UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. ~~20459~~20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2016~~2017, or



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

For the transition period from to

Commission File No. 0-10587

FULTON FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



PENNSYLVANIA		23-2195389
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Penn Square, P.O. Box 4887, Lancaster, Pennsylvania		17604
(Address of principal executive offices)		(Zip Code)

(717) 291-2411

(Registrant’s telephone number, including area code)

Indicate by checkmark 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 ý No ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý No ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting ~~company~~company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $2.50 Par Value ~~–173,060,000~~–174,941,000 shares outstanding as of July ~~29, 2016.~~28, 2017.

FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2016~~2017

INDEX



Description		Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

(a)	Consolidated Balance Sheets - June 30, ~~2016~~2017 and December 31, ~~2015~~2016	3

(b)	Consolidated Statements of Income - Three and six months ended June 30, ~~2016~~2017 and ~~2015~~2016	4

(c)	Consolidated Statements of Comprehensive Income - Three and six months ended June 30, ~~2016~~2017 and ~~2015~~2016	5

(d)	Consolidated Statements of Shareholders’ Equity - Six months ended June 30, ~~2016~~2017 and ~~2015~~2016	6

(e)	Consolidated Statements of Cash Flows - Six months ended June 30, ~~2016~~2017 and ~~2015~~2016	7

(f)	Notes to Consolidated Financial Statements	8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		3841

Item 3. Quantitative and Qualitative Disclosures about Market Risk		6266

Item 4. Controls and Procedures		6670

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		6771

Item 1A. Risk Factors		6771

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		6871

Item 3. Defaults Upon Senior Securities - (not applicable)		68

Item 4. Mine Safety Disclosures - (not applicable)		68

Item 5. Other Information - (none to be reported)		68

Item 6. Exhibits		6871

Signatures		6972

Exhibit Index		7073

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share data)


	June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(unaudited)						(unaudited)
ASSETS
Cash and due from banks	$	84,647		$	101,120		$	94,938		$	118,763
Interest-bearing deposits with other banks	348,232			230,300			322,514			233,763
Federal Reserve Bank and Federal Home Loan Bank stock	59,854			62,216			70,328			57,489
Loans held for sale	34,330			16,886			62,354			28,697
Available for sale investment securities	2,529,724			2,484,773			2,488,699			2,559,227
Loans, net of unearned income	14,155,159			13,838,602			15,346,617			14,699,272
Less: Allowance for loan losses	(162,546		)	(169,054		)	(172,342		)	(168,679		)
Net Loans	13,992,613			13,669,548			15,174,275			14,530,593
Premises and equipment	228,861			225,535			217,558			217,806
Accrued interest receivable	43,316			42,767			47,603			46,294
Goodwill and intangible assets	531,556			531,556			531,556			531,556
Other assets	626,902			550,017			637,610			620,059
Total Assets	$	18,480,035		$	17,914,718		$	19,647,435		$	18,944,247
LIABILITIES
Deposits:
Noninterest-bearing	$	4,125,375		$	3,948,114		$	4,574,619		$	4,376,137
Interest-bearing	10,167,189			10,184,203			10,782,742			10,636,727
Total Deposits	14,292,564			14,132,317			15,357,361			15,012,864
Short-term borrowings:
Federal funds purchased	449,184			197,235			206,269			278,570
Other short-term borrowings	273,030			300,428			488,590			262,747
Total Short-Term Borrowings	722,214			497,663			694,859			541,317
Accrued interest payable	8,336			10,724			7,804			9,632
Other liabilities	384,372			282,578			357,680			329,916
Federal Home Loan Bank advances and long-term debt	965,552			949,542
Federal Home Loan Bank advances and other long-term debt							1,037,961			929,403
Total Liabilities	16,373,038			15,872,824			17,455,665			16,823,132
SHAREHOLDERS’ EQUITY
Common stock, $2.50 par value, 600 million shares authorized, 219.0 million shares issued in 2016 and 218.9 million shares issued in 2015	547,530			547,141
Common stock, $2.50 par value, 600 million shares authorized, 220.8 million shares issued in 2017 and 219.9 million shares issued in 2016							551,936			549,707
Additional paid-in capital	1,455,351			1,450,690			1,473,549			1,467,602
Retained earnings	686,635			641,588			782,541			732,099
Accumulated other comprehensive income (loss)	7,689			(22,017		)
Treasury stock, at cost, 45.9 million shares in 2016 and 44.7 million shares in 2015	(590,208		)	(575,508		)
Accumulated other comprehensive loss							(24,875		)	(38,449		)
Treasury stock, at cost, 45.9 million shares in 2017 and 45.8 million shares in 2016							(591,381		)	(589,844		)
Total Shareholders’ Equity	2,106,997			2,041,894			2,191,770			2,121,115
Total Liabilities and Shareholders’ Equity	$	18,480,035		$	17,914,718		$	19,647,435		$	18,944,247

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


(in thousands, except per-share data)	Three months ended June 30				Six months ended June 30					Three months ended June 30				Six months ended June 30
	2016		2015		2016		2015			2017		2016		2017		2016
INTEREST INCOME
Loans, including fees	$	134,643	$	129,910	$	268,722	$	259,687		$	148,440	$	134,643	$	291,006	$	268,722
Investment securities:
Taxable	11,159		10,944		23,162		22,226			11,474		11,159		23,388		23,162
Tax-exempt	2,320		1,881		4,360		3,968			2,856		2,320		5,705		4,360
Dividends	135		296		295		644			109		135		238		295
Loans held for sale	188		265		319		438			201		188		388		319
Other interest income	864		933		1,762		3,038			801		864		1,643		1,762
Total Interest Income	149,309		144,229		298,620		290,001			163,881		149,309		322,368		298,620
INTEREST EXPENSE
Deposits	10,887		10,053		21,614		19,876			12,884		10,887		24,685		21,614
Short-term borrowings	217		103		485		180			974		217		1,829		485
Long-term debt	9,289		11,153		18,551		23,444
Federal Home Loan Bank advances and other long-term debt										8,460		9,289		16,712		18,551
Total Interest Expense	20,393		21,309		40,650		43,500			22,318		20,393		43,226		40,650
Net Interest Income	128,916		122,920		257,970		246,501			141,563		128,916		279,142		257,970
Provision for credit losses	2,511		2,200		4,041		(1,500		)	6,700		2,511		11,500		4,041
Net Interest Income After Provision for Credit Losses	126,405		120,720		253,929		248,001			134,863		126,405		267,642		253,929
NON-INTEREST INCOME
Other service charges and fees	12,983		10,988		23,733		20,351			14,342		12,983		26,779		23,733
Service charges on deposit accounts	12,896		12,637		25,454		24,206			12,914		12,896		25,314		25,454
Investment management and trust services	11,247		11,011		22,235		21,900			12,132		11,247		23,940		22,235
Mortgage banking income	3,897		5,339		7,927		10,027			6,141		3,897		10,737		7,927
Investment securities gains, net	76		2,415		1,023		6,560			1,436		76		2,542		1,023
Other	5,038		4,099		8,902		8,182			5,406		5,038		9,732		8,902
Total Non-Interest Income	46,137		46,489		89,274		91,226			52,371		46,137		99,044		89,274
NON-INTEREST EXPENSE
Salaries and employee benefits	70,029		65,067		139,401		130,057			74,496		70,029		143,732		139,401
Net occupancy expense	11,811		11,809		24,031		25,501			12,316		11,811		24,979		24,031
Other outside services	5,508		8,125		11,564		13,875			7,708		5,508		13,254		11,564
Data processing	5,476		4,894		10,876		9,662			4,619		5,476		8,905		10,876
Software	3,953		3,376		7,874		6,694			4,435		3,953		9,128		7,874
Amortization of tax credit investments										3,151		—		4,149		—
Equipment expense										3,034		2,872		6,393		6,243
Professional fees	3,353		2,731		5,686		5,602			2,931		3,353		5,668		5,686
FDIC insurance expense	2,960		2,885		5,909		5,707			2,366		2,960		4,424		5,909
Equipment expense	2,872		3,335		6,243		7,293
Supplies and postage	2,706		2,726		5,285		5,095
Marketing	1,916		2,235		3,540		3,468			2,234		1,916		4,220		3,540
Telecommunications	1,459		1,617		2,947		3,333
Operating risk loss	986		674		1,526		1,501
Other real estate owned and repossession expense	365		129		1,003		1,491
Intangible amortization	—		106		—		236
Other	8,243		8,645		16,165		17,317			15,405		13,759		30,118		26,926
Total Non-Interest Expense	121,637		118,354		242,050		236,832			132,695		121,637		254,970		242,050
Income Before Income Taxes	50,905		48,855		101,153		102,395			54,539		50,905		111,716		101,153
Income taxes	11,155		12,175		23,146		25,679			9,072		11,155		22,869		23,146
Net Income	$	39,750	$	36,680	$	78,007	$	76,716		$	45,467	$	39,750	$	88,847	$	78,007

PER SHARE:
Net Income (Basic)	$	0.23	$	0.21	$	0.45	$	0.43		$	0.26	$	0.23	$	0.51	$	0.45
Net Income (Diluted)	0.23		0.21		0.45		0.43			0.26		0.23		0.51		0.45
Cash Dividends	0.10		0.09		0.19		0.18			0.11		0.10		0.22		0.19
See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	Three months ended June 30						Six months ended June 30						Three months ended June 30						Six months ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016

Net Income	$	39,750		$	36,680		$	78,007		$	76,716		$	45,467		$	39,750		$	88,847		$	78,007
Other Comprehensive Income (Loss), net of tax:
Unrealized gain (loss) on securities	12,839			(12,008		)	29,865			(2,016		)
Other Comprehensive Income, net of tax:
Unrealized gain on securities													10,268			12,839			14,541			29,865
Reclassification adjustment for securities gains included in net income	(49		)	(1,569		)	(665		)	(4,264		)	(932		)	(49		)	(1,651		)	(665		)
Non-credit related unrealized gain on other-than-temporarily impaired debt securities	—			—			—			125
Amortization of unrealized loss on derivative financial instruments	4			34			8			68			—			4			—			8
Amortization of net unrecognized pension and postretirement items	32			466			498			932			341			32			684			498
Other Comprehensive Income (Loss)	12,826			(13,077		)	29,706			(5,155		)
Other Comprehensive Income													9,677			12,826			13,574			29,706
Total Comprehensive Income	$	52,576		$	23,603		$	107,713		$	71,561		$	55,144		$	52,576		$	102,421		$	107,713

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

SIX MONTHS ENDED JUNE 30, ~~2016~~2017 AND ~~2015~~2016

(in thousands, except per-share data)


	Common Stock						Retained Earnings			��					Treasury Stock			Total			Common Stock						Retained Earnings						Treasury Stock			Total
	Shares Outstanding		Amount		Additional Paid-in Capital						Accumulated Other Comprehensive Income (Loss)										Shares Outstanding		Amount		Additional Paid-in Capital					Accumulated Other Comprehensive Income (Loss)

Balance at December 31, 2016																					174,040		$	549,707	$	1,467,602	$	732,099		$	(38,449	)	$	(589,844	)	$	2,121,115
Net income																											88,847									88,847
Other comprehensive income																														13,574						13,574
Stock issued																					877		2,229		4,178								(1,537		)	4,870
Stock-based compensation awards																									1,769											1,769
Common stock cash dividends - $0.22 per share																											(38,405		)							(38,405		)
Balance at June 30, 2017																					174,917		$	551,936	$	1,473,549	$	782,541		$	(24,875	)	$	(591,381	)	$	2,191,770

Balance at December 31, 2015	174,176		$	547,141	$	1,450,690	$	641,588			$	(22,017	)		$	(575,508	)	$	2,041,894		174,176		$	547,141	$	1,450,690	$	641,588		$	(22,017	)	$	(575,508	)	$	2,041,894
Net income							78,007											78,007									78,007									78,007
Other comprehensive income											29,706							29,706
Other comprehensive loss																														29,706						29,706
Stock issued, including related tax benefits	273		389		1,405										1,554			3,348			273		389		1,405								1,554			3,348
Stock-based compensation awards					3,256													3,256							3,256											3,256
Acquisition of treasury stock	(1,310	)													(16,254		)	(16,254		)	(1,310	)											(16,254		)	(16,254		)
Common stock cash dividends - $0.19 per share							(32,960		)									(32,960		)							(32,960		)							(32,960		)
Balance at June 30, 2016	173,139		$	547,530	$	1,455,351	$	686,635			$	7,689			$	(590,208	)	$	2,106,997		173,139		$	547,530	$	1,455,351	$	686,635		$	7,689		$	(590,208	)	$	2,106,997

Balance at December 31, 2014	178,924		$	545,555	$	1,420,523	$	558,810			$	(17,722	)		$	(510,501	)	$	1,996,665
Net income							76,716											76,716
Other comprehensive loss											(5,155		)					(5,155		)
Stock issued, including related tax benefits	423		664		1,954										2,077			4,695
Stock-based compensation awards					2,838													2,838
Acquisition of treasury stock	(1,538	)													(19,013		)	(19,013		)
Settlement of accelerated stock repurchase agreement	(1,790	)			20,000									—	(20,000		)	—
Common stock cash dividends - $0.18 per share							(31,929		)									(31,929		)
Balance at June 30, 2015	176,019		$	546,219	$	1,445,315	$	603,597			$	(22,877	)		$	(547,437	)	$	2,024,817

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six months ended June 30						Six months ended June 30
	2016			2015			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	78,007		$	76,716		$	88,847		$	78,007
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	4,041			(1,500		)	11,500			4,041
Depreciation and amortization of premises and equipment	13,804			13,920			13,974			13,804
Net amortization of investment securities premiums	4,647			3,288			4,775			4,647
Investment securities gains, net	(1,023		)	(6,560		)	(2,542		)	(1,023		)
Gain on sales of mortgage loans held for sale	(7,110		)	(7,961		)	(6,562		)	(7,110		)
Proceeds from sales of mortgage loans held for sale	304,516			406,703			283,251			304,516
Originations of mortgage loans held for sale	(314,850		)	(415,200		)	(281,356		)	(314,850		)
Amortization of intangible assets	—			236
Amortization of issuance costs on long-term debt	193			279			382			193
Stock-based compensation	3,256			2,838			1,769			3,256
Excess tax benefits from stock-based compensation	(28		)	(63		)	—			(28		)
(Increase) decrease in accrued interest receivable	(549		)	625
(Increase) decrease in other assets	(18,268		)	10,181
Increase in accrued interest receivable							(1,309		)	(549		)
Increase in other assets							(26,610		)	(18,268		)
Decrease in accrued interest payable	(2,388		)	(2,873		)	(1,828		)	(2,388		)
Increase (decrease) in other liabilities	9,866			(3,322		)
(Decrease) increase in other liabilities							(9,327		)	9,866
Total adjustments	(3,893		)	591			(13,883		)	(3,893		)
Net cash provided by operating activities	74,114			77,307			74,964			74,114
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale	84,972			18,815			29,518			84,972
Proceeds from maturities of securities available for sale	282,832			205,620
Proceeds from principal repayments and maturities of securities available for sale							225,788			282,832
Purchase of securities available for sale	(355,220		)	(346,322		)	(158,078		)	(355,220		)
(Increase) decrease in short-term investments	(115,570		)	35,759
Increase in short-term investments							(101,590		)	(115,570		)
Net increase in loans	(326,902		)	(147,492		)	(655,172		)	(326,902		)
Net purchases of premises and equipment	(17,130		)	(14,687		)	(13,726		)	(17,130		)
Net cash used in investing activities	(447,018		)	(248,307		)	(673,260		)	(447,018		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits	202,552			205,901			351,329			202,552
Net decrease in time deposits	(42,305		)	(67,698		)	(6,832		)	(42,305		)
Increase in short-term borrowings	224,551			79,316			153,542			224,551
Additions to long-term debt	16,000			148,099			223,251			16,000
Repayments of long-term debt	(183		)	(155,150		)	(115,075		)	(183		)
Net proceeds from issuance of common stock	3,320			4,632			4,870			3,320
Excess tax benefits from stock-based compensation	28			63			—			28
Dividends paid	(31,278		)	(30,397		)	(36,614		)	(31,278		)
Acquisition of treasury stock	(16,254		)	(19,013		)	—			(16,254		)
Net cash provided by financing activities	356,431			165,753			574,471			356,431
Net Decrease in Cash and Due From Banks	(16,473		)	(5,247		)	(23,825		)	(16,473		)
Cash and Due From Banks at Beginning of Period	101,120			105,702			118,763			101,120
Cash and Due From Banks at End of Period	$	84,647		$	100,455		$	94,938		$	84,647
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	43,038		$	46,373		$	45,054		$	43,038
Income taxes	9,087			11,051			7,016			9,087
Supplemental schedule of certain noncash activities:
Transfer of student loans to loans held for sale							$	28,990		$	—
See Notes to Consolidated Financial Statements

FULTON FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of Fulton Financial Corporation (the "Corporation") have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. Operating results for the ~~three and~~ six months ended June 30, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016.~~2017. The Corporation evaluates subsequent events through the date of filing of this Form 10-Q with the Securities and Exchange Commission ("SEC").

Recently Issued Accounting Standards

In May 2014, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued ASC Update 2014-09, "Revenue from Contracts with Customers." This standards update establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle prescribed by this standards update is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard applies to all contracts with customers, except those that are within the scope of other topics in the FASB ASC. The standard also requires significantly expanded disclosures about revenue recognition. During ~~the first half of~~ 2016, the FASB issued amendments to this standard (ASC Updates 2016-08, 2016-10, 2016-11 and 2016-12). These amendments provide further clarification to the standard. For public business entities, ASC Update 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is not permitted. For the Corporation, this standards update is effective with its March 31, 2018 quarterly report on Form 10-Q. The Corporation is currently evaluating the impact of the adoption of ASC Update 2014-09 on its consolidated financial statements.

In January 2016, the FASB issued ASC Update 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities." ASC Update 2016-01 provides guidance regarding the income statement impact of equity investments held by an entity and the recognition of changes in fair value of financial liabilities when the fair value option is elected. This standard will require equity investments to be measured at fair value, with changes recorded in net income. ASC Update 2016-01 is effective for public business entities' annual and interim reporting periods beginning after December 15, 2017, with earlier adoption permitted. The Corporation intends to adopt this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2016-01 to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASC Update 2016-02, "Leases." This standards update states that a lessee should recognize the assets and liabilities that arise from all leases with a term greater than 12 months. The core principle requires the lessee to recognize a liability to make lease payments and a "right-of-use" asset. The accounting applied by the lessor is relatively unchanged. The standards update also requires expanded qualitative and quantitative disclosures. For public business entities, ASC Update 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. ASC Update 2016-02 mandates a modified retrospective transition for all ~~entities.~~entities, which requires restatement of all comparative periods in the year of adoption. Early ~~application~~adoption is permitted. For the Corporation, this standards update is effective with its March 31, 2019 quarterly report on Form 10-Q. The Corporation is currently evaluating the impact of the adoption of ASC Update 2016-02 on its consolidated financial statements.

~~In March 2016,~~ The Corporation currently operates a number of branches that are leased, with the ~~FASB issued~~leases accounted for as operating leases that are not recognized on the consolidated balance sheet. Under ASC Update ~~2016-09, "Stock Compensation: Improvements~~2016-02, right-of-use assets and lease liabilities will need to Employee Share-Based Payment Accounting." The purpose of this standards update is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liability, and classificationbe recognized on the ~~statement~~consolidated balance sheet for these branches. The recognition of ~~cash flows. ASC Update 2016-09~~operating leases on the consolidated balance sheet is ~~effective for interim and annual reporting periods beginning after December 15, 2016. Early application is permitted. For~~expected to be the ~~Corporation, this standards update is effective with its March 31, 2017 quarterly report on Form 10-Q. The Corporation is currently evaluating the~~most significant impact of the adoption of ~~ASC Update 2016-09 on its consolidated financial statements.~~

this standards update.

In June 2016, the FASB issued ASC Update 2016-13, "Financial Instruments - Credit Losses." The new impairment model prescribed by this standards update is a single impairment model for all financial assets (i.e., loans and investments). The recognition of credit losses would be based on an entity’s current estimate of expected losses (referred to as the Current Expected Credit Loss

model, or "CECL"), as opposed to recognition of losses only when they are probable ~~(current practice).~~under current U.S. GAAP. ASC Update 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. ~~For the~~The Corporation intends to adopt this standards update is effective with its March 31, 2020 quarterly report on Form 10-Q. The Corporation is currently evaluating the impact of the adoption of ASC Update 2016-13 on its consolidated financial statements.

In August 2016, the FASB issued ASC Update 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments." This standards update provides guidance regarding the presentation of certain cash receipts and cash payments in the statement of cash flows, addressing eight specific cash flow classification issues, in order to reduce existing diversity in practice. ASC Update 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2016-15 to have a material impact on its consolidated financial statements.

In November 2016, the FASB issued ASC Update 2016-18, "Statement of Cash Flows - Restricted Cash." This standards update provides guidance regarding the presentation of restricted cash in the statement of cash flows. The updaterequires companies to include amounts generally described as restricted cash and restricted cash equivalents, along with cash and cash equivalents, when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. It also requires an entity to disclose the nature of the restrictions on cash and cash equivalents. ASC Update 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2016-18 to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASC Update 2017-04, "Intangibles - Goodwill and Other." This standards update eliminates Step 2 of the goodwill impairment test which measures the impairment amount. Identifying and measuring impairment will take place in a single quantitative step. In addition, no separate qualitative assessment for reporting units with zero or negative carrying amount is required. Entities must disclose the existence of these reporting units and the amount of goodwill allocated to them. This update should be applied on a prospective basis, and an entity is required to disclose the nature of and reason for the change in accounting principle upon transition. ASC Update 2017-04 is effective for annual or interim goodwill impairment tests in reporting periods beginning after December 15, 2019. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its 2020 goodwill impairment test and does not expect the adoption of ASC Update 2017-04 to have a material impact on its consolidated financial statements.

In March 2017, the FASB issued ASC Update 2017-07, "Improving the Presentation of Net Periodic Pension Costs and Net Periodic Benefit Cost." This standards update requires a company to present service cost separately from the other components of net benefit cost. In addition, the update provides explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. ASC Update 2017-07 is effective for annual or interim reporting periods beginning after December 15, 2017. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and is currently evaluating the impact of the adoption of ASC Update 2017-07 on its consolidated financial statements.

In March 2017, the FASB issued ASC Update 2017-08, "Premium Amortization on Purchased Callable Debt Securities." This standards update requires that a company amortize the premium on callable debt securities to the earliest call date versus current U.S. GAAP which requires amortization over the contractual life of the securities. The amortization period for callable debt securities purchased at a discount would not be impacted by the new accounting standards update. This amendment is to be adopted on a modified retrospective basis with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. ASC Update 2017-08 is effective for annual or interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2019 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2017-08 to have a material impact on its consolidated financial statements.

In May 2017, the FASB issued ASC Update 2017-09, "Scope of Modification Accounting." This standards update provides clarity and reduces both (1) diversity in practice and (2) cost and complexity, when applying the guidance in the stock compensation standard, to a change to the terms or conditions of a share-based payment award. ASC Update 2017-09 is effective for annual or interim reporting periods beginning after December 15, 2017. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2017-09 to have a material impact on its consolidated financial statements.

Reclassifications

Certain amounts in the ~~2015~~2016 consolidated financial statements and notes have been reclassified to conform to the ~~2016~~2017 presentation.

NOTE 2 – Net Income Per Share

Basic net income per share is calculated as net income divided by the weighted average number of shares outstanding.

Diluted net income per share is calculated as net income divided by the weighted average number of shares outstanding plus the incremental number of shares added as a result of converting common stock equivalents, calculated using the treasury stock method. The Corporation’s common stock equivalents consist of outstanding stock options, ~~restricted stock,~~ restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs"). PSUs are required to be included in weighted average shares outstanding if performance measures, as defined in each PSU award agreement, are met as of the end of the period.

A reconciliation of weighted average shares outstanding used to calculate basic net income per share and diluted net income per share follows:


	Three months ended June 30		Six months ended June 30		Three months ended June 30		Six months ended June 30
	2016	2015	2016	2015	2017	2016	2017	2016
	(in thousands)				(in thousands)
Weighted average shares outstanding (basic)	173,394	176,433	173,363	177,446	174,597	173,394	174,375	173,363
Impact of common stock equivalents	924	1,098	1,004	1,042	935	924	1,179	1,004
Weighted average shares outstanding (diluted)	174,318	177,531	174,367	178,488	175,532	174,318	175,554	174,367

For the three and six months ended June 30, 2016, 802,000 and 844,000 stock options, respectively, were excluded from the diluted net income per share computation as their effect would have been anti-dilutive. ~~For~~There were no stock options excluded for the three and six months ended June 30, ~~2015, 1.8 million and 2.0 million stock options, respectively, were excluded from the diluted net income per share computation as their effect would have been anti-dilutive.~~2017.

NOTE 3 – Accumulated Other Comprehensive Income

The following table presents changes in other comprehensive income:


	Before-Tax Amount			Tax Effect			Net of Tax Amount			Before-Tax Amount			Tax Effect			Net of Tax Amount
	(in thousands)									(in thousands)
Three months ended June 30, 2017
Unrealized gain on securities										$	15,798		$	(5,530	)	$	10,268
Reclassification adjustment for securities gains included in net income ⁽¹⁾										(1,436		)	504			(932		)
Amortization of net unrecognized pension and postretirement items ⁽³⁾										522			(181		)	341
Total Other Comprehensive Income										$	14,884		$	(5,207	)	$	9,677
Three months ended June 30, 2016
Unrealized gain on securities	$	19,753		$	(6,914	)	$	12,839		$	19,753		$	(6,914	)	$	12,839
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(76		)	27			(49		)	(76		)	27			(49		)
Amortization of unrealized loss on derivative financial instruments ⁽²⁾	6			(2		)	4			6			(2		)	4
Amortization of net unrecognized pension and postretirement items ⁽³⁾	49			(17		)	32			49			(17		)	32
Total Other Comprehensive Income	$	19,732		$	(6,906	)	$	12,826		$	19,732		$	(6,906	)	$	12,826
Three months ended June 30, 2015
Unrealized loss on securities	$	(18,474	)	$	6,466		$	(12,008	)

Six months ended June 30, 2017
Unrealized gain on securities										$	22,374		$	(7,833	)	$	14,541
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(2,413		)	844			(1,569		)	(2,542		)	891			(1,651		)
Amortization of unrealized loss on derivative financial instruments⁽²⁾	52			(18		)	34
Amortization of net unrecognized pension and postretirement items ⁽³⁾	717			(251		)	466			1,051			(367		)	684
Total Other Comprehensive Loss	$	(20,118	)	$	7,041		$	(13,077	)
Total Other Comprehensive Income										$	20,883		$	(7,309	)	$	13,574

Six months ended June 30, 2016
Unrealized gain on securities	$	45,946		$	(16,081	)	$	29,865		$	45,946		$	(16,081	)	$	29,865
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(1,023		)	358			(665		)	(1,023		)	358			(665		)
Amortization of unrealized loss on derivative financial instruments ⁽²⁾	12			(4		)	8			12			(4		)	8
Amortization of net unrecognized pension and postretirement items ⁽³⁾	766			(268		)	498			766			(268		)	498
Total Other Comprehensive Income	$	45,701		$	(15,995	)	$	29,706		$	45,701		$	(15,995	)	$	29,706

Six months ended June 30, 2015
Unrealized loss on securities	$	(3,103	)	$	1,087		$	(2,016	)
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(6,558		)	2,294			(4,264		)
Non-credit related unrealized gains on other-than-temporarily impaired debt securities	192			(67		)	125
Amortization of unrealized loss on derivative financial instruments ⁽²⁾	104			(36		)	68
Amortization of net unrecognized pension and postretirement items ⁽³⁾	1,434			(502		)	932
Total Other Comprehensive Loss	$	(7,931	)	$	2,776		$	(5,155	)


(1)	Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included in "Investment securities gains, net" on the consolidated statements of income. See Note 4, "Investment Securities," for additional details.


(2)	Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included in "Interest expense" on the consolidated statements of income.


(3)	Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included in "Salaries and employee benefits" on the consolidated statements of income. See Note 8, "Employee Benefit Plans," for additional details.

The following table presents changes in each component of accumulated other comprehensive income (loss), net of tax:


	Unrealized Gains (Losses) on Investment Securities Not Other-Than-Temporarily Impaired			Unrealized Non-Credit Gains (Losses) on Other-Than-Temporarily Impaired Debt Securities			Unrealized Effective Portions of Losses on Forward-Starting Interest Rate Swaps			Unrecognized Pension and Postretirement Plan Income (Costs)			Total			Unrealized Gains (Losses) on Investment Securities Not Other-Than-Temporarily Impaired			Unrealized Non-Credit Gains (Losses) on Other-Than-Temporarily Impaired Debt Securities		Unrealized Effective Portions of Losses on Forward-Starting Interest Rate Swaps			Unrecognized Pension and Postretirement Plan Income (Costs)			Total
	(in thousands)															(in thousands)
Three months ended June 30, 2017
Balance at March 31, 2017																$	(19,493	)	$	273	$	—		$	(15,332	)	$	(34,552	)
Other comprehensive income before reclassifications																10,268			—		—			—			10,268
Amounts reclassified from accumulated other comprehensive income (loss)																(932		)	—		—			341			(591		)
Balance at June 30, 2017																$	(10,157	)	$	273	$	—		$	(14,991	)	$	(24,875	)
Three months ended June 30, 2016
Balance at March 31, 2016	$	9,911		$	458		$	(11	)	$	(15,495	)	$	(5,137	)	$	9,911		$	458	$	(11	)	$	(15,495	)	$	(5,137	)
Other comprehensive income before reclassifications	12,839			—			—			—			12,839			12,839			—		—			—			12,839
Amounts reclassified from accumulated other comprehensive income (loss)	(49		)	—			4			32			(13		)	(49		)	—		4			32			(13		)
Balance at June 30, 2016	$	22,701		$	458		$	(7	)	$	(15,463	)	$	7,689		$	22,701		$	458	$	(7	)	$	(15,463	)	$	7,689
Three months ended June 30, 2015
Balance at March 31, 2015	$	14,311		$	440		$	(2,512	)	$	(22,039	)	$	(9,800	)

Six months ended June 30, 2017
Balance at December 31, 2016																$	(23,047	)	$	273	$	—		$	(15,675	)	$	(38,449	)
Other comprehensive income before reclassifications	(12,008		)	—			—			—			(12,008		)	14,541			—		—			—			14,541
Amounts reclassified from accumulated other comprehensive income (loss)	(1,473		)	(96		)	34			466			(1,069		)	(1,651		)	—		—			684			(967		)
Balance at June 30, 2015	$	830		$	344		$	(2,478	)	$	(21,573	)	$	(22,877	)

Balance at June 30, 2017																$	(10,157	)	$	273	$	—		$	(14,991	)	$	(24,875	)
Six months ended June 30, 2016
Balance at December 31, 2015	$	(6,499	)	$	458		$	(15	)	$	(15,961	)	$	(22,017	)	$	(6,499	)	$	458	$	(15	)	$	(15,961	)	$	(22,017	)
Other comprehensive income before reclassifications	29,865			—			—			—			29,865			29,865			—		—			—			29,865
Amounts reclassified from accumulated other comprehensive income (loss)	(665		)	—			8			498			(159		)	(665		)	—		8			498			(159		)
Balance at June 30, 2016	$	22,701		$	458		$	(7	)	$	(15,463	)	$	7,689		$	22,701		$	458	$	(7	)	$	(15,463	)	$	7,689
Six months ended June 30, 2015
Balance at December 31, 2014	$	5,980		$	1,349		$	(2,546	)	$	(22,505	)	$	(17,722	)
Other comprehensive income before reclassifications	(2,016		)	125			—			—			(1,891		)
Amounts reclassified from accumulated other comprehensive income (loss)	(3,134		)	(1,130		)	68			932			(3,264		)
Balance at June 30, 2015	$	830		$	344		$	(2,478	)	$	(21,573	)	$	(22,877	)

NOTE 4 – Investment Securities

The following table presents the amortized cost and estimated fair values of investment securities, which were all classified as available for sale:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)									(in thousands)
June 30, 2016
June 30, 2017
U.S. Government sponsored agency securities	$	143	$	3	$	—		$	146	$	5,960	$	94	$	—		$	6,054
State and municipal securities	333,246		12,101		—			345,347		405,035		3,726		(7,125		)	401,636
Corporate debt securities	95,419		3,001		(6,873		)	91,547		88,887		2,531		(2,426		)	88,992
Collateralized mortgage obligations	701,853		5,951		(1,458		)	706,346		546,847		1,399		(9,739		)	538,507
Mortgage-backed securities	1,242,267		25,501		(5		)	1,267,763
Residential mortgage-backed securities										1,218,257		5,782		(10,974		)	1,213,065
Commercial mortgage-backed securities										121,012		390		(335		)	121,067
Auction rate securities	106,949		—		(9,063		)	97,886		107,410		—		(9,487		)	97,923
Total debt securities	2,479,877		46,557		(17,399		)	2,509,035		2,493,408		13,922		(40,086		)	2,467,244
Equity securities	14,210		6,493		(14		)	20,689		10,487		10,968		—			21,455
Total	$	2,494,087	$	53,050	$	(17,413	)	$	2,529,724	$	2,503,895	$	24,890	$	(40,086	)	$	2,488,699


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)									(in thousands)
December 31, 2015
December 31, 2016
U.S. Government sponsored agency securities	$	25,154	$	35	$	(53	)	$	25,136	$	132	$	2	$	—		$	134
State and municipal securities	256,746		6,019		—			262,765		405,274		2,043		(15,676		)	391,641
Corporate debt securities	100,336		2,695		(6,076		)	96,955		112,016		1,978		(4,585		)	109,409
Collateralized mortgage obligations	835,439		3,042		(16,972		)	821,509		604,095		1,943		(12,178		)	593,860
Mortgage-backed securities	1,154,935		10,104		(6,204		)	1,158,835
Residential mortgage-backed securities										1,328,192		6,546		(16,900		)	1,317,838
Commercial mortgage-backed securities										25,100		—		(537		)	24,563
Auction rate securities	106,772		—		(8,713		)	98,059		107,215		—		(9,959		)	97,256
Total debt securities	2,479,382		21,895		(38,018		)	2,463,259		2,582,024		12,512		(59,835		)	2,534,701
Equity securities	14,677		6,845		(8		)	21,514		12,231		12,295		—			24,526
Total	$	2,494,059	$	28,740	$	(38,026	)	$	2,484,773	$	2,594,255	$	24,807	$	(59,835	)	$	2,559,227

Securities carried at $1.7 billion and $1.8 billion as of June 30, ~~2016~~2017 and December 31, ~~2015~~2016, respectively, were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

Equity securities include common stocks of publicly traded financial institutions (estimated fair value of ~~$19.8~~$20.5 million at June 30, ~~2016~~2017 and ~~$20.6~~$23.5 million at December 31, ~~2015)~~2016) and other equity investments (estimated fair value of ~~$895,000~~$1.0 million at both June 30, ~~2016~~2017 and ~~$914,000 at~~ December 31, ~~2015)~~2016).

