Item 7. Management’s Discussion and Analysis
Item 7. 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 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.
OVERVIEW
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. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the NIM, which is FTE net interest income as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses on loans and OBS credit risks, non-interest expenses and income taxes.
The following table presents a summary of the Corporation's earnings and selected performance ratios:
2024 2023 2022
(dollars in thousands, except per share)
Net income $ 288,743 $ 284,280 $ 286,981
Net income available to common shareholders $ 278,495 $ 274,032 $ 276,733
Net income available to common shareholders per share (diluted) $ 1.57 $ 1.64 $ 1.67
Operating net income available to common shareholders per share (1)
$ 1.85 $ 1.71 $ 1.76
Return on average assets 0.95 % 1.04 % 1.10 %
Operating return on average assets (1)
1.11 % 1.08 % 1.16 %
Return on average common shareholders' equity 9.83 % 11.24 % 11.69 %
Operating return on average common shareholders' equity (tangible) (1)
14.81 % 15.21 % 16.08 %
Net interest margin (2)
3.42 % 3.42 % 3.27 %
Efficiency ratio (1)
60.8 % 60.5 % 60.5 %
Non-performing assets to total assets 0.69 % 0.56 % 0.66 %
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. See reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure under the "Supplemental Reporting of Non-GAAP Based Financial Measures" section of Management's Discussion.
(2) Presented on a FTE basis using a 21% federal tax rate and statutory interest expense disallowances.
Acquisition of Substantially all of the Assets and Assumption of Substantially all of the Deposits and Certain Liabilities of Republic First Bank from the FDIC
On the Acquisition Date, Fulton Bank acquired substantially all of the assets and assumed substantially all of the deposits and certain liabilities of Republic First Bank from the FDIC, as receiver for Republic First Bank. As part of the Republic First Transaction, the Bank acquired approximately $4.8 billion of assets of Republic First Bank and assumed approximately $5.6 billion of liabilities of Republic First Bank. The Bank received approximately $0.8 billion of cash from the FDIC in connection with the Republic First Transaction.
As a result of the Republic First Transaction, the Bank enhanced its presence in Philadelphia, Pennsylvania and New Jersey.
In connection with the Republic First Transaction, Fulton Bank made a $5.0 million donation to the Fulton Forward Foundation to provide additional impact grants to nonprofit community organizations across the region that share the Bank’s vision of advancing economic empowerment, particularly in underserved communities.
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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.
Borrowings
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
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
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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
This Annual Report on Form 10-K contains supplemental financial information, as detailed below, that has been derived by methods other than GAAP. The Corporation has presented these non-GAAP financial measures because it believes that these measures provide useful and comparative information to assess trends in the Corporation's results of operations. Presentation of these non-GAAP financial measures is consistent with how the Corporation evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Corporation's industry. Management believes that these non-GAAP financial measures, in addition to GAAP measures, are also useful to investors to evaluate the Corporation's results. Investors should recognize that the Corporation's presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures, and the Corporation strongly encourages a review of its consolidated financial statements in their entirety.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure follow:
2024 2023 2022
(dollars in thousands, except per share data)
Operating net income available to common shareholders
Net income available to common shareholders $ 278,495 $ 274,032 $ 276,733
Less: Other revenue (1,805) 1,855 —
Less: Gain on acquisition, net of tax (36,996) — —
Plus: Loss on securities restructuring 20,282 — —
Plus: Core deposit intangible amortization 17,307 2,308 1,029
Plus: Acquisition-related expense 37,635 — 10,328
Plus: CECL Day 1 Provision 23,444 — 7,954
Plus: FDIC special assessment 940 6,494 —
Less: Gain on Sale-Leaseback Transaction (20,266) — —
Plus: FultonFirst implementation and asset disposals 32,038 3,197 —
Less: Tax impact of adjustments (23,011) (2,909) (4,055)
Operating net income available to common shareholders (numerator) $ 328,063 $ 284,977 $ 291,989
Weighted average shares (diluted) (denominator) 177,223 166,769 165,472
Operating net income available to common shareholders, per share (diluted) $ 1.85 $ 1.71 $ 1.76
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2024 2023 2022
(dollars in thousands)
Operating return on average assets
Net income $ 288,743 $ 284,280 $ 286,981
Plus: Other revenue (1,805) 1,855 —
Less: Gain on acquisition, net of tax (36,996) — —
Plus: Loss on securities restructuring 20,282 — —
Plus: Core deposit intangible amortization 17,307 2,308 1,029
Plus: Acquisition-related expense 37,635 — 10,328
Plus: CECL Day 1 Provision 23,444 — 7,954
Plus: FDIC special assessment 940 6,494 —
Less: Gain on Sale-Leaseback Transaction (20,266) — —
Plus: FultonFirst implementation and asset disposals 32,038 3,197 —
Less: Tax impact of adjustments (23,011) (2,909) (4,055)
Operating net income (numerator) $ 338,311 $ 295,225 $ 302,237
Total average assets $ 30,473,130 $ 27,229,704 $ 25,971,484
Less: Average net core deposit intangible (61,810) (5,996) (3,915)
