What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-28 compared with 2021-03-01 · 385 added, 389 removed, 1783 unchanged (30% of the section changed)

15 unchanged sentences

Accrued interest receivable 57,451 72,942

Goodwill and intangible assets 536,659 535,303

Goodwill and net intangible assets 538,053 536,659

Other assets 1,004,397 1,078,128

3 unchanged sentences

Total Deposits 21,573,499 20,839,207

Accrued interest payable 10,365 8,834

Short-term borrowings 416,764 630,066

Accrued interest payable 7,000 10,365

Long-term borrowings 621,345 1,296,263

2 unchanged sentences

SHAREHOLDERS’ EQUITY

Preferred stock, no par value;

10,000,000 shares authorized Series A, 200,000 shares authorized and issued in 2020;

liquidation preference of $1,000 per share 192,878 —

Preferred stock, no par value, 10.0 million shares authorized, Series A, 0.2 million shares authorized and issued in 2021 and 2020, liquidation preference of $ 1,000 per share

192,878 192,878

Common stock, 2.50 par value, 600.0 million shares authorized, 223.9 million shares issued in 2021 and 223.2 million issued in 2020

559,766 557,917

Additional paid-in capital 1,519,873 1,508,117

Retained earnings 1,282,383 1,120,781

Accumulated other comprehensive gain (loss) 65,091 ( 137 )

Accumulated other comprehensive gain 27,411 65,091

Treasury stock, at cost, 63.4 million shares in 2021 and 60.8 million shares in 2020

( 869,631 ) ( 827,956 )

Total Shareholders’ Equity 2,712,680 2,616,828

31 unchanged sentences

Salaries and employee benefits 329,138 324,395 311,934

Net occupancy 53,013 52,826 51,678

Data processing and software 56,440 48,073 44,679

Net occupancy 53,799 53,013 52,826

Other outside services 34,194 31,432 39,989

Equipment 13,885 13,575 13,243

Professional fees 12,835 13,134 14,161

Debt extinguishment 33,249 2,878 4,326

State taxes 18,793 12,613 8,894

Equipment 13,807 13,885 13,575

FDIC insurance 10,665 8,865 7,780

Professional fees 9,647 12,835 13,134

Amortization of TCI 6,187 6,126 6,021

Prepayment penalty on FHLB advances 2,878 4,326 —

Marketing 5,275 5,127 9,848

Intangible amortization 589 529 1,427

6 unchanged sentences

Net Income Available to Common Shareholders $ 265,220 $ 175,905 $ 226,339

Net Income (Basic) $ 1.08 $ 1.36 $ 1.19

Net Income (Diluted) 1.08 1.35 1.18

Net income available to common shareholders (basic) $ 1.63 $ 1.08 $ 1.36

Net income available to common shareholders (diluted) 1.62 1.08 1.35

Cash dividends 0.64 0.56 0.56

4 unchanged sentences

Net Income $ 275,497 $ 178,040 226,339

Other Comprehensive Income (Loss), net of tax:

Other Comprehensive (Loss)/Income, net of tax:

Unrealized gains (losses) on AFS investment securities:

Unrealized gain (loss) on securities 65,651 56,919 ( 24,326 )

Unrealized (loss)/gain on securities ( 17,948 ) 65,651 56,919

Reclassification adjustment for securities gains included in net income ( 25,905 ) ( 2,359 ) ( 3,686 )

2 unchanged sentences

Net unrealized gains (losses) on AFS investment securities ( 41,163 ) 66,740 58,838

Unrealized (losses) gains on interest rate swaps used in cash flow hedges:

Net unrealized holding (losses) gains arising during the period ( 2,147 ) — —

reclassification adjustment for net losses (gains) realized in net income 2,670 — —

Net unrealized (losses) gains on interest rate swaps used in cash flow hedges ( 4,817 ) — —

Defined benefit pension plan and postretirement benefits:

2 unchanged sentences

Net unrealized (losses) gains on defined benefit pension and postretirement plans 8,300 ( 1,512 ) 88

Other Comprehensive Income (Loss) 65,228 58,926 ( 18,988 )

Other Comprehensive (Loss)/Income ( 37,680 ) 65,228 58,926

Total Comprehensive Income $ 237,817 $ 243,268 $ 285,265

6 unchanged sentences

(Loss) Income

Outstanding Amount Shares

Outstanding Amount Retained

Shares Amount Shares Amount Retained

Earnings Treasury

5 unchanged sentences

Acquisition of treasury stock ( 6,849 ) ( 111,457 ) ( 111,457 )

Reclassification of stranded tax effects (1)

7,101 $ ( 7,101 ) —

Common stock cash dividends - $ 0.56 per share

( 92,980 ) ( 92,980 )

Balance at December 31, 2019 — $ — 164,218 $ 556,110 $ 1,499,681 $ 1,079,391 $ ( 137 ) $ ( 792,869 ) $ 2,342,176

1 unchanged sentence

Other comprehensive income 65,228 65,228

Preferred stock issued 200 192,878 192,878

Common stock issued 1,040 1,807 907 4,661 7,375

1 unchanged sentence

Acquisition of treasury stock ( 2,908 ) ( 39,748 ) ( 39,748 )

Adjustment for CECL(1) ( 43,807 ) ( 43,807 )

Preferred stock dividend ( 2,135 ) ( 2,135 )

Common stock cash dividends - $ 0.56 per share

( 90,708 ) ( 90,708 )

Balance at December 31, 2020 200 $ 192,878 162,350 $ 557,917 $ 1,508,117 $ 1,120,781 $ 65,091 $ ( 827,956 ) $ 2,616,828

Net income 275,497 275,497

Other comprehensive income 65,228 65,228

Preferred stock issued 200 192,878 192,878

Other comprehensive loss ( 37,680 ) ( 37,680 )

Common stock issued 943 1,849 3,354 2,234 7,437

1 unchanged sentence

Acquisition of treasury stock ( 2,803 ) ( 43,909 ) ( 43,909 )

Adjustment for CECL (2)

( 43,807 ) ( 43,807 )

Preferred stock dividend ( 10,277 ) ( 10,277 )

Common stock cash dividends - $ 0.64 per share

( 103,618 ) ( 103,618 )

Balance at December 31, 2021 200 $ 192,878 160,490 $ 559,766 $ 1,519,873 $ 1,282,383 $ 27,411 $ ( 869,631 ) $ 2,712,680

See Notes to Consolidated Financial Statements

(1) Result of adoption of ASU 2018-02.

See Note 1 to Consolidated Financial Statements for further details.

(1) The Corporation adopted ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326):

12 unchanged sentences

Deferred income tax benefit 12,410 ( 21,591 ) ( 165 )

Re-measurement of net DTA — — ( 809 )

Investment securities gains, net ( 33,516 ) ( 3,053 ) ( 4,733 )

4 unchanged sentences

Amortization of issuance costs and discounts on long-term borrowings 1,846 1,128 842

Debt extinguishment costs 33,249 2,877 —

Stock-based compensation 8,402 7,529 7,413

7 unchanged sentences

Purchase of AFS securities ( 1,309,470 ) ( 1,134,380 ) ( 1,138,070 )

Purchase of HTM securities ( 443,081 ) — —

Sale of Visa Shares 33,962 — —

Sale (purchase) of FRB and FHLB stock 34,494 5,293 ( 18,139 )

Net increase in loans ( 2,072,831 ) ( 708,048 ) ( 447,849 )

Net decrease (increase) in loans 561,664 ( 2,072,831 ) ( 708,048 )

Net purchases of premises and equipment ( 17,679 ) ( 20,237 ) ( 33,717 )

12 unchanged sentences

Acquisition of treasury stock ( 43,909 ) ( 39,748 ) ( 111,457 )

Net cash provided by financing activities 3,675,033 837,737 487,488

Net Increase in Cash and Cash Equivalents 1,330,041 72,104 43,591

Cash and Cash Equivalents at Beginning of Year 517,791 445,687 402,096

Cash and Cash Equivalents at End of Year $ 1,847,832 $ 517,791 $ 445,687

Net cash (used in) provided by financing activities ( 337,523 ) 3,672,156 837,737

Net (decrease) increase in Cash and Cash Equivalents ( 209,218 ) 1,330,041 72,104

Cash and Cash Equivalents at Beginning of Period 1,847,832 517,791 445,687

Cash and Cash Equivalents at End of Period $ 1,638,614 $ 1,847,832 $ 517,791

Supplemental Disclosures of Cash Flow Information:

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fulton Financial Corporation (the Parent Company) is a financial holding company which provides a full range of banking and financial services to businesses and consumers through its wholly owned banking subsidiary, Fulton Bank, N.A.

The Corporation is a financial holding company that provides a full range of banking and financial services to businesses and consumers through its wholly owned banking subsidiary, Fulton Bank.

In addition, the Parent Company owns the following non-bank subsidiaries:

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Industry diversity is the key to the economic well-being of these markets, and the Corporation is not dependent upon any single customer or industry.

In 2018, the Corporation had three banking subsidiaries.

During 2019, the Corporation consolidated two wholly owned banking subsidiaries into its lead bank, Fulton Bank.

Basis of Financial Statement Presentation:

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however, since the investment portfolio serves as a source of liquidity, most debt securities are classified as AFS.

AFS securities are carried at estimated fair value with the related unrealized holding gains and losses reported in shareholders’ equity as a component of other comprehensive income, net of tax.

AFS securities are carried at estimated fair value with the related unrealized holding gains and losses reported in shareholders’ equity as a component of OCI, net of tax.

Realized securities gains and losses are computed using the specific identification method and are recorded on a trade date basis.

2 unchanged sentences

The portion of this standards update related to codification improvements specific to Topic 326 was implemented with the Corporation’s adoption of ASU 2016-13 in the first quarter of 2020.

Additional codification improvements to Topic 825, specifically ASU 2016-01, which the Corporation adopted as of January 1, 2018, did not have an impact on the Corporation's consolidated financial statements.

HTM Debt Securities:

3 unchanged sentences

The ACL approach for AFS debt securities differs from the approach used for HTM debt securities as AFS debt securities are carried at fair value rather than amortized cost.

Under CECL, the concept of OTTI has been eliminated, and credit losses on AFS debt securities are recognized through an ACL rather than through a direct write-down of the security.

In evaluating credit losses on AFS debt securities, management considers factors such as delinquency, guarantees and whether the securities are rated higher than investment grade.

8 unchanged sentences

Interest income on loans is accrued as earned.

Unearned income on lease financing receivables is recognized on a basis which approximates the effective yield method.

In general, loans are placed on non-accrual status once they become 90 days delinquent as to principal or interest.

23 unchanged sentences

The CARES Act includes an option for financial institutions to suspend the requirements of GAAP for certain loan modifications that would otherwise be categorized as a TDR.

Certain conditions must be met with respect to the loan modification including that the modification is related to COVID-19, the modified loan was not more than 30 days past due on December 31, 2019 and the modification was executed between March 1, 2020 and the earlier of (a) 60 days after the date of the COVID-19 national emergency comes to an end or (b) December 31, 2020.

Certain conditions must be met with respect to the loan modification including that the modification is related to COVID-19 and the modified loan was not more than 30 days past due on December 31, 2019.

On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law and this Act extended the relief for TDR treatment until January 1, 2022, when it expired.

The Corporation is applying the option under the CARES act for all loan modifications that qualify.

On April 7, 2020, Troubled Debt Restructurings:

Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by COVID-19 was issued by the federal banking regulatory agencies.

Included in the Interagency Statement were provisions permitting banks that grant loan modifications to customers impacted by COVID-19 to exclude those modifications from loans categorized as TDRs.

The Corporation is adopting the guidance in this Interagency Statement effective for COVID-19-related modifications occurring subsequent to March 13, 2020.

In November 2021, the FASB issued a proposed ASU as part of its Post-Implementation Review process.

As part of that process, the proposed ASU would eliminate the accounting guidance for TDRs, effective in 2022.

Allowance for Credit Losses:

17 unchanged sentences

This category includes loans on non-accrual status and TDRs where the total commitment amount is less than $1 million.

