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Item 8. Financial Statements and Supplementary Data

2024-03-01 compared with 2023-03-01 · 475 added, 590 removed, 1670 unchanged (39% of the section changed)

24 unchanged sentences

Senior debt and subordinated debt 535,384 539,634

Other borrowings 890,573 417,703

Other borrowings and interest-bearing liabilities 612,142 890,573

Total borrowings 2,487,526 2,871,207

3 unchanged sentences

SHAREHOLDERS' EQUITY

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

Preferred stock, no par value, 10,000,000 shares authorized, Series A, 200,000 shares authorized and issued as of December 31, 2023 and 2022, liquidation preference of $ 1,000 per share

192,878 192,878

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

Common stock, $ 2.50 par value, 600,000,000 shares authorized, 225,760,963 shares issued as of December 31, 2023 and 224,604,432 issued as of December 31, 2022

564,402 561,511

1 unchanged sentence

Retained earnings 1,619,300 1,450,758

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

Accumulated other comprehensive loss ( 312,280 ) ( 385,476 )

Treasury stock, at cost, 61,959,552 shares in 2023 and 57,005,339 shares in 2022

( 857,021 ) ( 781,754 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per-share data)

(dollars in thousands, except per-share data)

2023 2022 2021

2 unchanged sentences

Investment securities 101,518 98,115 79,821

Loans held for sale 866 1,302 2,077

Other interest income 15,345 8,114 4,996

5 unchanged sentences

Senior debt and subordinated debt 21,361 22,257 26,784

Other borrowings 6,817 607 2,147

Other borrowings and interest-bearing liabilities 28,002 6,817 607

Total Interest Expense 418,950 83,204 59,682

4 unchanged sentences

Commercial banking 81,160 75,779 68,689

Consumer banking 49,496 45,544 41,598

Wealth management 75,541 72,843 71,798

Consumer banking 47,197 49,496 45,544

Mortgage banking 10,388 14,204 33,576

8 unchanged sentences

Other outside services 47,724 37,152 34,194

State taxes 15,113 18,793 12,613

Equipment 14,033 13,807 13,885

FDIC insurance 25,565 12,547 10,665

Professional fees 9,123 9,647 12,835

Equipment 14,390 14,033 13,807

Marketing 9,004 6,885 5,275

Professional fees 8,392 9,123 9,647

Intangible amortization 2,944 1,731 589

Debt extinguishment — 33,249 2,878

Debt extinguishment cost — — 33,249

Merger-related expenses — 10,328 —

16 unchanged sentences

Unrealized gains (losses) on AFS investment securities:

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

Net unrealized holding gains (losses) on securities 36,023 ( 312,169 ) ( 17,948 )

Reclassification adjustment for securities gains (losses) included in net income ( 567 ) ( 20 ) ( 25,905 )

2 unchanged sentences

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 ) —

Net unrealized holding losses arising during the period 6,998 ( 62,963 ) ( 2,670 )

Reclassification adjustment for net gains (losses) realized in net income 19,995 6,004 ( 2,147 )

8 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(dollars in thousands, except per share data)

(in thousands, except per share data)

Preferred Stock Common Stock Additional

2 unchanged sentences

(Loss) Income

Shares Amount Shares Amount Retained

Shares Outstanding Amount Shares Outstanding Amount Retained

Earnings Treasury

1 unchanged sentence

Net income 275,497 275,497

Other comprehensive income (loss) 65,228 65,228

Preferred stock issued 200 192,878 192,878

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

Common stock issued (1)

Stock-based compensation awards 7,529 7,529

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

Adjustment for CECL (1)

288 720 3,960 ( 136 ) 4,544

Dividend reinvestment activity 362 4 4,934 4,938

Stock-based compensation awards (repurchases) 293 1,129 7,792 ( 2,564 ) 6,357

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

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

Common stock cash dividends - $ 0.56 per share

Common stock dividends - $ 0.64 per share

( 103,618 ) ( 103,618 )

1 unchanged sentence

Net income 286,981 286,981

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

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

Common stock issued (1)

Stock-based compensation awards 8,402 8,402

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

261 653 3,677 4,330

Dividend reinvestment activity 362 85 5,149 5,234

Stock-based compensation awards (repurchases) 277 1,092 13,658 ( 2,438 ) 12,312

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

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

Common stock cash dividends - $ 0.64 per share

Common stock dividends - $ 0.66 per share

( 108,358 ) ( 108,358 )

1 unchanged sentence

Net income 284,280 284,280

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

Other comprehensive income 73,196 73,196

Common stock issued (1)

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

Stock-based compensation awards 14,000 14,000

231 578 2,548 34 3,160

Dividend reinvestment activity 408 ( 132 ) 5,691 5,559

Stock-based compensation awards (repurchases) 592 2,313 8,604 ( 3,936 ) 6,981

Acquisition of treasury stock ( 5,029 ) ( 77,056 ) ( 77,056 )

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

Common stock cash dividends - $ 0.66 per share

Common stock dividends - $ 0.64 per share

( 105,490 ) ( 105,490 )

Balance at December 31, 2023 200 $ 192,878 163,801 $ 564,402 $ 1,552,860 $ 1,619,300 $ ( 312,280 ) $ ( 857,021 ) $ 2,760,139

(1) Issuance of common stock includes issuance in connection with the Corporation's ESPP and exercised stock options.

See Notes to Consolidated Financial Statements

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

Measurement of Credit Losses of Financial Instruments on January 1, 2020.

See Note 1 to the Consolidated Financial Statements for further details.

CONSOLIDATED STATEMENTS OF CASH FLOWS

8 unchanged sentences

Investment securities losses (gains), net 733 27 ( 33,516 )

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

Gain on sales of mortgage loans held for sale ( 5,094 ) ( 8,816 ) ( 24,379 )

Proceeds from sales of mortgage loans held for sale 363,406 455,607 1,050,943

5 unchanged sentences

Change in deferred federal income tax 24,666 ( 117,849 ) ( 417 )

Net change in accrued salaries and benefits ( 5,868 ) 12,826 ( 1,226 )

Change in life insurance cash surrender value ( 27,664 ) ( 95,702 ) ( 93,986 )

1 unchanged sentence

Total adjustments 78,704 307,810 62,894

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

Net cash provided by operating activities 362,984 594,791 338,391

CASH FLOWS FROM INVESTING ACTIVITIES:

5 unchanged sentences

Sale of Visa Shares — — 33,962

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 )

Net change in FRB and FHLB stock 5,781 ( 72,551 ) 34,494

Net change in loans ( 1,100,816 ) ( 1,407,289 ) 561,664

Net purchases of premises and equipment ( 32,958 ) ( 21,246 ) ( 17,679 )

Settlement of bank owned life insurance 2,264 3,474 3,881

Net cash paid for acquisition — ( 21,811 ) ( 1,982 )

Net change in tax credit investments ( 26,753 ) ( 29,071 ) ( 18,363 )

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

Net cash used in investing activities ( 809,215 ) ( 1,535,583 ) ( 210,086 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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 )

Net change in demand and savings deposits ( 1,198,222 ) ( 1,198,319 ) 1,315,139

Net change in time deposits and brokered deposits 2,086,307 ( 257,823 ) ( 580,847 )

Net (decrease) increase in other borrowings ( 379,431 ) 1,629,870 ( 212,682 )

Repayments of senior debt and subordinated debt ( 5,000 ) ( 81,496 ) ( 710,633 )

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

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

Net proceeds from issuance of common stock 3,160 7,876 7,437

2 unchanged sentences

Net cash provided by (used in) financing activities 314,020 ( 15,901 ) ( 337,523 )

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

Net decrease in Cash and Cash Equivalents ( 132,211 ) ( 956,693 ) ( 209,218 )

Cash and Cash Equivalents at Beginning of Period 681,921 1,638,614 1,847,832

11 unchanged sentences

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

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

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

and Fulton Community Partner, LLC.

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

5 unchanged sentences

The Corporation offers, through its banking subsidiary, a full range of retail and commercial banking services in Pennsylvania, Delaware, Maryland, New Jersey and Virginia.

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

Basis of Financial Statement Presentation:

The consolidated financial statements have been prepared in conformity with GAAP and include the accounts of the Parent Company and all wholly owned subsidiaries.

The consolidated financial statements have been prepared in accordance with GAAP and include the accounts of the Parent Company and all wholly-owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated.

19 unchanged sentences

AFS Debt Securities :

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.

The Bank's AFS rated debt securities are investment grade.

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

As of December 31, 2023, no AFS debt securities required an ACL.

6 unchanged sentences

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

Loans are stated at their principal amount outstanding, except for mortgage loans held for sale, which are carried at fair value.

Loans are stated at amortized cost, except for mortgage loans held for sale, which are carried at fair value.

Interest income on loans is accrued as earned.

2 unchanged sentences

When interest accruals are discontinued, unpaid interest previously credited to income is reversed.

Non-accrual loans may be restored to accrual status when all delinquent principal and interest has been paid currently for six consecutive months or the loan is considered secured and in the process of collection.

