Document


 
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, 2018, 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. 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 –175,918,000 shares outstanding as of July 31, 2018.

1


FULTON FINANCIAL CORPORATION
FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018
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)
 
June 30,
2018
 
December 31,
2017
 
(unaudited)
 
ASSETS
 
 
 
Cash and due from banks
$
99,742

 
$
108,291

Interest-bearing deposits with other banks
298,087

 
293,805

Federal Reserve Bank and Federal Home Loan Bank stock
66,715

 
60,761

Loans held for sale
35,898

 
31,530

Available for sale investment securities
2,593,283

 
2,547,956

Loans, net of unearned income
15,792,969

 
15,768,247

Less: Allowance for loan losses
(156,050
)
 
(169,910
)
Net Loans
15,636,919

 
15,598,337

Premises and equipment
230,195

 
222,802

Accrued interest receivable
55,208

 
52,910

Goodwill and intangible assets
531,556

 
531,556

Other assets
624,936

 
588,957

Total Assets
$
20,172,539

 
$
20,036,905

LIABILITIES
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
4,324,659

 
$
4,437,294

Interest-bearing
11,275,140

 
11,360,238

Total Deposits
15,599,799

 
15,797,532

Short-term borrowings:
 
 
 
Federal funds purchased
343,000

 
220,000

Other short-term borrowings
640,833

 
397,524

Total Short-Term Borrowings
983,833

 
617,524

Accrued interest payable
8,293

 
9,317

Other liabilities
342,881

 
344,329

Federal Home Loan Bank advances and other long-term debt
991,948

 
1,038,346

Total Liabilities
17,926,754

 
17,807,048

SHAREHOLDERS’ EQUITY
 
 
 
Common stock, $2.50 par value, 600 million shares authorized, 221.6 million shares issued in 2018 and 220.9 million shares issued in 2017
553,958

 
552,232

Additional paid-in capital
1,484,185

 
1,478,389

Retained earnings
871,192

 
821,619

Accumulated other comprehensive loss
(73,258
)
 
(32,974
)
Treasury stock, at cost, 45.7 million shares in 2018 and 2017
(590,292
)
 
(589,409
)
Total Shareholders’ Equity
2,245,785

 
2,229,857

Total Liabilities and Shareholders’ Equity
$
20,172,539

 
$
20,036,905

 
 
 
 
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
 
2018
 
2017
 
2018
 
2017
INTEREST INCOME
 
 
 
 
 
 
 
Loans, including fees
$
167,825

 
$
148,440

 
$
327,961

 
$
291,006

Investment securities:
 
 
 
 
 
 
 
Taxable
13,885

 
11,474

 
27,078

 
23,388

Tax-exempt
2,933

 
2,856

 
5,898

 
5,705

Dividends
—

 
109

 
5

 
238

Loans held for sale
284

 
201

 
500

 
388

Other interest income
1,243

 
801

 
2,415

 
1,643

Total Interest Income
186,170

 
163,881

 
363,857

 
322,368

INTEREST EXPENSE
 
 
 
 
 
 
 
Deposits
19,284

 
12,884

 
35,734

 
24,685

Short-term borrowings
3,036

 
974

 
5,077

 
1,829

Federal Home Loan Bank advances and other long-term debt
7,783

 
8,460

 
15,661

 
16,712

Total Interest Expense
30,103

 
22,318

 
56,472

 
43,226

Net Interest Income
156,067

 
141,563

 
307,385

 
279,142

Provision for credit losses
33,117

 
6,700

 
37,087

 
11,500

Net Interest Income After Provision for Credit Losses
122,950

 
134,863

 
270,298

 
267,642

NON-INTEREST INCOME
 
 
 
 
 
 
 
Investment management and trust services
12,803

 
12,132

 
25,674

 
23,940

Other service charges and fees
13,665

 
14,342

 
25,084

 
26,779

Service charges on deposit accounts
12,270

 
12,914

 
24,232

 
25,314

Mortgage banking income
5,163

 
6,141

 
9,356

 
10,737

Other
5,189

 
5,406

 
10,600

 
9,732

Non-interest income before investment securities gains
49,090

 
50,935

 
94,946

 
96,502

Investment securities gains, net
4

 
1,436

 
23

 
2,542

Total Non-Interest Income
49,094

 
52,371

 
94,969

 
99,044

NON-INTEREST EXPENSE
 
 
 
