $89 million for the third quarter of 2021, compared to net income of $91 million for the second quarter of 2021. Net income available to common equity was $85 million for the third quarter of 2021, or $0.56 for both basic and diluted earnings per common share. Comparatively, net income available to common equity for the second quarter of 2021 was $86 million, or $0.56 for both basic and diluted earnings per common share (see Table 1).

Fully tax-equivalent net interest income for the third quarter of 2021 was $188 million, $4 million, or 2%, higher than the second quarter of 2021. The net interest margin in the third quarter of 2021 was up 1 bp to 2.38%. Average earning assets increased $348 million, or 1%, to $31.4 billion in the third quarter of 2021, with investments and other increasing $562 million, or 8%. Average loans decreased $215 million, or 1%. On the funding side, total interest-bearing deposits increased $532 million, or 3%, primarily driven by customers holding proceeds from government stimulus programs in their deposit accounts and changing savings habits in response to the pandemic.(see Table 2).

The provision for credit losses had a release of $24 million for the third quarter of 2021, compared to a release of $35 million for the second quarter of 2021 (see Table 12). See discussion under sections: Provision for Credit Losses, Nonperforming Assets, and Allowance for Credit Losses on Loans.

Noninterest income for the third quarter of 2021 was $82 million, up $9 million, or 12%, from the second quarter of 2021, primarily due to gains on private equity investments of $5 million along with an increase of $3 million in mortgage banking, net, driven by a $2 million recovery of MSRs impairment during the third quarter of 2021 (see Table 3).

Noninterest expense for the third quarter of 2021 was $178 million, up $3 million, or 2%, from the second quarter of 2021 (see Table 4).

For the third quarter of 2021, the Corporation recognized income tax expense of $23 million, compared to income tax expense of $22 million for the second quarter of 2021. See Income Taxes section for a detailed discussion on income taxes.

Comparable Quarter Results

The Corporation reported net income of $89 million for the third quarter of 2021, compared to $45 million for the third quarter of 2020. Net income available to common equity was $85 million for the third quarter of 2021, or $0.56 for both basic and diluted earnings per common share. Comparatively, net income available to common equity for the third quarter of 2020 was $40 million, or $0.26 for both basic and diluted earnings per share (see Table 1).

Fully tax-equivalent net interest income for the third quarter of 2021 was $188 million, $2 million, or 1%, higher than the third quarter of 2020. The net interest margin between the comparable quarters was up 7 bp, to 2.38% in the third quarter of 2021. The increase in net interest income and net interest margin was due to lower interest bearing liability costs as excess liquidity was deployed to control those costs. Average earning assets decreased $726 million, or 2%, to $31.4 billion in the third quarter of 2021 as average loans decreased $1.1 billion, or 4%, partially offset by an increase of $353 million, or 5%, in investments and other, driven by higher interest-bearing deposits in other financial institutions. On the funding side, average interest-bearing deposits increased $505 million, or 3%, from the third quarter of 2020, due to increases in lower cost deposits, partially offset by a decrease in higher cost deposits. Average noninterest-bearing deposits increased $730 million, or 10%, to $8.1 billion. Average short and long-term funding decreased $2.0 billion, or 48%, driven by decreases in PPPLF, which was paid in full in the fourth quarter of 2020, and the Corporation's prepayment of $950 million in long-term FHLB advances during the third quarter of 2020 (see Table 2).

The provision for credit losses had a release of $24 million for the third quarter of 2021, compared to $43 million of provision expense for the third quarter of 2020, as a result of improving credit quality within the loan portfolio and an improving economic forecast (see Table 12). See discussion under sections: Provision for Credit Losses, Nonperforming Assets, and Allowance for Credit Losses on Loans.

Noninterest income for the third quarter of 2021 was $82 million, up $7 million, or 9%, compared to the third quarter of 2020, primarily due to gains on private equity investments of $5 million during the third quarter of 2021 (see Table 3).

Noninterest expense decreased $50 million, or 22%, to $178 million for the third quarter of 2021, primarily due to the prepayment of $950 million of long-term FHLB advances during the third quarter of 2020 that incurred a loss of $45 million on the prepayment. (see Table 4).

The Corporation recognized income tax expense of $23 million for the third quarter of 2021, compared to an income tax benefit of $58 million for the third quarter of 2020. The increase in income tax expense was primarily due to tax planning strategies which occurred during the third quarter of 2020. See section Income Taxes for a detailed discussion on income taxes.

