What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-02-28 · 604 added, 512 removed, 1656 unchanged (40% of the section changed)

21 unchanged sentences

Total Deposits 20,649,538 21,573,499

Short-term borrowings 416,764 630,066

Federal funds purchased 191,000 —

Federal Home Loan Bank advances 1,250,000 —

Senior debt and subordinated debt 539,634 620,406

Other borrowings 890,573 417,703

Total borrowings 2,871,207 1,038,109

Accrued interest payable 10,185 7,000

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

Other liabilities 821,015 465,110

1 unchanged sentence

SHAREHOLDERS' EQUITY

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

Preferred stock, no par value, 10.0 million shares authorized, Series A, 0.2 million shares authorized and issued as of December 31, 2022 and 2021, 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

Common stock, 2.50 par value, 600.0 million shares authorized, 224.6 million shares issued as of December 31, 2022 and 223.9 million issued as of December 31, 2021

561,511 559,766

1 unchanged sentence

Retained earnings 1,450,758 1,282,383

Accumulated other comprehensive gain 27,411 65,091

Accumulated other comprehensive (loss) income ( 385,476 ) 27,411

Treasury stock, at cost, 57.0 million shares in 2022 and 63.4 million shares in 2021

4 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per-share data)

(in thousands, except per-share data)

2022 2021 2020

2 unchanged sentences

Investment securities 98,115 79,821 79,220

Taxable 55,351 58,173 62,556

Tax-exempt 24,470 21,047 14,218

Loans held for sale 866 1,302 2,077

3 unchanged sentences

Deposits 43,829 30,005 70,046

Short-term borrowings 583 5,227 14,543

Long-term borrowings 29,094 38,398 30,599

Federal funds purchased 2,967 — 541

Federal Home Loan Bank advances 7,334 2,286 12,913

Senior debt and subordinated debt 22,257 26,784 28,024

Other borrowings 6,817 607 2,147

Total Interest Expense 83,204 59,682 113,671

9 unchanged sentences

Non-Interest Income Before Investment Securities Gains, Net 227,157 240,229 226,335

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

Investment securities gains (losses), net ( 27 ) 33,516 3,053

Total Non-Interest Income 227,130 273,745 229,388

4 unchanged sentences

Other outside services 37,152 34,194 31,432

Debt extinguishment 33,249 2,878 4,326

State taxes 15,113 18,793 12,613

2 unchanged sentences

Professional fees 9,123 9,647 12,835

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

Marketing 6,885 5,275 5,127

Intangible amortization 1,731 589 529

Debt extinguishment — 33,249 2,878

Merger-related expenses 10,328 — —

Other 53,482 52,234 65,795

10 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(dollars in thousands)

2022 2021 2020

Net Income $ 286,981 $ 275,497 $ 178,040

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

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

Unrealized gains (losses) on AFS investment securities:

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 )

Amortization of net unrealized losses on AFS securities transferred to HTM 2,690 3,448 6,285

Non-credit related unrealized (loss) gain on other-than-temporarily impaired debt securities — — ( 680 )

Unrealized gains (losses) on securities ( 312,169 ) ( 17,948 ) 65,651

Reclassification adjustment for securities gains (losses) included in net income ( 20 ) ( 25,905 ) ( 2,359 )

Amortization of net unrealized gains (losses) on AFS securities transferred to HTM ( 44,483 ) 2,690 3,448

Net unrealized gains (losses) on AFS investment securities ( 356,672 ) ( 41,163 ) 66,740

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 ) — —

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

Net unrealized holding gains (losses) arising during the period ( 62,963 ) ( 2,670 ) —

Reclassification adjustment for net gains (losses) realized in net income 6,004 ( 2,147 ) —

Net unrealized gains (losses) on interest rate derivatives used in cash flow hedges ( 56,959 ) ( 4,817 ) —

Defined benefit pension plan and postretirement benefits:

Unrecognized pension and postretirement (cost) income 7,144 ( 2,532 ) ( 937 )

Amortization of net unrecognized pension and postretirement income 1,156 1,020 1,025

Unrecognized pension and postretirement income (cost) 644 7,144 ( 2,532 )

Amortization of net unrecognized pension and postretirement income (loss) 100 1,156 1,020

Net unrealized (losses) gains on defined benefit pension and postretirement plans 744 8,300 ( 1,512 )

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

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

Other Comprehensive Income (Loss) ( 412,887 ) ( 37,680 ) 65,228

Total Comprehensive Income (Loss) $ ( 125,906 ) $ 237,817 $ 243,268

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands, except per share data)

(dollars in thousands, except per share data)

Preferred Stock Common Stock Additional

6 unchanged sentences

Net income 178,040 178,040

Other comprehensive income 58,926 58,926

Other comprehensive income (loss) 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

2 unchanged sentences

Net income 275,497 275,497

Other comprehensive income 65,228 65,228

Preferred stock issued 200 192,878 192,878

Other comprehensive income (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(1) ( 43,807 ) ( 43,807 )

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

3 unchanged sentences

Net income 286,981 286,981

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

Other comprehensive income (loss) ( 412,887 ) ( 412,887 )

Common stock issued 900 1,745 3,420 2,711 7,876

Reissuance of treasury stock pursuant to acquisition 6,209 4,547 85,166 89,713

Stock-based compensation awards 14,000 14,000

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

Preferred stock dividend ( 10,248 ) ( 10,248 )

7 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(dollars in thousands)

2022 2021 2020

4 unchanged sentences

Depreciation and amortization of premises and equipment 30,201 28,802 28,803

Amortization of TCI 28,003 30,800 32,810

Net amortization of investment securities premiums 12,824 16,031 12,222

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

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

Gain on sales of mortgage loans held for sale ( 24,379 ) ( 53,599 ) ( 17,882 )

Investment securities losses (gains), net 27 ( 33,516 ) ( 3,053 )

Loss (gain) on sales of mortgage loans held for sale ( 8,816 ) ( 24,379 ) ( 53,599 )

Proceeds from sales of mortgage loans held for sale 455,607 1,050,943 1,536,174

4 unchanged sentences

Stock-based compensation 14,000 8,402 7,529

Change in deferred federal income tax ( 117,849 ) ( 417 ) ( 29,173 )

Change in life insurance cash surrender value ( 92,228 ) ( 90,105 ) ( 26,348 )

Other changes, net 405,331 68,376 ( 46,051 )

Total adjustments 311,285 66,775 ( 20,675 )

Net cash provided by operating activities 342,272 157,365 127,713

Net cash provided by (used in) operating activities 598,266 342,272 157,365

CASH FLOWS FROM INVESTING ACTIVITIES:

5 unchanged sentences

Sale of Visa Shares — 33,962 —

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

Decrease (increase) of FRB and FHLB stock ( 72,551 ) 34,494 5,293

Net decrease (increase) in loans ( 1,407,289 ) 561,664 ( 2,072,831 )

2 unchanged sentences

Net change in tax credit investments ( 29,071 ) ( 18,363 ) ( 15,259 )

Net cash used in investing activities ( 213,967 ) ( 2,499,480 ) ( 893,346 )

Net cash provided by (used in) investing activities ( 1,539,058 ) ( 213,967 ) ( 2,499,480 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase in demand and savings deposits 1,315,139 3,951,905 849,437

Net (decrease) increase in time deposits ( 580,847 ) ( 506,611 ) 168,317

Net (decrease) increase in short-term borrowings ( 213,302 ) ( 253,175 ) 128,464

Proceeds from long-term borrowings 620 495,898 485,000

Repayments of long-term borrowings ( 710,633 ) ( 85,410 ) ( 596,056 )

Net increase (decrease) in demand and savings deposits ( 1,198,319 ) 1,315,139 3,951,905

Net increase (decrease) in time deposits ( 257,823 ) ( 580,847 ) ( 506,611 )

Net increase (decrease) in other borrowings 1,629,870 ( 212,682 ) ( 132,277 )

Repayments of senior debt and subordinated debt ( 81,496 ) ( 710,633 ) ( 85,410 )

Proceeds from senior debt and subordinated debt — — 375,000

Net proceeds from issuance of preferred stock — — 192,878

2 unchanged sentences

Acquisition of treasury stock — ( 43,909 ) ( 39,748 )

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

Net cash provided by (used in) financing activities ( 15,901 ) ( 337,523 ) 3,672,156

Net increase (decrease) in Cash and Cash Equivalents ( 956,693 ) ( 209,218 ) 1,330,041

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

6 unchanged sentences

Transfer of AFS securities to HTM securities $ 479,008 $ 376,165 $ —

Transfer of HTM securities to AFS securities — — 158,898

See Notes to Consolidated Financial Statements

3 unchanged sentences

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

Fulton Financial Realty Company, Central Pennsylvania Financial Corp., FFC Management, Inc., FFC Penn Square, Inc.

and Fulton Insurance Services Group, Inc.

Fulton Financial Realty Company, Central Pennsylvania Financial Corp., FFC Penn Square, Inc., Fulton Community Partner, LLC, and Fulton Insurance Services Group, Inc.

Collectively, the Parent Company and its subsidiaries are referred to as the Corporation.

25 unchanged sentences

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

The Corporation early adopted ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivative and Hedging, and Topic 825, Financial Instruments," in the third quarter of 2019, which permitted the one-time reclassification of certain HTM securities to AFS under Topic 815, specific to the transition guidance of ASU update 2017-12, which the Corporation adopted on January 1, 2019.

See “Note 3 - Investment Securities” for additional information on this reclassification.

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.

HTM Debt Securities:

Expected credit losses on HTM debt securities would be recorded in the ACL on HTM debt securities.

As of December 31, 2021, no HTM debt securities required an ACL as these investments consist solely of government guaranteed residential mortgage-backed securities.

As of December 31, 2022, no HTM debt securities required an ACL as these investments consist solely of Agency guaranteed residential mortgage-backed and commercial mortgage-backed securities.

AFS Debt Securities :

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.

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.

The Bank's AFS debt securities are investment grade.

In evaluating credit losses on debt securities, management considers factors such as the credit quality of the investment counterparty, the credit rating of the security, and the delinquency history of the security.

As of December 31, 2022, no AFS debt securities required an ACL.

3 unchanged sentences

The Corporation determines fair value for its mortgage loans held for sale 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.

Changes in fair values during the period are recorded as components of mortgage banking income on the consolidated statements of income.

Changes in fair values during the period are recorded as components of mortgage banking income on the

consolidated statements of income.

Interest income earned on mortgage loans held for sale is classified in interest income on the consolidated statements of income.

18 unchanged sentences

For mortgage loans sold, net loan origination fees and costs are included in the gain or loss on sale of the related loan, as components of mortgage banking.

Loan origination fees and the related direct origination costs for loans originated under the PPP loan program are amortized on a straight-line basis over the repayment period of the loan.

To the extent that a PPP loan is forgiven, the unamortized fees and costs will be recognized as interest income at the time of forgiveness.

Troubled Debt Restructurings:

4 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 and the modified loan was not more than 30 days past due on December 31, 2019.

Certain conditions were required to 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.

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.

The Corporation applied the option under the CARES act for all loan modifications that qualified.

Allowance for Credit Losses:

CECL Adoption

On January 1, 2020, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326):

Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology, and is referred to as CECL.

The Corporation follows ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326):

Measurement of Credit Losses on Financial Instruments .

The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans and HTM debt securities.

It also applies to OBS credit exposures, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments, and net investments in leases recognized by a lessor in accordance with ASC Topic 842.

The Corporation adopted CECL using the modified retrospective method for all financial assets measured at amortized cost, net investments in leases and OBS credit exposures.

