FIRST CITIZENS BANCSHARES, INC. 
Management's discussion and analysis ("MD&A") of earnings and related financial
data are presented to assist in understanding the financial condition and
results of operations of First Citizens BancShares, Inc. and Subsidiaries
("BancShares"). This discussion and analysis should be read in conjunction with
the unaudited consolidated financial statements and related notes presented
within this Quarterly Report on Form 10-Q along with our financial statements
and related MD&A of financial condition and results of operations included in
our 2019 Annual Report on Form 10-K. Intercompany accounts and transactions have
been eliminated. Although certain amounts for prior years have been reclassified
to conform to statement presentations for 2020, the reclassifications had no
effect on shareholders' equity or net income as previously reported. Unless
otherwise noted, the terms "we," "us" and "BancShares" refer to the consolidated
financial position and consolidated results of operations for BancShares.
EXECUTIVE OVERVIEW
BancShares conducts its banking operations through its wholly-owned subsidiary
First-Citizens Bank & Trust Company ("FCB"), a state-chartered bank organized
under the laws of the state of North Carolina .
BancShares' earnings and cash flows are primarily derived from our commercial
and retail banking activities. We gather deposits from retail and commercial
customers and also secure funding through various non-deposit sources. We invest
the liquidity generated from these funding sources in interest-earning assets,
including loans and leases, investment securities and overnight investments. We
also invest in bank premises, hardware, software, furniture and equipment used
to conduct our commercial and retail banking business. We provide treasury
services products, cardholder and merchant services, wealth management services
and various other products and services typically offered by commercial banks.
The fees and service charges generated from these products and services are
primary sources of noninterest income which is an essential component of our
total revenue.
We are focused on expanding our position in legacy and target markets through
organic growth and strategic acquisitions. We believe our franchise is
positioned for continued growth as a result of our client centric banking
principles, disciplined lending standards, and our people.
Refer to our 2019 Annual Report on Form 10-K for further discussion of our
strategy.
RECENT ECONOMIC AND INDUSTRY DEVELOPMENTS
During the first quarter of 2020, a novel strain of coronavirus ("COVID-19")
spread throughout the world, causing significant disruptions to the domestic and
global economies which continue to date. In response to the outbreak,
governments have imposed restrictions resulting in business shutdowns, regional
quarantines, disruptions of supply chains, changes in consumer behavior and
overall economic instability. This uncertainty has led to volatility in the
financial markets. This impact was coupled with spikes in unemployment as a
result of business shutdowns that continue to impact financial institutions
operationally and financially. For a discussion of the risks we face with
respect to the COVID-19 pandemic, the associated economic uncertainty, the steps
taken to mitigate the pandemic and the resulting economic contraction, see "Item
1A - Risk Factors" in Part II of this quarterly report on Form 10-Q, which
should be read in conjunction with the risk factors disclosed in our annual
report on Form 10-K for the year ended December 31, 2019 .
During the third quarter of 2020, the Federal Reserve's Federal Open Market
Committee ("FOMC") maintained the federal funds rate at a target range of 0.00%
to 0.25%. The FOMC cited the effects of COVID-19 on economic activity and the
risks posed to the economic outlook. The FOMC expects to maintain this target
range until labor market conditions have reached levels consistent with the
FOMC's assessments of maximum employment and inflation has risen to 2% and is on
track to moderately exceed 2% for some time.
On March 27, 2020 , the Coronavirus Aid Relief and Economic Security Act (the
"CARES Act") was passed. The bill was designed to provide short-term economic
relief to individuals and businesses most impacted by the fallout of the
pandemic. Key provisions include: for individuals, economic impact payments and
enhanced unemployment benefits; for small businesses, access to loans and
support through the Small Business Administration Paycheck Protection Program
("SBA-PPP"), direct aid and loans to the medical industry and other affected
sectors, and certain tax benefits that can be used in conjunction with the other
aid mentioned. While direct aid to financial services entities is not a primary
goal of the provisions, financial institutions will function to transmit funds
from the Federal Reserve , SBA and United States ("U.S.") Treasury to the public.