Non-accrual loans may be restored to accrual status when all delinquent principal and interest has been paid currently for six consecutive months or the loan is considered adequately secured and in the process of collection.

The Corporation generally applies payments received on non-accruing loans to principal until such time as the principal is paid off, after which time any payments received are recognized as interest income.

5 unchanged sentences

Loans deemed to be a loss are written off through a charge against the ACL.

Closed-end consumer loans are generally charged- off when they become 120 days past due ( 180 days for open-end consumer loans) if they are not adequately secured by real

Closed-end consumer loans are generally charged- off when they become 120 days past due ( 180 days for open-end consumer loans) if they are not adequately secured by real estate.

All other loans are evaluated for possible charge-off when it is probable that the balance will not be collected, based on the ability of the borrower to pay and the value of the underlying collateral, if any.

3 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.

Troubled Debt Restructurings:

Loans are accounted for and reported as TDRs when, for economic or legal reasons, the Corporation grants a concession to a borrower experiencing financial difficulty that it would not otherwise consider.

Concessions, whether negotiated or imposed by bankruptcy, granted under a TDR typically involve a temporary deferral of scheduled loan payments, an extension of a loan's stated maturity date or a reduction in the interest rate.

Non-accrual TDRs can be restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification.

On March 27, 2020 the CARES Act was signed into law.

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

Loan Modifications:

Loans are accounted for and reported as modified when, for economic or legal reasons, the Corporation grants a concession to a borrower experiencing financial difficulty that it would not otherwise consider.

Concessions, whether negotiated or imposed by bankruptcy, granted under a loan modification typically involve a more than insignificant deferral of scheduled loan payments, an extension of a loan's stated maturity date, a reduction in the interest rate or a forgiveness of principal.

Because the effect of most modifications made to loans to borrowers experiencing financial difficulty is already included in the ACL, a change to the ACL is generally not recorded upon modification.

When principal forgiveness is provided, the amortized cost basis of the forgiven portion of the loan is written off against the ACL.

Allowance for Credit Losses:

5 unchanged sentences

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

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 or decreased (when the provision for credit losses is negative) through the provision for credit losses and increased or decreased (when recoveries of loans previously charged off exceed loans charged off) by charge-offs, net of

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

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

2 unchanged sentences

Loans Evaluated Collectively :

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.

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

• Loans are aggregated into pools based on similar risk characteristics.

• The PD and LGD rates are determined by historical credit loss experience for each pool of loans.

• The loan segment PD rates are estimated using six econometric regression models that use the Corporation's historical credit loss experience and incorporate reasonable and supportable economic forecasts for various macroeconomic variables that are statistically correlated with expected loss behavior in the loan segment.

• The reasonable and supportable forecast for each macroeconomic variable is sourced from an external third party and is applied over the contractual term of the Corporation's loan portfolio.

The Corporation's economic forecast considers the general health of the economy, the interest rate environment, real estate pricing and market risk.

• A single baseline forecast scenario is used for each macroeconomic variable.

• The loan segment lifetime LGD rates are estimated using a loss rate approach based on the Corporation's historical charge-off experience and the balance at the time of loan default.

• The LGD rates are adjusted for the Corporation's recovery experience.

• To calculate the EAD, the Corporation estimates contractual cash flows over the remaining life of each loan.

Certain cash flow assumptions are established for each loan using maturity date, amortization schedule and interest rate.

In addition, a prepayment rate is used in determining the EAD estimate.

Loans evaluated collectively for expected credit losses include accruing loans and non-accrual loans where the total commitment amount is less than $1 million.

In determining the ACL, the Corporation uses three inputs to model the estimate.

These inputs are the PD rate which estimates the likelihood that a borrower will be unable to meet its debt obligations, the LGD rate which estimates the percentage of an asset that is lost if a borrower defaults, and the EAD balance which estimates the gross exposure under a facility upon default.

The PD models were developed based on historical default data.

Both internal and external variables are evaluated in the process.

The main internal variables are risk rating or delinquency history and indicators of default.

The external variables are economic variables obtained from third-party forecasts.

The PD models are transition matrix models that utilize historical credit observations and incorporate economic forecasts to project future default rates using a linear regression methodology for each loan segment.

The LGD model uses a vintage loss approach that estimates LGD rates based on the bank’s historical loss experience for each loan segment.

The EAD incorporates a prepayment rate and applies the PD rates to estimate the projected exposure at default across the life of each loan.

The ACL is calculated by applying the LGD to the EAD at each period across the life of each loan.

The ACL incorporates the Corporation’s historical credit observations, current conditions, and reasonable and supportable forecasts that are based on the projected performance of specific economic variables that are statistically correlated with historical PD rates.

The reasonable and supportable forecast extends to 24 months and reverts back to an average PD rate using a straight-line reversion methodology over a 12 month period.

The ACL is highly sensitive to the economic forecasts used to develop the reserve.

As such, the calculation of the ACL is inherently subjective and requires management to exercise judgment.

The ACL may include qualitative adjustments intended to capture the impact of uncertainties not reflected in the quantitative models.

In determining qualitative adjustments, management considers changes in national, regional, and local economic and business conditions and their impact on the lending environment, including underwriting standards and other factors affecting credit losses over the remaining life of each loan.

Loans Evaluated Individually :

20 unchanged sentences

When updated appraisals are not obtained for loans secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated an acceptable loan-to-value position and there has not been a significant deterioration in the collateral value since the original appraisal was performed.

For loans with principal balances greater than or equal to $1.0 million secured by non-real estate collateral, such as accounts receivable or inventory, estimated fair values are determined based on borrower financial statements, inventory listings, accounts receivable agings or borrowing base certificates.

Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

14 unchanged sentences

There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt.

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

The Corporation considers risk factors such as:

3 unchanged sentences

and the composition of the portfolio by loan type.

Qualitative and Other Adjustments to ACL:

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

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

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

Qualitative adjustments are evaluated and approved on a quarterly basis.

Additionally, the ACL includes other allowance categories that are not directly incorporated in the quantitative results.

These categories include but are not limited to loans-in-process, trade acceptances and overdrafts.

OBS Credit Exposures:

17 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.

1 unchanged sentence

Derivative Financial Instruments:

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

The Corporation manages its exposure to certain interest rate risk through the use of derivatives.

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

5 unchanged sentences

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

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

For derivatives designated as cash flow hedges where hedge accounting is applied, changes in fair value are recognized in OCI, net of tax.

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

2 unchanged sentences

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

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

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

Mortgage Banking Derivatives

8 unchanged sentences

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 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's existing OBS credit exposures 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.

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

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

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

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are made on the Corporation's variable-rate loans.

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

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative is recorded in OCI, net of tax, and subsequently reclassified into interest income or interest expense in the same period during which the hedged transaction affects earnings.

Amounts reported in OCI related to derivatives will be reclassified to interest income or interest expense as interest payments are made on the Corporation's variable-rate loans and borrowings.

Foreign Exchange Contracts

3 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, 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 $ 0.5 million.

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

7 unchanged sentences

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.

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

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.

17 unchanged sentences

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

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

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

The Corporation also grants equity awards to non-employee members of its Board of Directors and Fulton Bank's Board of Directors under the Directors' Plan.

Under the Directors' Plan, the Corporation can grant equity awards to non-employee

holding company and subsidiary bank directors in the form of stock options, restricted stock, RSUs or common stock.

Recent grants of equity awards under the Directors' Plan have been limited to RSUs.

1 unchanged sentence

The vesting period for non-performance-based awards represents the period during which employees are required to provide service in exchange for such awards.

Equity awards under the Directors' Plan are generally granted annually and become fully vested after a one-year vesting period.

Equity awards under the Directors' Plan are generally granted annually and fully vest after a one-year vesting period.

Certain events, as defined in the Employee Equity Plan and the Directors' Plan, result in the acceleration of the vesting of equity awards.

1 unchanged sentence

The fair value of stock options, restricted stock and RSUs granted to employees or directors is recognized as compensation expense over the vesting period for such awards.

Compensation expense for PSUs is also recognized over the vesting period, however, compensation expense for PSUs may vary based on the expectations for actual performance relative to defined performance measures.

Compensation expense for PSUs is also recognized over the vesting period and service period, however, compensation expense for PSUs may vary based on the expectations for actual performance relative to defined performance measures.

The fair value of restricted stock, RSUs and a majority of PSUs are based on the trading price of the Corporation's stock on the date of grant.

26 unchanged sentences

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.

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.

Tax credits earned are subject to recapture by federal taxing authorities based upon compliance requirements to be met at the project level.

Because the Corporation owns 100% of the equity interests in its NMTC, these investments were consolidated based on ASC Topic 810 as of December 31, 2022 and 2021.

Because the Corporation owns 100% of the equity interests in its NMTC investments, these investments were consolidated based on ASC Topic 810 as of December 31, 2023 and 2022.

Investments in affordable housing projects were not consolidated based on management's assessment of the provisions of ASC Topic 810.

26 unchanged sentences

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, ATM fees, debit and credit card income and merchant services fees.

Consists of cash management, overdraft 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.

9 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 CPI or rate at the commencement date and are included in the measurement of the lease liability.