Results for reporting periods beginning after January 1, 2020 are presented under CECL, while prior period results are reported in accordance with the previously applicable incurred loss methodology, ASC 310-10 and ASC 450-20.

The Corporation recorded an increase of $ 58.3 million to the ACL on January 1, 2020 as a result of the adoption of CECL.

Retained earnings decreased $ 43.8 million, and DTAs increased by $ 12.4 million.

Included in the $ 58.3 million increase to the ACL was $ 2.1 million for certain OBS credit exposures that was previously recognized in other liabilities before the adoption of CECL.

The Corporation has elected to exclude accrued interest receivable from the measurement of its ACL.

When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.

The ACL for loans is an estimate of the expected losses to be realized over the life of the loans in the portfolio.

The ACL is an estimate of the expected losses to be realized over the life of the loans in the portfolio.

The ACL is determined for two distinct categories of loans:

1 unchanged sentence

Loans Evaluated Collectively :

Loans evaluated collectively for expected credit losses include loans on accrual status, excluding accruing TDRs, and loans initially evaluated individually, but determined not to have enhanced credit risk characteristics.

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

Loans evaluated collectively for expected credit losses include loans on accrual status and loans initially evaluated individually, but determined not to have enhanced credit risk characteristics.

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

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

12 unchanged sentences

Loans Evaluated Individually :

Loans evaluated individually for expected credit losses include loans on non-accrual status and TDRs where the commitment amount equals or exceeds $1.0 million.

Loans evaluated individually for expected credit losses include loans on non-accrual status where the commitment amount equals or exceeds $1.0 million.

The required ACL for such loans is determined using either the present value of expected future cash flows, observable market price or the fair value of collateral.

49 unchanged sentences

OBS Credit Exposures:

The ACL for OBS credit exposures is recorded in other liabilities on the consolidated balance sheets.

This portion of the ACL represents management’s estimate of expected losses in its unfunded loan commitments and other OBS credit exposures.

The ACL specific to unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws.

The reserve for OBS credit exposures is recorded in other liabilities on the consolidated balance sheets, and represents management's estimate of expected losses in its unfunded loan commitments and other OBS credit exposures.

The reserve for OBS credit exposures specific to unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws.

Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken).

The ACL for OBS credit exposures is increased or decreased by charges or reductions to expense, through the provision for credit losses.

ACL Methodology Before CECL Adoption

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 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.

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

The Corporation’s ACL for loans includes:

1) specific allowances allocated to loans evaluated for impairment under the ASC Section 310-10-35;

and 2) allowances calculated for pools of loans evaluated for impairment under ASC Subtopic 450-20.

A loan is considered to be impaired if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement.

An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value.

All loans not evaluated for impairment under ASC Section 310-10-35 are evaluated for impairment under ASC Subtopic 450-20, using a pooled loss evaluation approach.

Loans are segmented into pools with similar characteristics and a consistently developed loss factor is then applied to all loans in these pools.

The Corporation calculates allowance for loan loss allocation needs for loans evaluated under ASC Subtopic 450-20 through the following procedures:

The loans are segmented into pools with similar characteristics, as noted above.

Commercial loans, commercial mortgages and construction loans to commercial borrowers are further segmented into separate pools based on internally assigned risk ratings.

Residential mortgages, home equity loans, consumer loans, and equipment lease financing are further segmented into separate pools based on delinquency status;

• A loss rate is calculated for each pool through an analysis of historical losses as loans migrate through the various risk rating or delinquency categories.

Estimated loss rates are based on a probability of default and a loss rate forecast;

• The loss rate is adjusted to consider qualitative factors, such as economic conditions and trends;

• The resulting adjusted loss rate is applied to the balance of the loans in the pool to arrive at the allowance allocation for the pool.

The allocation of the ACL for loans is reviewed to evaluate its appropriateness in relation to the overall risk profile of the loan portfolio.

The Corporation considers risk factors such as:

local and national economic conditions;

trends in delinquencies and non-accrual loans;

the diversity of borrower industry types;

and the composition of the portfolio by loan type.

The reserve for OBS credit exposures is increased or decreased by charges or reductions to expense, through the provision for credit losses.

Premises and Equipment:

2 unchanged sentences

Leasehold improvements are amortized over the shorter of the useful life or the non-cancelable lease term.

Premises and equipment acquired in a business combination are initially recorded at fair value and subsequently carried at cost less depreciation and amortization.

See Note 6, "Premises and Equipment" for additional information.

7 unchanged sentences

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

To the extent the amortized cost of the MSRs exceeds their estimated fair value, a valuation allowance is established through a charge against servicing income.

To the extent the amortized

cost of the MSRs exceeds their estimated fair value, a valuation allowance is established through a charge against servicing income.

If subsequent valuations indicate that impairment no longer exists, the valuation allowance is reduced through an increase to servicing income.

20 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 - Non-Designated Hedges

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

The Corporation simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and terms.

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.

Interest Rate Derivatives - Non-Designated Hedges

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

The Corporation simultaneously enters into interest rate derivatives with dealer counterparties, with identical notional amounts and terms.

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

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.

The Corporation's existing credit derivatives result from participation in interest rate derivatives 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.

The Corporation is required to clear all eligible interest rate derivative 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.

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

The Corporation enters into interest rate derivatives designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans.

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.

4 unchanged sentences

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 .

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

See "Note 11 - Derivative Financial Instruments" for additional information.

3 unchanged sentences

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.

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

Under these agreements, 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.

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 interest rate swaps in the event of default.

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 interest rate derivatives in the event of default.

A daily settlement occurs through a clearing agent for changes in the fair value of centrally cleared derivatives.

Not all of the derivatives are required to be cleared through a daily clearing agent.

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.

As a result, the total fair values of interest rate 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.

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.

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

As with interest rate derivatives, 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.

For additional information on balance sheet offsetting, see "Note 11 - Derivative Financial Instruments."

Income Taxes:

1 unchanged sentence

Under this method, DTAs and deferred tax liabilities are determined based upon the difference between the values of the assets and liabilities as reflected in the financial statements and their related tax basis using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled.

As changes in tax law or rates are enacted, DTAs and deferred tax liabilities are adjusted through the provision for income taxes.

As changes in tax law or rates are enacted, DTAs and deferred tax liabilities are adjusted through income tax expense.

In assessing the realizability of DTAs, management considers whether it is more likely than not that some portion or all of the DTAs will not be realized.

40 unchanged sentences

Any impairment write-downs are recognized as non-interest expense on the consolidated statements of income.

See "Note 6 - Goodwill and Intangible Assets," for additional details.

Variable Interest Entities ("VIEs") :

See "Note 7 - Goodwill and Intangible Assets," for additional information.

ASC Topic 810 provides guidance on when to consolidate certain VIEs in the financial statements of the Corporation.

3 unchanged sentences

The primary beneficiary of a VIE is determined to be the party that has the power to make decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE.

Subsidiary Trusts

The Parent Company owns all of the common stock of three subsidiary trusts, which have issued securities (TruPS) in conjunction with the Parent Company issuing junior subordinated deferrable interest debentures to the trusts.

The terms of the junior subordinated deferrable interest debentures are the same as the terms of the TruPS.

The Parent Company’s obligations under the debentures constitute a full and unconditional guarantee by the Parent Company of the obligations of the trusts.

The provisions of ASC Topic 810 related to subsidiary trusts, as interpreted by the SEC, disallow consolidation of subsidiary trusts in the financial statements of the Corporation.

As a result, TruPS are not included on the Corporation’s consolidated balance sheets.

The junior subordinated debentures issued by the Parent Company to the subsidiary trusts, which have the same total balance and rate as the combined equity securities and TruPS issued by the subsidiary trusts, remain in long-term borrowings.

See "Note 9 - Short-Term and Long-Term Borrowings" for additional information.

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, 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.

The Corporation makes investments in certain community development projects, the majority of which generate tax credits under various federal programs, including TCIs.

These investments are made throughout the Corporation's market area as a

means of supporting the communities it serves.

The Corporation typically acts as a limited partner or member of a limited liability company in its TCIs and does not exert control over the operating or financial policies of the partnership or limited liability company.

5 unchanged sentences

There were no impairment losses recognized for the Corporation's TCIs in 2022, 2021 or 2020.

For additional details, see "Note 12 - Income Taxes."

For additional information, see "Note 13 - Income Taxes."

Fair Value Measurements:

5 unchanged sentences

The Corporation has categorized all assets and liabilities required to be measured at fair value on both a recurring and nonrecurring basis into the above three levels.

See "Note 19 - Fair Value Measurements" for additional details.

See "Note 20 - Fair Value Measurements" for additional information.

Revenue Recognition:

4 unchanged sentences

Interest income :

Interest income is recognized on an accrual basis according to loan and lease agreements, investment securities contracts or other such written contracts.

Interest income is recognized on an accrual basis according to loan and lease agreements, investment securities contracts or other written contracts.

Wealth management services:

1 unchanged sentence

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 when earned.

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.

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

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

Insurance commissions are earned and recognized when policies are originated.

1 unchanged sentence

Commercial and consumer banking income:

Consists of cash management, overdraft, non-sufficient fund fees and other service charges on deposit accounts as well as branch fees, automated teller machine fees, debit and credit card income and merchant services fees.

Also included are letter of credit fees, foreign exchange income and interest rate swap fees.

Consists of cash management, overdraft, non-sufficient fund fees and other service charges on deposit accounts as well as branch fees, ATM fees, debit and credit card income and merchant services fees.

Also included are letter of credit fees, foreign exchange income and interest rate derivative fees.

Revenue is primarily transactional and recognized when earned at the time the transactions occur.

3 unchanged sentences

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

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

All leases with an initial term greater than 12 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;

2 unchanged sentences

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.

The operating leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for 5 years or more.

The operating leases have remaining lease terms of 1 year to 20 years, some of which include options to

extend the leases for 5 years or more.

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

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.

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

Operating lease expense represents fixed lease payments for operating leases recognized on a straight-line basis over the applicable lease term.

2 unchanged sentences

See "Note 18 - Leases" for additional information.

Defined Benefit Pension Plan:

Defined Benefit Plan:

Net periodic pension costs are funded based on the requirements of federal laws and regulations.

2 unchanged sentences

Net periodic pension expense includes interest cost, based on the assumed discount rate, an expected return on plan assets, amortization of prior service cost or credit and amortization of net actuarial gains or losses.

For the Corporation, there is no service cost as the plan was curtailed in 2008, with no additional benefits accruing.

The Corporation curtailed the Pension Plan in 2008, with no additional benefits accruing.

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

Net periodic pension cost is recognized in salaries and employee benefits on the consolidated statements of income.

For additional details, see "Note 16 - Employee Benefit Plans."

For additional information, see "Note 17 - Employee Benefit Plans."

Business Combinations:

Business combinations are accounted for using the acquisition method of accounting.

Under the acquisition method, identifiable assets acquired and liabilities assumed are measured at fair value as of the acquisition date.

The difference between the purchase price and the fair value of net assets acquired is recorded as goodwill.

Results of the operations of the acquired entity are included in the consolidated statement of income from the acquisition date.

Acquisition costs are expensed as incurred.

Other Recently Adopted Accounting Standards

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.

On January 1, 2022, the Corporation adopted ASC Update 2021-06 Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946):

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants (SEC Update).

The Corporation adopted this standards update effective with its March 31, 2022 quarterly report on Form 10-Q and it did not have a material impact on the consolidated financial statements.

Recently Issued Accounting Standards

In March 2022, FASB issued ASU 2022-01 Derivatives and Hedging (Topic 815):

Fair Value Hedging – Portfolio Layer Method ("ASU 2022-01").