This was supplemented by the Paycheck Protection Program Flexibility Act, which
was signed into law on June 5, 2020 and amended provisions of the SBA-PPP
including timing of the program and changes to forgiveness criteria. In
addition, there were other regulatory actions taken that may impact our business
including changes in credit reporting on customer forbearance, federally backed
mortgage forbearance, potential legal lending limit relaxation and other
economic stabilization efforts. Further legislation is expected as the
government continues to mitigate the economic impact on the crisis.
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BANCSHARES' COVID-19 CONTINUED MONITORING AND RESPONSE
BancShares remains in a very strong capital and liquidity position providing
stability in navigating the COVID-19 crisis. Our leadership team continues to
ensure appropriate measures are in place to protect the welfare of our employees
and soundness of the organization, while continuing to support our customers.
Our branches have re-opened with enhanced safety protocols, and our corporate
locations remain at limited occupancy due to current virus trends.
Through September 30, 2020 , over 94% of all COVID-19 related loan extensions
have begun repayment. Delinquency trends among loans entering repayment are in
line with the remainder of the portfolio. We have not seen significant declines
in overall credit quality, though the impact of the SBA-PPP and payment
extensions could be delaying signs of credit deterioration.
During 2020, BancShares originated over 23,000 SBA-PPP loans with an outstanding
balance of $3.11 billion at September 30, 2020 . We have collected all $117.2
million in SBA-PPP related loan fees per the program terms. These fees and
related costs were deferred and are being recognized in interest income over the
life of the loans. We have begun accepting and processing applications for
forgiveness, and subsequent to the third quarter, we have begun receiving
forgiveness payments. We anticipate acceleration of the fee income as the volume
of approved forgiveness applications and payments received from the SBA
increase.
Table 1
SBA-PPP LOANS BY LOAN SIZE
(Dollars in thousands)
Loan Size $ of Loans % of Loans $
Less than $150,000 $ 862,026 27.7 %
$150,000 to $2,000,000 1,766,649 56.8
Greater than $2,000,000 484,001 15.5
Total $ 3,112,676 100.0 %
Strong Liquidity and Capital Position
We maintain a strong level of liquidity. As of September 30, 2020 , liquid assets
(available cash and unencumbered high quality liquid assets at market value)
totaled approximately $8.51 billion representing 17.5% of consolidated assets as
of September 30, 2020 .
In addition to liquid assets, we had contingent sources of liquidity totaling
approximately $11.37 billion in the form of Federal Home Loan Bank ("FHLB")
borrowing capacity, Federal Reserve Discount Window availability, federal funds
lines and a committed line of credit.
At September 30, 2020 , BancShares' regulatory capital ratios were well in excess
of Basel III capital requirements with a total risk-based capital ratio of
13.7%, a Tier 1 risk-based capital ratio of 11.5%, a common equity Tier 1 ratio
of 10.4%, a Tier 1 leverage ratio of 7.8% and a capital conservation buffer of
5.5%, more than twice the required level of 2.5%.
SIGNIFICANT EVENTS IN 2020
On January 1, 2020 BancShares adopted Accounting Standards Update ("ASU")
2016-13, Financial Instruments-Credit Losses (Accounting Standards Codification
("ASC") Topic 326): Measurement of Credit Losses on Financial Instruments, which
introduced a new credit loss methodology for the estimation of credit losses.The
amendments in this ASU require loss estimates be determined over an asset's
lifetime and broaden the information that an entity must consider in developing
its expected credit losses. BancShares adopted this ASU using the modified
retrospective approach for all loans, leases, debt securities designated as held
to maturity, and unfunded loan commitments. BancShares adopted this ASU using
the prospective transition approach for PCD loans previously accounted for under
ASC 310-30 and debt securities available for sale. Refer to Note A - Accounting
Policies and Basis of Presentation for additional information.
