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What changed in FULTON FINANCIAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FULTON FINANCIAL CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+300 added−293 removedSource: 10-K (2025-02-28) vs 10-K (2024-03-01)

Top changes in FULTON FINANCIAL CORP's 2024 10-K

300 paragraphs added · 293 removed · 203 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

52 edited+20 added−41 removed129 unchanged
Biggest changeAML Requirements and the Patriot Act - The Patriot Act amended the BSA and other AML laws and regulations and imposed affirmative obligations on a wide range of financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing. 15 Among other requirements, the Patriot Act and related regulations impose the following requirements on financial institutions: • establishment of AML programs; • establishment of a program specifying procedures for obtaining identifying information from customers seeking to open new accounts, including verifying the identity of customers within a reasonable period of time; • establishment of enhanced due diligence policies, procedures and controls designed to detect and report money laundering; and • prohibition on correspondent accounts for foreign shell banks and compliance with recordkeeping obligations with respect to correspondent accounts of foreign banks.
Biggest changeAmong other requirements, the Patriot Act and related regulations impose the following requirements on financial institutions: • establishment of AML programs; • establishment of a program specifying procedures for obtaining identifying information from customers seeking to open new accounts, including verifying the identity of customers within a reasonable period of time; • establishment of enhanced due diligence policies, procedures and controls designed to detect and report money laundering; and 16 • prohibition on correspondent accounts for foreign shell banks and compliance with recordkeeping obligations with respect to correspondent accounts of foreign banks.
Specifically, that rule allows a non-QM loan or a "rebuttable presumption" QM loan to 12 receive a safe harbor from APR liability at the end of a "seasoning" period of at least 36 months as a "seasoned QM" if it satisfies certain product restrictions, points-and-fees limits, and underwriting requirements, and the loan meets the designated performance and portfolio requirements during the "seasoning period." Integrated disclosures under the RESPA and the TILA - Under the CFPB rules, mortgage lenders are required to provide a loan estimate, not later than the third business day after submission of a loan application, and a closing disclosure at least three days prior to the loan closing.
Specifically, that rule allows a non-QM loan or a "rebuttable presumption" QM loan to receive a safe harbor from APR liability at the end of a "seasoning" period of at least 36 months as a "seasoned QM" if it satisfies certain product restrictions, points-and-fees limits, and underwriting requirements, and the loan meets the designated performance and portfolio requirements during the "seasoning period." Integrated disclosures under the RESPA and the TILA - Under the CFPB rules, mortgage lenders are required to provide a loan estimate, not later than the third business day after submission of a loan application, and a closing disclosure at least three days prior to the loan closing.
The CFPB is also authorized to prevent any institution under its authority from engaging in an unfair, deceptive, or abusive act or practice in connection with consumer financial products and services. As a residential mortgage lender, we are subject to multiple federal consumer protection statutes and regulations, including, but not limited to, those statutes and regulations referenced above.
The CFPB is also authorized to prevent 12 any institution under its authority from engaging in an unfair, deceptive, or abusive act or practice in connection with consumer financial products and services. As a residential mortgage lender, we are subject to multiple federal consumer protection statutes and regulations, including, but not limited to, those statutes and regulations referenced above.
In general, these statutes, regulations promulgated thereunder, and related interpretations establish the eligible business activities we can engage in, certain acquisition and merger restrictions, limitations on intercompany transactions (such as loans and dividends), cash reserve requirements, lending limitations, compliance with unfair, deceptive and abusive acts and practices prohibitions, limitations on investments, and capital adequacy requirements, among other things.
In general, these statutes, regulations promulgated thereunder, and related interpretations establish the eligible business activities we can engage in, certain acquisition and merger restrictions, limitations on intercompany transactions (such as loans and dividends), cash reserve requirements, lending limitations, compliance with unfair, deceptive and abusive acts and practices prohibitions, limitations on 11 investments, and capital adequacy requirements, among other things.
Loans and Dividends from Bank Subsidiary - There are various restrictions on the extent to which Fulton Bank can make loans and other extensions of credit (including credit exposure arising from repurchase and reverse repurchase agreements, securities borrowing and derivative transactions) to, or enter into certain transactions with, its affiliates, which includes the Corporation and its non-bank subsidiaries.
Loans and Dividends from Bank Subsidiary - There are various restrictions on the extent to which Fulton Bank can make loans and other extensions of credit (including credit exposure arising from repurchase and reverse repurchase agreements, securities 15 borrowing and derivative transactions) to, or enter into certain transactions with, its affiliates, which includes the Corporation and its non-bank subsidiaries.
In addition, the CFPB examines Fulton Bank for compliance with most federal consumer financial protection laws, including the laws relating to fair 10 lending and prohibiting unfair, deceptive or abusive acts or practices in connection with the offer, sale or provision of consumer financial products or services and enforces such laws with respect to Fulton Bank and our affiliates.
In addition, the CFPB examines Fulton Bank for compliance with most federal consumer financial protection laws, including the laws relating to fair lending and prohibiting unfair, deceptive or abusive acts or practices in connection with the offer, sale or provision of consumer financial products or services and enforces such laws with respect to Fulton Bank and our affiliates.
We provide for professional development of new and existing employees largely through the efforts of our Learning and Development area that develops and administers a wide variety of training programs for professional development. We also provide a number of third-party offerings in which employees can further enhance their skills, knowledge and leadership potential.
We provide for professional development of new and existing employees through the efforts of our Learning and Development area that develops and administers a wide variety of training programs. We also provide a number of third-party offerings in which employees can further enhance their skills, knowledge and leadership potential.
Until the financial holding 19 company returns to compliance, the Federal Reserve Board may impose limitations or conditions on the conduct of its activities, and the company may not commence any new non-banking financial activities permissible for financial holding companies or acquire a company engaged in such financial activities without prior approval of the Federal Reserve Board.
Until the financial holding company returns to compliance, the Federal Reserve Board may impose limitations or conditions on the conduct of its activities, and the company may not commence any new non-banking financial activities permissible for financial holding companies or acquire a company engaged in such financial activities without prior approval of the Federal Reserve Board.
A reserve of 3% must be maintained against aggregate transaction account balances of between $16.9 million and $127.5 million (subject to adjustment by the Federal Reserve Board) plus a reserve of 10% (subject to adjustment by the Federal Reserve Board within a range of between 8% and 14%) against that portion of total transaction account balances in excess of $127.5 million.
A reserve of 3% must be 18 maintained against aggregate transaction account balances of between $16.9 million and $127.5 million (subject to adjustment by the Federal Reserve Board) plus a reserve of 10% (subject to adjustment by the Federal Reserve Board within a range of between 8% and 14%) against that portion of total transaction account balances in excess of $127.5 million.
Financial Statements and Supplementary Data - Report of Independent Registered Public Accounting Firm." Certifications of the Chief Executive Officer and the Chief Financial Officer as required by the Sarbanes-Oxley Act of 2002 and the resulting SEC rules can be found in the Signatures and Exhibits sections.
Financial Statements and Supplementary Data - Report of Independent Registered Public Accounting Firm." Certifications of the Chief Executive Officer and the Chief Financial Officer as required by the Sarbanes-Oxley Act of 2002 and the resulting SEC rules can be found in the Signatures and Exhibits sections. 20
In certain circumstances, repurchases of our common stock may be subject to a prior approval or notice requirement 13 under other regulations or policies of the Federal Reserve Board. Any redemption or repurchase of preferred stock or subordinated debt remains subject to the prior approval of the Federal Reserve Board.
In certain circumstances, repurchases of our common stock may be subject to a prior approval or notice requirement under other regulations or policies of the Federal Reserve Board. Any redemption or repurchase of preferred stock or subordinated debt remains subject to the prior approval of the Federal Reserve Board.
We have adopted policies, procedures and controls to address compliance with the Patriot Act and other AML laws and regulations, and we will continue to revise and update our policies, procedures and controls to reflect required changes.
We have adopted policies, procedures and controls to address compliance with the Patriot Act and other BSA and AML laws and regulations, and we will continue to revise and update our policies, procedures and controls to reflect required changes.
The Corporation has an additional 10 million authorized shares of preferred stock, of which approximately 200,000 shares with a liquidation preference of $1,000 per share were outstanding as of December 31, 2023. Supervision and Regulation We operate in an industry that is subject to laws and regulations that are enforced by a number of federal and state agencies.
The Corporation has an additional 10 million authorized shares of preferred stock, of which approximately 200,000 shares with a liquidation preference of $1,000 per share were outstanding as of December 31, 2024. Supervision and Regulation We operate in an industry that is subject to laws and regulations that are enforced by a number of federal and state agencies.
The CRA also requires all institutions to make public disclosure of their CRA ratings. As of December 31, 2023, Fulton Bank was rated as "outstanding." Current regulations require that Fulton Bank publicly disclose certain agreements that are in fulfillment of CRA. Fulton Bank is not a party to any such agreements at this time.
The CRA also requires all institutions to make public disclosure of their CRA ratings. As of December 31, 2024, Fulton Bank was rated as "outstanding." Current regulations require that Fulton Bank publicly disclose certain agreements that are in fulfillment of CRA. Fulton Bank is not a party to any such agreements at this time.
The special assessment is based on an IDI's estimated uninsured deposits as of December 31, 2022, adjusted to excluding the first $5.0 billion of estimated uninsured deposits, and will be assessed at a quarterly rate of 3.36 bps, over eight quarterly assessment periods, beginning in the first quarter of 2024.
The special assessment is based on an IDI's estimated uninsured deposits as of December 31, 2022, adjusted to exclude the first $5.0 billion of estimated uninsured deposits, and will be assessed at a quarterly rate of 3.36 bps, over eight quarterly assessment periods, beginning in the first quarter of 2024.
Failure to comply with the requirements of the Patriot Act and other AML laws and regulations could have serious legal, financial, regulatory and reputational consequences. In addition, bank regulators will consider a bank holding company's effectiveness in combating money laundering when ruling on BHCA and Bank Merger Act applications.
Failure to comply with the requirements of the Patriot Act and other AML laws and regulations could have serious legal, financial, regulatory and reputational consequences. In addition, bank regulators will consider a bank holding company's effectiveness in combating money laundering when ruling on BHCA and BMA applications.
As of December 31, 2023, the Corporation and Fulton Bank exceeded the minimum capital requirements, including the capital conservation buffer, as prescribed in the Basel III Rules. The Basel III Rules also provide that the largest banking institutions must adhere to additional countercyclical buffer and supplementary leverage ratio requirements.
As of December 31, 2024, the Corporation and Fulton Bank exceeded the minimum capital requirements, including the capital conservation buffer, as prescribed in the Basel III Rules. The Basel III Rules also provide that the largest banking institutions must adhere to additional countercyclical buffer and supplementary leverage ratio requirements.
Electronic copies of our 2023 Annual Report on Form 10-K are available free of charge by visiting "Investor Relations - Documents" at www.fultonbank.com . Electronic copies of quarterly reports on Form 10-Q and current reports on Form 8-K are also available at this Internet address.
Electronic copies of our 2024 Annual Report on Form 10-K are available free of charge by visiting "Investor Relations - Documents" at www.fultonbank.com . Electronic copies of Quarterly Reports on Form 10-Q and Current Reports on Form 8-K are also available at this Internet address.
Risk Factors - Interest Rate and Credit Risks - Our loan portfolio composition subjects us to credit risk and A significant proportion of our loan portfolio consists of commercial mortgage loans that may pose increased credit risk." We offer a wide range of consumer and commercial banking products and services, as well as wealth management products and services, to our customers and the communities we serve: Consumer Banking - We offer a diversified suite of consumer banking products and services in our market area.
Risk Factors - Interest Rate and Credit Risks - Our loan portfolio composition subjects us to credit risk and A significant proportion of our loan portfolio consists of commercial mortgage loans that may pose increased credit risk." The Corporation offers a wide range of consumer and commercial banking products and services, as well as wealth management products and services, to our customers and the communities the Corporation serves: Consumer Banking - We offer a diversified suite of consumer banking products and services in our market area.
As of December 31, 2023, Fulton Bank's capital ratios were above the minimum levels required to be considered "well capitalized" by the OCC.
As of December 31, 2024, Fulton Bank's capital ratios were above the minimum levels required to be considered "well capitalized" by the OCC.
The Economic Growth Act also enacted other important changes, for which the banking agencies issued certain corresponding guidance documents and implementing regulations, including: • Raising the total asset threshold for Dodd-Frank Act company-run stress tests from $10 billion to $250 billion; • Prohibiting federal banking agencies from imposing higher capital requirements for high volatility commercial real estate exposures unless such exposures meet the statutory definition for high volatility acquisition, development or construction loans in the Economic Growth Act; • Exempting from appraisal requirements certain transactions involving real property in rural areas and valued at less than $400,000; • Providing that reciprocal deposits are not treated as brokered deposits in the case of a "well capitalized" institution that received an "outstanding" or "good" rating on its most recent examination to the extent the amount of such deposits does not exceed the lesser of $5 billion or 20% of the bank's total liabilities; and • Directing the CFPB to provide guidance on the applicability of the TILA-RESPA Integrated Disclosure rule to mortgage assumption transactions and construction-to-permanent home loans, as well the extent to which lenders can rely on model disclosures that do not reflect recent regulatory changes. 11 Given Fulton Bank's size, a number of additional benefits afforded to community banks under applicable asset thresholds are not available to Fulton Bank.
The Economic Growth Act also enacted other important changes, for which the banking agencies issued certain corresponding guidance documents and implementing regulations, including: • Raising the total asset threshold for Dodd-Frank Act company-run stress tests from $10 billion to $250 billion; • Prohibiting federal banking agencies from imposing higher capital requirements for high volatility commercial real estate exposures unless such exposures meet the statutory definition for high volatility acquisition, development or construction loans in the Economic Growth Act; • Exempting from appraisal requirements certain transactions involving real property in rural areas and valued at less than $400,000; • Providing that reciprocal deposits are not treated as brokered deposits in the case of a "well capitalized" institution that received an "outstanding" or "good" rating on its most recent examination to the extent the amount of such deposits does not exceed the lesser of $5 billion or 20% of the bank's total liabilities; and • Directing the CFPB to provide guidance on the applicability of the TILA-RESPA Integrated Disclosure rule to mortgage assumption transactions and construction-to-permanent home loans, as well the extent to which lenders can rely on model disclosures that do not reflect recent regulatory changes.
The impact of Basel IV on the Corporation and Fulton Bank will depend on the manner in which it is implemented by the federal banking agencies. As of December 31, 2023, the Corporation and Fulton Bank exceeded all capital requirements necessary to be deemed "well-capitalized" for all regulatory purposes under the capital rules.
The impact of Basel IV on the Corporation and Fulton Bank will depend on the manner in which it is implemented by the federal banking agencies. As of December 31, 2024, the 14 Corporation and Fulton Bank exceeded all capital requirements necessary to be deemed "well-capitalized" for all regulatory purposes under the U.S. capital rules.
Moreover, we face increased competition from certain non-bank entities, such as Fintechs and marketplace lenders, that in many cases, are not subject to the same regulatory compliance requirements as us.
Moreover, we face increased competition from certain non-bank entities, such as FinTechs, private equity funds, private debt funds and marketplace lenders, that in many cases, are not subject to the same regulatory compliance requirements as us.
Stock Information The Corporation's common stock is traded on the Nasdaq Global Select Market under the ticker symbol "FULT." There are 600 million authorized shares of the Corporation's common stock, with approximately 164 million shares outstanding as of December 31, 2023.
Stock Information The Corporation's common stock is traded on the Nasdaq Global Select Market under the ticker symbol "FULT." There are 600 million authorized shares of the Corporation's common stock, with approximately 182 million shares outstanding as of December 31, 2024.
Banking and Financial Services Through our banking subsidiary, Fulton Bank, we deliver financial services primarily within our five-state market area, comprised of Pennsylvania, Delaware, Maryland, New Jersey and Virginia, in a personalized, community-oriented style that emphasizes relationship banking. We operate in areas that are home to a wide range of manufacturing, healthcare, agriculture and other service companies.
Banking and Financial Services Through our banking subsidiary, Fulton Bank, the Corporation delivers financial services primarily within our five-state market area, comprised of Pennsylvania, Delaware, Maryland, New Jersey and Virginia, in a personalized, community-oriented style that emphasizes relationship banking. The Corporation operates in areas that are home to a wide range of manufacturing, healthcare, agriculture and other service companies.
Employee Engagement and Retention - We place a premium on having a highly engaged workforce because engaged employees tend to perform at a higher level, support our success, and are more likely to remain with our organization.
Employee Engagement and Retention - We place a premium on having a highly engaged workforce because engaged employees tend to perform at a higher level, support our success, and are more likely to stay with the Corporation.
Climate change may contribute to or exacerbate these conditions. We are also susceptible to losses arising from the transition to a low carbon economy, including policy changes, energy costs, and shifts in market and customer sentiment that can impact us and our clients as well as other key stakeholders.
Climate change may contribute to or exacerbate these conditions. We are also susceptible to losses arising from policy changes, energy costs, and shifts in market and customer sentiment that can impact us and our clients as well as other key stakeholders.
It is currently unclear if the reduction of the reserve requirements on transaction accounts is permanent. 18 Acquisitions — The BHCA requires a bank holding company to obtain the prior approval of the Federal Reserve Board before: • the company acquires direct or indirect ownership or control of any voting shares of any bank or savings and loan association, if after such acquisition the bank holding company will directly or indirectly own or control more than five percent of any class of voting securities of the institution; • any of the company's subsidiaries, other than a bank, acquires all or substantially all of the assets of any bank or savings and loan association; or • the company merges or consolidates with any other bank or financial holding company.
Acquisitions — The BHCA requires a bank holding company to obtain the prior approval of the Federal Reserve Board before: • the company acquires direct or indirect ownership or control of any voting shares of any bank or savings and loan association, if after such acquisition the bank holding company will directly or indirectly own or control more than five percent of any class of voting securities of the institution; • any of the company's subsidiaries, other than a bank, acquires all or substantially all of the assets of any bank or savings and loan association; or • the company merges or consolidates with any other bank or financial holding company.
As of December 31, 2023, we had 208 financial centers, not including remote service facilities (mainly stand-alone ATMs), and our main office located in Lancaster, Pennsylvania. Human Capital Our workforce, excluding temporary employees and interns, on December 31, 2023 consisted of approximately 3,400 employees, compared to approximately 3,300 employees at December 31, 2022.
As of December 31, 2024, we had 216 financial centers, not including remote service facilities (mainly stand-alone ATMs), and our main office located in Lancaster, Pennsylvania. Human Capital Our workforce, excluding temporary employees and interns, consisted of approximately 3,400 employees, at December 31, 2024 and December 31, 2023.
Compensation and Rewards - The Corporation invests in its workforce by offering a comprehensive Total Rewards program which includes competitive salaries, incentives, and benefits programs. In line with the Corporation's pay for performance philosophy, we offer performance-based incentive programs designed to drive results in the business units as well as at the corporate level.
Compensation and Rewards - The Corporation invests in its workforce by offering a comprehensive Total Rewards program that includes competitive salaries, incentives, and benefits programs. We offer performance-based incentive programs designed to drive results in the business units as well as at the corporate level.
Electronic delivery channels include a network of ATMs and telephone, mobile and online banking. The variety of available delivery channels allows customers to access their account information and perform certain transactions, such as depositing checks, transferring funds and paying bills, at any time of the day.
We deliver these products and services through a network of financial center locations. Electronic delivery channels include a network of ATMs and telephone, mobile and online banking. The variety of available delivery channels allows customers to access their account information and perform certain transactions, such as depositing checks, transferring funds and paying bills, at any time of the day.
On July 1, 2022, we completed our acquisition of 100% of the outstanding common stock of Prudential Bancorp. Prudential Bancorp's wholly-owned subsidiary, Prudential Bank, became our wholly-owned subsidiary. Prudential Bank merged with and into Fulton Bank on November 5, 2022. Our Internet address is www.fultonbank.com .
On April 26, 2024, the Corporation consummated the Republic First Transaction. On July 1, 2022, the Corporation completed our acquisition of 100% of the outstanding common stock of Prudential Bancorp. Prudential Bancorp's wholly-owned subsidiary, Prudential Bank, became our wholly-owned subsidiary. Prudential Bank merged with and into Fulton Bank on November 5, 2022. Our Internet address is www.fultonbank.com .
As such, we maintain a comprehensive cybersecurity strategy that includes, but is not limited to: regular employee cybersecurity training and communications; continuous monitoring, detection, alerting, and defense in-depth technologies; regular internal and third-party program oversight; policies and procedures regularly reviewed and designed with regulatory and industry guidance; and regular reviews of vendors who maintain sensitive data on behalf of Fulton Bank. 9 Given that cybersecurity threat actors are continuously adapting their techniques, it is important to note that no cybersecurity program is completely infallible.
As such, we maintain a comprehensive cybersecurity strategy that includes, but is not limited to: regular employee cybersecurity training and communications; continuous monitoring, detection, alerting, and defense in-depth technologies; regular internal and third-party program oversight; policies and procedures regularly reviewed and designed with regulatory and industry guidance; and regular reviews of vendors who maintain sensitive data on behalf of Fulton Bank.
Permissible Activities — As a bank holding company, the Corporation may engage in the business of banking, managing or controlling banks, performing servicing activities for subsidiaries, and engaging in activities that the Federal Reserve Board has determined, by order or regulation, are so closely related to banking as to be a proper incident thereto.
The amended control rule has had, and will likely continue to have, a meaningful impact on control determinations related to investments in banks and bank holding companies and investments by bank holding companies in nonbank companies. 19 Permissible Activities — As a bank holding company, the Corporation may engage in the business of banking, managing or controlling banks, performing servicing activities for subsidiaries, and engaging in activities that the Federal Reserve Board has determined, by order or regulation, are so closely related to banking as to be a proper incident thereto.
