Array

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The following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes and with the statistical
information and financial data appearing in this report as well as the Company's
2021 Annual Report on Form 10-K. Results of operations for the six month periods
ended June 30, 2022 are not necessarily indicative of results to be attained for
any other period.

Forward-Looking Information

This report may contain "forward-looking statements" that are subject to risks
and uncertainties and include information about possible or assumed future
results of operations. Many possible events or factors could affect the future
financial results and performance of the Company. This could cause results or
performance to differ materially from those expressed in the forward-looking
statements. Words such as "expects", "anticipates", "believes", "estimates",
variations of such words and other similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions that are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in, or implied by, such
forward-looking statements. Readers should not rely solely on the
forward-looking statements and should consider all uncertainties and risks
discussed throughout this report. Forward-looking statements speak only as of
the date they are made. The Company does not undertake to update forward-looking
statements to reflect circumstances or events that occur after the date the
forward-looking statements are made or to reflect the occurrence of
unanticipated events. Such possible events or factors include: changes in
economic conditions in the Company's market area, the effects of the COVID-19
pandemic, changes in policies by regulatory agencies, governmental legislation
and regulation, fluctuations in interest rates, changes in liquidity
requirements, demand for loans in the Company's market area, changes in
accounting and tax principles, estimates made on income taxes, competition with
other entities that offer financial services, cybersecurity threats, and such
other factors as discussed in Part I Item 1A - "Risk Factors" and Part II Item 7
- "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 2021 Annual Report on Form 10-K and in Part II Item
1A of this Quarterly Report on Form 10-Q. During the quarter ended June 30,
2022, there were no material changes to the Risk Factors disclosed in the
Company's 2021 Annual Report on Form 10-K.

Array


The Company has identified certain policies as being critical because they
require management to make particularly difficult, subjective and/or complex
judgments about matters that are inherently uncertain and because of the
likelihood that materially different amounts would be reported under different
conditions or using different assumptions. These estimates and related policies
are the Company's allowance for credit losses and fair value measurement
policies. A discussion of these estimates and related policies can be found in
the sections captioned "Critical Accounting Policies" and "Allowance for Credit
Losses on Loans and Liability for Unfunded Lending Commitments" in Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's 2021 Annual Report on Form 10-K. There have been no
changes in the Company's application of critical accounting policies since
December 31, 2021.

                                       45
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                                                             Table of Contents
Selected Financial Data

                                                            Three Months Ended June 30              Six Months Ended June 30
                                                               2022            2021                   2022            2021
Per Share Data
  Net income per common share - basic                     $      .96     $       1.32   *        $      1.93     $      2.38  *
  Net income per common share - diluted                          .96             1.32   *               1.93            2.38  *
  Cash dividends on common stock                                .265             .250   *               .530            .500  *
  Book value per common share                                                                          22.29           28.47  *
  Market price                                                                                         65.65           71.01  *
Selected Ratios
(Based on average balance sheets)
  Loans to deposits (1)                                        53.93   %        57.78   %              52.91   %       59.73  %
  Non-interest bearing deposits to total deposits              39.02            40.09                  39.18           39.76
  Equity to loans (1)                                          18.41            21.26                  20.10           20.97
  Equity to deposits                                            9.93            12.29                  10.63           12.53
  Equity to total assets                                        8.37            10.07                   8.82           10.22
  Return on total assets                                        1.36             1.93                   1.35            1.78

  Return on common equity                                      16.29            19.12                  15.28           17.42

Array

  Non-interest income to revenue (2)                           37.50            40.08                  38.07           39.94
  Efficiency ratio (3)                                         57.29            56.90                  58.72           56.64
  Tier I common risk-based capital ratio                                                               13.95           14.20
  Tier I risk-based capital ratio                                                                      13.95           14.20
  Total risk-based capital ratio                                                                       14.64           15.07
  Tangible common equity to tangible assets ratio (4)                                                   7.56            9.91
  Tier I leverage ratio                                                                                 9.45            9.36


* Restated for the 5% stock dividend distributed in December 2021.
(1) Includes loans held for sale.
(2) Revenue includes net interest income and non-interest income.
(3) The efficiency ratio is calculated as non-interest expense (excluding
intangibles amortization) as a percent of revenue.
(4) The tangible common equity to tangible assets ratio is a measurement which
management believes is a useful indicator of capital adequacy and utilization.
It provides a meaningful basis for period to period and company to company
comparisons, and also assists regulators, investors and analysts in analyzing
the financial position of the Company. Tangible common equity and tangible
assets are non-GAAP measures and should not be viewed as substitutes for, or
superior to, data prepared in accordance with GAAP.

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

                                                                                   June 30
(Dollars in thousands)                                                      2022            2021
Total equity                                                           $  2,675,313    $  3,493,830
Less non-controlling interest                                                16,467           8,210

Less goodwill                                                               138,921         138,921
Less core deposit premium                                                     4,446           4,772
Total tangible common equity (a)                                       $  2,515,479    $  3,341,927
Total assets                                                           $ 33,435,370    $ 33,856,162
Less goodwill                                                               138,921         138,921
Less core deposit premium                                                     4,446           4,772
Total tangible assets (b)                                              $ 33,292,003    $ 33,712,469
Tangible common equity to tangible assets ratio (a)/(b)                        7.56  %         9.91  %



                                       46
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                                                             Table of Contents
Results of Operations

Summary

                                                        Three Months Ended June 30                          Six Months Ended June 30
(Dollars in thousands)                             2022              2021         % change                           2022         2021         % change
Net interest income                        $     232,385         $ 207,982             11.7  %                   $ 441,171    $ 413,730              6.6  %
Provision for credit losses                       (7,162)           45,655            115.7                          2,696       51,887             94.8
Non-interest income                              139,427           139,143               .2                        271,196      275,188             (1.5)
Investment securities gains, net                   1,029            16,804            (93.9)                         8,192       26,657            (69.3)
Non-interest expense                            (213,505)         (198,126)             7.8                       (419,153)    (390,699)             7.3
Income taxes                                     (32,021)          (45,209)           (29.2)                       (63,923)     (77,285)           (17.3)
Non-controlling interest expense                  (4,359)           (3,923)            11.1                         (6,231)      (6,180)              

Array

Net income attributable to Commerce
Bancshares, Inc.                           $     115,794         $ 162,326            (28.7  %)                  $ 233,948    $ 293,298            (20.2  %)



For the quarter ended June 30, 2022, net income attributable to Commerce
Bancshares, Inc. (net income) amounted to $115.8 million, a decrease of $46.5
million, or 28.7%, compared to the second quarter of the previous year. For the
current quarter, the annualized return on average assets was 1.36%, the
annualized return on average equity was 16.29%, and the efficiency ratio was
57.29%. Diluted earnings per common share was $.96, a decrease of 27.3% compared
to $1.32 per share in the second quarter of 2021, and decreased 1.0% compared to
$.97 per share in the previous quarter.

Compared to the second quarter of last year, net interest income increased $24.4
million, or 11.7%, mainly due to an increase of $33.5 million in interest income
on investment securities, partly offset by decreases in interest on loans and
securities purchased under agreements to resell of $2.1 million and $6.0
million, respectively. The provision for credit losses increased $52.8 million
due to an increase in the estimate of the allowance for credit losses on loans
and unfunded lending commitments and higher net loan charge-offs, coupled with
the release of allowances associated with certain pandemic-related estimates in
the prior quarter. Non-interest income increased $284 thousand, or .2%, compared
to the second quarter of 2021, mainly due to growth in deposit, bank card, and
cash sweep fees, offset by lower loan fees and sales and a fair value adjustment
on the Company's deferred compensation plan assets. Net gains on investment
securities totaled $1.0 million in the current quarter compared to net gains of
$16.8 million in the same quarter of last year. Net securities gains in the
current quarter primarily resulted from net fair value gains of $15.6 million in
the Company's private equity investment portfolio, mostly offset by losses of
$9.6 million on sales of available for sale securities and a $4.3 million loss
on the sale of an investment in the Company's private equity portfolio.
Non-interest expense increased $15.4 million, or 7.8%, over the second quarter
of 2021 mainly due to higher salaries, data processing and software, and travel
and entertainment expense.

Net income for the first six months of 2022 was $233.9 million, a decrease of
$59.4 million, or 20.2%, from the same period last year. Diluted earnings per
common share was $1.93, a decrease of 18.9% compared to $2.38 per share in the
same period last year. For the first six months of 2022, the annualized return
on average assets was 1.35%, the annualized return on average equity was 15.28%,
and the efficiency ratio was 58.72%. Net interest income increased $27.4
million, or 6.6%, over the same period last year. This growth was largely due to
an increase of $55.0 million in interest income on investment securities, partly
offset by decreases in interest on loans and securities purchased under
agreements to resell of $16.6 million and $11.9 million, respectively. The
provision for credit losses was a recovery of $2.7 million for the first six
months of 2022, compared to a recovery of $51.9 million in the same period last
year, resulting in an increase in provision expense of $49.2 million.
Non-interest income decreased $4.0 million, or 1.5%, from the first six months
of last year mainly due to lower loan fees and sales and other non-interest
income, partly offset by higher trust fees and net bank card fees. Non-interest
expense increased $28.5 million, or 7.3%, over the first six months of last year
mainly due to increases in salaries and benefits expense and data processing and
software expense.
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Array


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

Array

                                                        Three Months Ended June 30, 2022 vs.
                                                                        2021                        Six Months Ended June 30, 2022 vs. 2021
                                                             Change due to                                 Change due to
                                                          Average      Average                          Average        Average
(In thousands)                                             Volume       Rate        Total               Volume          Rate        Total
Interest income, fully taxable equivalent basis:
Loans:
 Business                                               $  (6,530)   $     

