UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~March 31,~~September 30, 2020,, or



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

For the transition period from to

Commission File No. 0-10587

FULTON FINANCIAL ~~CORPORATION~~CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania

23-2195389

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

~~Pennsylvania~~

~~23-2195389~~

~~(State or other jurisdiction of~~

~~incorporation or organization)~~

~~(I.R.S. Employer~~

~~Identification No.)~~

One Penn Square

~~P.O. Box 4887~~Lancaster,

~~Lancaster,~~Pennsylvania

~~Pennsylvania~~

~~17604~~17602

(Address of principal executive offices)

(Zip Code)

(~~717~~) (717) 291-2411

(Registrant’s telephone number, including area code)

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



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

*Denotes class of security issued and outstanding on the date this report is filed, but not at September 30, 2020.

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

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 ~~–161,794,000~~–162,250,000 shares outstanding as of ~~May 1,~~October 30, 2020.

FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2020

INDEX


Description			Page


~~Description~~		~~Page~~



Glossary of Terms	3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

(a)		Consolidated Balance Sheets - ~~March 31,~~September 30, 2020 and December 31, 2019	4

(b)		Consolidated Statements of Income - Three and nine months ended ~~March 31,~~September 30, 2020 and 2019	5

(c)		Consolidated Statements of Comprehensive Income - Three and nine months ended ~~March 31,~~September 30, 2020 and 2019	6

(d)		Consolidated Statements of Shareholders’ Equity - Three and nine months ended ~~March 31,~~September 30, 2020 and 2019	7

(e)		Consolidated Statements of Cash Flows - ~~Three~~Nine months ended ~~March 31,~~September 30, 2020 and 2019	8

(f)		Notes to Consolidated Financial Statements	9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			4144

Item 3. Quantitative and Qualitative Disclosures about Market Risk			6273

Item 4. Controls and Procedures			6576

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			6676

Item 1A. Risk Factors			6676

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6876

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~~	69

~~Signatures~~	70



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

Item 6. Exhibits						78

Signatures						79


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
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~~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~~
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
Net Loans						Loans and lease receivables, (net of unearned income)
OBS						Off-Balance-Sheet
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~~
TruPS						Trust Preferred Securities

Note: Some numbers contained in the document may not sum due to rounding

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

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

March 31,
2020 December 31,
2019
(unaudited)
ASSETS
Cash and due from banks $ 181,777
$ 132,283
Interest-bearing deposits with other banks 674,583
385,508
Cash and cash equivalents 856,360
517,791
FRB and FHLB stock 118,989
97,422
Loans held for sale 40,645
37,828
Investment securities:
AFS, at estimated fair value 2,790,834
2,497,537
HTM, at amortized cost 350,606
369,841
Loans 17,077,403
16,837,526
Less: ACL - loans (238,508 ) (163,622 )
Net loans 16,838,895
16,673,904
Premises and equipment 236,908
240,046
Accrued interest receivable 59,365
60,898
Goodwill and intangible assets 535,171
535,303
Other assets 1,102,086
855,470
Total Assets $ 22,929,859
$ 21,886,040
LIABILITIES
Deposits:
Noninterest-bearing $ 4,531,872
$ 4,453,324
Interest-bearing 12,833,154
12,940,589
Total Deposits 17,365,026
17,393,913
Short-term borrowings 1,386,808
883,241
Accrued interest payable 10,890
8,834
Long-term borrowings 1,378,466
881,769
Other liabilities 502,921
376,107
Total Liabilities 20,644,111
19,543,864
SHAREHOLDERS’ EQUITY
Common stock, $2.50 par value, 600 million shares authorized, 222.5 million shares issued in 2020 and 222.4 million issued in 2019 556,243
556,110
Additional paid-in capital 1,502,189
1,499,681
Retained earnings 1,040,646
1,079,391
Accumulated other comprehensive gain (loss) 18,308
(137 )
Treasury stock, at cost, 61.1 million shares in 2020 and 58.2 million shares in 2019 (831,638 ) (792,869 )
Total Shareholders’ Equity 2,285,748
2,342,176
Total Liabilities and Shareholders’ Equity $ 22,929,859
$ 21,886,040

See Notes to Consolidated Financial Statements

~~CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)~~

(in thousands, except per-share data) Three months ended March 31
2020 2019
INTEREST INCOME
Loans, including fees $ 175,523
$ 183,744
Investment securities:
Taxable 16,294
15,435
Tax-exempt 4,709
3,279
Loans held for sale 320
240
Other interest income 2,532
2,002
Total Interest Income 199,378
204,700
INTEREST EXPENSE
Deposits 26,440
29,689
Short-term borrowings 4,073
3,582
Long-term borrowings 8,119
8,114
Total Interest Expense 38,632
41,385
Net Interest Income 160,746
163,315
Provision for credit losses 44,030
5,100
Net Interest Income After Provision for Credit Losses 116,716
158,215
NON-INTEREST INCOME
Wealth management 15,055
13,239
Commercial banking 18,419
15,250
Consumer banking 11,239
11,377
Mortgage banking 6,234
4,772
Other 3,651
2,048
Non-Interest Income Before Investment Securities Gains 54,598
46,686
Investment securities gains, net 46
65
Total Non-Interest Income 54,644
46,751
NON-INTEREST EXPENSE
Salaries and employee benefits 80,228
77,757
Net occupancy 13,486
12,909
Data processing and software 11,645
10,353
Other outside services 7,881
8,352
Professional fees 4,202
3,960
Equipment 3,418
3,342
State Taxes 2,804
2,002
FDIC insurance 2,808
2,609
Marketing 1,579
2,160
Amortization of TCI 1,450
1,491
Intangible amortization 132
107
Other 12,919
12,782
Total Non-Interest Expense 142,552
137,824
Income Before Income Taxes 28,808
67,142
Income taxes 2,761
10,479
Net Income $ 26,047
$ 56,663
PER SHARE:
Net Income (Basic) $ 0.16
$ 0.33
Net Income (Diluted) 0.16
0.33
Cash Dividends 0.13
0.13
See Notes to Consolidated Financial Statements

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

~~(in thousands)~~

Three months ended March 31
2020 2019

Net Income $ 26,047
$ 56,663
Other Comprehensive Income, net of tax:
Unrealized gain on securities 17,431
20,298
Reclassification adjustment for securities gains included in net income (36 ) (51 )
Amortization of net unrealized losses on AFS securities transferred to HTM 795
974
Non-credit related unrealized (loss) on other-than-temporarily impaired debt securities —
(82 )
Amortization of net unrecognized pension and postretirement income 255
291
Other Comprehensive Income 18,445
21,430
Total Comprehensive Income $ 44,492
$ 78,093

See Notes to Consolidated Financial Statements

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

(in thousands, except per-share data)


	September 30, 2020		December 31, 2019
	(unaudited)
ASSETS
Cash and due from banks	$	139,304	$	132,283
Interest-bearing deposits with other banks	1,395,586		385,508
Cash and cash equivalents	1,534,890		517,791
FRB and FHLB stock	93,964		97,422
Loans held for sale	93,621		37,828
Investment securities:
AFS, at estimated fair value	2,793,480		2,497,537
HTM, at amortized cost	304,241		369,841
Loans	19,028,621		16,837,526
Less: ACL - loans	(266,825)		(163,622)
Net Loans	18,761,796		16,673,904
Premises and equipment	236,943		240,046
Accrued interest receivable	70,766		60,898
Goodwill and intangible assets	534,907		535,303
Other assets	1,118,673		855,470
Total Assets	$	25,543,281	$	21,886,040
LIABILITIES
Deposits:
Noninterest-bearing	$	6,378,077	$	4,453,324
Interest-bearing	14,351,974		12,940,589
Total Deposits	20,730,051		17,393,913



Short-term borrowings	611,727		883,241
Accrued interest payable	9,123		8,834
Long-term borrowings	1,296,012		881,769
Other liabilities	506,107		376,107
Total Liabilities	23,153,020		19,543,864
SHAREHOLDERS’ EQUITY
Common stock, $2.50 par value, 600 million shares authorized, 223.1 million shares issued in 2020 and 222.4 million issued in 2019	557,718		556,110
Additional paid-in capital	1,505,730		1,499,681
Retained earnings	1,099,684		1,079,391
Accumulated other comprehensive gain (loss)	56,954		(137)
Treasury stock, at cost, 61.0 million shares in 2020 and 58.3 million shares in 2019	(829,825)		(792,869)
Total Shareholders’ Equity	2,390,261		2,342,176
Total Liabilities and Shareholders’ Equity	$	25,543,281	$	21,886,040

See Notes to Consolidated Financial Statements

Common Stock
Retained
Earnings

Treasury
Stock
Total

Shares
Outstanding
Amount
Additional Paid-in
Capital

Accumulated
Other Comprehensive
Income (Loss)

Three months ended March 31, 2020
Balance at December 31, 2019 164,218
$ 556,110
$ 1,499,681
$ 1,079,391
$ (137 ) $ (792,869 ) $ 2,342,176
Net income

26,047

26,047
Other comprehensive income

18,445

18,445
Stock issued 125
133
889

979
2,001
Stock-based compensation awards

1,619

1,619
Acquisition of treasury stock (2,908 ) (39,748 ) (39,748 )
Impact of adopting CECL ⁽¹⁾
(43,807 ) (43,807 )
Common stock cash dividends - $0.13 per share

(20,985 )

(20,985 )
Balance at March 31, 2020 161,435
$ 556,243
$ 1,502,189
$ 1,040,646
$ 18,308
$ (831,638 ) $ 2,285,748

Three months ended March 31, 2019
Balance at December 31, 2018 170,184
$ 554,377
$ 1,489,703
$ 946,032
$ (59,063 ) $ (683,476 ) $ 2,247,573
Net income

56,663

56,663
Other comprehensive income

21,430

21,430
Stock issued 115
108
607

942
1,657
Stock-based compensation awards

1,560

1,560
Acquisition of treasury stock (376 ) (5,877 ) (5,877 )
Common stock cash dividends - $0.13 per share

(21,987 )

(21,987 )
Balance at March 31, 2019 169,923
$ 554,485
$ 1,491,870
$ 980,708
$ (37,633 ) $ (688,411 ) $ 2,301,019

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
	2020		2019		2020		2019
INTEREST INCOME
Loans, including fees	$	158,804	$	186,001	$	493,256	$	558,055
Investment securities:
Taxable	13,150		15,565		44,615		46,935
Tax-exempt	5,449		3,673		15,481		10,222

Loans held for sale	728		466		1,557		1,056
Other interest income	1,028		2,709		4,324		6,879
Total Interest Income	179,159		208,414		559,233		623,147
INTEREST EXPENSE
Deposits	14,631		35,737		58,189		97,974
Short-term borrowings	370		4,156		4,960		12,200
Long-term borrowings	10,042		7,260		28,468		23,854
Total Interest Expense	25,043		47,153		91,617		134,028
Net Interest Income	154,116		161,260		467,616		489,119
Provision for credit losses	7,080		2,170		70,680		12,295
Net Interest Income After Provision for Credit Losses	147,036		159,090		396,936		476,824
NON-INTEREST INCOME
Wealth management	14,943		13,867		43,405		41,259
Commercial banking	18,311		18,788		53,477		53,055
Consumer banking	10,423		13,333		30,800		37,077
Mortgage banking	16,801		6,658		32,998		18,023
Other	2,769		2,675		10,080		6,733
Non-Interest Income Before Investment Securities Gains	63,246		55,321		170,761		156,147
Investment securities gains, net	2		4,492		3,053		4,733
Total Non-Interest Income	63,248		59,813		173,814		160,879
NON-INTEREST EXPENSE
Salaries and employee benefits	79,227		78,211		240,467		234,959
Net occupancy	13,221		12,368		39,851		39,746
Data processing and software	12,285		11,590		36,123		33,211
Other outside services	7,617		12,163		23,098		31,774
Professional fees	2,879		3,331		10,412		10,261
Equipment	3,711		3,459		10,322		10,100
State taxes	2,692		2,523		8,583		7,005
FDIC insurance	1,578		239		6,519		5,603
Marketing	1,147		3,322		4,029		8,345
Amortization of TCI	1,694		1,533		4,594		4,516
Intangible amortization	132		1,071		397		1,285
Prepayment penalty on FHLB advances	0		4,326		2,878		4,326
Other	12,962		12,634		37,431		37,631
Total Non-Interest Expense	139,147		146,770		424,705		428,762
Income Before Income Taxes	71,137		72,133		146,045		208,941
Income taxes	9,529		10,025		18,832		30,391
Net Income	$	61,607	$	62,108	$	127,213	$	178,550
PER SHARE:
Net Income (Basic)	$	0.38	$	0.38	$	0.78	$	1.06
Net Income (Diluted)	0.38		0.37		0.78		1.06
Cash Dividends	0.13		0.13		0.39		0.39
See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	Three months ended September 30				Nine months ended September 30
	2020		2019		2020		2019

Net Income	$	61,607	$	62,108	$	127,213	$	178,550
Other Comprehensive Income, net of tax:
Unrealized gain on securities	4,333		18,029		56,186		63,244

Reclassification adjustment for securities gains included in net income	(1)		(3,498)		(2,377)		(3,686)
Amortization of net unrealized losses on AFS securities transferred to HTM	928		3,430		2,517		5,425

Non-credit related unrealized loss on other-than-temporarily impaired debt securities	0		0		0		(682)


Amortization of net unrecognized pension and postretirement income	255		277		765		843
Other Comprehensive Income	5,515		18,238		57,091		65,144
Total Comprehensive Income	$	67,122	$	80,346	$	184,304	$	243,694

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except per-share data)


	Common Stock					Retained Earnings				Treasury Stock		Total
	Shares Outstanding	Amount		Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)
Three months ended September 30, 2020
Balance at June 30, 2020	161,958	$	557,569	$	1,503,750	$	1,059,160	$	51,439	$	(831,417)	$	2,340,501
Net income						61,607						61,607
Other comprehensive income								5,515				5,515
Stock issued	176	149		105						1,592		1,846
Stock-based compensation awards				1,875								1,875


Common stock cash dividends - $0.13 per share						(21,083)						(21,083)
Balance at September 30, 2020	162,134	$	557,718	$	1,505,730	$	1,099,684	$	56,954	$	(829,825)	$	2,390,261

Three months ended September 30, 2019
Balance at June 30, 2019	166,903	$	555,690	$	1,493,628	$	1,018,736	$	(12,157)	$	(747,099)	$	2,308,798
Net income						62,108						62,108
Other comprehensive income								18,238				18,238
Stock issued	157	198		919						1,043		2,160
Stock-based compensation awards				2,110								2,110
Acquisition of treasury stock	(3,024)									(48,071)		(48,071)


Common stock cash dividends - $0.13 per share						(21,327)						(21,327)
Balance at September 30, 2019	164,036	$	555,888	$	1,496,657	$	1,059,517	$	6,081	$	(794,127)	$	2,324,016

Nine months ended September 30, 2020
Balance at December 31, 2019	164,218	$	556,110	$	1,499,681	$	1,079,391	$	(137)	$	(792,869)	$	2,342,176
Net income						127,213						127,213
Other comprehensive income								57,091				57,091
Stock issued	824	1,608		646						2,792		5,046
Stock-based compensation awards				5,403								5,403
Acquisition of treasury stock	(2,908)									(39,748)		(39,748)

Impact of adopting CECL (1)						(43,807)						(43,807)
Common stock cash dividends - $0.39 per share						(63,113)						(63,113)
Balance at September 30, 2020	162,134	$	557,718	$	1,505,730	$	1,099,684	$	56,954	$	(829,825)	$	2,390,261

Nine months ended September 30, 2019
Balance at December 31, 2018	170,184	$	554,377	$	1,489,703	$	946,032	$	(59,063)	$	(683,476)	$	2,247,573
Net income						178,550						178,550
Other comprehensive income								65,144				65,144
Stock issued	701	1,511		1,496						806		3,813
Stock-based compensation awards				5,458								5,458
Acquisition of treasury stock	(6,849)									(111,457)		(111,457)


Common stock cash dividends - $0.39 per share						(65,065)						(65,065)
Balance at September 30, 2019	164,036	$	555,888	$	1,496,657	$	1,059,517	$	6,081	$	(794,127)	$	2,324,016

See Notes to Consolidated Financial Statements

(1) The Corporation adopted ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments ~~effective~~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) Three months ended March 31
2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 26,047
$ 56,663
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for credit losses 44,030
5,100
Depreciation and amortization of premises and equipment 7,161
6,888
Amortization of TCI 7,619
8,155
Net amortization of investment securities premiums 2,707
2,075
Investment securities gains, net (46 ) (65 )
Gain on sales of mortgage loans held for sale (6,181 ) (3,122 )
Proceeds from sales of mortgage loans held for sale 195,649
142,739
Originations of mortgage loans held for sale (192,285 ) (140,286 )
Intangible amortization 132
107
Amortization of issuance costs and discounts on long-term debt 250
211
Stock-based compensation 1,619
1,560
Other changes, net (133,579 ) (41,754 )
Total adjustments (72,924 ) (18,392 )
Net cash (used in) provided by operating activities (46,877 ) 38,271
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities AFS 59,894
37,660
Proceeds from principal repayments and maturities of AFS securities 61,408
51,097
Proceeds from principal repayments and maturities of HTM securities 19,758
18,687
Purchase of securities AFS (390,936 ) (143,588 )
Purchase of FRB and FHLB stock (21,567 ) (6,250 )
Net increase in loans (250,993 ) (101,123 )
Net purchases of premises and equipment (4,023 ) (11,363 )
Net cash paid for acquisition —
(3,907 )
Net change in tax credit investments (128 ) (8,003 )
Net cash used in investing activities (526,587 ) (166,790 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand and savings deposits (34,866 ) (108,185 )
Net increase in time deposits 5,979
110,004
Net increase in short-term borrowings 503,567
74,239
Additions to long-term debt 496,461
75,000
Repayments of long-term debt (13 ) (2,026 )
Net proceeds from issuance of common stock 2,001
1,657
Dividends paid (21,348 ) (20,592 )
Acquisition of treasury stock (39,748 ) (5,877 )
Net cash provided by financing activities 912,033
124,220
Net Increase (Decrease) in Cash and Cash Equivalents 338,569
(4,299 )
Cash and Cash Equivalents at Beginning of Period 517,791
445,687
Cash and Cash Equivalents at End of Period $ 856,360
$ 441,388
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 36,576
$ 40,695
Income taxes 1,072
1,485
See Notes to Consolidated Financial Statements


(in thousands)	Nine months ended September 30
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	127,213	$	178,550
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	70,680		12,295
Depreciation and amortization of premises and equipment	21,653		20,984
Amortization of TCI	22,883		24,608
Net amortization of investment securities premiums	8,722		6,861
Investment securities gains, net	(3,053)		(4,733)
Gain on sales of mortgage loans held for sale	(42,208)		(13,822)
Proceeds from sales of mortgage loans held for sale	1,113,671		672,314
Originations of mortgage loans held for sale	(1,127,256)		(665,338)
Intangible amortization	397		1,285
Amortization of issuance costs and discounts on long-term debt	836		632
Stock-based compensation	5,403		5,458


Other changes, net	(169,447)		(195,560)
Total adjustments	(97,719)		(135,016)
Net cash provided by operating activities	29,494		43,534
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of AFS securities	215,150		697,634
Proceeds from principal repayments and maturities of AFS securities	282,832		169,380
Proceeds from principal repayments and maturities of HTM securities	67,268		62,320
Purchase of AFS securities	(728,937)		(838,634)

Sale (purchase) of FRB and FHLB stock	3,458		(15,274)
Net increase in loans	(2,203,974)		(529,974)
Net purchases of premises and equipment	(18,550)		(23,799)
Net cash paid for acquisition	0		(3,907)
Net change in tax credit investments	(9,585)		(14,715)
Net cash used in investing activities	(2,392,338)		(496,969)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits	3,669,990		627,958
Net (decrease) increase in time deposits	(333,852)		338,600
Net (decrease) increase in short-term borrowings	(271,514)		78,083
Additions to long-term debt	495,898		305,000
Repayments of long-term debt	(82,491)		(571,197)
Net proceeds from issuance of common stock	5,046		3,813

Dividends paid	(63,387)		(64,439)
Acquisition of treasury stock	(39,748)		(111,457)
Net cash provided by financing activities	3,379,942		606,361
Net Increase in Cash and Cash Equivalents	1,017,099		152,926
Cash and Cash Equivalents at Beginning of Period	517,791		445,687
Cash and Cash Equivalents at End of Period	$	1,534,890	$	598,613
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	91,328	$	134,935
Income taxes	12,118		7,966
Supplemental schedule of certain noncash activities:

Transfer of HTM securities to AFS securities	$	0	$	158,898
See Notes to Consolidated Financial Statements

FULTON FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of ~~Fulton Financial~~the Corporation have been prepared in conformity with 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 GAAP for complete financial statements. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2019. Operating results for the three and nine months ended ~~March 31,~~September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The Corporation evaluates subsequent events through the date of filing of this Form 10-Q with the SEC.

CECL Adoption and Updated Significant Accounting Policy

On January 1, 2020, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, and is referred to as CECL. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans and HTM debt securities. It also applies to OBS credit exposures, ~~(loan~~such as loan commitments, standby letters of credit, financial guarantees, and other similar ~~instruments)~~instruments, and net investments in leases recognized by a lessor in accordance with ASC Topic 842.

The Corporation adopted CECL using the modified retrospective method for all financial assets measured at amortized cost, net of investments in leases and OBS credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under CECL, while prior period results are reported in accordance with the previously applicable incurred loss methodology. The Corporation recorded an ~~overall~~ increase of $58.3 million to the ACL on January 1, 2020 as a result of the adoption of CECL. Retained earnings decreased $43.8 million and deferred tax assets increased by $12.4 million. Included in the $58.3 million increase to the ACL was $2.1 million for certain OBS credit exposures that was previously recognized in other liabilities before the adoption of CECL.

Loans: Loans are stated at their principal amount outstanding, except for mortgage loans held for sale, which are carried at fair value. Interest income on loans is accrued as earned. Unearned income on lease financing receivables is recognized on a basis which approximates the effective yield method.