Volcker Rule - Provisions of the Dodd-Frank Act, commonly known as the "Volcker Rule," prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring hedge funds and private equity funds and other private funds that are, among other things, offered within specified exemptions to the Investment Company Act, known as "covered funds," subject to certain exemptions.
The closing disclosure must include, among other things, closing costs and a comparison of costs reported on the loan estimate to actual charges to be applied at closing. 13 Volcker Rule - Provisions of the Dodd-Frank Act, commonly known as the "Volcker Rule," prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring hedge funds and private equity funds and other private funds that are, among other things, offered within specified exemptions to the Investment Company Act, known as "covered funds," subject to certain exemptions.
Our commercial lending policy encourages relationship banking and provides strict guidelines related to customer creditworthiness and collateral requirements for secured loans. We offer equipment lease financing, letters of credit, cash management services and traditional deposit products to commercial customers. We have established lending limits based on our internal risk rating of a borrower and for certain types of lending commitments.
Our commercial lending policy encourages relationship banking and provides guidelines related to customer creditworthiness and collateral requirements for secured loans. We offer equipment lease financing, letters of credit, cash management services and traditional deposit products to commercial customers.
Workforce Recruitment and Development - We recruit our workforce, filling both vacant and new positions by posting these positions on our website and on social media platforms, through employee referrals and through talent recruiting efforts by internal and third-party recruiters.
Workforce Recruitment and Development - We recruit our workforce, filling replacement and new positions through employee referrals, recruiting efforts, and by posting positions internally, on our website and on social media platforms.
This belief includes relationships with customers and relationships among employees. We place significant emphasis on developing our corporate culture, and we consider our culture to be one of the primary components of our continuing success.
Culture and Inclusion - We place significant emphasis on shaping our corporate culture, and we consider our culture to be one of the primary components of our continuing success.
Under this limited exception, qualified IDIs, like Fulton Bank, are 14 able to except from treatment as "brokered" deposits the lesser of up to $5 billion, or 20% of the institution's total liabilities, in reciprocal deposits.
Under this limited exception, qualified IDIs, like Fulton Bank, are able to except from treatment as "brokered" deposits the lesser of up to $5 billion, or 20% of the institution's total liabilities, in reciprocal deposits. On July 30, 2024, the FDIC issued a proposed rule that would significantly revise the existing brokered deposits regulation as outlined above.
The loan estimate must detail the terms of the loan, including, among other things, expenses, projected monthly mortgage payments and estimated closing costs. The closing disclosure must include, among other things, closing costs and a comparison of costs reported on the loan estimate to actual charges to be applied at closing.
The loan estimate must detail the terms of the loan, including, among other things, expenses, projected monthly mortgage payments and estimated closing costs.
Our culture-shaping program, The Fulton Experience, is a highly engaging program that is intended to create new ways of thinking about employees' individual roles, how employees collaborate, and how we and our employees grow together. We believe that we succeed as a company because we value our employees' teamwork and foster a culture around that belief.
Our culture-shaping program, The Fulton Experience, is a highly engaging program that is intended to create new ways of thinking about employees' individual roles, how employees collaborate, and how we grow together. We recognize that having an inclusive culture fosters a culture of respect and is a crucial element of our success.
Wealth Management - We offer wealth management services, which include investment management, trust, brokerage, insurance and investment advisory services, to consumer and commercial customers in our market area through Fulton Financial Advisors and Fulton Private Bank, both operating divisions of Fulton Bank. 8 We deliver these products and services through a network of financial center offices.
We have established lending limits based on our internal risk rating of a borrower and for certain types of lending commitments. 9 Wealth Management - We offer wealth management services, which include investment management, trust, brokerage, insurance and investment advisory services, to consumer and commercial customers in our market area through Fulton Financial Advisors and Fulton Private Bank, both operating divisions of Fulton Bank.
The cybersecurity threat environment is volatile and dynamic requiring all levels of the organization to be cognizant and aware of these threats at all times.
By the very nature of our business, handling sensitive data is a part of daily operations and is taken very seriously by all employees. The cybersecurity threat environment is volatile and dynamic requiring all levels of the organization to be cognizant and aware of these threats at all times.
If the institution fails to comply with such an order, the regulator may seek to enforce such order in judicial proceedings and to impose civil money penalties. The guidelines prohibit excessive compensation to any executive officer, employee, director or principal shareholder as an unsafe and unsound practice.
If the institution fails to comply with such an order, the regulator may seek to enforce such order in judicial proceedings and to impose civil money penalties.
Community Reinvestment — Under the CRA, Fulton Bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to ascertain and meet the credit needs of its entire community, including low- and moderate-income areas. 16 The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community.
The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community.
We conduct an annual survey of our workforce to measure employee engagement, assess employee morale, and help identify areas of the employee experience that could be improved.
We conduct an annual survey of our workforce to measure employee engagement, assess employee morale, and help identify areas of the employee experience that could be improved. We then task our leaders with developing and implementing communication and action plans to gain a better understanding of the results of the assessment and to foster enhanced future engagement.
The federal banking agencies have issued guidance that provides that, to be consistent with safety and soundness principles, a banking organization's incentive compensation arrangements should: (i) provide employees with incentives that appropriately balance risk and reward; (ii) be compatible with effective controls and risk management; and (iii) be supported by strong corporate governance, including active and effective oversight by the banking organization's board of directors.
The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, is based upon the key principles that a banking organization's incentive 17 compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization's ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization's board of directors.
At this time, we have not experienced material losses from climate change. However, we are aware that its impact may increase in the future. As the potential impact of climate change broadens, we will continue to assess and respond to climate risks as they evolve.
Cybersecurity." Climate Risk Management At this time, we have not experienced material losses from climate change. However, we are aware that its impact may increase in the future. We recognize the potential impact climate change may have on us, our clients, our suppliers, employees, 10 shareholders, and the communities we serve.
In addition to traditional healthcare, paid time off, paid parental leave and retirement benefits, we provide behavioral and mental health support and work-life services through our Employee Assistance Program. Following the end of the COVID-19 pandemic, we continue to iterate our approach to remote and hybrid working arrangements to support new ways of working while strengthening employee engagement.
Safety, Health and Wellness - The safety, health and wellness of our employees is a top priority. In addition to healthcare, paid time off, paid parental leave and retirement benefits, we provide behavioral and mental health support and work-life services through our Employee Assistance Program. Cybersecurity Cybersecurity is a major component of our overall risk management approach.
Consumer Financial Protection Laws and Enforcement - The CFPB and the federal banking agencies continue to focus attention on consumer protection laws and regulations.
Given Fulton Bank's size, a number of additional benefits afforded to community banks under applicable asset thresholds are not available to Fulton Bank. Consumer Financial Protection Laws and Enforcement - The CFPB and the federal banking agencies continue to focus attention on consumer protection laws and regulations.
As we continue to offer new and innovative technologies for our customers, the risk of cybersecurity attacks and our oversight of this risk will remain at a high level. See "Item 1C. Cybersecurity." Climate Risk Management We recognize the potential impact climate change may have on us, our clients, our suppliers, employees, shareholders, and the communities we serve.
Given that cybersecurity threat actors are continuously adapting their techniques, it is important to note that no cybersecurity program is completely infallible. As we continue to offer new and innovative technologies for our customers, the risk of cybersecurity attacks and our oversight of this risk will remain at a high level. See "Item 1C.
The Dodd-Frank Act requires federal banking agencies and the SEC to establish joint regulations or guidelines for specified entities, including the Corporation and Fulton Bank, that have at least $1 billion in total assets, prohibiting incentive-based compensation arrangements that encourage inappropriate risk-taking by an executive officer, employee, director or principal shareholder that could lead to material financial loss to the entity.
In accordance with the Dodd-Frank Act, the federal banking agencies prohibit incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions (generally institutions, like us, that have over $1 billion in assets) and are deemed to be excessive, or that may lead to material losses.
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We then task our leaders with developing and implementing communication and action plans aimed at collaborating with their respective teams to gain a better understanding of the results of the assessment and to foster enhanced future engagement.
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As the potential impact of climate change broadens, we will continue to assess and respond to climate risks as they evolve.
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Our leaders are held accountable for the employee engagement of their teams as each leader's engagement score is included in their annual performance review. Additionally, aggregated employee engagement assessment results are reported to our Board of Directors as a key indicator of the health and well-being of our workforce. Culture, Diversity and Inclusion - We believe that building relationships matters.
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Among other things, the proposed rule would broaden the scope of deposits that IDIs would be required to classify as brokered and narrow the exception to the definition of the term “deposit broker,” which would result in more deposits being classified as brokered deposits.
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We apply that same emphasis to the development of a diverse, equitable, and inclusive workforce. We recognize that having a diverse, equitable, and inclusive culture fosters a culture of respect and is a crucial element of a successful organization.
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As a result of the change in the U.S. presidential administration, and based on recent statements from the new Acting Chairman of the FDIC, the proposed rule is unlikely to be adopted as proposed and the prospects and timing for any re-proposal or supervisory action in this area remain uncertain at this time.
Removed
One such example, afforded to employees with future leadership potential, is through our participation in the Stonier School of Banking sponsored by the American Bankers Association. Safety, Health and Wellness - The safety, health and wellness of our employees remains a top priority.
Added
BSA, AML Requirements and the Patriot Act - The Patriot Act amended the BSA and other AML laws and regulations and imposed affirmative obligations on a wide range of financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing.
Removed
Cybersecurity Cybersecurity is a major component of our overall risk management approach. By the very nature of our business, handling sensitive data is a part of daily operations and is taken very seriously by all employees.
Added
Community Reinvestment — Under the CRA, Fulton Bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to ascertain and meet the credit needs of its entire community, including low- and moderate-income areas.
Removed
On January 1, 2021, the NDAA was signed into law, which enacted the most significant overhaul of BSA and other AML-related laws since the Patriot Act.
Added
On October 24, 2023, the federal regulatory agencies jointly issued a final rule to strengthen and modernize regulations implementing the CRA. On March 29, 2024, a federal district court in Texas granted a preliminary injunction barring implementation of the final rule in response to a lawsuit filed by several trade groups. We will continue to monitor the litigation until resolved.
Removed
Notable aspects of the NDAA include: (i) significant changes to the collection of beneficial ownership and the establishment of a beneficial ownership registry that requires corporate entities (generally, any corporation, limited liability company, or other similar entity with 20 or fewer employees and annual gross income of $5 million or less) to report beneficial ownership information to the FinCEN (which will be maintained by the FinCEN and made available upon request to financial institutions); (ii) enhanced whistleblower provisions that provide that one or more whistleblowers who voluntarily provide original information leading to the successful enforcement of violations of the BSA or other AML-related laws in any judicial or administrative action brought by the Secretary of the Treasury or the U.S.
Added
We have also begun efforts to evaluate the impact of the new rule and develop a strategy to ensure compliance.
Removed
Attorney General resulting in monetary sanctions exceeding $1 million (including disgorgement and interest but excluding forfeiture, restitution, or compensation to victims) will receive not more than 30 percent of the monetary sanctions collected and will receive increased protections; (iii) increased penalties for violations of the BSA; (iv) improvements to existing information sharing provisions that permit financial institutions to share information relating to suspicious activity reports with foreign branches, subsidiaries, and affiliates (except those located in China, Russia, or certain other jurisdictions) for the purpose of combating illicit finance risks; and (v) expanded duties and powers of the FinCEN.
Added
Incentive Compensation - Federal banking agencies have issued guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
Removed
Many of the new provisions, including those with respect to beneficial ownership, require the Department of Treasury and the FinCEN to promulgate rules. On December 8, 2021, the FinCEN issued proposed regulations that would implement the amendments with respect to beneficial ownership.
Added
The Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Corporation, that are not "large, complex banking organizations." These reviews will be tailored to each organization based on the scope and complexity of the organization's activities and the prevalence of incentive compensation arrangements.
Removed
On September 29, 2022, the FinCEN issued a final rule establishing a beneficial ownership information reporting requirement, pursuant to the CTA.
Added
The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the organization's supervisory ratings, which can affect the organization's ability to make acquisitions and take other actions.
Removed
The rule requires most corporations, limited liability companies, and other entities created in or registered to do business in the United States to report information about their beneficial owners—the persons who ultimately own or control the company, to the FinCEN.
Added
Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization's safety and soundness, and the organization is not taking prompt and effective measures to correct the deficiencies.
Removed
On December 22, 2023, FinCEN issued a final rule regarding access by authorized recipients to BOI that will be reported to FinCEN pursuant to Sec. 6403 of the CTA, which is part of the NDAA.
Added
In accordance with SEC rules, securities exchanges have adopted rules mandating, in the case of an accounting restatement, the recovery or "clawback" of excess incentive-based compensation paid to current or former executive officers and requiring listed issuers to disclose any recovery analysis where recovery is triggered by a restatement.
Removed
The regulations implement strict protocols required by the CTA to protect sensitive personally identifiable information reported to FinCEN and establish the circumstances in which specified recipients have access to BOI, along with data protection protocols and oversight mechanisms applicable to each recipient category.
Added
The scope and content of the U.S. banking regulators' policies on executive compensation may continue to evolve in the near future. It cannot be determined at this time whether compliance with such policies will adversely affect the Corporation's ability to hire, retain, and motivate its key employees.
Removed
The disclosure of BOI to authorized recipients in accordance with appropriate protocols and oversight will help law enforcement and national security agencies prevent and combat money laundering, terrorist financing, tax fraud, and other illicit activity, as well as protect national security.
Added
It is currently unclear if the reduction of the reserve requirements on transaction accounts is permanent.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+13 added−6 removed143 unchanged
Biggest changeThere can be no assurance that future evaluations of goodwill will not result in impairment charges. We may not be able to achieve our growth plans. Our business plan includes the pursuit of profitable growth.
Biggest changeWe are required to evaluate goodwill for impairment at least annually. Write-downs of the amount of any impairment, if necessary, are to be charged to earnings in the period in which the impairment occurs. There can be no assurance that future evaluations of goodwill will not result in impairment charges. We may not be able to achieve our growth plans.
The financial services industry has become even more competitive as a result of legislative, regulatory, and technological changes and continued banking consolidation, which may increase in connection with current economic, market, and political conditions. We face substantial competition in all phases of our operations from a variety of competitors, including national banks, regional banks, community banks and Fintechs.
The financial services industry has become even more competitive as a result of legislative, regulatory, and technological changes and continued banking consolidation, which may increase in connection with current economic, market, and political conditions. We face substantial competition in all phases of our operations from a variety of competitors, including national 30 banks, regional banks, community banks and FinTechs.
These effects can disrupt 27 business operations, damage property, devalue assets and change consumer and business preferences, which may adversely affect borrowers, increase credit risk and reduce demand for our products and services. At this time, we have not experienced material losses from climate change; however, we are aware that its impact may increase in the future.
These effects can disrupt business operations, damage property, devalue assets and change consumer and business preferences, which may adversely affect borrowers, increase credit risk and reduce demand for our products and services. At this time, we have not experienced material losses from climate change; however, we are aware that its impact may increase in the future.
Our large transaction volume and necessary dependence upon automated systems to record and process these transactions results in the risk that technical flaws, tampering, or manipulation of those automated systems, arising from events wholly or partially beyond our control, and may give rise to disruption of service to customers and to financial loss or liability.
Our large transaction volume and necessary dependence upon automated systems to record and process these transactions results in the risk that technical flaws, tampering, or manipulation of those automated systems, arising from events wholly or partially beyond our control, and may give rise to 24 disruption of service to customers and to financial loss or liability.
Unfavorable or uncertain economic and market conditions can be caused by: declines in economic growth, business activity or investor or business confidence; limitations on the availability, or increases in the cost, of credit and capital; changes in the rate of inflation or in interest rates; high unemployment; labor shortages; governmental fiscal and monetary policies; the level of, or changes in, prices of raw materials, goods or commodities; supply chain issues; global economic conditions; trade policies and tariffs affecting other countries as well as retaliatory policies and tariffs by such countries; geopolitical events, including the war between Russia and Ukraine and the conflict in the Middle East; natural disasters; public health crises, such as epidemics and pandemics; acts of war or terrorism; or a combination of these or other factors.
Unfavorable or uncertain economic and market conditions can be caused by: declines in economic growth, business activity or investor or business confidence; limitations on the availability, or increases in the cost, of credit and capital; changes in the rate of inflation or in interest rates; high unemployment; labor shortages; governmental fiscal and monetary policies; the level of, or changes in, prices of raw materials, goods or commodities; supply chain issues; global economic conditions; immigration policies; trade policies and tariffs affecting other countries as well as retaliatory policies and tariffs by such countries; geopolitical events, including the war between Russia and Ukraine and the ongoing conflict in the Middle East; natural disasters; public health crises, such as epidemics and pandemics; acts of war or terrorism; or a combination of these or other factors.
Cyber threats could result in unauthorized access, loss or destruction of confidential information or customer data; unavailability, degradation or denial of service; introduction of computer viruses or ransomware; and other adverse events causing us to incur additional costs repairing systems, restoring date or adding new personnel or protection technologies.
Cyber threats could result in unauthorized access, loss or destruction of confidential information or customer data; unavailability, degradation or denial of service; introduction of computer viruses or ransomware; and other adverse events causing us to incur additional costs repairing systems, restoring data or adding new personnel or protection technologies.
Virtually every aspect of our operations is subject to extensive regulation and supervision by federal and state regulatory agencies, including the Federal Reserve Board, OCC, FDIC, CFPB, DOJ, UST, SEC, HUD, DOL, state attorneys general and state banking, financial services, securities and insurance regulators.
Virtually every aspect of our operations is subject to extensive regulation and supervision by federal and state regulatory agencies, including the Federal Reserve Board, OCC, FDIC, CFPB, DOJ, UST, SEC, HUD, DOL, EEOC, state attorneys general and state banking, financial services, securities and insurance regulators.
We are also exposed to the risk that our business continuity and data security systems prove to be inadequate. 25 Furthermore, our risk management framework is subject to inherent limitations, and risks may exist, or develop in the future, that we have not identified or anticipated.
We are also exposed to the risk that our business continuity and data security systems prove to be inadequate. Furthermore, our risk management framework is subject to inherent limitations, and risks may exist, or develop in the future, that we have not identified or anticipated.
Competition for qualified personnel is intense in many areas of the financial services industry. We endeavor to attract talented and diverse new employees and retain and motivate our existing employees to assist in executing our growth, acquisition and business strategies.
Competition for qualified personnel is intense in many areas of the financial services industry. We endeavor to attract talented new employees and retain and motivate our existing employees to assist in executing our growth, acquisition and business strategies.
We are not required to pay dividends on, or effect repurchases of, our common stock and may reduce or eliminate our common stock dividend and/or share repurchases in the future.
We are not required to pay dividends on, or effect repurchases of, our common stock and may reduce or eliminate our common stock 31 dividend and/or share repurchases in the future.
The adoption of new products, services and delivery channels contribute to a more complex operating environment, which enhances operational risk and presents the potential for additional structural vulnerabilities. There can be no assurance that the measures we employ to detect and combat direct or indirect cyber threats will be effective.
The adoption of new products, services and delivery channels contribute to a more complex operating environment, which impacts operational risk and presents the potential for additional structural vulnerabilities. There can be no assurance that the measures we employ to detect and combat direct or indirect cyber threats will be effective.
The effects of such changes are difficult to predict and may produce unintended consequences, like limiting the types of financial services and products we may offer, altering demand for existing products and services, increasing the ability of non-banks to offer competing financial services and products, increasing compliance burdens, or otherwise adversely affecting our business, financial condition or results of operations.
The effects of such changes are difficult to predict and may produce unintended consequences, like limiting the types of financial services and products we may offer, limiting the fees we may charge, altering demand for existing products and services, increasing the ability of non-banks to offer competing financial services and products, increasing compliance burdens, or otherwise adversely affecting our business, financial condition or results of operations.
In addition, our ability to sell our securities brokerage services is dependent, in part, upon consumers' level of confidence in securities markets. Securities market volatility or other market disruptions may adversely 23 affect our ability to sell our securities brokerage services, which could negatively affect our fee-based non-interest income, and as a result, our results of operations.
In addition, our ability to sell our securities brokerage services is dependent, in part, upon 22 consumers' level of confidence in securities markets. Securities market volatility or other market disruptions may adversely affect our ability to sell our securities brokerage services, which could negatively affect our fee-based non-interest income, and as a result, our results of operations.
Changes to the Tax Code may affect our business, financial condition and results of operations. 29 Regulations relating to privacy, information security, and data protection could increase our costs, affect or limit how we collect and use personal information, and adversely affect our business opportunities.
Changes to the Tax Code may affect our business, financial condition and results of operations. 28 Regulations relating to privacy, information security, and data protection could increase our costs, affect or limit how we collect and use personal information, and adversely affect our business opportunities.
Failure to comply with these regulatory requirements, including inadvertent or unintentional violations, may result in the assessment of fines and penalties, the commencement of informal or formal regulatory enforcement 28 actions against us, or regulatory restrictions on our activities.
Failure to comply with these regulatory requirements, including inadvertent or unintentional 27 violations, may result in the assessment of fines and penalties, the commencement of informal or formal regulatory enforcement actions against us, or regulatory restrictions on our activities.
Our loan portfolio composition subjects us to credit risk. At December 31, 2023, approximately 65% of our loan portfolio consisted of commercial loans, commercial mortgage loans, and residential and commercial construction loans.
Our loan portfolio composition subjects us to credit risk. At December 31, 2024, approximately 65% of our loan portfolio consisted of commercial loans, commercial mortgage loans, and residential and commercial construction loans.
Any of these operational or other risks could result in our diminished ability to operate one or more of our businesses, financial loss, potential liability to customers, inability to secure insurance, reputational damage and regulatory intervention and could materially adversely affect our business, financial condition and results of operations.
Any of these operational or other risks could result in our diminished ability to operate one or more of our businesses, financial loss, potential liability to customers, inability to secure insurance, reputational damage and regulatory intervention and could materially adversely affect our business, financial condition and results of operations. 26 Climate change may materially adversely affect our business and results of operations.