The ACL is estimated by applying a probability of default (PD) and loss given default (LGD) to the exposure at default (EAD) at the loan level.

The ACL is estimated by applying a PD and LGD to the EAD at the loan level.

In order to determine the PD, LGD, and EAD calculation inputs:

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In addition to the quantitative credit loss estimates for loans evaluated collectively, qualitative factors that may not be fully captured in the quantitative results are also evaluated.

These qualitative factors include changes in lending policy, the nature and volume of the portfolio, overall business conditions in the economy, credit concentrations, specific industry risks, competition, model imprecision and legal and regulatory requirements.

These qualitative factors include changes in lending policy, the nature and volume of the portfolio, overall business conditions in the economy, credit concentrations, specific industry risks, model imprecision and legal and regulatory requirements.

Qualitative adjustments are judgmental and are based on management’s knowledge of the portfolio and the markets in which the Corporation operates.

10 unchanged sentences

For the years ended December 31, 2019 and prior, the ACL consists of the ACL for loans and unfunded commitments.

The ACL represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans.

The ACL represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a

reduction to loans.

The ACL for unfunded commitments represents management’s estimate of incurred losses in its unfunded loan commitments and other off-balance sheet credit exposures, such as letters of credit, and is recorded in other liabilities on the consolidated balance sheets.

32 unchanged sentences

Fair values are determined through a discounted cash flows valuation completed by a third-party valuation expert.

Significant inputs

to the valuation include expected net servicing income, the discount rate and the expected lives of the underlying loans.

Significant inputs to the valuation include expected net servicing income, the discount rate and the expected lives of the underlying loans.

Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections.

3 unchanged sentences

Derivative Financial Instruments:

The Corporation manages its exposure to certain interest rate and foreign exchange risks through the use of derivatives.

None of the Corporation's outstanding derivative contracts are designated as hedges and none are entered into for speculative purposes.

Derivative instruments are carried at fair value, with changes in fair value recognized in earnings as components of non-interest income or non-interest expense on the consolidated statements of income.

The Corporation manages its exposure to certain interest rate and foreign currency risks through the use of derivatives.

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.

The Corporation records all derivatives on the balance sheet at fair value.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Corporation has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges.

The Corporation does not have any derivative instruments designated as fair value hedges.

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated as cash flow hedges where hedge accounting is applied, changes in fair value are recognized in other comprehensive income.

For derivatives where hedge accounting does not apply, changes in fair value are recognized in earnings as components of non-interest income or non-interest expense on the consolidated statements of income.

Derivative contracts create counterparty credit risk with both the Corporation's customers and with institutional derivative counterparties.

The Corporation manages counterparty credit risk through its credit approval processes, monitoring procedures and obtaining adequate collateral, when the Corporation determines it is appropriate to do so and in accordance with counterparty contracts.

For each of the derivatives, gross derivative assets and liabilities are recorded in other assets and other liabilities, respectively, on the consolidated balance sheets.

Related gains and losses on these derivative instruments are recorded in other changes, net on the consolidated statement of cash flows.

Mortgage Banking Derivatives

3 unchanged sentences

The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured.

Interest Rate Swaps

Interest Rate Swaps - Non-Designated Hedges

The Corporation enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs.

1 unchanged sentence

The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Corporation receives a floating rate.

The Bank is required to clear all eligible interest rate swap contracts with a central counterparty as it is subject to the regulations of the Commodity Futures Trading Commission.

As the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

The Corporation’s existing credit derivatives result from participation in interest rate swaps provided by external lenders as part of loan participation arrangements and, therefore, are not used to manage interest rate risk in the Corporation’s assets or liabilities.

Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain lenders participating in loans.

The Corporation is required to clear all eligible interest rate swap contracts with a clearing agent and is subject to the regulations of the Commodity Futures Trading Commission.

Cash Flow Hedges of Interest Rate Risk

The Corporation’s objectives in using interest rate derivatives are to reduce volatility in net interest income and to manage its exposure to interest rate movements.

To accomplish this objective, the Corporation primarily uses interest rate swaps as part of its interest rate risk management strategy.

During the first quarter of 2021, the Corporation entered into interest rate swaps designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans.

These hedge contracts involve the receipt of fixed-rate amounts from a counterparty in exchange for the Corporation making floating-rate payments over the life of the agreements without exchange of the underlying notional amount.

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 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 loans.

Foreign Exchange Contracts

2 unchanged sentences

The Corporation limits its foreign exchange exposure with customers by entering into contracts with institutional counterparties to mitigate its foreign exchange risk.

The Corporation also holds certain amounts of foreign currency with international correspondent banks ("Foreign Currency Nostro Accounts").

The Corporation also holds certain amounts of Foreign Currency Nostro Accounts.

The Corporation limits the total overnight net foreign currency open positions, which is defined as an aggregate of all outstanding contracts and Foreign Currency Nostro Account balances, to $ 500,000 .

1 unchanged sentence

Balance Sheet Offsetting:

Although certain financial assets and liabilities may be eligible for offset on the consolidated balance sheets because they are subject to master netting arrangements or similar agreements, the Corporation elects to not offset such qualifying assets and liabilities.

Certain financial assets and liabilities may be eligible for offset on the consolidated balance sheets because they are subject to master netting arrangements or similar agreements.

The Corporation has elected to net its financial assets and liabilities designated as cash flow hedges when offsetting is permitted.

The Corporation has elected not to offset the remaining assets and liabilities subject to such arrangements on the consolidated financial statements.

The Corporation is a party to interest rate swaps with financial institution counterparties and customers.

4 unchanged sentences

As a result, the total fair values of interest rate swap derivative assets and derivative liabilities recognized on the consolidated balance sheets are not equal and offsetting.

The Corporation is also a party to foreign exchange contracts with financial institution counterparties, under which the Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on, or termination of,

any one contract.

The Corporation is also a party to foreign exchange contracts with financial institution counterparties under which the Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on, or termination of, any one contract.

As with interest rate swaps, cash collateral is posted by the party with a net liability position in accordance with contract thresholds and can be used to settle the fair value of the foreign exchange contracts in the event of default.

The Corporation also enters into agreements with customers in which it sells securities subject to an obligation to repurchase the same or similar securities, referred to as repurchase agreements.

Under these agreements, the Corporation may transfer legal control over the assets but still maintain effective control through agreements that both entitle and obligate the Corporation to repurchase the assets.

Therefore, repurchase agreements are reported as secured borrowings, classified in short-term borrowings on the consolidated balance sheets, while the securities underlying the repurchase agreements remain classified with AFS investment securities on the consolidated balance sheets.

The Corporation has no intention of setting off these amounts, therefore, these repurchase agreements are not eligible for offset.

For additional details on balance sheet offsetting, see "Note 10 - Derivative Financial Instruments."

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The liability for unrecognized tax benefits is included in other liabilities within the consolidated balance sheets.

Effective January 1, 2018, the Corporation adopted ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This standards update permits a reclassification from AOCI to retained earnings of the stranded tax effects resulting from the application of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), which changed the federal corporate income tax rate from a top rate of 35% to a flat rate of 21%.

Upon adoption, the Corporation elected to reclassify $ 7.1 million of stranded tax effects from AOCI to retained earnings at the beginning of the period of adoption.

The Corporation's policy for releasing income tax effects from AOCI is to release them as investments are sold or mature and as pension and post-retirement liabilities are extinguished.

See Note 12, "Income Taxes" for additional information.

2 unchanged sentences

In addition, employees may purchase stock under the Corporation’s ESPP.

The Corporation also grants equity awards to non-employee members of its board of directors and subsidiary bank board of directors under the 2011 Directors’ Equity Participation Plan, which was amended and approved by shareholders as the Directors’ Plan in 2019.

The Corporation also grants equity awards to non-employee members of its board of directors and subsidiary bank board of directors under the Directors' Plan.

Under the Directors’ Plan, the Corporation can grant equity awards to non-employee holding company and subsidiary bank directors in the form of stock options, restricted stock, RSUs or common stock.

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Any purchase price exceeding the fair value of net assets acquired is recorded as goodwill.

In 2019, the Corporation adopted ASU 2017-04 "Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment" which did not have a material impact on the Corporation's consolidated financial statements.

Goodwill is not amortized to expense, but is tested for impairment at least annually.

Goodwill is not amortized to expense, but is evaluated for impairment at least annually.

Write-downs of the balance, if necessary as a result of the impairment test, are charged to expense in the period in which goodwill is determined to be impaired.

The Corporation performs its annual test of goodwill impairment as of October 31st of each year.

If certain events occur which indicate goodwill might be impaired between annual tests, goodwill would be tested when such events occur.

The Corporation performs its annual assessment of goodwill impairment in the fourth quarter of each year.

If certain events occur which indicate goodwill might be impaired between annual assessments, goodwill would be evaluated when such events occur.

Intangible assets are amortized over their estimated lives.

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Tax Credit Investments

The Corporation makes investments in certain community development projects, the majority of which, generate tax credits under various federal programs, including qualified affordable housing projects, new market tax credits ("NMTC") projects and historic rehabilitation projects (collectively, TCIs).

The Corporation makes investments in certain community development projects, the majority of which generate tax credits under various federal programs, including qualified affordable housing projects, NMTC projects and historic rehabilitation projects (collectively, TCIs).

These investments are made throughout the Corporation's market area as a means of supporting the communities it serves.

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Revenue Recognition:

The Corporation adopted ASC Update 2014-09, "Revenue from Contracts with Customers" using the modified retrospective method applied to all open contracts as of January 1, 2018 with no material impact on its consolidated financial statements.

This update established a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.

The core principle prescribed by this standards update is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The sources of revenue for the Corporation are interest income from loans, leases and investments and non-interest income.

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Consists of income from trust commissions, brokerage, money market and insurance commissions.

Trust commissions consists of advisory fees that are based on market values of clients' managed portfolios and transaction fees for fiduciary services performed, both of which are recognized as earned.

Brokerage includes advisory fees which are recognized as earned on a monthly basis and transaction fees that are recognized when transactions occur.

Brokerage includes advisory fees which are recognized when earned on a monthly basis and transaction fees that are recognized when transactions occur.

Money market is based on the balances held in trust accounts and is recognized monthly.

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Includes gains on sales of SBA loans, cash surrender value of life insurance, and other miscellaneous income.

Effective January 1, 2019, the Corporation adopted ASU 2016-02, "Leases (Topic 842)." This standards update requires a lessee to recognize for all leases with an initial term greater than twelve months:

All leases with an initial term greater than twelve months recognize:

(1) a ROU asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term;

and (2) a lease liability, which

is a lessee’s obligation to make lease payments arising from a lease, each measured on a discounted basis.

The Corporation adopted this standards update in the first quarter of 2019 using the modified retrospective method, which eliminates the requirement to restate the earliest prior period presented in an entity’s financial statements.

As such, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019, which continue to be reported in accordance with previous guidance (ASC Topic 840).

This standards update provides for a number of practical expedients in transition.

The Corporation elected to apply the package of practical expedients permitted within the new standard, which, among other things, allowed it to carryforward the prior conclusions on lease identification, lease classification and initial direct costs.

In addition, the Corporation elected to not separate lease and non-lease components.

The Corporation did not elect the practical expedient to apply hindsight in determining the lease term and in assessing impairment of the ROU assets.

and (2) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, each measured on a discounted basis.

The Corporation elected to not separate lease and non-lease components.

As a lessee, the majority of the operating lease portfolio consists of real estate leases for the Corporation's financial centers, land and office space.

1 unchanged sentence

ROU assets and lease liabilities are not recognized for leases with an initial term of 12 months or less.

The Corporation does not have any finance leases as the lessee.

Certain real estate leases have lease payments that adjust based on annual changes in the Consumer Price Index ("CPI").

Certain real estate leases have lease payments that adjust based on annual changes in the CPI.

The leases that are dependent upon CPI are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability.

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Other Recently Adopted Accounting Standards

On January 1, 2020, the Corporation adopted ASC Update 2018-13 - Fair Value Measurement (Topic 820):

Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement.

