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ASSOCIATED BANC-CORP - Quarter Report: 2020 March (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2020

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: 001-31343

Associated Banc-Corp
(Exact name of registrant as specified in its charter)

Wisconsin39-1098068
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

433 Main Street
Green Bay,Wisconsin54301
(Address of principal executive offices)(Zip Code)
(920) 491-7500
(Registrant’s telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the act:
Title of each classTrading symbolName of each exchange on which registered
Common stock, par value $0.01 per shareASBNew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 6.125% Non-Cum. Perp Pref Stock, Srs CASB PrCNew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.375% Non-Cum. Perp Pref Stock, Srs DASB PrDNew York Stock Exchange
Depositary Shrs, each representing 1/40th intrst in a shr of 5.875% Non-Cum. Perp Pref Stock, Srs EASB PrENew York Stock Exchange

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          No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes          No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
Non-accelerated filer  Smaller reporting company  
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes          No  
APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of registrant’s common stock, par value $0.01 per share, at May 7, 2020 was 153,673,563.
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ASSOCIATED BANC-CORP
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ASSOCIATED BANC-CORP
Commonly Used Acronyms and Abbreviations
The following listing provides a reference of common acronyms and abbreviations used throughout the document:

ABSAsset Backed Securities
ACLAllowance for Credit Losses on Loans and Investments
ACLLAllowance for Credit Losses on Loans
ALCO Asset / Liability Committee
ASCAccounting Standards Codification
Associated / Corporation / our / us / weAssociated Banc-Corp collectively with all of its subsidiaries and affiliates
Associated Bank / the BankAssociated Bank, National Association
ASUAccounting Standards Update
Basel IIIInternational framework established by the Basel Committee on Banking Supervision for the regulation of capital and liquidity
bpbasis point(s)
CARES ActCoronavirus Aid, Relief, and Economic Security Act
CDsCertificates of Deposit
CDIsCore Deposit Intangibles
CECLCurrent Expected Credit Losses
CET1Common Equity Tier 1
CMOsCollateralized Mortgage Obligations
CRACommunity Reinvestment Act
EAREarnings at Risk
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
Federal ReserveBoard of Governors of the Federal Reserve System
FFELPFederal Family Education Loan Program
FHLBFederal Home Loan Bank
FHLMCFederal Home Loan Mortgage Corporation
FICOFair Isaac Corporation, provider of a broad-based risk score to aid in credit decisions
First StauntonFirst Staunton Bancshares, Incorporated
FNMAFederal National Mortgage Association
FTPFunds Transfer Pricing
GAAPGenerally Accepted Accounting Principles
GNMAGovernment National Mortgage Association
GSEsGovernment-Sponsored Enterprises
HuntingtonThe Huntington National Bank, a subsidiary of Huntington Bancshares Incorporated
LIBORLondon Interbank Offered Rate
LTVLoan-to-Value
MBSMortgage-Backed Securities
MSRsMortgage Servicing Rights
MVEMarket Value of Equity
Net Free FundsNoninterest-bearing sources of funds
NIINet Interest Income
NPAsNonperforming Assets
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OCCOffice of the Comptroller of the Currency
OREOOther Real Estate Owned
Parent CompanyAssociated Banc-Corp individually
PCDPurchased Credit Deteriorated
PPPPaycheck Protection Program
RAPRetirement Account Plan - the Corporation's noncontributory defined benefit retirement plan
Restricted Stock AwardsRestricted common stock and restricted common stock units to certain key employees
S&PStandard & Poor's
SBASmall Business Administration
SECU.S. Securities and Exchange Commission
Series C Preferred StockThe Corporation's 6.125% Non-Cumulative Perpetual Preferred Stock, Series C, liquidation preference $1,000 per share
Series D Preferred StockThe Corporation's 5.375% Non-Cumulative Perpetual Preferred Stock, Series D, liquidation preference $1,000 per share
Series E Preferred StockThe Corporation's 5.875% Non-Cumulative Perpetual Preferred Stock, Series E, liquidation preference $1,000 per share
TDRTroubled Debt Restructuring






































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PART I - FINANCIAL INFORMATION
ITEM 1.Financial Statements:

