UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Under Section 13 or 15(d)

of the Securities Exchange Act of 1934

For Quarter endedMarch 31, 20167

Commission File Number 1-35746

Bryn Mawr Bank Corporation

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2434506
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer identification No.)

801 Lancaster Avenue, Bryn Mawr, Pennsylvania	19010
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (610) 525-1700

Not Applicable

Former name, former address and fiscal year, if changed since last report.

Indicate by checkmark whether the registrant (1) has filed all reports 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, ~~or a~~ smaller reporting company or an emerging growth company. See definition of “accelerated filer”, “large accelerated filer”, ~~and~~ “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 checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

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

Classes		Outstanding atMay 52, 20167
Common Stock, par value $1		~~16,807,121~~16,987,574

Table of Contents

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDEDMarch 31, 20167

Index


PART I -	FINANCIAL INFORMATION	Page 3

ITEM 1.	Financial Statements (unaudited)

	~~Consolidated Financial Statements~~	Page 3

	Consolidated Financial Statements	Page 3

	Notes to Consolidated Financial Statements	Page 8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 38

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 5156

ITEM 4.	Controls and Procedures	Page 5156

PART II -	OTHER INFORMATION	Page 5256

ITEM 1.	Legal Proceedings	Page 5256

ITEM 1A.	Risk Factors	Page 5256

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 5256

ITEM 3.	Defaults Upon Senior Securities	Page 5256

ITEM 4.	Mine Safety Disclosures	Page 5256

ITEM 5.	Other Information	Page 5256

ITEM 6.	Exhibits	Page 5357

Table of Contents

~~PART~~PART I. FINANCIAL INFORMATION

ITEM 1. ~~Financial~~ FinancialStatements

BRYN ~~MAWR~~ MAWRBANK CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets - Unaudited

	(unaudited)
	March 31,			December 31,
(dollars in thousands)	2017			2016
Assets
Cash and due from banks	$	17,457		$	16,559
Interest bearing deposits with banks		69,978			34,206
Cash and cash equivalents		87,435			50,765
Investment securities available for sale, at fair value (amortized cost of $392,326 and $568,890as of March 31, 2017 and December 31, 2016 respectively)		391,028			566,996
Investment securities held to maturity, at amortized cost (fair value of $5,116 and $2,818as of March 31, 2017 and December 31, 2016, respectively)		5,194			2,879
Investment securities, trading		4,138			3,888
Loans held for sale		3,015			9,621
Portfolio loans and leases, originated		2,286,814			2,240,987
Portfolio loans and leases, acquired		268,775			294,438
Total portfolio loans and leases		2,555,589			2,535,425
Less: Allowance for originated loan and lease losses		(17,069	)		(17,458	)
Less: Allowance for acquired loan and lease losses		(38	)		(28	)
Total allowance for loans and lease losses		(17,107	)		(17,486	)
Net portfolio loans and leases		2,538,482			2,517,939
Premises and equipment, net		40,515			41,778
Accrued interest receivable		8,392			8,533
Mortgage servicing rights		5,686			5,582
Bank owned life insurance		39,479			39,279
Federal Home Loan Bank stock		8,505			17,305
Goodwill		104,765			104,765
Intangible assets		19,864			20,405
Other investments		8,716			8,627
Other assets		27,403			23,168
Total assets	$	3,292,617		$	3,421,530
Liabilities
Deposits:
Non-interest-bearing	$	771,556		$	736,180
Interest-bearing		1,865,009			1,843,495
Total deposits		2,636,565			2,579,675

Short-term borrowings		23,613			204,151
Long-term FHLB advances		174,711			189,742
Subordinated notes		29,546			29,532
Accrued interest payable		2,722			2,734
Other liabilities		37,365			34,569
Total liabilities		2,904,522			3,040,403
Shareholders' equity
Common stock, par value $1; authorized 100,000,000 shares;issued 21,141,146 and 21,110,968 shares as of March 31, 2017 and December 31, 2016, respectively,and outstanding of 16,969,451 and 16,939,715 as of March 31, 2017 and December 31, 2016, respectively		21,141			21,111
Paid-in capital in excess of par value		233,910			232,806
Less: Common stock in treasury at cost - 4,171,695 and 4,171,253 shares as of March 31, 2017and December 31, 2016, respectively		(66,969	)		(66,950	)
Accumulated other comprehensive loss, net of tax		(1,990	)		(2,409	)
Retained earnings		202,003			196,569
Total shareholders' equity		388,095			381,127
Total liabilities and shareholders' equity	$	3,292,617		$	3,421,530

March 31,

December 31,

(dollars in thousands)

2016

2015

Assets

Cash and due from banks
$ 15,594 $ 18,452
Interest bearing deposits with banks
33,954 124,615
Cash and cash equivalents
49,548 143,067
Investment securities available for sale, at fair value (amortized cost of $361,673 and $347,776as of March 31, 2016 and December 31, 2015 respectively)
365,819 348,966
Investment securities, trading
3,642 3,950
Loans held for sale
7,807 8,987
Portfolio loans and leases, originated
2,015,683 1,883,869
Portfolio loans and leases, acquired
363,158 385,119
Total portfolio loans and leases
2,378,841 2,268,988
Less: Allowance for originated loan and lease losses
(16,817 ) (15,857 )
Less: Allowance for acquired loan and lease losses
(28 ) -
Total allowance for loans and lease losses
(16,845 ) (15,857 )
Net portfolio loans and leases
2,361,996 2,253,131
Premises and equipment, net
44,712 45,339
Accrued interest receivable
8,205 7,869
Mortgage servicing rights
5,182 5,142
Bank owned life insurance
38,616 38,371
Federal Home Loan Bank stock
12,142 12,942
Goodwill
104,765 104,765
Intangible assets
23,012 23,903
Other investments
8,487 9,460
Other assets
24,314 25,105
Total assets
$ 3,058,247 $ 3,030,997
Liabilities

Deposits:

Non-interest-bearing
$ 643,492 $ 626,684
Interest-bearing
1,700,550 1,626,041
Total deposits
2,344,042 2,252,725

Short-term borrowings
37,010 94,167
Long-term FHLB advances
249,832 254,863
Subordinated notes
29,491 29,479
Accrued interest payable
1,294 1,851
Other liabilities
31,401 32,201
Total liabilities
2,693,070 2,665,286
Shareholders' equity

Common stock, par value $1; authorized 100,000,000 shares;issued 20,949,369 and 20,931,416 shares as of March 31, 2016 and December 31, 2015, respectively,and outstanding of 16,801,801 and 17,071,523 as of March 31, 2016 and December 31, 2015, respectively
20,949 20,931
Paid-in capital in excess of par value
229,479 228,814
Less: Common stock in treasury at cost - 4,147,568 and 3,859,893 shares as of March 31, 2016and December 31, 2015, respectively
(66,140 ) (58,144 )
Accumulated other comprehensive income (loss), net of tax
1,502 (412 )
Retained earnings
179,387 174,522
Total shareholders' equity
365,177 365,711
Total liabilities and shareholders' equity
$ 3,058,247 $ 3,030,997

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income - Unaudited

	Three Months Ended March 31,					Three Months Ended March 31,
	2016			2015		2017		2016
(dollars in thousands, except per share data)
Interest income:
Interest and fees on loans and leases	$	26,696		$	25,164	$	28,482	$	26,696
Interest on cash and cash equivalents		46			115		66		46
Interest on investment securities:
Taxable		1,351			1,320		1,623		1,351
Non-taxable		128			135		110		128
Dividends		48			20		45		48
Total interest income		28,269			26,754		30,326		28,269
Interest expense:
Interest on deposits		1,076			1,028		1,828		1,076
Interest on short-term borrowings		17			21		27		17
Interest on FHLB advances and other borrowings		908			910		698		908
Interest on subordinated notes		366			-		370		366
Total interest expense		2,367			1,959		2,923		2,367
Net interest income	��	25,902			24,795		27,403		25,902
Provision for loan and lease losses		1,410			569		291		1,410
Net interest income after provision for loan and lease losses		24,492			24,226		27,112		24,492
Non-interest income:
Fees for wealth management services		8,832			9,105		9,303		8,832
Insurance commissions		1,276			1,021		763		1,276
Service charges on deposits		702			712		647		702
Loan servicing and other fees		492			591		503		492
Net gain on sale of loans		760			808		629		705
Net (loss) gain on sale of investment securities available for sale		(15	)		810
Net (loss) gain on sale of other real estate owned ("OREO")		(76	)		15
Net gain (loss) on sale of investment securities available for sale							1		(15	)
Net loss on sale of other real estate owned ("OREO")							-		(76	)
Dividends on FHLB and FRB stock		214			615		214		214
Other operating income		1,023			1,088		1,167		1,023
Total non-interest income		13,208			14,765		13,227		13,153
Non-interest expenses:
Salaries and wages		11,738			10,870		12,450		11,738
Employee benefits		2,485			2,729		2,559		2,485
Occupancy and bank premises		2,488			2,466		2,526		2,488
Furniture, fixtures, and equipment		1,919			1,512		1,974		1,919
Advertising		284			557		386		284
Amortization of intangible assets		891			982		693		891
Due diligence, merger-related and merger integration expenses		-			2,501		511		-
Professional fees		813			673		711		813
Pennsylvania bank shares tax		638			433		664		638
Information technology		1,048			702		874		1,048
Other operating expenses		2,747			4,004		3,312		2,692
Total non-interest expenses		25,051			27,429		26,660		24,996

Income before income taxes		12,649			11,562		13,679		12,649
Income tax expense		4,375			4,068		4,635		4,328
Net income	$	8,274		$	7,494	$	9,044	$	8,321

Basic earnings per common share	$	0.49		$	0.43	$	0.53	$	0.49
Diluted earnings per common share	$	0.49		$	0.42	$	0.53	$	0.49
Dividends declared per share	$	0.20		$	0.19	$	0.21	$	0.20

Weighted-average basic shares outstanding		16,848,202			17,545,802		16,954,132		16,848,202
Dilutive shares		34,991			357,456		228,557		34,991
Adjusted weighted-average diluted shares		16,883,193			17,903,258		17,182,689		16,883,193

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income - Unaudited

(dollars in thousands)	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2017			2016

Net income	$	8,274		$	7,494		$	9,044		$	8,321

Other comprehensive income (loss):
Net change in unrealized gains (losses) on investment securities available for sale:
Net unrealized gains arising during the period, net of tax expense of $1,029 and $983, respectively		1,912			1,828
Less: reclassification adjustment for net losses (gains) on sales realized in net income, net of tax (benefit) expense of $(6) and $283, respectively		9			(527	)
Unrealized investment gains, net of tax expense of $1,046 and $700, respectively		1,921			1,301
Net change in fair value of derivative used for cash flow hedge:
Net unrealized losses arising during the period, net of tax benefit of $0 and $(126), respectively		-			(234	)
Net unrealized gains arising during the period, net of tax expense of $208 and $1,040, respectively								388			1,912
Less: reclassification adjustment for net losses (gains) on sales realized in net income, net of tax (benefit) expense of $0 and $(6), respectively								(1	)		9
Unrealized investment gains, net of tax expense of $208 and $1,046, respectively								387			1,921
Net change in unfunded pension liability:
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation,net of tax (benefit) expense $(4) and $188, respectively		(7	)		350
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation,net of tax expense (benefit) of $17 and $(4), respectively								32			(7	)
Total other comprehensive income		1,914			1,417			419			1,914

Total comprehensive income	$	10,188		$	8,911		$	9,463		$	10,235

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows - Unaudited

(dollars in thousands)	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2017			2016
Operating activities:
Net Income	$	8,274		$	7,494		$	9,044		$	8,321
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		1,410			569			291			1,410
Depreciation of fixed assets		1,422			1,137			1,392			1,422
Net amortization of investment premiums and discounts		779			788			673			779
Net loss (gain) on sale of investment securities available for sale		15			(810	)
Net (gain) loss on sale of investment securities available for sale								(1	)		15
Net gain on sale of loans		(760	)		(808	)		(629	)		(760	)
Stock based compensation cost		403			376			484			403
Amortization and net impairment of mortgage servicing rights		219			187			172			219
Net accretion of fair value adjustments		(1,124	)		(1,461	)		(795	)		(1,124	)
Amortization of intangible assets		891			982			693			891
Impairment of other real estate owned ("OREO")		-			90
Net loss (gain) on sale of OREO		76			(15	)
Net loss on sale of OREO								-			76
Net increase in cash surrender value of bank owned life insurance ("BOLI")		(245	)		(183	)		(200	)		(245	)
Other, net		(5,340	)		3,038			(6,380	)		(5,340	)
Loans originated for resale		(27,183	)		(29,479	)		(26,064	)		(27,183	)
Proceeds from loans sold		28,864			27,783			33,023			28,864
(Benefit from) provision for deferred income taxes		(60	)		677
Excess tax benefit from stock-based compensation		-			(277	)
Provision for deferred income taxes								167			(60	)
Change in income taxes payable/receivable		2,785			(598	)		4,324			2,738
Change in accrued interest receivable		(336	)		189			141			(336	)
Change in accrued interest payable		(557	)		(134	)		(12	)		(557	)
Net cash provided by operating activities		9,533			9,545			16,323			9,533

Investing activities:
Purchases of investment securities available for sale		(45,507	)		(22,088	)		(42,842	)		(45,507	)
Proceeds from maturity of investment securities and paydowns of mortgage-related securities		13,955			12,468
Purchases of investment securities held to maturity								(2,335	)		-
Proceeds from maturity and paydowns of investment securities available for sale								217,539			13,955
Proceeds from maturity and paydowns of investment securities held to maturity								15			-
Proceeds from sale of investment securities available for sale		65			62,788			65			65
Net change in FHLB stock		800			4,963			8,800			800
Proceeds from calls of investment securities		16,795			25,525			1,134			16,795
Proceeds from sales of other investments								-			-
Net change in other investments		973			(3,962	)		(89	)		973
Purchase of domain name								(152	)
Net portfolio loan and lease originations		(109,322	)		(10,194	)		(20,108	)		(109,322	)
Purchases of premises and equipment		(828	)		(1,273	)		(162	)		(828	)
Acquisitions, net of cash acquired		-			16,609
Proceeds from sale of OREO		1,806			279			39			1,806
Net cash (used in) provided by investing activities		(121,263	)		85,115
Net cash provided by (used in) investing activities								161,904			(121,263	)

Financing activities:
Change in deposits		91,427			71,907			56,909			91,427
Change in short-term borrowings		(57,146	)		(94,026	)		(180,538	)		(57,146	)
Dividends paid		(3,357	)		(3,335	)		(3,559	)		(3,357	)
Change in FHLB advances and other borrowings		(5,000	)		(29,749	)
Excess tax benefit from stock-based compensation		-			277
Net purchase of treasury stock for deferred compensation plans		-			(6	)
Net purchase of treasury stock		(7,996	)		-
Proceeds from issuance of common stock		-			16
Change in long-term FHLB advances and other borrowings								(15,000	)		(5,000	)
Cash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensation								(19	)		(25	)
Net purchase of treasury stock through publicly announced plans								-			(7,971	)
Proceeds from exercise of stock options		283			2,504			650			283
Net cash provided by (used in) financing activities		18,211			(52,412	)
Net cash (used in) provided by financing activities								(141,557	)		18,211

Change in cash and cash equivalents		(93,519	)		42,248			36,670			(93,519	)
Cash and cash equivalents at beginning of period		143,067			219,269			50,765			143,067
Cash and cash equivalents at end of period	$	49,548		$	261,517		$	87,435		$	49,548

Supplemental cash flow information:
Cash paid during the year for:
Income taxes	$	1,651		$	3,399		$	117		$	1,651
Interest	$	2,924		$	1,798		$	2,935		$	2,924

Non-cash information:
Change in other comprehensive income	$	1,914		$	1,417
Change in deferred tax due to change in comprehensive income	$	1,042		$	762
Transfer of loans to other real estate owned	$	-		$	282
Acquisition of noncash assets and liabilities:
Assets acquired	$	-		$	726,591
Liabilities assumed	$	-		$	619,466
Change in other comprehensive loss							$	419		$	1,914
Change in deferred tax due to change in other comprehensive loss							$	225		$	1,042

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes In Shareholders’ Equity - Unaudited

(dollars in thousands, except per share information)

For the Three Months Ended March 31, 2016

Shares of Common Stock
Issued

Common Stock

Paid-in Capital

Treasury Stock

Accumulated Other Comprehensive Income (Loss)

Retained Earnings

Total Shareholders' Equity

Balance December 31, 2015
20,931,416 $ 20,931 $ 228,814 $ (58,144 ) $ (412 ) $ 174,522 $ 365,711
Net income
- - - - - 8,274 8,274
Dividends declared, $0.20 per share
- - - - - (3,409 ) (3,409 )
Other comprehensive income, net of tax expense of $1,042
- - - - 1,914 - 1,914
Stock based compensation
- - 403 - - - 403
Excess tax benefit (deficiency) from stock-based compensation
- - (3 ) - - - (3 )
Net purchase of treasury stock
- - - (7,996 ) - - (7,996 )
Common stock issued through share-based awards and options exercises
17,953 18 265 - - - 283
Balance March 31, 2016
20,949,369 $ 20,949 $ 229,479 $ (66,140 ) $ 1,502 $ 179,387 $ 365,177

(dollars in thousands, except per share information)
	For the Three Months Ended March 31, 2017
	Shares of Common Stock Issued		Common Stock		Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total Shareholders' Equity

Balance December 31, 2016		21,110,968	$	21,111	$	232,806	$	(66,950	)	$	(2,409	)	$	196,569		$	381,127
Net income				-		-		-			-			9,044			9,044
Dividends declared, $0.21 per share				-		-		-			-			(3,610	)		(3,610	)
Other comprehensive income, net of tax expense of $225				-		-		-			419			-			419
Stock based compensation				-		484		-			-			-			484
Net purchase of treasury stock from stock awards for statutory tax withholdings				-		-		(19	)		-			-			(19	)
Common stock issued through share-based awards and options exercises		30,178		30		620		-			-			-			650
Balance March 31, 2017		21,141,146	$	21,141	$	233,910	$	(66,969	)	$	(1,990	)	$	202,003		$	388,095

The accompanying notes are an integral part of the unaudited consolidated financial statements.

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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Notes toConsolidatedFinancial Statements

(Unaudited)

Note 1 - Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In the opinion of Bryn Mawr Bank Corporation’s (the “Corporation”) management, all adjustments necessary for a fair presentation of the consolidated financial position and the results of operations for the interim periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Corporation’s Annual Report on Form 10-K for the twelve months ended December 31, ~~2015~~2016 (the ~~“2015~~“2016 Annual Report”).

The results of operations for the three months ended March 31, ~~2016~~2017 are not necessarily indicative of the results to be expected for the full year.

Note 2 - Earnings per Common Share

Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share takes into account the potential dilution computed pursuant to the treasury stock method that could occur if stock options were exercised and converted into common stock, as well as the effect of restricted and performance shares becoming unrestricted common stock. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be anti-dilutive. All weighted average shares, actual shares and per share information in the financial statements have been adjusted retroactively for the effect of stock dividends and splits.

	Three Months Ended				Three Months Ended
	March 31,				March 31,
(dollars in thousands except per share data)	2016		2015		2017		2016
Numerator:
Net income available to common shareholders	$	8,274	$	7,494	$	9,044	$	8,321
Denominator for basic earnings per share –weighted average shares outstanding		16,848,202		17,545,802		16,954,132		16,848,202
Effect of dilutive common shares		34,991		357,456		228,557		34,991
Denominator for diluted earnings per share – adjusted weighted average shares outstanding		16,883,193		17,903,258		17,182,689		16,883,193
Basic earnings per share	$	0.49	$	0.43	$	0.53	$	0.49
Diluted earnings per share	$	0.49	$	0.42	$	0.53	$	0.49
Anti-dilutive shares excluded from computation of average dilutive earnings per share		—		—		—		—

Page 8

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Note 3 - Business Combinations

~~Robert J. McAllister Agency, Inc.~~~~(“RJM”)~~

~~The acquisition~~Pending Business Combination – Royal Bancshares of ~~RJM, an insurance brokerage headquartered in Rosemont,~~ Pennsylvania, was completed on April 1, 2015. The consideration paid by the Corporation was $1.0 million, of which $500 thousand was paid at closing, with five contingent cash payments, not to exceed $100 thousand each, to be payable on each of March 31, 2016, March 31, 2017, March 31, 2018, March 31, 2019, and March 31, 2020, subject to the attainment of certain revenue targets during the related periods. As of March 31, 2016, the first contingent payment, in the amount of $85 thousand became payable and shall be paid within the payment period established by the transaction agreement. The acquisition enhanced the Corporation’s ability to offer comprehensive insurance solutions to both individual and business clients.

In connection with the RJM acquisition, the following table details the consideration paid, the initial estimated fair value of identifiable assets acquired and liabilities assumed as of the date of acquisition and subsequent adjustments, during the measurement period, to the fair value of the assets acquired, liabilities assumed and the resulting goodwill recorded:

(dollars in thousands)

Original
Estimates

Adjustments to
Estimates

Final
Valuation

Consideration paid:

Cash paid at closing
$ 500 $ — $ 500
Contingent payment liability
500 — 500
Value of consideration
1,000 — 1,000

Assets acquired:

Cash operating accounts
20 — 20
Intangible assets – trade name
129 (129
)
—
Intangible assets – customer relationships
424 — 424
Intangible assets – non-competition agreements
257 — 257
Other assets
4 — 4
Total assets
834 (129
)
705

Liabilities assumed:

Deferred tax liability
336 (45
)
291
Other liabilities
46 — 46
Total liabilities
382 (45
)
337

Net assets acquired
452 (84
)
368

Goodwill resulting from acquisition of RJM
$ 548 $ 84 $ 632

During the three months ended December 31, 2015, a measurement-period adjustment was made which eliminated the value initially placed on the trade name (and its associated deferred tax liability), as the entity was immediately merged into PCPB.

~~As of December 31, 2015, the estimates of fair values of the assets acquired and liabilities assumed in the acquisition of RJM were finalized.~~

~~Continental Bank Holdings,~~ Inc.

On January ~~1, 2015,~~30, 2017, the ~~previously announced merger~~Corporation entered into a definitive Agreement and Plan of ~~Continental~~Merger to acquire Royal Bancshares of Pennsylvania, Inc. (“RBPI”), parent company of Royal Bank ~~Holdings, Inc.~~America (“~~CBH”~~RBA”), in a transaction with an aggregate value of $127.7 million (the “Acquisition”). In connection with the Acquisition, RBPI will merge with and into the Corporation and ~~the merger of Continental Bank~~RBA will merge with and into the ~~Bank (collectively, the “Merger”) as contemplated by the Agreement~~Bank. The Acquisition, which is expected to add approximately $602 million in loans and ~~Plan of Merger, by and between CBH and the Corporation, dated as of May 5, 2014 (as amended by the Amendment to Agreement and Plan of Merger, dated as of October 23, 2014, the “Agreement”)~~$630 million in deposits (based on December 31, 2016 financial information), ~~were completed. In accordance with the Agreement, the aggregate share consideration paid to CBH shareholders consisted of 3,878,383 shares (which included fractional shares paid in cash) of~~strengthens the Corporation’s ~~common stock. Shareholders~~position as the largest community bank in Philadelphia’s western suburbs and, based on deposits, ranks it as the eighth largest community bank headquartered in Pennsylvania. The Acquisition, which will expand the Corporation's distribution network by providing entry into the new markets of ~~CBH received 0.45 shares of Corporation common stock for each share of CBH common stock they owned as of the effective date of the Merger. Holders of options~~New Jersey and Berks County, Pennsylvania, and an expanded physical presence in Philadelphia County, Pennsylvania, is expected to purchase shares of CBH common stock received options to purchase shares of Corporation common stock, converted at the same ratio of 0.45. In addition, $1.3 million was paid to certain warrant holders to cash-out certain warrants. In accordance with the acquisition method of accounting, assets acquired and liabilities assumed were preliminarily adjusted to their fair values as of the date of the Merger. The excess of consideration paid above the fair value of net assets acquired was recorded as goodwill. This goodwill is not amortizable nor is it deductible for income tax purposes.

In connection with the Merger, the following table details the consideration paid, the initial estimated fair value of identifiable assets acquired and liabilities assumed as of the date of acquisition and the subsequent adjustments,close during the ~~measurement period, to the fair value~~third quarter of ~~the assets acquired, liabilities assumed and the resulting goodwill recorded:~~ 2017.

(dollars in thousands)

Original
Estimates

Adjustments to
Estimates

Final
Valuation

Consideration paid:

Common shares issued (3,878,304)
$ 121,391 $ — $ 121,391
Cash in lieu of fractional shares
2 — 2
Cash-out of certain warrants
1,323 — 1,323
Fair value of options assumed
2,343 — 2,343
Value of consideration
125,059 — 125,059

Assets acquired:

Cash and due from banks
17,934 — 17,934
Investment securities available for sale
181,838 — 181,838
Loans*
426,601 (1,864
)
424,737
Premises and equipment
9,037 — 9,037
Deferred income taxes
6,288 1,396 7,684
Bank-owned life insurance
12,054 — 12,054
Core deposit intangible
4,191 — 4,191
Favorable lease asset
792 (68
)
724
Other assets
18,085 (111
)
17,974
Total assets
676,820 (647
)
676,173

Liabilities assumed:

Deposits
481,674 — 481,674
FHLB and other long-term borrowings
19,726 — 19,726
Short-term borrowings
108,609 — 108,609
Unfavorable lease liability
2,884 — 2,884
Other liabilities
4,706 1,867 6,573
Total liabilities
617,599 1,867 619,466

Net assets acquired
59,221 (2,514
)
56,707

Goodwill resulting from the Merger
$ 65,838 $ 2,514 $ 68,352

*includes $507 thousand in loans held for sale

During the measurement period subsequent to the Merger, adjustments to the fair value of the assets acquired and liabilities assumed were related to circumstances that existed prior to the Merger date, but that were not known to the Corporation. The adjustments included reductions in the fair value of certain loans, unrecorded liabilities of CBH, and an immaterial adjustment to the calculation of a favorable lease asset, which reduced its value, along with the associated deferred tax items.

