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ASSOCIATED BANC-CORP - Quarter Report: 2021 March (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2021

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to 
Commission file number: 001-31343

Associated Banc-Corp
(Exact name of registrant as specified in its charter)

Wisconsin39-1098068
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

433 Main Street
Green Bay,Wisconsin54301
(Address of principal executive offices)(Zip Code)
(920) 491-7500
(Registrant’s telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the act:
Title of each classTrading symbolName of each exchange on which registered
Common stock, par value $0.01 per shareASBNew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 6.125% Non-Cum. Perp Pref Stock, Srs CASB PrCNew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.375% Non-Cum. Perp Pref Stock, Srs DASB PrDNew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.875% Non-Cum. Perp Pref Stock, Srs EASB PrENew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.625% Non-Cum. Perp Pref Stock, Srs FASB PrFNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes          No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes          No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
Non-accelerated filer  Smaller reporting company  
Emerging growth company 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes          No  
APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of registrant’s common stock, par value $0.01 per share, at April 23, 2021 was 152,808,020.
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ASSOCIATED BANC-CORP
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ASSOCIATED BANC-CORP
Commonly Used Acronyms and Abbreviations
The following listing provides a reference of common acronyms and abbreviations used throughout the document:

ABRCAssociated Benefits & Risk Consulting, the Corporation's insurance division which was sold on June 30, 2020
ACLAllowance for Credit Losses on Loans and Investments
ACLLAllowance for Credit Losses on Loans
AFSAvailable for Sale
ALCO Asset / Liability Committee
ARRCAlternative Reference Rate Committee
ASCAccounting Standards Codification
Associated / Corporation / our / weAssociated Banc-Corp collectively with all of its subsidiaries and affiliates
Associated Bank / the BankAssociated Bank, National Association
ASUAccounting Standards Update
Basel IIIInternational framework established by the Basel Committee on Banking Supervision for the regulation of capital and liquidity
bpbasis point(s)
CARES ActCoronavirus Aid, Relief, and Economic Security Act
CDsCertificates of Deposit
CDIsCore Deposit Intangibles
CECLCurrent Expected Credit Losses
CET1Common Equity Tier 1
CRACommunity Reinvestment Act
CRECommercial Real Estate
EAREarnings at Risk
Economic Aid ActEconomic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
Federal ReserveBoard of Governors of the Federal Reserve System
FFELPFederal Family Education Loan Program
FHLBFederal Home Loan Bank
FHLMCFederal Home Loan Mortgage Corporation
FICOFair Isaac Corporation, provider of a broad-based risk score to aid in credit decisions
First StauntonFirst Staunton Bancshares, Incorporated
FNMAFederal National Mortgage Association
FTEsFull-time equivalent employees
FTPFunds Transfer Pricing
GAAPGenerally Accepted Accounting Principles
GNMAGovernment National Mortgage Association
GSEsGovernment-Sponsored Enterprises
HTMHeld to Maturity
LIBORLondon Interbank Offered Rate
LTVLoan-to-Value
MSRsMortgage Servicing Rights
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MVEMarket Value of Equity
Net Free FundsNoninterest-bearing sources of funds
NIINet Interest Income
NPAsNonperforming Assets
OREOOther Real Estate Owned
Parent CompanyAssociated Banc-Corp individually
PCDPurchased Credit Deteriorated
PPPPaycheck Protection Program
PPPLFPaycheck Protection Program Liquidity Facility
RAPRetirement Account Plan - the Corporation's noncontributory defined benefit retirement plan
Repurchase AgreementsSecurities sold under agreements to repurchase
Restricted Stock AwardsRestricted common stock and restricted common stock units to certain key employees
Retirement Eligible ColleaguesColleagues whose retirement meets the early retirement or normal retirement definitions under the applicable equity compensation plan
RockefellerRockefeller Capital Management
S&PStandard & Poor's
SBASmall Business Administration
SECU.S. Securities and Exchange Commission
Series C Preferred StockThe Corporation's 6.125% Non-Cumulative Perpetual Preferred Stock, Series C, liquidation preference $1,000 per share
Series D Preferred StockThe Corporation's 5.375% Non-Cumulative Perpetual Preferred Stock, Series D, liquidation preference $1,000 per share
Series E Preferred StockThe Corporation's 5.875% Non-Cumulative Perpetual Preferred Stock, Series E, liquidation preference $1,000 per share
Series F Preferred StockThe Corporation's 5.625% Non-Cumulative Perpetual Preferred Stock, Series F, liquidation preference $1,000 per share
SOFRSecured Overnight Finance Rate
TDRTroubled Debt Restructuring
USI USI Insurance Services LLC
WhitnellWhitnell & Co.
YTDYear-to-Date

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PART I - FINANCIAL INFORMATION
ITEM 1.Financial Statements:

ASSOCIATED BANC-CORP
Consolidated Balance Sheets
 March 31, 2021December 31, 2020
 (In Thousands, except share and per share data)
(Unaudited)(Audited)
Assets
Cash and due from banks$356,285 $416,154 
Interest-bearing deposits in other financial institutions1,590,494 298,759 
Federal funds sold and securities purchased under agreements to resell— 1,135 
Investment securities AFS, at fair value3,356,949 3,085,441 
Investment securities HTM, net, at amortized cost1,857,087 1,878,938 
Equity securities15,673 15,106 
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost168,281 168,280 
Residential loans held for sale153,151 129,158 
Loans24,162,328 24,451,724 
Allowance for loan losses(352,938)(383,702)
Loans, net23,809,389 24,068,022 
Tax credit and other investments303,701 297,232 
Premises and equipment, net398,671 418,914 
Bank and corporate owned life insurance680,831 679,647 
Goodwill1,104,992 1,109,300 
Other intangible assets, net64,701 68,254 
Mortgage servicing rights, net49,500 41,961 
Interest receivable86,466 90,263 
Other assets579,084 653,219 
Total assets$34,575,255 $33,419,783 
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits$8,496,194 $7,661,728 
Interest-bearing deposits19,180,972 18,820,753 
Total deposits27,677,166 26,482,481 
Federal funds purchased and securities sold under agreements to repurchase138,507 192,971 
Commercial paper51,171 59,346 
FHLB advances1,629,966 1,632,723 
Other long-term funding549,729 549,465 
Allowance for unfunded commitments50,776 47,776 
Accrued expenses and other liabilities350,160 364,088 
Total liabilities30,447,474 29,328,850 
Stockholders’ Equity
Preferred equity353,512 353,512 
Common equity
Common stock1,752 1,752 
Surplus1,706,786 1,720,329 
Retained earnings2,520,144 2,458,920 
Accumulated other comprehensive income (loss)(4,193)12,618 
Treasury stock, at cost(450,222)(456,198)
Total common equity3,774,268 3,737,421 
Total stockholders’ equity4,127,780 4,090,933 
Total liabilities and stockholders’ equity$34,575,255 $33,419,783 
Preferred shares authorized (par value $1.00 per share)
750,000 750,000 
Preferred shares issued and outstanding364,458 364,458 
Common shares authorized (par value $0.01 per share)
250,000,000 250,000,000 
Common shares issued175,216,409 175,216,409 
Common shares outstanding153,684,904 153,540,224 
Numbers may not sum due to rounding.
See accompanying notes to consolidated financial statements.
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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Income (Unaudited)
 Three Months Ended March 31,
 (In Thousands, except per share data)
20212020
Interest income
Interest and fees on loans$174,049 $224,786 
Interest and dividends on investment securities
Taxable7,014 20,272 
Tax-exempt14,162 14,882 
Other interest1,694 3,304 
Total interest income196,920 263,244 
Interest expense
Interest on deposits5,909 36,666 
Interest on federal funds purchased and securities sold under agreements to repurchase26 368 
Interest on other short-term funding36 
Interest on FHLB advances9,493 17,626 
Interest on long-term funding5,585 5,607 
Total interest expense21,018 60,303 
Net interest income175,902 202,942 
Provision for credit losses(23,004)53,001 
Net interest income after provision for credit losses198,906 149,941 
Noninterest income
Wealth management fees22,414 20,816 
Service charges and deposit account fees14,855 15,222 
Card-based fees9,743 9,597 
Other fee-based revenue4,596 4,497 
Capital markets, net8,118 7,935 
Mortgage banking, net23,925 6,143 
Bank and corporate owned life insurance 2,702 3,094 
Insurance commissions and fess76 22,608 
Asset gains (losses), net4,809 (77)
Investment securities gains (losses), net(39)6,118 
Gains on sale of branches, net(a)
1,002 — 
Other3,141 2,352 
Total noninterest income95,343 98,306 
Noninterest expense
Personnel104,026 114,200 
Technology20,740 20,799 
Occupancy16,156 16,069 
Business development and advertising4,395 5,826 
Equipment5,518 5,439 
Legal and professional6,530 5,160 
Loan and foreclosure costs2,220 3,120 
FDIC assessment4,750 5,500 
Other intangible amortization2,236 2,814 
Other8,775 13,263 
Total noninterest expense175,347 192,191 
Income (loss) before income taxes118,903 56,056 
Income tax expense (benefit)24,602 10,219 
Net income94,301 45,838 
Preferred stock dividends5,207 3,801 
Net income available to common equity$89,094 $42,037 
Earnings per common share
Basic$0.58 $0.27 
Diluted$0.58 $0.27 
Average common shares outstanding
Basic152,355 154,701 
Diluted153,688 155,619 
Numbers may not sum due to rounding.
(a) Includes the deposit premium on the sale of branches net of miscellaneous costs to sell. See Note 2 Acquisitions and Dispositions for additional details on the branch sales.
See accompanying notes to consolidated financial statements.
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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended March 31,
 ($ in Thousands)
20212020
Net income$94,301 $45,838 
Other comprehensive income (loss), net of tax
Investment securities AFS
Net unrealized gains (losses)(23,979)26,419 
Amortization of net unrealized (gains) losses on AFS securities transferred to HTM securities518 556 
Reclassification adjustment for net losses (gains) realized in net income39 (6,118)
Income tax (expense) benefit5,851 (5,225)
Other comprehensive income (loss) on investment securities AFS(17,571)15,632 
Defined benefit pension and postretirement obligations
Amortization of prior service cost(37)(38)
Amortization of actuarial loss (gain)1,050 808 
Income tax (expense) benefit(253)(193)
Other comprehensive income (loss) on pension and postretirement obligations760 577 
Total other comprehensive income (loss)(16,811)16,209 
Comprehensive income$77,490 $62,046 
Numbers may not sum due to rounding.
See accompanying notes to consolidated financial statements.

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Item 1. Financial Statements Continued:    
ASSOCIATED BANC-CORP
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
(In Thousands, except per share data)Preferred EquityCommon StockSurplusRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury StockTotal
Balance, December 31, 2020$353,512 $1,752 $1,720,329 $2,458,920 $12,618 $(456,198)$4,090,933 
Comprehensive income
Net income— — — 94,301 — — 94,301 
Other comprehensive income (loss)— — — — (16,811)— (16,811)
Comprehensive income77,490 
Common stock issued
Stock-based compensation plans, net— — (16,986)— — 27,542 10,556 
Purchase of treasury stock, open market purchases— — — — — (17,973)(17,973)
Purchase of treasury stock, stock-based compensation plans— — — — — (3,593)(3,593)
Cash dividends
Common stock, $0.18 per share— — — (27,870)— — (27,870)
Preferred stock(a)
— — — (5,207)— — (5,207)
Stock-based compensation expense, net— — 3,444 — — — 3,444 
Balance, March 31, 2021$353,512 $1,752 $1,706,786 $2,520,144 $(4,193)$(450,222)$4,127,780 
Numbers may not sum due to rounding.
(a) Series C, $0.3828125 per share; Series D, $0.3359375 per share; Series E, $0.3671875 per share; and Series F, $0.3515625 per share.
(In Thousands, except per share data)Preferred EquityCommon StockSurplusRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury StockTotal
Balance, December 31, 2019$256,716 $1,752 $1,716,431 $2,380,867 $(33,183)$(400,460)$3,922,124 
Cumulative effect of ASU 2016-13 adoption (CECL)— — — (98,337)— — (98,337)
Total shareholder's equity at beginning of period, as adjusted256,716 1,752 1,716,431 2,282,530 (33,183)(400,460)3,823,787 
Comprehensive income
Net income— — — 45,838 — — 45,838 
Other comprehensive income (loss)— — — — 16,209 — 16,209 
Comprehensive income62,046 
Common stock issued
Stock-based compensation plans, net— — (20,659)— — 23,555 2,896 
Purchase of treasury stock, open market purchases— — — — — (71,255)(71,255)
Purchase of treasury stock, stock-based compensation plans— — — — — (5,555)(5,555)
Cash dividends
Common stock, $0.18 per share— — — (28,392)— — (28,392)
Preferred stock(a)
— — — (3,801)— — (3,801)
Stock-based compensation expense, net— — 10,744 — — — 10,744 
Balance, March 31, 2020$256,716 $1,752 $1,706,516 $2,296,176 $(16,974)$(453,714)$3,790,471 
Numbers may not sum due to rounding.
(a) Series C, $0.3828125 per share; Series D, $0.3359375 per share; and Series E, $0.3671875 per share.
See accompanying notes to consolidated financial statements.




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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
 ($ in Thousands)
20212020
Cash Flow From Operating Activities
Net income$94,301 $45,838 
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Provision for credit losses(23,004)53,001 
Depreciation and amortization12,038 14,971 
Addition to (recovery of) valuation allowance on mortgage servicing rights, net(10,578)9,098 
Amortization of mortgage servicing rights6,388 3,635 
Amortization of other intangible assets2,236 2,814 
Amortization and accretion on earning assets, funding, and other, net7,941 5,728 
Net amortization of tax credit investments8,301 6,486 
Losses (gains) on sales of investment securities, net39 (6,118)
Asset (gains) losses, net(4,809)77 
(Gains) losses on sale of branch, net(1,002)— 
(Gain) loss on mortgage banking activities, net(10,326)(14,274)
Mortgage loans originated and acquired for sale(412,645)(310,254)
Proceeds from sales of mortgage loans held for sale400,135 297,265 
Changes in certain assets and liabilities
(Increase) decrease in interest receivable3,797 (1,181)
Increase (decrease) in interest payable(8,694)(6,511)
Increase (decrease) in expense payable(12,818)(61,924)
(Increase) decrease in net derivative position69,829 (77,369)
Increase (decrease) in unsettled trades3,000 — 
(Increase) decrease in net income tax position10,627 (23,556)
Net change in other assets and other liabilities23,012 42,192 
Net cash provided by (used in) operating activities157,768 (20,083)
Cash Flow From Investing Activities
Net decrease (increase) in loans274,733 (1,395,767)
Purchases of
AFS securities(809,140)(93,487)
HTM securities(37,215)(29,463)
Federal Home Loan Bank and Federal Reserve Bank stocks(1)(49,794)
Premises, equipment, and software, net of disposals(6,477)(11,045)
Other intangibles— (200)
Proceeds from
Sales of AFS securities 51,295 365,239 
Sale of Federal Home Loan Bank and Federal Reserve Bank stocks— 55,000 
Prepayments, calls, and maturities of AFS investment securities 419,235 186,496 
Prepayments, calls, and maturities of HTM investment securities 97,196 84,360 
Sales, prepayments, calls, and maturities of other assets8,525 10,482 
Net cash received in Whitnell sale2,484 — 
Net change in tax credit and alternative investments(12,990)(17,877)
Net cash (paid) received in acquisition — (31,452)
Net cash provided by (used in) investing activities(12,354)(927,507)
Cash Flow From Financing Activities
Net increase (decrease) in deposits1,225,867 1,443,965 
Net decrease in deposits due to branch sales(31,083)— 
Net increase (decrease) in short-term funding(62,639)(324,317)
Net increase (decrease) in short-term FHLB advances— 30,000 
Repayment of long-term FHLB advances(2,954)(5,464)
Proceeds from long-term FHLB advances251 — 
(Repayment) proceeds of finance lease principal(37)
Proceeds from issuance of common stock for stock-based compensation plans10,556 2,896 
Purchase of treasury stock, open market purchases(17,973)(71,255)
Purchase of treasury stock, stock-based compensation plans(3,593)(5,555)
Cash dividends on common stock(27,870)(28,392)
Cash dividends on preferred stock(5,207)(3,801)
Net cash provided by (used in) financing activities1,085,319 1,038,079 
Net increase (decrease) in cash and cash equivalents1,230,732 90,488 
Cash and cash equivalents at beginning of period716,048 588,744 
Cash and cash equivalents at end of period(a)
$1,946,780 $679,232 
Numbers may not sum due to rounding.
(a) No restricted cash due to the Federal Reserve reducing the required reserve ratio to zero
See accompanying notes to consolidated financial statements.
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ASSOCIATED BANC-CORP
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
 ($ in Thousands)
20212020
Supplemental disclosures of cash flow information
Cash paid for interest$29,258 $66,316 
Cash paid for (received from) income and franchise taxes(114)1,373 
Loans and bank premises transferred to OREO15,426 3,374 
Capitalized mortgage servicing rights3,348 3,716 
Loans transferred into held for sale from portfolio, net5,582 205,065 
Unsettled trades to purchase securities3,000 — 
Acquisition
Fair value of assets acquired, including cash and cash equivalents— 457,448 
Fair value ascribed to goodwill and intangible assets— 22,538 
Fair value of liabilities assumed— 479,985 

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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Notes to Consolidated Financial Statements
These interim consolidated financial statements have been prepared according to the rules and regulations of the SEC and, therefore, certain information and footnote disclosures normally presented in accordance with GAAP have been omitted or abbreviated. The information contained on the consolidated financial statements and footnotes in Associated Banc-Corp's 2020 Annual Report on Form 10-K should be referred to in connection with the reading of these unaudited interim financial statements.
Note 1 Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and comprehensive income, changes in stockholders’ equity, and cash flows of the Corporation and Parent Company for the periods presented, and all such adjustments are of a normal recurring nature. The consolidated financial statements include the accounts of all subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Estimates that are particularly susceptible to significant change include the determination of the ACLL, goodwill impairment assessment, MSRs valuation, and income taxes. Management has evaluated subsequent events for potential recognition or disclosure.
Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes.
Note 2 Acquisitions and Dispositions
Acquisitions:
The Corporation did not have any acquisitions during the first quarter of 2021.
2020
First Staunton Acquisition
On February 14, 2020, the Corporation completed its acquisition of First Staunton. The purchase price was based on an assumed 4% deposit premium at announcement. The conversion of the branches was completed simultaneously with the close of the transaction, expanding the Bank's presence into nine new Metro-East St. Louis communities. As a result of the acquisition and other consolidations, a net of seven branch locations were added.
The Corporation recorded approximately $15 million in goodwill related to the First Staunton acquisition. Goodwill created by the acquisition is not tax deductible. See Note 8 for additional information on goodwill, as well as the carrying amount and amortization of CDI assets related to the First Staunton acquisition.
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The following table presents the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date related to the First Staunton acquisition:
 ($ in Thousands)Purchase Accounting AdjustmentsFebruary 14, 2020
Assets
Cash and cash equivalents$— $44,782 
Investment securities AFS(24)98,743 
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost— 781 
Loans(4,808)369,741 
Premises and equipment, net(3,005)4,865 
Bank owned life insurance6,770 
Goodwill14,812 
Core deposit intangibles (included in other intangible assets, net on the face of the consolidated balance sheets)7,379 7,379 
OREO (included in other assets on the face of the consolidated balance sheets)670 762 
Other assets2,795 7,692 
Total assets$556,328 
Liabilities
Deposits$1,285 $438,684 
Other borrowings61 34,613 
Accrued expenses and other liabilities179 6,730 
Total liabilities$480,028 
Total consideration paid$76,300 
For a description of methods used to determine the fair value of significant assets and liabilities presented on the balance sheet above, see Assumptions section of this Note.
The Corporation has purchased loans with the First Staunton acquisition, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination (PCD). The carrying amount of those loans is as follows:
($ in Thousands)February 14, 2020
Purchase price of loans at acquisition$77,221 
Allowance for credit losses at acquisition3,504 
Non-credit discount/(premium) at acquisition(951)
Par value of acquired loans at acquisition$79,774 
The Corporation acquired no PCD securities in connection with the acquisition.
Assumptions
Investment Securities: The fair value of investments on the date of acquisition was determined utilizing an external third party broker opinion of the market value.
Loans: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. For the non-credit (interest and liquidity) premium, loans were grouped together according to similar characteristics when applying various valuation techniques. For the credit discount, loans were also grouped based on whether they had more than insignificant deterioration in credit since origination.
CDIs: This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative cost of funds, and the interest costs associated with customer deposits. The CDIs are being amortized on a straight-line basis over 10 years.
Time Deposits: The fair value for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.
FHLB Borrowings: The fair value of FHLB advances are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.
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Dispositions:
2021
On March 1, 2021, the Corporation closed on the sale of its wealth management subsidiary Whitnell to Rockefeller for a purchase price of $8 million. Associated reported a first quarter 2021 pre-tax gain of approximately $2 million, included in asset gains (losses), net on the consolidated statements of income, in conjunction with the sale.
On February 26, 2021, the Bank completed the sale of one branch located in Monroe, Wisconsin to Summit Credit Union. Under the terms of the transaction, Associated Bank sold $31 million in total deposits and no loans. Associated Bank received an approximately 4% purchase premium on deposits transferred.
2020
On June 30, 2020, the Corporation completed the sale of ABRC to USI for $266 million in cash. Associated recorded a second quarter 2020 pre-tax book gain of approximately $163 million in conjunction with the sale.
On December 11, 2020, the Bank completed the sale of five branches in Peoria, Illinois to Morton Community Bank. Under the terms of the transaction, the Bank sold $180 million in total deposits and no loans. Associated Bank received a 4% purchase premium on deposits transferred. With the sale of these branches, the Bank exited the Peoria market.
On December 11, 2020, the Bank completed the sale of two branches in southwest Wisconsin to Royal Bank. Under the terms of the transaction, Associated Bank sold $53 million in total deposits and no loans. Associated Bank received a 4% purchase premium on deposits transferred in the Prairie du Chien and Richland Center branches.
Note 3 Summary of Significant Accounting Policies
The accounting and reporting policies of the Corporation conform to U.S. GAAP and to general practice within the financial services industry. A discussion of these policies can be found in Note 1 Summary of Significant Accounting Policies included in the Corporation’s 2020 Annual Report on Form 10-K. There have been no changes to the Corporation's significant accounting policies since December 31, 2020.
New Accounting Pronouncements Adopted
StandardDescriptionDate of adoptionEffect on financial statements
ASU 2019-12
Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes
The FASB issued this amendment to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendment also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this Update were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendment was permitted.1st Quarter 2021Adoption of this amendment did not have a material impact on the Corporation's results of operation, financial position or liquidity.
ASU 2020-08 Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other CostsThe FASB issued this amendment to clarify that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. The amendments in this Update were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments was not permitted.1st Quarter 2021Adoption of this amendment did not have a material impact on the Corporation's results of operation, financial position or liquidity.
Future Accounting Pronouncements
There are no accounting pronouncements recently issued or proposed that have not yet been adopted by the Corporation.
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Note 4 Earnings Per Common Share
Earnings per common share are calculated utilizing the two-class method. Basic earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding adjusted for the dilutive effect of common stock awards (outstanding stock options and unvested restricted stock awards). Presented below are the calculations for basic and diluted earnings per common share:
 Three Months Ended March 31,
 (In Thousands, except per share data)20212020
Net income$94,301 $45,838 
Preferred stock dividends(5,207)(3,801)
Net income available to common equity$89,094 $42,037 
Common shareholder dividends(27,661)(28,264)
Unvested share-based payment awards(209)(128)
Undistributed earnings$61,224 $13,645 
Undistributed earnings allocated to common shareholders$60,836 $13,555 
Undistributed earnings allocated to unvested share-based payment awards387 90 
Undistributed earnings$61,224 $13,645 
Basic
Distributed earnings to common shareholders$27,661 $28,264 
Undistributed earnings allocated to common shareholders60,836 13,555 
Total common shareholders earnings, basic$88,497 $41,819 
Diluted
Distributed earnings to common shareholders$27,661 $28,264 
Undistributed earnings allocated to common shareholders60,836 13,555 
Total common shareholders earnings, diluted$88,497 $41,819 
Weighted average common shares outstanding152,355 154,701 
Effect of dilutive common stock awards1,333 918 
Diluted weighted average common shares outstanding153,688 155,619 
Basic earnings per common share$0.58 $0.27 
Diluted earnings per common share$0.58 $0.27 
Non-dilutive common stock options of approximately 3 million and 4 million for the three months ended March 31, 2021 and 2020, respectively, were excluded from the earnings per common share calculation.
Note 5 Stock-Based Compensation
The fair values of stock options and restricted stock awards (including restricted stock units) are amortized as compensation expense on a straight-line basis over the vesting period of the grants. For colleagues who meet the definition of retirement eligible under the 2017 Incentive Compensation Plan and the 2020 Incentive Compensation Plan, expenses related to stock options and restricted stock awards are fully recognized on the date the colleague meets the definition of normal or early retirement. Compensation expense recognized is included in personnel expense on the consolidated statements of income.
Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock option represents the period of time stock options are expected to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the implied volatility of the Corporation’s stock.
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The Corporation did not grant stock options in the first three months of 2021. The following assumptions were used in estimating the fair value for options granted for the full year 2020:
2020
Dividend yield3.50 %
Risk-free interest rate1.60 %
Weighted average expected volatility21.00 %
Weighted average expected life5.75 years
Weighted average per share fair value of options$2.39
A summary of the Corporation’s stock option activity for the three months ended March 31, 2021 is presented below:
Stock Options
Shares(a)
Weighted Average
Exercise Price
Weighted Average Remaining Contractual Term
Aggregate Intrinsic Value(a)
Outstanding at December 31, 20206,473 $19.77 6.23 years$2,005 
Exercised615 15.96 
Forfeited or expired35 20.99 
Outstanding at March 31, 20215,823 $20.17 6.21 years$13,099 
Options Exercisable at March 31, 20214,240 $20.19 5.39 years$10,154 
(a) In thousands
Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option. For the three months ended March 31, 2021, the intrinsic value of stock options exercised was $3 million compared to less than $1 million for the three months ended March 31, 2020. The total fair value of stock options vested was $3 million for both the three months ended March 31, 2021 and 2020.
The Corporation recognized compensation expense for the vesting of stock options of $403 thousand for the three months ended March 31, 2021, compared to $2 million for the three months ended March 31, 2020. Included in compensation expense for 2021 was no expense for the accelerated vesting of stock options granted to retirement eligible colleagues. At March 31, 2021, the Corporation had approximately $2 million of unrecognized compensation expense related to stock options that is expected to be recognized over the remaining requisite service periods that extend predominately through the first quarter of 2024.
The Corporation also has issued time-based and performance-based restricted stock awards under the 2017 Incentive Compensation Plan and subsequent 2020 Incentive Compensation Plan. Performance awards are based on performance goals of earnings per share and total shareholder return with vesting ranging from a minimum of 0% to a maximum of 150% of the target award. Performance awards are valued utilizing a Monte Carlo simulation model to estimate fair value of the awards at the grant date.