This update changes the fair value measurement disclosure requirements of ASC Topic 820 "Fair Value Measurement." Among other things, the update modifies the disclosure objective paragraphs of ASC 820 to eliminate:

(1) "at a minimum" from the phrase "an entity shall disclose at a minimum;" and (2) other similar disclosure requirements to promote the appropriate exercise of discretion by entities.

The Corporation adopted this standards update effective with its March 31, 2020 quarterly report on Form 10-Q and it did not

have a material impact on its consolidated financial statements.

On January 1, 2020, the Corporation adopted ASC Update 2018-15 - Intangibles - Goodwill and Other - Internal-Use Software

(Topic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

This update requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC Subtopic 350-40 to determine which implementation costs to capitalize as assets.

The Corporation adopted this standards update effective with its March 31, 2020 quarterly report on Form 10-Q and it did not have a material impact on its consolidated financial statements

In March 2020, the Corporation adopted ASC Update 2020-04 - Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This standards update provided optional guidance for a limited time to ease the potential burden in accounting for reference rate reform, specific to those using LIBOR or another reference rate expected to

be discontinued due to this reform.

The Corporation adopted this standards update effective with its March 31, 2020 quarterly report on Form 10-Q and it did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards:

Standard Description Date of Anticipated Adoption Effect on Financial Statements

ASC Update 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20):

Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans This update amends ASC Topic 715-20 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans.

This update is effective for annual reporting periods beginning after December 15, 2020.

Early adoption is permitted.

First Quarter 2021 The Corporation intends to adopt this standards update effective with its March 31, 2021 quarterly report on Form 10-Q.

This standard will impact the Corporation's disclosure relating to employee benefit plans, but the Corporation does not expect the adoption of this update to have a material impact on its consolidated financial statements.

ASC Update 2019-12 Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes This update simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

It also improves consistent application of, and simplifies GAAP for, other areas of Topic 740 by clarifying and amending existing guidance.

This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption of the amendments is permitted.

First Quarter 2021 The Corporation intends to adopt this standards update effective with its March 31, 2021 quarterly report on Form 10-Q and does not expect the adoption of this update to have a material impact on its consolidated financial statements.

On January 1, 2021, the Corporation adopted ASC Update 2019-12 Income Taxes (Topic 740):

Simplifying the Accounting for

Income Taxes.

The Corporation adopted this standards update effective with its March 31, 2021 quarterly report on Form 10-Q

and it did not have a material impact on the consolidated financial statements.

On January 1, 2021, the Corporation adopted ASC Update 2021-01 Reference Rate Reform (Topic 848).

This update permits

entities to apply optional expedients in Topic 848 to derivative instruments modified because of LIBOR transition affected by

changes to the interest rates used for discounting, margining or contract price alignment due to reference rate reform.

update was effective upon issuance, and entities may elect to apply the guidance to modifications either retrospectively, as of

any date from the beginning of any interim period that includes or is subsequent to March 12, 2020, or prospectively to new

modifications from any date in an interim period that includes or is subsequent to January 7, 2021.

The Corporation adopted

this standards update retrospectively effective with its March 31, 2021 quarterly report on Form 10-Q and such adoption did not have a material impact on the consolidated financial statements.

On March 1, 2021, the Corporation adopted ASC Update 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20).

The Corporation adopted this standards update effective with its March 31, 2021 quarterly report on Form 10-Q and such adoption did not have a material impact on the consolidated financial statements.

Reclassifications

Certain amounts in the 2019 and 2018 consolidated financial statements and notes have been reclassified to conform to the 2020 presentation.

Certain amounts in the 2020 consolidated financial statements and notes have been reclassified to conform to the 2021 presentation.

NOTE 2 – RESTRICTIONS ON CASH AND CASH EQUIVALENTS

The Corporation is required to maintain reserves against its deposit liabilities.

Prior to March 2020, reserves were in the form of cash and balances with the FRB, included in "interest-bearing deposits with other banks." The FRB suspended cash reserve requirements effective March 26, 2020.

On the consolidated balance sheets, the amounts of such reserves as of December 31, 2019 were $ 218.9 million.

The Bank is required to maintain reserves against its deposit liabilities.

Prior to March 2020, reserves were in the form of cash and balances with the FRB.

The FRB suspended cash reserve requirements effective March 26, 2020.

In addition, collateral is posted by the Corporation with counterparties to secure derivative and other contracts, which is included in "interest-bearing deposits with other banks".

5 unchanged sentences

Available for Sale

Government securities $ 127,831 $ — $ ( 213 ) $ 127,618

State and municipal securities 1,139,187 50,161 ( 678 ) 1,188,670

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Residential mortgage-backed securities $ 404,958 $ 11,022 $ ( 7,067 ) $ 408,913

Commercial mortgage-backed securities 575,426 — ( 18,472 ) 556,954

Total $ 980,384 $ 11,022 $ ( 25,539 ) $ 965,867

9 unchanged sentences

Residential mortgage-backed securities $ 278,281 $ 18,576 $ — $ 296,857

Total $ 369,841 $ 13,864 $ — $ 383,705

On July 1, 2019, the Corporation transferred state and municipal securities from the HTM classification to the AFS classification as permitted through the early adoption of ASU 2019-04, as disclosed in "Note 1 - Summary of Significant Accounting Policies." The amortized cost of the securities transferred was $ 158.9 million, and the estimated fair value was $ 168.5 million.

The Corporation has the positive intent and ability to hold the remainder of the HTM portfolio, consisting of residential mortgage-backed securities, to maturity.

On August 1, 2018, the Corporation transferred debt securities with an amortized cost of $ 665.5 million and an estimated fair value of $ 641.7 million from the AFS classification to the HTM classification.

These securities consisted of residential mortgage-backed securities ($ 505.5 million amortized cost and $ 485.3 million estimated fair value) and state and municipal securities ($ 160.0 million amortized cost and $ 156.4 million estimated fair value) and were transferred as the Corporation had the positive intent and ability to hold these securities to maturity.

The transfer of debt securities into the HTM category from the AFS category was recorded at fair value on the date of transfer.

The net unrealized gains or losses at the transfer date are included in AOCI and are being amortized over the remaining lives of the securities.

This amortization is expected to offset the amortization of the related premium or discount created by the investment securities transfer into the HTM classification, with no expected impact on future net income.

Securities carried at $ 520.5 million at December 31, 2020 and $ 462.6 million at December 31, 2019, were pledged as collateral to secure public and trust deposits and customer repurchase agreements.

Securities carried at $ 2,502.1 million at December 31, 2021 and $ 520.5 million at December 31, 2020, were pledged as collateral to secure public and trust deposits.

The amortized cost and estimated fair values of debt securities as of December 31, 2021, by contractual maturity, are shown in the following table.

24 unchanged sentences

2019 11,554 ( 6,821 ) 4,733

During 2020, the Corporation completed a limited balance sheet restructuring that included the sale of investment securities, with an amortized cost $ 79.0 million and an estimated fair value of $ 82.0 million, resulting in net investment securities gains of $ 3.0 million.

Offsetting these gains were $ 2.9 million of prepayment penalties recorded in non-interest expense for the redemption of FHLB advances.

During 2019, the Corporation completed a limited balance sheet restructuring that included the sale of investment securities, with an amortized cost of $ 409.2 million and an estimated fair value of $ 413.7 million, resulting in net investment securities gains of $ 4.5 million.

During 2021, the Corporation completed a balance sheet restructuring that included a $ 34.0 million gain on the sale of Visa Shares, offset by net losses on other securities of $ 0.4 million, primarily in connection with the sale of $ 24.6 million of ARCs.

During 2020, the Corporation completed a balance sheet restructuring that included the sale of investment securities, with an amortized cost of $ 79.0 million and an estimated fair value of $ 82.0 million, resulting in net investment securities gains of $ 3.0 million.

Offsetting these gains were $ 2.9 million of prepayment penalties recorded in non-interest expense for the redemption of FHLB advances.

The Corporation had cumulative credit-related OTTI charges, recognized as components of earnings, for debt securities held by the Corporation of $ 990,000 for both December 31, 2020 and 2019 and $ 11.5 million as of December 31, 2018.

The following tables present the gross unrealized losses and estimated fair values of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31:

8 unchanged sentences

Available for Sale

Government securities 2 $ 127,618 $ ( 213 ) — $ — $ — $ 127,618 $ ( 213 )

State and municipal securities 29 82,731 ( 678 ) — — — 82,731 ( 678 )

Corporate debt securities 6 43,068 ( 358 ) — — — 43,068 ( 358 )

5 unchanged sentences

Total available for sale 89 $ 917,933 $ ( 13,925 ) 119 $ 91,336 $ ( 2,331 ) $ 1,009,269 $ ( 16,256 )

Held to Maturity

Residential mortgage-backed securities 14 $ 205,969 $ ( 7,067 ) — $ — $ — $ 205,969 $ ( 7,067 )

Commercial mortgage-backed securities 36 556,954 ( 18,472 ) — — — 556,954 ( 18,472 )

Total 50 $ 762,923 $ ( 25,539 ) — $ — $ — $ 762,923 $ ( 25,539 )

Less Than 12 months 12 Months or Longer Total

Number of Securities Estimated

Fair Value Unrealized

Losses Number of Securities Estimated

Fair Value Unrealized

Losses Estimated

Fair Value Unrealized

Available for Sale

State and municipal securities 44 $ 136,344 $ ( 1,024 ) — $ — $ — $ 136,344 $ ( 1,024 )

Corporate debt securities 9 $ 44,528 $ ( 377 ) 1 $ 6,871 $ ( 314 ) $ 51,399 $ ( 691 )

4 unchanged sentences

Total available for sale 22 $ 266,636 $ ( 1,660 ) 163 $ 105,077 $ ( 3,618 ) $ 371,713 $ ( 5,278 )

No held to maturity securities were in an unrealized loss position as of December 31, 2020 and 2019.

No held to maturity securities were in an unrealized loss position as of December 31, 2020.

The Corporation’s collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.

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The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost.

Therefore, the Corporation does not have an ACL for these investments as of December 31, 2020.

As of December 31, 2020, all auction rate certificates ("ARCs") and corporate debt securities were rated above investment grade.

Therefore, the Corporation does not have an ACL for these investments as of December 31, 2021 and 2020.

As of December 31, 2021 and 2020, all ARCs and corporate debt securities were rated above investment grade.

All of the loans underlying the ARCs have principal payments which are guaranteed by the federal government.

Based on the payment status, rating and management’s evaluation of these securities, no ACL was required for ARCs or corporate debt securities as of December 31, 2020.

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND ASSET QUALITY

Based on the payment status, rating and management’s evaluation of these securities, no ACL was required for ARCs or corporate debt securities as of December 31, 2021 and 2020.

NOTE 4 – Loans and Allowance for Credit Losses

Loans and leases, net of unearned income

13 unchanged sentences

Net Loans $ 18,325,350 $ 18,900,820

(1) Includes PPP loans totaling $ 1.6 billion as of December 31, 2020.

(1) Includes PPP loans totaling $ 0.3 billion and $ 1.6 billion as of December 31, 2021 and 2020 respectively.

The Corporation has extended credit to officers and directors of the Corporation and to their associates.

These related-party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collection.

The aggregate dollar amount of these loans, including unadvanced commitments, was $ 129.6 million and $ 162.5 million as of December 31, 2021 and 2020, respectively.

During 2021, additions totaled $ 52.8 million and repayments totaled $ 85.7 million for related-party loans.

Allowance for Credit Losses, effective January 1, 2020

As discussed in Note 1, "Summary of Significant Accounting Policies," the Corporation adopted CECL effective January 1, 2020.

CECL requires estimated credit losses on loans to be determined based on an expected life of loan model, as compared to an incurred loss model (in effect for periods prior to 2020).

Accordingly, ACL disclosures subsequent to January 1, 2020 are not always comparable to prior periods.

In addition, certain new disclosures required under CECL are not applicable to prior periods.

As a result, the following tables present disclosures separately for each period, where appropriate.