~~As of December 31, 2015, the estimates of fair values of the assets acquired and liabilities assumed in the Merger were finalized.~~

Due Diligence, Merger-Related and Merger IntegrationExpenses

Due diligence, merger-related and merger integration expenses may include consultant costs, investment banker fees, contract breakage fees, retention bonuses for severed employees, and salary and wages for redundant staffing involved in the integration of the institutions. The following table details the costs identified and classified as due diligence, merger-related and merger integration costs for the periods indicated:

	Three Months EndedMarch 31,				Three Months EndedMarch 31,
(dollars in thousands)	2016		2015		2017		2016
Employee benefits	$	—	$	94
Furniture, fixtures and equipment		—		20
Information technology		—		239
Professional fees		—		1,193	$	396	$	—
Salaries and wages		—		480		80		—
Other		—		475		35		—
Total due diligence and merger-related expenses	$	—	$	2,501	$	511	$	—

Note 4 - Investment Securities

The amortized cost and fair value of investment securitiesavailable for sale are as follows:

As ofMarch 31, ~~2016~~2017

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	101	$	1	$	—		$	102	$	101	$	—	$	—		$	101
Obligations of the U.S. government and agencies		95,096		1,002		(18	)		96,080		101,279		161		(964	)		100,476
Obligations of state and political subdivisions		40,404		203		(12	)		40,595		30,949		56		(65	)		30,940
Mortgage-backed securities		180,101		3,056		(30	)		183,127		197,224		1,281		(1,085	)		197,420
Collateralized mortgage obligations		28,776		334		(4	)		29,106		46,253		87		(864	)		45,476
Other investments		17,195		44		(430	)		16,809		16,520		177		(82	)		16,615

Total	$	361,673	$	4,640	$	(494	)	$	365,819	$	392,326	$	1,762	$	(3,060	)	$	391,028

As of December 31,~~2015~~
2016

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	101	$	—	$	(1	)	$	100	$	200,094	$	3	$	—		$	200,097
Obligations of the U.S. government and agencies		101,342		470		(317	)		101,495		83,111		167		(1,080	)		82,198
Obligations of state and political subdivisions		41,892		123		(49	)		41,966		33,625		26		(121	)		33,530
Mortgage-backed securities		157,422		1,482		(215	)		158,689		185,997		1,260		(1,306	)		185,951
Collateralized mortgage obligations		29,756		166		(123	)		29,799		49,488		108		(902	)		48,694
Other investments		17,263		38		(384	)		16,917		16,575		105		(154	)		16,526

Total	$	347,776	$	2,279	$	(1,089	)	$	348,966	$	568,890	$	1,669	$	(3,563	)	$	566,996

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The following tables detail the amount of investment securitiesavailable for sale that were in an unrealized loss position as of the dates indicated:

As ofMarch 31, ~~2016~~2017

	Less than 12 Months					12 Months or Longer					Total					Less than 12 Months					12 Months or Longer					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities																$	101	$	—		$	—	$	—		$	101	$	—
Obligations of the U.S. government and agencies	$	9,985	$	(18	)	$	—	$	—		$	9,985	$	(18	)		75,404		(964	)		—		—			75,404		(964	)
Obligations of state and political subdivisions		8,013		(9	)		1,517		(3	)		9,530		(12	)		13,847		(65	)		—		—			13,847		(65	)
Mortgage-backed securities		9,527		(30	)		—		—			9,527		(30	)		103,807		(1,085	)		—		—			103,807		(1,085	)
Collateralized mortgage obligations		—		—			1,169		(4	)		1,169		(4	)		34,441		(864	)		—		—			34,441		(864	)
Other investments		1,953		(200	)		11,725		(230	)		13,678		(430	)		2,331		(46	)		11,920		(36	)		14,251		(82	)
Total	$	29,478	$	(257	)	$	14,411	$	(237	)	$	43,889	$	(494	)	$	229,931	$	(3,024	)	$	11,920	$	(36	)	$	241,851	$	(3,060	)

As of December 31,~~2015~~2016

	Less than 12 Months					12 Months or Longer					Total					Less than 12 Months					12 Months or Longer					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities	$	100	$	(1	)	$	—	$	—		$	100	$	(1	)
Obligations of the U.S. government and agencies		49,759		(317	)		—		—			49,759		(317	)	$	62,211	$	(1,080	)	$	—	$	—		$	62,211	$	(1,080	)
Obligations of state and political subdivisions		18,725		(46	)		2,016		(3	)		20,741		(49	)		24,482		(121	)		—		—			24,482		(121	)
Mortgage-backed securities		55,763		(215	)		—		—			55,763		(215	)		101,433		(1,306	)		—		—			101,433		(1,306	)
Collateralized mortgage obligations		6,407		(85	)		2,436		(38	)		8,843		(123	)		35,959		(902	)		—		—			35,959		(902	)
Other investments		3,945		(238	)		11,810		(146	)		15,755		(384	)		2,203		(93	)		11,895		(61	)		14,098		(154	)
Total	$	134,699	$	(902	)	$	16,262	$	(187	)	$	150,961	$	(1,089	)	$	226,288	$	(3,502	)	$	11,895	$	(61	)	$	238,183	$	(3,563	)

Management evaluates the Corporation’s investment securities available for sale that are in an unrealized loss position in order to determine if the decline in fair value is other than temporary. The available for sale investment portfolio includes debt securities issued by U.S. government agencies, U.S. government-sponsored agencies, state and local municipalities and other issuers. All fixed income investment securities in the Corporation’s available for sale investment portfolio are rated as investment grade. Factors considered in the evaluation include the current economic climate, the length of time and the extent to which the fair value has been below cost, interest rates and the bond rating of each security. The unrealized losses presented in the tables above are temporary in nature and are primarily related to market interest rates rather than the underlying credit quality of the issuers. The Corporation does not believe that these unrealized losses are other-than-temporary. The Corporation does not have the intent to sell these securities prior to their maturity or the recovery of their cost bases and believes that it is more likely than not that it will not have to sell these securities prior to their maturity or the recovery of their cost bases.

As of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, securities having fair values of ~~$110.4~~$103.4 million and ~~$128.9~~$119.4 million, respectively, were specifically pledged as collateral for public funds, trust deposits, the Federal Reserve Bank of Philadelphia discount window program, Federal Home Loan Bank of Pittsburgh (“FHLB”) borrowings and other purposes. The FHLB has a blanket lien on non-pledged, mortgage-related loans ~~and securities~~ as part of the Corporation’s borrowing agreement with the FHLB.

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The amortized cost and fair value of investment securitiesavailable for sale as of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, by contractual maturity, are ~~shown~~detailed below:

	March 31, 2016				December 31,2015				March 31, 2017				December 31,2016
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Investment securities¹:
Due in one year or less	$	10,605	$	10,611	$	9,570	$	9,574	$	12,019	$	12,026	$	213,876	$	213,885
Due after one year through five years		61,498		61,862		61,368		61,467		65,360		65,221		40,335		40,270
Due after five years through ten years		45,292		45,485		53,193		53,070		39,023		38,328		45,840		44,914
Due after ten years		19,906		20,519		20,904		21,141		17,226		17,240		18,079		18,055
Subtotal		137,301		138,477		145,035		145,252		133,628		132,815		318,130		317,124
Mortgage-related securities¹		208,877		212,233		187,178		188,488		243,477		242,896		235,485		234,644
Mutual funds with no stated maturity		15,495		15,109		15,563		15,226		15,221		15,317		15,275		15,228
Total	$	361,673	$	365,819	$	347,776	$	348,966	$	392,326	$	391,028	$	568,890	$	566,996

¹Expected maturities of mortgage-related securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The amortized cost and fair value of investment securitiesheld to maturity as of March 31, 2017 and December 31, 2016 are detailed below:

As ofMarch 31, 2017

(dollars in thousands)

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Fair

Value

Mortgage-backed securities

5,194

—

(78

)

5,116

Total

5,194

—

(78

)

5,116

As ofDecember 31, 2016

(dollars in thousands)

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Fair Value

Mortgage-backed securities

2,879

—

(61

)

2,818

Total

2,879

—

(61

)

2,818

The following tables detail the amount ofheld to maturitysecurities that were in an unrealized loss position as of March 31, 2017 and December 31, 2016:

As of March 31, 2017

	Less than 12 Months					12 Months or Longer				Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities	$	5,116	$	(78	)	$	—	$	—	$	5,116	$	(78	)
Total	$	5,116	$	(78	)	$	—	$	—	$	5,116	$	(78	)

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As ofDecember 31, 2016

	Less than 12 Months					12 Months or Longer				Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities	$	2,818	$	(61	)	$	—	$	—	$	2,818	$	(61	)
Total	$	2,818	$	(61	)	$	—	$	—	$	2,818	$	(61	)

The amortized cost and fair value of investment securitiesheld to maturity as of March 31, 2017 and December 31, ~~2015,~~2016, by contractual maturity, are detailed below:

	March 31, 2017				December 31,2016
(dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Mortgage-related securities¹	$	5,194	$	5,116	$	2,879	$	2,818
Total	$	5,194	$	5,116	$	2,879	$	2,818

As of March 31, 2017 and December 31, 2016, the Corporation’s investment securities held intrading accounts ~~were comprised~~totaled $4.1 million and $3.9 million, respectively, and consisted solely of a deferred compensation trust accounts which iswere invested in ~~marketable securities~~listed mutual funds whose diversification is at the discretion of the deferred compensation plan participants. Investment securities held in trading accounts are reported at fair value, with adjustments in fair value reported through income.

Note 5 - Loans and Leases

The loan and lease portfolio consists of loans and leases originated by the Corporation, as well as loans acquired in mergers and acquisitions. These mergers and acquisitions include the January 2015 acquisition of CBH, the November 2012 transaction with First Bank of Delaware (“FBD”) and the July 2010 acquisition of First Keystone Financial, Inc. (“FKF”). Many of the tables in this footnote are presented for all loans as well as supplemental tables fororiginatedandacquired loans.

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A. The table below detailsallportfolioloans and leases as of the dates indicated:

March 31,
2016

December 31,
2015

Loans held for sale
$ 7,807 $ 8,987
Real estate loans:

Commercial mortgage
$ 1,044,415 $ 964,259
Home equity lines and loans
205,896 209,473
Residential mortgage
412,006 406,404
Construction
119,194 90,421
Total real estate loans
1,781,511 1,670,557
Commercial and industrial
523,052 524,515
Consumer
21,427 22,129
Leases
52,851 51,787
Total portfolio loans and leases
2,378,841 2,268,988
Total loans and leases
$ 2,386,648 $ 2,277,975
Loans with fixed rates
$ 1,145,746 $ 1,103,622
Loans with adjustable or floating rates
1,240,902 1,174,353
Total loans and leases
$ 2,386,648 $ 2,277,975
Net deferred loan origination fees included in the above loan table
$ (270
)
$ (70
)

	March 31, 2017			December 31, 2016
Loans held for sale	$	3,015		$	9,621
Real estate loans:
Commercial mortgage	$	1,137,870		$	1,110,898
Home equity lines and loans		203,962			207,999
Residential mortgage		418,264			413,540
Construction		145,699			141,964
Total real estate loans		1,905,795			1,874,401
Commercial and industrial		567,917			579,791
Consumer		23,932			25,341
Leases		57,945			55,892
Total portfolio loans and leases		2,555,589			2,535,425
Total loans and leases	$	2,558,604		$	2,545,046
Loans with fixed rates	$	1,124,066		$	1,130,172
Loans with adjustable or floating rates		1,434,538			1,414,874
Total loans and leases	$	2,558,604		$	2,545,046
Net deferred loan origination fees included in the above loan table	$	(864	)	$	(735	)

The table below details the Corporation’soriginated portfolio loans and leases as of the dates indicated:

	March 31, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Loans held for sale	$	7,807		$	8,987		$	3,015		$	9,621
Real estate loans:
Commercial mortgage	$	863,017		$	772,571		$	990,579		$	946,879
Home equity lines and loans		169,708			171,189			176,555			178,450
Residential mortgage		325,486			316,487			351,349			342,268
Construction		117,603			87,155			145,699			141,964
Total real estate loans		1,475,814			1,347,402			1,664,182			1,609,561
Commercial and industrial		465,731			462,746			540,896			550,334
Consumer		21,287			21,934			23,791			25,200
Leases		52,851			51,787			57,945			55,892
Total portfolio loans and leases		2,015,683			1,883,869			2,286,814			2,240,987
Total loans and leases	$	2,023,490		$	1,892,856		$	2,289,829		$	2,250,608
Loans with fixed rates	$	981,571		$	932,575		$	995,798		$	992,917
Loans with adjustable or floating rates		1,041,919			960,281			1,294,031			1,257,691
Total originated loans and leases	$	2,023,490		$	1,892,856		$	2,289,829		$	2,250,608
Net deferred loan origination fees included in the above loan table	$	(270	)	$	(70	)	$	(864	)	$	(735	)

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The table below details the Corporation’sacquired portfolio loans as of the dates indicated:

	March 31, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Real estate loans:
Commercial mortgage	$	181,398	$	191,688	$	147,291	$	164,019
Home equity lines and loans		36,188		38,284		27,407		29,549
Residential mortgage		86,520		89,917		66,915		71,272
Construction		1,591		3,266		—		—
Total real estate loans		305,697		323,155		241,613		264,840
Commercial and industrial		57,321		61,769		27,021		29,457
Consumer		140		195		141		141
Total portfolio loans and leases		363,158		385,119		268,775		294,438
Total loans and leases	$	363,158	$	385,119	$	268,775	$	294,438
Loans with fixed rates	$	164,175	$	171,047	$	128,268	$	137,255
Loans with adjustable or floating rates		198,983		214,072		140,507		157,183
Total acquired loans and leases	$	363,158	$	385,119	$	268,775	$	294,438

B. Components of the net investment in leases are detailed as follows:

(dollars in thousands)

March 31,
2016

December 31,
2015

Minimum lease payments receivable
$ 59,480 $ 58,422
Unearned lease income
(8,898
)
(8,919
)
Initial direct costs and deferred fees
2,269 2,284
Total
$ 52,851 $ 51,787

(dollars in thousands)	March 31, 2017				December 31, 2016
Minimum lease payments receivable	$	64,502		$	62,379
Unearned lease income		(8,648	)		(8,608	)
Initial direct costs and deferred fees		2,091			2,121
Total	$	57,945		$	55,892

C. Non-Performing Loans and Leases⁽¹⁾

The following table detailsall non-performing portfolio loans and leases as of the dates indicated:

(dollars in thousands)	March 31, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Non-accrual loans and leases:
Commercial mortgage	$	872	$	829	$	315	$	320
Home equity lines and loans		1,953		2,027		1,828		2,289
Residential mortgage		2,923		3,212		2,640		2,658
Construction		12		34
Commercial and industrial		3,822		4,133		2,471		2,957
Consumer						—		2
Leases		54		9		75		137
Total	$	9,636	$	10,244	$	7,329	$	8,363

⁽¹⁾

Purchased credit-impaired loans, which have been recorded at their fair values at acquisition, and which are performing, are excluded from this table, with the exception of$343 thousand and $344 thousand of purchased credit-impaired loans as ofMarch 31, 2017 and December 31,2016, respectively, which became non-performing subsequent to acquisition.

The following table details non-performingoriginated portfolio loans and leases as of the dates indicated:

(dollars in thousands)	March 31, 2017		December 31, 2016
Non-accrual originated loans and leases:
Commercial mortgage	$	263	$	265
Home equity lines and loans		1,674		2,169
Residential mortgage		1,624		1,654
Commercial and industrial		908		941
Consumer		—		2
Leases		75		137
Total	$	4,544	$	5,168

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The following table details non-performingacquired portfolio loans⁽¹⁾ as of the dates indicated:

(dollars in thousands)	March 31, 2017		December 31, 2016
Non-accrual acquired loans and leases:
Commercial mortgage	$	52	$	55
Home equity lines and loans		154		120
Residential mortgage		1,016		1,004
Commercial and industrial		1,563		2,016
Total	$	2,785	$	3,195

⁽¹⁾

Purchased credit-impaired loans, which have been recorded at their fair values at acquisition, and which are performing, are excluded from this table, with the exception of$~~609~~ ~~thousand~~ ~~and $~~~~661 tho~~~~usand of purchased credit-impaired loans as of~~~~March 31, 2016~~ ~~and December 31,~~~~2015~~~~, respectively, which became non-performing subsequent to acquisition.~~

~~The following table details non-performing~~~~originated~~ ~~portfolio loans and leases as of the dates indicated:~~

(dollars in thousands)

March 31,
2016

December 31,
2015

Non-accrual originated loans and leases:

Commercial mortgage
$ 280 $ 279
Home equity lines and loans
1,776 1,788
Residential mortgage
1,876 1,964
Construction
12 34
Commercial and industrial
2,786 3,044
Leases
54 9
Total
$ 6,784 $ 7,118

~~The following table details non-performing~~~~acquired~~ ~~portfolio loans~~⁽¹⁾ ~~as of the dates indicated:~~

(dollars in thousands)

March 31,
2016

December 31,
2015

Non-accrual acquired loans and leases:

Commercial mortgage
$ 592 $ 550
Home equity lines and loans
177 239
Residential mortgage
1,047 1,248
Commercial and industrial
1,036 1,089
Total
$ 2,852 $ 3,126

⁽¹⁾

~~Purchased credit-impaired loans, which have been recorded at their fair values at acquisition, and which are performing, are excluded from this table, with the exception of~~$~~609~~343thousand and $~~661~~344 thousand of purchased credit-impaired loans as ofMarch 31, ~~2016~~2017 and December 31,~~2015~~2016, respectively, which became non-performing subsequent to acquisition.

D. Purchased Credit-Impaired Loans

The outstanding principal balance and related carrying amount of credit-impaired loans, for which the Corporation applies ASC 310-30,Accounting for Purchased Loans with Deteriorated Credit Quality, to account for the interest earned, as of the dates indicated, are as follows:

(dollars in thousands)

March 31,

2016

December 31,

2015

March 31,

2017

December 31,

2016

Outstanding principal balance

23,023

24,879

17,264

18,091

Carrying amount⁽¹⁾

15,705

16,846

11,862

12,432

⁽¹⁾

Includes $~~642~~360 thousand and $~~699~~368 thousandofpurchased credit-impaired loans as ofMarch 31, ~~2016~~2017 and December 31,~~2015~~2016, respectively, for which the Corporation could not estimate the timing or amount of expected cash flows to be collected at acquisition, and for which no accretable yield is recognized. Additionally, the table above includes $~~610~~343 thousand and $~~661~~344 thousand of purchased credit-impaired loans as ofMarch 31, ~~2016~~2017 and December 31,~~2015~~2016, respectively, which became non-performing subsequent to acquisition, which are disclosed in Note 5C, above, and which also have no accretable yield.

The following table presents changes in the accretable discount on purchased credit-impaired loans, for which the Corporation applies ASC 310-30, for the three months ended March 31, ~~2016:~~2017:

(dollars in thousands)	Accretable Discount			Accretable Discount
Balance, December 31, 2015	$	6,115
Balance, December 31, 2016				$	3,233
Accretion		(720	)		(485	)
Reclassifications from nonaccretable difference		5			—
Additions/adjustments		68			—
Disposals		(160	)		—
Balance, March 31, 2016	$	5,308
Balance, March 31, 2017				$	2,748

E. Age Analysis of Past Due Loans and Leases

The following tables present an aging ofall portfolio loans and leases as of the dates indicated:

	Accruing Loans and Leases																Accruing Loans and Leases
(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
As ofMarch 31, 2016
(dollars in thousands) As of March 31, 2017																	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	656	$	—	$	—	$	656	$	1,042,887	$	1,043,543	$	872	$	1,044,415	$	1,926	$	—	$	—	$	1,926	$	1,135,629	$	1,137,555	$	315	$	1,137,870
Home equity lines and loans		221		1,290		—		1,511		202,432		203,943		1,953		205,896		24		200		—		224		201,910		202,134		1,828		203,962
Residential mortgage		1,520		—		—		1,520		407,563		409,083		2,923		412,006		1,967		233		—		2,200		413,424		415,624		2,640		418,264
Construction		—		—		—		—		119,182		119,182		12		119,194		—		—		—		—		145,699		145,699		—		145,699
Commercial and industrial		2,348		—		—		2,348		516,882		519,230		3,822		523,052		519		719		—		1,238		564,208		565,446		2,471		567,917
Consumer		15		7		—		22		21,405		21,427		—		21,427		10		10		—		20		23,912		23,932		—		23,932
Leases		202		39		—		241		52,556		52,797		54		52,851		159		310		—		469		57,401		57,870		75		57,945
	$	4,962	$	1,336	$	—	$	6,298	$	2,362,907	$	2,369,205	$	9,636	$	2,378,841	$	4,605	$	1,472	$	—	$	6,077	$	2,542,183	$	2,548,260	$	7,329	$	2,555,589

Accruing Loans and Leases

(dollars in thousands)

30 – 59
Days
Past Due

60 – 89
Days
Past Due

Over 89
Days
Past Due

Total Past
Due

Current

Total
Accruing
Loans and
Leases

Nonaccrual
Loans and
Leases

Total
Loans and
Leases

As of December 31, 2015

Commercial mortgage
$ 1,126 $ 211 $ — $ 1,337 $ 962,093 $ 963,430 $ 829 $ 964,259
Home equity lines and loans
1,596 15 — 1,611 205,835 207,446 2,027 209,473
Residential mortgage
1,923 74 — 1,997 401,195 403,192 3,212 406,404
Construction
— — — — 90,387 90,387 34 90,421
Commercial and industrial
99 39 — 138 520,244 520,382 4,133 524,515
Consumer
20 — — 20 22,109 22,129 — 22,129
Leases
375 123 — 498 51,280 51,778 9 51,787
$ 5,139 $ 462 $ — $ 5,601 $ 2,253,143 $ 2,258,744 $ 10,244 $ 2,268,988

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(dollars in thousands)	Accruing Loans and Leases
As of December 31, 2016	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	666	$	722	$	—	$	1,388	$	1,109,190	$	1,110,578	$	320	$	1,110,898
Home equity lines and loans		11		—		—		11		205,699		205,710		2,289		207,999
Residential mortgage		823		490		—		1,313		409,569		410,882		2,658		413,540
Construction		—		—		—		—		141,964		141,964		—		141,964
Commercial and industrial		36		—		—		36		576,798		576,834		2,957		579,791
Consumer		10		5		—		15		25,324		25,339		2		25,341
Leases		177		86		—		263		55,492		55,755		137		55,892
	$	1,723	$	1,303	$	—	$	3,026	$	2,524,036	$	2,527,062	$	8,363	$	2,535,425

*included as “current” are $2.0 million and $15.3 million of loans and leases as ofMarch 31, 2017 andDecember 31, 2016, respectively, which are classified as Administratively Delinquent. An Administratively Delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. The Corporation does not consider these loans to be delinquent.

The following tables present an aging oforiginated portfolio loans and leases as of the dates indicated:

	Accruing Loans and Leases																Accruing Loans and Leases
(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
As ofMarch 31, 2016
(dollars in thousands) As of March 31, 2017																	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	646	$	—	$	—	$	646	$	862,091	$	862,737	$	280	$	863,017	$	714	$	—	$	—	$	714	$	989,602	$	990,316	$	263	$	990,579
Home equity lines and loans		100		1,290		—		1,390		166,542		167,932		1,776		169,708		24		—		—		24		174,857		174,881		1,674		176,555
Residential mortgage		1,075		—		—		1,075		322,535		323,610		1,876		325,486		1,732		—		—		1,732		347,993		349,725		1,624		351,349
Construction		—		—		—		—		117,591		117,591		12		117,603		—		—		—		—		145,699		145,699		—		145,699
Commercial and industrial		2,090		—		—		2,090		460,855		462,945		2,786		465,731		364		—		—		364		539,624		539,988		908		540,896
Consumer		15		7		—		22		21,265		21,287		—		21,287		10		10		—		20		23,771		23,791		—		23,791
Leases		202		39		—		241		52,556		52,797		54		52,851		159		310		—		469		57,401		57,870		75		57,945
	$	4,128	$	1,336	$	—	$	5,464	$	2,003,435	$	2,008,899	$	6,784	$	2,015,683	$	3,003	$	320	$	—	$	3,323	$	2,278,947	$	2,282,270	$	4,544	$	2,286,814

	Accruing Loans and Leases
(dollars in thousands) As of December 31, 2016	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	—	$	722	$	—	$	722	$	945,892	$	946,614	$	265	$	946,879
Home equity lines and loans		11		—		—		11		176,270		176,281		2,169		178,450
Residential mortgage		773		64		—		837		339,778		340,615		1,653		342,268
Construction		—		—		—		—		141,964		141,964		—		141,964
Commercial and industrial		—		—		—		—		549,393		549,393		941		550,334
Consumer		10		5		—		15		25,183		25,198		2		25,200
Leases		177		86		—		263		55,492		55,755		137		55,892
	$	971	$	877	$	—	$	1,848	$	2,233,972	$	2,235,820	$	5,167	$	2,240,987

*included as “current” are $2.0 million and $13.5 million of loans and leases as ofMarch 31, 2017 andDecember 31, 2016, respectively, which are classified as Administratively Delinquent. An Administratively Delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. The Corporation does not consider these loans to be delinquent.

Accruing Loans and Leases

(dollars in thousands)

30 – 59
Days
Past Due

60 – 89
Days
Past Due

Over 89
Days
Past Due

Total Past
Due

Current

Total
Accruing
Loans and
Leases

Nonaccrual
Loans and
Leases

Total
Loans and
Leases

As of December 31, 2015

Commercial mortgage
$ 1,016 $ 155 $ — $ 1,171 $ 771,121 $ 772,292 $ 279 $ 772,571
Home equity lines and loans
1,445 — — 1,445 167,956 169,401 1,788 171,189
Residential mortgage
1,475 9 — 1,484 313,039 314,523 1,964 316,487
Construction
— — — — 87,121 87,121 34 87,155
Commercial and industrial
— — — — 459,702 459,702 3,044 462,746
Consumer
20 — — 20 21,914 21,934 — 21,934
Leases
375 123 — 498 51,280 51,778 9 51,787
$ 4,331 $ 287 $ — $ 4,618 $ 1,872,133 $ 1,876,751 $ 7,118 $ 1,883,869

The following tables present an aging ofacquired portfolio loans and leases as of the dates indicated:

	Accruing Loans and Leases																Accruing Loans and Leases
(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
As ofMarch 31, 2016
(dollars in thousands) As of March 31, 2017																	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	10	$	—	$	—	$	10	$	180,796	$	180,806	$	592	$	181,398	$	1,212	$	—	$	—	$	1,212	$	146,027	$	147,239	$	52	$	147,291
Home equity lines and loans		121		—		—		121		35,890		36,011		177		36,188		—		200		—		200		27,053		27,253		154		27,407
Residential mortgage		445		—		—		445		85,028		85,473		1,047		86,520		235		233		—		468		65,431		65,899		1,016		66,915
Construction		—		—		—		—		1,591		1,591		—		1,591
Commercial and industrial		258		—		—		258		56,027		56,285		1,036		57,321		155		719		—		874		24,584		25,458		1,563		27,021
Consumer		—		—		—		—		140		140		—		140		—		—		—		—		141		141		—		141
	$	834	$	—	$	—	$	834	$	359,472	$	360,306	$	2,852	$	363,158	$	1,602	$	1,152	$	—	$	2,754	$	263,236	$	265,990	$	2,785	$	268,775

Accruing Loans and Leases

(dollars in thousands)

30 – 59 Days
Past Due

60 – 89 Days
Past Due

Over 89 Days
Past Due

Total Past
Due

Current

Total
Accruing L
oans and
Leases

Nonaccrual
Loans and
Leases

Total
Loans and
Leases

As of December 31, 2015

Commercial mortgage
$ 110 $ 56 $ — $ 166 $ 190,972 $ 191,138 $ 550 $ 191,688
Home equity lines and loans
151 15 — 166 37,879 38,045 239 38,284
Residential mortgage
448 65 — 513 88,156 88,669 1,248 89,917
Construction
— — — — 3,266 3,266 — 3,266
Commercial and industrial
99 39 — 138 60,542 60,680 1,089 61,769
Consumer
— — — — 195 195 — 195
$ 808 $ 175 $ — $ 983 $ 381,010 $ 381,993 $ 3,126 $ 385,119

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Table of Contents

	Accruing Loans and Leases
(dollars in thousands) As of December 31, 2016	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	666	$	—	$	—	$	666	$	163,298	$	163,964	$	55	$	164,019
Home equity lines and loans		—		—		—		—		29,429		29,429		120		29,549
Residential mortgage		50		426		—		476		69,791		70,267		1,005		71,272
Commercial and industrial		36		—		—		36		27,405		27,441		2,016		29,457
Consumer		—		—		—		—		141		141		—		141
	$	752	$	426	$	—	$	1,178	$	290,064	$	291,242	$	3,196	$	294,438

*included as “current” are $0 and $1.8 million of loans and leases as ofMarch 31, 2017 andDecember 31, 2016, respectively, which are classified as Administratively Delinquent. An Administratively Delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. The Corporation does not consider these loans to be delinquent.