As of June 30, ~~2016,~~2017, the financial institutions stock portfolio had a cost basis of ~~$13.4~~$9.7 million and an estimated fair value of ~~$19.8~~$20.5 million, including an investment in a single financial institution with a cost basis of ~~$7.4~~$4.3 million and an estimated fair value of ~~$10.4~~$8.8 million. The estimated fair value of this investment accounted for ~~52.5%~~42.9% of the estimated fair value of the Corporation's investments in the common stocks of publicly traded financial institutions. No other investment in a single financial institution in the financial institutions stock portfolio exceeded 10% of the portfolio's estimated fair value.

The amortized cost and estimated fair values of debt securities as of June 30, ~~2016,~~2017, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities ~~because borrowers may have the right~~as certain investment securities are subject to call or ~~prepay obligations~~prepayment with or without call or prepayment penalties.


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
	(in thousands)					(in thousands)
Due in one year or less		$	55,965	$	56,628		$	20,103	$	20,336
Due from one year to five years		44,833		46,408			27,967		28,335
Due from five years to ten years		94,787		97,933			111,883		113,050
Due after ten years		340,172		333,957			447,339		432,884
		535,757		534,926			607,292		594,605
Residential mortgage-backed securities							1,218,257		1,213,065
Commercial mortgage-backed securities							121,012		121,067
Collateralized mortgage obligations		701,853		706,346			546,847		538,507
Mortgage-backed securities		1,242,267		1,267,763
Total debt securities		$	2,479,877	$	2,509,035		$	2,493,408	$	2,467,244

The following table presents information related to the gross realized gains and losses on the sales of equity and debt securities:


	Gross Realized Gains		Gross Realized Losses			Net Gains (Losses)			Gross Realized Gains		Gross Realized Losses			Net Gains (Losses)
Three months ended June 30, 2017									(in thousands)
Equity securities									$	1,305	$	—		$	1,305
Debt securities									145		(14		)	131
Total									$	1,450	$	(14	)	$	1,436
Three months ended June 30, 2016	(in thousands)
Equity securities	$	4	$	(10	)	$	(6	)	$	4	$	(10	)	$	(6	)
Debt securities	108		(26		)	82			108		(26		)	82
Total	$	112	$	(36	)	$	76		$	112	$	(36	)	$	76
Three months ended June 30, 2015

Six months ended June 30, 2017
Equity securities	$	2,290	$	—		$	2,290		$	2,350	$	—		$	2,350
Debt securities	125		—			125			206		(14		)	192
Total	$	2,415	$	—		$	2,415		$	2,556	$	(14	)	$	2,542

Six months ended June 30, 2016
Equity securities	$	737	$	(10	)	$	727		$	737	$	(10	)	$	727
Debt securities	322		(26		)	296			322		(26		)	296
Total	$	1,059	$	(36	)	$	1,023		$	1,059	$	(36	)	$	1,023
Six months ended June 30, 2015
Equity securities	$	4,260	$	—		$	4,260
Debt securities	2,300		—			2,300
Total	$	6,560	$	—		$	6,560

The ~~following table presents a summary~~cumulative balance of ~~the cumulative~~ credit related other-than-temporary impairment charges, previously recognized as components of earnings, for debt securities held by the Corporation at June 30, 2017 and June 30, 2016 was $10.0 million. There were no other-than-temporary impairment charges recognized for the three and ~~2015:~~six months ended June 30, 2017 and June 30, 2016.

Three months ended June 30 Six months ended June 30
2016 2015 2016 2015
(in thousands)
Balance of cumulative credit losses on debt securities, beginning of period $ (11,510 ) $ (12,302 ) $ (11,510 ) $ (16,242 )
Reductions for securities sold during the period —
792
—
4,730
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security —
—
—
2
Balance of cumulative credit losses on debt securities, end of period $ (11,510 ) $ (11,510 ) $ (11,510 ) $ (11,510 )

The following table presents the gross unrealized losses and estimated fair values of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2017 and December 31, 2016:


	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
	(in thousands)
June 30, 2017																(in thousands)
State and municipal securities																$	214,497	$	(7,125	)	$	—	$	—		$	214,497	$	(7,125	)
Corporate debt securities	$	—	$	—		$	32,186	$	(6,873	)	$	32,186	$	(6,873	)	4,020		(9		)	32,148		(2,417		)	36,168		(2,426		)
Collateralized mortgage obligations	21,695		(17		)	292,954		(1,441		)	314,649		(1,458		)	144,523		(3,057		)	231,936		(6,682		)	376,459		(9,739		)
Mortgage-backed securities	—		—			11,569		(5		)	11,569		(5		)
Residential mortgage-backed securities																896,206		(10,974		)	—		—			896,206		(10,974		)
Commercial mortgage-backed securities																68,546		(335		)	—		—			68,546		(335		)
Auction rate securities	—		—			97,886		(9,063		)	97,886		(9,063		)	—		—			97,923		(9,487		)	97,923		(9,487		)
Total debt securities	21,695		(17		)	434,595		(17,382		)	456,290		(17,399		)	$	1,327,792	$	(21,500	)	$	362,007	$	(18,586	)	$	1,689,799	$	(40,086	)
Equity securities	681		(14		)	—		—			681		(14		)
	$	22,376	$	(31	)	$	434,595	$	(17,382	)	$	456,971	$	(17,413	)



	Less than 12 months					12 months or longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
December 31, 2016	(in thousands)
State and municipal securities	$	247,509	$	(15,676	)	$	—	$	—		$	247,509	$	(15,676	)
Corporate debt securities	11,922		(110		)	34,629		(4,475		)	46,551		(4,585		)
Collateralized mortgage obligations	166,905		(3,899		)	258,237		(8,279		)	425,142		(12,178		)
Residential mortgage-backed securities	1,112,947		(16,900		)	—		—			1,112,947		(16,900		)
Commercial mortgage-backed securities	24,563		(537		)	—		—			24,563		(537		)
Auction rate securities	—		—			97,256		(9,959		)	97,256		(9,959		)
Total debt securities	$	1,563,846	$	(37,122	)	$	390,122	$	(22,713	)	$	1,953,968	$	(59,835	)

The Corporation’s collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the declinechange in ~~market~~fair value of these securities is attributable to changes in interest rates and not credit quality, and ~~because~~ the Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized ~~cost,~~cost. Therefore, the Corporation does not consider these investments to be other-than-temporarily impaired as of June 30, ~~2016.~~2017.

As of June 30, ~~2016,~~2017, all of the auction rate securities (auction rate certificates, or "ARCs"), were rated above investment grade. All of the loans underlying the ARCs have principal payments which are guaranteed by the federal government. As of June 30, ~~2016,~~2017, all ARCs were current and making scheduled interest ~~payments. Based~~payments, and based on management’s evaluations, ~~ARCs with an estimated fair value of $97.9 million~~ were not subject to any other-than-temporary impairment charges as of June 30, ~~2016.~~2017. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.

For its investments in equity securities, particularly its investments in stocks of financial institutions, management evaluates the near-term prospects of the issuers in relation to the severity and duration of the impairment. Based on that evaluation and the Corporation’s ability and intent to hold those investments for a reasonable period of time sufficient for a recovery of fair value, the Corporation does not consider those investments with unrealized holding losses as of June 30, 2016 to be other-than-temporarily impaired.

The majority of the Corporation's available for sale corporate debt securities are issued by financial institutions. The following table presents the amortized cost and estimated fair value of corporate debt securities:


	June 30, 2016				December 31, 2015				June 30, 2017				December 31, 2016
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value		Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)								(in thousands)
Single-issuer trust preferred securities	$	43,697	$	37,461	$	44,648	$	39,106	$	43,795	$	42,478	$	43,746	$	39,829
Subordinated debt	29,662		30,708		39,610		40,779		29,069		29,697		46,231		46,723
Senior debt	18,040		18,652		12,043		12,329		12,035		12,407		18,037		18,433
Pooled trust preferred securities	—		706		—		706		—		422		—		422
Corporate debt securities issued by financial institutions	91,399		87,527		96,301		92,920		84,899		85,004		108,014		105,407
Other corporate debt securities	4,020		4,020		4,035		4,035		3,988		3,988		4,002		4,002
Available for sale corporate debt securities	$	95,419	$	91,547	$	100,336	$	96,955	$	88,887	$	88,992	$	112,016	$	109,409

Single-issuer trust preferred securities had an unrealized loss of ~~$6.2~~$1.3 million at June 30, ~~2016.~~2017. Six of the 19 single-issuer trust preferred securities, with an amortized cost of $11.6 million and an estimated fair value of $10.9 million at June 30, 2017, were rated below investment grade by at least one ratings ~~agency, with an amortized cost of $11.5 million and an estimated fair value of $9.5 million at June 30, 2016.~~agency. All of the single-issuer trust preferred securities rated below investment grade were rated "BB" orand "Ba". Two single-issuer trust preferred securities with an amortized cost of ~~$3.7~~$3.8 million and an estimated fair value of ~~$2.4~~$2.8 million at June 30, ~~2016~~2017 were not rated by any ratings agency.

Based on management’s evaluations, no corporate debt securities ~~with a fair value of $91.5 million~~ were ~~not~~ subject to any other-than-temporary impairment charges as of June 30, ~~2016.~~2017. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.

NOTE 5 – Loans and Allowance for Credit Losses

Loans, Net of Unearned Income

Loans, net of unearned income are summarized as follows:


	June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(in thousands)						(in thousands)
Real-estate - commercial mortgage	$	5,635,347		$	5,462,330		$	6,262,008		$	6,018,582
Commercial - industrial, financial and agricultural	4,099,177			4,088,962			4,245,849			4,087,486
Real-estate - residential mortgage							1,784,712			1,601,994
Real-estate - home equity	1,647,319			1,684,439			1,579,739			1,625,115
Real-estate - residential mortgage	1,447,292			1,376,160
Real-estate - construction	853,699			799,988			938,900			843,649
Consumer	278,071			268,588			283,156			291,470
Leasing and other	208,602			170,914			269,787			246,704
Overdrafts	3,214			2,737			4,435			3,662
Loans, gross of unearned income	14,172,721			13,854,118			15,368,586			14,718,662
Unearned income	(17,562		)	(15,516		)	(21,969		)	(19,390		)
Loans, net of unearned income	$	14,155,159		$	13,838,602		$	15,346,617		$	14,699,272

Allowance for Credit Losses

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of incurred losses in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheets. The allowance for credit losses is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.

The Corporation’s allowance for credit losses includes: (1) specific allowances allocated to loans evaluated for impairment under ~~the FASB's~~FASB ASC Section 310-10-35; and (2) allowances calculated for pools of loans measured for impairment under FASB ASC Subtopic 450-20.

The Corporation segments its loan portfolio by general loan type, or "portfolio segments," as presented in the table under the heading, "Loans, Net of Unearned Income," above. Certain portfolio segments are further disaggregated and evaluated collectively for impairment based on "class segments," which are largely based on the type of collateral underlying each loan. Commercial loans include ~~loans~~both secured ~~by collateral~~ and unsecured loans. Construction loan class segments include loans secured by commercial real estate, loans to commercial borrowers secured by residential real estate and loans to individuals secured by residential real estate. Consumer loan class segments include direct consumer installment loans and indirect ~~automobile~~vehicle loans.

The following table presents the components of the allowance for credit losses:


	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
	(in thousands)				(in thousands)
Allowance for loan losses	$	162,546	$	169,054	$	172,342	$	168,679
Reserve for unfunded lending commitments	2,562		2,358		2,656		2,646
Allowance for credit losses	$	165,108	$	171,412	$	174,998	$	171,325

The following table presents the activity in the allowance for credit losses:


	Three months ended June 30						Six months ended June 30						Three months ended June 30						Six months ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016
	(in thousands)												(in thousands)
Balance at beginning of period	$	166,065		$	179,658		$	171,412		$	185,931		$	172,647		$	166,065		$	171,325		$	171,412
Loans charged off	(10,746		)	(15,372		)	(21,901		)	(21,136		)	(8,715		)	(10,746		)	(18,122		)	(21,901		)
Recoveries of loans previously charged off	7,278			2,967			11,556			6,158			4,366			7,278			10,295			11,556
Net loans charged off	(3,468		)	(12,405		)	(10,345		)	(14,978		)	(4,349		)	(3,468		)	(7,827		)	(10,345		)
Provision for credit losses	2,511			2,200			4,041			(1,500		)	6,700			2,511			11,500			4,041
Balance at end of period	$	165,108		$	169,453		$	165,108		$	169,453		$	174,998		$	165,108		$	174,998		$	165,108

The Corporation has historically maintained an unallocated allowance for credit losses for factors and conditions that exist at the balance sheet date, but are not specifically identifiable, and to recognize the inherent imprecision in estimating and measuring loss exposure. During the second quarter of 2017, enhancements were made to allow for the impact of these factors and conditions to be quantified in the allowance allocation process. Accordingly, an unallocated allowance for credit losses is no longer necessary.

The following table presents the activity in the allowance for loan losses by portfolio segment:


	Real Estate - Commercial Mortgage			Commercial - Industrial, Financial and Agricultural			Real Estate - Home Equity			Real Estate - Residential Mortgage			Real Estate - Construction			Consumer			Leasing, other and overdrafts			Unallocated			Total			Real Estate - Commercial Mortgage			Commercial - Industrial, Financial and Agricultural			Real Estate - Home Equity			Real Estate - Residential Mortgage			Real Estate - Construction			Consumer			Leasing, other and overdrafts			Unallocated			Total
	(in thousands)																											(in thousands)
Three months ended June 30, 2017
Balance at March 31, 2017																												$	47,373		$	55,309		$	23,821		$	22,018		$	7,501		$	3,031		$	3,268		$	7,755		$	170,076
Loans charged off																												(242		)	(5,353		)	(592		)	(124		)	(774		)	(430		)	(1,200		)	—			(8,715		)
Recoveries of loans previously charged off																												934			1,974			215			151			373			470			249			—			4,366
Net loans charged off																												692			(3,379		)	(377		)	27			(401		)	40			(951		)	—			(4,349		)
Provision for loan losses (1)																												9,307			15,712			(5,988		)	(5,606		)	2,434			(1,277		)	(212		)	(7,755		)	6,615
Balance at June 30, 2017																												$	57,372		$	67,642		$	17,456		$	16,439		$	9,534		$	1,794		$	2,105		$	—		$	172,342
Three months ended June 30, 2016
Balance at March 31, 2016	$	48,311		$	54,333		$	22,524		$	19,928		$	6,282		$	2,324		$	2,974		$	7,165		$	163,841		$	48,311		$	54,333		$	22,524		$	19,928		$	6,282		$	2,324		$	2,974		$	7,165		$	163,841
Loans charged off	(1,474		)	(4,625		)	(1,045		)	(340		)	(742		)	(569		)	(1,951		)	—			(10,746		)	(1,474		)	(4,625		)	(1,045		)	(340		)	(742		)	(569		)	(1,951		)	—			(10,746		)
Recoveries of loans previously charged off	1,367			2,931			350			420			1,563			539			108			—			7,278			1,367			2,931			350			420			1,563			539			108			—			7,278
Net loans charged off	(107		)	(1,694		)	(695		)	80			821			(30		)	(1,843		)	—			(3,468		)	(107		)	(1,694		)	(695		)	80			821			(30		)	(1,843		)	—			(3,468		)
Provision for loan losses (1)	(4,464		)	(884		)	4,341			1,218			(1,331		)	690			1,387			1,216			2,173			(4,464		)	(884		)	4,341			1,218			(1,331		)	690			1,387			1,216			2,173
Balance at June 30, 2016	$	43,740		$	51,755		$	26,170		$	21,226		$	5,772		$	2,984		$	2,518		$	8,381		$	162,546		$	43,740		$	51,755		$	26,170		$	21,226		$	5,772		$	2,984		$	2,518		$	8,381		$	162,546
Three months ended June 30, 2015
Balance at March 31, 2015	$	52,860		$	57,150		$	23,481		$	23,235		$	8,487		$	2,527		$	1,653		$	8,308		$	177,701
Six months ended June 30, 2017
Balance at December 31, 2016																												$	46,842		$	54,353		$	26,801		$	22,929		$	6,455		$	3,574		$	3,192		$	4,533		$	168,679
Loans charged off	(1,642		)	(11,166		)	(870		)	(783		)	(87		)	(357		)	(467		)	—			(15,372		)	(1,466		)	(10,880		)	(1,290		)	(340		)	(1,021		)	(1,286		)	(1,839		)	—			(18,122		)
Recoveries of loans previously charged off	451			1,471			189			187			231			368			70			—			2,967			1,384			6,165			352			381			921			706			386			—			10,295
Net loans charged off	(1,191		)	(9,695		)	(681		)	(596		)	144			11			(397		)	—			(12,405		)	(82		)	(4,715		)	(938		)	41			(100		)	(580		)	(1,453		)	—			(7,827		)
Provision for loan losses (1)	(989		)	1,715			(294		)	148			(882		)	70			359			2,062			2,189			10,612			18,004			(8,407		)	(6,531		)	3,179			(1,200		)	366			(4,533		)	11,490
Balance at June 30, 2015	$	50,680		$	49,170		$	22,506		$	22,787		$	7,749		$	2,608		$	1,615		$	10,370		$	167,485
Balance at June 30, 2017																												$	57,372		$	67,642		$	17,456		$	16,439		$	9,534		$	1,794		$	2,105		$	—		$	172,342
Six months ended June 30, 2016
Balance at December 31, 2015	$	47,866		$	57,098		$	22,405		$	21,375		$	6,529		$	2,585		$	2,468		$	8,728		$	169,054		$	47,866		$	57,098		$	22,405		$	21,375		$	6,529		$	2,585		$	2,468		$	8,728		$	169,054
Loans charged off	(2,056		)	(10,813		)	(2,586		)	(1,408		)	(1,068		)	(1,576		)	(2,394		)	—			(21,901		)	(2,056		)	(10,813		)	(2,586		)	(1,408		)	(1,068		)	(1,576		)	(2,394		)	—			(21,901		)
Recoveries of loans previously charged off	2,192			5,250			688			556			1,946			735			189			—			11,556			2,192			5,250			688			556			1,946			735			189			—			11,556
Net loans charged off	136			(5,563		)	(1,898		)	(852		)	878			(841		)	(2,205		)	—			(10,345		)	136			(5,563		)	(1,898		)	(852		)	878			(841		)	(2,205		)	—			(10,345		)
Provision for loan losses (1)	(4,262		)	220			5,663			703			(1,635		)	1,240			2,255			(347		)	3,837			(4,262		)	220			5,663			703			(1,635		)	1,240			2,255			(347		)	3,837
Balance at June 30, 2016	$	43,740		$	51,755		$	26,170		$	21,226		$	5,772		$	2,984		$	2,518		$	8,381		$	162,546		$	43,740		$	51,755		$	26,170		$	21,226		$	5,772		$	2,984		$	2,518		$	8,381		$	162,546
Six months ended June 30, 2015
Balance at December 31, 2014	$	53,493		$	51,378		$	28,271		$	29,072		$	9,756		$	3,015		$	1,799		$	7,360		$	184,144
Loans charged off	(2,351		)	(13,029		)	(1,638		)	(2,064		)	(87		)	(1,137		)	(830		)	—			(21,136		)
Recoveries of loans previously charged off	887			2,257			440			346			1,378			609			241			—			6,158
Net loans charged off	(1,464		)	(10,772		)	(1,198		)	(1,718		)	1,291			(528		)	(589		)	—			(14,978		)
Provision for loan losses (1)	(1,349		)	8,564			(4,567		)	(4,567		)	(3,298		)	121			405			3,010			(1,681		)
Balance at June 30, 2015	$	50,680		$	49,170		$	22,506		$	22,787		$	7,749		$	2,608		$	1,615		$	10,370		$	167,485

(1)

The provision for loan losses excluded an $85,000 and a $10,000 increase, respectively, in the reserve for unfunded lending commitments for the three and six months ended June 30, 2017 and a $338,000 and $204,000 increase, respectively, in the reserve for unfunded lending commitments for the three and six months ended June 30, 2016 and an $11,000 and $181,000 increase, respectively, in the reserve for unfunded lending commitments for the three and six months ended June 30, 2015. The total provision for credit losses, comprised of allocations for both funded and unfunded loans, was $2.5 million and $4.0 million for the three and six months ended June 30, 2016, respectively, and $2.2 million and a negative $1.5 million for the~~three and six months ended June 30, 2015.~~

2016.

The following table presents loans, net of unearned income and their related allowance for loan losses, by portfolio segment:


																			Real Estate - Commercial Mortgage		Commercial - Industrial, Financial and Agricultural		Real Estate - Home Equity		Real Estate - Residential Mortgage		Real Estate - Construction		Consumer		Leasing, other and overdrafts		Unallocated		Total
																			(in thousands)
Allowance for loan losses at June 30, 2017:																			Allowance for loan losses at June 30, 2017:
Measured for impairment under FASB ASC Subtopic 450-20																			$	49,055	$	57,341	$	7,607	$	6,013	$	5,370	$	1,773	$	2,105	$	—	$	129,264
Evaluated for impairment under FASB ASC Section 310-10-35																			8,317		10,301		9,849		10,426		4,164		21		—		N/A		43,078
																			$	57,372	$	67,642	$	17,456	$	16,439	$	9,534	$	1,794	$	2,105	$	—	$	172,342

Loans, net of unearned income at June 30, 2017:																			Loans, net of unearned income at June 30, 2017:
Measured for impairment under FASB ASC Subtopic 450-20																			$	6,212,998	$	4,189,676	$	1,557,989	$	1,741,404	$	921,839	$	283,123	$	252,253	N/A		$	15,159,282
Evaluated for impairment under FASB ASC Section 310-10-35																			49,010		56,173		21,750		43,308		17,061		33		—		N/A		187,335
	Real Estate - Commercial Mortgage		Commercial - Industrial, Financial and Agricultural		Real Estate - Home Equity		Real Estate - Residential Mortgage		Real Estate - Construction		Consumer		Leasing, other and overdrafts		Unallocated (1)		Total		$	6,262,008	$	4,245,849	$	1,579,739	$	1,784,712	$	938,900	$	283,156	$	252,253	N/A		$	15,346,617
	(in thousands)
Allowance for loan losses at June 30, 2016:	Allowance for loan losses at June 30, 2016:																		Allowance for loan losses at June 30, 2016:
Measured for impairment under FASB ASC Subtopic 450-20	$	32,861	$	40,945	$	17,089	$	9,044	$	4,004	$	2,971	$	2,518	$	8,381	$	117,813	$	32,861	$	40,945	$	17,089	$	9,044	$	4,004	$	2,971	$	2,518	$	8,381	$	117,813
Evaluated for impairment under FASB ASC Section 310-10-35	10,879		10,810		9,081		12,182		1,768		13		—		N/A		44,733		10,879		10,810		9,081		12,182		1,768		13		—		N/A		44,733
	$	43,740	$	51,755	$	26,170	$	21,226	$	5,772	$	2,984	$	2,518	$	8,381	$	162,546	$	43,740	$	51,755	$	26,170	$	21,226	$	5,772	$	2,984	$	2,518	$	8,381	$	162,546

Loans, net of unearned income at June 30, 2016:	Loans, net of unearned income at June 30, 2016:																		Loans, net of unearned income at June 30, 2016:
Measured for impairment under FASB ASC Subtopic 450-20	$	5,582,027	$	4,057,883	$	1,629,443	$	1,399,399	$	841,193	$	278,053	$	194,254	N/A		$	13,982,252	$	5,582,027	$	4,057,883	$	1,629,443	$	1,399,399	$	841,193	$	278,053	$	194,254	N/A		$	13,982,252
Evaluated for impairment under FASB ASC Section 310-10-35	53,320		41,294		17,876		47,893		12,506		18		—		N/A		172,907		53,320		41,294		17,876		47,893		12,506		18		—		N/A		172,907
	$	5,635,347	$	4,099,177	$	1,647,319	$	1,447,292	$	853,699	$	278,071	$	194,254	N/A		$	14,155,159	$	5,635,347	$	4,099,177	$	1,647,319	$	1,447,292	$	853,699	$	278,071	$	194,254	N/A		$	14,155,159

Allowance for loan losses at June 30, 2015:
Measured for impairment under FASB ASC Subtopic 450-20	$	37,228	$	38,090	$	15,838	$	8,763	$	5,430	$	2,588	$	1,615	$	10,370	$	119,922
Evaluated for impairment under FASB ASC Section 310-10-35	13,452		11,080		6,668		14,024		2,319		20		—		N/A		47,563
	$	50,680	$	49,170	$	22,506	$	22,787	$	7,749	$	2,608	$	1,615	$	10,370	$	167,485

Loans, net of unearned income at June 30, 2015:
Measured for impairment under FASB ASC Subtopic 450-20	$	5,172,333	$	3,764,999	$	1,676,410	$	1,315,908	$	712,975	$	272,463	$	136,521	N/A		$	13,051,609
Evaluated for impairment under FASB ASC Section 310-10-35	65,467		41,700		13,278		53,195		18,950		31		—		N/A		192,621
	$	5,237,800	$	3,806,699	$	1,689,688	$	1,369,103	$	731,925	$	272,494	$	136,521	N/A		$	13,244,230


~~(1)~~	The unallocated allowance, which was approximately 5% and 6% of the total allowance for credit losses, respectively, as of June 30, 2016 and 2015, was, in the opinion of management, reasonable and appropriate given that the estimates used in the allocation process are inherently imprecise.

N/A - Not applicable.

Impaired Loans

A loan is considered to be impaired if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. Impaired loans consist of all loans on non-accrual status and accruing troubled debt restructurings ("TDRs"). An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. Impaired loans to borrowers with total outstanding commitments greater than or equal to $1.0 million are evaluated individually for impairment. Impaired loans to borrowers with total outstanding commitments less than $1.0 million are pooled and measured for impairment collectively.

Based on an evaluation of all relevant credit quality factors, the Corporation recorded a $2.5 million provision for credit losses during the three months ended June 30, 2016, compared to a $2.2 million provision for credit losses for the same period in 2015.

All loans individually evaluated for impairment under FASB ASC Section 310-10-35 are measured for losses on a quarterly basis.

As of June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, substantially all of the Corporation’s individually evaluated impaired loans with total outstanding balances greater than or equal to $1.0 million were measured based on the estimated fair value of each loan’s collateral. Collateral could be in the form of real estate, in the case of impaired commercial mortgages and construction loans, or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real property.

As of June 30, 2017 and 2016, approximately 87% and ~~2015, approximately~~ 89% ~~and 72%~~, respectively, of impaired loans with principal balances greater than or equal to $1.0 million, whose primary collateral is real estate, were measured at estimated fair value of the collateral using state certified third-party appraisals that had been updated in the preceding 12 months.

When updated appraisals are not obtained for loans evaluated for impairment under FASB ASC Section 310-10-35 that are secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated an acceptable loan-to-value position and, in the opinion of the Corporation's internal credit administration staff, there has not been a significant

deterioration in the collateral value since the original appraisal was performed. Original appraisals are typically used only when the estimated collateral value, as adjusted for the age of the appraisal, results in a current loan-to-value ratio that is lower than the Corporation's loan-to-value requirements for new loans, generally less than 70%.

The following table presents total impaired loans by class segment:


	June 30, 2016							December 31, 2015						June 30, 2017						December 31, 2016
	Unpaid Principal Balance			Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance
	(in thousands)													(in thousands)
With no related allowance recorded:	With no related allowance recorded:													With no related allowance recorded:
Real estate - commercial mortgage	$	25,452		$	22,501	$	—	$	27,872	$	22,596	$	—	$	25,219	$	22,396	$	—	$	28,757	$	25,447	$	—
Commercial - secured	21,458			18,137		—		18,012		13,702		—		43,206		36,036		—		29,296		25,526		—
Real estate - residential mortgage	6,353			6,171		—		4,790		4,790		—		4,629		4,629		—		4,689		4,689		—
Construction - commercial residential	7,743			6,543		—		9,916		8,865		—		10,054		8,044		—		6,271		4,795		—
Construction - commercial														598		590		—		—		—		—
	61,006			53,352				60,590		49,953				83,706		71,695				69,013		60,457
With a related allowance recorded:	With a related allowance recorded:													With a related allowance recorded:
Real estate - commercial mortgage	41,420			30,819		10,879		45,189		35,698		12,471		34,131		26,614		8,317		37,132		29,446		10,162
Commercial - secured	27,349			22,183		10,230		39,659		33,629		14,085		23,576		19,479		9,947		27,767		22,626		13,198
Commercial - unsecured	1,182			974		580		971		821		498		912		658		354		1,122		823		455
Real estate - home equity	22,944			17,876		9,081		20,347		15,766		7,993		25,753		21,750		9,849		23,971		19,205		9,511
Real estate - residential mortgage	49,976			41,722		12,182		55,242		45,635		13,422		45,300		38,679		10,426		48,885		41,359		11,897
Construction - commercial residential	8,610			5,043		1,447		9,949		6,290		2,110		10,479		7,210		3,725		10,103		4,206		1,300
Construction - commercial	731			504		166		820		638		217		186		126		45		681		435		145
Construction - other	416			416		155		331		193		68		1,096		1,091		394		1,096		1,096		423
Consumer - direct	18			18		13		19		19		14		18		18		12		21		21		14
Consumer - indirect	—		��	—		—		14		14		8		16		15		9		19		19		12
Leasing, other and overdrafts	—			—		—		1,658		1,425		704
	152,646			119,555		44,733		174,199		140,128		51,590		141,467		115,640		43,078		150,797		119,236		47,117
Total	$	213,652		$	172,907	$	44,733	$	234,789	$	190,081	$	51,590	$	225,173	$	187,335	$	43,078	$	219,810	$	179,693	$	47,117

As of June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, there were ~~$53.4~~$71.7 million and ~~$50.0~~$60.5 million, respectively, of impaired loans that did not have a related allowance for loan loss. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or they were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

The following table presents average impaired loans by class segment:


	Three months ended June 30								Six months ended June 30							Three months ended June 30								Six months ended June 30
	2016				2015				2016				2015			2017				2016				2017				2016
	Average Recorded Investment		Interest Income (1)		Average Recorded Investment		Interest Income (1)		Average Recorded Investment		Interest Income (1)		Average Recorded Investment		Interest Income (1)	Average Recorded Investment		Interest Income (1)		Average Recorded Investment		Interest Income (1)		Average Recorded Investment		Interest Income (1)		Average Recorded Investment		Interest Income (1)
	(in thousands)															(in thousands)
With no related allowance recorded:
Real estate - commercial mortgage	$	22,762	$	72	$	27,410	$	87	$	22,707	$	141	$	26,018	178	$	22,316	$	71	$	22,762	$	72	$	23,360	$	141	$	22,707	141
Commercial - secured	15,182		20		16,163		24		14,688		36		15,636		45	30,829		46		15,182		20		29,061		82		14,688		36
Real estate - residential mortgage	6,191		33		5,541		32		5,724		63		5,318		60	4,643		26		6,191		33		4,658		52		5,724		63
Construction - commercial residential	6,421		16		12,171		40		7,236		35		13,048		95	6,368		4		6,421		16		5,844		6		7,236		35
Construction - commercial	—		—		925		—		—		—		1,144		—	597		—		—		—		398		—		—		—
	50,556		141		62,210		183		50,355		275		61,164		378	64,753		147		50,556		141		63,321		281		50,355		275
With a related allowance recorded:
Real estate - commercial mortgage	33,042		104		40,204		126		33,927		212		40,143		259	27,710		88		33,042		104		28,288		173		33,927		212
Commercial - secured	25,919		33		25,902		38		28,489		71		23,713		74	20,675		31		25,919		33		21,325		63		28,489		71
Commercial - unsecured	929		1		2,082		2		893		2		1,751		3	712		—		929		1		749		—		893		2
Real estate - home equity	17,950		70		13,016		33		17,222		127		13,163		64	20,352		117		17,950		70		19,969		212		17,222		127
Real estate - residential mortgage	41,928		226		47,020		270		43,164		461		46,839		543	39,500		225		41,928		226		40,119		455		43,164		461
Construction - commercial residential	5,566		14		6,031		21		5,807		29		6,655		49	7,248		4		5,566		14		6,234		7		5,807		29
Construction - commercial	548		—		960		—		578		—		981		—	104		—		548		—		214		—		578		—
Construction - other	513		—		281		—		406		—		281		—	1,094		—		513		—		1,094		—		406		—
Consumer - direct	10		—		17		—		16		—		18		—	19		—		10		—		19		—		16		—
Consumer - indirect	15		—		17		—		11		—		17		—	17		—		15		—		17		—		11		—
Leasing, other and overdrafts	711		—		—		—		949		—		—		—	—		—		711		—		475		—		949		—
	127,131		448		135,530		490		131,462		902		133,561		992	117,431		465		127,131		448		118,503		910		131,462		902
Total	$	177,687	$	589	$	197,740	$	673	$	181,817	$	1,177	$	194,725	1,370	$	182,184	$	612	$	177,687	$	589	$	181,824	$	1,191	$	181,817	1,177


(1)	All impaired loans, excluding accruing TDRs, were non-accrual loans. Interest income recognized for the three and six months ended June 30, ~~2016~~2017 and ~~2015~~2016 represents amounts earned on accruing TDRs.

