UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

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 30, 2017, or

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

For the transition period fromto

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. See the definitions of "large accelerated filer," "accelerated filer" and "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 –174,941,000 shares outstanding as of July 28, 2017.

1

FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017

INDEX

Description		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
(a)	Consolidated Balance Sheets - June 30, 2017 and December 31, 2016	3
(b)	Consolidated Statements of Income - Three and six months ended June 30, 2017 and 2016	4
(c)	Consolidated Statements of Comprehensive Income - Three and six months ended June 30, 2017 and 2016	5
(d)	Consolidated Statements of Shareholders’ Equity - Six months ended June 30, 2017 and 2016	6
(e)	Consolidated Statements of Cash Flows - Six months ended June 30, 2017 and 2016	7
(f)	Notes to Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		41
Item 3. Quantitative and Qualitative Disclosures about Market Risk		66
Item 4. Controls and Procedures		70
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		71
Item 1A. Risk Factors		71
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		71
Item 3. Defaults Upon Senior Securities - (not applicable)
Item 4. Mine Safety Disclosures - (not applicable)
Item 5. Other Information - (none to be reported)
Item 6. Exhibits		71
Signatures		72
Exhibit Index		73

2

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share data)

	June 30, 2017			December 31, 2016
	(unaudited)
ASSETS
Cash and due from banks	$	94,938		$	118,763
Interest-bearing deposits with other banks	322,514			233,763
Federal Reserve Bank and Federal Home Loan Bank stock	70,328			57,489
Loans held for sale	62,354			28,697
Available for sale investment securities	2,488,699			2,559,227
Loans, net of unearned income	15,346,617			14,699,272
Less: Allowance for loan losses	(172,342		)	(168,679		)
Net Loans	15,174,275			14,530,593
Premises and equipment	217,558			217,806
Accrued interest receivable	47,603			46,294
Goodwill and intangible assets	531,556			531,556
Other assets	637,610			620,059
Total Assets	$	19,647,435		$	18,944,247
LIABILITIES
Deposits:
Noninterest-bearing	$	4,574,619		$	4,376,137
Interest-bearing	10,782,742			10,636,727
Total Deposits	15,357,361			15,012,864
Short-term borrowings:
Federal funds purchased	206,269			278,570
Other short-term borrowings	488,590			262,747
Total Short-Term Borrowings	694,859			541,317
Accrued interest payable	7,804			9,632
Other liabilities	357,680			329,916
Federal Home Loan Bank advances and other long-term debt	1,037,961			929,403
Total Liabilities	17,455,665			16,823,132
SHAREHOLDERS’ EQUITY
Common stock, $2.50 par value, 600 million shares authorized, 220.8 million shares issued in 2017 and 219.9 million shares issued in 2016	551,936			549,707
Additional paid-in capital	1,473,549			1,467,602
Retained earnings	782,541			732,099
Accumulated other comprehensive loss	(24,875		)	(38,449		)
Treasury stock, at cost, 45.9 million shares in 2017 and 45.8 million shares in 2016	(591,381		)	(589,844		)
Total Shareholders’ Equity	2,191,770			2,121,115
Total Liabilities and Shareholders’ Equity	$	19,647,435		$	18,944,247
See Notes to Consolidated Financial Statements

