FULTON FINANCIAL CORP 10-K

Item 8. Financial Statements and Supplementary Data CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per-share data) December 31, 2024 2023 ASSETS Cash and due from banks $ 279,041 $ 300,343 Interest-bearing deposits with other banks 784,830 249,367 Cash and Cash Equivalents 1,063,871 549,710 FRB and FHLB stock 139,574 124,405 Loans held for sale 25,618 15,158 Investment securities: AFS, at estimated fair value 3,410,899 2,398,352 HTM, at amortized cost 1,395,569 1,267,922 Net loans 24,044,919 21,351,094 Less: ACL - loans ( 379,156 ) ( 293,404 ) Loans, Net 23,665,763 21,057,690 Net premises and equipment 195,527 222,881 Accrued interest receivable 117,029 107,972 Goodwill and net intangible assets 635,458 560,687 Other assets 1,422,502 1,267,138 Total Assets $ 32,071,810 $ 27,571,915 LIABILITIES Deposits: Noninterest-bearing $ 5,499,760 $ 5,314,094 Interest-bearing 20,629,673 16,223,529 Total Deposits 26,129,433 21,537,623 Borrowings: Federal funds purchased — 240,000 FHLB advances 850,000 1,100,000 Senior debt and subordinated debt 367,316 535,384 Other borrowings and interest-bearing liabilities 564,732 612,142 Total Borrowings 1,782,048 2,487,526 Accrued interest payable 31,620 35,083 Other liabilities 931,384 751,544 Total Liabilities 28,874,485 24,811,776 SHAREHOLDERS' EQUITY Preferred stock, no par value, 10,000,000 shares authorized, Series A, 200,000 shares issued as of December 31, 2024 and 2023, liquidation preference of $ 1,000 per share 192,878 192,878 Common stock, $ 2.50 par value, 600,000,000 shares authorized, 245,946,392 shares issued as of December 31, 2024 and 225,760,963 issued as of December 31, 2023 614,866 564,402 Additional paid-in capital 1,789,214 1,552,860 Retained earnings 1,775,620 1,619,300 Accumulated other comprehensive loss ( 287,819 ) ( 312,280 ) Treasury stock, at cost, 63,857,567 shares in 2024 and 61,959,552 shares in 2023 ( 887,434 ) ( 857,021 ) Total Shareholders' Equity 3,197,325 2,760,139 Total Liabilities and Shareholders' Equity $ 32,071,810 $ 27,571,915 See Notes to Consolidated Financial Statements 70 CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per-share data) 2024 2023 2022 Interest Income Loans, including fees $ 1,394,969 $ 1,156,373 $ 758,609 Investment securities 136,650 101,518 98,115 Other interest income 50,577 15,345 8,114 Total Interest Income 1,582,196 1,273,236 864,838 Interest Expense Deposits 521,859 292,205 43,829 Federal funds purchased 2,881 30,417 2,967 FHLB advances 37,793 46,965 7,334 Senior debt and subordinated debt 20,255 21,361 22,257 Other borrowings and interest-bearing liabilities 39,083 28,002 6,817 Total Interest Expense 621,871 418,950 83,204 Net Interest Income 960,325 854,286 781,634 Provision for credit losses 71,636 54,036 28,021 Net Interest Income After Provision for Credit Losses 888,689 800,250 753,613 Non-Interest Income Commercial banking 84,982 81,160 75,779 Wealth management 84,743 75,541 72,843 Consumer banking 55,504 47,197 49,496 Mortgage banking 13,943 10,388 14,204 Gain on acquisition, net of tax 36,996 — — Other 19,846 14,125 14,835 Non-Interest Income Before Investment Securities Gains (Losses), Net 296,014 228,411 227,157 Investment securities gains (losses), net ( 20,283 ) ( 733 ) ( 27 ) Total Non-Interest Income 275,731 227,678 227,130 Non-Interest Expense Salaries and employee benefits 432,821 377,417 356,884 Data processing and software 77,882 66,471 60,255 Net occupancy 69,359 58,019 56,195 Other outside services 60,586 47,724 37,152 FDIC insurance 23,829 25,565 12,547 Equipment 17,850 14,390 14,033 Intangible amortization 17,830 2,944 1,731 Professional fees 10,857 8,392 9,123 Marketing 8,958 9,004 6,885 Acquisition-related expenses 37,635 — 10,328 Other 62,184 69,281 68,595 Total Non-Interest Expense 819,791 679,207 633,728 Income Before Income Taxes 344,629 348,721 347,015 Income taxes 55,886 64,441 60,034 Net Income 288,743 284,280 286,981 Preferred stock dividends ( 10,248 ) ( 10,248 ) ( 10,248 ) Net Income Available to Common Shareholders $ 278,495 $ 274,032 $ 276,733 PER SHARE: Net income available to common shareholders (basic) $ 1.59 $ 1.66 $ 1.69 Net income available to common shareholders (diluted) 1.57 1.64 1.67 Cash dividends 0.69 0.64 0.66 See Notes to Consolidated Financial Statements 71 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (dollars in thousands) 2024 2023 2022 Net Income $ 288,743 $ 284,280 $ 286,981 Other comprehensive income (loss), net of tax: Unrealized gains (losses) on AFS investment securities: Net unrealized holding gains (losses) ( 22,425 ) 36,023 ( 312,169 ) Reclassification adjustment for securities net change realized in net income 15,689 ( 567 ) ( 20 ) Amortization of net unrealized gains (losses) on AFS securities transferred to HTM 5,609 5,913 ( 44,483 ) Net Unrealized Gains (Losses) on AFS Investment Securities ( 1,127 ) 41,369 ( 356,672 ) Unrealized gains (losses) on interest rate derivatives used in cash flow hedges: Net unrealized holding gains (losses) 590 6,998 ( 62,963 ) Reclassification adjustment for net change realized in net income 18,141 19,995 6,004 Net Unrealized Gains (Losses) on Interest Rate Derivatives Used in Cash Flow Hedges 18,731 26,993 ( 56,959 ) Defined benefit pension plan and postretirement benefits: Unrecognized pension and postretirement income (cost) 7,279 4,777 644 Amortization of net unrecognized pension and postretirement income (loss) ( 422 ) 57 100 Net Unrealized Gains (Losses) on Defined Benefit Pension and Postretirement Plans 6,857 4,834 744 Other Comprehensive Income (Loss), Net of Tax 24,461 73,196 ( 412,887 ) Total Comprehensive Income $ 313,204 $ 357,476 $ ( 125,906 ) See Notes to Consolidated Financial Statements 72 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands, except per share data) Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Income Shares Outstanding Amount Shares Outstanding Amount Retained Earnings Treasury Stock Total Balance at December 31, 2021 200 $ 192,878 160,490 $ 559,766 $ 1,519,873 $ 1,282,383 $ 27,411 $ ( 869,631 ) $ 2,712,680 Net income 286,981 286,981 Other comprehensive loss ( 412,887 ) ( 412,887 ) Common stock issued (1) 261 653 3,677 4,330 Dividend reinvestment activity 362 85 5,149 5,234 Reissuance of treasury stock pursuant to acquisition 6,209 4,547 85,166 89,713 Stock-based compensation awards (repurchases) 277 1,092 13,658 ( 2,438 ) 12,312 Preferred stock dividend ( 10,248 ) ( 10,248 ) Common stock dividends - $ 0.66 per share ( 108,358 ) ( 108,358 ) Balance at December 31, 2022 200 192,878 167,599 561,511 1,541,840 1,450,758 ( 385,476 ) ( 781,754 ) 2,579,757 Net income 284,280 284,280 Other comprehensive income 73,196 73,196 Common stock issued (1) 231 578 2,548 34 3,160 Dividend reinvestment activity 408 ( 132 ) 5,691 5,559 Stock-based compensation awards (repurchases) 592 2,313 8,604 ( 3,936 ) 6,981 Acquisition of treasury stock ( 5,029 ) ( 77,056 ) ( 77,056 ) Preferred stock dividend ( 10,248 ) ( 10,248 ) Common stock dividends - $ 0.64 per share ( 105,490 ) ( 105,490 ) Balance at December 31, 2023 200 192,878 163,801 564,402 1,552,860 1,619,300 ( 312,280 ) ( 857,021 ) 2,760,139 Net income 288,743 288,743 Other comprehensive income 24,461 24,461 Common stock issued (2) 19,339 48,348 227,052 12 275,412 Dividend reinvestment activity 322 902 4,753 5,655 Stock-based compensation awards (repurchases) 561 2,116 8,400 ( 4,830 ) 5,686 Acquisition of treasury stock ( 1,934 ) ( 30,348 ) ( 30,348 ) Preferred stock dividend ( 10,248 ) ( 10,248 ) Common stock dividends - $ 0.69 per share ( 122,175 ) ( 122,175 ) Balance at December 31, 2024 200 $ 192,878 182,089 $ 614,866 $ 1,789,214 $ 1,775,620 $ ( 287,819 ) $ ( 887,434 ) $ 3,197,325 (1) Issuance of common stock includes issuance in connection with the Corporation's ESPP and exercised stock options. (2) Issuance of common stock includes the issuance of 19,166,667 shares of common stock in an underwritten public offering that closed on May 1, 2024, issuance in connection with the Corporation’s ESPP and exercised stock options. See Notes to Consolidated Financial Statements 73 CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 288,743 $ 284,280 $ 286,981 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 71,636 54,036 28,021 Depreciation and amortization of premises and equipment 39,164 30,055 30,201 Net amortization of investment securities premiums 764 11,231 12,824 Net accretion of loan discounts ( 38,748 ) — — Investment securities losses, net 20,283 733 27 Gain on sales of mortgage loans held for sale ( 8,186 ) ( 5,094 ) ( 8,816 ) Proceeds from sales of mortgage loans held for sale 547,691 363,406 455,607 Originations of mortgage loans held for sale ( 549,965 ) ( 366,206 ) ( 418,287 ) Intangible amortization 17,830 2,944 1,731 Amortization of issuance costs and discounts on long-term borrowings 710 750 724 Gain on acquisition, net of tax ( 36,996 ) — — Gain on disposal of premises and equipment ( 30 ) — — Gain on Sale-Leaseback Transaction ( 20,266 ) — — Stock-based compensation 10,516 12,540 14,000 Net change in deferred income tax ( 23,187 ) 24,666 ( 117,849 ) Net change in accrued salaries and benefits 19,463 ( 5,868 ) 12,826 Net change in life insurance cash surrender value ( 19,872 ) ( 27,664 ) ( 95,702 ) Other changes, net 97,015 ( 16,825 ) 392,503 Total adjustments 127,822 78,704 307,810 Net Cash Provided by Operating Activities 416,565 362,984 594,791 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of AFS securities 2,300,487 213,424 196,411 Proceeds from principal repayments and maturities of AFS securities 334,405 149,211 583,444 Proceeds from principal repayments and maturities of HTM securities 56,455 59,685 109,759 Purchase of AFS securities ( 1,744,778 ) ( 79,053 ) ( 845,744 ) Purchase of HTM securities ( 177,947 ) — ( 30,959 ) Net change in FRB and FHLB stock 22,762 5,781 ( 72,551 ) Net change in loans ( 149,081 ) ( 1,100,816 ) ( 1,407,289 ) Net purchases of premises and equipment ( 42,453 ) ( 32,958 ) ( 21,246 ) Settlement of bank owned life insurance 2,687 2,264 3,474 Proceeds from Sale-Leaseback Transaction 51,123 — — Net cash received (paid) for acquisitions 1,018,371 — ( 21,811 ) Net change in tax credit investments ( 42,699 ) ( 26,753 ) ( 29,071 ) Net Cash Provided by (Used in) Investing Activities 1,629,332 ( 809,215 ) ( 1,535,583 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in demand and savings deposits 478,593 ( 1,198,222 ) ( 1,198,319 ) Net change in time deposits and brokered deposits 1,074 2,086,307 ( 257,823 ) Net change in other borrowings ( 1,951,161 ) ( 379,431 ) 1,629,870 Repayments of senior debt and subordinated debt ( 168,778 ) ( 5,000 ) ( 81,496 ) Net proceeds from common stock 270,582 3,160 7,876 Dividends paid ( 131,698 ) ( 115,738 ) ( 116,009 ) Acquisition of treasury stock ( 30,348 ) ( 77,056 ) — Net Cash (Used in) Provided by Financing Activities ( 1,531,736 ) 314,020 ( 15,901 ) Net increase (decrease) in Cash and Cash Equivalents 514,161 ( 132,211 ) ( 956,693 ) Cash and Cash Equivalents at Beginning of Period 549,710 681,921 1,638,614 Cash and Cash Equivalents at End of Period $ 1,063,871 $ 549,710 $ 681,921 Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 658,778 $ 394,052 $ 80,019 Income taxes 29,116 25,319 32,669 74 Supplemental Schedule of Certain Noncash Activities: Transfer of AFS securities to HTM securities $ — $ — $ 479,008 Fair value of tangible assets acquired 4,707,290 — — Intangible assets 92,600 — — Liabilities assumed 5,561,979 — — PCD Loans credit discount 54,631 — — See Notes to Consolidated Financial Statements 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business: The Corporation is a financial holding company that provides a full range of banking and financial services to businesses and consumers through its wholly-owned banking subsidiary, Fulton Bank. In addition, the Parent Company owns the following non-bank subsidiaries: Fulton Financial Realty Company, Central Pennsylvania Financial Corp., FFC Penn Square, Inc., Fulton Insurance Services Group, Inc. and Fulton Community Partner, LLC. Collectively, the Parent Company and its subsidiaries are referred to as the Corporation. The Corporation's primary sources of revenue are interest income on loans, investment securities and other interest-earning assets and fee income earned on its products and services. Its expenses consist of interest expense on deposits and borrowed funds, provision for credit losses, other operating expenses and income taxes. The Corporation's primary competition is other financial services providers operating in its region. Competitors also include financial services providers located outside the Corporation's geographic market as a result of the growth in electronic delivery channels. The Corporation is subject to the regulations of certain federal and state agencies and undergoes periodic examinations by such regulatory agencies. The Corporation offers, through its banking subsidiary, a full range of retail and commercial banking services in Pennsylvania, Delaware, Maryland, New Jersey and Virginia. Basis of Financial Statement Presentation: The consolidated financial statements have been prepared in accordance with GAAP and include the accounts of the Parent Company and all wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosed amount of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The Corporation evaluates subsequent events through the date of the filing of this report with the SEC. Cash and Cash Equivalents and Restricted Cash: Cash and cash equivalents consists of cash and due from banks and interest-bearing deposits with other banks, which includes restricted cash. Restricted cash comprises cash balances required to be maintained with the FRB, based on customer transaction deposit account levels, and cash balances provided as collateral on derivative contracts and other contracts. See "Note 3 - Restrictions on Cash and Cash Equivalents" for additional information. FRB and FHLB Stock: The Bank is a member of the FRB and FHLB and is required by federal law to hold stock in these institutions according to predetermined formulas. These restricted investments are carried at cost on the consolidated balance sheets and are periodically evaluated for impairment. Investments: Debt securities are classified as HTM at the time of purchase when the Corporation has both the intent and ability to hold these investments until they mature. Such debt securities are carried at cost, adjusted for amortization of premiums and accretion of discounts using the effective yield method. The Corporation does not engage in trading activities; however, since the investment portfolio serves as a source of liquidity, most debt securities are classified as AFS. AFS securities are carried at estimated fair value with the related unrealized holding gains and losses reported in shareholders' equity as a component of AOCI, net of tax. Realized securities gains and losses are computed using the specific identification method and are recorded on a trade date basis. HTM Debt Securities: Expected credit losses on HTM debt securities would be recorded in the ACL on HTM debt securities. As of December 31, 2024, no HTM debt securities required an ACL as these investments consist solely of agency-guaranteed residential mortgage-backed and commercial mortgage-backed securities. AFS Debt Securities : The Bank's AFS rated debt securities are investment grade. In evaluating credit losses on debt securities, management considers factors such as the credit quality of the investments, the credit rating of the security, and the delinquency history of the security. As of December 31, 2024, no AFS debt securities required an ACL. Fair Value Option: The Corporation has elected to measure mortgage loans held for sale at fair value. Derivative financial instruments related to mortgage banking activities are also recorded at fair value, as detailed under the heading "Derivative Financial Instruments," below. The Corporation determines fair value for its mortgage loans held for sale based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Changes in fair values during the period are recorded as components of mortgage banking income on the 76 consolidated statements of income. Interest income earned on mortgage loans held for sale is classified in interest income on the consolidated statements of income. Loans : Loans are stated at amortized cost, except for mortgage loans held for sale, which are carried at fair value. Interest income on loans is accrued as earned. In general, loans are placed on non-accrual status once they become 90 days delinquent as to principal or interest. 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 loan 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 adequately secured and in the process of collection. The Corporation generally applies payments received on non-accruing loans to principal until such time as the principal is paid off, after which time any payments received are recognized as interest income. If the Corporation believes that all amounts outstanding on a non-accrual loan will ultimately be collected, payments received subsequent to its classification as a non-accrual loan are allocated between interest income and principal. A loan that is 90 days delinquent may continue to accrue interest if the loan is both adequately secured and is in the process of collection. Past due status is determined based on contractual due dates for loan payments. An adequately secured loan is one that has collateral with a supported fair value that is sufficient to discharge the debt, and/or has an enforceable guarantee from a financially responsible party. A loan is considered to be in the process of collection if collection is proceeding through legal action or through other activities that are reasonably expected to result in repayment of the debt or restoration to current status in the near future. Loans deemed to be a loss are written off through a charge against the ACL. Closed-end consumer loans are generally charged- off when they become 120 days past due ( 180 days for open-end consumer loans) if they are not adequately secured by real estate. All other loans are evaluated for possible charge-off when it is probable that the balance will not be collected, based on the ability of the borrower to pay and the value of the underlying collateral, if any. Principal recoveries of loans previously charged-off are recorded as increases to the ACL. Loan Origination Fees and Costs: Loan origination fees and the related direct origination costs are deferred and amortized over the life of the loan as an adjustment to interest income using the effective yield method. For mortgage loans sold, net loan origination fees and costs are included in the gain or loss on sale of the related loan, as components of mortgage banking. Loan Modifications: Loans are accounted for and reported as modified when, for economic or legal reasons, the Corporation grants a concession to a borrower experiencing financial difficulty that it would not otherwise consider. Concessions, whether negotiated or imposed by bankruptcy, granted under a loan modification typically involve a more than insignificant deferral of scheduled loan payments, an extension of a loan's stated maturity date, a reduction in the interest rate or a forgiveness of principal. Because the effect of most modifications made to loans to borrowers experiencing financial difficulty is already included in the ACL, a change to the ACL is generally not recorded upon modification. When principal forgiveness is provided, the amortized cost basis of the forgiven portion of the loan is written off against the ACL. Allowance for Credit Losses: The Corporation follows ASU 2016-13 Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments . The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans and HTM debt securities. It also applies to OBS credit exposures, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments, and net investments in leases recognized by a lessor in accordance with ASC Topic 842. The Corporation has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income. The ACL consists of loans evaluated collectively and individually for expected credit losses. The ACL represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to net loans. The ACL is increased or decreased (when the provision for credit losses is negative) through the provision for credit losses and increased or decreased (when recoveries of loans previously charged off exceed loans charged off) by charge-offs, net of 77 recoveries. The reserve for OBS credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures. Loans: The ACL is an estimate of the expected losses to be realized over the life of the loans in the portfolio. The ACL is determined for two distinct categories of loans: (i) loans evaluated collectively for expected credit losses and (ii) loans evaluated individually for expected credit losses. Loans Evaluated Collectively : Loans evaluated collectively for expected credit losses include accruing loans and non-accrual loans where the total commitment amount is less than $1 million. In determining the ACL, the Corporation uses three inputs to model the estimate. These inputs are the PD rate which estimates the likelihood that a borrower will be unable to meet its debt obligations, the LGD rate which estimates the percentage of an asset that is lost if a borrower defaults, and the EAD balance which estimates the gross exposure under a facility upon default. The PD models were developed based on historical default data. Both internal and external variables are evaluated in the process. The main internal variables are risk rating or delinquency history and indicators of default. The external variables are economic variables obtained from third-party forecasts. The PD models are transition matrix models that utilize historical credit observations and incorporate economic forecasts to project future default rates using a linear regression methodology for each loan segment. The LGD model uses a vintage loss approach that estimates LGD rates based on the bank’s historical loss experience for each loan segment. The EAD incorporates a prepayment rate and applies the PD rates to estimate the projected exposure at default across the life of each loan. The ACL is calculated by applying the LGD to the EAD at each period across the life of each loan. The ACL incorporates the Corporation’s historical credit observations, current conditions, and reasonable and supportable forecasts that are based on the projected performance of specific economic variables that are statistically correlated with historical PD rates. The reasonable and supportable forecast extends to 24 months and reverts back to an average PD rate using a straight-line reversion methodology over a 12 month period. The ACL is highly sensitive to the economic forecasts used to develop the reserve. As such, the calculation of the ACL is inherently subjective and requires management to exercise judgment. The ACL may include qualitative adjustments intended to capture the impact of uncertainties not reflected in the quantitative models. In determining qualitative adjustments, management considers changes in national, regional, and local economic and business conditions and their impact on the lending environment, including underwriting standards and other factors affecting credit losses over the remaining life of each loan. Loans Evaluated Individually : Loans evaluated individually for expected credit losses include loans on non-accrual status where the commitment amount equals or exceeds $1.0 million. The required ACL for such loans is determined using the present value of expected future cash flows, observable market price or the fair value of collateral. Loans evaluated individually may have specific allocations of the ACL assigned if the measured value of the loan using one of the noted techniques is less than its current carrying value. For loans measured using the fair value of collateral, if the analysis determines that sufficient collateral value would be available for repayment of the debt, then no allocations would be assigned to those loans. Collateral could be in the form of real estate or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate. For loans secured by real estate, estimated fair values are determined primarily through appraisals performed by third-party appraisers, discounted to arrive at expected net sale proceeds. For collateral-dependent loans, estimated real estate fair values are also net of estimated selling costs. When a real estate secured loan is impaired, a decision is made regarding whether an updated appraisal of the real estate is necessary. This decision is based on various considerations, including: the age of the most recent appraisal; the loan-to-value ratio based on the original appraisal; the condition of the property; the Corporation's experience and knowledge of the real estate market; the purpose of the loan; market factors; payment status; the strength of any guarantors; and the existence and age of other indications of value such as broker price opinions, among others. The Corporation generally obtains updated appraisals performed by third-party appraisers for impaired loans secured predominantly by real estate every 12 months. When updated appraisals are not obtained for loans secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated an acceptable loan-to-value position and there has not been a significant deterioration in the collateral value since the original appraisal was performed. 