This update addresses questions regarding the last-of-layer method arising from the issuance of ASU 2017-12 and permits more flexibility in hedging interest rate risk for both variable-rate and fixed-rate financial instruments and introduces the ability to hedge risk components for non-financial hedges.

The Corporation adopted ASU 2022-01 on January 1, 2023.

The Corporation does not expect the adoption of ASU 2022-01 to have a material impact on its consolidated financial statements.

In March 2022, FASB issued ASU 2022-02 Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

This update reduces the complexity of accounting for TDRs by eliminating certain accounting guidance, enhancing disclosures and improving the consistency of vintage disclosures.

The Corporation adopted ASU 2022-02 on January 1, 2023.

The Corporation does not expect the adoption of ASU 2022-02 to have a material impact on its consolidated financial statements.

In June 2022, FASB issued ASU 2022-03 Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

This update clarifies how the fair value of equity securities subject to contractual sale restrictions is determined and requires additional qualitative and quantitative disclosures for equity securities with contractual

sale restrictions.

The Corporation will adopt ASU 2022-03 on January 1, 2024.

The Corporation does not expect the adoption of ASU 2022-03 to have a material impact on its consolidated financial statements.

In September 2022, FASB issued ASU 2022-04 Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations ("ASU 2022-04").

This update enhances transparency in the disclosure of supplier finance programs, which previously had no explicit requirements under GAAP.

The Corporation adopted ASU 2022-04 on January 1, 2023.

The Corporation does not expect the adoption of ASU 2022-04 to have a material impact on its consolidated financial statements.

In December 2022, FASB issued ASU 2022-06 Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of topic 848.

This update extends the sunset provision date of "ASU 2020-04" to December 31, 2024 .

ASU 2022-06 became effective for the Corporation upon issuance of ASU 2022-06.

The Corporation does not expect ASU 2022-06 to have a material impact on its consolidated financial statements.

In January 2023, FASB ratified the EITF consensus on EITF Issue No.

21-A, "Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method" reached at the December 1, 2022 meeting, but has not yet issued the standard.

The standard will allow any tax credit program that meets certain criteria to use the proportional amortization method.

The Corporation expects to early adopt the standard using the modified retrospective method effective upon issuance.

The Corporation does not expect the adoption of the upcoming ASU to have a material impact on its consolidated financial statements.

Reclassifications

Certain amounts in the 2021 consolidated financial statements and notes have been reclassified to conform to the 2022 presentation.

NOTE 2 - BUSINESS COMBINATIONS

On July 1, 2022, the Corporation completed its acquisition of Prudential Bancorp, a Pennsylvania chartered bank holding company headquartered in Philadelphia, Pennsylvania that primarily served the Greater Philadelphia region.

On that date, the Corporation acquired 100 % of the outstanding common stock of Prudential Bancorp, Prudential Bancorp was merged with and into the Corporation, and Prudential Bancorp's wholly owned subsidiary, Prudential Bank, became a wholly owned subsidiary of the Corporation.

The Corporation merged Prudential Bank with and into Fulton Bank in the fourth quarter of 2022.

Results of the operations of the acquired entity are included in the Corporation's consolidated financial statements beginning on the acquisition date, July 1, 2022.

As a result of this acquisition, the Corporation enhanced its presence in Philadelphia, expanded its customer base and leveraged operating costs through economies of scale.

In accordance with the terms of the Merger Agreement, each share of Prudential Bancorp's common stock issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive the Merger Consideration.

In the aggregate, approximately eighty percent ( 80 %) of the Merger Consideration consisted of the Corporation's common stock with the remaining approximately twenty percent ( 20 %) payable in cash.

The receipt of the Corporation’s common stock in the Merger is expected to qualify as a tax-free exchange for Prudential Bancorp shareholders.

The acquisition of Prudential Bancorp was accounted for as a business combination using the acquisition method of accounting, and accordingly, the assets acquired, the liabilities assumed, and consideration transferred were recorded at their estimated fair values as of the Merger.

The $ 16.3 million excess of the Merger Consideration over the fair value of assets acquired was recorded as goodwill and is not amortizable or deductible for tax purposes.

The following table summarizes the consideration transferred and the fair values of identifiable assets acquired and liabilities assumed on July 1, 2022:

(in thousands, except per share data)

Consideration transferred:

Common stock shares issued ( 6,208,516 )

Cash paid to Prudential Bancorp shareholders 29,343

Value of consideration 119,056

Assets acquired:

Cash and due from banks 7,532

Investment securities 287,126

Loans, net 554,288

Premises and equipment 13,738

Other assets 70,720

Total assets 933,404

Liabilities assumed:

Deposits 532,180

Borrowings (1)

Other liabilities 14,441

Total liabilities 830,621

Net assets acquired:

Goodwill resulting from acquisition of Prudential Bancorp $ 16,273

(1) Includes a $ 30.5 million intercompany borrowing between Prudential Bank and Fulton Bank.

While the valuation of the acquired assets and liabilities is completed, fair value estimates related to the assets and liabilities from Prudential Bancorp are subject to adjustment for up to one year after the closing date of the Merger if additional information becomes available.

Included in the above table are adjustments of $17 thousand that occurred during the fourth quarter of 2022, resulting in an increase to goodwill from the acquisition of Prudential Bancorp.

The amount of goodwill recorded reflects the increased market share and related synergies that are expected to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired from Prudential Bancorp.

The following is a description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed.

Cash and due from banks:

The estimated fair values of cash and due from banks approximate their stated value.

Investment securities:

The acquired investment portfolio had a fair value of $ 287.1 million, primarily consisting of mortgage-backed securities, U.S.

Government securities and municipal securities.

The fair value of the investment portfolio was based on quoted market prices, dealer quotes and pricing obtained from independent pricing services.

The Company recorded $ 554.3 million of acquired loans, which were initially recorded at their fair values as of the Merger date.

Fair value for the loans was based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors, such as liquidity, from the perspective of a market participant.

Loan cash flows were generated on an individual loan basis.

The PD, LGD, EAD and prepayment assumptions are the key factors driving credit losses that are embedded into the estimated cash flows.

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

Unpaid Principal Balance Fair Value

(dollars in thousands)

Real estate - commercial mortgage $ 224,904 $ 216,613

Commercial and industrial 63,560 62,050

Real-estate - residential mortgage 177,327 169,098

Real-estate - home equity 6,034 5,812

Real-estate - construction 98,963 98,546

Consumer 2,306 2,286

Total acquired loans $ 573,094 $ 554,405

The following table presents the carrying amount of loans for which, at the date of the Merger, there was evidence of more than insignificant deterioration of credit quality since origination:

(dollars in thousands)

Book balance of loans with deteriorated credit quality at acquisition $ 27,057

Allowance for credit losses at acquisition ( 1,135 )

Non-credit related discount ( 130 )

Total initial purchased credit deteriorated loans $ 25,792

The Merger resulted in the addition of $ 9.1 million in allowance for credit losses, including the $ 1.1 million identified in the table above for initial purchased credit deteriorated loans recorded through the provision for credit losses at the date of the Merger.

Premises and equipment:

The fair value of land and buildings reflected in premises and equipment was determined by obtaining recent market sales for comparable properties.

The difference between the fair market value and the net book value for these properties resulted in an increase of $ 7.1 million to the premises and equipment acquired from Prudential Bancorp.

Intangible assets:

The Corporation recorded $ 8.2 million of CDI reflected in other assets that is being amortized over seven years using the sum-of-the-years digits method.

The fair value of the CDI was determined using the cost savings approach.

The cost savings approach is defined as the difference between the cost of funds of core deposits and an alternative cost of funds for those deposits.

The CDI fair value was determined by projected discounted net cash flows, that included assumptions related to customer attrition rates, discount rates, deposit interest rates, deposit account maintenance costs and alternative cost of funding rates.

Time deposits:

Time deposits were valued at the account level based on their remaining maturity dates and comparing the contractual cost of the portfolio to brokered deposit costs having a similar tenor.

The valuation adjustment of $ 1.9 million will be accreted to interest expense over the remaining maturities of the individual customer deposits.

The estimated fair values for borrowings approximated their stated value given these were short-term advances.

The following table presents the change in goodwill during the period:

Twelve Months Ended December 31

(dollars in thousands)

Goodwill at December 31, 2021 $ 534,266

Goodwill from Prudential Bancorp acquisition 16,273

Goodwill at December 31, 2022 $ 550,539

Merger-related expenses

The Company developed a comprehensive integration plan under which it has incurred direct costs, which are expensed as incurred.

These direct costs include costs primarily related to terminated contracts, consolidated facilities (including lease termination expenses), severance, marketing and professional fees.

Costs related to the acquisition and restructuring are included in Merger-related expenses on the unaudited Consolidated Statements of Income.

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

Twelve Months Ended December 31

(dollars in thousands)

Salaries and employee benefits $ 938

Data processing and software 1,412

Net occupancy 1,658

Other outside services 225

Professional fees 3,053

Charitable donation 2,000

Total Merger-related expenses $ 10,328

As part of the Merger, the Corporation made a $ 2.0 million contribution to the Fulton Forward Foundation in July 2022, designated to be used to provide impact gifts in support of nonprofit community organizations in Philadelphia that are focused on advancing economic empowerment, particularly in underserved communities.

Income Statement

During the fourth quarter of 2022, the Corporation merged Prudential Bank with and into Fulton Bank.

Separate results from legacy Prudential Bancorp assets and liabilities can no longer be identified.

The following table summarizes the results of operations contributed by Prudential Bancorp for the three-month period ended September 30, 2022, presented in the unaudited Consolidated Statements of Income:

Three Months Ended September 30, 2022

(dollars in thousands)

Total interest income $ 10,871

Total interest expense 2,733

Net interest income 8,138

Provisions for credit losses 7,571

Net Interest Income After Provision for Credit Losses 567

Total noninterest income 197

Total noninterest expense 3,583

Income Before Income Taxes ( 2,819 )

Income taxes ( 753 )

Net Loss $ ( 2,066 )

Pro Forma Income Statement (unaudited)

The below table presents the pro forma results of the operations of the combined institutions as if the Merger occurred on January 1, 2021.

The pro forma income statement adjustments are limited to the effects of fair value mark amortization and accretion and intangible asset amortization and do not consider future cost savings the Corporation expects to achieve subsequent to the merger of Prudential Bank with and into the Bank.

Year Ended December 31

(dollars in thousands)

Net interest income $ 801,907 $ 687,216

Provision for credit losses 34,041 ( 14,400 )

Net Interest Income After Provision for Credit Losses 767,866 701,616

Total noninterest income 232,054 277,217

Total noninterest expenses 663,133 635,568

Income Before Income Taxes 336,787 343,265

Income tax expense 57,249 59,985

Net Income $ 279,538 $ 283,280

NOTE 3 – RESTRICTIONS ON CASH AND CASH EQUIVALENTS

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".

On the consolidated balance sheets, the amounts of such collateral as of December 31, 2021 and 2020 were $ 202.8 million and $ 408.1 million, respectively.

Collateral is posted by the Corporation with counterparties to secure derivative and other contracts, which is included in "interest-bearing deposits with other banks." On the consolidated balance sheets, the amounts of such collateral as of December 31, 2022 and 2021 were $ 13.9 million and $ 202.8 million, respectively.

NOTE 4 – INVESTMENT SECURITIES

1 unchanged sentence

Losses Estimated

(in thousands)

(dollars in thousands)

Available for Sale

Government securities $ 226,140 $ — $ ( 7,655 ) $ 218,485

Government-sponsored agency securities 1,050 — ( 42 ) 1,008

State and municipal securities 1,284,245 283 ( 178,816 ) 1,105,712

3 unchanged sentences

Commercial mortgage-backed securities 631,604 — ( 79,082 ) 552,522

Auction rate securities 76,350 — ( 1,683 ) 74,667

Total $ 2,992,513 $ 301 $ ( 346,047 ) $ 2,646,767

4 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

7 unchanged sentences

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

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.

