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Item 7. Management’s Discussion and Analysis

2025-02-28 compared with 2024-03-01 · 282 added, 178 removed, 652 unchanged (41% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion relates to the Corporation, a financial holding company registered under the BHCA and corporation incorporated under the laws of the Commonwealth of Pennsylvania, and its wholly-owned subsidiaries.

This Management's Discussion relates to the Corporation, a financial holding company registered under the BHCA and incorporated under the laws of the Commonwealth of Pennsylvania, and its wholly-owned subsidiaries.

Management's Discussion should be read in conjunction with the Consolidated Financial Statements and other financial information presented in this Annual Report on Form 10-K.

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

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

The Corporation generates the majority of its revenue through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings.

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Return on average common shareholders' equity 9.83 % 11.24 % 11.69 %

Return on average common shareholders' equity (tangible) (1)

Operating return on average common shareholders' equity (tangible) (1)

14.81 % 15.21 % 16.08 %

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Non-performing assets to total assets 0.69 % 0.56 % 0.66 %

Net charge-offs (recoveries) to average loans 0.14 % 0.04 % 0.07 %

Net charge-offs to average loans, annualized 0.19 % 0.14 % 0.04 %

(1) Ratio represents a financial measure derived by methods other than GAAP.

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

Fed Funds Rate

Since March 15, 2022, the FOMC increased the target rate for the Fed Funds Rate eleven times to address elevated levels of inflation, placing the target range at 5.25% - 5.50% as of February 29, 2024.

LIBOR Transition

dollar LIBOR ceased as of June 30, 2023.

The Corporation has transitioned all of its products away from LIBOR.

For most financial products, the most common alternative reference rates have been SOFR-based benchmarks.

This is true for both new originations and legacy LIBOR contracts that were subject to amendment or a transition by their terms.

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

On the Acquisition Date, Fulton Bank acquired substantially all of the assets and assumed substantially all of the deposits and certain liabilities of Republic First Bank from the FDIC, as receiver for Republic First Bank.

As part of the Republic First Transaction, the Bank acquired approximately $4.8 billion of assets of Republic First Bank and assumed approximately $5.6 billion of liabilities of Republic First Bank.

The Bank received approximately $0.8 billion of cash from the FDIC in connection with the Republic First Transaction.

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

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

During the fourth quarter of 2024, as part of the Bank's Republic First Transaction integration, the Corporation closed 13 of the Bank's financial center locations and consolidated the operations of those locations into nearby financial center locations operated by the Bank.

The premises and equipment of the 13 locations included five locations owned by the Bank and eight locations leased by the Bank.

The Corporation recorded pre-tax costs of approximately $9.8 million reflected in acquisition-related expenses in the Consolidated Statements of Income for the year ended December 31, 2024, consisting of write-offs of premises and equipment and related expenses, severance expenses and lease termination charges.

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

Financial Statements."

Common Stock Offering

On May 1, 2024, the Corporation completed its underwritten public offering of 19,166,667 shares of its common stock at a price to the public of $15.00 per share, before underwriting discounts.

The net proceeds to the Corporation from the offering after deducting underwriting discounts and transaction expenses were approximately $272.6 million.

Sale-Leaseback Transaction

On May 10, 2024, the Bank and Fulton Financial Realty Company, a wholly owned subsidiary of the Corporation, entered into the Sale-Leaseback Transaction and received an aggregate cash purchase price of $55.4 million.

The Bank leased each of the locations sold in the Sale-Leaseback Transaction for an initial term of 15 years, with the option to extend the term of each for up to three successive terms of up to five years each.

The Corporation recorded a pre-tax gain, after deduction of transaction-related expenses, of approximately $20.3 million in connection with the Sale-Leaseback Transaction during the second quarter of 2024.

See "Note 18 - Leases" in the Notes to Consolidated Financial Statements in "Item 1.

Financial Statements."

Securities Restructuring

In May 2024, the Corporation sold approximately $345.7 million AFS securities and recorded a pre-tax loss of $20.3 million during the second quarter of 2024.

The proceeds from the sale were reinvested into higher-yielding securities of a similar type and similar duration.

In November 2024, the Corporation retired $168.8 million of subordinated notes issued in November 2014 and June 2015 which matured on November 15, 2024.

See "Note 10 - Borrowings" in the Notes to Consolidated Financial Statements in "Item 1.

Financial Statements."

Financial Highlights

Following is a summary of the financial highlights for the year ended December 31, 2023:

• Net Income Available to Common Shareholders and Net Income Per Share - Net income available to common shareholders was $274.0 million for the year ended December 31, 2023, a $2.7 million decrease compared to $276.7 million for the same period in 2022.

• Net Interest Income - Net interest income was $854.3 million for the year ended December 31, 2023, an increase of $72.7 million, or 9.3%, compared to the same period in 2022.

The increase was driven by higher interest rates and higher average loan balances.

◦ Net Interest Margin - For the year ended December 31, 2023, NIM increased to 3.42%, or 15 bps compared to the same period in 2022, driven by a 157 bps increase in the yield on net loans, a 16 bps increase in the yield on investment securities and a 298 bps increase in the yield on other interest-earning assets, partially offset by a 139 bps increase in the cost of total interest-bearing liabilities and noninterest-bearing deposits.

◦ Net Loans - Average net loans increased $1.8 billion, or 9.3%, for the year ended December 31, 2023 compared to the same period in 2022.

The increase in average net loans was largely driven by increases in average residential mortgage loans, average commercial and industrial loans, average commercial mortgage loans, average consumer loans, and average real estate construction loans of $818.2 million, $366.6 million, $352.3 million, $178.8 million, and $68.8 million, respectively.

◦ Deposits - Average deposits decreased $297.7 million, or 1.4%, for the year ended December 31, 2023 compared to the same period in 2022.

The decrease in average deposits was largely due to a decrease in average noninterest-bearing demand deposits of $1.6 billion, partially offset by increases in average brokered deposits, average time deposits and average savings and money market deposits of $585.4 million, $552.4 million and $157.9 million, respectively.

◦ Borrowings and Other Interest-Bearing Liabilities - Average borrowings and other interest-bearing liabilities increased $1.4 billion for the year ended December 31, 2023 compared to the same period in 2022.

The increase in borrowings and other interest-bearing liabilities was primarily due to increases in average FHLB advances and Federal funds purchased of $727.9 million and $475.3 million, respectively.

• Asset Quality - Non-performing assets decreased $23.5 million, or 13.2%, as of December 31, 2023 compared to December 31, 2022, and were 0.56% and 0.66% of total assets as of those dates, respectively.

Net charge-offs to average loans outstanding was 0.14% for the year ended December 31, 2023, compared to net charge-offs to average loans outstanding of 0.04% for the same period in 2022.

Net charge-offs of $29.1 million for the year ended December 31, 2023 included a charge-off of $13.3 million during the first quarter of 2023 for a commercial office loan.

The provision for credit losses was $54.0 million for the year ended December 31, 2023, compared to $28.0 million for the same period of 2022.