ASSOCIATED BANC-CORP
Consolidated Balance Sheets
 March 31, 2020December 31, 2019
 (In Thousands, except share and per share data)
(Unaudited)(Audited)
Assets
Cash and due from banks$480,337  $373,380  
Interest-bearing deposits in other financial institutions176,440  207,624  
Federal funds sold and securities purchased under agreements to resell22,455  7,740  
Investment securities held to maturity, net, at amortized cost(a)
2,149,373  2,205,083  
Investment securities available for sale, at fair value2,928,787  3,262,586  
Equity securities15,063  15,090  
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost222,922  227,347  
Residential loans held for sale366,330  136,280  
Commercial loans held for sale—  15,000  
Loans24,365,633  22,821,440  
Allowance for loan losses(b)
(337,793) (201,371) 
Loans, net24,027,841  22,620,068  
Bank and corporate owned life insurance674,026  671,948  
Tax credit and other investments315,909  279,969  
Premises and equipment, net438,469  435,284  
Goodwill1,191,388  1,176,230  
Mortgage servicing rights, net58,289  67,306  
Other intangible assets, net92,723  88,301  
Interest receivable92,377  91,196  
Other assets655,328  506,046  
Total assets$33,908,056  $32,386,478  
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits$6,107,386  $5,450,709  
Interest-bearing deposits19,554,194  18,328,355  
Total deposits25,661,580  23,779,064  
Federal funds purchased and securities sold under agreements to repurchase133,007  433,097  
Commercial paper33,647  32,016  
FHLB advances3,214,194  3,180,967  
Other long-term funding549,644  549,343  
Allowance for unfunded commitments(b)
56,276  21,907  
Accrued expenses and other liabilities(b)
469,236  467,961  
Total liabilities30,117,584  28,464,355  
Stockholders’ Equity
Preferred equity256,716  256,716  
Common equity
Common stock1,752  1,752  
Surplus1,706,516  1,716,431  
Retained earnings(b)
2,296,176  2,380,867  
Accumulated other comprehensive income (loss)(16,974) (33,183) 
Treasury stock, at cost(453,714) (400,460) 
Total common equity3,533,755  3,665,407  
Total stockholders’ equity3,790,471  3,922,124  
Total liabilities and stockholders’ equity$33,908,056  $32,386,478  
Preferred shares authorized (par value $1.00 per share)750,000  750,000  
Preferred shares issued and outstanding264,458  264,458  
Common shares authorized (par value $0.01 per share)250,000,000  250,000,000  
Common shares issued175,216,409  175,216,409  
Common shares outstanding153,690,421  157,171,247  
Numbers may not sum due to rounding.
(a) At March 31, 2020, the investment securities held to maturity are reported net of the related allowance for credit losses on investments. Prior periods were unadjusted due to the modified retrospective application of ASU 2016-13.
(b) At January 1, 2020, the adoption of ASU 2016-13 resulted in an increase to the allowance for loan losses of $112 million and an increase to the allowance for unfunded commitments of $19 million for a total increase to the ACLL of $131 million. A corresponding after tax decrease to common equity of $98 million was recorded along with a deferred tax asset of $33 million, included in accrued expenses and other liabilities. Prior periods were unadjusted due to the modified retrospective application of ASU 2016-13.
See accompanying notes to consolidated financial statements.
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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Income (Unaudited)
 Three Months Ended March 31,
 (In Thousands, except per share data)
20202019
Interest income
Interest and fees on loans$224,786  $258,853  
Interest and dividends on investment securities
Taxable20,272  29,053  
Tax-exempt14,882  13,816  
Other interest3,304  4,226  
Total interest income263,244  305,948  
Interest expense
Interest on deposits36,666  62,773  
Interest on federal funds purchased and securities sold under agreements to repurchase368  627  
Interest on other short-term funding39  51  
Interest on FHLB advances17,626  19,554  
Interest on long-term funding5,604  7,396  
Total interest expense60,303  90,401  
Net interest income202,942  215,547  
Provision for credit losses53,001  6,000  
Net interest income after provision for credit losses149,941  209,547  
Noninterest income
Insurance commissions and fees22,608  25,464  
Wealth management fees(a)
20,816  20,180  
Service charges and deposit account fees15,222  15,115  
Card-based fees9,597  9,261  
Other fee-based revenue4,497  3,983  
Capital markets, net7,935  3,189  
Mortgage banking, net6,143  4,712  
Bank and corporate owned life insurance 3,094  3,792  
Asset gains (losses), net(77) 567  
Investment securities gains (losses), net6,118  1,680  
Other2,352  3,260  
Total noninterest income98,306  91,202  
Noninterest expense
Personnel114,200  120,050  
Technology20,799  19,012  
Occupancy16,069  16,472  
Business development and advertising5,826  6,636  
Equipment5,439  5,668  
Legal and professional5,160  3,951  
Loan and foreclosure costs3,120  2,146  
FDIC assessment5,500  3,750  
Other intangible amortization2,814  2,226  
Acquisition related costs(b)
1,721  632  
Other11,543  11,128  
Total noninterest expense192,191  191,671  
Income (loss) before income taxes56,056  109,078  
Income tax expense10,219  22,392  
Net income45,838  86,686  
Preferred stock dividends3,801  3,801  
Net income available to common equity$42,037  $82,885  
Earnings per common share
Basic$0.27  $0.50  
Diluted$0.27  $0.50  
Average common shares outstanding
Basic154,701  163,928  
Diluted155,619  165,433  
Numbers may not sum due to rounding.
(a) Includes trust, asset management, brokerage, and annuity fees.
(b) Includes Huntington branch and First Staunton acquisition related costs only.

See accompanying notes to consolidated financial statements.
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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Comprehensive Income (Unaudited)
 Three months ended
March 31,
 ($ in Thousands)
20202019
Net income$45,838  $86,686  
Other comprehensive income, net of tax
Investment securities available for sale
Net unrealized gains (losses)26,419  30,490  
Amortization of net unrealized (gains) losses on available for sale securities transferred to held to maturity securities556  69  
Reclassification adjustment for net losses (gains) realized in net income(6,118) (1,680) 
Income tax (expense) benefit(5,225) (7,301) 
Other comprehensive income (loss) on investment securities available for sale15,632  21,578  
Defined benefit pension and postretirement obligations
Amortization of prior service cost(38) (38) 
Amortization of actuarial loss (gain)808  64  
Income tax (expense) benefit(193) (7) 
Other comprehensive income (loss) on pension and postretirement obligations577  20  
Total other comprehensive income (loss)16,209  21,597  
Comprehensive income$62,046  $108,283  
Numbers may not sum due to rounding.


See accompanying notes to consolidated financial statements.

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Item 1. Financial Statements Continued: 
ASSOCIATED BANC-CORP
Consolidated Statements of Changes in Stockholders’ Equity
(In Thousands, except per share data)Preferred EquityCommon StockSurplusRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury StockTotal
Balance, December 31, 2019$256,716  $1,752  $1,716,431  $2,380,867  $(33,183) $(400,460) $3,922,124  
Cumulative effect of ASU 2016-13 adoption (CECL)—  —  —  (98,337) —  —  (98,337) 
Total shareholder's equity at beginning of period, as adjusted256,716  1,752  1,716,431  2,282,530  (33,183) (400,460) 3,823,787  
Comprehensive income
Net income—  —  —  45,838  —  —  45,838  
Other comprehensive income (loss)—  —  —  —  16,209  —  16,209  
Comprehensive income62,046  
Common stock issued
Stock-based compensation plans, net—  —  (20,659) —  —  23,555  2,896  
Purchase of treasury stock, open market purchases—  —  —  —  —  (71,255) (71,255) 
Purchase of treasury stock, stock-based compensation plans—  —  —  —  —  (5,555) (5,555) 
Cash dividends
Common stock, $0.18 per share—  —  —  (28,392) —  —  (28,392) 
Preferred stock(a)
—  —  —  (3,801) —  —  (3,801) 
Stock-based compensation expense, net—  —  10,744  —  —  —  10,744  
Balance, March 31, 2020$256,716  $1,752  $1,706,516  $2,296,176  $(16,974) $(453,714) $3,790,471  
Numbers may not sum due to rounding.
(a) Series C, $0.3828125 per share; Series D, $0.3359375 per share; and Series E, $0.3671875 per share.

(In Thousands, except per share data)Preferred EquityCommon StockSurplusRetained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury StockTotal
Balance, December 31, 2018$256,716  $1,752  $1,712,615  $2,181,414  $(124,972) $(246,638) $3,780,888  
Comprehensive income
Net income—  —  —  86,686  —  —  86,686  
Other comprehensive income (loss)—  —  —  —  21,597  —  21,597  
Comprehensive income108,283  
Common stock issued
Stock-based compensation plans, net—  —  (32,220) —  —  39,265  7,045  
Purchase of treasury stock, open market purchases—  —  —  —  —  (29,999) (29,999) 
Purchase of treasury stock, stock-based compensation plans—  —  —  —  —  (7,468) (7,468) 
Cash dividends
Common stock, $0.17 per share—  —  —  (28,183) —  —  (28,183) 
Preferred stock(a)
—  —  —  (3,801) —  —  (3,801) 
Stock-based compensation expense, net—  —  9,397  —  —  —  9,397  
Other—  —  —  (293) —  —  (293) 
Balance, March 31, 2019$256,716  $1,752  $1,689,792  $2,235,824  $(103,375) $(244,840) $3,835,870  
Numbers may not sum due to rounding.
(a) Series C, $0.3828125 per share; Series D, $0.3359375 per share; and Series E, $0.3671875 per share.