 
 
 
 
Salaries and employee benefits
74,919

 
74,496

 
150,687

 
143,732

Net occupancy expense
12,760

 
12,316

 
26,392

 
24,979

Data processing and software
10,453

 
9,054

 
20,926

 
18,033

Other outside services
7,568

 
7,708

 
15,692

 
13,254

Equipment expense
3,434

 
3,034

 
6,968

 
6,393

FDIC insurance expense
2,663

 
2,366

 
5,616

 
4,424

State Taxes
2,454

 
2,814

 
4,756

 
4,900

Professional fees
2,372

 
2,931

 
7,188

 
5,668

Marketing
2,335

 
2,234

 
4,585

 
4,220

Amortization of tax credit investments
1,637

 
3,151

 
3,274

 
4,149

Other
12,750

 
12,591

 
23,922

 
25,218

Total Non-Interest Expense
133,345

 
132,695

 
270,006

 
254,970

Income Before Income Taxes
38,699

 
54,539

 
95,261

 
111,716

Income taxes
3,502

 
9,072

 
10,584

 
22,869

Net Income
$
35,197

 
$
45,467

 
$
84,677

 
$
88,847

 
 
 
 
 
 
 
 
PER SHARE:
 
 
 
 
 
 
 
Net Income (Basic)
$
0.20

 
$
0.26

 
$
0.48

 
$
0.51

Net Income (Diluted)
0.20

 
0.26

 
0.48

 
0.51

Cash Dividends
0.12

 
0.11

 
0.24

 
0.22

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
 
2018
 
2017
 
2018
 
2017
 
 
Net Income
$
35,197

 
$
45,467

 
$
84,677

 
$
88,847

Other Comprehensive (Loss) Income, net of tax:
 
 
 
 
 
 
 
Unrealized (loss) gain on securities
(6,631
)
 
10,268

 
(34,275
)
 
14,541

Reclassification adjustment for securities gains included in net income
(3
)
 
(932
)
 
(19
)
 
(1,651
)
Non-credit related unrealized gain on other-than-temporarily impaired debt securities
8

 
—

 
232

 
—

Amortization of net unrecognized pension and postretirement items
540

 
341

 
879

 
684

Other Comprehensive (Loss) Income
(6,086
)
 
9,677

 
(33,183
)
 
13,574

Total Comprehensive Income
$
29,111

 
$
55,144

 
$
51,494

 
$
102,421

 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements
 
 
 
 
 
 
 


5


CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2018 AND 2017
 
(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, 2017
175,170

 
$
552,232

 
$
1,478,389

 
$
821,619

 
$
(32,974
)
 
$
(589,409
)
 
$
2,229,857

Net income

 

 

 
84,677

 

 

 
84,677

Other comprehensive loss

 

 

 

 
(33,183
)
 

 
(33,183
)
Stock issued
661

 
1,686

 
1,652

 

 

 
(883
)
 
2,455

Stock-based compensation awards
16
 
40
 
4,144

 

 

 

 
4,184

Reclassification of stranded tax effects (1)
 
 
 
 
 
 
7,101

 
(7,101
)
 
 
 
—

Common stock cash dividends - $0.24 per share

 

 

 
(42,205
)
 

 

 
(42,205
)
Balance at June 30, 2018
175,847

 
$
553,958

 
$
1,484,185

 
$
871,192

 
$
(73,258
)
 
$
(590,292
)
 
$
2,245,785

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Result of adoption of ASU 2018-02, See Note 1 to Consolidated Financial Statements for further details.
 