There is substantial uncertainty concerning whether those expiring provisions will be extended or whether future legislation will further revise the Tax Code.
There is substantial uncertainty concerning whether those expiring provisions will be extended and whether future legislation will further revise the Tax Code.
To achieve profitable growth, we may pursue new lines of business or offer new products or services, all of which can involve significant costs, uncertainties and risks. Any new activity we pursue may require a significant investment of time and resources and may not generate the anticipated return on that investment.
Our business plan includes the pursuit of profitable growth. To achieve profitable growth, we may pursue new lines of business or offer new products or services, all of which can involve significant costs, uncertainties and risks. Any new activity we pursue may require a significant investment of time and resources and may not generate the anticipated return on that investment.
In addition, recent increases in the level of interest rates may make it more difficult for commercial real estate borrowers to refinance or repay maturing loans and may adversely affect the market value of the underlying real estate. Changes in the real estate market could also affect the value of foreclosed assets.
In addition, the current elevated level of interest rates may make it more difficult for commercial real estate borrowers to refinance or repay maturing loans and may adversely affect the market value of the underlying real estate. Changes in the real estate market could also affect the value of foreclosed assets.
A significant proportion of our loan portfolio consists of commercial mortgage loans that may pose increased credit risk. At December 31, 2023, commercial mortgage loans represented approximately 38% of our loan portfolio. These loans are secured by both owner-occupied and non-owner-occupied commercial real estate.
A significant proportion of our loan portfolio consists of commercial mortgage loans that may pose increased credit risk. At December 31, 2024, commercial mortgage loans represented approximately 40% of our loan portfolio. These loans are secured by both owner-occupied and non-owner-occupied commercial real estate.
Thus, changes in market interest rates might, for example, result in an increase in the interest paid on interest-bearing liabilities that is not accompanied by a corresponding increase in the interest earned on interest-earning assets, or the increase in interest earned on 22 interest-earning assets might be at a slower pace, or in a smaller amount, than the increase in interest paid on interest-bearing liabilities, reducing our net interest income and/or net interest margin.
Thus, changes in 21 market interest rates might, for example, result in a decrease in the interest earned on interest-earning assets that is not accompanied by a corresponding decrease in the interest paid on interest-bearing liabilities, or the decrease in interest paid on interest-bearing liabilities might be at a slower pace, or in a smaller amount, than the decrease in interest earned on interest-earning assets, reducing our net interest income and/or net interest margin.
Further, deposits from state and municipal entities, primarily in non-maturing, interest-bearing accounts, are a significant source of deposit funding for us, representing approximately 11% of total deposits at December 31, 2023.
Further, deposits from state and municipal entities, primarily in non-maturing, interest-bearing accounts, are a significant source of deposit funding for us, representing approximately 13% of total deposits at December 31, 2024.
Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income is the most significant component of our net income, accounting for approximately 79% of total revenues in 2023.
Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income is the most significant component of our net income, accounting for approximately 78% of total revenues in 2024.
As a result of rising interest rates in recent years, the fair value of our AFS investment securities declined resulting in unrealized losses of approximately $275 million as of December 31, 2023 and is reflected in AOCI as a reduction to total shareholders' equity.
As a result of elevated interest rates in recent years, the fair value of our AFS investment securities declined resulting in unrealized losses of approximately $276 million as of December 31, 2024 and is reflected in AOCI as a reduction to total shareholders' equity.
Climate change may materially adversely affect our business and results of operations. We operate in areas where our business and the activities of our customers could be impacted by the effects of climate change, including increased frequency or severity of storms, hurricanes, floods, droughts, and rising sea levels.
We operate in areas where our business and the activities of our customers could be impacted by the effects of climate change, including increased frequency or severity of storms, hurricanes, floods, droughts, and rising sea levels.
At December 31, 2023, approximately 33% of our deposits were uninsured and we are dependent on these deposits for liquidity.
At December 31, 2024, approximately 37% of our deposits were uninsured and we are dependent on these deposits for liquidity.
The Inflation Reduction Act of 2022 imposes a 1% excise tax on the value of our shares we repurchase on or after January 1, 2023 that exceeds $1 million in the aggregate during any taxable year, subject to certain adjustments. In addition, a number of the changes to the Tax Code are set to expire in future years.
The Inflation Reduction Act of 2022 imposes a 1% excise tax on the value of our shares we repurchase that exceeds $1 million in the aggregate during any taxable year, subject to certain adjustments. In addition, a number of the changes to the Tax Code are set to expire at the end of 2025.
In a series of actions to combat rising inflation that began in March 2022, the Federal Reserve Board raised the Fed Funds Rate to 5.25% to 5.50% as of February 1, 2024.
In a series of actions to combat rising inflation that began in March 2022, the Federal Reserve Board raised the Fed Funds Rate to 5.25% to 5.50% in July 2023.
If we are unable to attract and retain banking customers, we may be unable to grow or maintain the levels of our loans and deposits, and our financial condition and results of operations may be adversely affected as a result.
If we are unable to attract and retain banking customers, we may be unable to grow or maintain the levels of our loans and deposits, and our financial condition and results of operations may be adversely affected as a result. Ultimately, we may not be able to compete successfully against current and future competitors.
A reduction or discontinuance of dividends on our common stock or our share repurchases could have a material adverse effect on the market price of our common stock.
A reduction or discontinuance of dividends on our common stock or our share repurchases could have a material adverse effect on the market price of our common stock. Item 1B. Unresolved Staff Comments None.
The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.
Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.
Furthermore, failure to realize the expected revenue increases, cost savings, strategic gains, increases in geographic or product presence, and/or other anticipated benefits from pending or future acquisitions could have a material adverse effect on our business, financial condition and results of operations. 30 If the goodwill that we have recorded or will record in the future in connection with our acquisitions becomes impaired, it could have a negative impact on our results of operations.
Furthermore, failure to realize the expected revenue increases, cost savings, strategic gains, increases in geographic or product presence, and/or other anticipated benefits from pending or future acquisitions could have a material adverse effect on our business, financial condition and results of operations.
If any of these risks actually occurs, our business, financial condition and results of operations could be materially, adversely affected. GENERAL ECONOMIC AND MARKET CONDITIONS RISKS Difficult conditions in the economy and the financial markets may materially adversely affect our business, financial condition and results of operations.
GENERAL ECONOMIC AND MARKET CONDITIONS RISKS Difficult conditions in the economy and the financial markets may materially adversely affect our business, financial condition and results of operations. Our financial condition and results of operations are affected by conditions in the economy and the financial markets generally.
Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of us, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among 24 those with uninsured deposits.
Changes in any of these factors could increase our funding costs, reduce our net interest margin and/or create liquidity challenges. 23 Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of us, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.
State and municipal customers frequently maintain large deposit account balances substantially in excess of the FDIC insurance limit, and these depositors may be more sensitive than other depositors to changes in interest rates. Changes in any of these factors could increase our funding costs, reduce our net interest margin and/or create liquidity challenges.
State and municipal customers frequently maintain large deposit account balances substantially in excess of the FDIC insurance limit, and these depositors may be more sensitive than other depositors to changes in interest rates.
Our financial condition and results of operations are affected by conditions in the economy and the financial markets generally. Our financial performance is highly dependent upon the business environment in the markets where we operate and in the United States as a whole.
Our financial performance is highly dependent upon the business environment in the markets where we operate and in the United States as a whole.
We have supplemented our internal growth with strategic acquisitions of banks, branches and other financial services companies. In the future, we may seek to supplement organic growth through additional acquisitions. If the purchase price of an acquired company exceeds the fair value of the company's net assets, the excess is carried on the acquirer's balance sheet as goodwill.
In the future, we may seek to supplement organic growth through additional acquisitions. If the purchase price of an acquired company exceeds the fair value of the company's net assets, the excess is carried on the acquirer's balance sheet as goodwill. As of December 31, 2024, we had $553 million of goodwill recorded on our balance sheet.
If new regulations or supervisory guidance applicable to us came into effect, our compliance costs and other compliance-related risks would be expected to increase and affect our financial position and results of operations.
For instance, the leadership of the federal banking agencies, including the OCC, have emphasized that climate-related risks are faced by banking organizations of all types and sizes. If new regulations or supervisory guidance applicable to us came into effect, our compliance costs and other compliance-related risks would be expected to increase and affect our financial position and results of operations.
Item 1A. Risk Factors An investment in our securities involves certain risks, including, among others, the risks described below. In addition to the other information contained in this Report, you should carefully consider the following risk factors. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
Item 1A. Risk Factors An investment in our securities involves certain risks, including, among others, the risks described below. In addition to the other information contained in this Annual Report on Form 10-K, you should carefully consider the following risk factors.
Although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, our insurance coverage may be inapplicable or otherwise insufficient to cover any or all losses. 26 Additionally, account data compromise, malware and ransomware events affecting a broad spectrum of commercial businesses and governmental entities in recent years have resulted in heightened legislative and regulatory focus on privacy, data protection and information security.
Additionally, account data compromise, malware and ransomware events affecting a broad spectrum of commercial businesses and governmental entities in recent years have resulted in heightened legislative and regulatory focus on privacy, data protection and information security.
Changes in applicable federal or state laws, regulations or governmental policies may affect us and our business.
Changes in applicable federal or state laws, regulations or governmental policies, including as a result of changes in U.S. presidential administrations that have different regulatory agendas, may affect us and our business.
Ultimately, we may not be able to compete successfully against current and future competitors. 31 Failure to keep pace with technological change could adversely affect our business. The financial services industry experiences continuous technological change with frequent introductions of new technology-driven products and services.
Failure to keep pace with technological change could adversely affect our business. The financial services industry experiences continuous technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.
The speed and magnitude of increases in the Fed Funds Rate since March 2022 is unprecedented in modern economic times, and, as a result of persistently high inflation, the timing and magnitude of future Fed Funds Rate decreases are uncertain, and increases in Fed Funds Rates are possible.
Beginning in September 2024, as inflation moderated toward the Federal Reserve Board's policy objective, the Federal Reserve Board incrementally reduced the Fed Funds Rate to 4.25% to 4.50% as of February 1, 2025. The timing and magnitude of future Fed Funds Rate decreases are uncertain, and increases in Fed Funds Rates are possible.
Removed
For instance, the leadership of the federal banking agencies, including the OCC, have emphasized that climate-related risks are faced by banking organizations of all types and sizes and are in the process of enhancing supervisory expectations regarding banks' risk management practices.
Added
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of these risks actually occurs, our business, financial condition and results of operations could be materially, adversely affected.
Removed
The OCC also has appointed its first ever Climate Change Risk Officer and established an internal climate risk implementation committee to assist with these initiatives and support the agency's efforts to enhance its supervision of climate change risk management.
Added
Although we maintain insurance coverage that may, subject 25 to policy terms and conditions, cover certain aspects of cyber risks, our insurance coverage may be inapplicable or otherwise insufficient to cover any or all losses.
Removed
On July 9, 2021, President Biden issued an executive order on promoting competition in the U.S. economy. Among other initiatives, the executive order encouraged the federal banking agencies to review their current merger oversight practices under the BHCA and the Bank Merger Act and adopt a plan for revitalization of such practices.
Added
On September 17, 2024, the FDIC, the OCC and the DOJ, each announced new rules and policy statements i mpacting their bank merger review processes.
Removed
In January 2024, the OCC issued a notice of proposed rulemaking related to the framework for evaluating mergers involving national banks like Fulton Bank.
Added
Among these actions, the FDIC approved a final statement of policy on bank merger transactions and the OCC approved a final rule updating the agency's regulations for business combinations involving national banks and federal savings associations.
Removed
There are many steps that must be taken by the agencies before any formal changes to the framework for evaluating bank mergers, including the OCC's recent rule proposal, can be finalized and the prospects for such action are uncertain at this time; however, the adoption of more expansive or prescriptive standards may have an impact on our acquisition activities.
Added
The OCC's final rule modifies its procedures for reviewing bank merger applications under the BMA applications, including the elimination of the expedited bank merger review and the streamlined application procedures.
Removed
As of December 31, 2023, we had $553 million of goodwill recorded on our balance sheet. We are required to evaluate goodwill for impairment at least annually. Write-downs of the amount of any impairment, if necessary, are to be charged to earnings in the period in which the impairment occurs.
Added
The OCC’s final rule also includes as an appendix a policy statement which includes a list of characteristics of a merger transaction that the OCC would consider to be consistent or inconsistent with approval.
Added
The FDIC and the OCC take a similar risk-based approach to bank merger transactions, although there are some differences in how the FDIC and the OCC would consider each statutory factor under the BMA. Each agency applies varying levels of enhanced scrutiny to transactions involving or resulting in institutions with $50 billion or more in total assets.
Added
However, Acting FDIC Chairman Travis Hill has indicated the possibility of withdrawing the FDIC's statement of policy, and it is unclear whether the OCC will reconsider its new regulation and policy statement.
Added
In addition, the DOJ withdrew from its 1995 Bank Merger Guidelines and announced that it would consider bank mergers under its 2023 Merger Guidelines, which includes a brief bank merger addendum.
Added
The coordinated agency actions have, for the moment, significantly modified the existing regulatory framework for bank merger transactions such that future proposed bank merger transactions, including those involving us, may be subject to heightened regulatory scrutiny.
Added
The extent to which the new U.S. presidential administration will affirmatively encourage each of the agencies to return to a less restrictive approach to bank merger reviews, including possible rescission of modification t he recent pronouncements described above, is uncertain at this time.
Added
Any enhanced regulatory scrutiny of bank mergers and 29 acquisitions and revision of the framework for bank merger application review may adversely affect the marketplace for such transactions, could result in our acquisitions in future periods being delayed, impeded or restricted in certain respects and result in new rules that possibly limit the size of financial institutions we may be able to acquire in the future and alter the terms for such transactions.
Added
If the goodwill that we have recorded or will record in the future in connection with our acquisitions becomes impaired, it could have a negative impact on our results of operations. We have supplemented our internal growth with strategic acquisitions of banks, branches and other financial services companies.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

7 edited+1 added−0 removed8 unchanged
Biggest changeCybersecurity incidents are managed through the ICIRP, which provides direction to management allowing for the timely transfer of information throughout the organization. Our policy requires material incidents to be reported within four business days after an incident is determined to be material with the materiality determination to be completed without unreasonable delay.
Biggest changeOur policy requires material incidents to be reported within four business days after an incident is determined to be material with the materiality determination to be completed without unreasonable delay. Management's Disclosure Committee has developed a plan to facilitate making timely determinations as to whether and when incidents should be disclosed.
Independent oversight and assurance activities specifically include internal audits, vulnerability assessments and penetration testing. The Corporation's cybersecurity professionals are well-trained on how to protect customer and employee information through ongoing education and awareness initiatives. The Corporation maintains a third-party risk management program designed to identify, analyze and monitor risks, including cybersecurity risks, associated with vendors and outside service providers.
Independent oversight and assurance activities include internal audits, vulnerability assessments and penetration testing. The Corporation's cybersecurity professionals are well-trained on how to protect customer and employee information through ongoing education and awareness initiatives. The Corporation maintains a third-party risk management program designed to identify, analyze and monitor risks, including cybersecurity risks, associated with vendors and outside service providers.
Our management team, with input from our Board of Directors, proactively manages the Corporation's cybersecurity risks to avoid or minimize the impacts of attacks by unauthorized parties attempting to obtain access to confidential information, destroy data, disrupt service, sabotage systems or cause other damage. Specifically, the Corporation has appointed a CISO to maintain a comprehensive information security program.
Our management team, with oversight from our Board of Directors, proactively manages the Corporation's cybersecurity risks to avoid or minimize the impacts of attacks by unauthorized parties attempting to obtain access to confidential information, destroy data, disrupt service, sabotage systems or cause other damage. Specifically, the Corporation has appointed a CISO to maintain a comprehensive information security program.
The Corporation provides the CISO and the information security team the latest tools and techniques to protect the confidentiality, integrity and availability of the Corporation's data for the benefit of our customers, employees and shareholders. We periodically engage third-party consultants to assess the effectiveness of our strategy, tools and techniques, and overall information security program.
The Corporation provides the CISO and the information security team with a comprehensive suite of security tools and techniques to protect the confidentiality, integrity and availability of the Corporation's data for the benefit of our customers, employees and shareholders. We periodically engage third-party consultants to assess the effectiveness of our strategy, tools and techniques, and overall information security program.
Our Board of Directors provides direction and oversight over the Corporation's enterprise-wide risk management program, including risks related to cybersecurity. The Risk Committee is responsible for overseeing the Corporation's information security program and execution. The Risk Committee promotes collaboration and cooperation between various elements within the Corporation relative to information security.
Our Board of Directors provides direction and oversight over the Corporation's enterprise-wide risk management program, including risks related to cybersecurity. The Risk Committee is responsible for overseeing the Corporation's information security program and execution.
To our knowledge, previous cybersecurity incidents have not materially affected the Corporation, its business strategy, financial condition or results of operation. With regard to the possible impact of future cybersecurity threats or incidents, see "Item 1A. Risk Factors." 33
With regard to the possible impact of future cybersecurity threats or incidents, see "Item 1A. Risk Factors."
Management's Disclosure Committee has developed a plan to facilitate making timely determinations as to whether and when incidents should be disclosed. If a material incident occurs, the Corporation will describe in detail the material aspects and nature, scope and timing of the incident, along with the impact to its financial condition and results of operations.
If a material incident occurs, the Corporation will describe in detail the material aspects and nature, scope and timing of the incident, along with the impact to its financial condition and results of operations. To our knowledge, previous cybersecurity incidents have not materially affected the Corporation, its business strategy, financial condition or results of operation.
Added
The Risk Committee promotes collaboration and cooperation between various elements within the Corporation relative to information security. 32 Cybersecurity incidents are managed through the ICIRP, which provides direction to management allowing for the timely transfer of information throughout the organization.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties The Corporation's financial center properties as of December 31, 2023 totaled 208 financial centers. Of those financial centers, 88 were owned and 120 were leased. Remote service facilities (mainly stand-alone ATMs) are excluded from these totals. The Corporation's headquarters is located in Lancaster, Pennsylvania.
Biggest changeItem 2. Properties The Corporation's financial center properties as of December 31, 2024 totaled 216 financial centers. Of those financial centers, 54 were owned and 162 were leased. Remote service facilities (mainly stand-alone ATMs) are excluded from these totals. The Corporation's headquarters is located in Lancaster, Pennsylvania. The Corporation owns an operations center located in East Petersburg, Pennsylvania.
Removed
The Corporation owns two dedicated operations centers, located in East Petersburg, Pennsylvania and Mantua, New Jersey.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information presented in the "Legal Proceedings" section of "Note 20 - Commitments and Contingencies" in the Notes to Consolidated Financial Statements is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 34 PART II
Biggest changeItem 3. Legal Proceedings The information presented in the "Legal Proceedings" section of "Note 21 - Commitments and Contingencies" in the Notes to Consolidated Financial Statements is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 33 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−3 removed8 unchanged
Biggest changeThe 2024 Repurchase Program will expire on December 31, 2024. Under the 2024 Repurchase Program, the Corporation is authorized to repurchase up to $125.0 million of shares of its common stock outstanding shares through December 31, 2024.
Biggest changeUnder 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 through December 31, 2025.
(2) The weighted-average exercise price of outstanding options, warrants and rights does not take into account outstanding PSUs and RSUs granted under the Employee Equity and the Directors' Plan.
(2) The weighted-average exercise price of outstanding warrants and rights does not take into account outstanding PSUs and RSUs granted under the Employee Equity Plan and the Directors' Plan.
Excludes accrued purchase rights under the ESPP as of December 31, 2023 as the number of shares to be purchased is indeterminable until the shares are issued. 35 Performance Graph The following graph shows cumulative total shareholder return (i.e., price change, plus reinvestment of dividends) on the common stock of the Corporation during the five-year period ended December 31, 2023, compared with (1) the Nasdaq Bank Index and (2) the S&P 500.
Excludes accrued purchase rights under the ESPP as of December 31, 2024 as the number of shares to be purchased is indeterminable until the shares are issued. 34 Performance Graph The following graph shows cumulative total shareholder return (i.e., price change, plus reinvestment of dividends) on the common stock of the Corporation during the five-year period ended December 31, 2024, compared with (1) the Nasdaq Bank Index and (2) the S&P 500.
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 under the 2024 Repurchase Program in open market or privately negotiated transactions, including without limitation, through accelerated share repurchase transactions. The 2024 Repurchase Program may be discontinued at any time. 37 Item 6. [Reserved]
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 under the 2025 Repurchase Program in open market or privately negotiated transactions, including without limitation, through accelerated share repurchase transactions. The 2025 Repurchase Program may be discontinued at any time. 36 Item 6. [Reserved]
Financial Statements and Supplementary Data." Securities Authorized for Issuance under Equity Compensation Plans The following table provides information about options outstanding under the Corporation's Employee Equity Plan and the number of securities remaining available for future issuance under the Employee Equity Plan, the Directors' Plan and the ESPP as of December 31, 2023: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) (3) Equity compensation plans approved by security holders 2,702,606 $ 12.61 5,766,366 Equity compensation plans not approved by security holders — — — Total 2,702,606 $ 12.61 5,766,366 (1) The number of securities to be issued upon exercise of outstanding options, warrants and rights includes 1,291,601 PSUs, which is the target number of PSUs that are payable under the Employee Equity Plan, though no shares will be issued until achievement of applicable performance goals, 40,135 stock option units, 1,074,639 time-vested RSUs granted under the Employee Equity Plan and 296,231 time-vested RSUs granted under the Directors' Plan.