In general, loans are placed on non-accrual status once they become 90 days delinquent as to principal or interest. In certain cases a loan may be placed on non-accrual status prior to being 90 days delinquent if there is an indication that the borrower is having difficulty making payments, or the Corporation believes it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. When interest accruals are discontinued, unpaid interest previously credited to income is reversed. Non-accrual loans may be restored to accrual status when all delinquent principal and interest has been paid currently for six consecutive months or the loan is considered secured and in the process of collection. The Corporation generally applies payments received on non-accruing loans to principal until such time as the principal is paid off, after which time any payments received are recognized as interest income. If the Corporation believes that all amounts outstanding on a non-accrual loan will ultimately be collected, payments received subsequent to its classification as a non-accrual loan are allocated between interest income and principal.

A loan that is 90 days delinquent may continue to accrue interest if the loan is both adequately secured and is in the process of collection. Past due status is determined based on contractual due dates for loan payments. An adequately secured loan is one that has collateral with a supported fair value that is sufficient to discharge the debt, and/or has an enforceable guarantee from a financially responsible party. A loan is considered to be in the process of collection if collection is proceeding through legal action or through other activities that are reasonably expected to result in repayment of the debt or restoration to current status in the near future.

Loans deemed to be a loss are written off through a charge against the ACL. Closed-end consumer loans are generally charged off when they become 120 days past due (180 days for open-end consumer loans) if they are not adequately secured by real

estate. All other loans are evaluated for possible charge-off when it is probable that the balance will not be collected, based on the ability

of the borrower to pay and the value of the underlying collateral, if any. Principal recoveries of loans previously charged off are recorded as increases to the ACL.

Loan Origination Fees and Costs: Loan origination fees and the related direct origination costs are deferred and amortized over the life of the loan as an adjustment to interest income using the effective yield method. For mortgage loans sold, net loan origination fees and costs are included in the gain or loss on sale of the related loan, as components of mortgage banking.

Loan origination fees and the related direct origination costs for loans originated under the PPP loan program are amortized on a straight-line basis over the repayment period of the loan. To the extent that a PPP loan is forgiven, the unamortized fees and costs will be recorded at the time of forgiveness.

Troubled Debt Restructurings: Loans are accounted for and reported as TDRs when, for economic or legal reasons, the Corporation grants a concession to a borrower experiencing financial difficulty that it would not otherwise consider. Concessions, whether negotiated or imposed by bankruptcy, granted under a TDR typically involve a temporary deferral of scheduled loan payments, an extension of a loan’s stated maturity date or a reduction in the interest rate. Non-accrual TDRs can be restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification.

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, the modified loan was not more than 30 days past due on December 31, 2019 and the modification was executed between March 1, 2020 and the earlier of (a) 60 days after the date of the COVID-19 national emergency comes to an end or (b) December 31, 2020. The Corporation is applying the option under the CARES act for all loan modifications that qualify.

On April 7, 2020, Troubled Debt Restructurings: Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by COVID-19 was issued by the federal banking regulatory agencies. Included in the Interagency Statement were provisions permitting banks that grant loan modifications to customers impacted by COVID-19 to exclude those modifications from loans categorized as TDRs. The Corporation is adopting the guidance in this Interagency Statement effective for COVID-19-related modifications occurring subsequent to March 13, 2020.

Allowance for Credit Losses: The discussion that follows describes the methodology for determining the ACL under the CECL model that was adopted ~~effective~~ January 1, 2020. The allowance methodology for prior periods is disclosed in the Corporation’s 2019 Annual Report on Form 10-K.

The Corporation has 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 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 expected credit losses. ~~The ACL also includes certain qualitative adjustments to the CECL model.~~

Loans Evaluated Collectively: Loans evaluated collectively for expected credit losses include loans on accrual status, excluding accruing TDRs, and loans initially evaluated individually, but determined to not to have enhanced credit risk characteristics. This category includes loans on non-accrual status and TDRs where the total commitment amount is less than $1 million. The ACL is estimated by applying a probability of default (PD) and loss given default (LGD) to the exposure at default (EAD) at the loan or lease level. In order to determine the ~~ACL:~~PD, LGD, and EAD inputs:

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

•The PD and LGD ~~CECL~~ model components are determined based on loss estimates driven by historical credit loss experience ~~at the input level.~~

~~The PD model component uses "through the economic cycle transition" matrices based on the Corporation's historical loan and transaction data across~~for each pool of loans.

•The PD model components use econometric regression models that use the Corporation’s historical credit loss experience and economic variable inputs to estimate a PD for each loan pool. The LGD model component calculates a lifetime LGD estimate across each pool of loans utilizing a ~~nonparametric~~ loss ~~curve modeling approach.~~rate approach based on the Corporation’s historical charge-off and the balance at the time of loan default adjusted for the Corporation’s recovery experience.

•Reasonable and supportable economic variable forecasts are incorporated into the PD model ~~component.~~components.

•Reasonable and supportable forecast periods are based on different economic forecasts and scenarios sourced from an external third party. A future loss forecast over the reasonable and supportable forecast period is based on the projected performance of specific economic variables that statistically correlate ~~with~~loss experience in the ~~PD and LGD~~various loan pools.

•After the reasonable and supportable forecast period, ~~loss estimates~~economic variable forecasts naturally revert, at the input level,to ~~input-level reversion.~~a long-run average.

~~Cash~~•To calculate the EAD model component, cash flow assumptions are established for each loan using maturity date, amortization schedule and interest rate.

A In addition, a constant prepayment rate is calculated for each loan ~~pool in the CECL model.~~pool.

Loans Evaluated Individually: Loans evaluated individually for expected credit losses include loans on non-accrual status and TDRs where the commitment amount equals or exceeds $1$1.0 million. The required ACL for such loans is determined using either the present value of expected future cash flows, observable market price or the fair value of collateral.

Loans evaluated individually may have specific allocations 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 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.

For loans secured by real estate, estimated fair values are determined primarily through appraisals performed by third-party appraisers, 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 appraisal of the 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 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 there has not been a significant deterioration in the collateral value since the original appraisal was performed.

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 determined based on borrower financial statements, inventory listings, accounts receivable agings or borrowing base certificates. Indications of value from these sources are generally discounted based on the age of the 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 following is a summary of the Corporation's internal risk rating categories:

•

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

•Special Mention: These loans have a heightened credit risk, but not to the point of justifying a classification of Substandard. Loans in this category are currently acceptable, but are nevertheless potentially weak.

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

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


•	~~Special Mention: These loans have a heightened credit risk, but not to the point of justifying a classification of Substandard. Loans in this category are currently acceptable, but are nevertheless potentially weak.~~


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

The allocation of 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~~management’s knowledge of the portfolio and the markets in which the Corporation operates. Qualitative adjustments are evaluated and approved on a 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 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, such as letters of credit and credit recourse on sold residential mortgage loans.~~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.

HTM ~~debt securities:~~Debt Securities: Expected credit losses on HTM debt securities would be recorded in the ACL on HTM debt securities. As of ~~March 31,~~September 30, 2020, no HTM debt securities required an ACL as these investments consist solely of government guaranteed residential mortgage-backed securities.

AFS ~~debt securities~~Debt Securities: The ACL approach for AFS debt securities differs from the CECL approach used for HTM debt securities as AFS debt securities are carried at fair value rather than amortized cost. Prior to the adoption of CECL, credit losses on AFS debt securities were determined using an OTTI approach. Under CECL, the concept of OTTI has been eliminated, but the general approach to determining credit losses is largely consistent with the OTTI method. Under CECL, credit losses on AFS debt securities are recognized through an ACL rather than through a direct write-down of the security. As of ~~March 31,~~September 30, 2020, no AFS debt securities required an ACL.

Other Recently Adopted Accounting Standards

On January 1, 2020, the Corporation adopted ASC Update 2018-13 - Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This update changes the fair value measurement disclosure requirements of ASC Topic 820 "Fair Value Measurement." Among other things, the update modifies the disclosure objective paragraphs of ASC 820 to eliminate: (1) "at a minimum" from the phrase "an entity shall disclose at a minimum;" and (2) other similar disclosure requirements to promote the appropriate exercise of discretion by entities.

The Corporation adopted this standards update effective with its March 31, 2020 quarterly report on Form 10-Q and it did not have a material impact on its consolidated financial statements.

On January 1, 2020, the Corporation adopted ASC Update 2018-15 - Intangibles - Goodwill and Other - Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This update requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC Subtopic 350-40 to determine which implementation costs to capitalize as assets.

The Corporation adopted this standards update effective with its March 31, 2020 quarterly report on Form 10-Q and it did not have a material impact on its consolidated financial statements

In March 2020, the Corporation adopted ASC Update 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standards update provided optional guidance for a limited time to ease the potential burden in accounting for reference rate reform, specific to those using LIBOR or another reference rate expected to be discontinued due to this reform.

The Corporation adopted this standards update effective with its March 31, 2020 quarterly report on Form 10-Q and it did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards



Standard	Description	Date of Anticipated Adoption	Effect on Financial Statements
ASC Update 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans	This update amends ASC Topic 715-20 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This update is effective for fiscal years ending after December 15, 2020. Early adoption is permitted.	Fiscal Year 2020	The Corporation intends to adopt this standards update effective with its December 31, 2020 annual report on Form 10-K. This standard will impact the Corporation's disclosure relating to employee benefit plans, but the Corporation does not expect the adoption of this update to have a material impact on ~~its~~the consolidated financial statements.
ASC Update 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	This update simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This update is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted.	First Quarter 2021	The Corporation intends to adopt this standards update effective with its March 31, 2021 quarterly report on Form 10-Q. This update is not expected to have a material impact on the consolidated financial statements.

Reclassifications

Certain amounts in the 2019 consolidated financial statements and notes have been reclassified to conform to the 2020 presentation.

NOTE 2 – Restrictions on Cash and Cash Equivalents

The Bank is required to maintain reserves against its deposit liabilities. Prior to March 2020, reserves were in the form of cash and balances with the ~~FRB, included in "interest-bearing deposits with other banks."~~FRB. The FRB suspended cash reserve requirements effective March 26, 2020. The amount of such reserves as of December 31, 2019 was $218.9 million.

In addition, cash collateral is posted by the Corporation with counterparties to secure derivative and other ~~contracts, which is included in "interest-bearing deposits with other banks" on the consolidated balance sheets.~~contracts. The amounts of such cash collateral as of ~~March 31,~~September 30, 2020 and December 31, 2019 were ~~$452.9~~$460.3 million and $199.6 million, respectively.

NOTE 3 – Investment Securities

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


	September 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale	(in thousands)


State and municipal securities	$	880,495	$	46,216	$	(157)	$	926,554
Corporate debt securities	327,143		16,724		(1,309)		342,558
Collateralized mortgage obligations	516,312		16,207		(46)		532,473
Residential mortgage-backed securities	318,343		3,409		(57)		321,695
Commercial mortgage-backed securities	548,076		24,136		(2)		572,210
Auction rate securities	101,510		0		(3,520)		97,990


Total	$	2,691,879	$	106,692	$	(5,091)	$	2,793,480

Held to Maturity

Residential mortgage-backed securities	$	304,241	$	20,699	$	0	$	324,940

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value
March 31, 2020 (in thousands)
Available for Sale
State and municipal securities $ 825,863
$ 23,790
$ (1,569 ) $ 848,084
Corporate debt securities 375,141
5,378
(7,041 ) 373,478
Collateralized mortgage obligations 638,458
29,194
—
667,652
Residential mortgage-backed securities 214,259
6,370
—
220,629
Commercial mortgage-backed securities 574,860
12,681
(216 ) 587,325
Auction rate securities 107,410
—
(13,744 ) 93,666
Total $ 2,735,991
$ 77,413
$ (22,570 ) $ 2,790,834

Held to Maturity
Residential mortgage-backed securities $ 350,606
$ 21,667
$ —
$ 372,273

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value
December 31, 2019 (in thousands)
Available for Sale
State and municipal securities $ 638,125
$ 15,826
$ (1,024 ) $ 652,927
Corporate debt securities 370,401
8,490
(1,534 ) 377,357
Collateralized mortgage obligations 682,307
11,726
(315 ) 693,718
Residential mortgage-backed securities 177,183
1,078
(949 ) 177,312
Commercial mortgage-backed securities 489,603
6,471
(1,777 ) 494,297
Auction rate securities 107,410
—
(5,484 ) 101,926
Total $ 2,465,029
$ 43,591
$ (11,083 ) $ 2,497,537

Held to Maturity
Residential mortgage-backed securities $ 369,841
$ 13,864
$ —
$ 383,705


	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale	(in thousands)


State and municipal securities	$	638,125	$	15,826	$	(1,024)	$	652,927
Corporate debt securities	370,401		8,490		(1,534)		377,357
Collateralized mortgage obligations	682,307		11,726		(315)		693,718
Residential mortgage-backed securities	177,183		1,078		(949)		177,312
Commercial mortgage-backed securities	489,603		6,471		(1,777)		494,297
Auction rate securities	107,410		0		(5,484)		101,926
Total	$	2,465,029	$	43,591	$	(11,083)	$	2,497,537



Held to Maturity

Residential mortgage-backed securities	$	369,841	$	13,864	$	0	$	383,705

On July 1, 2019, the Corporation transferred state and municipal securities from the held to maturity classification to the available for sale classification as permitted through the early adoption of ASU 2019-04. The amortized cost of the securities transferred was $158.9 million and the estimated fair value was $168.5 million.

Securities carried at ~~$497.8~~$568.4 million at ~~March 31,~~September 30, 2020 and $462.6 million at December 31, 2019 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 ~~March 31,~~September 30, 2020, 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.


		September 30, 2020
		Available for Sale				Held to Maturity
		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due in one year or less		$	11,252	$	11,388	$	0	$	0
Due from one year to five years		32,118		33,397		0		0
Due from five years to ten years		315,094		330,233		0		0
Due after ten years		950,684		992,084		0		0
		1,309,148		1,367,102		0		0
Residential mortgage-backed securities(1)		318,343		321,695		304,241		324,940
Commercial mortgage-backed securities(1)		548,076		572,210		0		0
Collateralized mortgage obligations(1)		516,312		532,473		0		0
Total		$	2,691,879	$	2,793,480	$	304,241	$	324,940

(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.

Available for Sale Held to Maturity
Amortized
Cost Estimated
Fair Value Amortized
Cost Estimated
Fair Value
(in thousands)
Due in one year or less $ 1,175
$ 1,175
$ —
$ —
Due from one year to five years 34,996
35,936
—
—
Due from five years to ten years 355,584
355,472
—
—
Due after ten years 916,659
922,645
—
—
1,308,414
1,315,228
—
—
Residential mortgage-backed securities⁽¹⁾
214,259
220,629
350,606
372,273
Commercial mortgage-backed securities⁽¹⁾
574,860
587,325
—
—
Collateralized mortgage obligations⁽¹⁾
638,458
667,652
—
—
Total $ 2,735,991
$ 2,790,834
$ 350,606
$ 372,273

(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.

The following table presents information related to the gross realized gains and losses on the sales of ~~debt~~investment securities for the ~~three months ended:~~periods presented:


	Gross Realized Gains		Gross Realized Losses		Net Gains
Three months ended	(in thousands)
September 30, 2020	$	94	$	(92)	$	2
September 30, 2019	7,938		(3,446)		4,492

Nine months ended
September 30, 2020	$	6,545	$	(3,492)	$	3,053
September 30, 2019	11,207		(6,474)		4,733

Gross Realized

Gains
Losses Net Gains
Three months ended March 31, 2020 (in thousands)
March 31, 2020 $ 117
$ (71 ) $ 46
Three months ended March 31, 2019
March 31, 2019 $ 257
$ (192 ) $ 65

~~The cumulative balance~~During the second quarter of ~~credit-related OTTI charges previously recognized as components of earnings for debt securities held by~~2020, the Corporation ~~at March 31, 2019~~completed a limited balance sheet restructuring that included the sale of investment securities, with an amortized cost $79.0 million and an estimated fair value of $82.0 million, resulting in net investment securities gains of $3.0 million. Offsetting these gains were ~~$11.5 million. There were no additional credit losses recognized~~$2.9 million of prepayment penalties recorded in non-interest expense for the ~~three months ended March 31, 2020.~~redemption of FHLB advances.

During the third quarter of 2019, the Corporation completed a balance sheet restructuring that included the sale of investment securities, with an amortized cost of $409.2 million and an estimated fair value of $413.7 million, resulting in net investment securities gains of $4.5 million. Offsetting these gains were $4.3 million of prepayment penalties recorded in non-interest expense for the redemption of FHLB advances.

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


	September 30, 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)

State and municipal securities	6	$	25,372	$	(157)	0	$	0	$	0	$	25,372	$	(157)
Corporate debt securities	16	67,030		(965)		1	6,847		(344)		73,877		(1,309)
Collateralized mortgage obligations	1	25,489		(46)		0	0		0		25,489		(46)
Residential mortgage-backed securities	4	75,876		(57)		0	0		0		75,876		(57)
Commercial mortgage-backed securities	1	9,322		(2)		0	0		0		9,322		(2)
Auction rate securities	0	0		0		162	97,990		(3,520)		97,990		(3,520)
Total available for sale(1)	28	$	203,089	$	(1,227)	163	$	104,837	$	(3,864)	$	307,926	$	(5,091)

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
March 31, 2020
Available for Sale (in thousands)
State and municipal securities 34
$ 124,083
$ (1,569 ) —
$ —
$ —
$ 124,083
$ (1,569 )
Corporate debt securities 15
159,999
(3,609 ) 8
16,527
(3,432 ) 176,526
(7,041 )
Commercial mortgage-backed securities 3
71,118
(216 ) —
—
—
71,118
(216 )
Auction rate securities —
—
—
177
93,666
(13,744 ) 93,666
(13,744 )
Total available for sale⁽¹⁾
52
$ 355,200
$ (5,394 ) 185
$ 110,193
$ (17,176 ) $ 465,393
$ (22,570 )

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
December 31, 2019
Available for Sale (in thousands)
State and municipal securities 44
$ 136,344
$ (1,024 ) —
$ —
$ —
$ 136,344
$ (1,024 )
Corporate debt securities 5
30,719
(346 ) 8
18,759
(1,188 ) 49,478
(1,534 )
Collateralized mortgage obligations 5
33,865
(190 ) 1
5,330
(125 ) 39,195
(315 )
Residential mortgage-backed securities 5
12,247
(40 ) 26
127,373
(909 ) 139,620
(949 )
Commercial mortgage-backed securities 7
121,340
(1,777 ) —
—
—
121,340
(1,777 )
Auction rate securities —
—
—
177
101,926
(5,484 ) 101,926
(5,484 )
Total available for sale⁽¹⁾
66
$ 334,515
$ (3,377 ) 212
$ 253,388
$ (7,706 ) $ 587,903
$ (11,083 )


	December 31, 2019
	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)

State and municipal securities	44	$	136,344	$	(1,024)	0	$	0	$	0	$	136,344	$	(1,024)
Corporate debt securities	5	30,719		(346)		8	18,759		(1,188)		49,478		(1,534)
Collateralized mortgage obligations	5	33,865		(190)		1	5,330		(125)		39,195		(315)
Residential mortgage-backed securities	5	12,247		(40)		26	127,373		(909)		139,620		(949)
Commercial mortgage-backed securities	7	121,340		(1,777)		0	0		0		121,340		(1,777)
Auction rate securities	0	0		0		177	101,926		(5,484)		101,926		(5,484)
Total available for sale(1)	66	$	334,515	$	(3,377)	212	$	253,388	$	(7,706)	$	587,903	$	(11,083)

⁽¹⁾ No HTM securities were in an unrealized loss position as of ~~March 31,~~September 30, 2020 ~~and~~or December 31, 2019.

The Corporation’s collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The change in fair value of these securities is attributable to changes in interest rates and not credit ~~quality, and the~~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 these securities prior to a recovery of their fair value to amortized cost. Therefore, the Corporation does not have an ACL for these investments as of ~~March 31,~~September 30, 2020.

Based on management’s evaluations, no ACL was required for ARCs or corporate debt securities as of ~~March 31,~~September 30, 2020. 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 4 - Allowance for Credit Losses and Asset Quality

The Corporation segments its loan portfolio by "portfolio segments," as presented in the table above. Certain portfolio segments are further disaggregated by "class segment" for the purpose of estimating credit losses. See "Allowance for Credit Losses" below for further discussion regarding portfolio and class segments and their impact on the determination of the ACL.

Allowance for Credit Losses, effective January 1, 2020

As discussed in Note 1, "Basis of Presentation," the Corporation adopted CECL effective January 1, 2020. CECL requires estimated credit losses on loans to be determined based on an expected life of loan model, as compared to an incurred loss model (in effect for periods prior to 2020). Accordingly, ACL disclosures subsequent to January 1, 2020 are not always comparable to prior periods. In addition, certain new disclosures required under CECL are not applicable to prior periods. As a result, the following tables

present disclosures separately for each period, where appropriate. New disclosures required under CECL are only shown for the current period and are noted. See Note 1, "Basis of Presentation", for a summary of the impact of adopting CECL on January 1, 2020.

Under CECL, loans evaluated individually for impairment consist of non-accrual loans and TDRs. Under the incurred loss model in effect prior to the adoption of CECL, loans evaluated individually for impairment were referred to as impaired loans.

The ACL related to loans consists of loans evaluated collectively and individually for expected credit losses. The ACL related to loans represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to Net Loans. The ACL for OBS credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures. The total ACL is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.

March 31,
2020
ACL - loans $ 238,508
ACL - OBS credit exposure 18,963
Total ACL $ 257,471

The following table presents the activity in the ACL ~~for the three months ended March 31, 2020 (in thousands):~~in 2020:

Balance at December 31, 2019 $ 166,209
Impact of adopting CECL ⁽¹⁾
58,349
Loans charged off (14,003 )
Recoveries of loans previously charged off 2,887
Net loans charged off (11,116 )
Provision for credit losses ⁽²⁾
44,029
Balance at March 31, 2020 $ 257,471





	Three months ended September 30, 2020		Nine months ended September 30, 2020
	(in thousands)
Balance at beginning of period	$	272,920	$	166,209
Impact of adopting CECL on January 1, 2020 (1)	0		58,348
Loans charged off	(5,489)		(27,539)
Recoveries of loans previously charged off	7,847		14,660
Net loans recovered (charged off)	2,358		(12,879)
Provision for credit losses (2)	7,080		70,680
Balance at end of period	$	282,358	$	282,358

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

⁽²⁾ Includes ~~$3.8 million of provision~~$850,000 and $320,000 related to OBS credit ~~exposures.~~exposures for the three and nine months ended September 30, 2020, respectively.