78 For loans with principal balances greater than or equal to $1.0 million secured by non-real estate collateral, such as accounts receivable or inventory, estimated fair values are determined based on borrower financial statements, inventory listings, accounts receivable agings or borrowing base certificates provided by the borrower. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. Liquidation or collection discounts are applied to these assets based upon existing loan evaluation policies. Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification. For commercial loans, commercial mortgages and construction loans to commercial borrowers, an internal risk rating process is used. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk rating categories is a significant component of the ACL methodology for these loans, which bases the PD on this migration. Assigning risk ratings involves judgment. Risk ratings may be changed based on ongoing monitoring procedures, or if specific loan review assessments identify a deterioration or an improvement in the loan. The following is a summary of the Corporation's internal risk rating categories: • Pass : These loans do not currently pose undue credit risk and can range from the highest to average quality, depending on the degree of potential risk. • Special Mention : These loans have a heightened credit risk, but not to the point of justifying a classification of Substandard. Loans in this category are currently acceptable but, are nevertheless potentially weak. • Substandard or Lower : These loans are inadequately protected by current sound worth and paying capacity of the borrower. There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt. The Corporation considers risk factors such as: local and national economic conditions; trends in delinquencies and non-accrual loans; the diversity of borrower industry types; and the composition of the portfolio by loan type. OBS Credit Exposures: The reserve for OBS credit exposures is recorded in other liabilities on the consolidated balance sheets, and represents management's estimate of expected losses in its unfunded loan commitments and other OBS credit exposures. The reserve for OBS credit exposures specific to unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). The reserve for OBS credit exposures is increased or decreased by charges or reductions to expense, through the provision for credit losses. Premises and Equipment: Premises and equipment are stated at cost, less accumulated depreciation and amortization. The provision for depreciation and amortization is generally computed using the straight-line method over the estimated useful lives of the related assets, which are a maximum of 50 years for buildings and improvements, 8 years for furniture and 7 years for equipment. Leasehold improvements are amortized over the shorter of the useful life or the non-cancelable lease term. Premises and equipment acquired in a business combination are initially recorded at fair value and subsequently carried at cost less depreciation and amortization. See "Note 6 - Premises and Equipment" for additional information. OREO: Assets acquired in settlement of mortgage loan indebtedness are recorded as OREO and are included in other assets on the consolidated balance sheets, initially at the lower of the estimated fair value of the asset, less estimated selling costs, or the carrying amount of the loan. Costs to maintain the assets and subsequent gains and losses on sales are included in other non-interest expense on the consolidated statements of income. MSRs: The estimated fair value of MSRs related to residential mortgage loans sold and serviced by the Corporation is recorded as an asset upon the sale of such loans. MSRs are amortized as a reduction to mortgage servicing income, included as a component of mortgage banking income on the consolidated statements of income, over the estimated lives of the underlying loans. MSRs are stratified and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined through a discounted cash flows valuation completed by a third-party valuation expert. Significant inputs to the valuation include expected net servicing income, the discount rate and the expected lives of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. To the extent the amortized cost of the MSRs exceeds their estimated fair value, a valuation allowance is established through a charge against servicing income. If subsequent valuations indicate that impairment no longer exists, the valuation allowance is reduced through an increase to servicing income. See "Note 8 - Mortgage Servicing Rights" for additional information. 79 Derivative Financial Instruments: The Corporation manages its exposure to certain interest rate risk through the use of derivatives. Certain of the Corporation's outstanding derivative contracts are designated as hedges, and none are entered into for speculative purposes. The Corporation enters into derivative contracts that are intended to economically hedge certain of its risks, even if hedge accounting does not apply or the Corporation elects not to apply hedge accounting. The Corporation records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Corporation has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. The Corporation does not have any derivative instruments designated as fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives designated as cash flow hedges where hedge accounting is applied, changes in fair value are recognized in OCI, net of tax. For derivatives where hedge accounting does not apply, changes in fair value are recognized in earnings as components of non-interest income or non-interest expense on the consolidated statements of income. Derivative contracts create counterparty credit risk with both the Corporation's customers and with institutional derivative counterparties. The Corporation manages counterparty credit risk through its credit approval processes, monitoring procedures and obtaining adequate collateral, when the Corporation determines it is appropriate to do so and in accordance with counterparty contracts. For each of the derivatives, gross derivative assets and liabilities are recorded in other assets and other liabilities, respectively, on the consolidated balance sheets. Related gains and losses on these derivative instruments are recorded in other changes, net on the consolidated statements of cash flows. Mortgage Banking Derivatives In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed-rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation enters into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured. Interest Rate Derivatives - Non-Designated Hedges The Corporation enters into interest rate derivatives with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate derivatives with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate derivatives is that the customer pays a fixed rate of interest and the Corporation receives a floating rate. As the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. The Corporation's existing OBS credit exposures result from participation in interest rate derivatives provided by external lenders as part of loan participation arrangements and, therefore, are not used to manage interest rate risk in the Corporation's assets or liabilities. The Corporation is required to clear all eligible interest rate derivative contracts with a clearing agent and is subject to the regulations of the Commodity Futures Trading Commission. Cash Flow Hedges of Interest Rate Risk The Corporation's objectives in using interest rate derivatives are to reduce volatility in net interest income and interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate derivatives as part of its interest rate risk management strategy. The Corporation enters into interest rate derivatives designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans and borrowings. 80 For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative is recorded in OCI, net of tax, and subsequently reclassified into interest income or interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in OCI related to derivatives will be reclassified to interest income or interest expense as interest payments are made on the Corporation's variable-rate loans and borrowings. Foreign Exchange Contracts The Corporation enters into foreign exchange contracts to accommodate the needs of its customers. Foreign exchange contracts are commitments to buy or sell foreign currency on a specific date at a contractual price. The Corporation limits its foreign exchange exposure with customers by entering into contracts with institutional counterparties to mitigate its foreign exchange risk. The Corporation also holds certain amounts of Foreign Currency Nostro Accounts. The Corporation limits the total overnight net foreign currency open positions, which is defined as an aggregate of all outstanding contracts, to $ 0.5 million. See "Note 11 - Derivative Financial Instruments" for additional information. Balance Sheet Offsetting: Certain financial assets and liabilities may be eligible for offset on the consolidated balance sheets because they are subject to master netting arrangements or similar agreements. The Corporation has elected to net its financial assets and liabilities designated as cash flow hedges when offsetting is permitted. The Corporation has elected not to offset the remaining assets and liabilities subject to such arrangements on the consolidated financial statements. The Corporation is a party to interest rate derivatives with financial institution counterparties and customers. Under these agreements, the Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on, or termination of, any one contract. Cash collateral is posted by the party with a net liability position in accordance with contract thresholds and can be used to settle the fair value of the interest rate derivatives in the event of default. A daily settlement occurs through a clearing agent for changes in the fair value of centrally cleared derivatives. Not all derivatives are required to be cleared through a daily clearing agent. As a result, the total fair values of interest rate derivative assets and derivative liabilities recognized on the consolidated balance sheets are not equal and offsetting. The Corporation is also a party to foreign exchange contracts with financial institution counterparties under which the Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on, or termination of, any one contract. As with interest rate derivatives, cash collateral is posted by the party with a net liability position in accordance with contract thresholds and can be used to settle the fair value of the foreign exchange contracts in the event of default. For additional information on balance sheet offsetting, see "Note 11 - Derivative Financial Instruments." Income Taxes: The Corporation utilizes the asset and liability method in accounting for income taxes. Under this method, DTAs and deferred tax liabilities are determined based upon the difference between the values of the assets and liabilities as reflected in the financial statements and their related tax basis using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. As changes in tax law or rates are enacted, DTAs and deferred tax liabilities are adjusted through income tax expense. In assessing the realizability of DTAs, management considers whether it is more likely than not that some portion or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income and tax planning strategies which will create taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the amount of taxes paid in available carryback years, projected future taxable income, and, if necessary, tax planning strategies in making this assessment. A valuation allowance is provided against DTAs unless it is more likely than not that such DTAs will be realized. ASC Topic 740, "Income Taxes" creates a single model to address uncertainty in tax positions, and clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in an enterprise's financial statements. It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The liability for unrecognized tax benefits is included in other liabilities within the consolidated balance sheets. See "Note 13 - Income Taxes" for additional information. Stock-Based Compensation: The Corporation grants equity awards to employees, consisting of restricted stock, RSUs and PSUs under its Employee Equity Plan. In addition, employees may purchase stock under the Corporation's ESPP. The Corporation also grants equity awards to non-employee members of its Board of Directors and Fulton Bank's Board of Directors under the Directors' Plan. Under the Directors' Plan, the Corporation can grant equity awards to non-employee 81 holding company and subsidiary bank directors in the form of restricted stock, RSUs or common stock. Recent grants of equity awards under the Directors' Plan have been limited to RSUs. Equity awards issued under the Employee Equity Plan are generally granted annually and become fully vested over or after a three-year vesting period. The vesting period for non-performance-based awards represents the period during which employees are required to provide service in exchange for such awards. Equity awards under the Directors' Plan are generally granted annually and fully vest after a one-year vesting period. Certain events, as defined in the Employee Equity Plan and the Directors' Plan, result in the acceleration of the vesting of equity awards. Restricted stock, RSUs and PSUs earn dividends during the vesting period, which are forfeitable if the awards do not vest. The fair value of stock options, restricted stock and RSUs granted to employees or directors is recognized as compensation expense over the vesting period for such awards. Compensation expense for PSUs is also recognized over the vesting period and service period, however, compensation expense for PSUs may vary based on the expectations for actual performance relative to defined performance measures. The fair value of restricted stock, RSUs and a majority of PSUs are based on the trading price of the Corporation's stock on the date of grant. The fair value of certain PSUs are estimated through the use of the Monte Carlo valuation methodology as of the date of grant. See "Note 16 - Stock-Based Compensation Plans" for additional information. The Corporation has not issued stock options since 2014 and accordingly, there is no compensation expense for this instrument. All stock options have been exercised or expired during 2024. Disclosures about Segments of an Enterprise and Related Information: Fulton Financial Corporation is a single segment. The Corporation's Chief Operating Decision Maker reviews consolidated results on a GAAP basis. Financial Guarantees : Financial guarantees, which consist primarily of standby and commercial letters of credit, are accounted for by recognizing a liability equal to the fair value of the guarantees and crediting the liability to income over the term of the guarantee. Fair value is estimated based on the fees currently charged to enter into similar agreements with similar terms. Goodwill and Intangible Assets: The Corporation accounts for its acquisitions using the purchase accounting method. Purchase accounting requires that all assets acquired and liabilities assumed, including certain intangible assets that must be recognized, be recorded at their estimated fair values as of the acquisition date. Any purchase price exceeding the fair value of net assets acquired is recorded as goodwill. Any purchase price lower than the fair value of net assets acquired is recorded as a gain on acquisition, net of tax. Goodwill is not amortized to expense, but is evaluated for impairment at least annually. Write-downs of the balance, if necessary as a result of the impairment test, are charged to expense in the period in which goodwill is determined to be impaired. The Corporation performs its annual assessment of goodwill impairment in the fourth quarter of each year. If certain events occur which indicate goodwill might be impaired between annual assessments, goodwill would be evaluated when such events occur. Intangible assets are amortized over their estimated lives. Some intangible assets have indefinite lives and are, therefore, not amortized. All intangible assets must be evaluated for impairment if certain events occur. Any impairment write-downs are recognized as non-interest expense on the consolidated statements of income. See "Note 7 - Goodwill and Intangible Assets," for additional information. VIEs: ASC Topic 810 provides guidance on when to consolidate certain VIEs in the financial statements of the Corporation. VIEs are entities in which equity investors do not have a controlling financial interest or do not have sufficient equity at risk for the entity to finance activities without additional financial support from other parties. VIEs are assessed for consolidation under ASC Topic 810 when the Corporation holds variable interests in these entities. The Corporation consolidates VIEs when it is deemed to be the primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has the power to make decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. The Corporation makes investments in certain community development projects, the majority of which generate tax credits under various federal programs, including TCIs. These investments are made throughout the Corporation's market area as a means of supporting the communities it serves. The Corporation typically acts as a limited partner or member of a limited liability company in its TCIs and does not exert control over the operating or financial policies of the partnership or limited liability company. Tax credits earned are subject to recapture by federal taxing authorities based upon compliance requirements to be met at the project level. 