3

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per-share data)	Three months ended June 30				Six months ended June 30
	2017		2016		2017		2016
INTEREST INCOME
Loans, including fees	$	148,440	$	134,643	$	291,006	$	268,722
Investment securities:
Taxable	11,474		11,159		23,388		23,162
Tax-exempt	2,856		2,320		5,705		4,360
Dividends	109		135		238		295
Loans held for sale	201		188		388		319
Other interest income	801		864		1,643		1,762
Total Interest Income	163,881		149,309		322,368		298,620
INTEREST EXPENSE
Deposits	12,884		10,887		24,685		21,614
Short-term borrowings	974		217		1,829		485
Federal Home Loan Bank advances and other long-term debt	8,460		9,289		16,712		18,551
Total Interest Expense	22,318		20,393		43,226		40,650
Net Interest Income	141,563		128,916		279,142		257,970
Provision for credit losses	6,700		2,511		11,500		4,041
Net Interest Income After Provision for Credit Losses	134,863		126,405		267,642		253,929
NON-INTEREST INCOME
Other service charges and fees	14,342		12,983		26,779		23,733
Service charges on deposit accounts	12,914		12,896		25,314		25,454
Investment management and trust services	12,132		11,247		23,940		22,235
Mortgage banking income	6,141		3,897		10,737		7,927
Investment securities gains, net	1,436		76		2,542		1,023
Other	5,406		5,038		9,732		8,902
Total Non-Interest Income	52,371		46,137		99,044		89,274
NON-INTEREST EXPENSE
Salaries and employee benefits	74,496		70,029		143,732		139,401
Net occupancy expense	12,316		11,811		24,979		24,031
Other outside services	7,708		5,508		13,254		11,564
Data processing	4,619		5,476		8,905		10,876
Software	4,435		3,953		9,128		7,874
Amortization of tax credit investments	3,151		—		4,149		—
Equipment expense	3,034		2,872		6,393		6,243
Professional fees	2,931		3,353		5,668		5,686
FDIC insurance expense	2,366		2,960		4,424		5,909
Marketing	2,234		1,916		4,220		3,540
Other	15,405		13,759		30,118		26,926
Total Non-Interest Expense	132,695		121,637		254,970		242,050
Income Before Income Taxes	54,539		50,905		111,716		101,153
Income taxes	9,072		11,155		22,869		23,146
Net Income	$	45,467	$	39,750	$	88,847	$	78,007
PER SHARE:
Net Income (Basic)	$	0.26	$	0.23	$	0.51	$	0.45
Net Income (Diluted)	0.26		0.23		0.51		0.45
Cash Dividends	0.11		0.10		0.22		0.19
See Notes to Consolidated Financial Statements

4

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

	Three months ended June 30						Six months ended June 30
	2017			2016			2017			2016
Net Income	$	45,467		$	39,750		$	88,847		$	78,007
Other Comprehensive Income, net of tax:
Unrealized gain on securities	10,268			12,839			14,541			29,865
Reclassification adjustment for securities gains included in net income	(932		)	(49		)	(1,651		)	(665		)
Amortization of unrealized loss on derivative financial instruments	—			4			—			8
Amortization of net unrecognized pension and postretirement items	341			32			684			498
Other Comprehensive Income	9,677			12,826			13,574			29,706
Total Comprehensive Income	$	55,144		$	52,576		$	102,421		$	107,713
See Notes to Consolidated Financial Statements

5

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 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							88,847									88,847
Other comprehensive income										13,574						13,574
Stock issued	877		2,229		4,178								(1,537		)	4,870
Stock-based compensation awards					1,769											1,769
Common stock cash dividends - $0.22 per share							(38,405		)							(38,405		)
Balance at June 30, 2017	174,917		$	551,936	$	1,473,549	$	782,541		$	(24,875	)	$	(591,381	)	$	2,191,770
Balance at December 31, 2015	174,176		$	547,141	$	1,450,690	$	641,588		$	(22,017	)	$	(575,508	)	$	2,041,894
Net income							78,007									78,007
Other comprehensive loss										29,706						29,706
Stock issued, including related tax benefits	273		389		1,405								1,554			3,348
Stock-based compensation awards					3,256											3,256
Acquisition of treasury stock	(1,310	)											(16,254		)	(16,254		)
Common stock cash dividends - $0.19 per share							(32,960		)							(32,960		)
Balance at June 30, 2016	173,139		$	547,530	$	1,455,351	$	686,635		$	7,689		$	(590,208	)	$	2,106,997
See Notes to Consolidated Financial Statements