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 March 31, 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 29,361
(18,576 ) (65 ) 21,235
4,015
5,969
3,784
45,723
Loans charged off (855 ) (10,899 ) (316 ) (187 ) —
(1,213 ) (533 ) (14,003 )
Recoveries of loans previously charged off 244
1,734
646
85
70
—
108
2,887
Net loans recovered (charged off) (611 ) (9,165 ) 330
(102 ) 70
(1,213 ) (425 ) (11,116 )
Provision for credit losses⁽¹⁾
15,959
22,745
(2,756 ) 1,523
(130 ) 1,347
1,591
40,279
Balance at March 31, 2020 $ 90,319
$ 63,606
$ 15,253
$ 42,427
$ 8,398
$ 9,865
$ 8,640
$ 238,508

Provision for loan losses (1)

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

~~The following table presents the ACL - loans and amortized cost basis of Net Loans under CECL methodology as of March 31, 2020:~~

ACL - Loans Net Loans
Collectively Evaluated for Impairment Individually Evaluated for Impairment Total ACL - Loans Collectively Evaluated for Impairment Individually Evaluated for Impairment Total Net Loans
March 31, 2020
Real Estate - Commercial Mortgage $ 84,173
$ 6,146
$ 90,319
$ 6,851,765
$ 43,304
$ 6,895,069
Commercial and Industrial 57,640
5,966
63,606
4,405,393
45,846
4,451,239
Real Estate - Home Equity 7,806
7,447
15,253
2,696,515
21,775
2,718,290
Real Estate - Residential Mortgage 36,935
5,492
42,427
1,254,677
38,000
1,292,677
Real Estate - Construction 8,168
230
8,398
944,209
3,559
947,768
Consumer 9,861
4
9,865
468,165
7
468,172
Equipment Lease Financing and Other 8,640
—
8,640
287,789
16,399
304,188

Total $ 213,223
$ 25,285
$ 238,508
$ 16,908,513
$ 168,890
$ 17,077,403

The higher provision during the first nine 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 ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. Qualitative adjustments include and consider changes in international, national, regional and local economic and business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting credit quality. Qualitative adjustments used in determining the ACL increased compared to those at the time of adoption of CECL on January 1, 2020 primarily as a result of uncertainties related to forecasted economic variables due to the economic impact of COVID-19 and the future performance of loans that received deferrals or forbearances due to COVID-19.

Allowance for Credit Losses, prior to January 1, 2020

~~The~~Prior to January 1, 2020, the ACL ~~consists~~consisted of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses ~~represents~~represented management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to ~~net loans.~~Net Loans. The reserve for unfunded lending commitments ~~represents~~represented management’s estimate of incurred losses in unfunded loan commitments and letters of credit, and iswas recorded in other liabilities on the consolidated balance sheets. The ACL iswas increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.

Allowance for loan losses $ 163,622
Reserve for unfunded lending commitments 2,587
ACL $ 166,209

The following table presents the activity in the ACL for the ~~three month ended March 31, 2019 (in thousands):~~periods indicated in 2019:

Provision for credit losses(1)

(1) Includes ~~$610,000 release of provision~~($46,000) and ($2.2 million) related to reserve for unfunded lending ~~commitments.~~commitments for the three and nine months ended September 30, 2019, respectively.

The following table presents the activity in the allowance for loan losses, by portfolio segment, for the three and nine months ended ~~March 31,~~September 30, 2019:

Provision for loan losses(1)

Provision for loan losses⁽¹⁾

Provision for loan losses(1)

(1) The provision in the table only includes the portion related to ~~net loans.~~Net Loans.

~~The following table presents Net Loans and their related allowance for loan losses, by portfolio segment as of March 31, 2019:~~

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)
Allowance for loan losses:
Collectively evaluated for impairment $ 45,736
$ 48,266
$ 8,619
$ 9,560
$ 4,390
$ 3,312
$ 3,041
$ 122,924
Individually evaluated for impairment 6,210
12,235
10,596
9,586
551
7
—
39,185
$ 51,946
$ 60,501
$ 19,215
$ 19,146
$ 4,941
$ 3,319
$ 3,041
$ 162,109

Net Loans:
Collectively evaluated for impairment $ 6,384,048
$ 4,373,677
$ 1,389,670
$ 2,274,330
$ 946,436
$ 433,534
$ 271,854
$ 16,073,549
Individually evaluated for impairment 44,640
55,861
23,830
39,578
6,651
11
18,513
189,084
$ 6,428,688
$ 4,429,538
$ 1,413,500
$ 2,313,908
$ 953,087
$ 433,545
$ 290,367
$ 16,262,633
19

All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of ~~March 31,~~September 30, 2020 and December 31, 2019, 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 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 ~~March 31,~~both September 30, 2020 and December 31, 2019, approximately ~~91% and~~ 93%~~, respectively,~~ of loans evaluated individually for impairment with principal balances greater than or equal to $1.0 million, whose primary collateral is 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.


	September 30, 2020						December 31, 2019
	Non-accrual Loans						Non-accrual Loans
	With a Related Allowance		Without a Related Allowance		Total		Total
	(in thousands)
Real estate - commercial mortgage	$	15,145	$	25,781	$	40,926	$	33,166
Commercial and industrial	14,326		20,948		35,274		48,106
Real estate - residential mortgage	23,637		1,256		24,893		16,676
Real estate - home equity	8,682		0		8,682		7,004
Real estate - construction	607		1,014		1,621		3,618
Consumer	235		0		235		0
Equipment lease financing and other	0		16,690		16,690		16,528
	$	62,632	$	65,689	$	128,321	$	125,098

March 31, 2020 December 31, 2019
Non-accrual Loans
With a Related Allowance Without a Related Allowance Total Total Non-accrual loans
Real estate - commercial mortgage $ 19,319
$ 16,337
$ 35,656
$ 33,166
Commercial and industrial 15,683
25,393
41,076
48,106
Real estate - residential mortgage 15,134
1,260
16,394
16,676
Real estate - home equity 7,261
—
7,261
7,004
Real estate - construction 1,127
2,432
3,559
3,618
Equipment lease financing and other —
16,399
16,399
16,528
$ 58,524
$ 61,821
$ 120,345

$ 125,098

As of ~~March 31,~~September 30, 2020, there were ~~$61.8~~$65.7 million of non-accrual loans that did not have a related allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

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 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 categories is a significant component of the ACL methodology for these loans, under both the CECL and incurred loss models, 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 loan officers or credit administration staff, or if specific loan review assessments identify a deterioration or an improvement in the loans.

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

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

~~Special Mention:~~ ~~These loans have a heightened credit risk, but not to the point of justifying a classification of Substandard. Loans in the 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 summarizes designated internal risk categories by portfolio segment and loan class, by origination year, ~~as of March 31, 2020:~~in the current period :


		September 30, 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	$	94,758	$	243,614	$	196,393	$	138,308	$	44,315	$	114,228	$	47,594	$	0	$	879,210
	Special Mention	0		241		0		0		7,103		6,106		0		0		13,450
	Substandard or Lower	0		448		0		0		760		5,822		943		0		7,973
	Total real estate - construction	94,758		244,303		196,393		138,308		52,178		126,156		48,537		0		900,633
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		4,875		0		0		4,943
	Total net (charge-offs) recoveries	0		0		0		0		68		4,858		0		0		4,926
Commercial and industrial
	Pass	2,409,273		540,493		330,516		229,184		216,228		635,782		1,256,763		0		5,618,239
	Special Mention	52,203		13,653		7,618		10,886		13,693		29,919		50,673		0		178,645
	Substandard or Lower	38,983		1,125		15,819		11,797		13,422		25,081		64,089		954		171,270
	Total commercial and industrial	2,500,459		555,271		353,953		251,867		243,343		690,782		1,371,525		954		5,968,154
Commercial and industrial
	Current period gross charge-offs	0		(106)		(10)		(102)		(388)		(117)		(16,625)		0		(17,348)
	Current period recoveries			39		364		207		91		1,704		4,410		0		6,815
	Total net (charge-offs) recoveries	0		(67)		354		105		(297)		1,587		(12,215)		0		(10,533)
Real estate - commercial mortgage
	Pass	702,768		933,999		792,029		850,926		871,759		2,381,373		88,116		327		6,621,297
	Special Mention	13,247		13,505		19,298		33,245		46,354		139,832		3,502		0		268,983
	Substandard or Lower	1,119		2,409		13,665		39,467		9,375		88,671		1,344		0		156,050
	Total real estate - commercial mortgage	717,134		949,913		824,992		923,638		927,488		2,609,876		92,962		327		7,046,330
Real estate - commercial mortgage
	Current period gross charge-offs	0		(16)		(36)		(2,515)		(29)		(1,312)		(17)		0		(3,925)
	Current period recoveries	0		0		0		0		1		438		0		0		439
	Total net (charge-offs) recoveries	0		(16)		(36)		(2,515)		(28)		(874)		(17)		0		(3,486)
Total
	Pass	$	3,206,799	$	1,718,106	$	1,318,938	$	1,218,418	$	1,132,302	$	3,131,383	$	1,392,473	$	327	$	13,118,746
	Special Mention	65,450		27,399		26,916		44,131		67,150		175,857		54,175		0		461,078
	Substandard or Lower	40,102		3,982		29,484		51,264		23,557		119,574		66,376		954		335,293
	Total	$	3,312,351	$	1,749,487	$	1,375,338	$	1,313,813	$	1,223,009	$	3,426,814	$	1,513,024	$	1,281	$	13,915,117

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
Pass $ 15,264
$ 207,620
$ 207,198
$ 151,785
$ 50,763
$ 169,515
$ 34,143
$ —
$ 836,288
Special Mention —
242
4,010
—
1,177
2,812
552
—
8,793
Substandard or Lower —
155
—
—
409
5,701
524
—
6,789
   Total real estate - construction 15,264
208,017
211,208
151,785
52,349
178,028
35,219
—
851,870

Real estate - construction
Current period gross charge-offs —
—
—
—
—
—
—
—
—
Current period recoveries —
—
—
—
—
70
—
—
70
   Current period net charge-offs —
—
—
—
—
70
—
—
70

Commercial and industrial
Pass 168,025
624,970
386,768
270,298
243,397
684,875
1,753,315
1,469
4,133,117
Special Mention 2,192
6,618
12,636
10,854
17,833
39,986
68,501
128
158,748
Substandard or Lower 1,962
1,648
15,229
14,390
11,508
27,280
85,565
1,792
159,374
   Total commercial and industrial 172,179
633,236
414,633
295,542
272,738
752,141
1,907,381
3,389
4,451,239

Commercial and industrial loans
Current period gross charge-offs —
—
—
(48 ) —
(92 ) (10,759 ) —
(10,899 )
Current period recoveries —
—
121
59
39
1,410
105
—
1,734
   Current period net charge-offs —
—
121
11
39
1,318
(10,654 ) —
(9,165 )

Real estate - commercial
Pass 292,395
907,650
794,055
933,439
946,455
2,676,281
72,827
5,517
6,628,619
Special Mention 110
2,712
14,966
17,897
18,254
81,555
3,131
—
138,625
Substandard or Lower —
246
8,224
31,411
9,014
77,394
1,536
—
127,825
Total real estate - commercial 292,505
910,608
817,245
982,747
973,723
2,835,230
77,494
5,517
6,895,069

Real estate - commercial
Current period gross charge-offs —
—
(16 ) —
(5 ) (834 ) —
—
(855 )
Current period recoveries —
—
—
—
1
243
—
—
244
   Current period net charge-offs —
—
(16 ) —
(4 ) (591 ) —
—
(611 )

Total
Pass $ 475,684
$ 1,740,240
$ 1,388,021
$ 1,355,522
$ 1,240,615
$ 3,530,671
$ 1,860,285
$ 6,986
$ 11,598,024
Special Mention 2,302
9,572
31,612
28,751
37,264
124,353
72,184
128
306,166
Substandard or Lower 1,962
2,049
23,453
45,801
20,931
110,375
87,625
1,792
293,988
Total 479,948
1,751,861
1,443,086
1,430,074
1,298,810
3,765,399
2,020,094
8,906
12,198,178

The information presented in the table above is not required for periods prior to the adoption of CECL. The following table presents the most comparable required information for the prior period, internal credit risk ratings for the indicated loan class ~~segments as of December 31, 2019:~~segments:


	December 31, 2019
	Pass			Special Mention			Substandard or Lower			Total
	(dollars in thousands)
Real estate - commercial mortgage	$	6,429,407		$	137,163		$	134,206		$	6,700,776
Commercial and industrial - secured	3,830,847			171,442			195,884			4,198,173
Commercial and industrial - unsecured	234,987			9,665			3,876			248,528
Total commercial and industrial	4,065,834			181,107			199,760			4,446,701
Construction - commercial residential	100,808			2,897			3,461			107,166
Construction - commercial	765,562			1,322			2,676			769,560
Total construction (excluding construction - other)	866,370			4,219			6,137			876,726
	$	11,361,611		$	322,489		$	340,103		$	12,024,203
% of Total	94.5		%	2.7		%	2.8		%	100.0		%

Pass Special Mention Substandard or Lower Total
December 31, 2019
(dollars in thousands)
Real estate - commercial mortgage $ 6,429,407
$ 137,163
$ 134,206
$ 6,700,776
Commercial and industrial - secured 3,830,847
171,442
195,884
4,198,173
Commercial and industrial - unsecured 234,987
9,665
3,876
248,528
Total commercial and industrial 4,065,834
181,107
199,760
4,446,701
Construction - commercial residential 100,808
2,897
3,461
107,166
Construction - commercial 765,562
1,322
2,676
769,560
Total construction (excluding Construction - other) 866,370
4,219
6,137
876,726
$ 11,361,611
$ 322,489
$ 340,103
$ 12,024,203
% of Total 94.5 % 2.7 % 2.8 % 100.0 %

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 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 ACL methodology for those loans, under both the CECL and incurred loss models, which base the PD on this migration.

The Corporation considers the performance of the loan portfolio and its impact on the ACL. For certain loans classes, the Corporation evaluates credit quality based on the aging status of the loan. The following table presents the amortized cost of these loans based on payment activity, by origination year, ~~as of March 31, 2020:~~for the current period:


		September 30, 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	$	21,247	$	8,297	$	14,573	$	12,064	$	13,006	$	140,145	$	995,811	$	5,485	$	1,210,628
	Nonperforming	0		0		153		256		225		2,354		8,764		329		12,081
	Total real estate - home equity	21,247		8,297		14,726		12,320		13,231		142,499		1,004,575		5,814		1,222,709
Real estate - home equity
	Current period gross charge-offs	0		0		0		0		0		0		(1,137)		0		(1,137)
	Current period recoveries	0		0		0		0		0		123		182		0		305
	Total net (charge-offs) recoveries	0		0		0		0		0		123		(955)		0		(832)
Real estate - residential mortgage
	Performing	953,063		649,475		268,809		383,345		294,005		484,717		0		0		3,033,414
	Nonperforming	0		832		2,437		2,611		723		21,818		0		0		28,421
	Total real estate - residential mortgage	953,063		650,307		271,246		385,956		294,728		506,535		0		0		3,061,835
Real estate - residential mortgage
	Current period gross charge-offs	0		(68)		(101)		(190)		(7)		(254)		0		0		(620)
	Current period recoveries	0		0		13		1		0		278		0		0		292
	Total net (charge-offs) recoveries	0		(68)		(88)		(189)		(7)		24		0		0		(328)
Consumer
	Performing	93,208		106,797		104,984		48,281		27,828		38,319		49,594		0		469,011
	Nonperforming	123		68		56		62		47		162		22		0		540
	Total consumer	93,331		106,865		105,040		48,343		27,875		38,481		49,616		0		469,551
Consumer
	Current period gross charge-offs	0		(500)		(425)		(346)		(433)		(642)		(442)		0		(2,788)
	Current period recoveries	0		48		148		116		177		891		101		0		1,481
	Total net (charge-offs) recoveries	0		(452)		(277)		(230)		(256)		249		(341)		0		(1,307)
Equipment lease financing and other
	Performing	69,512		71,629		53,733		39,888		18,481		6,219		0		0		259,462
	Nonperforming	0		0		190		16,054		272		286		0		0		16,802
	Total leasing and other	69,512		71,629		53,923		55,942		18,753		6,505		0		0		276,264
Equipment lease financing and other
	Current period gross charge-offs	(1,463)		(241)		0		0		0		0		0		0		(1,704)
	Current period recoveries	187		136		17		16		9		20		0		0		385
	Total net (charge-offs) recoveries	(1,276)		(105)		17		16		9		20		0		0		(1,319)
Construction - other
	Performing	45,386		36,764		6,614		0		16		0		17,940		0		106,720
	Nonperforming	0		0		0		181		0		0		0		0		181
	Total construction - other	45,386		36,764		6,614		181		16		0		17,940		0		106,901
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	$	1,182,416	$	872,962	$	448,713	$	483,578	$	353,336	$	669,400	$	1,063,345	$	5,485	$	5,079,235
	Nonperforming	123		900		2,836		19,164		1,267		24,620		8,786		329		58,025
	Total	$	1,182,539	$	873,862	$	451,549	$	502,742	$	354,603	$	694,020	$	1,072,131	$	5,814	$	5,137,260

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 $ 5,325
$ 8,862
$ 15,818
$ 15,412
$ 15,729
$ 163,189
$ 1,054,889
$ 2,667
$ 1,281,891
Nonperforming —
—
153
381
241
2,489
7,522
—
10,786
   Total real estate - home equity 5,325
8,862
15,971
15,793
15,970
165,678
1,062,411
2,667
1,292,677

Real estate - home equity
Current period gross charge-offs —
—
—
—
(90 ) (197 ) —
—
(287 )
Current period recoveries —
—
—
—
—
217
—
—
217
   Current period net charge-offs —
—
—
—
(90 ) 20
—
—
(70 )

Real estate - residential mortgage
Performing 169,609
706,861
378,541
499,825
347,773
589,717
—
—
2,692,326
Nonperforming —
506
2,181
3,079
381
19,817
—
—
25,964
   Total real estate - residential mortgage 169,609
707,367
380,722
502,904
348,154
609,534
—
—
2,718,290

Real estate - residential mortgage
Current period gross charge-offs —
(15 ) (80 ) —
—
(92 ) —
—
(187 )
Current period recoveries —
—
4
—
—
81
—
—
85
   Current period net charge-offs —
(15 ) (76 ) —
—
(11 ) —
—
(102 )

Consumer
Performing 33,478
122,882
125,090
59,335
33,219
46,978
46,494
—
467,476
Nonperforming —
102
31
41
100
273
149
—
696
   Total consumer credit - other consumer loans 33,478
122,984
125,121
59,376
33,319
47,251
46,643
—
468,172

Consumer
Current period gross charge-offs —
(212 ) (219 ) (254 ) (166 ) (391 ) —
—
(1,242 )
Current period recoveries 83
45
40
—
—
261
—
—
429
   Current period net charge-offs 83
(167 ) (179 ) (254 ) (166 ) (130 ) —
—
(813 )

Equipment Lease Financing and Other
Performing 43,624
88,926
66,722
50,454
25,179
8,638
—
283,543
Nonperforming 956
3,115
225
16,039
284
26
—
20,645
   Total leasing and other 44,580
92,041
66,947
66,493
25,463
8,664
—
—
304,188

Equipment Lease Financing and other
Current period gross charge-offs —
—
—
(95 ) —
(438 ) —
—
(533 )
Current period recoveries 5
7
—
64
—
32
—
—
108
   Current period net charge-offs 5
7
—
(31 ) —
(406 ) —
—
(425 )

Construction - other
Performing 7,226
73,650
7,678
1,304
16
—
5,841
—
95,715
Nonperforming —
183
—
—
—
—
—
—
183
   Total leasing and other 7,226
73,833
7,678
1,304
16
—
5,841
—
95,898

Construction - other
Current period gross charge-offs —
—
—
—
—
—
—
—
—
Current period recoveries —
—
—
—
—
—
—
—
—
   Current period net charge-offs —
—
—
—
—
—
—
—
—

Total
Performing $ 259,262
$ 1,001,181
$ 593,849
$ 626,330
$ 421,916
$ 808,522
$ 1,107,224
$ 2,667
$ 4,820,951
Nonperforming 956
3,906
2,590
19,540
1,006
22,605
7,671
—
58,274
Total 260,218
1,005,087
596,439
645,870
422,922
831,127
1,114,895
2,667
4,879,225

The information presented in the table above is not required for periods prior to the adoption of CECL. The following table presents the most comparable required information for the prior period, a summary of performing, delinquent and non-performing loans for the indicated class ~~segments as of December 31, 2019:~~segments:


	December 31, 2019
	Performing			Delinquent (1)			Non-performing (2)			Total
	(dollars in thousands)
Real estate - home equity	$	1,292,035		$	12,341		$	10,568		$	1,314,944
Real estate - residential mortgage	2,584,763			34,291			22,411			2,641,465
Construction - other	92,649			895			809			94,353
Consumer - direct	63,582			465			190			64,237
Consumer - indirect	393,974			4,685			268			398,927
Total consumer	457,556			5,150			458			463,164
Equipment lease financing and other	278,743			4,012			16,642			299,397
	$	4,705,746		$	56,689		$	50,888		$	4,813,323
% of Total	97.8		%	1.2		%	1.0		%	100		%

Performing
Delinquent ⁽¹⁾

Non-performing ⁽²⁾
Total
December 31, 2019
(dollars in thousands)
Real estate - home equity $ 1,292,035
$ 12,341
$ 10,568
$ 1,314,944
Real estate - residential mortgage 2,584,763
34,291
22,411
2,641,465
Construction - other 92,649
895
809
94,353
Consumer - direct 63,582
465
190
64,237
Consumer - indirect 393,974
4,685
268
398,927
Total consumer 457,556
5,150
458
463,164
Equipment lease financing and other 278,743
4,012
16,642
299,397
$ 4,705,746
$ 56,689
$ 50,888
$ 4,813,323
% of Total 97.8 % 1.2 % 1.0 % 100 %
(1)Includes all accruing loans 30 days to 89 days past due.


