FNB CORP/PA/ - FORM 10-Q - November 6, 2015

Attached files

Attached files

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

file	filename
EX-31.2 - EX-31.2 - FNB CORP/PA/	d47774dex312.htm
EX-32.2 - EX-32.2 - FNB CORP/PA/	d47774dex322.htm
EX-32.1 - EX-32.1 - FNB CORP/PA/	d47774dex321.htm
EX-31.1 - EX-31.1 - FNB CORP/PA/	d47774dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the quarterly period ended September 30, 2015

¨	Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-31940

F.N.B. CORPORATION

(Exact name of registrant as specified in its charter)

Florida

25-1255406

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


One North Shore Center, 12 Federal Street, Pittsburgh, PA		15212
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 800-555-5455

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark 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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its 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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

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.


Class		Outstanding at October 31, 2015
Common Stock, $0.01 Par Value		175,377,201 Shares

F.N.B. CORPORATION

FORM 10-Q

September 30, 2015

INDEX


PART I – FINANCIAL INFORMATION		PAGE

Item 1.	Financial Statements

	Consolidated Balance Sheets	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	69

Item 4.	Controls and Procedures	69

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	70

Item 1A.	Risk Factors	70

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70

Item 3.	Defaults Upon Senior Securities	70

Item 4.	Mine Safety Disclosures	70

Item 5.	Other Information	70

Item 6.	Exhibits	71

Signatures		72

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except par value


	September 30, 2015			December 31, 2014
	(Unaudited)
Assets
Cash and due from banks	$	208,560		$	196,240
Interest bearing deposits with banks		50,206			91,153

Cash and Cash Equivalents		258,766			287,393
Securities available for sale		1,578,526			1,534,065
Securities held to maturity (fair value of $1,546,135 and $1,468,258)		1,526,290			1,453,355
Residential mortgage loans held for sale		3,575			6,180
Loans and leases, net of unearned income of $48,830 and $56,131		11,873,645			11,247,038
Allowance for credit losses		(136,183	)		(125,926	)

Net Loans and Leases		11,737,462			11,121,112
Premises and equipment, net		161,689			168,756
Goodwill		834,141			832,213
Core deposit and other intangible assets, net		46,417			47,504
Bank owned life insurance		306,061			301,771
Other assets		383,146			374,741

Total Assets	$	16,836,073		$	16,127,090

Liabilities
Deposits:
Non-interest bearing demand	$	2,911,435		$	2,647,623
Interest bearing demand		5,558,322			4,547,628
Savings		1,736,350			1,575,922
Certificates and other time deposits		2,553,629			2,611,035

Total Deposits		12,759,736			11,382,208
Short-term borrowings		1,287,302			2,041,658
Long-term borrowings		542,653			541,443
Other liabilities		151,633			140,325

Total Liabilities		14,741,324			14,105,634

Stockholders’ Equity
Preferred stock - $0.01 par value Authorized – 20,000,000 shares Issued – 110,877 shares		106,882			106,882
Common stock - $0.01 par value Authorized – 500,000,000 shares Issued – 176,513,189 and 175,450,303 shares		1,766			1,754
Additional paid-in capital		1,805,926			1,798,984
Retained earnings		227,287			176,120
Accumulated other comprehensive loss		(34,397	)		(46,003	)
Treasury stock – 1,149,750 and 1,458,045 shares at cost		(12,715	)		(16,281	)

Total Stockholders’ Equity		2,094,749			2,021,456

Total Liabilities and Stockholders’ Equity	$	16,836,073		$	16,127,090

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In thousands, except per share data

Unaudited


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Interest Income
Loans and leases, including fees	$	120,875	$	116,468	$	358,074	$	330,107
Securities:
Taxable		14,576		13,693		43,257		39,557
Nontaxable		1,707		1,356		4,564		3,934
Dividends		9		26		29		218
Other		30		23		90		70

Total Interest Income		137,197		131,566		406,014		373,886
Interest Expense
Deposits		7,948		7,457		23,033		22,067
Short-term borrowings		1,786		1,459		5,348		4,011
Long-term borrowings		2,262		2,031		6,744		5,172

Total Interest Expense		11,996		10,947		35,125		31,250

Net Interest Income		125,201		120,619		370,889		342,636
Provision for credit losses		10,777		11,197		27,777		28,608

Net Interest Income After Provision for Credit Losses		114,424		109,422		343,112		314,028
Non-Interest Income
Service charges		18,628		17,742		51,959		50,452
Trust fees		5,210		4,868		15,803		14,494
Insurance commissions and fees		4,423		4,169		12,351		12,805
Securities commissions and fees		3,304		3,132		9,958		8,525
Net securities gains		314		1,178		319		11,415
Mortgage banking operations		2,424		1,078		6,739		2,220
Bank owned life insurance		1,846		1,828		5,527		5,820
Other		5,210		3,557		16,637		13,081

Total Non-Interest Income		41,359		37,552		119,293		118,812
Non-Interest Expense
Salaries and employee benefits		51,859		49,590		151,559		147,008
Net occupancy		7,957		7,734		25,405		24,284
Equipment		8,237		7,625		23,583		21,701
Amortization of intangibles		2,034		2,455		6,148		7,199
Outside services		7,314		8,183		25,254		23,653
FDIC insurance		3,158		3,206		9,630		9,599
Merger and acquisition related		1,312		1,904		1,683		8,054
Other		16,278		15,150		46,041		41,099

Total Non-Interest Expense		98,149		95,847		289,303		282,597

Income Before Income Taxes		57,634		51,127		173,102		150,243
Income taxes		17,581		15,736		52,575		45,497

Net Income		40,053		35,391		120,527		104,746
Less: Preferred stock dividends		2,010		2,010		6,030		6,342

Net Income Available to Common Stockholders	$	38,043	$	33,381	$	114,497	$	98,404

Net Income per Common Share – Basic	$	0.22	$	0.20	$	0.65	$	0.60
Net Income per Common Share – Diluted		0.22		0.20		0.65		0.59
Cash Dividends per Common Share		0.12		0.12		0.36		0.36

Comprehensive Income	$	49,609	$	31,499	$	132,133	$	121,219

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Dollars in thousands, except per share data

Unaudited


	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balance at January 1, 2015	$	106,882	$	1,754	$	1,798,984	$	176,120		$	(46,003	)	$	(16,281	)	$	2,021,456
Comprehensive income								120,527			11,606						132,133
Dividends declared:
Preferred stock								(6,030	)								(6,030	)
Common stock: $0.36/share								(63,330	)								(63,330	)
Issuance of common stock				12		3,651								3,566			7,229
Restricted stock compensation						3,286											3,286
Tax benefit of stock-based compensation						5											5

Balance at September 30, 2015	$	106,882	$	1,766	$	1,805,926	$	227,287		$	(34,397	)	$	(12,715	)	$	2,094,749

Balance at January 1, 2014	$	106,882	$	1,592	$	1,608,117	$	121,870		$	(56,924	)	$	(7,154	)	$	1,774,383
Comprehensive income								104,746			16,473						121,219
Dividends declared:
Preferred stock								(6,342	)								(6,342	)
Common stock: $0.36/share								(60,234	)								(60,234	)
Issuance of common stock				16		9,007		(228	)					(7,377	)		1,418
Issuance of common stock - acquisitions				139		170,024											170,163
Restricted stock compensation						2,328											2,328
Tax benefit of stock-based compensation						2,198											2,198

Balance at September 30, 2014	$	106,882	$	1,747	$	1,791,674	$	159,812		$	(40,451	)	$	(14,531	)	$	2,005,133

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in thousands

Unaudited


	Nine Months Ended September 30,
	2015			2014
Operating Activities
Net income	$	120,527		$	104,746
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		31,412			29,007
Provision for credit losses		27,777			28,608
Deferred tax expense (benefit)		3,874			(2,533	)
Net securities gains		(319	)		(11,415	)
Tax benefit of stock-based compensation		(5	)		(2,198	)
Loans originated for sale		(336,776	)		(98,741	)
Loans sold		346,174			105,169
Gain on sale of loans		(6,794	)		(3,721	)
Net change in:
Interest receivable		(4,457	)		(1,590	)
Interest payable		(414	)		(1,058	)
Securities classified as trading in business combination and sold		—			241,595
Bank owned life insurance		(4,266	)		(5,205	)
Other, net		8,144			(4,165	)

Net cash flows provided by operating activities		184,877			378,499

Investing Activities
Net change in loans and leases		(657,586	)		(888,443	)
Securities available for sale:
Purchases		(279,636	)		(686,108	)
Sales		33,499			175,872
Maturities		212,140			245,942
Securities held to maturity:
Purchases		(279,998	)		(436,519	)
Sales		—			4,570
Maturities		203,689			153,624
Purchase of bank owned life insurance		(72,688	)		(16	)
Withdrawal/surrender of bank owned life insurance		72,664			18,715
Increase in premises and equipment		(7,304	)		(12,580	)
Net cash received in business combinations		148,159			60,035

Net cash flows used in investing activities		(627,061	)		(1,364,908	)

Financing Activities
Net change in:
Demand (non-interest bearing and interest bearing) and savings accounts		1,304,345			654,144
Time deposits		(78,764	)		(224,733	)
Short-term borrowings		(754,356	)		348,827
Increase in long-term borrowings		20,976			376,418
Decrease in long-term borrowings		(19,804	)		(87,677	)
Net proceeds from issuance of common stock		10,515			7,795
Tax benefit of stock-based compensation		5			2,198
Cash dividends paid:
Preferred stock		(6,030	)		(6,342	)
Common stock		(63,330	)		(60,234	)

Net cash flows provided by financing activities		413,557			1,010,396

Net (Decrease) Increase in Cash and Cash Equivalents		(28,627	)		23,987
Cash and cash equivalents at beginning of period		287,393			213,981

Cash and Cash Equivalents at End of Period	$	258,766		$	237,968

See accompanying Notes to Consolidated Financial Statements

F.N.B. CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except share data

(Unaudited)

September 30, 2015

BUSINESS

F.N.B. Corporation (the Corporation), headquartered in Pittsburgh, Pennsylvania, is a diversified financial services company operating in six states and three major metropolitan areas, including Pittsburgh, Pennsylvania, Baltimore, Maryland and Cleveland, Ohio. As of September 30, 2015, the Corporation had 289 banking offices throughout Pennsylvania, Ohio, Maryland and West Virginia. The Corporation provides a full range of commercial banking, consumer banking and wealth management solutions through its subsidiary network which is led by its largest affiliate, First National Bank of Pennsylvania (FNBPA). Commercial banking solutions include corporate banking, small business banking, investment real estate financing, international banking, business credit, capital markets and lease financing. Consumer banking provides a full line of consumer banking products and services including deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services. Wealth management services include asset management, private banking and insurance. The Corporation also operates Regency Finance Company (Regency), which had 73 consumer finance offices in Pennsylvania, Ohio, Kentucky and Tennessee as of September 30, 2015.

BASIS OF PRESENTATION

The Corporation’s accompanying consolidated financial statements and these notes to the financial statements include subsidiaries in which the Corporation has a controlling financial interest. The Corporation owns and operates FNBPA, First National Trust Company, First National Investment Services Company, LLC, F.N.B. Investment Advisors, Inc., First National Insurance Agency, LLC, Regency, Bank Capital Services, LLC and F.N.B. Capital Corporation, LLC, and includes results for each of these entities in the accompanying consolidated financial statements.

The accompanying consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly reflect the Corporation’s financial position and results of operations in accordance with U.S. generally accepted accounting principles (GAAP). All significant intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. Events occurring subsequent to the date of the balance sheet have been evaluated for potential recognition or disclosure in the consolidated financial statements through the date of the filing of the consolidated financial statements with the Securities and Exchange Commission (SEC).

Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The interim operating results are not necessarily indicative of operating results the Corporation expects for the full year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K filed with the SEC on February 27, 2015.

USE OF ESTIMATES

The accounting and reporting policies of the Corporation conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Material estimates that are particularly susceptible to significant changes include the allowance for credit losses, securities valuations, goodwill and other intangible assets and income taxes.