See accompanying notes to consolidated financial statements.




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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Consolidated Statements of Cash Flows (Unaudited)
 Three Months Ended March 31,
 ($ in Thousands)
20202019
Cash Flow From Operating Activities
Net income$45,838  $86,686  
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Provision for credit losses53,001  6,000  
Depreciation and amortization14,971  14,358  
Addition to (recovery of) valuation allowance on mortgage servicing rights, net9,098  121  
Amortization of mortgage servicing rights3,635  2,693  
Amortization of other intangible assets2,814  2,226  
Amortization and accretion on earning assets, funding, and other, net5,728  6,571  
Net amortization of tax credit investments6,486  5,637  
Losses (gains) on sales of investment securities, net(6,118) (1,680) 
Asset (gains) losses, net77  (567) 
(Gain) loss on mortgage banking activities, net(14,274) (3,174) 
Mortgage loans originated and acquired for sale(310,254) (162,521) 
Proceeds from sales of mortgage loans held for sale297,265  159,842  
Changes in certain assets and liabilities
(Increase) decrease in interest receivable(1,181) (12,068) 
Increase (decrease) in interest payable(6,511) (1,516) 
Increase (decrease) in expense payable(61,924) (51,247) 
(Increase) decrease in net derivative position(77,369) (54,411) 
Net change in other assets and other liabilities18,636  (10,552) 
Net cash provided by (used in) operating activities(20,083) (13,602) 
Cash Flow From Investing Activities
Net increase in loans(1,395,767) (216,817) 
Purchases of
Available for sale securities(93,487) (120,282) 
Held to maturity securities(29,463) (140,670) 
Federal Home Loan Bank and Federal Reserve Bank stocks(49,794) (88,245) 
Premises, equipment, and software, net of disposals(11,045) (13,368) 
Other intangibles(200) —  
Proceeds from
Sales of available for sale securities 365,239  131,122  
Sale of Federal Home Loan Bank and Federal Reserve Bank stocks55,000  121,839  
Prepayments, calls, and maturities of available for sale investment securities 186,496  135,541  
Prepayments, calls, and maturities of held to maturity investment securities 84,360  43,953  
Sales, prepayments, calls, and maturities of other assets10,482  3,179  
Net change in tax credit and alternative investments(17,877) (18,772) 
Net cash (paid) received in acquisition (31,452) —  
Net cash provided by (used in) investing activities(927,507) (162,518) 
Cash Flow From Financing Activities
Net increase (decrease) in deposits1,443,965  635,664  
Net increase (decrease) in short-term funding(324,317) 2,043  
Net increase (decrease) in short-term FHLB advances30,000  (880,000) 
Repayment of long-term FHLB advances(5,464) (169) 
Proceeds from long-term FHLB advances—  250,633  
Proceeds from finance lease principal —  
Proceeds from issuance of common stock for stock-based compensation plans2,896  7,045  
Purchase of treasury stock, open market purchases(71,255) (29,999) 
Purchase of treasury stock, stock-based compensation plans(5,555) (7,468) 
Cash dividends on common stock(28,392) (28,183) 
Cash dividends on preferred stock(3,801) (3,801) 
Net cash provided by (used in) financing activities1,038,079  (54,235) 
Net increase (decrease) in cash, cash equivalents, and restricted cash90,488  (230,355) 
Cash, cash equivalents, and restricted cash at beginning of period588,744  876,698  
Cash, cash equivalents, and restricted cash at end of period$679,232  $646,343  
Supplemental disclosures of cash flow information
   Cash paid for interest$66,316  $91,521  
   Cash paid for (received from) income and franchise taxes1,373  (5,760) 
   Loans and bank premises transferred to OREO3,374  2,222  
   Capitalized mortgage servicing rights3,716  1,247  
   Loans transferred into held for sale from portfolio, net205,065  1,074  
   Unsettled trades to purchase securities—  11,244  
Acquisition
   Fair value of assets acquired, including cash and cash equivalents457,448  —  
   Fair value ascribed to goodwill and intangible assets22,538  (79) 
   Fair value of liabilities assumed479,985  —  
   Equity issued in (adjustments related to) acquisition—  (79) 
Numbers may not sum due to rounding.
See accompanying notes to consolidated financial statements.
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The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same sum amounts shown on the consolidated statements of cash flows:
 Three Months Ended March 31,
 ($ in Thousands)
20202019
Cash and cash equivalents$679,232  $489,095  
Restricted cash—  157,248  
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows$679,232  $646,343  

Amounts included in restricted cash represent required reserve balances with the Federal Reserve Bank, which is included in interest-bearing deposits in other financial institutions on the face of the consolidated balance sheets. At March 31, 2020, the Corporation had no restricted cash due to the Federal Reserve reducing the requirement ratios to zero percent.
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Item 1. Financial Statements Continued:
ASSOCIATED BANC-CORP
Notes to Consolidated Financial Statements

