Edgar Filing: FULTON FINANCIAL CORP

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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.

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 September 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.

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 –176,096,000 shares outstanding as of October 31, 2018.

FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018

INDEX



Description		Page



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

(a)	Consolidated Balance Sheets - September 30, 2018 and December 31, 2017	3

(b)	Consolidated Statements of Income - Three and nine months ended September 30, 2018 and 2017	4

(c)	Consolidated Statements of Comprehensive Income - Three and nine months ended September 30, 2018 and 2017	5

(d)	Consolidated Statements of Shareholders’ Equity - Nine months ended September 30, 2018 and 2017	6

(e)	Consolidated Statements of Cash Flows - Nine months ended September 30, 2018 and 2017	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		70

Item 4. Controls and Procedures		72

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		73

Item 1A. Risk Factors		73

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		73

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		73

Signatures		74

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share data)



	September 30, 2018			December 31, 2017
	(unaudited)
ASSETS
Cash and due from banks	$	90,361		$	108,291
Interest-bearing deposits with other banks	322,330			293,805
Federal Reserve Bank and Federal Home Loan Bank stock	65,926			60,761
Loans held for sale	27,525			31,530
Investment securities:
Available for sale, at estimated fair value	2,008,816			2,547,956
Held to maturity, at amortized cost	626,597			—
Loans, net of unearned income	15,925,093			15,768,247
Less: Allowance for loan losses	(157,810		)	(169,910		)
Net Loans	15,767,283			15,598,337
Premises and equipment	231,236			222,802
Accrued interest receivable	58,584			52,910
Goodwill and intangible assets	531,556			531,556
Other assets	634,596			588,957
Total Assets	$	20,364,810		$	20,036,905
LIABILITIES
Deposits:
Noninterest-bearing	$	4,216,064		$	4,437,294
Interest-bearing	12,032,950			11,360,238
Total Deposits	16,249,014			15,797,532
Short-term borrowings:
Federal funds purchased	50,000			220,000
Other short-term borrowings	435,565			397,524
Total Short-Term Borrowings	485,565			617,524
Accrued interest payable	11,151			9,317
Other liabilities	343,951			344,329
Federal Home Loan Bank advances and other long-term debt	992,115			1,038,346
Total Liabilities	18,081,796			17,807,048
SHAREHOLDERS’ EQUITY
Common stock, $2.50 par value, 600 million shares authorized, 221.7 million shares issued in 2018 and 220.9 million shares issued in 2017	554,208			552,232
Additional paid-in capital	1,487,129			1,478,389
Retained earnings	915,687			821,619
Accumulated other comprehensive loss	(84,640		)	(32,974		)
Treasury stock, at cost, 45.7 million shares in 2018 and 2017	(589,370		)	(589,409		)
Total Shareholders’ Equity	2,283,014			2,229,857
Total Liabilities and Shareholders’ Equity	$	20,364,810		$	20,036,905

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



(in thousands, except per-share data)	Three months ended September 30				Nine months ended September 30
	2018		2017		2018		2017
INTEREST INCOME
Loans, including fees	$	175,068	$	155,152	$	503,029	$	446,158
Investment securities:
Taxable	13,956		11,423		41,034		34,811
Tax-exempt	3,035		2,920		8,933		8,625
Dividends	—		105		5		343
Loans held for sale	388		243		888		631
Other interest income	1,601		1,667		4,016		3,311
Total Interest Income	194,048		171,510		557,905		493,879
INTEREST EXPENSE
Deposits	23,819		16,023		59,553		40,709
Short-term borrowings	2,002		578		7,079		2,407
Federal Home Loan Bank advances and other long-term debt	8,100		8,100		23,761		24,812
Total Interest Expense	33,921		24,701		90,393		67,928
Net Interest Income	160,127		146,809		467,512		425,951
Provision for credit losses	1,620		5,075		38,707		16,575
Net Interest Income After Provision for Credit Losses	158,507		141,734		428,805		409,376
NON-INTEREST INCOME
Other service charges and fees	15,433		12,251		40,517		39,030
Investment management and trust services	13,066		12,157		38,740		36,097
Service charges on deposit accounts	12,259		13,022		36,491		38,336
Mortgage banking income	4,896		4,805		14,252		15,542
Other	5,365		5,142		15,965		14,874
Non-interest income before investment securities gains	51,019		47,377		145,965		143,879
Investment securities gains, net	14		4,597		37		7,139
Total Non-Interest Income	51,033		51,974		146,002		151,018
NON-INTEREST EXPENSE
Salaries and employee benefits	76,770		72,894		227,457		216,626
Net occupancy expense	12,578		12,180		38,970		37,159
Data processing and software	10,157		10,301		31,083		28,334
Other outside services	9,122		6,582		24,814		19,836
Professional fees	3,427		3,388		10,615		9,056
Equipment expense	3,000		3,298		9,968		9,691
FDIC insurance expense	2,814		3,007		8,430		7,431
State Taxes	2,707		2,830		7,463		7,730
Marketing	2,692		2,089		7,277		6,309
Amortization of tax credit investments	1,637		3,503		4,911		7,652
Other	10,509		12,085		34,431		37,303
Total Non-Interest Expense	135,413		132,157		405,419		387,127
Income Before Income Taxes	74,127		61,551		169,388		173,267
Income taxes	8,494		12,646		19,078		35,515
Net Income	$	65,633	$	48,905	$	150,310	$	137,752

