SECURITIES AND EXCHANGE COMMISSION



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

For the transition period fromto

Commission File No. 0-10587

(Exact name of registrant as specified in its charter)

(Registrant’s telephone number, including area code)

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.

Large accelerated filer

ý☒

Accelerated filer

¨☐

Non-accelerated filer

¨☐

Smaller reporting company

¨☐

Emerging growth company

¨☐

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

¨☐

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~~–163,075,000 shares outstanding as of ~~October 27, 2017.~~


FULTON FINANCIAL CORPORATION
GLOSSARY OF DEFINED ACRONYMS AND TERMS

ACL						Allowance for credit losses
AFS						Available for sale
ALCO						Asset/Liability Management Committee
AML						Anti-Money Laundering
AOCI						Accumulated other comprehensive income
ARC						Auction rate security
ASC						Accounting Standards Codification
ASU						Accounting Standards Update
bp						Basis point(s)
BSA						Bank Secrecy Act
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
CECL						Current expected credit losses
Corporation or Company						Fulton Financial Corporation

COVID-19						Coronavirus
ETR						Effective tax rate
Exchange Act						Securities Exchange Act of 1934
EAD						Exposure at default
FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
Fed Funds Rate						Target federal funds rate
FHLB						Federal Home Loan Bank
FOMC						Federal Open Market Committee

FRB						Federal Reserve Bank
FTE						Fully taxable-equivalent
Fulton Bank or the Bank						Fulton Bank, N.A.
GAAP						U.S. Generally Accepted Accounting Principles
HTM						Held to maturity
LGD						Loss given default
LIBOR						London Interbank Offered Rate
MSRs						Mortgage servicing rights
NIM						Net interest margin
N/M						Not meaningful
Net Loans						Loans and lease receivables, (net of unearned income)
OBS						Off-balance-sheet
OCI						Other comprehensive income
OREO						Other real estate owned
OTTI						Other-than-temporary impairment
PD						Probability of default
PPP						Paycheck Protection Program
PSU						Performance-based restricted stock unit
RSU						Restricted stock unit
SBA						Small Business Administration
SEC						United States Securities and Exchange Commission
TCI						Tax credit investment


TDR						Troubled debt restructuring

TruPS						Trust Preferred Securities
Visa Shares						Visa, Inc. Class B restricted shares

CONSOLIDATED BALANCE SHEETS

~~(in thousands, except per-share data)~~

September 30,
2017 December 31,
2016
(unaudited)
ASSETS
Cash and due from banks $ 99,803
$ 118,763
Interest-bearing deposits with other banks 582,845
233,763
Federal Reserve Bank and Federal Home Loan Bank stock 62,951
57,489
Loans held for sale 23,049
28,697
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
Premises and equipment 221,551
217,806
Accrued interest receivable 50,082
46,294
Goodwill and intangible assets 531,556
531,556
Other assets 614,853
620,059
Total Assets $ 20,062,860
$ 18,944,247
LIABILITIES
Deposits:
Noninterest-bearing $ 4,363,915
$ 4,376,137
Interest-bearing 11,777,865
10,636,727
Total Deposits 16,141,780
15,012,864
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
Accrued interest payable 10,568
9,632
Other liabilities 347,816
329,916
Federal Home Loan Bank advances and other long-term debt 1,038,159
929,403
Total Liabilities 17,837,074
16,823,132
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
Additional paid-in capital 1,476,150
1,467,602
Retained earnings 812,148
732,099
Accumulated other comprehensive loss (24,203 ) (38,449 )
Treasury stock, at cost, 45.8 million shares in 2017 and 2016 (590,462 ) (589,844 )
Total Shareholders’ Equity 2,225,786
2,121,115
Total Liabilities and Shareholders’ Equity $ 20,062,860
$ 18,944,247

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

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)~~

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016

Net Income $ 48,905
$ 41,468
$ 137,752
$ 119,475
Other Comprehensive Income (Loss), net of tax:
Unrealized gain (loss) on securities 3,320
(3,580 ) 17,861
26,285
Reclassification adjustment for securities gains included in net income (2,988 ) (1 ) (4,639 ) (666 )
Amortization of unrealized loss on derivative financial instruments —
4
—
12
Amortization of net unrecognized pension and postretirement items 340
379
1,024
877
Other Comprehensive Income (Loss) 672
(3,198 ) 14,246
26,508
Total Comprehensive Income $ 49,577
$ 38,270
$ 151,998
$ 145,983

See Notes to Consolidated Financial Statements

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)~~

~~NINE~~ ~~MONTHS ENDED~~ ~~SEPTEMBER 30, 2017~~ ~~AND~~ ~~2016~~

Common Stock
Retained
Earnings

Treasury
Stock
Total

Shares
Outstanding
Amount
Additional Paid-in
Capital

Accumulated
Other Comprehensive
Income (Loss)

Balance at December 31, 2016 174,040
$ 549,707
$ 1,467,602
$ 732,099
$ (38,449 ) $ (589,844 ) $ 2,121,115
Net income

137,752

137,752
Other comprehensive income

14,246

14,246
Stock issued 1,017
2,446
5,209

(618 ) 7,037
Stock-based compensation awards

3,339

3,339
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

Balance at December 31, 2015 174,176
$ 547,141
$ 1,450,690
$ 641,588
$ (22,017 ) $ (575,508 ) $ 2,041,894
Net income

119,475

119,475
Other comprehensive income

26,508

26,508
Stock issued, including related tax benefits 454
594
2,099

2,833
5,526
Stock-based compensation awards

4,808

4,808
Acquisition of treasury stock (1,486 ) (18,545 ) (18,545 )
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

See Notes to Consolidated Financial Statements


	June 30, 2021		December 31, 2020
	(unaudited)
ASSETS
Cash and due from banks	$	143,002	$	120,462
Interest-bearing deposits with other banks	1,761,057		1,727,370
Cash and cash equivalents	1,904,059		1,847,832
FRB and FHLB stock	62,631		92,129
Loans held for sale	41,924		83,886
Investment securities:
AFS, at estimated fair value	3,097,375		3,062,143
HTM, at amortized cost	824,283		278,281
Net Loans	18,586,756		18,900,820
Less: ACL - loans	(255,032)		(277,567)
Loans, net	18,331,724		18,623,253
Net premises and equipment	228,353		231,480
Accrued interest receivable	63,232		72,942
Goodwill and intangible assets	536,847		536,659
Other assets	989,346		1,078,128
Total Assets	$	26,079,774	$	25,906,733
LIABILITIES
Deposits:
Noninterest-bearing	$	7,442,132	$	6,531,002
Interest-bearing	14,282,180		14,308,205
Total Deposits	21,724,312		20,839,207



Short-term borrowings	533,749		630,066
Accrued interest payable	7,322		10,365
Long-term borrowings	627,213		1,296,263
Other liabilities	494,220		514,004
Total Liabilities	23,386,816		23,289,905
SHAREHOLDERS’ EQUITY
Preferred stock, no par value, 10,000,000 shares authorized; Series A, 200,000 shares authorized and issued in 2020, liquidation preference of $1,000 per share	192,878		192,878
Common stock, $2.50 par value, 600.0 million shares authorized, 223.8 million shares issued in 2021 and 223.2 million issued in 2020	559,485		557,917
Additional paid-in capital	1,513,645		1,508,117
Retained earnings	1,208,086		1,120,781
Accumulated other comprehensive gain	47,201		65,091
Treasury stock, at cost, 60.8 million shares in 2021 and in 2020	(828,337)		(827,956)
Total Shareholders’ Equity	2,692,958		2,616,828
Total Liabilities and Shareholders’ Equity	$	26,079,774	$	25,906,733

See Notes to Consolidated Financial Statements


(in thousands, except per-share data)	Three months ended June 30				Six months ended June 30
	2021		2020		2021		2020
Interest Income
Loans, including fees	$	155,080	$	158,928	$	319,065	$	334,452
Investment securities:
Taxable	13,898		15,171		27,588		31,465
Tax-exempt	5,921		5,323		11,574		10,031

Loans held for sale	199		509		671		829
Other interest income	1,575		766		2,711		3,297
Total Interest Income	176,673		180,697		361,609		380,074
Interest Expense
Deposits	7,982		17,118		17,584		43,558
Short-term borrowings	137		517		325		4,590
Long-term borrowings	6,155		10,307		16,853		18,426
Total Interest Expense	14,274		27,942		34,762		66,574
Net Interest Income	162,399		152,755		326,847		313,500
Provision for credit losses	(3,500)		19,570		(9,000)		63,600
Net Interest Income After Provision for Credit Losses	165,899		133,185		335,847		249,900
Non-Interest Income
Commercial banking	17,129		16,748		33,471		35,167
Consumer banking	10,860		9,138		21,614		20,377
Wealth management	17,634		13,407		34,981		28,462
Mortgage banking	2,838		9,964		16,798		16,198
Other	3,393		3,660		6,912		7,311
Non-Interest Income Before Investment Securities Gains	51,854		52,917		113,776		107,515
Investment securities gains, net	36		3,005		33,511		3,051
Total Non-Interest Income	51,890		55,922		147,287		110,566
Non-Interest Expense
Salaries and employee benefits	78,367		81,012		160,953		161,240
Data processing and software	13,932		12,193		27,493		23,838
Net occupancy	12,494		13,144		26,476		26,630
Other outside services	8,178		7,600		16,668		15,481
State taxes	4,384		3,088		8,889		5,891
Equipment	3,424		3,193		6,852		6,611
Professional fees	2,651		3,331		5,430		7,533
FDIC insurance	2,282		2,133		4,906		4,941
Amortization of TCI	1,563		1,450		3,094		2,900
Marketing	1,348		1,303		2,350		2,882
Intangible amortization	178		132		293		264
Debt extinguishment	412		2,878		32,575		2,878
Other	11,618		11,549		23,236		24,469
Total Non-Interest Expense	140,831		143,006		319,215		285,558
Income Before Income Taxes	76,958		46,101		163,919		74,909
Income taxes	11,994		6,542		25,892		9,303
Net Income	64,964		39,559		138,027		65,606
Preferred stock dividends	(2,562)		0		(5,153)		0
Net Income Available to Common Shareholders	$	62,402	$	39,559	$	132,874	$	65,606

PER SHARE:
Net Income Available to Common Shareholders (Basic)	$	0.38	$	0.24	$	0.81	$	0.40
Net Income Available to Common Shareholders (Diluted)	0.38		0.24		0.81		0.40
Cash Dividends	0.14		0.13		0.28		0.26
See Notes to Consolidated Financial Statements


	Three months ended June 30				Six months ended June 30
	2021		2020		2021		2020

Net Income	$	64,964	$	39,559	$	138,027	$	65,606
Other Comprehensive Income (Loss), net of tax:
Unrealized gain (loss) on securities	19,298		34,424		(20,701)		51,853
Reclassification adjustment for securities (gains) losses included in net income	(28)		(2,341)		349		(2,376)
Amortization of net unrealized (gains) losses on AFS securities transferred to HTM	(270)		793		1,517		1,589
Net unrealized gain on interest rate swaps used in cash flow hedges	2,074		0		367		0

Amortization of net unrecognized pension and postretirement income	289		255		578		510
Other Comprehensive Income (Loss)	21,363		33,131		(17,890)		51,576
Total Comprehensive Income	$	86,327	$	72,690	$	120,137	$	117,182

See Notes to Consolidated Financial Statements

Adjustment for CECL (1)

(1) The Corporation adopted ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments on January 1, 2020. See Note 1, "Basis of Presentation" to the Consolidated Financial Statements for further details.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

~~(in thousands)~~


(in thousands)	Six months ended June 30
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	138,027	$	65,606
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	(9,000)		63,600
Depreciation and amortization of premises and equipment	13,775		14,331
Amortization of TCI	14,002		15,237
Net amortization of investment securities premiums	7,546		5,599
Investment securities gains, net	(33,511)		(3,051)
Gain on sales of mortgage loans held for sale	(14,094)		(22,728)
Proceeds from sales of mortgage loans held for sale	554,406		584,924
Originations of mortgage loans held for sale	(498,350)		(601,783)
Intangible amortization	293		264
Amortization of issuance costs and discounts on long-term borrowings	1,378		543
Debt extinguishment costs	32,575		2,878
Stock-based compensation	4,000		3,530


Other changes, net	22,537		(161,412)
Total adjustments	95,557		(98,068)
Net cash provided by (used in) operating activities	233,584		(32,462)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of AFS securities	125,811		187,819
Proceeds from principal repayments and maturities of AFS securities	246,740		147,551
Proceeds from principal repayments and maturities of HTM securities	58,470		40,374
Purchase of AFS securities	(766,574)		(418,395)
Purchase of HTM securities	(227,687)		0
Sale of Visa Shares	33,962		0
Sale of FRB and FHLB stock	29,498		6,380
Net decrease (increase) in loans	300,929		(1,882,433)
Net purchases of premises and equipment	(10,648)		(13,881)
Net cash paid for acquisition	292		0
Net change in tax credit investments	(8,065)		(4,873)
Net cash used in investing activities	(217,272)		(1,937,458)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits	1,234,732		2,678,900
Net decrease in time deposits	(349,627)		(188,604)
Net decrease in short-term borrowings	(96,317)		(310,690)
Proceeds from long-term borrowings	620		495,898
Repayments of long-term borrowings	(703,624)		(85,893)
Net proceeds from issuance of common stock	2,715		3,198

Dividends paid	(48,584)		(42,333)
Acquisition of treasury stock	0		(39,748)
Net cash provided by financing activities	39,915		2,510,728
Net Increase in Cash and Cash Equivalents	56,227		540,808
Cash and Cash Equivalents at Beginning of Period	1,847,832		517,791
Cash and Cash Equivalents at End of Period	$	1,904,059	$	1,058,599
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	37,805	$	63,837
Income taxes	8,127		11,051
Supplemental Schedule of Certain Noncash Activities:
Transfer of AFS securities to HTM securities	$	376,165	$	0

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~~Consolidated Financial Statements of ~~Fulton Financial~~the Corporation ~~(the "Corporation")~~ have been prepared in conformity with ~~U.S. generally accepted accounting principles ("U.S. GAAP")~~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~~Consolidated Financial Statements should be read in conjunction with the audited ~~consolidated financial statements~~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.~~2020. Operating results for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2021. The Corporation evaluates subsequent events through the date of filing of this Form 10-Q with the ~~Securities~~SEC.

CECL Adoption

On January 1, 2020, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments. The Corporation adopted CECL using the modified retrospective method for all financial assets measured at amortized cost, net of investments in leases and ~~Exchange Commission ("SEC").~~

~~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.OBS credit exposures. The ~~core principle prescribed by this standards update is that~~Corporation recorded an ~~entity recognizes revenue to depict the transfer~~increase 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$58.3 million 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 reportACL on ~~Form 10-Q. The Corporation has evaluated the impact~~January 1, 2020 as a result of the adoption of ~~ASC Update 2014-09 on its consolidated financial statements~~CECL. Retained earnings decreased $43.8 million and ~~has not identified any significant changes~~deferred tax assets increased by $12.4 million. Included in the ~~timing of revenue recognition as a result of this amended guidance at this time. In addition,~~$58.3 million increase to the ~~Corporation is evaluating the expanded disclosure requirements included~~ACL was $2.1 million for certain OBS credit exposures that was previously recognized in ~~the update. The Corporation plans to adopt this update on January 1, 2018 under the modified retrospective approach and does not expect~~other liabilities before the adoption of CECL.

CARES Act and Consolidated Appropriations Act - 2021

On March 27, 2020 the CARES Act was signed into law. The CARES Act includes an option for financial institutions to suspend the requirements of GAAP for certain loan modifications that would otherwise be categorized as a TDR. Certain conditions must be met with respect to the loan modification including that the modification is related to COVID-19 and the modified loan was not more than 30 days past due on December 31, 2019. On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law and this Act extended the relief for TDR treatment that was set to expire on December 31, 2020 to the earlier of 60 days after the national emergency termination date or January 1, 2022. The Corporation is applying the option under the CARES act for all loan modifications that qualify.

Recently Adopted Accounting Standards

On January 1, 2021, the Corporation adoptedASC Update ~~2014-09 to have a material impact on its consolidated financial statements.~~

~~In January 2016,~~2019-12 Income Taxes (Topic 740):Simplifying 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 effectiveAccounting for ~~public business entities' annual and interim reporting periods beginning after December 15, 2017, with earlier adoption permitted.~~Income Taxes.The Corporation ~~intends to adopt~~adopted this standards update effective with its March 31, ~~2018~~2021 quarterly report on Form 10-Q and ~~does~~it did not ~~expect the adoption of ASC Update 2016-01 to~~ have a material impact on ~~its~~the consolidated financial statements.

~~In February 2016,~~On January 1, 2021, the ~~FASB issued~~ Corporation adopted ASC Update ~~2016-02, "Leases."~~2021-01 Reference Rate Reform (Topic 848). This ~~standards~~ update ~~states that a lessee should recognize~~permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of LIBOR transition affected by changes to the ~~assets~~interest rates used for discounting, margining or contract price alignment due to reference rate reform. This update was effective upon issuance and ~~liabilities that arise from all leases with a term greater than 12 months. The core principle requires~~entities may elect to apply 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~~modifications either retrospectively, as of any date from the beginning of any interim period that includes or is ~~effective for~~subsequent to March 12, 2020, or prospectively to new modifications from any date in an 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 adoptionperiod that includes or is ~~permitted. For the~~subsequent to January 7, 2021. The Corporation adopted this standards update isretrospectively 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

~~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, 20182021 quarterly report on Form 10-Q and ~~does not expect~~ the adoption ~~of ASC Update 2016-15 to~~did not have a material impact on ~~its~~the 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~~2020 consolidated financial statements and notes have been reclassified to conform to the ~~2017~~2021 presentation.

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

~~Basic net income per share~~The Bank is ~~calculated as net income divided~~required to maintain reserves against its deposit liabilities. Prior to March 2020, reserves were in the form of cash and balances with the FRB. The FRB suspended cash reserve requirements effective March 26, 2020.

In addition, cash collateral is posted by the ~~weighted average number~~Corporation with counterparties to secure derivative and other contracts. The amounts 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 are required to be included in weighted average shares outstanding if performance measures, as defined in each PSU award agreement, are metsuch cash collateral as of ~~the end of the period.~~June 30, 2021 and December 31, 2020 were $269.6 million and $408.1 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~~Investment Securities

The following table presents ~~changes~~the amortized cost and estimated fair values of investment securities for the periods presented:


	June 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale	(in thousands)
U.S. Government securities	$	153,885	$	0	$	(340)	$	153,545
U.S. Government sponsored agency securities	62,529		0		(98)		62,431
State and municipal securities	1,002,146		53,924		(608)		1,055,462
Corporate debt securities	354,593		16,876		(88)		371,381
Collateralized mortgage obligations	299,333		7,965		(133)		307,165
Residential mortgage-backed securities	201,654		1,641		(1,748)		201,547
Commercial mortgage-backed securities	858,574		14,338		(1,902)		871,010
Auction rate securities	76,350		0		(1,516)		74,834


Total	$	3,009,064	$	94,744	$	(6,433)	$	3,097,375

Held to Maturity

Residential mortgage-backed securities	$	439,220	$	15,470	$	(5,019)	$	449,671
Commercial mortgage-backed securities	385,063		0		(7,802)		377,261
Total	$	824,283	$	15,470	$	(12,821)	$	826,932


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale	(in thousands)


State and municipal securities	$	891,327	$	61,286	$	0	$	952,613
Corporate debt securities	348,391		19,445		(691)		367,145
Collateralized mortgage obligations	491,321		12,560		(115)		503,766
Residential mortgage-backed securities	373,779		4,246		(27)		377,998
Commercial mortgage-backed securities	741,172		22,384		(1,141)		762,415
Auction rate securities	101,510		0		(3,304)		98,206
Total	$	2,947,500	$	119,921	$	(5,278)	$	3,062,143



Held to Maturity

Residential mortgage-backed securities	$	278,281	$	18,576	$	0	$	296,857

Securities carried at $2.0 billion at June 30, 2021 and $520.5 million at December 31, 2020 were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

The amortized cost and estimated fair values of debt securities as of June 30, 2021, by contractual maturity, are shown in ~~other comprehensive income:~~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.


		June 30, 2021
		Available for Sale				Held to Maturity
		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due in one year or less		$	8,212	$	8,240	$	0	$	0
Due from one year to five years		253,200		253,976		0		0
Due from five years to ten years		353,124		371,026		0		0
Due after ten years		1,034,967		1,084,411		0		0
		1,649,503		1,717,653		0		0
Residential mortgage-backed securities(1)		201,654		201,547		439,220		449,671
Commercial mortgage-backed securities(1)		858,574		871,010		385,063		377,261
Collateralized mortgage obligations(1)		299,333		307,165		0		0
Total		$	3,009,064	$	3,097,375	$	824,283	$	826,932

(1) Mortgage-backed securities and collateralized mortgage obligations do not have stated maturities and are dependent upon the interest rate environment and prepayments on the underlying loans.

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 information related to the gross realized gains and losses on the sales of investment securities for the periods presented:


	Gross Realized Gains		Gross Realized Losses		Net Gains
Three months ended	(in thousands)
June 30, 2021	$	465	$	(429)	$	36
June 30, 2020	6,334		(3,329)		3,005

Six months ended
June 30, 2021	$	34,481	$	(970)	$	33,511
June 30, 2020	6,451		(3,400)		3,051

During the first quarter of 2021, the Corporation completed a balance sheet restructuring that included a $34.0 million gain on the sale of Visa Shares, offset by net losses on other securities of $400,000, primarily in connection with the sale of $24.6 million of ARCs. In addition, debt extinguishment costs of $32.2 million included in non-interest expense and a write-off of $841,000 in unamortized discounts was recognized in net interest income in connection with the cash tender offer for certain of its outstanding senior and subordinated notes and the prepayment of certain term FHLB advances. See Note 14, "Long-Term Debt" for further details.

The following tables present the gross unrealized losses and estimated fair values of investment securities, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position for the periods presented:


	June 30, 2021
	Less than 12 months					12 months or longer					Total
	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 securities	2	$	153,545	$	(340)	0	$	0	$	0	$	153,545	$	(340)
U.S. Government sponsored agency securities	1	62,431		(98)		0	0		0		62,431		(98)
State and municipal securities	12	46,851		(608)		0	0		0		46,851		(608)
Corporate debt securities	5	19,921		(88)		0	0		0		19,921		(88)
Collateralized mortgage obligations	1	30,402		(133)		0	0		0		30,402		(133)
Residential mortgage-backed securities	7	154,928		(1,748)		0	0		0		154,928		(1,748)
Commercial mortgage-backed securities	15	241,220		(1,902)		0	0		0		241,220		(1,902)
Auction rate securities	0	0		0		118	74,834		(1,516)		74,834		(1,516)
Total available for sale	43	$	709,298	$	(4,917)	118	$	74,834	$	(1,516)	$	784,132	$	(6,433)

Held to Maturity

Residential mortgage-backed securities	12	$	203,077	$	(5,019)	0	$	0	$	0	$	203,077	$	(5,019)
Commercial mortgage-backed securities	21	377,261		(7,802)		0	0		0		377,261		(7,802)
Total	33	$	580,338	$	(12,821)	0	$	0	$	0	$	580,338	$	(12,821)


	December 31, 2020
	Less than 12 months					12 months or longer					Total
	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)


Corporate debt securities	9	$	44,528	$	(377)	1	$	6,871	$	(314)	$	51,399	$	(691)
Collateralized mortgage obligations	3	57,601		(115)		0	0		0		57,601		(115)
Residential mortgage-backed securities	1	20,124		(27)		0	0		0		20,124		(27)
Commercial mortgage-backed securities	9	144,383		(1,141)		0	0		0		144,383		(1,141)
Auction rate securities	0	0		0		162	98,206		(3,304)		98,206		(3,304)
Total available for sale(1)	22	$	266,636	$	(1,660)	163	$	105,077	$	(3,618)	$	371,713	$	(5,278)

(1) No HTM securities were in an unrealized loss position as of December 31, 2020.

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 ~~each component~~interest rates and not credit quality. 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 ~~accumulated other comprehensive income (loss), net~~these securities prior to a recovery of ~~tax:~~their fair value to amortized cost. Therefore, the Corporation does not have an ACL for these investments as of June 30, 2021.

Based on management’s evaluations, no ACL was required for municipal securities, corporate debt securities or ARCs as of June 30, 2021. 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.

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:~~

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
State and municipal securities 415,313
4,005
(5,405 ) 413,913
Corporate debt securities 92,355
2,578
(1,956 ) 92,977
Collateralized mortgage obligations 601,845
1,380
(9,547 ) 593,678
Residential mortgage-backed securities 1,184,797
5,850
(8,561 ) 1,182,086
Commercial mortgage-backed securities 161,960
299
(627 ) 161,632
Auction rate securities 107,410
—
(9,254 ) 98,156
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

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 and $1.8 billion as of September 30, 2017 and December 31, 2016, respectively, were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

Equity securities include common stocks of publicly traded financial institutions (estimated fair value of $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 30, 2017, 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.

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 securities:~~

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 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 30, 2017 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.

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 30, 2017 and December 31, 2016:

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 )

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 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 30, 2017.

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

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 months ended September 30, 2017. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.

~~NOTE 5 –~~- Loans and Allowance for Credit Losses

~~Loans,~~ Net ~~of Unearned Income~~

Loans ~~net of unearned income~~ are summarized as follows:


	June 30, 2021		December 31, 2020
	(in thousands)
Real estate - commercial mortgage	$	7,152,932	$	7,105,092
Commercial and industrial (1)	4,985,414		5,670,828
Real-estate - residential mortgage	3,555,897		3,141,915
Real-estate - home equity	1,136,128		1,202,913
Real-estate - construction	1,070,755		1,047,218
Consumer	448,433		466,772
Equipment lease financing and other	254,550		284,377
Overdrafts	1,843		4,806
Gross loans	18,605,952		18,923,921
Unearned income	(19,196)		(23,101)
Net Loans	$	18,586,756	$	18,900,820

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~~(1) Includes PPP loans totaling $1.1 billion and ~~the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of incurred losses in the loan portfolio~~$1.6 billion as of ~~the balance sheet date~~June 30, 2021 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.December 31, 2020, respectively.

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

Allowance for Credit Losses

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

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
2017 2016 2017 2016
(in thousands)
Balance at beginning of period $ 174,998
$ 165,108
$ 171,325
$ 171,412
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 )
Provision for credit losses 5,075
4,141
16,575
8,182
Balance at end of period $ 174,749
$ 165,169
$ 174,749
$ 165,169

The Corporation has ~~historically maintained~~elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

Loans: The ACL for loans is an ~~unallocated allowance~~estimate of the expected losses to be realized over the life of the loans in the portfolio. The ACL is determined for two distinct categories of loans: 1) loans evaluated collectively for expected credit losses and 2) loans evaluated individually 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 allowexpected credit losses.

Loans Evaluated Collectively: Loans evaluated collectively for ~~the impact of these factors and conditions to be quantified in the allowance allocation process. Accordingly, an unallocated allowance for~~expected credit losses ~~is no longer necessary.~~

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

Real Estate -
Commercial
Mortgage

Commercial -
Industrial,
Financial and
Agricultural

Real Estate -
Home
Equity

Real Estate -
Residential
Mortgage

Real Estate -
Construction
Consumer
Leasing, other
and
overdrafts
Unallocated Total
(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


~~(1)~~	The provision for loan losses excluded decreases of $152,000 and $142,000 in the reserve for unfunded lending commitments for the three and nine months ended September 30, 2017, respectively and increases of $81,000 and $285,000 in the reserve for unfunded lending commitments for the three and nine months ended September 30, 2016, respectively.

~~The following table presents~~include loans ~~net of unearned income~~on accrual status, excluding accruing TDRs, and ~~their related allowance for loan losses, by portfolio segment:~~

~~N/A - Not applicable.~~

~~Impaired Loans~~

~~A loan is considered~~loans initially evaluated individually, but determined not to ~~be impaired if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. Impaired loans consist of all~~have enhanced credit risk characteristics. This category includes loans on non-accrual status and ~~accruing troubled debt restructurings ("TDRs"). An allowance~~TDRs where the total commitment amount is less than $1 million. The ACL is estimated by applying a PD and LGD to the EAD at the loan level. In order to determine the PD, LGD, and EAD calculation inputs:

•Loans are aggregated into pools based on similar risk characteristics.

•The PD and LGD rates are determined by historical credit loss experience for each pool of loans.

•The loan ~~losses~~segment PD rates are estimated using six econometric regression models that use the Corporation’s historical credit loss experience and incorporate reasonable and supportable economic forecasts for various macroeconomic variables that are statistically correlated with expected loss behavior in the loan segment.

•The reasonable and supportable forecast for each macroeconomic variable is sourced from an external third party and is applied over the contractual term of the Corporation’s loan portfolio. The Corporation’s economic forecast considers the general health of the economy, the interest rate environment, real estate pricing and market risk.

•A single baseline forecast scenario is used for each macroeconomic variable.

•The loan segment lifetime LGD rates are estimated using a loss rate approach based on the Corporation’s historical charge-off experience and the balance at the time of loan default.

•The LGD rates are adjusted for the Corporation’s recovery experience.

•To calculate the EAD, the corporation estimates contractual cash flows over the remaining life of each loan. Certain cash flow assumptions are established for ~~an impaired~~each loan ~~if its carrying value exceeds its estimated fair value. Impaired loans to borrowers with total outstanding commitments greater than or equal to $1.0 million are~~using maturity date, amortization schedule and interest rate. In addition, a prepayment rate is used in determining the EAD estimate.

Loans Evaluated Individually: Loans evaluated individually for ~~impairment. Impaired~~expected credit losses include loans ~~to borrowers with total outstanding commitments less than~~on non-accrual status and TDRs where the commitment amount equals or exceeds $1.0 ~~million are pooled and measured~~million. The required ACL for ~~impairment collectively.~~

~~All~~such loans ~~individually evaluated for impairment under FASB ASC Section 310-10-35 are measured for losses on a quarterly basis. As~~is determined using either the present value of ~~September 30, 2017 and December 31, 2016, substantially all of~~expected future cash flows, observable market price or the ~~Corporation’s individually evaluated impaired loans with total outstanding balances greater than or equal to $1.0 million were measured based on the estimated~~ fair value of ~~each loan’s~~ collateral.

Loans evaluated individually may have specific allocations of the ACL assigned if the measured value of the loan using one of the noted techniques is less than its current carrying value. For loans measured using the fair value of collateral, if the analysis determines that sufficient collateral value would be available for repayment of the debt, then no allocations would be assigned to those loans. 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 30, 2017 and 2016, approximately 95% and 73%, respectively, of impaired~~For loans ~~with principal balances greater than or equal to $1.0 million, whose primary collateral is~~secured by real estate, ~~were measured at~~ estimated fair ~~value of the collateral using~~values are determined primarily through appraisals performed by ~~state certified~~ third-party appraisers, ~~that had been~~discounted to arrive at expected net sale proceeds. For collateral dependent loans, estimated real estate fair values are also net of estimated selling costs. When a real estate secured loan is impaired, a decision is made regarding whether an updated inappraisal of the ~~preceding~~real estate is necessary. This decision is based on various considerations, including: the age of the most recent appraisal; the loan-to-value ratio based on the original appraisal; the condition of the property; the Corporation’s experience and knowledge of the real estate market; the purpose of the loan; market factors; payment status; the strength of any guarantors; and the existence and age of other indications of value such as broker price opinions, among others. The Corporation generally obtains updated appraisals performed by third-party appraisers for impaired loans secured predominantly by real estate every 12 months.

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

For loans with principal balances greater than or equal to $1.0 million secured by non-real estate collateral, such as accounts receivable or inventory, estimated fair values are ~~typically used only when the estimated collateral~~determined based on borrower financial statements, inventory listings, accounts receivable agings or borrowing base certificates. Indications of value ~~as adjusted for~~from these sources are generally discounted based on the age of the ~~appraisal,~~financial information or the quality of the assets. Liquidation or collection discounts are applied to these assets based upon existing loan evaluation policies.

Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification. For commercial loans, commercial mortgages and construction loans to commercial borrowers, an internal risk rating process is used. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk rating categories is a significant component of the ACL methodology for these loans, which bases the PD on this migration. Assigning risk ratings involves judgment. Risk ratings may be changed based on ongoing monitoring procedures, or if specific loan review assessments identify a deterioration or an improvement in the loan.

The ACL is reviewed to evaluate its appropriateness in relation to the overall risk profile of the loan portfolio. The Corporation considers risk factors such as: local and national economic conditions; trends in delinquencies and non-accrual loans; the diversity of borrower industry types; and the composition of the portfolio by loan type.

Qualitative and Other Adjustments to ACL: In addition to the quantitative credit loss estimates for loans evaluated collectively, qualitative factors that may not be fully captured in the quantitative results are also evaluated. These qualitative factors include changes in lending policy, the nature and volume of the portfolio, overall business conditions in the economy, credit concentrations, specific industry risks, competition, model imprecision and legal and regulatory requirements. Qualitative adjustments are judgmental and are based on management’s knowledge of the portfolio and the markets in which the Corporation operates. Qualitative adjustments are evaluated and approved on a ~~current loan-to-value ratio~~quarterly basis. Additionally, the ACL includes other allowance categories that are not directly incorporated in the quantitative results. These categories include but are not limited to loans-in-process, trade acceptances and overdrafts.

OBS Credit Exposures: The ACL for OBS credit exposures is ~~lower~~recorded in other liabilities on the consolidated balance sheets. This portion of the ACL represents management’s estimate of expected losses in its unfunded loan commitments and other OBS credit exposures. The ACL specific to unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). The ACL for OBS credit exposures is increased or decreased by charges or reductions to expense, through the provision for credit losses.

The following table presents the components of the ACL:



	June 30, 2021		December 31, 2020
	(in thousands)
ACL - loans	$	255,032	$	277,567
ACL - OBS credit exposure	14,773		14,373
Total ACL	$	269,805	$	291,940

The following table presents the activity in the ACL:


	Three months ended June 30				Six months ended June 30
	2021		2020			2021		2020
	(in thousands)
Balance at beginning of period	$	280,259	$	257,471		$	291,940	$	166,209
Impact of adopting CECL on January 1, 2020 (1)	0		0			0		58,348
Loans charged off	(9,522)		(8,047)			(17,724)		(22,050)
Recoveries of loans previously charged off	2,568		3,926			4,589		6,813
Net loans charged off	(6,954)		(4,121)			(13,135)		(15,237)
Provision for credit losses (2)	(3,500)		19,570			(9,000)		63,600
Balance at end of period	$	269,805	$	272,920		$	269,805	$	272,920

(1) Includes $12.6 million of reserves for OBS credit exposures as of January 1, 2020.

(2) Includes $500,000 and $(2.6) million related to OBS credit exposures for the three months ended June 30, 2021 and 2020, respectively, and includes $400,000 and $1.2 million related to OBS credit exposure for the six months ended June 30, 2021 and 2020, respectively.

The following table presents the activity in the ACL - loans by portfolio segment:


	Real Estate - Commercial Mortgage		Commercial and Industrial		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, 2021
Balance at March 31, 2021	$	100,976	$	71,194	$	13,730	$	49,995	$	15,079	$	9,412	$	5,600	$	265,986
Loans charged off	(6,506)		(954)		(212)		(496)		0		(918)		(436)		(9,522)
Recoveries of loans previously charged off	729		693		58		105		254		576		153		2,568
Net loans recovered (charged off)	(5,777)		(261)		(154)		(391)		254		(342)		(283)		(6,954)
Provision for loan losses (1)	182		(5,529)		(983)		4,584		(2,679)		331		94		(4,000)
Balance at June 30, 2021	$	95,381	$	65,404	$	12,593	$	54,188	$	12,654	$	9,401	$	5,411	$	255,032
Three months ended June 30, 2020
Balance at March 31, 2020	$	90,319	$	63,606	$	15,253	$	42,427	$	8,398	$	9,865	$	8,640	$	238,508
Loans charged off	(2,324)		(3,480)		(458)		(235)		(17)		(845)		(688)		(8,047)
Recoveries of loans previously charged off	95		2,978		44		112		0		605		92		3,926
Net loans recovered (charged off)	(2,229)		(502)		(414)		(123)		(17)		(240)		(596)		(4,121)
Provision for loan and lease losses (1)	14,605		(1,657)		1,552		4,139		3,933		674		(1,096)		22,150
Balance at June 30, 2020	$	102,695	$	61,447	$	16,391	$	46,443	$	12,314	$	10,299	$	6,948	$	256,537
Six months ended June 30, 2021
Balance at December 31, 2020	$	103,425	$	74,771	$	14,232	$	51,995	$	15,608	$	10,905	$	6,631	$	277,567

Loans charged off	(8,343)		(5,273)		(424)		(688)		(39)		(1,553)		(1,404)		(17,724)
Recoveries of loans previously charged off	903		1,462		109		200		638		965		312		4,589
Net loans (charged off) recovered	(7,440)		(3,811)		(315)		(488)		599		(588)		(1,092)		(13,135)
Provision for loan losses (1)	(604)		(5,556)		(1,324)		2,681		(3,553)		(916)		(128)		(9,400)
Balance at June 30, 2021	$	95,381	$	65,404	$	12,593	$	54,188	$	12,654	$	9,401	$	5,411	$	255,032
Six months ended June 30, 2020
Balance at December 31, 2019	$	45,610	$	68,602	$	17,744	$	19,771	$	4,443	$	3,762	$	3,690	$	163,622
Impact of adopting CECL on January 1, 2020	29,361		(18,576)		(65)		21,235		4,015		5,969		3,784		45,723
Loans charged off	(3,179)		(14,379)		(745)		(422)		(17)		(2,087)		(1,221)		(22,050)
Recoveries of loans previously charged off	339		4,712		261		197		70		1,034		200		6,813
Net loans recovered (charged off)	(2,840)		(9,667)		(484)		(225)		53		(1,053)		(1,021)		(15,237)
Provision for loan losses (1)	30,564		21,088		(804)		5,662		3,803		1,621		495		62,429
Balance at June 30, 2020	$	102,695	$	61,447	$	16,391	$	46,443	$	12,314	$	10,299	$	6,948	$	256,537

(1) Provision included in the table only includes the portion related to Net Loans.

Several factors as of the end of the second quarter of 2021 in comparison to the end of the fourth quarter of 2020, including improved economic forecasts, reduced the level of the ACL determined to be necessary as of June 30, 2021, resulting in the negative provision for credit losses for the both the three and six months ended June 30, 2021. The higher provision expense during the first six months of 2020 was largely driven by the overall downturn in economic forecasts due to COVID-19, resulting in higher expected future credit losses under CECL. Qualitative adjustments during the first six months of 2020 increased compared to those at the time of the adoption of CECL on January 1, 2020 primarily as a result of uncertainties related to the economic impact of COVID-19. These uncertainties included consideration for the future performance of loans that received deferrals or forbearances as a result of COVID-19 and the impact COVID-19 had on certain industries where the quantitative models did not appear to be fully capturing the appropriate level of risk at that time. PPP loans issued are fully guaranteed by the SBA and, as such, no ACL was recorded against the PPP loan portfolio.

Non-accrual Loans

All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of June 30, 2021 and December 31, 2020, substantially all of the Corporation’s individually evaluated loans with total commitments greater than or equal to $1.0 million were measured based on the ~~Corporation's loan-to-value requirements~~estimated fair value of each loan’s collateral, if any. Collateral could be in the form of real estate, in the case of 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 estate.

As of June 30, 2021 and December 31, 2020, approximately 81% and 83%, respectively, of loans evaluated individually for ~~new loans, generally less~~impairment with principal balances greater than ~~70%.~~or equal to $1.0 million, whose primary collateral consisted of real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months.

The following table presents total ~~impaired~~non-accrual loans, by class segment:


	June 30, 2021						December 31, 2021
	With a Related Allowance		Without a Related Allowance		Total		With a Related Allowance		Without a Related Allowance		Total
	(in thousands)
Real estate - commercial mortgage	$	22,516	$	30,912	$	53,428	$	19,909	$	31,561	$	51,470
Commercial and industrial	15,142		18,039		33,181		13,937		18,056		31,993
Real estate - residential mortgage	32,577		2,198		34,775		24,590		1,517		26,107
Real estate - home equity	9,279		0		9,279		9,398		190		9,588
Real estate - construction	173		843		1,016		437		958		1,395
Consumer	287		0		287		332		0		332
Equipment lease financing and other	6,643		9,255		15,898		0		16,313		16,313
	$	86,617	$	61,247	$	147,864	$	68,603	$	68,595	$	137,198

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

As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, there were ~~$65.1~~$61.2 million and ~~$60.5~~$68.6 million, respectively,of ~~impaired~~non-accrual loans that did not have a related allowance for ~~loan loss.~~credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or ~~they~~the loans were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

Asset Quality

Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, residential construction, commercial and industrial, and commercial real estate, an internal risk rating process is used. The ~~following table presents average impaired~~Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk rating categories is a significant component of the ACL methodology for these loans, which bases the probability of default on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide a separate assessment of risk rating accuracy. Risk ratings may be changed based on the ongoing monitoring procedures performed by ~~class segment:~~loan officers or credit administration staff or if specific loan review assessments identify a deterioration or an improvement in the loans.

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


~~(1)~~	All impaired loans, excluding accruing TDRs, were non-accrual loans. Interest income recognized for the three and nine months ended September 30, 2017 and 2016 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 ~~constitute an undue and unwarranted~~have a heightened credit risk, but not to athe point of justifying a classification of ~~substandard.~~Substandard. Loans in this category are currently acceptable but, are nevertheless potentially weak.

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

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

Pass Special Mention Substandard or Lower Total
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 %

The risk rating process allows management to identify credits that potentially carry more risk in a timely manner and to allocate resources to managing troubled accounts. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for the class segments presented above. The migration of loans through the varioussummarizes designated 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~~by portfolio segment and loan ~~review officers provide an independent assessment of risk rating accuracy. Ratings may be changed based on the ongoing monitoring procedures performed~~class, by ~~loan officers or credit administration staff, or if specific loan review activities identify a deterioration or an improvement~~origination year, in the ~~loan.~~current period:


		June 30, 2021
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(dollars in thousands)												Amortized		Amortized
		2021		2020		2019		2018		2017		Prior		Cost Basis		Cost Basis		Total
Real estate - construction(1)
	Pass	$	55,746	$	259,489	$	203,753	$	163,203	$	34,926	$	132,581	$	39,453	$	0	$	889,151
	Special Mention	4,386		0		285		0		0		14,421		0		0		19,092
	Substandard or Lower	0		0		153		0		1,952		1,598		239		0		3,942
	Total real estate - construction	60,132		259,489		204,191		163,203		36,878		148,600		39,692		0		912,185
Real estate - construction(1)
	Current period gross charge-offs	0		0		(39)		0		0		0		0		0		(39)
	Current period recoveries	0		0		39		0		0		599		0		0		638
	Total net (charge-offs) recoveries	0		0		0		0		0		599		0		0		599
Commercial and industrial
	Pass	1,094,643		890,179		474,995		252,445		190,560		659,879		1,127,132		0		4,689,833
	Special Mention	286		12,141		21,656		16,478		9,393		39,229		44,015		0		143,198
	Substandard or Lower	4,933		6,987		15,496		23,258		13,193		41,750		44,881		1,885		152,383
	Total commercial and industrial	1,099,862		909,307		512,147		292,181		213,146		740,858		1,216,028		1,885		4,985,414
Commercial and industrial
	Current period gross charge-offs	0		(50)		(70)		(91)		(130)		(472)		(4,460)		0		(5,273)
	Current period recoveries	0		0		22		249		58		640		493		0		1,462
	Total net (charge-offs) recoveries	0		(50)		(48)		158		(72)		168		(3,967)		0		(3,811)
Real estate - commercial mortgage
	Pass	433,412		953,225		924,009		629,504		749,132		2,622,402		61,387		0		6,373,071
	Special Mention	204		43,125		30,204		93,345		79,800		294,149		841		105		541,773
	Substandard or Lower	0		3,453		24,239		15,881		40,407		151,580		2,491		37		238,088
	Total real estate - commercial mortgage	433,616		999,803		978,452		738,730		869,339		3,068,131		64,719		142		7,152,932
Real estate - commercial mortgage
	Current period gross charge-offs	0		0		0		(25)		(6,603)		(1,517)		(198)		0		(8,343)
	Current period recoveries	0		0		0		0		0		903		0		0		903
	Total net (charge-offs) recoveries	0		0		0		(25)		(6,603)		(614)		(198)		0		(7,440)
Total
	Pass	$	1,583,801	$	2,102,893	$	1,602,757	$	1,045,152	$	974,618	$	3,414,862	$	1,227,972	$	0	$	11,952,055
	Special Mention	4,876		55,266		52,145		109,823		89,193		347,799		44,856		105		704,063
	Substandard or Lower	4,933		10,440		39,888		39,139		55,552		194,928		47,611		1,922		394,413
	Total	$	1,593,610	$	2,168,599	$	1,694,790	$	1,194,114	$	1,119,363	$	3,957,589	$	1,320,439	$	2,027	$	13,050,531

(1) Excludes real estate - construction - other.

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

The following table ~~presents a summary~~summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the prior period:


		December 31, 2020
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(dollars in thousands)												Amortized		Amortized
		2020		2019		2018		2017		2016		Prior		Cost Basis		Cost Basis		Total
Real estate - construction(1)
	Pass	$	185,883	$	229,097	$	217,604	$	81,086	$	37,976	$	110,470	$	38,026	$	0	$	900,142
	Special Mention	0		0		0		0		7,047		6,212		0		0		13,259
	Substandard or Lower	0		447		0		2,000		753		1,637		632		0		5,469
	Total real estate - construction	185,883		229,544		217,604		83,086		45,776		118,319		38,658		0		918,870
Real estate - construction(1)
	Current period gross charge-offs	0		0		0		0		0		(17)		0		0		(17)
	Current period recoveries	0		0		0		0		68		5,054		0		0		5,122
	Total net (charge-offs) recoveries	0		0		0		0		68		5,037		0		0		5,105
Commercial and industrial
	Pass	2,283,533		508,541		298,567		214,089		208,549		596,646		1,278,689		0		5,388,614
	Special Mention	6,633		23,834		29,167		10,945		11,506		25,960		45,994		0		154,039
	Substandard or Lower	3,221		5,947		8,434		11,251		11,192		23,852		64,278		0		128,175
	Total commercial and industrial	2,293,387		538,322		336,168		236,285		231,247		646,458		1,388,961		0		5,670,828
Commercial and industrial
	Current period gross charge-offs	0		(114)		(30)		(488)		(393)		(520)		(17,370)		0		(18,915)
	Current period recoveries	0		43		486		216		162		4,531		5,958		0		11,396
	Total net (charge-offs) recoveries	0		(71)		456		(272)		(231)		4,011		(11,412)		0		(7,519)
Real estate - commercial mortgage
	Pass	973,664		917,510		708,946		794,955		783,094		2,213,343		53,041		404		6,444,957
	Special Mention	13,639		40,874		84,047		80,705		89,112		167,424		2,364		0		478,165
	Substandard or Lower	1,238		6,681		6,247		39,027		22,605		103,007		2,225		940		181,970
	Total real estate - commercial mortgage	988,541		965,065		799,240		914,687		894,811		2,483,774		57,630		1,344		7,105,092
Real estate - commercial mortgage
	Current period gross charge-offs	(60)		(21)		(36)		(2,515)		(29)		(1,547)		(17)		0		(4,225)
	Current period recoveries	0		6		0		0		1		1,020		0		0		1,027
	Total net (charge-offs) recoveries	(60)		(15)		(36)		(2,515)		(28)		(527)		(17)		0		(3,198)
Total
	Pass	$	3,443,080	$	1,655,148	$	1,225,117	$	1,090,130	$	1,029,619	$	2,920,459	$	1,369,756	$	404	$	12,733,713
	Special Mention	20,272		64,708		113,214		91,650		107,665		199,596		48,358		0		645,463
	Substandard or Lower	4,459		13,075		14,681		52,278		34,550		128,496		67,135		940		315,614
	Total	$	3,467,811	$	1,732,931	$	1,353,012	$	1,234,058	$	1,171,834	$	3,248,551	$	1,485,249	$	1,344	$	13,694,790

(1) Excludes real estate - construction - other.

The Corporation considers the performance of ~~performing, delinquent~~the loan portfolio and ~~non-performing~~its impact on the ACL. For certain loan classes, the Corporation evaluates credit quality based on the aging status of the loan. The following tables present the amortized cost of these loans based on payment activity, by origination year, for the ~~indicated loan class segments:~~periods shown:


		June 30, 2021
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(dollars in thousands)												Amortized		Amortized
		2021		2020		2019		2018		2017		Prior		Cost Basis		Cost Basis		Total
Real estate - home equity
	Performing	$	14,248	$	27,159	$	7,757	$	11,063	$	8,898	$	112,798	$	940,727	$	2,502	$	1,125,152
	Nonperforming	0		0		0		23		233		2,489		8,231		0		10,976
	Total real estate - home equity	14,248		27,159		7,757		11,086		9,131		115,287		948,958		2,502		1,136,128
Real estate - home equity
	Current period gross charge-offs	0		0		(41)		0		0		(171)		(212)		0		(424)
	Current period recoveries	0		0		0		0		0		58		51		0		109
	Total net (charge-offs) recoveries	0		0		(41)		0		0		(113)		(161)		0		(315)
Real estate - residential mortgage
	Performing	916,128		1,203,025		435,125		148,034		251,748		563,509		0		0		3,517,569
	Nonperforming	0		6,259		2,412		3,232		2,934		23,491		0		0		38,328
	Total real estate - residential mortgage	916,128		1,209,284		437,537		151,266		254,682		587,000		0		0		3,555,897
Real estate - residential mortgage
	Current period gross charge-offs	0		(49)		(143)		(125)		(4)		(367)		0		0		(688)
	Current period recoveries	0		0		0		12		0		96		92		0		200
	Total net (charge-offs) recoveries	0		(49)		(143)		(113)		(4)		(271)		92		0		(488)
Consumer
	Performing	62,507		95,909		81,669		75,781		33,021		51,329		47,785		0		448,001
	Nonperforming	0		150		24		74		34		102		48		0		432
	Total consumer	62,507		96,059		81,693		75,855		33,055		51,431		47,833		0		448,433
Consumer
	Current period gross charge-offs	(12)		(208)		(225)		(154)		(172)		(157)		(625)		0		(1,553)
	Current period recoveries	0		87		85		52		43		523		175		0		965
	Total net (charge-offs) recoveries	(12)		(121)		(140)		(102)		(129)		366		(450)		0		(588)
Equipment lease financing and other
	Performing	31,408		70,990		55,764		41,562		26,647		14,115		0		0		240,486
	Nonperforming	0		0		157		0		15,750		0		0		0		15,907
	Total leasing and other	31,408		70,990		55,921		41,562		42,397		14,115		0		0		256,393
Equipment lease financing and other
	Current period gross charge-offs	(128)		(1,276)		0		0		0		0		0		0		(1,404)
	Current period recoveries	0		239		58		6		5		4		0		0		312
	Total net (charge-offs) recoveries	(128)		(1,037)		58		6		5		4		0		0		(1,092)
Construction - other
	Performing	52,082		94,302		7,085		4,912		0		16		0		0		158,397
	Nonperforming	0		0		0		0		173		0		0		0		173
	Total construction - other	52,082		94,302		7,085		4,912		173		16		0		0		158,570
Construction - other
	Current period gross charge-offs	0		0		0		0		0		0		0		0		0
	Current period recoveries	0		0		0		0		0		0		0		0		0
	Total net (charge-offs) recoveries	0		0		0		0		0		0		0		0		0
Total
	Performing	$	1,076,373	$	1,491,385	$	587,400	$	281,352	$	320,314	$	741,767	$	988,512	$	2,502	$	5,489,605
	Nonperforming	0		6,409		2,593		3,329		19,124		26,082		8,279		0		65,816
	Total	$	1,076,373	$	1,497,794	$	589,993	$	284,681	$	339,438	$	767,849	$	996,791	$	2,502	$	5,555,421

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
(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
Real estate - residential mortgage 1,845,495
1,557,995
20,769
20,344
21,643
23,655
1,887,907
1,601,994
Construction - other 64,110
55,874
382
—
1,091
1,096
65,583
56,970
Consumer - direct 55,490
93,572
158
1,752
63
1,563
55,711
96,887
Consumer - indirect 243,723
190,656
2,834
3,599
180
328
246,737
194,583
Total consumer 299,213
284,228
2,992
5,351
243
1,891
302,448
291,470
Leasing 256,784
229,591
884
1,068
80
317
257,748
230,976
$ 4,007,891
$ 3,730,375
$ 37,982
$ 36,037
$ 35,286
$ 40,113
$ 4,081,159
$ 3,806,525
% of Total 98.2 % 98.0 % 0.9 % 0.9 % 0.9 % 1.1 % 100.0 % 100.0 %


		December 31, 2020
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(dollars in thousands)												Amortized		Amortized
		2020		2019		2018		2017		2016		Prior		Cost Basis		Cost Basis		Total
Real estate - home equity
	Performing	$	31,445	$	8,176	$	13,906	$	11,024	$	11,667	$	126,749	$	982,285	$	5,321	$	1,190,573
	Nonperforming	0		88		23		233		221		2,290		9,485		0		12,340
	Total real estate - home equity	31,445		8,264		13,929		11,257		11,888		129,039		991,770		5,321		1,202,913
Real estate - home equity
	Current period gross charge-offs	0		0		0		0		0		(34)		(1,159)		0		(1,193)
	Current period recoveries	0		0		0		0		0		138		366		0		504
	Total net (charge-offs) recoveries	0		0		0		0		0		104		(793)		0		(689)
Real estate - residential mortgage
	Performing	1,255,532		585,878		228,398		341,563		264,990		434,889		0		0		3,111,250
	Nonperforming	217		2,483		3,177		2,483		722		21,583		0		0		30,665
	Total real estate - residential mortgage	1,255,749		588,361		231,575		344,046		265,712		456,472		0		0		3,141,915
Real estate - residential mortgage
	Current period gross charge-offs	0		(68)		(101)		(190)		(7)		(254)		0		0		(620)
	Current period recoveries	0		68		16		1		1		405		0		0		491
	Total net (charge-offs) recoveries	0		0		(85)		(189)		(6)		151		0		0		(129)
Consumer
	Performing	114,399		98,587		95,072		43,334		25,804		36,086		52,698		42		466,022
	Nonperforming	168		19		124		141		114		150		34		0		750
	Total consumer	114,567		98,606		95,196		43,475		25,918		36,236		52,732		42		466,772
Consumer
	Current period gross charge-offs	(134)		(542)		(524)		(444)		(489)		(769)		(498)		0		(3,400)
	Current period recoveries	0		64		165		159		94		101		1,292		0		1,875
	Total net (charge-offs) recoveries	(134)		(478)		(359)		(285)		(395)		(668)		794		0		(1,525)
Equipment lease financing and other
	Performing	102,324		65,303		49,453		34,995		15,631		5,040		0		0		272,746
	Nonperforming	0		0		30		15,983		142		282		0		0		16,437
	Total leasing and other	102,324		65,303		49,483		50,978		15,773		5,322		0		0		289,183
Equipment lease financing and other
	Current period gross charge-offs	(606)		(1,581)		0		0		0		0		0		0		(2,187)
	Current period recoveries	185		349		21		18		11		21		0		0		605
	Total net (charge-offs) recoveries	(421)		(1,232)		21		18		11		21		0		0		(1,582)
Construction - other
	Performing	96,444		24,888		6,822		0		16		0		0		0		128,170
	Nonperforming	0		0		0		178		0		0		0		0		178
	Total construction - other	96,444		24,888		6,822		178		16		0		0		0		128,348
Construction - other
	Current period gross charge-offs	0		0		0		0		0		0		0		0		0
	Current period recoveries	0		0		0		0		0		0		0		0		0
	Total net (charge-offs) recoveries	0		0		0		0		0		0		0		0		0
Total
	Performing	$	1,600,144	$	782,832	$	393,651	$	430,916	$	318,108	$	602,764	$	1,034,983	$	5,363	$	5,168,761
	Nonperforming	385		2,590		3,354		19,018		1,199		24,305		9,519		0		60,370
	Total	$	1,600,529	$	785,422	$	397,005	$	449,934	$	319,307	$	627,069	$	1,044,502	$	5,363	$	5,229,131


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


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

The following table presents non-performing assets:


	June 30, 2021		December 31, 2020
	(in thousands)
Non-accrual loans	$	147,864	$	137,198
Loans 90 days or more past due and still accruing	5,865		9,929
Total non-performing loans	153,729		147,127
OREO (1)	2,779		4,178
Total non-performing assets	$	156,508	$	151,305

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
(1) Excludes$7.4 million and $8.1 million of residential mortgage properties for which formal foreclosure proceedings were in process as of June 30, 2021 and December 31, 2020, respectively.

The following tables present ~~past due status and non-accrual~~the aging of the amortized cost basis of loans, by ~~portfolio segment and~~ class segment:


	30-59		60-89		≥ 90 Days
	Days Past		Days Past		Past Due		Non-
	Due		Due		and Accruing		Accrual		Current		Total
	(in thousands)
June 30, 2021
Real estate – commercial mortgage	$	5,341	$	40	$	265	$	53,428	$	7,093,858	$	7,152,932
Commercial and industrial	7,136		1,406		171		33,181		4,943,520		4,985,414
Real estate – residential mortgage	13,753		611		3,398		34,775		3,503,360		3,555,897
Real estate – home equity	2,883		774		1,698		9,279		1,121,494		1,136,128
Real estate – construction	666		0		0		1,016		1,069,073		1,070,755
Consumer	1,935		456		144		287		445,611		448,433
Equipment lease financing and other	33		257		189		15,898		220,820		237,197
Total	$	31,747	$	3,544	$	5,865	$	147,864	$	18,397,736	$	18,586,756


	30-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Current		Total
	(in thousands)
December 31, 2020
Real estate – commercial mortgage	$	14,999	$	9,273	$	1,177	$	51,470	$	7,028,173	$	7,105,092
Commercial and industrial	11,285		1,068		616		31,993		5,625,866		5,670,828
Real estate – residential mortgage	22,281		7,675		4,687		26,107		3,081,165		3,141,915
Real estate – home equity	5,622		1,654		2,753		9,588		1,183,296		1,202,913
Real estate – construction	1,938		0		155		1,395		1,043,730		1,047,218
Consumer	3,036		501		417		332		462,486		466,772
Equipment lease financing and other	838		150		124		16,313		248,657		266,082
Total	$	59,999	$	20,321	$	9,929	$	137,198	$	18,673,373	$	18,900,820

Collateral-Dependent Loans

A financial asset is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of financial assets deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent financial assets consists

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
of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agriculture land, and vacant land.

Troubled Debt Restructurings

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:


						June 30, 2021		December 31, 2020
	September 30, 2017		December 31, 2016			(in thousands)
Real estate - commercial mortgage					Real estate - commercial mortgage	$	14,651	$	28,451
Commercial and industrial					Commercial and industrial	6,765		6,982
Real estate - residential mortgage					Real estate - residential mortgage	16,861		18,602
Real estate - home equity					Real estate - home equity	13,566		14,391
Real estate - construction					Real estate - construction	153		0
Consumer					Consumer	4		0
	(in thousands)
Real-estate - residential mortgage	$	26,193	$	27,617
Real-estate - commercial mortgage	14,439		15,957
Real estate - home equity	14,789		8,594
Commercial	7,512		6,627
Construction	169		726
Consumer	33		39
Total accruing TDRs	63,135		59,560		Total accruing TDRs	52,000		68,426
Non-accrual TDRs ⁽¹⁾	28,742		27,850		Non-accrual TDRs (1)	60,504		35,755
Total TDRs	$	91,877	$	87,410	Total TDRs	$	112,504	$	104,181

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

~~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.~~

The following table presents TDRs, by class segment, ~~and type of concession~~ for loans that were modified during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016:~~2020:


	Three months ended June 30						Six months ended June 30
	2021			2020			2021			2020
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(dollars in thousands)
Commercial and industrial	0	$	0	13	$	1,304	4	$	1,894	14	$	1,378
Real estate - commercial mortgage	3	2,729		6	16,082		5	6,891		7	16,474
Real estate - residential mortgage	14	3,101		33	8,505		37	10,728		40	9,165

Real estate - home equity	11	598		19	1,609		16	746		27	2,186
Real estate - construction	0	0		0	0		1	154		0	0
Consumer	0	0		8	185		0	0		8	185
Total	28	$	6,428	79	$	27,685	63	$	20,413	96	$	29,388

Restructured loan modifications may include payment schedule modifications, interest rate concessions, bankruptcies, principal reduction or some combination of these concessions. The restructured loan modifications primarily included maturity date extensions, rate modifications and payment schedule modifications.

In accordance with regulatory guidance, payment schedule modifications granted after March 13, 2020 to borrowers impacted by the effects of the COVID-19 pandemic and who were not delinquent at the time of the payment schedule modifications have been excluded from TDRs. As of June 30, 2021 and 2020, payment schedule modifications since the inception of this guidance having a recorded investment of $3.5 billion and $3.9 billion, respectively, were excluded from TDRs.

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,~~summarizes the changes in MSRs, which are included in other assets on the consolidated balance sheets:

MSRs represent the economic value of contractual rights to service mortgage loans that have been sold. The total portfolio of mortgage loans serviced by ~~class segment,~~the Corporation for unrelated third parties was $4.4 billion and $4.7 billion as of ~~September~~June 30, ~~2017~~2021 and ~~2016,~~December 31, 2020, respectively. Actual and expected prepayments of the underlying mortgage loans can impact the fair values of the 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 $29.5 million and $28.2 million at June 30, 2021 and December 31, 2020, respectively. Based on its fair value analysis as of June 30, 2021, the Corporation determined that ~~were modified in~~a $2.2 million increase to the ~~previous 12 months and had a post-modification payment default during~~valuation allowance was required for the ~~nine~~three months ended ~~September~~June 30, ~~2017 and 2016.~~2021, resulting in a total valuation allowance of $6.6 million as of June 30, 2021. The ~~Corporation defines a payment default~~$2.2 million increase to the valuation allowance was recorded as a ~~single missed payment.~~reduction to mortgage banking income on the consolidated statements of income for the three months ended June 30, 2021. Based on its fair value analysis as of March 31, 2021 the Corporation had determined that a $6.1 million reduction to the valuation allowance was required as of March 31, 2021; the net $3.9 million decrease to the valuation allowance was recorded as an increase to mortgage banking income on the consolidated statements of income for the six months ended June 30, 2021.

The Corporation manages its exposure to certain interest rate and foreign currency risks through the use of derivatives. Certain of the Corporation's outstanding derivative contracts are designated as hedges, and none are entered into for speculative purposes. The Corporation does enter into derivative contracts that are intended to economically hedge certain of its risks, even if hedge accounting does not apply or the Corporation elects not to apply hedge accounting.

The Corporation records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Corporation has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives where hedge accounting is applied, changes in fair value are recognized in other comprehensive income. For derivatives where hedge accounting does not apply, changes in fair value are recognized in earnings as components of interest income, non-interest income 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.

For each of the derivatives, gross derivative assets and liabilities are recorded in other assets and other liabilities, respectively, on the consolidated balance sheets. Related gains and losses on these derivative instruments are recorded in other changes, net on the consolidated statement of cash flows.

Mortgage ~~Servicing Rights~~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.

Interest Rate Swaps - Non-Designated Hedges

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. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. The Corporation’s existing credit derivatives result from participations in interest rate swaps provided by external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Corporation’s assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain lenders which participate in loans.The Corporation is required to clear all eligible interest rate swap contracts with a clearing agent and is subject to the regulations of the Commodity Futures Trading Commission.