These interim consolidated financial statements have been prepared according to the rules and regulations of the SEC and, therefore, certain information and footnote disclosures normally presented in accordance with GAAP have been omitted or abbreviated. The information contained on the consolidated financial statements and footnotes in Associated Banc-Corp's 2019 Annual Report on Form 10-K should be referred to in connection with the reading of these unaudited interim financial statements.
Note 1 Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and comprehensive income, changes in stockholders’ equity, and cash flows of the Corporation and Parent Company for the periods presented, and all such adjustments are of a normal recurring nature. The consolidated financial statements include the accounts of all subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Estimates that are particularly susceptible to significant change include the determination of the ACLL, goodwill impairment assessment, MSRs valuation, and income taxes. Management has evaluated subsequent events for potential recognition or disclosure.
Within the tables presented, certain columns and rows may not sum due to the use of rounded numbers for disclosure purposes.
Note 2 Acquisitions
First Staunton Acquisition
On February 14, 2020, the Corporation completed its acquisition of First Staunton. The Corporation paid a 4% premium on acquired deposits. The conversion of the branches was completed simultaneously with the close of the transaction, expanding the banks presence into 9 new Metro-East St. Louis communities. As a result of the acquisition and other consolidations, a net of 7 branch locations were added.
The First Staunton acquisition constituted a business combination. The acquisition has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair value on the acquisition date. The determination of estimated fair values required management to make certain estimates that are subjective in nature and may require adjustments upon the availability of new information regarding facts and circumstances which existed at the date of acquisition (i.e., appraisals) for up to a year following the acquisition. The Corporation continues to review information relating to events or circumstances existing at the acquisition date. Management anticipates that this review could result in adjustments to the acquisition date valuation amounts presented herein but does not anticipate that these adjustments will be material.
The Corporation recorded approximately $15 million in goodwill related to the First Staunton acquisition during the first quarter of 2020. Goodwill created by the acquisition is not tax deductible. See Note 8 for additional information on goodwill, as well as the carrying amount and amortization of CDI assets related to the First Staunton acquisition.
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The following table presents the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date related to the First Staunton acquisition:
 ($ in Thousands)Purchase Accounting AdjustmentsFebruary 14, 2020
Assets
Cash and cash equivalents$—  $44,848  
Investment securities available for sale(24) 98,743  
Federal Home Loan Bank and Federal Reserve Bank stocks, at cost—  781  
Loans(4,808) 369,684  
Premises and equipment, net(3,005) 4,865  
Bank owned life insurance 6,770  
Goodwill15,158  
Core deposit intangibles (included in other intangible assets, net on the face of the consolidated balance sheets)7,379  7,379  
OREO (included in other assets on the face of the consolidated balance sheets)670  762  
Other assets2,486  7,293  
Total assets$556,285  
Liabilities
Deposits$1,285  $438,684  
Other borrowings61  34,613  
Accrued expenses and other liabilities179  6,688  
Total liabilities$479,985  
Total consideration paid$76,300  
For a description of methods used to determine the fair value of significant assets and liabilities presented on the balance sheet above, see Assumptions section of this Note.
The Corporation has purchased loans with the First Staunton acquisition, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:
($ in Thousands)February 14, 2020
Purchase price of loans at acquisition$77,221  
Allowance for credit losses at acquisition3,504  
Non-credit discount/(premium) at acquisition(951) 
Par value of acquired loans at acquisition$79,774  
There were no PCD securities.
Huntington Wisconsin Branch Acquisition
On June 14, 2019, the Corporation completed its acquisition of the Wisconsin branches of Huntington. The Corporation paid a 4% premium on acquired deposits. The conversion of the branches happened simultaneously with the close of the transaction and the acquisition expanded the Bank's presence into 13 new Wisconsin communities. As a result of the acquisition and other consolidations, a net of 14 branch locations were added.
The Huntington branch acquisition constituted a business combination. The acquisition has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair value on the acquisition date. The determination of estimated fair values required management to make certain estimates that are subjective in nature and may require adjustments upon the availability of new information regarding facts and circumstances which existed at the date of acquisition (i.e., appraisals) for up to a year following the acquisition.
The Corporation recorded approximately $7 million in goodwill related to the Huntington branch acquisition during the second quarter of 2019 and approximately $210,000 during the third quarter of 2019. Upon review of information relating to events and circumstances existing at the acquisition date, and in accordance with applicable accounting guidance, the Corporation remeasured select previously reported fair value amounts. The adjustment to goodwill was driven by an update that decreased the fair value of furniture acquired. Goodwill created by the acquisition is tax deductible. See Note 8 for additional information on goodwill.
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The following table presents the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date related to Huntington branch acquisition:
 ($ in Thousands)
Purchase Accounting AdjustmentsJune 14, 2019
Assets
Cash and cash equivalents$—  $551,250  
Loans(1,552) 116,346  
Premises and equipment, net4,800  22,430  
Goodwill7,286  
Core deposit intangibles (included in other intangible assets, net on the face of the consolidated balance sheets)22,630  22,630  
OREO (included in other assets on the face of the consolidated balance sheets)(2,561) 5,263  
Other assets—  559  
Total assets$725,764  
Liabilities
Deposits$156  $725,173  
Other liabilities70  590  
Total liabilities$725,764  
Assumptions
Investment Securities: The fair value of investments on the date of acquisition was determined utilizing an external third party broker opinion of the market value.
Loans: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. For the non-credit (interest and liquidity) premium, loans were grouped together according to similar characteristics when applying various valuation techniques. For the credit discount, loans were also grouped based on whether they had more than insignificant deterioration in credit since origination.
CDIs: This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative cost of funds, and the interest costs associated with customer deposits. The CDIs will be amortized on a straight-line basis over 10 years.
Time Deposits: The fair value for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.
FHLB Borrowings: The fair value of FHLB advances are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.
Note 3 Summary of Significant Accounting Policies
The accounting and reporting policies of the Corporation conform to U.S. GAAP and to general practice within the financial services industry. A discussion of these policies can be found in Note 1 Summary of Significant Accounting Policies included in the Corporation’s 2019 Annual Report on Form 10-K. As a result of adopting ASU 2016-13 Financial Instruments - Credit Losses (Topic 326), there have been changes to the Corporation's significant accounting policies since December 31, 2019, which are described below.

Investment Securities
Management measures expected credit losses on held to maturity securities on a collective basis by major security type. Accrued interest receivable on held to maturity securities is excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts and is included in investment securities held to maturity, net on the consolidated balance sheets.

For available for sale securities the Corporation evaluates whether any decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the
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security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses on investments is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses on investments is recognized in other comprehensive income.

Changes in the allowance for credit losses on investments are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the available for sale security is uncollectible or when either of the criteria regarding intent or requirement to sell is met. Accrued interest receivable on available for sale debt securities is excluded from the estimate of credit losses.

Allowance for Credit Losses on Loans

The level of the allowance for loan losses represents management's estimate of an amount appropriate to provide for lifetime credit losses in the loan portfolio at the balance sheet date. The allocation methodology applied by the Corporation, designed to assess the appropriateness of the allowance for loan losses, includes an allocation methodology, as well as management’s ongoing review and grading of the loan portfolio into criticized loan categories. The allocation methodology focuses on evaluation of several factors, including but not limited to: evaluation of facts and issues related to specific loans, management's ongoing review and grading of the loan portfolio using a dual risk rating system leveraging probability of default and loss given default, consideration of historical credit loss and delinquency experience on each portfolio category, trends in past due and nonaccrual loans, the level of potential problem loans, the risk characteristics of the various classifications of loans, changes in the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions and economic forecasts, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect potential loan losses. The Corporation utilizes the Moody's Baseline economic forecast in the allowance model and applies that forecast over a reasonable and supportable period with reversion to historical losses. For additional detail on the reasonable and supportable period and reversion methodology, see Note 7 Loans. Potential problem loans are generally defined by management to include loans rated as substandard by management. Assessing these numerous factors involves significant judgment. The provision for loan losses is predominantly a function of the result of the methodology and other qualitative and quantitative factors used to determine the allowance for loan losses.