Included in the December 31, 2022 provision for credit losses was the CECL Day 1 Provision of $8.0 million for the acquired Prudential Bancorp loan portfolio.

• Non-Interest Income - Non-interest income, excluding investment securities losses, for the year ended December 31, 2023 increased $1.3 million, or 0.6%, compared to the same period in 2022.

The increase in non-interest income, excluding investment securities losses, was primarily due to an increase in commercial banking revenues of $5.4 million, driven by an increase in commercial customer interest rate swap fee income reflected in capital markets and an increase in wealth management of $2.7 million, partially offset by decreases in mortgage banking income of $3.8 million and in consumer banking fees of $2.3 million, largely due to a decline in overdraft fees.

• Non-Interest Expense - Non-interest expense for the year ended December 31, 2023 increased $45.5 million, or 7.2%, compared to the same period in 2022.

Excluding merger-related expenses of $10.3 million for the year ended December 31, 2022, non-interest expense increased $55.8 million, or 9.0%, for the year ended December 31, 2023 compared to the same period in 2022.

The increase in non-interest expense, excluding merger-related expenses, was largely driven by increases of $20.5 million in salaries and employee benefits expense, $13.0 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023 and the special assessment of $6.5 million charged to recover the loss to the DIF in

connection with the closures of certain banks in 2023, $10.6 million in other outside services expense, $6.2 million in data processing and software expense and $2.1 million in marketing expense.

The $20.5 million increase in salaries and employee benefits expense was primarily driven by annual merit increases, an increase in the number of employees, higher healthcare claims expenses and higher pension expense.

• Income Taxes - The Corporation's ETR was 18.5% for the year ended 2023, compared to 17.3% for the same period in 2022.

The ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities and investments in community development projects that generate tax credits under various programs.

Net Income Available to Common Shareholders and Net Income Per Share - Net income available to common shareholders was $278.5 million for the year ended December 31, 2024, a $4.5 million increase compared to $274.0 million in 2023.

Net income available to common shareholders per diluted share was $1.57 for the year ended December 31, 2024, a $0.07 decrease compared to $1.64 in 2023.

Year Ended December 31, 2024 Results were Impacted by the Following Items:

• Preliminary gain on acquisition of $37.0 million (net of tax).

• CDI of $92.6 million in connection with the Republic First Transaction resulting in intangible amortization expense of $15.7 million.

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

• Acquisition-related expenses of $37.6 million.

• FultonFirst implementation and asset disposal costs of $32.0 million.

In the fourth quarter of 2024, in connection with the FultonFirst initiative, the Corporation recorded pre-tax costs of $8.5 million in connection with the Corporation's plan to consolidate 15 financial centers in early 2025.

The pre-tax costs of $8.5

million consisted of write-offs of premises and equipment and related expenses, severance expenses and lease termination charges.

Supplemental Reporting of Non-GAAP Based Financial Measures

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Net income available to common shareholders $ 278,495 $ 274,032 $ 276,733

Other revenue (1,805) 1,855 —

Gain on acquisition, net of tax (36,996) — —

Loss on securities restructuring 20,282 — —

Core deposit intangible amortization 17,307 2,308 1,029

Merger-related expenses — 10,328 —

CECL Day 1 Provision expense — 7,954 —

Interest rate derivative transition valuation (1)

Acquisition-related expense 37,635 — 10,328

CECL Day 1 Provision 23,444 — 7,954

FDIC special assessment 940 6,494 —

FultonFirst initiative expenses 3,197 — —

Gain on Sale-Leaseback Transaction (20,266) — —

FultonFirst implementation and asset disposals 32,038 3,197 —

Tax impact of adjustments (23,011) (2,909) (4,055)

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Net income $ 288,743 $ 284,280 $ 286,981

Other revenue (1,805) 1,855 —

Gain on acquisition, net of tax (36,996) — —

Loss on securities restructuring 20,282 — —

Core deposit intangible amortization 17,307 2,308 1,029

Merger-related expenses — 10,328 —

CECL Day 1 Provision expense — 7,954 —

Interest rate derivative transition valuation (1)

Acquisition-related expense 37,635 — 10,328

CECL Day 1 Provision 23,444 — 7,954

FDIC special assessment 940 6,494 —

FultonFirst initiative expenses 3,197 — —

Gain on Sale-Leaseback Transaction (20,266) — —

FultonFirst implementation and asset disposals 32,038 3,197 —

Tax impact of adjustments (23,011) (2,909) (4,055)

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Operating return on average assets 1.11 % 1.08 % 1.16 %

Return on average common shareholders' equity (tangible)

Operating return on average common shareholders' equity (tangible)

Net income available to common shareholders $ 278,495 $ 274,032 $ 276,733

Other revenue (1,805) 1,855 —

Gain on acquisition, net of tax (36,996) — —

Loss on securities restructuring 20,282 —

Intangible amortization 17,830 2,944 1,731

Merger-related expenses — 10,328 —

CECL Day 1 Provision expense — 7,954 —

Interest rate derivative transition valuation (1)

Acquisition-related expense 37,635 — 10,328

CECL Day 1 Provision 23,444 — 7,954

FDIC special assessment 940 6,494 —

FultonFirst initiative expenses 3,197 — —

Gain on Sale-Leaseback Transaction (20,266) — —

FultonFirst implementation and asset disposals 32,038 3,197 —

Tax impact of adjustments (23,121) (3,043) (4,203)

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Intangible amortization (17,830) (2,944) (1,731)

Merger-related expenses — (10,328) —

Acquisition-related expense (37,635) — (10,328)

Debt extinguishment gain (cost) — 720 —

FDIC special assessment (940) (6,494) —

FultonFirst initiative expenses (3,197) — —

Gain on Sale-Leaseback Transaction 20,266 — —

FultonFirst implementation and asset disposals (32,038) (3,197) —

Non-interest expense (numerator) $ 751,614 $ 667,292 $ 618,886

2 unchanged sentences

Total non-interest income 275,731 227,678 227,130

Interest rate derivative transition valuation (1)

Other revenue (1,805) 1,855 —

Gain on acquisition, net of tax (36,996) — —

Investment securities losses (gains), net 20,283 733 27

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Efficiency ratio 60.8 % 60.5 % 60.5 %

(1) Resulting from the reference rate transition from LIBOR to SOFR in the Corporation's commercial customer interest rate swap program.

CRITICAL ACCOUNTING POLICIES

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The ACL for loans was $379.2 million and $293.4 million on December 31, 2024 and December 31, 2023, respectively.

The increase of $24.0 million was primarily a result of increased loan growth, changes to the macroeconomic outlook and risk migration.

The Corporation performs loan loss sensitivity analysis on a quarterly basis to determine the impact of varying economic conditions based on third-party forecasts.

The increase of $85.8 million was primarily a result of the Republic First Transaction, which included $54.6 million for PCD Loans and $23.4 million recorded through the provision for credit losses at the Acquisition Date for non-PCD Loans.

The Corporation performs loan loss sensitivity analysis on a quarterly basis to determine the impact of varying economic conditions based on third-p arty forecasts.

Our sensitivity analysis does not represent management's view of expected credit losses at the balance sheet date.