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.

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

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

During the first quarter of 2022, all ARC's were sold.

On May 1, 2022, the Corporation transferred certain residential mortgage-backed securities and commercial mortgage-backed securities from AFS to HTM classification as permitted by ASU 2019-04.

The estimated fair value of the securities transferred was $415.2 million, and the amortized cost of the securities was $479.0 million.

Securities carried at $ 1.1 billion at December 31, 2022 and $ 2.5 billion at December 31, 2021, were pledged as collateral to secure public and trust deposits.

The amortized cost and estimated fair values of debt securities as of December 31, 2022, by contractual maturity, are shown in the following table.

4 unchanged sentences

Cost Estimated

(in thousands)

(dollars in thousands)

Due in one year or less $ 148,382 $ 143,463 $ — $ —

12 unchanged sentences

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

Gross Realized Gains Gross Realized Losses Net Gains

(in thousands)

Gross Realized Gains Gross Realized Losses Net Gains (Losses)

(dollars in thousands)

2022 $ 1,587 $ ( 1,614 ) $ ( 27 )

1 unchanged sentence

2020 6,545 ( 3,492 ) 3,053

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 2021, the Corporation completed a balance sheet restructuring that included a $ 34.0 million gain on the sale of Visa Shares, offset by 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.

11 unchanged sentences

Government securities 1 $ 96,906 $ ( 2,814 ) 2 $ 121,579 $ ( 4,841 ) $ 218,485 $ ( 7,655 )

Government sponsored agency securities 1 1,008 ( 42 ) — — — 1,008 ( 42 )

State and municipal securities 360 995,122 ( 157,397 ) 29 61,089 ( 21,419 ) 1,056,211 ( 178,816 )

4 unchanged sentences

Commercial mortgage-backed securities 114 371,109 ( 38,845 ) 20 181,413 ( 40,237 ) 552,522 ( 79,082 )

Auction rate securities — — — 118 74,667 ( 1,683 ) 74,667 ( 1,683 )

Total available for sale 719 $ 2,108,595 $ ( 256,382 ) 63 $ 477,373 $ ( 89,665 ) $ 2,585,968 $ ( 346,047 )

11 unchanged sentences

Available for Sale

U.S 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 )

4 unchanged sentences

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

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

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 )

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.

2 unchanged sentences

Therefore, the Corporation does not have an ACL for these investments as of December 31, 2022 and 2021.

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, 2021 and 2020.

As of December 31, 2022 and 2021, no ACL was required for state and municipal securities.

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

As of December 31, 2022 and 2021, all corporate debt securities were rated above investment grade.

Based on the payment status, rating and management's evaluation of these securities, no ACL was required for corporate debt securities as of December 31, 2022 and 2021.

NOTE 5 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

1 unchanged sentence

Loans and leases, net of unearned income are summarized as follows as of December 31:

(in thousands)

(dollars in thousands)

Real estate - commercial mortgage $ 7,693,835 $ 7,279,080

10 unchanged sentences

Net loans $ 20,279,547 $ 18,325,350

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

(1) Includes PPP loans totaling $ 20.4 million and $ 301.3 million as of December 31, 2022 and 2021 respectively.

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

3 unchanged sentences

Allowance for Credit Losses

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

The ACL related to loans represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to Net Loans.

The ACL for OBS credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures.

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:

(in thousands)

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

The ACL represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to net loans.

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

The reserve for OBS credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures.

The following table summarizes the ACL - loans balance and the reserve for OBS credit exposures balance as of December 31, 2022 and 2021:

(dollars in thousands)

ACL - loans $ 269,366 $ 249,001

ACL - OBS credit exposure 14,533 14,373

Total ACL $ 263,534 $ 291,940

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

Reserve for OBS credit exposures (1)

$ 16,328 $ 14,533

(in thousands)

(1) Included in other liabilities on the Consolidated Balance Sheets.

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

2022 2021 2020

(dollars in thousands)

Balance at beginning of period $ 249,001 $ 277,567 $ 163,620

CECL Day 1 Provision expense 7,954 — —

Purchased credit deteriorated loans 1,135 — —

Impact of adopting CECL on January 1, 2020 — — 45,724

1 unchanged sentence

Recoveries of loans previously charged off 14,092 17,146 21,020

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

Net loans (charged-off) recovered ( 7,380 ) ( 13,806 ) ( 9,537 )

Provision for credit losses 18,656 ( 14,760 ) 77,760

( 14,600 ) 76,920 32,825

Balance at the end of the period $ 269,366 $ 249,001 $ 277,567

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

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

Provision for OBS credit exposures $ 1,411 $ 160 $ ( 840 )

Reserve for OBS credit exposures $ 16,328 $ 14,533 $ 14,373

The following tables present the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2022 and 2021, by portfolio segment:

Real Estate -

Mortgage Commercial and Industrial Real Estate -

Mortgage Commercial and Industrial Consumer and Real Estate -

Equity Real Estate -

Mortgage Real Estate -

Construction Consumer Equipment Finance Leasing and Other Total

(in thousands)

Construction Equipment Finance Leasing and Other Total

(dollars in thousands)

Balance at December 31, 2020 $ 103,425 $ 74,771 $ 25,137 $ 51,995 $ 15,608 $ 6,631 $ 277,567

Impact of adopting CECL on January 1, 2020 29,361 ( 18,576 ) ( 65 ) 21,235 4,015 5,969 3,784 45,723

Loans charged off ( 8,726 ) ( 15,337 ) ( 3,309 ) ( 1,290 ) ( 39 ) ( 2,251 ) ( 30,952 )

Recoveries of loans previously charged off 2,474 9,587 2,345 375 1,412 953 17,146

Net loans recovered (charged off) ( 3,198 ) ( 7,519 ) ( 689 ) ( 129 ) 5,105 ( 1,525 ) ( 1,582 ) ( 9,537 )

Net loans (charged off) recovered ( 6,252 ) ( 5,750 ) ( 964 ) ( 915 ) 1,373 ( 1,298 ) ( 13,806 )

Provision for loan losses (1)

1 unchanged sentence

Balance at December 31, 2021 87,970 67,056 19,749 54,236 12,941 7,049 249,001

CECL Day 1 Provision expense 4,107 — 131 3,716 — — 7,954

Initial purchased credit deteriorated loans 1,051 — 7 77 — — 1,135

Loans charged off ( 12,473 ) ( 2,390 ) ( 4,412 ) ( 66 ) — ( 2,131 ) ( 21,472 )

Recoveries of loans previously charged off 3,860 5,893 2,581 425 574 759 14,092

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

Net loans (charged off) recovered ( 8,613 ) 3,503 ( 1,831 ) 359 574 ( 1,372 ) ( 7,380 )

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.

The ACL - loans inc ludes 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 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.

The increase in ACL - loans in 2022 was related to loan growth and changes to the macroeconomic outlook.

The impact from qualitative adjustments related to COVID-19 on the ACL - loans decreased in 2021 with the improvement in economic conditions.

Non-accrual Loans

6 unchanged sentences

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

(in thousands)

(dollars in thousands)

Real estate - commercial mortgage $ 39,722 $ 30,439 $ 70,161 $ 20,564 $ 32,251 $ 52,815

23 unchanged sentences

2022 2021 2020 2019 2018 Prior Cost Basis Cost Basis Total

Real estate - construction (1)

Real estate - commercial mortgage

Pass $ 1,014,575 $ 1,095,725 $ 969,118 $ 810,850 $ 621,689 $ 2,610,511 $ 80,665 $ 307 $ 7,203,440

1 unchanged sentence

Substandard or Lower 1,032 3,039 31,042 38,378 23,112 87,168 243 — 184,014

Total real estate - construction 195,873 316,586 123,229 104,086 35,181 127,657 46,636 — 949,248

Real estate - construction (1)

Total real estate - commercial mortgage 1,015,702 1,149,131 1,023,456 882,963 661,006 2,879,415 81,855 307 7,693,835

Real estate - commercial mortgage

Current period gross charge-offs — — — — — ( 53 ) — ( 12,420 ) ( 12,473 )

10 unchanged sentences

Total net (charge-offs) recoveries — — ( 6 ) 95 358 1,375 ( 381 ) 2,062 3,503

Real estate - commercial mortgage

Real estate - construction (1)

Pass 159,195 390,993 243,406 28,539 24,421 93,511 47,271 — 987,336

1 unchanged sentence

Substandard or Lower — — 3,852 2,274 — 4,272 203 — 10,601

Total real estate - commercial mortgage 1,088,967 968,420 952,184 718,751 815,611 2,677,490 56,169 1,488 7,279,080

Real estate - commercial mortgage

Total real estate - construction 159,195 390,993 247,258 30,813 24,421 119,386 47,474 — 1,019,540

Real estate - construction (1)

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

12 unchanged sentences

2021 2020 2019 2018 2017 Prior Cost Basis Cost Basis Total

Real estate - construction (1)

Real estate - commercial mortgage

Pass $ 1,086,113 $ 899,172 $ 826,866 $ 624,653 $ 712,223 $ 2,356,308 $ 55,370 $ — $ 6,560,705

1 unchanged sentence

Substandard or Lower 1,537 8,516 28,810 68,818 69,793 151,450 684 1,488 331,096

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

Real estate - construction (1)

Total real estate - commercial mortgage 1,088,967 968,420 952,184 718,751 815,611 2,677,490 56,169 1,488 7,279,080

Real estate - commercial mortgage

Current period gross charge-offs — — ( 14 ) ( 25 ) ( 6,972 ) ( 1,517 ) ( 198 ) — ( 8,726 )

10 unchanged sentences

Total net (charge-offs) recoveries ( 2,971 ) ( 367 ) ( 275 ) 633 171 1,542 ( 4,483 ) — ( 5,750 )

Real estate - commercial mortgage

Real estate - construction (1)

Pass 190,030 315,811 113,245 83,886 17,545 117,157 46,409 — 884,083

1 unchanged sentence

Substandard or Lower — — — — 1,912 4,185 227 — 6,324

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

Total real estate - construction 195,873 316,586 123,229 104,086 35,181 127,657 46,636 — 949,248

Real estate - construction (1)

Current period gross charge-offs — — ( 39 ) — — — — — ( 39 )

6 unchanged sentences

(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.

(2) Loans originated in 2021 and 2020 include $ 301.3 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government guaranty through the SBA.

