SECURITIES AND EXCHANGE COMMISSION

For the quarterly period ended ~~September~~June 30, ~~2017~~2019, or

For the transition period from to

Commission File No. 0-10587

(Exact name of registrant as specified in its charter)



~~PENNSYLVANIA~~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)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $2.50	FULT	Nasdaq

Indicate by ~~checkmark~~check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý☒ No ¨☐

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

Indicate by ~~checkmark~~check mark 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 ~~–175,122,000~~–166,270,000 shares outstanding as of ~~October 27, 2017.~~July 31, 2019.

FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2019

INDEX



Description		Page



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

(a)	Consolidated Balance Sheets - ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018	3

(b)	Consolidated Statements of Income - Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018	4

(c)	Consolidated Statements of Comprehensive Income - Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018	5

(d)	Consolidated Statements of Shareholders’ Equity - ~~Nine~~Three and six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018	6

(e)	Consolidated Statements of Cash Flows - ~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018	7

(f)	Notes to Consolidated Financial Statements	8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		4140

Item 3. Quantitative and Qualitative Disclosures about Market Risk		67

Item 4. Controls and Procedures		69

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		70

~~PART II. OTHER INFORMATION~~

Item ~~1. Legal Proceedings~~1A. Risk Factors		7170

~~Item 1A. Risk Factors~~		71

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		7170

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

Item 4. Mine Safety Disclosures - (not applicable)

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

Item 6. Exhibits		71

Signatures		72

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share data)


	September 30, 2017			December 31, 2016			June 30, 2019			December 31, 2018
	(unaudited)						(unaudited)
ASSETS
Cash and due from banks	$	99,803		$	118,763		$	107,091		$	103,436
Interest-bearing deposits with other banks	582,845			233,763			391,720			342,251
Cash and cash equivalents							498,811			445,687
Federal Reserve Bank and Federal Home Loan Bank stock	62,951			57,489			97,248			79,283
Loans held for sale	23,049			28,697			45,754			27,099
Available for sale investment securities	2,561,516			2,559,227
Loans, net of unearned income	15,486,899			14,699,272
Less: Allowance for loan losses	(172,245		)	(168,679		)
Net Loans	15,314,654			14,530,593
Investment securities:
Available for sale, at estimated fair value							2,285,794			2,080,294
Held to maturity, at amortized cost							567,564			606,679
Loans and leases, net of unearned income							16,368,458			16,165,800
Less: Allowance for loan and lease losses							(170,233		)	(160,537		)
Net Loans and leases							16,198,225			16,005,263
Premises and equipment	221,551			217,806			243,300			234,529
Accrued interest receivable	50,082			46,294			62,984			58,879
Goodwill and intangible assets	531,556			531,556			535,249			531,556
Other assets	614,853			620,059			773,741			612,883
Total Assets	$	20,062,860		$	18,944,247		$	21,308,670		$	20,682,152
LIABILITIES
Deposits:
Noninterest-bearing	$	4,363,915		$	4,376,137		$	4,226,404		$	4,310,105
Interest-bearing	11,777,865			10,636,727			12,162,491			12,066,054
Total Deposits	16,141,780			15,012,864			16,388,895			16,376,159
Short-term borrowings:
Federal funds purchased	5,812			278,570
Other short-term borrowings	292,939			262,747
Total Short-Term Borrowings	298,751			541,317
Short-Term Borrowings							1,188,390			754,777
Accrued interest payable	10,568			9,632			9,218			10,529
Other liabilities	347,816			329,916			425,953			300,835
Federal Home Loan Bank advances and other long-term debt	1,038,159			929,403
Federal Home Loan Bank advances and long-term debt							987,416			992,279
Total Liabilities	17,837,074			16,823,132			18,999,872			18,434,579
SHAREHOLDERS’ EQUITY
Common stock, $2.50 par value, 600 million shares authorized, 220.9 million shares issued in 2017 and 219.9 million shares issued in 2016	552,153			549,707
Common stock, $2.50 par value, 600 million shares authorized, 222.3 million shares issued in 2019 and 221.8 million issued in 2018							555,690			554,377
Additional paid-in capital	1,476,150			1,467,602			1,493,628			1,489,703
Retained earnings	812,148			732,099			1,018,736			946,032
Accumulated other comprehensive loss	(24,203		)	(38,449		)	(12,157		)	(59,063		)
Treasury stock, at cost, 45.8 million shares in 2017 and 2016	(590,462		)	(589,844		)
Treasury stock, at cost, 55.4 million shares in 2019 and 51.6 million shares in 2018							(747,099		)	(683,476		)
Total Shareholders’ Equity	2,225,786			2,121,115			2,308,798			2,247,573
Total Liabilities and Shareholders’ Equity	$	20,062,860		$	18,944,247		$	21,308,670		$	20,682,152

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per-share data) Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
INTEREST INCOME
Loans, including fees $ 155,152
$ 136,639
$ 446,158
$ 405,361
Investment securities:
Taxable 11,423
10,874
34,811
34,036
Tax-exempt 2,920
2,550
8,625
6,910
Dividends 105
143
343
438
Loans held for sale 243
210
631
529
Other interest income 1,667
1,052
3,311
2,814
Total Interest Income 171,510
151,468
493,879
450,088
INTEREST EXPENSE
Deposits 16,023
11,311
40,709
32,925
Short-term borrowings 578
254
2,407
739
Federal Home Loan Bank advances and other long-term debt 8,100
9,338
24,812
27,889
Total Interest Expense 24,701
20,903
67,928
61,553
Net Interest Income 146,809
130,565
425,951
388,535
Provision for credit losses 5,075
4,141
16,575
8,182
Net Interest Income After Provision for Credit Losses 141,734
126,424
409,376
380,353
NON-INTEREST INCOME
Service charges on deposit accounts 13,022
13,078
38,336
38,532
Other service charges and fees 12,251
14,407
39,030
38,140
Investment management and trust services 12,157
11,425
36,097
33,660
Mortgage banking income 4,805
4,529
15,542
12,456
Investment securities gains, net 4,597
2
7,139
1,025
Other 5,142
4,708
14,874
13,610
Total Non-Interest Income 51,974
48,149
151,018
137,423
NON-INTEREST EXPENSE
Salaries and employee benefits 72,894
70,696
216,626
210,097
Net occupancy expense 12,180
11,782
37,159
35,813
Data processing and software 10,301
8,727
28,334
27,477
Other outside services 6,582
5,783
19,836
17,347
Amortization of tax credit investments 3,503
—
7,652
—
Professional fees 3,388
2,535
9,056
8,221
Equipment expense 3,298
3,137
9,691
9,380
FDIC insurance expense 3,007
1,791
7,431
7,700
Marketing 2,089
1,774
6,309
5,314
Other 14,915
13,623
45,033
40,549
Total Non-Interest Expense 132,157
119,848
387,127
361,898
Income Before Income Taxes 61,551
54,725
173,267
155,878
Income taxes 12,646
13,257
35,515
36,403
Net Income $ 48,905
$ 41,468
$ 137,752
$ 119,475

PER SHARE:
Net Income (Basic) $ 0.28
$ 0.24
$ 0.79
$ 0.69
Net Income (Diluted) 0.28
0.24
0.78
0.69
Cash Dividends 0.11
0.10
0.33
0.29
See Notes to Consolidated Financial Statements



(in thousands, except per-share data)	Three months ended June 30				Six months ended June 30
	2019		2018		2019		2018
INTEREST INCOME
Loans and leases, including fees	$	188,310	$	167,825	$	372,054	$	327,961
Investment securities:
Taxable	15,935		13,885		31,370		27,083
Tax-exempt	3,271		2,933		6,550		5,898
Loans held for sale	350		284		590		500
Other interest income	2,168		1,243		4,170		2,415
Total Interest Income	210,034		186,170		414,734		363,857
INTEREST EXPENSE
Deposits	32,548		19,284		62,237		35,734
Short-term borrowings	4,462		3,036		8,044		5,077
Federal Home Loan Bank advances and long-term debt	8,480		7,783		16,594		15,661
Total Interest Expense	45,490		30,103		86,875		56,472
Net Interest Income	164,544		156,067		327,859		307,385
Provision for credit losses	5,025		33,117		10,125		37,087
Net Interest Income After Provision for Credit Losses	159,519		122,950		317,734		270,298
NON-INTEREST INCOME
Wealth management income	14,153		12,803		27,392		25,674
Commercial banking income	18,442		16,431		33,205		30,388
Consumer banking income	12,367		11,931		23,744		23,340
Mortgage banking income	6,593		5,163		11,365		9,356
Other income	2,584		2,762		5,119		6,188
Non-Interest Income Before Investment Securities Gains	54,139		49,090		100,825		94,946
Investment securities gains, net	176		4		241		23
Total Non-Interest Income	54,315		49,094		101,066		94,969
NON-INTEREST EXPENSE
Salaries and employee benefits	78,991		74,919		156,748		150,687
Net occupancy expense	14,469		12,760		27,378		26,392
Data processing and software	11,268		10,453		21,621		20,926
Other outside services	11,259		7,568		19,611		15,692
Equipment expense	3,299		3,434		6,641		6,968
Professional fees	2,970		2,372		6,930		7,188
Marketing	2,863		2,335		5,023		4,585
FDIC insurance expense	2,755		2,663		5,364		5,616
State Taxes	2,480		2,454		4,482		4,756
Amortization of tax credit investments	1,492		1,637		2,983		3,274
Intangible amortization	107		—		214		—
Other	12,215		12,750		24,997		23,922
Total Non-Interest Expense	144,168		133,345		281,992		270,006
Income Before Income Taxes	69,666		38,699		136,808		95,261
Income taxes	9,887		3,502		20,366		10,584
Net Income	$	59,779	$	35,197	$	116,442	$	84,677
PER SHARE:
Net Income (Basic)	$	0.36	$	0.20	$	0.69	$	0.48
Net Income (Diluted)	0.35		0.20		0.68		0.48
Cash Dividends	0.13		0.12		0.26		0.24
See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	Three months ended September 30						Nine months ended September 30						Three months ended June 30						Six months ended June 30
	2017			2016			2017			2016			2019			2018			2019			2018

Net Income	$	48,905		$	41,468		$	137,752		$	119,475		$	59,779		$	35,197		$	116,442		$	84,677
Other Comprehensive Income (Loss), net of tax:
Unrealized gain (loss) on securities	3,320			(3,580		)	17,861			26,285			24,917			(6,631		)	45,215			(34,275		)
Reclassification adjustment for securities gains included in net income	(2,988		)	(1		)	(4,639		)	(666		)	(137		)	(3		)	(188		)	(19		)
Amortization of unrealized loss on derivative financial instruments	—			4			—			12
Amortization of net unrecognized pension and postretirement items	340			379			1,024			877
Amortization of net unrealized losses on available for sale securities transferred to held to maturity													1,021			—			1,995			—
Non-credit related unrealized (loss) gain on other-than-temporarily impaired debt securities													(600		)	8			(682		)	232
Amortization of net unrecognized pension and postretirement income													275			540			566			879
Other Comprehensive Income (Loss)	672			(3,198		)	14,246			26,508			25,476			(6,086		)	46,906			(33,183		)
Total Comprehensive Income	$	49,577		$	38,270		$	151,998		$	145,983		$	85,255		$	29,111		$	163,348		$	51,494

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

~~NINE~~ ~~MONTHS ENDED~~ ~~SEPTEMBER 30, 2017~~ ~~AND~~ ~~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
Three months ended June 30, 2019
Balance at March 31, 2019																			169,923		$	554,485	$	1,491,870		$	980,708		$	(37,633	)	$	(688,411	)	$	2,301,019
Net income							137,752									137,752										59,779									59,779
Other comprehensive income										14,246						14,246													25,476						25,476
Stock issued	1,017		2,446		5,209								(618		)	7,037			429		1,205		(30		)							(1,179		)	(4		)
Stock-based compensation awards					3,339											3,339							1,788												1,788
Common stock cash dividends - $0.33 per share							(57,703		)							(57,703		)
Balance at September 30, 2017	175,057		$	552,153	$	1,476,150	$	812,148		$	(24,203	)	$	(590,462	)	$	2,225,786
Acquisition of treasury stock																			(3,449	)												(57,509		)	(57,509		)
Common stock cash dividends - $0.13 per share																										(21,751		)							(21,751		)
Balance at June 30, 2019																			166,903		$	555,690	$	1,493,628		$	1,018,736		$	(12,157	)	$	(747,099	)	$	2,308,798

Balance at December 31, 2015	174,176		$	547,141	$	1,450,690	$	641,588		$	(22,017	)	$	(575,508	)	$	2,041,894
Three months ended June 30, 2018
Balance at March 31, 2018																			175,404		$	552,682	$	1,481,545		$	857,153		$	(67,172	)	$	(588,715	)	$	2,235,493
Net income																										35,197									35,197
Other comprehensive loss																													(6,086		)				(6,086		)
Stock issued																			427		1,236		6									(1,577		)	(335		)
Stock-based compensation awards																			16		40		2,634												2,674
Common stock cash dividends - $0.12 per share																										(21,158		)							(21,158		)
Balance at June 30, 2018																			175,847		$	553,958	$	1,484,185		$	871,192		$	(73,258	)	$	(590,292	)	$	2,245,785

Six months ended June 30, 2019
Balance at December 31, 2018																			170,184		$	554,377	$	1,489,703		$	946,032		$	(59,063	)	$	(683,476	)	$	2,247,573
Net income							119,475									119,475										116,442									116,442
Other comprehensive income										26,508						26,508													46,906						46,906
Stock issued, including related tax benefits	454		594		2,099								2,833			5,526
Stock issued																			544		1,313		577									(237		)	1,653
Stock-based compensation awards					4,808											4,808							3,348												3,348
Acquisition of treasury stock	(1,486	)											(18,545		)	(18,545		)	(3,825	)												(63,386		)	(63,386		)
Common stock cash dividends - $0.29 per share							(50,230		)							(50,230		)
Balance at September 30, 2016	173,144		$	547,735	$	1,457,597	$	710,833		$	4,491		$	(591,220	)	$	2,129,436
Common stock cash dividends - $0.26 per share																										(43,738		)							(43,738		)
Balance at June 30, 2019																			166,903		$	555,690	$	1,493,628		$	1,018,736		$	(12,157	)	$	(747,099	)	$	2,308,798

Six months ended June 30, 2018
Balance at December 31, 2017																			175,170		$	552,232	$	1,478,389		$	821,619		$	(32,974	)	$	(589,409	)	$	2,229,857
Net income																										84,677									84,677
Other comprehensive loss																													(33,183		)				(33,183		)
Stock issued																			661		1,686		1,652									(883		)	2,455
Stock-based compensation awards																			16		40		4,144												4,184
Reclassification of stranded tax effects ⁽¹⁾																										7,101			(7,101		)				—
Common stock cash dividends - $0.24 per share																										(42,205		)							(42,205		)
Balance at June 30, 2018																			175,847		$	553,958	$	1,484,185		$	871,192		$	(73,258	)	$	(590,292	)	$	2,245,785

See Notes to Consolidated Financial Statements
(1) The Corporation adopted the Accounting Standards Codification ("ASC") Update 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" in the first quarter of 2018 which permitted a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings of the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017, which changed the federal corporate income tax rate from 35% to 21%. As a result, $7.1 million of stranded tax effects were reclassified from AOCI to retained earnings during the first quarter of 2018.																			(1) The Corporation adopted the Accounting Standards Codification ("ASC") Update 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" in the first quarter of 2018 which permitted a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings of the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017, which changed the federal corporate income tax rate from 35% to 21%. As a result, $7.1 million of stranded tax effects were reclassified from AOCI to retained earnings during the first quarter of 2018.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