Certain real estate leases have lease payments that adjust based on annual changes in the CPI or at a stated contractual rate.

The leases that are dependent upon the CPI or stated contractual rate are initially measured using the CPI or contractual 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.

17 unchanged sentences

Acquisition costs are expensed as incurred.

Other Recently Adopted Accounting Standards

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

Recently Adopted Accounting Standards

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

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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.

The Corporation adopted ASU 2022-01 on January 1, 2023, and it did not have a material impact on its consolidated financial statements.

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

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.

The Corporation adopted ASU 2022-02 on January 1, 2023, and it did not have a material impact on its consolidated financial statements.

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

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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 adopted ASU 2022-04 on January 1, 2023, and it did not 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 Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") to December 31, 2024 .

The Corporation adopted ASU 2020-04 on June 30, 2023 and it did not have a material impact on its consolidated financial statements.

In March 2023, FASB issued ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ("ASU 2023-02") .

This update allows any tax credit program that meets certain criteria to use the proportional amortization method.

The Corporation early adopted ASU 2023-02 using the modified retrospective method effective upon issuance, and it did not have a material impact on its consolidated financial statements.

In July 2023, FASB issued ASU 2023-03 Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718):

Amendments to SEC Paragraphs Pursuant to SEC SAB No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and SAB Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock ("ASU 2023-03") .

This update amends certain SEC paragraphs from the Codification in response to (1) the issuance of SEC SAB 120;

(2) the SEC staff announcement at the March 24, 2022, EITF meeting;

and (3) SAB Topic 6.B, "Accounting Series Release No.

280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock." ASU 2023-03 does not provide any new guidance so there is no transition or effective date associated with it.

In August 2023, FASB issued ASU 2023-04 Liabilities (Topic 405):

Amendments to SEC Paragraphs Pursuant to SEC SAB No.

121 ("ASU 2023-04") .

This update adjusts language in FASB ASC 405-10 to align with SEC SAB No.

121 relating to accounting for obligations to safeguard crypto-assets an entity holds for its platform users.

ASU 2023-24 does not provide any new guidance so there is no transition or effective date associated with it.

The Corporation currently does not have obligations to safeguard crypto-assets.

In October 2023, FASB issued ASU 2023-06 Disclosure Improvements ("ASU 2023-06").

This update adjusts language in FASB disclosure guidance to align with certain SEC disclosure requirements.

The Corporation adopted ASU 2023-06 upon issuance, and it did not have an impact on its consolidated financial statements.

Recently Issued Accounting Standards

In March 2023, FASB issued ASU 2023-01 Leases (Topic 842):

Common Control Arrangements ("ASU 2023-01") .

This update clarifies guidance for leases between related parties under common control .

The Corporation will adopt ASU 2023-01 on January 1, 2024.

The Corporation does not expect the adoption of ASU 2023-01 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.

In November 2023, FASB issued ASU 2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("ASU 2023-04") .

This update requires public entities with reportable segments to provide additional and more detailed disclosures.

The Corporation will adopt ASU 2023-07 on December 15, 2024.

The Corporation is not currently required to report segment information and, as such, does not expect the adoption of ASU 2023-07 to have an impact on its consolidated financial statements.

In December 2023, FASB issued ASU 2023-08 Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets ("ASU 2023-08") .

This update provides guidance for crypto assets to be carried at fair value and requires additional disclosures.

The Corporation will adopt ASU 2023-08 on January 1, 2025.

The Corporation does not expect the adoption of ASU 2023-08 to have an impact on its consolidated financial statements.

The Corporation currently does not hold crypto assets.

In December 2023, FASB issued ASU 2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ("ASU 2023-09") .

This update requires companies to disclose specific categories in the income tax rate reconciliation and requires additional information for certain reconciling items.

The Corporation will adopt ASU 2023-09 on January 1, 2025.

The Corporation does not expect the adoption of ASU 2023-09 to have an impact on its consolidated financial statements.

Reclassifications

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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.

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

In accordance with the terms of the definitive 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%) paid in cash.

The $ 19.1 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)

(dollars in thousands, except share data)

Consideration transferred:

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Investment securities 287,126

Loans, net 554,288

Loans 554,091

Premises and equipment 8,574

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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.

Goodwill resulting from the Merger $ 19,081

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

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

Included in the above table are adjustments of $2.8 million that occurred during the year ended December 31, 2023 resulting in a change to goodwill resulting from the Merger.

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 from the Merger 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

Adjustments to goodwill from the Merger 2,807

Goodwill at December 31, 2023 $ 553,346

NOTE 3 - RESTRICTIONS ON CASH AND CASH EQUIVALENTS

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.

Cash collateral is posted by the Corporation with counterparties to secure derivatives and other contracts, which is included in "interest-bearing deposits with other banks" on the consolidated balance sheets.

The amounts of such collateral as of December 31, 2023 and 2022 were $ 17.4 million and $ 13.9 million, respectively.

NOTE 4 - INVESTMENT SECURITIES

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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

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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

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Total $ 1,321,256 $ — $ ( 196,207 ) $ 1,125,049

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.

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 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments .

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.

Securities carried at $ 0.4 billion and $ 1.1 billion at December 31, 2023 and 2022, respectively, were pledged as collateral to secure public and trust deposits.

The amortized cost and estimated fair values of debt securities as of December 31, 2023, by contractual maturity, are shown in the following table.

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without call or prepayment penalties.

Available for Sale Held to Maturity

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

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

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

Gross Realized Gains Gross Realized Losses Net Gains (Losses)

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2021 35,593 ( 2,077 ) 33,516

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.

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

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

Less than 12 months 12 Months or Longer Total

Number of Securities Estimated

Fair Value Unrealized

Losses Number of Securities Estimated

Losses Estimated

Fair Value Unrealized

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Collateralized mortgage obligations — — 111,434 ( 11,390 ) 111,434 ( 11,390 )

96 113,191 ( 7,650 ) 1 20,842 ( 5,472 ) 134,033 ( 13,122 )

Residential mortgage-backed securities 409 ( 3 ) 195,453 ( 26,482 ) 195,862 ( 26,485 )

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Commercial mortgage-backed securities — — 716,937 ( 143,910 ) 716,937 ( 143,910 )

Total 127 $ 504,922 $ ( 38,304 ) 53 $ 620,127 $ ( 157,903 ) $ 1,125,049 $ ( 196,207 )

Total held to maturity $ — $ — $ 1,072,207 $ ( 195,715 ) $ 1,072,207 $ ( 195,715 )

There were 727 AFS and 180 HTM positions at unrealized loss at December 31, 2023.

Less than 12 months 12 Months or Longer Total

Number of Securities Estimated

Fair Value Unrealized

Losses Number of Securities Estimated

Losses Estimated

Fair Value Unrealized

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Fair Value Unrealized

2022 (dollars in thousands)

Available for Sale

U.S Government Securities 2 $ 127,618 $ ( 213 ) — $ — $ — $ 127,618 $ ( 213 )

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

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

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

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

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

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

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Commercial mortgage-backed securities 258,255 ( 24,029 ) 466,949 ( 114,698 ) 725,204 ( 138,727 )

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.

Total held to maturity $ 504,922 $ ( 38,304 ) $ 620,127 $ ( 157,903 ) $ 1,125,049 $ ( 196,207 )

There were 782 AFS and 180 HTM positions at unrealized loss at December 31, 2022.

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

The change in fair value of these securities is attributable to changes in interest rates and not credit quality.

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

In addition, these securities have principal payments that are guaranteed by U.S.

government-sponsored agencies.

Therefore, the Corporation does not have an ACL for these investments as of December 31, 2023 and 2022.

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

As of December 31, 2023 and 2022, no ACL was required for the Corporation's state and municipal securities.

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

The majority of the corporate debt securities were rated at or above investment grade as of December 31, 2023 and 2022, respectively.

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, 2023 and 2022.

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Consumer 729,318 699,179

Equipment lease financing and other 324,928 283,557

Overdrafts 3,403 1,988

Gross loans 20,308,924 18,342,386

Unearned income ( 29,377 ) ( 17,036 )

Leases and other loans (2)

336,314 303,487

Net loans $ 21,351,094 $ 20,279,547

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

(1) Includes unearned income of $ 41.0 thousand and $ 4.5 million at December 31, 2023 and December 31, 2022, respectively.

(2) Includes unearned income of $ 38.0 million and $ 24.8 million at December 31, 2023 and December 31, 2022, respectively.

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

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Allowance for Credit Losses

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, 2023 and 2022:

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CECL Day 1 Provision expense — 7,954 —

Purchased credit deteriorated loans 1,135 — —

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

Initial purchased credit deteriorated loans — 1,135 —

Loans charged off ( 39,201 ) ( 21,472 ) ( 30,952 )

2 unchanged sentences

Provision for credit losses 53,110 18,656 ( 14,760 )

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

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:

Balance at end of period $ 293,404 $ 269,366 $ 249,001

The following table presents the activity in the ACL - loans losses by portfolio segment for the years ended December 31, 2023 and 2022, by portfolio segment:

Real Estate -

2 unchanged sentences

Mortgage Real Estate -

Construction Equipment Finance Leasing and Other Total

Construction Leases and other loans Total

(dollars in thousands)

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 )

4 unchanged sentences

Balance at December 31, 2022 69,456 70,116 26,429 83,250 10,743 9,372 269,366

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 ( 17,999 ) ( 9,246 ) ( 7,514 ) ( 62 ) — ( 4,380 ) ( 39,201 )

5 unchanged sentences

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

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.