Upon adoption, BancShares recorded a net decrease of $37.9 million in the
Allowance for Credit Losses ("ACL") which included a decrease of $56.9 million
in the ACL on non-purchased credit deteriorated ("non-PCD") loans, offset by an
increase of $19.0 million in the ACL on purchased credit deteriorated ("PCD")
loans. The $56.9 million change in the ACL on non-PCD loans, as well as an $8.9
million increase in the reserve for unfunded commitments, net of deferred taxes,
resulted in a net increase in retained earnings of $36.9 million . The $19.0
million increase in the ACL on PCD loans was a reclassification of the PCD
credit discount and resulted in a gross up of loan balances by this same amount
and did not have any effect on retained earnings. Impact to total capital and
capital ratios was not significant and we did not elect the capital phase-in
option allowable for regulatory reporting purposes.
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On October 15, 2020 , BancShares and CIT Group Inc., a Delaware corporation
("CIT"), entered into an Agreement and Plan of Merger (the "Merger Agreement")
by and among BancShares, FCB, FC Merger Subsidiary IX, Inc. , a direct, wholly
owned subsidiary of FCB ("Merger Sub"), and CIT, the parent company of CIT Bank,
N.A ., a national banking association ("CIT Bank "). Pursuant to the terms and
subject to the conditions set forth in the Merger Agreement, Merger Sub will
merge with and into CIT, with CIT as the surviving entity (the "First-Step
Merger"), and as soon as reasonably practicable following the effective time of
the First-Step Merger, CIT will merge with and into FCB, with FCB as the
surviving entity (together with the First-Step Merger, the "Mergers"). The
Merger Agreement further provides that immediately following the consummation of
the Mergers, CIT Bank will merge with and into FCB, with FCB as the surviving
bank (together with the Mergers, the "Transaction").
The Merger Agreement was unanimously approved by the Board of Directors of each
of BancShares and CIT. Subject to the fulfillment of customary closing
conditions, the parties anticipate that the Transaction will close in the first
half of 2021.
Upon the terms and subject to the conditions set forth in the Merger Agreement,
at the effective time of the First-Step Merger (the "Effective Time"), each
share of CIT common stock, par value $0.01 per share, issued and outstanding
immediately prior to the Effective Time ("CIT Common Stock"), except for certain
shares of CIT Common Stock owned by CIT or BancShares, will be converted into
the right to receive .06200 shares of BancShares Class A common stock, par value
$1.00 per share. Holders of CIT Common Stock will receive cash in lieu of
fractional shares.
In addition, at the Effective Time, each share of Fixed-to-Floating Rate
Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share,
of CIT and 5.625% Non-Cumulative Perpetual Preferred Stock, Series B, par value
$0.01 per share, of CIT issued and outstanding will automatically be converted
into the right to receive one share of a newly created series of preferred
stock, Series B, of BancShares and one share of a newly created series of
preferred stock, Series C, of BancShares, respectively.
The Merger Agreement requires that, effective as of the Effective Time, the
Boards of Directors of the combined company and the combined bank will consist
of 14 directors, (i) 11 of whom will be members of the current Board of
Directors of BancShares, and (ii) three of whom will be selected from among the
current Board of Directors of CIT and will include as one of those three Ellen
R. Alemany , Chairwoman and Chief Executive Officer of CIT.
FINANCIAL PERFORMANCE SUMMARY
Third Quarter Highlights
•Net income for the third quarter of 2020 totaled $142.7 million , an increase of
$17.9 million , or 14.3% compared to the same quarter in 2019. Net income
available to common shareholders totaled $138.0 million . Net income per common
share increased $2.76 , or 24.5%, to $14.03 in the third quarter of 2020, from
$11.27 per share during the same period in 2019.
•Return on average assets for the third quarter of 2020 was 1.18%, down from
1.32% in the third quarter of 2019. Return on average equity for the third
quarter of 2020 was 14.93%, up from 13.83% in the the third quarter of 2019.