F. Allowance for Loan and Lease Losses (the “Allowance”)

The following tables detail the roll-forward of the Allowance for the three months ended March 31, ~~2016:~~2017:

(dollars in thousands)

Commercial
Mortgage

Home Equity
Lines and
Loans

Residential
Mortgage

Construction

Commercial
and
Industrial

Consumer

Leases

Unallocated

Total

Balance, December 31, 2015
$ 5,199 $ 1,307 $ 1,740 $ 1,324 $ 5,609 $ 142 $ 518 $ 18 $ 15,857
Charge-offs
(110
)
(75
)
(4
)
— (28
)
(34
)
(300
)
— (551
)
Recoveries
3 4 39 — 3 14 66 — 129
Provision for loan and lease losses
764 (110
)
93 578 (139
)
(2
)
244 (18
)
1,410
Balance, March 31, 2016
$ 5,856 $ 1,126 $ 1,868 $ 1,902 $ 5,445 $ 120 $ 528 $ — $ 16,845

(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans			Residential Mortgage			Construction			Commercial and Industrial			Consumer			Leases			Unallocated		Total
Balance, December 31, 2016	$	6,227	$	1,255		$	1,917		$	2,233		$	5,142		$	153		$	559		$	—	$	17,486
Charge-offs		—		(438	)		(27	)		—			(59	)		(41	)		(206	)		—		(771	)
Recoveries		3		—			—			1			—			2			95			—		101
Provision for loan and lease losses		180		426			(92	)		(39	)		(336	)		21			131			—		291
Balance, March 31, 2017	$	6,410	$	1,243		$	1,798		$	2,195		$	4,747		$	135		$	579		$	—	$	17,107

The following table details the roll-forward of the Allowance for the three months ended March 31, ~~2015:~~ 2016:

(dollars in thousands)	Commercial Mortgage			Home Equity Lines and Loans			Residential Mortgage			Construction		Commercial and Industrial			Consumer			Leases			Unallocated		Total			Commercial Mortgage			Home Equity Lines and Loans			Residential Mortgage			Construction		Commercial and Industrial			Consumer			Leases			Unallocated			Total
Balance, December 31, 2014	$	3,948		$	1,917		$	1,736		$	1,367	$	4,533		$	238		$	468		$	379	$	14,586
Balance, December 31, 2015																										$	5,199		$	1,307		$	1,740		$	1,324	$	5,609		$	142		$	518		$	18		$	15,857
Charge-offs		—			(129	)		(468	)		—		(276	)		(35	)		(20	)		—		(928	)		(110	)		(75	)		(4	)		—		(28	)		(34	)		(300	)		—			(551	)
Recoveries		21			4			5			1		21			3			14			—		69			3			4			39			—		3			14			66			—			129
Provision for loan and lease losses		(193	)		259			593			5		(293	)		51			22			125		569			764			(110	)		93			578		(139	)		(2	)		244			(18	)		1,410
Balance March 31, 2015	$	3,776		$	2,051		$	1,866		$	1,373	$	3,985		$	257		$	484		$	504	$	14,296
Balance, March 31, 2016																										$	5,856		$	1,126		$	1,868		$	1,902	$	5,445		$	120		$	528		$	—		$	16,845

The following table details the allocation of the Allowance forall portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Unallocated		Total
As ofMarch 31, 2016
(dollars in thousands) As of March 31, 2017																			Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Unallocated		Total
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	—	$	74	$	—	$	519	$	5	$	—	$	—	$	598	$	—	$		$	73	$	—	$	11	$	5	$	—	$	—	$	89
Collectively evaluated for impairment		5,856		1,126		1,794		1,902		4,926		115		528		—		16,247		6,410		1,243		1,725		2,195		4,736		130		579		—		17,018
Purchased credit-impaired⁽¹⁾		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	5,856	$	1,126	$	1,868	$	1,902	$	5,445	$	120	$	528	$	—	$	16,845	$	6,410	$	1,243	$	1,798	$	2,195	$	4,747	$	135	$	579	$	—	$	17,107
As of December 31,2015
As of December 31,2016
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	115	$	54	$	—	$	519	$	5	$	—	$	—	$	693	$	—	$	—	$	73	$	—	$	5	$	8	$	—	$	—	$	86
Collectively evaluated for impairment		5,199		1,192		1,686		1,324		5,090		137		518		18		15,164		6,227		1,255		1,844		2,233		5,137		145		559		—		17,400
Purchased credit-impaired⁽¹⁾		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	5,199	$	1,307	$	1,740	$	1,324	$	5,609	$	142	$	518	$	18	$	15,857	$	6,227	$	1,255	$	1,917	$	2,233	$	5,142	$	153	$	559	$	—	$	17,486

⁽¹⁾	Purchased credit-impaired loans are evaluated for impairment on an individual basis.

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The following table details the carrying value forall portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
As ofMarch 31, 2016
(dollars in thousands) As of March 31, 2017																	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Carrying value of loans and leases:
Individually evaluated for impairment	$	406	$	1,906	$	7,489	$	12	$	3,955	$	30	$	—	$	13,798	$	1,570	$	1,945	$	7,256	$	—	$	2,444	$	29	$	—	$	13,244
Collectively evaluated for impairment		1,032,877		203,880		404,505		119,182		514,646		21,397		52,851		2,349,338		1,126,325		201,917		411,008		145,699		563,686		23,903		57,945		2,530,483
Purchased credit-impaired⁽¹⁾		11,132		110		12		—		4,451		—		—		15,705		9,975		100		—		—		1,787		—		—		11,862
Total	$	1,044,415	$	205,896	$	412,006	$	119,194	$	523,052	$	21,427	$	52,851	$	2,378,841	$	1,137,870	$	203,962	$	418,264	$	145,699	$	567,917	$	23,932	$	57,945	$	2,555,589
As of December 31,2015
As of December 31,2016
Carrying value of loans and leases:
Individually evaluated for impairment	$	349	$	1,980	$	7,754	$	33	$	4,240	$	30	$	—	$	14,386	$	1,576	$	2,354	$	7,266	$	—	$	2,946	$	31	$	—	$	14,173
Collectively evaluated for impairment		952,448		207,378		398,635		89,625		515,784		22,099		51,787		2,237,756		1,098,788		205,540		406,271		141,964		575,055		25,310		55,892		2,508,820
Purchased credit-impaired⁽¹⁾		11,462		115		15		763		4,491		—		—		16,846		10,534		105		3		—		1,790		—		—		12,432
Total	$	964,259	$	209,473	$	406,404	$	90,421	$	524,515	$	22,129	$	51,787	$	2,268,988	$	1,110,898	$	207,999	$	413,540	$	141,964	$	579,791	$	25,341	$	55,892	$	2,535,425

⁽¹⁾	Purchased credit-impaired loans are evaluated for impairment on an individual basis.

The following table details the allocation of the Allowance fororiginated portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Unallocated		Total
As ofMarch 31, 2016
(dollars in thousands) As ofMarch 31, 2017																			Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Unallocated		Total
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	—	$	46	$	—	$	519	$	5	$	—	$	—	$	570	$	—	$	—	$	45	$	—	$	1	$	5	$	—	$	—	$	51
Collectively evaluated for impairment		5,856		1,126		1,794		1,902		4,926		115		528		—		16,247		6,410		1,243		1,725		2,195		4,736		130		579		—		17,018
Total	$	5,856	$	1,126	$	1,840	$	1,902	$	5,445	$	120	$	528	$	—	$	16,817	$	6,410	$	1,243	$	1,770	$	2,195	$	4,737	$	135	$	579	$	—	$	17,069
As of December 31,2015
As of December 31,2016
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	115	$	54	$	—	$	519	$	5	$	—	$	—	$	693	$	—	$	—	$	45	$	—	$	5	$	8	$	—	$	—	$	58
Collectively evaluated for impairment		5,199		1,192		1,686		1,324		5,090		137		518		18		15,164		6,227		1,255		1,844		2,233		5,137		145		559		—		17,400
Total	$	5,199	$	1,307	$	1,740	$	1,324	$	5,609	$	142	$	518	$	18	$	15,857	$	6,227	$	1,255	$	1,889	$	2,233	$	5,142	$	153	$	559	$	—	$	17,458

The following table details the carrying value fororiginated portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
As ofMarch 31, 2016
(dollars in thousands) As of March 31, 2017																	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Carrying value of loans and leases:
Individually evaluated for impairment	$	280	$	1,821	$	4,297	$	12	$	2,961	$	30	$	—	$	9,401	$	1,518	$	1,873	$	4,070	$	—	$	1,141	$	29	$	—	$	8,631
Collectively evaluated for impairment		862,737		167,887		321,189		117,591		462,770		21,257		52,851		2,006,282		989,061		174,682		347,279		145,699		539,755		23,762		57,945		2,278,183
Total	$	863,017	$	169,708	$	325,486	$	117,603	$	465,731	$	21,287	$	52,851	$	2,015,683	$	990,579	$	176,555	$	351,349	$	145,699	$	540,896	$	23,791	$	57,945	$	2,286,814
As of December 31,2015
As of December 31,2016
Carrying value of loans and leases:
Individually evaluated for impairment	$	279	$	1,832	$	4,394	$	33	$	3,229	$	30	$	—	$	9,797	$	1,521	$	2,319	$	4,111	$	—	$	1,190	$	31	$	—	$	9,172
Collectively evaluated for impairment		772,292		169,357		312,093		87,122		459,517		21,904		51,787		1,874,072		945,358		176,131		338,157		141,964		549,144		25,169		55,892		2,231,815
Total	$	772,571	$	171,189	$	316,487	$	87,155	$	462,746	$	21,934	$	51,787	$	1,883,869	$	946,879	$	178,450	$	342,268	$	141,964	$	550,334	$	25,200	$	55,892	$	2,240,987

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The following table details the allocation of the Allowance foracquired portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Unallocated		Total
As ofMarch 31, 2016
(dollars in thousands) As of March 31, 2017																			Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Unallocated		Total
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	—	$	28	$	—	$	—	$	—	$	—	$	—	$	28	$	—	$	—	$	28	$	—	$	10	$	—	$	—	$	—	$	38
Collectively evaluated for impairment		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Purchased credit-impaired⁽¹⁾		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	28	$	—	$	—	$	—	$	—	$	—	$	28	$	—	$	—	$	28	$	—	$	10	$	—	$	—	$	—	$	38
As of December 31,2015
As of December 31,2016
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	28	$	—	$	—	$	—	$	—	$	—	$	28
Collectively evaluated for impairment		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Purchased credit-impaired⁽¹⁾		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	28	$	—	$	—	$	—	$	—	$	—	$	28

⁽¹⁾	Purchased credit-impaired loans are evaluated for impairment on an individual basis.

The following table details the carrying value foracquired portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
As ofMarch 31, 2016
(dollars in thousands) As of March 31, 2017																	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Carrying value of loans and leases:
Individually evaluated for impairment	$	126	$	85	$	3,192	$	—	$	994	$	—	$	—	$	4,397	$	52	$	72	$	3,186	$	—	$	1,303	$	—	$	—	$	4,613
Collectively evaluated for impairment		170,140		35,993		83,316		1,591		51,876		140		—		343,056		137,264		27,235		63,729		—		23,931		141		—		252,300
Purchased credit-impaired⁽¹⁾		11,132		110		12		—		4,451		—		—		15,705		9,975		100		—		—		1,787		—		—		11,862
Total	$	181,398	$	36,188	$	86,520	$	1,591	$	57,321	$	140	$	—	$	363,158	$	147,291	$	27,407	$	66,915	$	—	$	27,021	$	141	$	—	$	268,775
As of December 31,2015
As of December 31,2016
Carrying value of loans and leases:
Individually evaluated for impairment	$	70	$	148	$	3,360	$	—	$	1,011	$	—	$	—	$	4,589	$	55	$	35	$	3,155	$	—	$	1,756	$	—		—	$	5,001
Collectively evaluated for impairment		180,156		38,021		86,542		2,503		56,267		195		—		363,684		153,430		29,409		68,114		—		25,911		141		—		277,005
Purchased credit-impaired⁽¹⁾		11,462		115		15		763		4,491		—		—		16,846		10,534		105		3		—		1,790		—		—		12,432
Total	$	191,688	$	38,284	$	89,917	$	3,266	$	61,769	$	195	$	—	$	385,119	$	164,019	$	29,549	$	71,272	$	—	$	29,457	$	141		—	$	294,438

⁽¹⁾ Purchased credit-impaired loans are evaluated for impairment on an individual basis.

As part of the process of determining the Allowance for the different segments of the loan and lease portfolio, Management considers certain credit quality indicators. For the commercial mortgage, construction and commercial and industrial loan segments, periodic reviews of the individual loans are performed by both in-house staff as well as external loan reviewers. The result of these reviews is reflected in the risk grade assigned to each loan. These internally assigned grades are as follows:

Pass – Loans considered satisfactory with no indications of deterioration.

Special mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

In addition, for the remaining segments of the loan and lease portfolio, which include residential mortgage, home equity lines and loans, consumer, and leases, the credit quality indicator used to determine this component of the Allowance is based on performance status.

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The following tables detail the carrying value ofall portfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

	Credit Risk Profile by Internally Assigned Grade																Credit Risk Profile by Internally Assigned Grade

(dollars in thousands)	Commercial Mortgage				Construction				Commercial and Industrial				Total				Commercial Mortgage				Construction				Commercial and Industrial				Total
	March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016
Pass	$	1,031,411	$	946,887	$	116,552	$	88,653	$	512,156	$	510,040	$	1,660,119	$	1,545,580	$	1,126,655	$	1,099,557	$	143,732	$	140,370	$	559,773	$	570,342	$	1,830,160	$	1,810,269
Special Mention		6,996		7,029		—		—		1,118		1,123		8,114		8,152		1,886		1,892		—		—		674		2,315		2,560		4,207
Substandard		6,008		10,343		2,642		1,768		9,778		13,352		18,428		25,463		9,329		9,449		1,967		1,594		7,123		5,512		18,419		16,555
Doubtful																		—		—		—		—		347		1,622		347		1,622
Total	$	1,044,415	$	964,259	$	119,194	$	90,421	$	523,052	$	524,515	$	1,686,661	$	1,579,195	$	1,137,870	$	1,110,898	$	145,699	$	141,964	$	567,917	$	579,791	$	1,851,486	$	1,832,653

Credit Risk Profile by Payment Activity

(dollars in thousands)

Residential Mortgage

Home Equity Lines and Loans

Consumer

Leases

Total

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

Performing
$ 409,083 $ 403,192 $ 203,943 $ 207,446 $ 21,427 $ 22,129 $ 52,797 $ 51,778 $ 687,250 $ 684,545
Non-performing
2,923 3,212 1,953 2,027 — — 54 9 4,930 5,248
Total
$ 412,006 $ 406,404 $ 205,896 $ 209,473 $ 21,427 $ 22,129 $ 52,851 $ 51,787 $ 692,180 $ 689,793

	Credit Risk Profile by Payment Activity

(dollars in thousands)	Residential Mortgage				Home Equity Lines and Loans				Consumer				Leases				Total
	March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016
Performing	$	415,624	$	410,882	$	202,134	$	205,710	$	23,932	$	25,339	$	57,870	$	55,755	$	699,560	$	697,686
Non-performing		2,640		2,658		1,828		2,289		—		2		75		137		4,543		5,086
Total	$	418,264	$	413,540	$	203,962	$	207,999	$	23,932	$	25,341	$	57,945	$	55,892	$	704,103	$	702,772

The following tables detail the carrying value oforiginatedportfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

	Credit Risk Profile by Internally Assigned Grade																Credit Risk Profile by Internally Assigned Grade

(dollars in thousands)	Commercial Mortgage				Construction				Commercial and Industrial				Total				Commercial Mortgage				Construction				Commercial and Industrial				Total
	March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016
Pass	$	853,077	$	758,240	$	114,961	$	86,065	$	460,921	$	454,454	$	1,428,959	$	1,298,759	$	980,545	$	936,737	$	143,732	$	140,370	$	536,621	$	544,876	$	1,660,898	$	1,621,983
Special Mention		6,996		7,029		—		—		1,016		1,015		8,012		8,044		1,886		1,892		—		—		642		2,279		2,528		4,171
Substandard		2,944		7,302		2,642		1,090		3,794		7,277		9,380		15,669		8,148		8,250		1,967		1,594		3,508		3,054		13,623		12,898
Doubtful																		—		—		—		—		125		125		125		125
Total	$	863,017	$	772,571	$	117,603	$	87,155	$	465,731	$	462,746	$	1,446,351	$	1,322,472	$	990,579	$	946,879	$	145,699	$	141,964	$	540,896	$	550,334	$	1,677,174	$	1,639,177

Credit Risk Profile by Payment Activity
																					Credit Risk Profile by Payment Activity

(dollars in thousands)	Residential Mortgage				Home Equity Lines and Loans				Consumer				Leases				Total				Residential Mortgage				Home Equity Lines and Loans				Consumer				Leases				Total
	March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2016		December 31,2015		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016
Performing	$	323,610	$	314,523	$	167,931	$	169,401	$	21,287	$	21,934	$	52,797	$	51,778	$	565,625	$	557,636	$	349,725	$	340,615	$	174,882	$	176,281	$	23,791	$	25,198	$	57,870	$	55,755	$	606,268	$	597,849
Non-performing		1,876		1,964		1,777		1,788		—		—		54		9		3,707		3,761		1,624		1,653		1,673		2,169		—		2		75		137		3,372		3,961
Total	$	325,486	$	316,487	$	169,708	$	171,189	$	21,287	$	21,934	$	52,851	$	51,787	$	569,332	$	561,397	$	351,349	$	342,268	$	176,555	$	178,450	$	23,791	$	25,200	$	57,945	$	55,892	$	609,640	$	601,810

The following tables detail the carrying value ofacquiredportfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

Credit Risk Profile by Internally Assigned Grade

(dollars in thousands)

Commercial Mortgage

Construction

Commercial and Industrial

Total

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

Pass
$ 178,334 $ 188,647 $ 1,591 $ 2,588 $ 51,235 $ 55,586 $ 231,160 $ 246,821
Special Mention
— — — — 102 108 102 108
Substandard
3,064 3,041 — 678 5,984 6,075 9,048 9,794
Total
$ 181,398 $ 191,688 $ 1,591 $ 3,266 $ 57,321 $ 61,769 $ 240,310 $ 256,723

	Credit Risk Profile by Internally Assigned Grade

(dollars in thousands)	Commercial Mortgage				Construction				Commercial and Industrial				Total
	March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016
Pass	$	146,110	$	162,820	$	—	$	—	$	23,152	$	25,466	$	169,262	$	188,286
Special Mention		—		—		—		—		32		36		32		36
Substandard		1,181		1,199		—		—		3,615		2,458		4,796		3,657
Doubtful		—		—		—		—		222		1,497		222		1,497
Total	$	147,291	$	164,019	$	—	$	—	$	27,021	$	29,457	$	174,312	$	193,476

Credit Risk Profile by Payment Activity

(dollars in thousands)

Residential Mortgage

Home Equity Lines and Loans

Consumer

Total

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

March 31,
2016

December 31,2015

Performing
$ 85,473 $ 88,669 $ 36,012 $ 38,045 $ 140 $ 195 $ 121,625 $ 126,909
Non-performing
1,047 1,248 176 239 — — 1,223 1,487
Total
$ 86,520 $ 89,917 $ 36,188 $ 38,284 $ 140 $ 195 $ 122,848 $ 128,396

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Table of Contents

	Credit Risk Profile by Payment Activity

(dollars in thousands)	Residential Mortgage				Home Equity Lines and Loans				Consumer				Total
	March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016		March 31, 2017		December 31,2016
Performing	$	65,899	$	70,267	$	27,252	$	29,429	$	141	$	141	$	93,292	$	99,837
Non-performing		1,016		1,005		155		120		—		—		1,171		1,125
Total	$	66,915	$	71,272	$	27,407	$	29,549	$	141	$	141	$	94,463	$	100,962

G. Troubled Debt Restructurings (“TDRs”)

The restructuring of a loan is considered a “troubled debt restructuring” if both of the following conditions are met: (i) the borrower is experiencing financial difficulties, and (ii) the creditor has granted a concession. The most common concessions granted include one or more modifications to the terms of the debt, such as (a) a reduction in the interest rate for the remaining life of the debt, (b) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (c) a temporary period of interest-only payments, (d) a reduction in the contractual payment amount for either a short period or remaining term of the loan, and (e) for leases, a reduced lease payment. A less common concession granted is the forgiveness of a portion of the principal.

The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower, were a concession not granted. Similarly, the determination of whether a concession has been granted is very subjective in nature. For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender.

The following table presents the balance of TDRs as of the indicated dates:

(dollars in thousands)	March 31, 2016		December 31, 2015		March 31, 2017		December 31, 2016
TDRs included in nonperforming loans and leases	$	1,756	$	1,935	$	2,681	$	2,632
TDRs in compliance with modified terms		4,893		4,880		6,492		6,395
Total TDRs	$	6,649	$	6,815	$	9,173	$	9,027

The following table presents information regarding loan and lease modifications categorized as TDRs for the three months ended March 31, ~~2016:~~ 2017:

	For the Three Months Ended March 31, 2016						For the Three Months Ended March 31, 2017
(dollars in thousands)	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Home equity loans and lines		1	$	83	$	36		1	$	8	$	8
Residential mortgage								1		194		202
Leases		2		67		67		3		62		62
Total		3	$	150	$	103		5	$	264	$	272

The following table presents information regarding the types of loan and lease modifications made for the three months ended March 31, ~~2016:~~2017:

	Number of Contracts for the Three Months Ended March 31, 2016														Number of Contracts for the Three Months Ended March 31, 2017
	Interest Rate Change		Loan Term Extension		Interest Rate Change and Term Extension		Interest Rate Change and/or Interest-Only Period		Contractual Payment Reduction (Leases only)		Forgiveness of Interest		Forgiveness of Principal		Interest Rate Change		Loan Term Extension		Interest Rate Change and Term Extension		Interest Rate Change and/or Interest-Only Period		Contractual Payment Reduction (Leases only)		Forgiveness of Interest		Forgiveness of Principal
Home equity loans and lines		—		—		—		—		—		—		1		—		1		—		—		—		—		—
Residential mortgage																—		—		1		—		—		—		—
Leases		—		—		—		—		2		—		—		—		—		—		—		3		—		—
Total		—		—		—		—		2		—		1		—		1		1		—		3		—		—

During the three months ended March 31, ~~2016,~~2017, there were no defaults of loans or leases that had been previously modified to troubled debt restructurings.

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H. Impaired Loans

The following tables detail the recorded investment and principal balance of impaired loans by portfolio segment, their related Allowance and interest income recognized as of the dates or for the periods indicated:

(dollars in thousands)	Recorded Investment⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest Income Recognized		Cash-Basis Interest Income Recognized
As of or for the three months ended March 31, 2017
Impaired loans with related Allowance:
Residential mortgage	$	620	$	619	$	73	$	621	$	7	$	—
Commercial and industrial		88		121		11		110		1		—
Consumer		29		29		5		29		—		—
Total	$	737	$	769	$	89	$	760	$	8	$	—

Impaired loans without related Allowance^{(1) (3)}:
Commercial mortgage	$	1,570	$	1,570	$	—	$	1,573	$	15	$	—
Home equity lines and loans		1,945		2,806		—		2,358		2		—
Residential mortgage		6,637		6,623		—		6,755		53		—
Commercial and industrial		2,357		3,156		—		2,456		2		—
Total	$	12,509	$	14,155	$	—	$	13,142	$	72	$	—

Grand total	$	13,246	$	14,924	$	89	$	13,902	$	80	$	—

⁽¹⁾	The table above does not include the recorded investment of $232 thousand of impaired leases without a relatedAllowance.

⁽²⁾	Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.

⁽³⁾	This table excludes all purchased credit-impaired loans, which are discussed in Note5D, above.

(dollars in thousands)	Recorded Investment⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest Income Recognized		Cash-Basis Interest Income Recognized
As of or for the three months endedMarch 31, 2016
Impaired loans with related Allowance:
Residential mortgage	$	628	$	642	$	74	$	642	$	7	$	—
Commercial and industrial		1,947		1,966		519		1,990		1		—
Consumer		30		30		5		30		—		—
Total	$	2,605	$	2,638	$	598	$	2,662	$	8	$	—

Impaired loans without related Allowance^{(1) (3)}:
Commercial mortgage	$	405	$	527	$	—	$	528	$	—	$	—
Home equity lines and loans		1,906		2,393		—		2,538		1		—
Residential mortgage		6,861		7,707		—		8,134		52		—
Construction		12		974		—		994		—		—
Commercial and industrial		2,009		2,826		—		4,759		1		—
Total	$	11,193	$	14,427	$	—	$	16,953	$	54	$	—

Grand total	$	13,798	$	17,065	$	598	$	19,615	$	62	$	—

⁽¹⁾	The table above does not include the recorded investment of$122 thousand of impaired leases without a related Allowance.

⁽²⁾	Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.

⁽³⁾	This table excludes all purchased credit-impaired loans, which are discussed in Note 5D, above.

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(dollars in thousands)

Recorded
Investment⁽²⁾

Principal
Balance

Related
Allowance

Average
Principal
Balance

Interest
Income
Recognized

Cash-Basis
Interest
Income
Recognized

As of or for the three months ended March 31, 2015

Impaired loans with related Allowance:

Home equity lines and loans
$ 75 $ 75 $ 26 $ 75 $ — $ —
Residential mortgage
587 596 65 597 6 —
Commercial and industrial
975 972 103 983 13 —
Consumer
40 40 15 41 — —
Total
$ 1,677 $ 1,683 $ 209 $ 1,696 $ 19 $ —

Impaired loans without related Allowance^{(1) (3)}:

Commercial mortgage
$ 94 $ 94 $ — $ 100 $ — $ —
Home equity lines and loans
963 1,059 — 1,174 1 —
Residential mortgage
7,468 8,360 — 8,728 33 —
Construction
201 1,163 — 1,162 — —
Commercial and industrial
2,110 2,830 — 2,909 1 —
Total
$ 10,836 $ 13,506 $ — $ 14,073 $ 35 $ —

Grand total
$ 12,513 $ 15,189 $ 209 $ 15,769 $ 54 $ —

⁽¹⁾	~~The table above does not include the recorded investment of $~~70 ~~thousand of impaired leases without a related~~A~~llowance.~~

⁽²⁾	~~Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.~~

⁽³⁾	~~This table excludes all purchased credit-impaired loans, which are discussed in Note~~5D~~, above.~~

(dollars in thousands)	Recorded Investment⁽²⁾		Principal Balance		Related Allowance		Recorded Investment⁽²⁾		Principal Balance		Related Allowance
As of December 31,2015
As of December 31,2016
Impaired loans with related allowance:
Home equity lines and loans	$	115	$	115	$	115
Residential mortgage		515		527		54	$	622	$	622	$	73
Commercial and industrial		2,011		2,002		519		84		84		5
Consumer		30		30		5		31		31		8
Total	$	2,671	$	2,674	$	693	$	737	$	737	$	86

Impaired loans⁽¹⁾⁽³⁾ without related allowance:
Commercial mortgage	$	349	$	358	$	—	$	1,577	$	1,577	$	—
Home equity lines and loans		1,865		2,447		—		2,354		2,778		—
Residential mortgage		7,239		8,166		—		6,644		6,970		—
Construction		33		996		—
Commercial and industrial		2,229		3,089		—		2,862		3,692		—
Total	$	11,715	$	15,056	$	—	$	13,437	$	15,017	$	—

Grand total	$	14,386	$	17,730	$	693	$	14,174	$	15,754	$	86

⁽¹⁾	The table above does not include the recorded investment of$77240thousand of impaired leases without a related Allowance.

⁽²⁾	Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.

⁽³⁾	This table excludes all purchased credit-impaired loans, which are discussed in Note5D, above.

I.Loan Mark

Loans acquired in mergers and acquisitions are recorded at fair value as of the date of the transaction. This adjustment to the acquired principal amount is referred to as the “Loan Mark”. With the exception of purchased credit impaired loans, whose Loan Mark is accounted for under ASC 310-30, the Loan Mark is amortized or accreted as an adjustment to yield over the lives of the loans. The following tables detail, foracquired loans, the outstanding principal, remaining loan mark, and recorded investment, by portfolio segment, as of the dates indicated:

(dollars in thousands)	As of March 31, 2016							As of March 31, 2017
	Outstanding Principal		Remaining Loan Mark			Recorded Investment		Outstanding Principal		Remaining Loan Mark			Recorded Investment
Commercial mortgage	$	186,893	$	(5,495	)	$	181,398	$	151,454	$	(4,163	)	$	147,291
Home equity lines and loans		38,101		(1,913	)		36,188		29,047		(1,640	)		27,407
Residential mortgage		89,743		(3,223	)		86,520		69,338		(2,423	)		66,915
Construction		1,588		3			1,591
Commercial and industrial		62,600		(5,279	)		57,321		30,317		(3,296	)		27,021
Consumer		164		(24	)		140		162		(21	)		141
Total	$	379,089	$	(15,931	)	$	363,158	$	280,318	$	(11,543	)	$	268,775

(dollars in thousands)	As of December 31, 2016
	Outstanding Principal		Remaining Loan Mark			Recorded Investment
Commercial mortgage	$	168,612	$	(4,593	)	$	164,019
Home equity lines and loans		31,236		(1,687	)		29,549
Residential mortgage		73,902		(2,630	)		71,272
Commercial and industrial		32,812		(3,355	)		29,457
Consumer		163		(22	)		141
Total	$	306,725	$	(12,287	)	$	294,438

(dollars in thousands)

As of December 31, 2015

Outstanding
Principal

Remaining
Loan Mark

Recorded
Investment

Commercial mortgage
$ 197,532 $ (5,844
)
$ 191,688
Home equity lines and loans
40,258 (1,974
)
38,284
Residential mortgage
93,230 (3,313
)
89,917
Construction
3,807 (541
)
3,266
Commercial and industrial
67,181 (5,412
)
61,769
Consumer
220 (25
)
195
Total
$ 402,228 $ (17,109
)
$ 385,119

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Note 6 - Deposits

The following table details the components of deposits:

(dollars in thousands)

March 31, 2016

December 31, 2015

Interest-bearing checking accounts
$ 335,240 $ 338,861
Money market accounts
773,637 749,726
Savings accounts
190,477 187,299
Wholesale non-maturity deposits
62,454 67,717
Wholesale time deposits
131,145 53,185
Time deposits
207,597 229,253
Total interest-bearing deposits
1,700,550 1,626,041
Non-interest-bearing deposits
643,492 626,684
Total deposits
$ 2,344,042 $ 2,252,725

(dollars in thousands)	March 31, 2017		December 31, 2016

Interest-bearing checking accounts	$	395,131	$	379,424
Money market accounts		757,071		761,657
Savings accounts		255,791		232,193
Wholesale non-maturity deposits		69,471		74,272
Wholesale time deposits		68,164		73,037
Time deposits		319,381		322,912
Total interest-bearing deposits		1,865,009		1,843,495
Non-interest-bearing deposits		771,556		736,180
Total deposits	$	2,636,565	$	2,579,675

Note 7 - Borrowings

A. Short-term borrowings

The Corporation’s short-term borrowings (original maturity of one year or less), which consist of a revolving line of credit with a correspondent bank, funds obtained from overnight repurchase agreements with commercial customers, FHLB advances with original maturities of one year or less and overnight fed funds, are detailed below.