Total average operating assets (denominator) $ 30,411,320 $ 27,223,708 $ 25,967,569
Operating return on average assets 1.11 % 1.08 % 1.16 %
Operating return on average common shareholders' equity (tangible)
Net income available to common shareholders $ 278,495 $ 274,032 $ 276,733
Plus: Other revenue (1,805) 1,855 —
Less: Gain on acquisition, net of tax (36,996) — —
Plus: Loss on securities restructuring 20,282 —
Plus: Intangible amortization 17,830 2,944 1,731
Plus: Acquisition-related expense 37,635 — 10,328
Plus: CECL Day 1 Provision 23,444 — 7,954
Plus: FDIC special assessment 940 6,494 —
Less: Gain on Sale-Leaseback Transaction (20,266) — —
Plus: FultonFirst implementation and asset disposals 32,038 3,197 —
Less: Tax impact of adjustments (23,121) (3,043) (4,203)
Adjusted net income available to common shareholders (numerator) $ 328,476 $ 285,479 $ 292,543
Average shareholders' equity $ 3,025,642 $ 2,631,249 $ 2,560,323
Less: Average goodwill and intangible assets (615,156) (561,858) (548,102)
Less: Average preferred stock (192,878) (192,878) (192,878)
Average tangible common shareholders' equity (denominator) $ 2,217,608 $ 1,876,513 $ 1,819,343
Return on average common shareholders' equity (tangible) 14.81 % 15.21 % 16.08 %
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2024 2023 2022
(dollars in thousands)
Efficiency ratio
Non-interest expense $ 819,791 $ 679,207 $ 633,728
Less: Amortization of tax credit investments — — (2,783)
Less: Intangible amortization (17,830) (2,944) (1,731)
Less: Acquisition-related expense (37,635) — (10,328)
Less: Debt extinguishment gain (cost) — 720 —
Less: FDIC special assessment (940) (6,494) —
Less: Gain on Sale-Leaseback Transaction 20,266 — —
Less: FultonFirst implementation and asset disposals (32,038) (3,197) —
Non-interest expense (numerator) $ 751,614 $ 667,292 $ 618,886
Net interest income $ 960,325 $ 854,286 $ 781,634
Tax equivalent adjustment 17,915 17,811 14,995
Plus: Total non-interest income 275,731 227,678 227,130
Plus: Other revenue (1,805) 1,855 —
Less: Gain on acquisition, net of tax (36,996) — —
Plus: Investment securities losses (gains), net 20,283 733 27
Total revenue (denominator) $ 1,235,453 $ 1,102,363 $ 1,023,786
Efficiency ratio 60.8 % 60.5 % 60.5 %
CRITICAL ACCOUNTING POLICIES
The following is a summary of those accounting policies that the Corporation considers to be most important to the presentation of its financial condition and results of operations, because they require management's most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain. See additional information regarding these critical accounting policies in "Note 1 - Summary of Significant Accounting Policies," in the Notes to the Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."
Allowance for Credit Losses - The ACL is based on estimated losses over the remaining expected life of loans. Management's determination of the appropriateness of the reserve is based on periodic evaluations of the loan portfolio, lending-related commitments, current and forecasted economic factors and other relevant factors.
Loans Evaluated Collectively : Loans evaluated collectively for expected credit losses include all 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.
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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.
The ACL for loans was $379.2 million and $293.4 million on December 31, 2024 and December 31, 2023, respectively. 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 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. Financial Statements and Supplementary Data."
Income Taxes - Income tax expense is based upon income before taxes, adjusted for the effect of certain tax-exempt income, non-deductible expenses and credits. In addition, certain items of income and expense are reported in different periods for financial reporting and tax return purposes. The tax effects of these temporary differences are recognized currently in the deferred income tax provision or benefit. DTAs or deferred tax liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the applicable enacted marginal tax rate.
The Corporation must also evaluate the likelihood that DTAs will be recovered through future taxable income. If any such assets are determined to be more likely than not unrecoverable, then a valuation allowance must be recognized. The assessment of the carrying value of DTAs is based on certain assumptions, the changes of which could have a material impact on the Corporation's consolidated financial statements.
On a periodic basis, the Corporation evaluates its income tax expense based on tax laws, regulations and financial reporting considerations and records adjustments as appropriate. Recognition and measurement of tax positions is based upon management's evaluations of current taxing authorities' examinations of the Corporation's tax returns, recent positions taken by the taxing authorities on similar transactions and the overall tax environment.
Income tax expense was $55.9 million and $64.4 million for the years ended December 31, 2024 and December 31, 2023, respectively.
Recently Issued Accounting Standards
For a description of accounting standards recently issued, but not yet adopted by the Corporation, see "Recently Issued Accounting Standards," in "Note 1 - Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data."
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RESULTS OF OPERATIONS
Net Interest 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. Quantitative and Qualitative Disclosures About Market Risk." The following table provides a comparative average balance sheet and net interest income analysis for 2024 compared to 2023 and 2022. Interest income and yields are presented on an FTE basis using a 21% federal tax rate as well as statutory interest expense disallowances. The discussion following this table is based on these tax-equivalent amounts.