~~(in thousands)~~



(in thousands)	Six months ended June 30
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	116,442		$	84,677
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	10,125			37,087
Depreciation and amortization of premises and equipment	13,924			14,580
Amortization of tax credit investments	16,311			16,729
Net amortization of investment securities premiums	4,359			4,856
Investment securities gains, net	(241		)	(23		)
Gain on sales of mortgage loans held for sale	(8,302		)	(6,499		)
Proceeds from sales of mortgage loans held for sale	375,306			379,399
Originations of mortgage loans held for sale	(385,659		)	(377,268		)
Amortization of intangible assets	214			—
Amortization of issuance costs and discounts on long-term debt	421			399
Stock-based compensation	3,348			4,184
Increase in accrued interest receivable	(4,105		)	(2,298		)
Increase in other assets	(217,816		)	(10,687		)
Increase in accrued interest payable	(1,311		)	(1,024		)
Increase (decrease) in other liabilities	155,832			(9,278		)
Total adjustments	(37,594		)	50,157
Net cash provided by operating activities	78,848			134,834
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale	283,952			48,731
Proceeds from principal repayments and maturities of securities held to maturity	40,058			—
Proceeds from principal repayments and maturities of securities available for sale	113,154			170,141
Purchase of securities available for sale	(538,629		)	(306,713		)
Purchase of Federal Reserve Bank and Federal Home Loan Bank stock	(17,965		)	(5,954		)
Net increase in loans and leases	(205,404		)	(65,361		)
Net purchases of premises and equipment	(22,695		)	(21,973		)
Net cash paid for acquisition	(3,907		)	—
Net change in tax credit investments	(11,092		)	(38,544		)
Net cash used in by investing activities	(362,528		)	(219,673		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand and savings deposits	(228,999		)	(265,298		)
Net increase in time deposits	241,735			67,565
Increase in short-term borrowings	433,613			366,309
Additions to long-term debt	105,000			50,000
Repayments of long-term debt	(110,132		)	(100,081		)
Net proceeds from issuance of common stock	1,653			2,455
Dividends paid	(42,680		)	(40,378		)
Acquisition of treasury stock	(63,386		)	—
Net cash provided by financing activities	336,804			80,572
Net Increase (Decrease) in Cash and Cash Equivalents	53,124			(4,267		)
Cash and Cash Equivalents at Beginning of Period	445,687			402,096
Cash and Cash Equivalents at End of Period	$	498,811		$	397,829
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	88,186		$	57,496
Income taxes	4,932			5,794
See Notes to Consolidated Financial Statements

Nine months ended September 30
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 137,752
$ 119,475
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 16,575
8,182
Depreciation and amortization of premises and equipment 21,013
20,547
Net amortization of investment securities premiums 7,412
7,434
Investment securities gains, net (7,139 ) (1,025 )
Gain on sales of mortgage loans held for sale (10,122 ) (11,967 )
Proceeds from sales of mortgage loans held for sale 470,927
493,457
Originations of mortgage loans held for sale (455,157 ) (492,440 )
Amortization of issuance costs on long-term debt 618
347
Stock-based compensation 3,339
4,808
Excess tax benefits from stock-based compensation —
(58 )
Increase in accrued interest receivable (3,788 ) (833 )
Decrease (increase) in other assets 38,108
(9,075 )
Increase in accrued interest payable 936
2,921
(Decrease) increase in other liabilities (26,027 ) 2,061
Total adjustments 56,695
24,359
Net cash provided by operating activities 194,447
143,834
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale 44,485
84,978
Proceeds from principal repayments and maturities of securities available for sale 321,088
426,932
Purchase of securities available for sale (344,569 ) (484,164 )
Increase in short-term investments (354,544 ) (136,450 )
Net increase in loans (800,778 ) (567,061 )
Net purchases of premises and equipment (24,758 ) (23,021 )
Net cash used in investing activities (1,159,076 ) (698,786 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits 1,014,697
880,795
Net increase (decrease) in time deposits 114,219
(60,633 )
Decrease in short-term borrowings (242,566 ) (233,621 )
Additions to long-term debt 223,251
16,000
Repayments of long-term debt (115,114 ) (603 )
Net proceeds from issuance of common stock 7,037
5,468
Excess tax benefits from stock-based compensation —
58
Dividends paid (55,855 ) (48,590 )
Acquisition of treasury stock —
(18,545 )
Net cash provided by financing activities 945,669
540,329
Net Decrease in Cash and Due From Banks (18,960 ) (14,623 )
Cash and Due From Banks at Beginning of Period 118,763
101,120
Cash and Due From Banks at End of Period $ 99,803
$ 86,497
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 66,992
$ 58,632
Income taxes 7,881
9,404
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 Corporation's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018. Operating results for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2019. The Corporation evaluates subsequent events through the date of filing of this Form 10-Q with the U.S. Securities and Exchange Commission ("SEC").

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASC Update 2016-02, "Leases (Topic 842)." This standards update requires a lessee to recognize for all leases with an initial term greater than twelve months: (1) a "right-of-use" ("ROU") asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term; and (2) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, each measured on a discounted basis. This standards update is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Corporation adopted ASC Update 2016-02 in the first quarter of 2019 using the alternative transition method, which eliminates the requirement to restate the earliest prior period presented in an entity’s financial statements. As such, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.

This standards update provides for a number of practical expedients in transition. The Corporation elected to apply the package of practical expedients permitted within the new standard, which, among other things, allowed it to carryforward the prior conclusions on lease identification, lease classification and initial direct costs. In addition, the Corporation elected to not separate lease and non-lease components. The Corporation did not elect the practical expedient to apply hindsight in determining the lease term and in assessing impairment of the ROU assets. See "Note 6 - Leases" for additional information and expanded lessee disclosures.

This standards update also provides additional guidance on lessor accounting. The Corporation provides equipment lease financing to its customers, which are categorized as direct financing leases. The adoption of this standards update did not result in any changes to the accounting for this type of lease as the lessor.

Recently Issued Accounting Standards

In May 2014, the 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. The FASB has issued amendments to this standard (ASC Updates 2016-08, 2016-10, 2016-11, 2016-12 and 2017-13). 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. For the Corporation, this standards update is effective with its March 31, 2018 quarterly report on Form 10-Q. The Corporation has evaluated the impact of the adoption of ASC Update 2014-09 on its consolidated financial statements and has not identified any significant changes in the timing of revenue recognition as a result of this amended guidance at this time. In addition, the Corporation is evaluating the expanded disclosure requirements included in the update. The Corporation plans to adopt this update on January 1, 2018 under the modified retrospective approach and does not expect the adoption of ASC Update 2014-09 to have a material impact on its consolidated financial statements.



Standard	Description	Date of Anticipated Adoption	Effect on Financial Statements
ASC Update 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	The new impairment model prescribed by this standards update is a single impairment model for all financial assets (i.e., loans and held to maturity 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 incurred under current GAAP. This update also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. This adjustment will also be recognized in regulatory capital. This update is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. In November 2018, the FASB issued ASC Update 2018-19, "Codifications Improvements to Topic 326, Financial Instruments - Credit Losses" which clarifies that receivables arising from operating leases are accounted for using lease guidance and not as financial instruments. ASC Update 2019-04 and 2019-05 were issued to provide certain clarifications and transition relief to adopting this standards update.	First Quarter of 2020	The Corporation intends to adopt these standards updates effective with its March 31, 2020 quarterly report on Form 10-Q. The Corporation believes that total credit loss reserves will increase at the adoption date and that the magnitude of the increase will depend on the composition, characteristics and quality of its loan portfolio and off balance sheet credit exposures as well as the prevailing economic conditions and forecasts as of the adoption date. The Corporation is in the early stages of conducting parallel runs of its new processes and controls and is beginning its model validation process. The Corporation will continue to make refinements to its credit loss model throughout the remainder of 2019.
ASC Update 2017-04 Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	The FASB issued this update to simplify the subsequent quantitative measurement of goodwill by eliminating Step 2 of the goodwill impairment test. Instead, 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 amounts 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. This update is effective for annual or interim goodwill impairment tests in reporting periods beginning after December 15, 2019. Early adoption is permitted.	Fourth Quarter of 2020, in line with its annual impairment testing in October of each year	The Corporation does not expect the adoption of this update to have a material impact on its consolidated financial statements. The Corporation has not needed to perform step 2 since its 2012 impairment testing.
ASC Update 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	This update changes the fair value measurement disclosure requirements of ASC Topic 820 "Fair Value Measurement." Among other things, the update modifies the disclosure objective paragraphs of ASC 820 to eliminate: (1) "at a minimum" from the phrase "an entity shall disclose at a minimum;" and (2) other similar disclosure requirements to promote the appropriate exercise of discretion by entities.	First Quarter of 2020	The Corporation intends to adopt this standards update effective with its March 31, 2020 quarterly report on Form 10-Q. This standard will impact the Corporation's Fair Value Measurement disclosure, but the Corporation does not expect the adoption of this update to have a material impact 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. In September of 2017, the FASB issued clarifying guidance to this standard (ASC Update 2017-13). 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, which requires restatement of all comparative periods in the year of adoption. Early 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. The Corporation currently operates a number of branches that are leased, with the leases accounted for as operating leases that are not recognized on the consolidated balance sheet. Under ASC Update 2016-02, right-of-use assets and lease liabilities will need to be recognized on the consolidated balance sheet for these branches, which will also have an impact on regulatory capital ratios. The recognition



Standard	Description	Date of Anticipated Adoption	Effect on Financial Statements
ASC Update 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans	This update amends ASC Topic 715-20 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This update is effective for annual reporting periods beginning after December 15, 2020. Early adoption is permitted.	First Quarter of 2021	The Corporation intends to adopt this standards update effective with its March 31, 2021 quarterly report on Form 10-Q. This standard will impact the Corporation's disclosure relating to employee benefit plans, but the Corporation does not expect the adoption of this update to have a material impact on its consolidated financial statements.
ASC Update 2018-15 Intangibles - Goodwill and Other - Internal Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract	This update requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC Subtopic 350-40 to determine which implementation costs to capitalize as assets. This update is effective for annual or interim reporting periods beginning after December 15, 2019. Early adoption is permitted.	First Quarter of 2020	The Corporation intends to adopt this standards update effective with its March 31, 2020 quarterly report on Form 10-Q and does not expect the adoption of this update to have a material impact on its consolidated financial statements.

~~of operating leases on the consolidated balance sheet is expected to be the most significant impact of the adoption of 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 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. The Corporation intends to adopt this standards update 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 does not expect the adoption of ASC Update 2017-07 to have a material impact 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 ~~2016~~2018 consolidated financial statements and notes have been reclassified to conform to the ~~2017~~2019 presentation.

NOTE 2 – ~~Net Income Per Share~~Restrictions on Cash and Cash Equivalents

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 units ("RSUs") and performance-based restricted stock units ("PSUs"). PSUs~~subsidiary banks are required to bemaintain reserves against their deposit liabilities. These reserves are in the form of cash and balances with the Federal Reserve Bank ("FRB"), included in ~~weighted average shares outstanding if performance measures, as defined in each PSU award agreement, are met~~"interest-bearing deposits with other banks." The amounts of such reserves as of June 30, 2019 and December 31, 2018 were $186.6 million and $156.8 million, respectively.

In addition, collateral is posted by the ~~end~~Corporation with counterparties to secure derivative contracts and other contracts, which are included in "interest-bearing deposits with other banks." The amounts of ~~the period.~~such collateral as of June 30, 2019 and December 31, 2018 were $173.1 million and $45.1 million, respectively.

~~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 September 30 Nine months ended September 30
2017 2016 2017 2016
(in thousands)
Weighted average shares outstanding (basic) 174,991
173,020
174,582
173,248
Impact of common stock equivalents 1,225
1,044
1,194
1,017
Weighted average shares outstanding (diluted) 176,216
174,064
175,776
174,265

For the three and nine months ended September 30, 2016, 447,000 and 712,000 stock options, respectively, were excluded from the diluted net income per share computation as their effect would have been anti-dilutive. There were no stock options excluded for the three and nine months ended September 30, 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
(in thousands)
Three months ended September 30, 2017
Unrealized gain on securities $ 5,109
$ (1,789 ) $ 3,320
Reclassification adjustment for securities gains included in net income ⁽¹⁾
(4,597 ) 1,609
(2,988 )
Amortization of net unrecognized pension and postretirement items ⁽³⁾
523
(183 ) 340
Total Other Comprehensive Income $ 1,035
$ (363 ) $ 672
Three months ended September 30, 2016
Unrealized loss on securities $ (5,505 ) $ 1,925
$ (3,580 )
Reclassification adjustment for securities gains included in net income ⁽¹⁾
(2 ) 1
(1 )
Amortization of unrealized loss on derivative financial instruments⁽²⁾
6
(2 ) 4
Amortization of net unrecognized pension and postretirement items ⁽³⁾
583
(204 ) 379
Total Other Comprehensive Loss $ (4,918 ) $ 1,720
$ (3,198 )

Nine months ended September 30, 2017
Unrealized gain on securities $ 27,482
$ (9,621 ) $ 17,861
Reclassification adjustment for securities gains included in net income ⁽¹⁾
(7,139 ) 2,500
(4,639 )
Amortization of net unrecognized pension and postretirement items ⁽³⁾
1,575
(551 ) 1,024
Total Other Comprehensive Income $ 21,918
$ (7,672 ) $ 14,246

Nine months ended September 30, 2016
Unrealized gain on securities $ 40,441
$ (14,156 ) $ 26,285
Reclassification adjustment for securities gains included in net income ⁽¹⁾
(1,025 ) 359
(666 )
Amortization of unrealized loss on derivative financial instruments ⁽²⁾
18
(6 ) 12
Amortization of net unrecognized pension and postretirement items ⁽³⁾
1,349
(472 ) 877
Total Other Comprehensive Income $ 40,783
$ (14,275 ) $ 26,508


~~(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
(in thousands)
Three months ended September 30, 2017
Balance at June 30, 2017 $ (10,157 ) $ 273
$ —
$ (14,991 ) $ (24,875 )
Other comprehensive income before reclassifications 3,320
—
—
—
3,320
Amounts reclassified from accumulated other comprehensive income (loss) (2,988 ) —
—
340
(2,648 )
Balance at September 30, 2017 $ (9,825 ) $ 273
$ —
$ (14,651 ) $ (24,203 )
Three months ended September 30, 2016

Balance at June 30, 2016 $ 22,701
$ 458
$ (7 ) $ (15,463 ) $ 7,689
Other comprehensive loss before reclassifications (3,580 )
—
—
—
(3,580 )
Amounts reclassified from accumulated other comprehensive income (loss) (1 ) —
4
379
382
Balance at September 30, 2016 $ 19,120
$ 458
$ (3 ) $ (15,084 ) $ 4,491

Nine months ended September 30, 2017
Balance at December 31, 2016 $ (23,047 ) $ 273
$ —
$ (15,675 ) $ (38,449 )
Other comprehensive income before reclassifications 17,861
—
—
—
17,861
Amounts reclassified from accumulated other comprehensive income (loss) (4,639 ) —
—
1,024
(3,615 )
Balance at September 30, 2017 $ (9,825 ) $ 273
$ —
$ (14,651 ) $ (24,203 )
Nine months ended September 30, 2016
Balance at December 31, 2015 $ (6,499 ) $ 458
$ (15 ) $ (15,961 ) $ (22,017 )
Other comprehensive income before reclassifications 26,285
—
—
—
26,285
Amounts reclassified from accumulated other comprehensive income (loss) (666 ) —
12
877
223
Balance at September 30, 2016 $ 19,120
$ 458
$ (3 ) $ (15,084 ) $ 4,491

~~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:~~securities:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
September 30, 2017
U.S. Government sponsored agency securities	$	5,961	$	54	$	—		$	6,015
June 30, 2019										(in thousands)
Available for Sale
State and municipal securities	415,313		4,005		(5,405		)	413,913		$	307,911	$	8,508	$	(85	)	$	316,334
Corporate debt securities	92,355		2,578		(1,956		)	92,977		194,858		4,885		(2,321		)	197,422
Collateralized mortgage obligations	601,845		1,380		(9,547		)	593,678		889,053		12,190		(2,126		)	899,117
Residential mortgage-backed securities	1,184,797		5,850		(8,561		)	1,182,086		331,566		1,623		(3,914		)	329,275
Commercial mortgage-backed securities	161,960		299		(627		)	161,632		433,027		7,406		(152		)	440,281
Auction rate securities	107,410		—		(9,254		)	98,156		107,410		—		(4,045		)	103,365
Total debt securities	2,569,641		14,166		(35,350		)	2,548,457
Equity securities	6,560		6,499		—			13,059
Total	$	2,576,201	$	20,665	$	(35,350	)	$	2,561,516	$	2,263,825	$	34,612	$	(12,643	)	$	2,285,794

Held to Maturity
State and municipal securities										$	155,861	$	8,700	$	—		$	164,561
Residential mortgage-backed securities										411,703		13,464		—			425,167
Total										$	567,564	$	22,164	$	—		$	589,728



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2018	(in thousands)
Available for Sale
U.S. Government sponsored agency securities	$	31,586	$	185	$	(139	)	$	31,632
State and municipal securities	282,383		2,178		(5,466		)	279,095
Corporate debt securities	111,454		1,432		(3,353		)	109,533
Collateralized mortgage obligations	841,294		2,758		(11,972		)	832,080
Residential mortgage-backed securities	476,973		1,583		(15,212		)	463,344
Commercial mortgage-backed securities	264,165		524		(3,073		)	261,616
Auction rate securities	107,410		—		(4,416		)	102,994
Total	$	2,115,265	$	8,660	$	(43,631	)	$	2,080,294

Held to Maturity
State and municipal securities	$	156,134	$	1,166	$	(93	)	$	157,207
Residential mortgage-backed securities	450,545		3,667		—			454,212
Total	$	606,679	$	4,833	$	(93	)	$	611,419

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value
(in thousands)
December 31, 2016
U.S. Government sponsored agency securities $ 132
$ 2
$ —
$ 134
State and municipal securities 405,274
2,043
(15,676 ) 391,641
Corporate debt securities 112,016
1,978
(4,585 ) 109,409
Collateralized mortgage obligations 604,095
1,943
(12,178 ) 593,860
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 107,215
—
(9,959 ) 97,256
Total debt securities 2,582,024
12,512
(59,835 ) 2,534,701
Equity securities 12,231
12,295
—
24,526
Total $ 2,594,255
$ 24,807
$ (59,835 ) $ 2,559,227

Securities carried at ~~$1.9 billion~~$857.1 million at June 30, 2019 and ~~$1.8 billion as of September 30, 2017 and~~$973.4 million at December 31, ~~2016, respectively,~~2018, 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 $12.1 million at September 30, 2017 and $23.5 million at December 31, 2016) and other equity investments (estimated fair value of $1.0 million at both September 30, 2017 and December 31, 2016).