•Net interest income totaled $353.7 million for the third quarter of 2020, an
increase of $17.2 million , or 5.1% compared to the same quarter in 2019. The
increase was primarily due to an increase of $21.3 million in interest earned on
loans due to loan growth and lower interest expense on deposits of $8.3 million ,
partially offset by a decrease in interest earned on overnight investments of
$6.4 million . Interest and fee income related to SBA-PPP loans totaled $29.8
million in the third quarter of 2020. The taxable-equivalent net interest margin
("NIM") was 3.06% for the third quarter of 2020, down 71 basis points from 3.77%
for the third quarter in 2019.
•Noninterest income for the third quarter of 2020 totaled $120.6 million , an
increase of $19.6 million , or 19.5%, compared to the same quarter of 2019,
predominantly due to realized gains on the sale of available for sale
securities.
•Noninterest expense was $291.7 million for the third quarter of 2020, compared
to $270.4 million during the same quarter of 2019, an increase of $21.3 million
or 7.9%.
•Total loans grew to $32.85 billion , an increase of $426.7 million , or by 5.2%
on an annualized basis, since June 30, 2020 . The net charge-off ratio was 0.03%
for the third quarter of 2020, down from 0.09% for the second quarter of 2020
and 0.10% for the third quarter of 2019.
•Total deposits grew to $42.25 billion , an increase of $771.4 million , or by
7.4% on an annualized basis, since June 30, 2020 .
•BancShares repurchased 117,700 shares of its Class A common stock during the
third quarter of 2020 totaling $47.1 million . At September 30, 2020 , BancShares
remained well capitalized with a total risk-based capital ratio of 13.7%, a Tier
1 risk-based capital of 11.5%, a common equity Tier 1 ratio of 10.4%, and a
leverage ratio of 7.8%.
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Year to Date Highlights
•Net income for the nine months ended September 30, 2020 totaled $353.6 million ,
a decrease of $1.9 million , or 0.5% compared to the same period of 2019. Net
income available to common shareholders totaled $344.2 million . Earnings per
share increased $2.46 , or 7.8%, to $33.96 for the nine months ended September
30, 2020 , from $31.50 per share during the same period in 2019.
•Return on average assets for the nine months ended September 30, 2020 was
1.05%, down 24 basis points compared to the same period in 2019. Return on
average equity for the nine months ended September 30, 2020 was 12.59%, down 82
basis points compared to the same period in 2019.
•Net interest income for the nine months ended September 30, 2020 , was $1.03
billion , an increase of $45.2 million , or 4.6% compared to the same period of
2019. The increase was primarily due to an increase of $78.7 million in interest
earned on loans primarily due to loan growth, partially offset by a decrease in
interest earned on overnight investments of $15.0 million as well as an increase
in total interest expense of $12.0 million . Interest and fee income related to
SBA-PPP loans totaled $47.9 million in the first nine months of 2020. The
taxable-equivalent NIM was 3.23% for the nine months ended September 30, 2020 ,
down 57 basis points from 3.80% during the same period of 2019.
•The allowance for credit losses was $223.9 million at September 30, 2020 ,
compared to $225.1 million at December 31, 2019 . The $1.2 million change was due
primarily to the $37.9 million reduction in the allowance as a result of
adopting ASC 326, partially offset by a $36.1 million reserve build related to
potential COVID-19 impact.
•Total loans grew to $32.85 billion , an increase of $3.96 billion since
December 31, 2019 . Excluding $3.11 billion of loans originated under the
SBA-PPP, total loans increased $851.0 million , or by 3.9% on an annualized
basis. The net charge-off ratio was 0.07% for the nine months ended September
30, 2020 , a 3 basis point decrease compared to the same period of 2019.
•Total deposits grew to $42.25 billion , an increase of $7.82 billion since
December 31, 2019 . Excluding estimated SBA-PPP deposits of $1.30 billion , total
deposits grew $6.52 billion , or by 25.3% on an annualized basis.
•BancShares repurchased 813,090 shares of its Class A common stock during the
nine months ended September 30, 2020 totaling $333.8 million .
•During the first quarter of 2020, BancShares successfully completed a $695
million capital raise which consisted of $350 million of subordinated notes and
$345 million of Series A preferred stock.