2024 2023 2022
Average
Balance Interest (1)
Yield/
Rate Average
Balance Interest (1)
Yield/
Rate Average
Balance Interest (1)
Yield/
Rate
(dollars in thousands)
ASSETS
Interest-earning assets:
Net loans (2)
$ 23,145,114 $ 1,406,216 6.08 % $ 20,929,302 $ 1,166,376 5.57 % $ 19,152,740 $ 765,603 4.00 %
Investment securities (3)
4,486,726 143,317 3.19 4,210,010 109,325 2.59 4,364,627 106,115 2.43
Other interest-earning assets 962,971 50,578 5.25 387,360 15,346 3.96 829,705 8,115 0.98
Total interest-earning assets 28,594,811 1,600,111 5.60 25,526,672 1,291,047 5.06 24,347,072 879,833 3.61
Noninterest-earning assets:
Cash and due from banks 295,156 215,649 156,050
Premises and equipment 197,823 219,315 220,982
Other assets 1,761,083 1,553,284 1,505,277
Less: ACL - loans (4)
(375,743) (285,216) (257,897)
Total Assets $ 30,473,130 $ 27,229,704 $ 25,971,484
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 7,049,915 $ 128,969 1.83 % $ 5,582,930 $ 62,494 1.12 % $ 5,593,942 $ 8,219 0.15 %
Savings and money market deposits 7,364,106 180,455 2.45 6,616,087 122,340 1.85 6,458,165 16,642 0.26
Brokered deposits 981,060 51,691 5.27 847,795 43,635 5.15 262,359 4,097 1.56
Time deposits 3,747,029 160,744 4.29 2,170,245 63,735 2.94 1,617,804 14,871 0.92
Total interest-bearing deposits 19,142,110 521,859 2.73 15,217,057 292,204 1.92 13,932,270 43,829 0.31
Borrowings and other interest-bearing liabilities 2,280,382 100,012 4.39 2,771,330 126,746 4.54 1,358,357 39,375 2.89
Total interest-bearing liabilities 21,422,492 621,871 2.90 17,988,387 418,950 2.32 15,290,627 83,204 0.54
Noninterest-bearing liabilities:
Demand deposits 5,394,518 5,939,799 7,522,304
Other liabilities 630,478 670,269 598,230
Total Liabilities 27,447,488 24,598,455 23,411,161
Shareholders' equity 3,025,642 2,631,249 2,560,323
Total Liabilities and Shareholders' Equity $ 30,473,130 $ 27,229,704 $ 25,971,484
Net interest income/net interest margin (FTE) 978,240 3.42 % 872,097 3.42 % 796,629 3.27 %
Tax equivalent adjustment (17,915) (17,811) (14,995)
Net interest income $ 960,325 $ 854,286 $ 781,634
(1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.
(2) Average balances include non-performing loans.
(3) Average balances include amortized historical cost for AFS securities; the related unrealized holding gains (losses) are included in other assets.
(4) ACL - loans relates to the ACL specifically for net loans and does not include the ACL for OBS credit exposures, which is included in other liabilities.
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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
Volume Yield/Rate Net
(dollars in thousands)
FTE interest income on:
Net loans (1)
$ 128,611 $ 111,229 $ 239,840
Investment securities 7,513 26,479 33,992
Other interest-earning assets 28,897 6,335 35,232
Total FTE interest income $ 165,021 $ 144,043 $ 309,064
Interest expense on:
Demand deposits $ 19,480 $ 46,995 $ 66,475
Savings and money market deposits 15,022 43,093 58,115
Brokered deposits 7,016 1,040 8,056
Time deposits 59,441 37,568 97,009
Borrowings and other interest-bearing liabilities (22,532) (4,202) (26,734)
Total interest expense $ 78,427 $ 124,494 $ 202,921
(1) Average balance includes non-performing loans.
Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of the direct changes that are attributable to each component.
Compared to 2023, FTE total interest income for 2024 increased $309.1 million due to increases of $144.0 million attributable to changes in yield and $165.0 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.
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 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.
Average loans and average FTE yields, by type, are summarized in the following table:
2024 2023 Increase (Decrease)
Balance Yield Balance Yield $ %
(dollars in thousands)
Real estate - commercial mortgage $ 9,052,738 6.51 % $ 7,876,076 5.97 % $ 1,176,662 14.9 %
Commercial and industrial 4,779,254 6.67 4,596,742 6.27 182,512 4.0
Real estate - residential mortgage 5,925,708 4.31 5,079,739 3.76 845,969 16.7
Real estate - home equity 1,060,520 7.43 1,060,396 6.95 124 —
Real estate - construction 1,275,562 7.61 1,247,336 6.81 28,226 2.3
Consumer 725,308 6.67 748,089 5.94 (22,781) (3.0)
Leases and other loans (1)
326,024 5.77 320,924 4.37 5,100 1.6
Total loans $ 23,145,114 6.08 % $ 20,929,302 5.57 % $ 2,215,812 10.6 %
(1) Consists of equipment lease financing, overdrafts and net origination fees and costs.