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

The ACL may include qualitative adjustments intended to capture the impact of uncertainties not reflected in the quantitative models.

The increase in ACL - loans in 2023 was largely due to loan growth, changes to the macroeconomic outlook, net charge-offs and risk migration.

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

In 2023, the Corporation made updates to its PD and LGD models and methodology to enhance base quantitative ACL models.

The Corporation updated the PD models to utilize a linear regression methodology and implemented a discreet 24 month reasonable and supportable forecast period with a 12 month straight-line reversion methodology.

The ACL model enhancements did not have a material effect on the ACL as the model updates reduced reliance on supplementary models and qualitative factors and increased reliance on the output of the Corporation’s base quantitative models.

Collateral-Dependent Loans

A loan or a lease is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral.

For all classes of loans and leases deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell.

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

Substantially all of the collateral supporting collateral-dependent loans or leases consists of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agricultural land, and vacant land.

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

As of December 31, 2023 and 2022, substantially all of the Corporation's individually evaluated loans with total commitments greater than or equal to $ 1.0 million were measured based on the estimated fair value of each loan's collateral, if any.

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

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

Commercial and industrial loans may also be secured by real estate.

As of December 31, 2022 and 2021, approximately 91 % and 98 %, respectively, of loans evaluated individually for impairment with principal balances greater than or equal to $ 1.0 million, whose primary collateral is real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months.

As of December 31, 2023 and 2022, approximately 78 % and 91 %, respectively, of loans evaluated individually for impairment with principal balances greater than or equal to $ 1.0 million, whose primary collateral consisted of real estate, were measured at estimated fair value using appraisals performed by certified third-party appraisers that had been updated in the preceding 12 months.

Non-accrual Loans

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

7 unchanged sentences

Consumer 52 — 52 92 — 92

Equipment lease financing and other 4,052 9,255 13,307 6,247 9,393 15,640

Leases and other loans 9,255 638 9,893 4,052 9,255 13,307

Total $ 68,851 $ 52,769 $ 121,620 $ 90,826 $ 53,617 $ 144,443

As of December 31, 2022, there were $ 53.6 million of non-accrual loans that did not have a related allowance for credit losses.

As of December 31, 2023 and December 31, 2022, there were $ 52.8 million and $53.6 million, respectively, of non-accrual loans that did not have a specific valuation allowance within the ACL.

The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to realizable collateral values.

3 unchanged sentences

Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner.

For commercial construction, residential construction, commercial and industrial, and commercial real estate, an internal risk rating process is used.

For construction, commercial and industrial, and commercial real estate, an internal risk rating process is used.

The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans.

The migration of loans through the various internal risk categories is a significant component of the ACL methodology for these loans, under both the CECL and incurred loss models, which bases the probability of default on this migration.

The migration of loans through the various internal risk categories is a significant component of the ACL methodology for these loans, which bases the probability of default on this migration.

Assigning risk ratings involves judgment.

The Corporation's loan review officers provide a separate assessment of risk rating accuracy.

Risk ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff, or if specific loan review assessments identify a deterioration or an improvement in the loans.

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

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

December 31, 2023

(dollars in thousands)

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

(dollars in thousands) Amortized Amortized

Amortized Amortized

2023 2022 2021 2020 2019 Prior Cost Basis Cost Basis Total

6 unchanged sentences

Current period gross charge-offs — — — — — ( 424 ) — ( 17,575 ) ( 17,999 )

Current period recoveries — — — — — 4 — 3,856 3,860

Total net (charge-offs) recoveries — — — — — ( 49 ) — ( 8,564 ) ( 8,613 )

Commercial and industrial

5 unchanged sentences

Current period gross charge-offs — ( 299 ) — — — ( 249 ) ( 682 ) ( 8,016 ) ( 9,246 )

Current period recoveries — — 30 95 379 1,740 811 2,838 5,893

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

Real estate - construction (1)

5 unchanged sentences

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

Current period recoveries — — — — — 527 — 47 574

Total net (charge-offs) recoveries — — — — — 527 — 47 574

Pass $ 1,732,981 $ 1,841,229 $ 1,796,011 $ 1,363,602 $ 1,003,493 $ 3,455,090 $ 1,516,133 $ 42,372 $ 12,750,911

3 unchanged sentences

(1) Excludes real estate - construction - other.

(2) Loans originated in 2022 include $ 20.4 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government guaranty through the SBA.

Total loans risk- rated substandard or lower increased by $157.9 million, or 54.4%, compared to December 31, 2022, primarily due to borrower performance in both commercial and industrial loans and commercial real estate loans.

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

December 31, 2022

(dollars in thousands)

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

(dollars in thousands) Amortized Amortized

Amortized Amortized

2022 2021 2020 2019 2018 Prior Cost Basis Cost Basis Total

6 unchanged sentences

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

Current period recoveries — — — — 983 1,491 — — 2,474

Total net (charge-offs) recoveries — — ( 14 ) ( 25 ) ( 5,989 ) ( 26 ) ( 198 ) — ( 6,252 )

Commercial and industrial

5 unchanged sentences

Current period gross charge-offs — — ( 36 ) — ( 21 ) ( 365 ) ( 1,192 ) ( 776 ) ( 2,390 )

Current period recoveries 6 39 4,691 841 457 2,342 1,211 — 9,587

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

Real estate - construction (1)

5 unchanged sentences

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

Current period recoveries — — 39 — — 1,373 — — 1,412

Total net (charge-offs) recoveries — — — — — 1,373 — — 1,373

Pass $ 2,081,160 $ 1,935,863 $ 1,610,405 $ 1,154,994 $ 831,206 $ 3,308,374 $ 1,515,897 $ 925 $ 12,438,824

3 unchanged sentences

(1) Excludes real estate - construction - other.

(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.

The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and equipment lease financing.

For these loans, the most relevant credit quality indicator is delinquency status, and the Corporation evaluates credit quality based on the aging status of the loan.

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

The following tables present the amortized cost of these loans based on payment activity, by origination year, for the periods shown:

December 31, 2023

(dollars in thousands)

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

(dollars in thousands) Amortized Amortized

Amortized Amortized

2023 2022 2021 2020 2019 Prior Cost Basis Cost Basis Total

1 unchanged sentence

Performing $ 623,247 $ 1,126,656 $ 1,682,759 $ 984,050 $ 260,049 $ 607,133 $ — $ — $ 5,283,894

Non-performing 1,199 5,104 6,597 6,466 4,587 22,556 — — 46,509

Nonperforming — 1,720 4,888 4,701 6,233 24,487 — — 42,029

Total real estate - residential mortgage 623,247 1,128,376 1,687,647 988,751 266,282 631,620 — — 5,325,923

1 unchanged sentence

Current period gross charge-offs — — — — — — — ( 62 ) ( 62 )

Current period recoveries — — 4 — 27 261 — 133 425

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

Consumer and real estate - home equity

Performing 272,571 276,373 85,985 62,426 37,667 204,913 805,645 20,044 1,765,624

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

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

Nonperforming 295 455 866 282 354 5,526 1,439 1,661 10,878

Total consumer and real estate - home equity 272,866 276,828 86,851 62,708 38,021 210,439 807,084 21,705 1,776,502

Consumer and real estate - home equity

Current period gross charge-offs ( 119 ) — — — — ( 525 ) ( 283 ) ( 6,587 ) ( 7,514 )

Current period recoveries — 44 88 29 16 595 294 1,515 2,581

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

Leases and other loans

Performing 166,490 83,641 27,755 22,304 16,246 9,867 — — 326,303

Nonperforming — 118 — — — 9,893 — — 10,011

Total leases and other loans 166,490 83,759 27,755 22,304 16,246 19,760 — — 336,314

Leases and other loans

Current period gross charge-offs ( 471 ) ( 521 ) ( 246 ) ( 128 ) ( 82 ) ( 656 ) ( 765 ) ( 1,511 ) ( 4,380 )

Construction - other

Performing 127,382 93,319 13,698 555 — — — — 234,954

Non-performing — — — — — — — — —

Nonperforming — 1,535 — — — — — — 1,535

Total construction - other 127,382 94,854 13,698 555 — — — — 236,489

1 unchanged sentence

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

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

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

Equipment lease financing and other

Performing $ 1,189,690 $ 1,579,989 $ 1,810,197 $ 1,069,335 $ 313,962 $ 821,913 $ 805,645 $ 20,044 $ 7,610,775

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

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 )

Current period recoveries 63 18 82 25 10 268 — 293 759

Total net (charge-offs) recoveries ( 443 ) ( 149 ) ( 58 ) ( 55 ) ( 37 ) ( 923 ) — 293 ( 1,372 )