82 Because the Corporation owns 100% of the equity interests in its NMTC investments, these investments were consolidated based on ASC Topic 810 as of December 31, 2024 and 2023. Investments in affordable housing projects were not consolidated based on management's assessment of the provisions of ASC Topic 810. TCIs are tested for impairment when events or changes in circumstances indicate that it is more likely than not that the carrying amount of the investment will not be realized. An impairment loss is measured as the amount by which the current carrying value exceeds its aggregated remaining value of the tax benefits of the investment. There were no impairment losses recognized for the Corporation's TCIs in 2024, 2023 or 2022. For additional information, see "Note 13 - Income Taxes." Fair Value Measurements: Assets and liabilities are categorized in a fair value hierarchy for the inputs to valuation techniques used to measure assets and liabilities at fair value using the following three categories (from highest to lowest priority): • Level 1 - Inputs that represent quoted prices for identical instruments in active markets. • Level 2 - Inputs that represent quoted prices for similar instruments in active markets, or quoted prices for identical instruments in non-active markets. Also included are valuation techniques whose inputs are derived principally from observable market data other than quoted prices, such as interest rates or other market-corroborated means. • Level 3 - Inputs that are largely unobservable, as little or no market data exists for the instrument being valued. The Corporation has categorized all assets and liabilities required to be measured at fair value on both a recurring and nonrecurring basis into the above three levels. See "Note 19 - Fair Value Measurements" for additional information. Revenue Recognition: The sources of revenue for the Corporation are interest income from loans, leases and investments and non-interest income. Non-interest income is earned from various banking and financial services that the Corporation offers through its subsidiaries. Revenue is recognized as earned based on contractual terms, as transactions occur, or as services are provided. Following is further detail of the various types of revenue the Corporation earns and when it is recognized: Interest income : Interest income is recognized on an accrual basis according to loan and lease agreements, investment securities contracts or other written contracts. Wealth management services: Consists of income from trust commissions, brokerage, money market and insurance commissions. Trust commissions consist of advisory fees that are based on market values of clients' managed portfolios and transaction fees for fiduciary services performed, both of which are recognized when earned. Brokerage income includes advisory fees which are recognized when earned on a monthly basis and transaction fees that are recognized when transactions occur. Money market income is based on the balances held in trust accounts and is recognized monthly. Insurance commissions are earned and recognized when policies are originated. Currently, no investment management and trust service income is based on performance or investment results. Commercial and consumer banking income: Consists of cash management, overdraft and other service charges on deposit accounts as well as branch fees, ATM fees, debit and credit card income and merchant services fees. Also included are letter of credit fees, foreign exchange income and interest rate derivative fees. Revenue is primarily transactional and recognized when earned at the time the transactions occur. Mortgage banking income: Consists of gains or losses on the sale of residential mortgage loans and mortgage loan servicing income. Other Income: Includes gains on sales of SBA loans, cash surrender value of life insurance, and other miscellaneous income. Leases: All leases with an initial term greater than 12 months recognize: (1) a ROU asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term; and (2) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, each measured on a discounted basis. The Corporation elected to not separate lease and non-lease components. As a lessee, the majority of the operating lease portfolio consists of real estate leases for the Corporation's financial centers, land and office space. The operating leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for 5 years or more. ROU assets and lease liabilities are not recognized for leases with an initial term of 12 months or less. 83 Certain real estate leases have lease payments that adjust based on annual changes in the CPI or at a stated contractual rate. The leases that are dependent upon the CPI or stated contractual rate are initially measured using the CPI or contractual rate at the commencement date and are included in the measurement of the lease liability. Operating lease expense represents fixed lease payments for operating leases recognized on a straight-line basis over the applicable lease term. Variable lease expense represents expenses such as the payment of real estate taxes, insurance and common area maintenance based on the Corporation's pro-rata share. Sublease income consists mostly of operating leases for space within the Corporation's offices and financial centers and is recorded as a reduction to net occupancy expense on the consolidated statements of income. See "Note 18 - Leases" for additional information. Defined Benefit Plan: Net periodic pension costs are funded based on the requirements of federal laws and regulations. The determination of net periodic pension costs is based on assumptions about future events that will affect the amount and timing of required benefit payments under the plan. These assumptions include demographic assumptions such as retirement age and mortality, a discount rate used to determine the current benefit obligation, form of payment election and a long-term expected rate of return on plan assets. Net periodic pension expense includes interest cost, based on the assumed discount rate, an expected return on plan assets, amortization of prior service cost or credit and amortization of net actuarial gains or losses. The Corporation curtailed the Pension Plan in 2008, with no additional benefits accruing. In connection with the Merger, the Corporation assumed the obligations of Prudential Bancorp under a multiemployer defined benefit pension plan that had previously been closed to new Prudential Bancorp participants. Net periodic pension cost is recognized in salaries and employee benefits on the consolidated statements of income. For additional information, see "Note 17 - Employee Benefit Plans." Business Combinations: Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method, identifiable assets acquired and liabilities assumed are measured at fair value as of the acquisition date. The difference between the purchase price and the fair value of net assets acquired is recorded as goodwill, unless the acquisition is a bargain purchase. Results of the operations of the acquired entity are included in the consolidated statement of income from the acquisition date. Acquisition costs are expensed as incurred. Recently Adopted Accounting Standards In June 2022, FASB issued ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03") . This update clarifies how the fair value of equity securities subject to contractual sale restrictions is determined and requires additional qualitative and quantitative disclosures for equity securities with contractual sale restrictions. The Corporation adopted ASU 2022-03 on January 1, 2024, and it did not have a material impact on its consolidated financial statements. In March 2023, FASB issued ASU 2023-01 Leases (Topic 842): Common Control Arrangements ("ASU 2023-01") . This update clarifies guidance for leases between related parties under common control . The Corporation adopted ASU 2023-01 on January 1, 2024, and it did not have a material impact on its consolidated financial statements. In November 2023, FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07") . This update requires public entities with reportable segments to provide additional and more detailed disclosures. The Corporation adopted ASU 2023-07 on December 15, 2024, and it did not have a material impact on its consolidated financial statements. Recently Issued Accounting Standards In December 2023, FASB issued ASU 2023-08 Intangibles – Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets ("ASU 2023-08") . This update provides guidance for crypto assets to be carried at fair value and requires additional disclosures. The Corporation will adopt ASU 2023-08 on January 1, 2025. The Corporation does not expect the adoption of ASU 2023-08 to have an impact on its consolidated financial statements. The Corporation currently does not hold crypto assets. In December 2023, FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09") . This update requires companies to disclose specific categories in the income tax rate reconciliation and requires additional information for certain reconciling items. The Corporation will adopt ASU 2023-09 on January 1, 2025. The Corporation does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements. 84 In March 2024, FASB issued ASU 2024-01 Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards ("ASU 2024-01") . This update provides guidance for profits interest and similar awards. The Corporation will adopt ASU 2024-01 on January 1, 2025. The Corporation does not expect the adoption of ASU 2024-01 to have a material impact on its consolidated financial statements. In November 2024, FASB issued ASU 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"). This update requires disaggregation of certain expenses in a note to the consolidated financial statements. The Corporation will adopt ASU 2024-03 on January 25, 2027. The Corporation does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements. In November 2024, FASB issued ASU 2024-04 – Debt – Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments ("ASU 2024-04"). This update clarifies the requirements for determining whether settlement of convertible debt should be accounted for as induced conversion. The Corporation will adopt ASU 2024-04 on January 1, 2026. The Corporation does not expect the adoption of ASU 2024-04 to have an impact on its consolidated financial statements. Reclassifications Certain amounts in the 2023 consolidated financial statements and notes have been reclassified to conform to the 2024 presentation. NOTE 2 - BUSINESS COMBINATIONS 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 received approximately $ 0.8 billion of cash from the FDIC. The Bank assumed approximately $ 5.6 billion of total liabilities of Republic First Bank. The Bank did not enter into a loss sharing arrangement with 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. The Republic First Transaction constitutes a business combination as defined by FASB ASC Topic 805, Business Combinations. Accordingly, the assets acquired and liabilities assumed are presented at their estimated fair values as of the Acquisition Date. The determination of estimated fair values required management to make certain estimates about discount rates, future expected cash flows and market conditions at the time of the Republic First Transaction. The Bank is awaiting conclusion of the customary final settlement process to determine whether certain assets and liabilities of Republic First Bank will be acquired by the Bank. Until the settlement process is finalized, the preliminary gain on acquisition can be updated for a period not to exceed one year following the Acquisition Date. The fair value estimates of assets acquired and liabilities assumed, provide a reasonable basis for determining the preliminary gain on acquisition. During the fourth quarter of 2024, adjustments to the estimated fair values of certain assets acquired were recorded, resulting in a decrease of $ 2.7 million in the preliminary gain on acquisition, net of income taxes. The excess of the estimated fair value of net assets acquired and the cash consideration received from the FDIC over the estimated fair value of liabilities assumed was recorded as a preliminary gain on acquisition of $ 37.0 million, net of income taxes. 85 The following table summarizes the consideration transferred and the estimated fair values of identifiable assets acquired and liabilities assumed in connection with the Republic First Transaction: Estimated Fair Value (dollars in thousands) Cash payment received from FDIC $ 809,920 Assets acquired: Cash and due from banks 208,451 Investment securities 1,938,571 Loans 2,495,810 Premises and equipment 184 CDI 92,600 FHLB Stock 37,931 Accrued interest receivable 16,164 Other assets 10,179 Total assets 4,799,890 Liabilities assumed: Deposits 4,112,143 Borrowings 1,413,751 Accrued interest payable 33,444 Other liabilities 2,641 Total liabilities 5,561,979 Net assets acquired: ( 762,089 ) Gain on acquisition, before income taxes $ 47,831 Gain on acquisition, net of income taxes $ 36,996 In the fourth quarter of 2024, the Bank assumed 14 leases from the FDIC in accordance with the terms of the P and A Agreement. Upon assignment of the leases, the Corporation recorded at fair market value, a $ 13.1 million ROU asset and a corresponding $ 14.4 million lease liability, with the $ 1.3 million difference recognized as a decrease to gain on acquisition, before income taxes. Additionally, in the fourth quarter of 2024, the Bank purchased 15 premises and related property, plant and equipment in accordance with the P and A Agreement. Upon the purchase, the Corporation recorded at fair market value, $ 21.7 million in premises and equipment, with a corresponding reduction of $ 1.0 million in gain on acquisition, before income taxes. The following is a description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed. Cash and due from banks: The fair values of cash and due from banks approximate their book values. Investment securities: The investment portfolio acquired in the Republic First Transaction, with a fair value of $ 1.9 billion, was sold by the Corporation shortly after the Acquisition Date. The fair value of the investment portfolio was based on the proceeds from the sale. Loans: The Corporation recorded $ 2.5 billion of acquired loans that were initially recorded at their estimated fair values as of the Acquisition Date. The estimated fair value for the loans was based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors from the perspective of a market participant. Loan cash flows were generated on an individual loan basis. The PD, LGD, exposure at default and prepayment assumptions are the key factors driving credit losses that are embedded in the estimated cash flows. 86 The following table presents information with respect to the estimated fair value and unpaid principal balance of acquired loans at the Acquisition Date: April 26, 2024 Unpaid Principal Balance Estimated Fair Value (dollars in thousands) Real estate - commercial mortgage $ 1,384,029 $ 1,234,409 Commercial and industrial 310,190 279,309 Real-estate - residential mortgage 947,144 752,331 Real-estate - home equity 90,882 84,369 Real-estate - construction 149,047 142,768 Consumer 2,638 2,624 Total acquired loans $ 2,883,930 $ 2,495,810 The following table summarizes PCD Loans acquired in the Republic First Transaction as of the Acquisition Date: April 26, 2024 (dollars in thousands) Book balance of loans with deteriorated credit quality at acquisition $ 1,014,559 Fair value of loans with deteriorated credit quality at acquisition 895,588 Fair value discount 118,971 PCD Loans credit discount ( 54,631 ) Non-credit discount $ 64,340 The Republic First Transaction resulted in the addition of $ 78.1 million to the ACL, including the $ 54.6 million identified in the table above for PCD Loans, and $ 23.4 million recorded through the provision for credit losses at the Acquisition Date for non-PCD Loans. Intangible assets: The Corporation recorded $ 92.6 million of CDI reflected in other assets that is being amortized over seven years using the sum-of-the-years'-digits method. The estimated fair value of the CDI was determined using the cost savings approach. The cost savings approach is defined as the difference between the cost of funds of core deposits and an alternative cost of funds for those deposits. The CDI estimated fair value was determined by projecting discounted net cash flows that included assumptions related to customer attrition rates, discount rates, deposit interest rates, deposit account maintenance costs and alternative cost of funding rates. FHLB stock: The Corporation acquired $ 37.9 million of FHLB stock. The estimated fair value of the FHLB stock approximated its book value. Accrued interest receivable: The Corporation acquired $ 16.2 million of accrued interest receivable. The fair value of the accrued interest receivable approximated its book value. Core deposits: Demand deposits, savings and money market deposits and time deposits (less than $250,000) were recorded at book value which approximated fair value. The Corporation recorded $ 92.6 million of CDI in other assets for these deposits. Time deposits: Time deposits of $250,000 and greater were valued based on a comparison with the contractual cost of a portfolio of brokered deposits having a similar tenor. As the time deposit portfolio had a remaining average life of approximately three months, the estimated fair value of the time deposits approximated their book value and no adjustment was recorded. Borrowings: Borrowings assumed in the Republic First Transaction, with a fair value of $ 1.4 billion, were repaid shortly after the Acquisition Date. The fair value of borrowings was based on the repayment amounts. 87 Acquisition-related expenses: The Corporation developed a comprehensive integration plan under which it incurred direct costs that are expensed as incurred. Costs related to the Republic First Transaction are included in acquisition-related expenses in the unaudited Consolidated Statements of Income. The following table details the costs identified and classified as acquisition-related expenses: Year ended December 31, 2024 (dollars in thousands) Salaries and employee benefits $ 2,023 Net occupancy 10,085 Professional fees 11,439 Charitable donation Charitable donation 5,000 Other 9,088 $ 37,635 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, the Corporation closed 13 of the Bank's financial center offices and consolidated the operations of those offices into nearby financial center offices operated by the Bank. The plan was adopted as part of the Bank's integration of the assets acquired and the deposits and certain other liabilities assumed in the Republic First Transaction. 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, and lease termination charges. Unaudited Pro Forma Information: The amount of net interest income, non-interest income, non-interest expense and net income of $ 111.4 million, $ 44.7 million, $ 71.9 million and $ 50.5 million, respectively, attributable to the Republic First Transaction were included in the Corporation's Consolidated Statements of Income for the year ended December 31, 2024. Included in non-interest income above is $ 37.0 million related to the gain on acquisition, net of tax. Net interest income, non-interest income, non-interest expense and net income shown above reflect management's best estimates based on information available. Republic First Bank does not have historical financial information that the Corporation could base pro forma information. Additionally, the Bank did not acquire all of the assets or assume all of the liabilities of Republic First Bank. Therefore, it is impracticable to provide pro forma information on revenues and earnings for the Republic First Transaction in accordance with ASC 805-10-50-2. Prudential Bancorp, Inc On July 1, 2022, the Corporation completed its acquisition of Prudential Bancorp, a Pennsylvania chartered bank holding company headquartered in Philadelphia, Pennsylvania that primarily served the Greater Philadelphia region. On that date, the Corporation acquired 100 % of the outstanding common stock of Prudential Bancorp. As of July 1, 2022, Prudential Bancorp had approximately $ 930.6 million in assets, $ 554.1 million in loans and $ 532.2 million in deposits after purchase accounting adjustments. The common shareholders of Prudential received 0.7974 shares of Fulton Financial common stock and $ 3.65 cash for each Prudential Bancorp share they owned prior to the Merger. The total consideration for the Merger was $ 119.1 million consisting of approximately 6,208,516 shares of the Corporation's common stock and $ 29.3 million in cash. 88 NOTE 3 - RESTRICTIONS ON CASH AND CASH EQUIVALENTS Cash collateral is posted by the Corporation with counterparties to secure derivatives and other contracts, which is included in "interest-bearing deposits with other banks" on the consolidated balance sheets. The amounts of such collateral as of December 31, 2024 and 2023 were $ 4.0 million and $ 17.4 million, respectively. 89 NOTE 4 - INVESTMENT SECURITIES The following tables present the amortized cost and estimated fair values of investment securities, as of December 31: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (dollars in thousands) 2024 Available for Sale State and municipal securities $ 960,227 $ 106 $ ( 145,446 ) $ 814,887 Corporate debt securities 313,681 1,123 ( 14,434 ) 300,370 Collateralized mortgage obligations 798,157 4,629 ( 13,901 ) 788,885 Residential mortgage-backed securities 1,029,846 30 ( 40,001 ) 989,875 Commercial mortgage-backed securities 617,605 — ( 100,723 ) 516,882 Total $ 3,719,516 $ 5,888 $ ( 314,505 ) $ 3,410,899 Held to Maturity Residential mortgage-backed securities $ 537,856 $ 2 $ ( 60,162 ) $ 477,696 Commercial mortgage-backed securities 857,713 — ( 151,960 ) 705,753 Total $ 1,395,569 $ 2 $ ( 212,122 ) $ 1,183,449 2023 Available for Sale U.S. Government securities $ 42,475 $ — $ ( 314 ) $ 42,161 U.S. Government-sponsored agency securities 1,038 — ( 28 ) 1,010 State and municipal securities 1,200,571 1,089 ( 129,647 ) 1,072,013 Corporate debt securities 480,714 473 ( 40,636 ) 440,551 Collateralized mortgage obligations 122,824 — ( 11,390 ) 111,434 Residential mortgage-backed securities 223,273 7 ( 26,485 ) 196,795 Commercial mortgage-backed securities 627,364 — ( 92,976 ) 534,388 Total $ 2,698,259 $ 1,569 $ ( 301,476 ) $ 2,398,352 Held to Maturity Residential mortgage-backed securities $ 407,075 $ — $ ( 51,805 ) $ 355,270 Commercial mortgage-backed securities 860,847 — ( 143,910 ) 716,937 Total $ 1,267,922 $ — $ ( 195,715 ) $ 1,072,207 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. Securities carried at $ 0.3 billion and $ 0.4 billion at December 31, 2024 and 2023, respectively, were pledged as collateral to secure public and trust deposits. 