Credit Quality Indicators and Non-performing Assets

The following table presents internal credit risk ratings for real estate - commercial mortgages, commercial - secured loans, commercial - unsecured loans, construction - commercial residential loans and construction - commercial loans:

Pass Special Mention Substandard or Lower Total
June 30, 2016 December 31, 2015 June 30, 2016 December 31, 2015 June 30, 2016 December 31, 2015 June 30, 2016 December 31, 2015
(dollars in thousands)
Real estate - commercial mortgage $ 5,371,366
$ 5,204,263
$ 141,417
$ 102,625
$ 122,564
$ 155,442
$ 5,635,347
$ 5,462,330
Commercial - secured 3,718,231
3,696,692
95,330
92,711
130,180
136,710
3,943,741
3,926,113
Commercial - unsecured 149,548
156,742
2,467
2,761
3,421
3,346
155,436
162,849
Total commercial - industrial, financial and agricultural 3,867,779
3,853,434
97,797
95,472
133,601
140,056
4,099,177
4,088,962
Construction - commercial residential 151,817
140,337
17,012
17,154
14,838
21,812
183,667
179,303
Construction - commercial 596,971
552,710
2,548
3,684
4,594
3,597
604,113
559,991
Total construction (excluding Construction - other) 748,788
693,047
19,560
20,838
19,432
25,409
787,780
739,294
$ 9,987,933
$ 9,750,744
$ 258,774
$ 218,935
$ 275,597
$ 320,907
$ 10,522,304
$ 10,290,586
% of Total 94.9 % 94.8 % 2.5 % 2.1 % 2.6 % 3.1 % 100.0 % 100.0 %

The following is a summary of the Corporation's internal risk rating categories:

Pass: These loans do not currently pose undue credit risk and can range from the highest to average quality, depending on the degree of potential risk.

Special Mention: These loans constitute an undue and unwarranted credit risk, but not to a point of justifying a classification of substandard. Loans in this category are currently acceptable, but are nevertheless potentially weak.

Substandard or Lower: These loans are inadequately protected by current sound worth and paying capacity of the borrower. There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt.

The following table presents internal credit risk ratings for the indicated loan class segments:



	Pass						Special Mention						Substandard or Lower						Total
	June 30, 2017			December 31, 2016			June 30, 2017			December 31, 2016			June 30, 2017			December 31, 2016			June 30, 2017			December 31, 2016
	(dollars in thousands)
Real estate - commercial mortgage	$	6,004,958		$	5,763,122		$	119,534		$	132,484		$	137,516		$	122,976		$	6,262,008		$	6,018,582
Commercial - secured	3,813,864			3,686,152			119,119			128,873			169,602			118,527			4,102,585			3,933,552
Commercial - unsecured	134,455			145,922			6,264			4,481			2,545			3,531			143,264			153,934
Total commercial - industrial, financial and agricultural	3,948,319			3,832,074			125,383			133,354			172,147			122,058			4,245,849			4,087,486
Construction - commercial residential	131,115			113,570			9,789			15,447			16,387			13,172			157,291			142,189
Construction - commercial	718,702			635,963			4,727			3,412			5,220			5,115			728,649			644,490
Total construction (excluding Construction - other)	849,817			749,533			14,516			18,859			21,607			18,287			885,940			786,679
	$	10,803,094		$	10,344,729		$	259,433		$	284,697		$	331,270		$	263,321		$	11,393,797		$	10,892,747
% of Total	94.8		%	95.0		%	2.3		%	2.6		%	2.9		%	2.4		%	100.0		%	100.0		%

The risk rating process allows management to identify credits that potentially carry more risk in a timely manner and to allocate resources to managing troubled accounts. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for the class segments presented above. The migration of loans through the various internal risk rating categories is a significant component of the allowance for credit loss methodology, which bases the probability of default on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide an independent assessment of risk rating accuracy. Ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff, or if specific loan review activities identify a deterioration or an improvement in the loan.

The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and lease receivables. For these loans, the most relevant credit quality indicator is delinquency status. The migration of loans through the various delinquency status categories is a significant component of the allowance for credit losses methodology for those loans, which bases the probability of default on this migration.

The following table presents a summary of performing, ~~delinquency~~delinquent and non-performing ~~status~~loans for ~~home equity, real estate - residential mortgages, construction loans to individuals and consumer, leasing and other loans by~~the indicated loan class ~~segment:~~segments:


	Performing						Delinquent (1)						Non-performing (2)						Total						Performing						Delinquent (1)						Non-performing (2)						Total
	June 30, 2016			December 31, 2015			June 30, 2016			December 31, 2015			June 30, 2016			December 31, 2015			June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016			June 30, 2017			December 31, 2016			June 30, 2017			December 31, 2016			June 30, 2017			December 31, 2016
	(dollars in thousands)																								(dollars in thousands)
Real estate - home equity	$	1,623,095		$	1,660,773		$	10,051		$	8,983		$	14,173		$	14,683		$	1,647,319		$	1,684,439		$	1,557,629		$	1,602,687		$	10,223		$	9,274		$	11,887		$	13,154		$	1,579,739		$	1,625,115
Real estate - residential mortgage	1,408,244			1,329,371			14,018			18,305			25,030			28,484			1,447,292			1,376,160			1,746,977			1,557,995			15,889			20,344			21,846			23,655			1,784,712			1,601,994
Construction - other	63,404			59,997			1,416			88			1,099			609			65,919			60,694			51,869			55,874			—			—			1,091			1,096			52,960			56,970
Consumer - direct	92,906			94,262			1,860			2,254			1,695			2,203			96,461			98,719			55,825			93,572			1,761			1,752			1,143			1,563			58,729			96,887
Consumer - indirect	179,293			166,823			2,124			2,809			193			237			181,610			169,869			222,380			190,656			1,921			3,599			126			328			224,427			194,583
Total consumer	272,199			261,085			3,984			5,063			1,888			2,440			278,071			268,588			278,205			284,228			3,682			5,351			1,269			1,891			283,156			291,470
Leasing, other and overdrafts	193,233			155,870			863			759			158			1,506			194,254			158,135
Leasing																									251,050			229,591			922			1,068			281			317			252,253			230,976
	$	3,560,175		$	3,467,096		$	30,332		$	33,198		$	42,348		$	47,722		$	3,632,855		$	3,548,016		$	3,885,730		$	3,730,375		$	30,716		$	36,037		$	36,374		$	40,113		$	3,952,820		$	3,806,525
% of Total	98.0		%	97.7		%	0.8		%	1.0		%	1.2		%	1.3		%	100.0		%	100.0		%	98.3		%	98.0		%	0.8		%	0.9		%	0.9		%	1.1		%	100.0		%	100.0		%


(1)	Includes all accruing loans 30 days to 89 days past due.


(2)	Includes all accruing loans 90 days or more past due and all non-accrual loans.

The following table presents non-performing assets:


	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
	(in thousands)				(in thousands)
Non-accrual loans	$	111,742	$	129,523	$	122,600	$	120,133
Loans 90 days or more past due and still accruing	15,992		15,291		13,143		11,505
Total non-performing loans	127,734		144,814		135,743		131,638
Other real estate owned (OREO)	11,918		11,099		11,432		12,815
Total non-performing assets	$	139,652	$	155,913	$	147,175	$	144,453

The following ~~table presents~~tables present past due status and non-accrual loans by portfolio segment and class segment:


	June 30, 2016																June 30, 2017
	30-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Total ≥ 90 Days		Total Past Due		Current		Total		30-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Total ≥ 90 Days		Total Past Due		Current		Total
	(in thousands)																(in thousands)
Real estate - commercial mortgage	$	7,813	$	2,288	$	192	$	35,512	$	35,704	$	45,805	$	5,589,542	$	5,635,347	$	8,259	$	676	$	309	$	32,267	$	32,576	$	41,511	$	6,220,497	$	6,262,008
Commercial - secured	4,532		7,207		2,997		34,675		37,672		49,411		3,894,330		3,943,741		6,411		2,425		3,135		47,489		50,624		59,460		4,043,125		4,102,585
Commercial - unsecured	372		43		367		863		1,230		1,645		153,791		155,436		430		57		98		598		696		1,183		142,081		143,264
Total commercial - industrial, financial and agricultural	4,904		7,250		3,364		35,538		38,902		51,056		4,048,121		4,099,177		6,841		2,482		3,233		48,087		51,320		60,643		4,185,206		4,245,849
Real estate - home equity	7,600		2,451		3,470		10,703		14,173		24,224		1,623,095		1,647,319		8,103		2,120		2,167		9,720		11,887		22,110		1,557,629		1,579,739
Real estate - residential mortgage	10,356		3,662		4,461		20,569		25,030		39,048		1,408,244		1,447,292		12,640		3,249		4,906		16,940		21,846		37,735		1,746,977		1,784,712
Construction - commercial residential	—		541		—		8,499		8,499		9,040		174,627		183,667		538		20		978		13,779		14,757		15,315		141,976		157,291
Construction - commercial	1,482		1,134		1,777		504		2,281		4,897		599,216		604,113		—		—		—		716		716		716		727,933		728,649
Construction - other	1,416		—		682		417		1,099		2,515		63,404		65,919		—		—		—		1,091		1,091		1,091		51,869		52,960
Total real estate - construction	2,898		1,675		2,459		9,420		11,879		16,452		837,247		853,699		538		20		978		15,586		16,564		17,122		921,778		938,900
Consumer - direct	1,169		691		1,695		—		1,695		3,555		92,906		96,461		1,054		707		1,143		—		1,143		2,904		55,825		58,729
Consumer - indirect	1,734		390		193		—		193		2,317		179,293		181,610		1,708		213		126		—		126		2,047		222,380		224,427
Total consumer	2,903		1,081		1,888		—		1,888		5,872		272,199		278,071		2,762		920		1,269		—		1,269		4,951		278,205		283,156
Leasing, other and overdrafts	400		463		158		—		158		1,021		193,233		194,254		671		251		281		—		281		1,203		251,050		252,253
Total	$	36,874	$	18,870	$	15,992	$	111,742	$	127,734	$	183,478	$	13,971,681	$	14,155,159	$	39,814	$	9,718	$	13,143	$	122,600	$	135,743	$	185,275	$	15,161,342	$	15,346,617


	December 31, 2015																December 31, 2016
	30-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Total ≥ 90 Days		Total Past Due		Current		Total		30-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Total ≥ 90 Days		Total Past Due		Current		Total
	(in thousands)																(in thousands)
Real estate - commercial mortgage	$	6,469	$	1,312	$	439	$	40,731	$	41,170	$	48,951	$	5,413,379	$	5,462,330	$	6,254	$	1,622	$	383	$	38,936	$	39,319	$	47,195	$	5,971,387	$	6,018,582
Commercial - secured	5,654		2,615		1,853		41,498		43,351		51,620		3,874,493		3,926,113		6,660		2,616		959		41,589		42,548		51,824		3,881,728		3,933,552
Commercial - unsecured	510		83		19		701		720		1,313		161,536		162,849		898		35		152		760		912		1,845		152,089		153,934
Total commercial - industrial, financial and agricultural	6,164		2,698		1,872		42,199		44,071		52,933		4,036,029		4,088,962		7,558		2,651		1,111		42,349		43,460		53,669		4,033,817		4,087,486
Real estate - home equity	6,438		2,545		3,473		11,210		14,683		23,666		1,660,773		1,684,439		6,596		2,678		2,543		10,611		13,154		22,428		1,602,687		1,625,115
Real estate - residential mortgage	15,141		3,164		6,570		21,914		28,484		46,789		1,329,371		1,376,160		15,600		4,744		5,224		18,431		23,655		43,999		1,557,995		1,601,994
Construction - commercial residential	1,366		494		—		11,213		11,213		13,073		166,230		179,303		233		51		36		8,275		8,311		8,595		133,594		142,189
Construction - commercial	50		176		—		638		638		864		559,127		559,991		743		—		—		435		435		1,178		643,312		644,490
Construction - other	88		—		416		193		609		697		59,997		60,694		—		—		—		1,096		1,096		1,096		55,874		56,970
Total real estate - construction	1,504		670		416		12,044		12,460		14,634		785,354		799,988		976		51		36		9,806		9,842		10,869		832,780		843,649
Consumer - direct	1,687		567		2,203		—		2,203		4,457		94,262		98,719		1,211		541		1,563		—		1,563		3,315		93,572		96,887
Consumer - indirect	2,308		501		237		—		237		3,046		166,823		169,869		3,200		399		328		—		328		3,927		190,656		194,583
Total consumer	3,995		1,068		2,440		—		2,440		7,503		261,085		268,588		4,411		940		1,891		—		1,891		7,242		284,228		291,470
Leasing, other and overdrafts	483		276		81		1,425		1,506		2,265		155,870		158,135		543		525		317		—		317		1,385		229,591		230,976
Total	$	40,194	$	11,733	$	15,291	$	129,523	$	144,814	$	196,741	$	13,641,861	$	13,838,602	$	41,938	$	13,211	$	11,505	$	120,133	$	131,638	$	186,787	$	14,512,485	$	14,699,272

The following table presents TDRs, by class segment:


	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
	(in thousands)				(in thousands)
Real-estate - residential mortgage	$	27,324	$	28,511	$	26,368	$	27,617
Real-estate - commercial mortgage	17,808		17,563		13,772		15,957
Commercial - secured	5,645		5,833
Construction - commercial residential	3,086		3,942
Real estate - home equity	7,173		4,556		12,031		8,594
Commercial - unsecured	111		120
Consumer - indirect	—		14
Consumer - direct	18		19
Commercial					8,086		6,627
Construction					1,475		726
Consumer					33		39
Total accruing TDRs	61,165		60,558		61,765		59,560
Non-accrual TDRs ⁽¹⁾	24,887		31,035		29,373		27,850
Total TDRs	$	86,052	$	91,593	$	91,138	$	87,410


(1)	Included in non-accrual loans in the preceding table detailing non-performing assets.

As of June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, there were ~~$3.8~~$2.6 million and ~~$5.3~~$3.6 million ~~respectively,~~ of commitments, respectively, to lend additional funds to borrowers whose loans were modified under TDRs.

The following table presents TDRs, by class segment and type of concession for loans that were modified during the three and six months ended June 30, 2017 and 2016:



		Three months ended June 30						Six months ended June 30
		2017			2016			2017			2016
		Number of Loans	Post-Modification Recorded Investment		Number of Loans	Post-Modification Recorded Investment		Number of Loans	Post-Modification Recorded Investment		Number of Loans	Post-Modification Recorded Investment
		(dollars in thousands)
Real estate – residential mortgage:
	Extend maturity without rate concession	—	$	—	2	$	315	2	$	337	2	$	315
	Bankruptcy	1	157		1	373		2	335		1	373
Real estate - commercial mortgage:
	Extend maturity without rate concession	3	663		—	—		4	981		—	$	—
	Bankruptcy	1	12		—	—		1	12		—	$	—
Real estate - home equity:
	Extend maturity without rate concession	17	1,275		18	738		33	2,559		39	$	1,995
	Bankruptcy	10	1,063		5	231		17	1,516		22	$	1,716
Commercial:
	Extend maturity without rate concession	4	2,567		4	1,146		8	5,693		6	1,976
	Bankruptcy	1	490		—	—		1	490		—	—
Commercial – unsecured:
	Extend maturity without rate concession	1	33		—	—		1	33		2	103
Construction - commercial residential:
	Extend maturity without rate concession	1	1,204		—	—		1	1,204		—	—
Consumer - indirect:
	Bankruptcy	—	—		—	—		—	—		1	2

Total		39	$	7,464	30	$	2,803	70	$	13,160	73	$	6,480

The following table presents TDRs, by class segment, as of June 30, ~~2016~~2017 and ~~2015, that were modified during the three and six months ended June 30,~~ 2016, ~~and 2015:~~

Three months ended June 30 Six months ended June 30
2016 2015 2016 2015
Number of Loans Post-Modification Recorded Investment Number of Loans Post-Modification Recorded Investment Number of Loans Post-Modification Recorded Investment Number of Loans Post-Modification Recorded Investment
(dollars in thousands)
Commercial – secured:
Extend maturity without rate concession 4
$ 1,146
3
$ 1,047
6
$ 1,976
11
$ 7,823
Commercial – unsecured:
Extend maturity without rate concession —
—
—
—
2
103
1
42
Real estate - commercial mortgage:
Extend maturity without rate concession —
—
1
132
—
—
4
2,627
Real estate - home equity:
Extend maturity with rate concession —
—
—
—
1
44
—
—
Bankruptcy 23
969
15
739
60
3,667
25
1,231
Real estate – residential mortgage:
Extend maturity with rate concession —
—
—
—
—
—
1
104
Extend maturity without rate concession 2
315
—
—
2
315
2
225
Bankruptcy 1
373
4
456
1
373
5
737
Construction - commercial residential:
Extend maturity without rate concession —
—
—
—
—
—
1
889
Consumer - direct:
Bankruptcy —
—
—
—
1
2
—
—
Consumer - indirect:
Bankruptcy —
—
—
—
—
—
1
13

Total 30
$ 2,803
23
$ 2,374
73
$ 6,480
51
$ 13,691

~~The following table presents TDRs, by class segment, as of June 30, 2016 and 2015,~~ that were modified in the previous 12 months and had a post-modification payment default during the six months ended June 30, ~~2016~~2017 and ~~2015.~~2016. The Corporation defines a payment default as a single missed payment.


	2016			2015			2017			2016
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(dollars in thousands)						(dollars in thousands)
Real estate - residential mortgage							7	$	1,911	5	$	972
Real estate - commercial mortgage							3	674		2	132
Real estate - home equity	22	$	1,448	7	$	614	16	922		22	1,448
Real estate - residential mortgage	5	972		6	652
Commercial - secured	4	1,096		8	4,779
Real estate - commercial mortgage	2	132		2	191
Commercial - unsecured	1	27		—	—
Commercial							5	2,772		5	1,123
Consumer							1	16		—	—
Total	34	$	3,675	23	$	6,236	32	$	6,295	34	$	3,675

NOTE 6 – Mortgage Servicing Rights

The following table summarizes the changes in mortgage servicing rights ("MSRs"), which are included in other assets on the consolidated balance sheets:


	Three months ended June 30						Six months ended June 30						Three months ended June 30						Six months ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016
	(in thousands)												(in thousands)
Amortized cost:
Balance at beginning of period	$	40,195		$	41,803		$	40,944		$	42,148		$	38,543		$	40,195		$	38,822		$	40,944
Originations of mortgage servicing rights	1,508			1,956			2,428			3,513			1,203			1,508			2,386			2,428
Amortization	(1,829		)	(2,161		)	(3,498		)	(4,063		)	(1,566		)	(1,829		)	(3,028		)	(3,498		)
Balance at end of period	$	39,874		$	41,598		$	39,874		$	41,598		$	38,180		$	39,874		$	38,180		$	39,874

Valuation allowance:
Balance at beginning of period	$	—		$	—		$	—		$	—		$	(1,291	)	$	—		$	(1,291	)	$	—
Additions	(1,721		)	—			(1,721		)	—
(Additions) reductions to valuation allowance													1,291			(1,721		)	1,291			(1,721		)
Balance at end of period	$	(1,721	)	$	—		$	(1,721	)	$	—		$	—		$	(1,721	)	$	—		$	(1,721	)

Net MSRs at end of period	$	38,153		$	41,598		$	38,153		$	41,598		$	38,180		$	38,153		$	38,180		$	38,153

MSRs represent the economic value of existing contractual rights to service mortgage loans that have been sold. Accordingly, actual and expected prepayments of the underlying mortgage loans can impact the value of MSRs. The Corporation accounts for MSRs at the lower of amortized cost or fair value.

The fair value of MSRs is estimated by discounting the estimated cash flows from servicing income, net of expense, over the expected life of the underlying loans at a discount rate commensurate with the risk associated with these assets. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. Based on its fair value analysis, the Corporation determined that ana reduction to the valuation allowance of $1.3 million was appropriate for the three and six months ended June 30, 2017. An addition to the valuation allowance of $1.7 million was determined to be necessary ~~as of~~for the three and six months ended June 30, 2016. NoAdditions and reductions to the valuation allowance ~~was necessary~~are recorded as decreases and increases, respectively, to "mortgage banking income" on the consolidated statements of ~~June 30, 2015.~~

income.

NOTE 7 – Stock-Based Compensation

The Corporation grants equity awards to employees, consisting of stock options, restricted stock, RSUs and PSUs under its Amended and Restated Equity and Cash Incentive Compensation Plan ("Employee Equity Plan"). In addition, employees may purchase stock under the Corporation’s Employee Stock Purchase Plan. The fair value of equity awards granted to employees is recognized as compensation expense over the period during which employees are required to provide service in exchange for such awards. Compensation expense for PSUs is also recognized over the period during which employees are required to provide service in exchange for such awards, however, compensation expense may vary based on the expectations for actual performance relative to defined performance measures.

The Corporation also grants equity awards to non-employee members of its board of directors under the 2011 Directors’ Equity Participation Plan ("Directors’ Plan"). Under the Directors’ Plan, the Corporation can grant equity awards to non-employee holding company and subsidiary bank directors in the form of stock options, restricted stock or common stock.

Equity awards issued under the Employee Equity Plan are generally granted annually and become fully vested over or after a three-year vesting period. The vesting period for non-performance-based awards represents the period during which employees are required to provide service in exchange for such awards. Equity awards under the Directors' Plan generally vest immediately upon grant. Certain events, as defined in the Employee Equity Plan and the Directors' Plan, result in the acceleration of the vesting of equity awards.

The following table presents compensation (benefit) expense and the related tax benefits for equity awards recognized in the consolidated statements of income:


	Three months ended June 30						Six months ended June 30						Three months ended June 30						Six months ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016
	(in thousands)												(in thousands)
Stock-based compensation expense	$	1,820		$	1,767		$	3,256		$	2,838		$	1,035		$	1,820		$	1,769		$	3,256
Tax benefit	(642		)	(622		)	(1,075		)	(914		)	(1,940		)	(642		)	(2,684		)	(1,075		)
Stock-based compensation expense, net of tax	$	1,178		$	1,145		$	2,181		$	1,924
Stock-based compensation expense, net of tax benefit													$	(905	)	$	1,178		$	(915	)	$	2,181

For the three and six months ended June 30, 2017, the tax benefit exceeded the stock-based compensation expense as a result of excess tax benefits arising from corporate stock price levels, stock option exercises and vesting restricted stock, RSUs and PSUs during these periods, which were recorded as reductions to income tax expense as required under ASU 2016-09.

Stock option fair values are estimated through the use of the Black-Scholes valuation methodology as of the date of grant. Stock options carry terms of up to ten years. Fair values for restricted stock, RSUs and a majority of PSUs are based on the trading price of the Corporation’s stock on the date of grant and earn dividends or dividend equivalents during the vesting period, which are forfeitable if the awards do not vest. The fair value of certain PSUs are estimated through the use of the Monte Carlo valuation methodology as of the date of grant.

As of June 30, ~~2016~~2017, the Employee Equity Plan had ~~11.5~~10.7 million shares reserved for future grants through 2023, and the Directors’ Plan had approximately ~~384,000~~360,000 shares reserved for future grants through 2021. On May 1, ~~2016,~~2017, the Corporation granted approximately ~~356,000~~284,000 PSUs and ~~163,000~~140,000 RSUs under the Employee Equity Plan. On June 1, ~~2016,~~2017, the Corporation granted approximately ~~12,000~~11,000 shares of common stock to its ~~directors. Total~~directors for a total expense of ~~$175,000 was~~$193,000 recognized in other ~~expense for this grant.~~expense.

NOTE 8 – Employee Benefit Plans

~~The Corporation maintains a defined benefit pension plan ("Pension Plan") for certain employees, which was curtailed in~~ ~~2008~~. Contributions to the Pension Plan are actuarially determined and funded annually, if required. Pension Plan assets are invested in: money markets; fixed income securities, including corporate bonds, U.S. Treasury securities and common trust funds; and equity securities, including common stocks and common stock mutual funds.

The net periodic benefit cost for the Corporation’s Defined Benefit Pension Plan ("Pension Plan") consisted of the following components:


	Three months ended June 30						Six months ended June 30						Three months ended June 30						Six months ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016
	(in thousands)												(in thousands)
Service cost ⁽¹⁾	$	194		$	145		$	344		$	290		$	—		$	194		$	—		$	344
Interest cost	879			851			1,760			1,702			830			879			1,660			1,760
Expected return on plan assets	(433		)	(752		)	(1,159		)	(1,504		)	(451		)	(433		)	(902		)	(1,159		)
Net amortization and deferral	428			782			1,210			1,564			663			428			1,326			1,210
Net periodic benefit cost	$	1,068		$	1,026		$	2,155		$	2,052		$	1,042		$	1,068		$	2,084		$	2,155


(1)	The Pension Plan was curtailed effective January 1, 2008. Service cost was related to administrative costs associated with the plan and was not due to the accrual of additional participant benefits.

~~The Corporation provides benefits under a postretirement benefits plan ("Postretirement Plan") to certain retirees who were employees of the Corporation prior to~~ ~~January 1, 1998~~ ~~and retired from employment with the Corporation prior to February 1, 2014.~~

The net periodic ~~cost (benefit)~~benefit of the Corporation’s Postretirement Benefits Plan ("Postretirement Plan") consisted of the following components:


	Three months ended June 30						Six months ended June 30						Three months ended June 30						Six months ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016
	(in thousands)												(in thousands)
Interest cost	5			52			43			104			$	17		$	5		$	34		$	43
Expected return on plan assets	(1		)	—			(1		)	—			—			(1		)	—			(1		)
Net accretion and deferral	(210		)	(65		)	(275		)	(130		)	(141		)	(210		)	(282		)	(275		)
Net periodic benefit	$	(206	)	$	(13	)	$	(233	)	$	(26	)	$	(124	)	$	(206	)	$	(248	)	$	(233	)

The Corporation recognizes the funded status of its Pension Plan and Postretirement Plan on the consolidated balance sheets and recognizes the change in that funded status through other comprehensive income.

NOTE 9 – Derivative Financial Instruments

The Corporation manages its exposure to certain interest rate and foreign currency risks through the use of derivatives. None of the Corporation's outstanding derivative contracts are designated as hedges, and none are entered into for speculative purposes. Derivative instruments are carried at fair value, with changes in fair values recognized in earnings as components of non-interest income and non-interest expense on the consolidated statements of income.

Derivative contracts create counterparty credit risk with both the Corporation's customers and with institutional derivative counterparties. The Corporation manages counterparty credit risk through its credit approval processes, monitoring procedures and obtaining adequate collateral, when the Corporation determines it is appropriate to do so and in accordance with counterparty contracts.

Mortgage Banking Derivatives

In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed-rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation enters into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Gross derivative assets and liabilities are recorded in other assets and other liabilities, respectively, on the consolidated balance sheets, and changes in fair values during the period are recorded in mortgage banking income on the consolidated statements of income.

Interest Rate Swaps

The Corporation enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Corporation receives a floating rate. These interest rate swaps are derivative financial instruments ~~that~~and the gross fair values are recorded ~~at their fair value~~ in other assets and other liabilities on the consolidated balance sheets, with changes in fair ~~value~~values during the period recorded in other non-interest expense on the consolidated statements of income.Fulton Bank, N.A. ("Fulton Bank"), the Corporation's largest banking subsidiary, exceeded $10 billion in total assets as of December 31, 2016 and was required to clear all eligible interest rate swap contracts with a central counterparty, effective January 1, 2017. As a result, Fulton Bank became subject to the regulations of the Commodity Futures Trading Commission ("CFTC").

Foreign Exchange Contracts

The Corporation enters into foreign exchange contracts to accommodate the needs of its customers. Foreign exchange contracts are commitments to buy or sell foreign currency on a future date at a contractual price. The Corporation offsets its foreign exchange contract exposure with customers by entering into contracts with third-party correspondent financial institutions to mitigate its exposure to fluctuations in foreign currency exchange rates. The Corporation also holds certain amounts of foreign currency with international correspondent banks. The Corporation's policy limits the total net foreign currency open positions, which includes all outstanding contracts and foreign account balances, to $500,000. Gross ~~derivative assets and liabilities~~fair values are recorded in other assets and other liabilities ~~respectively,~~ on the consolidated balance sheets, with changes in fair values during the period recorded within other service charges and fees on the consolidated statements of income.

The following table presents a summary of the notional amounts and fair values of derivative financial instruments:


	June 30, 2016					December 31, 2015					June 30, 2017					December 31, 2016
	Notional Amount		Asset (Liability) Fair Value			Notional Amount		Asset (Liability) Fair Value			Notional Amount		Asset (Liability) Fair Value			Notional Amount		Asset (Liability) Fair Value
	(in thousands)										(in thousands)
Interest Rate Locks with Customers
Positive fair values	$	159,646	$	3,023		$	87,781	$	1,291		$	141,136	$	1,354		$	87,119	$	863
Negative fair values	414		(4		)	267		(16		)	3,573		(28		)	18,239		(227		)
Net interest rate locks with customers			3,019					1,275					1,326					636
Forward Commitments
Positive fair values	—		—			69,045		205			25,343		94			70,031		2,223
Negative fair values	137,811		(1,831		)	16,193		(24		)	91,629		(205		)	19,964		(112		)
Net forward commitments			(1,831		)			181					(111		)			2,111
Interest Rate Swaps with Customers
Positive fair values	1,098,942		82,874			846,490		32,915			1,242,309		34,331			876,744		24,397
Negative fair values	8,000		(14		)	8,757		(55		)	581,370		(13,938		)	583,060		(16,998		)
Net interest rate swaps with customers			82,860					32,860					20,393					7,399
Interest Rate Swaps with Dealer Counterparties
Positive fair values	8,000		14			8,757		55			581,370		13,938			583,060		16,998
Negative fair values	1,098,942		(82,874		)	846,490		(32,915		)
Negative fair values ⁽¹⁾											1,242,309		(29,167		)	876,744		(24,397		)
Net interest rate swaps with dealer counterparties			(82,860		)			(32,860		)			(15,229		)			(7,399		)
Foreign Exchange Contracts with Customers
Positive fair values	11,577		479			4,897		114			4,460		309			11,674		504
Negative fair values	6,268		(94		)	8,050		(184		)	7,295		(343		)	4,659		(221		)
Net foreign exchange contracts with customers			385					(70		)			(34		)			283
Foreign Exchange Contracts with Correspondent Banks
Positive fair values	9,595		377			9,728		428			9,268		407			7,040		241
Negative fair values	15,231		(443		)	6,899		(147		)	6,873		(283		)	12,869		(447		)
Net foreign exchange contracts with correspondent banks			(66		)			281					124					(206		)
Net derivative fair value asset			$	1,507				$	1,667				$	6,469				$	2,824

(1) Includes centrally cleared interest rate swaps with a notional amount of $240.7 million and a fair value of $0 as of June 30, 2017. Collateral is posted daily through a clearing agent for changes in the fair value.

The following table presents a summary of the fair value gains ~~and losses~~(losses) on derivative financial instruments:


	Three months ended June 30						Six months ended June 30						Three months ended June 30						Six months ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016
	(in thousands)												(in thousands)
Interest rate locks with customers	$	512		$	(1,287	)	$	1,744		$	(165	)	$	(155	)	$	512		$	690		$	1,744
Forward commitments	(906		)	2,291			(2,012		)	2,845			157			(906		)	(2,222		)	(2,012		)
Interest rate swaps with customers	20,569			(9,839		)	50,000			(435		)	13,809			20,569			12,994			50,000
Interest rate swaps with dealer counterparties	(20,569		)	9,839			(50,000		)	435			(10,831		)	(20,569		)	(7,830		)	(50,000		)
Foreign exchange contracts with customers	81			(748		)	455			(181		)	(325		)	81			(317		)	455
Foreign exchange contracts with correspondent banks	(68		)	711			(347		)	387			367			(68		)	330			(347		)
Net fair value gains (losses) on derivative financial instruments	$	(381	)	$	967		$	(160	)	$	2,886		$	3,022		$	(381	)	$	3,645		$	(160	)

Fair Value Option

U.S. GAAP permits entities to measure many financial instruments and certain other items at fair value and requires certain disclosures for amounts for which the fair value option is applied. The Corporation has elected to measure mortgage loans held

for sale at fair value to more accurately reflect the financial results of its mortgage banking activities in its consolidated financial statements. Derivative financial instruments related to these activities are also recorded at fair value, as noted above. The Corporation

determines fair value for its mortgage loans held for sale based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Changes in fair values during the period are recorded as components of mortgage banking income on the consolidated statements of income. Interest income earned on mortgage loans held for sale is classified in interest income on the consolidated statements of income.

The following table presents a summary of the Corporation’s mortgage loans held for sale:


	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
	(in thousands)				(in thousands)
Cost	$	33,164	$	16,584	$	32,810	$	28,708
Fair value	34,330		16,886		33,364		28,697

During the three ~~and six~~ months ended June 30, 2017 and 2016, the Corporation recorded gains related to changes in fair values of mortgage loans held for sale of ~~$634,000~~$26,000 and ~~$864,000,~~$634,000, respectively. During the ~~three and~~ six months ended June 30, ~~2015,~~2017 and 2016, the Corporation recorded ~~losses~~gains related to changes in fair values of mortgage loans held for sale of ~~$483,000~~$565,000 and ~~$222,000,~~$864,000, respectively.

Balance Sheet Offsetting

Certain financial assets and liabilities may be eligible for offset on the consolidated balance sheets because they are subject to master netting arrangements or similar agreements. The Corporation elects to not offset certain assets and liabilities subject to such arrangements on the consolidated financial statements.

The Corporation is a party to interest rate swap transactions with financial institution counterparties and customers, disclosed in detail above. Under these agreements, the Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on, or termination of, any one contract. Cash collateral is posted by the party with a net liability position in accordance with contract thresholds and can be used to settle the fair value of the interest rate swap agreements in the event of default. Collateral is posted daily through a clearing agent for changes in the fair value of centrally cleared derivatives with negative fair values. As a result, the total fair values of interest rate swap derivative assets and derivative liabilities recognized on the consolidated balance sheet are not equal and offsetting.

The Corporation is also a party to foreign currency exchange contracts with financial institution counterparties, under which the Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on, or termination of, any one contract. As with interest rate swap contracts, ~~cash~~ collateral is posted by the party with a net liability position in accordance with contract thresholds and can be used to settle the fair value of the foreign currency exchange contracts in the event of default.

The Corporation also enters into agreements with customers in which it sells securities subject to an obligation to repurchase the same or similar securities, referred to as repurchase agreements. Under these agreements, the Corporation may transfer legal control over the assets but still maintain effective control through agreements that both entitle and obligate the Corporation to repurchase the assets. Therefore, repurchase agreements are reported as secured borrowings, classified in short-term borrowings on the consolidated balance sheets, while the securities underlying the repurchase agreements remain classified with investment securities on the consolidated balance sheets. The Corporation has no intention of setting off these amounts. Therefore, these repurchase agreements are not eligible for offset.