New disclosures required under CECL are only shown for the current period and are noted.

See Note 1, "Summary of Significant Accounting Policies," for a summary of the impact of adopting CECL on January 1, 2020.

Under CECL, loans evaluated individually for impairment consist of non-accrual loans and TDRs.

Under the incurred loss model in effect prior to the adoption of CECL, loans evaluated individually for impairment were referred to as impaired loans.

Allowance for Credit Losses

The ACL related to loans consists of loans evaluated collectively and individually for expected credit losses.

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The total ACL is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.

The following table presents the components of the ACL under CECL:

The following table presents the components of the ACL:

(in thousands)

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Total ACL $ 263,534 $ 291,940

The following table presents the activity in the ACL in 2020:

The following table presents the activity in the ACL for the years ended December 31:

2021 2020 2019

(in thousands)

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Recoveries of loans previously charged off 17,146 21,020 17,163

Net loans recovered (charged off) ( 9,537 )

Net loans charged off ( 13,806 ) ( 9,537 ) ( 36,026 )

Provision for credit losses (2)

( 14,600 ) 76,920 32,825

Balance at the end of the period (3)

$ 263,534 $ 291,940 $ 166,209

(1) Includes $ 12.6 million of reserves for OBS credit exposures as of January 1, 2020.

(2) Includes $( 840,000 ) related to OBS credit exposures for the year ended December 31, 2020.

(3) Includes $ 14.4 million of reserves for OBS credit exposures as of December 31, 2020.

The following table presents the activity in the ACL - loans by portfolio segment, for the year ended December 31, 2020:

(2) Includes $ 0.2 million, $( 0.8 ) million and $( 6.3 ) million related to OBS credit exposures for the years ended December 31, 2021, 2020 and 2019, respectively.

(3) Includes $ 14.5 million, $ 14.4 million and $ 2.6 million of reserves for OBS credit exposures as of December 31, 2021, 2020 and 2019, respectively.

The following tables present the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2021 and 2020, by portfolio segment:

Real Estate -

Mortgage Commercial and

Industrial Real Estate -

Mortgage Commercial and Industrial Real Estate -

Equity Real Estate -

Mortgage Real Estate -

Construction Consumer Equipment lease financing, other

and overdrafts Total

Construction Consumer Equipment Finance Leasing and Other Total

(in thousands)

Year ended December 31, 2020

Balance at December 31, 2019 $ 45,610 $ 68,602 $ 17,744 $ 19,771 $ 4,443 $ 3,762 $ 3,690 $ 163,622

6 unchanged sentences

Balance at December 31, 2020 103,425 74,771 14,232 51,995 15,608 10,905 6,631 277,567

(1) Provision included in the table only includes the portion related to Net Loans.

The higher provision during 2020 was largely driven by the overall downturn in economic forecasts due to COVID-19, resulting in higher expected future credit losses under CECL.

The ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models.

Qualitative adjustments include and consider changes in national, regional and local economic and business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting credit quality.

Qualitative adjustments have increased compared to those at the time of the adoption of CECL on January 1, 2020 primarily as a result of uncertainties related to the economic impact of COVID-19, including consideration for the future performance of loans that received deferrals or forbearances as a result of COVID-19 and the impact COVID-19 had on certain industries where the quantitative models was not fully capturing the appropriate level of risk.

PPP loans that were issued during 2020 are fully guaranteed by the SBA and as such, no ACL were recorded against the PPP loan portfolio.

Allowance for Credit Losses, prior to January 1, 2020

Prior to January 1, 2020, the ACL consisted of the allowance for loan losses and the reserve for unfunded lending commitments.

The allowance for loan losses represented management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a reduction to Net Loans.

The reserve for unfunded lending commitments represented management’s estimate of incurred losses in unfunded loan commitments and letters of credit, and was recorded in other liabilities on the consolidated balance sheets.

The ACL was increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.

The following table presents the components of the ACL as of December 31:

(in thousands)

Allowance for loan losses $ 163,622 $ 160,537

Reserve for unfunded lending commitments 2,587 8,873

Total ACL $ 166,209 $ 169,410

The following table presents the activity in the ACL for the years ended December 31:

(in thousands)

Balance at beginning of period $ 169,410 $ 176,084

Loans charged off ( 8,726 ) ( 15,337 ) ( 676 ) ( 1,290 ) ( 39 ) ( 2,633 ) ( 2,251 ) ( 30,952 )

1 unchanged sentence

Net loans recovered (charged off) ( 6,252 ) ( 5,750 ) ( 428 ) ( 915 ) 1,373 ( 536 ) ( 1,298 ) ( 13,806 )

Provisions for credit losses (1)

32,825 46,907

Balance at the end of the period (2)

$ 166,209 $ 169,410

(1) Includes $( 6.3 ) million and $ 2.7 million related to OBS credit exposures for the years ended 2019 and 2018, respectively.

(2) Includes $ 2.6 million and $ 8.9 million of reserves for OBS credit exposures as of December 31, 2019 and 2018.

The following tables present the activity in the allowance for loan losses by portfolio segment for the year ended December 31, 2019 and 2018, by portfolio segment:

Real Estate -

Mortgage Commercial and Industrial Real Estate -

Equity Real Estate -

Mortgage Real Estate -

Construction Consumer Equipment Finance Leasing and Other Total

(in thousands)

Balance at December 31, 2018 52,889 58,868 18,911 18,921 5,061 3,217 2,670 160,537

Loans charged off ( 1,837 ) ( 42,410 ) ( 1,291 ) ( 1,545 ) ( 143 ) ( 3,403 ) ( 2,560 ) ( 53,189 )

Recoveries of loans previously charged off 2,202 8,721 688 989 2,591 1,306 666 17,163

Net loans recovered (charged off) 365 ( 33,689 ) ( 603 ) ( 556 ) 2,448 ( 2,097 ) ( 1,894 ) ( 36,026 )

Provision for loan losses (1)

2 unchanged sentences

(1) Provision included in the table only includes the portion related to Net Loans

The ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models.

Qualitative adjustments increased during 2020, primarily as a result of uncertainties related to the economic impact of COVID-19, including consideration for the future performance of loans that received deferrals or forbearances as a result of COVID-19 and the impact COVID-19 had on certain industries where the quantitative models were not fully capturing the appropriate level of risk.

The impact from qualitative adjustments on the ACL decreased in 2021 with the improvement in economic conditions.

Non-accrual Loans

All loans individually evaluated for impairment are measured for losses on a quarterly basis.

As of December 31, 2020 and December 31, 2019, 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 December 31, 2021 and 2020, 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.

Collateral could be in the form of real estate, in the case of commercial mortgages and construction loans, or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans.

2 unchanged sentences

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

With a Related Allowance Without a Related Allowance Total Total

With a Related Allowance Without a Related Allowance Total With a Related Allowance Without a Related Allowance Total

(in thousands)

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Accordingly, no specific valuation allowance was considered to be necessary.

In 2020, the total interest income that would have been recorded if non-accrual loans had been current in accordance with their original terms was $ 5.8 million.

The amount of interest income on non-accrual loans that was recognized in 2020 was approximately $ 290,000 .

The amount of interest income on non-accrual loans that was recognized was approximately $ 1.3 million in 2021 and $ 0.3 million in 2020.

Asset Quality

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(2) Loans originated in 2021 include $ 0.3 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government guaranty through the SBA.

The information presented in the preceding table is not required to be disclosed for periods prior to the adoption of CECL.

The following table presents the most comparable required information for the prior period, internal credit risk ratings for the indicated loan class segments:

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

December 31, 2020

Pass Special Mention Substandard or Lower Total

(dollars in thousands)

Real estate - commercial mortgage $ 6,429,407 $ 137,163 $ 134,206 $ 6,700,776

Commercial and industrial - secured 3,830,847 171,442 195,884 4,198,173

Commercial and industrial - unsecured 234,987 9,665 3,876 248,528

Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans

(dollars in thousands) Amortized Amortized

2020 2019 2018 2017 2016 Prior Cost Basis Cost Basis Total

Real estate - construction (1)

Pass $ 185,883 $ 229,097 $ 217,604 $ 81,086 $ 37,976 $ 110,470 $ 38,026 $ — $ 900,142

Special Mention — — — — 7,047 6,212 — — 13,259

Substandard or Lower — 447 — 2,000 753 1,637 632 — 5,469

Total real estate - construction 185,883 229,544 217,604 83,086 45,776 118,319 38,658 — 918,870

Real estate - construction (1)

Current period gross charge-offs — — — — — ( 17 ) — — ( 17 )

Current period recoveries — — — — 68 5,054 — — 5,122

Total net (charge-offs) recoveries — — — — 68 5,037 — — 5,105

Commercial and industrial (2)

Pass 2,283,533 508,541 298,567 214,089 208,549 596,646 1,278,689 — 5,388,614

Special Mention 6,633 23,834 29,167 10,945 11,506 25,960 45,994 — 154,039

Substandard or Lower 3,221 5,947 8,434 11,251 11,192 23,852 64,278 — 128,175

Total commercial and industrial 2,293,387 538,322 336,168 236,285 231,247 646,458 1,388,961 — 5,670,828

4,065,834 181,107 199,760 4,446,701

Construction - commercial residential 100,808 2,897 3,461 107,166

Construction - commercial 765,562 1,322 2,676 769,560

Total construction (excluding construction - other)

866,370 4,219 6,137 876,726

$ 11,361,611 $ 322,489 $ 340,103 $ 12,024,203

% of Total 94.5 % 2.7 % 2.8 % 100.0 %

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 equipment lease financing.

For these loans, the most relevant credit quality indicator is delinquency status.

The migration of loans through the various delinquency status categories is a significant component of the ACL methodology for those loans, under both the CECL and incurred loss models, which base the PD on this migration.

Commercial and industrial

Current period gross charge-offs — ( 114 ) ( 30 ) ( 488 ) ( 393 ) ( 520 ) ( 17,370 ) — ( 18,915 )

Current period recoveries — 43 486 216 162 4,531 5,958 — 11,396

Total net (charge-offs) recoveries — ( 71 ) 456 ( 272 ) ( 231 ) 4,011 ( 11,412 ) — ( 7,519 )

Real estate - commercial mortgage

Pass 973,664 917,510 708,946 794,955 783,094 2,213,343 53,041 404 6,444,957

Special Mention 13,639 40,874 84,047 80,705 89,112 167,424 2,364 — 478,165

Substandard or Lower 1,238 6,681 6,247 39,027 22,605 103,007 2,225 940 181,970

Total real estate - commercial mortgage 988,541 965,065 799,240 914,687 894,811 2,483,774 57,630 1,344 7,105,092

Real estate - commercial mortgage

Current period gross charge-offs ( 60 ) ( 21 ) ( 36 ) ( 2,515 ) ( 29 ) ( 1,547 ) ( 17 ) — ( 4,225 )

Current period recoveries — 6 — — 1 1,020 — — 1,027

Total net (charge-offs) recoveries ( 60 ) ( 15 ) ( 36 ) ( 2,515 ) ( 28 ) ( 527 ) ( 17 ) — ( 3,198 )

Pass $ 3,443,080 $ 1,655,148 $ 1,225,117 $ 1,090,130 $ 1,029,619 $ 2,920,459 $ 1,369,756 $ 404 $ 12,733,713

Special Mention 20,272 64,708 113,214 91,650 107,665 199,596 48,358 — 645,463

Substandard or Lower 4,459 13,075 14,681 52,278 34,550 128,496 67,135 940 315,614

Total $ 3,467,811 $ 1,732,931 $ 1,353,012 $ 1,234,058 $ 1,171,834 $ 3,248,551 $ 1,485,249 $ 1,344 $ 13,694,790

(1) Excludes real estate - construction - other.

(2) Loans originated in 2020 include $ 1.6 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government guaranty through the SBA.

The Corporation considers the performance of the loan portfolio and its impact on the ACL.

For certain loans classes, the Corporation evaluates credit quality based on the aging status of the loan.