90 The amortized cost and estimated fair values of debt securities as of December 31, 2024, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities because issuers may have the right to call or borrowers may have the right to prepay with or without call or prepayment penalties. Available for Sale Held to Maturity Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value (dollars in thousands) Due in one year or less $ 15,672 $ 15,532 $ — $ — Due from one year to five years 106,119 102,912 — — Due from five years to ten years 309,940 294,656 — — Due after ten years 842,177 702,157 — — 1,273,908 1,115,257 — — Residential mortgage-backed securities (1) 1,029,846 989,875 537,856 477,696 Commercial mortgage-backed securities (1) 617,605 516,882 857,713 705,753 Collateralized mortgage obligations (1) 798,157 788,885 — — Total $ 3,719,516 $ 3,410,899 $ 1,395,569 $ 1,183,449 (1) Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on the underlying loans. The following table presents information related to gross gains and losses on the sales of securities for the years presented: Gross Realized Gains Gross Realized Losses Net Gains (Losses) (dollars in thousands) 2024 $ 179 $ ( 20,462 ) $ ( 20,283 ) 2023 283 ( 1,016 ) ( 733 ) 2022 1,587 ( 1,614 ) ( 27 ) 91 The following tables present the gross unrealized losses and estimated fair values of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31: Less than 12 months 12 Months or Longer Total Number of Securities Estimated Fair Value Unrealized Losses Number of Securities Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses 2024 (dollars in thousands) Available for Sale State and municipal securities 22 $ 53,026 $ ( 1,692 ) 272 $ 755,310 $ ( 143,754 ) $ 808,336 $ ( 145,446 ) Corporate debt securities 1 4,844 ( 13 ) 47 264,099 ( 14,421 ) 268,943 ( 14,434 ) Collateralized mortgage obligations 12 288,871 ( 3,463 ) 77 85,485 ( 10,438 ) 374,356 ( 13,901 ) Residential mortgage-backed securities 42 777,695 ( 9,178 ) 69 174,284 ( 30,823 ) 951,979 ( 40,001 ) Commercial mortgage-backed securities 1 19,291 ( 875 ) 135 497,591 ( 99,848 ) 516,882 ( 100,723 ) Total available for sale 78 $ 1,143,727 $ ( 15,221 ) 600 $ 1,776,769 $ ( 299,284 ) $ 2,920,496 $ ( 314,505 ) Held to Maturity Residential mortgage-backed securities 7 $ 155,726 $ ( 1,754 ) 120 $ 303,220 $ ( 58,408 ) $ 458,946 $ ( 60,162 ) Commercial mortgage-backed securities — — — 60 705,753 ( 151,960 ) 705,753 ( 151,960 ) Total held to maturity 7 $ 155,726 $ ( 1,754 ) 180 $ 1,008,973 $ ( 210,368 ) $ 1,164,699 $ ( 212,122 ) Less than 12 months 12 Months or Longer Total Number of Securities Estimated Fair Value Unrealized Losses Number of Securities Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses 2023 (dollars in thousands) Available for Sale U.S. Government Securities — $ — $ — 1 $ 42,161 $ ( 314 ) $ 42,161 $ ( 314 ) U.S. Government-sponsored agency securities — — — 1 1,010 ( 28 ) 1,010 ( 28 ) State and municipal securities 40 76,155 ( 858 ) 314 917,274 ( 128,789 ) 993,429 ( 129,647 ) Corporate debt securities 8 42,945 ( 1,326 ) 60 370,523 ( 39,310 ) 413,468 ( 40,636 ) Collateralized mortgage obligations — — — 93 111,434 ( 11,390 ) 111,434 ( 11,390 ) Residential mortgage-backed securities 6 409 ( 3 ) 69 195,453 ( 26,482 ) 195,862 ( 26,485 ) Commercial mortgage-backed securities 2 26,907 ( 1,053 ) 133 507,481 ( 91,923 ) 534,388 ( 92,976 ) Total available for sale 56 $ 146,416 $ ( 3,240 ) 671 $ 2,145,336 $ ( 298,236 ) $ 2,291,752 $ ( 301,476 ) Held to maturity Residential mortgage-backed securities — $ — $ — 120 $ 355,270 $ ( 51,805 ) $ 355,270 $ ( 51,805 ) Commercial mortgage-backed securities — — — 60 716,937 ( 143,910 ) 716,937 ( 143,910 ) Total held to maturity — $ — $ — 180 $ 1,072,207 $ ( 195,715 ) $ 1,072,207 $ ( 195,715 ) The Corporation's collateralized mortgage obligations, residential mortgage-backed securities and commercial mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The change in fair value of these securities is attributable to changes in interest rates and not credit quality. The Corporation does not have the intent to sell, and does not believe it will more likely than not be required to sell, any of these securities prior to a recovery of their fair value to amortized cost. In addition, these securities have principal payments that are guaranteed by U.S. government-sponsored agencies. Therefore, the Corporation does not have an ACL for these investments as of December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, no ACL was required for the Corporation's state and municipal securities. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity. Therefore, the Corporation did not record a loss on these investments as of December 31, 2024 and December 31, 2023, respectively. The majority of the corporate debt securities were rated at or above investment grade as of December 31, 2024 and December 31, 2023. Based on the payment status, rating and management's evaluation of these securities, no ACL was required for corporate debt securities as of December 31, 2024 and December 31, 2023. The Corporation does not have the intent to sell and does not believe it will more likely than not to be required to sell any of these securities prior to a recovery of their fair value to 92 amortized cost, which may be at maturity. Therefore, the Corporation did not record a loss on these investments as of December 31, 2024 and December 31, 2023. NOTE 5 - LOANS AND ALLOWANCE FOR CREDIT LOSSES Loans and leases, net of unearned income Loans and leases, net of unearned income are summarized as follows as of December 31: 2024 2023 (dollars in thousands) Real estate - commercial mortgage $ 9,601,858 $ 8,127,728 Commercial and industrial (1) 4,605,589 4,545,552 Real-estate - residential mortgage 6,349,643 5,325,923 Real-estate - home equity 1,160,616 1,047,184 Real-estate - construction 1,394,899 1,239,075 Consumer 616,856 729,318 Leases and other loans (2) 315,458 336,314 Net loans $ 24,044,919 $ 21,351,094 (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 at December 31, 2024 and December 31, 2023, respectively. The Corporation has extended credit to officers and directors of the Corporation and to their associates. These related-party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collection or present other unfavorable features. The aggregate dollar amount of these loans, including unadvanced commitments, was $ 166.2 million and $ 162.5 million as of December 31, 2024 and 2023, respectively. During 2024, additions totaled $ 9.1 million and repayments totaled $ 5.4 million for related-party loans. Allowance for Credit Losses The following table summarizes the ACL - loans balance and the reserve for OBS credit exposures balance as of December 31, 2024 and 2023: 2024 2023 (dollars in thousands) ACL - loans $ 379,156 $ 293,404 Reserve for OBS credit exposures (1) $ 14,161 $ 17,254 (1) Included in other liabilities on the Consolidated Balance Sheets. 93 The following table presents the activity in the ACL for the years ended December 31: 2024 2023 2022 (dollars in thousands) Balance at beginning of period $ 293,404 $ 269,366 $ 249,001 CECL Day 1 Provision (1) 23,444 — 7,954 Initial PCD allowance for credit losses 54,631 — 1,135 Loans charged off ( 54,429 ) ( 39,201 ) ( 21,472 ) Recoveries of loans previously charged off 9,984 10,129 14,092 Net loans (charged off) recovered ( 44,445 ) ( 29,072 ) ( 7,380 ) Provision for credit losses (1) (2) 52,122 53,110 18,656 Balance 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 $ 14,161 $ 17,254 $ 16,328 (1) The sum of these amounts are reflected in the provision for credit losses in the Consolidated Statements of Income. (2) Provision only includes the portion related to net loans. The following table presents the activity in the ACL by portfolio segment: Real Estate - Commercial Mortgage Commercial and Industrial Real Estate - Residential Mortgage Consumer and Real Estate - Home Equity Real Estate - Construction Leases and other loans Total (dollars in thousands) Balance at December 31, 2022 $ 69,456 $ 70,116 $ 83,250 $ 26,429 $ 10,743 $ 9,372 $ 269,366 Loans charged off ( 17,999 ) ( 9,246 ) ( 62 ) ( 7,514 ) — ( 4,380 ) ( 39,201 ) Recoveries of loans previously charged off 1,076 3,473 421 3,198 858 1,103 10,129 Net loans (charged off) recovered ( 16,923 ) ( 5,773 ) 359 ( 4,316 ) 858 ( 3,277 ) ( 29,072 ) Provision for loan losses (1)(2) 60,032 9,923 ( 10,323 ) ( 4,509 ) 694 ( 2,707 ) 53,110 Balance at December 31, 2023 112,565 74,266 73,286 17,604 12,295 3,388 293,404 CECL Day 1 Provision (1) 6,648 1,121 14,920 445 310 — 23,444 Initial PCD allowance for credit losses 41,559 10,463 565 357 1,687 — 54,631 Loans charged off ( 13,186 ) ( 26,585 ) ( 1,472 ) ( 8,490 ) — ( 4,696 ) ( 54,429 ) Recoveries of loans previously charged off 603 4,440 472 3,357 382 730 9,984 Net loans (charged off) recovered ( 12,583 ) ( 22,145 ) ( 1,000 ) ( 5,133 ) 382 ( 3,966 ) ( 44,445 ) Provision for loan losses (1)(2) 9,992 28,507 ( 6,440 ) 6,124 10,466 3,473 52,122 Balance at December 31, 2024 $ 158,181 $ 92,212 $ 81,331 $ 19,397 $ 25,140 $ 2,895 $ 379,156 (1) These amounts are reflected in the provision for credit loss in the Consolidated Statements of Income. (2) Provision included in the table only includes the portion related to net loans. 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 increase in ACL in 2024 was largely due to loans acquired in the Republic First Transaction. The increase in ACL in 2023 was primarily due to loan growth, changes to the macroeconomic outlook, net charge-offs and risk migration. Collateral-Dependent Loans A loan or a lease is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans and leases deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less costs to sell. Substantially all of the collateral supporting collateral-dependent loans or leases consists of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agricultural land, and vacant land. Commercial and industrial loans may also be secured by real estate. 94 All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of December 31, 2024 and 2023, substantially all of the Corporation's individually evaluated loans with total commitments greater than or equal to $ 1.0 million were measured based on the estimated fair value of each loan's collateral, if any. As of December 31, 2024 and 2023, approximately 90 % and 78 %, respectively, of loans evaluated individually for impairment with principal balances greater than or equal to $ 1.0 million, whose primary collateral consisted of real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months. Non-accrual Loans The following table presents total non-accrual loans, by class segment: 2024 2023 With a Related Allowance Without a Related Allowance Total With a Related Allowance Without a Related Allowance Total (dollars in thousands) Real estate - commercial mortgage $ 31,654 $ 67,843 $ 99,497 $ 23,338 $ 21,467 $ 44,805 Commercial and industrial 17,011 25,206 42,217 12,410 27,542 39,952 Real estate - residential mortgage 23,387 2,013 25,400 18,806 2,018 20,824 Real estate - home equity 8,513 78 8,591 4,649 104 4,753 Real estate - construction 1,746 — 1,746 341 1,000 1,341 Consumer 8 — 8 52 — 52 Leases and other loans 1,801 10,033 11,834 9,255 638 9,893 Total $ 84,120 $ 105,173 $ 189,293 $ 68,851 $ 52,769 $ 121,620 As of December 31, 2024 and December 31, 2023, there were $ 105.2 million and $ 52.8 million, respectively, of non-accrual loans that did not have a specific valuation allowance within the ACL. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary. The amount of interest income on non-accrual loans that was recognized was approximately $ 1.0 million in 2024 and $ 1.5 million in 2023. Asset Quality Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction loans, commercial and industrial loans, and commercial real estate loans, an internal risk rating process is used. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk categories is a significant component of the ACL methodology for these loans, which bases the PD on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide a separate assessment of risk rating accuracy. Risk ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff, or if specific loan review assessments identify a deterioration or an improvement in a loan. 95 The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the current period: December 31, 2024 (dollars in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans Amortized Amortized 2024 2023 2022 2021 2020 Prior Cost Basis Cost Basis Total Real estate - commercial mortgage Pass $ 623,742 $ 898,296 $ 1,138,669 $ 1,316,000 $ 1,077,625 $ 3,414,138 $ 69,942 $ 9,646 $ 8,548,058 Special Mention 4,441 73,348 149,280 157,543 28,734 107,099 10,978 — 531,423 Substandard or Lower 4,831 44,665 102,952 95,617 75,097 193,922 1,380 3,913 522,377 Total real estate - commercial mortgage 633,014 1,016,309 1,390,901 1,569,160 1,181,456 3,715,159 82,300 13,559 9,601,858 Real estate - commercial mortgage Current period gross charge-offs — ( 126 ) ( 84 ) — — ( 12,950 ) — ( 26 ) ( 13,186 ) Commercial and industrial Pass 435,917 486,720 512,622 261,603 268,194 684,931 1,375,201 6,346 4,031,534 Special Mention 9,928 8,333 19,931 18,888 4,844 58,632 117,940 313 238,809 Substandard or Lower 10,795 16,593 34,748 10,183 12,496 49,439 176,755 24,237 335,246 Total commercial and industrial 456,640 511,646 567,301 290,674 285,534 793,002 1,669,896 30,896 4,605,589 Commercial and industrial Current period gross charge-offs ( 612 ) ( 3,709 ) ( 2,560 ) ( 4,587 ) ( 317 ) ( 7,612 ) ( 3,553 ) ( 3,635 ) ( 26,585 ) Real estate - construction (1) Pass 197,206 494,072 157,296 37,438 8,784 41,480 30,608 619 967,503 Special Mention — 10,612 80,651 69,109 938 — — — 161,310 Substandard or Lower — — 14,407 10,399 — 20,350 121 1,906 47,183 Total real estate - construction 197,206 504,684 252,354 116,946 9,722 61,830 30,729 2,525 1,175,996 Real estate - construction (1) Current period gross charge-offs — — — — — — — — — Total Pass $ 1,256,865 $ 1,879,088 $ 1,808,587 $ 1,615,041 $ 1,354,603 $ 4,140,549 $ 1,475,751 $ 16,611 $ 13,547,095 Special Mention 14,369 92,293 249,862 245,540 34,516 165,731 128,918 313 931,542 Substandard or Lower 15,626 61,258 152,107 116,199 87,593 263,711 178,256 30,056 904,806 Total $ 1,286,860 $ 2,032,639 $ 2,210,556 $ 1,976,780 $ 1,476,712 $ 4,569,991 $ 1,782,925 $ 46,980 $ 15,383,443 (1) Excludes real estate - 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. 96 The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the prior period: December 31, 2023 (dollars in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans Amortized Amortized 2023 2022 2021 2020 2019 Prior Cost Basis Cost Basis Total Real estate - commercial mortgage Pass $ 783,673 $ 993,017 $ 1,203,852 $ 984,958 $ 721,857 $ 2,822,155 $ 59,253 $ 31,636 $ 7,600,401 Special Mention 2,767 43,904 105,185 7,862 35,289 105,786 1,760 — 302,553 Substandard or Lower 366 20,958 31,304 49,142 26,579 95,621 804 — 224,774 Total real estate - commercial mortgage 786,806 1,057,879 1,340,341 1,041,962 783,725 3,023,562 61,817 31,636 8,127,728 Real estate - commercial mortgage Current period gross charge-offs — — — — — ( 424 ) — ( 17,575 ) ( 17,999 ) Commercial and industrial Pass 626,386 590,132 330,576 341,218 272,126 598,838 1,443,203 10,736 4,213,215 Special Mention 7,936 9,548 16,499 3,577 6,817 18,487 72,775 198 135,837 Substandard or Lower 247 25,184 4,611 3,843 18,988 31,663 105,230 6,734 196,500 Total commercial and industrial 634,569 624,864 351,686 348,638 297,931 648,988 1,621,208 17,668 4,545,552 Commercial and industrial Current period gross charge-offs — ( 299 ) — — — ( 249 ) ( 682 ) ( 8,016 ) ( 9,246 ) Real estate - construction (1) Pass 322,922 258,080 261,583 37,426 9,510 34,097 13,677 — 937,295 Special Mention — 12,622 25,898 — — — — — 38,520 Substandard or Lower — 521 2,229 — 340 21,284 168 2,229 26,771 Total real estate - construction 322,922 271,223 289,710 37,426 9,850 55,381 13,845 2,229 1,002,586 Real estate - construction (1) Current period gross charge-offs — — — — — — — — — Total Pass $ 1,732,981 $ 1,841,229 $ 1,796,011 $ 1,363,602 $ 1,003,493 $ 3,455,090 $ 1,516,133 $ 42,372 $ 12,750,911 Special Mention 10,703 66,074 147,582 11,439 42,106 124,273 74,535 198 476,910 Substandard or Lower 613 46,663 38,144 52,985 45,907 148,568 106,202 8,963 448,045 Total $ 1,744,297 $ 1,953,966 $ 1,981,737 $ 1,428,026 $ 1,091,506 $ 3,727,931 $ 1,696,870 $ 51,533 $ 13,675,866 (1) Excludes real estate - construction - other. 97 The Corporation considers the performance of the loan portfolio and its impact on the ACL. The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and other loans. For these loans, the most relevant credit quality indicator is delinquency status, and the Corporation evaluates credit quality based on the aging status of the loan. The following tables present the amortized cost of these loans based on payment activity, by origination year, for the periods shown: December 31, 2024 (dollars in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans Amortized Amortized 2024 2023 2022 2021 2020 Prior Cost Basis Cost Basis Total Real estate - residential mortgage Performing $ 470,918 $ 728,630 $ 1,515,521 $ 1,726,991 $ 1,022,116 $ 839,566 $ — $ — $ 6,303,742 Nonperforming 87 1,358 5,118 3,232 5,523 30,583 — — 45,901 Total real estate - residential mortgage 471,005 729,988 1,520,639 1,730,223 1,027,639 870,149 — — 6,349,643 Real estate - residential mortgage Current period gross charge-offs — ( 172 ) ( 106 ) ( 12 ) ( 43 ) ( 888 ) — ( 251 ) ( 1,472 ) Consumer and real estate - home equity Performing 178,722 116,370 211,647 65,412 48,201 188,442 913,920 40,384 1,763,098 Nonperforming 236 848 918 963 753 4,571 2,893 3,192 14,374 Total consumer and real estate - home equity 178,958 117,218 212,565 66,375 48,954 193,013 916,813 43,576 1,777,472 Consumer and real estate - home equity Current period gross charge-offs ( 118 ) ( 1,016 ) ( 1,552 ) ( 790 ) ( 398 ) ( 2,704 ) ( 75 ) ( 1,837 ) ( 8,490 ) Leases and other loans Performing 123,991 89,006 52,724 16,894 10,830 9,996 — — 303,441 Nonperforming — — 1,922 744 23 9,328 — — 12,017 Total leases and other loans 123,991 89,006 54,646 17,638 10,853 19,324 — — 315,458 Leases and other loans Current period gross charge-offs ( 1,977 ) ( 913 ) ( 335 ) ( 334 ) ( 192 ) ( 770 ) — ( 175 ) ( 4,696 ) Construction - other Performing 138,440 61,848 15,710 1,499 — — — — 217,497 Nonperforming — — 1,406 — — — — — 1,406 Total construction - other 138,440 61,848 17,116 1,499 — — — — 218,903 Construction - other Current period gross charge-offs — — — — — — — — — Total Performing $ 912,071 $ 995,854 $ 1,795,602 $ 1,810,796 $ 1,081,147 $ 1,038,004 $ 913,920 $ 40,384 $ 8,587,778 Nonperforming 323 2,206 9,364 4,939 6,299 44,482 2,893 3,192 73,698 Total $ 912,394 $ 998,060 $ 1,804,966 $ 1,815,735 $ 1,087,446 $ 1,082,486 $ 916,813 $ 43,576 $ 8,661,476 98 December 31, 2023 (dollars in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans Amortized Amortized 2023 2022 2021 2020 2019 Prior Cost Basis Cost Basis Total Real estate - residential mortgage Performing $ 623,247 $ 1,126,656 $ 1,682,759 $ 984,050 $ 260,049 $ 607,133 $ — $ — $ 5,283,894 Nonperforming — 1,720 4,888 4,701 6,233 24,487 — — 42,029 Total real estate - residential mortgage 623,247 1,128,376 1,687,647 988,751 266,282 631,620 — — 5,325,923 Real estate - residential mortgage Current period gross charge-offs — — — — — — — ( 62 ) ( 62 ) Consumer and real estate - home equity Performing 272,571 276,373 85,985 62,426 37,667 204,913 805,645 20,044 1,765,624 Nonperforming 295 455 866 282 354 5,526 1,439 1,661 10,878 Total consumer and real estate - home equity 272,866 276,828 86,851 62,708 38,021 210,439 807,084 21,705 1,776,502 Consumer and real estate - home equity loans Current period gross charge-offs ( 119 ) — — — — ( 525 ) ( 283 ) ( 6,587 ) ( 7,514 ) Leases and other loans Performing 166,490 83,641 27,755 22,304 16,246 9,867 — — 326,303 Nonperforming — 118 — — — 9,893 — — 10,011 Total leases and other 166,490 83,759 27,755 22,304 16,246 19,760 — — 336,314 Leases and other loans Current period gross charge-offs ( 471 ) ( 521 ) ( 246 ) ( 128 ) ( 82 ) ( 656 ) ( 765 ) ( 1,511 ) ( 4,380 ) Construction - other Performing 127,382 93,319 13,698 555 — — — — 234,954 Nonperforming — 1,535 — — — — — — 1,535 Total construction - other 127,382 94,854 13,698 555 — — — — 236,489 Construction - other Current period gross charge-offs — — — — — — — — — Total Performing $ 1,189,690 $ 1,579,989 $ 1,810,197 $ 1,069,335 $ 313,962 $ 821,913 $ 805,645 $ 20,044 $ 7,610,775 Nonperforming 295 3,828 5,754 4,983 6,587 39,906 1,439 1,661 64,453 Total $ 1,189,985 $ 1,583,817 $ 1,815,951 $ 1,074,318 $ 320,549 $ 861,819 $ 807,084 $ 21,705 $ 7,675,228 99 The following table presents non-performing assets: December 31, 2024 December 31, 2023 (dollars in thousands) Non-accrual loans $ 189,293 $ 121,620 Loans 90 days or more past due and still accruing 30,781 31,721 Total non-performing loans 220,074 153,341 OREO (1) 2,621 896 Total non-performing assets $ 222,695 $ 154,237 (1) Excludes $ 17.5 million and $ 10.9 million of residential mortgage properties for which formal foreclosure proceeding were in process as of December 31, 2024 and 2023, respectively. The following tables present the aging of the amortized cost basis of loans, by class segment: 30-59 60-89 ≥ 90 Days Days Past Days Past Past Due Non- Due Due and Accruing Accrual Current Total (dollars in thousands) December 31, 2024 Real estate - commercial mortgage $ 32,715 $ 16,684 $ 2,862 $ 99,497 $ 9,450,100 $ 9,601,858 Commercial and industrial (1) 6,031 3,636 1,460 42,217 4,552,245 4,605,589 Real estate - residential mortgage 59,593 5,946 20,501 25,400 6,238,203 6,349,643 Real estate - home equity 6,778 1,057 4,758 8,591 1,139,432 1,160,616 Real estate - construction 3,549 5,163 — 1,746 1,384,441 1,394,899 Consumer 6,779 1,627 1,017 8 607,425 616,856 Leases and other loans (1) 269 105 183 11,834 303,067 315,458 Total $ 115,714 $ 34,218 $ 30,781 $ 189,293 $ 23,674,913 $ 24,044,919 (1) Includes unearned income. 30-59 Days Past Due 60-89 Days Past Due ≥ 90 Days Past Due and Accruing Non- accrual Current Total (dollars in thousands) December 31, 2023 Real estate - commercial mortgage $ 4,408 $ 1,341 $ 1,722 $ 44,805 $ 8,075,452 $ 8,127,728 Commercial and industrial (1) 5,620 1,656 1,068 39,952 4,497,256 4,545,552 Real estate - residential mortgage 49,145 10,838 21,205 20,824 5,223,911 5,325,923 Real estate - home equity 8,142 2,075 5,326 4,753 1,026,888 1,047,184 Real estate - construction 4,185 451 1,535 1,341 1,231,563 1,239,075 Consumer 8,361 1,767 747 52 718,391 729,318 Leases and other loans (1) 146 722 118 9,893 325,435 336,314 Total $ 80,007 $ 18,850 $ 31,721 $ 121,620 $ 21,098,896 $ 21,351,094 (1 ) Includes unearned income. Loan Modifications to Borrowers Experiencing Financial Difficulty The Corporation modifies loans by providing a concession when deemed appropriate. Depending on the circumstances, a term extension, interest rate reduction or principal forgiveness may be granted. In certain instances a combination of concessions may be provided to a borrower. 