One scenario identified includes a slowdown in near-term economic growth.

This scenario resulted in a hypothetical increase to the ACL o f approximately $21.6 million.

One scenario identified includes a highly adverse economic environment.

This scenario resulted in a hypothetical increase to the ACL of approximately $39.5 million.

For further discussion of the methodology used in the determination of the ACL, refer to Note 1, "Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements in "Item 8.

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Net Interest Income

Net interest income is the most significant component of the Corporation's net income.

FTE net interest income was $978.2 million for the year ended December 31, 2024, an increase of $106.1 million, compared to $872.1 million for the same period in 2023.

For the twelve months ended December 31, 2024 and December 31, 2023, NIM was 3.42%.

The Corporation manages the risk associated with changes in interest rates through the techniques described within Item "7A.

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Total Liabilities 27,447,488 24,598,455 23,411,161

Total deposits 21,156,856 1.38% 21,454,574 0.20% 21,723,946 0.14%

Total interest-bearing liabilities and noninterest-bearing deposits 23,928,186 1.75% 22,812,931 0.36% 23,021,909 0.26%

Shareholders' equity 3,025,642 2,631,249 2,560,323

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the related unrealized holding gains (losses) are included in other assets.

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

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

Comparison of 2024 to 2023

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volumes) and changes in yields and rates:

2024 versus 2023

Increase (decrease) due to change in

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(dollars in thousands)

Interest income on:

FTE interest income on:

Net loans (1)

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Other interest-earning assets 28,897 6,335 35,232

Total interest income $ 66,547 $ 344,667 $ 411,214

Total FTE interest income $ 165,021 $ 144,043 $ 309,064

Interest expense on:

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The increase due to changes in yield was largely due to an increase in net loans.

The increase due to changes in volume was due to an increase in average net loans, partially offset by decreases in average other interest-earning assets and investment securities.

The increase due to changes in volume was due to an increase in average net loans.

The yield on average interest-earning assets increased 54 bps in 2024 compared to 2023.

In 2024, interest expense increased $202.9 million compared to 2023, primarily driven by an increase in rate on interest-bearing liabilities resulting in a $124.5 million increase in interest expense.

The increase in interest expense attributable to rate was driven by the increases in savings and money market deposits, interest-bearing demand deposits, time deposits, borrowings and other interest-bearing liabilities and brokered deposits.

The increase in interest expense attributable to volume was $82.9 million primarily driven by increases in borrowings and other interest-bearing liabilities and brokered deposits.

The increase in interest expense attributable to rate was driven by increases in interest-bearing demand deposits, savings and money market deposits and time deposits.

The increase in interest expense attributable to volume was $78.4 million primarily driven by increases in time deposits, interest-bearing demand deposits and savings and money market deposits, partially offset by a decrease in borrowings and other interest-bearing liabilities.

The rate on average interest-bearing liabilities increased 58 bps in 2024 compared to 2023.

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

During 2023, average loans increased $1.8 billion, or 9.3%, compared to 2022.

The increase was largely driven by increases in average residential mortgage loans, average commercial and industrial loans, average commercial mortgage loans, average consumer loans and average construction loans of $818.2 million, $366.6 million, $352.3 million, $178.8 million and $68.8 million, respectively.

During 2024, average net loans increased $2.2 billion, or 10.6%, compared to 2023.

The increase in average net loans was primarily due to approximately $2.4 billion of total loans acquired in the Republic First Transaction and outstanding as of December 31, 2024.

Overall, the increase in average net loans was largely driven by increases in average commercial mortgage loans, average residential mortgage loans and average commercial and industrial loans of $1.2 billion, $846.0 million and $182.5 million, respectively.

The yield on total loans increased 51 bps to 6.08% in 2024 compared to 5.57% in 2023.

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Total demand deposits and savings and money market deposits 19,808,539 1.56 18,138,816 1.02 1,669,723 9.2

Brokered deposits 847,795 5.15 262,359 1.56 585,436 N/M

Brokered deposits 981,060 5.27 847,795 5.15 133,265 15.7

Time deposits 3,747,029 4.29 2,170,245 2.94 1,576,784 72.7

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The cost of total deposits increased 75 bps to 2.13% in 2024 compared to 1.38% in 2023, primarily due to rising interest rates and a change in mix of deposits.

Average deposits decreased $297.7 million driven by a $1.6 billion decrease in average noninterest-bearing demand deposits, partially offset by increases in average brokered deposits, average time deposits and average savings and money market deposits of $585.4 million, $552.4 million and $157.9 million, respectively.

Average deposits increased $3.4 billion, or 16.0%, compared to 2023.

The increase in average total deposits was primarily due to approximately $3.7 billion of total deposits assumed in the Republic First Transaction and outstanding as of December 31, 2024.

The increase in average deposits occurred primarily in average time deposits, average interest-bearing demand deposits and average savings and money market deposits, which increased $1.6 billion, $1.5 billion and $748.0 million, respectively, partially offset by a decrease in average noninterest-bearing demand deposits of $545.3 million.

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

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(dollars in thousands)

Federal funds purchased $ 566,379 5.30 % $ 91,125 3.21 % $ 475,254 N/M

Federal Home Loan Bank advances 922,164 5.05 194,295 3.77 727,869 N/M

Federal funds purchased $ 51,306 5.52 % $ 566,379 5.30 % $ (515,073) (90.9)

Federal Home Loan Bank advances 804,328 4.30 922,164 5.05 (117,836) (12.8) %

Senior debt and subordinated debt 514,073 3.66 539,726 3.96 (25,653) (4.8)

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Total borrowings and other interest-bearing liabilities $ 2,280,382 4.39 % $ 2,771,330 4.54 % $ (490,948) (17.7) %

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

Average borrowings and other interest-bearing liabilities increased $1.4 billion during 2023 compared to 2022, primarily as a result of an increase in average net loans and a decrease in average total deposits.

Average FHLB advances, average Federal funds purchased and average other borrowings and other interest-bearing liabilities increased $727.9 million, $475.3 million and $234.5 million, respectively.

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

Average borrowings and other interest-bearing liabilities decreased $490.9 million during 2024 compared to 2023.

The decrease in average borrowings and other interest-bearing liabilities was primarily due to decreases in federal funds purchased and average FHLB advances of $515.1 million and $117.8 million, respectively, partially offset by an increase in average other interest-bearing liabilities of $167.6 million.

In November 2024, the Corporation retired $168.8 million of subordinated notes issued in November 2014 and June 2015 which matured on November 15, 2024.

See "Note 10 - Borrowings" of the Notes to Consolidated Financial Statements for additional details.

Provision for Credit Losses

The provision for credit losses was $71.6 million in 2024 compared to $54.0 million in 2023.

The increase was primarily due to the Republic First Transaction, which included a provision for credit losses of $23.4 million for non-PCD Loans, partially offset

by an elevated level of provision for credit losses in the same period in 2023 due to a $13.3 million charge-off for a commercial office loan.