Management individually analyzes loans that do not share similar risk characteristics to other loans in the portfolio. Management has determined that commercial loan relationships that have nonaccrual status or commercial and retail loans that have had their terms restructured in a TDR meet this definition. Probable TDRs are loans the Corporation has reviewed individually to determine whether there is a high likelihood that the loans will default and will require restructuring in the near future. Probable TDRs could be classified as Pass, Special Mention, Substandard or Nonaccrual within the Corporation's credit quality analysis depending on the specific circumstances surrounding the individual credits. Accrued interest receivable on loans is excluded from the estimate of credit losses.

The allowance for unfunded commitments leverages the same methodology utilized to measure the allowance for loan losses. The Corporation estimates expected credit losses over the contractual period in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. See Note 7 for additional information on the ACLL and Note 12 for additional information on the allowance for unfunded commitments.

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Impact of adopting ASU 2016-13 Financial Instruments - Credit Losses (Topic 326)

The following table illustrates the adoption impact:
December 31, 2019January 1, 2020
($ in Thousands)Allowance for Loan LossesAllowance for Unfunded CommitmentsCECL Day 1 AdjustmentACLL Beginning Balance
Commercial and industrial$91,133  $12,276  $48,921  $152,330  
Commercial real estate - owner occupied10,284  127  (1,851) 8,560  
Commercial and business lending101,417  12,403  47,070  160,890  
Commercial real estate - investor40,514  530  2,287  43,331  
Real estate construction24,915  7,532  25,814  58,261  
Commercial real estate lending65,428  8,062  28,101  101,591  
Total Commercial166,846  20,465  75,171  262,482  
Residential mortgage16,960  —  33,215  50,175  
Home equity10,926  1,038  14,240  26,204  
Other consumer6,639  405  8,520  15,564  
Total consumer34,525  1,443  55,975  91,943  
Total loans$201,371  $21,907  $131,147  $354,425  
The allowance for credit losses on held to maturity securities was approximately $61,000 at January 1, 2020, attributable entirely to the Corporation's municipal securities.
At January 1, 2020, the adoption of ASU 2016-13 resulted in an increase to the allowance for loan losses of $112 million and an increase to the allowance for unfunded commitments of $19 million for a total increase to the ACLL of $131 million. A corresponding after tax decrease to common equity of $98 million was recorded along with a deferred tax asset of $33 million.
New Accounting Pronouncements Adopted
StandardDescriptionDate of adoptionEffect on financial statements
ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments


The FASB issued an amendment to replace the current incurred loss impairment methodology. Under the new guidance, entities will be required to measure expected credit losses by utilizing forward-looking information to assess an entity's ACL. The guidance also requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. This amendment was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities should apply the amendment by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. ASU 2018-19 was issued to clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. ASU 2019-04 was issued and provides entities alternatives for measurement of accrued interest receivable, clarifies the steps entities should take when recording the transfer of loans or debt securities between measurement classifications or categories and clarifies that entities should include expected recoveries on financial assets. ASU 2019-05 was issued to provide entities that have certain instruments within the scope of Subtopic 320-20 with an option to irrevocably elect the fair value option in Subtopic 825-10. ASU 2020-02 was issued to further explain the measurement of current expected credit losses and the development, governance, and documentation of a systematic methodology. Early adoption was permitted. 1st Quarter 2020The Corporation has adopted the Update using a modified retrospective approach. The Corporation has developed a CECL allowance model which calculates reserves over the life of the loan and is largely driven by portfolio characteristics, risk-grading, economic outlook, and key methodology assumptions. Those assumptions are based upon the existing probability of default and loss given default framework. At adoption, the Corporation utilized a single economic forecast over a 2-year reasonable and supportable forecast period. In the second year, the Corporation used straight-line reversion to historical losses. The Corporation recorded a $131 million adjustment to the ACL related to the adoption of this standard, which includes $61 thousand related to the held to maturity investment securities portfolio. The Corporation has elected to maintain pools accounted for under Subtopic 310-30 at adoption. The Corporation has elected to utilize the 2019 Capital Transition Relief for initial adoption, as well as the 2020 Capital Transition Relief as permitted under applicable regulations. The total impact at adoption equates to an approximately 29 bp net, after tax, reduction in the tangible common equity ratio. Results for the periods after January 1, 2020 are presented in accordance with ASC 326 while prior period amounts continue to be reported in accordance with previously applicable standards.
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StandardDescriptionDate of adoptionEffect on financial statements
ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value MeasurementThe FASB issued an amendment to add, modify, and remove disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the FASB Concepts Statement "Conceptual Framework for Financial Reporting," including the consideration of costs and benefits. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption was permitted.1st Quarter 2020The Corporation has evaluated and determined it has an immaterial impact with minor changes in presentation.
ASU 2017-04 Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill ImpairmentThe FASB issued an amendment to simplify the subsequent quantitative measurement of goodwill by eliminating step two from the goodwill impairment test. Instead, an entity will perform only step one of its quantitative goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and then recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity will still have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative step one impairment test is necessary. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Entities should apply the amendment prospectively. Early adoption is permitted, including in an interim period, for impairment tests performed after January 1, 2017.1st Quarter 2020There has been no material impact on results of operations, financial position, and liquidity. The Corporation does its annual impairment testing in May.
ASU 2020-03 Codification Improvements to Financial InstrumentsThe FASB issued an amendment to further clarify that all entities are required to provide the fair value option disclosures in paragraphs 825-10-50-24 through 50-32. The amendment also states that paragraphs 820-10-35-2A(g) and 820-10-35-18L are to include the phrase nonfinancial items accounted for as derivatives under Topic 815 to be consistent with the previous amendments to Section 820-10-35 that were made by ASU No. 2018-09, Codification Improvements. The amendment also clarifies that the disclosure requirements in Topic 320 apply to the disclosure requirements in Topic 942 for depository and lending institutions along with improving the understandability of the guidance relating to subtopic 470-50 and subtopic 820-10. Lastly, the amendment clarifies that the contractual term of a net investment in a lease determined in accordance with Topic 842 should be the contractual term used to measure expected credit losses under Topic 326 and that when an entity regains control of financial assets sold, an ACL should be recorded in accordance with Topic 326. 1st Quarter 2020The Corporation has evaluated and determined it has an immaterial impact.
ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial ReportingThe FASB issued an amendment to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendment only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.1st Quarter 2020The Corporation has evaluated the impact of the Update and determined the expedients provided allow for simpler, more streamlined modifications to the financial instruments referencing LIBOR. A small population of loans have been modified under the new standard.
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Future Accounting Pronouncements
The expected impact of accounting pronouncements recently issued or proposed but not yet required to be adopted are displayed in the table below:
StandardDescriptionDate of anticipated adoptionEffect on financial statements
ASU 2018-14
Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans
The FASB issued an amendment to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments also added requirements to disclose the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendment also clarifies the disclosure requirements in paragraph 715-20-50-3, which states that certain information for defined benefit pension plans should be disclosed. The amendments in this Update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendment is effective for fiscal years ending after December 15, 2020. Entities should apply the amendments in this Update on a retrospective basis to all periods presented. Early adoption is permitted.1st Quarter 2021The Corporation is currently evaluating the impact on its results of operations, financial position, and liquidity.
ASU 2020-01 Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)

Clarifying the Interactions between Topic 321, Topic 323, and Topic 815
The FASB issued an amendment to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments also clarify that for the purpose of applying paragraph 815-10-15-141(a) an entity should not consider whether, upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic 825. An entity also would evaluate the remaining characteristics in paragraph 815-010-15-141 to determine the accounting for those forward contracts and purchased options.1st Quarter 2021The Corporation is currently evaluating the impact on its results of operations, financial position, and liquidity.