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 table presents the amortized cost of these loans based on payment activity, by origination year, for the current period :

44 unchanged sentences

Total $ 1,952,466 $ 1,348,730 $ 470,872 $ 224,975 $ 272,696 $ 632,441 $ 999,354 $ 4,197 $ 5,905,731

The information presented in the preceding table not required to be disclosed for periods prior to the adoption of CECL.

The following table presents the most comparable required information for the prior period, a summary of performing, delinquent and non-performing loans for the indicated class segments:

December 31, 2020

Performing Delinquent (1)

Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans

(dollars in thousands) Amortized Amortized

2020 2019 2018 2017 2016 Prior Cost Basis Cost Basis Total

Real estate - home equity

Performing $ 31,445 $ 8,176 $ 13,906 $ 11,024 $ 11,667 $ 126,749 $ 982,285 $ 5,321 $ 1,190,573

Non-performing — 88 23 233 221 2,290 9,485 — 12,340

(dollars in thousands)

Total real estate - home equity 31,445 8,264 13,929 11,257 11,888 129,039 991,770 5,321 1,202,913

Real estate - home equity

Current period gross charge-offs — — — — — ( 34 ) ( 1,159 ) — ( 1,193 )

Current period recoveries — — — — — 138 366 — 504

Total net (charge-offs) recoveries — — — — — 104 ( 793 ) — ( 689 )

Real estate - residential mortgage

Construction - other 92,649 895 809 94,353

Consumer - direct 63,582 465 190 64,237

Consumer - indirect 393,974 4,685 268 398,927

Performing 1,255,532 585,878 228,398 341,563 264,990 434,889 — — 3,111,250

Non-performing 217 2,483 3,177 2,483 722 21,583 — — 30,665

Total real estate - residential mortgage 1,255,749 588,361 231,575 344,046 265,712 456,472 — — 3,141,915

Real estate - residential mortgage

Current period gross charge-offs — ( 68 ) ( 101 ) ( 190 ) ( 7 ) ( 254 ) — — ( 620 )

Current period recoveries — 68 16 1 1 405 — — 491

Total net (charge-offs) recoveries — — ( 85 ) ( 189 ) ( 6 ) 151 — — ( 129 )

Performing 114,399 98,587 95,072 43,334 25,804 36,086 52,698 42 466,022

Non-performing 168 19 124 141 114 150 34 — 750

Total consumer 114,567 98,606 95,196 43,475 25,918 36,236 52,732 42 466,772

Current period gross charge-offs ( 134 ) ( 542 ) ( 524 ) ( 444 ) ( 489 ) ( 769 ) ( 498 ) — ( 3,400 )

Current period recoveries — 64 165 159 94 101 1,292 — 1,875

Total net (charge-offs) recoveries ( 134 ) ( 478 ) ( 359 ) ( 285 ) ( 395 ) ( 668 ) 794 — ( 1,525 )

Equipment lease financing and other

$ 4,705,746 $ 56,689 $ 50,888 $ 4,813,323

% of Total 97.8 % 1.2 % 1.0 % 100 %

(1) Includes all accruing loans 30 days to 89 days past due.

(2) Includes all accruing loans 90 days or more past due and all non-accrual loans.

Performing 102,324 65,303 49,453 34,995 15,631 5,040 — — 272,746

Non-performing — — 30 15,983 142 282 — — 16,437

Total leasing and other 102,324 65,303 49,483 50,978 15,773 5,322 — — 289,183

Equipment lease financing and other

Current period gross charge-offs ( 606 ) ( 1,581 ) — — — — — — ( 2,187 )

Current period recoveries 185 349 21 18 11 21 — — 605

Total net (charge-offs) recoveries ( 421 ) ( 1,232 ) 21 18 11 21 — — ( 1,582 )

Construction - other

Performing 96,444 24,888 6,822 — 16 — — — 128,170

Non-performing — — — 178 — — — — 178

Total construction - other 96,444 24,888 6,822 178 16 — — — 128,348

Construction - other

Current period gross charge-offs — — — — — — — — —

Current period recoveries — — — — — — — — —

Total net (charge-offs) recoveries — — — — — — — — —

Performing $ 1,600,144 $ 782,832 $ 393,651 $ 430,916 $ 318,108 $ 602,764 $ 1,034,983 $ 5,363 $ 5,168,761

Non-performing 385 2,590 3,354 19,018 1,199 24,305 9,519 — 60,370

Total $ 1,600,529 $ 785,422 $ 397,005 $ 449,934 $ 319,307 $ 627,069 $ 1,044,502 $ 5,363 $ 5,229,131

The following table presents non-performing assets:

38 unchanged sentences

In most cases, the Corporation records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell.

Substantially all of the collateral supporting collateral-dependent financial assets consists of various types of real estate including residential properties;

Substantially all of the collateral supporting collateral-dependent financial assets consists of various types of real estate including:

residential properties;

commercial properties such as retail centers, office buildings, and lodging;

21 unchanged sentences

Real estate - home equity 30 1,226 48 4,359 59 2,706

Real estate - construction 1 154 — — — —

Consumer — — 14 345 — —

3 unchanged sentences

In accordance with regulatory guidance, payment schedule modifications granted after March 13, 2020, to borrowers impacted by the effects of COVID-19 pandemic and who are not delinquent at the time of the payment schedule modifications, have been excluded from TDRs.

For the year ended December 31, 2020, payment schedule modifications having a recorded investment of $ 3.5 billion were excluded from TDRs based on this regulatory guidance.

As of December 31, 2021, $ 38.2 million in recorded investment remain in an active COVID-19 deferral program.

NOTE 5 – PREMISES AND EQUIPMENT

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NOTE 6 – GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets totaled $ 536.7 million and $ 535.3 million as of December 31, 2020 and 2019, respectively.

The increase of $ 1.4 million, net of amortization, was the result of the acquisition of a wealth management business in 2020.

There were no goodwill impairment charges in 2020 based on the results of the annual test.

Goodwill totaled $ 534.3 million and $ 533.4 million as of December 31, 2021 and 2020, respectively.

The increase of $ 0.9 million was the result of certain acquisitions in 2021.

There were no goodwill impairment charges in 2021 based on the annual assessment.

The estimated fair values of the Corporation’s reporting units are subject to uncertainty, including future changes in fair values of banks in general and future operating results of reporting units, which could differ significantly from the assumptions used in the current valuation of reporting units.

The follow table summarizes intangible assets, which are included in Goodwill and intangible assets on the consolidated balance sheets:

(in millions)

Intangible assets

Amortizing intangible assets $ 5.4 $ 4.3

Accumulated amortization ( 1.6 ) ( 1.0 )

Net intangibles $ 3.8 $ 3.3

Amortization expense was $ 589 thousand and $ 529 thousand for the years ending December 31, 2021 and 2020, respectively.

NOTE 7 – MORTGAGE SERVICING RIGHTS

9 unchanged sentences

Balance at beginning of period $ ( 10,500 ) $ — $ —

Additions to valuation allowance ( 10,500 ) — —

Reduction (addition) to valuation allowance 9,900 ( 10,500 ) —

Balance at end of period $ ( 600 ) $ ( 10,500 ) $ —

8 unchanged sentences

The fair values of MSRs were $ 35.4 million and $ 28.2 million as of December 31, 2021 and 2020, respectively.

Based on its fair value analysis as of December 31, 2020, the Corporation determined that a $ 10.5 million increase to the valuation allowance was required for the year ended December 31, 2020.

The increase to the valuation allowance was recorded as a reduction to mortgage banking income on the consolidated statements of income for the year ended December 31, 2020.

There were no valuation allowances for the years ended December 31, 2019 and 2018.

Total servicing income, recognized as an increase to mortgage banking income in the consolidated statements of income, was $ 11.9 million, $ 12.0 million and $ 11.8 million in 2020, 2019 and 2018, respectively, excluding the increase in the valuation allowance recorded in 2020.

Based on its fair value analysis as of December 31, 2021,

the Corporation determined that a $ 0.6 million valuation allowance was required for the year ended December 31, 2021.

The valuation allowance was $ 10,500 and $ 0 at December 31, 2020 and 2019, respectively.

Total servicing income, recognized as an increase to mortgage banking income in the consolidated statements of income, was $ 11.2 million, $ 11.9 million and $ 12.0 million as of December 31, 2021, 2020 and 2019, respectively.

Total MSR amortization expense, recognized as a reduction to mortgage banking income in the consolidated statements of income, was $ 12.0 million, $ 12.7 million and $ 6.9 million in 2021, 2020 and 2019, respectively.

Estimated future MSR amortization expense, based on balances as of December 31, 2021, and the estimated remaining lives of the underlying loans, follows (in thousands):

Beyond 2025 11,055

Thereafter 10,280

Total estimated amortization expense $ 35,993

16 unchanged sentences

Short-term borrowings as of December 31, 2021 and 2020 and the related maximum amounts outstanding at the end of any month in each of the three years then ended are presented below.

The securities underlying the repurchase agreements remain in AFS investment securities.

December 31 Maximum Outstanding

8 unchanged sentences

(1) Represents FHLB advances with an original maturity term of less than one year.

(2) Includes repurchase agreements and short-term promissory notes.

(2) Includes short-term promissory notes.

As of December 31, 2021, the Corporation had aggregate availability under federal funds lines of $ 2.1 billion.

A combination of commercial real estate loans, commercial loans and investment securities were pledged to the FRB to provide access to FRB Discount Window borrowings.

As of December 31, 2020 and 2019, the Corporation had $ 324.3 million and $ 334.3 million, respectively, of collateralized borrowing availability at the FRB Discount Window, and no outstanding borrowings.

A combination of commercial real estate loans, commercial loans, consumer loans and investment securities were pledged to the FRB to provide access to FRB discount window borrowings.

As of December 31, 2021 and 2020, the Corporation had $ 0.9 billion and $ 0.3 billion, respectively, of collateralized borrowing availability at the FRB discount window, and no outstanding borrowings.

FHLB advances with an original maturity of one year or more and long-term borrowings included the following as of December 31:

4 unchanged sentences

Junior subordinated deferrable interest debentures 16,496 16,496

Other long-term debt 939 507

Unamortized discounts and issuance costs ( 4,868 ) ( 6,713 )

Total long-term borrowings $ 621,345 $ 1,296,263

Excluded from the preceding table is the Parent Company’s revolving line of credit with Fulton Bank.

As of December 31, 2020 and 2019, there were no amounts outstanding under this line of credit.

This line of credit, with a total commitment of $ 75.0 million, is secured by insurance investments and bears interest at the LIBOR for maturities of one month plus 2.00 %.

The amount that the Corporation is permitted to borrow under this commitment at any given time is subject to a formula based on a percentage of the value of the collateral pledged.

Although balances drawn on the line of credit and related interest income and expense are eliminated in the consolidated financial statements, this borrowing arrangement is senior to the subordinated debt and the junior subordinated deferrable interest debentures.

FHLB advances mature through 2027 and carry a weighted average interest rate of 1.78 %.

As of December 31, 2021, the Corporation had additional borrowing capacity of approximately $ 5.8 billion with the FHLB.

Advances from the FHLB are secured by FHLB stock, qualifying residential mortgages, investment securities and other assets.

The following table summarizes the scheduled maturities of FHLB advances with an original maturity of one year or more and long-term borrowings as of December 31, 2020 (in thousands):

The following table summarizes the scheduled maturities with an original maturity of one year or more and long-term borrowings as of December 31, 2021 (in thousands):

2022 $ 65,313

Thereafter 391,496

Unamortized discounts and issuance costs ( 4,868 )

In March 2020, the Corporation issued $ 200.0 million and $ 175.0 million of subordinated notes due in 2030 and 2035, respectively.