Array Array Array Array Array

 Real estate - construction and land                        1,214       1,605       2,819                   1,587       2,216        3,803
 Real estate - business                                     1,293       1,657       2,950                   1,918         589        2,507
 Real estate - personal                                       175        (295)       (120)                     36      (1,158)      (1,122)
 Consumer                                                     631      (1,112)       (481)                  1,546      (3,247)      (1,701)
 Revolving home equity                                       (126)        178          52                    (339)        243          (96)
 Consumer credit card                                      (1,064)        133        (931)                 (2,909)        642       (2,267)
 Overdrafts                                                     -           -           -                       -           -            -
   Total interest on loans                                 (4,407)      2,254      (2,153)                (13,949)     (2,651)     (16,600)
Loans held for sale                                          (139)         55         (84)                   (340)        102         (238)
Investment securities:
 U.S. government and federal agency securities              5,497      (1,639)      3,858                   7,773         860        8,633
 Government-sponsored enterprise obligations                   29           8          37                      35           5           40
 State and municipal obligations                              961        (606)        355                   1,685      (1,505)         180
 Mortgage-backed securities                                 1,309      15,829      17,138                   2,454      26,455       28,909
 Asset-backed securities                                    4,314       1,036       5,350                  10,489      (1,282)       9,207
 Other securities                                           1,800       4,715       6,515                   3,292       4,322        7,614
   Total interest on investment securities                 13,910      19,343      33,253                  25,728      28,855       54,583
Federal funds sold                                              4          13          17                       5          13           18
Securities purchased under agreements to resell             8,520     (14,551)     (6,031)                 19,876     (31,735)     (11,859)
Interest earning deposits with banks                         (405)      2,090       1,685                     (99)      2,565        2,466
Total interest income                                      17,483       9,204      26,687                  31,221      (2,851)      28,370
Interest expense:
Deposits:
 Savings                                                       27        (147)       (120)                     72        (291)        (219)
 Interest checking and money market                           236         318         554                     544        (234)         310
 Certificates of deposit of less than $100,000                (55)        (67)       (122)                   (135)       (321)        (456)
 Certificates of deposit of $100,000 and over                 (88)       (103)       (191)                    (48)       (778)        (826)
   Total interest on deposits                                 120           1         121                     433      (1,624)      (1,191)
Federal funds purchased                                        11            210         221                   10         213          223
Securities sold under agreements to repurchase                 17       2,368       2,385                     104       2,656        2,760
Other borrowings                                                2           8          10                       2           7            9
Total interest expense                                        150       2,587       2,737                     549       1,252        1,801
Net interest income, tax equivalent basis               $  17,333    $  

Array Array Array Array Array




Net interest income in the second quarter of 2022 was $232.4 million, an
increase of $24.4 million over the second quarter of 2021. On a tax equivalent
(T/E) basis, net interest income totaled $235.0 million in the second quarter of
2022, up $24.0 million over the same period last year and up $23.6 million over
the previous quarter. The increase in net interest income
                                       48
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compared to the second quarter of 2021 was mainly due to higher interest income
earned on on investment securities (T/E) of $33.3 million, partly offset by
lower interest earned on loans (T/E) of $2.2 million and securities purchased
under agreements to resell of $6.0 million and higher interest expense on
securities sold under agreements to repurchase of $2.4 million. The increase in
interest earned on investment securities (T/E) was due to higher average
balances and rates, an increase of $3.4 million in inflation income on the
Company's U.S. Treasury inflation-protected securities (TIPS), the receipt of
$6.5 million in non-accrual interest on the sale of a private equity investment
during the current quarter and a $5.0 million adjustment to premium amortization
on mortgage-backed securities. The decrease in total interest earned on loans
(T/E) was the result of a decline in average balances, partly offset by higher
rates earned, while the decrease in securities purchased under agreements to
resell declined due to lower average rates, partly offset by higher average
balances. Interest expense on securities sold under agreements to repurchase
increased due to higher average rates. The Company's net yield on earning assets
(T/E) was 2.79% in the current quarter compared to 2.60% in the second quarter
of 2021.

Total interest income (T/E) increased $26.7 million over the second quarter of
2021. Interest income on loans (T/E) was $143.5 million during the second
quarter of 2022, a decrease of $2.2 million, or 1.5%, from the same quarter last
year. The decrease in interest income from the same quarter last year was
primarily due to a decline of $504.9 million, or 3.2%, in average loan balances,
partly offset by an increase of seven basis points in the average rate earned.
Most of the decrease in interest income occurred in the business, consumer
credit card and consumer loan categories. These decreases were partly offset by
increases in interest income in the business real estate and construction and
land loan categories. Business loan interest income decreased $6.4 million due
to a decline of $826.4 million in average balances. The decline in business loan
average balances was mainly due to a decrease of $1.2 billion in Paycheck
Protection Program (PPP) loans, while interest earned on PPP loans declined
$11.2 million from the same quarter last year. Consumer credit card loan
interest decreased $931 thousand mainly due to a decline of $38.0 million in
average balances, slightly offset by a ten basis point increase in the average
rate earned. Consumer loan interest declined $481 thousand due to a decrease of
22 basis points in the average rate earned, partly offset by a $65.9 million, or
3.3%, increase in average balances. Personal real estate loan interest income
fell $120 thousand due to a four basis point decrease in the average rate
earned, partly offset by higher average balances of $21.2 million. These
decreases to interest income (T/E) were partly offset by an increase of $2.8
million in interest earned on construction and land loans, due to an increase of
53 basis points in the average rate earned and growth of $136.8 million, or
12.6%, in average loan balances. In addition, interest earned on business real
estate loans increased $3.0 million due to a 21 basis point increase in the
average rate earned and higher average balances of $148.6 million, or 4.9%.

Interest income on investment securities (T/E) was $90.4 million during the
second quarter of 2022, which was an increase of $33.3 million over the same
quarter last year. The increase in interest income occurred mainly in interest
earned on mortgage-backed securities, which increased $17.1 million, partly due
to a $5.0 million increase in premium amortization, reflecting slower forward
prepayment speed estimates in the current quarter, compared to a premium
amortization adjustment decrease of $1.9 million in the prior year. In addition,
the average rate earned on mortgage-backed securities increased 88 basis points
and the average balance increased $472.8 million, or 7.1%. Interest on U.S.
government and federal agency obligations grew $3.9 million mainly due to higher
average loan balances of $399.5 million, or 55.5%, and an increase in inflation
income on the Company's TIPS, while an overall decrease of 59 basis points in
the average rate earned partially offset these increases in income. Interest
income related to TIPS, which is tied to the Consumer Price Index, increased
$3.4 million over the same quarter last year. Interest on asset-backed
securities rose $5.4 million due to higher average balances of $1.4 billion, or
52.2%, coupled with an increase of ten basis points in the average rate earned.
Interest earned on other securities increased $6.2 million mainly due to the
receipt of non-accrual interest of $6.5 million, mentioned above. The average
balance of the total investment portfolio (excluding unrealized fair value
adjustments on available for sale debt securities) was $15.4 billion in the
second quarter of 2022, compared to $12.9 billion in the second quarter of 2021.

Interest income on securities purchased under agreements to resell decreased
$6.0 million from the same quarter last year, due to a decrease of 343 basis
points in the average rate earned, partly offset by growth of $766.2 million in
the average balance. Interest income on balances at the Federal Reserve grew
$1.7 million due to an increase of 67 basis points in the average rate earned,
partly offset by a decrease of $1.5 billion in the average balance invested.

Array


Total interest expense increased $2.7 million compared to the second quarter of
2021 due to a increases in interest expense of $121 thousand on interest bearing
deposits and $2.6 million on borrowings. The increase in deposit interest
expense resulted mainly from an increase of $554 thousand in interest expense on
interest checking and money market deposit accounts due to a one basis point
increase in the average rate paid and higher average balances of $1.6 billion.
Partially offsetting the increase in income earned on interest checking and
money market deposits was a lower average rate earned on savings deposits
(partially offset by higher average balances), as well as lower average rates
earned and lower average balances of certificates of deposit.
                                       49
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Interest expense on borrowings was higher due to an increase of 42 basis points
in the average rate paid on customer repurchase agreements. The overall average
rate incurred on all interest bearing liabilities was .12% and .07% in the
second quarters of 2022 and 2021, respectively.

Net interest income (T/E) for the first six months of 2022 was $446.4 million
compared to $419.8 million for the same period in 2021. For the first six months
of 2022, the net interest margin was 2.62% compared to 2.65% for the same period
in 2021.

Total interest income (T/E) for the first six months of 2022 increased $28.4
million over the same period last year mainly due to higher interest income on
investment securities (T/E), partly offset by lower interest earned on loans
(T/E) and securities purchased under agreements to resell. Loan interest income
(T/E) declined $16.6 million, or 5.7%, due to an $805.7 million decrease in
average loan balances and a three basis point decrease in the average rate
earned. Most of the decrease in loan interest occurred in the business loan
category due to lower average balances and rates. In addition, consumer credit
card loan interest declined due to lower average balances, partly offset by
higher rates earned, while consumer and personal real estate loan interest
declined due to lower average rates earned, partly offset by higher average
balances. These decreases were partly offset by higher interest earned on
business real estate and construction and land development loans due to higher
average balances and rates earned. Interest income on investment securities
(T/E) increased $54.6 million due to a 42 basis point increase in the average
rate earned and a $2.6 billion increase in average balances. Interest earned on
U.S. government and federal agency obligations increased $8.6 million, mainly
due to higher TIPS interest income. Interest earned on mortgage-backed
securities increased $28.9 million due to higher average rates earned and growth
in average balances, while interest on asset-backed securities increased $9.2
million due to higher average balances, partly offset by lower average rates
earned. Interest income on securities purchased under agreements to resell
decreased $11.9 million due to lower rates earned, partly offset by higher
average balances, while interest income on balances at the Federal Reserve
increased $2.5 million due to higher average rates earned.

Total interest expense for the first six months of 2022 increased $1.8 million
compared to the same period last year. Interest expense on borrowings increased
$3.0 million, mainly due to higher rates paid on customer repurchase agreements.
This increase was partly offset by a decline of $1.2 million in interest expense
on interest bearing deposits, mainly due to a two basis point decrease in the
average rate paid. The overall cost of total interest bearing liabilities
increased to .09% compared to .08% in the same period last year.