100 When principal forgiveness is provided, the amount of principal forgiven is deemed to be uncollectible and the amortized cost basis of the loan is reduced by the amount of the forgiven portion, with a corresponding reduction to the ACL. The following table presents the amortized cost basis of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted: Term Extension 2024 2023 Amortized Cost Basis % of Class of Financing Receivable Amortization Cost Basis % of Class of Financing Receivable (dollars in thousands) Real estate - commercial mortgage $ 20,501 0.21 % $ 2,944 0.04 % Commercial and industrial 3,913 0.08 11,970 0.26 Real estate - residential mortgage 11,604 0.18 8,182 0.15 Real estate - home equity 379 0.03 — — Real estate - construction 595 0.04 — — Total $ 36,992 $ 23,096 Interest Rate Reduction and Term Extension 2024 2023 Amortized Cost Basis % of Class of Financing Receivable Amortization Cost Basis % of Class of Financing Receivable (dollars in thousands) Real estate - residential mortgage $ 2,365 0.04 % $ 910 0.02 % Total $ 2,365 $ 910 101 The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty: Term Extension Financial Effect 2024 Real estate - commercial mortgage Added a weighted-average 1.99 years to the life of loans, which reduced monthly payment amounts for the borrowers. Commercial and industrial Added a weighted-average 0.67 years to the life of loans, which reduced monthly payment amounts for the borrowers. Real estate - residential mortgage Added a weighted-average 8.98 years to the life of loans, which reduced monthly payment amounts for the borrowers. Real estate - home equity Added a weighted-average 14.30 years to the life of loans, which reduced monthly payment amounts for the borrowers. Real estate - construction Added a weighted-average 0.67 years to the life of loans, which reduced monthly payment amounts for the borrowers. 2023 Real estate - commercial mortgage Added a weighted-average 1.22 years to the life of loans, which reduced monthly payment amounts for the borrowers. Commercial and industrial Added a weighted-average 0.92 years to the life of loans, which reduced monthly payment amounts for the borrowers. Real estate - residential mortgage Added a weighted-average 8.10 years to the life of loans, which reduced monthly payment amounts for the borrowers. Interest Rate Reduction Financial Effect 2024 Real estate - residential mortgage Reduced weighted-average interest rate from 2.35 % to 1.40 % 2023 Real estate - residential mortgage Reduced weighted-average interest rate from 3.76 % to 2.30 % During the years ended December 31, 2024 and 2023, there were no loans modified due to financial difficulty where there was a principal balance forgiveness. During the years ended December 31, 2024 and 2023, there were no loans modified due to financial difficulty that defaulted subsequent to modification. The following table presents the performance of loans that have been modified due to financial difficulty in the previous 12 months. 30-89 90+ Total Days Past Past Due Past Current Due and Accruing Due (dollars in thousands) Real estate - commercial mortgage $ 16,321 $ 123 $ — $ 123 Commercial and industrial 3,913 — — — Real estate - residential mortgage 11,448 1,918 642 2,560 Real estate - home equity 379 — — — Real estate - construction 595 — — — Total $ 32,656 $ 2,041 $ 642 $ 2,683 102 There were no commitments to lend additional funds to borrowers with loan modifications as a result of financial difficulty as of December 31, 2024. NOTE 6 - PREMISES AND EQUIPMENT The following is a summary of premises and equipment as of December 31: 2024 2023 (dollars in thousands) Land $ 36,080 $ 39,742 Buildings and improvements 310,786 365,744 Furniture and equipment 173,778 161,244 Construction in progress 4,872 12,313 Total premises and equipment 525,516 579,043 Less: Accumulated depreciation and amortization ( 329,989 ) ( 356,162 ) Net premises and equipment $ 195,527 $ 222,881 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. NOTE 7 - GOODWILL AND INTANGIBLE ASSETS Goodwill totaled $ 553.3 million as of December 31, 2024 and 2023, respectively. There were no goodwill impairment charges in 2024 based on the annual assessment. The estimated fair values of the Corporation's reporting units are subject to uncertainty, including future changes in fair values of banks in general and future operating results of reporting units, which could differ significantly from the assumptions used in the current valuation of reporting units. The following table summarizes intangible assets, which are included in goodwill and net intangible assets on the consolidated balance sheets: December 31, 2024 2023 (dollars in thousands) Amortizing intangible assets $ 106,196 $ 13,596 Accumulated amortization ( 24,085 ) ( 6,255 ) Net intangibles $ 82,111 $ 7,341 103 Net intangibles included CDI of $ 80.2 million and $ 4.9 million as of December 31, 2024 and 2023, respectively. The CDI was recorded as part of the Republic First Transaction and the Merger and is being amortized over seven years using the sum-of-the-years' digits method. The following table summarizes CDI amortization expense for each of the next five years and thereafter (dollars in thousands): Year 2025 $ 22,010 2026 18,667 2027 15,066 2028 11,213 2029 7,717 Thereafter 5,512 Total $ 80,185 NOTE 8 - MORTGAGE SERVICING RIGHTS The following table summarizes the changes in MSRs, which are included in other assets on the consolidated balance sheets, with adjustments to the carrying value included in mortgage banking income on the consolidated statements of income: 2024 2023 2022 (dollars in thousands) Amortized cost: Balance at beginning of period $ 31,602 $ 34,217 $ 35,993 Originations of MSRs 3,758 2,475 4,067 Amortization ( 4,669 ) ( 5,090 ) ( 5,843 ) Balance at end of period $ 30,691 $ 31,602 $ 34,217 Valuation allowance: Balance at beginning of period $ — $ — $ ( 600 ) Reduction (addition) to valuation allowance — — 600 Balance at end of period $ — $ — $ — Net MSRs at end of period $ 30,691 $ 31,602 $ 34,217 Estimated fair value of MSRs at end of period $ 53,972 $ 49,696 $ 50,044 MSRs represent the economic value of contractual rights to service mortgage loans that have been sold. The total portfolio of mortgage loans serviced by the Corporation for unrelated third parties was $ 4.1 billion as of December 31, 2024 and 2023, respectively. Actual and expected prepayments of the underlying mortgage loans can impact the fair value of MSRs. The Corporation accounts for MSRs at the lower of amortized cost or fair value. The fair value of MSRs is estimated by discounting the estimated cash flows from servicing income, net of expense, over the expected life of the underlying loans at a discount rate commensurate with the risk associated with these assets. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The fair values of MSRs were $ 54.0 million, $ 49.7 million and $ 50.0 million as of December 31, 2024, 2023 and 2022, respectively. Based on its fair value analysis as of December 31, 2024, 2023, and 2022, the Corporation determined that no valuation allowances were required. Total servicing income, included in mortgage banking income in the consolidated statements of income, was $ 10.2 million, $ 10.2 million and $10.6 million as of December 31, 2024, 2023 and 2022, respectively. Total MSRs amortization expense, recognized as a reduction to mortgage banking income in the consolidated statements of income, was $ 4.7 million, $ 5.1 million and $ 5.8 million in 2024, 2023 and 2022, respectively. Estimated future MSRs 104 amortization expense, based on balances as of December 31, 2024, and the estimated remaining lives of the underlying loans, is as follows (dollars in thousands): Year 2025 $ 3,509 2026 3,169 2027 2,856 2028 2,577 2029 2,331 Thereafter 16,249 Total estimated amortization expense $ 30,691 NOTE 9 - DEPOSITS Deposits consisted of the following as of December 31: 2024 2023 (dollars in thousands) Noninterest-bearing demand $ 5,499,760 $ 5,314,094 Interest-bearing demand 7,843,604 5,722,695 Savings and money market accounts 7,792,114 6,616,901 Total demand and savings 21,135,478 17,653,690 Brokered deposits 843,857 1,144,692 Time deposits 4,150,098 2,739,241 Total Deposits $ 26,129,433 $ 21,537,623 The scheduled maturities of time deposits as of December 31, 2024 were as follows (dollars in thousands): Year 2025 $ 3,801,297 2026 242,638 2027 40,071 2028 10,130 2029 11,908 Thereafter 44,054 Total $ 4,150,098 Included in time deposits were certificates of deposit equal to or greater than $100,000 of $ 2.5 billion and $ 1.5 billion as of December 31, 2024 and 2023, respectively. Time deposits equal or greater than $250,000 were $ 1.0 billion and $ 551.2 million as of December 31, 2024 and 2023, respectively. 105 NOTE 10 - BORROWINGS Borrowings as of December 31, 2024 and 2023 and the related maximum amounts outstanding at the end of any month in each of the two years then ended are presented below. December 31 Maximum Outstanding 2024 2023 2024 2023 (dollars in thousands) Federal funds purchased $ — $ 240,000 $ 125,000 $ 862,000 FHLB advances 850,000 1,100,000 1,706,621 1,720,000 Other borrowings: Short-term promissory notes issued to customers and customer repurchase agreements 563,831 611,304 625,829 646,439 Other borrowings 901 838 1,155 1,151 Total other borrowings $ 564,732 As of December 31, 2024, the Corporation had aggregate federal funds line borrowing capacity of $ 2.6 billion, with no amount outstanding. A combination of commercial real estate loans, commercial loans, consumer loans and investment securities were pledged to the FRB to provide access to the FRB discount window borrowings. The Corporation had $ 3.1 billion of collateralized borrowing availability at the FRB discount window with no amount outstanding as of December 31, 2024. As of December 31, 2024, the Corporation had total FHLB borrowing capacity of $ 11.1 billion with $5.1 billion of advances and letters of credit outstanding, for a remaining borrowing capacity of approximately $ 6.0 billion. Advances from the FHLB, when utilized, are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets. The following is included in senior and subordinated debt as of December 31: 2024 2023 (dollars in thousands) Subordinated debt $ 370,000 $ 538,778 Unamortized discounts and issuance costs ( 2,684 ) ( 3,394 ) Total senior debt and subordinated debt $ 367,316 $ 535,384 The following table summarizes the scheduled maturities of senior and subordinated debt with an original maturity of one year or more as of December 31, 2024 (dollars in thousands): Year 2025 $ — 2026 — 2027 — 2028 — 2029 — Thereafter 370,000 Unamortized discounts and issuance costs ( 2,684 ) Total $ 367,316 In November 2024, the Corporation retired $168.8 million of subordinated notes issued in June 2015 and November 2014 which matured on November 15, 2024. The subordinated notes issued June 2015 carried a fixed rate of 4.50 % and an effective rate of 4.69 % as a result of discounts and issuance costs. Interest was paid semi-annually in May and November. The subordinated notes issued November 2014, carried a fixed rate of 4.50 % and an effective rate of 4.87 % as a result of discounts and issuance costs. Interest was paid semi-annually in May and November. In December 2023, the Corporation retired $ 5.0 million of subordinated debt with a fixed-to-floating rate of 3.25 % and effective rate of 3.35 % maturing in 2030. 106 On March 16, 2022, $ 65 million of senior notes with a fixed rate of 3.60% were repaid upon their maturity. In March 2020, the Corporation issued $ 200.0 million and $ 175.0 million of subordinated notes due in 2030 and 2035, respectively. The subordinated notes maturing in 2030 were issued with a fixed-to-floating rate of 3.25 % and an effective rate of 3.35 %, due to issuance costs, and the subordinated notes maturing in 2035 were issued with a fixed-to-floating rate of 3.75 % and an effective rate of 3.85 %, due to issuance costs. NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS The following table presents a summary of notional amounts and fair values of derivative financial instruments as of December 31: 2024 2023 Notional Amount Asset (Liability) Fair Value Notional Amount Asset (Liability) Fair Value (dollars in thousands) Interest Rate Locks with Customers Positive fair values $ 171,933 $ 389 $ 119,558 $ 460 Negative fair values 3,888 ( 58 ) 1,015 ( 2 ) Forward Commitments Positive fair values 51,250 363 — — Negative fair values — — 42,000 ( 854 ) Interest Rate Derivatives with Customers (1) Positive fair values 767,905 8,480 824,659 22,656 Negative fair values 3,976,294 ( 239,058 ) 3,784,236 ( 222,530 ) Interest Rate Derivatives with Dealer Counterparties Positive fair values 3,976,294 150,480 3,784,236 128,235 Negative fair values 767,905 ( 10,734 ) 824,659 ( 23,023 ) Interest Rate Derivatives used in Cash Flow Hedges Positive fair values 2,500,000 227 2,500,000 6,189 Negative fair values 1,400,000 ( 2,971 ) 750,000 — Foreign Exchange Contracts with Customers Positive fair values 28,327 1,619 4,159 40 Negative fair values 693 ( 27 ) 13,353 ( 446 ) Foreign Exchange Contracts with Correspondent Banks Positive fair values 4,059 63 15,969 532 Negative fair values 32,406 ( 1,569 ) 6,112 ( 31 ) (1) Fair values are net of a valuation allowance of $366.3 thousand as of December 31, 2024 and 2023, respectively. In the third quarter of 2023, the Corporation transitioned certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions from LIBOR to SOFR. During 2024, the increase to other non-interest income to reflect market valuation movements from the transition from LIBOR to SOFR was $0.4 million. During 2023, the reduction to other non-interest income related to the transition from LIBOR to SOFR was $1.9 million. 107 The following table presents the effect of cash flow hedge accounting on AOCI: Amount of Gain (Loss) Recognized in OCI on Derivative Amount of Gain (Loss) Recognized in OCI Included Component Amount of Gain (Loss) Recognized in OCI Excluded Component Location of Gain (Loss) Recognized from AOCI into Income Amount of Gain (Loss) Reclassified from AOCI into Income Amount of Gain (Loss) Reclassified from AOCI into Income Included Component Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component (dollars in thousands) Year ended December 31, 2024 Interest Rate Products $ ( 10,261 ) $ ( 10,261 ) $ — Interest Income $ ( 29,899 ) $ ( 29,899 ) $ — Interest Rate Products 11,025 11,025 — Interest Expense 6,446 6,446 — Total $ 764 $ 764 $ — $ ( 23,453 ) $ ( 23,453 ) $ — Year ended December 31, 2023 Interest Rate Products $ 19,598 $ 19,598 $ — Interest Income $ ( 27,546 ) $ ( 27,546 ) $ — Interest Rate Products ( 10,550 ) ( 10,550 ) — Interest Expense 1,696 1,696 — Total $ 9,048 $ 9,048 $ — $ ( 25,850 ) $ ( 25,850 ) $ — The following table presents the effect of fair value and cash flow hedge accounting on the income statement for the year ended December 31: Consolidated Statements of Income Classification 2024 2023 Interest Income Interest Expense Interest Income Interest Expense (dollars in thousands) Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded $ ( 29,899 ) $ 6,446 $ ( 27,546 ) $ 1,696 The effects of fair value and cash flow hedging: Amount of gain or (loss) on cash flow hedging relationships — — — — Interest contracts: Amount of (loss) gain reclassified from AOCI into income ( 29,899 ) 6,446 ( 27,546 ) 1,696 Amount of (loss) gain reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring — — — — Amount of (loss) gain reclassified from AOCI into income - included component ( 29,899 ) 6,446 ( 27,546 ) 1,696 Amount of (loss) gain reclassified from AOCI into income - excluded component — — — — During the next twelve months, the Corporation estimates that an additional $ 16.5 million will be reclassified as a decrease to interest income. 108 The following table presents the fair value gains (losses) on derivative financial instruments for the years ended December 31: Consolidated Statements of Income Classification 2024 2023 2022 (dollars in thousands) Mortgage banking derivatives (1) Mortgage banking $ 1,090 $ ( 380 ) $ ( 2,360 ) Interest rate derivatives Other income 419 ( 1,855 ) — Foreign exchange contracts Other income ( 9 ) 7 81 Net fair value gains (losses) on derivative financial instruments $ 1,500 $ ( 2,228 ) $ ( 2,279 ) (1) Includes interest rate locks with customers and forward commitments. Fair Value Option The Corporation has elected to measure mortgage loans held for sale at fair value. The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements as of December 31: 2024 2023 (dollars in thousands) Amortized Cost (1) $ 25,316 $ 14,792 Fair value 25,618 15,158 (1) Cost basis of mortgage loans held for sale represents the unpaid principal balance. Losses related to changes in fair values of mortgage loans held for sale were $ 0.1 million for the year ended December 31, 2024. Gains related to changes in fair values of mortgage loans held for sale were $ 0.3 million for the year ended December 31, 2023, and losses related to changes in fair values of mortgage loans held for sale were $ 0.6 million for the year ended December 31, 2022. The gains and losses are recorded on the consolidated income statements as an adjustment to mortgage banking income. 109 Balance Sheet Offsetting The fair values of interest rate derivative agreements and foreign exchange contracts the Corporation enters into with customers and dealer counterparties may be eligible for offset on the consolidated balance sheets if they are subject to master netting arrangements or similar agreements. The Corporation has elected to net its financial assets and liabilities designated as interest rate derivatives when offsetting is permitted. The following table presents the Corporation's financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets as of December 31: Gross Amounts Gross Amounts Not Offset Recognized on the Consolidated on the Balance Sheets Consolidated Financial Cash Net Balance Sheets Instruments (1) Collateral (2) Amount (dollars in thousands) 2024 Interest rate derivative assets $ 159,187 $ ( 12,739 ) $ — $ 146,448 Foreign exchange derivative assets with correspondent banks 63 ( 63 ) — — Total $ 159,250 $ ( 12,802 ) $ — $ 146,448 Interest rate derivative liabilities $ 252,763 $ ( 9,995 ) $ ( 94,339 ) $ 148,429 Foreign exchange derivative liabilities with correspondent banks 1,569 ( 63 ) — 1,506 Total $ 254,332 $ ( 10,058 ) $ ( 94,339 ) $ 149,935 2023 Interest rate derivative assets $ 157,080 $ ( 15,154 ) $ — $ 141,926 Foreign exchange derivative assets with correspondent banks 532 ( 532 ) — — Total $ 157,612 $ ( 15,686 ) $ — $ 141,926 Interest rate derivative liabilities $ 245,553 $ ( 21,343 ) $ ( 93,841 ) $ 130,369 Foreign exchange derivative liabilities with correspondent banks 31 ( 532 ) — ( 501 ) Total $ 245,584 $ ( 21,875 ) $ ( 93,841 ) $ 129,868 (1) For interest rate derivative assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default. For interest rate derivative liabilities, amounts represent any derivative asset fair values that could be offset in the event of counterparty or customer default. (2) Amounts represent cash collateral received from the counterparty or posted by the Corporation on interest rate derivative transactions and foreign exchange contracts with financial institution counterparties. Interest rate derivatives with customers are collateralized by the same collateral securing the underlying loans to those borrowers. Cash and securities collateral amounts are included in the table only to the extent of the net derivative fair values. Cash Flow Hedge Terminations On October 10, 2024, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $250 million. As the hedged transaction continues to be probable, the unrealized losses will be recorded in AOCI and will be recognized as an increase to interest expense when the previously forecasted hedged items affect earnings in future periods. During the year ended December 31, 2024, $0.2 million of these unrealized losses were reclassified as an increase to interest expense on borrowings on the Consolidated Statements of Income. In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $ 1.0 billion. As the hedged transaction continues to be probable, the unrealized losses that have been recorded in AOCI are recognized as reduction to interest income, including fees, when the previously forecasted hedged item affects earnings in future periods. During the years ended December 31, 2024 and 2023, $27.9 million and $ 22.1 million, respectively, of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the consolidated statements of income. 110 NOTE 12 - REGULATORY MATTERS Regulatory Capital Requirements The Corporation and the Bank are subject to regulatory capital requirements administered by banking regulators. Failure to meet minimum capital requirements can trigger certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Corporation's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Basel III Rules The Basel III Rules provide a comprehensive framework and require the Corporation and the Bank to: • Meet a minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets and a minimum Tier 1 capital of 6.00% of risk-weighted assets; • Meet a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 leverage capital ratio of 4.00% of average 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. The Corporation and the Bank are required to maintain a "capital conservation buffer" of 2.50% above the minimum risk-based capital requirements. The rules provide that the failure to maintain the "capital conservation buffer" results in restrictions on capital distributions and discretionary cash bonus payments to executive officers. As a result, under the Basel III Rules, if the Bank fails to maintain the required minimum capital conservation buffer, the Corporation will be subject to limits, and possibly prohibitions, on its ability to obtain capital distributions from such subsidiaries. If the Corporation does not receive sufficient cash dividends from the Bank, it may not have sufficient funds to pay dividends on its common stock, service its debt obligations or repurchase its common stock. As of December 31, 2024 and 2023, the Corporation's capital levels met the minimum capital requirements, including the capital conservation buffers, as prescribed in the Basel III Rules. As of December 31, 2024 and 2023, the Bank was well capitalized under the regulatory framework for prompt corrective action based on its capital ratio calculation. To be categorized as well capitalized, the Bank was required to maintain minimum total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the table below. There are no conditions or events since December 31, 2024, that management believes have changed the Corporation and the Bank's categories. 