Financial Statements and Supplementary Data." Securities Authorized for Issuance under Equity Compensation Plans The following table provides information about options outstanding under the Corporation's Employee Equity Plan and the number of securities remaining available for future issuance under the Employee Equity Plan, the Directors' Plan and the ESPP as of December 31, 2024: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding, options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) (3) Equity compensation plans approved by security holders 2,702,997 $ 12.61 5,030,550 Equity compensation plans not approved by security holders — — — Total 2,702,997 $ 12.61 5,030,550 (1) The number of securities to be issued upon exercise of outstanding options, warrants and rights includes: (i) 1,094,846 PSUs, which is the target number of PSUs that are payable under the Employee Equity Plan, though no shares will be issued until achievement of applicable performance goals, (ii) 1,315,836 time-vested RSUs granted under the Employee Equity Plan and (iii) 292,315 time-vested RSUs granted under the Directors' Plan.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock As of December 31, 2023, the Corporation had 163.8 million shares of $2.50 par value common stock outstanding held by approximately 42,078 holders of record. The closing price per share of the Corporation's common stock on February 16, 2024 was $15.70.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock As of February 3, 2025, the Corporation had 182.2 million shares of $2.50 par value common stock outstanding held by approximately 48,603 holders of record. The closing price per share of the Corporation's common stock on February 25, 2025 was $19.57.
(3) Consists of 4,369,008 shares that may be awarded under the Employee Equity Plan, 398,341 shares that may be awarded under the Directors' Plan and 999,017 shares that may be purchased under the ESPP.
(3) Consists of: (i) 3,839,493 shares that may be awarded under the Employee Equity Plan, (ii) 325,059 shares that may be awarded under the Directors' Plan and (iii) 865,998 shares that may be purchased under the ESPP.
Removed
Year Ending December 31 Index 2018 2019 2020 2021 2022 2023 Fulton Financial Corporation $ 100.00 $ 117.16 $ 88.95 $ 123.51 $ 126.38 $ 128.62 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 Nasdaq Bank Index $ 100.00 $ 119.62 $ 105.49 $ 150.07 $ 122.01 $ 113.84 36 Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 1, 2023 to October 31, 2023 — $ — — $ 29,060,105 November 1, 2023 to November 30, 2023 441,638 13.85 441,638 22,943,716 December 1, 2023 to December 31, 2023 — — — — Total 441,638 $ 13.85 441,638 (1) Includes 1% excise tax on net repurchases of the Corporation's common stock.
Added
Year Ending December 31 Index 2019 2020 2021 2022 2023 2024 Fulton Financial Corporation $ 100.00 $ 76.52 $ 106.37 $ 109.15 $ 111.42 $ 134.46 S&P 500 $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 Nasdaq Bank Index $ 100.00 $ 88.19 $ 125.45 $ 102.00 $ 95.17 $ 111.09 35 Issuer Purchases of Equity Securities There were no repurchases of our common stock during the fourth quarter of 2024.
Removed
(2) On December 20, 2022, the Corporation announced the 2023 Repurchase Program which authorized the Corporation to repurchase up to $100.0 million of its common stock through December 31, 2023. The 2023 Repurchase Program expired on December 31, 2023. On December 19, 2023, the Corporation announced that its Board of Directors approved the 2024 Repurchase Program.
Added
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 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.
Removed
Under this authorization, up to $25.0 million of the $125 million authorization may be used to repurchase shares of the Corporation's preferred stock and outstanding subordinated notes.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data: Consolidated Balance Sheets 68 Consolidated Statements of Income 69 Consolidated Statements of Comprehensive Income 70 Consolidated Statements of Shareholders' Equity 71 Consolidated Statements of Cash Flows 72 Notes to Consolidated Financial Statements 73 Management Report On Internal Control Over Financial Reporting 129 Report of Independent Registered Public Accounting Firm 130
Biggest changeFinancial Statements and Supplementary Data: Consolidated Balance Sheets 70 Consolidated Statements of Income 71 Consolidated Statements of Comprehensive Income 72 Consolidated Statements of Shareholders' Equity 73 Consolidated Statements of Cash Flows 74 Notes to Consolidated Financial Statements 76 Management Report On Internal Control Over Financial Reporting 137 Report of Independent Registered Public Accounting Firm 138
Item 6. [Reserved] 38 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 63 Item 8.
Item 6. [Reserved] 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 37 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 64 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

67 edited+57 added−33 removed38 unchanged
Biggest changeReconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure follow: 2023 2022 2021 (dollars in thousands, except per share data) Operating net income available to common shareholders Net income available to common shareholders $ 274,032 $ 276,733 $ 265,220 Plus: Core deposit intangible amortization 2,308 1,029 — Plus: Merger-related expenses — 10,328 — Plus: CECL Day 1 Provision expense — 7,954 — Plus: Interest rate derivative transition valuation (1) 1,855 — — Plus: FDIC special assessment 6,494 — — Plus: FultonFirst initiative expenses 3,197 — — Less: Tax impact of adjustments (2,909) (4,055) — Operating net income available to common shareholders (numerator) $ 284,977 $ 291,989 $ 265,220 Weighted average shares (diluted) (denominator) 166,769 165,472 163,307 Operating net income available to common shareholders, per share (diluted) $ 1.71 $ 1.76 $ 1.62 40 2023 2022 2021 (dollars in thousands) Operating return on average assets Net income $ 284,280 $ 286,981 $ 275,497 Plus: Core deposit intangible amortization 2,308 1,029 — Plus: Merger-related expenses — 10,328 — Plus: CECL Day 1 Provision expense — 7,954 — Plus: Interest rate derivative transition valuation (1) 1,855 — — Plus: FDIC special assessment 6,494 — — Plus: FultonFirst initiative expenses 3,197 — — Less: Tax impact of adjustments (2,909) (4,055) — Operating net income (numerator) $ 295,225 $ 302,237 $ 275,497 Total average assets $ 27,229,704 $ 25,971,484 $ 26,170,333 Less: Average net core deposit intangible (5,996) (3,915) — Total average operating assets (denominator) $ 27,223,708 $ 25,967,569 $ 26,170,333 Operating return on average assets 1.08 % 1.16 % 1.05 % Return on average common shareholders' equity (tangible) Net income available to common shareholders $ 274,032 $ 276,733 $ 265,220 Plus: Intangible amortization 2,944 1,731 589 Plus: Merger-related expenses — 10,328 — Plus: CECL Day 1 Provision expense — 7,954 — Plus: Interest rate derivative transition valuation (1) 1,855 — — Plus: FDIC special assessment 6,494 — — Plus: FultonFirst initiative expenses 3,197 — — Less: Tax impact of adjustments (3,043) (4,203) (127) Adjusted net income available to common shareholders (numerator) $ 285,479 $ 292,543 $ 265,682 Average shareholders' equity $ 2,631,249 $ 2,560,323 $ 2,685,946 Less: Average goodwill and intangible assets (561,858) (548,102) (536,621) Less: Average preferred stock (192,878) (192,878) (192,878) Average tangible common shareholders' equity (denominator) $ 1,876,513 $ 1,819,343 $ 1,956,447 Return on average common shareholders' equity (tangible) 15.21 % 16.08 % 13.58 % 41 2023 2022 2021 (dollars in thousands) Efficiency ratio Non-interest expense $ 679,207 $ 633,728 $ 617,830 Less: Amortization of tax credit investments — (2,783) (6,187) Less: Intangible amortization (2,944) (1,731) (589) Less: Merger-related expenses — (10,328) — Less: Debt extinguishment gain (cost) 720 — (33,249) Less: FDIC special assessment (6,494) — — Less: FultonFirst initiative expenses (3,197) — — Non-interest expense (numerator) $ 667,292 $ 618,886 $ 577,805 Net interest income $ 854,286 $ 781,634 $ 663,730 Tax equivalent adjustment 17,811 14,995 12,296 Plus: Total non-interest income 227,678 227,130 273,745 Plus: Interest rate derivative transition valuation (1) 1,855 — — Less: Investment securities losses (gains), net 733 27 (33,516) Total revenue (denominator) $ 1,102,363 $ 1,023,786 $ 916,255 Efficiency ratio 60.5 % 60.5 % 63.1 % (1) Resulting from the reference rate transition from LIBOR to SOFR in the Corporation's commercial customer interest rate swap program.
Biggest changeReconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure follow: 2024 2023 2022 (dollars in thousands, except per share data) Operating net income available to common shareholders Net income available to common shareholders $ 278,495 $ 274,032 $ 276,733 Less: Other revenue (1,805) 1,855 — Less: Gain on acquisition, net of tax (36,996) — — Plus: Loss on securities restructuring 20,282 — — Plus: Core deposit intangible amortization 17,307 2,308 1,029 Plus: Acquisition-related expense 37,635 — 10,328 Plus: CECL Day 1 Provision 23,444 — 7,954 Plus: FDIC special assessment 940 6,494 — Less: Gain on Sale-Leaseback Transaction (20,266) — — Plus: FultonFirst implementation and asset disposals 32,038 3,197 — Less: Tax impact of adjustments (23,011) (2,909) (4,055) Operating net income available to common shareholders (numerator) $ 328,063 $ 284,977 $ 291,989 Weighted average shares (diluted) (denominator) 177,223 166,769 165,472 Operating net income available to common shareholders, per share (diluted) $ 1.85 $ 1.71 $ 1.76 39 2024 2023 2022 (dollars in thousands) Operating return on average assets Net income $ 288,743 $ 284,280 $ 286,981 Plus: Other revenue (1,805) 1,855 — Less: Gain on acquisition, net of tax (36,996) — — Plus: Loss on securities restructuring 20,282 — — Plus: Core deposit intangible amortization 17,307 2,308 1,029 Plus: Acquisition-related expense 37,635 — 10,328 Plus: CECL Day 1 Provision 23,444 — 7,954 Plus: FDIC special assessment 940 6,494 — Less: Gain on Sale-Leaseback Transaction (20,266) — — Plus: FultonFirst implementation and asset disposals 32,038 3,197 — Less: Tax impact of adjustments (23,011) (2,909) (4,055) Operating net income (numerator) $ 338,311 $ 295,225 $ 302,237 Total average assets $ 30,473,130 $ 27,229,704 $ 25,971,484 Less: Average net core deposit intangible (61,810) (5,996) (3,915) Total average operating assets (denominator) $ 30,411,320 $ 27,223,708 $ 25,967,569 Operating return on average assets 1.11 % 1.08 % 1.16 % Operating return on average common shareholders' equity (tangible) Net income available to common shareholders $ 278,495 $ 274,032 $ 276,733 Plus: Other revenue (1,805) 1,855 — Less: Gain on acquisition, net of tax (36,996) — — Plus: Loss on securities restructuring 20,282 — Plus: Intangible amortization 17,830 2,944 1,731 Plus: Acquisition-related expense 37,635 — 10,328 Plus: CECL Day 1 Provision 23,444 — 7,954 Plus: FDIC special assessment 940 6,494 — Less: Gain on Sale-Leaseback Transaction (20,266) — — Plus: FultonFirst implementation and asset disposals 32,038 3,197 — Less: Tax impact of adjustments (23,121) (3,043) (4,203) Adjusted net income available to common shareholders (numerator) $ 328,476 $ 285,479 $ 292,543 Average shareholders' equity $ 3,025,642 $ 2,631,249 $ 2,560,323 Less: Average goodwill and intangible assets (615,156) (561,858) (548,102) Less: Average preferred stock (192,878) (192,878) (192,878) Average tangible common shareholders' equity (denominator) $ 2,217,608 $ 1,876,513 $ 1,819,343 Return on average common shareholders' equity (tangible) 14.81 % 15.21 % 16.08 % 40 2024 2023 2022 (dollars in thousands) Efficiency ratio Non-interest expense $ 819,791 $ 679,207 $ 633,728 Less: Amortization of tax credit investments — — (2,783) Less: Intangible amortization (17,830) (2,944) (1,731) Less: Acquisition-related expense (37,635) — (10,328) Less: Debt extinguishment gain (cost) — 720 — Less: FDIC special assessment (940) (6,494) — Less: Gain on Sale-Leaseback Transaction 20,266 — — Less: FultonFirst implementation and asset disposals (32,038) (3,197) — Non-interest expense (numerator) $ 751,614 $ 667,292 $ 618,886 Net interest income $ 960,325 $ 854,286 $ 781,634 Tax equivalent adjustment 17,915 17,811 14,995 Plus: Total non-interest income 275,731 227,678 227,130 Plus: Other revenue (1,805) 1,855 — Less: Gain on acquisition, net of tax (36,996) — — Plus: Investment securities losses (gains), net 20,283 733 27 Total revenue (denominator) $ 1,235,453 $ 1,102,363 $ 1,023,786 Efficiency ratio 60.8 % 60.5 % 60.5 % CRITICAL ACCOUNTING POLICIES The following is a summary of those accounting policies that the Corporation considers to be most important to the presentation of its financial condition and results of operations, because they require management's most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion relates to the Corporation, a financial holding company registered under the BHCA and corporation incorporated under the laws of the Commonwealth of Pennsylvania, and its wholly-owned subsidiaries.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion relates to the Corporation, a financial holding company registered under the BHCA and incorporated under the laws of the Commonwealth of Pennsylvania, and its wholly-owned subsidiaries.
Average deposits and interest rates, by type, are summarized in the following table: 2023 2022 Increase (Decrease) Balance Rate Balance Rate $ % (dollars in thousands) Noninterest-bearing demand $ 5,939,799 — % $ 7,522,304 — % $ (1,582,505) (21.0) % Interest-bearing demand 5,582,930 1.12 5,593,942 0.15 (11,012) (0.2) Savings and money market deposits 6,616,087 1.85 6,458,165 0.26 157,922 2.4 Total demand deposits and savings and money market deposits 18,138,816 1.02 19,574,411 0.13 (1,435,595) (7.3) Brokered deposits 847,795 5.15 262,359 1.56 585,436 N/M Time deposits 2,170,245 2.94 1,617,804 0.92 552,441 34.1 Total deposits $ 21,156,856 1.38 % $ 21,454,574 0.20 % $ (297,718) (1.4) % The cost of total deposits increased 118 bps to 1.38% in 2023 compared to 0.20% in 2022, primarily due to rising interest rates and a change in mix of deposits.
Average deposits and interest rates, by type, are summarized in the following table: 2023 2022 Increase (Decrease) Balance Rate Balance Rate $ % (dollars in thousands) Noninterest-bearing demand $ 5,939,799 — % $ 7,522,304 — % $ (1,582,505) (21.0) % Interest-bearing demand 5,582,930 1.12 5,593,942 0.15 (11,012) (0.2) Savings and money market deposits 6,616,087 1.85 6,458,165 0.26 157,922 2.4 Total demand and savings and money market deposits 18,138,816 1.02 19,574,411 0.13 (1,435,595) (7.3) Brokered deposits 847,795 5.15 262,359 1.56 585,436 N/M Time deposits 2,170,245 2.94 1,617,804 0.92 552,441 34.1 Total deposits $ 21,156,856 1.38 % $ 21,454,574 0.20 % $ (297,718) (1.4) % The cost of total deposits increased 118 bps to 1.38% in 2023 compared to 0.20% in 2022, primarily due to rising interest rates and a change in mix of deposits.
Average borrowings and interest rates, by type, are summarized in the following table: 2023 2022 Increase (Decrease) Balance Rate Balance Rate $ % (dollars in thousands) Federal funds purchased $ 566,379 5.30 % $ 91,125 3.21 % $ 475,254 N/M Federal Home Loan Bank advances 922,164 5.05 194,295 3.77 727,869 N/M Senior debt and subordinated debt 539,726 3.96 564,337 3.94 (24,611) (4.4) Other borrowings and other interest-bearing liabilities (1) 743,061 3.77 508,600 1.34 234,461 46.1 Total borrowings and other interest-bearing liabilities $ 2,771,330 4.54 % $ 1,358,357 2.89 % $ 1,412,973 104.0 % (1) Includes repurchase agreements, short-term promissory notes, capital leases and interest-bearing collateral.
Average borrowings and interest rates, by type, are summarized in the following table: 2023 2022 Increase (Decrease) Balance Rate Balance Rate $ % (dollars in thousands) Federal funds purchased $ 566,379 5.30 % $ 91,125 3.21 % $ 475,254 N/M Federal Home Loan Bank advances 922,164 5.05 194,295 3.77 727,869 N/M Senior debt and subordinated debt 539,726 3.96 564,337 3.94 (24,611) (4.4) Other borrowings and other interest-bearing liabilities (1) 743,061 3.77 508,600 1.34 234,461 46.1 Total borrowings and other interest-bearing liabilities $ 2,771,330 4.54 % $ 1,358,357 2.89 % $ 1,412,973 104.0 % (1) Includes repurchase agreements, short-term promissory notes, capital leases and collateral liabilities.
Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of the direct changes that are attributable to each component.
Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of the direct changes that are attributable to each component.
(2) Includes accruing loans 90 days or more past due and non-accrual loans and leases. 58 Loans and Allowance for Credit Losses The Corporation accounts for the credit risk associated with lending activities through the ACL and the provision for credit losses.
(2) Includes accruing loans 90 days or more past due and non-accrual loans and leases. 58 Allowance for Credit Losses The Corporation accounts for the credit risk associated with lending activities through the ACL and the provision for credit losses.
See "Note 10 - Borrowings" of the Notes to Consolidated Financial Statements for additional details. 46 Non-Interest Income The following table presents the components of non-interest income: Increase (Decrease) 2023 2022 $ % (dollars in thousands) Commercial banking: Merchant and card $ 29,205 $ 28,276 $ 929 3.3 % Cash management 23,340 23,729 (389) (1.6) Capital markets 15,654 12,256 3,398 27.7 Other commercial banking 12,961 11,518 1,443 12.5 Total commercial banking 81,160 75,779 5,381 7.1 Wealth management 75,541 72,843 2,698 3.7 Consumer banking: Card 26,343 24,472 1,871 7.6 Overdraft 11,416 15,480 (4,064) (26.3) Other consumer banking 9,438 9,544 (106) (1.1) Total consumer banking 47,197 49,496 (2,299) (4.6) Mortgage banking 10,388 14,204 (3,816) (26.9) Other 14,125 14,835 (710) (4.8) Non-interest income before investment securities gains (losses) 228,411 227,157 1,254 0.6 Investment securities gains (losses), net (733) (27) (706) N/M Total Non-Interest Income $ 227,678 $ 227,130 $ 548 0.2 % Non-interest income before investment securities gains (losses) increased $1.3 million, or 0.6%, during 2023 compared to 2022.
See "Note 10 - Borrowings" of the Notes to Consolidated Financial Statements for additional details. 49 Non-Interest Income The following table presents the components of non-interest income: Increase (Decrease) 2023 2022 $ % (dollars in thousands) Wealth management $ 75,541 $ 72,843 $ 2,698 3.7 Commercial banking: Merchant and card 29,205 28,276 929 3.3 % Cash management 23,340 23,729 (389) (1.6) Capital markets 15,654 12,256 3,398 27.7 Other commercial banking 12,961 11,518 1,443 12.5 Total commercial banking 81,160 75,779 5,381 7.1 Consumer banking: Card 26,343 24,472 1,871 7.6 Overdraft 11,416 15,480 (4,064) (26.3) Other consumer banking 9,438 9,544 (106) (1.1) Total consumer banking 47,197 49,496 (2,299) (4.6) Mortgage banking 10,388 14,204 (3,816) (26.9) Other 14,125 14,835 (710) (4.8) Non-interest income before investment securities gains (losses) 228,411 227,157 1,254 0.6 Investment securities (losses) gains, net (733) (27) (706) N/M Total Non-Interest Income $ 227,678 $ 227,130 $ 548 0.2 % Non-interest income before investment securities gains (losses) increased $1.3 million, or 0.6%, during 2023 compared to 2022.
Average loans and average FTE yields, by type, are summarized in the following table: 2023 2022 Increase (Decrease) Balance Yield Balance Yield $ % (dollars in thousands) Real estate - commercial mortgage $ 7,876,076 5.97 % $ 7,523,806 4.00 % $ 352,270 4.7 % Commercial and industrial 4,596,742 6.27 4,230,133 4.13 366,609 8.7 Real estate - residential mortgage 5,079,739 3.76 4,261,527 3.38 818,212 19.2 Real estate - home equity 1,060,396 6.95 1,101,142 4.60 (40,746) (3.7) Real estate - construction 1,247,336 6.81 1,178,550 4.14 68,786 5.8 Consumer 748,089 5.94 569,305 5.11 178,784 31.4 Leases and other loans (1) 320,924 4.37 288,277 6.04 32,647 11.3 Total loans $ 20,929,302 5.57 % $ 19,152,740 4.00 % $ 1,776,562 9.3 % (1) Consists of equipment lease financing, overdrafts and net origination fees and costs. 45 During 2023, average loans increased $1.8 billion, or 9.3%, compared to 2022.
Average loans and average FTE yields, by type, are summarized in the following table: 2023 2022 Increase (Decrease) Balance Yield Balance Yield $ % (dollars in thousands) Real estate - commercial mortgage $ 7,876,076 5.97 % $ 7,523,806 4.00 % $ 352,270 4.7 % Commercial and industrial 4,596,742 6.27 4,230,133 4.13 366,609 8.7 Real estate - residential mortgage 5,079,739 3.76 4,261,527 3.38 818,212 19.2 Real estate - home equity 1,060,396 6.95 1,101,142 4.60 (40,746) (3.7) Real estate - construction 1,247,336 6.81 1,178,550 4.14 68,786 5.8 Consumer 748,089 5.94 569,305 5.11 178,784 31.4 Leases and other loans (1) 320,924 4.37 288,277 6.04 32,647 11.3 Total loans $ 20,929,302 5.57 % $ 19,152,740 4.00 % $ 1,776,562 9.3% (1) Consists of equipment lease financing, overdrafts and net origination fees and costs. 48 During 2023, average loans increased $1.8 billion, or 9.3%, compared to 2022.
Management's Discussion should be read in conjunction with the consolidated financial statements and other financial information presented in this Annual Report on Form 10-K. OVERVIEW The Corporation is a financial holding company, which, through its wholly-owned banking subsidiary, provides a full range of retail and commercial financial services in Pennsylvania, Delaware, Maryland, New Jersey and Virginia.