6

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Six months ended June 30
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	88,847		$	78,007
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	11,500			4,041
Depreciation and amortization of premises and equipment	13,974			13,804
Net amortization of investment securities premiums	4,775			4,647
Investment securities gains, net	(2,542		)	(1,023		)
Gain on sales of mortgage loans held for sale	(6,562		)	(7,110		)
Proceeds from sales of mortgage loans held for sale	283,251			304,516
Originations of mortgage loans held for sale	(281,356		)	(314,850		)
Amortization of issuance costs on long-term debt	382			193
Stock-based compensation	1,769			3,256
Excess tax benefits from stock-based compensation	—			(28		)
Increase in accrued interest receivable	(1,309		)	(549		)
Increase in other assets	(26,610		)	(18,268		)
Decrease in accrued interest payable	(1,828		)	(2,388		)
(Decrease) increase in other liabilities	(9,327		)	9,866
Total adjustments	(13,883		)	(3,893		)
Net cash provided by operating activities	74,964			74,114
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale	29,518			84,972
Proceeds from principal repayments and maturities of securities available for sale	225,788			282,832
Purchase of securities available for sale	(158,078		)	(355,220		)
Increase in short-term investments	(101,590		)	(115,570		)
Net increase in loans	(655,172		)	(326,902		)
Net purchases of premises and equipment	(13,726		)	(17,130		)
Net cash used in investing activities	(673,260		)	(447,018		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits	351,329			202,552
Net decrease in time deposits	(6,832		)	(42,305		)
Increase in short-term borrowings	153,542			224,551
Additions to long-term debt	223,251			16,000
Repayments of long-term debt	(115,075		)	(183		)
Net proceeds from issuance of common stock	4,870			3,320
Excess tax benefits from stock-based compensation	—			28
Dividends paid	(36,614		)	(31,278		)
Acquisition of treasury stock	—			(16,254		)
Net cash provided by financing activities	574,471			356,431
Net Decrease in Cash and Due From Banks	(23,825		)	(16,473		)
Cash and Due From Banks at Beginning of Period	118,763			101,120
Cash and Due From Banks at End of Period	$	94,938		$	84,647
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	45,054		$	43,038
Income taxes	7,016			9,087
Supplemental schedule of certain noncash activities:
Transfer of student loans to loans held for sale	$	28,990		$	—
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 six months ended June 30, 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 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. 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. The recognition of operating leases on the consolidated balance sheet 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

8

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 updaterequires 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 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.

In May 2017, the FASB issued ASC Update 2017-09, "Scope of Modification Accounting." This standards update provides clarity and reduces both (1) diversity in practice and (2) cost and complexity, when applying the guidance in the stock compensation standard, to a change to the terms or conditions of a share-based payment award. ASC Update 2017-09 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 does not expect the adoption of ASC Update 2017-09 to have a material impact on its consolidated financial statements.

9

Reclassifications

Certain amounts in the 2016 consolidated financial statements and notes have been reclassified to conform to the 2017 presentation.

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 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
	2017	2016	2017	2016
	(in thousands)
Weighted average shares outstanding (basic)	174,597	173,394	174,375	173,363
Impact of common stock equivalents	935	924	1,179	1,004
Weighted average shares outstanding (diluted)	175,532	174,318	175,554	174,367

For the three and six months ended June 30, 2016, 802,000 and 844,000 stock options, respectively, 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 and six months ended June 30, 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 June 30, 2017
Unrealized gain on securities	$	15,798		$	(5,530	)	$	10,268
Reclassification adjustment for securities gains included in net income (1)	(1,436		)	504			(932		)
Amortization of net unrecognized pension and postretirement items (3)	522			(181		)	341
Total Other Comprehensive Income	$	14,884		$	(5,207	)	$	9,677
Three months ended June 30, 2016
Unrealized gain on securities	$	19,753		$	(6,914	)	$	12,839
Reclassification adjustment for securities gains included in net income (1)	(76		)	27			(49		)
Amortization of unrealized loss on derivative financial instruments(2)	6			(2		)	4
Amortization of net unrecognized pension and postretirement items (3)	49			(17		)	32
Total Other Comprehensive Income	$	19,732		$	(6,906	)	$	12,826
Six months ended June 30, 2017
Unrealized gain on securities	$	22,374		$	(7,833	)	$	14,541
Reclassification adjustment for securities gains included in net income (1)	(2,542		)	891			(1,651		)
Amortization of net unrecognized pension and postretirement items (3)	1,051			(367		)	684
Total Other Comprehensive Income	$	20,883		$	(7,309	)	$	13,574
Six months ended June 30, 2016
Unrealized gain on securities	$	45,946		$	(16,081	)	$	29,865
Reclassification adjustment for securities gains included in net income (1)	(1,023		)	358			(665		)
Amortization of unrealized loss on derivative financial instruments (2)	12			(4		)	8
Amortization of net unrecognized pension and postretirement items (3)	766			(268		)	498
Total Other Comprehensive Income	$	45,701		$	(15,995	)	$	29,706