31 unchanged sentences

Negative fair values 3,213,924 ( 79,889 ) 3,834,062 ( 165,205 )

Interest Rate Swaps used in Cash Flow Hedges

Positive fair values 500,000 60 — —

Negative fair values 500,000 ( 1,432 ) — —

Foreign Exchange Contracts with Customers

4 unchanged sentences

Negative fair values 9,364 ( 240 ) 1,422 ( 5 )

The following table presents the effect of fair value and cash flow hedge accounting on accumulated OCI for the year ended December 31, 2021:

Amount of Gain (Loss) Recognized in OCI on Derivative Amount of Gain (Loss) Recognized in OCI Included Component Amount of Gain or (Loss) Recognized in OCI Excluded Component Location of Gain or (Loss) Recognized from AOCI into Income Amount of Gain Reclassified from AOCI into Income Amount of Gain Reclassified from AOCI into Income Included Component Amount of Gain or (Loss) Reclassified from AOCI into Income Excluded Component

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products ( 3,452,060 ) ( 3,452,060 ) — Interest income 2,775,589 2,775,589 —

The following table presents the effect of fair value and cash flow hedge accounting on the consolidated statements of income for the year ended December 31, 2021:

Consolidated Statements of Income Classification

Interest Income Interest Expense

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 $ 2,776 $ —

The effects of fair value and cash flow hedging:

Amount of gain or (loss) on cash flow hedging relationships — —

Interest contracts:

Amount of gain reclassified from AOCI into income 2,776 —

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 Reclassified from AOCI into Income - Included Component 2,776 —

Amount of Gain or (Loss) Reclassified from AOCI into Income - Excluded Component — —

During the next twelve months, the Corporation estimates that an additional $ 4.9 million will be reclassified as an increase to interest income.

The following table presents the fair value gains (losses) on derivative financial instruments for the years ended December 31:

15 unchanged sentences

(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 $ 2.8 million for the year ended December 31, 2020, losses related to changes in fair values of mortgage loans held for sale were $ 260,000 for the year ended December 31, 2019, and gains related to changes in fair values of mortgage loans held for sale were $ 231,000 for the year ended December 31, 2018.

Losses related to changes in fair values of mortgage loans held for sale were $ 2.5 million for the year ended December 31, 2021.

Gains related to changes in fair values of mortgage loans held for sale were $ 2.8 million for the year ended December 31, 2020, and losses related to changes in fair values of mortgage loans held for sale were $ 0.3 million for the year ended December 31, 2019.

The gains and losses are recorded on the consolidated income statements as an adjustment to mortgage banking income.

1 unchanged sentence

The fair values of interest rate swap 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 elects to not offset assets and liabilities subject to such arrangements on the consolidated financial statements.

The Corporation has elected to net its financial assets and liabilities designated as cash flow hedges when offsetting is permitted.

The following table presents the financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets as of December 31:

29 unchanged sentences

The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Basel III Capital Rules

In July 2013, the FRB approved final rules (the "U.S.

Basel III Capital Rules") establishing a new comprehensive capital framework for U.S.

Basel III Rules

In July 2013, the FRB approved Basel III Rules establishing a new comprehensive capital framework for U.S.

banking organizations and implementing the Basel Committee on Banking Supervision's December 2010 framework for strengthening international capital standards.

Basel III Capital Rules substantially revised the risk-based capital requirements applicable to bank holding companies and depository institutions.

The minimum regulatory capital requirements established by the U.S.

Basel III Capital Rules became effective on January 1, 2015, and became fully phased in on January 1, 2019.

Basel III Capital Rules require the Corporation and the Bank to:

The Basel III Rules substantially revised the risk-based capital requirements applicable to bank holding companies and depository institutions.

The minimum regulatory capital requirements established by the Basel III Rules became effective on January 1, 2015, and became fully phased in on January 1, 2019.

The Basel III Rules require the Corporation and the Bank to:

• Meet a minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets and a minimum Tier 1 capital of 6.00% of risk-weighted assets;

3 unchanged sentences

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.

Basel III Capital Rules use a standardized approach for risk weightings that expand the risk-weightings for assets and off-balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures, resulting in higher risk weights for a variety of asset categories.

The Basel III Rules use a standardized approach for risk weightings that expand the risk-weightings for assets and off-balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures, resulting in higher risk weights for a variety of asset categories.

The Corporation and the Bank are required to maintain a "capital conservation buffer" of 2.50% above the minimum risk-based capital requirements.

The rules provide that the failure to maintain the "capital conservation buffer" results in restrictions on capital distributions and discretionary cash bonus payments to executive officers.

As a result, under the U.S.

Basel III Capital Rules, if the Bank fails to maintain the required minimum capital conservation buffer, the Corporation will be subject to limits, and possibly prohibitions, on its ability to obtain capital distributions from such subsidiaries.

As a result, under the Basel III Rules, if the Bank fails to maintain the required minimum capital conservation buffer, the Corporation will be subject to limits, and possibly prohibitions, on its ability to obtain capital distributions from such subsidiaries.

If the Corporation does not receive sufficient cash dividends from the Bank, it may not have sufficient funds to pay dividends on its common stock, service its debt obligations or repurchase its common stock.

As of December 31, 2020 and 2019, the Corporation's capital levels met the fully phased-in minimum capital requirements, including the new capital conservation buffers, as prescribed in the U.S.

Basel III Capital Rules.

As of December 31, 2021 and 2020, the Corporation's capital levels met the fully phased-in minimum capital requirements, including the new capital conservation buffers, as prescribed in the Basel III Rules.

As of December 31, 2021 and 2020, the Bank was well capitalized under the regulatory framework for prompt corrective action based on its capital ratio calculation.

To be categorized as well capitalized, the bank was required to 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 following table.

There are no conditions or events since December 31, 2021, that management believes have changed the institution's categories.

The following tables present the Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage requirements under the U.S.

Basel III Capital Rules, as of December 31:

T he following tables present the Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage requirements under the Basel III Rules, as of December 31:

Actual For Capital

36 unchanged sentences

The dividends that may be paid by the Bank to the Parent Company are subject to certain legal and regulatory limitations.

The total amount available for payment of dividends by the Bank to the Corporation was approximately $ 220 million as of December 31, 2020, based on the Bank maintaining enough capital to be considered well capitalized under the U.S.

Basel III Capital Rules.

The total amount available for payment of dividends by the Bank to the Parent Company was approximately $ 73.7 million as of December 31, 2021, based on the Bank maintaining enough capital to be considered well capitalized under the Basel III Rules.

Under current regulations, the Bank is limited in the amount it may loan to its affiliates, including the Parent Company.

21 unchanged sentences

Change in valuation allowance — — 1.8

Re-measurement of net DTA due to the Tax Act — — ( 0.3 )

Executive compensation 0.1 — —

9 unchanged sentences

State loss carryforwards 23,996 20,401

Lease Liability 21,034 —

Tax credit investments 11,203 10,159

7 unchanged sentences

Equipment lease financing $ 41,049 $ 44,216

Right-of-use-asset 18,671 —

Unrealized holding gains on AFS securities 10,432 23,978

3 unchanged sentences

Intangible assets 1,272 1,205

Postretirement and defined benefit plans 1,243 —

Other 13,492 15,811

24 unchanged sentences

These offsetting increases and decreases are likely to continue in the future, including over the next twelve months.

While the net effect on total unrecognized tax benefits during this period cannot be reasonably estimated, approximately $ 513,000 is expected to reverse in 2021 due to lapsing of the statute of limitations.

While the net effect on total unrecognized tax benefits during this period cannot be reasonably estimated, approximately $ 0.6 million is expected to reverse in 2022 due to lapsing of the statute of limitations.

Decreases can also occur throughout the settlement of positions with taxing authorities.

As of December 31, 2021, if recognized, all of the Corporation’s unrecognized tax benefits would impact the effective tax rate.

Not included in the table above is $ 468,000 of federal income tax benefit on unrecognized state tax benefits which, if recognized, would also impact the effective tax rate.

Not included in the table above is $ 0.4 million of federal income tax benefit on unrecognized state tax benefits which, if recognized, would also impact the effective tax rate.

Interest accrued related to unrecognized tax benefits is recorded as a component of income tax expense.

1 unchanged sentence

The Corporation recognized approximately $( 75,000 ) and $( 17,000 ) in 2021 and 2020, respectively, for interest and penalties in income tax expense related to unrecognized tax positions.

As of December 31, 2020 and 2019, total accrued interest and penalties related to unrecognized tax positions were approximately $ 680,000 and $ 697,000 , respectively.

As of December 31, 2021 and 2020, total accrued interest and penalties related to unrecognized tax positions were approximately $ 0.6 million and $ 0.7 million, respectively.

The Corporation files income tax returns in the federal and various state jurisdictions.

21 unchanged sentences

Components of income taxes:

Affordable housing tax credits and other tax benefits $ ( 28,777 ) $ ( 30,642 ) $ ( 30,721 )

Other tax credit investment credits and tax benefits ( 4,163 ) ( 4,542 ) ( 6,385 )

Amortization of affordable housing investments, net of tax benefit 20,429 22,184 21,569

Tax credits and benefits ( 28,141 ) ( 32,940 ) ( 35,184 )

Amortization of tax credits and benefits, net of tax benefits 17,378 20,429 22,184

Deferred tax expense 639 921 954

1 unchanged sentence

Amortization of TCIs:

Affordable housing tax credits investment $ 4,087 $ 3,344 $ 3,355

Other tax credit investment amortization 2,039 2,677 8,094

Total amortization of TCIs $ 6,187 $ 6,126 $ 6,021

19 unchanged sentences

(in thousands)

Unrealized gain on securities $ 85,188 $ ( 19,537 ) $ 65,651

Unrealized loss on securities $ ( 23,222 ) $ 5,274 $ ( 17,948 )

Reclassification adjustment for securities gains included in net income (1)

2 unchanged sentences

3,485 ( 795 ) 2,690

Net unrealized holding loss arising during the period on interest rate swaps used in cash flow hedges ( 2,776 ) 629 ( 2,147 )

Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash flow hedges ( 3,452 ) 782 ( 2,670 )

Unrecognized pension and postretirement income 9,147 ( 2,003 ) 7,144

1 unchanged sentence

1,480 ( 324 ) 1,156

Total Other Comprehensive Income $ 84,564 $ ( 19,336 ) $ 65,228

Total Other Comprehensive Loss $ ( 48,854 ) $ 11,174 $ ( 37,680 )

Unrealized gain on securities $ 85,188 $ ( 19,537 ) $ 65,651

3 unchanged sentences

4,360 ( 912 ) 3,448

Non-credit related unrealized losses on other-than-temporarily impaired debt securities ( 873 ) 193 ( 680 )

Unrecognized pension and postretirement income ( 3,242 ) 710 ( 2,532 )

2 unchanged sentences

Total Other Comprehensive Income $ 84,564 $ ( 19,336 ) $ 65,228

Unrealized loss on securities $ ( 31,235 ) $ 6,909 $ ( 24,326 )

Unrealized gain on securities $ 73,085 $ ( 16,166 ) $ 56,919

Reclassification adjustment for securities gains included in net income (1)

6 unchanged sentences

1,316 ( 291 ) 1,025

Total Other Comprehensive Loss $ ( 24,379 ) $ 5,391 $ ( 18,988 )

Total Other Comprehensive Income $ 75,662 $ ( 16,736 ) $ 58,926

(1) Amounts reclassified out of AOCI/(loss).