DEBT OFFERING

On October 2, 2015, the Corporation completed its offering of $100,000 aggregate principal amount of 4.875% subordinated notes due in 2025. The subordinated notes will be treated as tier 2 capital for regulatory capital purposes. The net proceeds of the debt offering after deducting underwriting discounts and commissions and estimated offering expenses were $98,500. The Corporation intends to use the net proceeds from the sale of the subordinated notes for general corporate purposes, which may include investments at the holding company level, providing capital to support the growth of FNBPA and its business, repurchases of its common shares and the payment of the cash consideration components of future acquisitions.

MERGERS AND ACQUISITIONS

Branch Purchase – Bank of America

On September 18, 2015, the Corporation completed its purchase of five branch-banking locations in southeastern Pennsylvania from Bank of America, in which the Corporation acquired approximately $154,619 in deposits. The assets and liabilities relating to the branches purchased were recorded on the Corporation’s consolidated balance sheet at their preliminary fair values as of September 18, 2015, and the related results of operations for these branches have been included in the Corporation’s consolidated statement of comprehensive income since that date. Based on the preliminary purchase price allocation, the Corporation recorded $2,539 in goodwill and $3,081 in core deposit intangibles. These fair value estimates are provisional amounts based on third party valuations that are currently under review. The goodwill for this transaction is expected to be deductible for income tax purposes.

OBA Financial Services, Inc.

On September 19, 2014, the Corporation completed its acquisition of OBA Financial Services, Inc. (OBA), a bank holding company based in Germantown, Maryland. On the acquisition date, the estimated fair values of OBA included $390,160 in assets, $291,393 in loans and $295,922 in deposits. The acquisition was valued at $85,554 and resulted in the Corporation issuing 7,170,037 shares of its common stock in exchange for 4,025,895 shares of OBA common stock. The Corporation also acquired the outstanding stock options of OBA that became fully vested upon the acquisition. The assets and liabilities of OBA were recorded on the Corporation’s consolidated balance sheet at their fair values as of September 19, 2014, the acquisition date, and OBA’s results of operations have been included in the Corporation’s consolidated statement of comprehensive income since that date. OBA’s banking affiliate, OBA Bank, was merged into FNBPA on September 19, 2014. Based on the purchase price allocation, the Corporation recorded $20,107 in goodwill and $4,304 in core deposit intangibles as a result of the acquisition. None of the goodwill is deductible for income tax purposes.

BCSB Bancorp, Inc.

On February 15, 2014, the Corporation completed its acquisition of BCSB Bancorp, Inc. (BCSB), a bank holding company based in Baltimore, Maryland. On the acquisition date, the estimated fair values of BCSB included $596,122 in assets, $304,932 in loans and $532,197 in deposits. The acquisition was valued at $80,547 and resulted in the Corporation issuing 6,730,597 shares of its common stock in exchange for 3,235,961 shares of BCSB common stock. The Corporation also acquired the outstanding stock options of BCSB that became fully vested upon the acquisition. The assets and liabilities of BCSB were recorded on the Corporation’s consolidated balance sheet at their fair values as of February 15, 2014, the acquisition date, and BCSB’s results of operations have been included in the Corporation’s consolidated statement of comprehensive income since that date. BCSB’s banking affiliate, Baltimore County Savings Bank, was merged into FNBPA on February 15, 2014. Based on the purchase price allocation, the Corporation recorded $42,451 in goodwill and $6,591 in core deposit intangibles as a result of the acquisition. None of the goodwill is deductible for income tax purposes.

Pending Acquisition – Metro Bancorp, Inc.

On August 4, 2015, the Corporation entered into a definitive merger agreement to acquire Metro Bancorp, Inc. (METR), a bank holding company based in Harrisburg, Pennsylvania with approximately $3,001,357 in total assets. The transaction is valued at approximately $474,000. Under the terms of the merger agreement, METR shareholders will be entitled to receive 2.373 shares of the Corporation’s common stock for each share of METR common stock. The Corporation expects to issue approximately 33.6 million shares of its common stock in exchange for approximately 14.1 million shares of METR common stock. METR’s banking affiliate, Metro Bank, will be merged into FNBPA. The transaction is expected to be completed in the first quarter of 2016, pending regulatory approvals, the approval of shareholders of the Corporation and METR, and the satisfaction of other closing conditions.

Pending Branch Purchase – Fifth Third Bank

On September 3, 2015, the Corporation announced that it entered into a purchase and assumption agreement to acquire approximately $383,000 in retail and private banking deposits, 17 branch-banking locations and related consumer loans in the Pittsburgh, Pennsylvania area from Fifth Third Bank. The transaction is expected to close during the second quarter of 2016, pending regulatory approval.

NEW ACCOUNTING STANDARDS

Business Combinations – Simplifying the Accounting for Measurement-Period Adjustments

In September 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-16, Business Combinations – Simplifying the Accounting for Measurement-Period Adjustments. ASU 2015-16 eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer must recognize measurement-period adjustments in the period in which it determines the amount of the adjustment, including the effect on earnings of any amounts that would have been recorded in previous periods if the accounting had been completed at the acquisition date. The guidance is effective for fiscal periods beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this update will not have a material effect on the financial statements, results of operations or liquidity of the Corporation.

Insurance – Disclosures about Short-Duration Contracts

In May 2015, the FASB issued ASU 2015-09, Financial Services – Insurance. ASU 2015-09 requires insurance entities that issue short-duration contracts to provide additional disclosures about the liability for unpaid claims and claim adjustment expenses, including disclosure of information about significant changes in methodologies and assumptions used to calculate the liability, reasons for the change, and the effects on the financial statements. These additional disclosures will increase the transparency of significant estimates made in measuring those liabilities, improve comparability by requiring consistent disclosure of information, and provide financial statement users with information to facilitate analysis. ASU 2015-09 should be applied retrospectively and is effective for annual periods beginning after December 15, 2015, and interim periods beginning after December 15, 2016, with early adoption permitted. The adoption of this update is not expected to have a material effect on the financial statements, results of operations or liquidity of the Corporation.

Cloud Computing Arrangements

In April 2015, the FASB issued ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software. ASU 2015-05 provides guidance about whether a cloud computing arrangement includes a license for internal use software, and how to account for the software license element of the arrangement. This update eliminates the existing requirement to analogize the guidance on leases in ASC 840 in accounting for some software licenses. ASU 2015-05 is effective for reporting periods beginning after December 15, 2015, with early adoption permitted. A reporting entity may apply ASU 2015-05 either prospectively or retrospectively. The Corporation is evaluating this new guidance and has not yet determined which approach it will adopt or the impact that the adoption of this update will have on its financial statements.

Interest – Imputation of Interest

In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest. ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the corresponding debt liability. The recognition and measurement guidance for debt issuance costs is not affected by the amendments in this update. ASU 2015-03 is effective for reporting periods beginning after December 15, 2015, with early adoption permitted. A reporting entity should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The adoption of this update is not expected to have a material effect on the financial statements, results of operations or liquidity of the Corporation.

Consolidation

In February 2015, the FASB issued ASU 2015-02, Consolidation. ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This update modifies the evaluation of whether limited partnerships or similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. The ASU is effective for reporting periods beginning after December 15, 2015, with early adoption permitted. A reporting entity may apply ASU 2015-02 either retrospectively or by using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The adoption of this update is not expected to have a material effect on the financial statements, results of operations or liquidity of the Corporation.

Income Statement

In January 2015, the FASB issued ASU 2015-01, Income Statement – Extraordinary and Unusual Items. ASU 2015-01 simplified income statement presentation by eliminating from GAAP the concept of extraordinary items. The ASU is effective for reporting periods beginning after December 15, 2015, with early adoption permitted. A reporting entity may apply ASU 2015-01 prospectively, or retrospectively to all prior periods presented in the financial statements. The adoption of this update will not have an effect on the financial statements, results of operations or liquidity of the Corporation, as the Corporation has not reported extraordinary items.

SECURITIES

The amortized cost and fair value of securities are as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
September 30, 2015
U.S. Treasury	$	29,704	$	300	$	—		$	30,004
U.S. government-sponsored entities		388,428		2,644		(305	)		390,767
Residential mortgage-backed securities:
Agency mortgage-backed securities		587,244		9,958		(82	)		597,120
Agency collateralized mortgage obligations		529,656		3,220		(4,948	)		527,928
Non-agency collateralized mortgage obligations		1,212		15		—			1,227
Commercial mortgage-backed securities		4,384		8		—			4,392
States of the U.S. and political subdivisions		10,927		345		—			11,272
Other debt securities		14,700		267		(414	)		14,553

Total debt securities		1,566,255		16,757		(5,749	)		1,577,263
Equity securities		975		288		—			1,263

	$	1,567,230	$	17,045	$	(5,749	)	$	1,578,526

December 31, 2014
U.S. Treasury	$	29,604	$	78	$	—		$	29,682
U.S. government-sponsored entities		338,330		742		(1,939	)		337,133
Residential mortgage-backed securities:
Agency mortgage-backed securities		546,572		7,548		(35	)		554,085
Agency collateralized mortgage obligations		580,601		1,617		(9,047	)		573,171
Non-agency collateralized mortgage obligations		1,414		17		—			1,431
Commercial mortgage-backed securities		7,891		—		(11	)		7,880
States of the U.S. and political subdivisions		12,713		477		(32	)		13,158
Other debt securities		16,615		420		(857	)		16,178

Total debt securities		1,533,740		10,899		(11,921	)		1,532,718
Equity securities		1,031		316		—			1,347

	$	1,534,771	$	11,215	$	(11,921	)	$	1,534,065


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Held to Maturity
September 30, 2015
U.S. Treasury	$	500	$	169	$	—		$	669
U.S. government-sponsored entities		146,528		1,964		(79	)		148,413
Residential mortgage-backed securities:
Agency mortgage-backed securities		669,221		15,887		(16	)		685,092
Agency collateralized mortgage obligations		462,191		3,556		(4,181	)		461,566
Non-agency collateralized mortgage obligations		3,055		15		—			3,070
Commercial mortgage-backed securities		17,334		468		—			17,802
States of the U.S. and political subdivisions		227,461		2,888		(826	)		229,523

	$	1,526,290	$	24,947	$	(5,102	)	$	1,546,135

December 31, 2014
U.S. Treasury	$	502	$	168	$	—		$	670
U.S. government-sponsored entities		101,602		885		(524	)		101,963
Residential mortgage-backed securities:
Agency mortgage-backed securities		677,169		16,712		(346	)		693,535
Agency collateralized mortgage obligations		501,965		1,858		(7,329	)		496,494
Non-agency collateralized mortgage obligations		4,285		28		—			4,313
Commercial mortgage-backed securities		17,560		179		—			17,739
States of the U.S. and political subdivisions		150,272		3,315		(43	)		153,544

	$	1,453,355	$	23,145	$	(8,242	)	$	1,468,258

The Corporation classifies securities as trading securities when management intends to sell such securities in the near term. Such securities are carried at fair value, with unrealized gains (losses) reflected through the consolidated statements of comprehensive income. The Corporation classified certain securities acquired in conjunction with its acquisitions as trading securities. The Corporation both acquired and sold these trading securities during the quarterly periods in which each of the acquisitions occurred. As of September 30, 2015 and December 31, 2014, the Corporation did not hold any trading securities.

Gross gains and gross losses were realized on securities as follows:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2015		2014			2015			2014
Gross gains	$	314	$	1,191		$	328		$	19,939
Gross losses		—		(13	)		(9	)		(8,524	)

	$	314	$	1,178		$	319		$	11,415

During the first quarter of 2014, the Corporation strategically sold its portfolio of pooled trust preferred securities (TPS) with net proceeds of $51,540 and a gain of $13,766. These were previously classified as collateralized debt obligations (CDOs) available for sale. Of the 23 pooled securities sold, one was determined to be a disallowed investment under the Volcker Rule (Section 619) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and as such, was required to be disposed of by July 2016. Partially offsetting this gain was a net loss of $3,529 relating to the sale of other securities. By selling these securities, the Corporation strengthened the risk profile of its investment portfolio, improved its capital levels due to lowered risk-weighted assets and generated capital to support future growth.