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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.
Average deposits and interest rates, by type, are summarized in the following table:
2024 2023 Increase (Decrease)
Balance Rate Balance Rate $ %
(dollars in thousands)
Noninterest-bearing demand $ 5,394,518 — % $ 5,939,799 — % $ (545,281) (9.2) %
Interest-bearing demand 7,049,915 1.83 5,582,930 1.12 1,466,985 26.3
Savings and money market deposits 7,364,106 2.45 6,616,087 1.85 748,019 11.3
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 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
Total deposits $ 24,536,628 2.13 % $ 21,156,856 1.38 % $ 3,379,772 16.0 %
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 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:
2024 2023 Increase (Decrease)
Balance Rate Balance Rate $ %
(dollars in thousands)
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)
Other borrowings and other interest-bearing liabilities (1)
910,675 3.66 743,061 3.77 167,614 22.6
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 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
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by an elevated level of provision for credit losses in the same period in 2023 due to a $13.3 million charge-off for a commercial office loan.
Non-Interest Income
The following table presents the components of non-interest income:
Increase (Decrease)
2024 2023 $ %
(dollars in thousands)
Wealth management $ 84,743 $ 75,541 $ 9,202 12.2 %
Commercial banking:
Merchant and card 29,186 29,205 (19) —
Cash management 28,106 23,340 4,766 20.4
Capital markets 11,033 15,654 (4,621) (29.5)
Other commercial banking 16,657 12,961 3,696 28.5
Total commercial banking 84,982 81,160 3,822 4.7
Consumer banking:
Card 30,914 26,343 4,571 17.4
Overdraft 13,764 11,416 2,348 20.6
Other consumer banking 10,826 9,438 1,388 14.7
Total consumer banking 55,504 47,197 8,307 17.6
Mortgage banking 13,943 10,388 3,555 34.2
Other 19,846 14,125 5,721 40.5
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 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.
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Non-Interest Expense
The following table presents the components of non-interest expense:
Increase (Decrease)
2024 2023 $ %
(dollars in thousands)
Salaries and employee benefits $ 424,733 $ 376,795 $ 47,938 12.7 %
Data processing and software 77,882 66,471 11,411 17.2
Net occupancy 69,359 58,019 11,340 19.5
Other outside services 47,811 45,149 2,662 5.9
FDIC insurance 23,829 25,565 (1,736) (6.8)
Equipment 17,850 14,390 3,460 24.0
Marketing 8,958 9,004 (46) (0.5)
Professional fees 10,681 8,392 2,289 27.3
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 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 Taxes
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.
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Comparison of 2023 to 2022
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
Volume Yield/Rate Net
(dollars in thousands)
FTE interest income on:
Net loans (1)
$ 76,608 $ 324,165 $ 400,773
Investment securities (3,763) 6,973 3,210
Other interest-earning assets (6,298) 13,529 7,231
Total FTE interest income $ 66,547 $ 344,667 $ 411,214
Interest expense on:
Demand deposits $ (17) $ 54,292 $ 54,275
Savings and money market deposits 421 105,277 105,698
Brokered deposits 19,464 20,074 39,538
Time deposits 6,577 42,287 48,864
Borrowings 56,410 30,961 87,371
Total interest expense $ 82,855 $ 252,891 $ 335,746
(1) Average balance includes non-performing loans.
Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of the direct changes that are attributable to each component.
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 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 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 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:
2023 2022 Increase (Decrease)
Balance Yield Balance Yield $ %
(dollars in thousands)
Real estate - commercial mortgage $ 7,876,076 5.97 % $ 7,523,806 4.00 % $ 352,270 4.7 %
Commercial and industrial
4,596,742 6.27 4,230,133 4.13 366,609 8.7
Real estate - residential mortgage 5,079,739 3.76 4,261,527 3.38 818,212 19.2
Real estate - home equity 1,060,396 6.95 1,101,142 4.60 (40,746) (3.7)
Real estate - construction 1,247,336 6.81 1,178,550 4.14 68,786 5.8
Consumer 748,089 5.94 569,305 5.11 178,784 31.4
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 equipment lease financing, overdrafts and net origination fees and costs.
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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. 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:
2023 2022 Increase (Decrease)
Balance Rate Balance Rate $ %
(dollars in thousands)
Noninterest-bearing demand $ 5,939,799 — % $ 7,522,304 — % $ (1,582,505) (21.0) %
Interest-bearing demand 5,582,930 1.12 5,593,942 0.15 (11,012) (0.2)
Savings and money market deposits 6,616,087 1.85 6,458,165 0.26 157,922 2.4
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 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 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 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 borrowings and interest rates, by type, are summarized in the following table:
2023 2022 Increase (Decrease)
Balance Rate Balance Rate $ %
(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
Senior debt and subordinated debt 539,726 3.96 564,337 3.94 (24,611) (4.4)
Other borrowings and other interest-bearing liabilities (1)
743,061 3.77 508,600 1.34 234,461 46.1
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, capital leases and collateral liabilities.