The following table presents the Corporation's financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets:


	Gross Amounts		Gross Amounts Not Offset								Gross Amounts		Gross Amounts Not Offset
	Recognized		on the Consolidated								Recognized		on the Consolidated
	on the		Balance Sheets								on the		Balance Sheets
	Consolidated		Financial			Cash			Net		Consolidated		Financial			Cash			Net
	Balance Sheets		Instruments⁽¹⁾			Collateral ⁽²⁾			Amount		Balance Sheets		Instruments⁽¹⁾			Collateral ⁽²⁾			Amount
	(in thousands)										(in thousands)
June 30, 2016
June 30, 2017
Interest rate swap derivative assets	$	82,888	$	(14	)	$	—		$	82,874	$	48,269	$	(14,372	)	$	—		$	33,897
Foreign exchange derivative assets with correspondent banks	377		(359		)	(18		)	—		407		(283		)	—			124
Total	$	83,265	$	(373	)	$	(18	)	$	82,874	$	48,676	$	(14,655	)	$	—		$	34,021

Interest rate swap derivative liabilities	$	82,888	$	(14	)	$	(82,510	)	$	364	$	43,105	$	(14,372	)	$	(18,320	)	$	10,413
Foreign exchange derivative liabilities with correspondent banks	443		(359		)	—			84		283		(283		)	—			—
Total	$	83,331	$	(373	)	$	(82,510	)	$	448	$	43,388	$	(14,655	)	$	(18,320	)	$	10,413

December 31, 2015
December 31, 2016
Interest rate swap derivative assets	$	32,970	$	(55	)	$	—		$	32,915	$	41,395	$	(15,117	)	$	—		$	26,278
Foreign exchange derivative assets with correspondent banks	428		(147		)	—			281		241		(241		)	—			—
Total	$	33,398	$	(202	)	$	—		$	33,196	$	41,636	$	(15,358	)	$	—		$	26,278

Interest rate swap derivative liabilities	$	32,970	$	(55	)	$	(31,130	)	$	1,785	$	41,395	$	(15,117	)	$	(4,010	)	$	22,268
Foreign exchange derivative liabilities with correspondent banks	147		(147		)	—			—		447		(241		)	(206		)	—
Total	$	33,117	$	(202	)	$	(31,130	)	$	1,785	$	41,842	$	(15,358	)	$	(4,216	)	$	22,268


(1)	For derivative assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default. For derivative liabilities, amounts represent any derivative asset fair values that could be offset in the event of counterparty or customer default.


(2)	Amounts represent ~~cash~~ collateral received from the counterparty or posted by the Corporation.

NOTE 10 – Commitments and Contingencies

Commitments

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.

Those financial instruments include commitments to extend credit and letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized on the Corporation’s consolidated balance sheets. Exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the outstanding amount of those instruments.

The outstanding amounts of commitments to extend credit and letters of credit ~~as of the dates indicated~~ were as follows:


	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
	(in thousands)				(in thousands)
Commitments to extend credit	$	5,898,623	$	5,784,138	$	6,382,314	$	6,075,567
Standby letters of credit	362,506		374,729		349,953		356,359
Commercial letters of credit	37,836		39,529		41,501		38,901

The Corporation records a reserve for unfunded lending commitments, which represents management’s estimate of losses associated with unused commitments to extend credit. See Note 5, "Loans and Allowance for Credit Losses," for additional details.

Residential Lending

Residential mortgages originated and sold by the Corporation consist primarily of conforming, prime loans sold to government sponsored agencies, such as the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). The Corporation also sells certain prime loans it originates to non-government sponsored agency investors.

The Corporation provides customary representations and warranties to government sponsored entities and investors that specify, among other things, that the loans have been underwritten to the standards established by the government sponsored entity or investor. The Corporation may be required to repurchase a loan, or reimburse the government sponsored entity or investor for a credit loss incurred on a loan, if it is determined that the representations and warranties have not been met. Such repurchases or reimbursements generally result from an underwriting or documentation deficiency. As of both June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, total outstanding repurchase requests totaled approximately $543,000.

From 2000 to 2011, the Corporation sold loans to the Federal Home Loan Bank of Pittsburgh under its Mortgage Partnership Finance Program ("MPF Program"). The Corporation provided a "credit enhancement" for residential mortgage loans sold under the MPF Program whereby it would assume credit losses in excess of a defined "First Loss Account," or "FLA" balance, up to specified amounts. The FLA is funded by the Federal Home Loan Bank of Pittsburgh based on a percentage of the outstanding principal balance of loans sold. As of June 30, ~~2016,~~2017, the unpaid principal balance of loans sold under the MPF Program was approximately ~~$114~~$94 million. As of June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the reserve for estimated credit losses related to loans sold under the MPF Program was ~~$2.1~~$1.6 million and ~~$1.8~~$1.7 million, respectively. Required reserves are calculated based on delinquency status and estimated loss rates established through the Corporation's existing allowance for credit losses methodology for residential mortgage loans.

As of June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the total reserve for losses on residential mortgage loans sold was ~~$2.8~~$2.4 million and ~~$2.6~~$2.5 million, respectively, including both reserves for credit losses under the MPF Program and reserves for representation and warranty exposures. Management believes that the reserves recorded as of June 30, ~~2016~~2017 are adequate. However, declines in collateral values, the identification of additional loans to be repurchased, or a deterioration in the credit quality of loans sold under the MPF Program could necessitate additional reserves, established through charges to earnings, in the future.

Legal Proceedings

The Corporation and its subsidiaries are involved in various legal proceedings in the ordinary course of business of the Corporation. The Corporation periodically evaluates the possible impact of pending litigation matters based on, among other factors, the advice of counsel, available insurance coverage and recorded liabilities and reserves for probable legal liabilities and costs. In addition, from time to time, the Corporation is the subject of investigations or other forms of regulatory or governmental inquiry covering a range of possible issues and, in some cases, these may be part of similar reviews of the specified activities of other industry participants. These inquiries could lead to administrative, civil or criminal proceedings, and could possibly result in fines, penalties, restitution or the need to alter the Corporation’s business practices, and cause the Corporation to incur additional costs. The Corporation’s practice is to cooperate fully with regulatory and governmental investigations.

As of the date of this report, the Corporation believes that any liabilities, individually or in the aggregate, which may result from the final outcomes of pending proceedings will not have a material adverse effect on the financial condition of the Corporation. However, legal proceedings are often unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to the Corporation’s results of operations for any particular period, depending, in part, upon the size of the loss or liability imposed and the operating results for the applicable period.

BSA/AML Enforcement Orders

The Corporation and each of its bank subsidiaries are subject to regulatory enforcement orders issued during 2014 and 2015 by their respective federal and state bank regulatory agencies relating to identified deficiencies in the Corporation’s centralized Bank Secrecy Act and anti-money laundering compliance program (the "BSA/AML Compliance Program"), which was designed to comply with the requirements of the Bank Secrecy Act, the USA Patriot Act of 2001 and related anti-money laundering regulations (collectively, the "BSA/AML Requirements"). The regulatory enforcement orders, which are in the form of consent orders or orders to cease and desist issued upon consent ("Consent Orders"), generally require, among other things, that the Corporation and its bank subsidiaries undertake a number of required actions to strengthen and enhance the BSA/AML Compliance Program, and, in some cases, conduct retrospective reviews of past account activity and transactions, as well as certain reports filed in accordance with the BSA/AML Requirements, to determine whether suspicious activity and certain transactions in currency were properly identified and reported in accordance with the BSA/AML Requirements. The Corporation and its bank subsidiaries have

~~properly identified~~implemented numerous enhancements to the BSA/AML Compliance Program, completed the retrospective reviews required under the Consent Orders, and ~~reported~~continue to strengthen and refine the BSA/AML Compliance Program to achieve a sustainable program in accordance with the BSA/AML Requirements. In addition to requiring strengthening and enhancement of the BSA/AML Compliance Program, while the Consent Orders remain in effect, the Corporation is subject to certain restrictions on expansion activities of the Corporation and its bank subsidiaries. Further, any failure to comply with the requirements of any of the Consent Orders involving the Corporation or its bank subsidiaries could result in further enforcement actions, the imposition of material restrictions on the activities of the Corporation or its bank subsidiaries, or the assessment of fines or penalties.

Fair Lending Investigation

During the second quarter of 2015, Fulton Bank, N.A. ~~(the "Bank")~~, the Corporation’s largest bank subsidiary, received a letter from the U.S. Department of Justice (the "Department") indicating that the Department had initiated an investigation regarding potential violations of fair lending laws (specifically, the Equal Credit Opportunity Act and the Fair Housing Act) by ~~the~~Fulton Bank, N.A. in certain ~~of its~~ geographies. ~~The~~Fulton Bank, N.A. has been and is cooperating with the Department and responding to the Department’s requests for information. ~~Although~~During the third quarter of 2016, the Department informed the Corporation, isFulton Bank, N.A., and three of the Corporation’s other bank subsidiaries, Fulton Bank of New Jersey, The Columbia Bank and Lafayette Ambassador Bank, that the Department was expanding its investigation of potential lending discrimination on the basis of race and national origin to encompass additional geographies that were not included in the initial letter from the Department. In addition to requesting information concerning the lending activities of these bank subsidiaries, the Department also requested information concerning the Corporation and the residential mortgage lending activities conducted under the Fulton Mortgage Company brand, the trade name used by all of the Corporation’s bank subsidiaries for residential mortgage lending. The investigation relates to lending activities during the period January 1, 2009 to the present. The Corporation and the identified bank subsidiaries are cooperating with the Department and responding to the Department’s requests for information. The Corporation and its bank subsidiaries are not able at this time to ~~predict~~determine the ~~outcome~~terms on which this investigation will be resolved or the timing of such resolution, or to reliably estimate the ~~Department’s investigation, it could result in legal proceedings the resolution~~amounts of ~~which could potentially involve a~~any settlement, fines or other penalties or the cost of any other remedial ~~actions.~~actions, if enforcement action is taken. In addition, should the investigation result in an enforcement action against the Corporation or its bank subsidiaries, or a settlement with the Department, the ability of the Corporation and its bank subsidiaries to engage in certain expansion or other activities may be restricted.

Agostino, et al. Litigation

Fulton Bank, N.A. (the "Bank"), the Corporation’s largest bank subsidiary, and two unrelated, third-party defendants, Ameriprise Financial Services, Inc. (“Ameriprise”) and Riverview Bank (“Riverview”), have been named as defendants in a lawsuit brought on behalf of a group of 5867 plaintiffs filed on March 31, 2016, in the Court of Common Pleas for Dauphin County, Pennsylvania (Agostino, et al. v. Ameriprise Financial Services, Inc., et al., No. 2016-CV-2048-CV). The plaintiffs in this action, who are individuals, trustees of certain irrevocable trusts, or the executors of the estates of deceased individuals, were clients of Jeffrey M. Mottern, a ~~now deceased~~now-deceased attorney, who is alleged to have operated a ~~Ponzi~~fraud scheme ~~which defrauded the plaintiffs~~ over a period of years through the sale of fictitious ~~high-yielding~~high-yield investments or by otherwise misappropriating funds entrusted to Mr. Mottern. Mr. Mottern is alleged to have used the proceeds of these activities to engage in speculative securities trading through defendant Ameriprise, which ~~incurred~~caused significant losses, and for Mr. Mottern’s personal expenses. The allegations against the Bank relate to a commercial checking account at the Bank maintained by Mr. Mottern in connection with Mr. Mottern’s law practice. The lawsuit alleges that the Bank is liable to the plaintiffs for failing to properly monitor Mr. Mottern’s checking account and detect Mr. Mottern’s fraudulent activity, and specifically alleges that the Bank aided and abetted Mr. Mottern’s: (1) fraud; (2) breach of fiduciary duty; (3) violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law; and (4) conversion. Similar claims have been asserted against Ameriprise ~~Financial Services, Inc.~~ and Riverview, ~~Bank,~~ which allegedly maintained a personal brokerage account and a trust account for client or other third-party funds, respectively, for Mr. Mottern. The lawsuit seeks damages from the defendants, including the Bank, alleged to be in excess of $11.3 million, treble damages and attorneys’ fees with respect to alleged violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, punitive damages, plus interest and costs. On April 29, 2016, the Bank filed a Notice of Removal to remove this lawsuit to the United States District Court for the Middle District of Pennsylvania. On May ~~25, 2016, the Bank filed a motion to dismiss the lawsuit for failure to state a claim. On May~~ 31, 2016, the plaintiffs filed a motion to remand the lawsuit to the Court of Common Pleas for Dauphin County, Pennsylvania. On October 24, 2016, the District Court granted the plaintiffs' motion and the lawsuit was remanded back to the Court of Common Pleas for Dauphin County. All defendants subsequently filed preliminary objections to the Complaint, including objections that, if granted, would result in dismissal of the case. On May 26, 2017, the Court of Common Pleas for Dauphin County denied all substantive preliminary objections filed by the Bank. On June ~~17, 2016,~~23, 2017, the Bank filed ~~a brief opposing the motion to remand. The motion to remand is pending before the District Court and further briefing on the motion to dismiss has been stayed pending resolution~~its Combined Motion for Partial Reconsideration of the ~~motion~~Court’s May 26, 2017 Order and Application for Amendment of the Order to ~~remand.~~Set Forth Expressly the Statement in Pa.C.S. s. 702(b) (the “Motion”). The Bank also filed its Answer and New Matter (the “Answer”) on June 23, 2017. The Plaintiffs subsequently responded to the Motion and the Answer, and the case has now entered the discovery phase.

NOTE 11 – Fair Value Measurements

FASB ASC Topic 820 establishes a fair value hierarchy for the inputs to valuation techniques used to measure assets and liabilities at fair value using the following three categories (from highest to lowest priority):

Level 1 – Inputs that represent quoted prices for identical instruments in active markets.

Level 2 – Inputs that represent quoted prices for similar instruments in active markets, or quoted prices for identical instruments in non-active markets. Also includes valuation techniques whose inputs are derived principally from observable market data other than quoted prices, such as interest rates or other market-corroborated means.

Level 3 – Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.

The Corporation has categorized all assets and liabilities measured at fair value on both a recurring and nonrecurring basis into the above three levels.

The following tables present summaries of the Corporation’s assets and liabilities measured at fair value on a recurring basis and reported on the consolidated balance sheets:


	June 30, 2016								June 30, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Mortgage loans held for sale	$	—	$	34,330	$	—	$	34,330	$	—	$	33,364	$	—	$	33,364
Available for sale investment securities:
Equity securities	20,689		—		—		20,689		21,455		—		—		21,455
U.S. Government sponsored agency securities	—		146		—		146		—		6,054		—		6,054
State and municipal securities	—		345,347		—		345,347		—		401,636		—		401,636
Corporate debt securities	—		88,416		3,131		91,547		—		85,795		3,197		88,992
Collateralized mortgage obligations	—		706,346		—		706,346		—		538,507		—		538,507
Mortgage-backed securities	—		1,267,763		—		1,267,763
Residential mortgage-backed securities									—		1,213,065		—		1,213,065
Commercial mortgage-backed securities									—		121,067		—		121,067
Auction rate securities	—		—		97,886		97,886		—		—		97,923		97,923
Total available for sale investment securities	20,689		2,408,018		101,017		2,529,724		21,455		2,366,124		101,120		2,488,699
Other assets	16,873		85,911		—		102,784		18,533		49,717		—		68,250
Total assets	$	37,562	$	2,528,259	$	101,017	$	2,666,838	$	39,988	$	2,449,205	$	101,120	$	2,590,313
Other liabilities	$	16,541	$	84,722	$	—	$	101,263	$	18,438	$	43,338	$	—	$	61,776


	December 31, 2015								December 31, 2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Mortgage loans held for sale	$	—	$	16,886	$	—	$	16,886	$	—	$	28,697	$	—	$	28,697
Available for sale investment securities:
Equity securities	21,514		—		—		21,514		24,526		—		—		24,526
U.S. Government sponsored agency securities	—		25,136		—		25,136		—		134		—		134
State and municipal securities	—		262,765		—		262,765		—		391,641		—		391,641
Corporate debt securities	—		93,619		3,336		96,955		—		106,537		2,872		109,409
Collateralized mortgage obligations	—		821,509		—		821,509		—		593,860		—		593,860
Mortgage-backed securities	—		1,158,835		—		1,158,835
Residential mortgage-backed securities									—		1,317,838		—		1,317,838
Commercial mortgage-backed securities									—		24,563		—		24,563
Auction rate securities	—		—		98,059		98,059		—		—		97,256		97,256
Total available for sale investment securities	21,514		2,361,864		101,395		2,484,773		24,526		2,434,573		100,128		2,559,227
Other assets	16,129		34,465		—		50,594		17,111		44,481		—		61,592
Total assets	$	37,643	$	2,413,215	$	101,395	$	2,552,253	$	41,637	$	2,507,751	$	100,128	$	2,649,516
Other liabilities	$	15,914	$	33,010	$	—	$	48,924	$	17,032	$	41,734	$	—	$	58,766

The valuation techniques used to measure fair value for the items in the preceding tables are as follows:

Mortgage loans held for sale – This category consists of mortgage loans held for sale that the Corporation has elected to measure at fair value. Fair values as of June 30, ~~2016~~2017 and December 31, ~~2015~~2016 were measured based on the price that secondary market investors were offering for loans with similar characteristics. See Note 9, "Derivative Financial Instruments" for details related to the Corporation’s election to measure assets and liabilities at fair value.

Available for sale investment securities – Included in this asset category are both equity and debt securities. Level 2 available for sale debt securities are valued by a third-party pricing service commonly used in the banking industry. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings, and matrix pricing.

Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable.

Management tests the values provided by the pricing service by obtaining securities prices from an alternative third-party source and comparing the results. This test is done for ~~approximately~~at least 80% of the securities valued by the pricing service. Generally, differences by security in excess of 5% are researched to reconcile the difference.

Equity securities – Equity securities consist of common stocks of financial institutions ($~~19.8~~20.5 million at June 30, ~~2016~~2017 and ~~$20.6~~$23.5 million at December 31, ~~2015)~~2016) and other equity investments ($~~895,000~~1.0 million at June 30, ~~2016~~2017 and ~~$914,000 at~~ December 31, ~~2015)~~2016). These Level 1 investments are measured at fair value based on quoted prices for identical securities in active markets.

U.S. Government securities/U.S. Government sponsored agency securities/State and municipal securities/Collateralized mortgage obligations/~~Mortgage-backed~~Residential mortgage-backed securities/Commercial mortgage-backed securities – These debt securities are classified as Level 2 investments. Fair values are determined by a third-party pricing service, as detailed above.

Corporate debt securities – This category consists of subordinated debt issued by financial institutions ($~~30.7~~42.1 million at June 30, ~~2016~~2017 and ~~$40.8~~$65.2 million at December 31, ~~2015), senior debt ($18.7 million at June 30, 2016 and $12.3 million at December 31, 2015)~~2016), single-issuer trust preferred securities issued by financial institutions ($~~37.4~~42.5 million at June 30, ~~2016~~2017 and ~~$39.1~~$39.8 million at December 31, ~~2015)~~2016), pooled trust preferred securities issued by financial institutions ($~~706,000~~422,000 at both June 30, ~~2016~~2017 and December 31, ~~2015)~~2016) and other corporate debt issued by non-financial institutions ($4.0 million at both June 30, ~~2016~~2017 and December 31, ~~2015)~~2016).

Level 2 investments include the Corporation’s holdings of subordinated debt, other corporate debt issued by non-financial institutions and ~~$35.0~~$39.7 million and ~~$36.5~~$37.3 million of single-issuer trust preferred securities held at June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.

Level 3 investments include the Corporation’s investments in pooled trust preferred securities ($~~706,000~~422,000 at both June 30, ~~2016~~2017 and December 31, ~~2015)~~2016) and certain single-issuer trust preferred securities ($~~2.4~~2.8 million at June 30, ~~2016~~2017 and ~~$2.6~~$2.5 million at December 31, ~~2015)~~2016). The fair values of these securities were determined based on quotes provided by third-party brokers who determined fair values based predominantly on internal valuation models which were not indicative prices or binding offers. The Corporation’s third-party pricing service cannot derive fair values for these securities primarily due to inactive markets for similar investments. Level 3 values are tested by management primarily through trend analysis, by comparing current values to those reported at the end of the preceding calendar quarter, and determining if they are reasonable based on price and spread movements for this asset class.

Auction rate securities – Due to their illiquidity, ARCs are classified as Level 3 investments and are valued through the use of an expected cash flows model prepared by a third-party valuation expert. The assumptions used in preparing the expected cash flows model include estimates for coupon rates, time to maturity and market rates of return. The most significant unobservable input to the expected cash flows model is an assumed return to market liquidity sometime in the next five years. If the assumed return to market liquidity was lengthened beyond the next five years, this would result in a decrease in the fair value of these ARCs. The Corporation believes that the trusts underlying the ARCs will self-liquidate as student loans are repaid. Level 3 fair values

are tested by management through the performance of a trend analysis of the market price and discount rate. Changes in the price and discount rates are compared to changes in market data, including bond ratings, parity ratios, balances and delinquency levels.

Other assets – Included in this category are the following:

Level 1 assets include mutual funds that are held in trust for employee deferred compensation plans ($~~16.0~~17.8 million at June 30, ~~2016~~2017 and ~~$15.6~~$16.4 million at December 31, ~~2015)~~2016) and the fair value of foreign currency exchange contracts ($~~868,000~~716,000 at June 30, ~~2016~~2017 and ~~$547,000~~$745,000 at December 31, ~~2015)~~2016). The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.

Level 2 assets include the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($~~3.0~~1.4 million at June 30, ~~2016~~2017 and ~~$1.5~~$3.1 million at December 31, ~~2015)~~2016) and the fair value of interest rate swaps ($~~82.9~~48.3 million at June 30, ~~2016~~2017 and ~~$33.0~~$41.4 million at December 31, ~~2015)~~2016). The fair values of the Corporation’s interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See Note 9, "Derivative Financial Instruments," for additional information.

Other liabilities – Included in this category are the following:

Level 1 liabilities include employee deferred compensation liabilities which represent amounts due to employees under deferred compensation plans ($~~16.0~~17.8 million at June 30, ~~2016~~2017 and ~~$15.6~~$16.4 million at December 31, ~~2015)~~2016) and the fair value of foreign currency exchange contracts ($~~537,000~~626,000 at June 30, ~~2016~~2017 and ~~$331,000~~$668,000 at December 31, ~~2015)~~2016). The fair value of these liabilities are determined in the same manner as the related assets, as described under the heading "Other assets" above.

Level 2 liabilities include the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($~~1.8 million~~233,000 at June 30, ~~2016~~2017 and ~~$40,000~~$339,000 at December 31, ~~2015)~~2016) and the fair value of interest rate swaps ($~~82.9~~43.1 million at June 30, ~~2016~~2017 and ~~$33.0~~$41.4 million at December 31, ~~2015)~~2016). The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Other assets" above.

The following table presents the changes in the Corporation’s available for sale investment securities measured at fair value on a recurring basis using unobservable inputs (Level 3):


	Three months ended June 30, 2016									Three months ended June 30, 2017
										Pooled Trust Preferred Securities		Single-issuer Trust Preferred Securities			ARCs
										(in thousands)
Balance at March 31, 2017										$	422	$	2,750		$	97,439
Unrealized adjustment to fair value ⁽¹⁾										—		22			386
Discount accretion ⁽²⁾										—		3			98
Balance at June 30, 2017										$	422	$	2,775		$	97,923
	Pooled Trust Preferred Securities			Single-issuer Trust Preferred Securities			ARCs
	(in thousands)									Three months ended June 30, 2016
Balance at March 31, 2016	$	706		$	2,400		$	97,326		$	706	$	2,400		$	97,326
Unrealized adjustment to fair value ⁽¹⁾	—			22			482			—		22			482
Discount accretion ⁽²⁾	—			3			78			—		3			78
Balance at June 30, 2016	$	706		$	2,425		$	97,886		$	706	$	2,425		$	97,886

	Three months ended June 30, 2015									Six months ended June 30, 2017
Balance at March 31, 2015	$	1,084		$	3,820		$	98,932
Sales	(554		)	—			—
										Pooled Trust Preferred Securities		Single-issuer Trust Preferred Securities			ARCs
										(in thousands)
Balance at December 31, 2016										$	422	$	2,450		$	97,256
Unrealized adjustment to fair value ⁽¹⁾	—			(2		)	(420		)	—		319			472
Discount accretion ⁽²⁾	—			2			94			—		6			195
Balance at June 30, 2015	$	530		$	3,820		$	98,606

	Six months ended June 30, 2016
Balance at June 30, 2017										$	422	$	2,775		$	97,923
	Pooled Trust Preferred Securities			Single-issuer Trust Preferred Securities			ARCs
	(in thousands)									Six months ended June 30, 2016
Balance at December 31, 2015	$	706		$	2,630		$	98,059		$	706	$	2,630		$	98,059
Unrealized adjustment to fair value ⁽¹⁾	—			(211		)	(350		)	—		(211		)	(350		)
Discount accretion ⁽²⁾	—			6			177			—		6			177
Balance at June 30, 2016	$	706		$	2,425		$	97,886		$	706	$	2,425		$	97,886

	Six months ended June 30, 2015
Balance at December 31, 2014	$	4,088		$	3,820		$	100,941
Sales	(3,633		)	—			—
Unrealized adjustment to fair value ⁽¹⁾	190			(4		)	(88		)
Settlements - calls	(117		)	—			(2,446		)
Discount accretion ⁽²⁾	2			4			199
Balance at June 30, 2015	$	530		$	3,820		$	98,606


(1)	Pooled trust preferred securities, single-issuer trust preferred securities and ARCs are classified as available for sale investment securities; as such, the unrealized adjustment to fair value was recorded as an unrealized holding gain (loss) and included as a component of ~~available~~"available for sale investment ~~securities~~securities" on the consolidated balance sheets.


(2)	Included as a component of ~~net~~"net interest ~~income~~income" on the consolidated statements of income.

Certain financial assets are not measured at fair value on an ongoing basis, but are subject to fair value measurement in certain circumstances, such as upon their acquisition or when there is evidence of impairment. The following table presents the Corporation’s financial assets measured at fair value on a nonrecurring basis and reported on the Corporation’s consolidated balance sheets:


	June 30, 2016								June 30, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Net loans	$	—	$	—	$	128,174	$	128,174	$	—	$	—	$	144,256	$	144,256
Other financial assets	—		—		50,071		50,071		—		—		49,613		49,613
Total assets	$	—	$	—	$	178,245	$	178,245	$	—	$	—	$	193,869	$	193,869


	December 31, 2015								December 31, 2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Net loans	$	—	$	—	$	138,491	$	138,491	$	—	$	—	$	132,576	$	132,576
Other financial assets	—		—		52,043		52,043		—		—		50,347		50,347
Total assets	$	—	$	—	$	190,534	$	190,534	$	—	$	—	$	182,923	$	182,923

The valuation techniques used to measure fair value for the items in the table above are as follows:

Net loans – This category consists of loans that were ~~evaluated~~measured for impairment under FASB ASC Section 310-10-35 and have been classified as Level 3 assets. The amount shown is the balance of impaired loans, net of the related allowance for loan losses. See Note 5, "Loans and Allowance for Credit Losses," for additional details.

Other financial assets – This category includes OREO ($~~11.9~~11.4 million at June 30, ~~2016~~2017 and ~~$11.1~~$12.8 million at December 31, ~~2015)~~2016) and MSRs ($38.2 million at June 30, ~~2016~~2017 and ~~$40.9~~$37.5 million at December 31, ~~2015)~~2016), both classified as Level 3 assets.

Fair values for OREO were based on estimated selling prices less estimated selling costs for similar assets in active markets.

MSRs are initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the June 30, ~~2016~~2017 valuation were ~~13.7%~~11.8% and ~~10.1%~~9.5%, respectively. Management tests the reasonableness of the significant inputs to the third-party valuation in comparison to market data.

As required by FASB ASC Section 825-10-50, the following table details the book values and estimated fair values of the Corporation’s financial instruments as of June 30, ~~2016~~2017 and December 31, ~~2015.~~2016. In addition, a general description of the methods and assumptions used to estimate such fair values is also provided.


	June 30, 2016				December 31, 2015				June 30, 2017				December 31, 2016
	Book Value		Estimated Fair Value		Book Value		Estimated Fair Value		Book Value		Estimated Fair Value		Book Value		Estimated Fair Value
	(in thousands)								(in thousands)
FINANCIAL ASSETS
Cash and due from banks	$	84,647	$	84,647	$	101,120	$	101,120	$	94,938	$	94,938	$	118,763	$	118,763
Interest-bearing deposits with other banks	348,232		348,232		230,300		230,300		322,514		322,514		233,763		233,763
Federal Reserve Bank and Federal Home Loan Bank stock	59,854		59,854		62,216		62,216		70,328		70,328		57,489		57,489
Loans held for sale ⁽¹⁾	34,330		34,330		16,886		16,886		62,354		62,354		28,697		28,697
Available for sale investment securities ⁽¹⁾	2,529,724		2,529,724		2,484,773		2,484,773		2,488,699		2,488,699		2,559,227		2,559,227
Net Loans ⁽¹⁾	13,992,613		13,950,868		13,669,548		13,540,903		15,174,275		15,007,961		14,530,593		14,387,454
Accrued interest receivable	43,316		43,316		42,767		42,767		47,603		47,603		46,294		46,294
Other financial assets ⁽¹⁾	226,808		226,808		166,920		166,920		212,773		212,773		206,132		206,132
FINANCIAL LIABILITIES
Demand and savings deposits	$	11,469,919	$	11,469,919	$	11,267,367	$	11,267,367	$	12,610,951	$	12,610,951	$	12,259,622	$	12,259,622
Time deposits	2,822,645		2,973,640		2,864,950		2,862,868		2,746,410		2,758,807		2,753,242		2,769,757
Short-term borrowings	722,214		722,214		497,663		497,663		694,859		694,859		541,317		541,317
Accrued interest payable	8,336		8,336		10,724		10,724		7,804		7,804		9,632		9,632
Other financial liabilities ⁽¹⁾	274,104		274,104		190,927		190,927		252,537		252,537		216,080		216,080
Federal Home Loan Bank advances and long-term debt	965,552		993,194		949,542		959,315
Federal Home Loan Bank advances and other long-term debt									1,037,961		1,035,711		929,403		928,167


(1)	These financial instruments, or certain financial instruments in these categories, are measured at fair value on the Corporation’s consolidated balance sheets. Descriptions of the fair value determinations for these financial instruments are disclosed above.

Fair values of financial instruments are significantly affected by the assumptions used, principally the timing of future cash flows and discount rates. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument. The aggregate fair value amounts presented do not necessarily represent management’s estimate of the underlying value of the Corporation.

For short-term financial instruments, defined as those with remaining maturities of 90 days or less, and excluding those recorded at fair value on the Corporation’s consolidated balance sheets, book value was considered to be a reasonable estimate of fair value.

The following instruments are predominantly short-term:



Assets		Liabilities
Cash and due from banks		Demand and savings deposits
Interest-bearing deposits with other banks		Short-term borrowings
Accrued interest receivable		Accrued interest payable

Federal Reserve Bank and Federal Home Loan Bank ("FHLB") stock represent restricted investments and are carried at cost on the consolidated balance sheets.

Fair values for loans and time deposits were estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers and similar deposits would be issued to customers for the same remaining maturities. Fair values estimated in this manner do not fully incorporate an exit price approach to fair value, as defined in FASB ASC Topic 820.

Loans held for sale includes $28.9 million of student loans as of June 30, 2017, carried at the lower of cost or fair value. In June 2017, the Corporation determined to sell this portfolio and began discussions with a potential purchaser of this portfolio, and reclassified these loans from consumer loans to loans held for sale. Fair value is based on the price per the preliminary offer from the potential purchaser. As such, a loss of $440,000 was recorded in the second quarter of 2017 and included in "other expense" on the consolidated statements of income.

The fair values of FHLB advances and long-term debt were estimated by discounting the remaining contractual cash flows using a rate at which the Corporation could issue debt with similar remaining maturities as of the balance sheet date. These borrowings would be categorized in Level 2 liabilities under FASB ASC Topic 820.

NOTE 12 – Long-Term Debt

In March 2017, the Corporation issued $125.0 million of senior notes, with a fixed rate of 3.60% and an effective rate of 3.95%, that mature in 2022. A portion of the net proceeds from this issuance were used to repay $100.0 million of 10-year subordinated notes, which matured on May 1, 2017 and carried a fixed rate of 5.75% and an effective rate of 5.96%.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations ("Management’s Discussion") relates to Fulton Financial Corporation (the "Corporation"), a financial holding company registered under the Bank Holding Company Act of 1956 and incorporated under the laws of the Commonwealth of Pennsylvania in 1982, and its wholly owned subsidiaries. Management’s Discussion should be read in conjunction with the consolidated financial statements and notes presented in this report.