PER SHARE:
Net Income (Basic)	$	0.37	$	0.28	$	0.86	$	0.79
Net Income (Diluted)	0.37		0.28		0.85		0.78
Cash Dividends	0.12		0.11		0.36		0.33
See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)



	Three months ended September 30						Nine months ended September 30
	2018			2017			2018			2017

Net Income	$	65,633		$	48,905		$	150,310		$	137,752
Other Comprehensive (Loss) Income, net of tax:
Unrealized (loss) gain on securities	(12,531		)	3,320			(46,806		)	17,861
Reclassification adjustment for securities gains included in net income	(11		)	(2,988		)	(30		)	(4,639		)
Amortization of net unrealized losses on available for sale securities transferred to held to maturity	791			—			791			—
Non-credit related unrealized gain on other-than-temporarily impaired debt securities	—			—			232			—
Amortization of net unrecognized pension and postretirement items	369			340			1,248			1,024
Other Comprehensive (Loss) Income	(11,382		)	672			(44,565		)	14,246
Total Comprehensive Income	$	54,251		$	49,577		$	105,745		$	151,998

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(in thousands, except per-share data)



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

Balance at December 31, 2017	175,170	$	552,232	$	1,478,389	$	821,619		$	(32,974	)	$	(589,409	)	$	2,229,857
Net income						150,310									150,310
Other comprehensive loss									(44,565		)				(44,565		)
Stock issued	833	1,936		2,773								39			4,748
Stock-based compensation awards	16	40		5,967											6,007
Reclassification of stranded tax effects ⁽¹⁾						7,101			(7,101		)				—
Common stock cash dividends - $0.36 per share						(63,343		)							(63,343		)
Balance at September 30, 2018	176,019	$	554,208	$	1,487,129	$	915,687		$	(84,640	)	$	(589,370	)	$	2,283,014

Balance at December 31, 2016	174,040	$	549,707	$	1,467,602	$	732,099		$	(38,449	)	$	(589,844	)	$	2,121,115
Net income						137,752									137,752
Other comprehensive income									14,246						14,246
Stock issued	1,017	2,446		5,209								(618		)	7,037
Stock-based compensation awards				3,339											3,339
Common stock cash dividends - $0.33 per share						(57,703		)							(57,703		)
Balance at September 30, 2017	175,057	$	552,153	$	1,476,150	$	812,148		$	(24,203	)	$	(590,462	)	$	2,225,786