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. See "Note 10 - Borrowings" of the Notes to Consolidated Financial Statements for additional details.
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Non-Interest Income
The following table presents the components of non-interest income:
Increase (Decrease)
2023 2022 $ %
(dollars in thousands)
Wealth management $ 75,541 $ 72,843 $ 2,698 3.7
Commercial banking:
Merchant and card 29,205 28,276 929 3.3 %
Cash management 23,340 23,729 (389) (1.6)
Capital markets 15,654 12,256 3,398 27.7
Other commercial banking 12,961 11,518 1,443 12.5
Total commercial banking 81,160 75,779 5,381 7.1
Consumer banking:
Card 26,343 24,472 1,871 7.6
Overdraft 11,416 15,480 (4,064) (26.3)
Other consumer banking 9,438 9,544 (106) (1.1)
Total consumer banking 47,197 49,496 (2,299) (4.6)
Mortgage banking 10,388 14,204 (3,816) (26.9)
Other 14,125 14,835 (710) (4.8)
Non-interest income before investment securities gains (losses) 228,411 227,157 1,254 0.6
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) 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.
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Non-Interest Expense
The following table presents the components of non-interest expense:
Increase (Decrease)
2023 2022 $ %
(dollars in thousands)
Salaries and employee benefits $ 376,795 $ 356,884 $ 19,911 5.6 %
Data processing and software 66,471 60,255 6,216 10.3
Net occupancy 58,019 56,195 1,824 3.2
Other outside services 45,149 37,152 7,997 21.5
FDIC insurance 25,565 12,547 13,018 103.8
Equipment 14,390 14,033 357 2.5
Marketing 9,004 6,885 2,119 30.8
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 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 Taxes
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. 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.
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FINANCIAL CONDITION
The table below presents condensed consolidated ending balance sheets:
December 31, Increase (Decrease)
2024 2023 $ %
(dollars in thousands)
Assets
Cash and cash equivalents $ 1,063,871 $ 549,710 $ 514,161 93.5 %
FRB and FHLB Stock 139,574 124,405 15,169 12.2
Loans held for sale 25,618 15,158 10,460 69.0
Investment securities 4,806,468 3,666,274 1,140,194 31.1
Net loans, less ACL - loans 23,665,763 21,057,690 2,608,073 12.4
Net premises and equipment 195,527 222,881 (27,354) (12.3)
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
Total Assets $ 32,071,810 $ 27,571,915 $ 4,499,895 16.3 %
Liabilities and Shareholders' Equity
Deposits $ 26,129,433 $ 21,537,623 $ 4,591,810 21.3 %
Borrowings 1,782,048 2,487,526 (705,478) (28.4)
Other liabilities 963,004 786,627 176,377 22.4
Total Liabilities 28,874,485 24,811,776 4,062,709 16.4
Total Shareholders' Equity 3,197,325 2,760,139 437,186 15.8
Total Liabilities and Shareholders' Equity $ 32,071,810 $ 27,571,915 $ 4,499,895 16.3 %
Investment Securities
The table below presents the carrying amount of investment securities:
December 31, Increase (Decrease)
2024 2023 $ %
(dollars in thousands)
Available for Sale
U.S. Government securities $ — $ 42,161 $ (42,161) N/M
U.S. 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 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)
Total available for sale securities $ 3,410,899 $ 2,398,352 $ 1,012,547 42.2 %
Held to Maturity
Residential mortgage-backed securities $ 537,856 $ 407,075 $ 130,781 32.1 %
Commercial mortgage-backed securities 857,713 860,847 (3,134) (0.4)
Total held to maturity securities $ 1,395,569 $ 1,267,922 $ 127,647 10.1 %
Total investment securities $ 4,806,468 $ 3,666,274 $ 1,140,194 31.1 %
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
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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.
Loans
The following table presents ending net loans outstanding, by type:
December 31, Increase (Decrease)
2024 2023 $ %
(dollars in thousands)
Real estate - commercial mortgage $ 9,601,858 $ 8,127,728 $ 1,474,130 18.1 %
Commercial and industrial (1)
4,605,589 4,545,552 60,037 1.3
Real estate - residential mortgage 6,349,643 5,325,923 1,023,720 19.2
Real estate - home equity 1,160,616 1,047,184 113,432 10.8
Real estate - construction 1,394,899 1,239,075 155,824 12.6
Consumer 616,856 729,318 (112,462) (15.4)
Leases and other loans (2)
315,458 336,314 (20,856) (6.2)
Net loans $ 24,044,919 $ 21,351,094 $ 2,693,825 12.6 %
(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 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 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.
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The following table summarizes the industry concentrations within the commercial mortgage and the commercial and industrial loan portfolios:
December 31,
2024 2023
Real estate (1)
39.5 % 46.6 %
Retail 6.6 3.3
Health care 6.3 6.6
Agriculture 5.3 5.6
Other services 5.3 4.5
Manufacturing 5.1 6.1
Construction (2)
4.3 4.1
Hospitality and food services 4.0 3.6
Wholesale trade 3.4 3.2
Educational services 3.0 2.9
Professional, scientific and technical services 2.7 2.2
Arts, entertainment and recreation 2.4 1.9
Finance and Insurance 1.6 1.3
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
Total 100.0 % 100.0 %
(1) Includes commercial loans to borrowers engaged in the business of: renting, leasing or managing real estate for others; selling and/or buying real estate for
others; and appraising real estate.