9 unchanged sentences

The following table presents changes in each component of accumulated other comprehensive income (loss), net of tax, for the years ended December 31:

Unrealized Gains (Losses) on Investment Securities Not Other-Than-Temporarily Impaired Unrealized Non-Credit Gains (Losses) on Other-Than-Temporarily Impaired Debt Securities Unrecognized Pension and Postretirement Plan Income (Cost) Total

Unrealized Gains (Losses) on Investment Securities Net Unrealized (Loss) Gain on Interest Rate Swaps used in Cash Flow Hedges Unrecognized Pension and Postretirement Plan Income (Costs) Total

(in thousands)

1 unchanged sentence

Other comprehensive loss before reclassifications 56,239 — ( 937 ) 55,302

Amounts reclassified from accumulated other comprehensive income (loss) ( 30 ) — 1,648 1,618

Amounts reclassified from AOCI (loss) ( 3,686 ) — 1,025 ( 2,661 )

Amortization of net unrealized losses on AFS securities transferred to HTM 6,285 — — 6,285

Reclassification of stranded tax effects ( 3,887 ) — ( 3,214 ) ( 7,101 )

Balance at December 31, 2019 14,864 — ( 15,001 ) ( 137 )

Other comprehensive income before reclassifications 56,919 ( 680 ) ( 937 ) 55,302

Amounts reclassified from accumulated other comprehensive income (loss) ( 3,686 ) — 1,025 ( 2,661 )

OCI before reclassifications 65,651 — ( 2,532 ) 63,119

Amounts reclassified from AOCI ( 2,359 ) — 1,020 ( 1,339 )

Amortization of net unrealized losses on AFS securities transferred to HTM 3,448 — — 3,448

Balance at December 31, 2020 81,604 — ( 16,513 ) 65,091

Other comprehensive income before reclassifications 65,651 — ( 2,532 ) 63,119

Amounts reclassified from accumulated other comprehensive income (loss) ( 2,359 ) — 1,020 ( 1,339 )

OCI before reclassifications ( 17,948 ) — 7,144 ( 10,804 )

Amounts reclassified from AOCI ( 25,905 ) ( 4,817 ) 1,156 ( 29,566 )

Amortization of net unrealized losses on AFS securities transferred to HTM 2,690 — — 2,690

2 unchanged sentences

In February 2021, the Corporation's board of directors approved a share repurchase program pursuant to which the Corporation is authorized to repurchase up to $ 75.0 million of its outstanding shares of common stock, or approximately 3.2 % of its outstanding shares, through December 31, 2021 .

In November 2021, the Corporation's board of directors approved the extension of this program through March 31, 2022.

During 2021, 2.8 million shares were repurchased at a total cost of $ 43.9 million, or $ 15.65 per share, under this program.

As of December 31, 2021, there was $ 31.1 million of share repurchase authorization that may be utilized to repurchase common shares through March 31, 2022 under this program.

In October 2019, the Corporation's board of directors approved a share repurchase program pursuant to which the Corporation was authorized to repurchase up to $ 100.0 million of its outstanding shares of common stock, or approximately 3.9 % of its outstanding shares, through December 31, 2020.

During the first quarter of 2020, 2.9 million shares were repurchased at a total cost of $ 39.7 million, or $ 13.65 per share, under this program.

The repurchase program was suspended in mid-March in order to preserve liquidity in response to potential unknown economic impacts of the COVID-19 pandemic at that time.

The repurchase program was suspended in mid-March of 2020 in order to preserve liquidity in response to potential unknown economic impacts of the COVID-19 pandemic at that time.

In March 2019, the Corporation's board of directors approved a share repurchase program pursuant to which the Corporation was authorized to repurchase up to $ 100.0 million of its outstanding shares of common stock, or approximately 3.5 % of its outstanding shares, through December 31, 2019 .

43 unchanged sentences

As of December 31, 2021, there was $ 12.7 million of total unrecognized compensation cost (pre-tax) related to restricted stock, RSUs and PSUs that will be recognized as compensation expense over a weighted average period of 1.85 years.

December 31, 2020, the Employee Equity Plan had 9.3 million shares reserved for future grants through 2023, and the Directors’ Plan had 180,000 shares reserved for future grants through 2021.

As of December 31, 2021, the Employee Equity Plan had 9.6 million shares reserved for future grants through 2023, and the Directors’ Plan had 109,000 shares reserved for future grants through 2029.

The fair value of certain PSUs with market-based performance conditions granted under the Employee Equity Plan was estimated on the grant date using the Monte Carlo valuation methodology performed by a third-party valuation expert.

26 unchanged sentences

Contributions to the Defined Benefit Pension Plan ("Pension Plan") are actuarially determined and funded annually, if necessary.

The Corporation recognizes the funded status of its Pension Plan on the consolidated balance sheets and recognizes the changes in that funded status through other comprehensive income.

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

The Pension Plan has been curtailed, with no additional benefits accruing to participants.

15 unchanged sentences

Fair value of plan assets at beginning of year $ 87,177 $ 83,676

Employer contributions (1)

Actual return on plan assets 11,210 7,605

1 unchanged sentence

Fair value of plan assets at end of year $ 94,115 $ 87,177

(1) The Corporation funds at least the minimum amount required by federal law and regulations.

The Corporation contributed $ 20.8 million to the Pension Plan during 2019.

The following table presents the funded status of the Pension Plan, included in other liabilities on the consolidated balance sheets, as of December 31:

The following table presents the funded status of the Pension Plan, included in other assets and other liabilities on the consolidated balance sheets, as of December 31:

(in thousands)

13 unchanged sentences

Balance as of December 31, 2021 $ 13,558 $ 10,545

The total amount of unrecognized net loss that will be amortized as a component of net periodic pension cost in 2021 is expected to be $ 2.3 million.

The following rates were used to calculate the net periodic pension cost and the present value of benefit obligations as of December 31:

2 unchanged sentences

Expected long-term rate of return on plan assets 5.00 % 5.00 % 5.00 %

The discount rates used were determined using the Citigroup Average Life discount rate table, as adjusted based on the Pension Plan's expected benefit payments and rounded to the nearest 0.25 %.

The discount rates used were determined using the Citigroup Average Life discount rate table, as adjusted based on the Pension Plan's expected benefit payments.

The 5.00 % long-term rate of return on plan assets used to calculate the net periodic pension cost was based on historical returns, adjusted for expectations of long-term asset returns based on the December 31, 2021 weighted average asset allocations.

26 unchanged sentences

Prior to February 1, 2014, certain full-time employees became eligible for these discretionary benefits if they reached retirement age while working for the Corporation.

The Corporation recognizes the funded status of the postretirement plan on the consolidated balance sheets and recognizes the changes in that funded status through other comprehensive income.

The Corporation recognizes the funded status of the postretirement plan on the consolidated balance sheets and recognizes the changes in that funded status through OCI.

The components of the net benefit for Postretirement Plan other than pensions are as follows:

30 unchanged sentences

Expected long-term rate of return on plan assets 3.00 % 3.00 % 3.00 %

The discount rates used to calculate the accumulated postretirement benefit obligation were determined using the Citigroup Average Life discount rate table, as adjusted based on the Postretirement Plan's expected benefit payments and rounded to the nearest 0.25 %.

Estimated future benefit payments under the Postretirement Plan are as follows (in thousands):

4 unchanged sentences

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

2021 2020 2019

Operating lease expense $ 16,345 $ 18,481 $ 18,852

23 unchanged sentences

Commitments to extend credit are agreements to lend to a customer 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.

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.

8 unchanged sentences

The Corporation records a reserve for unfunded commitments, included in other liabilities on the consolidated balance sheets, which represents management's estimate of losses inherent in commitments to extend credit and letters of credit.

See "Note 4 - Allowance for Credit Losses and Asset Quality," for additional information.

See "Note 4 - Loans and Allowance for Credit Losses," for additional information.

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

13 unchanged sentences

The Corporation maintains a reserve for estimated credit losses related to loans sold to investors.

As of December 31, 2020 and 2019, the total reserve for losses on residential mortgage loans sold was $ 1.1 million and $ 3.2 million, respectively, including reserves for both representation and warranty and credit loss exposures.

As of December 31, 2021 and 2020, the total reserve for losses on residential mortgage loans sold was $ 1.1 million, for each period, including reserves for both representation and warranty and credit loss exposures.

With the adoption of CECL on January 1, 2020, the reserve for estimated losses on certain residential mortgage loans sold to investors was reclassified to ACL - OBS credit exposures.

The reclassification resulted in a $ 2.1 million increase to the ACL - OBS credit exposures and a corresponding decrease to the reserve for estimated losses related to loans sold to investors in the first quarter of 2020.

In addition, a component of ACL - OBS credit exposures of $ 3.8 million and $ 5.3 million as of December 31, 2021 and December 31, 2020, respectively, related to additional credit exposure for potential loan repurchases.

Legal Proceedings

8 unchanged sentences

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, which 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.

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.

15 unchanged sentences

The lawsuit also asserts New Jersey common law claims seeking compensatory damages and interest.

The Corporation and counsel representing plaintiffs ("Plaintiffs’ Counsel") have reached and executed a formal Settlement Agreement to resolve this lawsuit.

Plaintiffs’ Counsel has filed a Motion for Preliminary Approval of Class and Collective Settlement and Provisional Certification of Settlement Class and Collective ("the Motion") with the U.S.

The Corporation and counsel representing plaintiffs ("Plaintiffs' Counsel") reached and executed a formal Settlement Agreement to resolve this lawsuit.

Plaintiffs' Counsel filed a Motion for Preliminary Approval of Class and Collective Settlement and Provisional Certification of Settlement Class and Collective ("the Motion") with the U.S.

District Court for the District of New Jersey ("the Court").

The Corporation is not able to provide any assurance that the Court will grant the Motion.

If the Court does grant the Motion, the

Settlement Agreement will be administered according to its terms and thereafter subject to final approval by the Court.

If the Court grants the Motion, subject to final approval by

the Court, the Settlement Agreement will be administered according to its terms.

The financial terms of the Settlement Agreement are not expected to be material to the Corporation.

The Corporation established an accrued liability during the third quarter of 2020 for the costs expected to be incurred in connection with the Settlement Agreement.

The accrued liability is included in "other liabilities" on the consolidated balance sheets.

NOTE 19 – FAIR VALUE MEASUREMENTS

4 unchanged sentences

Available for sale investment securities:

Government securities 127,618 — — 127,618

State and municipal securities — 1,188,670 — 1,188,670

43 unchanged sentences

For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable.

Government securities – These securities are classified as Level 1.

Fair values are based on quoted prices with active markets.

Government sponsored agency securities – These debt securities are classified as Level 2.

Fair values are determined by a third-party pricing service, as detailed above.

• 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 – This category consists of subordinated and senior debt issued by financial institutions ($ 362.8 million at December 31, 2020 and $ 362.3 million at December 31, 2019), single-issuer trust preferred securities issued by financial institutions ($ 0.0 million at December 31, 2020 and $ 11.2 million at December 31, 2019), and other corporate debt issued by non-financial institutions ($ 4.4 million at December 31, 2020 and $ 3.9 million at December 31, 2019).

• Corporate debt securities – This category consists of subordinated and senior debt issued by financial institutions ($ 383.4 million at December 31, 2021 and $ 362.8 million at December 31, 2020), single-issuer trust preferred securities issued by financial institutions (none at December 31, 2021 and at 2020), and other corporate debt issued by non-financial institutions ($ 2.8 million at December 31, 2021 and $ 4.4 million at December 31, 2020).

As noted in "Note 3 - Investment Securities", several corporate debt securities were sold during 2020.

Refer to the specific note for further information.

Level 2 investments include subordinated debt and senior debt, other corporate debt issued by non-financial institutions and $ 0.0 million and $ 8.8 million of single-issuer trust preferred securities held at December 31, 2020 and 2019, respectively.

Level 2 investments include subordinated debt and senior debt, and other corporate debt issued by non-financial institutions at December 31, 2021 and 2020.

The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.

Level 3 investments include the Corporation's investments certain single-issuer TruPS ($ 0.0 million at December 31, 2020 and $ 2.4 million December 31, 2019).

The fair values of these securities were determined based on quotes provided by third-party brokers who determined fair values based predominantly on internal valuation models which were not indicative prices or binding offers.

The Corporation’s third-party pricing service cannot derive fair values for these securities primarily due to inactive markets for similar investments.

Level 3 values are tested by management primarily through trend analysis, by comparing current values to those reported at the end of the preceding calendar quarter, and determining if they are reasonable based on price and spread movements for this asset class.

• Auction rate securities – Due to their illiquidity, ARCs are classified as Level 3 investments and are valued through the use of an expected cash flows model prepared by a third-party valuation expert.

Level 3 investments include ARCs.

Due to their illiquidity, ARCs are classified as Level 3 investments and are valued through the use of an expected cash flows model prepared by a third-party valuation expert.