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



(in thousands)	Nine months ended September 30
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	150,310		$	137,752
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	38,707			16,575
Depreciation and amortization of premises and equipment	21,423			21,013
Amortization of tax credit investments	25,093			28,117
Net amortization of investment securities premiums	6,153			7,412
Investment securities gains, net	(37		)	(7,139		)
Gain on sales of mortgage loans held for sale	(10,158		)	(10,122		)
Proceeds from sales of mortgage loans held for sale	608,561			470,927
Originations of mortgage loans held for sale	(594,398		)	(455,157		)
Amortization of issuance costs and discounts on long-term debt	606			618
Stock-based compensation	6,007			3,339
Increase in accrued interest receivable	(5,674		)	(3,788		)
(Increase) decrease in other assets	(11,893		)	9,991
Increase in accrued interest payable	1,834			936
Decrease in other liabilities	(3,843		)	(4,943		)
Total adjustments	82,381			77,779
Net cash provided by operating activities	232,691			215,531
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale	54,638			44,485
Proceeds from principal repayments and maturities of securities held to maturity	15,475			—
Proceeds from principal repayments and maturities of securities available for sale	237,624			321,088
Purchase of securities available for sale	(459,799		)	(344,569		)
Increase in other interest-earning assets	(49,225		)	(376,696		)
Net increase in loans	(200,526		)	(800,778		)
Net purchases of premises and equipment	(29,857		)	(24,758		)
Net change in tax credit investments	(47,096		)	(21,084		)
Net cash used in investing activities	(478,766		)	(1,202,312		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits	342,080			1,014,697
Net increase in time deposits	109,402			114,219
Decrease in short-term borrowings	(131,959		)	(242,566		)
Additions to long-term debt	50,000			223,251
Repayments of long-term debt	(100,122		)	(115,114		)
Net proceeds from issuance of common stock	4,748			7,037
Dividends paid	(61,539		)	(55,855		)
Net cash provided by financing activities	212,610			945,669
Net Decrease in Cash and Restricted Cash	(33,465		)	(41,112		)
Cash and Restricted Cash at Beginning of Period	246,726			236,887
Cash and Restricted Cash at End of Period	$	213,261		$	195,775
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	88,559		$	66,992
Income taxes	8,178			7,881
Supplemental schedule of certain noncash activities:
Transfer of student loans to loans held for sale	$	—		$	28,990
Transfer of available for sale securities to held to maturity securities	641,672			—
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 $122.9 million and $96.0 million at September 30, 2018 and 2017, respectively.

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 nine months ended September 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 U.S. 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 the standard, 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.

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, in the second quarter of 2018 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 federal corporate income 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." ASC Update 2016-02 requires a lessee to recognize for all leases with an initial term greater than twelve months: (1) a “right-of-use” asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term; and (2) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis. ASC Update 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018. In July 2018, the FASB also issued amendments to ASC Update 2016-02 (ASC Updates 2018-10 and 2018-11), which allow for an alternative transition method that eliminates the requirement to restate the earliest prior period presented in an entity’s financial statements. Entities that elect this transition method still adopt ASC Update 2016-02 using the modified retrospective transition method, but they recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. The Corporation expects to adopt ASC Update 2016-02 in the first quarter of 2019 using this alternative transition method. The Corporation expects to elect to apply the package of practical expedients permitted within the new standard, which, among other things, allows it to carryforward the historical lease classification, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset.

Based on preliminary evaluation, the right-of-use asset and corresponding lease obligation liability, which represents substantially all of the Corporation’s operating lease commitments, is expected to be less than 1% of the Corporation's total assets at adoption. The Corporation does not believe the new lease standard will materially affect its consolidated net income. This estimate is based primarily on the present value of the unpaid future minimum lease payments. The final amount recognized may be impacted by assumptions relating to lease renewals and extensions before the effective date, and the interest rate used to discount those future lease obligations.

ASC Update 2016-02 requires lessors to classify leases as a sales-type, direct financing or operating lease. Substantially all of the Corporation's leasing activities as lessor are under direct financing leases and it does not expect the new standard to have a material effect on its financial statements related to these leases and does not expect a significant change in its leasing activities between now and time of adoption.

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 beginning of the first reporting period in which the guidance is adopted. This adjustment will also be recognized in regulatory capital. 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. Current activities also include data gathering and building loss models. 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.

In August 2018, the FASB issued ASC Update 2018-13, "Fair Value Measurement - Disclosure Framework." This standards update changes the fair value measurement disclosure requirements of ASC 820 "Fair Value Measurement." Among other things, the ASU modifies the disclosure objective paragraphs of ASC 820 to eliminate (1) “at a minimum” from the phrase “an entity shall disclose at a minimum” and (2) other similar “open ended” disclosure requirements to promote the appropriate exercise of discretion by entities. ASC Update 2018-13 is effective for annual or interim 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. This standard will impact the Corporation's Fair Value Measurement disclosure but the Corporation does not expect the adoption of ASC Update 2018-13 to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASC Update 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General." This standards update amends ASC 715-20 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. ASC Update 2018-14 is effective for annual reporting periods beginning after December 15, 2020. Early adoption is permitted. The Corporation intends to adopt this standards update effective with its March 31, 2021 quarterly report on Form 10-Q. This standard will impact the Corporation's disclosure relating to employee benefit plans, but the Corporation does not expect the adoption of ASC Update 2018-14 to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASC Update 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software." This standards update requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets. ASC Update 2018-15 is effective for annual or interim 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 and does not expect the adoption of ASC Update 2018-15 to have an 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 nine months ended September 30, 2017 was changed to conform to this presentation, resulting in a $21.1 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.