Array

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                                                             Table of Contents
Non-Interest Income

                                        Three Months Ended June 30            Increase (Decrease)                        Six Months Ended June 30        Increase (Decrease)
(Dollars in thousands)                      2022            2021             Amount        % change                          2022           2021        Amount       % change
Bank card transaction fees            $      43,873     $   42,608       $     1,265             3.0  %                $     85,918     $  80,303    $   5,615            7.0  %
Trust fees                                   46,792         46,257               535             1.2                         94,603        90,384        4,219            4.7
Deposit account charges and other
fees                                         25,564         23,988             1,576             6.6                         47,871        46,563        1,308            2.8
Capital market fees                           3,327          3,327                 -               -                          7,452         8,308         (856)         (10.3)
Consumer brokerage services                   5,068          4,503               565            12.5                          9,514         8,584          930           10.8
Loan fees and sales                           3,246          7,446            (4,200)          (56.4)                         7,481        17,630      (10,149)         (57.6)
Other                                        11,557         11,014               543             4.9                         18,357        23,416       (5,059)         (21.6)
Total non-interest income             $     139,427     $  139,143       $       284              .2  %                $    271,196     $ 275,188       (3,992)          (1.5  %)
Non-interest income as a % of total
revenue*                                       37.5  %        40.1  %                                                          38.1  %       39.9  %


Array

Array Array Array


                                             Three Months Ended June 30                                        Six Months Ended June 30
(Dollars in thousands)              2022         2021      $ change      % change                    2022        2021      $ change      % change
Net debit card fees             $   10,533    $ 10,505    $     28              .3  %             $ 20,085    $ 19,872    $    213             1.1  %
Net credit card fees                 3,712       4,105        (393)           (9.6)                  7,434       7,526         (92)           (1.2)
Net merchant fees                    4,934       4,895          39              .8                   9,914       9,509         405             4.3
Net corporate card fees             24,694      23,103       1,591             6.9                  48,485      43,396       5,089            11.7
Total bank card transaction
fees                            $   43,873    $ 42,608    $  1,265             3.0  %             $ 85,918    $ 80,303    $  5,615             7.0  %



For the second quarter of 2022, total non-interest income amounted to $139.4
million compared to $139.1 million in the same quarter last year, which was an
increase of $284 thousand, or .2%. The increase was mainly due to higher bank
card and deposit fees, offset by lower loan fees and sales. Bank card
transaction fees for the current quarter grew $1.3 million, or 3.0%, over the
same period last year, mainly due to growth of $1.6 million in net corporate
card fees, partly offset by lower net credit card fees of $393 thousand. The
growth in net corporate card fees was mainly due to higher interchange income,
partly offset by higher rewards expense, while the decline in net credit card
fees was due to higher rewards expense, partly offset by higher interchange
income. Trust fees for the quarter increased $535 thousand, or 1.2%, over the
same quarter last year, resulting from higher private client fees, which were up
3.1%. Compared to the second quarter of last year, deposit account fees
increased $1.6 million, or 6.6%, mainly due to higher corporate cash management
fees. Consumer brokerage service fees increased $565 thousand, or 12.5%, due to
growth in annuity, advisory, and mutual fund fees, while loan fees and sales
decreased $4.2 million, or 56.4%, due to a decline in mortgage banking revenue.
Other non-interest income increased $543 thousand, or 4.9%, mainly due to $2.3
million higher cash sweep commissions, $450 thousand higher tax credit sales
fees, and income of $2.2 million from a life insurance death benefit. Partly
offsetting these increases was a decrease of $3.7 million in fair value
adjustments on the Company's deferred compensation plan assets, which are held
in a trust, recorded as both an asset and a liability, and affect both other
income and other expense.

Non-interest income for the first six months of 2022 was $271.2 million,
compared to $275.2 million in the first six months of 2021, resulting in a
decrease of $4.0 million, or 1.5%. Bank card fees increased $5.6 million, or
7.0%, mainly due to growth of $5.1 million in net corporate card fees. Trust
fees increased $4.2 million, or 4.7%, mainly due to continued growth in private
client trust fees. Deposit account fees increased $1.3 million, or 2.8%, mainly
due to higher corporate cash management fees and overdraft and return item fees,
partly offset by lower personal account deposit fees. Capital market fees
declined $856 thousand, or 10.3%, while consumer brokerage service fees
increased $930 thousand, or 10.8%, due to higher advisory and annuity fees. Loan
fees and sales decreased $10.1 million, or 57.6%, due to lower mortgage banking
revenue. Other income decreased $5.1 million, or 21.6%, due to a gain of $2.4
million on the sale of a branch location recorded last year coupled with a
write-down of $965 thousand on a branch location recorded in the first quarter
of 2022. In addition, fair value adjustments on the Company's deferred
compensation plan assets decreased $5.6 million from the same period last year.
Partly offsetting these decreases were $1.9 million higher cash sweep
commissions and income of $2.2 million from a life insurance death benefit.


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                                                           Three Months Ended June 30           Six Months Ended June 30
(In thousands)                                                  2022           2021                 2022          2021

Array Array Array Array Array


Fair value adjustments on equity securities, net                    (736)         50                 (1,023)         15

Array

       88                 (4,286)      1,611
Fair value adjustments on private equity investments              15,633      16,666                 23,083      25,031

Total investment securities gains, net                    $        1,029    

Array Array Array




Net gains on investment securities, which were recognized in earnings during the
three months ended June 30, 2022 and 2021, are shown in the table above. Net
securities gains of $1.0 million were reported in the second quarter of 2022,
compared to net gains of $16.8 million in the same period last year. The net
gains in the second quarter of 2022 were primarily comprised of $15.6 million of
net gains in fair value on the Company's private equity investments, partially
offset by losses of $9.6 million and $4.3 million on sales of available for sale
securities and a private equity investment, respectively. The Company received
$6.5 million in nonaccrual interest, recorded in net interest income, upon the
sale of the private investment. The net gains on investment securities for the
same quarter last year were mainly comprised of $16.7 million of net gains in
fair value on the Company's private equity investments.

Net gains on investment securities of $8.2 million were recognized in earnings
for the six months ended June 30, 2022, compared to net gains of $26.7 million
for the same period in 2021. Net gains in the first half of 2022 were mainly
comprised of net gains in fair value of $23.1 million on private equity
investments, due to fair value adjustments, offset by losses of $9.6 million on
sales of available for sale securities, net losses of $4.3 million on sales of
private equity investments, and net losses in fair value of $1.0 million on
equity investments. Net gains in the first half of 2021 were mainly comprised of
a gain of $1.6 million on the sale of a private equity investment and $25.0
million of net gains in fair value on private equity investments. The portion of
private equity activity attributable to minority interests is reported as
non-controlling interest in the consolidated statements of income and resulted
in expense of $3.8 million during the first six months of 2022 and expense of
$5.2 million during the first six months of 2021.

Non-Interest Expense

                                                                          Increase                                                                          Increase
                                       Three Months Ended June 30        (Decrease)                                        Six Months Ended June 30        (Decrease)
(Dollars in thousands)                     2022            2021            Amount         % change                            2022              2021         Amount         % change
Salaries and employee benefits       $      142,243    $ 130,751       $     11,492             8.8  %                $     278,196         $ 259,784    $     18,412             7.1  %
Net occupancy                                12,503       11,527                976             8.5                          24,799            23,548    $      1,251             5.3
Equipment                                     4,734        4,605                129             2.8                           9,302             8,958    $        344             3.8
Supplies and communication                    4,361        4,033                328             8.1                           9,074             8,158    $        916            11.2
Data processing and software                 27,635       24,954              2,681            10.7                          54,651            50,417    $      4,234             8.4
Marketing                                     5,836        5,680                156             2.7                          12,180            10,838    $      1,342            12.4
Other                                        16,193       16,576               (383)           (2.3)                         30,951            28,996    $      1,955             6.7
Total non-interest expense           $      213,505    $ 198,126       $     15,379             7.8  %                $     419,153         $ 390,699    $     28,454             7.3  %



Non-interest expense for the second quarter of 2022 amounted to $213.5 million,
an increase of $15.4 million, or 7.8%, compared to expense of $198.1 million in
the second quarter of last year. The increase in expense over the same period
last year was mainly due to higher salaries and benefits expense, data
processing and software expense and occupancy expense. Salaries expense
increased $10.6 million, or 9.5%, due to growth in full-time salaries expense
and an accrual of $5.4 million for special bonuses to be paid to
non-incentivized full-time and part-time employees in the second half of 2022.
Employee benefits expense totaled $19.9 million, reflecting growth of $862
thousand, or 4.5%, mainly due to higher payroll taxes and 401(k) expense, partly
offset by lower healthcare expense. Full-time equivalent employees totaled 4,579
at June 30, 2022, compared to 4,590 at June 30, 2021. Occupancy expense
increased $976 thousand, or 8.5%, mainly due to increases in rent expense,
outside services expense, depreciation expense, and building repairs and
supplies. Equipment expense increased $129 thousand, or 2.8%, while supplies and
communication expense increased $328 thousand, or 8.1%, due to higher postage
and courier expense and bank card reissuance fees. Data processing and software
expense increased $2.7 million, or 10.7%, due to higher software amortization,
bank card processing fees and increased costs for service providers. Other
non-interest expense
                                       52
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decreased $383 thousand, or 2.3%, mainly due to a decline of $3.7 million in the
deferred compensation adjustment previously mentioned, mostly offset by
increases in travel and entertainment expense of $1.3 million, loan collection
fees of $430 thousand, and legal and professional fees of $339 thousand.

Non-interest expense amounted to $419.2 million for the first six months of
2022, an increase of $28.5 million, or 7.3%, over the first six months of 2021.
Salaries and benefits expense increased $18.4 million, or 7.1%, mainly due to
higher costs for salaries, payroll taxes, 401(k) expense, and the special bonus
accrual mentioned above. Occupancy expense increased $1.3 million, or 5.3%,
mainly due to higher rent expense, outside services expense, and building
repairs and supplies expense, while equipment expense increased $344 thousand,
or 3.8%. Marketing expense increased $1.3 million, or 12.4%, while supplies and
communication expense increased $916 thousand, or 11.2%, mainly due to higher
postage and courier expense and bank card reissuance fees. Data processing and
software expense increased $4.2 million, or 8.4%, due to higher costs for
service providers, software amortization and bank card processing fees. Other
non-interest expense increased $2.0 million, or 6.7%, mainly due to an increase
in travel and entertainment expense of $2.4 million, higher loan collection
fees, professional and legal fees and insurance expense, in addition to lower
deferred origination costs. These increases to expense were partly offset by the
previously mentioned fair value equity adjustments (decrease of $5.6 million) on
the Company's deferred compensation plan assets.