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Segment Review

As discussed in Note 15 Segment Reporting of the notes to consolidated financial statements, the Corporation’s reportable segments have been determined based upon its internal profitability reporting system, which is organized by strategic business unit. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer, and the distribution of those products and services are similar. The reportable segments are Corporate and Commercial Specialty; Community, Consumer and Business; and Risk Management and Shared Services.

Table 21 Selected Segment Financial Data


	Three Months Ended Sep 30,								Nine Months Ended Sep 30,
($ in Thousands)	2021			2020			% Change		2021			2020			% Change
Corporate and Commercial Specialty
Total revenue (a)	$	142,881		$	136,376		5	%	$	424,104		$	412,987		3	%
Provision for credit losses	14,864			15,572			(5)	%	48,803			41,456			18	%
Noninterest expense	58,652			52,635			11	%	172,781			160,899			7	%
Income tax expense (benefit)	12,617			12,497			1	%	37,213			39,161			(5)	%
Net income	56,747			55,672			2	%	165,307			171,472			(4)	%
Average earning assets	14,578,127			14,682,074			(1)	%	14,582,112			14,128,156			3	%
Average loans	14,577,082			14,681,690			(1)	%	14,581,288			14,124,838			3	%
Average deposits	10,007,194			9,631,000			4	%	9,761,845			9,387,212			4	%
Average allocated capital (Average CET1) (b)	1,467,902			1,468,341			—	%	1,469,694			1,414,696			4	%
Return on average allocated capital (ROCET1) (b)	15.34		%	15.08		%	26 bp		15.04		%	16.19		%	-115 bp
Community, Consumer, and Business
Total revenue	$	119,538		$	115,833		3	%	$	362,548		$	404,345		(10)	%
Provision for credit losses	4,233			5,758			(26)	%	13,897			16,296			(15)	%
Noninterest expense	94,762			102,139			(7)	%	290,443			335,675			(13)	%
Income tax expense (benefit)	4,314			1,667			159	%	12,224			10,999			11	%
Net income	16,230			6,269			159	%	45,985			41,376			11	%
Average earning assets	8,642,457			9,414,194			(8)	%	8,845,983			9,457,405			(6)	%
Average loans	8,642,457			9,414,194			(8)	%	8,845,983			9,457,405			(6)	%
Average deposits	17,075,676			15,577,322			10	%	16,642,694			14,753,893			13	%
Average allocated capital (Average CET1) (b)	465,632			507,233			(8)	%	480,369			543,377			(12)	%
Return on average allocated capital (ROCET1) (b)	13.83		%	4.92		%	N/M		12.80		%	10.17		%	N/M
Risk Management and Shared Services
Total revenue (c)	$	3,333		$	5,487		(39)	%	$	3,301		$	185,973		(98)	%
Provision for credit losses	(43,107)			21,679			N/M		(144,717)			99,257			N/M
Noninterest expense	24,478			72,813			(66)	%	64,490			106,610			(40)	%
Income tax expense (benefit)	6,129			(72,278)			N/M		20,705			(46,817)			N/M
Net income	15,833			(16,727)			N/M		62,824			26,922			133	%
Average earning assets	8,166,891			8,017,579			2	%	7,495,515			7,282,279			3	%
Average loans	664,419			867,187			(23)	%	719,246			906,992			(21)	%
Average deposits	991,503			1,631,256			(39)	%	1,049,968			1,621,079			(35)	%
Average allocated capital (Average CET1) (b)	838,953			684,046			23	%	803,937			570,364			41	%
Return on average allocated capital (ROCET1) (b)	5.52		%	(12.76)		%	N/M		10.45		%	3.22		%	N/M
Consolidated Total
Total revenue (a)(c)	$	265,752		$	257,695		3	%	$	789,954		$	1,003,305		(21)	%
Return on average allocated capital (ROCET1) (b)	12.11		%	5.98		%	N/M		12.62		%	11.97		%	65 bp

N//M = Not meaningful

(a) For the nine months ended September 30, 2021, the Corporation recognized a $2 million pre-tax gain on sale of Whitnell.

(b) The Federal Reserve establishes capital adequacy requirements for the Corporation, including CET1. For segment reporting purposes, the return on CET1 ("ROCET1") reflects return on average allocated CET1. The ROCET1 for the Risk Management and Shared Services segment and the Consolidated Total is inclusive of the annualized effect of the
preferred stock dividends.

