10-Q 1 fult331201710q.htm 10-Q Document


 
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 March 31, 2017, 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.
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
Non-accelerated filer
 
¨
  
Smaller reporting company
 
¨
 
 
 
 
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨

Indicate by checkmark 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 –174,816,000 shares outstanding as of April 28, 2017.

1


FULTON FINANCIAL CORPORATION
FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2017
INDEX
 
Description
Page
 
 
 
PART I. FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
(a)
 
 
 
(b)
 
 
 
(c)
 
 
 
(d)
 
 
 
(e)
 
 
 
(f)
 
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 4. Mine Safety Disclosures - (not applicable)
 
 
 
 
Item 5. Other Information - (none to be reported)
 
 
 
 
 
 
 
 
 
 
 
 
 

2




Item 1. Financial Statements
 

CONSOLIDATED BALANCE SHEETS 
 
(in thousands, except per-share data)
 
March 31,
2017
 
December 31,
2016
 
(unaudited)
 
ASSETS
 
 
 
Cash and due from banks
$
93,844

 
$
118,763

Interest-bearing deposits with other banks
284,750

 
233,763

Federal Reserve Bank and Federal Home Loan Bank stock
65,637

 
57,489

Loans held for sale
24,783

 
28,697

Available for sale investment securities
2,506,017

 
2,559,227

Loans, net of unearned income
14,963,177

 
14,699,272

Less: Allowance for loan losses
(170,076
)
 
(168,679
)
Net Loans
14,793,101

 
14,530,593

Premises and equipment
216,171

 
217,806

Accrued interest receivable
46,355

 
46,294

Goodwill and intangible assets
531,556

 
531,556

Other assets
616,362

 
620,059

Total Assets
$
19,178,576

 
$
18,944,247

LIABILITIES
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
4,417,733

 
$
4,376,137

Interest-bearing
10,672,611

 
10,636,727

Total Deposits
15,090,344

 
15,012,864

Short-term borrowings:
 
 
 
Federal funds purchased
54,421

 
278,570

Other short-term borrowings
398,896

 
262,747

Total Short-Term Borrowings
453,317

 
541,317

Accrued interest payable
12,506

 
9,632

Other liabilities
329,817

 
329,916

Federal Home Loan Bank advances and long-term debt
1,137,909

 
929,403

Total Liabilities
17,023,893

 
16,823,132

SHAREHOLDERS’ EQUITY
 
 
 
Common stock, $2.50 par value, 600 million shares authorized, 220.1 million shares issued in 2017 and 219.9 million shares issued in 2016
550,292

 
549,707

Additional paid-in capital
1,471,601

 
1,467,602

Retained earnings
756,305

 
732,099

Accumulated other comprehensive loss
(34,552
)
 
(38,449
)
Treasury stock, at cost, 45.8 million shares in 2017 and 2016
(588,963
)
 
(589,844
)
Total Shareholders’ Equity
2,154,683

 
2,121,115

Total Liabilities and Shareholders’ Equity
$
19,178,576

 
$
18,944,247

 
 
 
 
See Notes to Consolidated Financial Statements
 
 
 
 

3


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
(in thousands, except per-share data)
Three months ended March 31
 
2017
 
2016
INTEREST INCOME
 
 
 
Loans, including fees
$
142,566

 
$
134,079

Investment securities:
 
 
 
Taxable
11,914

 
12,003

Tax-exempt
2,849

 
2,040

Dividends
129

 
160

Loans held for sale
187

 
131

Other interest income
842

 
898

Total Interest Income
158,487

 
149,311

INTEREST EXPENSE
 
 
 
Deposits
11,801

 
10,727

Short-term borrowings
855

 
268

Long-term debt
8,252

 
9,262

Total Interest Expense
20,908

 
20,257

Net Interest Income
137,579

 
129,054

Provision for credit losses
4,800

 
1,530

Net Interest Income After Provision for Credit Losses
132,779

 
127,524

NON-INTEREST INCOME
 
 
 
Other service charges and fees
12,437

 
10,750

Service charges on deposit accounts
12,400

 
12,558

Investment management and trust services
11,808

 
10,988

Mortgage banking income
4,596

 
4,030

Investment securities gains, net
1,106

 
947

Other
4,326

 
3,864

Total Non-Interest Income
46,673

 
43,137

NON-INTEREST EXPENSE
 
 
 
Salaries and employee benefits
69,236

 
69,372

Net occupancy expense
12,663

 
12,220

Other outside services
5,546

 
6,056

Software
4,693

 
3,921

Data processing
4,286

 
5,400

Equipment expense
3,359

 
3,371

Professional fees
2,737

 
2,333

FDIC insurance expense
2,058

 
2,949

Marketing
1,986

 
1,624

Other
15,711

 
13,167

Total Non-Interest Expense
122,275

 
120,413

Income Before Income Taxes
57,177

 
50,248

Income taxes
13,797

 
11,991

Net Income
$
43,380

 
$
38,257

 
 