                                       53
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Array

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

                                                                            Three Months Ended                              Six Months Ended June 30
                                                             June 30, 2022     Mar. 31, 2022     June 30, 2021                 2022              2021

Array


Balance at beginning of period                             $      134,710   

Array Array Array Array

  Provision for credit losses on loans                              7,287   

Array Array Array

Array

Array

    Business                                                           19                77            (4,909)                    96            (4,913)
    Real estate-construction and land                                   -                 -                 -                      -                 1
    Real estate-business                                               (1)               (7)              (85)                    (8)              (65)
Commercial net loan charge-offs (recoveries)                           18                70            (4,994)                    88            (4,977)
   Personal Banking:
    Real estate-personal                                              (41)               22               (16)                   (19)               (1)
    Consumer                                                          633               808               378                  1,441             1,141
    Revolving home equity                                             (14)               18                28                      4                51
    Consumer credit card                                            2,937             3,372             5,155                  6,309            14,136
    Overdrafts                                                        425               358               148                    783               301
Personal banking net loan charge-offs                               3,940             4,578             5,693                  8,518            15,628
Total net loan charge-offs                                          3,958             4,648               699                  8,606            10,651
Balance at end of period                                   $      138,039   

Array Array Array Array
Array


Balance at beginning of period                                     25,032            24,204            42,430                 24,204            38,307
Provision for credit losses on unfunded lending
commitments                                                          (125)              828           (18,222)                   703           (14,099)
Balance at end of period                                           24,907            25,032            24,208                 24,907            24,208

Array

                               $      162,946    $      159,742    $      196,603          $     162,946         $ 196,603



                                                                             Three Months Ended                             Six Months Ended June 30
                                                             June 30, 2022   Mar. 31, 2022      June 30, 2021                2022             2021
Annualized net loan charge-offs (recoveries)*:
Commercial:
 Business                                                              -  %          .01  %              (.32  %)                  -  %         (.16  

Array

 Real estate-construction and land                                     -               -                    -                      -               -
 Real estate-business                                                  -               -                 (.01)                     -               -
Commercial net loan charge-offs (recoveries)                           -               -                 (.19)                     -            (.10)
Personal Banking:
 Real estate-personal                                               (.01)              -                    -                      -               -
 Consumer                                                            .12             .16                  .08                    .14             .12
 Revolving home equity                                              (.02)            .03                  .04                      -             .04
 Consumer credit card                                               2.19            2.53                 3.59                   2.36            4.81
 Overdrafts                                                        30.86           28.04                15.89                  29.50           16.67
Personal banking net loan charge-offs                                .28             .33                  .40                    .30             .55
Total annualized net loan charge-offs                                .10  %          .12  %               .02  %                 .11  %          .13  %


Array

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To determine the amount of the allowance for credit losses on loans and the
liability for unfunded lending commitments, the Company has an established
process which assesses the risks and losses expected in its portfolios. This
process provides an allowance based on estimates of allowances for pools of
loans and unfunded lending commitments, as well as a second, smaller component
based on certain individually evaluated loans and unfunded lending commitments.
The Company's policies and processes for determining the allowance for credit
losses on loans and the liability for unfunded lending commitments are discussed
in Note 1 to the consolidated financial statements and in the "Allowance for
Credit Losses" discussion within Critical Accounting Estimates and Related
Policies in Item 7 of the 2021 Annual Report on Form 10-K.

Net loan charge-offs in the second quarter of 2022 amounted to $4.0 million,
compared to $4.6 million in the prior quarter and $699 thousand in the second
quarter of last year. During the second quarter of 2022, the Company recorded
net charge-offs on commercial loans of $18 thousand, compared to net charge-offs
of $70 thousand in the prior quarter and net recoveries of $4.9 million in the
second quarter of 2021. Business loan net charge-offs decreased $58 thousand in
the second quarter of 2022, compared to the prior quarter, but increased $4.9
million compared to the same quarter in the prior year due to two large
recoveries in 2021. Compared to the same period last year, net loan charge-offs
in the second quarter of 2022 increased $3.3 million. This increase was
primarily driven by the increase in net charge-offs on business loans created by
the two non-recurring recoveries, but partially offset by a $2.2 million
decrease in net charge-offs on consumer credit card loans.

For the three months ended June 30, 2022, annualized net charge-offs on average
consumer credit card loans totaled 2.19%, compared to 2.53% in the previous
quarter and 3.59% in the same period last year. Consumer loan annualized net
charge-offs in the current quarter amounted to .12%, compared to .16% in the
prior quarter and .08% in the same period last year. In the second quarter of
2022, total annualized net loan charge-offs were .10%, compared to .12% in the
previous quarter and .02% in the same period last year.

For the six months ended June 30, 2022, net loan charge-offs amounted to $8.6
million, compared to $10.7 million during the same period in the prior year. The
decrease in net loan charge-offs in the six months ended June 30, 2022 was
primarily driven by a $7.8 million decline in net charge-offs on consumer credit
card loans, but partly offset by a $5.0 million increase in net charge-offs on
business loans due to the non-recurring recoveries in 2021. For the six months
ended June 30, 2022, annualized net charge-offs on average consumer credit card
loans totaled 2.36%, compared to 4.81% during the same period last year, while
consumer loan annualized net charge-offs in the six months ended June 30, 2022
amounted to .14%, compared to .12% during the same period last year. During the
first half of 2022, total annualized net loan charge-offs were .11%, compared to
.13% during the same period last year.

The provision for credit losses on loans was $7.3 million in the current
quarter, which was an $18.0 million increase from the $10.7 million benefit
recorded in the prior quarter and an increase of $34.7 million over the benefit
recorded for the three months ended June 30, 2021. The increase in the provision
from the prior quarter was due to higher loan balances and economic
uncertainties associated with the possibility of a future recession as inflation
rises and supply chain issues continue, coupled with the release of allowances
associated with certain pandemic estimates in the prior quarter. The provision
for credit losses on loans for the second quarter of the prior year reflected
lower than projected net charge-offs and an improved forecast at that point in
time. For the six months ended June 30, 2022, the provision for credit losses on
loans was a recovery of $3.4 million, compared to a recovery of $37.8 million
during the same period in the prior year.

For the six months ended June 30, 2022, the allowance for credit losses on loans
decreased $12.0 million, compared to the allowance for credit losses on loans as
of December 31, 2021. The decrease was primarily the net result of lower than
projected net loan charge-offs during the first quarter of 2022 and the improved
economic forecast as pandemic economic concerns lessened compared to December
31, 2021, slightly offset by an emerging uncertainty introduced in 2022 related
to the geopolitical environment, high inflation, and supply constraints on the
economy. The allowance for credit losses on commercial loans decreased by $1.7
million, while the allowance for credit losses related to personal banking
loans, including consumer credit card loans, decreased $13.8 million, mostly
related to decreases in consumer credit card loans experienced in first quarter
of 2022.

While the forecast reflects a continued economic recovery from the recession
driven by the COVID-19 pandemic, the allowance considered the uncertainty of
disruptions caused by higher inflation, the geopolitical environment, and
ongoing supply constraints on the economy and on the consumer and commercial
loan portfolios. At June 30, 2022, the allowance for credit losses on loans
amounted to $138.0 million, compared to $134.7 million at March 31, 2022. This
increase in the allowance for credit losses on loans compared to the prior
quarter is due to the higher loan balances and the economic uncertainties
associated with the possibility of a future recession as inflation rises and
supply chain issues continue. The allowance for credit losses on loans was
$172.4 million at June 30, 2021, reflecting pandemic uncertainties and the
economic forecast at that point in time, and was .88%, .87% and 1.10% of total
loans at June 30, 2022, March 31, 2022 and June 30, 2021, respectively.
                                       55
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In the current quarter, the provision for credit losses on unfunded lending
commitments was a benefit of $125 thousand, reflecting a $953 thousand decrease
over the provision in the prior quarter and a $18.1 million increase compared to
the second quarter of 2021. For the six months ended June 30, 2022, the
provision for credit losses on unfunded lending commitments was $703 thousand,
compared to a benefit of $14.1 million during the same period in the prior year.
At June 30, 2022, the liability for unfunded lending commitments was $24.9
million, compared to $25.0 million at March 31, 2022 and $24.2 million at June
30, 2021. The Company's unfunded lending commitments primarily relate to
construction loans, and the Company's estimate for credit losses in its unfunded
lending commitments utilizes the same model and forecast as its estimate for
credit losses on loans. See Note 2 for further discussion of the model inputs
utilized in the Company's estimate of credit losses.

Array ArrayArray


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


                                       56
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Array


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

(Dollars in thousands)                                              June 30, 2022    December 31, 2021

Non-accrual loans                                                  $       7,917    $          9,157
Foreclosed real estate                                                       296                 115
Total non-performing assets                                        $       8,213    $          9,272
Non-performing assets as a percentage of total loans                         .05  %              .06  %
Non-performing assets as a percentage of total assets                        .02  %              .03  %

Total loans past due 90 days and still accruing interest           $      

Array




Non-accrual loans totaled $7.9 million at June 30, 2022, a decrease of $1.2
million from the balance at December 31, 2021. The decrease occurred mainly in
business loans which decreased $998 thousand. At June 30, 2022, non-accrual
loans were comprised of business (79.8%), personal real estate (18.1%), and
business real estate (2.1%) loans. Foreclosed real estate totaled $296 thousand
at June 30, 2022, an increase of $181 thousand when compared to December 31,
2021. Total loans past due 90 days or more and still accruing interest were
$11.9 million as of June 30, 2022, an increase of $183 thousand from
December 31, 2021. Balances by class for non-accrual loans and loans past due 90
days and still accruing interest are shown in the "Delinquent and non-accrual
loans" section in Note 2 to the consolidated financial statements.