Management's Discussion should be read in conjunction with the Consolidated Financial Statements and other financial information presented in this Annual Report on Form 10-K. OVERVIEW The Corporation is a financial holding company, which, through its wholly-owned banking subsidiary, provides a full range of consumer and commercial financial services in Pennsylvania, Delaware, Maryland, New Jersey and Virginia.
The 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. 42 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 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. 41 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.
As of December 31, 2023, Fulton Bank met the well-capitalized requirements under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, a bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the Capital Rules.
As of December 31, 2024, Fulton Bank met the well-capitalized requirements under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, a bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the Capital Rules.
The $20.5 million increase in salaries and employee benefits expense was largely due to annual merit increases, an increase in the number of employees, higher healthcare claims expense and higher pension expense. Income Taxes Income tax expense for 2023 was $64.4 million, a $4.4 million increase compared to 2022. The ETR was 18.5% in 2023 compared to 17.3% in 2022.
The $19.9 million increase in salaries and employee benefits expense was largely due to annual merit increases, an increase in the number of employees, higher healthcare claims expense and higher pension expense. Income Taxes Income tax expense for 2023 was $64.4 million, a $4.4 million increase compared to 2022. The ETR was 18.5% in 2023 compared to 17.3% in 2022.
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. As of December 31, 2023, the Corporation's capital levels met the minimum capital requirements, including the capital conservation buffers, as prescribed in the Capital Rules.
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. 61 As of December 31, 2024, the Corporation's capital levels met the minimum capital requirements, including the capital conservation buffers, as prescribed in the Capital Rules.
The following table summarizes the Corporation's capital ratios in comparison to regulatory requirements: December 31, 2023 December 31, 2022 Regulatory Minimum for Capital Adequacy Fully Phased-in, with Capital Conservation Buffers Total Risk-Based Capital (to Risk-Weighted Assets) 14.0% 13.6% 8.0% 10.5% Tier I Risk-Based Capital (to Risk-Weighted Assets) 11.2% 10.9% 6.0% 8.5% Common Equity Tier I (to Risk-Weighted Assets) 10.3% 10.0% 4.5% 7.0% Tier I Leverage Capital (to Average Assets) 9.5% 9.5% 4.0% 4.0% 61 Contractual Obligations and Off-Balance Sheet Arrangements The Corporation has various financial obligations that require future cash payments.
The following table summarizes the Corporation's capital ratios in comparison to regulatory requirements: December 31, 2024 December 31, 2023 Regulatory Minimum for Capital Adequacy With Capital Conservation Buffers Total Risk-Based Capital (to Risk-Weighted Assets) 14.3% 14.0% 8.0% 10.5% Tier I Risk-Based Capital (to Risk-Weighted Assets) 11.5% 11.2% 6.0% 8.5% Common Equity Tier I (to Risk-Weighted Assets) 10.8% 10.3% 4.5% 7.0% Tier I Leverage Capital (to Average Assets) 9.0% 9.5% 4.0% 4.0% Contractual Obligations and Off-Balance Sheet Arrangements The Corporation has various financial obligations that require future cash payments.
The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $20.5 million in salaries and employee benefits expense, $13.0 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023, and the special assessment of $6.5 million charged to recover the loss to the DIF in connection with the closures of certain banks in 2023, $10.6 million in other outside services expense largely due to a number of corporate initiatives, $6.2 million in data processing and software expense due to ongoing investment in technology and customer growth and $2.1 million in marketing expense primarily due to a targeted customer deposit acquisition program and brand marketing campaigns.
The increase in noninterest expense, excluding acquisition-related expenses and FultonFirst initiatives, was primarily due to increases of $19.9 million in salaries and employee benefits expense, $13.0 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023, and the special assessment of $6.5 million charged to recover the loss to the DIF in connection with the closures of certain banks in 2023, $8.0 million in other outside services expense largely due to a number of corporate initiatives, $6.2 million in data processing and software expense due to ongoing investment in technology and customer growth and $2.1 million in marketing expense primarily due to a targeted customer deposit acquisition program and brand marketing campaigns.
Recognition and measurement of tax positions is based upon management's evaluations of current taxing authorities' examinations of the Corporation's tax returns, recent positions taken by the taxing authorities on similar transactions and the overall tax environment. Income tax expense was $64.4 million and $60.0 million for the years ended December 31, 2023 and December 31, 2022, respectively.
Recognition and measurement of tax positions is based upon management's evaluations of current taxing authorities' examinations of the Corporation's tax returns, recent positions taken by the taxing authorities on similar transactions and the overall tax environment. Income tax expense was $55.9 million and $64.4 million for the years ended December 31, 2024 and December 31, 2023, respectively.
(2) Ending loan portfolio segment balances as a % of total net loans for the periods presented. Management believes that the $293.4 million ACL - loans as of December 31, 2023 is sufficient to cover expected credit losses in the loan portfolio.
(2) Ending loan portfolio segment balances as a % of total net loans for the periods presented. Management believes that the $379.2 million ACL - loans as of December 31, 2024 is sufficient to cover expected credit losses in the loan portfolio.
This scenario resulted in a hypothetical increase to the ACL o f approximately $21.6 million. For further discussion of the methodology used in the determination of the ACL, refer to Note 1, "Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements in "Item 8.
This scenario resulted in a hypothetical increase to the ACL of approximately $39.5 million. For further discussion of the methodology used in the determination of the ACL, refer to Note 1, "Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements in "Item 8.
These obligations include payments for liabilities recorded on the Corporation's consolidated balance sheets as well as contractual obligations for purchased services. Contractual purchase obligations to third parties that were fixed and determinable of approximately $125 million and $93 million at December 31, 2023 and 2022, respectively, include information technology, telecommunication and data processing outsourcing contracts.
These obligations include payments for liabilities recorded on the Corporation's consolidated balance sheets as well as contractual obligations for purchased services. Contractual purchase obligations to third parties that were fixed and determinable of approximately $72.4 million and $124.6 million at December 31, 2024 and 2023, respectively, include information technology, telecommunication and data processing outsourcing contracts.
The increase in non-interest income was primarily due to increases in commercial banking revenues of $5.4 million, largely driven by an increase in commercial customer interest rate swap fee income reflected in capital markets, an increase in wealth management of $2.7 million, due to an increase in assets under management, and an increase in the cash surrender value of bank owned life insurance agreements of $1.7 million, reflected in other non-interest income, partially offset by decreases in mortgage banking income of $3.8 million, mainly due to lower sales volumes and lower gains on sales margins, consumer banking income of $2.3 million, driven largely by decreases in overdraft fees, and an $1.8 million reduction in other non-interest income to reflect market valuation movement in certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions resulting from the transition from LIBOR to SOFR. 47 Non-Interest Expense The following table presents the components of non-interest expense: Increase (Decrease) 2023 2022 $ % (dollars in thousands) Salaries and employee benefits $ 377,417 $ 356,884 $ 20,533 5.8 % Data processing and software 66,471 60,255 6,216 10.3 Net occupancy 58,019 56,195 1,824 3.2 Other outside services 47,724 37,152 10,572 28.5 FDIC insurance 25,565 12,547 13,018 103.8 Equipment 14,390 14,033 357 2.5 Marketing 9,004 6,885 2,119 30.8 Professional fees 8,392 9,123 (731) (8.0) Intangible amortization 2,944 1,731 1,213 70.1 Merger-related expenses — 10,328 (10,328) N/M Other 69,281 68,595 686 1.0 Total Non-Interest Expense $ 679,207 $ 633,728 $ 45,479 7.2 % Non-interest expense in 2023 increased $45.5 million, or 7.2%, compared to 2022.
The increase in non-interest income was primarily due to increases in commercial banking revenues of $5.4 million, largely driven by an increase in commercial customer interest rate swap fee income reflected in capital markets, an increase in wealth management of $2.7 million, due to an increase in assets under management, and an increase in the cash surrender value of bank owned life insurance agreements of $1.7 million, reflected in other non-interest income, partially offset by decreases in mortgage banking income of $3.8 million, mainly due to lower sales volumes and lower gains on sales margins, consumer banking income of $2.3 million, driven largely by decreases in overdraft fees, and a $1.8 million reduction in other non-interest income to reflect market valuation movement in certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions resulting from the transition from LIBOR to SOFR. 50 Non-Interest Expense The following table presents the components of non-interest expense: Increase (Decrease) 2023 2022 $ % (dollars in thousands) Salaries and employee benefits $ 376,795 $ 356,884 $ 19,911 5.6 % Data processing and software 66,471 60,255 6,216 10.3 Net occupancy 58,019 56,195 1,824 3.2 Other outside services 45,149 37,152 7,997 21.5 FDIC insurance 25,565 12,547 13,018 103.8 Equipment 14,390 14,033 357 2.5 Marketing 9,004 6,885 2,119 30.8 Professional fees 8,392 9,123 (731) (8.0) Intangible amortization 2,944 1,731 1,213 70.1 Other 69,281 68,595 686 1.0 Subtotal $ 676,010 $ 623,400 $ 52,610 8.4 % FultonFirst implementation and asset disposals 3,197 — 3,197 N/M Acquisition-related expenses — 10,328 (10,328) N/M Total non-interest expense $ 679,207 $ 633,728 $ 45,479 7.2 % Non-interest expense in 2023 increased $45.5 million, or 7.2%, compared to 2022.
The Corporation performs loan loss sensitivity analysis on a quarterly basis to determine the impact of varying economic conditions based on third-party forecasts. Our sensitivity analysis does not represent management's view of expected credit losses at the balance sheet date. One scenario identified includes a slowdown in near-term economic growth.
The Corporation performs loan loss sensitivity analysis on a quarterly basis to determine the impact of varying economic conditions based on third-p arty forecasts. Our sensitivity analysis does not represent management's view of expected credit losses at the balance sheet date. One scenario identified includes a highly adverse economic environment.
The Corporation does not have a significant concentration of credit risk with any single borrower. As of December 31, 2023, approximately $9.4 billion, or 43.9%, of the loan portfolio was comprised of commercial mortgage loans and construction loans.
The Corporation does not have a significant concentration of credit risk with any single borrower. As of December 31, 2024, approximately $11.0 billion, or 45.7%, of the loan portfolio was comprised of commercial mortgage loans and construction loans.
(2) Reserve for OBS credit exposures is recorded within other liabilities on the consolidated balance sheets. (3) Includes accruing loans past due 90 days or more.
(2) Provision for credit losses includes only the portion related to net loans. (3) Reserve for OBS credit exposures is recorded within other liabilities on the Consolidated Balance Sheets. (4) Includes accruing loans past due 90 days or more.
The following table presents a summary of the Corporation's earnings and selected performance ratios: 2023 2022 2021 (dollars in thousands, except per share) Net income $ 284,280 $ 286,981 $ 275,497 Net income available to common shareholders $ 274,032 $ 276,733 $ 265,220 Net income available to common shareholders per share (diluted) $ 1.64 $ 1.67 $ 1.62 Operating net income available to common shareholders per share (1) $ 1.71 $ 1.76 $ 1.62 Return on average assets 1.04 % 1.10 % 1.05 % Operating return on average assets (1) 1.08 % 1.16 % 1.05 % Return on average common shareholders' equity 11.24 % 11.69 % 10.64 % Return on average common shareholders' equity (tangible) (1) 15.21 % 16.08 % 13.58 % Net interest margin (2) 3.42 % 3.27 % 2.78 % Efficiency ratio (1) 60.5 % 60.5 % 63.1 % Non-performing assets to total assets 0.56 % 0.66 % 0.60 % Net charge-offs (recoveries) to average loans 0.14 % 0.04 % 0.07 % (1) Ratio represents a financial measure derived by methods other than GAAP.
The following table presents a summary of the Corporation's earnings and selected performance ratios: 2024 2023 2022 (dollars in thousands, except per share) Net income $ 288,743 $ 284,280 $ 286,981 Net income available to common shareholders $ 278,495 $ 274,032 $ 276,733 Net income available to common shareholders per share (diluted) $ 1.57 $ 1.64 $ 1.67 Operating net income available to common shareholders per share (1) $ 1.85 $ 1.71 $ 1.76 Return on average assets 0.95 % 1.04 % 1.10 % Operating return on average assets (1) 1.11 % 1.08 % 1.16 % Return on average common shareholders' equity 9.83 % 11.24 % 11.69 % Operating return on average common shareholders' equity (tangible) (1) 14.81 % 15.21 % 16.08 % Net interest margin (2) 3.42 % 3.42 % 3.27 % Efficiency ratio (1) 60.8 % 60.5 % 60.5 % Non-performing assets to total assets 0.69 % 0.56 % 0.66 % Net charge-offs to average loans, annualized 0.19 % 0.14 % 0.04 % (1) Ratio represents a financial measure derived by methods other than GAAP.
(4) ACL - loans relates to the ACL for net loans and does not include the ACL for OBS credit exposures, which is included in other liabilities. 44 Comparison of 2023 to 2022 The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volumes) and changes in yields and rates: 2023 vs. 2022 Increase (decrease) due to change in Volume Yield/Rate Net (dollars in thousands) Interest income on: Net loans (1) $ 76,608 $ 324,165 $ 400,773 Investment securities (3,763) 6,973 3,210 Other interest-earning assets (6,298) 13,529 7,231 Total interest income $ 66,547 $ 344,667 $ 411,214 Interest expense on: Demand deposits $ (17) $ 54,292 $ 54,275 Savings and money market deposits 421 105,277 105,698 Brokered deposits 19,464 20,074 39,538 Time deposits 6,577 42,287 48,864 Borrowings and other interest-bearing liabilities 56,410 30,961 87,371 Total interest expense $ 82,855 $ 252,891 $ 335,746 (1) Average balance includes non-performing loans.
The ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities and TCIs that generate tax credits under various federal programs. 47 Comparison of 2023 to 2022 The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volumes) and changes in yields and rates: 2023 versus 2022 Increase (decrease) due to change in Volume Yield/Rate Net (dollars in thousands) FTE interest income on: Net loans (1) $ 76,608 $ 324,165 $ 400,773 Investment securities (3,763) 6,973 3,210 Other interest-earning assets (6,298) 13,529 7,231 Total FTE interest income $ 66,547 $ 344,667 $ 411,214 Interest expense on: Demand deposits $ (17) $ 54,292 $ 54,275 Savings and money market deposits 421 105,277 105,698 Brokered deposits 19,464 20,074 39,538 Time deposits 6,577 42,287 48,864 Borrowings 56,410 30,961 87,371 Total interest expense $ 82,855 $ 252,891 $ 335,746 (1) Average balance includes non-performing loans.
There were no other conditions or events since December 31, 2023 that management believes have changed the Corporation's capital categories.
There were no other conditions or events in 2024 that management believes have changed the Corporation's capital categories.
The Corporation has established lower total lending limits for certain types of lending commitments and lower total lending limits based on the Corporation's internal risk rating of an individual borrower at the time the lending commitment is approved. 54 The following table summarizes the industry concentrations within the commercial mortgage and the commercial and industrial loan portfolios: December 31, 2023 2022 Real estate (1) 46.6 % 43.9 % Health care 6.6 6.5 Manufacturing 6.1 6.8 Agriculture 5.6 5.4 Other services 4.5 4.7 Construction (2) 4.1 4.7 Hospitality and food services 3.6 3.6 Retail 3.3 3.1 Wholesale trade 3.2 3.1 Educational services 2.9 2.8 Professional, scientific and technical services 2.2 1.8 Arts, entertainment and recreation 1.9 2.0 Transportation and warehousing 1.7 1.3 Finance and Insurance 1.3 0.9 Administrative and Support 1.1 1.1 Public administration 1.0 1.2 Other 4.3 7.1 Total 100.0 % 100.0 % (1) Includes commercial loans to borrowers engaged in the business of: renting, leasing or managing real estate for others; selling and/or buying real estate for others; and appraising real estate.
The Corporation reviews portfolio concentrations and adjusts the lending limits based on asset quality, economic forecasts and industry outlook. 53 The following table summarizes the industry concentrations within the commercial mortgage and the commercial and industrial loan portfolios: December 31, 2024 2023 Real estate (1) 39.5 % 46.6 % Retail 6.6 3.3 Health care 6.3 6.6 Agriculture 5.3 5.6 Other services 5.3 4.5 Manufacturing 5.1 6.1 Construction (2) 4.3 4.1 Hospitality and food services 4.0 3.6 Wholesale trade 3.4 3.2 Educational services 3.0 2.9 Professional, scientific and technical services 2.7 2.2 Arts, entertainment and recreation 2.4 1.9 Finance and Insurance 1.6 1.3 Transportation and warehousing 1.5 1.7 Public administration 1.3 1.0 Administrative and Support 1.2 1.1 Other 6.5 4.3 Total 100.0 % 100.0 % (1) Includes commercial loans to borrowers engaged in the business of: renting, leasing or managing real estate for others; selling and/or buying real estate for others; and appraising real estate.
During 2023, non-accrual loans as a percentage of net loans decreased to 0.57%, compared to 0.71% as of December 31, 2022. 55 The following table presents non-performing assets: December 31, 2023 2022 2021 (dollars in thousands) Non-accrual loans (1)(2) $ 121,620 $ 144,443 $ 143,666 Loans 90 days or more past due and still accruing (2) 31,721 27,463 8,453 Total non-performing loans and leases 153,341 171,906 152,119 OREO (3) 896 5,790 1,817 Total non-performing assets $ 154,237 $ 177,696 $ 153,936 Non-accrual loans to total loans 0.57 % 0.71 % 0.78 % Non-performing loans to total loans 0.72 % 0.85 % 0.83 % Non-performing assets to total assets 0.56 % 0.66 % 0.60 % ACL to non-performing loans 191 % 157 % 164 % (1) The amount of interest income on non-accrual loans that was recognized in 2023, 2022 and 2021was approximately $1.5 million, $2.2 million and $1.3 million, respectively.
The following table presents non-performing assets: December 31, 2024 2023 2022 (dollars in thousands) Non-accrual loans (1)(2) $ 189,293 $ 121,620 $ 144,443 Loans 90 days or more past due and still accruing (2) 30,781 31,721 27,463 Total non-performing loans and leases 220,074 153,341 171,906 OREO (3) 2,621 896 5,790 Total non-performing assets $ 222,695 $ 154,237 $ 177,696 Non-accrual loans to total loans 0.79 % 0.57 % 0.71 % Non-performing loans to total loans 0.92 % 0.72 % 0.85 % Non-performing assets to total assets 0.69 % 0.56 % 0.66 % ACL to non-performing loans 172 % 191 % 157 % (1) The amount of interest income on non-accrual loans that was recognized in 2024, 2023 and 2022 was approximately $1.0 million, $1.5 million and $2.2 million, respectively.
The following table presents the activity in the ACL: December 31, December 31, December 31, 2023 2022 2021 (dollars in thousands) Net loans $ 21,351,094 $ 20,279,547 $ 18,325,350 Average balance of net loans $ 20,929,302 $ 19,152,740 $ 18,627,787 Balance of ACL at beginning of period $ 269,366 $ 249,001 $ 277,567 CECL Day 1 provision expense — 7,954 — Initial purchased credit deteriorated loans — 1,135 — Loans charged off: Commercial and industrial (9,246) (2,390) (15,337) Real estate - commercial mortgage (17,999) (12,473) (8,726) Consumer and real estate - home equity (7,514) (4,412) (3,309) Real estate - residential mortgage (62) (66) (1,290) Real estate - construction — — (39) Leases and other loans (4,380) (2,131) (2,251) Total loans charged off (39,201) (21,472) (30,952) Recoveries of loans previously charged off: Commercial and industrial 3,473 5,893 9,587 Real estate - commercial mortgage 1,076 3,860 2,474 Consumer and real estate - home equity 3,198 2,581 2,345 Real estate - residential mortgage 421 425 375 Real estate - construction 858 574 1,412 Leases and other loans 1,103 759 953 Total recoveries 10,129 14,092 17,146 Net loans charged off (recoveries) (29,072) (7,380) (13,806) Provision for credit losses (1) 53,110 18,656 (14,760) Balance of ACL at end of period $ 293,404 $ 269,366 $ 249,001 Provision for OBS credit exposures $ 926 $ 1,411 $ 160 Reserve for OBS credit exposures (2) $ 17,254 $ 16,328 $ 14,533 Selected Asset Quality Ratios %: Net charge-offs to average loans 0.14 % 0.04 % 0.07 % ACL - loans to total net loans 1.37 1.33 1.36 Non-performing assets (3) to total assets 0.56 0.66 0.60 Non-accrual loans to total net loans 0.57 0.71 0.78 ACL - loans to non-performing loans 191 157 164 ACL - loans to non-accrual loans 241 186 173 (1) Provision for credit losses includes only the portion related to net loans.
The following table presents the activity in the ACL: December 31, December 31, December 31, 2024 2023 2022 (dollars in thousands) Net loans $ 24,044,919 $ 21,351,094 $ 20,279,547 Average balance of net loans $ 23,145,114 $ 20,929,302 $ 19,152,740 Balance of ACL at beginning of period $ 293,404 $ 269,366 $ 249,001 CECL Day 1 Provision (1) 23,444 — 7,954 Initial purchased credit deteriorated loans 54,631 — 1,135 Loans charged off: Real estate - commercial mortgage (13,186) (17,999) (12,473) Commercial and industrial (26,585) (9,246) (2,390) Real estate - residential mortgage (1,472) (62) (66) Consumer and real estate - home equity (8,490) (7,514) (4,412) Real estate - construction — — — Leases and other loans (4,696) (4,380) (2,131) Total loans charged off (54,429) (39,201) (21,472) Recoveries of loans previously charged off: Real estate - commercial mortgage 603 1,076 3,860 Commercial and industrial 4,440 3,473 5,893 Real estate - residential mortgage 472 421 425 Consumer and real estate - home equity 3,357 3,198 2,581 Real estate - construction 382 858 574 Leases and other loans 730 1,103 759 Total recoveries 9,984 10,129 14,092 Net loans charged off (recoveries) (44,445) (29,072) (7,380) Provision for credit losses (1)(2) 52,122 53,110 18,656 Balance of ACL at end of period $ 379,156 $ 293,404 $ 269,366 Provision for OBS credit exposures (1) $ (3,930) $ 926 $ 1,411 Reserve for OBS credit exposures (3) $ 14,161 $ 17,254 $ 16,328 Selected Asset Quality Ratios %: Net charge-offs to average loans 0.19 % 0.14 % 0.04 % ACL - loans to total net loans 1.58 1.37 1.33 Non-performing assets (4) to total assets 0.69 0.56 0.66 Non-accrual loans to total net loans 0.79 0.57 0.71 ACL - loans to non-performing loans 172 191 157 ACL - loans to non-accrual loans 200 241 186 (1) These amounts are reflected in the provision for credit losses in the Consolidated Statements of Income.