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Table 2
SELECTED QUARTERLY DATA
2020 2019 (1)
Third Second First Fourth Third Nine months ended September 30
(Dollars in thousands, except share data) Quarter Quarter Quarter Quarter Quarter 2020 2019
SUMMARY OF OPERATIONS
Interest income $ 374,334 $
363,257
$ 1,107,150 $ 1,049,963 Interest expense 20,675 25,863 31,159 26,924 25,893 77,697 65,718 Net interest income 353,659 337,394 338,400 327,124 336,425 1,029,453 984,245 Provision for credit losses 4,042 20,552 28,355 7,727 6,766 52,949 23,714 Net interest income after provision for credit losses 349,617 316,842 310,045 319,397 329,659 976,504 960,531 Noninterest income 120,572 165,402 64,011 104,393 100,930 349,985 311,468 Noninterest expense 291,662 291,679 299,971 292,262 270,425 883,312 811,479 Income before income taxes 178,527 190,565 74,085 131,528 160,164 443,177 460,520 Income taxes 35,843 36,779 16,916 29,654 35,385 89,538 105,023 Net income 142,684 153,786 57,169 101,874 124,779 353,639 355,497
Net income available to common shareholders
$ 344,213 $ 355,497 Net interest income, taxable equivalent$ 354,256 $ 337,965 $ 339,174 $ 328,045 $ 337,322 $ 1,031,395 $ 986,896 PER COMMON SHARE DATA Net income$ 14.03 $ 14.74 $ 5.46 $ 9.55 $ 11.27 $ 33.96$ 31.50 Cash dividends on common shares 0.40 0.40 0.40 0.40 0.40 1.20 1.20 Market price at period end (Class A) 318.78 405.02 332.87 532.21 471.55 318.78 471.55 Book value at period-end 380.43 367.57 351.90 337.38 327.86 380.43 327.86 SELECTED QUARTERLY AVERAGE BALANCES Total assets$ 48,262,155 $
45,553,502
$ 36,770,191 Investment securities 9,930,197 8,928,467 7,453,159 7,120,023 6,956,981 8,774,840 6,851,348 Loans and leases (2) 32,694,996 31,635,958 29,098,101 27,508,062 26,977,476 31,148,683 26,368,922 Interest-earning assets 45,617,376 42,795,781 38,004,341 36,032,680 35,293,979 42,151,861 34,473,814 Deposits 41,905,844 39,146,415 34,750,061 33,295,141 32,647,264 38,612,836 31,856,771 Interest-bearing liabilities 25,591,707 24,407,285 23,153,777 20,958,943 20,551,393 24,388,339 20,204,705 Securities sold under customer repurchase agreements 710,237 659,244 474,231 495,804 533,371 614,920 542,618 Other short-term borrowings - 45,549 157,759 28,284 23,236 67,522 21,335 Long-term borrowings 1,256,331 1,275,928 961,132 467,223 384,047 1,164,475 366,850 Common shareholders' equity 3,679,138 3,648,284 3,625,975 3,570,872 3,580,235 3,651,132 3,545,418 Shareholders' equity$ 4,019,075 $
3,988,225
$ 3,896,645 $ 3,545,418 Common shares outstanding 9,836,629 10,105,520 10,473,119 10,708,084 11,060,462 10,137,321 11,286,984 SELECTED QUARTER-END BALANCES Total assets (1)$ 48,666,873 $
47,866,194
$ 37,748,324 Investment securities 9,860,594 9,508,476 8,845,197 7,173,003 7,167,680 9,860,594 7,167,680 Loans and leases 32,845,144 32,418,425 29,240,959 28,881,496 27,196,511 32,845,144 27,196,511 Deposits 42,250,606 41,479,245 35,346,711 34,431,236 32,743,277 42,250,606 32,743,277 Securities sold under customer repurchase agreements 693,889 740,276 540,362 442,956 522,195 693,889 522,195 Other short-term borrowings - - 105,000 295,277 - - - Long-term borrowings 1,252,016 1,258,719 1,297,132 588,638 453,876 1,252,016 453,876 Shareholders' equity$ 4,074,414 $
3,991,444