Non-Interest Income

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(dollars in thousands)

Wealth management $ 84,743 $ 75,541 $ 9,202 12.2 %

Commercial banking:

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Total commercial banking 84,982 81,160 3,822 4.7

Wealth management 75,541 72,843 2,698 3.7

Consumer banking:

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Other 19,846 14,125 5,721 40.5

Non-interest income before investment securities gains (losses) 228,411 227,157 1,254 0.6

Investment securities gains (losses), net (733) (27) (706) N/M

Non-interest income before investment securities gains (losses) and gain on acquisition, net of tax 259,018 228,411 30,607 13.4

Gain on acquisition, net of tax 36,996 — 36,996 N/M

Investment securities losses, net (20,283) (733) (19,550) N/M

Total Non-Interest Income $ 275,731 $ 227,678 $ 48,053 21.1 %

Non-interest income before investment securities gains (losses) increased $1.3 million, or 0.6%, during 2023 compared to 2022.

The increase in non-interest income was primarily due to increases in commercial banking revenues of $5.4 million, largely driven by an increase in commercial customer interest rate swap fee income reflected in capital markets, an increase in wealth management of $2.7 million, due to an increase in assets under management, and an increase in the cash surrender value of bank owned life insurance agreements of $1.7 million, reflected in other non-interest income, partially offset by decreases in mortgage banking income of $3.8 million, mainly due to lower sales volumes and lower gains on sales margins, consumer banking income of $2.3 million, driven largely by decreases in overdraft fees, and an $1.8 million reduction in 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.

Non-interest income before investment securities losses and gain on acquisition, net of tax increased $30.6 million, or 13.4%, during 2024 compared to 2023.

The increase in non-interest income was partially due to $7.7 million from acquired operations in the Republic First Transaction.

The remaining increase of $22.9 million included a $9.2 million increase in wealth management revenues due to an increase in assets under management, a $4.3 million increase in cash management fee income due to an increase in account analysis fees with customers electing to move funds to interest-bearing deposit accounts, a $3.6 million increase in mortgage banking income primarily due to higher loan volumes and spreads, a $1.8 million increase in SBA income largely due to higher loan sale volumes, a $1.6 million increase in income from bank owned life insurance and a $1.7 million increase in debit card fee income.

In May 2024, the Corporation sold $345.7 million of AFS securities and recorded a pre-tax loss of $20.3 million.

The proceeds from the sale were reinvested into higher yielding securities of a similar type and similar duration.

Non-Interest Expense

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Professional fees 10,681 8,392 2,289 27.3

Intangible amortization 2,944 1,731 1,213 70.1

Merger-related expenses — 10,328 (10,328) N/M

Intangible amortization 17,830 2,944 14,886 N/M

Other 71,451 69,281 2,170 3.1

Subtotal 770,384 676,010 94,374 14.0 %

Gain on Sale-Leaseback Transaction (20,266) — (20,266) N/M

Acquisition-related expenses 37,635 — 37,635 N/M

FultonFirst implementation and asset disposals 32,038 3,197 28,841 N/M

Total Non-Interest Expense $ 819,791 $ 679,207 $ 140,584 20.7 %

Non-interest expense in 2024 increased $140.6 million, or 20.7%, compared to 2023.

Excluding merger-related expenses of $10.3 million in 2022, non-interest expense increased $55.8 million, or 9.0%, in 2023 compared to 2022.

The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $20.5 million in salaries and employee benefits expense, $13.0 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023, and the special assessment of $6.5 million charged to recover the loss to the DIF in connection with the closures of certain banks in 2023, $10.6 million in other outside services expense largely due to a number of corporate initiatives, $6.2 million in data processing and software expense due to ongoing investment in technology and customer growth and $2.1 million in marketing expense primarily due to a targeted customer deposit acquisition program and brand marketing campaigns.

The $20.5 million increase in salaries and employee benefits expense was largely due to annual merit increases, an increase in the number of employees, higher healthcare claims expense and higher pension expense.

Income tax expense for 2023 was $64.4 million, a $4.4 million increase compared to 2022.

The ETR was 18.5% in 2023 compared to 17.3% in 2022.

The increase in income tax expense in 2023 resulted primarily from the higher ETR.

Excluding the gain on the Sale-Leaseback Transaction, acquisition-related expenses and FultonFirst implementation and asset disposal costs, non-interest expense increased $94.4 million, or 14.0%, in 2024 compared to 2023.

The increase in non-interest expense was primarily due to $71.9 million from acquired operations in the Republic First Transaction, including $15.7 million of CDI amortization expense, and $21.5 million in salaries and benefits expense driven by annual merit increases, higher incentive compensation expense and lower deferred costs from loan origination activities.

Income tax expense for 2024 was $55.9 million, an $8.6 million decrease compared to 2023.

The Corporation's ETR was 16.2% in 2024.

Excluding the impact from the $37.0 million gain on acquisition, net of tax, the Corporation's ETR was 18.2% compared to 18.5% in 2023.

The decrease in income tax expense in 2024 resulted primarily from the lower ETR.

The ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities and TCIs that generate tax credits under various federal programs.

1 unchanged sentence

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volumes) and changes in yields and rates:

2023 versus 2022

Increase (decrease) due to change in

1 unchanged sentence

(dollars in thousands)

Interest income on:

FTE interest income on:

Net loans (1)

2 unchanged sentences

Other interest-earning assets (6,298) 13,529 7,231

Total interest income $ 30,935 $ 113,190 $ 144,125

Total FTE interest income $ 66,547 $ 344,667 $ 411,214

Interest expense on:

7 unchanged sentences

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

Compared to 2021, FTE total interest income for 2022 increased $144.1 million, or 19.6%, primarily due to an increase of $113.2 million attributable to changes in yield, of which $102.7 million related to net loans.

Compared to 2022, FTE total interest income for 2023 increased $411.2 million due to increases of $344.7 million attributable to changes in yield and $66.5 million attributable to changes in volume.

The increase due to changes in yield was largely due to

an increase in net loans.

The increase due to changes in volume was due to an increase in average net loans, partially offset by decreases in average other interest-earning assets and investment securities.

The yield on average interest-earning assets increased 145 bps in 2023 compared to 2022.

In 2022, interest expense increased $23.5 million compared to 2021, primarily driven by increases in rate on interest-bearing liabilities resulting in a $25.4 million increase in interest expense.

The increase in interest expense attributable to rate was primarily driven by the increases in savings and money market deposits, borrowings, interest-bearing demand deposits and brokered deposits.

In 2023, interest expense increased $335.7 million compared to 2022, primarily driven by an increase in rate on interest-bearing

liabilities resulting in a $252.9 million increase in interest expense.

The increase in interest expense attributable to volume was $82.9 million, primarily driven by increases in borrowings and other interest-bearing liabilities and brokered deposits.

The rate on average interest-bearing liabilities increased 178 bps in 2023 compared to 2022.

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

9 unchanged sentences

Consumer 748,089 5.94 569,305 5.11 178,784 31.4

Equipment finance leasing 249,595 3.99 252,104 3.89 (2,509) (1.0)

38,682 — (3,776) — 42,458 N/M

Leases and other loans (1)

320,924 4.37 288,277 6.04 32,647 11.3

Total loans $ 20,929,302 5.57 % $ 19,152,740 4.00 % $ 1,776,562 9.3%

(1) Consists of overdrafts and net origination fees and costs.