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Note 4 Earnings Per Common Share
Earnings per common share are calculated utilizing the two-class method. Basic earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per common share are calculated by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding adjusted for the dilutive effect of common stock awards (outstanding stock options and unvested restricted stock awards). Presented below are the calculations for basic and diluted earnings per common share:
 Three Months Ended March 31,
 (In Thousands, except per share data)20202019
Net income$45,838  $86,686  
Preferred stock dividends(3,801) (3,801) 
Net income available to common equity42,037  82,885  
Common shareholder dividends(28,264) (28,080) 
Unvested share-based payment awards(128) (103) 
Undistributed earnings$13,645  $54,702  
Undistributed earnings allocated to common shareholders$13,555  $54,410  
Undistributed earnings allocated to unvested share-based payment awards90  292  
Undistributed earnings$13,645  $54,702  
Basic
Distributed earnings to common shareholders$28,264  $28,080  
Undistributed earnings allocated to common shareholders13,555  54,410  
Total common shareholders earnings, basic$41,819  $82,490  
Diluted
Distributed earnings to common shareholders$28,264  $28,080  
Undistributed earnings allocated to common shareholders13,555  54,410  
Total common shareholders earnings, diluted$41,819  $82,490  
Weighted average common shares outstanding154,701  163,928  
Effect of dilutive common stock awards918  1,505  
Diluted weighted average common shares outstanding155,619  165,433  
Basic earnings per common share$0.27  $0.50  
Diluted earnings per common share$0.27  $0.50  
Non-dilutive common stock options of approximately 4 million and 3 million for the three months ended March 31, 2020 and 2019, respectively, were excluded from the earnings per common share calculation.
Note 5 Stock-Based Compensation
The fair value of stock options granted is estimated on the date of grant using a Black-Scholes option pricing model, while the fair value of restricted stock awards is their fair market value on the date of grant. The fair values of stock options and restricted stock awards are amortized as compensation expense on a straight-line basis over the vesting period of the grants. For retirement eligible colleagues, whose employment meets the definitions under the 2017 Incentive Compensation Plan, expenses related to stock options and restricted stock awards are fully recognized on the date the colleague meets the definition of normal or early retirement. Compensation expense recognized is included in personnel expense on the consolidated statements of income.
Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock option represents the period of time stock options are expected to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the implied volatility of the Corporation’s stock.
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The following assumptions were used in estimating the fair value for options granted in the first three months of 2020 and full year 2019:
20202019
Dividend yield3.50 %3.30 %
Risk-free interest rate1.60 %2.60 %
Weighted average expected volatility21.00 %24.00 %
Weighted average expected life5.75 years5.75 years
Weighted average per share fair value of options$2.39$4.00
A summary of the Corporation’s stock option activity for the three months ended March 31, 2020 is presented below:
Stock Options
Shares(a)
Weighted Average
Exercise Price
Weighted Average Remaining Contractual Term
Aggregate Intrinsic Value(a)
Outstanding at December 31, 20195,543  $20.13  6.25 years$16,043  
Granted1,697  18.43  
Exercised(102) 13.98  
Forfeited or expired(159) 22.52  
Outstanding at March 31, 20206,978  $19.75  6.96 years$19  
Options Exercisable at March 31, 20204,090  $19.15  5.37 years$19  
(a) In thousands

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option. For the three months ended March 31, 2020, the intrinsic value of stock options exercised was less than $1 million compared to $2 million for the three months ended March 31, 2019. The total fair value of stock options vested was $3 million for the three months ended March 31, 2020, compared to $4 million for the three months ended March 31, 2019.
The Corporation recognized compensation expense for the vesting of stock options of $2 million for the three months ended March 31, 2020 and $1 million for the three months ended March 31, 2019. Included in compensation expense for 2020 was less than $1 million of expense for the accelerated vesting of stock options granted to retirement eligible colleagues. At March 31, 2020, the Corporation had approximately $6 million of unrecognized compensation expense related to stock options that is expected to be recognized over the remaining requisite service periods that extend through the first quarter of 2024.
The Corporation also issues restricted stock awards under the 2017 Incentive Compensation Plan. Performance awards are based on performance goals of earnings per share and total shareholder return with vesting ranging from a minimum of 0% to a maximum of 150% of the target award. Performance awards are valued utilizing a Monte Carlo simulation model to estimate fair value of the awards at the grant date.

The following table summarizes information about the Corporation’s restricted stock awards activity for the three months ended March 31, 2020:
Restricted Stock Awards
Shares(a)
Weighted Average
Grant Date Fair Value
Outstanding at December 31, 20192,393  $22.39  
Granted1,018  18.54  
Vested(752) 23.33  
Forfeited(61) 23.12  
Outstanding at March 31, 20202,598  $20.59  
(a) In thousands
The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period specified in the grant's award agreement. Performance-based restricted stock awards granted during 2019 and 2020 will vest ratably over a period of three years. Service-based restricted stock awards granted during 2019 and 2020 will vest ratably over a period of four years. Expense for restricted stock awards issued of approximately $9 million was recorded for the three months ended March 31, 2020 and $8 million was recorded for the three months ended March 31, 2019. Included in compensation expense for the first three months of 2020 was approximately $2 million of expense for the accelerated vesting of restricted stock awards granted to retirement eligible colleagues. The Corporation had $27 million of unrecognized compensation costs related to restricted stock awards at March 31, 2020 that are expected to be recognized over the remaining requisite service periods that extend through the first quarter of 2024.
The Corporation has the ability to issue shares from treasury or new shares upon the exercise of stock options or the granting of restricted stock awards. The Board of Directors has authorized management to repurchase shares of the Corporation’s common
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stock in the market, to be made available for issuance in connection with the Corporation’s employee incentive plans and for other corporate purposes. The repurchase of shares will be based on market and investment opportunities, capital levels, growth prospects, and regulatory constraints. Such repurchases may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchase programs, or similar facilities.