As of September 30, 2015, the amortized cost and fair value of securities, by contractual maturities, were as follows:


	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	4,994	$	5,027	$	1,940	$	1,951
Due from one to five years		423,858		426,751		139,429		140,465
Due from five to ten years		10,013		10,338		71,708		73,681
Due after ten years		4,894		4,480		161,412		162,508

		443,759		446,596		374,489		378,605
Residential mortgage-backed securities:
Agency mortgage-backed securities		587,244		597,120		669,221		685,092
Agency collateralized mortgage obligations		529,656		527,928		462,191		461,566
Non-agency collateralized mortgage obligations		1,212		1,227		3,055		3,070
Commercial mortgage-backed securities		4,384		4,392		17,334		17,802
Equity securities		975		1,263		—		—

	$	1,567,230	$	1,578,526	$	1,526,290	$	1,546,135

Maturities may differ from contractual terms because borrowers may have the right to call or prepay obligations with or without penalties. Periodic payments are received on mortgage-backed securities based on the payment patterns of the underlying collateral.

At September 30, 2015 and December 31, 2014, securities with a carrying value of $2,062,257 and $1,036,380, respectively, were pledged to secure public deposits, trust deposits and for other purposes as required by law. Securities with a carrying value of $258,428 and $892,647 at September 30, 2015 and December 31, 2014, respectively, were pledged as collateral for short-term borrowings.

Following are summaries of the fair values and unrealized losses of securities, segregated by length of impairment:


	Less than 12 Months							12 Months or More							Total
	#		Fair Value		Unrealized Losses			#		Fair Value		Unrealized Losses			#		Fair Value		Unrealized Losses
Securities Available for Sale
September 30, 2015
U.S. government-sponsored entities		3	$	59,823	$	(177	)		3	$	37,867	$	(128	)		6	$	97,690	$	(305	)
Residential mortgage-backed securities:
Agency mortgage-backed securities		1		18,591		(82	)		—		—		—			1		18,591		(82	)
Agency collateralized mortgage obligations		4		63,640		(123	)		18		228,010		(4,825	)		22		291,650		(4,948	)
Other debt securities		—		—		—			3		4,480		(414	)		3		4,480		(414	)

		8	$	142,054	$	(382	)		24	$	270,357	$	(5,367	)		32	$	412,411	$	(5,749	)

December 31, 2014
U.S. government-sponsored entities		7	$	89,986	$	(275	)		7	$	99,326	$	(1,664	)		14	$	189,312	$	(1,939	)
Residential mortgage-backed securities:
Agency mortgage-backed securities		2		45,145		(35	)		—		—		—			2		45,145		(35	)
Agency collateralized mortgage obligations		9		166,908		(1,238	)		16		225,700		(7,809	)		25		392,608		(9,047	)
Commercial mortgage-backed securities		1		7,880		(11	)		—		—		—			1		7,880		(11	)
States of the U.S. and political subdivisions		—		—		—			1		1,159		(32	)		1		1,159		(32	)
Other debt securities		—		—		—			4		6,030		(857	)		4		6,030		(857	)

		19	$	309,919	$	(1,559	)		28	$	332,215	$	(10,362	)		47	$	642,134	$	(11,921	)


	Less than 12 Months							12 Months or More							Total
	#		Fair Value		Unrealized Losses			#		Fair Value		Unrealized Losses			#		Fair Value		Unrealized Losses
Securities Held to Maturity
September 30, 2015
U.S. government-sponsored entities		—	$	—	$	—			1	$	14,921	$	(79	)		1	$	14,921	$	(79	)
Residential mortgage-backed securities:
Agency mortgage-backed securities		—		—		—			1		924		(16	)		1		924		(16	)
Agency collateralized mortgage obligations		3		46,120		(212	)		14		170,359		(3,969	)		17		216,479		(4,181	)
States of the U.S. and political subdivisions		24		46,933		(826	)		—		—		—			24		46,933		(826	)

		27	$	93,053	$	(1,038	)		16	$	186,204	$	(4,064	)		43	$	279,257	$	(5,102	)

December 31, 2014
U.S. government-sponsored entities		2	$	24,989	$	(40	)		2	$	29,516	$	(484	)		4	$	54,505	$	(524	)
Residential mortgage-backed securities:
Agency mortgage-backed securities		1		1,099		(1	)		4		45,042		(345	)		5		46,141		(346	)
Agency collateralized mortgage obligations		8		104,071		(630	)		14		189,642		(6,699	)		22		293,713		(7,329	)
States of the U.S. and political subdivisions		1		1,427		(4	)		4		5,453		(39	)		5		6,880		(43	)

		12	$	131,586	$	(675	)		24	$	269,653	$	(7,567	)		36	$	401,239	$	(8,242	)

The Corporation does not intend to sell the debt securities and it is not more likely than not that the Corporation will be required to sell the securities before recovery of their amortized cost basis.

The Corporation’s remaining portfolio of TPS consists of three single-issuer securities, which are primarily from money-center and large regional banks and are included in other debt securities. These TPS had an amortized cost and estimated fair value of $4,894 and $4,480 at September 30, 2015, respectively. The Corporation has concluded from its analysis performed at September 30, 2015 that it is probable that the Corporation will collect all contractual principal and interest payments related to these securities.

Other-Than-Temporary Impairment

The Corporation evaluates its investment securities portfolio for other-than-temporary impairment (OTTI) on a quarterly basis. Impairment is assessed at the individual security level. The Corporation considers an investment security impaired if the fair value of the security is less than its cost or amortized cost basis. The following table presents a summary of the cumulative credit-related OTTI charges recognized as components of earnings for securities for which a portion of an OTTI is recognized in other comprehensive income:


	Collateralized Debt Obligations			Equities		Total
For the Nine Months Ended September 30, 2015
Beginning balance		—		$	27	$	27
Loss where impairment was not previously recognized		—			—		—
Additional loss where impairment was previously recognized		—			—		—
Reduction due to credit impaired securities sold		—			—		—

Ending balance		—		$	27	$	27

For the Nine Months Ended September 30, 2014
Beginning balance	$	17,155		$	27	$	17,182
Loss where impairment was not previously recognized		—			—		—
Additional loss where impairment was previously recognized		—			—		—
Reduction due to credit impaired securities sold		(17,155	)		—		(17,155	)

Ending balance	$	—		$	27	$	27

The Corporation did not recognize any impairment losses on securities for the nine months ended September 30, 2015 or 2014.

States of the U.S. and Political Subdivisions

The Corporation’s municipal bond portfolio of $238,733 as of September 30, 2015 is highly rated with an average entity-specific rating of AA and 99.0% of the portfolio rated A or better. General obligation bonds comprise 99.8% of the portfolio. Geographically, municipal bonds support the Corporation’s primary footprint as 93.6% of the securities are from municipalities located throughout Pennsylvania, Ohio and Maryland. The average holding size of the securities in the municipal bond portfolio is $1,492. In addition to the strong stand-alone ratings, 83.0% of the municipalities have some formal credit enhancement insurance that strengthens the creditworthiness of their issue. Management also reviews the credit profile of each issuer on a quarterly basis.

FEDERAL HOME LOAN BANK STOCK

The Corporation is a member of the Federal Home Loan Bank (FHLB) of Pittsburgh. The FHLB requires members to purchase and hold a specified minimum level of FHLB stock based upon their level of borrowings, collateral balances and participation in other programs offered by the FHLB. Stock in the FHLB is non-marketable and is redeemable at the discretion of the FHLB. Both cash and stock dividends on FHLB stock are reported as income.

Members do not purchase stock in the FHLB for the same reasons that traditional equity investors acquire stock in an investor-owned enterprise. Rather, members purchase stock to obtain access to the low-cost products and services offered by the FHLB. Unlike equity securities of traditional for-profit enterprises, the stock of FHLB does not provide its holders with an opportunity for capital appreciation because, by regulation, FHLB stock can only be purchased, redeemed and transferred at par value.

At September 30, 2015 and December 31, 2014, the Corporation’s FHLB stock totaled $44,845 and $54,751, respectively, and is included in other assets on the balance sheet. The Corporation accounts for the stock in accordance with ASC 325, which requires the investment to be carried at cost and evaluated for impairment based on the ultimate recoverability of the par value. Due to the continued improvement of the FHLB’s financial performance and stability over the past several years, along with a special dividend during the first quarter of 2015 and quarterly cash dividends in 2014 and 2015, the Corporation believes its holdings in the stock are ultimately recoverable at par value and, therefore, determined that FHLB stock was not other-than-temporarily impaired. In addition, the Corporation has ample liquidity and does not require redemption of its FHLB stock in the foreseeable future.

LOANS AND LEASES

Following is a summary of loans and leases, net of unearned income:


	Originated Loans		Acquired Loans		Total Loans and Leases
September 30, 2015
Commercial real estate	$	3,322,669	$	626,577	$	3,949,246
Commercial and industrial		2,410,186		81,169		2,491,355
Commercial leases		199,130		—		199,130

Total commercial loans and leases		5,931,985		707,746		6,639,731
Direct installment		1,643,345		49,293		1,692,638
Residential mortgages		1,013,254		373,132		1,386,386
Indirect installment		973,216		812		974,028
Consumer lines of credit		1,003,278		123,724		1,127,002
Other		53,860		—		53,860

	$	10,618,938	$	1,254,707	$	11,873,645

December 31, 2014
Commercial real estate	$	3,031,810	$	783,898	$	3,815,708
Commercial and industrial		2,197,793		120,222		2,318,015
Commercial leases		177,824		—		177,824

Total commercial loans and leases		5,407,427		904,120		6,311,547
Direct installment		1,579,770		64,851		1,644,621
Residential mortgages		817,586		445,467		1,263,053
Indirect installment		873,645		1,906		875,551
Consumer lines of credit		946,427		164,549		1,110,976
Other		41,290		—		41,290

	$	9,666,145	$	1,580,893	$	11,247,038

Commercial real estate includes both owner-occupied and non-owner-occupied loans secured by commercial properties. Commercial and industrial includes loans to businesses that are not secured by real estate. Commercial leases are made for new or used equipment. Direct installment is comprised of fixed-rate, closed-end consumer loans for personal, family or household use, such as home equity loans and automobile loans. Residential mortgages consist of conventional and jumbo mortgage loans for non-commercial properties. Indirect installment is comprised of loans originated by third parties and underwritten by the Corporation, primarily automobile loans. Consumer lines of credit include home equity lines of credit (HELOC) and consumer lines of credit that are either unsecured or secured by collateral other than home equity. Other is comprised primarily of credit cards, mezzanine loans and student loans.

The loan and lease portfolio consists principally of loans to individuals and small- and medium-sized businesses within the Corporation’s primary market area of Pennsylvania, eastern Ohio, Maryland and northern West Virginia. The total loan portfolio contains consumer finance loans to individuals in Pennsylvania, Ohio, Tennessee and Kentucky, which totaled $181,298 or 1.5% of total loans and leases at September 30, 2015, compared to $180,588 or 1.6% of total loans and leases at December 31, 2014. Due to the relative size of the consumer finance loan portfolio, they are not segregated from other consumer loans.

As of September 30, 2015, 38.9% of the commercial real estate loans were owner-occupied, while the remaining 61.1% were non-owner-occupied, compared to 41.6% and 58.4%, respectively, as of December 31, 2014. As of September 30, 2015 and December 31, 2014, the Corporation had commercial construction loans of $294,249 and $296,156, respectively, representing 2.5% and 2.6% of total loans and leases at those respective dates.