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


	March 31, 2020		December 31, 2019			September 30, 2020		December 31, 2019
	(in thousands)					(in thousands)
Non-accrual loans	$	120,345	$	125,098	Non-accrual loans	$	128,321	$	125,098
Loans 90 days or more past due and still accruing	19,593		16,057		Loans 90 days or more past due and still accruing	13,761		16,057
Total non-performing loans	139,938		141,155		Total non-performing loans	142,082		141,155
OREO ⁽¹⁾	6,593		6,831		OREO (1)	4,565		6,831
Total non-performing assets	$	146,531	$	147,986	Total non-performing assets	$	146,647	$	147,986

⁽¹⁾ Excludes ~~$14.8~~$9.6 million of residential mortgage properties for which formal foreclosure proceedings were in process as of ~~March 31,~~September 30, 2020.


	30-59		60-89		≥ 90 Days
	Days Past		Days Past		Past Due		Non-
	Due		Due		and Accruing		Accrual		Current		Total
	(in thousands)
September 30, 2020
Real estate – commercial mortgage	$	11,867	$	3,702	$	2,499	$	40,926	$	6,987,336	$	7,046,330
Commercial and industrial	5,326		1,228		1,950		35,274		5,924,376		5,968,154
Real estate – residential mortgage	10,686		1,180		3,394		24,893		3,021,682		3,061,835
Real estate – home equity	3,966		902		3,070		8,682		1,206,089		1,222,709
Real estate – construction	0		0		2,430		1,621		1,003,483		1,007,534
Consumer	1,648		436		306		235		466,926		469,551
Equipment lease financing and other	250		110		112		16,690		235,346		252,508
Total	$	33,743	$	7,558	$	13,761	$	128,321	$	18,845,238	$	19,028,621

30-59 Days Past
Due 60-89
Days Past
Due ≥ 90 Days
Past Due
and
Accruing Non-
accrual Current Total
December 31, 2019 (in thousands)
Real estate – commercial mortgage $ 10,912
$ 1,543
$ 4,113
$ 33,166
$ 6,651,042
$ 6,700,776
Commercial and industrial 2,302
2,630
1,385
48,106
4,392,278
4,446,701
Real estate – residential mortgage 26,982
7,309
5,735
16,676
2,584,763
2,641,465
Real estate – home equity 9,635
2,706
3,564
7,004
1,292,035
1,314,944
Real estate – construction 1,715
900
688
3,618
964,158
971,079
Consumer 4,228
922
458
—
457,556
463,164
Equipment lease financing and other 552
3,460
114
16,528
278,743
299,397
Total $ 56,326
$ 19,470
$ 16,057
$ 125,098
$ 16,620,575
$ 16,837,526

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 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

The following table presents TDRs, by class segment:

Non-accrual TDRs (1)

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

The following table presents TDRs, by class segment, for loans that were modified during the three and nine months ended ~~March 31,~~September 30, 2020 and 2019:


	Three months ended September 30						Nine months ended September 30
	2020			2019			2020			2019
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(dollars in thousands)
Real estate - residential mortgage	8	$	1,351	1	$	830	48	$	10,516	6	$	2,263
Real estate - commercial mortgage	5	8,394		1	81		12	24,868		1	81
Real estate - home equity	13	1,370		12	327		40	3,556		46	2,281
Commercial and industrial	4	3,021		3	97		18	4,399		13	4,928
Consumer	3	53		0	0		11	238		0	0
Total	33	$	14,189	17	$	1,335	129	$	43,577	66	$	9,553

Three months ended March 31
2020 2019
Number of Loans Recorded Investment Number of Loans Recorded Investment
(dollars in thousands)
Real estate - residential mortgage 7
$ 660
4
$ 917
Real estate - commercial mortgage 1
392
—
—
Real estate - home equity 8
577
12
829
Commercial and industrial 1
74
4
2,460
Total 17
$ 1,703
20
$ 4,206

Restructured loan modifications may include payment schedule modifications, interest rate concessions, bankruptcies, principal reduction or some combination of these concessions. ~~During the three months ended March 31, 2020 and 2019,~~The restructured loan modifications ~~of residential mortgages, home equity and commercial loans~~ 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. For the ~~three~~nine months ended ~~March 31,~~September 30, 2020, payment schedule modifications having a recorded investment of ~~$1.0~~$3.8 billion were excluded from TDRs based on this regulatory guidance.

The following table summarizes the changes in MSRs, which are included in other assets on the ~~Consolidated Balance Sheets:~~consolidated balance sheets:

Three months ended March 31
2020 2019
(in thousands)
Amortized cost:
Balance at beginning of period $ 39,267
$ 38,573
Originations of MSRs 1,478
1,225
Amortization (1,891 ) (1,294 )
Balance at end of period $ 38,854
$ 38,504

Valuation allowance:
Balance at beginning of period $ —
$ —
Additions to valuation allowance (1,100 ) —
Balance at end of period $ (1,100 ) $ —

Net MSRs at end of period $ 37,754
$ 38,504

MSRs represent the economic value of contractual rights to service mortgage loans that have been sold. The total portfolio of loans serviced by the Corporation for unrelated third parties was $4.8 billion and $4.9 billion as of ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. Actual and expected prepayments of the underlying mortgage loans can impact the ~~corresponding~~ 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 ~~$37.8~~$29.7 million and $45.2 million at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively. Based on its fair value analysis ~~at March 31,~~as of September 30, 2020, the

Corporation determined that a ~~$1.1~~$1.5 million increase to the valuation allowance was ~~appropriate. This increase was~~required for the three months ended September 30, 2020, resulting in a total valuation allowance of $9.2 million for the nine months ended September 30, 2020. The increases to the valuation allowance were recorded as ~~a reduction~~reductions to mortgage banking income on the consolidated statements of income for the three and nine months ended ~~March 31,~~September 30, 2020.

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

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. The Corporation is required to clear all eligible interest rate swap contracts with a ~~central counterparty~~clearing agent and is subject to the regulations of the Commodity Futures Trading Commission.

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

March 31, 2020 December 31, 2019
Notional
Amount Asset
(Liability)
Fair Value Notional
Amount Asset
(Liability)
Fair Value
(in thousands)
Interest Rate Locks with Customers
Positive fair values $ 315,084
$ 5,990
$ 132,260
$ 1,123
Negative fair values 4,968
(57 ) 9,783
(53 )
Forward Commitments
Positive fair values —
—
75,000
63
Negative fair values 341,680
(4,131 ) 180,000
(371 )
Interest Rate Swaps with Customers
Positive fair values 3,457,081
368,172
2,903,489
143,484
Negative fair values (12,288 ) (6 ) 376,705
(695 )
Interest Rate Swaps with Dealer Counterparties
Positive fair values 12,288
6
376,705
695
Negative fair values 3,457,081
(180,576 ) 2,903,489
(75,327 )
Foreign Exchange Contracts with Customers
Positive fair values 12,331
359
3,373
38
Negative fair values 2,985
(125 ) 7,283
(154 )
Foreign Exchange Contracts with Correspondent Banks
Positive fair values 5,290
168
9,028
192
Negative fair values 11,393
(252 ) 4,976
(45 )

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

Consolidated Statements of Income Classification Three months ended March 31
2020 2019
(in thousands)
Mortgage banking derivatives ⁽¹⁾
Mortgage banking $ 1,040
$ 662
Interest rate swaps Other expense 72
(149 )
Foreign exchange contracts Other income 119
48
Net fair value gains on derivative financial instruments $ 1,231
$ 561

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:

March 31,
2020 December 31,
2019
(in thousands)
Amortized cost ⁽¹⁾
$ 39,480
$ 37,396
Fair value 40,645
37,828

Gains related to changes in fair values of mortgage loans held for sale were ~~$733,000~~$658,000 and ~~$21,000~~$2.8 million for the three and nine months ended ~~March 31,~~September 30, 2020, respectively. During the three and nine months ended September 30, 2019, losses related to changes in fair values of mortgage loans held for sale were $499,000 and $174,000, respectively.

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~~dealer 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 ~~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 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 investment securities on the consolidated balance sheets. The Corporation has no intent to set 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, 2020
Interest rate swap derivative assets	$	375,569	$	(2)	$	0	$	375,567
Foreign exchange derivative assets with correspondent banks	340		(19)		0		321
Total	$	375,909	$	(21)	$	0	$	375,888

Interest rate swap derivative liabilities	$	183,230	$	(2)	$	(183,228)	$	0
Foreign exchange derivative liabilities with correspondent banks	19		(19)		0		0
Total	$	183,249	$	(21)	$	(183,228)	$	0

December 31, 2019
Interest rate swap derivative assets	$	144,179	$	(757)	$	0	$	143,422
Foreign exchange derivative assets with correspondent banks	192		(45)		0		147
Total	$	144,371	$	(802)	$	0	$	143,569

Interest rate swap derivative liabilities	$	76,022	$	(757)	$	(75,265)	$	0
Foreign exchange derivative liabilities with correspondent banks	45		(45)		0		0
Total	$	76,067	$	(802)	$	(75,265)	$	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.

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)
March 31, 2020
Interest rate swap derivative assets $ 368,178
$ (6 ) $ —
$ 368,172
Foreign exchange derivative assets with correspondent banks 168
(168 ) —
—
Total $ 368,346
$ (174 ) $ —
$ 368,172

Interest rate swap derivative liabilities $ 180,582
$ (6 ) $ (180,576 ) $ —
Foreign exchange derivative liabilities with correspondent banks 252
(168 ) —
84
Total $ 180,834
$ (174 ) $ (180,576 ) $ 84

December 31, 2019
Interest rate swap derivative assets $ 144,179
$ (757 ) $ —
$ 143,422
Foreign exchange derivative assets with correspondent banks 192
(45 ) —
147
Total $ 144,371
$ (802 ) $ —
$ 143,569

Interest rate swap derivative liabilities $ 76,022
$ (757 ) $ (75,265 ) $ —
Foreign exchange derivative liabilities with correspondent banks 45
(45 ) —
—
Total $ 76,067
$ (802 ) $ (75,265 ) $ —

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:


		September 30,		December 31,
		2020		2019
Included in other assets:		(in thousands)
Affordable housing tax credit investment, net		$	145,415	$	153,351
Other tax credit investments, net		70,379		64,354
	Total TCIs, net	$	215,794	$	217,705
Included in other liabilities:
Unfunded affordable housing tax credit commitments		$	22,591	$	16,684
Other tax credit liabilities		60,585		55,105
	Total unfunded tax credit commitments and liabilities	$	83,176	$	71,789

March 31, December 31,
2020 2019
Included in other assets: (in thousands)
Affordable housing tax credit investment, net $ 146,556
$ 153,351
Other tax credit investments, net 63,658
64,354
Total TCIs, net $ 210,214
$ 217,705
Included in other liabilities
Unfunded affordable housing tax credit commitments $ 15,331
$ 16,684
Other tax credit liabilities 54,823
55,105
Total unfunded tax credit commitments and liabilities $ 70,154
$ 71,789


		Three Months Ended				Nine Months Ended
		September 30				September 30
		2020		2019		2020		2019
Components of income taxes:		(in thousands)
Affordable housing tax credits and other tax benefits		$	(7,290)	$	(7,852)	$	(21,678)	$	(23,002)
Other tax credit investment credits and tax benefits		(1,240)		(1,136)		(3,122)		(3,407)
Amortization of affordable housing investments, net of tax benefit		5,024		5,649		15,071		16,638
Deferred tax expense		275		238		691		715
	Total net reduction in income tax expense	$	(3,231)	$	(3,101)	$	(9,038)	$	(9,056)
Amortization of TCIs:
Affordable housing tax credits investment		$	1,021	$	863	$	3,065	$	2,508
Other tax credit investment amortization		673		670		1,529		2,008
	Total amortization of TCIs	$	1,694	$	1,533	$	4,594	$	4,516

Three Months Ended
March 31
2020 2019
Components of income taxes: (in thousands)
Affordable housing tax credits and other tax benefits $ (7,194 ) $ (7,575 )
Other tax credit investment credits and tax benefits (941 ) (1,136 )
Amortization of affordable housing investments, net of tax benefit 5,024
5,495

Deferred tax expense 208
238

Total reduction in income tax expense $ (2,903 ) $ (2,978 )
Amortization of TCIs:
Affordable housing tax credits investment $ 1,022
$ 822

Other tax credit investment amortization 428
669

Total amortization of TCIs $ 1,450
$ 1,491

The following table presents changes in other comprehensive income:


	Before-Tax Amount		Tax Effect		Net of Tax Amount
Three months ended September 30, 2020	(in thousands)
Unrealized gain on securities	$	5,565	$	(1,232)	$	4,333

Reclassification adjustment for securities gains included in net income (1)	(2)		1		(1)

Amortization of net unrealized losses on AFS securities transferred to HTM (2)	1,192		(264)		928



Amortization of net unrecognized pension and postretirement items (3)	329		(73)		255
Total Other Comprehensive Income	$	7,083	$	(1,568)	$	5,515
Three months ended September 30, 2019
Unrealized gain on securities (4)	$	23,150	$	(5,121)	$	18,029

Reclassification adjustment for securities gains included in net income (1)	(4,492)		994		(3,498)
Amortization of net unrealized losses on AFS securities transferred to HTM (2)	4,405		(974)		3,430



Amortization of net unrecognized pension and postretirement items (3)	357		(80)		277
Total Other Comprehensive Income	$	23,419	$	(5,181)	$	18,238

Nine months ended September 30, 2020
Unrealized gain on securities	$	72,146	$	(15,960)	$	56,186

Reclassification adjustment for securities gains included in net income (1)	(3,053)		676		(2,377)

Amortization of net unrealized losses on AFS securities transferred to HTM (2)	3,232		(715)		2,517



Amortization of net unrecognized pension and postretirement items (3)	984		(219)		765
Total Other Comprehensive Income	$	73,309	$	(16,218)	$	57,091

Nine months ended September 30, 2019
Unrealized gain on securities (4)	$	81,207	$	(17,963)	$	63,244
Reclassification adjustment for securities gains included in net income (1)	(4,733)		1,047		(3,686)


Amortization of net unrealized losses on AFS securities transferred to HTM (2)	6,966		(1,541)		5,425
Non-credit related unrealized losses on other-than-temporarily impaired debt securities	(875)		193		(682)


Amortization of net unrecognized pension and postretirement items (3)	1,083		(240)		843
Total Other Comprehensive Income	$	83,648	$	(18,504)	$	65,144

Before-Tax Amount Tax Effect Net of Tax Amount
(in thousands)
Three months ended March 31, 2020
Unrealized gain on securities $ 22,380
$ (4,949 ) $ 17,431
Reclassification adjustment for securities gains included in net income ⁽¹⁾
(46 ) 10
(36 )
Amortization of net unrealized losses on AFS securities transferred to HTM ⁽²⁾
1,022
(227 ) 795
Amortization of net unrecognized pension and postretirement items ⁽³⁾
328
(73 ) 255
Total Other Comprehensive Income $ 23,684
$ (5,239 ) $ 18,445
Three months ended March 31, 2019
Unrealized gain on securities $ 26,062
$ (5,764 ) $ 20,298
Reclassification adjustment for securities gains included in net income ⁽¹⁾
(65 ) 14
(51 )
Amortization of net unrealized losses on AFS securities transferred to HTM ⁽²⁾
1,252
(278 ) 974
Non-credit related unrealized loss on other-than-temporarily impaired debt securities (105 ) 23
(82 )
Amortization of net unrecognized pension and postretirement items ⁽³⁾
374
(83 ) 291
Total Other Comprehensive Income $ 27,518
$ (6,088 ) $ 21,430

(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 3, "Investment Securities," for additional details.

(2) Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included as a reduction to "Interest Income" 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 12, "Employee Benefit Plans," for additional details.

(4) Before-Tax amount includes a $3.7 million reclassification of unrealized loss related to the early adoption of ASU 2019-04.

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

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, 2019
Level 1 Level 2 Level 3 Total
(in thousands)
Loans held for sale $ —
$ 37,828
$ —
$ 37,828
Available for sale investment securities:
State and municipal securities —
652,927
—
652,927
Corporate debt securities —
374,957
2,400
377,357
Collateralized mortgage obligations —
693,718
—
693,718
Residential mortgage-backed securities —
177,312
—
177,312
Commercial mortgage-backed securities —
494,297
—
494,297
Auction rate securities —
—
101,926
101,926
Total available for sale investment securities —
2,393,211
104,326
2,497,537
Other assets:
Investments held in Rabbi Trust 22,213
—
—
22,213
Derivative assets 230
145,365
—
145,595
Total assets $ 22,443
$ 2,576,404
$ 104,326
$ 2,703,173
Other liabilities:
Deferred compensation liabilities $ 22,213
$ —
$ —
$ 22,213
Derivative liabilities 199
76,447
—
76,646
Total liabilities $ 22,412
$ 76,447
$ —
$ 98,859

Loans held for sale – This category includes mortgage loans held for sale that are measured at fair value. Fair values as of ~~March 31,~~September 30, 2020 and December 31, 2019 were based on the price that secondary market investors were offering for loans with similar characteristics. See "Note 6 - Derivative Financial Instruments" for details related to the Corporation’s election to measure assets and liabilities at fair value.

Available for sale investment securities – Included in this asset category are debt securities. Level 2 ~~AFS debt~~investment securities are valued by a third-party pricing ~~service commonly used in the banking industry.~~service. 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.

•Corporate debt securities – This category consists of subordinated debt and senior debt issued by ~~obtaining~~financial institutions ($338.2 million at September 30, 2020 and $362.3 million at December 31, 2019), single-issuer trust preferred securities ~~prices from an alternative third-party source~~issued by financial institutions ($0 at September 30, 2020 and ~~comparing~~$11.2 million at December 31, 2019) and other corporate debt issued by non-financial institutions ($4.4 million at September 30, 2020 and $3.9 million at December 31, 2019). As noted in "Note 3 - Investment Securities", several corporate debt securities were sold in the ~~results. This test is performed~~second quarter of 2020. Refer to the specific note for ~~at least 95% of the securities valued by the pricing service. Generally, differences by security in excess of 5% are researched to reconcile the difference.~~further information.

~~State and municipal securities/Collateralized mortgage obligations/Residential mortgage-backed securities/Commercial mortgage-backed securities~~

~~– These debt securities are classified as Level 2 investments. Fair values are determined by a third-party pricing service, as detailed above.~~

~~Corporate debt securities~~ – This category consists of subordinated debt and senior debt issued by financial institutions ($359.4 million at March 31, 2020 and $362.3 million at December 31, 2019), single-issuer trust preferred securities issued by financial institutions ($10.2 million at March 31, 2020 and $11.2 million at December 31, 2019) and other corporate debt issued by non-financial institutions ($3.9 million at March 31, 2020 and December 31, 2019).

Investments held in Rabbi Trust – This category consists of mutual funds that are held in trust for employee deferred compensation plans that the Corporation has elected to measure at fair value. Shares of mutual funds are valued based on net asset value, which represent quoted market prices for the underlying shares held in the mutual funds, and as such, are classified as Level 1.

Derivative assets – Fair value of foreign currency exchange contracts classified as Level 1 assets ($~~527,000~~372,000 at ~~March 31,~~September 30, 2020 and $230,000 at December 31, 2019). The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.

Deferred compensation liabilities – Fair value of amounts due to employees under deferred compensation plans, classified as Level 1 liabilities and are included in other liabilities on the ~~Consolidated Balance Sheets.~~consolidated balance sheets. The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Investments held in Rabbi Trust" above.

Derivative liabilities – Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($~~377,000~~299,000 at ~~March 31,~~September 30, 2020 and $199,000 at December 31, 2019).

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 ($~~4.2~~1.7 million at ~~March 31,~~September 30, 2020 and $424,000 at December 31, 2019) and the fair value of interest rate swaps ($~~180.6~~183.2 million at ~~March 31,~~September 30, 2020 and $76.0 million at December 31, 2019).

The 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)

~~(2)Included~~ as a component of ~~"net interest income"~~"available for sale at estimated fair value" on the consolidated ~~statements of income.~~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:

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

~~MSRs~~ - This category consists of MSRs, which were initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors, and subsequently carried at the lower of amortized cost or fair value. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the March 31, 2020 valuation were 14.9% and 9.5%, respectively. Management tests the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See "Note 5 - Mortgage Servicing Rights," for additional information.

In 2008, the Corporation received Class B restricted shares of Visa, Inc. ("Visa") as part of Visa’s initial public offering. These securities are considered equity securities without readily determinable fair values. As such, the approximately 133,000 Visa Class B shares owned as of ~~March 31,~~September 30, 2020 were carried at a zero cost basis.

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.

The following instruments are predominantly short-term:



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

FRB and FHLB stock represent restricted investments and are carried at cost.

As of ~~March 31,~~September 30, 2020, 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.

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

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

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

Three months ended March 31
2020 2019
Weighted average shares outstanding (basic) 163,475
169,884
Impact of common stock equivalents 942
1,025
Weighted average shares outstanding (diluted) 164,417
170,909
Per share:
Basic $ 0.16
$ 0.33
Diluted 0.16
0.33

The Corporation grants equity awards to employees in the form of stock options, restricted stock, RSUs or PSUs under its Amended and Restated Equity and Cash Incentive Compensation Plan ("Employee Equity Plan"). Recent grants of equity awards under the Employee Equity Plan have generally been limited to RSUs and PSUs. In addition, employees may purchase stock under the Corporation’s Employee Stock Purchase Plan. The fair value of equity awards granted to employees is recognized as compensation expense over the period during which employees are required to provide service in exchange for

such awards. Compensation expense for PSUs is also recognized over the period during which employees are required to provide service in exchange for such

awards, however, compensation expense may vary based on the expectations for actual performance relative to defined performance measures.