Average loans increased $525.0 million, or 2.8%, compared to 2021.

The increase was largely driven by increases in average residential mortgage loans, average commercial mortgage loans, average consumer loans and average construction loans of $760.5 million, $374.1 million, $112.9 million and $100.2 million, respectively, partially offset by decreases in average commercial and industrial loans of $822.7 million primarily due to the repayment of Paycheck Protection Program loans upon forgiveness by the SBA.

Average investment securities increased $691.4 million, or 18.8%, in comparison to 2021, which contributed a $16.8 million increase in FTE interest income.

The yield on investment securities increased 8 bps in comparison to 2021, resulting in a $3.0 million increase in FTE interest income.

Yield on other interest-earning assets increased 74 bps in comparison to 2021, contributing $7.5 million to FTE interest income, partially offset by a decrease in the average balance of other interest-earning assets of $1.2 billion, contributing a $4.4 million decrease to FTE interest income.

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

During 2023, average loans increased $1.8 billion, or 9.3%, compared to 2022.

The yield on total loans increased 157 bps to 5.57% in 2023 compared to 4.00% in 2022.

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

6 unchanged sentences

Total demand and savings and money market deposits 18,138,816 1.02 19,574,411 0.13 (1,435,595) (7.3)

Brokered deposits 262,359 1.56 286,901 0.38 (24,542) (8.6)

Brokered deposits 847,795 5.15 262,359 1.56 585,436 N/M

Time deposits 2,170,245 2.94 1,617,804 0.92 552,441 34.1

Total deposits $ 21,156,856 1.38 % $ 21,454,574 0.20 % $ (297,718) (1.4) %

The cost of interest-bearing deposits increased 10 bps, to 0.31%, from 0.21% in 2021, due to an increase in rates.

The rate on total demand deposits and savings and money market deposits increased to 0.13%, compared to 0.04% for 2021.

Average interest-bearing demand deposits and average time deposits decreased $385.5 million and $321.6 million, respectively, during 2022.

Average noninterest-bearing demand deposits and average savings and money market deposits increased $311.2 million and $151.2 million, respectively, during 2022 compared to 2021.

The cost of total deposits increased 118 bps to 1.38% in 2023 compared to 0.20% in 2022, primarily due to rising interest rates and a change in mix of deposits.

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

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Federal funds purchased $ 566,379 5.30 % $ 91,125 3.21 % $ 475,254 N/M

Federal Home Loan Bank advances 194,295 3.77 126,677 1.80 67,618 53.4

Federal Home Loan Bank advances 922,164 5.05 194,295 3.77 727,869 N/M

Senior debt and subordinated debt 539,726 3.96 564,337 3.94 (24,611) (4.4)

2 unchanged sentences

Total borrowings and other interest-bearing liabilities $ 2,771,330 4.54 % $ 1,358,357 2.89 % $ 1,412,973 104.0 %

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

Total average borrowings and other interest-bearing liabilities increased $60.4 million, or 4.7%, and the rate on total average borrowings and other interest-bearing liabilities increased 60 bps, to 2.89%, compared to 2021.

Borrowings increased primarily as a result of the decrease in deposits.

Short-term Federal funds purchased and FHLB advances increased $91.1 million and $67.6 million, respectively.

Senior debt and subordinated debt decreased $93.0 million primarily due to the $65.0 million repayment of senior notes on March 16, 2022 and the redemption of $17.0 million of TruPS in September 2022.

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

Average FHLB advances, average federal funds purchased and average other borrowings and other interest-bearing liabilities increased $727.9 million, $475.3 million and $234.5 million, respectively.

See "Note 10 - Borrowings" of the Notes to Consolidated Financial Statements for additional details.

4 unchanged sentences

(dollars in thousands)

Wealth management $ 75,541 $ 72,843 $ 2,698 3.7

Commercial banking:

4 unchanged sentences

Total commercial banking 81,160 75,779 5,381 7.1

Wealth management 72,843 71,798 1,045 1.5

Consumer banking:

6 unchanged sentences

Non-interest income before investment securities gains (losses) 228,411 227,157 1,254 0.6

Investment securities gains (losses), net (27) 33,516 (33,543) (100.1)

Investment securities (losses) gains, net (733) (27) (706) N/M

Total Non-Interest Income $ 227,678 $ 227,130 $ 548 0.2 %

Non-interest income before investment securities gains (losses) decreased $13.1 million, or 5.4%, in 2022, as compared to 2021.

The primary contributors to this net decrease were as follows:

• Mortgage banking income decreased $19.4 million, or 57.7%, compared to 2021, mainly due to reduced gains on sales of mortgage loans.

• Other non-interest income decreased $5.8 million, or 28.1%, compared to 2021, primarily due to a decline in income from equity method investments.

• Total commercial banking income increased $7.1 million, or 10.3%, compared to 2021, driven mainly by increases in commercial customer interest rate swap fees reflected in capital markets, cash management fees and merchant and card revenues.

• Total consumer banking income increased $4.0 million, or 8.7%, compared to 2021, driven primarily by increases in overdraft fees and card income.

• Investment securities gains decreased $33.5 million, primarily due to the gain on sale of Visa Shares, as part of the balance sheet restructuring undertaken in 2021.

Non-interest income before investment securities gains (losses) increased $1.3 million, or 0.6%, during 2023 compared to 2022.

The increase in non-interest income was primarily due to increases in commercial banking revenues of $5.4 million, largely driven by an increase in commercial customer interest rate swap fee income reflected in capital markets, an increase in wealth management of $2.7 million, due to an increase in assets under management, and an increase in the cash surrender value of bank owned life insurance agreements of $1.7 million, reflected in other non-interest income, partially offset by decreases in mortgage banking income of $3.8 million, mainly due to lower sales volumes and lower gains on sales margins, consumer banking income of $2.3 million, driven largely by decreases in overdraft fees, and a $1.8 million reduction in 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.

Non-Interest Expense

7 unchanged sentences

Other outside services 45,149 37,152 7,997 21.5

Equipment 14,033 13,807 226 1.6

FDIC insurance 25,565 12,547 13,018 103.8

Professional fees 9,123 9,647 (524) (5.4)

Equipment 14,390 14,033 357 2.5

Marketing 9,004 6,885 2,119 30.8

Intangible amortization 1,731 589 1,142 N/M

Debt extinguishment — 33,249 (33,249) N/M

Merger-related expenses 10,328 — 10,328 N/M

Professional fees 8,392 9,123 (731) (8.0)

Intangible amortization 2,944 1,731 1,213 70.1

Other 69,281 68,595 686 1.0

Subtotal $ 676,010 $ 623,400 $ 52,610 8.4 %

FultonFirst implementation and asset disposals 3,197 — 3,197 N/M

Acquisition-related expenses — 10,328 (10,328) N/M

Total non-interest expense $ 679,207 $ 633,728 $ 45,479 7.2 %

Non-interest expense increased $15.9 million, or 2.6% compared to 2021.