A summary of short-term borrowings is as follows:

(dollars in thousands)	March 31,2016		December 31,2015		March 31, 2017		December 31, 2016
Repurchase agreements* – commercial customers	$	22,010	$	29,156	$	23,613	$	39,151
Repurchase agreement** – correspondent bank		—		5,011
Short-term FHLB advances		15,000		30,000		—		165,000
Overnight federal funds		—		30,000		—		—
Total short-term borrowings	$	37,010	$	94,167	$	23,613	$	204,151

* overnight repurchase agreements with no expiration date

** overnight repurchase agreement, expired ~~January 2016~~

The following table sets forth information concerning short-term borrowings:

(dollars in thousands)	Three Months EndedMarch 31,						Three Months EndedMarch 31,
	2016			2015			2017			2016
Balance at period-end	$	37,010		$	38,372		$	23,613		$	37,010
Maximum amount outstanding at any month-end		38,972			38,534			39,378			38,972
Average balance outstanding during the period		34,158			55,344			47,603			34,158
Weighted-average interest rate:
As of period-end		0.27	%		0.10	%		0.10	%		0.27	%
Paid during the period		0.20	%		0.15	%		0.23	%		0.20	%

B. Long-term FHLB Advances and Other Borrowings

The Corporation’s long-term FHLB advances and other borrowings consist of advances from the FHLB with original maturities of greater than one year and an adjustable-rate commercial loan from a correspondent bank.

The following table presents the remaining periods until maturity of the long-term FHLB advances and other borrowings:

(dollars in thousands)	March 31, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Within one year	$	75,000	$	75,000	$	91,471	$	75,000
Over one year through five years		174,832		179,863		83,240		114,742
Total	$	249,832	$	254,863	$	174,711	$	189,742

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The following table presents rate and maturity information on long-term FHLB advances and other borrowings:

(dollars in thousands)	Maturity Range⁽¹⁾			Weighted			Coupon Rate⁽¹⁾					Balance				Maturity Range⁽¹⁾		Weighted			Coupon Rate⁽¹⁾					Balance
Description	From		To	Average Rate⁽¹⁾			From			To		March 31, 2016		December 31, 2015		From	To	Average Rate⁽¹⁾			From			To		March 31, 2017		December 31, 2016
Bullet maturity – fixed rate	05/19/2016	12/19/2020			1.46	%		0.80	%	2.41	%	$	198,612	$	198,612	05/24/2017	12/19/2020		1.48	%		0.95	%	2.13	%	$	138,612	$	153,612
Bullet maturity – variable rate	04/01/2016	11/28/2017			0.76	%		0.66	%	0.90	%		30,000		35,000	11/28/2017	11/28/2017		1.20	%		1.20	%	1.20	%		15,000		15,000
Convertible-fixed⁽²⁾	01/03/2018	08/20/2018			2.94	%		2.58	%	3.50	%		21,220		21,251	01/03/2018	08/20/2018		2.94	%		2.58	%	3.50	%		21,099		21,130
Total												$	249,832	$	254,863											$	174,711	$	189,742

⁽¹⁾Maturity range, weighted average rate and coupon rate range refers toMarch 31, ~~2016~~2017 balances
⁽²⁾FHLB advances whereby the FHLB has the option, at predetermined times, to convert the fixed interest rate to an adjustable interest rate indexed to the London Interbank Offered Rate (“LIBOR”). The Corporation has the option to prepay these advances, without penalty, if the FHLB elects to convert the interest rate to an adjustable rate. As ofMarch 31, ~~2016~~2017, substantially all FHLB advances with this convertible feature are subject to conversion in fiscal 20167. These advances are included in the maturity ranges in which they mature, rather than the period in which they are subject to conversion.

C. Other Borrowings Information

As of March 31, ~~2016~~2017 the Corporation had a maximum borrowing capacity with the FHLB of ~~approximately $1.14~~$1.23 billion, of which the unused capacity was ~~$846.9 million.~~$1.04 billion. In addition, there were unused capacities of $79.0 million in overnight federal funds ~~line, $131.4~~lines, $108.0 million of Federal Reserve Discount Window borrowings and $5.0 million in a revolving line of credit from a correspondent bank as of March 31, ~~2016.~~2017. In connection with its FHLB borrowings, the Corporation is required to hold the capital stock of the FHLB. The amount of FHLB capital stock held was ~~$12.1~~$8.5 million and ~~$12.9~~$17.3 million as of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. The carrying amount of the FHLB capital stock approximates its redemption value.

Note 8 – Stock-Based Compensation

A. General Information

Prior to April 25, 2007, all shares authorized for grant as stock-based compensation were limited to grants of stock options. On April 25, 2007, the shareholders of the Corporation approved the Corporation’s “2007 Long-Term Incentive Plan” (the “2007 LTIP”) under which a total of 428,996 shares of the Corporation’s common stock were made available for award grants. On April 28, 2010, the shareholders of the Corporation approved the Corporation’s “2010 Long Term Incentive Plan” (the “2010 LTIP”) under which a total of 445,002 shares of the Corporation’s common stock were made available for award grants. On April 30, 2015, the shareholders of the Corporation approved the Amended and Restated Bryn Mawr Bank Corporation 2010 Long-Term Incentive Plan (the “Amended 2010 LTIP”), under which the total number of shares of Corporation Common Stock made available for award grants was increased by 500,000 shares to 945,002 shares.

In addition to the shareholder-approved plans mentioned in the preceding paragraph, the Corporation periodically authorizes grants of stock-based compensation as inducement awards to new employees. This type of award does not require shareholder approval in accordance with Rule 5635(c)(4) of the Nasdaq listing rules.

Equity awards are authorized to be in the form of, among others, options to purchase the Corporation’s common stock, restricted stock awards or units (“RSAs” or “RSUs”) and performance stock awards or units (“PSAs” or “PSUs”).

RSAs and RSUs have a restriction based on the passage of ~~time and may also have a restriction based on non-market-related performance criteria.~~time. The grant date fair value of the RSAs and RSUs is based on the closing price on the ~~day preceding the~~ date of the grant.

~~The~~ PSAs and PSUs ~~also~~ have a restriction based on the passage of time ~~but~~and also have a restriction based on a performance criteria. The performance criteria ~~related to~~may be a market-based criteria measured by the Corporation’s total shareholder return (“TSR”) relative to the performance of the community bank index or a bank peer group for the respective period. ~~The amount of PSAs or PSUs earned will not exceed 100% of the PSAs or PSUs awarded.~~ The fair value of the PSAs and PSUs based on the Corporation’s TSR relative to the performance of the community bank index is calculated using the Monte Carlo Simulation method. The performance criteria may also be based on a non-market-based criteria such as return on average equity. The grant date fair value of these PSUs and PSAs is based on the closing price of the Corporation’s stock on the date of the grant. PSU and PSA grants may have a vesting percent ranging from 0% to 150%.

B. Stock Options

Stock-based compensation cost is measured at the grant date, based on the fair value of the award and is recognized as an expense over the vesting period. The fair value of stock option grants is determined using the Black-Scholes pricing model. The assumptions necessary for the calculation of the fair value are expected life of options, annual volatility of stock price, risk-free interest rate and annual dividend yield.

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The following table provides information about options outstanding for the three months ended March 31, ~~2016:~~2017:

	Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Options outstanding, December 31, 2015		290,853		$	20.88	$	5.77
Options outstanding, December 31, 2016									185,023		$	21.04	$	4.88
Forfeited		—		$	—	$	—		—		$	—	$	—
Expired		—		$	—	$	—		—		$	—	$	—
Exercised		(15,953	)	$	17.74	$	12.93		(29,178	)	$	22.29	$	4.98
Options outstanding, March 31, 2016		274,900		$	21.07	$	5.35
Options outstanding, March 31, 2017									155,845		$	20.80	$	4.86

As of March 31, ~~2016,~~2017, there were no unvested stock options.

For the three months ended March 31, ~~2016,~~2017, the Corporation did not recognize any expense related to stock options. As of March 31, ~~2016,~~2017, there was no unrecognized expense related to stock options.

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised during the three months ended March 31, ~~2016~~2017 and ~~2015~~2016 are detailed below:

(dollars in thousands)	Three Months Ended March 31,				Three Months Ended March 31,
	2016		2015		2017		2016
Proceeds from exercise of stock options	$	283	$	2,504	$	650	$	283
Related tax benefit recognized		—		277		141		47
Net proceeds of options exercised	$	283	$	2,781	$	791	$	330
Intrinsic value of options exercised	$	131	$	1,391	$	548	$	131

The following table provides information about options outstanding and exercisable at March 31, ~~2016:~~2017:

(dollars in thousands, except exercise price)	Outstanding		Exercisable		Outstanding		Exercisable
Number of shares		274,900		274,900		155,845		155,845
Weighted average exercise price	$	21.06	$	21.06	$	20.80	$	20.80
Aggregate intrinsic value	$	1,284	$	1,284	$	2,914	$	2,914
Weighted average contractual term in years		2.6		2.6		1.8		1.8

C. Restricted Stock Awards and Performance Stock Awards

The Corporation has granted RSAs, RSUs, PSAs and PSUs under the 2007 LTIP, 2010 LTIP and Amended 2010 LTIP.

RSAs and RSUs

The compensation expense for the RSAs and RSUs is measured based on the market price of the stock on the day prior to the grant date and is recognized on a straight line basis over the vesting period.

For the three months ended March 31, ~~2016,~~2017, the Corporation recognized ~~$132~~$180 thousand of expense related to the Corporation’s RSAs and RSUs. As of March 31, ~~2016,~~2017, there was ~~$780 thousand~~$1.1 million of unrecognized compensation cost related to RSAs and RSUs. This cost will be recognized over a weighted average period of 2.0 years.

The following table details the unvested RSAs and RSUs for the three months ended March 31, ~~2016:~~2017:

	Three Months EndedMarch 31, 2016					Three Months EndedMarch 31, 2016
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Beginning balance		42,802		$	28.58		58,862		$	29.57
Granted		2,250		$	26.30		2,000		$	38.51
Vested		(1,000	)	$	30.04		(1,000	)	$	30.04
Forfeited		—		$	—		—		$	—
Ending balance		44,052		$	28.43		59,862		$	29.86

For the three months ended March 31, ~~2016,~~2017, the Corporation recorded a $3$4 thousand excess tax ~~deficiency~~benefit related to the vesting of RSAs and RSUs.

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PSAs and PSUs

The compensation expense for PSAs and PSUs is measured based on the grant date fair value as calculated using the Monte Carlo Simulation method.

For the three months ended March 31, ~~2016,~~2017, the Corporation recognized ~~$271~~$304 thousand of expense related to the PSAs and PSUs. As of March 31, ~~2016,~~2017, there was ~~$1.6~~$1.7 million of unrecognized compensation cost related to ~~PSAs.~~PSAs and PSUs. This cost will be recognized over a weighted average period of ~~1.8~~1.9 years.

For the three months ended March 31, ~~2016,~~2017, the Corporation recorded ~~$172 thousand~~$0 of tax benefit related to the vesting of PSAs and PSUs.

The following table details the unvested PSAs and PSUs for the three months ended March 31, ~~2016:~~ 2017:

	Three Months EndedMarch 31, 2016				Three Months EndedMarch 31, 2017
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Beginning balance		216,820	$	15.07		192,844	$	18.77
Granted		—		—		—		—
Vested		—		—		—		—
Forfeited		—		—		—		—
Ending balance		216,820	$	15.07		192,844	$	18.77

Note 9 - Pension and Other Post-Retirement Benefit Plans

~~Prior to the December 2015 settlement of the qualified~~The Corporation has two defined ~~benefits plan (the “QDBP”), the Corporation had three defined~~ benefit ~~pension plans: the QDBP which covered all employees over age 20 1/2 who met certain service requirements, and two non-qualified defined-benefit~~ pension plans (“SERP I” and “SERP II”), both of which are non-qualified plans which are restricted to certain senior officers of the Corporation.

SERP I provides each participant with the equivalent pension benefit provided by ~~the QDBP~~a previously settled qualified defined benefit plan on any compensation and bonus deferrals that exceed the IRS limit applicable to ~~the QDBP.~~such plan.

On February 12, 2008, the Corporation amended ~~the QDBP and~~ SERP I to freeze further increases in the defined-benefit amounts to all participants, effective March 31, 2008.

On April 1, 2008, the Corporation added SERP II, a non-qualified defined-benefit plan which was restricted to certain senior officers of the Corporation. Effective January 1, 2013, the Corporation curtailed SERP II, as further increases to the defined-benefit amounts to over 20% of the participants were frozen.

On May 29, 2015, by unanimous consent, the Board of Directors of the Corporation voted to terminate the QDBP. On June 2, 2015, notices were sent to participants informing them of the termination. Final distributions to participants were completed by December 31, 2015.

The Corporation also has a postretirement ~~benefit~~medicalbenefit plan (“PRBP”) that covers ~~certain~~or will cover a portion of health insurance costs ofcertain retired employees and a group of current employees. The PRBP was closed to new participants in 1994. In 2007, the Corporation amended the PRBP to allow for settlement of obligations to certain current and retired employees. Certain retired participant obligations were settled in 2007 and current employee obligations were settled in 2008.

The following tables provide details of the components of the net periodic benefits cost (benefit) for the three months ended March 31, ~~2016~~2017 and ~~2015:~~2016:

Three Months EndedMarch 31,

SERP I and SERP II

QDBP

PRBP

(dollars in thousands)

2016

2015

2016

2015

2016

2015

Service cost
$ — $ — $ — $ — $ — $ —
Interest cost
46 46 — 397 4 5
Expected return on plan assets
— — — (804
)
— —
Amortization of prior service costs
— — — — —
Amortization of net loss
14 16 — 479 10 9
Net periodic benefit cost
$ 60 $ 62 $ — $ 72 $ 14 $ 14

~~QDBP:~~~~The QDBP was settled as of December 31, 2015. As such, no contributions were made during the three months ended March 31, 2016.~~

	Three Months EndedMarch 31,
	SERP I and SERP II				PRBP
(dollars in thousands)	2017		2016		2017		2016
Service cost	$	—	$	—	$	—	$	—
Interest cost		44		46		3		4
Expected return on plan assets		—		—		—		—
Amortization of prior service costs		—		—		—		—
Amortization of net loss		14		14		9		10
Net periodic benefit cost	$	58	$	60	$	12	$	14

SERP I and SERP II:The Corporation contributed $65 thousand during the three months ended March 31, ~~2016,~~2017, and is expected to contribute an additional $195 thousand to the SERP I and SERP II plans for the remaining nine months of ~~2016.~~2017.

PRBP:In 2005, the Corporation capped the maximum annual payment under the PRBP at 120% of the 2005 benefit. This maximum was reached in 2008 and the cap is not expected to be increased above this level.

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Note 10 - Segment Information

FASB Codification 280 – “Segment Reporting” identifies operating segments as components of an enterprise which are evaluated regularly by the Corporation’s Chief Operating Decision Maker, our Chief Executive Officer, in deciding how to allocate resources and assess performance. The Corporation has applied the aggregation criterion set forth in this codification to the results of its operations.

The Corporation’s Banking segment consists of commercial and retail banking. The Banking segment is evaluated as a single strategic unit which generates revenues from a variety of products and services. The Banking segment generates interest income from its lending (including leasing) and investing activities and is dependent on the gathering of lower cost deposits from its branch network or borrowed funds from other sources for funding its loans, resulting in the generation of net interest income. The Banking segment also derives revenues from other sources including gains on the sale of available for sale investment securities, gains on the sale of residential mortgage loans, service charges on deposit accounts, cash sweep fees, overdraft fees, BOLI income and interchange revenue associated with its Visa Check Card offering.

The Wealth Management segment has responsibility for a number of activities within the Corporation, including trust administration, other related fiduciary services, custody, investment management and advisory services, employee benefits and IRA administration, estate settlement, tax services and brokerage. Bryn Mawr Trust of Delaware and Lau Associates are included in the Wealth Management segment of the Corporation since they have similar economic characteristics, products and services to those of the Wealth Management Division of the Corporation. Powers Craft Parker and Beard (“PCPB”), which was merged with the Corporation’s existing insurance subsidiary, Insurance Counsellors of Bryn Mawr (“ICBM”), and RJM, which was acquired on April 1, 2015, now operate under the Powers Craft Parker and Beard, Inc. name. The Wealth Management Division has assumed oversight responsibility for all insurance services of the Corporation. Prior to the PCPB and RJM acquisitions, ICBM was reported through the Banking segment. Any adjustments to prior year figures are immaterial and are not reflected in the tables below.

The following tables detail segment information for the three months ended March 31, ~~2016~~2017 and ~~2015:~~2016:

Three Months EndedMarch 31, 2016

Three Months EndedMarch 31,2015

(dollars in thousands)

Banking

Wealth
Management

Consolidated

Banking

Wealth
Management

Consolidated

Net interest income
$ 25,901 $ 1 $ 25,902 $ 24,794 $ 1 $ 24,795
Less: loan loss provision
1,410 — 1,410 569 — 569
Net interest income after loan loss provision
24,491 1 24,492 24,225 1 24,226
Other income:

Fees for wealth management services
— 8,832 8,832 — 9,105 9,105
Service charges on deposit accounts
702 — 702 712 — 712
Loan servicing and other fees
492 — 492 591 — 591
Net (loss) gain on sale of loans
760 — 760 808 — 808
Net gain on sale of available for sale securities
(15
)
— (15
)
810 — 810
Net (loss) gain on sale of other real estate owned
(76
)
— (76
)
15 — 15
Insurance commissions
— 1,276 1,276 — 1,021 1,021
Other operating income
1,201 36 1,237 1,662 41 1,703
Total other income
3,064 10,144 13,208 4,598 10,167 14,765

Other expenses:

Salaries & wages
7,897 3,841 11,738 7,407 3,463 10,870
Employee benefits
1,645 840 2,485 1,986 743 2,729
Occupancy & equipment

2,082
406 2,488 2,050 416 2,466
Amortization of intangible assets
220 671 891 341 641 982
Professional fees
799 14 813 654 19 673
Other operating expenses
5,772 864 6,636 8,690 1,019 9,709
Total other expenses
18,415 6,636 25,051 21,128 6,301 27,429
Segment profit
9,140 3,509 12,649 7,695 3,867 11,562
Intersegment (revenues) expenses*
(99
)
99 — (105
)
105 —
Pre-tax segment profit after eliminations
$ 9,041 $ 3,608 $ 12,649 $ 7,590 $ 3,972 $ 11,562
% of segment pre-tax profit after eliminations
71.5
%
28.5
%
100.0
%
65.6
%
34.4
%
100.0
%
Segment assets(dollars in millions)
$ 3,010 $ 48 $ 3,058 $ 2,894 $ 49 $ 2,943

	Three Months EndedMarch 31, 2017									Three Months EndedMarch 31,2016
(dollars in thousands)	Banking			Wealth Management			Consolidated			Banking			Wealth Management			Consolidated

Net interest income	$	27,402		$	1		$	27,403		$	25,901		$	1		$	25,902
Less: loan loss provision		291			—			291			1,410			—			1,410
Net interest income after loan loss provision		27,111			1			27,112			24,491			1			24,492
Other income:
Fees for wealth management services		—			9,303			9,303			—			8,832			8,832
Service charges on deposit accounts		647			—			647			702			—			702
Loan servicing and other fees		503			—			503			492			—			492
Net gain on sale of loans		629			—			629			705			—			705
Net gain (loss) on sale of available for sale securities		1			—			1			(15	)		—			(15	)
Net (loss) gain on sale of other real estate owned		—			—			—			(76	)		—			(76	)
Insurance commissions		—			763			763			—			1,276			1,276
Other operating income		1,333			48			1,381			1,201			36			1,237
Total other income		3,113			10,114			13,227			3,009			10,144			13,153

Other expenses:
Salaries & wages		8,630			3,820			12,450			7,897			3,841			11,738
Employee benefits		1,627			932			2,559			1,645			840			2,485
Occupancy & equipment		2,127			399			2,526			2,082			406			2,488
Amortization of intangible assets		353			340			693			220			671			891
Professional fees		681			30			711			799			14			813
Due diligence, merger-related and merger integration costs		511			—			511			—			—			—
Other operating expenses		6,184			1,026			7,210			5,717			864			6,581
Total other expenses		20,113			6,547			26,660			18,360			6,636			24,996
Segment profit		10,111			3,568			13,679			9,140			3,509			12,649
Intersegment (revenues) expenses*		(112	)		112			—			(99	)		99			—
Pre-tax segment profit after eliminations	$	9,999		$	3,680		$	13,679		$	9,041		$	3,608		$	12,649
% of segment pre-tax profit after eliminations		73.1	%		26.9	%		100.0	%		71.5	%		28.5	%		100.0	%
Segment assets(dollars in millions)	$	3,247		$	46		$	3,293		$	3,010		$	48		$	3,058

*	Inter-segment revenues consist of rental payments, interest on deposits and management fees.

Other segment information is as follows:

Wealth Management Segment Information

(dollars in millions)

March 31, 2016

December 31,2015

Assets under management, administration, supervision and brokerage:
$ 9,281.7 $ 8,364.8

	*(dollars in millions)*
	March 31, 2017		December 31,2016
Assets under management, administration, supervision and brokerage:	$	11,725.5	$	11,328.5

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Note 11 - Mortgage Servicing Rights

The following table summarizes the Corporation’s activity related to mortgage servicing rights (“MSRs”) for the three months ended March 31, ~~2016~~2017 and ~~2015:~~ 2016:

	Three Months EndedMarch 31,						Three Months EndedMarch 31,
(dollars in thousands)	2016			2015			2017			2016
Balance, beginning of period	$	5,142		$	4,765		$	5,582		$	5,142
Additions		259			237			276			259
Amortization		(136	)		(114	)		(169	)		(136	)
Recovery		—			—			2			—
Impairment		(83	)		(73	)		(5	)		(83	)
Balance, end of period	$	5,182		$	4,815		$	5,686		$	5,182
Fair value	$	5,182		$	5,291		$	6,394		$	5,182

As of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, key economic assumptions and the sensitivity of the current fair value of MSRs to immediate 10 and 20 percent adverse changes in those assumptions are as follows:

(dollars in thousands)	March 31, 2016			December 31,2015			March 31, 2017			December 31, 2016
Fair value amount of MSRs	$	5,182		$	5,726		$	6,394		$	6,154
Weighted average life (in years)		5.5			6.4			6.3			6.3
Prepayment speeds (constant prepayment rate)*		12.9			10.2	%		10.0	%		10.2	%
Impact on fair value:
10% adverse change	$	(219	)	$	(198	)	$	(115	)	$	(115	)
20% adverse change	$	(421	)	$	(384	)	$	(238	)	$	(238	)
Discount rate		9.55	%		10.5	%		9.55	%		9.55	%
Impact on fair value:
10% adverse change	$	(171	)	$	(224	)	$	(236	)	$	(225	)
20% adverse change	$	(331	)	$	(431	)	$	(455	)	$	(434	)

*	* Represents the weighted average prepayment rate for the life of the MSR asset.

These assumptions and sensitivities are hypothetical and should be used with caution. Changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which could magnify or counteract the sensitivities.

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Note 12 - Goodwill and Other Intangibles

The Corporation’s goodwill and intangible assets related to the acquisitions of Lau Associates, LLC (“Lau”) in July 2008, FKF in July 2010, the Private Wealth Management Group of the Hershey Trust Company (“PWMG”) in May 2011, Davidson Trust Company (“DTC”) in May 2012, the loan and deposit accounts and a branch location of FBD in November 2012, PCPB in October 2014, CBH in January 2015 and RJM in April 2015 are detailed below:

(dollars in thousands)

Balance
December 31,
2015

Additions/ Adjustments

Amortization

Balance
March 31,
2016

Amortization
Period (Years)
Goodwill – Wealth
$ 20,412 $ — $ — $ 20,412
Indefinite

Goodwill – Banking
80,783 — — 80,783
Indefinite

Goodwill – Insurance
3,570 — — 3,570
Indefinite

Total
$ 104,765 $ — $ — $ 104,765
Core deposit intangible
$ 4,272 $ — $ (208
)
$ 4,064
10

Customer relationships
14,384 — (408
)
13,976 10
to
20
Non-compete agreements
2,932 — (263
)
2,669 5
to
10
Trade name
2,165 — — 2,165
Indefinite

Favorable lease
150 — (12
)
138
5.75

Total
$ 23,903 $ — $ (891
)
$ 23,012
Grand total
$ 128,668 $ — $ (891
)
$ 127,777

(dollars in thousands)	Balance December 31, 2016		Additions/ Adjustments		Amortization			Balance March 31, 2017		Amortization Period
Goodwill – Wealth	$	20,412	$	—	$	—		$	20,412		Indefinite
Goodwill – Banking		80,783		—		—			80,783		Indefinite
Goodwill – Insurance		3,570		—		—			3,570		Indefinite
Total	$	104,765	$	—	$	—		$	104,765
Core deposit intangible (years)	$	3,447	$	—	$	(184	)	$	3,263		10
Customer relationships (years)		13,056		—		(368	)		12,688	10	to	20
Non-compete agreements (years)		1,634		—		(129	)		1,505	5	to	10
Trade name		2,165		—		—			2,165		Indefinite
Domain name		—		152		—			152		Indefinite
Favorable lease (months)		103		—		(12	)		91	17	to	75
Total	$	20,405	$	152	$	(693	)	$	19,864
Grand total	$	125,170	$	152	$	(693	)	$	124,629

The Corporation performed its annual review of goodwill and identifiable intangible assets as of ~~December~~October 31, ~~2015~~2016 in accordance with ASC 350, “Intangibles Goodwill and Other.” For the ~~three~~five months ended March 31, ~~2016,~~2017, the Corporation determined there were no events that would necessitate impairment testing of goodwill and other intangible assets.