(c) For the nine months ended September 30, 2020, the Corporation recognized a $163 million pre-tax gain related to the sale of ABRC.

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Notable Changes in Segment Financial Data

The Corporate and Commercial Specialty segment consists of lending and deposit solutions to larger businesses, developers, not-for-profits, municipalities, and financial institutions, and the support to deliver, fund, and manage such banking solutions. In addition, this segment provides a variety of investment, fiduciary, and retirement planning products and services to individuals and small to mid-sized businesses. During the first quarter of 2021, the Corporation sold its wealth management subsidiary Whitnell.

• Revenue increased $11 million from the nine months ended September 30, 2020 and increased $7 million from the three months ended September 30, 2020, driven by higher asset gains.

• Provision for credit losses increased $7 million from the nine months ended September 30, 2020 as a result of the long term annual net charge off rates attributable to the current portfolio.

• Noninterest expense increased $12 million from the nine months ended September 30, 2020 driven by an increase in personnel expense due to an increase in funding of the management incentive plan partially offset by lower salary expense as a result of fewer employees.

• Average loans increased $456 million from the nine months ended September 30, 2020, primarily driven by a $412 million increase in CRE loans.

The Community, Consumer, and Business segment consists of lending, deposit solutions, and historically offered ancillary financial services, primarily insurance and risk consulting, to individuals and small to mid-sized businesses.

• Revenue decreased $42 million from the nine months ended September 30, 2020, primarily driven by the sale of ABRC during the second quarter of 2020, which lowered insurance commissions and fees by $45 million. Revenue increased $4 million from the three months ended September 30, 2020, primarily driven by an increase in service charges and deposit account fees. These fees were waived during 2020 in response to the COVID-19 pandemic.

• Noninterest expense decreased $45 million from the nine months ended September 30, 2020, and decreased $7 million from the three months ended September 30, 2020, primarily driven by a decrease in personnel expense, which was largely due to a reduction in FTEs as a result of branch consolidations and the sale of ABRC, along with lower loan and foreclosure costs.

• Average loans decreased $611 million from the nine months ended September 30, 2020, primarily driven by a decrease in residential mortgages as a result of higher refinances, as well as decreases in home equity and other consumer portfolios. Average loans decreased $772 million from the three months ended September 30, 2020 driven by decreases across all loan categories.

• Average deposits increased $1.9 billion from the nine months ended September 30, 2020, and increased $1.5 billion from the three months ended September 30, 2020. The increase was primarily driven by customers holding proceeds from government stimulus programs, and more recently driven by changes in consumer saving habits.

The Risk Management and Shared Services segment includes key shared Corporate functions, Parent Company activity, intersegment eliminations, and residual revenues and expenses.

• Revenues decreased $183 million from the nine months ended September 30, 2020, primarily driven by the $163 million asset gain on sale of ABRC which occurred during the second quarter of 2020.

• Provision for credit losses decreased $244 million from the nine months ended September 30, 2020, and decreased $65 million from the three months ended September 30, 2020, as a result of improving credit quality within the loan portfolio and an improving economic forecast.

• Noninterest expense decreased $42 million from the nine months ended September 30, 2020 and decreased $48 million from the three months ended September 30, 2020, primarily driven by a loss on the prepayment of FHLB advances incurred during the third quarter of 2020.

• Average loans decreased $188 million from the nine months ended September 30, 2020 and decreased $203 million from the three months ended September 30, 2020 primarily driven by a decrease in commercial and business lending.

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• Average deposits decreased $571 million from the nine months ended September 30, 2020, and decreased $640 million from the three months ended September 30, 2020. These decreases were primarily driven by a decrease in network deposits for both time periods.

Critical Accounting Policies

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 sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Estimates that are particularly susceptible to significant change include the determination of the ACLL, goodwill impairment assessment, MSRs valuation, and income taxes. A discussion of these policies can be found in the Critical Accounting Policies section in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Corporation’s 2020 Annual Report on Form 10-K. There have been no changes in the Corporation's application of critical accounting policies since December 31, 2020.