The discussion following this table is based on these tax-equivalent amounts. 2023 2022 2021 Average Balance Interest (1) Yield/ Rate Average Balance Interest (1) Yield/ Rate Average Balance Interest (1) Yield/ Rate (dollars in thousands) ASSETS Interest-earning assets: Net loans (2) $ 20,929,302 $ 1,166,376 5.57 % $ 19,152,740 $ 765,603 4.00 % $ 18,627,787 $ 644,387 3.46 % Investment securities (3) 4,210,010 109,325 2.59 4,364,627 106,115 2.43 3,673,250 86,325 2.35 Other interest-earning assets 387,360 15,346 3.96 829,705 8,115 0.98 2,054,165 4,996 0.24 Total interest-earning assets 25,526,672 1,291,047 5.06 24,347,072 879,833 3.61 24,355,202 735,708 3.02 Noninterest-earning assets: Cash and due from banks 215,649 156,050 165,942 Premises and equipment 219,315 220,982 228,708 Other assets 1,553,284 1,505,277 1,686,053 Less: ACL - loans (4) (285,216) (257,897) (265,572) Total Assets $ 27,229,704 $ 25,971,484 $ 26,170,333 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Demand deposits $ 5,582,930 $ 62,494 1.12 % $ 5,593,942 $ 8,219 0.15 % $ 5,979,479 $ 3,662 0.06 % Savings and money market deposits 6,616,087 122,340 1.85 6,458,165 16,642 0.26 6,306,967 4,936 0.08 Brokered deposits 847,795 43,635 5.15 262,359 4,097 1.56 286,901 1,096 0.38 Time deposits 2,170,245 63,735 2.94 1,617,804 14,871 0.92 1,939,446 20,311 1.05 Total interest-bearing deposits 15,217,057 292,204 1.92 13,932,270 43,829 0.31 14,512,793 30,005 0.21 Borrowings and other interest-bearing liabilities 2,771,330 126,746 4.54 1,358,357 39,375 2.89 1,297,963 29,677 2.29 Total interest-bearing liabilities 17,988,387 418,950 2.32 15,290,627 83,204 0.54 15,810,756 59,682 0.38 Noninterest-bearing liabilities: Demand deposits 5,939,799 7,522,304 7,211,153 Other liabilities 670,269 598,230 462,478 Total Liabilities 24,598,455 23,411,161 23,484,387 Total deposits 21,156,856 1.38% 21,454,574 0.20% 21,723,946 0.14% Total interest-bearing liabilities and noninterest-bearing deposits 23,928,186 1.75% 22,812,931 0.36% 23,021,909 0.26% Shareholders' equity 2,631,249 2,560,323 2,685,946 Total Liabilities and Shareholders' Equity $ 27,229,704 $ 25,971,484 $ 26,170,333 Net interest income/net interest margin (FTE) 872,097 3.42 % 796,629 3.27 % 676,026 2.78 % Tax equivalent adjustment (17,811) (14,995) (12,296) Net interest income $ 854,286 $ 781,634 $ 663,730 (1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.
The discussion following this table is based on these tax-equivalent amounts. 2024 2023 2022 Average Balance Interest (1) Yield/ Rate Average Balance Interest (1) Yield/ Rate Average Balance Interest (1) Yield/ Rate (dollars in thousands) ASSETS Interest-earning assets: Net loans (2) $ 23,145,114 $ 1,406,216 6.08 % $ 20,929,302 $ 1,166,376 5.57 % $ 19,152,740 $ 765,603 4.00 % Investment securities (3) 4,486,726 143,317 3.19 4,210,010 109,325 2.59 4,364,627 106,115 2.43 Other interest-earning assets 962,971 50,578 5.25 387,360 15,346 3.96 829,705 8,115 0.98 Total interest-earning assets 28,594,811 1,600,111 5.60 25,526,672 1,291,047 5.06 24,347,072 879,833 3.61 Noninterest-earning assets: Cash and due from banks 295,156 215,649 156,050 Premises and equipment 197,823 219,315 220,982 Other assets 1,761,083 1,553,284 1,505,277 Less: ACL - loans (4) (375,743) (285,216) (257,897) Total Assets $ 30,473,130 $ 27,229,704 $ 25,971,484 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Demand deposits $ 7,049,915 $ 128,969 1.83 % $ 5,582,930 $ 62,494 1.12 % $ 5,593,942 $ 8,219 0.15 % Savings and money market deposits 7,364,106 180,455 2.45 6,616,087 122,340 1.85 6,458,165 16,642 0.26 Brokered deposits 981,060 51,691 5.27 847,795 43,635 5.15 262,359 4,097 1.56 Time deposits 3,747,029 160,744 4.29 2,170,245 63,735 2.94 1,617,804 14,871 0.92 Total interest-bearing deposits 19,142,110 521,859 2.73 15,217,057 292,204 1.92 13,932,270 43,829 0.31 Borrowings and other interest-bearing liabilities 2,280,382 100,012 4.39 2,771,330 126,746 4.54 1,358,357 39,375 2.89 Total interest-bearing liabilities 21,422,492 621,871 2.90 17,988,387 418,950 2.32 15,290,627 83,204 0.54 Noninterest-bearing liabilities: Demand deposits 5,394,518 5,939,799 7,522,304 Other liabilities 630,478 670,269 598,230 Total Liabilities 27,447,488 24,598,455 23,411,161 Shareholders' equity 3,025,642 2,631,249 2,560,323 Total Liabilities and Shareholders' Equity $ 30,473,130 $ 27,229,704 $ 25,971,484 Net interest income/net interest margin (FTE) 978,240 3.42 % 872,097 3.42 % 796,629 3.27 % Tax equivalent adjustment (17,915) (17,811) (14,995) Net interest income $ 960,325 $ 854,286 $ 781,634 (1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.
Total criticized and classified loans increased $172.9 million, or 23.0%, compared to December 31, 2022. 57 The following table presents, by class segment, a summary of delinquency status and rates, as a percentage of total loans that do not have internal risk ratings: Delinquent (1) Non-performing (2) Total December 31, December 31, December 31, December 31, December 31, December 31, 2023 2022 2023 2022 2023 2022 $ % $ % $ % $ % $ % $ % (dollars in thousands) Consumer and real estate - home equity $ 20,345 1.15 % $ 16,141 0.90 % $ 10,878 0.61 % $ 9,800 0.54 % $ 31,223 1.76 % $ 25,941 1.44 % Real estate - residential mortgage 59,983 1.13 65,270 1.38 42,029 0.79 46,509 0.98 102,012 1.92 111,779 2.36 Real estate - construction 4,636 0.37 3,520 0.28 1,535 0.12 — — 6,171 0.50 3,520 0.28 Leases and other loans 868 0.26 470 0.16 10,011 2.98 13,307 4.45 10,879 3.23 13,777 4.61 Total $ 85,832 0.99 % $ 85,401 1.05 % $ 64,453 0.74 % $ 69,616 0.86 % $ 150,285 1.74 % $ 155,017 1.92 % (1) Includes accruing loans 30 days to 89 days past due.
The following table presents, by class segment, a summary of delinquency status and rates, as a percentage of loans in each portfolio and in total, that do not have internal risk ratings: Delinquent (1) Non-performing (2) Total December 31, December 31, December 31, December 31, December 31, December 31, 2024 2023 2024 2023 2024 2023 $ % $ % $ % $ % $ % $ % (dollars in thousands) Consumer and real estate - home equity $ 16,241 0.91 % $ 20,345 1.15 % $ 14,374 0.81 % $ 10,878 0.61 % $ 30,615 1.72 % $ 31,223 1.76 % Real estate - residential mortgage 65,539 1.03 59,983 1.13 45,901 0.72 42,029 0.79 111,440 1.76 102,012 1.92 Real estate - construction 5,302 2.42 4,636 0.37 1,406 0.64 1,535 0.12 6,708 3.06 6,171 0.50 Leases and other loans 374 0.12 868 0.26 12,017 3.81 10,011 2.98 12,391 3.93 10,879 3.23 Total $ 87,456 1.01 % $ 85,832 0.99 % $ 73,698 0.85 % $ 64,453 0.74 % $ 161,154 1.86 % $ 150,285 1.74 % (1) Includes accruing loans 30 days to 89 days past due.
The increase in the provision for credit losses for net loans was primarily driven by loan growth, changes to the macroeconomic outlook, higher net loan charge-offs and migration of internally risk-rated loans into special mention and substandard or lower categories. 59 The following table summarizes the allocation of the ACL - loans : December 31, 2023 December 31, 2022 December 31, 2021 ACL - loans % to Total ACL - loans (1) % to Total Net Loans (2) ACL - loans % to Total ACL - loans (1) % to Total Net Loans (2) ACL - loans % to Total ACL - loans (1) % to Total Net Loans (2) (dollars in thousands) Real estate - commercial mortgage $ 112,565 38.4 % 38.1 % $ 69,456 25.8 % 37.9 % $ 87,970 35.3 % 39.7 % Commercial and industrial 74,266 25.3 21.3 70,116 26.0 22.1 67,056 26.9 23.0 Real estate - residential mortgage 73,286 25.0 24.9 83,250 30.9 23.4 54,236 21.8 21.0 Consumer, home equity and leases and other loans 20,992 7.1 9.9 35,801 13.3 10.3 26,798 10.8 10.1 Real estate - construction 12,295 4.2 5.8 10,743 4.0 6.3 12,941 5.2 6.2 Total $ 293,404 100.0 % 100 % $ 269,366 100.0 % 100 % $ 249,001 100.0 % 100.0 % (1) Ending ACL - loan portfolio segment balance as a % of total ACL - loans.
See "Note 5 - Loans and Allowance for Credit Losses" of the Notes to Consolidated Financial Statements for additional details. 59 The following table summarizes the allocation of the ACL - loans : December 31, 2024 December 31, 2023 December 31, 2022 ACL - loans % to Total ACL - loans (1) % to Total Net Loans (2) ACL - loans % to Total ACL - loans (1) % to Total Net Loans (2) ACL - loans % to Total ACL - loans (1) % to Total Net Loans (2) (dollars in thousands) Real estate - commercial mortgage $ 158,181 41.7 % 39.9 % $ 112,565 38.4 % 38.1 % $ 69,456 25.8 % 37.9 % Commercial and industrial 92,212 24.3 19.2 74,266 25.3 21.3 70,116 26.0 22.1 Real estate - residential mortgage 81,331 21.5 26.4 73,286 25.0 24.9 83,250 30.9 23.4 Consumer, home equity and leases and other loans 22,292 5.9 8.7 20,992 7.1 9.9 35,801 13.3 10.3 Real estate - construction 25,140 6.6 5.8 12,295 4.2 5.8 10,743 4.0 6.3 Total $ 379,156 100.0 % 100.0 % $ 293,404 100.0 % 100.0 % $ 269,366 100.0 % 100.0 % (1) Ending ACL - loan portfolio segment balance as a % of total ACL - loans.
Excluding merger-related expenses of $10.3 million in 2022, non-interest expense increased $55.8 million, or 9.0%, in 2023 compared to 2022.
Excluding acquisition-related expenses of $10.3 million in 2022 and FultonFirst initiatives of $3.2 million in 2023, non-interest expense increased $52.6 million, or 8.4%, in 2023 compared to 2022.
In 2022, interest expense increased $23.5 million compared to 2021, primarily driven by increases in rate on interest-bearing liabilities resulting in a $25.4 million increase in interest expense. The increase in interest expense attributable to rate was primarily driven by the increases in savings and money market deposits, borrowings, interest-bearing demand deposits and brokered deposits.
The increase in interest expense attributable to volume was $78.4 million primarily driven by increases in time deposits, interest-bearing demand deposits and savings and money market deposits, partially offset by a decrease in borrowings and other interest-bearing liabilities. The rate on average interest-bearing liabilities increased 58 bps in 2024 compared to 2023.
(2) Considered "classified" loans by banking regulators. (3) Excludes construction - other. Total loans risk-rated special mention increased by $15.0 million, or 3.2%, compared to December 31, 2022.
(2) Considered "classified" loans by banking regulators. (3) Excludes construction - other. Total criticized and classified loans increased $911.4 million, or 98.5%, compared to December 31, 2023.
The increase in total deposits was primarily due to increases in time deposits, brokered deposits, interest-bearing demand deposits and savings and money market deposits of $1.2 billion, $936.3 million, $311.8 million and $182.3 million, respectively, partially offset by a decrease in noninterest-bearing demand deposits $1.7 billion.
The increase in average deposits occurred primarily in average time deposits, average interest-bearing demand deposits and average savings and money market deposits, which increased $1.6 billion, $1.5 billion and $748.0 million, respectively, partially offset by a decrease in average noninterest-bearing demand deposits of $545.3 million.
Financial Statements and Supplementary Data" for details of accumulated comprehensive loss. Regulatory Capital The Corporation and its wholly-owned subsidiary bank, Fulton Bank, are subject to the Capital Rules administered by banking regulators. Failure to meet minimum capital requirements can trigger certain actions by regulators that could have a material effect on the Corporation's financial statements.
See "Note 15 - Shareholders' Equity" in the Notes to the Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for details of accumulated comprehensive loss. Regulatory Capital The Corporation and its wholly-owned subsidiary bank, Fulton Bank, are subject to the Capital Rules administered by banking regulators.
The following table presents non-performing loans: December 31, 2023 2022 2021 (dollars in thousands) Real estate - commercial mortgage $ 46,527 $ 72,634 $ 54,044 Commercial and industrial 41,020 28,288 30,629 Real estate - residential mortgage 42,029 46,509 39,399 Real estate - home equity 10,079 8,809 10,924 Real estate - construction 2,876 1,368 901 Consumer 799 991 582 Leases and other loans 10,011 13,307 15,640 Total non-performing loans $ 153,341 $ 171,906 $ 152,119 Non-performing loans to total loans 0.72 % 0.85 % 0.83 % The following table presents the amortized cost basis of loans modified to borrowers experiencing financial difficulty: December 31, 2023 (dollars in thousands) Real estate - commercial mortgage $ 2,944 Commercial and industrial 11,970 Real estate - residential mortgage 9,092 Total $ 24,006 There were no loans modified due to borrowers experiencing financial difficulty that defaulted during 2023. 56 The following table summarizes OREO, by property type: December 31, 2023 2022 2021 (dollars in thousands) Commercial properties $ 165 $ 3,881 $ 943 Residential properties 229 482 669 Undeveloped land 502 1,427 205 Total OREO $ 896 $ 5,790 $ 1,817 The Corporation's ability to identify potential problem loans in a timely manner is important to maintaining an adequate ACL.
(3) Excludes $17.5 million, $10.9 million and $6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of December 31, 2024, 2023 and 2022, respectively. 56 The following table presents non-performing loans: December 31, 2024 2023 2022 (dollars in thousands) Real estate - commercial mortgage $ 102,359 $ 46,527 $ 72,634 Commercial and industrial 43,677 41,020 28,288 Real estate - residential mortgage 45,901 42,029 46,509 Real estate - home equity 13,349 10,079 8,809 Real estate - construction 1,746 2,876 1,368 Consumer 1,025 799 991 Leases and other loans 12,017 10,011 13,307 Total non-performing loans $ 220,074 $ 153,341 $ 171,906 Non-performing loans to total loans 0.92 % 0.72 % 0.85 % The following table presents the amortized cost basis of loans modified to borrowers experiencing financial difficulty: December 31, 2024 2023 (dollars in thousands) Real estate - commercial mortgage $ 20,501 $ 2,944 Commercial and industrial 3,913 11,970 Real estate - residential mortgage 13,969 9,092 Real estate - home equity 379 — Real estate - construction 595 — Total $ 39,357 $ 24,006 There were no loans modified due to borrowers experiencing financial difficulty that defaulted during 2024.
Commercial letters of credit are conditional commitments issued to facilitate foreign or domestic trade transactions for customers. Commitments and standby and commercial letters of credit do not necessarily represent future cash needs, as they may expire without being drawn.
Commercial letters of credit are conditional commitments issued to facilitate foreign or domestic trade transactions for customers.
The following table presents the changes in non-accrual loans for the years ended December 31: Commercial and Industrial Real Estate - Commercial Mortgage Real Estate - Construction Real Estate - Residential Mortgage Consumer and Real Estate - Home Equity Equipment Lease Financing Total (dollars in thousands) Balance at December 31, 2021 $ 30,141 $ 52,815 $ 901 $ 35,269 $ 8,900 $ 15,640 $ 143,666 Additions 27,627 66,212 1,104 6,151 6,363 1,188 108,645 Payments (27,260) (27,394) (637) (5,440) (2,941) (1,390) (65,062) Charge-offs (2,390) (12,473) — (66) (4,412) (2,131) (21,472) Transfers to OREO (22) (3,461) — — (297) — (3,780) Transfers to accrual status (980) (5,538) — (9,620) (1,416) — (17,554) Balance at December 31, 2022 27,116 70,161 1,368 26,294 6,197 13,307 144,443 Additions 46,358 31,004 438 792 8,416 1,520 88,528 Payments (24,276) (38,296) (465) (1,881) (2,245) (554) (67,717) Charge-offs (9,246) (17,999) — (62) (7,514) (4,380) (39,201) Transfers to OREO — — — (1,793) — — (1,793) Transfers to accrual status — (65) — (2,526) (49) — (2,640) Balance at December 31, 2023 $ 39,952 $ 44,805 $ 1,341 $ 20,824 $ 4,805 $ 9,893 $ 121,620 During 2023, non-accrual loans decreased $22.8 million, or 15.8%, largely due to payments and charge-offs, partially offset by additions to non-accrual loans.
The commercial mortgage multi-family non-owner occupied loan portfolio table above excludes commercial construction loans secured by multi-family property collateral with a total outstanding loan balance of $405.2 million and outstanding loan commitment of $693.4 million as of December 31, 2024. 55 The following table presents the changes in non-accrual loans for the years ended December 31: Commercial and Industrial Real Estate - Commercial Mortgage Real Estate - Construction Real Estate - Residential Mortgage Consumer and Real Estate - Home Equity Leases and Other Loans Total (dollars in thousands) Balance at December 31, 2022 $ 27,116 $ 70,161 $ 1,368 $ 26,294 $ 6,197 $ 13,307 $ 144,443 Additions 46,358 31,004 438 792 8,416 1,520 88,528 Payments (24,276) (38,296) (465) (1,881) (2,245) (554) (67,717) Charge-offs (9,246) (17,999) — (62) (7,514) (4,380) (39,201) Transfers to OREO — — — (1,793) — — (1,793) Transfers to accrual status — (65) — (2,526) (49) — (2,640) Balance at December 31, 2023 39,952 44,805 1,341 20,824 4,805 9,893 121,620 Additions 70,700 94,887 1,406 11,067 15,066 7,759 200,885 Payments (33,580) (25,757) (130) (4,780) (2,414) (825) (67,486) Charge-offs (26,585) (13,186) — (1,472) (8,490) (4,696) (54,429) Transfers to OREO (90) (133) (871) (97) (190) — (1,381) Transfers to accrual status (8,180) (1,119) — (142) (178) (297) (9,916) Balance at December 31, 2024 $ 42,217 $ 99,497 $ 1,746 $ 25,400 $ 8,599 $ 11,834 $ 189,293 During 2024, non-accrual loans increased $67.7 million, or 55.6%, largely due to additions to non-accrual loans, partially offset by payments and charge-offs.
Deposits and Borrowings The following table presents ending deposits, by type: December 31, Increase (Decrease) 2023 2022 $ % (dollars in thousands) Noninterest-bearing demand $ 5,314,094 $ 7,006,388 $ (1,692,294) (24.2) % Interest-bearing demand 5,722,695 5,410,903 311,792 5.8 Savings and money market deposits 6,616,901 6,434,621 182,280 2.8 Total demand and savings 17,653,690 18,851,912 (1,198,222) (6.4) Brokered deposits 1,144,692 208,416 936,276 N/M Time deposits 2,739,241 1,589,210 1,150,031 72.4 Total deposits $ 21,537,623 $ 20,649,538 $ 888,085 4.3 % During 2023, total deposits increased by $888.1 million, or 4.3%, compared to December 31, 2022.
Deposits and Borrowings The following table presents ending deposits, by type: December 31, Increase (Decrease) 2024 2023 $ % (dollars in thousands) Noninterest-bearing demand $ 5,499,760 $ 5,314,094 $ 185,666 3.5 % Interest-bearing demand 7,843,604 5,722,695 2,120,909 37.1 Savings and money market deposits 7,792,114 6,616,901 1,175,213 17.8 Total demand and savings 21,135,478 17,653,690 3,481,788 19.7 Brokered deposits 843,857 1,144,692 (300,835) (26.3) Time deposits 4,150,098 2,739,241 1,410,857 51.5 Total deposits $ 26,129,433 $ 21,537,623 $ 4,591,810 21.3 % During 2024, total deposits increased by $4.6 billion, or 21.3%, compared to December 31, 2023.