FORWARD-LOOKING STATEMENTS

The Corporation has made, and may continue to make, certain forward-looking statements with respect to its financial condition and results of operations. Do not unduly rely on forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "will," "could," "estimates," "predicts," "potential," "continue," "anticipates," "believes," "plans," "expects," "future," "intends" and similar expressions which are intended to identify forward-looking statements. ~~Statements relating to the "outlook" or "2016 outlook" contained herein are forward-looking statements.~~

These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, some of which are beyond the Corporation's control and ability to predict, that could cause actual results to differ materially from those expressed in the forward-looking statements. The Corporation undertakes no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Many factors could affect future financial results including, without limitation:

the impact of adverse conditions in the economy and capital markets on the performance of the Corporation’s loan portfolio and demand for the Corporation’s products and services;

increases in non-performing assets, which may require the Corporation to increase the allowance for credit losses, charge off loans and incur elevated collection and carrying costs related to such non-performing assets;

investment securities gains and losses, including other-than-temporary declines in the value of securities which may result in charges to earnings;

the effects of market interest rates, and the relative balances of interest rate-sensitive assets to interest rate-sensitive liabilities, on net interest margin and net interest income;

the effects of changes in interest rates on demand for the Corporation’s products and services;

the effects of changes in interest rates or disruptions in liquidity markets on the Corporation’s sources of funding;

the Corporation’s ability to manage liquidity, both at the holding company level and at its bank subsidiaries;

the impact of increased regulatory scrutiny of the banking industry;

the effects of the increasing amounts of time and expense associated with regulatory compliance and risk management;

the potential for negative consequences from regulatory violations and investigations, including potential supervisory actions and the assessment of fines and penalties;

the additional time, expense and investment required to comply with, and the restrictions on potential growth and investment activities resulting from, the existing enforcement orders applicable to the Corporation and its bank subsidiaries by federal and state bank regulatory agencies requiring improvement in compliance functions and other remedial actions, or any future enforcement orders;

the Corporation’s ability to manage the uncertainty associated with the delay in implementing many of the regulations mandated by the Dodd-Frank Act;

the effects of, and uncertainty surrounding, potential changes in legislation, regulation and government policy as a result of the recent change in federal administration;

the effects of negative publicity on the Corporation’s reputation;

the effects of adverse outcomes in litigation and governmental or administrative proceedings;

the potential to incur losses in connection with repurchase and indemnification payments related to sold loans;

the Corporation’s ability to successfully transform its business model;

the Corporation’s ability to achieve its growth plans;

the effects of competition on deposit rates and growth, loan rates and growth and net interest margin;

the Corporation’s ability to manage the level of non-interest expenses, including salaries and employee benefits expenses, operating risk losses and goodwill impairment;

the effects of changes in accounting policies, standards, and interpretations on the Corporation's consolidated balance sheets and consolidated statements of income;

the impact of operational risks, including the risk of human error, inadequate or failed internal processes and systems, computer and telecommunications systems failures, faulty or incomplete data and an inadequate risk management framework;

the impact of failures of third parties upon which the Corporation relies to perform in accordance with contractual arrangements;

the failure or circumvention of the Corporation’s system of internal controls;

the loss of, or failure to safeguard, confidential or proprietary information;

the Corporation’s failure to identify and to address cyber-security risks;

the Corporation’s ability to keep pace with technological changes;

the Corporation’s ability to attract and retain talented personnel;

capital and liquidity strategies, including the Corporation’s ability to comply with applicable capital and liquidity requirements, and the Corporation’s ability to generate capital internally or raise capital on favorable terms;

the Corporation’s reliance on its subsidiaries for substantially all of its revenues and its ability to pay dividends or other distributions; and

the effects of any downgrade in the Corporation’s credit ratings on its borrowing costs or access to capital ~~markets; and~~

~~the effects of changes in accounting policies, standards, and interpretations on the Corporation’s financial condition and results of operations.~~markets.

RESULTS OF OPERATIONS

Overview ~~and Outlook~~

Fulton Financial Corporation is a financial holding company comprised of six wholly owned ~~banking~~bank subsidiaries which provide a full range of retail and commercial financial services through locations in Pennsylvania, Delaware, Maryland, New Jersey and ~~Virginia.~~Virginia and eight wholly owned non-bank subsidiaries. The Corporation generates the majority of its revenue through net interest income, or the difference between interest earned on loans, investments and other interest-earning ~~assets.~~assets, and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is net interest income (fully taxable-equivalent, or "FTE") as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments, or properties. Offsetting these revenue sources are provisions for credit losses on loans, non-interest expenses and income taxes.

The following table presents a summary of the Corporation’s earnings and selected performance ratios:


	As of or for the Three months ended June 30						As of or for the Six months ended June 30							As of or for the Three months ended June 30						As of or for the Six months ended June 30
	2016			2015			2016				2015			2017			2016			2017			2016
Net income (in thousands)	$	39,750		$	36,680		$	78,007			$	76,716		$	45,467		$	39,750		$	88,847		$	78,007
Diluted net income per share	$	0.23		$	0.21		$	0.45			$	0.43		$	0.26		$	0.23		$	0.51		$	0.45
Return on average assets	0.88		%	0.86		%	0.87		%		0.90		%	0.94		%	0.88		%	0.93		%	0.87		%
Return on average equity	7.65		%	7.24		%	7.56		%		7.64		%	8.36		%	7.65		%	8.29		%	7.56		%
Return on average tangible equity ⁽¹⁾	10.26		%	9.83		%	10.17		%	0.1039	10.39		%	11.06		%	10.26		%	11.00		%	10.17		%
Net interest margin ⁽²⁾	3.20		%	3.20		%	3.22		%		3.24		%	3.29		%	3.20		%	3.28		%	3.22		%
Efficiency ratio ⁽¹⁾	67.59		%	68.94		%	67.96		%		69.55		%	65.33		%	67.59		%	64.80		%	67.96		%
Non-performing assets to total assets	0.76		%	0.93		%	0.76		%		0.93		%	0.75		%	0.76		%	0.75		%	0.76		%
Annualized net charge-offs to average loans	0.10		%	0.38		%	0.15		%		0.23		%	0.11		%	0.10		%	0.10		%	0.15		%

(1)

Ratio represents a financial measure derived by methods other than U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). See reconciliation of this ~~non-GAAP~~non-U.S. GAAP financial measure to the most comparable U.S. GAAP measure under the heading, "Supplemental Reporting of ~~Non-GAAP~~Non-U.S.GAAP Based Financial Measures" at the end of this ~~"Overview and Outlook"~~"Overview" section.


(2)	Presented on an FTE basis, using a 35% federal tax rate and statutory interest expense disallowances. See also the “Net Interest Income” section of Management’s Discussion.

Net income for the three and six months ended June 30, ~~2016~~2017 increased ~~$3.1~~$5.7 million, or ~~8.4%~~14.4%, and ~~$1.3~~$10.8 million, or ~~1.7%~~13.9%, respectively, compared to the same periods in ~~2015,~~2016.The increases were mainly due to ~~increases in~~higher net interest income and non-interest income, ~~excluding investment securities gains,~~ partially offset by increases in the provision for credit losses ~~decreases in investment securities gains~~ and ~~increases in~~ non-interest ~~expense.~~

expenses.

The following is a summary of financial highlights for the three and six months ended June 30, ~~2016:~~2017:

FTE Net Interest Income and Net Interest Margin - For the three and six months ended June 30, ~~2016,~~2017, FTE net interest income increased ~~$6.4~~$13.5 million, or ~~5.1%~~10.1%, and ~~$12.4~~$22.7 million, or ~~4.8%~~8.5%, ~~respectively,~~ in comparison to the same periods in ~~2015.~~2016. These increases were

driven by growth in interest-earning assets asand 9 and 6 basis points increases in the net interest margin ~~was generally stable.~~during the three and six months ended June 30, 2017, respectively.

Average interest-earning assets increased ~~$848.6 million,~~$1.2 billion, or ~~5.3%~~7.0%, in the second quarter of ~~2016~~2017 in comparison to the same period in ~~2015,~~2016, mainly due to a ~~$773.4 million,~~$1.2 billion, or ~~5.9%~~8.3%, increase in average loans and a ~~$164.3~~$48.7 million, or ~~7.2%~~2.0%, increase in average investment securities, partially offset by a ~~$82.2~~$32.5 million, or ~~18.7%~~9.1%, decrease in average other interest-earning assets. Average interest-bearing liabilities increased ~~$501.9~~$747.9 million, or ~~4.5%~~6.4%, primarily due to a ~~$539.7~~$413.1 million, or ~~5.5%~~4.0%, increase in average interest-bearing deposits, ~~and~~ a ~~$23.7~~$229.4 million, or ~~6.2%~~56.8%, increase in average short-term borrowings ~~partially offset by~~and a ~~$61.5~~$105.3 million, or ~~6.0%~~10.9%, ~~decrease~~increase in average ~~FHLB~~Federal Home Loan Bank ("FHLB") advances and ~~average~~ long-term debt. Additional funding to support the increase in average interest-earning assets was provided by a ~~$342.8~~$309.9 million, or ~~9.2%~~7.6%, increase in average noninterest-bearing deposits.

During the first ~~half~~six months of ~~2016,~~2017, average interest-earning assets increased ~~$836.7 million,~~$1.1 billion, or ~~5.3%~~6.7%, ~~compared~~in comparison to the same period in ~~2015,~~2016, mainly due to a ~~$765.4 million,~~$1.1 billion, or ~~5.8%~~7.8%, increase in average loans and a ~~$175.9~~$77.6 million, or ~~7.7%~~3.2%, increase in average investment securities, partially offset by a ~~$98.7~~$39.3 million, or ~~21.6%~~11.0%, decrease in average other interest-earning assets. Average interest-bearing liabilities increased ~~$498.2~~$696.6 million, or ~~4.5%~~6.0%, ~~the net result of $531.9~~primarily due to a $379.8 million, or ~~5.5%~~3.7%, increase in average interest-bearing deposits, ~~and~~ a ~~$79.7~~$248.0 million, or ~~23.1%~~58.4%, increase in average short-term borrowings ~~partially offset by $113.4~~and a $68.8 million, or ~~10.5%~~7.2%, ~~decrease~~increase in average FHLB advances and ~~average~~ long-term debt. Additional funding to support the increase in average interest-earning assets was provided by a ~~$324.1~~$322.1 million, or ~~8.8%~~8.0%, increase in average noninterest-bearing deposits.

Long-term Debt- In March 2017, the Corporation issued $125.0 million of senior notes, with a fixed rate of 3.60% and an effective rate of 3.95%, that mature in 2022. A portion of the net proceeds from this issuance were used on May 1, 2017 to repay $100.0 million of 10-year subordinated notes, which matured and carried a fixed rate of 5.75% and an effective rate of 5.96%.

Loan Growth - The $1.2 billion and $1.1 billion growth in average loans for the second quarter and the first six months of 2017, respectively, in comparison to the same periods in 2016, was primarily recognized in the commercial mortgage, residential mortgage and commercial loan portfolios. The growth occurred across all geographic markets, but was predominately attributable to the Pennsylvania and Maryland markets.

Asset Quality - The Corporation recorded a ~~$2.5~~$6.7 million provision for credit losses for the three months ended June 30, ~~2016,~~2017, compared to a ~~$2.2~~$2.5 million provision for the same period in ~~2015.~~2016. For the six months ended June 30, ~~2016,~~2017, the Corporation recorded ~~a $4.0~~an $11.5 million provision for credit losses compared to a ~~$1.5~~$4.0 million ~~negative~~ provision infor the same period ~~of 2015.~~in 2016. The ~~negative~~increases in provision for credit losses in ~~2015 was driven by an improvement~~2017 were largely due to growth in ~~net charge-off levels, particularly among pooled impaired loans across all~~the loan portfolio, ~~segments.~~with generally stable credit metrics.

Annualized net charge-offs to average loans outstanding were 0.11% for the second quarter of 2017, compared to 0.10% for the second quarter of ~~2016, compared to 0.38% for~~2016. For the ~~second quarter~~first six months of ~~2015. Annualized~~2017, annualized net charge-offs to average loans outstanding ~~were~~improved to 0.10%, compared to 0.15% for the ~~first half~~same period of ~~2016, compared to 0.23% for the first half of 2015.~~ 2016.

Non-performing assets ~~decreased $22.6~~increased $7.5 million, or ~~13.9%~~5.4%, as of June 30, ~~2016~~2017 compared to June 30, ~~2015 and were 0.76% and 0.93%~~2016. However, as a percent of total assets, non-performing assets remained fairly consistent at 0.75% and 0.76%, respectively, as of those dates. The total delinquency rate improved to 1.20% as of June 30, ~~2016 and June 30, 2015, respectively. The total delinquency rate was~~2017, from 1.30% as of June 30, ~~2016, compared to 1.60% as of June 30, 2015.~~2016.

Non-interest Income - For the three and six months ended June 30, ~~2016,~~2017, non-interest income, excluding investment securities gains, increased ~~$2.0~~$4.9 million, or ~~4.5%~~10.6%, and ~~$3.6~~$8.3 million, or ~~4.2%~~9.3%, ~~respectively,~~ in comparison to the same periods in ~~2015.~~2016, respectively. The increases ~~in both periods~~ were primarily ~~the result of increases in~~driven by higher commercial loan interest rate swap fees, investment management and ~~higher service charges on deposit accounts, partially offset by decreases in~~trust services income and mortgage banking income. Mortgage servicing income ~~resulting primarily from~~increased $3.4 million during the first half of 2017 compared to the same period in 2016 as a result of a ~~$1.7~~$1.3 million ~~impairment charge on MSRs~~reduction to the mortgage servicing rights ("MSRs") valuation allowance during the second quarter of ~~2016. See Note 6, "Mortgage Servicing Rights,"~~2017, which was originally established in June 2016 through an impairment charge of $1.7 million. Excluding the ~~Notes to Consolidated Financial Statements for additional details regarding~~impact of the ~~impairment charge.~~MSR valuation allowance adjustments, mortgage servicing income increased $346,000, or 13.6%.

Investment securities gains for the three and six months ended June 30, ~~2016~~2017 were ~~$76,000~~$1.4 million and ~~$1.0~~$2.5 million, respectively, as compared to ~~$2.4 million~~$76,000 and ~~$6.6~~$1.0 million for the same periods in ~~2015.~~2016, respectively.

Non-interest Expense - For the three and six months ended June 30, ~~2016,~~2017, non-interest expense increased ~~$3.3~~$11.1 million, or ~~2.8%~~9.1%, and ~~$5.2~~$12.9 million, or ~~2.2%~~5.3%, respectively, in comparison to the same periods ~~in 2015.~~of 2016. The ~~primary drivers of the net~~ increases were primarily driven by higher salaries and employee benefits, amortization of certain tax credit investments, other outside services and software expenses, partially offset by decreases in ~~other~~data processing expense ~~categories, most notably other outside services.~~

~~2016 Outlook~~

~~Originally the Corporation provided its outlook for 2016 results in its Annual Report on Form 10-K for the year ended December 31, 2015. The following outlook for 2016 remains unchanged:~~

~~annual mid- to high- single digit growth rate in average loans~~ and ~~deposits;~~

~~provision for~~FDIC insurance expense. Amortization of certain new tax credit ~~losses driven primarily by loan growth;~~

~~annual mid- to high- single digit growth rate in non-interest income, excluding the impact of securities gains;~~

~~annual low- to mid- single digit growth rate~~investments was classified in non-interest expense ~~(excluding, for comparison purposes, the~~rather than income tax expense in 2017. There was no impact on net income as a result of the ~~loss on redemption~~different classifications of ~~Trust Preferred Securities (TruPS) incurred~~the amortization for these new tax credit investments as the increases in ~~the third quarter of 2015); and~~

~~focus on utilizing capital to support growth and provide appropriate returns to shareholders.~~non-interest expense were offset by decreases in income tax expense.

The Corporation's original outlook expected net interest margin to be stable on an annual basis with modest quarterly volatility of plus or minus 0 to 3 basis points. This outlook has been updated as follows:

~~absent further market interest rate increases, low-single digit quarterly compression in net interest margin.~~

Supplemental Reporting of ~~Non-GAAP~~Non-U.S. GAAP Based Financial Measures

This Quarterly Report on Form 10-Q contains supplemental financial information, as detailed below, which has been derived by methods other than U.S. GAAP. The Corporation has presented these ~~non-GAAP~~non-U.S. GAAP financial measures because it believes that these measures provide useful and comparative information to assess trends in the Corporation's results of operations. Presentation of these ~~non-GAAP~~non-U.S. GAAP financial measures is consistent with how the Corporation evaluates its performance internally, and these ~~non-GAAP~~non-U.S. GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Corporation's industry. Management believes that these ~~non-GAAP~~non-U.S. GAAP financial measures, in addition to U.S. GAAP measures, are also useful to investors to evaluate the Corporation's results. Investors should recognize that the Corporation's presentation of these ~~non-GAAP~~non-U.S. GAAP financial measures might not be comparable to similarly-titled measures of other companies. These ~~non-GAAP~~non-U.S. GAAP financial measures should not be considered a substitute for U.S. GAAP basis measures, and the Corporation strongly encourages a review of its consolidated financial statements in their entirety. Following are reconciliations of these ~~non-GAAP~~non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP measure as of and for the ~~quarter~~three and ~~year to date~~six months ended June 30:


	As of or for the Three months ended June 30						As of or for the Six months ended June 30						As of or for the Three months ended June 30						As of or for the Six months ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016
	(in thousands)												(dollars in thousands)
Return on average tangible equity
Net income	$	39,750		$	36,680		$	78,007		$	76,716
Plus: Intangible amortization, net of tax	—			69			—			153
Numerator	$	39,750		$	36,749		$	78,007		$	76,869
Net income - numerator													$	45,467		$	39,750		$	88,847		$	78,007

Average common shareholders' equity	$	2,089,915		$	2,031,788		$	2,074,357		$	2,023,919		$	2,181,189		$	2,089,915		$	2,160,980		$	2,074,357
Less: Average goodwill and intangible assets	(531,556		)	(531,618		)	(561,556		)	(531,675		)	(531,556		)	(531,556		)	(531,556		)	(531,556		)
Average tangible shareholders' equity (denominator)	$	1,558,359		$	1,500,170		$	1,512,801		$	1,492,244
Average tangible shareholders' equity - denominator													$	1,649,633		$	1,558,359		$	1,629,424		$	1,542,801

Return on average tangible equity, annualized	10.26		%	9.83		%	10.17		%	10.39		%	11.06		%	10.26		%	11.00		%	10.17		%

Efficiency ratio
Non-interest expense	$	121,637		$	118,354		$	242,050		$	236,832		$	132,695		$	121,637		$	254,970		$	242,050
Less: Intangible amortization	—			(106		)	—			(236		)
Less: Amortization of tax credit investments ⁽¹⁾													(3,151		)	—			(4,149		)	—
Numerator	$	121,637		$	118,248		$	242,050		$	236,596		$	129,544		$	121,637		$	250,821		$	242,050

Net interest income (fully taxable equivalent) ⁽¹⁾	$	133,890		$	127,445		$	267,916		$	255,531
Net interest income (fully taxable equivalent) ⁽²⁾													$	147,349		$	133,890		$	290,593		$	267,916
Plus: Total Non-interest income	46,137			46,489			89,274			91,226			52,371			46,137			99,044			89,274
Less: Investment securities gains, net	(76		)	(2,415		)	(1,023		)	(6,560		)	(1,436		)	(76		)	(2,542		)	(1,023		)
Denominator	$	179,951		$	171,519		$	356,167		$	340,197		$	198,284		$	179,951		$	387,095		$	356,167

Efficiency ratio	67.59		%	68.94		%	67.96		%	69.55		%	65.3		%	67.6		%	64.8		%	68.0		%

(1)

Amortization expense for tax credit investments that are considered to be qualified affordable housing investments under applicable accounting guidance is included in income taxes. Amortization expense for other tax credit investments that are not considered to be affordable housing investments is included in non-interest expense. If amortization expense for all tax credit investments were recorded in income taxes, the effective tax rate for the quarter ended June 30, 2017 would have been 21.2% vs 16.6%.


(2)	Presented on an FTE basis, using a 35% federal tax rate and statutory interest expense disallowances. See also the “Net Interest Income” section of Management’s Discussion.

Quarter Ended June 30, ~~2016~~2017 compared to the Quarter Ended June 30, ~~2015~~2016

Net Interest Income

FTE net interest income increased ~~$6.4~~$13.5 million, to $147.3 million, in the second quarter of 2017, from $133.9 million in the second quarter of ~~2016, from $127.4 million~~2016. The increase was due to a $1.2 billion, or 7.0%, increase in interest-earning assets and a 9 basis points, or 2.8%, increase in net interest margin, to 3.29%, for the second quarter of ~~2015. This increase was due~~2017 compared to ~~an $848.6 million, or 5.3%, increase in interest-earning assets. The net interest margin of~~ 3.20% for the second quarter of ~~2016 was flat compared to the second quarter of 2015.~~2016. The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a 35% federal tax rate and statutory interest expense disallowances. The discussion following this table is based on these FTE amounts.


	Three months ended June 30																Three months ended June 30
	2016								2015								2017								2016
	Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate
ASSETS	(dollars in thousands)																(dollars in thousands)
Interest-earning assets:
Loans, net of unearned income ⁽²⁾	$	13,966,024		$	138,317		3.98	%	$	13,192,600		$	133,339		4.05	%	$	15,127,205		$	152,649		4.05	%	$	13,966,024		$	138,317		3.98	%
Taxable investment securities ⁽³⁾	2,127,780			11,159			2.10		2,048,558			10,944			2.14		2,090,120			11,473			2.12		2,127,780			11,159			2.10
Tax-exempt investment securities⁽³⁾	314,851			3,570			4.54		216,355			2,894			5.35		404,680			4,394			4.34		314,851			3,570			4.54
Equity securities ⁽³⁾	14,220			185			5.23		27,618			379			5.50		10,759			148			5.52		14,220			185			5.23
Total investment securities	2,456,851			14,914			2.43		2,292,531			14,217			2.48		2,505,559			16,015			2.56		2,456,851			14,914			2.43
Loans held for sale	19,449			188			3.87		26,335			265			4.03		19,750			201			4.07		19,449			188			3.87
Other interest-earning assets	357,211			864			0.96		439,425			933			0.85		324,719			802			0.99		357,211			864			0.96
Total interest-earning assets	16,799,535			154,283			3.69	%	15,950,891			148,754			3.74	%	17,977,233			169,667			3.78	%	16,799,535			154,283			3.69	%
Noninterest-earning assets:
Cash and due from banks	100,860								104,723								103,078								100,860
Premises and equipment	227,517								226,569								218,075								227,517
Other assets	1,189,226								1,094,071								1,174,745								1,189,226
Less: Allowance for loan losses	(164,573		)						(176,085		)						(172,156		)						(164,573		)
Total Assets	$	18,152,565							$	17,200,169							$	19,300,975							$	18,152,565
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Demand deposits	$	3,454,031		$	1,527		0.18	%	$	3,152,697		$	987		0.13	%	$	3,690,059		$	2,780		0.30	%	$	3,454,031		$	1,527		0.18	%
Savings deposits	3,989,988			1,886			0.19		3,568,579			1,247			0.14
Savings and money market deposits																	4,315,495			2,710			0.25		3,989,988			1,886			0.19
Time deposits	2,844,434			7,474			1.06		3,027,520			7,819			1.04		2,696,033			7,394			1.10		2,844,434			7,474			1.06
Total interest-bearing deposits	10,288,453			10,887			0.43		9,748,796			10,053			0.41		10,701,587			12,884			0.48		10,288,453			10,887			0.43
Short-term borrowings	403,669			217			0.21		379,988			103			0.11		633,102			974			0.61		403,669			217			0.21
Federal Home Loan Bank advances and long-term debt	965,526			9,289			3.86		1,026,987			11,153			4.35
FHLB advances and other long-term debt																	1,070,845			8,460			3.16		965,526			9,289			3.86
Total interest-bearing liabilities	11,657,648			20,393			0.70	%	11,155,771			21,309			0.77	%	12,405,534			22,318			0.72	%	11,657,648			20,393			0.70	%
Noninterest-bearing liabilities:
Demand deposits	4,077,642								3,734,880								4,387,517								4,077,642
Other	327,360								277,730								326,735								327,360
Total Liabilities	16,062,650								15,168,381								17,119,786								16,062,650
Shareholders’ equity	2,089,915								2,031,788								2,181,189								2,089,915
Total Liabilities and Shareholders’ Equity	$	18,152,565							$	17,200,169							$	19,300,975							$	18,152,565
Net interest income/net interest margin (FTE)				133,890			3.20	%				127,445			3.20	%				147,349			3.29	%				133,890			3.20	%
Tax equivalent adjustment				(4,974		)						(4,525		)						(5,786		)						(4,974		)
Net interest income				$	128,916							$	122,920							$	141,563							$	128,916


(1)	Includes dividends earned on equity securities.


(2)	Includes non-performing loans.


(3)	Balances include amortized historical cost for available for sale securities; the related unrealized holding gains (losses) are included in other assets.

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volume) and changes in rates for the three months ended June ~~30:~~30, 2017 in comparison to the three months ended June 30, 2016:


	2016 vs. 2015 Increase (Decrease) due to change in									2017 vs. 2016 Increase (Decrease) due to change in
	Volume			Rate			Net			Volume			Rate			Net
	(in thousands)									(in thousands)
Interest income on:
Loans, net of unearned income	$	7,400		$	(2,422	)	$	4,978		$	11,969		$	2,363		$	14,332
Taxable investment securities	420			(205		)	215			29			285			314
Tax-exempt investment securities	1,163			(487		)	676			978			(154		)	824
Equity securities	(176		)	(18		)	(194		)	(47		)	10			(37		)
Loans held for sale	(66		)	(11		)	(77		)	3			10			13
Other interest-earning assets	(183		)	114			(69		)	(78		)	16			(62		)
Total interest income	$	8,558		$	(3,029	)	$	5,529		$	12,854		$	2,530		$	15,384
Interest expense on:
Demand deposits	$	108		$	432		$	540		$	112		$	1,141		$	1,253
Savings deposits	159			480			639
Savings and money market deposits										165			659			824
Time deposits	(491		)	146			(345		)	(389		)	309			(80		)
Short-term borrowings	7			107			114			177			580			757
Federal Home Loan Bank advances and long-term debt	(647		)	(1,217		)	(1,864		)
FHLB advances and other long-term debt										949			(1,778		)	(829		)
Total interest expense	$	(864	)	$	(52	)	$	(916	)	$	1,014		$	911		$	1,925

Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of direct changes that are attributable to each component.

As summarized above, the increase in average interest-earning assets, primarily loans, since the second quarter of 2016 resulted in ~~an $8.6~~a $12.9 million increase in FTE interest income. ~~This was partially offset by~~The 9 basis points increase in the ~~impact of a 5 basis point, or 1.3%, decrease in yields~~yield on average interest-earning assets ~~which~~ resulted in a ~~$3.0~~$2.5 million ~~decrease~~increase in FTE interest income. The yield on the loan portfolio increased 7 basis points, or 1.8%, from the second quarter of 2016, the result of federal funds rate increases that occurred in December 2016 and March 2017, which primarily impacted variable rate loans and adjustable rate loans that repriced in the first half of 2017.

Average loans and average FTE yields, by type, are summarized in the following table:


	Three months ended June 30								Increase (Decrease) in					Three months ended June 30								Increase (Decrease) in
	2016				2015				Balance					2017				2016				Balance
	Balance		Yield		Balance		Yield		$			%		Balance		Yield		Balance		Yield		$			%
	(dollars in thousands)													(dollars in thousands)
Real estate – commercial mortgage	$	5,557,680	4.00	%	$	5,210,540	4.15	%	$	347,140		6.7	%	$	6,163,844	4.00	%	$	5,557,680	4.00	%	$	606,164		10.9	%
Commercial – industrial, financial and agricultural	4,080,524		3.81		3,836,397		3.79		244,127			6.4		4,221,025		4.00		4,080,524		3.81		140,501			3.4
Real estate – residential mortgage														1,707,929		3.77		1,399,851		3.78		308,078			22.0
Real estate – home equity	1,656,140		4.10		1,695,171		4.11		(39,031		)	(2.3	)	1,587,680		4.33		1,656,140		4.10		(68,460		)	(4.1	)
Real estate – residential mortgage	1,399,851		3.78		1,356,464		3.82		43,387			3.2
Real estate – construction	820,881		3.81		698,685		3.97		122,196			17.5		897,321		3.98		820,881		3.81		76,440			9.3
Consumer	272,293		5.37		265,354		5.48		6,939			2.6		300,966		5.03		272,293		5.37		28,673			10.5
Leasing, other and overdrafts	178,655		6.22		129,989		6.94		48,666			37.4		248,440		5.04		178,655		6.22		69,785			39.1
Total	$	13,966,024	3.98	%	$	13,192,600	4.05	%	$	773,424		5.9	%	$	15,127,205	4.05	%	$	13,966,024	3.98	%	$	1,161,181		8.3	%

Average loans increased ~~$773.4 million,~~$1.2 billion, or ~~5.9%~~8.3%, compared to the second quarter of ~~2015, the~~2016. The increase was mainly in commercial mortgage, commercial loans, construction loans and leasing, other and overdrafts. The average yield on loans decreased 7 basis points, or 1.7%, to 3.98% in 2016 from 4.05% in 2015. Thedriven largely by growth in the commercial mortgage and residential mortgage portfolios, as well as the commercial loan ~~portfolio~~portfolio. The $606.2 million, or 10.9%, increase in commercial mortgages occurred in both owner-occupied and investment property typesand was realized in all geographic markets, but predominately in the Pennsylvania, Maryland and Delaware markets. The $308.1 million, or 22.0%, increase in residential mortgages was also experienced across all geographic markets, with the most significant increases occurring in the Maryland, Virginia and Pennsylvania markets. This growth was primarily the result of a strategic decision to retain certain

mortgage loans. The $140.5 million, or 3.4%, increase in commercial loans was spread across a broad range of industries ~~largely~~and concentrated in the Pennsylvania ~~markets and, to a lesser extent, the New Jersey~~ market. The decrease in average yields on loans was attributable to repayments of higher-yielding loans, continued refinancing activity at lower rates, and new loan production at rates lower than the overall portfolio yield.

Average total interest-bearing liabilities increased ~~$501.9~~$747.9 million, or ~~4.5%~~6.4%, compared to the second quarter of ~~2015.~~2016. Interest expense ~~decreased $916,000,~~increased $1.9 million, or ~~4.3%~~9.4%, to ~~$20.4~~$22.3 million in the second quarter of ~~2016 primarily as a result of a change in the mix from higher cost time deposits and long-term debt to lower-cost deposits, as well as the refinancing of certain long-term debt.~~2017. Average deposits and average interest rates, by type, are summarized in the following table:


	Three months ended June 30								Increase (Decrease) in Balance					Three months ended June 30								Increase (Decrease) in Balance
	2016				2015				Increase (Decrease) in Balance					2017				2016				Increase (Decrease) in Balance
	Balance		Rate		Balance		Rate		$			%		Balance		Rate		Balance		Rate		$			%
	(dollars in thousands)													(dollars in thousands)
Noninterest-bearing demand	$	4,077,642	—	%	$	3,734,880	—	%	$	342,762		9.2	%	$	4,387,517	—	%	$	4,077,642	—	%	$	309,875		7.6	%
Interest-bearing demand	3,454,031		0.18		3,152,697		0.13		301,334			9.6		3,690,059		0.30		3,454,031		0.18		236,028			6.8
Savings	3,989,988		0.19		3,568,579		0.14		421,409			11.8
Savings and money market accounts														4,315,495		0.25		3,989,988		0.19		325,507			8.2
Total demand and savings	11,521,661		0.12		10,456,156		0.09		1,065,505			10.2		12,393,071		0.18		11,521,661		0.12		871,410			7.6
Time deposits	2,844,434		1.06		3,027,520		1.04		(183,086		)	(6.0	)	2,696,033		1.10		2,844,434		1.06		(148,401		)	(5.2	)
Total deposits	$	14,366,095	0.30	%	$	13,483,676	0.30	%	$	882,419		6.5	%	$	15,089,104	0.34	%	$	14,366,095	0.30	%	$	723,009		5.0	%

The ~~$1.1 billion,~~$871.4 million, or ~~10.2%~~7.6%, increase in total demand and savings accounts was primarily due to a ~~$505.3~~$487.4 million, or ~~10.2%~~9.0%, increase in personal account balances, a ~~$375.5~~$308.3 million, or ~~10.2%~~7.4%, increase in business account balances and a ~~$189.2~~$65.7 million, or ~~10.6%~~3.5%, increase in municipal account balances. The average cost of ~~both demand and savings deposits and time~~total deposits increased ~~however, due~~4 basis points to ~~a shift~~0.34% in the second quarter of 2017 compared, to ~~lower-cost demand and savings deposits, the total cost of interest-bearing deposits remained unchanged at~~ 0.30% in the second quarter of ~~2016 compared to the second quarter of 2015.~~2016.

Average borrowings and interest rates, by type, are summarized in the following table:


	Three months ended June 30								Increase (Decrease)					Three months ended June 30								Increase
	2016				2015				in Balance					2017				2016				in Balance
	Balance		Rate		Balance		Rate		$			%		Balance		Rate		Balance		Rate		$		%
	(dollars in thousands)													(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements	$	180,595	0.11	%	$	179,804	0.10	%	$	791		0.4	%
Customer short-term promissory notes	77,535		0.04		80,073		—		(2,538		)	(3.2	)
Total short-term customer funding	258,130		0.09		259,877		0.07		(1,747		)	(0.7	)
Customer repurchase agreements and short-term promissory notes														$	277,211	0.09	%	$	258,130	0.09	%	$	19,081	7.4	%
Federal funds purchased	138,012		0.43		108,078		0.17		29,934			27.7		242,375		1.03		138,012		0.43		104,363		75.6
Short-term FHLB advances ⁽¹⁾	7,527		0.45		12,033		0.34		(4,506		)	(37.4	)	113,516		0.99		7,527		0.45		105,989		N/M
Total short-term borrowings	403,669		0.21		379,988		0.11		23,681			6.2		633,102		0.61		403,669		0.21		229,433		56.8
Long-term debt:
FHLB advances	603,700		3.17		627,939		3.51		(24,239		)	(3.9	)	652,192		2.27		603,700		3.17		48,492		8.0
Other long-term debt	361,826		5.01		399,048		5.67		(37,222		)	(9.3	)	418,653		4.56		361,826		5.01		56,827		15.7
Total long-term debt	965,526		3.86		1,026,987		4.35		(61,461		)	(6.0	)	1,070,845		3.16		965,526		3.86		105,319		10.9
Total borrowings	$	1,369,195	2.78	%	$	1,406,975	3.20	%	$	(37,780	)	(2.7	)%	$	1,703,947	2.22	%	$	1,369,195	2.78	%	$	334,752	24.4	%

N/M - Not meaningful

(1) Represents FHLB advances with an original maturity term of less than one year.

~~Total~~Average total short-term borrowings increased ~~$23.7~~$229.4 million, or ~~6.2%~~56.8%, as a result of ~~increases~~average loan growth out-pacing the increase in ~~federal funds purchased.~~ average deposits.

Average long-term debt ~~decreased $61.5~~increased $105.3 million, or ~~6.0%~~10.9%, ~~partially~~ due mainly to ~~FHLB advance maturities. In addition, in June 2015,~~ the ~~Corporation issued $150~~$125 million of ~~subordinated debt at an effective rate~~senior notes issued in March 2017, partially offset by the repayment of ~~4.69%. The proceeds of this issuance were used to redeem $150~~$100.0 million of ~~trust preferred securities, with an effective rate of 6.52%, in July 2015.~~ 10-year subordinated notes, which matured on May 1, 2017.The ~~net effect of these transactions was a $37.2 million decrease in average balances and a 0.66%~~70 basis point, or 18.1%, decrease in the average rate on ~~other~~ long-term ~~debt.~~

~~In the third quarter~~debt was primarily a result of ~~2015, the Corporation executed two transactions to restructure its long-term FHLB advances. First,~~ $200 million of FHLB advances ~~with a weighted average rate of 4.45% and a maturity date in the first quarter of 2017,~~that were refinanced ~~with new advances maturing from September 2019 to~~in December ~~2020, at a weighted average rate~~ of ~~2.95%. This transaction~~2016, which reduced interest expense on a quarterly basis by approximately $750,000, beginning in the fourth quarter of 2015. Second, forward agreements were executed to refinance an additional $200 million of FHLB advances when the advances mature in December

~~2016. These forward agreements have maturity dates from March 2021 to December 2021 and the refinancing will reduce~~ the weighted average rate on these advances from 4.03% to 2.40% ~~and decrease interest expense on a quarterly basis by approximately $800,000, beginning in the first quarter of 2017.~~.