(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.

11

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

	Unrealized Gains (Losses) on Investment Securities Not Other-Than-Temporarily Impaired			Unrealized Non-Credit Gains (Losses) on Other-Than-Temporarily Impaired Debt Securities		Unrealized Effective Portions of Losses on Forward-Starting Interest Rate Swaps			Unrecognized Pension and Postretirement Plan Income (Costs)			Total
	(in thousands)
Three months ended June 30, 2017
Balance at March 31, 2017	$	(19,493	)	$	273	$	—		$	(15,332	)	$	(34,552	)
Other comprehensive income before reclassifications	10,268			—		—			—			10,268
Amounts reclassified from accumulated other comprehensive income (loss)	(932		)	—		—			341			(591		)
Balance at June 30, 2017	$	(10,157	)	$	273	$	—		$	(14,991	)	$	(24,875	)
Three months ended June 30, 2016
Balance at March 31, 2016	$	9,911		$	458	$	(11	)	$	(15,495	)	$	(5,137	)
Other comprehensive income before reclassifications	12,839			—		—			—			12,839
Amounts reclassified from accumulated other comprehensive income (loss)	(49		)	—		4			32			(13		)
Balance at June 30, 2016	$	22,701		$	458	$	(7	)	$	(15,463	)	$	7,689
Six months ended June 30, 2017
Balance at December 31, 2016	$	(23,047	)	$	273	$	—		$	(15,675	)	$	(38,449	)
Other comprehensive income before reclassifications	14,541			—		—			—			14,541
Amounts reclassified from accumulated other comprehensive income (loss)	(1,651		)	—		—			684			(967		)
Balance at June 30, 2017	$	(10,157	)	$	273	$	—		$	(14,991	)	$	(24,875	)
Six months ended June 30, 2016
Balance at December 31, 2015	$	(6,499	)	$	458	$	(15	)	$	(15,961	)	$	(22,017	)
Other comprehensive income before reclassifications	29,865			—		—			—			29,865
Amounts reclassified from accumulated other comprehensive income (loss)	(665		)	—		8			498			(159		)
Balance at June 30, 2016	$	22,701		$	458	$	(7	)	$	(15,463	)	$	7,689

12

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)
June 30, 2017
U.S. Government sponsored agency securities	$	5,960	$	94	$	—		$	6,054
State and municipal securities	405,035		3,726		(7,125		)	401,636
Corporate debt securities	88,887		2,531		(2,426		)	88,992
Collateralized mortgage obligations	546,847		1,399		(9,739		)	538,507
Residential mortgage-backed securities	1,218,257		5,782		(10,974		)	1,213,065
Commercial mortgage-backed securities	121,012		390		(335		)	121,067
Auction rate securities	107,410		—		(9,487		)	97,923
Total debt securities	2,493,408		13,922		(40,086		)	2,467,244
Equity securities	10,487		10,968		—			21,455
Total	$	2,503,895	$	24,890	$	(40,086	)	$	2,488,699

	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
Residential mortgage-backed securities	1,328,192		6,546		(16,900		)	1,317,838
Commercial mortgage-backed securities	25,100		—		(537		)	24,563
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 $1.7 billion and $1.8 billion as of June 30, 2017 and December 31, 2016, respectively, were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

Equity securities include common stocks of publicly traded financial institutions (estimated fair value of $20.5 million at June 30, 2017 and $23.5 million at December 31, 2016) and other equity investments (estimated fair value of $1.0 million at both June 30, 2017 and December 31, 2016).