$ 4,074,414 $ 3,568,482 Common shares outstanding 9,816,405 9,934,105 10,280,105 10,629,495 10,884,005 9,816,405 10,884,005 SELECTED RATIOS AND OTHER DATA Return on average assets (annualized) 1.18 % 1.36 % 0.57 % 1.05 % 1.32 % 1.05 % 1.29 % Return on average common shareholders' equity (annualized) 14.93 16.43 6.34 11.32 13.83 12.59 13.41 Net yield on interest-earning assets (taxable equivalent) 3.06 3.14 3.55 3.59 3.77 3.23 3.80 Net charge-offs (annualized) to average loans and leases 0.03 0.09 0.10 0.14 0.10 0.07 0.10 Allowance for credit losses to total loans and leases(3): PCD 5.07 5.07 4.80 1.35 1.34 5.07 1.34 Non-PCD 0.61 0.61 0.64 0.77 0.82 0.61 0.82 Total 0.68 0.69 0.72 0.78 0.83 0.68 0.83 Ratio of total nonperforming assets to total loans, leases and other real estate owned (4) 0.73 0.77 0.79 0.58 0.57 0.73 0.57 Tier 1 risk-based capital ratio 11.48 11.38 11.43 10.86 11.80 11.48 11.80 Common equity Tier 1 ratio 10.43 10.32 10.36 10.86 11.80 10.43 11.80 Total risk-based capital ratio 13.70 13.63 13.65 12.12 13.09 13.70 13.09 Tier 1 leverage capital ratio 7.80 8.07 8.98 8.81 9.18 7.80 9.18 Dividend payout ratio 2.85 2.71 7.33 4.19 3.55 3.53 3.81 Average loans and leases to average deposits 78.02 80.81 83.74 82.62 82.63 80.67 82.77 (1) We adopted ASC Topic 326 ("CECL") utilizing the modified retrospective approach. We did not restate selected financial data for the quarters prior to 2020 presented above. (2) Average loan and lease balances include PCD loans, non-PCD loans and leases, loans held for sale and nonaccrual loans and leases. (3) Loans originated in relation to the SBA-PPP ($3.11 billion as ofSeptember 30, 2020 ) do not have a recorded ACL. As ofSeptember 30, 2020 , the ratio of ACL to total Non-PCD loans excluding SBA-PPP loans is 0.68% while the ratio of ACL to total loans excluding SBA-PPP loans is 0.75%. (4) Upon adoption of ASC 326, we dissolved pooling of PCI loans allowed under ASC 310-30. This increased the amount of nonaccrual loans as those nonaccrual loans within performing PCI pools were previously excluded from reporting. As ofJanuary 1, 2020 , there were$47.0 million of nonaccrual loans released from performing PCI pools. Of these nonaccrual loans,$27.5 million were outstanding as ofSeptember 30, 2020 . 44 -------------------------------------------------------------------------------- Table of Contents BUSINESS COMBINATIONS CIT Group Inc. OnOctober 15, 2020 , BancShares and CIT, entered into the Merger Agreement by and among BancShares, FCB, the Merger Sub, and CIT, the parent company ofCIT Bank . Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub and CIT will ultimately merge with and into FCB, with FCB as the surviving entity. The Merger Agreement further provides that immediately following the consummation of the Mergers,CIT Bank will merge with and into FCB, with FCB as the surviving bank. Subject to the fulfillment of customary closing conditions, the parties anticipate that the Transaction will close in the first half of 2021.Community Financial Holding Company, Inc. OnFebruary 1, 2020 , FCB completed the merger ofDuluth, Georgia -basedCommunity Financial Holding Company, Inc. ("Community Financial") and its bank subsidiary,Gwinnett Community Bank , into FCB. Under the terms of the agreement, total cash consideration of$2.3 million was paid to the shareholders of Community Financial. The merger allows FCB to expand its presence and enhance banking efforts inGeorgia . The merger contributed$222.1 million in consolidated assets, which included$686 thousand of goodwill,$134.0 million in loans, and$209.3 million in deposits. See Note B - Business Combinations for additional disclosures.Entegra Financial Corp. OnDecember 31, 2019 , FCB completed the merger ofFranklin, North Carolina -basedEntegra Financial Corp. ("Entegra") and its bank subsidiary,Entegra