The assumptions used in preparing the expected cash flows model include estimates for coupon rates, time to maturity and market rates of return.

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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 ($ 280,000 at December 31, 2020 and $ 199,000 at December 31, 2019).

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 ($ 2.3 million at December 31, 2020 and $ 424,000 at December 31, 2019) and the fair value of interest rate swaps ($ 165.2 million at December 31, 2020 and $ 76.0 million at December 31, 2019).

Derivative liabilities - Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($ 0.3 million at December 31, 2021 and 2020).

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 ($ 0.0 million at December 31, 2021 and $ 2.3 million at December 31, 2020) and the fair value of interest rate swaps ($ 86.1 million at December 31, 2021 and $ 165.2 million at December 31, 2020).

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

The following table presents the changes in AFS investment securities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the years ended December 31:

Securities Single-issuer

Single-issuer

Trust Preferred

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Unrealized adjustment to fair value (1)

— ( 242 ) ( 3,720 )

Discount accretion (2)

Balance at December 31, 2021 $ — $ 74,667

(1) Pooled trust preferred securities, single-issuer trust preferred securities and ARCs are classified as AFS investment securities;

(1) Single-issuer trust preferred securities and ARCs are classified as AFS investment securities;

as such, the unrealized adjustment to fair value was recorded as an unrealized holding gain (loss) and included as a component of "AFS at estimated fair value" on the consolidated balance sheets.

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In 2021, the amount shown is the balance of nonaccrual loans, net of the related ACL.

amount shown is the balance of impaired loans, net of the related ACL See "Note 4 - Allowance for Credit Losses and Asset Quality," for additional details.

In 2020, the amount shown is the balance of impaired loans, net of the related ACL See "Note 4 - 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.

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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.

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.

10 unchanged sentences

Discount Rate + 200 bps ( 7 )%

In 2008, the Corporation received Class B restricted shares of Visa, Inc.

("Visa") as part of Visa’s initial public offering.

These securities are considered equity securities without readily determinable fair values.

As such, the approximately 133,000 Visa Class B shares owned as of December 31, 2020 were carried at a zero cost basis.

The following table details the book values and the estimated fair values of the Corporation’s financial instruments as of December 31, 2021 and 2020.

97 unchanged sentences

Equity in undistributed net income of subsidiaries 148,091 ( 55,895 ) ( 38,400 )

Write-off of unamortized costs on trust preferred securities 12,390 — —

(Decrease) increase in other liabilities and payable to non-bank subsidiaries 78,716 ( 244,598 ) 1,580

36 unchanged sentences

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption of Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326):

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption of ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326):

Measurement of Credit Losses on Financial Instruments .

23 unchanged sentences

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which it relates.

Valuation of the allowance for credit losses related to loans evaluated collectively

As discussed in Notes 1 and 4 to the consolidated financial statements, the Corporation’s allowance for credit losses related to loans evaluated collectively for expected credit losses (the collective ACL) was $264.2 million, of a total allowance for credit losses of $277.6 million as of December 31, 2020.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of the allowance for credit losses related to loans evaluated collectively for expected credit losses

As discussed in Notes 1 and 4 to the consolidated financial statements, the Company’s allowance for credit losses related to loans evaluated collectively for expected credit losses (collective ACL) was $234.9 million, of a total allowance for credit losses of $249.0 million as of December 31, 2021.

The collective ACL includes the measure of expected credit losses on a collective (pooled) basis for those loans and leases that share similar risk characteristics and uses an undiscounted approach.

The Corporation estimates the collective ACL by applying a probability of default (PD) and loss given default (LGD) to the exposure at default (EAD) at the loan level.

The PD models are econometric regression models that utilize the Corporation’s historical credit loss experience and incorporate a reasonable and supportable economic forecast through the use of externally developed macroeconomic scenarios.

The reasonable and supportable forecast is applied over the estimated life of the Corporation’s loan portfolio.

The LGD model calculates a lifetime LGD estimate for each loan pool utilizing a loss rate approach that is based on the Corporation’s historical charge-off experience.

The EAD calculation incorporates prepayment rates, and inputs related to loan level cash flows, maturity dates, and interest rates.

The prepayment rates utilized in the EAD calculation are sourced from a prepayment model that utilizes the Corporation’s historical loan prepayment history to develop prepayment speeds.

The collective ACL also includes qualitative reserve adjustments for factors that are not fully captured in the quantitative model.

The Company estimates the collective ACL by applying a probability of default (PD) and loss given default (LGD) to the exposure at default (EAD) at the loan level.

The PD models are econometric regression models that utilize the Company’s historical credit loss experience and incorporate a reasonable and supportable economic forecast through the use of externally developed macroeconomic scenarios.

After a reasonable and supportable forecast period, the forecast of future economic conditions reverts to long-run historical economic trends.

The LGD model calculates a lifetime LGD estimate for each loan pool utilizing a loss rate approach that is based on the Company’s historical charge-off experience.

The EAD calculation incorporates pre-payment rates, and inputs related to loan level cash flows, maturity dates, and interest rates.

The pre-payment rates utilized in the EAD calculation are sourced from a prepayment model that utilizes the Company’s historical loan prepayment history to develop prepayment speeds.

The collective ACL also includes qualitative reserve adjustments for factors that are not fully captured in the quantitative models.

We identified the assessment of the valuation of the collective ACL as a critical audit matter.

Such assessment involved significant measurement uncertainty requiring complex auditor judgment, and specialized skills and knowledge of the industry.

Such assessment involved significant measurement uncertainty requiring especially complex auditor judgment, and specialized skills and knowledge of the industry.

In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

The assessment of the collective ACL encompassed the evaluation of the overall ACL methodology, which includes the methods and models used to estimate PD, LGD, and EAD and their key assumptions and inputs.

Such key assumptions and inputs include the historical observation period, loan pool segmentation (including the use of credit risk ratings for commercial and industrial loans, commercial mortgages and construction loans for the PD model), the reasonable and supportable economic forecast, the prepayment rate and loan level cash flow adjustments.

The assessment also included an evaluation of the qualitative adjustments including an evaluation of the methods used by the Corporation in estimating this reserve.

Key assumptions and inputs used in the estimation of the PD rate include the historical observation period, loan pool segmentation including the use of credit risk ratings for commercial and industrial loans, commercial mortgages and construction loans, and a reasonable and supportable economic forecast which includes reversion to a long run historical economic trends.

Key assumptions and inputs used in the estimation of the LGD rate include the loan pool segmentation and historical observation period.

Key assumptions and inputs used in the estimation of the EAD include a constant prepayment rate and loan level cash flow adjustments.

Key assumptions and inputs used in the estimation of the constant prepayment rate include interest rates, the historical observation period and loan pool segmentation.

The assessment also included an evaluation of the qualitative adjustments including an evaluation of the methods used by management in estimating this reserve.

The collective ACL estimate is sensitive to changes in the assumption discussed above such that changes in these assumptions can cause significant changes to the estimate.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Corporation’s measurement of the collective ACL estimate, including controls over the:

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collective ACL estimate, including controls over the:

• development of the collective ACL methodology

• development of the PD, LGD, and prepayment models and of the methods used to calculate the EAD

• Identification and determination of the key inputs and assumptions used in the PD and LGD models, and EAD calculation which included key inputs and assumptions within the prepayment model

• identification and determination of the key inputs and assumptions used in the PD and LGD models, and EAD calculation which included key inputs and assumptions within the pre-payment model

• performance monitoring of the PD, LGD, and prepayment models

• development of the qualitative adjustments

We evaluated the Corporation’s process to develop the collective ACL estimate by testing certain sources of data, factors, and assumptions that the Corporation used, and considered the relevance and reliability of such data, factors, and assumptions.

In addition, we involved credit risk professionals with specialized skills and knowledge who assisted in:

• Evaluating the Corporation’s collective ACL methodology for compliance with U.S.

generally accepted accounting principles

• Evaluating the assumptions and methodologies used in developing the PD, LGD, and EAD estimates and judgements made by the Corporation relative to performance monitoring by inspecting the Corporation's model and methodology documentation and through comparisons against Corporation specific metrics, the Corporation's business environment, and applicable industry and regulatory practices

• Evaluating the economic forecast and related assumptions used in the PD model with respect to the Corporation’s business environment and the loan products used across the industry

• Determining whether loans are pooled by similar risk characteristics by comparing to the Corporation’s business environment and relevant industry practices

• Testing individual credit ratings for a selection of commercial loan borrowers by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees and underlying collateral

• Evaluating the methodology used to develop the qualitative adjustments by inspecting the Corporation’s methodology and development documentation and assessing the effects of these factors on the collective ACL estimate compared with relevant industry practices and Corporation specific metrics

We also assessed the sufficiency of the audit evidence obtained related to the collective ACL estimate by evaluating the cumulative results of the audit procedures, qualitative aspects of the Corporation’s accounting practices, and potential bias in the accounting estimate.

• measurement and on-going monitoring of the overall ACL estimate.

We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data,

factors, and assumptions that the Company used, and considered the relevance and reliability of such data,

factors, assumptions, and related methodologies.

In addition, we involved credit risk professionals with specialized

skills and knowledge who assisted in:

• evaluating the Company’s collective ACL methodology for compliance with U.S.

generally accepted

accounting principles

• evaluating the assumptions and methodologies used in developing the PD rates, LGD rates, and EAD estimate

and judgments made by the Company relative to performance monitoring by inspecting management’s

model and methodology documentation and through comparisons against Company specific metrics, the

Company’s business environment, and applicable industry and regulatory practices

• determining whether loans are pooled by similar risk characteristics by comparing to the Company’s business environment and relevant industry practices

• testing individual credit ratings for a selection of borrowers by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees and underlying collateral evaluating the methodology used to develop the qualitative adjustments by inspecting management’s methodology and development documentation and assessing the effects of these factors on the collective ACL estimate compared with relevant industry practices and Company specific metrics.

We also assessed the sufficiency of the audit evidence obtained related to the collective ACL estimate by evaluating

the cumulative results of the audit procedures, qualitative aspects of the Company’s accounting practices, and potential

bias in the accounting estimates.

We have served as the Company’s auditor since 2002.

Philadelphia, Pennsylvania

March 1, 2021

QUARTERLY CONSOLIDATED RESULTS OF OPERATIONS (UNAUDITED)

(in thousands, except per-share data)

Three Months Ended

March 31 June 30 September 30 December 31

Interest income $ 199,378 $ 180,697 $ 179,159 $ 183,645

Interest expense 38,632 27,942 25,043 22,054

Net interest income 160,746 152,754 154,116 161,591

Provision for credit losses 44,030 19,570 7,080 6,240

Non-interest income 54,644 55,922 63,248 55,574

Non-interest expenses 142,552 143,006 139,147 154,737

Income before income taxes 28,808 46,100 71,137 56,187

Income tax expense 2,761 6,542 9,529 5,362

Net income 26,047 39,559 61,607 50,825

Preferred stock dividends — — — (2,135)

Net income available to common shareholders $ 26,047 $ 39,559 $ 61,607 $ 48,690

Per share data:

Net income (basic) $ 0.16 $ 0.24 $ 0.38 $ 0.30

Net income (diluted) 0.16 0.24 0.38 0.30

Cash dividends 0.13 0.13 0.13 0.17

Interest income $ 204,700 $ 210,034 $ 208,414 $ 202,159

Interest expense 41,385 45,490 47,153 42,889

Net interest income 163,315 164,544 161,261 159,270

Provision for credit losses 5,100 5,025 2,170 20,530

Non-interest income 46,751 54,315 59,813 55,281

Non-interest expenses 137,824 144,168 146,770 138,974

Income before income taxes 67,142 69,666 72,133 55,047

Income tax expense 10,479 9,887 10,025 7,258

Net income $ 56,663 $ 59,779 $ 62,108 $ 47,789

Per share data:

Net income (basic) $ 0.33 $ 0.36 $ 0.38 $ 0.29

Net income (diluted) 0.33 0.35 0.37 0.29

Cash dividends 0.13 0.13 0.13 0.17

February 28, 2022

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data