The Corporation also grants equity awards to non-employee members of its board of directors and subsidiary bank boards of directors under the 2011 Directors’ Equity Participation Plan, which was amended and approved by shareholders as the Amended and Restated Directors’ Equity Participation Plan in 2019 ("Directors’ Plan"). Under the Directors’ Plan, the Corporation can grant equity awards to non-employee holding company and subsidiary bank directors in the form of stock options, restricted stock, RSUs or common stock. Recent grants of equity awards under the Directors’ Plan have been limited to RSUs.

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

Fair values for RSUs and a majority of PSUs are based on the trading price of the Corporation’s stock on the date of grant and earn dividend equivalents during the vesting period, which are forfeitable if the awards do not vest. The fair value of certain PSUs are estimated through the use of the Monte Carlo valuation methodology as of the date of grant.

As of ~~March 31,~~September 30, 2020, the Employee Equity Plan had ~~10.2~~9.3 million shares reserved for future grants through 2023, and the Directors’ Plan had approximately ~~259,000~~180,000 shares reserved for future grants through ~~2029~~.2029.

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


	Three months ended September 30				Nine months ended September 30
	2020		2019		2020		2019
	(in thousands)
Compensation expense	$	1,875	$	2,110	$	5,403	$	5,458
Tax benefit	(397)		(451)		(1,144)		(1,194)
Stock-based compensation expense, net of tax benefit	$	1,478	$	1,659	$	4,259	$	4,264

Three months ended March 31
2020 2019
(in thousands)
Compensation expense $ 1,619
$ 1,560
Tax benefit (344 ) (331 )
Stock-based compensation expense, net of tax benefit $ 1,275
$ 1,229

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

Three months ended March 31
2020 2019
(in thousands)
Interest cost $ 681
$ 815
Expected return on plan assets (982 ) (689 )
Net amortization and deferral 465
495
Net periodic pension cost $ 164
$ 621

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

Three months ended March 31
2020 2019
(in thousands)
Interest cost $ 11
$ 15
Net accretion and deferral (137 ) (139 )
Net periodic benefit $ (126 ) $ (124 )

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

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:

March 31,
2020 December 31, 2019
(in thousands)
Commitments to extend credit $ 6,569,660
$ 6,689,519
Standby letters of credit 293,726
303,020
Commercial letters of credit 51,471
50,432

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. See "Note 4 - Allowance for Credit Losses and Asset Quality," for additional details.

The Corporation originates and sells residential mortgages to secondary market investors. The Corporation provides customary representations and warranties to secondary market investors that specify, among other things, that the loans have been underwritten to the standards of the secondary market investor. The Corporation may be required to repurchase specific loans, or reimburse the investor for a credit loss incurred on a sold loan if it is determined that the representations and warranties have not been met. Under some agreements with secondary market investors, the Corporation may have additional credit exposure beyond customary representations and warranties, based on the specific terms of those agreements.

The Corporation maintains a reserve for estimated losses related to loans sold to investors. As of ~~March 31,~~September 30, 2020 and December 31, 2019, the total reserve for losses on residential mortgage loans sold was ~~$1.0~~$1.1 million and $3.2 million, respectively, including reserves for both representation and warranty and credit loss exposures. With the adoption of CECL on January 1, 2020 the reserve for estimated losses on certain residential mortgage loans sold to investors was reclassified to ACL - OBS credit exposures. This reclassification resulted in a $2.1 million increase to ACL - OBS credit exposures and a corresponding decrease to the reserve for estimated losses related to loans sold to ~~investors.~~investors in the first quarter of 2020.

The Corporation is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business activities. The Corporation evaluates the possible impact of these matters, taking into consideration the 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 the loss cannot be reasonably estimated by the Corporation, no loss reserve is established.

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 ~~similarly situated~~teller supervisors, tellers, and other similar non-exempt ~~hourly~~ 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 ~~which non-exempt employees who are paid based on their time worked,~~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. Following the submission of a formal demand for damages by Counsel representing plaintiffs ("Plaintiffs’ Counsel"), the Corporation and Plaintiffs’ Counsel engaged in negotiations regarding the potential settlement of this lawsuit on a collective and class basis. While the negotiations are ongoing, the Corporation and Plaintiffs’ Counsel have reached a tentative agreement with respect to the financial terms of a potential settlement to resolve this lawsuit. If the parties are able to reach a formal settlement agreement, that settlement agreement would be subject to approval by the U.S. District Court for the District of New Jersey. The Corporation is not able to provide any assurance that a formal settlement agreement will be reached, or that the District Court will approve the settlement agreement.The financial terms of the potential settlement involve an amount that is not expected to be material to the Corporation. The Corporation established an accrued liability during the third quarter of 2020 for the amount of the potential settlement.

In March 2020, the Corporation issued $200.0 million and $175.0 million of subordinated notes due in 2030 and 2035, respectively. The subordinated notes maturing in 2030 were issued with a fixed-to-floating rate of 3.25% and an effective rate of 3.35%, due to issuance costs, and the subordinated notes maturing in 2035 were issued with a fixed-to-floating rate of 3.75% and an effective rate of 3.85%, due to issuance costs.

On October 29, 2020 the Corporation issued 8,000,000 depositary shares ("Depositary Shares"), each representing a 1/40th interest in a share of Fulton’s 5.125% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, with a liquidation preference of $1,000 per share (equivalent to $25.00 per Depositary Share), for an aggregate offering amount of $200 million. The Corporation received net proceeds from the offering of $193.7 million, after deducting underwriting discounts and commissions and before deducting transaction expenses payable by the Corporation.

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, a financial holding company registered under the Bank Holding Company Act 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 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, results of 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," "projects," the negative of these terms and other comparable terminology. These forward-looking statements may include projections of, or guidance on, the Corporation's future financial performance, expected levels of future 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 changes in circumstances that are difficult to predict and many of which are outside of the Corporation's control, and actual results and financial condition may differ materially from those 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 financial markets on the performance of the Corporation’s loan and lease 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, and the direct and indirect impacts of the pandemic on the Corporation, its customers and third ~~parties.~~parties;

•increases in non-performing assets, which may require the Corporation to increase the allowance for credit losses, charge off loans and leases 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 effects of the extensive level of regulation and supervision to which the Corporation and Fulton Bank, N.A. 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 theBSA, the Patriot Act and related AML requirements, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to the Corporation’s reputation;

•BSA, the Patriot Act and related AML requirements, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions and the need to undertake remedial actions;

the continuing impact of the Dodd-Frank Act on the Corporation’s business and results of operations;

•the effects of, and uncertainty surrounding, new legislation, changes in regulation and government policy, which could result in 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 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 Corporation’s ability to achieve the expected cost savings, and the timing of such savings, associated with the Corporation’s recently announced plans to consolidate certain of its financial service offices and implement other cost-saving measures;

•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 reporting of its financial condition and results of ~~operations;~~operations, including the Corporation’s adoption of ASU 2016-13, Financial Instruments – Credit Losses (CECL);

•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 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 their borrowing costs or access to capital ~~markets; and~~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, 2019, Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 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

The Corporation is a financial holding company which, through its wholly owned banking subsidiary, provides a full range of consumer and commercial financial services through locations in Pennsylvania, Delaware, Maryland, New Jersey and Virginia. 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 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, non-interest expenses and income taxes.

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


	Three months ended September 30		Nine months ended September 30
	2020	2019	2020	2019

Net income (in thousands)	$61,607	$62,108	$127,213	$178,550
Diluted net income per share	$0.38	$0.37	$0.78	$1.06
Return on average assets	0.97%	1.15%	0.71%	1.13%
Return on average shareholders' equity	10.32%	10.64%	7.26%	10.41%
Return on average tangible shareholders' equity (1)	13.50%	14.03%	9.44%	13.64%
Net interest margin (2)	2.70%	3.31%	2.90%	3.41%
Efficiency ratio (1)	62.3%	63.6%	64.4%	63.9%
Non-performing assets to total assets	0.57%	0.66%	0.57%	0.66%
Annualized net (recoveries) charge-offs to average loans	(0.05)%	0.15%	0.10%	0.07%

Three months ended March 31
2020 2019
Net income (in thousands) $ 26,047
$ 56,663
Diluted net income per share $ 0.16
$ 0.33
Return on average assets 0.47 % 1.11 %
Return on average shareholders' equity 4.48 % 10.15 %
Return on average tangible shareholders' equity ⁽¹⁾
5.84 % 13.28 %
Net interest margin ⁽²⁾
3.21 % 3.49 %
Efficiency ratio ⁽¹⁾
64.5 % 63.9 %
Non-performing assets to total assets 0.64 % 0.70 %
Annualized net charge-offs to average loans 0.26 % 0.10 %
(1)Ratio represents a financial measure derived by methods other than GAAP. See reconciliation of this non-GAAP financial measure to the most 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.


~~(1)~~	Ratio represents a financial measure derived by methods other than GAAP. See reconciliation of this non-GAAP financial measure to the most 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.~~

(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 the first quarter of 2020, the COVID-19 pandemic has caused substantial disruption in economic and social activity, both globally and in the United States. The spread of COVID-19, and the related government actions to mandate or encourage temporary closures of businesses, quarantines, social distancing, ~~and~~ "stay at home" orders and other restrictions on in-person operations, activities, and operations, have caused severe disruptions in the U.S. economy, which has, in turn, disrupted, and will likely continue to disrupt the business ~~activities, and operations~~ of the Company's customers, as well as the Company's own business and operations. The resulting impacts of ~~the pandemic~~COVID-19 on consumers, including the sudden, significant increase in the unemployment rate, ~~is expected to cause~~has caused changes in consumer and business spending, borrowing needs and saving habits, which will likely affect the demand for loans and other products and services the Company offers, as well as the creditworthiness of current and prospective borrowers. The significant decrease in commercial activity and disruptions in supply chains associated with the pandemic, both nationally and in the Company’s markets, may cause customers, vendors, and counterparties to be unable to meet existing payment or other obligations to the Company. ~~If borrowers are unable to meet their payment obligations, the Company will be required to increase the ACL through provisions for credit losses.~~

The Company expects COVID-19 to limit, at least for a period of time, customer demand for many banking products and services. Many companies and residents in the Company's market areas ~~are~~were subject to a mandatory "non-essential business" shut-downs and stay at home orders, which ~~have~~ reduced banking activity across its market areas. In response to these mandates, the Company ~~has~~ temporarily limited most locations to drive-up and ATM services, with lobby access available by appointment only, reduced hours of operation at some locations, temporarily closed some locations and encouraged the Company’s customers to use electronic banking platforms. In addition, a significant portion of the Company’s employees have transitioned to working remotely as a result of COVID-19.

As the COVID-19 ~~pandemic. It is not yet fully known what impact~~pandemic began to subside within the Company’s markets and governmental restrictions began to be lifted or eased, the Company adopted a phased approach to restoring regular lobby access at most of its locations and returning employees currently working remotely to the Company’s offices. The timing and scope of these ~~operational~~processes are adaptable to respond to changes in ~~response~~the evolution of COVID-19 and governmental restrictions and recommendations, and include the addition of new physical and procedural safeguards designed to protect the ~~pandemic may have on~~health and safety of the Company’s ~~financial performance.~~

employees and

customers and comply with governmental requirements and recommendations. Approximately 25% of the Company’s locations are expected to provide lobby access by appointment only on a long-term basis.

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 continue to adversely affect the Company's net interest income and margins and 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 who meet the necessary eligibility requirements in order to keep their workers on the payroll. As of ~~April~~September 30, 2020, the Company funded approximately 10,000 loans totaling $2.0 billion under the ~~PPP~~PPP.

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. 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 Company, ~~received approximately 9,200applications,~~either of which ~~approximately 7,200 had been funded totaling $1.8 billion in new loans and an additional approximately $200 million was in~~could require the ~~process of being funded.~~Company to increase the ACL through provisions for credit losses.

The impact of COVID-19 on the Company’s financial results is evolving and uncertain. The Company has limited exposure to some of the industries that were initially most significantly impacted by COVID-19, such as ~~accommodation~~hospitality and food services, energy and entertainment, and most of these loans are secured by real estate and other forms of collateral. ~~However, the overall slowing~~While many areas of the economy ~~and lack~~began to exhibit signs of ~~growth~~recovery during the third quarter of 2020, the lingering effects of the pandemic, particularly in ~~gross domestic product~~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 a decreased demand for the Company’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 Company’s net interest income, non-interest income and credit-related losses for an uncertain period of time. As a result, the Company has taken steps to maintain liquidity and conserve capital during this period of uncertainty. The Company has been holding excess cash reserves since the middle of March, has additional liquidity available through ~~Federal Funds lines~~borrowing arrangements and ~~brokered deposits~~other sources and has suspended its share repurchase program until there is more clarity surrounding the economic conditions. See additional discussion in "Results of Operations" and "Financial Condition" of Management's Discussion.

Adoption of CECL

The Corporation adopted CECL effective January 1, 2020 using the modified retrospective method for all financial assets measured at amortized cost, and OBS credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under CECL, while prior period results are reported in accordance with the previously applicable incurred loss methodology. The Corporation recorded an ~~overall~~ increase of $58.3 million to the ACL on January 1, 2020 primarily as a result of the adoption of CECL. Retained earnings decreased $43.8 million and deferred tax assets increased by $12.4 million on January 1, 2020, representing the cumulative effect of adoption.

The allowance for credit losses is impacted by changing economic forecasts over the expected life of the Corporation's loan portfolio. Should economic forecasts during the second quarter of 2020 worsen, the allowance for credit losses will increase due to a decline in the overall economy.

Summary of Financial Results for thethree and nine months ended ~~March 31,~~September 30, 2020:

•

~~Net Income and Net Income Per Share~~ - Net income was $26.0 million for the three months ended March 31, 2020 a $30.6 million, or 54.0%, decrease compared to the same period in 2019. Diluted net income per share was $0.16, a $0.17, or 51.5%, decrease compared to the same period in 2019, primarily as a result of lower net income, largely driven by a higher provision for credit losses, as a result of the adoption of CECL and deteriorating economic assumptions resulting from COVID-19.

•

~~Net Interest Income~~- Net interest income decreased $2.6 million, or 1.6%, for the three months ended March 31, 2020, compared to the same period in 2019. The decrease resulted from lower yields on interest-earning assets, partially offset by balance sheet growth and the impact of lower funding costs. Overall, the net interest margin decreased 28 bp during the three months ended March 31,•Net Income and Net Income Per Share - Net income was $61.6 million and $127.2 million for the three and nine months ended September 30, 2020, respectively. For the three months ended September 30, 2020, net income decreased $500,000 compared to the same period in 2019. Diluted net income per share was $0.38, a $0.01, or 2.7%, increase compared to the same period in 2019. The increase in diluted net income per share was the result of lower weighted average diluted shares outstanding for the three months ended September 30, 2020 compared to the same period in 2019. Net income for the nine months ended September 30, 2020 decreased $51.3 million, or 28.8%, compared to the same period in 2019, and diluted net income per share was $0.78, a $0.28, or 26.4%, decrease compared to the same period in 2019. The decreases in net income for both periods were primarily a result of lower net interest income, and a higher provision for credit losses, as a result of the adoption of CECL and deteriorating economic assumptions resulting from COVID-19, partially offset by higher non-interest income and lower non-interest expense.

•Net Interest Income - Net interest income decreased $7.1 million, or 4.4%, and $21.5 million, or 4.4%, for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The decreases resulted from lower yields on interest-earning assets, partially offset by balance sheet growth and the impact of lower funding costs. Overall, the net interest margin decreased 61 bp and 51 bp for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019.


◦	~~Net Interest Margin~~ ~~- The decrease in the net interest margin reflects the net impact of a 38 bp decrease in yields on interest-earning assets, partially offset by a 13 bp decrease in the cost of funds.~~


◦	~~Loan Growth~~ - Average Net Loans grew by $665.7 million, or 4.1%, for the three months ended March 31, 2020, compared to the same period in 2019. The most notable increases were in the residential, commercial mortgage and consumer loan portfolios.


◦	~~Deposit Growth~~ - Average deposits grew $845.8 million, or 5.2%, for the three months ended March 31, 2020, compared to the same period in 2019. The increase was driven by growth in total interest-bearing demand and savings accounts.

◦Net Interest Margin - For the three and nine months ended September 30, 2020, the decreases in the net interest margin reflect the net impact of a 112 bp and a 88 bp decrease in yields on interest-earning assets, respectively, partially offset by a 55 bp and 39 bp decrease in the cost of funds, respectively.

•

◦Loan Growth - Average Net Loans grew by $2.4 billion, or 14.9%, and $1.7 billion, or 10.5%, for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. 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 $3.4 billion, or 20.3%, and $2.4 billion, or 14.5%, for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019. The increases were driven by growth in all deposit categories except time deposits. The increases in average total demand and savings accounts were driven by the funding of various government stimulus programs, which largely remained in customer deposit accounts during the second and third quarters as well as seasonal increases in municipal accounts.

•Long-term Debt - In March 2020, the Corporation issued a total of $375.0 million of subordinated notes, with $200.0 million of subordinated notes due in 2030 having a fixed-to-floating rate of 3.25% and an effective rate of 3.35% and $175.0 million of subordinated notes due in 2035 having a fixed-to-floating rate of 3.75% and an effective rate of 3.85%.

•Asset Quality - Non-performing assets decreased $1.3 million as of September 30, 2020 compared to December 31, 2019. Annualized net recoveries to average loans outstanding were 0.05% for the three months ended September 30, 2020 and annualized net charge-offs were 0.10% for the nine months ended September 30, 2020, compared to net charge-offs of 0.15% and 0.07% for the same periods in 2019, respectively. The provisions for credit losses for the three and nine months ended September 30, 2020 were $7.1 million and $70.7 million, respectively, compared to $2.2 million and $12.3 million, respectively, for the same periods in 2019. The higher provision during the first nine 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 used in determining the ACL increased compared to those at the time of adoption of CECL on January 1, 2020 primarily as a result of uncertainties related to forecasted economic variables due to the economic impact of COVID-19 and the future performance of loans that received deferrals or forbearances due to COVID-19.

•Non-interest Income - For the three and nine months ended September 30, 2020, non-interest income, excluding net investment securities gains, increased $7.9 million, or 14.3%, and $14.6 million, or 9.4%, respectively, as compared to the same periods in 2019. The increase during the three months ended September 30, 2020, was primarily the result of mortgage banking income which increased $10.1 million, driven by an increase in gains on sales of mortgage loans, partially offset by a $1.5 million increase to the valuation allowance for MSRs. In addition wealth management fees increased $1.0 million resulting from overall market performance. For the nine months ended September 30, 2020, mortgage banking increased $15.0 million, net of a $9.2 million increase to the valuation allowance for MSRs. Increases were also experienced in wealth management fees and commercial banking.

•Non-interest Expense - Non-interest expense decreased $7.6 million, or 5.2%, and $4.1 million, or 0.9%, for the three and nine months ended September 30, 2020, respectively, in comparison to the same periods in 2019. The decrease during the three months ended September 30, 2020 was primarily the result of lower outside services, marketing and professional fees, partially offset by higher FDIC insurance and salaries and employee benefits. During 2019 in connection with the consolidation of the Corporation's subsidiary banks into Fulton Bank ("Charter Consolidation"), expenses, primarily outside services, totaling $5.2 million and $11.7 million were incurred for the three and nine months ended September 30, 2019, respectively. In addition during the third quarter of 2019, the Corporation recorded $4.3 million of prepayment penalties on certain FHLB advances in conjunction with a balance sheet restructuring. The decrease during the nine months ended September 30, 2020 was primarily the result of decreases in outside services and marketing, and lower prepayment penalties on FHLB advances, partially offset by higher salaries and employee benefits, increases in data processing and software expenses and state taxes.

As a result of a recent strategic operating expense review announced in October of 2020, the Corporation is undertaking a number of cost-saving initiatives that are expected to result in annual expense savings of $25 million. The Corporation expects to reinvest a portion of the cost savings to accelerate digital transformation initiatives. It is expected that the cost savings will not be fully realized until mid-2021. In addition, it is expected that a pre-tax charge within the range of $17 to $19 million will be realized for this initiative for employee severance, fixed asset write-offs

•

~~Asset Quality~~ - Non-performing assets decreased $1.5 million as of March 31, 2020 compared to December 31, 2019. Annualized net charge-offs to average loans outstanding were 0.26% for the three months ended March 31, 2020, compared to 0.10% for the same period in 2019. The provision for credit losses for the three months ended March 31, 2020 was $44.0 million compared to $5.1 million for the same period in 2019. The higher provision during the first quarter 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 ACL as of March 31, 2020 increased primarily due to the adoption of CECL and the higher provision for credit losses.


•	~~Non-interest Income~~ - For the three months ended March 31, 2020, non-interest income, excluding net investment securities gains, increased $7.9 million, or 16.9%, as compared to the same period in 2019. Increases were experienced in commercial banking, wealth management and mortgage banking.


•	~~Non-interest Expense~~ - Non-interest expense increased $4.7 million, or 3.4%, for the three months ended March 31, 2020, in comparison to the same period in 2019. The increase was primarily the result of higher salaries and employee benefits and data processing and software expenses.

•

~~Income Taxes~~ - Income tax expense was $2.8 million for the three months ended March 31, 2020, resulting in an ETR, or income taxes as a percentage of income before income taxes, of 9.6% as compared to 15.6% for the same period in 2019. The ETR was lower mainly due to lower income before income taxes. The 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 investments in community development projects that generate tax credits under various federal programs.

and lease termination charges, among others. Of this charge, $800,000 for severance expense in connection with the closure and consolidation of 21 financial centers expected to be completed in early 2021 was incurred in the third quarter of 2020, $16 to $17 million is expected to be incurred in the fourth quarter of 2020, with the remaining charges of up to approximately $1 million being recognized in the first quarter of 2021.

•Income Taxes - Income taxes were $9.5 million and $18.8 million for the three and nine months ended September 30, 2020, respectively, resulting in ETRs of 13.4% and 12.9%, respectively, as compared to 13.9% and 14.5% for the same periods in 2019, respectively. The ETR was lower mainly due to lower income before income taxes. The 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 investments in community development projects that generate tax credits under various federal programs.