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



	Three months ended September 30		Nine months ended September 30
	2018	2017	2018	2017
	(in thousands)
Weighted average shares outstanding (basic)	175,942	174,991	175,672	174,582
Impact of common stock equivalents	1,186	1,225	1,176	1,194
Weighted average shares outstanding (diluted)	177,128	176,216	176,848	175,776

NOTE 3 – Accumulated Other Comprehensive (Loss) Income

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



	Before-Tax Amount			Tax Effect			Net of Tax Amount
	(in thousands)
Three months ended September 30, 2018
Unrealized loss on securities	$	(15,865	)	$	3,334		$	(12,531	)
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(14		)	3			(11		)
Amortization of net unrealized losses on AFS securities transferred to HTM ⁽²⁾	1,000			(209		)	791
Amortization of net unrecognized pension and postretirement items ⁽³⁾	466			(97		)	369
Total Other Comprehensive Loss	$	(14,413	)	$	3,031		$	(11,382	)
Three months ended September 30, 2017
Unrealized gain on securities	$	5,109		$	(1,789	)	$	3,320
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(4,597		)	1,609			(2,988		)
Amortization of net unrecognized pension and postretirement items ⁽³⁾	523			(183		)	340
Total Other Comprehensive Income	$	1,035		$	(363	)	$	672

Nine months ended September 30, 2018
Unrealized loss on securities	$	(59,250	)	$	12,444		$	(46,806	)
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(37		)	7			(30		)
Amortization of net unrealized losses on AFS securities transferred to HTM ⁽²⁾	1,000			(209		)	791
Non-credit related unrealized gains on other-than-temporarily impaired debt securities	294			(62		)	232
Amortization of net unrecognized pension and postretirement items ⁽³⁾	1,580			(332		)	1,248
Total Other Comprehensive Loss	$	(56,413	)	$	11,848		$	(44,565	)

Nine months ended September 30, 2017
Unrealized gain on securities	$	27,482		$	(9,621	)	$	17,861
Reclassification adjustment for securities gains included in net income ⁽¹⁾	(7,139		)	2,500			(4,639		)
Amortization of net unrecognized pension and postretirement items ⁽³⁾	1,575			(551		)	1,024
Total Other Comprehensive Income	$	21,918		$	(7,672	)	$	14,246


(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 as a reduction to "Interest Income" on the consolidated statements of income. See Note 4, "Investment Securities," for additional details.


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

The following table presents changes in each component of accumulated other comprehensive income (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 September 30, 2018
Balance at June 30, 2018	$	(56,690	)	$	690	$	(17,258	)	$	(73,258	)
Other comprehensive loss before reclassifications	(12,531		)	—		—			(12,531		)
Amounts reclassified from accumulated other comprehensive income (loss)	(11		)	—		369			358
Amortization of net unrealized losses on AFS securities transferred to HTM	791			—		—			791
Balance at September 30, 2018	$	(68,441	)	$	690	$	(16,889	)	$	(84,640	)
Three months ended September 30, 2017
Balance at June 30, 2017	$	(10,157	)	$	273	$	(14,991	)	$	(24,875	)
Other comprehensive income before reclassifications	3,320			—		—			3,320
Amounts reclassified from accumulated other comprehensive income (loss)	(2,988		)	—		340			(2,648		)
Balance at September 30, 2017	$	(9,825	)	$	273	$	(14,651	)	$	(24,203	)

Nine months ended September 30, 2018
Balance at December 31, 2017	$	(18,509	)	$	458	$	(14,923	)	$	(32,974	)
Other comprehensive income before reclassifications	(46,806		)	232		—			(46,574		)
Amounts reclassified from accumulated other comprehensive income (loss)	(30		)	—		1,248			1,218
Amortization of net unrealized losses on AFS securities transferred to HTM	791			—		—			791
Reclassification of stranded tax effects	(3,887		)	—		(3,214		)	(7,101		)
Balance at September 30, 2018	$	(68,441	)	$	690	$	(16,889	)	$	(84,640	)
Nine months ended September 30, 2017
Balance at December 31, 2016	$	(23,047	)	$	273	$	(15,675	)	$	(38,449	)
Other comprehensive income before reclassifications	17,861			—		—			17,861
Amounts reclassified from accumulated other comprehensive income (loss)	(4,639		)	—		1,024			(3,615		)
Balance at September 30, 2017	$	(9,825	)	$	273	$	(14,651	)	$	(24,203	)