The following table summarizes information about the Corporation’s restricted stock awards activity for the three months ended March 31, 2021:
Restricted Stock Awards
Shares(a)
Weighted Average
Grant Date Fair Value
Outstanding at December 31, 20202,293 $20.70 
Granted771 19.59 
Vested571 21.69 
Forfeited28 24.13 
Outstanding at March 31, 20212,466 $19.72 
(a) In thousands
The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period specified in the grant's award agreement. Performance-based restricted stock awards granted during 2020 and 2021 will vest ratably over a period of three years. Service-based restricted stock awards granted during 2020 and 2021 will vest ratably over a period of four years. Expense for restricted stock awards issued of approximately $3 million was recorded for the three months ended March 31, 2021 and $9 million was recorded for the three months ended March 31, 2020. Included in compensation expense for the first three months of 2021 was approximately $1 million of expense for the accelerated vesting of restricted stock awards granted to retirement eligible colleagues. The Corporation had $24 million of unrecognized compensation costs related to restricted stock awards at March 31, 2021 that are expected to be recognized over the remaining requisite service periods that extend predominately through the first quarter of 2025.
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The Corporation has the ability to issue shares from treasury or new shares upon the exercise of stock options or the granting of restricted stock awards. The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock in the market, to be made available for issuance in connection with the Corporation’s employee incentive plans and for other corporate purposes. The repurchase of shares, if any, will be based on market and investment opportunities, capital levels, growth prospects, and regulatory constraints. Such repurchases may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchase programs, or similar facilities.

Note 6 Investment Securities
Investment securities are classified as AFS, HTM, or equity on the consolidated balance sheets at the time of purchase. The amortized cost and fair values of securities AFS and HTM at March 31, 2021 were as follows:
($ in Thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Fair Value
Investment securities AFS
U. S. Treasury securities$54,237 $— $(544)$53,693 
Agency securities15,000 — (96)14,904 
Obligations of state and political subdivisions (municipal securities)411,964 21,218 — 433,182 
Residential mortgage-related securities
FNMA / FHLMC1,910,644 5,956 (5,647)1,910,954 
GNMA119,913 3,451 — 123,365 
Commercial mortgage-related securities
FNMA / FHLMC93,902 2,330 (1,883)94,349 
GNMA381,158 8,254 — 389,411 
Asset backed securities
FFELP325,812 1,675 (1,554)325,933 
SBA8,216 — (57)8,160 
Other debt securities3,000 — — 3,000 
Total investment securities AFS$3,323,846 $42,885 $(9,782)$3,356,949 
Investment securities HTM
U. S. Treasury securities$1,000 $20 $— $1,019 
Obligations of state and political subdivisions (municipal securities)1,455,462 106,933 (994)1,561,401 
Residential mortgage-related securities
FNMA / FHLMC47,480 2,471 — 49,951 
GNMA87,717 3,353 — 91,070 
Commercial mortgage-related securities
FNMA/FHLMC63,844 157 (2,138)61,863 
GNMA201,648 5,611 (21)207,238 
Total investment securities HTM$1,857,150 $118,544 $(3,154)$1,972,541 

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The amortized cost and fair values of securities AFS and HTM at December 31, 2020 were as follows:
($ in Thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Fair Value
Investment securities AFS
U. S. Treasury securities$26,436 $95 $— $26,531 
Agency securities24,985 53 — 25,038 
Obligations of state and political subdivisions (municipal securities)425,057 25,605 — 450,662 
Residential mortgage-related securities
FNMA / FHLMC1,448,806 12,935 (500)1,461,241 
GNMA231,364 4,176 (3)235,537 
Commercial mortgage-related securities
FNMA / FHLMC19,654 3,250 — 22,904 
GNMA511,429 13,327 — 524,756 
Asset backed securities
FFELP329,030 1,172 (3,013)327,189 
SBA8,637 — (53)8,584 
Other debt securities3,000 — — 3,000 
Total investment securities AFS$3,028,399 $60,612 $(3,570)$3,085,441 
Investment securities HTM
U. S. Treasury securities$999 $25 $— $1,024 
Obligations of state and political subdivisions (municipal securities)1,441,900 133,544 — 1,575,445 
Residential mortgage-related securities
FNMA / FHLMC54,599 2,891 — 57,490 
GNMA114,553 4,260 — 118,813 
Commercial mortgage-related securities
FNMA / FHLMC11,211 — — 11,211 
GNMA255,742 9,218 — 264,960 
 Total investment securities HTM$1,879,005 $149,938 $— $2,028,943 
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The expected maturities of investment securities AFS and HTM at March 31, 2021, are shown below:
 AFSHTM
($ in Thousands)Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Due in one year or less$9,575 $9,588 $35,299 $35,587 
Due after one year through five years79,504 79,813 47,810 49,383 
Due after five years through ten years357,498 373,906 179,382 188,263 
Due after ten years37,624 41,472 1,193,970 1,289,186 
Total debt securities484,201 504,778 1,456,461 1,562,420 
Residential mortgage-related securities
FNMA / FHLMC1,910,644 1,910,954 47,480 49,951 
GNMA119,913 123,365 87,717 91,070 
Commercial mortgage-related securities
FNMA / FHLMC93,902 94,349 63,844 61,863 
GNMA381,158 389,411 201,648 207,238 
Asset backed securities
FFELP 325,812 325,933 — — 
SBA8,216 8,160 — — 
Total investment securities$3,323,846 $3,356,949 $1,857,150 $1,972,541 
Ratio of fair value to amortized cost101.0 %106.2 %
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On a quarterly basis, the Corporation refreshes the credit quality of each HTM security. The following table summarizes the credit quality indicators of HTM securities at amortized cost at March 31, 2021:
($ in Thousands)AAAAAANot RatedTotal
U. S. Treasury securities$1,000 $— $— $— $1,000 
Obligations of state and political subdivisions (municipal securities)582,675 860,882 11,711 193 1,455,462 
Residential mortgage-related securities
FNMA / FHLMC47,480 — — — 47,480 
GNMA87,717 — — — 87,717 
Commercial mortgage-related securities
FNMA / FHLMC63,844 — — — 63,844 
GNMA 201,648 — — — 201,648 
Total HTM securities$984,363 $860,882 $11,711 $193 $1,857,150 
The following table summarizes the credit quality indicators of HTM securities at amortized cost at December 31, 2020:
($ in Thousands)AAAAAATotal
U. S. Treasury securities$999 $— $— $999 
Obligations of state and political subdivisions (municipal securities)567,252 860,607 14,041 1,441,900 
Residential mortgage-related securities
FNMA / FHLMC54,599 — — 54,599 
GNMA114,553 — — 114,553 
Commercial mortgage-related securities
FNMA / FHLMC11,211 — — 11,211 
GNMA 255,742 — — 255,742 
Total HTM securities$1,004,357 $860,607 $14,041 $1,879,005 
Investment securities gains (losses), net includes proceeds from the sale of investment securities as well as any applicable write-ups or write-downs of investment securities. The proceeds from the sale of investment securities for the three months ended March 31, 2021 and 2020, are shown below:
Three Months Ended March 31,
($ in Thousands)20212020
Gross gains on AFS securities$36 $6,198 
Gross (losses) on AFS securities(75)(80)
Investment securities gains (losses), net$(39)$6,118 
Proceeds from sales of investment securities$51,295 $365,239 
During the first quarter of 2021, the Corporation sold $51 million of lower yielding U.S. Treasury and Agency securities at a slight loss to take advantage of the steeper yield curve by reinvesting the proceeds into similar but higher yielding, longer duration securities.
During the first quarter of 2020, the Corporation sold $281 million of primarily prepayment sensitive mortgage-related securities at a gain of $6 million. Additionally, in February 2020, the Corporation sold $84 million of certain securities acquired in the First Staunton acquisition that did not fit the parameters of the Corporation's current investment strategy.
Investment securities with a carrying value of approximately $1.5 billion and $1.6 billion at March 31, 2021 and December 31, 2020, respectively, were pledged to secure certain deposits or for other purposes as required or permitted by law.
Accrued interest receivable on HTM securities totaled $12 million and $14 million at March 31, 2021 and December 31, 2020, respectively. Accrued interest receivable on AFS securities totaled $8 million at both March 31, 2021 and December 31, 2020. Accrued interest receivable on both HTM and AFS securities is included in interest receivable on the consolidated balance sheets. There was no interest income reversed for investments going into nonaccrual at both March 31, 2021 and 2020.
A security is considered past due once it is 30 days past due under the terms of the agreement. At both March 31, 2021 and December 31, 2020, the Corporation had no past due HTM securities.

The allowance for credit losses on HTM securities was approximately $63,000 at March 31, 2021 and approximately $67,000 at December 31, 2020, attributable entirely to the Corporation's municipal securities, included in investment securities HTM, net, at amortized cost on the consolidated balance sheets. The Corporation also holds U.S. Treasury and mortgage-related securities
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issued by the U.S. government or a GSE which are backed by the full faith and credit of the U.S. government and, as a result, no allowance for credit losses has been recorded related to these securities.

The following represents gross unrealized losses and the related fair value of investment securities AFS and HTM, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at March 31, 2021:
 Less than 12 months12 months or moreTotal
($ in Thousands)Number
of
Securities
Unrealized
(Losses)
Fair
Value
Number
of
Securities
Unrealized
(Losses)
Fair
Value
Unrealized
(Losses)
Fair
Value
Investment securities AFS
U.S. Treasury securities$(544)$53,693 — $— $— $(544)$53,693 
Agency securities(96)14,904 — — — (96)14,904 
Obligations of state and political subdivisions (municipal securities)— 910 — — — — 910 
Residential mortgage-related securities
FNMA / FHLMC 24 (5,647)756,359 — — — (5,647)756,359 
GNMA— 253 — — — — 253 
Commercial mortgage-related securities
FNMA / FHLMC(1,883)72,435 — — — (1,883)72,435 
GNMA— 78 — — — — 78 
Asset backed securities
FFELP— — — 15 (1,554)141,652 (1,554)141,652 
SBA— — — 14 (57)7,750 (57)7,750 
Total35 $(8,171)$898,632 29 $(1,611)$149,402 $(9,782)$1,048,033 
Investment securities HTM
Obligations of state and political subdivisions (municipal securities)33 $(994)$62,908 — $— $— $(994)$62,908 
 Commercial mortgage-related securities
FNMA / FHLMC(2,138)41,105 — — — (2,138)41,105 
GNMA(21)22,205 — — — (21)22,205 
Total41 $(3,154)$126,218 — $— $— $(3,154)$126,218 
For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities AFS and HTM, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2020:
 Less than 12 months12 months or moreTotal
($ in Thousands)Number
of
Securities
Unrealized
(Losses)
Fair
Value
Number
of
Securities
Unrealized
(Losses)
Fair
Value
Unrealized
(Losses)
Fair
Value
Investment securities AFS
Residential mortgage-related securities
FNMA / FHLMC$(500)$163,002 — $— $— $(500)$163,002 
GNMA(3)9,784 — — — (3)9,784 
GNMA commercial mortgage-related securities— 287 — — — — 287 
Asset backed securities
FFELP(129)9,267 16 (2,885)178,681 (3,013)187,948 
SBA14 (53)8,379 — — — (53)8,379 
Other debt securities— 2,000 — — — — 2,000 
Total27 $(685)$192,720 16 $(2,885)$178,681 $(3,570)$371,400 
Investment securities HTM
GNMA residential mortgage-related securities$— $325 — $— $— $— $325 
Total$— $325 — $— $— $— $325 
The Corporation reviews the AFS investment securities portfolio on a quarterly basis to monitor its credit exposure. A determination as to whether a security’s decline in fair value is the result of credit risk takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors the Corporation may consider in the impairment analysis include the extent to which the security has been in an unrealized loss position, the change in security
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rating, financial condition and near-term prospects of the issuer, as well as the security and industry specific economic conditions.
Based on the Corporation’s evaluation, management does not believe any unrealized losses at March 31, 2021 represent credit deterioration as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions. The U.S. Treasury 3 year and 5 year rates increased by 18 bp and 56 bp, respectively, from December 31, 2020. The Corporation does not intend to sell nor does it believe that it will be required to sell the securities in an unrealized loss position before recovery of their amortized cost basis.
FHLB and Federal Reserve Bank stocks: The Corporation is required to maintain Federal Reserve Bank stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. The Corporation had FHLB stock of $82 million at both March 31, 2021 and December 31, 2020. The Corporation had Federal Reserve Bank stock of $87 million at both March 31, 2021 and December 31, 2020. Accrued interest receivable on FHLB stock totaled approximately $944,000 and approximately $972,000 at March 31, 2021 and December 31, 2020, respectively. There was approximately $370,000 of accrued interest receivable on Federal Reserve Bank stock at March 31, 2021 and none at December 31, 2020. Accrued interest receivable on both FHLB stock and Federal Reserve Bank stock is included in interest receivable on the consolidated balance sheets.
Equity Securities
Equity securities with readily determinable fair values: The Corporation's portfolio of equity securities with readily determinable fair values is primarily comprised of CRA Qualified Investment mutual funds. At both March 31, 2021 and December 31, 2020, the Corporation had equity securities with readily determinable fair values of $2 million.
Equity securities without readily determinable fair values: The Corporation's portfolio of equity securities without readily determinable fair values primarily consists of 77,996 Visa Class B restricted shares, 77,000 of which the Corporation received in 2008 as part of Visa's initial public offering and carried at fair value after the Corporation donated 42,039 Visa Class B restricted shares to the Corporation's Charitable Remainder Trust during the second quarter of 2019, with the subsequent sale of those shares resulting in an observable market price after the shares were previously carried at a zero cost basis. During the first quarter of 2020, the Corporation acquired 996 Visa Class B restricted shares from the acquisition of First Staunton, and those shares are carried at a zero cost basis due to the lack of an observable market price since the time of acquisition. The Corporation had equity securities without readily determinable fair values of $14 million at March 31, 2021 and $13 million at December 31, 2020.
Note 7 Loans
The period end loan composition was as follows:
($ in Thousands)March 31, 2021December 31, 2020
PPP$836,566 $767,757 
Commercial and industrial7,664,501 7,701,422 
Commercial real estate — owner occupied883,237 900,912 
Commercial and business lending9,384,303 9,370,091 
Commercial real estate — investor4,260,706 4,342,584 
Real estate construction1,882,299 1,840,417 
Commercial real estate lending6,143,004 6,183,001 
Total commercial15,527,307 15,553,091 
Residential mortgage7,685,218 7,878,324 
Home equity651,647 707,255 
Other consumer298,156 313,054 
Total consumer8,635,020 8,898,632 
Total loans$24,162,328 $24,451,724 

Accrued interest receivable on loans totaled $64 million at March 31, 2021, and $66 million at December 31, 2020, and is included in interest receivable on the consolidated balance sheets. Interest accrued but not received for loans placed on nonaccrual is reversed against interest income. The amount of accrued interest reversed totaled approximately $98,000 for the three months ended March 31, 2021, and approximately $327,000 for the three months ended March 31, 2020.

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The following table presents commercial and consumer loans by credit quality indicator by vintage year at March 31, 2021:
Term Loans Amortized Cost Basis by Origination Year(a)
($ in Thousands)
Rev Loans Converted to Term(a)
Rev Loans Amortized Cost BasisYTD 20212020201920182017PriorTotal
PPP:(b)
Risk rating:
Pass$— $— $281,120 $527,971 $— $— $— $— $809,091 
Special Mention— — 1,642 3,434 — — — — 5,076 
Potential Problem— — 9,450 12,948 — — — — 22,398 
PPP$— $— $292,213 $544,353 $— $— $— $— $836,566 
Commercial and industrial:
Risk rating:
Pass$2,009 $2,170,406 $378,782 $1,303,573 $1,333,680 $1,119,175 $389,390 $694,910 $7,389,917 
Special Mention— 7,298 96 3,805 59,502 48,156 207 185 119,249 
Potential Problem1,800 20,492 4,166 17,407 34,437 37,587 1,761 6,294 122,143 
Nonaccrual— — — 6,143 725 16,530 334 9,461 33,192 
Commercial and industrial$3,809 $2,198,196 $383,045 $1,330,929 $1,428,343 $1,221,448 $391,692 $710,849 $7,664,501 
Commercial real estate - owner occupied:
Risk rating:
Pass$11,868 $20,916 $59,551 $174,514 $210,032 $128,471 $81,020 $184,983 $859,487 
Special Mention— — — 5,014 2,080 — 424 260 7,777 
Potential Problem— 622 105 3,992 1,066 652 2,035 7,493 15,965 
Nonaccrual— — — — — — — 
Commercial real estate - owner occupied$11,868 $21,538 $59,656 $183,520 $213,178 $129,123 $83,479 $192,743 $883,237 
Commercial and business lending:
Risk rating:
Pass$13,877 $2,191,322 $719,454 $2,006,059 $1,543,712 $1,247,646 $470,410 $879,893 $9,058,495 
Special Mention— 7,298 1,738 12,253 61,582 48,156 631 444 132,102 
Potential Problem1,800 21,114 13,721 34,347 35,502 38,238 3,796 13,786 160,506 
Nonaccrual— — — 6,143 725 16,530 334 9,468 33,200 
Commercial and business lending$15,677 $2,219,734 $734,913 $2,058,802 $1,641,521 $1,350,571 $475,170 $903,592 $9,384,303 
Commercial real estate - investor:
Risk rating:
Pass$— $153,847 $344,412 $1,106,623 $989,271 $635,944 $208,367 $445,269 $3,883,733 
Special Mention— — 1,776 83,975 104,806 16,161 8,897 17,121 232,735 
Potential Problem— 802 5,473 52,576 8,952 1,787 2,840 13,321 85,752 
Nonaccrual— — — 8,883 15,605 19,522 14,173 302 58,485 
Commercial real estate - investor$— $154,649 $351,662 $1,252,057 $1,118,634 $673,414 $234,276 $476,014 $4,260,706 
Real estate construction:
Risk rating:
Pass$5,732 $26,865 $125,807 $756,890 $628,967 $228,127 $21,478 $16,815 $1,804,950 
Special Mention— — — 529 3,648 58,826 42 — 63,045 
Potential Problem— — 12 131 13,713 — — 119 13,977 
Nonaccrual— — — — — — — 327 327 
Real estate construction$5,732 $26,865 $125,819 $757,550 $646,328 $286,953 $21,520 $17,262 $1,882,299 
Commercial real estate lending:
Risk rating:
Pass$5,732 $180,712 $470,219 $1,863,513 $1,618,239 $864,072 $229,845 $462,084 $5,688,683 
Special Mention— — 1,776 84,504 108,453 74,987 8,939 17,121 295,780 
Potential Problem— 802 5,486 52,708 22,665 1,787 2,840 13,440 99,728 
Nonaccrual— — — 8,883 15,605 19,522 14,173 630 58,813 
Commercial real estate lending$5,732 $181,515 $477,481 $2,009,607 $1,764,962 $960,368 $255,796 $493,275 $6,143,004 
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Term Loans Amortized Cost Basis by Origination Year(a)
($ in Thousands)
Rev Loans Converted to Term(a)
Rev Loans Amortized Cost BasisYTD 20212020201920182017PriorTotal
Total commercial:
Risk rating:
Pass$19,609 $2,372,034 $1,189,673 $3,869,571 $3,161,950 $2,111,718 $700,255 $1,341,977 $14,747,179 
Special Mention— 7,298 3,514 96,757 170,035 123,143 9,569 17,565 427,882 
Potential Problem1,800 21,916 19,207 87,055 58,167 40,026 6,636 27,227 260,234 
Nonaccrual— — — 15,026 16,330 36,052 14,507 10,098 92,012 
Total commercial$21,409 $2,401,249 $1,212,394 $4,068,409 $3,406,483 $2,310,939 $730,967 $1,396,867 $15,527,307 
Residential mortgage:
Risk rating:
Pass$— $— $449,381 $2,205,662 $1,280,604 $545,743 $881,884 $2,257,349 $7,620,622 
Special Mention— — — 121 — 37 133 525 816 
Potential Problem— — 72 510 561 674 126 582 2,524 
Nonaccrual— — — 1,765 3,160 6,431 8,243 41,657 61,256 
Residential mortgage$— $— $449,452 $2,208,058 $1,284,324 $552,885 $890,386 $2,300,113 $7,685,218 
Home equity:
Risk rating:
Pass$1,891 $526,777 $71 $2,080 $11,595 $13,535 $10,333 $75,385 $639,776 
Special Mention— 25 — — — 60 — 265 350 
Potential Problem— 1,563 — — — 20 — 146 1,729 
Nonaccrual262 91 10 786 118 366 413 8,008 9,792 
Home equity$2,153 $528,455 $81 $2,866 $11,713 $13,981 $10,745 $83,805 $651,647 
Other consumer:
Risk rating:
Pass$171 $156,829 $1,908 $8,330 $8,674 $2,974 $1,351 $117,360 $297,427 
Special Mention— 452 — — 40 — — 497 
Nonaccrual13 93 — 15 35 10 23 56 231 
Other consumer$183 $157,375 $1,908 $8,345 $8,749 $2,984 $1,374 $117,421 $298,156 
Total consumer:
Risk rating:
Pass$2,062 $683,606 $451,360 $2,216,072 $1,300,872 $562,252 $893,567 $2,450,094 $8,557,824 
Special Mention— 477 — 121 40 96 133 795 1,663 
Potential Problem— 1,563 72 510 561 694 126 728 4,254 
Nonaccrual274 184 10 2,566 3,313 6,807 8,678 49,722 71,280 
Total consumer$2,336 $685,830 $451,442 $2,219,269 $1,304,787 $569,850 $902,504 $2,501,338 $8,635,020 
Total loans:
Risk rating:
Pass$21,671 $3,055,640 $1,641,033 $6,085,644 $4,462,823 $2,673,970 $1,593,822 $3,792,071 $23,305,003 
Special Mention— 7,775 3,514 96,877 170,076 123,240 9,703 18,360 429,545 
Potential Problem1,800 23,479 19,279 87,565 58,729 40,720 6,761 27,955 264,488 
Nonaccrual274 184 10 17,592 19,643 42,859 23,185 59,819 163,292 
Total loans$23,745 $3,087,079 $1,663,836 $6,287,678 $4,711,270 $2,880,788 $1,633,471 $3,898,205 $24,162,328 

(a) Revolving loans converted to term loans are also reported in their year of origination
(b) The Corporation’s policy is to assign risk ratings at the borrower level. PPP loans are 100% guaranteed by the SBA and therefore the Corporation considers these loans to have a risk profile similar to pass rated loans.