Bank . In order to obtain regulatory approval, FCB entered into an agreement forSelect Bank to purchase three of ourNorth Carolina branches, located inHighlands ,Sylva andFranklin . OnApril 17, 2020 , FCB completed the divestiture of the branches including loans and leases, premises and equipment and total deposits with a fair value of$110.1 million ,$2.1 million and$184.8 million , respectively.The Select Bank purchase price for the divested branches included an 8% premium for deposits acquired that was applied against goodwill generated as part of the merger withEntegra Bank . Federal Deposit Insurance Corporation Assisted Transactions BancShares completed fourteenFederal Deposit Insurance Corporation ("FDIC") assisted transactions between 2009 and 2017. Nine of the fourteenFDIC -assisted transactions included shared-loss agreements which, for their terms, protect us from a substantial portion of the credit and asset quality risk we would otherwise incur. As ofSeptember 30, 2020 , shared-loss protection remains for single family residential loans acquired in the amount of$36.2 million . The shared-loss agreement for two of theFDIC -assisted transactions included a provision related to a payment owed to theFDIC at the termination of the agreement (the "clawback liability"). As ofSeptember 30, 2020 andDecember 31, 2019 , the estimated clawback liability was$15.3 million and$112.4 million , respectively, as a result of a payment to theFDIC in the first quarter of 2020 for$99.5 million related to one of the transactions. The remaining clawback liability payment date isMarch 2021 . 45 -------------------------------------------------------------------------------- Table of Contents Table 3 CONSOLIDATED QUARTER-TO-DATE AVERAGE TAXABLE-EQUIVALENT BALANCE SHEETS Three months ended September 30 2020 2019 Interest Interest Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate Balance Expense Rate Assets Loans and leases$ 32,694,996 $ 336,934 4.06 %$ 26,977,476 $ 315,621 4.61 % Investment securities: U.S. Treasury 695,419 497 0.28 834,577 5,262 2.50 Government agency 587,377 1,335 0.91 628,322 4,742 3.02 Mortgage-backed securities 8,047,247 28,236 1.40 5,195,711 27,891 2.15 Corporate bonds 489,602 6,433 5.26 149,888 1,912 5.10 Other investments 110,552 739 2.66 148,483 636 1.70 Total investment securities 9,930,197 37,240 1.50 6,956,981 40,443 2.32 Overnight investments 2,992,183 757 0.10 1,359,522 7,151 2.09 Total interest-earning assets 45,617,376 374,931 3.24 35,293,979 363,215 4.06 Cash and due from banks 349,079 256,379 Premises and equipment 1,261,864 1,224,118 Allowance for credit losses (222,793) (227,707) Other real estate owned 52,716 46,131 Other assets 1,203,913 1,025,936 Total assets$ 48,262,155 $ 37,618,836 Liabilities Interest-bearing deposits: Checking with interest$ 9,239,838 $ 1,369 0.06 %$ 7,361,758 $ 1,509 0.08 % Savings 3,070,619 314 0.04 2,636,583 528 0.08 Money market accounts 8,108,832 3,634 0.18 6,088,740 6,610 0.43 Time deposits 3,205,850 8,151 1.01 3,523,658 13,090 1.47 Total interest-bearing deposits 23,625,139 13,468 0.23 19,610,739 21,737
0.44
Securities sold under customer repurchase agreements 710,237 395 0.22 533,371 542 0.40 Other short-term borrowings - - - 23,236 203 3.50 Long-term borrowings 1,256,331 6,812 2.15 384,047 3,411 3.51 Total interest-bearing liabilities 25,591,707 20,675 0.32 20,551,393 25,893
0.50