Cash Flow Hedges of Interest Rate Risk

The Corporation’s objectives in using interest rate derivatives are to reduce volatility in net interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate swaps as part of its interest rate risk management strategy. During the first quarter of 2021, the Corporation entered into interest rate swaps designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans. These hedge contracts involve the receipt of fixed-rate amounts from a counterparty in exchange for the Corporation making floating-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are made on the Corporation’s variable-rate liabilities. During the next twelve months, the Corporation estimates that an additional $3.4 million will be reclassified as an increase to interest income.

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 specific date at a contractual price. The Corporation limits its foreign exchange exposure with customers by entering into contracts with institutional counterparties to mitigate its foreign exchange risk. The Corporation also holds certain amounts of foreign currency with international correspondent banks ("Foreign Currency Nostro Accounts"). The Corporation limits the total overnight net foreign currency open positions, which is defined as an aggregate of all outstanding contracts and Foreign Currency Nostro Account balances, to $500,000.

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

The following table presents the effect of fair value and cash flow hedge accounting on AOCI:


	Amount of Gain (Loss) Recognized in OCI on Derivative		Amount of Gain (Loss) Recognized in OCI Included Component		Amount of Gain or (Loss) Recognized in OCI Excluded Component		Location of Gain or (Loss) Recognized from AOCI into Income	Amount of Gain Reclassified from AOCI into Income		Amount of Gain Reclassified from AOCI into Income Included Component		Amount of Gain or (Loss) Reclassified from AOCI into Income Excluded Component
	(in thousands)
Derivatives in Cash Flow Hedging Relationships:
Three months ended June 30, 2021
Interest Rate Products	$	3,560	$	3,560	$	0	Interest income	$	877	$	877	$	0
Six months ended June 30, 2021
Interest Rate Products	$	1,495	$	1,495	$	0	Interest income	$	1,021	$	1,021	$	0

The following table presents the effect of fair value and cash flow hedge accounting:




	Consolidated Statements of Income Classification
	Interest Income
	Three months ended		Six months ended
	June 30, 2021		June 30, 2021
	(in thousands)
Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded	$	877	$	1,021
The effects of fair value and cash flow hedging:
Gain or (loss) on cash flow hedging relationships	—
Interest contracts:
Amount of gain reclassified from AOCI into income	877		1,021
Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring	—		—
Amount of Gain Reclassified from AOCI into Income - Included Component	877		1,021
Amount of Gain or (Loss) Reclassified from AOCI into Income - Excluded Component	0		0

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

Mortgage banking derivatives (1)

The Corporation has elected to measure mortgage loans held for sale at fair value. The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements as of the periods shown:

Gains related to changes in fair values of mortgage ~~servicing rights ("MSRs"),~~loans held for sale were $711,000 and $1.4 million for the three months ended June 30, 2021 and 2020, respectively. During the six months ended June 30, 2021, losses related to changes in fair values of mortgage loans held for sale were $2.2 million compared to gains of $2.1 million for the six months ended June 30, 2020.

Balance Sheet Offsetting

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 Corporation elects to not offset such qualifying assets and liabilities.

The Corporation is a party to interest rate swaps with financial institution counterparties and customers. 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. A daily settlement occurs through a clearing agent for changes in the fair value of centrally cleared derivatives. Not all of the derivatives are required to be cleared daily through a clearing agent. As a result, the total fair values of interest rate swap derivative assets and 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 swaps, 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 AFS investment securities on the consolidated balance sheets. The Corporation has no intention of setting off these amounts, therefore, these repurchase agreements are not eligible for offset.

As of June 30, 2021, the fair value of derivatives were in a net asset position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements and as such the Corporation did not post any collateral to its derivative counterparty.

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


	Gross Amounts		Gross Amounts Not Offset
	Recognized		on the Consolidated
	on the		Balance Sheets
	Consolidated		Financial		Cash		Net
	Balance Sheets		Instruments(1)		Collateral (2)		Amount
	(in thousands)
June 30, 2021
Interest rate swap derivative assets	$	212,106	$	(2,506)	$	0	$	209,600

Foreign exchange derivative assets with correspondent banks	89		(89)		0		0
Total	$	212,195	$	(2,595)	$	0	$	209,600

Interest rate swap derivative liabilities	$	107,184	$	(2,506)	$	(103,435)	$	1,243

Foreign exchange derivative liabilities with correspondent banks	145		(89)		0		56
Total	$	107,329	$	(2,595)	$	(103,435)	$	1,299

December 31, 2020
Interest rate swap derivative assets	$	330,951	$	(2)	$	0	$	330,949
Foreign exchange derivative assets with correspondent banks	318		(5)		0		313
Total	$	331,269	$	(7)	$	0	$	331,262

Interest rate swap derivative liabilities	$	165,205	$	(2)	$	(165,203)	$	0
Foreign exchange derivative liabilities with correspondent banks	5		(5)		0		0
Total	$	165,210	$	(7)	$	(165,203)	$	0

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

(2)Amounts represent cash collateral received from the counterparty or posted by the Corporation on interest rate swap transactions and foreign exchange contracts with financial institution counterparties. Interest rate swaps with customers are collateralized by the same collateral securing the underlying loans to those borrowers. Cash and securities collateral amounts are included in the table only to the extent of the net derivative fair values.

TCIs are primarily for investments promoting qualified affordable housing projects and investments in community development entities. 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 recorded 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.

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


		June 30,		December 31,
		2021		2020
Included in other assets:		(in thousands)
Affordable housing tax credit investment, net		$	162,431	$	152,203
Other tax credit investments, net		50,577		59,224
	Total TCIs, net	$	213,008	$	211,427
Included in other liabilities:
Unfunded affordable housing tax credit commitments		$	47,354	$	31,562
Other tax credit liabilities		41,217		49,491
	Total unfunded tax credit commitments and liabilities	$	88,571	$	81,053


		Three months ended June 30				Six months ended June 30
		2021		2020		2021		2020
Components of income taxes:		(in thousands)
Affordable housing tax credits and other tax benefits		$	(6,543)	$	(7,194)	$	(13,031)	$	(14,388)
Other tax credit investment credits and tax benefits		(722)		(941)		(1,445)		(1,882)
Amortization of affordable housing investments, net of tax benefit		4,323		5,023		8,689		10,047
Deferred tax expense		160		208		320		416
	Total net reduction in income tax expense	$	(2,782)	$	(2,904)	$	(5,467)	$	(5,807)
Amortization of TCIs:
Affordable housing tax credits investment		$	1,018	$	1,022	$	2,004	$	2,044
Other tax credit investment amortization		545		428		1,090		856
	Total amortization of TCIs	$	1,563	$	1,450	$	3,094	$	2,900

The following table presents other comprehensive income(loss):


	Before-Tax Amount		Tax Effect		Net of Tax Amount
Three months ended June 30, 2021	(in thousands)
Unrealized gain on securities	$	24,968	$	(5,670)	$	19,298

Reclassification adjustment for securities gains included in net income (1)	(36)		8		(28)

Amortization of net unrealized gains on AFS securities transferred to HTM (2)	(349)		79		(270)
Net unrealized gain on interest rate swaps used in cash flow hedges (3)	2,683		(609)		2,074



Amortization of net unrecognized pension and postretirement items (4)	370		(81)		289
Total OCI	$	27,636	$	(6,273)	$	21,363
Three months ended June 30, 2020
Unrealized gain on securities	$	44,199	$	(9,775)	$	34,424

Reclassification adjustment for securities gains included in net income (1)	(3,005)		664		(2,341)
Amortization of net unrealized losses on AFS securities transferred to HTM (2)	1,019		(226)		793



Amortization of net unrecognized pension and postretirement items (4)	328		(73)		255
Total OCI	$	42,541	$	(9,410)	$	33,131

Six months ended June 30, 2021
Unrealized loss on securities	$	(26,783)	$	6,082	$	(20,701)

Reclassification adjustment for securities losses included in net income (1)	451		(102)		349

Amortization of net unrealized losses on AFS securities transferred to HTM (2)	1,963		(446)		1,517


Net unrealized gain on interest rate swaps used in cash flow hedges (3)	474		(107)		367
Amortization of net unrecognized pension and postretirement items (3)	740		(162)		578
Total OCI	$	(23,155)	$	5,265	$	(17,890)

Six months ended June 30, 2020
Unrealized gain on securities (4)	$	66,581	$	(14,728)	$	51,853
Reclassification adjustment for securities gains included in net income (1)	(3,051)		675		(2,376)


Amortization of net unrealized losses on AFS securities transferred to HTM (2)	2,040		(451)		1,589



Amortization of net unrecognized pension and postretirement items (3)	656		(146)		510
Total OCI	$	66,226	$	(14,650)	$	51,576

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

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

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

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

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:


	December 31, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Loans held for sale	$	0	$	83,886	$	0	$	83,886
Available for sale investment securities:



State and municipal securities	0		952,613		0		952,613
Corporate debt securities	0		367,145		0		367,145
Collateralized mortgage obligations	0		503,766		0		503,766
Residential mortgage-backed securities	0		377,998		0		377,998
Commercial mortgage-backed securities	0		762,415		0		762,415
Auction rate securities	0		0		98,206		98,206
Total available for sale investment securities	0		2,963,937		98,206		3,062,143
Other assets:
Investments held in Rabbi Trust	24,383		0		0		24,383
Derivative assets	323		338,987		0		339,310
Total assets	$	24,706	$	3,386,810	$	98,206	$	3,509,722
Other liabilities:
Deferred compensation liabilities	$	24,383	$	0	$	0	$	24,383
Derivative liabilities	280		167,505		0		167,785
Total liabilities	$	24,663	$	167,505	$	0	$	192,168

•U.S. Government securities – These securities are classified as Level 1. Fair values are based on quoted prices with 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. 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 ($367.0 million at June 30, 2021 and $362.8 million at December 31, 2020) and other corporate debt issued by non-financial institutions ($4.3 million at June 30, 2021 and $4.4 million at December 31, 2020).

•Auction rate securities – Due to their illiquidity, ARCs are classified as Level 3 investment securities 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. All of the loans underlying the ARCs have principal payments which are guaranteed by the federal government. 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.

Deferred compensation liabilities – Fair value of ~~existing contractual rights~~amounts due to ~~service mortgage loans that have been sold. Accordingly, actual~~employees under deferred compensation plans, classified as Level 1 liabilities and ~~expected prepayments~~are included in other liabilities on the consolidated balance sheets. The fair values of these liabilities are determined in the ~~underlying mortgage loans can impact~~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 ~~MSRs.~~ foreign currency exchange contracts ($193,000 at June 30, 2021 and $280,000 at December 31, 2020).

Level 2 liabilities, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($221,000 at June 30, 2021 and $2.3 million at December 31, 2020) and the fair value of interest rate swaps ($107.2 million at June 30, 2021 and $165.2 million at December 31, 2020).

The ~~Corporation accounts~~fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Derivative assets" above.

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

Unrealized adjustment to fair value (1)

(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.

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 Level 3 financial assets measured at fair value on a nonrecurring basis:

(1)Amounts shown are estimated fair value. MSRs are recorded on the Corporation's consolidated balance sheets at the lower of amortized cost or fair value. See "Note 5 - Mortgage Servicing Rights" for additional information.

•Net Loans – This category consists of loans that were individually evaluated for impairment and have been classified as Level 3 assets. 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, ~~is estimated by discounting~~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 by product type 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 ~~from~~valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, ~~net of expense, over~~the discount rate and the expected life of the underlying ~~loans at a discount rate commensurate with the risk associated with these assets.~~loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. ~~Based on~~The weighted average annual constant prepayment rate and the weighted average discount rate used in the June 30, 2021 valuation were 17.8% and 9.0%, respectively. Management reviews 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.

In 2007, the Corporation received the Visa Shares in connection with a corporate restructuring undertaken by Visa, Inc. in contemplation of its initial public offering. These securities were considered equity securities without readily determinable fair values. As such, the approximately 133,000 Visa Shares owned were carried at a zero cost basis. During the first quarter of 2021, the Corporation sold all of its Visa Shares and recognized a $34.0 million gain.

The following instruments are predominantly short-term:

FRB and ~~$3.0 million were necessary for the three~~FHLB stock represent restricted investments 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"~~carried at cost on the consolidated ~~statements~~balance sheets, which is a reasonable estimate of ~~income.~~fair value.

As of June 30, 2021, fair values for loans and time deposits were estimated by discounting future cash flows using the current rates, as adjusted for liquidity considerations, at which similar loans would be made to borrowers and similar deposits would be issued to customers for the same remaining maturities. Fair values of loans also include estimated credit losses that would be assumed in a market transaction, which represents estimated exit prices.

~~NOTE 7 – Stock-Based Compensation~~

~~The Corporation grants equity awards to employees, consisting~~Brokered deposits consists of ~~stock options, restricted stock, RSUs~~demand and ~~PSUs under its Amended~~saving deposits, which are classified as Level 1, 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.~~time deposits, which are classified as Level 2. The fair value of ~~equity awards granted to employees is recognized as compensation expense over~~these deposits are determined in a manner consistent with 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.respective type of deposits discussed above.

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 810 – ~~Employee Benefit Plans~~Net Income Per Share

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

Diluted net income per share is calculated as net income available to common shareholders 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, RSUs, and PSUs. PSUs are required to be included in weighted average diluted shares outstanding if performance measures, as defined in each PSU award agreement, are met as of the end of the period.

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


	Three months ended June 30				Six months ended June 30
	2021		2020		2021		2020
Weighted average shares outstanding (basic)	162,785		161,715		162,614		162,582
Impact of common stock equivalents	1,073		552		1,124		744
Weighted average shares outstanding (diluted)	163,858		162,267		163,738		163,326
Per share:
Basic	$	0.38	$	0.24	$	0.81	$	0.40
Diluted	0.38		0.24		0.81		0.40

NOTE 11 – Stock-Based Compensation

The ~~net periodic benefit cost for~~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 ~~Defined Benefit Pension~~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 ("~~Pension~~Directors’ Plan") ~~consisted~~. 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 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 ~~following components:~~vesting of equity awards.

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


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

~~The net periodic benefit~~Fair values for RSUs and a majority of PSUs are based on the trading price 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~~stock on the ~~consolidated balance sheets~~date of grant and ~~recognizes~~earn dividend equivalents during the ~~change in that funded status through other comprehensive income.~~

~~NOTE 9 – Derivative Financial Instruments~~

vesting period, which are forfeitable if the awards do not vest. The ~~Corporation manages its exposure to~~fair value of certain ~~interest rate and foreign currency risks~~PSUs are estimated through the use of ~~derivatives. None of~~ the Corporation's outstanding derivative contracts are designated as hedges, and none are entered into for speculative purposes. Derivative instruments are carried at fair value, with changes in fair values recognized in earnings as components of non-interest income and non-interest expense on the consolidated statements of income.

~~Mortgage Banking Derivatives~~

As of June 30, 2021, the ~~consolidated balance sheets, and changes in fair values during the period are recorded in mortgage banking income on the consolidated statements of income.~~

~~Interest Rate Swaps~~

The Corporation enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interestEmployee Equity Plan had 8.8 million shares reserved for future grants through 2023, 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 $10 billion in total assets as of December 31, 2016 and was required to clear all eligible interest rate swap contracts with a central counterparty, effective January 1, 2017. As a result, Fulton Bank became subject to the regulations of the Commodity Futures Trading Commission ("CFTC").Directors’ Plan had approximately 126,000 shares reserved for future grants through 2029.

~~Foreign Exchange Contracts~~

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

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

September 30, 2017 December 31, 2016
Notional
Amount Asset
(Liability)
Fair Value Notional
Amount Asset
(Liability)
Fair Value
(in thousands)
Interest Rate Locks with Customers
Positive fair values $ 141,250
$ 1,283
$ 87,119
$ 863
Negative fair values 5,530
(16 ) 18,239
(227 )
Net interest rate locks with customers
1,267

636
Forward Commitments
Positive fair values 27,562
48
70,031
2,223
Negative fair values 77,000
(207 ) 19,964
(112 )
Net forward commitments (159 ) 2,111
Interest Rate Swaps with Customers
Positive fair values 1,329,394
34,028
876,744
24,397
Negative fair values 578,120
(13,682 ) 583,060
(16,998 )
Net interest rate swaps with customers 20,346
7,399
Interest Rate Swaps with Dealer Counterparties
Positive fair values 578,120
13,682
583,060
16,998
Negative fair values ⁽¹⁾
1,329,394
(27,663 ) 876,744
(24,397 )
Net interest rate swaps with dealer counterparties (13,981 ) (7,399 )
Foreign Exchange Contracts with Customers
Positive fair values 5,912
332
11,674
504
Negative fair values 5,473
(226 ) 4,659
(221 )
Net foreign exchange contracts with customers 106
283
Foreign Exchange Contracts with Correspondent Banks
Positive fair values 8,978
293
7,040
241
Negative fair values 4,420
(280 ) 12,869
(447 )
Net foreign exchange contracts with correspondent banks 13
(206 )
Net derivative fair value asset $ 7,592
$ 2,824

~~(1) Includes centrally cleared interest rate swaps with a notional amount of $324.3 million and a fair value of $0 as of September 30, 2017. Collateral is posted daily through a clearing agent~~related tax benefits for ~~changes~~equity awards recognized in ~~the fair value.~~

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

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
(in thousands)
Interest rate locks with customers $ (59 ) $ 178
$ 631
$ 1,922
Forward commitments (48 ) 970
(2,270 ) (1,042 )
Interest rate swaps with customers (47 ) (1,948 ) 12,947
48,052
Interest rate swaps with dealer counterparties 1,248
1,948
(6,582 ) (48,052 )
Foreign exchange contracts with customers 140
47
(177 ) 502
Foreign exchange contracts with correspondent banks (111 ) (266 ) 219
(613 )
Net fair value gains on derivative financial instruments $ 1,123
$ 929
$ 4,768
$ 769

~~Fair Value Option~~

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

for sale at fair value to more accurately reflect the financial results of its mortgage banking activities in its consolidated financial statements. Derivative financial instruments related to these activities are also recorded at fair value, as noted above. The Corporation determines fair value for its mortgage loans held for sale based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Changes in fair values during the period are recorded as components of mortgage banking income on the consolidated statements of ~~income. Interest income earned on mortgage loans held for sale is classified in interest income on the consolidated statements of income.~~income:


	Three months ended June 30				Six months ended June 30
	2021		2020		2021		2020
	(in thousands)
Compensation expense	$	2,098	$	1,911	$	4,000	$	3,530
Tax benefit	(457)		(403)		(870)		(747)
Stock-based compensation expense, net of tax benefit	$	1,641	$	1,508	$	3,130	$	2,783

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

September 30,
2017 December 31,
2016
(in thousands)
Cost $ 22,615
$ 28,708
Fair value 23,049
28,697

During the three months ended September 30, 2017 and 2016, the Corporation recorded losses related to changes in fair values of mortgage loans held for sale of $120,000 and $360,000, respectively. During the nine months ended September 30, 2017 and 2016, the Corporation recorded gains related to changes in fair values of mortgage loans held for sale of $445,000 and $504,000, respectively.

~~Balance Sheet Offsetting~~

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

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

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

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

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

Gross Amounts Gross Amounts Not Offset
Recognized on the Consolidated
on the Balance Sheets
Consolidated Financial Cash Net
Balance Sheets
Instruments⁽¹⁾

Collateral ⁽²⁾

Amount
(in thousands)
September 30, 2017
Interest rate swap derivative assets $ 47,710
$ (14,163 ) $ —
$ 33,547
Foreign exchange derivative assets with correspondent banks 293
(280 ) —
13
Total $ 48,003
$ (14,443 ) $ —
$ 33,560

Interest rate swap derivative liabilities $ 41,345
$ (14,163 ) $ (15,520 ) $ 11,662
Foreign exchange derivative liabilities with correspondent banks 280
(280 ) —
—
Total $ 41,625
$ (14,443 ) $ (15,520 ) $ 11,662

December 31, 2016
Interest rate swap derivative assets $ 41,395
$ (15,117 ) $ —
$ 26,278
Foreign exchange derivative assets with correspondent banks 241
(241 ) —
—
Total $ 41,636
$ (15,358 ) $ —
$ 26,278

Interest rate swap derivative liabilities $ 41,395
$ (15,117 ) $ (4,010 ) $ 22,268
Foreign exchange derivative liabilities with correspondent banks 447
(241 ) (206 ) —
Total $ 41,842
$ (15,358 ) $ (4,216 ) $ 22,268


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


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

NOTE 1012 – 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
	2021		2020		2021		2020
	(in thousands)

Interest cost	$	561	$	681	$	1,122	$	1,362
Expected return on plan assets	(1,011)		(982)		(2,022)		(1,964)
Net amortization and deferral	504		465		1,008		930
Net periodic pension cost	$	54	$	164	$	108	$	328

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
	2021		2020		2021		2020
	(in thousands)
Interest cost	$	8	$	11	$	16	$	22

Net accretion and deferral	(134)		(137)		(268)		(274)
Net periodic benefit	$	(126)	$	(126)	$	(252)	$	(252)

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 13 – Commitments and Contingencies

Commitments

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

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

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

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, included in ACL - OBS credit exposures, which represents management’s estimate of credit losses associated with unused commitments to extend credit and letters of credit. As of June 30, 2021 and December 31, 2020, the ACL - OBS credit exposures for unfunded lending commitments was $10.1 million and $9.1 million, respectively. See ~~Note 5, "Loans~~"Note 4 - Loans and Allowance for Credit Losses," for additional details.

The following table presents the Corporation's commitments to extend credit and letters of credit:


	June 30, 2021		December 31, 2020
	(in thousands)
Commitments to extend credit	$	9,003,425	$	8,651,055
Standby letters of credit	314,921		298,750
Commercial letters of credit	56,862		56,229

Residential Lending

Residential mortgages originated and sold by the Corporation consist primarily of conforming, prime loans sold to government sponsored agencies, such as the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). The Corporation ~~also~~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 in other liabilities. As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, the total reserve for losses on residential mortgage loans sold was ~~$2.1~~$1.3 million and ~~$2.5~~$1.1 million, respectively, including ~~both~~ reserves for ~~credit losses under the MPF Program and reserves for~~both representation and warranty and credit loss exposures. ~~Management believes that the reserves recorded~~In addition, a component of ACL - OBS credit exposures of $4.7 million and $5.3 million, as of ~~September~~June 30, ~~2017 are adequate. However, declines in collateral values, the identification of~~2021 and December 31, 2020, respectively, related to additional ~~loans to be repurchased, or a deterioration in the~~ credit ~~quality of loans sold under the MPF Program could necessitate additional reserves, established through charges to earnings, in the future.~~exposures for potential loan repurchases.

Legal Proceedings

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 restrictions, 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~~Kress v. Fulton Bank, N.A.

On October 15, 2019, a former Fulton Bank teller supervisor, D. Kress filed a putative collective and class action lawsuit on behalf of herself and other teller supervisors, tellers, and other similar non-exempt employees in the U.S. District Court for the District of New Jersey, D. Kress v. Fulton Bank, N.A., Case No. 1:19-cv-18985. Fulton Bank accepted summons without a formal service of process on January 20, 2020. The lawsuit alleges that Fulton Bank did not record or otherwise account for the amount of time D. Kress and putative collective and class members spent conducting branch opening security procedures. The allegation is that, as a result, Fulton Bank did not properly compensate those employees for their regular and overtime wages. The lawsuit alleges that by doing so, Fulton violated: (i) the federal Fair Labor Standards Act and seeks back overtime wages

for a period of three years, liquidated damages and attorney fees and costs; (ii) the New Jersey State Wage and Hour Law and seeks back overtime wages for a period of six years, treble damages and attorney fees and costs; and (iii) the New Jersey Wage Payment Law and seeks back wages for a period of six years, treble damages and attorney fees and costs. The lawsuit also asserts New Jersey common law claims seeking compensatory damages and interest. The Corporation and ~~each~~counsel representing plaintiffs ("Plaintiffs’ Counsel") have reached and executed a formal Settlement Agreement to resolve this lawsuit. Plaintiffs’ Counsel has filed a Motion for Preliminary Approval of Class and Collective Settlement and Provisional Certification of Settlement Class and Collective ("the Motion") with the U.S. District Court for the District of New Jersey ("the Court"). The Corporation is not able to provide any assurance that the Court will grant the Motion. If the Court does grant the Motion, the Settlement Agreement will be administered according to its ~~bank subsidiaries are~~terms and thereafter subject to ~~regulatory enforcement orders issued during 2014 and 2015~~final approval by ~~their respective federal and state bank regulatory agencies relating to identified deficiencies in~~ the ~~Corporation’s centralized Bank Secrecy Act and anti-money laundering compliance program (the "BSA/AML Compliance Program"), which was designed to comply with the requirements~~Court. The financial terms of the ~~Bank Secrecy Act,~~Settlement Agreement are not expected to be material to 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.Corporation. 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") 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.

~~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 initiatedestablished 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. Duringaccrued liability during the third quarter of ~~2016,~~2020 for the Department informed the Corporation, Fulton Bank, N.A., and three of the Corporation’s other bank subsidiaries, Fulton Bank of New Jersey, The Columbia Bank and Lafayette Ambassador Bank, that the Department was expanding its investigation of potential lending discrimination on the basis of race and national origincosts expected 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 the investigation result in an enforcement action against the Corporation or its bank subsidiaries, or a settlement with the Department, the ability of the Corporation and its bank subsidiaries to engage in certain expansion or other activities may be restricted.

~~Agostino, et al. Litigation~~

Fulton Bank, N.A. (the "Bank"), the Corporation’s largest bank subsidiary, and two unrelated, third-party defendants, Ameriprise Financial Services, Inc. (“Ameriprise”) and Riverview Bank (“Riverview”), have been named as defendants in a lawsuit brought on behalf of a group of 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. Motternincurred in connection with ~~Mr. Mottern’s law practice.~~the Settlement Agreement.

NOTE 14 – Long-Term Borrowings

On March 30, 2021, pursuant to a cash tender offer, the Corporation purchased $75.0 million and $60.0 million of its subordinated notes which mature on November 15, 2024 and its senior notes which mature on March 16, 2022, respectively. The ~~lawsuit alleges that~~subordinated notes carry a fixed rate of 4.50% and an effective rate of 4.87% and the ~~Bank is liable to the plaintiffs for failing to properly monitor Mr. Mottern’s checking account~~senior notes carry a fixed rate of 3.60% and ~~detect Mr. Mottern’s fraudulent activity, and specifically alleges that the Bank aided and abetted Mr. Mottern’s: (1) fraud; (2) breach~~an effective rate 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.3.95%. The ~~lawsuit seeks damages from the defendants, including the Bank, alleged to be in excess of~~Corporation incurred $11.3 million ~~treble damages~~in debt extinguishment costs and ~~attorneys’ fees with respect to alleged violations~~expensed $841,000 of unamortized discount costs. In addition, during the ~~Pennsylvania Unfair Trade Practices and Consumer Protection Law, punitive damages, plus interest and costs. On April 29, 2016, the Bank filed a Notice~~first quarter 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 informed2021, 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~~

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

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

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

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

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

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 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 to the Corporation’s election to measure assets and liabilities at fair value.

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

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

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

~~Equity securities~~ – Equity securities consist of common stocks of financial institutions ($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).

~~Level 2 investments include the Corporation’s holdings of subordinated debt, other corporate debt issued by non-financial institutions and $35.5 million and $37.3~~prepaid $536.0 million of single-issuer trust preferred securities held at September 30, 2017 and December 31, 2016, respectively. The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.

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

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

~~Changes in the price and discount rates are compared to changes in market data, including bond ratings, parity ratios, balances and delinquency levels.~~

~~Other assets~~ ~~– Included in this category are the following:~~

Level 1 assets include mutual funds that are held in trust for employee deferred compensation plans ($18.1 million at September 30, 2017 and $16.4 million at December 31, 2016) and the fair value of foreign currency exchange contracts ($625,000 at September 30, 2017 and $745,000 at December 31, 2016). The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.

Level 2 assets include the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($1.3 million at September 30, 2017 and $3.1 million at December 31, 2016) and the fair value of interest rate swaps ($47.7 million at September 30, 2017 and $41.4 million at December 31, 2016). The fair values of the Corporation’s interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See Note 9, "Derivative Financial Instruments," for additional information.

~~Other liabilities~~ ~~– Included in this category are the following:~~

Level 1 liabilities include employee deferred compensation liabilities which represent amounts due to employees under deferred compensation plans ($18.1 million at September 30, 2017 and $16.4 million at December 31, 2016) and the fair value of foreign currency exchange contracts ($506,000 at September 30, 2017 and $668,000 at December 31, 2016). The fair value of these liabilities are determined in the same manner as the related assets, as described under the heading "Other assets" above.

Level 2 liabilities include the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($223,000 at September 30, 2017 and $339,000 at December 31, 2016) and the fair value of interest rate swaps ($41.3 million at September 30, 2017 and $41.4 million at December 31, 2016). The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Other assets" above.

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

Three months ended September 30, 2017
Pooled Trust
Preferred
Securities Single-issuer
Trust Preferred
Securities ARCs
(in thousands)
Balance at June 30, 2017 $ 422
$ 2,775
$ 97,923
Unrealized adjustment to fair value ⁽¹⁾
—
(28 ) 233
Discount accretion ⁽²⁾
—
3
—
Balance at September 30, 2017 $ 422
$ 2,750
$ 98,156

Three months ended September 30, 2016
Balance at June 30, 2016 $ 706
$ 2,425
$ 97,886
Unrealized adjustment to fair value ⁽¹⁾
—
7
(318 )
Discount accretion ⁽²⁾
—
3
158
Balance at September 30, 2016 $ 706
$ 2,435
$ 97,726

Nine months ended September 30, 2017
Pooled Trust
Preferred
Securities Single-issuer
Trust Preferred
Securities ARCs
(in thousands)
Balance at December 31, 2016 $ 422
$ 2,450
$ 97,256
Unrealized adjustment to fair value ⁽¹⁾
—
291
705
Discount accretion ⁽²⁾
—
9
195
Balance at September 30, 2017 $ 422
$ 2,750
$ 98,156

Nine months ended September 30, 2016
Balance at December 31, 2015 $ 706
$ 2,630
$ 98,059
Unrealized adjustment to fair value ⁽¹⁾
—
(204 ) (668 )
Discount accretion ⁽²⁾
—
9
335
Balance at September 30, 2016 $ 706
$ 2,435
$ 97,726


~~(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 investment securities" on the consolidated balance sheets.


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

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:

September 30, 2017 December 31, 2016
(in thousands)
Net loans $ 140,779
$ 132,576
OREO 10,542
12,815
MSRs 37,874
37,532
Total assets $ 189,195
$ 182,923

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

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

~~OREO~~ – This category includes OREO ($10.5 million at September 30, 2017 and $12.8 million at December 31, 2016) classified as Level 3 assets. Fair values for OREO were based on estimated selling prices less estimated selling costs for similar assets in active markets.

~~MSRs~~ – This category includes MSRs ($37.9 million at September 30, 2017 and $37.5 million at December 31, 2016), classified as Level 3 assets. MSRs are initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the September 30, 2017 valuation were 12.4% and 9.5%, respectively. Management tests the reasonableness of the significant inputs to the third-party valuation in comparison to market data.

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

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.

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

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

~~The following instruments are predominantly short-term:~~



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

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

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

~~The fair values of~~long-term FHLB advances and long-term debt were estimated by discounting the remaining contractual cash flows using a rate at which the Corporation could issue debt with similar remaining maturities as of the balance sheet date. These borrowings would be categorizedincurred $20.9 million in ~~Level 2 liabilities under FASB ASC Topic 820.~~prepayment penalties.

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

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

FORWARD-LOOKING STATEMENTS

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

other comparable terminology. These forward-looking statements ~~are not guarantees~~may include projections of, or guidance on, the Corporation's future financial performance, expected levels of future ~~performance~~expenses, including future credit losses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends in the Corporation's business or financial results.

