UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20459

FORM 10-Q

(Mark One)



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

For the quarterly period ended September 30, ~~2014~~2015, or



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

For the transition period from to

Commission File No. 0-10587

FULTON FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



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

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

(717) 291-2411

(Registrant’s telephone number, including area code)

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

Common Stock, $2.50 Par Value ~~–185,265,000~~–174,031,000 shares outstanding as of October ~~31, 2014.~~30, 2015.

FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, ~~2014~~2015

INDEX



Description		Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

(a)	Consolidated Balance Sheets - September 30, ~~2014~~2015 and December 31, ~~2013~~2014	3

(b)	Consolidated Statements of Income - Three and nine months ended September 30, ~~2014~~2015 and ~~2013~~2014	4

(c)	Consolidated Statements of Comprehensive Income - Three and nine months ended September 30, ~~2014~~2015 and ~~2013~~2014	5

(d)	Consolidated Statements of Shareholders’ Equity - Nine months ended September 30, ~~2014~~2015 and ~~2013~~2014	6

(e)	Consolidated Statements of Cash Flows - Nine months ended September 30, ~~2014~~2015 and ~~2013~~2014	7

(f)	Notes to Consolidated Financial Statements	8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		39

Item 3. Quantitative and Qualitative Disclosures about Market Risk		6667

Item 4. Controls and Procedures		7071

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		7172

Item 1A. Risk Factors		7172

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		7273

Item 3. Defaults Upon Senior Securities		7273

Item 4. Mine Safety Disclosures		7273

Item 5. Other Information		7273

Item 6. Exhibits		7273

Signatures		7374

Exhibit Index		7475

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share data)


	September 30, 2014			December 31, 2013			September 30, 2015			December 31, 2014
	(unaudited)						(unaudited)
ASSETS
Cash and due from banks	$	220,946		$	218,540		$	93,803		$	105,702
Interest-bearing deposits with other banks	291,523			163,988			510,943			358,130
Federal Reserve Bank and Federal Home Loan Bank stock	86,056			84,173			68,977			64,953
Loans held for sale	25,212			21,351			26,937			17,522
Available for sale investment securities	2,470,609			2,568,434			2,436,337			2,323,371
Loans, net of unearned income	13,030,405			12,782,220			13,536,361			13,111,716
Less: Allowance for loan losses	(189,477		)	(202,780		)	(167,136		)	(184,144		)
Net Loans	12,840,928			12,579,440			13,369,225			12,927,572
Premises and equipment	224,441			226,021			225,705			226,027
Accrued interest receivable	43,544			44,037			42,846			41,818
Goodwill and intangible assets	532,117			533,076			531,562			531,803
Other assets	502,798			495,574			531,724			527,869
Total Assets	$	17,238,174		$	16,934,634		$	17,838,059		$	17,124,767
LIABILITIES
Deposits:
Noninterest-bearing	$	3,556,810		$	3,283,172		$	3,906,228		$	3,640,623
Interest-bearing	9,776,817			9,208,014			10,178,166			9,726,883
Total Deposits	13,333,627			12,491,186			14,084,394			13,367,506
Short-term borrowings:
Federal funds purchased	6,606			582,436			5,527			6,219
Other short-term borrowings	558,346			676,193			426,104			323,500
Total Short-Term Borrowings	564,952			1,258,629			431,631			329,719
Accrued interest payable	17,425			15,218			14,727			18,045
Other liabilities	225,875			222,830			301,970			273,419
Federal Home Loan Bank advances and long-term debt	1,018,289			883,584			979,433			1,139,413
Total Liabilities	15,160,168			14,871,447			15,812,155			15,128,102
SHAREHOLDERS’ EQUITY
Common stock, $2.50 par value, 600 million shares authorized, 218.1 million shares issued in 2014 and 217.8 million shares issued in 2013	545,207			544,568
Common stock, $2.50 par value, 600 million shares authorized, 218.6 million shares issued in 2015 and 218.2 million shares issued in 2014							546,444			545,555
Additional paid-in capital	1,438,343			1,432,974			1,447,569			1,420,523
Retained earnings	538,749			463,843			622,237			558,810
Accumulated other comprehensive loss	(11,948		)	(37,341		)	(13,219		)	(17,722		)
Treasury stock, at cost, 32.9 million shares in 2014 and 25.2 million shares in 2013	(432,345		)	(340,857		)
Treasury stock, at cost, 44.8 million shares in 2015 and 39.3 million shares in 2014							(577,127		)	(510,501		)
Total Shareholders’ Equity	2,078,006			2,063,187			2,025,904			1,996,665
Total Liabilities and Shareholders’ Equity	$	17,238,174		$	16,934,634		$	17,838,059		$	17,124,767

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


(in thousands, except per-share data)	Three months ended September 30						Nine months ended September 30						Three months ended September 30					Nine months ended September 30
	2014			2013			2014			2013			2015		2014			2015			2014
INTEREST INCOME
Loans, including fees	$	133,741		$	136,150		$	397,011		$	405,312		$	131,804	$	133,741		$	391,491		$	397,011
Investment securities:
Taxable	12,278			12,977			37,962			40,890			11,252		12,278			33,478			37,962
Tax-exempt	2,219			2,327			6,865			7,151			1,904		2,219			5,872			6,865
Dividends	339			337			996			1,091			190		339			834			996
Loans held for sale	237			382			585			1,261			194		237			632			585
Other interest income	976			659			3,065			1,527			884		976			3,922			3,065
Total Interest Income	149,790			152,832			446,484			457,232			146,228		149,790			436,229			446,484
INTEREST EXPENSE
Deposits	8,998			8,743			25,579			28,642			10,217		8,998			30,093			25,579
Short-term borrowings	297			691			1,470			1,900			92		297			272			1,470
Long-term debt	11,129			10,865			32,606			32,448			10,225		11,129			33,669			32,606
Total Interest Expense	20,424			20,299			59,655			62,990			20,534		20,424			64,034			59,655
Net Interest Income	129,366			132,533			386,829			394,242			125,694		129,366			372,195			386,829
Provision for credit losses	3,500			9,500			9,500			38,000			1,000		3,500			(500		)	9,500
Net Interest Income After Provision for Credit Losses	125,866			123,033			377,329			356,242			124,694		125,866			372,695			377,329
NON-INTEREST INCOME
Service charges on deposit accounts	12,801			13,938			37,064			42,700			12,982		12,801			37,188			37,064
Investment management and trust services	11,120			10,420			33,417			31,117			11,237		11,120			33,137			33,417
Other service charges and fees	9,954			9,518			29,407			27,536			10,965		9,954			31,316			29,407
Mortgage banking income	4,038			7,123			13,384			26,293			3,864		4,038			13,891			13,384
Investment securities gains, net:
Net gains on sales of investment securities													1,730		99			8,290			1,223
Net other-than-temporary impairment losses													—		(18		)	—			(30		)
Investment securities gains, net													1,730		81			8,290			1,193
Other	3,906			3,725			10,813			11,315			3,996		3,906			12,178			10,813
Investment securities gains, net:
Other-than-temporary impairment losses	(84		)	(125		)	(122		)	(146		)
Less: Portion of gain recognized in other comprehensive income (loss) (before taxes)	66			28			92			22
Net other-than-temporary impairment losses	(18		)	(97		)	(30		)	(124		)
Net gains on sales of investment securities	99			2,730			1,223			8,095
Investment securities gains, net	81			2,633			1,193			7,971
Total Non-Interest Income	41,900			47,357			125,278			146,932			44,774		41,900			136,000			125,278
NON-INTEREST EXPENSE
Salaries and employee benefits	62,434			63,344			185,623			188,046			65,308		62,434			195,365			185,623
Net occupancy expense	11,582			11,519			36,649			34,810			10,710		11,582			36,211			36,649
Other outside services	8,632			5,048			19,684			13,223			7,373		8,632			21,248			19,684
Loss on redemption of trust preferred securities													5,626		—			5,626			—
Data processing	4,689			4,757			12,816			13,169			5,105		4,689			14,767			12,816
Software	3,353			3,268			9,487			9,110			3,984		3,353			10,678			9,487
Equipment expense	3,307			3,646			10,269			11,447			3,595		3,307			10,888			10,269
FDIC insurance expense													2,867		2,882			8,574			8,186
Professional fees	3,252			3,329			9,715			9,771			2,828		3,252			8,430			9,715
FDIC insurance expense	2,882			2,918			8,186			8,766
Supplies and postage													2,708		2,560			7,803			7,337
Marketing	1,798			2,251			5,719			6,045			2,102		1,798			5,570			5,719
Telecommunications													1,587		1,587			4,920			5,193
Operating risk loss													1,136		1,242			2,637			3,786
Other real estate owned and repossession expense	1,303			1,453			3,034			6,248			1,016		1,303			2,507			3,034
Operating risk loss	1,242			3,297			3,786			6,923
Intangible amortization	314			534			944			1,603			5		314			241			944
Other	11,010			11,241			35,614			35,510			8,939		6,863			26,256			23,084
Total Non-Interest Expense	115,798			116,605			341,526			344,671			124,889		115,798			361,721			341,526
Income Before Income Taxes	51,968			53,785			161,081			158,503			44,579		51,968			146,974			161,081
Income taxes	13,402			13,837			41,136			38,746			10,328		13,402			36,007			41,136
Net Income	$	38,566		$	39,948		$	119,945		$	119,757		$	34,251	$	38,566		$	110,967		$	119,945

PER SHARE:
Net Income (Basic)	$	0.21		$	0.21		$	0.64		$	0.62		$	0.20	$	0.21		$	0.63		$	0.64
Net Income (Diluted)	0.21			0.21			0.64			0.61			0.20		0.21			0.63			0.64
Cash Dividends	0.08			0.08			0.24			0.24			0.09		0.08			0.27			0.24
See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	Three months ended September 30						Nine months ended September 30,						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014

Net Income	$	38,566		$	39,948		$	119,945		$	119,757		$	34,251		$	38,566		$	110,967		$	119,945
Other Comprehensive Income (Loss), net of tax:
Unrealized gain (loss) on securities	(3,011		)	(6,951		)	23,912			(43,784		)	7,857			(3,011		)	5,841			23,912
Reclassification adjustment for postretirement amendment gains included in net income	—			—			(944		)	—			—			—			—			(944		)
Reclassification adjustment for securities gains included in net income	(52		)	(1,711		)	(775		)	(5,181		)	(1,124		)	(52		)	(5,388		)	(775		)
Reclassification adjustment for loss on derivative financial instruments included in net income													2,456			—			2,456			—
Non-credit related unrealized gain on other-than-temporarily impaired debt securities	138			(106		)	650			1,332			—			138			125			650
Unrealized gain on derivative financial instruments	34			34			102			102
Unrecognized pension and postretirement income	—			—			2,144			—
Amortization of unrealized loss on derivative financial instruments													3			34			71			102
Unrecognized postretirement income arising due to plan amendment													—			—			—			2,144
Amortization of net unrecognized pension and postretirement items	104			329			304			985			466			104			1,398			304
Other Comprehensive Income (Loss)	(2,787		)	(8,405		)	25,393			(46,546		)	9,658			(2,787		)	4,503			25,393
Total Comprehensive Income	$	35,779		$	31,543		$	145,338		$	73,211		$	43,909		$	35,779		$	115,470		$	145,338

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, ~~2014~~2015 AND ~~2013~~2014

(in thousands, except per-share data)


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

Balance at December 31, 2014																			178,924		$	545,555	$	1,420,523	$	558,810		$	(17,722	)	$	(510,501	)	$	1,996,665
Net income																									110,967									110,967
Other comprehensive income																												4,503						4,503
Stock issued, including related tax benefits																			613		889		2,675								3,374			6,938
Stock-based compensation awards																							4,371											4,371
Acquisition of treasury stock																			(3,976	)											(50,000		)	(50,000		)
Settlement of accelerated stock repurchase agreement																			(1,790	)			20,000								(20,000		)	—
Common stock cash dividends - $0.27 per share																									(47,540		)							(47,540		)
Balance at September 30, 2015																			173,771		$	546,444	$	1,447,569	$	622,237		$	(13,219	)	$	(577,127	)	$	2,025,904

Balance at December 31, 2013	192,652		$	544,568	$	1,432,974	$	463,843		$	(37,341	)	$	(340,857	)	$	2,063,187		192,652		$	544,568	$	1,432,974	$	463,843		$	(37,341	)	$	(340,857	)	$	2,063,187
Net income							119,945									119,945									119,945									119,945
Other comprehensive income (loss)										25,393						25,393
Other comprehensive income																												25,393						25,393
Stock issued, including related tax benefits	506		639		1,059								3,767			5,465			506		639		1,059								3,767			5,465
Stock-based compensation awards					4,310											4,310							4,310											4,310
Acquisition of treasury stock	(8,000	)											(95,255		)	(95,255		)	(8,000	)											(95,255		)	(95,255		)
Common stock cash dividends - $0.24 per share							(45,039		)							(45,039		)							(45,039		)							(45,039		)
Balance at September 30, 2014	185,158		$	545,207	$	1,438,343	$	538,749		$	(11,948	)	$	(432,345	)	$	2,078,006		185,158		$	545,207	$	1,438,343	$	538,749		$	(11,948	)	$	(432,345	)	$	2,078,006

Balance at December 31, 2012	199,225		$	542,093	$	1,426,267	$	363,937		$	5,675		$	(256,316	)	$	2,081,656
Net income							119,757									119,757
Other comprehensive income (loss)										(46,546		)				(46,546		)
Stock issued, including related tax benefits	1,107		1,959		562								4,838			7,359
Stock-based compensation awards					4,186											4,186
Acquisition of treasury stock	(8,000	)											(90,927		)	(90,927		)
Common stock cash dividends - $0.24 per share							(46,521		)							(46,521		)
Balance at September 30, 2013	192,332		$	544,052	$	1,431,015	$	437,173		$	(40,871	)	$	(342,405	)	$	2,028,964

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Nine months ended September 30						Nine months ended September 30
	2014			2013			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	119,945		$	119,757		$	110,967		$	119,945
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	9,500			38,000			(500		)	9,500
Depreciation and amortization of premises and equipment	18,412			19,165			20,302			18,412
Net amortization of investment securities premiums	4,399			8,749			5,369			4,399
Investment securities gains, net	(1,193		)	(7,971		)
Net (increase) decrease in loans held for sale	(3,861		)	28,626
Net gains on sales of investment securities							(8,290		)	(1,193		)
Net increase in loans held for sale							(9,415		)	(3,861		)
Amortization of intangible assets	944			1,603			241			944
Stock-based compensation	4,310			4,186			4,371			4,310
Excess tax benefits from stock-based compensation	(54		)	(237		)	(86		)	(54		)
Decrease in accrued interest receivable	493			1,071
(Increase) decrease in other assets	(1,909		)	37,129
Increase (decrease) in accrued interest payable	2,207			(2,673		)
Decrease in other liabilities	(5,315		)	(24,207		)
Loss on redemption of trust preferred securities							5,626			—
(Increase) decrease in accrued interest receivable							(1,028		)	493
Decrease (increase) in other assets							6,683			(1,909		)
(Decrease) increase in accrued interest payable							(3,318		)	2,207
Increase (decrease) in other liabilities							3,995			(5,315		)
Total adjustments	27,933			103,441			23,950			27,933
Net cash provided by operating activities	147,878			223,198			134,917			147,878
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale	15,219			268,259			29,309			15,219
Proceeds from maturities of securities held to maturity	—			86
Proceeds from maturities of securities available for sale	273,688			526,393			317,813			273,688
Purchase of securities available for sale	(164,676		)	(691,362		)	(444,111		)	(164,676		)
Increase in short-term investments	(129,418		)	(63,965		)	(156,837		)	(129,418		)
Net increase in loans	(271,494		)	(684,529		)	(440,681		)	(271,494		)
Net purchases of premises and equipment	(16,832		)	(18,741		)	(19,980		)	(16,832		)
Net cash used in investing activities	(293,513		)	(663,859		)	(714,487		)	(293,513		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits	768,979			595,722			852,611			768,979
Net increase (decrease) in time deposits	73,462			(358,764		)
(Decrease) increase in short-term borrowings	(693,677		)	330,178
Net (decrease) increase in time deposits							(135,723		)	73,462
Increase (decrease) in short-term borrowings							101,912			(693,677		)
Additions to long-term debt	140,000			—			347,778			140,000
Repayments of long-term debt	(5,295		)	(5,131		)	(509,606		)	(5,295		)
Net proceeds from issuance of common stock	5,411			7,122			6,852			5,411
Excess tax benefits from stock-based compensation	54			237			86			54
Dividends paid	(45,638		)	(31,138		)	(46,239		)	(45,638		)
Acquisition of treasury stock	(95,255		)	(90,927		)	(50,000		)	(95,255		)
Net cash provided by financing activities	148,041			447,299			567,671			148,041
Net Increase in Cash and Due From Banks	2,406			6,638
Net (Decrease) Increase in Cash and Due From Banks							(11,899		)	2,406
Cash and Due From Banks at Beginning of Period	218,540			256,300			105,702			218,540
Cash and Due From Banks at End of Period	$	220,946		$	262,938		$	93,803		$	220,946
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	57,448		$	65,663		$	67,352		$	57,448
Income taxes	16,632			29,964			9,168			16,632
See Notes to Consolidated Financial Statements

FULTON FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of Fulton Financial Corporation (the ~~Corporation)~~"Corporation") have been prepared in conformity with U.S. generally accepted accounting principles ~~(U.S. GAAP)~~("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014. Operating results for the three and nine months ended September 30, ~~2014~~2015 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2014~~.2015. The Corporation evaluates subsequent events through the date of filing ~~date~~ of this Form 10-Q with the Securities and Exchange Commission ~~(SEC)~~("SEC").

Recent Accounting Standards

~~In April 2014,~~

Effective January 1, 2015, the Corporation adopted the Financial Accounting Standards ~~Board (FASB) issued~~Board's ("FASB") Accounting Standards Codification ~~(ASC)~~("ASC") Update ~~2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.~~2014-01, "Accounting for Investments in Qualified Affordable Housing Projects." ASC Update ~~2014-08 changes~~2014-01 provides guidance on accounting for investments made by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the ~~criteria~~low income housing tax credit. The Corporation has made certain investments in partnerships that generate tax credits under various federal programs which promote investment in low and moderate income housing and local economic development. The net income tax benefit associated with these investments, which consists of the amortization of the investments net of tax benefit, and the income tax credits earned on the investments recorded in income taxes on the consolidated income statements was $2.3 million and $2.1 million for ~~reporting discontinued operations, including a change~~the three months ended September 30, 2015 and 2014, respectively, and $7.1 million and $7.4 million for the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015 and December 31, 2014, the Corporation’s tax credit investments, included in other assets on the ~~definition of what constitutes the disposal of a component~~consolidated balance sheets, totaled $164.0 million and additional disclosure requirements. For public business entities ASC Update 2014-08 is effective for disposals that occur within annual periods beginning after December 15, 2014. For the Corporation, this standards update is effective with its March 31, 2015 quarterly report on Form 10-Q.$155.6 million, respectively. The adoption of this ASC ~~Update 2014-08 is~~update did not ~~expected to~~ have a material impact on the Corporation's consolidated financial ~~statements.~~statements for the three or nine months ended September 30, 2015 or 2014.

In ~~May 2014,~~February 2015, the FASB issued ASC Update 2014-09, "Revenue from Contracts with Customers." This standards update provides a framework that replaces most existing revenue recognition guidance. The core principle prescribed by this standards update is that an entity recognizes revenue2015-02, "Consolidation: Amendments to ~~depict~~ the ~~transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.~~Consolidation Analysis." ASC Update ~~2014-09~~2015-02 changes the way reporting enterprises evaluate whether: (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity ("VIE"), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE.ASC Update 2015-02 is effective for ~~interim~~public business entities' annual and ~~annual~~interim reporting periods beginning after December 15, ~~2016. Early application is not~~2015, with earlier adoption permitted. ~~For the~~The Corporation intends to adopt this standards update is effective with its March 31, ~~2017~~2016 quarterly report on Form ~~10-Q. The Corporation is currently evaluating the impact of~~10-Q, and does not expect the adoption of ASC Update ~~2014-09~~2015-02 to have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASC Update 2015-03, "Interest - Imputation of Interest" and updated ASC Update 2015-03 with the issuance of ASC Update 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,” in August of 2015. ASC Update 2015-03 simplifies the presentation of debt issuances costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. Under current U.S. GAAP, debt issuance costs are reported on the balance sheet as assets. The costs will continue to be amortized to interest expense using the effective interest method. ASC Update 2015-03 is effective for public business entities' annual and interim reporting periods beginning after December 15, 2015, with earlier adoption permitted.The Corporation intends to adopt this standards update effective with its March 31, 2016 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2015-03 to have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASC Update 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." ASC Update 2015-05 provides explicit guidance to determine when a customer's fees paid in a cloud computing arrangement is for the acquisition of software licenses, services, or both. ASC Update 2015-05 is effective for public business entities' annual and interim reporting periods beginning after December 15, 2015, with earlier adoption permitted.The Corporation intends to adopt

this standards update effective with its March 31, 2016 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2015-05 to have a material impact on its consolidated financial statements.

In June 2014, the FASB issued ASC Update 2014-11, "Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures." In addition to new disclosure requirements, ASC Update 2014-11 requires that all repurchase-to-maturity transactions be accounted for as secured borrowings rather than as sales of financial assets. Also, all transfers of financial assets executed contemporaneously with a repurchase agreement with the same counterparty must be accounted for separately, the result of which would be the treatment of such transactions as secured borrowings. ASC Update 2014-11 is effective for public business entities’ interim and annual reporting periods beginning after December 15, 2014. For the Corporation, this standards update is effective with its March 31, 2015 quarterly report on Form 10-Q. The adoption of ASC Update 2014-11 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In June 2014, the FASB issued ASC Update 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period." ASC Update 2014-12 clarifies guidance related to accounting for share-based payment awards with terms that allow an employee to vest in the award regardless of whether the employee is rendering service on the date a performance target is achieved. ASC Update 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. ASC Update 2014-12 is effective for public business entities’ interim and annual reporting periods beginning after December 15, 2014, with earlier adoption permitted. For the Corporation, this standards update is effective with its March 31, 2015 quarterly report on Form 10-Q. The adoption of ASC Update 2014-12 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In August 2014, the FASB issued ASC Update 2014-14, "Receivables - Troubled Debt Restructuring by Creditors." ASC Update 2014-14 clarifies troubled debt restructuring guidance related to the classification and measurement of certain government-sponsored loan guarantee programs upon foreclosure. ASC Update 2014-14 is effective for public business entities’ interim and annual reporting periods beginning after December 15, 2014, with earlier adoption permitted. For the Corporation, this standards

update is effective with its March 31, 2015 quarterly report on Form 10-Q. The adoption of ASC Update 2014-14 is not expected to have a material impact on the Corporation’s consolidated financial statements.

In August 2014, the FASB issued ASC Update 2014-15, "Presentation of Financial Statements - Going Concern." ASC Update 2014-15 provides guidance regarding management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related disclosures. The standards update describes how an entity's management should assess whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. ASC Update 2014-15 is effective for public business entities’ annual reporting periods ending after December 15, 2016, with earlier adoption permitted. For the Corporation, this standards update is effective with its December 31, 2016 annual report on Form 10-K. The adoption of ASC Update 2014-15 is not expected to have a material impact on the Corporation’s consolidated financial statements.

~~Reclassifications~~

~~Certain amounts in the~~ ~~2013~~ ~~consolidated financial statements and notes have been reclassified to conform to the~~ ~~2014~~ ~~presentation.~~

NOTE B2 – Net Income Per Share

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

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

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


	Three months ended September 30		Nine months ended September 30		Three months ended September 30		Nine months ended September 30
	2014	2013	2014	2013	2015	2014	2015	2014
	(in thousands)				(in thousands)
Weighted average shares outstanding (basic)	186,109	192,251	187,893	193,926	174,338	186,109	176,399	187,893
Impact of common stock equivalents	846	1,008	970	1,000	1,004	846	1,029	970
Weighted average shares outstanding (diluted)	186,955	193,259	188,863	194,926	175,342	186,955	177,428	188,863

For the three and nine months ended September 30, ~~2014~~, ~~2.5~~2015, 1.5 million and ~~2.9~~1.8 million ~~shares issuable under~~ stock options, respectively, were excluded from the diluted net income per share computation as their effect would have been anti-dilutive. For the three and nine months ended September 30, ~~2013~~, ~~3.2~~2014, 2.5 million and ~~3.7~~2.9 million ~~shares issuable under~~ stock options, respectively, were excluded from the diluted net income per share computation as their effect would have been anti-dilutive.

NOTE C3 – Accumulated Other Comprehensive Income ~~(Loss)~~

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

Before-Tax Amount Tax Effect Net of Tax Amount
(in thousands)
Three months ended September 30, 2014
Unrealized gain (loss) on securities $ (4,629 ) $ 1,618
$ (3,011 )
Reclassification adjustment for securities gains included in net income (1) (81 ) 29
(52 )
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities 212
(74 ) 138
Unrealized gain on derivative financial instruments 52
(18 ) 34
Amortization of net unrecognized pension and postretirement items (2) 160
(56 ) 104
Total Other Comprehensive Income (Loss) $ (4,286 ) $ 1,499
$ (2,787 )
Three months ended September 30, 2013
Unrealized gain (loss) on securities $ (10,691 ) $ 3,740
$ (6,951 )
Reclassification adjustment for securities gains included in net income (1) (2,633 ) 922
(1,711 )
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities (163 ) 57
(106 )
Unrealized gain on derivative financial instruments 52
(18 ) 34
Amortization of net unrecognized pension and postretirement items (2) 505
(176 ) 329
Total Other Comprehensive Income (Loss) $ (12,930 ) $ 4,525
$ (8,405 )

Nine months ended September 30, 2014
Unrealized gain (loss) on securities $ 36,790
$ (12,878 ) $ 23,912
Reclassification adjustment for postretirement gains included in net income (2) (1,452 ) 508
(944 )
Reclassification adjustment for securities gains included in net income (1) (1,193 ) 418
(775 )
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities 1,000
(350 ) 650
Unrealized gain on derivative financial instruments 157
(55 ) 102
Unrecognized pension and postretirement income 3,291
(1,147 ) 2,144
Amortization of net unrecognized pension and postretirement items (2) 469
(165 ) 304
Total Other Comprehensive Income (Loss) $ 39,062
$ (13,669 ) $ 25,393
Nine months ended September 30, 2013
Unrealized gain (loss) on securities $ (67,357 ) $ 23,573
$ (43,784 )
Reclassification adjustment for securities gains included in net income (1) (7,971 ) 2,790
(5,181 )
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities 2,049
(717 ) 1,332
Unrealized gain on derivative financial instruments 157
(55 ) 102
Amortization of net unrecognized pension and postretirement items (2) 1,515
(530 ) 985
Total Other Comprehensive Income (Loss) $ (71,607 ) $ 25,061
$ (46,546 )



	Before-Tax Amount			Tax Effect			Net of Tax Amount
	(in thousands)
Three months ended September 30, 2015
Unrealized gain on securities	$	12,088		$	(4,231	)	$	7,857
Reclassification adjustment for securities gains included in net income (1)	(1,730		)	606			(1,124		)
Reclassification adjustment for loss on derivative financial instruments included in net income (2)	3,778			(1,322		)	2,456
Amortization of unrealized loss on derivative financial instruments	5			(2		)	3
Amortization of net unrecognized pension and postretirement items (3)	717			(251		)	466
Total Other Comprehensive Income	$	14,858		$	(5,200	)	$	9,658
Three months ended September 30, 2014
Unrealized loss on securities	$	(4,629	)	$	1,618		$	(3,011	)
Reclassification adjustment for securities gains included in net income (1)	(81		)	29			(52		)
Non-credit related unrealized gains on other-than-temporarily impaired debt securities	212			(74		)	138
Amortization of unrealized loss on derivative financial instruments	52			(18		)	34
Amortization of net unrecognized pension and postretirement items (3)	160			(56		)	104
Total Other Comprehensive Loss	$	(4,286	)	$	1,499		$	(2,787	)

Nine months ended September 30, 2015
Unrealized gain on securities	$	8,987		$	(3,146	)	$	5,841
Reclassification adjustment for securities gains included in net income (1)	(8,290		)	2,902			(5,388		)
Reclassification adjustment for loss on derivative financial instruments included in net income (2)	3,778			(1,322		)	2,456
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities	192			(67		)	125
Amortization of unrealized loss on derivative financial instruments	110			(39		)	71
Amortization of net unrecognized pension and postretirement items (3)	2,151			(753		)	1,398
Total Other Comprehensive Income	$	6,928		$	(2,425	)	$	4,503
Nine months ended September 30, 2014
Unrealized gain on securities	$	36,790		$	(12,878	)	$	23,912
Reclassification adjustment for securities gains included in net income (1)	(1,193		)	418			(775		)
Reclassification adjustment for postretirement gains included in net income (3)	(1,452		)	508			(944		)
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities	1,000			(350		)	650
Amortization of unrealized loss on derivative financial instruments	157			(55		)	102
Unrecognized pension and postretirement income	3,291			(1,147		)	2,144
Amortization of net unrecognized pension and postretirement items (3)	469			(165		)	304
Total Other Comprehensive Income	$	39,062		$	(13,669	)	$	25,393


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


(2)	Amount reclassified out of accumulated other comprehensive income. Before-tax amount included within "Loss on Redemption of Trust Preferred Securities" on the consolidated statements of income. See Note 15, "Long-Term Debt," for additional details.


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

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


	Unrealized Gains (Losses) on Investment Securities Not Other-Than-Temporarily Impaired			Unrealized Non-Credit Gains (Losses) on Other-Than-Temporarily Impaired Debt Securities			Unrealized Effective Portions of Losses on Forward-Starting Interest Rate Swaps			Unrecognized Pension and Postretirement Plan Income (Costs)			Total			Unrealized Gains (Losses) on Investment Securities Not Other-Than-Temporarily Impaired				Unrealized Non-Credit Gains (Losses) on Other-Than-Temporarily Impaired Debt Securities			Unrealized Effective Portions of Losses on Forward-Starting Interest Rate Swaps				Unrecognized Pension and Postretirement Plan Income (Costs)			Total
	(in thousands)															(in thousands)
Three months ended September 30, 2015
Balance at June 30, 2015																$	830			$	344		$	(2,478	)		$	(21,573	)	$	(22,877	)
Other comprehensive loss before reclassifications																7,857				—			—				—			7,857
Amounts reclassified from accumulated other comprehensive income (loss)																(1,124		)		—			3				466			(655		)
Reclassification adjustment for loss on derivative financial instruments included in net income																—			—	—			2,456			—	—			2,456
Balance at September 30, 2015																$	7,563			$	344		$	(19	)		$	(21,107	)	$	(13,219	)
Three months ended September 30, 2014
Balance at June 30, 2014	$	(580	)	$	1,434		$	(2,614	)	$	(7,401	)	$	(9,161	)	$	(580	)		$	1,434		$	(2,614	)		$	(7,401	)	$	(9,161	)
Other comprehensive income (loss) before reclassifications	(3,011		)	138			—			—			(2,873		)
Other comprehensive income before reclassifications																(3,011		)		138			—				—			(2,873		)
Amounts reclassified from accumulated other comprehensive income (loss)	(63		)	11			34			104			86			(63		)		11			34				104			86
Balance at September 30, 2014	$	(3,654	)	$	1,583		$	(2,580	)	$	(7,297	)	$	(11,948	)	$	(3,654	)		$	1,583		$	(2,580	)		$	(7,297	)	$	(11,948	)
Three months ended September 30, 2013
Balance at June 30, 2013	$	(12,941	)	$	1,050		$	(2,750	)	$	(17,825	)	$	(32,466	)
Other comprehensive income (loss) before reclassifications	(6,951		)	(106		)	—			—			(7,057		)

Nine months ended September 30, 2015
Balance at December 31, 2014																$	5,980			$	1,349		$	(2,546	)		$	(22,505	)	$	(17,722	)
Other comprehensive income before reclassifications																5,841				125			—				—			5,966
Amounts reclassified from accumulated other comprehensive income (loss)	(1,774		)	63			34			329			(1,348		)	(4,258		)		(1,130		)	71				1,398			(3,919		)
Balance at September 30, 2013	$	(21,666	)	$	1,007		$	(2,716	)	$	(17,496	)	$	(40,871	)

Reclassification adjustment for loss on derivative financial instruments included in net income																—				—			2,456				—			2,456
Balance at September 30, 2015																$	7,563			$	344		$	(19	)		$	(21,107	)	$	(13,219	)
Nine months ended September 30, 2014
Balance at December 31, 2013	$	(27,510	)	$	1,652		$	(2,682	)	$	(8,801	)	$	(37,341	)	$	(27,510	)		$	1,652		$	(2,682	)		$	(8,801	)	$	(37,341	)
Other comprehensive income (loss) before reclassifications	23,912			650			—			2,144			26,706
Other comprehensive income before reclassifications																23,912				650			—				2,144			26,706
Amounts reclassified from accumulated other comprehensive income (loss)	(56		)	(719		)	102			(640		)	(1,313		)	(56		)		(719		)	102				(640		)	(1,313		)
Balance at September 30, 2014	$	(3,654	)	$	1,583		$	(2,580	)	$	(7,297	)	$	(11,948	)	$	(3,654	)		$	1,583		$	(2,580	)		$	(7,297	)	$	(11,948	)
Nine months ended September 30, 2013
Balance at December 31, 2012	$	26,361		$	613		$	(2,818	)	$	(18,481	)	$	5,675
Other comprehensive income (loss) before reclassifications	(43,784		)	1,332			—			—			(42,452		)
Amounts reclassified from accumulated other comprehensive income (loss)	(4,243		)	(938		)	102			985			(4,094		)
Balance at September 30, 2013	$	(21,666	)	$	1,007		$	(2,716	)	$	(17,496	)	$	(40,871	)

NOTE D4 – Investment Securities

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)									(in thousands)
September 30, 2014
September 30, 2015
Equity securities	$	34,380	$	10,927	$	(29	)	$	45,278	$	16,087	$	7,453	$	(8	)	$	23,532
U.S. Government securities	200		—		—			200
U.S. Government sponsored agency securities	235		5		—			240		48,320		231		—			48,551
State and municipal securities	250,195		7,917		(496		)	257,616		234,868		5,430		(62		)	240,236
Corporate debt securities	99,670		5,777		(4,020		)	101,427		102,297		2,935		(5,291		)	99,941
Collateralized mortgage obligations	975,971		6,700		(27,631		)	955,040		879,738		5,638		(11,077		)	874,299
Mortgage-backed securities	954,412		14,201		(6,278		)	962,335		1,036,193		16,845		(1,133		)	1,051,905
Auction rate securities	158,725		1		(10,253		)	148,473		106,661		—		(8,788		)	97,873
	$	2,473,788	$	45,528	$	(48,707	)	$	2,470,609	$	2,424,164	$	38,532	$	(26,359	)	$	2,436,337


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)									(in thousands)
December 31, 2013
December 31, 2014
Equity securities	$	33,922	$	12,355	$	(76	)	$	46,201	$	33,469	$	14,167	$	(13	)	$	47,623
U.S. Government securities	525		—		—			525		200		—		—			200
U.S. Government sponsored agency securities	720		7		(1		)	726		209		5		—			214
State and municipal securities	281,810		6,483		(3,444		)	284,849		238,250		7,231		(266		)	245,215
Corporate debt securities	100,468		5,685		(7,404		)	98,749		99,016		5,126		(6,108		)	98,034
Collateralized mortgage obligations	1,069,138		8,036		(44,776		)	1,032,398		917,395		5,705		(20,787		)	902,313
Mortgage-backed securities	949,328		13,881		(17,497		)	945,712		914,797		16,978		(2,944		)	928,831
Auction rate securities	172,299		234		(13,259		)	159,274		108,751		—		(7,810		)	100,941
	$	2,608,210	$	46,681	$	(86,457	)	$	2,568,434	$	2,312,087	$	49,212	$	(37,928	)	$	2,323,371

Securities carried at ~~$1.8~~$1.8 billion as of September 30, ~~2014~~2015 and ~~$1.7~~$1.7 billion as of December 31, ~~2013~~2014 were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

Equity securities include common stocks of financial institutions (estimated fair value of ~~$39.3~~$22.4 million at September 30, ~~2014~~2015 and ~~$40.6~~$41.8 million at December 31, ~~2013)~~2014) and other equity investments (estimated fair value of ~~$6.0~~$1.1 million at September 30, ~~2014~~2015 and ~~$5.6~~$5.8 million at December 31, ~~2013)~~2014).