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Note 13 – Accumulated Other ComprehensiveIncome (Loss)

The following table details the components of accumulated other comprehensive income (loss) for the three month periods ended March 31, ~~2016~~2017 and ~~2015:~~2016:

(dollars in thousands)	Net Change in Unrealized Gains on Available-for-Sale Investment Securities		Net Change in Fair Value of Derivative Used for Cash Flow Hedge			Net Change in Unfunded Pension Liability			Accumulated Other ComprehensiveIncome (Loss)			Net Change in Unrealized Gains on Available-for-Sale Investment Securities			Net Change in Unfunded Pension Liability			Accumulated Other ComprehensiveIncome (Loss)
Balance, December 31, 2016												$	(1,231	)		(1,178	)		(2,409	)
Net change													387			32			419
Balance, March 31, 2017												$	(844	)		(1,146	)		(1,990	)

Balance, December 31, 2015	$	774		—			(1,186	)		(412	)	$	774			(1,186	)		(412	)
Net change		1,921		—			(7	)		1,914			1,921			(7	)		1,914
Balance, March 31, 2016	$	2,695		—			(1,193	)		1,502		$	2,695			(1,193	)		1,502

Balance, December 31, 2014	$	1,316		(25	)		(12,995	)		(11,704	)
Net change		1,301		(234	)		350			1,417
Balance, March 31, 2015	$	2,617		(259	)		(12,645	)		(10,287	)

The following table details the amounts reclassified from each component of accumulated other comprehensive loss to each component’s applicable income statement line, for the three month periods ended March 31, ~~2016~~2017 and ~~2015:~~2016:

	Amount Reclassified from Accumulated Other Comprehensive Loss
Description of Accumulated Other Comprehensive Loss Component	For The Three Months Ended March 31,					Affected Income Statement Category
Description of Accumulated Other							Amount Reclassified from Accumulated Other Comprehensive Loss
Comprehensive Loss Component							For The Three Months Ended March 31,					Affected Income Statement Category
	2016		2015				2017			2016
*Net unrealized gain on investment securities available for sale:*
Realization of loss (gain) on sale of investment securities available for sale	$	15	$	(810	)	Net (loss) gain on sale of available for sale investment securities	$	(1	)	$	15	Net (loss) gain on sale of available for sale investment securities
Less: income tax benefit (expense)		6		(283	)	Less: income tax benefit (expense)		—			6	Less: income tax benefit (expense)
Net of income tax	$	9	$	(527	)	Net of income tax	$	(1	)	$	9	Net of income tax

*Unfunded pension liability:*
Amortization of net loss included in net periodic pension costs*	$	24	$	504		Employee benefits	$	23		$	24	Employee benefits
Amortization of prior service cost included in net periodic pension costs*		—		—		Employee benefits		—			—	Employee benefits
Total expense before income tax benefit		24		504		Total expense before income tax benefit		23			24	Total expense before income tax benefit
Less: income tax benefit		8		176		Less: income tax benefit		8			8	Less: income tax benefit
	$	16	$	328		Net of income tax
Net of income tax							$	15		$	16	Net of income tax

*Accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note9 - Pension and Other Post-Retirement Benefit Plans

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Note 14 - Shareholders’ Equity

Dividend

On April ~~28, 2016,~~20, 2017, the Corporation’s Board of Directors declared a regular quarterly dividend of ~~$0.20~~$0.21 per share payable June 1, ~~2016~~2017 to shareholders of record as of May ~~10, 2016.~~2, 2017. During the first quarter of ~~2016,~~2017, the Corporation paid or accrued, as applicable, a regular quarterly dividend of ~~$0.20~~$0.21 per share. This dividend totaled ~~$3.4~~$3.6 million, based on outstanding shares and restricted stock units as of February 2, ~~2016~~2017 of ~~17,046,680~~17,190,700 shares.

S-3 Shelf Registration Statement and Offerings Thereunder

In March 2015, the Corporation filed a shelf registration statement on Form S-3 (the “Shelf Registration Statement”) to replace its 2012 Shelf Registration Statement, which was set to expire in April 2015. The Shelf Registration Statement allows the Corporation to raise additional capital through offers and sales of registered securities consisting of common stock, debt securities, warrants to purchase common stock, stock purchase contracts and units or units consisting of any combination of the foregoing securities. Using the prospectus in the Shelf Registration Statement, together with applicable prospectus supplements, the Corporation may sell, from time to time, in one or more offerings, such securities in a dollar amount up to $200 million, in the aggregate.

In addition, the Corporation has in place under its Shelf Registration Statement a Dividend Reinvestment and Stock Purchase Plan (the “Plan”), which allows it to issue up to 1,500,000 shares of registered common stock. The Plan allows for the grant of a request for waiver (“RFW”) above the Plan’s maximum investment of $120 thousand per account per year. An RFW is granted based on a variety of factors, including the Corporation’s current and projected capital needs, prevailing market prices of the Corporation’s common stock and general economic and market conditions.

Options

In addition to shares that may be issued through the Plan, the Corporation also issues shares through the exercise of stock options. During the three months ended March 31, ~~2016, 15,953~~2017, 29,178 shares were issued pursuant to the exercise of stock options, increasing shareholders’ equity by ~~$283~~$650 thousand.

Stock Repurchases

On August 6, 2015, the Corporation announced a stock repurchase program (the “2015 Program”) under which the Corporation may repurchase up to 1,200,000 shares of the Corporation’s common stock, at an aggregate purchase price not to exceed $40 million. During the three months ended March 31, ~~2016, the Corporation~~2017, no shares were repurchased ~~286,700 shares~~ under the 2015 ~~Program at an average price of $27.80 per share. All share repurchases under the 2015 Program were accomplished in open market transactions.~~Program. As of March 31, ~~2016,~~2017, the maximum number of shares remaining authorized for repurchase under the 2015 Program was 189,300. In addition to the 2015 Program, it is the Corporation’s practice to retire shares to its treasury account upon the vesting of stock awards to certain officers in order to cover the statutory income tax withholdings related to such vestings.

Note 15 - Accounting for Uncertainty in Income Taxes

The Corporation recognizes the financial statement benefit of a tax position only after determining that the Corporation would be more likely than not to sustain the position following an examination. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon settlement with the relevant tax authority.

The Corporation is subject to income taxes in the United States federal jurisdiction and multiple state jurisdictions. The Corporation is no longer subject to U.S. federal income tax examination by taxing authorities for years before ~~2012.~~2013.

The Corporation’s policy is to record interest and penalties on uncertain tax positions as income tax expense. No interest or penalties were accrued for the three months ended March 31, ~~2016~~2017 or ~~2015.~~2016.

Note 16 - Fair Value Measurement

The following disclosures are made in conjunction with the application of fair value measurements.

FASB ASC 820 “Fair Value Measurement” establishes a fair value hierarchy based on the nature of data inputs for fair value determinations, under which the Corporation is required to value each asset using assumptions that market participants would utilize to value that asset. When the Corporation uses its own assumptions, it is required to disclose additional information about the assumptions used and the effect of the measurement on earnings or the net change in assets for the period.

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The Corporation’s investment securities available for sale, which generally include state and municipal securities, U.S. government agency securities and mortgage-related securities, are reported at fair value. These securities are valued by an independent third party. The third party’s evaluations are based on market data. They utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, their pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions.

U.S. Government agency securities are evaluated and priced using multi-dimensional relational models and option-adjusted spreads. State and municipal securities are evaluated on a series of matrices including reported trades and material event notices. Mortgage-related securities are evaluated using matrix correlation to treasury or floating index benchmarks, prepayment speeds, monthly payment information and other benchmarks. Other available for sale investments are evaluated using a broker-quote based application, including quotes from issuers. The Corporation has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of available for sale investments to enable management to maintain an appropriate system of internal control.

The value of the investment portfolio is determined using three broad levels of inputs:

Level 1 – Quoted prices in active markets for identical securities.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Instruments whose significant value drivers are unobservable.

These levels are not necessarily an indication of the risks or liquidity associated with these investments. The following tables summarize the assets at March 31, ~~2016~~2017 and December 31, ~~2015~~2016 that are recognized on the Corporation’s balance sheet using fair value measurement determined based on the differing levels of input.

The following table sets forth the fair value of assets measured on a recurring and non-recurring basis as of March 31, ~~2016:~~2017:

(dollars in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets Measured at Fair Value on a Recurring Basis:
Investment securities (available for sale and trading):
U.S. Treasury securities	$	0.1	$	0.1	$	—	$	—	$	0.1	$	0.1	$	—	$	—
Obligations of the U.S. government agency securities		96.1		—		96.1		—		100.5		—		100.5		—
Obligations of state & political subdivisions		40.6		—		40.6		—		30.9		—		30.9		—
Mortgage-backed securities		183.1		—		183.1		—		202.5		—		202.5		—
Collateralized mortgage obligations		29.1		—		29.1		—		45.5		—		45.5		—
Mutual funds		18.8		18.8		—		—		19.5		19.5		—		—
Other debt securities		1.7		—		1.7		—		1.3		—		1.3		—
Total assets measured on a recurring basis at fair value	$	369.5	$	18.9	$	350.6	$	—	$	400.3	$	19.6	$	380.7	$	—

Assets Measured at Fair Value on a Non-Recurring Basis
Mortgage servicing rights	$	5.2	$	—	$	—	$	5.2	$	6.4	$	—	$	—	$	6.4
Impaired loans and leases		13.3		—		—		13.3		13.4		—		—		13.4
Other real estate owned (“OREO”)		0.8		—		—		0.8		1.0		—		—		1.0
Total assets measured on a non-recurring basis at fair value	$	19.3	$	—	$	—	$	19.3	$	20.8	$	—	$	—	$	20.8

The following table sets forth the fair value of assets measured on a recurring and non-recurring basis as of December 31, ~~2015:~~2016:

(dollars in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets Measured at Fair Value on a Recurring Basis:
Investment securities (available for sale and trading):
U.S. Treasury securities	$	0.1	$	0.1	$	—	$	—	$	200.1	$	200.1	$	—	$	—
Obligations of the U.S. government agency securities		101.5		—		101.5		—		82.2		—		82.2		—
Obligations of state & political subdivisions		42.0		—		42.0		—		33.5		—		33.5		—
Mortgage-backed securities		158.7		—		158.7		—		188.8		—		188.8		—
Collateralized mortgage obligations		29.8		—		29.8		—		48.7		—		48.7		—
Mutual funds		19.2		19.2		—		—		19.1		19.1		—		—
Other debt securities		1.6		—		1.6		—		1.3		—		1.3		—
Total assets measured on a recurring basis at fair value	$	352.9	$	19.3	$	333.6	$	—	$	573.7	$	219.2	$	354.5	$	—

Assets Measured at Fair Value on a Non-Recurring Basis
Mortgage servicing rights	$	5.7	$	—	$	—	$	5.7	$	6.2	$	—	$	—	$	6.2
Impaired loans and leases		13.8		—		—		13.8		14.3		—		—		14.3
OREO		2.6		—		—		2.6		1.0		—		—		1.0
Total assets measured on a non-recurring basis at fair value	$	22.1	$	—	$	—	$	22.1	$	21.5	$	—	$	—	$	21.5

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During the three months ended March 31, ~~2016, a decrease~~2017, an increase of ~~$96~~$3 thousand was recorded in the Allowance as a result of adjusting the carrying value and estimated fair value of the impaired loans in the above tables. As it relates to the fair values of assets measured on a recurring basis, there have been no transfers between levels during the three months ended March 31, ~~2016.~~2017.

Impaired Loans

The Corporation evaluates and values impaired loans at the time the loan is identified as impaired, and the fair values of such loans are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral has a unique appraisal and management’s discount of the value is based on the factors unique to each impaired loan. The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which range from 10% - 50%. Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on the appraisals by qualified licensed appraisers hired by the Corporation. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.

The Corporation has an appraisal policy in which an appraisal is obtained for a commercial loan at the point at which the loan either becomes nonperforming or is downgraded to a substandard or worse classification. For consumer loans, the Corporation obtains updated appraisals when a loan becomes 90 days past due or when it receives other information that may indicate possible impairment. Based on the appraisals obtained by the Corporation, an appropriate Allowance is allocated to the particular loan.

Other Real Estate Owned

Other real estate owned consists of properties acquired as a result of foreclosures and deeds in-lieu-of foreclosure. Properties are classified as OREO and are reported at the lower of cost or fair value less cost to sell, and are classified as Level 3 in the fair value hierarchy.

Mortgage Servicing Rights

MSRs do not trade in an active, open market with readily observable prices. Accordingly, the Corporation obtains the fair value of the MSRs using a third-party pricing provider. The provider determines the fair value by discounting projected net servicing cash flows of the remaining servicing portfolio. The valuation model used by the provider considers market loan prepayment predictions and other economic factors which the Corporation considers to be significant unobservable inputs. The fair value of MSRs is mostly affected by changes in mortgage interest rates since rate changes cause the loan prepayment acceleration factors to increase or decrease. All assumptions are market driven. The Corporation has a sufficient understanding of the third party service’s valuation models, assumptions and inputs used in determining the fair value of MSRs to enable management to maintain an appropriate system of internal control. Mortgage servicing rights are classified within Level 3 of the fair value hierarchy as the valuation is model driven and primarily based on unobservable inputs.

Note 17 - Fair Value of Financial Instruments

FASB ASC 825, “Disclosures about Fair Value of Financial Instruments” requires disclosure of the fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate such value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other fair value techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The aggregate fair value amounts presented below do not represent the underlying value of the Corporation.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents

The carrying amounts reported in the balance sheet for cash and cash equivalents approximate their fair values.

Investment Securities

Estimated fair values for investment securities are generally valued by an independent third party based on market data, utilizing pricing models that vary by asset and incorporate available trade, bid and other market information. Management reviews, annually, the process utilized by its independent third-party valuation experts. On a quarterly basis, Management tests the validity of the prices provided by the third party by selecting a representative sample of the portfolio and obtaining actual trade results, or if actual trade results are not available, competitive broker pricing. See Note 4 of the Notes to Consolidated Financial Statements for more information.

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Loans Held for Sale

The fair value of loans held for sale is based on pricing obtained from secondary markets.

Net Portfolio Loans and Leases

For variable-rate loans that re-price frequently and which have no significant change in credit risk, estimated fair values are based on carrying values. Fair values of certain mortgage loans and consumer loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality and is indicative of an entry price. The estimated fair value of nonperforming loans is based on discounted estimated cash flows as determined by the internal loan review of the Corporation or the appraised fair value of the underlying collateral, as determined by independent third party appraisers. This technique does not reflect an exit price.

Impaired Loans

Mortgage Servicing Rights

The fair value of the MSRs for these periods was determined using a proprietary third-party valuation model that calculates the present value of estimated future servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds and discount rates. Due to the proprietary nature of the valuation model used, the Corporation classifies the value of MSRs as using Level 3 inputs.

Other Assets

The carrying amount of accrued interest receivable, income taxes receivable and other investments approximates fair value. ~~The fair value of the interest-rate swap derivative isderived from quoted prices for similar instruments in active markets and is classified as using Level 2 inputs.~~

Deposits

The estimated fair values disclosed for noninterest-bearing demand deposits, savings, NOW accounts, and market rate accounts are, by definition, equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of expected monthly maturities on the certificate of deposit. FASB Codification 825 defines the fair value of demand deposits as the amount payable on demand as of the reporting date and prohibits adjusting estimated fair value from any value derived from retaining those deposits for an expected future period of time.

Short-term borrowings

The carrying amount of short-term borrowings, which include overnight repurchase agreements, fed funds and FHLB advances with original maturity of one year or less, approximates their fair value.

Long-term FHLB Advances and Other Borrowings

The fair value of long-term FHLB advances and other borrowings (with original maturities of greater than one year) is established using a discounted cash flow calculation that applies interest rates currently being offered on mid-term and long term borrowings.

SubordinatedNotes

The fair value of the Notes is estimated by discounting the principal balance using the FHLB yield curve for the term to the call date as the Corporation has the option to call the Notes. The Notes are classified within Level 2 in the fair value hierarchy.

Other Liabilities

The carrying amounts of accrued interest payable and other accrued payables approximate fair value.

Off-Balance Sheet Instruments

Estimated fair values of the Corporation’s commitments to extend credit, standby letters of credit and financial guarantees are not included in the table below as their carrying values generally approximate their fair values. These instruments generate fees that approximate those currently charged to originate similar commitments.

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As of the dates indicated, the carrying amount and estimated fair value of the Corporation’s financial instruments are as follows:

		As ofMarch 31,				As of December 31						As ofMarch 31,				As of December 31,
	Fair Value	2016				2015					Fair Value	2017				2016
(dollars in thousands)	Hierarchy Level*	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value			Hierarchy Level*	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value

Financial assets:
Cash and cash equivalents	Level 1	$	49,548	$	49,548	$	143,067	$	143,067		Level 1	$	87,435	$	87,435	$	50,765	$	50,765
Investment securities, available for sale	See Note 16		365,819		365,819		348,966		348,966		See Note 16		391,028		392,239		566,996		566,996
Investment securities, trading	Level 2		3,642		3,642		3,950		3,950		See Note 16		4,138		4,138		3,888		3,888
Investments, held to maturity											Level 2		5,194		5,116		2,879		2,818
Loans held for sale	Level 2		7,807		7,807		8,987		8,987		Level 2		3,015		3,015		9,621		9,621
Net portfolio loans and leases	Level 3		2,361,996		2,428,307		2,253,131		2,273,947		Level 3		2,538,482		2,564,015		2,517,939		2,505,546
Mortgage servicing rights	Level 3		5,182		5,182		5,142		5,726		Level 3		5,686		6,394		5,582		6,154
Other assets	Level 3		28,834		28,834		30,271		30,271		Level 3		25,613		25,613		34,465		34,465
Total financial assets		$	2,822,828	$	2,889,139	$	2,793,514	$	2,814,914	Total financial assets		$	3,060,591	$	3,087,965	$	3,192,135	$	3,180,253
Financial liabilities:
Deposits	Level 2	$	2,344,042	$	2,343,771	$	2,252,725	$	2,251,703		Level 2	$	2,636,565	$	2,635,731	$	2,579,675	$	2,579,011
Short-term borrowings	Level 2		37,010		37,011		94,167		94,156		Level 2		23,613		23,612		204,151		204,151
Long-term FHLB advances and other borrowings	Level 2		249,832		251,718		254,863		254,796		Level 2		174,711		174,967		189,742		186,863
Subordinated notes	Level 2		29,491		28,896		29,479		27,453		Level 2		29,546		29,624		29,532		29,228
Other liabilities	Level 2		32,695		32,695		34,052		34,052		Level 2		40,087		40,087		37,303		37,303
Total financial liabilities	Total financial liabilities	$	2,693,070	$	2,694,091	$	2,665,286	$	2,662,160	Total financial liabilities		$	2,904,522	$	2,904,021	$	3,040,403	$	3,036,556

*See Note 16 for a description of fair value hierarchy levels.

Note 18 - ~~New~~Recent Accounting Pronouncements

FASB ASU No. 2014-09 (Topic 606), “Revenue from Contracts with Customers”

Issued in May 2014, ASU 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016- 08, “Principal versus Agent Considerations (Reporting Gross versus Net),” which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers and 2016-12, Narrow-Scope Improvements and Practical Expedients, both of which provide additional clarification of certain provisions in Topic 606. These Accounting Standards Codification (“ASC”) updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Early adoption is permitted only as of annual reporting periods after December 15, 2016. The standard permits the use of either the retrospective or retrospectively with the cumulative effect transition method. The Corporation is currently in the process of evaluating all revenue streams, accounting policies, practices and reporting to identify and understand any impact on the Corporation’s Consolidated Financial Statements. Our preliminary evaluation suggests that adoption of this guidance is not expected to have a material effect on our Consolidated Financial Statements.

FASB ASU 2017-04 (Topic 350), “Intangibles – Goodwill and Others”

Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Corporation is evaluating the effect that ASU 2017-04 will have on its consolidated financial statements and related disclosures.

FASB ASU 2017-01 (Topic 805), “Business Combinations”

Issued in January 2017, ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. ASU 2017-01 is effective for annual periods beginning after December 15, 2017 including interim periods within those periods. The Corporation is evaluating the effect that ASU 2017-01 will have on its consolidated financial statements and related disclosures.

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FASB ASU 2016-15 (Topic 320), “Classification of Certain Cash Receipts and Cash Payments”

Issued in August 2016, ASU 2016-15 provides guidance on eight specific cash flow issues and their disclosure in the consolidated statements of cash flows. The issues addressed include debt prepayment, settlement of zero-coupon debt, contingent consideration in business combinations, proceeds from settlement of insurance claims, proceeds from settlement of BOLI, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the Predominance principle. 2016-15 is effective for the annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The Corporation is currently evaluating the impact of this guidance and does not anticipate a material impact on its consolidated financial statements.

FASB ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments”

Issued in June 2016, ASU 2016-13 significantly changes how companies measure and recognize credit impairment for many financial assets. The new current expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets that are in the scope of the standard. The ASU also makes targeted amendments to the current impairment model for available-for-sale debt securities. ASU 2016-13 is effective for the annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Corporation is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

FASB ASU 2016-02 (Topic 842), “Leases”

Issued in February 2016, ASU 2016-02 revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. ASU 2016-02 is effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. The standard is required to be adopted using the modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Corporation is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

FASB ASU 2016-01 (Subtopic 825-10), “Financial Instruments – Overall, Recognition and Measurement of Financial Assets and Financial Liabilities”

Issued in January 2016, ASU 2016-01 provides that equity investments will be measured at fair value with changes in fair value recognized in net income. When fair value is not readily determinable an entity may elect to measure the equity investment at cost, minus impairment, plus or minus any change in the investment’s observable price. For financial liabilities that are measured at fair value, the amendment requires an entity to present separately, in other comprehensive income, any change in fair value resulting from a change in instrument-specific credit risk. ASU 2016-01 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Entities may apply this guidance on a prospective or retrospective basis. The Corporation is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

FASB ASU ~~2016-0~~9 (T~~opic~~~~718~~)2017-08 (Subtopic 310-20), “~~Improvements to Employee Share-Based Payment Accounting~~Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”

~~ASU 2016-09 was issued~~Issued in March ~~2016 as part of FASB’s simplification initiative,~~2017, ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendment requires the premium to be amortized to the earliest call date. The amendments does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. For public business entities, the amendments in this update are effective for fiscal years, and intends to improve the accounting for share-based payment transactions. The ASU changes several aspects of the accounting for share-based payment award transactions, including: (1) accounting and cash flow classification for excess tax benefits and deficiencies, (2) forfeitures, (3) tax withholding requirements and cash flow classification. ASU 2016-09 will be effective forinterim periods within those fiscal years, beginning after December ~~15, 2016, with early~~15,2018. Early adoption is permitted, including adoption in ~~any~~an interim ~~or annual period, provided that the entire ASU is adopted.~~period. The Corporation has evaluated ASU 2017-08 and determined that it currently follows the guidance related to premium amortization on callable debt securities.

FASB ASU 2017-07—Compensation—Retirement Benefits (Topic 715):“Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”

Issued in March 2017, ASU 2017-07 require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not ~~elected~~used, the line item or items used in the income statement to ~~early-adopt ASU 2016-09 and~~present the other components of net benefit cost must be disclosed. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset). The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is ~~currently~~permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The Corporation is evaluating the effect that ~~the~~ ASU 2017-07 will have on its consolidated financial statements and related ~~disclosures.~~

~~FASB ASU 2016-0~~5 (T~~opic~~~~815~~~~), “~~~~Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships~~”

~~Issued in March 2016, ASU 2016-05 clarifies~~that a change in one of the parties to a derivative contract (through novation) that is part of a hedge accounting relationship does not, by itself, require dedesignation of that relationship, as long as all other hedge accounting criteria continue to be met. ASU 2016-05 is effective in interim and annual periods in fiscal years beginning after December 15, 2016. The Corporation is currently evaluating the ASU, however, because the Corporation does not currently employ any hedge accounting relationships, itdisclosures, but does not expect that it will materially affect the ~~ASU to have a material effect on its consolidated~~Corporation’s financial ~~statements and related disclosures.~~statements.

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ITEM 2 Management’s Discussionand Analysisof Results of Operation and Financial Condition

The following is the Corporation’s discussion and analysis of the significant changes in the financial condition, results of operations, capital resources and liquidity presented in the accompanying consolidated financial statements. Current performance does not guarantee, and may not be indicative of, similar performance in the future.

Brief History of the Corporation

The Bryn Mawr Trust Company (the “Bank”) received its Pennsylvania banking charter in 1889 and is a member of the Federal Reserve System. In 1986, Bryn Mawr Bank Corporation (the “Corporation”) was formed and on January 2, 1987, the Bank became a wholly-owned subsidiary of the Corporation. The Bank and Corporation are headquartered in Bryn Mawr, Pennsylvania, a western suburb of Philadelphia. The Corporation and its subsidiaries ~~provide community banking,~~offer a full range of personal and business banking ~~residential mortgage lending,~~services, consumer and commercial ~~lending to customers through its 26~~loans, equipment leasing, mortgages, insurance and wealth management services, including investment management, trust and estate administration, retirement planning, custody services, and tax planning and preparation from 25 full-service branches, ~~and~~ eight limited-hour retirement community offices, one limited-service branch, five wealth management offices and a full-service insurance agency located throughout ~~the~~ Montgomery, Delaware, Chester, Dauphin and ~~Dauphin~~Philadelphia counties ofin Pennsylvania and New Castle county in Delaware. The ~~Corporation and its subsidiaries also provide wealth management and insurance advisory services through its network~~common stock of ~~Wealth Management and insurance offices located in Bryn Mawr, Devon and Hershey, Pennsylvania as well as Greenville, Delaware. The Corporation’s stock~~the Corporation trades on the NASDAQ Stock Market (“NASDAQ”) under the symbol BMTC. ~~The goal of the Corporation is to become the preeminent community bank and wealth management organization in the Philadelphia area.~~

The Corporation operates in a highly competitive market area that includes local, national and regional banks as competitors along with savings banks, credit unions, insurance companies, trust companies, registered investment advisors and mutual fund families. The Corporation and its subsidiaries are regulated by many agencies including the Securities and Exchange Commission (“SEC”), NASDAQ, ~~the~~ Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve ~~Board~~ and the Pennsylvania Department of Banking and Securities. The goal of the Corporation is to become the preeminent community bank and wealth management organization in the Philadelphia area.

Critical Accounting Policies, Judgments and Estimates

The accounting and reporting policies of the Corporation and its subsidiaries conform with U.S. generally accepted accounting principles (“GAAP”). All inter-company transactions are eliminated in consolidation and certain reclassifications are made when necessary to conform the previous year’s financial statements to the current year’s presentation. In preparing the consolidated financial statements, the Corporation is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the dates of the balance sheets and revenues and expenditures for the periods presented. However, there are uncertainties inherent in making these estimates and actual results could differ from these estimates. The Corporation has identified certain areas that require estimates and assumptions, which include the allowance for loan and lease losses (the “Allowance”), the valuation of goodwill and intangible assets, the fair value of investment securities, and the valuation of mortgage servicing rights, deferred tax assets and liabilities, benefit plans and stock-based compensation.

These critical accounting policies, along with other significant accounting policies, are presented in Footnote 1 – Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements in the Corporation’s ~~2015~~2016 Annual Report on Form 10-K (the ~~“2015~~“2016 Annual Report”).

~~Acquisition~~Pending Business Combination – Royal Bancshares of ~~Robert J. McAllister Agency,~~Pennsylvania, Inc. ~~(“RJM”)~~

The acquisition of RJM, an insurance brokerage headquartered in Rosemont, Pennsylvania, was completed on April 1, 2015. The consideration paid by the Corporation was $1.0 million, of which $500 thousand was paid at closing and five contingent cash payments, not to exceed $100 thousand each, to be payable on each of March 31, 2016, March 31, 2017, March 31, 2018, March 31, 2019, and March 31, 2020, subject to the attainment of certain revenue targets during the related periods. As of March 31, 2016, the first contingent payment, in the amount of $85 thousand became payable and shall be paid within the payment period established by the transaction agreement. The acquisition enhanced the Corporation’s ability to offer comprehensive insurance solutions to both individual and business clients.

~~Acquisit~~~~ion of Continental Bank Holdings, Inc. (“CBH”)~~

On January ~~1, 2015,~~30, 2017, the ~~previously announced merger~~Corporation entered into a definitive Agreement and Plan of Merger to acquire Royal Bancshares of Pennsylvania, Inc. (“RBPI”), parent company of Royal Bank America (“RBA”), in a transaction with an aggregate value of $127.7 million (the ~~“Merger” or~~“Acquisition”). In connection with the ~~“Continental Merger”) of CBH~~Acquisition, RBPI will merge with and into the Corporation and ~~the merger of Continental Bank~~RBA will merge with and into the Bank. The ~~Bryn Mawr Trust Company, the wholly-owned subsidiary of the Corporation (the “Bank”)~~Acquisition, which is expected to add approximately $602 million in loans and $630 million in deposits (based on December 31, 2016 financial information), as contemplated by the Agreement and Plan of Merger, by and between CBH and the Corporation, dated as of May 5, 2014 (as amended by the Amendment to Agreement and Plan of Merger, dated as of October 23, 2014, the “Agreement”), were completed. In accordance with the Agreement, the aggregate share consideration paid to CBH shareholders consisted of 3,878,383 shares (which included fractional shares paid in cash) ofstrengthens the Corporation’s ~~common stock. Shareholders~~position as the largest community bank in Philadelphia’s western suburbs and, based on deposits, ranks it as the eighth largest community bank headquartered in Pennsylvania. The Acquisition, which will expand the Corporation's distribution network by providing entry into the new markets of ~~CBH received 0.45 shares~~New Jersey and Berks County, Pennsylvania, and an expanded physical presence in Philadelphia County, Pennsylvania, is expected to close during the third quarter of ~~Corporation common stock for each share of CBH common stock they owned~~2017 and is subject to shareholder approval as ~~of the effective date of the Merger. Holders of options to purchase shares of CBH common stock received options to purchase shares of Corporation common stock, converted at the same ratio of 0.45.~~ well as applicable regulatory approvals and closing conditions.