As of September 30, 2017, the financial institutions stock portfolio had a cost basis of $5.8 million and an estimated fair value of $12.1 million, including an investment in a single financial institution with a cost basis of $4.2 million and an estimated fair value of $8.8 million. The estimated fair value of this investment accounted for 73.4% 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 ~~September~~June 30, ~~2017,~~2019, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities as certain investment securities are subject to call or prepayment with or without call or prepayment penalties.



		Available for Sale				Held to Maturity
		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due in one year or less		$	5,828	$	5,828	$	—	$	—
Due from one year to five years		38,664		39,900		—		—
Due from five years to ten years		175,654		178,922		2,154		2,277
Due after ten years		390,033		392,471		153,707		162,284
		610,179		617,121		155,861		164,561
Residential mortgage-backed securities⁽¹⁾		331,566		329,275		411,703		425,167
Commercial mortgage-backed securities⁽¹⁾		433,027		440,281		—		—
Collateralized mortgage obligations⁽¹⁾		889,053		899,117		—		—
Total		$	2,263,825	$	2,285,794	$	567,564	$	589,728

(1) Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on the underlying loans.

Amortized
Cost Estimated
Fair Value
(in thousands)
Due in one year or less $ 23,940
$ 24,118
Due from one year to five years 30,708
31,196
Due from five years to ten years 114,114
115,336
Due after ten years 452,277
440,411
621,039
611,061
Residential mortgage-backed securities 1,184,797
1,182,086
Commercial mortgage-backed securities 161,960
161,632
Collateralized mortgage obligations 601,845
593,678
Total debt securities $ 2,569,641
$ 2,548,457

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



	Gross Realized Gains		Gross Realized Losses			Net Gains
Three months ended June 30, 2019	(in thousands)
Debt securities	$	3,012	$	(2,836	)	$	176
Total	$	3,012	$	(2,836	)	$	176
Three months ended June 30, 2018
Debt securities	$	1,530	$	(1,526	)	$	4
Total	$	1,530	$	(1,526	)	$	4

Six months ended June 30, 2019
Debt securities	$	3,269	$	(3,028	)	$	241
Total	$	3,269	$	(3,028	)	$	241
Six months ended June 30, 2018
Equity securities	$	9	$	—		$	9
Debt securities	1,540		(1,526		)	14
Total	$	1,549	$	(1,526	)	$	23

Gross
Realized
Gains Gross
Realized
Losses Net Gains (Losses)
Three months ended September 30, 2017 (in thousands)
Equity securities $ 4,817
$ —
$ 4,817
Debt securities 12
(232 ) (220 )
Total $ 4,829
$ (232 ) $ 4,597
Three months ended September 30, 2016
Equity securities $ 2
$ —
$ 2
Debt securities —
—
—
Total $ 2
$ —
$ 2

Nine months ended September 30, 2017
Equity securities $ 7,167
$ —
$ 7,167
Debt securities 218
(246 ) (28 )
Total $ 7,385
$ (246 ) $ 7,139
Nine months ended September 30, 2016
Equity securities $ 739
$ (10 ) $ 729
Debt securities 322
(26 ) 296
Total $ 1,061
$ (36 ) $ 1,025

The following table presents a summary of the cumulative ~~balance of~~ credit related other-than-temporary impairment charges, ~~previously~~ recognized as components of earnings, for debt securities held by the Corporation at ~~September~~June 30, ~~2017~~2019 and ~~September 30, 2016 was $10.0 million. There were no other-than-temporary impairment charges recognized for the three and nine months ended September 30, 2017 and September 30, 2016.~~2018:



	Three months ended June 30						Six months ended June 30
	2019			2018			2019			2018
	(in thousands)
Balance of cumulative credit losses on debt securities, beginning of period	$	(11,510	)	$	(11,510	)	$	(11,510	)	$	(11,510	)
Reductions for securities sold during the period	10,520			—			10,520			—
Balance of cumulative credit losses on debt securities, end of period	$	(990	)	$	(11,510	)	$	(990	)	$	(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 ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016:~~2018:



	Less than 12 months						12 months or longer						Total
June 30, 2019	Number of Securities	Estimated Fair Value		Unrealized Losses			Number of Securities	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Available for Sale		(in thousands)
State and municipal securities	3	$	15,714	$	(44	)	4	$	17,403	$	(41	)	$	33,117	$	(85	)
Corporate debt securities	3	7,054		(8		)	14	25,988		(2,313		)	33,042		(2,321		)
Collateralized mortgage obligations	—	—		—			39	110,517		(2,126		)	110,517		(2,126		)
Residential mortgage-backed securities	—	—		—			61	285,675		(3,914		)	285,675		(3,914		)
Commercial mortgage-backed securities	1	11,926		(143		)	2	17,475		(9		)	29,401		(152		)
Auction rate securities	—	—		—			177	103,365		(4,045		)	103,365		(4,045		)
Total	7	$	34,694	$	(195	)	297	$	560,423	$	(12,448	)	$	595,117	$	(12,643	)

Less than 12 months 12 months or longer Total

Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses

Estimated
Fair Value

Unrealized
Losses
September 30, 2017 (in thousands)
State and municipal securities $ 121,527
$ (1,930 ) $ 87,466
$ (3,475 ) $ 208,993
$ (5,405 )
Corporate debt securities 3,570
(16 ) 31,533
(1,940 ) 35,103
(1,956 )
Collateralized mortgage obligations 85,335
(837 ) 301,009
(8,710 ) 386,344
(9,547 )
Residential mortgage-backed securities 796,019
(8,359 ) 5,513
(202 ) 801,532
(8,561 )
Commercial mortgage-backed securities 87,260
(627 ) —
—
87,260
(627 )
Auction rate securities —
—
98,156
(9,254 ) 98,156
(9,254 )
Total debt securities $ 1,093,711
$ (11,769 ) $ 523,677
$ (23,581 ) $ 1,617,388
$ (35,350 )
No Held to Maturity investments were in an unrealized loss position at June 30, 2019.



	Less than 12 months						12 months or longer						Total
December 31, 2018	Number of Securities	Estimated Fair Value		Unrealized Losses			Number of Securities	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
Available for Sale	(in thousands)
U.S. Government sponsored agency securities	1	$	4,961	$	(31	)	1	$	5,770	$	(108	)	$	10,731	$	(139	)
State and municipal securities	33	72,950		(1,292		)	38	83,770		(4,174		)	156,720		(5,466		)
Corporate debt securities	8	24,419		(227		)	14	25,642		(3,126		)	50,061		(3,353		)
Collateralized mortgage obligations	39	136,563		(1,050		)	89	388,173		(10,922		)	524,736		(11,972		)
Residential mortgage-backed securities	17	18,220		(222		)	110	402,779		(14,990		)	420,999		(15,212		)
Commercial mortgage-backed securities	1	9,778		(35		)	25	197,326		(3,038		)	207,104		(3,073		)
Auction rate securities	—	—		—			177	102,994		(4,416		)	102,994		(4,416		)
Total	99	$	266,891	$	(2,857	)	454	$	1,206,454	$	(40,774	)	$	1,473,345	$	(43,631	)
Held to Maturity
State and municipal securities	6	$	20,601	$	(93	)	—	$	—	$	—		$	20,601	$	(93	)
Total	6	$	20,601	$	(93	)	—	$	—	$	—		$	20,601	$	(93	)

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. The change in fair value of these securities is attributable to changes in interest rates and not credit quality, and 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. Therefore, the Corporation does not consider these investments to be other-than-temporarily impaired as of ~~September~~June 30, ~~2017.~~2019.

As of ~~September~~June 30, ~~2017,~~2019, 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 September 30, 2017, all ARCs were current and making scheduled interest payments, and basedBased on management’s evaluations, none of the ARCs were ~~not~~ subject to any other-than-temporary impairment charges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019. 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.

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:

September 30, 2017 December 31, 2016

Amortized
cost

Estimated
fair value

Amortized
cost

Estimated
fair value
(in thousands)
Single-issuer trust preferred securities $ 39,186
$ 38,251
$ 43,746
$ 39,829
Subordinated debt 37,147
37,859
46,231
46,723
Senior debt 12,033
12,456
18,037
18,433
Pooled trust preferred securities —
422
—
422
Corporate debt securities issued by financial institutions 88,366
88,988
108,014
105,407
Other corporate debt securities 3,989
3,989
4,002
4,002
Available for sale corporate debt securities $ 92,355
$ 92,977
$ 112,016
$ 109,409

Single-issuer trust preferred securities had an unrealized loss of $935,000 at September 30, 2017. Five of the 18 single-issuer trust preferred securities, with an amortized cost of $6.9 million and an estimated fair value of $6.6 million at September 30, 2017, were rated below investment grade by at least one ratings agency. All of the single-issuer trust preferred securities rated below investment grade were rated "BB" and "Ba". Two single-issuer trust preferred securities with an amortized cost of $3.8 million and an estimated fair value of $2.8 million at September 30, 2017 were not rated by any ratings agency.

Based on management’s evaluations, no corporate debt securities were subject to any other-than-temporary impairment charges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019. 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 54 – Loans and Leases and Allowance for Credit Losses

Loans and Leases, Net of Unearned Income

Loans and leases, net of unearned income are summarized as follows:



	June 30, 2019			December 31, 2018
	(in thousands)
Real-estate - commercial mortgage	$	6,497,973		$	6,434,285
Commercial - industrial, financial and agricultural	4,365,248			4,404,548
Real estate - residential mortgage	2,451,966			2,251,044
Real estate - home equity	1,386,974			1,452,137
Real estate - construction	922,547			916,599
Consumer	452,874			419,186
Equipment lease financing and other	314,901			311,866
Overdrafts	3,187			2,774
Loans and leases, gross of unearned income	16,395,670			16,192,439
Unearned income	(27,212		)	(26,639		)
Loans and leases, net of unearned income	$	16,368,458		$	16,165,800

September 30,
2017 December 31, 2016
(in thousands)
Real-estate - commercial mortgage $ 6,275,140
$ 6,018,582
Commercial - industrial, financial and agricultural 4,223,075
4,087,486
Real-estate - residential mortgage 1,887,907
1,601,994
Real-estate - home equity 1,567,473
1,625,115
Real-estate - construction 973,108
843,649
Consumer 302,448
291,470
Leasing and other 278,658
246,704
Overdrafts 3,400
3,662
Loans, gross of unearned income 15,511,209
14,718,662
Unearned income (24,310 ) (19,390 )
Loans, net of unearned income $ 15,486,899
$ 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 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 and lease portfolio by general loan type, or "portfolio segments," as presented in the table under the heading, "Loans and Leases, 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 both secured and unsecured loans. Construction ~~loan class segments~~loans 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~~loans include direct consumer installment loans and indirect vehicle loans.

Allowance for Credit Losses

The allowance for credit losses consists of the allowance for loan and lease losses and the reserve for unfunded lending commitments. The allowance for loan and lease losses represents management’s estimate of incurred losses in the loan and lease portfolio as of the balance sheet date and is recorded as a reduction to loans and leases. The reserve for unfunded lending commitments represents management’s estimate of incurred losses in its unfunded loan commitments and other off balance sheet credit exposures, such as letters of credit, 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 and leases individually evaluated for impairment (FASB ASC Section 310-10-35); and (2) allowances calculated for pools of loans and leases collectively evaluated for impairment (FASB ASC Subtopic 450-20).

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



	June 30, 2019		December 31, 2018
	(in thousands)
Allowance for loan and lease losses	$	170,233	$	160,537
Reserve for unfunded lending commitments	6,708		8,873
Allowance for credit losses	$	176,941	$	169,410

September 30,
2017 December 31,
2016
(in thousands)
Allowance for loan losses $ 172,245
$ 168,679
Reserve for unfunded lending commitments 2,504
2,646
Allowance for credit losses $ 174,749
$ 171,325

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


	Three months ended September 30						Nine months ended September 30						Three months ended June 30						Six months ended June 30
	2017			2016			2017			2016			2019			2018			2019			2018
	(in thousands)												(in thousands)
Balance at beginning of period	$	174,998		$	165,108		$	171,325		$	171,412		$	170,372		$	176,019		$	169,410		$	176,084
Loans charged off	(7,795		)	(7,672		)	(25,917		)	(29,573		)
Recoveries of loans previously charged off	2,471			3,592			12,766			15,148
Net loans charged off	(5,324		)	(4,080		)	(13,151		)	(14,425		)
Loans and leases charged off													(3,711		)	(42,160		)	(10,080		)	(48,557		)
Recoveries of loans and leases previously charged off													5,255			2,271			7,486			4,633
Net loans and leases recovered (charged off)													1,544			(39,889		)	(2,594		)	(43,924		)
Provision for credit losses	5,075			4,141			16,575			8,182			5,025			33,117			10,125			37,087
Balance at end of period	$	174,749		$	165,169		$	174,749		$	165,169		$	176,941		$	169,247		$	176,941		$	169,247

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. In 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 and lease 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)
Three months ended September 30, 2017
Balance at June 30, 2017 $ 57,372
$ 67,642
$ 17,456
$ 16,439
$ 9,534
$ 1,794
$ 2,105
$ —
$ 172,342
Loans charged off (483 ) (2,714 ) (547 ) (195 ) (2,744 ) (373 ) (739 ) —
(7,795 )
Recoveries of loans previously charged off 106
665
252
219
629
193
407
—
2,471
Net loans charged off (377 ) (2,049 ) (295 ) 24
(2,115 ) (180 ) (332 ) —
(5,324 )
Provision for loan losses (1) (2,008 ) 5,392
1,297
220
(283 ) 383
226
—
5,227
Balance at Sept 30, 2017 $ 54,987
$ 70,985
$ 18,458
$ 16,683
$ 7,136
$ 1,997
$ 1,999
$ —
$ 172,245
Three months ended September 30, 2016
Balance at June 30, 2016 $ 43,740
$ 51,755
$ 26,170
$ 21,226
$ 5,772
$ 2,984
$ 2,518
$ 8,381
$ 162,546
Loans charged off (1,350 ) (3,144 ) (709 ) (802 ) (150 ) (685 ) (832 ) —
(7,672 )
Recoveries of loans previously charged off 296
1,539
241
228
898
222
168
—
3,592
Net loans charged off (1,054 ) (1,605 ) (468 ) (574 ) 748
(463 ) (664 ) —
(4,080 )
Provision for loan losses (1) 3,171
(1,871 ) 1,419
1,452
23
852
1,075
(2,061 ) 4,060
Balance at September 30, 2016 $ 45,857
$ 48,279
$ 27,121
$ 22,104
$ 6,543
$ 3,373
$ 2,929
$ 6,320
$ 162,526
Nine months ended September 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 (1,949 ) (13,594 ) (1,837 ) (535 ) (3,765 ) (1,659 ) (2,578 ) —
(25,917 )
Recoveries of loans previously charged off 1,490
6,830
604
600
1,550
899
793
—
12,766
Net loans charged off (459 ) (6,764 ) (1,233 ) 65
(2,215 ) (760 ) (1,785 ) —
(13,151 )
Provision for loan losses (1) 8,604
23,396
(7,110 ) (6,311 ) 2,896
(817 ) 592
(4,533 ) 16,717
Balance at September 30, 2017 $ 54,987
$ 70,985
$ 18,458
$ 16,683
$ 7,136
$ 1,997
$ 1,999
$ —
$ 172,245
Nine months ended September 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
Loans charged off (3,406 ) (13,957 ) (3,295 ) (2,210 ) (1,218 ) (2,261 ) (3,226 ) —
(29,573 )
Recoveries of loans previously charged off 2,488
6,789
929
784
2,844
957
357
—
15,148
Net loans charged off (918 ) (7,168 ) (2,366 ) (1,426 ) 1,626
(1,304 ) (2,869 ) —
(14,425 )
Provision for loan losses (1) (1,091 ) (1,651 ) 7,082
2,155
(1,612 ) 2,092
3,330
(2,408 ) 7,897
Balance at September 30, 2016 $ 45,857
$ 48,279
$ 27,121
$ 22,104
$ 6,543
$ 3,373
$ 2,929
$ 6,320
$ 162,526