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

6 unchanged sentences

2022 2021 2020 2019 2018 Prior Cost Basis Cost Basis Total

Real estate - home equity

Performing $ 32,682 $ 23,478 $ 7,024 $ 9,255 $ 7,415 $ 92,983 $ 930,289 $ 3,999 $ 1,107,125

Non-performing — — — 15 282 2,145 8,483 198 11,123

Total real estate - home equity 32,682 23,478 7,024 9,270 7,697 95,128 938,772 4,197 1,118,248

Real estate - home equity

Current period gross charge-offs — — ( 41 ) — — ( 171 ) ( 464 ) — ( 676 )

Current period recoveries — — — — — 96 152 — 248

Total net (charge-offs) recoveries — — ( 41 ) — — ( 75 ) ( 312 ) — ( 428 )

Real estate - residential mortgage

6 unchanged sentences

Total net (charge-offs) recoveries — — 4 — 27 261 — 67 359

Consumer and real estate - home equity

Performing 416,631 109,724 80,422 52,384 45,642 211,127 842,226 34,061 1,792,217

Non-performing 292 298 174 36 98 6,512 1,722 668 9,800

Total consumer 129,881 79,541 66,805 59,345 25,871 42,632 60,582 — 464,657

Total real estate - home equity 416,923 110,022 80,596 52,420 45,740 217,639 843,948 34,729 1,802,017

Consumer and real estate - home equity

Current period gross charge-offs — ( 587 ) ( 70 ) ( 108 ) ( 16 ) ( 442 ) ( 178 ) ( 3,011 ) ( 4,412 )

1 unchanged sentence

Total net (charge-offs) recoveries — ( 543 ) 18 ( 79 ) — 153 116 ( 1,496 ) ( 1,831 )

Equipment lease financing and other

Construction - other

Performing 164,924 73,492 10,892 — 1,077 — — — 250,385

Non-performing — — — — — — — — —

Total leasing and other 97,077 65,316 49,591 34,107 37,947 1,507 — — 285,545

Equipment lease financing and other

Total construction - other 164,924 73,492 10,892 — 1,077 — — — 250,385

Construction - other

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

1 unchanged sentence

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

Construction - other

Equipment lease financing and other

Performing 146,198 39,427 40,024 29,309 15,019 15,670 — — 285,647

Non-performing — — — — — 13,307 — — 13,307

Total construction - other 144,652 40,040 638 5,028 173 — — — 190,531

Construction - other

Total leasing and other 146,198 39,427 40,024 29,309 15,019 28,977 — — 298,954

Equipment lease financing and other

Current period gross charge-offs ( 506 ) ( 167 ) ( 140 ) ( 80 ) ( 47 ) ( 1,191 ) — — ( 2,131 )

8 unchanged sentences

2021 2020 2019 2018 2017 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

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

6 unchanged sentences

Total net (charge-offs) recoveries — ( 626 ) ( 147 ) ( 107 ) ( 4 ) ( 123 ) 92 — ( 915 )

Consumer and real estate - home equity

Performing 162,441 102,918 73,769 68,564 33,254 135,412 990,842 3,999 1,571,199

Non-performing 122 101 60 51 314 2,348 8,512 198 11,706

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

Total real estate - home equity 162,563 103,019 73,829 68,615 33,568 137,760 999,354 4,197 1,582,905

Consumer real estate - home equity

Current period gross charge-offs ( 175 ) ( 491 ) ( 496 ) ( 238 ) ( 224 ) ( 411 ) ( 1,274 ) — ( 3,309 )

1 unchanged sentence

Total net (charge-offs) recoveries ( 175 ) ( 268 ) ( 365 ) ( 107 ) ( 57 ) 637 ( 629 ) — ( 964 )

Equipment lease financing and other

Construction - other

Performing 144,652 40,040 638 5,028 — — — — 190,358

Non-performing — — — — 173 — — — 173

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

Equipment lease financing and other

Total construction - other 144,652 40,040 638 5,028 173 — — — 190,531

Construction - other

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

1 unchanged sentence

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

Construction - other

Equipment lease financing and other

Performing 97,077 65,316 49,591 34,107 22,444 1,369 — — 269,904

Non-performing — — — — 15,503 138 — — 15,641

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

Construction - other

Total leasing and other 97,077 65,316 49,591 34,107 37,947 1,507 — — 285,545

Equipment lease financing and other

Current period gross charge-offs ( 975 ) ( 1,276 ) — — — — — — ( 2,251 )

6 unchanged sentences

2022 December 31,

(in thousands)

(dollars in thousands)

Non-accrual loans $ 144,443 $ 143,666

2 unchanged sentences

Total non-performing assets $ 177,696 $ 153,936

(1) Excludes PPP loans which are fully guaranteed by the federal government of $ 7.7 million as of December 31, 2022.

(2) Excludes $ 6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of December 31, 2022.

3 unchanged sentences

Due Due and Accruing Accrual Current Total

(in thousands)

(dollars in thousands)

December 31, 2022

1 unchanged sentence

Commercial and industrial (1)

6,067 2,289 1,172 27,116 4,440,893 4,477,537

Real estate – residential mortgage 57,061 8,209 20,215 26,294 4,625,500 4,737,279

4 unchanged sentences

Total $ 88,349 $ 20,805 $ 27,463 $ 144,443 $ 19,998,487 $ 20,279,547

(1) Excludes delinquent PPP loans 30-59 days past due, 60-89 days and 90 days or more pa st due of $ 0.1 million, $ 0.7 million and $ 7.7 million, re spectively, which are fully guaranteed by the federal government.

30-59 Days Past

2 unchanged sentences

accrual Current Total

(in thousands)

(dollars in thousands)

December 31, 2021

11 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:

Substantially all of the collateral supporting collateral-dependent financial assets consists

of various types of real estate including:

residential properties;

4 unchanged sentences

The following table presents TDRs, by class segment for the years ended December 31:

(in thousands)

(dollars in thousands)

Real estate - commercial mortgage $ 3,255 $ 3,464

20 unchanged sentences

The restructured loan modifications primarily included maturity date extensions, rate modifications and payment schedule modifications.

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.

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

As of December 31, 2022, $ 3.4 million in recorded investment remain in an active COVID-19 deferral program.

1 unchanged sentence

The following is a summary of premises and equipment as of December 31:

(in thousands)

(dollars in thousands)

Land $ 39,752 $ 38,494

7 unchanged sentences

Goodwill totaled $ 550.5 million and $ 534.3 million as of December 31, 2022 and 2021, respectively.

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

The increase was the result of the Prudential Bancorp acquisition.

See "Note 2 - Business Combinations" in the Notes to Consolidated Financial Statements for additional information.

There were no goodwill impairment charges in 2022 based on the annual assessment.

1 unchanged sentence

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

(in millions)

(dollars in thousands)

Intangible assets

2 unchanged sentences

Net intangibles $ 10,285 $ 3,788

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

Net intangibles of $10.3 million as of December 31, 2022, included $ 7.2 million of CDI that was recorded as part of the Merger and is being amortized over seven years using the sum-of-the-years digits method.

NOTE 8 – MORTGAGE SERVICING RIGHTS

1 unchanged sentence

2022 2021 2020

(in thousands)

(dollars in thousands)

Amortized cost:

16 unchanged sentences

The fair values of MSRs were $ 50.0 million and $ 35.4 million as of December 31, 2022 and 2021, respectively.

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.

Based on its fair value analysis as of December 31, 2022, the Corporation determined that no valuation allowance was required for the year ended December 31, 2022.

The valuation allowance was $ 0.6 million and $ 10.5 million at December 31, 2021 and 2020, respectively.

Total servicing income, recognized as an increase to mortgage banking income in the consolidated statements of income, was $ 10.6 million, $ 11.2 million and $ 11.9 million as of December 31, 2022, 2021 and 2020, respectively.

Total MSR amortization expense, recognized as a reduction to mortgage banking income in the consolidated statements of income, was $ 5.8 million, $ 12.0 million and $ 12.7 million in 2022, 2021 and 2020, 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):

Estimated future MSR amortization expense, based on balances as of December 31, 2022, and the estimated remaining lives of the underlying loans, follows (dollars in thousands):

Thereafter 16,650

2 unchanged sentences

Deposits consisted of the following as of December 31:

(in thousands)

(dollars in thousands)

Noninterest-bearing demand $ 7,006,388 $ 7,370,963

5 unchanged sentences

Total Deposits $ 20,649,538 $ 21,573,499

The scheduled maturities of time deposits as of December 31, 2021 were as follows (in thousands):

The scheduled maturities of time deposits as of December 31, 2022 were as follows (dollars in thousands):

2023 $ 966,235

Thereafter 64,589

Included in time deposits were certificates of deposit equal to or greater than $100,000 of $ 0.7 billion and $ 1.0 billion as of December 31, 2021 and 2020, respectively.

Included in time deposits were certificates of deposit equal to or greater than $100,000 of $ 691.4 million and $ 745.5 million as of December 31, 2022 and 2021, respectively.

Time deposits of $250,000 or more were $ 214.8 million and $ 219.0 million as of December 31, 2022 and 2021, respectively.

NOTE 9 – SHORT-TERM AND LONG-TERM BORROWINGS

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.

NOTE 10 – BORROWINGS

Borrowings as of December 31, 2022 and 2021 and the related maximum amounts outstanding at the end of any month in each of the two years then ended are presented below.

December 31 Maximum Outstanding

2022 2021 2022 2021

(in thousands)

(dollars in thousands)

Federal funds purchased $ 191,000 $ — $ 292,000 $ —

Short-term FHLB advances (1)

— — — 980,000

Customer funding (2)

416,764 630,066 552,547 630,066

Total short-term borrowings $ 416,764 $ 630,066

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

(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, consumer loans and investment securities were pledged to the FRB to provide access to FRB discount window borrowings.

Federal Home Loan Bank advances 1,250,000 — 1,250,000 535,969

Other borrowings:

Customer repurchase agreements 574,394 416,764 574,394 552,547

Other repurchase agreements 315,000 — 315,000 —

Other borrowings 1,179 939 N/A N/A

Total other borrowings $ 890,573 $ 417,703

In connection with the Merger, the Corporation assumed $ 253.5 million of Prudential Bancorp FHLB advances.

As of December 31, 2022, the Corporation had aggregate availability under federal funds lines of $ 2.3 billion, with $0.2 billion of outstanding borrowings against that amount.

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

As of December 31, 2022 and 2021, the Corporation had $ 1.3 billion and $ 0.9 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:

(in thousands)

FHLB advances $ — $ 535,973

As of December 31, 2022, the Corporation had additional borrowing capacity of approximately $ 4.6 billion with the FHLB.

Advances from the FHLB, when utilized, are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets.

The following is included in senior and subordinated debt as of December 31:

(dollars in thousands)

Subordinated debt $ 543,601 $ 608,519

Senior notes 65,000 125,000

Junior subordinated deferrable interest debentures — 16,496

Other long-term debt 939 507

Unamortized discounts and issuance costs ( 3,967 ) ( 4,609 )

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

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 with an original maturity of one year or more and long-term borrowings as of December 31, 2021 (in thousands):

2022 $ 65,313

Total senior debt and subordinated debt $ 539,634 $ 620,406

The following table summarizes the scheduled maturities with an original maturity of one year or more as of December 31, 2022 (dollars in thousands):

Thereafter 375,000

Unamortized discounts and issuance costs ( 4,144 )

On March 16, 2022, $ 65.0 million of senior notes with a fixed rate of 3.60 % were repaid upon their maturity.

On March 30, 2021, pursuant to a cash tender offer, the Corporation purchased $ 75.0 million and $ 60.0 million of its subordinated notes that are scheduled to mature on November 15, 2024 and its senior notes which matured on March 16, 2022, respectively.

The Corporation incurred $ 11.3 million in debt extinguishment costs and expensed $ 0.8 million of unamortized discount costs.

In addition, during the first quarter of 2021, the Corporation prepaid $ 536.0 million of FHLB advances and incurred $ 20.9 million in prepayment penalties.

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

The subordinated notes maturing in 2030 were issued with a fixed-to-floating rate of 3.25 % and an effective rate of 3.35 %, due to issuance costs, and the subordinated notes maturing in 2035 were issued with a fixed-to-floating rate of 3.75 % and an effective rate of 3.85 %, due to issuance costs.

In March 2017, the Corporation issued $ 125.0 million of senior notes, with a fixed rate of 3.60 % and an effective rate of 3.95 %, as a result of discounts and issuance costs, which mature on March 16, 2022.

Interest is paid semi-annually in September and March.