(2) Includes commercial loans to borrowers engaged in the construction industry.
The commercial mortgage loan portfolio consists of 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 %
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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)
Outstanding Balance Total Commitment Weighted Average LTV (1)
(dollars in thousands)
Philadelphia (2)
$ 339,164 $ 369,758 62 % $ 241,596 $ 247,395 56 %
New York (3)
96,129 100,893 59 60,149 62,565 71
Washington, D.C. (4)
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)
Outstanding Balance Total Commitment Weighted Average LTV (1)
(dollars in thousands)
Philadelphia (2)
$ 707,826 $ 738,256 62 % $ 467,749 $ 480,942 57 %
New York (3)
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. (5)
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.
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The following table presents the changes in non-accrual loans for the years ended December 31:
Commercial and
Industrial Real Estate -
Commercial
Mortgage Real Estate -
Construction Real Estate -
Residential
Mortgage Consumer and
Real Estate -
Home Equity Leases and Other Loans Total
(dollars in thousands)
Balance at December 31, 2022 $ 27,116 $ 70,161 $ 1,368 $ 26,294 $ 6,197 $ 13,307 $ 144,443
Additions 46,358 31,004 438 792 8,416 1,520 88,528
Payments (24,276) (38,296) (465) (1,881) (2,245) (554) (67,717)
Charge-offs (9,246) (17,999) — (62) (7,514) (4,380) (39,201)
Transfers to OREO — — — (1,793) — — (1,793)
Transfers to accrual status — (65) — (2,526) (49) — (2,640)
Balance at December 31, 2023 39,952 44,805 1,341 20,824 4,805 9,893 121,620
Additions 70,700 94,887 1,406 11,067 15,066 7,759 200,885
Payments (33,580) (25,757) (130) (4,780) (2,414) (825) (67,486)
Charge-offs (26,585) (13,186) — (1,472) (8,490) (4,696) (54,429)
Transfers to OREO (90) (133) (871) (97) (190) — (1,381)
Transfers to accrual status (8,180) (1,119) — (142) (178) (297) (9,916)
Balance at December 31, 2024 $ 42,217 $ 99,497 $ 1,746 $ 25,400 $ 8,599 $ 11,834 $ 189,293
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:
December 31,
2024 2023 2022
(dollars in thousands)
Non-accrual loans (1)(2)
$ 189,293 $ 121,620 $ 144,443
Loans 90 days or more past due and still accruing (2)
30,781 31,721 27,463
Total non-performing loans and leases 220,074 153,341 171,906
OREO (3)
2,621 896 5,790
Total non-performing assets $ 222,695 $ 154,237 $ 177,696
Non-accrual loans to total loans 0.79 % 0.57 % 0.71 %
Non-performing loans to total loans 0.92 % 0.72 % 0.85 %
Non-performing assets to total assets 0.69 % 0.56 % 0.66 %
ACL to non-performing loans 172 % 191 % 157 %
(1) The amount of interest income on non-accrual loans that was recognized in 2024, 2023 and 2022 was approximately $1.0 million, $1.5 million and $2.2
million, respectively.
(2) Accrual of interest is generally discontinued when a loan becomes 90 days past due. In certain cases a loan may be placed on non-accrual status prior to being
90 days delinquent if there is an indication that the borrower is having difficulty making payments or the Corporation believes it is probable that all amounts
will not be collected according to the contractual terms of the agreement. 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 to be adequately secured and in the process of collection. Certain loans, primarily adequately collateralized residential
mortgage loans, may continue to accrue interest after reaching 90 days past due.
(3) Excludes $17.5 million, $10.9 million and $6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of
December 31, 2024, 2023 and 2022, respectively.
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The following table presents non-performing loans:
December 31,
2024 2023 2022
(dollars in thousands)
Real estate - commercial mortgage $ 102,359 $ 46,527 $ 72,634
Commercial and industrial 43,677 41,020 28,288
Real estate - residential mortgage 45,901 42,029 46,509
Real estate - home equity 13,349 10,079 8,809
Real estate - construction 1,746 2,876 1,368
Consumer 1,025 799 991
Leases and other loans 12,017 10,011 13,307
Total non-performing loans $ 220,074 $ 153,341 $ 171,906
Non-performing loans to total loans 0.92 % 0.72 % 0.85 %
The following table presents the amortized cost basis of loans modified to borrowers experiencing financial difficulty:
December 31,
2024 2023
(dollars in thousands)
Real estate - commercial mortgage $ 20,501 $ 2,944
Commercial and industrial 3,913 11,970
Real estate - residential mortgage 13,969 9,092
Real estate - home equity 379 —
Real estate - construction 595 —
Total $ 39,357 $ 24,006
There were no loans modified due to borrowers experiencing financial difficulty that defaulted during 2024.