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The following table presents commercial and consumer loans by credit quality indicator by vintage year at December 31, 2020:
Term Loans Amortized Cost Basis by Origination Year(a)
($ in Thousands)
Rev Loans Converted to Term(a)
Rev Loans Amortized Cost Basis20202019201820172016PriorTotal
PPP:(b)
Risk rating:
Pass$— $— $745,767 $— $— $— $— $— $745,767 
Special Mention— — 3,988 — — — — — 3,988 
Potential Problem— — 18,002 — — — — — 18,002 
PPP$— $— $767,757 $— $— $— $— $— $767,757 
Commercial and industrial:
Risk rating:
Pass$4,628 $2,177,138 $1,389,260 $1,435,519 $1,182,302 $483,957 $305,998 $453,734 $7,427,908 
Special Mention— 10,159 2,719 39,854 37,042 113 215 67 90,169 
Potential Problem2,565 7,237 19,331 28,413 56,580 2,269 6,477 1,179 121,487 
Nonaccrual16,852 — 6,238 5,789 17,014 16,623 8,781 7,414 61,859 
Commercial and industrial$24,045 $2,194,534 $1,417,548 $1,509,575 $1,292,938 $502,962 $321,471 $462,394 $7,701,422 
Commercial real estate - owner occupied:
Risk rating:
Pass$1,150 $18,022 $185,861 $209,069 $128,360 $99,546 $147,366 $79,111 $867,335 
Special Mention— 113 1,882 3,122 300 658 264 — 6,339 
Potential Problem— 3,486 4,104 8,916 — 1,490 4,437 3,747 26,179 
Nonaccrual— — — — — 318 — 740 1,058 
Commercial real estate - owner occupied$1,150 $21,621 $191,847 $221,107 $128,660 $102,012 $152,067 $83,598 $900,912 
Commercial and business lending:
Risk rating:
Pass$5,778 $2,195,160 $2,320,888 $1,644,588 $1,310,662 $583,503 $453,364 $532,845 $9,041,009 
Special Mention— 10,272 8,589 42,976 37,342 771 479 67 100,496 
Potential Problem2,565 10,723 41,437 37,329 56,580 3,759 10,915 4,926 165,668 
Nonaccrual16,852 — 6,238 5,789 17,014 16,941 8,781 8,154 62,917 
Commercial and business lending$25,195 $2,216,154 $2,377,152 $1,730,682 $1,421,598 $604,974 $473,539 $545,992 $9,370,091 
Commercial real estate - investor:
Risk rating:
Pass$10,971 $171,497 $1,249,644 $976,332 $720,237 $271,987 $341,658 $211,360 $3,942,714 
Special Mention— — 90,235 97,333 12,339 — 21,882 8,465 230,254 
Potential Problem— 838 16,343 13,575 30,911 2,279 239 27,209 91,396 
Nonaccrual19,803 — 10,141 53,056 446 14,267 — 309 78,220 
Commercial real estate - investor$30,774 $172,335 $1,366,364 $1,140,297 $763,933 $288,533 $363,779 $247,343 $4,342,584 
Real estate construction:
Risk rating:
Pass$776 $47,880 $645,925 $738,561 $294,910 $25,219 $2,420 $16,768 $1,771,682 
Special Mention— — 487 494 48,283 42 — 30 49,336 
Potential Problem— — 135 — 18,803 — 93 15 19,046 
Nonaccrual— — — — — 16 — 338 353 
Real estate construction$776 $47,880 $646,547 $739,055 $361,996 $25,277 $2,513 $17,150 $1,840,417 
Commercial real estate lending:
Risk rating:
Pass$11,746 $219,377 $1,895,569 $1,714,893 $1,015,146 $297,205 $344,078 $228,127 $5,714,396 
Special Mention— — 90,722 97,827 60,622 42 21,882 8,494 279,590 
Potential Problem— 838 16,479 13,575 49,714 2,279 332 27,224 110,442 
Nonaccrual19,803 — 10,141 53,056 446 14,283 — 647 78,573 
Commercial real estate lending$31,549 $220,215 $2,012,911 $1,879,352 $1,125,929 $313,810 $366,292 $264,493 $6,183,001 
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Term Loans Amortized Cost Basis by Origination Year(a)
($ in Thousands)
Rev Loans Converted to Term(a)
Rev Loans Amortized Cost Basis20202019201820172016PriorTotal
Total commercial:
Risk rating:
Pass$17,524 $2,414,537 $4,216,457 $3,359,482 $2,325,808 $880,708 $797,441 $760,973 $14,755,405 
Special Mention— 10,272 99,311 140,803 97,964 813 22,361 8,562 380,086 
Potential Problem2,565 11,561 57,916 50,905 106,295 6,038 11,247 32,150 276,111 
Nonaccrual36,655 — 16,379 58,845 17,460 31,224 8,781 8,801 141,490 
Total commercial$56,745 $2,436,370 $4,390,063 $3,610,033 $2,547,526 $918,783 $839,831 $810,485 $15,553,091 
Residential mortgage:
Risk rating:
Pass$— $— $2,185,240 $1,490,589 $615,118 $998,072 $911,797 $1,612,971 $7,813,788 
Special Mention— — — 355 330 102 126 537 1,450 
Potential Problem— — 1,200 689 652 — 179 1,028 3,749 
Nonaccrual— — 1,478 2,271 5,882 7,116 11,003 31,587 59,337 
Residential mortgage$— $— $2,187,918 $1,493,903 $621,983 $1,005,290 $923,105 $1,646,124 $7,878,324 
Home equity:
Risk rating:
Pass$10,224 $569,389 $2,057 $12,968 $15,792 $11,594 $5,803 $76,165 $693,767 
Special Mention596 631 — 39 14 39 804 1,532 
Potential Problem— 1,922 — — — — — 146 2,068 
Nonaccrual1,600 100 965 134 410 319 711 7,249 9,888 
Home equity$12,421 $572,041 $3,022 $13,141 $16,216 $11,952 $6,518 $84,364 $707,255 
Other consumer:
Risk rating:
Pass$70 $165,114 $9,525 $10,309 $3,987 $1,872 $1,185 $120,425 $312,416 
Special Mention438 13 16 11 498 
Nonaccrual33 49 21 10 — 18 140 
Other consumer$81 $165,585 $9,547 $10,374 $4,019 $1,886 $1,192 $120,451 $313,054 
Total consumer:
Risk rating:
Pass$10,294 $734,502 $2,196,822 $1,513,865 $634,897 $1,011,539 $918,785 $1,809,561 $8,819,971 
Special Mention602 1,069 13 410 356 145 137 1,349 3,480 
Potential Problem— 1,922 1,200 689 652 — 179 1,174 5,817 
Nonaccrual1,605 133 2,452 2,454 6,313 7,445 11,714 38,854 69,364 
Total consumer$12,501 $737,626 $2,200,487 $1,517,417 $642,218 $1,019,128 $930,816 $1,850,939 $8,898,632 
Total loans:
Risk rating:
Pass (c)
$27,819 $3,149,039 $6,413,278 $4,873,347 $2,960,705 $1,892,247 $1,716,226 $2,570,534 $23,575,376 
Special Mention602 11,341 99,324 141,213 98,320 958 22,498 9,911 383,566 
Potential Problem2,565 13,483 59,116 51,593 106,947 6,038 11,426 33,324 281,928 
Nonaccrual38,260 133 18,831 61,298 23,773 38,669 20,496 47,655 210,854 
Total loans$69,246 $3,173,996 $6,590,550 $5,127,451 $3,189,745 $1,937,912 $1,770,647 $2,661,424 $24,451,724 

(a) Revolving loans converted to term loans are also reported in their year of origination
(b) The Corporation’s policy is to assign risk ratings at the borrower level. PPP loans are 100% guaranteed by the SBA and therefore the Corporation considers these loans to have a risk profile similar to pass rated loans.
(c) Accruing TDRs are included in pass unless otherwise rated as special mention
Factors that are important to managing overall credit quality are sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, and appropriate policies for allowance for loan losses, allowance for unfunded commitments, nonaccrual loans, and charge offs.
For commercial loans, management has determined the pass credit quality indicator to include credits exhibiting acceptable financial statements, cash flow, and leverage. If any risk exists, it is mitigated by the loan structure, collateral, monitoring, or control. For consumer loans, performing loans include credits performing in accordance with the original contractual terms.
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Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Special mention credits have potential weaknesses that deserve management’s attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit. Potential problem loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These loans generally have a well-defined weakness, or weaknesses, which may jeopardize liquidation of the debt, and are characterized by the distinct possibility the Corporation will sustain some loss if the deficiencies are not corrected. Management has determined commercial loan relationships in nonaccrual status, and commercial and consumer loan relationships with their terms restructured in a TDR, meet the criteria to be individually evaluated. Commercial loans classified as special mention, potential problem, and nonaccrual are reviewed at a minimum on a quarterly basis, while pass credits, which are performing rated credits, are generally reviewed on an annual basis or more frequently if the loan renewal is less than one year or if otherwise warranted.
The following table presents loans by past due status at March 31, 2021:
Accruing
($ in Thousands)
Current(a)
30-59 Days
Past Due
60-89 Days
Past Due
90+ Days
Past Due
Nonaccrual(b)(c)
Total
PPP$836,566 $— $— $— $— $836,566 
Commercial and industrial7,630,593 444 82 190 33,192 7,664,501 
Commercial real estate - owner occupied883,229 — — — 883,237 
Commercial and business lending9,350,388 444 82 190 33,200 9,384,303 
Commercial real estate - investor4,196,221 5,999 — — 58,485 4,260,706 
Real estate construction1,880,995 977 — — 327 1,882,299 
Commercial real estate lending6,077,216 6,976 — — 58,813 6,143,004 
Total commercial15,427,603 7,420 82 190 92,012 15,527,307 
Residential mortgage7,619,602 3,494 479 387 61,256 7,685,218 
Home equity639,503 2,002 350 — 9,792 651,647 
Other consumer295,556 681 589 1,098 231 298,156 
Total consumer8,554,661 6,177 1,417 1,485 71,280 8,635,020 
Total loans$23,982,264 $13,597 $1,500 $1,675 $163,292 $24,162,328 
(a) Any loans deferred in connection with the COVID-19 pandemic are considered current in accordance with Section 4013 of the CARES Act.
(b) Of the total nonaccrual loans, $99 million, or 61%, were current with respect to payment at March 31, 2021.
(c) No interest income was recognized on nonaccrual loans for the three months ended March 31, 2021. In addition, there were $16 million of nonaccrual loans for which there was no related ACLL at March 31, 2021.

The following table presents loans by past due status at December 31, 2020:
Accruing
($ in Thousands)
Current(a)
30-59 Days
Past Due
60-89 Days
Past Due
90+ Days 
Past Due
Nonaccrual(b)(c)
Total
PPP$767,757 $— $— $— $— $767,757 
Commercial and industrial7,633,269 2,819 3,300 175 61,859 7,701,422 
Commercial real estate - owner occupied899,480 158 215 — 1,058 900,912 
Commercial and business lending9,300,506 2,977 3,516 175 62,917 9,370,091 
Commercial real estate - investor4,251,571 1,024 11,769 — 78,220 4,342,584 
Real estate construction1,839,073 991 — — 353 1,840,417 
Commercial real estate lending6,090,644 2,015 11,769 — 78,573 6,183,001 
Total commercial15,391,150 4,992 15,284 175 141,490 15,553,091 
Residential mortgage7,808,294 8,975 1,410 308 59,337 7,878,324 
Home equity692,565 3,071 1,731 — 9,888 707,255 
Other consumer310,200 1,039 560 1,115 140 313,054 
Total consumer8,811,060 13,085 3,701 1,423 69,364 8,898,632 
Total loans$24,202,209 $18,077 $18,985 $1,598 $210,854 $24,451,724 
(a) Any loans deferred in connection with the COVID-19 pandemic are considered current in accordance with Section 4013 of the CARES Act.
(b) Of the total nonaccrual loans, $128 million, or 61%, were current with respect to payment at December 31, 2020.
(c) No interest income was recognized on nonaccrual loans for the year ended December 31, 2020. In addition, there were $28 million of nonaccrual loans for which there was no related ACLL at December 31, 2020.

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Troubled Debt Restructurings
Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty.
The following table presents nonaccrual and performing restructured loans by loan portfolio:
 March 31, 2021December 31, 2020
 ($ in Thousands)Performing
Restructured
Loans
Nonaccrual
Restructured
Loans(a)
Performing
Restructured
Loans
Nonaccrual
Restructured
Loans(a)
Commercial and industrial$11,985 $2,114 $12,713 $6,967 
Commercial real estate — owner occupied1,488 — 1,711 — 
Commercial real estate — investor13,627 220 26,435 225 
Real estate construction256 109 260 111 
Residential mortgage10,462 13,537 7,825 11,509 
Home equity1,929 1,644 1,957 1,379 
Other consumer1,073 — 1,191 — 
   Total restructured loans(b)
$40,820 $17,624 $52,092 $20,190 
(a) Nonaccrual restructured loans have been included within nonaccrual loans.
(b) Does not include any restructured loans related to the COVID-19 pandemic in accordance with Section 4013 of the CARES Act.
The Corporation had a recorded investment of $6 million in loans modified as TDRs during the three months ended March 31, 2021, of which $3 million were in accrual status, included in pass or special mention based on their risk rating within the credit quality tables, and $3 million were in nonaccrual, within the credit quality tables, pending a sustained period of repayment. Short-term loan modifications made in good faith to help ease the adverse effects of the COVID-19 pandemic are not categorized as TDRs in accordance with the CARES Act. The following table provides the number of loans modified in a TDR by loan portfolio, the recorded investment, and unpaid principal balance for the three months ended March 31, 2021 and 2020:
 Three Months Ended March 31, 2021Three Months Ended March 31, 2020
 ($ in Thousands)Number
of
Loans
Recorded
Investment(a)
Unpaid
Principal
Balance(b)
Number
of
Loans
Recorded
Investment(a)
Unpaid
Principal
Balance(b)
Commercial and industrial— $— $— $48 $48 
Commercial real estate — owner occupied— — — 290 321 
Commercial real estate — investor1,693 1,693 570 1,740 
Real estate construction— — — 122 122 
Residential mortgage20 3,876 3,902 18 3,592 3,668 
Home equity430 430 277 277 
   Total loans modified 25 $5,999 $6,025 30 $4,899 $6,175 
(a) Represents post-modification outstanding recorded investment.
(b) Represents pre-modification outstanding recorded investment.
Restructured loan modifications may include payment schedule modifications, interest rate concessions, maturity date extensions, modification of note structure (A/B Note), non-reaffirmed Chapter 7 bankruptcies, principal reduction, or some combination of these concessions. During the three months ended March 31, 2021, restructured loan modifications of commercial loans primarily included maturity date extensions and payment schedule modifications. Restructured loan modifications of consumer loans primarily included maturity date extensions, interest rate concessions, non-reaffirmed Chapter 7 bankruptcies, or a combination of these concessions for the three months ended March 31, 2021.
The following table provides the number of loans modified in a TDR during the previous twelve months which subsequently defaulted during the three months ended March 31, 2021 and 2020, and the recorded investment in these restructured loans as of March 31, 2021 and 2020:
 Three Months Ended March 31, 2021Three Months Ended March 31, 2020
 ($ in Thousands)Number of
Loans
Recorded
Investment
Number of
Loans
Recorded
Investment
Residential mortgage97 388 
Home equity— — 88 
   Total loans modified$97 $476 
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All loans modified in a TDR are individually evaluated for impairment. The nature and extent of the impairment of restructured loans, including those which have experienced a subsequent payment default, are considered in the determination of an appropriate level of the ACLL.
The Corporation analyzes loans for classification as a probable TDR. This analysis includes identifying customers that are showing possible liquidity issues in the near term without reasonable access to alternative sources of capital. At March 31, 2021, the Corporation had $49 million in loans meeting this classification compared to $68 million at December 31, 2020. Of the loans classified as probable TDRs at March 31, 2021, $36 million were related to the commercial and industrial portfolio and $13 million were related to the CRE portfolio.
Allowance for Credit Losses on Loans
The ACLL is comprised of the allowance for loan losses and the allowance for unfunded commitments. The level of the ACLL represents management’s estimate of an amount appropriate to provide for expected lifetime credit losses in the loan portfolio at the balance sheet date. The expected lifetime credit losses are the product of multiplying the Corporation's estimates of probability of default, loss given default, and the individual loan level exposure at default on an undiscounted basis. A main factor in the determination of the ACLL is the economic forecast. The Corporation utilized Moody's baseline forecast, updated during March 2021, in the allowance model. The forecast is applied over a 2 year reasonable and supportable period with straight-line reversion to the historical losses over the second year of the period. The allowance for unfunded commitments is maintained at a level believed by management to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit). See Note 12 for additional information on the change in the allowance for unfunded commitments.





















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The following table presents a summary of the changes in the ACLL by portfolio segment for the three months ended March 31, 2021:
($ in Thousands)December 31, 2020Charge offsRecoveriesNet Charge offsProvision for credit lossesMarch 31, 2021ACLL / Loans
Allowance for loan losses
PPP$531 $— $— $— $76 $607 
Commercial and industrial142,793 (3,123)4,490 1,367 (19,453)124,707 
Commercial real estate — owner occupied11,274 — 508 11,786 
Commercial and business lending154,598 (3,123)4,494 1,370 (18,869)137,099 
Commercial real estate — investor93,435 (8,739)2,854 (5,886)1,694 89,243 
Real estate construction59,193 (3)31 29 (4,979)54,243 
Commercial real estate lending152,629 (8,742)2,885 (5,857)(3,286)143,486 
Total commercial307,226 (11,865)7,379 (4,487)(22,155)280,585 
Residential mortgage42,996 (243)134 (109)2,328 45,215 
Home equity18,849 (238)583 344 (2,822)16,371 
Other consumer14,630 (827)315 (511)(3,351)10,767 
Total consumer76,475 (1,308)1,031 (277)(3,845)72,353 
Total loans$383,702 $(13,174)$8,410 $(4,764)$(26,000)$352,938 
Allowance for unfunded commitments
Commercial and industrial22,311 — — — 2,417 24,728 
Commercial real estate — owner occupied266 — — — 38 304 
Commercial and business lending22,577 — — — 2,455 25,033 
Commercial real estate — investor636 — — — 15 651 
Real estate construction18,887 — — — 422 19,309 
Commercial real estate lending19,523 — — — 437 19,960 
Total commercial42,101 — — — 2,892 44,993 
Home equity3,118 — — — (199)2,919 
Other consumer2,557 — — — 307 2,865 
Total consumer5,675 — — — 108 5,783 
Total loans$47,776 $— $— $— $3,000 $50,776 
Allowance for credit losses on loans
PPP$531 $— $— $— $76 $607 0.07 %
Commercial and industrial165,105 (3,123)4,490 1,367 (17,037)149,435 1.95 %
Commercial real estate — owner occupied11,539 — 547 12,090 1.37 %
Commercial and business lending177,175 (3,123)4,494 1,370 (16,414)162,132 1.73 %
Commercial real estate — investor94,071 (8,739)2,854 (5,886)1,709 89,894 2.11 %
Real estate construction78,080 (3)31 29 (4,557)73,552 3.91 %
Commercial real estate lending172,152 (8,742)2,885 (5,857)(2,849)163,446 2.66 %
Total commercial349,327 (11,865)7,379 (4,487)(19,262)325,578 2.10 %
Residential mortgage42,996 (243)134 (109)2,328 45,215 0.59 %
Home equity21,967 (238)583 344 (3,021)19,290 2.96 %
Other consumer17,187 (827)315 (511)(3,044)13,631 4.57 %
Total consumer82,150 (1,308)1,031 (277)(3,738)78,136 0.90 %
Total loans$431,478 $(13,174)$8,410 $(4,764)$(23,000)$403,714 1.67 %





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The following table presents a summary of the changes in the ACLL by portfolio segment for the year ended December 31, 2020:
($ in Thousands)Dec. 31, 2019Cumulative effect of ASU 2016-13 adoption (CECL)Jan. 1, 2020Charge offsRecoveriesNet Charge offsGross up of allowance for PCD loans at acquisitionProvision recorded at acquisitionProvision for credit lossesDec. 31, 2020ACLL / Loans
Allowance for loan losses
PPP$— $— $— $— $— $— $— $— $531 $531 
Commercial and industrial91,133 52,919 144,052 (80,320)7,004 (73,316)293 408 71,355 142,793 
Commercial real estate — owner occupied10,284 (1,851)8,433 (419)147 (272)890 255 1,967 11,274 
Commercial and business lending101,417 51,068 152,485 (80,739)7,151 (73,588)1,183 663 73,853 154,598 
Commercial real estate — investor40,514 2,041 42,555 (22,920)643 (22,277)753 472 71,933 93,435 
Real estate construction24,915 7,467 32,382 (19)49 31 435 492 25,854 59,193 
Commercial real estate lending65,428 9,508 74,937 (22,938)692 (22,246)1,188 964 97,787 152,629 
Total commercial166,846 60,576 227,422 (103,677)7,844 (95,834)2,371 1,627 171,641 307,226 
Residential mortgage16,960 33,215 50,175 (1,867)500 (1,367)651 403 (6,864)42,996 
Home equity10,926 11,649 22,575 (1,719)1,978 259 422 374 (4,781)18,849 
Other consumer6,639 7,016 13,655 (4,790)1,101 (3,689)61 140 4,462 14,630 
Total consumer34,525 51,880 86,405 (8,376)3,579 (4,797)1,134 917 (7,183)76,475 
Total loans$201,371 $112,457 $313,828 $(112,053)$11,422 $(100,631)$3,504 $2,543 $164,457 $383,702 
Allowance for unfunded commitments
Commercial and industrial12,276 (3,998)8,278 — — — — 61 13,972 22,311 
Commercial real estate — owner occupied127 — 127 — — — — 135 266 
Commercial and business lending12,403 (3,998)8,405 — — — — 65 14,108 22,577 
Commercial real estate — investor530 246 776 — — — — (141)636 
Real estate construction7,532 18,347 25,879 — — — — 45 (7,038)18,887 
Commercial real estate lending8,062 18,593 26,655 — — — — 47 (7,179)19,523 
Total commercial20,465 14,595 35,060 — — — — 112 6,929 42,101 
Home equity1,038 2,591 3,629 — — — — 66 (577)3,118 
Other consumer405 1,504 1,909 — — — — — 649 2,557 
Total consumer1,443 4,095 5,538 — — — — 66 72 5,675 
Total loans$21,907 $18,690 $40,597 $— $— $— $— $179 $7,000 $47,776 
Allowance for credit losses on loans
PPP$— $— $— $— $— $— $— $— $531 $531 0.07 %
Commercial and industrial103,409 48,921 152,330 (80,320)7,004 (73,316)293 469 85,327 165,105 2.14 %
Commercial real estate — owner occupied10,411 (1,851)8,560 (419)147 (272)890 259 2,102 11,539 1.28 %
Commercial and business lending113,820 47,070 160,890 (80,739)7,151 (73,588)1,183 728 87,961 177,175 1.89 %
Commercial real estate — investor41,044 2,287 43,331 (22,920)643 (22,277)753 474 71,792 94,071 2.17 %
Real estate construction32,447 25,814 58,261 (19)49 31 435 537 18,816 78,080 4.24 %
Commercial real estate lending73,490 28,101 101,591 (22,938)692 (22,246)1,188 1,011 90,608 172,152 2.78 %
Total commercial187,311 75,171 262,482 (103,677)7,844 (95,834)2,371 1,739 178,569 349,327 2.25 %
Residential mortgage16,960 33,215 50,175 (1,867)500 (1,367)651 403 (6,864)42,996 0.55 %
Home equity11,964 14,240 26,204 (1,719)1,978 259 422 440 (5,358)21,967 3.11 %
Other consumer7,044 8,520 15,564 (4,790)1,101 (3,689)61 140 5,111 17,187 5.49 %
Total consumer35,968 55,975 91,943 (8,376)3,579 (4,797)1,134 983 (7,112)82,150 0.92 %
Total loans$223,278 $131,147 $354,425 $(112,053)$11,422 $(100,631)$3,504 $2,722 $171,457 $431,478 1.76 %

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Loans Acquired in Acquisitions
Loans acquired in a business combination after January 1, 2020 are recorded in accordance with ASC Topic 326. See Note 2 for more information on loans acquired in a business combination. After January 1, 2020, acquired loans were segregated into two types:
Non-PCD loans are accounted for in accordance with ASC Topic 310-20 "Nonrefundable Fees and Other Costs" as these loans do not show evidence of credit deterioration since origination. The allowance for loan losses on these loans is recorded through provision for credit losses on the consolidated statements of income at acquisition.
PCD loans are loans demonstrating more than insignificant credit deterioration and are accounted for with ASC Topic 326-30. Under this guidance, the credit mark on acquired assets grosses up the ACLL and the amortized cost of the loan.
Note 8 Goodwill and Other Intangible Assets
Goodwill
Goodwill is not amortized but is instead subject to impairment tests on at least an annual basis, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
The Corporation conducted its most recent annual impairment testing in May 2020, utilizing a quantitative assessment of goodwill impairment which included determining the estimated fair value of each reporting unit, utilizing an equally weighted combination of discounted cash flow and market-based approaches, and comparing that fair value to each reporting unit’s carrying amount (including goodwill). An impairment loss is recognized if the carrying amount of a reporting unit exceeds its fair value. Based on the quantitative assessment, management concluded that the estimated fair value exceeded the carrying value (including goodwill) for each reporting unit. Therefore, based on the step one quantitative analysis, no impairment was required. There have been no events since the May 2020 impairment testing that have changed the Corporation's impairment assessment conclusion. There were no impairment charges recorded in 2020 or the first three months of 2021.
Each of the valuation techniques employed by the Corporation requires significant assumptions. Depending upon the specific approach, assumptions are made regarding the economic environment including forecasted cash flow projections, expected net interest margins, long-term growth rates, discount rates for cash flows, control premiums, and price-to-forward earnings multiples. Changes to any one of these assumptions could result in significantly different results. A sustained decline in the Corporation’s expected future cash flows or estimated growth rates, or a prolonged decline in the price of the Corporation’s common stock due to deterioration in the economic environment, may necessitate additional interim testing, which could result in an impairment charge to goodwill in future reporting periods.
At both March 31, 2021 and December 31, 2020, the Corporation had goodwill of $1.1 billion. During the first quarter of 2021, there was a reduction of $4 million related to the sale of Whitnell.
Other Intangible Assets
The Corporation has other intangible assets that are amortized, consisting of CDIs and MSRs. For CDIs and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows:
($ in Thousands)Three Months Ended March 31, 2021Year Ended December 31, 2020
Core deposit intangibles
Gross carrying amount at the beginning of the year$88,109 $80,730 
Additions during the period— 7,379 
Accumulated amortization(23,408)(21,205)
Net book value$64,701 $66,904 
Amortization during the year$2,203 $8,749 
Other intangibles
Gross carrying amount at the beginning of the year $2,000 $38,970 
Additions during the period— 200 
Reductions due to sale(1,317)(17,435)
Accumulated amortization(683)(20,385)
Net book value $— $1,350 
Amortization during the year$33 $1,443 
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Mortgage Servicing Rights
The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. MSRs are amortized in proportion to and over the period of estimated net servicing income and assessed for impairment at each reporting date.
The Corporation evaluates its MSRs asset for impairment at minimum on a quarterly basis. Impairment is assessed based on fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates fall, prepayment speeds are usually faster and the value of the MSRs asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the MSRs asset generally increases, requiring less valuation reserve. A valuation allowance is established, through a charge to earnings, to the extent the amortized cost of the MSRs exceeds the estimated fair value by stratification. An other-than-temporary impairment (i.e., recoverability is considered remote when considering interest rates and loan pay off activity) is recognized as a write-down of the MSRs asset and the related valuation allowance (to the extent a valuation allowance is available) and then against earnings. A direct write-down permanently reduces the carrying value of the MSRs asset and valuation allowance, precluding subsequent recoveries. See Note 12 for a discussion of the recourse provisions on sold residential mortgage loans. See Note 13 which further discusses fair value measurement relative to the MSRs asset.
A summary of changes in the balance of the MSRs asset and the MSRs valuation allowance is as follows:
($ in Thousands)Three Months Ended March 31, 2021Year Ended December 31, 2020
Mortgage servicing rights
Mortgage servicing rights at beginning of period$59,967 $67,607 
Additions from acquisition— 1,357 
Additions3,348 13,667 
Amortization(6,388)(22,664)
Mortgage servicing rights at end of period$56,927 $59,967 
Valuation allowance at beginning of period$(18,006)$(302)
(Additions) recoveries, net10,578 (17,704)
Valuation allowance at end of period$(7,428)$(18,006)
Mortgage servicing rights, net$49,500 $41,961 
Fair value of mortgage servicing rights$49,541 $41,990 
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)$7,313,308 $7,743,956 
Mortgage servicing rights, net to servicing portfolio0.68 %0.54 %
Mortgage servicing rights expense(a)
$(4,190)$40,369 
(a) Includes the amortization of mortgage servicing rights and additions / recoveries to the valuation allowance of mortgage servicing rights, and is a component of mortgage banking, net on the consolidated statements of income.
The projections of amortization expense are based on existing asset balances, the current interest rate environment, and prepayment speeds as of March 31, 2021. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable. The following table shows the estimated future amortization expense for amortizing intangible assets:
($ in Thousands)Core Deposit IntangiblesMortgage Servicing Rights
Nine Months Ending December 31, 2021$6,608 $8,345 
20228,811 11,550 
20238,811 8,909 
20248,811 6,983 
20258,811 5,547 
20268,811 4,466 
Beyond 202614,038 11,125 
Total Estimated Amortization Expense$64,701 $56,927 