111 T he following tables present the Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage requirements under the Basel III Rules as of December 31: 2024 Actual For Capital Adequacy Purposes Well Capitalized Amount Ratio Amount Ratio Amount Ratio (dollars in thousands) Total Capital (to Risk-Weighted Assets): Corporation $ 3,544,021 14.3 % $ 1,986,754 8.0 % N/A N/A Fulton Bank, N.A. 3,338,891 13.5 1,976,697 8.0 $ 2,470,871 10.0 % Tier I Capital (to Risk-Weighted Assets): Corporation $ 2,866,143 11.5 % $ 1,490,065 6.0 % N/A N/A Fulton Bank, N.A 3,029,881 12.3 1,482,523 6.0 $ 1,976,697 8.0 % Common Equity Tier I Capital (to Risk-Weighted Assets): Corporation $ 2,673,265 10.8 % $ 1,117,549 4.5 % N/A N/A Fulton Bank, N.A 2,985,881 12.1 1,111,892 4.5 $ 1,606,066 6.5 % Tier I Leverage Capital (to Average Assets): Corporation $ 2,866,143 9.0 % $ 1,269,248 4.0 % N/A N/A Fulton Bank, N.A 3,029,881 9.6 1,265,809 4.0 $ 1,582,261 5.0 % N/A - Not applicable as "well capitalized" applies to banks only. 2023 Actual For Capital Adequacy Purposes Well Capitalized Amount Ratio Amount Ratio Amount Ratio (dollars in thousands) Total Capital (to Risk-Weighted Assets): Corporation $ 3,184,496 14.0 % $ 1,817,712 8.0 % N/A N/A Fulton Bank, N.A. 2,896,908 12.8 1,809,836 8.0 $ 2,262,295 10.0 % Tier I Capital (to Risk-Weighted Assets): Corporation $ 2,541,819 11.2 % $ 1,363,284 6.0 % N/A N/A Fulton Bank, N.A 2,620,837 11.6 1,357,377 6.0 $ 1,809,836 8.0 % Common Equity Tier I Capital (to Risk-Weighted Assets): Corporation $ 2,348,941 10.3 % $ 1,022,463 4.5 % N/A N/A Fulton Bank, N.A 2,576,837 11.4 1,018,033 4.5 $ 1,470,492 6.5 % Tier I Leverage Capital (to Average Assets): Corporation $ 2,541,819 9.5 % $ 1,072,189 4.0 % N/A N/A Fulton Bank, N.A 2,620,837 9.6 1,089,195 4.0 $ 1,361,494 5.0 % N/A - Not applicable as "well capitalized" applies to banks only. Dividend and Loan Limitations The dividends that may be paid by the Bank to the Parent Company are subject to certain legal and regulatory limitations. The total amount available for payment of dividends by the Bank to the Parent Company calculated using the three-year earnings test was approximately $ 334.4 million as of December 31, 2024 based on the Bank maintaining enough capital to be considered well capitalized under the Basel III Rules. A condition of the OCC’s approval of the Republic First Transaction requires that the Bank, for a period of two years following the Acquisition Date, request and receive a written determination of no supervisory objection from the OCC prior to declaring or paying any dividend to the Parent Company Under current regulations, the Bank is limited in the amount it may lend to its affiliates, including the Parent Company. Loans to a single affiliate may not exceed 10 %, and the aggregate of loans to all affiliates may not exceed 20 % of the Bank's regulatory capital. 112 NOTE 13 - INCOME TAXES The components of income taxes are as follows: 2024 2023 2022 (dollars in thousands) Current tax expense: Federal $ 66,817 $ 49,707 $ 44,478 State 12,256 11,137 6,906 Total current tax expense 79,073 60,844 51,384 Deferred tax (benefit) expense: Federal ( 20,248 ) 3,021 8,974 State ( 2,939 ) 576 ( 324 ) Total deferred tax (benefit) expense ( 23,187 ) 3,597 8,650 Total income tax expense $ 55,886 $ 64,441 $ 60,034 The differences between the effective income tax rate and the federal statutory income tax rate are as follows: 2024 2023 2022 Statutory tax rate 21.0 % 21.0 % 21.0 % Tax credit investments ( 0.3 ) ( 1.3 ) ( 2.0 ) Tax-exempt income ( 4.3 ) ( 4.2 ) ( 3.5 ) Bargain purchase gain ( 2.3 ) — — Bank owned life insurance ( 0.9 ) ( 0.8 ) ( 0.7 ) State income taxes, net of federal benefit 1.9 2.6 1.2 Executive compensation 0.1 0.3 0.3 FDIC Premium 0.8 0.5 0.3 Other, net 0.2 0.4 0.7 Effective income tax rate 16.2 % 18.5 % 17.3 % 113 The net DTA recorded by the Corporation is included in other assets and consists of the following tax effects of temporary differences as of December 31: 2024 2023 (dollars in thousands) Deferred tax assets: Unrealized holding losses on securities $ 85,516 $ 90,671 Allowance for credit losses 90,148 71,013 Lease liability 34,921 21,570 State loss carryforwards 26,118 27,948 Other accrued expenses 16,142 11,082 Deferred compensation 11,138 10,215 Intangible assets 5,889 7,460 Stock-based compensation 5,458 5,129 Tax credit carryforwards — 4,995 Other 7,444 5,469 Total gross deferred tax assets $ 282,774 $ 255,552 Deferred tax liabilities: Equipment lease financing 45,644 47,345 Right-of-use-asset 31,960 20,022 Acquisition premiums/discounts 16,360 5,508 MSRs 6,952 7,158 Postretirement and defined benefit plans 5,560 3,438 Tax credit investments 2,033 1,747 Premises and equipment 736 1,678 Total gross deferred tax liabilities $ 109,245 $ 86,896 Net deferred tax asset, before valuation allowance 173,529 168,656 Valuation allowance ( 26,118 ) ( 27,948 ) Net deferred tax asset $ 147,411 $ 140,708 In assessing the realizability of DTAs, management considers whether it is more likely than not that some or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income and/or capital gain income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies, such as those that may be implemented to generate capital gains, in making this assessment. The valuation allowance relates to state net operating loss carryforwards for which realizability is uncertain. As of December 31, 2024 and 2023, the Corporation had state net operating loss carryforwards of approximately $ 389.3 million and $ 354.1 million, respectively, which are available to offset future state taxable income, and expire at various dates through 2044. As of December 31, 2024, based on the level of historical taxable income and projections for future taxable income over the periods in which the DTAs are deductible, management believes it is more likely than not that the Corporation will realize the benefits of its DTAs, net of the valuation allowance. Uncertain Tax Positions The following table summarizes the changes in unrecognized tax benefits for the years ended December 31: 2024 2023 2022 (dollars in thousands) Balance at beginning of year $ 1,044 $ 1,228 $ 1,673 Current period tax positions 120 147 112 Lapse of statute of limitations ( 104 ) ( 331 ) ( 557 ) Balance at end of year $ 1,060 $ 1,044 $ 1,228 114 Virtually all of the Corporation's unrecognized tax benefits are for positions that are taken on an annual basis on state tax returns. Increases to unrecognized tax benefits will occur as a result of accruing for the nonrecognition of the position for the current year. Decreases will occur as a result of the lapsing of the statute of limitations for the oldest outstanding year which includes the position. These offsetting increases and decreases are likely to continue in the future, including over the next twelve months. While the net effect on total unrecognized tax benefits during this period cannot be reasonably estimated, approximately $ 82 thousand is expected to reverse in 2025 due to lapsing of the statute of limitations. Decreases can also occur throughout the settlement of positions with taxing authorities. As of December 31, 2024, if recognized, all of the Corporation's unrecognized tax benefits would impact the effective tax rate. Not included in the table above is $ 134 thousand of federal income tax benefit on unrecognized state tax benefits which, if recognized, would also impact the effective tax rate. Interest accrued related to unrecognized tax benefits is recorded as a component of income tax expense. Penalties, if incurred, would also be recognized in income tax expense. The Corporation recognized approximately $ 168 thousand and $ 138 thousand of recoveries in 2024 and 2023, respectively, for interest and penalties in income tax expense related to unrecognized tax positions. As of December 31, 2024 and 2023, total accrued interest and penalties related to unrecognized tax positions were approximately $ 177 thousand and $ 0.3 million, respectively. The Corporation files income tax returns in the federal and various state jurisdictions. In most cases, unrecognized tax benefits are related to tax years that remain subject to examination by the relevant taxing authorities. With few exceptions, the Corporation is no longer subject to federal, state and local examinations by tax authorities for years before 2021. Tax Credit Investments The TCIs are included in other assets, with any unfunded equity commitments recorded in other liabilities on the consolidated balance sheets and changes are reflected in change in tax credit investments in the consolidated statements of cash flows. In 2023, the Corporation adopted ASU 2023-02, which allows all TCIs to qualify for the proportional amortization method if: (1) it is probable that the income tax credits allocatable to the Corporation will be available; (2) the Corporation does not have the ability to exercise significant influence over the operating and financial policies of the underlying project; (3) substantially all of the projected benefits are from income tax credits and other income tax benefits; (4) the Corporation's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive; and (5) the Corporation is a limited liability investor in the limited liability entity for both legal and tax purposes, and the Corporation’s liability is limited to its capital investment. See "Note 1 - Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements. All TCIs held as of December 31, 2024 that qualify for the proportional amortization method are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the Consolidated Statements of Income and net income in the Consolidated Statements of Cash Flows. All TCIs are evaluated for impairment at the end of each reporting period. There were no impairments recorded against TCIs during 2024. The following table presents the balances of the Corporation's TCIs and related unfunded commitments as of December 31: 2024 2023 Included in other assets: (dollars in thousands) Affordable housing tax credit investments, net $ 211,572 $ 170,115 Other tax credit investments, net 29,649 35,907 Total TCIs, net $ 241,221 $ 206,022 Included in other liabilities: Unfunded affordable housing tax credit commitments $ 84,572 $ 58,312 Other tax credit liabilities 24,109 28,361 Total unfunded tax credit commitments and liabilities $ 108,681 $ 86,673 The following table presents other information relating to the Corporation's TCIs for the years ended December 31: 115 2024 2023 2022 (dollars in thousands) Components of income taxes: Tax credits and benefits $ ( 26,762 ) $ ( 28,748 ) $ ( 27,154 ) Amortization of tax credits and benefits, net of tax benefits 25,069 23,446 19,298 Deferred tax expense 559 610 766 Total reduction in income tax expense $ ( 1,134 ) $ ( 4,692 ) $ ( 7,090 ) Amortization of TCIs: Total amortization of TCIs $ — $ — $ 2,783 NOTE 14 - NET INCOME PER COMMON SHARE Basic net income per common share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding. Diluted net income per common share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding plus the incremental number of shares added as a result of converting common stock equivalents, calculated using the treasury stock method. The Corporation's common stock equivalents consist of outstanding restricted stock, RSUs and PSUs. PSUs are required to be included in weighted average diluted shares outstanding if performance measures, as defined in each PSU award agreement, are met as of the end of the period. A reconciliation of weighted average common shares outstanding used to calculate basic and diluted net income per share follows: 2024 2023 2022 (in thousands) Weighted average common shares outstanding (basic) 175,523 165,241 164,119 Impact of common stock equivalents 1,700 1,528 1,353 Weighted average common shares outstanding (diluted) 177,223 166,769 165,472 116 NOTE 15 - SHAREHOLDERS' EQUITY Preferred Stock On October 29, 2020, the Corporation issued 8.0 million depositary shares ("Depositary Shares"), each representing a 1/40 th interest in a share of the Corporation's 5.125 % Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, of which 200,000 are authorized and issued, with a liquidation preference of $ 1,000 per share (equivalent to $ 25.00 per Depositary Share), for an aggregate offering amount of $ 200 million. The preferred stock is redeemable, at the Corporation's option, in whole or in part, on and after January 15, 2026, and redeemable in whole, but not in part, prior to January 15, 2026 within 90 days following the occurrence of a regulatory capital treatment event. 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. Stock Reissuance On July 1, 2022, the Corporation reissued 6,208,516 shares of common stock that had been held as Treasury stock in connection with the Merger. 117 Accumulated Other Comprehensive Income (Loss) The following table presents the components of OCI for the years ended December 31: Before-Tax Amount Tax Effect Net of Tax Amount (dollars in thousands) 2024 Net unrealized gains (losses) on securities $ ( 28,993 ) $ 6,568 $ ( 22,425 ) Reclassification adjustment for securities gains (losses) included in net income (1) 20,283 ( 4,594 ) 15,689 Amortization of net unrealized gains (losses) on AFS transferred to HTM (2) 7,251 ( 1,642 ) 5,609 Net unrealized holding gains (losses) arising during the period on interest rate derivatives used in cash flow hedges 764 ( 174 ) 590 Reclassification adjustment for net gains (losses) realized in net income on interest rate derivatives used in cash flow hedges 23,453 ( 5,312 ) 18,141 Unrecognized pension and postretirement income 9,411 ( 2,132 ) 7,279 Amortization of net unrecognized pension and postretirement items (3) ( 541 ) 119 ( 422 ) Total Other Comprehensive Income (Loss) $ 31,628 $ ( 7,167 ) $ 24,461 2023 Net unrealized gains (losses) on securities $ 46,572 $ ( 10,549 ) $ 36,023 Reclassification adjustment for securities gains (losses) included in net income (1) ( 733 ) 166 ( 567 ) Amortization of net unrealized gains (losses) on AFS transferred to HTM (2) 7,644 ( 1,731 ) 5,913 Net unrealized holding gains (losses) arising during the period on interest rate derivatives used in cash flow hedges 9,048 ( 2,050 ) 6,998 Reclassification adjustment for net gains (losses) realized in net income on interest rate derivatives used in cash flow hedges 25,850 ( 5,855 ) 19,995 Unrecognized pension and postretirement income 6,162 ( 1,385 ) 4,777 Amortization of net unrecognized pension and postretirement items (3) 73 ( 16 ) 57 Total Other Comprehensive Income (Loss) $ 94,616 $ ( 21,420 ) $ 73,196 2022 Net unrealized gains (losses) on securities $ ( 403,606 ) $ 91,437 $ ( 312,169 ) Reclassification adjustment for securities gains (losses) included in net income (1) ( 27 ) 7 ( 20 ) Amortization of net unrealized gains (losses) on AFS transferred to HTM (2) ( 57,509 ) 13,026 ( 44,483 ) Net unrealized holding gains (losses) arising during the period on interest rate derivatives used in cash flow hedges ( 81,400 ) 18,437 ( 62,963 ) Reclassification adjustment for net gains (losses) loss realized in net income on interest rate swaps used in cash flow hedges 7,761 ( 1,757 ) 6,004 Unrecognized pension and postretirement income 825 ( 181 ) 644 Amortization of net unrecognized pension and postretirement items (3) 128 ( 28 ) 100 Total Other Comprehensive Income (Loss) $ ( 533,828 ) $ 120,941 $ ( 412,887 ) (1) Amounts reclassified out of AOCI. Before-tax amounts included in "Investment securities gains, net" on the Consolidated Statements of Income. See "Note 4 - Investment Securities," for additional details. (2) Amounts reclassified out of AOCI. Before-tax amounts included as a reduction to "Interest Income" on the Consolidated Statements of Income. (3) Amounts reclassified out of AOCI. Before-tax amounts included in "Salaries and employee benefits" on the Consolidated Statements of Income. See "Note 17 - Employee Benefit Plans," for additional details. 118 The following table presents changes in each component of AOCI, net of tax, for the years ended December 31: Unrealized Gains (Losses) on Investment Securities Net Unrealized Gain (Loss) on Interest Rate Derivatives used in Cash Flow Hedges Unrecognized Pension and Postretirement Plan Income (Costs) Total (dollars in thousands) Balance at December 31, 2021 $ 40,441 $ ( 4,817 ) $ ( 8,213 ) $ 27,411 OCI before reclassifications ( 312,169 ) ( 62,963 ) 644 ( 374,488 ) Amounts reclassified from AOCI ( 20 ) 6,004 100 6,084 Amortization of net unrealized gains (losses) on AFS securities transferred to HTM ( 44,483 ) — — ( 44,483 ) Balance at December 31, 2022 ( 316,231 ) ( 61,776 ) ( 7,469 ) ( 385,476 ) OCI before reclassifications 36,023 6,998 4,777 47,798 Amounts reclassified from AOCI ( 567 ) 19,995 57 19,485 Amortization of net unrealized gains (losses) on AFS securities transferred to HTM 5,913 — — 5,913 Balance at December 31, 2023 ( 274,862 ) ( 34,783 ) ( 2,635 ) ( 312,280 ) OCI before reclassifications ( 22,425 ) 590 7,279 ( 14,556 ) Amounts reclassified from AOCI 15,689 18,141 ( 422 ) 33,408 Amortization of net unrealized gains (losses) on AFS securities transferred to HTM 5,609 — — 5,609 Balance at December 31, 2024 $ ( 275,989 ) $ ( 16,052 ) $ 4,222 $ ( 287,819 ) Common Stock Repurchase Programs On December 17, 2024, the Corporation announced that its Board of Directors approved the 2025 Repurchase Program. The 2025 Repurchase Program will expire on December 31, 2025. Under the 2025 Repurchase Program, the Corporation is authorized to repurchase up to $ 125.0 million of shares of its common stock. Under this authorization, up to $ 25.0 million of the $125 million authorization may be used to repurchase the Corporation's Preferred Stock. The 2025 Repurchase Program may be discontinued at any time. On December 19, 2023, the Corporation announced that its Board of Directors approved the 2024 Repurchase Program. The 2024 Repurchase Program expired on December 31, 2024. Under the 2024 Repurchase Program, the Corporation was authorized to repurchase up to $ 125.0 million of shares of its common stock. Under this authorization, up to $ 25.0 million of the $125 million authorization may be used to repurchase the Corporation's Preferred Stock and outstanding subordinated notes through December 31, 2024. During 2024, 1.9 million shares were repurchased at a total cost of $30.3 million, or $15.69 per share, under t he 2024 Repurchase Program. On December 20, 2022, the Corporation announced that its Board of Directors approved the 2023 Repurchase Program. Under the 2023 Repurchase Program, the Corporation was authorized to repurchase up to $ 100.0 million of its common stock through December 31, 2023. During 2023, 5.0 million shares were repurchased at a total cost of $ 77.1 million, or $ 15.32 per share, under t he 2023 Repurchase Program. Under these repurchase programs, repurchased shares are added to treasury stock, at cost. As permitted by securities laws and other legal requirements, and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase transactions. 119 NOTE 16 - STOCK-BASED COMPENSATION PLANS The following table presents compensation expense and related tax benefits for all equity awards recognized in the consolidated statements of income for the years ended December 31: 2024 2023 2022 (dollars in thousands) Compensation expense $ 10,907 $ 11,265 $ 15,081 Tax benefit ( 2,466 ) ( 2,484 ) ( 2,690 ) Total stock-based compensation, net of tax $ 8,441 $ 8,781 $ 12,391 The tax benefits as a percentage of compensation expense, as shown in the preceding table, were 22.6 %, 22.1 % and 17.8 % in 2024, 2023 and 2022, respectively. These percentages differ from the Corporation's federal statutory tax rate of 21 %. Tax benefits are only recognized over the vesting period for awards that ordinarily will generate a tax deduction when exercised, in the case of non-qualified stock options, or upon vesting, in the case of restricted stock, RSUs, and PSUs. Tax benefits in excess of the tax rate resulted from incentive stock option exercises that triggered a tax deduction when they were exercised and excess tax benefits realized on vesting RSUs and PSUs during the period. The following table provides information about stock option activity for the year ended December 31, 2024: Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in millions) Outstanding and exercisable as of December 31, 2023 40,135 $ 12.61 Granted — — Exercised ( 39,310 ) 12.61 Forfeited — — Expired ( 825 ) 12.61 Outstanding and exercisable as of December 31, 2024 — $ 12.61 0.0 years $ — The following table presents information about stock options exercised for the years ended December 31: 2024 2023 2022 (dollars in thousands) Number of options exercised 39,310 68,134 130,503 Total intrinsic value of options exercised $ 116 $ 249 $ 842 Cash received from options exercised $ 496 $ 805 $ 1,402 Tax benefit from options exercised $ 23 $ 47 $ 163 Upon exercise, the Corporation issues shares from its authorized, but unissued, common stock to satisfy the options. The following table provides information about nonvested restricted stock, RSUs and PSUs granted under the Employee Equity Plan and Directors' Plan for the year ended December 31, 2024: Restricted Stock/RSUs/PSUs (1) Shares Weighted Average Grant Date Fair Value Nonvested as of December 31, 2023 2,662,471 $ 14.24 Granted 933,962 15.22 Vested ( 739,626 ) 16.14 Forfeited ( 153,810 ) 14.30 Nonvested as of December 31, 2024 2,702,997 $ 14.57 (1) There were no nonvested stock options at December 31, 2024 or 2023. 