The following table summarizes OREO, by property type:
December 31,
2024 2023 2022
(dollars in thousands)
Commercial properties $ 1,888 $ 165 $ 3,881
Residential properties 733 229 482
Undeveloped land — 502 1,427
Total OREO $ 2,621 $ 896 $ 5,790
The Corporation's ability to identify potential problem loans in a timely manner is important to maintaining an adequate ACL. For commercial and industrial loans, commercial mortgage loans and construction loans to commercial borrowers, an internal risk rating process is used to monitor credit quality. The evaluation of credit risk for residential mortgages, home equity loans, construction loans to individuals, consumer loans and leases and other loans is based on payment history through the monitoring of delinquency levels and trends.
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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:
Special Mention (1)
Increase (Decrease) Substandard or Lower (2)
Increase (Decrease) Total Criticized and Classified Loans
December 31, December 31, December 31,
2024 2023 $ % 2024 2023 $ % 2024 2023
(dollars in thousands)
Real estate - commercial mortgage $ 531,423 $ 302,553 $ 228,870 75.6% $ 522,377 $ 224,774 $ 297,603 132.4% $ 1,053,800 $ 527,327
Commercial and industrial 238,809 135,837 102,972 75.8 335,246 196,500 138,746 70.6 574,055 332,337
Real estate - construction (3)
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
% of total risk-rated loans 6.1% 3.5% 5.9% 3.3% 11.9% 6.8%
(1) Considered "criticized" loans by banking regulators.
(2) Considered "classified" loans by banking regulators.
(3) Excludes construction - other.
Total criticized and classified loans increased $911.4 million, or 98.5%, compared to December 31, 2023.
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)
Non-performing (2)
Total
December 31, December 31, December 31, December 31, December 31, December 31,
2024 2023 2024 2023 2024 2023
$ % $ % $ % $ % $ % $ %
(dollars in thousands)
Consumer and real estate - home equity $ 16,241 0.91 % $ 20,345 1.15 % $ 14,374 0.81 % $ 10,878 0.61 % $ 30,615 1.72 % $ 31,223 1.76 %
Real estate - residential mortgage 65,539 1.03 59,983 1.13 45,901 0.72 42,029 0.79 111,440 1.76 102,012 1.92
Real estate - construction 5,302 2.42 4,636 0.37 1,406 0.64 1,535 0.12 6,708 3.06 6,171 0.50
Leases and other loans 374 0.12 868 0.26 12,017 3.81 10,011 2.98 12,391 3.93 10,879 3.23
Total $ 87,456 1.01 % $ 85,832 0.99 % $ 73,698 0.85 % $ 64,453 0.74 % $ 161,154 1.86 % $ 150,285 1.74 %
(1) Includes accruing loans 30 days to 89 days past due.
(2) Includes accruing loans 90 days or more past due and non-accrual loans and leases.
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Allowance for Credit Losses
The Corporation accounts for the credit risk associated with lending activities through the ACL and the provision for credit losses.
The following table presents the activity in the ACL:
December 31, December 31, December 31,
2024 2023 2022
(dollars in thousands)
Net loans $ 24,044,919 $ 21,351,094 $ 20,279,547
Average balance of net loans $ 23,145,114 $ 20,929,302 $ 19,152,740
Balance of ACL at beginning of period $ 293,404 $ 269,366 $ 249,001
CECL Day 1 Provision (1)
23,444 — 7,954
Initial purchased credit deteriorated loans 54,631 — 1,135
Loans charged off:
Real estate - commercial mortgage (13,186) (17,999) (12,473)
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 — — —
Leases and other loans (4,696) (4,380) (2,131)
Total loans charged off (54,429) (39,201) (21,472)
Recoveries of loans previously charged off:
Real estate - commercial mortgage 603 1,076 3,860
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
Leases and other loans 730 1,103 759
Total recoveries 9,984 10,129 14,092
Net loans charged off (recoveries) (44,445) (29,072) (7,380)
Provision for credit losses (1)(2)
52,122 53,110 18,656
Balance of ACL at end of period $ 379,156 $ 293,404 $ 269,366
Provision for OBS credit exposures (1)
$ (3,930) $ 926 $ 1,411
Reserve for OBS credit exposures (3)
$ 14,161 $ 17,254 $ 16,328
Selected Asset Quality Ratios %:
Net charge-offs to average loans 0.19 % 0.14 % 0.04 %
ACL - loans to total net loans 1.58 1.37 1.33
Non-performing assets (4) to total assets
0.69 0.56 0.66
Non-accrual loans to total net loans 0.79 0.57 0.71
ACL - loans to non-performing loans 172 191 157
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.
(3) Reserve for OBS credit exposures is recorded within other liabilities on the Consolidated Balance Sheets.
(4) Includes accruing loans past due 90 days or more.
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.