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Note 9 Short and Long-Term Funding
The following table presents the components of short-term funding (funding with original contractual maturities of one year or less) and long-term funding (funding with original contractual maturities greater than one year):
($ in Thousands)March 31, 2021December 31, 2020
Short-Term Funding
Federal funds purchased$7,450 $7,070 
Securities sold under agreements to repurchase131,057 185,901 
Federal funds purchased and securities sold under agreements to repurchase138,507 192,971 
Commercial paper51,171 59,346 
Total short-term funding$189,678 $252,317 
Long-Term Funding
Bank senior notes, at par, due 2021$300,000 $300,000 
Corporation subordinated notes, at par, due 2025250,000 250,000 
Finance leases1,091 1,128 
Capitalized costs(1,362)(1,663)
FHLB advances1,629,966 $1,632,723 
Total long-term funding2,179,694 2,182,188 
Total short and long-term funding$2,369,372 $2,434,505 
Securities Sold Under Agreements to Repurchase
The Corporation enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Corporation may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Corporation to repurchase the assets. The obligation to repurchase the securities is reflected as a liability on the Corporation’s consolidated balance sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts (i.e., there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities). See Note 11 for additional disclosures on balance sheet offsetting.
The Corporation utilizes securities sold under agreements to repurchase to facilitate the needs of its customers. As of March 31, 2021, the Corporation pledged agency mortgage-related securities with a fair value of $192 million as collateral for the repurchase agreements. Securities pledged as collateral under repurchase agreements are maintained with the Corporation's safekeeping agents and are monitored on a daily basis due to the market risk of fair value changes in the underlying securities. The Corporation generally pledges excess securities to ensure there is sufficient collateral to satisfy short-term fluctuations in both the repurchase agreement balances and the fair value of the underlying securities.
The remaining contractual maturity of the securities sold under agreements to repurchase on the consolidated balance sheets as of March 31, 2021 and December 31, 2020 are presented in the following table:
Remaining Contractual Maturity of the Agreements
($ in Thousands)Overnight and ContinuousUp to 30 days30-90 daysGreater than 90 daysTotal
March 31, 2021
Repurchase agreements
Agency mortgage-related securities$131,057 $— $— $— $131,057 
Total $131,057 $— $— $— $131,057 
December 31, 2020
Repurchase agreements
Agency mortgage-related securities$185,901 $— $— $— $185,901 
Total $185,901 $— $— $— $185,901 

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Long-Term Funding
Senior Notes 
In August 2018, the Bank issued $300 million of senior notes, due August 2021, and callable July 2021. The senior notes have a fixed coupon interest rate of 3.50% and were issued at a discount.
Subordinated Notes 
In November 2014, the Corporation issued $250 million of 10-year subordinated notes, due January 2025, and callable October 2024. The subordinated notes have a fixed coupon interest rate of 4.25% and were issued at a discount.
Finance Leases
In connection with the construction of new branches in Oshkosh and Eau Claire, Wisconsin, the Corporation entered into land leases with options to purchase the underlying land for a fixed price, which the Corporation now expects to exercise. The finance leases have fixed interest rates of approximately 1.00%. See Note 18 for additional disclosure regarding the Corporation’s leases.
Note 10 Derivative and Hedging Activities
The Corporation is exposed to certain risk arising from both its business operations and economic conditions. The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Corporation enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Corporation's derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation's known or expected cash receipts and its known or expected cash payments principally related to the Corporation's assets.
The contract or notional amount of a derivative is used to determine, along with the other terms of the derivative, the amounts to be exchanged between the counterparties. The Corporation is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. To mitigate the counterparty risk, contracts generally contain language outlining collateral pledging requirements for each counterparty. For non-centrally cleared derivatives, collateral must be posted when the market value exceeds certain mutually agreed upon threshold limits. Securities and cash are often pledged as collateral. The Corporation pledged $67 million of investment securities as collateral at March 31, 2021, and pledged $72 million of investment securities as collateral at December 31, 2020. At March 31, 2021, the Corporation posted $21 million of cash collateral compared to $31 million at December 31, 2020.
Federal regulations require the Corporation to clear all LIBOR interest rate swaps through a clearing house, if possible. For derivatives cleared through central clearing houses, the variation margin payments are legally characterized as daily settlements of the derivative rather than collateral. The Corporation's clearing agent for interest rate derivative contracts that are centrally cleared through the Chicago Mercantile Exchange (CME) and the London Clearing House (LCH) settles the variation margin daily. As a result, the variation margin payment and the related derivative instruments are considered a single unit of account for accounting and financial reporting purposes. Depending on the net position, the fair value is reported in other assets or accrued expenses and other liabilities on the consolidated balance sheets. The daily settlement of the derivative exposure does not change or reset the contractual terms of the instrument.
Fair Value Hedges of Interest Rate Risk
The Corporation is exposed to changes in the fair value of certain of its pools of prepayable fixed-rate assets due to changes in benchmark interest rates. The Corporation used interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involved the payment of fixed-rate amounts to a counterparty in exchange for the Corporation receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk were recognized in interest income. During the fourth quarter of 2019, the Corporation terminated the outstanding fair value hedges.
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Derivatives to Accommodate Customer Needs
The Corporation also facilitates customer borrowing activity by entering into various derivative contracts which are designated as free standing derivative contracts. Free standing derivative products are entered into primarily for the benefit of commercial customers seeking to manage their exposures to interest rate risk, foreign currency, and commodity prices. These derivative contracts are not designated against specific assets and liabilities on the consolidated balance sheets or forecasted transactions and, therefore, do not qualify for hedge accounting treatment. Such derivative contracts are carried at fair value in other assets and accrued expenses and other liabilities on the consolidated balance sheets with changes in the fair value recorded as a component of capital markets, net, and typically include interest rate-related instruments (swaps and caps), foreign currency exchange forwards, and commodity contracts. See Note 11 for additional information and disclosures on balance sheet offsetting.
Interest rate-related instruments: The Corporation provides interest rate risk management services to commercial customers, primarily forward interest rate swaps and caps. The Corporation’s market risk from unfavorable movements in interest rates related to these derivative contracts is generally economically hedged by concurrently entering into offsetting derivative contracts. The offsetting derivative contracts have identical notional values, terms, and indices.
Foreign currency exchange forwards: The Corporation provides foreign currency exchange services to customers, primarily forward contracts. The Corporation's customers enter into a foreign currency exchange forward with the Corporation as a means for them to mitigate exchange rate risk. The Corporation mitigates its risk by then entering into an offsetting foreign currency exchange derivative contract.
Commodity contracts: Commodity contracts are entered into primarily for the benefit of commercial customers seeking to manage their exposure to fluctuating commodity prices. The Corporation mitigates its risk by then entering into an offsetting commodity derivative contract.
Mortgage Derivatives
Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded in other assets and accrued expenses and other liabilities on the consolidated balance sheets with the changes in fair value recorded as a component of mortgage banking, net.
The following table presents the total notional amounts and gross fair values of the Company’s derivatives, as well as the balance sheet netting adjustments as of March 31, 2021 and December 31, 2020. The derivative assets and liabilities are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after the variation margin payments with central clearing organizations have been applied as settlement, as applicable. Total derivative assets and liabilities are adjusted to take into consideration the effects of legally enforceable master netting agreements and cash collateral received or paid as of March 31, 2021 and December 31, 2020. The resulting net derivative asset and liability fair values are included in other assets and accrued expenses and other liabilities, respectively, on the consolidated balance sheets.
 March 31, 2021December 31, 2020
AssetLiabilityAssetLiability
($ in Thousands)Notional AmountFair ValueNotional AmountFair ValueNotional AmountFair ValueNotional AmountFair Value
Not designated as hedging instruments
Interest rate-related instruments$3,654,732 $121,020 $3,654,732 $28,382 $3,639,679 $192,518 $3,639,679 $25,680 
Foreign currency exchange forwards448,395 3,044 439,381 2,828 411,292 4,909 398,890 4,836 
Commodity contracts70,633 5,808 70,758 5,098 87,547 12,486 83,214 11,155 
Mortgage banking(a)(b)
292,704 11,171 408,500 — 226,818 9,624 335,500 2,046 
Gross derivatives before netting$141,043 $36,308 $219,537 $43,716 
Less: Legally enforceable master netting agreements2,643 2,643 1,936 1,936 
Less: Cash collateral pledged/received1,581 17,583 10,879 25,625 
Total derivative instruments, after netting$136,819 $16,082 $206,722 $16,155 
(a) Mortgage derivative assets include interest rate lock commitments and mortgage derivative liabilities include forward commitments.
(b) Includes $4 million forward commitment fair value.
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The Corporation terminated its $500 million fair value hedge during the fourth quarter of 2019. At March 31, 2021, the amortized cost basis of the closed portfolios which had previously been used in the terminated hedging relationship was $534 million and is included in loans and investment securities, AFS, at fair value on the consolidated balance sheets. This amount includes $3 million of hedging adjustments on the discontinued hedging relationships.

The table below identifies the effect of fair value hedge accounting on the Corporation's consolidated statements of income for the three months ended March 31, 2021 and 2020:
Location and Amount of Gain or (Loss) Recognized in Income on
Fair Value and Cash Flow Hedging Relationships
Three Months Ended March 31,
20212020
($ in Thousands)Interest IncomeOther Income (Expense)Interest IncomeOther Income (Expense)
Total amounts of income and expense line items presented on the consolidated statements of income in which the effects of the fair value hedge is recorded$(485)$— $(322)$(262)
The effects of fair value hedging: Gain or (loss) on fair value hedging relationships in Subtopic 815-20
Interest contracts
Hedged items (485)— (322)(262)
Derivatives designated as hedging instruments(a)
— — — — 
(a) Includes net settlements on the derivatives.
The table below identifies the effect of derivatives not designated as hedging instruments on the Corporation's consolidated statements of income for the three months ended March 31, 2021 and 2020:
Consolidated Statements of Income Category of
Gain / (Loss) 
Recognized in Income
Three Months Ended March 31,
($ in Thousands)20212020
Derivative Instruments
Interest rate-related instruments — customer and mirror, netCapital markets, net$2,938 $(3,090)
Foreign currency exchange forwardsCapital markets, net143 (122)
Commodity contractsCapital markets, net(621)746 
Interest rate lock commitments (mortgage)Mortgage banking, net(2,708)9,928 
Forward commitments (mortgage)Mortgage banking, net(6,300)(10,262)

Note 11 Balance Sheet Offsetting
Interest Rate-Related Instruments, Commodity Contracts, and Foreign Exchange Forwards (“Interest, Commodity, and Foreign Exchange Agreements”)
The Corporation enters into interest rate-related instruments to facilitate the interest rate risk management strategies of commercial customers, commodity contracts to manage commercial customers' exposure to fluctuating commodity prices, and foreign exchange forwards to manage customers' exposure to fluctuating foreign exchange rates. The Corporation mitigates these risks by entering into equal and offsetting agreements with highly rated third-party financial institutions. The Corporation is party to master netting arrangements with its financial institution counterparties that create single net settlements of all legal claims or obligations to pay or receive the net amount of settlement of the individual interest, commodity, and foreign exchange agreements. Collateral, usually in the form of investment securities and cash, is posted by the counterparty with net liability positions in accordance with contract thresholds. Derivatives subject to a legally enforceable master netting agreement are reported on a net basis, net of cash collateral, in other assets and accrued expenses and other liabilities, on the face of the consolidated balance sheets. See Note 10 for additional information on the Corporation’s derivative and hedging activities.
Securities Sold Under Agreements to Repurchase
The Corporation enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. These repurchase agreements are accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities (i.e., there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities). The right of set-off for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Corporation be in default
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(e.g., fails to make an interest payment to the counterparty). In addition, the Corporation does not enter into reverse repurchase agreements; therefore, there is no such offsetting to be done with the repurchase agreements. See Note 9 for additional disclosures on repurchase agreements.
The following table presents the interest rate, commodity, and foreign exchange assets and liabilities subject to an enforceable master netting arrangement. The interest, commodity and foreign exchange agreements the Corporation has with its commercial customers are not subject to an enforceable master netting arrangement and are therefore excluded from this table:
 Gross Amounts RecognizedGross Amounts Subject to Master Netting Arrangements Offset on the Consolidated Balance SheetsNet Amounts Presented on the Consolidated Balance SheetsGross Amounts Not Offset on the Consolidated Balance Sheets 
 ($ in Thousands)Derivative
Liabilities Offset
Cash Collateral ReceivedNet Amount
Derivative assets
March 31, 2021$4,496 $(2,643)$(1,581)$272 $ $272 
December 31, 202013,441 (1,936)(10,879)626 — 626 
 Gross Amounts RecognizedGross Amounts Subject to Master Netting Arrangements Offset on the Consolidated Balance SheetsNet Amounts Presented on the Consolidated Balance SheetsGross Amounts Not Offset on the Consolidated Balance Sheets 
 ($ in Thousands)Derivative
Assets Offset
Cash Collateral PledgedNet Amount
Derivative liabilities
March 31, 2021$20,393 $(2,643)$(17,583)$167 $ $167 
December 31, 202027,951 (1,936)(25,625)390 — 390 

Note 12 Commitments, Off-Balance Sheet Arrangements, Legal Proceedings and Regulatory Matters
The Corporation utilizes a variety of financial instruments in the normal course of business to meet the financial needs of its customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include lending-related and other commitments (see below) as well as derivative instruments (see Note 10). The following is a summary of lending-related commitments:
($ in Thousands)March 31, 2021December 31, 2020
Commitments to extend credit, excluding commitments to originate residential mortgage loans held for sale(a)(b)
$10,102,713 $10,010,492 
Commercial letters of credit(a)
7,301 3,642 
Standby letters of credit(c)
247,473 278,798 
(a) These off-balance sheet financial instruments are exercisable at the market rate prevailing at the date the underlying transaction will be completed and, thus, are deemed to have no current fair value, or the fair value is based on fees currently charged to enter into similar agreements and was not material at March 31, 2021 or December 31, 2020.
(b) Interest rate lock commitments to originate residential mortgage loans held for sale are considered derivative instruments and are disclosed in Note 10.
(c) The Corporation has established a liability of $3 million for both March 31, 2021 and December 31, 2020, as an estimate of the fair value of these financial instruments.
Lending-related Commitments
As a financial services provider, the Corporation routinely enters into commitments to extend credit. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Corporation, with each customer’s creditworthiness evaluated on a case-by-case basis. The commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to these financial instruments is represented by the contractual amount of those instruments. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the customer. Since a significant portion of commitments to extend credit are subject to specific restrictive loan covenants or may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements. An allowance for unfunded commitments is maintained at a level believed by management to be sufficient to absorb expected lifetime losses related to unfunded commitments (including unfunded loan commitments and letters of credit). The following table presents a summary of the changes in the allowance for unfunded commitments:
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($ in Thousands)Three Months Ended March 31, 2021Year Ended December 31, 2020
Allowance for Unfunded Commitments
Balance at beginning of period$47,776 $21,907 
Cumulative effect of ASU 2016-13 adoption (CECL)N/A18,690 
Balance at beginning of period, adjusted47,776 40,597 
Provision for unfunded commitments3,000 7,000 
Amount recorded at acquisition— 179 
Balance at end of period$50,776 $47,776 
Lending-related commitments include commitments to extend credit, commitments to originate residential mortgage loans held for sale, commercial letters of credit, and standby letters of credit. Commitments to extend credit are legally binding agreements to lend to customers at predetermined interest rates, as long as there is no violation of any condition established in the contracts. Interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments, and the fair value of these commitments is recorded on the consolidated balance sheets. The Corporation’s derivative and hedging activity is further described in Note 10. Commercial and standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party, while standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.
Other Commitments
The Corporation invests in qualified affordable housing projects, federal and state historic projects, new market projects, and opportunity zone funds for the purpose of community reinvestment and obtaining tax credits and other tax benefits. Return on the Corporation's investment in these projects and funds comes in the form of the tax credits and tax losses that pass through to the Corporation, and deferral or elimination of capital gain recognition for tax purposes. The aggregate carrying value of these investments at March 31, 2021 was $280 million, compared to $272 million at December 31, 2020, included in tax credit and other investments on the consolidated balance sheets. The Corporation utilizes the proportional amortization method to account for investments in qualified affordable housing projects.
Under the proportional amortization method, the Corporation amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits. The Corporation recognized additional income tax expense attributable to the amortization of investments in qualified affordable housing projects of $8 million and $6 million for the three months ended March 31, 2021 and 2020, respectively. The Corporation's remaining investment in qualified affordable housing projects accounted for under the proportional amortization method totaled $277 million at March 31, 2021 and $268 million at December 31, 2020.
The Corporation’s unfunded equity contributions relating to investments in qualified affordable housing, federal and state historic projects, and new market projects are recorded in accrued expenses and other liabilities on the consolidated balance sheets. The Corporation’s remaining unfunded equity contributions totaled $119 million and $118 million at March 31, 2021 and December 31, 2020, respectively.
For the three months ended March 31, 2021 and the year ended December 31, 2020, the Corporation did not record any impairment related to qualified affordable housing investments.
The Corporation has principal investment commitments to provide capital-based financing to private and public companies through either direct investment in specific companies or through investment funds and partnerships. The timing of future cash requirements to fund such principal investment commitments is generally dependent on the investment cycle, whereby privately held companies are funded by private equity investors and ultimately sold, merged, or taken public through an initial offering, which can vary based on overall market conditions, as well as the nature and type of industry in which the companies operate. The Corporation also invests in loan pools that support CRA loans. The timing of future cash requirements to fund these pools is dependent upon loan demand, which can vary over time. The aggregate carrying value of these investments was $23 million and $25 million at March 31, 2021 and December 31, 2020, respectively, included in tax credit and other investments on the consolidated balance sheets.
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Legal Proceedings
The Corporation is party to various pending and threatened claims and legal proceedings arising in the normal course of business activities, some of which involve claims for substantial amounts. Although there can be no assurance as to the ultimate outcomes, the Corporation believes it has meritorious defenses to the claims asserted against it in its currently outstanding matters and intends to continue to defend itself vigorously with respect to such legal proceedings. The Corporation will consider settlement of cases when, in management’s judgment, it is in the best interests of the Corporation and its shareholders.
On at least a quarterly basis, the Corporation assesses its liabilities and contingencies in connection with all pending or threatened claims and litigation, utilizing the most recent information available. On a matter by matter basis, an accrual for loss is established for those matters which the Corporation believes it is probable that a loss may be incurred and that the amount of such loss can be reasonably estimated. Once established, each accrual is adjusted as appropriate to reflect any subsequent developments. Accordingly, management’s estimate will change from time to time, and actual losses may be more or less than the current estimate. For matters where a loss is not probable, or the amount of the loss cannot be estimated, no accrual is established.
Resolution of legal claims is inherently unpredictable, and in many legal proceedings various factors exacerbate this inherent unpredictability, including where the damages sought are unsubstantiated or indeterminate, it is unclear whether a case brought as a class action will be allowed to proceed on that basis, discovery is not complete, the proceeding is not yet in its final stages, the matters present legal uncertainties, there are significant facts in dispute, there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants), or there is a wide range of potential results.
A lawsuit, Evans et al v. Associated Banc-Corp et al, was filed in the United States District Court for the Eastern District of Wisconsin - Green Bay Division on January 13, 2021 by one current and one former participant in the Associated Banc-Corp 401(k) and Employee Stock Ownership Plan (the “Plan”) as representatives of a putative class. The plaintiffs alleged that Associated Banc-Corp, the Associated Banc-Corp Plan Administrative Committee, and current and past members of such committee during the relevant time period (the “Defendants”) breached their fiduciary duties with respect to the Plan in violation of Employee Retirement Income Security Act of 1974, as amended, by applying an imprudent and inappropriate preference for products associated with Associated Banc-Corp within the Plan, and that the Defendants failed to monitor or control the recordkeeping expenses paid to Associated Trust Company, N.A. On March 18, 2021, the Defendants filed a motion to dismiss. On April 8, 2021, the plaintiffs filed an amended complaint which dropped the record keeping claim, added Associated Trust Company N.A. and Kellogg Asset Management, LLC as defendants, and alleged various breaches of fiduciary duty related to the selection and monitoring of, and the fees charged by, proprietary collective investment trusts. The plaintiffs, in part, seek an accounting and disgorgement of certain profits, as well as certain equitable restitution and equitable monetary relief. The Corporation intends to vigorously defend against this lawsuit. It is not possible for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss at this time with respect to this lawsuit.
Regulatory Matters
A variety of consumer products, including mortgage and deposit products, and certain fees and charges related to such products, have come under increased regulatory scrutiny. It is possible that regulatory authorities could bring enforcement actions, including civil money penalties, or take other actions against the Corporation and the Bank in regard to these consumer products. The Bank could also determine of its own accord, or be required by regulators, to refund or otherwise make remediation payments to customers in connection with these products. It is not possible at this time for management to assess the probability of a material adverse outcome or reasonably estimate the amount of any potential loss related to such matters.
Mortgage Repurchase Reserve
The Corporation sells residential mortgage loans to investors in the normal course of business. Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages originated under the Corporation's usual underwriting procedures, and are most often sold on a nonrecourse basis, primarily to the GSEs. The Corporation’s agreements to sell residential mortgage loans in the normal course of business usually require certain representations and warranties on the underlying loans sold, related to credit information, loan documentation, collateral, and insurability. Subsequent to being sold, if a material underwriting deficiency or documentation defect is discovered, the Corporation may be obligated to repurchase the loan or reimburse the GSEs for losses incurred (collectively, “make whole requests”). The make whole requests and any related risk of loss under the representations and warranties are largely driven by borrower performance.
As a result of make whole requests, the Corporation has repurchased loans with aggregate principal balances of $2 million and $10 million for the three months ended March 31, 2021 and the year ended December 31, 2020, respectively. There were $109 thousand of loss reimbursement and settlement claims paid for the three months ended March 31, 2021 and there were no such
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claims for the year ended December 31, 2020. Make whole requests during 2020 and the first three months of 2021 generally arose from loans sold during the period of January 1, 2012 to December 31, 2020. Since January 1, 2012, loans sold totaled $14.7 billion at the time of sale, and consisted primarily of loans sold to GSEs. As of March 31, 2021, approximately $6.5 billion of these sold loans remain outstanding.
The balance in the mortgage repurchase reserve at the balance sheet date reflects the estimated amount of potential loss the Corporation could incur from repurchasing a loan, as well as loss reimbursements, indemnifications, and other settlement resolutions. The mortgage repurchase reserve, included in accrued expenses and other liabilities on the consolidated balance sheets, was $1 million as of March 31, 2021 and $2 million as of December 31, 2020.
The Corporation may also sell residential mortgage loans with limited recourse (limited in that the recourse period ends prior to the loan’s maturity, usually after certain time and / or loan paydown criteria have been met), whereby repurchase could be required if the loan had defined delinquency issues during the limited recourse periods. At March 31, 2021 and December 31, 2020, there were approximately $27 million and $36 million, respectively, of residential mortgage loans sold with such recourse risk. There have been limited instances and immaterial historical losses on repurchases for recourse under the limited recourse criteria.
The Corporation has a subordinate position to the FHLB in the credit risk on residential mortgage loans it sold to the FHLB in exchange for a monthly credit enhancement fee. The Corporation has not sold loans to the FHLB with such credit risk retention since February 2005. At March 31, 2021 and December 31, 2020, there were $31 million and $33 million, respectively, of such residential mortgage loans with credit risk recourse, upon which there have been negligible historical losses to the Corporation.
Note 13 Fair Value Measurements
Fair value represents the estimated price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (i.e., an exit price concept).
The valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis are described in the Fair Value Measurements note in the Corporation’s 2020 Annual Report on Form 10-K.
The table below presents the Corporation’s financial instruments measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall:
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 ($ in Thousands)Fair Value HierarchyMarch 31, 2021December 31, 2020
Assets
Investment securities AFS
U.S. Treasury securities Level 1$53,693 $26,531 
Agency securitiesLevel 214,904 25,038 
Obligations of state and political subdivisions (municipal securities)Level 2433,182 450,662 
Residential mortgage-related securities
FNMA / FHLMC Level 21,910,954 1,461,241 
GNMA Level 2123,365 235,537 
Commercial mortgage-related securities
FNMA / FHLMCLevel 294,349 22,904 
GNMA Level 2389,411 524,756 
Asset backed securities
FFELP Level 2325,933 327,189 
SBALevel 28,160 8,584 
Other debt securities Level 23,000 3,000 
Total investment securities AFS Level 1$53,693 $26,531 
Total investment securities AFS Level 23,303,257 3,058,910 
Equity securities with readily determinable fair values Level 11,684 1,661 
Residential loans held for sale Level 2153,151 129,158 
Interest rate-related instruments(a)
 Level 2121,020 192,518 
Foreign currency exchange forwards(a)
 Level 23,044 4,909 
Commodity contracts(a)
 Level 25,808 12,486 
Interest rate lock commitments to originate residential mortgage loans held for sale Level 36,917 9,624 
Forward commitments to sell residential mortgage loansLevel 34,255 — 
Liabilities
Interest rate-related instruments(a)
 Level 2$28,382 $25,680 
Foreign currency exchange forwards(a)
 Level 22,828 4,836 
Commodity contracts(a)
 Level 25,098 11,155 
Forward commitments to sell residential mortgage loans Level 3— 2,046 
(a) Figures are presented gross before netting. See Note 10 and Note 11 for information relating to the impact of offsetting derivative assets and liabilities and cash collateral with the same counterparty where there is a legally enforceable master netting agreement in place.
The table below presents a rollforward of the consolidated balance sheets amounts for the three months ended March 31, 2021 and the year ended December 31, 2020, for the Corporation's mortgage derivatives measured on a recurring basis and classified within Level 3 of the fair value hierarchy:
($ in Thousands)Interest rate lock commitments to originate residential mortgage loans held for saleForward commitments to sell residential mortgage loansTotal
Balance December 31, 2019$2,527 $710 $1,817 
New production72,659 (3,505)76,164 
Closed loans / settlements(76,001)(12,587)(63,414)
Other10,439 17,427 (6,988)
Mortgage derivative gain (loss)7,097 1,335 5,762 
Balance December 31, 2020$9,624 $2,046 $7,579 
New production$16,629 $(1,203)$17,832 
Closed loans / settlements(14,186)2,501 (16,687)
Other(5,151)(7,598)2,447 
Mortgage derivative gain (loss)(2,708)(6,300)3,593 
Balance March 31, 2021$6,917 $(4,255)$11,171 
The closing ratio on interest rate lock commitments to originate residential mortgage loans held for sale is a Level 3 measurement, and was 89% at March 31, 2021.
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The following table presents the carrying value of equity securities without readily determinable fair values still held as of March 31, 2021 that are measured under the measurement alternative and the related adjustments recorded during the periods presented for those securities with observable price changes. These securities are included in the nonrecurring fair value tables when applicable price changes are observable. Also shown are the cumulative upward and downward adjustments for the Corporation's equity securities without readily determinable fair values as of March 31, 2021:
 ($ in Thousands)
Equity securities without readily determinable fair values
Carrying value as of December 31, 2020
$13,444 
Carrying value changes— 
Additions 544 
Carrying value as of March 31, 2021
$13,989 
Cumulative upward carrying value changes between January 1, 2018 and March 31, 2021
$13,444 
Cumulative downward carrying value changes/impairment between January 1, 2018 and March 31, 2021
$— 
The table below presents the Corporation’s assets measured at fair value on a nonrecurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall:
Consolidated Statements of Income
Category of Adjustment 
Recognized in Income
Adjustment Recognized on the Consolidated Statements of Income(c)
($ in Thousands)Fair Value HierarchyFair Value
March 31, 2021
Assets
Individually evaluated loans(a)
Level 3$93,201 Provision for credit losses$(1,613)
OREO(b)
Level 210,326 Other noninterest expense3,681 
Mortgage servicing rightsLevel 349,541 Mortgage banking, net10,578 
December 31, 2020
Assets
Individually evaluated loans(a)
Level 3$138,752 Provision for credit losses$97,519 
OREO(b)
Level 26,125 Other noninterest expense3,747 
Mortgage servicing rightsLevel 341,990 Mortgage banking, net(17,704)
(a) Includes probable TDRs which are individually analyzed, net of the related allowance for credit losses.
(b) If the fair value of the collateral exceeds the carrying amount of the asset, no charge off or adjustment is necessary, the asset is not considered to be carried at fair value, and is therefore not included in the table.
(c) Includes the full year impact on the consolidated statements of income
Certain nonfinancial assets and nonfinancial liabilities measured at fair value on a nonrecurring basis include the fair value analysis in the goodwill impairment test, and intangible assets and other nonfinancial long-lived assets measured at fair value for impairment assessment.
The Corporation's significant Level 3 measurements which employ unobservable inputs that are readily quantifiable pertain to MSRs and individually evaluated loans.
The table below presents information about these inputs and further discussion is found above:
March 31, 2021Valuation TechniqueSignificant Unobservable InputRange of InputsWeighted Average Input Applied
Mortgage servicing rightsDiscounted cash flowDiscount rate9%-14%9%
Mortgage servicing rightsDiscounted cash flowConstant prepayment rate10%-45%16%
Individually evaluated loansAppraisals / Discounted cash flowCollateral / Discount factor25%-38%34%
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Fair Value of Financial Instruments
The Corporation is required to disclose estimated fair values for its financial instruments.
Fair value estimates are set forth below for the Corporation’s financial instruments:
 March 31, 2021December 31, 2020
($ in Thousands)Fair Value Hierarchy LevelCarrying AmountFair ValueCarrying AmountFair Value
Financial assets
Cash and due from banks Level 1$356,285 $356,285 $416,154 $416,154 
Interest-bearing deposits in other financial institutions Level 11,590,494 1,590,494 298,759 298,759 
Federal funds sold and securities purchased under agreements to resell Level 1— — 1,135 1,135 
Investment securities AFS Level 153,693 53,693 26,531 26,531 
Investment securities AFSLevel 23,303,257 3,303,257 3,058,910 3,058,910 
Investment securities HTM, netLevel 11,000 1,019 999 1,024 
Investment securities HTM, netLevel 21,856,088 1,971,459 1,877,939 2,027,852 
Equity securities with readily determinable fair valuesLevel 11,684 1,684 1,661 1,661 
Equity securities without readily determinable fair valuesLevel 313,989 13,989 13,444 13,444 
FHLB and Federal Reserve Bank stocksLevel 2168,281 168,281 168,280 168,280 
Residential loans held for saleLevel 2153,151 153,151 129,158 129,158 
Loans, netLevel 323,809,389 23,723,543 24,068,022 24,012,738 
Bank and corporate owned life insuranceLevel 2680,831 680,831 679,647 679,647 
Derivatives (other assets)(a)
Level 2129,872 129,872 209,913 209,913 
Interest rate lock commitments to originate residential mortgage loans held for sale (other assets)Level 36,917 6,917 9,624 9,624 
Forward commitments to sell residential mortgage loans (other assets)Level 34,255 4,255 — — 
Financial liabilities
Noninterest-bearing demand, savings, interest-bearing demand, and money market accountsLevel 3$26,115,814 $26,115,814 $24,725,451 $24,725,451 
Brokered CDs and other time deposits(b)
Level 21,561,352 1,566,421 1,757,030 1,766,200 
Short-term fundingLevel 2189,678 189,672 252,317 252,303 
FHLB advancesLevel 21,629,966 1,693,172 1,632,723 1,760,727 
Other long-term fundingLevel 2549,729 576,183 549,465 578,233 
Standby letters of credit(c)
Level 22,549 2,549 2,731 2,731 
Derivatives (accrued expenses and other liabilities)(a)
Level 236,308 36,308 41,671 41,671 
Forward commitments to sell residential mortgage loans (accrued expenses and other liabilities) Level 3— — 2,046 2,046 
(a) Figures are presented gross before netting. See Note 10 and Note 11 for information relating to the impact of offsetting derivative assets and liabilities and cash collateral with the same counterparty where there is a legally enforceable master netting agreement in place.
(b) When the estimated fair value is less than the carrying value, the carrying value is reported as the fair value.
(c) The commitment on standby letters of credit was $247 million at March 31, 2021 and $279 million at December 31, 2020. See Note 12 for additional information on the standby letters of credit and for information on the fair value of lending-related commitments.
Note 14 Retirement Plans
The Corporation has a noncontributory defined benefit retirement account plan, the RAP, covering substantially all employees who meet participation requirements. The benefits are based primarily on years of service and the employee’s compensation paid. Employees of acquired entities generally participate in the RAP after consummation of the business combinations. Any retirement plans of acquired entities are typically merged into the RAP after completion of the mergers, and credit is usually given to employees for years of service at the acquired institution for vesting and eligibility purposes.
The Corporation also provides legacy healthcare access to a limited group of retired employees from a previous acquisition in the Postretirement Plan. There are no other active retiree healthcare plans.
The First Staunton acquisition closed on February 14, 2020, and the employees who met the required criteria as a result of the transaction became eligible to participate in the RAP on February 15, 2020, with their vesting service credit based on their prior hours of service with First Staunton. See Note 2 for additional information on the First Staunton acquisition.
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The components of net periodic pension cost and net periodic benefit cost for the RAP and Postretirement Plan for the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31,
($ in Thousands)20212020
Components of Net Periodic Benefit Cost
RAP
Service cost$2,075 $2,165 
Interest cost1,623 2,008 
Expected return on plan assets(6,430)(6,405)
Amortization of prior service cost(18)(19)
Amortization of actuarial loss (gain)1,050 808 
Total net periodic pension cost$(1,701)$(1,444)
Postretirement Plan
Interest cost$13 $20 
Amortization of prior service cost(19)(19)
Total net periodic benefit cost$(6)$
The components of net periodic pension cost and net periodic benefit cost, other than the service cost component, are included in the line item other of noninterest expense on the consolidated statements of income. The service cost components are included in personnel on the consolidated statements of income. The weighted-average interest crediting rate was 2.80% at both March 31, 2021 and December 31, 2020.
The Corporation’s funding policy is to pay at least the minimum amount required by federal law and regulations, with consideration given to the maximum funding amounts allowed. The Corporation regularly reviews the funding of its RAP. There were no contributions during the three months ended March 31, 2021 and 2020.
Note 15 Segment Reporting
The Corporation utilizes a risk-based internal profitability measurement system to provide strategic business unit reporting. The profitability measurement system is based on internal management methodologies designed to produce consistent results and reflect the underlying economics of the units. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer, and the distribution of those products and services are similar. The three reportable segments are Corporate and Commercial Specialty; Community, Consumer, and Business; and Risk Management and Shared Services. The financial information of the Corporation’s segments has been compiled utilizing the accounting policies described in the Corporation’s 2020 Annual Report on Form 10-K with certain exceptions. The more significant of these exceptions are described herein.
The reportable segment results are presented based on the Corporation's internal management accounting process. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to U.S. GAAP. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in previously reported segment financial data. Additionally, the information presented is not indicative of how the segments would perform if they operated as independent entities.
To determine financial performance of each segment, the Corporation allocates FTP assignments, the provision for credit losses, certain noninterest expenses, income taxes, and equity to each segment. Allocation methodologies are subject to periodic adjustment as the internal management accounting system is revised, the interest rate environment evolves, and business or product lines within the segments change. Also, because the development and application of these methodologies is a dynamic process, the financial results presented may be periodically reviewed.
The Corporation allocates net interest income using an internal FTP methodology that charges users of funds (assets) and credits providers of funds (liabilities, primarily deposits) based on the maturity, prepayment and / or re-pricing characteristics of the assets and liabilities. The net effect of this allocation is offset in the Risk Management and Shared Services segment to ensure consolidated totals reflect the Corporation's net interest income. The net FTP allocation is reflected as net intersegment income (expense) in the accompanying tables.
A credit provision is allocated to segments based on the expected long-term annual net charge off rates attributable to the credit risk of loans managed by the segment during the period. In contrast, the level of the consolidated provision for credit losses is
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determined based on an ACLL model using the methodologies described in the Corporation’s 2020 Annual Report on Form 10-K. The net effect of the credit provision is recorded in Risk Management and Shared Services. Indirect expenses incurred by certain centralized support areas are allocated to segments based on actual usage (for example, volume measurements) and other criteria. Certain types of administrative expense and bank-wide expense accruals (including amortization of CDIs and other intangible assets associated with acquisitions, acquisition-related costs, and asset gains on disposed business units) are generally not allocated to segments. Income taxes are allocated to segments based on the Corporation’s estimated effective tax rate, with certain segments adjusted for any tax-exempt income or non-deductible expenses. Equity is allocated to the segments based on regulatory capital requirements and in proportion to an assessment of the inherent risks associated with the business of the segment (including interest, credit and operating risk).
A brief description of each business segment is presented below. A more in-depth discussion of these segments can be found in the Segment Reporting footnote in the Corporation’s 2020 Annual Report on Form 10-K.
The Corporate and Commercial Specialty segment serves a wide range of customers including larger businesses, developers, not-for-profits, municipalities, and financial institutions by providing lending and deposit solutions as well as the support to deliver, fund, and manage such banking solutions. In addition, this segment provides a variety of investment, fiduciary, and retirement planning products and services to individuals and small to mid-sized businesses. During the first quarter of 2021, the Corporation sold its wealth management subsidiary Whitnell. The Community, Consumer, and Business segment serves individuals, as well as small and mid-sized businesses, by providing lending and deposit solutions. In addition, the Corporation offered insurance and risk consulting services. The Risk Management and Shared Services segment includes key shared operational functions and also includes residual revenue and expenses, representing the difference between actual amounts incurred and the amounts allocated to operating segments, including interest rate risk residuals (FTP mismatches) and credit risk and provision residuals (long-term credit charge mismatches).
Information about the Corporation’s segments is presented below:
Corporate and Commercial Specialty
Three Months Ended March 31,
($ in Thousands)20212020
Net interest income$93,161 $107,753 
Net intersegment interest income (expense)6,684 (10,726)
Segment net interest income99,845 97,028 
Noninterest income(a)
43,031 38,733 
Total revenue142,876 135,761 
Provision for credit losses17,509 12,172 
Noninterest expense57,725 54,304 
Income (loss) before income taxes67,642 69,284 
Income tax expense (benefit)12,649 12,940 
Net income$54,993 $56,344 
Allocated goodwill$525,836 $530,144 

Community, Consumer, and Business
Three Months Ended March 31,
($ in Thousands)20212020
Net interest income$68,275 $74,927 
Net intersegment interest income (expense)12,875 18,665 
Segment net interest income81,150 93,592 
Noninterest income46,128 53,350 
Total revenue127,278 146,942 
Provision for credit losses5,099 5,108 
Noninterest expense97,346 113,777 
Income (loss) before income taxes24,834 28,057 
Income tax expense (benefit)5,215 5,892 
Net income$19,618 $22,165 
Allocated goodwill$579,156 $661,244 

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 Risk Management and Shared Services
Three Months Ended March 31,
($ in Thousands)20212020
Net interest income$14,465 $20,261 
Net intersegment interest income (expense)(19,559)(7,939)
Segment net interest income(5,094)12,322 
Noninterest income6,184 6,223 
Total revenue1,091 18,545 
Provision for credit losses(45,612)35,720 
Noninterest expense20,275 24,110 
Income (loss) before income taxes26,427 (41,285)
Income tax expense (benefit)6,737 (8,613)
Net income$19,690 $(32,672)
Allocated goodwill$— $— 

Consolidated Total
Three Months Ended March 31,
($ in Thousands)20212020
Net interest income$175,902 $202,942 
Net intersegment interest income (expense)— — 
Segment net interest income175,902 202,942 
Noninterest income(a)
95,343 98,306 
Total revenue271,245 301,248 
Provision for credit losses(23,004)53,001 
Noninterest expense175,347 192,191 
Income (loss) before income taxes118,903 56,056 
Income tax expense (benefit)24,602 10,219 
Net income$94,301 $45,838 
Allocated goodwill$1,104,992 $1,191,388 
(a) Includes $2 million pre-tax gain on sale of Whitnell.
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Note 16 Accumulated Other Comprehensive Income (Loss)
The following tables summarize the components of accumulated other comprehensive income (loss) at March 31, 2021 and 2020, including changes during the preceding three month periods as well as any reclassifications out of accumulated other comprehensive income (loss):
($ in Thousands)Investment
Securities
AFS
Defined Benefit
Pension and
Postretirement
Obligations
Accumulated
Other
Comprehensive
Income (Loss)
Balance December 31, 2020
$41,325 $(28,707)$12,618 
Other comprehensive income (loss) before reclassifications(23,979)— (23,979)
Amounts reclassified from accumulated other comprehensive income (loss)
Investment securities losses (gains), net39 — 39 
Personnel expense— (37)(37)
Other expense— 1,050 1,050 
Interest income518 — 518 
Income tax (expense) benefit5,851 (253)5,598 
Net other comprehensive income (loss) during period(17,571)760 (16,811)
Balance March 31, 2021$23,754 $(27,947)$(4,193)
Balance December 31, 2019
$3,989 $(37,172)$(33,183)
Other comprehensive income (loss) before reclassifications26,419 — 26,419 
Amounts reclassified from accumulated other comprehensive income (loss)
Investment securities losses (gains), net(6,118)— (6,118)
Personnel expense— (38)(38)
Other expense— 808 808 
Interest income556 — 556 
Income tax (expense) benefit(5,225)(193)(5,418)
Net other comprehensive income (loss) during period15,632 577 16,209 
Balance March 31, 2020$19,620 $(36,595)$(16,974)


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Note 17 Revenue from Contracts with Customers
Revenue from contracts with customers is recognized when obligations under the terms of a contract with the Corporation's customer are satisfied. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. We do not have any material significant payment terms as payment is received at or shortly after the satisfaction of the performance obligation.
The Corporation's disaggregated revenue by major source is presented below:
Corporate and Commercial Specialty
Three Months Ended March 31,
($ in Thousands)20212020
Wealth management fees$22,414 $20,106 
Service charges and deposit account fees4,905 3,551 
Card-based fees(a)
435 515 
Insurance commissions and fees 24 76 
Other revenue685 788 
   Noninterest income (in-scope of Topic 606) $28,463 $25,036 
   Noninterest income (out-of-scope of Topic 606)14,568 13,697 
  Total noninterest income $43,031 $38,733 
Community, Consumer, and Business
Three Months Ended March 31,
($ in Thousands)20212020
Wealth management fees$— $710 
Service charges and deposit account fees9,935 11,665 
Card-based fees(a)
9,325 9,045 
Insurance commissions and fees 50 22,529 
Other revenue3,579 2,286 
   Noninterest income (in-scope of Topic 606) $22,889 $46,235 
Noninterest income (out-of-scope of Topic 606)23,239 7,115 
  Total noninterest income $46,128 $53,350 

Risk Management and Shared Services
Three Months Ended March 31,
($ in Thousands)20212020
Service charges and deposit account fees15 
Card-based fees(a)
47 
Insurance commissions and fees
Other revenue389 23 
Noninterest income (in-scope of Topic 606) $409 $77 
Noninterest income (out-of-scope of Topic 606)5,775 6,146 
  Total noninterest income $6,184 $6,223 
Consolidated Total
Three Months Ended March 31,
($ in Thousands)20212020
Wealth management fees$22,414 $20,816 
Service charges and deposit account fees14,855 15,222 
Card-based fees(a)
9,764 9,607 
 Insurance commissions and fees 76 22,608 
Other revenue4,653 3,096 
Noninterest income (in-scope of Topic 606) $51,762 $71,348 
Noninterest income (out-of-scope of Topic 606)43,581 26,958 
  Total noninterest income $95,343 $98,306 
(a) Certain card-based fees are out-of-scope of Topic 606.


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Below is a listing of performance obligations for the Corporation's main revenue streams:
Revenue StreamNoninterest income in-scope of Topic 606
Service charges and deposit account feesService charges and deposit account fees consist of monthly service fees (i.e. business analyzed fees and consumer service charges) and other deposit account related fees. The Corporation's performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Other deposit account related fees are largely transactional based, and therefore, the Corporation's performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges and deposit account fees is primarily received immediately or in the following month through a direct charge to customers’ accounts.
Card-based fees(a)
Card-based fees are primarily comprised of debit and credit card income, ATM fees, and merchant services income. Debit and credit card income is primarily comprised of interchange fees earned whenever the Corporation's debit and credit cards are processed through card payment networks. ATM and merchant fees are largely transactional based, and therefore, the Corporation's performance obligation is satisfied, and related revenue recognized, at a point in time. Payment is typically received immediately or in the following month.
Trust and asset management fees(b)
Trust and asset management income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Corporation's performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to the customers’ accounts. The Corporation's performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.
Brokerage and advisory fees(b)
Brokerage and advisory fees primarily consist of investment advisory, brokerage, retirement services, and annuities. The Corporation's performance obligation for investment advisory services and retirement services is generally satisfied, and the related revenue recognized, over the period in which the services are provided. The performance obligation for annuities is satisfied upon sale of the annuity, and therefore, the related revenue is primarily recognized at the time of sale. Payment for these services are typically received immediately or in advance of the service.
(a) Certain card-based fees are out-of-scope of Topic 606.
(b) Trust and asset management fees and brokerage and advisory fees are included in wealth management fees.
Note 18 Leases
The Corporation has operating leases for retail and corporate offices, land, and equipment. The Corporation also has finance leases for land.
These leases have original terms of 1 year or longer with remaining maturities up to 42 years, some of which include options to extend the lease term. An analysis of the lease options has been completed and any purchase options or optional periods that the Corporation is reasonably likely to extend have been included in the capitalization.
The discount rate used to capitalize the operating leases is the Corporation's FHLB borrowing rate on the date of lease commencement. When determining the rate to discount specific lease obligations, the repayment period and term are considered.
Operating and finance lease costs and cash flows resulting from these leases are presented below:
Three Months Ended March 31,
($ in Thousands)20212020
Operating lease costs$2,240 $2,623 
Finance lease costs39 36 
Operating lease cash flows2,963 2,731 
Finance lease cash flows40 21 

The lease classifications on the consolidated balance sheets were as follows:
($ in Thousands)Consolidated Balance Sheets CategoryMarch 31, 2021December 31, 2020
Amount
Operating lease right-of-use assetPremises and equipment$32,071 $31,994 
Finance lease right-of-use assetOther assets854 962 
Operating lease liabilityAccrued expenses and other liabilities36,079 36,425 
Finance lease liabilityOther long-term funding1,091 1,128 
The lease payment obligations, weighted-average remaining lease term, and weighted-average discount rate were as follows:
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March 31, 2021December 31, 2020
($ in Thousands)Lease paymentsWeighted-average lease term (in years)Weighted-average discount rateLease paymentsWeighted-average lease term (in years)Weighted-average discount rate
Operating leases
Equipment$385 2.240.46 %$386 2.490.46 %
Retail and corporate offices33,707 5.943.27 %34,036 6.043.33 %
Land6,165 8.833.10 %6,385 8.993.09 %
Total operating leases$40,257 6.333.22 %$40,806 6.453.27 %
Finance leases
Land$1,105 1.401.05 %$1,145 1.651.05 %
Total finance leases$1,105 1.401.05 %$1,145 1.651.05 %
Contractual lease payment obligations for each of the next five years and thereafter, in addition to a reconciliation to the Corporation’s lease liability, were as follows:
($ in Thousands)Operating LeasesFinance LeasesTotal Leases
Nine Months Ending December 31, 2021$6,591 $132 $6,724 
20227,111 973 8,084 
20236,010 — 6,010 
20245,274 — 5,274 
20254,110 — 4,110 
Beyond 202511,160 — 11,160 
Total lease payments$40,257 $1,105 $41,362 
Less: interest4,178 14 4,192 
Present value of lease payments$36,079 $1,091 $37,170 
As of March 31, 2021 and December 31, 2020, additional operating leases, primarily retail and corporate offices, that had not yet commenced totaled $15 million and $17 million, respectively. The leases that had not yet commenced as of March 31, 2021, will commence between April 2021 and October 2023 with lease terms of 1 year to 6 years.
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ITEM 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
This report contains statements that may constitute forward-looking statements within the meaning of the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, such as statements other than historical facts contained or incorporated by reference into this report. These forward-looking statements include statements with respect to the Corporation’s financial condition, results of operations, plans, objectives, future performance and business, including statements preceded by, followed by or that include the words “believes,” “expects,” or “anticipates,” references to estimates or similar expressions. Future filings by the Corporation with the SEC, and future statements other than historical facts contained in written material, press releases and oral statements issued by, or on behalf of the Corporation may also constitute forward-looking statements.
All forward-looking statements contained in this report or which may be contained in future statements made for or on behalf of the Corporation are based upon information available at the time the statement is made and the Corporation assumes no obligation to update any forward-looking statements, except as required by federal securities law. Forward-looking statements are subject to significant risks and uncertainties, and the Corporation’s actual results may differ materially from the expected results discussed in such forward-looking statements. Factors that might cause actual results to differ from the results discussed in forward-looking statements include, but are not limited to, the risk factors in Item 1A, Risk Factors, in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020, in the Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, in Item 1A of Part 2 herein, and as may be described from time to time in the Corporation’s subsequent SEC filings.
Overview
The following discussion and analysis is presented to assist in the understanding and evaluation of the Corporation’s financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements, footnotes, and supplemental financial data appearing elsewhere in this Quarterly Report on Form 10-Q and should be read in conjunction therewith. Management continually evaluates strategic acquisition opportunities and various other strategic alternatives that could involve the sale or acquisition of branches or other assets, or the consolidation or creation of subsidiaries. Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes.
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Performance Summary
Average loans of $24.5 billion increased $1.2 billion, or 5%, compared to the first three months of 2020, driven by an increase in PPP and CRE loans. The Corporation expects 2021 commercial loan growth, excluding PPP, of 2% to 4%.
Average deposits of $26.8 billion increased $2.5 billion, or 10%, from the first three months of 2020, driven primarily by government stimulus related inflows.
Net interest income of $176 million decreased $27 million, or 13%, from the first three months of 2020, and net interest margin was 2.39% compared to 2.84% for the first three months of 2020, both decreases are primarily due to a lower interest rate environment. The Corporation expects a full year margin of 2.45% to 2.55%.
Provision for credit losses had a release of $23 million, compared to provision expense of $53 million for the first three months of 2020. The Corporation expects full year provision to be nominal.
Noninterest income of $95 million decreased $3 million, or 3%, from the first three months of 2020. The Corporation expects 2021 noninterest income of $310 million to $330 million, reflecting positive fee income trends which we expect will outpace margin pressure. In addition, mortgage banking revenue is expected to remain elevated in the second quarter of 2021 with potential further MSRs recoveries should rates move higher.
Noninterest expense of $175 million decreased $17 million, or 9%, from the first three months of 2020 due to a decrease in personnel expense of $10 million, or 9%, primarily due to having fewer employees. During the first quarter of 2021, the Corporation began hiring staff for the purpose of originating auto-secured loans indirectly through dealers beginning in the fall of 2021 and expects a total of 55-60 FTEs by year end. As a result of the new indirect auto lending initiative, additional mortgage commission, and incentive and compensation expenses, the Corporation expects 2021 noninterest expense of $690 million to $695 million.
Table 1 Summary Results of Operations: Trends
($ in Thousands, except per share data)1Q214Q203Q202Q201Q20
Net income$94,301 $67,002 $45,214 $148,718 $45,838 
Net income available to common equity89,094 61,795 40,007 144,573 42,037 
Earnings per common share - basic 0.58 0.40 0.26 0.94 0.27 
Earnings per common share - diluted0.58 0.40 0.26 0.94 0.27 
Effective tax rate20.69 %20.10 %N/M25.62 %18.23 %
N/M = Not Meaningful
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Table 2 Net Interest Income Analysis
 Three Months Ended
 March 31, 2021December 31, 2020March 31, 2020
 ($ in Thousands)Average
Balance
Interest
Income /
Expense
Average
Yield /
Rate
Average
Balance
Interest
Income /
Expense
Average
Yield /
Rate
Average
Balance
Interest
Income /
Expense
Average
Yield /
Rate
Assets
Earning assets
Loans(a)(b)(c)
Commercial PPP lending$806,699 $8,900 4.47 %$929,859 $10,854 4.64 %$— $— — %
Commercial and business lending (excl PPP loans)8,537,301 54,091 2.57 %8,513,750 57,473 2.69 %8,380,113 80,217 3.85 %
Commercial real estate lending6,171,202 44,315 2.91 %6,157,622 44,636 2.88 %5,329,568 57,499 4.34 %
Total commercial15,515,202 107,307 2.80 %15,601,230 112,963 2.88 %13,709,681 137,716 4.04 %
Residential mortgage7,962,691 55,504 2.79 %8,029,585 60,292 3.00 %8,404,351 69,961 3.33 %
Retail985,456 11,630 4.75 %1,051,022 13,035 4.95 %1,194,586 17,473 5.86 %
Total loans24,463,349 174,442 2.88 %24,681,837 186,290 3.01 %23,308,618 225,149 3.88 %
Investment securities
Taxable2,976,469 7,014 0.94 %3,155,508 9,746 1.24 %3,460,224 20,272 2.34 %
Tax-exempt(a)
1,900,346 17,844 3.76 %1,909,512 17,870 3.74 %1,974,247 18,603 3.77 %
Other short-term investments991,844 1,694 0.69 %985,091 1,699 0.69 %473,604 3,304 2.81 %
Investments and other5,868,659 26,553 1.81 %6,050,111 29,315 1.94 %5,908,075 42,179 2.86 %
Total earning assets30,332,008 $200,994 2.67 %30,731,948 $215,605 2.80 %29,216,693 $267,329 3.67 %
Other assets, net3,352,135 3,343,844 3,360,311 
Total assets$33,684,143 $34,075,792 $32,577,005 
Liabilities and Stockholders' equity
Interest-bearing liabilities
Interest-bearing deposits
Savings$3,810,321 $332 0.04 %$3,628,458 $356 0.04 %$2,868,840 $1,800 0.25 %
Interest-bearing demand5,713,270 1,178 0.08 %5,739,983 1,215 0.08 %5,307,230 8,755 0.66 %
Money market6,875,730 1,059 0.06 %6,539,583 1,121 0.07 %6,538,658 10,806 0.66 %
Network transaction deposits1,080,109 327 0.12 %1,265,748 468 0.15 %1,434,128 4,601 1.29 %
Time deposits1,658,568 3,014 0.74 %1,888,074 4,602 0.97 %2,636,231 10,703 1.63 %
Total interest-bearing deposits19,137,998 5,909 0.13 %19,061,847 7,762 0.16 %18,785,088 36,666 0.79 %
Federal funds purchased and securities sold under agreements to repurchase136,144 26 0.08 %164,091 32 0.08 %194,406 368 0.76 %
Commercial paper42,774 0.05 %40,128 0.05 %34,282 25 0.29 %
PPPLF— — — %464,119 410 0.35 %— — — %
Other short-term funding— — — %— — — %16,997 11 0.25 %
FHLB advances1,631,895 9,493 2.36 %1,660,274 9,888 2.37 %3,231,999 17,626 2.19 %
Long-term funding549,585 5,585 4.07 %549,307 5,585 4.07 %549,465 5,607 4.08 %
Total short and long-term funding2,360,397 15,109 2.58 %2,877,919 15,920 2.20 %4,027,149 23,637 2.36 %
Total interest-bearing liabilities21,498,395 $21,018 0.40 %21,939,766 $23,682 0.43 %22,812,237 $60,303 1.06 %
Noninterest-bearing demand deposits7,666,561 7,677,003 5,506,861 
Other liabilities415,195 405,430 416,107 
Stockholders’ Equity4,103,991 4,053,593 3,841,800 
Total liabilities and stockholders’ equity$33,684,143 $34,075,792 $32,577,005 
Interest rate spread2.27 %2.37 %2.61 %
Net free funds0.12 %0.12 %0.23 %
Fully tax-equivalent net interest income and net interest margin ("NIM")$179,976 2.39 %$191,923 2.49 %$207,026 2.84 %
Fully tax-equivalent adjustment4,074 3,930 4,084 
Net interest income$175,902 $187,993 $202,942 
Numbers may not sum due to rounding
(a) The yield on tax-exempt loans and securities is computed on a fully tax-equivalent basis using a tax rate of 21% and is net of the effects of certain disallowed interest deductions.
(b) Nonaccrual loans and loans held for sale have been included in the average balances.
(c) Interest income includes amortization of net deferred loan origination costs and net accreted purchase loan discount.