Non-interest expense, excluding merger-related expenses of $10.3 million, was $623.4 million, an increase of $5.6 million, or 0.9% compared to non-interest expense of $617.8 million in 2021.

Excluding merger-related expenses, the increase in non-interest expense compared to 2021 was primarily due to increases in salaries and employee benefits of $27.7 million, attributable to higher employee base salaries of $20.2 million and deferred loan origination expense of $14.3 million, partially offset by lower commissions expense of $8.8 million.

Increases in data processing and software expenses, other outside services and net occupancy expense in 2022 of $3.8 million, $3.0 million and $2.4 million, respectively, also contributed to the increase in non-interest expense compared to 2021.

These increases were partially offset by a decrease of $33.2 million in debt extinguishment expense in 2021.

Non-interest expense in 2023 increased $45.5 million, or 7.2%, compared to 2022.

Excluding acquisition-related expenses of $10.3 million in 2022 and FultonFirst initiatives of $3.2 million in 2023, non-interest expense increased $52.6 million, or 8.4%, in 2023 compared to 2022.

The increase in noninterest expense, excluding acquisition-related expenses and FultonFirst initiatives, was primarily due to increases of $19.9 million in salaries and employee benefits expense, $13.0 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023, and the special assessment of $6.5 million charged to recover the loss to the DIF in connection with the closures of certain banks in 2023, $8.0 million in other outside services expense largely due to a number of corporate initiatives, $6.2 million in data processing and software expense due to ongoing investment in technology and customer growth and $2.1 million in marketing expense primarily due to a targeted customer deposit acquisition program and brand marketing campaigns.

The $19.9 million increase in salaries and employee benefits expense was largely due to annual merit increases, an increase in the number of employees, higher healthcare claims expense and higher pension expense.

Income tax expense for 2023 was $64.4 million, a $4.4 million increase compared to 2022.

The Corporation's ETR was 17.3% for the year ended 2022, compared to 17.6% for the same period in 2021.

The ETR was 18.5% in 2023 compared to 17.3% in 2022.

The increase in income tax expense in 2023 resulted primarily from the higher ETR.

FINANCIAL CONDITION

9 unchanged sentences

Net premises and equipment 195,527 222,881 (27,354) (12.3)

Goodwill and intangibles 560,687 560,824 (137) —

Goodwill and net intangible assets 635,458 560,687 74,771 13.3

Other assets 1,539,531 1,375,110 164,421 12.0

13 unchanged sentences

Available for Sale

Government securities $ 42,161 $ 218,485 $ (176,324) (80.7) %

Government-sponsored agency securities 1,010 1,008 2 0.2

Government securities $ — $ 42,161 $ (42,161) N/M

Government-sponsored agency securities — 1,010 (1,010) N/M

State and municipal securities 814,887 1,072,013 (257,126) (24.0)

Corporate debt securities 300,370 440,551 (140,181) (31.8)

Collateralized mortgage obligations 111,434 134,033 (22,599) (16.9)

Residential mortgage-backed securities 196,795 212,698 (15,903) (7.5)

Collateralized mortgage obligations 788,885 111,434 677,451 N/M

Residential mortgage-backed securities 989,875 196,795 793,080 N/M

Commercial mortgage-backed securities 516,882 534,388 (17,506) (3.3)

5 unchanged sentences

Total investment securities $ 4,806,468 $ 3,666,274 $ 1,140,194 31.1 %

Compared to December 31, 2022, total AFS securities at December 31, 2023 decreased $248.4 million, or 9.4%, primarily due to decreases in U.S.

Government securities, state and municipal securities, collateralized mortgage obligations, commercial

mortgage-backed securities and residential mortgage-backed securities of $176.3 million $33.7 million, $22.6 million, $18.1 million and $15.9 million, respectively.

At December 31, 2023, total HTM securities decreased $53.3 million, or 4.0%, primarily driven by a decrease in residential mortgage-backed securities of $50.3 million due to payments.

The following table presents ending loans outstanding, by type:

Compared to December 31, 2023, total AFS securities at December 31, 2024 increased $1.0 billion, or 42.2%.

The increase in AFS securities at December 31, 2024 compared to December 31, 2023 was due to increases in residential mortgage-backed

securities and collateralized mortgage obligations of $793.1 million and $677.5 million, respectively, partially offset by decreases in state and municipal securities and corporate debt securities of $257.1 million and $140.2 million, respectively.

Compared to December 31, 2023, total HTM securities at December 31, 2024 increased $127.6 million, or 10.1%.

The increase in HTM securities at December 31, 2024 compared to December 31, 2023 was largely driven by an increase in residential mortgage-backed securities of $130.8 million.

The following table presents ending net loans outstanding, by type:

December 31, Increase (Decrease)

11 unchanged sentences

Net loans $ 24,044,919 $ 21,351,094 $ 2,693,825 12.6 %

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

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

(2) Includes unearned income of $35.6 million and $38.0 million as of December 31, 2024 and 2023, respectively.

During 2023, net loans increased $1.1 billion, or 5.3%, compared to December 31, 2022, primarily due to increases in residential mortgage loans, commercial mortgage loans and commercial and industrial loans of $588.6 million, $433.9 million and $72.5 million, respectively, partially offset by decreases in home equity loans and construction loans of $55.7 million and $30.9 million, respectively.

During 2024, net loans increased $2.7 billion, or 12.6%, compared to December 31, 2023.

The increase in net loans during 2024 was primarily due to $2.4 billion of net loans acquired in the Republic First Transaction and outstanding as of December 31, 2024.

The overall increase in net loans was largely due to increases in commercial mortgage loans and residential mortgage loans, of $1.5 billion and $1.0 billion, respectively.

The Corporation does not have a significant concentration of credit risk with any single borrower.

As of December 31, 2024, approximately $11.0 billion, or 45.7%, of the loan portfolio was comprised of commercial mortgage loans and construction loans.

The Corporation has established lower total lending limits for certain types of lending commitments and lower total lending limits based on the Corporation's internal risk rating of an individual borrower at the time the lending commitment is approved.

The Corporation has established lower total lending limits for certain types of commercial lending commitments and lower total lending limits based on the Corporation's internal risk rating of an individual borrower at the time the lending commitment is approved.

The Corporation adheres to loan portfolio management practices, which include requiring an annual review of the majority of loans.

Additionally, management monitors the loan portfolio throughout the year taking into account, among other things, the size, complexity and level risk of loans and individual borrowers.

An independent loan review function assesses the portfolio for internal risk rating accuracy and loan servicing policy requirements.

The Corporation consolidates risk migrations to identify emerging risks by industry and real estate property types, taking into consideration economic forecasts and industry trends.

In 2024, the Corporation identified the office and multi-family commercial mortgage loan portfolios as posing heightened risks and consequently moderated the volume of new loan originations.

The Corporation takes a risk-based approach when reviewing a specific loan portfolio, such as the office loan or multi-family loan portfolios.

The Corporation reviews portfolio concentrations and adjusts the lending limits based on asset quality, economic forecasts and industry outlook.