In addition to the non-performing and past due loans mentioned above, the
Company also has identified loans for which management has concerns about the
ability of the borrowers to meet existing repayment terms. They are classified
as substandard under the Company's internal rating system. The loans are
generally secured by either real estate or other borrower assets, reducing the
potential for loss should they become non-performing. Although these loans are
generally identified as potential problem loans, they may never become
non-performing. Such loans totaled $319.2 million at June 30, 2022 compared with
$278.7 million at December 31, 2021, resulting in an increase of $40.5 million,
or 14.5%.

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

Array

       Business                              $       32,338   $          

Array

       Real estate - construction and land           59,229              

Array

       Real estate - business                       227,158             

Array

       Real estate - personal                           436                 

Array

Array Array Array




At June 30, 2022, the Company had $142.4 million of loans whose terms have been
modified or restructured under a troubled debt restructuring. These loans have
been extended to borrowers who are experiencing financial difficulty and who
have been granted a concession, as defined by accounting guidance, and are
further discussed in the "Troubled debt restructurings" section in Note 2 to the
consolidated financial statements. This balance includes certain commercial
loans totaling $126.5 million which are classified as substandard and included
in the table above because of this classification.

Array


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

                                       57
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The Company's portfolio of construction and land loans, as shown in the table
below, amounted to 8.1% of total loans outstanding at June 30, 2022. The largest
component of construction and land loans was commercial construction, which
increased $114.7 million during the six months ended June 30, 2022. At June 30,
2022, multi-family residential construction loans totaled approximately $238.3
million, or 23.0%, of the commercial construction loan portfolio, compared to
$155.9 million, or 16.9%, at December 31, 2021.

                                                                                  % of                                           % of
                                               June 30,                           Total     December 31,                         Total
(Dollars in thousands)                           2022          % of Total         Loans         2021           % of Total        Loans
Commercial construction                     $ 1,037,311                81.9  %      6.6  % $    922,654               82.5  %      6.1  %
Residential construction                        130,388                10.3          .9          96,618                8.6          .7
Commercial land and land development             52,062                 4.1          .3          48,481                4.3          .3
Residential land and land development            46,499                 3.7          .3          50,513                4.6          .3
Total real estate - construction and land
loans                                       $ 1,266,260               100.0  %      8.1  % $  1,118,266              100.0  %      7.4  %



Real Estate - Business Loans

Total business real estate loans were $3.2 billion at June 30, 2022 and
comprised 20.5% of the Company's total loan portfolio. These loans include
properties such as manufacturing and warehouse buildings, small office and
medical buildings, churches, hotels and motels, shopping centers, and other
commercial properties. At June 30, 2022, 37.4% of business real estate loans
were for owner-occupied real estate properties, which have historically resulted
in lower net charge-off rates than non-owner-occupied commercial real estate
loans.

                                                                                   % of                                            % of
                                               June 30,                           Total      December 31,                         Total
(Dollars in thousands)                           2022          % of Total         Loans          2021           % of Total        Loans
Owner-occupied                              $ 1,202,576                37.4  %       7.7  % $  1,188,469               38.9  %       7.8  %
Office                                          503,895                15.7          3.2         380,101               12.4          2.5
Retail                                          333,391                10.4          2.1         339,874               11.1          2.2
Multi-family                                    332,799                10.3          2.1         354,282               11.6          2.3
Hotels                                          232,191                 7.2          1.5         234,673                7.7          1.5
Farm                                            196,527                 6.1          1.3         178,780                5.8          1.2
Senior living                                   147,433                 4.6           .9         174,871                5.7          1.2
Industrial                                      142,074                 4.4           .9          99,800                3.3           .7
Other                                           124,692                 3.9           .8         107,987                3.5           .8
Total real estate - business loans          $ 3,215,578               100.0  %      20.5  % $  3,058,837              100.0  %      20.2  %



Array


The Company had $271.9 million in revolving home equity loans at June 30, 2022
that were generally collateralized by residential real estate. Most of these
loans (92.3%) are written with terms requiring interest-only monthly payments.
These loans are offered in three main product lines: LTV up to 80%, 80% to 90%,
and 90% to 100%. As of June 30, 2022, the outstanding principal of loans with an
original LTV higher than 80% was $29.4 million, or 10.8% of the portfolio,
compared to $30.9 million as of December 31, 2021. Total revolving home equity
loan balances over 30 days past due were $1.3 million at June 30, 2022 and $1.6
million at December 31, 2021, and there were no revolving home equity loans on
non-accrual status at June 30, 2022 or December 31, 2021. The weighted average
FICO score for the total current portfolio balance is 791. At maturity, the
accounts are re-underwritten, and if they qualify under the Company's credit,
collateral and capacity policies, the borrower is given the option to renew the
line of credit or convert the outstanding balance to an amortizing loan.  If
criteria are not met, amortization is required, or the borrower may pay off the
loan. During the remainder of 2022 through 2024, approximately 14% of the
Company's current outstanding balances are expected to mature. Of these
balances, approximately 87% have a FICO score of 700 or higher. The Company does
not expect a significant increase in losses as these loans mature, due to their
high FICO scores, low LTVs, and low historical loss levels.

Array


Within the consumer loan portfolio are several direct and indirect product
lines, which include loans for the purchase of automobiles, motorcycles, marine
and RVs. Auto loans comprised 38.0% of the consumer loan portfolio at June 30,
2022, and outstanding balances for auto loans were $794.9 million and $855.4
million at June 30, 2022 and December 31, 2021,
                                       58
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respectively. The balances over 30 days past due amounted to $7.6 million at
June 30, 2022 and $9.0 million at December 31, 2021, respectively and comprised
1.0% of the outstanding balances of these loans at June 30, 2022 and 1.1% at
December 31, 2021, respectively. For the six months ended June 30, 2022, $153.5
million of new auto loans were originated, compared to $228.5 million during the
first six months of 2021.  At June 30, 2022, the automobile loan portfolio had a
weighted average FICO score of 756, and net charge-offs on auto loans were .2%
of average auto loans.

The Company's consumer loan portfolio also includes fixed rate home equity
loans, typically for home repair or remodeling, and these loans comprised 11% of
the consumer loan portfolio at June 30, 2022. Losses on these loans have
historically been low, and the Company saw net recoveries of $35 thousand for
the first six months of 2022. Private banking loans comprised 34% of the
consumer loan portfolio at June 30, 2022. The Company's private banking loans
are generally well-collateralized, and at June 30, 2022 were secured primarily
by assets held by the Company's trust department. The remaining portion of the
Company's consumer loan portfolio is comprised of health services financing,
motorcycles, marine and RV loans. Net charge-offs on private banking, health
services financing, motorcycle and marine and RV loans totaled $779 thousand in
the first six months of 2022 and were .2% of the average balances of these loans
at June 30, 2022.

Consumer Credit Card Loans

The Company offers low promotional rates on selected consumer credit card
products. Out of a portfolio at June 30, 2022 of $558.1 million in consumer
credit card loans outstanding, approximately $90.4 million, or 16.2%, carried a
low promotional rate. Within the next six months, $32.1 million of these loans
are scheduled to convert to the ongoing higher contractual rate. To mitigate
some of the risk involved with this credit card product, the Company performs
credit checks and detailed analysis of the customer borrowing profile before
approving the loan application. Management believes that the risks in the
consumer loan portfolio are reasonable and the anticipated loss ratios are
within acceptable parameters.

Array


The Company's energy lending portfolio is comprised of lending to the petroleum
and natural gas sectors and totaled $289.1 million, or 1.8% of total loans at
June 30, 2022, an increase of $28.5 million from year end 2021, as shown in the
table below.

                                                                                                 Unfunded
                                                                      December 31,            commitments at
(In thousands)                                       June 30, 2022        2021                June 30, 2022
Extraction                                         $      213,398    $    184,840           $       192,997
Mid-stream shipping and storage                            38,732          36,850                    70,283
Downstream distribution and refining                       25,953          24,915                    18,037
Support activities                                         11,037          14,039                     7,055
Total energy lending portfolio                     $      289,120    $    260,644           $       288,372



Array


The Company participates in credits of large, publicly traded companies which
are defined by regulation as shared national credits, or SNCs. Regulations
define SNCs as loans exceeding $100 million that are shared by three or more
financial institutions. The Company typically participates in these loans when
business operations are maintained in the local communities or regional markets
and opportunities to provide other banking services are present. The balance of
SNC loans totaled $1.2 billion at June 30, 2022 and December 31, 2021.
Additional unfunded commitments at June 30, 2022 totaled $1.8 billion.

Array


Income tax expense was $32.0 million in the second quarter of 2022, compared to
$31.9 million in the first quarter of 2022 and $45.2 million in the second
quarter of 2021. The Company's effective tax rate, including the effect of
non-controlling interest, was 21.7% in the second quarter of 2022, compared to
21.3% in the first quarter of 2022 and 21.8% in the second quarter of 2021. For
the six months ended June 30, 2022, income tax expense was $63.9 million,
compared to $77.3 million for the same period during the previous year,
resulting in effective tax rates of 21.5% and 20.9%, respectively.

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Financial Condition

Balance Sheet

Total assets of the Company were $33.4 billion at June 30, 2022 and $36.7
billion at December 31, 2021. Earning assets (excluding the allowance for credit
losses on loans and fair value adjustments on debt securities) amounted to $32.9
billion at June 30, 2022 and $35.5 billion at December 31, 2021, and consisted
of 48% in loans and 46% in investment securities at June 30, 2022.

At June 30, 2022, total loans increased $510.3 million, or 3.4%, compared to
balances at December 31, 2021. The increase was mainly due to growth in business
real estate, construction and business loans of $156.7 million, $148.0 million
and $138.1 million, respectively. The growth in business loans was mainly the
result of increased commercial and industrial and commercial card lending,
partly offset by declines in tax free and lease loans. Personal real estate
loans increased $31.4 million. Consumer loans, which includes automobile, marine
and RV, fixed rate home equity and other consumer loans, increased $57.4
million, as declines in auto loans were offset by growth in other consumer
loans. These increases were partly offset by a decline in consumer credit card
loans of $17.3 million.