The following table presents ending borrowings, by type: December 31, Increase (Decrease) 2023 2022 $ % (dollars in thousands) Federal funds purchased $ 240,000 $ 191,000 $ 49,000 25.7 Federal Home Loan Bank advances 1,100,000 1,250,000 (150,000) (12.0) Senior debt and subordinated debt 535,384 539,634 (4,250) (0.8) Other borrowings (1) 612,142 890,573 (278,431) (31.3) Total borrowings $ 2,487,526 $ 2,871,207 $ (383,681) (13.4) % (1) Includes repurchase agreements, short-term promissory notes and capital leases. 60 During 2023, total borrowings decreased $383.7 million, or 13.4%, compared to December 31, 2022.
Total uninsured deposits (excluding intra-Company deposits) were estimated to be $9.4 billion and $7.2 billion at December 31, 2024 and December 31, 2023, respectively. 60 The following table presents ending borrowings, by type: December 31, Increase (Decrease) 2024 2023 $ % (dollars in thousands) Federal funds purchased $ — $ 240,000 $ (240,000) N/M Federal Home Loan Bank advances 850,000 1,100,000 (250,000) (22.7) Senior debt and subordinated debt 367,316 535,384 (168,068) (31.4) Other borrowings (1) 564,732 612,142 (47,410) (7.7) Total borrowings $ 1,782,048 $ 2,487,526 $ (705,478) (28.4) % (1) Includes repurchase agreements, short-term promissory notes and capital leases.
Quantitative and Qualitative Disclosures About Market Risk." The following table provides a comparative average balance sheet and net interest income analysis for 2023 compared to 2022 and 2021. Interest income and yields are presented on an FTE basis using a 21% federal tax rate as well as statutory interest expense disallowances.
Interest income and yields are presented on an FTE basis using a 21% federal tax rate as well as statutory interest expense disallowances.
For commercial and industrial loans, commercial mortgage loans and construction loans to commercial borrowers, an internal risk rating process is used to monitor credit quality. The evaluation of credit risk for residential mortgages, home equity loans, construction loans to individuals, consumer loans and leases and other loans is based on payment history through the monitoring of delinquency levels and trends.
For commercial and industrial loans, commercial mortgage loans and construction loans to commercial borrowers, an internal risk rating process is used to monitor credit quality.
Loans The following table presents ending loans outstanding, by type: December 31, Increase (Decrease) 2023 2022 $ % (dollars in thousands) Real estate - commercial mortgage $ 8,127,728 $ 7,693,835 $ 433,893 5.6 % Commercial and industrial (1) 4,545,552 4,473,004 72,548 1.6 Real estate - residential mortgage 5,325,923 4,737,279 588,644 12.4 Real estate - home equity 1,047,184 1,102,838 (55,654) (5.0) Real estate - construction 1,239,075 1,269,925 (30,850) (2.4) Consumer 729,318 699,179 30,139 4.3 Leases and other loans (2) 336,314 303,487 32,827 10.8 Net loans $ 21,351,094 $ 20,279,547 $ 1,071,547 5.3 % (1) Includes unearned income of $41.0 thousand and $4.5 million as of December 31, 2023 and 2022, respectively.
Loans The following table presents ending net loans outstanding, by type: December 31, Increase (Decrease) 2024 2023 $ % (dollars in thousands) Real estate - commercial mortgage $ 9,601,858 $ 8,127,728 $ 1,474,130 18.1 % Commercial and industrial (1) 4,605,589 4,545,552 60,037 1.3 Real estate - residential mortgage 6,349,643 5,325,923 1,023,720 19.2 Real estate - home equity 1,160,616 1,047,184 113,432 10.8 Real estate - construction 1,394,899 1,239,075 155,824 12.6 Consumer 616,856 729,318 (112,462) (15.4) Leases and other loans (2) 315,458 336,314 (20,856) (6.2) Net loans $ 24,044,919 $ 21,351,094 $ 2,693,825 12.6 % (1) Includes no unearned income for December 31, 2024 and $41.0 thousand at December 31, 2023.
The following table presents criticized and classified loans, or those with internal risk ratings of special mention (1) or substandard or lower (2) for commercial mortgages, commercial and industrial loans and construction loans to commercial borrowers, by class segment: Special Mention (1) Increase (Decrease) Substandard or Lower (2) Increase (Decrease) Total Criticized and Classified Loans December 31, December 31, December 31, 2023 2022 $ % 2023 2022 $ % 2023 2022 (dollars in thousands) Real estate - commercial mortgage $ 302,553 $ 306,381 $ (3,828) (1.2)% $ 224,774 $ 184,014 $ 40,760 22.2% $ 527,327 $ 490,395 Commercial and industrial 135,837 133,943 1,894 1.4 196,500 95,546 100,954 105.7 332,337 229,489 Real estate - construction (3) 38,520 21,603 16,917 78.3 26,771 10,601 16,170 152.5 65,291 32,204 Total $ 476,910 $ 461,927 $ 14,983 3.2% $ 448,045 $ 290,161 $ 157,884 54.4% $ 924,955 $ 752,088 % of total risk-rated loans 3.5% 3.5% 3.3% 2.2% 6.8% 5.7% (1) Considered "criticized" loans by banking regulators.
The following table presents criticized and classified loans, or those with internal risk ratings of special mention or substandard or lower for commercial mortgages, commercial and industrial loans and construction loans to commercial borrowers, by class segment: Special Mention (1) Increase (Decrease) Substandard or Lower (2) Increase (Decrease) Total Criticized and Classified Loans December 31, December 31, December 31, 2024 2023 $ % 2024 2023 $ % 2024 2023 (dollars in thousands) Real estate - commercial mortgage $ 531,423 $ 302,553 $ 228,870 75.6% $ 522,377 $ 224,774 $ 297,603 132.4% $ 1,053,800 $ 527,327 Commercial and industrial 238,809 135,837 102,972 75.8 335,246 196,500 138,746 70.6 574,055 332,337 Real estate - construction (3) 161,310 38,520 122,790 N/M 47,183 26,771 20,412 76.2 208,493 65,291 Total $ 931,542 $ 476,910 $ 454,632 95.3% $ 904,806 $ 448,045 $ 456,761 101.9% $ 1,836,348 $ 924,955 % of total risk-rated loans 6.1% 3.5% 5.9% 3.3% 11.9% 6.8% (1) Considered "criticized" loans by banking regulators.
(2) Includes unearned income of $38.0 million and $24.8 million as of December 31, 2023 and 2022, respectively.
(2) Includes unearned income of $35.6 million and $38.0 million as of December 31, 2024 and 2023, respectively. During 2024, net loans increased $2.7 billion, or 12.6%, compared to December 31, 2023.
Other Liabilities During 2023, other liabilities decreased $69.5 million, or 8.5%, compared to December 31, 2022, primarily due to a decrease in derivative related liabilities. Shareholders' Equity During 2023, total shareholders' equity increased $180.4 million, or 7.0%, to $2.8 billion, or 10.0% of total assets, as of December 31, 2023.
Shareholders' Equity During 2024, total shareholders' equity increased $437.2 million, or 15.8%, to $3.2 billion, or 10.0% of total assets, as of December 31, 2024.
The decrease in total borrowings was due to decreases in other borrowings of $278.4 million, FHLB advances of $150.0 million and senior and subordinated debt of $4.3 million, partially offset by an increase in Federal funds purchased of $49.0 million.
During 2024, total borrowings decreased $705.5 million, or 28.4%, compared to December 31, 2023. The decrease in total borrowings was primarily due to decreases in FHLB advances, federal funds purchased and senior debt and subordinated debt of $250.0 million, $240.0 million and $168.1 million, respectively.
Compared to 2021, FTE total interest income for 2022 increased $144.1 million, or 19.6%, primarily due to an increase of $113.2 million attributable to changes in yield, of which $102.7 million related to net loans. The yield on average interest-earning assets increased 59 bps in 2022 compared to 2021.
Compared to 2023, FTE total interest income for 2024 increased $309.1 million due to increases of $144.0 million attributable to changes in yield and $165.0 million attributable to changes in volume. The increase due to changes in yield was largely due to an increase in net loans.
The provision for credit losses, specific to loans, for 2023 was $53.1 million, compared to a provision for credit losses, specific to loans, of $26.6 million, which included an $8.0 million CECL Day 1 Provision recorded in 2022.
The provision for credit losses for 2024 was $71.6 million compared to a provision for credit losses of $54.0 million in 2023. The increase in the provision for credit losses was primarily driven by a $23.4 million CECL Day 1 Provision related to the Republic First Transaction in 2024.
Government securities $ 42,161 $ 218,485 $ (176,324) (80.7) % U.S.
Government securities $ — $ 42,161 $ (42,161) N/M U.S.
The following table presents the Corporation's commitments to extend credit and letters of credit as of December 31, 2023 (dollars in thousands): Commercial and industrial $ 4,929,981 Real estate - commercial mortgage and real estate - construction 1,867,830 Real estate - home equity 1,992,700 Total commitments to extend credit $ 8,790,511 Standby letters of credit $ 264,440 Commercial letters of credit 67,396 Total letters of credit $ 331,836 62
Commitments and standby and commercial letters of credit do not necessarily represent future cash needs, as they may expire without being drawn. 62 The following table presents the Corporation's commitments to extend credit and letters of credit as of December 31, 2024 (dollars in thousands): Commercial and industrial $ 4,967,334 Real estate - commercial mortgage and real estate - construction 1,706,879 Real estate - home equity 2,154,382 Total commitments to extend credit $ 8,828,595 Standby letters of credit $ 279,309 Commercial letters of credit 48,993 Total letters of credit $ 328,302 63
Certain loans, primarily adequately collateralized residential mortgage loans, may continue to accrue interest after reaching 90 days past due. (3) Excludes $10.9 million, $6.0 million and $6.4 million of residential mortgage properties for which formal foreclosure proceedings were in process as of December 31, 2023, 2022 and 2021, respectively.
Certain loans, primarily adequately collateralized residential mortgage loans, may continue to accrue interest after reaching 90 days past due.
Total internally risk-rated loans were $13.7 billion and $13.2 billion as of December 31, 2023 and 2022, respectively, of which $0.9 million and $0.8 million were criticized and classified loans, respectively.
The evaluation of credit risk for residential mortgages, home equity loans, construction loans to individuals, consumer loans and leases and other loans is based on payment history through the monitoring of delinquency levels and trends. 57 Total internally risk-rated loans were $15.4 billion and $13.7 billion as of December 31, 2024 and 2023, respectively, of which $1.8 billion and $925.0 million were criticized and classified loans, respectively.
This is true for both new originations and legacy LIBOR contracts that were subject to amendment or a transition by their terms. 38 Financial Highlights Following is a summary of the financial highlights for the year ended December 31, 2023: • Net Income Available to Common Shareholders and Net Income Per Share - Net income available to common shareholders was $274.0 million for the year ended December 31, 2023, a $2.7 million decrease compared to $276.7 million for the same period in 2022. • Net Interest Income - Net interest income was $854.3 million for the year ended December 31, 2023, an increase of $72.7 million, or 9.3%, compared to the same period in 2022.
Financial Statements." Financial Highlights Net Income Available to Common Shareholders and Net Income Per Share - Net income available to common shareholders was $278.5 million for the year ended December 31, 2024, a $4.5 million increase compared to $274.0 million in 2023.
The increase in borrowings and other interest-bearing liabilities was primarily due to increases in average FHLB advances and Federal funds purchased of $727.9 million and $475.3 million, respectively. • Asset Quality - Non-performing assets decreased $23.5 million, or 13.2%, as of December 31, 2023 compared to December 31, 2022, and were 0.56% and 0.66% of total assets as of those dates, respectively.
Average borrowings and other interest-bearing liabilities decreased $490.9 million during 2024 compared to 2023. The decrease in average borrowings and other interest-bearing liabilities was primarily due to decreases in federal funds purchased and average FHLB advances of $515.1 million and $117.8 million, respectively, partially offset by an increase in average other interest-bearing liabilities of $167.6 million.
The increase in average net loans was largely driven by increases in average residential mortgage loans, average commercial and industrial loans, average commercial mortgage loans, average consumer loans, and average real estate construction loans of $818.2 million, $366.6 million, $352.3 million, $178.8 million, and $68.8 million, respectively. ◦ Deposits - Average deposits decreased $297.7 million, or 1.4%, for the year ended December 31, 2023 compared to the same period in 2022.
Overall, the increase in average net loans was largely driven by increases in average commercial mortgage loans, average residential mortgage loans and average commercial and industrial loans of $1.2 billion, $846.0 million and $182.5 million, respectively. The yield on total loans increased 51 bps to 6.08% in 2024 compared to 5.57% in 2023.
Average borrowings and interest rates, by type, are summarized in the following table: 2022 2021 Increase (Decrease) Balance Rate Balance Rate $ % (dollars in thousands) Borrowings: Federal funds purchased $ 91,125 3.21 % $ — — % $ 91,125 N/M Federal Home Loan Bank advances 194,295 3.77 126,677 1.80 67,618 53.4 Senior debt and subordinated debt 564,337 3.94 657,386 4.07 (93,049) (14.2) Other borrowings and other interest-bearing liabilities (1) 508,600 1.34 513,900 0.12 (5,300) (1.0) Total borrowings and other interest-bearing liabilities $ 1,358,357 2.89 % $ 1,297,963 2.29 % $ 60,394 4.7 % (1) Includes repurchase agreements, short-term promissory notes and capital leases.
Average borrowings and interest rates, by type, are summarized in the following table: 2024 2023 Increase (Decrease) Balance Rate Balance Rate $ % (dollars in thousands) Federal funds purchased $ 51,306 5.52 % $ 566,379 5.30 % $ (515,073) (90.9) Federal Home Loan Bank advances 804,328 4.30 922,164 5.05 (117,836) (12.8) % Senior debt and subordinated debt 514,073 3.66 539,726 3.96 (25,653) (4.8) Other borrowings and other interest-bearing liabilities (1) 910,675 3.66 743,061 3.77 167,614 22.6 Total borrowings and other interest-bearing liabilities $ 2,280,382 4.39 % $ 2,771,330 4.54 % $ (490,948) (17.7) % (1) Includes repurchase agreements, short-term promissory notes, capital leases and collateral liabilities.
Excluding merger-related expenses, the increase in non-interest expense compared to 2021 was primarily due to increases in salaries and employee benefits of $27.7 million, attributable to higher employee base salaries of $20.2 million and deferred loan origination expense of $14.3 million, partially offset by lower commissions expense of $8.8 million.
The increase in non-interest expense was primarily due to $71.9 million from acquired operations in the Republic First Transaction, including $15.7 million of CDI amortization expense, and $21.5 million in salaries and benefits expense driven by annual merit increases, higher incentive compensation expense and lower deferred costs from loan origination activities.
The increase is primarily due to the renewals of large multi-year contracts. The Corporation is a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of its customers.
The following table summarizes the contractual purchase obligations for each of the next five years (dollars in thousands): Year 2025 $ 28,062 2026 25,392 2027 7,365 2028 6,713 2029 4,835 Total $ 72,367 The Corporation is a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of its customers.
Financial Statements and Supplementary Data." 43 RESULTS OF OPERATIONS Net Interest Income Net interest income is the most significant component of the Corporation's net income. The Corporation manages the risk associated with changes in interest rates through the techniques described within Item "7A.
The Corporation manages the risk associated with changes in interest rates through the techniques described within Item "7A. Quantitative and Qualitative Disclosures About Market Risk." The following table provides a comparative average balance sheet and net interest income analysis for 2024 compared to 2023 and 2022.
Government-sponsored agency securities 1,010 1,008 2 0.2 State and municipal securities 1,072,013 1,105,712 (33,699) (3.0) Corporate debt securities 440,551 422,309 18,242 4.3 Collateralized mortgage obligations 111,434 134,033 (22,599) (16.9) Residential mortgage-backed securities 196,795 212,698 (15,903) (7.5) Commercial mortgage-backed securities 534,388 552,522 (18,134) (3.3) Total available for sale securities $ 2,398,352 $ 2,646,767 $ (248,415) (9.4) % Held to Maturity Residential mortgage-backed securities $ 407,075 $ 457,325 $ (50,250) (11.0) % Commercial mortgage-backed securities 860,847 863,931 (3,084) (0.4) Total held to maturity securities $ 1,267,922 $ 1,321,256 $ (53,334) (4.0) % Total investment securities $ 3,666,274 $ 3,968,023 $ (301,749) (7.6) % Compared to December 31, 2022, total AFS securities at December 31, 2023 decreased $248.4 million, or 9.4%, primarily due to decreases in U.S.
Government-sponsored agency securities — 1,010 (1,010) N/M State and municipal securities 814,887 1,072,013 (257,126) (24.0) Corporate debt securities 300,370 440,551 (140,181) (31.8) Collateralized mortgage obligations 788,885 111,434 677,451 N/M Residential mortgage-backed securities 989,875 196,795 793,080 N/M Commercial mortgage-backed securities 516,882 534,388 (17,506) (3.3) Total available for sale securities $ 3,410,899 $ 2,398,352 $ 1,012,547 42.2 % Held to Maturity Residential mortgage-backed securities $ 537,856 $ 407,075 $ 130,781 32.1 % Commercial mortgage-backed securities 857,713 860,847 (3,134) (0.4) Total held to maturity securities $ 1,395,569 $ 1,267,922 $ 127,647 10.1 % Total investment securities $ 4,806,468 $ 3,666,274 $ 1,140,194 31.1 % Compared to December 31, 2023, total AFS securities at December 31, 2024 increased $1.0 billion, or 42.2%.
The decrease in average deposits was largely due to a decrease in average noninterest-bearing demand deposits of $1.6 billion, partially offset by increases in average brokered deposits, average time deposits and average savings and money market deposits of $585.4 million, $552.4 million and $157.9 million, respectively. ◦ Borrowings and Other Interest-Bearing Liabilities - Average borrowings and other interest-bearing liabilities increased $1.4 billion for the year ended December 31, 2023 compared to the same period in 2022.
The increase in total deposits was primarily due to $3.7 billion of total deposits assumed in the Republic First Transaction and outstanding as of December 31, 2024. Overall, the increase in total deposits was largely due to increases in interest-bearing demand deposits, time deposits and savings and money market deposits of $2.1 billion, $1.4 billion and $1.2 billion, respectively.
December 31, Increase (Decrease) 2023 2022 $ % (dollars in thousands) Assets Cash and cash equivalents $ 549,710 $ 681,921 $ (132,211) (19.4) % FRB and FHLB Stock 124,405 130,186 (5,781) (4.4) Loans held for sale 15,158 7,264 7,894 108.7 Investment securities 3,666,274 3,968,023 (301,749) (7.6) Net loans, less ACL - loans 21,057,690 20,010,181 1,047,509 5.2 Net premises and equipment 222,881 225,141 (2,260) (1.0) Goodwill and intangibles 560,687 560,824 (137) — Other assets 1,375,110 1,348,162 26,948 2.0 Total Assets $ 27,571,915 $ 26,931,702 $ 640,213 2.4 % Liabilities and Shareholders' Equity Deposits $ 21,537,623 $ 20,649,538 $ 888,085 4.3 % Borrowings 2,487,526 2,871,207 (383,681) (13.4) Other liabilities 786,627 831,200 (44,573) (5.4) Total Liabilities 24,811,776 24,351,945 459,831 1.9 Total Shareholders' Equity 2,760,139 2,579,757 180,382 7.0 Total Liabilities and Shareholders' Equity $ 27,571,915 $ 26,931,702 $ 640,213 2.4 % Investment Securities The table below presents the carrying amount of investment securities: December 31, Increase (Decrease) 2023 2022 $ % (dollars in thousands) Available for Sale U.S.
The ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities and TCIs that generate tax credits under various federal programs. 51 FINANCIAL CONDITION The table below presents condensed consolidated ending balance sheets: December 31, Increase (Decrease) 2024 2023 $ % (dollars in thousands) Assets Cash and cash equivalents $ 1,063,871 $ 549,710 $ 514,161 93.5 % FRB and FHLB Stock 139,574 124,405 15,169 12.2 Loans held for sale 25,618 15,158 10,460 69.0 Investment securities 4,806,468 3,666,274 1,140,194 31.1 Net loans, less ACL - loans 23,665,763 21,057,690 2,608,073 12.4 Net premises and equipment 195,527 222,881 (27,354) (12.3) Goodwill and net intangible assets 635,458 560,687 74,771 13.3 Other assets 1,539,531 1,375,110 164,421 12.0 Total Assets $ 32,071,810 $ 27,571,915 $ 4,499,895 16.3 % Liabilities and Shareholders' Equity Deposits $ 26,129,433 $ 21,537,623 $ 4,591,810 21.3 % Borrowings 1,782,048 2,487,526 (705,478) (28.4) Other liabilities 963,004 786,627 176,377 22.4 Total Liabilities 28,874,485 24,811,776 4,062,709 16.4 Total Shareholders' Equity 3,197,325 2,760,139 437,186 15.8 Total Liabilities and Shareholders' Equity $ 32,071,810 $ 27,571,915 $ 4,499,895 16.3 % Investment Securities The table below presents the carrying amount of investment securities: December 31, Increase (Decrease) 2024 2023 $ % (dollars in thousands) Available for Sale U.S.
Net charge-offs to average loans outstanding was 0.14% for the year ended December 31, 2023, compared to net charge-offs to average loans outstanding of 0.04% for the same period in 2022. Net charge-offs of $29.1 million for the year ended December 31, 2023 included a charge-off of $13.3 million during the first quarter of 2023 for a commercial office loan.
The increase was primarily due to the Republic First Transaction, which included a provision for credit losses of $23.4 million for non-PCD Loans, partially offset 45 by an elevated level of provision for credit losses in the same period in 2023 due to a $13.3 million charge-off for a commercial office loan.
Real estate commercial office represents 3% of total loans. (2) Includes commercial loans to borrowers engaged in the construction industry.
(2) Includes commercial loans to borrowers engaged in the construction industry. The commercial mortgage loan portfolio consists of 46% owner occupied commercial mortgage loans and 54% of non-owner occupied commercial mortgage loans as of December 31, 2024. The following table summarizes the non-owner occupied commercial mortgage loan portfolio and the percent to total net loans.