 
 
 
 
 
 
 
 

6


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
(in thousands)
 
Six months ended June 30
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net Income
$
84,677

 
$
88,847

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for credit losses
37,087

 
11,500

Depreciation and amortization of premises and equipment
14,580

 
13,974

Amortization of tax credit investments
16,729

 
17,932

Net amortization of investment securities premiums
4,856

 
4,775

Investment securities gains, net
(23
)
 
(2,542
)
Gain on sales of mortgage loans held for sale
(6,499
)
 
(6,562
)
Proceeds from sales of mortgage loans held for sale
379,399

 
283,251

Originations of mortgage loans held for sale
(377,268
)
 
(281,356
)
Amortization of issuance costs on long-term debt
399

 
382

Stock-based compensation
4,184

 
1,769

Increase in accrued interest receivable
(2,298
)
 
(1,309
)
Increase in other assets
(10,687
)
 
(44,542
)
Decrease in accrued interest payable
(1,024
)
 
(1,828
)
(Decrease) increase in other liabilities
(9,278
)
 
3,398

Total adjustments
50,157

 
(1,158
)
Net cash provided by operating activities
134,834

 
87,689

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Proceeds from sales of securities available for sale
48,731

 
29,518

Proceeds from principal repayments and maturities of securities available for sale
170,141

 
225,788

Purchase of securities available for sale
(306,713
)
 
(158,078
)
Increase in other interest-earning assets
(3,480
)
 
(71,845
)
Net increase in loans
(65,361
)
 
(655,172
)
Net purchases of premises and equipment
(21,973
)
 
(13,726
)
Net change in tax credit investments
(38,544
)
 
(12,725
)
Net cash used in investing activities
(217,199
)
 
(656,240
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net (decrease) increase in demand and savings deposits
(265,298
)
 
351,329

Net increase (decrease) in time deposits
67,565

 
(6,832
)
Increase in short-term borrowings
366,309

 
153,542

Additions to long-term debt
50,000

 
223,251

Repayments of long-term debt
(100,081
)
 
(115,075
)
Net proceeds from issuance of common stock
2,455

 
4,870

Dividends paid
(40,378
)
 
(36,614
)
Net cash provided by financing activities
80,572

 
574,471

Net (Decrease) Increase in Cash and Restricted Cash
(1,793
)
 
5,920

Cash and Restricted Cash at Beginning of Period
246,726

 
236,887

Cash and Restricted Cash at End of Period
$
244,933

 
$
242,807

Supplemental Disclosures of Cash Flow Information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
57,496

 
$
45,054

Income taxes
5,794

 
7,016

Supplemental schedule of certain noncash activities:
 
 
 
Transfer of student loans to loans held for sale
$
—

 
$
28,990

See Notes to Consolidated Financial Statements
 
 
 
 
Restricted cash is comprised of required reserve balances with the Federal Reserve Bank and cash collateral posted by the Corporation with counterparties to secure derivative financial instruments. These balances are included in "Interest Bearing Deposits with Other Banks" on the consolidated balance sheets and totaled $145.2 million and $147.9 million at June 30, 2018 and 2017, respectively.

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 Corporation's Annual Report on Form 10-K for the year ended December 31, 2017. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. 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

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification ("ASC") Update 2014-09, "Revenue from Contracts with Customers." This standards update established 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 Corporation adopted this standard, and all subsequent Accounting Standards Updates ("ASU") that modified it on January 1, 2018 under the modified retrospective approach with no material impact on its consolidated financial statements. The Corporation evaluated the impact of the adoption of ASC Update 2014-09 on its consolidated financial statements and did not identify any significant changes in the timing of revenue recognition as a result of this amended guidance. The sources of revenue for the Corporation are interest income from loans and investments, net of interest expense on deposits and borrowings, and non-interest income. Non-interest income is earned from various banking and financial services that the Corporation offers through its subsidiary banks. Revenue is recognized as earned based on contractual terms, as transactions occur, or as services are provided. Following is further detail of the various types of revenue the Corporation earns and when it is recognized.

Interest income: Interest income is recognized on an accrual basis according to loan agreements, securities contracts or other such written contracts and is outside the scope of ASC Update 2014-09.