In June 2015, the Corporation issued $ 150.0 million of subordinated notes, which mature on November 15, 2024 and carry a fixed rate of 4.50 % and an effective rate of 4.69 % as a result of discounts and issuance costs.

2 unchanged sentences

Interest is paid semi-annually in May and November.

As of December 31, 2021, the Parent Company owned all of the common stock of three subsidiary trusts, which have issued TruPS in conjunction with the Parent Company issuing junior subordinated deferrable interest debentures to the trusts.

The TruPS are redeemable on specified dates, or earlier if certain events arise.

The following table provides details of the debentures as of December 31, 2021 (dollars in thousands):

Debentures Issued to Fixed/

Variable Interest

Rate Amount Maturity Callable Call Price

Columbia Bancorp Statutory Trust Variable 2.78 % $ 6,186 06/30/34 03/31/22 100.0

Columbia Bancorp Statutory Trust II Variable 2.09 % 4,124 03/15/35 03/15/22 100.0

Columbia Bancorp Statutory Trust III Variable 1.97 % 6,186 06/15/35 03/15/22 100.0

The Corporation owned all of the common stock of the Columbia Bancorp Statutory Trust, Columbia Bancorp Statutory Trust II and Columbia Bancorp Statutory Trust III, each of which issued TruPS in conjunction with the Corporation issuing junior subordinated deferrable interest debentures to these trusts.

In September 2022, the Corporation redeemed all of the outstanding junior subordinated deferrable interest debentures issued to these trusts, totaling approximately $ 17.2 million, and these trusts redeemed all of the outstanding TruPS in a like amount, after which the subsidiary trusts were canceled.

NOTE 11 – DERIVATIVE FINANCIAL INSTRUMENTS

1 unchanged sentence

Fair Value Notional

(in thousands)

(dollars in thousands)

Interest Rate Locks with Customers

4 unchanged sentences

Negative fair values 10,000 ( 147 ) — —

Interest Rate Swaps with Customers

Interest Rate Derivatives with Customers

Positive fair values 171,317 3,337 3,213,924 153,752

Negative fair values 3,802,480 ( 280,401 ) 752,462 ( 4,766 )

Interest Rate Swaps with Dealer Counterparties

Interest Rate Derivatives with Dealer Counterparties

Positive fair values 3,802,480 161,956 752,462 4,766

Negative fair values 171,317 ( 3,703 ) 3,213,924 ( 79,889 )

Interest Rate Swaps used in Cash Flow Hedges

Interest Rate Derivatives used in Cash Flow Hedges

Positive fair values 600,000 1,321 500,000 60

6 unchanged sentences

Negative fair values 8,280 ( 499 ) 9,364 ( 240 )

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

The following table presents the effect of fair value and cash flow hedge accounting on AOCI for the years ended December 31, 2022 and 2021:

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

(in thousands)

Derivatives in Cash Flow Hedging Relationships:

Year Ended December 31, 2022

Interest Rate Products $ ( 81,400 ) $ ( 81,400 ) $ — Interest Income $ ( 7,761 ) $ ( 7,761 ) $ —

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:

Year Ended December 31, 2021

Interest Rate Products ( 3,452 ) ( 3,452 ) — Interest Income 2,776 2,776 —

The following table presents the effect of fair value and cash flow hedge accounting on the income statement for the years ended December 31:

Consolidated Statements of Income Classification

Interest Income Interest Expense

Interest Income Interest Expense Interest Income Interest Expense

(in thousands)

Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded $ ( 7,761 ) $ — $ 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 (loss) reclassified from AOCI into income ( 7,761 ) — 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.

Amount of gain (loss) reclassified from AOCI into income - included component ( 7,761 ) — 2,776 —

Amount of gain (loss) reclassified from AOCI into income - excluded component — — — —

During the next twelve months, the Corporation estimates that an additional $ 38.5 million will be reclassified as a decrease to interest income.

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

Consolidated Statements of Income Classification 2022 2021 2020

(in thousands)

(dollars in thousands)

Mortgage banking derivatives (1)

Mortgage banking $ ( 2,360 ) $ ( 3,392 ) $ 4,974

Interest rate swaps Other expense 1,050 70 122

Interest rate derivatives Other expense — 1,050 70

Foreign exchange contracts Other income 81 ( 36 ) 12

4 unchanged sentences

The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements as of December 31:

(in thousands)

(dollars in thousands)

Amortized cost (1)

3 unchanged sentences

Losses related to changes in fair values of mortgage loans held for sale were $ 0.6 million for the year ended December 31, 2022.

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.

Losses related to changes in fair values of mortgage loans held for sale were $ 2.5 million for the year ended December 31, 2021, and gains related to changes in fair values of mortgage loans held for sale were $ 2.8 million for the year ended December 31, 2020.

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

Balance Sheet Offsetting

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 fair values of interest rate derivative agreements and foreign exchange contracts the Corporation enters into with customers and dealer counterparties may be eligible for offset on the consolidated balance sheets if they are subject to master netting arrangements or similar agreements.

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

7 unchanged sentences

(in thousands)

Interest rate swap derivative assets $ 158,578 $ ( 8,028 ) $ — $ 150,550

Interest rate derivative assets $ 166,614 $ ( 8,071 ) $ — $ 158,543

Foreign exchange derivative assets with correspondent banks 101 ( 101 ) — —

Total $ 166,715 $ ( 8,172 ) $ — $ 158,543

Interest rate swap derivative liabilities $ 86,087 $ ( 6,656 ) $ ( 74,359 ) $ 5,072

Interest rate derivative liabilities $ 296,267 $ ( 2,771 ) $ ( 127,638 ) $ 165,858

Foreign exchange derivative liabilities with correspondent banks 499 ( 101 ) — 398

Total $ 296,766 $ ( 2,872 ) $ ( 127,638 ) $ 166,256

Interest rate swap derivative assets $ 330,951 $ ( 2 ) $ — $ 330,949

Interest rate derivative assets $ 158,578 $ ( 8,028 ) $ — $ 150,550

Foreign exchange derivative assets with correspondent banks 69 ( 69 ) — —

Total $ 158,647 $ ( 8,097 ) $ — $ 150,550

Interest rate swap derivative liabilities $ 165,205 $ ( 2 ) $ ( 165,203 ) $ —

Interest rate derivative liabilities $ 86,087 $ ( 6,656 ) $ ( 74,359 ) $ 5,072

Foreign exchange derivative liabilities with correspondent banks 240 ( 69 ) — 171

Total $ 86,327 $ ( 6,725 ) $ ( 74,359 ) $ 5,243

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

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

(2) Amounts represent cash collateral (pledged by the Corporation) or received from the counterparty on interest rate swap transactions and foreign exchange contracts with financial institution counterparties.

Interest rate swaps with customers are collateralized by the same collateral securing the underlying loans to those borrowers.

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

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

(2) Amounts represent cash collateral (pledged by the Corporation) or received from the counterparty on interest rate derivative transactions and foreign exchange contracts with financial institution counterparties.

Interest rate derivatives with customers are collateralized by the same collateral securing the underlying loans to those borrowers.

Cash collateral amounts are included in the table only to the extent of the net derivative fair values.

Cash Flow Hedge Terminations

In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $1.0 billion.

As the hedged transaction continues to be probable, the unrealized losses that have been recorded in AOCI will be recognized as reduction to interest income when the previously forecasted hedged item affects earnings in future periods.

NOTE 12 – REGULATORY MATTERS

67 unchanged sentences

NOTE 13 – INCOME TAXES

The components of the provision for income taxes are as follows:

The components of income taxes are as follows:

2022 2021 2020

(in thousands)

(dollars in thousands)

Current tax expense:

1 unchanged sentence

State 6,906 10,646 7,389

46,338 45,786 37,814

Total current tax expense 51,384 46,338 45,786

Deferred tax (benefit) expense:

1 unchanged sentence

State ( 324 ) 1,329 ( 3,460 )

12,410 ( 21,591 ) ( 165 )

Total deferred tax (benefit) expense 8,650 12,410 ( 21,591 )

Total income tax expense $ 60,034 $ 58,748 $ 24,195

6 unchanged sentences

State income taxes, net of federal benefit 1.2 2.6 1.1

Change in valuation allowance — — 1.8

Executive compensation 0.3 0.1 —

4 unchanged sentences

The net DTA recorded by the Corporation is included in other assets and consists of the following tax effects of temporary differences as of December 31:

(in thousands)

(dollars in thousands)

Deferred tax assets:

Unrealized holding losses on securities $ 110,689 $ —

Allowance for credit losses 65,481 62,465

Tax credit carryforwards 27,192 39,294

State loss carryforwards 26,421 23,996

3 unchanged sentences

Deferred compensation 9,014 9,190

Tax credit carryforwards 5,146 27,192

Stock-based compensation 4,681 3,499

Postretirement and defined benefit plans — 1,553

Other 8,158 7,348

3 unchanged sentences

Right-of-use-asset 19,276 18,671

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

Premises and equipment 9,151 8,876

MSRs 7,750 8,016

Premises and equipment 5,775 9,151

Acquisition premiums/discounts 5,492 5,466

Intangible assets 1,272 1,205

Postretirement and defined benefit plans 1,755 1,243

Unrealized holding gains on AFS securities — 10,432

Intangible assets — 1,272

Other 14,507 13,492

15 unchanged sentences

2022 2021 2020

(in thousands)

(dollars in thousands)

Balance at beginning of year $ 1,673 $ 2,151 $ 2,517

12 unchanged sentences

Penalties, if incurred, would also be recognized in income tax expense.

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.

The Corporation recognized approximately $ 121.0 thousand and $ 75.0 thousand of recoveries in 2022 and 2021, respectively, for interest and penalties in income tax expense related to unrecognized tax positions.

As of December 31, 2022 and 2021, total accrued interest and penalties related to unrecognized tax positions were approximately $ 0.5 million and $ 0.6 million, respectively.

10 unchanged sentences

Included in other assets:

( in thousands)

(dollars in thousands)

Affordable housing tax credit investments, net $ 161,103 $ 161,052

7 unchanged sentences

2022 2021 2020

( in thousands)

(dollars in thousands)

Components of income taxes:

21 unchanged sentences

The Corporation received net proceeds from the offering of $ 192.9 million, after deducting underwriting discounts and commissions and before deducting transaction expenses payable by the Corporation.

Stock Reissuance

On July 1, 2022, the Corporation reissued 6,208,516 shares of common stock that had been held as Treasury stock in connection with the Merger.

Accumulated Other Comprehensive Income (Loss)

1 unchanged sentence

Before-Tax Amount Tax Effect Net of Tax Amount

(in thousands)

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

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

(dollars in thousands)

Unrealized gain (loss) on securities $ ( 403,606 ) $ 91,437 $ ( 312,169 )

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

( 27 ) 7 ( 20 )

Amortization of net unrealized losses on AFS transferred to HTM (2)

Amortization of net unrealized gains (losses) on AFS transferred to HTM (2)

( 57,509 ) 13,026 ( 44,483 )

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

Net unrealized holding gains (loss) arising during the period on interest rate derivatives used in cash flow hedges ( 81,400 ) 18,437 ( 62,963 )

Reclassification adjustment for net loss (gain) realized in net income on interest rate derivatives used in cash flow hedges 7,761 ( 1,757 ) 6,004

Unrecognized pension and postretirement income (cost) 825 ( 181 ) 644

Amortization of net unrecognized pension and postretirement items (3)

128 ( 28 ) 100

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

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

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

Total Other Comprehensive Income (Loss) $ ( 533,828 ) $ 120,941 $ ( 412,887 )

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

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

( 33,516 ) 7,611 ( 25,905 )

Amortization of net unrealized losses on AFS transferred to HTM (2) (4)

Amortization of net unrealized gains (losses) on AFS transferred to HTM (2)

3,485 ( 795 ) 2,690

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

Net unrealized holding gain (loss) arising during the period on interest rate derivatives used in cash flow hedges ( 3,452 ) 782 ( 2,670 )

Reclassification adjustment for net loss (gain) realized in net income on interest rate derivatives used in cash flow hedges ( 2,776 ) 629 ( 2,147 )

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

Amortization of net unrecognized pension and postretirement items (3)

1,480 ( 324 ) 1,156

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

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

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

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

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

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

( 3,053 ) 694 ( 2,359 )

Amortization of net unrealized losses on AFS transferred to HTM (2)

Amortization of net unrealized gains (losses) on AFS transferred to HTM (2)(4)

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 ( 1,203 ) 266 ( 937 )

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

Amortization of net unrecognized pension and postretirement items (3)

1,311 ( 291 ) 1,020

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

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

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

Before-tax amounts included in "Investment securities gains, net" on the consolidated statements of income.

