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 ~~June~~September 30, 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 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 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 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 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 ~~–174,944,000~~–174,031,000 shares outstanding as of ~~July 31,~~October 30, 2015.

FULTON FINANCIAL CORPORATION

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

INDEX



Description		Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

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

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

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

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

(e)	Consolidated Statements of Cash Flows - ~~Six~~Nine months ended ~~June~~September 30, 2015 and 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)


	June 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	(unaudited)						(unaudited)
ASSETS
Cash and due from banks	$	100,455		$	105,702		$	93,803		$	105,702
Interest-bearing deposits with other banks	322,218			358,130			510,943			358,130
Federal Reserve Bank and Federal Home Loan Bank stock	65,106			64,953			68,977			64,953
Loans held for sale	33,980			17,522			26,937			17,522
Available for sale investment securities	2,440,492			2,323,371			2,436,337			2,323,371
Loans, net of unearned income	13,244,230			13,111,716			13,536,361			13,111,716
Less: Allowance for loan losses	(167,485		)	(184,144		)	(167,136		)	(184,144		)
Net Loans	13,076,745			12,927,572			13,369,225			12,927,572
Premises and equipment	226,794			226,027			225,705			226,027
Accrued interest receivable	41,193			41,818			42,846			41,818
Goodwill and intangible assets	531,567			531,803			531,562			531,803
Other assets	526,923			527,869			531,724			527,869
Total Assets	$	17,365,473		$	17,124,767		$	17,838,059		$	17,124,767
LIABILITIES
Deposits:
Noninterest-bearing	$	3,805,165		$	3,640,623		$	3,906,228		$	3,640,623
Interest-bearing	9,700,544			9,726,883			10,178,166			9,726,883
Total Deposits	13,505,709			13,367,506			14,084,394			13,367,506
Short-term borrowings:
Federal funds purchased	5,058			6,219			5,527			6,219
Other short-term borrowings	403,977			323,500			426,104			323,500
Total Short-Term Borrowings	409,035			329,719			431,631			329,719
Accrued interest payable	15,172			18,045			14,727			18,045
Other liabilities	278,099			273,419			301,970			273,419
Federal Home Loan Bank advances and long-term debt	1,132,641			1,139,413			979,433			1,139,413
Total Liabilities	15,340,656			15,128,102			15,812,155			15,128,102
SHAREHOLDERS’ EQUITY
Common stock, $2.50 par value, 600 million shares authorized, 218.5 million shares issued in 2015 and 218.2 million shares issued in 2014	546,219			545,555
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	1,445,315			1,420,523			1,447,569			1,420,523
Retained earnings	603,597			558,810			622,237			558,810
Accumulated other comprehensive loss	(22,877		)	(17,722		)	(13,219		)	(17,722		)
Treasury stock, at cost, 42.5 million shares in 2015 and 39.3 million shares in 2014	(547,437		)	(510,501		)
Treasury stock, at cost, 44.8 million shares in 2015 and 39.3 million shares in 2014							(577,127		)	(510,501		)
Total Shareholders’ Equity	2,024,817			1,996,665			2,025,904			1,996,665
Total Liabilities and Shareholders’ Equity	$	17,365,473		$	17,124,767		$	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 June 30					Six months ended June 30						Three months ended September 30					Nine months ended September 30
	2015		2014			2015			2014			2015		2014			2015			2014
INTEREST INCOME
Loans, including fees	$	129,910	$	131,440		$	259,687		$	263,270		$	131,804	$	133,741		$	391,491		$	397,011
Investment securities:
Taxable	10,944		12,418			22,226			25,684			11,252		12,278			33,478			37,962
Tax-exempt	1,881		2,298			3,968			4,646			1,904		2,219			5,872			6,865
Dividends	296		325			644			657			190		339			834			996
Loans held for sale	265		214			438			348			194		237			632			585
Other interest income	933		1,207			3,038			2,089			884		976			3,922			3,065
Total Interest Income	144,229		147,902			290,001			296,694			146,228		149,790			436,229			446,484
INTEREST EXPENSE
Deposits	10,053		8,685			19,876			16,581			10,217		8,998			30,093			25,579
Short-term borrowings	103		540			180			1,173			92		297			272			1,470
Long-term debt	11,153		10,779			23,444			21,477			10,225		11,129			33,669			32,606
Total Interest Expense	21,309		20,004			43,500			39,231			20,534		20,424			64,034			59,655
Net Interest Income	122,920		127,898			246,501			257,463			125,694		129,366			372,195			386,829
Provision for credit losses	2,200		3,500			(1,500		)	6,000			1,000		3,500			(500		)	9,500
Net Interest Income After Provision for Credit Losses	120,720		124,398			248,001			251,463			124,694		125,866			372,695			377,329
NON-INTEREST INCOME
Service charges on deposit accounts	12,637		12,552			24,206			24,263			12,982		12,801			37,188			37,064
Investment management and trust services	11,011		11,339			21,900			22,297			11,237		11,120			33,137			33,417
Other service charges and fees	10,988		10,526			20,351			19,453			10,965		9,954			31,316			29,407
Mortgage banking income	5,339		5,741			10,027			9,346			3,864		4,038			13,891			13,384
Investment securities gains, net:
Net gains on sales of investment securities	2,415		1,124			6,560			1,124			1,730		99			8,290			1,223
Other-than-temporary impairment losses	—		(12		)	—			(12		)
Net other-than-temporary impairment losses												—		(18		)	—			(30		)
Investment securities gains, net	2,415		1,112			6,560			1,112			1,730		81			8,290			1,193
Other	4,099		3,602			8,182			6,907			3,996		3,906			12,178			10,813
Total Non-Interest Income	46,489		44,872			91,226			83,378			44,774		41,900			136,000			125,278
NON-INTEREST EXPENSE
Salaries and employee benefits	65,067		63,623			130,057			123,189			65,308		62,434			195,365			185,623
Net occupancy expense	11,809		11,464			25,501			25,067			10,710		11,582			36,211			36,649
Other outside services	8,125		7,240			13,875			11,052			7,373		8,632			21,248			19,684
Loss on redemption of trust preferred securities												5,626		—			5,626			—
Data processing	4,894		4,331			9,662			8,127			5,105		4,689			14,767			12,816
Software	3,376		3,209			6,694			6,134			3,984		3,353			10,678			9,487
Equipment expense	3,335		3,360			7,293			6,962			3,595		3,307			10,888			10,269
FDIC insurance expense	2,885		2,615			5,707			5,304			2,867		2,882			8,574			8,186
Professional fees	2,731		3,559			5,602			6,463			2,828		3,252			8,430			9,715
Supplies and postage	2,726		2,451			5,095			4,777			2,708		2,560			7,803			7,337
Marketing	2,235		2,337			3,468			3,921			2,102		1,798			5,570			5,719
Telecommunications	1,617		1,787			3,333			3,606			1,587		1,587			4,920			5,193
Operating risk loss	674		716			1,501			2,544			1,136		1,242			2,637			3,786
Other real estate owned and repossession expense	129		748			1,491			1,731			1,016		1,303			2,507			3,034
Intangible amortization	106		315			236			630			5		314			241			944
Other	8,645		8,419			17,317			16,221			8,939		6,863			26,256			23,084
Total Non-Interest Expense	118,354		116,174			236,832			225,728			124,889		115,798			361,721			341,526
Income Before Income Taxes	48,855		53,096			102,395			109,113			44,579		51,968			146,974			161,081
Income taxes	12,175		13,500			25,679			27,734			10,328		13,402			36,007			41,136
Net Income	$	36,680	$	39,596		$	76,716		$	81,379		$	34,251	$	38,566		$	110,967		$	119,945

PER SHARE:
Net Income (Basic)	$	0.21	$	0.21		$	0.43		$	0.43		$	0.20	$	0.21		$	0.63		$	0.64
Net Income (Diluted)	0.21		0.21			0.43			0.43			0.20		0.21			0.63			0.64
Cash Dividends	0.09		0.08			0.18			0.16			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 June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014

Net Income	$	36,680		$	39,596		$	76,716		$	81,379		$	34,251		$	38,566		$	110,967		$	119,945
Other Comprehensive Income (Loss), net of tax:
Unrealized gain (loss) on securities	(12,008		)	12,990			(2,016		)	26,923			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	(1,569		)	(723		)	(4,264		)	(723		)	(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	—			323			125			512			—			138			125			650
Unrealized gain on derivative financial instruments	34			34			68			68
Amortization of unrealized loss on derivative financial instruments													3			34			71			102
Unrecognized postretirement income arising due to plan amendment	—			—			—			2,144			—			—			—			2,144
Amortization of net unrecognized pension and postretirement items	466			104			932			200			466			104			1,398			304
Other Comprehensive Income (Loss)	(13,077		)	12,728			(5,155		)	28,180			9,658			(2,787		)	4,503			25,393
Total Comprehensive Income	$	23,603		$	52,324		$	71,561		$	109,559		$	43,909		$	35,779		$	115,470		$	145,338

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2015 AND 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		178,924		$	545,555	$	1,420,523	$	558,810		$	(17,722	)	$	(510,501	)	$	1,996,665
Net income							76,716									76,716									110,967									110,967
Other comprehensive loss										(5,155		)				(5,155		)
Other comprehensive income																												4,503						4,503
Stock issued, including related tax benefits	423		664		1,954								2,077			4,695			613		889		2,675								3,374			6,938
Stock-based compensation awards					2,838											2,838							4,371											4,371
Acquisition of treasury stock	(1,538	)											(19,013		)	(19,013		)	(3,976	)											(50,000		)	(50,000		)
Settlement of accelerated stock repurchase agreement	(1,790	)			20,000								(20,000		)	—			(1,790	)			20,000								(20,000		)	—
Common stock cash dividends - $0.18 per share							(31,929		)							(31,929		)
Balance at June 30, 2015	176,019		$	546,219	$	1,445,315	$	603,597		$	(22,877	)	$	(547,437	)	$	2,024,817
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							81,379									81,379									119,945									119,945
Other comprehensive income										28,180						28,180												25,393						25,393
Stock issued, including related tax benefits	381		498		763								2,809			4,070			506		639		1,059								3,767			5,465
Stock-based compensation awards					3,022											3,022							4,310											4,310
Acquisition of treasury stock	(4,000	)											(49,804		)	(49,804		)	(8,000	)											(95,255		)	(95,255		)
Common stock cash dividends - $0.16 per share							(30,234		)							(30,234		)
Balance at June 30, 2014	189,033		$	545,066	$	1,436,759	$	514,988		$	(9,161	)	$	(387,852	)	$	2,099,800
Common stock cash dividends - $0.24 per share																									(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

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Six months ended June 30						Nine months ended September 30
	2015			2014			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	76,716		$	81,379		$	110,967		$	119,945
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	(1,500		)	6,000			(500		)	9,500
Depreciation and amortization of premises and equipment	13,920			12,354			20,302			18,412
Net amortization of investment securities premiums	3,288			2,908			5,369			4,399
Net gains on sales of investment securities	(6,560		)	(1,112		)	(8,290		)	(1,193		)
Net increase in loans held for sale	(16,458		)	(14,728		)	(9,415		)	(3,861		)
Amortization of intangible assets	236			630			241			944
Stock-based compensation	2,838			3,022			4,371			4,310
Excess tax benefits from stock-based compensation	(63		)	(52		)	(86		)	(54		)
Decrease in accrued interest receivable	625			1,921
Loss on redemption of trust preferred securities							5,626			—
(Increase) decrease in accrued interest receivable							(1,028		)	493
Decrease (increase) in other assets	9,818			(3,039		)	6,683			(1,909		)
(Decrease) increase in accrued interest payable	(2,873		)	1,429			(3,318		)	2,207
(Decrease) increase in other liabilities	(2,959		)	3,646
Increase (decrease) in other liabilities							3,995			(5,315		)
Total adjustments	312			12,979			23,950			27,933
Net cash provided by operating activities	77,028			94,358			134,917			147,878
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale	18,815			15,189			29,309			15,219
Proceeds from maturities of securities available for sale	205,620			174,619			317,813			273,688
Purchase of securities available for sale	(346,322		)	(60,952		)	(444,111		)	(164,676		)
Decrease (increase) in short-term investments	35,759			(57,357		)
Increase in short-term investments							(156,837		)	(129,418		)
Net increase in loans	(147,492		)	(74,766		)	(440,681		)	(271,494		)
Net purchases of premises and equipment	(14,687		)	(11,501		)	(19,980		)	(16,832		)
Net cash used in investing activities	(248,307		)	(14,768		)	(714,487		)	(293,513		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits	205,901			104,390			852,611			768,979
Net (decrease) increase in time deposits	(67,698		)	98,083			(135,723		)	73,462
Increase (decrease) in short-term borrowings	79,316			(250,322		)	101,912			(693,677		)
Additions to long-term debt	148,099			90,000			347,778			140,000
Repayments of long-term debt	(154,871		)	(5,189		)	(509,606		)	(5,295		)
Net proceeds from issuance of common stock	4,632			4,018			6,852			5,411
Excess tax benefits from stock-based compensation	63			52			86			54
Dividends paid	(30,397		)	(30,521		)	(46,239		)	(45,638		)
Acquisition of treasury stock	(19,013		)	(49,804		)	(50,000		)	(95,255		)
Net cash provided by (used in) financing activities	166,032			(39,293		)
Net cash provided by financing activities							567,671			148,041
Net (Decrease) Increase in Cash and Due From Banks	(5,247		)	40,297			(11,899		)	2,406
Cash and Due From Banks at Beginning of Period	105,702			218,540			105,702			218,540
Cash and Due From Banks at End of Period	$	100,455		$	258,837		$	93,803		$	220,946
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	46,373		$	37,802		$	67,352		$	57,448
Income taxes	11,051			16,407			9,168			16,632
See Notes to Consolidated Financial Statements

FULTON FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – Basis of Presentation

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

Recent Accounting Standards

Effective January 1, 2015, the Corporation adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Update 2014-01, "Accounting for Investments in Qualified Affordable Housing Projects." ASC Update 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 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 ~~benefits,~~benefit, and the income tax credits earned on the investments recorded in income taxes on the consolidated income statements was ~~$2.4~~$2.3 million and ~~$2.8~~$2.1 million for the three months ended ~~June~~September 30, 2015 and 2014, respectively, and ~~$4.8~~$7.1 million and ~~$5.3~~$7.4 million for the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, respectively. As of ~~June~~September 30, 2015 and December 31, 2014, the Corporation’s tax credit investments, included in other assets on the consolidated balance sheets, totaled ~~$156.8~~$164.0 million and $155.6 million, respectively. The adoption of this ASC update did not have a material impact on the Corporation's consolidated financial statements for the three or ~~six~~nine months ended ~~June~~September 30, 2015 or 2014.

In February 2015, the FASB issued ASC Update 2015-02, "Consolidation: Amendments to the Consolidation Analysis." ASC Update 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 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 2015-02 to have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASC Update 2015-03, "Interest - Imputation of ~~Interest."~~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.

NOTE 2 – 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") and performance based restricted stock units ("PSUs"). PSUs are required to be included in weighted average shares outstanding if performance measures, as defined in each PSU award agreement, are 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 June 30		Six months ended June 30		Three months ended September 30		Nine months ended September 30
	2015	2014	2015	2014	2015	2014	2015	2014
	(in thousands)				(in thousands)
Weighted average shares outstanding (basic)	176,433	188,139	177,446	188,799	174,338	186,109	176,399	187,893
Impact of common stock equivalents	1,098	1,043	1,042	1,033	1,004	846	1,029	970
Weighted average shares outstanding (diluted)	177,531	189,182	178,488	189,832	175,342	186,955	177,428	188,863

For the three and ~~six~~nine months ended ~~June~~September 30, 2015,, ~~1.8~~ 1.5 million and ~~2.0~~1.8 million 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 ~~six~~nine months ended ~~June~~September 30, 2014, ~~3.3~~2.5 million and ~~3.2~~2.9 million stock options, respectively, were excluded from the diluted net income per share computation as their effect would have been anti-dilutive.

NOTE 3 – Accumulated Other Comprehensive Income

The following table presents changes in other comprehensive income:


	Before-Tax Amount			Tax Effect			Net of Tax Amount			Before-Tax Amount			Tax Effect			Net of Tax Amount
	(in thousands)									(in thousands)
Three months ended June 30, 2015
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	$	(18,474	)	$	6,466		$	(12,008	)	$	(4,629	)	$	1,618		$	(3,011	)
Reclassification adjustment for securities gains included in net income (1)	(2,413		)	844			(1,569		)	(81		)	29			(52		)
Unrealized gain on derivative financial instruments	52			(18		)	34
Amortization of net unrecognized pension and postretirement items (2)	717			(251		)	466
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	$	(20,118	)	$	7,041		$	(13,077	)	$	(4,286	)	$	1,499		$	(2,787	)
Three months ended June 30, 2014

Nine months ended September 30, 2015
Unrealized gain on securities	$	19,984		$	(6,994	)	$	12,990		$	8,987		$	(3,146	)	$	5,841
Reclassification adjustment for securities gains included in net income (1)	(1,112		)	389			(723		)	(8,290		)	2,902			(5,388		)
Non-credit related unrealized gains on other-than-temporarily impaired debt securities	497			(174		)	323
Unrealized gain on derivative financial instruments	52			(18		)	34
Amortization of net unrecognized pension and postretirement items (2)	160			(56		)	104
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	$	19,581		$	(6,853	)	$	12,728		$	6,928		$	(2,425	)	$	4,503

Six months ended June 30, 2015
Unrealized loss on securities	$	(3,103	)	$	1,087		$	(2,016	)
Reclassification adjustment for securities gains included in net income (1)	(6,558		)	2,294			(4,264		)
Non-credit related unrealized gains (losses) on other-than-temporarily impaired debt securities	192			(67		)	125
Unrealized gain on derivative financial instruments	104			(36		)	68
Amortization of net unrecognized pension and postretirement items (2)	1,434			(502		)	932
Total Other Comprehensive Loss	$	(7,931	)	$	2,776		$	(5,155	)
Six months ended June 30, 2014
Nine months ended September 30, 2014
Unrealized gain on securities	$	41,419		$	(14,496	)	$	26,923		$	36,790		$	(12,878	)	$	23,912
Reclassification adjustment for securities gains included in net income (1)	(1,112		)	389			(723		)	(1,193		)	418			(775		)
Reclassification adjustment for postretirement gains included in net income (2)	(1,452		)	508			(944		)
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	788			(276		)	512			1,000			(350		)	650
Unrealized gain on derivative financial instruments	105			(37		)	68
Amortization of unrealized loss on derivative financial instruments										157			(55		)	102
Unrecognized pension and postretirement income	3,291			(1,147		)	2,144			3,291			(1,147		)	2,144
Amortization of net unrecognized pension and postretirement items (2)	309			(109		)	200
Amortization of net unrecognized pension and postretirement items (3)										469			(165		)	304
Total Other Comprehensive Income	$	43,348		$	(15,168	)	$	28,180		$	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 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 8, "Employee Benefit Plans," for additional details.

The following table presents changes in each component of accumulated other comprehensive income, 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 June 30, 2015
Balance at March 31, 2015	$	14,311		$	440		$	(2,512	)	$	(22,039	)	$	(9,800	)
Three months ended September 30, 2015
Balance at June 30, 2015																$	830			$	344		$	(2,478	)		$	(21,573	)	$	(22,877	)
Other comprehensive loss before reclassifications	(12,008		)	—			—			—			(12,008		)	7,857				—			—				—			7,857
Amounts reclassified from accumulated other comprehensive income (loss)	(1,473		)	(96		)	34			466			(1,069		)	(1,124		)		—			3				466			(655		)
Balance at June 30, 2015	$	830		$	344		$	(2,478	)	$	(21,573	)	$	(22,877	)
Three months ended June 30, 2014
Balance at March 31, 2014	$	(13,577	)	$	1,841		$	(2,648	)	$	(7,505	)	$	(21,889	)
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	)
Other comprehensive income before reclassifications	12,990			323			—			—			13,313			(3,011		)		138			—				—			(2,873		)
Amounts reclassified from accumulated other comprehensive income (loss)	7			(730		)	34			104			(585		)	(63		)		11			34				104			86
Balance at June 30, 2014	$	(580	)	$	1,434		$	(2,614	)	$	(7,401	)	$	(9,161	)
Balance at September 30, 2014																$	(3,654	)		$	1,583		$	(2,580	)		$	(7,297	)	$	(11,948	)

Six months ended June 30, 2015
Nine months ended September 30, 2015
Balance at December 31, 2014	$	5,980		$	1,349		$	(2,546	)	$	(22,505	)	$	(17,722	)	$	5,980			$	1,349		$	(2,546	)		$	(22,505	)	$	(17,722	)
Other comprehensive income (loss) before reclassifications	(2,016		)	125			—			—			(1,891		)
Other comprehensive income before reclassifications																5,841				125			—				—			5,966
Amounts reclassified from accumulated other comprehensive income (loss)	(3,134		)	(1,130		)	68			932			(3,264		)	(4,258		)		(1,130		)	71				1,398			(3,919		)
Balance at June 30, 2015	$	830		$	344		$	(2,478	)	$	(21,573	)	$	(22,877	)
Six months ended June 30, 2014
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 before reclassifications	26,923			512			—			2,144			29,579			23,912				650			—				2,144			26,706
Amounts reclassified from accumulated other comprehensive income (loss)	7			(730		)	68			(744		)	(1,399		)	(56		)		(719		)	102				(640		)	(1,313		)
Balance at June 30, 2014	$	(580	)	$	1,434		$	(2,614	)	$	(7,401	)	$	(9,161	)
Balance at September 30, 2014																$	(3,654	)		$	1,583		$	(2,580	)		$	(7,297	)	$	(11,948	)

NOTE 4 – Investment Securities

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


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)									(in thousands)
June 30, 2015
September 30, 2015
Equity securities	$	23,981	$	9,072	$	(12	)	$	33,041	$	16,087	$	7,453	$	(8	)	$	23,532
U.S. Government sponsored agency securities	48,333		57		(130		)	48,260		48,320		231		—			48,551
State and municipal securities	231,592		5,312		(387		)	236,517		234,868		5,430		(62		)	240,236
Corporate debt securities	98,756		3,183		(4,767		)	97,172		102,297		2,935		(5,291		)	99,941
Collateralized mortgage obligations	931,093		4,932		(17,793		)	918,232		879,738		5,638		(11,077		)	874,299
Mortgage-backed securities	998,418		14,112		(3,866		)	1,008,664		1,036,193		16,845		(1,133		)	1,051,905
Auction rate securities	106,504		—		(7,898		)	98,606		106,661		—		(8,788		)	97,873
	$	2,438,677	$	36,668	$	(34,853	)	$	2,440,492	$	2,424,164	$	38,532	$	(26,359	)	$	2,436,337



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
December 31, 2014
Equity securities	$	33,469	$	14,167	$	(13	)	$	47,623
U.S. Government securities	200		—		—			200
U.S. Government sponsored agency securities	209		5		—			214
State and municipal securities	238,250		7,231		(266		)	245,215
Corporate debt securities	99,016		5,126		(6,108		)	98,034
Collateralized mortgage obligations	917,395		5,705		(20,787		)	902,313
Mortgage-backed securities	914,797		16,978		(2,944		)	928,831
Auction rate securities	108,751		—		(7,810		)	100,941
	$	2,312,087	$	49,212	$	(37,928	)	$	2,323,371

Securities carried at ~~$1.6~~$1.8 billion as of ~~June~~September 30, 2015 and $1.7 billion as of December 31, 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 ~~$27.2~~$22.4 million at ~~June~~September 30, 2015 and $41.8 million at December 31, 2014) and other equity investments (estimated fair value of $1.1 million at September 30, 2015 and $5.8 million at ~~both June 30, 2015 and~~ December 31, 2014).