Forward-looking statements are neither historical facts, nor assurance of future performance. Instead, they are based on current beliefs, expectations and assumptions regarding the future of the Corporation's business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and ~~uncertainties, some~~changes in circumstances that are difficult to predict and many of which are ~~beyond~~outside of the Corporation's control, and ~~ability to predict, that could cause~~ actual results toand financial condition may differ materially from those ~~expressed~~indicated in the forward-looking statements. Therefore, you should not unduly rely on any of these forward-looking statements. Any forward-looking statement is based only on information currently available and speaks only as of the date when made. The Corporation undertakes no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Many factors could affect future financial results including, without limitation:

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

•the scope and duration of the COVID-19 pandemic, actions taken by governmental authorities in response to the pandemic, the Corporation’s participation in the PPP and other COVID-19 relief programs, and the direct and indirect impacts of the pandemic on the Corporation, its customers and third parties;

•the determination of the ACL, which depends significantly upon assumptions and judgments with respect to a variety of factors, including the performance of the loan portfolio, the weighted-average remaining lives of different classifications of loans within the loan portfolio and current and forecasted economic conditions, among other factors;

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

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

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

•the planned phasing out of LIBOR as a benchmark reference rate;

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

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

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

~~the impact of increased regulatory scrutiny of the banking industry;~~

•the effects of the ~~increasing~~extensive level of regulation and supervision to which the Corporation and Fulton Bank are subject;

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

•the potential for negative consequences resulting from regulatory violations, investigations and examinations, or failure to comply with the BSA, the Patriot Act and related AML requirements, including potential supervisory actions, ~~and~~ the assessment of fines and ~~penalties;~~

penalties, the ~~additional time, expense~~imposition of sanctions or restrictions, the need to undertake remedial actions and ~~investment required to comply with, and the restrictions on potential growth and investment activities resulting from, the existing enforcement orders applicable~~possible damage to the ~~Corporation and its bank subsidiaries by federal and state bank regulatory agencies requiring improvement in compliance functions and other remedial actions, or any future enforcement orders;~~Corporation’s reputation;

•the continuing impact of the Dodd-Frank Act on the Corporation’s ~~ability to manage the uncertainty associated with the delay in implementing many~~business and results of ~~the regulations mandated by the Dodd-Frank Act;~~operations;

•the effects of, and uncertainty surrounding, ~~potential~~new legislation, changes in ~~legislation,~~ regulation and government policy, ~~as a~~which could result ~~of the recent change~~ in ~~federal administration;~~significant changes in banking and financial services regulation;

•the effects of actions by the federal government, including those of the Federal Reserve Board and other government agencies, that impact money supply and market interest rates;

•the effects of changes in U.S. federal, state or local tax laws;

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

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

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

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

•the Corporation’s ability to achieve its growth plans;

•completed and potential acquisitions may affect costs and the Corporation may not be able to successfully integrate the acquired business or realize the anticipated benefits from such acquisitions;

•the potential effects of climate change and related government policies on the Corporation’s business and results of operations;

•the Corporation’s ability to implement, from time to time, measures intended to manage growth in non-interest expenses and improve the efficiency of its operations and realize the intended effects of those initiatives;

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

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

•the effects of changes in accounting policies, standards, and interpretations on the ~~Corporation's consolidated balance sheets~~Corporation’s reporting of its financial condition and ~~consolidated statements~~results of ~~income;~~operations;

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

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

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

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

•the Corporation’s failure to identify and to address cyber-security risks, including data breaches ~~or cyberattacks;~~and cyber-attacks;

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

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

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

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

•the effects of any downgrade in the Corporation’s or Fulton Bank’s credit ratings on ~~its~~their borrowing costs or access to capital markets.

Additional information regarding these as well as other factors that could affect future financial results can be found in the sections entitled "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020, Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and elsewhere in this Report, including in Note 13 "Commitments and Contingencies" of the Notes to Consolidated Financial Statements and in Item 1A. "Risk Factors".

RESULTS OF OPERATIONS

Overview

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

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


	Three months ended June 30		Six months ended June 30
	2021	2020	2021	2020


Net income available to common shareholders (in thousands)	$62,402	$39,559	$132,874	$65,606
Diluted net income available to common shareholders per share	$0.38	$0.24	$0.81	$0.40
Return on average assets, annualized	1.00%	0.66%	1.07%	0.57%
Return on average common shareholders' equity, annualized	9.38%	6.89%	10.10%	5.68%
Return on average common shareholders' equity (tangible), annualized (1)	12.93%	8.99%	13.95%	7.40%
Net interest margin (2)	2.73%	2.81%	2.76%	3.01%
Efficiency ratio (1)	63.8%	66.4%	63.4%	65.4%
Non-performing assets to total assets	0.60%	0.59%	0.60%	0.60%
Annualized net charge-offs to average loans	0.15%	0.09%	0.14%	0.17%

(1)Ratio represents a financial measure derived by methods other than GAAP. See reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure under the heading, "Supplemental Reporting of Non-GAAP Based Financial Measures" at the end of this "Overview" section of Management’s Discussion.

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

COVID-19 Pandemic

Beginning in first quarter of 2020, the COVID-19 pandemic has caused substantial disruptions in economic and social activity, both globally and in the United States. The spread of COVID-19, and related governmental actions to mandate or encourage temporary closures of businesses, quarantines, social distancing, "stay at home" orders and other restrictions on in-person operations and activities, have caused severe disruptions in the U.S. economy, which, in turn, disrupted the business, activities, and operations of the Corporation’s customers, as well as the Corporation’s own business and operations. The resulting impacts of the pandemic on consumers, including elevated levels of unemployment and changes in consumer behavior, as well as disruptions in national and global supply chains, have continued to cause changes in consumer and business spending, borrowing needs and saving habits, which have and will likely continue to affect the demand for loans and other products and services the Corporation offers, as well as the creditworthiness of its borrowers.

While economic activity has rebounded as much of the national economy has “reopened,” there is still significant uncertainty concerning the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as their impact on the U.S. economy and the Corporation’s customers, vendors and counterparties. The extent to which the pandemic impacts the Corporation’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the continuing severity of the COVID-19 pandemic, whether there are additional outbreaks of COVID-19 or the emergence of more virulent COVID-19 variants, and the actions taken to respond to any such future developments. Moreover, although multiple COVID-19 vaccines have received regulatory approval and are currently being distributed, it is too early to know how quickly and broadly these vaccines can be distributed and will be accepted and how effective they will be in mitigating the adverse social and economic effects of the COVID-19 pandemic.

The Corporation’s business is dependent upon the willingness and ability of its customers to conduct banking and other financial transactions. In an effort to mitigate the spread of COVID-19, the Corporation adjusted service models at certain of its financial center locations, including limiting some locations to drive-up and ATM services only, offering lobby access by

As of or for the
Three months ended
September 30 As of or for the
Nine months ended
September 30
2017 2016 2017 2016
Net income (in thousands) $ 48,905
$ 41,468
$ 137,752
$ 119,475
Diluted net income per share $ 0.28
$ 0.24
$ 0.78
$ 0.69
Return on average assets 0.98 % 0.89 % 0.95 % 0.87 %
Return on average equity 8.76 % 7.78 % 8.45 % 7.64 %
Return on average tangible equity ⁽¹⁾
11.52 % 10.38 % 11.18 % 10.24 %
Net interest margin ⁽²⁾
3.27 % 3.14 % 3.27 % 3.19 %
Efficiency ratio ⁽¹⁾
64.3 % 65.2 % 64.6 % 67.0 %
Non-performing assets to total assets 0.73 % 0.80 % 0.73 % 0.80 %
Annualized net charge-offs to average loans 0.14 % 0.11 % 0.12 % 0.14 %
appointment only, and encouraging the Corporation’s customers to use electronic banking platforms. Approximately 25% of the Corporation’s locations are expected to provide lobby access by appointment only on a long-term basis.


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


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

~~Net~~As the COVID-19 pandemic unfolded in the first quarter of 2020, a significant portion of the Corporation’s employees transitioned to working remotely as a result of the COVID-19 pandemic, which, in addition to requiring added support from the Corporation’s information technology infrastructure, increases cybersecurity risks. The Corporation has announced plans for the majority of its employees currently working remotely to return to onsite or hybrid onsite-remote working arrangements late in the third quarter of 2021.

COVID-19 has significantly affected the financial markets and has resulted in a number of responses by the U.S. government, including reductions in interest rates by the FOMC. These reductions in interest rates, especially if prolonged, could adversely affect the Corporation’s net interest income and margins and the Corporation’s profitability.

The CARES Act was enacted in March 2020 and, among other provisions, authorized the SBA to guarantee loans under the PPP for small businesses that meet eligibility requirements in order to keep their workers on the payroll and fund specified operating expenses. Subsequent legislation extended the authority of the SBA to guaranty loans under the PPP through August 8, 2020. In December 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act reauthorized the SBA to guarantee loans under the PPP through March 31, 2021, and the PPP Extension Act of 2021 extended that authorization through June 30, 2021 for applications received by the SBA prior to June 1, 2021. From the inception of the PPP through June 30, 2021, the Corporation funded a total of approximately $2.7 billion of loans under the PPP. Through June 30, 2021, a total of $1.6 billion of those PPP loans have qualified for loan forgiveness and have been repaid by the SBA.

A series of stimulus payments to eligible consumers, enhanced unemployment benefits provided by the federal government and traditional, state-provided unemployment compensation, as well as other forms of relief provided to consumers and businesses, have helped to limit some of the adverse impacts of COVID-19 and, together with other factors, have contributed to significant growth in the Corporation’s customer deposit balances since the pandemic began. The reduction, expiration or discontinuation of these measures may adversely impact the recovery of economic activity and the ability of borrowers to meet their payment and other obligations to the Corporation, either of which could require the Corporation to increase the ACL through provisions for credit losses. Further, if economic activity continues to recover, and consumer spending and business investment increase, customers may be less likely to maintain deposit balances with the Corporation at recent levels, which might require the Corporation to increase its reliance on alternative or higher-cost sources of funding.

The impact of COVID-19 on the Corporation’s financial results is evolving and uncertain. The Corporation has limited exposure to some of the industries that were initially most significantly impacted by COVID-19, such as hospitality and food services, energy and entertainment, and most of these loans are secured by real estate and other forms of collateral. While many areas of the economy continue to exhibit signs of recovery, the lingering effects of the pandemic, particularly in certain sectors of the economy, or a resurgence in COVID-19 infections that prompts the continuation or imposition of governmental restrictions on activities, may result in decreased demand for the Corporation’s loan products. In addition, the decline in economic activity occurring due to COVID-19 and the actions by the FOMC with respect to interest rates are likely to affect the Corporation’s net interest income, non-interest income and credit-related losses for an uncertain period of time. See additional discussion in "Results of Operations" and "Financial Condition" of Management's Discussion.

Financial Highlights

Following is a summary of the financial highlights for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021:

•Net Income Available to Common Shareholders and Net Income Per Share - Net income available to common shareholders was $62.4 million for the three months ended June 30, 2021, a $22.8 million increase compared to $39.6 million for the same period of 2020. Diluted net income per share was $0.38, a $0.14 increase compared to the same period in 2020. The increase in net income during the second quarter of 2021 was primarily a result of a negative provision for credit losses, an increase in net interest income and lower non-interest expenses, partially offset by lower non-interest income, net investment securities gains, higher income taxes and the preferred stock dividend as discussed below.

Net income available to common shareholders was $132.9 million for the six months ended June 30, 2021, a $67.3 million increase compared to $65.6 million for the same period of 2020. Diluted net income per share was $0.81, a $0.41 increase compared to the same period in 2020. The increase in net income during thesix months ended June 30, 2021was primarily a result of a negative provision for credit losses, an increase in net interest income, non-

interest income, and net investment securities gains, partially offset by higher non-interest expenses, higher income taxes and the preferred stock dividend as discussed below.

•Net Interest Income - Net interest income increased ~~$7.4~~$9.6 million, or ~~17.9%~~6.3%, for the three months ended June 30, 2021 and ~~$18.3~~increased $13.0 million, or ~~15.3%,~~4.3% for the six months ended June 30, 2021 compared to the same periods in 2020. The increases resulted from reduced long-term borrowings, lower rates on interest-bearing liabilities and higher volumes of interest-earning assets, primarily loans, partially offset by lower yields on interest-earning assets. Overall, the net interest margin decreased 8 bp and 25 bp for the three and six months ended June 30, 2021, respectively compared to the same periods in ~~2016.~~2020.

~~The following is a summary of financial highlights for the three and nine months ended September 30, 2017:~~

~~FTE Net Interest Income and~~ ◦Net Interest Margin - For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, FTE~~2021, the decreases in the net interest ~~income increased $16.9~~margin reflected the net impact of 35 bp and 58 bp, respectively, decreases in yields on interest-earning assets, partially offset by 28 bp and 35 bp, respectively, decreases in the cost of funds.

◦Loan Growth - Average Net Loans grew by $574.8 million, or ~~12.5%~~3.1%, and ~~$39.6 million,~~$1.3 billion, or ~~9.8%~~7.7%, ~~in comparison~~for the three and six months ended June 30, 2021, respectively, compared to the same periods in ~~2016. These~~2020. The increases were driven largely by the issuance of PPP loans and growth in the real estate commercial and residential mortgage portfolios.

◦Deposit Growth - Average deposits grew $2.5 billion, or 12.9%, and $3.2 billion, or 17.8%, for the three and six months ended June 30, 2021, respectively compared to the same periods in 2020. The increases were driven by growth in ~~interest-earning assets and improvements in the net interest margin, resulting from~~all deposit categories except time deposits. The increases in ~~yields on interest-earning assets exceeding increases in costs of interest-bearing liabilities. The growth in interest-earning assets accounted~~average total demand and savings accounts were driven by strong customer liquidity.

•Provision for approximately 70% and 87% of the FTE net interest income growth for the three and nine months ended September 30, 2017, respectively, while the increase in net interest margin accounted for the remaining 30% and 13% growth in these periods, respectively.

~~Asset Quality~~Credit Losses - The provision for credit losses was a negative $3.5 million and a negative $9.0 million for the three and six months ended June 30, 2021, respectively, decreases of $23.1 million and $72.6 million, respectively, from the same periods of 2020. As of June 30, 2021, improved economic forecasts and other factors compared to those as of both March 31, 2021, for the three months ended ~~September~~June 30, ~~2017 was $5.1 million , compared to a $4.1 million provision~~2021, and December 31, 2020, for the ~~same period in 2016. For the nine~~six months ended ~~September~~June 30, ~~2017,~~2021, reduced the level of the ACL determined to be necessary at the end of the second quarter of 2021. The higher provision for credit losses in the first half of 2020 was ~~$16.6~~primarily driven by the assessment of the initial estimated impacts of COVID-19, as reflected in economic forecasts, on the level of expected credit losses.

•Asset Quality - Non-performing assets increased $5.2 million, or 3.4%, as of June 30, 2021 compared to ~~an $8.2 million provision for the same period in 2016. The increases in the 2017 periods~~December 31, 2020, and were ~~largely due to growth in the loan portfolio,~~0.60% and 0.58% of total assets, respectively, as ~~credit metrics were generally stable.~~

of those dates. Annualized net charge-offs to average loans outstanding were ~~0.14%~~0.15% for the ~~third quarter of 2017,~~three months ended June 30, 2021 compared to ~~0.11%~~0.09% for the ~~third quarter of 2016.~~same period in 2020. For the ~~first nine~~six months ~~of 2017,~~ended June 30, 2021 and 2020, annualized net charge-offs to average loans outstanding ~~improved~~were 0.14% and 0.17%, respectively.

•Balance Sheet Restructuring - During the first quarter of 2021, the Corporation completed a balance sheet restructuring that included a $34.0 million gain on sale of Visa Shares, offset by other securities losses of $400,000, debt extinguishment costs of $32.6 million and a write-off of $841,000 recognized in net interest income in connection with the cash tender offer for certain of its outstanding senior and subordinated notes and the prepayment of certain term FHLB advances. See Note 14, "Long-Term Debt," in the Notes to ~~0.12%~~Consolidated Financial Statements for further details on the tender of certain outstanding senior and subordinated notes.

•Non-interest Income - For the three months ended June 30, 2021, non-interest income, excluding net investment securities gains, decreased $1.1 million, or 2.0%, as compared to ~~0.14%~~the same period in 2020. The decrease in the 2021 period was primarily the result of mortgage banking income, which decreased $7.1 million, driven by a reduction in gain-on-sale spreads of mortgages sold as well as a $2.2 million addition to the valuation allowance for MSRs. Partially offsetting this decrease were wealth management fees, which increased $4.2 million, or 31.5%, resulting from an increase in client asset levels and overall market performance, and higher. commercial and consumer banking revenues.

For the six months ended June 30, 2021, non-interest income, excluding net investment securities gains, increased $6.3 million, or 5.8%, as compared to the same period in 2020. The increase in the 2021 period was primarily the result of wealth management fees, which increased $6.5 million, or 22.9%, resulting from an increase in client asset levels and overall market performance, consumer banking revenues and mortgage banking income, partially offset by lower commercial banking income, driven primarily by a decrease in capital markets income, consisting primarily of fees earned on commercial loan interest rate swaps.

•Non-interest Expense - Non-interest expense decreased $2.2 million, or 1.5%, for the three months ended June 30, 2021 compared to the same period in 2020. The decrease during the quarter was largely driven by lower salaries and employee benefits and lower debt extinguishment costs. In the second quarter of 2020, the Corporation redeemed long-term FHLB advances, which resulted in prepayment penalties of $2.9 million. Increases were recognized in data processing and software expenses and state taxes.

Non-interest expense increased $33.7 million, or 11.8%, for the six months ended June 30, 2021 compared to the same period in 2020. The increase was largely driven by debt extinguishment costs recorded in the first quarter of 2021, in connection with the balance sheet restructuring discussed above, compared to $2.9 million of debt extinguishment costs recognized in the second quarter of 2020. Higher data processing and software, state taxes and other outside services also contributed to the increase, partially offset by lower professional fees.

In 2020, the Corporation completed a strategic operating expense review, which resulted in a number of cost-saving initiatives that were expected to result in annual expense savings of $25 million, these expense reductions were fully realized by the end of the second quarter of 2021. The expense reductions occurred primarily within salaries and employee benefits and net occupancy expense categories. The Corporation has been reinvesting a portion of the cost savings to accelerate digital transformation initiatives.

•Income Taxes - Income tax expense for the three months ended June 30, 2021 was $12.0 million, a $5.5 million increase from $6.5 million for the same period ~~of 2016.~~

~~Non-performing assets decreased $3.1 million, or 2.1%, as of September 30, 2017~~ in ~~comparison to September 30, 2016 and decreased to 0.73% as a percentage of total assets, compared to 0.80% as of September 30, 2016.~~2020. The ~~total delinquency rate improved to 1.28% as of September 30, 2017, from 1.38% as of September 30, 2016.~~

~~Non-interest Income~~ - For the three and nine months ended September 30, 2017, non-interest income, excluding investment securities gains, increased $770,000, or 1.6%, and $7.5 million, or 5.5%, in comparison to the same periods in 2016, respectively. The increases were primarily driven by higher investment management and trust services income and mortgage banking income. Improvements in mortgage banking income were largely due to changes in the MSR valuation allowance. See further discussion under non-interest income in "Results of Operations."

~~Investment securities gains~~Corporation’s ETR was 15.6% for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017 were $4.6 million and $7.1 million, respectively, as~~2021, compared to ~~$2,000 and $1.0~~14.2% in the same period of 2020. Income tax expense for the six months ended June 30, 2021 was $25.9 million, a $16.6 million increase from $9.3 million for the same ~~periods~~period in ~~2016, respectively.~~

~~Non-interest Expense~~ ~~- For~~2020. The Corporation’s ETR was 15.8% for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017, non-interest~~2021, compared to 12.4% in the same period of 2020. The increase in income tax expense ~~increased $12.3 million, or 10.3%, and $25.2 million, or 7.0%, respectively,~~primarily resulted from an increase in ~~comparison~~income before taxes, while net favorable permanent differences were relatively the same compared to the same periods of ~~2016.~~2020. The ~~increases were primarily driven by higher salaries~~ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities and ~~employee benefits, amortization of certain~~investments in community development projects that generate tax credit investments, other outside services and net occupancy expenses. Amortization of certain new tax credit investments was classified in non-interest expense rather than income tax expense in 2017. There was no impact on net income as a result of the different classifications of the amortization for these new tax credit investments as the increases in non-interest expense were offset by decreases in income tax expense.credits under various federal programs.

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

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


	Three months ended June 30						Six months ended June 30
	2021			2020			2021			2020
	(dollars in thousands)
Return on average common shareholders' equity (tangible)
Net income available to common shareholders	$	62,402		$	39,558		$	132,874		$	65,606
Plus: Intangible amortization, net of tax	140			104			230			208
Numerator	$	62,542		$	39,662		$	133,104		$	65,814

Average common shareholders' equity	$	2,669,413		$	2,309,133		$	2,653,345		$	2,323,074
Less: Average goodwill and intangible assets	(536,470)			(535,103)			(536,536)			(535,169)
Less: Average preferred stock	(192,878)			—			(192,878)			—
Denominator	$	1,940,065		$	1,774,030		$	1,923,931		$	1,787,905

Return on average common shareholders' equity (tangible), annualized	12.93		%	8.99		%	13.95		%	7.40		%

Efficiency ratio
Non-interest expense	$	140,831		$	143,006		$	319,215		$	285,558
Less: Debt extinguishment cost	(412)			(2,878)			(32,575)			(2,878)
Less: Amortization of tax credit investments	(1,563)			(1,450)			(3,094)			(2,900)
Less: Intangible amortization	(178)			(132)			(293)			(264)
Numerator	$	138,678		$	138,546		$	283,253		$	279,516

Net interest income	$	162,399		$	152,754		$	326,847		$	313,500
Tax equivalent adjustment (1)	3,018			3,100			5,998			6,325
Plus: Total non-interest income	51,890			55,922			147,287			110,565
Less: Investment securities gains, net	(36)			(3,005)			(33,511)			(3,051)
Denominator	$	217,271		$	208,771		$	446,621		$	427,339

Efficiency ratio	63.8		%	66.4		%	63.4		%	65.4		%

(1) Calculated using a 21% federal tax rate and statutory interest expense disallowances. See also the “Net Interest Income” section of Management’s Discussion and ~~for the three and nine~~Analysis.

Three months ended ~~September 30:~~

As of or for the
Three months ended
September 30 As of or for the
Nine months ended
September 30
2017 2016 2017 2016
(dollars in thousands)
Return on average tangible equity
Net income - numerator $ 48,905
$ 41,468
$ 137,752
$ 119,475

Average common shareholders' equity $ 2,215,389
$ 2,120,596
$ 2,179,316
$ 2,089,882
Less: Average goodwill and intangible assets (531,556 ) (531,556 ) (531,556 ) (531,556 )
Average tangible shareholders' equity - denominator $ 1,683,833
$ 1,589,040
$ 1,647,760
$ 1,558,326

Return on average tangible equity, annualized 11.52 % 10.38 % 11.18 % 10.24 %

Efficiency ratio
Non-interest expense $ 132,157
$ 119,848
$ 387,127
$ 361,898
Less: Amortization of tax credit investments ⁽¹⁾
(3,503 ) —
(7,652 ) —
Numerator $ 128,654
$ 119,848
$ 379,475
$ 361,898

Net interest income (fully taxable equivalent) ⁽²⁾
$ 152,721
$ 135,784
$ 443,313
$ 403,700
Plus: Total Non-interest income 51,974
48,149
151,018
137,423
Less: Investment securities gains, net (4,597 ) (2 ) (7,139 ) (1,025 )
Denominator $ 200,098
$ 183,931
$ 587,192
$ 540,098

Efficiency ratio 64.3 % 65.2 % 64.6 % 67.0 %

~~(1)~~

Amortization expense for tax credit investments that are considered to be qualified affordable housing investments under applicable accounting guidance is included in income taxes. Amortization expense for other tax credit investments that are not considered to be affordable housing investments is included in non-interest expense. If amortization expense for all tax credit investments were recorded in income taxes, the effective tax rate for the quarter ended September 30, 2017 would have been 24.8% vs 20.5%.


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

~~Quarter Ended September~~June 30, ~~2017~~2021 compared to the ~~Quarter Ended September~~three months ended June 30, ~~2016~~2020

Net Interest Income

FTE net interest income increased ~~$16.9~~$9.6 million, to ~~$152.7~~$165.4 million, for the three months ended June 30, 2021, from $155.9 million in the ~~third quarter of 2017, from $135.8 million~~same period in ~~the third quarter of 2016.~~2020. The ~~increase was due~~NIM decreased 8 bp, or 2.8%, to ~~a $1.3 billion, or 7.8%~~2.73%, ~~increase in interest-earning assets and a 13 basis points, or 4.1%, increase in net interest margin,~~compared to ~~3.27%,~~2.81% for the ~~third quarter of 2017 compared to 3.14% for the third quarter of 2016.~~same period in 2020. The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a ~~35%~~21% federal tax rate and statutory interest expense disallowances. The discussion following this table is based on these FTE amounts.


	Three months ended June 30
	2021						2020
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
ASSETS	(dollars in thousands)
Interest-earning assets:
Net Loans (1)	$	18,906,556	$	156,525	3.32	%	$	18,331,797	$	160,613	3.52	%
Taxable investment securities (2)	2,630,090		13,898		1.93		2,200,870		15,171		2.76
Tax-exempt investment securities (2)	961,141		7,494		3.11		830,836		6,737		3.23

Total investment securities	3,591,231		21,392		2.38		3,031,706		21,908		2.89
Loans held for sale	31,948		199		2.49		55,608		509		3.66
Other interest-earning assets	1,752,549		1,575		0.16		815,910		766		0.38
Total interest-earning assets	24,282,284		179,691		2.97		22,235,021		183,796		3.32
Noninterest-earning assets:
Cash and due from banks	129,927						153,728
Premises and equipment	229,047						240,417
Other assets	1,643,410						1,761,038
Less: ACL - loans (3)	(267,126)						(251,088)
Total Assets	$	26,017,542					$	24,139,116
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits	$	5,979,855	$	932	0.06	%	$	5,103,419	$	2,219	0.17	%
Savings deposits	6,280,629		1,363		0.09		5,446,368		3,331		0.25
Brokered deposits	297,815		253		0.34		312,121		422		0.54
Time deposits	2,003,606		5,434		1.09		2,624,962		11,145		1.71
Total interest-bearing deposits	14,561,905		7,982		0.22		13,486,870		17,118		0.51
Short-term borrowings	514,025		137		0.11		707,771		517		0.29
Long-term borrowings	626,795		6,155		3.93		1,361,421		10,307		3.03
Total interest-bearing liabilities	15,702,725		14,274		0.36		15,556,062		27,942		0.72
Noninterest-bearing liabilities:
Demand deposits	7,203,696						5,789,788
Other liabilities	441,708						484,133
Total Liabilities	23,348,129						21,829,983
Total Deposits/Cost of deposits	21,765,601				0.15		19,276,658				0.36
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds	22,906,421				0.25		21,345,850				0.53
Shareholders’ equity	2,669,413						2,309,133
Total Liabilities and Shareholders’ Equity	$	26,017,542					$	24,139,116
Net interest income/FTE NIM			165,417		2.73	%			155,854		2.81	%
Tax equivalent adjustment			(3,018)						(3,100)
Net interest income			$	162,399					$	152,754

(1)Average balance includes non-performing loans.

(2)Balances include amortized historical cost for AFS. The related unrealized holding gains (losses) are included in other assets.

(3)ACL - loans relates to the ACL specifically for Net Loans and does not include the ACL for OBS credit exposures, which is included in other liabilities.

Three months ended September 30
2017 2016

Average
Balance
Interest (1)
Yield/
Rate

Average
Balance
Interest (1)
Yield/
Rate
ASSETS (dollars in thousands)
Interest-earning assets:
Loans, net of unearned income ⁽²⁾
$ 15,392,067
$ 159,454
4.12 % $ 14,212,250
$ 140,434
3.93 %
Taxable investment securities ⁽³⁾
2,115,931
11,423
2.16
2,110,084
10,872
2.06
Tax-exempt investment securities⁽³⁾
408,594
4,492
4.40
344,231
3,923
4.56
Equity securities ⁽³⁾
8,709
143
6.52
14,209
196
5.50
Total investment securities 2,533,234
16,058
2.53
2,468,524
14,991
2.43
Loans held for sale 22,456
243
4.33
22,593
210
3.72
Other interest-earning assets 590,676
1,667
1.12
501,666
1,051
0.84
Total interest-earning assets 18,538,433
177,422
3.80 % 17,205,033
156,686
3.63 %
Noninterest-earning assets:
Cash and due from banks 101,643
101,927

Premises and equipment 220,129
227,906

Other assets 1,186,622
1,219,844

Less: Allowance for loan losses (174,101 ) (163,074 )
Total Assets $ 19,872,726
$ 18,591,636

LIABILITIES AND EQUITY
Interest-bearing liabilities:
Demand deposits $ 3,943,118
$ 3,847
0.39 % $ 3,602,448
$ 1,706
0.19 %
Savings and money market deposits 4,603,155
3,962
0.34
4,078,942
2,042
0.20
Brokered deposits 89,767
277
1.23
—
—
—
Time deposits 2,744,532
7,937
1.15
2,814,258
7,562
1.07
Total interest-bearing deposits 11,380,572
16,023
0.56
10,495,648
11,310
0.43
Short-term borrowings 402,341
578
0.57
426,369
254
0.23
FHLB advances and other long-term debt 1,038,062
8,100
3.11
965,228
9,338
3.86
Total interest-bearing liabilities 12,820,975
24,701
0.77 % 11,887,245
20,902
0.70 %
Noninterest-bearing liabilities:

Demand deposits 4,494,897
4,227,639

Other 341,465
356,156

Total Liabilities 17,657,337
16,471,040

Shareholders’ equity 2,215,389
2,120,596

Total Liabilities and Shareholders’ Equity $ 19,872,726
$ 18,591,636

Net interest income/net interest margin (FTE) 152,721
3.27 % 135,784
3.14 %
Tax equivalent adjustment (5,912 ) (5,219 )
Net interest income $ 146,809
$ 130,565


~~(1)~~	~~Includes dividends earned on equity securities.~~


~~(2)~~	~~Includes non-performing loans.~~


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

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volume) and changes in rates for the three months ended ~~September~~June 30, ~~2017~~2021 in comparison to the ~~three months ended September 30, 2016:~~same period in 2020:


	2021 vs. 2020 Increase (Decrease) due to change in
	Volume		Rate		Net
	(in thousands)
FTE Interest income on:
Net Loans (1)	$	5,075	$	(9,163)	$	(4,088)
Taxable investment securities	3,072		(4,345)		(1,273)
Tax-exempt investment securities	1,012		(255)		757

Loans held for sale	(177)		(133)		(310)
Other interest-earning assets	1,124		(315)		809
Total interest income	$	10,106	$	(14,211)	$	(4,105)
Interest expense on:
Demand deposits	$	317	$	(1,604)	$	(1,287)
Savings deposits	450		(2,418)		(1,968)
Brokered deposits	(21)		(148)		(169)
Time deposits	(2,256)		(3,455)		(5,711)
Short-term borrowings	(115)		(265)		(380)
Long-term borrowings	(6,612)		2,460		(4,152)
Total interest expense	$	(8,237)	$	(5,430)	$	(13,667)

2017 vs. 2016
Increase (Decrease) due
to change in
Volume Rate Net
(in thousands)
Interest income on:
Loans, net of unearned income $ 12,223
$ 6,797
$ 19,020
Taxable investment securities 30
521
551
Tax-exempt investment securities 714
(145 ) 569
Equity securities (86 ) 33
(53 )
Loans held for sale (1 ) 34
33
Other interest-earning assets 212
404
616
Total interest income $ 13,092
$ 7,644
$ 20,736
Interest expense on:
Demand deposits $ 177
$ 1,964
$ 2,141
Savings and money market deposits 293
1,627
1,920
Brokered deposits 277
—
277
Time deposits (186 ) 561
375
Short-term borrowings (15 ) 339
324
FHLB advances and other long-term debt 674
(1,912 ) (1,238 )
Total interest expense $ 1,220
$ 2,579
$ 3,799
(1)Average balance includes non-performing loans.