Available for sale debt securities, excluding fair value adjustments, increased
$364.2 million at June 30, 2022 compared to December 31, 2021. Purchases of
securities during this period totaled $1.9 billion, offset by sales, maturities
and pay downs of $1.5 billion. The largest increases in outstanding balances
occurred in asset-backed securities, non-agency mortgage-backed securities, and
U.S. government and federal agency obligations, which increased $413.4 million,
$97.9 million, and $90.1 million, respectively. These increases were partially
offset by a decrease in agency mortgage-backed securities of $233.8 million at
June 30, 2022 compared to December 31, 2021. At June 30, 2022, the duration of
the investment portfolio was 3.8 years, and maturities and pay downs of
approximately $2.2 billion are expected to occur during the next 12 months.

Total deposits at June 30, 2022 amounted to $28.2 billion, a decrease of $1.6
billion compared to December 31, 2021. The decline in deposits largely resulted
from a decrease in demand deposits, mainly in business demand deposits (decrease
of $1.0 billion). Additionally, certificates of deposit decreased $437.0
million, interest checking deposits decreased $412.2 million, and money market
deposits decreased $200.0 million, at June 30, 2022 compared to balances at
December 31, 2021. The Company's borrowings totaled $2.2 billion at June 30,
2022, a decrease of $795.2 million from balances at December 31, 2021, mainly
due to a decline in customer repurchase agreements.

Array

Array

Array ArrayArray


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

Array

 Available for sale debt securities                  $  13,700,308          

Array Array

 Federal funds sold                                         26,000                        5,945                       2,800
 Securities purchased under agreements to
resell                                                   1,450,000                    1,300,000                   1,625,000
 Balances at the Federal Reserve Bank                      684,994                    2,161,644                   3,971,217
 Total                                               $  15,861,302                $  16,759,095          $       20,049,044



Federal funds sold, which are funds lent to the Company's correspondent bank
customers with overnight maturities, totaled $26.0 million as of June 30, 2022.
Resale agreements, maturing through 2025, totaled $1.5 billion at June 30, 2022.
Under these agreements, the Company lends funds to upstream financial
institutions and holds marketable securities, safe-kept by a third-party
custodian, as collateral. This collateral totaled $1.5 billion in fair value at
June 30, 2022. Interest earning balances at the Federal Reserve Bank, which have
overnight maturities and are used for general liquidity purposes, totaled $685.0
million at June 30, 2022. The fair value of the available for sale debt
portfolio was $13.7 billion at June 30, 2022 and included an unrealized net loss
of $1.1 billion.
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Approximately $2.2 billion of the available for sale debt portfolio is expected
to mature or pay down during the next 12 months, and these funds offer
substantial resources to meet new loan demand or help offset potential
reductions in the Company's deposit funding base. The Company pledges portions
of its investment securities portfolio to secure public fund deposits,
securities sold under agreements to repurchase, trust funds, letters of credit
issued by the FHLB, and borrowing capacity at the Federal Reserve Bank. Total
investment securities pledged for these purposes were as follows:

(In thousands)                                      June 30, 2022       June 30, 2021     December 31, 2021
Investment securities pledged for the purpose of
securing:
 Federal Reserve Bank borrowings                  $       14,854       $      25,179    $           17,465
 FHLB borrowings and letters of credit                     2,405               4,296                 3,218

Array

             3,475,589
 Other deposits and swaps                              2,767,433           2,982,225             2,897,576
 Total pledged securities                              5,291,678           5,585,014             6,393,848
 Unpledged and available for pledging                  7,390,389           6,369,604             6,913,721
 Ineligible for pledging                               1,018,241           1,336,888             1,142,458
 Total available for sale debt securities, at
fair value                                        $   13,700,308       $  

Array Array

Array


Liquidity is also available from the Company's large base of core customer
deposits, defined as non-interest bearing, interest checking, savings, and money
market deposit accounts. At June 30, 2022, such deposits totaled $27.2 billion
and represented 96.4% of total deposits. These core deposits are normally less
volatile, as they are often with customer relationships tied to other products
offered by the Company, promoting long lasting relationships and stable funding
sources. Certificates of deposit of $100,000 and over totaled $601.5 million at
June 30, 2022. These accounts are normally considered more volatile with higher
cost and comprised 2.1% of total deposits at June 30, 2022.

     (In thousands)               June 30, 2022      June 30, 2021   December 31, 2021
     Core deposit base:
      Non-interest bearing       $  11,102,585      $  11,085,286   $       11,772,374
      Interest checking              2,815,600          2,192,932            3,227,822
      Savings and money market      13,247,464         12,461,764           13,370,263
      Total                      $  27,165,649      $  25,739,982   $       28,370,459


Array


(In thousands)                                     June 30, 2022        June 30, 2021     December 31, 2021
Borrowings:
 Federal funds purchased                         $        7,750       $       12,335    $           43,385
 Securities sold under agreements to repurchase       2,226,546            2,305,893             2,979,582

 Other debt                                               6,025                2,194                12,560
 Total                                           $    2,240,321       $    2,320,422    $        3,035,527



Federal funds purchased are unsecured overnight borrowings obtained mainly from
upstream correspondent banks with which the Company maintains approved lines of
credit. Repurchase agreements are borrowings by the Company from its customers
in the form of securities sold under agreements to repurchase. These repurchase
agreements, which generally mature overnight, are comprised of non-insured
customer funds totaling $2.2 billion at June 30, 2022 and are collateralized by
securities in the Company's investment portfolio. At June 30, 2022, the value of
the collateral pledged for the benefit of customers was $2.3 billion. The
Company also borrows on a secured basis through advances from the FHLB. The
advances are generally short-term, fixed interest rate borrowings. There were no
advances outstanding from the FHLB at June 30, 2022.
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Array

The Company pledges certain assets, including loans and investment securities,
to both the Federal Reserve Bank and the FHLB as security to establish lines of
credit and borrow from these entities. Based on the amount and type of
collateral pledged, the FHLB establishes a collateral value from which the
Company may draw advances against the collateral. Also, this collateral is used
to enable the FHLB to issue letters of credit in favor of public fund depositors
of the Company. The Federal Reserve Bank also establishes a collateral value of
assets pledged and permits borrowings from the discount window. The following
table reflects the collateral value of assets pledged, borrowings, and letters
of credit outstanding, in addition to the estimated future funding capacity
available to the Company at June 30, 2022.

                                                                    June 30, 2022
(In thousands)                                        FHLB         Federal 

Array Array Array Array


Letters of credit issued                             (162,645)                  -        (162,645)
Available for future advances                    $  1,764,399    $        

Array Array




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

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

             Rating outlook                              Stable

             Commerce Bank
             Issuer rating                                    A          A2
             Baseline credit assessment                                  a1
             Short-term rating                              A-1         P-1
             Rating outlook                              Stable      Stable



The cash flows from the operating, investing and financing activities of the
Company resulted in a net decrease in cash, cash equivalents and restricted cash
of $3.2 billion during the first six months of 2022, as reported in the
consolidated statements of cash flows in this report. Operating activities,
consisting mainly of net income adjusted for certain non-cash items, provided
cash flow of $286.2 million and has historically been a stable source of funds.
Investing activities, which occur mainly in the loan and investment securities
portfolios, used cash of $799.4 million. Activity in the investment securities
portfolio used cash of $428.4 million from purchases (net of sales, maturities
and pay downs), securities purchased under agreements to resell used cash of
$200.0 million, and an increase in the loan portfolio used cash of $518.9
million. These cash outflows were partially offset by repayments related to
securities purchased under agreements to resell, which provided cash of $375.0
million. Financing activities used cash of $2.7 billion, largely resulting from
a decrease in federal funds purchased and securities sold under agreements to
repurchase of $788.7 million, paired with a decrease in deposits of $1.7
billion.

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Array

Array


The Company met all capital adequacy requirements and had regulatory capital
ratios in excess of the levels established for well-capitalized institutions at
June 30, 2022 and December 31, 2021, as shown in the following table.

                                                                                                              Minimum Ratios
                                                                                 Minimum Ratios under              for
                                                                                   Capital Adequacy          Well-Capitalized
(Dollars in thousands)                       June 30, 2022   December 31, 2021        Guidelines                 Banks *
Risk-adjusted assets                        $ 23,597,076    $      22,483,748
Tier I common risk-based capital               3,290,703            3,225,044
Tier I risk-based capital                      3,290,703            3,225,044
Total risk-based capital                       3,454,090            3,399,880
Tier I common risk-based capital ratio             13.95  %             14.34  %               7.00  %                      6.50  %
Tier I risk-based capital ratio                    13.95                14.34                  8.50                         8.00
Total risk-based capital ratio                     14.64                15.12                 10.50                        10.00
Tier I leverage ratio                               9.45                 9.13                  4.00                         5.00

Array


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

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

Array ArrayArray Array Array ArrayArray


The Company's common stock dividend policy reflects its earnings outlook,
desired payout ratios, the need to maintain adequate capital and liquidity
levels, and alternative investment options. The Company paid a $.265 per share
cash dividend on its common stock in the second quarter of 2022, which was a
6.0% increase compared to its 2021 quarterly dividend.

Array


The Company's material cash requirements include commitments for contractual
obligations (both short-term and long-term), commitments to extend credit, and
off-balance sheet arrangements. The Company's material cash requirements for the
next 12 months are primarily to fund loan growth. Additionally, the Company will
utilize cash to fund deposit maturities and withdrawals that may occur in the
next 12 months. Other contractual obligations, purchase commitments, lease
obligations, and unfunded commitments may require cash payments by the Company,
and these are further discussed in the Company's 2021 Annual Report on Form
10-K. There have been no changes in the Company's material cash requirements
since December 31, 2021. Further discussion of the Company's longer-term
material cash obligations is below.