	Real Estate - Commercial Mortgage			Commercial - Industrial, Financial and Agricultural			Real Estate - Home Equity			Real Estate - Residential Mortgage			Real Estate - Construction			Consumer			Equipment lease financing, other and overdrafts			Total
	(in thousands)
Three months ended June 30, 2019
Balance at March 31, 2019	$	51,946		$	60,501		$	19,215		$	19,146		$	4,941		$	3,319		$	3,041		$	162,109
Loans and leases charged off	(230		)	(1,895		)	(206		)	(134		)	(3		)	(795		)	(448		)	(3,711		)
Recoveries of loans and leases previously charged off	169			2,680			223			211			1,245			579			148			5,255
Net loans and leases (charged off) recovered	(61		)	785			17			77			1,242			(216		)	(300		)	1,544
Provision for loan and lease losses ⁽¹⁾	2,974			5,055			(251		)	(331		)	(1,255		)	260			128			6,580
Balance at June 30, 2019	$	54,859		$	66,341		$	18,981		$	18,892		$	4,928		$	3,363		$	2,869		$	170,233
Three months ended June 30, 2018
Balance at March 31, 2018	$	58,717		$	61,830		$	17,528		$	15,261		$	5,924		$	1,903		$	2,054		$	163,217
Loans and leases charged off	(366		)	(38,632		)	(816		)	(483		)	(606		)	(712		)	(545		)	(42,160		)
Recoveries of loans and leases previously charged off	321			541			271			96			444			446			152			2,271
Net loans and leases charged off	(45		)	(38,091		)	(545		)	(387		)	(162		)	(266		)	(393		)	(39,889		)
Provision for loan and lease losses ⁽¹⁾	(2,089		)	35,306			(736		)	(370		)	226			62			323			32,722
Balance at June 30, 2018	$	56,583		$	59,045		$	16,247		$	14,504		$	5,988		$	1,699		$	1,984		$	156,050
Six months ended June 30, 2019
Balance at December 31, 2018	$	52,889		$	58,868		$	18,911		$	18,921		$	5,061		$	3,217		$	2,670		$	160,537
Loans and leases charged off	(1,375		)	(4,682		)	(425		)	(789		)	(98		)	(1,478		)	(1,233		)	(10,080		)
Recoveries of loans and leases previously charged off	305			3,923			420			343			1,329			789			377			7,486
Net loans and leases (charged off) recovered	(1,070		)	(759		)	(5		)	(446		)	1,231			(689		)	(856		)	(2,594		)
Provision for loan losses ⁽¹⁾	3,040			8,232			75			417			(1,364		)	835			1,055			12,290
Balance at June 30, 2019	$	54,859		$	66,341		$	18,981		$	18,892		$	4,928		$	3,363		$	2,869		$	170,233
Six months ended June 30, 2018
Balance at December 31, 2017	$	58,793		$	66,280		$	18,127		$	16,088		$	6,620		$	2,045		$	1,957		$	169,910
Loans and leases charged off	(633		)	(42,637		)	(1,224		)	(645		)	(764		)	(1,604		)	(1,050		)	(48,557		)
Recoveries of loans and leases previously charged off	600			1,616			477			203			750			625			362			4,633
Net loans and leases charged off	(33		)	(41,021		)	(747		)	(442		)	(14		)	(979		)	(688		)	(43,924		)
Provision for loan losses ⁽¹⁾	(2,177		)	33,786			(1,133		)	(1,142		)	(618		)	633			715			30,064
Balance at June 30, 2018	$	56,583		$	59,045		$	16,247		$	14,504		$	5,988		$	1,699		$	1,984		$	156,050

(1)

The provision for loan and lease losses excluded ~~decreases of $152,000~~a $1.6 million and ~~$142,000~~a $2.2 million decrease in the reserve for unfunded lending commitments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, respectively, and ~~increases of $81,000~~a $395,000 and ~~$285,000~~a $7.0 million increase in the reserve for unfunded lending commitments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2018, respectively.

The following table presents loans and leases, net of unearned income and their related allowance for loan and lease 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		Equipment lease financing, other and overdrafts		Total
	(in thousands)
Allowance for loan and lease losses at June 30, 2019:
Collectively evaluated for impairment	$	45,367	$	53,985	$	8,463	$	9,913	$	4,399	$	3,356	$	2,869	$	128,352
Individually evaluated for impairment	9,492		12,356		10,518		8,979		529		7		—		41,881
	$	54,859	$	66,341	$	18,981	$	18,892	$	4,928	$	3,363	$	2,869	$	170,233

Loans and leases, net of unearned income at June 30, 2019:
Collectively evaluated for impairment	$	6,438,080	$	4,313,666	$	1,363,392	$	2,414,627	$	918,380	$	452,865	$	273,118	$	16,174,128
Individually evaluated for impairment	59,893		51,582		23,582		37,339		4,167		9		17,758		194,330
	$	6,497,973	$	4,365,248	$	1,386,974	$	2,451,966	$	922,547	$	452,874	$	290,876	$	16,368,458

Allowance for loan and lease losses at June 30, 2018:
Collectively evaluated for impairment	$	48,489	$	49,354	$	5,093	$	5,171	$	5,338	$	1,691	$	1,984	$	117,120
Individually evaluated for impairment	8,094		9,691		11,154		9,333		650		8		—		38,930
	$	56,583	$	59,045	$	16,247	$	14,504	$	5,988	$	1,699	$	1,984	$	156,050

Loans and leases, net of unearned income at June 30, 2018:
Collectively evaluated for impairment	$	6,252,747	$	4,209,786	$	1,466,393	$	2,055,206	$	981,584	$	360,304	$	286,947	$	15,612,967
Individually evaluated for impairment	51,728		54,816		25,002		39,324		9,121		11		—		180,002
	$	6,304,475	$	4,264,602	$	1,491,395	$	2,094,530	$	990,705	$	360,315	$	286,947	$	15,792,969

~~N/A - Not applicable.~~

Impaired Loans and Leases

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

All loans and leases individually evaluated for impairment ~~under FASB ASC Section 310-10-35~~ are measured for losses on a quarterly basis. As of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, substantially all of the Corporation’s individually evaluated impaired loans and leases with total ~~outstanding balances~~commitments 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.~~estate.

As of ~~September~~June 30, ~~2017~~2019 and ~~2016,~~December 31, 2018, approximately ~~95%~~84% and ~~73%~~89%, respectively, of impaired loans and leases 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 appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months.

When updated appraisals are not obtained for loans and leases 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 and leases by class segment:

September 30, 2017 December 31, 2016

Unpaid
Principal
Balance

Recorded
Investment

Related
Allowance

Unpaid
Principal
Balance

Recorded
Investment

Related
Allowance
(in thousands)
With no related allowance recorded:
Real estate - commercial mortgage $ 24,722
$ 21,000
$ —
$ 28,757
$ 25,447
$ —
Commercial - secured 32,738
30,053
—
29,296
25,526
—
Real estate - residential mortgage 4,603
4,603
—
4,689
4,689
—
Construction - commercial residential 14,086
9,450
—
6,271
4,795
—
76,149
65,106

69,013
60,457

With a related allowance recorded:
Real estate - commercial mortgage 32,770
25,205
7,726
37,132
29,446
10,162
Commercial - secured 33,481
29,189
14,974
27,767
22,626
13,198
Commercial - unsecured 1,236
976
525
1,122
823
455
Real estate - home equity 27,739
23,922
10,826
23,971
19,205
9,511
Real estate - residential mortgage 43,979
37,975
10,195
48,885
41,359
11,897
Construction - commercial residential 6,119
2,883
1,006
10,103
4,206
1,300
Construction - commercial 186
100
36
681
435
145
Construction - other 1,096
1,091
392
1,096
1,096
423
Consumer - direct 24
19
13
21
21
14
Consumer - indirect 14
14
8
19
19
12
146,644
121,374
45,701
150,797
119,236
47,117
Total $ 222,793
$ 186,480
$ 45,701
$ 219,810
$ 179,693
$ 47,117



	June 30, 2019						December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance
	(in thousands)
With no related allowance recorded:
Real estate - commercial mortgage	$	32,406	$	30,574	$	—	$	25,095	$	23,481	$	—
Commercial	29,696		23,588		—		33,493		26,585		—
Real estate - residential mortgage	4,565		4,400		—		3,149		3,149		—
Construction	6,454		2,604		—		8,980		5,083		—
Equipment lease financing	17,758		17,758		—		19,269		19,268		—
	90,879		78,924		—		89,986		77,566		—
With a related allowance recorded:
Real estate - commercial mortgage	40,435		29,319		9,492		29,005		22,592		7,255
Commercial	38,010		27,994		12,356		37,706		28,708		12,513
Real estate - residential mortgage	37,202		32,939		8,979		39,972		35,621		9,394
Real estate - home equity	26,712		23,582		10,518		26,599		23,373		10,370
Construction	5,112		1,563		529		5,984		2,307		793
Consumer	9		9		7		11		11		7
	147,480		115,406		41,881		139,277		112,612		40,332
Total	$	238,359	$	194,330	$	41,881	$	229,263	$	190,178	$	40,332

As of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, there were ~~$65.1~~$78.9 million and ~~$60.5~~$77.6 million, respectively, of impaired loans and leases that did not have a related allowance for loan ~~loss.~~and lease losses. The estimated fair values of the collateral securing these loans and leases exceeded their carrying amount, or ~~they~~the loans and leases 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 and leases by class segment:

Three months ended September 30 Nine months ended September 30
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)
(in thousands)
With no related allowance recorded:
Real estate - commercial mortgage $ 21,698
$ 72
$ 25,048
$ 78
$ 22,770
$ 213
$ 23,929
219
Commercial - secured 33,044
46
23,836
32
29,309
128
18,400
68
Real estate - residential mortgage 4,616
27
6,151
33
4,645
79
5,826
96
Construction - commercial residential 8,747
5
5,734
10
6,745
11
6,658
45
Construction - commercial 295
—
—
—
298
—
—
—
68,400
150
60,769
153
63,767
431
54,813
428
With a related allowance recorded:
Real estate - commercial mortgage 25,910
86
29,139
91
27,518
259
32,310
303
Commercial - secured 24,334
33
21,688
29
23,291
96
26,665
100
Commercial - unsecured 818
1
953
1
806
1
903
3
Real estate - home equity 22,837
150
18,283
76
20,957
362
17,589
203
Real estate - residential mortgage 38,329
225
40,913
221
39,584
680
42,399
683
Construction - commercial residential 5,047
4
4,947
8
5,397
11
5,568
37
Construction - commercial 113
—
476
—
186
—
546
—
Construction - other 1,091
—
756
—
1,094
—
579
—
Consumer - direct 19
—
19
—
19
—
17
1
Consumer - indirect 15
—
11
—
17
—
14
—
Leasing, other and overdrafts —
—
—
—
356
—
712
—
118,513
499
117,185
426
119,225
1,409
127,302
1,330
Total $ 186,913
$ 649
$ 177,954
$ 579
$ 182,992
$ 1,840
$ 182,115
1,758



	Three months ended June 30								Six months ended June 30
	2019				2018				2019				2018
	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)
With no related allowance recorded:
Real estate - commercial mortgage	$	27,738	$	100	$	27,127	$	97	$	26,319	$	197	$	25,713	$	180
Commercial	25,238		32		33,644		69		25,686		62		35,612		142
Real estate - residential mortgage	3,764		23		3,870		24		3,559		43		4,105		51
Construction	3,814		—		7,528		—		4,237		—		7,718		—
Equipment lease financing, other and overdrafts	18,136		—		—		—		18,513		—				—
	78,690		155		72,169		190		78,314		302		73,148		373
With a related allowance recorded:
Real estate - commercial mortgage	24,528		87		25,419		91		23,883		172		25,578		175
Commercial	28,485		36		26,120		54		28,558		69		25,471		97
Real estate - home equity	23,706		222		24,907		195		23,595		445		24,835		379
Real estate - residential mortgage	34,695		215		36,261		223		35,004		440		36,551		444
Construction	1,595		—		2,400		—		1,832		—		2,966		—
Consumer	10		—		18		—		10		—		20		—
	113,019		560		115,125		563		112,882		1,126		115,421		1,095
Total	$	191,709	$	715	$	187,294	$	753	$	191,196	$	1,428	$	188,569	$	1,468


(1)	All impaired loans, excluding accruing TDRs, were non-accrual loans. Interest income recognized for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 represents amounts earned on accruing TDRs.

Credit Quality Indicators and Non-performing Assets

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 have a heightened credit risk, but not to the 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.

~~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:~~

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.~~in the preceding tables. 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 following table presents internal credit risk ratings for the indicated loan class segments:



	Pass						Special Mention						Substandard or Lower						Total
	June 30, 2019			December 31, 2018			June 30, 2019			December 31, 2018			June 30, 2019			December 31, 2018			June 30, 2019			December 31, 2018
	(dollars in thousands)
Real estate - commercial mortgage	$	6,173,883		$	6,129,463		$	162,425		$	170,827		$	161,665		$	133,995		$	6,497,973		$	6,434,285
Commercial - secured	3,835,171			3,902,484			182,569			193,470			171,856			129,026			4,189,596			4,224,980
Commercial - unsecured	168,311			171,589			4,972			4,016			2,369			3,963			175,652			179,568
Total commercial - industrial, financial and agricultural	4,003,482			4,074,073			187,541			197,486			174,225			132,989			4,365,248			4,404,548
Construction - commercial residential	109,168			104,079			3,082			6,912			3,959			6,881			116,209			117,872
Construction - commercial	725,556			723,030			731			1,163			3,197			2,533			729,484			726,726
Total construction (excluding Construction - other)	834,724			827,109			3,813			8,075			7,156			9,414			845,693			844,598
	$	11,012,089		$	11,030,645		$	353,779		$	376,388		$	343,046		$	276,398		$	11,708,914		$	11,683,431
% of Total	94.1		%	94.4		%	3.0		%	3.2		%	2.9		%	2.4		%	100.0		%	100.0		%

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

The following table presents a summary of performing, delinquent and non-performing loans and leases for the indicated ~~loan~~ class segments:

The following table presents non-performing assets:



	June 30, 2019		December 31, 2018
	(in thousands)
Non-accrual loans and leases	$	133,118	$	128,572
Loans and leases 90 days or more past due and still accruing	14,598		11,106
Total non-performing loans and leases	147,716		139,678
Other real estate owned (OREO)	7,241		10,518
Total non-performing assets	$	154,957	$	150,196

September 30,
2017 December 31,
2016
(in thousands)
Non-accrual loans $ 123,345
$ 120,133
Loans 90 days or more past due and still accruing 13,124
11,505
Total non-performing loans 136,469
131,638
Other real estate owned (OREO) 10,542
12,815
Total non-performing assets $ 147,011
$ 144,453

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



	June 30, 2019
	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)
Real estate - commercial mortgage	$	16,620	$	2,059	$	637	$	43,213	$	43,850	$	62,529	$	6,435,444	$	6,497,973
Commercial - secured	8,480		1,923		1,422		45,114		46,536		56,939		4,132,657		4,189,596
Commercial - unsecured	592		136		—		723		723		1,451		174,201		175,652
Total commercial - industrial, financial and agricultural	9,072		2,059		1,422		45,837		47,259		58,390		4,306,858		4,365,248
Real estate - home equity	9,370		2,264		4,803		7,193		11,996		23,630		1,363,344		1,386,974
Real estate - residential mortgage	26,135		5,741		6,708		14,950		21,658		53,534		2,398,432		2,451,966
Construction - commercial residential	—		—		—		3,959		3,959		3,959		112,250		116,209
Construction - commercial	895		—		466		19		485		1,380		728,104		729,484
Construction - other	549		—		—		189		189		738		76,116		76,854
Total real estate - construction	1,444		—		466		4,167		4,633		6,077		916,470		922,547
Consumer - direct	205		90		123		—		123		418		58,295		58,713
Consumer - indirect	2,901		607		259		—		259		3,767		390,394		394,161
Total consumer	3,106		697		382		—		382		4,185		448,689		452,874
Equipment lease financing, other and overdrafts	1,365		443		180		17,758		17,938		19,746		271,130		290,876
Total	$	67,112	$	13,263	$	14,598	$	133,118	$	147,716	$	228,091	$	16,140,367	$	16,368,458