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

The general level of interest rates has remained at or near historic lows since March 2020 as a result of the FOMC reducing the Fed Funds Rate to near zero and taking other monetary policy actions in response to COVID-19. As summarized ~~above,~~in the ~~increase in average interest-earning assets, primarily loans, since~~preceding table, the ~~third quarter of 2016 resulted in a $13.1 million increase in FTE interest income. The 17 basis points increase~~35 bp decrease in the yield on average interest-earning assets ~~resulted in~~drove a ~~$7.6~~$14.2 million ~~increase~~decrease in FTE interest income that was partially offset by the impact of a $2.0 billion, or 9.2%, increase in average interest-earning assets, primarily PPP loans, which contributed $10.1 million to FTE interest income.The yield on the loan portfolio ~~increased 19 basis points,~~decreased 20 bp, or ~~4.8%~~5.7%, from the ~~third~~second quarter of ~~2016, the result of federal funds rate increases that occurred in December 2016, March 2017~~2020, as variable and ~~June 2017, which primarily impacted variable rate loans and~~certain adjustable rate loans ~~that~~ repriced to lower rates, and yields on new loan originations generally were lower than the average yield on the loan portfolio. Adjustable rate loans reprice on dates specified in the ~~first nine months~~loan agreements, which may be later than the date the Fed Funds Rate and related loan index rates increase or decrease. As a result, the impact of ~~2017.~~changes in index rates, primarily the prime rate and LIBOR, on adjustable rate loans may not be fully realized until future periods.

Interest expense ~~increased $3.8~~decreased $13.7 million primarily due to the ~~20 and 14 basis points increases~~36 bp decrease in the rate on average interest-bearing liabilities.The rates on average interest-bearing demand deposits and savings deposits decreased 11 bp and ~~money market deposits, as a result of the federal funds rate increases. These basis points increases~~16 bp, respectively, which contributed ~~$2.0~~$1.6 million and ~~$1.6~~$2.4 million to the ~~increase~~decrease in ~~FTE~~ interest expense, respectively. ~~These increases were~~The cost of average time depositsdecreased 62 bp and the average balance of time deposits decreased $621.4 million, which contributed $3.5 million and $2.3 million to the decrease in interest expense, respectively.In addition, the $734.6 million decrease in average long-term borrowings resulted in a $6.6 million decrease in interest expense, partially offset by ~~a 75 basis points decrease~~the 90 bp increase in the average rate on ~~average~~long-term borrowings, which contributed $2.5 million of additional interest expense. As discussed in the "Overview" section of Management's Discussion, the Corporation completed a balance sheet restructuring in March of 2021, which included the prepayment of $535.0 million of FHLB advances and ~~other long-term~~the cash tender offer for $75.0 million and $60.0 million of subordinated debt ~~which lowered FTE interest expense by $1.2 million.~~and senior notes, respectively.

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


	Three months ended June 30								Increase (Decrease)
	2021				2020				in Balance
	Balance		Yield		Balance		Yield		$		%
	(dollars in thousands)
Real estate – commercial mortgage	$	7,177,622	3.16	%	$	6,875,872	3.47	%	$	301,750	4.4	%
Commercial and industrial (1)	5,445,160		2.58		5,710,145		3.35		(264,985)		(4.6)
Real estate – residential mortgage	3,396,690		3.39		2,769,682		3.88		627,008		22.6
Real estate – home equity	1,139,558		3.71		1,271,190		3.91		(131,632)		(10.4)
Real estate – construction	1,054,469		3.05		941,079		3.53		113,390		12.0
Consumer	451,486		3.89		465,728		4.17		(14,242)		(3.1)
Equipment lease financing	256,248		3.74		284,658		3.44		(28,410)		(10.0)
Other (2)	(14,677)		—		13,443		—		(28,120)		N/M
Total loans	$	18,906,556	3.32	%	$	18,331,797	3.52	%	$	574,759	3.1	%

Three months ended September 30 Increase (Decrease) in
2017 2016 Balance
Balance Yield Balance Yield $ %
(dollars in thousands)
Real estate – commercial mortgage $ 6,208,630
4.07 % $ 5,670,888
3.99 % $ 537,742
9.5 %
Commercial – industrial, financial and agricultural 4,257,075
4.08
4,066,275
3.76
190,800
4.7
Real estate – residential mortgage 1,841,559
3.83
1,503,209
3.76
338,350
22.5
Real estate – home equity 1,569,898
4.48
1,640,913
4.08
(71,015 ) (4.3 )
Real estate – construction 943,029
4.05
837,920
3.76
105,109
12.5
Consumer 318,546
4.94
281,517
5.31
37,029
13.2
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 %
(1) Includes average PPP loans of $1.5 billion and $1.3 billion for the three months ended June 30, 2021 and 2020, respectively.

(2) Consists of overdrafts and net origination fees and costs.

Average loans increased ~~$1.2 billion,~~$574.8 million, or ~~8.3%~~3.1%, compared to the ~~third quarter~~same period of ~~2016.~~2020. The increase was driven largely by growth in the commercial ~~mortgage~~ and residential mortgage and construction portfolios, partially offset by decreases in the commercial and industrial and home equity portfolios. The decrease in the commercial and industrial portfolio was the net result of the forgiveness of $639.0 million of loans originated under the PPP and the origination of $60.0 million of new PPP loans, as well as the commercial loan portfolio. The $537.7 million, or 9.5%, increase in commercial mortgages occurred in both owner-occupied and investment property types and was realized across most geographic markets. The $338.4 million, or 22.5%, increase in residential mortgages was also experienced across all geographic markets, with the most significant increases occurring in Maryland, Virginia and Pennsylvania. This growth was in part related to new product offerings and marketing efforts targeting specific customer segments, including loans to low- to moderate-income and minority borrowers and loans in low- to moderate-income and majority-minority geographies. The $190.8 million, or 4.7%, increase in commercial loans was spread across a broad rangereduced utilization of ~~industries and concentrated in Pennsylvania.~~lines of credit.

Average total interest-bearing liabilities increased $933.7 million, or 7.9%, compared to the third quarter of 2016. Interest expense increased $3.8 million, or 18.2%, to $24.7 million in the third quarter of 2017. Average deposits and average interest rates, by type, are summarized in the following table:


	Three months ended June 30								Increase (Decrease) in Balance
	2021				2020
	Balance		Rate		Balance		Rate		$		%
	(dollars in thousands)
Noninterest-bearing demand	$	7,203,696	—	%	$	5,789,788	—	%	$	1,413,908	24.4	%
Interest-bearing demand	5,979,855		0.06		5,103,419		0.17		876,436		17.2
Savings	6,280,629		0.09		5,446,368		0.25		834,261		15.3
Total demand and savings	19,464,180		0.05		16,339,575		0.14		3,124,605		19.1
Brokered deposits	297,815		0.34		312,121		0.54		(14,306)		(4.6)
Time deposits	2,003,606		1.09		2,624,962		1.71		(621,356)		(23.7)
Total deposits	$	21,765,601	0.15	%	$	19,276,658	0.36	%	$	2,488,943	12.9	%

Three months ended September 30 Increase (Decrease) in Balance
2017 2016
Balance Rate Balance Rate $ %
(dollars in thousands)
Noninterest-bearing demand $ 4,494,897
— % $ 4,227,639
— % $ 267,258
6.3 %
Interest-bearing demand 3,943,118
0.39
3,602,448
0.19
340,670
9.5
Savings and money market accounts 4,603,155
0.34
4,078,942
0.20
524,213
12.9
Total demand and savings 13,041,170
0.24
11,909,029
0.13
1,132,141
9.5
Brokered deposits 89,767
1.23
—
—
89,767
N/M
Time deposits 2,744,532
1.15
2,814,258
1.07
(69,726 ) (2.5 )
Total deposits $ 15,875,469
0.40 % $ 14,723,287
0.31 % $ 1,152,182
7.8 %

~~N/M - Not meaningful~~

The $1.1 billion, or 9.5%, increase in total demand and savings accounts was primarily due to a $623.2 million, or 11.3%, increase in personal account balances, a $276.4 million, or 6.4%, increase in business account balances and a $221.2 million, or 10.7%, increase in municipal account balances.

During the third quarter of 2017, the Corporation began accepting deposits under an agreement with a non-bank third party pursuant to which excess cash in the accounts of customers of the third party is swept on a collective basis, as frequently as every business day, by the third party, into omnibus deposit accounts maintained by one of the Corporation’s subsidiary banks. Under the agreement with the third party, generally, no more than $250 million of excess cash in accounts of customers of the third party may be swept into the omnibus deposit accounts. The average balance in the omnibus accounts during the third quarter of 2017 was $89.8 million and is shown as “brokered deposits” in the above table. This source of funding is considered to be both geographically diverse and relatively stable, with balances in the omnibus deposit accounts bearing interest at a rate based on the federal funds rate.

The average cost of total deposits ~~increased 9 basis points~~decreased 21 bp, to ~~0.40%~~0.15%, for the second quarter of 2021, compared to 0.36% for the same period of 2020, mainly as a result of reductions in deposit rates, due to the continued low interest rate environment, and growth in noninterest-bearing demand deposits. This decrease in the ~~third quarter~~average cost of ~~2017, compared~~deposits contributed $7.6 million to ~~0.31%~~the reduction of interest expense. Average total deposits increased $2.5 billion, or 12.9%, primarily driven by increases in ~~the third quarter of 2016.~~noninterest-bearing demand deposits, interest-bearing demand and saving accounts, partially offset by a $621.4 million, or 23.7%, decrease in time deposits.

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


	Three months ended September 30								Increase (Decrease)
	2017				2016				in Balance						Three months ended June 30								Increase (Decrease)
	Balance		Rate		Balance		Rate		$			%			2021				2020				in Balance
	(dollars in thousands)														Balance		Rate		Balance		Rate		$		%
Short-term borrowings:														Short-term borrowings:	(dollars in thousands)
Customer repurchase agreements and short-term promissory notes	$	256,562	0.19	%	$	257,659	0.09	%	$	(1,097	)	(0.4	)%

Customer funding(1)														Customer funding(1)	$	514,025	0.11	%	$	546,716	0.23	%	$	(32,691)	(6.0)	%
Federal funds purchased	90,453		1.21		148,546		0.47		(58,093		)	(39.1	)	Federal funds purchased	—		—		74,231		0.06		(74,231)		(100.0)
Short-term FHLB advances ⁽¹⁾	55,326		1.24		20,163		0.41		35,163			174.4
FHLB advances and other borrowings (2)														FHLB advances and other borrowings (2)	—		—		86,824		0.90		(86,824)		(100.0)
Total short-term borrowings	402,341		0.57		426,368		0.23		(24,027		)	(5.6	)	Total short-term borrowings	514,025		0.11		707,771		0.29		(193,746)		(27.4)
Long-term debt:
Long-term borrowings:														Long-term borrowings:
FHLB advances	652,160		2.30		603,285		3.17		48,875			8.1		FHLB advances	—		—		601,938		1.88		(601,938)		(100.0)
Other long-term debt	385,902		4.48		361,943		5.01		23,959			6.6		Other long-term debt	626,795		3.93		759,483		3.94		(132,688)		(17.5)
Total long-term debt	1,038,062		3.11		965,228		3.86		72,834			7.5
Total long-term borrowings														Total long-term borrowings	626,795		3.93		1,361,421		3.03		(734,626)		(54.0)
Total borrowings	$	1,440,403	2.40	%	$	1,391,596	2.75	%	$	48,807		3.5	%	Total borrowings	$	1,140,820	2.21	%	$	2,069,192	2.10	%	$	(928,372)	(44.9)	%

(1) ~~Represents~~Includes repurchase agreements and short-term promissory notes.

(2) Consists of FHLB advances and other borrowings with an original ~~maturity term~~terms of less than one year.

Average total short-term borrowings decreased ~~$24.0~~$193.7 million, or ~~5.6%~~27.4%, in the second quarter of 2021, compared to the same period of 2020, primarily as a ~~portion~~result of ~~these borrowings were repaid with funds~~excess funding provided by higher deposit balances.

Average total long-term borrowings decreased $734.6 million, or 54.0%, in the ~~strong growth in deposits during the third~~second quarter of ~~2017.~~

~~The increase~~2021, compared to the same period of ~~$48.9~~2020, primarily as a result of the balance sheet restructuring completed in March of 2021, which included the prepayment of $536.0 million ~~or 8.1%, in average~~of long-term FHLB advances ~~provided additional funding to support loan growth. Average~~and the cash tender offer for $75.0 million and $60.0 million of the Corporation's outstanding subordinated and senior notes, respectively. This reduction in long-term ~~debt increased $72.8~~borrowings contributed $6.6 million ~~or 7.5%, due mainly~~ to the ~~issuance~~reduction of ~~$125 million~~interest expense during the second quarter of ~~senior notes in March 2017, partially offset by~~2021 compared to the ~~repayment of $100.0 million of 10-year subordinated notes, which matured on May 1, 2017. The 75 basis point, or 19.4%, decrease in the average rate on long-term debt was primarily~~same period a ~~result of $200 million of FHLB advances that were refinanced in December of 2016, which reduced the weighted average rate on these advances from 4.03% to 2.40%.~~year ago.

Provision for Credit Losses

The provision for credit losses was ~~$5.1~~a negative $3.5 million for the ~~third~~second quarter of ~~2017, an increase~~2021, a decrease of ~~$934,000~~$23.1 million from the ~~third~~same period of 2020. Several factors as of the end of the second quarter of ~~2016, driven mainly by loan growth and~~2021 in comparison to the ~~impact~~end of ~~normal changes~~the fourth quarter of 2020, including improved economic forecasts, reduced the level of the ACL determined to be necessary at the end of the second quarter of 2021, resulting in the ~~risk characteristics of the loan portfolio.~~

~~The~~negative provision for credit losses ~~is recognized as an~~for the second quarter of 2021. The $19.6 million provision expense ~~in the consolidated statements of income and is the amount necessary to adjust the allowance~~ for credit losses in the second quarter of 2020 was the result of several factors, most notably, the overall uncertainty in economic forecasts due to its appropriate balance, as determined through the Corporation's allowance methodology. The Corporation determines the appropriate level of the allowance for credit losses based on many quantitative and qualitative factors, including, but not limited to: the size and composition of the loan portfolio, changes in risk ratings, changes in collateral values, delinquency levels, historical losses and economic conditions. See the "Financial Condition" section of Management's Discussion under the heading "Provision and Allowance for Credit Losses" for details related to the Corporation's provision and allowance for credit losses.COVID-19.

Non-Interest Income

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


	Three months ended June 30				Increase (Decrease)
	2021		2020		$		%
	(dollars in thousands)
Commercial banking:
Merchant and card	$	6,786	$	5,326	$	1,460	27.4	%
Cash management	5,341		4,503		838		18.6
Capital markets	1,536		5,004		(3,468)		(69.3)
Other commercial banking	3,466		1,914		1,552		81.1
Total commercial banking	17,129		16,748		381		2.3
Consumer banking:
Card	5,733		4,966		767		15.4
Overdraft	2,750		2,107		643		30.5
Other consumer banking	2,377		2,065		312		15.1
Total consumer banking	10,860		9,138		1,722		18.8
Wealth management fees	17,634		13,407		4,227		31.5
Mortgage banking:
Gains on sales of mortgage loans	5,438		16,547		(11,109)		(67.1)
Mortgage servicing income	(2,601)		(6,584)		3,983		(60.5)
Total mortgage banking	2,838		9,964		(7,126)		(71.5)
Other	3,393		3,660		(267)		(7.3)
Non-interest income before investment securities gains	51,854		52,917		(1,063)		(2.0)
Investment securities gains, net	36		3,005		(2,969)		(98.8)
Total Non-Interest Income	$	51,890	$	55,922	$	(4,032)	(7.2)	%

Three months ended September 30 Increase (Decrease)
2017 2016 $ %
(dollars in thousands)
Service charges on deposit accounts:
Overdraft fees $ 5,844
$ 5,770
$ 74
1.3 %
Cash management fees 3,624
3,605
19
0.5 %
Other 3,554
3,703
(149 ) (4.0 )%
         Total service charges on deposit accounts 13,022
13,078
(56 ) (0.4 )%
Other service charges and fees:
Merchant fees 4,398
4,220
178
4.2
Debit card income 2,830
2,718
112
4.1
Commercial loan interest rate swap fees 1,954
4,359
(2,405 ) (55.2 )
Letter of credit fees 1,056
1,078
(22 ) (2.0 )
Other 2,013
2,032
(19 ) (0.9 )
        Total other service charges and fees 12,251
14,407
(2,156 ) (15.0 )
Investment management and trust services 12,157
11,425
732
6.4
Mortgage banking income:
Gains on sales of mortgage loans 3,560
4,857
(1,297 ) (26.7 )
Mortgage servicing income 1,245
(328 ) 1,573
N/M
        Total mortgage banking income 4,805
4,529
276
6.1
Credit card income 2,829
2,668
161
6.0
Other income 2,313
2,040
273
13.4
        Total, excluding investment securities gains, net 47,377
48,147
(770 ) (1.6 )
Investment securities gains, net 4,597
2
4,595
N/M
              Total $ 51,974
$ 48,149
$ 3,825
7.9 %

~~N/M - Not meaningful~~

~~Excluding~~Non-interest income, before net investment securities gains, ~~non-interest income~~ decreased ~~$770,000,~~$1.1 million, or ~~1.6%~~2.0%, in the ~~third~~second quarter of ~~2017~~2021 as compared to the same period in ~~2016. Other service charges and fees decreased $2.2 million,~~2020.

Total commercial banking increased $381,000, or ~~15.0%~~2.3%, ~~primarily due to a $2.4 million decrease in commercial loan interest rate swap fees, mainly as a result of lower commercial loan originations during the third quarter of 2017.~~

~~Investment management and trust services income increased $732,000, or 6.4%, in the third quarter of 2017 as~~ compared to the same period in ~~2016, with growth~~2020, driven by increases in ~~both trust commissions~~other commercial banking income, primarily SBA income and ~~brokerage~~merchant and card income, ~~due to overall market performance and an increase~~partially offset by decreases in ~~assets under management.~~capital markets revenue, which consists primarily of commercial loan interest rate swaps.

~~Gains on sales of mortgage loans decreased $1.3~~

Total consumer banking income increased $1.7 million, or ~~26.7%~~18.8%, ~~in the third quarter of 2017~~ compared to the same period in ~~2016,~~2020, primarily driven by higher overdraft fees and an increase in card income.

Wealth management revenues increased $4.2 million, or 31.5%, primarily resulting from growth in brokerage income due to an increase in client asset levels andimproved overall market performance.

Mortgage banking income decreased $7.1 million, or 71.5%, as ~~both volumes~~a result of decreased gains on sales of mortgage loans, driven by lower mortgage sales and ~~pricing~~gain-on-sale spreads ~~decreased. Mortgage servicing income increased $1.6 million as the third quarter of 2016 included~~on loans sold. This was slightly offset by an ~~MSR impairment charge of $1.3 million. Excluding this charge,~~increase in mortgage servicing income, ~~increased $293,000, or 30.8%. For more information, see Note 6, "Mortgage Servicing Rights,"~~which was negatively impacted by a $2.2 million addition to the valuation allowance for MSRs in the ~~Notes to Consolidated Financial Statements for additional details.~~

~~Investment securities gains increased $4.6 million from the third~~second quarter of ~~2016. The increase resulted from sales~~2021 compared to a $6.6 million addition during the same period last year.

Net investment securities gain were $3.0 million lower compared to the second quarter of ~~financial institution common stocks. See Note 4, "Investment Securities," in the Notes to Consolidated Financial Statements for additional details.~~2020.

Non-Interest Expense

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


	Three months ended June 30				Increase (Decrease)
	2021		2020		$		%
	(dollars in thousands)
Salaries and employee benefits	$	78,367	$	81,012	$	(2,645)	(3.3)	%
Data processing and software	13,932		12,193		1,739		14.3
Net occupancy	12,494		13,144		(650)		(4.9)
Other outside services	8,178		7,600		578		7.6
State taxes	4,384		3,088		1,296		42.0
Equipment	3,424		3,193		231		7.2
Professional fees	2,651		3,331		(680)		(20.4)
FDIC insurance	2,282		2,133		149		7.0
Amortization of TCI	1,563		1,450		113		7.8
Marketing	1,348		1,303		45		3.5
Intangible amortization	178		132		46		34.8
Debt extinguishment	412		2,878		(2,466)		(85.7)
Other	11,618		11,549		69		0.6
Total non-interest expense	$	140,831	$	143,006	$	(2,175)	(1.5)	%

Three months ended September 30 Increase
2017 2016 $ %
(dollars in thousands)
Salaries and employee benefits $ 72,894
$ 70,696
$ 2,198
3.1 %
Net occupancy expense 12,180
11,782
398
3.4
Data processing and software 10,301
8,727
1,574
18.0
Other outside services 6,582
5,783
799
13.8
Amortization of tax credit investments 3,503
—
3,503
N/M
Professional fees 3,388
2,535
853
33.6
Equipment expense 3,298
3,137
161
5.1
FDIC insurance expense 3,007
1,791
1,216
67.9
Marketing 2,089
1,774
315
17.8
Other 14,915
13,623
1,292
9.5
Total $ 132,157
$ 119,848
$ 12,309
10.3 %

~~N/M - Not meaningful~~

~~The increase in salaries~~Salaries and employee benefits ~~expense was driven entirely by salaries, reflecting annual merit increases and an increase in staffing levels. Average~~decreased $2.6 million, or 3.3%, primarily the result of lower salary expenses due to a lower number of full-time equivalent ~~employees increased 2.2%, to 3,582 in 2017, as compared to 3,504 in 2016.~~employees.

Data processing and software ~~expense~~ increased ~~$1.6~~$1.7 million, or ~~18.0%~~14.3%, reflecting ~~higher transaction volumes and new processing platforms.~~

~~Other outside services increased $799,000, or 13.8%, largely due to consulting services~~costs related to ~~pre-bank consolidation efforts and~~ technology initiatives.

~~In 2017, amortization of certain new tax credit investments was classified in non-interest expense, rather than income tax expense, as further discussed under income~~

State taxes ~~below.~~

~~The $853,000, or 33.6%, increase in professional fees was driven by higher legal expenses. FDIC insurance expense~~ increased ~~$1.2~~$1.3 million, or ~~67.9%~~42.0%, reflecting the Corporation's largest banking subsidiary exceeding $10 billion in assets and becoming subject to the 'large bank' premium assessments and balance sheet growth. Marketing expense increased $315,000, or 17.8%, compared to the third quarterprimarily as a result of ~~2016, due to~~ an increase in the ~~number of marketing promotions.~~accrual for PA shares tax expense resulting from increased capital levels.

~~Other expenses increased $1.3 million,~~Professional fees decreased $680,000, or ~~9.5%~~20.4%, primarily due to ~~higher state taxes resulting from legislated increases~~a decrease in legal fees. The Corporation incurs fees related to various legal matters in the ~~Pennsylvania bank shares tax rate,~~normal course of business. These fees can fluctuate based on timing and ~~certain sales tax liabilities.~~the extent of these matters.

Debt extinguishment costs decreased $2.5 million in the second quarter of 2021. In the second quarter of 2020, the Corporation redeemed long-term FHLB advances, which resulted in prepayment penalties of $2.9 million.

Income Taxes

Income tax expense for the ~~third quarter of 2017~~three months ended June 30, 2021 was ~~$12.6~~$12.0 million, a ~~$611,000, or 4.6%, decrease~~$5.5 million increase from ~~$13.3~~$6.5 million for the ~~third quarter of 2016.~~

same period in 2020. The Corporation’s ~~effective tax rate~~ETR was ~~20.5%~~15.6% for the three months ended June 30, 2021, compared to 14.2% in the ~~third quarter~~same period of ~~2017, as compared to 24.2%~~2020. The increase in the third quarter of 2016. The effective tax rate is generally lower than the federal statutory rate of 35% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities, credits earned from community development investments in partnerships that generate tax credits under various federal programs and excess tax benefits realized on stock-based compensation. In 2017, amortization of certain new tax credit investments was included in non-interest expense, rather than as a component of income tax expense. If the amortization had been included as a component of income tax expense and the ~~effective tax rate for~~ETR primarily resulted from an increase in income before taxes, while net favorable permanent differences were relatively the ~~third quarter of 2017 would have been 24.8%.~~

~~Nine Months Ended September 30, 2017~~same compared to the ~~Nine Months Ended September~~same period of 2020.

Six months ended June 30, ~~2016~~2021 compared to the six months ended June 30, 2020

Net Interest Income

FTE net interestincome increased ~~$39.6~~$13.0 million to ~~$443.3~~$332.8 million infor the ~~first nine~~six months ~~of 2017,~~ended June 30, 2021, up from ~~$403.7~~$319.8 million in the same period ~~of 2016.~~in 2020. The ~~increase was due~~NIM decreased 25 bp, or 8.3%, to ~~a $1.2 billion, or 7.1%~~2.76%, ~~increase in interest-earning assets and an 8 basis points, or 2.5%, increase in net interest margin, to 3.27%, for the first nine months of 2017~~ compared to ~~3.19%~~3.01% for the same period in ~~2016.~~ 2020.The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a ~~35%~~21% federal tax rate and statutory interest expense disallowances. The discussion following this table is based on these FTE amounts.


	Six months ended June 30
	2021						2020
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
ASSETS	(dollars in thousands)
Interest-earning assets:
Net Loans(1)	$	18,943,367	$	321,987	3.42	%	$	17,595,932	$	338,110	3.86	%
Taxable investment securities (2)	2,534,821		27,588		2.00		2,242,663		31,465		2.81
Tax-exempt investment securities (2)	936,531		14,651		3.12		775,530		12,698		3.26

Total investment securities	3,471,352		42,239		2.43		3,018,193		44,163		2.92
Loans held for sale	42,647		671		3.14		41,393		829		4.00
Other interest-earning assets	1,825,966		2,711		0.19		709,091		3,297		4.31
Total interest-earning assets	24,283,332		367,607		3.05		21,364,609		386,399		3.63
Noninterest-earning assets:
Cash and due from banks	125,081						145,988
Premises and equipment	229,843						240,019
Other assets	1,685,708						1,675,849
Less: ACL - loans(3)	(273,965)						(230,858)
Total Assets	$	26,049,999					$	23,195,607
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits	$	5,906,423	$	2,092	0.07	%	$	4,876,662	$	8,020	0.33	%
Savings and money market deposits	6,209,253		2,890		0.09		5,287,015		10,441		0.40
Brokered deposits	311,016		647		0.42		293,756		1,495		1.02
Time deposits	2,076,681		11,955		1.16		2,693,202		23,602		1.76
Total interest-bearing deposits	14,503,373		17,584		0.24		13,150,635		43,558		0.67
Short-term borrowings	542,243		325		0.12		1,005,409		4,590		0.91
FHLB advances and other long-term debt	947,203		16,853		3.56		1,212,318		18,426		3.04
Total interest-bearing liabilities	15,992,819		34,762		0.44		15,368,362		66,574		0.87
Noninterest-bearing liabilities:
Demand deposits	6,939,731						5,048,408
Other liabilities	464,104						455,763
Total Liabilities	23,396,654						20,872,533
Total Deposits/Cost of deposits	21,443,104				0.17		18,199,043				0.48
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds	22,932,550				0.30		20,416,770				0.65
Shareholders’ equity	2,653,345						2,323,074
Total Liabilities and Shareholders’ Equity	$	26,049,999					$	23,195,607
Net interest income/FTE NIM			332,845		2.76	%			319,825		3.01	%
Tax equivalent adjustment			(5,998)						(6,325)
Net interest income			$	326,847					$	313,500

Nine months ended September 30
2017 2016
Average
Balance Interest (1) Yield/
Rate Average
Balance Interest (1) Yield/
Rate
ASSETS (dollars in thousands)
Interest-earning assets:
Loans, net of unearned income ⁽²⁾
$ 15,127,569
$ 458,753
4.05 % $ 14,011,301
$ 416,646
3.97 %
Taxable investment securities ⁽³⁾
2,117,127
34,811
2.19
2,139,378
34,034
2.12
Tax-exempt investment securities ⁽³⁾
405,728
13,268
4.36
306,298
10,631
4.63
Equity securities ⁽³⁾
10,391
467
6.01
14,272
599
5.60
Total investment securities 2,533,246
48,546
2.56
2,459,948
45,264
2.45
Loans held for sale 19,378
631
4.34
18,114
529
3.90
Other interest-earning assets 410,250
3,311
1.08
406,163
2,813
0.92
Total interest-earning assets 18,090,443
511,241
3.78 % 16,895,526
465,252
3.68 %
Noninterest-earning assets:
Cash and due from banks 107,029
100,417

Premises and equipment 218,700
227,237

Other assets 1,170,466
1,182,260

Less: Allowance for loan losses (172,145 ) (164,999 )
Total Assets $ 19,414,493
$ 18,240,441

LIABILITIES AND EQUITY
Interest-bearing liabilities:
Demand deposits $ 3,762,439
$ 8,865
0.32 % $ 3,498,659
$ 4,727
0.18 %
Savings deposits 4,372,453
8,883
0.27
4,000,871
5,732
0.19
Brokered deposits 30,251
277
1.23
—
—
—
Time deposits 2,726,693
22,684
1.11
2,842,011
22,465
1.06
Total interest-bearing deposits 10,891,836
40,709
0.50
10,341,541
32,924
0.43
Short-term borrowings 581,511
2,407
0.55
425,151
739
0.23
FHLB advances and other long-term debt 1,033,159
24,812
3.21
962,997
27,889
3.86
Total interest-bearing liabilities 12,506,506
67,928
0.73 % 11,729,689
61,552
0.70 %
Noninterest-bearing liabilities:
Demand deposits 4,395,421
4,091,555

Other 333,250
329,315

Total Liabilities 17,235,177
16,150,559

Shareholders’ equity 2,179,316
2,089,882

Total Liabilities and Shareholders’ Equity $ 19,414,493
$ 18,240,441

Net interest income/net interest margin (FTE) 443,313
3.27 % 403,700
3.19 %
Tax equivalent adjustment (17,362 ) (15,165 )
Net interest income $ 425,951
$ 388,535

~~(1)~~

~~Includes dividends earned on equity securities.~~


~~(2)~~			~~Includes non-performing loans.~~

~~(3)~~

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

(1) Average balance includes non-performing loans.

(2) Balances include amortized historical cost for AFS. The related unrealized holding gains (losses) are included in other assets.

(3) ACL - loans relates to the ACL specifically for "Net Loans" and does not include the ACL for OBS credit exposures, which is included in other liabilities.

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average

balances (volume) and changes in rates for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 in comparison to the same period ~~of 2016:~~in 2020:


											2021 vs. 2020 Increase (Decrease) due to change in
	2017 vs. 2016 Increase (Decrease) due to change in										Volume		Rate		Net
	Volume			Rate			Net				(in thousands)
	(in thousands)
Interest income on:
Loans, net of unearned income	$	33,471		$	8,636		$	42,107
FTE interest income on:										FTE interest income on:
Net Loans (1)										Net Loans (1)	$	24,330	$	(40,453)	$	(16,123)
Taxable investment securities	(355		)	1,132			777			Taxable investment securities	4,378		(8,255)		(3,877)
Tax-exempt investment securities	3,277			(640		)	2,637			Tax-exempt investment securities	2,750		(797)		1,953
Equity securities	(172		)	40			(132		)

Loans held for sale	39			63			102			Loans held for sale	24		(183)		(158)
Other interest-earning assets	28			470			498			Other interest-earning assets	3,090		(3,676)		(586)
Total interest income	$	36,288		$	9,701		$	45,989		Total interest income	$	34,572	$	(53,364)	$	(18,792)
Interest expense on:										Interest expense on:
Demand deposits	$	381		$	3,757		$	4,138		Demand deposits	$	1,405	$	(7,333)	$	(5,928)
Savings and money market deposits	573			2,578			3,151
Savings deposits										Savings deposits	1,553		(9,104)		(7,550)
Brokered deposits	277			—			277			Brokered deposits	112		(960)		(848)
Time deposits	(939		)	1,158			219			Time deposits	(4,679)		(6,968)		(11,647)
Short-term borrowings	349			1,319			1,668			Short-term borrowings	(1,479)		(2,786)		(4,265)
FHLB advances and other long-term debt	1,916			(4,993		)	(3,077		)
Long-term borrowings										Long-term borrowings	(4,387)		2,814		(1,573)
Total interest expense	$	2,557		$	3,819		$	6,376		Total interest expense	$	(7,475)	$	(24,337)	$	(31,812)

(1)Average balance includes non-performing loans.