Supplemental Reporting of 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 GAAP. The Corporation has presented these 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. Presentation of these non-GAAP financial measures is consistent with how the Corporation evaluates its performance internally, and these 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-GAAP financial measures, in addition to GAAP measures, are also useful to investors to evaluate the Corporation's results. Investors should recognize that the Corporation's presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures at other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures, and the Corporation strongly encourages a review of its consolidated financial statements in their entirety. Following are reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure:


	Three months ended September 30						Nine months ended September 30
	2020			2019			2020			2019
	(dollars in thousands)
Return on average tangible shareholders' equity
Net income	$	61,607		$	62,108		$	127,213		$	178,550
Plus: Intangible amortization, net of tax	103			846			312			1,016
Numerator	$	61,711		$	62,954		$	127,525		$	179,566

Average common shareholders' equity	$	2,374,091		$	2,315,585		$	2,340,204		$	2,294,165
Less: Average goodwill and intangible assets	(534,971)			(535,184)			(535,103)			(534,097)
Denominator	$	1,839,120		$	1,780,401		$	1,805,101		$	1,760,068

Return on average tangible shareholders' equity, annualized	13.50		%	14.03		%	9.44		%	13.64		%

Efficiency ratio
Non-interest expense	$	139,147		$	146,770		$	424,705		$	428,762
Less: Prepayment penalty on FHLB advances	—			(4,326)			(2,878)			(4,326)
Less: Amortization of tax credit investments	(1,694)			(1,533)			(4,594)			(4,516)
Less: Intangible amortization	(132)			(1,071)			(397)			(1,285)
Numerator	$	137,321		$	139,840		$	416,836		$	418,635

Net interest income (FTE) (1)	$	157,106		$	164,517		$	476,931		$	498,877
Plus: Total non-interest income	63,248			59,813			173,814			160,879
Less: Investment securities gains, net	(2)			(4,492)			(3,053)			(4,733)
Denominator	$	220,353		$	219,838		$	647,692		$	655,023

Efficiency ratio	62.3		%	63.6		%	64.4		%	63.9		%

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

Three months ended March 31
2020 2019
(dollars in thousands)
Return on average tangible shareholders' equity
Net income $ 26,047
$ 56,663
Plus: Intangible amortization, net of tax 104
85
Numerator $ 26,151
$ 56,748

Average common shareholders' equity $ 2,337,016
$ 2,265,097
Less: Average goodwill and intangible assets (535,235 ) (531,767 )
Average tangible shareholders' equity (denominator) $ 1,801,781
$ 1,733,330

Return on average tangible shareholders' equity, annualized 5.84 % 13.28 %

Efficiency ratio
Non-interest expense $ 142,552
$ 137,824
Less: Amortization of tax credit investments (1,450 ) (1,491 )
Less: Intangible amortization (132 ) (107 )
Numerator $ 140,970
$ 136,226

Net interest income (FTE) ⁽¹⁾
$ 163,970
$ 166,564
Plus: Total non-interest income 54,644
46,751
Less: Investment securities gains, net (46 ) (65 )
Denominator $ 218,568
$ 213,250

Efficiency ratio 64.5 % 63.9 %


~~(1)~~	~~Presented on a FTE basis, using a 21% federal tax rate and statutory interest expense disallowances. See also the “Net Interest Income” section of Management’s Discussion and Analysis.~~

CRITICAL ACCOUNTING POLICIES

The Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 includes a summary of critical accounting policies that the Corporation considers to be most important to the presentation of its financial condition and results of operations, because they require management’s most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain.

The following discussion ~~is regarding~~addresses the critical accounting policies related to the application of CECL, which was adopted on January 1, 2020.

ALLOWANCE FOR CREDIT LOSSES

The Corporation adopted new accounting guidance for estimating credit losses, known as CECL, in the first quarter of 2020. In accordance with CECL, the ACL, which includes both the ACL - loans and the ACL ~~for~~- OBS credit exposures, is calculated with the objective of maintaining a reserve for ~~current expected credit losses~~CECL over the remaining expected life of the portfolio. Management's determination of the appropriateness of the reserve is based on periodic evaluations of the loan portfolio, lending-related commitments, current as well as forecasted economic factors and other relevant factors.

In determining the ACL, the Corporation uses three independent components. These components are PD, which measures the likelihood that a borrower will be unable to meet its debt obligations, LGD, which measures the share of an asset that is lost if a borrower defaults, and EAD which measures the gross exposure under a facility upon default. The PD models were developed based on historical default data. Both internal variables and external variables are evaluated in the process. The main internal variables are risk rating (commercial loans) or delinquency history (consumer loans) and the external variables are economic variables obtained from external forecasts. Management applies risk rating transition matrices to pools of loans and lending-related commitments with similar risk characteristics to determine default probabilities, calibrates using economic forecasts, applies modeled LGD results to associated EAD and incorporates modeled overlays and qualitative adjustments to estimate ACL. As such, the calculation of ACL is inherently subjective and requires management to exercise significant judgment.

The ACL is estimated over a reasonable and supportable forecast period based on the projected performance of specific economic variables that statistically correlate with PD rates. As economic variables revert to long-term averages through the forecast process, externally developed long-term economic forecasts are used to establish the impacts of the economic scenario, reversion, and long-term averages in the development of losses over the expected life of the assets being modeled. The CECL estimate is highly sensitive to the economic forecasts used to develop the estimate. Due to the high level of uncertainty regarding significant assumptions, such as the ultimate impact of COVID-19 and effectiveness of the related government ~~stimulus,~~response, since the beginning of 2020 the Corporation has evaluated a range of economic scenarios, including more and less severe economic deteriorations, ~~in the second quarter of 2020,~~ with varying speeds of recovery.In isolation, assuming a more prolonged recession through 2021 with elevated unemployment levels through the latter half of 2022, the CECL estimate may have resulted in a significantly higher ACL. However, because qualitative adjustments are a part of the allowance methodology, the actual impact of a change in assumptions is not determinable.

~~CECL~~The ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. Qualitative adjustments include and consider changes in international, national, regional and local economic and business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting credit quality. Qualitative adjustments ~~at March 31, 2020~~have increased compared to those at the time of adoption of CECL on January 1, 2020 primarily as a result of uncertainties related to forecasted economic variables due to the economic impact of COVID-19 and the future performance of loans that received deferrals or forbearances due to COVID-19.

For further discussion of the methodology used in the determination of the ACL, refer to Note 1, "Basis of Presentation" to the Consolidated Financial Statements. To the extent actual outcomes differ from management estimates, additional provision for credit losses may be required that would adversely impact earnings in future periods.

Three months ended ~~March 31,~~September 30, 2020 compared to the three months ended ~~March 31,~~September 30, 2019

Net Interest Income

FTE net interest income decreased ~~$2.6~~$7.4 million, to ~~$164.0~~$157.1 million, for the three months ended ~~March 31,~~September 30, 2020, from ~~$166.6~~$164.5 million in the same period in 2019. The NIM decreased 2861 bp, or ~~8.0%~~18.4%, to ~~3.21%~~2.70%, compared to ~~3.49%~~3.31% for the same period in 2019. 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 21% federal tax rate and statutory interest expense disallowances. The discussion following this table is based on these FTE amounts.


	Three months ended September 30
	2020						2019
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
ASSETS	(dollars in thousands)
Interest-earning assets:
Net Loans (1)	$	18,880,519	$	160,344	3.38	%	$	16,436,507	$	188,280	4.55	%
Taxable investment securities (2)	2,011,893		13,150		2.61		2,282,292		15,565		2.73
Tax-exempt investment securities (2)	861,764		6,899		3.19		516,907		4,650		3.57

Total investment securities	2,873,657		20,049		2.79		2,799,199		20,215		2.88
Loans held for sale	79,999		728		3.64		31,898		466		5.83
Other interest-earning assets	1,387,327		1,028		0.30		509,579		2,709		2.12
Total interest-earning assets	23,221,502		182,149		3.13		19,777,183		211,670		4.25
Noninterest-earning assets:
Cash and due from banks	138,567						120,967
Premises and equipment	239,183						240,383
Other assets	1,835,190						1,491,115
Less: ACL - loans (3)	(264,934)						(171,848)
Total Assets	$	25,169,508					$	21,457,800
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits	$	5,591,548	$	1,913	0.14	%	$	4,448,112	$	9,163	0.82	%
Savings deposits	5,716,050		2,347		0.16		5,026,316		11,059		0.87
Brokered deposits	314,721		440		0.56		253,426		1,536		2.40
Time deposits	2,495,445		9,931		1.58		2,974,993		13,979		1.86
Total interest-bearing deposits	14,117,764		14,631		0.41		12,702,847		35,737		1.12
Short-term borrowings	613,127		370		0.24		919,697		4,156		1.78
FHLB advances and long-term debt	1,295,515		10,042		3.10		842,706		7,260		3.44
Total interest-bearing liabilities	16,026,406		25,043		0.62		14,465,250		47,153		1.29
Noninterest-bearing liabilities:
Demand deposits	6,270,683						4,247,820
Total Deposits/Cost of deposits	20,388,447				0.29		16,950,667				0.84
Other liabilities	498,328						429,145
Total Liabilities	22,795,417						19,142,215
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds	22,297,089				0.45		18,713,070				1.00
Shareholders’ equity	2,374,091						2,315,585
Total Liabilities and Shareholders’ Equity	$	25,169,508					$	21,457,800
Net interest income/FTE NIM			157,106		2.70	%			164,517		3.31	%
Tax equivalent adjustment			(2,990)						(3,257)
Net interest income			$	154,116					$	161,260

Three months ended March 31
2020 2019

Average
Balance
Interest
Yield/
Rate

Average
Balance
Interest
Yield/
Rate
ASSETS (dollars in thousands)
Interest-earning assets:
Net loans ⁽¹⁾
$ 16,860,067
$ 177,496
4.23 % $ 16,194,375
$ 186,122
4.65 %
Taxable investment securities⁽²⁾
2,284,457
16,294
2.85
2,285,724
15,435
2.70
Tax-exempt investment securities⁽²⁾
720,223
5,960
3.29
444,132
4,150
3.71
Total investment securities 3,004,680
22,254
2.96
2,729,856
19,585
2.87
Loans held for sale 27,178
320
4.71
16,434
240
5.85
Other interest-earning assets 602,270
2,532
1.69
366,175
2,002
2.20
Total interest-earning assets 20,494,195
202,602
3.97
19,306,840
207,949
4.35
Noninterest-earning assets:
Cash and due from banks 138,248
110,693

Premises and equipment 239,619
237,124

Other assets 1,590,666
1,197,034

Less: ACL - loans ⁽³⁾
(210,629 ) (161,326 )
Total Assets $ 22,252,099
$ 20,690,365

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 4,649,905
$ 5,643
0.49 % $ 4,153,984
$ 7,519
0.73 %
Savings deposits 5,127,662
7,110
0.56
4,912,856
9,962
0.82
Brokered deposits 275,359
1,073
1.57
220,115
1,382
2.55
Time deposits 2,761,474
12,614
1.84
2,765,803
10,826
1.59
Total interest-bearing deposits 12,814,400
26,440
0.83
12,052,758
29,689
1.00
Short-term borrowings 1,303,047
4,073
1.25
820,054
3,582
1.76
FHLB advances and long-term debt 1,063,214
8,119
3.06
1,002,463
8,114
3.26
Total interest-bearing liabilities 15,180,661
38,632
1.02
13,875,275
41,385
1.21
Noninterest-bearing liabilities:

Demand deposits 4,307,027
4,222,875

Total Deposits/Cost of deposits 17,121,427
0.62
16,275,633
0.74
Other liabilities 427,395
327,118

Total Liabilities 19,915,083
18,425,268

Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds 19,487,688
0.80
18,098,150
0.93
Shareholders’ equity 2,337,016
2,265,097

Total Liabilities and Shareholders’ Equity $ 22,252,099
$ 20,690,365

Net interest income/FTE NIM 163,970
3.21 % 166,564
3.49 %
Tax equivalent adjustment (3,224 ) (3,249 )
Net interest income $ 160,746
$ 163,315

(1)Average balance includes non-performing loans.


~~(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 on "Net Loans" and does not include the ACL for OBS credit exposures which is included in other liabilities.~~

(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 three months ended ~~March 31,~~September 30, 2020 in comparison to the same period in 2019:


	2020 vs. 2019 Increase (Decrease) due to change in
	Volume		Rate		Net
	(in thousands)
FTE Interest income on:
Net Loans (1)	$	24,784	$	(52,720)	$	(27,936)
Taxable investment securities	(1,961)		(454)		(2,415)
Tax-exempt investment securities	2,783		(534)		2,249

Loans held for sale	487		(225)		262
Other interest-earning assets	1,957		(3,638)		(1,681)
Total interest income	$	28,050	$	(57,571)	$	(29,521)
Interest expense on:
Demand deposits	$	1,569	$	(8,819)	$	(7,250)
Savings deposits	1,303		(10,014)		(8,711)
Brokered deposits	232		(1,328)		(1,096)
Time deposits	(2,094)		(1,955)		(4,049)
Short-term borrowings	(1,054)		(2,732)		(3,786)
Long-term borrowings	3,550		(768)		2,782
Total interest expense	$	3,507	$	(25,617)	$	(22,110)

2020 vs. 2019
Increase (Decrease) due
to change in
Volume Rate Net
(in thousands)
FTE Interest income on:
Net Loans $ 7,899
$ (16,525 ) $ (8,626 )
Taxable investment securities (9 ) 868
859
Tax-exempt investment securities 2,313
(503 ) 1,810
Loans held for sale 134
(54 ) 80
Other interest-earning assets 1,079
(549 ) 530
Total interest income $ 11,416
$ (16,763 ) $ (5,347 )
Interest expense on:
Demand deposits $ 741
$ (2,617 ) $ (1,876 )
Savings deposits 430
(3,282 ) (2,852 )
Brokered deposits 305
(614 ) (309 )
Time deposits 246
1,542
1,788
Short-term borrowings 1,725
(1,234 ) 491
Long-term borrowings 502
(497 ) 5
Total interest expense $ 3,949
$ (6,702 ) $ (2,753 )
(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 FOMC decreased the Fed Funds Rate by 25 bp in each of August, September and October of 2019. In March 2020, the FOMC decreased the Fed Funds Rate by a total of 150 bp in response to COVID-19. These changes in the Fed Funds Rate resulted in corresponding decreases to the index rates for the Corporation's variable and adjustable rate loans, primarily the prime rate and ~~the~~ LIBOR as well as for certain interest-bearing liabilities.

As summarized in the preceding table, the 38112 bp decrease in the yield on average interest-earning assets drove a ~~$16.8~~$57.6 million decrease in FTE interest income, but was partially offset by the impact of a ~~$1.2~~$3.4 billion, or ~~6.1%~~17.4%, increase in average interest-earning assets, primarily PPP loans, which contributed ~~$11.4~~$28.1 million to FTE interest income.The yield on the loan portfolio decreased 42117 bp, or ~~9.0%~~25.7%, from the ~~first~~third quarter of 2019, as all variable and certain adjustable rate loans 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 loan agreements, which may be later than the date the Fed Funds Rate and related loan index rates increase or decrease. As such, the impact of changes in index rates on adjustable rate loans may not be fully realized until future periods.

Interest expense decreased ~~$2.8~~$22.1 million primarily due to the 1967 bp decrease in the rate on average interest-bearing liabilities.The rates on average interest-bearing demand deposits and savings deposits decreased 68 bp and 71 bp, respectively, which contributed $8.8 million and $10.0 million to the decrease in interest expense, respectively. Brokered deposit rates decreased 184 bp, which contributed $1.3 million to the decrease in interest expense. In addition, the 154 bp decrease in the rates on short-term borrowings contributed $2.7 million to the decrease in interest expense. The $452.8 million increase in average long-term borrowings contributed $3.6 million of additional interest expense, partially offset by a $768,000 decrease in additional interest expense as a result of 34 bp decrease in the average rate.

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


	Three months ended September 30								Increase (Decrease)
	2020				2019				in Balance
	Balance		Yield		Balance		Yield		$		%
	(dollars in thousands)
Real estate – commercial mortgage	$	6,986,528	3.27	%	$	6,489,456	4.57	%	$	497,072	7.7	%
Commercial and industrial (1)	5,983,872		2.53		4,414,406		4.57		1,569,466		35.6
Real estate – residential mortgage	2,975,516		3.73		2,512,899		4.06		462,617		18.4
Real estate – home equity	1,237,602		3.87		1,364,161		5.27		(126,559)		(9.3)
Real estate – construction	981,589		3.84		905,060		4.68		76,529		8.5
Consumer	464,851		4.07		457,524		4.36		7,327		1.6
Equipment lease financing	279,217		3.96		277,555		4.41		1,662		0.6
Other (2)	(28,656)		—		15,446		—		(44,102)		N/M
Total loans	$	18,880,519	3.38	%	$	16,436,507	4.55	%	$	2,444,012	14.9	%

(1) Includes average PPP loans of $2.0 billion for the three months ended September 30, 2020.

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

N/M - Not meaningful

Average loans increased $2.4 billion, or 14.9%, compared to the same period of 2019. The increase was driven largely by growth in the commercial and industrial portfolio as a result of loans originated under the PPP. Excluding loans originated under the PPP, commercial and industrial loan balances declined. Commercial and residential mortgage loan portfolios, as well as the construction, consumer and equipment lease financing portfolios, experienced growth, partially offset by decreases in the home equity loan portfolio.

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


	Three months ended September 30								Increase (Decrease) in Balance
	2020				2019
	Balance		Rate		Balance		Rate		$		%
	(dollars in thousands)
Noninterest-bearing demand	$	6,270,683	—	%	$	4,247,820	—	%	$	2,022,863	47.6	%
Interest-bearing demand	5,591,548		0.14		4,448,112		0.82		1,143,436		25.7
Savings	5,716,050		0.16		5,026,316		0.87		689,734		13.7
Total demand and savings	17,578,281		0.1		13,722,248		0.58		3,856,033		28.1
Brokered deposits	314,721		0.56		253,426		2.40		61,295		24.2
Time deposits	2,495,445		1.58		2,974,993		1.86		(479,548)		(16.1)
Total deposits	$	20,388,447	0.29	%	$	16,950,667	0.84	%	$	3,437,780	20.3	%

Average total demand and savings accounts increased $3.9 billion, or 28.1%, primarily driven by increases in noninterest-bearing demand deposits as well as interest-bearing demand and saving accounts. The increases in average total demand and savings accounts resulted from the funding of various government stimulus programs, which largely remained in customer deposit accounts during the quarter as well as seasonal increases in municipal accounts.

The average cost of total deposits decreased 55 bp, to 0.29%, for the third quarter of 2020, compared to 0.84% for the same period of 2019, mainly as a result of reductions in deposit rates in response to the FOMC reductions to the Fed Funds Rate and also as a result of deposit rate decreases implemented after the Fed Funds Rate cuts during the second half of 2019.

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


	Three months ended September 30								Increase (Decrease)
	2020				2019				in Balance
	Balance		Rate		Balance		Rate		$		%
Short-term borrowings:	(dollars in thousands)


Customer funding(1)	$	613,127	0.24	%	$	332,893	0.80	%	$	280,234	84.2	%
Federal funds purchased	—		—		101,022		2.11		(101,022)		N/M
FHLB advances and other borrowings (2)	—		—		485,782		2.38		(485,782)		N/M
Total short-term borrowings	613,127		0.24		919,697		1.78		(306,570)		(33.3)
Long-term borrowings:
FHLB advances	535,992		1.81		455,264		2.55		80,728		17.7
Other long-term debt	759,523		4.00		387,442		4.48		372,081		96.0
Total long-term borrowings	1,295,515		3.10		842,706		3.44		452,809		53.7
Total borrowings	$	1,908,642	2.18	%	$	1,762,403	2.57	%	$	146,239	8.3	%

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

(2) Consists of FHLB borrowings with original term of less than one year.

Average total short-term borrowings decreased $306.6 million, or 33.3%, primarily as a result of a $485.8 million decrease in FHLB advances and other borrowings and a $101.0 million decrease in federal funds purchased, partially offset by a $280.2 million increase in customer funding. These decreases resulted from excess funding provided by higher deposits. The average cost of short-term borrowings decreased 154 bp, mainly due to the net impact of changes in the Fed Funds Rate.

Average total long-term borrowings increased $452.8 million, or 53.7%, during the third quarter of 2020, compared to the same period of 2019, primarily as a result of the issuance of $375.0 million of subordinated notes in March of 2020. The 74 bp decrease in the rate on FHLB advances reflects the impact of restructurings.

Provision for Credit Losses

The provision for credit losses was $7.1 million for the third quarter of 2020, an increase of $4.9 million from the same period of 2019. The increase was the result of several factors, most notably, the overall uncertainty in economic forecasts due to COVID-19.

Non-Interest Income

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


	Three months ended September 30				Increase (Decrease)
	2020		2019		$		%
	(dollars in thousands)
Wealth management fees	$	14,943	$	13,867	$	1,076	7.8	%
Commercial banking:
Merchant and card	6,237		6,166		71		1.2
Cash management	4,742		4,696		46		1.0
Capital markets	4,696		4,448		248		5.6
Other commercial banking	2,636		3,478		(842)		(24.2)
Total commercial banking	18,311		18,788		(477)		(2.5)
Consumer banking:
Card	5,002		5,791		(789)		(13.6)
Overdraft	3,015		4,682		(1,667)		(35.6)
Other consumer banking	2,406		2,860		(454)		(15.9)
Total consumer banking	10,423		13,333		(2,910)		(21.8)
Mortgage banking:
Gains on sales of mortgage loans	19,480		5,520		13,960		N/M
Mortgage servicing income	(2,679)		1,138		(3,817)		N/M
Total mortgage banking	16,801		6,658		10,143		N/M
Other	2,769		2,675		94		3.5
Non-interest income before investment securities gains	63,246		55,321		7,925		14.3
Investment securities gains, net	2		4,492		(4,490)		N/M
Total Non-Interest Income	$	63,248	$	59,813	$	3,435	5.7	%

N/M - Not meaningful

Non-interest income, before net investment securities gains, increased $7.9 million, or 14.3%, in the third quarter of 2020 as compared to the same period in 2019. Wealth management revenues increased $1.1 million, or 7.8%, primarily resulting from growth in brokerage income due to an increase in client asset levels and improved overall market performance.