Acquired Loans

All acquired loans were initially recorded at fair value at the acquisition date. The outstanding balance and the carrying amount of acquired loans included in the consolidated balance sheet are as follows:


	September 30, 2015		December 31, 2014
Accounted for under ASC 310-30:
Outstanding balance	$	1,345,685	$	1,597,558
Carrying amount		1,094,604		1,344,171

Accounted for under ASC 310-20:
Outstanding balance		159,695		242,488
Carrying amount		153,539		228,748

Total acquired loans:
Outstanding balance		1,505,380		1,840,046
Carrying amount		1,248,143		1,572,919

The carrying amount of purchased credit impaired loans included in the table above totaled $8,766 at September 30, 2015 and $9,556 at December 31, 2014, representing less than 1% of the carrying amount of total acquired loans as of each date.

The following table provides changes in accretable yield for all acquired loans accounted for under ASC 310-30. Loans accounted for under ASC 310-20 are not included in this table.


	Nine Months Ended
	September 30,
	2015			2014
Balance at beginning of period	$	331,899		$	305,646
Acquisitions		—			71,111
Reduction due to unexpected early payoffs		(35,601	)		(34,747	)
Reclass from non-accretable difference		24,489			9,925
Disposals/transfers		(509	)		(5,390	)
Accretion		(46,207	)		(54,664	)

Balance at end of period	$	274,071		$	291,881

Credit Quality

Management monitors the credit quality of the Corporation’s loan and lease portfolio on an ongoing basis. Measurement of delinquency and past due status is based on the contractual terms of each loan.

Non-performing loans include non-accrual loans and non-performing troubled debt restructurings (TDRs). Past due loans are reviewed on a monthly basis to identify loans for non-accrual status. The Corporation places a loan on non-accrual status and discontinues interest accruals on originated loans generally when principal or interest is due and has remained unpaid for a certain number of days, or when the full amount of principal and interest due is not expected to be collected in full, unless the loan is both well secured and in the process of collection. Commercial loans are placed on non-accrual at 90 days, installment loans are placed on non-accrual at 120 days and residential mortgages and consumer lines of credit are generally placed on non-accrual at 180 days. When a loan is placed on non-accrual status, all unpaid interest is reversed. Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured. TDRs are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress.

Following is a summary of non-performing assets:


	September 30, 2015			December 31, 2014
Non-accrual loans	$	47,298		$	45,113
Troubled debt restructurings		21,221			23,439

Total non-performing loans		68,519			68,552
Other real estate owned (OREO)		38,931			41,466

Total non-performing assets	$	107,450		$	110,018

Asset quality ratios:
Non-performing loans as a percent of total loans and leases		0.58	%		0.61	%
Non-performing loans + OREO as a percent of total loans and leases + OREO		0.90	%		0.97	%
Non-performing assets as a percent of total assets		0.64	%		0.68	%

The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure amounted to $4,285 at September 30, 2015. Also, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process at September 30, 2015 amounted to $12,786.

The following tables provide an analysis of the aging of the Corporation’s past due loans by class, segregated by loans and leases originated and loans acquired:


	30-89 Days Past Due		> 90 Days Past Due and Still Accruing		Non-Accrual		Total Past Due		Current		Total Loans and Leases
Originated Loans and Leases
September 30, 2015
Commercial real estate	$	6,040	$	3	$	25,262	$	31,305	$	3,291,364	$	3,322,669
Commercial and industrial		3,854		3		9,529		13,386		2,396,800		2,410,186
Commercial leases		709		14		835		1,558		197,572		199,130

Total commercial loans and leases		10,603		20		35,626		46,249		5,885,736		5,931,985
Direct installment		9,874		3,326		4,718		17,918		1,625,427		1,643,345
Residential mortgages		11,121		1,334		2,971		15,426		997,828		1,013,254
Indirect installment		8,213		522		1,133		9,868		963,348		973,216
Consumer lines of credit		3,385		629		988		5,002		998,276		1,003,278
Other		134		169		—		303		53,557		53,860

	$	43,330	$	6,000	$	45,436	$	94,766	$	10,524,172	$	10,618,938

December 31, 2014
Commercial real estate	$	9,601	$	313	$	24,132	$	34,046	$	2,997,764	$	3,031,810
Commercial and industrial		2,446		3		8,310		10,759		2,187,034		2,197,793
Commercial leases		961		43		722		1,726		176,098		177,824

Total commercial loans and leases		13,008		359		33,164		46,531		5,360,896		5,407,427
Direct installment		9,333		3,617		7,117		20,067		1,559,703		1,579,770
Residential mortgages		8,709		3,891		2,964		15,564		802,022		817,586
Indirect installment		7,804		684		1,149		9,637		864,008		873,645
Consumer lines of credit		2,408		562		719		3,689		942,738		946,427
Other		13		135		—		148		41,142		41,290

	$	41,275	$	9,248	$	45,113	$	95,636	$	9,570,509	$	9,666,145


	30-89 Days Past Due		> 90 Days Past Due and Still Accruing		Non-Accrual		Total Past Due (1) (2)		Current		Discount			Total Loans
Acquired Loans
September 30, 2015
Commercial real estate	$	10,510	$	11,108	$	1,303	$	22,921	$	641,768	$	(38,112	)	$	626,577
Commercial and industrial		686		527		107		1,320		87,163		(7,314	)		81,169

Total commercial loans		11,196		11,635		1,410		24,241		728,931		(45,426	)		707,746
Direct installment		670		834		—		1,504		46,981		808			49,293
Residential mortgages		8,607		15,261		—		23,868		386,425		(37,161	)		373,132
Indirect installment		26		11		—		37		801		(26	)		812
Consumer lines of credit		1,105		810		452		2,367		125,150		(3,793	)		123,724

	$	21,604	$	28,551	$	1,862	$	52,017	$	1,288,288	$	(85,598	)	$	1,254,707

December 31, 2014
Commercial real estate	$	12,076	$	12,368		—	$	24,444	$	799,991	$	(40,537	)	$	783,898
Commercial and industrial		687		1,968		—		2,655		127,535		(9,968	)		120,222

Total commercial loans		12,763		14,336		—		27,099		927,526		(50,505	)		904,120
Direct installment		2,670		1,443		—		4,113		59,532		1,206			64,851
Residential mortgages		8,159		19,936		—		28,095		456,810		(39,438	)		445,467
Indirect installment		38		30		—		68		2,179		(341	)		1,906
Consumer lines of credit		1,048		2,279		—		3,327		166,912		(5,690	)		164,549

	$	24,678	$	38,024		—	$	62,702	$	1,612,959	$	(94,768	)	$	1,580,893

(1)	Past due information for acquired loans is based on the contractual balance outstanding at September 30, 2015 and December 31, 2014.

(2)

Acquired loans are considered performing upon acquisition, regardless of whether the customer is contractually delinquent, as long as the Corporation can reasonably estimate the timing and amount of expected cash flows on such loans. In these instances, the Corporation does not consider acquired contractually delinquent loans to be non-accrual or non-performing and continues to recognize interest income on these loans using the accretion method. Acquired loans are considered non-accrual or non-performing when, due to credit deterioration or other factors, the Corporation determines it is no longer able to reasonably estimate the timing and amount of expected cash flows on such loans. The Corporation does not recognize interest income on acquired loans considered non-accrual or non-performing.

The Corporation utilizes the following categories to monitor credit quality within its commercial loan and lease portfolio:


Rating Category		Definition

Pass		in general, the condition and performance of the borrower is satisfactory or better

Special Mention		in general, the condition of the borrower has deteriorated, requiring an increased level of monitoring

Substandard		in general, the condition and performance of the borrower has significantly deteriorated and could further deteriorate if deficiencies are not corrected

Doubtful		in general, the condition of the borrower has significantly deteriorated and the collection in full of both principal and interest is highly questionable or improbable

The use of these internally assigned credit quality categories within the commercial loan and lease portfolio permits management’s use of transition matrices to estimate a quantitative portion of credit risk. The Corporation’s internal credit risk grading system is based on past experiences with similarly graded loans and leases and conforms with regulatory categories. In general, loan and lease risk ratings within each category are reviewed on an ongoing basis according to the Corporation’s policy for each class of loans and leases. Each quarter, management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the commercial loan and lease portfolio. Loans and leases within the Pass credit category or that migrate toward the Pass credit category generally have a lower risk of loss compared to loans and leases that migrate toward the Substandard or Doubtful credit categories. Accordingly, management applies higher risk factors to Substandard and Doubtful credit categories.

The following tables present a summary of the Corporation’s commercial loans and leases by credit quality category, segregated by loans and leases originated and loans acquired:


	Commercial Loan and Lease Credit Quality Categories
	Pass		Special Mention		Substandard		Doubtful		Total
Originated Loans and Leases
September 30, 2015
Commercial real estate	$	3,195,455	$	60,727	$	65,568	$	919	$	3,322,669
Commercial and industrial		2,259,932		103,650		45,014		1,590		2,410,186
Commercial leases		194,783		3,149		1,198		—		199,130

	$	5,650,170	$	167,526	$	111,780	$	2,509	$	5,931,985

December 31, 2014
Commercial real estate	$	2,890,830	$	58,630	$	81,951	$	399	$	3,031,810
Commercial and industrial		2,085,893		71,420		39,684		796		2,197,793
Commercial leases		174,677		2,198		949		—		177,824

	$	5,151,400	$	132,248	$	122,584	$	1,195	$	5,407,427

Acquired Loans
September 30, 2015
Commercial real estate	$	488,840	$	49,669	$	88,068		—	$	626,577
Commercial and industrial		69,036		1,969		10,164		—		81,169

	$	557,876	$	51,638	$	98,232		—	$	707,746

December 31, 2014
Commercial real estate	$	610,260	$	73,891	$	99,747		—	$	783,898
Commercial and industrial		103,862		3,506		12,854		—		120,222

	$	714,122	$	77,397	$	112,601		—	$	904,120

Credit quality information for acquired loans is based on the contractual balance outstanding at September 30, 2015 and December 31, 2014.

The Corporation uses delinquency transition matrices within the consumer and other loan classes to enable management to estimate a quantitative portion of credit risk. Each month, management analyzes payment and volume activity, FICO scores and other external factors such as unemployment, to determine how consumer loans are performing.

Following is a table showing originated consumer loans by payment status:


	Consumer Loan Credit Quality by Payment Status
	Performing		Non-Performing		Total
September 30, 2015
Direct installment	$	1,630,566	$	12,779	$	1,643,345
Residential mortgages		1,000,774		12,480		1,013,254
Indirect installment		971,936		1,280		973,216
Consumer lines of credit		1,000,929		2,349		1,003,278
Other		53,860		—		53,860

December 31, 2014
Direct installment	$	1,565,090	$	14,680	$	1,579,770
Residential mortgages		802,522		15,064		817,586
Indirect installment		872,340		1,305		873,645
Consumer lines of credit		944,631		1,796		946,427
Other		41,290		—		41,290

Loans and leases are designated as impaired when, in the opinion of management, based on current information and events, the collection of principal and interest in accordance with the loan and lease contract is doubtful. Typically, the Corporation does not consider loans and leases for impairment unless a sustained period of delinquency (i.e., 90-plus days) is noted or there are subsequent events that impact repayment probability (i.e., negative financial trends, bankruptcy filings, imminent foreclosure proceedings, etc.). Impairment is evaluated in the aggregate for consumer installment loans, residential mortgages, consumer lines of credit and commercial loan and lease relationships less than $500 based on loan and lease segment loss given default. For commercial loan relationships greater than or equal to $500, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using a market interest rate or at the fair value of collateral if repayment is expected solely from the collateral. Consistent with the Corporation’s existing method of income recognition for loans and leases, interest on impaired loans, except those classified as non-accrual, is recognized as income using the accrual method. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Following is a summary of information pertaining to originated loans and leases considered to be impaired, by class of loan and lease:


	Unpaid Contractual Principal Balance		Recorded Investment With No Specific Reserve		Recorded Investment With Specific Reserve		Total Recorded Investment		Specific Reserve		Average Recorded Investment
At or for the Nine Months Ended September 30, 2015
Commercial real estate	$	35,733	$	25,035	$	2,057	$	27,092	$	919	$	26,928
Commercial and industrial		10,981		4,770		5,107		9,877		1,590		9,565
Commercial leases		835		835		—		835		—		767

Total commercial loans and leases		47,549		30,640		7,164		37,804		2,509		37,260
Direct installment		13,569		12,779		—		12,779		—		13,538
Residential mortgages		12,971		12,480		—		12,480		—		13,744
Indirect installment		3,220		1,280		—		1,280		—		1,168
Consumer lines of credit		2,565		2,349		—		2,349		—		2,134

	$	79,874	$	59,528	$	7,164	$	66,692	$	2,509	$	67,844

At or for the Year Ended December 31, 2014
Commercial real estate	$	34,583	$	25,443	$	883	$	26,326	$	399	$	30,807
Commercial and industrial		11,412		7,609		1,948		9,557		780		9,510
Commercial leases		722		722		—		722		—		686

Total commercial loans and leases		46,717		33,774		2,831		36,605		1,179		41,003
Direct installment		14,987		14,680		—		14,680		—		14,248
Residential mortgages		16,791		15,064		—		15,064		—		16,924
Indirect installment		1,467		1,305		—		1,305		—		1,399
Consumer lines of credit		1,803		1,796		—		1,796		—		1,793

	$	81,765	$	66,619	$	2,831	$	69,450	$	1,179	$	75,367

Interest income is generally no longer recognized once a loan becomes impaired.