Performing $ 1,661,656 $ 1,931,346 $ 1,185,464 $ 367,860 $ 149,193 $ 847,213 $ 842,226 $ 34,061 $ 7,019,019

Non-performing 1,491 5,402 6,771 6,502 4,685 42,375 1,722 668 69,616

Nonperforming 295 3,828 5,754 4,983 6,587 39,906 1,439 1,661 64,453

Total $ 1,189,985 $ 1,583,817 $ 1,815,951 $ 1,074,318 $ 320,549 $ 861,819 $ 807,084 $ 21,705 $ 7,675,228

December 31, 2022

(dollars in thousands)

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

(dollars in thousands) Amortized Amortized

Amortized Amortized

2022 2021 2020 2019 2018 Prior Cost Basis Cost Basis Total

1 unchanged sentence

Performing $ 933,903 $ 1,708,703 $ 1,054,126 $ 286,167 $ 87,455 $ 620,416 $ — $ — $ 4,690,770

Non-performing — 6,753 2,189 3,424 2,844 24,332 — — 39,542

Nonperforming 1,199 5,104 6,597 6,466 4,587 22,556 — — 46,509

Total real estate - residential mortgage 935,102 1,713,807 1,060,723 292,633 92,042 642,972 — — 4,737,279

1 unchanged sentence

Current period gross charge-offs — — — — — — — ( 66 ) ( 66 )

Current period recoveries — — 1 18 — 264 92 — 375

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

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

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

Nonperforming 292 298 174 36 98 6,512 1,722 668 9,800

Total consumer and 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 loans

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

Current period recoveries — 223 131 131 167 1,048 645 — 2,345

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

Leases and other loans

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

Nonperforming — — — — — 13,307 — — 13,307

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

Leases and other loans

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

Construction - other

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

Non-performing — — — — 173 — — — 173

Nonperforming — — — — — — — — —

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

1 unchanged sentence

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

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

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

Equipment lease financing and other

Performing $ 1,661,656 $ 1,931,346 $ 1,185,464 $ 367,860 $ 149,193 $ 847,213 $ 842,226 $ 34,061 $ 7,019,019

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

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 )

Current period recoveries 255 539 88 10 18 43 — — 953

Total net (charge-offs) recoveries ( 720 ) ( 737 ) 88 10 18 43 — — ( 1,298 )

Performing $ 1,952,344 $ 1,341,876 $ 468,623 $ 221,500 $ 253,862 $ 605,623 $ 990,842 $ 3,999 $ 5,838,669

Non-performing 122 6,854 2,249 3,475 18,834 26,818 8,512 198 67,062

Nonperforming 1,491 5,402 6,771 6,502 4,685 42,375 1,722 668 69,616

Total $ 1,663,147 $ 1,936,748 $ 1,192,235 $ 374,362 $ 153,878 $ 889,588 $ 843,948 $ 34,729 $ 7,088,635

6 unchanged sentences

Total non-performing assets $ 154,237 $ 177,696

(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.

(1) Excludes $ 10.9 million and $ 6.0 million of residential mortgage properties for which formal foreclosure proceeding were in process as of December 31, 2023 and 2022, respectively.

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

11 unchanged sentences

Consumer 8,361 1,767 747 52 718,391 729,318

Equipment lease financing and other 348 122 — 13,307 285,177 298,954

Leases and other loans (1)

146 722 118 9,893 325,435 336,314

Total $ 80,007 $ 18,850 $ 31,721 $ 121,620 $ 21,098,896 $ 21,351,094

(1) 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.

(1) Includes unearned income.

30-59 Days Past

6 unchanged sentences

Commercial and industrial (1)

6,067 2,289 1,172 27,116 4,436,360 4,473,004

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

2 unchanged sentences

Consumer 6,692 1,339 899 92 690,157 699,179

Equipment lease financing and other 226 27 — 15,640 252,616 268,509

Leases and other loans (1)

348 122 — 13,307 289,710 303,487

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

Collateral-Dependent Loans

A financial asset is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral.

For all classes of financial assets deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral's fair value less cost to sell.

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

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

of various types of real estate including:

residential properties;

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

agriculture land;

and vacant land.

Troubled Debt Restructurings

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

(1 ) Includes unearned income.

Loan Modifications to Borrowers Experiencing Financial Difficulty

On January 1, 2023, the Corporation adopted ASU 2022-02.

Loan modifications reported below do not include modifications with insignificant payment delays.

ASU 2022-02 lists the following factors when considering if the loan modification has insignificant payment delays:

(1) the amount of the restructured payments subject to the delay is insignificant relative to the unpaid principal or collateral value of the debt and will result in an insignificant shortfall in the contractual amount due, and (2)

the delay in timing of the restructured payment period is insignificant relative to the frequency of payments due under the debt, the debt’s original contractual maturity or the debt’s original expected duration.

The Corporation modifies loans by providing a concession when deemed appropriate.

Depending on the circumstances, a term extension, interest rate reduction or principal forgiveness may be granted.

In certain instances a combination of concessions may be provided to a customer.

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

The following table presents the amortized cost basis for the year ended December 31, 2023 of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

Term Extension

Amortized Cost Basis % of Class of Financing Receivable

(dollars in thousands)

2 unchanged sentences

Real estate - residential mortgage 8,182 0.15

Real estate - home equity 10,717 12,218

Total accruing TDRs 29,585 29,492

Non-accrual TDRs (1)

31,853 55,945

Total TDRs $ 61,438 $ 85,437

(1) Included within non-accrual loans in the preceding table .

The following table presents TDRs, by class segment, for loans that were modified during the years ended December 31:

2022 2021 2020

Number of Loans Post-Modification Recorded Investment Number of Loans Post-Modification Recorded Investment Number of Loans Post-Modification Recorded Investment

Total $ 23,096

Interest Rate Reduction and Term Extension

Amortized Cost Basis % of Class of Financing Receivable

(dollars in thousands)

Real estate - residential mortgage $ 910 0.02 %

The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty for the year ended December 31, 2023.

Term Extension

Financial Effect

Real estate - commercial mortgage Added a weighted-average 1.22 years to the life of loans, which reduced monthly payment amounts for the borrowers.

Commercial and industrial Added a weighted-average 0.92 years to the life of loans, which reduced monthly payment amounts for the borrowers.

Real estate - residential mortgage Added a weighted-average 8.10 years to the life of loans, which reduced monthly payment amounts for the borrowers.

Interest Rate Reduction

Financial Effect

Real estate - residential mortgage Reduced weighted-average interest rate from 3.76 % to 2.30 %

During the year ended December 31, 2023, there were no loans modified due to financial difficulty where there was a principal balance forgiveness.

During the year ended December 31, 2023, there were no loans modified due to financial difficulty during 2023 that defaulted subsequent to modification.

The following table presents the performance of loans that have been modified in the year ended December 31, 2023.

30-89 90+ Total

Days Past Past Due Past

Current Due and Accruing Due

(dollars in thousands)

Real estate - commercial mortgage $ 2,944 $ — $ — $ —

1 unchanged sentence

Real estate - residential mortgage 9,092 — — —

Real estate - home equity 5 329 30 1,226 48 4,359

Real estate - construction — — 1 154 — —

Consumer 13 792 — — 14 345

Total $ 24,006 $ — $ — $ —

Restructured loan modifications may include payment schedule modifications, interest rate concessions, bankruptcies, principal reduction or some combination of these concessions.

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 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.

There were no commitments to lend additional funds to borrowers with loan modifications as a result of financial difficulty as of December 31, 2023.

NOTE 6 - PREMISES AND EQUIPMENT

10 unchanged sentences

Goodwill totaled $ 553.3 million and $ 550.5 million as of December 31, 2023 and 2022, respectively.

The increase was the result of the Prudential Bancorp acquisition.

The increase was the result of adjustments related to the Merger.

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

3 unchanged sentences

(dollars in thousands)

Intangible assets

Amortizing intangible assets $ 13,596 $ 13,596

1 unchanged sentence

Net intangibles $ 7,341 $ 10,285

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.

Net intangibles included CDI of $ 4.9 million and $ 7.2 million as of December 31, 2023 and 2022, respectively.

The CDI was recorded as part of the Merger and is being amortized over 7 years using the sum-of-the-years digits method.

NOTE 8 - MORTGAGE SERVICING RIGHTS

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

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

2023 2022 2021

11 unchanged sentences

Estimated fair value of MSRs at end of period $ 49,696 $ 50,044 $ 35,393

MSRs represent the economic value of existing contractual rights to service mortgage loans that have been sold.

MSRs represent the economic value of contractual rights to service mortgage loans that have been sold.

The total portfolio of mortgage loans serviced by the Corporation for unrelated third parties was $ 4.1 billion and $ 4.2 billion as of December 31, 2023 and 2022, respectively.

Actual and expected prepayments of the underlying mortgage loans can impact the value of MSRs.

Actual and expected prepayments of the underlying mortgage loans can impact the fair value of MSRs.

The Corporation accounts for MSRs at the lower of amortized cost or fair value.