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

1 unchanged sentence

39.5 % 46.6 %

Retail 6.6 3.3

Health care 6.3 6.6

Manufacturing 6.1 6.8

Agriculture 5.3 5.6

Other services 5.3 4.5

Manufacturing 5.1 6.1

Construction (2)

Hospitality and food services 4.0 3.6

Retail 3.3 3.1

Wholesale trade 3.4 3.2

2 unchanged sentences

Arts, entertainment and recreation 2.4 1.9

Transportation and warehousing 1.7 1.3

Finance and Insurance 1.6 1.3

Administrative and Support 1.1 1.1

Transportation and warehousing 1.5 1.7

Public administration 1.3 1.0

Administrative and Support 1.2 1.1

Other 6.5 4.3

4 unchanged sentences

and appraising real estate.

Real estate commercial office represents 3% of total loans.

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

The commercial mortgage loan portfolio consists of 46% owner occupied commercial mortgage loans and 54% of non-owner occupied commercial mortgage loans as of December 31, 2024.

The following table summarizes the non-owner occupied commercial mortgage loan portfolio and the percent to total net loans.

December 31, 2024 December 31, 2023

(dollars in thousands)

Multi-family $ 1,543,943 6.4 % $ 1,147,612 5.4 %

Retail trade 1,097,712 4.6 893,029 4.2

Industrial 829,354 3.4 634,533 3.0

Office 761,929 3.2 640,403 3.0

Hospitality and food services 470,907 2.0 453,305 2.1

Other 527,661 2.2 498,122 2.3

Total non-owner occupied commercial mortgage loans $ 5,231,506 21.8 % $ 4,267,004 20.0 %

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

December 31, 2024 December 31, 2023

Outstanding Balance Total Commitment Weighted Average LTV (1)

(dollars in thousands)

Philadelphia (2)

$ 339,164 $ 369,758 62 % $ 241,596 $ 247,395 56 %

96,129 100,893 59 60,149 62,565 71

Washington, D.C.

87,688 87,688 55 97,270 97,847 56

Baltimore (5)

75,318 76,453 58 82,573 82,577 51

Other 163,630 171,442 61 158,815 161,533 61

Total office non-owner occupied commercial real estate $ 761,929 $ 806,234 60 % $ 640,403 $ 651,917 58 %

(1) Weighted Average LTV as of origination .

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

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

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

(5) Baltimore-Columbia-Towson, MD.

The commercial mortgage office non-owner occupied loan portfolio table above excludes commercial construction loans secured by office property collateral with a total outstanding balance of $52.5 million and outstanding loan commitment of $57.4 million as of December 31, 2024.

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

December 31, 2024 December 31, 2023

Outstanding Balance Total Commitment Weighted Average LTV (1)

(dollars in thousands)

Philadelphia (2)

$ 707,826 $ 738,256 62 % $ 467,749 $ 480,942 57 %

124,321 130,238 64 53,153 53,642 72

Baltimore (4)

108,384 108,680 59 54,675 54,879 56

Washington, D.C.

28,145 31,121 48 87,020 92,483 51

Lancaster, PA 135,891 146,593 69 159,691 169,437 66

Other 439,376 479,884 59 325,324 361,693 65

Total multi-family non-owner occupied commercial real estate $ 1,543,943 $ 1,634,772 62 % $ 1,147,612 $ 1,213,076 59 %

(1) Weighted Average LTV as of origination .

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

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

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

(5) Baltimore-Columbia-Towson, MD.

The commercial mortgage multi-family non-owner occupied loan portfolio table above excludes commercial construction loans secured by multi-family property collateral with a total outstanding loan balance of $405.2 million and outstanding loan commitment of $693.4 million as of December 31, 2024.

The following table presents the changes in non-accrual loans for the years ended December 31:

5 unchanged sentences

Real Estate -

Home Equity Equipment Lease Financing Total

Home Equity Leases and Other Loans Total

(dollars in thousands)

12 unchanged sentences

Balance at December 31, 2024 $ 42,217 $ 99,497 $ 1,746 $ 25,400 $ 8,599 $ 11,834 $ 189,293

During 2023, non-accrual loans decreased $22.8 million, or 15.8%, largely due to payments and charge-offs, partially offset by additions to non-accrual loans.

During 2023, non-accrual loans as a percentage of net loans decreased to 0.57%, compared to 0.71% as of December 31, 2022.

During 2024, non-accrual loans increased $67.7 million, or 55.6%, largely due to additions to non-accrual loans, partially offset by payments and charge-offs.

During 2024, non-accrual loans as a percentage of net loans increased to 0.79%, compared to 0.57% as of December 31, 2023.

The following table presents non-performing assets:

43 unchanged sentences

Real estate - residential mortgage 13,969 9,092

Real estate - home equity 379 —

Real estate - construction 595 —

Total $ 39,357 $ 24,006

10 unchanged sentences

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

Total internally risk-rated loans were $13.7 billion and $13.2 billion as of December 31, 2023 and 2022, respectively, of which $0.9 million and $0.8 million were criticized and classified loans, respectively.

Total internally risk-rated loans were $15.4 billion and $13.7 billion as of December 31, 2024 and 2023, respectively, of which $1.8 billion and $925.0 million were criticized and classified loans, respectively.

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

8 unchanged sentences

Real estate - construction (3)

38,520 21,603 16,917 78.3 26,771 10,601 16,170 152.5 65,291 32,204

161,310 38,520 122,790 N/M 47,183 26,771 20,412 76.2 208,493 65,291

Total $ 931,542 $ 476,910 $ 454,632 95.3% $ 904,806 $ 448,045 $ 456,761 101.9% $ 1,836,348 $ 924,955

3 unchanged sentences

(3) Excludes construction - other.

Total loans risk-rated special mention increased by $15.0 million, or 3.2%, compared to December 31, 2022.

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.

Total criticized and classified loans increased $911.4 million, or 98.5%, compared to December 31, 2023.

The following table presents, by class segment, a summary of delinquency status and rates, as a percentage of total loans that do not have internal risk ratings:

The increase of $454.6 million in special mention loans as of December 31, 2024 was primarily due to loans acquired in the Republic First Transaction with a balance of $350.4 million as of December 31, 2024.

The increase of $456.8 million in substandard or lower loans as of December, 31, 2024 was partially due to loans acquired in the Republic First Transaction with a balance of $193.0 million as of December 31, 2024.