As of ~~June~~September 30, 2015, the financial institutions stock portfolio had a cost basis of ~~$18.2~~$15.1 million and an estimated fair value of ~~$27.2~~$22.4 million, including an investment in a single financial institution with a cost basis of ~~$10.7~~$8.5 million and an estimated fair value of ~~$15.7~~$12.8 million. The estimated fair value of this investment accounted for ~~57.7%~~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 ~~June~~September 30, 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		$	57,382	$	58,372		$	62,247	$	63,023
Due from one year to five years		104,022		106,663			104,989		107,283
Due from five years to ten years		148,682		151,430			132,930		136,571
Due after ten years		175,099		164,090			191,980		179,724
		485,185		480,555			492,146		486,601
Collateralized mortgage obligations		931,093		918,232			879,738		874,299
Mortgage-backed securities		998,418		1,008,664			1,036,193		1,051,905
		$	2,414,696	$	2,407,451		$	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 June 30, 2015	(in thousands)
Three months ended September 30, 2015												(in thousands)
Equity securities	$	2,290	$	—		$	—		$	2,290		$	1,730	$	—		$	—		$	1,730
Debt securities	125		—			—			125			—		—			—			—
Total	$	2,415	$	—		$	—		$	2,415		$	1,730	$	—		$	—		$	1,730
Three months ended June 30, 2014
Three months ended September 30, 2014
Equity securities	$	—	$	—		$	(12	)	$	(12	)	$	99	$	—		$	—		$	99
Debt securities	1,124		—			—			1,124			—		—			(18		)	(18		)
Total	$	1,124	$	—		$	(12	)	$	1,112		$	99	$	—		$	(18	)	$	81

Six months ended June 30, 2015
Nine months ended September 30, 2015
Equity securities	$	4,260	$	—		$	—		$	4,260		$	5,990	$	—		$	—		$	5,990
Debt securities	2,300		—			—			2,300			2,300		—			—			2,300
Total	$	6,560	$	—		$	—		$	6,560		$	8,290	$	—		$	—		$	8,290
Six months ended June 30, 2014
Nine months ended September 30, 2014
Equity securities	$	1	$	—		$	(12	)	$	(11	)	$	100	$	—		$	(12	)	$	88
Debt securities	1,446		(323		)	—			1,123			1,446		(323		)	(18		)	1,105
Total	$	1,447	$	(323	)	$	(12	)	$	1,112		$	1,546	$	(323	)	$	(30	)	$	1,193

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 ~~June~~September 30, 2015 and 2014:


	Three months ended June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014
	(in thousands)												(in thousands)
Balance of cumulative credit losses on debt securities, beginning of period	$	(12,302	)	$	(19,961	)	$	(16,242	)	$	(20,691	)	$	(11,510	)	$	(17,214	)	$	(16,242	)	$	(20,691	)
Additions for credit losses recorded which were not previously recognized as components of earnings													—			(18		)	—			(18		)
Reductions for securities sold during the period	792			2,746			4,730			3,472			—			—			4,730			3,472
Reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security	—			1			2			5			—			—			2			5
Balance of cumulative credit losses on debt securities, end of period	$	(11,510	)	$	(17,214	)	$	(11,510	)	$	(17,214	)	$	(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 ~~June~~September 30, 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	$	28,051	$	(130	)	$	—	$	—		$	28,051	$	(130	)	$	—	$	—		$	—	$	—		$	—	$	—
State and municipal securities	34,107		(387		)	—		—			34,107		(387		)	11,892		(62		)	—		—			11,892		(62		)
Corporate debt securities	7,965		(13		)	35,229		(4,754		)	43,194		(4,767		)	7,968		(15		)	33,718		(5,276		)	41,686		(5,291		)
Collateralized mortgage obligations	95,315		(651		)	517,338		(17,142		)	612,653		(17,793		)	30,723		(62		)	493,703		(11,015		)	524,426		(11,077		)
Mortgage-backed securities	306,980		(2,498		)	69,029		(1,368		)	376,009		(3,866		)	161,097		(443		)	67,071		(690		)	228,168		(1,133		)
Auction rate securities	—		—			98,606		(7,898		)	98,606		(7,898		)	—		—			97,873		(8,788		)	97,873		(8,788		)
Total debt securities	472,418		(3,679		)	720,202		(31,162		)	1,192,620		(34,841		)	211,680		(582		)	692,365		(25,769		)	904,045		(26,351		)
Equity securities	—		—			78		(12		)	78		(12		)	—		—			13		(8		)	13		(8		)
	$	472,418	$	(3,679	)	$	720,280	$	(31,174	)	$	1,192,698	$	(34,853	)	$	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 ~~June~~September 30, 2015.

The unrealized holding losses on auction rate securities (auction rate certificates, 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 ~~June~~September 30, 2015, all of the ARCs were rated above investment grade, with approximately $6$5.4 million, or 6%, "AAA" rated and ~~$93~~$92.4 million, or 94%, "AA" rated. All of the loans underlying the ARCs have principal payments which are guaranteed by the federal government.

As of ~~June~~September 30, 2015, all ARCs were current and making scheduled interest payments. Based on management’s evaluations, ARCs with an estimated fair value of ~~$98.6~~$97.9 million were not subject to any other-than-temporary impairment charges as of ~~June~~September 30, 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 ~~June~~September 30, 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:


	June 30, 2015				December 31, 2014				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	$	47,613	$	43,378	$	47,569	$	42,016	$	46,624	$	41,787	$	47,569	$	42,016
Subordinated debt	47,595		49,716		47,530		50,023		51,625		53,576		47,530		50,023
Pooled trust preferred securities	—		530		2,010		4,088		—		530		2,010		4,088
Corporate debt securities issued by financial institutions	95,208		93,624		97,109		96,127		98,249		95,893		97,109		96,127
Other corporate debt securities	3,548		3,548		1,907		1,907		4,048		4,048		1,907		1,907
Available for sale corporate debt securities	$	98,756	$	97,172	$	99,016	$	98,034	$	102,297	$	99,941	$	99,016	$	98,034

The Corporation’s investments in single-issuer trust preferred securities had an unrealized loss of ~~$4.2~~$4.8 million at ~~June~~September 30, 2015. The Corporation did not record any other-than-temporary impairment charges for single-issuer trust preferred securities during the three or ~~six~~nine months ended ~~June~~September 30, 2015 or 2014.Seven of the Corporation's 19 single-issuer trust preferred securities were rated belowinvestment grade by at least one ratings agency, with an amortized cost of $14.5 million and an estimated fair value of ~~$13.1~~$13.2 million at ~~June~~September 30, 2015. All of the single-issuer trust preferred securities rated below investment grade were rated "BB" or "Ba". ~~Three~~Two single-issuer trust preferred securities with an amortized cost of ~~$4.7~~$3.7 million and an estimated fair value of ~~$3.8~~$2.7 million at ~~June~~September 30, 2015 were not rated by any ratings agency.

During the ~~six~~nine months ended ~~June~~September 30, 2015, the Corporation sold three pooled trust preferred securities with a total amortized cost of $1.9 million, for a gain of $2.3 million. As of ~~June~~September 30, 2015, both of the Corporation's remaining pooled trust preferred securities, with an amortized cost of $0 and an estimated fair value of $530,000, were rated below investment grade by at least one ratings agency, with ratings ranging from "C" to "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 ~~$97.2~~$99.9 million were not subject to any other-than-temporary impairment charges as of ~~June~~September 30, 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.

NOTE 5 – Loans and Allowance for Credit Losses

Loans, Net of Unearned Income

Loans, net of unearned income are summarized as follows:


	June 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	(in thousands)						(in thousands)
Real-estate - commercial mortgage	$	5,237,800		$	5,197,155		$	5,339,928		$	5,197,155
Commercial - industrial, financial and agricultural	3,806,699			3,725,567			3,929,908			3,725,567
Real-estate - home equity	1,689,688			1,736,688			1,693,649			1,736,688
Real-estate - residential mortgage	1,369,103			1,377,068			1,382,085			1,377,068
Real-estate - construction	731,925			690,601			769,565			690,601
Consumer	272,494			265,431			271,696			265,431
Leasing and other	147,960			127,562			161,911			127,562
Overdrafts	2,642			4,021			2,614			4,021
Loans, gross of unearned income	13,258,311			13,124,093			13,551,356			13,124,093
Unearned income	(14,081		)	(12,377		)	(14,995		)	(12,377		)
Loans, net of unearned income	$	13,244,230		$	13,111,716		$	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. Commercial loans 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:


	June 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Allowance for loan losses	$	167,485	$	184,144	$	167,136	$	184,144
Reserve for unfunded lending commitments	1,968		1,787		2,259		1,787
Allowance for credit losses	$	169,453	$	185,931	$	169,395	$	185,931

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


	Three months ended June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014
	(in thousands)												(in thousands)
Balance at beginning of period	$	179,658		$	199,006		$	185,931		$	204,917		$	169,453		$	193,442		$	185,931		$	204,917
Loans charged off	(15,372		)	(11,476		)	(21,136		)	(21,744		)	(5,561		)	(9,604		)	(26,697		)	(31,348		)
Recoveries of loans previously charged off	2,967			2,412			6,158			4,269			4,503			3,770			10,661			8,039
Net loans charged off	(12,405		)	(9,064		)	(14,978		)	(17,475		)	(1,058		)	(5,834		)	(16,036		)	(23,309		)
Provision for credit losses	2,200			3,500			(1,500		)	6,000			1,000			3,500			(500		)	9,500
Balance at end of period	$	169,453		$	193,442		$	169,453		$	193,442		$	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 June 30, 2015
Balance at March 31, 2015	$	52,860		$	57,150		$	23,481		$	23,235		$	8,487		$	2,527		$	1,653		$	8,308		$	177,701
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	(1,642		)	(11,166		)	(870		)	(783		)	(87		)	(357		)	(467		)	—			(15,372		)	(660		)	(1,640		)	(940		)	(1,035		)	(114		)	(650		)	(522		)	—			(5,561		)
Recoveries of loans previously charged off	451			1,471			189			187			231			368			70			—			2,967			842			1,598			304			201			898			314			346			—			4,503
Net loans charged off	(1,191		)	(9,695		)	(681		)	(596		)	144			11			(397		)	—			(12,405		)	182			(42		)	(636		)	(834		)	784			(336		)	(176		)	—			(1,058		)
Provision for loan losses (1)	(989		)	1,715			(294		)	148			(882		)	70			359			2,062			2,189			825			(405		)	180			(609		)	(964		)	282			223			1,177			709
Balance at June 30, 2015	$	50,680		$	49,170		$	22,506		$	22,787		$	7,749		$	2,608		$	1,615		$	10,370		$	167,485
Three months ended June 30, 2014
Balance at March 31, 2014	$	53,757		$	50,563		$	32,460		$	33,329		$	9,842		$	3,324		$	2,011		$	11,803		$	197,089
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
Loans charged off	(2,141		)	(5,512		)	(1,234		)	(1,089		)	(218		)	(449		)	(833		)	—			(11,476		)	(1,557		)	(5,167		)	(1,492		)	(231		)	(313		)	(538		)	(306		)	—			(9,604		)
Recoveries of loans previously charged off	430			775			177			108			158			402			362			—			2,412			1,167			1,013			336			95			470			448			241			—			3,770
Net loans charged off	(1,711		)	(4,737		)	(1,057		)	(981		)	(60		)	(47		)	(471		)	—			(9,064		)	(390		)	(4,154		)	(1,156		)	(136		)	157			(90		)	(65		)	—			(5,834		)
Provision for loan losses (1)	(2,204		)	3,258			638			396			1,549			29			311			(317		)	3,660			(278		)	6,110			406			397			(312		)	244			180			(3,121		)	3,626
Balance at June 30, 2014	$	49,842		$	49,084		$	32,041		$	32,744		$	11,331		$	3,306		$	1,851		$	11,486		$	191,685
Six months ended June 30, 2015
Balance at September 30, 2014																												$	49,174		$	51,040		$	31,291		$	33,005		$	11,176		$	3,460		$	1,966		$	8,365		$	189,477
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		$	53,493		$	51,378		$	28,271		$	29,072		$	9,756		$	3,015		$	1,799		$	7,360		$	184,144
Loans charged off	(2,351		)	(13,029		)	(1,638		)	(2,064		)	(87		)	(1,137		)	(830		)	—			(21,136		)	(3,011		)	(14,669		)	(2,578		)	(3,099		)	(201		)	(1,787		)	(1,352		)	—			(26,697		)
Recoveries of loans previously charged off	887			2,257			440			346			1,378			609			241			—			6,158			1,729			3,855			744			547			2,276			923			587			—			10,661
Net loans charged off	(1,464		)	(10,772		)	(1,198		)	(1,718		)	1,291			(528		)	(589		)	—			(14,978		)	(1,282		)	(10,814		)	(1,834		)	(2,552		)	2,075			(864		)	(765		)	—			(16,036		)
Provision for loan losses (1)	(1,349		)	8,564			(4,567		)	(4,567		)	(3,298		)	121			405			3,010			(1,681		)	(524		)	8,159			(4,387		)	(5,176		)	(4,262		)	403			628			4,187			(972		)
Balance at June 30, 2015	$	50,680		$	49,170		$	22,506		$	22,787		$	7,749		$	2,608		$	1,615		$	10,370		$	167,485
Six months ended June 30, 2014
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	(3,527		)	(10,637		)	(2,885		)	(1,935		)	(432		)	(1,200		)	(1,128		)	—			(21,744		)	(5,084		)	(15,804		)	(4,377		)	(2,166		)	(745		)	(1,738		)	(1,434		)	—			(31,348		)
Recoveries of loans previously charged off	474			1,519			533			224			382			611			526			—			4,269			1,641			2,532			869			319			852			1,059			767			—			8,039
Net loans charged off	(3,053		)	(9,118		)	(2,352		)	(1,711		)	(50		)	(589		)	(602		)	—			(17,475		)	(3,443		)	(13,272		)	(3,508		)	(1,847		)	107			(679		)	(667		)	—			(23,309		)
Provision for loan losses (1)	(2,764		)	7,872			6,171			1,373			(1,268		)	635			(917		)	(4,722		)	6,380			(3,042		)	13,982			6,577			1,770			(1,580		)	879			(737		)	(7,843		)	10,006
Balance at June 30, 2014	$	49,842		$	49,084		$	32,041		$	32,744		$	11,331		$	3,306		$	1,851		$	11,486		$	191,685
Balance at September 30, 2014																												$	49,174		$	51,040		$	31,291		$	33,005		$	11,176		$	3,460		$	1,966		$	8,365		$	189,477

(1)

The provision for loan losses excluded ~~an $11,000~~a $291,000 and ~~$181,000~~$472,000 increase, respectively, in the reserve for unfunded lending commitments for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and a ~~$160,000~~$126,000 and ~~$380,000~~$506,000 decrease, respectively, in the reserve for unfunded lending commitments for the three and ~~six~~nine months ended ~~June~~September 30, 2014. The total provision for credit losses, comprised of allocations for both funded and unfunded loans, was ~~$2.2~~$1.0 million and negative ~~$1.5~~$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 ~~six~~nine months ended ~~June 30, 2015 and $3.5 million and $6.0 million, respectively, for the three and six months ended June~~September 30, 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		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)																		(in thousands)
Allowance for loan losses at June 30, 2015:
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	$	37,228	$	38,090	$	15,838	$	8,763	$	5,430	$	2,588	$	1,615	$	10,370	$	119,922	$	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	13,452		11,080		6,668		14,024		2,319		20		—		N/A		47,563		13,197		12,721		7,183		13,423		2,450		19		—		N/A		48,993
	$	50,680	$	49,170	$	22,506	$	22,787	$	7,749	$	2,608	$	1,615	$	10,370	$	167,485	$	51,687	$	48,723	$	22,050	$	21,344	$	7,569	$	2,554	$	1,662	$	11,547	$	167,136

Loans, net of unearned income at June 30, 2015:
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	$	5,172,333	$	3,764,999	$	1,676,410	$	1,315,908	$	712,975	$	272,463	$	136,521	N/A		$	13,051,609	$	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	65,467		41,700		13,278		53,195		18,950		31		—		N/A		192,621		66,109		43,952		14,178		51,307		18,936		29		—		N/A		194,511
	$	5,237,800	$	3,806,699	$	1,689,688	$	1,369,103	$	731,925	$	272,494	$	136,521	N/A		$	13,244,230	$	5,339,928	$	3,929,908	$	1,693,649	$	1,382,085	$	769,565	$	271,696	$	149,530	N/A		$	13,536,361

Allowance for loan losses at June 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	$	33,388	$	36,603	$	22,234	$	11,450	$	7,163	$	3,285	$	1,851	$	11,486	$	127,460	$	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	16,454		12,481		9,807		21,294		4,168		21		—		N/A		64,225		16,223		11,942		9,625		21,502		5,167		21		—		N/A		64,480
	$	49,842	$	49,084	$	32,041	$	32,744	$	11,331	$	3,306	$	1,851	$	11,486	$	191,685	$	49,174	$	51,040	$	31,291	$	33,005	$	11,176	$	3,460	$	1,966	$	8,365	$	189,477

Loans, net of unearned income at June 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	$	5,067,400	$	3,558,788	$	1,715,953	$	1,309,739	$	606,221	$	280,534	$	102,008	N/A		$	12,640,643	$	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	61,334		42,933		14,544		52,237		27,797		23		—		N/A		198,868		61,716		36,100		13,987		52,700		28,906		23		—		N/A		193,432
	$	5,128,734	$	3,601,721	$	1,730,497	$	1,361,976	$	634,018	$	280,557	$	102,008	N/A		$	12,839,511	$	5,156,979	$	3,691,262	$	1,733,036	$	1,372,033	$	687,728	$	278,219	$	111,148	N/A		$	13,030,405


(1)	The unallocated allowance, which was approximately 6%7% and 4% of the total allowance for credit losses as of both ~~June~~September 30, 2015 and ~~June~~September 30, 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"). 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 ~~$1.5 million~~$500,000 negative provision for credit losses during the ~~six~~nine months ended ~~June~~September 30, 2015, compared to a ~~$6.0~~$9.5 million provision for credit losses for the same period in 2014. The ~~$7.5~~$10.0 million ~~improvement~~decrease in the provision for credit losses was driven by an improvement in all credit quality measures, particularly net charge-off levels, ~~particularly among pooled impaired loans~~ 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 ~~June~~September 30, 2015 and December 31, 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 ~~June~~September 30, 2015 and 2014, approximately ~~72% and 79%, respectively,~~77% 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 appraisals are not obtained for loans evaluated for impairment under FASB ASC Section 310-10-35 that are secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated an acceptable

loan-to-value position and, in the opinion of the Corporation's internal 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 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:


	June 30, 2015						December 31, 2014						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	$	29,836	$	24,357	$	—	$	25,802	$	23,236	$	—	$	31,961	$	26,075	$	—	$	25,802	$	23,236	$	—
Commercial - secured	24,250		17,557		—		17,599		14,582		—		22,097		17,661		—		17,599		14,582		—
Commercial - unsecured													86		86		—		—		—		—
Real estate - home equity													—		—		—		—		—		—
Real estate - residential mortgage	6,630		6,223		—		4,873		4,873		—		6,607		6,201		—		4,873		4,873		—
Construction - commercial residential	13,581		10,699		—		18,041		14,801		—		13,353		10,417		—		18,041		14,801		—
Construction - commercial	1,299		1,156		—		1,707		1,581		—		1,295		1,143		—		1,707		1,581		—
	75,596		59,992				68,022		59,073				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	49,792		41,110		13,452		49,619		40,023		16,715		48,734		40,034		13,197		49,619		40,023		16,715
Commercial - secured	26,694		21,239		10,020		24,824		19,335		12,165		29,415		23,533		11,789		24,824		19,335		12,165
Commercial - unsecured	3,062		2,904		1,060		1,241		1,089		865		2,832		2,672		932		1,241		1,089		865
Real estate - home equity	18,752		13,278		6,668		19,392		13,458		9,224		18,854		14,178		7,183		19,392		13,458		9,224
Real estate - residential mortgage	56,048		46,972		14,024		56,607		46,478		18,592		54,604		45,106		13,423		56,607		46,478		18,592
Construction - commercial residential	11,976		5,472		1,771		14,007		7,903		2,675		9,613		6,019		1,985		14,007		7,903		2,675
Construction - commercial	1,879		1,342		445		1,501		1,023		459		1,223		1,077		363		1,501		1,023		459
Construction - other	452		281		103		452		281		137		452		280		102		452		281		137
Consumer - direct	15		15		10		19		19		17		14		14		10		19		19		17
Consumer - indirect	16		16		10		20		19		18		15		15		9		20		19		18
	168,686		132,629		47,563		167,682		129,628		60,867		165,756		132,928		48,993		167,682		129,628		60,867
Total	$	244,282	$	192,621	$	47,563	$	235,704	$	188,701	$	60,867	$	241,155	$	194,511	$	48,993	$	235,704	$	188,701	$	60,867

As of ~~June~~September 30, 2015 and December 31, 2014, there were ~~$60.0~~$61.6 million and $59.1 million, respectively, of impaired loans that did not have a related allowance for loan loss. The estimated fair values of the collateral 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 June 30								Six months ended June 30							Three months ended September 30								Nine months ended September 30
	2015				2014				2015				2014			2015				2014				2015				2014
	Average Recorded Investment		Interest Income (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)		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	$	27,410	$	87	$	23,162	$	80	$	26,018	$	178	$	23,606	166	$	25,216	$	68	$	23,056	$	78	$	26,033	$	246	$	23,524	244
Commercial - secured	16,163		24		21,695		34		15,636		45		21,591		69	17,609		28		18,903		29		16,142		74		20,014		98
Commercial - unsecured																43		—		—		—		22		—		—		—
Real estate - home equity	—		—		300		1		—		—		300		1	—		—		150		—		—		—		225		1
Real estate - residential mortgage	5,541		32		857		5		5,318		60		571		6	6,212		34		1,236		7		5,539		94		697		13
Construction - commercial residential	12,171		40		17,853		62		13,048		95		16,482		122	10,558		28		14,881		51		12,390		124		16,052		173
Construction - commercial	925		—		1,418		—		1,144		—		1,604		—	1,150		—		1,060		—		1,144		—		1,514		—
	62,210		183		65,285		182		61,164		378		64,154		364	60,788		158		59,286		165		61,270		538		62,026		529
With a related allowance recorded:
Real estate - commercial mortgage	40,204		126		38,455		132		40,143		259		37,580		264	40,572		110		38,469		130		40,116		368		37,794		394
Commercial - secured	25,902		38		21,652		33		23,713		74		21,876		71	22,386		36		19,764		30		23,668		111		21,404		101
Commercial - unsecured	2,082		2		757		1		1,751		3		854		2	2,788		1		850		1		1,981		4		847		3
Real estate - home equity	13,016		33		14,049		28		13,163		64		14,145		48	13,728		37		14,116		30		13,417		101		14,106		78
Real estate - residential mortgage	47,020		270		51,153		300		46,839		543		51,134		594	46,039		254		51,283		298		46,406		797		51,257		894
Construction - commercial residential	6,031		21		7,676		27		6,655		49		9,977		62	5,746		15		11,189		38		6,496		64		10,480		100
Construction - commercial	960		—		723		—		981		—		547		—	1,210		—		942		—		1,005		—		567		—
Construction - other	281		—		413		—		281		—		458		—	281		—		281		—		281		—		414		—
Consumer - direct	17		—		16		—		18		—		14		—	15		—		18		—		18		—		15		—
Consumer - indirect	17		—		4		—		17		—		3		—	15		—		6		—		17		—		4		—
	135,530		490		134,898		521		133,561		992		136,588		1,041	132,780		453		136,918		527		133,405		1,445		136,888		1,570
Total	$	197,740	$	673	$	200,183	$	703	$	194,725	$	1,370	$	200,742	1,405	$	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 ~~six~~nine months ended ~~June~~September 30, 2015 and 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
	June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014			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	$	4,943,773		$	4,899,016		$	114,385		$	127,302		$	179,642		$	170,837		$	5,237,800		$	5,197,155		$	5,028,655		$	4,899,016		$	132,823		$	127,302		$	178,450		$	170,837		$	5,339,928		$	5,197,155
Commercial - secured	3,419,331			3,333,486			123,663			120,584			110,666			110,544			3,653,660			3,564,614			3,579,389			3,333,486			97,617			120,584			105,820			110,544			3,782,826			3,564,614
Commercial - unsecured	141,431			146,680			3,667			7,463			7,941			6,810			153,039			160,953			138,709			146,680			3,568			7,463			4,805			6,810			147,082			160,953
Total commercial - industrial, financial and agricultural	3,560,762			3,480,166			127,330			128,047			118,607			117,354			3,806,699			3,725,567			3,718,098			3,480,166			101,185			128,047			110,625			117,354			3,929,908			3,725,567
Construction - commercial residential	138,834			136,109			17,526			27,495			30,588			40,066			186,948			203,670			144,329			136,109			16,763			27,495			29,429			40,066			190,521			203,670
Construction - commercial	469,515			409,631			13,314			12,202			5,587			5,586			488,416			427,419			514,969			409,631			1,693			12,202			5,204			5,586			521,866			427,419
Total construction (excluding Construction - other)	608,349			545,740			30,840			39,697			36,175			45,652			675,364			631,089			659,298			545,740			18,456			39,697			34,633			45,652			712,387			631,089
	$	9,112,884		$	8,924,922		$	272,555		$	295,046		$	334,424		$	333,843		$	9,719,863		$	9,553,811		$	9,406,051		$	8,924,922		$	252,464		$	295,046		$	323,708		$	333,843		$	9,982,223		$	9,553,811
% of Total	93.8		%	93.4		%	2.8		%	3.1		%	3.4		%	3.5		%	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 Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, consumer, 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 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
	June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014			June 30, 2015			December 31, 2014			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	$	1,665,771		$	1,711,017		$	9,285		$	10,931		$	14,632		$	14,740		$	1,689,688		$	1,736,688		$	1,671,473		$	1,711,017		$	9,069		$	10,931		$	13,107		$	14,740		$	1,693,649		$	1,736,688
Real estate - residential mortgage	1,316,650			1,321,139			20,891			26,934			31,562			28,995			1,369,103			1,377,068			1,336,877			1,321,139			17,501			26,934			27,707			28,995			1,382,085			1,377,068
Construction - other	55,864			59,180			—			—			697			332			56,561			59,512			56,482			59,180			—			—			696			332			57,178			59,512
Consumer - direct	103,985			104,018			2,886			2,891			2,326			2,414			109,197			109,323			98,576			104,018			2,697			2,891			1,961			2,414			103,234			109,323
Consumer - indirect	161,201			153,358			1,839			2,574			257			176			163,297			156,108			166,040			153,358			2,304			2,574			118			176			168,462			156,108
Total consumer	265,186			257,376			4,725			5,465			2,583			2,590			272,494			265,431			264,616			257,376			5,001			5,465			2,079			2,590			271,696			265,431
Leasing and other and overdrafts	135,895			118,550			553			523			73			133			136,521			119,206			148,980			118,550			464			523			86			133			149,530			119,206
	$	3,439,366		$	3,467,262		$	35,454		$	43,853		$	49,547		$	46,790		$	3,524,367		$	3,557,905		$	3,478,428		$	3,467,262		$	32,035		$	43,853		$	43,675		$	46,790		$	3,554,138		$	3,557,905
% of Total	97.6		%	97.5		%	1.0		%	1.2		%	1.4		%	1.3		%	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:


	June 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Non-accrual loans	$	129,152	$	121,080	$	132,154	$	121,080
Accruing loans 90 days or more past due	20,353		17,402		12,867		17,402
Total non-performing loans	149,505		138,482		145,021		138,482
Other real estate owned (OREO)	12,763		12,022		10,561		12,022
Total non-performing assets	$	162,268	$	150,504	$	155,582	$	150,504

The following table presents TDRs, by class segment:


	June 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Real-estate - residential mortgage	$	31,584	$	31,308	$	29,330	$	31,308
Real-estate - commercial mortgage	17,482		18,822		17,282		18,822
Commercial - secured	6,417		5,170		7,259		5,170
Construction - commercial residential	4,482		9,241		4,363		9,241
Real estate - home equity	3,299		2,975		3,954		2,975
Commercial - unsecured	174		67		140		67
Consumer - indirect	16		19		15		19
Consumer - direct	15		19		14		19
Total accruing TDRs	63,469		67,621		62,357		67,621
Non-accrual TDRs (1)	27,230		24,616		27,618		24,616
Total TDRs	$	90,699	$	92,237	$	89,975	$	92,237


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

As of ~~June~~September 30, 2015 and December 31, 2014, there were ~~$6.0~~$5.3 million and $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 ~~June~~September 30, 2015 and 2014, that were modified during the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014:


	Three months ended June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			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	$	1,047	1	$	143	11	$	7,823	1	$	143	3	$	1,380	3	$	1,214	14	$	9,203	4	$	1,357
Real estate - home equity	15	739		10	334		25	1,231		20	863		14	562		6	764		39	1,793		26	1,627
Real estate - residential mortgage	4	456		9	1,130		8	1,066		15	1,836		2	229		3	256		10	1,295		18	2,092
Real estate - commercial mortgage	1	132		2	2,334		4	2,627		9	9,804		2	188		1	391		6	2,815		10	10,195
Construction - commercial residential	—	—		1	1,366		1	889		2	1,914		—	—		—	—		1	889		2	1,914
Commercial - unsecured	—	—		—	—		1	42		—	—		—	—		—	—		1	42		—	—
Consumer - indirect	—	—		1	6		1	13		4	7		—	—		—	—		1	13		4	7
Consumer - direct	—	—		2	4		—	—		6	8		—	—		—	—		—	—		6	8
Total	23	$	2,374	26	$	5,317	51	$	13,691	57	$	14,575	21	$	2,359	13	$	2,625	72	$	16,050	70	$	17,200

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


	2015			2014			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	8	$	4,779	1	$	10	6	$	3,855	3	$	415
Real estate - residential mortgage	6	652		9	1,204		4	500		8	1,147
Real estate - home equity	7	614		9	777		9	459		5	724
Real estate - commercial mortgage	2	191		2	35		2	233		1	35
Construction - commercial residential	—	—		1	619		—	—		3	2,509
Total	23	$	6,236	22	$	2,645	21	$	5,047	20	$	4,830

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


	June 30, 2015																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	$	16,139	$	1,848	$	1,947	$	47,985	$	49,932	$	67,919	$	5,169,881	$	5,237,800	$	7,322	$	1,169	$	194	$	48,827	$	49,021	$	57,512	$	5,282,416	$	5,339,928
Commercial - secured	6,489		1,463		730		32,379		33,109		41,061		3,612,599		3,653,660		6,909		4,536		1,414		33,935		35,349		46,794		3,736,032		3,782,826
Commercial - unsecured	307		80		—		2,730		2,730		3,117		149,922		153,039		2,380		15		65		2,618		2,683		5,078		142,004		147,082
Total commercial - industrial, financial and agricultural	6,796		1,543		730		35,109		35,839		44,178		3,762,521		3,806,699		9,289		4,551		1,479		36,553		38,032		51,872		3,878,036		3,929,908
Real estate - home equity	7,161		2,124		4,653		9,979		14,632		23,917		1,665,771		1,689,688		6,312		2,757		2,883		10,224		13,107		22,176		1,671,473		1,693,649
Real estate - residential mortgage	16,835		4,056		9,951		21,611		31,562		52,453		1,316,650		1,369,103		11,499		6,002		5,730		21,977		27,707		45,208		1,336,877		1,382,085
Construction - commercial residential	151		—		—		11,689		11,689		11,840		175,108		186,948		1,832		231		—		12,073		12,073		14,136		176,385		190,521
Construction - commercial	—		—		—		2,498		2,498		2,498		485,918		488,416		265		—		—		2,220		2,220		2,485		519,381		521,866
Construction - other	—		—		416		281		697		697		55,864		56,561		—		—		416		280		696		696		56,482		57,178
Total real estate - construction	151		—		416		14,468		14,884		15,035		716,890		731,925		2,097		231		416		14,573		14,989		17,317		752,248		769,565
Consumer - direct	2,159		727		2,326		—		2,326		5,212		103,985		109,197		1,398		1,299		1,961		—		1,961		4,658		98,576		103,234
Consumer - indirect	1,719		120		257		—		257		2,096		161,201		163,297		1,962		342		118		—		118		2,422		166,040		168,462
Total consumer	3,878		847		2,583		—		2,583		7,308		265,186		272,494		3,360		1,641		2,079		—		2,079		7,080		264,616		271,696
Leasing and other and overdrafts	468		85		73		—		73		626		135,895		136,521		449		15		86		—		86		550		148,980		149,530
Total	$	51,428	$	10,503	$	20,353	$	129,152	$	149,505	$	211,436	$	13,032,794	$	13,244,230	$	40,328	$	16,366	$	12,867	$	132,154	$	145,021	$	201,715	$	13,334,646	$	13,536,361



	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
	(in thousands)
Real estate - commercial mortgage	$	14,399	$	3,677	$	800	$	44,437	$	45,237	$	63,313	$	5,133,842	$	5,197,155
Commercial - secured	4,839		958		610		28,747		29,357		35,154		3,529,460		3,564,614
Commercial - unsecured	395		65		9		1,022		1,031		1,491		159,462		160,953
Total commercial - industrial, financial and agricultural	5,234		1,023		619		29,769		30,388		36,645		3,688,922		3,725,567
Real estate - home equity	8,048		2,883		4,257		10,483		14,740		25,671		1,711,017		1,736,688
Real estate - residential mortgage	18,789		8,145		8,952		20,043		28,995		55,929		1,321,139		1,377,068
Construction - commercial residential	160		—		—		13,463		13,463		13,623		190,047		203,670
Construction - commercial	—		—		—		2,604		2,604		2,604		424,815		427,419
Construction - other	—		—		51		281		332		332		59,180		59,512
Total real estate - construction	160		—		51		16,348		16,399		16,559		674,042		690,601
Consumer - direct	2,034		857		2,414		—		2,414		5,305		104,018		109,323
Consumer - indirect	2,156		418		176		—		176		2,750		153,358		156,108
Total consumer	4,190		1,275		2,590		—		2,590		8,055		257,376		265,431
Leasing and other and overdrafts	357		166		133		—		133		656		118,550		119,206
Total	$	51,177	$	17,169	$	17,402	$	121,080	$	138,482	$	206,828	$	12,904,888	$	13,111,716

NOTE 6 – Mortgage Servicing Rights

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


	Three months ended June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014
	(in thousands)												(in thousands)
Amortized cost:
Balance at beginning of period	$	41,803		$	41,668		$	42,148		$	42,452		$	41,598		$	42,586		$	42,148		$	42,452
Originations of mortgage servicing rights	1,956			1,236			3,513			2,351			1,463			1,456			4,976			3,807
Amortization	(2,161		)	(318		)	(4,063		)	(2,217		)	(1,829		)	(1,664		)	(5,892		)	(3,881		)
Balance at end of period	$	41,598		$	42,586		$	41,598		$	42,586		$	41,232		$	42,378		$	41,232		$	42,378

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 valuation allowance was necessary as of ~~June~~September 30, 2015 or 2014.

~~The Corporation accounts for MSRs at the lower of amortized cost or fair value.~~ As of ~~June~~September 30, 2015, the estimated fair value of MSRs was ~~$45.7~~$43.8 million, which exceeded their book value.

NOTE 7 – Stock-Based Compensation

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

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

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

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


	Three months ended June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014
	(in thousands)												(in thousands)
Stock-based compensation expense	$	1,767		$	1,989		$	2,838		$	3,022		$	1,533		$	1,288		$	4,371		$	4,310
Tax benefit	(622		)	(446		)	(914		)	(709		)	(489		)	(358		)	(1,403		)	(1,067		)
Stock-based compensation expense, net of tax	$	1,145		$	1,543		$	1,924		$	2,313		$	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. Fair values for restricted stock, RSUs and a majority of PSUs are based on the trading price

of the Corporation’s stock on the date of grant and earn dividends during the vesting period, which are forfeitable if the awards

do not vest. The fair value of certain PSUs are estimated through the use of the Monte Carlo valuation methodology as of the date of grant.

As of ~~June~~September 30, 2015, the Employee Equity Plan had 11.6 million shares reserved for future grants through 2023, and the Directors’ Plan had approximately 396,000 shares reserved for future grants through 2021. ~~On April 1, 2015, the Corporation granted approximately 403,000 PSUs and 139,500 RSUs under its Employee Equity Plan.~~

NOTE 8 – Employee Benefit Plans

The Corporation maintains a defined benefit 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 consisted of the following components:


	Three months ended June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014
	(in thousands)												(in thousands)
Service cost (1)	$	145		$	92		$	290		$	184		$	145		$	92		$	435		$	276
Interest cost	851			853			1,702			1,706			851			853			2,553			2,559
Expected return on plan assets	(752		)	(810		)	(1,504		)	(1,621		)	(752		)	(811		)	(2,256		)	(2,432		)
Net amortization and deferral	782			244			1,564			488			782			244			2,346			732
Net periodic benefit cost	$	1,026		$	379		$	2,052		$	757		$	1,026		$	378		$	3,078		$	1,135


(1)	The Pension Plan service cost recorded for the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 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") 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 during the ~~six~~nine months ended ~~June~~September 30, 2014, as a 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 $3.4 million decrease in the accumulated postretirement benefit obligation and a corresponding increase in unrecognized prior service cost credits.

The net periodic cost (benefit) of the Corporation’s Postretirement Plan consisted of the following components, excluding the $1.5 million plan amendment gain in 2014:


	Three months ended June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014
	(in thousands)												(in thousands)
Service cost (1)	$	—		$	—		$	—		$	15		$	—		$	—		$	—		$	15
Interest cost	52			48			104			109			52			48			156			157
Net accretion and deferral	(65		)	(84		)	(130		)	(179		)	(65		)	(84		)	(195		)	(263		)
Net periodic benefit	$	(13	)	$	(36	)	$	(26	)	$	(55	)	$	(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.

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

NOTE 9 – Derivative Financial Instruments

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

Mortgage Banking Derivatives

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


	June 30, 2015					December 31, 2014					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	$	126,063	$	1,268		$	89,655	$	1,391		$	121,546	$	2,263		$	89,655	$	1,391
Negative fair values	2,240		(48		)	301		(6		)	172		(2		)	301		(6		)
Net interest rate locks with customers			1,220					1,385					2,261					1,385
Forward Commitments
Positive fair values	111,387		1,705			—		—			110		—			—		—
Negative fair values	27,107		(24		)	93,802		(1,164		)	117,389		(1,502		)	93,802		(1,164		)
Net forward commitments			1,681					(1,164		)			(1,502		)			(1,164		)
Interest Rate Swaps with Customers
Positive fair values	558,750		19,317			468,080		19,716			681,647		37,436			468,080		19,716
Negative fair values	46,937		(234		)	25,418		(198		)	8,000		(87		)	25,418		(198		)
Net interest rate swaps with customers			19,083					19,518					37,349					19,518
Interest Rate Swaps with Dealer Counterparties
Positive fair values	46,937		234			25,418		198			8,000		87			25,418		198
Negative fair values	558,750		(19,317		)	468,080		(19,716		)	681,647		(37,436		)	468,080		(19,716		)
Net interest rate swaps with dealer counterparties			(19,083		)			(19,518		)			(37,349		)			(19,518		)
Foreign Exchange Contracts with Customers
Positive fair values	8,200		572			11,616		810			7,183		260			11,616		810
Negative fair values	7,128		(384		)	5,250		(441		)	7,091		(269		)	5,250		(441		)
Net foreign exchange contracts with customers			188					369					(9		)			369
Foreign Exchange Contracts with Correspondent Banks
Positive fair values	9,296		629			5,287		446			10,308		614			5,287		446
Negative fair values	9,824		(672		)	13,572		(876		)	8,630		(334		)	13,572		(876		)
Net foreign exchange contracts with correspondent banks			(43		)			(430		)			280					(430		)
Net derivative fair value asset			$	3,046				$	160				$	1,030				$	160

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


	Three months ended June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014
	(in thousands)												(in thousands)
Interest rate locks with customers	$	(1,287	)	$	1,203		$	(165	)	$	1,592		$	1,041		$	(1,092	)	$	876		$	500
Forward commitments	2,291			(1,503		)	2,845			(3,001		)	(3,183		)	1,374			(338		)	(1,627		)
Interest rate swaps with customers	(9,839		)	6,135			(435		)	10,340			18,266			(40		)	17,831			10,300
Interest rate swaps with dealer counterparties	9,839			(6,135		)	435			(10,340		)	(18,266		)	40			(17,831		)	(10,300		)
Foreign exchange contracts with customers	(748		)	105			(181		)	297			(197		)	557			(378		)	854
Foreign exchange contracts with correspondent banks	711			(98		)	387			(366		)	323			(527		)	710			(893		)
Net fair value gains (losses) on derivative financial instruments	$	967		$	(293	)	$	2,886		$	(1,478	)	$	(2,016	)	$	312		$	870		$	(1,166	)

NOTE 10 – 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 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 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:


	June 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Cost	$	33,760	$	17,080	$	26,186	$	17,080
Fair value	33,980		17,522		26,937		17,522

During the three ~~and six~~ months ended ~~June~~September 30, 2015, the Corporation recorded ~~losses~~gains related to changes in fair values of mortgage loans held for sale of ~~$483,000 and $222,000, respectively. During~~$531,000 compared to losses of $472,000 for the three ~~and six~~ months ended ~~June~~September 30, 2014. For the nine months ended September 30, 2015 and 2014, the Corporation recorded gains related to changes in fair values of mortgage loans held for sale of ~~$518,000~~$309,000 and ~~$815,000,~~$343,000, respectively.

NOTE 11 – 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 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.

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 foreign currency exchange contracts in the event of default. For additional details, see Note 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)
June 30, 2015
September 30, 2015
Interest rate swap derivative assets	$	19,551	$	(235	)	$	—		$	19,316	$	37,523	$	(87	)	$	—		$	37,436
Foreign exchange derivative assets with correspondent banks	629		(629		)	—			—		614		(334		)	—			280
Total	$	20,180	$	(864	)	$	—		$	19,316	$	38,137	$	(421	)	$	—		$	37,716

Interest rate swap derivative liabilities	$	19,551	$	(235	)	$	(19,290	)	$	26	$	37,523	$	(87	)	$	(37,436	)	$	—
Foreign exchange derivative liabilities with correspondent banks	672		(629		)	—			43		334		(334		)	310			310
Total	$	20,223	$	(864	)	$	(19,290	)	$	69	$	37,857	$	(421	)	$	(37,126	)	$	310

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

Interest rate swap derivative liabilities	$	19,914	$	(206	)	$	(19,210	)	$	498	$	19,914	$	(206	)	$	(19,210	)	$	498
Foreign exchange derivative liabilities with correspondent banks	876		(446		)	(310		)	120		876		(446		)	(310		)	120
Total	$	20,790	$	(652	)	$	(19,520	)	$	618	$	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 12 – 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:


	June 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(in thousands)				(in thousands)
Commitments to extend credit	$	5,071,983	$	4,389,064	$	5,635,629	$	4,389,064
Standby letters of credit	387,996		382,465		390,501		382,465
Commercial letters of credit	35,769		32,304		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 5, "Loans and Allowance for Credit Losses," for additional details.

Residential Lending

Residential mortgages originated and sold by the Corporation consist primarily of conforming, prime loans sold to government sponsored agencies, such as the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). The Corporation also 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 ~~June~~September 30, 2015 and December 31, 2014, total outstanding repurchase requests were ~~$918,000~~$851,000 and $543,000, respectively.

From 2000 to 2011, the Corporation sold loans to the Federal Home Loan Bank of Pittsburgh under its Mortgage Partnership Finance Program ("MPF Program"). No loans were sold under this program during the ~~six~~nine months ended ~~June~~September 30, 2015 or 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," 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 ~~June~~September 30, 2015, the unpaid principal balance of loans sold under the MPF Program was approximately ~~$140~~$132 million. As of ~~June~~September 30, 2015 and December 31, 2014, the reserve for estimated credit losses related to loans sold under the MPF Program was ~~$2.1~~$1.8 million and $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 for residential mortgage loans.

As of ~~June~~September 30, 2015 and December 31, 2014, the total reserve for losses on residential mortgage loans sold was ~~$2.9~~$2.5 million and $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 ~~June~~September 30, 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.

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. Refer also to Part II. Other Information, Item 1. Legal Proceedings.

NOTE 13 – 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:


	June 30, 2015								September 30, 2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Mortgage loans held for sale	$	—	$	33,980	$	—	$	33,980	$	—	$	26,937	$	—	$	26,937
Available for sale investment securities:
Equity securities	33,041		—		—		33,041		23,532		—		—		23,532
U.S. Government sponsored agency securities	—		48,260		—		48,260		—		48,551		—		48,551
State and municipal securities	—		236,517		—		236,517		—		240,236		—		240,236
Corporate debt securities	—		92,822		4,350		97,172		—		96,761		3,180		99,941
Collateralized mortgage obligations	—		918,232		—		918,232		—		874,299		—		874,299
Mortgage-backed securities	—		1,008,664		—		1,008,664		—		1,051,905		—		1,051,905
Auction rate securities	—		—		98,606		98,606		—		—		97,873		97,873
Total available for sale investments	33,041		2,304,495		102,956		2,440,492		23,532		2,311,752		101,053		2,436,337
Other assets	18,002		22,524		—		40,526		16,253		39,787		—		56,040
Total assets	$	51,043	$	2,360,999	$	102,956	$	2,514,998	$	39,785	$	2,378,476	$	101,053	$	2,519,314
Other liabilities	$	17,848	$	19,622	$	—	$	37,470	$	15,982	$	39,027	$	—	$	55,009



	December 31, 2014
	Level 1		Level 2		Level 3		Total
	(in thousands)
Mortgage loans held for sale	$	—	$	17,522	$	—	$	17,522
Available for sale investment securities:
Equity securities	47,623		—		—		47,623
U.S. Government securities	—		200		—		200
U.S. Government sponsored agency securities	—		214		—		214
State and municipal securities	—		245,215		—		245,215
Corporate debt securities	—		90,126		7,908		98,034
Collateralized mortgage obligations	—		902,313		—		902,313
Mortgage-backed securities	—		928,831		—		928,831
Auction rate securities	—		—		100,941		100,941
Total available for sale investments	47,623		2,166,899		108,849		2,323,371
Other assets	17,682		21,305		—		38,987
Total assets	$	65,305	$	2,205,726	$	108,849	$	2,379,880
Other liabilities	$	17,737	$	21,084	$	—	$	38,821

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

Mortgage loans held for sale – This category consists of mortgage loans held for sale that the Corporation has elected to measure at fair value. Fair values as of ~~June~~September 30, 2015 and December 31, 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 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 ($~~27.2~~22.4 million at ~~June~~September 30, 2015 and $41.8 million at December 31, 2014) and other equity investments ($~~5.8~~1.1 million at ~~both June~~September 30, 2015 and $5.8 million at December 31, 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 ($~~49.7~~53.6 million at ~~June~~September 30, 2015 and $50.0 million at December 31, 2014), single-issuer trust preferred securities issued by financial institutions ($~~43.4~~41.8 million at ~~June~~September 30, 2015 and $42.0 million at December 31, 2014), pooled trust preferred securities issued by financial institutions ($530,000 at ~~June~~September 30, 2015 and $4.1 million at December 31, 2014) and other corporate debt issued by non-financial institutions ($~~3.5~~4.0 million at ~~June~~September 30, 2015 and $1.9 million at December 31, 2014).

Level 2 investments include the Corporation’s holdings of subordinated debt, other corporate debt issued by non-financial institutions and ~~$39.6~~$39.2 million and $38.2 million of single-issuer trust preferred securities held at ~~June~~September 30, 2015 and December 31, 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 $4.1 million at December 31, 2014) and certain single-issuer trust preferred securities ($~~3.8~~2.7 million at ~~June~~September 30, 2015 and $3.8 million at December 31, 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 ($~~16.8~~15.4 million at ~~June~~September 30, 2015 and $16.4 million at December 31, 2014) and the fair value of foreign currency exchange contracts ($~~1.2 million~~874,000 at ~~June~~September 30, 2015 and $1.3 million at December 31, 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 ($~~3.0~~2.3 million at ~~June~~September 30, 2015 and $1.4 million at December 31, 2014) and the fair value of interest rate swaps ($~~19.6~~37.5 million at ~~June~~September 30, 2015 and $19.9

million at December 31, 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 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 ($~~16.8~~15.4 million at ~~June~~September 30, 2015 and $16.4 million at December 31, 2014) and the fair value of foreign currency exchange contracts ($~~1.0 million~~603,000 at ~~June~~September 30, 2015 and $1.3 million at December 31, 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 ($~~72,000~~1.5 million at ~~June~~September 30, 2015 and $1.2 million at December 31, 2014) and the fair value of interest rate swaps ($~~19.6~~37.5 million at ~~June~~September 30, 2015 and $19.9 million at December 31, 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 June 30, 2015									Three months ended September 30, 2015
	Pooled Trust Preferred Securities			Single-issuer Trust Preferred Securities			ARCs			Pooled Trust Preferred Securities			Single-issuer Trust Preferred Securities			ARCs
	(in thousands)									(in thousands)
Balance at March 31, 2015	$	1,084		$	3,820		$	98,932
Sales	(554		)	—			—
Unrealized adjustment to fair value (1)	—			(2		)	(420		)
Discount accretion (2)	—			2			94
Balance at June 30, 2015	$	530		$	3,820		$	98,606		$	530		$	3,820		$	98,606

	Three months ended June 30, 2014
Balance at March 31, 2014	$	5,659		$	3,820		$	147,713
Sales	(1,394		)	—			—
Unrealized adjustment to fair value (1)	38			(2		)	124			—			(203		)	(890		)
Settlements - calls	(28		)	—			(1,081		)	—			(970		)	—
Discount accretion (2)	—			2			175			—			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		$	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

	Six months ended June 30, 2015									Nine months ended September 30, 2015
	Pooled Trust Preferred Securities			Single-issuer Trust Preferred Securities			ARCs			Pooled Trust Preferred Securities			Single-issuer Trust Preferred Securities			ARCs
	(in thousands)									(in thousands)
Balance at December 31, 2014	$	4,088		$	3,820		$	100,941		$	4,088		$	3,820		$	100,941
Sales	(3,633		)	—			—			(3,633		)	—			—
Unrealized adjustment to fair value (2)	190			(4		)	(88		)
Unrealized adjustment to fair value (1)										190			(207		)	(978		)
Settlements - calls	(117		)	—			(2,446		)	(117		)	(970		)	(2,446		)
Discount accretion (3)	2			4			199
Balance at June 30, 2015	$	530		$	3,820		$	98,606
Discount accretion (2)										2			7			356
Balance at September 30, 2015										$	530		$	2,650		$	97,873

	Six months ended June 30, 2014									Nine months ended September 30, 2014
Balance at December 31, 2013	$	5,306		$	3,781		$	159,274		$	5,306		$	3,781		$	159,274
Sales	(1,394		)	—			(11,912		)	(1,394		)	—			(11,912		)
Unrealized adjustment to fair value (2)	559			36			248
Realized adjustment to fair value (3)										(18		)	—			—
Unrealized adjustment to fair value (1)										789			83			1,528
Settlements - calls	(200		)	—			(1,081		)	(200		)	—			(1,081		)
Discount accretion (3)	4			3			402
Balance at June 30, 2014	$	4,275		$	3,820		$	146,931
Discount accretion (2)										4			5			664
Balance at September 30, 2014										$	4,487		$	3,869		$	148,473


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


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


(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:


	June 30, 2015								September 30, 2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)								(in thousands)
Net loans	$	—	$	—	$	145,058	$	145,058	$	—	$	—	$	145,518	$	145,518
Other financial assets	—		—		54,361		54,361		—		—		51,794		51,794
Total assets	$	—	$	—	$	199,419	$	199,419	$	—	$	—	$	197,312	$	197,312



	December 31, 2014
	Level 1		Level 2		Level 3		Total
	(in thousands)
Net loans	$	—	$	—	$	127,834	$	127,834
Other financial assets	—		—		54,170		54,170
Total assets	$	—	$	—	$	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 5, "Loans and Allowance for Credit Losses," for additional details.

Other financial assets – This category includes OREO ($~~12.8~~10.6 million at ~~June~~September 30, 2015 and $12.0 million at December 31, 2014) and MSRs ($~~41.6~~41.2 million at ~~June~~September 30, 2015 and $42.1 million at December 31, 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 ~~June~~September 30, 2015 valuation were ~~11.3%~~11.6% and 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 ~~June~~September 30, 2015 and December 31, 2014. In addition, a general description of the methods and assumptions used to estimate such fair values is also provided.


	June 30, 2015				December 31, 2014				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	$	100,455	$	100,455	$	105,702	$	105,702	$	93,803	$	93,803	$	105,702	$	105,702
Interest-bearing deposits with other banks	322,218		322,218		358,130		358,130		510,943		510,943		358,130		358,130
Federal Reserve Bank and Federal Home Loan Bank stock	65,106		65,106		64,953		64,953		68,977		68,977		64,953		64,953
Loans held for sale (1)	33,980		33,980		17,522		17,522		26,937		26,937		17,522		17,522
Available for sale investment securities (1)	2,440,492		2,440,492		2,323,371		2,323,371		2,436,337		2,436,337		2,323,371		2,323,371
Loans, net of unearned income (1)	13,244,230		13,129,521		13,111,716		13,030,543		13,536,361		13,428,016		13,111,716		13,030,543
Accrued interest receivable	41,193		41,193		41,818		41,818		42,846		42,846		41,818		41,818
Other financial assets (1)	157,792		157,792		169,764		169,764		174,835		174,835		169,764		169,764
FINANCIAL LIABILITIES
Demand and savings deposits	$	10,501,956	$	10,501,956	$	10,296,055	$	10,296,055	$	11,148,667	$	11,148,667	$	10,296,055	$	10,296,055
Time deposits	3,003,753		2,999,352		3,071,451		3,069,883		2,935,727		2,944,618		3,071,451		3,069,883
Short-term borrowings	409,035		409,035		329,719		329,719		431,631		431,631		329,719		329,719
Accrued interest payable	15,172		15,172		18,045		18,045		14,727		14,727		18,045		18,045
Other financial liabilities (1)	175,220		175,220		172,786		172,786		192,281		192,281		172,786		172,786
Federal Home Loan Bank advances and long-term debt	1,132,641		1,152,810		1,139,413		1,142,980		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 14 – Common Stock Repurchase Plans

In 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 iswas authorized to repurchase up to $50.0 million of its outstanding shares of common stock, or approximately 2.3% of its outstanding shares, through December 31, 2015. Repurchased shares may be added to treasury stock, at cost, and will be used for general corporate purposes. 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. Through ~~June~~September 30, 2015, ~~1.5~~approximately 4.0 million shares had been repurchased under this program for a total cost of ~~$19.0~~$50.0 million, or ~~$12.36~~$12.57 per ~~share.~~share, completing this 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 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 1516 – Subsequent Event

In ~~June~~October 2015, the Corporation ~~issued $150~~announced that its board of directors had approved a share repurchase program pursuant to which the Corporation is authorized to repurchase up to $50.0 million of ~~ten-year subordinated notes, which mature on November 15, 2024~~its outstanding shares of common stock, or approximately 2.3% of its outstanding shares, through December 31, 2016. Repurchased shares will be added to treasury stock, at cost. As permitted by securities laws and ~~carry a fixed rate of 4.50%~~other legal requirements and ~~an effective rate of approximately 4.70% as a result of issuance costs. Interest is paid semi-annually~~subject to market conditions and other factors, purchases may be made from time to time in ~~May and November.~~

open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase transactions. The proceeds from the issuance of the subordinated notes were used to redeem $150 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.share repurchase program may be discontinued at any time.

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") relates to Fulton Financial Corporation (the "Corporation"), a financial holding company registered under the Bank Holding Company Act of 1956 and incorporated under the laws of the Commonwealth of Pennsylvania in 1982, and its wholly owned subsidiaries. Management’s Discussion should be read in conjunction with the consolidated financial statements and notes 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 conditions in the economy and capital markets on the performance of the Corporation’s loan portfolio and 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 loans and incur elevated collection and carrying costs related to such non-performing assets;

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

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

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

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

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

the Corporation’s failure to identify and to address cyber-security risks;

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

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

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

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

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

RESULTS OF OPERATIONS

Overview and 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") 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 June 30						As of or for the Six months ended June 30						As of or for the Three months ended September 30						As of or for the Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014
Income before income taxes (in thousands)	$	48,855		$	53,096		$	102,395		$	109,113		$	44,579		$	51,968		$	146,974		$	161,081
Net income (in thousands)	$	36,680		$	39,596		$	76,716		$	81,379		$	34,251		$	38,566		$	110,967		$	119,945
Diluted net income per share	$	0.21		$	0.21		$	0.43		$	0.43		$	0.20		$	0.21		$	0.63		$	0.64
Return on average assets	0.86		%	0.94		%	0.90		%	0.97		%	0.78		%	0.90		%	0.86		%	0.95		%
Return on average equity	7.24		%	7.63		%	7.64		%	7.92		%	6.72		%	7.32		%	7.33		%	7.72		%
Net interest margin (1)	3.20		%	3.41		%	3.24		%	3.44		%	3.18		%	3.39		%	3.22		%	3.42		%
Non-performing assets to total assets	0.93		%	0.96		%	0.93		%	0.96		%	0.87		%	0.91		%	0.87		%	0.91		%
Annualized net charge-offs to average loans	0.38		%	0.28		%	0.23		%	0.27		%	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 three months and ~~six~~nine months ended ~~June~~September 30, 2015 decreased ~~$4.2~~$7.4 million, or ~~8.0%~~14.2%, and ~~$6.7~~$14.1 million, or ~~6.2%~~8.8%, respectively, compared to the same periods of 2014. The Corporation's results for the three and ~~six~~nine months ended ~~June~~September 30, 2015 in comparison to the same periods in 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 and higher non-interest income.

Following is a summary of financial highlights for the three and ~~six~~nine months ended ~~June~~September 30, 2015:

Net Interest Income and Net Interest Margin - For the three and ~~six~~nine months ended ~~June~~September 30, 2015, net interest income decreased ~~$5.0~~$3.7 million, or ~~3.9%~~2.8%, and ~~$11.0~~$14.6 million, or ~~4.3%~~3.8%, respectively, in comparison to the same periods in 2014.

For both the three and ~~six~~nine 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.The second~~assets. In the third quarter of 2015, ~~saw a~~net interest margin decreased 21 basis ~~point decrease in the net interest margin~~points in comparison to the same period in 2014, asmainly due to a 22 basis point decrease in yields on interest-earning ~~assets declined 18 basis points, while the cost of interest-bearing liabilities increased 6 basis points.~~assets. For the first ~~six~~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 decreased 1618 basis points and the cost of interest-bearing liabilities increased 85 basis points.

Average interest-earning assets increased ~~$383.3~~$553.4 million, or ~~2.5%~~3.5%, in the ~~second~~third quarter of 2015 in comparison to the same period of 2014, mainly due to a ~~$396.9~~$447.1 million, or ~~3.1%~~3.5%, increase in average loans and a ~~$200.5~~$183.9 million, or ~~83.9%~~62.7%, increase in other interest-earning assets, partially offset by a ~~$222.9~~$74.5 million, or ~~8.9%~~3.0%, decrease in average investment securities.

Average interest-earning assets increased ~~$315.9~~$395.9 million, or ~~2.0%~~2.5%, in the first ~~half~~nine months of 2015 in comparison to the same period of 2014, primarily as a result of a ~~$365.2~~$392.8 million, or ~~2.9%~~3.1%, increase in average loans and a ~~$207.8~~$199.7 million, or ~~83.5%~~75.7%, increase in other interest-earning assets, partially offset by a ~~$263.3~~$199.7 million, or ~~10.4%~~7.9%, decrease in average investment securities.

Average interest-bearing liabilities ~~decreased $69.3~~increased $127.3 million, or ~~0.6%~~1.1%, in the ~~second~~third quarter of 2015 in comparison to the ~~second~~third quarter of 2014, primarily due to a ~~$667.7~~$469.2 million, or ~~63.7%~~4.9%, increase in interest-bearing deposits, partially offset by a $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 11.1%, increase in noninterest-bearing deposits.

During the first nine months of 2015, average interest-bearing liabilities decreased $37.6 million, or 0.3%, in comparison to the first nine months of 2014 primarily due to a $634.7 million, or 65.2%, decrease in average short-term borrowings, offset by a ~~$465.9~~$473.3 million, or ~~5.0%~~5.1%, increase in interest-bearing deposits and a ~~$132.5~~$123.7 million, or ~~14.8%~~13.4%, increase in FHLB advances and long-term debt. Additional funding to support the increase in interest-earning assets was provided by a ~~$412.7~~$407.0 million, or ~~12.4%, increase in noninterest-bearing deposits.~~

During the first half of 2015, average interest-bearing liabilities decreased $121.4 million, or 1.1%, in comparison to the first half of 2014 primarily due to a $783.1 million, or 69.4%, decrease in average short-term borrowings, offset by a $475.4 million, or 5.1%, increase in interest-bearing deposits and a $186.2 million, or 20.9%, increase in FHLB advances and long-term debt. Additional funding to support the increase in interest-earning assets was provided by a $415.6 million, or 12.7%12.1%, increase in noninterest-bearing deposits.

Asset Quality - The Corporation recorded a ~~$2.2~~$1.0 million provision for credit losses during the three months ended ~~June~~September 30, 2015, compared to a $3.5 million provision for ~~credit losses for~~ the same period in 2014. During the ~~six~~nine months ended ~~June~~September 30, 2015, the Corporation recorded a ~~$1.5 million~~$500,000 negative provision for credit losses compared to a ~~$6.0~~$9.5 million provision ~~for credit losses~~ for the same period in 2014.

Annualized net charge-offs to average loans outstanding were ~~0.38%~~0.03% for the ~~second~~third quarter of 2015, compared to ~~0.28%~~0.18% for the ~~second~~third quarter of 2014. For the first ~~six~~nine months of 2015, annualized net charge-off to average loans outstanding were ~~0.23%~~0.16% compared to ~~0.27%~~0.24% for the same period of ~~2014. Non-performing loans increased $193,000 since June 30, 2014. The total delinquency rate was 1.60% as of June 30, 2015, compared to 1.75% as of June 30,~~ 2014.

Non-interest Income - For the three and ~~six~~nine months ended ~~June~~September 30, 2015, non-interest income, excluding investment securities gains, increased ~~$314,000,~~$1.2 million, or ~~0.7%~~2.9%, and ~~$2.4~~$3.6 million, or 2.9%, respectively, in comparison to the same periods in 2014. The increase in the ~~second~~third quarter of 2015 compared to the ~~second~~third quarter of 2014 was primarily a result of an increase in other service charges and fees, partially offset by lower mortgage banking income. The increase realized during the first ~~half~~nine months of 2015 compared to the first ~~half~~nine months of 2014 resulted from increases in other service charges and fees, mortgage banking income and other income.

Gains on sales of investment securities for the three and ~~six~~nine months ended ~~June~~September 30, 2015 were ~~$2.4~~$1.7 million and ~~$6.6~~$8.3 million, respectively, as compared to ~~$1.1~~$81,000 and $1.2 million, respectively, for ~~both~~ the three and ~~six~~nine months ended ~~June~~September 30, 2014.

Non-interest Expense - For the three and ~~six~~nine months ended ~~June~~September 30, 2015, non-interest expense increased ~~$2.2~~$9.1 million, or ~~1.9%~~7.9%, and ~~$11.1~~$20.2 million, or ~~4.9%~~5.9%, respectively, in comparison to the same periods in 2014. ~~Increases~~Included in ~~both comparative~~non-interest expense for the three and nine months ended September 30, 2015 was a $5.6 million loss incurred on the redemption of trust preferred securities ("TruPS"). Excluding this loss, non-interest expense increased $3.5 million, or 3.0%, and $14.6 million, or 4.3%, respectively, for the three and nine months ended September 30, 2015 compared to the same periods ~~were seen primarily~~ in salaries and employee benefits, data processing and other outside services. These increases were mitigated by lower professional fees in both periods and a decrease in operating risk loss in the six-month period.2014.

In both 2015 and 2014, the Corporation implemented cost savings initiatives ~~to mitigate~~that mitigated the impact of elevated ~~expense levels~~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 ~~six~~nine months of 2015, these initiatives included the consolidation of ~~nine~~11 branches, modifications to retirement benefits and the elimination of certain positions. These actions resulted in implementation expenses of ~~$520,000 in the second quarter of 2015 and $2.0~~$2.1 million for the first ~~six~~nine months ~~of 2015. In July 2015, the Corporation consolidated two additional branches, which are expected to result in approximately $200,000 additional implementation expenses in the third quarter~~ 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~~

.2015.

In 2014, cost savings initiatives resulted in implementation expenses, net of associated gains, of $980,000 during the first ~~six months and cost~~nine months. Cost savings ~~for the full year of~~from these initiatives are estimated to be approximately $7$7.9 million ~~or a projected annualized rate of $7.9 million.~~annually.

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


	Three months ended June 30, 2015					Six months ended June 30, 2015												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 Expense Reductions for the Year Ending December 31, 2015			Projected Annualized Cost Savings			Implementation Expenses		Expense Reductions			Implementation Expenses			Expense Reductions						Estimated Annualized Cost Savings
	(in thousands)																	(in thousands)
Branch consolidations	$	520	$	(165	)	$	1,570		$	(165	)	$	(1,690	)	$	(3,050	)	$	70	$	(660	)	$	1,640		$	(825	)	$	(1,590	)	$	(3,050	)
Modification of retirement benefits and staffing reductions	—		(740		)	450			(1,495		)	(3,065		)	(3,470		)	—		(870		)	450			(2,365		)	(3,235		)	(3,470		)
2015 cost savings initiatives	$	520	$	(905	)	$	2,020		$	(1,660	)	$	(4,755	)	$	(6,520	)	$	70	$	(1,530	)	$	2,090		$	(3,190	)	$	(4,825	)	$	(6,520	)

	Three months ended June 30, 2014					Six months ended June 30, 2014												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 (Gains)		Expense Reductions			Implementation Expenses (Gains)			Expense Reductions			Actual Expense Reductions for the Year Ended December 31, 2014			Projected Annualized Cost Savings			Implementation Expenses		Expense Reductions			Implementation Expenses (Gains)			Expense Reductions						Estimated Annualized Cost Savings
	(in thousands)																	(in thousands)
Branch consolidations	$	—	$	(800	)	$	2,080		$	(800	)	$	(2,400	)	$	(3,200	)	$	—	$	(800	)	$	2,080		$	(1,600	)	$	(2,400	)	$	(3,200	)
Subsidiary bank management reductions and other employee benefit reductions	—		(1,175		)	(1,100		)	(2,195		)	(4,550		)	(4,700		)	—		(1,175		)	(1,100		)	(3,370		)	(4,550		)	(4,700		)
2014 cost savings initiatives	$	—	$	(1,975	)	$	980		$	(2,995	)	$	(6,950	)	$	(7,900	)	$	—	$	(1,975	)	$	980		$	(4,970	)	$	(6,950	)	$	(7,900	)

Regulatory Enforcement Orders ~~-During~~- During 2014 and 2015, the Corporation and each of its banking subsidiaries became subject to regulatory enforcement orders (the "Regulatory Orders") issued by banking regulatory agencies relating to identified deficiencies in a 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 Orders are described in more detail in Part II. Other Information, Item 1. Legal Proceedings.

The Regulatory Orders require, among other things, that the Corporation and its banking subsidiaries review, assess and take actions to strengthen and enhance the BSA/AML Compliance Program, and, in some cases, conduct retrospective reviews of past account activity and transactions, as well as certain reports filed in accordance with the BSA/AML Requirements, to determine whether suspicious activity and certain transactions in currency were properly identified and reported in accordance with the BSA/AML Requirements.

In addition to requiring strengthening and enhancement of the BSA/AML Compliance Program, while the Regulatory Orders remain in effect, the 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 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.

Additional expenses and investments have been incurred as the Corporation expanded its hiring of personnel and use of outside professionals, such as consulting and legal services, and 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 Regulatory Orders, have had an adverse effect on the Corporation’s results of operations in recent periods and 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 ~~six~~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 50 to 83 basis points ~~over~~during the ~~remaining six months~~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

~~In July 2015,~~Excluding the ~~Corporation incurred a $5.6 million~~ loss on the redemption of ~~the $150 million of trust preferred securities (see Note 15, "Subsequent Event," in the Notes to the Consolidated Financial Statements). Excluding this loss, the original outlook for~~TruPS, non-interest expense growth ~~remains unchanged.~~is expected to be at, or slightly above, the low single digit range.

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

Net Interest Income

Fully-taxable equivalent (FTE) net interest income decreased ~~$4.7~~$3.4 million, to ~~$127.4~~$130.3 million, in the ~~second~~third quarter of 2015, from ~~$132.2~~$133.7 million in the ~~second~~third quarter of 2014. This decrease was primarily due to a 21 basis point, or 6.2%, decrease in the net interest margin, to ~~3.20%~~3.18% for the ~~second~~third quarter of 2015 from ~~3.41%~~3.39% for the ~~second~~third quarter of 2014, partially offset by the impact of an increase in average interest-earning assets. The following table provides a comparative average balance sheet and net interest income analysis for the ~~second~~third quarter of 2015 as compared to the same period in 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 June 30																2015								2014
	2015								2014								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)	$	13,192,600		$	133,339		4.05	%	$	12,795,747		$	134,387		4.21	%	$	13,369,874		$	135,268		4.02	%	$	12,922,821		$	136,773		4.20	%
Taxable investment securities (3)	2,048,558			10,944			2.14		2,211,004			12,418			2.25		2,148,403			11,252			2.09		2,181,099			12,278			2.25
Tax-exempt investment securities (3)	216,355			2,894			5.35		270,482			3,534			5.23		230,178			2,929			5.09		256,303			3,414			5.33
Equity securities (3)	27,618			379			5.50		33,922			419			4.95		18,280			257			5.58		34,002			438			5.12
Total investment securities	2,292,531			14,217			2.48		2,515,408			16,371			2.60		2,396,861			14,438			2.41		2,471,404			16,130			2.61
Loans held for sale	26,335			265			4.03		17,540			214			4.87		20,704			194			3.74		23,699			237			4.01
Other interest-earning assets	439,425			933			0.85		238,921			1,207			2.02		477,145			884			0.74		293,286			976			1.33
Total interest-earning assets	15,950,891			148,754			3.74	%	15,567,616			152,179			3.92	%	16,264,584			150,784			3.68	%	15,711,210			154,116			3.90	%
Noninterest-earning assets:
Cash and due from banks	104,723								198,291								104,622								203,134
Premises and equipment	226,569								224,586								226,446								224,241
Other assets	1,094,071								1,037,654								1,097,600								1,055,521
Less: Allowance for loan losses	(176,085		)						(196,462		)						(168,770		)						(192,163		)
Total Assets	$	17,200,169							$	16,831,685							$	17,524,482							$	17,001,943
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Demand deposits	$	3,152,697		$	987		0.13	%	$	2,914,887		$	904		0.12	%	$	3,316,532		$	1,122		0.13	%	$	3,047,191		$	953		0.12	%
Savings deposits	3,568,579			1,247			0.14		3,355,929			1,031			0.12		3,714,282			1,436			0.15		3,468,958			1,061			0.12
Time deposits	3,027,520			7,819			1.04		3,012,061			6,750			0.90		2,963,774			7,659			1.03		3,009,225			6,984			0.92
Total interest-bearing deposits	9,748,796			10,053			0.41		9,282,877			8,685			0.38		9,994,588			10,217			0.41		9,525,374			8,998			0.37
Short-term borrowings	379,988			103			0.11		1,047,684			540			0.21		324,685			92			0.11		667,397			297			0.18
Federal Home Loan Bank advances and long-term debt	1,026,987			11,153			4.35		894,511			10,779			4.83		996,247			10,225			4.09		995,486			11,129			4.45
Total interest-bearing liabilities	11,155,771			21,309			0.77	%	11,225,072			20,004			0.71	%	11,315,520			20,534			0.72	%	11,188,257			20,424			0.73	%
Noninterest-bearing liabilities:
Demand deposits	3,734,880								3,322,195								3,904,176								3,514,033
Other	277,730								202,520								281,957								210,194
Total Liabilities	15,168,381								14,749,787								15,501,653								14,912,484
Shareholders’ equity	2,031,788								2,081,898								2,022,829								2,089,459
Total Liabilities and Shareholders’ Equity	$	17,200,169							$	16,831,685							$	17,524,482							$	17,001,943
Net interest income/net interest margin (FTE)				127,445			3.20	%				132,175			3.41	%				130,250			3.18	%				133,692			3.39	%
Tax equivalent adjustment				(4,525		)						(4,277		)						(4,556		)						(4,326		)
Net interest income				$	122,920							$	127,898							$	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.

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 ~~June~~September 30:


	2015 vs. 2014 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	$	4,116		$	(5,164	)	$	(1,048	)	$	4,565		$	(6,070	)	$	(1,505	)
Taxable investment securities	(885		)	(589		)	(1,474		)	(178		)	(848		)	(1,026		)
Tax-exempt investment securities	(719		)	79			(640		)	(336		)	(149		)	(485		)
Equity securities	(84		)	44			(40		)	(217		)	36			(181		)
Loans held for sale	93			(42		)	51			(28		)	(15		)	(43		)
Other interest-earning assets	663			(937		)	(274		)	457			(549		)	(92		)
Total interest income	$	3,184		$	(6,609	)	$	(3,425	)	$	4,263		$	(7,595	)	$	(3,332	)
Interest expense on:
Demand deposits	$	41		$	42		$	83		$	87		$	82		$	169
Savings deposits	59			157			216			83			292			375
Time deposits	34			1,035			1,069			(111		)	786			675
Short-term borrowings	(250		)	(187		)	(437		)	(116		)	(89		)	(205		)
Federal Home Loan Bank advances and long-term debt	1,505			(1,131		)	374			9			(913		)	(904		)
Total interest expense	$	1,389		$	(84	)	$	1,305		$	(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, ~~an 18~~a 22 basis point, or ~~4.6%~~5.6%, decrease in yields on average interest-earning assets, primarily loans, resulted in a ~~$6.6~~$7.6 million decrease in FTE interest income, partially offset by a ~~$3.2~~$4.3 million increase in FTE interest income as a result of an increase in interest-earning assets, ~~primarily~~the net effect of increases in loans and other interest-earning assets, ~~partially offset by~~and a decrease in investment securities.

Average investment securities decreased ~~$222.9~~$74.5 million, or ~~8.9%~~3.0%, as portfolio cash flows were not fully reinvested. The yield on average investment securities decreased 1220 basis points, or ~~4.6%~~7.7%, to ~~2.48%~~2.41% in the ~~second~~third quarter of 2015 from ~~2.60%~~2.61% in the ~~second~~third quarter of 2014. The decrease in average investment securities was partially offset by a ~~$200.5~~$183.9 million, or ~~83.9%~~62.7%, 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.As a result, ~~average other interest-earning assets increased $200.5 million, however,~~ the average yield on other interest-earning assets decreased ~~117~~59 basis points, or ~~57.9%~~44.4%, despite the increase in average other interest-earning assets.

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


	Three months ended June 30								Increase (Decrease) in					Three months ended September 30								Increase (Decrease) in
	2015				2014				Balance					2015				2014				Balance
	Balance		Yield		Balance		Yield		$			%		Balance		Yield		Balance		Yield		$			%
	(dollars in thousands)													(dollars in thousands)
Real estate – commercial mortgage	$	5,210,540	4.15	%	$	5,138,537	4.36	%	$	72,003		1.4	%	$	5,242,021	4.09	%	$	5,114,221	4.35	%	$	127,800		2.5	%
Commercial – industrial, financial and agricultural	3,836,397		3.79		3,617,977		3.95		218,420			6.0		3,887,161		3.78		3,657,047		3.97		230,114			6.3
Real estate – home equity	1,695,171		4.11		1,735,767		4.18		(40,596		)	(2.3	)	1,692,860		4.08		1,727,253		4.18		(34,393		)	(2.0	)
Real estate – residential mortgage	1,356,464		3.82		1,339,034		3.97		17,430			1.3		1,381,141		3.78		1,369,087		3.93		12,054			0.9
Real estate – construction	698,685		3.97		588,176		4.17		110,509			18.8		753,584		3.88		663,922		3.98		89,662			13.5
Consumer	265,354		5.48		276,444		4.56		(11,090		)	(4.0	)	270,391		5.81		284,630		5.39		(14,239		)	(5.0	)
Leasing and other	129,989		6.94		99,812		9.20		30,177			30.2		142,716		6.79		106,661		7.32		36,055			33.8
Total	$	13,192,600	4.05	%	$	12,795,747	4.21	%	$	396,853		3.1	%	$	13,369,874	4.02	%	$	12,922,821	4.20	%	$	447,053		3.5	%

Average loans increased ~~$396.9~~$447.1 million, or ~~3.1%~~3.5%, compared to the ~~second~~third quarter of 2014, mainly in commercial loans, construction loans and leasing and other. The growth in commercial loans and leasing and other was driven by a combination of loans and leases to new customers and increased borrowings from existing 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 1618 basis points, or ~~3.8%~~4.3%, to ~~4.05%~~4.02% in 2015 from ~~4.21%~~4.20% in 2014. The decrease in average yields on loans was attributable to repayments of higher-yielding loans, continued refinancing activity at lower rates, and new loan production at rates lower than the overall portfolio yield.

~~Interest expense~~Average total interest-bearing liabilities increased ~~$1.3~~$127.3 million, or ~~6.5%, to $21.3 million in the second quarter of 2015 from $20.0 million in the second quarter of 2014. Although average interest-bearing liabilities decreased $69.3 million, or 0.6%~~1.1%, compared to the ~~second~~third quarter of ~~2014, 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 purchased and short-term FHLB advances to higher cost deposits and long-term FHLB advances and subordinated debt resulted in a $1.4 million 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 June 30								Increase in Balance				Three months ended September 30								Increase (Decrease) in Balance
	2015				2014				Increase in Balance				2015				2014				Increase (Decrease) in Balance
	Balance		Rate		Balance		Rate		$		%		Balance		Rate		Balance		Rate		$			%
	(dollars in thousands)												(dollars in thousands)
Noninterest-bearing demand	$	3,734,880	—	%	$	3,322,195	—	%	$	412,685	12.4	%	$	3,904,176	—	%	$	3,514,033	—	%	$	390,143		11.1	%
Interest-bearing demand	3,152,697		0.13		2,914,887		0.12		237,810		8.2		3,316,532		0.13		3,047,191		0.12		269,341			8.8
Savings	3,568,579		0.14		3,355,929		0.12		212,650		6.3		3,714,282		0.15		3,468,958		0.12		245,324			7.1
Total demand and savings	10,456,156		0.09		9,593,011		0.08		863,145		9.0		10,934,990		0.09		10,030,182		0.08		904,808			9.0
Time deposits	3,027,520		1.04		3,012,061		0.90		15,459		0.5		2,963,774		1.03		3,009,225		0.92		(45,451		)	(1.5	)
Total deposits	$	13,483,676	0.30	%	$	12,605,072	0.28	%	$	878,604	7.0	%	$	13,898,764	0.29	%	$	13,039,407	0.27	%	$	859,357		6.6	%

The ~~$863.1~~$904.8 million, or 9.0%, increase in total demand and savings accounts was primarily due to a ~~$399.2~~$427.4 million, or ~~12.2%~~12.3%, increase in business account balances, a ~~$281.6~~$352.3 million, or ~~6.0%~~7.6%, increase in personal account balances and a ~~$180.7~~$124.7 million, or ~~11.2%~~6.7%, increase in municipal account balances. The average cost of total deposits increased two basis points largely due to an increase in rates on average time deposits.

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


	Three months ended June 30								Increase (Decrease) in					Three months ended September 30								Increase (Decrease)
	2015				2014				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	$	179,804	0.10	%	$	216,212	0.11	%	$	(36,408	)	(16.8	)%	$	149,415	0.10	%	$	202,809	0.11	%	$	(53,394	)	(26.3	)%
Customer short-term promissory notes	80,073		—		81,823		0.05		(1,750		)	(2.1	)	79,308		0.02		83,734		0.05		(4,426		)	(5.3	)
Total short-term customer funding	259,877		0.07		298,035		0.09		(38,158		)	(12.8	)	228,723		0.07		286,543		0.09		(57,820		)	(20.2	)
Federal funds purchased	108,078		0.17		444,429		0.22		(336,351		)	(75.7	)	85,092		0.19		224,930		0.19		(139,838		)	(62.2	)
Short-term FHLB advances (1)	12,033		0.34		305,220		0.30		(293,187		)	(96.1	)	10,870		0.34		155,924		0.32		(145,054		)	(93.0	)
Total short-term borrowings	379,988		0.11		1,047,684		0.21		(667,696		)	(63.7	)	324,685		0.11		667,397		0.18		(342,712		)	(51.4	)
Long-term debt:
FHLB advances	627,939		3.51		524,782		4.07		103,157			19.7		618,010		3.49		625,712		3.60		(7,702		)	(1.2	)
Other long-term debt	399,048		5.67		369,729		5.90		29,319			7.9		378,237		5.06		369,774		5.89		8,463			2.3
Total long-term debt	1,026,987		4.35		894,511		4.83		132,476			14.8		996,247		4.09		995,486		4.45		761			0.1
Total borrowings	$	1,406,975	3.20	%	$	1,942,195	2.33	%	$	(535,220	)	(27.6	)%

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

Total short-term borrowings decreased ~~$667.7~~$342.7 million, or ~~63.7%~~51.4%, primarily in Federal funds purchased and short-term FHLB advances. The decrease was driven by lower wholesale funding needs resulting from the increase in average deposits exceeding the growth in average interest-earning assets.

~~The $103.2 million increase in FHLB advances was a result of the Corporation’s efforts to lengthen maturities and lock in longer-term rates, while the $29.3 million increase in~~Average other long-term debt increased $8.5 million, or 2.3%. This increase was ~~a result~~the net impact of the ~~issuance~~maturity of ~~$150.0~~$100.0 million of subordinated debt in ~~June 2015. The issuance~~April 2015 and the redemption of ~~$100~~$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 ~~maturity~~cost of ~~$100~~other long-term debt decreased 83 basis points.

In the third quarter of 2015, the Corporation executed two transactions to restructure its long-term FHLB advances. First, $200 million of ~~subordinated debt~~FHLB advances, with a weighted average rate of 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 ~~April 1, 2015 had no net impact on comparative average balances for~~a quarterly basis by approximately $750,000, beginning in the ~~quarter.~~

~~The average cost~~fourth quarter of ~~total borrowings increased 87 basis points, or 37.3%,~~2015. Second, forward agreements were executed to ~~3.20%~~refinance an additional $200 million of FHLB advances when they mature in ~~2015~~December 2016. These forward agreements have maturity dates from ~~2.33% in 2014, primarily due~~March 2021 to December 2021 and will reduce the weighted average ~~cost impact of~~rate on these advances from 4.03% to 2.40% and decrease interest expense on a ~~decrease in lower-cost, short-term borrowings, which were 27.0% of total borrowings~~quarterly basis by approximately $800,000 beginning in the ~~second~~first quarter of ~~2015, compared to 53.9% for the same period in 2014.~~2017.

Provision for Credit Losses

The provision for credit losses was ~~$2.2~~$1.0 million for the ~~second~~third quarter of 2015, a decrease of ~~$1.3~~$2.5 million from the ~~second~~third quarter of 2014. This decrease resulted from lower allowance for credit losses allocation needs as asset quality 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 June 30				Increase (Decrease)					Three months ended September 30				Increase (Decrease)
	2015		2014		$			%		2015		2014		$			%
	(dollars in thousands)									(dollars in thousands)
Service charges on deposit accounts:
Overdraft fees	$	5,353	$	5,542	$	(189	)	(3.4	)%	$	5,652	$	5,806	$	(154	)	(2.7	)%
Cash management fees	3,369		3,293		76			2.3		3,418		3,191		227			7.1
Other	3,915		3,717		198			5.3		3,912		3,804		108			2.8
Total service charges on deposit accounts	12,637		12,552		85			0.7		12,982		12,801		181			1.4
Investment management and trust services	11,011		11,339		(328		)	(2.9	)	11,237		11,120		117			1.1
Other service charges and fees:
Merchant fees	4,088		3,843		245			6.4		4,000		3,774		226			6.0
Debit card income	2,626		2,435		191			7.8		2,572		2,407		165			6.9
Letter of credit fees	1,174		1,184		(10		)	(0.8	)	1,143		1,163		(20		)	(1.7	)
Commercial swap fees	1,026		994		32			3.2		1,251		537		714			133.0
Other	2,074		2,070		4			0.2		1,999		2,073		(74		)	(3.6	)
Total other service charges and fees	10,988		10,526		462			4.4		10,965		9,954		1,011			10.2
Mortgage banking income:
Gain on sales of mortgage loans	4,428		2,974		1,454			48.9		2,627		2,613		14			0.5
Mortgage servicing income	911		2,767		(1,856		)	(67.1	)	1,237		1,425		(188		)	(13.2	)
Total mortgage banking income	5,339		5,741		(402		)	(7.0	)	3,864		4,038		(174		)	(4.3	)
Credit card income	2,474		2,353		121			5.1		2,548		2,331		217			9.3
Other income	1,625		1,249		376			30.1		1,448		1,575		(127		)	(8.1	)
Total, excluding gains on sales of investment securities	44,074		43,760		314			0.7		43,044		41,819		1,225			2.9
Net gains on sales of investment securities	2,415		1,112		1,303			117.2		1,730		81		1,649			N/M
Total	$	46,489	$	44,872	$	1,617		3.6	%	$	44,774	$	41,900	$	2,874		6.9	%

N/M - Not meaningful

Excluding ~~net~~ gains on sales of investment securities, non-interest income increased ~~$314,000,~~$1.2 million, or ~~0.7%~~2.9%, the net effect of modest increases in certain income categories being partially offset by modest decreases in others. ~~The following is~~Other service charges and fees grew $1.0 million, or 10.2%, driven mainly by a ~~discussion of some of the more noteworthy items.~~

The $189,000, or 3.4%, decrease in overdraft fee income consisted of a $158,000 decrease in fees assessed on personal accounts and a $31,000 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. Partially offsetting the decrease in overdraft fee income was a $198,000, or 5.3%,$714,000 increase in ~~other service charges on deposits.~~

~~Investment management and trust services income decreased $328,000, or 2.9%, mainly in brokerage income~~commercial swap fees as ~~a result of declines in retail referrals.~~

~~The $245,000, or 6.4%, increase in merchant fee income and the $191,000, or 7.8%, increase in debit card income were due to an increase in the~~new loan volumes ~~of transactions~~increased in comparison to the ~~second~~third quarter of ~~2015.~~2014. Service charges on deposits increased a moderate $181,000, or 1.4%, as a $227,000, or 7.1%, increase in cash management fees resulting from changes in fee structures were partially offset by lower overdraft fees.

Gains on sales of mortgage loans ~~increased $1.5 million, or 48.9%, due to a 41.6% increase in pricing spreads and a $13.5 million, or 5.2%, increase in new loan commitments~~remained flat when compared to the ~~second~~third quarter of ~~2014.~~2014, the net effect of a 13.7% increase in volumes and a 11.6% decrease in spreads. Mortgage servicing income decreased ~~$1.9 million,~~$188,000, or ~~67.1%~~13.2%, due to an increase in amortization of mortgage servicing rights (MSRs), as prepayments were ~~higher.~~

~~The $376,000, or 30.1%, increase in other income was~~higher due to higher ~~gains on~~refinancing volumes when compared to the ~~sales~~third quarter of ~~fixed assets.~~2014.

Investment securities gains for the ~~second~~third quarter of 2015 ~~were~~resulted from sales of financial institution stocks. Investment securities gains in the third quarter of 2014 resulted from sales of financial institution stocks, ~~and pooled trust preferred securities. Investment securities gains in the second quarter of 2014 were from sales of debt securities.~~partially offset by other-than-temporary impairment losses. See Note 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 June 30				Increase (Decrease)					Three months ended September 30				Increase (Decrease)
	2015		2014		$			%		2015		2014		$			%
	(dollars in thousands)									(dollars in thousands)
Salaries and employee benefits	$	65,067	$	63,623	$	1,444		2.3	%	$	65,308	$	62,434	$	2,874		4.6	%
Net occupancy expense	11,809		11,464		345			3.0		10,710		11,582		(872		)	(7.5	)
Other outside services	8,125		7,240		885			12.2		7,373		8,632		(1,259		)	(14.6	)
Loss on redemption of trust preferred securities										5,626		—		5,626			N/M
Data processing	4,894		4,331		563			13.0		5,105		4,689		416			8.9
Software	3,376		3,209		167			5.2		3,984		3,353		631			18.8
Equipment expense	3,335		3,360		(25		)	(0.7	)	3,595		3,307		288			8.7
FDIC insurance expense	2,885		2,615		270			10.3		2,867		2,882		(15		)	(0.5	)
Professional fees	2,731		3,559		(828		)	(23.3	)	2,828		3,252		(424		)	(13.0	)
Supplies and postage	2,726		2,451		275			11.2		2,708		2,560		148			5.8
Marketing	2,235		2,337		(102		)	(4.4	)	2,102		1,798		304			16.9
Telecommunications	1,617		1,787		(170		)	(9.5	)	1,587		1,587		—			—
Operating risk loss	674		716		(42		)	(5.9	)	1,136		1,242		(106		)	(8.5	)
Other real estate owned and repossession expense	129		748		(619		)	(82.8	)	1,016		1,303		(287		)	(22.0	)
Intangible amortization	106		315		(209		)	(66.3	)	5		314		(309		)	(98.4	)
Other	8,645		8,419		226			2.7		8,939		6,863		2,076			30.2
Total	$	118,354	$	116,174	$	2,180		1.9	%	$	124,889	$	115,798	$	9,091		7.9	%

N/M - Not meaningful

The ~~$1.4~~$2.9 million, or ~~2.3%~~4.6%, increase in salaries and employee benefits resulted from a ~~$2.2~~$2.3 million, or 4.2%, increase in salaries ~~partially offset by~~and a ~~$781,000,~~$625,000, or ~~7.2%~~6.7%, ~~decrease~~increase in employee benefits. The increase in salaries was primarily due to higher average salaries per full-time equivalent (FTE) employee and an increase in incentive compensation, partially offset by the impact of a decrease in the average number of ~~full-time equivalent~~FTE employees, to ~~3,470~~3,450 as of ~~June~~September 30, 2015 from 3,530 as of ~~June~~September 30, 2014. The decrease in FTE employees reflects the cost savings initiatives, primarily branch consolidations. The increase in employee benefits was primarily due to ~~decreases in employee healthcare costs and profit sharing expense, partially offset by an increase~~increases in defined benefit plan expense and other employee benefits, partially offset by a decrease in profit sharing expense.

The ~~$885,000,~~$1.3 million, or ~~12.2%~~14.6%, ~~increase~~decrease in other outside services ~~resulted from the timing of engagements~~was primarily in costs related to ~~risk management and compliance efforts, including those in connection with the enhancement of the Corporation’s program for compliance with the~~ BSA/AML ~~Requirements.~~

remediation efforts. The ~~$730,0000,~~$1.0 million, or ~~9.7%~~13.1%, combined increase in data processing and software resulted from increased transaction volume and contractual increases for expenses related to ~~the~~ core processing ~~system~~systems and amortization of capitalized software investments. The ~~$828,000, or 23.3%, decrease~~$2.1 million increase in ~~professional fees~~the other expenses was ~~due to~~largely impacted by costs associated with branch consolidations.

In July 2015, the Corporation redeemed $150.0 million of TruPS. In connection with this redemption, a ~~decrease in legal fees primarily resulting from the timing~~loss of ~~engagements with outside counsel.~~$5.6 million was recognized as a component of non-interest expense.

The $619,000, or 82.8%, decrease in other real estate expense was primarily due to a decrease in repossession expense. This expense category can experience volatility from period to period based on the timing of sales of properties and payments of expenses, such as real estate taxes.

Income Taxes

Income tax expense for the ~~second~~third quarter of 2015 was ~~$12.2~~$10.3 million, a ~~$1.3~~$3.1 million, or ~~9.8%~~22.9%, decrease from ~~$13.5~~$13.4 million for the ~~second~~third quarter of 2014.

The Corporation’s effective tax rate was ~~24.9%~~23.2% in the ~~second~~third quarter of 2015, as compared to ~~25.4%~~25.8% in the ~~second~~third quarter of 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.

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

Net Interest Income

FTE net interest income decreased ~~$10.5~~$13.9 million, or ~~3.9%~~3.5%, to ~~$255.5~~$385.8 million in the first ~~six~~nine months of 2015 from ~~$266.0~~$399.7 million in the same period of 2014. Net interest margin decreased 20 basis points, or 5.8%, to ~~3.24%~~3.22% for the first ~~six~~nine months of 2015 from ~~3.44%~~3.42% for the first ~~six~~nine months of 2014. The decrease in net interest margin was the result of ~~a 16~~an 18 basis point, or ~~4.1%~~4.6%, decrease in yields on interest-earning assets, ~~as well as an 8~~and a 5 basis point, or ~~11.4%~~7.0%, increase in funding costs.


																	Nine months ended September 30
	Six months ended June 30																2015								2014
	2015								2014								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)	$	13,144,332		$	266,394		4.08	%	$	12,779,145		$	269,131		4.24	%	$	13,220,339		$	401,662		4.06	%	$	12,827,563		$	405,904		4.23	%
Taxable investment securities (3)	2,027,170			22,226			2.19		2,234,259			25,684			2.30		2,068,025			33,478			2.16		2,216,344			37,962			2.28
Tax-exempt investment securities (3)	222,684			6,106			5.48		274,856			7,147			5.20		225,209			9,035			5.35		268,604			10,561			5.24
Equity securities (3)	29,901			829			5.58		33,922			848			5.03		25,985			1,086			5.59		33,949			1,286			5.06
Total investment securities	2,279,755			29,161			2.56		2,543,037			33,679			2.65		2,319,219			43,599			2.51		2,518,897			49,809			2.64
Loans held for sale	21,694			438			4.04		15,494			348			4.49		21,360			632			3.94		18,259			585			4.27
Other interest-earning assets	456,633			3,038			1.33		248,807			2,089			1.68		463,545			3,922			1.13		263,797			3,065			1.55
Total interest-earning assets	15,902,414			299,031			3.79	%	15,586,483			305,247			3.95	%	16,024,463			449,815			3.75	%	15,628,516			459,363			3.93	%
Noninterest-earning assets:
Cash and due from banks	104,996								198,962								104,870								200,368
Premises and equipment	226,480								225,436								226,469								225,033
Other assets	1,104,019								1,034,877								1,101,856								1,041,834
Less: Allowance for loan losses	(179,985		)						(199,813		)						(176,205		)						(197,235		)
Total Assets	$	17,157,924							$	16,845,945							$	17,281,453							$	16,898,516
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Demand deposits	$	3,144,358		$	1,970		0.13	%	$	2,929,965		$	1,813		0.12	%	$	3,202,380		$	3,092		0.13	%	$	2,969,470		$	2,766		0.12	%
Savings deposits	3,542,960			2,366			0.13		3,353,910			2,066			0.12		3,600,695			3,802			0.14		3,392,681			3,127			0.12
Time deposits	3,044,463			15,540			1.03		2,972,480			12,702			0.86		3,017,271			23,199			1.03		2,984,861			19,686			0.88
Total interest-bearing deposits	9,731,781			19,876			0.41		9,256,355			16,581			0.36		9,820,346			30,093			0.41		9,347,012			25,579			0.37
Short-term borrowings	344,797			180			0.10		1,127,872			1,173			0.21		338,019			272			0.11		972,694			1,470			0.20
FHLB advances and long-term debt	1,075,262			23,444			4.38		889,051			21,477			4.85		1,048,634			33,669			4.29		924,920			32,606			4.71
Total interest-bearing liabilities	11,151,840			43,500			0.78	%	11,273,278			39,231			0.70	%	11,206,999			64,034			0.76	%	11,244,626			59,655			0.71	%
Noninterest-bearing liabilities:
Demand deposits	3,698,661								3,283,027								3,767,919								3,360,876
Other	283,504								217,181								282,983								214,826
Total Liabilities	15,134,005								14,773,486								15,257,901								14,820,328
Shareholders’ equity	2,023,919								2,072,459								2,023,552								2,078,188
Total Liabilities and Shareholders’ Equity	$	17,157,924							$	16,845,945							$	17,281,453							$	16,898,516
Net interest income/net interest margin (FTE)				255,531			3.24	%				266,016			3.44	%				385,781			3.22	%				399,708			3.42	%
Tax equivalent adjustment				(9,030		)						(8,553		)						(13,586		)						(12,879		)
Net interest income				$	246,501							$	257,463							$	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 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 ~~six~~nine months of 2015 as compared to the same period in 2014 due to changes in average balances (volume) and changes in rates:


	2015 vs. 2014 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	$	7,755		$	(10,492	)	$	(2,737	)	$	12,249		$	(16,491	)	$	(4,242	)
Taxable investment securities	(2,166		)	(1,292		)	(3,458		)	(1,984		)	(2,500		)	(4,484		)
Tax-exempt investment securities	(1,362		)	321			(1,041		)	(1,299		)	(227		)	(1,526		)
Equity securities	(106		)	87			(19		)	(322		)	122			(200		)
Loans held for sale	130			(40		)	90			111			(64		)	47
Other interest-earning assets	1,468			(519		)	949			2,403			(1,546		)	857
Total interest income	$	5,719		$	(11,935	)	$	(6,216	)	$	11,158		$	(20,706	)	$	(9,548	)
Interest expense on:
Demand deposits	$	134		$	23		$	157		$	222		$	104		$	326
Savings deposits	120			180			300			200			475			675
Time deposits	315			2,523			2,838			216			3,297			3,513
Short-term borrowings	(566		)	(427		)	(993		)	(698		)	(500		)	(1,198		)
FHLB advances and long-term debt	4,252			(2,285		)	1,967			4,115			(3,052		)	1,063
Total interest expense	$	4,255		$	14		$	4,269		$	4,055		$	324		$	4,379

~~A 16~~An 18 basis point, or ~~4.1%~~4.6%, decrease in yields on average interest-earning assets resulted in ~~an $11.9~~a $20.7 million decrease in FTE interest ~~income, which~~income. This decrease was partially offset by ~~a $5.7~~an $11.2 million increase in FTE interest income resulting from a ~~$315.9~~$395.9 million, or ~~2.0%~~2.5%, increase in average interest-earning ~~assets, primarily~~assets. Increases in loans and other interest-earning assets were partially offset by a decrease in average investment securities.

Average investment securities decreased ~~$263.3~~$199.7 million, or ~~10.4%~~7.9%, as portfolio cash flows were not fully reinvested. The yield on average investments decreased 913 basis points, or ~~3.4%~~4.9%, to ~~2.56%~~2.51% in 2015 from ~~2.65%~~2.64% in 2014. The decrease in average investment securities was ~~partially~~ offset by a ~~$207.8~~$199.7 million, or ~~83.5%~~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 the yield on other interest-earning assets.

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


	Six months ended June 30								Increase (Decrease) in					Nine months ended September 30								Increase (Decrease)
	2015				2014				Balance					2015				2014				in Balance
	Balance		Yield		Balance		Yield		$			%		Balance		Yield		Balance		Yield		$			%
	(dollars in thousands)													(dollars in thousands)
Real estate – commercial mortgage	$	5,187,322	4.19	%	$	5,111,979	4.40	%	$	75,343		1.5	%	$	5,205,755	4.15	%	$	5,112,735	4.38	%	$	93,020		1.8	%
Commercial – industrial, financial and agricultural	3,803,475		3.83		3,627,471		3.99		176,004			4.9		3,831,678		3.81		3,637,440		3.98		194,238			5.3
Real estate – home equity	1,708,163		4.13		1,745,503		4.18		(37,340		)	(2.1	)	1,703,006		4.11		1,739,352		4.18		(36,346		)	(2.1	)
Real estate – residential mortgage	1,363,382		3.83		1,337,686		3.98		25,696			1.9		1,369,367		3.81		1,348,269		3.96		21,098			1.6
Real estate – construction	693,715		3.95		582,294		4.13		111,421			19.1		713,893		3.93		609,803		4.08		104,090			17.1
Consumer	262,265		5.37		275,682		4.69		(13,417		)	(4.9	)	265,002		5.52		278,697		4.93		(13,695		)	(4.9	)
Leasing and other	126,010		7.64		98,530		9.72		27,480			27.9		131,638		7.33		101,267		8.88		30,371			30.0
Total	$	13,144,332	4.08	%	$	12,779,145	4.24	%	$	365,187		2.9	%	$	13,220,339	4.06	%	$	12,827,563	4.23	%	$	392,776		3.1	%

The average yield on loans decreased 1617 basis points, or ~~3.8%~~4.0%, to ~~4.08%~~4.06% in 2015 from ~~4.24%~~4.23% in 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.~~rates. Average loan balances increased ~~$365.2~~$392.8 million, or ~~2.9%~~3.1%. The ~~$176.0~~$194.2 million, or ~~4.9%~~5.3%, increase in commercial loans, ~~and~~ the ~~$111.4~~$104.1 million, or ~~19.1%~~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 ~~$4.3~~$4.4 million, or ~~10.9%~~7.3%, to ~~$43.5~~$64.0 million in the first ~~six~~nine months of 2015 from ~~$39.2~~$59.7 million in the first ~~six~~nine months of 2014. Although total average interest-bearing liabilities decreased ~~$121.4~~$37.6 million, or ~~1.1%~~0.3%, compared to the first ~~six~~nine months of 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 ~~$4.3~~$4.1 million increase in interest ~~expense.~~expense attributable to volume.

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


	Six months ended June 30								Increase in Balance				Nine months ended September 30								Increase in Balance
	2015				2014				Increase in Balance				2015				2014				Increase in Balance
	Balance		Rate		Balance		Rate		$		%		Balance		Rate		Balance		Rate		$		%
	(dollars in thousands)												(dollars in thousands)
Noninterest-bearing demand	$	3,698,661	—	%	$	3,283,027	—	%	$	415,634	12.7	%	$	3,767,919	—	%	$	3,360,876	—	%	$	407,043	12.1	%
Interest-bearing demand	3,144,358		0.13		2,929,965		0.12		214,393		7.3		3,202,380		0.13		2,969,470		0.12		232,910		7.8
Savings	3,542,960		0.13		3,353,910		0.12		189,050		5.6		3,600,695		0.14		3,392,681		0.12		208,014		6.1
Total demand and savings	10,385,979		0.08		9,566,902		0.08		819,077		8.6		10,570,994		0.09		9,723,027		0.08		847,967		8.7
Time deposits	3,044,463		1.03		2,972,480		0.86		71,983		2.4		3,017,271		1.03		2,984,861		0.88		32,410		1.1
Total deposits	$	13,430,442	0.30	%	$	12,539,382	0.27	%	$	891,060	7.1	%	$	13,588,265	0.30	%	$	12,707,888	0.27	%	$	880,377	6.9	%

The ~~$819.1~~$848.0 million, or ~~8.6%~~8.7%, increase in total demand and savings account balances was primarily due to a ~~$410.6~~$416.3 million, or ~~12.6%~~12.5%, increase in business account balances, a ~~$240.1~~$277.9 million, or ~~5.2%~~6.0%, increase in personal account balances and a ~~$168.5~~$153.8 million, or ~~10.3%~~8.9%, increase in municipal account balances. The average cost of deposits increased 3 basis points, or 11.1%, to 0.30% in 2015 from 0.27% in 2014, primarily due to an increase in higher-cost time deposits.

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


	Six months ended June 30								Increase (Decrease) in					Nine months ended September 30								Increase (Decrease)
	2015				2014				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	$	176,732	0.10	%	$	201,866	0.11	%	$	(25,134	)	(12.5	)%	$	167,526	0.10	%	$	202,184	0.11	%	$	(34,658	)	(17.1	)%
Customer short-term promissory notes	83,148		0.02		91,856		0.06		(8,708		)	(9.5	)	81,854		0.02		89,119		0.05		(7,265		)	(8.2	)
Total short-term customer funding	259,880		0.07		293,722		0.09		(33,842		)	(11.5	)	249,380		0.07		291,303		0.09		(41,923		)	(14.4	)
Federal funds purchased	66,795		0.17		430,407		0.21		(363,612		)	(84.5	)	72,961		0.17		361,162		0.21		(288,201		)	(79.8	)
Short-term FHLB advances (1)	18,122		0.30		403,743		0.29		(385,621		)	(95.5	)	15,678		0.31		320,229		0.29		(304,551		)	(95.1	)
Total short-term borrowings	344,797		0.10		1,127,872		0.21		(783,075		)	(69.4	)	338,019		0.11		972,694		0.20		(634,675		)	(65.2	)
Long-term debt:
FHLB advances	642,736		3.50		519,316		4.11		123,420			23.8		634,403		3.50		555,172		3.92		79,231			14.3
Other long-term debt	432,526		5.68		369,735		5.90		62,791			17.0		414,231		5.50		369,748		5.90		44,483			12.0
Total long-term debt	1,075,262		4.38		889,051		4.85		186,211			20.9		1,048,634		4.29		924,920		4.71		123,714			13.4
Total	$	1,420,059	3.34	%	$	2,016,923	2.26	%	$	(596,864	)	(29.6	)%

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

Total short-term borrowings decreased ~~$783.1~~$634.7 million, or ~~69.4%~~65.2%, primarily in federal funds purchased 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 $596.9~~increased $123.7 million, or ~~29.6%. The cost of borrowings increased 108 basis points, or 47.8%~~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 a negative ~~$1.5 million~~$500,000 for the first ~~six~~nine months of 2015, a decrease of ~~$7.5~~$10.0 million, or ~~125.0%~~105.3%, in comparison to the first ~~six~~nine months of 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, ~~particularly among pooled impaired loans.~~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:


	Six months ended June 30				Increase (Decrease)					Nine months ended September 30				Increase (Decrease)
	2015		2014		$			%		2015		2014		$			%
	(dollars in thousands)									(dollars in thousands)
Service charges on deposit accounts:
Overdraft fees	$	10,154	$	10,839	$	(685	)	(6.3	)%	$	15,806	$	16,645	$	(839	)	(5.0	)%
Cash management fees	6,586		6,398		188			2.9		10,004		9,589		415			4.3
Other	7,466		7,026		440			6.3		11,378		10,830		548			5.1
Total service charges on deposit accounts	24,206		24,263		(57		)	(0.2	)	37,188		37,064		124			0.3
Investment management and trust services	21,900		22,297		(397		)	(1.8	)	33,137		33,417		(280		)	(0.8	)
Other service charges and fees:
Merchant fees	7,265		6,566		699			10.6		11,265		10,340		925			8.9
Debit card income	5,015		4,645		370			8.0		7,587		7,052		535			7.6
Letter of credit fees	2,331		2,285		46			2.0		3,474		3,448		26			0.8
Commercial swap fees	1,837		2,007		(170		)	(8.5	)	3,088		2,544		544			21.4
Other	3,903		3,950		(47		)	(1.2	)	5,902		6,023		(121		)	(2.0	)
Total other service charges and fees	20,351		19,453		898			4.6		31,316		29,407		1,909			6.5
Mortgage banking income:
Gain on sales of mortgage loans	7,961		5,396		2,565			47.5		10,588		8,009		2,579			32.2
Mortgage servicing income	2,066		3,950		(1,884		)	(47.7	)	3,303		5,375		(2,072		)	(38.5	)
Total mortgage banking income	10,027		9,346		681			7.3		13,891		13,384		507			3.8
Credit card income	4,709		4,524		185			4.1		7,257		6,855		402			5.9
Other income	3,473		2,383		1,090			45.7		4,921		3,958		963			24.3
Total, excluding gains on sales of investment securities	84,666		82,266		2,400			2.9		127,710		124,085		3,625			2.9
Net gains on sales of investment securities	6,560		1,112		5,448			489.9		8,290		1,193		7,097			N/M
Total	$	91,226	$	83,378	$	7,848		9.4	%	$	136,000	$	125,278	$	10,722		8.6	%

~~The $685,000,~~N/M - Not meaningful

Total service charges on deposits increased a modest $124,000, or 6.3%, decrease in overdraft fee income consisted of a $356,000 decrease in fees assessed on commercial accounts and a $329,000 decrease in fees assessed on personal accounts. The overall decline in these fees resulted from a reduction in the number of overdrafts. Partially offsetting these decreases was a $440,000, or 6.3%, increase0.3%. Improvements were seen in other service charges on ~~deposits.~~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 fees due to lower volumes partially driven by changes in customer behavior.

The ~~$699,000,~~$925,000, or ~~10.6%~~8.9%, increase in merchant fee income, ~~and~~ the ~~$370,000,~~$535,000, or ~~8.0%~~7.6%, increase in debit card income, and the $402,000, or 5.9%, increase in credit card income were largely driven by higher transaction volumes. Commercial swap fees increased $544,000, or 21.4%, due to ~~an increase in the volumes of transactions in comparison to 2014.~~higher new loan volumes.

Gains on sales of mortgage loans increased $2.6 million, or ~~47.5%~~32.2%, due to a ~~$141.5~~$168.6 million, or ~~31.4%~~26.0%, increase in new loan commitments and a ~~12.3%~~4.9% increase in pricing spreads compared to ~~the prior year.~~2014. The increase in new loan commitments was largely in refinancing volumes, which were ~~$318.8~~$408.0 million, or ~~53.7%~~49.9%, of new loan commitments in 2015 compared to ~~$130.1~~$186.5 million, or

28.8%, during 2014. Mortgage servicing income decreased ~~$1.9~~$2.1 million, or ~~47.7%~~38.5%, due to an increase in amortization of mortgage servicing rights (MSRs), as prepayments increased when compared to 2014.

The ~~$1.1 million,~~$963,000, or ~~45.7%~~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 ~~$6.6~~$8.3 million for the first ~~six~~nine months of 2015 were a result of ~~$4.3~~$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 ~~$1.1~~$1.2 million of investment securities gains for first ~~six~~nine months of 2014 included $1.1 million of net realized gains on debt ~~securities.~~securities and $88,000 of net realized gains on the sales of financial institution stocks.

Non-Interest Expense

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


	Six months ended June 30				Increase (Decrease)					Nine months ended September 30				Increase (Decrease)
	2015		2014		$			%		2015		2014		$			%
	(dollars in thousands)									(dollars in thousands)
Salaries and employee benefits	$	130,057	$	123,189	$	6,868		5.6	%	$	195,365	$	185,623	$	9,742		5.2	%
Net occupancy expense	25,501		25,067		434			1.7		36,211		36,649		(438		)	(1.2	)
Other outside services	13,875		11,052		2,823			25.5		21,248		19,684		1,564			7.9
Data processing	9,662		8,127		1,535			18.9		14,767		12,816		1,951			15.2
Equipment expense	7,293		6,962		331			4.8		10,888		10,269		619			6.0
Software	6,694		6,134		560			9.1		10,678		9,487		1,191			12.6
FDIC insurance expense	5,707		5,304		403			7.6		8,574		8,186		388			4.7
Professional fees	5,602		6,463		(861		)	(13.3	)	8,430		9,715		(1,285		)	(13.2	)
Supplies and postage	5,095		4,777		318			6.7		7,803		7,337		466			6.4
Loss on redemption of trust preferred securities										5,626		—		5,626			N/M
Marketing	3,468		3,921		(453		)	(11.6	)	5,570		5,719		(149		)	(2.6	)
Telecommunications	3,333		3,606		(273		)	(7.6	)	4,920		5,193		(273		)	(5.3	)
Other real estate owned and repossession expense	1,491		1,731		(240		)	(13.9	)	2,507		3,034		(527		)	(17.4	)
Operating risk loss	1,501		2,544		(1,043		)	(41.0	)	2,637		3,786		(1,149		)	(30.3	)
Intangible amortization	236		630		(394		)	(62.5	)	241		944		(703		)	(74.5	)
Other	17,317		16,221		1,096			6.8		26,256		23,084		3,172			13.7
Total	$	236,832	$	225,728	$	11,104		4.9	%	$	361,721	$	341,526	$	20,195		5.9	%

N/M - Not meaningful

Salaries and employee benefits increased ~~$6.9~~$9.7 million, or ~~5.6%~~5.2%, with salaries increasing ~~$4.7~~$6.9 million, or ~~4.5%~~4.4%, and employee benefits increasing ~~$2.2~~$2.8 million, or ~~11.4%~~9.9%. The increase in salaries was primarily due to higher average salaries per full-time equivalent employee, ~~and~~ 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 ~~six~~nine months ended ~~June~~September 30, 2015, compared to 3,540 for the ~~six~~nine months ended ~~June~~September 30, 2014. The increase in employee benefits was primarily due to an increase in defined benefit plan expense in 2015, while 2014 included a $1.5 million gain realized on the post-retirement plan amendment in 2014.

Other outside services increased ~~$2.8~~$1.6 million, or ~~25.5%~~7.9%, due to an increase in consulting services related to the Corporation’s risk management and compliance efforts, including those in connection with the enhancement of the Corporation's program for compliance with the BSA/AML 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 ~~$2.1~~$3.1 million, or ~~14.7%~~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 ~~$1.0~~$1.3 million, or ~~41.0%~~13.2%, decrease in 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 lower repossession expense in 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 real estate taxes.

The $1.1 million, or 30.3%, decrease in operating risk loss was due to a ~~$1.4~~$1.3 million decrease in check card fraud losses, partially offset by a ~~$607,000~~$215,000 increase in losses associated with previously sold residential mortgages. See Note 12 "Commitments and Contingencies," in the Notes to Consolidated Financial Statements for additional details related to repurchases of previously sold residential mortgages.

Income Taxes

Income tax expense for the first ~~six~~nine months of 2015 was ~~$25.7~~$36.0 million, a ~~$2.1~~$5.1 million, or ~~7.4%~~12.5%, decrease from ~~$27.7~~$41.1 million in 2014.

The Corporation’s effective tax rate was ~~25.1%~~24.5% in 2015, as compared to ~~25.4%~~25.5% in 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 lower effective tax rate in 2015 was driven by lower pre-tax income.

5455

FINANCIAL CONDITION

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


					Increase (Decrease)									Increase (Decrease)
	June 30, 2015		December 31, 2014		$			%		September 30, 2015		December 31, 2014		$			%
	(dollars in thousands)									(dollars in thousands)
Assets
Cash and due from banks	$	100,455	$	105,702	$	(5,247	)	(5.0	)%	$	93,803	$	105,702	$	(11,899	)	(11.3	)%
Other interest-earning assets	387,324		423,083		(35,759		)	(8.5	)	579,920		423,083		156,837			37.1
Loans held for sale	33,980		17,522		16,458			93.9		26,937		17,522		9,415			53.7
Investment securities	2,440,492		2,323,371		117,121			5.0		2,436,337		2,323,371		112,966			4.9
Loans, net of allowance	13,076,745		12,927,572		149,173			1.2		13,369,225		12,927,572		441,653			3.4
Premises and equipment	226,794		226,027		767			0.3		225,705		226,027		(322		)	(0.1	)
Goodwill and intangible assets	531,567		531,803		(236		)	—		531,562		531,803		(241		)	—
Other assets	568,116		569,687		(1,571		)	(0.3	)	574,570		569,687		4,883			0.9
Total Assets	$	17,365,473	$	17,124,767	$	240,706		1.4	%	$	17,838,059	$	17,124,767	$	713,292		4.2	%
Liabilities and Shareholders’ Equity
Deposits	$	13,505,709	$	13,367,506	$	138,203		1.0	%	$	14,084,394	$	13,367,506	$	716,888		5.4	%
Short-term borrowings	409,035		329,719		79,316			24.1		431,631		329,719		101,912			30.9
Long-term debt	1,132,641		1,139,413		(6,772		)	(0.6	)	979,433		1,139,413		(159,980		)	(14.0	)
Other liabilities	293,271		291,464		1,807			0.6		316,697		291,464		25,233			8.7
Total Liabilities	15,340,656		15,128,102		212,554			1.4		15,812,155		15,128,102		684,053			4.5
Total Shareholders’ Equity	2,024,817		1,996,665		28,152			1.4		2,025,904		1,996,665		29,239			1.5
Total Liabilities and Shareholders’ Equity	$	17,365,473	$	17,124,767	$	240,706		1.4	%	$	17,838,059	$	17,124,767	$	713,292		4.2	%

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

Investment Securities

The following table presents the carrying amount of investment securities:


					Increase (Decrease)									Increase (Decrease)
	June 30, 2015		December 31, 2014		$			%		September 30, 2015		December 31, 2014		$			%
	(dollars in thousands)									(dollars in thousands)
U.S. Government securities	$	—	$	200	$	(200	)	(100.0	)%	$	—	$	200	$	(200	)	(100.0	)%
U.S. Government sponsored agency securities	48,260		214		48,046			N/M		48,551		214		48,337			N/M
State and municipal securities	236,517		245,215		(8,698		)	(3.5	)	240,236		245,215		(4,979		)	(2.0	)
Corporate debt securities	97,172		98,034		(862		)	(0.9	)	99,941		98,034		1,907			1.9
Collateralized mortgage obligations	918,232		902,313		15,919			1.8		874,299		902,313		(28,014		)	(3.1	)
Mortgage-backed securities	1,008,664		928,831		79,833			8.6		1,051,905		928,831		123,074			13.3
Auction rate securities	98,606		100,941		(2,335		)	(2.3	)	97,873		100,941		(3,068		)	(3.0	)
Total debt securities	2,407,451		2,275,748		131,703			5.8		2,412,805		2,275,748		137,057			6.0
Equity securities	33,041		47,623		(14,582		)	(30.6	)	23,532		47,623		(24,091		)	(50.6	)
Total	$	2,440,492	$	2,323,371	$	117,121		5.0	%	$	2,436,337	$	2,323,371	$	112,966		4.9	%

N/M - Not meaningful

Total investment securities increased ~~$117.1~~$113.0 million, or ~~5.0%~~4.9%, in comparison to December 31, 2014, as prior period portfolio cash flows were reinvested in mortgage-backed securities and U.S. Government sponsored agency securities. The ~~$14.6~~$24.1 million, or ~~30.6%~~50.6%, decrease in equity securities reflects the sales of certain financial institutions stocks during the first ~~six~~nine months of 2015.

Loans, net of unearned income

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


					Increase (Decrease)									Increase (Decrease)
	June 30, 2015		December 31, 2014		$			%		September 30, 2015		December 31, 2014		$			%
	(in thousands)									(dollars in thousands)
Real-estate – commercial mortgage	$	5,237,800	$	5,197,155	$	40,645		0.8	%	$	5,339,928	$	5,197,155	$	142,773		2.7	%
Commercial – industrial, financial and agricultural	3,806,699		3,725,567		81,132			2.2		3,929,908		3,725,567		204,341			5.5
Real-estate – home equity	1,689,688		1,736,688		(47,000		)	(2.7	)	1,693,649		1,736,688		(43,039		)	(2.5	)
Real-estate – residential mortgage	1,369,103		1,377,068		(7,965		)	(0.6	)	1,382,085		1,377,068		5,017			0.4
Real-estate – construction	731,925		690,601		41,324			6.0		769,565		690,601		78,964			11.4
Consumer	272,494		265,431		7,063			2.7		271,696		265,431		6,265			2.4
Leasing and other	136,521		119,206		17,315			14.5		149,530		119,206		30,324			25.4
Loans, net of unearned income	$	13,244,230	$	13,111,716	$	132,514		1.0	%	$	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. Approximately ~~$6.0~~$6.1 billion, or 45.1%, of the loan portfolio was in commercial mortgage and construction loans as of ~~June~~September 30, 2015. The Corporation's maximum total lending commitment to an individual borrower was $50.0 million as of ~~June~~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 ~~June~~September 30, 2015, the Corporation had 92 101relationships with total borrowing commitments between $20.0 million and $50.0 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:

June 30, 2015 December 31, 2014
Balance Delinquency Rate (1) % of Total Balance Delinquency Rate (1) % of Total
(dollars in thousands)
Commercial $ 488,416
0.5 % 66.7 % $ 427,419
0.6 % 61.9 %
Commercial - residential 186,948
6.3
25.6
203,670
6.6
29.5
Other 56,561
1.2
7.7
59,512
0.6
8.6
Total Real estate - construction $ 731,925
2.1 % 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~~Commercial loans increased ~~$41.3~~$204.3 million, or ~~6.0%~~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, 2014, ~~and comprised 5.5% of the total loan portfolio at June 30, 2015 as compared to 5.3% at December 31, 2014.~~The increase in construction loans was primarily in loans secured by commercial real estate. Geographically, the increase in real estate construction loans was primarily in the Pennsylvania ($68.7 million, or 18.9%) market and New Jersey ($13.5 million, or 14.8%) market, partially offset by a decrease in the Maryland ($30.7 million, or 35.6%) market.

The $81.1 million, or 2.2%, increase in commercial loans was primarily in the Pennsylvania ($82.0 million, or 3.1%), New Jersey ($6.7 million, or 1.2%) and Maryland ($3.6 million, or 1.2%) markets offset by decreases in the Virginia ($7.1 million, or 4.8%) and Delaware ($3.8 million, or 4.0%) markets. Commercial mortgage loans increased $40.6 million, or 0.8%, in comparison to December 31, 2014. Geographically, the increase in wasgenerally in all markets, with the exception of the New Jersey market, which ~~decreased $13.4 million, or 1.0%.~~experienced a slight decrease.

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


	June 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
Services	19.5	%	19.2	%	20.2	%	19.2	%
Manufacturing	13.2		13.1		12.5		13.1
Health care					10.5		9.0
Construction (1)	10.6		11.0		10.4		11.0
Health care	9.1		9.0
Retail	9.0		9.6		8.8		9.6
Wholesale	8.7		8.7		8.6		8.7
Real estate (2)	7.6		7.6		7.5		7.6
Agriculture	5.1		5.5		4.9		5.5
Arts and entertainment	3.0		3.4		2.9		3.4
Transportation	2.3		2.4		2.2		2.4
Financial services	2.1		1.9		1.9		1.9
Other	9.8		8.6		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:


	June 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(dollars in thousands)				(in thousands)
Commercial - industrial, financial and agricultural	$	128,808	$	116,705	$	147,791	$	116,705
Real estate - commercial mortgage	137,709		137,952		124,971		137,952
	$	266,517	$	254,657	$	272,762	$	254,657

Total shared national credits increased ~~$11.9~~$18.1 million, or ~~4.7%~~7.1%, in comparison to December 31, 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 ~~June~~September 30, 2015, ~~one~~two of the shared national credits, or ~~1.2%~~0.6% of the total balance, ~~was~~were past due. There were no shared national credits past due at December 31, 2014.



	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 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 construction loans was primarily in loans secured by commercial real estate. Geographically, the increase in real estate construction loans was primarily in the 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 new products and services being added during 2015 and a focus on growing this portfolio.

Home equity loans decreased ~~$47.0~~$43.0 million, or ~~2.7%~~2.5%, primarily as a result of customers ~~rolling~~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 June 30						Six months ended June 30						Three months ended September 30						Nine months ended September 30
	2015			2014			2015			2014			2015			2014			2015			2014
	(dollars in thousands)												(dollars in thousands)
Average balance of loans, net of unearned income	$	13,192,600		$	12,795,747		$	13,144,332		$	12,779,145		$	13,369,874		$	12,922,821		$	13,220,339		$	12,827,563

Balance of allowance for credit losses at beginning of period	$	179,658		$	199,006		$	185,931		$	204,917		$	169,453		$	193,442		$	185,931		$	204,917
Loans charged off:
Commercial – industrial, financial and agricultural	11,166			5,512			13,029			10,637			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	1,642			2,141			2,351			3,527			660			1,557			3,011			5,084
Real estate – home equity	870			1,234			1,639			2,885
Real estate – residential mortgage	783			1,089			2,064			1,935
Consumer	357			449			1,136			1,200			650			538			1,787			1,738
Real estate – construction	87			218			87			432			114			313			201			745
Leasing and other	467			833			830			1,128			522			306			1,352			1,434
Total loans charged off	15,372			11,476			21,136			21,744			5,561			9,604			26,697			31,348
Recoveries of loans previously charged off:
Commercial – industrial, financial and agricultural	1,471			775			2,257			1,519			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	451			430			887			474			842			1,167			1,729			1,641
Real estate – home equity	189			177			440			533
Real estate – residential mortgage	187			108			346			224
Consumer	368			402			609			611			314			448			923			1,059
Real estate – construction	231			158			1,378			382			898			470			2,276			852
Leasing and other	70			362			241			526			346			241			587			767
Total recoveries	2,967			2,412			6,158			4,269			4,503			3,770			10,661			8,039
Net loans charged off	12,405			9,064			14,978			17,475			1,058			5,834			16,036			23,309
Provision for credit losses	2,200			3,500			(1,500		)	6,000			1,000			3,500			(500		)	9,500
Balance of allowance for credit losses at end of period	$	169,453		$	193,442		$	169,453		$	193,442		$	169,395		$	191,108		$	169,395		$	191,108

Net charge-offs to average loans (annualized)	0.38		%	0.28		%	0.23		%	0.27		%	0.03		%	0.18		%	0.16		%	0.24		%

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


	June 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
	(dollars in thousands)						(dollars in thousands)
Allowance for loan losses	$	167,485		$	184,144		$	167,136		$	184,144
Reserve for unfunded lending commitments	1,968			1,787			2,259			1,787
Allowance for credit losses	$	169,453		$	185,931		$	169,395		$	185,931

Allowance for credit losses to loans outstanding	1.28		%	1.42		%	1.25		%	1.42		%

The provision for credit losses for the three months ended ~~June~~September 30, 2015 was ~~$2.2~~$1.0 million, a decrease of ~~$1.3~~$2.5 million in comparison to the same period in 2014. For the ~~six~~nine months ended ~~June~~September 30, 2015, the provision for credit losses was a negative ~~$1.5 million,~~$500,000, a decrease of ~~$7.5~~$10.0 million compared to the same period in 2014. The decrease in the provision for credit losses was based on the evaluation of all relevant credit quality ~~factors. The $7.5 million year to date 2015 decrease compared to~~factors and the ~~same period in 2014 was driven by improvement in net charge-off levels and improvements in~~results of the allowance for credit ~~quality.~~losses allocation methodology.

Net charge-offs ~~increased $3.3~~decreased $4.8 million, or ~~36.9%~~81.9%, to ~~$12.4~~$1.1 million for the ~~second~~third quarter of 2015, compared to ~~$9.1~~$5.8 million for the ~~second~~third quarter of 2014. The increase in net charge-offs was primarily due to a $5.0 million increase in commercial loan net charge-offs attributable to two impaired loans which had migrated to non-accrual status during the first quarter of 2015. Of the

~~$12.4 million of net charge-offs recorded in the second quarter of 2015, the majority were for loans originated in Pennsylvania and New Jersey.~~

~~During the first half of 2015, net charge-offs decreased $2.5 million, or 14.3%, to $15.0 million compared to $17.5 million for the first half~~ of 2014. The decrease in net charge-offs was primarily due to a ~~$1.6~~$4.1 million decrease in commercial loan net charge-

offs. Of the $1.1 million of net charge-offs recorded in the third quarter of 2015, the majority were for loans originated in Pennsylvania.

During the first nine months of 2015, net charge-offs decreased $7.3 million, or ~~52.0%~~31.2%, to $16.0 million, compared to $23.3 million for the first nine months of 2014. The decrease in net charge-offs was primarily due to a $2.5 million, or 18.5%, decrease in commercial loan net charge-offs, a $2.2 million, or 62.8%, decrease in commercial mortgage net charge-offs, a ~~$1.3~~$2.0 million decrease in real estate construction net charge-offs ~~largely due to recoveries~~ and a ~~$1.2~~$1.7 million, or ~~49.0%~~47.7%, decrease in home equity net charges-offs, partially offset by a ~~$1.7 million,~~$705,000, or ~~18.1%~~38.2%, increase in ~~commercial loan~~residential mortgage net charge-offs. Of the ~~$15.0~~$16.0 million of net charge-offs recorded in the first ~~half~~nine months of 2015, the majority were for loans originated in Pennsylvania and New Jersey.

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


	June 30, 2015			June 30, 2014			December 31, 2014			September 30, 2015			September 30, 2014			December 31, 2014
	(dollars in thousands)									(dollars in thousands)
Non-accrual loans	$	129,152		$	129,934		$	121,080		$	132,154		$	126,420		$	121,080
Loans 90 days or more past due and accruing	20,353			19,378			17,402			12,867			17,428			17,402
Total non-performing loans	149,505			149,312			138,482			145,021			143,848			138,482
Other real estate owned (OREO)	12,763			13,482			12,022			10,561			13,489			12,022
Total non-performing assets	$	162,268		$	162,794		$	150,504		$	155,582		$	157,337		$	150,504
Non-accrual loans to total loans	0.98		%	1.01		%	0.92		%	0.98		%	0.97		%	0.92		%
Non-performing assets to total assets	0.93		%	0.96		%	0.88		%	0.87		%	0.91		%	0.88		%
Allowance for credit losses to non-performing loans	113.34		%	129.56		%	134.26		%	116.81		%	132.85		%	134.26		%

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


	June 30, 2015		June 30, 2014		December 31, 2014		September 30, 2015		September 30, 2014		December 31, 2014
	(in thousands)						(in thousands)
Real estate – residential mortgage	$	31,584	$	31,184	$	31,308	$	29,330	$	30,850	$	31,308
Real estate – commercial mortgage	17,482		19,398		18,822		17,282		18,869		18,822
Real estate – construction	4,482		8,561		9,241		4,363		9,251		9,241
Commercial – industrial, financial and agricultural	6,591		6,953		5,237		7,399		5,115		5,237
Real estate – home equity	3,299		2,815		2,975		3,954		2,904		2,975
Consumer	31		23		38		29		23		38
Total accruing TDRs	63,469		68,934		67,621		62,357		67,012		67,621
Non-accrual TDRs (1)	27,230		25,526		24,616		27,618		27,724		24,616
Total TDRs	$	90,699	$	94,460	$	92,237	$	89,975	$	94,736	$	92,237

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

TDRs modified during the first ~~six~~nine months of 2015 and still outstanding as of ~~June~~September 30, 2015 totaled ~~$13.7~~$16.1 million.During the first ~~six~~nine months of 2015, ~~$6.2~~$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 ~~six~~nine months ended ~~June~~September 30, 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 June 30, 2015
Balance of non-accrual loans at March 31, 2015	$	39,619		$	46,291		$	13,994		$	20,353		$	9,670		$	2		$	—		$	129,929
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	11,115			11,004			1,780			3,360			2,062			357			225			29,903			9,960			4,109			1,488			2,768			2,516			650			149			21,640
Payments	(4,459		)	(7,176		)	(1,219		)	(502		)	(278		)	(2		)	—			(13,636		)	(5,187		)	(2,411		)	(1,269		)	(938		)	(766		)	—			—			(10,571		)
Charge-offs	(11,166		)	(1,642		)	(87		)	(783		)	(870		)	(357		)	(225		)	(15,130		)	(1,640		)	(660		)	(114		)	(1,035		)	(940		)	(650		)	(149		)	(5,188		)
Transfers to accrual status	—			—			—			—			(251		)	—			—			(251		)	—			—			—			(136		)	(60		)	—			—			(196		)
Transfers to OREO status	—			(492		)	—			(817		)	(354		)	—			—			(1,663		)
Balance of non-accrual loans at June 30, 2015	$	35,109		$	47,985		$	14,468		$	21,611		$	9,979		$	—		$	—		$	129,152
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

Six months ended June 30, 2015
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		$	29,769		$	44,437		$	16,348		$	20,043		$	10,483		$	—		$	—		$	121,080
Additions	27,701			17,938			2,478			6,969			3,594			1,139			357			60,176			37,661			22,047			3,966			9,737			6,110			1,789			506			81,816
Payments	(8,640		)	(11,299		)	(4,271		)	(1,435		)	(698		)	(2		)	—			(26,345		)	(13,827		)	(13,710		)	(5,540		)	(2,373		)	(1,464		)	(2		)	—			(36,916		)
Charge-offs	(13,029		)	(2,351		)	(87		)	(2,064		)	(1,638		)	(1,137		)	(357		)	(20,663		)	(14,669		)	(3,011		)	(201		)	(3,099		)	(2,578		)	(1,787		)	(506		)	(25,851		)
Transfers to accrual status	—			(44		)	—			(304		)	(464		)	—			—			(812		)	—			(44		)	—			(440		)	(524		)	—			—			(1,008		)
Transfers to OREO status	(692		)	(696		)	—			(1,598		)	(1,298		)	—			—			(4,284		)
Balance of non-accrual loans at June 30, 2015	$	35,109		$	47,985		$	14,468		$	21,611		$	9,979		$	—		$	—		$	129,152
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 $782,000,~~increased $5.7 million, or ~~0.6%~~4.5%, and $11.1 million, or 9.1%, in comparison to ~~June~~September 30, 2014 and ~~increased $8.1 million, or 6.7%, in comparison to~~ December 31, ~~2014.~~2014, respectively.

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


	June 30, 2015		June 30, 2014		December 31, 2014		September 30, 2015		September 30, 2014		December 31, 2014
	(in thousands)						(in thousands)
Real estate – commercial mortgage	$	49,932	$	44,015	$	45,237	$	49,021	$	44,602	$	45,237
Commercial – industrial, financial and agricultural	35,839		38,163		30,388		38,032		33,277		30,388
Real estate – residential mortgage	31,562		27,887		28,995		27,707		28,135		28,995
Real estate – construction	14,884		20,268		16,399		14,989		19,860		16,399
Real estate – home equity	14,632		16,094		14,740		13,107		15,071		14,740
Consumer	2,583		2,825		2,590		2,079		2,515		2,590
Leasing	73		60		133		86		388		133
Total non-performing loans	$	149,505	$	149,312	$	138,482	$	145,021	$	143,848	$	138,482

Non-performing loans ~~were largely unchanged, in total,~~increased $1.2 million, or 0.8%, in comparison to ~~June~~September 30, ~~2014, the net effect of increases in some types being offset by decreases in others.~~2014. Non-performing commercial loans increased $4.8 million, or 14.3%, and non-performing commercial mortgages increased ~~$5.9~~$4.4 million, or ~~13.4%, and non-performing residential mortgages increased $3.7 million, or 13.2%~~9.9%, while non-performing construction loans decreased ~~$5.4~~$4.9 million, or ~~26.6%, non-performing commercial loans decreased $2.3 million, or 6.1%~~24.5%, and non-performing home equity loans decreased ~~$1.5~~$2.0 million, or ~~9.1%~~13.0%, in comparison to ~~June~~September 30, 2014.

6061

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


	June 30, 2015		June 30, 2014		December 31, 2014		September 30, 2015		September 30, 2014		December 31, 2014
	(in thousands)						(in thousands)
Residential properties	$	7,992	$	8,279	$	6,656	$	6,934	$	8,121	$	6,656
Commercial properties	2,123		3,262		3,453		1,584		3,758		3,453
Undeveloped land	2,648		1,941		1,913		2,043		1,610		1,913
Total OREO	$	12,763	$	13,482	$	12,022	$	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. 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 ~~$9.7~~$10.0 billion as of ~~June~~September 30, 2015 and $9.6 billion as of December 31, 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
	June 30, 2015			December 31, 2014			$			%		June 30, 2015			December 31, 2014			$			%		June 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	$	114,385		$	127,302		$	(12,917	)	(10.1	)%	$	179,642		$	170,837		$	8,805		5.2	%	$	294,027		$	298,139		$	132,823		$	127,302		$	5,521		4.3	%	$	178,450		$	170,837		$	7,613		4.5	%	$	311,273		$	298,139
Commercial - secured	123,663			120,584			3,079			2.6		110,666			110,544			122			0.1		234,329			231,128			97,617			120,584			(22,967		)	(19.0	)	105,820			110,544			(4,724		)	(4.3	)	203,437			231,128
Commercial -unsecured	3,667			7,463			(3,796		)	(50.9	)	7,941			6,810			1,131			16.6		11,608			14,273			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	127,330			128,047			(717		)	(0.6	)	118,607			117,354			1,253			1.1		245,937			245,401			101,185			128,047			(26,862		)	(21.0	)	110,625			117,354			(6,729		)	(5.7	)	211,810			245,401
Construction - commercial residential	17,526			27,495			(9,969		)	(36.3	)	30,588			40,066			(9,478		)	(23.7	)	48,114			67,561			16,763			27,495			(10,732		)	(39.0	)	29,429			40,066			(10,637		)	(26.5	)	46,192			67,561
Construction - commercial	13,314			12,202			1,112			9.1		5,587			5,586			1			—		18,901			17,788			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)	30,840			39,697			(8,857		)	(22.3	)	36,175			45,652			(9,477		)	(20.8	)	67,015			85,349			18,456			39,697			(21,241		)	(53.5	)	34,633			45,652			(11,019		)	(24.1	)	53,089			85,349
Total	$	272,555		$	295,046		$	(22,491	)	(7.6	)%	$	334,424		$	333,843		$	581		0.2	%	$	606,979		$	628,889		$	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	2.8		%	3.1		%						3.4		%	3.5		%						6.2		%	6.6		%	2.5		%	3.1		%						3.3		%	3.5		%						5.8		%	6.6		%

As of June 30, 2015, total loans with risk ratings of Substandard or lower increased $581,000, or 0.2%, in comparison to December 31, 2014, primarily due to increases in commercial mortgages and commercial loans, partially offset by a decrease in real estate construction loans. Special Mention loans decreased $22.5 million, or 7.6%, in comparison to December 31, 2014 primarily due to decreases in commercial mortgages and commercial residential construction loans.

6162

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


	June 30, 2015									June 30, 2014									December 31, 2014									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	0.34		%	0.96		%	1.30		%	0.30		%	0.86		%	1.16		%	0.35		%	0.87		%	1.22		%	0.16		%	0.92		%	1.08		%	0.48		%	0.86		%	1.34		%	0.35		%	0.87		%	1.22		%
Commercial – industrial, financial and agricultural	0.22		%	0.93		%	1.15		%	0.47		%	1.05		%	1.52		%	0.17		%	0.81		%	0.98		%	0.35		%	0.97		%	1.32		%	0.28		%	0.91		%	1.19		%	0.17		%	0.81		%	0.98		%
Real estate – construction	0.02		%	2.04		%	2.06		%	0.10		%	3.20		%	3.30		%	0.02		%	2.38		%	2.40		%	0.30		%	1.95		%	2.25		%	0.03		%	2.89		%	2.92		%	0.02		%	2.38		%	2.40		%
Real estate – residential mortgage	1.53		%	2.30		%	3.83		%	1.78		%	2.05		%	3.83		%	1.96		%	2.10		%	4.06		%	1.27		%	2.00		%	3.27		%	1.81		%	2.06		%	3.87		%	1.96		%	2.10		%	4.06		%
Real estate – home equity	0.55		%	0.87		%	1.42		%	0.68		%	0.93		%	1.61		%	0.63		%	0.85		%	1.48		%	0.54		%	0.77		%	1.31		%	0.59		%	0.87		%	1.46		%	0.63		%	0.85		%	1.48		%
Consumer, leasing and other	1.29		%	0.65		%	1.94		%	1.55		%	0.76		%	2.31		%	1.56		%	0.70		%	2.26		%	1.30		%	0.51		%	1.81		%	1.41		%	0.75		%	2.16		%	1.56		%	0.70		%	2.26		%
Total	0.47		%	1.13		%	1.60		%	0.58		%	1.17		%	1.75		%	0.52		%	1.06		%	1.58		%	0.42		%	1.07		%	1.49		%	0.58		%	1.11		%	1.69		%	0.52		%	1.06		%	1.58		%
Total dollars (in thousands)	$	61,931		$	149,505		$	211,436		$	74,955		$	149,312		$	224,267		$	68,346		$	138,482		$	206,828		$	56,694		$	145,021		$	201,715		$	75,976		$	143,848		$	219,824		$	68,346		$	138,482		$	206,828


(1)	Includes non-accrual loans.

Management believes that the allowance for credit losses of ~~$169.5~~$169.4 million as of ~~June~~September 30, 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 (Decrease)									Increase (Decrease)
	June 30, 2015		December 31, 2014		$			%		September 30, 2015		December 31, 2014		$			%
	(dollars in thousands)									(dollars in thousands)
Noninterest-bearing demand	$	3,805,165	$	3,640,623	$	164,542		4.5	%	$	3,906,228	$	3,640,623	$	265,605		7.3	%
Interest-bearing demand	3,129,903		3,150,612		(20,709		)	(0.7	)	3,362,336		3,150,612		211,724			6.7
Savings	3,566,888		3,504,820		62,068			1.8		3,880,103		3,504,820		375,283			10.7
Total demand and savings	10,501,956		10,296,055		205,901			2.0		11,148,667		10,296,055		852,612			8.3
Time deposits	3,003,753		3,071,451		(67,698		)	(2.2	)	2,935,727		3,071,451		(135,724		)	(4.4	)
Total deposits	$	13,505,709	$	13,367,506	$	138,203		1.0	%	$	14,084,394	$	13,367,506	$	716,888		5.4	%

Non-interest bearing demand deposits increased ~~$164.5~~$265.6 million, or ~~4.5%~~7.3%, primarily as a result of increases in business account balances of ~~$149.4~~$256.0 million, or ~~5.4%~~9.3%, and ~~personal~~municipal account balances of ~~$16.8~~$12.6 million, or ~~2.3%~~12.6%.

Interest-bearing demand accounts ~~decreased $20.7~~increased $211.7 million, or ~~0.7%~~6.7%, due to a ~~$91.6~~$188.6 million, or ~~7.6%~~15.8%, seasonal ~~decrease~~increase in municipal account balances ~~partially offset by~~and a ~~$71.9~~$25.9 million, or ~~56.2%~~20.3%, increase in business account balances. The ~~$62.1~~$375.3 million, or ~~1.8%~~10.7%, increase in savings account balances was primarily due to a ~~$154.7~~$205.6 million, or ~~7.1%~~9.4%, increase in personal account balances, ~~partially offset by~~ a seasonal ~~decrease~~increase of ~~$72.6~~$91.3 million, or ~~12.6%~~15.9%, in municipal account balances and a ~~$20.0~~$78.3 million, or ~~2.7%~~10.6%, ~~decrease~~increase in business account balances. The ~~$67.7~~$135.7 million, or ~~2.2%~~4.4%, decrease in time deposits was primarily due to a decrease in time deposits with original maturities of less than two years.

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


					Increase (Decrease)									Increase (Decrease)
	June 30, 2015		December 31, 2014		$			%		September 30, 2015		December 31, 2014		$			%
	(dollars in thousands)									(dollars in thousands)
Short-term borrowings:
Customer repurchase agreements	$	169,918	$	158,394	$	11,524		7.3	%	$	145,225	$	158,394	$	(13,169	)	(8.3	)%
Customer short-term promissory notes	74,059		95,106		(21,047		)	(22.1	)	80,879		95,106		(14,227		)	(15.0	)
Total short-term customer funding	243,977		253,500		(9,523		)	(3.8	)	226,104		253,500		(27,396		)	(10.8	)
Federal funds purchased	5,058		6,219		(1,161		)	(18.7	)	5,527		6,219		(692		)	(11.1	)
Short-term FHLB advances (1)	160,000		70,000		90,000			128.6		200,000		70,000		130,000			185.7
Total short-term borrowings	409,035		329,719		79,316			24.1		431,631		329,719		101,912			30.9
Long-term debt:
FHLB advances	618,033		673,107		(55,074		)	(8.2	)	617,790		673,107		(55,317		)	(8.2	)
Other long-term debt	514,608		466,306		48,302			10.4		361,643		466,306		(104,663		)	(22.4	)
Total long-term debt	1,132,641		1,139,413		(6,772		)	(0.6	)	979,433		1,139,413		(159,980		)	(14.0	)
Total borrowings	$	1,541,676	$	1,469,132	$	72,544		4.9	%	$	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 ~~$79.3~~$101.9 million increase in total short-term borrowings was largely due to a ~~$90.0~~$130.0 million, or ~~128.6%~~185.7%, increase in short-term FHLB advances. The ~~$55.1~~$55.3 million decrease in long-term FHLB advances resulted from maturities that were replaced with short-term advances. Other long-term debt ~~increased~~decreased by ~~$48.3~~$104.7 million, or ~~10.4%~~22.4%, ~~the net effect~~primarily as a result of the ~~issuance of $150 million of ten-year subordinated debt in June 2015, and~~ the maturity of $100 million of subordinated debt in 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 redeem $150 million of TruPS, that carried an effective rate of 6.52%, in July 2015.

Shareholders' Equity

Total shareholders’ equity increased ~~$28.2~~$29.2 million, or ~~1.4%~~1.5%, during the first ~~six~~nine months of 2015. The increase was due primarily to ~~$76.7~~$111.0 million of net income partially offset by ~~$31.9~~$47.5 million of common stock dividends and ~~$19.0~~$50.0 million in treasury stock purchases.

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. 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 became effective for the Corporation on January 1, 2015, and will be fully phased in on January 1, 2019.

The U.S. Basel III Capital Rules require the Corporation and its bank subsidiaries 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; and

Comply with a revised definition of capital to improve the ability of regulatory capital instruments to absorb losses. Certain non-qualifying capital instruments, including cumulative preferred stock and ~~trust preferred securities,~~TruPS, 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 sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures and resulting in higher risk weights for a variety of asset categories.

As of ~~June~~September 30, 2015, the Corporation and each of its bank subsidiaries met the minimum requirements of the U.S. Basel III Capital Rules, and each of the Corporation’s bank subsidiaries’ capital ratios exceeded the amounts required to be considered "well capitalized" as defined in the regulations. As of ~~June~~September 30, 2015, the Corporation's capital levels 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:


	June 30, 2015		December 31, 2014		Regulatory Minimum for Capital Adequacy		September 30, 2015		December 31, 2014		Regulatory Minimum for Capital Adequacy
Common Equity Tier I (to Risk-Weighted Assets)	10.7	%	N/A		4.5	%	10.8	%	N/A		4.5	%
Total Capital (to Risk-Weighted Assets)	14.8	%	14.7	%	8.0	%	13.8	%	14.7	%	8.0	%
Tier I Capital (to Risk-Weighted Assets)	10.9	%	12.3	%	6.0	%	10.8	%	12.3	%	6.0	%
Tier I Capital (to Average Assets)	9.4	%	10.0	%	4.0	%	9.4	%	10.0	%	4.0	%

The ~~June~~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 1545 basis points in the risk-based capital ratios, primarily as a result of the changes in risk-weightings. In addition, $124.5 million of capital instruments that were previously included in Tier I capital are now only included in Total capital under the Basel III Capital Rules. This transition resulted in an additional 90 basis point decrease in the Tier I capital ratio.

The $150 million of subordinated debt issued in June 2015 is a component of Total capital, which increased this capital ratio by 110 basis points. The proceeds from this issuance were used to redeem $150 million of trust preferred securities, which are also a component of Total capital, in July 2015. Accordingly, because of the timing difference between the subordinated debt issuance in the second quarter and the redemption of the trust preferred securities in the third quarter, this ratio will decrease as of September 30, 2015.

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 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 ~~June~~September 30, 2015, the Corporation had ~~$778.0~~$817.8 million of short and long-term advances outstanding from the FHLB with an additional borrowing capacity of approximately ~~$2.7~~$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 ~~June~~September 30, 2015, the Corporation had aggregate availability under Federal funds lines of $1.2 billion with no borrowings outstanding on those lines. As of ~~June~~September 30, 2015, the Corporation had a repurchase agreement relationship with a community bank, with a balance of ~~$5.1~~$5.5 million, 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 ~~June~~September 30, 2015, the Corporation had ~~$1.2~~$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 and Analysis. The consolidated statements of cash flows provide additional information. The Corporation’s operating activities during the first ~~six~~nine months of 2015 generated ~~$77.0~~$134.9 million of cash, mainly due to net income, partially offset by the impact of non-cash expenses, most notably a net increase in loans held for ~~sale.~~sale and investment securities gains. Cash used in investing activities was ~~$248.3~~$714.5 million, due ~~mainly~~ to a net ~~increase in investment securities and an increase~~increases in loans, ~~partially offset by a decrease in~~ short-term ~~investments.~~investments, and investment securities. Net cash provided by financing activities was ~~$166.0~~$567.7 million due to increases in deposits, short-term borrowings and additions to long-term debt, partially offset by repayments of long-term debt, common stock cash dividends and purchases of treasury 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 ~~June~~September 30, 2015, equity investments consisted of ~~$27.2~~$22.4 million of common stocks of publicly traded financial institutions and ~~$5.8~~$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 ~~$18.2~~$15.1 million and a fair value of ~~$27.2~~$22.4 million at ~~June~~September 30, 2015, including an investment in a single financial institution with a cost basis of ~~$10.7~~$8.5 million and a fair value of ~~$15.7~~$12.8 million. The fair value of this investment accounted for ~~57.7%~~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. As of ~~June~~September 30, 2015, the financial institutions stock portfolio had ~~$9.0~~$7.3 million of net ~~unrealized gains, comprised mostly of~~ unrealized 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. 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 ~~June~~September 30, 2015, the Corporation owned municipal securities issued by various municipalities with a total fair value of ~~$236.5~~$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 ~~June~~September 30, 2015, approximately 95% of municipal securities were supported by the general obligation of corresponding municipalities. Approximately ~~82%~~83% of these securities were school district issuances, which are also supported by the states of the issuing municipalities.

Auction Rate Certificates

As of ~~June~~September 30, 2015, the Corporation’s investments in student loan auction rate certificates (ARCs), had a cost basis of ~~$106.5~~$106.7 million and a fair value of ~~$98.6~~$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, since early 2008, market auctions for these securities failed due to an insufficient number of buyers, resulting in an illiquid market. Therefore, as of ~~June~~September 30, 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 that were materially different from those that would be expected from settlement of these investments in the current market. The expected cash flows model, ~~prepared by~~

6667

prepared by a third-party valuation expert, produced fair values 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 ~~June~~September 30, 2015, all of the ARCs were rated above investment grade, with approximately $6$5 million, or 6%, "AAA" rated and ~~$93~~$92 million, or 94%, "AA" rated. All of the loans underlying the ARCs have principal payments that are guaranteed by the federal government. As of ~~June~~September 30, 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 ~~June~~September 30, 2015:


	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)				(in thousands)
Single-issuer trust preferred securities	$	47,613	$	43,378	$	46,624	$	41,787
Subordinated debt	47,595		49,716		51,625		53,576
Pooled trust preferred securities	—		530		—		530
Corporate debt securities issued by financial institutions	$	95,208	$	93,624	$	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 ~~$4.2~~$4.8 million at ~~June~~September 30, 2015. The Corporation did not record any other-than-temporary impairment charges for single-issuer trust preferred securities during the three and ~~six~~nine months ended ~~June~~September 30, 2015 or 2014. Seven of the Corporation's 19 single-issuer trust preferred securities were rated below investment grade by at least one ratings agency, with an amortized cost of $14.5 million and an estimated fair value of ~~$13.1~~$13.2 million as of ~~June~~September 30, 2015. All of the single-issuer trust preferred securities rated below investment grade were rated "BB" or "Ba". Single-issuer trust preferred securities with an amortized cost of ~~$4.7~~$3.7 million and an estimated fair value of ~~$3.8~~$2.7 million at ~~June~~September 30, 2015 were not rated by any ratings agency.

As of ~~June~~September 30, 2015, the Corporation held two pooled trust preferred securities with an amortized cost of $0 and an estimated fair value of $530,000, that were rated below investment grade by at least one ratings ~~agency, and 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 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.

See Note 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"), 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

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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 ~~June~~September 30, 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)	$	946,054		$	481,703		$	353,811		$	383,730		$	211,854		$	645,324		$	3,022,476		$	3,009,913	$	975,597		$	484,581		$	350,691		$	380,102		$	239,651		$	678,863		$	3,109,485		$	3,078,275
Average rate	3.70		%	4.32		%	4.16		%	4.54		%	4.47		%	3.76		%	4.03		%			3.60		%	4.20		%	4.07		%	4.43		%	4.32		%	3.61		%	3.90		%

Floating rate loans (1) (2)	2,334,773			1,564,927			1,269,282			1,078,292			1,320,279			2,651,559			10,219,112			10,116,966		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	3.66		%	3.80		%	3.82		%	3.84		%	3.78		%	3.79		%	3.77		%			3.66		%	3.76		%	3.79		%	3.81		%	3.77		%	3.71		%	3.73		%

Fixed rate investments (3)	422,647			326,186			253,320			222,175			205,633			828,371			2,258,332			2,263,077		435,564			324,117			252,653			223,718			215,175			800,264			2,251,491			2,269,686
Average rate	2.80		%	2.88		%	2.73		%	2.57		%	2.51		%	2.57		%	2.67		%			2.80		%	2.83		%	2.69		%	2.58		%	2.49		%	2.59		%	2.67		%

Floating rate investments (3)	4,979			4,964			106,538			24			—			40,185			156,690			144,699		4,985			4,972			106,681			22			—			40,166			156,826			143,359
Average rate	0.98		%	0.96		%	0.87		%	2.01		%	—		%	1.47		%	1.03		%			1.04		%	1.90		%	1.90		%	2.00		%	—		%	1.50		%	1.77		%

Other interest-earning assets	356,198			—			—			—			—			65,106			421,304			421,304		537,880			—			—			—			—			68,977			606,857			606,857
Average rate	0.52		%	—		%	—		%	—		%	—		%	5.07		%	1.22		%			0.36		%	—		%	—		%	—		%	—		%	5.03		%	0.89		%

Total	$	4,064,651		$	2,377,780		$	1,982,951		$	1,684,221		$	1,737,766		$	4,230,545		$	16,077,914		$	15,955,959	$	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	3.30		%	3.78		%	3.58		%	3.83		%	3.71		%	3.54		%	3.57		%			3.15		%	3.72		%	3.60		%	3.79		%	3.68		%	3.50		%	3.50		%

Fixed rate deposits (4)	$	1,306,608		$	475,613		$	284,195		$	335,383		$	252,582		$	22,974		$	2,677,355		$	2,697,218	$	1,216,409		$	501,015		$	257,453		$	364,496		$	258,021		$	24,697		$	2,622,091		$	2,642,857
Average rate	0.70		%	1.08		%	1.37		%	2.04		%	2.06		%	1.93		%	1.14		%			0.60		%	1.10		%	1.39		%	2.03		%	2.05		%	1.94		%	1.13		%

Floating rate deposits (5)	4,794,360			844,410			550,886			302,838			278,652			252,043			7,023,189			6,998,925		5,342,016			856,561			552,477			310,183			284,762			210,076			7,556,075			7,544,200
Average rate	0.16		%	0.11		%	0.10		%	0.08		%	0.08		%	0.11		%	0.15		%			0.17		%	0.11		%	0.10		%	0.08		%	0.08		%	0.13		%	0.15		%

Fixed rate borrowings (6)	181,399			551,684			630			50,660			75,047			256,725			1,116,145			1,146,794		31,297			351,638			668			130,533			157,947			290,854			962,937			996,097
Average rate	5.44		%	4.49		%	4.66		%	1.88		%	1.84		%	4.58		%	4.37		%			1.69		%	4.51		%	4.65		%	2.12		%	2.78		%	4.31		%	3.75		%

Floating rate borrowings (7)	409,035			—			—			—			—			16,496			425,531			415,051		431,632			—			—			—			—			16,496			448,128			438,296
Average rate	0.20		%	—		%	—		%	—		%	—		%	2.41		%	0.28		%			0.05		%	—		%	—		%	—		%	—		%	2.46		%	0.14		%

Total	$	6,691,402		$	1,871,707		$	835,711		$	688,881		$	606,281		$	548,238		$	11,242,220		$	11,257,988	$	7,021,354		$	1,709,214		$	810,598		$	805,212		$	700,730		$	542,123		$	11,589,231		$	11,621,450
Average rate	0.41		%	1.64		%	0.53		%	1.17		%	1.12		%	2.35		%	0.81		%			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 ~~$10.2~~$10.4 billion of floating rate loans above are ~~$3.4~~$3.3 billion of loans, or ~~33.3%~~31.9% of the total, that float with the prime interest rate, ~~$2.2~~$2.3 billion, or ~~21.6%~~22.1%, of loans that float with other interest rates, primarily the London Interbank Offered Rate ("LIBOR"), and ~~$4.6~~$4.8 billion, or ~~45.1%~~46.0%, of adjustable rate loans. The ~~$4.6~~$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.

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



	Percent of Total Adjustable Rate Loans
One year	~~32.4%~~33.4%
Two years	17.9
Three years	~~17.9~~17.4
Four years	~~13.0~~12.9
Five years	~~11.2~~11.1
Greater than five years	~~7.6~~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 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	+ $ ~~75.7~~65.5 million	~~+15.6%~~+13.3%
+200 bp	+ $ ~~48.6~~42.2 million	+~~10.0~~8.6
+100 bp	+ $ ~~21.2~~18.4 million	+~~4.4~~3.7
–100 bp	– $ ~~19.2~~16.3 million	–~~4.0~~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. Abrupt changes or "shocks" in interest rates, both upward and downward, are used to determine the comparative effect of such interest rate movements relative to the unchanged environment. This measurement tool is used primarily to evaluate the longer-term repricing risks and options in the Corporation’s balance sheet. The Corporation's policy limits the economic value of equity that may be at risk, in a non-parallel instantaneous shock, to 10% of the base case economic value of equity for a 100 basis point shock in interest rates, 20% for a 200 basis point shock and 30% for a 300 basis point shock. As of ~~June~~September 30, 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 of the Corporation. However, legal proceedings are often unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to the Corporation’s results of operations for any particular period, depending, in part, upon the size of the loss or liability imposed and the operating results for the applicable period.

Item 1A. Risk Factors

There have been no 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, 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 ~~second~~third quarter of 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 Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs
April 1, 2015 to April 30, 2015 2,510,174
$11.47 2,510,174
$ 41,217,080
May 1, 2015 to May 31, 2015 818,000
$12.51 818,000
$ 30,987,418
June 1, 2015 to June 30, 2015 —
— —
$ 30,987,418

In 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, pursuant to a share repurchase program for a like amount of the Corporation's outstanding common stock announced on November 12, 2014. 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.



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 April 21, 2015, the Corporation announced that its board of directors had approved a share repurchase program pursuant to which the Corporation is authorized to repurchase up to $50.0 million of its outstanding shares of common stock, or approximately 2.3% of its outstanding shares, through December 31, 2015. Repurchased shares may be added to treasury stock, at ~~cost, and will be used for general corporate purposes.~~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. ~~Through June 30,~~During the second quarter of 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 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.

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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:	~~August 7,~~November 6, 2015	/s/ E. Philip Wenger
		E. Philip Wenger
		Chairman, Chief Executive Officer and President

Date:	~~August 7,~~November 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.

~~10.1~~		~~Fulton Financial Corporation Deferred Compensation Plan, as amended and restated effective July 1, 2015.~~

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 period ended ~~June~~September 30, 2015, filed on ~~August 7,~~November 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