As of September 30, ~~2014~~,2015, the financial institutions stock portfolio had a cost basis of ~~$28.6~~$15.1 million and an estimated fair value of ~~$39.3~~$22.4 million,, including an investment in a single financial institution with a cost basis of ~~$20.0~~$8.5 million and an estimated fair value of ~~$27.5 million~~.$12.8 million. The estimated fair value of this investment accounted for ~~70.0%~~57.1% of the estimated fair value of the Corporation's investments in the common stocks of publicly traded financial institutions. No other investment within the financial institutions stock portfolio exceeded 5% of the portfolio's estimated fair value.

The amortized cost and estimated fair values of debt securities as of September 30, ~~2014~~,2015, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
	(in thousands)					(in thousands)
Due in one year or less		$	13,218	$	13,284		$	62,247	$	63,023
Due from one year to five years		75,307		78,967			104,989		107,283
Due from five years to ten years		187,966		193,537			132,930		136,571
Due after ten years		232,534		222,168			191,980		179,724
		509,025		507,956			492,146		486,601
Collateralized mortgage obligations		975,971		955,040			879,738		874,299
Mortgage-backed securities		954,412		962,335			1,036,193		1,051,905
		$	2,439,408	$	2,425,331		$	2,408,077	$	2,412,805

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


	Gross Realized Gains		Gross Realized Losses			Other-than- temporary Impairment Losses			Net Gains (Losses)			Gross Realized Gains		Gross Realized Losses			Other-than- temporary Impairment Losses			Net Gains (Losses)
Three months ended September 30, 2015												(in thousands)
Equity securities												$	1,730	$	—		$	—		$	1,730
Debt securities												—		—			—			—
Total												$	1,730	$	—		$	—		$	1,730
Three months ended September 30, 2014	(in thousands)
Equity securities	$	99	$	—		$	—		$	99		$	99	$	—		$	—		$	99
Debt securities	—		—			(18		)	(18		)	—		—			(18		)	(18		)
Total	$	99	$	—		$	(18	)	$	81		$	99	$	—		$	(18	)	$	81
Three months ended September 30, 2013

Nine months ended September 30, 2015
Equity securities	$	2,135	$	—		$	—		$	2,135		$	5,990	$	—		$	—		$	5,990
Debt securities	617		(22		)	(97		)	498			2,300		—			—			2,300
Total	$	2,752	$	(22	)	$	(97	)	$	2,633		$	8,290	$	—		$	—		$	8,290

Nine months ended September 30, 2014
Equity securities	$	100	$	—		$	(12	)	$	88		$	100	$	—		$	(12	)	$	88
Debt securities	1,446		(323		)	(18		)	1,105			1,446		(323		)	(18		)	1,105
Total	$	1,546	$	(323	)	$	(30	)	$	1,193		$	1,546	$	(323	)	$	(30	)	$	1,193
Nine months ended September 30, 2013
Equity securities	$	4,357	$	(28	)	$	(27	)	$	4,302
Debt securities	3,788		(22		)	(97		)	3,669
Total	$	8,145	$	(50	)	$	(124	)	$	7,971

~~The other-than-temporary impairment charges for equity securities during the three and nine months ended~~ ~~September 30, 2014~~ ~~and~~ ~~2013~~ were for investments in common stocks of financial institutions and were due to the severity and duration of the declines in the fair values of certain financial institution stocks, in conjunction with management's assessment of the near-term prospects of each specific financial institution.

The credit related other-than-temporary impairment charges for debt securities during the three and nine months ended September 30, 2014 and 2013 were for investments in pooled trust preferred securities issued by financial institutions. The credit related other-than-temporary impairment charges for the pooled trust preferred securities were determined based on an expected cash flows model.

The following table presents a summary of the cumulative credit related other-than-temporary impairment charges, recognized as components of earnings, for debt securities held by the Corporation at September 30, ~~2014~~2015 and ~~2013~~:2014:


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
	(in thousands)												(in thousands)
Balance of cumulative credit losses on debt securities, beginning of period	$	(17,214	)	$	(20,607	)	$	(20,691	)	$	(23,079	)	$	(11,510	)	$	(17,214	)	$	(16,242	)	$	(20,691	)
Additions for credit losses recorded which were not previously recognized as components of earnings	(18		)	(97		)	(18		)	(97		)	—			(18		)	—			(18		)
Reductions for securities sold during the period	—			—			3,472			2,468			—			—			4,730			3,472
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			—			5			4			—			—			2			5
Balance of cumulative credit losses on debt securities, end of period	$	(17,232	)	$	(20,704	)	$	(17,232	)	$	(20,704	)	$	(11,510	)	$	(17,232	)	$	(11,510	)	$	(17,232	)

The following table presents the gross unrealized losses and estimated fair values of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, ~~2014~~:2015:


	Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
	(in thousands)															(in thousands)
U.S. Government sponsored agency securities																$	—	$	—		$	—	$	—		$	—	$	—
State and municipal securities	$	7,996	$	(37	)	$	26,484	$	(459	)	$	34,480	$	(496	)	11,892		(62		)	—		—			11,892		(62		)
Corporate debt securities	—		—			38,900		(4,020		)	38,900		(4,020		)	7,968		(15		)	33,718		(5,276		)	41,686		(5,291		)
Collateralized mortgage obligations	53,189		(248		)	652,396		(27,383		)	705,585		(27,631		)	30,723		(62		)	493,703		(11,015		)	524,426		(11,077		)
Mortgage-backed securities	241,707		(527		)	291,712		(5,751		)	533,419		(6,278		)	161,097		(443		)	67,071		(690		)	228,168		(1,133		)
Auction rate securities	—		—			148,380		(10,253		)	148,380		(10,253		)	—		—			97,873		(8,788		)	97,873		(8,788		)
Total debt securities	302,892		(812		)	1,157,872		(47,866		)	1,460,764		(48,678		)	211,680		(582		)	692,365		(25,769		)	904,045		(26,351		)
Equity securities	269		(17		)	77		(12		)	346		(29		)	—		—			13		(8		)	13		(8		)
	$	303,161	$	(829	)	$	1,157,949	$	(47,878	)	$	1,461,110	$	(48,707	)	$	211,680	$	(582	)	$	692,378	$	(25,777	)	$	904,058	$	(26,359	)

The Corporation’s collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the decline in market value of these securities is attributable to changes in interest rates and not credit quality, and because the Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, the Corporation does not consider these investments to be other-than-temporarily impaired as of September 30, ~~2014~~.2015.

The unrealized holding losses on auction rate securities ~~or auction~~(auction rate certificates, ~~(ARCs)~~or "ARCs"), are attributable to liquidity issues resulting from the failure of periodic auctions. The Corporation had previously purchased ARCs for investment management and trust customers as short-term investments with fair values that could be derived based on periodic auctions under normal market conditions. During 2008 and 2009, the Corporation purchased ARCs from these customers due to the failure of these periodic auctions, which made these previously short-term investments illiquid.

As of September 30, ~~2014, approximately $144 million, or 97%,~~2015, all of the ARCs were rated above investment grade, with approximately $6$5.4 million, or 4%6%, ~~AAA~~"AAA" rated and ~~$104~~$92.4 million, or ~~72%~~94%, AA"AA" rated. ~~Approximately $4 million, or 3%, of ARCs were either not rated or rated below investment grade by at least one ratings agency. Of this amount, approximately $3 million~~All of the ~~student~~ loans underlying ~~these~~the ARCs have principal payments which are guaranteed by the federal government. ~~In total, approximately $147 million, or 99%, of the student loans underlying the ARCs have principal payments that are guaranteed by the federal government.~~

~~During the nine months ended September 30, 2014, the Corporation sold ARCs with a total book value of $11.9 million, with no gain or loss upon sale.~~ As of September 30, ~~2014,~~2015, all ARCs were current and making scheduled interest payments. Based on management’s evaluations, ARCs with aan estimated fair value of ~~$148.5~~$97.9 million were not subject to any other-than-temporary impairment charges as of September 30, ~~2014.~~2015. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.

For its investments in equity securities, particularly its investments in stocks of financial institutions, management evaluates the near-term prospects of the issuers in relation to the severity and duration of the impairment. Based on that evaluation and the Corporation’s ability and intent to hold those investments for a reasonable period of time sufficient for a recovery of fair value,

the Corporation does not consider those investments with unrealized holding losses as of September 30, ~~2014~~2015 to be other-than-temporarily impaired.

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


	September 30, 2014				December 31, 2013				September 30, 2015				December 31, 2014
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value		Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)								(in thousands)
Single-issuer trust preferred securities	$	47,546	$	44,075	$	47,481	$	40,531	$	46,624	$	41,787	$	47,569	$	42,016
Subordinated debt	47,498		50,289		47,405		50,327		51,625		53,576		47,530		50,023
Pooled trust preferred securities	2,050		4,487		2,997		5,306		—		530		2,010		4,088
Corporate debt securities issued by financial institutions	97,094		98,851		97,883		96,164		98,249		95,893		97,109		96,127
Other corporate debt securities	2,576		2,576		2,585		2,585		4,048		4,048		1,907		1,907
Available for sale corporate debt securities	$	99,670	$	101,427	$	100,468	$	98,749	$	102,297	$	99,941	$	99,016	$	98,034

The Corporation’s investments in single-issuer trust preferred securities had an unrealized loss of ~~$3.5~~$4.8 million at September 30, ~~2014.~~2015. The Corporation did not record any other-than-temporary impairment charges for single-issuer trust preferred securities during the three or nine months ended September 30, ~~2014~~2015 or ~~2013.~~2014. ~~Six~~Seven of the Corporation's 2019 single-issuer trust preferred securities were rated below investment grade by at least one ratings agency, with an amortized cost of ~~$13.5~~$14.5 million and an estimated fair value of ~~$12.3~~$13.2 million at September 30, ~~2014.~~2015. All of the single-issuer trust preferred securities rated below investment grade were rated BB"BB" or ~~Ba.Three~~"Ba". Two single-issuer trust preferred securities with an amortized cost of ~~$4.7~~$3.7 million and an estimated fair value of ~~$3.9~~$2.7 million at September 30, ~~2014~~2015 were not rated by any ratings agency.

During the nine months ended September 30, ~~2014,~~2015, the Corporation sold ~~two~~three pooled trust preferred securities with a total amortized cost of ~~$728,000,~~$1.9 million, for a gain of ~~$1.1~~$2.3 million. As of September 30, ~~2014, all six~~2015, both of the Corporation's remaining pooled trust preferred securities, with an amortized cost of ~~$2.1 million~~$0 and an estimated fair value of ~~$4.5 million,~~$530,000, were rated below investment grade by at least one ratings agency, with ratings ranging from C"C" to ~~Ca.~~"Ca". The class of securities held by the Corporation was below the most senior tranche, with the Corporation’s interests being subordinate to other investors in the pool. The Corporation determines the fair value of pooled trust preferred securities based on quotes provided by third-party brokers.

The amortized cost of pooled trust preferred securities is the purchase price of the securities, net of cumulative credit related other-than-temporary impairment charges, determined using an expected cash flows model. The most significant input to the expected cash flows model is the expected payment deferral rate for each pooled trust preferred security. The Corporation evaluates the financial metrics, such as capital ratios and non-performing assets ratios, of the individual financial institution issuers that comprise each pooled trust preferred security to estimate its expected deferral rate.

Based on management’s evaluations, corporate debt securities with a fair value of ~~$101.4~~$99.9 million were not subject to any ~~additional~~ other-than-temporary impairment charges as of September 30, ~~2014~~.2015. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.

As mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), in December 2013, five regulatory bodies issued final rulings (Final Rules) implementing certain prohibitions and restrictions on the ability of a banking entity and non-bank financial company supervised by the Federal Reserve Board to engage in proprietary trading and have certain ownership interests in, or relationships with, a "covered fund" (the so-called "Volcker Rule"). The Final Rules generally treat as a covered fund any entity that would be an investment company under the Investment Company Act of 1940 (1940 Act) but for the application of the exemptions from SEC registration set forth in Section 3(c)(1) (fewer than 100 beneficial owners) or Section 3(c)(7) (qualified purchasers) of the 1940 Act. The Final Rules also require regulated entities to establish an internal compliance program that is consistent with the extent to which it engages in activities covered by the Volcker Rule, which must include making regular reports about those activities to regulators. Although the Final Rules provide some tiering of compliance and reporting obligations based on size, the fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including the Corporation. Banking entities have until July 21, 2015 to conform their activities and investments to the requirements of the Final Rules. The Corporation does not engage in proprietary trading or in any other activities prohibited by the Final Rules. Based on the Corporation's evaluation of its investments, none fall within the definition of a "covered fund" and would need to be disposed

~~of by July 21, 2015. Therefore, it does not currently expect that the Final Rules will have a material effect on its business, financial condition or results of operations.~~

NOTE E5 – Loans and Allowance for Credit Losses

Loans, Net of Unearned Income

Loans, net of unearned income are summarized as follows:


	September 30, 2014			December 31, 2013			September 30, 2015			December 31, 2014
	(in thousands)						(in thousands)
Real-estate - commercial mortgage	$	5,156,979		$	5,101,922		$	5,339,928		$	5,197,155
Commercial - industrial, financial and agricultural	3,691,262			3,628,420			3,929,908			3,725,567
Real-estate - home equity	1,733,036			1,764,197			1,693,649			1,736,688
Real-estate - residential mortgage	1,372,033			1,337,380			1,382,085			1,377,068
Real-estate - construction	687,728			573,672			769,565			690,601
Consumer	278,219			283,124			271,696			265,431
Leasing and other	120,144			99,256			161,911			127,562
Overdrafts	2,646			4,045			2,614			4,021
Loans, gross of unearned income	13,042,047			12,792,016			13,551,356			13,124,093
Unearned income	(11,642		)	(9,796		)	(14,995		)	(12,377		)
Loans, net of unearned income	$	13,030,405		$	12,782,220		$	13,536,361		$	13,111,716

Allowance for Credit Losses

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

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

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

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


	September 30, 2014		December 31, 2013		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Allowance for loan losses	$	189,477	$	202,780	$	167,136	$	184,144
Reserve for unfunded lending commitments	1,631		2,137		2,259		1,787
Allowance for credit losses	$	191,108	$	204,917	$	169,395	$	185,931

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


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
	(in thousands)												(in thousands)
Balance at beginning of period	$	193,442		$	217,626		$	204,917		$	225,439		$	169,453		$	193,442		$	185,931		$	204,917
Loans charged off	(9,604		)	(18,108		)	(31,348		)	(61,597		)	(5,561		)	(9,604		)	(26,697		)	(31,348		)
Recoveries of loans previously charged off	3,770			3,820			8,039			10,996			4,503			3,770			10,661			8,039
Net loans charged off	(5,834		)	(14,288		)	(23,309		)	(50,601		)	(1,058		)	(5,834		)	(16,036		)	(23,309		)
Provision for credit losses	3,500			9,500			9,500			38,000			1,000			3,500			(500		)	9,500
Balance at end of period	$	191,108		$	212,838		$	191,108		$	212,838		$	169,395		$	191,108		$	169,395		$	191,108

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


	Real Estate - Commercial Mortgage			Commercial - Industrial, Financial and Agricultural			Real Estate - Home Equity			Real Estate - Residential Mortgage			Real Estate - Construction			Consumer			Leasing and other and overdrafts			Unallocated			Total			Real Estate - Commercial Mortgage			Commercial - Industrial, Financial and Agricultural			Real Estate - Home Equity			Real Estate - Residential Mortgage			Real Estate - Construction			Consumer			Leasing and other and overdrafts			Unallocated			Total
	(in thousands)																											(in thousands)
Three months ended September 30, 2015
Balance at June 30, 2015																												$	50,680		$	49,170		$	22,506		$	22,787		$	7,749		$	2,608		$	1,615		$	10,370		$	167,485
Loans charged off																												(660		)	(1,640		)	(940		)	(1,035		)	(114		)	(650		)	(522		)	—			(5,561		)
Recoveries of loans previously charged off																												842			1,598			304			201			898			314			346			—			4,503
Net loans charged off																												182			(42		)	(636		)	(834		)	784			(336		)	(176		)	—			(1,058		)
Provision for loan losses (1)																												825			(405		)	180			(609		)	(964		)	282			223			1,177			709
Balance at September 30, 2015																												$	51,687		$	48,723		$	22,050		$	21,344		$	7,569		$	2,554		$	1,662		$	11,547		$	167,136
Three months ended September 30, 2014
Balance at June 30, 2014	$	49,842		$	49,084		$	32,041		$	32,744		$	11,331		$	3,306		$	1,851		$	11,486		$	191,685		$	49,842		$	49,084		$	32,041		$	32,744		$	11,331		$	3,306		$	1,851		$	11,486		$	191,685
Loans charged off	(1,557		)	(5,167		)	(1,492		)	(231		)	(313		)	(538		)	(306		)	—			(9,604		)	(1,557		)	(5,167		)	(1,492		)	(231		)	(313		)	(538		)	(306		)	—			(9,604		)
Recoveries of loans previously charged off	1,167			1,013			336			95			470			448			241			—			3,770			1,167			1,013			336			95			470			448			241			—			3,770
Net loans charged off	(390		)	(4,154		)	(1,156		)	(136		)	157			(90		)	(65		)	—			(5,834		)	(390		)	(4,154		)	(1,156		)	(136		)	157			(90		)	(65		)	—			(5,834		)
Provision for loan losses (1)	(278		)	6,110			406			397			(312		)	244			180			(3,121		)	3,626			(278		)	6,110			406			397			(312		)	244			180			(3,121		)	3,626
Balance at September 30, 2014	$	49,174		$	51,040		$	31,291		$	33,005		$	11,176		$	3,460		$	1,966		$	8,365		$	189,477		$	49,174		$	51,040		$	31,291		$	33,005		$	11,176		$	3,460		$	1,966		$	8,365		$	189,477
Three months ended September 30, 2013
Balance at June 30, 2013	$	58,696		$	57,557		$	25,736		$	32,684		$	14,471		$	2,497		$	2,925		$	21,865		$	216,431
Nine months ended September 30, 2015
Balance at December 31, 2014																												$	53,493		$	51,378		$	28,271		$	29,072		$	9,756		$	3,015		$	1,799		$	7,360		$	184,144
Loans charged off	(3,724		)	(9,394		)	(2,365		)	(767		)	(598		)	(473		)	(787		)	—			(18,108		)	(3,011		)	(14,669		)	(2,578		)	(3,099		)	(201		)	(1,787		)	(1,352		)	—			(26,697		)
Recoveries of loans previously charged off	185			2,295			198			245			379			294			224			—			3,820			1,729			3,855			744			547			2,276			923			587			—			10,661
Net loans charged off	(3,539		)	(7,099		)	(2,167		)	(522		)	(219		)	(179		)	(563		)	—			(14,288		)	(1,282		)	(10,814		)	(1,834		)	(2,552		)	2,075			(864		)	(765		)	—			(16,036		)
Provision for loan losses (1)	3,470			1,437			4,451			1,595			(1,221		)	610			620			(2,619		)	8,343			(524		)	8,159			(4,387		)	(5,176		)	(4,262		)	403			628			4,187			(972		)
Balance at September 30, 2013	$	58,627		$	51,895		$	28,020		$	33,757		$	13,031		$	2,928		$	2,982		$	19,246		$	210,486
Balance at September 30, 2015																												$	51,687		$	48,723		$	22,050		$	21,344		$	7,569		$	2,554		$	1,662		$	11,547		$	167,136
Nine months ended September 30, 2014
Balance at December 31, 2013	$	55,659		$	50,330		$	28,222		$	33,082		$	12,649		$	3,260		$	3,370		$	16,208		$	202,780		$	55,659		$	50,330		$	28,222		$	33,082		$	12,649		$	3,260		$	3,370		$	16,208		$	202,780
Loans charged off	(5,084		)	(15,804		)	(4,377		)	(2,166		)	(745		)	(1,738		)	(1,434		)	—			(31,348		)	(5,084		)	(15,804		)	(4,377		)	(2,166		)	(745		)	(1,738		)	(1,434		)	—			(31,348		)
Recoveries of loans previously charged off	1,641			2,532			869			319			852			1,059			767			—			8,039			1,641			2,532			869			319			852			1,059			767			—			8,039
Net loans charged off	(3,443		)	(13,272		)	(3,508		)	(1,847		)	107			(679		)	(667		)	—			(23,309		)	(3,443		)	(13,272		)	(3,508		)	(1,847		)	107			(679		)	(667		)	—			(23,309		)
Provision for loan losses (1)	(3,042		)	13,982			6,577			1,770			(1,580		)	879			(737		)	(7,843		)	10,006			(3,042		)	13,982			6,577			1,770			(1,580		)	879			(737		)	(7,843		)	10,006
Balance at September 30, 2014	$	49,174		$	51,040		$	31,291		$	33,005		$	11,176		$	3,460		$	1,966		$	8,365		$	189,477		$	49,174		$	51,040		$	31,291		$	33,005		$	11,176		$	3,460		$	1,966		$	8,365		$	189,477
Nine months ended September 30, 2013
Balance at December 31, 2012	$	62,928		$	60,205		$	22,776		$	34,536		$	17,287		$	2,367		$	2,752		$	21,052		$	223,903
Loans charged off	(13,050		)	(24,856		)	(6,735		)	(8,282		)	(5,181		)	(1,456		)	(2,037		)	—			(61,597		)
Recoveries of loans previously charged off	2,754			3,430			721			442			1,794			1,206			649			—			10,996
Net loans charged off	(10,296		)	(21,426		)	(6,014		)	(7,840		)	(3,387		)	(250		)	(1,388		)	—			(50,601		)
Provision for loan losses (1)	5,995			13,116			11,258			7,061			(869		)	811			1,618			(1,806		)	37,184
Balance at September 30, 2013	$	58,627		$	51,895		$	28,020		$	33,757		$	13,031		$	2,928		$	2,982		$	19,246		$	210,486

(1)

The provision for loan losses excluded a $291,000 and $472,000 increase, respectively, in the reserve for unfunded lending commitments for the three and nine months ended September 30, 2015 and a $126,000 and $506,000 decrease, respectively, in the reserve for unfunded lending commitments for the three and nine months ended September 30, ~~2014 and excluded a $1.2 million and $816,000 increase, respectively, in the reserve for unfunded lending commitments for the three and nine months ended September 30, 2013.~~2014. The total provision for credit losses, comprised of allocations for both funded and unfunded loans, was $1.0 million and negative $500,000, respectively, for the three and nine months ended September 30, 2015 and $3.5 million and $9.5 million, respectively, for the three and nine months ended September 30, ~~2014 and $9.5 million and $38.0 million, respectively, for the three and nine months ended September 30, 2013.~~2014.

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


																				Real Estate - Commercial Mortgage		Commercial - Industrial, Financial and Agricultural		Real Estate - Home Equity		Real Estate - Residential Mortgage		Real Estate - Construction		Consumer		Leasing and other and overdrafts		Unallocated (1)		Total
																				(in thousands)
Allowance for loan losses at September 30, 2015:																				Allowance for loan losses at September 30, 2015:
Measured for impairment under FASB ASC Subtopic 450-20																				$	38,490	$	36,002	$	14,867	$	7,921	$	5,119	$	2,535	$	1,662	$	11,547	$	118,143
Evaluated for impairment under FASB ASC Section 310-10-35																				13,197		12,721		7,183		13,423		2,450		19		—		N/A		48,993
																				$	51,687	$	48,723	$	22,050	$	21,344	$	7,569	$	2,554	$	1,662	$	11,547	$	167,136

Loans, net of unearned income at September 30, 2015:																				Loans, net of unearned income at September 30, 2015:
Measured for impairment under FASB ASC Subtopic 450-20																				$	5,273,819	$	3,885,956	$	1,679,471	$	1,330,778	$	750,629	$	271,667	$	149,530	N/A		$	13,341,850
Evaluated for impairment under FASB ASC Section 310-10-35																				66,109		43,952		14,178		51,307		18,936		29		—		N/A		194,511
	Real Estate - Commercial Mortgage		Commercial - Industrial, Financial and Agricultural			Real Estate - Home Equity		Real Estate - Residential Mortgage		Real Estate - Construction		Consumer		Leasing and other and overdrafts		Unallocated (1)		Total		$	5,339,928	$	3,929,908	$	1,693,649	$	1,382,085	$	769,565	$	271,696	$	149,530	N/A		$	13,536,361
	(in thousands)
Allowance for loan losses at September 30, 2014:	Allowance for loan losses at September 30, 2014:																			Allowance for loan losses at September 30, 2014:
Measured for impairment under FASB ASC Subtopic 450-20	$	32,951	$	39,098		$	21,666	$	11,503	$	6,009	$	3,439	$	1,966	$	8,365	$	124,997	$	32,951	$	39,098	$	21,666	$	11,503	$	6,009	$	3,439	$	1,966	$	8,365	$	124,997
Evaluated for impairment under FASB ASC Section 310-10-35	16,223		11,942			9,625		21,502		5,167		21		—		N/A		64,480		16,223		11,942		9,625		21,502		5,167		21		—		N/A		64,480
	$	49,174	$	51,040		$	31,291	$	33,005	$	11,176	$	3,460	$	1,966	$	8,365	$	189,477	$	49,174	$	51,040	$	31,291	$	33,005	$	11,176	$	3,460	$	1,966	$	8,365	$	189,477

Loans, net of unearned income at September 30, 2014:	Loans, net of unearned income at September 30, 2014:																			Loans, net of unearned income at September 30, 2014:
Measured for impairment under FASB ASC Subtopic 450-20	$	5,095,263	$	3,655,162		$	1,719,049	$	1,319,333	$	658,822	$	278,196	$	111,148	N/A		$	12,836,973	$	5,095,263	$	3,655,162	$	1,719,049	$	1,319,333	$	658,822	$	278,196	$	111,148	N/A		$	12,836,973
Evaluated for impairment under FASB ASC Section 310-10-35	61,716		36,100			13,987		52,700		28,906		23		—		N/A		193,432		61,716		36,100		13,987		52,700		28,906		23		—		N/A		193,432
	$	5,156,979	$	3,691,262	��	$	1,733,036	$	1,372,033	$	687,728	$	278,219	$	111,148	N/A		$	13,030,405	$	5,156,979	$	3,691,262	$	1,733,036	$	1,372,033	$	687,728	$	278,219	$	111,148	N/A		$	13,030,405

Allowance for loan losses at September 30, 2013:
Measured for impairment under FASB ASC Subtopic 450-20	$	43,262	$	38,025		$	18,482	$	11,494	$	8,648	$	2,911	$	2,982	$	19,246	$	145,050
Evaluated for impairment under FASB ASC Section 310-10-35	15,365		13,870			9,538		22,263		4,383		17		—		N/A		65,436
	$	58,627	$	51,895		$	28,020	$	33,757	$	13,031	$	2,928	$	2,982	$	19,246	$	210,486

Loans, net of unearned income at September 30, 2013:
Measured for impairment under FASB ASC Subtopic 450-20	$	5,001,851	$	3,593,038		$	1,758,492	$	1,277,200	$	543,268	$	296,122	$	97,749	N/A		$	12,567,720
Evaluated for impairment under FASB ASC Section 310-10-35	61,522		52,232			15,062		50,269		34,074		20		—		N/A		213,179
	$	5,063,373	$	3,645,270		$	1,773,554	$	1,327,469	$	577,342	$	296,142	$	97,749	N/A		$	12,780,899


(1)	The unallocated allowance, which was approximately 4%7% and 9%4% of the total allowance for credit losses as of both September 30, ~~2014~~2015 and September 30, ~~2013, respectively,~~2014, was, in the opinion of management, reasonable and appropriate given that the estimates used in the allocation process are inherently imprecise.

N/A – Not applicable.

Impaired Loans

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

Based on an evaluation of all relevant credit quality factors, the Corporation recorded a $500,000 negative provision for credit losses during the nine months ended September 30, 2015, compared to a $9.5 million provision for credit losses for the same period in 2014. The $10.0 million decrease in the provision for credit losses was driven by improvement in all credit quality measures, particularly net charge-off levels, across all loan portfolio segments.

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

As of September 30, ~~2014~~2015 and December 31, ~~2013,~~2014, substantially all of the Corporation’s individually evaluated impaired loans with total outstanding balances greater than or equal to $1.0 million were measured based on the estimated fair value of each loan’s collateral. Collateral could be in the form of real estate, in the case of impaired commercial mortgages and construction loans, or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real property.

As of September 30, ~~2014~~2015 and ~~2013,~~2014, approximately 77% ~~and 89%, respectively,~~ of impaired loans with principal balances greater than or equal to $1.0 million, whose primary collateral is real estate, were measured at estimated fair value using state certified third-party appraisals that had been updated within the preceding 12 months.

When updated ~~certified~~ appraisals are not obtained for loans ~~to commercial borrowers~~ evaluated for impairment under FASB ASC Section 310-10-35 that are secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated ~~a strong~~ an acceptable

loan-to-value position and, in the opinion of the Corporation's internal loan evaluation staff, there has not been a significant deterioration in the collateral value since the original appraisal was performed. Original appraisals are typically used only when the estimated collateral value, as adjusted ~~appropriately~~ for the age of the appraisal, results in a current loan-to-value ratio that is lower than the Corporation's loan-to-value requirements for new loans, generally less than 70%.

The following table presents total impaired loans by class segment:


	September 30, 2014						December 31, 2013						September 30, 2015						December 31, 2014
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance
	(in thousands)												(in thousands)
With no related allowance recorded:	With no related allowance recorded:												With no related allowance recorded:
Real estate - commercial mortgage	$	26,102	$	23,280	$	—	$	28,892	$	24,494	$	—	$	31,961	$	26,075	$	—	$	25,802	$	23,236	$	—
Commercial - secured	19,100		15,283		—		23,890		21,383		—		22,097		17,661		—		17,599		14,582		—
Commercial - unsecured													86		86		—		—		—		—
Real estate - home equity	—		—		—		399		300		—		—		—		—		—		—		—
Real estate - residential mortgage	1,075		1,075		—		—		—		—		6,607		6,201		—		4,873		4,873		—
Construction - commercial residential	20,725		14,761		—		18,943		13,740		—		13,353		10,417		—		18,041		14,801		—
Construction - commercial	1,361		1,245		—		2,996		1,976		—		1,295		1,143		—		1,707		1,581		—
	68,363		55,644				75,120		61,893				75,399		61,583				68,022		59,073
With a related allowance recorded:	With a related allowance recorded:												With a related allowance recorded:
Real estate - commercial mortgage	47,938		38,436		16,223		43,282		35,830		14,444		48,734		40,034		13,197		49,619		40,023		16,715
Commercial - secured	29,939		19,990		11,336		34,267		22,324		13,315		29,415		23,533		11,789		24,824		19,335		12,165
Commercial - unsecured	974		827		606		1,113		1,048		752		2,832		2,672		932		1,241		1,089		865
Real estate - home equity	19,810		13,987		9,625		20,383		14,337		9,059		18,854		14,178		7,183		19,392		13,458		9,224
Real estate - residential mortgage	62,182		51,625		21,502		63,682		51,097		21,745		54,604		45,106		13,423		56,607		46,478		18,592
Construction - commercial residential	18,046		11,990		4,769		25,769		14,579		3,493		9,613		6,019		1,985		14,007		7,903		2,675
Construction - commercial	1,834		629		260		485		195		77		1,223		1,077		363		1,501		1,023		459
Construction - other	452		281		138		719		548		301		452		280		102		452		281		137
Consumer - direct	18		18		16		11		11		10		14		14		10		19		19		17
Consumer - indirect	5		5		5		2		2		2		15		15		9		20		19		18
	181,198		137,788		64,480		189,713		139,971		63,198		165,756		132,928		48,993		167,682		129,628		60,867
Total	$	249,561	$	193,432	$	64,480	$	264,833	$	201,864	$	63,198	$	241,155	$	194,511	$	48,993	$	235,704	$	188,701	$	60,867

As of September 30, ~~2014~~2015 and December 31, ~~2013,~~2014, there were ~~$55.6~~$61.6 million and ~~$61.9~~$59.1 million, respectively, of impaired loans that did not have a related allowance for loan loss. The estimated fair values of the collateral ~~for~~securing these loans exceeded their carrying amount, or they were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

The following table presents average impaired loans by class segment:


	Three months ended September 30								Nine months ended September 30							Three months ended September 30								Nine months ended September 30
	2014				2013				2014				2013			2015				2014				2015				2014
	Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)	Average Recorded Investment		Interest Income (1)		Average Recorded Investment		Interest Income (1)		Average Recorded Investment		Interest Income (1)		Average Recorded Investment		Interest Income (1)
	(in thousands)															(in thousands)
With no related allowance recorded:
Real estate - commercial mortgage	$	23,056	$	78	$	27,120	$	113	$	23,524	$	244	$	29,630	394	$	25,216	$	68	$	23,056	$	78	$	26,033	$	246	$	23,524	244
Commercial - secured	18,903		29		33,644		49		20,014		98		32,528		131	17,609		28		18,903		29		16,142		74		20,014		98
Commercial - unsecured	—		—		—		—		—		—		33		—	43		—		—		—		22		—		—		—
Real estate - home equity	150		—		300		—		225		1		253		1	—		—		150		—		—		—		225		1
Real estate - residential mortgage	1,236		7		747		4		697		13		869		25	6,212		34		1,236		7		5,539		94		697		13
Construction - commercial residential	14,881		51		20,809		66		16,052		173		21,730		200	10,558		28		14,881		51		12,390		124		16,052		173
Construction - commercial	1,060		—		2,021		—		1,514		—		3,500		2	1,150		—		1,060		—		1,144		—		1,514		—
	59,286		165		84,641		232		62,026		529		88,543		753	60,788		158		59,286		165		61,270		538		62,026		529
With a related allowance recorded:
Real estate - commercial mortgage	38,469		130		37,962		158		37,794		394		46,213		563	40,572		110		38,469		130		40,116		368		37,794		394
Commercial - secured	19,764		30		22,771		34		21,404		101		29,317		115	22,386		36		19,764		30		23,668		111		21,404		101
Commercial - unsecured	850		1		1,260		1		847		3		1,502		4	2,788		1		850		1		1,981		4		847		3
Real estate - home equity	14,116		30		14,761		17		14,106		78		14,031		49	13,728		37		14,116		30		13,417		101		14,106		78
Real estate - residential mortgage	51,283		298		51,365		290		51,257		894		52,581		924	46,039		254		51,283		298		46,406		797		51,257		894
Construction - commercial residential	11,189		38		12,053		39		10,480		100		11,774		121	5,746		15		11,189		38		6,496		64		10,480		100
Construction - commercial	942		—		525		—		567		—		1,641		3	1,210		—		942		—		1,005		—		567		—
Construction - other	281		—		501		—		414		—		517		1	281		—		281		—		281		—		414		—
Consumer - direct	18		—		18		—		15		—		21		—	15		—		18		—		18		—		15		—
Consumer - indirect	6		—		3		—		4		—		1		—	15		—		6		—		17		—		4		—
Leasing and other and overdrafts	—		—		—		—		—		—		14		—
	136,918		527		141,219		539		136,888		1,570		157,612		1,780	132,780		453		136,918		527		133,405		1,445		136,888		1,570
Total	$	196,204	$	692	$	225,860	$	771	$	198,914	$	2,099	$	246,155	2,533	$	193,568	$	611	$	196,204	$	692	$	194,675	$	1,983	$	198,914	2,099


(1)	All impaired loans, excluding accruing TDRs, were non-accrual loans. Interest income recognized for the three and nine months ended September 30, ~~2014~~2015 and ~~2013~~2014 represents amounts earned on accruing TDRs.