The following table presents, by class segment, a summary of delinquency status and rates, as a percentage of loans in each portfolio and in total, that do not have internal risk ratings:

Delinquent (1)

11 unchanged sentences

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

Loans and Allowance for Credit Losses

Allowance for Credit Losses

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

6 unchanged sentences

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

CECL Day 1 provision expense — 7,954 —

CECL Day 1 Provision (1)

23,444 — 7,954

Initial purchased credit deteriorated loans 54,631 — 1,135

Loans charged off:

Commercial and industrial (9,246) (2,390) (15,337)

Real estate - commercial mortgage (13,186) (17,999) (12,473)

Consumer and real estate - home equity (7,514) (4,412) (3,309)

Commercial and industrial (26,585) (9,246) (2,390)

Real estate - residential mortgage (1,472) (62) (66)

Consumer and real estate - home equity (8,490) (7,514) (4,412)

Real estate - construction — — —

2 unchanged sentences

Recoveries of loans previously charged off:

Commercial and industrial 3,473 5,893 9,587

Real estate - commercial mortgage 603 1,076 3,860

Consumer and real estate - home equity 3,198 2,581 2,345

Commercial and industrial 4,440 3,473 5,893

Real estate - residential mortgage 472 421 425

Consumer and real estate - home equity 3,357 3,198 2,581

Real estate - construction 382 858 574

6 unchanged sentences

Provision for OBS credit exposures (1)

$ (3,930) $ 926 $ 1,411

Reserve for OBS credit exposures (3)

8 unchanged sentences

ACL - loans to non-accrual loans 200 241 186

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

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

1 unchanged sentence

(4) Includes accruing loans past due 90 days or more.

The provision for credit losses, specific to loans, for 2023 was $53.1 million, compared to a provision for credit losses, specific to loans, of $26.6 million, which included an $8.0 million CECL Day 1 Provision recorded in 2022.

The increase in the provision for credit losses for net loans was primarily driven by loan growth, changes to the macroeconomic outlook, higher net loan charge-offs and migration of internally risk-rated loans into special mention and substandard or lower categories.

The provision for credit losses for 2024 was $71.6 million compared to a provision for credit losses of $54.0 million in 2023.

The increase in the provision for credit losses was primarily driven by a $23.4 million CECL Day 1 Provision related to the Republic First Transaction in 2024.

Additionally, included in the ACL as of December 31, 2024 was $54.6 million recorded for PCD Loans acquired in the Republic First Transaction.

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

See "Note 5 - Loans and Allowance for Credit Losses" of the Notes to Consolidated Financial Statements for additional details.

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

16 unchanged sentences

Management believes that the $379.2 million ACL - loans as of December 31, 2024 is sufficient to cover expected credit losses in the loan portfolio.

Premises and Equipment

The $58.6 million decrease in land and buildings and improvements was primarily due to $73.5 million of asset disposals in the Sale-Leaseback Transaction, partially offset by $21.7 million of land and buildings and improvements purchased as part of the Republic First Transaction in the fourth quarter of 2024.

The $73.5 million of premises and equipment disposals in the Sale-Leaseback Transaction included $42.5 million of related accumulated depreciation for a net disposal amount of $31.0 million.

Deposits and Borrowings

7 unchanged sentences

Total demand and savings 21,135,478 17,653,690 3,481,788 19.7

Brokered deposits 1,144,692 208,416 936,276 N/M

Brokered deposits 843,857 1,144,692 (300,835) (26.3)

Time deposits 4,150,098 2,739,241 1,410,857 51.5

Total deposits $ 26,129,433 $ 21,537,623 $ 4,591,810 21.3 %

During 2023, total deposits increased by $888.1 million, or 4.3%, compared to December 31, 2022.

The increase in total deposits was primarily due to increases in time deposits, brokered deposits, interest-bearing demand deposits and savings and money market deposits of $1.2 billion, $936.3 million, $311.8 million and $182.3 million, respectively, partially offset by a decrease in noninterest-bearing demand deposits $1.7 billion.

The shift from noninterest-bearing demand deposits to interest-bearing deposits was mainly due to rising interest rates.

During 2024, total deposits increased by $4.6 billion, or 21.3%, compared to December 31, 2023.

The increase in total deposits was primarily due to $3.7 billion of total deposits assumed in the Republic First Transaction and outstanding as of December 31, 2024.

Overall, the increase in total deposits was largely due to increases in interest-bearing demand deposits, time deposits and savings and money market deposits of $2.1 billion, $1.4 billion and $1.2 billion, respectively.

Total uninsured deposits (excluding intra-Company deposits) were estimated to be $9.4 billion and $7.2 billion at December 31, 2024 and December 31, 2023, respectively.

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(dollars in thousands)

Federal funds purchased $ 240,000 $ 191,000 $ 49,000 25.7

Federal funds purchased $ — $ 240,000 $ (240,000) N/M

Federal Home Loan Bank advances 850,000 1,100,000 (250,000) (22.7)

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During 2024, total borrowings decreased $705.5 million, or 28.4%, compared to December 31, 2023.

The decrease in total borrowings was due to decreases in other borrowings of $278.4 million, FHLB advances of $150.0 million and senior and subordinated debt of $4.3 million, partially offset by an increase in Federal funds purchased of $49.0 million.

The decrease in total borrowings was primarily due to decreases in FHLB advances, federal funds purchased and senior debt and subordinated debt of $250.0 million, $240.0 million and $168.1 million, respectively.

In November 2024, the Corporation retired $168.8 million of subordinated notes issued in November 2014 and June 2015 which matured on November 15, 2024.

See "Note 10 - Borrowings" of the Notes to Consolidated Financial Statements for additional details.

Other Liabilities

During 2023, other liabilities decreased $69.5 million, or 8.5%, compared to December 31, 2022, primarily due to a decrease in derivative related liabilities.

During 2024, other liabilities increased $176.4 million, or 22.4%, compared to December 31, 2023, primarily due to increases in the operating lease liability due to the Sale-Leaseback Transaction, accrued expenses and as a result of affordable housing investments made in 2024.

Shareholders' Equity

During 2024, total shareholders' equity increased $437.2 million, or 15.8%, to $3.2 billion, or 10.0% of total assets, as of December 31, 2024.

The increase was due primarily to an increase of $168.5 million in retained earnings and a reduction of $73.2 million in accumulated other comprehensive loss, partially offset by a $75.3 million increase in treasury stock largely due to common stock repurchases.

The increase in total shareholders' equity was largely due to net proceeds of $272.6 million related to the Corporation's underwritten public offering of 19,166,667 shares of its common stock at a price to the public of $15.00 per share, and $156.3 million in retained earnings.

See "Note 15 - Shareholders' Equity" in the Notes to the Consolidated Financial Statements in "Item 8.

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To be categorized as well-capitalized, a bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the Capital Rules.

There were no other conditions or events since December 31, 2023 that management believes have changed the Corporation's capital categories.

There were no other conditions or events in 2024 that management believes have changed the Corporation's capital categories.

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

1 unchanged sentence

2023 Regulatory

Adequacy Fully Phased-in, with Capital Conservation Buffers

Adequacy With Capital Conservation Buffers

Total Risk-Based Capital (to Risk-Weighted Assets) 14.3% 14.0% 8.0% 10.5%

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Contractual purchase obligations to third parties that were fixed and determinable of approximately $72.4 million and $124.6 million at December 31, 2024 and 2023, respectively, include information technology, telecommunication and data processing outsourcing contracts.

The increase is primarily due to the renewals of large multi-year contracts.

The decrease is primarily due to contract changes to annual renewals.

The following table summarizes the contractual purchase obligations for each of the next five years (dollars in thousands):

2025 $ 28,062

Total $ 72,367

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

13 unchanged sentences

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 7. Management’s Discussion and Analysis