Investment management and trust services: Consists of trust commission income, brokerage income, money market income and insurance commission income. Trust commission income consists of advisory fees that are based on market values of clients' managed portfolios and transaction fees for fiduciary services performed, both of which are recognized as earned. Brokerage income includes advisory fees which are recognized as earned on a monthly basis and transaction fees that are recognized when transactions occur. Money market income is based on the balances held in trust accounts and is recognized monthly. Insurance commission income is earned and recognized when policies are originated. Currently, no investment management and trust service income is based on performance or investment results.

Service charges on deposit accounts: Consists of cash management, overdraft, non-sufficient fund fees and other service charges on deposit accounts. Revenue is primarily transactional and recognized when earned, at the time the transactions occur.

Other service charges and fees: Consists of branch fees, automated teller machine fees, debit card income and merchant services fees. These fees are primarily transactional, and revenue is recognized when transactions occur. Also included in other service charges and fees are letter of credit fees, foreign exchange income and commercial loan interest rate swap fees, which are outside the scope of ASC Update 2014-09.

Mortgage banking income: Consists of gains or losses on the sale of residential mortgage loans and mortgage loan servicing income. These revenues are outside the scope of ASC Update 2014-09.


8


Other Income: Includes credit card income, gains on sales of Small Business Association ("SBA") loans, cash surrender value of life insurance, and other miscellaneous income. These items are either outside the scope of ASC Update 2014-09 or are immaterial.

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 requires equity investments to be measured at fair value, with changes recorded in net income. This ASU also requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes. ASC Update 2016-01 was effective for interim and annual reporting periods beginning after December 15, 2017. The Corporation adopted this standards update effective with its March 31, 2018 quarterly report on Form 10-Q and the adoption of ASC Update 2016-01 did not 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 was effective for interim and annual reporting periods beginning after December 15, 2017. The adoption of ASC Update 2016-18 did not have a material impact on its consolidated financial statements; however on the Consolidated Statements of Cash Flows, the Corporation corrected an error related to the adoption of this standards update to include restricted cash along with cash and cash equivalents in the reconciliation of beginning-of-period and end-of-period total amounts. The change had no impact on net income or retained earnings. In addition, the Corporation will revise the Consolidated Statements of Cash Flows for the three months ended March 31, 2018 when the amounts are next presented in the first quarter of 2019.

In February 2018, the FASB issued ASC Update 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This ASU permits a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings of the stranded tax effects resulting from the application of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), which changed the corporate tax rate from 35% to 21%. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Corporation adopted this standards update effective January 1, 2018 and elected to reclassify $7.1 million of stranded tax effects from AOCI to retained earnings at the beginning of the period of adoption. The Corporation's policy for releasing income tax effects from accumulated other comprehensive income is to release them as investments are sold or mature and as pension and post-retirement liabilities are extinguished.

Recently Issued Accounting Standards

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. The FASB has also issued amendments to this standard (ASC Updates 2017-13, 2018-01 and 2018-11). ASC Update 2016-02 is effective for interim and annual 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. 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 Corporation is assessing various components of this new standard including the practical expedients it intends to elect at adoption, the final determination of the incremental borrowing rate and the impact to regulatory capital ratios. The recognition of operating leases on the Corporation's consolidated balance sheet and additional disclosures are 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 held to maturity 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. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. Entities will apply the standard's provisions as a cumulative-effect adjustment to retained earnings as of the

9


beginning of the first reporting period in which the guidance is adopted. 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 and disclosures. While the Corporation is currently unable to reasonably estimate the impact of adopting ASU 2016-13, it expects that the impact of adoption could be significantly influenced by the composition, characteristics and quality of its loan portfolio as well as the prevailing economic conditions and forecasts as of the adoption date. The Corporation’s steering committee and working group, which are comprised of individuals from various functional areas, are assessing processes, portfolio segmentation, systems requirements and solutions and resources to implement this new accounting standard. In addition, the Corporation has engaged a third-party consultant to assist with these implementation efforts.

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 amounts 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 2017-08, "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.