As of June 30, 2017, the financial institutions stock portfolio had a cost basis of $9.7 million and an estimated fair value of $20.5 million, including an investment in a single financial institution with a cost basis of $4.3 million and an estimated fair value of $8.8 million. The estimated fair value of this investment accounted for 42.9% 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.

13

The amortized cost and estimated fair values of debt securities as of June 30, 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		$	20,103	$	20,336
Due from one year to five years		27,967		28,335
Due from five years to ten years		111,883		113,050
Due after ten years		447,339		432,884
		607,292		594,605
Residential mortgage-backed securities		1,218,257		1,213,065
Commercial mortgage-backed securities		121,012		121,067
Collateralized mortgage obligations		546,847		538,507
Total debt securities		$	2,493,408	$	2,467,244

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 June 30, 2017	(in thousands)
Equity securities	$	1,305	$	—		$	1,305
Debt securities	145		(14		)	131
Total	$	1,450	$	(14	)	$	1,436
Three months ended June 30, 2016
Equity securities	$	4	$	(10	)	$	(6	)
Debt securities	108		(26		)	82
Total	$	112	$	(36	)	$	76
Six months ended June 30, 2017
Equity securities	$	2,350	$	—		$	2,350
Debt securities	206		(14		)	192
Total	$	2,556	$	(14	)	$	2,542
Six months ended June 30, 2016
Equity securities	$	737	$	(10	)	$	727
Debt securities	322		(26		)	296
Total	$	1,059	$	(36	)	$	1,023

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 June 30, 2017 and June 30, 2016 was $10.0 million. There were no other-than-temporary impairment charges recognized for the three and six months ended June 30, 2017 and June 30, 2016.

14

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 30, 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
June 30, 2017	(in thousands)
State and municipal securities	$	214,497	$	(7,125	)	$	—	$	—		$	214,497	$	(7,125	)
Corporate debt securities	4,020		(9		)	32,148		(2,417		)	36,168		(2,426		)
Collateralized mortgage obligations	144,523		(3,057		)	231,936		(6,682		)	376,459		(9,739		)
Residential mortgage-backed securities	896,206		(10,974		)	—		—			896,206		(10,974		)
Commercial mortgage-backed securities	68,546		(335		)	—		—			68,546		(335		)
Auction rate securities	—		—			97,923		(9,487		)	97,923		(9,487		)
Total debt securities	$	1,327,792	$	(21,500	)	$	362,007	$	(18,586	)	$	1,689,799	$	(40,086	)

	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		)
Residential mortgage-backed securities	1,112,947		(16,900		)	—		—			1,112,947		(16,900		)
Commercial mortgage-backed securities	24,563		(537		)	—		—			24,563		(537		)
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 change in fair 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 June 30, 2017.

As of June 30, 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 June 30, 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 June 30, 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:

	June 30, 2017				December 31, 2016
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)
Single-issuer trust preferred securities	$	43,795	$	42,478	$	43,746	$	39,829
Subordinated debt	29,069		29,697		46,231		46,723
Senior debt	12,035		12,407		18,037		18,433
Pooled trust preferred securities	—		422		—		422
Corporate debt securities issued by financial institutions	84,899		85,004		108,014		105,407
Other corporate debt securities	3,988		3,988		4,002		4,002
Available for sale corporate debt securities	$	88,887	$	88,992	$	112,016	$	109,409

15

Single-issuer trust preferred securities had an unrealized loss of $1.3 million at June 30, 2017. Six of the 19 single-issuer trust preferred securities, with an amortized cost of $11.6 million and an estimated fair value of $10.9 million at June 30, 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 June 30, 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 June 30, 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.