Credit Quality Indicators and Non-performing Assets

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


	Pass						Special Mention						Substandard or Lower						Total						Pass						Special Mention						Substandard or Lower						Total
	September 30, 2014			December 31, 2013			September 30, 2014			December 31, 2013			September 30, 2014			December 31, 2013			September 30, 2014			December 31, 2013			September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	(dollars in thousands)																								(dollars in thousands)
Real estate - commercial mortgage	$	4,877,904		$	4,763,987		$	113,650		$	141,013		$	165,425		$	196,922		$	5,156,979		$	5,101,922		$	5,028,655		$	4,899,016		$	132,823		$	127,302		$	178,450		$	170,837		$	5,339,928		$	5,197,155
Commercial - secured	3,243,731			3,167,168			138,136			111,613			129,273			125,382			3,511,140			3,404,163			3,579,389			3,333,486			97,617			120,584			105,820			110,544			3,782,826			3,564,614
Commercial - unsecured	162,620			209,836			12,246			11,666			5,256			2,755			180,122			224,257			138,709			146,680			3,568			7,463			4,805			6,810			147,082			160,953
Total commercial - industrial, financial and agricultural	3,406,351			3,377,004			150,382			123,279			134,529			128,137			3,691,262			3,628,420			3,718,098			3,480,166			101,185			128,047			110,625			117,354			3,929,908			3,725,567
Construction - commercial residential	170,027			146,041			28,517			31,522			42,875			57,806			241,419			235,369			144,329			136,109			16,763			27,495			29,429			40,066			190,521			203,670
Construction - commercial	370,187			258,441			1,469			2,932			5,550			8,124			377,206			269,497			514,969			409,631			1,693			12,202			5,204			5,586			521,866			427,419
Total construction (excluding Construction - other)	540,214			404,482			29,986			34,454			48,425			65,930			618,625			504,866			659,298			545,740			18,456			39,697			34,633			45,652			712,387			631,089
	$	8,824,469		$	8,545,473		$	294,018		$	298,746		$	348,379		$	390,989		$	9,466,866		$	9,235,208		$	9,406,051		$	8,924,922		$	252,464		$	295,046		$	323,708		$	333,843		$	9,982,223		$	9,553,811
% of Total	93.2		%	92.6		%	3.1		%	3.2		%	3.7		%	4.2		%	100.0		%	100.0		%	94.2		%	93.4		%	2.5		%	3.1		%	3.3		%	3.5		%	100.0		%	100.0		%

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

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

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

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

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

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

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


	Performing						Delinquent (1)						Non-performing (2)						Total						Performing						Delinquent (1)						Non-performing (2)						Total
	September 30, 2014			December 31, 2013			September 30, 2014			December 31, 2013			September 30, 2014			December 31, 2013			September 30, 2014			December 31, 2013			September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	(dollars in thousands)																								(dollars in thousands)
Real estate - home equity	$	1,707,659		$	1,731,185		$	10,306		$	16,029		$	15,071		$	16,983		$	1,733,036		$	1,764,197		$	1,671,473		$	1,711,017		$	9,069		$	10,931		$	13,107		$	14,740		$	1,693,649		$	1,736,688
Real estate - residential mortgage	1,319,002			1,282,754			24,896			23,279			28,135			31,347			1,372,033			1,337,380			1,336,877			1,321,139			17,501			26,934			27,707			28,995			1,382,085			1,377,068
Construction - other	68,822			68,258			—			—			281			548			69,103			68,806			56,482			59,180			—			—			696			332			57,178			59,512
Consumer - direct	115,449			126,666			3,025			3,586			2,359			2,391			120,833			132,643			98,576			104,018			2,697			2,891			1,961			2,414			103,234			109,323
Consumer - indirect	155,027			147,017			2,203			3,312			156			152			157,386			150,481			166,040			153,358			2,304			2,574			118			176			168,462			156,108
Total consumer	270,476			273,683			5,228			6,898			2,515			2,543			278,219			283,124			264,616			257,376			5,001			5,465			2,079			2,590			271,696			265,431
Leasing and other and overdrafts	110,491			92,876			269			581			388			48			111,148			93,505			148,980			118,550			464			523			86			133			149,530			119,206
	$	3,476,450		$	3,448,756		$	40,699		$	46,787		$	46,390		$	51,469		$	3,563,539		$	3,547,012		$	3,478,428		$	3,467,262		$	32,035		$	43,853		$	43,675		$	46,790		$	3,554,138		$	3,557,905
% of Total	97.6		%	97.2		%	1.2		%	1.3		%	1.3		%	1.5		%	100.0		%	100.0		%	97.9		%	97.5		%	0.9		%	1.2		%	1.2		%	1.3		%	100.0		%	100.0		%


(1)	Includes all accruing loans 31 days to 89 days past due.


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

The following table presents non-performing assets:


	September 30, 2014		December 31, 2013		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Non-accrual loans	$	126,420	$	133,753	$	132,154	$	121,080
Accruing loans greater than 90 days past due	17,428		20,524
Accruing loans 90 days or more past due					12,867		17,402
Total non-performing loans	143,848		154,277		145,021		138,482
Other real estate owned (OREO)	13,489		15,052		10,561		12,022
Total non-performing assets	$	157,337	$	169,329	$	155,582	$	150,504

The following table presents TDRs, by class segment:


	September 30, 2014		December 31, 2013		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Real-estate - residential mortgage	$	30,850	$	28,815	$	29,330	$	31,308
Real-estate - commercial mortgage	18,869		19,758		17,282		18,822
Commercial - secured					7,259		5,170
Construction - commercial residential	9,251		10,117		4,363		9,241
Commercial - secured	5,042		7,933
Real estate - home equity	2,904		1,365		3,954		2,975
Commercial - unsecured	73		112		140		67
Consumer - indirect					15		19
Consumer - direct	18		11		14		19
Consumer - indirect	5		—
Total accruing TDRs	67,012		68,111		62,357		67,621
Non-accrual TDRs (1)	27,724		30,209		27,618		24,616
Total TDRs	$	94,736	$	98,320	$	89,975	$	92,237


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

As of September 30, ~~2014~~2015 and December 31, ~~2013,~~2014, there were ~~$4.6~~$5.3 million and ~~$9.6~~$3.9 million, respectively, of commitments to lend additional funds to borrowers whose loans were modified under TDRs.

The following table presents TDRs, by class segment as of September 30, ~~2014~~2015 and ~~2013~~2014, that were modified during the three and nine months ended September 30, ~~2014~~2015 and ~~2013:~~2014:


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(dollars in thousands)												(dollars in thousands)
Commercial - secured													3	$	1,380	3	$	1,214	14	$	9,203	4	$	1,357
Real estate - home equity													14	562		6	764		39	1,793		26	1,627
Real estate - residential mortgage													2	229		3	256		10	1,295		18	2,092
Real estate - commercial mortgage	1	$	391	4	$	3,774	10	$	10,195	13	$	8,428	2	188		1	391		6	2,815		10	10,195
Construction - commercial residential	—	—		2	4,427		2	1,914		5	9,542		—	—		—	—		1	889		2	1,914
Real estate - residential mortgage	3	256		5	836		18	2,092		44	6,861
Real estate - home equity	6	764		14	1,071		26	1,627		42	2,928
Commercial - secured	3	1,214		—	—		4	1,357		8	592
Commercial - unsecured													—	—		—	—		1	42		—	—
Consumer - indirect	—	—		—	—		4	7		—	—		—	—		—	—		1	13		4	7
Consumer - direct	—	—		—	—		6	8		9	2		—	—		—	—		—	—		6	8
Commercial - unsecured	—	—		—	—		—	—		1	15
Total	13	$	2,625	25	$	10,108	70	$	17,200	122	$	28,368	21	$	2,359	13	$	2,625	72	$	16,050	70	$	17,200

The following table presents TDRs, by class segment, as of September 30, ~~2014~~2015 and ~~2013~~2014, that were modified within the previous 12 months and had a post-modification payment default during the nine months ended September 30, ~~2014~~2015 and ~~2013.~~2014. The Corporation defines a payment default as a single missed payment.


	2014			2013			2015			2014
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(dollars in thousands)						(dollars in thousands)
Commercial - secured							6	$	3,855	3	$	415
Real estate - residential mortgage	8	$	1,147	20	$	3,460	4	500		8	1,147
Real estate - home equity	5	724		18	1,419		9	459		5	724
Real estate - commercial mortgage							2	233		1	35
Construction - commercial residential	3	2,509		1	608		—	—		3	2,509
Real estate - commercial mortgage	1	35		5	2,062
Commercial - secured	3	415		1	100
Consumer - direct	—	—		3	1
Total	20	$	4,830	48	$	7,650	21	$	5,047	20	$	4,830

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


	September 30, 2014																September 30, 2015
	31-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Total ≥ 90 Days		Total Past Due		Current		Total		31-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Total ≥ 90 Days		Total Past Due		Current		Total
	(in thousands)																(in thousands)
Real estate - commercial mortgage	$	19,506	$	5,074	$	1,755	$	42,847	$	44,602	$	69,182	$	5,087,797	$	5,156,979	$	7,322	$	1,169	$	194	$	48,827	$	49,021	$	57,512	$	5,282,416	$	5,339,928
Commercial - secured	7,530		1,215		2,292		30,231		32,523		41,268		3,469,872		3,511,140		6,909		4,536		1,414		33,935		35,349		46,794		3,736,032		3,782,826
Commercial - unsecured	1,528		209		—		754		754		2,491		177,631		180,122		2,380		15		65		2,618		2,683		5,078		142,004		147,082
Total commercial - industrial, financial and agricultural	9,058		1,424		2,292		30,985		33,277		43,759		3,647,503		3,691,262		9,289		4,551		1,479		36,553		38,032		51,872		3,878,036		3,929,908
Real estate - home equity	8,094		2,212		3,988		11,083		15,071		25,377		1,707,659		1,733,036		6,312		2,757		2,883		10,224		13,107		22,176		1,671,473		1,693,649
Real estate - residential mortgage	17,102		7,794		6,285		21,850		28,135		53,031		1,319,002		1,372,033		11,499		6,002		5,730		21,977		27,707		45,208		1,336,877		1,382,085
Construction - commercial residential	215		—		205		17,500		17,705		17,920		223,499		241,419		1,832		231		—		12,073		12,073		14,136		176,385		190,521
Construction - commercial	—		—		—		1,874		1,874		1,874		375,332		377,206		265		—		—		2,220		2,220		2,485		519,381		521,866
Construction - other	—		—		—		281		281		281		68,822		69,103		—		—		416		280		696		696		56,482		57,178
Total real estate - construction	215		—		205		19,655		19,860		20,075		667,653		687,728		2,097		231		416		14,573		14,989		17,317		752,248		769,565
Consumer - direct	2,032		993		2,359		—		2,359		5,384		115,449		120,833		1,398		1,299		1,961		—		1,961		4,658		98,576		103,234
Consumer - indirect	1,815		388		156		—		156		2,359		155,027		157,386		1,962		342		118		—		118		2,422		166,040		168,462
Total consumer	3,847		1,381		2,515		—		2,515		7,743		270,476		278,219		3,360		1,641		2,079		—		2,079		7,080		264,616		271,696
Leasing and other and overdrafts	185		84		388		—		388		657		110,491		111,148		449		15		86		—		86		550		148,980		149,530
Total	$	58,007	$	17,969	$	17,428	$	126,420	$	143,848	$	219,824	$	12,810,581	$	13,030,405	$	40,328	$	16,366	$	12,867	$	132,154	$	145,021	$	201,715	$	13,334,646	$	13,536,361


	December 31, 2013																December 31, 2014
	31-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Total ≥ 90 Days		Total Past Due		Current		Total		31-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Total ≥ 90 Days		Total Past Due		Current		Total
	(in thousands)																(in thousands)
Real estate - commercial mortgage	$	15,474	$	4,009	$	3,502	$	40,566	$	44,068	$	63,551	$	5,038,371	$	5,101,922	$	14,399	$	3,677	$	800	$	44,437	$	45,237	$	63,313	$	5,133,842	$	5,197,155
Commercial - secured	8,916		1,365		1,311		35,774		37,085		47,366		3,356,797		3,404,163		4,839		958		610		28,747		29,357		35,154		3,529,460		3,564,614
Commercial - unsecured	332		125		—		936		936		1,393		222,864		224,257		395		65		9		1,022		1,031		1,491		159,462		160,953
Total commercial - industrial, financial and agricultural	9,248		1,490		1,311		36,710		38,021		48,759		3,579,661		3,628,420		5,234		1,023		619		29,769		30,388		36,645		3,688,922		3,725,567
Real estate - home equity	13,555		2,474		3,711		13,272		16,983		33,012		1,731,185		1,764,197		8,048		2,883		4,257		10,483		14,740		25,671		1,711,017		1,736,688
Real estate - residential mortgage	16,969		6,310		9,065		22,282		31,347		54,626		1,282,754		1,337,380		18,789		8,145		8,952		20,043		28,995		55,929		1,321,139		1,377,068
Construction - commercial residential	—		645		346		18,202		18,548		19,193		216,176		235,369		160		—		—		13,463		13,463		13,623		190,047		203,670
Construction - commercial	14		—		—		2,171		2,171		2,185		267,312		269,497		—		—		—		2,604		2,604		2,604		424,815		427,419
Construction - other	—		—		—		548		548		548		68,258		68,806		—		—		51		281		332		332		59,180		59,512
Total real estate - construction	14		645		346		20,921		21,267		21,926		551,746		573,672		160		—		51		16,348		16,399		16,559		674,042		690,601
Consumer - direct	2,091		1,495		2,391		—		2,391		5,977		126,666		132,643		2,034		857		2,414		—		2,414		5,305		104,018		109,323
Consumer - indirect	2,864		448		150		2		152		3,464		147,017		150,481		2,156		418		176		—		176		2,750		153,358		156,108
Total consumer	4,955		1,943		2,541		2		2,543		9,441		273,683		283,124		4,190		1,275		2,590		—		2,590		8,055		257,376		265,431
Leasing and other and overdrafts	559		22		48		—		48		629		92,876		93,505		357		166		133		—		133		656		118,550		119,206
Total	$	60,774	$	16,893	$	20,524	$	133,753	$	154,277	$	231,944	$	12,550,276	$	12,782,220	$	51,177	$	17,169	$	17,402	$	121,080	$	138,482	$	206,828	$	12,904,888	$	13,111,716

NOTE F6 – Mortgage Servicing Rights

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


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
	(in thousands)												(in thousands)
Amortized cost:
Balance at beginning of period	$	42,586		$	41,750		$	42,452		$	39,737		$	41,598		$	42,586		$	42,148		$	42,452
Originations of mortgage servicing rights	1,456			2,909			3,807			10,371			1,463			1,456			4,976			3,807
Amortization	(1,664		)	(2,031		)	(3,881		)	(7,480		)	(1,829		)	(1,664		)	(5,892		)	(3,881		)
Balance at end of period	$	42,378		$	42,628		$	42,378		$	42,628		$	41,232		$	42,378		$	41,232		$	42,378

Valuation allowance:
Balance at beginning of period	$	—		$	(1,690	)	$	—		$	(3,680	)
Reversals	—			1,690			—			3,680
Balance at end of period	$	—		$	—		$	—		$	—

Net MSRs at end of period	$	42,378		$	42,628		$	42,378		$	42,628

MSRs represent the economic value of existing contractual rights to service mortgage loans that have been sold. Accordingly, actual and expected prepayments of the underlying mortgage loans can impact the value of MSRs.

The Corporation ~~estimates~~accounts for MSRs at the lower of amortized cost or fair value.

The fair value of ~~its~~ MSRs is estimated by discounting the estimated cash flows from servicing income, net of expense, over the expected life of the underlying loans at a discount rate commensurate with the risk associated with these assets. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. No ~~adjustment to the~~ valuation allowance was necessary ~~for three and nine months ended~~as of September 30, 2015 or 2014. ~~A decrease to the valuation allowance~~As of ~~$1.7 million and $3.7 million was recorded for the three and nine months ended~~ September 30, ~~2013.~~

~~The Corporation accounts for MSRs at the lower of amortized cost or fair value. As of~~ ~~September 30, 2014~~,2015, the estimated fair value of MSRs was ~~$47.9~~$43.8 million,, which exceeded their book value. ~~Therefore, no increase to the valuation allowance was necessary during the three or nine months ended~~ ~~September 30, 2014~~.

NOTE G7 – Stock-Based Compensation

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

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

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

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


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
	(in thousands)												(in thousands)
Stock-based compensation expense	$	1,288		$	979		$	4,310		$	4,186		$	1,533		$	1,288		$	4,371		$	4,310
Tax benefit	(358		)	(272		)	(1,067		)	(1,183		)	(489		)	(358		)	(1,403		)	(1,067		)
Stock-based compensation expense, net of tax	$	930		$	707		$	3,243		$	3,003		$	1,044		$	930		$	2,968		$	3,243

Stock option fair values are estimated through the use of the Black-Scholes valuation methodology as of the date of grant. Stock options carry terms of up to ten years. ~~The fair value of~~Fair values for restricted stock, ~~is based on the trading price of the Corporation’s stock on the date of grant. Restricted stock awards earn dividends during the vesting period, which are forfeitable if the awards do not vest.~~

~~During the three and nine months ended September 30, 2014, the Corporation granted approximately 389,000 PSUs, 289,000 stock options and 105,000 RSUs under its Employee Option Plan. The fair value of~~ RSUs and a majority of PSUs are based on the trading price of the ~~Corporation's~~Corporation’s stock on the date of ~~grant.~~grant and earn dividends during the vesting period, which are forfeitable if the awards

do not vest. The fair value of certain PSUs are estimated through the use of the Monte Carlo valuation methodology as of the date of grant. ~~RSUs become fully vested over or after a~~

~~three~~ year vesting period, however, certain events, as defined in the Employee Option Plan, can result in the acceleration of the vesting of RSUs. RSUs and PSUs earn dividends during the vesting period, which are forfeitable if the awards do not vest. The fair value of PSUs, which is recognized as compensation expense over the period during which employees are required to provide service in exchange for such awards, may vary, based on the expectations for actual performance relative to defined performance measures. As of September 30, ~~2014~~2015, the Employee ~~Option~~Equity Plan had ~~11.2~~11.6 million shares reserved for future grants through 2023~~. During the nine months ended September 30, 2014, the Corporation granted approximately 13,000 shares of stock under its Directors' Plan. As of~~ ~~September 30, 2014~~, and the Directors’ Plan had approximately ~~424,000~~396,000 shares reserved for future grants through 2021.

NOTE H8 – Employee Benefit Plans

The Corporation maintains a defined benefit pension plan ~~(Pension Plan)~~("Pension Plan") for certain employees, which was curtailed effective January 1, 2008. Contributions to the Pension Plan are actuarially determined and funded annually, if required. Pension Plan assets are invested in: money markets; fixed income securities, including corporate bonds, U.S. Treasury securities and common trust funds; and equity securities, including common stocks and common stock mutual funds.

The net periodic benefit cost for the Corporation’s Pension Plan ~~as determined by a third-party actuary,~~ consisted of the following components:


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
	(in thousands)												(in thousands)
Service cost (1)	$	92		$	51		$	276		$	153		$	145		$	92		$	435		$	276
Interest cost	853			772			2,559			2,316			851			853			2,553			2,559
Expected return on plan assets	(811		)	(800		)	(2,432		)	(2,400		)	(752		)	(811		)	(2,256		)	(2,432		)
Net amortization and deferral	244			596			732			1,788			782			244			2,346			732
Net periodic benefit cost	$	378		$	619		$	1,135		$	1,857		$	1,026		$	378		$	3,078		$	1,135


(1)	The Pension Plan service cost recorded for the ~~three~~ ~~and~~ nine months ended September 30, ~~2014~~2015 and ~~2013~~2014~~, respectively,~~ was related to administrative costs associated with the plan and was not due to the accrual of additional participant benefits.

The Corporation currently provides medical and life insurance benefits under a postretirement benefits plan ~~(Postretirement Plan)~~("Postretirement Plan") to certain retired full-time employees who were employees of the Corporation prior to January 1, 1998.

Effective February 1, 2014, the Corporation amended the Postretirement Plan, making all active full-time employees ineligible for benefits under this plan. As a result of this amendment, the Corporation recorded a $1.5 million gain induring the nine months ended September 30, 2014, as ~~determined by~~ a ~~third-party actuary and included as a component of~~reduction to salaries and employee benefits on the consolidated statements of income. The gain resulted from the recognition of the remaining prior service cost prior to the amendment date as of December 31, 2013. In addition, this amendment resulted in a ~~$3.3~~$3.4 million decrease in the accumulated postretirement benefit obligation and a corresponding increase in unrecognized prior service cost credits.

The net periodic ~~benefit (income)~~ cost (benefit) of the Corporation’s Postretirement Plan ~~as determined by consulting actuaries,~~ consisted of the following components, excluding the ~~impact of the~~ $1.5 million plan amendment ~~gain:~~gain in 2014:


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
	(in thousands)												(in thousands)
Service cost (1)	$	—		$	57		$	15		$	171		$	—		$	—		$	—		$	15
Interest cost	48			81			157			243			52			48			156			157
Net accretion and deferral	(84		)	(91		)	(263		)	(273		)	(65		)	(84		)	(195		)	(263		)
Net periodic benefit (income) cost	$	(36	)	$	47		$	(91	)	$	141
Net periodic benefit													$	(13	)	$	(36	)	$	(39	)	$	(91	)


(1)	As a result of the plan amendment, additional participant benefits are not accrued under the Postretirement Plan after February 1, 2014. ~~Service costs recorded after the effective date of the amendment represent administrative costs associated with the plan.~~

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

NOTE I9 – Derivative Financial Instruments

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

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

Mortgage Banking Derivatives

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

Interest Rate Swaps

The Corporation enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Corporation receives a floating rate. These interest rate swaps are derivative financial instruments that are recorded at their fair ~~values~~value within other assets and other liabilities on the consolidated balance ~~sheets. Changes~~sheets, with changes in fair value during the period ~~are~~ recorded within other non-interest expense on the consolidated statements of income.

Foreign Exchange Contracts

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

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


	September 30, 2014					December 31, 2013					September 30, 2015					December 31, 2014
	Notional Amount		Asset (Liability) Fair Value			Notional Amount		Asset (Liability) Fair Value			Notional Amount		Asset (Liability) Fair Value			Notional Amount		Asset (Liability) Fair Value
	(in thousands)										(in thousands)
Interest Rate Locks with Customers
Positive fair values	$	92,136	$	1,324		$	75,217	$	867		$	121,546	$	2,263		$	89,655	$	1,391
Negative fair values	937		(16		)	11,393		(59		)	172		(2		)	301		(6		)
Net interest rate locks with customers			1,308					808					2,261					1,385
Forward Commitments
Positive fair values	6,165		23			87,904		1,263			110		—			—		—
Negative fair values	98,323		(392		)	2,373		(5		)	117,389		(1,502		)	93,802		(1,164		)
Net forward commitments			(369		)			1,258					(1,502		)			(1,164		)
Interest Rate Swaps with Customers
Positive fair values	360,442		10,027			111,899		2,105			681,647		37,436			468,080		19,716
Negative fair values	54,308		(615		)	105,673		(2,993		)	8,000		(87		)	25,418		(198		)
Net interest rate swaps with customers			9,412					(888		)			37,349					19,518
Interest Rate Swaps with Dealer Counterparties
Positive fair values	54,308		615			105,673		2,993			8,000		87			25,418		198
Negative fair values	360,442		(10,027		)	111,899		(2,105		)	681,647		(37,436		)	468,080		(19,716		)
Net interest rate swaps with dealer counterparties			(9,412		)			888					(37,349		)			(19,518		)
Foreign Exchange Contracts with Customers
Positive fair values	17,434		959			2,150		24			7,183		260			11,616		810
Negative fair values	6,273		(424		)	12,775		(343		)	7,091		(269		)	5,250		(441		)
Net foreign exchange contracts with customers			535					(319		)			(9		)			369
Foreign Exchange Contracts with Correspondent Banks
Positive fair values	6,554		428			17,348		498			10,308		614			5,287		446
Negative fair values	16,988		(871		)	5,872		(48		)	8,630		(334		)	13,572		(876		)
Net foreign exchange contracts with correspondent banks			(443		)			450					280					(430		)
Net derivative fair value asset			$	1,031				$	2,197				$	1,030				$	160

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


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
	(in thousands)												(in thousands)
Interest rate locks with customers	$	(1,092	)	$	4,717		$	500		$	(3,707	)	$	1,041		$	(1,092	)	$	876		$	500
Forward commitments	1,374			(12,244		)	(1,627		)	(1,969		)	(3,183		)	1,374			(338		)	(1,627		)
Interest rate swaps with customers	(40		)	1,009			10,300			(5,270		)	18,266			(40		)	17,831			10,300
Interest rate swaps with dealer counterparties	40			(1,009		)	(10,300		)	5,270			(18,266		)	40			(17,831		)	(10,300		)
Foreign exchange contracts with customers	557			(344		)	854			(175		)	(197		)	557			(378		)	854
Foreign exchange contracts with correspondent banks	(527		)	(50		)	(893		)	910			323			(527		)	710			(893		)
Net fair value gains (losses) on derivative financial instruments	$	312		$	(7,921	)	$	(1,166	)	$	(4,941	)	$	(2,016	)	$	312		$	870		$	(1,166	)

NOTE J10 – Fair Value Option

U.S. GAAP permits entities to measure many financial instruments and certain other items at fair value and requires certain disclosures for amounts for which the fair value option is applied. The Corporation has elected to measure mortgage loans held for sale at fair value to more accurately reflect the financial results of its mortgage banking activities in its consolidated financial statements. Derivative financial instruments related to these activities are also recorded at fair value, as noted within Note I,9, "Derivative Financial Instruments." The Corporation determines fair value for its mortgage loans held for sale based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Changes in fair values during the period are recorded as components of mortgage banking income on the consolidated statements of income. Interest income earned on mortgage loans held for sale is ~~recorded~~classified within interest income on the consolidated statements of income.

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


	September 30, 2014		December 31, 2013		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Cost	$	24,690	$	21,172	$	26,186	$	17,080
Fair value	25,212		21,351		26,937		17,522

During the three months ended September 30, ~~2014, losses related to changes in fair values of mortgage loans held for sale were $472,000, compared to $343,000 of gains for~~2015, the ~~nine months ended September 30, 2014. During the three months ended September 30, 2013,~~Corporation recorded gains related to changes in fair values of mortgage loans held for sale ~~were $2.6 million,~~of $531,000 compared to losses of ~~$784,000~~$472,000 for the three months ended September 30, 2014. For the nine months ended September 30, ~~2013.~~2015 and 2014, the Corporation recorded gains related to changes in fair values of mortgage loans held for sale of $309,000 and $343,000, respectively.

NOTE K11 – Balance Sheet Offsetting

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

The Corporation is a party to interest rate swap transactions with financial institution counterparties and customers, disclosed in detail within Note I,9, "Derivative Financial Instruments." Under these agreements, the Corporation has the right to ~~net settle~~net-settle multiple contracts with the same counterparty in the event of default on, or termination of, any one contract. Cash collateral is posted by the party with a net liability position in accordance with contract thresholds and can be used to settle the fair value of the interest rate swap agreements in the event of default.

~~Beginning in the first quarter of 2014, the~~The Corporation is also a party to foreign currency exchange contracts with financial institution counterparties, under which the Corporation has the right to ~~net settle~~net-settle multiple contracts with the same counterparty in the event of default on, or termination of, any one contract. As with interest rate swap contracts, cash collateral is posted by the party with a net liability position in accordance with contract thresholds and can be used to settle the fair value of the ~~interest rate swap agreements~~foreign currency exchange contracts in the event of default. For additional details, see Note I,9, "Derivative Financial Instruments."

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

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


	Gross Amounts		Gross Amounts Not Offset								Gross Amounts		Gross Amounts Not Offset
	Recognized		on the Consolidated								Recognized		on the Consolidated
	on the		Balance Sheets								on the		Balance Sheets
	Consolidated		Financial			Cash			Net		Consolidated		Financial			Cash			Net
	Balance Sheets		Instruments (1)			Collateral (2)			Amount		Balance Sheets		Instruments (1)			Collateral (2)			Amount
	(in thousands)										(in thousands)
September 30, 2014
September 30, 2015
Interest rate swap derivative assets	$	10,642	$	(636	)	$	—		$	10,006	$	37,523	$	(87	)	$	—		$	37,436
Foreign exchange derivative assets with correspondent banks	428		(428		)	—			—		614		(334		)	—			280
Total	$	11,070	$	(1,064	)	$	—		$	10,006	$	38,137	$	(421	)	$	—		$	37,716

Interest rate swap derivative liabilities	$	10,642	$	(636	)	$	(9,480	)	$	526	$	37,523	$	(87	)	$	(37,436	)	$	—
Foreign exchange derivative liabilities with correspondent banks	871		(428		)	(310		)	133		334		(334		)	310			310
Total	$	11,513	$	(1,064	)	$	(9,790	)	$	659	$	37,857	$	(421	)	$	(37,126	)	$	310

December 31, 2013
December 31, 2014
Interest rate swap derivative assets	$	5,098	$	(2,104	)	$	—		$	2,994	$	19,914	$	(206	)	$	—		$	19,708
Foreign exchange derivative assets with correspondent banks											446		(446		)	—			—
Total											$	20,360	$	(652	)	$	—		$	19,708

Interest rate swap derivative liabilities	$	5,098	$	(2,104	)	$	(730	)	$	2,264	$	19,914	$	(206	)	$	(19,210	)	$	498
Foreign exchange derivative liabilities with correspondent banks											876		(446		)	(310		)	120
Total											$	20,790	$	(652	)	$	(19,520	)	$	618


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


(2)	Amounts represent cash collateral posted on interest rate swap transactions with financial institution counterparties. Interest rate swaps with customers are collateralized by the underlying loans to those borrowers.

NOTE L12 – Commitments and Contingencies

Commitments

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

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

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


	September 30, 2014		December 31, 2013		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Commitments to extend credit	$	4,437,607	$	4,379,578	$	5,635,629	$	4,389,064
Standby letters of credit	382,526		391,445		390,501		382,465
Commercial letters of credit	30,067		36,344		36,365		32,304

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

Residential Lending

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

The Corporation provides customary representations and warranties to investors that specify, among other things, that the loans have been underwritten to the standards established by the investor. The Corporation may be required to repurchase a loan, or reimburse the investor for a credit loss incurred on a loan, if it is determined that the representations and warranties have not been

met. Such repurchases or reimbursements generally result from an underwriting or documentation deficiency. As of September 30, ~~2014~~2015 and December 31, ~~2013~~,2014, total outstanding repurchase requests ~~totaled~~were $851,000 and $543,000, ~~and $8.8 million,~~ respectively. ~~During the first quarter of 2014, the Corporation entered into a settlement agreement with a secondary market investor. Under this agreement, the Corporation agreed~~

From 2000 to pay this investor $4.5 million to settle all outstanding and potential future repurchase requests under a series of specified loan purchase agreements with that secondary market investor. The result of this settlement was a reduction to outstanding repurchase requests of $7.5 million and a reduction to reserves for repurchases of $5.1 million, resulting in a $600,000 reduction to operating risk loss on the consolidated statements of income during the nine months ended ~~September 30, 2014~~.

~~From~~ ~~2000~~ to 2011,, the Corporation sold loans to the Federal Home Loan Bank of Pittsburgh under its Mortgage Partnership Finance Program ~~(MPF Program)~~("MPF Program"). No loans were sold under this program during the nine months ended September 30, ~~2014~~2015 or ~~during 2013 or 2012.~~2014. The Corporation provided a "credit enhancement" for residential mortgage loans sold under the MPF Program whereby it would assume credit losses in excess of a defined "First Loss ~~Account" (FLA)~~Account," or "FLA" balance, up to specified amounts. The FLA is funded by the Federal Home Loan Bank of Pittsburgh based on a percentage of the outstanding principal balance of loans sold. As of September 30, ~~2014~~,2015, the unpaid principal balance of loans sold under the MPF Program was approximately ~~$158 million~~.$132 million. As of September 30, ~~2014~~2015 and December 31, ~~2013~~,2014, the reserve for estimated credit losses related to loans sold under the MPF Program was ~~$2.4~~$1.8 million and ~~$2.5~~$2.3 million,, respectively. Required reserves are calculated based on delinquency status and estimated loss rates established through the Corporation's existing allowance for credit losses ~~methodology.~~methodology for residential mortgage loans.