These tables do not reflect the additional allowance for credit losses relating to acquired loans in the following pools and categories: commercial real estate of $3,056; commercial and industrial of $579; direct installment of $1,427; residential mortgages of $558; indirect installment of $302; and consumer lines of credit of $642, totaling $6,564 at September 30, 2015 and commercial real estate of $3,286; commercial and industrial of $1,484; direct installment of $1,847; residential mortgages of $858; indirect installment of $232; and consumer lines of credit of $267, totaling $7,974 at December 31, 2014.

Troubled Debt Restructurings

TDRs are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties. TDRs typically result from loss mitigation activities and could include the extension of a maturity date, interest rate reduction, principal forgiveness, deferral or decrease in payments for a period of time and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.

Following is a summary of the payment status of originated TDRs:


	September 30, 2015		December 31, 2014
Accruing:
Performing	$	14,692	$	9,441
Non-performing		21,221		23,439
Non-accrual		7,800		8,272

	$	43,713	$	41,152

TDRs that are accruing and performing include loans that met the criteria for non-accrual of interest prior to restructuring for which the Corporation can reasonably estimate the timing and amount of the expected cash flows on such loans and for which the Corporation expects to fully collect the new carrying value of the loans. During the nine months ended September 30, 2015, the Corporation returned to performing status $7,577 in restructured residential mortgage loans that have consistently met their modified obligations for more than six months. TDRs that are accruing and non-performing are comprised of consumer loans that have not demonstrated a consistent repayment pattern on the modified terms for more than six months, however it is expected that the Corporation will collect all future principal and interest payments. TDRs that are on non-accrual are not placed on accruing status until all delinquent principal and interest have been paid and the ultimate collectability of the remaining principal and interest is reasonably assured. Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and may result in potential incremental losses which are factored into the allowance for credit losses.

Excluding purchased impaired loans, commercial loans over $500 whose terms have been modified in a TDR are generally placed on non-accrual, individually analyzed and measured for estimated impairment based on the fair value of the underlying collateral. The Corporation’s allowance for credit losses included specific reserves for commercial TDRs of $438 and $371 at September 30, 2015 and December 31, 2014, respectively, and pooled reserves for individual loans under $500 of $1,146 and $1,215 for those same respective periods, based on loan segment loss given default. Upon default, the amount of the recorded investment in the TDR in excess of the fair value of the collateral, less estimated selling costs, is generally considered a confirmed loss and is charged-off against the allowance for credit losses.

All other classes of loans, which are primarily secured by residential properties, whose terms have been modified in a TDR are pooled and measured for estimated impairment based on the expected net present value of the estimated future cash flows of the pool. The Corporation’s allowance for credit losses included pooled reserves for these classes of loans of $3,350 and $3,448 at September 30, 2015 and December 31, 2014, respectively. Upon default of an individual loan, the Corporation’s charge-off policy is followed accordingly for that class of loan.

The majority of TDRs are the result of interest rate concessions for a limited period of time. Following is a summary of originated loans, by class, that have been restructured:


	Three Months Ended September 30, 2015						Nine Months Ended September 30, 2015
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate		—	$	—	$	—		2	$	312	$	168
Commercial and industrial		—		—		—		1		5		4

Total commercial loans		—		—		—		3		317		172
Direct installment		121		1,757		1,726		361		5,064		4,835
Residential mortgages		10		232		233		31		1,048		1,074
Indirect installment		3		13		10		13		43		40
Consumer lines of credit		10		146		143		40		666		610

		144	$	2,148	$	2,112		448	$	7,138	$	6,731


	Three Months Ended September 30, 2014						Nine Months Ended September 30, 2014
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate		1	$	50	$	48		10	$	2,633	$	2,187
Commercial and industrial		2		126		119		3		323		307

Total commercial loans		3		176		167		13		2,956		2,494
Direct installment		116		1,323		1,240		378		4,922		4,693
Residential mortgages		9		480		470		33		1,847		1,784
Indirect installment		7		18		15		20		52		48
Consumer lines of credit		6		88		56		31		899		857

		141	$	2,085	$	1,948		475	$	10,676	$	9,876

Following is a summary of originated TDRs, by class of loans and leases, for which there was a payment default, excluding loans that were either charged-off or cured by period end. Default occurs when a loan is 90 days or more past due and is within 12 months of restructuring.


	Three Months Ended September 30, 2015 (1)				Nine Months Ended September 30, 2015 (1)
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial real estate		—	$	—		—	$	—
Commercial and industrial		—		—		1		204

Total commercial loans		—		—		1		204
Direct installment		22		87		75		254
Residential mortgages		2		75		5		179
Indirect installment		1		6		6		12
Consumer lines of credit		—		—		1		8

		25	$	168		88	$	657


	Three Months Ended September 30, 2014 (1)				Nine Months Ended September 30, 2014 (1)
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Direct installment		41	$	356		80	$	732
Residential mortgages		2		33		2		33
Indirect installment		3		10		4		11
Consumer lines of credit		1		50		1		50

		47	$	449		87	$	826

(1)	The recorded investment is as of period end.

ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses is established as losses are estimated to have occurred through a provision charged to earnings. Losses are charged against the allowance for credit losses when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for credit losses. Allowances for impaired commercial loans over $500 are generally determined based on collateral values or the present value of estimated cash flows. All other impaired loans and leases are evaluated in the aggregate based on loan segment loss given default. Changes in the allowance for credit losses related to impaired loans and leases are charged or credited to the provision for credit losses.

The allowance for credit losses is maintained at a level that, in management’s judgment, is believed adequate to absorb probable losses associated with specifically identified loans and leases, as well as estimated probable credit losses inherent in the remainder of the portfolio. Adequacy of the allowance for credit losses is based on management’s evaluation of potential losses in the portfolio, which includes an assessment of past experience, current economic conditions in specific industries and geographic areas, general economic conditions, known and inherent risks in the portfolio, the estimated value of underlying collateral and residuals and changes in the composition of the portfolio. Determination of the allowance for credit losses is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans and leases, estimated losses on pools of homogeneous loans and leases based on transition matrices with predefined loss emergence periods and consideration of qualitative factors, all of which are susceptible to significant change.

Credit impaired loans obtained through acquisitions are accounted for under the provisions of ASC 310-30. The Corporation also accounts for certain acquired loans considered performing at the time of acquisition by analogy to ASC 310-30. ASC 310-30 requires the initial recognition of acquired loans at the present value of amounts expected to be received. Any deterioration in the credit quality of acquired loans subsequent to acquisition would be considered in the allowance for credit losses.

Following is a summary of changes in the allowance for credit losses, by loan and lease class:


	Balance at Beginning of Period		Charge- Offs			Recoveries		Net Charge- Offs			Provision for credit losses			Balance at End of Period
Three Months Ended September 30, 2015
Commercial real estate	$	39,872	$	(1,259	)	$	370	$	(889	)	$	2,870		$	41,853
Commercial and industrial		32,305		(584	)		290		(294	)		3,223			35,234
Commercial leases		2,223		(124	)		50		(74	)		265			2,414

Total commercial loans and leases		74,400		(1,967	)		710		(1,257	)		6,358			79,501
Direct installment		22,279		(2,722	)		565		(2,157	)		1,214			21,336
Residential mortgages		8,579		(268	)		14		(254	)		341			8,666
Indirect installment		8,909		(1,650	)		264		(1,386	)		2,090			9,613
Consumer lines of credit		9,118		(472	)		56		(416	)		871			9,573
Other		911		(402	)		8		(394	)		413			930

Total allowance on originated loans and leases		124,196		(7,481	)		1,617		(5,864	)		11,287			129,619

Purchased credit-impaired loans		658		—			—		—			36			695
Other acquired loans		6,287		(153	)		282		129			(546	)		5,869

Total allowance on acquired loans		6,945		(153	)		282		129			(510	)		6,564

Total allowance	$	131,141	$	(7,634	)	$	1,899	$	(5,735	)	$	10,777		$	136,183

Nine Months Ended September 30, 2015
Commercial real estate	$	37,588	$	(3,237	)	$	779	$	(2,458	)	$	6,723		$	41,853
Commercial and industrial		32,645		(2,684	)		1,386		(1,298	)		3,887			35,234
Commercial leases		2,398		(328	)		95		(233	)		249			2,414

Total commercial loans and leases		72,631		(6,249	)		2,260		(3,989	)		10,859			79,501
Direct installment		20,538		(8,108	)		1,131		(6,977	)		7,775			21,336
Residential mortgages		8,024		(891	)		53		(838	)		1,480			8,666
Indirect installment		7,504		(4,433	)		898		(3,535	)		5,644			9,613
Consumer lines of credit		8,496		(1,205	)		132		(1,073	)		2,150			9,573
Other		759		(1,062	)		44		(1,018	)		1,189			930

Total allowance on originated loans and leases		117,952		(21,948	)		4,518		(17,430	)		29,097			129,619

Purchased credit-impaired loans		660		(64	)		19		(45	)		80			695
Other acquired loans		7,314		(698	)		653		(45	)		(1,400	)		5,869

Total allowance on acquired loans		7,974		(762	)		672		(90	)		(1,320	)		6,564

Total allowance	$	125,926	$	(22,710	)	$	5,190	$	(17,520	)	$	27,777		$	136,183


	Balance at Beginning of Period		Charge- Offs			Recoveries			Net Charge- Offs			Provision for credit losses			Balance at End of Period
Three Months Ended September 30, 2014
Commercial real estate	$	38,478	$	(1,724	)	$	506		$	(1,218	)	$	(80	)	$	37,180
Commercial and industrial		33,017		(1,796	)		192			(1,604	)		2,883			34,296
Commercial leases		2,079		(167	)		11			(156	)		282			2,205

Total commercial loans and leases		73,574		(3,687	)		709			(2,978	)		3,085			73,681
Direct installment		16,844		(2,369	)		271			(2,098	)		4,814			19,560
Residential mortgages		5,506		(87	)		13			(74	)		1,218			6,650
Indirect installment		6,693		(898	)		211			(687	)		364			6,370
Consumer lines of credit		7,664		(360	)		50			(310	)		587			7,941
Other		907		(341	)		9			(332	)		(208	)		367

Total allowance on originated loans and leases		111,188		(7,742	)		1,263			(6,479	)		9,860			114,569

Purchased credit-impaired loans		448		(712	)		1			(711	)		1,026			763
Other acquired loans		5,112		(113	)		(41	)		(154	)		311			5,269