2 unchanged sentences

The fair values of MSRs were $ 49.7 million and $ 50.0 million as of December 31, 2023 and 2022, 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.

Based on its fair value analysis as of December 31, 2023 and 2022, the Corporation determined that no valuation allowance was required for the years ended December 31, 2023 and 2022.

The valuation allowance was $ 0.6 million at December 31, 2021.

Total servicing income, included in mortgage banking income in the consolidated statements of income, was $ 10.2 million, $ 10.6 million and $ 11.2 million as of December 31, 2023, 2022 and 2021, respectively.

Total MSR amortization expense, recognized as a reduction to mortgage banking income in the consolidated statements of income, was $ 5.1 million, $ 5.8 million and $ 12.0 million in 2023, 2022 and 2021, respectively.

15 unchanged sentences

Thereafter 48,369

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.

Total $ 2,739,241

Included in time deposits were certificates of deposit equal to or greater than $100,000 of $ 1.5 billion and $ 691.4 million as of December 31, 2023 and 2022, respectively.

Time deposits equal or greater than $250,000 were $ 551.2 million and $ 214.8 million as of December 31, 2023 and 2022, respectively.

NOTE 10 - BORROWINGS

6 unchanged sentences

Other borrowings:

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

Short-term promissory notes issued to customers and customer repurchase agreements 611,304 574,394 646,439 574,394

Other repurchase agreements — 315,000 — 315,000

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

Other borrowings 838 1,179 1,151 —

Total other borrowings $ 612,142 $ 890,573

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.

As of December 31, 2023, the Corporation had aggregate federal funds lines borrowing capacity of $ 2.6 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.

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

The Corporation had $ 1.3 billion of collateralized borrowing availability at the FRB discount window with no amount outstanding as of December 31, 2023.

The Corporation had $1.9 billion of borrowing capacity at the Bank Term Funding Program facility with no amount outstanding as of December 31, 2023.

As of December 31, 2023, the Corporation had total borrowing capacity of $ 8.2 billion with remaining borrowing capacity of approximately $ 4.9 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.

2 unchanged sentences

Subordinated debt $ 538,778 $ 543,601

Junior subordinated deferrable interest debentures — 16,496

Unamortized discounts and issuance costs ( 3,394 ) ( 3,967 )

Total senior debt and subordinated debt $ 535,384 $ 539,634

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

The following table summarizes the scheduled maturities of senior and subordinated debt with an original maturity of one year or more as of December 31, 2023 (dollars in thousands):

2024 $ 168,778

Thereafter 370,000

Unamortized discounts and issuance costs ( 3,394 )

Total $ 535,384

In December 2023, the Corporation retired $ 5.0 million of subordinated debt with a fixed-to-floating rate of 3.25 % and effective rate of 3.35 % maturing in 2030.

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.

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.

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

4 unchanged sentences

Interest is paid semi-annually in May and November.

NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS

The following table presents the notional amounts and fair values of derivative financial instruments as of December 31:

The following table presents a summary of notional amounts and fair values of derivative financial instruments as of December 31:

Fair Value Notional

21 unchanged sentences

Negative fair values 6,112 ( 31 ) 8,280 ( 499 )

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:

(1) Fair values are net of a valuation allowance of $366.3 thousand as of December 31, 2023 and 2022.

In the third quarter of 2023, the Corporation recorded a $3.0 million reduction to other non-interest income to reflect market valuation movement in certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions resulting from the transition from LIBOR to SOFR.

For the year ended December 31, 2023, the full-year reduction to other non-interest income related to the transition from LIBOR to SOFR was $1.9 million.

The following table presents the effect of cash flow hedge accounting on AOCI for the year ended December 31, 2023 and 2022:

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:

(dollars in thousands)

Year ended December 31, 2023

Interest Rate Products $ 19,598 $ 19,598 $ — Interest Income $ ( 27,546 ) $ ( 27,546 ) $ —

Interest Rate Products ( 10,550 ) ( 10,550 ) — Interest Expense 1,696 1,696 —

Total $ 9,048 $ 9,048 $ — $ ( 25,850 ) $ ( 25,850 ) $ —

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 income statement for the years ended December 31:

Total $ ( 81,400 ) $ ( 81,400 ) $ — $ ( 7,761 ) $ ( 7,761 ) $ —

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

Consolidated Statements of Income Classification

Interest Income Interest Expense Interest Income Interest Expense

(in thousands)

(dollars 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 $ ( 27,546 ) $ 1,696 $ ( 7,761 ) $ —

The effects of fair value and cash flow hedging:

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

Interest contracts:

9 unchanged sentences

Mortgage banking $ ( 380 ) $ ( 2,360 ) $ ( 3,392 )

Interest rate derivatives Other expense — 1,050 70

Interest rate derivatives Other income ( 1,855 ) — 1,050

Foreign exchange contracts Other income 7 81 ( 36 )

9 unchanged sentences

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

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

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.

Gains related to changes in fair values of mortgage loans held for sale were $ 0.3 million for the year ended December 31, 2023.

Losses related to changes in fair values of mortgage loans held for sale were $ 0.6 million for the year ended December 31, 2022, and losses related to changes in fair values of mortgage loans held for sale were $ 2.5 million for the year ended December 31, 2021.

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

1 unchanged sentence

The fair values of interest rate 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.

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

The Corporation has elected to net its financial assets and liabilities designated as interest rate derivatives when offsetting is permitted.

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

Gross Amounts Gross Amounts Not Offset

4 unchanged sentences

Collateral (2)

(in thousands)

(dollars in thousands)

Interest rate derivative assets $ 157,080 $ ( 15,154 ) $ — $ 141,926

12 unchanged sentences

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.

(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.

1 unchanged sentence

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.

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

During 2023, $ 22.1 million of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the consolidated statements of income.

NOTE 12 - REGULATORY MATTERS

5 unchanged sentences

Basel III Rules

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

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

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

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

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

The Basel III Rules provide a comprehensive framework and require the Corporation and the Bank to:

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

3 unchanged sentences

Certain non-qualifying capital instruments, including cumulative preferred stock and TruPS, are excluded as a component of Tier 1 capital for institutions of the Corporation's size.

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

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

2 unchanged sentences

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

As of December 31, 2022 and 2021, the Corporation's capital levels met the fully phased-in minimum capital requirements, including the new capital conservation buffers, as prescribed in the Basel III Rules.

As of December 31, 2023 and 2022, the Corporation's capital levels met the minimum capital requirements, including the capital conservation buffers, as prescribed in the Basel III Rules.

As of December 31, 2023 and 2022, the Bank was well capitalized under the regulatory framework for prompt corrective action based on its capital ratio calculation.

40 unchanged sentences

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

The total amount available for payment of dividends by the Bank to the Parent Company was approximately $ 151.6 million as of December 31, 2022, based on the Bank maintaining enough capital to be considered well capitalized under the Basel III Rules.

The total amount available for payment of dividends by the Bank to the Parent Company calculated using the three-year earnings test was approximately $ 131.8 million as of December 31, 2023, based on the Bank maintaining enough capital to be considered well capitalized under the Basel III Rules.

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

22 unchanged sentences

FDIC Premium 0.5 0.3 0.3

Penalties — — 0.2

Other, net 0.4 0.7 0.1

7 unchanged sentences

Lease liability 21,570 21,264

Tax credit investments 11,186 11,203

Other accrued expenses 11,082 10,059

Deferred compensation 10,215 9,014

Tax credit carryforwards 5,146 27,192

Intangible assets 7,460 3,023

Stock-based compensation 5,129 4,681

Tax credit carryforwards 4,995 5,146

Other 5,469 5,223

4 unchanged sentences

MSRs 7,158 7,750

Premises and equipment 5,775 9,151

Acquisition premiums/discounts 5,508 5,492

Postretirement and defined benefit plans 3,438 1,755

Unrealized holding gains on AFS securities — 10,432

Intangible assets — 1,272

Other 14,507 13,492

Tax credit investments 1,747 3,393

Premises and equipment 1,678 5,775

Total gross deferred tax liabilities $ 86,896 $ 70,017

9 unchanged sentences

As of December 31, 2023, the Corporation had tax credit carryforwards related to TCIs of approximately $ 5 million.

The Corporation recorded a DTA of $ 5.1 million, reflecting the benefit of these tax credit carryforwards.

Such DTA will begin to expire in 2042 if not yet utilized.

The Corporation recorded a DTA of $ 5 million, reflecting the benefit of these tax credit carryforwards, which will begin to expire in 2042 if not yet utilized.

Uncertain Tax Positions

22 unchanged sentences

Tax Credit Investments

The TCIs are included in other assets, with any unfunded equity commitments recorded in other liabilities on the consolidated balance sheets.

Certain TCIs qualify for the proportional amortization method and are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the consolidated statements of income.

Other TCIs are accounted for under the equity method of accounting, with amortization included within non-interest expense on the consolidated statements of income.

This amortization includes equity in partnership losses and the systematic write-down of investments over the period in which income tax credits are earned.

All of the TCIs are evaluated for impairment at the end of each reporting period.