 
 
PER SHARE:
 
 
 
Net Income (Basic)
$
0.25

 
$
0.22

Net Income (Diluted)
0.25

 
0.22

Cash Dividends
0.11

 
0.09

See Notes to Consolidated Financial Statements
 
 
 

4



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
(in thousands)
 
Three months ended March 31
 
2017
 
2016
 
 
Net Income
$
43,380

 
$
38,257

Other Comprehensive Income, net of tax:
 
 
 
Unrealized gain on securities
4,273

 
17,026

Reclassification adjustment for securities gains included in net income
(719
)
 
(616
)
Amortization of unrealized loss on derivative financial instruments
—

 
4

Amortization of net unrecognized pension and postretirement items
343

 
466

Other Comprehensive Income
3,897

 
16,880

Total Comprehensive Income
$
47,277

 
$
55,137

 
 
 
 
See Notes to Consolidated Financial Statements
 
 
 


5



CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2017 AND 2016
 
(in thousands, except per-share data)
 
Common Stock
 
 
 
Retained
Earnings
 
 
 
Treasury
Stock
 
Total
 
Shares
Outstanding
 
Amount
 
Additional Paid-in
Capital
 
Accumulated
Other Comprehensive
Income (Loss)
 
 
 
Balance at December 31, 2016
174,040

 
$
549,707

 
$
1,467,602

 
$
732,099

 
$
(38,449
)
 
$
(589,844
)
 
$
2,121,115

Net income

 

 

 
43,380

 

 

 
43,380

Other comprehensive income

 

 

 

 
3,897

 

 
3,897

Stock issued
303

 
585

 
3,265

 

 

 
881

 
4,731

Stock-based compensation awards

 

 
734

 

 

 

 
734

Common stock cash dividends - $0.11 per share

 

 

 
(19,174
)
 

 

 
(19,174
)
Balance at March 31, 2017
174,343

 
$
550,292

 
$
1,471,601

 
$
756,305

 
$
(34,552
)
 
$
(588,963
)
 
$
2,154,683

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
174,176

 
$
547,141

 
$
1,450,690

 
$
641,588

 
$
(22,017
)
 
$
(575,508
)
 
$
2,041,894

Net income

 

 

 
38,257

 

 

 
38,257

Other comprehensive loss

 

 

 

 
16,880

 

 
16,880

Stock issued, including related tax benefits
134

 
121

 
345

 

 

 
1,181

 
1,647

Stock-based compensation awards

 

 
1,436

 

 

 

 
1,436

Acquisition of treasury stock
(917
)
 
 
 
 
 
 
 
 
 
(11,196
)
 
(11,196
)
Common stock cash dividends - $0.09 per share

 

 

 
(15,609
)
 

 

 
(15,609
)
Balance at March 31, 2016
173,393

 
$
547,262

 
$
1,452,471

 
$
664,236

 
$
(5,137
)
 
$
(585,523
)
 
$
2,073,309

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 

6


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
(in thousands)
 
Three months ended March 31
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net Income
$
43,380

 
$
38,257

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for credit losses
4,800

 
1,530

Depreciation and amortization of premises and equipment
7,032

 
6,949

Net amortization of investment securities premiums
2,416

 
2,055

Investment securities gains, net
(1,106
)
 
(947
)
Gain on sales of mortgage loans held for sale
(3,074
)
 
(2,670
)
Proceeds from sales of mortgage loans held for sale
115,417

 
114,255

Originations of mortgage loans held for sale
(108,429
)
 
(114,418
)
Amortization of issuance costs on long-term debt
168

 
154

Stock-based compensation
734

 
1,436

Excess tax benefits from stock-based compensation
—

 
(10
)
Increase in accrued interest receivable
(61
)
 
(1,612
)
Decreases (increase) in other assets
4,614

 
(4,469
)
Increase in accrued interest payable
2,874

 
2,843

Decrease in other liabilities
(4,244
)
 
(9,245
)
Total adjustments
21,141

 
(4,149
)
Net cash provided by operating activities
64,521

 
34,108

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Proceeds from sales of securities available for sale
8,735

 
46,541

Proceeds from principal repayments and maturities of securities available for sale
98,024

 
117,221

Purchase of securities available for sale
(49,430
)
 
(169,436
)
Increase in short-term investments
(59,135
)
 
(115,544
)
Net increase in loans
(267,383
)
 
(38,976
)
Net purchases of premises and equipment
(5,397
)
 
(9,471
)
Net cash used in investing activities
(274,586
)
 
(169,665
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net increase in demand and savings deposits
112,348

 
269,899

Net (decrease) increase in time deposits
(34,868
)
 
2,064

Decrease in short-term borrowings
(88,000
)
 
(144,780
)
Additions to long-term debt
223,375

 
16,000

Repayments of long-term debt
(15,037
)
 