Provision for Credit Losses

The provision for credit losses was ~~$2.5~~$6.7 million for the second quarter of ~~2016,~~2017, an increase of ~~$311,000~~$4.2 million from the second quarter of ~~2015.~~2016, driven mainly by loan growth and the impact of normal changes in the risk characteristics of the loan portfolio.

The provision for credit losses is recognized as an expense in the consolidated statements of income and is the amount necessary to adjust the allowance for credit losses to its appropriate balance, as determined through the Corporation's allowance methodology. The Corporation determines the appropriate level of the allowance for credit losses based on many quantitative and qualitative factors, including, but not limited to: the size and composition of the loan portfolio, changes in risk ratings, changes in collateral values, delinquency levels, historical losses and economic conditions. See the "Financial Condition" section of Management's Discussion under the heading "Provision ~~for Credit Losses~~ and Allowance for Credit Losses" for details related to the Corporation's ~~allowance~~provision and ~~provision~~allowance for credit losses.

Non-Interest Income

The following table presents the components of non-interest income:


	Three months ended June 30					Increase (Decrease)					Three months ended June 30					Increase (Decrease)
	2016			2015		$			%		2017		2016			$			%
	(dollars in thousands)										(dollars in thousands)
Other service charges and fees:
Merchant fees											$	4,531	$	4,252		$	279		6.6	%
Commercial loan interest rate swap fees											3,768		2,751			1,017			37.0
Debit card income											2,884		2,719			165			6.1
Letter of credit fees											1,109		1,162			(53		)	(4.6	)
Other											2,050		2,099			(49		)	(2.3	)
Total other service charges and fees											14,342		12,983			1,359			10.5
Service charges on deposit accounts:
Overdraft fees	$	5,384		$	5,353	$	31		0.6	%	5,648		5,384			264			4.9
Cash management fees	3,580			3,369		211			6.3		3,614		3,580			34			0.9
Other	3,932			3,915		17			0.4		3,652		3,932			(280		)	(7.1	)
Total service charges on deposit accounts	12,896			12,637		259			2.0		12,914		12,896			18			0.1
Investment management and trust services	11,247			11,011		236			2.1		12,132		11,247			885			7.9
Other service charges and fees:
Merchant fees	4,252			4,088		164			4.0
Commercial interest rate swap fees	2,751			1,026		1,725			168.1
Debit card income	2,719			2,626		93			3.5
Letter of credit fees	1,162			1,174		(12		)	(1.0	)
Other	2,099			2,074		25			1.2
Total other service charges and fees	12,983			10,988		1,995			18.2
Mortgage banking income:
Gains on sales of mortgage loans	4,440			4,428		12			0.3		3,488		4,440			(952		)	(21.4	)
Mortgage servicing income	(543		)	911		(1,454		)	(159.6	)	2,653		(543		)	3,196			N/M
Total mortgage banking income	3,897			5,339		(1,442		)	(27.0	)	6,141		3,897			2,244			57.6
Credit card income	2,596			2,474		122			4.9		2,666		2,596			70			2.7
Other income	2,442			1,625		817			50.3		2,740		2,442			298			12.2
Total, excluding investment securities gains, net	46,061			44,074		1,987			4.5		50,935		46,061			4,874			10.6
Investment securities gains, net	76			2,415		(2,339		)	(96.9	)	1,436		76			1,360			N/M
Total	$	46,137		$	46,489	$	(352	)	(0.8	)%	$	52,371	$	46,137		$	6,234		13.5	%

N/M - Not meaningful

Excluding investment securities gains, non-interest income increased ~~$2.0~~$4.9 million, or ~~4.5%~~10.6%. Other service charges and fees increased ~~$2.0~~$1.4 million, or ~~18.2%~~10.5%, ~~driven~~ mainly bydue to a ~~$1.7~~$1.0 million increase in commercial loan interest rate swap fees, asdriven by loan growth and a ~~larger portion of new loan originations were in loan types that were conducive to~~favorable interest rate swaps during the second quarter of 2016, and by a $164,000 increase in merchant fee income resulting from higher transaction volumes in the second quarter of 2016. Service charges on deposits increased $259,000, or 2.0%, primarily due to higher cash management fees.

environment.

Investment management and trust services income increased ~~$236,000,~~$885,000, or ~~2.1%~~7.9%, with growth in both trust commissions and brokerage income, due to overall market performance and an increase in ~~trust income partially offset by a decrease in brokerage revenue.~~assets under management.

Gains on sales of mortgage loans ~~were flat~~decreased $952,000, or 21.4%, compared to the same period in ~~2015,~~2016, as both ~~new loan commitments~~volumes and pricing spreads ~~were fairly stable.~~decreased. Mortgage servicing income ~~excluding a $1.7~~increased $3.2 million ~~impairment charge on MSRs recognized in the second quarter of 2016, increased $265,000, or 29.1%,~~ compared to the second quarter of ~~2015. See Note 6, "Mortgage Servicing Rights,"~~2016. The second quarter of 2017 included a $1.3 million reduction to the MSRs valuation allowance, which was originally established in June 2016 through an impairment charge of $1.7 million. Excluding the ~~Notes to Consolidated Financial Statements for additional details regarding~~impact of the ~~impairment charge.~~MSR valuation allowance adjustments, mortgage servicing income increased $196,000, or 16.9%.

Investment securities gains ~~decreased $2.3~~increased $1.4 million from the second quarter of ~~2015.~~2016. See Note 4, "Investment Securities," in the Notes to Consolidated Financial Statements for additional details.

Non-Interest Expense

The following table presents the components of non-interest expense:


	Three months ended June 30				Increase (Decrease)					Three months ended June 30				Increase (Decrease)
	2016		2015		$			%		2017		2016		$			%
	(dollars in thousands)									(dollars in thousands)
Salaries and employee benefits	$	70,029	$	65,067	$	4,962		7.6	%	$	74,496	$	70,029	$	4,467		6.4	%
Net occupancy expense	11,811		11,809		2			—		12,316		11,811		505			4.3
Other outside services	5,508		8,125		(2,617		)	(32.2	)	7,708		5,508		2,200			39.9
Data processing	5,476		4,894		582			11.9		4,619		5,476		(857		)	(15.7	)
Software	3,953		3,376		577			17.1		4,435		3,953		482			12.2
Amortization of tax credit investments										3,151		—		3,151			N/M
Equipment expense										3,034		2,872		162			5.6
Professional fees	3,353		2,731		622			22.8		2,931		3,353		(422		)	(12.6	)
FDIC insurance expense	2,960		2,885		75			2.6		2,366		2,960		(594		)	(20.1	)
Equipment expense	2,872		3,335		(463		)	(13.9	)
Supplies and postage	2,706		2,726		(20		)	(0.7	)
Marketing	1,916		2,235		(319		)	(14.3	)	2,234		1,916		318			16.6
Telecommunications	1,459		1,617		(158		)	(9.8	)
Operating risk loss	986		674		312			46.3
Other real estate owned and repossession expense	365		129		236			182.9
Intangible amortization	—		106		(106		)	(100.0	)
Other	8,243		8,645		(402		)	(4.7	)	15,405		13,759		1,646			12.0
Total	$	121,637	$	118,354	$	3,283		2.8	%	$	132,695	$	121,637	$	11,058		9.1	%

N/M - Not meaningful

The ~~$5.0 million, or 7.6%,~~ increase in salaries and employee benefits ~~primarily resulted from a $4.2 million, or 7.6%, increase in~~expense was driven entirely by salaries, ~~resulting from higher average salaries per full-time equivalent (FTE) employee,~~reflecting normal merit increases and an increase in ~~incentive compensation.~~staffing levels. Average full-time equivalent employees increased 2.1% to 3,564 in 2017, as compared to 3,492 in 2016.

~~Outside~~Other outside services ~~include fees paid to consultants and expenses for contracted or outsourced services. Consulting expenses can fluctuate based on the timing and need for such services. The $2.6~~increased $2.2 million, or ~~32.2%~~39.9%, ~~decrease in expense in comparison to the second quarter of 2015 was~~ largely due to pre-bank consolidation efforts and the timing of expenses ~~related~~for various engagements.

In 2017, amortization expense on certain new tax credit investments was classified in non-interest expense, rather than income tax expense, as further discussed under income taxes below.

Software expense increased $482,000, or 12.2%, largely due to ~~the Corporation’s BSA/AML compliance program remediation efforts and certain information~~investments in technology ~~and human resources initiatives.~~

~~The $1.2 million, or 14.0%, combined increase in data~~solutions. Data processing ~~and software resulted from higher transaction volumes and contractual increases related to core processing systems, and the amortization of capitalized software investments.~~

~~Equipment~~ expense decreased ~~$463,000,~~$857,000, or ~~13.9%~~15.7%, ~~primarily~~ due to ~~lower depreciation expense when compared to the second quarter of 2015 as certain assets became fully depreciated.~~benefits from renegotiated contracts. The ~~$622,000,~~$422,000, or ~~22.8%~~12.6%, ~~increase~~decrease in professional fees was driven by ~~higher costs~~lower legal expenses. FDIC insurance expense decreased $594,000, or 20.1%, as the assessment rates for ~~legal services resulting from~~banks decreased when the ~~timing~~Deposit Insurance Fund (DIF) exceeded 1.15% of the ~~need for such services.~~deposit base in 2016. Marketing expense ~~decreased $319,000,~~increased $318,000, or ~~14.3%~~16.6%, compared to the second quarter of ~~2015~~2016, due to an increase in the ~~timing~~number of ~~various~~ marketing promotions.

~~The $312,000, or 46.3%, increase in operating risk loss was~~Other expenses increased $1.6 million due mainly to a ~~$425,000 increase in losses associated with previously sold mortgages, partially offset by a $152,000 decrease in check card fraud losses.~~

~~Other real estate owned and repossession expense increased $236,000, or 182.9%, when compared to the second quarter of 2015. This increase was due to a $445,000 decrease in net gains~~$440,000 loss on the planned sale of the student loan portfolio and higher state taxes resulting from legislated increases in the Pennsylvania bank shares tax rate, and certain sales ~~of other real estate properties. This expense category can experience fluctuations from period to period based on the timing of sales of properties and payments of expenses, such as real estate taxes.~~tax liabilities.

Income Taxes

Income tax expense for the second quarter of ~~2016~~2017 was ~~$11.2~~$9.1 million, a ~~$1.0~~$2.1 million, or ~~8.4%~~18.7%, decrease from ~~$12.2~~$11.2 million for the second quarter of ~~2015.~~2016.

The Corporation’s effective tax rate was 16.6% in the second quarter of 2017, as compared to 21.9% in the second quarter of ~~2016, as compared to 24.9% in the second quarter of 2015.~~2016. Theeffective tax rate is generally lower than the federal statutory rate of 35% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities, ~~and~~ credits earned from community development investments in partnerships that generate tax credits under various federal ~~programs. The decrease~~programs and excess tax benefits realized on stock-based compensation. In 2017, amortization of certain new tax credit investments was included in non-interest expense, rather than as a component of income tax expense. If the amortization had been included as a component of income tax expense, the effective tax rate ~~from~~for the second quarter would have been 21.2%.In addition, in the second quarter of ~~2015 was driven by higher net low-income housing~~2017, the Corporation realized $1.6 million of excess tax ~~credits.~~benefits mainly related to vesting employee stock awards.

Six Months Ended June 30, ~~2016~~2017 compared to the Six Months Ended June 30, ~~2015~~2016

Net Interest Income

FTE net interest income increased ~~$12.4~~$22.7 million, ~~or 4.8%,~~ to ~~$267.9~~$290.6 million, in the first six months of ~~2016~~2017, from ~~$255.5~~$267.9 million in the same period of ~~2015. Net~~2016. The increase was due to a $1.1 billion, or 6.7%, increase in interest-earning assets and a 6 basis points, or 1.9%, increase in net interest margin, ~~decreased 2 basis points~~ to ~~3.22%~~3.28%, for the first six months of ~~2016 from 3.24%~~2017 compared to 3.22% for the ~~first six months~~same period of ~~2015. The increase in FTE net interest income was due to an $836.7 million, or 5.3%, increase in interest earning assets.~~2016. The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a 35% federal tax rate and statutory interest expense disallowances. The discussion following this table is based on these FTE amounts.


	Six months ended June 30																Six months ended June 30
	2016								2015								2017								2016
	Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate
ASSETS	(dollars in thousands)																(dollars in thousands)
Interest-earning assets:
Loans, net of unearned income ⁽²⁾	$	13,909,722		$	276,212		3.99	%	$	13,144,332		$	266,394		4.08	%	$	14,993,129		$	299,299		4.02	%	$	13,909,722		$	276,212		3.99	%
Taxable investment securities ⁽³⁾	2,154,187			23,162			2.15		2,027,170			22,226			2.19		2,117,733			23,387			2.16		2,154,187			23,162			2.15
Tax-exempt investment securities ⁽³⁾	287,123			6,708			4.67		222,684			6,106			5.48		404,271			8,777			4.34		287,123			6,708			4.67
Equity securities ⁽³⁾	14,303			403			5.67		29,901			829			5.58		11,247			324			5.81		14,303			403			5.67
Total investment securities	2,455,613			30,273			2.47		2,279,755			29,161			2.56		2,533,251			32,488			2.57		2,455,613			30,273			2.47
Loans held for sale	15,850			319			4.03		21,694			438			4.04		17,814			388			4.36		15,850			319			4.03
Other interest-earning assets	357,887			1,762			0.98		456,633			3,038			1.33		318,542			1,644			1.03		357,887			1,762			0.98
Total interest-earning assets	16,739,072			308,566			3.70	%	15,902,414			299,031			3.79	%	17,862,736			333,819			3.76	%	16,739,072			308,566			3.70	%
Noninterest-earning assets:
Cash and due from banks	99,654								104,996								109,766								99,654
Premises and equipment	226,901								226,480								217,974								226,901
Other assets	1,163,259								1,104,019								1,162,254								1,163,259
Less: Allowance for loan losses	(165,972		)						(179,985		)						(171,151		)						(165,972		)
Total Assets	$	18,062,914							$	17,157,924							$	19,181,579							$	18,062,914
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Demand deposits	$	3,446,193		$	3,021		0.18	%	$	3,144,358		$	1,970		0.13	%	$	3,670,603		$	5,019		0.28	%	$	3,446,193		$	3,021		0.18	%
Savings deposits	3,961,405			3,690			0.19		3,542,960			2,366			0.13		4,255,190			4,921			0.23		3,961,405			3,690			0.19
Time deposits	2,856,044			14,903			1.05		3,044,463			15,540			1.03		2,717,624			14,745			1.09		2,856,044			14,903			1.05
Total interest-bearing deposits	10,263,642			21,614			0.42		9,731,781			19,876			0.41		10,643,417			24,685			0.47		10,263,642			21,614			0.42
Short-term borrowings	424,535			485			0.23		344,797			180			0.10		672,580			1,829			0.54		424,535			485			0.23
FHLB advances and long-term debt	961,870			18,551			3.87		1,075,262			23,444			4.38
FHLB advances and other long-term debt																	1,030,667			16,712			3.25		961,870			18,551			3.87
Total interest-bearing liabilities	11,650,047			40,650			0.70	%	11,151,840			43,500			0.78	%	12,346,664			43,226			0.70	%	11,650,047			40,650			0.70	%
Noninterest-bearing liabilities:
Demand deposits	4,022,764								3,698,661								4,344,859								4,022,764
Other	315,746								283,504								329,076								315,746
Total Liabilities	15,988,557								15,134,005								17,020,599								15,988,557
Shareholders’ equity	2,074,357								2,023,919								2,160,980								2,074,357
Total Liabilities and Shareholders’ Equity	$	18,062,914							$	17,157,924							$	19,181,579							$	18,062,914
Net interest income/net interest margin (FTE)				267,916			3.22	%				255,531			3.24	%				290,593			3.28	%				267,916			3.22	%
Tax equivalent adjustment				(9,946		)						(9,030		)						(11,451		)						(9,946		)
Net interest income				$	257,970							$	246,501							$	279,142							$	257,970


(1)	Includes dividends earned on equity securities.


(2)	Includes non-performing loans.


(3)	Balances include amortized historical cost for available for sale securities; the related unrealized holding gains (losses) are included in other assets.

The following table summarizes the changes in FTE interest income and interest expense ~~for the first six months of 2016 as compared to the same period in 2015 due to~~resulting from changes in average balances (volume) and changes in ~~rates:~~rates for the six months ended June 30, 2017 in comparison to the same period of 2016:


	2016 vs. 2015 Increase (Decrease) due to change in									2017 vs. 2016 Increase (Decrease) due to change in
	Volume			Rate			Net			Volume			Rate			Net
	(in thousands)									(in thousands)
Interest income on:
Loans, net of unearned income	$	15,654		$	(5,836	)	$	9,818		$	21,020		$	2,067		$	23,087
Taxable investment securities	1,349			(413		)	936			54			171			225
Tax-exempt investment securities	1,586			(984		)	602			2,559			(490		)	2,069
Equity securities	(439		)	13			(426		)	(89		)	10			(79		)
Loans held for sale	(118		)	(1		)	(119		)	41			28			69
Other interest-earning assets	(575		)	(701		)	(1,276		)	(203		)	85			(118		)
Total interest income	$	17,457		$	(7,922	)	$	9,535		$	23,382		$	1,871		$	25,253
Interest expense on:
Demand deposits	$	194		$	857		$	1,051		$	223		$	1,775		$	1,998
Savings deposits	295			1,029			1,324			287			944			1,231
Time deposits	(953		)	316			(637		)	(758		)	600			(158		)
Short-term borrowings	46			259			305			398			946			1,344
FHLB advances and long-term debt	(2,326		)	(2,567		)	(4,893		)
FHLB advances and other long-term debt										1,245			(3,084		)	(1,839		)
Total interest expense	$	(2,744	)	$	(106	)	$	(2,850	)	$	1,395		$	1,181		$	2,576

As summarized above, the ~~increase in FTE interest income was the result of an~~ increase in average interest-earning assets, primarily loans, ~~which~~in comparison to the first six months of 2016 resulted in a ~~$17.5~~$23.4 million ~~increase in FTE interest income, partially offset by a $7.9 million decrease due to lower yields on average interest-earning assets.~~

~~Average loans, by type, are summarized in the following table:~~

Six months ended June 30 Increase (Decrease)
2016 2015 in Balance
Balance Yield Balance Yield $ %
(dollars in thousands)
Real estate – commercial mortgage $ 5,522,550
4.02 % $ 5,187,322
4.19 % $ 335,228
6.5 %
Commercial – industrial, financial and agricultural 4,087,897
3.80
3,803,475
3.83
284,422
7.5
Real estate – home equity 1,665,086
4.10
1,708,163
4.13
(43,077 ) (2.5 )
Real estate – residential mortgage 1,390,631
3.78
1,363,382
3.83
27,249
2.0
Real estate – construction 806,448
3.81
693,715
3.95
112,733
16.3
Consumer 267,794
5.44
262,265
5.37
5,529
2.1
Leasing, other and overdrafts 169,316
6.81
126,010
7.64
43,306
34.4
Total $ 13,909,722
3.99 % $ 13,144,332
4.08 % $ 765,390
5.8 %

~~Average loans increased $765.4 million, or 5.8%, which contributed $15.7 million to the~~ increase in FTE interest income. The ~~average~~6 basis points increase in the yield on ~~loans decreased 9~~average interest-earning assets resulted in a $1.9 million increase in FTE interest income. The yield on the loan portfolio increased 3 basis points, or ~~2.2%~~0.8%, ~~to 3.99%~~from the same period of 2016, the result of federal funds rate increases that occurred in December 2016 ~~from 4.08% in 2015. The growth in the loan portfolio was primarily driven by the commercial mortgage~~ and ~~commercial portfolios,~~March 2017, which impacted variable rate loans and ~~was spread across a broad range of industries, largely in Pennsylvania markets and, to a lesser extent, the New Jersey market. The decrease in average yields on~~adjustable rate loans ~~was attributable to repayments of higher-yielding loans, continued refinancing activity at lower rates, and new loan production at rates lower than the overall portfolio yield.~~

~~Average investment securities increased $175.9 million, or 7.7%.~~The yield on average investments decreased 9 basis points, or 3.5%, to 2.47% in 2016 from 2.56% in 2015. The increase in average investment securities was partially offset by a $98.7 million, or 21.6%, decrease in other interest-earning assets.

~~Interest expense decreased $2.9 million, or 6.6%, to $40.7 million~~that repriced in the first ~~six months~~half of 2016 from $43.5 million in the first six months of 2015. Although total average interest-bearing liabilities increased $498.2 million, or 4.5%, compared to the first six months of 2015, the funding mix became more concentrated in lower cost deposits and short-term borrowings. This shift and the impact of certain refinancing activities for FHLB advances and long-term debt drove the decrease in interest expense.2017.

Average ~~deposits,~~loans and average FTE yields, by type, are summarized in the following table:

Six months ended June 30 Increase (Decrease) in Balance
2016 2015
Balance Rate Balance Rate $ %
(dollars in thousands)
Noninterest-bearing demand $ 4,022,764
— % $ 3,698,661
— % $ 324,103
8.8 %
Interest-bearing demand 3,446,193
0.18
3,144,358
0.13
301,835
9.6
Savings 3,961,405
0.19
3,542,960
0.13
418,445
11.8
Total demand and savings 11,430,362
0.12
10,385,979
0.08
1,044,383
10.1
Time deposits 2,856,044
1.05
3,044,463
1.03
(188,419 ) (6.2 )
Total deposits $ 14,286,406
0.30 % $ 13,430,442
0.30 % $ 855,964
6.4 %



	Six months ended June 30								Increase (Decrease)
	2017				2016				in Balance
	Balance		Yield		Balance		Yield		$			%
	(dollars in thousands)
Real estate – commercial mortgage	$	6,101,836	3.99	%	$	5,522,550	4.02	%	$	579,286		10.5	%
Commercial – industrial, financial and agricultural	4,213,094		3.95		4,087,897		3.80		125,197			3.1
Real estate – residential mortgage	1,672,994		3.77		1,390,631		3.78		282,363			20.3
Real estate – home equity	1,600,394		4.26		1,665,086		4.10		(64,692		)	(3.9	)
Real estate – construction	869,299		3.98		806,448		3.81		62,851			7.8
Consumer	292,704		5.14		267,794		5.44		24,910			9.3
Leasing, other and overdrafts	242,808		5.06		169,316		6.81		73,492			43.4
Total	$	14,993,129	4.02	%	$	13,909,722	3.99	%	$	1,083,407		7.8	%

Average loans increased $1.1 billion, or 7.8%, compared to the first six months of 2016.The increase was driven largely by growth in the commercial mortgage and residential mortgage portfolios, as well as the commercial loan, construction and leasing portfolios. The $579.3 million, or 10.5%, increase in commercial mortgages occurred in both owner-occupied and investment property types and was realized in all geographic markets, but predominantly in the Pennsylvania, Maryland and Delaware markets. The $282.4 million, or 20.3%, increase in residential mortgages was also experienced across all geographic markets, with the most significant increases occurring in the Maryland and Virginia markets. This growth has been primarily the result of a strategic decision to

retain certain mortgage loans. The $125.2 million, or 3.1%, increase in commercial loans was spread across a broad range of industries and concentrated in the Pennsylvania market.

Average total interest-bearing liabilities for the first six months of 2017 increased $696.6 million, or 6.0%, compared to the same period of 2016. Interest expense increased $2.6 million, or 6.3%, to $43.2 million in the first half of 2017. Average deposits and average interest rates, by type, are summarized in the following table:



	Six months ended June 30								Increase (Decrease) in Balance
	2017				2016				Increase (Decrease) in Balance
	Balance		Rate		Balance		Rate		$			%
	(dollars in thousands)
Noninterest-bearing demand	$	4,344,859	—	%	$	4,022,764	—	%	$	322,095		8.0	%
Interest-bearing demand	3,670,603		0.28		3,446,193		0.18		224,410			6.5
Savings	4,255,190		0.23		3,961,405		0.19		293,785			7.4
Total demand and savings	12,270,652		0.16		11,430,362		0.12		840,290			7.4
Time deposits	2,717,624		1.09		2,856,044		1.05		(138,420		)	(4.8	)
Total deposits	$	14,988,276	0.33	%	$	14,286,406	0.30	%	$	701,870		4.9	%

The ~~$1.0 billion,~~$840.3 million, or ~~10.1%~~7.4%, increase in total demand and savings ~~account balances~~accounts was primarily due to a ~~$485.1~~$478.6 million, or ~~10.0%~~8.9%, increase in personal account balances, a ~~$385.3~~$291.3 million, or ~~10.3%~~7.1%, increase in business account balances and a ~~$176.7~~$55.7 million, or ~~10.2%~~3.1%, increase in municipal account balances. ~~While the~~The average cost of ~~both demand and savings deposits and time~~total deposits increased ~~the shift~~3 basis points to ~~a higher concentration of lower-cost demand and savings deposits resulted~~0.33% in ~~a total cost of interest-bearing deposits of 0.30% for both~~ the first ~~six months~~half of ~~2016 and 2015.~~2017, compared to 0.30% in the same period in 2016.

~~The following table summarizes changes in average short-term~~

Average borrowings and ~~long-term debt,~~interest rates, by ~~type:~~type, are summarized in the following table:

Six months ended June 30 Increase (Decrease)
2016 2015 in Balance
Balance Rate Balance Rate $ %
(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements $ 176,001
0.11 % $ 176,732
0.10 % $ (731 ) (0.4 )%
Customer short-term promissory notes 75,774
0.04
83,148
0.02
(7,374 ) (8.9 )
Total short-term customer funding 251,775
0.09
259,880
0.07
(8,105 ) (3.1 )
Federal funds purchased 160,991
0.42
66,795
0.17
94,196
141.0
Short-term FHLB advances ⁽¹⁾
11,769
0.46
18,122
0.30
(6,353 ) (35.1 )
Total short-term borrowings 424,535
0.23
344,797
0.10
79,738
23.1
Long-term debt:
FHLB advances 600,026
3.18
642,736
3.50
(42,710 ) (6.6 )
Other long-term debt 361,844
5.00
432,526
5.68
(70,682 ) (16.3 )
Total long-term debt 961,870
3.87
1,075,262
4.38
(113,392 ) (10.5 )
Total borrowings $ 1,386,405
2.75 % $ 1,420,059
3.34 % $ (33,654 ) (2.4 )%



	Six months ended June 30								Increase (Decrease)
	2017				2016				in Balance
	Balance		Rate		Balance		Rate		$		%
	(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements	$	199,945	0.10	%	$	176,001	0.11	%	$	23,944	13.6	%
Customer short-term promissory notes	78,348		0.05		75,774		0.04		2,574		3.4
Total short-term customer funding	278,293		0.08		251,775		0.09		26,518		10.5
Federal funds purchased	275,116		0.87		160,991		0.42		114,125		70.9
Short-term FHLB advances ⁽¹⁾	119,171		0.87		11,769		0.46		107,402		N/M
Total short-term borrowings	672,580		0.54		424,535		0.23		248,045		58.4
Long-term debt:
FHLB advances	629,141		2.31		600,026		3.18		29,115		4.9
Other long-term debt	401,526		4.73		361,844		5.00		39,682		11.0
Total long-term debt	1,030,667		3.25		961,870		3.87		68,797		7.2
Total borrowings	$	1,703,247	2.18	%	$	1,386,405	2.75	%	$	316,842	22.9	%

N/M - Not meaningful

(1) Represents FHLB advances with an original maturity term of less than one year.

~~Total~~Average total short-term borrowings ~~decreased $33.7~~increased $248.0 million, or ~~2.4%. The cost of borrowings decreased 59 basis points, or 17.7%~~58.4%, as a result of ~~lower-cost,~~loan growth out-pacing the increase in deposits. The increase in average short-term borrowings ~~comprising a larger percentage~~contributed $398,000 of ~~total borrowings.~~additional interest expense while the rate on average short-term borrowings increased 31 basis points, contributing an additional $946,000 to interest expense.

~~Total~~Average long-term debt ~~decreased $113.4~~increased $68.8 million, or ~~10.5%~~7.2%, primarily as ~~the~~a result of ~~maturing FHLB advances and~~ the ~~maturity~~$125 million of senior notes issued in March 2017, partially offset by the repayment of $100.0 million of 10-year subordinated notes, which matured on May 1, 2017.The 62 basis point, or 16.0%, decrease in the average rate on long-term debt ~~in April 2015. In addition, in June 2015, the Corporation issued $150 million~~was primarily a result of ~~subordinated debt at an effective rate of 4.69%. The proceeds of this issuance were used to redeem $150 million of trust preferred securities, with an effective rate of 6.52%, in July 2015.~~

~~In the third quarter of 2015, the Corporation executed two transactions to restructure its long-term FHLB advances. First,~~ $200 million of FHLB advances ~~with a weighted average rate of 4.45% and a maturity date in the first quarter of 2017,~~that were refinanced with new advances maturing from September 2019 to December 2020, at a weighted average rate of 2.95%. This transaction reduced interest expense on a quarterly basis by approximately $750,000, beginning in the fourth quarter of 2015. Second, forward agreements were executed to refinance an additional $200 million of FHLB advances when the advances mature in December ~~2016. These forward agreements have maturity dates from March 2021 to December 2021 and the refinancing will reduce~~of 2016, which reduced the weighted average rate on these advances from 4.03% to 2.40% ~~and decrease interest expense on a quarterly basis by approximately $800,000, beginning in the first quarter of 2017.~~.

Provision for Credit Losses

The provision for credit losses was ~~$4.0~~$11.5 million for the first six months of ~~2016,~~2017, an increase of ~~$5.5~~$7.5 million from the same period of 2016, driven mainly by loan growth and the impact of normal changes in ~~comparison to~~ the ~~first six months~~risk characteristics of ~~2015. In~~ the first six months of 2015, a negative provision of $1.5 million was recorded, primarily due to an improvement in net charge-off levels, particularly among pooled impaired loans. For details related to the Corporation's allowance andloan portfolio.

The provision for credit losses ~~see~~is recognized as an expense in the consolidated statements of income and is the amount necessary to adjust the allowance for credit losses to its appropriate balance, as determined through the Corporation's allowance methodology. The Corporation determines the appropriate level of the allowance for credit losses based on many quantitative and qualitative factors, including, but not limited to: the size and composition of the loan portfolio, changes in risk ratings, changes in collateral values, delinquency levels, historical losses and economic conditions. See the "Financial Condition" section of Management's Discussion under the heading "Provision ~~for Credit Losses~~ and Allowance for Credit ~~Losses."~~Losses" for details related to the Corporation's allowance and provision for credit losses.

Non-Interest Income

The following table presents the components of non-interest income:


	Six months ended June 30				Increase (Decrease)					Six months ended June 30				Increase (Decrease)
	2016		2015		$			%		2017		2016		$			%
	(dollars in thousands)									(dollars in thousands)
Other service charges and fees:
Merchant fees										$	8,138	$	7,935	$	203		2.6	%
Commercial loan interest rate swap fees										6,826		4,193		2,633			62.8
Debit card income										5,549		5,230		319			6.1
Letter of credit fees										2,309		2,308		1			—
Other										3,957		4,067		(110		)	(2.7	)
Total other service charges and fees										26,779		23,733		3,046			12.8
Service charges on deposit accounts:
Overdraft fees	$	10,656	$	10,154	$	502		4.9	%	11,117		10,656		461			4.3
Cash management fees	7,046		6,586		460			7.0		7,151		7,046		105			1.5
Other	7,752		7,466		286			3.8		7,046		7,752		(706		)	(9.1	)
Total service charges on deposit accounts	25,454		24,206		1,248			5.2		25,314		25,454		(140		)	(0.6	)
Investment management and trust services	22,235		21,900		335			1.5		23,940		22,235		1,705			7.7
Other service charges and fees:
Merchant fees	7,935		7,265		670			9.2
Debit card income	5,230		5,015		215			4.3
Commercial swap fees	4,193		1,837		2,356			128.3
Letter of credit fees	2,308		2,331		(23		)	(1.0	)
Other	4,067		3,903		164			4.2
Total other service charges and fees	23,733		20,351		3,382			16.6
Mortgage banking income:
Gains on sales of mortgage loans	7,110		7,961		(851		)	(10.7	)	6,562		7,110		(548		)	(7.7	)
Mortgage servicing income	817		2,066		(1,249		)	(60.5	)	4,175		817		3,358			N/M
Total mortgage banking income	7,927		10,027		(2,100		)	(20.9	)	10,737		7,927		2,810			35.4
Credit card income	5,020		4,709		311			6.6		5,314		5,020		294			5.9
Other income	3,882		3,473		409			11.8		4,418		3,882		536			13.8
Total, excluding investment securities gains, net	88,251		84,666		3,585			4.2		96,502		88,251		8,251			9.3
Investment securities gains, net	1,023		6,560		(5,537		)	(84.4	)	2,542		1,023		1,519			148.5
Total	$	89,274	$	91,226	$	(1,952	)	(2.1	)%	$	99,044	$	89,274	$	9,770		10.9	%

N/M - Not meaningful

Excluding investment securities gains, non-interest income increased $8.3 million, or 9.3%. Other service charges and fees increased $3.0 million, or 12.8%, mainly due to a $2.6 million increase in commercial loan interest rate swap fees, driven by loan growth and a favorable interest rate environment.

The ~~$502,000,~~$460,000, or ~~4.9%~~4.3%, increase in overdraft fee income during the six months ended June 30, ~~2016~~2017 in comparison to the same period during ~~2015~~2016 consisted of a ~~$310,000~~$315,000 increase in fees assessed on personal accounts and a $145,000 increase in fees assessed on commercial accounts, ~~and a $192,000 increase in fees assessed on personal accounts,~~ due to higher volumes. ~~Cash~~Other service charges on deposit accounts decreased $705,000, or 9.1%, resulting from changes in customer behavior and the loss of a significant processing customer.