The general level of interest rates has remained at or near historic lows since March 2020 as a result of the FOMC reducing the Fed Funds Rate to near zero and taking other monetary policy actions in response to COVID-19. As summarized ~~above,~~in the ~~increase in average interest-earning assets, primarily loans, in comparison to~~preceding table, the ~~first nine months of 2016, resulted in a $36.3 million increase in FTE interest income. The 10 basis points increase~~58 bp decrease in the yield on average interest-earning assets ~~resulted in~~drove a ~~$9.7~~$53.4 million ~~increase~~decrease in FTE interest income that was partially offset by the impact of a $2.9 billion, or 13.7%, increase in average interest-earning assets which contributed $34.6 million to FTE interest income.The yield on the loan portfolio ~~increased 8 basis points,~~decreased 44 bp, or ~~2.0%~~11.3%, from the same period of ~~2016, the result of federal funds rate increases that occurred in December 2016, March 2017~~2020, as variable and ~~June 2017, which impacted variable rate loans and~~certain adjustable rate loans ~~that~~ repriced to lower rates and yields on new loan originations generally were lower than the average yield on the loan portfolio. Adjustable rate loans reprice on dates specified in the ~~first nine months~~loan agreements, which may be later than the date the Fed Funds Rate and related loan index rates increase or decrease. As a result, the impact of ~~2017.~~changes in index rates, primarily the prime rate and LIBOR, on adjustable rate loans may not be fully realized until future periods.

Interest expense ~~increased $6.4~~decreased $31.8 million primarily due to the ~~14 and 8 basis points increases~~43 bp decrease in the rate on average interest-bearing liabilities.The rates on average interest-bearing demand deposits and savings deposits decreased 26 bp and ~~money market deposits, as a result of the federal funds rate increases. These basis points increases~~31 bp, respectively, which contributed ~~$3.8~~$7.3 million and ~~$2.6~~$9.1 million to the ~~increase~~decrease in ~~FTE~~ interest expense, respectively. ~~In addition, a 32 basis points increase in short-term borrowings~~The cost of average time depositsdecreased 60 bp and the average balance of time deposits decreased $616.5 million, which contributed ~~$1.3~~$7.0 million and $4.7 million to the ~~increase in FTE interest expense. These increases were partially offset by a 65 basis points~~ decrease in interest expense, respectively.In addition, the ~~rate on~~$463.2 million decrease in average short-term borrowings and the $265.1 million decrease in average long-term borrowings resulted in $4.3 million and $1.6 million decreases in interest expense, respectively. As discussed in the "Overview" section of Management's Discussion, the Corporation completed a balance sheet restructuring in March of 2021, which included the prepayment of $535.0 million of FHLB advances and ~~other long-term~~the cash tender offer for $75.0 million and $60.0 million of subordinated debt ~~which lowered FTE interest expense by $5.0 million.~~and senior notes, respectively.

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


	Six months ended June 30								Increase (Decrease) in Balance
	2021				2020
	Balance		Yield		Balance		Yield		$		%
	(dollars in thousands)
Real estate – commercial mortgage	$	7,153,444	3.16	%	$	6,811,318	3.83	%	$	342,126	5.0	%
Commercial and industrial (1)	5,582,855		3.73		5,078,448		3.73		504,407		9.9
Real estate – residential mortgage	3,290,726		3.46		2,719,851		3.93		570,875		21.0
Real estate – home equity	1,157,289		3.73		1,285,661		4.32		(128,372)		(10.0)
Real estate – construction	1,054,593		3.07		935,304		3.83		119,289		12.8
Consumer	455,241		4.01		466,071		4.25		(10,830)		(2.3)
Equipment lease financing	261,300		3.93		284,612		3.88		(23,312)		(8.2)
Other (2)	(12,081)		—		14,667		—		(26,748)		N/M
Total loans	$	18,943,367	3.42	%	$	17,595,932	3.86	%	$	1,347,435	7.7	%

Nine months ended September 30 Increase (Decrease)
2017 2016 in Balance
Balance Yield Balance Yield $ %
(dollars in thousands)
Real estate – commercial mortgage $ 6,137,824
4.02 % $ 5,572,356
4.01 % $ 565,468
10.1 %
Commercial – industrial, financial and agricultural 4,227,918
3.99
4,080,638
3.79
147,280
3.6
Real estate – residential mortgage 1,729,799
3.79
1,428,430
3.77
301,369
21.1
Real estate – home equity 1,590,117
4.33
1,656,969
4.09
(66,852 ) (4.0 )
Real estate – construction 894,146
4.00
817,014
3.80
77,132
9.4
Consumer 301,414
5.07
272,402
5.40
29,012
10.7
Leasing, other and overdrafts 246,351
5.00
183,492
6.01
62,859
34.3
Total $ 15,127,569
4.05 % $ 14,011,301
3.97 % $ 1,116,268
8.0 %
(1) Includes average PPP loans of $1.6 billion and $629.5 million for the six months ended June 30, 2021 and 2020, respectively.

(2) Consists of overdrafts and net origination fees and costs.

Average loans increased ~~$1.1~~$1.3 billion, or ~~8.0%~~7.7%, compared to the ~~first nine months~~same period of ~~2016.~~2020. The increase was driven largely by growth in the commercial ~~mortgage~~ and residential mortgage portfolios, the commercial and industrial portfolio, as a result of loans originated under the PPP, and construction portfolio. Excluding loans originated under the PPP, commercial and industrial loan balances declined. The increases were partially offset by decreases in the home equity, equipment lease financing and consumer portfolios as well as the commercial loan, construction and leasing portfolios. The $565.5 million, or 10.1%, increase in commercial mortgages occurred in both owner-occupied and investment property types and was realized in all geographic markets, but predominantly in Pennsylvania, Maryland and Delaware.The $301.4 million, or 21.1%, increase in residential mortgages was also experienced across all geographic markets, with the most significant increases occurring in Maryland and Virginia. This growth was in part related to new product offerings and marketing efforts targeting specific customer segments, including loans to low- to moderate-income and minority borrowers and loans in low- to moderate-income and majority-minority geographies. The $147.3 million, or 3.6%, increase in commercial loans was spread across a broad range of industries and concentrated in Pennsylvania.other loans.

Average total interest-bearing liabilities for the first nine months of 2017 increased $776.8 million, or 6.6%, compared to the same period of 2016. Interest expense increased $6.4 million, or 10.4%, to $67.9 million in the first nine months of 2017. Average deposits and average interest rates, by type, are summarized in the following table:


	Nine months ended September 30								Increase (Decrease) in Balance						Six months ended June 30								Increase (Decrease) in Balance
	2017				2016										2021				2020
	Balance		Rate		Balance		Rate		$			%			Balance		Rate		Balance		Rate		$		%
	(dollars in thousands)														(dollars in thousands)
Noninterest-bearing demand	$	4,395,421	—	%	$	4,091,555	—	%	$	303,866		7.4	%	Noninterest-bearing demand	$	6,939,731	—	%	$	5,048,408	—	%	$	1,891,323	37.5	%
Interest-bearing demand	3,762,439		0.32		3,498,659		0.18		263,780			7.5		Interest-bearing demand	5,906,423		0.07		4,876,662		0.33		1,029,761		21.1
Savings	4,372,453		0.27		4,000,871		0.19		371,582			9.3		Savings	6,209,253		0.09		5,287,015		0.40		922,238		17.4
Total demand and savings	12,530,313		0.19		11,591,085		0.12		939,228			8.1		Total demand and savings	19,055,407		0.05		15,212,085		0.24		3,843,322		25.3
Brokered deposits	30,251		1.23		—		—		30,251			N/M		Brokered deposits	311,016		0.42		293,756		1.02		17,260		5.9
Time deposits	2,726,693		1.11		2,842,011		1.06		(115,318		)	(4.1	)	Time deposits	2,076,681		1.16		2,693,202		1.76		(616,521)		(22.9)
Total deposits	$	15,287,257	0.36	%	$	14,433,096	0.30	%	$	854,161		5.9	%	Total deposits	$	21,443,104	0.17	%	$	18,199,043	0.48	%	$	3,244,061	17.8	%

~~N/M - Not meaningful~~

The $939.2 million, or 8.1%, increase in total demand and savings accounts was primarily due to a $527.5 million, or 9.8%, increase in personal account balances, a $286.5 million, or 6.8%, increase in business account balances and an $113.7 million, or 5.8%, increase in municipal account balances.

During the third quarter of 2017, the Corporation began accepting deposits under an agreement with a non-bank third party pursuant to which excess cash in the accounts of customers of the third party is swept on a collective basis, as frequently as every business day, by the third party, into omnibus deposit accounts maintained by one of the Corporation’s subsidiary banks. Under the agreement with the third party, generally, no more than $250 million of excess cash in accounts of customers of the third party may be swept into the omnibus deposit accounts. The average balance in the omnibus accounts during the nine months ended September 30, 2017 was $30.3 million and is shown as “brokered deposits” in the above table. This source of funding is considered to be both geographically diverse and relatively stable, with balances in the omnibus deposit accounts bearing interest at a rate based on the federal funds rate.

The average cost of total deposits ~~increased 6 basis points~~decreased 31 bp to ~~0.36% in~~0.17% for the first ~~nine months~~half of ~~2017,~~2021 compared to ~~0.30% in~~0.48% for the same period of 2020, mainly as a result of reductions in ~~2016.~~deposit rates due to the continued low interest rate environment, and growth in noninterest-bearing demand deposits. This decrease in the average cost of deposits contributed $24.4 million to the reduction of interest expense. Average total deposits increased $3.2 billion, or 17.8%, primarily driven by increases in noninterest-bearing demand deposits, interest-bearing demand and saving accounts, partially offset by a $616.5 million, or 22.9%, decrease in time deposits.

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

Nine months ended September 30 Increase
2017 2016 in Balance
Balance Rate Balance Rate $ %
(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements $ 191,740
0.11 % $ 179,892
0.11 % $ 11,848
6.6 %
Customer short-term promissory notes 79,230
0.13
73,859
0.04
5,371
7.3
Total short-term customer funding 270,970
0.12
253,751
0.09
17,219
6.8
Federal funds purchased 212,885
0.92
156,812
0.44
56,073
35.8
Short-term FHLB advances ⁽¹⁾
97,656
0.94
14,588
0.43
83,068
N/M
Total short-term borrowings 581,511
0.55
425,151
0.23
156,360
36.8
Long-term debt:
FHLB advances 636,898
2.31
601,120
3.18
35,778
6.0
Other long-term debt 396,261
4.65
361,877
5.00
34,384
9.5
Total long-term debt 1,033,159
3.21
962,997
3.86
70,162
7.3
Total borrowings $ 1,614,670
2.25 % $ 1,388,148
2.75 % $ 226,522
16.3 %

~~N/M - Not meaningful~~


	Six months ended June 30								Increase (Decrease) in Balance
	2021				2020
	Balance		Rate		Balance		Rate		$		%
Short-term borrowings:	(dollars in thousands)
Customer funding(1)	$	542,243	0.12	%	$	487,478	0.38	%	$	54,765	11.2	%
Federal funds purchased	—		—		130,549		0.82		(130,549)		(100.0)
FHLB advances and other borrowings(2)	—		—		387,382		1.61		(387,382)		(100.0)
Total short-term borrowings	542,243		0.12		1,005,409		0.91		(463,166)		(46.1)
Long-term borrowings:
FHLB advances	255,453		1.80		579,445		1.91		(323,992)		(55.9)
Other long-term debt	691,750		4.21		632,873		4.09		58,877		9.3
Total long-term borrowings	947,203		3.56		1,212,318		3.04		(265,115)		(21.9)
Total borrowings	$	1,489,446	2.31	%	$	2,217,727	2.08	%	$	(728,281)	(32.8)	%

(1) ~~Represents~~Includes repurchase agreements and short-term promissory notes.

(2) Consists of FHLB ~~advances~~borrowings with an original ~~maturity~~ term of less than one year.

Average total short-term borrowings ~~increased $156.4~~decreased $463.2 million, or ~~36.8%~~46.1%, during the first six months of 2021, compared to the same period of 2020 primarily as a result of ~~loan~~excess funding provided by growth ~~out-pacing the increase~~ in ~~deposits. Interest expense on average short-term~~deposit balances.

Average total long-term borrowings ~~increased by $1.7~~decreased $265.1 million, ~~mainly driven by the 32 basis points increase~~or 21.9%, in the ~~rate, contributing $1.3 million~~first half of 2021, compared to ~~interest expense.~~

~~The increase~~the same period of ~~$35.8 million, or 6.0%, in average long-term FHLB advances provided additional funding to support loan growth. Average long-term debt increased $70.2 million, or 7.3%,~~2020 primarily as a result of the ~~$125~~balance sheet restructuring competed in March of 2021, which included the prepayment of $536.0 million of long-term FHLB advances and the cash tender offer for $75.0 million and $60.0 million of the Corporation's outstanding subordinated and senior notes, ~~issued~~respectively. This reduction in ~~March 2017,~~long-term borrowings contributed $4.4 million to the reduction of interest expense, partially offset by the ~~repayment~~impact of ~~$100.0 million of 10-year subordinated notes, which matured on May 1, 2017. The 65 basis point, or 16.8%, decrease~~a 52 bp increase in the ~~average~~ rate on average long-term ~~debt was primarily a result~~borrowings during the first half of ~~$200 million of FHLB advances that were refinanced in December of 2016, which reduced the weighted average rate on these advances from 4.03% to 2.40%.~~2021.

Provision for Credit Losses

The provision for credit losses was ~~$16.6~~a negative $9.0 million for the first ~~nine~~six months of ~~2017, an increase~~2021, a decrease of ~~$8.4~~$72.6 million from the same period of ~~2016, driven mainly by loan growth and the impact of normal changes in the risk characteristics~~2020. Several factors as of the ~~loan portfolio.~~

six months ended June 30, 2021 in comparison to the end of the fourth quarter of 2020, including improved economic forecasts, reduced the level of the ACL determined to be necessary at the end of the six months ended June 30, 2021. The $63.6 million provision for credit losses ~~is recognized as an expense~~during the six months ended June 30, 2020 was the result of several factors, most notably, the overall uncertainty in ~~the consolidated statements of income and is the amount necessary~~economic forecasts due to adjust the allowance for credit losses to its appropriate balance, as determined through the Corporation's allowance methodology. The Corporation determines the appropriate level of the allowance for credit losses based on many quantitative and qualitative factors, including, but not limited to: the size and composition of the loan portfolio, changes in risk ratings, changes in collateral values, delinquency levels, historical losses and economic conditions. See the "Financial Condition" section of Management's Discussion under the heading "Provision and Allowance for Credit Losses" for details related to the Corporation's allowance and provision for credit losses.COVID-19.

Non-Interest Income

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


	Six months ended June 30				Increase (Decrease)
	2021		2020		$		%
	(dollars in thousands)
Commercial banking:
Merchant and card	$	12,554	$	10,950	$	1,604	14.6	%
Cash management	10,262		9,245		1,017		11.0
Capital markets	4,336		10,079		(5,743)		(57.0)
Other commercial banking	6,319		4,892		1,427		29.2
Total commercial banking	33,471		35,167		(1,696)		(4.8)
Consumer banking:
Card	11,611		9,651		1,960		20.3
Overdraft	5,474		6,165		(691)		(11.2)
Other consumer banking	4,529		4,561		(32)		(0.7)
Total consumer banking	21,614		20,377		1,237		6.1
Wealth management fees	34,981		28,462		6,519		22.9
Mortgage banking:
Gains on sales of mortgage loans	14,094		22,728		(8,634)		(38.0)
Mortgage servicing income	2,704		(6,530)		9,234		(141.4)
Total mortgage banking	16,798		16,198		600		3.7
Other	6,912		7,311		(399)		(5.5)
Non-interest income before investment securities gains, net	113,776		107,515		6,261		5.8
Investment securities gains, net	33,511		3,051		30,460		N/M
Total Non-Interest Income	$	147,287	$	110,566	$	36,721	33.2	%

Nine months ended September 30 Increase (Decrease)
2017 2016 $ %
(dollars in thousands)
Service charges on deposit accounts:
Overdraft fees $ 16,961
$ 16,426
$ 535
3.3 %
Cash management fees 10,775
10,651
124
1.2
Other 10,600
11,455
(855 ) (7.5 )
         Total service charges on deposit accounts 38,336
38,532
(196 ) (0.5 )
Other service charges and fees:
Merchant fees 12,536
12,155
381
3.1 %
Commercial loan interest rate swap fees 8,780
8,552
228
2.7
Debit card income 8,379
7,948
431
5.4
Letter of credit fees 3,366
3,385
(19 ) (0.6 )
Other 5,969
6,100
(131 ) (2.1 )
        Total other service charges and fees 39,030
38,140
890
2.3
Investment management and trust services 36,097
33,660
2,437
7.2
Mortgage banking income:
Gains on sales of mortgage loans 10,122
11,967
(1,845 ) (15.4 )
Mortgage servicing income 5,420
489
4,931
N/M
        Total mortgage banking income 15,542
12,456
3,086
24.8
Credit card income 8,143
7,688
455
5.9
Other income 6,731
5,922
809
13.7
        Total, excluding investment securities gains, net 143,879
136,398
7,481
5.5
Investment securities gains, net 7,139
1,025
6,114
N/M
              Total $ 151,018
$ 137,423
$ 13,595
9.9 %

~~N/M - Not meaningful~~

~~Excluding~~Non-interest income, before net investment securities gains, ~~non-interest income~~ increased ~~$7.5~~$6.3 million, or ~~5.5%~~5.8%, ~~for~~during the ~~first nine~~six months ~~of 2017,~~ended June 30, 2021 as compared to the same period in ~~2016. Other service charges and fees increased $890,000, or 2.3%, mainly due to increases in merchant fees, debit card income and commercial loan interest rate swap fees.~~2020.

The $534,000, or 3.3%, increase in overdraft fee income during the nine months ended September 30, 2017, in comparison to the same period during 2016, consisted of a $358,000 increase in fees assessed on personal accounts and a $176,000 increase in fees assessed on commercial accounts, due to higher transaction volumes. Other service charges on deposit accountsCommercial banking decreased ~~$854,000, or 7.5%, resulting from changes in customer behavior and the loss of a significant processing customer.~~

~~Investment management and trust services income increased $2.4~~$1.7 million, or ~~7.2%, with growth in both trust and brokerage income, due to overall market performance and an increase in assets under management.~~

~~Gains on sales of mortgage loans decreased $1.8 million, or 15.4%~~4.8%, compared to the same period in ~~2016, as both volumes~~2020, driven by a decrease in capital markets revenue, which consists primarily of fees earned on commercial loan interest rate swaps, partially offset by increases in merchant and ~~pricing spreads decreased. Mortgage servicing income~~card, cash management and other commercial banking.

Consumer banking increased ~~$4.9~~$1.2 million, or 6.1%, compared to the same period in ~~2016~~2020, primarily driven by an increase in card income.

Wealth management revenues increased $6.5 million, or 22.9%, primarily resulting from growth in brokerage income due to ~~a $1.3 million reduction to the MSRs valuation allowance~~an increase in ~~2017, which was originally established~~client asset levels and improved overall market performance.

Mortgage banking income increased $600,000, or 3.7%, driven by an increase in ~~2016 through impairment charges of $3.0 million. Excluding the impact of the MSR valuation allowance adjustments,~~ mortgage servicing income, ~~increased $639,000, or 18.3%. For more information, see Note 6, "Mortgage Servicing Rights,"~~partially offset by a decrease in ~~the Notes to Consolidated Financial Statements for additional details.~~

~~Gains~~gains on sales of ~~investment securities increased $6.1~~mortgage loans. The increase in mortgage servicing income was driven by a $3.9 million decrease to the valuation allowance for MSRs compared to a $7.7 million increase to the ~~first nine months of 2016.~~valuation allowance for the same period in 2020. The ~~increase resulted from~~decrease in gains on sales of ~~financial institution common stocks. See Note 4, "Investment Securities,"~~mortgage loans reflected decreases in both the volume of loans sold and lower spreads realized on mortgages sold.

Investment securities gains, net, were $33.5 million in the ~~Notes to Consolidated Financial Statements for additional details.~~six months ended June 30, 2021 as a result of a $34.0 million gain on the sale of the Visa Shares that was part of the balance sheet restructuring as discussed in the "Overviews" section of Management's Discussion.

Non-Interest Expense

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


	Six months ended June 30				Increase (Decrease)
	2021		2020		$		%
	(dollars in thousands)
Salaries and employee benefits	$	160,953	$	161,240	$	(287)	(0.2)	%
Data processing and software	27,493		23,838		3,655		15.3
Net occupancy	26,476		26,630		(154)		(0.6)
Other outside services	16,668		15,481		1,187		7.7
State taxes	8,889		5,891		2,998		50.9
Equipment	6,852		6,611		241		3.6
Professional fees	5,430		7,533		(2,103)		(27.9)
FDIC insurance	4,906		4,941		(35)		(0.7)
Amortization of TCI	3,094		2,900		194		6.7
Marketing	2,350		2,882		(532)		(18.5)
Intangible amortization	293		264		29		11.0
Debt extinguishment	32,575		2,878		29,697		N/M
Other	23,236		24,469		(1,233)		(5.0)
Total non-interest expense	$	319,215	$	285,558	$	33,657	11.8	%

Nine months ended September 30 Increase (Decrease)
2017 2016 $ %
(dollars in thousands)
Salaries and employee benefits $ 216,626
$ 210,097
$ 6,529
3.1 %
Net occupancy expense 37,159
35,813
1,346
3.8
Data processing and software 28,334
27,477
857
3.1
Other outside services 19,836
17,347
2,489
14.3
Equipment expense 9,691
9,380
311
3.3
Professional fees 9,056
8,221
835
10.2
Amortization of tax credit investments 7,652
—
7,652
100.0
FDIC insurance expense 7,431
7,700
(269 ) (3.5 )
Marketing 6,309
5,314
995
18.7
Other 45,033
40,549
4,484
11.1
Total $ 387,127
$ 361,898
$ 25,229
7.0 %

~~The $6.5~~Data processing and software increased $3.7 million, or ~~3.1%~~15.3%, ~~increase in salaries and employee benefits during the nine months ended September 30, 2017, in comparison~~reflecting costs related to ~~the same period during 2016, primarily resulted from a $7.7~~technology initiatives.

State taxes increased $3.0 million, or ~~4.4%~~50.9%, ~~increase in salaries, resulting from annual merit increases and an increase in staffing levels. Average full-time equivalent employees increased 1.9%, to 3,559, in 2017,~~primarily as ~~compared to 3,492 in 2016.~~

~~Other outside services increased $2.5 million, or 14.3%, largely due to consulting services related to pre-bank consolidation efforts and technology initiatives.~~

~~As previously mentioned, in 2017 amortization~~a result of ~~certain new tax credit investments was classified in non-interest expense, rather than income taxes.~~

~~Marketing expense increased $995,000, or 18.7%, compared to the first nine months of 2016, due to~~ an increase in the ~~number~~accrual for PA shares tax expense resulting from increased capital levels.

Professional fees decreased $2.1 million, or 27.9%, primarily due to a decrease in legal fees. The Corporation incurs fees related to various legal matters in the normal course of ~~marketing promotions. In 2017, many~~business. These fees can fluctuate based on timing and the extent of these ~~promotions were focused on deposit generation.~~matters.

~~Other~~Debt extinguishment costs increased $29.7 million as a result of $20.9 million in prepayment penalties incurred upon the prepayment of long-term FHLB advances and $11.3 million of expenses ~~increased $4.5 million, or 11.1%, due~~associated with the cash tender offer to ~~higher state taxes resulting from legislated increases~~purchase subordinated and senior notes as part of the balance sheet restructuring discussed in the ~~Pennsylvania bank shares tax rate, certain sales tax liabilities, and higher operating risk loss expense.~~"Overview" section of Management's Discussion.

Income Taxes

Income tax expense for the ~~first nine~~six months ~~of 2017~~ended June 30, 2021 was ~~$35.5~~$25.9 million, ~~an $888,000, or 2.4%, decrease~~a $16.6 million increase from ~~$36.4~~$9.3 million for the same period in ~~2016.~~2020. The Corporation’s ~~effective tax rate~~ETR was ~~20.5% in~~15.8% for the ~~first nine~~six months ~~of 2017,~~ended June 30, 2021, as compared to ~~23.4%~~12.4% in the same period of ~~2016.~~2020. The ~~effective tax rate is generally lower than the federal statutory rate of 35% due to tax-exempt interest income earned on loans, investments~~increase in tax-free municipal securities, credits earned from investments in partnerships that generate tax credits under various federal programs and excess tax benefits realized on stock-based compensation. In 2017, amortization of certain new tax credit investments was recorded in non-interest expense, rather than as a component of income tax expense. If the amortization had been included as a component of income tax expense and the ~~effective tax rate for~~ETR primarily resulted from an increase in income before taxes, while net favorable permanent differences were relatively the ~~first nine months~~same compared to the same period of ~~2017 would have been 23.9%.~~2020.

FINANCIAL CONDITION

The table below presents condensed consolidated ending balance sheets.


	June 30, 2021		December 31, 2020		Increase (Decrease)
					$		%
Assets	(dollars in thousands)
Cash and cash equivalents	$	1,904,059	$	1,847,832	$	56,227	3.0	%
FRB and FHLB Stock	62,631		92,129		(29,498)		(32.0)
Loans held for sale	41,924		83,886		(41,962)		(50.0)
Investment securities	3,921,658		3,340,424		581,234		17.4
Net Loans	18,331,724		18,623,253		(291,529)		(1.6)
Premises and equipment	228,353		231,480		(3,127)		(1.4)
Goodwill and intangibles	536,847		536,659		188		—
Other assets	1,052,578		1,151,070		(98,492)		(8.6)
Total Assets	$	26,079,774	$	25,906,733	$	173,041	0.7	%
Liabilities and Shareholders’ Equity
Deposits	$	21,724,312	$	20,839,207	$	885,105	4.2	%
Short-term borrowings	533,749		630,066		(96,317)		(15.3)
Long-term borrowings	627,213		1,296,263		(669,050)		(51.6)
Other liabilities	501,542		524,369		(22,827)		(4.4)
Total Liabilities	23,386,816		23,289,905		96,911		0.4
Total Shareholders’ Equity	2,692,958		2,616,828		76,130		2.9
Total Liabilities and Shareholders’ Equity	$	26,079,774	$	25,906,733	$	173,041	0.7	%

Increase (Decrease)
September 30, 2017 December 31, 2016 $ %
(dollars in thousands)
Assets
Cash and due from banks $ 99,803
$ 118,763
$ (18,960 ) (16.0 )%
Other interest-earning assets 645,796
291,252
354,544
121.7
Loans held for sale 23,049
28,697
(5,648 ) (19.7 )
Investment securities 2,561,516
2,559,227
2,289
0.1
Loans, net of allowance 15,314,654
14,530,593
784,061
5.4
Premises and equipment 221,551
217,806
3,745
1.7
Goodwill and intangible assets 531,556
531,556
—
—
Other assets 664,935
666,353
(1,418 ) (0.2 )
Total Assets $ 20,062,860
$ 18,944,247
$ 1,118,613
5.9 %
Liabilities and Shareholders’ Equity
Deposits $ 16,141,780
$ 15,012,864
$ 1,128,916
7.5 %
Short-term borrowings 298,751
541,317
(242,566 ) (44.8 )
Long-term debt 1,038,159
929,403
108,756
11.7
Other liabilities 358,384
339,548
18,836
5.5
Total Liabilities 17,837,074
16,823,132
1,013,942
6.0
Total Shareholders’ Equity 2,225,786
2,121,115
104,671
4.9
Total Liabilities and Shareholders’ Equity $ 20,062,860
$ 18,944,247
$ 1,118,613
5.9 %

Cash and Cash Equivalents

~~Other Interest-earning Assets~~

~~Other interest-earning assets increased $354.5~~The $56.2 million, or ~~121.7%~~3.0%, ~~during~~increase in cash and cash equivalents mainly resulted from additional cash maintained at the ~~first nine months of 2017 as a~~FRB due to the Corporation's excess liquidity position.

FRB and FHLB Stock

The $29.5 million, or 32.0%, decrease in FRB and FHLB stock was the result of ~~higher balances on deposit with the Federal Reserve Bank,~~a decrease in FHLB stock required due to ~~deposit growth~~the prepayment of long-term FHLB advances, as mentioned in ~~excess~~the "Overview" section of Management's Discussion, and a decrease in the usage of FHLB letters of credit.

Loans Held for Sale

Loans held for sale decreased $42.0 million, or 50.0%, primarily as the result of the Corporation's decision to hold a greater proportion of the residential mortgage loans it originated in the loan ~~growth during~~portfolio, rather than selling those loans in the ~~period driven mainly by an increase in municipal deposits.~~secondary market.

Investment Securities

The following table presents the carrying amount of investment securities:


	June 30, 2021		December 31, 2020		Increase (Decrease)
					$		%
Available for Sale	(dollars in thousands)
U.S. Government securities	$	153,545	$	—	$	153,545	N/M
U.S. Government sponsored agency securities	62,431		—		62,431		N/M
State and municipal securities	1,055,462		952,613		102,849		10.8	%
Corporate debt securities	371,381		367,145		4,236		1.2
Collateralized mortgage obligations	307,165		503,766		(196,601)		(39.0)
Residential mortgage-backed securities	201,547		377,998		(176,451)		(46.7)
Commercial mortgage-backed securities	871,010		762,415		108,595		14.2
Auction rate securities	74,834		98,206		(23,372)		(23.8)


Total available for sale securities	$	3,097,375	$	3,062,143	$	35,232	1.2	%
Held to Maturity

Residential mortgage-backed securities	$	439,220	$	278,281	$	160,939	57.8	%
Commercial mortgage-backed securities	385,063		—		385,063		N/M
Total held to maturity securities	$	824,283	$	278,281	$	546,002	N/M

Total Investment Securities	$	3,921,658	$	3,340,424	$	581,234	17.4	%

Increase (Decrease)
September 30, 2017 December 31, 2016 $ %
(dollars in thousands)
U.S. Government sponsored agency securities $ 6,015
$ 134
$ 5,881
N/M
State and municipal securities 413,913
391,641
22,272
5.7
Corporate debt securities 92,977
109,409
(16,432 ) (15.0 )
Collateralized mortgage obligations 593,678
593,860
(182 ) —
Residential mortgage-backed securities 1,182,086
1,317,838
(135,752 ) (10.3 )
Commercial mortgage-backed securities 161,632
24,563
137,069
N/M
Auction rate securities 98,156
97,256
900
0.9
Total debt securities 2,548,457
2,534,701
13,756
0.5
Equity securities 13,059
24,526
(11,467 ) (46.8 )
Total $ 2,561,516
$ 2,559,227
$ 2,289
0.1 %

~~N/M - Not meaningful~~

~~Commercial mortgage-backed~~Total AFS securities increased ~~$137.1 million, while residential mortgage-backed securities decreased $135.8~~$35.2 million, or ~~10.3%~~1.2%, primarily as the result of the purchase of $153.5 million and $62.4 million of U.S. Government securities and U.S. Government sponsored agency securities, respectively. The increase was partially offset by $376.2 million of residential and commercial mortgage backed securities ~~cash flows were reinvested in commercial~~transferred from the AFS classification to the HTM classification. In addition, the Corporation sold ARCs with an estimated fair value of $24.6 million during the first quarter of 2021.

Total HTM securities increased $546.0 million, primarily as a result of the above mentioned transfer of AFS securities as well as purchases of additional mortgage-backed ~~securities to diversify the portfolio into securities with a shorter average life.~~securities.