NOTE 4 – Investment Securities

The following table presents the amortized cost and estimated fair values of investment securities:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
September 30, 2018 Available for Sale
U.S. Government sponsored agency securities	$	31,527	$	1	$	(437	)	$	31,091
State and municipal securities	269,582		1,281		(9,723		)	261,140
Corporate debt securities	93,482		950		(2,142		)	92,290
Collateralized mortgage obligations	820,150		100		(23,016		)	797,234
Residential mortgage-backed securities	497,614		1,873		(21,310		)	478,177
Commercial mortgage-backed securities	251,969		—		(6,218		)	245,751
Auction rate securities	107,410		—		(4,277		)	103,133
Total	$	2,071,734	$	4,205	$	(67,123	)	$	2,008,816

September 30, 2018 Held to Maturity
State and municipal securities	$	156,267	$	—	$	(2,006	)	$	154,261
Residential mortgage-backed securities	470,330		2		(1,741		)	468,591
Total	$	626,597	$	2	$	(3,747	)	$	622,852



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
December 31, 2017 Available for Sale
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) and were transferred as the Corporation has the positive intent and ability to hold these securities to maturity. The transfer of debt securities into the held to maturity category from the available for sale category was recorded at fair value on the date of transfer. The net unrealized gains or losses at the transfer date are included in AOCI and are being amortized over the remaining lives of the securities. This amortization is expected to offset the amortization of the related premium or discount created by the investment securities transfer into the held to maturity classification, with no expected impact on future net income.

Securities carried at $1.6 billion at September 30, 2018 and $1.8 billion at December 31, 2017, were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

The amortized cost and estimated fair values of debt securities as of September 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.



		Available for Sale				Held to Maturity
		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in thousands)
Due in one year or less		$	5,946	$	5,949	$	—	$	—
Due from one year to five years		52,613		52,541		—		—
Due from five years to ten years		105,838		104,579		—		—
Due after ten years		337,604		324,585		156,267		154,261
		502,001		487,654		156,267		154,261
Residential mortgage-backed securities⁽¹⁾		497,614		478,177		470,330		468,591
Commercial mortgage-backed securities⁽¹⁾		251,969		245,751		—		—
Collateralized mortgage obligations⁽¹⁾		820,150		797,234		—		—
Total		$	2,071,734	$	2,008,816	$	626,597	$	622,852
(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 September 30, 2018	(in thousands)
Equity securities	$	—	$	—		$	—
Debt securities	116		(102		)	14
Total	$	116	$	(102	)	$	14
Three months ended September 30, 2017
Equity securities	$	4,817	$	—		$	4,817
Debt securities	12		(232		)	(220		)
Total	$	4,829	$	(232	)	$	4,597

Nine months ended September 30, 2018
Equity securities	$	9	$	—		$	9
Debt securities	1,656		(1,628		)	28
Total	$	1,665	$	(1,628	)	$	37
Nine months ended September 30, 2017
Equity securities	$	7,167	$	—		$	7,167
Debt securities	218		(246		)	(28		)
Total	$	7,385	$	(246	)	$	7,139

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

The following table presents the gross unrealized losses and estimated fair values of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 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
September 30, 2018 Available for Sale	(in thousands)
U.S. Government sponsored agency securities	$	30,992	$	(437	)	$	—	$	—		$	30,992	$	(437	)
State and municipal securities	112,366		(3,550		)	73,856		(6,173		)	186,222		(9,723		)
Corporate debt securities	56,159		(694		)	22,700		(1,448		)	78,859		(2,142		)
Collateralized mortgage obligations	620,047		(12,833		)	168,560		(10,183		)	788,607		(23,016		)
Residential mortgage-backed securities	105,850		(3,447		)	329,007		(17,863		)	434,857		(21,310		)
Commercial mortgage-backed securities	164,993		(3,591		)	77,302		(2,627		)	242,295		(6,218		)
Auction rate securities	—		—			103,133		(4,277		)	103,133		(4,277		)
Total	$	1,090,407	$	(24,552	)	$	774,558	$	(42,571	)	$	1,864,965	$	(67,123	)

September 30, 2018 Held to Maturity
State and municipal securities	154,261		(2,006		)	—		—			154,261		(2,006		)
Residential mortgage-backed securities	454,544		(1,741		)	—		—			454,544		(1,741		)
Total	$	608,805	$	(3,747	)	$	—	$	—		$	608,805	$	(3,747	)



	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 Available for Sale	(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 September 30, 2018.