See "Note 3 - Investment Securities," for additional details.

See "Note 4 - Investment Securities," for additional information.

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

Before-tax amounts included as a reduction to "Interest Income" on the consolidated statements of income.

See "Note 3, - Investment Securities," for additional details.

See "Note 4, - Investment Securities," for additional information.

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

Before-tax amounts included in "Salaries and employee benefits" on the consolidated statements of income.

See "Note 13 - Employee Benefit Plans," for additional details.

(4) Before-Tax amount includes a $ 3.7 million reclassification of unrealized loss related to the early adoption of ASU 2019-04, as disclosed in "Note 1 - Summary of Significant Accounting Policies" from "Amortization of net unrealized losses on AFS securities transferred to HTM" to "Unrealized gain on securities."

See "Note 17 - Employee Benefit Plans," for additional information.

(4) Before-Tax amount includes a $ 3.7 million reclassification of unrealized loss related to the early adoption of ASU 2019-04.

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

(in thousands)

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

(dollars in thousands)

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

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

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

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

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

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

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

1 unchanged sentence

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

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

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

Balance at December 31, 2021 40,441 ( 4,817 ) ( 8,213 ) 27,411

1 unchanged sentence

Amounts reclassified from AOCI ( 20 ) 6,004 100 6,084

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

Amortization of net unrealized gains (losses) on AFS securities transferred to HTM ( 44,483 ) — — ( 44,483 )

Balance at December 31, 2022 $ ( 316,231 ) $ ( 61,776 ) $ ( 7,469 ) $ ( 385,476 )

Common Stock Repurchase Plans

On December 20, 2022, the Corporation announced that its board of directors approved the 2023 Repurchase Program.

Under the 2023 Repurchase Program, the Corporation is authorized to repurchase up to $ 100.0 million of its common stock, or approximately 3.6 % of its outstanding shares, through December 31, 2023.

Under the 2023 Repurchase Program, repurchased shares are added to treasury stock at cost.

As permitted by securities laws and other legal requirements, and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase transactions.

The 2023 Repurchase Program may be discontinued at any time.

On March 21, 2022, the Corporation announced that its board of directors approved the repurchase of up to $75 million of shares of the Corporation's common stock, or approximately 2.7% of the Corporation's outstanding shares, based on the closing price of the Corporation's common stock and the number of shares outstanding on March 17, 2022.

No shares of the Corporation's common stock were repurchased under this program during 2022.

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 .

1 unchanged sentence

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.

1 unchanged sentence

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 .

During 2019, the Corporation repurchased approximately 6.1 million shares under this program for a total cost of $ 100.0 million, or $ 16.28 per share, completing this program.

In November 2018, the Corporation's board of directors approved a share repurchase program pursuant to which the Corporation was authorized to repurchase up to $ 75.0 million of its outstanding shares of common stock, or approximately 2.7 % of its outstanding shares, through December 31, 2019 .

During 2019 and 2018, the Corporation repurchased approximately 706,000 and 4.1 million shares, respectively, under this program for a total cost of $ 75.0 million, or $ 15.57 per share, completing this program.

Under these repurchase programs, repurchased shares are added to treasury stock, at cost.

1 unchanged sentence

NOTE 16 – STOCK-BASED COMPENSATION PLANS

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

The following table presents compensation expense and related tax benefits for all equity awards recognized in the consolidated statements of income for the years ended December 31, 2022, 2021 and 2020:

2022 2021 2020

(in thousands)

(dollars in thousands)

Compensation expense $ 15,081 $ 9,264 $ 8,381

13 unchanged sentences

Forfeited ( 624 ) 12.10

Expired ( 8,370 ) 11.24

Outstanding and exercisable as of December 31, 2021 239,591 $ 11.57 1.6 years $ 1.3

The following table presents information about stock options exercised:

Outstanding and exercisable as of December 31, 2022 108,464 $ 12.11 1.0 year $ 0.5

The following table presents information about stock options exercised for the years ended December 31, 2022, 2021 and 2020:

2022 2021 2020

15 unchanged sentences

As of December 31, 2022, there was $ 10.8 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 1.8 years.

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.

December 31, 2022, the Employee Equity Plan had 5.0 million shares reserved for future grants through 2023, and the Directors' Plan had 46.1 thousand 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.

19 unchanged sentences

2022 2021 2020

(in thousands)

(dollars in thousands)

401(k) Retirement Plan $ 10,988 $ 10,338 $ 9,853

3 unchanged sentences

Employee and employer contributions under these features are 100 % vested.

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

Contributions to the 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 OCI.

2 unchanged sentences

2022 2021 2020

(in thousands)

(dollars in thousands)

Interest cost $ 2,393 $ 2,244 $ 2,726

2 unchanged sentences

Net periodic pension cost $ ( 1,347 ) $ 217 $ 660

The following table summarizes the changes in the projected benefit obligation and fair value of plan assets for the plan years ended December 31:

(in thousands)

The following table summarizes the changes in the projected benefit obligation and fair value of Pension Plan assets for the plan years ended December 31:

(dollars in thousands)

Projected benefit obligation at beginning of year $ 87,530 $ 92,292

9 unchanged sentences

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)

(dollars in thousands)

Projected benefit obligation $ ( 68,716 ) $ ( 87,530 )

4 unchanged sentences

Before tax Net of tax

(in thousands)

(dollars in thousands)

Balance as of December 31, 2020 $ 25,474 $ 19,843

Recognized as a component of 2021 periodic pension cost ( 2,017 ) ( 1,574 )

Unrecognized gains arising in 2020 3,787 2,958

Unrecognized losses arising in 2021 ( 9,899 ) ( 7,724 )

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

6 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.

The discount rates used were determined using the FTSE Pension Discount Curve (formerly, 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, 2022 weighted average asset allocations.

23 unchanged sentences

Total $ 48,692

Multiemployer Defined Benefit Pension Plan

In connection with the Merger, the Corporation assumed the obligations of Prudential Bancorp under the Prudential Bancorp Pension Plan that had previously been closed to new Prudential Bancorp participants.

The Prudential Bancorp Pension Plan is structured as a multiple employer plan under Internal Revenue Code Section 413(c).

It maintains a single trust and all assets are commingled and invested on a pooled basis.

All amounts payable by the Prudential Bancorp Pension Plan are a general charge upon all its assets.

This structure gives rise to the risk if a participating employer fails before funding up to cover the liabilities of its participants and orphans, contributions for all remaining employers will increase, as assets have to be re-allocated to cover such shortfall.

Information regarding the Prudential Bancorp Pension Plan as of December 31, 2022 is as follows:

Legal Name of Plan Pentegra Defined Benefit Plan for Financial Institutions

(dollars in thousands)

Plan Employer Identification Number 23-1928421

The Corporation's contribution for the year ended December 31, 2022 (1)

Are the Corporation's contributions more than 5% of total contributions?

Funded Status 84.33 %

(1) Includes 2023 prepayment of $125 thousand.

Postretirement Benefits

The Corporation provides medical benefits and life insurance benefits under a postretirement benefits plan ("Postretirement Plan") to certain retired full-time employees who were employees of the Corporation prior to January 1, 1998.

The Corporation provides medical benefits and life insurance benefits under the Postretirement Plan to certain retired full-time employees who were employees of the Corporation prior to January 1, 1998.

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.

2 unchanged sentences

2022 2021 2020

(in thousands)

(dollars in thousands)

Interest cost $ 34 $ 32 $ 43

2 unchanged sentences

This table summarizes the changes in the accumulated postretirement benefit obligation for the years ended December 31:

(in thousands)

(dollars in thousands)

Accumulated postretirement benefit obligation at beginning of year $ 1,244 $ 1,322

4 unchanged sentences

Accumulated postretirement benefit obligation at end of year $ 972 $ 1,244

The fair values of the plan assets were $ 0 as of both December 31, 2021 and 2020.

The fair values of the Postretirement Plan assets were $ 0 as of both December 31, 2022 and 2021.

The funded status of the Postretirement Plan, included in other liabilities on the consolidated balance sheets as of December 31, 2022 and 2021 was $ 1.0 million and $ 1.2 million, respectively.

3 unchanged sentences

Net Loss (Gain) Total Net of tax

(in thousands)

(dollars in thousands)

Balance as of December 31, 2020 $ ( 3,012 ) $ ( 858 ) $ ( 3,870 ) $ ( 3,018 )

9 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.

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

The discount rates used to calculate the accumulated postretirement benefit obligation were determined using the FTSE Pension Discount Curve (formerly, the Citigroup Average Life discount rate table), as adjusted based on the Postretirement Plan's expected benefit payments.

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

Thereafter 297

Total $ 1,078

NOTE 18 – LEASES

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

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

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

2022 2021 2020

9 unchanged sentences

Weighted average discount rate 2.89 % 2.73 %

The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term, as of January 1, 2019, for leases that existed at adoption and as of the lease commencement or modification date for leases subsequently entered into.

Supplemental cash flow information related to operating leases was as follows (in thousands):

The discount rate used in determining the lease liability for each individual lease is the FHLB fixed advance rate which corresponds with the remaining lease term.

Supplemental cash flow information related to operating leases was as follows (dollars in thousands):

Cash paid for amounts included in the measurement of lease liabilities $ 19,405 $ 19,611

ROU assets obtained in exchange for lease obligations 18,715 12,588

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

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

Year Operating Leases

4 unchanged sentences

Present value of lease liabilities $ 93,883

As of December 31, 2021, the Corporation had not entered into any material leases that have not yet commenced.

As of December 31, 2022, the Corporation had not entered into any significant leases that have not yet commenced.

NOTE 19 – COMMITMENTS AND CONTINGENCIES

11 unchanged sentences

The maximum exposure to loss for standby and commercial letters of credit is equal to the contractual (or notional) amount of the instruments.

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

The Corporation has commitments to extend credit and letters of credit.

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

(in thousands)

(dollars in thousands)

Commercial and industrial $ 4,832,858 $ 5,072,008

11 unchanged sentences

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

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.

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.

As of December 31, 2022 and 2021, the total reserve for losses on residential mortgage loans sold was $ 1.4 million and $ 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 the reserve for OBS credit exposures.

In addition, a component of the reserve for OBS credit exposures of $ 6.0 million and $ 3.8 million as of December 31, 2022 and December 31, 2021, respectively, related to additional credit exposure for potential loan repurchases.

Legal Proceedings

14 unchanged sentences

Kress, filed a putative collective and class action lawsuit on behalf of herself and other teller supervisors, tellers, and other similar non-exempt employees in the U.S.

District Court for the District of New Jersey, D.