Loans ~~net of Unearned Income~~

The following table presents ending balances of Net Loans:


	June 30, 2021		December 31, 2020		2021 vs. 2020 Increase (Decrease)
					$		%
	(dollars in thousands)
Real estate – commercial mortgage	$	7,152,932	$	7,105,092	$	47,840	0.7	%
Commercial and industrial (1)	4,985,414		5,670,828		(685,414)		(12.1)
Real estate – residential mortgage	3,555,897		3,141,915		413,982		13.2
Real estate – home equity	1,136,128		1,202,913		(66,785)		(5.6)
Real estate – construction	1,070,755		1,047,218		23,537		2.2
Consumer	448,433		466,772		(18,339)		(3.9)
Equipment lease financing and other	254,550		284,377		(29,827)		(10.5)
Overdrafts	1,843		4,806		(2,963)		(61.7)
Gross loans	18,605,952		18,923,921		(317,969)		(1.7)
Unearned income	(19,196)		(23,101)		3,905		(16.9)
Net Loans	$	18,586,756	$	18,900,820	$	(314,064)	(1.7)	%

(1) Includes PPP loans ~~outstanding, net~~totaling $1.1 billion and $1.6 billion as of ~~unearned income:~~June 30, 2021 and December 31, 2020, respectively.

Increase (Decrease)
September 30, 2017 December 31, 2016 $ %
(dollars in thousands)
Real estate – commercial mortgage $ 6,275,140
$ 6,018,582
$ 256,558
4.3 %
Commercial – industrial, financial and agricultural 4,223,075
4,087,486
135,589
3.3
Real estate – residential mortgage 1,887,907
1,601,994
285,913
17.8
Real estate – home equity 1,567,473
1,625,115
(57,642 ) (3.5 )
Real estate – construction 973,108
843,649
129,459
15.3
Consumer 302,448
291,470
10,978
3.8
Leasing, other and overdrafts 257,748
230,976
26,772
11.6
Loans, net of unearned income $ 15,486,899
$ 14,699,272
$ 787,627
5.4 %

Net Loans ~~net of unearned income, increased $787.6~~decreased $314.1 million, or ~~5.4%~~1.7%, in comparison to December 31, ~~2016. In general, this growth resulted from improved business activity and customer sentiment~~2020, primarily due the forgiveness of approximately $1.2 billion PPP loans during the first ~~half~~six months of ~~2017, which was tempered somewhat~~2021. Growth in the ~~third quarter of 2017. Increases were realized mainly~~commercial and residential mortgage portfolios and construction loans partially offset decreases in ~~Pennsylvania, Maryland~~the commercial and ~~Virginia.~~industrial and other loan portfolios.

Residential mortgage loans increased $285.9 million, or 17.8%, compared to December 31, 2016, with the growth occurring primarily in Maryland ($110.1 million, or 37.2%), Virginia ($97.0 million, or 31.4%) and Pennsylvania ($52.4 million, or 7.7%).

Commercial mortgage loans increased $256.6 million, or 4.3%, in comparison to December 31, 2016, with the growth occurring largely in Pennsylvania ($122.2 million, or 3.9%), Maryland ($65.8 million, or 10.6%) and Virginia ($30.0 million, or 6.0%).

Commercial loans increased $135.6 million, or 3.3%, in comparison to December 31, 2016, with the growth occurring primarily in Pennsylvania ($140.7 million, or 4.7%) and New Jersey ($15.6 million, or 3.0%). Construction loans increased $129.5 million, or 15.3%, in comparison to December 31, 2016, with the growth occurring primarily in Maryland ($48.4 million, or 52.0%), New Jersey ($24.9 million, or 16.7%), Pennsylvania ($23.6 million, or 4.8%), and Delaware ($22.6 million, or 42.6%). Leasing, other and overdrafts increased compared to December 31, 2016 as a result of a $28.3 millionThe increase in the ~~leasing portfolio.~~residential mortgage portfolio was the result of continued growth in originations and the strategic decision by the Corporation to hold a greater proportion of the originations on its balance sheet. The decrease in the commercial and industrial loan portfolio was impacted by the net effect of the forgiveness of approximately $1.2 billion of PPP loans and the origination of approximately $753 million of new PPP loans during the first six months of 2021.

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

September 30, 2017 December 31, 2016
Balance Delinquency Rate (1) % of Total Balance Delinquency Rate (1) % of Total
(dollars in thousands)
Commercial $ 751,398
0.1 % 77.3 % $ 644,490
0.2 % 76.4 %
Commercial - residential 156,127
8.1
16.0
142,189
6.0
16.9
Other 65,583
2.2
6.7
56,970
1.9
6.7
Total Real estate - construction $ 973,108
1.5 % 100.0 % $ 843,649
1.3 % 100.0 %


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

~~The Corporation does not have a significant concentration of credit risk with any single borrower, industry or geographical location.~~ Approximately ~~$7.2~~$8.2 billion, or ~~46.8%~~44.2%, of the loan portfolio was in commercial mortgage and construction loans as of ~~September~~June 30, ~~2017.~~2021. The Corporation's internal policy limited its maximum total lending commitment to an individual borrowing relationship ~~was $50.0~~to $55 million as of ~~September~~June 30, ~~2017.~~2021. In addition, ~~to its policy of limiting the maximum total lending commitment to any individual borrowing~~

~~relationship to $50.0 million,~~ the Corporation has established lower total lending limits for certain types of lending commitments, and lower total lending limits based on the Corporation's internal risk rating of an individual borrowing relationship at the time the lending commitment is approved. As

The Corporation has limited exposure to some of ~~September 30, 2017,~~ the ~~Corporation had 143 individual borrowing relationships with total borrowing commitments between $20.0 million~~industries that were initially most significantly impacted by COVID-19, such as hospitality, energy and ~~$50.0 million.~~

entertainment, and most of these loans are secured by real estate and other forms of collateral. The following table summarizes the industry concentrations within the commercial mortgage and the commercial and industrial loan ~~portfolio:~~portfolios:


	June 30, 2021		December 31, 2020
Real estate (1)	44.7	%	41.4	%
Health care	7.6		8.7
Agriculture	6.3		6.4
Manufacturing	5.2		6.3
Other services (3)	5.2		5.1
Construction (2)	4.3		6.4
Hospitality and food services	4.0		4.2
Educational services	3.1		3.3
Retail	3.0		3.8
Wholesale trade	3.0		3.3
Arts, entertainment and recreation	2.7		2.4
Professional, scientific and technical services	2.2		3.6
Public administration	1.5		1.7
Transportation and warehousing	1.4		1.7
Other (4) (5)	5.8		1.7
Total	100.0	%	100.0	%

September 30,
2017 December 31, 2016
Services 22.1 % 21.8 %
Retail 15.6
15.1
Manufacturing 9.9
9.2
Health care 9.7
10.5
Construction ⁽¹⁾
8.6
9.0
Wholesale 6.8
7.0
Real estate ⁽²⁾
6.4
6.7
Agriculture 4.9
5.0
Arts and entertainment 2.5
2.6
Transportation 2.3
2.3
Financial services 2.1
2.1
Other 9.1
8.7
Total 100.0 % 100.0 %


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


~~(2)~~	(1) Includes commercial loans to borrowers engaged in the business of: renting, leasing or managing real estate for others; selling and/or buying real estate for others; and appraising real estate.

~~Commercial~~(2) Includes commercial loans to borrowers engaged in the construction industry.

(3) Excludes public administration.

(4) Includes the energy sector.

(5)Includes $790.7 million of PPP loans, consisting primarily of loans originated during the six months ended June 30, 2021, as of June 30, 2021 and ~~commercial mortgage~~$136.7 million of PPP loans ~~also include shared national credits, which are participations in loans or loan commitments~~as of ~~at least $20.0 million that are shared by three or more banks. Below is a summary of the Corporation's outstanding purchased shared national credits:~~

September 30, 2017 December 31, 2016
(in thousands)
Commercial - industrial, financial and agricultural $ 161,619
$ 155,353
Real estate - commercial mortgage 102,160
81,573
Total $ 263,779
$ 236,926

~~Total shared national credits increased $26.9 million, or 11.3%, in comparison to~~ December 31, ~~2016~~2020. The remaining PPP loans were included within their respective industry classification above as ~~a result~~ of both ~~new relationships~~June 30, 2021 and growth in existing relationships. The Corporation's shared national credits are to borrowers located in its geographical markets, and are granted subject to the Corporation's standard underwriting policies. None of the shared national credits were past due as of September 30, 2017 or December 31, ~~2016.~~2020.

~~Provision and Allowance for Credit Losses~~

The Corporation has historically maintained an unallocated allowance for loan losses for factors and conditions that exist at the balance sheet date, but are not specifically identifiable, and to recognize the inherent imprecision in estimating and measuring loss exposure. 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 loan losses is no longer necessary.

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

Three months ended September 30 Nine months ended September 30
2017 2016 2017 2016
(dollars in thousands)
Average balance of loans, net of unearned income $ 15,392,067
$ 14,212,250
$ 15,127,569
$ 14,011,301

Balance of allowance for credit losses at beginning of period $ 174,998
$ 165,108
$ 171,325
$ 171,412
Loans charged off:
Real estate – commercial mortgage 483
1,350
1,949
3,406
Commercial – industrial, financial and agricultural 2,714
3,144
13,594
13,957
Real estate – residential mortgage 195
802
535
2,210
Real estate – home equity 547
709
1,837
3,295
Real estate – construction 2,744
150
3,765
1,218
Consumer 373
685
1,659
2,261
Leasing, other and overdrafts 739
832
2,578
3,226
Total loans charged off 7,795
7,672
25,917
29,573
Recoveries of loans previously charged off:
Real estate – commercial mortgage 106
296
1,490
2,488
Commercial – industrial, financial and agricultural 665
1,539
6,830
6,789
Real estate – residential mortgage 219
228
600
784
Real estate – home equity 252
241
604
929
Real estate – construction 629
898
1,550
2,844
Consumer 193
222
899
957
Leasing, other and overdrafts 407
168
793
357
Total recoveries 2,471
3,592
12,766
15,148
Net loans charged off 5,324
4,080
13,151
14,425
Provision for credit losses 5,075
4,141
16,575
8,182
Balance of allowance for credit losses at end of period $ 174,749
$ 165,169
$ 174,749
$ 165,169

Net charge-offs to average loans (annualized) 0.14 % 0.11 % 0.12 % 0.14 %

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

September 30,
2017 December 31,
2016
(dollars 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

Allowance for credit losses to loans outstanding 1.13 % 1.17 %

The provision for credit losses for the three months ended September 30, 2017 was $5.1 million, an increase of $934,000 in comparison to the same period in 2016. For the nine months ended September 30, 2017, the provision for credit losses was $16.6 million, an increase of $8.4 million in comparison to the first nine months of 2016. The increases in the provision for credit losses largely reflected growth in the loan portfolio.

Net charge-offs increased $1.2 million, to $5.3 million for the third quarter of 2017, compared to $4.1 million for the third quarter of 2016. This increase resulted from a decrease in recoveries of loans previously charged off. Of the $5.3 million of net charge-offs recorded in the third quarter of 2017, the majority were for loans originated in Pennsylvania ($4.4 million), New Jersey ($638,000) and Maryland ($406,000), partially offset by net recoveries in Virginia and Delaware.

For the first nine months of 2017, net charge-offs decreased $1.3 million, to $13.2 million compared to $14.4 million for the same period of 2016. A $3.7 million decrease in gross charge-offs was partially offset by a $2.4 million decrease in recoveries. Of the $13.2 million of net charge-offs recorded in the first nine months of 2017, the majority were for loans originated in Pennsylvania ($11.9 million), New Jersey ($1.2 million) and Maryland ($349,000), partially offset by net recoveries in Virginia and Delaware.

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

September 30, 2017 September 30, 2016 December 31, 2016
(dollars in thousands)
Non-accrual loans $ 123,345
$ 124,017
$ 120,133
Loans 90 days or more past due and still accruing 13,124
14,095
11,505
Total non-performing loans 136,469
138,112
131,638
Other real estate owned (OREO) 10,542
11,981
12,815
Total non-performing assets $ 147,011
$ 150,093
$ 144,453
Non-accrual loans to total loans 0.80 % 0.86 % 0.82 %
Non-performing assets to total assets 0.73 % 0.80 % 0.76 %
Allowance for credit losses to non-performing loans 128.05 % 119.59 % 130.15 %

~~The following table presents loans whose terms have been modified under troubled debt restructurings ("TDRs"), by type, as of the indicated dates:~~

September 30, 2017 September 30, 2016 December 31, 2016
(in thousands)
Real-estate - residential mortgage $ 26,193
$ 26,854
$ 27,617
Real-estate - commercial mortgage 14,439
16,085
15,957
Real estate - home equity 14,789
7,668
8,594
Commercial 7,512
7,488
6,627
Construction 169
843
726
Consumer 33
39
39
Total accruing TDRs 63,135
58,977
59,560
Non-accrual TDRs ⁽¹⁾
28,742
27,904
27,850
Total TDRs $ 91,877
$ 86,881
$ 87,410

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

TDRs modified during the first nine months of 2017 and still outstanding as of September 30, 2017 totaled $16.6 million. During the first nine months of 2017, $5.4 million of TDRs that were modified in the previous 12 months had a payment default, which the Corporation defines as a single missed scheduled payment, subsequent to modification.

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

2021:


																										Commercial and Industrial		Real Estate - Commercial Mortgage		Real Estate - Construction		Real Estate - Residential Mortgage		Real Estate - Home Equity		Consumer		Equipment Lease Financing		Total
	Commercial - Industrial, Financial and Agricultural			Real Estate - Commercial Mortgage			Real Estate - Construction			Real Estate - Residential Mortgage			Real Estate - Home Equity			Consumer			Leasing			Total				(in thousands)
	(in thousands)
Three months ended September 30, 2017
Balance of non-accrual loans at June 30, 2017	$	48,087		$	32,267		$	15,586		$	16,940		$	9,720		$	—		$	—		$	122,600
Three months ended June 30, 2021																									Three months ended June 30, 2021
Balance at March 31, 2021																									Balance at March 31, 2021	$	31,652	$	51,977	$	1,441	$	33,401	$	9,368	$	301	$	15,749	$	143,889
Additions	16,107			6,281			1,512			1,399			995			373			325			26,992			Additions	8,153		18,395		—		2,779		607		924		309		31,167
Payments	(8,774		)	(5,974		)	(999		)	(891		)	(483		)	—			—			(17,121		)	Payments	(5,670)		(9,982)		(425)		(909)		(484)		(20)		(32)		(17,522)
Charge-offs	(2,714		)	(483		)	(2,744		)	(195		)	(547		)	(373		)	(325		)	(7,381		)	Charge-offs	(954)		(6,506)		—		(496)		(212)		(918)		(128)		(9,214)

Transfers to OREO	—			(325		)	—			(868		)	(552		)	—			—			(1,745		)	Transfers to OREO	—		(456)		—		—		—		—		—		(456)
Balance of non-accrual loans at September 30, 2017	$	52,706		$	31,766		$	13,355		$	16,385		$	9,133		$	—		$	—		$	123,345
Balance at June 30, 2021																									Balance at June 30, 2021	$	33,181	$	53,428	$	1,016	$	34,775	$	9,279	$	287	$	15,898	$	147,864

Nine months ended September 30, 2017
Balance of non-accrual loans at December 31, 2016	$	42,349		$	38,936		$	9,806		$	18,431		$	10,611		$	—		$	—		$	120,133
Six months ended June 30, 2021																									Six months ended June 30, 2021
Balance at December 31, 2020																									Balance at December 31, 2020	$	31,993	$	51,470	$	1,395	$	26,107	$	9,588	$	332	$	16,312	$	137,197
Additions	40,508			14,055			10,259			2,545			3,694			1,659			1,443			74,163			Additions	18,063		24,457		404		10,423		1,228		1,549		482		56,606
Payments	(16,554		)	(16,955		)	(2,796		)	(2,141		)	(1,141		)	—			—			(39,587		)	Payments	(11,540)		(13,231)		(744)		(1,067)		(839)		(41)		(84)		(27,546)
Charge-offs	(13,594		)	(1,949		)	(3,765		)	(535		)	(1,837		)	(1,659		)	(1,443		)	(24,782		)	Charge-offs	(5,273)		(8,343)		(39)		(688)		(424)		(1,553)		(812)		(17,132)
Transfers to accrual status	—			(913		)	—			(54		)	(678		)	—			—			(1,645		)	Transfers to accrual status	—		—		—		—		(274)		—		—		(274)
Transfers to OREO	(3		)	(1,408		)	(149		)	(1,861		)	(1,516		)	—			—			(4,937		)	Transfers to OREO	(62)		(925)		—		—		—		—		—		(987)
Balance of non-accrual loans at September 30, 2017	$	52,706		$	31,766		$	13,355		$	16,385		$	9,133		$	—		$	—		$	123,345
Balance at June 30, 2021																									Balance at June 30, 2021	$	33,181	$	53,428	$	1,016	$	34,775	$	9,279	$	287	$	15,898	$	147,864

Non-accrual loans increased ~~$672,000, or 0.5%, and $3.2~~approximately $4.0 million, or ~~2.7%~~2.8%, in comparison to ~~September 30, 2016~~March 31, 2021, primarily as a result of additions to non-accrual loans during the period, partially offset by payments and ~~December 31, 2016, respectively.~~charge-offs.

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


	June 30, 2021			December 31, 2020
	(dollars in thousands)
Non-accrual loans	$	147,864		$	137,198
Loans 90 days or more past due and still accruing	5,865			9,929
Total non-performing loans	153,729			147,127
OREO (1)	2,779			4,178
Total non-performing assets	$	156,508		$	151,305

Non-performing loans to total loans	0.83		%	0.78		%
Non-performing assets to total assets	0.60		%	0.58		%

ACL - loans to non-performing loans	166		%	189		%

(1) Excludes $7.4 million and $8.1 million of residential mortgage properties for which formal foreclosure proceedings were in process as of June 30, 2021 and December 31, 2020, respectively

Non-performing loans increased $6.6 million, or 4.5%, in comparison to December 31, 2020. Non-performing loans as a percentage of total loans were 0.83% at June 30, 2021 in comparison to 0.78% at December 31, 2020. See Note 4, "Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements for further details on non-performing loans.

The following table presents loans whose terms have been modified under TDRs, by type, as of the indicated dates:


	June 30, 2021		December 31, 2020
	(in thousands)
Real estate - commercial mortgage	$	14,651	$	28,451
Commercial and industrial	6,765		6,982
Real estate - residential mortgage	16,861		18,602
Real estate - home equity	13,566		14,391
Real estate - construction	153		—
Consumer	4		—

Total accruing TDRs	52,000		68,426
Non-accrual TDRs(1)	60,504		35,755
Total TDRs	$	112,504	$	104,181

September 30, 2017 September 30, 2016 December 31, 2016
(in thousands)
Commercial – industrial, financial and agricultural $ 54,209
$ 47,330
$ 43,460
Real estate – commercial mortgage 34,650
39,631
39,319
Real estate – residential mortgage 21,643
23,451
23,655
Real estate – construction 13,415
11,223
9,842
Real estate – home equity 12,229
14,260
13,154
Consumer 243
2,166
1,891
Leasing 80
51
317
Total non-performing loans $ 136,469
$ 138,112
$ 131,638
(1) Included with non-accrual loans in the preceding table.

Non-performing loans decreased $1.6 million, or 1.2%, and increased $4.8 million, or 3.7%, in comparison to September 30, 2016 and December 31, 2016, respectively. Non-performing loans to total loans was 0.88% at September 30, 2017 in comparison to 0.96% at September 30, 2016 and 0.90% at December 31, 2016.

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

September 30, 2017 September 30, 2016 December 31, 2016
(in thousands)
Residential properties $ 4,223
$ 6,279
$ 7,655
Commercial properties 3,709
3,050
2,651
Undeveloped land 2,610
2,652
2,509
Total OREO $ 10,542
$ 11,981
$ 12,815

The ability to identify potential problem loans in a timely manner is important to maintaining an adequate ~~allowance for credit losses.~~ACL. For commercial loans, commercial mortgages and construction loans to commercial borrowers, an internal risk rating process is used to monitor credit quality. The evaluation of credit risk for residential mortgages, home equity loans, construction loans to individuals and consumer loans ~~and lease receivables~~ is based on payment history, through the monitoring of delinquency levels and trends. For a description of the Corporation's risk ratings, see Note 5,4, "Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements.

Total internally risk-rated loans were ~~$11.4~~$13.1 billion, of which $1.1 billion were criticized and ~~$10.9 billion~~classified, as of ~~September~~June 30, ~~2017~~2021, and $13.7 billion, of which $961.1 million were criticized and classified, as of December 31, ~~2016, respectively.~~2020. The following table presents internal risk ratings for commercial and industrial loans, real estate - commercial mortgages and real estate - construction loans to commercial borrowers with internal risk ratings of Special Mention ~~(considered criticized loans)~~(1) or Substandard or lower ~~(considered classified loans),~~ (2):


	Special Mention (1)						Increase (Decrease)			Substandard or Lower (2)						Increase (Decrease)			Total Criticized and Classified Loans
	June 30, 2021			December 31, 2020			$		%	June 30, 2021			December 31, 2020			$		%	June 30, 2021			December 31, 2020
	(dollars in thousands)
Real estate - commercial mortgage	$	541,773		$	478,165		$	63,608	13.3%	$	238,088		$	181,970		$	56,118	30.8%	$	779,861		$	660,135
Commercial and industrial	143,198			154,039			(10,841)		(7.0)	152,383			128,175			24,208		18.9	295,581			282,214
Real estate - construction (3)	19,092			13,259			5,833		44.0	3,942			5,469			(1,527)		(27.9)	23,034			18,728
Total	$	704,063		$	645,463		$	58,600	9.1%	$	394,413		$	315,614		$	78,799	25.0%	$	1,098,476		$	961,077

% of total risk rated loans	5.4		%	4.7		%				3.0		%	2.3		%				8.4		%	7.0		%

(1) Considered "criticized" loans by ~~class segment.~~ banking regulators

(2) Considered "classified" loans by banking regulators

(3) Excludes construction - other

The ~~shift from special mention to~~increase in loans with internal risk ratings of substandard or lower ~~from December 31, 2016~~that occurred during the six months ended June 30, 2021 was attributed to ~~September~~risk rating downgrades due to COVID-19 related shutdowns and restrictions on operations, mostly impacting the hospitality and food services and arts, entertainment and recreation sectors.

Provision and Allowance for Credit Losses

The following table presents the components of the ACL:


	June 30, 2021		December 31, 2020
	(dollars in thousands)
ACL - loans	$	255,032	$	277,567
ACL - OBS credit exposure (1)	14,773		14,373
Total ACL	$	269,805	$	291,940

(1) Included in "other liabilities" on the consolidated balance sheet.

The following table presents the activity in the ACL related to loans:


	Three months ended June 30						Six months ended June 30
	2021			2020			2021			2020
	(dollars in thousands)
Average balance of Net Loans	$	18,906,556		$	18,331,797		$	18,943,367		$	17,595,932

Balance of ACL at beginning of period	$	265,986		$	238,508		$	277,567		$	163,622
Impact of adopting CECL on January 1, 2020	—			—			—			45,723
Loans charged off:
Real estate – commercial mortgage	6,506			2,324			8,343			3,179
Commercial and industrial	954			3,480			5,273			14,379
Real estate – residential mortgage	496			235			688			422
Real estate – home equity	212			458			424			745
Real estate – construction	—			17			39			17
Consumer	918			845			1,553			2,087
Equipment lease financing and other	436			688			1,404			1,221
Total loans charged off	9,522			8,047			17,724			22,050
Recoveries of loans previously charged off:
Real estate – commercial mortgage	729			95			903			339
Commercial and industrial	693			2,978			1,462			4,712
Real estate – residential mortgage	105			112			200			197
Real estate – home equity	58			44			109			261
Real estate – construction	254			—			638			70
Consumer	576			605			965			1,034
Equipment lease financing and other	153			92			312			200
Total recoveries	2,568			3,926			4,589			6,813
Net loan charged off	6,954			4,121			13,135			15,237
Provision for credit losses (1)	(4,000)			22,150			(9,400)			62,429
Balance of ACL at end of period	$	255,032		$	256,537		$	255,032		$	256,537

Net charge-offs to average loans (annualized)	0.15		%	0.09		%	0.14		%	0.17		%

(1) Provision for credit losses included in the table only includes the portion related to loans.

The provision for credit losses, specific to loans, for the three and six months ended June 30, ~~2017~~2021 was ~~primarily~~negative $4.0 million and negative $9.4 million, respectively, compared to a provision expense of $22.2 million and $62.4 million, respectively, recorded in the ~~result~~same periods of ~~downgrades of three large relationships to substandard~~2020. Several factors during the first ~~nine~~six months of ~~2017.~~ 2021 in comparison to the end of the fourth quarter of 2020, including improved economic forecasts, reduced the level of the ACL determined to be necessary at the end of both the first and second quarters of 2021. The higher provision during the first six months of 2020 was largely driven by the overall downturn in economic forecasts due to COVID-19, resulting in higher expected future credit losses under CECL. The

Special Mention Increase (Decrease) Substandard or lower Increase (Decrease) Total Criticized and Classified Loans
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 $ 118,947
$ 132,484
$ (13,537 ) (10.2 )% $ 127,670
$ 122,976
$ 4,694
3.8 % $ 246,617
$ 255,460
Commercial - secured 98,639
128,873
(30,234 ) (23.5 ) 183,181
118,527
64,654
54.5
281,820
247,400
Commercial -unsecured 3,474
4,481
(1,007 ) (22.5 ) 3,082
3,531
(449 ) (12.7 ) 6,556
8,012
Total Commercial - industrial, financial and agricultural 102,113
133,354
(31,241 ) (23.4 ) 186,263
122,058
64,205
52.6
288,376
255,412
Construction - commercial residential 6,746
15,447
(8,701 ) (56.3 ) 14,595
13,172
1,423
10.8
21,341
28,619
Construction - commercial 4,418
3,412
1,006
29.5
3,869
5,115
(1,246 ) (24.4 ) 8,287
8,527
Total real estate - construction (excluding construction - other) 11,164
18,859
(7,695 ) (40.8 ) 18,464
18,287
177
1.0
29,628
37,146
Total $ 232,224
$ 284,697
$ (52,473 ) (18.4 )% $ 332,397
$ 263,321
$ 69,076
26.2 % $ 564,621
$ 548,018

% of total risk-rated loans 2.0 % 2.6 % 2.9 % 2.4 % 5.0 % 5.0 %
ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. See Note 4, "Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements for further details on the provision for credit losses.

In addition, net loan charge offs in the three months ended June 30, 2021 increased $2.8 million compared to the same period of 2020. For the six months ended June 30, 2021, net loan charge offs decreased $2.1 million compared to the same period of 2020.

The following table summarizes ~~loan delinquency rates, by type, as~~the allocation of the ~~dates indicated:~~ACL - loans:


	June 30, 2021				December 31, 2020
	ACL - loans		% In Each Loan Category (1)		ACL - loans		% In Each Loan Category (1)
	(dollars in thousands)
Real estate - commercial mortgage	$	95,381	38.3	%	$	103,425	37.6	%
Commercial and industrial	65,404		26.8		74,771		30.0
Real estate - residential mortgage	54,188		19.1		51,995		16.6
Consumer, home equity, equipment lease financing	27,405		9.9		31,770		10.3
Real estate - construction	12,654		5.8		15,608		5.5

Total ACL - loans	$	255,032	100.0	%	$	277,567	100.0	%

September 30, 2017 September 30, 2016 December 31, 2016
30-89
Days ≥ 90 Days (1) Total 30-89
Days ≥ 90 Days (1) Total 30-89
Days ≥ 90 Days (1) Total
Real estate – commercial mortgage 0.20 % 0.55 % 0.75 % 0.18 % 0.69 % 0.87 % 0.13 % 0.65 % 0.78 %
Commercial – industrial, financial and agricultural 0.26 % 1.28 % 1.54 % 0.31 % 1.17 % 1.48 % 0.25 % 1.06 % 1.31 %
Real estate – construction 0.12 % 1.38 % 1.50 % 0.31 % 1.30 % 1.61 % 0.12 % 1.17 % 1.29 %
Real estate – residential mortgage 1.10 % 1.15 % 2.25 % 1.15 % 1.52 % 2.67 % 1.27 % 1.48 % 2.75 %
Real estate – home equity 0.83 % 0.78 % 1.61 % 0.64 % 0.87 % 1.51 % 0.57 % 0.81 % 1.38 %
Consumer, leasing and other 0.69 % 0.06 % 0.75 % 1.18 % 0.44 % 1.62 % 1.23 % 0.42 % 1.65 %
Total 0.40 % 0.88 % 1.28 % 0.42 % 0.96 % 1.38 % 0.38 % 0.89 % 1.27 %
Total dollars (in thousands) $ 62,247
$ 136,469
$ 198,716
$ 59,822
$ 138,112
$ 197,934
$ 55,149
$ 131,638
$ 186,787
(1) Ending loan balances as a % of total loans for the periods presented.

~~(1)~~

~~Includes non-accrual loans.~~

Management believes that the allowance for credit losses of $174.7 million as of September 30, 2017 is sufficient to cover incurred losses in the loan and lease portfolio and unfunded lending commitments as of that date and is appropriate based on U.S. GAAP.

Deposits and Borrowings

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


	June 30, 2021		December 31, 2020		Increase (Decrease)
					$		%
	(dollars in thousands)
Noninterest-bearing demand	$	7,442,132	$	6,531,002	$	911,130	14.0	%
Interest-bearing demand	5,795,404		5,818,564		(23,160)		(0.4)
Savings	6,276,554		5,929,792		346,762		5.8
Total demand and savings	19,514,090		18,279,358		1,234,732		6.8
Brokered deposits	277,444		335,185		(57,741)		(17.2)
Time deposits	1,932,778		2,224,664		(291,886)		(13.1)
Total deposits	$	21,724,312	$	20,839,207	$	885,105	4.2	%

Increase (Decrease)
September 30, 2017 December 31, 2016 $ %
(dollars in thousands)
Noninterest-bearing demand $ 4,363,915
$ 4,376,137
$ (12,222 ) (0.3 )%
Interest-bearing demand 4,119,419
3,703,712
415,707
11.2
Savings and money market accounts 4,790,985
4,179,773
611,212
14.6
Total demand and savings 13,274,319
12,259,622
1,014,697
8.3
Brokered deposits 109,936
—
109,936
N/M
Time deposits 2,757,525
2,753,242
4,283
0.2
Total deposits $ 16,141,780
$ 15,012,864
$ 1,128,916
7.5 %

~~N/M - Not meaningful~~

~~Interest-bearing~~Total demand and savings accounts increased ~~$415.7 million,~~$1.2 billion, or ~~11.2%~~6.8%, ~~due to a $401.4 million, or 30.8%, seasonal increase~~driven by increases in ~~municipal account balances~~noninterest-bearing demand and ~~a $25.3 million, or 7.8%, increase in business~~savings accounts, ~~which was~~primarily as the result of strong customer liquidity. These increases were partially offset by ~~a $10.1 million, or 0.5%, decrease~~decreases in ~~personal account balances.~~

~~The $611.2 million, or 14.6%, increase in savings~~interest-bearing demand, brokered and money market account balances was primarily due to a $449.1 million, or 16.0%, increase in personal account balances and an $83.3 million, or 10.5%, increase in business account balances as a result of certain promotions that occurred during the year. In addition, municipal account balances experienced seasonal increases of $78.8 million, or 13.7%.

Brokered deposits totaled $109.9 million as of September 30, 2017. As previously noted, during the third quarter of 2017, the Corporation began accepting deposits pursuant to an agreement with a non-bank third party, which are considered to be brokeredtime deposits.

The following table presents ending borrowings, by type:


	June 30, 2021		December 31, 2020		Increase (Decrease)
					$		%
	(dollars in thousands)
Short-term borrowings:
Customer funding (1)	$	533,749	$	630,066	$	(96,317)	(15.3)	%


Total short-term borrowings	533,749		630,066		(96,317)		(15.3)
Long-term borrowings:
FHLB advances	—		535,973		(535,973)		(100.0)
Other long-term borrowings	627,213		760,290		(133,077)		(17.5)
Total long-term borrowings	627,213		1,296,263		(669,050)		(51.6)
Total borrowings	$	1,160,962	$	1,926,329	$	(765,367)	(39.7)	%

(1) Includes repurchase agreements and short-term promissory notes.