The TCIs are included in other assets, with any unfunded equity commitments recorded in other liabilities on the consolidated balance sheets and changes are reflected in change in tax credit investments in the consolidated statements of cash flows.

In 2023, the Corporation adopted ASU 2023-02, which allows all TCIs to qualify for the proportional amortization method if:

(1) it is probable that the income tax credits allocatable to the Corporation will be available;

(2) the Corporation does not have the ability to exercise significant influence over the operating and financial policies of the underlying project;

(3) substantially all of the projected benefits are from income tax credits and other income tax benefits;

(4) the Corporation's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive;

and (5) the Corporation is a limited liability investor in the limited liability entity for both legal and tax purposes, and the Corporation’s liability is limited to its capital investment.

See "Note 1 - Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements.

All TCIs held as of December 31, 2023 that qualify for the proportional amortization method, are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the consolidated statements of income and net income in the consolidated statements of cash flows.

All TCIs are evaluated for impairment at the end of each reporting period.

There were no impairments recorded against TCIs during 2023.

The following table presents the balances of the Corporation's TCIs and related unfunded commitments as of December 31:

31 unchanged sentences

Preferred Stock

On October 29, 2020, the Corporation issued 8.0 million depositary shares ("Depositary Shares"), each representing a 1/40 th interest in a share of Fulton's 5.125 % Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, of which 200,000 are authorized and issued, with a liquidation preference of $ 1,000 per share (equivalent to $ 25.00 per Depositary Share), for an aggregate offering amount of $ 200 million.

On October 29, 2020, the Corporation issued 8.0 million depositary shares ("Depositary Shares"), each representing a 1/40 th interest in a share of the Corporation's 5.125 % Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, of which 200,000 are authorized and issued, with a liquidation preference of $ 1,000 per share (equivalent to $ 25.00 per Depositary Share), for an aggregate offering amount of $ 200 million.

The preferred stock is redeemable, at the Corporation's option, in whole or in part, on and after January 15, 2026, and redeemable in whole, but not in part, prior to January 15, 2026 within 90 days following the occurrence of a regulatory capital treatment event.

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

13 unchanged sentences

Amortization of net unrecognized pension and postretirement items (3)

128 ( 28 ) 100

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

Total Other Comprehensive Income $ 94,616 $ ( 21,420 ) $ 73,196

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

8 unchanged sentences

128 ( 28 ) 100

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

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

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

3 unchanged sentences

3,485 ( 795 ) 2,690

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

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

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

2 unchanged sentences

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

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

(1) Amounts reclassified out of AOCI.

Before-tax amounts included in "Investment securities gains, net" on the Consolidated Statements of Income.

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

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

- Investment Securities," for additional details.

(2) Amounts reclassified out of AOCI.

Before-tax amounts included as a reduction to "Interest Income" on the Consolidated Statements of Income.

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

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

(3) Amounts reclassified out of AOCI.

Before-tax amounts included in "Salaries and employee benefits" on the Consolidated Statements of Income.

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.

17 - Employee Benefit Plans," for additional details.

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 Derivatives used in Cash Flow Hedges Unrecognized Pension and Postretirement Plan Income (Costs) Total

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

(dollars in thousands)

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

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

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

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

9 unchanged sentences

Balance at December 31, 2023 $ ( 274,862 ) $ ( 34,783 ) $ ( 2,635 ) $ ( 312,280 )

Common Stock Repurchase Plans

Common Stock Repurchase Programs

On December 19, 2023, the Corporation announced that its Board of Directors approved the 2024 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 2024 Repurchase Program will expire on December 31, 2024.

Under the 2024 Repurchase Program, the Corporation is authorized to repurchase up to $ 125.0 million of shares of its common stock.

Under this authorization, up to $ 25.0 million of the $125 million authorization may be used to repurchase the Corporation's Preferred Stock and outstanding subordinated notes through December 31, 2024.

The 2024 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.

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.

During 2023, 5.0 million shares were repurchased at a total cost of $ 77.1 million or $ 15.32 per share, under t he 2023 Repurchase Program.

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 commencing on April 1, 2022 and expiring on December 31, 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 .

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

On February 9, 2021, the Corporation announced that its Board of Directors approved the share repurchase of up to $ 75.0 million of the Corporation's common stock through December 31, 2021 .

On November 19, 2021, the Corporation announced that its Board of Directors approved the extension of this program through March 31, 2022.

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

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

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

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

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

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

19 unchanged sentences

Forfeited — —

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

Expired ( 195 ) 11.58

Outstanding and exercisable as of December 31, 2023 40,135 $ 12.61 0.3 years $ 0.2

The following table presents information about stock options exercised for the years ended December 31, 2023, 2022 and 2021:

16 unchanged sentences

As of December 31, 2023, there was $ 10.6 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 1.7 years .

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.

As of December 31, 2023, the Employee Equity Plan had 4.4 million shares reserved for future grants through 2032, and the Directors' Plan had 398.3 thousand shares reserved for future grants through 2033.

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.

52 unchanged sentences

Funded status $ 15,707 $ 9,421

The following table summarizes the changes in the unrecognized net loss included as a component of accumulated other comprehensive income (loss):

The following table summarizes the changes in the unrecognized net loss included as a component of AOCI:

Unrecognized Net Loss

117 unchanged sentences

As of December 31, 2023, the Corporation had not entered into any significant leases that have not yet commenced.

NOTE 19 – COMMITMENTS AND CONTINGENCIES

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower or obligor.

Since a portion of the commitments is expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Corporation evaluates each customer's creditworthiness on a case-by-case basis.

The amount of collateral, if any, obtained upon extension of credit is based on management's credit evaluation of the customer.

Collateral held varies but may include accounts receivable, inventory, property, equipment and income-producing commercial properties.

Standby letters of credit are conditional commitments issued to guarantee the financial or performance obligation of a customer to a third party.

Commercial letters of credit are conditional commitments issued to facilitate foreign and domestic trade transactions for customers.

The credit risk involved in issuing letters of credit is similar to that involved in extending loan facilities.

These obligations are underwritten consistently with commercial lending standards.

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

The 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:

(dollars in thousands)

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

Real estate - commercial mortgage and real estate - construction 1,972,505 1,914,238

Real estate - home equity 1,890,258 1,744,922

Total commitments to extend credit $ 8,695,621 $ 8,731,168

Standby letters of credit $ 260,829 $ 298,275

Commercial letters of credit 49,288 54,196

Total letters of credit $ 310,117 $ 352,471

Residential Lending

The Corporation originates and sells residential mortgages to secondary market investors.

The Corporation provides customary representations and warranties to secondary market investors that specify, among other things, that the loans have been underwritten to the standards of the secondary market investor.

The Corporation may be required to repurchase specific loans, or reimburse the investor for a credit loss incurred on a sold loan if it is determined that the representations and warranties have not been met.

Under some agreements with secondary market investors, the Corporation may have additional credit exposure beyond customary representations and warranties, based on the specific terms of those agreements.

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

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

The Corporation is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business activities.

The Corporation evaluates the possible impact of these matters, taking into consideration the most recent information available.

A loss reserve is established for those matters for which the Corporation believes a loss is both probable and reasonably estimable.

Once established, the reserve is adjusted as appropriate to reflect any subsequent developments.

Actual losses with respect to any such matter may be more or less than the amount estimated by the Corporation.

For matters where a loss is not probable, or the amount of the loss cannot be reasonably estimated by the Corporation, no loss reserve is established.

In addition, from time to time, the Corporation is involved in investigations or other forms of regulatory or governmental inquiry covering a range of possible issues and, in some cases, these may be part of similar reviews of the specified activities of other companies.

These inquiries or investigations could lead to administrative, civil or criminal proceedings involving the Corporation, and could result in fines, penalties, restitution, other types of sanctions, or the need for the Corporation to undertake remedial actions, or to alter its business, financial or accounting practices.

The Corporation's practice is to cooperate fully with regulatory and governmental inquiries and investigations.

As of the date of this report, the Corporation believes that any liabilities, individually or in the aggregate, that may result from the final outcomes of pending legal proceedings, or regulatory or governmental inquiries or investigations, will not have a material adverse effect on the financial condition of the Corporation.

However, legal proceedings, inquiries and investigations are often unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to the Corporation's results of operations in any future period, depending, in part, upon the size of the loss or liability imposed and the operating results for the period, and could have a material adverse effect on the Corporation's business.

In addition, regardless of the ultimate outcome of any such legal proceeding, inquiry or investigation, any such matter could cause the Corporation to incur additional expenses, which could be significant, and possibly material, to the Corporation's results of operations in any future period.

Fulton Bank, N.A.

On October 15, 2019, a former Fulton Bank teller supervisor, D.

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 (the "Court"), D.

Fulton Bank, N.A.

1:19-cv-18985.

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 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.

NOTE 19 - FAIR VALUE MEASUREMENTS

25 unchanged sentences

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

9 unchanged sentences

Loans held for sale - This category includes mortgage loans held for sale that are measured at fair value.

Fair values as of December 31, 2022 and 2021, were measured as the price that secondary market investors were offering for loans with similar characteristics.