Recent Developments

On October 26, 2021, the Corporation’s Board of Directors declared a regular quarterly cash dividend of $0.20 per common share, payable on December 15, 2021 to shareholders of record at the close of business on December 1, 2021. The Board of Directors also declared a regular quarterly cash dividend of $0.3671875 per depositary share on Associated's 5.875% Series E Perpetual Preferred Stock, payable on December 15, 2021 to shareholders of record at the close of business on December 1, 2021. The Board of Directors also declared a regular quarterly cash dividend of $0.3515625 per depositary share on Associated's 5.625% Series F Perpetual Preferred Stock, payable on December 15, 2021 to shareholders of record at the close of business on December 1, 2021.

In addition, the Board of Directors authorized the repurchase of up to $100 million of Associated's common stock. This repurchase authorization is in addition to the authority remaining under the previous program. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, for more information on the Corporation's share repurchase program.


ITEM 3.			Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is set forth in Item 2 under the captions Quantitative and Qualitative Disclosures about Market Risk and Interest Rate Risk.

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ITEM 4.			Controls and Procedures

The Corporation maintains disclosure controls and procedures as required under Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended, that are designed to ensure that information required to be disclosed in the Corporation's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of September 30, 2021, the Corporation’s management carried out an evaluation, under the supervision and with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on the foregoing, its Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of September 30, 2021.

No changes were made to the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act of 1934) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’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 12 Commitments, Off-Balance Sheet Arrangements, Legal Proceedings and Regulatory Matters of the notes to consolidated financial statements.


ITEM 1A.			Risk Factors

The following risk factors supplement the Risk Factors described in the Corporation’s 2020 Annual Report on Form 10-K and should be read in conjunction therewith

Changes in the federal, state, or local tax laws may negatively impact our financial performance. On March 31, 2021, President Biden unveiled his infrastructure plan, which includes a proposal to increase the federal corporate tax rate from 21% to 28% as part of a package of tax reforms to help fund the spending proposals in the plan. If adopted as proposed, the increase of the corporate tax rate would adversely affect our results of operations in future periods. Congress is expected to debate the adoption of an infrastructure initiative in the coming weeks and months; however, the prospects and timing for the enactment of any such legislation, as well as its specific provisions, including funding options, and the extent of its potential impact on our results of operations if enacted, cannot be predicted at this time.

Cyberattacks, including those targeting critical infrastructure sectors, have become more frequent and sophisticated. Critical infrastructure sectors, including financial services, increasingly have been the targets of cyberattacks, including attacks emanating from foreign countries such as the attack on the information technology company SolarWinds, which affected many Fortune 500 companies as well as U.S. government agencies. Attacks involving large financial institutions, including denial of service attacks designed to disrupt external customer-facing services, nation state cyberattacks and ransomware attacks designed to deny organizations access to key internal resources or systems, and targeted social engineering and email attacks designed to allow unauthorized persons to obtain access to an institution’s information systems and data or that of its customers are becoming more common and increasingly sophisticated and can be difficult to prevent. Reports of ransomware incidents specifically have increased by approximately 300% since the start of 2020 and information technology software supply chain attacks, including those involving financial institutions, also have increased during this period, some of which have resulted in temporary, but impactful, disruptions to the functioning of critical infrastructure sectors or the operations of specific institutions. In addition, cybersecurity risks for financial institutions have evolved as a result of the use of new technologies, devices and delivery channels to transmit data and conduct financial transactions, while the ongoing and widespread remote work environment necessitated by the COVID-19 pandemic has subjected institutions to additional cybersecurity vulnerabilities and risks.

Any successful cyberattack or other security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer information or that compromises our ability to function could severely damage our reputation, erode confidence in the security of our systems, products and services, expose us to the risk of litigation and liability, disrupt our operations and have a material adverse effect on our business. Any successful cyberattack may also subject the Corporation to regulatory investigations, litigation or enforcement, or require the payment of regulatory fines or penalties or undertaking of costly remediation efforts with respect to third parties affected by a cybersecurity incident, all or any of which could adversely affect the Corporation’s business, financial condition or results of operations and damage its reputation.

Recent actions by the Biden Administration regarding competition in the financial services and technology sectors may adversely impact our business. On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy (the “Executive Order”). Among other initiatives, the Executive Order (i) encourages the federal banking agencies to review their current merger oversight practices under the Bank Holding Company Act of 1956, as amended, and the Bank Merger Act and, within 180 days of the date of the Executive Order, adopt a plan for revitalization of such practices; and (ii) directs the Bureau of Consumer Financial Protection (the “CFPB”) to commence or continue a rulemaking to facilitate the portability of consumer financial transaction data for the purpose of providing consumers with greater flexibility in switching financial institutions and using innovative financial products.