Other Pending Acquisitions and Expansion Plans

In addition ~~$1,323,000 was paid~~ to the RBPI Acquisition, the Bank has continued to execute on its strategies of diversification and acquiring and/or establishing specialty offices in strategically targeted areas where management believes there to be a high demand for the Bank’s products and services. On April 19, 2017, the Bank announced that it had entered into a definitive agreement to acquire Hirshorn Boothby, a full-service insurance agency established in 1931 and headquartered in the Chestnut Hill section of Philadelphia. Following receipt of applicable regulatory approvals and satisfaction of certain ~~warrant holders to cash-out certain warrants. The aggregate consideration paid to former CBH shareholders totaled $125.1 million.~~closing conditions, Hirshorn Boothby will be integrated into the Bank’s existing insurance subsidiary, Powers, Craft, Parker and Beard, Inc., which will expand the footprint of this growing segment.

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On April 4, 2017, the Corporation announced the anticipated opening, subject to regulatory approval, of a wealth management-focused office in Princeton, New Jersey which is expected to complement the already-established presence in central New Jersey that is to be acquired in the anticipated merger with RBPI.

In addition to these expansions of the Corporation’s physical presence, beginning in the second quarter of 2017 the Bank’s newly established Capital Markets department will begin operations that will focus on providing risk management services to address the needs of its commercial customer base. These capital markets capabilities will enable the Bank to offer hedging tools for qualified commercial customers through the use of interest rate swaps and options designed to mitigate the interest rate risk on variable rate loans. This interest rate hedging offering will allow the Bank to participate on and lead in larger and longer dated credits without incurring additional interest rate risk itself. Additional services will similarly focus on helping qualified customers to hedge their foreign exchange risk and meet their trade finance needs through enhanced international services capabilities.

Executive Overview

The following items highlight the Corporation’s results of operations for the three months ended March 31, ~~2016,~~2017, as compared to the same period in ~~2015,~~2016, and the changes in its financial condition as of March 31, ~~2016~~2017 as compared to December 31, ~~2015.~~2016. More detailed information related to these highlights can be found in the sections that follow.

Three Month Results of Operations

●

Net income for the three months ended March 31, ~~2016~~2017 was ~~$8.3~~$9.0 million, an increase of ~~$780~~$723 thousand as compared to net income of ~~$7.5~~$8.3 million for the same period in ~~2015.~~2016. Diluted earnings per share was ~~$0.49~~$0.53 for the three months ended March 31, ~~2016~~2017 as compared to ~~$0.42~~$0.49 for the same period in ~~2015.~~2016.

●

Return on average equity (“ROE”) and return on average assets (“ROA”) for the three months ended March 31, ~~2016~~2017 were ~~9.22%~~9.60% and ~~1.12%~~1.13%, respectively, as compared to ROE and ROA of ~~8.13%~~9.27% and ~~1.03%~~1.13%, respectively, for the same period in ~~2015.~~2016.

●

Provision for loan and lease losses (the “Provision”), of ~~$1.4 million~~$291 thousand for the three months ended March 31, ~~2016~~2017 was ~~an increase~~a decrease of ~~$841 thousand~~$1.1 million from the ~~$569 thousand~~$1.4 million Provision recorded for the same period in ~~2015.~~2016.

●

Non-interest income of $13.2 million for the three months ended March 31, ~~2016 decreased $1.6 million, or 10.5%,~~2017 was relatively unchanged, increasing $74 thousand as compared to ~~$14.8 million for~~ the same period in ~~2015.~~2016.

●

Fees for wealth management services and insurance revenue of ~~$8.8~~$9.3 million and ~~$1.3 million,~~$763 thousand, respectively, for the three months ended March 31, ~~2016~~2017 were an increase of $471 thousand and a decrease of ~~$273 thousand and an increase of $255~~$513 thousand, respectively, from the same period in ~~2015.~~2016.

●

Non-interest expense of ~~$25.1~~$26.7 million for the three months ended March 31, ~~2016 decreased $2.4~~2017 increased $1.7 million, from ~~$27.4~~$25.0 million for the same period in ~~2015.~~2016.

Changes in Financial Condition

●

Total assets of ~~$3.06~~$3.29 billion as of March 31, ~~2016 increased $27.3~~2017 decreased $128.9 million from December 31, ~~2015.~~2016.

●

Shareholders’ equity of ~~$365.2~~$388.1 million as of March 31, ~~2016 decreased $534 thousand~~2017 increased $7.0 million from ~~$365.7~~$381.1 million as of December 31, ~~2015.~~2016.

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●

Total portfolio loans and leases as of March 31, ~~2016~~2017 were ~~$2.38~~$2.56 billion, an increase of ~~$109.9~~$20.2 million from the December 31, ~~2015~~2016 balance.

●

Total non-performing loans and leases of ~~$9.6~~$7.3 million represented ~~0.41%~~0.29% of portfolio loans and leases as of March 31, ~~2016~~2017 as compared to ~~$10.2~~$8.4 million, or ~~0.45%~~0.33% of portfolio loans and leases as of December 31, ~~2015.~~2016.

●

The ~~$16.8~~$17.1 million Allowance, as of March 31, ~~2016,~~2017, represented ~~0.71%~~0.67% of portfolio loans and leases, as compared to ~~$15.9~~$17.5 million, or ~~0.70%~~0.69% of portfolio loans and leases as of December 31, ~~2015.~~2016.

●

Total deposits of ~~$2.34~~$2.64 billion as of March 31, ~~2016~~2017 increased ~~$91.3~~$56.9 million from ~~$2.25~~$2.58 billion as of December 31, ~~2015.~~2016.

●

Wealth Management assets under management, administration, supervision and brokerage as of March 31, ~~2016~~2017 were ~~$9.28~~$11.73 billion, an increase of ~~$916.9~~$397.0 million from December 31, ~~2015.~~2016.

Key Performance Ratios

Key financial performance ratios for the three months ended March 31, ~~2016~~2017 and ~~2015~~2016 are shown in the table below:

	Three Months Ended March 31,						Three Months Ended March 31,
	2015			2015			2017			2016
Annualized return on average equity		9.22	%		8.13	%		9.60	%		9.27	%
Annualized return on average assets		1.12	%		1.03	%		1.13	%		1.13	%
Tax-equivalent net interest margin		3.87	%		3.79	%		3.74	%		3.87	%
Basic earnings per share	$	0.49		$	0.43		$	0.53		$	0.49
Diluted earnings per share	$	0.49		$	0.42		$	0.53		$	0.49
Dividend per share	$	0.20		$	0.19		$	0.21		$	0.20
Dividend declared per share to net income per basic common share		40.8	%		44.2	%		39.4	%		40.5	%

The following table presents certain key period-end balances and ratios as of March 31, ~~2016~~2017 and December 31, ~~2015:~~ 2016:

(dollars in millions, except per share amounts)	March 31, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Book value per share	$	21.48		$	21.40		$	22.87		$	22.50
Tangible book value per share	$	13.87		$	13.86		$	15.53		$	15.11
Allowance as a percentage of loans and leases		0.71	%		0.70	%		0.67	%		0.69	%
Tier I capital to risk weighted assets		10.22	%		10.72	%		10.50	%		10.51	%
Tangible common equity ratio		8.10	%		8.17	%		8.32	%		7.76	%
Loan to deposit ratio		101.8	%		101.1	%		97.0	%		98.7	%
Wealth assets under management, administration, supervision and brokerage	$	9,281.7		$	8,364.8		$	11,725.5		$	11,328.5
Portfolio loans and leases	$	2,378.8		$	2,269.0		$	2,555.6		$	2,535.4
Total assets	$	3,058.2		$	3,031.0		$	3,292.6		$	3,421.5
Shareholders’ equity	$	365.2		$	365.7		$	388.1		$	381.1

The following sections discuss, in detail, the Corporation’s results of operations for the three months ended March 31, ~~2016,~~2017, as compared to the same ~~period~~periods in ~~2015,~~2016, and the changes in its financial condition as of March 31, ~~2016~~2017 as compared to December 31, ~~2015.~~2016.

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Components of Net Income

Net income is comprised of five major elements:

●

Net Interest Income, or the difference between the interest income earned on loans, leases and investments and the interest expense paid on deposits and borrowed funds;

●

Provision For Loan and Lease Losses, or the amount added to the Allowance to provide for estimated inherent losses on portfolio loans and leases;

●

Non-Interest Income, which is made up primarily of Wealth Management revenue, insurance revenue, gains and losses from the sale loans, gains and losses from the sale of investment securities available for sale and other fees from loan and deposit services;

●

Non-Interest Expense, which consists primarily of salaries and employee benefits, occupancy, intangible asset amortization, professional fees and other operating expenses; and

●

Income Taxes, which include state and federal jurisdictions.

TAX-EQUIVALENT NET INTEREST INCOME

Net interest income is the primary source of the Corporation’s revenue. The below tables present a summary, for the three months ended March 31, ~~2016~~2017 and ~~2015,~~2016, of the Corporation’s average balances and tax-equivalent yields earned on its interest-earning assets and the tax-equivalent rates paid on its interest-bearing liabilities. The tax-equivalent net interest margin is the tax-equivalent net interest income as a percentage of average interest-earning assets. The tax-equivalent net interest spread is the difference between the weighted average tax-equivalent yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. The effect of noninterest-bearing liabilities represents the effect on the net interest margin of net funding provided by noninterest-earning assets, noninterest-bearing liabilities and shareholders’ equity.

Tax-equivalent net interest income increased ~~$1.1~~$1.6 million, or ~~4.5%~~6.0%, to ~~$26.0~~$27.6 million for the three months ended March 31, ~~2016,~~2017, as compared to ~~$24.9~~$26.0 million for the same period in ~~2015.~~2016. The increase in net interest income between the periods was largely related to the increase in average loans for the three months ended March 31, ~~2016~~2017 as compared to the same period in ~~2015.~~2016. Average loans for the first quarter of ~~2016~~2017 increased by ~~$225.7~~$247.1 million from the same period in ~~2015,~~2016, while the tax-equivalent yield earned on loans decreased by 2413 basis points. In addition, average long-term FHLB advances decreased $67.5 million with a 9 basis point increase in rate paid between periods. The increase in average loan balances ~~was accompanied~~and decrease in average long-term FHLB advances were offset by a ~~$167.6~~$218.5 million ~~decrease~~increase in average interest-bearing deposits, ~~with banks. Partially offsetting~~whose tax-equivalent rate paid increased by 14 basis points between the ~~increase in average loans was a $29.5 million increase in subordinated notes paying interest at 4.99%. The subordinated notes were issued in August 2015.~~periods.

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Analyses of Interest Rates and Interest Differential

The table below presents the major asset and liability categories on an average daily balance basis for the periods presented, along with interest income, interest expense and key rates and yields.

For theThree Months EndedMarch 31,

2016

2015

(dollars in thousands)

Average
Balance

Interest
Income/
Expense

Average
Rates
Earned/
Paid

Average
Balance

Interest
Income/
Expense

Average
Rates
Earned/
Paid

Assets:

Interest-bearing deposits with banks
$ 39,050 $ 46 0.47
%
$ 206,694 $ 115 0.23
%
Investment securities - available for sale:

Taxable
316,353 1,397 1.78
%
335,208 1,336 1.62
%
Non-taxable⁽³⁾
40,658 191 1.89
%
35,085 203 2.35
%
Total investment securities - available for sale
357,011 1,588 1.79
%
370,293 1,539 1.69
%
Investment securities - trading
3,946 2 0.20
%
3,897 4 0.42
%
Loans and leases⁽¹⁾⁽²⁾⁽³⁾
2,308,584 26,778 4.67
%
2,082,882 25,226 4.91
%
Total interest-earning assets
2,708,591 28,414 4.22
%
2,663,766 26,884 4.09
%
Cash and due from banks
16,501 19,092
Allowance for loan and lease losses
(16,239
)
(14,866
)

Other assets
264,295 250,164
Total assets
$ 2,973,148 $ 2,918,156
Liabilities:

Savings, NOW, and market rate accounts
$ 1,279,630 569 0.18
%
$ 1,252,410 594 0.19
%
Wholesale deposits
137,201 233 0.68
%
140,120 188 0.54
%
Time deposits
216,820 274 0.51
%
267,800 246 0.37
%
Total interest-bearing deposits
1,633,651 1,076 0.26
%
1,660,330 1,028 0.25
%
Short-term borrowings
34,158 17 0.20
%
55,344 21 0.15
%
Long-term FHLB advances and other borrowings
250,015 908 1.46
%
266,205 910 1.39
%
Subordinated notes
29,482 366 4.99
%
— — —
%
Total borrowings
313,655 1,291 1.66
%
321,549 931 1.17
%
Total interest-bearing liabilities
1,947,306 2,367 0.49
%
1,981,879 1,959 0.40
%
Non-interest-bearing deposits
631,047 534,403
Other liabilities
33,923 30,935
Total non-interest-bearing liabilities
664,970 565,338
Total liabilities
2,612,276 2,547,217
Shareholders’ equity
360,872 370,939
Total liabilities and shareholders’ equity
$ 2,973,148 $ 2,918,156
Net interest spread
3.73
%
3.69
%
Effect of non-interest-bearing liabilities
0.14
%
0.10
%
Tax-equivalent net interest income and margin on earning assets⁽³⁾
$ 26,047 3.87
%
$ 24,925 3.79
%
Tax-equivalent adjustment⁽³⁾
$ 145 0.02
%
$ 130 0.02
%

	For theThree Months EndedMarch 31,
	2017								2016
(dollars in thousands)	Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid			Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid
Assets:
Interest-bearing deposits with banks	$	39,669		$	66		0.67	%	$	39,050		$	46		0.47	%
Investment securities - available for sale:
Taxable		354,229			1,653		1.89	%		316,353			1,397		1.78	%
Non-taxable⁽³⁾		31,485			164		2.11	%		40,658			191		1.89	%
Total investment securities - available for sale		385,714			1,817		1.91	%		357,011			1,588		1.79	%
Investment securities – held to maturity		3,702			7		0.77	%		—			—		—
Investment securities – trading		3,890			8		0.83	%		3,946			2		0.20	%
Loans and leases⁽¹⁾⁽²⁾⁽³⁾		2,555,677			28,622		4.54	%		2,308,584			26,778		4.67	%
Total interest-earning assets		2,988,652			30,520		4.14	%		2,708,591			28,414		4.22	%
Cash and due from banks		14,942								16,501
Allowance for loan and lease losses		(17,580	)							(16,239	)
Other assets		258,046								264,295
Total assets	$	3,244,060							$	2,973,148
Liabilities:
Savings, NOW, and market rate accounts	$	1,388,561			756		0.22	%	$	1,279,630			569		0.18	%
Wholesale deposits		143,461			317		0.90	%		137,201			233		0.68	%
Time deposits		320,172			755		0.96	%		216,820			274		0.51	%
Total interest-bearing deposits		1,852,194			1,828		0.40	%		1,633,651			1,076		0.26	%
Short-term borrowings		47,603			27		0.23	%		34,158			17		0.20	%
Long-term FHLB advances and other borrowings		182,507			698		1.55	%		250,015			908		1.46	%
Subordinated notes		29,537			370		5.08	%		29,482			366		4.99	%
Total borrowings		259,647			1,095		1.71	%		313,655			1,291		1.66	%
Total interest-bearing liabilities		2,111,841			2,923		0.56	%		1,947,306			2,367		0.49	%
Non-interest-bearing deposits		711,794								631,047
Other liabilities		38,211								33,923
Total non-interest-bearing liabilities		750,005								664,970
Total liabilities		2,861,846								2,612,276
Shareholders’ equity		382,214								360,872
Total liabilities and shareholders’ equity	$	3,244,060							$	2,973,148
Net interest spread							3.58	%							3.73	%
Effect of non-interest-bearing liabilities							0.16	%							0.14	%
Tax-equivalent net interest income and margin on earning assets⁽³⁾				$	27,597		3.74	%				$	26,047		3.87	%
Tax-equivalent adjustment⁽³⁾				$	194		0.02	%				$	145		0.02	%

⁽¹⁾

Nonaccrual loans have been included in average loan balances, but interest on nonaccrual loans has been excluded for purposes of determining interest income.

⁽²⁾	Loans include portfolio loans and leases and loans held for sale.
⁽³⁾	Tax rate used for tax-equivalent calculations is 35%.

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Rate/Volume Analysis (tax-equivalent basis)*

The rate/volume analysis in the table below analyzes dollar changes in the components of interest income and interest expense as they relate to the change in balances (volume) and the change in interest rates (rate) of tax-equivalent net interest income for the three months ended March 31, ~~2016~~2017 as compared to the same period in ~~2015,~~2016, allocated by rate and volume. The change in interest income and/or expense due to both volume and rate has been allocated to changes in volume.

	2016 Compared to 2015									2017 Compared to 2016
	Three Months Ended March 31,									Three Months Ended March 31,
(dollars in thousands)	Volume			Rate			Total			Volume			Rate			Total
Interest income
Interest-bearing deposits with other banks	$	(206	)	$	137		$	(69	)	$	1		$	19		$	20
Investment securities		(209	)		256			47			51			191			242
Loans and leases		8,422			(6,870	)		1,552			6,591			(4,747	)		1,844
Total interest income	$	8,007		$	(6,477	)	$	1,530		$	6,643		$	(4,537	)	$	2,106
Interest expense:
Savings, NOW and market rate accounts	$	66		$	(91	)	$	(25	)	$	49		$	138		$	187
Wholesale deposits		(26	)		71			45			10			74			84
Retail time deposits		(222	)		250			28			129			352			481
Borrowed funds**		(223	)		217			(6	)		(455	)		255			(200	)
Subordinated notes		366			—			366			—			4			4
Total interest expense		(39	)		447			408			(267	)		823			556
Interest differential	$	7,968		$	(6,030	)	$	1,938		$	6,910		$	(5,360	)	$	1,550

*The tax rate used in the calculation of thetax-equivalent income is 35%.

**Borrowed funds include short-term borrowings and Federal Home Loan Bank advances and other borrowings.

Tax-Equivalent Net Interest Margin

The tax-equivalent net interest margin of ~~3.87%~~3.74% for the three months ended March 31, ~~2016~~2017 was ~~an 8~~a 13 basis point ~~increase~~decrease from ~~3.79%~~3.87% for the same period in ~~2015.~~2016. The ~~increase~~decrease was largely the result of the ~~$167.6 million reduction~~13 basis point decrease in ~~low-yielding interest-bearing deposits with banks~~tax-equivalent yield earned on loans and leases and the ~~$225.7~~14 basis point increase in rate paid on interest-bearing deposits. The $280.1 million volume increase in average interest-earning assets versus the $164.5 million increase in average ~~loans and leases, which had an average yield for the three months ended March 31, 2016 of 4.67%. Partially offsetting~~interest-bearing liabilities partially offset the effect of the ~~loan growth on~~yield decrease and rate increase between the ~~tax-equivalent interest margin was the $29.5 million increase in average subordinated notes at a rate of 4.99% for the first quarter of 2016 as compared to the same period in 2015.~~periods. The contribution of fair value mark accretion to the tax equivalent net interest margin accounted for 1611 basis points of the margin for the first quarter of ~~2016~~2017 as compared to 2216 basis points for the first quarter of ~~2015.~~2016.

The tax-equivalent net interest margin and related components for the past five consecutive quarters are shown in the table below:

Quarter

Interest-
Earning Asset
Yield

Interest-Bearing
Liability Cost

Net Interest
Spread

Effect of Non-
Interest Bearing
Sources

Net Interest
Margin

1^st Quarter 2016
4.22%

0.49%

3.73%

0.14%

3.87%

4^th Quarter 2015
4.11%

0.48%

3.63%

0.14%

3.77%

3^rd Quarter 2015
3.97%

0.45%

3.52%

0.13%

3.65%

2^nd Quarter 2015
4.10%

0.40%

3.70%

0.11%

3.81%

1^st Quarter 2015
4.09%

0.40%

3.69%

0.10%

3.79%

Quarter	Interest- Earning Asset Yield			Interest-Bearing Liability Cost			Net Interest Spread			Effect of Non- Interest Bearing Sources			Net Interest Margin
1^st Quarter 2017		4.14	%		0.56	%		3.58	%		0.16	%		3.74	%
4^th Quarter 2016		4.05	%		0.56	%		3.49	%		0.16	%		3.65	%
3^rd Quarter 2016		4.09	%		0.55	%		3.54	%		0.17	%		3.71	%
2^nd Quarter 2016		4.18	%		0.53	%		3.65	%		0.16	%		3.81	%
1^st Quarter 2016		4.22	%		0.49	%		3.73	%		0.14	%		3.87	%

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Interest Rate Sensitivity

The Corporation actively manages its interest rate sensitivity position. The objectives of interest rate risk management are to control exposure of net interest income to risks associated with interest rate movements and to achieve sustainable growth in net interest income. The Corporation’s Asset Liability Committee (“ALCO”), using policies and procedures approved by the Corporation’s Board of Directors, is responsible for the management of the Corporation’s interest rate sensitivity position. The Corporation manages interest rate sensitivity by changing the mix, pricing and re-pricing characteristics of its assets and liabilities, through the management of its investment portfolio, its offerings of loan and selected deposit terms and through wholesale funding. Wholesale funding consists of multiple sources including borrowings from the FHLB, the Federal Reserve Bank of Philadelphia’s discount window, certificates of deposit from institutional brokers, including the Certificate of Deposit Account Registry Service (“CDARS”), the Insured Network Deposit (“IND”) Program, the Charity Deposits Corporation (“CDC”), the Insured Cash Sweep (“ICS”) and the Pennsylvania Local Government Investment Trust (“PLGIT”).

The Corporation uses several tools to ~~manage~~measure its interest rate risk including interest rate sensitivity analysis, or gap analysis, market value of portfolio equity analysis, interest rate simulations under various rate scenarios and tax-equivalent net interest margin trend reports. The results of these reports are compared to limits established by the Corporation’s ALCO policies and appropriate adjustments are made if the results are outside the established limits.

The following table demonstrates the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock”, in the yield curve and subjective adjustments in deposit pricing, might have on the Corporation’s projected net interest income over the next 12 months.

This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next 12 months. The changes to net interest income shown below are in compliance with the Corporation’s policy guidelines.

Summary of Interest Rate Simulation

	Change in Net Interest Income Over the Twelve Months Beginning After March 31, 2016						Change in Net Interest Income Over the Twelve Months Beginning After December 31, 2015						Change in Net Interest Income Over the Twelve Months Beginning After March 31, 2016						Change in Net Interest Income Over the Twelve Months Beginning After December 31, 2015
	Amount			Percentage			Amount			Percentage			Amount			Percentage			Amount			Percentage
+300 basis points	$	4,057			3.81	%	$	3,128			3.09	%	$	10,798			9.40	%	$	10,207			9.01	%
+200 basis points	$	2,360			2.22	%	$	1,637			1.62	%	$	7,226			6.29	%	$	6,653			5.87	%
+100 basis points	$	662			0.62	%	$	210			0.21	%	$	3,560			3.10	%	$	3,048			2.69	%
-100 basis points	$	(2,698	)		(2.53	)%	$	(2,490	)		(2.46	)%	$	(4,362	)		(3.80	)%	$	(4,397	)		(3.88	)%

The above interest rate simulation suggests that the Corporation’s balance sheet is asset sensitive as of March 31, ~~2016~~2017 in the +100 basis point scenario, which is similar to the December 31, ~~2015~~2016 simulation. ~~Asset~~The asset sensitivity table indicates that a 100, 200 or 300 basis point increase in interest rates would have a positive impact on net interest income over the next 12 months. The balance sheet is slightly more asset sensitive in comparison to December 31, ~~2015.~~2016. This is a result of rise in interest rates that is impacting interest income on interest bearing assets while the ~~decline in low~~cost of interest ~~earning cash balances which was redeployed into higher earning investment and loan assets, but was partially offset by slight increases in funding costs.~~bearing liabilities remained stable.

The interest rate simulation is an estimate based on assumptions, which are derived from past behavior of customers, along with expectations of future behavior relative to interest rate changes. In today’s uncertain economic environment and the current extended period of very low interest rates, the reliability of the Corporation’s assumptions in the interest rate simulation model is more uncertain than in other periods. Actual customer behavior may be different than expected behavior, which could cause an unexpected outcome and may result in lower net interest income.

Gap Analysis

The interest sensitivity, or gap analysis, shows interest rate risk by identifying re-pricing gaps in the Corporation’s balance sheet. All assets and liabilities are categorized in the following table according to their behavioral sensitivity, which is usually the earliest of either: re-pricing, maturity, contractual amortization, prepayments or likely call dates. Non-maturity deposits, such as NOW, savings and money market accounts are spread over various time periods based on the expected sensitivity of these rates considering liquidity and the investment preferences of the Corporation. Non-rate-sensitive assets and liabilities are placed in a separate period. Capital is spread over time periods to reflect the Corporation’s view of the maturity of these funds.

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The following table presents the Corporation’s interest rate sensitivity position or gap analysis as of March 31, ~~2016:~~2017:

(dollars in millions)	0 to 90 Days			91 to 365 Days			1 - 5 Years			Over 5 Years			Non-Rate Sensitive			Total			0 to 90 Days			91 to 365 Days			1 - 5 Years			Over 5 Years			Non-Rate Sensitive			Total
Assets:
Interest-bearing deposits with banks	$	31.0		$	2.9		$	—		$	—		$	—		$	33.9		$	70.0		$	—		$	—		$	—		$	—		$	70.0
Investment securities – available for sale		38.7			72.4			169.8			85.0			—			365.9			31.3			76.1			191.4			92.3			—			391.1
Investment securities – held to maturity																				—			—			—			5.2			—			5.2
Investment securities – trading		3.6			—			—			—			—			3.6			4.1			—			—			—			—			4.1
Loans and leases⁽¹⁾		773.9			290.9			971.7			350.1			—			2,386.6			942.3			288.1			965.5			362.7			—			2,558.6
Allowance for loan and lease losses		—			—			—			—			(16.8	)		(16.8	)		—			—			—			—			(17.1	)		(17.1	)
Cash and due from banks		—			—			—			—			15.6			15.6			—			—			—			—			17.5			17.5
Other assets		—			—			—			—			269.4			269.4			—			—			—			—			263.2			263.2
Total assets	$	847.2		$	366.2		$	1,141.5		$	435.1		$	268.2		$	3,058.2		$	1,047.7		$	364.2		$	1,156.9		$	460.2		$	263.6		$	3,292.6
Liabilities and shareholders’ equity:
Demand, non-interest-bearing	$	40.0		$	120.1		$	170.7		$	312.7		$	—		$	643.5		$	47.9		$	143.7		$	202.2		$	377.8		$	—		$	771.5
Savings, NOW and market rate		93.1			279.2			642.9			284.1			—			1,299.3			96.8			290.3			693.6			327.3			—			1,408.0
Time deposits		62.5			—			—			—			—			62.5			104.6			176.4			38.3			0.1			—			319.4
Wholesale non-maturity deposits		72.8			69.5			65.1			0.2			—			207.6			69.5			—			—			—			—			69.5
Wholesale time deposits		48.7			31.4			51.1			—			—			131.2			17.9			14.4			35.9			—			—			68.2
Short-term borrowings		37.0			—			—			—			—			37.0			23.6			—			—			—			—			23.6
Long-term FHLB advances and other borrowings		40.0			50.0			159.8			—			—			249.8
Long-term FHLB advances																				25.0			66.4			83.3			—			—			174.7
Subordinated notes		—			—			29.5			—			—			29.5			—			—			29.5			—			—			29.5
Other liabilities		—			—			—			—			32.7			32.7			—			—			—			—			40.1			40.1
Shareholders’ equity		13.0			39.1			208.6			104.4			—			365.1			13.9			41.6			221.8			110.8			—			388.1
Total liabilities and shareholders’ equity	$	407.1		$	589.3		$	1,327.7		$	701.4		$	32.7		$	3,058.2		$	399.2		$	732.8		$	1,304.6		$	816.0		$	40.1		$	3,292.6
Interest-earning assets	$	847.2		$	366.2		$	1,141.5		$	435.1		$	—		$	2,790.0		$	1,047.7		$	364.2		$	1,156.9		$	460.2		$	—		$	3,029.0
Interest-bearing liabilities		354.1			430.1			948.4			284.3			—			2,016.9			337.4			547.5			880.6			327.4			—			2,092.9
Difference between interest-earning assets and interest-bearing liabilities	$	493.1		$	(63.9	)	$	193.1		$	150.8		$	—		$	773.1		$	710.3		$	(183.3	)	$	276.3		$	132.8		$	—		$	936.1
Cumulative difference between interest earning assets and interest-bearing liabilities	$	493.1			429.2			622.3			773.1			—			773.1		$	710.3			527.0			803.3			936.1			—			936.1
Cumulative earning assets as a % of cumulative interest bearing liabilities		239	%		155	%		136	%		138	%					138	%		311	%		160	%		145	%		145	%		—			145	%

¹Loans include portfolio loans and loans held for sale

The table above indicates that the Corporation is asset-sensitive in the immediate to 90-day time frame and may experience an increase in net interest income during that time period if rates rise. Conversely, if rates decline, net interest income may decline. It should be noted that the gap analysis is only one tool used to measure interest rate sensitivity and should be used in conjunction with other measures such as the interest rate simulation discussed above. The gap analysis measures the timing of changes in rate, but not the true weighting of any specific component of the Corporation’s balance sheet. The asset-sensitive position reflected in this gap analysis is similar to the Corporation’s position at December 31, ~~2015.~~2016.