(42
)
Net proceeds from issuance of common stock
4,731

 
1,637

Excess tax benefits from stock-based compensation
—

 
10

Dividends paid
(17,403
)
 
(15,676
)
Acquisition of treasury stock
—

 
(11,196
)
Net cash provided by financing activities
185,146

 
117,916

Net Decrease in Cash and Due From Banks
(24,919
)
 
(17,641
)
Cash and Due From Banks at Beginning of Period
118,763

 
101,120

Cash and Due From Banks at End of Period
$
93,844

 
$
83,479

Supplemental Disclosures of Cash Flow Information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
18,034

 
$
17,414

Income taxes
116

 
3,972

See Notes to Consolidated Financial Statements
 
 
 
 

7


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, 2016. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The Corporation evaluates subsequent events through the date of filing of this Form 10-Q with the Securities and Exchange Commission ("SEC").

Recently Adopted Accounting Standards

The Corporation adopted Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") Update 2016-09, "Stock Compensation: Improvements to Employee Share-Based Payment Accounting" effective January 1, 2017. This standards update simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liability, and classification on the statement of cash flows. ASC Update 2016-09 was effective for interim and annual reporting periods that began after December 15, 2016 with early application permitted. For the Corporation, this standards update was effective with this March 31, 2017 quarterly report on Form 10-Q. The adoption of ASC Update 2016-09 did not have a material impact on the Corporation's consolidated financial statements.

Recently Issued Accounting Standards

In May 2014, the FASB issued ASC Update 2014-09, "Revenue from Contracts with Customers." This standards update establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle prescribed by this standards update is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard applies to all contracts with customers, except those that are within the scope of other topics in the FASB ASC. The standard also requires significantly expanded disclosures about revenue recognition. During 2016, the FASB issued amendments to this standard (ASC Updates 2016-08, 2016-10, 2016-11 and 2016-12). These amendments provide further clarification to the standard. For public business entities, ASC Update 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017. Early application is not permitted. For the Corporation, this standards update is effective with its March 31, 2018 quarterly report on Form 10-Q. The Corporation is currently evaluating the impact of the adoption of ASC Update 2014-09 on its consolidated financial statements.

In January 2016, the FASB issued ASC Update 2016-01, "Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities." ASC Update 2016-01 provides guidance regarding the income statement impact of equity investments held by an entity and the recognition of changes in fair value of financial liabilities when the fair value option is elected.This standard will require equity investments to be measured at fair value, with changes recorded in net income. ASC Update 2016-01 is effective for public business entities' annual and interim reporting periods beginning after December 15, 2017, with earlier adoption permitted. The Corporation intends to adopt this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2016-01 to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASC Update 2016-02, "Leases." This standards update states that a lessee should recognize the assets and liabilities that arise from all leases with a term greater than 12 months. The core principle requires the lessee to recognize a liability to make lease payments and a "right-of-use" asset. The accounting applied by the lessor is relatively unchanged. The standards update also requires expanded qualitative and quantitative disclosures. For public business entities, ASC Update 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. ASC Update 2016-02 mandates a modified retrospective transition for all entities, which requires restatement of all comparative periods in the year of adoption.

8


Early adoption is permitted. For the Corporation, this standards update is effective with its March 31, 2019 quarterly report on Form 10-Q. The Corporation is currently evaluating the impact of the adoption of ASC Update 2016-02 on its consolidated financial statements. The Corporation currently operates a number of branches that are leased, with the leases accounted for as operating leases that are not recognized on the consolidated balance sheet. Under ASC Update 2016-02, right-of-use assets and lease liabilities will need to be recognized on the consolidated balance sheet for these branches. This is expected to be the most significant impact of the adoption of this standards update.

In June 2016, the FASB issued ASC Update 2016-13, "Financial Instruments - Credit Losses." The new impairment model prescribed by this standards update is a single impairment model for all financial assets (i.e., loans and investments). The recognition of credit losses would be based on an entity’s current estimate of expected losses (referred to as the Current Expected Credit Loss model, or "CECL"), as opposed to recognition of losses only when they are probable under current U.S. GAAP. ASC Update 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2020 quarterly report on Form 10-Q. The Corporation is currently evaluating the impact of the adoption of ASC Update 2016-13 on its consolidated financial statements.

In August 2016, the FASB issued ASC Update 2016-15, "Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments." This standards update provides guidance regarding the presentation of certain cash receipts and cash payments in the statement of cash flows, addressing eight specific cash flow classification issues, in order to reduce existing diversity in practice. ASC Update 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2016-15 to have a material impact on its consolidated financial statements.