Total allowance on acquired loans		5,560		(825	)		(40	)		(865	)		1,337			6,032

Total allowance	$	116,748	$	(8,567	)	$	1,223		$	(7,344	)	$	11,197		$	120,601

Nine Months Ended September 30, 2014
Commercial real estate	$	32,548	$	(5,519	)	$	1,068		$	(4,451	)	$	9,083		$	37,180
Commercial and industrial		32,603		(2,849	)		730			(2,119	)		3,812			34,296
Commercial leases		1,903		(317	)		93			(224	)		526			2,205

Total commercial loans and leases		67,054		(8,685	)		1,891			(6,794	)		13,421			73,681
Direct installment		17,824		(7,154	)		821			(6,333	)		8,069			19,560
Residential mortgages		5,836		(356	)		61			(295	)		1,109			6,650
Indirect installment		6,409		(2,396	)		658			(1,738	)		1,699			6,370
Consumer lines of credit		7,231		(1,023	)		143			(880	)		1,590			7,941
Other		530		(910	)		19			(891	)		728			367

Total allowance on originated loans and leases		104,884		(20,524	)		3,593			(16,931	)		26,616			114,569

Purchased credit-impaired loans		1,000		(2,614	)		1			(2,613	)		2,376			763
Other acquired loans		4,900		(230	)		983			753			(384	)		5,269

Total allowance on acquired loans		5,900		(2,844	)		984			(1,860	)		1,992			6,032

Total allowance	$	110,784	$	(23,368	)	$	4,577		$	(18,791	)	$	28,608		$	120,601

Following is a summary of the individual and collective originated allowance for credit losses and corresponding loan and lease balances by class:


	Allowance				Loans and Leases Outstanding
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Loans and Leases		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
September 30, 2015
Commercial real estate	$	919	$	40,934	$	3,322,669	$	14,182	$	3,308,487
Commercial and industrial		1,590		33,644		2,410,186		6,186		2,404,000
Commercial leases		—		2,414		199,130		—		199,130

Total commercial loans and leases		2,509		76,992		5,931,985		20,368		5,911,617
Direct installment		—		21,336		1,643,345		—		1,643,345
Residential mortgages		—		8,666		1,013,254		—		1,013,254
Indirect installment		—		9,613		973,216		—		973,216
Consumer lines of credit		—		9,573		1,003,278		—		1,003,278
Other		—		930		53,860		—		53,860

	$	2,509	$	127,110	$	10,618,938	$	20,368	$	10,598,570

December 31, 2014
Commercial real estate	$	399	$	37,189	$	3,031,810	$	13,952	$	3,017,858
Commercial and industrial		780		31,865		2,197,793		5,837		2,191,956
Commercial leases		—		2,398		177,824		—		177,824

Total commercial loans and leases		1,179		71,452		5,407,427		19,789		5,387,638
Direct installment		—		20,538		1,579,770		—		1,579,770
Residential mortgages		—		8,024		817,586		—		817,586
Indirect installment		—		7,504		873,645		—		873,645
Consumer lines of credit		—		8,496		946,427		—		946,427
Other		—		759		41,290		—		41,290

	$	1,179	$	116,773	$	9,666,145	$	19,789	$	9,646,356

BORROWINGS

Following is a summary of short-term borrowings:


	September 30, 2015		December 31, 2014
Securities sold under repurchase agreements	$	256,320	$	882,696
Federal Home Loan Bank advances		450,000		820,000
Federal funds purchased		456,000		210,000
Subordinated notes		124,982		128,962

	$	1,287,302	$	2,041,658

Securities sold under repurchase agreements is comprised of customer repurchase agreements, which are sweep accounts with next day maturities utilized by larger commercial customers to earn interest on their funds. Securities are pledged to these customers in an amount equal to the outstanding balance.

Following is a summary of long-term borrowings:


	September 30, 2015		December 31, 2014
Federal Home Loan Bank advances	$	400,017	$	400,042
Subordinated notes		84,351		83,155
Junior subordinated debt		58,285		58,246

	$	542,653	$	541,443

The Corporation’s banking affiliate has available credit with the FHLB of $4,467,170 of which $850,017 was used as of September 30, 2015. These advances are secured by loans collateralized by residential mortgages, HELOCs, commercial real estate and FHLB stock and are scheduled to mature in various amounts periodically through the year 2021. Effective interest rates paid on the long-term advances ranged from 0.76% to 4.19% for both the nine months ended September 30, 2015 and the year ended December 31, 2014.

The Corporation had two unconsolidated subsidiary trusts as of September 30, 2015 (collectively, the Trusts): F.N.B. Statutory Trust II and Omega Financial Capital Trust I. One hundred percent of the common equity of each Trust is owned by the Corporation. The Trusts were formed for the purpose of issuing Corporation-obligated mandatorily redeemable capital securities (TPS) to third-party investors. The proceeds from the sale of TPS and the issuance of common equity by the Trusts were invested in junior subordinated debt securities (subordinated debt) issued by the Corporation, which are the sole assets of each Trust. Since third-party investors are the primary beneficiaries, the Trusts are not consolidated in the Corporation’s financial statements. The Trusts pay dividends on the TPS at the same rate as the distributions paid by the Corporation on the junior subordinated debt held by the Trusts. Omega Financial Capital Trust I was assumed as a result of an acquisition.

Distributions on the subordinated debt issued to the Trusts are recorded as interest expense by the Corporation. The TPS are subject to mandatory redemption, in whole or in part, upon repayment of the subordinated debt. The TPS are eligible for redemption, at any time, at the Corporation’s discretion. Under recently issued capital guidelines, effective January 1, 2015, the portion of the subordinated debt, net of the Corporation’s investments in the Trusts, that qualifies as tier 1 capital is limited to 25% of the total $57,500 outstanding at September 30, 2015, with the remaining 75% moving to tier 2 capital. In 2016, the entire balance of the subordinated debt will be included in tier 2 capital. The Corporation has entered into agreements which, when taken collectively, fully and unconditionally guarantee the obligations under the TPS subject to the terms of each of the guarantees.

The following table provides information relating to the Trusts as of September 30, 2015:


	Trust Preferred Securities		Common Securities		Junior Subordinated Debt		Stated Maturity Date		Interest Rate
F.N.B. Statutory Trust II	$	21,500	$	665	$	22,165		6/15/36		1.99	%	Variable; 3-month LIBOR + 165 basis points (bps)
Omega Financial Capital Trust I		36,000		1,114		36,120		10/18/34		2.48	%	Variable; 3-month LIBOR + 219 bps

	$	57,500	$	1,779	$	58,285

DERIVATIVE AND HEDGING ACTIVITIES

The Corporation is exposed to certain risks arising from both its business operations and economic conditions. The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate risk, primarily by managing the amount, source, and duration of its assets and liabilities, and through the use of derivative instruments. Derivative instruments are used to reduce the effects that changes in interest rates may have on net income and cash flows. The Corporation also uses derivative instruments to facilitate transactions on behalf of its customers.

All derivatives are carried on the consolidated balance sheet at fair value and do not take into account the effects of master netting arrangements the Corporation has with other financial institutions. Credit risk is included in the determination of the estimated fair value of derivatives. Derivative assets are classified in the consolidated balance sheet under other assets and derivative liabilities are classified in the consolidated balance sheet under other liabilities. Changes in fair value are recognized in earnings except for certain changes related to derivative instruments designated as part of a cash flow hedging relationship.

The following table presents notional amounts and gross fair values of all derivative assets and derivative liabilities held by the Corporation:


	September 30, 2015						December 31, 2014
	Notional		Fair Value				Notional		Fair Value
	Amount		Asset		Liability		Amount		Asset		Liability
Gross Derivatives
Subject to master netting arrangements:
Interest rate contracts – designated	$	250,000	$	4,918	$	855	$	200,000	$	2,109	$	2,330
Interest rate swaps – not designated		1,193,598		1		61,753		972,002		140		43,655
Equity contracts – not designated		1,180		12		—		1,210		47		—

Total subject to master netting arrangements		1,444,778		4,931		62,608		1,173,212		2,296		45,985

Not subject to master netting arrangements:
Interest rate swaps – not designated		1,193,598		61,348		1		972,002		43,602		128
Credit risk contracts – not designated		111,976		14		185		68,632		—		—
Equity contracts – not designated		1,180		—		12		1,210		—		47

Total not subject to master netting arrangements		1,306,754		61,362		198		1,041,844		43,602		175

	$	2,751,532	$	66,293	$	62,806	$	2,215,056	$	45,898	$	46,160

Derivatives Designated as Hedging Instruments under GAAP

Interest Rate Contracts. The Corporation entered into interest rate derivative agreements to modify the interest rate characteristics of certain commercial loans and one of its FHLB advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes. These agreements are designated as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows). The effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings in the same line item associated with the forecasted transaction when the forecasted transaction affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately.

At September 30, 2015 and December 31, 2014, the notional amount of these interest rate derivative agreements totaled $250,000 and $200,000, respectively. Fair values included in other assets and other liabilities on the consolidated balance sheet applicable to these agreements amounted to $4,918 and $855, respectively, at September 30, 2015, and $2,109 and $2,330, respectively, at December 31, 2014. For the nine months ended September 30, 2015, the amount reclassified from accumulated other comprehensive income (AOCI) to interest income and interest expense totaled $2,440 ($1,586 net of tax) and $115 ($75 net of tax), respectively.

As of September 30, 2015, the maximum length of time over which forecasted interest cash flows are hedged is eight years. In the twelve months that follow September 30, 2015, the Corporation expects to reclassify from the amount currently reported in AOCI net derivative gains of $2,219 ($1,443 net of tax), in association with interest on the hedged loans and FHLB advance. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to September 30, 2015.

There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness related to these cash flow hedges. For the nine months ended September 30, 2015 and 2014, there was no hedge ineffectiveness. Also, during the nine months ended September 30, 2015 and 2014, there were no gains or losses from cash flow hedge derivatives reclassified to earnings because it became probable that the original forecasted transactions would not occur.

Derivatives Not Designated as Hedging Instruments under GAAP

Interest Rate Swaps. The Corporation enters into interest rate swap agreements to meet the financing, interest rate and equity risk management needs of qualifying commercial loan customers. These agreements provide the customer the ability to convert from variable to fixed interest rates. The credit risk associated with derivatives executed with customers is essentially the same as that involved in extending loans and is subject to normal credit policies and monitoring. Swap derivative transactions with customers are not subject to enforceable master netting arrangements and are generally secured by rights to non-financial collateral, such as real and personal property.

The Corporation enters into positions with a derivative counterparty in order to offset its exposure on the fixed components of the customer interest rate swap agreements. The Corporation seeks to minimize counterparty credit risk by entering into transactions only with high-quality financial dealer institutions. These arrangements meet the definition of derivatives, but are not designated as hedging instruments under ASC 815, Derivatives and Hedging. Substantially all contracts with dealers that require central clearing (generally, transactions since June 10, 2014) are novated to a SEC registered clearing agency who becomes the Corporation’s counterparty.

The notional amount of these customer derivative agreements and the offsetting derivative counterparty positions each totaled $1,193,598 at September 30, 2015. Fair values included in other assets and other liabilities on the consolidated balance sheet applicable to these agreements amounted to $61,349 and $61,754, respectively, at September 30, 2015. At December 31, 2014, the notional amount of these customer derivative agreements and the offsetting derivative counterparty positions each totaled $972,002. At December 31, 2014, fair values included in other assets and other liabilities on the consolidated balance sheet amounted to $43,742 and $43,783, respectively.

The interest rate swap agreement with the loan customer and with the counterparty is reported at fair value in other assets and other liabilities on the consolidated balance sheet with any resulting gain or loss recorded in current period earnings as other income or other expense.

Credit Risk Contracts. The Corporation purchases and sells credit protection under risk participation agreements to share with other counterparties some of the credit exposure related to interest rate derivative contracts or to take on credit exposure to generate revenue. The Corporation will make/receive payments under these agreements if a customer defaults on its obligation to perform under certain derivative swap contracts.