September 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
(in thousands)
Real estate - commercial mortgage $ 10,276
$ 2,297
$ 2,884
$ 31,766
$ 34,650
$ 47,223
$ 6,227,917
$ 6,275,140
Commercial - secured 8,382
2,378
1,503
51,787
53,290
64,050
4,024,908
4,088,958
Commercial - unsecured 114
34
—
919
919
1,067
133,050
134,117
Total commercial - industrial, financial and agricultural 8,496
2,412
1,503
52,706
54,209
65,117
4,157,958
4,223,075
Real estate - home equity 11,192
1,763
3,096
9,133
12,229
25,184
1,542,289
1,567,473
Real estate - residential mortgage 15,106
5,663
5,258
16,385
21,643
42,412
1,845,495
1,887,907
Construction - commercial residential 400
18
60
12,164
12,224
12,642
143,485
156,127
Construction - commercial 366
—
—
100
100
466
750,932
751,398
Construction - other 382
—
—
1,091
1,091
1,473
64,110
65,583
Total real estate - construction 1,148
18
60
13,355
13,415
14,581
958,527
973,108
Consumer - direct 118
40
63
—
63
221
55,490
55,711
Consumer - indirect 2,393
441
180
—
180
3,014
243,723
246,737
Total consumer 2,511
481
243
—
243
3,235
299,213
302,448
Leasing, other and overdrafts 764
120
80
—
80
964
256,784
257,748
Total $ 49,493
$ 12,754
$ 13,124
$ 123,345
$ 136,469
$ 198,716
$ 15,288,183
$ 15,486,899



	December 31, 2018
	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)
Real estate - commercial mortgage	$	12,206	$	1,500	$	1,765	$	30,388	$	32,153	$	45,859	$	6,388,426	$	6,434,285
Commercial - secured	5,227		938		1,068		49,299		50,367		56,532		4,168,448		4,224,980
Commercial - unsecured	1,598		—		51		851		902		2,500		177,068		179,568
Total commercial - industrial, financial and agricultural	6,825		938		1,119		50,150		51,269		59,032		4,345,516		4,404,548
Real estate - home equity	7,144		3,558		3,061		6,708		9,769		20,471		1,431,666		1,452,137
Real estate - residential mortgage	20,796		8,192		4,433		14,668		19,101		48,089		2,202,955		2,251,044
Construction - commercial residential	2,489		—		—		6,881		6,881		9,370		108,502		117,872
Construction - commercial	—		—		—		19		19		19		726,707		726,726
Construction - other	—		—		—		490		490		490		71,511		72,001
Total real estate - construction	2,489		—		—		7,390		7,390		9,879		906,720		916,599
Consumer - direct	267		71		66		—		66		404		55,629		56,033
Consumer - indirect	2,908		497		343		—		343		3,748		359,405		363,153
Total consumer	3,175		568		409		—		409		4,152		415,034		419,186
Equipment lease financing, other and overdrafts	1,005		297		319		19,268		19,587		20,889		267,112		288,001
Total	$	53,640	$	15,053	$	11,106	$	128,572	$	139,678	$	208,371	$	15,957,429	$	16,165,800

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
(in thousands)
Real estate - commercial mortgage $ 6,254
$ 1,622
$ 383
$ 38,936
$ 39,319
$ 47,195
$ 5,971,387
$ 6,018,582
Commercial - secured 6,660
2,616
959
41,589
42,548
51,824
3,881,728
3,933,552
Commercial - unsecured 898
35
152
760
912
1,845
152,089
153,934
Total commercial - industrial, financial and agricultural 7,558
2,651
1,111
42,349
43,460
53,669
4,033,817
4,087,486
Real estate - home equity 6,596
2,678
2,543
10,611
13,154
22,428
1,602,687
1,625,115
Real estate - residential mortgage 15,600
4,744
5,224
18,431
23,655
43,999
1,557,995
1,601,994
Construction - commercial residential 233
51
36
8,275
8,311
8,595
133,594
142,189
Construction - commercial 743
—
—
435
435
1,178
643,312
644,490
Construction - other —
—
—
1,096
1,096
1,096
55,874
56,970
Total real estate - construction 976
51
36
9,806
9,842
10,869
832,780
843,649
Consumer - direct 1,211
541
1,563
—
1,563
3,315
93,572
96,887
Consumer - indirect 3,200
399
328
—
328
3,927
190,656
194,583
Total consumer 4,411
940
1,891
—
1,891
7,242
284,228
291,470
Leasing, other and overdrafts 543
525
317
—
317
1,385
229,591
230,976
Total $ 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:

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



	Three months ended June 30						Six months ended June 30
	2019			2018			2019			2018
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(dollars in thousands)
Commercial	6	$	2,371	2	$	53	10	$	4,831	11	$	9,412
Real estate - residential mortgage	1	516		1	77		5	1,433		2	82
Real estate - home equity	22	1,125		28	1,659		34	1,954		47	3,043
Total	29	$	4,012	31	$	1,789	49	$	8,218	60	$	12,537

Three months ended September 30 Nine months ended September 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 with rate concession 2
$ 468
—
$ —
2
$ 468
—
$ —
Extend maturity without rate concession 2
151
—
—
4
488
2
$ 315
Bankruptcy —
—
2
350
2
335
3
723
Real estate - commercial mortgage:
Extend maturity without rate concession 2
1,247
—
—
6
2,228
—
$ —
Bankruptcy —
—
—
—
1
12
—
$ —
Real estate - home equity:
Extend maturity without rate concession 14
1,315
24
1,063
47
3,874
63
$ 3,058
Bankruptcy 6
127
11
563
23
1,643
33
$ 2,279
Commercial:
Extend maturity without rate concession 1
160
4
1,826
9
5,853
10
3,802
Bankruptcy —
—
—
—
1
490
—
—
Commercial – unsecured:
Extend maturity without rate concession —
—
—
—
1
33
2
103
Construction - commercial residential:
Extend maturity without rate concession —
—
—
—
1
1,204
—
—
Consumer - direct:
Bankruptcy —
—
—
—
—
—
1
2
Consumer - indirect:
Bankruptcy —
—
1
21
—
—
1
21

Total 27
$ 3,468
42
$ 3,823
97
$ 16,628
115
$ 10,303

The following table presents TDRs, by class segment, as of ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018 that were modified in the previous 12 months and had a post-modification payment default during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016.~~2018. The Corporation defines a payment default as a single missed payment.



	2019			2018
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(dollars in thousands)
Real estate - residential mortgage	2	$	299	8	$	863
Real estate - commercial mortgage	—	—		1	176
Real estate - home equity	16	890		29	1,955
Commercial	4	2,302		5	146
Total	22	$	3,491	43	$	3,140

2017 2016
Number of Loans Recorded Investment Number of Loans Recorded Investment
(dollars in thousands)
Real estate - residential mortgage 5
$ 1,321
7
$ 1,395
Real estate - commercial mortgage 3
653
2
129
Real estate - home equity 27
1,598
29
1,902
Commercial 2
264
6
2,593
Commercial - unsecured —
—
1
26
Construction - commercial residential 1
1,198
—
—
Construction - other 1
411
—
—
Total 39
$ 5,445
45
$ 6,045

NOTE 65 – 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
	2019			2018			2019			2018
	(in thousands)
Amortized cost:
Balance at beginning of period	$	38,504		$	37,748		$	38,573		$	37,663
Originations of mortgage servicing rights	1,861			1,746			3,086			3,229
Amortization	(1,539		)	(1,600		)	(2,833		)	(2,998		)
Balance at end of period	$	38,826		$	37,894		$	38,826		$	37,894

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
(in thousands)
Amortized cost:
Balance at beginning of period $ 38,180
$ 39,874
$ 38,822
$ 40,944
Originations of mortgage servicing rights 1,333
1,499
3,719
3,927
Amortization (1,639 ) (2,064 ) (4,667 ) (5,562 )
Balance at end of period $ 37,874
$ 39,309
$ 37,874
$ 39,309

Valuation allowance:
Balance at beginning of period $ —
$ (1,721 ) $ (1,291 ) $ —
(Additions) reductions to valuation allowance —
(1,280 ) 1,291
(3,001 )
Balance at end of period $ —
$ (3,001 ) $ —
$ (3,001 )

Net MSRs at end of period $ 37,874
$ 36,308
$ 37,874
$ 36,308

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. The fair values of MSRs were $44.9 million and $50.2 million at June 30, 2019 and December 31, 2018, respectively. Based on its fair value analysis, the Corporation determined ~~that~~ no ~~adjustment to the~~ valuation allowance was necessary as of June 30, 2019 or 2018.

Effective January 1, 2019, the Corporation adopted ASC Update 2016-02, "Leases (Topic 842)," using the modified retrospective method of applying the new standard at the adoption date. In addition, the Corporation elected the package of practical expedients permitted under the transition guidance within the new standard as the lessee. This permitted the carry forward of the conclusions on lease identification, lease classification and initial direct costs. The Corporation also elected not to separate lease and non-lease components. Financial results for reporting periods beginning on or after January 1, 2019 are presented under the new guidance (Topic 842), while prior period amounts are not adjusted and continue to be reported in accordance with previous guidance (Topic 840).

As a lessee, the majority of the operating lease portfolio consists of real estate leases for the ~~three~~Corporation's branches, land and office space. The operating leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for 5 years or more. ROU assets and lease liabilities are not recognized for leases with an initial term of 12 months ~~ended September 30, 2017, while~~or less. The Corporation does not have any finance leases as the lessee.

Certain real estate leases have lease payments that adjust based on annual changes in the Consumer Price Index ("CPI"). The leases that are dependent upon CPI are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability.

Operating lease expense primarily represents fixed lease payments for operating leases recognized on a ~~reduction~~straight-line basis over the applicable lease term. Variable lease expense represents the payment of ~~$1.3 million was required~~real estate taxes, insurance and common area maintenance based on the Corporation's pro-rata share.

In addition, the Corporation rents or subleases certain real estate to third parties. The rental and sublease portfolio consists mostly of operating leases for space within the ~~nine months ended September 30, 2017. Additions to~~Corporation's offices and branches.

The following table presents the ~~valuation allowance~~components of ~~$1.3 million and $3.0 million were necessary~~the Corporation’s lease costs for operating leases as the ~~three and nine months ended September 30, 2016, respectively. Additions and reductions to the valuation allowance are recorded as decreases and increases, respectively, to "mortgage banking income"~~lessee, which is included in net occupancy expense on the consolidated statements of ~~income.~~income (in thousands):



	Three months ended			Six months ended
	June 30, 2019			June 30, 2019
Operating lease expense	$	4,796		$	9,486
Variable lease expense	761			1,370
Sublease income	(168		)	(371		)
Total lease expense	$	5,389		$	10,485

Supplemental balance sheet information related to leases was as follows (in thousands, except for weighted-averages):



Operating Leases	Classification	June 30, 2019
ROU assets	Other assets	$	104,046
Lease liabilities	Other liabilities	$	110,987
Weighted-average remaining lease term		8.4 years
Weighted-average discount rate		3.06		%

The discount rate used in determining the lease liability for each individual lease was the Federal Home Loan Bank ("FHLB") fixed advance rate which corresponded with the remaining lease term as of January 1, 2019 for leases that existed at adoption and as of the lease commencement or modification date for leases subsequently entered into.

Supplemental cash flow information related to operating leases was as follows (in thousands):



	Six months ended
	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities	$	9,269
ROU assets obtained in exchange for lease obligations	$	111,995

Lease payment obligations for each of the next five years and thereafter with a reconciliation to the Corporation's lease liability were as follows (in thousands):



Year	Operating Leases
For the six months ending December 31, 2019	$	9,390
2020	18,607
2021	17,400
2022	16,052
2023	13,804
Thereafter	52,664
Total lease payments	127,917
Less: imputed interest	(16,930		)
Present value of lease liabilities	$	110,987

As of June 30, 2019, the Corporation had not entered into any material leases that have not yet commenced.

As previously disclosed in the Corporation's 2018 Annual Report on Form 10-K and under Topic 840, future minimum lease payments for operating leases having initial or remaining noncancellable lease terms in excess of one year as of December 31, 2018 were $18.0 million, $17.3 million, $15.7 million, $13.7 million, $11.4 million for years 2019 through 2023, respectively, and $43.3 million in the aggregate for all years thereafter.

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 expense and the related tax benefits for equity awards recognized in the consolidated statements of income:~~

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
(in thousands)
Stock-based compensation expense $ 1,570
$ 1,552
$ 3,339
$ 4,808
Tax benefit (628 ) (536 ) (3,312 ) (1,611 )
Stock-based compensation expense, net of tax benefit $ 942
$ 1,016
$ 27
$ 3,197

~~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~~ ~~September 30, 2017, the Employee Equity Plan had 11.1 million shares reserved for future grants through~~ ~~2023, and the Directors’ Plan had approximately 360,000 shares reserved for future grants through~~ ~~2021~~.

~~NOTE 8 – Employee Benefit Plans~~

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

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
(in thousands)
Service cost ⁽¹⁾
$ —
$ 172
$ —
$ 516
Interest cost 830
880
2,490
2,640
Expected return on plan assets (451 ) (580 ) (1,353 ) (1,739 )
Net amortization and deferral 663
605
1,989
1,815
Net periodic benefit cost $ 1,042
$ 1,077
$ 3,126
$ 3,232

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

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
(in thousands)
Interest cost $ 17
$ 21
$ 51
$ 64
Expected return on plan assets —
—
—
(1 )
Net accretion and deferral (141 ) (138 ) (423 ) (413 )
Net periodic benefit $ (124 ) $ (117 ) $ (372 ) $ (350 )

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~~value recognized in earnings as components of non-interest income ~~and~~or 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.

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 and the gross fair values are recorded in other assets and other liabilities on the consolidated balance sheets, with changes in fair 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~~exceeds $10 billion in total assets ~~as of December 31, 2016~~ and ~~was~~is required to clear all eligible interest rate swap contracts with a central ~~counterparty, effective January 1, 2017.~~counterparty. As a result, Fulton Bank ~~became~~is 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~~specific date at a contractual price. The Corporation ~~offsets~~limits its foreign exchange ~~contract~~ exposure with customers by entering into contracts with ~~third-party correspondent financial institutions~~institutional counterparties to mitigate its ~~exposure to fluctuations in~~ foreign ~~currency~~ exchange ~~rates.~~risk. The Corporation also holds certain amounts of foreign currency with international correspondent ~~banks.~~banks ("Foreign Currency Nostro Accounts"). The ~~Corporation's policy~~Corporation limits the total overnight net foreign currency open positions, which ~~includes~~is defined as an aggregate of all outstanding contracts and ~~foreign account~~Foreign Currency Nostro Account balances, to $500,000. Gross fair values are recorded in other assets and other liabilities on the consolidated balance sheets, with changes in fair values during the period recorded ~~within~~in other ~~service charges and fees~~income 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, 2019					December 31, 2018
	Notional Amount		Asset (Liability) Fair Value			Notional Amount		Asset (Liability) Fair Value
	(in thousands)
Interest Rate Locks with Customers
Positive fair values	$	184,657	$	2,118		$	101,700	$	1,148
Negative fair values	3,090		(21		)	1,646		(12		)
Net interest rate locks with customers			2,097					1,136
Forward Commitments
Positive fair values	40,334		221			1,540		3
Negative fair values	111,530		(1,631		)	83,562		(1,066		)
Net forward commitments			(1,410		)			(1,063		)
Interest Rate Swaps with Customers
Positive fair values	2,514,261		136,298			1,185,144		33,258
Negative fair values	292,200		(1,716		)	1,386,046		(30,769		)
Net interest rate swaps with customers			134,582					2,489
Interest Rate Swaps with Dealer Counterparties
Positive fair values ⁽¹⁾	292,200		1,716			1,386,046		28,143
Negative fair values ⁽¹⁾	2,514,261		(74,516		)	1,185,144		(16,338		)
Net interest rate swaps with dealer counterparties			(72,800		)			11,805
Foreign Exchange Contracts with Customers
Positive fair values	6,423		105			5,881		105
Negative fair values	6,643		(186		)	9,690		(251		)
Net foreign exchange contracts with customers			(81		)			(146		)
Foreign Exchange Contracts with Correspondent Banks
Positive fair values	8,750		226			9,220		287
Negative fair values	6,590		(100		)	6,831		(130		)
Net foreign exchange contracts with correspondent banks			126					157
Net derivative fair value asset			$	62,514				$	14,378

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



	Three months ended June 30						Six months ended June 30
	2019			2018			2019			2018
	(in thousands)
Interest rate locks with customers	$	355		$	231		$	961		$	360
Forward commitments	(403		)	(541		)	(347		)	(315		)
Interest rate swaps with customers	81,576			(12,375		)	132,093			(55,017		)
Interest rate swaps with dealer counterparties ⁽¹⁾	(50,673		)	10,811			(84,605		)	44,625
Foreign exchange contracts with customers	(154		)	(23		)	65			(16		)
Foreign exchange contracts with correspondent banks	140			(50		)	(31		)	38
Net fair value gains (losses) on derivative financial instruments	$	30,841		$	(1,947	)	$	48,136		$	(10,325	)

~~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.value.