Total short-term borrowings ~~and long-term debt by type, as of the dates indicated:~~

Increase (Decrease)
September 30, 2017 December 31, 2016 $ %
(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements $ 185,945
$ 195,734
$ (9,789 ) (5.0 )%
Customer short-term promissory notes 106,994
67,013
39,981
59.7
Total short-term customer funding 292,939
262,747
30,192
11.5
Federal funds purchased 5,812
278,570
(272,758 ) (97.9 )
Total short-term borrowings 298,751
541,317
(242,566 ) (44.8 )
Long-term debt:
FHLB advances 652,145
567,240
84,905
15.0
Other long-term debt 386,014
362,163
23,851
6.6
Total long-term debt 1,038,159
929,403
108,756
11.7
Total borrowings $ 1,336,910
$ 1,470,720
$ (133,810 ) (9.1 )%

~~Total borrowings~~ decreased ~~$133.8~~$96.3 million, or ~~9.1%, due to a $242.6 million, or 44.8%, decrease in short-term borrowings, partially offset by an $108.8 million, or 11.7%, increase in long-term debt.~~15.3%. The decrease in short-term borrowings was ~~mainly~~a result of higher balances of deposits, reducing the need for short-term borrowings. Total long-term borrowings decreased $669.1 million. As discussed in ~~federal funds purchased~~the "Overview" section of Management's Discussion, as ~~borrowings were reduced with funding provided by deposit growth. The increase~~part of ~~$84.9~~a balance sheet restructuring, the Corporation prepaid $536.0 million ~~or 15.0%, in~~of long-term FHLB advances ~~provided additional funding to support loan growth. The increase in other long-term debt was primarily the result of the issuance of $125.0~~and completed a cash tender offer for $75.0 million of 4.50% subordinated debt due in 2024 and $60.0 million of 3.60% senior notes due in ~~March 2017, offset by~~2022. Also, See Note 14, "Long-Term Debt," in the ~~repayment of the $100.0 million of 10-year subordinated notes, which matured on May 1, 2017.~~Notes to Consolidated Financial Statements for further details.

Shareholders' Equity

Total shareholders’ equity increased ~~$104.7~~$76.1 million ~~or 4.9%,~~ during the first ~~nine~~six months of ~~2017.~~2021. The increase was due primarily to ~~$137.8~~$138.0 million of net income, ~~$7.0 million of stock issued and a $14.2 million increase in other comprehensive income,~~ partially offset by ~~$57.7~~$45.6 million of common stock cash dividends, a $17.9 million decrease in AOCI, mainly due to declines in fair values of AFS securities, and $5.2 million of preferred stock dividends.

In ~~November 2016,~~February 2021, the Corporation's board of directors approved ~~an extension, through December 31, 2017, to~~ a share repurchase program pursuant to which the Corporation is authorized to repurchase up to ~~$50.0~~$75.0 million of its outstanding shares of common stock, or approximately ~~2.3%~~3.2% of its outstanding ~~shares. Repurchased~~ shares, ~~may be~~through December 31, 2021. Under the repurchase program, repurchased shares are added to treasury stock, at cost. As permitted by securities laws and other legal requirements, and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase transactions. The ~~share~~ repurchase program may be discontinued at any time. AsNo repurchases of ~~September 30, 2017, 1.5 million shares had been repurchased~~common stock were made under this program ~~for a total cost of $18.5 million, or $12.48 per share. Up to an additional $31.5 million of~~during the ~~Corporation's common stock may be repurchased under this program through December 31, 2017.~~six months ended June 30, 2021.

Regulatory Capital

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

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

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

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

•Meet a minimum Tier 1 Leverage capital ratio of ~~6.00%~~4.00% of ~~risk-weighted~~average assets;

~~Continue to require~~

•Meet a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 ~~leverage~~ capital ratio of ~~4.00%~~6.00% of ~~average~~risk-weighted assets;

•Maintain a "capital conservation buffer" of 2.50% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonus payments; and

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

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

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

As of ~~September~~June 30, 2017, the Corporation and each of its bank subsidiaries met the minimum requirements of the U.S. Basel III Capital Rules, and each of the Corporation’s bank subsidiaries’ capital ratios exceeded the amounts required to be considered "well capitalized" as defined in the regulations. As of September 30, 2017,2021, the Corporation's capital levels ~~also~~ met the ~~fully-phased in~~fully phased-in minimum capital requirements, including the capital conservation buffers, as prescribed in the ~~U.S. Basel III~~ Capital Rules.

In March 2020, the banking regulators amended the optional CECL Transition Rule to allow banks to add back to regulatory capital the decrease recorded to retained earnings at the CECL adoption date, or January 1, 2020 for the Corporation, plus 25% of additions to the ACL over the next two years. These amounts will then be phased in as reductions to regulatory capital over the following three years, or 2022 - 2024. Prior to this amendment, the regulatory capital impact of adopting CECL was to be phased in over a 3-year period beginning in 2020. The Corporation elected to apply the amended rule to the regulatory capital treatment for the adoption of CECL.

As of June 30, 2021, Fulton Bank met the well capitalized requirements under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the regulation. There were no other conditions or events since June 30, 2021 that management believes have changed the Corporation's capital categories.

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


	June 30, 2021		December 31, 2020		Regulatory Minimum for Capital Adequacy		Fully Phased-in, with Capital Conservation Buffers
Total Capital (to Risk-Weighted Assets)	14.5	%	14.4	%	8.0	%	10.5	%
Tier I Capital (to Risk-Weighted Assets)	11.0	%	10.5	%	6.0	%	8.5	%
Common Equity Tier I (to Risk-Weighted Assets)	10.0	%	9.5	%	4.5	%	7.0	%
Tier I Leverage Capital (to Average Assets)	8.5	%	8.2	%	4.0	%	4.0	%

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

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

Simulation of net interest income is performed for the next 12-month period. A variety of interest rate scenarios are used to measure the effects of sudden and gradual movements upward and downward in the yield curve. These results are compared to the results obtained in a flat or unchanged interest rate scenario. Simulation of net interest income is used primarily to measure the Corporation’s short-term earnings exposure to rate movements. The Corporation’s policy limits the potential exposure of net interest income, in a non-parallel instantaneous shock, to 10% of the base case net interest income for a 100 ~~basis point~~bp shock in interest rates, 15% for a 200 ~~basis point~~bp shock, ~~and~~ 20% for a 300 ~~basis point~~bp shock and 25% for a 400 bp shock. A "shock" is an immediate upward or downward movement of interest rates. The shocks do not take into account changes in customer behavior that could result in changes to mix and/or volumes in the balance sheet, nor ~~do they~~does it take into account the potential effects of competition on the pricing of deposits and loans over the forward 12-month period.

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

The following table summarizes the expected impact of abrupt interest rate changes, that is, a non-parallel instantaneous shock, on net interest income as of ~~September~~June 30, ~~2017~~2021 (due to the current level of interest rates, the ~~200 and 300 basis point~~ downward shock scenarios are not shown):


Rate Shock(1)		Annual change in net interest income	% change in net interest income
+400 bp		+ $186.1 million	30.4%
+300 bp		+ $139.5 million	22.7%
+200 bp		+ $92.4 million	15.1%
+100 bp		+ $44.6 million	7.3%

~~Rate Shock (1)~~		~~Annual change~~ ~~in net interest income~~	~~% Change in net interest income~~
~~+300 bp~~	~~+ $93.9 million~~	~~15.5%~~
~~+200 bp~~	~~+ $64.5 million~~	~~10.6%~~
~~+100 bp~~	~~+ $32.9 million~~	~~5.4%~~
~~–100 bp~~	~~– $49.0 million~~	~~– 8.1%~~

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

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

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

Cash Flow Hedges of Interest Rate Risk

The Corporation must maintain a sufficient level of liquid assets to meet the cash needs of its customers, who, as depositors, may want to withdraw funds or who, as borrowers, need credit availability. Liquidity is provided on a continuous basis through scheduled and unscheduled principal and interest payments on investments and outstanding loans and through the availability of deposits and borrowings. The Corporation also maintains secondary sources that provide liquidity on a secured and unsecured basis to meet short-term and long-term needs.

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

~~Each of the Corporation’s subsidiary banks~~Fulton Bank is a member of the FHLB and has access to FHLB overnight and term credit facilities.As of ~~September~~June 30, ~~2017,~~2021, the Corporation had ~~$652.1~~$3.0 million of ~~advances~~borrowings outstanding from the FHLB with an additional borrowing capacity of approximately ~~$3.2~~ $5.4billion under these facilities. Advances from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets.

As of ~~September~~June 30, ~~2017,~~2021, the Corporation had aggregate ~~availability under~~ federal funds lines of ~~$1.1~~$2.1 billion, with ~~$5.8 million borrowed against that amount.~~no outstanding borrowings. A combination of commercial real estate loans, commercial loans and securities are pledged to the ~~Federal Reserve Bank~~FRB of Philadelphia to provide access to ~~Federal Reserve Bank~~FRB Discount Window borrowings. As of ~~September~~June 30, ~~2017,~~2021, the Corporation had ~~$908.5~~$799.2 million of collateralized borrowing availability at the Discount Window, and no outstanding borrowings.

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

The Corporation’s sources and uses of funds were discussed in general terms in the "Net Interest Income" section of Management’s Discussion and Analysis. The consolidated statements of cash flows provide additional information. The Corporation’s operating activities during the first ~~nine~~six months of ~~2017 generated $194.4~~2021 provided $233.6 million of cash, mainly due to net ~~income.~~income of $138.0 million, and by the net impact of other operating activities. Cash used in investing activities was ~~$1.2 billion,~~$217.3 million, mainly due to net increases in ~~loans and short-term investments. Net cash~~investments, partially offset by net decreases in loans. Cash provided by financing activities was ~~$945.7~~$39.9 million due ~~mainly~~ to increases in demand and savings deposits, partially offset by the repayments of long-term ~~debt~~borrowings and decreases in time deposits and short-term borrowings.

Equity market price risk is the risk that changes in the values of equity investments could have a material impact on the financial position or results of operations of the Corporation. As of September 30, 2017, equity investments consisted of $12.1 million of common stocks of publicly traded financial institutions and $1.0 million of other equity investments.

The equity investments most susceptible to equity market price risk are the financial institutions stocks, which had a cost basis of approximately $5.8 million and an estimated fair value of $12.1 million at September 30, 2017, 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 fair value of this investment

accounted for 73.4% of the fair value of the common stocks of publicly traded financial institutions. No other investment in a single financial institution in the financial institutions stock portfolio exceeded 10% of the portfolio's fair value. In total, net unrealized gains in this portfolio were approximately $6.3 million as of September 30, 2017.

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

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

Debt Security Market Price Risk

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

State and Municipal Securities

As of ~~September~~June 30, ~~2017,~~2021, the Corporation owned ~~$413.9 million of municipal~~ securities issued by various states ~~or municipalities. Downward pressure~~and municipalities with a total a fair value of $1.1 billion. Uncertainty with respect to the financial strength of state and municipal bond insurers places emphasis on the underlying strength of issuers. Pressure on local tax revenues of issuers due to adverse economic conditions could have an adverse impact on the underlying credit quality of issuers. The Corporation evaluates existing and potential holdings primarily based on the underlying creditworthiness of the issuing state or municipality and then, to a lesser extent, on any ~~underlying~~ credit enhancement. State orand municipal securities can be supported by the general obligation of the issuing state or municipality, allowing the securities to be repaid by any means available to the issuing state or municipality. As of ~~September~~June 30, ~~2017, approximately 98%~~2021, substantially all of state orand municipal securities were supported by the general obligation of corresponding states or municipalities. Approximately ~~60%~~65% of these securities were school district issuances, which are also supported by the states of the issuing municipalities.

Auction Rate Securities

As of ~~September~~June 30, ~~2017,~~2021, the Corporation’s investments in ~~auction rate certificates ("ARCs"), a type of auction rate security,~~ARCs had a cost basis of ~~$107.4~~$76.4 million and aan estimated fair value of ~~$98.2~~$74.8 million.

~~As of September 30, 2017, the~~ The fair values of the ARCs currently in the portfolio were derived using significant unobservable inputs based on an expected cash flows model which produced fair values that ~~were materially different from~~may not represent those that ~~would~~could be expected from settlement of these investments in the current market. The expected cash flows model produced fair values which assumed a return to market liquidity sometime inwithin the next five years. The Corporation believes that the trusts underlying the ARCs will self-liquidate as student loans are repaid.

The credit quality of the underlying debt associated with the ARCs is also a factor in the determination of their estimated fair value. As of ~~September~~June 30, ~~2017,~~2021, all of the ARCs were rated above investment grade. All of the loans underlying the ARCs have principal payments ~~that~~which are guaranteed by the federal government. At ~~September~~June 30, ~~2017,~~2021, all of the Corporation's ARCs were current and making scheduled interest payments.

~~Corporate Debt Securities~~

The Corporation holds corporate debt securities in the form of pooled trust preferred securities, single-issuer trust preferred securities, subordinated debt and senior debt issued by financial institutions. As of September 30, 2017, these securities had an amortized cost of $92.4 million and an estimated fair value of $93.0 million.

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

Item 4. Controls and Procedures

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

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information presented in the "Legal Proceedings" section of Note ~~10 "Commitment~~13 "Commitments and Contingencies" of the Notes to Consolidated Financial Statements is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A of the Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2020.

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

(a) None.

(b) None.

(c) ~~There~~On February 9, 2021, the Corporation announced that its board of directors approved a share repurchase program pursuant to which the Corporation is authorized to repurchase up to $75.0 million of its outstanding shares of common stock, or approximately 3.2% of its outstanding shares, through December 31, 2021. Under the repurchase program, repurchased shares are added to treasury stock, at cost. As permitted by securities laws and other legal requirements, and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase transactions. The repurchase program may be discontinued at any time. No repurchases of common stock were ~~no purchases of equity securities by the issuer or any affiliated purchasers~~made under this program during the ~~three~~six months ended ~~September~~June 30, ~~2017.~~2021.

Item 6. Exhibits




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

3.2	Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State - Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020.

3.3	Bylaws of Fulton Financial Corporation as amended – Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on ~~an Amended~~a Form 8-K ~~dated September 23, 2014.~~filed on May 14 , 202 1 .

~~31.1~~4.1	Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State - Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020.

4.2	Deposit Agreement, dated October 29, 2020, among Fulton Financial Corporation, Equiniti Trust Company, as depositary, and the holders from time to time of the depositary receipts described therein - Incorporated by reference to Exhibit 4.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020.

4.3	Form of depositary receipt representing the Depositary Shares (included as Exhibit A to Exhibit 4.2 of this report).

10.1	Third Amendment effective March 11, 2021 to the Fulton Financial Corporation Deferred Compensation Plan - filed herewith.

10.2	Fourth Amendment effective July 20, 2021 to the Fulton Financial Corporation Deferred Compensation Plan - filed herewith.

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

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

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

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

101		~~Financial statements from the Quarterly Report on Form 10-Q~~Interactive data files pursuant to Rule 405 of ~~Fulton Financial Corporation for the period ended September 30, 2017, filed on November 3, 2017, formatted in XBRL:~~Regulation S-T: (i) ~~the~~Unaudited Consolidated Balance Sheets, (ii) ~~the~~Unaudited Consolidated Statements of Income, (iii) ~~the~~Unaudited Consolidated Statements of Comprehensive Income, (iv) ~~the~~Unaudited Consolidated Statements of Shareholders' Equity, (v) ~~the~~ Consolidated Statements of Cash Flows, and (vi) ~~the~~ Notes to Consolidated Financial ~~Statements - filed herewith.~~Statements.

104	Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101)

FULTON FINANCIAL CORPORATION AND SUBSIDIARIES

SIGNATURES

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

FULTON FINANCIAL CORPORATION

~~FULTON FINANCIAL CORPORATION~~Date:

August 9, 2021

~~Date:~~

~~November 3, 2017~~

/s/ E. Philip Wenger

E. Philip Wenger

Chairman and Chief Executive Officer ~~and President~~

Date:

~~November 3, 2017~~August 9, 2021

/s/ ~~Philmer H. Rohrbaugh~~Mark R. McCollom

~~Philmer H. Rohrbaugh~~Mark R. McCollom

Senior Executive Vice President ~~Chief Operating Officer~~

and Chief Financial Officer


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $2.50	FULT	The Nasdaq Stock Market, LLC
Depositary Shares, Each Representing 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A	FULTP	The Nasdaq Stock Market, LLC


Description		Page


~~Description~~	~~Page~~
Glossary of Terms			3


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

(a)	Consolidated Balance Sheets - ~~September 30, 2017~~June 3 0 , 2021 and December 31, ~~2016~~2020	35

(b)	Consolidated Statements of Income - Three and ~~nine~~ six months ended ~~September 30, 2017~~June 3 0 , 2021 and ~~2016~~2020	46

(c)	Consolidated Statements of Comprehensive Income - Three and ~~nine~~six months ended ~~September 30, 2017~~June 3 0 , 2021 and ~~2016~~2020	57

(d)	Consolidated Statements of Shareholders’ Equity - ~~Nine~~ Three and six months ended ~~September 30, 2017~~June 3 0 , 2021 and ~~2016~~2020	68

(e)	Consolidated Statements of Cash Flows - ~~Nine~~Six months ended ~~September 30, 2017~~June 3 0 , 2021 and ~~2016~~2020	79

(f)	Notes to Consolidated Financial Statements	810

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		4143

Item 3. Quantitative and Qualitative Disclosures about Market Risk		6770

Item 4. Controls and Procedures		7073

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		7173

Item 1A. Risk Factors		7173

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		7173

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		7174

Signatures		7275



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



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

Balance at December 31, 2016	174,040		$	549,707	$	1,467,602	$	732,099		$	(38,449	)	$	(589,844	)	$	2,121,115
Net income							137,752									137,752
Other comprehensive income										14,246						14,246
Stock issued	1,017		2,446		5,209								(618		)	7,037
Stock-based compensation awards					3,339											3,339
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

Balance at December 31, 2015	174,176		$	547,141	$	1,450,690	$	641,588		$	(22,017	)	$	(575,508	)	$	2,041,894
Net income							119,475									119,475
Other comprehensive income										26,508						26,508
Stock issued, including related tax benefits	454		594		2,099								2,833			5,526
Stock-based compensation awards					4,808											4,808
Acquisition of treasury stock	(1,486	)											(18,545		)	(18,545		)
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

See Notes to Consolidated Financial Statements


	Preferred Stock			Common Stock			Additional		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
	Shares	Amount		Shares	Amount		Paid-in Capital
Three months ended June 30, 2021
Balance at March 31, 2021	200	$	192,878	162,517	$	558,116	$	1,511,101	$	1,168,491	$	25,838	$	(826,769)	$	2,629,655
Net income									64,964						64,964
Other comprehensive income											21,363				21,363

Common stock issued				471	1,369		446						(1,568)		247
Stock-based compensation awards							2,098								2,098

Preferred stock dividend									(2,562)						(2,562)
Common stock cash dividends - $0.14 per share									(22,807)						(22,807)
Balance at June 30, 2021	200	$	192,878	162,988	$	559,485	$	1,513,645	$	1,208,086	$	47,201	$	(828,337)	$	2,692,958

Three months ended June 30, 2020
Balance at March 31, 2020	0	$	0	161,435	$	556,243	$	1,502,189	$	1,040,646	$	18,308	$	(831,638)	$	2,285,748
Net income									39,559						39,559
Other comprehensive income											33,131				33,131

Common stock issued				523	1,326		(350)						221		1,197
Stock-based compensation awards							1,911								1,911



Common stock cash dividends - $0.13 per share									(21,045)						(21,045)
Balance at June 30, 2020	0	$	0	161,958	$	557,569	$	1,503,750	$	1,059,160	$	51,439	$	(831,417)	$	2,340,501

Six months ended June 30, 2021
Balance at December 31, 2020	200	$	192,878	162,350	$	557,917	$	1,508,117	$	1,120,781	$	65,091	$	(827,956)	$	2,616,828
Net income									138,027						138,027
Other comprehensive loss											(17,890)				(17,890)

Common stock issued				638	1,568		1,528						(381)		2,715
Stock-based compensation awards							4,000								4,000

Preferred stock dividend									(5,153)						(5,153)
Common stock cash dividends - $0.28 per share									(45,569)						(45,569)
Balance at June 30, 2021	200	$	192,878	162,988	$	559,485	$	1,513,645	$	1,208,086	$	47,201	$	(828,337)	$	2,692,958

Six months ended June 30, 2020
Balance at December 31, 2019	0	$	0	164,218	$	556,110	$	1,499,681	$	1,079,391	$	(137)	$	(792,869)	$	2,342,176
Net income									65,606						65,606
Other comprehensive income											51,576				51,576

Common stock issued				648	1,459		540						1,200		3,198
Stock-based compensation awards							3,530								3,530
Adjustment for CECL (1)									(43,807)						(43,807)
Acquisition of treasury stock				(2,908)									(39,748)		(39,748)

Common stock cash dividends - $0.26 per share									(42,030)						(42,030)
Balance at June 30, 2020	0	$	0	161,958	$	557,569	$	1,503,750	$	1,059,160	$	51,439	$	(831,417)	$	2,340,501

See Notes to Consolidated Financial Statements



	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



	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



	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



	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
	(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
Real estate - residential mortgage	1,845,495			1,557,995			20,769			20,344			21,643			23,655			1,887,907			1,601,994
Construction - other	64,110			55,874			382			—			1,091			1,096			65,583			56,970
Consumer - direct	55,490			93,572			158			1,752			63			1,563			55,711			96,887
Consumer - indirect	243,723			190,656			2,834			3,599			180			328			246,737			194,583
Total consumer	299,213			284,228			2,992			5,351			243			1,891			302,448			291,470
Leasing	256,784			229,591			884			1,068			80			317			257,748			230,976
	$	4,007,891		$	3,730,375		$	37,982		$	36,037		$	35,286		$	40,113		$	4,081,159		$	3,806,525
% of Total	98.2		%	98.0		%	0.9		%	0.9		%	0.9		%	1.1		%	100.0		%	100.0		%



	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


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


	June 30, 2021				December 31, 2020
	Notional Amount		Asset (Liability) Fair Value		Notional Amount		Asset (Liability) Fair Value
	(in thousands)
Interest Rate Locks with Customers
Positive fair values	$	335,010	$	3,595	$	382,903	$	8,034
Negative fair values	1,688		(10)		3,154		(35)

Forward Commitments
Positive fair values	0		0		0		0
Negative fair values	54,000		(211)		292,262		(2,263)

Interest Rate Swaps with Customers
Positive fair values	3,315,775		210,570		3,834,062		330,951
Negative fair values	542,265		(1,301)		45,640		(2)

Interest Rate Swaps with Dealer Counterparties
Positive fair values	542,265		1,301		45,640		2
Negative fair values	3,315,775		(105,883)		3,834,062		(165,205)

Interest Rate Swaps used in Cash Flow Hedges
Positive fair values	500,000		235		0		0
Negative fair values	0		0		0		0
Foreign Exchange Contracts with Customers
Positive fair values	11,672		143		1,121		5
Negative fair values	1,463		(48)		5,963		(275)

Foreign Exchange Contracts with Correspondent Banks
Positive fair values	5,582		89		6,372		318
Negative fair values	10,942		(145)		1,422		(5)


	Unrealized Gains (Losses) on Investment Securities		Net Unrealized (Loss) Gain on Interest Rate Swaps used in Cash Flow Hedges		Unrecognized Pension and Postretirement Plan Income (Costs)		Total
	(in thousands)
Three months ended June 30, 2021
Balance at March 31, 2021	$	43,769	$	(1,707)	$	(16,224)	$	25,838
OCI before reclassifications	19,298		0		0		19,298
Amounts reclassified from AOCI	(28)		2,074		289		2,335
Amortization of net unrealized gains on AFS securities transferred to HTM	(270)		0		0		(270)

Balance at June 30, 2021	$	62,769	$	367	$	(15,935)	$	47,201
Three months ended June 30, 2020
Balance at March 31, 2020	$	33,054	$	0	$	(14,746)	$	18,308
OCI before reclassifications	34,424		0		0		34,424
Amounts reclassified from AOCI	(2,341)		0		255		(2,086)
Amortization of net unrealized losses on AFS securities transferred to HTM	793		0		0		793

Balance at June 30, 2020	$	65,930	$	0	$	(14,491)	$	51,439

Six months ended June 30, 2021
Balance at December 31, 2020	$	81,604	$	0	$	(16,513)	$	65,091
OCI before reclassifications	(20,701)		0		0		(20,701)
Amounts reclassified from AOCI	349		367		578		1,294
Amortization of net unrealized losses on AFS securities transferred to HTM	1,517		0		0		1,517

Balance at June 30, 2021	$	62,769	$	367	$	(15,935)	$	47,201
Six months ended June 30, 2020
Balance at December 31, 2019	$	14,864	$	0	$	(15,001)	$	(137)
OCI before reclassifications	51,853		0		0		51,853
Amounts reclassified from AOCI	(2,376)		0		510		(1,866)
Amortization of net unrealized losses on AFS securities transferred to HTM	1,589		0		0		1,589

Balance at June 30, 2020	$	65,930	$	0	$	(14,491)	$	51,439


		Single-issuer Trust Preferred Securities		ARCs
Three months ended June 30, 2021	(in thousands)
Balance at March 31, 2021		$	0	$	76,204


Unrealized adjustment to fair value (1)		0		(1,370)


Balance at June 30, 2021		$	0	$	74,834

Three months ended June 30, 2020
Balance at March 31, 2020		$	2,160	$	93,666
Sales		(2,160)		0

Unrealized adjustment to fair value (1)		0		7,193


Balance at June 30, 2020		$	0	$	100,859

Six months ended June 30, 2021
Balance at December 31, 2020		$	0	$	98,206
Sales		0		(24,619)

Unrealized adjustment to fair value (1)		0		1,247


Balance at June 30, 2021		$	0	$	74,834

Six months ended June 30, 2020
Balance at December 31, 2019		$	2,400	$	101,926
Sales		(2,160)		0

Unrealized adjustment to fair value (1)		(242)		(1,067)

Discount accretion		2		0
Balance at June 30, 2020		$	0	$	100,859


	June 30, 2021
			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	1,904,059	$	1,904,059	$	0	$	0	$	1,904,059
FRB and FHLB stock	62,631		0		62,631		0		62,631
Loans held for sale	41,924		0		41,924		0		41,924
AFS securities	3,097,375		153,545		2,868,996		74,834		3,097,375
HTM securities	824,283		0		826,932		0		826,932
Net Loans	18,331,724		0		0		17,963,518		17,963,518
Accrued interest receivable	63,232		63,232		0		0		63,232
Other assets	542,967		295,025		215,701		32,241		542,967
FINANCIAL LIABILITIES
Demand and savings deposits	$	19,514,090	$	19,514,090	$	0	$	0	$	19,514,090
Brokered deposits	277,444		257,444		20,830		0		278,274
Time deposits	1,932,778		0		1,942,321		0		1,942,321
Short-term borrowings	533,749		533,749		0		0		533,749
Accrued interest payable	7,322		7,322		0		0		7,322
Long-term borrowings	627,213		—		617,167		0��		617,167
Other liabilities	312,700		190,522		107,405		14,773		312,700



	Three months ended September 30, 2017
	Pooled Trust Preferred Securities		Single-issuer Trust Preferred Securities			ARCs
	(in thousands)
Balance at June 30, 2017	$	422	$	2,775		$	97,923
Unrealized adjustment to fair value ⁽¹⁾	—		(28		)	233
Discount accretion ⁽²⁾	—		3			—
Balance at September 30, 2017	$	422	$	2,750		$	98,156

	Three months ended September 30, 2016
Balance at June 30, 2016	$	706	$	2,425		$	97,886
Unrealized adjustment to fair value ⁽¹⁾	—		7			(318		)
Discount accretion ⁽²⁾	—		3			158
Balance at September 30, 2016	$	706	$	2,435		$	97,726

	Nine months ended September 30, 2017
	Pooled Trust Preferred Securities		Single-issuer Trust Preferred Securities			ARCs
	(in thousands)
Balance at December 31, 2016	$	422	$	2,450		$	97,256
Unrealized adjustment to fair value ⁽¹⁾	—		291			705
Discount accretion ⁽²⁾	—		9			195
Balance at September 30, 2017	$	422	$	2,750		$	98,156

	Nine months ended September 30, 2016
Balance at December 31, 2015	$	706	$	2,630		$	98,059
Unrealized adjustment to fair value ⁽¹⁾	—		(204		)	(668		)
Discount accretion ⁽²⁾	—		9			335
Balance at September 30, 2016	$	706	$	2,435		$	97,726



	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



	As of or for the Three months ended September 30						As of or for the Nine months ended September 30
	2017			2016			2017			2016
Net income (in thousands)	$	48,905		$	41,468		$	137,752		$	119,475
Diluted net income per share	$	0.28		$	0.24		$	0.78		$	0.69
Return on average assets	0.98		%	0.89		%	0.95		%	0.87		%
Return on average equity	8.76		%	7.78		%	8.45		%	7.64		%
Return on average tangible equity ⁽¹⁾	11.52		%	10.38		%	11.18		%	10.24		%
Net interest margin ⁽²⁾	3.27		%	3.14		%	3.27		%	3.19		%
Efficiency ratio ⁽¹⁾	64.3		%	65.2		%	64.6		%	67.0		%
Non-performing assets to total assets	0.73		%	0.80		%	0.73		%	0.80		%
Annualized net charge-offs to average loans	0.14		%	0.11		%	0.12		%	0.14		%



	Three months ended September 30								Increase (Decrease) in
	2017				2016				Balance
	Balance		Yield		Balance		Yield		$			%
	(dollars in thousands)
Real estate – commercial mortgage	$	6,208,630	4.07	%	$	5,670,888	3.99	%	$	537,742		9.5	%
Commercial – industrial, financial and agricultural	4,257,075		4.08		4,066,275		3.76		190,800			4.7
Real estate – residential mortgage	1,841,559		3.83		1,503,209		3.76		338,350			22.5
Real estate – home equity	1,569,898		4.48		1,640,913		4.08		(71,015		)	(4.3	)
Real estate – construction	943,029		4.05		837,920		3.76		105,109			12.5
Consumer	318,546		4.94		281,517		5.31		37,029			13.2
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	%



	Three months ended September 30				Increase
	2017		2016		$		%
	(dollars in thousands)
Salaries and employee benefits	$	72,894	$	70,696	$	2,198	3.1	%
Net occupancy expense	12,180		11,782		398		3.4
Data processing and software	10,301		8,727		1,574		18.0
Other outside services	6,582		5,783		799		13.8
Amortization of tax credit investments	3,503		—		3,503		N/M
Professional fees	3,388		2,535		853		33.6
Equipment expense	3,298		3,137		161		5.1
FDIC insurance expense	3,007		1,791		1,216		67.9
Marketing	2,089		1,774		315		17.8
Other	14,915		13,623		1,292		9.5
Total	$	132,157	$	119,848	$	12,309	10.3	%



	September 30, 2017		December 31, 2016
Services	22.1	%	21.8	%
Retail	15.6		15.1
Manufacturing	9.9		9.2
Health care	9.7		10.5
Construction ⁽¹⁾	8.6		9.0
Wholesale	6.8		7.0
Real estate ⁽²⁾	6.4		6.7
Agriculture	4.9		5.0
Arts and entertainment	2.5		2.6
Transportation	2.3		2.3
Financial services	2.1		2.1
Other	9.1		8.7
Total	100.0	%	100.0	%



	September 30, 2017			September 30, 2016			December 31, 2016
	(dollars in thousands)
Non-accrual loans	$	123,345		$	124,017		$	120,133
Loans 90 days or more past due and still accruing	13,124			14,095			11,505
Total non-performing loans	136,469			138,112			131,638
Other real estate owned (OREO)	10,542			11,981			12,815
Total non-performing assets	$	147,011		$	150,093		$	144,453
Non-accrual loans to total loans	0.80		%	0.86		%	0.82		%
Non-performing assets to total assets	0.73		%	0.80		%	0.76		%
Allowance for credit losses to non-performing loans	128.05		%	119.59		%	130.15		%