In November 2016, the FASB issued ASC Update 2016-18, "Statement of Cash Flows - Restricted Cash." This standards update provides guidance regarding the presentation of restricted cash in the statement of cash flows. The update requires companies to include amounts generally described as restricted cash and restricted cash equivalents, along with cash and cash equivalents, when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. It also requires an entity to disclose the nature of the restrictions on cash and cash equivalents. ASC Update 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and does not expect the adoption of ASC Update 2016-18 to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASC Update 2017-04, "Intangibles - Goodwill and Other." This standards update eliminates Step 2 of the goodwill impairment test which measures the impairment amount. Identifying and measuring impairment will take place in a single quantitative step. In addition, no separate qualitative assessment for reporting units with zero or negative carrying amount is required. Entities must disclose the existence of these reporting units and the amount of goodwill allocated to them. This update should be applied on a prospective basis and an entity is required to disclose the nature of and reason for the change in accounting principle upon transition. ASC Update 2017-04 is effective for annual or interim goodwill impairment tests in reporting periods beginning after December 15, 2019. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its 2020 goodwill impairment test and does not expect the adoption of ASC Update 2017-04 to have a material impact on its consolidated financial statements.

In March 2017, the FASB issued ASC Update 2017-07, "Improving the Presentation of Net Periodic Pension Costs and Net Periodic Benefit Cost." This standards update requires a company to present service cost separately from the other components of net benefit cost. In addition, the update provides explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. ASC Update 2017-07 is effective for annual or interim reporting periods beginning after December 15, 2017. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and is currently evaluating the impact of the adoption of ASC Update 2017-07 on its consolidated financial statements.

In March 2017, the FASB issued ASC Update 2017-08, "Premium Amortization on Purchased Callable Debt Securities." This standards update requires that a company amortize the premium on callable debt securities to the earliest call date versus current U.S. GAAP which requires amortization over the contractual life of the securities. The amortization period for callable debt securities purchased at a discount would not be impacted by the new accounting standards update. This amendment is to be adopted on a modified retrospective basis with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. ASC Update 2017-08 is effective for annual or interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2019 quarterly report

9


on Form 10-Q and does not expect the adoption of ASC Update 2017-08 to have a material impact on its consolidated financial statements.


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 March 31
 
2017
 
2016
 
(in thousands)
Weighted average shares outstanding (basic)
174,150

 
173,331

Impact of common stock equivalents
1,427

 
1,085

Weighted average shares outstanding (diluted)
175,577

 
174,416

For the three months ended March 31, 2016, 885,000 stock options were excluded from the diluted net income per share computation as their effect would have been anti-dilutive. There were no stock options excluded for the three months ended March 31, 2017.

10


NOTE 3 – Accumulated Other Comprehensive Income

The following table presents changes in other comprehensive income: 
 
Before-Tax Amount
 
Tax Effect
 
Net of Tax Amount
 
(in thousands)
Three months ended March 31, 2017
 
 
 
 
 
Unrealized gain on securities
$
6,575

 
$
(2,302
)
 
$
4,273

Reclassification adjustment for securities gains included in net income (1)
(1,106
)
 
387

 
(719
)
Amortization of net unrecognized pension and postretirement items (3)
528

 
(185
)
 
343

Total Other Comprehensive Income
$
5,997

 
$
(2,100
)
 
$
3,897

Three months ended March 31, 2016
 
 
 
 
 
Unrealized gain on securities
$
26,193

 
$
(9,167
)
 
$
17,026

Reclassification adjustment for securities gains included in net income (1)
(947
)
 
331

 
(616
)
Amortization of unrealized loss on derivative financial instruments(2)
6

 
(2
)
 
4

Amortization of net unrecognized pension and postretirement items (3)
717

 
(251
)
 
466

Total Other Comprehensive Income
$
25,969

 
$
(9,089
)
 
$
16,880


(1)
Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included in "Investment securities gains, net" on the consolidated statements of income. See Note 4, "Investment Securities," for additional details.
(2)
Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included in "Interest expense" on the consolidated statements of income.
(3)
Amounts reclassified out of accumulated other comprehensive income. Before-tax amounts included in "Salaries and employee benefits" on the consolidated statements of income. See Note 8, "Employee Benefit Plans," for additional details.

The following table presents 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
 
(in thousands)
Three months ended March 31, 2017
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
$
(23,047
)
 
$
273

 
$
—

 
$
(15,675
)
 
$
(38,449
)
Other comprehensive loss before reclassifications
4,273

 
—

 
—

 
—

 
4,273

Amounts reclassified from accumulated other comprehensive income (loss)
(719
)
 
—

 
—

 
343

 
(376
)
Balance at March 31, 2017
$
(19,493
)
 
$
273

 
$
—

 
$
(15,332
)
 
$
(34,552
)
Three months ended March 31, 2016

 

 
 
 

 

Balance at December 31, 2015
$
(6,499
)
 
$
458

 
$
(15
)
 
$
(15,961
)
 
$
(22,017
)
Other comprehensive income before reclassifications
17,026


—

 
—

 
—

 
17,026

Amounts reclassified from accumulated other comprehensive income (loss)
(616
)
 