Investment management ~~fees~~and trust services income increased ~~$460,000,~~$1.7 million, or ~~7.0%~~7.7%, ~~compared to 2015~~with growth in both trust and brokerage income, due to ~~increased transaction volumes~~overall market performance and ~~fee increases in 2016.~~

~~The $670,000, or 9.2%, increase in merchant fee income and the $215,000, or 4.3%, increase in debit card income were due to~~ an increase in ~~the volumes of transactions in comparison to 2015. The $2.4 million increase in commercial interest rate swap fees were due to an increase in new loan volumes in comparison to 2015.~~

assets under management.

Gains on sales of mortgage loans decreased ~~$851,000,~~$548,000, or ~~10.7%~~7.7%, ~~due to a $124.1 million, or 20.9%, decrease in new loan commitments, partially offset by a 12.9% increase in pricing spreads~~ compared to the ~~prior year.~~same period in 2016, as volumes decreased while pricing spreads remained flat. Mortgage servicing income ~~excluding~~increased $3.4 million compared to the same period in 2016. 2017 included a ~~$1.7~~$1.3 million reduction to the MSRs valuation allowance, which was originally established in June 2016 through an impairment charge ~~on MSRs recognized in~~of $1.7 million. Excluding the ~~second quarter~~impact of ~~2016,~~the MSR valuation allowance adjustments, mortgage servicing income increased ~~$470,000,~~$346,000, or ~~22.7%~~13.6%. ~~See Note 6, "Mortgage Servicing Rights," in the Notes to Consolidated Financial Statements for additional details regarding the impairment charge.~~

Gains on sales of investment securities ~~decreased $5.5~~increased $1.5 million compared to the first six months of ~~2015.~~2016. See Note 4, "Investment Securities," in the Notes to Consolidated Financial Statements for additional details.

Non-Interest Expense

The following table presents the components of non-interest expense:


	Six months ended June 30				Increase (Decrease)					Six months ended June 30				Increase (Decrease)
	2016		2015		$			%		2017		2016		$			%
	(dollars in thousands)									(dollars in thousands)
Salaries and employee benefits	$	139,401	$	130,057	$	9,344		7.2	%	$	143,732	$	139,401	$	4,331		3.1	%
Net occupancy expense	24,031		25,501		(1,470		)	(5.8	)	24,979		24,031		948			3.9
Other outside services	11,564		13,875		(2,311		)	(16.7	)	13,254		11,564		1,690			14.6
Data processing	10,876		9,662		1,214			12.6		8,905		10,876		(1,971		)	(18.1	)
Software	7,874		6,694		1,180			17.6		9,128		7,874		1,254			15.9
Equipment expense	6,243		7,293		(1,050		)	(14.4	)	6,393		6,243		150			2.4
Professional fees										5,668		5,686		(18		)	(0.3	)
FDIC insurance expense	5,909		5,707		202			3.5		4,424		5,909		(1,485		)	(25.1	)
Professional fees	5,686		5,602		84			1.5
Supplies and postage	5,285		5,095		190			3.7
Marketing	3,540		3,468		72			2.1		4,220		3,540		680			19.2
Telecommunications	2,947		3,333		(386		)	(11.6	)
Operating risk loss	1,526		1,501		25			1.7
Other real estate owned and repossession expense	1,003		1,491		(488		)	(32.7	)
Intangible amortization	—		236		(236		)	(100.0	)
Amortization of tax credit investments										4,149		—		4,149			N/M
Other	16,165		17,317		(1,152		)	(6.7	)	30,118		26,926		3,192			11.9
Total	$	242,050	$	236,832	$	5,218		2.2	%	$	254,970	$	242,050	$	12,920		5.3	%

N/M - Not meaningful

The ~~$9.3~~$4.3 million, or ~~7.2%~~3.1%, increase in salaries and employee benefits during the six months ended June 30, ~~2016~~2017 in comparison to the same period during ~~2015~~2016 primarily resulted from ~~an $8.4~~a $4.7 million, or ~~7.8%~~4.0%, increase in salaries, resulting from ~~higher average salaries per full-time equivalent (FTE) employee,~~ normal merit increases and an increase in ~~incentive compensation. Benefits~~staffing levels. Average full-time equivalent employees increased 2.0% to 3,548 as compared to 3,480 in 2016.

Other outside services increased $1.7 million, or 14.6%, largely due to pre-bank consolidation efforts and the timing of expenses for various engagements.

Software expense increased ~~$930,000,~~$1.3 million, or ~~4.3%~~15.9%, largely due to investments in technology solutions. Data processing expense decreased $2.0 million, or 18.1%, due to ~~an increase in 401(k) matching expense, defined benefit plan expense, employee education and other employee benefits.~~benefits from renegotiated contracts.

~~The~~FDIC insurance expense decreased $1.5 million, or ~~5.8%~~25.1%, ~~decrease~~as the assessment rates for banks decreased when the DIF exceeded 1.15% of the deposit base in ~~occupancy~~2016.

Marketing expense ~~was due to decreases in snow removal and utilities expenses when~~increased $680,000, or 19.2%, compared to the first six months of ~~2015. The $2.3 million, or 16.7%, decrease in other outside services in comparison to the first six months of 2015 was largely~~2016, due to an increase in the ~~timing~~number of ~~certain expenses~~marketing promotions. In 2017, many of these promotions were related to ~~the Corporation’s BSA/AML compliance program remediation efforts.~~deposit generation.

~~The $2.4 million, or 14.6%, combined increase~~In 2017, amortization expense on certain new tax credit investments is being recognized in ~~data processing and software resulted from higher transaction volumes and contractual increases related to core processing systems, and amortization of capitalized software investments.~~non-interest expense, rather than income taxes.

~~Equipment expense decreased $1.1 million, or 14.4%, primarily due to lower depreciation expense when compared to the first six months of 2015 as certain assets became fully depreciated.~~Other real estate owned and repossession expense decreased $488,000, or 32.7%, when compared to the first six months of 2015 due to decreases in repossession expense, maintenance expense and insurance expense on other real estate properties. This expense category can experience volatility from period to period based on the timing of foreclosures and sales of properties and payments of expenses, such as real estate taxes.

~~Other expense decreased $1.2 million, or 6.7%, due to lower state taxes and the timing of certain expense items, which can fluctuate from period to period.~~

Income Taxes

Income tax expense for the first six months of ~~2016~~2017 was ~~$23.1~~$22.9 million, a ~~$2.5 million,~~$277,000, or ~~9.9%~~1.2%, decrease from ~~$25.7~~$23.1 million in ~~2015.~~

2016.

The Corporation’s effective tax rate was 20.5% in the first six months of 2017, as compared to 22.9% in the first six months of ~~2016, as compared to 25.1% in the first six months of 2015.~~

2016. The effective tax rate is generally lower than the federal statutory rate of 35% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities, ~~and~~ credits earned from investments in partnerships that generate tax credits under various federal ~~programs. The decrease~~programs and excess tax benefits realized on stock-based compensation. In 2017, amortization of certain new tax credit investments was recorded in non-interest expense, rather than as a component of income tax expense. If the amortization had been included as a component of income tax expense, the effective tax rate ~~from 2015 was driven by higher low-income housing~~for the first six months of 2017 would have been 23.3%. In addition, in 2017, the Corporation realized $2.1 million of excess tax ~~credits.~~benefits mainly related to vesting employee stock awards.

FINANCIAL CONDITION

The table below presents condensed consolidated ending balance sheets.


					Increase (Decrease)									Increase (Decrease)
	June 30, 2016		December 31, 2015		$			%		June 30, 2017		December 31, 2016		$			%
	(dollars in thousands)									(dollars in thousands)
Assets
Cash and due from banks	$	84,647	$	101,120	$	(16,473	)	(16.3	)%	$	94,938	$	118,763	$	(23,825	)	(20.1	)%
Other interest-earning assets	408,086		292,516		115,570			39.5		392,842		291,252		101,590			34.9
Loans held for sale	34,330		16,886		17,444			103.3		62,354		28,697		33,657			117.3
Investment securities	2,529,724		2,484,773		44,951			1.8		2,488,699		2,559,227		(70,528		)	(2.8	)
Loans, net of allowance	13,992,613		13,669,548		323,065			2.4		15,174,275		14,530,593		643,682			4.4
Premises and equipment	228,861		225,535		3,326			1.5		217,558		217,806		(248		)	(0.1	)
Goodwill and intangible assets	531,556		531,556		—			—		531,556		531,556		—			—
Other assets	670,218		592,784		77,434			13.1		685,213		666,353		18,860			2.8
Total Assets	$	18,480,035	$	17,914,718	$	565,317		3.2	%	$	19,647,435	$	18,944,247	$	703,188		3.7	%
Liabilities and Shareholders’ Equity
Deposits	$	14,292,564	$	14,132,317	$	160,247		1.1	%	$	15,357,361	$	15,012,864	$	344,497		2.3	%
Short-term borrowings	722,214		497,663		224,551			45.1		694,859		541,317		153,542			28.4
Long-term debt	965,552		949,542		16,010			1.7		1,037,961		929,403		108,558			11.7
Other liabilities	392,708		293,302		99,406			33.9		365,484		339,548		25,936			7.6
Total Liabilities	16,373,038		15,872,824		500,214			3.2		17,455,665		16,823,132		632,533			3.8
Total Shareholders’ Equity	2,106,997		2,041,894		65,103			3.2		2,191,770		2,121,115		70,655			3.3
Total Liabilities and Shareholders’ Equity	$	18,480,035	$	17,914,718	$	565,317		3.2	%	$	19,647,435	$	18,944,247	$	703,188		3.7	%

Other Interest-earning Assets

~~The $115.6~~Other interest-earning assets increased $101.6 million, or ~~39.5%~~34.9%, ~~increase in other interest-earning assets~~ during the first six months of ~~2016 resulted from~~2017 as a result of higher balances on deposit with the Federal Reserve Bank, ~~as funding provided by deposit and borrowings increases outpaced the growth~~primarily due to a temporary increase in item clearing balances.

Loans Held for Sale

The $33.7 million, or 117.3%, increase in loans held for sale during the first six months of 2017, was mostly due to the reclassification of the student loan portfolio, totaling $28.9 million, from consumer loans. In June 2017, the Corporation determined to sell this portfolio and ~~investments.~~

began discussions with a potential purchaser of this portfolio. The sale is expected to be completed in the third quarter of 2017.

Investment Securities

The following table presents the carrying amount of investment securities:


					Increase (Decrease)									Increase (Decrease)
	June 30, 2016		December 31, 2015		$			%		June 30, 2017		December 31, 2016		$			%
	(dollars in thousands)									(dollars in thousands)
U.S. Government sponsored agency securities	$	146	$	25,136	$	(24,990	)	(99.4	)%	$	6,054	$	134	$	5,920		N/M
State and municipal securities	345,347		262,765		82,582			31.4		401,636		391,641		9,995			2.6
Corporate debt securities	91,547		96,955		(5,408		)	(5.6	)	88,992		109,409		(20,417		)	(18.7	)
Collateralized mortgage obligations	706,346		821,509		(115,163		)	(14.0	)	538,507		593,860		(55,353		)	(9.3	)
Mortgage-backed securities	1,267,763		1,158,835		108,928			9.4
Residential mortgage-backed securities										1,213,065		1,317,838		(104,773		)	(8.0	)
Commercial mortgage-backed securities										121,067		24,563		96,504			N/M
Auction rate securities	97,886		98,059		(173		)	(0.2	)	97,923		97,256		667			0.7
Total debt securities	2,509,035		2,463,259		45,776			1.9		2,467,244		2,534,701		(67,457		)	(2.7	)
Equity securities	20,689		21,514		(825		)	(3.8	)	21,455		24,526		(3,071		)	(12.5	)
Total	$	2,529,724	$	2,484,773	$	44,951		1.8	%	$	2,488,699	$	2,559,227	$	(70,528	)	(2.8	)%

N/M - Not meaningful

~~U.S. Government sponsored agency~~Corporate debt securities decreased ~~$25.0~~$20.4 million, or ~~99.4%~~18.7%, ~~as the result~~due to calls and maturities of ~~maturities. The proceeds were reinvested in municipal securities, which increased $82.6 million, or 31.4%.~~

certain holdings. Collateralized mortgage obligations decreased ~~$115.2~~$55.4 million, or ~~14.0%~~9.3%, as the Corporation reduced its holdings in ~~lower coupon~~lower-coupon investments due to volatility in market pricing. ~~The proceeds~~Residential mortgage-backed securities decreased $104.8 million, or 8.0%. Cash flows from both collateralized mortgage obligations and residential mortgage-backed securities were used to partially fund loan growth or were reinvested in commercial mortgage-backed securities ~~which increased $108.9 million, or 9.4%, in an effort~~ to ~~improve~~diversify the ~~portfolio yield.~~portfolio.

Loans, net of Unearned Income

The following table presents ending balances of loans outstanding, net of unearned income:


					Increase (Decrease)									Increase (Decrease)
	June 30, 2016		December 31, 2015		$			%		June 30, 2017		December 31, 2016		$			%
	(dollars in thousands)									(dollars in thousands)
Real estate – commercial mortgage	$	5,635,347	$	5,462,330	$	173,017		3.2	%	$	6,262,008	$	6,018,582	$	243,426		4.0	%
Commercial – industrial, financial and agricultural	4,099,177		4,088,962		10,215			0.2		4,245,849		4,087,486		158,363			3.9
Real estate – residential mortgage										1,784,712		1,601,994		182,718			11.4
Real estate – home equity	1,647,319		1,684,439		(37,120		)	(2.2	)	1,579,739		1,625,115		(45,376		)	(2.8	)
Real estate – residential mortgage	1,447,292		1,376,160		71,132			5.2
Real estate – construction	853,699		799,988		53,711			6.7		938,900		843,649		95,251			11.3
Consumer	278,071		268,588		9,483			3.5		283,156		291,470		(8,314		)	(2.9	)
Leasing, other and overdrafts	194,254		158,135		36,119			22.8		252,253		230,976		21,277			9.2
Loans, net of unearned income	$	14,155,159	$	13,838,602	$	316,557		2.3	%	$	15,346,617	$	14,699,272	$	647,345		4.4	%

Loans, net of unearned income, increased ~~$316.6~~$647.3 million, or ~~2.3%~~4.4%, in comparison to December 31, ~~2015, with~~2016. In general, this growth resulted from improved business activity and customer sentiment, as well as the ~~increases spread~~addition of commercial relationship managers in 2016. Increases were realized across all ~~across~~of the Corporation's geographic markets.Commercial mortgage loans increased ~~$173.0~~$243.4 million, or ~~3.2%~~4.0%, in comparison to December 31, ~~2015,~~2016, with the growth occurring primarily in the Pennsylvania ($~~135.0~~133.0 million, or ~~4.9%~~4.2%), Maryland ($63.9 million, or 10.3%) and New Jersey ($~~24.0~~38.7 million, or ~~1.7%) and Virginia ($11.0 million, or 2.4%~~2.7%) markets. ~~Real-estate residential~~Residential mortgage loans increased ~~$71.1~~$182.7 million, or ~~5.2%~~11.4%, compared to December 31, ~~2015,~~2016, with the growth occurring primarily in the Maryland ($~~41.0~~72.8 million, or ~~22.3%~~24.6%), Virginia ($59.0 million, or 19.1%) and ~~Virginia~~Pennsylvania ($~~33.0~~30.0 million, or ~~14.7%~~4.4%) ~~markets as the result of new portfolio product offerings that were introduced in 2015. Real-estate construction~~markets.

Commercial loans increased ~~$53.7~~$158.4 million, or ~~6.7%~~3.9%, in comparison to December 31, ~~2015,~~2016, with the growth occurring primarily in the Pennsylvania ($164.8 million, or 5.5%) and New Jersey ($~~27.0~~10.4 million, or ~~17.1%~~2.0%)~~, Delaware ($16.0~~ markets. Construction loans increased $95.3 million, or ~~35.4%~~11.3%, in comparison to December 31, 2016, with the growth occurring primarily in the Pennsylvania ($46.1

million, or 9.4%), Maryland ($27.6 million, or 29.7%) and ~~Pennsylvania~~Delaware ($~~11.0~~14.2 million, or ~~2.4%~~26.4%) markets. Leasing, other and overdrafts increased compared to December 31, ~~2015~~2016 as a result of a ~~$36.1~~$21.6 million increase in the leasing portfolio.

Construction loans include loans to commercial borrowers secured by commercial real estate, loans to commercial borrowers secured by residential real estate, and other construction loans, which represent loans to individuals secured by residential real estate. The following table presents outstanding construction loans and their delinquency rates by these class segments:


	June 30, 2016						December 31, 2015						June 30, 2017						December 31, 2016
	Balance		Delinquency Rate (1)		% of Total		Balance		Delinquency Rate (1)		% of Total		Balance		Delinquency Rate (1)		% of Total		Balance		Delinquency Rate (1)		% of Total
	(dollars in thousands)												(dollars in thousands)
Commercial	$	604,113	0.8	%	70.8	%	$	559,991	0.2	%	70.0	%	$	728,649	0.1	%	77.6	%	$	644,490	0.2	%	76.4	%
Commercial - residential	183,667		4.9		21.5		179,303		7.3		22.4		157,291		9.7		16.8		142,189		6.0		16.9
Other	65,919		3.8		7.7		60,694		1.1		7.6		52,960		2.1		5.6		56,970		1.9		6.7
Total Real estate - construction	$	853,699	1.9	%	100.0	%	$	799,988	1.8	%	100.0	%	$	938,900	1.8	%	100.0	%	$	843,649	1.3	%	100.0	%


(1)	Represents all accruing loans 30 days or more past due and non-accrual loans as a percentage of total loans in each class segment.

The Corporation does not have a significant concentration of credit risk with any single borrower, industry or geographical location. Approximately ~~$6.5~~$7.2 billion, or ~~45.8%~~46.9%, of the loan portfolio was in commercial mortgage and construction loans as of June 30, ~~2016.~~2017. The Corporation's maximum total lending commitment to an individual ~~borrower~~borrowing relationship was $50.0 million as of June 30, ~~2016.~~2017. In addition to its policy of limiting the maximum total lending commitment to any individual ~~borrower~~borrowing relationship to $50.0 million, the Corporation has established lower total lending limits for certain types of lending commitments, and lower total lending limits based on the Corporation's internal risk rating of an individual ~~borrower~~borrowing relationship at the time the lending commitment is approved. As of June 30, ~~2016,~~2017, the Corporation had ~~113~~137 individual borrowing relationships with total borrowing commitments between $20.0 million and $50.0 million.

The following table summarizes the industry concentrations within the commercial loan portfolio:


	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
Services	21.9	%	22.6	%	22.2	%	21.8	%
Retail					16.0		15.1
Health care	11.2		10.6		10.2		10.5
Manufacturing	10.7		11.3		9.0		9.2
Construction ⁽¹⁾	9.8		9.7		8.4		9.0
Retail	9.2		8.3
Wholesale	8.0		8.0		7.1		7.0
Real estate ⁽²⁾	7.7		7.3		6.6		6.7
Agriculture	4.8		5.1		4.7		5.0
Arts and entertainment	2.8		2.8		2.5		2.6
Transportation	2.7		2.7		2.4		2.3
Financial services	2.0		1.7		2.2		2.1
Other	9.2		9.9		8.7		8.7
Total	100.0	%	100.0	%	100.0	%	100.0	%


(1)	Includes commercial loans to borrowers engaged in the construction industry.


(2)	Includes commercial loans to borrowers engaged in the business of: renting, leasing or managing real estate for others; selling and/or buying real estate for others; and appraising real estate.

Commercial loans and commercial mortgage loans also include shared national credits, which are participations in loans or loan commitments of at least $20.0 million that are shared by three or more banks. Below is a summary of the Corporation's outstanding purchased shared national credits:


	June 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
	(in thousands)				(in thousands)
Commercial - industrial, financial and agricultural	$	162,712	$	152,830	$	166,500	$	155,353
Real estate - commercial mortgage	104,418		96,219		96,076		81,573
Total	$	267,130	$	249,049	$	262,576	$	236,926

Total shared national credits increased ~~$18.1~~$25.7 million, or ~~7.3%~~10.8%, in comparison to December 31, ~~2015.~~2016 as a result of both new relationships and growth in existing relationships. The Corporation's shared national credits are to borrowers located in its geographical markets, and ~~the increase was due~~are subject to normal lending activities consistent with the Corporation's underwriting policies. ~~As of June 30, 2016, none~~None of the shared national credits were past due ~~compared to one credit totaling $1.1 million, or 0.4%, of the total balance that was past due~~ as of June 30, 2017 or December 31, ~~2015.~~2016.

Provision ~~for Credit Losses~~ and Allowance for Credit Losses

The Corporation has historically maintained an unallocated allowance for loan losses for factors and conditions that exist at the balance sheet date, but are not specifically identifiable, and to recognize the inherent imprecision in estimating and measuring loss exposure. During the second quarter of 2017, enhancements were made to allow for the impact of these factors and conditions to be quantified in the allowance allocation process. Accordingly, an unallocated allowance for loan losses is no longer necessary.

The following table presents the activity in the allowance for credit losses:


	Three months ended June 30						Six months ended June 30						Three months ended June 30						Six months ended June 30
	2016			2015			2016			2015			2017			2016			2017			2016
	(dollars in thousands)												(dollars in thousands)
Average balance of loans, net of unearned income	$	13,966,024		$	13,192,600		$	13,909,722		$	13,144,332		$	15,127,205		$	13,966,024		$	14,993,129		$	13,909,722

Balance of allowance for credit losses at beginning of period	$	166,065		$	179,658		$	171,412		$	185,931		$	172,647		$	166,065		$	171,325		$	171,412
Loans charged off:
Commercial – industrial, financial and agricultural	4,625			11,166			10,813			13,029			5,353			4,625			10,880			10,813
Real estate – residential mortgage	340			783			1,408			2,064			124			340			340			1,408
Real estate – home equity	1,045			870			2,586			1,638			592			1,045			1,290			2,586
Real estate – commercial mortgage	1,474			1,642			2,056			2,351			242			1,474			1,466			2,056
Consumer	569			357			1,576			1,137			430			569			1,286			1,576
Real estate – construction	742			87			1,068			87			774			742			1,021			1,068
Leasing, other and overdrafts	1,951			467			2,394			830			1,200			1,951			1,839			2,394
Total loans charged off	10,746			15,372			21,901			21,136			8,715			10,746			18,122			21,901
Recoveries of loans previously charged off:
Commercial – industrial, financial and agricultural	2,931			1,471			5,250			2,257			1,974			2,931			6,165			5,250
Real estate – residential mortgage	420			187			556			346			151			420			381			556
Real estate – home equity	350			189			688			440			215			350			352			688
Real estate – commercial mortgage	1,367			451			2,192			887			934			1,367			1,384			2,192
Consumer	539			368			735			609			470			539			706			735
Real estate – construction	1,563			231			1,946			1,378			373			1,563			921			1,946
Leasing, other and overdrafts	108			70			189			241			249			108			386			189
Total recoveries	7,278			2,967			11,556			6,158			4,366			7,278			10,295			11,556
Net loans charged off	3,468			12,405			10,345			14,978			4,349			3,468			7,827			10,345
Provision for credit losses	2,511			2,200			4,041			(1,500		)	6,700			2,511			11,500			4,041
Balance of allowance for credit losses at end of period	$	165,108		$	169,453		$	165,108		$	169,453		$	174,998		$	165,108		$	174,998		$	165,108

Net charge-offs to average loans (annualized)	0.10		%	0.38		%	0.15		%	0.23		%	0.11		%	0.10		%	0.10		%	0.15		%

The following table presents the components of the allowance for credit losses:


	June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(dollars in thousands)						(dollars in thousands)
Allowance for loan losses	$	162,546		$	169,054		$	172,342		$	168,679
Reserve for unfunded lending commitments	2,562			2,358			2,656			2,646
Allowance for credit losses	$	165,108		$	171,412		$	174,998		$	171,325

Allowance for credit losses to loans outstanding	1.17		%	1.24		%	1.14		%	1.17		%

The provision for credit losses for the three months ended June 30, ~~2016~~2017 was ~~$2.5~~$6.7 million, an increase of ~~$311,000~~$4.2 million in comparison to the same period in ~~2015.~~2016. For the six months ended June 30, ~~2016,~~2017, the provision for credit losses was ~~$4.0~~$11.5 million, an increase of ~~$5.5~~$7.5 million in comparison to the first six months of ~~2015.~~2016. The ~~increase~~increases in the provision for credit losses ~~was~~ largely ~~due to a~~

~~negative provision recorded in the six months ended June 30, 2015 which was driven by an improvement in net charge-off levels, particularly among pooled impaired loans across all portfolio segments.~~reflected loan growth.

Net charge-offs ~~decreased $8.9~~increased $881,000, to $4.3 million ~~or 72.0%,~~for the second quarter of 2017, compared to $3.5 million for the second quarter of 2016, ~~compared to $12.4~~as a result of a $2.9 million ~~for~~decrease in recoveries which was partially offset by a $2.0 million decrease in gross charge-offs comparing the ~~second quarter of 2015. Gross charge-offs decreased by $4.6 million and recoveries increased by $4.3 million.~~same two periods. Of the ~~$3.5~~$4.3 million of net charge-offs recorded in the second quarter of ~~2016,~~2017, the majority

were for loans originated in ~~New Jersey~~Pennsylvania ($~~2.5~~4.9 million) and ~~Pennsylvania~~Maryland ($~~2.4 million)~~73,000), partially offset by net recoveries in ~~Maryland ($1.2 million)~~New Jersey, Virginia and ~~to a lesser extent, Delaware and Virginia.~~Delaware.

~~During~~For the first ~~half~~six months of ~~2016,~~2017, net charge-offs decreased ~~$4.6~~$2.5 million, ~~or 30.9%,~~to $7.8 million compared to $10.3 million ~~compared to $15.0 million~~ for ~~the first half of 2015. The decrease in net charge-offs was primarily due to an increase in recoveries during the first half of 2016 compared to~~ the same period of 2016 as a result of a $3.8 million decrease in gross charge-offs and an $1.3 million decrease in recoveries comparing the ~~prior year.~~same two periods. Of the ~~$10.3~~$7.8 million of net charge-offs recorded in the first ~~half~~six months of ~~2016,~~2017, the majority were for loans originated in Pennsylvania ($~~7.9~~7.5 million) and New Jersey ($~~3.7 million)~~566,000), partially offset by net recoveries in Virginia, Maryland ~~($1.0 million)~~ and ~~to a lesser extent, Delaware and Virginia.~~Delaware.

The following table summarizes non-performing assets as of the indicated dates:


	June 30, 2016			June 30, 2015			December 31, 2015			June 30, 2017			June 30, 2016			December 31, 2016
	(dollars in thousands)									(dollars in thousands)
Non-accrual loans	$	111,742		$	129,152		$	129,523		$	122,600		$	111,742		$	120,133
Loans 90 days or more past due and still accruing	15,992			20,353			15,291			13,143			15,992			11,505
Total non-performing loans	127,734			149,505			144,814			135,743			127,734			131,638
Other real estate owned (OREO)	11,918			12,763			11,099			11,432			11,918			12,815
Total non-performing assets	$	139,652		$	162,268		$	155,913		$	147,175		$	139,652		$	144,453
Non-accrual loans to total loans	0.79		%	0.98		%	0.94		%	0.80		%	0.79		%	0.82		%
Non-performing assets to total assets	0.76		%	0.93		%	0.87		%	0.75		%	0.76		%	0.76		%
Allowance for credit losses to non-performing loans	129.26		%	113.34		%	118.37		%	128.92		%	129.26		%	130.15		%

The following table presents ~~accruing~~ loans whose terms have been modified under troubled debt restructurings ("TDRs"), by

type, as of the indicated dates:



	June 30, 2017		June 30, 2016		December 31, 2016
	(in thousands)
Real-estate - residential mortgage	$	26,368	$	27,324	$	27,617
Real-estate - commercial mortgage	13,772		17,808		15,957
Real estate - home equity	12,031		7,173		8,594
Commercial	8,086		5,756		6,627
Construction	1,475		3,086		726
Consumer	33		18		39
Total accruing TDRs	61,765		61,165		59,560
Non-accrual TDRs ⁽¹⁾	29,373		24,887		27,850
Total TDRs	$	91,138	$	86,052	$	87,410

June 30, 2016 June 30, 2015 December 31, 2015
(in thousands)
Real estate – residential mortgage $ 27,324
$ 31,584
$ 28,511
Real estate – commercial mortgage 17,808
17,482
17,563
Real estate – construction 3,086
4,482
3,942
Commercial – industrial, financial and agricultural 5,756
6,975
5,953
Real estate – home equity 7,173
3,084
4,556
Consumer 18
34
33
Total accruing TDRs 61,165
63,641
60,558
Non-accrual TDRs ⁽¹⁾
24,887
27,230
31,035
Total TDRs $ 86,052
$ 90,871
$ 91,593

(1) Included with non-accrual loans in the preceding table.

TDRs modified during the first six months of ~~2016~~2017 and still outstanding as of June 30, ~~2016~~2017 totaled ~~$6.5~~$13.2 million. During the first six months of ~~2016, $3.7~~2017, $6.3 million of TDRs that were modified in the previous 12 months had a payment default, which the Corporation defines as a single missed scheduled payment, subsequent to modification.

The following table presents the changes in non-accrual loans for the three and six months ended June 30, ~~2016:~~2017:


	Commercial - Industrial, Financial and Agricultural			Real Estate - Commercial Mortgage			Real Estate - Construction			Real Estate - Residential Mortgage			Real Estate - Home Equity			Consumer			Leasing			Total			Commercial - Industrial, Financial and Agricultural			Real Estate - Commercial Mortgage			Real Estate - Construction			Real Estate - Residential Mortgage			Real Estate - Home Equity			Consumer			Leasing			Total
	(in thousands)																								(in thousands)
Three months ended June 30, 2016
Balance of non-accrual loans at March 31, 2016	$	37,116		$	40,861		$	10,498		$	20,780		$	11,494		$	—		$	1,421		$	122,170
Three months ended June 30, 2017																									Three months ended June 30, 2017
Balance of non-accrual loans at March 31, 2017																									$	40,818		$	35,803		$	13,485		$	17,807		$	9,351		$	—		$	—		$	117,264
Additions	6,340			4,835			3,098			2,100			2,068			572			207			19,220			16,388			4,776			3,691			484			1,678			430			855			28,302
Payments	(2,888		)	(5,150		)	(2,396		)	(1,595		)	(1,086		)	(1		)	(20		)	(13,136		)	(3,763		)	(7,537		)	(667		)	(311		)	(241		)	—			—			(12,519		)
Charge-offs	(4,625		)	(1,474		)	(742		)	(340		)	(1,045		)	(569		)	(1,608		)	(10,403		)	(5,353		)	(242		)	(774		)	(124		)	(592		)	(430		)	(855		)	(8,370		)
Transfers to accrual status	—			(3,149		)	—			(150		)	(206		)	(2		)	—			(3,507		)	—			—			—			(54		)	(250		)	—			—			(304		)
Transfers to OREO	(405		)	(411		)	(1,038		)	(226		)	(522		)	—			—			(2,602		)	(3		)	(533		)	(149		)	(862		)	(226		)	—			—			(1,773		)
Balance of non-accrual loans at June 30, 2016	$	35,538		$	35,512		$	9,420		$	20,569		$	10,703		$	—		$	—		$	111,742
Balance of non-accrual loans at June 30, 2017																									$	48,087		$	32,267		$	15,586		$	16,940		$	9,720		$	—		$	—		$	122,600

Six months ended June 30, 2016
Balance of non-accrual loans as of December 31, 2015	$	42,199		$	40,731		$	12,044		$	21,914		$	11,210		$	—		$	1,425		$	129,523
Six months ended June 30, 2017																									Six months ended June 30, 2017
Balance of non-accrual loans at December 31, 2016																									$	42,349		$	38,936		$	9,806		$	18,431		$	10,611		$	—		$	—		$	120,133
Additions	12,776			10,794			3,850			3,497			5,055			1,579			292			37,843			24,401			7,774			8,747			1,146			2,699			1,286			1,118			47,171
Payments	(8,219		)	(8,693		)	(4,368		)	(1,746		)	(1,452		)	(1		)	(24		)	(24,503		)	(7,780		)	(10,981		)	(1,797		)	(1,250		)	(658		)	—			—			(22,466		)
Charge-offs	(10,813		)	(2,056		)	(1,068		)	(1,408		)	(2,586		)	(1,576		)	(1,693		)	(21,200		)	(10,880		)	(1,466		)	(1,021		)	(340		)	(1,290		)	(1,286		)	(1,118		)	(17,401		)
Transfers to accrual status	—			(3,149		)	—			(310		)	(881		)	(2		)	—			(4,342		)	—			(913		)	—			(54		)	(678		)	—			—			(1,645		)
Transfers to OREO	(405		)	(2,115		)	(1,038		)	(1,378		)	(643		)	—			—			(5,579		)	(3		)	(1,083		)	(149		)	(993		)	(964		)	—			—			(3,192		)
Balance of non-accrual loans at June 30, 2016	$	35,538		$	35,512		$	9,420		$	20,569		$	10,703		$	—		$	—		$	111,742
Balance of non-accrual loans at June 30, 2017																									$	48,087		$	32,267		$	15,586		$	16,940		$	9,720		$	—		$	—		$	122,600

Non-accrual loans ~~decreased $17.4~~increased $10.9 million, or ~~13.5%~~9.7%, and ~~$17.8~~$2.5 million, or ~~13.7%~~2.1%, in comparison to June 30, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively.

The following table summarizes non-performing loans, by type, as of the indicated dates:


	June 30, 2016		June 30, 2015		December 31, 2015		June 30, 2017		June 30, 2016		December 31, 2016
	(in thousands)						(in thousands)
Commercial – industrial, financial and agricultural							$	51,320	$	38,902	$	43,460
Real estate – commercial mortgage	$	35,704	$	49,932	$	41,170	32,576		35,704		39,319
Commercial – industrial, financial and agricultural	38,902		35,839		44,071
Real estate – residential mortgage	25,030		31,562		28,484		21,846		25,030		23,655
Real estate – construction							16,564		11,879		9,842
Real estate – home equity	14,173		14,632		14,683		11,887		14,173		13,154
Real estate – construction	11,879		14,884		12,460
Consumer	1,888		2,583		2,440		1,269		1,888		1,891
Leasing	158		73		1,506		281		158		317
Total non-performing loans	$	127,734	$	149,505	$	144,814	$	135,743	$	127,734	$	131,638

Non-performing loans ~~decreased $21.8~~increased $8.0 million, or ~~14.6%~~6.3%, and ~~$17.1~~$4.1 million, or ~~11.8%~~3.1%, in comparison to June 30, ~~2015~~2016 and December 31, ~~2015,~~2016, respectively. ~~The decrease in non-performing~~Non-performing loans to total loans was ~~realized across all loan categories.~~

0.88% in comparison to 0.90% at both June 30, 2016 and December 31, 2016.