The following table presents a summary of ~~the Corporation’s~~ mortgage loans held for ~~sale:~~sale and the impact of the fair value election on the consolidated financial statements as of the periods shown:



	June 30, 2019		December 31, 2018
	(in thousands)
Cost ⁽¹⁾	$	44,737	$	26,407
Fair value	45,754		27,099

~~During the three months ended September 30, 2017 and 2016, the Corporation recorded losses related to changes in fair values~~(1) Cost basis of mortgage loans held for sale ~~of $120,000 and $360,000, respectively. During~~represents the ~~nine~~unpaid principal balance.

For the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016, the Corporation recorded~~2018, gains related to changes in fair values of mortgage loans held for sale were $304,000 and $324,000, respectively. During the six months ended June 30, 2019 and 2018, gains related to changes in fair values of ~~$445,000~~mortgage loans held for sale were $325,000 and ~~$504,000,~~$127,000, respectively.

Balance Sheet Offsetting

~~Certain~~Although 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~~agreements, the Corporation elects to not offset ~~certain~~such qualifying assets and ~~liabilities subject to such arrangements on the consolidated financial statements.~~liabilities.

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~~A daily settlement occurs through a clearing agent for changes in the fair value of centrally cleared ~~derivatives with negative fair values.~~derivatives. 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, 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~~does not enter into reverse repurchase agreements; therefore, there is no ~~intention of setting off these amounts. Therefore, these~~such offsetting to be done with the repurchase ~~agreements are not eligible for offset.~~agreements.

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

NOTE 8 – Tax Credit Investments

The Corporation's tax credit investments ("TCIs") are primarily related to investments promoting qualified affordable housing projects and investments in community development entities. The majority of these tax-advantaged investments support the Corporation's corporate mission and vision, as well as regulatory compliance with the Community Reinvestment Act. The Corporation's investments in these projects generate a return primarily through the realization of federal income tax credits and deductions for operating losses over a specified time period.

The TCIs are included in other assets, with any unfunded equity commitments carried in other liabilities on the consolidated balance sheets. Certain TCIs qualify for the proportional amortization method and are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the consolidated statements of income. Other TCIs are accounted for under the equity method of accounting, with amortization included within non-interest expense on the consolidated statements of income. This amortization includes equity in partnership losses and the systematic write-down of investments over the period in which income tax credits are earned. All of the TCIs are evaluated for impairment at the end of each reporting period. As illustrated below, realizable tax credits are included within income taxes and offset the amortization expense recorded.

The following table presents the balances of the Corporation's TCIs and related unfunded commitments:



		June 30,		December 31,
		2019		2018
Included in other assets:		(in thousands)
Affordable housing tax credit investment, net		$	161,986	$	170,401
Other tax credit investments, net		72,786		72,584
	Total TCIs, net	$	234,772	$	242,985
Included in other liabilities:
Unfunded affordable housing tax credit commitments		$	18,542	$	23,196
Other tax credit investment liabilities		61,483		59,823
	Total unfunded tax credit investment commitments and liabilities	$	80,025	$	83,019

The following table presents other information relating to the Corporation's TCIs:



		Three Months Ended						Six Months Ended
		June 30						June 30
		2019			2018			2019			2018
Components of income taxes:		(in thousands)
Affordable housing tax credits and other tax benefits		$	(7,575	)	$	(7,543	)	$	(15,150	)	$	(15,087	)
Other tax credit investment credits and tax benefits		(1,135		)	(1,597		)	(2,271		)	(3,193		)
Amortization of affordable housing investments, net of tax benefit		5,494			5,319			10,989			10,917
Deferred tax expense		239			336			477			671
	Total reduction in income tax expense	$	(2,977	)	$	(3,485	)	$	(5,955	)	$	(6,692	)
Amortization of TCIs:
Affordable housing tax credits investment		$	823		$	839		$	1,645		$	1,678
Other tax credit investment amortization		669			798			1,338			1,596
	Total amortization of TCIs	$	1,492		$	1,637		$	2,983		$	3,274

NOTE 9 – Accumulated Other Comprehensive Income (Loss)

The following table presents changes in other comprehensive income (loss):



	Before-Tax Amount			Tax Effect			Net of Tax Amount
	(in thousands)
Three months ended June 30, 2019
Unrealized gain on securities	$	31,994		$	(7,077	)	$	24,917
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(176		)	39			(137		)
Amortization of net unrealized losses on available for sale ("AFS") securities transferred to held to maturity ("HTM") ⁽²⁾	1,311			(290		)	1,021
Non-credit related unrealized losses on other-than-temporarily impaired debt securities	(770		)	170			(600		)
Amortization of net unrecognized pension and postretirement items ⁽³⁾	353			(78		)	275
Total Other Comprehensive Income	$	32,712		$	(7,236	)	$	25,476
Three months ended June 30, 2018
Unrealized loss on securities	$	(8,397	)	$	1,766		$	(6,631	)
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(4		)	1			(3		)
Non-credit related unrealized gains on other-than-temporarily impaired debt securities	9			(1		)	8
Amortization of net unrecognized pension and postretirement items ⁽³⁾	683			(143		)	540
Total Other Comprehensive Loss	$	(7,709	)	$	1,623		$	(6,086	)

Six months ended June 30, 2019
Unrealized gain on securities	$	58,056		$	(12,841	)	$	45,215
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(241		)	53			(188		)
Amortization of net unrealized losses on AFS securities transferred to HTM⁽²⁾	2,563			(568		)	1,995
Non-credit related unrealized losses on other-than-temporarily impaired debt securities	(875		)	193			(682		)
Amortization of net unrecognized pension and postretirement items ⁽³⁾	727			(161		)	566
Total Other Comprehensive Income	$	60,230		$	(13,324	)	$	46,906

Six months ended June 30, 2018
Unrealized loss on securities	$	(43,388	)	$	9,113		$	(34,275	)
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(23		)	4			(19		)
Non-credit related unrealized gains on other-than-temporarily impaired debt securities	294			(62		)	232
Amortization of net unrecognized pension and postretirement items⁽³⁾	1,113			(234		)	879
Total Other Comprehensive Loss	$	(42,004	)	$	8,821		$	(33,183	)

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			Unrecognized Pension and Postretirement Plan Income (Costs)			Total
	(in thousands)
Three months ended June 30, 2019
Balance at March 31, 2019	$	(23,433	)		$	598		$	(14,798	)	$	(37,633	)
Other comprehensive income before reclassifications	24,917				(600		)	—			24,317
Amounts reclassified from accumulated other comprehensive income (loss)	(137		)		—			275			138
Amortization of net unrealized losses on AFS securities transferred to HTM	1,021			—	—			—			1,021
Balance at June 30, 2019	$	2,368			$	(2	)	$	(14,523	)	$	(12,157	)
Three months ended June 30, 2018
Balance at March 31, 2018	$	(50,056	)		$	682		$	(17,798	)	$	(67,172	)
Other comprehensive loss before reclassifications	(6,631		)		8			—			(6,623		)
Amounts reclassified from accumulated other comprehensive income (loss)	(3		)		—			540			537
Balance at June 30, 2018	$	(56,690	)		$	690		$	(17,258	)	$	(73,258	)

Six months ended June 30, 2019
Balance at December 31, 2018	$	(44,654	)		$	680		$	(15,089	)	$	(59,063	)
Other comprehensive income before reclassifications	45,215				(682		)	—			44,533
Amounts reclassified from accumulated other comprehensive income (loss)	(188		)		—			566			378
Amortization of net unrealized losses on AFS securities transferred to HTM	1,995				—			—			1,995
Balance at June 30, 2019	$	2,368			$	(2	)	$	(14,523	)	$	(12,157	)
Six months ended June 30, 2018
Balance at December 31, 2017	$	(18,509	)		$	458		$	(14,923	)	$	(32,974	)
Other comprehensive loss before reclassifications	(34,275		)		232			—			(34,043		)
Amounts reclassified from accumulated other comprehensive income (loss)	(19		)		—			879			860
Reclassification of stranded tax effects	(3,887		)		—			(3,214		)	(7,101		)
Balance at June 30, 2018	$	(56,690	)		$	690		$	(17,258	)	$	(73,258	)

NOTE 10 – 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):

All assets and liabilities measured at fair value on both a recurring and nonrecurring basis, have been categorized into the above three levels. The following tables present assets and liabilities measured at fair value on a recurring basis and reported on the consolidated balance sheets:



	June 30, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Loans held for sale	$	—	$	45,754	$	—	$	45,754
Available for sale investment securities:
State and municipal securities	—		316,334		—		316,334
Corporate debt securities	—		195,052		2,370		197,422
Collateralized mortgage obligations	—		899,117		—		899,117
Residential mortgage-backed securities	—		329,275		—		329,275
Commercial mortgage-backed securities	—		440,281		—		440,281
Auction rate securities	—		—		103,365		103,365
Total available for sale investment securities	—		2,180,059		105,735		2,285,794
Other assets:
Investments held in Rabbi Trust	20,811		—		—		20,811
Derivative assets	541		140,353		—		140,894
Total assets	$	21,352	$	2,366,166	$	105,735	$	2,493,253
Other liabilities:
Deferred compensation liabilities	20,811		—		—		20,811
Derivative liabilities	475		77,883		—		78,358
Total liabilities	$	21,286	$	77,883	$	—	$	99,169



	December 31, 2018
	Level 1		Level 2		Level 3		Total
	(in thousands)
Loans held for sale	$	—	$	27,099	$	—	$	27,099
Available for sale investment securities:
U.S. Government sponsored agency securities	—		31,632		—		31,632
State and municipal securities	—		279,095		—		279,095
Corporate debt securities	—		106,258		3,275		109,533
Collateralized mortgage obligations	—		832,080		—		832,080
Residential mortgage-backed securities	—		463,344		—		463,344
Commercial mortgage-backed securities	—		261,616		—		261,616
Auction rate securities	—		—		102,994		102,994
Total available for sale investment securities	—		1,974,025		106,269		2,080,294
Other assets:
Investments held in Rabbi Trust	18,415		—		—		18,415
Derivative assets	392		62,552		—		62,944
Total assets	$	18,807	$	2,063,676	$	106,269	$	2,188,752
Other liabilities:
Deferred compensation liabilities	$	18,415	$	—	$	—	$	18,415
Derivative liabilities	381		48,185		—		48,566
Total liabilities	$	18,796	$	48,185	$	—	$	66,981

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, 2019 and December 31, 2018 were measured based on the price that secondary market investors were offering for loans with similar characteristics. See "Note 7 - 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 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.

U.S. Government sponsored agency securities/State and municipal securities/Collateralized mortgage obligations/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 and senior debt issued by financial institutions ($175.2 million at June 30, 2019 and $86.1 million at December 31, 2018), single-issuer trust preferred securities issued by financial institutions ($18.3 million at June 30, 2019 and $18.6 million at December 31, 2018), pooled trust preferred securities issued by financial institutions ($0 at June 30, 2019 and $875,000 at December 31, 2018) and other corporate debt issued by non-financial institutions ($3.9 million at June 30, 2019 and December 31, 2018).

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.

Investments held in Rabbi Trust – This category consists of mutual funds that are held in trust for employee deferred compensation plans that the Corporation has elected to measure at fair value. Shares of mutual funds are valued based on net asset value, which represent quoted market prices for the underlying shares held in the mutual funds, and as such, are classified as Level 1 and are included in other assets on the consolidated balance sheets ($20.8 million at June 30, 2019 and $18.4 million at December 31, 2018).

Derivative assets – Fair value of foreign currency exchange contracts classified as Level 1 assets ($331,000 at June 30, 2019 and $392,000 at December 31, 2018). 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.

Deferred compensation liabilities – Fair value of amounts due to employees under deferred compensation plans, classified as Level 1 liabilities and are included in other liabilities on the consolidated balance sheets ($20.8 million at June 30, 2019 and $18.4 million at December 31, 2018). The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Investments held in Rabbi Trust" above.

Derivative liabilities – Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($286,000 at June 30, 2019 and $381,000 at December 31, 2018).

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):



	Pooled Trust Preferred Securities			Single-issuer Trust Preferred Securities			ARCs
Three months ended June 30, 2019	(in thousands)
Balance at March 31, 2019	$	770		$	2,430		$	102,810
Sales	(770		)	—			—
Unrealized adjustment to fair value ⁽¹⁾	—			(60		)	555
Balance at June 30, 2019	$	—		$	2,370		$	103,365

Three months ended June 30, 2018
Balance at March 31, 2018	$	865		$	3,095		$	103,049
Unrealized adjustment to fair value ⁽¹⁾	10			102			73
Discount accretion ⁽²⁾	—			3			—
Balance at June 30, 2018	$	875		$	3,200		$	103,122

Six months ended June 30, 2019
Balance at December 31, 2018	$	875		$	2,400		$	102,994
Sales	(770		)	—			—
Unrealized adjustment to fair value ⁽¹⁾	(105		)	(30		)	371
Balance at June 30, 2019	$	—		$	2,370		$	103,365

Six months ended June 30, 2018
Balance at December 31, 2017	$	707		$	3,050		$	98,668
Unrealized adjustment to fair value ⁽¹⁾	168			144			4,454
Discount accretion ⁽²⁾	—			6			—
Balance at June 30, 2018	$	875		$	3,200		$	103,122

Certain 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 Level 3 financial assets measured at fair value on a nonrecurring basis and reported on the Corporation’s consolidated balance sheets:



	June 30, 2019		December 31, 2018
	(in thousands)
Net loans and leases	$	152,451	$	149,846
OREO	7,241		10,518
MSRs	44,916		50,204
Total assets	$	204,608	$	210,568

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

Net loans and leases – This category consists of loans and leases that were evaluated 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 4 - Loans and Allowance for Credit Losses," for additional details.

OREO – This category consists of OREO classified as Level 3 assets, for which the fair values were based on estimated selling prices less estimated selling costs for similar assets in active markets.

MSRs - This category consists of MSRs, which were initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors, and subsequently carried at the lower of amortized cost or fair value. 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, 2019 valuation were 10.2% and 9.5%, respectively. Management tests the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See "Note 5 - Mortgage Servicing Rights," for additional information.

The following table presents the carrying amounts and estimated fair values of the Corporation’s financial instruments as of June 30, 2019 and December 31, 2018. A general description of the methods and assumptions used to estimate such fair values follows:



	June 30, 2019
			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	498,811	$	498,811	$	—	$	—	$	498,811
FRB and FHLB stock	97,248		—		97,248		—		97,248
Loans held for sale	45,754		—		45,754		—		45,754
Available for sale investment securities	2,285,794		—		2,180,059		105,735		2,285,794
Held to maturity investment securities	567,564		589,728		—		—		589,728
Net Loans and Leases	16,198,225		—		—		16,019,233		16,019,233
Accrued interest receivable	62,984		62,984		—		—		62,984
Other financial assets	318,776		132,356		140,353		46,067		318,776
FINANCIAL LIABILITIES
Demand and savings deposits	$	13,249,017	$	13,249,017	$	—	$	—	$	13,249,017
Brokered deposits	246,116		206,116		40,292		—		246,408
Time deposits	2,893,762		—		2,894,290		—		2,894,290
Short-term borrowings	1,188,390		1,188,390		—		—		1,188,390
Accrued interest payable	9,218		9,218		—		—		9,218
Other financial liabilities	249,381		164,790		77,883		6,708		249,381
FHLB advances and long-term debt	987,416		—		986,336		—		986,336

	December 31, 2018
			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	445,687	$	445,687	$	—	$	—	$	445,687
FRB and FHLB stock	79,283		—		79,283		—		79,283
Loans held for sale	27,099		—		27,099		—		27,099
Available for sale investment securities	2,080,294		—		1,974,025		106,269		2,080,294
Held to maturity investment securities	606,679		611,419		—		—		611,419
Net Loans and Leases	16,005,263		—		—		15,446,895		15,446,895
Accrued interest receivable	58,879		58,879		—		—		58,879
Other financial assets	235,782		124,138		62,552		49,092		235,782
FINANCIAL LIABILITIES
Demand and savings deposits	$	13,478,016	$	13,478,016	$	—	$	—	$	13,478,016
Brokered deposits	176,239		176,239		—		—		176,239
Time deposits	2,721,904		—		2,712,296		—		2,712,296
Short-term borrowings	754,777		754,777		—		—		754,777
Accrued interest payable	10,529		10,529		—		—		10,529
Other financial liabilities	218,061		161,003		48,185		8,873		218,061
FHLB advances and long-term debt	992,279		—		970,985		—		970,985

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 cash equivalents		Demand and savings deposits
Accrued interest receivable		Short-term borrowings
		Accrued interest payable

FRB and FHLB stock represent restricted investments and are carried at cost on the consolidated balance sheets.