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

Fulton Bank, N.A.

1:19-cv-18985.

Fulton Bank accepted summons without a formal service of process on January 20, 2020.

The lawsuit alleges that Fulton Bank did not record or otherwise account for the amount of time D.

The lawsuit alleged that Fulton Bank did not record or otherwise account for the amount of time D.

Kress and putative collective and class members spent conducting branch opening security procedures.

The allegation is that, as a result, Fulton Bank did not properly compensate those employees for their regular and overtime wages.

The lawsuit alleges that by doing so, Fulton violated:

(i) the federal Fair Labor Standards Act and seeks back overtime wages for a period of three years, liquidated damages and attorney fees and costs;

(ii) the New Jersey State Wage and Hour Law and seeks back overtime wages for a period of six years, treble damages and attorney fees and costs;

and (iii) the New Jersey Wage Payment Law and seeks back wages for a period of six years, treble damages and attorney fees and costs.

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

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 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 lawsuit alleged that by doing so, Fulton Bank violated:

(i) the federal Fair Labor Standards Act and sought back overtime wages for a period of three years, liquidated damages and attorney fees and costs;

(ii) the New Jersey State Wage and Hour Law and sought back overtime wages for a period of six years, treble damages and attorney fees and costs;

and (iii) the New Jersey Wage Payment Law and sought back wages for a period of six years, treble damages and attorney fees and costs.

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

Fulton Bank and counsel representing plaintiffs ("Plaintiffs' Counsel") reached and executed a formal settlement agreement to resolve this lawsuit.

On June 30, 2022, the Court granted Plaintiffs' Counsel's Motion for Preliminary Approval of Class and Collective Settlement and Provisional Certification of Settlement Class and Collective and scheduled a hearing for final approval of the settlement agreement and matters related thereto for November 2, 2022.

On November 2, 2022, the Court granted final approval of the settlement agreement and matters related thereto and dismissed the lawsuit with prejudice.

The financial terms of the settlement agreement are not 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 20 – FAIR VALUE MEASUREMENTS

1 unchanged sentence

Level 1 Level 2 Level 3 Total

(in thousands)

(dollars in thousands)

Loans held for sale $ — $ 7,264 $ — $ 7,264

1 unchanged sentence

Government securities 218,485 — — 218,485

Government sponsored agency securities — 1,008 — 1,008

State and municipal securities — 1,105,712 — 1,105,712

3 unchanged sentences

Commercial mortgage-backed securities — 552,522 — 552,522

Auction rate securities — — 74,667 74,667

Total available for sale investment securities 218,485 2,428,282 — 2,646,767

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Level 1 Level 2 Level 3 Total

(in thousands)

(dollars in thousands)

Loans held for sale $ — $ 35,768 $ — $ 35,768

Available for sale investment securities:

Government securities 127,618 — — 127,618

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

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The most significant unobservable input to the expected cash flows model is an assumed return to market liquidity sometime within the next 5 years.

If the assumed return to market liquidity was lengthened beyond the next 5 years, this would result in a decrease in the fair value of these ARCs.

The Corporation believes that the trusts underlying the ARCs will self-liquidate as student loans are repaid.

Level 3 values are tested by management through the performance of a trend analysis of the market price and discount rate.

Changes in the price and discount rates are compared to changes in market data, including bond ratings, parity ratios, balances and delinquency levels.

In the first quarter of 2022, the Corporation sold all of its investment in ARCs.

Investments held in Rabbi Trust - This category consists of mutual funds that are held in trust for employee deferred compensation plans that the Corporation has elected to measure at fair value.

Shares of mutual funds are valued based on net asset value, which represents quoted market prices for the underlying shares held in the mutual funds, and as such, are classified as Level 1.

Derivative assets - Fair value of foreign currency exchange contracts classified as Level 1 assets ($ 298,000 at December 31, 2021 and $ 323,000 at December 31, 2020).

Derivative assets - Fair value of foreign currency exchange contracts classified as Level 1 assets ($ 0.7 million at December 31, 2022 and $ 0.3 million at December 31, 2021).

The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.

Level 2 assets, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($ 2.4 million at December 31, 2021 and $ 8.0 million at December 31, 2020) and the fair value of interest rate swaps ($ 158.6 million at December 31, 2021 and $ 331.0 million at December 31, 2020).

The fair values of the interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date.

Level 2 assets, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($ 0.2 million at December 31, 2022 and $ 2.4 million at December 31, 2021) and the fair value of interest rate derivatives ($ 166.6 million at December 31, 2022 and $ 158.6 million at December 31, 2021).

The fair values of the interest rate locks, forward commitments and interest rate derivatives represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date.

See "Note 11 - Derivative Financial Instruments," for additional information.

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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 ($ 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).

Derivative liabilities - Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($ 0.6 million and $ 0.3 million at December 31, 2022 and 2021, respectively).

Level 2 liabilities, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($ 0.2 million at December 31, 2022 and none at December 31, 2021) and the fair value of interest rate derivatives ($ 296.3 million at December 31, 2022 and $ 86.1 million at December 31, 2021).

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:

Single-issuer

Trust Preferred

Securities ARCs

(in thousands)

(dollars in thousands)

Balance at December 31, 2020 $ 98,206

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Unrealized adjustment to fair value (1)

( 242 ) ( 3,720 )

Discount accretion (2)

Balance at December 31, 2021 $ 74,667

1 unchanged sentence

Unrealized adjustment to fair value (1)

Discount accretion (2)

Balance at December 31, 2022 $ —

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

(1) 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.

(2) Included as a component of "net interest income" on the consolidated statements of income.

Certain financial instruments are not measured at fair value on an ongoing basis but are subject to fair value measurement in certain circumstances, such as upon their acquisition or when there is evidence of impairment.

The following table presents Level 3 financial instruments measured at fair value on a nonrecurring basis:

(in thousands)

(dollars in thousands)

Loans, net $ 121,115 $ 118,458

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• Loans, net – This category consists of loans that were individually evaluated for impairment and have been classified as Level 3 assets.

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

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.

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

See "Note 5 - Loans and Allowance for Credit Losses," for additional information.

• 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.

stratified by product type and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value.

MSRs are stratified by product type and evaluated for impairment by comparing each stratum's carrying amount to its estimated

Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert.

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Carrying Amount Level 1 Level 2 Level 3 Total

FINANCIAL ASSETS (in thousands)

FINANCIAL ASSETS (dollars in thousands)

Cash and cash equivalents $ 681,921 $ 681,921 $ — $ — $ 681,921

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AFS securities 2,646,767 218,485 2,428,282 — 2,646,767

Net Loans 18,076,349 — — 17,519,497 17,519,497

Loans, net 20,010,181 — — 18,862,701 18,862,701

Accrued interest receivable 91,579 91,579 — — 91,579

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Accrued interest payable 10,185 10,185 — — 10,185

Short-term borrowings 416,764 416,764 — — 416,764

Long-term borrowings 621,345 — 605,719 — 605,719

Federal funds purchased 191,000 190,998 — — 190,998

Federal Home Loan Bank advances 1,250,000 1,249,629 — — 1,249,629

Senior debt and subordinated debt 539,634 — 456,867 — 456,867

Other borrowings 890,573 889,393 1,180 — 890,573

Other liabilities 467,705 154,912 296,465 16,328 467,705

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Carrying Amount Level 1 Level 2 Level 3 Total

FINANCIAL ASSETS (in thousands)

FINANCIAL ASSETS (dollars in thousands)

Cash and cash equivalents $ 1,638,614 $ 1,638,614 $ — $ — $ 1,638,614

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AFS securities 3,187,390 127,618 2,985,105 74,667 3,187,390

Net Loans 18,623,253 — — 18,354,532 18,354,532

Loans, net 18,076,349 — — 17,519,497 17,519,497

Accrued interest receivable 57,451 57,451 — — 57,451

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Accrued interest payable 7,000 7,000 — — 7,000

Short-term borrowings 630,066 630,066 — — 630,066

Long-term borrowings 1,296,263 — 1,332,041 — 1,332,041

Senior debt and subordinated debt 620,406 — 604,780 — 604,780

Other borrowings 417,703 416,764 939 — 417,703

Other liabilities 288,862 188,219 86,110 14,533 288,862

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CONDENSED BALANCE SHEETS

(in thousands)

(dollars in thousands)

Cash and cash equivalents $ 169,208 $ 352,715

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LIABILITIES AND EQUITY

Long-term borrowings $ 620,406 $ 759,782

Senior and subordinated debt $ 539,634 $ 620,406

Payable to non-bank subsidiaries — 78,793

5 unchanged sentences

2022 2021 2020

(in thousands)

(dollars in thousands)

Dividends from subsidiaries $ 207,000 $ 469,339 $ 161,000

258 100 191,978

Other 725 258 100

207,725 469,597 161,100

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Net Income Available to Common Shareholders $ 276,733 $ 265,220 $ 175,905

(1) Consists primarily of management fees received from subsidiary banks in 2019 and 2018.

CONDENSED STATEMENTS OF CASH FLOWS

2022 2021 2020

(in thousands)

(dollars in thousands)

Cash Flows From Operating Activities:

3 unchanged sentences

Stock-based compensation 14,000 8,402 7,529

(Increase) decrease in other assets 119,822 ( 307,976 ) ( 20,449 )

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

Decrease (increase) in other assets 44,790 119,822 ( 307,976 )

Equity in undistributed net (income) loss of subsidiaries ( 120,213 ) 148,091 ( 55,895 )

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

Increase (decrease) in other liabilities and payable to non-bank subsidiaries ( 198,349 ) 78,716 ( 244,598 )

Total adjustments ( 259,048 ) 369,267 ( 599,812 )

Net cash provided by operating activities 644,764 ( 421,772 ) 177,325

Net cash provided by (used in) operating activities 27,933 644,764 ( 421,772 )

Cash Flows From Investing Activities

Net cash paid for acquisition ( 21,811 ) — —

Net cash provided by (used in) investing activities ( 21,811 ) — —

Cash Flows From Financing Activities:

5 unchanged sentences

Acquisition of treasury stock — ( 43,909 ) ( 39,748 )

Net cash used in financing activities ( 302,112 ) 420,994 ( 197,425 )

Net (Decrease) Increase in Cash and Cash Equivalents 342,652 ( 778 ) ( 20,100 )

Net cash provided by (used in) financing activities ( 189,629 ) ( 302,112 ) 420,994

Net increase (decrease) in Cash and Cash Equivalents ( 183,507 ) 342,652 ( 778 )

Cash and Cash Equivalents at Beginning of Year 352,715 10,063 10,841

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Based on this assessment, management concluded that, as of December 31, 2022, the Corporation's internal control over financial reporting is effective based on those criteria.

P HILIP W ENGER

Philip Wenger

/s/ CURTIS J.

Chairman and Chief Executive Officer

10 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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 ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326):

Measurement of Credit Losses on Financial Instruments .

Basis for Opinions

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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

The constant pre-payment rates utilized in the EAD calculation are sourced from a prepayment calculation 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.

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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.

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 PD rate include historical default observations, 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 long run historical economic trends.

Key assumptions and inputs used in the estimation of the LGD rate include the loan pool segmentation, historical loss observations, and the 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.

Key assumptions and inputs used in the estimation of the constant prepayment rate include historical prepayment observations, 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 ACL estimate is sensitive to changes in the assumptions 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.

1 unchanged sentence

• development of the collective ACL methodology

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

• development of the PD and LGD models and of the methods used to calculate the CPR and 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 pre-payment model

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

• performance monitoring of the PD and LGD models

• development of the qualitative adjustments

• 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:

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

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 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

February 28, 2022

March 1, 2023

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