—

 
4

 
466

 
(146
)
Balance at March 31, 2016
$
9,911

 
$
458

 
$
(11
)
 
$
(15,495
)
 
$
(5,137
)


11


NOTE 4 – Investment Securities

The following table presents the amortized cost and estimated fair values of investment securities, which were all classified as available for sale:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
(in thousands)
March 31, 2017
 
 
 
 
 
 
 
U.S. Government sponsored agency securities
$
5,959

 
$
37

 
$
—

 
$
5,996

State and municipal securities
404,125

 
2,352

 
(13,853
)
 
392,624

Corporate debt securities
109,595

 
2,055

 
(3,773
)
 
107,877

Collateralized mortgage obligations
575,596

 
1,811

 
(11,521
)
 
565,886

Mortgage-backed securities
1,321,573

 
6,155

 
(14,107
)
 
1,313,621

Auction rate securities
107,312

 
—

 
(9,873
)
 
97,439

   Total debt securities
2,524,160

 
12,410

 
(53,127
)
 
2,483,443

Equity securities
11,416

 
11,158

 
—

 
22,574

   Total
$
2,535,576

 
$
23,568

 
$
(53,127
)
 
$
2,506,017

 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
(in thousands)
December 31, 2016
 
 
 
 
 
 
 
U.S. Government sponsored agency securities
$
132

 
$
2

 
$
—

 
$
134

State and municipal securities
405,274

 
2,043

 
(15,676
)
 
391,641

Corporate debt securities
112,016

 
1,978

 
(4,585
)
 
109,409

Collateralized mortgage obligations
604,095

 
1,943

 
(12,178
)
 
593,860

Mortgage-backed securities
1,353,292

 
6,546

 
(17,437
)
 
1,342,401

Auction rate securities
107,215

 
—

 
(9,959
)
 
97,256

   Total debt securities
2,582,024

 
12,512

 
(59,835
)
 
2,534,701

Equity securities
12,231

 
12,295

 
—

 
24,526

   Total
$
2,594,255

 
$
24,807

 
$
(59,835
)
 
$
2,559,227

Securities carried at $1.8 billion as of March 31, 2017 and December 31, 2016 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 $21.6 million at March 31, 2017 and $23.5 million at December 31, 2016) and other equity investments (estimated fair value of $969,000 at March 31, 2017 and $1.0 million at December 31, 2016).
As of March 31, 2017, the financial institutions stock portfolio had a cost basis of $10.6 million and an estimated fair value of $21.6 million, including an investment in a single financial institution with a cost basis of $5.1 million and an estimated fair value of $9.6 million. The estimated fair value of this investment accounted for 44.6% of the estimated fair value of the Corporation's investments in the common stocks of publicly traded financial institutions. No other investment in a single financial institution in the financial institutions stock portfolio exceeded 10% of the portfolio's estimated fair value.

12


The amortized cost and estimated fair values of debt securities as of March 31, 2017, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities as certain investment securities are subject to call or prepayment with or without call or prepayment penalties.
 
 
Amortized
Cost
 
Estimated
Fair Value
 
(in thousands)
Due in one year or less
 
$
53,510

 
$
53,729

Due from one year to five years
 
27,178

 
27,785

Due from five years to ten years
 
113,529

 
113,708

Due after ten years
 
432,774

 
408,714

 
 
626,991

 
603,936

Collateralized mortgage obligations
 
575,596

 
565,886

Mortgage-backed securities
 
1,321,573

 
1,313,621

  Total debt securities
 
$
2,524,160

 
$
2,483,443

The following table presents information related to the gross realized gains and losses on the sales of equity and debt securities:
 
Gross
Realized
Gains
 
Gross
Realized
Losses
 
Net Gains (Losses)
Three months ended March 31, 2017
(in thousands)
Equity securities
$
1,045

 
$
—

 
$
1,045

Debt securities
61

 
—

 
61

Total
$
1,106

 
$
—

 
$
1,106

Three months ended March 31, 2016
 
 
 
 
 
Equity securities
$
733

 
$
—

 
$
733

Debt securities
214

 
—

 
214

Total
$
947

 
$
—

 
$
947


The cumulative balance of credit related other-than-temporary impairment charges, previously recognized as components of earnings, for debt securities held by the Corporation at March 31, 2017 and March 31, 2016 was $11.5 million. There were no other-than-temporary impairment charges recognized for the three months ended March 31, 2017 and March 31, 2016.
The following tables present 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 March 31, 2017 and December 31, 2016:
 
Less than 12 months
 
12 months or longer
 
Total
 
Estimated
Fair Value
 
Unrealized
Losses
 
Estimated
Fair Value
 
Unrealized
Losses
 
Estimated
Fair Value
 
Unrealized
Losses
March 31, 2017
(in thousands)
State and municipal securities
$
237,313

 
$
(13,853
)
 