As of September 30, ~~2014~~2015 and December 31, ~~2013~~,2014, the total reserve for losses on residential mortgage loans sold was ~~$3.3~~$2.5 million and ~~$8.6~~$3.2 million,, respectively, including both reserves for credit losses under the MPF Program and reserves for representation and warranty exposures. Management believes that the reserves recorded as of September 30, ~~2014~~2015 are adequate. However, declines in collateral values, the identification of additional loans to be repurchased, or a deterioration in the credit quality of loans sold under the MPF Program could necessitate additional reserves, established through charges to earnings, in the future.

~~Regulatory Matters~~

In July 2014, three wholly owned banking subsidiaries of the Corporation, Fulton Bank, N.A., Swineford National Bank and FNB Bank, N.A., each entered into a Stipulation and Consent to the Issuance of a Consent Order (Consent Order) with their primary Federal bank regulatory agency, the Office of the Comptroller of the Currency, relating to identified deficiencies in a centralized Bank Secrecy Act and anti-money laundering compliance program, which was designed to comply with the requirements of the Bank Secrecy Act, the USA Patriot Act of 2001 and related anti-money laundering regulations (collectively, the "BSA/AML Requirements") as disclosed by the Corporation in a Current Report on Form 8-K filed with the SEC on July 18, 2014. The Consent Orders require, among other things, that the banking subsidiaries review, assess and take actions to strengthen and enhance their compliance programs related to the BSA/AML Requirements (BSA/AML Compliance Program).

In September 2014, the Corporation and its wholly owned banking subsidiary, Lafayette Ambassador Bank (Lafayette), entered into a consent cease and desist order (Cease and Desist Order) with their primary Federal bank regulatory agency, the Board of Governors of the Federal Reserve System (Reserve Board), as disclosed by the Corporation in a Current Report on Form 8-K filed with the SEC on September 9, 2014. The Cease and Desist Order requires, among other things, that the Corporation and Lafayette strengthen the BSA/AML Compliance Program and imposes requirements similar to those set forth in the Consent Orders. In addition, the Cease and Desist Order requires the Corporation to engage an independent third-party firm to conduct a comprehensive assessment of the BSA/AML Compliance Program, and that Lafayette engage an independent third-party firm to conduct a retrospective review of account and transaction activity from January 1, 2014 to June 30, 2014 associated with high-risk customers to determine whether suspicious activity was properly identified and reported in accordance with the BSA/AML requirements. Based on the results of this review the Reserve Board may require a review of transactions for additional time periods. Further, because the Consent Orders and the Cease and Desist Order relate to the BSA/AML Compliance Program, which is operated jointly for all of the Corporation’s subsidiary banks, management anticipates that one or both of the Corporation's other subsidiary banks will also become subject to an enforcement action related to the BSA/AML Requirements, and the provisions of any such enforcement action may differ from those of the Consent Orders and Cease and Desist Order.

Other Contingencies

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

As of the date of this report, the Corporation believes that any liabilities, individually or in the aggregate, which may result from the final outcomes of pending proceedings will not have a material adverse effect on the financial condition, the operating results and/or the liquidity of the Corporation. However, legal proceedings are often unpredictable, and the actual results of such proceedings cannot be determined with certainty. Refer also to Part II. Other Information, Item 1. Legal Proceedings.

NOTE M13 – Fair Value Measurements

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

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

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

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

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

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



	September 30, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Mortgage loans held for sale	$	—	$	26,937	$	—	$	26,937
Available for sale investment securities:
Equity securities	23,532		—		—		23,532
U.S. Government sponsored agency securities	—		48,551		—		48,551
State and municipal securities	—		240,236		—		240,236
Corporate debt securities	—		96,761		3,180		99,941
Collateralized mortgage obligations	—		874,299		—		874,299
Mortgage-backed securities	—		1,051,905		—		1,051,905
Auction rate securities	—		—		97,873		97,873
Total available for sale investments	23,532		2,311,752		101,053		2,436,337
Other assets	16,253		39,787		—		56,040
Total assets	$	39,785	$	2,378,476	$	101,053	$	2,519,314
Other liabilities	$	15,982	$	39,027	$	—	$	55,009


	September 30, 2014								December 31, 2014
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Mortgage loans held for sale	$	—	$	25,212	$	—	$	25,212	$	—	$	17,522	$	—	$	17,522
Available for sale investment securities:
Equity securities	45,278		—		—		45,278		47,623		—		—		47,623
U.S. Government securities	—		200		—		200		—		200		—		200
U.S. Government sponsored agency securities	—		240		—		240		—		214		—		214
State and municipal securities	—		257,616		—		257,616		—		245,215		—		245,215
Corporate debt securities	—		93,071		8,356		101,427		—		90,126		7,908		98,034
Collateralized mortgage obligations	—		955,040		—		955,040		—		902,313		—		902,313
Mortgage-backed securities	—		962,335		—		962,335		—		928,831		—		928,831
Auction rate securities	—		—		148,473		148,473		—		—		100,941		100,941
Total available for sale investments	45,278		2,268,502		156,829		2,470,609		47,623		2,166,899		108,849		2,323,371
Other assets	17,475		11,988		—		29,463		17,682		21,305		—		38,987
Total assets	$	62,753	$	2,305,702	$	156,829	$	2,525,284	$	65,305	$	2,205,726	$	108,849	$	2,379,880
Other liabilities	$	17,376	$	11,050	$	—	$	28,426	$	17,737	$	21,084	$	—	$	38,821

December 31, 2013
Level 1 Level 2 Level 3 Total
(in thousands)
Mortgage loans held for sale $ —
$ 21,351
$ —
$ 21,351
Available for sale investment securities:
Equity securities 46,201
—
—
46,201
U.S. Government securities —
525
—
525
U.S. Government sponsored agency securities —
726
—
726
State and municipal securities —
284,849
—
284,849
Corporate debt securities —
89,662
9,087
98,749
Collateralized mortgage obligations —
1,032,398
—
1,032,398
Mortgage-backed securities —
945,712
—
945,712
Auction rate securities —
—
159,274
159,274
Total available for sale investments 46,201
2,353,872
168,361
2,568,434
Other assets 15,779
7,227
—
23,006
Total assets $ 61,980
$ 2,382,450
$ 168,361
$ 2,612,791
Other liabilities $ 15,648
$ 5,161
$ —
$ 20,809

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

Mortgage loans held for sale – This category consists of mortgage loans held for sale that the Corporation has elected to measure at fair value. Fair values as of September 30, ~~2014~~2015 and December 31, ~~2013~~2014 were measured based on the price that secondary market investors were offering for loans with similar characteristics. See Note 10, "Fair Value Option" for details related to the Corporation’s election to measure assets and liabilities at fair value.

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

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

Management tests the values provided by the pricing service by obtaining securities prices from an alternative third-party source and comparing the results. This test is done for approximately ~~75%~~80% of the securities valued by the pricing service. Generally, differences by security in excess of 5% are researched to reconcile the difference.

Equity securities – Equity securities consist of common stocks of financial institutions ($~~39.3~~22.4 million at September 30, ~~2014~~2015 and ~~$40.6~~$41.8 million at December 31, ~~2013)~~2014) and other equity investments ($~~6.0~~1.1 million at September 30, ~~2014~~2015 and ~~$5.6~~$5.8 million at December 31, ~~2013)~~2014). These Level 1 investments are measured at fair value based on quoted prices for identical securities in active markets.

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

Corporate debt securities – This category consists of subordinated debt issued by financial institutions ($~~50.3~~53.6 million at September 30, ~~2014~~2015 and $50.0 million at December 31, ~~2013)~~2014), single-issuer trust preferred securities issued by financial institutions ($~~44.1~~41.8 million at September 30, ~~2014~~2015 and ~~$40.5~~$42.0 million at December 31, ~~2013)~~2014), pooled trust preferred securities issued by financial institutions ($~~4.5 million~~530,000 at September 30, ~~2014~~2015 and ~~$5.3~~$4.1 million at December 31, ~~2013)~~2014) and other corporate debt issued by non-financial institutions ($~~2.6~~4.0 million at September 30, ~~2014~~2015 and $1.9 million at December 31, ~~2013)~~2014).

Level 2 investments include the Corporation’s holdings of subordinated debt, other corporate debt issued by non-financial institutions and ~~$40.2~~$39.2 million and ~~$36.7~~$38.2 million of single-issuer trust preferred securities held at

September 30, ~~2014~~2015 and December 31, ~~2013,~~2014, respectively. The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.

Level 3 investments include the Corporation’s investments in pooled trust preferred securities ($530,000 at September 30, 2015 and $4.1 million at December 31, 2014) and certain single-issuer trust preferred securities ($~~3.9~~2.7 million at September 30, ~~2014~~2015 and $3.8 million at December 31, ~~2013)~~2014). The fair values of these securities were determined based on quotes provided by third-party brokers who determined fair values based predominantly on internal valuation models which were not indicative prices or binding offers. The Corporation’s third-party pricing service cannot derive fair values for these securities primarily due to inactive markets for similar investments. Level 3 values are tested by management primarily through trend analysis, by comparing current values to those reported at the end of the preceding calendar quarter, and determining if they are reasonable based on price and spread movements for this asset class.

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

Other assets – Included within this category are the following:

Level 1 assets include mutual funds that are held in trust for employee deferred compensation plans ($~~16.1~~15.4 million at September 30, ~~2014~~2015 and ~~$15.3~~$16.4 million at December 31, ~~2013)~~2014) and the fair value of foreign currency exchange contracts ($~~1.4 million~~874,000 at September 30, ~~2014~~2015 and ~~$522,000~~$1.3 million at December 31, ~~2013)~~2014). The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.

Level 2 assets include the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($~~1.3~~2.3 million at September 30, ~~2014~~2015 and ~~$2.1~~$1.4 million at December 31, ~~2013)~~2014) and the fair value of interest rate swaps ($~~10.6~~37.5 million at September 30, ~~2014~~2015 and ~~$5.1~~ $19.9

million at December 31, ~~2013)~~2014). The fair values of the Corporation’s interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See Note I,9, "Derivative Financial Instruments," for additional information.

Other liabilities – Included within this category are the following:

Level 1 liabilities include employee deferred compensation liabilities which represent amounts due to employees under deferred compensation plans ($~~16.1~~15.4 million at September 30, ~~2014~~2015 and ~~$15.3~~$16.4 million at December 31, ~~2013)~~2014) and the fair value of foreign currency exchange contracts ($~~1.3 million~~603,000 at September 30, ~~2014~~2015 and ~~$391,000~~$1.3 million at December 31, ~~2013)~~2014). The fair value of these liabilities are determined in the same manner as the related assets, as described under the heading "Other assets" above.

Level 2 liabilities include the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($~~408,000~~1.5 million at September 30, ~~2014~~2015 and ~~$64,000~~$1.2 million at December 31, ~~2013)~~2014) and the fair value of interest rate swaps ($~~10.6~~37.5 million at September 30, ~~2014~~2015 and ~~$5.1~~$19.9 million at December 31, ~~2013)~~2014). The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Other assets" above.

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

Three months ended September 30, 2014
Pooled Trust
Preferred
Securities Single-issuer
Trust Preferred
Securities ARCs
(in thousands)
Balance at June 30, 2014 $ 4,275
$ 3,820
$ 146,931
Realized adjustment to fair value (1) (18 ) —
—
Unrealized adjustment to fair value (2) 230
47
1,280
Discount accretion (3) —
2
262
Balance at September 30, 2014 $ 4,487
$ 3,869
$ 148,473

Three months ended September 30, 2013
Balance at June 30, 2013 $ 5,391
$ 3,670
$ 152,592
Sales —
—
(25 )
Realized adjustment to fair value (1) (97 ) —
—
Unrealized adjustment to fair value (2) (103 ) 108
1,983
Settlements - calls —
—
(317 )
Discount accretion (3) —
2
277
Balance at September 30, 2013 $ 5,191
$ 3,780
$ 154,510

Nine months ended September 30, 2014
Pooled Trust
Preferred
Securities Single-issuer
Trust Preferred
Securities ARCs
(in thousands)
Balance at December 31, 2013 $ 5,306
$ 3,781
$ 159,274
Sales (1,394 ) —
(11,912 )
Realized adjustment to fair value (1) (18 ) —
—
Unrealized adjustment to fair value (2) 789
83
1,528
Settlements - calls (200 ) —
(1,081 )
Discount accretion (3) 4
5
664
Balance at September 30, 2014 $ 4,487
$ 3,869
$ 148,473

Nine months ended September 30, 2013
Balance at December 31, 2012 $ 6,927
$ 3,360
$ 149,339
Sales (4,987 ) —
(25 )
Realized adjustment to fair value (1) 1,604
—
—
Unrealized adjustment to fair value (2) 1,771
412
7,171
Settlements - calls (124 ) —
(2,725 )
Discount accretion (3) —
8
750
Balance at September 30, 2013 $ 5,191
$ 3,780
$ 154,510



	Three months ended September 30, 2015
	Pooled Trust Preferred Securities			Single-issuer Trust Preferred Securities			ARCs
	(in thousands)
Balance at June 30, 2015	$	530		$	3,820		$	98,606
Unrealized adjustment to fair value (1)	—			(203		)	(890		)
Settlements - calls	—			(970		)	—
Discount accretion (2)	—			3			157
Balance at September 30, 2015	$	530		$	2,650		$	97,873

	Three months ended September 30, 2014
Balance at June 30, 2014	$	4,275		$	3,820		$	146,931
Realized adjustment to fair value (3)	(18		)	—			—
Unrealized adjustment to fair value (1)	230			47			1,280
Discount accretion (2)	—			2			262
Balance at September 30, 2014	$	4,487		$	3,869		$	148,473

	Nine months ended September 30, 2015
	Pooled Trust Preferred Securities			Single-issuer Trust Preferred Securities			ARCs
	(in thousands)
Balance at December 31, 2014	$	4,088		$	3,820		$	100,941
Sales	(3,633		)	—			—
Unrealized adjustment to fair value (1)	190			(207		)	(978		)
Settlements - calls	(117		)	(970		)	(2,446		)
Discount accretion (2)	2			7			356
Balance at September 30, 2015	$	530		$	2,650		$	97,873

	Nine months ended September 30, 2014
Balance at December 31, 2013	$	5,306		$	3,781		$	159,274
Sales	(1,394		)	—			(11,912		)
Realized adjustment to fair value (3)	(18		)	—			—
Unrealized adjustment to fair value (1)	789			83			1,528
Settlements - calls	(200		)	—			(1,081		)
Discount accretion (2)	4			5			664
Balance at September 30, 2014	$	4,487		$	3,869		$	148,473


(1)	~~Realized adjustments to fair value represent credit related other-than-temporary impairment charges and gains on sales of investment securities, both included~~

~~as components of investment securities gains on the consolidated statements of income.~~


~~(2)~~	Pooled trust preferred securities, single-issuer trust preferred securities and ARCs are classified as available for sale investment securities; as such, the unrealized adjustment to fair value was recorded as an unrealized holding gain (loss) and included as a component of available for sale investment securities on the consolidated balance sheets.


~~(3)~~(2)	Included as a component of net interest income on the consolidated statements of income.


(3)	Realized adjustments to fair value represent credit related other-than-temporary impairment charges and gains on sales of investment securities, both included as components of investment securities gains on the consolidated statements of income.

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


	September 30, 2014								September 30, 2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Net loans	$	—	$	—	$	128,952	$	128,952	$	—	$	—	$	145,518	$	145,518
Other financial assets	—		—		55,867		55,867		—		—		51,794		51,794
Total assets	$	—	$	—	$	184,819	$	184,819	$	—	$	—	$	197,312	$	197,312


	December 31, 2013								December 31, 2014
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Net loans	$	—	$	—	$	138,666	$	138,666	$	—	$	—	$	127,834	$	127,834
Other financial assets	—		—		57,504		57,504		—		—		54,170		54,170
Total assets	$	—	$	—	$	196,170	$	196,170	$	—	$	—	$	182,004	$	182,004

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

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

Other financial assets – This category includes OREO ($~~13.5~~10.6 million at September 30, ~~2014~~2015 and ~~$15.1~~$12.0 million at December 31, ~~2013)~~2014) and MSRs ($~~42.4~~41.2 million at September 30, ~~2014~~2015 and ~~$42.5~~$42.1 million at December 31, ~~2013)~~2014), both classified as Level 3 assets.

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

MSRs are initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the September 30, ~~2014~~2015 valuation were ~~12.0%~~11.6% and ~~9.1%~~9.6%, respectively. Management tests the reasonableness of the significant inputs to the third-party valuation in comparison to market data.

As required by FASB ASC Section 825-10-50, the following table details the book values and estimated fair values of the Corporation’s financial instruments as of September 30, ~~2014~~2015 and December 31, ~~2013.~~2014. In addition, a general description of the methods and assumptions used to estimate such fair values is also provided.


	September 30, 2014				December 31, 2013				September 30, 2015				December 31, 2014
	Book Value		Estimated Fair Value		Book Value		Estimated Fair Value		Book Value		Estimated Fair Value		Book Value		Estimated Fair Value
	(in thousands)								(in thousands)
FINANCIAL ASSETS
Cash and due from banks	$	220,946	$	220,946	$	218,540	$	218,540	$	93,803	$	93,803	$	105,702	$	105,702
Interest-bearing deposits with other banks	291,523		291,523		163,988		163,988		510,943		510,943		358,130		358,130
Federal Reserve Bank and Federal Home Loan Bank stock	86,056		86,056		84,173		84,173		68,977		68,977		64,953		64,953
Loans held for sale (1)	25,212		25,212		21,351		21,351		26,937		26,937		17,522		17,522
Available for sale investment securities (1)	2,470,609		2,470,609		2,568,434		2,568,434		2,436,337		2,436,337		2,323,371		2,323,371
Loans, net of unearned income (1)	13,030,405		12,909,164		12,782,220		12,688,774		13,536,361		13,428,016		13,111,716		13,030,543
Accrued interest receivable	43,544		43,544		44,037		44,037		42,846		42,846		41,818		41,818
Other financial assets (1)	157,664		157,664		146,933		146,933		174,835		174,835		169,764		169,764
FINANCIAL LIABILITIES
Demand and savings deposits	$	10,342,243	$	10,342,243	$	9,573,264	$	9,573,264	$	11,148,667	$	11,148,667	$	10,296,055	$	10,296,055
Time deposits	2,991,384		2,986,545		2,917,922		2,927,374		2,935,727		2,944,618		3,071,451		3,069,883
Short-term borrowings	564,952		564,952		1,258,629		1,258,629		431,631		431,631		329,719		329,719
Accrued interest payable	17,425		17,425		15,218		15,218		14,727		14,727		18,045		18,045
Other financial liabilities (1)	147,121		147,121		124,440		124,440		192,281		192,281		172,786		172,786
Federal Home Loan Bank advances and long-term debt	1,018,289		1,012,741		883,584		875,984		979,433		1,002,761		1,139,413		1,142,980


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

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

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

The following instruments are predominantly short-term:



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

Federal Reserve Bank and Federal Home Loan Bank stock represent restricted investments and are carried at cost on the consolidated balance sheets. Each of the Corporation’s subsidiary banks is a member of the Federal Home Loan Bank for the region encompassing the headquarters of the subsidiary bank. Memberships are maintained with the Atlanta, New York and Pittsburgh regional Federal Home Loan Banks (collectively referred to as the "FHLB").

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

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

NOTE N14 – Common Stock Repurchase Plans

In ~~October 2013,~~November 2014, the Corporation entered into an accelerated share repurchase agreement ("ASR") with a third party to repurchase $100.0 million of shares of its common stock. Under the terms of the ASR, the Corporation paid $100.0 million to the third party in November 2014 and received an initial delivery of 6.5 million shares, representing 80% of the shares expected to be delivered under the ASR, based on the closing price for the Corporation’s shares on November 13, 2014. In April 2015, the third party delivered an additional 1.8 million shares of common stock pursuant to the terms of the ASR, thereby completing the $100.0 million ASR. The Corporation repurchased a total of 8.3 million shares of common stock under the ASR at an average price of $12.05 per share.

In April 2015, the Corporation announced that its board of directors had approved a share repurchase program pursuant to which the Corporation was authorized to repurchase up to ~~4.0~~$50.0 million of its outstanding shares of common stock, or approximately ~~2.1%~~2.3% of its outstanding shares, through ~~March 2014. During the first quarter of 2014, the Corporation repurchased~~December 31, 2015. Through September 30, 2015, approximately 4.0 million shares had been repurchased under this ~~repurchase plan at an average~~program for a total cost of ~~$12.45~~$50.0 million, or $12.57 per share, completing this ~~repurchase program on February 19, 2014.~~program.

NOTE 15 – Long-Term Debt

In June 2015, the Corporation issued $150.0 million of ten-year subordinated notes, which mature on November 15, 2024 and carry a fixed rate of 4.50% and an effective rate of approximately 4.69% as a result of discounts and issuance costs. Interest is paid semi-annually in May ~~2014,~~and November.

The proceeds from the issuance of the subordinated notes were used to redeem $150.0 million of trust preferred securities in July 2015. The redeemed securities carried a fixed interest rate of 6.29% and an effective rate of 6.52%, and had a scheduled maturity of February 1, 2036. As a result of this transaction, the Corporation recorded a $5.6 million loss on redemption, included as a component of non-interest expense, in July 2015. The loss on redemption included $2.5 million, net of $1.3 million tax effect, that had been recorded as an other comprehensive loss at the time the trust preferred securities were issued related to a cash flow hedge. See Note 3, "Accumulated Other Comprehensive Income," for additional details.

NOTE 16 – Subsequent Event

In October 2015, the Corporation announced that its board of directors had approved a share repurchase program pursuant to which the Corporation ~~was~~is authorized to repurchase up to ~~4.0~~$50.0 million of its outstanding shares of common stock, or approximately ~~2.1%~~2.3% of its outstanding shares, through December 31, ~~2014. During the third quarter of 2014, the Corporation repurchased 4.0 million~~2016. Repurchased shares ~~under this~~will be added to treasury stock, at cost. As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase ~~plan at an average cost of $11.36 per~~transactions. The share ~~completing this~~ repurchase program ~~on August 25, 2014.~~may be discontinued at any time.

~~NOTE O - Subsequent Event~~

~~Dividend Declaration~~

On November 5, 2014, the Corporation announced that its Board of Directors declared a special cash dividend of $0.02 per share on its common stock, which will be paid on December 15, 2014 to shareholders of record as of December 1, 2014.

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

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

FORWARD-LOOKING STATEMENTS

The Corporation has made, and may continue to make, certain forward-looking statements with respect to its financial condition and results of operations. Do not unduly rely on forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "will," "could," "estimates," "predicts," "potential," "continue," "anticipates," "believes," "plans," "expects," "future," "intends" and similar expressions which are intended to identify forward-looking statements. Statements relating to the "outlook" or "outlook for 2015" contained herein are forward-looking statements.

These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, some of which are beyond the Corporation's control and ability to predict, that could cause actual results to differ materially from those expressed in the forward-looking statements. The Corporation undertakes no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Many factors could affect future financial results including, without limitation:

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

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

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

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

the impact of increased regulatory scrutiny of the banking industry;

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

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

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

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

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

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

the Corporation’s ability to achieve its growth plans;

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

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

the impact of adverse ~~changes~~conditions in the economy and ~~real estate~~capital markets ~~including protracted periods~~on the performance of ~~low-growth~~the Corporation’s loan portfolio and ~~sluggish loan demand;~~demand for the Corporation’s products and services;

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

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

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

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

the impact of ~~non-interest income growth,~~operational risks, including the ~~impact of potential regulatory changes;~~

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

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

the additional time, expense and investment required to comply with, and the restrictions on potential growth and investment activities resulting from, the issuance of enforcement orders by federal bank regulatory agencies;

~~the Corporation’s ability to manage the uncertainty and lack of clear regulatory guidance associated with the delay in implementing many of the regulations mandated by the Dodd-Frank Act;~~

~~the impact of operational risk, i.e. the~~ risk of ~~loss resulting from~~ human error, inadequate or failed internal processes and systems, ~~outsourcing arrangements, compliance~~computer and ~~legal~~telecommunications systems failures, faulty or incomplete data and an inadequate risk ~~and external events;~~management framework;

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

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

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

the Corporation’s ~~ability~~failure to ~~manage the level of non-interest expenses, including salaries~~identify and ~~employee benefits expenses, operating risk losses, amortization of intangible assets and goodwill impairment;~~to address cyber-security risks;

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

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

capital and liquidity strategies, including the Corporation’s ability to ~~identify~~comply with applicable capital and liquidity requirements, and the Corporation’s ability to ~~address cyber-security risks;~~generate capital internally or raise capital on favorable terms;

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

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

any ~~damage to~~downgrade in the Corporation’s ~~reputation resulting from developments related~~credit ratings on its borrowing costs or access to ~~any of the items identified above.~~capital markets.

RESULTS OF OPERATIONS

Overview and ~~Summary Financial Results~~Outlook

Fulton Financial Corporation is a financial holding company comprised of six wholly owned banking subsidiaries which provide a full range of retail and commercial financial services in Pennsylvania, Delaware, Maryland, New Jersey and Virginia. The Corporation generates the majority of its revenue through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and/or maintaining or increasing the net interest margin, which is net interest income (fully taxable-equivalent, or ~~FTE)~~

"FTE") as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments, ~~lines of business~~ or properties. Offsetting these revenue sources are provisions for credit losses on loans, non-interest expenses and income taxes.

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


	As of or for the Three months ended September 30						As of or for the Nine months ended September 30						As of or for the Three months ended September 30						As of or for the Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
Income before income taxes (in thousands)	$	51,968		$	53,785		$	161,081		$	158,503		$	44,579		$	51,968		$	146,974		$	161,081
Net income (in thousands)	$	38,566		$	39,948		$	119,945		$	119,757		$	34,251		$	38,566		$	110,967		$	119,945
Diluted net income per share	$	0.21		$	0.21		$	0.64		$	0.61		$	0.20		$	0.21		$	0.63		$	0.64
Return on average assets	0.90		%	0.93		%	0.95		%	0.95		%	0.78		%	0.90		%	0.86		%	0.95		%
Return on average equity	7.32		%	7.81		%	7.72		%	7.79		%	6.72		%	7.32		%	7.33		%	7.72		%
Net interest margin (1)	3.39		%	3.45		%	3.42		%	3.51		%	3.18		%	3.39		%	3.22		%	3.42		%
Non-performing assets to total assets	0.91		%	1.09		%	0.91		%	1.09		%	0.87		%	0.91		%	0.87		%	0.91		%
Annualized net charge-offs to average loans	0.18		%	0.45		%	0.24		%	0.54		%	0.03		%	0.18		%	0.16		%	0.24		%


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

Income before income taxes for the ~~third quarter of 2014~~three months and nine months ended September 30, 2015 decreased ~~$1.8~~$7.4 million, or ~~3.4%~~14.2%, ~~compared to the third quarter of 2013. For the first nine months of 2014, income before taxes increased~~ ~~$2.6~~and $14.1 million, or 8.8%, or ~~1.6%~~,respectively, compared to the same ~~period in 2013.~~periods of 2014. The Corporation's results for the three and nine months ended September 30, ~~2014~~2015 in comparison to the same periods in ~~2013~~2014 were most significantly impacted by declines in net interest income and increases in non-interest expense, partially offset by decreases in the provision for credit losses ~~as a result of improved asset quality, a decline in net interest income,~~ and ~~lower~~higher non-interest ~~income, partially offset by decreases in non-interest expense.~~income.

Following is a summary of financial highlights for the three and nine months ended September 30, ~~2014:~~

~~Asset Quality~~ - For the three and nine months ended September 30, 2014, the Corporation's provision for credit losses decreased $6.0 million, or 63.2%, and $28.5 million, or 75.0%, respectively, in comparison to the same periods in 2013. These decreases were due to an overall improvement in asset quality.

Non-performing loans decreased $24.4 million, or 14.5%, since September 30, 2013. The total delinquency rate was 1.69% as of September 30, 2014, compared to 1.97% as of September 30, 2013. Annualized net charge-offs to average loans outstanding were 0.18% for the third quarter of 2014, compared to 0.45% for the third quarter of 2013.2015:

Net Interest Income and Net Interest Margin - For the three and nine months ended September 30, ~~2014~~,2015, net interest income decreased ~~$3.2~~$3.7 million,, or ~~2.4%~~2.8%, and ~~$7.4~~$14.6 million, or ~~1.9%~~3.8%, respectively, in comparison to the same periods in 2014.~~2013. Net interest income for~~

For both the three and nine ~~months ended~~ ~~September 30, 2014~~ ~~was negatively impacted~~month periods, the decrease in net interest income resulted from the impact of lower net interest margins, partially offset by the impact of growth in interest-earning assets. In the third quarter of 2015, net interest margin ~~compression~~decreased 21 basis points in comparison to the same period in 2014, mainly due to a 22 basis point decrease in yields on interest-earning assets. For the first nine months of 2015, the net interest margin decreased 20 basis points in comparison to the same period in 2014 as yields on interest-earning assets ~~declined more significantly than~~decreased 18 basis points and the cost of interest-bearing liabilities increased 5 basis points.

Average interest-earning assets increased $553.4 million, or 3.5%, in ~~comparison to~~ the ~~same periods in 2013. The net interest margin for the~~ third quarter of ~~2014 decreased~~ 6 ~~basis points, or~~ ~~1.7%, in comparison to the~~ ~~third~~ ~~quarter of~~ ~~2013. For the nine months ended September 30, 2014, net interest margin decreased 9 basis points, or 2.6%,~~2015 in comparison to the same period of ~~2013.~~2014, mainly due to a $447.1 million, or 3.5%, increase in average loans and a $183.9 million, or 62.7%, increase in other interest-earning assets, partially offset by a $74.5 million, or 3.0%, decrease in average investment securities.

Average interest-earning assets ~~decreased~~ ~~$56.5~~increased $395.9 million,, or ~~0.4%~~2.5%, in the ~~third quarter~~first nine months of ~~2014~~2015 in comparison to the same period of ~~2013, mainly due to~~2014, primarily as a ~~$295.6~~result of a $392.8 million, or ~~10.7%~~3.1%, increase in average loans and a $199.7 million, or 75.7%, increase in other interest-earning assets, partially offset by a $199.7 million, or 7.9%, decrease in average investment ~~securities~~securities.

Average interest-bearing liabilities increased $127.3 million, or 1.1%, in the third quarter of 2015 in comparison to the third quarter of 2014, primarily due to a $469.2 million, or 4.9%, increase in interest-bearing deposits, partially offset by a ~~$194.7~~$342.7 million, or 51.4%, decrease in short-term borrowings. Additional funding to support the increase in interest-earning assets was provided by a $390.1 million, or ~~1.5%~~11.1%, increase in noninterest-bearing deposits.

During the first nine months of 2015, average ~~loans. Average interest-earning assets for~~interest-bearing liabilities decreased $37.6 million, or 0.3%, in comparison to the first nine months of 2014 ~~increased $110.0~~primarily due to a $634.7 million, or ~~0.7%~~65.2%, decrease in average short-term borrowings, offset by a $473.3 million, or 5.1%, increase in interest-bearing deposits and a $123.7 million, or 13.4%, increase in FHLB advances and long-term debt. Additional funding to support the increase in interest-earning assets was provided by a $407.0 million, or 12.1%, increase in noninterest-bearing deposits.

Asset Quality - The Corporation recorded a $1.0 million provision for credit losses during the three months ended September 30, 2015, compared to a $3.5 million provision for the same period in ~~2013, primarily as~~2014. During the nine months ended September 30, 2015, the Corporation recorded a ~~result of~~$500,000 negative provision for credit losses compared to a ~~$321.2~~$9.5 million ~~or 2.6%, increase~~provision for the same period in 2014.

Annualized net charge-offs to average loans ~~partially offset by a $233.1 million, or 8.5%, decrease in~~outstanding were 0.03% for the third quarter of 2015, compared to 0.18% for the third quarter of 2014. For the first nine months of 2015, annualized net charge-off to average ~~investment securities.~~loans outstanding were 0.16% compared to 0.24% for the same period of 2014.

Non-interest Income - For the three and nine months ended September 30, ~~2014~~,2015, non-interest income, excluding investment securities gains, ~~decreased~~ ~~$2.9~~increased $1.2 million,, or ~~6.5%~~2.9%, and ~~$14.9~~$3.6 million, ~~10.7%~~or 2.9%, respectively, in comparison to the same periods in ~~2013~~.2014. The ~~decreases~~increase in ~~non-interest income were~~the third quarter of 2015 compared to the third quarter of 2014 was primarily ~~due~~a result of an increase in other service charges and fees, partially offset by lower mortgage banking income. The increase realized during the first nine months of 2015 compared to ~~decreases~~the first nine months of 2014 resulted from increases in other service charges and fees, mortgage banking income ~~with declines in service charges~~and other income.

Gains on ~~deposits, particularly overdraft fee income, also contributing~~sales of investment securities for the three and nine months ended September 30, 2015 were $1.7 million and $8.3 million, respectively, as compared to $81,000 and $1.2 million, respectively, for the ~~decreases.~~three and nine months ended September 30, 2014.

Non-interest Expense - For the three and nine months ended September 30, ~~2014,~~2015, non-interest expense ~~decreased $807,000,~~increased $9.1 million, or ~~0.7%~~7.9%, and ~~$3.1~~$20.2 million, or ~~0.9%~~5.9%, respectively, in comparison to the same periods in ~~2013. These decreases were primarily driven by decreases~~2014.Included in ~~other real estate owned (OREO) and repossession~~non-interest expense ~~due to improved asset quality, and decreases in operating risk losses, partially offset by increases in other outside services as a result of consulting expense incurred primarily~~ for ~~risk management and regulatory compliance initiatives, as discussed under the heading, "Regulatory Compliance and Risk Management Matters" below.~~

~~During the first quarter of~~ ~~2014~~, the Corporation implemented a series of initiatives intended to reduce non-interest expenses by approximately $7 million in 2014 and approximately $8 million on an annualized basis. These initiatives included the consolidation of 13 branches, streamlining of subsidiary bank management structures and other employee compensation and benefit reductions.