Fair values as of December 31, 2023 and 2022, were measured as the price that secondary market investors were offering for loans with similar

characteristics.

See "Note 1 - Summary of Significant Accounting Policies" for details related to the Corporation's election to measure assets and liabilities at fair value.

12 unchanged sentences

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

• Corporate debt securities – This category consists of subordinated and senior debt issued by financial institutions ($ 415.4 million at December 31, 2022 and $ 383.4 million at December 31, 2021), single-issuer trust preferred securities issued by financial institutions (none at December 31, 2022 and at 2021), and other corporate debt issued by non-financial institutions ($ 6.9 million at December 31, 2022 and $ 2.8 million at December 31, 2021).

As noted in "Note 4 - Investment Securities," several corporate debt securities were sold during 2020.

Refer to the specific note for further information.

• Corporate debt securities - This category consists of subordinated and senior debt issued by financial institutions ($ 433.4 million at December 31, 2023 and $ 415.4 million at December 31, 2022) and other corporate debt issued by non-financial institutions ($ 7.2 million at December 31, 2023 and $ 6.9 million at December 31, 2022).

Level 2 investments include subordinated debt and senior debt, and other corporate debt issued by non-financial institutions at December 31, 2023 and 2022.

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

Level 3 investments include ARCs.

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

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

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

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.

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Derivative liabilities - Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($ 0.5 million and $ 0.6 million at December 31, 2023 and 2022, 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:

(dollars in thousands)

Balance at December 31, 2020 $ 98,206

Sales ( 24,619 )

Unrealized adjustment to fair value (1)

Balance at December 31, 2021 $ 74,667

Sales ( 74,823 )

Unrealized adjustment to fair value (1)

Balance at December 31, 2022 $ —

(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.

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 ($ 0.9 million at December 31, 2023 and $ 0.2 million at December 31, 2022) and the fair value of interest rate derivatives ($ 245.6 million at December 31, 2023 and $ 296.3 million at December 31, 2022).

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

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

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

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

(dollars in thousands)

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MSRs are recorded on the Corporation's consolidated balance sheets at lower of amortized cost or fair value.

See "Note 8 - Mortgage Servicing Rights" for additional information.

"Note 8 - Mortgage Servicing Rights" for additional information.

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

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

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

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

The amount shown is the balance of non-accrual loans, net of related ACL.

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

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

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MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans.

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

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

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

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Loans held for sale 15,158 — 15,158 — 15,158

HTM securities 1,321,256 — 1,125,049 — 1,125,049

AFS securities 2,398,352 42,161 2,356,191 — 2,398,352

HTM securities 1,267,922 — 1,072,207 — 1,072,207

Loans, net 21,057,690 — — 19,930,560 19,930,560

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

HTM securities 980,384 — 965,867 — 965,867

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

HTM securities 1,321,256 — 1,125,049 — 1,125,049

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

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

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

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Fair values of financial instruments are significantly affected by the assumptions used, principally the timing of future cash flows and discount rates.

Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument.

be realized in an immediate sale or settlement of the instrument.

The aggregate fair value amounts presented do not necessarily represent management's estimate of the underlying value of the Corporation.

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Cash and cash equivalents Demand and savings deposits

Accrued interest receivable Short-term borrowings

Accrued interest receivable Other borrowings

Accrued interest payable

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Fair values of loans also include estimated credit losses that would be assumed in a market transaction, which represents estimated exit prices.

Brokered deposits consists of demand and saving deposits, which are classified as Level 1, and time deposits, which are classified as Level 2.

The fair value of these deposits are determined in a manner consistent with the respective type of deposits discussed above.

Brokered deposits consist of demand and saving deposits, which are classified as Level 1, and time deposits, which are classified as Level 2.

The fair value of these deposits is determined in a manner consistent with the respective type of deposits discussed above.

NOTE 20 - COMMITMENTS AND CONTINGENCIES

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

Commitments to extend credit are agreements to lend to a borrowers or obligors as long as there is no violation of any condition established in the contract.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower or obligor.

Since a portion of the commitments is expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Corporation evaluates each borrower or obligor's creditworthiness on a case-by-case basis.

The amount of collateral, if any, obtained upon extension of credit is based on management's credit evaluation of the borrower or obligor.

Collateral held varies but may include accounts receivable, inventory, property, equipment and income-producing commercial properties.

Standby letters of credit are conditional commitments issued to guarantee the financial or performance obligation of a borrower or obligor to a third party.

Commercial letters of credit are conditional commitments issued to facilitate foreign and domestic trade transactions for borrowers or obligors.

The credit risk involved in issuing letters of credit is similar to that involved in extending loan facilities.

These obligations are underwritten consistent with commercial lending standards.

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

The 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:

(dollars in thousands)

Commercial and industrial $ 4,929,981 $ 4,832,858

Real estate - commercial mortgage and real estate - construction 1,867,830 1,972,505

Real estate - home equity 1,992,700 1,890,258

Total commitments to extend credit $ 8,790,511 $ 8,695,621

Standby letters of credit $ 264,440 $ 260,829

Commercial letters of credit 67,396 49,288

Total letters of credit $ 331,836 $ 310,117

Residential Lending

The Corporation originates and sells residential mortgages to secondary market investors.

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

As of December 31, 2023 and 2022, the total reserve for losses on residential mortgage loans sold was $ 1.8 million and $ 1.4 million, for each period, including reserves for both representation and warranty and credit loss exposures.

In addition, a component of ACL for OBS credit exposures of $ 2.7 million and $ 6.0 million as of December 31, 2023 and December 31, 2022, respectively, related to additional credit exposure for potential loan repurchases.

Legal Proceedings

The Corporation is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business activities.

The Corporation evaluates the possible impact of these matters, taking into consideration the most recent information available.

A loss reserve is established for those matters for which the Corporation believes a loss is both probable and reasonably estimable.

Once established, the reserve is adjusted as appropriate to reflect any subsequent developments.

Actual losses with respect to any such matter may be more or less than the amount estimated by the Corporation.

For matters where a loss is not probable, or the amount of the loss cannot be reasonably estimated by the Corporation, no loss reserve is established.

The Corporation's practice is to cooperate fully with regulatory and governmental inquiries and investigations.

NOTE 21 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY

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Senior and subordinated debt $ 535,384 $ 539,634

Payable to non-bank subsidiaries — 78,793

Other liabilities 51,227 50,194

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Income before income taxes and equity in undistributed net income of subsidiaries 263,346 155,838 411,070

155,838 411,070 112,466

Income tax benefit ( 7,861 ) ( 12,331 ) ( 12,516 )

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Equity in undistributed net income (loss) of:

Bank subsidiary 121,388 ( 133,157 ) 162,037

Bank subsidiaries 8,932 121,388 ( 133,157 )

Non-bank subsidiaries 4,141 ( 2,576 ) ( 14,932 )

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Stock-based compensation 12,540 14,000 8,402

Decrease (increase) in other assets 44,790 119,822 ( 307,976 )

Net change in other assets ( 37,591 ) 44,790 119,822

Equity in undistributed net (income) loss of subsidiaries ( 13,073 ) ( 120,213 ) 148,091

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

Increase (decrease) in other liabilities and payable to non-bank subsidiaries ( 198,349 ) 78,716 ( 244,598 )

Net change in other liabilities and payable to non-bank subsidiaries ( 50,047 ) ( 198,349 ) 78,716

Total adjustments ( 87,421 ) ( 259,048 ) 369,267

Net cash provided by (used in) operating activities 27,933 644,764 ( 421,772 )

Net cash provided by operating activities 196,859 27,933 644,764

Cash Flows From Investing Activities

Net cash paid for acquisition — ( 21,811 ) —

Net cash provided by (used in) investing activities ( 21,811 ) — —

Net cash used in investing activities — ( 21,811 ) —

Cash Flows From Financing Activities:

Repayments of long-term borrowings ( 5,000 ) ( 81,496 ) ( 153,612 )

Additions to long-term borrowings — — 370,898

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

Net proceeds from issuance of common stock 3,160 7,876 7,437

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Acquisition of treasury stock ( 77,056 ) — ( 43,909 )

Net cash provided by (used in) financing activities ( 189,629 ) ( 302,112 ) 420,994

Net cash used in financing activities ( 194,634 ) ( 189,629 ) ( 302,112 )

Net increase (decrease) in Cash and Cash Equivalents 2,225 ( 183,507 ) 342,652

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Chairman and Chief Executive Officer

/s/ BETH ANN L.

Senior Executive Vice President

and Chief Financial Officer

and Interim Chief Financial Officer

Report of Independent Registered Public Accounting Firm

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

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

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

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

After a reasonable and supportable forecast period, the forecasted PD rates revert back to a historical average PD rate.

The LGD model calculates an 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 constant pre-payment rates, 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.

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

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

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.

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

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 historical prepayment observations, interest rates, the historical observation period, and loan pool segmentation.

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

Key assumptions and inputs used in the estimation of the CPR 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 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 collective 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.

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• 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.

• 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.

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Philadelphia, Pennsylvania

March 1, 2023

February 29, 2024

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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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