Risk participation agreements sold with notional amounts totaling $74,010 as of September 30, 2015 have remaining terms ranging from two to nine years. Under these agreements, the Corporation’s maximum exposure assuming a customer defaults on its obligation to perform under certain derivative swap contracts with third parties would be $185 at September 30, 2015 and $25 at December 31, 2014.

The fair values of risk participation agreements purchased and sold were not material at September 30, 2015 and December 31, 2014.

Counterparty Credit Risk

The Corporation is party to master netting arrangements with most of its swap derivative counterparties. Collateral, usually marketable securities and/or cash, is exchanged between the Corporation and its counterparties, and is generally subject to thresholds and transfer minimums. For swap transactions that require central clearing, the Corporation posts cash to its clearing agency. Collateral positions are valued daily, and adjustments to amounts received and pledged by the Corporation are made as appropriate to maintain proper collateralization for these transactions.

Certain master netting agreements contain provisions that, if violated, could cause the counterparties to request immediate settlement or demand full collateralization under the derivative instrument. If the Corporation had breached its agreements with its derivative counterparties it would be required to settle its obligations under the agreements at the termination value and would be required to pay an additional $1,816 and $1,862 as of September 30, 2015 and December 31, 2014, respectively, in excess of amounts previously posted as collateral with the respective counterparty.

The following table presents information about derivative assets and derivative liabilities that are subject to enforceable master netting arrangements as well as those not subject to enforceable master netting arrangements:


	Gross Amount		Gross Amounts Offset in the Balance Sheet		Net Amount Presented in the Balance Sheet
September 30, 2015
Derivative Assets
Subject to master netting arrangements:
Interest rate contracts
Designated	$	4,918		—	$	4,918
Not designated		1		—		1
Equity contracts – not designated		12		—		12

Not subject to master netting arrangements:
Interest rate contracts – not designated		61,348		—		61,348
Credit contracts – not designated		14		—		14

	$	66,293		—	$	66,293

Derivative Liabilities
Subject to master netting arrangements:
Interest rate contracts
Designated	$	855		—	$	855
Not designated		61,753		—		61,753

Not subject to master netting arrangements:
Interest rate contracts – not designated		1		—		1
Credit contracts – not designated		185		—		185
Equity contracts – not designated		12		—		12

	$	62,806		—	$	62,806

December 31, 2014
Derivative Assets
Subject to master netting arrangements:
Interest rate contracts
Designated	$	2,109		—	$	2,109
Not designated		140		—		140
Equity contracts – not designated		47		—		47
Not subject to master netting arrangements:
Interest rate contracts – not designated		43,602		—		43,602

	$	45,898		—	$	45,898

Derivative Liabilities
Subject to master netting arrangements:
Interest rate contracts
Designated	$	2,330		—	$	2,330
Not designated		43,655		—		43,655
Not subject to master netting arrangements:
Interest rate contracts – not designated		128		—		128
Equity contracts – not designated		47		—		47

	$	46,160		—	$	46,160

The following table presents a reconciliation of the net amounts of derivative assets and derivative liabilities presented in the balance sheet to the net amounts that would result in the event of offset:


	Net Amount Presented in the Balance Sheet		Amount Not Offset in the Balance Sheet
	Net Amount Presented in the Balance Sheet		Financial Instruments		Cash Collateral		Net Amount
September 30, 2015
Derivative Assets
Interest rate contracts:
Designated	$	4,918	$	2,557	$	2,361		—
Not designated		1		1		—		—
Equity contracts – not designated		12		12		—		—

	$	4,931	$	2,570	$	2,361		—

Derivative Liabilities
Interest rate contracts:
Designated	$	855	$	—	$	—	$	855
Not designated		61,753		31,827		28,290		1,636

	$	62,608	$	31,827	$	28,290	$	2,491

December 31, 2014
Derivative Assets
Interest rate contracts:
Designated	$	2,109	$	810	$	1,299		—
Not designated		140		138		2		—
Equity contracts – not designated		47		47		—		—

	$	2,296	$	995	$	1,301		—

Derivative Liabilities
Interest rate contracts:
Designated	$	2,330	$	2,330	$	—	$	—
Not designated		43,655		28,646		13,243		1,766

	$	45,985	$	30,976	$	13,243	$	1,766

The following table presents the effect of certain of the Corporation’s derivative financial instruments on the income statement:


	Income	Nine Months Ended
	Statement	September 30,
	Location	2015			2014
Interest Rate Contracts	Interest income - loans and leases	$	2,440		$	2,479
Interest Rate Contracts	Interest expense – short-term borrowings		115			—
Interest Rate Swaps	Other income		(364	)		(9	)
Credit Risk Contracts	Other income		(170	)		—

Other

The Corporation has entered into interest rate lock commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans to secondary market investors. These arrangements are considered derivative instruments. The fair values of the Corporation’s rate lock commitments to customers and commitments with investors at September 30, 2015 and December 31, 2014 are not material.

COMMITMENTS, CREDIT RISK AND CONTINGENCIES

The Corporation has commitments to extend credit and standby letters of credit that involve certain elements of credit risk in excess of the amount stated in the consolidated balance sheet. The Corporation’s exposure to credit loss in the event of non-performance by the customer is represented by the contractual amount of those instruments. The credit risk associated with loan commitments and standby letters of credit is essentially the same as that involved in extending loans and leases to customers and is subject to normal credit policies. Since many of these commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements.

Following is a summary of off-balance sheet credit risk information:


	September 30, 2015		December 31, 2014
Commitments to extend credit	$	3,527,479	$	3,665,481
Standby letters of credit		97,875		121,186

At September 30, 2015, funding of 75.3% of the commitments to extend credit was dependent on the financial condition of the customer. The Corporation has the ability to withdraw such commitments at its discretion. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Based on management’s credit evaluation of the customer, collateral may be deemed necessary. Collateral requirements vary and may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Corporation that may require payment at a future date. The credit risk involved in issuing letters of credit is quantified on a quarterly basis, through the review of historical performance of the Corporation’s portfolios and allocated as a liability on the Corporation’s balance sheet.

In addition, debt issued by FNB Financial Services, LP, a wholly-owned finance subsidiary, is fully and unconditionally guaranteed by the Corporation.

Other Legal Proceedings

The Corporation and its subsidiaries are involved in various pending legal proceedings in which claims for monetary damages and other relief are asserted. These actions include claims brought against the Corporation and its subsidiaries where the Corporation or a subsidiary acted as one or more of the following: a depository bank, lender, underwriter, fiduciary, financial advisor, broker, agent, acquiror or was engaged in other business activities. Although the ultimate outcome for any asserted claim cannot be predicted with certainty, the Corporation believes that it and its subsidiaries have valid defenses for all asserted claims. Reserves are established for legal claims when losses associated with the claims are judged to be probable and the amount of the loss can be reasonably estimated.

Based on information currently available, advice of counsel, available insurance coverage and established reserves, the Corporation does not anticipate, at the present time, that the aggregate liability, if any, arising out of such legal proceedings will have a material adverse effect on the Corporation’s consolidated financial position. However, the Corporation cannot determine whether or not any claims asserted against it will have a material adverse effect on its consolidated results of operations in any future reporting period.

STOCK INCENTIVE PLANS

Restricted Stock

The Corporation issues restricted stock awards, consisting of both restricted stock and restricted stock units, to key employees under its Incentive Compensation Plans (Plans). The Corporation issues time-based awards and performance-based awards under these Plans, both of which are based on a three-year vesting period. The grant date fair value of the time-based awards is equal to the price of the Corporation’s common stock on the grant date. The fair value of the performance-based awards is based on a Monte-Carlo Simulation valuation of the Corporation’s common stock as of the grant date.

For the nine months ended September 30, 2015 and 2014, the Corporation issued 402,947 and 364,065 restricted stock awards, respectively, with aggregated grant date fair values of $5,302 and $4,954 under these plans. For performance-based restricted stock awards granted, the amount of shares recipients will earn is variable based on the Corporation’s total stockholder return relative to a specified peer group of financial institutions over the three-year period.

These market-based restricted stock units are included in the table below as if the recipients earned shares equal to 100% of the units issued. As of September 30, 2015, the Corporation had available up to 2,072,110 shares of common stock to issue under the Plans.

The unvested restricted stock awards are eligible to receive cash dividends or dividend equivalents which are ultimately used to purchase additional shares of stock and are subject to forfeiture if the requisite service period is not completed or the specified performance criteria are not met. These awards are subject to certain accelerated vesting provisions upon retirement, death, disability or in the event of a change of control as defined in the award agreements.

Share-based compensation expense related to restricted stock awards was $3,287 and $2,294 for the nine months ended September 30, 2015 and 2014, the tax benefit of which was $1,150 and $803, respectively.

The following table summarizes certain information concerning restricted stock awards:


	Nine Months Ended September 30,
	2015					2014
	Awards			Weighted Average Grant Price		Awards			Weighted Average Grant Price
Unvested awards outstanding at beginning of period		1,354,093		$	11.86		1,729,033		$	10.23
Granted		402,947			13.16		364,065			13.61
Net adjustment due to performance		8,884			22.73		(87,512	)		11.41
Vested		(471,997	)		10.66		(703,428	)		8.79
Forfeited		(29,428	)		13.46		(50,849	)		11.47
Dividend reinvestment		30,551			11.32		34,521			12.73

Unvested awards outstanding at end of period		1,295,050			12.73		1,285,830			11.90

The total fair value of awards vested was $5,912 and $10,670 for the nine months ended September 30, 2015 and 2014, respectively.

As of September 30, 2015, there was $6,993 of unrecognized compensation cost related to unvested restricted stock awards, including $70 that is subject to accelerated vesting under the Plan’s immediate vesting upon retirement provision for awards granted prior to the adoption of ASC 718, Compensation – Stock Compensation. The components of the restricted stock awards as of September 30, 2015 are as follows:


	Service- Based Awards		Performance- Based Awards		Total
Unvested awards		648,154		646,896		1,295,050
Unrecognized compensation expense	$	4,458	$	2,535	$	6,993
Intrinsic value	$	8,394	$	8,377	$	16,771
Weighted average remaining life (in years)		2.11		1.99		2.05

Stock Options

All outstanding stock options were assumed in connection with certain of the Corporation’s completed acquisitions and are fully vested. Upon consummation of those acquisitions, all outstanding stock options issued by the acquired companies were converted into equivalent Corporation stock options. The Corporation issues shares of treasury stock or authorized but unissued shares to satisfy stock options exercised. Shares issued upon the exercise of stock options were 88,899 and 99,284 for the nine months ended September 30, 2015 and 2014, respectively.

The following table summarizes certain information concerning stock option awards:


	Nine Months Ended September 30,
	2015					2014
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding at beginning of period		568,834		$	8.86		533,524		$	11.50
Assumed from acquisitions		—			—		805,507			7.39
Exercised		(88,899	)		5.61		(140,817	)		6.21
Forfeited		(2,182	)		4.34		(54,962	)		24.41

Options outstanding and exercisable at end of period		477,753			9.48		1,143,252			8.64

The intrinsic value of outstanding and exercisable stock options at September 30, 2015 was $1,522.

Warrants

In conjunction with its participation in the U.S. Department of the Treasury’s (UST) Capital Purchase Program (CPP), the Corporation issued to the UST a warrant to purchase up to 1,302,083 shares of the Corporation’s common stock. Pursuant to Section 13(H) of the Warrant to Purchase Common Stock, the number of shares of common stock issuable upon exercise of the warrant was reduced in half to 651,042 shares on June 16, 2009, the date the Corporation completed a public offering. The warrant, which expires in 2019, was sold at auction by the UST and has an exercise price of $11.52 per share.

In conjunction with the Parkvale Financial Corporation (Parkvale) acquisition on January 1, 2012, the warrant issued by Parkvale to the UST under the CPP has been converted into a warrant to purchase up to 819,640 shares of the Corporation’s common stock. This warrant, which was recorded at its fair value on January 1, 2012, was sold at auction by the UST and was exercised at $5.81 per share during the second quarter of 2015.