The branch consolidations resulted in the transfer of deposits, employees and other branch resources to existing branch locations. During the first quarter of 2014, $2.1 million of expenses, consisting mainly of lease termination costs and the write-off of leasehold improvements, were incurred. Total expense reductions to be realized in 2014 as a result of the branch consolidations are approximately $2.4 million, including $800,000 and $1.6 million, respectively, during the three and nine months ended September 30, ~~2014.~~

~~The streamlining~~2015 was a $5.6 million loss incurred on the redemption of ~~subsidiary bank management structures resulted in the elimination of five subsidiary bank divisional executive positions, while other employee compensation~~trust preferred securities ("TruPS"). Excluding this loss, non-interest expense increased $3.5 million, or 3.0%, and benefit reductions were realized from changes to certain employee benefits plans, most notably an amendment to the postretirement benefits plan (Postretirement Plan). During the first quarter of 2014, $1.1$14.6 million of net implementation gains were recognized from these actions. Total expense reductions to be realized in 2014 as a result of these actions are approximately $4.6 million, including $1.2 million and $3.4 million,, or 4.3%, respectively, ~~during~~for the three and nine months ended September 30, 2015 compared to the same periods in 2014.

In both 2015 and 2014, the Corporation implemented cost savings initiatives that mitigated the impact of elevated expenses related to the continued build out of its risk, compliance and information technology infrastructures. In both periods, these initiatives included branch consolidations, changes in employee benefits and reductions in staffing.

During the first nine months of 2015, these initiatives included the consolidation of 11 branches, modifications to retirement benefits and the elimination of certain positions. These actions resulted in implementation expenses of $2.1 million for the first nine months of 2015. The annualized expense reductions from all of these 2015 initiatives, when completed, are projected to be approximately $6.5 million, with $4.8 million expected to be realized in 2015.

In 2014, cost savings initiatives resulted in implementation expenses, net of associated gains, of $980,000 during the first nine months. Cost savings from these initiatives are estimated to be approximately $7.9 million annually.

The following table presents a summary of the 2015 and 2014 cost savings initiatives:



	Three months ended September 30, 2015					Nine months ended September 30, 2015						Estimated Expense Reductions for the Year Ending December 31, 2015			Estimated Annualized Cost Savings
	Implementation Expenses		Expense Reductions			Implementation Expenses			Expense Reductions						Estimated Annualized Cost Savings
	(in thousands)
Branch consolidations	$	70	$	(660	)	$	1,640		$	(825	)	$	(1,590	)	$	(3,050	)
Modification of retirement benefits and staffing reductions	—		(870		)	450			(2,365		)	(3,235		)	(3,470		)
2015 cost savings initiatives	$	70	$	(1,530	)	$	2,090		$	(3,190	)	$	(4,825	)	$	(6,520	)

	Three months ended September 30, 2014					Nine months ended September 30, 2014						Actual Expense Reductions for the Year Ended December 31, 2014			Estimated Annualized Cost Savings
	Implementation Expenses		Expense Reductions			Implementation Expenses (Gains)			Expense Reductions						Estimated Annualized Cost Savings
	(in thousands)
Branch consolidations	$	—	$	(800	)	$	2,080		$	(1,600	)	$	(2,400	)	$	(3,200	)
Subsidiary bank management reductions and other employee benefit reductions	—		(1,175		)	(1,100		)	(3,370		)	(4,550		)	(4,700		)
2014 cost savings initiatives	$	—	$	(1,975	)	$	980		$	(4,970	)	$	(6,950	)	$	(7,900	)

Regulatory ~~Compliance and Risk Management Matters~~Enforcement Orders - ~~Virtually every aspect~~During 2014 and 2015, the Corporation and each of ~~the Corporation’s operations is~~its banking subsidiaries became subject to ~~extensive regulation, and in recent years, a combination of financial reform legislation and heightened scrutiny~~regulatory enforcement orders (the "Regulatory Orders") issued by banking ~~regulators has significantly increased expectations regarding what constitutes an effective risk~~regulatory agencies relating to identified deficiencies in a centralized Bank Secrecy Act and anti-money laundering compliance ~~management infrastructure. Bank regulators are scrutinizing banks through longer and more extensive bank examinations in both the safety and soundness and compliance areas.~~

To keep pace with these heightened expectations in the compliance area, in 2012 the Corporation began devoting substantial resources to improving its risk management framework and regulatory compliance programs, including thoseprogram (the "BSA/AML Compliance Program"), which was designed to comply with the requirements of the Bank Secrecy Act, the USA Patriot Act of 2001 and related anti-money laundering regulations (collectively, ~~BSA/~~the "BSA/AML ~~Requirements)~~Requirements"). The ~~Corporation has made substantial progress~~Regulatory Orders are described in ~~strengthening its risk management and regulatory compliance programs, including the addition of personnel and retention of third-party consultants that specialize~~more detail in strengthening compliance programs addressing the BSA/AML Requirements. However, the pace of this progress has not been consistent with current regulatory expectations, and continuing deficiencies in compliance program elements related to the BSA/AML Requirements have been identified at the Corporation’s banking subsidiaries, and at the Corporation.Part II. Other Information, Item 1. Legal Proceedings.

In July 2014, three of the Corporation’s banking subsidiaries, Fulton Bank, N.A., Swineford National Bank and FNB Bank, N.A., each entered into a Stipulation and Consent to the Issuance of a Consent Order (Consent Order) with their primary Federal bank regulatory agency, the Office of the Comptroller of the Currency, relating to identified deficiencies in a centralized compliance program (BSA/AML Compliance Program) designed to comply with the BSA/AML Requirements, as disclosed by the Corporation in a Current Report on Form 8-K filed with the Securities and Exchange Commission on July 18, 2014. The ~~Consent~~Regulatory Orders require, among other things, that the Corporation and its banking subsidiaries ~~in question~~ review, assess and take actions to strengthen and enhance the BSA/AML Compliance ~~Program.~~

~~In September 2014, the Corporation~~Program, and, ~~its wholly owned banking subsidiary, Lafayette Ambassador Bank (Lafayette), entered into a consent cease~~in some cases, conduct retrospective reviews of past account activity and ~~desist order (Cease and Desist Order) with their primary Federal bank regulatory agency, the Board of Governors of the Federal Reserve System (Reserve Board),~~transactions, as ~~disclosed by the Corporation~~well as certain reports filed in ~~a Current Report on Form 8-K filed~~accordance with the ~~SEC on September 9, 2014. The Cease and Desist Order requires, among other things, that the Corporation and Lafayette strengthen the~~ BSA/AML Compliance Program and imposes requirements similar to those set forth in the Consent Orders. In addition, the Cease and Desist Order requires the Corporation to engage an independent third-party firm to conduct a comprehensive assessment of the BSA/AML Compliance Program, and that Lafayette engage an independent third-party firm to conduct a retrospective review of account and transaction activity from January 1, 2014 to June 30, 2014 associated with high-risk customersRequirements, to determine whether suspicious activity ~~was~~and certain transactions in currency were properly identified and reported in accordance with the BSA/AML requirements. Based on the results of this review the Reserve Board may require a review of transactions for additional time periods. Further, because the Consent Orders and the Cease and Desist Order relate to the BSA/AML Compliance Program, which is operated

jointly for all of the Corporation’s subsidiary banks, management anticipates that one or both of the Corporation's other subsidiary banks will also become subject to an enforcement action related to the BSA/AML Requirements, and the provisions of any such enforcement action may differ from those of the Consent Orders and Cease and Desist Order.Requirements.

In addition to requiring strengthening and enhancement of the BSA/AML Compliance Program, while the ~~Consent~~Regulatory Orders ~~and~~remain in effect, the ~~Cease and Desist Order impose~~Corporation is subject to certain restrictions on expansion activities of the Corporation and its subsidiary banks. Further, any failure to comply with the requirements of any of ~~these enforcement actions~~the Regulatory Orders involving the Corporation or its subsidiary banks could result in further enforcement actions, the imposition of material restrictions on the activities of the Corporation or its subsidiary banks, or the assessment of fines or penalties.

During the three and nine months ended September 30, 2014 the Corporation incurred approximately $3 million and $6 million, respectively, of outside services expense related to strengthening and enhancing the BSA/AML Compliance Program.

Additional expenses and investments ~~may be required~~have been incurred as the Corporation ~~further expands~~expanded its hiring of personnel and use of outside professionals, such as consulting and legal services, and ~~possibly for~~ capital investments in operating systems to strengthen and support the BSA/AML Compliance Program, as well as the Corporation’s broader compliance and risk management infrastructures. The expense and capital investment associated with all of these efforts, including in connection with the ~~Consent~~Regulatory Orders, ~~and~~have had an adverse effect on the ~~the Cease~~Corporation’s results of operations in recent periods and ~~Desist Order~~ could have a material adverse effect on the Corporation’s results of operations in future periods.

2015 Outlook

The Corporation's original outlook for 2015 included the following:

anticipated annual average loan and deposit growth rates of 3% to 7%;

net interest margin compression at a rate of 0 to 4 basis points per quarter, on average, based on the current interest rate environment;

continued modest provision for credit losses, although provisions could be impacted by the performance of individual credits;

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

annual non-interest expense growth in the low-single digit rate.

Based on results for the first nine months of 2015 and expectations for the remainder of 2015, the Corporation has updated its 2015 outlook. The updated outlook for 2015 is as follows:

anticipated annual average loan and deposit growth rates of 3% to 7%, with loan growth likely to be at the lower end of the range;

net interest margin compression at a rate of 0 to 3 basis points during the fourth quarter of 2015;

continued modest provision for credit losses, although provisions could be impacted by the performance of individual credits;

non-interest income growth is expected to be at, or just below, the lower end of the mid- to high-single digit range; and

Excluding the loss on the redemption of TruPS, non-interest expense growth is expected to be at, or slightly above, the low single digit range.

Quarter Ended September 30, ~~2014~~2015 compared to the Quarter Ended September 30, ~~2013~~2014

Net Interest Income

Fully-taxable equivalent (FTE) net interest income decreased ~~$3.2~~$3.4 million, to $130.3 million, in the third quarter of 2015, from $133.7 million in the third quarter of ~~2014, from $136.9 million in the third quarter of 2013.~~2014. This decrease was primarily due to a 621 basis point, or ~~1.7%~~6.2%, decrease in the net interest margin, to 3.18% for the third quarter of 2015 from 3.39% for the third quarter of 2014, ~~from 3.45% for~~partially offset by the ~~third quarter~~impact of ~~2013.~~an increase in average interest-earning assets. The following table provides a comparative average balance sheet and net interest income analysis for the third quarter of ~~2014~~2015 as compared to the same period in ~~2013~~.2014. Interest income and yields are presented on an FTE basis, using a 35% Federal tax rate and statutory interest expense disallowances. The discussion following this table is based on these FTE amounts. All dollar amounts are in thousands.


																	Three months ended September 30
	Three months ended September 30																2015								2014
	2014								2013								Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate
ASSETS	Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate		(dollars in thousands)
Interest-earning assets:
Loans, net of unearned income (2)	$	12,922,821		$	136,773		4.20	%	$	12,728,162		$	139,141		4.34	%	$	13,369,874		$	135,268		4.02	%	$	12,922,821		$	136,773		4.20	%
Taxable investment securities (3)	2,181,099			12,278			2.25		2,446,583			12,977			2.12		2,148,403			11,252			2.09		2,181,099			12,278			2.25
Tax-exempt investment securities (3)	256,303			3,414			5.33		284,372			3,581			5.04		230,178			2,929			5.09		256,303			3,414			5.33
Equity securities (3)	34,002			438			5.12		35,999			435			4.82		18,280			257			5.58		34,002			438			5.12
Total investment securities	2,471,404			16,130			2.61		2,766,954			16,993			2.46		2,396,861			14,438			2.41		2,471,404			16,130			2.61
Loans held for sale	23,699			237			4.01		36,450			382			4.19		20,704			194			3.74		23,699			237			4.01
Other interest-earning assets	293,286			976			1.33		236,185			659			1.12		477,145			884			0.74		293,286			976			1.33
Total interest-earning assets	15,711,210			154,116			3.90	%	15,767,751			157,175			3.96	%	16,264,584			150,784			3.68	%	15,711,210			154,116			3.90	%
Noninterest-earning assets:
Cash and due from banks	203,134								210,525								104,622								203,134
Premises and equipment	224,241								224,837								226,446								224,241
Other assets	1,055,521								1,009,162								1,097,600								1,055,521
Less: Allowance for loan losses	(192,163		)						(220,342		)						(168,770		)						(192,163		)
Total Assets	$	17,001,943							$	16,991,933							$	17,524,482							$	17,001,943
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Demand deposits	$	3,047,191		$	953		0.12	%	$	2,895,156		$	938		0.13	%	$	3,316,532		$	1,122		0.13	%	$	3,047,191		$	953		0.12	%
Savings deposits	3,468,958			1,061			0.12		3,359,795			1,015			0.12		3,714,282			1,436			0.15		3,468,958			1,061			0.12
Time deposits	3,009,225			6,984			0.92		3,065,210			6,790			0.88		2,963,774			7,659			1.03		3,009,225			6,984			0.92
Total interest-bearing deposits	9,525,374			8,998			0.37		9,320,161			8,743			0.37		9,994,588			10,217			0.41		9,525,374			8,998			0.37
Short-term borrowings	667,397			297			0.18		1,337,742			691			0.20		324,685			92			0.11		667,397			297			0.18
Federal Home Loan Bank advances and long-term debt	995,486			11,129			4.45		889,141			10,865			4.87		996,247			10,225			4.09		995,486			11,129			4.45
Total interest-bearing liabilities	11,188,257			20,424			0.73	%	11,547,044			20,299			0.70	%	11,315,520			20,534			0.72	%	11,188,257			20,424			0.73	%
Noninterest-bearing liabilities:
Demand deposits	3,514,033								3,221,648								3,904,176								3,514,033
Other	210,194								194,163								281,957								210,194
Total Liabilities	14,912,484								14,962,855								15,501,653								14,912,484
Shareholders’ equity	2,089,459								2,029,078								2,022,829								2,089,459
Total Liabilities and Shareholders’ Equity	$	17,001,943							$	16,991,933							$	17,524,482							$	17,001,943
Net interest income/net interest margin (FTE)				133,692			3.39	%				136,876			3.45	%				130,250			3.18	%				133,692			3.39	%
Tax equivalent adjustment				(4,326		)						(4,343		)						(4,556		)						(4,326		)
Net interest income				$	129,366							$	132,533							$	125,694							$	129,366


(1)	Includes dividends earned on equity securities.


(2)	Includes non-performing loans.


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

4344

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volume) and changes in rates for the three months ended September 30:


	2014 vs. 2013 Increase (Decrease) due to change in									2015 vs. 2014 Increase (Decrease) due to change in
	Volume			Rate			Net			Volume			Rate			Net
	(in thousands)									(in thousands)
Interest income on:
Loans, net of unearned income	$	2,127		$	(4,495	)	$	(2,368	)	$	4,565		$	(6,070	)	$	(1,505	)
Taxable investment securities	(1,471		)	772			(699		)	(178		)	(848		)	(1,026		)
Tax-exempt investment securities	(368		)	201			(167		)	(336		)	(149		)	(485		)
Equity securities	(24		)	27			3			(217		)	36			(181		)
Loans held for sale	(129		)	(16		)	(145		)	(28		)	(15		)	(43		)
Other interest-earning assets	178			139			317			457			(549		)	(92		)
Total interest income	$	313		$	(3,372	)	$	(3,059	)	$	4,263		$	(7,595	)	$	(3,332	)
Interest expense on:
Demand deposits	$	65		$	(50	)	$	15		$	87		$	82		$	169
Savings deposits	46			—			46			83			292			375
Time deposits	(121		)	315			194			(111		)	786			675
Short-term borrowings	(329		)	(65		)	(394		)	(116		)	(89		)	(205		)
Federal Home Loan Bank advances and long-term debt	1,245			(981		)	264			9			(913		)	(904		)
Total interest expense	$	906		$	(781	)	$	125		$	(48	)	$	158		$	110

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

As summarized above, a 622 basis point, or ~~1.5%~~5.6%, decrease in yields on average ~~interest-earnings~~interest-earning assets, primarily loans, resulted in a ~~$3.4~~$7.6 million decrease in FTE interest income, partially offset by a ~~$313,000~~$4.3 million increase in FTE interest income as a result of an increase in interest-earning assets, the net effect of increases in loans and other interest-earning assets, and a ~~shift~~decrease in ~~the mix of average interest-earning assets.~~investment securities.

Average ~~investments~~investment securities decreased ~~$295.6~~$74.5 million, or ~~10.7%~~3.0%, as portfolio cash flows were not fully reinvested. The yield on average ~~investments increased 15~~investment securities decreased 20 basis points, or ~~6.1%~~7.7%, to 2.41% in the third quarter of 2015 from 2.61% in the third quarter of 2014. The decrease in average investment securities was partially offset by a $183.9 million, or 62.7%, increase in other interest-earning assets. During the fourth quarter of 2014, ~~from 2.46%~~the Corporation changed providers for check clearing services to the Federal Reserve Bank of Philadelphia, resulting in the ~~third quarter~~transfer of ~~2013. A $1.2 million,~~clearing account balances from non-interest earning assets to low-yielding interest-bearing Federal Reserve Bank accounts. As a result, the average yield on other interest-earning assets decreased 59 basis points, or ~~41.5%~~44.4%, ~~decrease~~despite the increase in ~~net premium amortization on mortgage-backed securities and collateralized mortgage obligations had a 14 basis point positive impact on the overall change in portfolio yield.~~average other interest-earning assets.

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


	Three months ended September 30								Increase (Decrease) in					Three months ended September 30								Increase (Decrease) in
	2014				2013				Balance					2015				2014				Balance
	Balance		Yield		Balance		Yield		$			%		Balance		Yield		Balance		Yield		$			%
	(dollars in thousands)													(dollars in thousands)
Real estate – commercial mortgage	$	5,114,221	4.35	%	$	4,961,871	4.57	%	$	152,350		3.1	%	$	5,242,021	4.09	%	$	5,114,221	4.35	%	$	127,800		2.5	%
Commercial – industrial, financial and agricultural	3,657,047		3.97		3,706,113		4.04		(49,066		)	(1.3	)	3,887,161		3.78		3,657,047		3.97		230,114			6.3
Real estate – home equity	1,727,253		4.18		1,767,095		4.19		(39,842		)	(2.3	)	1,692,860		4.08		1,727,253		4.18		(34,393		)	(2.0	)
Real estate – residential mortgage	1,369,087		3.93		1,323,972		4.15		45,115			3.4		1,381,141		3.78		1,369,087		3.93		12,054			0.9
Real estate – construction	663,922		3.98		576,222		4.10		87,700			15.2		753,584		3.88		663,922		3.98		89,662			13.5
Consumer	284,630		5.39		299,057		4.76		(14,427		)	(4.8	)	270,391		5.81		284,630		5.39		(14,239		)	(5.0	)
Leasing and other	106,661		7.16		93,832		9.42		12,829			13.7		142,716		6.79		106,661		7.32		36,055			33.8
Total	$	12,922,821	4.20	%	$	12,728,162	4.34	%	$	194,659		1.5	%	$	13,369,874	4.02	%	$	12,922,821	4.20	%	$	447,053		3.5	%

Average loans increased ~~$194.7~~$447.1 million, or ~~1.5%~~3.5%, compared to the third quarter of ~~2013,~~2014, mainly in commercial ~~mortgages, real estate -~~loans, construction loans and ~~residential mortgages.~~leasing and other. The growth in commercial ~~mortgages~~loans and leasing and other was driven by a combination of loans and leases to new customers and increased borrowings from existing ~~customers.~~customers, while the growth in construction loans was primarily due to an increase in loans secured by commercial properties. The average yield on loans decreased 1418 basis points, or ~~3.2%~~4.3%, to 4.02% in 2015 from 4.20% in ~~2014 from 4.34% in 2013.~~2014. The decrease in average yields on loans was ~~primarily in commercial mortgages and was~~

attributable to repayments of higher-yielding loans, continued refinancing activity at lower rates, and new loan production at rates lower ~~rates and elimination of interest rate floors on certain loans.~~than the overall portfolio yield.

Average ~~other interest-earning assets~~total interest-bearing liabilities increased ~~$57.1~~$127.3 million, or 24.2%, primarily due to an increase in average interest-bearing deposits with other banks. The average yield on other interest-earning assets increased 21 basis points, or 18.8%, due to increases in dividends on Federal Home Loan Bank stock. Each of the Corporation’s subsidiary banks is a member of the Federal Home Loan Bank for the region encompassing the headquarters of the subsidiary bank. Memberships are maintained with the Atlanta, New York and Pittsburgh regional Federal Home Loan Banks (collectively referred to as the "FHLB"). As of September 30, 2014, the Corporation held $66.8 million of FHLB stock.

Interest expense increased $125,000, or 0.6%, to $20.4 million in the third quarter of 2014 from $20.3 million in the third quarter of 2013. Although average interest-bearing liabilities decreased $358.8 million, or 3.1%1.1%, compared to the third quarter of ~~2013, a change~~2014. Interest expense increased $110,000, or 0.5%, to $20.5 million in funding mix from lower cost short-term federal funds and short-term FHLB advances to higher rate interest bearing non-maturity deposits and higher-cost long-term FHLB advances resulted in a $906,000 increase in interest expense.

the third quarter of 2015. Average deposits and average interest rates, by type, are summarized in the following table:


	Three months ended September 30								Increase (Decrease) in					Three months ended September 30								Increase (Decrease) in Balance
	2014				2013				Balance					2015				2014				Increase (Decrease) in Balance
	Balance		Rate		Balance		Rate		$			%		Balance		Rate		Balance		Rate		$			%
	(dollars in thousands)													(dollars in thousands)
Noninterest-bearing demand	$	3,514,033	—	%	$	3,221,648	—	%	$	292,385		9.1	%	$	3,904,176	—	%	$	3,514,033	—	%	$	390,143		11.1	%
Interest-bearing demand	3,047,191		0.12		2,895,156		0.13		152,035			5.3		3,316,532		0.13		3,047,191		0.12		269,341			8.8
Savings	3,468,958		0.12		3,359,795		0.12		109,163			3.2		3,714,282		0.15		3,468,958		0.12		245,324			7.1
Total demand and savings	10,030,182		0.08		9,476,599		0.08		553,583			5.8		10,934,990		0.09		10,030,182		0.08		904,808			9.0
Time deposits	3,009,225		0.92		3,065,210		0.88		(55,985		)	(1.8	)	2,963,774		1.03		3,009,225		0.92		(45,451		)	(1.5	)
Total deposits	$	13,039,407	0.27	%	$	12,541,809	0.28	%	$	497,598		4.0	%	$	13,898,764	0.29	%	$	13,039,407	0.27	%	$	859,357		6.6	%

The ~~$553.6~~$904.8 million, or ~~5.8%~~9.0%, increase in total demand and savings accounts was primarily due to a ~~$251.5~~$427.4 million, or ~~7.6%~~12.3%, increase in business account balances, a ~~$190.1~~$352.3 million, or ~~4.3%~~7.6%, increase in personal account balances and a ~~$129.4~~$124.7 million, or ~~7.8%~~6.7%, increase in municipal account balances. The average cost of total deposits ~~decreased one~~increased two basis ~~point~~points largely due to ~~a higher concentration in demand and savings accounts, partially offset by~~ an increase in rates on average time deposits.

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


	Three months ended September 30								Increase (Decrease) in					Three months ended September 30								Increase (Decrease)
	2014				2013				Balance					2015				2014				in Balance
	Balance		Rate		Balance		Rate		$			%		Balance		Rate		Balance		Rate		$			%
	(dollars in thousands)													(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements	$	202,809	0.11	%	$	196,503	0.11	%	$	6,306		3.2	%	$	149,415	0.10	%	$	202,809	0.11	%	$	(53,394	)	(26.3	)%
Customer short-term promissory notes	83,734		0.05		91,573		0.06		(7,839		)	(8.6	)	79,308		0.02		83,734		0.05		(4,426		)	(5.3	)
Total short-term customer funding	286,543		0.09		288,076		0.09		(1,533		)	(0.5	)	228,723		0.07		286,543		0.09		(57,820		)	(20.2	)
Federal funds purchased	224,930		0.19		559,992		0.23		(335,062		)	(59.8	)	85,092		0.19		224,930		0.19		(139,838		)	(62.2	)
Short-term FHLB advances (1)	155,924		0.32		489,674		0.23		(333,750		)	(68.2	)	10,870		0.34		155,924		0.32		(145,054		)	(93.0	)
Total short-term borrowings	667,397		0.18		1,337,742		0.20		(670,345		)	(50.1	)	324,685		0.11		667,397		0.18		(342,712		)	(51.4	)
Long-term debt:
FHLB advances	625,712		3.60		519,520		4.14		106,192			20.4		618,010		3.49		625,712		3.60		(7,702		)	(1.2	)
Other long-term debt	369,774		5.89		369,621		5.89		153			—		378,237		5.06		369,774		5.89		8,463			2.3
Total long-term debt	995,486		4.45		889,141		4.87		106,345			12.0		996,247		4.09		995,486		4.45		761			0.1
Total borrowings	$	1,662,883	2.74	%	$	2,226,883	2.07	%	$	(564,000	)	(25.3	)%

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

Total short-term borrowings decreased ~~$670.3~~$342.7 million, or ~~50.1%~~51.4%, primarily in ~~federal~~Federal funds purchased and short-term FHLB advances. The decrease was driven by lower wholesale funding needs resulting from the ~~decrease in average investment securities and an~~ increase in average deposits exceeding the growth in average ~~loans.~~interest-earning assets.

Average other long-term debt increased $8.5 million, or 2.3%. This increase was the net impact of the maturity of $100.0 million of subordinated debt in April 2015 and the redemption of $150.0 million of TruPS in July 2015, and the issuances of $100.0 million and $150.0 million of subordinated debt in November 2014 and June 2015, respectively. As a result of these transactions, the cost of other long-term debt decreased 83 basis points.

4546

~~The~~In the third quarter of 2015, the Corporation executed two transactions to restructure its long-term FHLB advances. First, $200 million of FHLB advances, with a weighted average ~~cost~~rate of ~~total borrowings increased 67~~4.45% and maturing in the first quarter of 2017, were refinanced with advances maturing from September 2019 to December 2020, at a weighted average rate of 2.95%. This transaction will reduce interest expense on a quarterly basis ~~points, or 32.4%,~~by approximately $750,000, beginning in the fourth quarter of 2015. Second, forward agreements were executed to ~~2.74%~~refinance an additional $200 million of FHLB advances when they mature in ~~2014~~December 2016. These forward agreements have maturity dates from ~~2.07% in 2013, primarily due~~March 2021 to December 2021 and will reduce the weighted average ~~cost impact~~rate on these advances from 4.03% to 2.40% and decrease interest expense on a quarterly basis by approximately $800,000 beginning in the first quarter of a decrease in lower-cost, short-term borrowings, which were 40.1% of total borrowings in 2014 and 60.1% in 2013. This reflects the Corporation's continuing efforts to lengthen maturities and lock in longer term rates.2017.

Provision for Credit Losses

The provision for credit losses was ~~$3.5~~$1.0 million for the third quarter of ~~2014,~~2015, a decrease of ~~$6.0~~$2.5 million ~~or 63.2%,~~ from the third quarter of ~~2013 due to improvements in~~2014. This decrease resulted from lower allowance for credit losses allocation needs as asset quality ~~as shown by reductions in non-performing loans and overall delinquency rates.~~improved.

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

Non-Interest Income

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


	Three months ended September 30				Increase (Decrease)					Three months ended September 30				Increase (Decrease)
	2014		2013		$			%		2015		2014		$			%
	(dollars in thousands)									(dollars in thousands)
Service charges on deposit accounts:
Overdraft fees	$	5,806	$	7,191	$	(1,385	)	(19.3	)%	$	5,652	$	5,806	$	(154	)	(2.7	)%
Cash management fees	3,191		3,001		190			6.3		3,418		3,191		227			7.1
Other	3,804		3,746		58			1.5		3,912		3,804		108			2.8
Total service charges on deposit accounts	12,801		13,938		(1,137		)	(8.2	)	12,982		12,801		181			1.4
Investment management and trust services	11,120		10,420		700			6.7		11,237		11,120		117			1.1
Other service charges and fees:
Merchant fees	3,774		3,396		378			11.1		4,000		3,774		226			6.0
Debit card income	2,407		2,394		13			0.5		2,572		2,407		165			6.9
Letter of credit fees	1,163		1,255		(92		)	(7.3	)	1,143		1,163		(20		)	(1.7	)
Commercial swap fees	537		447		90			20.1		1,251		537		714			133.0
Other	2,073		2,026		47			2.3		1,999		2,073		(74		)	(3.6	)
Total other service charges and fees	9,954		9,518		436			4.6		10,965		9,954		1,011			10.2
Mortgage banking income:
Gain on sales of mortgage loans	2,613		4,457		(1,844		)	(41.4	)	2,627		2,613		14			0.5
Mortgage servicing income	1,425		2,666		(1,241		)	(46.5	)	1,237		1,425		(188		)	(13.2	)
Total mortgage banking income	4,038		7,123		(3,085		)	(43.3	)	3,864		4,038		(174		)	(4.3	)
Credit card income	2,331		2,229		102			4.6		2,548		2,331		217			9.3
Other income	1,575		1,496		79			5.3		1,448		1,575		(127		)	(8.1	)
Total, excluding investment securities gains	41,819		44,724		(2,905		)	(6.5	)
Investment securities gains	81		2,633		(2,552		)	(96.9	)
Total, excluding gains on sales of investment securities										43,044		41,819		1,225			2.9
Net gains on sales of investment securities										1,730		81		1,649			N/M
Total	$	41,900	$	47,357	$	(5,457	)	(11.5	)%	$	44,774	$	41,900	$	2,874		6.9	%

~~The $1.4~~N/M - Not meaningful

Excluding gains on sales of investment securities, non-interest income increased $1.2 million, or ~~19.3%~~2.9%, ~~decrease~~the net effect of modest increases in ~~overdraft fee~~certain income ~~consisted~~categories being partially offset by modest decreases in others. Other service charges and fees grew $1.0 million, or 10.2%, driven mainly by a $714,000 increase in commercial swap fees as new loan volumes increased in comparison to the third quarter of 2014. Service charges on deposits increased a ~~$974,000 decrease in fees assessed on personal accounts and~~moderate $181,000, or 1.4%, as a $411,000 decrease in fees assessed on commercial accounts. The overall decline in these fees resulted from a reduction in the number of overdrafts, partially driven by changes in customer behavior and a reduction in the maximum number of overdraft fees that may be assessed each day.

~~The $700,000,~~$227,000, or ~~6.7%~~7.1%, increase in ~~investment~~cash management ~~and trust services income was due to a $350,000, or 7.7%, increase~~fees resulting from changes in ~~brokerage revenue and a $350,000, or 6.0%, increase in trust commissions. These increases resulted from new trust business~~

~~sales, improved market conditions that increased the values of existing assets under management and additional recurring revenue generated through the brokerage business due to growth in new accounts.~~fee structures were partially offset by lower overdraft fees.

Gains on sales of mortgage loans ~~decreased $1.8 million, or 41.4%, due to a $94.4 million, or 32.4%, decrease in new loan commitments and a 13.3% decrease in pricing spreads~~remained flat when compared to the third quarter of ~~2013. The decline~~2014, the net effect of a 13.7% increase in ~~new loan commitments was mainly~~volumes and a 11.6% decrease in ~~refinancing volumes, which totaled approximately $56.4 million, or 28.6%, of new loan commitments, in the third quarter of 2014 compared to $93.6 million, or 32.1%, during the third quarter of 2013.~~spreads. Mortgage servicing income decreased ~~$1.2 million,~~$188,000, or ~~46.5%, due to the absence of a $1.7 million reversal of the mortgage servicing rights valuation allowance, which occurred in the third quarter of 2013.~~

~~Merchant fees increased $377,000, or 11.1%~~13.2%, due to an increase in ~~volumes.~~ amortization of mortgage servicing rights (MSRs), as prepayments were higher due to higher refinancing volumes when compared to the third quarter of 2014.

Investment securities gains for the third quarter of 2015 resulted from sales of financial institution stocks. Investment securities gains in the third quarter of 2014 ~~were a result of net realized gains on~~resulted from sales of financial institution stocks, partially offset by ~~$18,000 of~~ other-than-temporary impairment charges on pooled trust preferred securities. Investment securities gains of $2.6 million for the third quarter of 2013 included $2.1 million of realized gains on financial institution stocks and $595,000 of net realized gains on the sales of debt securities, partially offset by $97,000 of other-than temporary impairment charges on pooled trust preferred debt securities.losses. See Note D,4, "Investment Securities," in the Notes to Consolidated Financial Statements for additional details.

Non-Interest Expense

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


	Three months ended September 30				Increase (Decrease)					Three months ended September 30				Increase (Decrease)
	2014		2013		$			%		2015		2014		$			%
	(dollars in thousands)									(dollars in thousands)
Salaries and employee benefits	$	62,434	$	63,344	$	(910	)	(1.4	)%	$	65,308	$	62,434	$	2,874		4.6	%
Net occupancy expense	11,582		11,519		63			0.5		10,710		11,582		(872		)	(7.5	)
Other outside services	8,632		5,048		3,584			71.0		7,373		8,632		(1,259		)	(14.6	)
Loss on redemption of trust preferred securities										5,626		—		5,626			N/M
Data processing	4,689		4,757		(68		)	(1.4	)	5,105		4,689		416			8.9
Software	3,353		3,268		85			2.6		3,984		3,353		631			18.8
Equipment expense	3,307		3,646		(339		)	(9.3	)	3,595		3,307		288			8.7
FDIC insurance expense										2,867		2,882		(15		)	(0.5	)
Professional fees	3,252		3,329		(77		)	(2.3	)	2,828		3,252		(424		)	(13.0	)
FDIC insurance expense	2,882		2,918		(36		)	(1.2	)
Supplies and postage										2,708		2,560		148			5.8
Marketing	1,798		2,251		(453		)	(20.1	)	2,102		1,798		304			16.9
Telecommunications	1,587		2,046		(459		)	(22.4	)	1,587		1,587		—			—
Postage	1,415		1,163		252			21.7
Operating risk loss										1,136		1,242		(106		)	(8.5	)
Other real estate owned and repossession expense	1,303		1,453		(150		)	(10.3	)	1,016		1,303		(287		)	(22.0	)
Operating risk loss	1,242		3,297		(2,055		)	(62.3	)
Supplies	1,145		1,504		(359		)	(23.9	)
Intangible amortization	314		534		(220		)	(41.2	)	5		314		(309		)	(98.4	)
Other	6,863		6,528		335			5.1		8,939		6,863		2,076			30.2
Total	$	115,798	$	116,605	$	(807	)	(0.7	)%	$	124,889	$	115,798	$	9,091		7.9	%

~~Salaries and employee benefits decreased $910,000,~~N/M - Not meaningful

The $2.9 million, or ~~1.4%, as a result of a $601,000, or 1.2%~~4.6%, increase in salaries ~~offset by~~and employee benefits resulted from a ~~$1.5~~$2.3 million, or ~~13.9%~~4.2%, ~~decrease~~increase in salaries and a $625,000, or 6.7%, increase in employee benefits. The increase in salaries was ~~mostly~~primarily due to ~~normal merit increases,~~higher average salaries per full-time equivalent (FTE) employee and an increase in incentive compensation, partially offset by ~~lower salaries expense resulting~~the impact of a decrease in the average number of FTE employees, to 3,450 as of September 30, 2015 from 3,530 as of September 30, 2014. The decrease in FTE employees reflects the ~~2014~~ cost savings ~~initiatives.~~initiatives, primarily branch consolidations. The ~~decrease~~increase in employee benefits was primarily ~~a result of the Corporation's cost savings initiatives, which included the elimination~~due to increases in defined benefit plan expense and ~~reduction of certain~~other employee ~~benefit plans, most notably~~benefits, partially offset by a decrease in profit sharing ~~contributions and an amendment to the Postretirement Plan. For additional information~~expense.