Total commercial banking income decreased $477,000, or 2.5%, compared to the same period in 2019, driven by decreases in other commercial banking income (primarily other services charges on deposits and Small Business Administration income) as a result of COVID-19.

Total consumer banking income decreased $2.9 million, or 21.8%, compared to the same period in 2019, primarily driven by lower overdraft fees.

Mortgage banking income increased $10.1 million, driven by an increase in gains on sales of mortgage loans, partially offset by a decrease in mortgage servicing income. The increase in gains on sales of mortgage loans reflected increases in both the volume of loans sold and higher spreads on sales. The decrease in mortgage servicing income was driven by a $1.5 million increase to the valuation allowance for MSRs in the third quarter of 2020, and higher MSR amortization due to higher prepayments.

Investment securities gains, net, were lower compared to the same period of 2019 as a result of a balance sheet restructuring involving the sale of approximately $400 million of investment securities and a corresponding prepayment of FHLB advances completed during the third quarter of 2019. As a result of these transactions, $4.5 million of investment securities gains were realized during the third quarter of 2019.

Non-Interest Expense

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


	Three months ended September 30				Increase (Decrease)
	2020		2019		$		%
	(dollars in thousands)
Salaries and employee benefits	$	79,227	$	78,211	$	1,016	1.3	%
Net occupancy	13,221		12,368		853		6.9
Data processing and software	12,285		11,590		695		6.0
Other outside services	7,617		12,163		(4,546)		(37.4)
Professional fees	2,879		3,331		(452)		(13.6)
Equipment	3,711		3,459		252		7.3
State taxes	2,692		2,523		169		6.7
FDIC insurance	1,578		239		1,339		N/M
Marketing	1,147		3,322		(2,175)		(65.5)
Amortization of TCI	1,694		1,533		161		10.5
Intangible amortization	132		1,071		(939)		(87.7)
Prepayment penalty on FHLB advances	—		4,326		(4,326)		N/M
Other	12,962		12,634		328		2.6
Total non-interest expense	$	139,147	$	146,770	$	(7,623)	(5.2)	%

N/M - Not meaningful

The $1.0 million, or 1.3%, increase in salaries and employee benefits reflected an $800,000 severance expense incurred in connection with the 21 financial center closures and consolidations expected to be completed in early 2021.

Other outside services decreased $4.5 million, or 37.4%, as 2019 included $2.6 million of expense associated with the Charter Consolidation.

Marketing expense declined $2.2 million, or 65.5%, as a result of reduced marketing campaigns during the quarter.

Professional fees decreased $452,000, or 13.6%, primarily due to a decrease in legal fees. The Corporation incurs fees related to various legal matters in the normal course of business. These fees can fluctuate based on timing and the extent of these matters.

FDIC insurance increased $1.3 million compared to the same period in 2019. FDIC insurance expense was reduced in the third quarter of 2019 as a result of the receipt of assessment credits.

The third quarter of 2019 included approximately $4.3 million of penalties related to the prepayment of certain FHLB advances in conjunction with the 2019 balance sheet restructuring mentioned above.

Income Taxes

Income tax expense for the three months ended September 30, 2020 was $9.5 million, a $500,000 decrease from $10.0 million for the same period in 2019. The Corporation’s ETR was 13.4% for the three months ended September 30, 2020, compared to 13.9% in the same period of 2019. The decrease in income tax expense primarily resulted from a decrease in income before taxes. The 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 investments in community development projects that generate tax credits under various federal programs.

Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019

Net Interest Income

FTE net interest income decreased $21.9 million, to $476.9 million for the nine months ended September 30, 2020, from $498.9 million for the same period in 2019. The NIM decreased 51 bp, or 15.0%, to 2.90% compared to 3.41% for the same period in 2019. 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 21% federal tax rate and statutory interest expense disallowances. The discussion following this table is based on these FTE amounts.


	Nine months ended September 30
	2020						2019
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
ASSETS	(dollars in thousands)
Interest-earning assets:
Net Loans(1)	$	18,027,253	$	498,455	3.69	%	$	16,316,540	$	565,095	4.63	%
Taxable investment securities (2)	2,165,180		44,615		2.75		2,305,472		46,935		2.71
Tax-exempt investment securities (2)	804,484		19,596		3.24		468,689		12,940		3.66

Total investment securities	2,969,664		64,211		2.88		2,774,161		59,875		2.87
Loans held for sale	54,355		1,557		3.82		24,357		1,056		5.78
Other interest-earning assets	936,819		4,325		0.62		428,982		6,879		2.14
Total interest-earning assets	21,988,091		568,548		3.45		19,544,040		632,905		4.33
Noninterest-earning assets:
Cash and due from banks	143,496						116,019
Premises and equipment	239,739						239,402
Other assets	1,729,351						1,337,482
Less: ACL - loans(3)	(242,300)						(165,733)
Total Assets	$	23,858,377					$	21,071,210
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits	$	5,116,696	$	9,933	0.26	%	$	4,263,869	$	24,854	0.78	%
Savings and money market deposits	5,431,071		12,788		0.31		4,955,403		31,570		0.85
Brokered deposits	300,795		1,935		0.86		240,045		4,500		2.51
Time deposits	2,626,802		33,533		1.71		2,853,147		37,050		1.74
Total interest-bearing deposits	13,475,364		58,189		0.58		12,312,464		97,974		1.06
Short-term borrowings	873,694		4,960		0.76		894,116		12,200		1.81
FHLB advances and other long-term debt	1,240,253		28,468		3.06		965,111		23,854		3.30
Total interest-bearing liabilities	15,589,311		91,617		0.78		14,171,691		134,028		1.26
Noninterest-bearing liabilities:
Demand deposits	5,458,807						4,223,927
Total Deposits/Cost of deposits	18,934,171				0.41		16,536,391				0.79
Other liabilities	470,055						381,427
Total Liabilities	21,518,173						18,777,045
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds	21,048,118				0.58		18,395,618				0.97
Shareholders’ equity	2,340,204						2,294,165
Total Liabilities and Shareholders’ Equity	$	23,858,377					$	21,071,210
Net interest income/FTE NIM			476,931		2.90	%			498,877		3.41	%
Tax equivalent adjustment			(9,315)						(9,758)
Net interest income			$	467,616					$	489,119

(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 months ended September 30, 2020 in comparison to the same period in 2019:


	2020 vs. 2019 Increase (Decrease) due to change in
	Volume		Rate		Net
FTE Interest income on:	(in thousands)
Net Loans (1)	$	3,192	$	(69,832)	$	(66,640)
Taxable investment securities	(2,213)		(108)		(2,320)
Tax-exempt investment securities	6,580		76		6,656

Loans held for sale	579		(78)		501
Other interest-earning assets	436		(2,990)		(2,554)
Total interest income	$	8,575	$	(72,932)	$	(64,357)
Interest expense on:
Demand deposits	$	(1,303)	$	(13,618)	$	(14,921)
Savings deposits	(732)		(18,050)		(18,782)
Brokered deposits	(228)		(2,336)		(2,565)
Time deposits	(1,161)		(2,355)		(3,517)
Short-term borrowings	(273)		(6,967)		(7,240)
Long-term borrowings	4,594		20		4,614
Total interest expense	$	896	$	(43,307)	$	(42,411)

(1)Average balance includes non-performing loans.

The FOMC decreased the Fed Funds Rate by 25 bp in each of August, September and October of 2019. In March 2020, the FOMC decreased the Fed Funds Rate by a total of 150 bp in response to COVID-19. These changes in the Fed Funds Rate resulted in corresponding decreases to the index rates for the Corporation's variable and adjustable rate loans, primarily the prime rate and LIBOR as well as for certain interest-bearing liabilities.

The 88 bp decrease in the yield on average interest-earning assets drove a $72.9 million decrease in FTE interest income, but was partially offset by the impact of a $2.4 billion, or 12.5%, increase in average interest-earning assets, primarily loans, which contributed $8.6 million to FTE interest income. The yield on the loan portfolio decreased 94 bp, or 20.2%, from the same period of 2019, as all variable and certain adjustable rate loans 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 loan agreements, which may be later than the date the Fed Funds Rate and related loan index rates increase or decrease. As such, the impact of changes in index rates on adjustable rate loans may not be fully realized until future periods.

Interest expense decreased $42.4 million primarily due to the 48 bp decrease in the rate on average interest-bearing liabilities. The rates on average interest-bearing demand deposits and savings deposits decreased 2452 bp and 2654 bp, respectively, which contributed ~~$2.6~~$13.6 million and ~~$3.3~~$18.1 million to the decrease in interest expense, respectively. ~~These decreases were partially offset by the 25 bp increase in the rates on time deposits, which generated a $1.5 million increase to interest expense.~~ In addition, the 51105 bp decrease in the rates on short-term borrowings contributed ~~$1.2~~$7.0 million to the decrease in interest ~~expense, however the increase in short-term borrowings contributed $1.7 million in additional interest~~ expense.

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


	Nine months ended September 30								Increase (Decrease)
	2020				2019				in Balance
	Balance		Yield		Balance		Yield		$		%
	(dollars in thousands)
Real estate – commercial mortgage	$	6,870,148	3.64	%	$	6,431,012	4.64	%	$	439,136	6.8	%
Commercial and industrial (1)	5,382,459		3.10		4,438,894		4.65		943,565		21.3
Real estate – residential mortgage	2,805,694		3.86		2,386,264		4.07		419,430		17.6
Real estate – home equity	1,269,525		4.17		1,400,371		5.32		(130,846)		(9.3)
Real estate – construction	950,845		3.83		926,036		4.94		24,809		2.7
Consumer	465,661		4.19		442,678		4.41		22,983		5.2
Equipment lease financing	282,800		3.91		278,463		4.42		4,337		1.6
Other (2)	121		—		12,822		—		(12,701)		(99.1)
Total loans	$	18,027,253	3.69	%	$	16,316,540	4.63	%	$	1,710,713	10.5	%

Average loans increased ~~$665.7 million,~~$1.7 billion, or ~~4.1%~~10.5%, compared to the same period of 2019. The increase was driven largely by growth in the ~~residential~~commercial and industrial portfolio, which was primarily attributable to the origination of PPP loans in the second quarter of 2020. Excluding loans originated under the PPP, commercial and industrial loan balances declined as a result of the overall slowing of the economy. Commercial and residential mortgage loan portfolios, as well as the construction, consumer ~~portfolio,~~and equipment lease financing portfolios experienced growth, partially offset by decreases in the home equity ~~and commercial and industrial~~ loan ~~portfolios.~~portfolio.

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


	Nine months ended September 30								Increase (Decrease) in Balance
	2020				2019
	Balance		Rate		Balance		Rate		$		%
	(dollars in thousands)
Noninterest-bearing demand	$	5,458,807	—	%	$	4,223,927	—	%	$	1,234,880	29.2	%
Interest-bearing demand	5,116,696		0.26		4,263,869		0.78		852,827		20.0
Savings	5,431,071		0.31		4,955,403		0.85		475,668		9.6
Total demand and savings	16,006,574		0.19		13,443,199		0.56		2,563,375		19.1
Brokered deposits	300,795		0.86		240,045		2.51		60,750		25.3
Time deposits	2,626,802		1.71		2,853,147		1.74		(226,345)		(7.9)
Total deposits	$	18,934,171	0.41	%	$	16,536,391	0.79	%	$	2,397,780	14.5	%

Three months ended March 31 Increase (Decrease)
in Balance
2020 2019
Balance Rate Balance Rate $ %
(dollars in thousands)
Noninterest-bearing demand $ 4,307,027
— % $ 4,222,875
— % $ 84,152
2.0 %
Interest-bearing demand 4,649,905
0.49
4,153,984
0.73
495,921
11.9
Savings 5,127,662
0.56
4,912,856
0.82
214,806
4.4
Total demand and savings 14,084,594
0.36
13,289,715
0.53
794,879
6.0
Brokered deposits 275,359
1.57
220,115
2.55
55,244
25.1
Time deposits 2,761,474
1.84
2,765,803
1.59
(4,329 ) (0.2 )
Total deposits $ 17,121,427
0.62 % $ 16,275,633
0.74 % $ 845,794
5.2 %

Average total demand and savings accounts increased ~~$794.9 million,~~$2.6 billion, or ~~6.0%~~19.1%, ~~primarily~~ driven by increases in noninterest-bearing demand deposits, interest-bearing demand deposits and saving accounts. The ~~average cost of interest-bearing deposits decreased 17 bp due rate decreases~~primary reason for the increases in ~~most non-maturity deposit categories. The overall increase in~~average total demand and savings ~~deposits was primarily due to a $570.1 million, or 11.8%, increase~~accounts were the result of the funding of various government stimulus programs, which largely remained in ~~commercial account balances, a $139.0 million, or 7.5%, increase~~customer deposit accounts during the period as well as seasonal increases in municipal ~~account balances, and an $85.7 million, or 1.3%, increase in consumer account balances.~~accounts.

The average cost of total deposits decreased 1238 bp, to ~~0.62%~~0.41%, for the first ~~quarter~~nine months of 2020, compared to ~~0.74%~~0.79% for the same period of 2019, mainly as a result of reductions in deposit rates in response to the FOMC reductions to the Fed Funds Rate as well as deposit rate decreases implemented after the Fed Funds Rate cuts during the second half of 2019. The majority of deposit rates are discretionary, with the exception of indexed municipal balances. ~~Deposit costs are expected to decrease significantly~~The average cost of interest-bearing deposits decreased in ~~the second quarter of 2020 as a result of~~all non-maturity deposit ~~rate cuts in the second half of March 2020 in response to the sweeping FOMC reductions to the Fed Funds Rate.~~categories.

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


	Nine months ended September 30								Increase (Decrease)
	2020				2019				in Balance
	Balance		Rate		Balance		Rate		$		%
Short-term borrowings:	(dollars in thousands)
Customer funding(1)	$	529,667	0.33	%	$	541,237	1.39	%	$	(11,570)	(2.1)	%
Federal funds purchased	86,715		0.82		146,432		2.35		(59,717)		(40.8)
FHLB advances and other borrowings(2)	257,312		1.61		206,447		2.55		50,865		24.6
Total short-term borrowings	873,694		0.76		894,116		1.81		(20,422)		(2.3)
Long-term borrowings:
FHLB advances	564,855		1.88		577,835		2.50		(12,980)		(2.2)
Other long-term debt	675,398		4.05		387,276		4.49		288,122		74.4
Total long-term borrowings	1,240,253		3.06		965,111		3.30		275,142		28.5
Total borrowings	$	2,113,947	2.11	%	$	1,859,227	2.58	%	$	254,720	13.7	%

Three months ended March 31 Increase (Decrease)
2020 2019 in Balance
Balance Rate Balance Rate $ %
(dollars in thousands)
Short-term borrowings:
Total short-term customer funding⁽¹⁾
$ 428,242
0.58 % $ 368,799
0.72 % $ 59,443
16.1 %
Federal funds purchased 186,868
1.12
157,122
2.43
29,746
18.9
Short-term FHLB advances and other borrowings ⁽²⁾
687,937
1.70
294,133
2.71
393,804
133.9
Total short-term borrowings 1,303,047
1.25
820,054
1.76
482,993
58.9
Long-term borrowings:

FHLB advances 556,951
1.93
615,343
2.48
(58,392 ) (9.5 )
Other long-term debt 506,263
4.30
387,120
4.49
119,143
30.8
Total long-term borrowings 1,063,214
3.06
1,002,463
3.26
60,751
6.1
Total borrowings $ 2,366,261
2.06 % $ 1,822,517
2.59 % $ 543,744
29.8 %

(2) Consists of FHLB borrowings with original term of less than one year.

Average total short-term borrowings ~~increased $483.0~~decreased $20.4 million, or ~~58.9%~~2.3%, primarily as a result of a ~~$393.8~~$59.7 million, or 40.8%, decrease in federal funds purchased partially offset by a $50.9 million increase in short-term FHLB advances and other borrowings. ~~Total short-term customer funding and federal funds purchased also increased during the first quarter of 2020.~~ The average cost of short-term borrowings decreased 51105 bp, mainly due to the net impact of changes in the Fed Funds Rate.

Average total long-term borrowings increased ~~$60.8~~$275.1 million, or ~~6.1%~~28.5%, during the first ~~quarter~~nine months of 2020, compared to the same period of 2019, as a result of the issuance of $375.0 million of subordinated notes in March of 2020, partially offset by a decrease in average FHLB advances.

The provision for credit losses was ~~$44.0~~$70.7 million for ~~the~~ first ~~quarter~~nine months of 2020, an increase of ~~$38.9~~$58.4 million from the same period of 2019. The increase was the result of several factors, most notably, the overall ~~downturn~~uncertainty in economic forecasts due to COVID-19.

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

~~Excluding net investment securities gains, non-interest income increased $7.9 million, or 16.9%, in the first quarter of 2020 as compared to the same period in 2019.~~ Wealth management revenues increased ~~$1.8~~$2.1 million, or ~~13.7%~~5.2%, resulting primarily from growth in brokerage income due to an increase in client asset levels and improved overall market ~~performance prior to the impact of COVID-19 at the end of the quarter.~~performance.

Total commercial banking income increased ~~$3.2 million,~~$422,000, or ~~20.8%~~0.8%, compared to the same period in 2019, driven by increases in capital markets revenues, primarily commercial loan interest rate swap income, partially offset by decreases in other commercial banking income, primarily other services charges on deposits and ~~cash management fees.~~Small Business Administration income, and merchant and card income as a result of COVID-19.



(in thousands, except per-share data)	Three months ended March 31
	2020		2019
INTEREST INCOME
Loans, including fees	$	175,523	$	183,744
Investment securities:
Taxable	16,294		15,435
Tax-exempt	4,709		3,279
Loans held for sale	320		240
Other interest income	2,532		2,002
Total Interest Income	199,378		204,700
INTEREST EXPENSE
Deposits	26,440		29,689
Short-term borrowings	4,073		3,582
Long-term borrowings	8,119		8,114
Total Interest Expense	38,632		41,385
Net Interest Income	160,746		163,315
Provision for credit losses	44,030		5,100
Net Interest Income After Provision for Credit Losses	116,716		158,215
NON-INTEREST INCOME
Wealth management	15,055		13,239
Commercial banking	18,419		15,250
Consumer banking	11,239		11,377
Mortgage banking	6,234		4,772
Other	3,651		2,048
Non-Interest Income Before Investment Securities Gains	54,598		46,686
Investment securities gains, net	46		65
Total Non-Interest Income	54,644		46,751
NON-INTEREST EXPENSE
Salaries and employee benefits	80,228		77,757
Net occupancy	13,486		12,909
Data processing and software	11,645		10,353
Other outside services	7,881		8,352
Professional fees	4,202		3,960
Equipment	3,418		3,342
State Taxes	2,804		2,002
FDIC insurance	2,808		2,609
Marketing	1,579		2,160
Amortization of TCI	1,450		1,491
Intangible amortization	132		107
Other	12,919		12,782
Total Non-Interest Expense	142,552		137,824
Income Before Income Taxes	28,808		67,142
Income taxes	2,761		10,479
Net Income	$	26,047	$	56,663
PER SHARE:
Net Income (Basic)	$	0.16	$	0.33
Net Income (Diluted)	0.16		0.33
Cash Dividends	0.13		0.13
See Notes to Consolidated Financial Statements



	Gross Realized
	Gains		Losses			Net Gains
Three months ended March 31, 2020	(in thousands)
March 31, 2020	$	117	$	(71	)	$	46
Three months ended March 31, 2019
March 31, 2019	$	257	$	(192	)	$	65



	September 30, 2020
	(in thousands)
ACL - loans	$	266,825
ACL - OBS credit exposure	15,533
Total ACL	$	282,358



	March 31, 2020
ACL - loans	$	238,508
ACL - OBS credit exposure	18,963
Total ACL	$	257,471



Balance at December 31, 2019	$	166,209
Impact of adopting CECL ⁽¹⁾	58,349
Loans charged off	(14,003		)
Recoveries of loans previously charged off	2,887
Net loans charged off	(11,116		)
Provision for credit losses ⁽²⁾	44,029
Balance at March 31, 2020	$	257,471



	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 March 31, 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	29,361			(18,576		)	(65		)	21,235			4,015			5,969			3,784			45,723
Loans charged off	(855		)	(10,899		)	(316		)	(187		)	—			(1,213		)	(533		)	(14,003		)
Recoveries of loans previously charged off	244			1,734			646			85			70			—			108			2,887
Net loans recovered (charged off)	(611		)	(9,165		)	330			(102		)	70			(1,213		)	(425		)	(11,116		)
Provision for credit losses⁽¹⁾	15,959			22,745			(2,756		)	1,523			(130		)	1,347			1,591			40,279
Balance at March 31, 2020	$	90,319		$	63,606		$	15,253		$	42,427		$	8,398		$	9,865		$	8,640		$	238,508



		ACL - Loans						Net Loans
		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Total ACL - Loans		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Total Net Loans
March 31, 2020
	Real Estate - Commercial Mortgage	$	84,173	$	6,146	$	90,319	$	6,851,765	$	43,304	$	6,895,069
	Commercial and Industrial	57,640		5,966		63,606		4,405,393		45,846		4,451,239
	Real Estate - Home Equity	7,806		7,447		15,253		2,696,515		21,775		2,718,290
	Real Estate - Residential Mortgage	36,935		5,492		42,427		1,254,677		38,000		1,292,677
	Real Estate - Construction	8,168		230		8,398		944,209		3,559		947,768
	Consumer	9,861		4		9,865		468,165		7		468,172
	Equipment Lease Financing and Other	8,640		—		8,640		287,789		16,399		304,188

Total		$	213,223	$	25,285	$	238,508	$	16,908,513	$	168,890	$	17,077,403


	December 31, 2019
	(in thousands)
Allowance for loan losses	$	163,622
Reserve for unfunded lending commitments	2,587
ACL	$	166,209