Although the scope and substance of any action by the federal banking agencies in response to the directives set forth in the Executive Order cannot be predicted at this time, the potential for increased regulatory scrutiny of bank mergers and acquisitions may adversely affect the marketplace for such transactions in the near- to medium-term and could result in our acquisitions in future periods being delayed, impeded or restricted in certain respects due to enhanced regulatory review processes. Similarly, although the CFPB has published principles for consumer-authorized financial data sharing and aggregation, we cannot predict the scope, substance or timing of any future CFPB rulemaking regarding the portability of financial transaction data in response to the Executive Order. The impact of any such rulemaking on the conduct of our customers also cannot be predicted. However, the adoption of any such rule could result in increased volatility of consumer accounts and expose the Corporation to additional operational, strategic, regulatory and compliance risks.

We are subject to environmental, social and governance risks that could adversely affect our reputation and the market price of our securities. The Corporation is subject to a variety of risks arising from environmental, social and governance matters or “ESG” matters. ESG matters include climate risk, hiring practices, the diversity of our work force, and racial and social justice issues involving our personnel, customers and third parties with whom we otherwise do business. Risks arising from ESG matters may adversely affect, among other things, our reputation and the market price of our securities.

In recognition of the risks posed by climate change, the Corporation has taken a variety of actions to manage its carbon footprint and has sought to engage in sustainable lending and investment activities, specifically including supporting renewable energy projects. However, we cannot guarantee the success of these actions, nor can we make any assurances that our regulators, investors in our securities or other third parties, such as environmental advocacy organizations, will find our efforts to support climate-related initiatives to be sufficient. Further, we may be exposed to negative publicity based on the identity and activities of those to whom we lend and with which we otherwise do business and the public’s view of the approach and performance of our customers and business partners with respect to ESG matters. Any such negative publicity could arise from adverse news coverage in traditional media and could also spread through the use of social media platforms. The Corporation’s relationships and reputation with its existing and prospective customers and third parties with which we do business could be damaged if we were to become the subject of any such negative publicity. This, in turn, could have an adverse effect on our ability to attract and retain customers and employees and could have a negative impact on the market price for securities.

Investors have begun to consider the steps taken and resources allocated by financial institutions and other commercial organizations to address ESG matters when making investment and operational decisions. Certain investors are beginning to incorporate the business risks of climate change and the adequacy of companies’ responses to the risks posed by climate change and other ESG matters into their investment theses. These shifts in investing priorities may result in adverse effects on the market price of our securities to the extent that investors determine that the Corporation has not made sufficient progress on ESG matters.

The leadership of each of the Office of the Comptroller of the Currency (the "OCC"), the Federal Reserve Board and the U.S. Treasury Department have indicated increased expectations of larger financial institutions to measure, monitor and manage climate related risk as part of their enterprise risk management processes. For instance, the OCC currently is engaged in multiple collaborative initiatives with other governmental authorities to assess the physical and transition risk posed by climate change and the appropriate corresponding expectations for bank risk management. The OCC also has appointed its first ever Climate Change Risk Officer to assist with these initiatives and to support the agency's efforts to enhance its supervision of climate change risk management. Further, the Federal Reserve Board has signaled that it is in the process of developing scenario analysis to model the possible financial risks associated with climate change. When developed, the resilience of large banking organizations, as well as the broader financial system, will be evaluated against these climate change-related scenarios as part of the stress testing process. Although these requirements would not apply to a banking organization of our size, as the Corporation continues to grow and expand the scope of our operations, our regulators generally will expect us to enhance our internal control programs and processes, including with respect to stress testing under a variety of adverse scenarios and related capital planning. To the extent that these initiatives lead to the promulgation of new regulations or supervisory guidance applicable to the Corporation, we would expect to experience increased compliance costs and other compliance-related risks.

Fiscal challenges facing the U.S. government could negatively impact financial markets which, in turn, could have an adverse effect on our financial position or results of operations. Recent federal budget deficit concerns and political conflict over legislation to raise the U.S. government's debt limit have increased the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States. Many of our investment securities are issued by the U.S. government and government agencies and sponsored entities. As a result of uncertain domestic political conditions, including the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks. In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2011, S&P lowered its long-term sovereign credit rating on the U.S. from AAA to AA+. A further downgrade, or a similar downgrade by other rating agencies, in response to current political dynamics, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.