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PROVISION FOR LOAN AND LEASE LOSSES

For the three months ended March 31, ~~2016,~~2017, the Corporation recorded a Provision of ~~$1.4~~$291 which was a $1.1 million decrease from the same period in 2016. Net charge-offs for the first quarter of 2017 were $670 thousand as compared to ~~$569~~$422 thousand for the same period in ~~2015.~~2016. The ~~increase~~decrease in Provision ~~for~~is indicative of improvements in certain qualitative factors used to determine the three months ended March 31, 2016 was primarily related to the increased loan volume, as portfolio loans increased by $109.9 million during the first quarter of 2016, as compared to a $12.4 million increase in the first quarter of 2015 (excluding loans acquired in the Continental Merger). Charge-offs for the first quarter of 2016 totaled $422 thousand as compared to $859 thousand for the same period in 2015.Allowance. For a general discussion of the Allowance, and our policies related thereto, refer to page 34 of the Corporation’s ~~2015~~2016 Annual Report.

Asset Quality and Analysis of Credit Risk

As of March 31, ~~2016,~~2017, total nonperforming loans and leases decreased by ~~$608 thousand,~~$1.0 million, to ~~$9.6~~$7.3 million, representing ~~0.41%~~0.29% of portfolio loans and leases, as compared to ~~$10.2~~$8.4 million, or ~~0.45%~~0.33% of portfolio loans and leases as of December 31, ~~2015.~~2016. The decrease in nonperforming loans and leases resulted from pay-offs or pay-downs of ~~$825~~$563 thousand of loans and ~~leases and~~ the ~~return to performing status~~charge-off of ~~$226~~$641 thousand of loans ~~and leases which had been~~ nonperforming as of December 31, ~~2015.~~2016. Partially offsetting the decreases in nonperforming loans from December 31, ~~2015~~2016 was the addition during the first quarter of ~~2016~~2017 of ~~$435~~$170 thousand of new nonperforming loans and leases.

As of March 31, ~~2016,~~2017, the Allowance of ~~$16.8~~$17.1 million represented ~~0.71%~~0.67% of portfolio loans and leases, a ~~one~~two basis point ~~increase~~decrease from ~~0.70%~~0.69% as of December 31, ~~2015.~~2016. The Allowance on originated portfolio loans, as a percentage of originated portfolio loans, was ~~0.83%~~0.75% as of March 31, ~~2016~~2017 as compared to ~~0.84%~~0.78% as of December 31, ~~2015.~~2016. Loans acquired in mergers are recorded at fair value as of the date of acquisition. This fair value estimate takes into account an estimate of the expected lifetime losses of the acquired loans. As such, an acquired loan will not generally become subject to additional Allowance unless it becomes impaired.

As of March 31, ~~2016,~~2017, the Corporation had OREO valued at ~~$756~~$978 thousand, as compared to ~~$2.6~~$1.0 million as of December 31, ~~2015.~~2016. During the three months ended March 31, ~~2016,~~2017, a ~~$1.9 million~~$39 thousand OREO property acquired ~~from a foreclosure during~~in the ~~fourth quarter of 2015~~CBH merger was sold, resulting in ano gain or loss on ~~sale of $76 thousand.~~sale. The balance of OREO as of March 31, ~~2016~~2017 was comprised of ~~five~~six residential properties, four of which are manufactured housing properties acquired in the Continental Merger. All properties are recorded at the lower of cost or fair value less cost to sell.

As of March 31, ~~2016,~~2017, the Corporation had ~~$6.6~~$9.2 million of troubled debt restructurings (“TDRs”), of which ~~$4.9~~$6.5 million were in compliance with the modified terms and excluded from non-performing loans and leases. As of December 31, ~~2015,~~2016, the Corporation had ~~$6.8~~$9.0 million of TDRs, of which ~~$4.9~~$6.4 million were in compliance with the modified terms, and were excluded from non-performing loans and leases.

As of March 31, ~~2016,~~2017, the Corporation had a recorded investment of ~~$13.9~~$13.5 million of impaired loans and leases which included ~~$6.6~~$9.2 million of TDRs. Impaired loans and leases are those for which it is probable that the Corporation will not be able to collect all scheduled principal and interest in accordance with the original terms of the loans and leases. Impaired loans and leases as of December 31, ~~2015~~2016 totaled ~~$14.5~~$14.4 million, which included ~~$6.8~~$9.0 million of TDRs. Refer to Note 5H in the Notes to unaudited consolidated Financial Statements for more information regarding the Corporation’s impaired loans and leases.

The Corporation continues to be diligent in its credit underwriting process and proactive with its loan review process, including the engagement of the services of an independent outside loan review firm, which helps identify developing credit issues. Proactive steps that are taken include the procurement of additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower. The Corporation believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall risk of loss.

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Nonperforming Assets and Related Ratios

(dollars in thousands)	March 31, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Nonperforming Assets:
Nonperforming loans and leases	$	9,636		$	10,244		$	7,329		$	8,363
Other real estate owned		756			2,638			978			1,017
Total nonperforming assets	$	10,392		$	12,882		$	8,307		$	9,380
Troubled Debt Restructures:
TDRs included in non-performing loans	$	1,756		$	1,935		$	2,681		$	2,632
TDRs in compliance with modified terms		4,893			4,880			6,492			6,395
Total TDRs	$	6,649		$	6,815		$	9,173		$	9,027
Loan and Lease quality indicators:
Allowance for loan and lease losses to nonperforming loans and leases		174.8	%		154.8	%		233.4	%		209.1	%
Nonperforming loans and leases to total portfolio loans and leases		0.41	%		0.45	%		0.29	%		0.33	%
Allowance for loan and lease losses to total portfolio loans and leases		0.71	%		0.70	%		0.67	%		0.69	%
Nonperforming assets to total loans and leases and OREO		0.44	%		0.56	%		0.32	%		0.37	%
Total portfolio loans and leases	$	2,378,841		$	2,268,988		$	2,555,589		$	2,535,425
Allowance for loan and lease losses	$	16,845		$	15,857		$	17,107		$	17,486

NON-INTEREST INCOME

Three Months Ended March 31, ~~2016~~2017 Compared to the Same Period in ~~2015~~2016

Non-interest income for the three months ended March 31, ~~2016 decreased $1.6 million as compared to~~2017 increased by $74 thousand from the same period in ~~2015. Largely contributing to this decrease was an $825~~2016. A $144 thousand ~~decrease~~increase in ~~net gain on sale of available for sale investment securities, a $401 thousand decrease in dividends on FHLB and FRB stocks~~other operating income and a ~~$273~~$471 thousand ~~decrease~~increase in fees for wealth management ~~services. During~~services, as wealth assets have increased 26.3% from the ~~three months ended~~ March 31, 2016 ~~$80~~level, were partially offset by a decrease of $76 thousand in gain on sale of ~~available for sale investment securities,~~residential mortgage loans, as market interest rate increases reduced origination activity, and a $513 thousand decrease in insurance revenues related to ~~a rabbi trust, were sold, resulting in a net loss~~the recognition of ~~$15 thousand as compared to the $63.2 million of available for sale investment securities sold~~contingent commissions from providers during the first quarter of ~~2015, much of~~2016, which ~~had been acquired from Continental Bank, and which resulted~~are being ratably recognized in a net gain on sale of $810 thousand. The decrease in dividends on FHLB and FRB stocks was related to the $448 thousand special dividend issued by the FHLB in the first quarter of 2015 which was not repeated in 2016. The decrease in wealth revenue largely related to the shifting of the composition of the wealth portfolio to lower-yielding, fixed-fee accounts. Although assets under management administration, supervision and brokerage increased by $1.47 billion from March 31, 2015 to March 31, 2016, the portion of the portfolio which derives its fees from market value changes declined, offset by increases in the lower-yielding fixed-fee accounts. This shift serves to reduce the earnings volatility associated with market movement.2017.

The following table provides supplemental information regarding mortgage loan originations and sales:

	As of or for the Three Months Ended March 31,						As of or for the Three Months Ended March 31,
(dollars in millions)	2016			2015			2017			2016
Residential mortgage loans held in portfolio	$	412.0		$	379.4		$	418.3		$	412.0
Mortgage originations	$	50.4		$	35.7		$	48.6		$	51.5
Total mortgage loans sold	$	28.4		$	27.2		$	32.7		$	28.4
Percent of originated mortgage loans sold		56.3	%		76.2	%		67.3	%		55.0	%
Percent of sold with servicing-retained		91.6	%		90.3	%		84.8	%		91.6	%
Percent of sold with servicing-released		8.4	%		9.7	%		15.2	%		8.4	%
Mortgage servicing rights at period end (“MSRs”)	$	5.2		$	4.8		$	5.7		$	5.2
Net gain on sale of residential mortgage loans	$	0.7		$	0.8		$	0.6		$	0.7
Residential mortgage loans serviced for others	$	605.4		$	592.0		$	638.6		$	605.4

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The following table provides details ofother operating income for the three months ended March 31, ~~2016~~2017 and ~~2015:~~2016:

Three Months EndedMarch 31,

(dollars in thousands)
2016

2015

Merchant interchange fees
$ 408 $ 297
Commissions and fees
205 130
Bank-owned life insurance (“BOLI”) income
245 183
Safe deposit box rentals
94 93
Other investment income
2 71
Rental income
42 48
Miscellaneous other income
27 266
Other operating income
$ 1,023 $ 1,088

(dollars in thousands)	Three Months EndedMarch 31,
	2017		2016
Merchant interchange fees	$	341	$	408
Commissions and fees		131		205
Bank-owned life insurance (“BOLI”) income		201		245
Safe deposit box rentals		90		94
Other investment income		—		2
Rental income		48		42
Miscellaneous other income		356		27
Other operating income	$	1,167	$	1,023

Wealth Assets Under Management,Administration,Supervision andBrokerage (“Wealth Assets”)

Wealth Asset accounts are categorized into two groups; the first account group consists predominantly of clients whose fees are determined based on the market value of the assets held in their accounts (“Market Value” fee basis). The second account group consists predominantly of clients whose fees are set at fixed amounts (“Fixed Fee” basis), and, as such, are not affected by market value changes.

The following tables detail the composition of Wealth Assets as it relates to the calculation of fees for wealth management services:

(dollars in thousands)	Wealth Assets as of:
Fee Basis	March 31, 2017		December 31, 2016		September 30, 2016		June 30, 2016		March 31, 2016
Market value	$	5,483,237	$	5,302,463	$	5,276,756	$	5,078,386	$	5,032,841
Fixed		6,242,223		6,025,994		4,692,989		4,554,135		4,248,902
	$	11,725,460	$	11,328,457	$	9,969,745	$	9,632,521	$	9,281,743

	Percentage of Wealth Assets
	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Market value		46.8	%		46.8	%		52.9	%		52.7	%		54.2	%
Fixed		53.2	%		53.2	%		47.1	%		47.3	%		45.8	%
		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following tables detail the composition of fees for wealth management services for the periods indicated:

(dollars in thousands)	For the Three Months Ended:
Fee Basis	March 31, 2017		December 31, 2016		September 30, 2016		June 30, 2016		March 31, 2016
Market value	$	7,230		7,212	$	7,196	$	7,187	$	6,823
Fixed		2,073		2,115		1,904		2,244		2,009
	$	9,303		9,327	$	9,100	$	9,431	$	8,832

	Percentage ofFees for Wealth Management
	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Market value		77.7	%		77.3	%		79.1	%		76.2	%		77.3	%
Fixed		22.3	%		22.7	%		20.9	%		23.8	%		22.7	%
		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

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NON-INTEREST EXPENSE

Three Months Ended March 31, ~~2016~~2017 Compared to the Same Period in ~~2015~~2016

Non-interest expense for the three months ended March 31, ~~2016 decreased $2.4~~2017 increased $1.7 million ~~to $25.1 million, as compared to $27.4 million for~~from the same period in ~~2015. Largely accounting for~~2016, primarily related to salary and wage increases of $712 thousand due to staffing increases, annual salary and wage increases and increases in incentive compensation, a $511 thousand increase in merger expenses in connection with the ~~decrease was a $2.5 million decrease in due diligence, merger-related and~~ merger ~~integration costs, a $273 thousand decrease in advertising expense~~with RBPI, and a ~~$244~~$700 thousand ~~decrease~~increase in ~~employee benefits. The merger expense and higher advertising expense during the first quarter of 2015 were~~other operating expenses, largely related to the January 1, 2015 Continental Merger. The decrease in employee benefits was related to the December 2015 settlement of the corporate pension plan, not only due to the elimination of the recurring pension costsdeferred compensation expense associated with ~~a defined benefits plan, but also due to~~ the ~~excess assets remaining~~valuation of Corporation stock held in the plan at settlement. For the three months ended March 31, 2016, excess assets from the settled pension plan were used to reduce 401(k) contribution costs by $300 thousand. Partially offsetting these decreases were increases of $868 thousand in salaries related to staff additions, which included the April 2015 Robert J. McAllister Agency acquisition, the October 2015 formation of the Key Capital Mortgage, Inc. subsidiary, and additions to our lending teams in our residential mortgage operation and our Hershey office, as well as the addition of a number of key senior management positions which had become vacant since the first quarter of 2015.

deferred compensation trusts.

The following table provides details ofother operating expenses for the three months ended March 31, ~~2016~~2017 and ~~2015:~~2016:

Three Months EndedMarch 31,

(dollars in thousands)
2016

2015

Debt prepayment penalties
$ — $ 177
Deferred compensation trust expense
(213
)
113
Director fees
185 151
Dues and subscriptions
101 100
FDIC insurance
434 375
Insurance
219 188
Loan processing
323 352
Miscellaneous
160 578
Mortgage servicing rights (“MSR”) amortization
136 114
MSR impairment
83 73
OREO impairment
— 89
Other taxes
9 22
Outsourced services
103 105
Portfolio maintenance
51 101
Postage
141 150
Stationary and supplies
153 187
Swap termination penalties
— 343
Telephone
399 398
Temporary help and recruiting
265 234
Travel and entertainment
198 154
Other operating expense
$ 2,747 $ 4,004

(dollars in thousands)	Three Months EndedMarch 31,
	2017		2016
Deferred compensation trust expense	$	125	$	(213	)
Director fees		157		185
Dues and subscriptions		154		101
FDIC insurance		374		434
Impairment of mortgage servicing rights		3		83
Insurance		207		219
Loan processing		523		268
Miscellaneous		156		160
Mortgage servicing rights (“MSR”) amortization		169		136
Other taxes		9		9
Outsourced services		99		103
Portfolio maintenance		99		51
Postage		148		141
Stationary and supplies		117		153
Telephone		400		399
Temporary help and recruiting		397		265
Travel and entertainment		175		198
Other operating expense	$	3,012	$	2,692

INCOME TAXES

Income tax expense for the three months ended March 31, ~~2016~~2017 was ~~$4.4~~$4.6 million, as compared to ~~$4.1~~$4.3 million for the same period in ~~2015.~~2016. The tax expense recorded reflects a decrease in the effective tax rate from ~~35.2% for the first quarter of 2015 to~~ 34.6% for the first quarter of ~~2016.~~2016 to 33.9% for the first quarter of 2017. The decrease in effective tax rate for the three months ended March 31, ~~2016~~2017 as compared to the same period in ~~2015~~2016 was ~~primarily~~ related to ~~non-tax-deductible~~recognition during the three months ended March 31, 2017 of excess tax benefits of $145 thousand related to the stock based compensation vesting and option exercises, partially offset by the non-deductible merger ~~expenses recorded during~~costs related to the anticipated RBPI merger incurred in the first quarter of ~~2015.~~2017.

BALANCE SHEET ANALYSIS

Total assets as of March 31, ~~2016~~2017 of ~~$3.06~~$3.29 billion ~~increased $27.3~~decreased $128.9 million from ~~$3.03~~$3.42 billion as of December 31, ~~2015.~~2016. The following tables detail the changes:

Loans and Leases

The table below compares the portfolio loans and leases outstanding at March 31, ~~2016~~2017 to December 31, ~~2015:~~2016:

	March 31, 2016					December 31, 2015					Change						March 31, 2017					December 31, 2016					Change
(dollars in thousands)	Balance		Percent of Portfolio			Balance		Percent of Portfolio			Amount			Percent			Balance		Percent of Portfolio			Balance		Percent of Portfolio			Amount			Percent
Commercial mortgage	$	1,044,415		43.9	%	$	964,259		42.5	%	$	80,156			8.3	%	$	1,137,870		44.5	%	$	1,110,898		43.8	%	$	26,972			2.4	%
Home equity lines & loans		205,896		8.7	%		209,473		9.2	%		(3,577	)		(1.7	) %		203,962		8.0	%		207,999		8.2	%		(4,037	)		(1.9	) %
Residential mortgage		412,006		17.3	%		406,404		17.9	%		5,602			1.4	%		418,264		16.4	%		413,540		16.3	%		4,724			1.1	%
Construction		119,194		5.0	%		90,421		4.0	%		28,773			31.8	%		145,699		5.7	%		141,964		5.6	%		3,735			2.6	%
Commercial and industrial		523,052		22.0	%		524,515		23.1	%		(1,463	)		(0.3	) %		567,917		22.2	%		579,791		22.9	%		(11,874	)		(2.0	) %
Consumer		21,427		0.9	%		22,129		1.0	%		(702	)		(3.2	) %		23,932		0.9	%		25,341		1.0	%		(1,409	)		(5.6	) %
Leases		52,851		2.2	%		51,787		2.3	%		1,064			2.1	%		57,945		2.3	%		55,892		2.2	%		2,053			3.7	%
Total portfolio loans and leases		2,378,841		100.0	%		2,268,988		100.0	%		109,853			4.8	%		2,555,589		100.0	%		2,535,425		100.0	%		20,164			0.8	%
Loans held for sale		7,807					8,987					(1,180	)		(13.1	) %		3,015					9,621					(6,606	)		(68.7	) %
Total loans and leases	$	2,386,648				$	2,277,975				$	108,673			4.8	%	$	2,558,604				$	2,545,046				$	13,558			0.5	%

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Cash and Investment Securities

As of March 31, ~~2016,~~2017, liquidity remained strong as the Corporation had ~~$27.7~~$69.4 million of cash balances at the Federal Reserve and ~~$6.3 million~~$590 thousand in other interest-bearing accounts, along with significant borrowing capacity as discussed in the “Liquidity” section below.

Investment securities available for sale as of March 31, ~~2016~~2017 totaled ~~$365.8~~$391.0 million, as compared to ~~$349.0~~$567.0 million as of December 31, ~~2015.~~2016. The ~~increase~~decrease was primarily related to ~~a $24.4~~the maturing, at the beginning of January 2017, of $200.0 million ~~increase in mortgage-backed securities, partially offset by decreases~~ of ~~$5.4 million and $1.4 million in~~short-term U.S. ~~government agency securities and municipal securities, respectively.~~Treasury bills.

Deposits, Borrowings and Subordinated Debt

Deposits and borrowings as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 were as follows:

	March 31, 2016					December 31, 2015					Change						March 31, 2017					December 31, 2016					Change
(dollars in thousands)	Balance		Percent of Deposits			Balance		Percent of Deposits			Amount			Percent			Balance		Percent of Deposits			Balance		Percent of Deposits			Amount			Percent
Interest-bearing checking	$	335,240		14.3	%	$	338,861		15.0	%	$	(3,621	)		(1.1	)%	$	395,131		15.0	%	$	379,424		14.7	%	$	15,707			4.1	%
Money market		773,637		33.0	%		749,726		33.3	%		23,911			3.2	%		757,071		28.7	%		761,657		29.6	%		(4,586	)		(0.6	)%
Savings		190,477		8.1	%		187,299		8.3	%		3,178			1.7	%		255,791		9.7	%		232,193		9.0	%		23,598			10.2	%
Wholesale non-maturity deposits		62,454		2.7	%		67,717		3.0	%		(5,263	)		(7.8	)%		69,471		2.6	%		74,272		2.9	%		(4,801	)		(6.5	)%
Wholesale time deposits		131,145		5.6	%		53,185		2.4	%		77,960			146.6	%		68,164		2.6	%		73,037		2.8	%		(4,873	)		(6.7	)%
Retail time deposits		207,597		8.8	%		229,253		10.2	%		(21,656	)		(9.4	)%		319,381		12.1	%		322,912		12.5	%		(3,531	)		(1.1	)%
Interest-bearing deposits		1,700,550		72.5	%		1,626,041		72.2	%		74,509			4.6	%		1,865,009		70.7	%		1,843,495		71.5	%		21,514			1.2	%
Non-interest-bearing deposits		643,492		27.5	%		626,684		27.8	%		16,808			2.7	%		771,556		29.3	%		736,180		28.5	%		35,376			4.8	%
Total deposits	$	2,344,042		100.0	%	$	2,252,725		100.0	%	$	91,317			4.1	%	$	2,636,565		100.0	%	$	2,579,675		100.0	%	$	56,890			2.2	%

	March 31, 2016					December 31, 2015					Change						March 31, 2017					December 31, 2016					Change
(dollars in thousands)	Balance		Percent of Borrowings			Balance		Percent of Borrowings			Amount			Percent			Balance		Percent of Borrowings			Balance		Percent of Borrowings			Amount			Percent
Short-term borrowings	$	37,010		11.5	%	$	94,167		24.5	%	$	(57,157	)		(60.7	)%	$	23,613		10.4	%	$	204,151		48.2	%	$	(180,538	)		(88.4	)%
Long-term FHLB advances and other borrowings		254,893		79.3	%		260,146		67.8	%		(5,253	)		(2.0	)%
Long-term FHLB advances																		174,711		76.7	%		189,742		44.8	%		(15,031	)		(7.9	)%
Subordinated notes		29,491		9.2	%		29,479		7.7	%		12			—	%		29,546		12.9	%		29,532		7.0	%		14			<0.1	%
Borrowed funds	$	321,394		100.0	%	$	383,792		100.0	%	$	(62,398	)		(16.3	) %	$	227,870		100.0	%	$	423,425		100.0	%	$	(195,555	)		(46.2	)%

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Capital

Consolidated shareholder’s equity of the Corporation was ~~$365.2~~$388.1 million, or ~~11.9%~~11.8% of total assets as of March 31, ~~2016,~~2017, as compared to ~~$365.7~~$381.1 million, or ~~12.1%~~11.1% of total assets as of December 31, ~~2015. During the first quarter of 2016, the Corporation contributed $15.0 million to the Bank, primarily to increase the Bank’s capital ratios.~~2016. The following table presents the Corporation’s and Bank’s capital ratios and the minimum capital requirements to be considered “Well Capitalized” by regulators as of March 31, ~~2016~~2017 and December 31, ~~2015:~~ 2016:

											Actual					Minimum to be Well-Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Actual					Minimum to be Well Capitalized					Amount		Ratio			Amount		Ratio
	Amount		Ratio			Amount		Ratio
March 31, 2016:
March 31, 2017:
Total (Tier II) capital to risk weighted assets
Corporation	$	296,845		12.13	%	$	244,720		10.00	%	$	321,604		12.30	%	$	261,501		10.00	%
Bank		278,252		11.39	%		244,295		10.00	%		293,689		11.25	%		261,091		10.00	%
Tier I capital to risk weighted assets
Corporation		250,208		10.22	%		195,858		8.00	%		274,570		10.50	%		209,201		8.00	%
Bank		261,106		10.69	%		195,402		8.00	%		276,201		10.58	%		208,873		8.00	%
Common equity Tier I capital to risk weighted assets
Corporation		250,208		10.22	%		122,411		5.00	%		274,570		10.50	%		169,976		6.50	%
Bank		261,106		10.69	%		122,126		5.00	%		276,201		10.58	%		169,709		6.50	%
Tier I Leverage ratio (Tier I capital to total quarterly average assets)
Corporation		250,208		8.76	%		185,657		6.50	%		274,570		8.77	%		156,506		5.00	%
Bank		261,106		9.15	%		185,485		6.50	%		276,201		8.83	%		156,319		5.00	%
Tangible common equity to tangible assets⁽¹⁾
Corporation		237,400		8.10	%		—		—			263,467		8.32	%		—		—
Bank		249,696		8.53	%		—		—			267,704		8.46	%		—		—

December 31,2015:
December 31,2016:
Total (Tier II) capital to risk weighted assets
Corporation	$	302,236		12.61	%	$	239,680		10.00	%	$	318,191		12.35	%	$	257,651		10.00	%
Bank		257,716		10.78	%		239,069		10.00	%		287,897		11.19	%		257,179		10.00	%
Tier I capital to risk weighted assets
Corporation		256,900		10.72	%		191,716		8.00	%		270,845		10.51	%		206,121		8.00	%
Bank		241,859		10.12	%		191,193		8.00	%		270,083		10.50	%		205,743		8.00	%
Common equity Tier I capital to risk weighted assets
Corporation		256,900		10.72	%		119,823		5.00	%		270,845		10.51	%		167,474		6.50	%
Bank		241,859		10.12	%		119,496		5.00	%		270,083		10.50	%		167,166		6.50	%
Tier I leverage ratio (Tier I capital to total quarterly average assets)
Corporation		256,900		9.02	%		185,127		6.50	%		270,845		8.73	%		155,035		5.00	%
Bank		241,859		8.51	%		184,734		6.50	%		270,083		8.73	%		154,761		5.00	%
Tangible common equity to tangible assets⁽¹⁾
Corporation		237,043		8.17	%		—		—			255,959		7.76	%		—		—
Bank		224,146		7.74	%		—		—			258,352		7.85	%		—		—

⁽¹⁾ There is no official regulatory guideline for the tangible common equity to tangible asset ratio.

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~~Both~~

The capital ratios for the Bank and the Corporation, ~~and~~as of March 31, 2017, as shown in the ~~Bank exceed~~above table, indicate levels well above the ~~capital levels~~regulatory minimum to be considered “well capitalized” ~~that are required by their respective regulators at~~under the ~~end of each period presented. The~~prompt corrective actions provisions. At the Bank level, all capital ratios ~~as of March 31, 2015 for the Corporation~~ have ~~decreased~~increased slightly from their December 31, ~~2015~~2016 levels ~~primarily as~~due to the effect of an increase in retained earnings and a ~~result of the~~decrease in other comprehensive loss partially offset by an increase in risk-weighted assets. At the Corporation level, Tier 1 and Total (Tier 1 & 2) capital to risk weighted assets declined by 1 and 5 basis points, respectively, related to an increase in risk-weighted assets and the decrease in retained earnings associated with the dividend payment during the first quarter of ~~2016. The loan growth during the first quarter of 2016 accounted for the majority of the risk-weighted asset growth, as cash balances that were present as of December 31, 2015,~~2017 which were risk-weighted at zero percent, were replaced largely by loans which are risk-weighted between 50% and 100%. In addition, the Corporation repurchased $8.0 million of treasury stock and issued dividends of $3.4 million during the first quarter of 2016, further reducing capital. These reductions were partially offset by the $8.3 million increase in retained earnings from net income for the first quarter of 2016. As noted above, the capital levels of the Bank, which were affected by the same factors which reduced the Corporation’s capital levels, were increased as a result of the $15 million downstream of capital from the Corporation.totaled $3.6 million. Neither the Corporation nor the Bank is under any agreement with regulatory authorities which would have a material effect on liquidity, capital resources or operations of the Corporation or the Bank.