120 As of December 31, 2024, there was $ 11.4 million of total unrecognized compensation cost (pre-tax) related to restricted stock, RSUs and PSUs that will be recognized as compensation expense over a weighted average period of 1.89 years. As of December 31, 2024, the Employee Equity Plan had 3.8 million shares reserved for future grants through 2032, and the Directors' Plan had 325.1 thousand shares reserved for future grants through 2033. The fair value of certain PSUs with market-based performance conditions granted under the Employee Equity Plan was estimated on the grant date using the Monte Carlo valuation methodology performed by a third-party valuation expert. This valuation is dependent upon certain assumptions, as summarized in the following table: 2024 2023 2022 Risk-free interest rate 4.75 % 3.84 % 2.84 % Volatility of Corporation’s stock 30.54 % 35.63 % 43.46 % Expected life of PSUs 3 years 3 years 3 years The expected life of the PSUs with fair values measured using the Monte Carlo valuation methodology was based on the defined performance period of three years . Volatility of the Corporation's stock was based on historical volatility for the period commensurate with the expected life of the PSUs. The risk-free interest rate is the zero-coupon U.S. Treasury rate commensurate with the expected life of the PSUs on the date of the grant. Based on the assumptions above, the Corporation calculated an estimated fair value per PSU with market-based performance conditions granted in 2024, 2023 and 2022 of $ 19.59 , $ 10.63 and $ 14.93 , respectively. Under the ESPP, eligible employees can purchase stock of the Corporation at 85 % of the fair market value of the stock on the date of purchase. The ESPP is considered to be a compensatory plan and, as such, compensation expense is recognized for the 15 % discount on shares purchased. The following table summarizes activity under the ESPP: 2024 2023 2022 ESPP shares purchased 133,019 162,667 134,645 Average purchase price per share (85% of market value) $ 14.55 $ 11.68 $ 14.06 Compensation expense recognized (in thousands) $ 342 $ 348 $ 334 NOTE 17 - EMPLOYEE BENEFIT PLANS The following summarizes retirement plan expense for the years ended December 31: 2024 2023 2022 (dollars in thousands) 401(k) Retirement Plan $ 13,739 $ 11,930 $ 10,988 Pension Plan ( 1,036 ) 464 ( 1,347 ) Total $ 12,703 $ 12,394 $ 9,641 The 401(k) Retirement Plan is a defined contribution plan under which eligible employees may defer a portion of their pre-tax covered compensation on an annual basis, with employer matches of up to 5 % of employee compensation. Employee and employer contributions under these features are 100 % vested. Contributions to the Pension Plan are actuarially determined and funded annually, if necessary. The Corporation recognizes the funded status of its Pension Plan on the consolidated balance sheets and recognizes the changes in that funded status through OCI. The Pension Plan has been curtailed, with no additional benefits accruing to participants. 121 Pension Plan The net periodic pension cost for the Pension Plan, as determined by consulting actuaries, consisted of the following components for the years ended December 31: 2024 2023 2022 (dollars in thousands) Interest cost $ 3,159 $ 3,269 $ 2,393 Expected return on assets ( 3,903 ) ( 3,436 ) ( 4,393 ) Net amortization and deferral — 631 653 Gain on settlement ( 292 ) — — Net periodic pension cost $ ( 1,036 ) $ 464 $ ( 1,347 ) The following table summarizes the changes in the projected benefit obligation and fair value of Pension Plan assets for the plan years ended December 31: 2024 2023 (dollars in thousands) Projected benefit obligation at beginning of year $ 68,952 $ 68,716 Interest cost 3,159 3,269 Benefit payments ( 8,843 ) ( 4,687 ) Change in assumptions ( 4,323 ) 1,492 Experience gain 484 162 Projected benefit obligation at end of year $ 59,429 $ 68,952 Fair value of plan assets at beginning of year $ 84,659 $ 78,137 Actual return on plan assets 9,779 11,209 Benefit payments ( 8,843 ) ( 4,687 ) Fair value of plan assets at end of year $ 85,595 $ 84,659 The following table presents the funded status of the Pension Plan, included in other assets and other liabilities on the consolidated balance sheets, as of December 31: 2024 2023 (dollars in thousands) Projected benefit obligation $ ( 59,429 ) $ ( 68,952 ) Fair value of plan assets 85,595 84,659 Funded status $ 26,166 $ 15,707 The following table summarizes the changes in the unrecognized net loss included as a component of AOCI: Unrecognized Net Loss (Gain) Before tax Net of tax (dollars in thousands) Balance as of December 31, 2022 $ 12,070 $ 9,384 Recognized as a component of 2023 periodic pension cost ( 631 ) ( 492 ) Unrecognized gains arising in 2023 ( 6,119 ) ( 4,775 ) Balance as of December 31, 2023 5,320 4,117 Recognized as a component of 2024 periodic pension cost — — Unrecognized gains arising in 2024 ( 9,417 ) ( 7,284 ) Balance as of December 31, 2024 $ ( 4,097 ) $ ( 3,167 ) 122 The following rates were used to calculate the net periodic pension cost and the present value of benefit obligations as of December 31: 2024 2023 2022 Discount rate-projected benefit obligation 5.38 % 4.73 % 4.93 % Expected long-term rate of return on plan assets 5.00 % 5.00 % 5.00 % The discount rates used were determined using the FTSE Pension Discount Curve (formerly, the Citigroup Average Life discount rate table), as adjusted based on the Pension Plan's expected benefit payments. The 5.00 % long-term rate of return on plan assets used to calculate the net periodic pension cost was based on historical returns, adjusted for expectations of long-term asset returns based on the December 31, 2024 weighted average asset allocations. The expected long-term return is considered to be appropriate based on the asset mix and the historical returns realized. The following table presents a summary of the fair values of the Pension Plan's assets as of December 31: 2024 2023 Estimated Fair Value % of Total Assets Estimated Fair Value % of Total Assets (dollars in thousands) Equity mutual funds $ 31,369 $ 27,998 Equity common trust funds 16,486 20,246 Equity securities 47,855 55.9 % 48,244 57.0 % Cash and money market funds 5,534 6,276 Fixed income mutual funds 13,590 12,639 Corporate debt securities 4,090 2,600 U.S. Government agency securities 9,493 9,908 Fixed income securities and cash 32,707 38.2 % 31,423 37.1 % Other alternative investment funds 5,033 5.9 % 4,992 5.9 % Total $ 85,595 100.0 % $ 84,659 100.0 % Investment allocation decisions are made by a retirement plan committee. The goal of the investment allocation strategy is to match certain benefit obligations with maturities of fixed income securities. Alternative investments may include managed futures, commodities, real estate investment trusts, master limited partnerships, and long-short strategies with traditional stocks and bonds. All alternative investments are in the form of mutual funds, not individual contracts, to enable daily liquidity. The fair values for assets held by the Pension Plan are based on quoted prices for identical instruments and would be categorized as Level 1 assets under the fair value hierarchy. Estimated future benefit payments are as follows (in thousands): Year 2025 $ 4,938 2026 5,005 2027 5,050 2028 5,058 2029 5,039 Thereafter 24,533 Total $ 49,623 Multiemployer Defined Benefit Pension Plan In connection with the Merger, the Corporation assumed the pension plan obligations of Prudential Bancorp, under the Prudential Bancorp Pension Plan, that had previously been closed to new Prudential Bancorp participants. 123 The Prudential Bancorp Pension Plan is structured as a multiple employer plan under Internal Revenue Code Section 413(c). It maintains a single trust and all assets are commingled and invested on a pooled basis. All amounts payable by the Plan are a general charge upon all its assets. This structure gives rise to the risk if a participating employer fails before funding up to cover the liabilities of its participants and orphans, contributions for all remaining employers will increase, as assets have to be re-allocated to cover such shortfall. Information regarding the Prudential Bancorp Pension Plan as of December 31, 2024 is as follows: Legal Name of Plan Prudential Bancorp Pension Plan (dollars in thousands) Plan Employer Identification Number 23-1928421 The Corporation's contribution for the year ended December 31, 2024 (1) $ 355 Are the Corporation's contributions more than 5% of total contributions? No Funded Status 80.81 % (1) Includes 2025 prepayment of $138 thousand. Postretirement Benefits The Corporation provides medical benefits and life insurance benefits under the Postretirement Plan to certain retired full-time employees who were employees of the Corporation prior to January 1, 1998. Prior to February 1, 2014, certain full-time employees became eligible for these discretionary benefits if they reached retirement age while working for the Corporation. The Corporation recognizes the funded status of the Postretirement Plan on the consolidated balance sheets and recognizes the changes in that funded status through OCI. The components of the net benefit for Postretirement Plan other than pensions are as follows: 2024 2023 2022 (dollars in thousands) Interest cost $ 38 $ 42 $ 34 Net amortization and deferral ( 541 ) ( 558 ) ( 525 ) Net postretirement benefit $ ( 503 ) $ ( 516 ) $ ( 491 ) This table summarizes the changes in the accumulated postretirement benefit obligation for the years ended December 31: 2024 2023 (dollars in thousands) Accumulated postretirement benefit obligation at beginning of year $ 844 $ 972 Interest cost 38 42 Benefit payments ( 135 ) ( 147 ) Change in experience 42 ( 31 ) Change in assumptions ( 36 ) 8 Accumulated postretirement benefit obligation at end of year $ 753 $ 844 The fair values of the Postretirement Plan assets were $ 0 as of both December 31, 2024 and 2023. The funded status for the Postretirement Plan included in other liabilities was $ 0.8 million in the consolidated balance sheets as of December 31, 2024 and 2023, respectively. 124 The following table summarizes the changes in items recognized as a component of accumulated other comprehensive income (loss): Before tax Unrecognized Prior Service Cost Unrecognized Net Loss (Gain) Total Net of tax (dollars in thousands) Balance as of December 31, 2022 $ ( 2,084 ) $ ( 818 ) $ ( 2,902 ) $ ( 2,264 ) Recognized as a component of 2023 postretirement cost 464 94 558 435 Unrecognized gains arising in 2023 — ( 23 ) ( 23 ) ( 18 ) Balance as of December 31, 2023 ( 1,620 ) ( 747 ) ( 2,367 ) ( 1,847 ) Recognized as a component of 2024 postretirement cost 464 77 541 422 Unrecognized loss arising in 2024 — 6 6 5 Balance as of December 31, 2024 $ ( 1,156 ) $ ( 664 ) $ ( 1,820 ) $ ( 1,420 ) The following rates were used to calculate net periodic postretirement benefit cost and the present value of benefit obligations as of December 31: 2024 2023 2022 Discount rate-projected benefit obligation 5.38 % 4.73 % 4.93 % Expected long-term rate of return on plan assets 3.00 % 3.00 % 3.00 % The discount rates used to calculate the accumulated postretirement benefit obligation were determined using the FTSE Pension Discount Curve (formerly, the Citigroup Average Life discount rate table), as adjusted based on the Postretirement Plan's expected benefit payments. Estimated future benefit payments under the Postretirement Plan are as follows (dollars in thousands): Year 2025 $ 129 2026 116 2027 103 2028 92 2029 81 Thereafter 270 Total $ 791 125 NOTE 18 - LEASES The Corporation has operating leases for certain financial centers, corporate offices and land. The following table presents the components of lease expense, which is included in net occupancy expense on the consolidated statements of income (dollars in thousands): 2024 2023 2022 Operating lease expense $ 27,893 $ 19,372 $ 17,766 Variable lease expense 3,147 3,160 3,017 Sublease income ( 1,224 ) ( 1,111 ) ( 964 ) Total lease expense $ 29,816 $ 21,421 $ 19,819 Supplemental consolidated balance sheet information related to leases was as follows as of December 31 (dollars in thousands): Operating Leases Balance Sheet Classification 2024 2023 ROU assets Other assets $ 140,997 $ 88,188 Lease liabilities Other liabilities $ 154,176 $ 95,230 Weighted average remaining lease term 9.30 years 6.48 years Weighted average discount rate 5.51 % 3.34 % The discount rate used in determining the lease liability for each individual lease is the Bank's incremental borrowing rate which corresponds with the remaining lease term. Supplemental cash flow information related to operating leases was as follows (dollars in thousands): 2024 2023 Cash paid for amounts included in the measurement of lease liabilities $ 25,161 $ 20,898 ROU assets obtained in exchange for lease obligations 78,278 20,184 Lease payment obligations for each of the next five years and thereafter, with a reconciliation to the Corporation's lease liability were as follows (dollars in thousands): Year Operating Leases 2025 $ 27,122 2026 25,744 2027 23,464 2028 20,254 2029 16,669 Thereafter 91,077 Total lease payments 204,330 Less: imputed interest ( 50,154 ) Present value of lease liabilities $ 154,176 On May 10, 2024, the Bank and Fulton Financial Realty Company, a wholly owned subsidiary of the Corporation, entered into the Sale-Leaseback Transaction for 40 financial center office locations for an aggregate cash purchase price of $55.4 million. The Bank entered into a lease for 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. During the initial lease terms, the base rental amount will increase annually at a rate of 2.25%. 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. The properties are located in Pennsylvania, New Jersey, Delaware, and Maryland. As of December 31, 2024, the Corporation had not entered into any significant leases that have not yet commenced. 126 NOTE 19 - FAIR VALUE MEASUREMENTS The following tables present assets and liabilities measured at fair value on a recurring basis and reported on the consolidated balance sheets: 2024 Level 1 Level 2 Level 3 Total (dollars in thousands) Loans held for sale $ — $ 25,618 $ — $ 25,618 Available for sale investment securities: State and municipal securities — 814,887 — 814,887 Corporate debt securities — 300,370 — 300,370 Collateralized mortgage obligations — 788,885 — 788,885 Residential mortgage-backed securities — 989,875 — 989,875 Commercial mortgage-backed securities — 516,882 — 516,882 Total available for sale investment securities — 3,410,899 — 3,410,899 Other assets: Investments held in Rabbi Trust 35,093 — — 35,093 Derivative assets 1,682 159,939 — 161,621 Total assets $ 36,775 $ 3,596,456 $ — $ 3,633,231 Other liabilities: Deferred compensation liabilities $ 35,093 $ — $ — $ 35,093 Derivative liabilities 1,596 252,821 — 254,417 Total liabilities $ 36,689 $ 252,821 $ — $ 289,510 2023 Level 1 Level 2 Level 3 Total (dollars in thousands) Loans held for sale $ — $ 15,158 $ — $ 15,158 Available for sale investment securities: U.S. Government securities 42,161 — — 42,161 U.S. Government-sponsored agency securities — 1,010 — 1,010 State and municipal securities — 1,072,013 — 1,072,013 Corporate debt securities — 440,551 — 440,551 Collateralized mortgage obligations — 111,434 — 111,434 Residential mortgage-backed securities — 196,795 — 196,795 Commercial mortgage-backed securities — 534,388 — 534,388 Total available for sale investment securities 42,161 2,356,191 — 2,398,352 Other assets: Investments held in Rabbi Trust 29,819 — — 29,819 Derivative assets 572 157,540 — 158,112 Total assets $ 72,552 $ 2,528,889 $ — $ 2,601,441 Other liabilities: Deferred compensation liabilities $ 29,819 $ — $ — $ 29,819 Derivative liabilities 477 246,157 — 246,634 Total liabilities $ 30,296 $ 246,157 $ — $ 276,453 The valuation techniques used to measure fair value for the items in the preceding tables are as follows: Loans held for sale - This category includes mortgage loans held for sale that are measured at fair value. Fair values as of December 31, 2024 and 2023, were measured as the price that secondary market investors were offering for loans with similar characteristics. See "Note 1 - Summary of Significant Accounting Policies" for details related to the Corporation's election to measure assets and liabilities at fair value. Available for sale investment securities - Included in this asset category are debt securities. Level 2 investment securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed 127 income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing. Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable. • U.S. Government securities - These securities are classified as Level 1. Fair values are based on quoted prices with active markets. • U.S. Government-sponsored agency securities/State and municipal securities/Collateralized mortgage obligations/Residential mortgage-backed securities/Commercial mortgage-backed securities - These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above. • Corporate debt securities - These securities are classified as Level 2. This category consists of subordinated and senior debt issued by financial institutions ($ 293.1 million at December 31, 2024 and $ 433.4 million at December 31, 2023) and other corporate debt issued by non-financial institutions ($ 7.3 million at December 31, 2024 and $ 7.2 million at December 31, 2023). The fair values for corporate debt securities are determined by a third-party pricing service as detailed above. Investments held in Rabbi Trust - This category consists of mutual funds that are held in trust for employee deferred compensation plans that the Corporation has elected to measure at fair value. Shares of mutual funds are valued based on net asset value, which represents quoted market prices for the underlying shares held in the mutual funds, and as such, are classified as Level 1. Derivative assets - Fair value of foreign currency exchange contracts classified as Level 1 assets ($ 1.7 million at December 31, 2024 and $ 0.6 million at December 31, 2023). The foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets. Level 2 assets, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($ 0.8 million at December 31, 2024 and $ 0.5 million at December 31, 2023) and the fair value of interest rate derivatives ($ 159.2 million at December 31, 2024 and $ 157.1 million at December 31, 2023). The fair values of the interest rate locks, forward commitments and interest rate derivatives represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See "Note 11 - Derivative Financial Instruments," for additional information. Deferred compensation liabilities - Fair value of amounts due to employees under deferred compensation plans, classified as Level 1 liabilities and are included in other liabilities on the consolidated balance sheets. The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Investments held in Rabbi Trust" above. Derivative liabilities - Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($ 1.6 million and $ 0.5 million at December 31, 2024 and 2023, respectively). Level 2 liabilities, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($ 0.1 million at December 31, 2024 and $ 0.9 million at December 31, 2023) and the fair value of interest rate derivatives ($ 252.8 million at December 31, 2024 and $ 245.6 million at December 31, 2023). The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Derivative assets" above. 128 Certain financial instruments are not measured at fair value on an ongoing basis but are subject to fair value measurement in certain circumstances, such as upon their acquisition or when there is evidence of impairment. The following table presents Level 3 financial assets measured at fair value on a nonrecurring basis : 2024 2023 (dollars in thousands) Loans, Net $ 168,668 $ 102,135 OREO 2,621 896 MSRs (1) 53,972 49,696 SBA servicing asset 3,120 — Total assets $ 228,381 $ 152,727 (1) Amounts shown are estimated fair value. MSRs are recorded on the Corporation's consolidated balance sheets at lower of amortized cost or fair value. See "Note 8 - Mortgage Servicing Rights" for additional information. The valuation techniques used to measure fair value for the items in the table above are as follows: • Loans, net – This category consists of loans that were individually evaluated for impairment and have been classified as Level 3 assets. The amount shown is the balance of non-accrual loans, net of related ACL. See "Note 5 - Loans and Allowance for Credit Losses," for additional details. • OREO – This category consists of OREO classified as Level 3 assets, for which the fair values were based on estimated selling prices less estimated selling costs for similar assets in active markets. • MSRs – This category consists of MSRs, which were initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors, and subsequently carried at the lower of amortized cost or fair value. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified by product type and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the December 31, 2024 valuation were 7.9 % and 9.5 %, respectively. Management reviews the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See "Note 8 - Mortgage Servicing Rights," for additional information. Changes in any of those inputs, in isolation, could result in a significantly different fair value measurement, as depicted in the table below: Significant Input Scenario Shock % Change in Valuation Prepayment Rate + 15% ( 4 )% Prepayment Rate - 15% 4 % Discount Rate - 200 bps 10 % Discount Rate + 200 bps ( 9 )% • SBA servicing asset – This category consists of the retained servicing rights on SBA-guaranteed loans sold to investors. The standard sale structure under the SBA Secondary Participation Guaranty Agreement provides for the Corporation to retain a portion of the cash flow from the interest payment received on the SBA guaranteed portion of the loan, which is commonly known as a servicing spread. A third-party valuation expert is utilized to perform the modeling to estimate the fair value of the SBA servicing asset. Since the valuation model uses significant unobservable inputs, the SBA servicing asset is classified within Level 3. 129 The following table details the book values and the estimated fair values of the Corporation's financial instruments as of December 31, 2024 and 2023. A general description of the methods and assumptions used to estimate such fair values is also provided. 