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The following table summarizes the allocation of the ACL - loans :
December 31, 2024 December 31, 2023 December 31, 2022
ACL - loans % to Total ACL - loans (1)
% to Total Net Loans (2)
ACL - loans % to Total ACL - loans (1)
% to Total Net Loans (2)
ACL - loans % to Total ACL - loans (1)
% to Total Net Loans (2)
(dollars in thousands)
Real estate - commercial mortgage $ 158,181 41.7 % 39.9 % $ 112,565 38.4 % 38.1 % $ 69,456 25.8 % 37.9 %
Commercial and industrial 92,212 24.3 19.2 74,266 25.3 21.3 70,116 26.0 22.1
Real estate - residential mortgage 81,331 21.5 26.4 73,286 25.0 24.9 83,250 30.9 23.4
Consumer, home equity and leases and other loans 22,292 5.9 8.7 20,992 7.1 9.9 35,801 13.3 10.3
Real estate - construction 25,140 6.6 5.8 12,295 4.2 5.8 10,743 4.0 6.3
Total $ 379,156 100.0 % 100.0 % $ 293,404 100.0 % 100.0 % $ 269,366 100.0 % 100.0 %
(1) Ending ACL - loan portfolio segment balance as a % of total ACL - loans.
(2) Ending loan portfolio segment balances as a % of total net loans for the periods presented.
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
The following table presents ending deposits, by type:
December 31, Increase (Decrease)
2024 2023 $ %
(dollars in thousands)
Noninterest-bearing demand $ 5,499,760 $ 5,314,094 $ 185,666 3.5 %
Interest-bearing demand 7,843,604 5,722,695 2,120,909 37.1
Savings and money market deposits 7,792,114 6,616,901 1,175,213 17.8
Total demand and savings 21,135,478 17,653,690 3,481,788 19.7
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 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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The following table presents ending borrowings, by type:
December 31, Increase (Decrease)
2024 2023 $ %
(dollars in thousands)
Federal funds purchased $ — $ 240,000 $ (240,000) N/M
Federal Home Loan Bank advances 850,000 1,100,000 (250,000) (22.7)
Senior debt and subordinated debt 367,316 535,384 (168,068) (31.4)
Other borrowings (1)
564,732 612,142 (47,410) (7.7)
Total borrowings $ 1,782,048 $ 2,487,526 $ (705,478) (28.4) %
(1) Includes repurchase agreements, short-term promissory notes and capital leases.
During 2024, total borrowings decreased $705.5 million, or 28.4%, compared to December 31, 2023. 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 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 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. Financial Statements and Supplementary Data" for details of accumulated comprehensive loss.
Regulatory Capital
The Corporation and its wholly-owned subsidiary bank, Fulton Bank, are subject to the Capital Rules administered by banking regulators. Failure to meet minimum capital requirements can trigger certain actions by regulators that could have a material effect on the Corporation's financial statements.
The Capital Rules require the Corporation and Fulton Bank to:
• Meet a minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets;
• Meet a minimum Tier 1 Leverage capital ratio of 4.00% of average assets;
• Meet a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 capital ratio of 6.00% of risk-weighted assets;
• Maintain a "capital conservation buffer" of 2.50% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonus payments; and
• Comply with a revised definition of capital to improve the ability of regulatory capital instruments to absorb losses. Certain non-qualifying capital instruments, including cumulative preferred stock and TruPS, are excluded as a component of Tier 1 capital for institutions of the Corporation's size.
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As of December 31, 2024, the Corporation's capital levels met the minimum capital requirements, including the capital conservation buffers, as prescribed in the Capital Rules.
As of December 31, 2024, Fulton Bank met the well-capitalized requirements under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, a bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the Capital Rules. There were no other conditions or events 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:
December 31,
2024 December 31,
2023 Regulatory
Minimum
for Capital
Adequacy With Capital Conservation Buffers
Total Risk-Based Capital (to Risk-Weighted Assets) 14.3% 14.0% 8.0% 10.5%
Tier I Risk-Based Capital (to Risk-Weighted Assets) 11.5% 11.2% 6.0% 8.5%
Common Equity Tier I (to Risk-Weighted Assets) 10.8% 10.3% 4.5% 7.0%
Tier I Leverage Capital (to Average Assets) 9.0% 9.5% 4.0% 4.0%
Contractual Obligations and Off-Balance Sheet Arrangements
The Corporation has various financial obligations that require future cash payments. These obligations include payments for liabilities recorded on the Corporation's consolidated balance sheets as well as contractual obligations for purchased services.
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 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):
Year
2025 $ 28,062
2026 25,392
2027 7,365
2028 6,713
2029 4,835
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. These financial instruments include commitments to extend credit and standby and commercial letters of credit, which involve, to varying degrees, elements of credit and interest rate risk that are not recognized on the consolidated balance sheets. 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. 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 or domestic trade transactions for customers. Commitments and standby and commercial letters of credit do not necessarily represent future cash needs, as they may expire without being drawn.
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The following table presents the Corporation's commitments to extend credit and letters of credit as of December 31, 2024 (dollars in thousands):
Commercial and industrial $ 4,967,334
Real estate - commercial mortgage and real estate - construction 1,706,879
Real estate - home equity 2,154,382
Total commitments to extend credit $ 8,828,595
Standby letters of credit $ 279,309
Commercial letters of credit 48,993
Total letters of credit $ 328,302
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