As of June 30, 2019, fair values for loans and leases and time deposits were estimated by discounting future cash flows using the current rates, as adjusted for liquidity considerations, at which similar loans and leases would be made to borrowers and similar deposits would be issued to customers for the same remaining maturities. Fair values of loans and leases also include estimated credit losses that would be assumed in a market transaction, which represents estimated exit prices.

Brokered deposits consists of demand and saving deposits, which are classified as level 1, and time deposits, which are classified as level 2. The fair value of these deposits are determined in a manner consistent with the respective type of deposits discussed above.

NOTE 11 – Net Income Per Share

A reconciliation of weighted average shares outstanding used to calculate basic net income per share and diluted net income per share follows (in thousands, except per share data):



	Three months ended June 30				Six months ended June 30
	2019		2018		2019		2018
Weighted average shares outstanding (basic)	168,343		175,764		169,109		175,535
Impact of common stock equivalents	825		1,080		933		1,171
Weighted average shares outstanding (diluted)	169,168		176,844		170,042		176,706
Per share:
Basic	$	0.36	$	0.20	$	0.69	$	0.48
Diluted	0.35		0.20		0.68		0.48

NOTE 12 – Stock-Based Compensation

The Corporation grants equity awards to employees in the form of stock options, restricted stock, RSUs or PSUs under its Amended and Restated Equity and Cash Incentive Compensation Plan ("Employee Equity Plan"). Recent grants of equity awards under the Employee Equity Plan have generally been limited to RSUs and PSUs. 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 and subsidiary bank boards of directors under the 2011 Directors’ Equity Participation Plan, which was amended and approved by shareholders as the Amended and Restated Directors’ Equity Participation Plan in 2019 ("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, RSUs or common stock.Recent grants of equity awards under the Directors’ Plan have been limited to RSUs.

Equity awards 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 are generally granted semi-annually and become fully vested after a one-year vesting period. Certain events, as defined in the Employee Equity Plan and the Directors' Plan, result in the acceleration of the vesting of equity awards.

Fair values for RSUs and a majority of PSUs are based on the trading price of the Corporation’s stock on the date of grant and earn 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, 2019, the Employee Equity Plan had 10.1 million shares reserved for future grants through 2023, and the Directors’ Plan had approximately 264,000 shares reserved for future grants through 2029.

The following table presents compensation 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
	2019			2018			2019			2018
	(in thousands)
Compensation expense	$	1,788		$	2,674		$	3,348		$	4,184
Tax benefit	(412		)	(1,075		)	(743		)	(1,536		)
Stock-based compensation expense, net of tax benefit	$	1,376		$	1,599		$	2,605		$	2,648

NOTE 13 – Employee Benefit Plans

The net periodic pension 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
	2019			2018			2019			2018
	(in thousands)
Interest cost	$	815		$	696		$	1,630		$	1,527
Expected return on plan assets	(689		)	(573		)	(1,378		)	(1,024		)
Net amortization and deferral	495			551			990			1,215
Net periodic pension cost	$	621		$	674		$	1,242		$	1,718

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



	Three months ended June 30						Six months ended June 30
	2019			2018			2019			2018
	(in thousands)
Interest cost	$	15		$	12		$	30		$	29
Net accretion and deferral	(139		)	(139		)	(278		)	(280		)
Net periodic benefit	$	(124	)	$	(127	)	$	(248	)	$	(251	)

NOTE 14 – Commitments and Contingencies

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 were as follows:



	June 30, 2019		December 31, 2018
	(in thousands)
Commitments to extend credit	$	6,688,574	$	6,306,583
Standby letters of credit	300,262		309,352
Commercial letters of credit	47,368		48,682

September 30,
2017 December 31, 2016
(in thousands)
Commitments to extend credit $ 6,418,318
$ 6,075,567
Standby letters of credit 331,096
356,359
Commercial letters of credit 41,819
38,901

The Corporation records a reserve for unfunded lending commitments, which represents management’s estimate of incurred losses associated with unused commitments to extend credit and letters of credit. See ~~Note 5, "Loans~~"Note 4 - Loans and Leases Allowance for Credit Losses," for additional details.

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~~originates and sells ~~certain prime loans it originates~~residential mortgages to ~~non-government sponsored agency~~secondary market investors.

The Corporation provides customary representations and warranties to ~~government sponsored entities and~~secondary market investors that specify, among other things, that the loans have been underwritten to the standards ~~established by~~of the ~~government sponsored entity or~~secondary market investor. The Corporation may be required to repurchase ~~a loan,~~specific loans, or reimburse the ~~government sponsored entity or~~ investor for a credit loss incurred on a sold 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 September 30, 2017 and December 31, 2016, total outstanding repurchase requests totaled approximately $543,000.

~~From 2000 to 2011,~~Under some agreements with secondary market investors, the Corporation ~~sold loans to~~may have additional credit exposure beyond customary representations and warranties, based on the ~~Federal Home Loan Bank~~specific terms of ~~Pittsburgh under its Mortgage Partnership Finance Program ("MPF Program").~~ those agreements.

The Corporation ~~provided~~maintains 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 September 30, 2017, the unpaid principal balance of loans sold under the MPF Program was approximately $89 million. As of September 30, 2017 and December 31, 2016, the reserve for estimated ~~credit~~ losses related to loans sold under the MPF Program was $1.3 million and $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.

to investors. As of ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the total reserve for losses on residential mortgage loans sold was ~~$2.1~~$2.5 million and ~~$2.5~~$2.1 million, respectively, including ~~both~~ reserves for ~~credit losses under the MPF Program and reserves for~~both representation and warranty exposures. Management believes that the reserves recorded as of September 30, 2017 are adequate. However, declines in collateral values, the identification of additional loans to be repurchased, or a deterioration in theand credit ~~quality of loans sold under the MPF Program could necessitate additional reserves, established through charges to earnings, in the future.~~loss exposures.

The Corporation ~~and its subsidiaries are~~is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business ~~of the Corporation.~~activities. The Corporation ~~periodically~~ evaluates the possible impact of ~~pending litigation~~these matters, ~~based on, among other factors,~~taking into consideration the ~~advice~~most recent information available. A loss reserve is established for those matters for which the Corporation believes a loss is both probable and reasonably estimable. Once established, the reserve is adjusted as appropriate to reflect any subsequent developments. Actual losses with respect to any such matter may be more or less than the amount estimated by the Corporation. For matters where a loss is not probable, or the amount of ~~counsel, available insurance coverage and recorded liabilities and reserves for probable legal liabilities and costs.~~ the loss cannot be reasonably estimated by the Corporation, no loss reserve is established.

In addition, from time to time, the Corporation is ~~the subject of~~involved in 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.~~companies. These inquiries or investigations could lead to administrative, civil or criminal proceedings involving the Corporation, and could ~~possibly~~ result in fines, penalties, restitution, other types of sanctions, or the need ~~to alter the Corporation’s business practices, and cause~~for the Corporation to ~~incur additional costs.~~undertake remedial actions, or to alter its business, financial or accounting practices. The Corporation’s practice is to cooperate fully with regulatory and governmental inquiries and 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 legal proceedings, or regulatory or governmental inquiries or investigations, will not have a material adverse effect on the financial condition of the Corporation. However, legal proceedings, inquiries and investigations 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~~in any ~~particular~~future period, depending, in part, upon the size of the loss or liability imposed and the operating results for the ~~applicable~~period, and could have a material adverse effect on the Corporation’s business. In addition, regardless of the ultimate outcome of any such legal proceeding, inquiry or investigation, any such matter could cause the Corporation to incur additional expenses, which could be significant, and possibly material, to the Corporation’s results of operations in any future period.

BSA/AML ~~Enforcement Orders~~Consent Order

~~The~~As of April 1, 2019, the Corporation and ~~each of~~ its bank ~~subsidiaries are~~subsidiary, Lafayette Ambassador Bank, were subject to ~~regulatory enforcement orders~~a Cease and Desist Order Issued Upon Consent ("Consent Order") issued ~~during~~on September 4, 2014 ~~and 2015~~ by ~~their respective federal and state bank regulatory agencies~~the Board of Governors of the Federal Reserve System (the "Board of Governors") 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~~program.

As previously disclosed in a Current Report on Form 8-K filed with the ~~requirements~~SEC on May 23, 2019, the Board 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

implemented numerous enhancements to the BSA/AML Compliance Program, completed the retrospective reviews required under the Consent Orders, and 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.

~~On October 27, 2017, the Office of the Comptroller of the Currency (the "OCC")~~Governors has terminated the Consent Orders that it issued on July 14, 2014 to three of the Corporation's bank subsidiaries, Fulton Bank, N.A., FNB Bank, N.A. and Swineford National Bank, relating to deficiencies in the BSA/AML Compliance Programs at those bank subsidiaries.Order.

Fair Lending Investigation

During the second quarter of 2015, Fulton Bank, N.A., 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 Fulton Bank, N.A. in certain geographies. Fulton Bank, N.A. has been and is cooperating with the Department and responding to the Department’s requests for information. During the third quarter of 2016, the Department informed the Corporation, Fulton Bank, N.A., and three of the Corporation’s other bank subsidiaries, Fulton Bank of New Jersey (which merged with and into Fulton Bank, N.A. effective on May 18, 2019), 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 determine the terms on which this investigation will be resolved or the timing of such ~~resolution, or to reliably estimate the amounts of any settlement, fines or other penalties or the cost of any other remedial actions, if enforcement action is taken. In addition, should~~resolution. 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~~SEC Investigation

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 67 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 attorney, who is alleged to have operated a fraud scheme over a period of years through the sale of fictitious 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 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 and Riverview, 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 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 23, 2017, the Bank filed its Combined Motion for Partial Reconsideration of the Court’s May 26, 2017 Order and Application for Amendment of the Order to 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.

In October 2017, the Bank and the plaintiffs agreed to settle the lawsuit. The plaintiffs' Steering Committee, which represents the interests of the 67 plaintiffs, approved the specific terms of the settlement on October 26,2017 and recommended that each plaintiff execute the settlement agreement. The settlement involves the Bank making an aggregate payment to the plaintiffs' attorney on their behalf, in exchange for the plaintiffs' agreement to dismiss the claims against the Bank and any related matters with prejudice. The material terms of the settlement will become effective upon the dismissal of the claims against the Bank by the court, which the plaintiffs have agreed to pursue. The Corporation’s insurance carrier has informed the Corporation that it will reimburse the Corporation for the full amount of the Bank's agreed upon settlement payment, and, as a result, any further financial impact to the Corporation is expected to be immaterial.

~~NOTE 11 – Fair Value Measurements~~

The Corporation ~~has categorized all assets and liabilities measured at fair value on both a recurring and nonrecurring basis into~~is responding to an investigation by the ~~above three levels.~~

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

September 30, 2017
Level 1 Level 2 Level 3 Total
(in thousands)
Mortgage loans held for sale $ —
$ 23,049
$ —
$ 23,049
Available for sale investment securities:
Equity securities 13,059
—
—
13,059
U.S. Government sponsored agency securities —
6,015
—
6,015
State and municipal securities —
413,913
—
413,913
Corporate debt securities —
89,755
3,222
92,977
Collateralized mortgage obligations —
593,678
—
593,678
Residential mortgage-backed securities —
1,182,086
—
1,182,086
Commercial mortgage-backed securities —
161,632
—
161,632
Auction rate securities —
—
98,156
98,156
Total available for sale investment securities 13,059
2,447,079
101,378
2,561,516
Other assets 18,742
49,041
—
67,783
Total assets $ 31,801
$ 2,519,169
$ 101,378
$ 2,652,348
Other liabilities $ 18,607
$ 41,569
$ —
$ 60,176

December 31, 2016
Level 1 Level 2 Level 3 Total
(in thousands)
Mortgage loans held for sale $ —
$ 28,697
$ —
$ 28,697
Available for sale investment securities:
Equity securities 24,526
—
—
24,526
U.S. Government sponsored agency securities —
134
—
134
State and municipal securities —
391,641
—
391,641
Corporate debt securities —
106,537
2,872
109,409
Collateralized mortgage obligations —
593,860
—
593,860
Residential mortgage-backed securities —
1,317,838
—
1,317,838
Commercial mortgage-backed securities —
24,563
—
24,563
Auction rate securities —
—
97,256
97,256
Total available for sale investment securities 24,526
2,434,573
100,128
2,559,227
Other assets 17,111
44,481
—
61,592
Total assets $ 41,637
$ 2,507,751
$ 100,128
$ 2,649,516
Other liabilities $ 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~~SEC regarding certain accounting determinations that the Corporation has elected to measure at fair value. Fair values as of September 30, 2017 and December 31, 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 tocould have impacted 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.

~~Equity securities~~ – Equity securities consist of common stocks of financial institutions ($12.1 million at September 30, 2017 and $23.5 million at December 31, 2016) and other equity investments ($1.0 million at September 30, 2017 and December 31, 2016). These Level 1 investments are measured at fair value based on quoted prices for identical securities in active markets.

~~U.S. Government sponsored agency securities/State and municipal securities/Collateralized mortgage obligations/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 ($50.3 million at September 30, 2017 and $65.2 million at December 31, 2016), single-issuer trust preferred securities issued by financial institutions ($38.3 million at September 30, 2017 and $39.8 million at December 31, 2016), pooled trust preferred securities issued by financial institutions ($422,000 at both September 30, 2017 and December 31, 2016) and other corporate debt issued by non-financial institutions ($4.0 million at both September 30, 2017 and December 31, 2016).

~~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.earnings per share. The Corporation believes that its financial statements filed with the ~~trusts underlying the ARCs will self-liquidate~~SEC in Forms 10-K and 10-Q present fairly, in all material respects, its financial condition, results of operations and cash flows as ~~student loans are repaid. Level 3 fair valuesare 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.~~



	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 September 30, 2017:
Measured for impairment under FASB ASC Subtopic 450-20	$	47,261	$	55,486	$	7,632	$	6,488	$	5,702	$	1,976	$	1,999	$	—	$	126,544
Evaluated for impairment under FASB ASC Section 310-10-35	7,726		15,499		10,826		10,195		1,434		21		—		N/A		45,701
	$	54,987	$	70,985	$	18,458	$	16,683	$	7,136	$	1,997	$	1,999	$	—	$	172,245

Loans, net of unearned income at September 30, 2017:
Measured for impairment under FASB ASC Subtopic 450-20	$	6,228,935	$	4,162,857	$	1,543,551	$	1,845,329	$	959,584	$	302,415	$	257,748	N/A		$	15,300,419
Evaluated for impairment under FASB ASC Section 310-10-35	46,205		60,218		23,922		42,578		13,524		33		—		N/A		186,480
	$	6,275,140	$	4,223,075	$	1,567,473	$	1,887,907	$	973,108	$	302,448	$	257,748	N/A		$	15,486,899

Allowance for loan losses at September 30, 2016:
Measured for impairment under FASB ASC Subtopic 450-20	$	36,151	$	38,858	$	17,828	$	10,410	$	4,422	$	3,346	$	2,929	$	6,320	$	120,264
Evaluated for impairment under FASB ASC Section 310-10-35	9,706		9,421		9,293		11,694		2,121		27		—		N/A		42,262
	$	45,857	$	48,279	$	27,121	$	22,104	$	6,543	$	3,373	$	2,929	$	6,320	$	162,526

Loans, net of unearned income at September 30, 2016:
Measured for impairment under FASB ASC Subtopic 450-20	$	5,763,863	$	3,972,461	$	1,621,731	$	1,496,461	$	850,315	$	283,633	$	219,780	N/A		$	14,208,244
Evaluated for impairment under FASB ASC Section 310-10-35	55,052		51,658		18,690		46,235		11,319		40		—		N/A		182,994
	$	5,818,915	$	4,024,119	$	1,640,421	$	1,542,696	$	861,634	$	283,673	$	219,780	N/A		$	14,391,238



	Pass						Special Mention						Substandard or Lower						Total
	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016
	(dollars in thousands)
Real estate - commercial mortgage	$	6,028,523		$	5,763,122		$	118,947		$	132,484		$	127,670		$	122,976		$	6,275,140		$	6,018,582
Commercial - secured	3,807,138			3,686,152			98,639			128,873			183,181			118,527			4,088,958			3,933,552
Commercial - unsecured	127,561			145,922			3,474			4,481			3,082			3,531			134,117			153,934
Total commercial - industrial, financial and agricultural	3,934,699			3,832,074			102,113			133,354			186,263			122,058			4,223,075			4,087,486
Construction - commercial residential	134,786			113,570			6,746			15,447			14,595			13,172			156,127			142,189
Construction - commercial	743,111			635,963			4,418			3,412			3,869			5,115			751,398			644,490
Total construction (excluding Construction - other)	877,897			749,533			11,164			18,859			18,464			18,287			907,525			786,679
	$	10,841,119		$	10,344,729		$	232,224		$	284,697		$	332,397		$	263,321		$	11,405,740		$	10,892,747
% of Total	95.1		%	95.0		%	2.0		%	2.6		%	2.9		%	2.4		%	100.0		%	100.0		%