The $1.3 million, or 14.6%, decrease in other outside services was primarily in costs related to ~~the amendment to the Postretirement Plan, see Note H, "Employee Benefit Plans" in the Notes to Consolidated Financial Statements.~~

~~Other outside services increased $3.6~~BSA/AML remediation efforts. The $1.0 million, or ~~71.0%~~13.1%, ~~due to an~~combined increase in ~~consulting services~~data processing and software resulted from increased transaction volume and contractual increases for expenses related to ~~the acceleration~~core processing systems and amortization of ~~risk management and compliance efforts, including those in connection with the enhancement of the Corporation’s program for compliance with the BSA/AML Requirements.~~capitalized software investments. The $2.1 million ~~or 62.3%, decrease~~increase in ~~operating risk loss~~the other expenses was ~~due to a $2.0 million decrease in losses~~largely impacted by costs associated with ~~previously sold residential mortgages.~~branch consolidations.

In July 2015, the Corporation redeemed $150.0 million of TruPS. In connection with this redemption, a loss of $5.6 million was recognized as a component of non-interest expense.

Income Taxes

Income tax expense for the third quarter of ~~2014~~2015 was ~~$13.4~~$10.3 million, a ~~$435,000,~~$3.1 million, or ~~3.1%~~22.9%, decrease from ~~$13.8~~$13.4 million for the third quarter of ~~2013.~~2014.

The Corporation’s effective tax rate was 23.2% in the third quarter of 2015, as compared to 25.8% in the third quarter of ~~2014, as compared to 25.7% in the third quarter of 2013.~~2014. The effective tax rate is generally lower than the Federal statutory rate of 35% due to investments in tax-free municipal securities and credits earned from investments in partnerships that generate tax credits under various federal programs. The decrease in the effective rate from the third quarter of 2014 was driven by lower income before income taxes, mainly resulting from the loss on redemption of TruPS, and higher net tax credits.

Nine Months Ended September 30, ~~2014~~2015 compared to the Nine Months Ended September 30, ~~2013~~2014

Net Interest Income

FTE net interest income decreased ~~$7.5~~$13.9 million, or ~~1.8%~~3.5%, to ~~$399.7~~$385.8 million in the first nine months of ~~2014~~2015 from ~~$407.2~~$399.7 million in the same period of ~~2013.~~

2014. Net interest margin decreased 920 basis points, or ~~2.6%~~5.8%, to 3.22% for the first nine months of 2015 from 3.42% for the first nine months of ~~2014 from 3.51% for the first nine months of 2013.~~2014. The decrease in net interest margin was the result of ~~a 12~~an 18 basis point, or ~~3.0%~~4.6%, decrease in yields on interest-earning assets, ~~partially offset by~~and a 35 basis point, or ~~4.1%~~7.0%, ~~decrease~~increase in funding costs.

The following table provides a comparative average balance sheet and net interest income analysis for the first nine months of 2014 as compared to the same period in 2013. Interest income and yields are presented on an FTE basis, using a 35% Federal tax rate and statutory interest expense disallowances. The discussion following this table is based on these FTE amounts. All dollar amounts are in thousands.


																	Nine months ended September 30
	Nine months ended September 30																2015								2014
	2014								2013								Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate
ASSETS	Average Balance			Interest (1)			Yield/ Rate		Average Balance			Interest (1)			Yield/ Rate		(dollars in thousands)
Interest-earning assets:
Loans, net of unearned income (2)	$	12,827,563		$	405,904		4.23	%	$	12,506,393		$	414,091		4.43	%	$	13,220,339		$	401,662		4.06	%	$	12,827,563		$	405,904		4.23	%
Taxable investment securities (3)	2,216,344			37,962			2.28		2,426,015			40,890			2.25		2,068,025			33,478			2.16		2,216,344			37,962			2.28
Tax-exempt investment securities (3)	268,604			10,561			5.24		285,638			11,003			5.14		225,209			9,035			5.35		268,604			10,561			5.24
Equity securities (3)	33,949			1,286			5.06		40,352			1,416			4.69		25,985			1,086			5.59		33,949			1,286			5.06
Total investment securities	2,518,897			49,809			2.64		2,752,005			53,309			2.58		2,319,219			43,599			2.51		2,518,897			49,809			2.64
Loans held for sale	18,259			585			4.27		42,122			1,261			3.99		21,360			632			3.94		18,259			585			4.27
Other interest-earning assets	263,797			3,065			1.55		217,975			1,527			0.93		463,545			3,922			1.13		263,797			3,065			1.55
Total interest-earning assets	15,628,516			459,363			3.93	%	15,518,495			470,188			4.05	%	16,024,463			449,815			3.75	%	15,628,516			459,363			3.93	%
Noninterest-earning assets:
Cash and due from banks	200,368								206,403								104,870								200,368
Premises and equipment	225,033								225,733								226,469								225,033
Other assets	1,041,834								1,047,122								1,101,856								1,041,834
Less: Allowance for loan losses	(197,235		)						(223,220		)						(176,205		)						(197,235		)
Total Assets	$	16,898,516							$	16,774,533							$	17,281,453							$	16,898,516
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Demand deposits	$	2,969,470		$	2,766		0.12	%	$	2,773,917		$	2,687		0.13	%	$	3,202,380		$	3,092		0.13	%	$	2,969,470		$	2,766		0.12	%
Savings deposits	3,392,681			3,127			0.12		3,348,413			3,054			0.12		3,600,695			3,802			0.14		3,392,681			3,127			0.12
Time deposits	2,984,861			19,686			0.88		3,184,281			22,901			0.96		3,017,271			23,199			1.03		2,984,861			19,686			0.88
Total interest-bearing deposits	9,347,012			25,579			0.37		9,306,611			28,642			0.41		9,820,346			30,093			0.41		9,347,012			25,579			0.37
Short-term borrowings	972,694			1,470			0.20		1,228,882			1,900			0.20		338,019			272			0.11		972,694			1,470			0.20
FHLB advances and long-term debt	924,920			32,606			4.71		889,826			32,448			4.87		1,048,634			33,669			4.29		924,920			32,606			4.71
Total interest-bearing liabilities	11,244,626			59,655			0.71	%	11,425,319			62,990			0.74	%	11,206,999			64,034			0.76	%	11,244,626			59,655			0.71	%
Noninterest-bearing liabilities:
Demand deposits	3,360,876								3,103,381								3,767,919								3,360,876
Other	214,826								190,976								282,983								214,826
Total Liabilities	14,820,328								14,719,676								15,257,901								14,820,328
Shareholders’ equity	2,078,188								2,054,857								2,023,552								2,078,188
Total Liabilities and Shareholders’ Equity	$	16,898,516							$	16,774,533							$	17,281,453							$	16,898,516
Net interest income/net interest margin (FTE)				399,708			3.42	%				407,198			3.51	%				385,781			3.22	%				399,708			3.42	%
Tax equivalent adjustment				(12,879		)						(12,956		)						(13,586		)						(12,879		)
Net interest income				$	386,829							$	394,242							$	372,195							$	386,829


(1)	Includes dividends earned on equity securities.


(2)	Includes non-performing loans.


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

The following table summarizes the changes in FTE interest income and expense for the first nine months of ~~2014~~2015 as compared to the same period in ~~2013~~2014 due to changes in average balances (volume) and changes in rates:


	2014 vs. 2013 Increase (Decrease) due to change in									2015 vs. 2014 Increase (Decrease) due to change in
	Volume			Rate			Net			Volume			Rate			Net
	(in thousands)									(in thousands)
Interest income on:
Loans, net of unearned income	$	10,461		$	(18,648	)	$	(8,187	)	$	12,249		$	(16,491	)	$	(4,242	)
Taxable investment securities	(3,425		)	497			(2,928		)	(1,984		)	(2,500		)	(4,484		)
Tax-exempt investment securities	(650		)	208			(442		)	(1,299		)	(227		)	(1,526		)
Equity securities	(237		)	107			(130		)	(322		)	122			(200		)
Loans held for sale	(759		)	83			(676		)	111			(64		)	47
Other interest-earning assets	365			1,173			1,538			2,403			(1,546		)	857
Total interest income	$	5,755		$	(16,580	)	$	(10,825	)	$	11,158		$	(20,706	)	$	(9,548	)
Interest expense on:
Demand deposits	$	184		$	(105	)	$	79		$	222		$	104		$	326
Savings deposits	41			32			73			200			475			675
Time deposits	(1,383		)	(1,832		)	(3,215		)	216			3,297			3,513
Short-term borrowings	(467		)	37			(430		)	(698		)	(500		)	(1,198		)
FHLB advances and long-term debt	1,218			(1,060		)	158			4,115			(3,052		)	1,063
Total interest expense	$	(407	)	$	(2,928	)	$	(3,335	)	$	4,055		$	324		$	4,379

~~A 12~~An 18 basis point, or ~~3.0%~~4.6%, decrease in yields on average interest-earning assets resulted in a ~~$16.6~~$20.7 million decrease in FTE interest ~~income, which~~income. This decrease was partially offset by ~~a $5.8~~an $11.2 million increase in FTE interest income resulting from a ~~$110.0~~$395.9 million, or ~~0.7%~~2.5%, increase in average interest-earning assets. Increases in loans and other interest-earning assets were partially offset by a decrease in average investment securities.

Average ~~investments~~investment securities decreased ~~$233.1~~$199.7 million, or ~~8.5%~~7.9%, as portfolio cash flows were not fully reinvested.

The yield on average investments ~~increased 6~~decreased 13 basis points, or ~~2.3%~~4.9%, to 2.51% in 2015 from 2.64% in ~~2014 from 2.58%~~2014. The decrease in ~~2013.A $5.4~~average investment securities was offset by a $199.7 million, or ~~52.1%~~75.7%, increase in other interest-earning assets. During the fourth quarter of 2014, the Corporation changed providers for check clearing services to the Federal Reserve Bank of Philadelphia, resulting in the transfer of clearing account balances from non-interest earning assets to low-yielding interest-bearing Federal Reserve Bank accounts, which contributed to a decrease in ~~net premium amortization~~the yield on mortgage-backed securities and collateralized mortgage obligations had a 13 basis point positive impact on the overall change in portfolio yield. This positive impact was partially offset by the impact of purchases of mortgage-backed securities and collateralized mortgage obligations at yields that were lower than the overall portfolio yield.other interest-earning assets.

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


	Nine months ended September 30								Increase (Decrease) in					Nine months ended September 30								Increase (Decrease)
	2014				2013				Balance					2015				2014				in Balance
	Balance		Yield		Balance		Yield		$			%		Balance		Yield		Balance		Yield		$			%
	(dollars in thousands)													(dollars in thousands)
Real estate – commercial mortgage	$	5,112,735	4.38	%	$	4,796,557	4.71	%	$	316,178		6.6	%	$	5,205,755	4.15	%	$	5,112,735	4.38	%	$	93,020		1.8	%
Commercial – industrial, financial and agricultural	3,637,440		3.98		3,694,612		4.14		(57,172		)	(1.5	)	3,831,678		3.81		3,637,440		3.98		194,238			5.3
Real estate – home equity	1,739,352		4.18		1,721,041		4.24		18,311			1.1		1,703,006		4.11		1,739,352		4.18		(36,346		)	(2.1	)
Real estate – residential mortgage	1,348,269		3.96		1,305,434		4.17		42,835			3.3		1,369,367		3.81		1,348,269		3.96		21,098			1.6
Real estate – construction	609,803		4.08		594,991		4.10		14,812			2.5		713,893		3.93		609,803		4.08		104,090			17.1
Consumer	278,697		4.93		303,127		4.88		(24,430		)	(8.1	)	265,002		5.52		278,697		4.93		(13,695		)	(4.9	)
Leasing and other	101,267		8.54		90,631		8.99		10,636			11.7		131,638		7.33		101,267		8.88		30,371			30.0
Total	$	12,827,563	4.23	%	$	12,506,393	4.43	%	$	321,170		2.6	%	$	13,220,339	4.06	%	$	12,827,563	4.23	%	$	392,776		3.1	%

5051

~~The $316.2 million, or 6.6%, increase in commercial mortgages was from both new and existing customers.~~ The average yield on loans decreased 2017 basis points, or ~~4.5%~~4.0%, to 4.06% in 2015 from 4.23% in ~~2014 from 4.43% in 2013.~~2014. The decrease in average yields on loans was attributable to repayments of higher-yielding loans and new loan production at lower ~~rates and elimination of interest rate floors on certain loans.~~

~~Interest expense decreased $3.3~~rates. Average loan balances increased $392.8 million, or 3.1%. The $194.2 million, or 5.3%, increase in commercial loans, the $104.1 million, or 17.1%, increase in real estate construction loans and the $93.0 million, or 1.8%, increase in commercial mortgages were from both new and existing customers.

Interest expense increased $4.4 million, or 7.3%, to $64.0 million in the first nine months of 2015 from $59.7 million in the first nine months of ~~2014 from $63.0~~2014. Although total average interest-bearing liabilities decreased $37.6 million, inor 0.3%, compared to the first nine months of ~~2013. Interest expense decreased $2.9~~2014, a change in funding mix from lower cost short-term Federal funds purchased and short-term FHLB advances to higher cost deposits and long-term FHLB advances and subordinated debt drove the $4.1 million as a result of a 3 basis point, or 4.1%, decrease in the average cost of interest-bearing liabilities, primarily a result of a decrease in average costs of time deposits. A $180.7 million, or 1.6%, decrease in average interest-bearing liabilities resulted in an additional $407,000 decreaseincrease in interest ~~expense.~~expense attributable to volume.

Average deposits, by type, are summarized in the following table:


	Nine months ended September 30								Increase (Decrease) in					Nine months ended September 30								Increase in Balance
	2014				2013				Balance					2015				2014				Increase in Balance
	Balance		Rate		Balance		Rate		$			%		Balance		Rate		Balance		Rate		$		%
	(dollars in thousands)													(dollars in thousands)
Noninterest-bearing demand	$	3,360,876	—	%	$	3,103,381	—	%	$	257,495		8.3	%	$	3,767,919	—	%	$	3,360,876	—	%	$	407,043	12.1	%
Interest-bearing demand	2,969,470		0.12		2,773,917		0.13		195,553			7.0		3,202,380		0.13		2,969,470		0.12		232,910		7.8
Savings	3,392,681		0.12		3,348,413		0.12		44,268			1.3		3,600,695		0.14		3,392,681		0.12		208,014		6.1
Total demand and savings	9,723,027		0.08		9,225,711		0.08		497,316			5.4		10,570,994		0.09		9,723,027		0.08		847,967		8.7
Time deposits	2,984,861		0.88		3,184,281		0.96		(199,420		)	(6.3	)	3,017,271		1.03		2,984,861		0.88		32,410		1.1
Total deposits	$	12,707,888	0.27	%	$	12,409,992	0.31	%	$	297,896		2.4	%	$	13,588,265	0.30	%	$	12,707,888	0.27	%	$	880,377	6.9	%

The ~~$497.3~~$848.0 million, or ~~5.4%~~8.7%, increase in total demand and savings account balances was primarily due to a ~~$233.4~~$416.3 million, or ~~7.5%~~12.5%, increase in business account balances, a ~~$207.0~~$277.9 million, or ~~4.7%~~6.0%, increase in personal account balances and a ~~$74.3~~$153.8 million, or ~~4.5%~~8.9%, increase in municipal account balances. The $199.4 million, or 6.3%, decrease in average time deposits was in accounts with balances less than $100,000 with original maturity terms of less than three years, partially offset by increases in accounts with balances of $100,000 or more and accounts with original maturity terms longer than 3 years.

~~The~~ average cost of deposits ~~decreased 4~~increased 3 basis points, or ~~12.9%~~11.1%, to 0.30% in 2015 from 0.27% in 2014, ~~from 0.31% in 2013,~~ primarilydue to ~~a decrease~~an increase in higher-cost time ~~deposits and an increase in non-interest bearing deposits and lower-cost interest-bearing savings and demand balances.~~deposits.

The following table summarizes changes in average short-term borrowings and long-term debt, by type:


	Nine months ended September 30								Increase (Decrease) in					Nine months ended September 30								Increase (Decrease)
	2014				2013				Balance					2015				2014				in Balance
	Balance		Rate		Balance		Rate		$			%		Balance		Rate		Balance		Rate		$			%
	(dollars in thousands)													(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements	$	202,184	0.11	%	$	183,432	0.11	%	$	18,752		10.2	%	$	167,526	0.10	%	$	202,184	0.11	%	$	(34,658	)	(17.1	)%
Customer short-term promissory notes	89,119		0.05		100,532		0.05		(11,413		)	(11.4	)	81,854		0.02		89,119		0.05		(7,265		)	(8.2	)
Total short-term customer funding	291,303		0.09		283,964		0.09		7,339			2.6		249,380		0.07		291,303		0.09		(41,923		)	(14.4	)
Federal funds purchased	361,162		0.21		681,576		0.24		(320,414		)	(47.0	)	72,961		0.17		361,162		0.21		(288,201		)	(79.8	)
Short-term FHLB advances (1)	320,229		0.29		263,342		0.23		56,887			21.6		15,678		0.31		320,229		0.29		(304,551		)	(95.1	)
Total short-term borrowings	972,694		0.20		1,228,882		0.20		(256,188		)	(20.8	)	338,019		0.11		972,694		0.20		(634,675		)	(65.2	)
Long-term debt:
FHLB advances	555,172		3.92		520,278		4.14		34,894			6.7		634,403		3.50		555,172		3.92		79,231			14.3
Other long-term debt	369,748		5.90		369,548		5.90		200			0.1		414,231		5.50		369,748		5.90		44,483			12.0
Total long-term debt	924,920		4.71		889,826		4.87		35,094			3.9		1,048,634		4.29		924,920		4.71		123,714			13.4
Total	$	1,897,614	2.40	%	$	2,118,708	2.16	%	$	(221,094	)	(10.4	)%

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

Total short-term borrowings decreased ~~$256.2~~$634.7 million, or ~~20.8%~~65.2%, primarily in federal funds purchased ~~partially offset by an increase~~and in short-term FHLB advances. The repayment of short-term borrowings was funded mainly by the increase in average deposits. Total long-term borrowings ~~decreased $221.1~~increased $123.7 million, or ~~10.4%. The cost of borrowings increased~~

~~24 basis points, or 11.1%~~13.4%, as a result of ~~lower-cost, short-term borrowings comprising a smaller percentage of total borrowings in an effort~~the Corporation's efforts to ~~extend~~lengthen maturities and lock in ~~longer term~~longer-term rates.

Provision for Credit Losses

The provision for credit losses was ~~$9.5 million~~a negative $500,000 for the first nine months of ~~2014,~~2015, a decrease of ~~$28.5~~$10.0 million, or ~~75.0%~~105.3%, in comparison to the first nine months of ~~2013,~~2014, reflecting improvements in asset quality. In the first quarter of 2015, a negative provision of $3.7 million was recorded, primarily due to an improvement in all credit quality measures, particularly net charge-off levels, across all loan portfolio segments. For details related to the Corporation's allowance and provision for credit losses, see the "Financial Condition" section of Management's Discussion under the heading "Provision for Credit Losses and Allowance for Credit Losses."

Non-Interest Income

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


	Nine months ended September 30				Increase (Decrease)					Nine months ended September 30				Increase (Decrease)
	2014		2013		$			%		2015		2014		$			%
	(dollars in thousands)									(dollars in thousands)
Service charges on deposit accounts:
Overdraft fees	$	16,645	$	22,276	$	(5,631	)	(25.3	)%	$	15,806	$	16,645	$	(839	)	(5.0	)%
Cash management fees	9,589		8,803		786			8.9		10,004		9,589		415			4.3
Other	10,830		11,621		(791		)	(6.8	)	11,378		10,830		548			5.1
Total service charges on deposit accounts	37,064		42,700		(5,636		)	(13.2	)	37,188		37,064		124			0.3
Investment management and trust services	33,417		31,117		2,300			7.4		33,137		33,417		(280		)	(0.8	)
Other service charges and fees:
Merchant fees	10,340		10,070		270			2.7		11,265		10,340		925			8.9
Debit card income	7,052		6,852		200			2.9		7,587		7,052		535			7.6
Letter of credit fees	3,448		3,721		(273		)	(7.3	)	3,474		3,448		26			0.8
Commercial swap fees	2,544		986		1,558			158.0		3,088		2,544		544			21.4
Other	6,023		5,907		116			2.0		5,902		6,023		(121		)	(2.0	)
Total other service charges and fees	29,407		27,536		1,871			6.8		31,316		29,407		1,909			6.5
Mortgage banking income:
Gain on sales of mortgage loans	8,009		21,472		(13,463		)	(62.7	)	10,588		8,009		2,579			32.2
Mortgage servicing income	5,375		4,821		554			11.5		3,303		5,375		(2,072		)	(38.5	)
Total mortgage banking income	13,384		26,293		(12,909		)	(49.1	)	13,891		13,384		507			3.8
Credit card income	6,855		6,535		320			4.9		7,257		6,855		402			5.9
Other income	3,958		4,780		(822		)	(17.2	)	4,921		3,958		963			24.3
Total, excluding investment securities gains	124,085		138,961		(14,876		)	(10.7	)
Investment securities gains	1,193		7,971		(6,778		)	(85.0	)
Total, excluding gains on sales of investment securities										127,710		124,085		3,625			2.9
Net gains on sales of investment securities										8,290		1,193		7,097			N/M
Total	$	125,278	$	146,932	$	(21,654	)	(14.7	)%	$	136,000	$	125,278	$	10,722		8.6	%

~~The $5.6 million,~~N/M - Not meaningful

Total service charges on deposits increased a modest $124,000, or ~~25.3%~~0.3%. Improvements were seen in other service charges on deposits ($548,000, or 5.1%, increase) due to growth in balances, and cash management fees ($415,000, or 4.3%, increase) due to changes in fee structures. These increases were largely offset by an $839,000, or 5.0%, decrease in overdraft ~~fee income consisted of a $3.6 million decrease~~fees due to lower volumes partially driven by changes in ~~fees assessed on personal accounts and a $2.0 million decrease in fees assessed on commercial accounts. The overall decline in these fees resulted from a reduction in the number of overdrafts.~~customer behavior.

The ~~$2.3 million,~~$925,000, or ~~7.4%~~8.9%, increase in ~~investment management and trust services~~merchant fee income, ~~was primarily due to a $1.6 million,~~the $535,000, or ~~11.7%~~7.6%, increase in ~~brokerage revenue~~debit card income, and ~~a $731,000,~~the $402,000, or ~~4.1%~~5.9%, increase in trust commissions. These increases resulted from new trust business sales, improved market conditions that increased the values of existing assets under management, and additional recurring revenue generated through the brokerage business due to growth in new accounts.

credit card income were largely driven by higher transaction volumes. Commercial swap fees increased ~~$1.6 million,~~$544,000, or ~~158.0%~~21.4%, due to the favorable interest rate environment for this product and the Corporation's introduction of this product by all of the Corporation's banking subsidiaries. For additional details see Note I, "Derivative Financial Instruments" in the Notes to Consolidated Financial Statements.higher new loan volumes.

Gains on sales of mortgage loans ~~decreased $13.5~~increased $2.6 million, or ~~62.7%~~32.2%, due to a ~~$648.0~~$168.6 million, or ~~50.0%~~26.0%, ~~decrease~~increase in new loan commitments and a ~~25.4% decrease~~4.9% increase in pricing spreads compared to ~~the prior year. Both decreases resulted primarily from an~~2014. The increase ~~in mortgage interest rates in the second half of 2013. The decline~~ in new loan commitments was ~~mainly~~largely in refinancing volumes, which were ~~$186.5~~$408.0 million, or ~~28.8%~~49.9%, of new loan commitments in ~~2014~~2015 compared to ~~$652.2~~$186.5 million, or ~~50.3%~~

28.8%, during ~~2013.~~2014. Mortgage servicing income decreased $2.1 million, or 38.5%, due to an increase in amortization of mortgage servicing rights (MSRs), as prepayments increased when compared to 2014.

The $963,000, or 24.3%, increase in other income was due to higher gains on sales of fixed assets, primarily branch properties, in 2015.

Investment securities gains of ~~$1.2~~$8.3 million for the first nine months of ~~2014~~2015 were a result of ~~$1.1~~$6.0 million of net realized gains on the sales of financial institution stocks and $2.3 million of net realized gains on the sales of debt securities. The $1.2 million of investment securities gains for first nine months of 2014 included $1.1 million of net realized gains on debt securities and ~~$100,000~~$88,000 of net realized gains on the sales of financial institution stocks.The $8.0 million of investment securities gains for first nine months of 2013 included $4.3 million of net realized gains on financial institution stocks and $3.8 million of realized gains on the sales of debt securities, partially offset by $124,000 of other-than-temporary impairment charges for certain financial institution stocks and pooled trust preferred debt securities.

Non-Interest Expense

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


	Nine months ended September 30				Increase (Decrease)					Nine months ended September 30				Increase (Decrease)
	2014		2013		$			%		2015		2014		$			%
	(dollars in thousands)									(dollars in thousands)
Salaries and employee benefits	$	185,623	$	188,046	$	(2,423	)	(1.3	)%	$	195,365	$	185,623	$	9,742		5.2	%
Net occupancy expense	36,649		34,810		1,839			5.3		36,211		36,649		(438		)	(1.2	)
Other outside services	19,684		13,223		6,461			48.9		21,248		19,684		1,564			7.9
Data processing	12,816		13,169		(353		)	(2.7	)	14,767		12,816		1,951			15.2
Equipment expense	10,269		11,447		(1,178		)	(10.3	)	10,888		10,269		619			6.0
Professional fees	9,715		9,771		(56		)	(0.6	)
Software	9,487		9,110		377			4.1		10,678		9,487		1,191			12.6
FDIC insurance expense	8,186		8,766		(580		)	(6.6	)	8,574		8,186		388			4.7
Professional fees										8,430		9,715		(1,285		)	(13.2	)
Supplies and postage										7,803		7,337		466			6.4
Loss on redemption of trust preferred securities										5,626		—		5,626			N/M
Marketing	5,719		6,045		(326		)	(5.4	)	5,570		5,719		(149		)	(2.6	)
Telecommunications	5,193		5,586		(393		)	(7.0	)	4,920		5,193		(273		)	(5.3	)
Postage	4,014		3,633		381			10.5
Other real estate owned and repossession expense										2,507		3,034		(527		)	(17.4	)
Operating risk loss	3,786		6,923		(3,137		)	(45.3	)	2,637		3,786		(1,149		)	(30.3	)
Supplies	3,323		4,096		(773		)	(18.9	)
Other real estate owned and repossession expense	3,034		6,248		(3,214		)	(51.4	)
Intangible amortization	944		1,603		(659		)	(41.1	)	241		944		(703		)	(74.5	)
Other	23,084		22,195		889			4.0		26,256		23,084		3,172			13.7
Total	$	341,526	$	344,671	$	(3,145	)	(0.9	)%	$	361,721	$	341,526	$	20,195		5.9	%

N/M - Not meaningful

Salaries and employee benefits ~~decreased $2.4~~increased $9.7 million, or ~~1.3%~~5.2%, with salaries increasing ~~$953,000,~~$6.9 million, or ~~0.6%~~4.4%, and employee benefits ~~decreasing $3.4~~increasing $2.8 million, or ~~10.5%~~9.9%. The increase in salaries was primarily due to higher average salaries per full-time equivalent employee, an increase in incentive compensation, and higher temporary employee expenses, partially offset by a decrease in the average number of full-time equivalent employees to 3,470 for the nine months ended September 30, 2015, compared to 3,540 for the nine months ended September 30, 2014. The increase in employee benefits was primarily due to the cost savings initiatives, which included the elimination and reduction of certain employee benefit plans, most notably a decrease in profit sharing contributions and an amendment to the Postretirement Plan, partially offset by an increase in ~~healthcare expenses and severance.~~defined benefit plan expense in 2015, while 2014 included a $1.5 million gain realized on the post-retirement plan amendment in 2014.

~~The $1.8 million, or 5.3%, increase in net occupancy expense was primarily due to an increase in snow removal costs in 2014, partially offset by savings from the branch consolidations.~~ Other outside services increased ~~$6.5~~$1.6 million, or ~~48.9%~~7.9%, due to an increase in consulting services related to the Corporation’s ~~acceleration of~~ risk management and compliance efforts, including those in connection with the enhancement of the Corporation's program for compliance with the BSA/AML ~~requirements.~~ Requirements. While BSA/AML remediation costs decreased for the third quarter of 2015 as compared to the third quarter of 2014, the year to date costs were higher due to significant expenditures incurred earlier in the year.

The ~~$1.2~~$3.1 million, or ~~10.3%~~14.1%, combined increase in data processing and software resulted from increased expenses related to the core processing system used to maintain customer account records as a result of contractual increases and higher transaction volumes, and amortization of software.

The $1.3 million, or 13.2%, decrease in ~~equipment~~professional fees was due to a decrease in legal fees primarily resulting from the timing of engagements with outside counsel.

In July 2015, the Corporation redeemed $150.0 million of TruPS. In connection with this redemption, a loss of $5.6 million was recognized as a component of non-interest expense.

The $527,000, or 17.4%, decrease in other real estate owned and repossession expense was primarily due to ~~a decrease~~lower repossession expense in ~~depreciation~~2015. This expense category can experience volatility from period to period based on the timing of foreclosures and sales of properties and payments of expenses, such as ~~certain assets became fully depreciated.~~real estate taxes.

The ~~$3.1~~$1.1 million, or ~~45.3%~~30.3%, decrease in operating risk loss was due to a ~~$3.7~~$1.3 million decrease in check card fraud losses, partially offset by a $215,000 increase in losses associated with previously sold residential ~~mortgages, partially offset by a net decrease in debit card and check fraud losses.~~mortgages. See Note L12 "Commitments and Contingencies," in the Notes to Consolidated Financial Statements for additional details related to repurchases of previously sold residential mortgages.

OREO and repossession expense decreased $3.2 million, or 51.4%, primarily due to an increase in net gains on sales of properties and a decrease in valuation provisions, which reflect the continued improvement in overall asset quality. The $659,000, or 41.1%, decrease in intangible amortization was primarily due to core deposit intangible assets, which are amortized on an accelerated basis.

Income Taxes

Income tax expense for the first nine months of ~~2014~~2015 was $36.0 million, a $5.1 million, or 12.5%, decrease from $41.1 million ~~a $2.4 million, or 6.2%, increase from $38.7 million~~ in ~~2013.~~2014.

The Corporation’s effective tax rate was ~~25.5%~~24.5% in ~~2014,~~2015, as compared to ~~24.4%~~25.5% in ~~2013.~~2014. The effective tax rate is generally lower than the Federal statutory rate of 35% due to investments in tax-free municipal securities, tax credits earned from investments in partnerships that generate such credits under various federal programs and the effect of state income taxes. The ~~increase in the~~lower effective tax rate in ~~comparison to the first nine months of 2013~~2015 was due primarily to a $2.1 million ($1.4 million, net of federal tax) decrease in the valuation allowance for certain state deferred tax assets that was recorded as a credit to income tax expense in 2013.driven by lower pre-tax income.

FINANCIAL CONDITION

The table below presents condensed consolidated ending balance ~~sheets for the Corporation.~~sheets.

Increase (Decrease)
September 30, 2014 December 31, 2013 $ %
(dollars in thousands)
Assets
Cash and due from banks $ 220,946
$ 218,540
$ 2,406
1.1 %
Other interest-earning assets 377,579
248,161
129,418
52.2
Loans held for sale 25,212
21,351
3,861
18.1
Investment securities 2,470,609
2,568,434
(97,825 ) (3.8 )
Loans, net of allowance 12,840,928
12,579,440
261,488
2.1
Premises and equipment 224,441
226,021
(1,580 ) (0.7 )
Goodwill and intangible assets 532,117
533,076
(959 ) (0.2 )
Other assets 546,342
539,611
6,731
1.2
Total Assets $ 17,238,174
$ 16,934,634
$ 303,540
1.8 %
Liabilities and Shareholders’ Equity
Deposits $ 13,333,627
$ 12,491,186
$ 842,441
6.7 %
Short-term borrowings 564,952
1,258,629
(693,677 ) (55.1 )
Long-term debt 1,018,289
883,584
134,705
15.2
Other liabilities 243,300
238,048
5,252
2.2
Total Liabilities 15,160,168
14,871,447
288,721
1.9
Total Shareholders’ Equity 2,078,006
2,063,187
14,819
0.7
Total Liabilities and Shareholders’ Equity $ 17,238,174
$ 16,934,634
$ 303,540
1.8 %

~~Other interest-earning assets~~



					Increase (Decrease)
	September 30, 2015		December 31, 2014		$			%
	(dollars in thousands)
Assets
Cash and due from banks	$	93,803	$	105,702	$	(11,899	)	(11.3	)%
Other interest-earning assets	579,920		423,083		156,837			37.1
Loans held for sale	26,937		17,522		9,415			53.7
Investment securities	2,436,337		2,323,371		112,966			4.9
Loans, net of allowance	13,369,225		12,927,572		441,653			3.4
Premises and equipment	225,705		226,027		(322		)	(0.1	)
Goodwill and intangible assets	531,562		531,803		(241		)	—
Other assets	574,570		569,687		4,883			0.9
Total Assets	$	17,838,059	$	17,124,767	$	713,292		4.2	%
Liabilities and Shareholders’ Equity
Deposits	$	14,084,394	$	13,367,506	$	716,888		5.4	%
Short-term borrowings	431,631		329,719		101,912			30.9
Long-term debt	979,433		1,139,413		(159,980		)	(14.0	)
Other liabilities	316,697		291,464		25,233			8.7
Total Liabilities	15,812,155		15,128,102		684,053			4.5
Total Shareholders’ Equity	2,025,904		1,996,665		29,239			1.5
Total Liabilities and Shareholders’ Equity	$	17,838,059	$	17,124,767	$	713,292		4.2	%

The ~~$129.4~~$156.8 million, or ~~52.2%~~37.1%, increase in other interest-earning assets ~~was~~resulted from higher balances on deposit with the Federal Reserve Bank due to ~~an increase in interest-bearing deposits with other banks.~~a higher net liquidity position.