Noninterest-bearing deposits 18,280,705 13,036,525 Other liabilities 370,668 450,683 Shareholders' equity 4,019,075 3,580,235 Total liabilities and shareholders' equity$ 48,262,155 $ 37,618,836 Interest rate spread 2.92 % 3.56 % Net interest income and net yield on interest-earning assets$ 354,256 3.06 %$ 337,322 3.77 % Loans and leases include PCD loans, non-PCD loans, nonaccrual loans and loans held for sale. Yields related to loans, leases and securities exempt from both federal and state income taxes, federal income taxes only, or state income taxes only are stated on a taxable-equivalent basis assuming statutory federal income tax rate of 21.0%, as well as state income tax rate of 3.4%, for both the three months endedSeptember 30, 2020 and 2019. The taxable-equivalent adjustment was$597 thousand and$897 thousand for the three months endedSeptember 30, 2020 and 2019, respectively. 46 -------------------------------------------------------------------------------- Table of Contents Table 4 CONSOLIDATED YEAR-TO-DATE AVERAGE TAXABLE-EQUIVALENT BALANCE SHEETS Nine months ended September 30 2020 2019 Interest Interest Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate Balance Expense Rate Assets Loans and leases$ 31,148,683 $ 989,708 4.20 %$ 26,368,922 $ 910,993 4.58 % Investment securities: U.S. Treasury 401,666 2,853 0.95 1,062,901 18,529 2.33 Government agency 655,097 6,883 1.40 434,097 10,084 3.10 Mortgage-backed securities 7,224,224 87,475 1.61 5,075,959 84,855 2.23 Corporate bonds 332,029 12,692 5.10 147,579 5,780 5.22 Other investments 161,824 3,653 3.02 130,812 1,552 1.59 Total investment securities 8,774,840 113,556 1.73 6,851,348 120,800
2.35
Overnight investments 2,228,338 5,828 0.35 1,253,544 20,820
2.22
Total interest-earning assets 42,151,861 1,109,092 3.48 34,473,814 1,052,613 4.05 Cash and due from banks 351,334 277,736 Premises and equipment 1,258,147 1,214,960 Allowance for credit losses (206,737) (227,081) Other real estate owned 53,871 46,488 Other assets 1,225,569 984,274 Total assets$ 44,834,045 $ 36,770,191 Liabilities Interest-bearing deposits: Checking with interest$ 8,665,758 $ 4,380 0.07 %$ 7,467,762 $ 4,457 0.08 % Savings 2,837,867 911 0.04 2,606,781 1,260 0.06 Money market accounts 7,583,359 19,262 0.34 5,950,591 16,249 0.37 Time deposits 3,454,438 31,025 1.20 3,248,768 31,854 1.31 Total interest-bearing deposits 22,541,422 55,578 0.33 19,273,902 53,820
0.37
Securities sold under customer repurchase agreements 614,920 1,236 0.27 542,618 1,516 0.37 Other short-term borrowings 67,522 1,052 2.05 21,335 481 2.99 Long-term borrowings 1,164,475 19,831 2.24 366,850 9,900 3.56 Total interest-bearing liabilities 24,388,339 77,697 0.42 20,204,705 65,717 0.43 Noninterest-bearing deposits 16,071,414 12,582,869 Other liabilities 477,647 437,199 Shareholders' equity 3,896,645 3,545,418 Total liabilities and shareholders' equity$ 44,834,045 $ 36,770,191 Interest rate spread 3.06 % 3.62 % Net interest income and net yield on interest-earning assets$ 1,031,395 3.23 %$ 986,896
3.80 %
Loans and leases include PCD loans, non-PCD loans, nonaccrual loans and loans held for sale. Yields related to loans, leases and securities exempt from both federal and state income taxes, federal income taxes only, or state income taxes only are stated on a taxable-equivalent basis assuming statutory federal income tax rate of 21.0%, as well as state income tax rate of 3.4%, for both the nine months endedSeptember 30, 2020 andSeptember 30, 2019 . The taxable-equivalent adjustment was$1.9 million and$2.7 million for the nine months endedSeptember 30, 2020 andSeptember 30, 2019 , respectively. 47
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