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ITEM 2.			Unregistered Sales of Equity Securities and Use of Proceeds

During the third quarter of 2021, the Corporation repurchased $60 million of common stock, including $60 million of open market purchases and approximately $112,000 of repurchases related to tax withholding on equity compensation, or approximately 2.9 million shares, of common stock. The repurchase details are presented in the table below:

Common Stock Purchases


	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (b)
Period

July 1, 2021 - July 31, 2021	468,431	$	19.77	468,431	—
August 1, 2021 - August 31, 2021	2,455,088	20.70		2,450,585	—
September 1, 2021 - September 30, 2021	1,020	20.70		—	—
Total	2,924,539	$	20.55	2,919,016	217,463

(a) During the third quarter of 2021, the Corporation repurchased 5,523 common shares for minimum tax withholding settlements on equity compensation. These purchases do not
count against the maximum number of shares that may yet be purchased under the Board of Directors’ authorization described below.
(b) At September 30, 2021, there remained approximately $5 million authorized to be repurchased in the aggregate. Approximately 217,000 shares of common stock remained
available to be repurchased under this Board authorization based on the closing share price on September 30, 2021.

Repurchases under Board authorized repurchase programs are subject to any necessary regulatory approvals and other limitations and may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchases, or similar facilities.

Preferred Stock Purchases

During the third quarter of 2021, the Corporation redeemed all outstanding depositary shares of the Corporation's Series D Preferred Stock, but did not repurchase any other shares of preferred stock.

The repurchase of depositary shares is based on market and investment opportunities, capital levels, growth prospects, and regulatory constraints. Such repurchases may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchase programs, or similar facilities.


ITEM 6.			Exhibits

(a) Exhibits:


Exhibit (3.1), Certificate relating to the Series D Preferred Stock, effective October 1, 2021 .
Exhibit (31.1), Certification Under Section 302 of Sarbanes-Oxley by Andrew J. Harmening, Chief Executive Officer.
Exhibit (31.2), Certification Under Section 302 of Sarbanes-Oxley by Christopher J. Del Moral-Niles, Chief Financial Officer.
Exhibit (32), Certification by the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley.
Exhibit (101), Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Income, (iii) Unaudited Consolidated Statements of Comprehensive Income, (iv) Unaudited Consolidated Statements of Changes in Stockholders’ Equity, (v) Unaudited Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.
Exhibit (104), The cover page from the Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 has been formatted in Inline XBRL (Inline Extensible Business Reporting Language) and contained in Exhibits in 101.


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 hereunto duly authorized.



						ASSOCIATED BANC-CORP
						(Registrant)

Date: October 28, 2021						/s/ Andrew J. Harmening
						Andrew J. Harmening
						President and Chief Executive Officer

Date: October 28, 2021						/s/ Christopher J. Del Moral-Niles
						Christopher J. Del Moral-Niles
						Chief Financial Officer

Date: October 28, 2021						/s/ Tammy C. Stadler
						Tammy C. Stadler
						Chief Accounting Officer

TABLE OF CONTENTS

Part I - Financial Information Item 1. Financial Statements:Item 1. Financial Statements Continued:Note 1 Basis Of Presentation Note 2 Acquisitions and Dispositions Note 3 Summary Of Significant Accounting Policies Note 4 Earnings Per Common Share Note 5 Stock-based Compensation Note 6 Investment Securities Note 7 Loans Note 8 Goodwill and Other Intangible Assets Note 9 Short and Long-term Funding Note 10 Derivative and Hedging Activities Note 11 Balance Sheet Offsetting Note 12 Commitments, Off-balance Sheet Arrangements, Legal Proceedings and Regulatory Matters Note 13 Fair Value Measurements Note 14 Retirement Plans Note 15 Segment Reporting Note 16 Accumulated Other Comprehensive Income (loss)Note 17 Revenue From Contracts with Customers Note 18 Leases Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II - Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 6. Exhibits

Exhibits

Exhibit (3.1), Certificate relating to the Series D Preferred Stock, effective October 1, 2021. Exhibit (31.1), Certification Under Section 302 of Sarbanes-Oxley by Andrew J. Harmening, Chief Executive Officer. Exhibit (31.2), Certification Under Section 302 of Sarbanes-Oxley by Christopher J. Del Moral-Niles, Chief Financial Officer. Exhibit (32), Certification by the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley.

ASB 10-Q Quarter ended Sept. 30, 2021

Exhibits