Investment Securities

The following table presents the carrying amount of investment securities:


					Increase (Decrease)									Increase (Decrease)
	September 30, 2014		December 31, 2013		$			%		September 30, 2015		December 31, 2014		$			%
	(dollars in thousands)									(dollars in thousands)
U.S. Government securities	$	200	$	525	$	(325	)	(61.9	)%	$	—	$	200	$	(200	)	(100.0	)%
U.S. Government sponsored agency securities	240		726		(486		)	(66.9	)	48,551		214		48,337			N/M
State and municipal securities	257,616		284,849		(27,233		)	(9.6	)	240,236		245,215		(4,979		)	(2.0	)
Corporate debt securities	101,427		98,749		2,678			2.7		99,941		98,034		1,907			1.9
Collateralized mortgage obligations	955,040		1,032,398		(77,358		)	(7.5	)	874,299		902,313		(28,014		)	(3.1	)
Mortgage-backed securities	962,335		945,712		16,623			1.8		1,051,905		928,831		123,074			13.3
Auction rate securities	148,473		159,274		(10,801		)	(6.8	)	97,873		100,941		(3,068		)	(3.0	)
Total debt securities	2,425,331		2,522,233		(96,902		)	(3.8	)	2,412,805		2,275,748		137,057			6.0
Equity securities	45,278		46,201		(923		)	(2.0	)	23,532		47,623		(24,091		)	(50.6	)
Total	$	2,470,609	$	2,568,434	$	(97,825	)	(3.8	)%	$	2,436,337	$	2,323,371	$	112,966		4.9	%

N/M - Not meaningful

Total investment securities ~~decreased $97.8~~increased $113.0 million, or ~~3.8%~~4.9%, in comparison to December 31, ~~2013, mainly in collateralized mortgage obligations and state and municipal securities,~~2014, as prior period portfolio cash flows were ~~not fully~~ reinvested ~~due to relatively low yields available on current investment options. Cash flows that were reinvested~~in mortgage-backed securities and U.S. Government sponsored agency securities. The $24.1 million, or 50.6%, decrease in equity securities reflects the sales of certain financial institutions stocks during the first nine months of 2014 were used to purchase securities with average lives of approximately five years to provide for more structured cash flows, thereby limiting price and extension risk in a rising interest rate environment. State and municipal securities decreased primarily due to maturities that2015.

5556

~~were not fully reinvested. The decrease in ARCs was primarily due to the sales of securities with a total book value of $11.9 million, resulting in no gain or loss.~~

The net pre-tax unrealized loss on available for sale investment securities was $3.2 million as of September 30, 2014, compared to a $39.8 million pre-tax unrealized loss as of December 31, 2013. The $36.6 million decrease in the net pre-tax unrealized loss was due to a decrease in market interest rates, which caused the fair values of collateralized mortgage obligations and mortgage-backed securities to increase. See additional details regarding investment security price risk within Item 3, "Quantitative and Qualitative Disclosures About Market Risk."

Loans, net of unearned income

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


					Increase (Decrease)									Increase (Decrease)
	September 30, 2014		December 31, 2013		$			%		September 30, 2015		December 31, 2014		$			%
	(in thousands)									(dollars in thousands)
Real-estate – commercial mortgage	$	5,156,979	$	5,101,922	$	55,057		1.1	%	$	5,339,928	$	5,197,155	$	142,773		2.7	%
Commercial – industrial, financial and agricultural	3,691,262		3,628,420		62,842			1.7		3,929,908		3,725,567		204,341			5.5
Real-estate – home equity	1,733,036		1,764,197		(31,161		)	(1.8	)	1,693,649		1,736,688		(43,039		)	(2.5	)
Real-estate – residential mortgage	1,372,033		1,337,380		34,653			2.6		1,382,085		1,377,068		5,017			0.4
Real-estate – construction	687,728		573,672		114,056			19.9		769,565		690,601		78,964			11.4
Consumer	278,219		283,124		(4,905		)	(1.7	)	271,696		265,431		6,265			2.4
Leasing and other	111,148		93,505		17,643			18.9		149,530		119,206		30,324			25.4
Loans, net of unearned income	$	13,030,405	$	12,782,220	$	248,185		1.9	%	$	13,536,361	$	13,111,716	$	424,645		3.2	%

The Corporation does not have a significant concentration of credit risk with any single borrower, industry or geographical location. AsApproximately $6.1 billion, or 45.1%, of the loan portfolio was in commercial mortgage and construction loans as of September 30, ~~2014, the~~2015. The Corporation's maximum total lending commitment to an individual borrower was $50.0 ~~million.~~million as of September 30, 2015. In addition to its policy of limiting the maximum total lending commitment to any individual borrower to $50.0 million, the Corporation has established lower total lending limits for certain types of lending commitments, and lower total lending limits based on the Corporation's internal risk rating of an individual borrower at the time the lending commitment is approved. As of September 30, ~~2014,~~2015, the Corporation had 66101 relationships with total borrowing commitments between $20.0 million and $50.0 million.

Approximately $5.8 billion, or 44.9%, of the loan portfolio was in commercial mortgage and construction loans as of September 30, 2014. The performance of these loans can be adversely impacted by fluctuations in real estate values. The Corporation limits its maximum non-owner occupied commercial real estate exposure to $33.0 million to any one borrower, based on the Corporation's internal risk rating at the time the lending commitment is approved, and limits its exposure to any one development project to $15.0 million.

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

September 30, 2014 December 31, 2013
Balance Delinquency Rate (1) % of Total Balance Delinquency Rate (1) % of Total
(dollars in thousands)
Commercial $ 377,206
0.5 % 54.9 % $ 269,497
0.8 % 47.0 %
Commercial - residential 241,419
7.4
35.1
235,369
8.2
41.0
Other 69,103
0.4
10.0
68,806
0.8
12.0
Total Real estate - construction $ 687,728
2.9 % 100.0 % $ 573,672
3.8 % 100.0 %


~~(1)~~	~~Represents all accruing loans 31 days or more past due and non-accrual loans as a percentage of total loans within each class segment.~~

~~Construction~~Commercial loans increased ~~$114.1~~$204.3 million, or ~~19.9%~~5.5%. The increase was primarily in the Pennsylvania ($191.0 million, or 7.3%) and Maryland ($25.8 million, or 8.6%) markets, partially offset by decreases in the Delaware and New Jersey markets.Commercial mortgage loans increased $142.8 million, or 2.7%, in comparison to December 31, ~~2013 and comprised 5.3%~~2014, generally in all markets, with the exception of the total loan portfolio at September 30, 2014 as compared to 4.5% at December 31, 2013. Over the past five years, the Corporation reduced its exposure in its construction portfolio, which accounted 8.2% of its total loan portfolio as of December 31, 2009. The growth during the first nine months of 2014 was primarily in commercial construction, which increased $107.7 million, or 40.0%.

~~Geographically, the increase in real estate construction loans was primarily in the Pennsylvania ($58.1 million, or 20.1%), Maryland ($25.5 million, or 41.8%) and New Jersey ($20.6, or 22.7%) markets.~~

~~The $62.8 million, or 1.7%, increase in commercial loans was primarily in~~ the New Jersey market. Commercial mortgage loans increased $55.1 million in comparison to December 31, 2013. Geographically, the increase in was in the New Jersey ($74.2 million, or 5.8%), Maryland ($35.0 million, or 6.5%) and Delaware ($22.1 million, or 11.3%) markets, partially offset bymarket, which experienced a ~~decrease in the Pennsylvania ($76.0 million, or 2.9%) market.~~slight decrease.

The following table summarizes the percentage of commercial loans, by industry:


	September 30, 2014		December 31, 2013		September 30, 2015		December 31, 2014
Services	18.7	%	19.2	%	20.2	%	19.2	%
Manufacturing	14.0		13.5		12.5		13.1
Health care					10.5		9.0
Construction (1)	11.5		10.0		10.4		11.0
Retail	10.0		11.0		8.8		9.6
Wholesale	9.4		9.7		8.6		8.7
Real estate (2)	7.9		7.0		7.5		7.6
Health care	7.6		8.1
Agriculture	4.7		5.8		4.9		5.5
Arts and entertainment	3.5		2.7		2.9		3.4
Transportation	2.4		2.5		2.2		2.4
Financial services	1.9		1.6		1.9		1.9
Other	8.4		8.9		9.6		8.6
	100.0	%	100.0	%	100.0	%	100.0	%


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


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

Commercial loans and commercial mortgage loans also include shared national credits, which are participations in loans or loan commitments of at least ~~$20~~$20.0 million that are shared by three or more banks. Below is a summary of the Corporation's outstanding purchased shared national credits:


	September 30, 2014		December 31, 2013		September 30, 2015		December 31, 2014
	(dollars in thousands)				(in thousands)
Commercial - industrial, financial and agricultural	$	141,100	$	129,840	$	147,791	$	116,705
Real estate - commercial mortgage	137,501		87,868		124,971		137,952
	$	278,601	$	217,708	$	272,762	$	254,657

Total shared national credits increased ~~$60.9~~$18.1 million, or ~~28.0%~~7.1%, in comparison to December 31, ~~2013.~~2014. The Corporation's shared national credits are to borrowers located in its geographical markets, and the increase was due to normal lending activities consistent with the Corporation's underwriting policies. As of September 30, ~~2014 and December 31, 2013, none~~2015, two of the shared national credits, or 0.6% of the total balance, were past due. There were no shared national credits past due at December 31, 2014.

Construction loans include loans to commercial borrowers secured by commercial real estate, loans to commercial borrowers secured by residential real estate, and other construction loans, which represent loans to individuals secured by residential real estate. The ~~$34.7~~following table presents outstanding construction loans and their delinquency rates by these class segments:



	September 30, 2015						December 31, 2014
	Balance		Delinquency Rate (1)		% of Total		Balance		Delinquency Rate (1)		% of Total
	(dollars in thousands)
Commercial	$	521,866	0.5	%	67.8	%	$	427,419	0.6	%	61.9	%
Commercial - residential	190,521		7.4		24.8		203,670		6.6		29.5
Other	57,178		1.2		7.4		59,512		0.6		8.6
Total Real estate - construction	$	769,565	2.3	%	100.0	%	$	690,601	2.4	%	100.0	%


(1)	Represents all accruing loans 31 days or more past due and non-accrual loans as a percentage of total loans within each class segment.

Construction loans increased $79.0 million, or ~~2.6%~~11.4%, in comparison to December 31, 2014 and comprised 5.7% of the total loan portfolio at September 30, 2015 as compared to 5.3% at December 31, 2014.The increase in ~~residential mortgages~~construction loans was ~~due to~~primarily in loans secured by commercial real estate. Geographically, the ~~retention of certain 15-year fixed rate mortgages~~increase in real estate construction loans was primarily in the ~~portfolio instead~~Pennsylvania ($94.7 million, or 26.1%) and New Jersey ($43.9 million, or 48.3%) markets, partially offset by decreases in the Virginia ($27.5 million, or 30.4%), Maryland ($23.8 million, or 27.5%) and Delaware ($8.3 million, or 13.8%) markets.

Leasing and other loans increased $30.3 million, or 25.4%, in comparison to December 31, 2014 as a result of ~~selling those mortgages to third-party investors.~~new products and services being added during 2015 and a focus on growing this portfolio.

Home equity loans decreased $43.0 million, or 2.5%, primarily as a result of customers refinancing outstanding home equity loans into residential mortgages.

5758

Provision for Credit Losses and Allowance for Credit Losses

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


	Three months ended September 30						Nine months ended September 30						Three months ended September 30						Nine months ended September 30
	2014			2013			2014			2013			2015			2014			2015			2014
	(dollars in thousands)												(dollars in thousands)
Average balance of loans, net of unearned income	$	12,922,821		$	12,728,162		$	12,827,563		$	12,506,393		$	13,369,874		$	12,922,821		$	13,220,339		$	12,827,563

Balance of allowance for credit losses at beginning of period	$	193,442		$	217,626		$	204,917		$	225,439		$	169,453		$	193,442		$	185,931		$	204,917
Loans charged off:
Commercial – industrial, financial and agricultural	5,167			9,394			15,804			24,856			1,640			5,167			14,669			15,804
Real estate – residential mortgage													1,035			231			3,099			2,166
Real estate – home equity													940			1,492			2,578			4,377
Real estate – commercial mortgage	1,557			3,724			5,084			13,050			660			1,557			3,011			5,084
Real estate – home equity	1,492			2,365			4,377			6,735
Real estate – residential mortgage	231			767			2,166			8,282
Consumer	538			473			1,738			1,456			650			538			1,787			1,738
Real estate – construction	313			598			745			5,181			114			313			201			745
Leasing and other	306			787			1,434			2,037			522			306			1,352			1,434
Total loans charged off	9,604			18,108			31,348			61,597			5,561			9,604			26,697			31,348
Recoveries of loans previously charged off:
Commercial – industrial, financial and agricultural	1,013			2,295			2,532			3,430			1,598			1,013			3,855			2,532
Real estate – residential mortgage													201			95			547			319
Real estate – home equity													304			336			744			869
Real estate – commercial mortgage	1,167			185			1,641			2,754			842			1,167			1,729			1,641
Real estate – home equity	336			198			869			721
Real estate – residential mortgage	95			245			319			442
Consumer	448			294			1,059			1,206			314			448			923			1,059
Real estate – construction	470			379			852			1,794			898			470			2,276			852
Leasing and other	241			224			767			649			346			241			587			767
Total recoveries	3,770			3,820			8,039			10,996			4,503			3,770			10,661			8,039
Net loans charged off	5,834			14,288			23,309			50,601			1,058			5,834			16,036			23,309
Provision for credit losses	3,500			9,500			9,500			38,000			1,000			3,500			(500		)	9,500
Balance of allowance for credit losses at end of period	$	191,108		$	212,838		$	191,108		$	212,838		$	169,395		$	191,108		$	169,395		$	191,108

Net charge-offs to average loans (annualized)	0.18		%	0.45		%	0.24		%	0.54		%	0.03		%	0.18		%	0.16		%	0.24		%

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


	September 30, 2014			December 31, 2013			September 30, 2015			December 31, 2014
	(dollars in thousands)						(dollars in thousands)
Allowance for loan losses	$	189,477		$	202,780		$	167,136		$	184,144
Reserve for unfunded lending commitments	1,631			2,137			2,259			1,787
Allowance for credit losses	$	191,108		$	204,917		$	169,395		$	185,931

Allowance for credit losses to loans outstanding	1.47		%	1.60		%	1.25		%	1.42		%

~~For~~The provision for credit losses for the three ~~and~~months ended September 30, 2015 was $1.0 million, a decrease of $2.5 million in comparison to the same period in 2014.For the nine months ended September 30, ~~2014,~~2015, the ~~Corporation's~~ provision for credit losses ~~decreased $6.0~~was a negative $500,000, a decrease of $10.0 million ~~or 63.2%, and $28.5 million, or 75.0%, respectively, in comparison~~compared to the same ~~periods~~period in ~~2013.~~2014. The ~~decreases~~decrease in the provision for credit losses ~~were due to improvements in~~was based on the evaluation of all relevant credit quality ~~as shown by a reduction in non-performing loans~~factors and ~~overall delinquency.~~the results of the allowance for credit losses allocation methodology.

Net charge-offs decreased ~~$8.5~~$4.8 million, or ~~59.2%~~81.9%, to $1.1 million for the third quarter of 2015, compared to $5.8 million for the third quarter of ~~2014, compared to $14.3 million for the third quarter of 2013.~~2014. The decrease in net charge-offs was primarily due to a ~~$3.1~~$4.1 million ~~or 89.0%, decrease in commercial mortgage net charge-offs and a $2.9 million, or 41.5%,~~ decrease in commercial loan net ~~charge-offs.~~charge-

offs. Of the ~~$5.8~~$1.1 million of net charge-offs recorded in the third quarter of ~~2014, 40.8% were for loans originated in Maryland, 32.6% were for loans originated in New Jersey and 26.5%~~2015, the majority were for loans originated in Pennsylvania.

During the first nine months of ~~2014,~~2015, net charge-offs decreased ~~$27.3~~$7.3 million, or ~~53.9%~~31.2%, to $16.0 million, compared to $23.3 million ~~compared to $50.6 million~~ for the ~~same period~~first nine months of ~~2013.~~2014. The decrease in net charge-offs was primarily due to ~~an $8.2~~a $2.5 million, or ~~38.1%~~18.5%, decrease in commercial loan net charge-offs, a ~~$6.9~~$2.2 million, or ~~66.6%~~62.8%, decrease in commercial mortgage net charge-offs, a $2.0 million decrease in real estate construction net charge-offs and a ~~$6.0~~$1.7 million, or ~~76.4%~~47.7%, decrease in home equity net charges-offs, partially offset by a $705,000, or 38.2%, increase in residential mortgage net charge-offs. Of the ~~$23.3~~$16.0 million of net charge-offs recorded ~~during~~in the first nine months of ~~2014, 58.6%, 26.3% and 16.8%~~2015, the majority were for loans originated in Pennsylvania and New ~~Jersey and Maryland, respectively. Net recoveries were recorded during the first nine months of 2014 for loans originated in Delaware and Virginia.~~Jersey.

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


	September 30, 2014			September 30, 2013			December 31, 2013			September 30, 2015			September 30, 2014			December 31, 2014
	(dollars in thousands)									(dollars in thousands)
Non-accrual loans	$	126,420		$	143,012		$	133,753		$	132,154		$	126,420		$	121,080
Loans 90 days past due and accruing	17,428			25,271			20,524
Loans 90 days or more past due and accruing										12,867			17,428			17,402
Total non-performing loans	143,848			168,283			154,277			145,021			143,848			138,482
Other real estate owned (OREO)	13,489			18,173			15,052			10,561			13,489			12,022
Total non-performing assets	$	157,337		$	186,456		$	169,329		$	155,582		$	157,337		$	150,504
Non-accrual loans to total loans	0.97		%	1.12		%	1.05		%	0.98		%	0.97		%	0.92		%
Non-performing assets to total assets	0.91		%	1.09		%	1.00		%	0.87		%	0.91		%	0.88		%
Allowance for credit losses to non-performing loans	132.85		%	126.48		%	132.82		%	116.81		%	132.85		%	134.26		%

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


	September 30, 2014		September 30, 2013		December 31, 2013		September 30, 2015		September 30, 2014		December 31, 2014
	(in thousands)						(in thousands)
Real estate – residential mortgage	$	30,850	$	27,820	$	28,815	$	29,330	$	30,850	$	31,308
Real estate – commercial mortgage	18,869		22,644		19,758		17,282		18,869		18,822
Real estate – construction	9,251		9,841		10,117		4,363		9,251		9,241
Commercial – industrial, financial and agricultural	5,115		8,184		8,045		7,399		5,115		5,237
Real estate – home equity	2,904		1,667		1,365		3,954		2,904		2,975
Consumer	23		11		11		29		23		38
Total accruing TDRs	67,012		70,167		68,111		62,357		67,012		67,621
Non-accrual TDRs (1)	27,724		30,501		30,209		27,618		27,724		24,616
Total TDRs	$	94,736	$	100,668	$	98,320	$	89,975	$	94,736	$	92,237

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

TDRs modified during the first nine months of ~~2014~~2015 and still outstanding as of September 30, ~~2014~~2015 totaled ~~$17.2~~$16.1 million.During the first nine months of ~~2014, $4.8~~2015, $5.0 million of TDRs that were modified within the previous 12 months had a payment default, which the Corporation defines as a single missed scheduled payment, subsequent to modification.

5960

The following table presents the changes in non-accrual loans for the three and nine months ended September 30, ~~2014:~~2015:


	Commercial - Industrial, Financial and Agricultural			Real Estate - Commercial Mortgage			Real Estate - Construction			Real Estate - Residential Mortgage			Real Estate - Home Equity			Consumer			Leasing			Total			Commercial - Industrial, Financial and Agricultural			Real Estate - Commercial Mortgage			Real Estate - Construction			Real Estate - Residential Mortgage			Real Estate - Home Equity			Consumer			Leasing			Total
	(in thousands)																								(in thousands)
Three months ended September 30, 2014
Balance of non-accrual loans at June 30, 2014	$	35,980		$	41,936		$	19,236		$	21,053		$	11,729		$	—		$	—		$	129,934
Three months ended September 30, 2015																									Three months ended September 30, 2015
Balance of non-accrual loans at June 30, 2015																									$	35,109		$	47,985		$	14,468		$	21,611		$	9,979		$	—		$	—		$	129,152
Additions	6,885			8,766			2,813			1,796			2,846			538			—			23,644			9,960			4,109			1,488			2,768			2,516			650			149			21,640
Payments	(4,400		)	(5,353		)	(1,850		)	(178		)	(1,132		)	—			—			(12,913		)	(5,187		)	(2,411		)	(1,269		)	(938		)	(766		)	—			—			(10,571		)
Charge-offs	(5,167		)	(1,557		)	(313		)	(231		)	(1,492		)	(533		)	—			(9,293		)	(1,640		)	(660		)	(114		)	(1,035		)	(940		)	(650		)	(149		)	(5,188		)
Transfers to accrual status	(2,302		)	—			—			(30		)	(160		)	(5		)	—			(2,497		)	—			—			—			(136		)	(60		)	—			—			(196		)
Transfers to OREO status	(11		)	(945		)	(231		)	(560		)	(708		)	—			—			(2,455		)
Balance of non-accrual loans as of September 30, 2014	$	30,985		$	42,847		$	19,655		$	21,850		$	11,083		$	—		$	—		$	126,420
Transfers to OREO																									(1,689		)	(196		)	—			(293		)	(505		)	—			—			(2,683		)
Balance of non-accrual loans at September 30, 2015																									$	36,553		$	48,827		$	14,573		$	21,977		$	10,224		$	—		$	—		$	132,154

Nine months ended September 30, 2014
Balance of non-accrual loans as of December 31, 2013	$	36,710		$	40,566		$	20,921		$	22,282		$	13,272		$	2		$	—		$	133,753
Nine months ended September 30, 2015																									Nine months ended September 30, 2015
Balance of non-accrual loans as of December 31, 2014																									$	29,769		$	44,437		$	16,348		$	20,043		$	10,483		$	—		$	—		$	121,080
Additions	27,054			23,190			3,964			8,601			8,397			1,742			407			73,355			37,661			22,047			3,966			9,737			6,110			1,789			506			81,816
Payments	(13,910		)	(13,965		)	(4,185		)	(1,624		)	(2,512		)	(6		)	—			(36,202		)	(13,827		)	(13,710		)	(5,540		)	(2,373		)	(1,464		)	(2		)	—			(36,916		)
Charge-offs	(15,804		)	(5,084		)	(745		)	(2,166		)	(4,377		)	(1,733		)	(407		)	(30,316		)	(14,669		)	(3,011		)	(201		)	(3,099		)	(2,578		)	(1,787		)	(506		)	(25,851		)
Transfers to accrual status	(2,302		)	(54		)	—			(2,358		)	(1,718		)	(5		)	—			(6,437		)	—			(44		)	—			(440		)	(524		)	—			—			(1,008		)
Transfers to OREO status	(763		)	(1,806		)	(300		)	(2,885		)	(1,979		)	—			—			(7,733		)
Balance of non-accrual loans as of September 30, 2014	$	30,985		$	42,847		$	19,655		$	21,850		$	11,083		$	—		$	—		$	126,420
Transfers to OREO																									(2,381		)	(892		)	—			(1,891		)	(1,803		)	—			—			(6,967		)
Balance of non-accrual loans at September 30, 2015																									$	36,553		$	48,827		$	14,573		$	21,977		$	10,224		$	—		$	—		$	132,154

Non-accrual loans ~~decreased $16.6~~increased $5.7 million, or ~~11.6%~~4.5%, and $11.1 million, or 9.1%, in comparison to September 30, ~~2013~~2014 and ~~$7.3 million in comparison to~~ December 31, ~~2013. Total non-accrual additions for the three and nine months ended September 30,~~ 2014, ~~were $23.6 million and $73.4 million, respectively, compared to additions for the three and nine months ended September 30, 2013 of $22.1 million and $105.7 million,~~ respectively.

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


	September 30, 2014		September 30, 2013		December 31, 2013		September 30, 2015		September 30, 2014		December 31, 2014
	(in thousands)						(in thousands)
Real estate – commercial mortgage	$	44,602	$	42,623	$	44,068	$	49,021	$	44,602	$	45,237
Commercial – industrial, financial and agricultural	33,277		45,184		38,021		38,032		33,277		30,388
Real estate – residential mortgage	28,135		34,309		31,347		27,707		28,135		28,995
Real estate – construction	19,860		24,396		21,267		14,989		19,860		16,399
Real estate – home equity	15,071		18,691		16,983		13,107		15,071		14,740
Consumer							2,079		2,515		2,590
Leasing	388		67		48		86		388		133
Consumer	2,515		3,013		2,543
Total non-performing loans	$	143,848	$	168,283	$	154,277	$	145,021	$	143,848	$	138,482

Non-performing ~~commercial~~ loans ~~decreased $11.9~~increased $1.2 million, or ~~26.4%~~0.8%, in comparison to September 30, ~~2013, primarily in the Pennsylvania market.~~2014. Non-performing ~~residential mortgages decreased $6.2~~commercial loans increased $4.8 million, or ~~18.0%~~14.3%, and non-performing commercial mortgages increased $4.4 million, or 9.9%, while non-performing construction loans decreased $4.9 million, or 24.5%, and non-performing home equity loans decreased $2.0 million, or 13.0%, in comparison to September 30, 2013. Geographically, the decrease was primarily in the New Jersey ($4.2 million, or 39.9%) market. Non-performing construction loans decreased $4.5 million, or 18.6%, in comparison to September 30, 2013.~~Geographically, the decrease occurred primarily in the Pennsylvania ($2.4 million, or 18.3%) and Maryland ($1.9 million, or 32.0%) markets.~~2014.

6061

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


	September 30, 2014		September 30, 2013		December 31, 2013		September 30, 2015		September 30, 2014		December 31, 2014
	(in thousands)						(in thousands)
Residential properties	$	8,121	$	5,836	$	7,052	$	6,934	$	8,121	$	6,656
Commercial properties	3,758		9,514		5,586		1,584		3,758		3,453
Undeveloped land	1,610		2,823		2,414		2,043		1,610		1,913
Total OREO	$	13,489	$	18,173	$	15,052	$	10,561	$	13,489	$	12,022

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

Total internally risk rated loans were ~~$9.5~~$10.0 billion as of September 30, ~~2014~~2015 and ~~$9.2~~$9.6 billion as of December 31, ~~2013.~~2014. The following table presents internal risk ratings for commercial loans, commercial mortgages and construction loans to commercial borrowers with internal risk ratings of Special Mention (considered criticized loans) or Substandard or lower (considered classified loans), by class segment:


	Special Mention						Increase (decrease)					Substandard or lower						Increase (decrease)					Total Criticized and Classified Loans						Special Mention						Increase (decrease)					Substandard or lower						Increase (decrease)					Total Criticized and Classified Loans
	September 30, 2014			December 31, 2013			$			%		September 30, 2014			December 31, 2013			$			%		September 30, 2014			December 31, 2013			September 30, 2015			December 31, 2014			$			%		September 30, 2015			December 31, 2014			$			%		September 30, 2015			December 31, 2014
	(dollars in thousands)																												(dollars in thousands)
Real estate - commercial mortgage	$	113,650		$	141,013		$	(27,363	)	(19.4	)%	$	165,425		$	196,922		$	(31,497	)	(16.0	)%	$	279,075		$	337,935		$	132,823		$	127,302		$	5,521		4.3	%	$	178,450		$	170,837		$	7,613		4.5	%	$	311,273		$	298,139
Commercial - secured	138,136			111,613			26,523			23.8		129,273			125,382			3,891			3.1		267,409			236,995			97,617			120,584			(22,967		)	(19.0	)	105,820			110,544			(4,724		)	(4.3	)	203,437			231,128
Commercial -unsecured	12,246			11,666			580			5.0		5,256			2,755			2,501			90.8		17,502			14,421			3,568			7,463			(3,895		)	(52.2	)	4,805			6,810			(2,005		)	(29.4	)	8,373			14,273
Total Commercial - industrial, financial and agricultural	150,382			123,279			27,103			22.0		134,529			128,137			6,392			5.0		284,911			251,416			101,185			128,047			(26,862		)	(21.0	)	110,625			117,354			(6,729		)	(5.7	)	211,810			245,401
Construction - commercial residential	28,517			31,522			(3,005		)	(9.5	)	42,875			57,806			(14,931		)	(25.8	)	71,392			89,328			16,763			27,495			(10,732		)	(39.0	)	29,429			40,066			(10,637		)	(26.5	)	46,192			67,561
Construction - commercial	1,469			2,932			(1,463		)	(49.9	)	5,550			8,124			(2,574		)	(31.7	)	7,019			11,056			1,693			12,202			(10,509		)	(86.1	)	5,204			5,586			(382		)	(6.8	)	6,897			17,788
Total real estate - construction (excluding construction - other)	29,986			34,454			(4,468		)	(13.0	)	48,425			65,930			(17,505		)	(26.6	)	78,411			100,384			18,456			39,697			(21,241		)	(53.5	)	34,633			45,652			(11,019		)	(24.1	)	53,089			85,349
Total	$	294,018		$	298,746		$	(4,728	)	(1.6	)%	$	348,379		$	390,989		$	(42,610	)	(10.9	)%	$	642,397		$	689,735		$	252,464		$	295,046		$	(42,582	)	(14.4	)%	$	323,708		$	333,843		$	(10,135	)	(3.0	)%	$	576,172		$	628,889

% of total risk rated loans	3.1		%	3.2		%						3.7		%	4.2		%						6.8		%	7.4		%	2.5		%	3.1		%						3.3		%	3.5		%						5.8		%	6.6		%

As of September 30, 2014, total loans with risk ratings of Substandard or lower decreased $42.6 million, or 10.9%, in comparison to December 31, 2013, primarily due to decreases in substandard commercial mortgages and construction loans to commercial borrowers. Special mention loans decreased $4.7 million, or 1.6%, in comparison to December 31, 2013 due to a decrease in special mention commercial mortgages and residential construction loans to commercial borrowers, partially offset by an increase in special mention commercial loans.

6162

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


	September 30, 2014									September 30, 2013									December 31, 2013									September 30, 2015									September 30, 2014									December 31, 2014
	31-89 Days			≥ 90 Days (1)			Total			31-89 Days			≥ 90 Days (1)			Total			31-89 Days			≥ 90 Days (1)			Total			31-89 Days			≥ 90 Days (1)			Total			31-89 Days			≥ 90 Days (1)			Total			31-89 Days			≥ 90 Days (1)			Total
Real estate – commercial mortgage	0.48		%	0.86		%	1.34		%	0.40		%	0.84		%	1.24		%	0.38		%	0.87		%	1.25		%	0.16		%	0.92		%	1.08		%	0.48		%	0.86		%	1.34		%	0.35		%	0.87		%	1.22		%
Commercial – industrial, financial and agricultural	0.28		%	0.91		%	1.19		%	0.32		%	1.24		%	1.56		%	0.30		%	1.04		%	1.34		%	0.35		%	0.97		%	1.32		%	0.28		%	0.91		%	1.19		%	0.17		%	0.81		%	0.98		%
Real estate – construction	0.03		%	2.89		%	2.92		%	0.40		%	4.22		%	4.62		%	0.11		%	3.71		%	3.82		%	0.30		%	1.95		%	2.25		%	0.03		%	2.89		%	2.92		%	0.02		%	2.38		%	2.40		%
Real estate – residential mortgage	1.81		%	2.06		%	3.87		%	1.82		%	2.58		%	4.40		%	1.74		%	2.34		%	4.08		%	1.27		%	2.00		%	3.27		%	1.81		%	2.06		%	3.87		%	1.96		%	2.10		%	4.06		%
Real estate – home equity	0.59		%	0.87		%	1.46		%	1.03		%	1.05		%	2.08		%	0.91		%	0.96		%	1.87		%	0.54		%	0.77		%	1.31		%	0.59		%	0.87		%	1.46		%	0.63		%	0.85		%	1.48		%
Consumer, leasing and other	1.41		%	0.75		%	2.16		%	1.91		%	0.79		%	2.70		%	1.99		%	0.68		%	2.67		%	1.30		%	0.51		%	1.81		%	1.41		%	0.75		%	2.16		%	1.56		%	0.70		%	2.26		%
Total	0.58		%	1.11		%	1.69		%	0.66		%	1.31		%	1.97		%	0.61		%	1.20		%	1.81		%	0.42		%	1.07		%	1.49		%	0.58		%	1.11		%	1.69		%	0.52		%	1.06		%	1.58		%
Total dollars (in thousands)	$	75,976		$	143,848		$	219,824		$	83,941		$	168,283		$	252,224		$	77,667		$	154,277		$	231,944		$	56,694		$	145,021		$	201,715		$	75,976		$	143,848		$	219,824		$	68,346		$	138,482		$	206,828


(1)	Includes non-accrual loans.

~~The Corporation~~Management believes that the allowance for credit losses of ~~$191.1~~$169.4 million as of September 30, ~~2014~~2015 is sufficient to cover incurred losses in both the loan portfolio and the unfunded lending commitments as of that date and is appropriate based on applicable accounting standards.

Deposits and Borrowings

The following table presents ending deposits, by type:


					Increase								Increase (Decrease)
	September 30, 2014		December 31, 2013		$		%		September 30, 2015		December 31, 2014		$			%
	(dollars in thousands)								(dollars in thousands)
Noninterest-bearing demand	$	3,556,810	$	3,283,172	$	273,638	8.3	%	$	3,906,228	$	3,640,623	$	265,605		7.3	%
Interest-bearing demand	3,164,514		2,945,210		219,304		7.4		3,362,336		3,150,612		211,724			6.7
Savings	3,620,919		3,344,882		276,037		8.3		3,880,103		3,504,820		375,283			10.7
Total demand and savings	10,342,243		9,573,264		768,979		8.0		11,148,667		10,296,055		852,612			8.3
Time deposits	2,991,384		2,917,922		73,462		2.5		2,935,727		3,071,451		(135,724		)	(4.4	)
Total deposits	$	13,333,627	$	12,491,186	$	842,441	6.7	%	$	14,084,394	$	13,367,506	$	716,888		5.4	%

Non-interest bearing demand deposits increased ~~$273.6~~$265.6 million, or ~~8.3%~~7.3%, ~~due~~ primarily toas a ~~$258.1 million, or 10.6%, increase~~result of increases in business account balances ~~and a $13.7~~of $256.0 million, or ~~13.2%~~9.3%, ~~increase in~~and municipal account ~~balances.~~balances of $12.6 million, or 12.6%.