2024 Estimated Fair Value Carrying Amount Level 1 Level 2 Level 3 Total FINANCIAL ASSETS (dollars in thousands) Cash and cash equivalents $ 1,063,871 $ 1,063,871 $ — $ — $ 1,063,871 FRB and FHLB stock 139,574 — 139,574 — 139,574 Loans held for sale 25,618 — 25,618 — 25,618 AFS securities 3,410,899 — 3,410,899 — 3,410,899 HTM securities 1,395,569 — 1,183,449 — 1,183,449 Loans, net 23,665,763 — — 22,555,687 22,555,687 Accrued interest receivable 117,029 117,029 — — 117,029 Other assets 736,502 543,251 159,939 59,713 762,903 FINANCIAL LIABILITIES Demand and savings deposits $ 21,135,478 $ 21,135,478 $ — $ — $ 21,135,478 Brokered deposits 843,857 145,056 698,647 — 843,703 Time deposits 4,150,098 — 4,154,726 — 4,154,726 Accrued interest payable 31,620 31,620 — — 31,620 FHLB advances 850,000 851,470 — — 851,470 Senior debt and subordinated debt 367,316 — 253,818 — 253,818 Other borrowings 564,732 544,908 901 — 545,809 Other liabilities 467,011 200,029 252,821 14,161 467,011 2023 Estimated Fair Value Carrying Amount Level 1 Level 2 Level 3 Total FINANCIAL ASSETS (dollars in thousands) Cash and cash equivalents $ 549,710 $ 549,710 $ — $ — $ 549,710 FRB and FHLB stock 124,405 — 124,405 — 124,405 Loans held for sale 15,158 — 15,158 — 15,158 AFS securities 2,398,352 42,161 2,356,191 — 2,398,352 HTM securities 1,267,922 — 1,072,207 — 1,072,207 Loans, net 21,057,690 — — 19,930,560 19,930,560 Accrued interest receivable 107,972 107,972 — — 107,972 Other assets 661,067 452,935 157,540 50,592 661,067 FINANCIAL LIABILITIES Demand and savings deposits $ 17,653,690 $ 17,653,690 $ — $ — $ 17,653,690 Brokered deposits 1,144,692 145,987 999,392 — 1,145,379 Time deposits 2,739,241 — 2,714,709 — 2,714,709 Accrued interest payable 35,083 35,083 — — 35,083 Federal funds purchased 240,000 240,000 — — 240,000 FHLB advances 1,100,000 1,094,013 — — 1,094,013 Senior debt and subordinated debt 535,384 — 463,270 — 463,270 Other borrowings 612,142 611,269 837 — 612,106 Other liabilities 429,046 165,635 246,157 17,254 429,046 Fair values of financial instruments are significantly affected by the assumptions used, principally the timing of future cash flows and discount rates. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument. The aggregate fair value amounts presented do not necessarily represent management's estimate of the underlying value of the Corporation. 130 For short-term financial instruments, defined as those with remaining maturities of 90 days or less, and excluding those recorded at fair value on the Corporation's consolidated balance sheets, book value was considered to be a reasonable estimate of fair value. The following instruments are predominantly short-term: Assets Liabilities Cash and cash equivalents Demand and savings deposits Accrued interest receivable Other borrowings Accrued interest payable FRB and FHLB stock represent restricted investments and are carried at cost on the consolidated balance sheets, which is a reasonable estimate of fair value. As of December 31, 2024, fair values for loans and time deposits were estimated by discounting future cash flows using the current rates, as adjusted for liquidity considerations, at which similar loans would be made to borrowers and similar deposits would be issued to customers for the same remaining maturities. Fair values of loans also include estimated credit losses that would be assumed in a market transaction, which represents estimated exit prices. Brokered deposits consist of demand and saving deposits, which are classified as Level 1, and time deposits, which are classified as Level 2. The fair value of these deposits is determined in a manner consistent with the respective type of deposit discussed above. NOTE 20 - SEGMENT REPORTING The Corporation has one reportable segment whose primary sources of revenue are interest income on loans, investment securities and other interest-earning assets and fee income earned on its products and services. Its expenses consist of interest expense on deposits and borrowed funds, provision for credit losses, other operating expenses and income taxes. The Corporation manages its business activities on a consolidated basis. The accounting policies of the segment are the same as those described in “Note 1 – Summary of Significant Accounting Policies.” The Chief Operating Decision Maker is the Chairman and Chief Executive Officer (“CEO”) who assesses performance of the segment based on net income available to common shareholders and net income available to common shareholders per share (diluted), which is reported in the Consolidated Statements of Income. Net income available to common shareholders and net income available to common shareholders per share (diluted), are used to monitor actual results versus budget, in competitive analyses by benchmarking to the Corporation’s peers, and in decision-making pertaining to executive compensation levels, common stock and preferred stock dividend levels, common share repurchases and capital expenditure spending. The measure of segment assets is reported on the Consolidated Balance Sheet. 131 The following table presents segment results as of December 31: (dollars in thousands, except per-share data) 2024 2023 2022 Interest Income Loans, including fees $ 1,394,969 $ 1,156,373 $ 758,609 Investment securities 136,650 101,518 98,115 Other interest income 50,577 15,345 8,114 Total Interest Income 1,582,196 1,273,236 864,838 Interest Expense Deposits 521,859 292,205 43,829 Federal funds purchased 2,881 30,417 2,967 FHLB advances 37,793 46,965 7,334 Senior debt and subordinated debt 20,255 21,361 22,257 Other borrowings and interest-bearing liabilities 39,083 28,002 6,817 Total Interest Expense 621,871 418,950 83,204 Net Interest Income 960,325 854,286 781,634 Provision for credit losses 71,636 54,036 28,021 Net Interest Income After Provision for Credit Losses 888,689 800,250 753,613 Total Non-Interest Income 275,731 227,678 227,130 Non-Interest Expense Salaries and employee benefits 432,821 377,417 356,884 Data processing and software 77,882 66,471 60,255 Net occupancy 69,359 58,019 56,195 Other outside services 60,586 47,724 37,152 FDIC insurance 23,829 25,565 12,547 Equipment 17,850 14,390 14,033 Intangible amortization 17,830 2,944 1,731 Professional fees 10,857 8,392 9,123 Marketing 8,958 9,004 6,885 Acquisition-related expenses 37,635 — 10,328 Other 62,184 69,281 68,595 Total Non-Interest Expense 819,791 679,207 633,728 Income Before Income Taxes 344,629 348,721 347,015 Income taxes 55,886 64,441 60,034 Net Income 288,743 284,280 286,981 Preferred stock dividends ( 10,248 ) ( 10,248 ) ( 10,248 ) 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 NOTE 21 - COMMITMENTS AND CONTINGENCIES Commitments The Corporation is a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of its borrowers or obligors. Commitments to extend credit are agreements to lend to a borrower or obligor as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower or obligor. Since a portion of the commitments is expected to expire without being drawn 132 upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each borrower's or obligor's creditworthiness on a case-by-case basis. The amount of collateral, if any, obtained upon extension of credit is based on management's credit evaluation of the borrower or obligor. Collateral held varies but may include accounts receivable, inventory, property, equipment and income-producing commercial properties. Standby letters of credit are conditional commitments issued to guarantee the financial or performance obligation of a borrower or obligor to a third party. Commercial letters of credit are conditional commitments issued to facilitate foreign and domestic trade transactions for borrowers or obligors. The credit risk involved in issuing letters of credit is similar to that involved in extending loan facilities. These obligations are underwritten consistent with commercial lending standards. The maximum exposure to loss for standby and commercial letters of credit is equal to the contractual (or notional) amount of the instruments. The following table presents the Corporation's commitments to extend credit and letters of credit: 2024 2023 (dollars in thousands) Commercial and industrial $ 4,967,334 $ 4,929,981 Real estate - commercial mortgage and real estate - construction 1,706,879 1,867,830 Real estate - home equity 2,154,382 1,992,700 Total commitments to extend credit $ 8,828,595 $ 8,790,511 Standby letters of credit $ 279,309 $ 264,440 Commercial letters of credit 48,993 67,396 Total letters of credit $ 328,302 $ 331,836 Residential Lending The Corporation originates and sells residential mortgages to secondary market investors. The Corporation provides customary representations and warranties to secondary market investors that specify, among other things, that the loans have been underwritten to the standards of the secondary market investor. The Corporation may be required to repurchase specific loans or reimburse the investor for a credit loss incurred on a sold loan if it is determined that the representations and warranties have not been met. Under some agreements with secondary market investors, the Corporation may have additional credit exposure beyond customary representations and warranties, based on the specific terms of those agreements. The Corporation maintains a reserve for estimated losses related to loans sold to investors. As of December 31, 2024 and 2023, the total reserve for losses on residential mortgage loans sold was $ 1.5 million and $ 1.8 million, respectively, including reserves for both representation and warranty and credit loss exposures. In addition, included as a component of ACL for OBS credit exposures was $ 1.2 million and $ 2.7 million as of December 31, 2024 and December 31, 2023, respectively, related to additional credit exposure for potential loan repurchases. Legal Proceedings The Corporation is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business activities. The Corporation evaluates the possible impact of these matters, taking into consideration the most recent information available. A loss reserve is established for those matters for which the Corporation believes a loss is both probable and reasonably estimable. Once established, the reserve is adjusted as appropriate to reflect any subsequent developments. Actual losses with respect to any such matter may be more or less than the amount estimated by the Corporation. For matters where a loss is not probable, or the amount of the loss cannot be reasonably estimated by the Corporation, no loss reserve is established. In addition, from time to time, the Corporation is involved in investigations or other forms of regulatory or governmental inquiry covering a range of possible issues and, in some cases, these may be part of similar reviews of the specified activities of other companies. These inquiries or investigations could lead to administrative, civil or criminal proceedings involving the Corporation, and could result in fines, penalties, restitution, other types of sanctions, or the need for the Corporation to undertake remedial actions, or to alter its business, financial or accounting practices. The Corporation's practice is to cooperate fully with regulatory and governmental inquiries and investigations. 133 As of the date of this report, the Corporation believes that any liabilities, individually or in the aggregate, that may result from the final outcomes of pending legal proceedings, or regulatory or governmental inquiries or investigations, will not have a material adverse effect on the financial condition of the Corporation. However, legal proceedings, inquiries and investigations are often unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to the Corporation's results of operations in any future period, depending, in part, upon the size of the loss or liability imposed and the operating results for the period, and could have a material adverse effect on the Corporation's business. In addition, regardless of the ultimate outcome of any such legal proceeding, inquiry or investigation, any such matter could cause the Corporation to incur additional expenses, which could be significant, and possibly material, to the Corporation's results of operations in any future period. NOTE 22 - CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY CONDENSED BALANCE SHEETS December 31, 2024 2023 (dollars in thousands) ASSETS Cash and cash equivalents $ 78,566 $ 171,433 Other assets 68,375 62,500 Receivable from subsidiaries 126,430 276,215 Investments in: Bank subsidiary 3,309,613 2,794,106 Non-bank subsidiaries 47,666 42,496 Total Assets $ 3,630,650 $ 3,346,750 LIABILITIES AND EQUITY Senior and subordinated debt $ 367,316 $ 535,384 Other liabilities 66,009 51,227 Total Liabilities 433,325 586,611 Shareholders' equity 3,197,325 2,760,139 Total Liabilities and Shareholders' Equity $ 3,630,650 $ 3,346,750 134 CONDENSED STATEMENTS OF INCOME 2024 2023 2022 (dollars in thousands) Income: Dividends from subsidiaries $ 75,000 $ 300,000 $ 207,000 Other 2,237 794 725 77,237 300,794 207,725 Expenses 42,572 37,448 51,887 Income before income taxes and equity in undistributed net income of subsidiaries 34,665 263,346 155,838 Income tax benefit ( 9,070 ) ( 7,861 ) ( 12,331 ) 43,735 271,207 168,169 Equity in undistributed net income (loss) of: Bank subsidiaries 239,677 8,932 121,388 Non-bank subsidiaries 5,331 4,141 ( 2,576 ) Net Income 288,743 284,280 286,981 Preferred stock dividends ( 10,248 ) ( 10,248 ) ( 10,248 ) Net Income Available to Common Shareholders $ 278,495 $ 274,032 $ 276,733 135 CONDENSED STATEMENTS OF CASH FLOWS 2024 2023 2022 (dollars in thousands) Cash Flows From Operating Activities: Net Income $ 288,743 $ 284,280 $ 286,981 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of issuance costs and discount of long-term debt 710 750 724 Stock-based compensation 10,516 12,540 14,000 Net change in other assets ( 83,081 ) ( 37,591 ) 44,790 Equity in undistributed net (income) loss of subsidiaries ( 245,009 ) ( 13,073 ) ( 120,213 ) Net change in other liabilities and payables to non-bank subsidiaries ( 4,504 ) ( 50,047 ) ( 198,349 ) Total adjustments ( 321,368 ) ( 87,421 ) ( 259,048 ) Net cash (used in) provided by operating activities ( 32,625 ) 196,859 27,933 Cash Flows From Investing Activities Net cash paid for acquisition — — ( 21,811 ) Net cash used in investing activities — — ( 21,811 ) Cash Flows From Financing Activities: Repayments of long-term borrowings ( 168,778 ) ( 5,000 ) ( 81,496 ) Net proceeds from common stock 270,582 3,160 7,876 Dividends paid ( 131,698 ) ( 115,738 ) ( 116,009 ) Acquisition of treasury stock ( 30,348 ) ( 77,056 ) — Net cash used in financing activities ( 60,242 ) ( 194,634 ) ( 189,629 ) Net (decrease) increase in Cash and Cash Equivalents ( 92,867 ) 2,225 ( 183,507 ) Cash and Cash Equivalents at Beginning of Year 171,433 169,208 352,715 Cash and Cash Equivalents at End of Year $ 78,566 $ 171,433 $ 169,208 136 Management Report on Internal Control Over Financial Reporting The management of Fulton Financial Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Fulton Financial Corporation's internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Republic First Transaction was completed on April 26, 2024, as further discussed in "Note 2—Business Combinations." System conversion was completed in the fourth quarter of 2024. The Corporation 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. The scope of management's assessment of effectiveness of the Corporation's internal control over financial reporting as of December 31, 2024, excludes the internal control over financial reporting associated with total acquired assets of approximately $4.8 billion and total net revenues of $156.2 million for the year ended December 31, 2024. Management assessed the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2024, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this assessment, management concluded that, as of December 31, 2024, the Corporation's internal control over financial reporting is effective based on those criteria. /s/ CURTIS J. MYERS Curtis J. Myers Chairman and Chief Executive Officer /s/ RICHARD S. KRAEMER Richard S. Kraemer Senior Executive Vice President and Chief Financial Officer 137 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors Fulton Financial Corporation: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Fulton Financial Corporation and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company 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. The scope of management's assessment of effectiveness of the Company's internal control over financial reporting as of December 31, 2024, excludes the internal control over financial reporting associated with total acquired assets of approximately $4.8 billion and total net revenues of $156.2 million for the year ended December 31, 2024. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Republic First Bank. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures 138 that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of the allowance for credit losses related to loans evaluated collectively for expected credit losses As discussed in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for credit losses related to loans evaluated collectively for expected credit losses (collective ACL) was $362.3 million of a total allowance for credit losses of $379.2 million as of December 31, 2024. The collective ACL includes the measure of expected credit losses on a collective (pooled) basis for those loans and leases that share similar risk characteristics and uses an undiscounted approach. The Company estimates the collective ACL by applying a probability of default (PD) and loss given default (LGD) to the exposure at default (EAD) at the loan level. The PD models are econometric regression models that utilize the Company’s historical credit loss experience and incorporate a reasonable and supportable economic forecast through the use of externally developed macroeconomic scenarios. After a reasonable and supportable forecast period, the forecasted PD rates revert back to a historical average PD rate. The LGD model calculates an LGD estimate for each loan pool utilizing a loss rate approach that is based on the Company’s historical charge-off experience. The EAD calculation incorporates constant pre-payment rates, and inputs related to loan level cash flows, maturity dates, and interest rates. The constant pre-payment rates utilized in the EAD calculation are sourced from a prepayment calculation that utilizes the Company’s historical loan prepayment history to develop prepayment speeds. The collective ACL also includes qualitative reserve adjustments for factors that are not fully captured in the quantitative models. We identified the assessment of the valuation of the collective ACL as a critical audit matter. Such assessment involved significant measurement uncertainty requiring especially complex auditor judgment, and specialized skills and knowledge of the industry. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained. The assessment of the collective ACL encompassed the evaluation of the overall ACL methodology, which includes the methods and models used to estimate the PD, LGD, and EAD and their key assumptions and inputs. Key assumptions and inputs used in the estimation of the PD rate include historical default observations, the historical observation period, loan pool segmentation including the use of credit risk ratings for commercial and industrial loans, commercial mortgages and construction loans, and a reasonable and supportable economic forecast which includes reversion to historical average default rates. Key assumptions and inputs used in the estimation of the LGD rate include the loan pool segmentation, historical loss observations, and the historical observation period. Key assumptions and inputs used in the estimation of the EAD include a constant prepayment rate (CPR) and loan level cash flow adjustments. Key assumptions and inputs used in the estimation of the CPR include historical prepayment observations, interest rates, the historical observation period, and loan pool segmentation. The assessment also included an evaluation of the qualitative adjustments, including an evaluation of the methods used by management in estimating this reserve. The collective ACL estimate is sensitive to changes in the assumptions discussed above, such that changes in these assumptions can cause significant changes to the estimate. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collective ACL estimate, including controls over the: • development of the collective ACL methodology • development of the PD and LGD models and of the methods used to calculate the CPR and EAD 139 • identification and determination of the key inputs and assumptions used in the PD and LGD models, and EAD calculation which included key inputs and assumptions within the pre-payment model • performance monitoring of the PD and LGD models • development of the qualitative adjustments • measurement and on-going monitoring of the overall ACL estimate. We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, assumptions, and related methodologies. In addition, we involved credit risk professionals with specialized skills and knowledge who assisted in: • evaluating the Company's collective ACL methodology for compliance with U.S. generally accepted accounting principles • evaluating the assumptions and methodologies used in developing the PD rates, LGD rates, and EAD estimate and judgments made by the Company relative to performance monitoring by inspecting management's model and methodology documentation and through comparisons against Company specific metrics, the Company's business environment, and applicable industry and regulatory practices • determining whether loans are pooled by similar risk characteristics by comparing to the Company's business environment and relevant industry practices • testing individual credit ratings for a selection of borrowers by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees and underlying collateral • evaluating the methodology used to develop the qualitative adjustments by inspecting management's methodology and development documentation and assessing the effects of these factors on the collective ACL estimate compared with relevant industry practices and Company specific metrics. We also assessed the sufficiency of the audit evidence obtained related to the collective ACL estimate by evaluating the cumulative results of the audit procedures, qualitative aspects of the Company’s accounting practices, and potential bias in the accounting estimate. /s/ KPMG LLP We have served as the Company's auditor since 2002. Philadelphia, Pennsylvania February 28, 2025 140 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.