NOTE 5 – Loans and Allowance for Credit Losses

Loans, Net of Unearned Income

Loans, net of unearned income are summarized as follows:

	June 30, 2017			December 31, 2016
	(in thousands)
Real-estate - commercial mortgage	$	6,262,008		$	6,018,582
Commercial - industrial, financial and agricultural	4,245,849			4,087,486
Real-estate - residential mortgage	1,784,712			1,601,994
Real-estate - home equity	1,579,739			1,625,115
Real-estate - construction	938,900			843,649
Consumer	283,156			291,470
Leasing and other	269,787			246,704
Overdrafts	4,435			3,662
Loans, gross of unearned income	15,368,586			14,718,662
Unearned income	(21,969		)	(19,390		)
Loans, net of unearned income	$	15,346,617		$	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.

16

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

	June 30, 2017		December 31, 2016
	(in thousands)
Allowance for loan losses	$	172,342	$	168,679
Reserve for unfunded lending commitments	2,656		2,646
Allowance for credit losses	$	174,998	$	171,325

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

	Three months ended June 30						Six months ended June 30
	2017			2016			2017			2016
	(in thousands)
Balance at beginning of period	$	172,647		$	166,065		$	171,325		$	171,412
Loans charged off	(8,715		)	(10,746		)	(18,122		)	(21,901		)
Recoveries of loans previously charged off	4,366			7,278			10,295			11,556
Net loans charged off	(4,349		)	(3,468		)	(7,827		)	(10,345		)
Provision for credit losses	6,700			2,511			11,500			4,041
Balance at end of period	$	174,998		$	165,108		$	174,998		$	165,108

The Corporation has historically maintained an unallocated allowance for credit losses for factors and conditions that exist at the balance sheet date, but are not specifically identifiable, and to recognize the inherent imprecision in estimating and measuring loss exposure. During the second quarter of 2017, enhancements were made to allow for the impact of these factors and conditions to be quantified in the allowance allocation process. Accordingly, an unallocated allowance for credit losses is no longer necessary.

17

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 June 30, 2017
Balance at March 31, 2017	$	47,373		$	55,309		$	23,821		$	22,018		$	7,501		$	3,031		$	3,268		$	7,755		$	170,076
Loans charged off	(242		)	(5,353		)	(592		)	(124		)	(774		)	(430		)	(1,200		)	—			(8,715		)
Recoveries of loans previously charged off	934			1,974			215			151			373			470			249			—			4,366
Net loans charged off	692			(3,379		)	(377		)	27			(401		)	40			(951		)	—			(4,349		)
Provision for loan losses (1)	9,307			15,712			(5,988		)	(5,606		)	2,434			(1,277		)	(212		)	(7,755		)	6,615
Balance at June 30, 2017	$	57,372		$	67,642		$	17,456		$	16,439		$	9,534		$	1,794		$	2,105		$	—		$	172,342
Three months ended June 30, 2016
Balance at March 31, 2016	$	48,311		$	54,333		$	22,524		$	19,928		$	6,282		$	2,324		$	2,974		$	7,165		$	163,841
Loans charged off	(1,474		)	(4,625		)	(1,045		)	(340		)	(742		)	(569		)	(1,951		)	—			(10,746		)
Recoveries of loans previously charged off	1,367			2,931			350			420			1,563			539			108			—			7,278
Net loans charged off	(107		)	(1,694		)	(695		)	80			821			(30		)	(1,843		)	—			(3,468		)
Provision for loan losses (1)	(4,464		)	(884		)	4,341			1,218			(1,331		)	690			1,387			1,216			2,173
Balance at June 30, 2016	$	43,740		$	51,755		$	26,170		$	21,226		$	5,772		$	2,984		$	2,518		$	8,381		$	162,546
Six months ended June 30, 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	(1,466		)	(10,880		)	(1,290		)	(340		)	(1,021		)	(1,286		)	(1,839		)	—			(18,122		)
Recoveries of loans previously charged off	1,384			6,165			352			381			921			706			386			—			10,295
Net loans charged off	(82		)	(4,715		)	(938		)	41			(100		)	(580		)	(1,453		)	—			(7,827		)
Provision for loan losses (1)	10,612			18,004			(8,407		)	(6,531		)	3,179			(1,200		)	366			(4,533		)	11,490
Balance at June 30, 2017	$	57,372		$	67,642