As of September 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 nine months ended September 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.

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:



	September 30, 2018				December 31, 2017
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
	(in thousands)
Single-issuer trust preferred securities	$	20,860	$	19,596	$	31,335	$	30,703
Subordinated debt	56,641		55,774		49,013		49,533
Senior debt	12,025		12,089		12,031		12,392
Pooled trust preferred securities	—		875		—		707
Corporate debt securities issued by financial institutions	89,526		88,334		92,379		93,335
Other corporate debt securities	3,956		3,956		3,974		3,974
Available for sale corporate debt securities	$	93,482	$	92,290	$	96,353	$	97,309

Single-issuer trust preferred securities had an unrealized loss of $1.3 million at September 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 September 30, 2018, were rated below investment grade by at least one ratings agency. The single-issuer trust preferred securities were rated "Baa2" or "BB+". One single-issuer trust preferred security with an amortized cost of $2.8 million and an estimated fair value of $2.5 million at September 30, 2018 was 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 nine months ended September 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.

NOTE 5 – Loans and Allowance for Credit Losses

Loans, Net of Unearned Income

Loans, net of unearned income are summarized as follows:



	September 30, 2018			December 31, 2017
	(in thousands)
Real-estate - commercial mortgage	$	6,337,984		$	6,364,804
Commercial - industrial, financial and agricultural	4,288,823			4,300,297
Real-estate - residential mortgage	2,173,548			1,954,711
Real-estate - home equity	1,469,152			1,559,719
Real-estate - construction	979,857			1,006,935
Consumer	390,708			313,783
Leasing and other	312,207			291,556
Overdrafts	2,047			4,113
Loans, gross of unearned income	15,954,326			15,795,918
Unearned income	(29,233		)	(27,671		)
Loans, net of unearned income	$	15,925,093		$	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:



	September 30, 2018		December 31, 2017
	(in thousands)
Allowance for loan losses	$	157,810	$	169,910
Reserve for unfunded lending commitments	10,016		6,174
Allowance for credit losses	$	167,826	$	176,084

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



	Three months ended September 30						Nine months ended September 30
	2018			2017			2018			2017
	(in thousands)
Balance at beginning of period	$	169,247		$	174,998		$	176,084		$	171,325
Loans charged off	(6,883		)	(7,795		)	(55,440		)	(25,917		)
Recoveries of loans previously charged off	3,842			2,471			8,475			12,766
Net loans charged off	(3,041		)	(5,324		)	(46,965		)	(13,151		)
Provision for credit losses	1,620			5,075			38,707			16,575
Balance at end of period	$	167,826		$	174,749		$	167,826		$	174,749

Included in the provision for credit losses for the nine months ended September 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 period included a $33.9 million charge-off related to the Commercial Relationship.

The Corporation had historically maintained an unallocated allowance for credit losses for factors and conditions that existed at the balance sheet date, but were 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 September 30, 2018
Balance at June 30, 2018	$	56,583		$	59,045		$	16,247		$	14,504		$	5,988		$	1,699		$	1,984		$	—	$	156,050
Loans charged off	(650		)	(3,541		)	(743		)	(483		)	(212		)	(672		)	(582		)	—		(6,883		)
Recoveries of loans previously charged off	928			731			217			317			664			390			595			—		3,842
Net loans charged off	278			(2,810		)	(526		)	(166		)	452			(282		)	13			—		(3,041		)
Provision for loan losses ⁽¹⁾	(2,750		)	(301		)	2,890			3,774			(961		)	1,429			720			—		4,801
Balance at September 30, 2018	$	54,111		$	55,934		$	18,611		$	18,112		$	5,479		$	2,846		$	2,717		$	—	$	157,810
Three months ended September 30, 2017
Balance at June 30, 2017	$	57,372		$	67,642		$	17,456		$	16,439		$	9,534		$	1,794		$	2,105		$	—	$	172,342
Loans charged off	(483		)	(2,714		)