$
—

 
$
—

 
$
237,313

 
$
(13,853
)
Corporate debt securities
4,020

 
(11
)
 
35,364

 
(3,762
)
 
39,384

 
(3,773
)
Collateralized mortgage obligations
145,052

 
(3,672
)
 
246,408

 
(7,849
)
 
391,460

 
(11,521
)
Mortgage-backed securities
1,089,397

 
(14,107
)
 
—

 
—

 
1,089,397

 
(14,107
)
Auction rate securities
—

 
—

 
97,439

 
(9,873
)
 
97,439

 
(9,873
)
Total debt securities
1,475,782

 
(31,643
)
 
379,211

 
(21,484
)
 
1,854,993

 
(53,127
)

13


 
Less than 12 months
 
12 months or longer
 
Total
 
Estimated
Fair Value
 
Unrealized
Losses
 
Estimated
Fair Value
 
Unrealized
Losses
 
Estimated
Fair Value
 
Unrealized
Losses
December 31, 2016
(in thousands)
State and municipal securities
$
247,509

 
$
(15,676
)
 
$
—

 
$
—

 
$
247,509

 
$
(15,676
)
Corporate debt securities
11,922

 
(110
)
 
34,629

 
(4,475
)
 
46,551

 
(4,585
)
Collateralized mortgage obligations
166,905

 
(3,899
)
 
258,237

 
(8,279
)
 
425,142

 
(12,178
)
Mortgage-backed securities
1,137,510

 
(17,437
)
 
—

 
—

 
1,137,510

 
(17,437
)
Auction rate securities
—

 
—

 
97,256

 
(9,959
)
 
97,256

 
(9,959
)
Total debt securities
1,563,846

 
(37,122
)
 
390,122

 
(22,713
)
 
1,953,968

 
(59,835
)
The decline in market value of these securities is attributable to changes in interest rates and not credit quality, and the Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, therefore the Corporation does not consider these investments to be other-than-temporarily impaired as of March 31, 2017.
As of March 31, 2017, all of the auction rate securities (auction rate certificates, or "ARCs"), were rated above investment grade. All of the loans underlying the ARCs have principal payments which are guaranteed by the federal government. As of March 31, 2017, all ARCs were current and making scheduled interest payments, and based on management’s evaluations, were not subject to any other-than-temporary impairment charges as of March 31, 2017. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.
The majority of the Corporation's available for sale corporate debt securities are issued by financial institutions. The following table presents the amortized cost and estimated fair value of corporate debt securities:
 
March 31, 2017
 
December 31, 2016
 
Amortized
cost
 
Estimated
fair value
 
Amortized
cost
 
Estimated
fair value
 
(in thousands)
Single-issuer trust preferred securities
$
43,770

 
$
40,720

 
$
43,746

 
$
39,829

Subordinated debt
43,787

 
44,399

 
46,231

 
46,723

Senior debt
18,036

 
18,334

 
18,037

 
18,433

Pooled trust preferred securities
—

 
422

 
—

 
422

Corporate debt securities issued by financial institutions
105,593

 
103,875

 
108,014

 
105,407

Other corporate debt securities
4,002

 
4,002

 
4,002

 
4,002

Available for sale corporate debt securities
$
109,595

 
$
107,877

 
$
112,016

 
$
109,409


Single-issuer trust preferred securities had an unrealized loss of $3.1 million at March 31, 2017. Six of the 19 single-issuer trust preferred securities, with an amortized cost of $11.6 million and an estimated fair value of $10.3 million at March 31, 2017, were rated below investment grade by at least one ratings agency. All of the single-issuer trust preferred securities rated below investment grade were rated "BB" and "Ba". Two single-issuer trust preferred securities with an amortized cost of $3.8 million and an estimated fair value of $2.8 million at March 31, 2017 were not rated by any ratings agency.
Based on management’s evaluations, no corporate debt securities were subject to any other-than-temporary impairment charges as of March 31, 2017. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.


14


NOTE 5 – Loans and Allowance for Credit Losses

Loans, Net of Unearned Income
Loans, net of unearned income are summarized as follows:
 
March 31,
2017
 
December 31, 2016
 
(in thousands)
Real-estate - commercial mortgage
$
6,118,533

 
$
6,018,582

Commercial - industrial, financial and agricultural
4,167,809

 
4,087,486

Real-estate - residential mortgage
1,665,142

 
1,601,994

Real-estate - home equity
1,595,901

 
1,625,115

Real-estate - construction
882,983

 
843,649

Consumer
288,826

 
291,470

Leasing and other
262,315

 
246,704

Overdrafts
3,342

 
3,662

Loans, gross of unearned income
14,984,851

 
14,718,662

Unearned income
(21,674
)
 
(19,390
)
Loans, net of unearned income
$
14,963,177

 
$
14,699,272


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 sheets. The allowance for credit losses is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.