Removed
Fed Funds Rate Since March 15, 2022, the FOMC increased the target rate for the Fed Funds Rate eleven times to address elevated levels of inflation, placing the target range at 5.25% - 5.50% as of February 29, 2024. LIBOR Transition U.S. dollar LIBOR ceased as of June 30, 2023.
Added
Acquisition of Substantially all of the Assets and Assumption of Substantially all of the Deposits and Certain Liabilities of Republic First Bank from the FDIC On the Acquisition Date, Fulton Bank acquired substantially all of the assets and assumed substantially all of the deposits and certain liabilities of Republic First Bank from the FDIC, as receiver for Republic First Bank.
Removed
The Corporation has transitioned all of its products away from LIBOR. For most financial products, the most common alternative reference rates have been SOFR-based benchmarks.
Added
As part of the Republic First Transaction, the Bank acquired approximately $4.8 billion of assets of Republic First Bank and assumed approximately $5.6 billion of liabilities of Republic First Bank. The Bank received approximately $0.8 billion of cash from the FDIC in connection with the Republic First Transaction.
Removed
The increase was driven by higher interest rates and higher average loan balances. ◦ Net Interest Margin - For the year ended December 31, 2023, NIM increased to 3.42%, or 15 bps compared to the same period in 2022, driven by a 157 bps increase in the yield on net loans, a 16 bps increase in the yield on investment securities and a 298 bps increase in the yield on other interest-earning assets, partially offset by a 139 bps increase in the cost of total interest-bearing liabilities and noninterest-bearing deposits. ◦ Net Loans - Average net loans increased $1.8 billion, or 9.3%, for the year ended December 31, 2023 compared to the same period in 2022.
Added
As a result of the Republic First Transaction, the Bank enhanced its presence in Philadelphia, Pennsylvania and New Jersey.
Removed
The provision for credit losses was $54.0 million for the year ended December 31, 2023, compared to $28.0 million for the same period of 2022.
Added
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. 37 During the fourth quarter of 2024, as part of the Bank's Republic First Transaction integration, the Corporation closed 13 of the Bank's financial center locations and consolidated the operations of those locations into nearby financial center locations operated by the Bank.
Removed
Included in the December 31, 2022 provision for credit losses was the CECL Day 1 Provision of $8.0 million for the acquired Prudential Bancorp loan portfolio. • Non-Interest Income - Non-interest income, excluding investment securities losses, for the year ended December 31, 2023 increased $1.3 million, or 0.6%, compared to the same period in 2022.
Added
The premises and equipment of the 13 locations included five locations owned by the Bank and eight locations leased by the Bank.
Removed
The increase in non-interest income, excluding investment securities losses, was primarily due to an increase in commercial banking revenues of $5.4 million, driven by an increase in commercial customer interest rate swap fee income reflected in capital markets and an increase in wealth management of $2.7 million, partially offset by decreases in mortgage banking income of $3.8 million and in consumer banking fees of $2.3 million, largely due to a decline in overdraft fees. • Non-Interest Expense - Non-interest expense for the year ended December 31, 2023 increased $45.5 million, or 7.2%, compared to the same period in 2022.
Added
The Corporation recorded pre-tax costs of approximately $9.8 million reflected in acquisition-related expenses in the Consolidated Statements of Income for the year ended December 31, 2024, consisting of write-offs of premises and equipment and related expenses, severance expenses and lease termination charges. See "Note 2 - Business Combinations" in the Notes to Consolidated Financial Statements in Part 1, "Item 1.
Removed
Excluding merger-related expenses of $10.3 million for the year ended December 31, 2022, non-interest expense increased $55.8 million, or 9.0%, for the year ended December 31, 2023 compared to the same period in 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

22 edited+4 added−6 removed22 unchanged
Biggest changeThe following table summarizes the expected impact of abrupt interest rate changes, i.e. a non-parallel instantaneous shock, on net interest income as of December 31, 2023: Rate Shock (1) Annual change in net interest income % Change in net interest income +400 bp +$38.1 million + 4.2% +300 bp + $29.7 million + 3.3% +200 bp + $22.5 million + 2.5% +100 bp + $14.0 million + 1.6% -100 bp - $38.1 million - 4.2% -200 bp - $76.8 million - 8.5% -300 bp - $105.9 million - 11.7% -400 bp - $124.8 million -13.8% (1) These results include the effect of implicit and explicit interest rate floors that limit further reduction in interest rates. 63 Economic value of equity estimates the discounted present value of asset and liability cash flows.
Biggest changeThe following table summarizes the expected impact of interest rate changes in rate-ramp scenarios over a 12-month period, that is, a gradual non-parallel shift, on net interest income as of December 31, 2024: Rate Ramp (1) Annual change in net interest income % change in net interest income +400 bp + $29.4 million +2.6% +300 bp + $25.0 million +2.2% +200 bp + $19.2 million +1.7% +100 bp + $11.8 million +1.1% –100 bp - $7.3 million -0.7% –200 bp - $14.3 million -1.3% –300 bp - $21.4 million -1.9% –400 bp - $29.0 million -2.6% (1) These results include the effect of implicit and explicit interest rate floors that limit further reduction in interest rates. 64 The following table summarizes the expected impact of abrupt interest rate changes, i.e. a non-parallel instantaneous shock, on net interest income as of December 31, 2024: Rate Shock (1) Annual change in net interest income % Change in net interest income +400 bp +$46.6 million +4.2% '+300 bp + $41.1 million + 3.7% '+200 bp + $35.3 million + 3.2% '+100 bp + $27.4 million + 2.5% '-100 bp - $18.7 million - 1.7% '-200 bp - $32.6 million - 2.9% -300 bp - $49.3 million - 4.4% -400 bp - $66.4 million -6.0% (1) These results include the effect of implicit and explicit interest rate floors that limit further reduction in interest rates.
The Corporation uses two complementary methods to measure and manage interest rate risk. They are simulation of net interest income and estimates of economic value of equity. Using these measurements in tandem provides a reasonably comprehensive summary of the magnitude of the Corporation's interest rate risk, level of risk as time evolves, and exposure to changes in interest rates.
The Corporation uses two complementary methods to measure and manage interest rate risk. They are a simulation of net interest income and estimates of economic value of equity. Using these measurements in tandem provides a reasonably comprehensive summary of the magnitude of the Corporation's interest rate risk, level of risk as time evolves, and exposure to changes in interest rates.
Cash flows from such investments are dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. As rates increase, cash flows generally decrease as prepayments on the underlying mortgage loans decrease.
Cash flows from such investments are dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. As rates increase, cash flows generally decrease as prepayments on the underlying mortgage loans decrease. As rates decrease, cash flows generally increase as prepayments increase.
As of December 31, 2023, the Corporation was within economic value of equity policy limits for every 100 bps shock. Interest Rate Derivatives The Corporation enters into interest rate derivatives with certain qualifying commercial loan customers to meet their interest rate risk management needs.
As of December 31, 2024, the Corporation was within economic value of equity policy limits for every 100 bps shock. Interest Rate Derivatives The Corporation enters into interest rate derivatives with certain qualifying commercial loan customers to meet their interest rate risk management needs.
The Corporation has commitments to extend credit and letters of credit. As of December 31, 2023, the balance of commitments to extend credit was $8.8 billion and total letters of credit were $0.3 billion. Liquidity must also be managed at the Parent Company level.
The Corporation has commitments to extend credit and letters of credit. As of December 31, 2024, the balance of commitments to extend credit was $8.8 billion and total letters of credit were $0.3 billion. Liquidity must also be managed at the Parent Company level.
State and municipal securities can be supported by the general obligation of the issuing state or municipality, allowing the securities to be repaid by any means available to the issuing state or municipality. As of December 31, 2023, approximately 100% of state and municipal securities were supported by the general obligation of corresponding states or municipalities.
State and municipal securities can be supported by the general obligation of the issuing state or municipality, allowing the securities to be repaid by any means available to the issuing state or municipality. As of December 31, 2024, approximately 100% of state and municipal securities were supported by the general obligation of corresponding states or municipalities.
As the hedged transaction continues to be probable, the unrealized losses that have been recorded in AOCI will be recognized as reduction to interest income when the previously forecasted hedged item affects earnings in future periods.
As the hedged transaction continues to be probable, the unrealized losses that have been recorded in AOCI will be recognized as reduction to interest income, including fees, when the previously forecasted hedged item affects earnings in future periods.
A combination of commercial real estate loans, commercial loans, consumer loans and securities are pledged to the FRB of Philadelphia to provide access to FRB discount window borrowings. Securities carried at $0.4 billion at December 31, 2023 and $1.1 billion at December 31, 2022 were pledged as collateral to secure public and trust deposits.
A combination of commercial real estate loans, commercial loans, consumer loans and securities are pledged to the FRB of Philadelphia to provide access to FRB discount window borrowings. Securities carried at $0.3 billion at December 31, 2024 and $0.4 billion at December 31, 2023 were pledged as collateral to secure public and trust deposits.
Approximately 74% of these securities were school district issuances, which are also supported by the states of the issuing municipalities. 67
Approximately 74% of these securities were school district issuances, which are also supported by the states of the issuing municipalities. 69
The Corporation's debt security investments consist primarily of U.S. government-sponsored agency issued residential mortgage-backed securities, commercial mortgage-backed securities and collateralized mortgage obligations; as well as, state and municipal securities and corporate debt securities. All of the Corporation's investments in residential mortgage-backed securities, commercial mortgage-backed securities and collateralized mortgage obligations have principal payments that are guaranteed by U.S. government-sponsored agencies.
The Corporation's debt security investments consist primarily of U.S. government-sponsored agency issued mortgage-backed securities and collateralized mortgage obligations, state and municipal securities, and corporate debt securities. All of the Corporation's investments in mortgage-backed securities and collateralized mortgage obligations have principal payments that are guaranteed by U.S. government-sponsored agencies.
State and Municipal Securities As of December 31, 2023, the Corporation owned securities issued by various states and municipalities with a total fair value of $1.1 billion. Uncertainty with respect to the financial strength of state and municipal bond insurers places emphasis on the underlying strength of issuers.
State and Municipal Securities As of December 31, 2024, the Corporation owned securities issued by various states and municipalities with a total fair value of $0.8 billion. Uncertainty with respect to the financial strength of state and municipal bond insurers places emphasis on the underlying strength of issuers.
Advances from the FHLB, when utilized, are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets. As of December 31, 2023, the Corporation had aggregate federal funds lines borrowing capacity of $2.6 billion, with $0.2 billion of outstanding borrowings against that amount.
Advances from the FHLB, when utilized, are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets. As of December 31, 2024, the Corporation had aggregate federal funds lines borrowing capacity of $2.6 billion with no amounts outstanding against that amount.
Fulton Bank is a member of the FHLB and has access to FHLB overnight and term credit facilities. As of December 31, 2023, the Bank had total borrowing capacity of approximately $8.2 billion with $3.3 billion of advances and letters of credit outstanding, for a remaining available borrowing capacity of approximately $4.9 billion.
Fulton Bank is a member of the FHLB and has access to FHLB overnight and term credit facilities. As of December 31, 2024, the Bank had total borrowing capacity of approximately $11.1 billion with $5.1 billion of advances and letters of credit outstanding, for a remaining available borrowing capacity of approximately $6.0 billion.
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.
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.
Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are made on the Corporation's variable-rate liabilities. In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $1.0 billion.
Amounts reported in AOCI related to derivatives will be reclassified to interest income or interest expense as interest payments are made on the Corporation's loans or borrowings. On October 10, 2024, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $250 million.
As of December 31, 2023, the Corporation had $1.3 billion of 64 collateralized borrowing capacity at the discount window and $1.9 billion of borrowing capacity at the Bank Term Funding Program facility with no amounts outstanding under these programs.
As of December 31, 2024, the Corporation had $3.1 billion of collateralized borrowing capacity at the FRB discount window with no amounts outstanding and had no borrowings drawn against the Bank Term Funding Program facility, which expired March 11, 2024.
Discount rates are based upon market prices for like assets and liabilities. Abrupt changes or "shocks" in interest rates, both upward and downward, are used to determine the comparative effect of such interest rate movements relative to the unchanged environment. This measurement tool is used primarily to evaluate the longer-term repricing risks and options in the Corporation's balance sheet.
Economic value of equity estimates the discounted present value of asset and liability cash flows. Discount rates are based upon market prices for like assets and liabilities. Abrupt changes or "shocks" in interest rates, both upward and downward, are used to determine the comparative effect of such interest rate movements relative to the unchanged environment.
These interest rate derivatives are derivative financial instruments, and the gross fair values are recorded in other assets and liabilities on the consolidated balance sheets, with changes in fair value during the period recorded in other non-interest income on the consolidated statements of income.
These interest rate derivatives are derivative financial instruments, and the gross fair values are recorded in other assets and liabilities on the consolidated balance sheets. Cash Flow Hedges The Corporation's objectives in using interest rate derivatives are to reduce volatility in net interest income and net interest expense and to manage its exposure to interest rate movements.
The Corporation's operating activities during 2023 generated $363.0 million of cash, mainly due to net income of $284.3 million. Cash used in investing activities was $809.2 million, primarily due to $1.1 billion net increase in loans.
The Corporation's operating activities during 2024 generated $416.6 million of cash, mainly due to net income of $288.7 million. Cash provided in investing activities was $1.6 billion, primarily due to $1.0 billion of net cash received for acquisitions in the Republic First Transaction.
The following table presents the expected maturities of government, state and municipal and corporate AFS investment securities, at estimated fair value, as of December 31, 2023 and the weighted average yields on such securities (calculated based on historical cost): Maturing Within One Year After One But Within Five Years After Five But Within Ten Years After Ten Years Amount Yield Amount Yield Amount Yield Amount Yield Available for sale (dollars in thousands) U.S.
Net cash used by financing activities was $1.5 billion, due largely to $2.1 billion in repayment of borrowings. 66 The following table presents the expected maturities of government, state and municipal and corporate AFS investment securities, at estimated fair value, as of December 31, 2024 and the weighted average yields on such securities (calculated based on historical cost): Maturing Within One Year After One But Within Five Years After Five But Within Ten Years After Ten Years Amount Yield Amount Yield Amount Yield Amount Yield Available for sale (dollars in thousands) State and municipal (1) $ 969 6.10% $ — —% $ 111,762 3.88% $ 702,156 3.85% Corporate debt securities 14,564 3.52 102,912 5.54 182,894 4.53 — — Total $ 15,533 3.68 % $ 102,912 5.54 % $ 294,656 4.28 % $ 702,156 3.85 % (1) Weighted average yields on tax-exempt securities have been computed on a FTE basis assuming a federal tax rate of 21% and statutory interest expense disallowances.
During 2023, $22.1 million of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the consolidated statements of income.
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. 65 In the fourth quarter of 2024, the Corporation executed $900.0 million of receive fixed, pay floating interest rate derivatives that qualify as cash flow hedges of interest rate risk to manage the Corporation's exposure to interest rate movements.
Contractual maturities of time deposits as of December 31, 2023 were as follows (dollars in thousands): Year 2024 $ 2,180,323 2025 421,029 2026 64,748 2027 16,343 2028 8,429 Thereafter 48,369 Total $ 2,739,241 66 Contractual maturities of the portion of time deposits estimated to be in excess of the FDIC insurance limit as of December 31, 2023 included in the table above, were as follows (dollars in thousands): Three months or less $ 46,709 Over three through six months 63,171 Over six through twelve months 65,705 Over twelve months 25,366 Total $ 200,951 Total uninsured deposits (excluding intra-Company deposits) were estimated to be $7.2 billion at December 31, 2023 compared with $7.8 billion at December 31, 2022.
Contractual 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 Contractual maturities of the portion of time deposits estimated to be in excess of the FDIC insurance limit as of December 31, 2024 included in the table above, were as follows (dollars in thousands): Three months or less $ 121,877 Over three through six months 108,934 Over six through twelve months 194,862 Over twelve months 13,867 Total $ 439,540 Total uninsured deposits (excluding intra-Company deposits) were estimated to be $9.4 billion at December 31, 2024 compared with $7.2 billion at December 31, 2023. 68 Debt Security Market Price Risk Debt security market price risk is the risk that changes in the values of debt securities, unrelated to interest rate changes, could have a material impact on the financial position or results of operations of the Corporation.
Removed
Cash Flow Hedges The Corporation's objectives in using interest rate derivatives are to reduce volatility in net interest income and net 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.
Added
This measurement tool is used primarily to evaluate the longer-term repricing risks and options in the Corporation's balance sheet.
Removed
Net cash provided by financing activities was $314.0 million, due largely to the increases in time and brokered deposits, partially offset by decreases in demand and savings deposits and other borrowings.
Added
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 affects earnings in future periods.
Removed
Government securities $ 42,161 2.40 % $ — — % $ — — % $ — — % U.S.
Added
During the year ended December 31, 2024, $0.2 million of these unrealized losses have been 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.
Removed
Government-sponsored agency securities — — 1,010 3.10 — — — — State and municipal (1) — — 5,089 4.57 178,818 3.92 888,106 3.90 Corporate debt securities 6,861 10.00 141,422 5.14 292,268 4.02 — — Total $ 49,022 3.45 % $ 147,521 5.10 % $ 471,086 3.99 % $ 888,106 3.90 % (1) Weighted average yields on tax-exempt securities have been computed on a FTE basis assuming a federal tax rate of 21% and statutory interest expense disallowances.
Added
The following table presents AFS residential mortgage-backed securities, commercial mortgage-backed securities and collateralized mortgage obligations, at estimated fair value, and HTM residential mortgage-backed securities and commercial mortgage-backed securities, at amortized cost, as of December 31, 2024, without stated maturities, including the weighted average yields and estimated weighted average lives based on prepayment speeds on such securities: Weighted Amount Yield Average Life (dollars in thousands) (in years) Available for sale Residential mortgage-backed securities $ 989,875 4.94 % 8.7 Commercial mortgage-backed securities 516,882 2.70 4.2 Collateralized mortgage obligations 788,885 5.15 2.1 Held to maturity Residential mortgage-backed securities $ 537,856 3.13 % 9.2 Commercial mortgage-backed securities 857,713 1.52 5.7 67 The following table presents the contractual maturities of fixed rate loans and loan types subject to changes in interest rates as of December 31, 2024: One Year or Less After One Through Five Years After Five Through Fifteen Years After 15 Years Total (dollars in thousands) Commercial and industrial: Adjustable and floating rate $ 1,160,844 $ 2,177,388 $ 320,385 $ 5,586 $ 3,664,203 Fixed rate 387,190 509,344 44,001 851 941,386 Total commercial and industrial 1,548,034 2,686,732 364,386 6,437 4,605,589 Real estate - mortgage (1) : Adjustable and floating rate 2,591,921 5,341,646 2,615,788 277,102 10,826,457 Fixed rate 1,288,523 2,412,596 1,866,083 718,458 6,285,660 Total real estate - mortgage (1) 3,880,444 7,754,242 4,481,871 995,560 17,112,117 Real estate - construction: Adjustable and floating rate 480,495 500,384 69,595 1,692 1,052,166 Fixed rate 254,477 84,382 3,874 — 342,733 Total real estate - construction 734,972 584,766 73,469 1,692 1,394,899 Consumer, leases and other: Adjustable and floating rate 12,599 57,746 166 — 70,511 Fixed rate 265,592 505,255 123,130 3,430 897,407 Total consumer, leases and other 278,191 563,001 123,296 3,430 967,918 Unearned income — (35,604) — — (35,604) Total $ 6,441,641 $ 11,553,137 $ 5,043,022 $ 1,007,119 $ 24,044,919 (1) Includes commercial and residential mortgages and home equity loans.
Removed
As rates decrease, cash flows generally increase as prepayments increase. 65 The following table presents AFS residential mortgage-backed securities, commercial mortgage-backed securities and collateralized mortgage obligations, at estimated fair value, and HTM residential mortgage-backed securities and commercial mortgage-backed securities, at amortized cost, as of December 31, 2023, without stated maturities, including the weighted average yields and estimated weighted average lives based on prepayment speeds on such securities: Weighted Amount Yield Average Life (dollars in thousands) (in years) Available for sale Residential mortgage-backed securities $ 196,795 2.79 % 6.6 Commercial mortgage-backed securities 534,388 2.71 6.6 Collateralized mortgage obligations 111,434 2.71 5.2 Held to maturity Residential mortgage-backed securities $ 407,075 2.01 % 6.6 Commercial mortgage-backed securities 860,847 1.53 6.6 The following table presents the contractual maturities of fixed rate loans and loan types subject to changes in interest rates as of December 31, 2023: One Year or Less One Through Five Years More Than Five Years Total (dollars in thousands) Commercial and industrial: Adjustable and floating rate $ 981,531 $ 2,171,857 $ 474,121 $ 3,627,509 Fixed rate 340,178 491,241 86,666 918,085 Total commercial and industrial 1,321,709 2,663,098 560,787 4,545,594 Real estate - mortgage (1) : Adjustable and floating rate 1,760,892 4,843,777 3,308,714 9,913,383 Fixed rate 870,638 1,890,160 1,826,655 4,587,453 Total real estate - mortgage (1) 2,631,530 6,733,937 5,135,369 14,500,836 Real estate - construction: Adjustable and floating rate 325,599 463,450 147,111 936,160 Fixed rate 258,068 41,105 3,742 302,915 Total real estate - construction 583,667 504,555 150,853 1,239,075 Consumer, leases and other: Adjustable and floating rate 11,322 37,660 8 48,990 Fixed rate 296,185 618,707 139,716 1,054,608 Total consumer, leases and other 307,507 656,367 139,724 1,103,598 Unearned income — (38,009) — (38,009) Total $ 4,844,413 $ 10,519,948 $ 5,986,733 $ 21,351,094 (1) Includes commercial and residential mortgages and home equity loans.
Removed
Debt Security Market Price Risk Debt security market price risk is the risk that changes in the values of debt securities, unrelated to interest rate changes, could have a material impact on the financial position or results of operations of the Corporation.

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