Interest-bearing demand accounts increased ~~$219.3~~$211.7 million, or ~~7.4%~~6.7%, ~~primarily~~ due to a ~~$228.0~~$188.6 million, or ~~21.0%~~15.8%, seasonal increase in municipal account balances and a ~~$31.0~~$25.9 million, or ~~28.4%~~20.3%, increase in business account ~~balances, partially offset by $39.6~~balances. The $375.3 million, or ~~2.3%, decrease in personal account balances. The $276.0 million, or 8.3%~~10.7%, increase in savings account balances was primarily due to a ~~$240.7~~$205.6 million, or ~~50.4%~~9.4%, increase in personal account balances, a seasonal increase of $91.3 million, or 15.9%, in municipal account balances and a ~~$34.8~~$78.3 million, or ~~1.6%~~10.6%, increase in ~~personal~~business account balances. The ~~$73.5~~$135.7 million, or ~~2.5%~~4.4%, ~~increase~~decrease in time deposits was primarily due to ~~an increase~~a decrease in time deposits with original maturities of ~~4 to 5 years due to promotional efforts intended to lock in longer-term rates.~~less than two years.

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The following table summarizes the changes in ending borrowings, by type:


					Increase (Decrease)									Increase (Decrease)
	September 30, 2014		December 31, 2013		$			%		September 30, 2015		December 31, 2014		$			%
	(dollars in thousands)									(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements	$	195,121	$	175,621	$	19,500		11.1	%	$	145,225	$	158,394	$	(13,169	)	(8.3	)%
Customer short-term promissory notes	78,225		100,572		(22,347		)	(22.2	)	80,879		95,106		(14,227		)	(15.0	)
Total short-term customer funding	273,346		276,193		(2,847		)	(1.0	)	226,104		253,500		(27,396		)	(10.8	)
Federal funds purchased	6,606		582,436		(575,830		)	(98.9	)	5,527		6,219		(692		)	(11.1	)
Short-term FHLB advances (1)	285,000		400,000		(115,000		)	(28.8	)	200,000		70,000		130,000			185.7
Total short-term borrowings	564,952		1,258,629		(693,677		)	(55.1	)	431,631		329,719		101,912			30.9
Long-term debt:
FHLB advances	648,477		513,854		134,623			26.2		617,790		673,107		(55,317		)	(8.2	)
Other long-term debt	369,812		369,730		82			—		361,643		466,306		(104,663		)	(22.4	)
Total long-term debt	1,018,289		883,584		134,705			15.2		979,433		1,139,413		(159,980		)	(14.0	)
Total borrowings	$	1,583,241	$	2,142,213	(558,972		)	(26.1	)%	$	1,411,064	$	1,469,132	$	(58,068	)	(4.0	)%

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

The ~~$693.7~~$101.9 million ~~reduction~~increase in total short-term borrowings ~~reflects the use of~~was largely due to a ~~portion~~$130.0 million, or 185.7%, increase in short-term FHLB advances. The $55.3 million decrease in long-term FHLB advances resulted from maturities that were replaced with short-term advances. Other long-term debt decreased by $104.7 million, or 22.4%, primarily as a result of the ~~$842.4~~the maturity of $100 million ~~increase~~of subordinated debt in ~~deposits~~April 2015. In June 2015, the Corporation issued $150 million of ten-year subordinated debt at an effective rate of 4.69%. The proceeds were used to ~~repay short-term borrowings, as well as a change~~redeem $150 million of TruPS, that carried an effective rate of 6.52%, in ~~funding mix from short-term federal funds purchased and short-term FHLB advances to long-term FHLB advances.~~July 2015.

Shareholders' Equity

Total shareholders’ equity increased ~~$14.8~~$29.2 million, or ~~0.7%~~1.5%, during the first nine months of ~~2014.~~2015. The increase was due primarily to ~~$119.9~~$111.0 million of net income ~~and a $23.8 million increase in after-tax unrealized holding gains on available for sale investment securities,~~ partially offset by ~~$95.3 million of stock repurchases and $45.0~~$47.5 million of common stock ~~cash dividends.~~dividends and $50.0 million in treasury stock purchases.

In October 2013, the Corporation announced that its board of directors had approved a share repurchase program pursuant to which the Corporation was authorized to repurchase up to 4.0 million shares, or approximately 2.1% of its outstanding shares, through March 2014. During the first quarter of 2014, the Corporation repurchased 4.0 million shares at an average cost of $12.45 per share, completing this repurchase program on February 19, 2014.

In May 2014, the Corporation announced that its board of directors had approved a share repurchase program pursuant to which the Corporation was authorized to repurchase up to 4.0 million shares, or approximately 2.1% of its outstanding shares, through December 31, 2014. During the third quarter of 2014, 4.0 million shares were repurchased by the Corporation at an average cost of $11.36 per share, completing this repurchase program on August 25, 2014.

The Corporation and its subsidiary banks are subject to regulatory capital requirements administered by various banking regulators. Failure to meet minimum capital requirements could result in certain actions by regulators that could have a material effect on the Corporation’s financial statements. The regulations require that banks maintain minimum amounts and ratios of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier I capital to average assets (as defined).

~~As of~~ ~~September 30, 2014~~, the Corporation and each of its bank subsidiaries met the minimum requirements. In addition, each of the Corporation’s bank subsidiaries’ capital ratios exceeded the amounts required to be considered "well capitalized" as defined in the regulations.

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

September 30, 2014 December 31, 2013 Regulatory
Minimum
for Capital
Adequacy
Total Capital (to Risk-Weighted Assets) 14.5 % 15.0 % 8.0 %
Tier I Capital (to Risk-Weighted Assets) 13.0 % 13.1 % 4.0 %
Tier I Capital (to Average Assets) 10.6 % 10.6 % 4.0 %

In July 2013, the Federal Reserve Board approved final rules (the "U.S. Basel III Capital Rules") establishing a new comprehensive capital framework for U.S. banking organizations and implementing the Basel Committee on Banking Supervision's December 2010 framework for strengthening international capital standards. The U.S. Basel III Capital Rules substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions.

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

~~When fully phased in, the~~

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

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

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

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

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

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

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

As of September 30, ~~2014,~~2015, the Corporation ~~believes~~and each of its ~~current~~bank subsidiaries met the minimum requirements of the U.S. Basel III Capital Rules, and each of the Corporation’s bank subsidiaries’ capital ratios exceeded the amounts required to be considered "well capitalized" as defined in the regulations. As of September 30, 2015, the Corporation's capital levels ~~would meet~~also met the fully-phased in minimum capital requirements, including the capital conservation buffers, as prescribed in the U.S. Basel III Capital Rules.

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



	September 30, 2015		December 31, 2014		Regulatory Minimum for Capital Adequacy
Common Equity Tier I (to Risk-Weighted Assets)	10.8	%	N/A		4.5	%
Total Capital (to Risk-Weighted Assets)	13.8	%	14.7	%	8.0	%
Tier I Capital (to Risk-Weighted Assets)	10.8	%	12.3	%	6.0	%
Tier I Capital (to Average Assets)	9.4	%	10.0	%	4.0	%

The September 30, 2015 capital ratios presented above were determined in accordance with the Basel III Capital Rules while the December 31, 2014 capital ratios were calculated under the prior capital standards. The impact of transitioning to the Basel III Capital Rules was a decrease of approximately 45 basis points in the risk-based capital ratios, primarily as a result of the changes in risk-weightings.

Liquidity

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

The Corporation maintains liquidity sources in the form of demand and savings deposits, time deposits, repurchase agreements and short-term promissory notes. The Corporation can access additional liquidity from these sources, if necessary, by increasing the rates of interest ~~rates.~~paid on those accounts and borrowings. The positive impact to liquidity resulting from paying higher interest rates could have a detrimental impact on the net interest margin and net income if rates on interest-earning assets do not experience a proportionate increase.

Borrowing availability with the FHLB and the Federal Reserve Bank, along with Federal funds lines at various correspondent banks, provides the Corporation with additional liquidity.

Each of the Corporation’s subsidiary banks is a member of the FHLB and has access to FHLB overnight and term credit facilities. As of September 30, ~~2014~~,2015, the Corporation had ~~$933.5~~$817.8 million of short and long-term advances outstanding from the FHLB with an additional borrowing capacity of approximately $2.1 billion under these facilities. Advances from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets.

As of September 30, ~~2014~~,2015, the Corporation had aggregate availability under Federal funds lines of ~~$1.3~~$1.2 billion with ~~$6.6~~no borrowings outstanding on those lines. As of September 30, 2015, the Corporation had a repurchase agreement relationship with a community bank, with a balance of $5.5 million, ~~of that amount outstanding.~~classified as Federal funds purchased. A combination of commercial real estate loans, commercial loans and securities are pledged to the Federal Reserve Bank of Philadelphia to provide access to Federal Reserve Bank Discount Window borrowings. As of September 30, ~~2014~~,2015, the Corporation had ~~$1.1~~$1.3 billion of collateralized borrowing availability at the Discount Window, and no outstanding borrowings.

Liquidity must also be managed at the Fulton Financial Corporation parent company level. For safety and soundness reasons, banking regulations limit the amount of cash that can be transferred from subsidiary banks to the parent company in the form of

loans and dividends. Generally, these limitations are based on the subsidiary banks’ regulatory capital levels and their net income.

Management continues to monitor the liquidity and capital needs of the parent company and will implement appropriate strategies, as necessary, to remain adequately capitalized and to meet its cash needs.

The Corporation’s sources and uses of funds were discussed in general terms in the net interest income section of Management’s ~~Discussion.~~Discussion and Analysis. The consolidated statements of cash flows provide additional information. The Corporation’s operating activities during the first nine months of ~~2014~~2015 generated ~~$147.9~~$134.9 million of cash, mainly due to net income, ~~as adjusted for~~partially offset by the impact of non-cash expenses, most notably ~~depreciation and amortization of premises and equipment and the provision for credit losses, partially offset by~~ a net ~~decrease~~increase in ~~other liabilities and~~ loans held for ~~sale.~~sale and investment securities gains. Cash used in investing activities was ~~$293.5~~$714.5 million, due ~~mainly~~ to ~~an increase~~net increases in loans, ~~and a net increase in~~ short-term investments, ~~partially offset by proceeds from the maturities~~ and ~~sales of~~ investment ~~securities in excess of purchases.~~securities. Net cash provided by financing activities was ~~$148.0~~$567.7 million due to increases in deposits, short-term borrowings and additions to long-term debt, partially offset by ~~a net decrease in short-term borrowings, acquisitions~~repayments of long-term debt, common stock cash dividends and purchases of treasury ~~stock and dividends paid on common shares.~~

stock.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the exposure to economic loss that arises from changes in the values of certain financial instruments. The types of market risk exposures generally faced by financial institutions include interest rate risk, equity market price risk, debt security market price risk, foreign currency price risk and commodity price risk. Due to the nature of its operations, only equity market price risk, debt security market price risk and interest rate risk are significant to the Corporation.

Equity Market Price Risk

Equity market price risk is the risk that changes in the values of equity investments could have a material impact on the financial position or results of operations of the Corporation. As of September 30, ~~2014,~~2015, equity investments consisted of ~~$39.3~~$22.4 million of common stocks of publicly traded financial institutions and ~~$6.0~~$1.1 million of other equity investments.

The equity investments most susceptible to equity market price risk are the financial institutions stocks, which had a cost basis of approximately ~~$28.6~~$15.1 million and a fair value of ~~$39.3~~$22.4 million at September 30, ~~2014,~~2015, including an investment in a single financial institution with a cost basis of ~~$20.0~~$8.5 million and a fair value of ~~$27.5 million~~.$12.8 million. The fair value of this investment accounted for ~~70.0%~~57.1% of the fair value of the common stocks of publicly traded financial institutions. No other investment in a single financial institution within the financial institutions stock portfolio exceeded 5% of the portfolio's fair value. ~~In total,~~As of September 30, 2015, the financial institutions stock portfolio had ~~gross~~$7.3 million of net unrealized ~~gains of $10.7 million and gross unrealized losses of $21,000 as of September 30, 2014.~~gains.

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

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

Debt Security Market Price Risk

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

Municipal Securities

As of September 30, ~~2014,~~2015, the Corporation ~~had $257.6 million of~~owned municipal securities issued by various ~~municipalities. Ongoing uncertainty~~municipalities with ~~respect to the financial strength~~a total fair value of municipal bond insurers places much greater emphasis on the underlying strength of issuers. Continued pressure on local tax revenues of issuers due to adverse economic conditions could have an adverse impact on the underlying credit quality of issuers.$240.2 million. The Corporation evaluates existing and potential holdings primarily based on the creditworthiness of the issuing municipality and then, to a lesser extent, on any underlying credit enhancement. Municipal securities can be supported by the general obligation of the issuing municipality, allowing the securities to be repaid by any means available to the issuing municipality. As of September 30, ~~2014,~~2015, approximately 95% of municipal securities were supported by the general obligation of corresponding municipalities. Approximately ~~87%~~83% of these securities were school district issuances, which are also supported by the states of the issuing municipalities.

Auction Rate Certificates

As of September 30, ~~2014,~~2015, the Corporation’s investments in student loan auction rate certificates (ARCs), had a cost basis of ~~$158.7~~$106.7 million and a fair value of ~~$148.5 million~~.$97.9 million.

ARCs are long-term securities that were structured to allow their sale in periodic auctions, resulting in both the treatment of ARCs as short-term instruments in normal market conditions and fair values that could be derived based on periodic auction prices. However, ~~beginning in~~since early 2008, market auctions for these securities ~~began to fail~~failed due to an insufficient number of buyers, resulting in an illiquid market. Therefore, as of September 30, ~~2014,~~2015, the fair values of the ARCs currently in the portfolio were derived using significant unobservable inputs based on an expected cash flows model which produced fair values ~~which~~that were materially different from those that would be expected from settlement of these investments in the current market. The expected cash flows model,

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~~model,~~ prepared by a third-party valuation expert, produced fair values ~~which~~that assumed a return to market liquidity sometime within the next five years. The Corporation believes that the trusts underlying the ARCs will self-liquidate as student loans are repaid.

The credit quality of the underlying debt associated with ARCs is also a factor in the determination of their estimated fair value. As of September 30, ~~2014, approximately~~ ~~$144 million, or~~ ~~97%~~,2015, all of the ARCs were rated above investment grade, with approximately $6$5 million, or 6%, or 4%~~, AAA~~"AAA" rated and ~~$104~~$92 million, or 94%, or ~~72%, AA~~"AA" rated. ~~Approximately~~ ~~$4 million, or~~ 3%~~, of ARCs were either not rated or rated below investment grade by at least one ratings agency. Of this amount, approximately~~ ~~$3 million~~All of the ~~student loans underlying these ARCs have principal payments which are guaranteed by the federal government. In total, approximately~~ ~~$147 million, or~~ ~~99%, of the student~~ loans underlying the ARCs have principal payments ~~which~~that are guaranteed by the federal government. As of September 30, ~~2014~~,2015, all ARCs were current and making scheduled interest payments.

Corporate Debt Securities Issued by Financial Institutions

The Corporation holds corporate debt securities in the form of pooled trust preferred securities, single-issuer trust preferred securities and subordinated debt issued by financial institutions, as presented in the following table as of September 30, ~~2014:~~2015:


	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)				(in thousands)
Single-issuer trust preferred securities	$	47,546	$	44,075	$	46,624	$	41,787
Subordinated debt	47,498		50,289		51,625		53,576
Pooled trust preferred securities	2,050		4,487		—		530
Corporate debt securities issued by financial institutions	$	97,094	$	98,851	$	98,249	$	95,893

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

The Corporation’s investments in single-issuer trust preferred securities had an unrealized loss of ~~$3.5~~$4.8 million at September 30, ~~2014~~.2015. The Corporation did not record any other-than-temporary impairment charges for single-issuer trust preferred securities during the three and nine months ended September 30, ~~2014~~2015 or ~~2013~~. ~~Six~~2014. Seven of the Corporation's 2019 single-issuer trust preferred securities were rated below investment grade by at least one ratings agency, with an amortized cost of ~~$13.5~~$14.5 million and an estimated fair value of ~~$12.3~~$13.2 million as of September 30, ~~2014~~.2015. All of the single-issuer trust preferred securities rated below investment grade were rated BB"BB" or ~~Ba.~~"Ba". Single-issuer trust preferred securities with an amortized cost of ~~$4.7~~$3.7 million and an estimated fair value of ~~$3.9~~$2.7 million at September 30, ~~2014~~2015 were not rated by any ratings agency.

As of September 30, ~~2014, all~~ ~~six~~ of2015, the ~~Corporation's~~Corporation held two pooled trust preferred securities with an amortized cost of ~~$2.1 million~~$0 and an estimated fair value of ~~$4.5 million~~,$530,000, that were rated below investment grade by at least one ratings ~~agency, with ratings ranging from C to Ca.~~agency. The class of securities held by the Corporation was below the most senior tranche, with the Corporation’s interests being subordinate to other investors in the ~~pools.~~pool.

The amortized cost of pooled trust preferred securities is the purchase price of the securities, net of cumulative credit related other-than-temporary impairment charges, determined using an expected cash flows model. The most significant input to the expected cash flows model was the expected payment deferral rate for each pooled trust preferred security. The Corporation evaluates the financial metrics, such as capital ratios and non-performing asset ratios, of the individual financial institution issuers that comprise each pooled trust preferred security to estimate its expected deferral rate.

~~During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2014~~, the Corporation recorded $18,000 of other than temporary impairment charges for pooled trust preferred securities. Additional impairment charges for corporate debt securities issued by financial institutions may be necessary in the future depending upon the performance of the individual investments.

See Note ~~D, "Investment Securities," in the Notes to Consolidated Financial Statements for further discussion related to other-than-temporary impairment evaluations for debt securities and Note M,~~13, "Fair Value Measurements," in the Notes to Consolidated Financial Statements for further discussion related to the fair values of debt securities.

Interest Rate Risk, Asset/Liability Management and Liquidity

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

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

From a liquidity standpoint, the Corporation must maintain a sufficient level of liquid assets to meet the cash needs of its customers, who, as depositors, may want to withdraw funds or who, as borrowers, may need credit availability. Liquidity is provided on a continuous basis through scheduled and unscheduled principal and interest payments on outstanding loans and investments and

through the availability of deposits and borrowings. The Corporation also maintains secondary sources that provide liquidity on a secured and unsecured basis to meet short-term and long-term needs.

The following table provides information about the Corporation’s interest rate sensitive financial instruments as of September 30, ~~2014~~.2015. The table presents expected cash flows and weighted average rates for each of the Corporation's significant interest rate sensitive financial instruments, by expected maturity period. None of the Corporation’s financial instruments are classified as trading. All dollar amounts are in thousands.


	Expected Maturity Period																					Estimated		Expected Maturity Period																					Estimated
	Year 1			Year 2			Year 3			Year 4			Year 5			Beyond			Total			Fair Value		Year 1			Year 2			Year 3			Year 4			Year 5			Beyond			Total			Fair Value
Fixed rate loans (1)	$	979,605		$	477,082		$	360,627		$	360,794		$	208,873		$	654,018		$	3,040,999		$	3,025,002	$	975,597		$	484,581		$	350,691		$	380,102		$	239,651		$	678,863		$	3,109,485		$	3,078,275
Average rate	3.87		%	4.47		%	4.37		%	4.65		%	4.57		%	3.90		%	4.17		%			3.60		%	4.20		%	4.07		%	4.43		%	4.32		%	3.61		%	3.90		%

Floating rate loans (1) (2)	2,384,919			1,467,374			1,196,069			1,028,622			1,369,511			2,540,265			9,986,760			9,881,516		2,392,556			1,597,191			1,293,230			1,095,874			1,069,244			2,976,168			10,424,263			10,347,127
Average rate	3.81		%	3.96		%	3.98		%	3.97		%	3.83		%	3.97		%	3.91		%			3.66		%	3.76		%	3.79		%	3.81		%	3.77		%	3.71		%	3.73		%

Fixed rate investments (3)	384,258			334,001			270,899			222,095			196,268			822,832			2,230,353			2,229,442		435,564			324,117			252,653			223,718			215,175			800,264			2,251,491			2,269,686
Average rate	2.77		%	2.79		%	2.80		%	2.62		%	2.59		%	2.70		%	2.72		%			2.80		%	2.83		%	2.69		%	2.58		%	2.49		%	2.59		%	2.67		%

Floating rate investments (3)	15			4,963			163,680			41			38			40,690			209,427			196,261		4,985			4,972			106,681			22			—			40,166			156,826			143,359
Average rate	1.00		%	0.94		%	1.99		%	1.62		%	2.09		%	1.44		%	1.86		%			1.04		%	1.90		%	1.90		%	2.00		%	—		%	1.50		%	1.77		%

Other interest-earning assets	316,735			—			—			—			—			86,056			402,791			402,791		537,880			—			—			—			—			68,977			606,857			606,857
Average rate	0.37		%	—		%	—		%	—		%	—		%	4.42		%	0.37		%			0.36		%	—		%	—		%	—		%	—		%	5.03		%	0.89		%

Total	$	4,065,532		$	2,283,420		$	1,991,275		$	1,611,552		$	1,774,690		$	4,143,861		$	15,870,330		$	15,735,012	$	4,346,582		$	2,410,861		$	2,003,255		$	1,699,716		$	1,524,070		$	4,564,438		$	16,548,922		$	16,445,304
Average rate	3.46		%	3.89		%	3.73		%	3.94		%	3.78		%	3.69		%	3.70		%			3.15		%	3.72		%	3.60		%	3.79		%	3.68		%	3.50		%	3.50		%

Fixed rate deposits (4)	$	1,410,310		$	465,112		$	313,816		$	98,102		$	314,450		$	22,882		$	2,624,672		$	2,640,788	$	1,216,409		$	501,015		$	257,453		$	364,496		$	258,021		$	24,697		$	2,622,091		$	2,642,857
Average rate	0.70		%	1.02		%	1.29		%	1.50		%	2.08		%	1.84		%	1.03		%			0.60		%	1.10		%	1.39		%	2.03		%	2.05		%	1.94		%	1.13		%

Floating rate deposits (5)	4,947,476			831,604			458,962			398,349			341,540			174,214			7,152,145			7,131,190		5,342,016			856,561			552,477			310,183			284,762			210,076			7,556,075			7,544,200
Average rate	0.15		%	0.11		%	0.09		%	0.08		%	0.08		%	0.10		%	0.13		%			0.17		%	0.11		%	0.10		%	0.08		%	0.08		%	0.13		%	0.15		%

Fixed rate borrowings (6)	187,323			729			551,539			565			100,452			161,185			1,001,793			1,007,287		31,297			351,638			668			130,533			157,947			290,854			962,937			996,097
Average rate	3.66		%	4.47		%	4.49		%	4.67		%	1.87		%	6.17		%	4.34		%			1.69		%	4.51		%	4.65		%	2.12		%	2.78		%	4.31		%	3.75		%

Floating rate borrowings (7)	564,952			—			—			—			—			16,496			581,448			570,406		431,632			—			—			—			—			16,496			448,128			438,296
Average rate	0.18		%	—		%	—		%	—		%	—		%	2.37		%	0.25		%			0.05		%	—		%	—		%	—		%	—		%	2.46		%	0.14		%

Total	$	7,110,061		$	1,297,445		$	1,324,317		$	497,016		$	756,442		$	374,777		$	11,360,058		$	11,349,671	$	7,021,354		$	1,709,214		$	810,598		$	805,212		$	700,730		$	542,123		$	11,589,231		$	11,621,450
Average rate	0.35		%	0.43		%	2.21		%	0.37		%	1.15		%	2.92		%	0.72		%			0.24		%	1.30		%	0.51		%	1.30		%	1.41		%	2.53		%	0.67		%


(1)	Amounts are based on contractual payments and maturities, adjusted for expected prepayments. Excludes $2.6 million of overdraft deposit balances.


(2)	Line of credit amounts are based on historical cash flows, with an average life of approximately 5 years.


(3)	Amounts are based on contractual maturities; adjusted for expected prepayments on mortgage-backed securities and collateralized mortgage obligations and expected calls on agency and municipal securities. Excludes equity securities as such investments do not have maturity dates.


(4)	Amounts are based on contractual maturities of time deposits.


(5)	Estimated based on history of deposit flows.


(6)	Amounts are based on contractual maturities of debt instruments, adjusted for possible calls. Amounts also include junior subordinated deferrable interest debentures.


(7)	Amounts include Federal Funds purchased, short-term promissory notes and securities sold under agreements to repurchase, which mature in less than 90 days, in addition to junior subordinated deferrable interest debentures.

The preceding table and discussion addressed the liquidity implications of interest rate risk and focused on expected cash flows from financial instruments. Expected maturities, however, do not necessarily reflect the net interest income impact of interest rate changes. Certain financial instruments, such as adjustable rate loans, have repricing periods that differ from expected cash flows periods.

Included within the ~~$10.0~~$10.4 billion of floating rate loans above are ~~$3.6~~$3.3 billion of loans, or ~~35.8%~~31.9% of the total, that float with the prime interest rate, ~~$2.0~~$2.3 billion, or ~~19.7%~~22.1%, of loans that float with other interest rates, primarily the London Interbank Offered Rate ~~(LIBOR)~~("LIBOR"), and ~~$4.4~~$4.8 billion, or ~~44.5%~~46.0%, of adjustable rate loans. The ~~$4.4~~$4.8 billion of adjustable rate loans include loans that are fixed rate instruments for a certain period of time, and then convert to floating rates.

The following table presents the percentage of adjustable rate loans, at September 30, ~~2014~~,2015, stratified by the period until their next repricing:



	Percent of Total Adjustable Rate Loans
One year	~~29.8%~~33.4%
Two years	~~17.6~~17.9
Three years	~~15.9~~17.4
Four years	~~16.2~~12.9
Five years	~~11.0~~11.1
Greater than five years	~~9.5~~7.3

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

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

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



Rate Shock (1)	Annual change in net interest income	% Change
+300 bp	+ $ ~~61.0~~65.5 million	~~+12.1%~~+13.3%
+200 bp	+ $ ~~38.2~~42.2 million	+~~7.6~~8.6
+100 bp	+ $ ~~15.8~~18.4 million	+~~3.1~~3.7
–100 bp	– $ ~~18.9~~16.3 million	–~~3.8~~3.3


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

(1) The inclusion of only one -100 bp rate shock reflects the effect of implicit and explicit floors that limit further reduction in interest rates.

Economic value of equity estimates the discounted present value of asset cash flows and liability cash flows. Discount rates are based upon market prices for like assets and liabilities. ~~Upward~~Abrupt changes or "shocks" in interest rates, both upward and downward, ~~shocks of interest rates~~ are used to determine the comparative effect of such interest rate movements relative to the unchanged environment. This measurement tool is used primarily to evaluate the longer-term repricing risks and options in the Corporation’s balance sheet. The Corporation's policy limits the economic value of equity that may be at risk, in a non-parallel instantaneous shock, to 10% of the base case economic value of equity for a 100 basis point shock in interest rates, 20% for a 200 basis point shock and 30% for a 300 basis point shock. As of September 30, ~~2014~~,2015, the Corporation was within policy limits for every 100 basis point shock.

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Item 4. Controls and Procedures

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

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

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

During the second quarter of 2015, Fulton Bank, N.A. (the "Bank"), the Corporation’s largest banking subsidiary, received a letter from the U.S. Department of Justice (the "Department") indicating that the Department had initiated an investigation regarding potential violations of fair lending laws by the Bank in certain of its geographies. The Bank is cooperating with the Department and responding to the Department’s request for information. Although this matter appears to be at a preliminary stage, it could result in legal proceedings the resolution of which could potentially involve a settlement, fines or other remedial actions.

The Corporation and each of its banking subsidiaries are subject to regulatory enforcement orders issued during 2014 and 2015 by their respective Federal and state bank regulatory agencies relating to identified deficiencies in the Corporation’s centralized Bank Secrecy Act and anti-money laundering compliance program (the "BSA/AML Compliance Program"), which was designed to comply with the requirements of the Bank Secrecy Act, the USA Patriot Act of 2001 and related anti-money laundering regulations (collectively, the "BSA/AML Requirements"). The regulatory enforcement orders, which are in the form of consent orders or orders to cease and desist issued upon consent ("Consent Orders"), generally require, among other things, that the Corporation and its subsidiary banks undertake a number of required actions to strengthen and enhance the BSA/AML Compliance Program. Further information pertaining to the Consent Orders was previously disclosed by the Corporation in Part II, Item 9B of its Annual Report on Form 10-K and in its Form 10-K/A each for the year ended December 31, 2014 and filed with the SEC on February 27, 2015 and June 8, 2015, respectively; in its Form 10-Q for the quarter-ended March 31, 2015 filed with the SEC on May 11, 2015; and in Current Reports on Form 8-K filed with the SEC on July 18, September 9, and December 29, 2014.

As of the date of this report, the Corporation believes that any liabilities, individually or in the aggregate, which may result from the final outcomes of pending proceedings will not have a material adverse effect on the financial condition ~~the operating results and/or the liquidity~~ of the Corporation. However, legal proceedings are often unpredictable, and ~~the actual results of such proceedings cannot be determined with certainty.~~

~~Regulatory Matters~~

In July 2014, three wholly owned banking subsidiaries of the Corporation, Fulton Bank, N.A., Swineford National Bank and FNB Bank, N.A., each entered into a Stipulation and Consent to the Issuance of a Consent Order (Consent Order) with their primary Federal bank regulatory agency, the Office of the Comptroller of the Currency relating to identified deficiencies in a centralized Bank Secrecy Act and anti-money laundering compliance program, which was designed to comply with the requirements of the Bank Secrecy Act, the USA Patriot Act of 2001 and related anti-money laundering regulations (collectively, the "BSA/AML Requirements") as disclosed by the Corporation in a Current Report on Form 8-K filed with the SEC on July 18, 2014. The Consent Orders require, among other thingsit is possible that the ~~banking subsidiaries in question review, assess and take actions to strengthen and enhance their compliance programs related to the BSA/AML Requirements (BSA/AML Compliance Program).~~

In September 2014, the Corporation and its wholly owned banking subsidiary, Lafayette Ambassador Bank (Lafayette), entered into a consent cease and desist order (Cease and Desist Order) with their primary Federal bank regulatory agency, the Board of Governors of the Federal Reserve System (Reserve Board), as disclosed by the Corporation in a Current Report on Form 8-K filed with the SEC on September 9, 2014. The Cease and Desist Order requires, among other things, that the Corporation and Lafayette strengthen the BSA/AML Compliance Program and imposes requirements similar to those set forth in the Consent Orders. In addition, the Cease and Desist Order requires the Corporation to engage an independent third-party firm to conduct a comprehensive assessment of the BSA/AML Compliance Program, and that Lafayette engage an independent third-party firm to conduct a retrospective review of account and transaction activity from January 1, 2014 to June 30, 2014 associated with high-risk customers to determine whether suspicious activity was properly identified and reported in accordance with the BSA/AML requirements. Based on the results of this review the Reserve Board may require a review of transactions for additional time periods. Further, because the Consent Orders and the Cease and Desist Order relate to the BSA/AML Compliance Program, which is operated jointly for all of the Corporation’s subsidiary banks, management anticipates that one or both of the Corporation's other subsidiary banks will also become subject to an enforcement action related to the BSA/AML Requirements, and the provisionsultimate resolution of any such ~~enforcement action~~matters, if unfavorable, may ~~differ from those~~be material to the Corporation’s results of operations for any particular period, depending, in part, upon the size of the ~~Consent Orders~~loss or liability imposed and ~~Cease and Desist Order.~~the operating results for the applicable period.

Item 1A. Risk Factors

The discussion under the heading “Regulatory Compliance and Risk Management Matters” contained in Part I, Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of this Quarterly Report on Form 10-Q, supplements and modifies the discussion of the risk factor “The supervision and regulation to which the Corporation is subject is increasing and can be a competitive disadvantage; the Corporation may incur fines, penalties and other negative consequences from regulatory violations, including inadvertent or unintentional violations” ~~as set forth in Part I, Item 1A of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013.~~ There have been no ~~other~~ material changes to the risk factors as previously disclosed in Part I, Item 1A of the Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014.

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

The following table presents the Corporation's monthly repurchases of its common stock during the third quarter of ~~2014:~~2015:

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2014 to July 31, 2014 1,316,158
$11.46 1,316,158
2,683,842
August 1, 2014 to August 31, 2014 2,683,842
$11.32 2,683,842
—
September 1, 2014 to September 30, 2014 —
— —
—



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

July 1, 2015 to July 31, 2015	1,192,400	$	12.74	1,192,400	$	15,790,528
August 1, 2015 to August 31, 2015	1,245,870	$	12.67	1,245,870	—
September 1, 2015 to September 31, 2015	—	$	—	—	—

On ~~May 28,2014,~~April 21, 2015, the Corporation announced that its board of directors had approved a share repurchase program pursuant to which the Corporation ~~was~~is authorized to repurchase up to ~~4.0~~$50.0 million of its outstanding shares of common stock, or approximately ~~2.1%~~2.3% of its outstanding shares, through December 31, ~~2014.~~2015. Repurchased shares may be added to treasury stock, at cost. As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including without limitation, through accelerated share repurchase transactions. The share repurchase program may be discontinued at any time. During the second quarter of ~~September 30, 2014, 4.0~~2015, 1.5 million shares had been repurchased under this program for a total cost of $19.0 million, or $12.36 per share. During the third quarter of 2015, the remaining $31.0 million, or approximately 2.4 million shares at an average $12.71 per share, were repurchased, completing this repurchase program.

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

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

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

7273

FULTON FINANCIAL CORPORATION AND SUBSIDIARIES

SIGNATURES

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



FULTON FINANCIAL CORPORATION

Date:	November ~~5, 2014~~6, 2015	/s/ E. Philip Wenger
		E. Philip Wenger
		Chairman, Chief Executive Officer and President

Date:	November ~~5, 2014~~6, 2015	/s/ Patrick S. Barrett
		Patrick S. Barrett
		Senior Executive Vice President and
		Chief Financial Officer

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EXHIBIT INDEX

Exhibits Required Pursuant

to Item 601 of Regulation S-K




3.1		Articles of Incorporation, as amended and restated, of Fulton Financial Corporation– Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K dated June 24, 2011.

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

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

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

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

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

101		Financial statements from the Quarterly Report on Form 10-Q of Fulton Financial Corporation for the ~~quarter~~period ended September 30, ~~2014,~~2015, filed on November ~~5, 2014,~~6, 2015, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (iv) the Consolidated Statements of Shareholders' Equity, (v) the Consolidated Statement of Cash Flows and (vi) the Notes to Consolidated Financial Statements - filed herewith.

7475

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company