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



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



	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)
Three months ended September 30, 2017
Balance at June 30, 2017	$	(10,157	)	$	273	$	—		$	(14,991	)	$	(24,875	)
Other comprehensive income before reclassifications	3,320			—		—			—			3,320
Amounts reclassified from accumulated other comprehensive income (loss)	(2,988		)	—		—			340			(2,648		)
Balance at September 30, 2017	$	(9,825	)	$	273	$	—		$	(14,651	)	$	(24,203	)
Three months ended September 30, 2016
Balance at June 30, 2016	$	22,701		$	458	$	(7	)	$	(15,463	)	$	7,689
Other comprehensive loss before reclassifications	(3,580		)	—		—			—			(3,580		)
Amounts reclassified from accumulated other comprehensive income (loss)	(1		)	—		4			379			382
Balance at September 30, 2016	$	19,120		$	458	$	(3	)	$	(15,084	)	$	4,491

Nine months ended September 30, 2017
Balance at December 31, 2016	$	(23,047	)	$	273	$	—		$	(15,675	)	$	(38,449	)
Other comprehensive income before reclassifications	17,861			—		—			—			17,861
Amounts reclassified from accumulated other comprehensive income (loss)	(4,639		)	—		—			1,024			(3,615		)
Balance at September 30, 2017	$	(9,825	)	$	273	$	—		$	(14,651	)	$	(24,203	)
Nine months ended September 30, 2016
Balance at December 31, 2015	$	(6,499	)	$	458	$	(15	)	$	(15,961	)	$	(22,017	)
Other comprehensive income before reclassifications	26,285			—		—			—			26,285
Amounts reclassified from accumulated other comprehensive income (loss)	(666		)	—		12			877			223
Balance at September 30, 2016	$	19,120		$	458	$	(3	)	$	(15,084	)	$	4,491



	Gross Realized Gains		Gross Realized Losses			Net Gains (Losses)
Three months ended September 30, 2017	(in thousands)
Equity securities	$	4,817	$	—		$	4,817
Debt securities	12		(232		)	(220		)
Total	$	4,829	$	(232	)	$	4,597
Three months ended September 30, 2016
Equity securities	$	2	$	—		$	2
Debt securities	—		—			—
Total	$	2	$	—		$	2

Nine months ended September 30, 2017
Equity securities	$	7,167	$	—		$	7,167
Debt securities	218		(246		)	(28		)
Total	$	7,385	$	(246	)	$	7,139
Nine months ended September 30, 2016
Equity securities	$	739	$	(10	)	$	729
Debt securities	322		(26		)	296
Total	$	1,061	$	(36	)	$	1,025


	Performing						Delinquent (1)						Non-performing (2)						Total						Performing						Delinquent ⁽¹⁾						Non-performing ⁽²⁾						Total
	September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016			June 30, 2019			December 31, 2018			June 30, 2019			December 31, 2018			June 30, 2019			December 31, 2018			June 30, 2019			December 31, 2018
	(dollars in thousands)																								(dollars in thousands)
Real estate - home equity	$	1,542,289		$	1,602,687		$	12,955		$	9,274		$	12,229		$	13,154		$	1,567,473		$	1,625,115		$	1,363,344		$	1,431,666		$	11,634		$	10,702		$	11,996		$	9,769		$	1,386,974		$	1,452,137
Real estate - residential mortgage	1,845,495			1,557,995			20,769			20,344			21,643			23,655			1,887,907			1,601,994			2,398,432			2,202,955			31,876			28,988			21,658			19,101			2,451,966			2,251,044
Construction - other	64,110			55,874			382			—			1,091			1,096			65,583			56,970			76,116			71,511			549			—			189			490			76,854			72,001
Consumer - direct	55,490			93,572			158			1,752			63			1,563			55,711			96,887			58,295			55,629			295			338			123			66			58,713			56,033
Consumer - indirect	243,723			190,656			2,834			3,599			180			328			246,737			194,583			390,394			359,405			3,508			3,405			259			343			394,161			363,153
Total consumer	299,213			284,228			2,992			5,351			243			1,891			302,448			291,470			448,689			415,034			3,803			3,743			382			409			452,874			419,186
Leasing	256,784			229,591			884			1,068			80			317			257,748			230,976
Equipment lease financing, other and overdrafts																									271,130			267,112			1,808			1,302			17,938			19,587			290,876			288,001
	$	4,007,891		$	3,730,375		$	37,982		$	36,037		$	35,286		$	40,113		$	4,081,159		$	3,806,525		$	4,557,711		$	4,388,278		$	49,670		$	44,735		$	52,163		$	49,356		$	4,659,544		$	4,482,369
% of Total	98.2		%	98.0		%	0.9		%	0.9		%	0.9		%	1.1		%	100.0		%	100.0		%	97.8		%	97.9		%	1.1		%	1.0		%	1.1		%	1.1		%	100.0		%	100.0		%


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


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


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


~~(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.~~


	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)
September 30, 2017
June 30, 2019
Interest rate swap derivative assets	$	47,710	$	(14,163	)	$	—		$	33,547	$	138,275	$	(1,941	)	$	—		$	136,334
Foreign exchange derivative assets with correspondent banks	293		(280		)	—			13		219		(93		)	—			126
Total	$	48,003	$	(14,443	)	$	—		$	33,560	$	138,494	$	(2,034	)	$	—		$	136,460

Interest rate swap derivative liabilities	$	41,345	$	(14,163	)	$	(15,520	)	$	11,662	$	76,232	$	(1,941	)	$	(74,291	)	$	—
Foreign exchange derivative liabilities with correspondent banks	280		(280		)	—			—		93		(93		)	—			—
Total	$	41,625	$	(14,443	)	$	(15,520	)	$	11,662	$	76,325	$	(2,034	)	$	(74,291	)	$	—

December 31, 2016
December 31, 2018
Interest rate swap derivative assets	$	41,395	$	(15,117	)	$	—		$	26,278	$	61,401	$	(12,955	)	$	(23,270	)	$	25,176
Foreign exchange derivative assets with correspondent banks	241		(241		)	—			—		287		(130		)	—			157
Total	$	41,636	$	(15,358	)	$	—		$	26,278	$	61,688	$	(13,085	)	$	(23,270	)	$	25,333

Interest rate swap derivative liabilities	$	41,395	$	(15,117	)	$	(4,010	)	$	22,268	$	47,107	$	(22,786	)	$	(22,786	)	$	1,535
Foreign exchange derivative liabilities with correspondent banks	447		(241		)	(206		)	—		130		(130		)	—			—
Total	$	41,842	$	(15,358	)	$	(4,216	)	$	22,268	$	47,237	$	(22,916	)	$	(22,786	)	$	1,535


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


(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 for sale at estimated fair value" on the consolidated balance sheets.


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


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



	September 30, 2017				December 31, 2016
	Book Value		Estimated Fair Value		Book Value		Estimated Fair Value
	(in thousands)
FINANCIAL ASSETS
Cash and due from banks	$	99,803	$	99,803	$	118,763	$	118,763
Interest-bearing deposits with other banks	582,845		582,845		233,763		233,763
Federal Reserve Bank and Federal Home Loan Bank stock	62,951		62,951		57,489		57,489
Loans held for sale ⁽¹⁾	23,049		23,049		28,697		28,697
Available for sale investment securities ⁽¹⁾	2,561,516		2,561,516		2,559,227		2,559,227
Net Loans ⁽¹⁾	15,314,654		15,086,654		14,530,593		14,387,454
Accrued interest receivable	50,082		50,082		46,294		46,294
Other financial assets ⁽¹⁾	219,434		219,434		206,132		206,132
FINANCIAL LIABILITIES
Demand and savings deposits	$	13,274,319	$	13,274,319	$	12,259,622	$	12,259,622
Brokered Deposits	109,936		109,936		—		—
Time deposits	2,757,525		2,759,913		2,753,242		2,769,757
Short-term borrowings	298,751		298,751		541,317		541,317
Accrued interest payable	10,568		10,568		9,632		9,632
Other financial liabilities ⁽¹⁾	234,160		234,160		216,080		216,080
Federal Home Loan Bank advances and other long-term debt	1,038,159		1,035,053		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.



~~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~~


	As of or for the Three months ended September 30						As of or for the Nine months ended September 30						Three months ended June 30						Six months ended June 30
	2017			2016			2017			2016			2019			2018			2019			2018
Net income (in thousands)	$	48,905		$	41,468		$	137,752		$	119,475		$	59,779		$	35,197		$	116,442		$	84,677
Diluted net income per share	$	0.28		$	0.24		$	0.78		$	0.69		$	0.35		$	0.20		$	0.68		$	0.48
Return on average assets	0.98		%	0.89		%	0.95		%	0.87		%	1.14		%	0.70		%	1.12		%	0.86		%
Return on average equity	8.76		%	7.78		%	8.45		%	7.64		%	10.42		%	6.28		%	10.28		%	7.64		%
Return on average tangible equity ⁽¹⁾	11.52		%	10.38		%	11.18		%	10.24		%	13.60		%	8.23		%	13.44		%	10.02		%
Net interest margin ⁽²⁾	3.27		%	3.14		%	3.27		%	3.19		%	3.44		%	3.39		%	3.46		%	3.37		%
Efficiency ratio ⁽¹⁾	64.3		%	65.2		%	64.6		%	67.0		%	64.2		%	63.3		%	64.1		%	65.3		%
Non-performing assets to total assets	0.73		%	0.80		%	0.73		%	0.80		%	0.73		%	0.67		%	0.73		%	0.67		%
Annualized net charge-offs to average loans	0.14		%	0.11		%	0.12		%	0.14		%
Annualized net (recoveries) charge-offs to average loans													(0.04		)%	1.01		%	0.03		%	0.56		%


(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-U.S. GAAP~~non-GAAP financial measure to the most comparable ~~U.S.~~ GAAP measure under the heading, "Supplemental Reporting of ~~Non-U.S.GAAP~~Non-GAAP Based Financial Measures" at the end of this "Overview" section.


(2)	Presented on an FTE basis, using a ~~35%~~21% federal tax rate and statutory interest expense disallowances. See also the “Net Interest Income” section of Management’s Discussion.


◦	Net Interest Margin - For the three and six months ended June 30, 2019, the net interest margin increases were driven by 33 and 38 basis point increases, respectively, in yields on interest-earning assets, partially offset by 30 and 31 basis point increases, respectively, in the cost of funds.


◦	Loan Growth - Average loans were $547.7 million, or 3.5%, and $540.6 million, or 3.4%, higher for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The most notable increases were in the residential mortgage, commercial and consumer loan portfolios.


◦	Deposit Growth - Average deposits grew $858.0 million, or 5.5%, and $856.7 million, or 5.5%, for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.


•	Non-interest Income - For the three and six months ended June 30, 2019, non-interest income, excluding investment securities gains, increased $5.0 million, or 10.3%, and $5.9 million, or 6.2%, respectively, as compared to the same periods in 2018. Increases were experienced during both periods in wealth management income, commercial banking income, mortgage banking income and consumer banking.


~~(2)~~	Presented on ~~an FTE~~a fully taxable equivalent ("FTE") basis, using a ~~35%~~21% federal tax rate and statutory interest expense disallowances. See also the “Net Interest Income” section of Management’s ~~Discussion.~~Discussion and Analysis.


~~(2)~~	~~Includes~~Average balance includes non-performing loans.


~~(3)~~(2)	Balances include amortized historical cost for available for sale securities; the related unrealized holding gains (losses) are included in other assets.


	2017 vs. 2016 Increase (Decrease) due to change in									2019 vs. 2018 Increase (Decrease) due to change in
	Volume			Rate			Net			Volume			Rate			Net
	(in thousands)									(in thousands)
Interest income on:
Loans, net of unearned income	$	12,223		$	6,797		$	19,020
Loans and leases, net of unearned income										$	6,049		$	14,639		$	20,688
Taxable investment securities	30			521			551			540			1,510			2,050
Tax-exempt investment securities	714			(145		)	569			346			81			427
Equity securities	(86		)	33			(53		)
Loans held for sale	(1		)	34			33			31			35			66
Other interest-earning assets	212			404			616			425			500			925
Total interest income	$	13,092		$	7,644		$	20,736		$	7,391		$	16,765		$	24,156
Interest expense on:
Demand deposits	$	177		$	1,964		$	2,141		$	308		$	2,905		$	3,213
Savings and money market deposits	293			1,627			1,920			510			4,494			5,004
Brokered deposits	277			—			277			986			201			1,187
Time deposits	(186		)	561			375			521			3,339			3,860
Short-term borrowings	(15		)	339			324			(256		)	1,682			1,426
FHLB advances and other long-term debt	674			(1,912		)	(1,238		)	863			(166		)	697
Total interest expense	$	1,220		$	2,579		$	3,799		$	2,932		$	12,455		$	15,387


	Three months ended September 30								Increase (Decrease) in					Three months ended June 30								Increase (Decrease)
	2017				2016				Balance					2019				2018				in Balance
	Balance		Yield		Balance		Yield		$			%		Balance		Yield		Balance		Yield		$			%
	(dollars in thousands)													(dollars in thousands)
Real estate – commercial mortgage	$	6,208,630	4.07	%	$	5,670,888	3.99	%	$	537,742		9.5	%	$	6,424,213	4.67	%	$	6,298,534	4.34	%	$	125,679		2.0	%
Commercial – industrial, financial and agricultural	4,257,075		4.08		4,066,275		3.76		190,800			4.7		4,440,860		4.73		4,335,097		4.27		105,763			2.4
Real estate – residential mortgage	1,841,559		3.83		1,503,209		3.76		338,350			22.5		2,366,685		4.09		2,026,161		3.89		340,524			16.8
Real estate – home equity	1,569,898		4.48		1,640,913		4.08		(71,015		)	(4.3	)	1,404,141		5.35		1,502,936		4.83		(98,795		)	(6.6	)
Real estate – construction	943,029		4.05		837,920		3.76		105,109			12.5		943,080		5.29		978,327		4.40		(35,247		)	(3.6	)
Consumer	318,546		4.94		281,517		5.31		37,029			13.2		445,666		4.38		345,572		4.43		100,094			29.0
Leasing, other and overdrafts	253,330		4.91		211,528		4.74		41,802			19.8
Total	$	15,392,067	4.12	%	$	14,212,250	3.93	%	$	1,179,817		8.3	%
Equipment lease financing														279,619		4.45		272,298		4.59		7,321			2.7
Other														11,812		—		9,452		—		2,360			25.0
Total loans and leases														$	16,316,076	4.69	%	$	15,768,377	4.32	%	$	547,699		3.5	%


	Three months ended September 30								Increase (Decrease) in Balance					Three months ended June 30								Increase (Decrease) in Balance
	2017				2016				Increase (Decrease) in Balance					2019				2018				Increase (Decrease) in Balance
	Balance		Rate		Balance		Rate		$			%		Balance		Rate		Balance		Rate		$			%
	(dollars in thousands)													(dollars in thousands)
Noninterest-bearing demand	$	4,494,897	—	%	$	4,227,639	—	%	$	267,258		6.3	%	$	4,200,810	—	%	$	4,281,574	—	%	$	(80,764	)	(1.9	)%
Interest-bearing demand	3,943,118		0.39		3,602,448		0.19		340,670			9.5		4,186,280		0.78		3,952,115		0.50		234,165			5.9
Savings and money market accounts	4,603,155		0.34		4,078,942		0.20		524,213			12.9		4,925,788		0.86		4,538,083		0.49		387,705			8.5
Total demand and savings	13,041,170		0.24		11,909,029		0.13		1,132,141			9.5		13,312,878		0.56		12,771,772		0.34		541,106			4.2
Brokered deposits	89,767		1.23		—		—		89,767			N/M		246,154		2.58		85,242		1.87		160,912			N/M
Time deposits	2,744,532		1.15		2,814,258		1.07		(69,726		)	(2.5	)	2,816,424		1.74		2,660,410		1.26		156,014			5.9
Total deposits	$	15,875,469	0.40	%	$	14,723,287	0.31	%	$	1,152,182		7.8	%	$	16,375,456	0.80	%	$	15,517,424	0.50	%	$	858,032		5.5	%

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Non-accelerated filer

Smaller reporting company

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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.