In the normal course of business, various commitments and contingent liabilities
arise which are not required to be recorded on the balance sheet. The most
significant of these are loan commitments, which at June 30, 2022 totaled $13.1
billion (including $5.0 billion in unused, approved credit card lines). In
addition, the Company enters into standby and commercial letters of credit.
These contracts totaled $504.0 million and $1.2 million, respectively, at
June 30, 2022. As many commitments expire unused or only partially used, these
totals do not necessarily reflect future cash requirements. The carrying value
of the guarantee obligations associated with the standby letters of credit,
which has been recorded as a liability on the consolidated balance sheet,
amounted to $4.0 million at June 30, 2022. The allowance for these commitments
is recorded in the Company's
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Array

Array ArrayArray ArrayArray


During the third quarter of 2020, the Company signed a $106.7 million agreement
with U.S. Capital Development to develop a 280,000 square foot commercial office
building in a two building complex in Clayton, Missouri, which is expected to be
completed near the end of 2022. As of June 30, 2022, the Company has made
payments totaling $71.8 million. While the Company intends to occupy a portion
of the office building for executive offices, a 15 year lease agreement has been
signed by an anchor tenant to lease approximately 50% of the office building.

The Company regularly purchases various state tax credits arising from third
party property redevelopment. These credits are either resold to third parties
at a profit or retained for use by the Company. During the first six months of
2022, purchases and sales of tax credits amounted to $62.3 million and $78.9
million, respectively. Fees from sales of tax credits were $2.7 million for the
six months ended June 30, 2022, compared to $2.6 million in the same period last
year. At June 30, 2022, the Company expected to fund outstanding purchase
commitments of $122.6 million during the remainder of 2022.

The Company's sound equity base, along with its long-term low debt level, common
and preferred stock availability, and excellent debt ratings, provide several
alternatives for future financing. Future acquisitions may utilize partial
funding through one or more of these options. Through the various sources of
liquidity described above, the Company maintains a liquidity position that it
believes will adequately satisfy its financial obligations. The Company is not
aware of any trends, events, or commitments that are reasonably likely to
increase or decrease its liquidity in a material way.

Array


The table below is a summary of segment pre-tax income results for the first six
months of 2022 and 2021.

                                                                               Segment        Other/       Consolidated
(Dollars in thousands)               Consumer     Commercial      Wealth       Totals      Elimination        Totals
Six Months Ended June 30, 2022
Net interest income                $ 163,529     $ 219,176     $  38,094    $ 420,799     $   20,372     $  441,171
Provision for credit losses           (8,422)         (145)           (3)      (8,570)        11,266          2,696
Non-interest income                   59,278       110,466       107,189      276,933         (5,737)       271,196
Investment securities gains, net           -             -             -            -          8,192          8,192
Non-interest expense                (148,400)     (180,852)      (72,773)    (402,025)       (17,128)      (419,153)
Income before income taxes         $  65,985     $ 148,645     $  72,507    $ 287,137     $   16,965     $  304,102
Six Months Ended June 30, 2021
Net interest income                $ 158,746     $ 224,750     $  35,111    $ 418,607     $   (4,877)    $  413,730
Provision for credit losses          (15,565)        4,925             1      (10,639)        62,526         51,887
Non-interest income                   75,153       102,987       103,490      281,630         (6,442)       275,188
Investment securities gains, net           -             -             -            -         26,657         26,657
Non-interest expense                (144,284)     (161,900)      (67,092)    (373,276)       (17,423)      (390,699)
Income before income taxes         $  74,050     $ 170,762     $  71,510    $ 316,322     $   60,441     $  376,763
Increase (decrease) in income
before income taxes:
  Amount                           $  (8,065)    $ (22,117)    $     997    $ (29,185)    $  (43,476)    $  (72,661)
  Percent                              (10.9  %)     (13.0  %)       1.4  %      (9.2  %)      (71.9  %)      (19.3  %)


Consumer

For the six months ended June 30, 2022, income before income taxes for the
Consumer segment decreased $8.1 million, or 10.9%, compared to the first six
months of 2021. The decrease in income before income taxes was mainly due to a
decline in non-interest income of $15.9 million, or 21.1%, and higher
non-interest expense of $4.1 million, or 2.9%. These decreases to income were
partly offset by growth in net interest income of $4.8 million, or 3.0%, and a
decrease in the provision for credit losses of $7.1 million, or 45.9%. Net
interest income increased due to a $7.8 million increase in net allocated
funding credits assigned to the Consumer segment's loan and deposit portfolios
and a $1.8 million decrease in deposit interest expense. These increases to
income were partly offset by a $4.8 million decline in loan interest income.
Non-interest income decreased mainly due to a decline of $14.9 million in
mortgage banking revenue. Non-interest expense increased over the same period in
the previous year mainly due to higher salaries expense, marketing expense and
allocated service and support costs for information
                                       64
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technology and bank card fraud operations, partly offset by lower allocated
service costs for branch employees. The provision for credit losses totaled $8.4
million, a $7.1 million decrease from the first six months of 2021, mainly due
to lower credit card loan net charge-offs.

Array


For the six months ended June 30, 2022, income before income taxes for the
Commercial segment decreased $22.1 million, or 13.0%, compared to the same
period in the previous year. This decrease was mainly due to an increase in
non-interest expense and a decline in net interest income, partly offset by an
increase in non-interest income. Net interest income decreased $5.6 million, or
2.5%, due to lower loan interest income of $12.8 million and higher interest
expense on customer repurchase agreements and deposits of $2.8 million and $1.1
million, respectively. These decreases to income were partly offset by a $10.9
million increase in net allocated funding credits. Non-interest income increased
$7.5 million, or 7.3%, over the previous year mainly due to growth in net bank
card fees (mainly corporate card fees) and deposit account fees (mainly
corporate cash management fees), partly offset by a decline in capital market
fees. Non-interest expense increased $19.0 million, or 11.7%, mainly due to
higher salaries and benefits expense, data processing and software expense,
allocated service and support costs (mainly information technology, branch
employee expense and commercial banking and payments expense), and lower
deferred origination costs. The provision for credit losses increased $5.1
million over the same period last year, mainly due to lower recoveries on
business loans.

Array


Wealth segment pre-tax profitability for the six months ended June 30, 2022
increased $997 thousand, or 1.4%, over the same period in the previous year. Net
interest income increased $3.0 million, or 8.5%, mainly due to a $3.1 million
increase in loan interest income. Non-interest income increased $3.7 million, or
3.6%, over the prior year largely due to higher trust fees (mainly private
client trust fees), cash sweep commissions and brokerage fees, partly offset by
lower mortgage banking revenue. Non-interest expense increased $5.7 million, or
8.5%, mainly due to higher salaries and benefits expense, travel and
entertainment expense, marketing expense and allocated costs for management
fees. The provision for credit losses increased $4 thousand over the same period
last year, due to higher overdraft loan net charge-offs.

The Other/Elimination category in the preceding table includes the activity of
various support and overhead operating units of the Company, in addition to the
investment securities portfolio and other items not allocated to the segments.
In accordance with the Company's transfer pricing procedures, the difference
between the total provision for credit losses and total net
charge-offs/recoveries is not allocated to a business segment and is included in
this category. The pre-tax profitability of this category was lower than in the
same period last year by $43.5 million. Unallocated securities gains were $8.2
million in the first six months of 2022 compared to gains of $26.7 million in
2021. Also, the unallocated provision for credit losses increased $51.3 million,
primarily driven by increases in the liability for unfunded lending commitments
and in the provision for credit losses on loans, which are both not allocated to
the segments for management reporting purposes. Net charge-offs are allocated to
the segments when incurred for management reporting purposes. The provision for
credit losses on loans was $12.0 million lower than net charge-offs, as the
provision was a benefit in 2022, while the provision was $48.4 million lower
than net charge-offs, as the provision was also a benefit in 2021. For the six
months ended June 30, 2022, the Company's provision on unfunded lending
commitments was expense of $699 thousand. These decreases to pre-tax
profitability were partly offset by higher net interest income of $25.2 million,
non-interest income of $705 thousand, and lower non-interest expense of $295
thousand.

Array


Reference Rate Reform The Financial Accounting Standards Board ("FASB") issued
ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of
Reference Rate Reform on Financial Reporting", in March 2020, and has been
followed by additional clarifying guidance related to derivatives that are
modified as a result of reference rate reform. The guidance provides optional
expedients and exceptions for applying GAAP to contracts, hedging relationships,
and other transactions affected by reference rate reform if they reference LIBOR
or another reference rate expected to be discontinued because of reference rate
reform. Further, the guidance applies to derivative instruments that use an
interest rate for margining, discounting, or contract price alignment that is
modified as a result of reference rate reform. The expedients and exceptions
provided by the new guidance do not apply to contract modifications made and
hedging relationships entered into or evaluated for effectiveness after December
31, 2022, except for certain hedging relationships existing as of December 31,
2022. In April 2022, the FASB proposed extending the sunset date under Topic 848
to December 31, 2024. The change is to align the temporary accounting relief
guidance with the expected cessation date of LIBOR, which was postponed by
administrators earlier this year to June 2023, a year after the current sunset
date of ASU 2020-04.

In order to assess the impact of transition and ensure a successful transition
process, the Company established a LIBOR Transition Program led by the LIBOR
Transition Steering Committee (the Committee), which is an internal,
cross-functional
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team with representatives from all relevant business lines, support functions
and legal counsel. A LIBOR impact and risk assessment has been performed, and
the Committee has developed and prioritized action items. All financial
contracts that reference LIBOR have been identified and LIBOR fallback language
has been included in key loan provisions of new and renewed loans in preparation
from transition from LIBOR. The Company ceased originating new loans with LIBOR
as a reference rate at the end of 2021 and is actively working with customers to
modify existing loans that reference LIBOR to a new reference rate. The Company
plans to finish transitioning the impacted loans by late spring of 2023.

Credit Losses The FASB issued ASU 2022-02, "Financial Instruments-Credit Losses
(Topic 326): Troubled Debt Restructurings and Vintage Disclosures", in March
2022. This ASU eliminates the troubled debt restructuring recognition and
measurement guidance and, instead, requires that an entity evaluate (consistent
with the accounting for other loan modifications) whether the modification
represents a new loan or a continuation of an existing loan. The amendments also
enhance existing disclosure requirements and introduce new requirements related
to certain modifications of receivables made to borrowers experiencing financial
difficulty. The amendments require that an entity disclose current period gross
write-offs by year of origination for financing receivables and net investment
in leases within the scope of Subtopic 326-20. The guidance is effective January
1, 2023. The Company is evaluating the guidance to determine the impact on the
Company's consolidated financial statements.