Reclassifications

Certain amounts in the 2017 consolidated financial statements and notes have been reclassified to conform to the 2018 presentation. On the Consolidated Statements of Cash Flows, the net change in tax credit investments is presented as cash flows from investing activities. Prior to the quarter ended March 31, 2018, these cash flows were presented as cash flows from operating activities, included in the net increase (decrease) in other liabilities. The presentation of the cash flows for the six months ended June 30, 2017 were changed to conform to this presentation, resulting in a $12.7 million decrease in net cash flows used in investing activities and a corresponding increase in net cash flows provided by operating activities. The change had no impact on net income or retained earnings. In addition, the Corporation will revise the Consolidated Statements of Cash Flows for each of the comparative 2017 periods in future filings.

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.


10


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
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Weighted average shares outstanding (basic)
175,764

 
174,597

 
175,535

 
174,375

Impact of common stock equivalents
1,080

 
935

 
1,171

 
1,179

Weighted average shares outstanding (diluted)
176,844

 
175,532

 
176,706

 
175,554


NOTE 3 – Accumulated Other Comprehensive Income

The following table presents changes in other comprehensive income (loss):
 
Before-Tax Amount
 
Tax Effect
 
Net of Tax Amount
 
(in thousands)
Three months ended June 30, 2018
 
 
 
 
 
Unrealized loss on securities
$
(8,397
)
 
$
1,766

 
$
(6,631
)
Reclassification adjustment for securities gains included in net income (1)
(4
)
 
1

 
(3
)
Non-credit related unrealized gains on other-than-temporarily impaired debt securities
9

 
(1
)
 
8

Amortization of net unrecognized pension and postretirement items (2)
683

 
(143
)
 
540

Total Other Comprehensive Loss
$
(7,709
)
 
$
1,623

 
$
(6,086
)
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 (2)
522

 
(181
)
 
341

Total Other Comprehensive Income
$
14,884

 
$
(5,207
)
 
$
9,677

 
 
 
 
 
 
Six months ended June 30, 2018
 
 
 
 
 
Unrealized loss on securities
$
(43,388
)
 
$
9,113

 
$
(34,275
)
Reclassification adjustment for securities gains included in net income (1)
(23
)
 
4

 
(19
)
Non-credit related unrealized gains on other-than-temporarily impaired debt securities
294

 
(62
)
 
232

Amortization of net unrecognized pension and postretirement items (2)
1,113

 
(234
)
 
879

Total Other Comprehensive Loss
$
(42,004
)
 
$
8,821

 
$
(33,183
)
 
 
 
 
 
 
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 (2)
1,051

 
(367
)
 
684

Total Other Comprehensive Income
$
20,883

 
$
(7,309
)
 
$
13,574


(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 "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
 
Unrecognized Pension and Postretirement Plan Income (Costs)
 
Total
 
(in thousands)
Three months ended June 30, 2018
 
 
 
 
 
 
 
Balance at March 31, 2018
$
(50,056
)
 
$
682

 
$
(17,798
)
 
$
(67,172
)
Other comprehensive loss before reclassifications
(6,631
)
 
8

 
—

 
(6,623
)
Amounts reclassified from accumulated other comprehensive income (loss)
(3
)
 
—

 
540

 
537

Balance at June 30, 2018
$
(56,690
)
 
$
690

 
$
(17,258
)
 
$
(73,258
)
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
)
 
 
 
 
 
 
 
 
Six months ended June 30, 2018
 
 
 
 
 
 
 
Balance at December 31, 2017
$
(18,509
)
 
$
458

 
$
(14,923
)
 
$
(32,974
)
Other comprehensive income before reclassifications
(34,275
)
 
232

 
—

 
(34,043
)
Amounts reclassified from accumulated other comprehensive income (loss)
(19
)
 
—

 
879

 
860

Reclassification of stranded tax effects
(3,887
)
 
—

 
(3,214
)
 
(7,101
)
Balance at June 30, 2018
$
(56,690
)
 
$
690

 
$
(17,258
)
 
$
(73,258
)
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
)


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, 2018
 
 
 
 
 
 
 
U.S. Government sponsored agency securities
$
26,830

 
$
5

 
$
(309
)
 
$
26,526

State and municipal securities
415,460

 
2,101

 
(9,865
)
 