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Notable Contributions to the Change in Net Interest Income
•    Average loans of $24.5 billion increased $1.2 billion, or 5%, compared to the first three months of 2020, primarily driven by an increase of $842 million, or 16%, in CRE loans as loans in the pipeline continued to fund along with slower payoffs. PPP loan originations, which began last April, increased average loans by $807 million. Partially offsetting this growth was a decrease of $442 million, or 5%, in residential mortgages as the lower rate environment has resulted in higher levels of refinances.
Net interest income on the consolidated statements of income (which excludes the fully tax-equivalent adjustment) was $176 million for the first three months of 2021 compared to $203 million for the first three months of 2020. Fully tax-equivalent net interest income of $180 million for the first three months of 2021 was $27 million, or 13%, lower than the first three months of 2020. The net interest margin for the first three months of 2021 was 2.39% compared to 2.84% for the first three months of 2020. The decreases were attributable to a lower interest rate environment and increased liquidity primarily related to monetary and fiscal stimulus programs. To lessen the impact of the lower rate environment, the Corporation began requiring LIBOR floors in applicable loan restructurings, renewals of existing loan transactions, and any new loan transactions. See sections Interest Rate Risk and Quantitative and Qualitative Disclosures about Market Risk for a discussion of interest rate risk and market risk.
•    Average interest-bearing liabilities of $21.5 billion for the first three months of 2021 were down $1.3 billion, or 6%, compared to the first three months of 2020. On average, FHLB advances decreased $1.6 billion, or 50%, primarily driven by the Corporation's prepayment of $950 million in FHLB advances during the third quarter of 2020. Interest-bearing deposits increased $353 million, or 2%, primarily driven by a combined increase of $1.7 billion, or 11%, in savings, money market and interest bearing demand deposits, partially offset by a combined decrease of $1.3 billion, or 33%, in higher cost network and time deposits. Average noninterest-bearing demand deposits of $7.7 billion for the first three months of 2021 were up $2.2 billion, or 39% versus the first three months of 2020. Government stimulus programs and a partially closed down economy has led to customers holding higher deposit balances.
•    The cost of interest-bearing liabilities was 0.40% for the first three months of 2021, which was a 66 bp drop from the first three months of 2020 primarily attributed to the federal funds rate decreases which occurred in March 2020.
The Federal Reserve lowered the federal funds target interest to a range of 0.00% to 0.25% in March 2020, which has remained constant through the end of the first quarter of 2021.
Provision for Credit Losses
The provision for credit losses is predominantly a function of the Corporation’s reserving methodology and judgments as to other qualitative and quantitative factors used to determine the appropriate level of the ACLL, which focuses on changes in the size and character of the loan portfolio, changes in levels of individually evaluated and other nonaccrual loans, historical losses and delinquencies in each portfolio category, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing economic conditions and economic forecasts, the fair value of underlying collateral, and other factors which could affect potential credit losses. The forecast the Corporation used for March 31, 2021 was the Moody's baseline scenario from March 2021 over a 2 year reasonable and supportable period with straight-line reversion to historical losses over the second year of the period. See additional discussion under the sections titled, Loans, Credit Risk, Nonperforming Assets, and Allowance for Credit Losses on Loans.
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Noninterest Income
Table 3 Noninterest Income
1Q21 Changes vs
($ in Thousands, except as noted)1Q214Q203Q202Q201Q204Q201Q20
Wealth management fees$22,414 $22,073 $21,152 $20,916 $20,816 %%
Service charges and deposit account fees14,855 15,318 14,283 11,484 15,222 (3)%(2)%
Card-based fees9,743 9,848 10,195 8,893 9,597 (1)%%
Other fee-based revenue4,596 4,998 4,968 4,774 4,497 (8)%%
Total fee-based revenue51,608 52,237 50,598 46,068 50,132 (1)%%
Capital markets, net8,118 5,898 7,222 6,910 7,935 38 %%
Mortgage servicing fees, net(a)
(1,397)(973)(957)(781)2,062 (44)%N/M
Gains (losses) and fair value adjustments on loans held for sale14,744 14,733 14,536 20,976 9,756 — %51 %
Fair value adjustment on portfolio loans transferred to held for sale— — 509 — 3,423 — %(100)%
Mortgage servicing rights (impairment) recovery10,578 776 (1,451)(7,932)(9,098)N/MN/M
Mortgage banking, net23,925 14,537 12,636 12,263 6,143 65 %N/M
Bank and corporate owned life insurance2,702 3,978 3,074 3,625 3,094 (32)%(13)%
Insurance commissions and fees76 92 114 22,430 22,608 (17)%(100)%
Other3,141 2,879 2,232 2,737 2,352 %34 %
Subtotal89,570 79,621 75,877 94,034 92,264 12 %(3)%
Asset gains (losses), net4,809 (1,356)(339)157,361 (77)N/MN/M
Investment securities gains(losses), net(39)— 3,096 6,118 N/MN/M
Gain/loss on the sale of branches, net1,002 7,449 — — — (87)%N/M
Total noninterest income$95,343 $85,714 $75,545 $254,490 $98,306 11 %(3)%
Mortgage loans originated for sale during period$412,645 $323,101 $458,361 $550,419 $310,254 28 %33 %
Mortgage loan settlements during period400,135 338,794 598,509 725,003 297,265 18 %35 %
Mortgage portfolio loans transferred to held for sale during period— — 69,532 — 199,587 — %(100)%
Assets under management, at market value(b)
12,553 13,314 12,195 11,755 10,454 (6)%20 %
N/M = Not Meaningful
(a) Includes mortgage origination and servicing fees, net of mortgage servicing rights amortization.
(b) $ in millions. Excludes assets held in brokerage accounts.

Notable Contributions to the Change in Noninterest Income
Mortgage banking, net was up $18 million from the first three months of 2020 due to an $11 million recovery of MSRs impairment during the quarter, compared to impairment of $9 million during the first three months of 2020.
Insurance commission and fees was down $23 million, from the first three months of 2020, driven by the sale of ABRC during the second quarter of 2020, which largely eliminated insurance commissions and fees.
Asset gains (losses), net was up $5 million from the first three months of 2020, driven by a gain of $2 million from the sale of Whitnell and gains of $3 million from private equity investments.
Investment securities gains (losses), net was down $6 million from the first three of 2020 due to fewer securities being sold at a gain.



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Noninterest Expense
Table 4 Noninterest Expense
1Q21 Change vs
($ in Thousands)1Q214Q203Q202Q201Q204Q201Q20
Personnel$104,026 $98,033 $108,567 $111,350 $114,200 %(9)%
Technology20,740 19,574 19,666 21,174 20,799 %— %
Occupancy16,156 15,678 17,854 14,464 16,069 %%
Business development and advertising4,395 5,421 3,626 3,556 5,826 (19)%(25)%
Equipment5,518 5,555 5,399 5,312 5,439 (1)%%
Legal and professional6,530 5,737 5,591 5,058 5,160 14 %27 %
Loan and foreclosure costs2,220 3,758 2,118 3,605 3,120 (41)%(29)%
FDIC assessment4,750 5,700 3,900 5,250 5,500 (17)%(14)%
Other intangible amortization2,236 2,253 2,253 2,872 2,814 (1)%(21)%
Loss on prepayments of FHLB advances— — 44,650 — — N/MN/M
Other8,775 11,141 13,963 10,766 13,263 (21)%(34)%
Total noninterest expense$175,347 $172,850 $227,587 $183,407 $192,191 %(9)%
Average FTEs(a)
4,020 4,134 4,374 4,701 4,631 (3)%(13)%
(a) Average FTEs without overtime
Notable Contributions to the Change in Noninterest Expense
Personnel expense decreased $10 million or 9% from the first three months of 2020, primarily due to having fewer employees as a result of the sale of ABRC, corporate restructurings and branch sales, offset by an increase in incentives and commission.
Income Taxes
The Corporation recognized income tax expense of $25 million for the three months ended March 31, 2021, compared to income tax expense of $10 million for the three months ended March 31, 2020. The Corporation's effective tax rate was 20.69% for the first three months of 2021, compared to an effective tax rate of 18.23% for the first three months of 2020. The higher income tax expense was driven primarily by an increase in income before tax. The Corporation expects a full year effective tax rate of 19% to 21%, assuming no change in the corporate tax rate.
Income tax expense recorded on the consolidated statements of income involves the interpretation and application of certain accounting pronouncements and federal and state tax laws and regulations, and is, therefore, considered a critical accounting policy. The Corporation is subject to examination by various taxing authorities. Examination by taxing authorities may impact the amount of tax expense and / or reserve for uncertainty in income taxes if their interpretations differ from those of management, based on their judgments about information available to them at the time of their examinations. See section Critical Accounting Policies, in the Corporation’s 2020 Annual Report on Form 10-K for additional information on income taxes.
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Balance Sheet Analysis
At March 31, 2021, total assets were $34.6 billion, up $1.2 billion, or 3%, from December 31, 2020 and up $667 million, or 2%, from March 31, 2020.
Interest bearing deposits in other financial institutions were $1.6 billion at March 31, 2021, up $1.3 billion and $1.4 billion from December 31, 2020 and March 31, 2020, respectively, primarily due to excess reserves being held at the Federal Reserve.
Loans of $24.2 billion at March 31, 2021 were down $289 million, or 1%, from December 31, 2020 and down $203 million, or 1% from March 31, 2020. See Note 7 Loans for additional details.
At March 31, 2021, total deposits of $27.7 billion were up $1.2 billion, or 5%, from December 31, 2020 and were up $2.0 billion, or 8%, from March 31, 2020. Government stimulus programs and a partially closed down economy has led to customers holding higher deposit balances. See section Deposits and Customer Funding for additional information on deposits.
FHLB advances were $1.6 billion at both March 31, 2021 and December 31, 2020, and down $1.6 billion, or 49%, from March 31, 2020, primarily driven by the Corporation's prepayment of $950 million in long-term FHLB advances during the third quarter of 2020.
Preferred equity was $354 million at both March 31, 2021 and December 31, 2020, and up $97 million, or 38%, from March 31, 2020. On June 9, 2020, the Corporation issued $100 million, or $97 million net of issuance costs, of 5.625% Non-Cumulative Perpetual Preferred Stock, Series F.
Loans
Table 5 Period End Loan Composition
 March 31, 2021December 31, 2020September 30, 2020June 30, 2020March 31, 2020
 ($ in Thousands)Amount% of
Total
Amount% of
Total
Amount% of
Total
Amount% of
Total
Amount% of
Total
PPP$836,566 %$767,757 %$1,022,217 %$1,012,033 %$— — %
Commercial and industrial7,664,501 32 %7,701,422 31 %7,933,404 32 %7,968,709 32 %8,517,974 35 %
Commercial real estate — owner occupied883,237 %900,912 %904,997 %914,385 %940,687 %
Commercial and business lending9,384,303 39 %9,370,091 38 %9,860,618 39 %9,895,127 40 %9,458,661 39 %
Commercial real estate — investor4,260,706 18 %4,342,584 18 %4,320,926 17 %4,174,125 17 %4,038,036 17 %
Real estate construction1,882,299 %1,840,417 %1,859,609 %1,708,189 %1,544,858 %
Commercial real estate lending6,143,004 25 %6,183,001 25 %6,180,536 25 %5,882,314 24 %5,582,894 23 %
Total commercial15,527,307 64 %15,553,091 64 %16,041,154 64 %15,777,441 64 %15,041,555 62 %
Residential mortgage7,685,218 32 %7,878,324 32 %7,885,523 32 %7,933,518 32 %8,132,417 33 %
Home equity651,647 %707,255 %761,593 %795,671 %844,901 %
Other consumer298,156 %313,054 %315,483 %326,040 %346,761 %
Total consumer8,635,020 36 %8,898,632 36 %8,962,599 36 %9,055,230 36 %9,324,079 38 %
Total loans$24,162,328 100 %$24,451,724 100 %$25,003,753 100 %$24,832,671 100 %$24,365,633 100 %
The Corporation has long-term guidelines relative to the proportion of Commercial and Business, CRE, and Consumer loan commitments within the overall loan portfolio, with each targeted to represent 30-40% of the overall loan portfolio. The targeted long-term guidelines were unchanged during 2020 and the first three months of 2021. Furthermore, certain sub-asset classes within the respective portfolios are further defined and dollar limitations are placed on these sub-portfolios. These guidelines and limits are reviewed quarterly and approved annually by the Enterprise Risk Committee of the Corporation’s Board of Directors. These guidelines and limits are designed to create balance and diversification within the loan portfolios.
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The Corporation’s loan distribution and interest rate sensitivity as of March 31, 2021 are summarized in the following table:
Table 6 Loan Distribution and Interest Rate Sensitivity
($ in Thousands)
Within 1 Year(a)
1-5 YearsAfter 5 YearsTotal% of Total
PPP$— $836,566 $— $836,566 %
Commercial and industrial7,079,691 479,171 105,640 7,664,501 32 %
Commercial real estate — owner occupied478,388 237,177 167,671 883,237 %
Commercial real estate — investor3,866,975 292,594 101,137 4,260,706 18 %
Real estate construction1,859,917 12,057 10,324 1,882,299 %
Residential mortgage - Adjustable(b)
508,921 1,125,983 1,729,486 3,364,391 14 %
Residential mortgage - Fixed37,612 95,429 4,187,785 4,320,827 18 %
Home equity27,204 92,789 531,654 651,647 %
Other consumer41,482 59,335 197,339 298,156 %
Total loans$13,900,190 $3,231,100 $7,031,037 $24,162,328 100 %
Fixed rate$5,404,162 $1,921,843 $4,737,476 $12,063,481 50 %
Floating or adjustable rate8,496,028 1,309,257 2,293,561 12,098,846 50 %
Total$13,900,190 $3,231,100 $7,031,037 $24,162,328 100 %
(a) Demand loans, past due loans, overdrafts, and credit cards are reported in the “Within 1 Year” category.
(b) Based on contractual loan terms for adjustable rate mortgages; does not factor in early prepayments or amortization.
At March 31, 2021, $17.5 billion, or 72%, of the loans outstanding were floating rate, adjustable rate, re-pricing within one year, or maturing within one year.
Credit Risk
An active credit risk management process is used for commercial loans to ensure that sound and consistent credit decisions are made. Credit risk is controlled by detailed underwriting procedures, comprehensive loan administration, and periodic review of borrowers’ outstanding loans and commitments. Borrower relationships are formally reviewed and graded on an ongoing basis for early identification of potential problems. Further analysis by customer, industry, and geographic location are performed to monitor trends, financial performance, and concentrations. See Note 7 Loans of the notes to consolidated financial statements for additional information on managing overall credit quality.
The loan portfolio is widely diversified by types of borrowers, industry groups, and market areas within the Corporation's branch footprint. Significant loan concentrations are considered to exist when there are amounts loaned to numerous borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At March 31, 2021, no significant concentrations existed in the Corporation’s portfolio in excess of 10% of total loans.
Commercial and business lending: The commercial and business lending classification primarily includes commercial loans to large corporations, middle market companies, small businesses, and lease financing.
Table 7 Largest Commercial and Business Lending Industry Group Exposures
March 31, 2021% of Total Loans% of Total Commercial and Business Lending
Finance and Insurance%19 %
Utilities%18 %
Manufacturing and Wholesale Trade%17 %
Real Estate%12 %
The remaining commercial and business lending portfolio is spread over a diverse range of industries, none of which exceed 2% of total loans.
The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any.
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Commercial real estate - investor: CRE-investor is comprised of loans secured by various non-owner occupied or investor income producing property types.
Table 8 Largest Commercial Real Estate Investor Property Type Exposures
March 31, 2021% of Total Loans% of Total Commercial Real Estate - Investor
Multi-Family%30 %
Office%24 %
Retail%19 %
Industrial%18 %
The remaining CRE-investor portfolio is spread over various other property types, none of which exceed 2% of total loans.
Credit risk is managed in a similar manner to commercial and business lending by employing sound underwriting guidelines, lending primarily to borrowers in local markets and businesses, periodically evaluating the underlying collateral, and formally reviewing the borrower’s financial soundness and relationship on an ongoing basis.
Real estate construction: Real estate construction loans are primarily short-term or interim loans that provide financing for the acquisition or development of commercial income properties, multi-family projects, or residential development, both single family and condominium. Real estate construction loans are made to developers and project managers who are generally well known to the Corporation and have prior successful project experience. The credit risk associated with real estate construction loans is generally confined to specific geographic areas but is also influenced by general economic conditions. The Corporation controls the credit risk on these types of loans by making loans in familiar markets to developers, reviewing the merits of individual projects, controlling loan structure, and monitoring project progress and construction advances.
Table 9 Largest Real Estate Construction Property Type Exposures
March 31, 2021% of Total Loans% of Total Real Estate Construction
Multi-Family%38 %

The remaining real estate construction portfolio is spread over various other property types, none of which exceed 2% of total loans.
The Corporation’s current lending standards for CRE and real estate construction lending are determined by property type and specifically address many criteria, including: maximum loan amounts, maximum LTV, requirements for pre-leasing and / or presales, minimum borrower equity, and maximum loan-to-cost. Currently, the maximum standard for LTV is 80%, with lower limits established for certain higher risk types, such as raw land that has a 50% LTV maximum. The Corporation’s LTV guidelines are in compliance with regulatory supervisory limits. In most cases, for real estate construction loans, the loan amounts include interest reserves, which are built into the loans and sized to fund loan payments through construction and lease up and / or sell out.
Residential mortgages: Residential mortgage loans are primarily first lien home mortgages with a maximum loan-to-collateral value without credit enhancement (e.g. private mortgage insurance) of 80%. The residential mortgage portfolio is focused primarily in the Corporation's three-state branch footprint, with approximately 88% of the outstanding loan balances in the Corporation's branch footprint at March 31, 2021. The majority of the on balance sheet residential mortgage portfolio consists of LIBOR or constant maturity treasury based, hybrid, adjustable rate mortgage loans with initial fixed rate terms of 3, 5, 7, or 10 years. The rates on these mortgages adjust based upon the movement in the underlying index which is then added to a margin and rounded to the nearest 0.125%. That result is then subjected to any periodic caps to produce the borrower's interest rate for the coming term.
In 2014, the Financial Stability Oversight Council and Financial Stability Board raised concerns about the reliability and robustness of LIBOR and called for the development of alternative interest rate benchmarks. The ARRC, through authority from the Federal Reserve, have selected the SOFR as the alternative rate and developed a paced transition plan which addresses the risk that LIBOR may not exist beyond the end of 2021. There are still many components of this plan which have not been fully decided or implemented in the industry. As a result, the Corporation is reaching out to certain borrowers offering an opportunity to refinance or modify their loans to avoid any uncertainty around the LIBOR transition. Performing borrowers can modify or refinance to a fixed interest rate or an adjustable rate mortgage tied to the one-year treasury adjusted to a constant maturity of one-year with an appropriate margin. This provides the Bank and borrower with greater certainty around the loan structure.
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The Corporation generally retains certain fixed-rate residential real estate mortgages in its loan portfolio, including retail and private banking jumbo mortgages and CRA-related mortgages. As part of management’s historical practice of originating and servicing residential mortgage loans, generally the Corporation’s 30 year, agency conforming, fixed-rate residential real estate mortgage loans have been sold in the secondary market with servicing rights retained. Subject to management’s analysis of the current interest rate environment, among other market factors, the Corporation may choose to retain 30 year mortgage loan production on its balance sheet. See section Loans for additional information on loans.
The Corporation’s underwriting and risk-based pricing guidelines for residential mortgage loans include minimum borrower FICO and maximum LTV of the property securing the loan. Residential mortgage products generally are underwritten using FHLMC and FNMA secondary marketing guidelines.
Home equity: Home equity consists of both home equity lines of credit and closed-end home equity loans. The Corporation’s credit risk monitoring guidelines for home equity is based on an ongoing review of loan delinquency status, as well as a quarterly review of FICO score deterioration and property devaluation. The Corporation does not routinely obtain appraisals on performing loans to update LTV ratios after origination; however, the Corporation monitors the local housing markets by reviewing the various home price indices and incorporates the impact of the changing market conditions in its ongoing credit monitoring process. For junior lien home equity loans, the Corporation is unable to track the performance of the first lien loan if it does not own or service the first lien loan. However, the Corporation obtains a refreshed FICO score on a quarterly basis and monitors this as part of its assessment of the home equity portfolio.
The Corporation’s underwriting and risk-based pricing guidelines for home equity lines of credit and loans consist of a combination of both borrower FICO and the original cumulative LTV against the property securing the loan. During the second quarter of 2020, in the volatile economic environment, the Corporation reduced its exposure by reducing its maximum LTV on home equity lines of credit from 90% to 80%, among other changes, while maintaining the minimum acceptable FICO at 670. The Corporation's current home equity line of credit offering is priced based on floating rate indices and generally allows 10 years of interest-only payments followed by a 20-year amortization of the outstanding balance. During the third quarter of 2020, based upon an analysis of market conditions and uncertainty around the timing and scope of the anticipated economic recovery, the Corporation temporarily suspended new applications for home equity lines of credit. Due to improving economic conditions, the Corporation resumed applications for home equity lines of credit in the first quarter of 2021. The loans in the Corporation's portfolio generally have an original term of 20 years with principal and interest payments required. See section Loans for additional information on loans.
Other consumer: Other consumer consists of student loans, short-term personal installment loans, and credit cards. The Corporation had $115 million and $118 million of student loans at March 31, 2021 and December 31, 2020, respectively, the majority of which are government guaranteed. As a result of the COVID-19 pandemic and the passage of the CARES Act, government guaranteed student loans had been placed on an administrative forbearance through September 30, 2020. Subsequently, on August 8, 2020, President Trump directed the Secretary of Education to continue to suspend loan payments, stop collections, and waive interest on U.S. Department of Education held federal student loans through December 31, 2020. On December 4, 2020, the relief measures were extended through January 31, 2021, and on January 20, 2021, President Biden extended the federal student loan relief through September 30, 2021. Credit risk for non-government guaranteed student loans, short-term personal installment loans, and credit cards is influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral. Risks of loss are generally on smaller average balances per loan spread over many borrowers. Once charged off, there is usually less opportunity for recovery of these smaller consumer loans. Credit risk is primarily controlled by reviewing the creditworthiness of the borrowers, monitoring payment histories, and taking appropriate collateral and guarantee positions. The student loan portfolio is in run-off and no new student loans are being originated.
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COVID-19 Update:
Beginning on April 3, 2020, the Corporation began originating SBA loans under the PPP, which are included in commercial and business lending loans, to help businesses keep their workforce employed and cover other working capital needs during the COVID-19 pandemic. All complete eligible applications for the PPP have been processed in the order in which they have been received. The Corporation began submitting PPP forgiveness applications on behalf of our customers on September 14, 2020. Forgiveness payments from the SBA began to be received in the fourth quarter of 2020. The Corporation received approximately $248 million and $221 million of forgiveness payments in 2020 and 2021, respectively, with nearly all of the remaining loans expected to be forgiven throughout the remainder of 2021. On December 27, 2020, the Economic Aid Act was signed into law, which included another round of PPP funding. The Corporation began originating the new round of PPP loans in January 2021. As of March 31, 2021, the Corporation had funded $293 million of PPP loans in this most recent round.
The following table summarizes the balance segmentation of the PPP loans and associated deferred fees as of March 31, 2021:
Table 10 Paycheck Protection Program Loan Segmentation
Round 1 & 2Round 3Total
Originated LoansOriginated BalanceOutstanding BalanceOriginated LoansOriginated BalanceOutstanding BalanceOutstanding Balance
($ in Thousands)
>=$2,000,00099 $335,534 $292,427 10 $20,000 $20,000 $312,427 
< $2,000,000 And > $350,000485 386,245 118,800 145 106,778 106,778 225,578 
<=$350,0007,495 344,007 133,126 4,158 165,753 165,434 298,560 
Total8,079 $1,065,786 $544,353 4,313 $292,531 $292,213 $836,566 
Deferred fees$6,072 $11,504 $17,576 