The following table summarizes the Corporation’s OREO, by property type, as of the indicated dates:


	June 30, 2016		June 30, 2015		December 31, 2015		June 30, 2017		June 30, 2016		December 31, 2016
	(in thousands)						(in thousands)
Residential properties	$	6,098	$	7,992	$	7,303	$	5,035	$	6,098	$	7,655
Commercial properties	3,686		2,123		2,167		3,670		3,686		2,651
Undeveloped land	2,134		2,648		1,629		2,727		2,134		2,509
Total OREO	$	11,918	$	12,763	$	11,099	$	11,432	$	11,918	$	12,815

The ~~Corporation's~~ ability to identify potential problem loans in a timely manner is important to maintaining an adequate allowance for credit losses. For commercial loans, commercial mortgages and construction loans to commercial borrowers, an internal risk rating process is used to monitor credit quality. The evaluation of credit risk for residential mortgages, home equity loans, construction loans to individuals, consumer loans and lease receivables is based on payment history, through the monitoring of delinquency levels and trends. For a description of the Corporation's risk ratings, see Note 5, "Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements.

Total internally risk rated loans were ~~$10.5~~$11.4 billion and ~~$10.3~~$10.9 billion as of June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. The following table presents internal risk ratings for commercial loans, commercial mortgages and construction loans to commercial borrowers with internal risk ratings of Special Mention (considered criticized loans) or Substandard or lower (considered classified loans), by class segment:


	Special Mention						Increase (decrease)					Substandard or lower						Increase (decrease)					Total Criticized and Classified Loans						Special Mention						Increase (Decrease)					Substandard or lower						Increase (Decrease)					Total Criticized and Classified Loans
	June 30, 2016			December 31, 2015			$			%		June 30, 2016			December 31, 2015			$			%		June 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016			$			%		June 30, 2017			December 31, 2016			$			%		June 30, 2017			December 31, 2016
	(dollars in thousands)																												(dollars in thousands)
Real estate - commercial mortgage	$	141,417		$	102,625		$	38,792		37.8	%	$	122,564		$	155,442		$	(32,878	)	(21.2	)%	$	263,981		$	258,067		$	119,534		$	132,484		$	(12,950	)	(9.8	)%	$	137,516		$	122,976		$	14,540		11.8	%	$	257,050		$	255,460
Commercial - secured	95,330			92,711			2,619			2.8		130,180			136,710			(6,530		)	(4.8	)	225,510			229,421			119,119			128,873			(9,754		)	(7.6	)	169,602			118,527			51,075			43.1		288,721			247,400
Commercial -unsecured	2,467			2,761			(294		)	(10.6	)	3,421			3,346			75			2.2		5,888			6,107			6,264			4,481			1,783			39.8		2,545			3,531			(986		)	(27.9	)	8,809			8,012
Total Commercial - industrial, financial and agricultural	97,797			95,472			2,325			2.4		133,601			140,056			(6,455		)	(4.6	)	231,398			235,528			125,383			133,354			(7,971		)	(6.0	)	172,147			122,058			50,089			41.0		297,530			255,412
Construction - commercial residential	17,012			17,154			(142		)	(0.8	)	14,838			21,812			(6,974		)	(32.0	)	31,850			38,966			9,789			15,447			(5,658		)	(36.6	)	16,387			13,172			3,215			24.4		26,176			28,619
Construction - commercial	2,548			3,684			(1,136		)	(30.8	)	4,594			3,597			997			27.7		7,142			7,281			4,727			3,412			1,315			38.5		5,220			5,115			105			2.1		9,947			8,527
Total real estate - construction (excluding construction - other)	19,560			20,838			(1,278		)	(6.1	)	19,432			25,409			(5,977		)	(23.5	)	38,992			46,247			14,516			18,859			(4,343		)	(23.0	)	21,607			18,287			3,320			18.2		36,123			37,146
Total	$	258,774		$	218,935		$	39,839		18.2	%	$	275,597		$	320,907		$	(45,310	)	(14.1	)%	$	534,371		$	539,842		$	259,433		$	284,697		$	(25,264	)	(8.9	)%	$	331,270		$	263,321		$	67,949		25.8	%	$	590,703		$	548,018

% of total risk rated loans	2.5		%	2.1		%						2.6		%	3.1		%						5.1		%	5.2		%	2.3		%	2.6		%						2.9		%	2.4		%						5.2		%	5.0		%

The following table summarizes loan delinquency rates, by type, as of the dates indicated:


	June 30, 2016									June 30, 2015									December 31, 2015									June 30, 2017									June 30, 2016									December 31, 2016
	30-89 Days			≥ 90 Days (1)			Total			30-89 Days			≥ 90 Days (1)			Total			30-89 Days			≥ 90 Days (1)			Total			30-89 Days			≥ 90 Days (1)			Total			30-89 Days			≥ 90 Days (1)			Total			30-89 Days			≥ 90 Days (1)			Total
Real estate – commercial mortgage	0.18		%	0.63		%	0.81		%	0.34		%	0.96		%	1.30		%	0.14		%	0.77		%	0.91		%	0.14		%	0.52		%	0.66		%	0.18		%	0.63		%	0.81		%	0.13		%	0.65		%	0.78		%
Commercial – industrial, financial and agricultural	0.30		%	0.95		%	1.25		%	0.22		%	0.93		%	1.15		%	0.21		%	1.06		%	1.27		%	0.22		%	1.21		%	1.43		%	0.30		%	0.95		%	1.25		%	0.25		%	1.06		%	1.31		%
Real estate – construction	0.54		%	1.39		%	1.93		%	0.02		%	2.04		%	2.06		%	0.28		%	1.59		%	1.87		%	0.06		%	1.76		%	1.82		%	0.54		%	1.39		%	1.93		%	0.12		%	1.17		%	1.29		%
Real estate – residential mortgage	0.97		%	1.73		%	2.70		%	1.53		%	2.30		%	3.83		%	1.33		%	2.07		%	3.40		%	0.89		%	1.22		%	2.11		%	0.97		%	1.73		%	2.70		%	1.27		%	1.48		%	2.75		%
Real estate – home equity	0.61		%	0.86		%	1.47		%	0.55		%	0.87		%	1.42		%	0.53		%	0.87		%	1.40		%	0.65		%	0.75		%	1.40		%	0.61		%	0.86		%	1.47		%	0.57		%	0.81		%	1.38		%
Consumer, leasing and other	1.03		%	0.43		%	1.46		%	1.29		%	0.65		%	1.94		%	1.36		%	0.92		%	2.28		%	0.37		%	0.11		%	0.48		%	1.03		%	0.43		%	1.46		%	1.23		%	0.42		%	1.65		%
Total	0.39		%	0.91		%	1.30		%	0.47		%	1.13		%	1.60		%	0.37		%	1.04		%	1.41		%	0.32		%	0.88		%	1.20		%	0.39		%	0.91		%	1.30		%	0.38		%	0.89		%	1.27		%
Total dollars (in thousands)	$	55,744		$	127,734		$	183,478		$	61,931		$	149,505		$	211,436		$	51,927		$	144,814		$	196,741		$	49,532		$	135,743		$	185,275		$	55,744		$	127,734		$	183,478		$	55,149		$	131,638		$	186,787


(1)	Includes non-accrual loans.

Management believes that the allowance for credit losses of ~~$165.1~~$175.0 million as of June 30, ~~2016~~2017 is sufficient to cover incurred losses in the loan and lease portfolio and unfunded lending commitments as of that date and is appropriate based on ~~applicable accounting standards.~~

~~Other Assets and Other Liabilities~~

The $77.4 million, or 13.1%, increase in other assets and the $99.4 million, or 33.9%, increase in other liabilities were driven by higher fair values for derivative financial instruments, mainly commercial loan interest rate swaps. See Note 9, "Derivative Financial Instruments," in the Notes to Consolidated Financial Statements for additional details.U.S. GAAP.

Deposits and Borrowings

The following table presents ending deposits, by ~~type:~~type, as of the dates indicated:


					Increase (Decrease)									Increase (Decrease)
	June 30, 2016		December 31, 2015		$			%		June 30, 2017		December 31, 2016		$			%
	(dollars in thousands)									(dollars in thousands)
Noninterest-bearing demand	$	4,125,375	$	3,948,114	$	177,261		4.5	%	$	4,574,619	$	4,376,137	$	198,482		4.5	%
Interest-bearing demand	3,358,536		3,451,207		(92,671		)	(2.7	)	3,650,204		3,703,712		(53,508		)	(1.4	)
Savings	3,986,008		3,868,046		117,962			3.0
Savings and money market accounts										4,386,128		4,179,773		206,355			4.9
Total demand and savings	11,469,919		11,267,367		202,552			1.8		12,610,951		12,259,622		351,329			2.9
Time deposits	2,822,645		2,864,950		(42,305		)	(1.5	)	2,746,410		2,753,242		(6,832		)	(0.2	)
Total deposits	$	14,292,564	$	14,132,317	$	160,247		1.1	%	$	15,357,361	$	15,012,864	$	344,497		2.3	%

Noninterest-bearing demand deposits increased ~~$177.3~~$198.5 million, or 4.5%, primarily as a result of increases in business account balances of ~~$195.2~~$187.6 million, or ~~6.5%~~5.7%, and personal account balances of $36.1 million, or 4.1%, partially offset by a decrease in municipal account balances of ~~$11.5~~$30.0 million, or ~~12.6%~~19.8%.

Interest-bearing demand accounts decreased $53.5 million, due to a $79.5 million, or 6.1%, seasonal decrease in municipal account balances, which was partially offset by ~~decreases~~a $24.2 million, or 1.2%, increase in personal account ~~balances of $16.6 million, or 2.0%, and other account balances of $12.9 million, or 27.5%.~~balances.

The ~~$118.0~~$206.4 million, or ~~3.0%~~4.9%, increase in savings and money market account balances was primarily due to a ~~$215.6~~$265.9 million, or ~~8.6%~~9.5%, increase in personal account balances, partially offset by a ~~decrease of $58.9~~$64.9 million, or ~~7.4%~~11.3%, ~~in business account balances and a $38.7 million, or 6.7%,~~seasonal decrease in municipal account balances.

Interest-bearing demand accounts decreased $92.7 million, or 2.7%, primarily due to a $58.8 million, or 2.9%, decrease in personal account balances, a $22.4 million, or 1.9%, decrease in municipal account balances and an $11.6 million, or 1.9%, decrease in business account balances.

The following table ~~summarizes~~presents ending short-term borrowings and long-term debt by type, as of the ~~changes in ending borrowings, by type:~~dates indicated:


					Increase (Decrease)									Increase (Decrease)
	June 30, 2016		December 31, 2015		$			%		June 30, 2017		December 31, 2016		$			%
	(dollars in thousands)									(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements	$	168,521	$	111,496	$	57,025		51.1	%	$	174,224	$	195,734	$	(21,510	)	(11.0	)%
Customer short-term promissory notes	69,509		78,932		(9,423		)	(11.9	)	74,366		67,013		7,353			11.0
Total short-term customer funding	238,030		190,428		47,602			25.0		248,590		262,747		(14,157		)	(5.4	)
Federal funds purchased	449,184		197,235		251,949			127.7		206,269		278,570		(72,301		)	(26.0	)
Short-term FHLB advances ⁽¹⁾	35,000		110,000		(75,000		)	(68.2	)	240,000		—		240,000			N/M
Total short-term borrowings	722,214		497,663		224,551			45.1		694,859		541,317		153,542			28.4
Long-term debt:
FHLB advances	603,685		587,756		15,929			2.7		652,177		567,240		84,937			15.0
Other long-term debt	361,867		361,786		81			—		385,784		362,163		23,621			6.5
Total long-term debt	965,552		949,542		16,010			1.7		1,037,961		929,403		108,558			11.7
Total borrowings	$	1,687,766	$	1,447,205	$	240,561		16.6	%	$	1,732,820	$	1,470,720	$	262,100		17.8	%

N/M - Not meaningful

(1) Represents FHLB advances with an original maturity term of less than one year.

~~The $224.6~~Total borrowings increased $262.1 million, or ~~45.1%~~17.8%, as a result of a $153.5 million, or 28.4%, increase in ~~total~~ short-term borrowings ~~resulted from~~and a $108.6 million, or 11.7%, increase in long-term debt. These increases were primarily the result of additional short-term and long-term FHLB advances used to help fund loan growth ~~exceeding~~as deposit growth ~~during~~lagged. The increase in other long-term debt was primarily the ~~first six months~~result of ~~2016.~~the issuance of $125.0 million of senior notes in March 2017, offset by the repayment of the $100.0 million of 10-year subordinated notes, which matured on May 1, 2017, as discussed in the "Results of Operations."

Shareholders' Equity

Total shareholders’ equity increased ~~$65.1~~$70.7 million, or ~~3.2%~~3.3%, during the first six months of ~~2016.~~2017. The increase was due primarily to ~~$78.0~~$88.8 million of net income, $4.9 million of stock issued and a ~~$29.7~~$13.6 million increase in other comprehensive income, partially offset by ~~$33.0~~$38.4 million of common stock ~~dividends and $16.3~~dividends.

In November 2016, the Corporation's board of directors approved an extension, through December 31, 2017, to a share repurchase program pursuant to which the Corporation is authorized to repurchase up to $50.0 million inof its outstanding shares of common stock, or approximately 2.3% of its outstanding shares. Repurchased shares may be added to treasury stock, ~~purchases.~~at cost. As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including without limitation, through accelerated share repurchase transactions. The share repurchase program may be discontinued at any time. As of June 30, 2017, 1.5 million shares were repurchased under this program for a total cost of $18.5 million, or $12.48 per share. Up to an additional $31.5 million of the Corporation's common stock may be repurchased under this program through December 31, 2017.

Regulatory Capital

The Corporation and its subsidiary banks are subject to regulatory capital requirements administered by various banking regulators. Failure to meet minimum capital requirements could result in certain actions by regulators that could have a material effect on the Corporation’s financial statements. In July 2013, the Federal Reserve Board approved final rules (the "U.S. Basel III Capital Rules") establishing a new comprehensive capital framework for U.S. banking organizations and implementing the Basel Committee on Banking Supervision's December 2010 framework for strengthening international capital standards. The U.S. Basel III Capital Rules substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions.

The ~~new~~ minimum regulatory capital requirements established by the U.S. Basel III Capital Rules became effective for the Corporation on January 1, 2015, and will be fully phased in on January 1, 2019.

The U.S. Basel III Capital Rules require the Corporation and its bank subsidiaries to:

Meet a ~~new~~ minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets and a Tier 1 capital ratio of 6.00% of risk-weighted assets;

Continue to require ~~the current~~a minimum Total capital ratio of 8.00% of risk-weighted assets and ~~the~~a minimum Tier 1 leverage capital ratio of 4.00% of average assets; and

Comply with a revised definition of capital to improve the ability of regulatory capital instruments to absorb losses. Certain non-qualifying capital instruments, including cumulative preferred stock and ~~TruPS, are being~~trust preferred securities ("TruPS"), have been phased out as a component of Tier 1 capital for institutions of the Corporation's size.

When fully phased in on January 1, 2019, the Corporation and its bank subsidiaries will also be required to maintain a "capital conservation buffer" of 2.50% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonus payments.

The U.S. Basel III Capital Rules use a standardized approach for risk weightings that expands the risk-weightings for assets and off-balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures and resulting in higher risk weights for a variety of asset categories.

As of June 30, ~~2016,~~2017, the Corporation and each of its bank subsidiaries met the minimum requirements of the U.S. Basel III Capital Rules, and each of the Corporation’s bank subsidiaries’ capital ratios exceeded the amounts required to be considered "well capitalized" as defined in the regulations. As of June 30, ~~2016,~~2017, the Corporation's capital levels also met the fully-phased in minimum capital requirements, including the capital conservation buffers, as prescribed in the U.S. Basel III Capital Rules.

The following table summarizes the Corporation’s capital ratios in comparison to regulatory requirements:


	June 30, 2016		December 31, 2015		Regulatory Minimum for Capital Adequacy		Fully Phased-in, with Capital Conservation Buffers		June 30, 2017		December 31, 2016		Regulatory Minimum for Capital Adequacy		Fully Phased-in, with Capital Conservation Buffers
Total Capital (to Risk-Weighted Assets)	13.1	%	13.2	%	8.0	%	10.5	%	12.9	%	13.2	%	8.0	%	10.5	%
Tier I Capital (to Risk-Weighted Assets)	10.3	%	10.2	%	6.0	%	8.5	%	10.2	%	10.4	%	6.0	%	8.5	%
Common Equity Tier I (to Risk-Weighted Assets)	10.3	%	10.2	%	4.5	%	7.0	%	10.2	%	10.4	%	4.5	%	7.0	%
Tier I Capital (to Average Assets)	9.0	%	9.0	%	4.0	%	4.0	%	9.1	%	9.0	%	4.0	%	4.0	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the exposure to economic loss that arises from changes in the values of certain financial instruments. The types of market risk exposures generally faced by financial institutions include interest rate risk, equity market price risk, debt security market price risk, foreign currency price risk and commodity price risk. Due to the nature of its operations, foreign currency price risk and commodity price risk are not significant to the Corporation.

Interest Rate Risk, Asset/Liability Management and Liquidity

Interest rate risk creates exposure in two primary areas. First, changes in rates have an impact on the Corporation’s liquidity position and could affect its ability to meet obligations and continue to grow. Second, movements in interest rates can create fluctuations in the Corporation’s net interest income and changes in the economic value of its equity.

The Corporation employs various management techniques to minimize its exposure to interest rate risk. An Asset/Liability Management Committee ~~(ALCO)~~("ALCO") is responsible for reviewing the interest rate sensitivity and liquidity positions of the Corporation, approving asset and liability management policies, and overseeing the formulation and implementation of strategies regarding balance sheet positions.

The Corporation uses two complementary methods to measure and manage interest rate risk. They are simulation of net interest income and estimates of economic value of equity. Using these measurements in tandem provides a reasonably comprehensive summary of the magnitude of the Corporation's interest rate risk, level of risk as time evolves, and exposure to changes in interest rates.

Simulation of net interest income is performed for the next 12-month period. A variety of interest rate scenarios are used to measure the effects of sudden and gradual movements upward and downward in the yield curve. These results are compared to the results obtained in a flat or unchanged interest rate scenario. Simulation of net interest income is used primarily to measure the Corporation’s short-term earnings exposure to rate movements. The Corporation’s policy limits the potential exposure of net interest income, in a non-parallel instantaneous shock, to 10% of the base case net interest income for a 100 basis point shock in interest rates, 15% for a 200 basis point shock and 20% for a 300 basis point shock. A "shock" is an immediate upward or downward movement of interest rates. The shocks do not take into account changes in customer behavior that could result in changes to mix and/or volumes in the balance sheet, nor do they take into account the potential effects of competition on the pricing of deposits and loans over the forward 12-month period.

Contractual maturities and repricing opportunities of loans are incorporated in the simulation model as are prepayment assumptions, maturity data and call options in the investment portfolio. Assumptions based on past experience are incorporated into the model for non-maturity deposit accounts. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model's simulated results due to timing, amount and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

The following table summarizes the expected impact of abrupt interest rate changes on net interest income as of June 30, ~~2016~~2017 (due to the current level of interest rates, the 200 and 300 basis point downward shock scenarios are not shown):



Rate Shock (1)	Annual change in net interest income	% Change in net interest income
+300 bp	+ ~~$73.3~~$102.5 million	~~14.1%~~16.5%
+200 bp	+ ~~$49.1~~$70.1 million	~~9.43%~~11.3%
+100 bp	+ ~~$22.5~~$35.6 million	~~4.3%~~5.7%
–100 bp	– ~~$15.6~~$52.3 million	– ~~3.0%~~8.4%


(1)	These results include the effect of implicit and explicit interest rate floors that limit further reduction in interest rates.

Economic value of equity estimates the discounted present value of asset and liability cash flows. Discount rates are based upon market prices for like assets and liabilities. Abrupt changes or "shocks" in interest rates, both upward and downward, are used to determine the comparative effect of such interest rate movements relative to the unchanged environment. This measurement tool is used primarily to evaluate the longer-term repricing risks and options in the Corporation’s balance sheet. The Corporation's policy limits the economic value of equity that may be at risk, in a non-parallel instantaneous shock, to 10% of the base case economic value of equity for a 100 basis point shock in interest rates, 20% for a 200 basis point shock and 30% for a 300 basis

point shock. As of June 30, ~~2016,~~2017, the Corporation was within economic value of equity policy limits for every 100 basis point shock.

Interest Rate Swaps

Liquidity

The Corporation must maintain a sufficient level of liquid assets to meet the cash needs of its customers, who, as depositors, may want to withdraw funds or who, as borrowers, need credit availability. Liquidity is provided on a continuous basis through scheduled and unscheduled principal and interest payments on investments and outstanding loans and through the availability of deposits and borrowings. The Corporation also maintains secondary sources that provide liquidity on a secured and unsecured basis to meet short-term and long-term needs. In addition, the Corporation has filed a shelf registration statement with the Securities and Exchange Commission under which the Corporation may, from time to time subject to then current market conditions, offer various types of debt and equity securities.

The Corporation maintains liquidity sources in the form of demand and savings deposits, time deposits, repurchase agreements and short-term promissory notes. The Corporation can access additional liquidity from these sources, if necessary, by increasing the rates of interest paid on those accounts and borrowings. The positive impact to liquidity resulting from paying higher interest rates could have a detrimental impact on the net interest margin and net income if rates on interest-earning assets do not experience a proportionate increase. Borrowing availability with the FHLB and the Federal Reserve Bank, along with federal funds lines at various correspondent banks, provides the Corporation with additional liquidity.

Each of the Corporation’s subsidiary banks is a member of the FHLB and has access to FHLB overnight and term credit facilities. As of June 30, ~~2016,~~2017, the Corporation had ~~$638.7~~$892.2 million of ~~short- and long-term~~ advances outstanding from the FHLB with an additional borrowing capacity of approximately ~~$2.8~~$3.0 billion under these facilities. Advances from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets.

As of June 30, ~~2016,~~2017, the Corporation had aggregate availability under federal funds lines of ~~$1.1 billion~~$932.0 million with ~~$449.2~~$206.3 million borrowed against that amount. A combination of commercial real estate loans, commercial loans and securities are pledged to the Federal Reserve Bank of Philadelphia to provide access to Federal Reserve Bank Discount Window borrowings. As of June 30, ~~2016,~~2017, the Corporation had ~~$1.3 billion~~$933.1 million of collateralized borrowing availability at the Discount Window, and no outstanding borrowings.

Liquidity must also be managed at the Fulton Financial Corporation parent company level. For safety and soundness reasons, banking regulations limit the amount of cash that can be transferred from subsidiary banks to the parent company in the form of loans and dividends. Generally, these limitations are based on the subsidiary banks’ regulatory capital levels and their net income. Management continues to monitor the liquidity and capital needs of the parent company and will implement appropriate strategies, as necessary, to remain adequately capitalized and to meet its cash needs.

The Corporation’s sources and uses of funds were discussed in general terms in the ~~net interest income~~"Net Interest Income" section of Management’s Discussion and Analysis. The consolidated statements of cash flows provide additional information. The Corporation’s operating activities during the first six months of ~~2016~~2017 generated ~~$74.1~~$75.0 million of cash, mainly due to net income. Cash used in investing activities was ~~$447.0~~$673.3 million, mainly due to net increases in loans and short-term investments. Net cash provided by financing activities was ~~$356.4~~$574.5 million due mainly to increases in deposits, ~~short-term borrowings and additions to~~ long-term debt ~~partially offset by cash dividends~~ and ~~purchases of treasury stock.~~short-term borrowings.

Equity Market Price Risk

Equity market price risk is the risk that changes in the values of equity investments could have a material impact on the financial position or results of operations of the Corporation. As of June 30, ~~2016,~~2017, equity investments consisted of ~~$19.8~~$20.5 million of common stocks of publicly traded financial institutions and ~~$895,000~~$1.0 million of other equity investments.

The equity investments most susceptible to equity market price risk are the financial institutions stocks, which had a cost basis of approximately ~~$13.4~~$9.7 million and aan estimated fair value of ~~$19.8~~$20.5 million at June 30, ~~2016,~~2017, including an investment in a single financial

institution with a cost basis of ~~$7.4~~$4.3 million and aan estimated fair value of ~~$10.4~~$8.8 million. The fair value of this investment accounted for ~~52.5%~~42.9% of the fair value of the common stocks of publicly traded financial institutions. No other investment in a single financial institution in the financial institutions stock portfolio exceeded 10% of the portfolio's fair value. In total, net unrealized gains in this portfolio were approximately ~~$6.5~~$10.8 million as of June 30, ~~2016.~~2017.

Management continuously monitors the fair value of its equity investments and evaluates current market conditions and operating results of the issuers. Periodic sale and purchase decisions are made based on this monitoring process. None of the Corporation’s equity securities are classified as trading.

In addition to its equity portfolio, investment management and trust services income may be impacted by fluctuations in the equity markets. A portion of this revenue is based on the value of the underlying investment portfolios, many of which include equity investments. If the values of those investment portfolios decrease, whether due to factors influencing U.S. or international securities markets in general or otherwise, the Corporation’s revenue would be negatively impacted. In addition, the Corporation’s ability to sell its brokerage services in the future will be dependent, in part, upon consumers’ level of confidence in financial markets.

Debt Security Market Price Risk

Debt security market price risk is the risk that changes in the values of debt securities, unrelated to interest rate changes, could have a material impact on the financial position or results of operations of the Corporation. The Corporation’s debt security investments consist primarily of U.S. government sponsored agency issued mortgage-backed securities and collateralized mortgage obligations, state and municipal securities, U.S. government debt securities, auction rate securities and corporate debt securities. All of the Corporation's investments in commercial and residential mortgage-backed securities and collateralized mortgage obligations have principal payments that are guaranteed by U.S. government sponsored agencies.

State and Municipal Securities

As of June 30, ~~2016,~~2017, the Corporation owned ~~$345.3~~$401.6 million of municipal securities issued by various states or municipalities. ~~Ongoing uncertainty with respect to the financial strength of municipal bond insurers places greater emphasis on the underlying strength of issuers. Continued~~Downward pressure on local tax revenues of issuers ~~due to adverse economic conditions~~ could have an adverse impact on the underlying credit quality of issuers. The Corporation evaluates existing and potential holdings primarily based on the creditworthiness of the issuing state or municipality and then, to a lesser extent, on any underlying credit enhancement. ~~Municipal~~State or municipal securities can be supported by the general obligation of the issuing state or municipality, allowing the securities to be repaid by any means available to the issuing municipality. As of June 30, ~~2016,~~2017, approximately ~~97%~~98% of state or municipal securities were supported by the general obligation of corresponding states or municipalities. Approximately ~~77%~~60% of these securities were school district issuances, which are also supported by the states of the issuing municipalities.

Auction Rate Securities

As of June 30, ~~2016,~~2017, the Corporation’s investments in ~~student loan~~ auction rate certificates ~~(ARC)~~("ARCs"), a type of auction rate ~~securities,~~security, had a cost basis of ~~$106.9~~$107.4 million and a fair value of $97.9 million.

ARCs are long-term securities that were structured to allow their sale in periodic auctions, resulting in both the treatment of ARCs as short-term instruments in normal market conditions and fair values that could be derived based on periodic auction prices. However, beginning in 2008, market auctions for these securities began to fail due to an insufficient number of buyers, resulting in an illiquid market. Therefore, asAs of June 30, ~~2016,~~2017, the fair values of the ARCs currently in the portfolio were derived using significant unobservable inputs based on an expected cash flows model which produced fair values that were materially different from those that would be expected from settlement of these investments in the current market. The expected cash flows model produced fair values which assumed a return to market liquidity sometime in the next five years. The Corporation believes that the trusts underlying the ARCs will self-liquidate as student loans are repaid.

The credit quality of the underlying debt associated with the ARCs is also a factor in the determination of their estimated fair value. As of June 30, ~~2016,~~2017, all of the ARCs were rated above investment grade. All of the loans underlying the ARCs have principal payments that are guaranteed by the federal government. At June 30, ~~2016,~~2017, all ARCs were current and making scheduled interest payments.

Corporate Debt Securities

The Corporation holds corporate debt securities in the form of pooled trust preferred securities, single-issuer trust preferred securities, subordinated debt and senior debt issued by financial ~~institutions and senior debt.~~institutions. As of June 30, ~~2016,~~2017, these securities had an amortized cost of ~~$95.4~~$88.9 million and an estimated fair value of ~~$91.5~~$89.0 million. ~~The amortized cost of pooled trust preferred securities was $0 as of June 30, 2016.~~

The fair values for pooled trust preferred securities and certain single-issuer trust preferred securities were based on quotes provided by third-party brokers who determined fair values based predominantly on internal valuation models which were not indicative prices or binding offers.

See "Note 4 - Investment Securities," in the Notes to Consolidated Financial Statements for further discussion related to the Corporation’s other-than-temporary impairment evaluations for debt securities, and see "Note 11 - Fair Value Measurements," in the Notes to Consolidated Financial Statements for further discussion related to the fair values of debt securities.

Item 4. Controls and Procedures

The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Rule 13a-15, promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, the Corporation’s disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in Corporation reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There have been no changes in the Corporation’s internal control over financial reporting during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information presented in the "Legal Proceedings" section of Note 10 "Commitment and Contingencies" of the Notes to Consolidated Financial Statements is incorporated herein by reference.

Item 1A. Risk Factors

~~See~~There have been no material changes to the risk factors previously disclosed in Part I, Item 1A of the Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 ~~for a detailed discussion of risk factors affecting the Company. Following is an additional risk factor:~~.

~~Changes in accounting policies, standards, and interpretations could materially affect how we report our financial condition and results of operations.~~

The preparation of the Corporation’s financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as revenues and expenses during the period. A summary of the accounting policies that the Corporation considers to be most important to the presentation of its financial condition and results of operations, because they require management’s most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain, is set forth under the heading "Critical Accounting Policies" within Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations," of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

A variety of factors could affect the ultimate values of assets, liabilities, income and expenses recognized and reported in the Corporation’s financial statements and these ultimate values may differ materially from those determined based on management’s estimates and assumptions. In addition, the Financial Accounting Standards Board (FASB), regulatory agencies, and other bodies that establish accounting standards from time to time change the financial accounting and reporting standards governing the preparation of the Corporation’s financial statements. Further, those bodies that establish and interpret the accounting standards (such as the FASB, the Securities and Exchange Commission, and banking regulators) may change prior interpretations or positions regarding how these standards should be applied. These changes can be difficult to predict and can materially affect how the Corporation records and reports its financial condition and results of operations. For example, the FASB recently issued a new accounting standard that will require the recognition of credit losses on loans and other financial assets based on an entity’s current estimate of expected losses over the lifetime of each loan or other financial asset, as opposed to current accounting standards, which require recognition of losses on loans and other financial assets only when those losses are "probable." The Corporation’s adoption of this accounting standard could materially affect the Corporation’s allowance for credit losses methodology, financial condition, capital levels and results of operations, including expenses the Corporation may incur in implementing this accounting standard.

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

~~The following table presents~~

(a) None.

(b) None.

(c) There were no purchases of equity securities by the ~~Corporation's monthly repurchases of its common stock~~issuer or any affiliated purchasers during the ~~second quarter of 2016:~~three months ended June 30, 2017.

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs

April 1, 2016 to April 30, 2016 —
$ —
—
$ 38,804,488
May 1, 2016 to May 31, 2016 —
—
—
38,804,488
June 1, 2016 to June 30, 2016 392,938
12.87
392,938
33,746,157

In October, 2015, the Corporation announced that its board of directors had approved a share repurchase program pursuant to which the Corporation is authorized to repurchase up to $50.0 million of its outstanding shares of common stock, or approximately 2.3% of its outstanding shares, through December 31, 2016. Repurchased shares may be added to treasury stock, at cost. As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including without limitation, through accelerated share repurchase transactions. The share repurchase program may be discontinued at any time. During the first quarter of 2016, 917,200 shares had been repurchased under this program for a total cost of $11.2 million, or $12.21 per share. During the second quarter of 2016, 392,938 shares had been repurchased under this program for a total cost of $5.1 million, or $12.87 per share.

~~No stock repurchases were made outside the program and all repurchases were made in accordance with the guidelines of Rule 10b-18 and in compliance with Regulation M.~~

~~Item 3. Defaults Upon Senior Securities~~

~~Not applicable.~~

~~Item 4. Mine Safety Disclosures~~

~~Not applicable.~~

~~Item 5. Other Information~~

~~Not applicable.~~

Item 6. Exhibits

See Exhibit Index for a list of the exhibits required by Item 601 of Regulation S-K and filed as part of this report.

FULTON FINANCIAL CORPORATION AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



FULTON FINANCIAL CORPORATION

Date:	August ~~5, 2016~~4, 2017	/s/ E. Philip Wenger
		E. Philip Wenger
		Chairman, Chief Executive Officer and President

Date:	August ~~5, 2016~~4, 2017	/s/ ~~Patrick S. Barrett~~Philmer H. Rohrbaugh
		~~Patrick S. Barrett~~Philmer H. Rohrbaugh
		Senior Executive Vice President, ~~and~~Chief Operating Officer
		and Chief Financial Officer

EXHIBIT INDEX

Exhibits Required Pursuant

to Item 601 of Regulation S-K




3.1		Articles of Incorporation, as amended and restated, of Fulton Financial Corporation– Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K dated June 24, 2011. (File No. 0-10587)

3.2		Bylaws of Fulton Financial Corporation as amended – Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on an Amended Form 8-K dated September 23, 2014.

~~10.1~~		~~Fulton Financial Corporation Equity and Cash Incentive Compensation Plan, as amended and restated effective June 30, 2016.~~

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		Financial statements from the Quarterly Report on Form 10-Q of Fulton Financial Corporation for the period ended June 30, ~~2016,~~2017, filed on August ~~5, 2016,~~4, 2017, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (iv) the Consolidated Statements of Shareholders' Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements - filed herewith.



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs

April 1, 2016 to April 30, 2016	—	$	—	—	$	38,804,488
May 1, 2016 to May 31, 2016	—	—		—	38,804,488
June 1, 2016 to June 30, 2016	392,938	12.87		392,938	33,746,157

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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