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

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

The following table presents the components of the allowance for credit losses:
 
March 31,
2017
 
December 31,
2016
 
(in thousands)
Allowance for loan losses
$
170,076

 
$
168,679

Reserve for unfunded lending commitments
2,571

 
2,646

Allowance for credit losses
$
172,647

 
$
171,325



15


The following table presents the activity in the allowance for credit losses:
 
Three months ended March 31
 
2017
 
2016
 
(in thousands)
Balance at beginning of period
$
171,325

 
$
171,412

Loans charged off
(9,407
)
 
(11,155
)
Recoveries of loans previously charged off
5,929

 
4,278

Net loans charged off
(3,478
)
 
(6,877
)
Provision for credit losses
4,800

 
1,530

Balance at end of period
$
172,647

 
$
166,065


The following table presents the activity in the allowance for loan losses by portfolio segment:
 
Real Estate -
Commercial
Mortgage
 
Commercial -
Industrial,
Financial and
Agricultural
 
Real Estate -
Home
Equity
 
Real Estate -
Residential
Mortgage
 
Real Estate -
Construction
 
Consumer
 
Leasing, other
and
overdrafts
 
Unallocated
 
Total
 
(in thousands)
Three months ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
$
46,842

 
$
54,353

 
$
26,801

 
$
22,929

 
$
6,455

 
$
3,574

 
$
3,192

 
$
4,533

 
$
168,679

Loans charged off
(1,224
)
 
(5,527
)
 
(698
)
 
(216
)
 
(247
)
 
(856
)
 
(639
)
 
—

 
(9,407
)
Recoveries of loans previously charged off
450

 
4,191

 
137

 
230

 
548

 
236

 
137

 
—

 
5,929

Net loans charged off
(774
)
 
(1,336
)
 
(561
)
 
14

 
301

 
(620
)
 
(502
)
 
—

 
(3,478
)
Provision for loan losses (1)
1,305

 
2,292

 
(2,419
)
 
(925
)
 
745

 
77

 
578

 
3,222

 
4,875

Balance at March 31, 2017
$
47,373

 
$
55,309

 
$
23,821

 
$
22,018

 
$
7,501

 
$
3,031

 
$
3,268

 
$
7,755

 
$
170,076

Three months ended March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
$
47,866

 
$
57,098

 
$
22,405

 
$
21,375

 
$
6,529

 
$
2,585

 
$
2,468

 
$
8,728

 
$
169,054

Loans charged off
(582
)
 
(6,188
)
 
(1,541
)
 
(1,068
)
 
(326
)
 
(1,007
)
 
(443
)
 
—

 
(11,155
)
Recoveries of loans previously charged off
825

 
2,319

 
338

 
136

 
383

 
196

 
81

 
—

 
4,278

Net loans charged off
243

 
(3,869
)
 
(1,203
)
 
(932
)
 
57

 
(811
)
 
(362
)
 
—

 
(6,877
)
Provision for loan losses (1)
202

 
1,104

 
1,322

 
(515
)
 
(304
)
 
550

 
868

 
(1,563
)
 
1,664

Balance at March 31, 2016
$
48,311

 
$
54,333

 
$
22,524

 
$
19,928

 
$
6,282

 
$
2,324

 
$
2,974

 
$
7,165

 
$
163,841


(1)
The provision for loan losses excluded a $75,000 and an $134,000 decrease, respectively, in the reserve for unfunded lending commitments for the three months ended March 31, 2017 and 2016.

16


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, other
and
overdrafts
 
Unallocated
 
Total
 
(in thousands)
Allowance for loan losses at March 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measured for impairment under FASB ASC Subtopic 450-20
$
37,457

 
$
43,155

 
$
14,744

 
$
10,581

 
$
4,915

 
$
3,007

 
$
3,268

 
$
7,755

 
$
124,882

Evaluated for impairment under FASB ASC Section 310-10-35
9,916

 
12,154

 
9,077

 
11,437

 
2,586

 
24

 
—

 
N/A

 
45,194

 
$
47,373

 
$
55,309

 
$
23,821

 
$
22,018

 
$
7,501

 
$
3,031

 
$
3,268

 
$
7,755

 
$
170,076

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net of unearned income at March 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measured for impairment under FASB ASC Subtopic 450-20
$
6,067,492

 
$
4,119,550

 
$
1,576,949

 
$
1,620,302

 
$
869,225

 
$
288,789

 
$
243,983

 
N/A

 
$
14,786,290

Evaluated for impairment under FASB ASC Section 310-10-35
51,041

 
48,259

 
18,952

 
44,840

 
13,758

 
37

 
—

 
N/A

 
176,887

 
$
6,118,533

 
$
4,167,809

 
$
1,595,901

 
$
1,665,142

 
$
882,983

 
$
288,826

 
$
243,983

 
N/A

 
$
14,963,177

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses at March 31, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measured for impairment under FASB ASC Subtopic 450-20
$
35,914