The following table summarizes loan forbearances outstanding in response to the COVID-19 pandemic as of March 31, 2021 as a result of the loan forbearance program:

Table 11 COVID-19 Loan Forbearances
($ in Thousands)March 31, 2021December 31, 2020September 30, 2020June 30, 2020March 31, 2020
Commercial and business lending$5,521 $12,377 $61,535 $187,708 $345 
Commercial real estate12,115 18,368 248,842 675,382 595 
Total consumer19,724 47,835 375,794 724,921 428 
Total$37,360 $78,579 $686,171 $1,588,011 $1,368 

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Nonperforming Assets
Management is committed to a proactive nonaccrual and problem loan identification philosophy. This philosophy is implemented through the ongoing monitoring and review of all pools of risk in the loan portfolio to ensure that problem loans are identified quickly and the risk of loss is minimized. Table 12 provides detailed information regarding NPAs, which include nonaccrual loans, OREO, and other NPAs:
Table 12 Nonperforming Assets
 ($ in Thousands)March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Nonperforming assets
Commercial and industrial$33,192 $61,859 $105,899 $80,239 $58,854 
Commercial real estate — owner occupied1,058 2,043 1,932 1,838 
Commercial and business lending33,200 62,917 107,941 82,171 60,692 
Commercial real estate — investor58,485 78,220 50,458 11,172 1,091 
Real estate construction327 353 392 503 486 
Commercial real estate lending58,813 78,573 50,850 11,675 1,577 
Total commercial92,012 141,490 158,792 93,846 62,269 
Residential mortgage61,256 59,337 62,331 66,656 64,855 
Home equity9,792 9,888 10,277 10,829 9,378 
Other consumer231 140 190 276 215 
Total consumer71,280 69,364 72,798 77,761 74,448 
Total nonaccrual loans163,292 210,854 231,590 171,607 136,717 
Commercial real estate owned2,092 2,185 2,113 2,968 3,105 
Residential real estate owned1,501 1,194 1,535 3,573 5,994 
Bank properties real estate owned20,995 10,889 15,335 13,723 13,431 
OREO24,588 14,269 18,983 20,264 22,530 
Other nonperforming assets— — 909 909 6,004 
Total nonperforming assets$187,880 $225,123 $251,481 $192,780 $165,251 
Accruing loans past due 90 days or more
Commercial$190 $175 $763 $385 $436 
Consumer1,485 1,423 1,091 1,081 1,819 
Total accruing loans past due 90 days or more$1,675 $1,598 $1,854 $1,466 $2,255 
Restructured loans (accruing)(a)
Commercial$27,356 $41,119 $18,407 $18,189 $18,767 
Consumer13,464 10,973 8,485 7,114 7,618 
Total restructured loans (accruing)$40,820 $52,092 $26,891 $25,303 $26,384 
Nonaccrual restructured loans (included in nonaccrual loans)$17,624 $20,190 $23,844 $25,362 $24,204 
Ratios
Nonaccrual loans to total loans0.68 %0.86 %0.93 %0.69 %0.56 %
NPAs to total loans plus OREO0.78 %0.92 %1.01 %0.78 %0.68 %
NPAs to total assets0.54 %0.67 %0.72 %0.54 %0.49 %
Allowance for credit losses on loans to nonaccrual loans247.23 %204.63 %190.85 %249.74 %288.24 %
(a) Does not include any restructured loans related to COVID-19 in accordance with Section 4013 of the CARES Act.
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Table 12 Nonperforming Assets (continued)
 ($ in Thousands)March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Accruing loans 30-89 days past due
Commercial and industrial$526 $6,119 $298 $716 $976 
Commercial real estate — owner occupied— 373 870 199 51 
Commercial and business lending526 6,492 1,167 916 1,027 
Commercial real estate — investor5,999 12,793 409 13,874 14,462 
Real estate construction977 991 111 385 179 
Commercial real estate lending6,976 13,784 520 14,260 14,641 
Total commercial7,502 20,276 1,687 15,175 15,668 
Residential mortgage 3,973 10,385 6,185 3,023 10,102 
Home equity 2,352 4,802 5,609 3,108 7,001 
Other consumer1,270 1,599 1,351 1,482 1,777 
Total consumer7,594 16,786 13,144 7,613 18,879 
Total accruing loans 30-89 days past due$15,097 $37,062 $14,831 $22,788 $34,547 
Potential problem loans
PPP(a)
$22,398 $18,002 $19,161 $19,161 $— 
Commercial and industrial122,143 121,487 144,159 176,270 149,747 
Commercial real estate — owner occupied15,965 26,179 22,808 15,919 15,802 
Commercial and business lending160,506 165,668 186,129 211,350 165,550 
Commercial real estate — investor85,752 91,396 100,459 88,237 61,030 
Real estate construction13,977 19,046 2,178 2,170 1,753 
Commercial real estate lending99,728 110,442 102,637 90,407 62,783 
Total commercial260,234 276,111 288,766 301,758 228,333 
Residential mortgage 2,524 3,749 2,396 3,157 3,322 
Home equity 1,729 2,068 1,632 1,921 2,238 
Total consumer4,254 5,817 4,028 5,078 5,559 
Total potential problem loans$264,488 $281,928 $292,794 $306,836 $233,892 
(a) The Corporation’s policy is to assign risk ratings at the borrower level. PPP loans are 100% guaranteed by the SBA and therefore the Corporation considers these loans to have a risk profile similar to pass rated loans.
Nonaccrual loans: Nonaccrual loans are considered to be one indicator of potential future loan losses. See Note 7 Loans of the notes to consolidated financial statements for additional nonaccrual loan disclosures. See also sections Credit Risk and Allowance for Credit Losses on Loans.
Accruing loans past due 90 days or more: Loans past due 90 days or more but still accruing interest are classified as such where the underlying loans are both well secured (the collateral value is sufficient to cover principal and accrued interest) and are in the process of collection.
Restructured loans: Loans are considered restructured loans if concessions have been granted to borrowers that are experiencing financial difficulty. See also Note 7 Loans of the notes to consolidated financial statements for additional restructured loans disclosures.
Potential problem loans: The level of potential problem loans is another predominant factor in determining the relative level of risk in the loan portfolio and in determining the appropriate level of the ACLL. Potential problem loans are generally defined by management to include loans rated as substandard by management that are collectively evaluated (not nonaccrual loans or accruing TDRs); however, there are circumstances present to create doubt as to the ability of the borrower to comply with present repayment terms. The decision of management to include performing loans in potential problem loans does not necessarily mean that the Corporation expects losses to occur, but that management recognizes a higher degree of risk associated with these loans.
OREO: Management actively seeks to ensure OREO properties held are monitored to minimize the Corporation’s risk of loss.
Other nonperforming assets: During the third quarter of 2019, the Bank accepted a partial settlement of a debt by receiving units of ownership interest in an oil and gas limited liability company, and during 2020, the Corporation wrote the value for the ownership interest down to zero.
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Allowance for Credit Losses on Loans
Credit risks within the loan portfolio are inherently different for each loan type. Credit risk is controlled and monitored through the use of lending standards, a thorough review of potential borrowers, and ongoing review of loan payment performance. Active asset quality administration, including early problem loan identification and timely resolution of problems, aids in the management of credit risk and the minimization of loan losses. Credit risk management for each loan type is discussed in the section entitled Credit Risk. See Note 7 Loans of the notes to consolidated financial statements for additional disclosures on the ACLL.
To assess the appropriateness of the ACLL, the Corporation focuses on the evaluation of many factors, including but not limited to: evaluation of facts and issues related to specific loans, management’s ongoing review and grading of the loan portfolio, credit report refreshes, consideration of historical loan loss and delinquency experience on each portfolio category, trends in past due and nonaccrual loans, the level of potential problem loans, the risk characteristics of the various classifications of loan segments, changes in the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions and economic forecasts, the fair value of underlying collateral, funding assumptions on lines, and other qualitative and quantitative factors which could affect potential credit losses. The Corporation utilized the Moody's baseline forecast for March 2021 in the allowance model. The forecast is applied over a 2 year reasonable and supportable period with straight-line reversion to historical losses over the second year of the period. Assessing these factors involves significant judgment. Because each of the criteria used is subject to change, the ACLL is not necessarily indicative of the trend of future credit losses on loans in any particular segment. Therefore, management considers the ACLL a critical accounting policy, see section Critical Accounting Policies for additional information on the ACLL. See section Nonperforming Assets for a detailed discussion on asset quality. See also Note 7 Loans of the notes to consolidated financial statements for additional ACLL disclosures. Table 5 provides information on loan growth and period end loan composition, Table 12 provides additional information regarding NPAs, and Table 13 and Table 14 provide additional information regarding activity in the ACLL.
The loan segmentation used in calculating the ACLL at March 31, 2021 and December 31, 2020 was generally comparable. The methodology to calculate the ACLL consists of the following components: a valuation allowance estimate is established for commercial and consumer loans determined by the Corporation to be individually evaluated, using discounted cash flows, estimated fair value of underlying collateral, and/or other data available. Loans are segmented for criticized loan pools by loan type as well as for non-criticized loan pools by loan type, primarily based on historical loss rates after considering loan type, historical loss and delinquency experience, credit quality, and industry classifications. Loans that have been criticized are considered to have a higher risk of default than non-criticized loans, as circumstances were present to support the lower loan grade, warranting higher loss factors. The loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in historical loss levels or other risks. Additionally, management allocates ACLL to absorb losses that may not be provided for by the other components due to qualitative factors evaluated by management, such as limitations within the credit risk grading process, known current economic or business conditions that may not yet show in trends, industry or other concentrations with current issues that impose higher inherent risks than are reflected in the loss factors, and other relevant considerations. The total allowance is available to absorb losses from any segment of the loan portfolio.











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Table 13 Allowance for Credit Losses on Loans
Quarter Ended
($ in Thousands)March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Allowance for Loan Losses
Balance at beginning of period$383,702 $384,711 $363,803 $337,793 $201,371 
Cumulative effect of ASU 2016-13 adoption (CECL)N/AN/AN/AN/A112,457 
Balance at beginning of period, adjusted383,702 384,711 363,803 337,793 313,828 
Provision for loan losses(26,000)26,500 50,500 52,500 34,957 
Provision for loan losses recorded at acquisitionN/AN/AN/AN/A2,543 
Gross up of allowance for PCD loans at acquisitionN/AN/AN/AN/A3,504 
Charge offs(13,174)(30,315)(34,079)(28,351)(19,308)
Recoveries8,410 2,805 4,488 1,861 2,268 
Net (charge offs) recoveries(4,764)(27,510)(29,592)(26,490)(17,040)
Balance at end of period$352,938 $383,702 $384,711 $363,803 $337,793 
Allowance for Unfunded Commitments
Balance at beginning of period$47,776 $57,276 $64,776 $56,276 $21,907 
Cumulative effect of ASU 2016-13 adoption (CECL)N/AN/AN/AN/A18,690 
Balance at beginning of period, adjusted47,776 57,276 64,776 56,276 40,597 
Provision for unfunded commitments3,000 (9,500)(7,500)8,500 15,500 
Amount recorded at acquisition— — — — 179 
Balance at end of period$50,776 $47,776 $57,276 $64,776 $56,276 
Allowance for credit losses on loans$403,714 $431,478 $441,988 $428,579 $394,069 
Provision for credit losses on loans(23,000)17,000 43,000 61,000 53,000 
Net loan (charge offs) recoveries
Commercial and industrial$1,367 $(8,514)$(24,834)$(24,919)$(15,049)
Commercial real estate — owner occupied143 (416)— 
Commercial and business lending1,370 (8,371)(25,249)(24,919)(15,048)
Commercial real estate — investor(5,886)(18,696)(3,609)28 — 
Real estate construction29 43 (21)(3)11 
Commercial real estate lending(5,857)(18,653)(3,630)25 11 
Total commercial(4,487)(27,024)(28,879)(24,893)(15,037)
Residential mortgage(109)(162)(79)(215)(912)
Home equity344 335 156 (303)71 
Other consumer(511)(659)(790)(1,078)(1,162)
Total consumer(277)(486)(712)(1,596)(2,003)
Total net (charge offs) recoveries$(4,764)$(27,510)$(29,592)$(26,490)$(17,040)
Ratios
Allowance for credit losses on loans to total loans1.67 %1.76 %1.77 %1.73 %1.62 %
Allowance for credit losses on loans to net charge offs (annualized)20.9x3.9x3.8x4.0x5.7x
Loan Evaluation Method for ACLL
Individually evaluated for impairment43,262 79,831 88,030 81,243 72,084 
Collectively evaluated for impairment360,452 351,646 353,957 347,336 321,985 
     Total ACLL403,714 431,478 441,988 428,579 394,069 
Loan Balance
Individually evaluated for impairment180,006 259,497 256,536 218,293 223,962 
Collectively evaluated for impairment23,982,321 24,192,227 24,747,216 24,614,378 24,141,672 
     Total loan balance24,162,328 24,451,724 25,003,753 24,832,671 24,365,633 









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Table 14 Annualized Net (Charge Offs) Recoveries(a)
Quarter Ended
(In basis points)March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Net loan (charge offs) recoveries
Commercial and industrial(45)(126)(121)(81)
Commercial real estate — owner occupied— (18)— — 
Commercial and business lending(35)(103)(100)(72)
Commercial real estate — investor(55)(173)(34)— — 
Real estate construction— — — 
Commercial real estate lending(38)(121)(24)— — 
Total commercial(12)(69)(73)(64)(44)
Residential mortgage(1)(1)— (1)(4)
Home equity21 18 (15)
Other consumer(68)(83)(98)(128)(134)
Total consumer(1)(2)(3)(7)(8)
Total net (charge offs) recoveries(8)(44)(47)(42)(29)
(a) Annualized ratio of net charge offs to average loans by loan type.
Notable Contributions to the Change in the Allowance for Credit Losses on Loans
Total loans decreased $289 million, or 1%, from December 31, 2020 and decreased $203 million, or 1%, from March 31, 2020. The decrease from March 31, 2020 was primarily driven by decreases in consumer lending, which was partially offset by an increase in CRE loans. See section Loans for additional information on the changes in the loan portfolio and see section Credit Risk for discussion about credit risk management for each loan type.
Potential problem loans decreased $17 million, or 6%, from December 31, 2020, but increased $31 million, or 13%, from March 31, 2020. The decrease from December 31, 2020 was primarily due to decreases in CRE and commercial and business lending, while the increase from March 31, 2020 was primarily driven by CRE loans. CRE loans were negatively impacted during the COVID-19 pandemic and saw an increase in potential problem loans throughout 2020. As economic conditions have improved throughout 2021, there have been decreases in CRE potential problem loans. See Table 12 for additional information regarding potential problem loans.
Total nonaccrual loans decreased $48 million, or 23%, from December 31, 2020, but increased $27 million, or 19%, from March 31, 2020. The decrease from December 31, 2020 was primarily due to decreases in commercial and industrial loans and CRE - investor loans, while the increase from March 31, 2020 was primarily driven by an increase in CRE lending, which was partially offset by a decrease in commercial and industrial lending. As economic conditions trended downward in 2020, due to the COVID-19 pandemic, nonaccrual loans increased. As economic conditions have been improving throughout 2021, nonaccrual loans have decreased. See Note 7 Loans of the notes to consolidated financial statements and Table 12 for additional disclosures on the changes in asset quality.
Net charge offs decreased $12 million from March 31, 2020, primarily driven by decreased charge off amounts in commercial and industrial loans. See Table 13 and Table 14 for additional information on the activity in the ACLL.
Management believes the level of ACLL to be appropriate at March 31, 2021.
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Deposits and Customer Funding
The following table summarizes the composition of our deposits and customer funding:
Table 15 Period End Deposit and Customer Funding Composition
March 31, 2021December 31, 2020September 30, 2020June 30, 2020March 31, 2020
 ($ in Thousands)Amount% of
Total
Amount% of
Total
Amount% of
Total
Amount% of
Total
Amount% of
Total
Noninterest-bearing demand$8,496,194 31 %$7,661,728 29 %$7,489,048 28 %$7,573,942 29 %$6,107,386 24 %
Savings4,032,830 15 %3,650,085 14 %3,529,423 13 %3,394,930 13 %3,033,039 12 %
Interest-bearing demand5,748,353 21 %6,090,869 23 %5,979,449 22 %5,847,349 22 %6,170,071 24 %
Money market7,838,437 28 %7,322,769 28 %7,687,775 29 %7,486,319 28 %7,717,739 30 %
Brokered CDs— — %— — %— — %4,225 — %65,000 — %
Other time1,561,352 %1,757,030 %2,026,852 %2,244,680 %2,568,345 10 %
   Total deposits$27,677,166 100 %$26,482,481 100 %$26,712,547 100 %$26,551,444 100 %$25,661,580 100 %
Customer funding(a)
182,228 245,247 198,741 178,398 142,174 
Total deposits and customer funding$27,859,394 $26,727,727 $26,911,289 $26,729,842 $25,803,754 
Network transaction deposits(b)
$1,054,634 $1,197,093 $1,390,778 $1,496,958 $1,731,996 
Net deposits and customer funding (total deposits and customer funding, excluding Brokered CDs and network transaction deposits)
$26,804,761 $25,530,634 $25,520,511 $25,228,660 $24,006,758 
Time deposits of more than $250,000$246,037 $341,068 $463,739 $559,434 $756,195 
(a) Securities sold under agreement to repurchase and commercial paper.
(b) Included above in interest-bearing demand and money market.

Total deposits, which are the Corporation's largest source of funds, increased $1.2 billion, or 5%, from December 31, 2020, and increased $2.0 billion, or 8%, from March 31, 2020, primarily driven by customers holding proceeds from government stimulus programs in their deposit accounts.
Noninterest-bearing deposits increased $834 million, or 11%, from December 31, 2020, and increased $2.4 billion, or 39%, from March 31, 2020. Savings accounts increased $383 million, or 10%, from December 31, 2020, and increased $1.0 billion, or 33%, from March 31, 2020. These increases were primarily due to government stimulus program inflows.
Time deposits decreased $196 million, or 11%, from December 31, 2020, and decreased $1.1 billion, or 41%, from March 31, 2020, due to higher priced time deposits rolling off as they mature.
Non-maturity deposit accounts, comprised of savings, money market, and demand (both interest and noninterest-bearing) accounts, comprised 94% of the Corporation's total deposits at March 31, 2021.
Included in the above amounts were $1.1 billion of network deposits, primarily sourced from other financial institutions and intermediaries. These represented 4% of the Corporation's total deposits at March 31, 2021. Network deposits decreased $142 million, or 12%, from December 31, 2020, and decreased $677 million, or 39%, from March 31, 2020.
Liquidity
The objective of liquidity risk management is to ensure that the Corporation has the ability to generate sufficient cash or cash equivalents in a timely and cost effective manner to satisfy the cash flow requirements of depositors and borrowers and to meet its other commitments as they become due. The Corporation’s liquidity risk management process is designed to identify, measure, and manage the Corporation’s funding and liquidity risk to meet its daily funding needs in the ordinary course of business, as well as to address expected and unexpected changes in its funding requirements. The Corporation engages in various activities to manage its liquidity risk, including diversifying its funding sources, stress testing, and holding readily-marketable assets which can be used as a source of liquidity, if needed.
The Corporation performs dynamic scenario analysis in accordance with industry best practices. Measures have been established to ensure the Corporation has sufficient high quality short-term liquidity to meet cash flow requirements under stressed scenarios. In addition, the Corporation also reviews static measures such as deposit funding as a percentage of total assets and liquid asset levels. Strong capital ratios, credit quality, and core earnings are also essential to maintaining cost effective access to wholesale funding markets. At March 31, 2021, the Corporation was in compliance with its internal liquidity objectives and had sufficient asset-based liquidity to meet its obligations under a stressed scenario.
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The Corporation maintains diverse and readily available liquidity sources, including:
Investment securities, which are an important tool to the Corporation’s liquidity objective and can be pledged or sold to enhance liquidity, if necessary. See Note 6 Investment Securities of the notes to consolidated financial statements for additional information on the Corporation's investment securities portfolio, including pledged investment securities.
Pledgeable loan collateral, which is eligible collateral with both the Federal Reserve Bank and the FHLB under established lines of credit. Based on the amount of collateral pledged, the FHLB established a collateral value from which the Bank may draw advances against the collateral. The collateral is also used to enable the FHLB to issue letters of credit in favor of public fund depositors of the Bank. As of March 31, 2021, the Bank had $5.7 billion available for future advances. The Federal Reserve Bank also establishes a collateral value of assets to support borrowings from the discount window. As of March 31, 2021, the Bank had $752 million available for discount window borrowings.
A $200 million Parent Company commercial paper program, of which $51 million was outstanding as of March 31, 2021.
Dividends and service fees from subsidiaries, as well as the proceeds from issuance of capital, which are also funding sources for the Parent Company.
Equity issuances by the Parent Company; the Corporation has filed a shelf registration statement with the SEC under which the Parent Company may, from time to time, offer shares of the Corporation’s common stock in connection with acquisitions of businesses, assets, or securities of other companies.
Other issuances by the Parent Company; the Corporation intends to file an updated universal shelf registration statement with the SEC, under which the Parent Company may offer the following securities, either separately or in units: debt securities, preferred stock, depositary shares, common stock, and warrants.
Bank issuances; the Bank may also issue institutional CDs, network transaction deposits, and brokered CDs.
Global Bank Note Program issuances; the Bank has implemented the program pursuant to which it may from time to time offer up to $2.0 billion aggregate principal amount of its unsecured senior and subordinated notes. In August 2018, the Bank issued $300 million of senior notes, due August 2021, and callable July 2021.