Note 6 Investment Securities
Investment securities are classified as available for sale, held to maturity, or equity on the consolidated balance sheets at the time of purchase. The amortized cost and fair values of securities available for sale and held to maturity at March 31, 2020 were as follows:
($ in Thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Fair Value
Investment securities available for sale
U.S. government SBA agency securities$10,241  $ $(5) $10,238  
Obligations of state and political subdivisions (municipal securities)492,195  16,443  (1) 508,636  
Residential mortgage-related securities
FNMA / FHLMC103,576  908  —  104,485  
GNMA799,983  23,804  —  823,787  
Commercial mortgage-related securities
FNMA / FHLMC19,861  2,912  —  22,773  
GNMA1,108,336  10,162  (4,055) 1,114,443  
FFELP asset backed securities360,658  —  (19,234) 341,424  
Other debt securities3,000  —  —  3,000  
Total investment securities available for sale$2,897,851  $54,231  $(23,295) $2,928,787  
Investment securities held to maturity
U. S. Treasury securities$999  $42  $—  $1,041  
Obligations of state and political subdivisions (municipal securities)1,426,543  82,382  (475) 1,508,451  
Residential mortgage-related securities
FNMA / FHLMC78,125  3,486  —  81,610  
GNMA245,675  8,124  —  253,799  
GNMA commercial mortgage-related securities398,092  6,500  (1,939) 402,653  
Total investment securities held to maturity$2,149,434  $100,534  $(2,414) $2,247,553  

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The amortized cost and fair values of securities available for sale and held to maturity at December 31, 2019 were as follows:
($ in Thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Fair Value
Investment securities available for sale
Obligations of state and political subdivisions (municipal securities)$529,908  $16,269  $(18) $546,160  
Residential mortgage-related securities
FNMA / FHLMC131,158  1,562  (59) 132,660  
GNMA982,941  3,887  (1,689) 985,139  
Commercial mortgage-related securities
FNMA / FHLMC19,929  1,799  —  21,728  
GNMA1,314,836  7,403  (12,032) 1,310,207  
FFELP asset backed securities270,178  —  (6,485) 263,693  
Other debt securities3,000  —  —  3,000  
Total investment securities available for sale$3,251,950  $30,920  $(20,284) $3,262,586  
Investment securities held to maturity
U. S. Treasury securities$999  $19  $—  $1,018  
Obligations of state and political subdivisions (municipal securities)1,418,569  69,775  (1,118) 1,487,227  
Residential mortgage-related securities
FNMA / FHLMC81,676  1,759  (15) 83,420  
GNMA269,523  1,882  (1,108) 270,296  
GNMA commercial mortgage-related securities434,317  6,308  (6,122) 434,503  
Total investment securities held to maturity$2,205,083  $79,744  $(8,363) $2,276,465  
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The expected maturities of investment securities available for sale and held to maturity at March 31, 2020 are shown below:
 Available for SaleHeld to Maturity
($ in Thousands)Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Due in one year or less$10,731  $10,738  $32,555  $32,703  
Due after one year through five years30,829  31,242  77,586  78,683  
Due after five years through ten years324,501  334,499  153,519  158,843  
Due after ten years129,134  135,157  1,163,883  1,239,262  
Total debt securities495,195  511,636  1,427,542  1,509,492  
U.S. government SBA agency securities10,241  10,238  —  —  
Residential mortgage-related securities
FNMA / FHLMC103,576  104,485  78,125  81,610  
GNMA799,983  823,787  245,675  253,799  
Commercial mortgage-related securities
FNMA / FHLMC19,861  22,773  —  —  
GNMA1,108,336  1,114,443  398,092  402,653  
FFELP asset backed securities360,658  341,424  —  —  
Total investment securities$2,897,851  $2,928,787  $2,149,434  $2,247,553  
Ratio of fair value to amortized cost101.1 %104.6 %
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On a quarterly basis, the Corporation refreshes credit quality of each held to maturity security. The following table summarizes the credit quality indicator of held to maturity securities at amortized cost at March 31, 2020:
($ in Thousands)AAAAAATotal
U. S. Treasury securities$999  $—  $—  $999  
Obligations of state and political subdivisions (municipal securities)543,620  862,040  20,883  1,426,543  
Residential mortgage-related securities
FNMA/FHLMC78,125  —  —  78,125  
GNMA245,675  —  —  245,675  
GNMA commercial mortgage-related securities398,092  —  —  398,092  
Total held to maturity securities$1,266,510  $862,040  $20,883  $2,149,434  
Investment securities gains (losses), net includes proceeds from the sale of investment securities as well as any applicable write-ups or write-downs of investment securities. The proceeds from the sale of investment securities for the three months ended March 31, 2020 and 2019 are shown below:
Three Months Ended March 31,
($ in Thousands)20202019
Gross gains on available for sale securities$6,198  $1,680  
Gross gains on held to maturity securities—  —  
Total gains6,198  1,680  
Gross (losses) on available for sale securities(80) —  
Gross (losses) on held to maturity securities—  —  
Total (losses)(80) —  
Investment securities gains (losses), net$6,118  $1,680  
Proceeds from sales of investment securities$365,239  $131,122  
During the first quarter of 2020, the Corporation sold $281 million of primarily prepayment sensitive mortgage-related securities at a gain of $6 million. Additionally, in February 2020, the Corporation sold $84 million of certain securities acquired in the First Staunton acquisition that did not fit the parameters of the Corporation's current investment strategy.
During the first quarter of 2019, the Corporation sold $131 million of taxable ABS, MBS, and CMO securities, with the proceeds utilized to pay down borrowings.
Investment securities with a carrying value of approximately $2.1 billion and $2.6 billion at March 31, 2020 and December 31, 2019, respectively, were pledged to secure certain deposits or for other purposes as required or permitted by law.
At March 31, 2020, accrued interest receivable on held to maturity and available for sale securities totaled $14 million and $10 million, respectively, both which are included in interest receivable on the consolidated balance sheets. There was no interest income reversed for investments going into nonaccrual.
A security is considered past due once it is 30 days contractually past due under the terms of the agreement. At March 31, 2020, the Corporation had no past due held to maturity securities.

The allowance for credit losses on held to maturity securities was approximately $61,000 at March 31, 2020, attributable entirely to the Corporation's municipal securities, included in investment securities held to maturity, net, at amortized cost on the consolidated balance sheets. The Corporation also holds U.S. Treasury and residential mortgage-related securities issued by the U.S. government or a GSE which are backed by the full faith and credit of the U.S. government and, as a result, no allowance for credit losses has been recorded related to these securities.