Fair Value Measurement The FASB issued ASU 2022-03 "Fair Value Measurement of
Equity Securities Subject to
Contractual Sale Restrictions", in June 2022. ASU 2022-3 clarifies that a
contractual restriction on the sale of an equity security is not considered part
of the unit of account of the equity security and, therefore, is not considered
in measuring fair value. The guidance is effective January 1, 2024. The Company
is evaluating the guidance to determine the impact on the Company's consolidated
financial statements.
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AVERAGE BALANCE SHEETS - AVERAGE RATES AND YIELDS
Three Months Ended June 30, 2022 and 2021
                                                                                 Second Quarter 2022                                                Second Quarter 2021
                                                                                     Interest            Avg. Rates                                      Interest           Avg. Rates
(Dollars in thousands)                                        Average Balance     Income/Expense         Earned/Paid              Average Balance     Income/Expense        Earned/Paid
ASSETS:
Loans:
Business(A)                                                 $      5,385,181    $         42,402                  3.16  %       $      6,211,610    $         48,844                3.15  %
Real estate - construction and land                                1,225,267              12,489                  4.09                 1,088,433               9,670                3.56
Real estate - business                                             3,163,508              29,173                  3.70                 3,014,955              26,223                3.49
Real estate - personal                                             2,825,578              23,043                  3.27                 2,804,388              23,163                3.31
Consumer                                                           2,070,560              18,697                  3.62                 2,004,625              19,178                3.84
Revolving home equity                                                272,280               2,507                  3.69                   287,031               2,455                3.43
Consumer credit card                                                 537,681              15,170                 11.32                   575,725              16,101               11.22
Overdrafts                                                             5,524                   -                     -                     3,735                      -                   -
Total loans                                                       15,485,579             143,481                  3.72                15,990,502             145,634                3.65
Loans held for sale                                                    7,933                 161                  8.14                    23,389                 245                4.20
Investment securities:
U.S. government and federal agency obligations                     1,119,305              13,770                  4.93                   719,849               9,912                5.52
Government-sponsored enterprise obligations                           55,762                 332                  2.39                    50,793                 295                2.33
State and municipal obligations(A)                                 2,126,380              12,189                  2.30                 1,966,673              11,834                2.41
Mortgage-backed securities                                         7,158,252              35,602                  1.99                 6,685,407              18,464                1.11
Asset-backed securities                                            4,038,113              13,612                  1.35                 2,653,928               8,262                1.25
Other debt securities                                                643,463               3,157                  1.97                   605,772               3,118                2.06
Trading debt securities(A)                                            43,904                 269                  2.46                    34,955                 104                1.19
Equity securities(A)                                                   9,094                 610                 26.90                     4,914                 528               43.10
Other securities(A)                                                  195,090              10,886                 22.38                   156,984               4,657               11.90
Total investment securities                                      
15,389,363              90,427                  2.36                12,879,275              57,174                1.78
Federal funds sold                                                     4,269                  19                  1.79                     1,338                   2                 .60
Securities purchased under agreements to resell                    1,703,569               4,385                  1.03                   937,372              10,416                4.46
Interest earning deposits with banks                               1,248,942               2,428                   .78                 2,724,782                 743                 .11
Total interest earning assets                                     33,839,655             240,901                  2.86                32,556,658             214,214                2.64
Allowance for credit losses on loans                                (134,670)                                                           

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Unrealized gain (loss) on debt securities                           (851,110)                                                            197,124
Cash and due from banks                                              315,352                                                             329,366
Premises and equipment, net                                          401,663                                                             403,810
Other assets                                                         521,478                                                             525,813
Total assets                                                $     34,092,368                                                    $     33,811,970
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings                                                     $      1,609,694                 157                   .04          $      1,474,391                 277                 .08
Interest checking and money market                                14,847,306               2,121                   .06                13,283,481               1,567                 .05
Certificates of deposit of less than $100,000                        411,655                 205                   .20                   491,446                 327                 .27
Certificates of deposit of $100,000 and over                         648,728                 470                   .29                 1,354,685                 661                 .20
Total interest bearing deposits                                   17,517,383               2,953                   .07                16,604,003               2,832                 .07

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Federal funds purchased                                     $        113,128    $            224                   .79                    23,292    $              3                 .05
Securities sold under agreements to repurchase                     2,258,184               2,702                   .48                 2,142,404                 317                 .06
Other borrowings(B)                                                    2,029                  12                  2.37                       978                   2                 .82
Total borrowings                                                   2,373,341               2,938                   .50                 2,166,674                 322                 .06
Total interest bearing liabilities                                19,890,724               5,891                   .12  %             18,770,677               3,154                 .07  %
Non-interest bearing deposits                                     11,209,680                                                          11,109,198
Other liabilities                                                    139,986                                                             527,401
Equity                                                             2,851,978                                                           3,404,694
Total liabilities and equity                                $     34,092,368                                                    $     33,811,970
Net interest margin (T/E)                                                       $        235,010                                                    $        211,060
Net yield on interest earning assets                                                                              2.79  %                                                           2.60  %


(A) Stated on a tax equivalent basis using a federal income tax rate of 21%.
(B) Interest expense capitalized on construction projects is not deducted from
the interest expense shown above.
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AVERAGE BALANCE SHEETS - AVERAGE RATES AND YIELDS
Six Months Ended June 30, 2022 and 2021
                                                                          Six Months 2022                                                     Six Months 2021
                                                                            Interest            Avg. Rates                                      Interest            Avg. Rates
(Dollars in thousands)                               Average Balance     Income/Expense         Earned/Paid              Average Balance     Income/Expense         Earned/Paid
ASSETS:
Loans:
Business(A)                                        $      5,354,845    $         80,818                  3.04  %       $      6,371,378    $         98,542                  3.12  %
Real estate - construction and land                       1,180,334              23,015                  3.93                 1,090,191              19,212                  3.55
Real estate - business                                    3,129,477              54,974                  3.54                 3,018,945              52,467                  3.50
Real estate - personal                                    2,817,325              45,739                  3.27                 2,815,190              46,861                  3.36
Consumer                                                  2,055,464              36,781                  3.61                 1,976,132              38,482                  3.93
Revolving home equity                                       273,065               4,854                  3.58                   293,167               4,950                  3.40
Consumer credit card                                        539,254              30,300                 11.33                   592,145              32,567                 11.09
Overdrafts                                                    5,352                   -                     -                     3,641                   -                     -
Total loans                                              15,355,116             276,481                  3.63                16,160,789             293,081                  3.66
Loans held for sale                                           8,654                 311                  7.25                    29,567                 549                  3.74
Investment securities:
U.S. government and federal agency obligations            1,111,570              23,087                  4.19                   722,593              14,454                  4.03
Government-sponsored enterprise obligations                  53,777                 630                  2.36                    50,797                 590                  2.34
State and municipal obligations(A)                        2,102,125              23,897                  2.29                 1,962,677              23,717                  2.44
Mortgage-backed securities                                7,236,993              71,372                  1.99                 6,841,099              42,463                  1.25
Asset-backed securities                                   3,985,877              24,596                  1.24                 2,371,280              15,389                  1.31
Other debt securities                                       639,875               6,291                  1.98                   588,042               6,138                  2.10
Trading debt securities(A)                                   42,304                 454                  2.16                    33,645                 190                  1.14
Equity securities(A)                                          9,295               1,219                 26.45                     4,619               1,056                 46.10
Other securities(A)                                         193,708              13,688                 14.25                   155,515               6,654                  8.63
Total investment securities                              15,375,524             165,234                  2.17                12,730,267             110,651                  1.75
Federal funds sold                                            2,670                  20                  1.51                       676                   2                   .60
Securities purchased under agreements to resell           1,718,644               9,685                  1.14                   893,927              21,544                  4.86
Interest earning deposits with banks                      1,924,731               3,579                   .37                 2,105,994               1,113                   .11
Total interest earning assets                            34,385,339             455,310                  2.67                31,921,220             426,940                  2.70
Allowance for credit losses on loans                       (142,136)                                                           (210,602)
Unrealized gain (loss) on debt securities                  (514,573)                                                            240,079
Cash and due from banks                                     327,728                                                             341,898
Premises and equipment, net                                 404,317                                                             402,527
Other assets                                                539,219                                                             538,986
Total assets                                       $     34,999,894                                                    $     33,234,108
LIABILITIES AND EQUITY:
Interest bearing deposits:
Savings                                            $      1,586,522                 335                   .04          $      1,404,174                 554                   .08
Interest checking and money market                       14,898,234               3,703                   .05                13,127,919               3,393                   .05
Certificates of deposit of less than $100,000               420,703                 344                   .16                   504,017                 800                   .32
Certificates of deposit of $100,000 and over                754,890                 897                   .24                 1,292,724               1,723                   .27
Total interest bearing deposits                          17,660,349               5,279                   .06                16,328,834               6,470                   .08
Borrowings:
Federal funds purchased                            $         68,490    $            231                   .68          $         30,125                   8                   .05
Securities sold under agreements to repurchase            2,484,071               3,384                   .27                 2,135,758                 624                   .06
Other borrowings(B)                                           1,402                  13                  1.87                       905                   4                   .89
Total borrowings                                          2,553,963               3,628                   .29                 2,166,788                 636                   .06
Total interest bearing liabilities                       20,214,312               8,907                   .09  %             18,495,622               7,106                   .08  %
Non-interest bearing deposits                            11,376,265                                                          10,775,770
Other liabilities                                           321,805                                                             567,584
Equity                                                    3,087,512                                                           3,395,132
Total liabilities and equity                       $     34,999,894                                                    $     33,234,108
Net interest margin (T/E)                                              $        446,403                                                    $        

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Net yield on interest earning assets                                                                     2.62  %                                                             2.65  %


(A) Stated on a tax equivalent basis using a federal income tax rate of 21%.
(B) Interest expense capitalized on construction projects is not deducted from
the interest expense shown above.

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