Credit ratings relate to the Corporation’s ability to issue debt securities and the cost to borrow money, and should not be viewed as an indication of future stock performance or a recommendation to buy, sell, or hold securities. Adverse changes in these factors could result in a negative change in credit ratings and impact not only the ability to raise funds in the capital markets but also the cost of these funds. The credit ratings of the Parent Company and the Bank at March 31, 2021 are displayed below:
Table 16 Credit Ratings
 Moody’sS&P
Bank short-term depositsP-1-
Bank long-term deposits/issuerA1BBB+
Corporation commercial paperP-2-
Corporation long-term senior debt/issuerBaa1BBB
OutlookNegativeStable
For the three months ended March 31, 2021, net cash provided by operating activities and financing activities was $158 million and $1.1 billion, respectively, while net cash used in investing activities was $12 million for a net increase in cash and cash equivalents of $1.2 billion since year-end 2020. At March 31, 2021, assets of $34.6 billion increased $1.2 billion, or 3%, from year-end 2020, primarily driven by a $1.3 billion increase in interest-bearing deposits in other financial institutions, offset by a $289 million, or 1%, decrease in loans. On the funding side, deposits of $27.7 billion increased $1.2 billion, or 5%, from year-end related to deposit inflows from government stimulus programs.
For the three months ended March 31, 2020, net cash used in operating activities and investing activities was $20 million and $928 million, respectively, while net cash provided by financing activities was $1.0 billion for a net increase in cash and cash equivalents of $90 million since year-end 2019. At March 31, 2020, assets of $33.9 billion increased $1.5 billion, or 5%, from year-end 2019, primarily driven by a $1.5 billion, or 7%, increase in loans as customers drew on their lines to enhance their liquidity in response to the uncertainty surrounding the COVID-19 pandemic. Additionally, on February 14, 2020, the Corporation added $370 million in loans from the First Staunton acquisition. On the funding side, deposits of $25.7 billion increased $1.9 billion, or 8%, from year-end as advances on customer's loans were deposited into their deposit account
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increasing their liquidity. Additionally, on February 14, 2020, the Corporation assumed $439 million of deposits from the First Staunton acquisition.
Quantitative and Qualitative Disclosures about Market Risk
Market risk and interest rate risk are managed centrally. Market risk is the potential for loss arising from adverse changes in the fair value of fixed income securities, equity securities, other earning assets and derivative financial instruments as a result of changes in interest rates or other factors. Interest rate risk is the potential for reduced net interest income resulting from adverse changes in the level of interest rates. As a financial institution that engages in transactions involving an array of financial products, the Corporation is exposed to both market risk and interest rate risk. In addition to market risk, interest rate risk is measured and managed through a number of methods. The Corporation uses financial modeling simulation techniques that measure the sensitivity of future earnings due to changing rate environments to measure interest rate risk.
Policies established by the Corporation’s ALCO and approved by the Board of Directors are intended to limit these risks. The Board has delegated day-to-day responsibility for managing market and interest rate risk to ALCO. The primary objectives of market risk management are to minimize any adverse effect that changes in market risk factors may have on net interest income and to offset the risk of price changes for certain assets recorded at fair value.
Interest Rate Risk
The primary goal of interest rate risk management is to control exposure to interest rate risk within policy limits approved by the Board of Directors. These limits and guidelines reflect the Corporation's risk appetite for interest rate risk over both short-term and long-term horizons. No interest rate limit breaches occurred during the first three months of 2021.
The major sources of the Corporation's non-trading interest rate risk are timing differences in the maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, and the potential exercise of explicit or embedded options. We measure these risks and their impact by identifying and quantifying exposures through the use of sophisticated simulation and valuation models which are employed by management to understand NII at risk, interest rate sensitive EAR, and MVE at risk. The Corporation’s interest rate risk profile is such that a higher or steeper yield curve adds to income while a flatter yield curve is relatively neutral, and a lower or inverted yield curve generally has a negative impact on earnings. The Corporation's EAR profile is asset sensitive at March 31, 2021.
For further discussion of the Corporation's interest rate risk and corresponding key assumptions, see the Interest Rate Risk section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Corporation’s 2020 Annual Report on Form 10-K.
The sensitivity analysis included below is measured as a percentage change in NII and EAR due to gradual moves in benchmark interest rates from a baseline scenario over 12 months. We evaluate the sensitivity using: 1) a dynamic forecast incorporating expected growth in the balance sheet, and 2) a static forecast where the current balance sheet is held constant.
While a gradual shift in interest rates was used in this analysis to provide an estimate of exposure under a probable scenario, an instantaneous shift in interest rates would have a much more significant impact.
Table 17 Estimated % Change in Rate Sensitive Earnings at Risk Over 12 Months
 Dynamic Forecast
March 31, 2021
Static Forecast
March 31, 2021
Dynamic Forecast
December 31, 2020
Static Forecast
December 31, 2020
Gradual Rate Change
100 bp increase in interest rates6.6 %6.4 %6.2 %6.3 %
200 bp increase in interest rates13.9 %13.3 %12.8 %12.7 %
At March 31, 2021, the MVE profile indicates an increase in net balance sheet value due to instantaneous upward changes in rates.
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Table 18 Market Value of Equity Sensitivity
March 31, 2021December 31, 2020
Instantaneous Rate Change
100 bp increase in interest rates0.9 %1.9 %
200 bp increase in interest rates1.4 %2.8 %
Since MVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in MVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year). Further, MVE does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changes in product spreads that could mitigate the adverse impact of changes in interest rates.
The above NII, EAR, and MVE measures do not include all actions that management may undertake to manage this risk in response to anticipated changes in interest rates.
Contractual Obligations, Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities
The following table summarizes significant contractual obligations and other commitments at March 31, 2021, at those amounts contractually due to the recipient, including any unamortized premiums or discounts, hedge basis adjustments, or other similar carrying value adjustments.
Table 19 Contractual Obligations and Other Commitments
($ in Thousands)One Year
or Less
One to
Three Years
Three to
Five Years
Over
Five Years
Total
Time deposits$1,194,134 $307,396 $59,817 $$1,561,352 
Short-term funding189,678 — — — 189,678 
FHLB advances17,822 7,337 1,000,466 604,340 1,629,966 
Other long-term funding299,865 923 248,940 — 549,729 
Operating leases7,516 11,189 8,093 9,281 36,079 
Commitments to extend credit5,444,007 3,875,437 1,040,485 151,284 10,511,213 
Total$7,153,022 $4,202,282 $2,357,802 $764,911 $14,478,017 
The Corporation utilizes a variety of financial instruments in the normal course of business to meet the financial needs of its customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include lending-related commitments and derivative instruments. A discussion of the Corporation’s derivative instruments at March 31, 2021 is included in Note 10 Derivative and Hedging Activities of the notes to consolidated financial statements. A discussion of the Corporation’s lending-related commitments is included in Note 12 Commitments, Off-Balance Sheet Arrangements, Legal Proceedings and Regulatory Matters of the notes to consolidated financial statements. See Note 9 Short and Long-Term Funding of the notes to consolidated financial statements for additional information on the Corporation’s short-term funding, FHLB advances, and long-term funding. See also Note 18 Leases of the notes to consolidated financial statements for additional information on the Corporation's operating leases.
Capital
Management actively reviews capital strategies for the Corporation and each of its subsidiaries in light of perceived business risks, future growth opportunities, industry standards, and compliance with regulatory requirements. The assessment of overall capital adequacy depends on a variety of factors, including asset quality, liquidity, stability of earnings, changing competitive forces, economic condition in markets served, and strength of management. At March 31, 2021, the capital ratios of the Corporation and its banking subsidiaries were in excess of regulatory minimum requirements. The Corporation’s capital ratios are summarized in the following table.
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Table 20 Capital Ratios
Quarter Ended
 ($ in Thousands)
March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Risk-based Capital(a)
CET1$2,759,473 $2,706,010 $2,671,739 $2,651,286 $2,421,135 
Tier 1 capital3,112,239 3,058,809 3,024,710 3,004,424 2,676,951 
Total capital3,682,720 3,632,807 3,601,705 3,577,757 3,249,807 
Total risk-weighted assets25,640,395 25,903,415 26,141,710 25,864,463 25,866,140 
CET1 capital ratio10.76 %10.45 %10.22 %10.25 %9.36 %
Tier 1 capital ratio12.14 %11.81 %11.57 %11.62 %10.35 %
Total capital ratio14.36 %14.02 %13.78 %13.83 %12.56 %
Tier 1 leverage ratio9.53 %9.37 %9.02 %9.08 %8.50 %
Selected Equity and Performance Ratios
Total stockholders’ equity / assets11.94 %12.24 %11.66 %11.34 %11.18 %
Dividend payout ratio(b)
31.03 %45.00 %69.23 %19.15 %66.67 %
Return on average assets1.14 %0.78 %0.51 %1.72 %0.57 %
Annualized noninterest expense / average assets2.11 %2.02 %2.55 %2.12 %2.37 %
(a) The Federal Reserve establishes regulatory capital requirements, including well-capitalized standards for the Corporation. The Corporation follows Basel III, subject to certain transition provisions. These regulatory capital measurements are used by management, regulators, investors, and analysts to assess, monitor and compare the quality and composition of the Corporation's capital with the capital of other financial services companies.
(b) Ratio is based upon basic earnings per common share.

See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, for information on the shares repurchased during the first quarter of 2021.
In February 2019, the federal bank regulatory agencies issued a final rule (the "2019 CECL Rule") that revised certain capital regulations to account for changes to credit loss accounting under GAAP. The rule included a transition option that allowed banking organizations to phase in, over a three-year period, the day-one impact of CECL adoption on regulatory capital ratios. In August 2020, the federal bank regulatory agencies issued a final rule that maintains the three-year transition option of the 2019 CECL Rule and also provided an option to delay for two years an estimate of the effect of CECL on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period. The Corporation has elected to utilize the CECL Transition Provision granted by the banking regulators. Under these provisions, the Day 1 capital impact relating to the adoption of ASU 2016-13 and 25% of the difference between the period end ACL and the Day 1 ACL will be 100% deferred for 2 years, and then phased in over the next 3 years. At March 31, 2021, the Corporation had a modified CECL transitional amount of $111 million.
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Non-GAAP Measures
Table 21 Non-GAAP Measures
Quarter Ended
($ in Thousands)March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Selected equity and performance ratios(a)(b)
Tangible common equity / tangible assets7.80 %7.94 %7.50 %7.25 %6.90 %
Return on average equity9.32 %6.58 %4.46 %15.55 %4.80 %
Return on average tangible common equity14.03 %9.75 %6.36 %25.45 %7.31 %
Return on average CET113.25 %9.16 %5.98 %23.71 %6.84 %
Return on average tangible assets1.18 %0.81 %0.52 %1.78 %0.59 %
Average stockholders' equity / average assets12.18 %11.90 %11.35 %11.04 %11.79 %
Tangible common equity reconciliation(a)
Common equity$3,774,268 $3,737,421 $3,691,796 $3,670,612 $3,533,755 
Goodwill and other intangible assets, net(1,169,694)(1,177,554)(1,178,409)(1,180,661)(1,284,111)
Tangible common equity$2,604,575 $2,559,867 $2,513,387 $2,489,951 $2,249,644 
Tangible Assets Reconciliation(a)
Total assets$34,575,255 $33,419,783 $34,698,746 $35,501,464 $33,908,056 
Goodwill and other intangible assets, net(1,169,694)(1,177,554)(1,178,409)(1,180,661)(1,284,111)
Tangible assets$33,405,561 $32,242,230 $33,520,337 $34,320,803 $32,623,944 
Average tangible common equity and average CET1 reconciliation(a)(b)
Common equity$3,750,479 $3,699,957 $3,680,687 $3,566,293 $3,585,083 
Goodwill and other intangible assets, net(1,174,617)(1,178,165)(1,179,796)(1,281,176)(1,272,175)
Tangible common equity2,575,862 2,521,792 2,500,891 2,285,117 2,312,908 
Modified CECL transitional amount115,649 122,828 120,228 115,272 101,340 
Accumulated other comprehensive loss (income)(5,337)(3,668)(3,682)7,663 10,398 
Deferred tax assets (liabilities), net40,608 41,578 42,183 44,777 46,635 
Average CET1$2,726,782 $2,682,530 $2,659,620 $2,452,829 $2,471,281 
Average tangible assets reconciliation(a)
Total assets$33,684,143 $34,075,792 $35,550,359 $34,845,943 $32,577,005 
Goodwill and other intangible assets, net(1,174,617)(1,178,165)(1,179,796)(1,281,176)(1,272,175)
Tangible assets$32,509,526 $32,897,626 $34,370,563 $33,564,768 $31,304,829 
Efficiency ratio reconciliation(c)
Federal Reserve efficiency ratio 65.74 %59.68 %85.41 %43.49 %70.37 %
Fully tax-equivalent adjustment(0.97)%(0.84)%(1.29)%(0.39)%(0.96)%
Other intangible amortization(0.82)%(0.82)%(0.87)%(0.65)%(0.95)%
Fully tax-equivalent efficiency ratio63.96 %58.02 %83.25 %42.46 %68.47 %
Acquisition related costs adjustment(0.01)%— %(0.08)%(0.12)%(0.58)%
Provision for unfunded commitments adjustment(1.09)%3.42 %2.87 %(1.91)%(5.18)%
Asset gains (losses), net adjustment1.12 %(0.30)%(0.11)%22.10 %(0.02)%
Branch Sales0.24 %1.68 %— %— %— %
3Q 2020 Initiatives(d)
— %— %(22.90)%— %— %
Adjusted efficiency ratio64.21 %62.83 %63.02 %62.53 %62.70 %
(a) The ratio tangible common equity to tangible assets excludes goodwill and other intangible assets, net. This financial measure has been included as it is considered to be a critical metric with which to analyze and evaluate financial condition and capital strength.
(b) These capital measurements are used by management, regulators, investors, and analysts to assess, monitor and compare the quality and composition of our capital with the capital of other financial services companies.
(c) The efficiency ratio as defined by the Federal Reserve guidance is noninterest expense (which includes the provision for unfunded commitments) divided by the sum of net interest income plus noninterest income, excluding investment securities gains / losses, net. The fully tax-equivalent efficiency ratio is noninterest expense (which includes the provision for unfunded commitments), excluding other intangible amortization, divided by the sum of fully tax-equivalent net interest income plus noninterest income, excluding investment securities gains / losses, net. The adjusted efficiency ratio is noninterest expense, which excludes the provision for unfunded commitments, other intangible amortization, acquisition related costs, and 3Q 2020 initiatives, divided by the sum of fully tax-equivalent net interest income plus noninterest income, excluding investment securities gains (losses), net, acquisition related costs, asset gains (losses), net, and gain on sale of branches. Management believes the adjusted efficiency ratio is a meaningful measure as it enhances the comparability of net interest income arising from taxable and tax-exempt sources and provides a better measure as to how the Corporation is managing its expenses by adjusting for acquisition related costs, provision for unfunded commitments, asset gains (losses), net, branch sales, and third quarter of 2020 initiatives.
(d) Third quarter of 2020 initiatives consisted of cost saving efforts that were executed during the third quarter of 2020. These initiatives included a $45 million loss on prepayment of FHLB advances, $10 million in severance, and $6 million in write-downs related to branch sales and lease breakage related to announced branch consolidations.

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Sequential Quarter Results
The Corporation reported net income of $94 million for the first quarter of 2021, compared to net income of $67 million for the fourth quarter of 2020. Net income available to common equity was $89 million for the first quarter of 2021, or $0.58 for both basic and diluted earnings per common share. Comparatively, net income available to common equity for the fourth quarter of 2020 was $62 million, or $0.40 for both basic and diluted earnings per common share (see Table 1).
Fully tax-equivalent net interest income for the first quarter of 2021 was $180 million, $12 million, or 6%, lower than the fourth quarter of 2020. The net interest margin in the first quarter of 2021 was down 10 bp to 2.39%. Average earning assets decreased $400 million, or 1%, to $30.3 billion in the first quarter of 2021, with decreases of $218 million in loans and $181 million in investments. On the funding side, short and long-term funding decreased $518 million from the fourth quarter of 2020 primarily due to the paydown of PPPLF borrowings (see Table 2).
The provision for credit losses had a release of $23 million for the first quarter of 2021, compared to $17 million of expense for the fourth quarter of 2020 (see Table 13). See discussion under sections: Provision for Credit Losses, Nonperforming Assets, and Allowance for Credit Losses on Loans.
Noninterest income for the first quarter of 2021 increased $10 million, or 11%, from the fourth quarter of 2020, primarily due to the increase of $9 million in mortgage banking, net, driven by the recovery of MSRs impairment (see Table 3).
Noninterest expense of $175 million increased $2 million, or 1%, from the fourth quarter of 2020, primarily due to higher personnel expense, partially offset by OREO write downs related to the closure of branches during the fourth quarter of 2020. (see Table 4).
For the first quarter of 2021, the Corporation recognized income tax expense of $25 million, compared to income tax expense of $17 million for the fourth quarter of 2020. The higher income tax expense during the first quarter of 2021 compared to the fourth quarter of 2020 was primarily driven by an increase in income before taxes. See Income Taxes section for a detailed discussion on income taxes.
Segment Review
As discussed in Note 15 Segment Reporting of the notes to consolidated financial statements, the Corporation’s reportable segments have been determined based upon its internal profitability reporting system, which is organized by strategic business unit. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer, and the distribution of those products and services are similar. The reportable segments are Corporate and Commercial Specialty; Community, Consumer and Business; and Risk Management and Shared Services.
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Table 22 Selected Segment Financial Data
Three Months Ended March 31,
($ in Thousands)20212020% Change
Corporate and Commercial Specialty
Total revenue(a)
$142,876 $135,761 %
Provision for credit losses17,509 12,172 44 %
Noninterest expense57,725 54,304 %
Income tax expense (benefit)12,649 12,940 (2)%
Net income54,993 56,344 (2)%
Average earning assets14,562,174 12,993,498 12 %
Average loans14,629,667 13,045,630 12 %
Average deposits9,561,666 9,027,986 %
Average allocated capital (Average CET1)(b)
1,467,932 1,328,293 11 %
Return on average allocated capital (ROCET1)(b)
15.19 %17.06 %-187 bp
Community, Consumer, and Business
Total revenue$127,278 $146,942 (13)%
Provision for credit losses5,099 5,108 — %
Noninterest expense97,346 113,777 (14)%
Income tax expense (benefit)5,215 5,892 (11)%
Net income19,618 22,165 (11)%
Average earning assets9,102,883 9,390,271 (3)%
Average loans9,034,449 9,329,349 (3)%
Average deposits16,080,866 13,691,417 17 %
Average allocated capital (Average CET1)(b)
498,630 549,689 (9)%
Return on average allocated capital (ROCET1)(b)
15.96 %16.22 %-26 bp
Risk Management and Shared Services
Total revenue$1,091 $18,545 (94)%
Provision for credit losses(45,612)35,720 N/M
Noninterest expense20,275 24,110 (16)%
Income tax expense (benefit)6,737 (8,613)N/M
Net income19,690 (32,672)N/M
Average earning assets6,666,951 6,832,924 (2)%
Average loans799,233 933,639 (14)%
Average deposits1,162,027 1,572,546 (26)%
Average allocated capital (Average CET1)(b)
760,220 593,299 28 %
Return on average allocated capital (ROCET1)(b)
7.73 %(24.72)%N/M
Consolidated Total
Total revenue(a)
$271,245 $301,248 (10)%
Return on average allocated capital (ROCET1)(b)
13.25 %6.84 %N/M
N/M = Not meaningful
(a) Includes $2 million pre-tax gain on sale of Whitnell.
(b) The Federal Reserve establishes capital adequacy requirements for the Corporation, including CET1. For segment reporting purposes, the return on CET1 ("ROCET1") reflects return on average allocated CET1. The ROCET1 for the Risk Management and Shared Services segment and the Consolidated Total is inclusive of the annualized effect of the preferred stock dividends.
Notable Changes in Segment Financial Data
The Corporate and Commercial Specialty segment consists of lending and deposit solutions to larger businesses, developers, not-for-profits, municipalities, and financial institutions, and the support to deliver, fund, and manage such banking solutions. In addition, this segment provides a variety of investment, fiduciary, and retirement planning products and services to individuals and small to mid-sized businesses. During the first quarter of 2021, the Corporation sold its wealth management subsidiary Whitnell.
Revenue increased $7 million, or 5%, from the three months ended March 31, 2020. The increase was primarily driven by an increase of $5 million in asset gains/losses, net, including a $2 million pre-tax gain on sale of Whitnell.
Credit provision increased $5 million, or 44%, as loans in the pipeline continued to fund along with slower payoffs.
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Average loans increased $1.6 billion, or 12%, primarily driven by an $808 million increase in commercial and business loans, which is largely related to PPP loans, and a $744 million increase in CRE loans.
The Community, Consumer, and Business segment consists of lending, deposit solutions, and historically offered ancillary financial services, primarily insurance and risk consulting, to individuals and small to mid-sized businesses.
Revenue decreased $20 million, or 13%, from the three months ended March 31, 2020. The decrease was primarily due to a $22 million decrease in insurance commissions and fees as a result of the sale of ABRC, which was partially offset by a $17 million increase in net mortgage banking income as a result of an $11 million recovery of MSRs impairment during the first three months of 2021, compared to impairment of $9 million during the first three months of 2020. In addition, net interest income decreased from the first three months of 2021 largely driven by the current interest rate environment.
Noninterest expense decreased $16 million, or 14%, from the three months ended March 31, 2020. The decrease was primarily driven by a $12 million decrease in personnel expense, largely driven by a reduction in FTEs as a result of branch consolidations and the sale of ABRC.
Average deposits increased $2.4 billion, or 17%, from the three months ended March 31, 2020. The increase was primarily driven by customers holding proceeds from government stimulus programs and tax returns in their deposit accounts.
The Risk Management and Shared Services segment includes key shared Corporate functions, Parent Company activity, intersegment eliminations, and residual revenues and expenses.
Revenues decreased $17 million, or 94%, from the three months ended March 31, 2020. The decrease was primarily driven by the FTP charge on loans decreasing faster than the FTP credit paid for deposits as a result of the current interest rate environment.
Credit provision decreased $81 million as a result of improving credit quality within the loan portfolio and an improving economic forecast.
Noninterest expense decreased $4 million from the three months ended March 31, 2020. The decrease was primarily driven by lower fringe benefit costs.
Average deposits decreased $411 million, or 26%, from the three months ended March 31, 2020. The decrease was primarily driven by a decrease in higher cost network deposits.
Critical Accounting Policies
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Estimates that are particularly susceptible to significant change include the determination of the ACLL, goodwill impairment assessment, MSRs valuation, and income taxes. A discussion of these policies can be found in the Critical Accounting Policies section in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Corporation’s 2020 Annual Report on Form 10-K. There has been no changes in the Corporation's application of critical accounting policies since December 31, 2020.
Recent Developments
On April 27, 2021, the Corporation’s Board of Directors declared a regular quarterly cash dividend of $0.18 per common share, payable on June 15, 2021 to shareholders of record at the close of business on June 1, 2021. The Board of Directors also declared a regular quarterly cash dividend of $0.3828125 per depositary share on Associated's 6.125% Series C Perpetual Preferred Stock, payable on June 15, 2021 to shareholders of record at the close of business on June 1, 2021. The Board of Directors also declared a regular quarterly cash dividend of $0.3359375 per depositary share on Associated's 5.375% Series D Perpetual Preferred Stock, payable on June 15, 2021 to shareholders of record at the close of business on June 1, 2021. The Board of Directors also declared a regular quarterly cash dividend of $0.3671875 per depositary share on Associated's 5.875% Series E Perpetual Preferred Stock, payable on June 15, 2021 to shareholders of record at the close of business on June 1, 2021. The Board of Directors also declared a regular quarterly cash dividend of $0.3515625 per depositary share on Associated's 5.625% Series F Perpetual Preferred Stock, payable on June 15, 2021 to shareholders of record at the close of business on June 1, 2021.

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On April 27, 2021, the Corporation announced it is calling for the redemption of all of its outstanding depositary shares representing a 1/40th interest in a share of the Corporation’s 6.125% Series C Non-Cumulative Perpetual Preferred Stock (the “Depositary Shares”) on June 15, 2021 (the “Redemption Date”). There are 2.6 million Depositary Shares outstanding. The Depositary Shares will be redeemed at a redemption price of $25 per Depositary Share, plus an amount equal to any declared and unpaid dividends to the Redemption Date.

ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk
Information required by this item is set forth in Item 2 under the captions Quantitative and Qualitative Disclosures about Market Risk and Interest Rate Risk.
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ITEM 4.    Controls and Procedures
The Corporation maintains disclosure controls and procedures as required under Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended, that are designed to ensure that information required to be disclosed in the Corporation's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of March 31, 2021, the Corporation’s management carried out an evaluation, under the supervision and with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on the foregoing, its Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of March 31, 2021.
No changes were made to the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act of 1934) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
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PART II - OTHER INFORMATION


ITEM 1.Legal Proceedings
The information required by this item is set forth in Part I, Item 1 under Note 12 Commitments, Off-Balance Sheet Arrangements, Legal Proceedings and Regulatory Matters of the notes to consolidated financial statements.

ITEM 1A.Risk Factors
The following risk factors supplement the Risk Factors described in the Corporation’s 2020 Annual Report on Form 10-K and should be read in conjunction therewith
Changes in the federal, state, or local tax laws may negatively impact our financial performance. On March 31, 2021, President Biden unveiled his infrastructure plan, which includes a proposal to increase the federal corporate tax rate from 21% to 28% as part of a package of tax reforms to help fund the spending proposals in the plan. The Biden plan is in the early stages of the legislative process, which is expected to proceed this year due to the Democratic Party's majority in both houses of Congress. If adopted as proposed, the increase of the corporate tax rate would adversely affect our results of operations in future periods.

ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
During the first quarter of 2021, the Corporation repurchased approximately $22 million of common stock, including $18 million of open market purchases and $4 million of repurchases related to tax withholding on equity compensation, or approximately 1.2 million shares, of common stock. The repurchase details are presented in the table below:
Common Stock Purchases
Total Number  of
Shares Purchased(a)
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans
or Programs(b)
Period
January 1, 2021 - January 31, 2021983,920 $18.58 966,354 — 
February 1, 2021 - February 28, 2021142,689 19.27 — — 
March 1, 2021 - March 31, 202127,182 20.78 — — 
Total1,153,791 $18.71 966,354 4,434,321 
(a) During the first quarter of 2021, the Corporation repurchased 187,437 common shares for minimum tax withholding settlements on equity compensation. These purchases do not count against the maximum number of shares that may yet be purchased under the Board of Directors’ authorization described below.
(b) At March 31, 2021, there remained approximately $95 million authorized to be repurchased in the aggregate. Approximately 4.4 million shares of common stock remained available to be repurchased under this Board authorization based on the closing share price on March 31, 2021.
Repurchases under Board authorized repurchase programs are subject to any necessary regulatory approvals and other limitations and may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchases, or similar facilities.
Preferred Stock Purchases
During the first quarter of 2021, the Corporation did not repurchase any shares of preferred stock.
On August 28, 2015, the Board of Directors authorized the repurchase of up to $10 million of depositary shares of the Corporation's Series C Preferred Stock, of which all of such depository shares remained available to repurchase as of March 31, 2021. Using the closing stock price on March 31, 2021 of $26.12, a total of approximately 383,000 shares remained available to be repurchased under the previously approved Board authorizations.
On July 25, 2017, the Board of Directors authorized the repurchase of up to $15 million of depositary shares of the Corporation's Series D Preferred Stock, of which approximately $14 million remained available to repurchase as of March 31,
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2021. Using the closing stock price on March 31, 2021 of $25.57, a total of approximately 565,000 shares remained available to be repurchased under the previously approved Board authorizations.
The repurchase of depositary shares is based on market and investment opportunities, capital levels, growth prospects, and regulatory constraints. Such repurchases may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchase programs, or similar facilities.
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ITEM 6.Exhibits
(a)    Exhibits:
Exhibit (101), Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Income, (iii) Unaudited Consolidated Statements of Comprehensive Income, (iv) Unaudited Consolidated Statements of Changes in Stockholders’ Equity, (v) Unaudited Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ASSOCIATED BANC-CORP
(Registrant)
Date: April 27, 2021/s/ Philip B. Flynn
Philip B. Flynn
President and Chief Executive Officer
Date: April 27, 2021/s/ Christopher J. Del Moral-Niles
  Christopher J. Del Moral-Niles
Chief Financial Officer
Date: April 27, 2021/s/ Tammy C. Stadler
Tammy C. Stadler
Principal Accounting Officer

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