In conjunction with the Annapolis Bancorp, Inc. (ANNB) acquisition on April 6, 2013, the warrant issued by ANNB to the UST under the CPP has been converted into a warrant to purchase up to 342,564 shares of the Corporation’s common stock at an exercise price of $3.57 per share. Subsequent adjustments related to actual dividends paid by the Corporation have increased the share amount of these warrants to 374,221, with a resulting lower exercise price of $3.27 per share as of September 30, 2015. The warrant, which was recorded at its fair value on April 6, 2013, was sold at auction by the UST and expires in 2019.

RETIREMENT PLANS

The Corporation sponsors the Retirement Income Plan (RIP), a qualified noncontributory defined benefit pension plan that covered substantially all salaried employees hired prior to January 1, 2008. The RIP covers employees who satisfied minimum age and length of service requirements. The Corporation’s funding guideline has been to make annual contributions to the RIP each year, if necessary, such that minimum funding requirements have been met. The RIP was frozen as of December 31, 2010.

The Corporation also sponsors two supplemental non-qualified retirement plans. The ERISA Excess Retirement Plan provides retirement benefits equal to the difference, if any, between the maximum benefit allowable under the Internal Revenue Code and the amount that would be provided under the RIP, if no limits were applied. The Basic Retirement Plan (BRP) is applicable to certain officers whom the Board of Directors designates. Officers participating in the BRP receive a benefit based on a target benefit percentage based on years of service at retirement and a designated tier as determined by the Board of Directors. When a participant retires, the basic benefit under the BRP is a monthly benefit equal to the target benefit percentage times the participant’s highest average monthly cash compensation during five consecutive calendar years within the last ten calendar years of employment. This monthly benefit is reduced by the monthly benefit the participant receives from Social Security, the RIP, the ERISA Excess Retirement Plan and the annuity equivalent of the automatic contributions to the qualified 401(k) defined contribution plan and the ERISA Excess Lost Match Plan. The BRP was frozen as of December 31, 2008. The ERISA Excess Retirement Plan was frozen as of December 31, 2010.

The net periodic benefit credit for the defined benefit plans includes the following components:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Service cost	$	18		$	15		$	52		$	47
Interest cost		1,470			1,610			4,424			4,802
Expected return on plan assets		(2,491	)		(2,486	)		(7,473	)		(7,460	)
Amortization:
Unrecognized net transition asset		—			(6	)		—			(16	)
Unrecognized prior service cost		2			2			6			6
Unrecognized loss		518			347			1,590			1,021

Net periodic pension credit	$	(483	)	$	(518	)	$	(1,401	)	$	(1,600	)

The Corporation’s subsidiaries participate in a qualified 401(k) defined contribution plan under which employees may contribute a percentage of their salary. Employees are eligible to participate upon their first day of employment. Under this plan, the Corporation matches 100% of the first six percent that the employee defers. Additionally, the Corporation may provide a performance-based company contribution of up to three percent if the Corporation exceeds annual financial goals. Prior to January 1, 2015, the Corporation matched 100% of the first four percent that the employee deferred, provided an automatic contribution of three percent of compensation at the end of the year and could make an additional performance-based company contribution of up to two percent if the Corporation achieved its performance goals for the plan year. The Corporation’s contribution expense was $5,794 and $7,595 for the nine months ended September 30, 2015 and 2014, respectively.

The Corporation also sponsors an ERISA Excess Lost Match Plan for certain officers. This plan provides retirement benefits equal to the difference, if any, between the maximum benefit allowable under the Internal Revenue Code and the amount that would have been provided under the qualified 401(k) defined contribution plan, if no limits were applied.

INCOME TAXES

The Corporation bases its provision for income taxes upon income before income taxes, adjusted for the effect of certain tax-exempt income and non-deductible expenses. In addition, the Corporation reports certain items of income and expense in different periods for financial reporting and tax return purposes. The Corporation recognizes the tax effects of these temporary differences currently in the deferred income tax provision or benefit. The Corporation computes deferred tax assets or liabilities based upon the differences between the financial statement and income tax bases of assets and liabilities using the applicable marginal tax rate.

The Corporation evaluates the probability that it will ultimately realize the full value of its deferred tax assets. Realization of the Corporation’s deferred tax assets is dependent upon a number of factors including the existence of any cumulative losses in prior periods, the amount of taxes paid in available carry-back periods, expectations for future earnings, applicable tax planning strategies and assessment of current and future economic and business conditions. The Corporation establishes a valuation allowance when it is “more likely than not” that the Corporation will not be able to realize a benefit from its deferred tax assets, or when future deductibility is uncertain.

At September 30, 2015, the Corporation anticipates that it will not utilize some of its state net operating loss carryforwards and other net deferred tax assets at certain of its subsidiaries and has recorded a valuation allowance against these deferred tax assets. The Corporation believes that, except for the portion which is covered by a valuation allowance, it is more likely than not the Corporation will realize the benefits of its deferred tax assets, net of the valuation allowance, at September 30, 2015, based on the levels of projected taxable income of some of its entities.

COMPREHENSIVE INCOME

The components of comprehensive income, net of related tax, are as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Net income	$	40,053		$	35,391		$	120,527		$	104,746
Other comprehensive income (loss):
Securities available for sale:
Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $3,649, $(1,551), $4,302 and $10,399		6,777			(2,881	)		7,989			19,312
Reclassification adjustment for gains included in net income, net of tax expense of $110, $412, $112 and $3,995		(204	)		(766	)		(207	)		(7,420	)
Derivative instruments:
Unrealized gains arising during the period, net of tax expense of $1,709, $40, $2,353 and $2,979		3,174			74			4,370			5,532
Reclassification adjustment for gains included in net income, net of tax expense of $286, $293, $854 and $867		(531	)		(543	)		(1,586	)		(1,610	)
Pension and postretirement benefit obligations:
Unrealized gains arising during the period, net of tax expense of $183, $121, $560 and $355		340			224			1,040			659

Other comprehensive income (loss)		9,556			(3,892	)		11,606			16,473

Comprehensive income	$	49,609		$	31,499		$	132,133		$	121,219

The amounts reclassified from AOCI related to securities available for sale are included in net securities gains on the Consolidated Statements of Comprehensive Income, while the amounts reclassified from AOCI related to derivative instruments are included in interest income on loans and leases on the Consolidated Statements of Comprehensive Income.

The tax (benefit) expense amounts reclassified from AOCI in connection with the securities available for sale and derivative instruments reclassifications are included in income taxes on the Consolidated Statements of Comprehensive Income.

The following table presents changes in AOCI, net of tax, by component:


	Unrealized Net Gains (Losses) on Securities Available for Sale			Unrealized Net Gains (Losses) on Derivative Instruments			Unrecognized Pension and Postretirement Obligations			Total
Nine Months Ended September 30, 2015
Balance at beginning of period	$	(440	)	$	(143	)	$	(45,420	)	$	(46,003	)
Other comprehensive income before reclassifications		7,989			4,370			1,040			13,399
Amounts reclassified from AOCI		(207	)		(1,586	)		—			(1,793	)

Net current period other comprehensive income		7,782			2,784			1,040			11,606

Balance at end of period	$	7,342		$	2,641		$	(44,380	)	$	(34,397	)

EARNINGS PER COMMON SHARE

Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding net of unvested shares of restricted stock.

Diluted earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding, adjusted for the dilutive effect of potential common shares issuable for stock options, warrants and restricted shares, as calculated using the treasury stock method. Adjustments to the weighted average number of shares of common stock outstanding are made only when such adjustments dilute earnings per common share.

The following table sets forth the computation of basic and diluted earnings per common share:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Net income	$	40,053	$	35,391	$	120,527	$	104,746
Less: Preferred stock dividends		2,010		2,010		6,030		6,342

Net income available to common stockholders	$	38,043	$	33,381	$	114,497	$	98,404

Basic weighted average common shares outstanding		175,343,789		167,260,386		174,816,692		165,229,206
Net effect of dilutive stock options, warrants, restricted stock and convertible debt		1,169,043		1,623,741		1,383,450		1,695,637

Diluted weighted average common shares outstanding		176,512,832		168,884,127		176,200,142		166,924,843

Earnings per common share:
Basic	$	0.22	$	0.20	$	0.65	$	0.60

Diluted	$	0.22	$	0.20	$	0.65	$	0.59

For the three months ended September 30, 2015 and 2014, 19,385 and 32,419 shares of common stock, respectively, related to stock options and warrants were excluded from the computation of diluted earnings per common share because the exercise price of the shares was greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive. For the nine months ended September 30, 2015 and 2014, 20,440 and 38,151 shares of common stock, respectively, related to stock options and warrants were excluded from the computation of diluted earnings per common share because the exercise price of the shares was greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive.

CASH FLOW INFORMATION

Following is a summary of supplemental cash flow information:


Nine Months Ended September 30	2015		2014
Interest paid on deposits and other borrowings	$	35,531	$	31,804
Income taxes paid		41,000		17,000
Transfers of loans to other real estate owned		6,901		7,784
Financing of other real estate owned sold		372		287

BUSINESS SEGMENTS

The Corporation operates in four reportable segments: Community Banking, Wealth Management, Insurance and Consumer Finance.

•

The Community Banking segment provides commercial and consumer banking services. Commercial banking solutions include corporate banking, small business banking, investment real estate financing, international banking, business credit, capital markets and lease financing. Consumer banking products and services include deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services.

•

The Wealth Management segment provides a broad range of personal and corporate fiduciary services including the administration of decedent and trust estates. In addition, it offers various alternative products, including securities brokerage and investment advisory services, mutual funds and annuities.

•

The Insurance segment includes a full-service insurance agency offering all lines of commercial and personal insurance through major carriers. The Insurance segment also includes a reinsurer.

•

The Consumer Finance segment primarily makes installment loans to individuals and purchases installment sales finance contracts from retail merchants. The Consumer Finance segment activity is funded through the sale of the Corporation’s subordinated notes at the finance company’s branch offices.

The following tables provide financial information for these segments of the Corporation. The information provided under the caption “Parent and Other” represents operations not considered to be reportable segments and/or general operating expenses of the Corporation, and includes the parent company, other non-bank subsidiaries and eliminations and adjustments which are necessary for purposes of reconciliation to the consolidated amounts.


	Community Banking		Wealth Management		Insurance		Consumer Finance		Parent and Other			Consolidated
At or for the Three Months Ended September 30, 2015
Interest income	$	125,281	$	—	$	22	$	10,096	$	1,798		$	137,197
Interest expense		10,473		—		—		878		645			11,996
Net interest income		114,808		—		22		9,218		1,153			125,201
Provision for credit losses		8,702		—		—		1,750		325			10,777
Non-interest income		29,667		8,682		3,602		716		(1,308	)		41,359
Non-interest expense		80,906		6,703		3,201		4,983		322			96,115
Intangible amortization		1,824		69		141		—		—			2,034
Income tax expense (benefit)		15,804		696		105		1,473		(497	)		17,581
Net income (loss)		37,239		1,214		177		1,728		(305	)		40,053
Total assets		16,658,489		21,099		22,201		187,721		(53,437	)		16,836,073
Total intangibles		855,164		10,516		13,069		1,809		—			880,558

At or for the Three Months Ended September 30, 2014
Interest income	$	120,122	$	—	$	24	$	9,773	$	1,647		$	131,566
Interest expense		9,435		—		—		826		686			10,947
Net interest income		110,687		—		24		8,947		961			120,619
Provision for credit losses		9,427		—		—		1,519		251			11,197
Non-interest income		27,179		8,174		3,373		719		(1,893	)		37,552
Non-interest expense		79,243		6,294		2,943		4,983		(71	)		93,392
Intangible amortization		2,282		72		101		—		—			2,455
Income tax expense (benefit)		14,347		656		128		1,216		(611	)		15,736
Net income (loss)		32,567		1,152		225		1,948		(501	)		35,391
Total assets		15,584,832		21,892		19,148		182,301		(51,128	)		15,757,045
Total intangibles

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller reporting company