					Three months ended September 30, 2019		Nine months ended September 30, 2019
Balance at beginning of period, December 31, 2018	$	169,410
					(in thousands)
Balance at beginning of period				Balance at beginning of period	$	176,941	$	169,410
Loans charged off	(6,369		)	Loans charged off	(10,128)		(20,208)
Recoveries of loans previously charged off	2,231			Recoveries of loans previously charged off	3,814		11,300
Net loans charged off	(4,138		)	Net loans charged off	(6,314)		(8,908)
Provision for credit losses⁽¹⁾	5,100			Provision for credit losses(1)	2,170		12,295
Balance at end of period, March 31, 2019	$	170,372
Balance at end of period				Balance at end of period	$	172,797	$	172,797


																										Real Estate - Commercial Mortgage		Commercial & Industrial		Real Estate - Home Equity		Real Estate - Residential Mortgage		Real Estate - Construction		Consumer		Equipment lease financing, other and overdrafts		Total
	Real Estate - Commercial Mortgage			Commercial & Industrial			Real Estate - Home Equity			Real Estate - Residential Mortgage			Real Estate - Construction			Consumer			Equipment lease financing, other and overdrafts			Total				(in thousands)
	(in thousands)
Three months ended March 31, 2019
Three months ended September 30, 2019																									Three months ended September 30, 2019
Balance at June 30, 2019																									Balance at June 30, 2019	$	54,859	$	66,341	$	18,981	$	18,892	$	4,928	$	3,363	$	2,869	$	170,233
Loans charged off																									Loans charged off	(394)		(7,181)		(498)		(533)		(45)		(877)		(600)		(10,128)
Recoveries of loans previously charged off																									Recoveries of loans previously charged off	444		2,311		132		440		164		216		107		3,814
Net loans recovered (charged off)																									Net loans recovered (charged off)	50		(4,870)		(366)		(93)		119		(661)		(493)		(6,314)
Provision for loan losses(1)																									Provision for loan losses(1)	(5,529)		7,710		(662)		(109)		(664)		798		672		2,216
Balance at September 30, 2019																									Balance at September 30, 2019	$	49,380	$	69,181	$	17,953	$	18,690	$	4,383	$	3,500	$	3,048	$	166,135
Nine months ended September 30, 2019																									Nine months ended September 30, 2019
Balance at December 31, 2018	$	52,889		$	58,868		$	18,911		$	18,921		$	5,061		$	3,217		$	2,670		$	160,537		Balance at December 31, 2018	$	52,889	$	58,868	$	18,911	$	18,921	$	5,061	$	3,217	$	2,670	$	160,537
Loans charged off	(1,145		)	(2,787		)	(219		)	(655		)	(95		)	(683		)	(785		)	(6,369		)	Loans charged off	(1,769)		(11,863)		(923)		(1,322)		(143)		(2,355)		(1,833)		(20,208)
Recoveries of loans previously charged off	136			1,243			197			132			84			210			229			2,231			Recoveries of loans previously charged off	749		6,234		552		783		1,493		1,005		484		11,300
Net loans recovered (charged off)	(1,009		)	(1,544		)	(22		)	(523		)	(11		)	(473		)	(556		)	(4,138		)	Net loans recovered (charged off)	(1,020)		(5,629)		(371)		(539)		1,350		(1,350)		(1,349)		(8,908)
Provision for loan losses⁽¹⁾	66			3,177			326			748			(109		)	575			927			5,710			Provision for loan losses(1)	(2,489)		15,942		(587)		308		(2,028)		1,633		1,727		14,506
Balance at March 31, 2019	$	51,946		$	60,501		$	19,215		$	19,146		$	4,941		$	3,319		$	3,041		$	162,109
Balance at September 30, 2019																									Balance at September 30, 2019	$	49,380	$	69,181	$	17,953	$	18,690	$	4,383	$	3,500	$	3,048	$	166,135



	Performing			Delinquent ⁽¹⁾			Non-performing ⁽²⁾			Total
	December 31, 2019
	(dollars in thousands)
Real estate - home equity	$	1,292,035		$	12,341		$	10,568		$	1,314,944
Real estate - residential mortgage	2,584,763			34,291			22,411			2,641,465
Construction - other	92,649			895			809			94,353
Consumer - direct	63,582			465			190			64,237
Consumer - indirect	393,974			4,685			268			398,927
Total consumer	457,556			5,150			458			463,164
Equipment lease financing and other	278,743			4,012			16,642			299,397
	$	4,705,746		$	56,689		$	50,888		$	4,813,323
% of Total	97.8		%	1.2		%	1.0		%	100		%


														30-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Current		Total
	30-59		60-89		≥ 90 Days									(in thousands)
	Days Past		Days Past		Past Due		Non-
March 31, 2020	Due		Due		and Accruing		Accrual		Current		Total
December 31, 2019													December 31, 2019
Real estate – commercial mortgage	$	20,052	$	1,028	$	879	$	35,657	$	6,837,453	$	6,895,069	Real estate – commercial mortgage	$	10,912	$	1,543	$	4,113	$	33,166	$	6,651,042	$	6,700,776
Commercial and industrial	3,401		4,577		243		41,075		4,401,943		4,451,239		Commercial and industrial	2,302		2,630		1,385		48,106		4,392,278		4,446,701
Real estate – residential mortgage	21,052		6,351		9,439		16,393		2,665,055		2,718,290		Real estate – residential mortgage	26,982		7,309		5,735		16,676		2,584,763		2,641,465
Real estate – home equity	6,782		1,999		3,525		7,261		1,273,110		1,292,677		Real estate – home equity	9,635		2,706		3,564		7,004		1,292,035		1,314,944
Real estate – construction	173		305		820		3,560		942,910		947,768		Real estate – construction	1,715		900		688		3,618		964,158		971,079
Consumer	2,852		555		440		—		464,325		468,172		Consumer	4,228		922		458		0		457,556		463,164
Equipment lease financing and other	1,461		194		4,247		16,399		281,887		304,188		Equipment lease financing and other	552		3,460		114		16,528		278,743		299,397
Total	$	55,773	$	15,009	$	19,593	$	120,345	$	16,866,683	$	17,077,403	Total	$	56,326	$	19,470	$	16,057	$	125,098	$	16,620,575	$	16,837,526


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


	September 30, 2020				December 31, 2019
	Notional Amount		Asset (Liability) Fair Value		Notional Amount		Asset (Liability) Fair Value
	(in thousands)
Interest Rate Locks with Customers
Positive fair values	$	446,268	$	11,994	$	132,260	$	1,123
Negative fair values	4,611		(61)		9,783		(53)

Forward Commitments
Positive fair values	0		0		75,000		63
Negative fair values	414,110		(1,644)		180,000		(371)

Interest Rate Swaps with Customers
Positive fair values	3,777,684		375,567		2,903,489		143,484
Negative fair values	12,288		(2)		376,705		(695)

Interest Rate Swaps with Dealer Counterparties
Positive fair values	12,288		2		376,705		695
Negative fair values	3,777,684		(183,225)		2,903,489		(75,327)

Foreign Exchange Contracts with Customers
Positive fair values	2,947		32		3,373		38
Negative fair values	5,885		(280)		7,283		(154)

Foreign Exchange Contracts with Correspondent Banks
Positive fair values	7,325		340		9,028		192
Negative fair values	2,653		(19)		4,976		(45)


~~(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.



		March 31,		December 31,
		2020		2019
Included in other assets:		(in thousands)
Affordable housing tax credit investment, net		$	146,556	$	153,351
Other tax credit investments, net		63,658		64,354
	Total TCIs, net	$	210,214	$	217,705
Included in other liabilities
Unfunded affordable housing tax credit commitments		$	15,331	$	16,684
Other tax credit liabilities		54,823		55,105
	Total unfunded tax credit commitments and liabilities	$	70,154	$	71,789



		Three Months Ended
		March 31
		2020			2019
Components of income taxes:		(in thousands)
Affordable housing tax credits and other tax benefits		$	(7,194	)	$	(7,575	)
Other tax credit investment credits and tax benefits		(941		)	(1,136		)
Amortization of affordable housing investments, net of tax benefit		5,024			5,495
Deferred tax expense		208			238
	Total reduction in income tax expense	$	(2,903	)	$	(2,978	)
Amortization of TCIs:
Affordable housing tax credits investment		$	1,022		$	822
Other tax credit investment amortization		428			669
	Total amortization of TCIs	$	1,450		$	1,491


~~(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 3, "Investment Securities," for additional details.


~~(2)~~	~~Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included as a reduction to "Interest Income" on the Consolidated Statements of Income.~~


														Unrealized Gains (Losses) on Investment Securities		Unrealized Non-Credit Gains (Losses) on Other-Than-Temporarily Impaired Debt Securities		Unrecognized Pension and Postretirement Plan Income (Costs)		Total
	Unrealized Gains (Losses) on Investment Securities			Unrealized Non-Credit Gains (Losses) on Other-Than-Temporarily Impaired Debt Securities			Unrecognized Pension and Postretirement Plan Income (Costs)			Total				(in thousands)
	(in thousands)
Three months ended March 31, 2020
Balance at December 31, 2019	$	14,864		$	—		$	(15,001	)	$	(137	)
Three months ended September 30, 2020													Three months ended September 30, 2020
Balance at June 30, 2020													Balance at June 30, 2020	$	65,930	$	0	$	(14,491)	$	51,439
Other comprehensive income before reclassifications	17,431			—			—			17,431			Other comprehensive income before reclassifications	4,333		0		0		4,333
Amounts reclassified from accumulated other comprehensive income	(36		)	—			255			219			Amounts reclassified from accumulated other comprehensive income	(1)		0		255		254
Amortization of net unrealized losses on AFS securities transferred to HTM	795			—			—			795			Amortization of net unrealized losses on AFS securities transferred to HTM	928		0		0		928
Balance at March 31, 2020	$	33,054		$	—		$	(14,746	)	$	18,308
Three months ended March 31, 2019

Balance at September 30, 2020													Balance at September 30, 2020	$	71,190	$	0	$	(14,236)	$	56,954
Three months ended September 30, 2019													Three months ended September 30, 2019
Balance at June 30, 2019													Balance at June 30, 2019	$	2,368	$	(2)	$	(14,523)	$	(12,157)
Other comprehensive income before reclassifications													Other comprehensive income before reclassifications	18,029		0		0		18,029
Amounts reclassified from accumulated other comprehensive income (loss)													Amounts reclassified from accumulated other comprehensive income (loss)	(3,498)		0		277		(3,221)
Amortization of net unrealized losses on AFS securities transferred to HTM													Amortization of net unrealized losses on AFS securities transferred to HTM	3,430		0		0		3,430

Balance at September 30, 2019													Balance at September 30, 2019	$	20,329	$	(2)	$	(14,246)	$	6,081

Nine months ended September 30, 2020													Nine months ended September 30, 2020
Balance at December 31, 2019													Balance at December 31, 2019	$	14,864	$	0	$	(15,001)	$	(137)
Other comprehensive income before reclassifications													Other comprehensive income before reclassifications	56,186		0		0		56,186
Amounts reclassified from accumulated other comprehensive income (loss)													Amounts reclassified from accumulated other comprehensive income (loss)	(2,377)		0		765		(1,612)
Amortization of net unrealized losses on AFS securities transferred to HTM													Amortization of net unrealized losses on AFS securities transferred to HTM	2,517		0		0		2,517

Balance at September 30, 2020													Balance at September 30, 2020	$	71,190	$	0	$	(14,236)	$	56,954
Nine months ended September 30, 2019													Nine months ended September 30, 2019
Balance at December 31, 2018	$	(44,654	)	$	680		$	(15,089	)	$	(59,063	)	Balance at December 31, 2018	$	(44,654)	$	680	$	(15,089)	$	(59,063)
Other comprehensive income before reclassifications	20,298			(82		)	—			20,216			Other comprehensive income before reclassifications	63,244		(682)		0		62,562
Amounts reclassified from accumulated other comprehensive income	(51		)	—			291			240
Amounts reclassified from accumulated other comprehensive income (loss)													Amounts reclassified from accumulated other comprehensive income (loss)	(3,686)		0		843		(2,843)
Amortization of net unrealized losses on AFS securities transferred to HTM	974			—			—			974			Amortization of net unrealized losses on AFS securities transferred to HTM	5,425		0		0		5,425
Balance at March 31, 2019	$	(23,433	)	$	598		$	(14,798	)	$	(37,633	)

Balance at September 30, 2019													Balance at September 30, 2019	$	20,329	$	(2)	$	(14,246)	$	6,081


	September 30, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Loans held for sale	$	0	$	93,621	$	0	$	93,621
Available for sale investment securities:



State and municipal securities	0		926,554		0		926,554
Corporate debt securities	0		342,558		0		342,558
Collateralized mortgage obligations	0		532,473		0		532,473
Residential mortgage-backed securities	0		321,695		0		321,695
Commercial mortgage-backed securities	0		572,210		0		572,210
Auction rate securities	0		0		97,990		97,990
Total available for sale investment securities	0		2,695,490		97,990		2,793,480
Other assets:
Investments held in Rabbi Trust	21,828		0		0		21,828
Derivative assets	372		387,563		0		387,935
Total assets	$	22,200	$	3,176,674	$	97,990	$	3,296,864
Other liabilities:
Deferred compensation liabilities	$	21,828	$	0	$	0	$	21,828
Derivative liabilities	299		184,932		0		185,231
Total liabilities	$	22,127	$	184,932	$	0	$	207,059


	Pooled Trust Preferred Securities		Single-issuer Trust Preferred Securities		ARCs
Three months ended September 30, 2020	(in thousands)
Balance at June 30, 2020	$	0	$	0	$	100,859
Sales	0		0		0

Unrealized adjustment to fair value (1)	0		0		(2,869)


Balance at September 30, 2020	$	0	$	0	$	97,990

Three months ended September 30, 2019
Balance at June 30, 2019	$	0	$	2,370	$	103,365


Unrealized adjustment to fair value (1)	0		(2)		(67)

Discount accretion	0		2		0
Balance at September 30, 2019	$	0	$	2,370	$	103,298

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

Unrealized adjustment to fair value (1)	0		(242)		(3,936)

Discount accretion	0		2		0
Balance at September 30, 2020	$	0	$	0	$	97,990

Nine months ended September 30, 2019
Balance at December 31, 2018	$	875	$	2,400	$	102,994
Sales	(770)		0		0

Unrealized adjustment to fair value (1)	(105)		(32)		304

Discount accretion	0		2		0
Balance at September 30, 2019	$	0	$	2,370	$	103,298


~~(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.~~


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


	March 31, 2020											September 30, 2020
			Estimated Fair Value											Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total			Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)											(in thousands)
FINANCIAL ASSETS											FINANCIAL ASSETS
Cash and cash equivalents	$	856,360	$	856,360	$	—	$	—	$	856,360	Cash and cash equivalents	$	1,534,890	$	1,534,890	$	0	$	0	$	1,534,890
FRB and FHLB stock	118,989		—		118,989		—		118,989		FRB and FHLB stock	93,964		0		93,964		0		93,964
Loans held for sale	40,645		—		40,645		—		40,645		Loans held for sale	93,621		0		93,621		0		93,621
AFS securities	2,790,834		—		2,695,008		95,826		2,790,834		AFS securities	2,793,480		0		2,695,490		97,990		2,793,480
HTM securities	350,606		—		372,273		—		372,273		HTM securities	304,241		0		324,940		0		324,940
Net Loans	16,838,895		—		—		16,427,379		16,427,379		Net Loans	18,761,796		0		0		18,514,547		18,514,547
Accrued interest receivable	59,365		59,365		—		—		59,365		Accrued interest receivable	70,766		70,766		0		0		70,766
Other assets	658,025		239,371		374,167		44,487		658,025		Other assets	694,442		272,632		387,563		34,247		694,442
FINANCIAL LIABILITIES											FINANCIAL LIABILITIES
Demand and savings deposits	$	14,349,257	$	14,349,257	$	—	$	—	$	14,349,257	Demand and savings deposits	$	17,997,443	$	17,997,443	$	0	$	0	$	17,997,443
Brokered deposits	313,337		273,043		40,294		—		313,337		Brokered deposits	317,588		275,719		41,869		0		317,588
Time deposits	2,702,432		—		2,730,425		—		2,730,425		Time deposits	2,415,020		0		2,442,422		0		2,442,422
Short-term borrowings	1,386,808		1,386,808		—		—		1,386,808		Short-term borrowings	611,727		611,727		0		0		611,727
Accrued interest payable	10,890		10,890		—		—		10,890		Accrued interest payable	9,123		9,123		0		0		9,123
FHLB advances and long-term debt	1,378,466		—		1,421,214		—		1,421,214		FHLB advances and long-term debt	1,296,012		0		1,342,192		0		1,342,192
Other liabilities	343,602		139,868		184,771		18,963		343,602		Other liabilities	352,740		152,272		184,935		15,533		352,740

	December 31, 2019											December 31, 2019
			Estimated Fair Value											Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total			Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)											(in thousands)
FINANCIAL ASSETS											FINANCIAL ASSETS
Cash and cash equivalents	$	517,791	$	517,791	$	—	$	—	$	517,791	Cash and cash equivalents	$	517,791	$	517,791	$	0	$	0	$	517,791
FRB and FHLB stock	97,422		—		97,422		—		97,422		FRB and FHLB stock	97,422		0		97,422		0		97,422
Loans held for sale	37,828		—		37,828		—		37,828		Loans held for sale	37,828		0		37,828		0		37,828
AFS securities	2,497,537		—		2,393,211		104,326		2,497,537		AFS securities	2,497,537		0		2,393,211		104,326		2,497,537
HTM securities	369,841		—		383,705		—		383,705		HTM securities	369,841		0		383,705		0		383,705
Net Loans	16,673,904		—		—		16,485,122		16,485,122		Net Loans	16,673,904		0		0		16,485,122		16,485,122
Accrued interest receivable	60,898		60,898		—		—		60,898		Accrued interest receivable	60,898		60,898		0		0		60,898
Other assets	431,565		234,176		145,365		52,024		431,565		Other assets	431,565		234,176		145,365		52,024		431,565
FINANCIAL LIABILITIES											FINANCIAL LIABILITIES
Demand and savings deposits	$	14,327,453	$	14,327,453	$	—	$	—	$	14,327,453	Demand and savings deposits	$	14,327,453	$	14,327,453	$	0	$	0	$	14,327,453
Brokered deposits	264,531		223,982		40,549		—		264,531		Brokered deposits	264,531		223,982		40,549		0		264,531
Time deposits	2,801,930		—		2,828,988		—		2,828,988		Time deposits	2,801,930		0		2,828,988		0		2,828,988
Short-term borrowings	883,241		883,241		—		—		883,241		Short-term borrowings	883,241		883,241		0		0		883,241
Accrued interest payable	8,834		8,834		—		—		8,834		Accrued interest payable	8,834		8,834		0		0		8,834
FHLB advances and long-term debt	881,769		—		878,385		—		878,385		FHLB advances and long-term debt	881,769		0		878,385		0		878,385
Other liabilities	221,542		142,508		76,447		2,587		221,542		Other liabilities	221,542		142,508		76,447		2,587		221,542


	September 30, 2020		December 31, 2019
Real estate (1)	39.4	%	41.4	%
Health care	7.3		8.1
Agriculture	5.9		7.1
Construction (2)	4.4		6.2
Manufacturing	4.9		6.0
Other services (3)	4.5		4.7
Retail	3.3		4.2
Hospitality and food services	3.6		4.1
Wholesale trade	2.4		3.6
Educational services	2.8		4.1
Professional, scientific and technical services	2.0		2.9
Arts, entertainment and recreation	2.2		2.2
Public administration	1.6		2.0
Transportation and warehousing	1.3		1.2
Other (4)	14.4		2.2
Total	100.0	%	100.0	%



	March 31, 2020		December 31, 2019
Real estate ⁽¹⁾	43.0	%	41.4	%
Health care	7.7		8.1
Agriculture	6.8		7.1
Construction ⁽²⁾	6.0		6.2
Manufacturing	6.1		6.0
Other services	4.9		4.7
Retail	4.2		4.2
Accommodation and food services	4.2		4.1
Wholesale trade	3.8		3.6
Educational services	3.1		4.1
Professional, scientific and technical services	2.8		2.9
Arts, entertainment and recreation	2.4		2.2
Public administration	1.9		2.0
Transportation and warehousing	1.3		1.2
Other ⁽⁴⁾	1.8		2.2
Total	100.0	%	100.0	%


~~(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 and Industrial			Real Estate - Commercial Mortgage			Real Estate - Construction			Real Estate - Residential Mortgage			Real Estate - Home Equity			Consumer			Equipment Lease Financing			Total
	(in thousands)
Three months ended March 31, 2020
Balance at December 31, 2019	$	48,106		$	33,166		$	3,618		$	16,676		$	7,004		$	—		$	16,528		$	125,098
Additions	16,659			7,615			—			887			1,174			1,213			526			28,074
Payments	(12,791		)	(4,253		)	(58		)	(163		)	(524		)	—			(560		)	(18,349		)
Charge-offs	(10,899		)	(855		)	—			(187		)	(316		)	(1,213		)	(95		)	(13,565		)
Transfers to OREO	—			(16		)	—			(820		)	(77		)	—			—			(913		)
Balance at March 31, 2020	$	41,075		$	35,657		$	3,560		$	16,393		$	7,261		$	—		$	16,399		$	120,345


	Special Mention (1)						Increase (Decrease)				Substandard or Lower (2)						Increase (Decrease)				Total Criticized and Classified Loans
	September 30, 2020			December 31, 2019			$		%		September 30, 2020			December 31, 2019			$		%		September 30, 2020			December 31, 2019
	(dollars in thousands)
Real estate - commercial mortgage	$	268,983		$	137,163		$	131,820	96.1	%	$	156,050		$	134,206		$	21,844	16.3	%	$	425,033		$	271,369
Commercial and industrial	178,645			181,107			(2,462)		(1.4)		171,270			199,760			(28,490)		(14.3)		349,915			380,867
Real estate - construction (3)	13,450			4,219			9,231		N/M		7,973			6,137			1,836		29.9		21,423			10,356
Total	$	461,078		$	322,489		$	138,589	43.0	%	$	335,293		$	340,103		$	(4,810)	(1.4)	%	$	796,371		$	662,592

% of total risk rated loans	3.3		%	2.7		%					2.4		%	2.8		%					5.7		%	5.5		%