Liquidity

The Corporation’s liquidity position is managed on a daily basis as part of the daily settlement function and continuously as part of the formal asset liability management process. The Bank’s liquidity is maintained by managing its core deposits as the primary source, purchasing federal funds, selling loans in the secondary market, borrowing from the FHLB and the Federal Reserve Bank, and purchasing and issuing wholesale certificates of deposit as its secondary sources.

Unused availability is detailed on the following table:

(dollars in millions)	Available Funds as of March 31, 2016		Percent of Total Borrowing Capacity			Available Funds asof December 31, 2015		Percent of Total Borrowing Capacity			Dollar Change		Percent Change			Available Funds as of March 31, 2017		Percent of Total Borrowing Capacity			Available Funds as of December 31, 2016		Percent of Total Borrowing Capacity			Dollar Change			Percent Change
Federal Home Loan Bank of Pittsburgh	$	846.9		74.2	%	$	824.6		72.4	%	$	22.3		2.7	%	$	1,036.8		84.5	%	$	886.0		72.9	%	$	150.8			17.0	%
Federal Reserve Bank of Philadelphia		131.4		100.0	%		131.0		100.0	%		0.4		0.3	%		108.0		100.0	%		117.3		100.0	%		(9.3	)		(7.9	)%
Fed Funds Lines (six banks)		79.0		100.0	%		34.0		53.1	%		45.0		132.4	%		79.0		100.0	%		79.0		100.0	%		—			—	%
Revolving line of credit with correspondent bank		5.0		100.0	%		5.0		100.0	%		—		—	%		5.0		100.0	%		5.0		100.0	%		—			—	%
	$	1,062.3		78.3	%	$	994.6		75.1	%	$	67.7		6.8	%	$	1,228.8		86.6	%	$	1,087.3		76.7	%	$	141.5			13.0	%

Quarterly, the ALCO reviews the Corporation’s liquidity needs and reports its findings to the ~~Risk Management Committee of the~~ Corporation’s Board of Directors.

The Corporation has an agreement with CDC to provide up to $5 million, excluding accrued interest, of money market deposits at an agreed upon rate currently at 0.45%. The Corporation had $1.7 million in balances, including accrued interest, as of March 31, 2016 under this program. The Corporation can request an increase in the agreement amount as it deems necessary. In addition, the Corporation has an agreement with IND to provide up to $40 million, excluding accrued interest, of money market and NOW funds at an agreed upon interest rate equal to the current Fed Funds rate plus 20 basis points. The Corporation had ~~$36.1~~$42.8 million in balances as of March 31, ~~2016~~2017 under this program.

The Corporation continually evaluates the cost and mix of its retail and wholesale funding sources relative to earning assets and expected future earning-asset growth. The Corporation believes that with its current branch network, along with the available borrowing capacity at FHLB and other sources, it has sufficient capacity available to fund expected earning-asset growth.

Discussion of Segments

The Corporation has two principal segments as defined by FASB ASC 280, “Segment Reporting.”The segments are Banking and Wealth Management (see Note 10 in the accompanying Notes to Unaudited Consolidated Financial Statements).

The Wealth Management Segment, as discussed in the Non-Interest Income section above, recorded a pre-tax segment profit (“PTSP”) of ~~$3.6~~$3.7 million for the three months ended March 31, ~~2016,~~2017, as compared to PTSP of ~~$4.0~~$3.6 million for the same period in ~~2015.~~2016. The Wealth Management Segment provided ~~28.5%~~26.9% of the Corporation’s pre-tax profit for the three months ended March 31, ~~2016~~2017 as compared to ~~34.4%~~28.5% for the same period in ~~2015.~~2016. While insurance revenues ~~increased~~decreased by ~~$255~~$513 thousand for the first quarter of ~~2016~~2017 as compared to the same period in ~~2015,~~2016, fees for wealth management services ~~decreased~~increased by ~~$273~~$471 thousand for the same period. The decrease in PTSP and the decrease in the contribution percentage to the consolidated pre-tax profit was primarily a result of an increase in non-interest expenses between March 31, 2015 and March 31, 2016. Accounting significantly for this increase in non-interest expense was the $378 thousand increase in salaries and wages between the periods, largely due to the added staff from the April 2015 acquisition of RJM.periods.

The Banking Segment recorded a PTSP of ~~$9.0~~$10.0 million for the three months ended March 31, ~~2016~~2017 as compared to PTSP of ~~$7.6~~$9.0 million for the same period in ~~2015.~~2016. The Banking Segment provided ~~71.5%~~73.1% of the Corporation’s pre-tax profit for the three months ended March 31, ~~2016~~2017 as compared to ~~65.6%~~71.5% for the same period in ~~2015.~~2016.

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Off Balance Sheet Risk

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. These financial instruments include commitments to extend credit and standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at March 31, ~~2016~~2017 were ~~$647.4~~$682.7 million, as compared to ~~$634.2~~$675.4 million at December 31, ~~2015.~~2016.

Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in granting loan facilities to customers. The Bank’s obligation under standby letters of credit at March 31, ~~2016~~2017 amounted to ~~$30.0~~$12.3 million, as compared to ~~$14.6~~$12.7 million at December 31, ~~2015.~~2016.

Estimated fair values of the Corporation’s off-balance sheet instruments are based on fees and rates currently charged to enter into similar loan agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. Since fees and rates charged for off-balance sheet items are at market levels when set, there is no material difference between the stated amount and the estimated fair value of off-balance sheet instruments.

Contractual Cash Obligations of the Corporation as ofMarch 31, ~~2016~~2017:

(dollars in millions)	Total		Within 1 Year		2 – 3 Years		4 – 5 Years		After 5 Years		Total		Within 1 Year		2 – 3 Years		4 – 5 Years		After 5 Years
Deposits without a stated maturity	$	2,005.3	$	2,005.3	$	—	$	—	$	—	$	2,249.1	$	2,249.1	$	—	$	—	$	—
Wholesale and retail time deposits		338.7		221.4		106.0		11.3		—		387.6		312.4		69.4		5.8		—
Short-term borrowings		37.0		37.0		—		—		—		23.6		23.6		—		—		—
Long-term FHLB advances and other borrowings		249.8		75.0		134.1		40.7		—
Long-term FHLB advances												174.7		91.5		75.7		7.5		—
Operating leases		35.0		4.3		8.4		10.4		11.9		30.4		4.2		7.9		5.8		12.5
Purchase obligations		8.1		2.3		2.9		2.9		—		8.1		2.3		2.9		2.9		—
Total	$	2,673.9	$	2,345.3	$	251.4	$	65.3		11.9	$	2,873.5	$	2,683.1	$	155.9	$	22.0		12.5

Other Information

Effects of Inflation

Inflation has some impact on the Corporation’s operating costs. Unlike many industrial companies, however, substantially all of the Corporation’s assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on the Corporation’s performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as prices of goods and services.

Effects of Government Monetary Policies

The earnings of the Corporation are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. An important function of the Federal Reserve Board is to regulate the money supply and interest rates. Among the instruments used to implement those objectives are open market operations in United States government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits, and their use may also affect rates charged on loans or paid for deposits.

The Corporation is a member of the Federal Reserve System and, therefore, the policies and regulations of the Federal Reserve Board have a significant effect on its deposits, loans and investment growth, as well as the rate of interest earned and paid, and are expected to affect the Corporation’s operations in the future. The effect of such policies and regulations upon the future business and earnings of the Corporation cannot be predicted.

Special Cautionary Notice Regarding Forward Looking Statements

Certain of the statements contained in this ~~Quarterly Report on Form 10-Q, including, without limitation, this Item 2 of Part I,~~report and the documents incorporated by reference herein may constitute forward-looking statements for the purposes of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, and may involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Bryn Mawr Bank Corporation (the “Corporation”) to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements include statements with respect to the Corporation’s financial goals, business plans, business prospects, credit quality, credit risk, reserve adequacy, liquidity, origination and sale of residential mortgage loans, mortgage servicing rights, the effect of changes in accounting standards, and market and pricing trends loss. The words The words “may”, “would”, “could”, “will”, “likely”, “expect,” “anticipate,” “intend”, “estimate”, “plan”, “forecast”, “project” and “believe” and similar expressions are intended to identify such forward-looking statements. The Corporation’s actual results may differ materially from the results anticipated by the forward-looking statements due to a variety of factors, including without limitation:

●

the effect of future economic conditions on the Corporation and its customers, including economic factors which affect consumer confidence in the securities markets, wealth creation, investment and savings patterns, the real estate market, and the Corporation’s interest rate risk exposure and credit risk;

●

~~changes in the securities markets with respect to the market values of financial assets and the stability of particular securities markets;~~

●

~~any future downgrades in the credit rating of the U.S. Government and federal agencies;~~

●

~~governmental monetary and fiscal policies, as well as legislation and regulatory changes;~~

●

results of examinations by the Federal Reserve Board, including the possibility that the Federal Reserve Board may, among other things, require us to increase our allowance for loan losses or to write down assets;

●

~~changes in accounting requirements or interpretations;~~

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●•

~~changes in existing statutes, regulatory guidance, legislation or judicial decisions~~local, regional, national and international economic conditions and the impact they may have on us and our customers and our assessment of that ~~adversely affect our business, including changes in federal income tax, state income taxes, without limitation, the Pennsylvania Bank Shares Tax or other tax regulations;~~impact;

●

~~the risks of changes in interest rates on the level and composition of deposits, loan demand, and the value of loan collateral and securities, as well as interest rate risk;~~

our need for capital;

●

the effects of competition from other commercial banks, thrifts, mortgage companies, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money-market and mutual funds and other institutions operating in the Corporation’s trade market area and elsewhere including institutions operating locally, regionally, nationally and internationally and such competitors offering banking products and services by mail, telephone, computer and the Internet;

lower demand for our products and services and lower revenues and earnings could result from an economic recession;

●

~~any extraordinary events (such as natural disasters, acts of terrorism, wars or political conflicts);~~

lower earnings could result from other-than-temporary impairment charges related to our investment securities portfolios or other assets;

●

~~the Corporation’s need for capital;~~

changes in monetary or fiscal policy, or existing statutes, regulatory guidance, legislation or judicial decisions that adversely affect our business, including changes in federal income tax or other tax regulations;

●

the Corporation’s success in continuing to generate new business in its existing markets, as well as its success in identifying and penetrating targeted markets and generating a profit in those markets in a reasonable time;

changes in the level of non-performing assets and charge-offs;

●

~~the Corporation’s ability to continue to generate investment results for customers and the ability to continue to develop investment products in a manner that meets customers’ needs;~~

changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements;

●

~~differences in the actual financial results, cost savings, and revenue enhancements associated with our acquisitions;~~

other changes in accounting requirements or interpretations;

●

~~changes in consumer and business spending, borrowing and savings habits and demand for financial services in our investment products in a manner that meets customers’ needs;~~

the accuracy of assumptions underlying the establishment of provisions for loan and lease losses and estimates in the value of collateral, and various financial assets and liabilities;

●

~~the Corporation’s timely development of competitive new products and services in a changing environment and the acceptance of such products and services by customers;~~

inflation, securities market and monetary fluctuations;

●

~~the Corporation’s ability to originate, sell and service residential mortgage loans;~~

changes in the securities markets with respect to the market values of financial assets and the stability of particular securities markets;

●

the accuracy of assumptions underlying the establishment of reserves for loan losses and estimates in the value of collateral, the market value of mortgage servicing rights and various financial assets and liabilities;

changes in interest rates, spreads on interest-earning assets and interest-bearing liabilities, and interest rate sensitivity;

●

~~the Corporation’s ability to retain key members of the senior management team;~~

prepayment speeds, loan originations and credit losses;

●

~~the ability of key third-party providers to perform their obligations to the Corporation and the Bank;~~

changes in the value of our mortgage servicing rights;

●

~~technological changes being more difficult or expensive than anticipated;~~

sources of liquidity and financial resources in the amounts, at the times and on the terms required to support our future business;

●

material differences in the actual financial results of the Corporation’s merger and acquisition activities compared with expectations, such as with respect to the full realization of anticipated cost savings and revenue enhancements within the expected time frame; and

legislation or other governmental action affecting the financial services industry as a whole, us or our subsidiaries individually or collectively, including changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we must comply;

●

results of examinations by the Federal Reserve Board, including the possibility that such regulator may, among other things, require us to increase our allowance for loan losses or to write down assets;

our common stock outstanding and common stock price volatility;

fair value of and number of stock-based compensation awards to be issued in future periods;

with respect to mergers and acquisitions, our business and the acquired business will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected;

revenues following the completion of a merger or acquisition may be lower than expected;

deposit attrition, operating costs, customer loss and business disruption following a merger or acquisition, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected;

material differences in the actual financial results of our merger and acquisition activities compared with expectations, such as with respect to the full realization of anticipated cost savings and revenue enhancements within the expected time frame;

our success in continuing to generate new business in our existing markets, as well as their success in identifying and penetrating targeted markets and generating a profit in those markets in a reasonable time;

our ability to continue to generate investment results for customers and the ability to continue to develop investment products in a manner that meets customers’ needs;

changes in consumer and business spending, borrowing and savings habits and demand for financial services in the relevant market areas;

rapid technological developments and changes;

the effects of competition from other commercial banks, thrifts, mortgage companies, finance companies, credit unions, securities brokerage firms, insurance companies, money-market and mutual funds and other institutions operating in our market areas and elsewhere including institutions operating locally, regionally, nationally and internationally together with such competitors offering banking products and services by mail, telephone, computer and the internet;

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our ability to continue to introduce competitive new products and services on a timely, cost-effective basis and the mix of those products and services;

containing costs and expenses;

protection and validity of intellectual property rights;

reliance on large customers;

technological, implementation and cost/financial risks in contracts;

the outcome of pending and future litigation and governmental proceedings;

any extraordinary events (such as natural disasters, acts of terrorism, wars or political conflicts);

ability to retain key employees and members of senior management;

the ability of key third-party providers to perform their obligations to us and our subsidiaries; and

Our success in managing the risks involved in the foregoing;

as it relates to our pending merger with RBPI, that required regulatory, shareholder or other approvals are not obtained or other closing conditions are not satisfied in a timely manner or at all;

that prior to the completion of the transaction or thereafter, the Corporation’s and RBPI’s respective businesses may not perform as expected due to transaction-related uncertainty or other factors;

that the parties are unable to successfully implement integration strategies;

the inability of RBPI to cash out outstanding warrants to purchase RBPI Class A Common Stock;

reputational risks and the reaction of the companies’ customers to the transaction;

diversion of management time on merger-related issues; the integration of acquired business with the Corporation may take longer than anticipated or be more costly to complete and that the anticipated benefits, including any anticipated cost savings or strategic gains may be significantly harder to achieve or take longer than anticipated or may not be achieved; the need for capital, ability to control operating costs and expenses, and to manage loan and lease delinquency rates;

the credit risks of lending activities and overall quality of the composition of acquired loan, lease and securities portfolio;

the inability of key third-party providers to perform their obligations to us.

~~the Corporation’s success in managing the risks involved in the foregoing.~~

All written or oral forward-looking statements attributed to the Corporation ~~and the Bank~~ are expressly qualified in their entirety by use of the foregoing cautionary statements. All forward-looking statements included in this ~~Quarterly~~ Report and the documents incorporated ~~documents~~by reference herein are based upon the Corporation’s beliefs and assumptions as of the date of this ~~Quarterly~~ Report. The Corporation assumes no obligation to update any forward-looking statement. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this ~~Quarterly~~ Report or incorporated documents might not occur and you should not put undue reliance on any forward-looking statements.

Additional Information About the Merger with RBPI and Where to Find It

In connection with the proposed merger transaction between the Corporation and RBPI, on April 20, 2017, the Corporation filed with the Securities and Exchange Commission a Registration Statement on Form S-4/A which included a Proxy Statement of RBPI, and a Prospectus of the Corporation, as well as other relevant documents concerning the proposed transaction. Shareholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the merger with RBPI and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information.

A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about the Corporation and RBPI, may be obtained at the SEC’s Internet site (http://www.sec.gov).

The Corporation and RBPI and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of RBPI in connection with the proposed merger. Information about the directors and executive officers of the Corporation is set forth in the proxy statement for the Corporation’s 2017 annual meeting of shareholders, filed with the SEC on a Schedule 14A on March 10, 2017. Information about the directors and executive officers of RBPI is set forth in the Form 10-K for RBPI, as filed with the SEC on March 22, 2017. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger. Free copies of this document may be obtained as described in the preceding paragraph.

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ITEM 3.Quantitative and Qualitative Disclosures About Market Risks

See the discussion of quantitative and qualitative disclosures about market risks in the Corporation’s ~~2015~~2016 Annual Report, as updated by the disclosure in “Management’s Discussion and Analysis of Results of Operations – Interest Rate Summary,” “– Summary of Interest Rate Simulation,” and “– Gap Analysis” in this quarterly report on Form 10-Q.

ITEM 4. Controls and Procedures

As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer, Francis J. Leto, and Chief Financial Officer, Michael W. Harrington, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of March 31, ~~2016.~~2017.

There were no changes in the Corporation’s internal controls over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II OTHER ~~INFORMATION.~~INFORMATION.

ITEM 1. Legal ~~Proceedings.~~Proceedings.

~~None~~.

In a Complaint filed on April 11, 2017 in the U.S. District Court for the Eastern District of Pennsylvania, the Corporation was named as a defendant in a lawsuit entitled Parshall v. Royal Bancshares of Pennsylvania, Inc., et al. In relevant part, Mr. Parshall, a purported shareholder of RBPI, alleges that the Corporation, as a “control person” of RBPI, should be liable for what Mr. Parshall claims to be inadequate disclosures in the proxy statement/prospectus RBPI sent to its shareholders in connection with soliciting approval of the Corporation’s acquisition of RBPI. Mr. Parshall purports to bring this claim on behalf of a class of similarly-situated RBPI shareholders, although no class has yet been certified by the court. Mr. Parshall does not articulate any monetary damages in his complaint, but seeks the right to prevent the Corporation’s acquisition of RBPI (or in the alternative, if it does proceed, rescind it or award rescissory damages), an order for an amended proxy statement/prospectus, a declaratory judgment that the defendants, including the Corporation, violated federal securities laws, and unspecified attorney's fees and litigation costs.

ITEM 1A. ~~Risk~~ RiskFactors
None.

ITEM 2. UnregisteredSalesof Equity Securities and Use of Proceeds

Share Repurchase

The following table presents the shares repurchased by the Corporation during the first quarter of ~~2016~~2017⁽¹⁾:

Period

Total Number of
Shares Purchased⁽²⁾

Average Price Paid
Per Share

Total Number of
Shares Purchased
as
Part of Publicly
Announced Plans
or
Programs

Maximum
Number of
Shares that
May Yet Be
Purchased
Under the Plan
or Programs

January 1, 2016 – January 31, 2016
286,700 $ 27.80 286,700 189,300
February 1, 2016 – February 29, 2016
— $ — — 189,300
March 1, 2016 – March 31, 2016
975 $ 25.41 — 189,300

Total
287,675 $ 27.79 286,700 189,300

Period	Total Number of Shares Purchased⁽²⁾		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plan or Programs
January 1, 2017 – January 31, 2017		—	$	—		—		189,300
February 1, 2017 – February 28, 2017		—	$	—		—		189,300
March 1, 2017 – March 31, 2017		442	$	42.00		—		189,300

Total		442	$	42.00		—		189,300

^⁽¹⁾

^⁽²⁾	OnMarch 2, 20167,~~975~~442 shares were purchased to cover statutory tax withholding requirements on vested stock awards for certain officers of the Corporation and Bank.

ITEM 3. ~~Defaults~~Defaults Upon Senior Securities

None.

ITEM 4. MineSafetyDisclosures.
Not applicable.

ITEM 5. Other ~~Information~~Information

None.

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ITEM 6.Exhibits

Exhibit No.	Description and References

2.1	Agreement and Plan of Merger, dated as of January 30, 2017, by and between Bryn Mawr Bank Corporation and Royal Bancshares of Pennsylvania, Inc., incorporated by reference to Exhibit 2.1 to the Corporation’s Form 8-K filed with the SEC on January 31, 2017
3.1		Amended and Restated By-Laws, effective November 20, 2007, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
3.2		Amended and Restated Articles of Incorporation, effective November 21, 2007, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
31.1		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
31.2		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

101.INS XBRL		Instance Document, filed herewith

101.SCH XBRL		Taxonomy Extension Schema Document, filed herewith

101.CAL XBRL		Taxonomy Extension Calculation Linkbase Document, filed herewith

101.DEF XBRL		Taxonomy Extension Definition Linkbase Document, filed herewith

101.LAB XBRL		Taxonomy Extension Label Linkbase Document, filed herewith

101.PRE XBRL		Taxonomy Extension Presentation Linkbase Document, filed herewith

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Signatures

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

	Bryn Mawr Bank Corporation

Date: May ~~6, 2016~~5, 2017	By:	/s/ Francis J. Leto
		Francis J. Leto
		President & Chief Executive Officer
		(Principal Executive Officer)

Date: May ~~6, 2016~~5, 2017	By:	/s/ Michael W. Harrington
		Michael W. Harrington
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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Form 10-Q

Index to Exhibits

Exhibit No.	Description and References

2.1	Agreement and Plan of Merger, dated as of January 30, 2017, by and between Bryn Mawr Bank Corporation and Royal Bancshares of Pennsylvania, Inc., incorporated by reference to Exhibit 2.1 to the Corporation’s Form 8-K filed with the SEC on January 31, 2017
3.1		Amended and Restated By-Laws, effective November 20, 2007, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
3.2		Amended and Restated Articles of Incorporation, effective November 21, 2007, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
31.1		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
31.2		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

101.INS XBRL		Instance Document, filed herewith

101.SCH XBRL		Taxonomy Extension Schema Document, filed herewith

101.CAL XBRL		Taxonomy Extension Calculation Linkbase Document, filed herewith

101.DEF XBRL		Taxonomy Extension Definition Linkbase Document, filed herewith

101.LAB XBRL		Taxonomy Extension Label Linkbase Document, filed herewith

101.PRE XBRL		Taxonomy Extension Presentation Linkbase Document, filed herewith

55Page 59

(dollars in thousands, except per share information)
	For the Three Months Ended March 31, 2016
	Shares of Common Stock Issued		Common Stock		Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Shareholders' Equity

Balance December 31, 2015		20,931,416	$	20,931	$	228,814		$	(58,144	)	$	(412	)	$	174,522		$	365,711
Net income		-		-		-			-			-			8,274			8,274
Dividends declared, $0.20 per share		-		-		-			-			-			(3,409	)		(3,409	)
Other comprehensive income, net of tax expense of $1,042		-		-		-			-			1,914			-			1,914
Stock based compensation		-		-		403			-			-			-			403
Excess tax benefit (deficiency) from stock-based compensation		-		-		(3	)		-			-			-			(3	)
Net purchase of treasury stock		-		-		-			(7,996	)		-			-			(7,996	)
Common stock issued through share-based awards and options exercises		17,953		18		265			-			-			-			283
Balance March 31, 2016		20,949,369	$	20,949	$	229,479		$	(66,140	)	$	1,502		$	179,387		$	365,177

(dollars in thousands)	Original Estimates		Adjustments to Estimates			Final Valuation
Consideration paid:
Cash paid at closing	$	500	$	—		$	500
Contingent payment liability		500		—			500
Value of consideration		1,000		—			1,000

Assets acquired:
Cash operating accounts		20		—			20
Intangible assets – trade name		129		(129	)		—
Intangible assets – customer relationships		424		—			424
Intangible assets – non-competition agreements		257		—			257
Other assets		4		—			4
Total assets		834		(129	)		705

Liabilities assumed:
Deferred tax liability		336		(45	)		291
Other liabilities		46		—			46
Total liabilities		382		(45	)		337

Net assets acquired		452		(84	)		368

Goodwill resulting from acquisition of RJM	$	548	$	84		$	632

(dollars in thousands)	As of December 31, 2015
	Outstanding Principal		Remaining Loan Mark			Recorded Investment
Commercial mortgage	$	197,532	$	(5,844	)	$	191,688
Home equity lines and loans		40,258		(1,974	)		38,284
Residential mortgage		93,230		(3,313	)		89,917
Construction		3,807		(541	)		3,266
Commercial and industrial		67,181		(5,412	)		61,769
Consumer		220		(25	)		195
Total	$	402,228	$	(17,109	)	$	385,119

	Three Months EndedMarch 31,
	SERP I and SERP II				QDBP					PRBP
(dollars in thousands)	2016		2015		2016		2015			2016		2015
Service cost	$	—	$	—	$	—	$	—		$	—	$	—
Interest cost		46		46		—		397			4		5
Expected return on plan assets		—		—		—		(804	)		—		—
Amortization of prior service costs		—		—		—					—		—
Amortization of net loss		14		16		—		479			10		9
Net periodic benefit cost	$	60	$	62	$	—	$	72		$	14	$	14

	Three Months EndedMarch 31, 2016									Three Months EndedMarch 31,2015
(dollars in thousands)	Banking			Wealth Management			Consolidated			Banking			Wealth Management			Consolidated

Net interest income	$	25,901		$	1		$	25,902		$	24,794		$	1		$	24,795
Less: loan loss provision		1,410			—			1,410			569			—			569
Net interest income after loan loss provision		24,491			1			24,492			24,225			1			24,226
Other income:
Fees for wealth management services		—			8,832			8,832			—			9,105			9,105
Service charges on deposit accounts		702			—			702			712			—			712
Loan servicing and other fees		492			—			492			591			—			591
Net (loss) gain on sale of loans		760			—			760			808			—			808
Net gain on sale of available for sale securities		(15	)		—			(15	)		810			—			810
Net (loss) gain on sale of other real estate owned		(76	)		—			(76	)		15			—			15
Insurance commissions		—			1,276			1,276			—			1,021			1,021
Other operating income		1,201			36			1,237			1,662			41			1,703
Total other income		3,064			10,144			13,208			4,598			10,167			14,765

Other expenses:
Salaries & wages		7,897			3,841			11,738			7,407			3,463			10,870
Employee benefits		1,645			840			2,485			1,986			743			2,729
Occupancy & equipment	2,082				406			2,488			2,050			416			2,466
Amortization of intangible assets		220			671			891			341			641			982
Professional fees		799			14			813			654			19			673
Other operating expenses		5,772			864			6,636			8,690			1,019			9,709
Total other expenses		18,415			6,636			25,051			21,128			6,301			27,429
Segment profit		9,140			3,509			12,649			7,695			3,867			11,562
Intersegment (revenues) expenses*		(99	)		99			—			(105	)		105			—
Pre-tax segment profit after eliminations	$	9,041		$	3,608		$	12,649		$	7,590		$	3,972		$	11,562
% of segment pre-tax profit after eliminations		71.5	%		28.5	%		100.0	%		65.6	%		34.4	%		100.0	%
Segment assets(dollars in millions)	$	3,010		$	48		$	3,058		$	2,894		$	49		$	2,943

(dollars in thousands)	Balance December 31, 2015		Additions/ Adjustments		Amortization			Balance March 31, 2016		Amortization Period (Years)
Goodwill – Wealth	$	20,412	$	—	$	—		$	20,412		Indefinite
Goodwill – Banking		80,783		—		—			80,783		Indefinite
Goodwill – Insurance		3,570		—		—			3,570		Indefinite
Total	$	104,765	$	—	$	—		$	104,765
Core deposit intangible	$	4,272	$	—	$	(208	)	$	4,064		10
Customer relationships		14,384		—		(408	)		13,976	10	to	20
Non-compete agreements		2,932		—		(263	)		2,669	5	to	10
Trade name		2,165		—		—			2,165		Indefinite
Favorable lease		150		—		(12	)		138		5.75
Total	$	23,903	$	—	$	(891	)	$	23,012
Grand total	$	128,668	$	—	$	(891	)	$	127,777