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The following represents gross unrealized losses and the related fair value of investment securities available for sale and held to maturity, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position, at March 31, 2020:
 Less than 12 months12 months or moreTotal
($ in Thousands)Number
of
Securities
Unrealized
(Losses)
Fair
Value
Number
of
Securities
Unrealized
(Losses)
Fair
Value
Unrealized
(Losses)
Fair
Value
Investment securities available for sale
U.S. government SBA agency securities $(5) $4,958  —  $—  $—  $(5) $4,958  
Obligations of state and political subdivisions (municipal securities) (1) 1,313  —  —  —  (1) 1,313  
GNMA commercial mortgage-related securities22  (1,111) 259,273   (2,944) 138,611  (4,055) 397,883  
FFELP asset backed securities16  (10,971) 222,197  10  (8,262) 119,228  (19,234) 341,424  
Other debt securities —  2,000  —  —  —  —  2,000  
Total52  $(12,089) $489,740  18  $(11,206) $257,838  $(23,295) $747,578  
Investment securities held to maturity
Obligations of state and political subdivisions (municipal securities)22  $(470) $28,779   $(5) $542  $(475) $29,321  
Residential mortgage-related securities
FNMA / FHLMC —  —  —  —  —  —  —  
GNMA commercial mortgage-related securities (332) 126,170   (1,607) 126,624  (1,939) 252,794  
Total31  $(802) $154,950  10  $(1,612) $127,166  $(2,414) $282,116  
For comparative purposes, the following represents gross unrealized losses and the related fair value of investment securities available for sale and held to maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2019:
 Less than 12 months12 months or moreTotal
($ in Thousands)Number
of
Securities
Unrealized
(Losses)
Fair
Value
Number
of
Securities
Unrealized
(Losses)
Fair
Value
Unrealized
(Losses)
Fair
Value
Investment securities available for sale
Obligations of state and political subdivisions (municipal securities) $(18) $1,225  —  $—  $—  $(18) $1,225  
Residential mortgage-related securities
FNMA / FHLMC—  —  —   (59) 34,807  (59) 34,807  
GNMA18  (924) 322,394   (766) 79,461  (1,689) 401,856  
GNMA commercial mortgage-related securities22  (810) 258,218  42  (11,222) 621,307  (12,032) 879,524  
FFELP asset backed securities19  (6,092) 250,780   (393) 12,913  (6,485) 263,693  
Other debt securities —  2,000  —  —  —  —  2,000  
Total65  $(7,843) $834,616  51  $(12,440) $748,487  $(20,284) $1,583,104  
Investment securities held to maturity
Obligations of state and political subdivisions (municipal securities)52  $(1,105) $77,562   $(13) $2,378  $(1,118) $79,940  
Residential mortgage-related securities
FNMA / FHLMC (6) 1,242   (9) 833  (15) 2,075  
GNMA12  (1,059) 187,261   (49) 6,587  (1,108) 193,849  
GNMA commercial mortgage-related securities (29) 26,202  21  (6,093) 357,733  (6,122) 383,935  
Total67  $(2,199) $292,267  36  $(6,164) $367,532  $(8,363) $659,799  
The Corporation reviews the available for sale investment securities portfolio on a quarterly basis to monitor its credit exposure. A determination as to whether a security’s decline in fair value is the result of credit risk takes into consideration numerous factors and the relative significance of any single factor can vary by security. Some factors the Corporation may consider in the impairment analysis includes the extent to which the security has been in an unrealized loss position, the change in security rating, financial condition and near-term prospects of the issuer, as well as the security and industry specific economic conditions.
Based on the Corporation’s evaluation, management does not believe any available for sale securities in an unrealized loss position at March 31, 2020 represent credit deterioration as these unrealized losses are primarily attributable to changes in interest rates and the current market conditions. The unrealized losses reported for municipal securities at March 31, 2020 pertain to various state and local political subdivisions and school districts, and have declined due to the decrease in overall
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interest rates. The unrealized losses at March 31, 2020 for mortgage-related securities have also declined due to the decrease in overall interest rates. The U.S. Treasury 3 year and 5 year rates decreased by 133 bp and 132 bp, respectively, from December 31, 2019. The Corporation does not intend to sell nor does it believe that it will be required to sell the securities in an unrealized loss position before recovery of their amortized cost basis.
FHLB and Federal Reserve Bank stocks: The Corporation is required to maintain Federal Reserve Bank stock and FHLB stock as a member of both the Federal Reserve System and the FHLB, and in amounts as required by these institutions. These equity securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other marketable equity securities and their fair value is equal to amortized cost. At March 31, 2020 and December 31, 2019, the Corporation had FHLB stock of $145 million and $149 million, respectively. The Corporation had Federal Reserve Bank stock of $78 million at both March 31, 2020 and December 31, 2019.
Equity Securities
Equity securities with readily determinable fair values: The Corporation's portfolio of equity securities with readily determinable fair values is primarily comprised of CRA Qualified Investment mutual funds. At both March 31, 2020 and December 31, 2019, the Corporation had equity securities with readily determinable fair values of $2 million.
Equity securities without readily determinable fair values: The Corporation's portfolio of equity securities without readily determinable fair values consists of 77,996 Visa Class B restricted shares, 77,000 of which the Corporation received in 2008 as part of Visa's initial public offering and carried at fair value after the Corporation donated 42,039 Visa Class B restricted shares to the Corporation's Charitable Remainder Trust during the second quarter of 2019, with the subsequent sale of those shares resulting in an observable market price after the shares were previously carried at a zero cost basis. During the first quarter of 2020, the Corporation also acquired 996 Visa Class B restricted shares from the acquisition of First Staunton, and those shares are carried at a zero cost basis due to the lack of an observable market price since the time of acquisition. The Corporation had equity securities without readily determinable fair values of $13 million at both March 31, 2020 and December 31, 2019.
Note 7 Loans
The period end loan composition was as follows:
($ in Thousands)March 31, 2020December 31, 2019
Commercial and industrial$8,517,974  $7,354,594  
Commercial real estate — owner occupied940,687  911,265  
Commercial and business lending9,458,661  8,265,858  
Commercial real estate — investor4,038,036  3,794,517  
Real estate construction1,544,858  1,420,900  
Commercial real estate lending5,582,894  5,215,417  
Total commercial15,041,555  13,481,275  
Residential mortgage8,132,417  8,136,980  
Home equity844,901  852,025  
Other consumer346,761  351,159  
Total consumer9,324,079  9,340,164  
Total loans(a)
$24,365,633  $22,821,440  
(a) During the first quarter of 2020, the Corporation transferred $200 million of portfolio residential mortgages to residential loans held for sale, which are not included in total loans.

Accrued interest receivable on loans totaled $66 million at March 31, 2020, included in interest receivable on the consolidated balance sheets. Interest accrued but not received for loans placed on nonaccrual is reversed against interest income. The amount of accrued interest reversed totaled approximately $327,000 for the period ended March 31, 2020.


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The following table presents commercial and consumer loans by credit quality indicator by vintage year at March 31, 2020: