Equibles

10-Q

FULTON FINANCIAL CORP (FULT)

10-Q 2024-08-08 For: 2024-06-30
View Original
Added on April 12, 2026

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 June 30, 2024, or

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

For the transition period from              to

Commission File No. 001-39680

FULTON FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania 23-2195389
(State or other jurisdiction of<br>incorporation or organization) (I.R.S. Employer<br>Identification No.)
One Penn Square P. O. Box 4887 Lancaster, Pennsylvania 17604
(Address of principal executive offices) (Zip Code)

(717) 291-2411

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $2.50 FULT The Nasdaq Stock Market, LLC
Depositary Shares, Each Representing 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A FULTP The Nasdaq Stock Market, LLC

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $2.50 Par Value – 181,905,424 shares outstanding as of August 2, 2024.

FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2024

INDEX

Description Page
Glossary of Terms 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
(a) Consolidated Balance Sheets -June 30, 2024 and December 31, 2023 7
(b) Consolidated Statements of Income - Three monthsand six monthsendedJune 30, 2024 and 2023 8
(c) Consolidated Statements of Comprehensive Income - Three monthsand six monthsendedJune 30, 2024 and 2023 9
(d) Consolidated Statements of Shareholders’ Equity - Three monthsand six monthsendedJune 30, 2024 and 2023 10
(e) Consolidated Statements of Cash Flows -Sixmonths endedJune 30, 2024 and 2023 11
(f) Notes to Consolidated Financial Statements 12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 36
Item 3. Quantitative and Qualitative DisclosuresAbout Market Risk 61
Item 4. Controls and Procedures 64
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 64
Item 1A. Risk Factors 64
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 64
Item 3. Defaults Upon Senior Securities - (not applicable)
Item 4. Mine Safety Disclosures - (not applicable)
Item 5. Other Information 77
Item 6. Exhibits 66
Signatures 67

Note: Some numbers contained in the document may not sum due to rounding

GLOSSARY OF DEFINED ACRONYMS AND TERMS
2024 Repurchase Program The authorization, commencing on January 1, 2024 and expiring on December 31, 2024, to repurchase up to $125 million of the Corporation's common stock; under this authorization, up to $25 million of the $125 million authorization may be used to repurchase the Corporation's preferred stock and outstanding subordinated notes
ACL Allowance for credit losses
Acquisition Date April 26, 2024, the date of the Republic First Transaction
AFS Available for sale
ALCO Asset/Liability Management Committee
AOCI Accumulated other comprehensive (loss) income
ASC Accounting Standards Codification
ASU Accounting Standards Update
BHCA Bank Holding Company Act of 1956, as amended
Blue Owl Agreement Agreement for Purchase and Sale of Real Property with certain affiliates of Blue Owl Capital Inc.
bp or bps Basis point(s)
Capital Rules Regulatory capital requirements applicable to the Corporation and Fulton Bank
CDI Core deposit intangible
CECL Day 1 Provision Initial provision for credit losses required on non-PCD Loans acquired in the Republic First Transaction
Corporation, Company, we, our or us Fulton Financial Corporation
Directors' Plan Amended and Restated 2023 Director Equity Plan
Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act
Employee Equity Plan 2022 Amended and Restated Equity and Cash Incentive Compensation Plan
ETR Effective tax rate
Exchange Act Securities Exchange Act of 1934, as amended
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
Federal Reserve Board Board of Governors of the Federal Reserve System
FHLB Federal Home Loan Bank
FRB Federal Reserve Bank
FTE Fully taxable-equivalent
Fulton Bank or the Bank Fulton Bank, N.A.
GAAP U.S. generally accepted accounting principles
HTM Held to maturity
LGD Loss given default
LIBOR London Interbank Offered Rate
LTV Loan-to-value
Management's Discussion Management’s Discussion and Analysis of Financial Condition and Results of Operations
Merger The acquisition by the Corporation of Prudential Bancorp that was completed effective as of July 1, 2022
MSRs Mortgage servicing rights
Net loans Loan and lease receivables (net of unearned income)
NIM Net interest margin
N/M Not meaningful
OBS Off-balance-sheet
OCI Other comprehensive income
OREO Other real estate owned
--- ---
PCD Loans Loans purchased with more-than-insignificant credit deterioration
PD Probability of default
Pension Plan Defined Benefit Pension Plan
Postretirement Plan Postretirement Benefits Plan
Prudential Bancorp Prudential Bancorp, Inc.
PSU Performance-based restricted stock unit
Republic First Bank Republic First Bank, doing business as Republic Bank
Republic First Assets and Liabilities The assets acquired and liabilities assumed of Republic First Bank by Fulton Bank in connection with the Republic First Transaction
Republic First Transaction The acquisition of substantially all of the assets and assumption of substantially all of the deposits and certain liabilities of Republic First Bank by Fulton Bank from the FDIC, as receiver for Republic First Bank
RSU Restricted stock unit
Sale-Leaseback Transaction Sale of 40 financial center office locations to certain affiliates of Blue Owl Capital Inc. with concurrent agreements to lease each of the locations
SBA Small Business Administration
SEC United States Securities and Exchange Commission
SOFR Secured Overnight Financing Rate
TruPS Trust Preferred Securities

FORWARD-LOOKING STATEMENTS

The Corporation has made, and may continue to make, certain forward-looking statements with respect to its financial condition, results of operations and business. Do not unduly rely on forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "will," "could," "estimates," "predicts," "potential," "continue," "anticipates," "believes," "plans," "expects," "future," "intends," "projects," the negative of these terms and other comparable terminology. These forward-looking statements may include projections of, or guidance on, the Corporation's future financial performance, expected levels of future expenses, including future credit losses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends in the Corporation's business or financial results.

Forward-looking statements are neither historical facts, nor assurance of future performance. Instead, the statements are based on current beliefs, expectations and assumptions regarding the future of the Corporation's business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Corporation's control, and actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not unduly rely on any of these forward-looking statements. Any forward-looking statement is based only on information currently available and speaks only as of the date when made. The Corporation undertakes no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Many factors could affect future financial results including, without limitation:

•the impact of adverse conditions in the economy and financial markets, including increasing or elevated interest rates and elevated levels of inflation, on the performance of the Corporation's loan portfolio and demand for the Corporation's products and services;

•the potential impacts of recent events affecting the financial services industry on the Corporation, including increased competition for, and costs of, deposits and other funding sources, more stringent regulatory requirements relating to liquidity and interest rate risk management and capital adequacy and increased FDIC insurance expenses;

•the effects of actions by the federal government, including those of the Federal Reserve Board and other government agencies, that impact the money supply and market interest rates;

•the effects of market interest rates, and the relative balances of interest rate-sensitive assets to interest rate-sensitive liabilities, on NIM and net interest income;

•the composition of the Corporation's loan portfolio, including commercial mortgage loans, commercial and industrial loans and construction loans, which collectively represent a majority of the loan portfolio, may expose the Corporation to increased credit risk;

•the effects of changes in interest rates on demand for the Corporation's products and services;

•investment securities gains and losses, including declines in the fair value of securities, which may result in changes to earnings or shareholders' equity;

•the effects of changes in interest rates or disruptions in liquidity markets on the Corporation's sources of funding;

•capital and liquidity strategies, including the Corporation's ability to comply with applicable capital and liquidity requirements, and the Corporation's ability to generate capital internally or raise capital on favorable terms;

•the effects of competition on deposit rates and growth, loan rates and growth and NIM;

•possible goodwill impairment charges;

•the impact of operational risks, including the risk of human error, inadequate or failed internal processes and systems, computer and telecommunications systems failures, faulty or incomplete data and an inadequate risk management framework;

•the loss of, or failure to safeguard, confidential or proprietary information;

•the Corporation's failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks;

•the impact of failures from third-party vendors upon which the Corporation relies to perform in accordance with contractual arrangements and the effects of concerns about other financial institutions on the Corporation;

•the potential to incur losses in connection with repurchase and indemnification payments related to sold loans;

•the potential effects of climate change on the Corporation's business and results of operations;

•the potential effects of increases in non-performing assets, which may require the Corporation to increase the ACL, charge-off loans and incur elevated collection and carrying costs related to such non-performing assets;

•the determination of the ACL, which depends significantly upon assumptions and judgments with respect to a variety of factors, including the performance of the loan portfolio, the weighted-average remaining lives of different classifications of loans within the loan portfolio and current and forecasted economic conditions, among other factors;

•the effects of the extensive level of regulation and supervision to which the Corporation and Fulton Bank are subject;

•changes in regulation and government policy, which could result in significant changes in banking and financial services regulation;

•the continuing impact of the Dodd-Frank Act on the Corporation's business and results of operations;

•the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to the Corporation's reputation;

•the effects of adverse outcomes in litigation and governmental or administrative proceedings;

•the effects of changes in U.S. federal, state or local tax laws;

•the effects of the significant amounts of time and expense associated with regulatory compliance and risk management;

•completed and potential acquisitions, including but not limited to the Republic First Transaction, may affect costs and the Corporation may not be able to successfully integrate the acquired business or realize the anticipated benefits from such acquisitions;

•the possibility that the anticipated benefits of the Republic First Transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or challenges arising from, the integration of the acquired assets and assumed liabilities into the Corporation, potential adverse reactions or changes to business or employee relationships, or as a result of other unexpected factors or events;

•the Corporation's ability to successfully integrate into the Corporation's operations any assumed assets, liabilities, customers, systems, and management personnel the Corporation may acquire in connection with the Republic First Transaction, which may result in a disruption to the Corporation’s business;

•changes in the estimated fair value of the Republic First Assets and Liabilities in connection with the Republic First Transaction;

•the possibility of increased scrutiny by, and/or additional regulatory requirements of, governmental authorities as a result of the Republic First Transaction;

•potential exposure to unknown or contingent risks and liabilities the Corporation has acquired, or may acquire, or target for acquisition, including in connection with the purchase and assumption of certain assets and liabilities in connection with the Republic First Transaction;

•geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, including the war between Russia and Ukraine and escalating conflict in the Middle East, which could impact business and economic conditions in the United States and abroad;

•public health crises and pandemics and their effects on the economic and business environments in which the Corporation operates, including on the Corporation's credit quality and business operations, as well as the impact on general economic and financial market conditions;

•the Corporation's ability to achieve its growth plans;

•the Corporation's ability to attract and retain talented personnel;

•the effects of competition from financial service companies and other companies offering bank services;

•the Corporation's ability to keep pace with technological changes;

•the Corporation's reliance on its subsidiaries for substantially all of its revenues and its ability to pay dividends or other distributions;

•the effects of negative publicity on the Corporation's reputation; and

•other factors that may affect future results of the Corporation.

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per-share data)

June 30, 2024 December 31,<br>2023
(unaudited)
ASSETS
Cash and due from banks $ 333,238 $ 300,343
Interest-bearing deposits with other banks 1,063,044 249,367
Cash and cash equivalents 1,396,282 549,710
FRB and FHLB stock 125,297 124,405
Loans held for sale 26,822 15,158
Investment securities
AFS, at estimated fair value 2,939,594 2,398,352
HTM, at amortized cost 1,244,433 1,267,922
Net loans 24,106,297 21,351,094
Less: ACL - loans (375,941) (293,404)
Loans, net 23,730,356 21,057,690
Net premises and equipment 180,642 222,881
Accrued interest receivable 120,752 107,972
Goodwill and net intangible assets 648,026 560,687
Other assets 1,357,609 1,267,138
Total Assets $ 31,769,813 $ 27,571,915
LIABILITIES
Deposits:
Noninterest-bearing $ 5,609,383 $ 5,314,094
Interest-bearing 19,950,271 16,223,529
Total Deposits 25,559,654 21,537,623
Borrowings:
Federal funds purchased — 240,000
Federal Home Loan Bank advances 750,000 1,100,000
Senior debt and subordinated debt 535,741 535,384
Other borrowings 892,856 612,142
Total Borrowings 2,178,597 2,487,526
Accrued interest payable 48,757 35,083
Other liabilities 881,196 751,544
Total Liabilities 28,668,204 24,811,776
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares authorized; Series A, 200,000 shares authorized and issued as of June 30, 2024 and December 31, 2023, liquidation preference of $1,000 per share 192,878 192,878
Common stock, $2.50 par value, 600,000,000 shares authorized, 245,809,384 shares issued as of June 30, 2024 and 225,760,963 shares issued as of December 31, 2023 614,523 564,402
Additional paid-in capital 1,781,090 1,552,860
Retained earnings 1,712,646 1,619,300
Accumulated other comprehensive loss (310,534) (312,280)
Treasury stock, at cost, 63,978,306 shares as of June 30, 2024 and 61,959,552 shares as of December 31, 2023 (888,994) (857,021)
Total Shareholders' Equity 3,101,609 2,760,139
Total Liabilities and Shareholders' Equity $ 31,769,813 $ 27,571,915
See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(dollars in thousands, except per-share data) Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
Interest Income
Loans, including fees $ 352,697 $ 284,690 $ 663,913 $ 545,341
Investment securities 32,079 25,362 57,201 50,883
Other interest income 15,730 4,860 19,058 8,508
Total Interest Income 400,506 314,912 740,172 604,732
Interest Expense
Deposits 131,087 69,799 234,661 111,420
Federal funds purchased 492 9,112 2,881 15,147
Federal Home Loan Bank advances 9,799 11,826 20,748 27,299
Senior debt and subordinated debt 5,299 5,344 10,604 10,689
Other borrowings and interest-bearing liabilities 12,109 5,979 22,621 11,738
Total Interest Expense 158,786 102,060 291,515 176,293
Net Interest Income 241,720 212,852 448,657 428,439
Provision for credit losses 32,056 9,747 42,981 34,291
Net Interest Income After Provision for Credit Losses 209,664 203,105 405,676 394,148
Non-Interest Income
Wealth management 20,990 18,678 41,144 36,740
Commercial banking 21,410 23,145 40,238 40,658
Consumer banking 14,600 11,720 26,268 22,937
Mortgage banking 3,951 2,940 7,041 4,910
Gain on acquisition, net of tax 47,392 — 47,392 —
Other 4,933 4,106 8,332 7,075
Non-Interest Income Before Investment Securities (Losses) Gains, Net 113,276 60,589 170,415 112,320
Investment securities (losses) gains, net (20,282) (4) (20,282) 19
Total Non-Interest Income 92,994 60,585 150,133 112,339
Non-Interest Expense
Salaries and employee benefits 110,630 94,102 206,111 183,385
Data processing and software 20,357 16,776 38,018 32,571
Net occupancy 17,793 14,374 33,943 28,812
Other outside services 16,933 10,834 30,216 20,960
FDIC insurance 6,696 4,895 12,800 9,690
Intangible amortization 4,688 1,072 5,261 1,746
Equipment 4,561 3,530 8,602 6,920
Professional fees 2,571 1,829 4,659 4,221
Marketing 2,101 1,655 4,012 3,541
Acquisition-related expenses 13,803 — 13,803 —
Other (645) 18,951 19,662 35,790
Total Non-Interest Expense 199,488 168,018 377,087 327,636
Income Before Income Taxes 103,170 95,672 178,722 178,851
Income taxes 8,195 16,065 21,806 30,931
Net Income 94,975 79,607 156,916 147,920
Preferred stock dividends (2,562) (2,562) (5,124) (5,124)
Net Income Available to Common Shareholders $ 92,413 $ 77,045 $ 151,792 $ 142,796
PER SHARE:
Net income available to common shareholders (basic) $ 0.53 $ 0.46 $ 0.90 $ 0.86
Net income available to common shareholders (diluted) 0.52 0.46 0.89 0.85
Cash dividends 0.17 0.16 0.34 0.31
See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(dollars in thousands)

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
Net Income $ 94,975 $ 79,607 $ 156,916 $ 147,920
Other Comprehensive Income (Loss), net of tax:
Unrealized gains (losses) on AFS investment securities
Net unrealized holding gains (losses) (14,199) (31,219) (30,864) 1,422
Reclassification adjustment for securities net change realized in net income 15,688 (3) 15,688 14
Amortization of net unrealized gains on AFS securities transferred to HTM 1,403 1,501 2,790 2,979
Net unrealized gains (losses) on AFS investment securities 2,892 (29,721) (12,386) 4,415
Unrealized gains (losses) on interest rate derivatives used in cash flow hedges
Net unrealized holding gains (losses) 2,256 (5,586) 6,553 (12,406)
Reclassification adjustment for net change realized in net income 3,891 7,010 7,790 14,153
Net unrealized gains on interest rate derivatives used in cash flow hedges 6,147 1,424 14,343 1,747
Defined benefit pension plan and postretirement benefits
Amortization of net unrecognized pension and postretirement items (105) 3 (211) 28
Other Comprehensive Income (Loss), net of tax 8,934 (28,294) 1,746 6,190
Total Comprehensive Income $ 103,909 $ 51,313 $ 158,662 $ 154,110
See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except per-share data)

Common Stock Additional Retained<br>Earnings Accumulated Other Comprehensive<br>Income (Loss) Treasury<br>Stock Total
Amount Shares Outstanding Amount Paid-in<br>Capital
Three months ended June 30, 2024
Balance at March 31, 2024 $ 192,878 162,087 $ 564,751 $ 1,554,624 $ 1,651,133 $ (319,468) $ (886,239) $ 2,757,679
Net income 94,975 94,975
Other comprehensive loss 8,934 8,934
Common stock issued(1) 19,200 48,000 225,205 — 273,205
Dividend reinvestment activity 91 90 1,255 1,345
Stock-based compensation awards (repurchases) 453 1,772 1,171 (4,010) (1,067)
Preferred stock dividend (2,562) (2,562)
Common stock dividends - 0.17 per share (30,900) (30,900)
Balance at June 30, 2024 $ 192,878 181,831 $ 614,523 $ 1,781,090 $ 1,712,646 $ (310,534) $ (888,994) $ 3,101,609
Three months ended June 30, 2023
Balance at March 31, 2023 $ 192,878 165,396 $ 561,853 $ 1,544,758 $ 1,491,701 $ (350,992) $ (821,200) $ 2,618,998
Net income 79,607 79,607
Other comprehensive loss (28,294) (28,294)
Common stock issued(2) 46 115 474 6 595
Dividend reinvestment activity 108 (68) 1,501 1,433
Stock-based compensation awards (repurchases) 547 2,169 542 (3,753) (1,042)
Preferred stock dividend (2,562) (2,562)
Common stock dividends - 0.16 per share (26,583) (26,583)
Balance at June 30, 2023 $ 192,878 166,097 $ 564,137 $ 1,545,706 $ 1,542,163 $ (379,286) $ (823,446) $ 2,642,152
Six months ended June 30, 2024
Balance at December 31, 2023 $ 192,878 163,801 $ 564,402 $ 1,552,860 $ 1,619,300 $ (312,280) $ (857,021) $ 2,760,139
Net income 156,916 156,916
Other comprehensive income 1,746 1,746
Common stock issued(1) 19,279 48,198 226,100 12 274,310
Dividend reinvestment activity 178 274 2,476 2,750
Stock-based compensation awards (repurchases) 507 1,923 1,856 (4,113) (334)
Acquisition of treasury stock (1,934) (30,348) (30,348)
Preferred stock dividend (5,124) (5,124)
Common stock dividends - 0.34 per share (58,446) (58,446)
Balance at June 30, 2024 $ 192,878 181,831 $ 614,523 $ 1,781,090 $ 1,712,646 $ (310,534) $ (888,994) $ 3,101,609
Six months ended June 30, 2023
Balance at December 31, 2022 $ 192,878 167,599 $ 561,511 $ 1,541,840 $ 1,450,758 $ (385,476) $ (781,754) $ 2,579,757
Net income 147,920 147,920
Other comprehensive loss 6,190 6,190
Common stock issued(2) 135 338 1,472 20 1,830
Dividend reinvestment activity 189 172 2,630 2,802
Stock-based compensation awards (repurchases) 586 2,288 2,222 (3,893) 617
Acquisition of treasury stock (2,412) (40,449) (40,449)
Preferred stock dividend (5,124) (5,124)
Common stock dividends - 0.31 per share (51,391) (51,391)
Balance at June 30, 2023 $ 192,878 166,097 $ 564,137 $ 1,545,706 $ 1,542,163 $ (379,286) $ (823,446) $ 2,642,152
See Notes to Consolidated Financial Statements

All values are in US Dollars.

(1) Issuance of common stock includes the issuance of 19,166,667 shares of common stock in an underwritten public offering that closed on May 1, 2024, issuance in connection with the Corporation’s Employee Stock Purchase Plan and exercised stock options.

(2) Issuance of common stock includes issuance in connection with the Corporation's Employee Stock Purchase Plan and exercised stock options.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands) Six months ended June 30
2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 156,916 $ 147,920
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 42,981 34,291
Depreciation and amortization of premises and equipment 15,673 14,675
Net amortization of investment securities premiums 822 5,829
Investment securities losses (gains), net 20,282 (19)
Gain on sales of mortgage loans held for sale (4,233) (2,277)
Proceeds from sales of mortgage loans held for sale 243,130 132,609
Originations of mortgage loans held for sale (250,561) (137,741)
Intangible amortization 5,261 1,746
Amortization of issuance costs and discounts on long-term borrowings 357 360
Gain on acquisition, net of tax (47,392) —
Loss on disposal of premises and equipment 222 —
Gain on Sale-Leaseback Transaction (20,266) —
Stock-based compensation 3,779 4,240
Net change in deferred federal income tax 14,491 19,232
Net change in accrued salaries and benefits (134) (12,163)
Net change in life insurance cash surrender value (7,051) (20,433)
Other changes, net 146,747 28,641
Total adjustments 164,108 68,990
Net cash provided by operating activities 321,024 216,910
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of AFS securities 2,261,028 80,666
Proceeds from principal repayments and maturities of AFS securities 120,714 55,102
Proceeds from principal repayments and maturities of HTM securities 26,542 29,815
Purchase of AFS securities (1,050,738) (64,996)
Net change in FRB and FHLB stock (892) 5,968
Net change in loans (214,157) (781,310)
Net purchases of premises and equipment (3,542) (11,019)
Settlement of bank-owned life insurance 963 45
Proceeds from Sale-Leaseback Transaction 51,123 —
Net cash received for acquisition 1,018,371 —
Net change in tax credit investments (24,292) (18,436)
Net cash provided (used) by investing activities 2,185,120 (704,165)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in demand and savings deposits (11,999) (796,291)
Net change in time deposits and brokered deposits (78,295) 1,353,293
Net change in other borrowings (1,745,262) (152,453)
Net proceeds from issuance of common stock 270,197 1,009
Dividends paid (63,865) (55,073)
Acquisition of treasury stock (30,348) (40,449)
Net cash (used) provided by financing activities (1,659,572) 310,036
Net increase (decrease) in Cash and Cash Equivalents 846,572 (177,219)
Cash and Cash Equivalents at Beginning of Period 549,710 681,921
Cash and Cash Equivalents at End of Period $ 1,396,282 $ 504,702
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 277,841 $ 162,377
Income taxes 19,308 15,183
Supplemental Schedule of Certain Noncash Activities:
Business Combination
Fair value of tangible assets acquired $ 4,718,909 $ —
Intangible assets 92,600 —
Liabilities assumed 5,560,160 —
PCD Loans credit discount 55,906 —
See Notes to Consolidated Financial Statements

FULTON FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of the Corporation have been prepared in conformity with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The Corporation evaluates subsequent events through the date of filing of this Quarterly Report on Form 10-Q with the SEC for potential recognition or disclosure in the Consolidated Financial Statements.

Significant Accounting Policies

The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023. Those significant accounting policies are unchanged at June 30, 2024.

Recently Adopted Accounting Standards

In June 2022, FASB issued ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"). This update clarifies how the fair value of equity securities subject to contractual sale restrictions is determined and requires additional qualitative and quantitative disclosures for equity securities with contractual sale restrictions. The Corporation adopted ASU 2022-03 on January 1, 2024, and it did not have a material impact on its consolidated financial statements.

In March 2023, FASB issued ASU 2023-01 Leases (Topic 842): Common Control Arrangements ("ASU 2023-01"). This update clarifies guidance for leases between related parties under common control. The Corporation adopted ASU 2023-01 on January 1, 2024, and it did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards

In November 2023, FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This update requires public entities with reportable segments to provide additional and more detailed disclosures. The Corporation will adopt ASU 2023-07 on December 15, 2024. The Corporation is not currently required to report segment information and, as such, does not expect the adoption of ASU 2023-07 to have an impact on its consolidated financial statements.

In December 2023, FASB issued ASU 2023-08 Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets ("ASU 2023-08"). This update provides guidance for crypto assets to be carried at fair value and requires additional disclosures. The Corporation will adopt ASU 2023-08 on January 1, 2025. The Corporation does not expect the adoption of ASU 2023-08 to have an impact on its consolidated financial statements. The Corporation currently does not hold crypto assets.

In December 2023, FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). This update requires companies to disclose specific categories in the income tax rate reconciliation and requires additional information for certain reconciling items. The Corporation will adopt ASU 2023-09 on January 1, 2025. The Corporation does not expect the adoption of ASU 2023-09 to have an impact on its consolidated financial statements.

In March 2024, FASB issued ASU 2024-01 Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards ("ASU 2024-01"). This update provides guidance for profits interest and similar awards. The Corporation will adopt ASU 2024-01 on January 1, 2025. The Corporation does not expect the adoption of ASU 2024-01 to have a material impact on its consolidated financial statements.

Reclassifications

Certain amounts in the 2023 consolidated financial statements and notes have been reclassified to conform to the 2024 presentation.

NOTE 2 – Business Combinations

On the Acquisition Date, Fulton Bank acquired substantially all of the assets and assumed substantially all of the deposits and certain liabilities of Republic First Bank from the FDIC, as receiver for Republic First Bank. As part of the Republic First Transaction, the Bank acquired approximately $4.8 billion of assets of Republic First Bank and received approximately $0.8 billion of cash from the FDIC. The Bank assumed approximately $5.6 billion of total liabilities of Republic First Bank. The Bank did not enter into a loss sharing arrangement with the FDIC in connection with the Republic First Transaction. Fulton Bank also has the option to purchase the Republic First Bank branches and office locations.

As a result of the Republic First Transaction, the Bank enhanced its presence in Philadelphia, Pennsylvania and New Jersey.

The Republic First Transaction constitutes a business combination as defined by FASB ASC Topic 805, Business Combinations. Accordingly, the assets acquired and liabilities assumed are presented at their estimated fair values based on preliminary valuations as of the Acquisition Date. The determination of estimated fair values required management to make certain estimates about discount rates, future expected cash flows and market conditions at the time of the Republic First Transaction.

The Bank and the FDIC are awaiting conclusion of the customary final settlement process to determine whether certain assets and liabilities of Republic First Bank will remain with the FDIC or be acquired by the Bank. Until management finalizes its fair value estimates for the acquired assets and assumed liabilities, the preliminary gain on acquisition can be updated for a period not to exceed one year following the Acquisition Date. The preliminary fair value estimates of assets acquired and liabilities assumed, provide a reasonable basis for determining the preliminary gain on acquisition.

The excess of the estimated fair value of net assets acquired and the cash consideration received from the FDIC over the estimated fair value of liabilities assumed was recorded as a preliminary gain on acquisition of $47.4 million, net of income taxes.

The following table summarizes the consideration transferred and the estimated fair values of identifiable assets acquired and liabilities assumed in connection with the Republic First Transaction on the Acquisition Date:

Estimated Fair Value
Cash payment received from FDIC $ 809,920
Assets acquired:
Cash and due from banks 208,451
Investment securities 1,938,571
Loans 2,505,040
Premises and equipment 970
CDI 92,600
FHLB Stock 37,931
Accrued interest receivable 16,164
Other assets 11,782
Total assets 4,811,509
Liabilities assumed:
Deposits 4,112,325
Borrowings 1,435,976
Other liabilities 11,859
Total liabilities 5,560,160
Net assets acquired: (748,651)
Gain on acquisition, before income taxes $ 61,269
Gain on acquisition, net of income taxes $ 47,392

The following is a description of the valuation methodologies used to estimate the fair values of major categories of assets

acquired and liabilities assumed.

Cash and due from banks: The fair values of cash and due from banks approximate their book values.

Investment securities: The investment portfolio acquired in the Republic First Transaction, with a fair value of $1.9 billion, was sold shortly after the Acquisition Date by the Corporation. The fair value of the investment portfolio was based on the proceeds from the sale.

Loans: The Corporation recorded $2.5 billion of acquired loans that were initially recorded at their estimated fair values as of the Acquisition Date. The estimated fair value for the loans was based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors from the perspective of a market participant. Loan cash flows were generated on an individual loan basis. The PD, LGD, exposure at default and prepayment assumptions are the key factors driving credit losses that are embedded in the estimated cash flows.

The following table presents information with respect to the estimated fair value and unpaid principal balance of acquired loans and leases at the Acquisition Date:

April 26, 2024
Unpaid Principal Balance Estimated Fair Value
(dollars in thousands)
Real estate - commercial mortgage $ 1,144,465 $ 1,024,004
Commercial and industrial 545,374 496,100
Real-estate - residential mortgage 947,135 752,328
Real-estate - home equity 72,730 66,237
Real-estate - construction 153,437 145,597
Consumer 20,789 20,774
Total acquired loans $ 2,883,930 $ 2,505,040

The following table summarizes PCD Loans:

April 26, 2024
(dollars in thousands)
Book balance of loans with deteriorated credit quality at acquisition $ 1,023,940
Fair value of loans with deteriorated credit quality at acquisition 904,558
Fair value discount 119,382
PCD Loans credit discount (55,906)
Non-credit discount $ 63,476

The Republic First Transaction resulted in the addition of $79.4 million to the ACL, including the $55.9 million identified in the table above for PCD Loans, and $23.4 million recorded through the provision for credit losses at the Acquisition Date for non-PCD Loans.

Intangible assets: The Corporation recorded $92.6 million of CDI reflected in other assets that is being amortized over seven years using the sum-of-the-years digits method. The estimated fair value of the CDI was determined using the cost savings approach. The cost savings approach is defined as the difference between the cost of funds of core deposits and an alternative cost of funds for those deposits. The CDI estimated fair value was determined by projecting discounted net cash flows that included assumptions related to customer attrition rates, discount rates, deposit interest rates, deposit account maintenance costs and alternative cost of funding rates.

FHLB stock: The Corporation acquired $37.9 million of FHLB stock. The estimated fair value of the FHLB stock approximated its book value.

Accrued interest receivable: The Corporation acquired $16.2 million of accrued interest receivable. The fair value of the accrued interest receivable approximated its book value.

Core deposits: Demand deposits, savings and money market deposits and time deposits (less than $250,000) were recorded at book value which approximated fair value. The Corporation recorded $92.6 million of CDI in other assets for these deposits.

Time deposits: Time deposits of $250,000 and greater were valued based on a comparison with the contractual cost of a portfolio of brokered deposits having a similar tenor. As the time deposit portfolio had a remaining average life of approximately three months, the estimated fair value of the time deposits approximated their book value and no adjustment was recorded.

Borrowings: The estimated fair values for borrowings approximated their book value given these were short-term advances. Assumed borrowings were subsequently repaid.

Acquisition-related expenses:

The Corporation developed a comprehensive integration plan under which it incurred direct costs that are expensed as incurred. For the second quarter of 2024, these direct costs included professional fees, a charitable donation, severance, and marketing expense. Costs related to the Republic First Transaction are included in acquisition-related expenses in the unaudited Consolidated Statements of Income.

The following table details the costs identified and classified as acquisition-related expenses:

Three months ended June 30, 2024
(dollars in thousands)
Salaries and employee benefits $ 805
Professional fees 7,624
Charitable donation Charitable donation 5,000
Other 374
$ 13,803

In connection with the Republic First Transaction, Fulton Bank made a $5.0 million donation to the Fulton Forward Foundation

to provide additional impact grants to nonprofit community organizations across the region that share Fulton Bank's vision of advancing economic empowerment, particularly in underserved communities.

Unaudited Pro Forma Information:

The amount of net interest income, non-interest income, non-interest expense and net income of $30.7 million, $50.2 million, $21.1 million and $38.8 million, respectively, attributable to the Republic First Transaction were included in the Corporation's unaudited Consolidated Statements of Income for the three months and six months ended June 30, 2024. Included in non-interest income above is $47.4 million related to the gain on acquisition, net of tax. Net interest income, non-interest income, non-interest expense and net income shown above reflect management's best estimates based on information available as of the date of the filing of this Quarterly Report on Form 10-Q.

Republic First Bank does not have historical financial information that the Corporation could base pro forma information. Additionally, the Bank did not acquire all of the assets or assume all of the liabilities of Republic First Bank. Therefore, it is impracticable to provide pro forma information on revenues and earnings for the Republic First Transaction in accordance with ASC 805-10-50-2.

NOTE 3 – Restrictions on Cash and Cash Equivalents

Cash collateral is posted by the Corporation with counterparties to secure derivatives and other contracts, which is included in "interest-bearing deposits with other banks" on the consolidated balance sheets. The amounts of such collateral as of June 30, 2024 and December 31, 2023 were $10.9 million and $17.4 million, respectively.

NOTE 4 – Investment Securities

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

June 30, 2024
Amortized<br>Cost Gross<br>Unrealized<br>Gains Gross<br>Unrealized<br>Losses Estimated<br>Fair<br>Value
Available for Sale (dollars in thousands)
State and municipal securities $ 965,392 $ 50 $ (145,333) $ 820,109
Corporate debt securities 368,901 510 (32,013) 337,398
Collateralized mortgage obligations 724,602 1,533 (12,366) 713,769
Residential mortgage-backed securities 589,267 14 (32,090) 557,191
Commercial mortgage-backed securities 610,960 — (99,833) 511,127
Total $ 3,259,122 $ 2,107 $ (321,635) $ 2,939,594
Held to Maturity
Residential mortgage-backed securities $ 384,956 $ — $ (58,593) $ 326,363
Commercial mortgage-backed securities 859,477 — (152,401) 707,076
Total $ 1,244,433 $ — $ (210,994) $ 1,033,439
December 31, 2023
--- --- --- --- --- --- --- --- ---
Amortized<br>Cost Gross<br>Unrealized<br>Gains Gross<br>Unrealized<br>Losses Estimated<br>Fair<br>Value
Available for Sale (dollars in thousands)
U.S. Government securities $ 42,475 $ — $ (314) $ 42,161
U.S. Government-sponsored agency securities 1,038 — (28) 1,010
State and municipal securities 1,200,571 1,089 (129,647) 1,072,013
Corporate debt securities 480,714 473 (40,636) 440,551
Collateralized mortgage obligations 122,824 — (11,390) 111,434
Residential mortgage-backed securities 223,273 7 (26,485) 196,795
Commercial mortgage-backed securities 627,364 — (92,976) 534,388
Total $ 2,698,259 $ 1,569 $ (301,476) $ 2,398,352
Held to Maturity
Residential mortgage-backed securities $ 407,075 $ — $ (51,805) $ 355,270
Commercial mortgage-backed securities 860,847 — (143,910) 716,937
Total $ 1,267,922 $ — $ (195,715) $ 1,072,207

In May 2024, the Corporation sold $345.7 million AFS securities and recorded a pre-tax loss of $20.3 million. The proceeds from the sale were reinvested into higher-yielding securities of a similar type and similar duration.

Securities carried at $1.2 billion and $0.4 billion at June 30, 2024 and December 31, 2023, respectively, were pledged as collateral to secure public and trust deposits.

The amortized cost and estimated fair values of debt securities as of June 30, 2024, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without call or prepayment penalties.

June 30, 2024
Available for Sale Held to Maturity
Amortized<br>Cost Estimated<br>Fair Value Amortized<br>Cost Estimated<br>Fair Value
(dollars in thousands)
Due in one year or less $ 13,762 $ 13,533 $ — $ —
Due from one year to five years 110,303 106,430 — —
Due from five years to ten years 362,563 327,817 — —
Due after ten years 847,665 709,727 — —
1,334,293 1,157,507 — —
Residential mortgage-backed securities(1) 589,267 557,191 384,956 326,363
Commercial mortgage-backed securities(1) 610,960 511,127 859,477 707,076
Collateralized mortgage obligations(1) 724,602 713,769 — —
Total $ 3,259,122 $ 2,939,594 $ 1,244,433 $ 1,033,439

(1) Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on the

underlying loans.

The following table presents information related to gross realized gains and losses on the sales of securities:

Gross Realized Gains Gross Realized Losses Net Gains (Losses)
Three months ended (dollars in thousands)
June 30, 2024 $ 91 $ (20,373) $ (20,282)
June 30, 2023 — (4) (4)
Six months ended
June 30, 2024 $ 91 $ (20,373) $ (20,282)
June 30, 2023 283 (264) 19

The following tables present the gross unrealized losses and estimated fair values of investment securities aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

June 30, 2024
Less than 12 months 12 months or longer Total
Number of Securities Estimated<br>Fair Value Unrealized<br>Losses Number of Securities Estimated<br>Fair Value Unrealized<br>Losses Estimated<br>Fair Value Unrealized<br>Losses
Available for Sale (dollars in thousands)
State and municipal securities 19 $ 48,682 $ (1,552) 276 $ 766,484 $ (143,781) $ 815,166 $ (145,333)
Corporate debt securities — — — 52 286,277 (32,013) 286,277 (32,013)
Collateralized mortgage obligations 9 195,411 (601) 82 93,219 (11,765) 288,630 (12,366)
Residential mortgage-backed securities 32 369,024 (1,115) 75 183,416 (30,975) 552,440 (32,090)
Commercial mortgage-backed securities — — — 135 511,127 (99,833) 511,127 (99,833)
Total available for sale 60 $ 613,117 $ (3,268) 620 $ 1,840,523 $ (318,367) $ 2,453,640 $ (321,635)
Held to Maturity
Residential mortgage-backed securities — $ — $ — 120 $ 326,363 $ (58,593) $ 326,363 $ (58,593)
Commercial mortgage-backed securities — — — 60 707,076 (152,401) 707,076 (152,401)
Total held to maturity — $ — $ — 180 $ 1,033,439 $ (210,994) $ 1,033,439 $ (210,994)
December 31, 2023
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Less than 12 months 12 months or longer Total
Number of Securities Estimated<br>Fair Value Unrealized<br>Losses Number of Securities Estimated<br>Fair Value Unrealized<br>Losses Estimated<br>Fair Value Unrealized<br>Losses
Available for Sale (dollars in thousands)
U.S. Government Securities — $ — $ — 1 $ 42,161 $ (314) $ 42,161 $ (314)
U.S. Government-sponsored agency securities — — — 1 1,010 (28) 1,010 (28)
State and municipal securities 40 76,155 (858) 314 917,274 (128,789) 993,429 (129,647)
Corporate debt securities 8 42,945 (1,326) 60 370,523 (39,310) 413,468 (40,636)
Collateralized mortgage obligations — — — 93 111,434 (11,390) 111,434 (11,390)
Residential mortgage-backed securities 6 409 (3) 69 195,453 (26,482) 195,862 (26,485)
Commercial mortgage-backed securities 2 26,907 (1,053) 133 507,481 (91,923) 534,388 (92,976)
Total available for sale 56 $ 146,416 $ (3,240) 671 $ 2,145,336 $ (298,236) $ 2,291,752 $ (301,476)
Held to Maturity
Residential mortgage-backed securities — $ — $ — 120 $ 355,270 $ (51,805) $ 355,270 $ (51,805)
Commercial mortgage-backed securities — — — 60 716,937 (143,910) 716,937 (143,910)
Total held to maturity — $ — $ — 180 $ 1,072,207 $ (195,715) $ 1,072,207 $ (195,715)

The Corporation's collateralized mortgage obligations, residential mortgage-backed securities and commercial mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The change in fair value of these securities is attributable to changes in interest rates and not credit quality. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. Therefore, the Corporation did not record a loss on these investments as of June 30, 2024 and December 31, 2023.

As of June 30, 2024 and December 31, 2023, no ACL was required for the Corporation's state and municipal securities. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity. Therefore, the Corporation did not record a loss on these investments as of June 30, 2024 and December 31, 2023.

The majority of the corporate debt securities were rated at or above investment grade as of June 30, 2024 and December 31, 2023. Based on the payment status, rating and management's evaluation of these securities, no ACL was required for corporate debt securities as of June 30, 2024 and December 31, 2023. The Corporation does not have the intent to sell and does not

believe it will more likely than not to be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity. Therefore, the Corporation did not record a loss on these investments as of June 30, 2024 and December 31, 2023.

NOTE 5 - Loans and Allowance for Credit Losses

Loans and leases, net of unearned income

Loans and leases, net of unearned income, are summarized as follows:

June 30,<br>2024 December 31, 2023
(dollars in thousands)
Real estate - commercial mortgage $ 9,289,770 $ 8,127,728
Commercial and industrial(1) 4,967,796 4,545,552
Real-estate - residential mortgage 6,248,856 5,325,923
Real-estate - home equity 1,120,878 1,047,184
Real-estate - construction 1,463,799 1,239,075
Consumer 692,086 729,318
Leases and other loans(2) 323,112 336,314
Net loans $ 24,106,297 $ 21,351,094

(1) Includes no unearned income at June 30, 2024 and $41.0 thousand at December 31, 2023.

(2) Includes unearned income of $36.6 million at June 30, 2024 and $38.0 million at December 31, 2023.

Allowance for Credit Losses

The ACL consists of reserves against loans that have been evaluated collectively and individually for expected credit losses. The ACL represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to net loans. The ACL is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries. The reserve for OBS credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures.

The following table summarizes the ACL - loans balance and the reserve for OBS credit exposures balance:

June 30,<br>2024 December 31,<br>2023
(dollars in thousands)
ACL - loans $ 375,941 $ 293,404
Reserve for OBS credit exposures(1) $ 14,540 $ 17,254

(1) Included in other liabilities on the consolidated balance sheets.

The following table presents the activity in the ACL - loans balances:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands)
Balance at beginning of period $ 297,888 $ 278,695 $ 293,404 269,366
CECL Day 1 Provision(1) 23,444 — 23,444 —
Initial PCD allowance for credit losses 55,906 — 55,906 —
Loans charged off (14,007) (4,787) (24,959) (21,690)
Recoveries of loans previously charged off 2,705 2,816 5,059 5,715
Net loans (charged off) recovered (11,302) (1,971) (19,900) (15,975)
Provision for credit losses(1) (2) 10,005 10,718 23,087 34,051
Balance at end of period $ 375,941 $ 287,442 $ 375,941 $ 287,442
Provision for OBS credit exposures(1) $ (1,393) $ (971) $ (3,550) $ 240
Reserve for OBS credit exposures $ 14,540 $ 16,568 $ 14,540 $ 16,568

(1) The sum of these amounts are reflected in the provision for credit losses in the Consolidated Statements of Income.

(2) Provision only includes the portion related to net loans.

The following table presents the activity in the ACL by portfolio segment:

Real Estate <br>Commercial<br>Mortgage Commercial and<br>Industrial Real Estate Residential<br>Mortgage Consumer and Home<br>Equity Real Estate<br>Construction Leases and other loans Total
(dollars in thousands)
Three months ended June 30, 2024
March 31, 2024 $ 114,492 $ 76,883 $ 73,216 $ 16,688 $ 12,966 $ 3,643 $ 297,888
CECL Day 1 Provision(1) 6,108 1,484 14,922 444 486 — 23,444
Initial PCD allowance for credit losses 32,157 20,869 565 357 1,958 — 55,906
Loans charged off (7,853) (2,955) (35) (1,766) — (1,398) (14,007)
Recoveries of loans previously charged off 146 796 122 1,161 233 247 2,705
Net loans (charged off) recovered (7,707) (2,159) 87 (605) 233 (1,151) (11,302)
Provision for loan losses(1) (2) 11,115 (2,454) 924 649 (1,033) 804 10,005
Balance at June 30, 2024 $ 156,165 $ 94,623 $ 89,714 $ 17,533 $ 14,610 $ 3,296 $ 375,941
Three months ended June 30, 2023
March 31, 2023 $ 66,256 $ 77,126 $ 86,209 $ 27,303 $ 11,646 $ 10,155 $ 278,695
Loans charged off (230) (2,017) (62) (1,313) — (1,165) (4,787)
Recoveries of loans previously charged off 29 988 58 959 569 213 2,816
Net loans (charged off) recovered (201) (1,029) (4) (354) 569 (952) (1,971)
Provision for loan and lease losses(1) (2) 6,247 (908) 2,644 2,033 (1,071) 1,773 10,718
Balance at June 30, 2023 $ 72,302 $ 75,189 $ 88,849 $ 28,982 $ 11,144 $ 10,976 $ 287,442
Six months ended June 30, 2024
Balance at December 31, 2023 $ 112,565 $ 74,266 $ 73,286 $ 17,604 $ 12,295 $ 3,388 $ 293,404
CECL Day 1 Provision(1) 6,108 1,484 14,922 444 486 — 23,444
Initial PCD allowance for credit losses 32,157 20,869 565 357 1,958 — 55,906
Loans charged off (7,879) (10,587) (286) (4,004) — (2,203) (24,959)
Recoveries of loans previously charged off 298 2,044 238 1,837 233 409 5,059
Net loans (charged off) recovered (7,581) (8,543) (48) (2,167) 233 (1,794) (19,900)
Provision for loan losses(1) (2) 12,916 6,547 989 1,295 (362) 1,702 23,087
Balance at June 30, 2024 $ 156,165 $ 94,623 $ 89,714 $ 17,533 $ 14,610 $ 3,296 $ 375,941
Six months ended June 30, 2023
Balance at December 31, 2022 $ 69,456 $ 70,116 $ 83,250 $ 26,429 $ 10,743 $ 9,372 $ 269,366
Loans charged off (13,592) (2,629) (62) (3,519) — (1,888) (21,690)
Recoveries of loans previously charged off 815 2,074 106 1,620 771 329 5,715
Net loans (charged off) recovered (12,777) (555) 44 (1,899) 771 (1,559) (15,975)
Provision for loan losses(1)(2) 15,623 5,628 5,555 4,452 (370) 3,163 34,051
Balance at June 30, 2023 $ 72,302 $ 75,189 $ 88,849 $ 28,982 $ 11,144 $ 10,976 $ 287,442

(1) These amounts are reflected in the provision for credit loss in the Consolidated Statements of Income.

(2) Provision included in the table only includes the portion related to net loans.

The ACL may include qualitative adjustments intended to capture the impact of uncertainties not reflected in the quantitative models. In determining qualitative adjustments, management considers changes in national, regional, and local economic and business conditions and their impact on the lending environment, including underwriting standards and other factors affecting credit losses over the remaining life of each loan.

The increase in the ACL - loans for the second quarter of 2024 and for the six months ended June 30, 2024, was primarily due to loans acquired in the Republic First Transaction.

Collateral-Dependent Loans

A loan or a lease is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans and leases deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent loans or leases consists of various

types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agricultural land, and vacant land. Commercial and industrial loans may also be secured by real estate.

All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of June 30, 2024 and December 31, 2023, substantially all of the Corporation's individually evaluated loans with total commitments greater than or equal to $1.0 million were measured based on the estimated fair value of each loan’s collateral, if any.

As of June 30, 2024 and December 31, 2023, approximately 76% and 78%, respectively, of loans evaluated individually for impairment with principal balances greater than or equal to $1.0 million, whose primary collateral consisted of real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months.

Non-accrual Loans

The following table presents total non-accrual loans, by class segment:

June 30, 2024 December 31, 2023
With a Related Allowance Without a Related Allowance Total With a Related Allowance Without a Related Allowance Total
(dollars in thousands)
Real estate - commercial mortgage $ 16,295 $ 29,897 $ 46,192 $ 23,338 $ 21,467 $ 44,805
Commercial and industrial 28,693 28,581 57,274 12,410 27,542 39,952
Real estate - residential mortgage 21,436 3,027 24,463 18,806 2,018 20,824
Real estate - home equity 6,249 90 6,339 4,649 104 4,753
Real estate - construction 340 886 1,226 341 1,000 1,341
Consumer 183 — 183 52 — 52
Leases and other loans 601 9,352 9,953 9,255 638 9,893
$ 73,797 $ 71,833 $ 145,630 $ 68,851 $ 52,769 $ 121,620

As of June 30, 2024 and December 31, 2023, there were $71.8 million and $52.8 million, respectively, of non-accrual loans that did not have a specific valuation allowance within the ACL. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

Asset Quality

Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, commercial and industrial, and commercial real estate, an internal risk rating process is used. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk categories is a significant component of the ACL methodology for these loans, which bases the PD on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide a separate assessment of risk rating accuracy. Risk ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff, or if specific loan review assessments identify a deterioration or an improvement in a loan.

The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the current period:

June 30, 2024
(dollars in thousands)
Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans
Amortized Amortized
2024 2023 2022 2021 2020 Prior Cost Basis Cost Basis Total
Real estate - commercial mortgage
Pass $ 309,982 $ 863,950 $ 1,071,750 $ 1,271,714 $ 1,045,978 $ 3,529,987 $ 67,395 $ — $ 8,160,756
Special Mention 1,226 64,073 156,132 221,347 78,390 222,166 10,166 1,531 755,031
Substandard or Lower 216 10,339 60,790 77,874 63,740 159,103 1,921 — 373,983
Total real estate - commercial mortgage 311,424 938,362 1,288,672 1,570,935 1,188,108 3,911,256 79,482 1,531 9,289,770
Real estate - commercial mortgage
Current period gross charge-offs — — (84) — — (7,769) — (26) (7,879)
Commercial and industrial
Pass 226,274 549,429 588,898 324,519 304,830 812,912 1,449,696 16,778 4,273,336
Special Mention 9,518 23,258 46,588 52,606 25,066 98,739 137,793 408 393,976
Substandard or Lower 8,828 3,716 32,980 7,707 8,213 70,004 167,668 1,368 300,484
Total commercial and industrial 244,620 576,403 668,466 384,832 338,109 981,655 1,755,157 18,554 4,967,796
Commercial and industrial
Current period gross charge-offs (370) (1,420) (29) (273) (57) (742) (4,061) (3,635) (10,587)
Real estate - construction(1)
Pass 53,160 458,484 321,727 161,398 6,181 40,431 26,297 — 1,067,678
Special Mention — 14,371 53,362 48,683 3,023 3,226 2,952 1,280 126,897
Substandard or Lower — — 13,116 11,929 — 26,195 142 — 51,382
Total real estate - construction 53,160 472,855 388,205 222,010 9,204 69,852 29,391 1,280 1,245,957
Real estate - construction(1)
Current period gross charge-offs — — — — — — — — —
Total
Pass 589,416 1,871,863 1,982,375 1,757,631 1,356,989 4,383,330 1,543,388 16,778 13,501,770
Special Mention 10,744 101,702 256,082 322,636 106,479 324,131 150,911 3,219 1,275,904
Substandard or Lower 9,044 14,055 106,886 97,510 71,953 255,302 169,731 1,368 725,849
Total $ 609,204 $ 1,987,620 $ 2,345,343 $ 2,177,777 $ 1,535,421 $ 4,962,763 $ 1,864,030 $ 21,365 $ 15,503,523

(1) Excludes real estate - construction - other.

The increase of $799.0 million in special mention loans as of June 30, 2024 was primarily due to loans acquired in the Republic First Transaction with a balance of $776.9 million as of June 30, 2024. The increase of $277.8 million in substandard or lower loans as of June 30, 2024 was primarily due to loans acquired in the Republic First Transaction with a balance of $166.5 million as of June 30, 2024.

The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the prior period:

December 31, 2023
(dollars in thousands)
Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans
Amortized Amortized
2023 2022 2021 2020 2019 Prior Cost Basis Cost Basis Total
Real estate - commercial mortgage
Pass $ 783,673 $ 993,017 $ 1,203,852 $ 984,958 $ 721,857 $ 2,822,155 $ 59,253 $ 31,636 $ 7,600,401
Special Mention 2,767 43,904 105,185 7,862 35,289 105,786 1,760 — 302,553
Substandard or Lower 366 20,958 31,304 49,142 26,579 95,621 804 — 224,774
Total real estate - commercial mortgage 786,806 1,057,879 1,340,341 1,041,962 783,725 3,023,562 61,817 31,636 8,127,728
Real estate - commercial mortgage
Current period gross charge-offs — — — — — (424) — (17,575) (17,999)
Commercial and industrial
Pass 626,386 590,132 330,576 341,218 272,126 598,838 1,443,203 10,736 4,213,215
Special Mention 7,936 9,548 16,499 3,577 6,817 18,487 72,775 198 135,837
Substandard or Lower 247 25,184 4,611 3,843 18,988 31,663 105,230 6,734 196,500
Total commercial and industrial 634,569 624,864 351,686 348,638 297,931 648,988 1,621,208 17,668 4,545,552
Commercial and industrial
Current period gross charge-offs — (299) — — — (249) (682) (8,016) (9,246)
Real estate - construction(1)
Pass 322,922 258,080 261,583 37,426 9,510 34,097 13,677 — 937,295
Special Mention — 12,622 25,898 — — — — — 38,520
Substandard or Lower — 521 2,229 — 340 21,284 168 2,229 26,771
Total real estate - construction 322,922 271,223 289,710 37,426 9,850 55,381 13,845 2,229 1,002,586
Real estate - construction(1)
Current period gross charge-offs — — — — — — — — —
Total
Pass 1,732,981 1,841,229 1,796,011 1,363,602 1,003,493 3,455,090 1,516,133 42,372 12,750,911
Special Mention 10,703 66,074 147,582 11,439 42,106 124,273 74,535 198 476,910
Substandard or Lower 613 46,663 38,144 52,985 45,907 148,568 106,202 8,963 448,045
Total $ 1,744,297 $ 1,953,966 $ 1,981,737 $ 1,428,026 $ 1,091,506 $ 3,727,931 $ 1,696,870 $ 51,533 $ 13,675,866

(1) Excludes real estate - construction - other.

The Corporation considers the performance of the loan portfolio and its impact on the ACL. The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and other loans. For these loans, the most relevant credit quality indicator is delinquency status and the Corporation evaluates credit quality based on the aging status of the loan. The following tables present the amortized cost of these loans based on payment activity, by origination year, for the periods shown:

June 30, 2024
(dollars in thousands)
Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans
Amortized Amortized
2024 2023 2022 2021 2020 Prior Cost Basis Cost Basis Total
Real estate - residential mortgage
Performing $ 223,893 $ 693,496 $ 1,541,848 $ 1,779,390 $ 1,063,559 $ 905,637 $ — $ — $ 6,207,823
Nonperforming — 1,265 2,259 3,831 4,809 28,869 — — 41,033
Total real estate - residential mortgage 223,893 694,761 1,544,107 1,783,221 1,068,368 934,506 — — 6,248,856
Real estate - residential mortgage
Current period gross charge-offs — — — — — (35) — (251) (286)
Consumer and real estate - home equity
Performing 160,101 136,412 250,006 77,901 56,063 235,923 872,989 11,614 1,801,009
Nonperforming 3 178 1,116 596 283 7,170 1,708 901 11,955
Total consumer and real estate - home equity 160,104 136,590 251,122 78,497 56,346 243,093 874,697 12,515 1,812,964
Consumer and real estate - home equity
Current period gross charge-offs (1) (326) (477) (125) (142) (1,096) — (1,837) (4,004)
Leases and other loans
Performing 77,600 107,668 71,018 22,699 16,005 18,130 — — 313,120
Nonperforming — — 568 72 41 9,311 — — 9,992
Leases and other loans 77,600 107,668 71,586 22,771 16,046 27,441 — — 323,112
Leases and other loans
Current period gross charge-offs (585) (559) (159) (193) (63) (343) (125) (176) (2,203)
Construction - other
Performing 32,808 135,217 42,100 6,311 — — — — 216,436
Nonperforming — — 1,406 — — — — — 1,406
Total construction - other 32,808 135,217 43,506 6,311 — — — — 217,842
Construction - other
Current period gross charge-offs — — — — — — — — —
Total
Performing 494,402 1,072,793 1,904,972 1,886,301 1,135,627 1,159,690 872,989 11,614 8,538,388
Nonperforming 3 1,443 5,349 4,499 5,133 45,350 1,708 901 64,386
Total $ 494,405 $ 1,074,236 $ 1,910,321 $ 1,890,800 $ 1,140,760 $ 1,205,040 $ 874,697 $ 12,515 $ 8,602,774 December 31, 2023
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
(dollars in thousands)
Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans
Amortized Amortized
2023 2022 2021 2020 2019 Prior Cost Basis Cost Basis Total
Real estate - residential mortgage
Performing $ 623,247 $ 1,126,656 $ 1,682,759 $ 984,050 $ 260,049 $ 607,133 $ — $ — $ 5,283,894
Nonperforming — 1,720 4,888 4,701 6,233 24,487 — — 42,029
Total real estate - residential mortgage 623,247 1,128,376 1,687,647 988,751 266,282 631,620 — — 5,325,923
Real estate - residential mortgage
Current period gross charge-offs — — — — — — — (62) (62)
Consumer and Real estate - home equity
Performing 272,571 276,373 85,985 62,426 37,667 204,913 805,645 20,044 1,765,624
Nonperforming 295 455 866 282 354 5,526 1,439 1,661 10,878
Total consumer and real estate - home equity 272,866 276,828 86,851 62,708 38,021 210,439 807,084 21,705 1,776,502
Consumer and Real estate - home equity
Current period gross charge-offs (119) — — — — (525) (283) (6,587) (7,514)
Leases and other loans
Performing 166,490 83,641 27,755 22,304 16,246 9,867 — — 326,303
Nonperforming — 118 — — — 9,893 — — 10,011
Leases and other loans 166,490 83,759 27,755 22,304 16,246 19,760 — — 336,314
Leases and other loans
Current period gross charge-offs (471) (521) (246) (128) (82) (656) (765) (1,511) (4,380)
Construction - other
Performing 127,382 93,319 13,698 555 — — — — 234,954
Nonperforming — 1,535 — — — — — — 1,535
Total construction - other 127,382 94,854 13,698 555 — — — — 236,489
Construction - other
Current period gross charge-offs — — — — — — — — —
Total
Performing 1,189,690 1,579,989 1,810,197 1,069,335 313,962 821,913 805,645 20,044 7,610,775
Nonperforming 295 3,828 5,754 4,983 6,587 39,906 1,439 1,661 64,453
Total $ 1,189,985 $ 1,583,817 $ 1,815,951 $ 1,074,318 $ 320,549 $ 861,819 $ 807,084 $ 21,705 $ 7,675,228

The following table presents non-performing assets:

June 30,<br>2024 December 31,<br>2023
(dollars in thousands)
Non-accrual loans $ 145,630 $ 121,620
Loans 90 days or more past due and still accruing 26,962 31,721
Total non-performing loans 172,592 153,341
OREO(1) 1,444 896
Total non-performing assets $ 174,036 $ 154,237

(1) Excludes $24.2 million and $10.9 million of residential mortgage properties for which formal foreclosure proceedings were in process as of June 30,

2024 and December 31, 2023, respectively.

The following tables present the aging of the amortized cost basis of loans, by class segment:

30-59 60-89 ≥ 90 Days
Days Past Days Past Past Due Non-
Due Due and Accruing Accrual Current Total
(dollars in thousands)
June 30, 2024
Real estate - commercial mortgage $ 14,262 $ 1,126 $ 2,422 $ 46,193 $ 9,225,767 $ 9,289,770
Commercial and industrial(1) 12,191 14,984 1,159 57,274 4,882,188 4,967,796
Real estate - residential mortgage 58,454 13,895 16,571 24,462 6,135,474 6,248,856
Real estate - home equity 7,403 1,776 4,880 6,338 1,100,482 1,120,878
Real estate - construction 10,951 749 1,406 1,226 1,449,467 1,463,799
Consumer 7,274 1,767 485 183 682,377 692,086
Leases and other loans(1) 397 80 39 9,954 312,642 323,112
Total $ 110,932 $ 34,377 $ 26,962 $ 145,630 $ 23,788,397 $ 24,106,297

(1) Includes unearned income.

30-59 Days Past<br>Due 60-89<br>Days Past<br>Due ≥ 90 Days<br>Past Due<br>and<br>Accruing Non-<br>accrual Current Total
(dollars in thousands)
December 31, 2023
Real estate - commercial mortgage $ 4,408 $ 1,341 $ 1,722 $ 44,805 $ 8,075,452 $ 8,127,728
Commercial and industrial(1) 5,620 1,656 1,068 39,952 4,497,256 4,545,552
Real estate - residential mortgage 49,145 10,838 21,205 20,824 5,223,911 5,325,923
Real estate - home equity 8,142 2,075 5,326 4,753 1,026,888 1,047,184
Real estate - construction 4,185 451 1,535 1,341 1,231,563 1,239,075
Consumer 8,361 1,767 747 52 718,391 729,318
Leases and other loans(1) 146 722 118 9,893 325,435 336,314
Total $ 80,007 $ 18,850 $ 31,721 $ 121,620 $ 21,098,896 $ 21,351,094

(1) Includes unearned income.

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Corporation modifies loans by providing a concession when deemed appropriate. Depending on the circumstances, a term extension, interest rate reduction or principal forgiveness may be granted. In certain instances a combination of concessions may be provided to a borrower.

When principal forgiveness is provided, the amount of principal forgiven is deemed to be uncollectible and the amortized cost basis of the loan is reduced by the amount of the forgiven portion, with a corresponding reduction to the ACL.

The following table presents the amortized cost basis of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

Term Extension
2024 2023
Amortization Cost Basis % of Class of Financing Receivable Amortization Cost Basis % of Class of Financing Receivable
(dollars in thousands)
Three months ended June 30
Real estate - commercial mortgage $ 20,603 0.22 % $ 276 — %
Commercial and industrial — — — —
Real estate - residential mortgage 2,966 0.05 2,045 0.04
Real estate - home equity 129 0.01 — —
Total $ 23,698 $ 2,321
Six months ended June 30
Real estate - commercial mortgage $ 20,603 0.22 % $ 1,478 0.02 %
Commercial and industrial — — 75 —
Real estate - residential mortgage 5,651 0.09 3,423 0.07
Real estate - home equity 129 0.01 — —
Real estate - construction 541 0.04 — —
Total $ 26,924 $ 4,976
Interest Rate Reduction and Term Extension
--- --- --- --- --- --- --- --- ---
2024 2023
Amortized Cost Basis % of Class of Financing Receivable Amortized Cost Basis % of Class of Financing Receivable
(dollars in thousands)
Three months ended June 30
Real estate - residential mortgage $ 884 0.01 % $ — — %
Total $ 884 $ —
Six months ended June 30
Real estate - residential mortgage $ 1,348 0.02 % $ — — %
Total $ 1,348 $ —

The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty:

Term Extension
Financial Effect
Three months ended June 30, 2024
Real estate - commercial mortgage Added a weighted-average 2.00 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgage Added a weighted-average 8.51 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - home equity Added a weighted-average 17.92 years to the life of loans, which reduced monthly payment amounts for borrowers.
Three months ended June 30, 2023
Real estate - commercial mortgage Added a weighted-average 1.25 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgage Added a weighted-average 5.29 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Six months ended June 30, 2024
Real estate - commercial mortgage Added a weighted-average 2.00 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgage Added a weighted-average 7.44 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - home equity Added a weighted-average 17.92 years to the life of loans, which reduced monthly payment amounts for borrowers.
Real estate - construction Added a weighted-average 0.67 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Six months ended June 30, 2023
Real estate - commercial mortgage Added a weighted-average 2.05 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Commercial and industrial Added a weighted-average 2.88 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgage Added a weighted-average 4.64 years to the life of loans, which reduced monthly payment amounts for the borrowers. Interest Rate Reduction(1)
--- ---
Financial Effect
Three months ended June 30, 2024
Real estate - residential mortgage Reduced weighted-average interest rate from 3.00% to 1.00%
Six months ended June 30, 2024
Real estate - residential mortgage Reduced weighted-average interest rate from 2.36% to 1.37%

(1) There were no loan modifications with interest rate reductions for the three months and six months ended June 30, 2023.

During the three months and six months ended June 30, 2024 and 2023, there were no loans modified due to financial difficulty where there was a principal balance forgiveness.

The following table presents the performance of loans that have been modified due to financial difficulty in the previous 12 months:

30-89 90+ Total
Days Past Past Due Past
Current Due and Accruing Due
June 30, 2024 (dollars in thousands)
Real estate - commercial mortgage $ 20,603 $ — $ — $ —
Commercial and industrial 9,859 — — —
Real estate - residential mortgage 8,776 1,977 1,353 3,330
Real estate - home equity 122 7 — 7
Real estate - construction 541 — — —
Total $ 39,901 $ 1,984 $ 1,353 $ 3,337

There were no commitments to lend additional funds to borrowers with loan modifications as a result of financial difficulty as of June 30, 2024.

NOTE 6 – Mortgage Servicing Rights

The following table summarizes the changes in MSRs, which are included in other assets on the consolidated balance sheets, with adjustments to the carrying value included in mortgage banking income on the consolidated statements of income:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands)
Amortized cost:
Balance at beginning of period $ 31,057 $ 33,082 $ 31,602 $ 34,217
Originations of MSRs 883 688 1,465 884
Amortization (1,294) (1,312) (2,421) (2,643)
Balance at end of period $ 30,646 $ 32,458 $ 30,646 $ 32,458
Estimated fair value of MSRs at end of period $ 51,724 $ 49,444 $ 51,724 $ 49,444

MSRs represent the economic value of contractual rights to service mortgage loans that have been sold. The total portfolio of mortgage loans serviced by the Corporation for unrelated third parties was $4.0 billion and $4.1 billion as of June 30, 2024 and December 31, 2023, respectively. Actual and expected prepayments of the underlying mortgage loans can impact the fair values of the MSRs. The Corporation accounts for MSRs at the lower of amortized cost or fair value.

The fair value of MSRs is estimated by discounting the estimated cash flows from servicing income, net of expense, over the expected life of the underlying loans at a discount rate commensurate with the risk associated with these assets. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The fair values of MSRs were $51.7 million and $49.7 million as of June 30, 2024 and December 31, 2023, respectively. Based on its fair value analysis as of June 30, 2024, the Corporation determined that no valuation allowance was required as of June 30, 2024.

NOTE 7 – Derivative Financial Instruments

The Corporation uses derivatives to manage its exposure to certain market risks, including interest rate and foreign currency risks, and to assist customers with their risk management objectives. Certain of the Corporation's outstanding derivative contracts are designated as hedges, and none are entered into for speculative purposes. The Corporation enters into derivative contracts that are intended to economically hedge certain of its risks, even if hedge accounting does not apply or the Corporation elects not to apply hedge accounting.

In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $1.0 billion. As the hedged transaction continues to be probable, the original unrealized loss of $70.6 million included in AOCI will be recognized as a reduction to interest income when the previously forecasted hedged item affects earnings in future periods. During the six months ended June 30, 2024, $14.1 million of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the Corporation's consolidated statements of income.

In the third quarter of 2023, the Corporation transitioned certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions from LIBOR to SOFR. For the six months ended June 30, 2024, the increase to other non-interest income to reflect market valuation movements from the transition from LIBOR to SOFR was $0.3 million. For the year ended December 31, 2023, the full-year reduction to other non-interest income related to the transition from LIBOR to SOFR was $1.9 million.

For additional information on our derivative accounting policies see Note 1 "Summary of Significant Accounting Policies" in our Annual Report on Form 10-K for the year ended December 31, 2023.

The following table presents a summary of the notional amounts and fair values of derivative financial instruments:

June 30, 2024 December 31, 2023
Notional<br>Amount Asset<br>(Liability)<br>Fair Value Notional<br>Amount Asset<br>(Liability)<br>Fair Value
(dollars in thousands)
Interest Rate Locks with Customers
Positive fair values $ 197,685 $ 965 $ 119,558 $ 460
Negative fair values 2,109 (3) 1,015 (2)
Forward Commitments
Positive fair values — — — —
Negative fair values 58,500 (236) 42,000 (854)
Interest Rate Derivatives with Customers
Positive fair values 546,330 8,091 824,659 22,656
Negative fair values 4,132,103 (271,356) 3,784,236 (222,530)
Interest Rate Derivatives with Dealer Counterparties(1)
Positive fair values 4,132,103 166,461 3,784,236 128,235
Negative fair values 546,330 (8,457) 824,659 (23,023)
Interest Rate Derivatives used in Cash Flow Hedges
Positive fair values 2,300,000 245 2,500,000 6,189
Negative fair values 950,000 (78) 750,000 —
Foreign Exchange Contracts with Customers
Positive fair values 25,730 639 4,159 40
Negative fair values 4,081 (81) 13,353 (446)
Foreign Exchange Contracts with Correspondent Banks
Positive fair values 4,798 127 15,969 532
Negative fair values 25,139 (467) 6,112 (31)

(1) Fair Values are net of a valuation allowance of $366.3 thousand as of June 30, 2024 and December 31, 2023.

The following table presents the effect of cash flow hedge accounting on AOCI:

Amount of Gain (Loss) Recognized in OCI on Derivative Amount of Gain (Loss) Recognized in OCI Included Component Amount of Gain (Loss) Recognized in OCI Excluded Component Location of Gain (Loss) Recognized from AOCI into Income Amount of Gain (Loss) Reclassified from AOCI into Income Amount of Gain (Loss) Reclassified from AOCI into Income Included Component Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component
(dollars in thousands)
Three months ended June 30, 2024
Interest Rate Products $ (381) $ (381) $ — Interest Income $ (7,032) $ (7,032) $ —
Interest Rate Products 3,297 3,297 — Interest Expense 2,030 2,030 —
Total $ 2,916 $ 2,916 $ — $ (5,002) $ (5,002) $ —
Three months ended June 30, 2023
Interest Rate Products $ (7,251) $ (7,251) — Interest Income $ (7,032) $ (7,032) —
Total $ (7,251) $ (7,251) — $ (7,032) $ (7,032) —
Six months ended June 30, 2024
Interest Rate Products (6,040) (6,040) — Interest Income (14,064) (14,064) —
Interest Rate Products 14,512 14,512 — Interest Expense 4,050 4,050 —
Total 8,472 8,472 — (10,014) (10,014) —
Six months ended June 30, 2023
Interest Rate Products 5,284 5,284 — Interest Income (14,189) (14,189) —

During the next twelve months, the Corporation estimates that an additional $15.9 million of unrecognized losses will be reclassified as a decrease to net interest income.

The following table presents the effect of fair value and cash flow hedge accounting on the income statement:

Consolidated Statements of Income Classification
2024 2023
Interest Income Interest Expense Interest Income Interest Expense
(dollars in thousands)
Three months ended June 30
Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded $ (7,032) $ 2,030 $ (7,032) $ —
Interest contracts:
Amount of gain (loss) reclassified from AOCI into income (7,032) 2,030 (7,032) —
Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring — — — —
Amount of gain (loss) reclassified from AOCI into income - included component (7,032) 2,030 (7,032) —
Amount of gain (loss) reclassified from AOCI into income - excluded component — — — —
Six months ended June 30
Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded $ (14,064) $ 4,050 $ (14,189) $ —
Interest contracts:
Amount of gain (loss) reclassified from AOCI into income (14,064) 4,050 (14,189) —
Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring — — — —
Amount of gain (loss) reclassified from AOCI into income - included component (14,064) 4,050 (14,189) —
Amount of gain (loss) reclassified from AOCI into income - excluded component — — — —

The following table presents a summary of the net fair value gains (losses) on derivative financial instruments:

Consolidated Statements of Income Classification Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands)
Mortgage banking derivatives(1) Mortgage banking income $ (45) $ 475 $ 1,122 $ 869
Interest rate derivatives Other income 137 — 288 —
Foreign exchange contracts Other income 84 93 123 184
Net fair value gains (losses) on derivative financial instruments $ 176 $ 568 $ 1,533 $ 1,053

(1) Includes interest rate locks with customers and forward commitments.

The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements:

June 30,<br>2024 December 31,<br>2023
(dollars in thousands)
Amortized cost(1) $ 26,335 $ 14,792
Fair value 26,822 15,158

(1) Cost basis of mortgage loans held for sale represents the unpaid principal balance.

Gains related to changes in fair values of mortgage loans held for sale were $0.3 million for the three months ended June 30, 2024 compared to a nominal amount for the three months ended June 30, 2023. Losses related to changes in fair values of mortgage loans held for sale were $0.1 million for the six months ended June 30, 2024 compared to gains of $0.1 million for the six months ended June 30, 2023.

Balance Sheet Offsetting

The fair values of interest rate derivative agreements and foreign exchange contracts the Corporation enters into with customers and dealer counterparties may be eligible for offset on the consolidated balance sheets if they are subject to master netting arrangements or similar agreements. The Corporation has elected to net its financial assets and liabilities designated as interest rate derivatives when offsetting is permitted. The following table presents the Corporation's financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets:

Gross Amounts Gross Amounts Not Offset
Recognized on the Consolidated
on the Balance Sheets
Consolidated Financial Cash Net
Balance Sheets Instruments(1) Collateral(2) Amount
(dollars in thousands)
June 30, 2024
Interest rate derivative assets $ 174,797 $ (9,480) $ — $ 165,317
Foreign exchange derivative assets with correspondent banks 127 (127) — —
Total $ 174,924 $ (9,607) $ — $ 165,317
Interest rate derivative liabilities $ 279,891 $ (9,647) $ (107,649) $ 162,595
Foreign exchange derivative liabilities with correspondent banks 467 (127) — 340
Total $ 280,358 $ (9,774) $ (107,649) $ 162,935
December 31, 2023
Interest rate derivative assets $ 157,080 $ (15,154) $ — $ 141,926
Foreign exchange derivative assets with correspondent banks 532 (532) — —
Total $ 157,612 $ (15,686) $ — $ 141,926
Interest rate derivative liabilities $ 245,553 $ (21,343) $ (93,841) $ 130,369
Foreign exchange derivative liabilities with correspondent banks 31 (532) — (501)
Total $ 245,584 $ (21,875) $ (93,841) $ 129,868

(1) For interest rate derivative assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default.

For interest rate derivative liabilities, amounts represent any derivative asset fair values that could be offset in the event of counterparty or customer default.

(2) Amounts represent cash collateral received from the counterparty or posted by the Corporation on interest rate derivative transactions and foreign exchange

contracts with financial institution counterparties. Interest rate derivatives with customers are collateralized by the same collateral securing the underlying

loans to those borrowers. Cash and securities collateral amounts are included in the table only to the extent of the net derivative fair values.

NOTE 8 – Accumulated Other Comprehensive (Loss) Income

The following table presents the components of other comprehensive income (loss):

Before-Tax Amount Tax Effect Net of Tax Amount
(dollars in thousands)
Three months ended June 30, 2024
Net unrealized gain on securities $ (18,356) $ 4,157 $ (14,199)
Reclassification adjustment for securities net change included in net income(1) 20,282 (4,594) 15,688
Amortization of net unrealized gains on AFS securities transferred to HTM(1) 1,815 (412) 1,403
Net unrealized holding gains arising during the period on interest rate derivatives used in cash flow hedges 2,916 (660) 2,256
Reclassification adjustment for net change realized in net income on interest rate derivatives used in cash flow hedges 5,002 (1,111) 3,891
Amortization of net unrecognized pension and postretirement items(2) (136) 31 (105)
Total Other Comprehensive Income $ 11,523 $ (2,589) $ 8,934
Three months ended June 30, 2023
Net unrealized losses on securities $ (40,361) $ 9,142 $ (31,219)
Reclassification adjustment for securities net change included in net income(3) (4) 1 (3)
Amortization of net unrealized gains on AFS securities transferred to HTM(1) 1,941 (440) 1,501
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges (7,251) 1,665 (5,586)
Reclassification adjustment for net change realized in net income on interest rate derivatives used in cash flow hedges 7,032 (22) 7,010
Amortization of net unrecognized pension and postretirement items(2) 4 (1) 3
Total Other Comprehensive Loss $ (38,639) $ 10,345 $ (28,294)
Six months ended June 30, 2024
Unrealized gain on securities $ (39,902) $ 9,038 $ (30,864)
Reclassification adjustment for securities net change included in net income(3) 20,282 (4,594) 15,688
Amortization of net unrealized gains on AFS securities transferred to HTM(1) 3,608 (818) 2,790
Net unrealized holding gains arising during the period on interest rate derivatives used in cash flow hedges 8,472 (1,919) 6,553
Reclassification adjustment for net change realized in net income on interest rate swaps used in cash flow hedges 10,014 (2,224) 7,790
Amortization of net unrecognized pension and postretirement item(2) (271) 60 (211)
Total Other Comprehensive Income $ 2,203 $ (457) $ 1,746
Six months ended June 30, 2023
Unrealized gain on securities $ 1,838 $ (416) $ 1,422
Reclassification adjustment for securities net change included in net income(3) 18 (4) 14
Amortization of net unrealized gains on AFS securities transferred to HTM(1) 3,851 (872) 2,979
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges 5,284 (17,690) (12,406)
Reclassification adjustment for change realized in net income on interest rate swaps used in cash flow hedges 14,189 (36) 14,153
Amortization of net unrecognized pension and postretirement items(2) 36 (8) 28
Total Other Comprehensive Income $ 25,216 $ (19,026) $ 6,190

(1) Amounts reclassified out of AOCI. Before-tax amounts included as a reduction to "Interest Income" on the Consolidated Statements of Income.

(2) Amounts reclassified out of AOCI. Before-tax amounts included in "Salaries and employee benefits" on the Consolidated Statements of Income. See "Note

12 - Employee Benefit Plans," for additional details.

(3) Amounts reclassified out of AOCI. Before-tax amounts included in "Investment securities gains, net" on the Consolidated Statements of Income. See "Note 4

  • Investment Securities," for additional details.

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

Unrealized Gains (Losses) on Investment Securities Net Unrealized Gain (Loss) on Interest Rate Derivatives used in Cash Flow Hedges Unrecognized Pension and Postretirement Plan Income (Costs) Total
(dollars in thousands)
Three months ended June 30, 2024
Balance at March 31, 2024 $ (290,140) $ (26,587) $ (2,741) $ (319,468)
OCI before reclassifications (14,199) 2,256 — (11,943)
Amounts reclassified from AOCI 15,688 3,891 (105) 19,474
Amortization of net unrealized gains on AFS securities transferred to HTM 1,403 — — 1,403
Balance at June 30, 2024 $ (287,248) $ (20,440) $ (2,846) $ (310,534)
Three months ended June 30, 2023
Balance at March 31, 2023 $ (282,095) $ (61,453) $ (7,444) $ (350,992)
OCI before reclassifications (31,219) (5,586) — (36,805)
Amounts reclassified from AOCI (3) 7,010 3 7,010
Amortization of net unrealized losses on AFS securities transferred to HTM 1,501 — — 1,501
Balance at June 30, 2023 $ (311,816) $ (60,029) $ (7,441) $ (379,286)
Six months ended June 30, 2024
Balance at December 31, 2023 $ (274,862) $ (34,783) $ (2,635) $ (312,280)
OCI before reclassifications (30,864) 6,553 — (24,311)
Amounts reclassified from AOCI 15,688 7,790 (211) 23,267
Amortization of net unrealized gains on AFS securities transferred to HTM 2,790 — — 2,790
Balance at June 30, 2024 $ (287,248) $ (20,440) $ (2,846) $ (310,534)
Six months ended June 30, 2023
Balance at December 31, 2022 $ (316,231) $ (61,776) $ (7,469) $ (385,476)
OCI before reclassifications 1,422 (12,406) — (10,984)
Amounts reclassified from AOCI 14 14,153 28 14,195
Amortization of net unrealized losses on AFS securities transferred to HTM 2,979 — — 2,979
Balance at June 30, 2023 $ (311,816) $ (60,029) $ (7,441) $ (379,286)

NOTE 9 – Fair Value Measurements

FASB ASC Topic 820 establishes a fair value hierarchy for the inputs to valuation techniques used to measure assets and liabilities at fair value using the following three categories (from highest to lowest priority):

•Level 1 – Inputs that represent quoted prices for identical instruments in active markets.

•Level 2 – Inputs that represent quoted prices for similar instruments in active markets or quoted prices for identical instruments in non-active markets. Also includes valuation techniques whose inputs are derived principally from observable market data other than quoted prices, such as interest rates or other market-corroborated means.

•Level 3 – Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.

All assets and liabilities measured at fair value on both a recurring and nonrecurring basis have been categorized into the above three levels. The following tables present assets and liabilities measured at fair value on a recurring basis and reported on the consolidated balance sheets:

June 30, 2024
Level 1 Level 2 Level 3 Total
(dollars in thousands)
Loans held for sale $ — $ 26,822 $ — $ 26,822
Available for sale investment securities:
State and municipal securities — 820,109 — 820,109
Corporate debt securities — 337,398 — 337,398
Collateralized mortgage obligations — 713,769 — 713,769
Residential mortgage-backed securities — 557,191 — 557,191
Commercial mortgage-backed securities — 511,127 — 511,127
Total available for sale investment securities — 2,939,594 — 2,939,594
Other assets:
Investments held in Rabbi Trust 34,339 — — 34,339
Derivative assets 766 175,762 — 176,528
Total assets $ 35,105 $ 3,142,178 $ — $ 3,177,283
Other liabilities:
Deferred compensation liabilities $ 34,339 $ — $ — $ 34,339
Derivative liabilities 548 280,130 — 280,678
Total liabilities $ 34,887 $ 280,130 $ — $ 315,017
December 31, 2023
--- --- --- --- --- --- --- --- ---
Level 1 Level 2 Level 3 Total
(dollars in thousands)
Loans held for sale $ — $ 15,158 $ — $ 15,158
Available for sale investment securities:
U.S. Government securities 42,161 — — 42,161
U.S. Government sponsored agency securities — 1,010 — 1,010
State and municipal securities — 1,072,013 — 1,072,013
Corporate debt securities — 440,551 — 440,551
Collateralized mortgage obligations — 111,434 — 111,434
Residential mortgage-backed securities — 196,795 — 196,795
Commercial mortgage-backed securities — 534,388 — 534,388
Total available for sale investment securities 42,161 2,356,191 — 2,398,352
Other assets:
Investments held in Rabbi Trust 29,819 — — 29,819
Derivative assets 572 157,540 — 158,112
Total assets $ 72,552 $ 2,528,889 $ — $ 2,601,441
Other liabilities:
Deferred compensation liabilities $ 29,819 $ — $ — $ 29,819
Derivative liabilities 477 246,157 — 246,634
Total liabilities $ 30,296 $ 246,157 $ — $ 276,453

The valuation techniques used to measure fair value for the items in the preceding tables are as follows:

Loans held for sale – This category includes mortgage loans held for sale that are measured at fair value. Fair values as of June 30, 2024 and December 31, 2023 were measured at the price that secondary market investors were offering for loans with similar characteristics.

Available for sale investment securities – Included in this asset category are debt securities. Level 2 investment securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing.

Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used or some of the standard market inputs may not be applicable.

•U.S. Government securities – These securities are classified as Level 1. Fair values are based on quoted prices with active markets.

•U.S. Government-sponsored agency securities, State and municipal securities/Collateralized mortgage obligations/Residential mortgage-backed securities/Commercial mortgage-backed securities – These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.

•Corporate debt securities – These securities are classified as Level 2. This category consists of subordinated debt and senior debt issued by financial institutions ($330.4 million at June 30, 2024 and $433.4 million at December 31, 2023) and other corporate debt issued by non-financial institutions ($6.9 million and $7.2 million at June 30, 2024 and December 31, 2023, respectively). The fair values for these corporate debt securities are determined by a third-party pricing service as detailed above.

Investments held in Rabbi Trust – This category consists of mutual funds that are held in trust for employee deferred compensation plans that the Corporation has elected to measure at fair value. Shares of mutual funds are valued based on net asset value, which represent quoted market prices for the underlying shares held in the mutual funds, and as such, are classified as Level 1.

Derivative assets – Fair value of foreign currency exchange contracts are classified as Level 1 assets ($0.8 million and $0.6 million at June 30, 2024 and December 31, 2023, respectively). The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.

Level 2 assets, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($1.0 million at June 30, 2024 and $0.5 million at December 31, 2023) and the fair value of interest rate derivatives ($174.8 million at June 30, 2024 and $157.1 million at December 31, 2023). The fair values of the interest rate locks, forward commitments and interest rate derivatives represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See "Note 7 - Derivative Financial Instruments," for additional information.

Deferred compensation liabilities – Fair value of amounts due to employees under deferred compensation plans, classified as Level 1 liabilities and are included in other liabilities on the consolidated balance sheets. The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Investments held in Rabbi Trust" above.

Derivative liabilities – Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($0.5 million at June 30, 2024 and December 31, 2023).

Level 2 liabilities, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($0.2 million at June 30, 2024 and $0.9 million at December 31, 2023) and the fair value of interest rate derivatives ($279.9 million at June 30, 2024 and $245.6 million at December 31, 2023).

The fair values of these liabilities are determined in the same manner as the related assets as described under the heading "Derivative assets" above.

Certain financial instruments are not measured at fair value on an ongoing basis but are subject to fair value measurement in certain circumstances, such as upon their acquisition or when there is evidence of impairment. The following table presents Level 3 financial assets measured at fair value on a nonrecurring basis:

June 30,<br>2024 December 31,<br>2023
(dollars in thousands)
Loans, net $ 121,942 $ 102,135
OREO 1,444 896
MSRs(1) 51,724 49,696
Total assets $ 175,110 $ 152,727

(1) Amounts shown are estimated fair value. MSRs are recorded on the Corporation's consolidated balance sheets at the lower of amortized cost or fair value.

See "Note 6 - Mortgage Servicing Rights" for additional information.

The valuation techniques used to measure fair value for the items in the table above are as follows:

•Loans, net – This category consists of loans that were individually evaluated for impairment and have been classified as Level 3 assets. The amount shown is the balance of non-accrual loans, net of related ACL. See "Note 5 - Loans and Allowance for Credit Losses," for additional details.

•OREO – This category consists of OREO classified as Level 3 assets, for which the fair values were based on estimated selling prices less estimated selling costs for similar assets in active markets.

•MSRs – This category consists of MSRs, which were initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors, and subsequently carried at the lower of amortized cost or fair value. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified by product type and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the June 30, 2024 valuation were 7.3% and 9.5%, respectively. Management reviews the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See "Note 6 - Mortgage Servicing Rights," for additional information.

The following tables detail the book values and the estimated fair values of the Corporation's financial instruments:

June 30, 2024
Estimated Fair Value
Carrying Amount Level 1 Level 2 Level 3 Total
(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents $ 1,396,282 $ 1,396,282 $ — $ — $ 1,396,282
FRB and FHLB stock 125,297 — 125,297 — 125,297
Loans held for sale 26,822 — 26,822 — 26,822
AFS securities 2,939,594 — 2,939,594 — 2,939,594
HTM securities 1,244,433 — 1,033,439 — 1,033,439
Loans, net 23,730,356 — — 22,391,497 22,391,497
Accrued interest receivable 120,752 120,752 — — 120,752
Other assets 731,849 524,312 175,762 53,168 753,242
FINANCIAL LIABILITIES
Demand and savings deposits $ 20,650,955 $ 20,650,955 $ — $ — $ 20,650,955
Brokered deposits 995,975 139,166 856,809 — 995,975
Time deposits 3,912,724 — 3,912,608 — 3,912,608
Accrued interest payable 48,757 48,757 — — 48,757
Federal Home Loan Bank advances 750,000 754,414 — — 754,414
Senior debt and subordinated debt 535,741 — 419,072 — 419,072
Other borrowings 892,856 891,851 1,119 — 892,970
Other liabilities 467,810 173,140 280,130 14,540 467,810
December 31, 2023
--- --- --- --- --- --- --- --- --- --- ---
Estimated Fair Value
Carrying Amount Level 1 Level 2 Level 3 Total
(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents $ 549,710 $ 549,710 $ — $ — $ 549,710
FRB and FHLB stock 124,405 — 124,405 — 124,405
Loans held for sale 15,158 — 15,158 — 15,158
AFS securities 2,398,352 42,161 2,356,191 — 2,398,352
HTM securities 1,267,922 — 1,072,207 — 1,072,207
Loans, net 21,057,690 — — 19,930,560 19,930,560
Accrued interest receivable 107,972 107,972 — — 107,972
Other assets 661,067 452,935 157,540 50,592 661,067
FINANCIAL LIABILITIES
Demand and savings deposits $ 17,653,690 $ 17,653,690 $ — $ — $ 17,653,690
Brokered deposits 1,144,692 145,987 999,392 — 1,145,379
Time deposits 2,739,241 — 2,714,709 — 2,714,709
Accrued interest payable 35,083 35,083 — — 35,083
Federal funds purchased 240,000 240,000 — — 240,000
Federal Home Loan Bank advances 1,100,000 1,094,013 — — 1,094,013
Senior debt and subordinated debt 535,384 — 463,270 — 463,270
Other borrowings 612,142 611,269 837 — 612,106
Other liabilities 429,046 165,635 246,157 17,254 429,046

Fair values of financial instruments are significantly affected by the assumptions used, principally the timing of future cash flows and discount rates. Because assumptions are inherently subjective in nature, the estimated fair values cannot be

substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument. The aggregate fair value amounts presented do not necessarily represent management’s estimate of the underlying value of the Corporation.

For short-term financial instruments, defined as those with remaining maturities of 90 days or less, and excluding those recorded at fair value on the Corporation's consolidated balance sheets, book value was considered to be a reasonable estimate of fair value.

The following instruments are predominantly short-term:

Assets Liabilities
Cash and cash equivalents Demand and savings deposits
Accrued interest receivable Other borrowings
Accrued interest payable

FRB and FHLB stock represent restricted investments and are carried at cost on the consolidated balance sheets, which is a reasonable estimate of fair value.

As of June 30, 2024, fair values for loans and time deposits were estimated by discounting future cash flows using the current rates, as adjusted for liquidity considerations, at which similar loans would be made to borrowers and similar deposits would be issued to customers for the same remaining maturities. Fair values of loans also include estimated credit losses that would be assumed in a market transaction, which represents estimated exit prices.

Brokered deposits consist of demand and saving deposits, which are classified as Level 1, and time deposits, which are classified as Level 2. The fair value of these deposits is determined in a manner consistent with the respective type of deposits discussed above.

NOTE 10 – Net Income Per Share

Basic net income per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding.

Diluted net income per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding plus the incremental number of shares added as a result of converting common stock equivalents, calculated using the treasury stock method. The Corporation's common stock equivalents consist of outstanding stock options, restricted stock, RSUs, and PSUs. PSUs are required to be included in weighted average diluted shares outstanding if performance measures, as defined in each PSU award agreement, are met as of the end of the period.

A reconciliation of weighted average shares outstanding used to calculate basic and diluted net income per share follows (in thousands, except per share data):

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
Weighted average shares outstanding (basic) 175,305 165,854 169,006 166,227
Impact of common stock equivalents 1,629 1,337 1,763 1,582
Weighted average shares outstanding (diluted) 176,934 167,191 170,769 167,809
Per share:
Basic $ 0.53 $ 0.46 $ 0.90 $ 0.86
Diluted 0.52 0.46 0.89 0.85

NOTE 11 – Stock-Based Compensation

The Corporation grants equity awards to employees in the form of restricted stock, RSUs or PSUs under its Employee Equity Plan. In addition, employees may purchase stock under the Corporation's Employee Stock Purchase Plan. The fair value of equity awards granted to employees is recognized as compensation expense over the period during which employees are required to provide service in exchange for such awards.

The Corporation also grants equity awards to non-employee members of its Board of Directors and the Bank's Board of Directors under the Directors’ Plan. Under the Directors’ Plan, the Corporation can grant equity awards to non-employee Corporation and Bank directors in the form of restricted stock, RSUs or common stock. Recent grants of equity awards under the Directors’ Plan have been limited to RSUs.

As of June 30, 2024, the Employee Equity Plan had approximately 3.9 million shares reserved for future grants through 2032, and the Directors’ Plan had approximately 330,000 shares reserved for future grants through 2033.

The following table presents compensation expense and the related tax benefits for equity awards recognized in the consolidated statements of income:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands)
Compensation expense $ 2,758 $ 2,571 $ 3,425 $ 4,240
Tax benefit (620) (565) (764) (927)
Total stock-based compensation, net of tax $ 2,138 $ 2,006 $ 2,661 $ 3,313

NOTE 12 – Employee Benefit Plans

The net periodic pension cost for the Pension Plan consisted of the following components:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands)
Interest cost $ 789 $ 855 $ 1,579 $ 1,711
Expected return on plan assets (975) (877) (1,951) (1,754)
Net amortization and deferral — 80 — 161
Net periodic pension cost $ (186) $ 58 $ (372) $ 118

The components of the net benefit for the Postretirement Plan consisted of the following components:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands)
Interest cost $ 9 $ 13 $ 19 $ 26
Net accretion and deferral (136) (136) (271) (272)
Net periodic benefit $ (127) $ (123) $ (252) $ (246)

In connection with the Merger, the Corporation assumed the obligations of Prudential Bancorp under a multiemployer defined benefit pension plan that had previously been closed to new Prudential Bancorp participants.

The Corporation recognizes the funded status of its Pension Plan and Postretirement Plan on the consolidated balance sheets and recognizes the change in that funded status through OCI.

NOTE 13 – LEASES

The Corporation has operating leases for certain financial centers, corporate offices and land.

On May 10, 2024, the Bank and Fulton Financial Realty Company, a wholly owned subsidiary of the Corporation, entered into a sale-leaseback agreement for 40 financial center office locations for an aggregate cash purchase price of $55.4 million. The Bank entered into a lease for each of the locations sold in the Sale-Leaseback Transaction for an initial term of 15 years, with the option to extend the term of each for up to three successive terms of up to five years each. During the initial 12 months of the lease terms, the aggregate base rental amount for the properties will be approximately $4.4 million. During the initial lease terms, the base rental amount will increase annually at a rate of 2.25%. The Corporation recorded a pre-tax gain, after deduction of transaction-related expenses, of approximately $20.3 million in connection with the Sale-Leaseback Transaction. The properties are located in Pennsylvania, New Jersey, Delaware and Maryland.

The following table presents the components of lease expense, which is included in net occupancy expense on the consolidated statements of income:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands)
Operating lease expense $ 7,633 $ 4,751 $ 12,697 $ 9,592
Variable lease expense 716 773 1,480 1,557
Sublease income (300) (292) (583) (540)
Total lease expense $ 8,049 $ 5,232 $ 13,594 $ 10,609

Supplemental consolidated balance sheet information related to leases was as follows:

Operating Leases Balance Sheet Classification June 30, 2024 December 31, 2023
(dollars in thousands)
ROU assets Other assets $ 131,796 $ 88,188
Lease liabilities Other liabilities $ 138,389 $ 95,230
Weighted average remaining lease term 9.23 years 6.48 years
Weighted average discount rate 5.14 % 3.34 %

The discount rate used in determining the lease liability for each individual lease is the Bank's incremental borrowing rate which corresponds with the remaining lease term.

Supplemental cash flow information related to operating leases was as follows:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities $ 5,662 $ 4,844 $ 11,272 $ 9,770
ROU assets obtained in exchange for lease obligations 47,446 — 52,993 9,018

Lease payment obligations for each of the next five years and thereafter, with a reconciliation to the Corporation's lease liabilities were as follows as of June 30, 2024 (dollars in thousands):

Year Operating Leases
Remaining in 2024 $ 12,616
2025 23,741
2026 22,122
2027 19,830
2028 16,622
Thereafter 79,672
Total lease payments 174,603
Less: imputed interest (36,214)
Present value of lease liabilities $ 138,389

As of June 30, 2024, the Corporation had not entered into any significant leases that have not yet commenced.

NOTE 14 – Commitments and Contingencies

Commitments

The Corporation is a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of its borrowers or obligors.

Commitments to extend credit are agreements to lend to a borrower or obligor as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower or obligor. Since a portion of the commitments is expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each borrower's or obligor's creditworthiness on a case-by-case basis. The amount of collateral, if any, obtained upon an extension of credit is based on management's credit evaluation of the borrower or obligor. Collateral held varies but may include accounts receivable, inventory, property, equipment and income-producing commercial properties.

Standby letters of credit are conditional commitments issued to guarantee the financial or performance obligation of a borrower or obligor to a third party. Commercial letters of credit are conditional commitments issued to facilitate foreign and domestic trade transactions for borrowers or obligors. The credit risk involved in issuing letters of credit is similar to that involved in extending loan facilities. These obligations are underwritten consistent with commercial lending standards. The maximum exposure to loss for standby and commercial letters of credit is equal to the contractual (or notional) amount of the instruments.

The following table presents the Corporation's commitments to extend credit and letters of credit:

June 30,<br>2024 December 31, 2023
(dollars in thousands)
Commitments to extend credit $ 9,100,013 $ 8,790,511
Standby letters of credit 254,067 264,440
Commercial letters of credit 64,605 67,396

Residential Lending

The Corporation originates and sells residential mortgages to secondary market investors. The Corporation provides customary representations and warranties to secondary market investors that specify, among other things, that the loans have been underwritten to the standards of the secondary market investor. The Corporation may be required to repurchase specific loans or reimburse the investor for a credit loss incurred on a sold loan if it is determined that the representations and warranties have not been met. Under some agreements with secondary market investors, the Corporation may have additional credit exposure beyond customary representations and warranties, based on the specific terms of those agreements.

The Corporation maintains a reserve for estimated losses related to loans sold to investors. As of June 30, 2024 and December 31, 2023, the total reserve for losses on residential mortgage loans sold was $2.5 million and $1.8 million, respectively, including reserves for both representation and warranty and credit loss exposures. In addition, a component of ACL - OBS credit exposures of $1.3 million and $2.7 million, as of June 30, 2024 and December 31, 2023, respectively, related to additional credit exposures for potential loan repurchases.

Legal Proceedings

The Corporation is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business activities. The Corporation evaluates the possible impact of these matters, taking into consideration the most recent information available. A loss reserve is established for those matters for which the Corporation believes a loss is both probable and reasonably estimable. Once established, the reserve is adjusted as appropriate to reflect any subsequent developments. Actual losses with respect to any such matter may be more or less than the amount estimated by the Corporation. For matters where a loss is not probable, or the amount of the loss cannot be reasonably estimated by the Corporation, no loss reserve is established.

In addition, from time to time, the Corporation is involved in investigations or other forms of regulatory or governmental inquiry covering a range of possible issues and, in some cases, these may be part of similar reviews of the specified activities of other companies. These inquiries or investigations could lead to administrative, civil or criminal proceedings involving the Corporation, and could result in fines, penalties, restitution, other types of sanctions, or the need for the Corporation to undertake remedial actions, or to alter its business, financial or accounting practices. The Corporation's practice is to cooperate fully with regulatory and governmental inquiries and investigations.

As of the date of this report, the Corporation believes that any liabilities, individually or in the aggregate, that may result from the final outcomes of pending legal proceedings, or regulatory or governmental inquiries or investigations, will not have a material adverse effect on the financial condition of the Corporation. However, legal proceedings, inquiries and investigations are often unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to the Corporation's results of operations in any future period, depending, in part, upon the size of the loss or liability imposed and the operating results for the period, and could have a material adverse effect on the Corporation's business. In addition, regardless of the ultimate outcome of any such legal proceeding, inquiry or investigation, any such matter could cause the Corporation to incur additional expenses, which could be significant, and possibly material, to the Corporation's results of operations in any future period.

NOTE 15 – Subsequent Events

On July 16, 2024, the Board of Directors of the Bank, approved a plan to close 13 of the Bank's financial center offices and consolidate the operations of those offices into nearby financial center offices operated by the Bank. The Board of Directors of the Bank adopted the plan as part of the Bank's integration of the assets acquired and the deposits and certain other liabilities assumed in the Republic First Transaction and the ongoing FultonFirst strategic initiative. The financial center offices to be closed are located in Pennsylvania and New Jersey. The financial centers are expected to close on or about November 22, 2024.

In connection with the planned financial center office closures, the Corporation expects to incur pre-tax costs of approximately $10 million, consisting of approximately $6 million of write-offs of premises and equipment and related expenses, approximately $3 million of lease termination charges, and approximately $1 million of future cash expenditures in connection with employee severance. The Corporation expects that, in the aggregate, these financial center office closures will reduce annual pre-tax operating expense by approximately $8 million, beginning in the first quarter of 2025.

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

This Management's Discussion relates to the Corporation, a financial holding company registered under the BHCA and corporation incorporated under the laws of the Commonwealth of Pennsylvania, and its wholly owned subsidiaries. This Management's Discussion should be read in conjunction with the consolidated financial statements and other financial information presented in this Quarterly Report on Form 10-Q.

OVERVIEW

The Corporation is a financial holding company, which, through its wholly owned banking subsidiary, provides a full range of retail and commercial financial services in Pennsylvania, Delaware, Maryland, New Jersey and Virginia.

The Corporation generates the majority of its revenue through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the NIM, which is FTE net interest income as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses on loans and OBS credit risks, non-interest expenses and income taxes.

The following table presents a summary of the Corporation's earnings and selected performance ratios:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands, except per share data)
Net income $ 94,975 $ 79,607 $ 156,916 $ 147,920
Net income available to common shareholders 92,413 77,045 151,792 142,796
Net income available to common shareholders (diluted) 0.52 0.46 0.89 0.85
Operating net income available to common shareholders per share(1) 0.47 0.47 0.87 0.86
Return on average assets, annualized 1.24 % 1.17 % 1.08 % 1.10 %
Operating return on average assets, annualized(1) 1.11 % 1.18 % 1.06 % 1.11 %
Return on average common shareholders' equity, annualized 13.47 % 12.59 % 11.45 % 11.81 %
Operating return on average common shareholders' equity (tangible), annualized(1) 15.56 % 16.52 % 14.40 % 15.50 %
Net interest margin(2) 3.43 % 3.40 % 3.37 % 3.46 %
Efficiency ratio(1) 62.6 % 60.1 % 62.9 % 59.3 %
Non-performing assets to total assets 0.55 % 0.55 % 0.55 % 0.55 %
Net charge-offs (recoveries) to average loans 0.19 % 0.04 % 0.18 % 0.15 %

(1) Ratio represents a financial measure derived by methods other than GAAP. See reconciliation of this non-GAAP financial measure to the most directly

comparable GAAP measure under the "Supplemental Reporting of Non-GAAP Based Financial Measures" section of Management's Discussion.

(2) Presented on a FTE basis, using a 21% federal tax rate and statutory interest expense disallowances.

Acquisition of Substantially all of the Assets and Assumption of Substantially all of the Deposits and Certain Liabilities of Republic First Bank from the FDIC

On the Acquisition Date, Fulton Bank acquired substantially all of the assets and assumed substantially all of the deposits and certain liabilities of Republic First Bank from the FDIC, as receiver for Republic First Bank. As part of the Republic First Transaction, the Bank acquired approximately $4.8 billion of assets of Republic First Bank and assumed approximately $5.6 billion of liabilities of Republic First Bank. The Bank received approximately $0.8 billion of cash from the FDIC in connection with the Republic First Transaction.

As a result of the Republic First Transaction, the Bank enhanced its presence in Philadelphia, Pennsylvania and New Jersey.

In connection with the Republic First Transaction, Fulton Bank made a $5.0 million donation to the Fulton Forward Foundation to provide additional impact grants to nonprofit community organizations across the region that share Bank’s vision of advancing economic empowerment, particularly in underserved communities.

See "Note 2 - Business Combinations" in the Notes to Consolidated Financial Statements in Part 1, "Item 1. Financial Statements."

Common Stock Offering

On May 1, 2024, the Corporation completed its previously announced underwritten public offering of 19,166,667 shares of its common stock at a price to the public of $15.00 per share, before underwriting discounts. The net proceeds to the Corporation from the offering before deducting transaction expenses were approximately $273.5 million.

The Corporation intends to use the net proceeds of the offering for general corporate purposes, including to support new opportunities in connection with the Republic First Transaction.

Sale-Leaseback Transaction

On May 10, 2024, the Bank and Fulton Financial Realty Company, a wholly owned subsidiary of the Corporation, entered into the Sale-Leaseback Transaction and received an aggregate cash purchase price of $55.4 million. The Bank leased each of the locations sold in the Sale-Leaseback Transaction for an initial term of 15 years, with the option to extend the term of each for up to three successive terms of up to five years each. The Corporation recorded a pre-tax gain, after deduction of transaction-related expenses, of approximately $20.3 million in connection with the Sale-Leaseback Transaction. See "Note 13 - Leases" in the Notes to Consolidated Financial Statements in "Item 1. Financial Statements."

Securities Restructuring

In May 2024, the Corporation sold approximately $345.7 million AFS securities and recorded a pre-tax loss of $20.3 million. The proceeds from the sale were reinvested into higher-yielding securities of a similar type and similar duration.

Financial Highlights

Net Income Available to Common Shareholders and Net Income Per Share - Net income available to common shareholders was $92.4 million for the three months ended June 30, 2024, a $15.4 million increase compared to $77.0 million for the same period in 2023. Diluted net income available to common shareholders per share was $0.52 for the three months ended June 30, 2024, a $0.06 increase compared to the same period in 2023. Net income available to common shareholders was $151.8 million for the six months ended June 30, 2024, a $9.0 million increase compared to $142.8 million for the same period in 2023. Diluted net income available to common shareholders per share was $0.89 for the six months ended June 30, 2024, a $0.04 increase compared to the same period in 2023.

Six-Months Ended 2024 Results were Impacted by the Following Items:

•Preliminary gain on acquisition of $47.4 million (net of tax).

•CDI of $92.6 million in connection with the Republic First Transaction resulting in intangible amortization expense of $4.1 million.

•Provision for credit losses of $23.4 million related to non-PCD Loans acquired in the Republic First Transaction.

•Acquisition-related expenses of $13.8 million.

•FultonFirst implementation and asset disposal costs of $12.7 million.

Critical Accounting Policies

The Corporation's accounting policies are fundamental to understanding Management’s Discussion. Critical policies are those that the Corporation considers to be most important to the presentation of its financial condition and results of operations, because they require management's most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain.

The Corporation's critical accounting policies are described in Part II, "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023.

Supplemental Reporting of Non-GAAP Based Financial Measures

This Quarterly Report on Form 10-Q contains supplemental financial information, as detailed below, that has been derived by methods other than GAAP. The Corporation has presented these non-GAAP financial measures because it believes that these measures provide useful and comparative information to assess trends in the Corporation's results of operations. Presentation of these non-GAAP financial measures is consistent with how the Corporation evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Corporation's industry. Management believes that these non-GAAP financial measures, in addition to GAAP measures, are also useful to investors to evaluate the Corporation's results. Investors should recognize that the Corporation's presentation of these non-GAAP financial measures might not be comparable to similarly titled measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures, and the Corporation strongly encourages a review of its consolidated financial statements in their entirety.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure follow:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands, except per share data and share data)
Operating net income available to common shareholders
Net income available to common shareholders $ 92,413 $ 77,045 $ 151,792 $ 142,796
Plus: Core deposit intangible amortization 4,556 912 4,997 1,426
Plus: Acquisition-related expense 13,803 — 13,803 —
Plus: CECL Day 1 Provision 23,444 — 23,444 —
Less: Non-PCD Loans credit-related interest income from acquisition (571) — (571) —
Less: Interest rate derivative transition valuation(1) (137) — (288) —
Less: Gain on acquisition, net of tax (47,392) — (47,392) —
Plus: Loss on securities restructuring 20,282 — 20,282 —
Plus: FDIC special assessment — — 956 —
Less: Gain on Sale-Leaseback Transaction (20,266) — (20,266) —
Plus: FultonFirst implementation and asset disposals 6,323 — 12,652 —
Less: Tax impact of adjustments (9,961) (192) (11,552) (299)
Operating net income available to common shareholders (numerator) $ 82,494 $ 77,765 $ 147,857 $ 143,923
Weighted average shares (diluted) (denominator) 176,934 167,191 170,769 167,809
Operating net income available to common shareholders, per share (diluted) $ 0.47 $ 0.47 $ 0.87 $ 0.86
Three months ended June 30 Six months ended June 30
--- --- --- --- --- --- --- --- --- --- --- --- ---
2024 2023 2024 2023
Operating return on average assets(2)
Net income $ 94,975 $ 79,607 $ 156,916 $ 147,920
Plus: Core deposit intangible amortization 4,556 912 4,997 1,426
Plus: Acquisition-related expense 13,803 — 13,803 —
Plus: CECL Day 1 Provision 23,444 — 23,444 —
Less: Non-PCD Loans credit-related interest income from acquisition (571) — (571) —
Less: Interest rate derivative transition valuation(1) (137) — (288) —
Less: Gain on acquisition, net of tax (47,392) — (47,392) —
Plus: Loss on securities restructuring 20,282 — 20,282 —
Plus: FDIC special assessment — — 956 —
Less: Gain on Sale-Leaseback Transaction (20,266) — (20,266) —
Plus: FultonFirst implementation and asset disposals 6,323 — 12,652 —
Less: Tax impact of adjustments (9,961) (192) (11,552) (299)
Operating net income (numerator) $ 85,056 $ 80,327 $ 152,981 $ 149,047
Total average assets 30,774,891 27,235,567 29,113,319 27,069,036
Less: Average net core deposit intangible (68,234) (6,417) (36,836) (6,676)
Total operating average assets $ 30,706,657 $ 27,229,150 $ 29,076,483 $ 27,062,360
Operating return on average assets 1.11 % 1.18 % 1.06 % 1.11 %
Operating return on average common shareholders' equity (tangible)(2)
Net income available to common shareholders $ 92,413 $ 77,045 $ 151,792 $ 142,796
Plus: Intangible amortization 4,688 1,072 5,261 1,746
Plus: Acquisition-related expense 13,803 — 13,803 —
Plus: CECL Day 1 Provision 23,444 — 23,444 —
Less: Non-PCD Loans credit-related interest income from acquisition (571) — (571) —
Less: Interest rate derivative transition valuation(1) (137) — (288) —
Less: Gain on acquisition, net of tax (47,392) — (47,392) —
Plus: Loss on securities restructuring 20,282 — 20,282 —
Plus: FDIC special assessment — — 956 —
Less: Gain on Sale-Leaseback Transaction (20,266) — (20,266) —
Plus: FultonFirst implementation and asset disposals 6,323 — 12,652 —
Less: Tax impact of adjustments (9,989) (225) (11,607) (367)
Adjusted net income available to common shareholders (numerator) $ 82,598 $ 77,892 $ 148,066 $ 144,175
Average shareholders' equity 2,952,671 $ 2,647,464 $ 2,859,808 $ 2,630,484
Less: Average preferred stock (192,878) (192,878) (192,878) (192,878)
Less: Average goodwill and intangible assets (624,471) (563,146) (592,432) (562,449)
Average tangible common shareholders' equity (denominator) $ 2,135,322 $ 1,891,440 $ 2,074,498 $ 1,875,157
Operating return on average common shareholders' equity (tangible) 15.56 % 16.52 % 14.40 % 15.50 %
Three months ended June 30 Six months ended June 30
--- --- --- --- --- --- --- --- --- --- --- --- ---
2024 2023 2024 2023
Efficiency ratio
Non-interest expense $ 199,488 $ 168,018 $ 377,087 $ 327,636
Less: Acquisition-related expense (13,803) — (13,803) —
Less: Intangible amortization (4,688) (1,072) (5,261) (1,746)
Less: FDIC special assessment — — (956) —
Less: Gain on Sale-Leaseback Transaction 20,266 — 20,266 —
Less: FultonFirst implementation and asset disposals (6,323) — (12,652) —
Non-interest expense (numerator) $ 194,940 $ 166,946 $ 364,681 $ 325,890
Net interest income $ 241,720 $ 212,852 $ 448,657 $ 428,439
Tax equivalent adjustment 4,556 4,405 9,148 8,819
Plus: Total non-interest income 92,994 60,585 150,133 112,339
Less: Interest rate derivative transition valuation(1) (137) — (288) —
Less: Non-PCD Loans credit-related interest income from acquisition (571) — (571) —
Plus: Gain on acquisition, net of tax (47,392) — (47,392) —
Plus: Investment securities losses (gains), net 20,282 4 20,282 (19)
Total revenue (denominator) $ 311,452 $ 277,846 $ 579,969 $ 549,578
Efficiency ratio 62.6 % 60.1 % 62.9 % 59.3 %
(1) Resulting from the reference rate transition from LIBOR to SOFR in the Corporation's commercial customer interest rate swap program.
(2) Results are annualized.

RESULTS OF OPERATIONS

Three months ended June 30, 2024 compared to the three months ended June 30, 2023

Net Interest Income

FTE net interest income was $246.3 million for the three months ended June 30, 2024, an increase of $29.0 million, compared to $217.3 million for the same period in 2023. For the three months ended June 30, 2024, NIM increased to 3.43%, or 3 bps, compared to the same period in 2023. The Corporation manages the risk associated with changes in interest rates through the techniques described within Part 1, "Item 3, Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report on Form 10-Q. The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a 21% federal tax rate, and statutory interest expense disallowances. The discussion following this table is based on these taxable-equivalent amounts.

Three months ended June 30
2024 2023
Average<br>Balance Interest (1) Yield/<br>Rate Average<br>Balance Interest (1) Yield/<br>Rate
ASSETS (dollars in thousands)
Interest-earning assets:
Net loans(2) $ 23,345,914 $ 355,533 6.12 % $ 20,866,235 $ 287,154 5.52 %
Investment securities(3) 4,396,050 33,799 3.07 4,234,096 27,303 2.57
Other interest-earning assets 1,125,886 15,730 5.61 529,582 4,860 3.68
Total interest-earning assets 28,867,850 405,062 5.64 25,629,913 319,317 4.99
Noninterest-earning assets:
Cash and due from banks 302,381 129,682
Premises and equipment 203,166 216,847
Other assets 1,759,138 1,541,657
Less: ACL - loans(4) (357,644) (282,532)
Total Assets $ 30,774,891 $ 27,235,567
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 7,080,302 $ 31,748 1.80 % $ 5,535,669 $ 14,612 1.06 %
Savings and money market deposits 7,309,141 44,901 2.47 6,632,572 29,289 1.77
Brokered deposits 1,123,328 15,074 5.40 954,773 12,135 5.10
Time deposits 3,670,158 39,364 4.31 2,063,038 13,763 2.68
Total interest-bearing deposits 19,182,929 131,087 2.75 15,186,052 69,799 1.84
Borrowings and other interest-bearing liabilities 2,441,691 27,699 4.53 2,790,860 32,261 4.60
Total interest-bearing liabilities 21,624,620 158,786 2.95 17,976,912 102,060 2.27
Noninterest-bearing liabilities:
Demand deposits 5,460,025 6,021,091
Other liabilities 737,575 590,100
Total Liabilities 27,822,220 24,588,103
Shareholders’ equity 2,952,671 2,647,464
Total Liabilities and Shareholders’ Equity $ 30,774,891 $ 27,235,567
Net interest income/net interest margin (FTE) 246,276 3.43 % 217,257 3.40 %
Tax equivalent adjustment (4,556) (4,405)
Net interest income $ 241,720 $ 212,852

(1) Presented on a FTE basis using a 21% federal tax rate and statutory interest expense disallowances.

(2) Average balance includes non-performing loans.

(3) Balances include amortized historical cost for AFS. The related unrealized holding gains (losses) are included in other assets.

(4) ACL - loans relates to the ACL specifically for net loans and does not include the ACL for OBS credit exposures, which is included in other liabilities.

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volume) and changes in yields and rates for the three months ended June 30, 2024 in comparison to the same period in 2023:

2024 vs. 2023<br>Increase (Decrease) due<br>to change in
Volume Yield/Rate Net
(dollars in thousands)
FTE Interest income on:
Net loans(1) $ 35,713 $ 32,666 $ 68,379
Investment securities 1,067 5,429 6,496
Other interest-earning assets 7,416 3,454 10,870
Total interest income $ 44,196 $ 41,549 $ 85,745
Interest expense on:
Demand deposits $ 4,893 $ 12,243 $ 17,136
Savings and money market deposits 3,201 12,411 15,612
Brokered deposits 2,204 735 2,939
Time deposits 14,377 11,224 25,601
Borrowings and other interest-bearing liabilities (4,067) (495) (4,562)
Total interest expense $ 20,608 $ 36,118 $ 56,726

(1) Average balance includes non-performing loans.

Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of direct changes that are attributable to each component.

Compared to the second quarter of 2023, FTE total interest income for the second quarter of 2024 increased $85.7 million, or 26.9%, primarily due to an increase of $44.2 million attributable to changes in volume, of which $35.7 million related to average net loans. Also contributing to the increase in FTE total interest income was $41.5 million attributable to changes in yield, of which $32.7 million related to net loans. The yield on average interest-earning assets increased 65 bps in the second quarter of 2024 compared to the same period in 2023. Overall, the increase in FTE interest income was largely due to net loans acquired and cash received in the Republic First Transaction as well as an increase in interest rates.

In the second quarter of 2024, interest expense increased $56.7 million compared to the second quarter of 2023, primarily driven by an increase in the rate on interest-bearing liabilities resulting in a $36.1 million increase in interest expense. The increase in interest expense attributable to rate was driven by increases in the rates on savings and money market deposits, demand deposits and time deposits. The increase in interest expense attributable to volume was primarily due to increases in average time deposits. The increase in interest expense on deposits was in part due to deposits assumed in the Republic First Transaction.

Average loans and average FTE yields, by type, are summarized in the following table:

Three months ended June 30
2024 2023 Increase (Decrease)
Balance Yield Balance Yield %
(dollars in thousands)
Real estate – commercial mortgage $ 8,958,139 6.57 % $ 7,775,436 5.93 % 15.2 %
Commercial and industrial 4,853,583 6.90 4,629,919 6.16 223,664 4.8
Real estate – residential mortgage 5,977,132 4.19 5,008,295 3.70 968,837 19.3
Real estate – home equity 1,117,367 7.33 1,066,615 6.93 50,752 4.8
Real estate – construction 1,430,057 7.42 1,306,286 6.68 123,771 9.5
Consumer 685,183 6.84 763,407 5.85 (78,224) (10.2)
Leases and other loans(1) 324,453 6.05 316,277 4.48 8,176 2.6
Total loans $ 23,345,914 6.12 % $ 20,866,235 5.52 % 11.9 %

All values are in US Dollars.

(1) Consists of equipment lease financing, overdrafts and net origination fees and costs.

During the second quarter of 2024, average net loans increased $2.5 billion, or 11.9%, compared to the same period in 2023. The increase in average net loans was primarily due to $1.8 billion of average net loans acquired in the Republic First Transaction. Excluding the Republic First Transaction, average net loans increased $655.4 million largely due to increases of $478.0 million and $431.5 million in average commercial mortgage loans and residential mortgage loans, respectively, partially offset by decreases of $142.6 million and $71.2 million in average commercial and industrial loans and average consumer loans, respectively.

The yield on total loans increased 60 bps to 6.12% for the second quarter of 2024, compared to 5.52% for the same period in 2023, primarily due to rising interest rates and net loans acquired in the Republic First Transaction being accounted for at current market interest rates.

Average deposits and average interest rates, by type, are summarized in the following table:

Three months ended June 30
2024 2023 Increase (Decrease)
Balance Rate Balance Rate %
(dollars in thousands)
Noninterest-bearing demand $ 5,460,025 — % $ 6,021,091 — % (9.3) %
Interest-bearing demand 7,080,302 1.80 5,535,669 1.06 1,544,633 27.9
Savings and money market deposits 7,309,141 2.47 6,632,572 1.77 676,569 10.2
Total demand deposits and savings and money market deposits 19,849,468 1.55 18,189,332 0.97 1,660,136 9.1
Brokered deposits 1,123,328 5.40 954,773 5.10 168,555 17.7
Time deposits 3,670,158 4.31 2,063,038 2.68 1,607,120 77.9
Total deposits $ 24,642,954 2.14 % $ 21,207,143 1.32 % 16.2 %

All values are in US Dollars.

The cost of deposits increased 82 bps, to 2.14%, for the second quarter of 2024 compared to 1.32% for the same period in 2023, primarily due to an increase in rates and a change in the mix of deposits.

Average deposits increased $3.4 billion during the second quarter of 2024 compared to the same period in 2023, primarily due to $2.9 billion of average deposits assumed in the Republic First Transaction. Excluding the Republic First Transaction, average deposits increased $652.6 million largely due to increases of $1.2 billion, $233.3 million, $191.4 million and $140.5 million in average time deposits, average savings and money market deposits, average interest-bearing demand deposits and brokered deposits, respectively, partially offset by a decrease of $1.1 billion in noninterest-bearing demand deposits.

Average borrowings and interest rates, by type, are summarized in the following table:

Three months ended June 30
2024 2023 Increase (Decrease)
Balance Rate Balance Rate %
(dollars in thousands)
Federal funds purchased $ 32,637 5.97 % $ 679,401 5.31 % (95.2) %
Federal Home Loan Bank advances 833,726 4.64 880,811 5.34 (47,085) (5.3)
Senior debt and subordinated debt 535,656 3.96 539,906 3.96 (4,250) (0.8)
Other borrowings and interest-bearing liabilities(1) 1,039,672 4.51 690,742 3.47 348,930 50.5
Total borrowings and other interest-bearing liabilities $ 2,441,691 4.53 % $ 2,790,860 4.60 % (12.5) %

All values are in US Dollars.

(1) Includes repurchase agreements, short-term promissory notes, capital leases and collateral liabilities.

Average borrowings and other interest-bearing liabilities decreased $349.2 million in the second quarter of 2024 compared to the same period in 2023. The decrease in average borrowings and other interest-bearing liabilities was primarily due to decreases in average Federal funds purchased and average FHLB advances of $646.8 million and $47.1 million, respectively, partially offset by an increase in average other borrowings and interest-bearing liabilities of $348.9 million.

Provision for Credit Losses

The provision for credit losses was $32.1 million for the three months ended June 30, 2024 compared to $9.7 million in the same period in 2023. The increase was primarily due to the Republic First Transaction, which included a provision for credit losses of $23.4 million for non-PCD Loans.

Non-Interest Income

The following table presents the components of non-interest income:

Three months ended June 30 Increase (Decrease)
2024 2023 %
(dollars in thousands)
Wealth management $ 20,990 $ 18,678 12.4 %
Commercial banking:
Merchant and card 7,798 7,700 98 N/M
Cash management 6,966 5,835 1,131 19.4
Capital markets 2,585 6,092 (3,507) (57.6)
Other commercial banking 4,061 3,518 543 15.4
Total commercial banking 21,410 23,145 (1,735) (7.5)
Consumer banking:
Card 8,305 6,592 1,713 26.0
Overdraft 3,377 2,696 681 25.3
Other consumer banking 2,918 2,432 486 20.0
Total consumer banking 14,600 11,720 2,880 24.6
Mortgage banking 3,951 2,940 1,011 34.4
Other 4,933 4,106 827 20.1
Subtotal 65,884 60,589 5,295 8.7
Gain on acquisition, net of tax 47,392 — 47,392 N/M
Investment securities gains (losses), net (20,282) (4) (20,278) N/M
Total Non-Interest Income $ 92,994 $ 60,585 53.5 %

All values are in US Dollars.

Compared to the three months ended June 30, 2023, non-interest income before investment securities gains (losses) and gain on acquisition, net of tax, increased $5.3 million, or 8.7%, from $60.6 million. The increase in non-interest income was primarily due to $2.8 million from acquired operations in the Republic First Transaction. Also contributing to the increase in non-interest income before investment securities gain (losses) were increases of $2.3 million in wealth management revenues due to an increase in assets under management, $1.1 million in cash management fee income due to an increase in account analysis fees with customers electing to move funds to interest-bearing deposit accounts and $1.0 million in mortgage banking income driven by higher loan sale volumes and higher spreads, partially offset by a $3.6 million decrease in commercial customer interest rate swap fee income, reflected in capital markets.

In May 2024, the Corporation sold $345.7 million AFS securities and recorded a pre-tax loss of $20.3 million. The proceeds from the sale were reinvested into higher-yielding investment securities of a similar type and similar duration.

Non-Interest Expense

The following table presents the components of non-interest expense:

Three months ended June 30 Increase (Decrease)
2024 2023 %
(dollars in thousands)
Salaries and employee benefits $ 109,466 $ 94,102 16.3 %
Data processing and software 20,357 16,776 3,581 21.3
Net occupancy 17,793 14,374 3,419 23.8
Other outside services 11,773 10,834 939 8.7
FDIC insurance 6,696 4,895 1,801 36.8
Intangible amortization 4,688 1,072 3,616 337.3
Equipment 4,561 3,530 1,031 29.2
Professional fees 2,571 1,829 742 40.6
Marketing 2,101 1,655 446 26.9
Other 19,622 18,951 671 3.5
Subtotal 199,628 168,018 31,610 18.8
Gain on Sale-Leaseback Transaction (20,266) — (20,266) N/M
Acquisition-related expenses 13,803 — 13,803 N/M
FultonFirst implementation and asset disposals 6,323 — 6,323 N/M
Total non-interest expense $ 199,488 $ 168,018 18.7 %

All values are in US Dollars.

Excluding the gain on the Sale-Leaseback Transaction, acquisition-related expenses and FultonFirst implementation and asset disposal costs, non-interest expense increased $31.6 million, or 18.8%, for the three months ended June 30, 2024 compared to the same period in 2023. The increase in non-interest expense was primarily due to $21.1 million from the acquired operations in the Republic First Transaction and $6.9 million in salaries and benefits expense driven by annual merit increases, an increase in the number of employees, higher variable incentive compensation expense and higher healthcare claims expense.

Income Taxes

The Corporation's ETR was 7.9% for the three months ended June 30, 2024. Excluding the impact from the $47.3 million gain on acquisition, net of tax, the Corporation's ETR was 14.7% for the three months ended June 30, 2024 compared to 16.8% for the same period in 2023.

Six months ended June 30, 2024 compared to the six months ended June 30, 2023

Net Interest Income

FTE net interest income increased $20.5 million to $457.8 million for the six months ended June 30, 2024, from $437.3 million for the same period in 2023. NIM decreased 9 bps to 3.37%, compared to 3.46% for the same period in 2023. The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a 21% federal tax rate, and statutory interest expense disallowances. The discussion following this table is based on these taxable-equivalent amounts.

Six months ended June 30
2024 2023
Average<br>Balance Interest Yield/<br>Rate Average<br>Balance Interest Yield/<br>Rate
ASSETS (dollars in thousands)
Interest-earning assets:
Net loans(1) $ 22,357,972 $ 669,414 6.02 % $ 20,665,779 $ 550,219 5.36 %
Investment securities(2) 4,189,901 60,847 2.90 4,261,718 54,824 2.57
Other interest-earning assets 699,547 19,059 5.47 511,456 8,508 3.34
Total interest-earning assets 27,247,420 749,320 5.52 25,438,953 613,551 4.85
Noninterest-earning assets:
Cash and due from banks 292,638 135,436
Premises and equipment 213,270 219,920
Other assets 1,686,941 1,552,669
Less: ACL - loans(3) (326,950) (277,942)
Total Assets $ 29,113,319 $ 27,069,036
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 6,338,513 $ 52,248 1.66 % $ 5,431,696 $ 23,067 0.86 %
Savings and money market deposits 6,989,186 83,699 2.41 6,551,470 49,824 1.53
Brokered deposits 1,103,356 29,728 5.42 698,644 17,308 5.00
Time deposits 3,319,249 68,986 4.18 1,880,970 21,221 2.28
Total interest-bearing deposits 17,750,304 234,661 2.66 14,562,780 111,420 1.54
Borrowings and other interest-bearing liabilities 2,525,034 56,854 4.49 2,928,819 64,873 4.43
Total interest-bearing liabilities 20,275,338 291,515 2.89 17,491,599 176,293 2.03
Noninterest-bearing liabilities:
Demand deposits 5,260,550 6,329,701
Other liabilities 717,623 617,252
Total Liabilities 26,253,511 24,438,552
Shareholders’ equity 2,859,808 2,630,484
Total Liabilities and Shareholders’ Equity $ 29,113,319 $ 27,069,036
Net interest income/net interest margin (FTE) 457,805 3.37 % 437,258 3.46 %
Tax equivalent adjustment (9,148) (8,819)
Net interest income $ 448,657 $ 428,439

(1) Average balance includes non-performing loans.

(2) Balances include amortized historical cost for AFS. The related unrealized holding gains (losses) are included in other assets.

(3) ACL - loans relates to the ACL specifically for net loans and does not include the ACL for OBS credit exposures, which is included in other liabilities.

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volume) and changes in yields and rates for the six months ended June 30, 2024 in comparison to the same period in 2023:

2024 vs. 2023<br>Increase (Decrease) due<br>to change in
Volume Yield/Rate Net
(dollars in thousands)
FTE interest income on:
Net loans (1) $ 47,606 $ 71,589 $ 119,195
Investment securities (924) 6,947 6,023
Other interest-earning assets 3,859 6,692 10,551
Total interest income $ 50,541 $ 85,228 $ 135,769
Interest expense on:
Demand deposits $ 4,440 $ 24,741 $ 29,181
Savings and money market deposits 3,525 30,350 33,875
Brokered deposits 10,847 1,573 12,420
Time deposits 22,856 24,909 47,765
Borrowings and other interest-bearing liabilities (8,893) 874 (8,019)
Total interest expense $ 32,775 $ 82,447 $ 115,222

(1) Average balance includes non-performing loans.

Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of direct changes that are attributable to each component.

Compared to the same period in 2023, FTE total interest income for the six months ended June 30, 2024 increased $135.8 million due to increases of $85.2 million attributable to changes in yield, of which $71.6 million was attributable to net loans, and $50.5 million attributable to changes in volume, of which $47.6 million was attributable to average net loans. The yield on average interest-earning assets increased 67 bps in the six months ended June 30, 2024 compared to the same period in 2023. The increase in FTE interest income was largely due to net loans and cash acquired in the Republic First Transaction as well as an increase in interest rates.

For the six months ended June 30, 2024, interest expense increased $115.2 million compared to the same period in 2023, primarily driven by an increase in the rate on interest-bearing liabilities resulting in an $82.4 million increase in interest expense. The increase in interest expense attributable to rate was driven by increases in the rates on savings and money market deposits, time deposits and demand deposits. The increase in interest expense attributable to volume was $32.8 million primarily driven by increases in average time deposits and average brokered deposits, partially offset by a decrease in average borrowings and other interest-bearing liabilities. The increase in interest expense on deposits was in part due to deposits assumed in the Republic First Transaction.

Average loans and average FTE yields, by type, are summarized in the following table:

Six months ended June 30
2024 2023 Increase (Decrease)
Balance Yield Balance Yield %
(dollars in thousands)
Real estate – commercial mortgage $ 8,562,077 6.46 % $ 7,748,356 5.74 % 10.5 %
Commercial and industrial 4,685,383 6.79 4,598,097 5.97 87,286 1.9
Real estate - residential mortgage 5,665,518 4.08 4,900,182 3.64 765,336 15.6
Real estate - home equity 1,078,344 7.33 1,076,270 6.65 2,074 0.2
Real estate – construction 1,335,348 7.43 1,291,299 6.49 44,049 3.4
Consumer 703,353 6.64 742,445 5.62 (39,092) (5.3)
Leases and other loans (1) 327,949 5.38 309,130 4.29 18,819 6.1
Total loans $ 22,357,972 6.02 % $ 20,665,779 5.36 % 8.2 %

All values are in US Dollars.

(1) Consists of equipment lease financing, overdrafts and net origination fees and costs.

During the six months ended June 30, 2024, average net loans increased $1.7 billion, or 8.2%, compared to the same period in 2023. The increase in average net loans was primarily due to $912.1 million of average net loans acquired in the Republic First Transaction. Excluding the Republic First Transaction, average net loans increased $780.1 million largely due to increases of $496.7 million and $461.4 million in average residential mortgage loans and average commercial mortgage loans, respectively, partially offset by decreases of $95.9 million, $35.6 million, $33.1 million and $32.0 million in average commercial and industrial loans, average consumer loans, average home equity loans and average construction loans, respectively.

The yield on total loans increased 66 bps for the first six months 2024 primarily due to rising interest rates and net loans acquired in the Republic First Transaction being accounted for at current market interest rates.

Average deposits and average interest rates, by type, are summarized in the following table:

Six months ended June 30
2024 2023 Increase (Decrease)
Balance Rate Balance Rate %
(dollars in thousands)
Noninterest-bearing demand $ 5,260,550 — % $ 6,329,701 — % (16.9) %
Interest-bearing demand 6,338,513 1.66 5,431,696 0.86 906,817 16.7
Savings and money market deposits 6,989,186 2.41 6,551,470 1.53 437,716 6.7
Total demand deposits and savings and money market deposits 18,588,249 1.47 18,312,867 0.80 275,382 1.5
Brokered deposits 1,103,356 5.42 698,644 5.00 404,712 57.9
Time deposits 3,319,249 4.18 1,880,970 2.28 1,438,279 76.5
Total deposits $ 23,010,854 2.05 % $ 20,892,481 1.08 % 10.1 %

All values are in US Dollars.

The cost of total deposits increased 97 bps to 2.05% for the first six months of 2024 compared to 1.08% for the same period of 2023, primarily due to rising interest rates and a change in the mix of deposits.

Average deposits increased $2.1 billion largely due to $1.4 billion of average deposits assumed in the Republic First Transaction. Excluding the Republic First Transaction, average deposits increased $726.8 million largely due to increases of $1.2 billion, $390.7 million, $230.2 million and $216.1 million in average time deposits, average brokered deposits, average interest-bearing demand deposits and average savings and money market deposits, respectively, partially offset by a decrease of $1.3 billion in noninterest-bearing demand deposits.

Average borrowings and interest rates, by type, are summarized in the following table:

Six months ended June 30
2024 2023 Increase (Decrease)
Balance Rate Balance Rate %
(dollars in thousands)
Federal funds purchased $ 103,148 5.52 % $ 592,753 5.08 % (82.6)
Federal Home Loan Bank advances 868,308 4.72 1,070,148 5.11 (201,840) (18.9)
Senior debt and subordinated debt 535,567 3.96 539,817 3.96 (4,250) (0.8)
Other borrowings and interest-bearing liabilities(1) 1,018,011 4.30 726,101 3.26 291,910 40.2
Total borrowings and other interest-bearing liabilities $ 2,525,034 4.49 % $ 2,928,819 4.43 % (13.8) %

All values are in US Dollars.

(1) Includes repurchase agreements, short-term promissory notes and capital leases.

Average borrowings and other interest-bearing liabilities decreased $403.8 million during the first six months of 2024 compared to the same period in 2023. The decrease in average borrowings and other interest-bearing liabilities was primarily due to decreases in average Federal funds purchased and average FHLB advances of $489.6 million and $201.8 million, respectively, partially offset by an increase in average other borrowings and interest-bearing liabilities of $291.9 million.

Provision for Credit Losses

The provision for credit losses was $43.0 million for the six months ended June 30, 2023, compared to $34.3 million for the same period in 2023. The increase was primarily due to the Republic First Transaction, which included a provision for credit losses of $23.4 million for non-PCD Loans, partially offset by an elevated level of provision for credit losses in the same period in 2023 due to a $13.3 million charge-off for a commercial office loan.

Non-Interest Income

The following table presents the components of non-interest income:

Six months ended June 30 Increase (Decrease)
2024 2023 %
(dollars in thousands)
Wealth management $ 41,144 $ 36,740 12.0 %
Commercial banking:
Merchant and card 14,607 14,534 73 0.5
Cash management 13,271 11,350 1,921 16.9
Capital markets 4,926 8,436 (3,510) (41.6)
Other commercial banking 7,434 6,338 1,096 17.3
Total commercial banking 40,238 40,658 (420) (1.0)
Consumer banking:
Card 14,933 12,835 2,098 16.3
Overdraft 6,163 5,429 734 13.5
Other consumer banking 5,172 4,673 499 10.7
Total consumer banking 26,268 22,937 3,331 14.5
Mortgage banking 7,041 4,910 2,131 43.4
Other 8,332 7,075 1,257 17.8
Subtotal 123,023 112,320 10,703 9.5
Gain on acquisition, net of tax 47,392 — 47,392 N/M
Investment securities (losses) gains, net (20,282) 19 (20,301) N/M
Total Non-Interest Income $ 150,133 $ 112,339 33.6 %

All values are in US Dollars.

Non-interest income before investment securities gains (losses) and gain on acquisition, net of tax, increased $10.7 million, or 9.5%, during the six months ended June 30, 2024 compared to the same period in 2023. The increase in non-interest income was due to $2.8 million from acquired operations in the Republic First Transaction. The remaining increase in non-interest income before investment securities gains (losses) of $7.9 million included a $4.4 million increase in wealth management revenues due to an increase in assets under management, a $2.1 million increase in mortgage banking income from higher loan volumes and higher spreads and a $1.9 million increase in cash management fee income due to an increase in account analysis fees with customers electing to move funds to interest-bearing deposit accounts.

In May 2024, the Corporation sold $345.7 million available for sale securities and recorded a pre-tax loss of $20.3 million. The proceeds from the sale were reinvested into higher-yielding securities of a similar type and similar duration.

Non-Interest Expense

The following table presents the components of non-interest expense:

Six months ended June 30 Increase (Decrease)
2024 2023 %
(dollars in thousands)
Salaries and employee benefits $ 204,705 $ 183,385 11.6 %
Data processing and software 38,018 32,571 5,447 16.7
Net occupancy 33,943 28,812 5,131 17.8
Other outside services 22,582 20,960 1,622 7.7
FDIC insurance 12,800 9,690 3,110 32.1
Equipment 8,602 6,920 1,682 N/M
Intangible amortization 5,261 1,746 3,515 N/M
Professional fees 4,659 4,221 438 10.4
Marketing 4,012 3,541 471 13.3
Other 36,316 35,790 526 1.5
Subtotal 370,898 327,636 43,262 13.2
Gain on Sale-Leaseback Transaction (20,266) — (20,266) N/M
Acquisition-related expenses 13,803 — 13,803 N/M
FultonFirst implementation and asset disposals 12,652 — 12,652 N/M
Total non-interest expense $ 377,087 $ 327,636 15.1 %

All values are in US Dollars.

Excluding the gain on the Sale-Leaseback Transaction, acquisition-related expenses and FultonFirst implementation and asset disposal costs, non-interest expense increased $43.3 million, or 13.2%, for the six months ended June 30, 2024 compared to the same period in 2023. The increase in non-interest expense was due to a $21.1 million from acquired operations in the Republic First Transaction, $12.8 million in salaries and benefits expense driven by annual merit increases, an increase in the number of employees, lower deferred costs from loan origination activities and higher healthcare claims expense, $3.0 million in higher data processing and software expenses, a result of technology investments and $2.7 million in higher net occupancy costs.

Income Taxes

The Corporation's ETR was 12.2% for the six months ended June 30, 2024. Excluding the impact from the $47.3 million gain on acquisition, net of tax, the Corporation's ETR was 16.6% for the six months ended June 30, 2024 compared to 17.3% for the same period in 2023.

FINANCIAL CONDITION

The table below presents condensed consolidated ending balance sheets:

June 30,<br>2024 December 31,<br>2023
%
Assets (dollars in thousands)
Cash and cash equivalents $ 1,396,282 $ 549,710 846,572 N/M
FRB and FHLB Stock 125,297 124,405 0.7
Loans held for sale 26,822 15,158 76.9
Investment securities 4,184,027 3,666,274 14.1
Net loans, less ACL - loans 23,730,356 21,057,690 12.7
Net premises and equipment 180,642 222,881 (19.0)
Goodwill and intangibles 648,026 560,687 15.6
Other assets 1,478,361 1,375,110 7.5
Total Assets $ 31,769,813 $ 27,571,915 4,197,898 15.2 %
Liabilities and Shareholders' Equity
Deposits $ 25,559,654 $ 21,537,623 4,022,031 18.7 %
Borrowings 2,178,597 2,487,526 (12.4)
Other liabilities 929,953 786,627 18.2
Total Liabilities 28,668,204 24,811,776 15.5
Total Shareholders' Equity 3,101,609 2,760,139 12.4
Total Liabilities and Shareholders' Equity $ 31,769,813 $ 27,571,915 4,197,898 15.2 %

All values are in US Dollars.

Investment Securities

The following table presents the carrying amount of investment securities:

June 30,<br>2024 December 31,<br>2023
%
Available for Sale (dollars in thousands)
U.S. Government securities $ — $ 42,161 (42,161) N/M
U.S. Government-sponsored agency securities — 1,010 N/M
State and municipal securities 820,109 1,072,013 (23.5)
Corporate debt securities 337,398 440,551 (23.4)
Collateralized mortgage obligations 713,769 111,434 N/M
Residential mortgage-backed securities 557,191 196,795 N/M
Commercial mortgage-backed securities 511,127 534,388 (4.4)
Total available for sale securities 2,939,594 2,398,352 22.6
Held to Maturity
Residential mortgage-backed securities 384,956 407,075 (5.4)
Commercial mortgage-backed securities 859,477 860,847 (0.2)
Total held to maturity securities 1,244,433 1,267,922 (1.9)
Total Investment Securities $ 4,184,027 $ 3,666,274 517,753 14.1 %

All values are in US Dollars.

Compared to December 31, 2023, total AFS securities at June 30, 2024 increased $541.2 million, or 22.6%. The increase in AFS securities at June 30, 2024 compared to December 31, 2023 was primarily due to increases in collateralized mortgage obligations and residential mortgage-backed securities of $602.3 million and $360.4 million, respectively, partially offset by decreases in state and municipal securities and corporate debt securities of $251.9 million and $103.2 million, respectively.

At June 30, 2024, total HTM securities decreased $23.5 million compared to December 31, 2023, primarily driven by a decrease of $22.1 million in residential mortgage-backed securities due to payments.

Loans

The following table presents ending net loans outstanding by type:

June 30,<br>2024 December 31,<br>2023
%
(dollars in thousands)
Real estate - commercial mortgage $ 9,289,770 $ 8,127,728 1,162,042 14.3%
Commercial and industrial(1) 4,967,796 4,545,552 9.3%
Real estate - residential mortgage 6,248,856 5,325,923 17.3%
Real estate - home equity 1,120,878 1,047,184 7.0%
Real estate - construction 1,463,799 1,239,075 18.1%
Consumer 692,086 729,318 (5.1)%
Leases and other loans(2) 323,112 336,314 (3.9)%
Net loans $ 24,106,297 $ 21,351,094 2,755,203 12.9%

All values are in US Dollars.

(1) Includes no unearned income for June 30, 2024 and $41.0 thousand for December 31, 2023.

(2) Includes unearned income of $36.6 million for June 30, 2024 and $38.0 million for December 31, 2023.

During the six months ended June 30, 2024, net loans increased $2.8 billion, or 12.9%, compared to December 31, 2023. The increase in net loans during the first six months of 2024 was primarily due to net loans acquired in the Republic First Transaction of $2.5 billion based on preliminary fair values as of the Acquisition Date. The reduction in fair value on the acquired net loans as of the Acquisition Date was $378.9 million, which included an adjustment for interest rates of $299.5 million, an adjustment for credit of $55.9 million on PCD Loans and an adjustment for credit of $23.4 million for non-PCD Loans. Excluding the impact from the credit-related adjustment on PCD Loans of $55.9 million and purchase accounting accretion of $10.4 million, net loans acquired in the Republic First Transaction declined approximately $33.1 million subsequent to the Acquisition Date. Excluding net loans acquired in the Republic First Transaction, net loans increased $216.9 million, or 1.0%, largely due to increases of $172.7 million, $119.7 million and $73.9 million in residential mortgage loans, commercial mortgage loans and construction loans, respectively, partially offset by a $84.1 million decrease in commercial and industrial loans.

The Corporation does not have a significant concentration of credit risk with any single borrower. As of June 30, 2024, approximately $10.8 billion, or 44.6%, of the loan portfolio was comprised of commercial mortgage loans and construction loans.

The Corporation has established lower total lending limits for certain types of commercial lending commitments and lower total lending limits based on the Corporation's internal risk rating of an individual borrower at the time the lending commitment is approved. The Corporation adheres to loan portfolio management practices, which include requiring an annual review of the majority of loans. Additionally, management monitors the loan portfolio throughout the year taking into account, among other things, the size, complexity and level risk of loans and individual borrowers. An independent loan review function assesses the portfolio for internal risk rating accuracy and loan servicing policy requirements. The Corporation consolidates risk migrations to identify emerging risks by industry and real estate property types, taking into consideration economic forecasts and industry trends. Recently, the Corporation identified the office and multi-family commercial mortgage loan portfolios as posing heightened risks and consequently moderated the volume of new loan originations. The Corporation takes a risk-based approach when reviewing a specific loan portfolio, such as the office loan or multi-family loan portfolios. The Corporation reviews portfolio concentrations and adjusts the lending limits based on asset quality, economic forecasts and industry outlook.

The following table summarizes the industry concentrations within the commercial mortgage and the commercial and industrial loan portfolios:

June 30, 2024 December 31, 2023
Real estate(1) 43.0 % 46.6 %
Health care 6.2 6.6
Retail 6.2 3.3
Manufacturing 5.9 6.1
Other services 5.2 4.5
Agriculture 5.0 5.6
Hospitality and food services 4.2 3.6
Construction(2) 3.7 4.1
Wholesale trade 2.9 3.2
Educational services 2.9 2.9
Professional, scientific and technical services 2.6 2.2
Arts, entertainment and recreation 2.2 1.9
Transportation and warehousing 1.7 1.7
Finance and Insurance 1.4 1.3
Public administration 1.2 1.0
Administrative and Support 0.9 1.1
Other 4.8 4.3
Total 100.0 % 100.0 %

(1) Includes commercial loans to borrowers engaged in the business of renting, leasing or managing real estate for others; selling and/or buying real estate for

others; and appraising real estate.

(2) Includes commercial loans to borrowers engaged in the construction industry.

The commercial mortgage loan portfolio consists of 44% owner occupied commercial mortgage loans and 56% of non-owner occupied commercial mortgage loans as of June 30, 2024. The following table summarizes the non-owner occupied commercial mortgage loan portfolio and the percent to total net loans.

June 30, 2024 December 31, 2023
% %
(dollars in thousands)
Multi-family 5.9 % 5.4 %
Retail trade 1,125,962 4.7 893,029 4.2
Industrial 867,391 3.6 634,533 3.0
Office 781,608 3.2 640,403 3.0
Hospitality and food services 469,453 1.9 453,305 2.1
Other 506,528 2.1 498,122 2.3
Total non-owner occupied commercial mortgage loans 21.5 % 20.0 %

All values are in US Dollars.

The following table summarizes the commercial mortgage office non-owner occupied loan portfolio outstanding balance, total commitment and LTV ratio by Metropolitan Statistical Area:

June 30, 2024 December 31, 2023
Outstanding Balance Total Commitment Weighted Average LTV (1) Outstanding Balance Total Commitment Weighted Average LTV (1)
(dollars in thousands)
Philadelphia(2) $ 334,294 $ 372,558 65 % $ 241,596 $ 247,395 56 %
New York(3) 99,019 104,560 68 60,149 62,565 71
Washington, D.C.(4) 91,920 91,920 56 97,270 97,847 56
Baltimore (5) 83,206 84,303 47 82,573 82,577 51
Other 173,169 185,021 63 158,815 161,533 61
Total office non-owner occupied commercial real estate $ 781,608 $ 838,362 62 % $ 640,403 $ 651,917 58 %

(1) Weighted Average LTV as of origination.

(2) Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

(3) New York-Newark-Jersey City, NY-NJ-PA

(4) Washington-Arlington-Alexandria, DC-VA-MD-WV

(5) Baltimore-Columbia-Towson, MD

The non-owner occupied commercial mortgage office loan portfolio table above excludes commercial construction loans secured by office property collateral with a total outstanding balance of $48.9 million and outstanding loan commitment of $57.4 million as of June 30, 2024.

The following table summarizes the commercial mortgage multi-family non-owner occupied loan portfolio outstanding balance, total commitment and LTV ratio by Metropolitan Statistical Area:

June 30, 2024 December 31, 2023
Outstanding Balance Total Commitment Weighted Average LTV (1) Outstanding Balance Total Commitment Weighted Average LTV (1)
(dollars in thousands)
Philadelphia(2) $ 676,646 $ 709,088 61 % $ 467,749 $ 480,942 57 %
New York(3) 124,458 131,619 71 53,153 53,642 72
Baltimore(4) 69,295 69,475 61 54,675 54,879 56
Washington, D.C.(5) 31,032 33,493 43 87,020 92,483 51
Lancaster, PA 134,548 143,668 69 159,691 169,437 66
Other 395,866 437,354 60 325,324 361,693 65
Total multi-family non-owner occupied commercial real estate $ 1,431,845 $ 1,524,697 62 % $ 1,147,612 $ 1,213,076 59 %

(1) Weighted Average LTV as of origination.

(2) Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

(3) New York-Newark-Jersey City, NY-NJ-PA

(4) Washington-Arlington-Alexandria, DC-VA-MD-WV

(5) Baltimore-Columbia-Towson, MD

The non-owner occupied commercial mortgage multi-family loan table above excludes commercial construction loans secured by multi-family property collateral with a total outstanding loan balance of $469.1 million and outstanding loan commitment of $874.6 million as of June 30, 2024.

The following table presents the changes in non-accrual loans for the three months and six months ended June 30, 2024:

Commercial <br>and <br>Industrial Real Estate -<br>Commercial<br>Mortgage Real Estate -<br>Construction Real Estate -<br>Residential<br>Mortgage Consumer and Real Estate -<br>Home<br>Equity Leases and other loans Total
(dollars in thousands)
Balance at March 31, 2024 $ 43,735 $ 45,961 $ 1,286 $ 23,245 $ 5,310 $ 10,091 $ 129,628
Additions 24,420 13,078 — 3,272 3,593 1,664 46,027
Payments (7,386) (4,994) (60) (1,771) (425) (404) (15,040)
Charge-offs (2,955) (7,853) — (35) (1,766) (1,398) (14,007)
Transfers to accrual status (540) — — — — — (540)
Transfers to OREO — — — (248) (190) — (438)
Balance at June 30, 2024 $ 57,274 $ 46,192 $ 1,226 $ 24,463 $ 6,522 $ 9,953 $ 145,630
Six months ended June 30, 2024
Balance at December 31, 2023 $ 39,952 $ 44,805 $ 1,341 $ 20,824 $ 4,805 $ 9,893 $ 121,620
Additions 55,362 24,316 — 5,974 6,746 2,912 95,310
Payments (19,450) (14,870) (115) (2,165) (697) (649) (37,946)
Charge-offs (10,587) (7,879) — (286) (4,004) (2,203) (24,959)
Transfers to accrual status (8,003) (180) — (142) (138) — (8,463)
Transfers to OREO — — — 258 (190) — 68
Balance at June 30, 2024 $ 57,274 $ 46,192 $ 1,226 $ 24,463 $ 6,522 $ 9,953 $ 145,630

During the six months ended June 30, 2024, non-accrual loans increased by approximately $24.0 million, or 19.7%, largely due to additions to non-accrual loans acquired in the Republic First Transaction of $22.7 million. During the six months ended June 30, 2024, non-accrual loans as a percentage of total net loans increased to 0.60%, compared to 0.57% as of December 31, 2023.

The following table summarizes non-performing assets as of the periods shown below:

June 30, 2024 December 31, 2023
(dollars in thousands)
Non-accrual loans $ 145,630 $ 121,620
Loans 90 days or more past due and still accruing 26,962 31,721
Total non-performing loans 172,592 153,341
OREO(1) 1,444 896
Total non-performing assets $ 174,036 $ 154,237
Non-accrual loans to total loans 0.60 % 0.57 %
Non-performing loans to total loans 0.72 % 0.72 %
Non-performing assets to total assets 0.55 % 0.56 %
ACL - loans to non-performing loans 218 % 191 %

(1) Excludes $24.2 million and $10.9 million of residential mortgage properties for which formal foreclosure proceedings were in process as of June 30, 2024

and December 31, 2023, respectively.

Non-performing loans at June 30, 2024 increased $19.3 million, or 12.6%, compared to $153.3 million as of December 31, 2023. The increase in non-performing loans during the first six months of 2024 was primarily due to additions to non-accrual loans from the Republic First Transaction of $22.7 million. Non-performing loans as a percentage of total net loans were 0.72% at June 30, 2024 and December 31, 2023. See "Note 5 - Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details on non-performing loans.

The ability to identify potential problem loans in a timely manner is important to maintaining an adequate ACL. For commercial and industrial loans, commercial mortgages and commercial construction loans to commercial borrowers, an

internal risk rating process is used to monitor credit quality. The evaluation of credit risk for residential mortgages, home equity loans, construction loans to individuals, consumer loans and leases and other loans is based on payment history, through the monitoring of delinquency levels and trends.

Total internally risk-rated loans were $15.5 billion and $13.7 billion as of June 30, 2024 and December 31, 2023, respectively, of which $2.0 billion and $0.9 billion were criticized and classified, respectively. For a description of the Corporation's risk ratings, see "Note 1 - Summary of Significant Accounting Policies - Allowance for Credit Losses" in the Notes to Consolidated Financial Statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023.

The following table presents criticized and classified loans, or those with internal risk ratings of special mention or substandard or lower for commercial mortgages, commercial and industrial loans and construction loans to commercial borrowers, by class segment:

Special Mention(1) Increase (Decrease) Substandard or Lower(2) Increase (Decrease) Total Criticized and Classified Loans
June 30, 2024 December 31, 2023 % June 30, 2024 December 31, 2023 % June 30, 2024 December 31, 2023
(dollars in thousands)
Real estate - commercial mortgage $ 755,031 $ 302,553 149.6% $ 373,983 $ 224,774 66.4 % $ 1,129,014 $ 527,327
Commercial and industrial 393,976 135,837 258,139 190.0 300,484 196,500 103,984 52.9 694,460 332,337
Real estate - construction(3) 126,897 38,520 88,377 229.4 51,382 26,771 24,611 91.9 178,279 65,291
Total $ 1,275,904 $ 476,910 167.5% $ 725,849 $ 448,045 62.0% $ 2,001,753 $ 924,955
% of total risk rated loans 8.2 % 3.5 % 4.7 % 3.3 % 12.9 % 6.8 %

All values are in US Dollars.

(1) Considered "criticized" loans by banking regulators.

(2) Considered "classified" loans by banking regulators.

(3) Excludes construction - other.

The Corporation accounts for the credit risk associated with lending activities through the ACL and the provision for credit losses.

The increase of $799.0 million in special mention loans as of June 30, 2024 was primarily due to loans acquired in the Republic First Transaction with a balance of $776.9 million as of June 30, 2024. The increase of $277.8 million in substandard or lower loans as of June 30, 2024 was primarily due to loans acquired in the Republic First Transaction with a balance of $166.5 million as of June 30, 2024.

The following table presents the activity in the ACL:

Three months ended June 30 Six months ended June 30
2024 2023 2024 2023
(dollars in thousands)
Average balance of net loans $ 23,345,914 $ 20,866,235 $ 22,357,972 $ 20,665,779
Balance of ACL at beginning of period $ 297,888 $ 278,695 $ 293,404 $ 269,366
CECL Day 1 Provision(1) 23,444 — 23,444 —
Initial PCD allowance for credit losses 55,906 — 55,906 —
Loans charged off:
Real estate - commercial mortgage (7,853) (230) (7,879) (13,592)
Commercial and industrial (2,955) (2,017) (10,587) (2,629)
Real estate - residential mortgage (35) (62) (286) (62)
Consumer and real estate - home equity (1,766) (1,313) (4,004) (3,519)
Real estate - construction — — — —
Leases and other loans (1,398) (1,165) (2,203) (1,888)
Total loans charged off (14,007) (4,787) (24,959) (21,690)
Recoveries of loans previously charged off:
Real estate - commercial mortgage 146 29 298 815
Commercial and industrial 796 988 2,044 2,074
Real estate - residential mortgage 122 58 238 106
Consumer and real estate - home equity 1,161 959 1,837 1,620
Real estate - construction 233 569 233 771
Leases and other loans 247 213 409 329
Total recoveries 2,705 2,816 5,059 5,715
Net loans charged off (recoveries) (11,302) (1,971) (19,900) (15,975)
Provision for credit losses(1)(2) 10,005 10,718 23,087 34,051
Balance of ACL at end of period $ 375,941 $ 287,442 $ 375,941 $ 287,442
Provision for OBS credit exposures(1) $ (1,393) $ (971) $ (3,550) $ 240
Reserve for OBS credit exposures(3) $ 14,540 $ 16,568 $ 14,540 $ 16,568
Net charge-offs to average loans (annualized) 0.19 % 0.04 % 0.18 % 0.15 %

(1) These amounts are reflected in the provision for credit losses in the Consolidated Statements of Income.

(2) Provision included in the table only includes the portion related to Net loans.

(3) Reserve for OBS credit exposures is recorded with other liabilities on the consolidated balance sheets.

The provision for credit losses, specific to loans, for the three months ended June 30, 2024 was $10.0 million compared to a provision of $10.7 million recorded for the same period in 2023. The provision for credit losses, specific to loans, for the six months ended June 30, 2024 was $23.1 million compared to a provision of $34.1 million recorded for the same period in 2023. During the second quarter of 2024, a provision for credit losses of $23.4 million was recorded for non-PCD Loans acquired in the Republic First Transaction. Additionally, included in the ACL during the second quarter of 2024 was $55.9 million recorded for PCD Loans acquired in the Republic First Transaction.

The ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. See "Note 5 - Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details on the provision for credit losses.

The following table summarizes the allocation of the ACL - loans:

June 30, 2024 December 31, 2023
ACL - loans % to Total ACL - loans(1) % to Total Net Loans(2) ACL - loans % to Total ACL - loans(1) % to Total Net Loans(2)
(dollars in thousands)
Real estate - commercial mortgage $ 156,165 41.5 % 38.5 % $ 112,565 38.4 % 38.1 %
Commercial and industrial 94,623 25.2 20.6 74,266 25.3 21.3
Real estate - residential mortgage 89,714 23.9 25.9 73,286 25.0 24.9
Consumer, home equity and leases and other loans 20,829 5.5 8.9 20,992 7.1 9.9
Real estate - construction 14,610 3.9 6.1 12,295 4.2 5.8
Total ACL - loans $ 375,941 100.0 % 100.0 % $ 293,404 100.0 % 100.0 %

(1) Ending ACL - loan portfolio segment balance as a % of total ACL - loans.

(2) Ending loan portfolio segment balances as a % of total net loans for the periods presented.

Deposits and Borrowings

The following table presents ending deposits by type:

June 30,<br>2024 December 31,<br>2023
%
(dollars in thousands)
Noninterest-bearing demand $ 5,609,383 $ 5,314,094 295,289 5.6 %
Interest-bearing demand 7,478,077 5,722,695 30.7
Savings and money market deposits 7,563,495 6,616,901 14.3
Total demand and savings 20,650,955 17,653,690 17.0
Brokered deposits 995,975 1,144,692 (13.0)
Time deposits 3,912,724 2,739,241 42.8
Total deposits $ 25,559,654 $ 21,537,623 4,022,031 18.7 %

All values are in US Dollars.

During the six months ended June 30, 2024, total deposits increased by $4.0 billion, or 18.7%, compared to December 31, 2023. The increase in total deposits was largely due to $4.1 billion of deposits assumed in the Republic First Transaction based on estimated fair values as of the Acquisition Date, which declined approximately $357.3 million subsequent to the Acquisition Date. Excluding the Republic First Transaction, total deposits increased approximately $267.0 million largely due to increases of $556.1 million and $331.9 million in time deposits and savings and money market deposits, respectively, partially offset by decreases of $416.4 million and $183.1 million in noninterest-bearing demand deposits and brokered deposits, respectively.

Total uninsured deposits were estimated to be $8.7 billion and $7.2 billion at June 30, 2024 and December 31, 2023, respectively.

Time deposits of $250 thousand or more were $848.8 million and $551.2 million at June 30, 2024 and December 31, 2023, respectively.

The following table presents ending borrowings by type:

June 30,<br>2024 December 31,<br>2023
%
(dollars in thousands)
Federal funds purchased $ — $ 240,000 (240,000) N/M
Federal Home Loan Bank advances 750,000 1,100,000 (31.8)
Senior debt and subordinated debt 535,741 535,384 0.1
Other borrowings(1) 892,856 612,142 45.9
Total borrowings $ 2,178,597 $ 2,487,526 (308,929) (12.4) %

All values are in US Dollars.

(1) Includes repurchase agreements, short-term promissory notes and capital leases.

During the six months ended June 30, 2024, total borrowings decreased $308.9 million, or 12.4%, compared to December 31, 2023. The decrease in total borrowings during the six months ended June 30, 2024 was due to decreases in FHLB advances and Federal funds purchased of $350.0 million and $240.0 million, respectively, partially offset by an increase in other borrowings of $280.7 million.

Shareholders' Equity

On December 19, 2023, the Corporation announced that its Board of Directors approved the 2024 Repurchase Program. The 2024 Repurchase Program will expire on December 31, 2024. Under the 2024 Repurchase Program, the Corporation is authorized to repurchase up to $125.0 million of shares of its common stock through December 31, 2024. Under this authorization, up to $25.0 million of the $125 million authorization may be used to repurchase shares of the Corporation's preferred stock and outstanding subordinated notes.

During the six months ended June 30, 2024, 1,934,297 shares were repurchased under the 2024 Repurchase Program at a total cost of $30.3 million, or $15.69 per share. No shares were repurchased during the second quarter of 2024.

On May 1, 2024, the Corporation completed its previously announced underwritten public offering of 19,166,667 shares of its common stock at a price to the public of $15.00 per share, before underwriting discounts. The proceeds to the Corporation from the offering were approximately $273.0 million net of issuance costs.

Regulatory Capital

The Corporation and its wholly owned subsidiary bank, Fulton Bank, are subject to the Capital Rules administered by banking regulators. Failure to meet minimum capital requirements can trigger certain actions by regulators that could have a material effect on the Corporation's financial statements.

The Capital Rules require the Corporation and Fulton Bank to:

•Meet a minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets;

•Meet a minimum Tier 1 Leverage capital ratio of 4.00% of average assets;

•Meet a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 capital ratio of 6.00% of risk-weighted assets;

•Maintain a "capital conservation buffer" of 2.50% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonus payments; and

•Comply with a revised definition of capital to improve the ability of regulatory capital instruments to absorb losses. Certain non-qualifying capital instruments, including cumulative preferred stock and TruPS, are excluded as a component of Tier 1 capital for institutions of the Corporation's size.

As of June 30, 2024, the Corporation's capital levels met the minimum capital requirements, including the capital conservation buffers, as prescribed in the Capital Rules.

As of June 30, 2024, Fulton Bank met the well-capitalized requirements under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, a bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the Capital Rules. There were no other conditions or events since June 30, 2024 that management believes have changed the Corporation's capital categories.

The following table summarizes the Corporation's capital ratios in comparison to regulatory requirements:

June 30,<br>2024 December 31, 2023 Regulatory<br>Minimum<br>for Capital<br>Adequacy With Capital Conservation Buffer
Total Risk-Based Capital (to Risk-Weighted Assets) 13.8 % 14.0 % 8.0 % 10.5 %
Tier I Risk-Based Capital (to Risk-Weighted Assets) 11.1 % 11.2 % 6.0 % 8.5 %
Common Equity Tier I (to Risk-Weighted Assets) 10.3 % 10.3 % 4.5 % 7.0 %
Tier I Leverage Capital (to Average Assets) 9.2 % 9.5 % 4.0 % 4.0 %

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the exposure to economic loss that arises from changes in the values of certain financial instruments. The types of market risk exposures generally faced by financial institutions include interest rate risk, equity market price risk, debt security market price risk, foreign currency price risk and commodity price risk. Due to the nature of its operations, foreign currency price risk and commodity price risk are not significant to the Corporation.

Interest Rate Risk, Asset/Liability Management and Liquidity

Interest rate risk creates exposure in two primary areas. First, changes in rates have an impact on the Corporation's liquidity position and could affect its ability to meet obligations and continue to grow. Second, movements in interest rates can create fluctuations in the Corporation's net interest income and changes in the economic value of its equity.

The Corporation employs various management techniques to minimize its exposure to interest rate risk. The Corporation's ALCO is responsible for reviewing the interest rate sensitivity and liquidity positions of the Corporation, approving asset and liability management policies, and overseeing the formulation and implementation of strategies regarding balance sheet positions.

The Corporation uses two complementary methods to measure and manage interest rate risk. They are a simulation of net interest income and estimates of economic value of equity. Using these measurements in tandem provides a reasonably comprehensive summary of the magnitude of the Corporation's interest rate risk, level of risk as time evolves, and exposure to changes in interest rates.

Simulation of net interest income is performed for the next 12-month period. A variety of interest rate scenarios are used to measure the effects of sudden and gradual movements upward and downward in the yield curve. These results are compared to the results obtained in a flat or unchanged interest rate scenario. Simulation of net interest income is used primarily to measure the Corporation's short-term earnings exposure to rate movements. The Corporation's policy limits the potential exposure of net interest income, in a non-parallel instantaneous shock, to 10% of the base case net interest income for a 100 bps shock in interest rates, 15% for a 200 bps shock, 20% for a 300 bps shock and 25% for a 400 bps shock. A "shock" is an immediate upward or downward movement of interest rates. The shocks do not take into account changes in customer behavior that could result in changes to mix and/or volumes in the balance sheet, nor does it take into account the potential effects of competition on the pricing of deposits and loans over the forward 12-month period.

Contractual maturities and repricing opportunities of loans are incorporated in the simulation model as are prepayment assumptions, maturity data and call options within the investment portfolio. Assumptions based on past experience are incorporated into the model for non-maturity deposit accounts. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model's simulated results due to timing, amount and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

The following table summarizes the expected impact of abrupt interest rate changes, that is, a non-parallel instantaneous shock, on net interest income as of June 30, 2024:

Rate Shock(1) Annual change<br>in net interest income % change in net interest income
+400 bp + $47.6 million +4.2%
+300 bp + $36.9 million +3.3%
+200 bp + $26.2 million +2.3%
+100 bp + $15.5 million +1.4%
–100 bp - $36.1 million -3.2%
–200 bp - $73.3 million -6.5%
–300 bp - $104.6 million -9.3%
–400 bp - $127.7 million -11.4%

(1) These results include the effect of implicit and explicit interest rate floors that limit further reduction in interest rates.

Economic value of equity estimates the discounted present value of asset and liability cash flows. Discount rates are based upon market prices for like assets and liabilities. Abrupt changes or "shocks" in interest rates, both upward and downward, are used to determine the comparative effect of such interest rate movements relative to the unchanged environment. This measurement tool is used primarily to evaluate the longer-term repricing risks and options in the Corporation's balance sheet. The Corporation's policy limits the economic value of equity that may be at risk, in a non-parallel instantaneous shock, to 10% of the base case economic value of equity for a 100 bps shock in interest rates, 20% for a 200 bps shock, 30% for a 300 bps shock and 40% for a 400 bps shock. As of June 30, 2024, the Corporation was within economic value of equity policy limits for every 100 bps shock.

Interest Rate Derivatives

The Corporation enters into interest rate derivatives with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate derivatives with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate derivatives is that the customer pays a fixed rate of interest and the Corporation receives a floating rate. These interest rate derivatives are derivative financial instruments, and the gross fair values are recorded in other assets and liabilities on the consolidated balance sheets, with changes in fair value during the period recorded in other non-interest expense on the consolidated statements of income.

Cash Flow Hedges

The Corporation's objectives in using interest rate derivatives are to reduce volatility in interest income and interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate derivatives as part of its interest rate risk management strategy. The Corporation enters into interest rate derivatives designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans and borrowings.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income or interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are made on the Corporation's variable-rate liabilities.

In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $1.0 billion. As the hedged transaction continues to be probable, the unrealized losses that have been recorded in AOCI will be recognized as a reduction to interest income when the previously forecasted hedged item affects earnings in future periods. During the six months ended June 30, 2024, $14.1 million of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the consolidated statements of income.

Liquidity

The Corporation must maintain a sufficient level of liquid assets to meet the cash needs of its customers, who, as depositors, may want to withdraw funds or who, as borrowers, need credit availability. Liquidity is provided on a continuous basis through scheduled and unscheduled principal and interest payments on investments and outstanding loans and through the availability of deposits and borrowings. The Corporation also maintains secondary sources that provide liquidity on a secured and unsecured basis to meet short- and long-term needs.

The Corporation maintains liquidity sources in the form of interest-bearing deposits and customer funding (short-term promissory notes). The Corporation can access additional liquidity from these sources, if necessary, by increasing the rates of interest paid on those instruments. The positive impact to liquidity resulting from paying higher interest rates could have a detrimental impact on NIM and net interest income if rates on interest-earning assets do not experience a proportionate increase. Borrowing availability with the FHLB and the FRB, along with federal funds lines at various correspondent banks, provides the Corporation with additional liquidity.

Fulton Bank is a member of the FHLB and has access to FHLB overnight and term credit facilities. As of June 30, 2024, the Bank had total borrowing capacity of approximately $10.8 billion with $4.3 billion of advances and letters of credit outstanding, for a remaining available borrowing capacity of approximately $6.5 billion under these facilities. Advances from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets.

As of June 30, 2024, the Corporation had aggregate federal funds lines borrowing capacity of $2.6 billion with $0 outstanding against that amount. As of June 30, 2024, the Corporation had $2.2 billion of collateralized borrowing capacity at the FRB discount window.

A combination of commercial real estate loans, commercial loans, consumer loans and securities are pledged to the FRB of Philadelphia to provide access to FRB discount window borrowings. Securities carried at $1.2 billion at June 30, 2024 and $0.4 billion at December 31, 2023 were pledged as collateral to secure public and trust deposits.

Liquidity must also be managed at the Corporation's parent company level. For safety and soundness reasons, banking regulations limit the amount of cash that can be transferred from subsidiary banks to the parent company in the form of loans and dividends. Generally, these limitations are based on the subsidiary banks’ regulatory capital levels and their net income. Management continues to monitor the liquidity and capital needs of the parent company including monitoring the granularity of the deposit portfolio and level of uninsured deposits. Management will implement appropriate strategies, as necessary, to remain adequately capitalized and to meet its cash needs.

The consolidated statements of cash flows provide additional information. The Corporation's operating activities during the six months ended June 30, 2024 provided $321.0 million of cash. Cash provided by investing activities was $2.2 billion and was mainly due to the sale of AFS securities and net cash received in the Republic First Transaction. Cash used by financing activities was $1.7 billion primarily due to the repayment of borrowings.

Debt Security Market Price Risk

Debt security market price risk is the risk that changes in the values of debt securities, unrelated to interest rate changes, could have a material impact on the financial position or results of operations of the Corporation. The Corporation's debt security investments consist primarily of U.S. government-sponsored agency issued mortgage-backed securities and collateralized mortgage obligations, state and municipal securities, and corporate debt securities. All of the Corporation's investments in mortgage-backed securities and collateralized mortgage obligations have principal payments that are guaranteed by U.S. government-sponsored agencies.

State and Municipal Securities

As of June 30, 2024, the Corporation owned securities issued by various states and municipalities with a total fair value of $0.8 billion. Uncertainty with respect to the financial strength of state and municipal bond insurers places emphasis on the underlying strength of issuers. Pressure on local tax revenues of issuers due to adverse economic conditions could have an adverse impact on the underlying credit quality of issuers. The Corporation evaluates existing and potential holdings primarily based on the underlying creditworthiness of the issuing state or municipality and then, to a lesser extent, on any credit enhancement. State and municipal securities can be supported by the general obligation of the issuing state or municipality, allowing the securities to be repaid by any means available to the issuing state or municipality. As of June 30, 2024, approximately 100% of state and municipal securities were supported by the general obligation of corresponding states or

municipalities. Approximately 73% of these securities were school district issuances, which are also supported by the states of the issuing municipalities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation's management, including the Corporation's Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures pursuant to Rule 13a-15, promulgated under the Exchange Act. Based upon that evaluation, the Corporation's Chief Executive Officer and Interim Chief Financial Officer concluded that, as of June 30, 2024, the Corporation's disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in Corporation reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

Changes in Internal Control Over Financial Reporting

We review our internal controls over financial reporting on a regular basis and make changes intended to ensure the quality of our financial reporting. During the second quarter of 2024, as the result of the Republic First Transaction, we commenced the evaluation of the applicable controls, and designed and implemented new controls as needed. The evaluation of the changes to processes, information technology systems and other components of internal control over financial reporting related to the Republic First Transaction is ongoing. Otherwise, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information presented in the "Legal Proceedings" section of Note 14 "Commitments and Contingencies" in the Notes to Consolidated Financial Statements in this Quarterly Report on From 10-Q is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A. Risk Factors of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023 and Part II, Item 1A. Risk Factors of the Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

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

(a)  None.

(b)  None.

(c) On December 19, 2023, the Corporation announced that its Board of Directors approved the 2024 Repurchase Program. The 2024 Repurchase Program will expire on December 31, 2024. Under the 2024 Repurchase Program, the Corporation is authorized to repurchase up to $125.0 million of shares of its common stock through December 31, 2024. Under this authorization, up to $25.0 million of the $125 million authorization may be used to repurchase shares of the Corporation's preferred stock and outstanding subordinated notes.

As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases may be made from time to time under the 2024 Repurchase Program in open market or privately negotiated transactions, including without limitation, through accelerated share repurchase transactions. The 2024 Repurchase Program may be discontinued at any time.

During the three months ended June 30, 2024, no shares were repurchased under the 2024 Repurchase Program.

Item 5. Other Information

(c) None of the Corporation's directors or "officers" (as defined in Rule 16a-1(f) (17 C.F.R. § 240.16a-1(f))) adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (as those terms are defined in Item 408 of Regulation S-K (17 C.F.R. § 229.408)) during the fiscal quarter ended June 30, 2024.

Item 6. Exhibits

1.1 Underwriting Agreement, dated as of April 29, 2024, by and among Fulton Financial Corporation and Piper Sandler & Co. and BofA Securities, Inc., as representatives of the several underwriters listed in Schedule I thereto (Incorporated by reference to Exhibit 1.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on May 1, 2024).
2.1 Purchase and Assumption Agreement – Whole Bank, All Deposits, effective as of April 26, 2024, with the Federal Deposit Insurance Corporation, as receiver of Republic First Bank, the Federal Deposit Insurance Corporation, and Fulton Bank, National Association (Incorporated by reference to Exhibit 2.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on May 2, 2024).
3.1 Articles of Incorporation, as amended and restated, of Fulton Financial Corporation as amended (Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report Form 8-K filed June 24, 2011).
3.2 Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State (Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020).
3.3 Bylaws of Fulton Financial Corporation as amended (Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on a Form 8-K filed May 14, 2021).
4.1 Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State (Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020).
4.2 Deposit Agreement, dated October 29, 2020, among Fulton Financial Corporation, Equiniti Trust Company, as depositary, and the holders from time to time of the depositary receipts described therein (Incorporated by reference to Exhibit 4.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020).
4.3 Form of depositary receipt representing the Depositary Shares (Included in Exhibit 4.2).
4.4 Stock Certificate (Incorporated by reference as Exhibit 4.1 of Fulton Financial Corporation Registration Statement on Form S-4 filed on April 21, 2022).
10.1 Formof Non-Employee Director Stock Unit Award Agreement - filed herewith.
10.2 Agreement for Purchase and Sale of Real Property dated May 10, 2024 (Incorporated by referencetoExhibit 10.1 of the Fulton Financial Corporation Current Report on Form 8-Kfiled on May 15, 2024).
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Income, (iii) Unaudited Consolidated Statements of Comprehensive Income, (iv) Unaudited Consolidated Statements of Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.
104 Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101)

FULTON FINANCIAL CORPORATION AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FULTON FINANCIAL CORPORATION
Date: August 8, 2024 /s/ Curtis J. Myers
Curtis J. Myers
Chairman and Chief Executive Officer
Date: August 8, 2024 /s/ Beth Ann L. Chivinski
Beth Ann L. Chivinski
Senior Executive Vice President and Interim Chief Financial Officer

67

Document

Exhibit 10.1

FULTON FINANCIAL

CORPORATION

Non-Employee Director Stock Unit Award Agreement

(“Award Agreement”)

[GRANT_DATE]

[PARTICIPANT_NAME]

[HOME_ADDRESS]

Dear [PARTICIPANT_NAME]:

Pursuant to the terms and conditions of the Amended and Restated 2023 Director Equity Plan (the “2023 Plan”) of Fulton Financial Corporation (“Fulton”), you are the recipient of a Restricted Stock Unit (“RSU”) award (the “Award”). The Award has the following terms and conditions as of the Date of Grant. Capitalized terms used herein but not defined shall have the meanings set forth in the 2023 Plan.

Granted To: [PARTICIPANT_NAME]
Date of Grant: [GRANT_DATE]
Number of Time-Vested RSUs Granted: [TOTAL_AWARDS]
Restricted Period: Unless your Award is forfeited before the end of the Restricted Period, the Restricted Period will end one year after the Date of Grant.
Death, Disability or Retirement: Your Award will vest and Shares will be delivered to you upon your death, Disability or Retirement (unless a deferral election has been made with respect to the Shares).
Change in Control: In the event of a termination of Continuous Service during the 12-month period following a Change in Control, the Restricted Period will immediately expire.
Right to Dividend Equivalents: Each RSU (representing one Share) may be credited with Shares equivalent to all the dividends paid with respect to the outstanding Common Stock paid by Fulton in respect of one Share.
Forfeiture: Your Award is subject to forfeiture until the expiration of the Restricted Period, including all Dividend Equivalents, pursuant to the terms of the 2023 Plan.
Deferral: [You have not elected to defer the payment of the Shares underlying the RSUs at the end of the Restricted Period, and you will receive payment of the Shares together with the accumulated Dividend Equivalents in Common Stock at the end of the Restricted Period.]<br><br>[You have elected to defer payment of the Shares underlying the RSUs at the end of the Restricted Period together with any accumulated Dividend Equivalents, and you will receive [a single issuance] [three annual installments] of Shares and accrued Dividend Equivalents in accordance with your deferral election.]
--- ---
Timing of Award Payment: Unless otherwise expressly set forth herein, payment will be made in the form of Shares within 60 days following the end of the Restricted Period.

The vesting of this Award will have tax consequences for you. We recommend that you consult your tax advisor. You have thirty (30) days after the date of this Award Agreement to either accept or decline this Award. No Award under this Award Agreement shall be released or otherwise paid unless and until you sign this Award Agreement.

Very Truly Yours,

image.jpg

Curtis J. Myers

Chairman and Chief Executive Officer

Fulton Financial Corporation

I, [PARTICIPANT_NAME], hereby acknowledge receipt of this Award made to me on the Date of Grant and agree to the terms and conditions of this Award Agreement.

[SIGNATURE]

[ACCEPTANCE_DATE]

Document

Exhibit 31.1 – Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Curtis J. Myers, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Fulton Financial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2024
/s/ Curtis J. Myers
Curtis J. Myers
Chairman and Chief Executive Officer

Document

Exhibit 31.2 – Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Beth Ann L. Chivinski, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Fulton Financial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2024
/s/ Beth Ann L. Chivinski
Beth Ann L. Chivinski
Senior Executive Vice President and Interim Chief Financial Officer

Document

Exhibit 32.1 - Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Curtis J. Myers, Chief Executive Officer of Fulton Financial Corporation, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, certify that:

The Form10-Q of Fulton Financial Corporation, containing the consolidated financial statements for the quarter ended June 30, 2024, fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Fulton Financial Corporation.

Date: August 8, 2024
/s/ Curtis J. Myers
Curtis J. Myers
Chairman and Chief Executive Officer

Document

Exhibit 32.2 - Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Beth Ann L. Chivinski, Chief Financial Officer of Fulton Financial Corporation, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, certify that:

The Form 10-Q of Fulton Financial Corporation, containing the consolidated financial statements for the quarter ended June 30, 2024, fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Fulton Financial Corporation.

August 8, 2024
/s/ Beth Ann L. Chivinski
Beth Ann L. Chivinski
Senior Executive Vice President and Interim Chief
Financial Officer

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