 
$
40,969

 
$
13,541

 
$
7,599

 
$
4,004

 
$
2,302

 
$
1,756

 
$
7,165

 
$
113,250

Evaluated for impairment under FASB ASC Section 310-10-35
12,397

 
13,364

 
8,983

 
12,329

 
2,278

 
22

 
1,218

 
N/A

 
50,591

 
$
48,311

 
$
54,333

 
$
22,524

 
$
19,928

 
$
6,282

 
$
2,324

 
$
2,974

 
$
7,165

 
$
163,841

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net of unearned income at March 31, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measured for impairment under FASB ASC Subtopic 450-20
$
5,499,820

 
$
3,992,567

 
$
1,641,457

 
$
1,329,114

 
$
797,282

 
$
263,189

 
$
164,806

 
N/A

 
$
13,688,235

Evaluated for impairment under FASB ASC Section 310-10-35
58,288

 
42,766

 
18,024

 
48,345

 
13,590

 
32

 
1,421

 
N/A

 
182,466

 
$
5,558,108

 
$
4,035,333

 
$
1,659,481

 
$
1,377,459

 
$
810,872

 
$
263,221

 
$
166,227

 
N/A

 
$
13,870,701

 
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 $4.8 million provision for credit losses during the three months ended March 31, 2017, compared to a $1.5 million provision for credit losses for the same period in 2016.
All loans individually evaluated for impairment under FASB ASC Section 310-10-35 are measured for losses on a quarterly basis. As of March 31, 2017 and December 31, 2016, 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 March 31, 2017 and 2016, approximately 67% and 77%, respectively, of impaired loans with principal balances greater than or equal to $1.0 million, whose primary collateral is real estate, were measured at estimated fair value using state certified third-party appraisals that had been updated in 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 credit administration 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%.

17


The following table presents total impaired loans by class segment:
 
March 31, 2017
 
December 31, 2016
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Related
Allowance
 
(in thousands)
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
Real estate - commercial mortgage
$
25,043

 
$
22,236

 
$
—

 
$
28,757

 
$
25,447

 
$
—

Commercial - secured
33,791

 
25,622

 
—

 
29,296

 
25,526

 
—

Real estate - residential mortgage
4,657

 
4,657

 
—

 
4,689

 
4,689

 
—

Construction - commercial residential
6,169

 
4,692

 
—

 
6,271

 
4,795

 
—

Construction - commercial
603

 
603

 
—

 
—

 
—

 
—

 
70,263

 
57,810

 

 
69,013

 
60,457

 

With a related allowance recorded:
 
 
 
 
 
 
 
 
 
 
Real estate - commercial mortgage
37,069

 
28,805

 
9,916

 
37,132

 
29,446

 
10,162

Commercial - secured
26,205

 
21,872

 
11,739

 
27,767

 
22,626

 
13,198

Commercial - unsecured
1,061

 
765

 
415

 
1,122

 
823

 
455

Real estate - home equity
23,351

 
18,952

 
9,077

 
23,971

 
19,205

 
9,511

Real estate - residential mortgage
47,442

 
40,183

 
11,437

 
48,885

 
41,359

 
11,897

Construction - commercial residential
13,451

 
7,286

 
2,134

 
10,103

 
4,206

 
1,300

Construction - commercial
141

 
81

 
31

 
681

 
435

 
145

Construction - other
1,096

 
1,096

 
421

 
1,096

 
1,096

 
423

Consumer - direct
20

 
20

 
14

 
19

 
19

 
12

Consumer - indirect
17

 
17

 
10

 
21

 
21

 
14

 
149,853

 
119,077

 
45,194

 
150,797

 
119,236

 
47,117

Total
$
220,116

 
$
176,887

 
$
45,194

 
$
219,810

 
$
179,693

 
$
47,117

As of March 31, 2017 and December 31, 2016, there were $57.8 million and $60.5 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.

18


The following table presents average impaired loans by class segment:
 
Three months ended March 31
 
2017
 
2016
 
Average
Recorded
Investment
 
Interest
Income (1)
 
Average
Recorded
Investment
 
Interest
Income (1)
 
(in thousands)
With no related allowance recorded:
 
 
 
 
 
 
 
Real estate - commercial mortgage
$
23,842

 
$
70

 
$
22,810

 
$
69

Commercial - secured
25,574

 
36

 
12,964

 
16

Real estate - residential mortgage
4,673

 
26

 
5,501

 
30

Construction - commercial residential
4,744

 
2

 
7,582

 
19

Construction - commercial
302

 
—

 
—

 
—

 
59,135

 
134

 
48,857

 
134

With a related allowance recorded:
 
 
 
 
 
 
 
Real estate - commercial mortgage
29,126

 
85

 
35,482

 
108

Commercial - secured
22,249

 
32

 
31,642

 
38

Commercial - unsecured
795

 
—

 
853

 
1

Real estate - home equity
19,079