407,696

Corporate debt securities
92,411

 
1,261

 
(1,802
)
 
91,870

Collateralized mortgage obligations
742,282

 
406

 
(18,366
)
 
724,322

Residential mortgage-backed securities
1,035,724

 
2,342

 
(37,102
)
 
1,000,964

Commercial mortgage-backed securities
244,046

 
34

 
(5,297
)
 
238,783

Auction rate securities
107,410

 
—

 
(4,288
)
 
103,122

   Total
$
2,664,163

 
$
6,149

 
$
(77,029
)
 
$
2,593,283

 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
(in thousands)
December 31, 2017
 
 
 
 
 
 
 
U.S. Government sponsored agency securities
$
5,962

 
$
2

 
$
(26
)
 
$
5,938

State and municipal securities
405,860

 
5,638

 
(2,549
)
 
408,949

Corporate debt securities
96,353

 
2,832

 
(1,876
)
 
97,309

Collateralized mortgage obligations
611,927

 
491

 
(9,795
)
 
602,623

Residential mortgage-backed securities
1,132,080

 
3,957

 
(15,241
)
 
1,120,796

Commercial mortgage-backed securities
215,351

 
—

 
(2,596
)
 
212,755

Auction rate securities
107,410

 
—

 
(8,742
)
 
98,668

   Total debt securities
2,574,943

 
12,920

 
(40,825
)
 
2,547,038

Equity securities
776

 
142

 
—

 
918

   Total
$
2,575,719

 
$
13,062

 
$
(40,825
)
 
$
2,547,956


On August 1, 2018, the Corporation transferred debt securities with an amortized cost of $665.5 million and an estimated fair value of $641.7 million from the available for sale classification to the held to maturity classification. These securities consisted of residential mortgage-backed securities ($505.5 million amortized cost and $485.3 million estimated fair value) and state and municipal securities ($160.0 million amortized cost and $156.4 million estimated fair value). The transfer was accounted for at estimated fair value. These securities were transferred as the Corporation has the positive intent and ability to hold these securities to maturity.
Securities carried at $1.5 billion at June 30, 2018 and $1.8 billion at December 31, 2017, were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

13


The amortized cost and estimated fair values of debt securities as of June 30, 2018, 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
 
$
7,305

 
$
7,313

Due from one year to five years
 
44,956

 
44,959

Due from five years to ten years
 
109,639

 
109,503

Due after ten years
 
480,211

 
467,439

 
 
642,111

 
629,214

Residential mortgage-backed securities(1)
 
1,035,724

 
1,000,964

Commercial mortgage-backed securities(1)
 
244,046

 
238,783

Collateralized mortgage obligations(1)
 
742,282

 
724,322

  Total
 
$
2,664,163

 
$
2,593,283

(1) Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on the underlying loans.
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, 2018
(in thousands)
Equity securities
$
—

 
$
—

 
$
—

Debt securities
1,530

 
(1,526
)
 
4

Total
$
1,530

 
$
(1,526
)
 
$
4

Three months ended June 30, 2017
 
 
 
 
 
Equity securities
$
1,305

 
$
—

 
$
1,305

Debt securities
145

 
(14
)
 
131

Total
$
1,450

 
$
(14
)
 
$
1,436

 
 
 
 
 
 
Six months ended June 30, 2018
 
 
 
 
 
Equity securities
$
9

 
$
—

 
$
9

Debt securities
1,540

 
(1,526
)
 
14

Total
$
1,549

 
$
(1,526
)
 
$
23

Six months ended June 30, 2017
 
 
 
 
 
Equity securities
$
2,350

 
$
—

 
$
2,350

Debt securities
206

 
(14
)
 
192

Total
$
2,556

 
$
(14
)
 
$
2,542


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, 2018 and June 30, 2017 was $11.5 million. There were no other-than-temporary impairment charges recognized for the three and six months ended June 30, 2018 and June 30, 2017.

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, 2018 and December 31, 2017:
 
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, 2018
(in thousands)
U.S. Government sponsored agency securities
$
24,028

 
$
(309
)
 
$
—

 
$
—

 
$
24,028

 
$
(309
)
State and municipal securities
166,323

 
(3,264
)
 
113,946

 
(6,601
)
 
280,269

 
(9,865
)
Corporate debt securities
35,112

 
(220
)
 
22,554

 
(1,582
)
 
57,666

 
(1,802
)
Collateralized mortgage obligations
529,808

 
(10,258
)
 
136,723

 
(8,108
)
 
666,531

 
(18,366
)
Residential mortgage-backed securities
501,230

 
(15,521
)
 
450,713

 
(21,581
)
 
951,943

 
(37,102
)
Commercial mortgage-backed securities
182,155

 
(3,903
)
 
45,352

 
(1,394
)
 
227,507

 
(5,297
)
Auction rate securities
—

 
—

 
103,122

 
(4,288
)
 
103,122

 
(4,288
)
Total
$
1,438,656

 
$
(33,475
)
 
$
872,410

 
$
(43,554
)
 
$
2,311,066

 
$
(77,029
)
 
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, 2017
(in thousands)
U.S. Government sponsored agency securities
$
5,830

 
$
(26
)
 
$
—

 
$
—

 
$
5,830

 
$
(26
)
State and municipal securities
11,650

 
(50
)
 
118,297

 
(2,499
)
 
129,947

 
(2,549
)
Corporate debt securities
4,544

 
(48
)
 
32,163

 
(1,828
)
 
36,707

 
(1,876
)
Collateralized mortgage obligations
303,932

 
(2,408
)
 
187,690

 
(7,387
)
 
491,622

 
(9,795
)
Residential mortgage-backed securities
511,378

 
(4,348
)
 
500,375

 
(10,893
)
 
1,011,753

 
(15,241
)
Commercial mortgage-backed securities
190,985

 
(2,118
)
 
21,770

 
(478
)
 
212,755

 
(2,596
)
Auction rate securities
—

 
—

 
98,668

 
(8,742
)
 
98,668

 
(8,742
)
Total
$
1,028,319

 
$
(8,998
)
 
$
958,963

 
$
(31,827
)
 
$
1,987,282

 
$
(40,825
)

The Corporation’s collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. 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, 2018.
As of June 30, 2018, all of the auction rate securities (auction rate certificates, or "ARCs"), were rated above investment grade. Based on management’s evaluations, none of the ARCs were subject to any other-than-temporary impairment charges for the three and six months ended June 30, 2018. 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.

15


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 values of corporate debt securities:
 
June 30, 2018
 
December 31, 2017
 
Amortized
cost
 
Estimated
fair value
 
Amortized
cost
 
Estimated
fair value
 
(in thousands)
Single-issuer trust preferred securities
$
21,779

 
$
20,396

 
$
31,335

 
$
30,703

Subordinated debt
54,649

 
54,534

 
49,013

 
49,533

Senior debt
12,027

 
12,109

 
12,031

 
12,392

Pooled trust preferred securities
—

 
875

 
—

 
707

Corporate debt securities issued by financial institutions
88,455

 
87,914

 
92,379

 
93,335

Other corporate debt securities
3,956

 
3,956

 
3,974

 
3,974

Available for sale corporate debt securities
$
92,411

 
$
91,870

 
$
96,353

 
$
97,309


Single-issuer trust preferred securities had an unrealized loss of $1.4 million at June 30, 2018. Two of the 11 single-issuer trust preferred securities, with an amortized cost of $2.0 million and an estimated fair value of $1.9 million at June 30, 2018, 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 either "BB" or "Ba". Two single-issuer trust preferred securities with an amortized cost of $3.8 million and an estimated fair value of $3.2 million at June 30, 2018 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 for the three and six months ended June 30, 2018. 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.


16


NOTE 5 – Loans and Allowance for Credit Losses

Loans, Net of Unearned Income

Loans, net of unearned income are summarized as follows:
 
June 30,
2018
 
December 31, 2017
 
(in thousands)
Real-estate - commercial mortgage
$
6,304,475

 
$
6,364,804

Commercial - industrial, financial and agricultural
4,264,602

 
4,300,297

Real-estate - residential mortgage
2,094,530

 
1,954,711

Real-estate - home equity
1,491,395

 
1,559,719

Real-estate - construction
990,705

 
1,006,935

Consumer
360,315

 
313,783

Leasing and other
315,243

 
291,556

Overdrafts
1,778

 
4,113

Loans, gross of unearned income
15,823,043

 
15,795,918

Unearned income
(30,074
)
 
(27,671
)
Loans, net of unearned income
$
15,792,969

 
$
15,768,247


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.

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 letters of credit 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 individually evaluated for impairment (FASB ASC Section 310-10-35); and (2) allowances calculated for pools of loans collectively evaluated for impairment (FASB ASC Subtopic 450-20).

The following table presents the components of the allowance for credit losses:
 
June 30,
2018
 
December 31,
2017
 
(in thousands)
Allowance for loan losses
$
156,050

 
$
169,910

Reserve for unfunded lending commitments
13,197

 
6,174

Allowance for credit losses
$
169,247

 
$
176,084



17


The following table presents the activity in the allowance for credit losses:
 
Three months ended June 30
 
Six months ended June 30
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Balance at beginning of period
$
176,019

 
$
172,647

 
$
176,084

 
$
171,325

Loans charged off
(42,160
)
 
(8,715
)
 
(48,557
)
 
(18,122
)
Recoveries of loans previously charged off
2,271

 
4,366

 
4,633

 
10,295

Net loans charged off
(39,889
)
 
(4,349
)
 
(43,924
)
 
(7,827
)
Provision for credit losses
33,117

 
6,700

 
37,087

 
11,500

Balance at end of period
$
169,247

 
$
174,998

 
$
169,247

 
$
174,998


Included in the provision for credit losses for the three and six months ended June 30, 2018 was a $36.8 million provision related to a single, large commercial lending relationship ("Commercial Relationship"). In addition, loans charged off for the same periods included a $33.9 million charge-off related to the Commercial Relationship.

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. In 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.

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, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2018
$
58,717

 
$
61,830

 
$
17,528

 
$
15,261

 
$
5,924

 
$
1,903

 
$
2,054

 
$
—

 
$
163,217

Loans charged off
(366
)
 
(38,632
)
 
(816
)
 
(483
)
 
(606
)
 
(712
)
 
(545
)
 
—

 
(42,160
)
Recoveries of loans previously charged off
321

 
541

 
271

 
96

 
444

 
446

 
152

 
—

 
2,271

Net loans charged off
(45
)
 
(38,091
)
 
(545
)
 
(387
)
 
(162
)
 
(266
)
 
(393
)
 
—

 
(39,889
)
Provision for loan losses (1)
(2,089
)
 
35,306

 
(736
)
 
(370
)
 
226

 
62

 
323

 
—

 
32,722

Balance at June 30, 2018
$
56,583

 
$
59,045

 
$
16,247

 
$
14,504

 
$
5,988

 
$
1,699

 
$
1,984

 
$
—

 
$
156,050

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

Six months ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
$
58,793

 
$
66,280

 
$
18,127

 
$
16,088

 
$
6,620

 
$
2,045

 
$
1,957

 
$
—

 
$
169,910

Loans charged off
(633
)
 
(42,637
)
 
(1,224
)
 
(645
)
 
(764
)
 
(1,604
)
 
(1,050
)
 
—

 
(48,557
)
Recoveries of loans previously charged off
600

 
1,616

 
477

 
203

 
750

 
625

 
362

 
—

 
4,633

Net loans charged off
(33
)
 
(41,021
)
 
(747
)
 
(442
)
 
(14
)
 
(979
)
 
(688
)
 
—

 
(43,924
)
Provision for loan losses (1)
(2,177
)
 
33,786

 
(1,133
)
 
(1,142
)
 
(618
)
 
633

 
715

 
—

 
30,064

Balance at June 30, 2018
$
56,583

 
$
59,045

 
$
16,247

 
$
14,504

 
$
5,988

 
$
1,699

 
$
1,984