FULTON FINANCIAL CORP [FULT] Filings

10-Q 1 fult-20230930.htm 10-Q fult-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023, or


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-39680

FULTON FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania

23-2195389

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

One Penn Square

P. O. Box 4887

Lancaster,

Pennsylvania

17604

(Address of principal executive offices)

(Zip Code)

(717) 291-2411

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $2.50	FULT	The Nasdaq Stock Market, LLC
Depositary Shares, Each Representing 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A	FULTP	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $2.50 Par Value – 164,190,634 shares outstanding as of October 30, 2023.

FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2023

INDEX


Description		Page



Glossary of Terms		3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

(a)	Consolidated Balance Sheets - September 30, 2023 and December 31, 2022	6

(b)	Consolidated Statements of Income - Three months and n ine months ended September 30, 2023 and 2022	7

(c)	Consolidated Statements of Comprehensive Income - Three months and nine months ended September 30, 2023 and 2022	8

(d)	Consolidated Statements of Shareholders’ Equity - Three months and nine months ended September 30, 2023 and 2022	9

(e)	Consolidated Statements of Cash Flows - Nine months ended September 30, 2023 and 2022	10

(f)	Notes to Consolidated Financial Statements	11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		45

Item 3. Quantitative and Qualitative Disclosures about Market Risk		69

Item 4. Controls and Procedures		71

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		72

Item 1A. Risk Factors		72

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities		72

Item 3. Defaults Upon Senior Securities - (not applicable)

Item 4. Mine Safety Disclosures - (not applicable)

Item 5. Other Information		70

Item 6. Exhibits		73

Signatures		74

Note: Some numbers contained in the document may not sum due to rounding


GLOSSARY OF DEFINED ACRONYMS AND TERMS

2023 Repurchase Program						The authorization to repurchase up to $100 million of the Corporation's common stock commencing January 1, 2023 and expiring December 31, 2023
ACL						Allowance for credit losses
AFS						Available for sale
ALCO						Asset/Liability Management Committee

AOCI						Accumulated other comprehensive (loss) income
ASC						Accounting Standards Codification
ASU						Accounting Standards Update


BHCA						Bank Holding Company Act of 1956, as amended
bp or bps						Basis point(s)

Capital Rules						Regulatory capital requirements applicable to the Corporation and Fulton Bank
CECL Day 1 Provision						Initial provision for credit losses required on non-purchased credit deteriorated loans acquired in the Merger
Corporation or Company						Fulton Financial Corporation
COVID-19						Coronavirus
Directors' Plan						Amended and Restated Directors’ Equity Participation Plan
Dodd-Frank Act						Dodd-Frank Wall Street Reform and Consumer Protection Act

Employee Equity Plan						2022 Amended and Restated Equity and Cash Incentive Compensation Plan

ETR						Effective tax rate
Exchange Act						Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
Fed Funds Rate						Target federal funds rate
Federal Reserve Board						Board of Governors of the Federal Reserve System
FHLB						Federal Home Loan Bank
FOMC						Federal Open Market Committee
Foreign Currency Nostro Accounts						Foreign currency with international correspondent banks
FRB						Federal Reserve Bank
FTE						Fully taxable-equivalent
Fulton Bank or the Bank						Fulton Bank, N.A.
GAAP						U.S. generally accepted accounting principles
HTM						Held to maturity
LIBOR						London Interbank Offered Rate
Management's Discussion						Management’s Discussion and Analysis of Financial Condition and Results of Operations
Merger						The acquisition by the Corporation of Prudential Bancorp that was completed effective as of July 1, 2022

Merger Consideration						For each share of Prudential Bancorp common stock, $3.65 in cash and 0.7974 of a share of the Corporation's common stock, with cash paid in lieu of each fractional share of the Corporation's common stock that would otherwise be issued, determined by multiplying such fractional share amount by $18.25
MSRs						Mortgage servicing rights
Net loans						Loan and lease receivables (net of unearned income)
NIM						Net interest margin
N/M						Not meaningful
OBS						Off-balance-sheet
OCI						Other comprehensive income
OREO						Other real estate owned


Pension Plan						Defined Benefit Pension Plan
Postretirement Plan						Postretirement Benefits Plan
PPP						Paycheck Protection Program
Prudential Bancorp						Prudential Bancorp, Inc.
PSU						Performance-based restricted stock unit
RSU						Restricted stock unit
SAB						Staff Accounting Bulletin
SBA						Small Business Administration
SEC						United States Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate

TDR						Troubled debt restructuring
TruPS						Trust Preferred Securities

FORWARD-LOOKING STATEMENTS

The Corporation has made, and may continue to make, certain forward-looking statements with respect to its financial condition, results of operations and business. Do not unduly rely on forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "will," "could," "estimates," "predicts," "potential," "continue," "anticipates," "believes," "plans," "expects," "future," "intends," "projects," the negative of these terms and other comparable terminology. These forward-looking statements may include projections of, or guidance on, the Corporation's future financial performance, expected levels of future expenses, including future credit losses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends in the Corporation's business or financial results.

Forward-looking statements are neither historical facts, nor assurance of future performance. Instead, the statements are based on current beliefs, expectations and assumptions regarding the future of the Corporation's business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Corporation's control, and actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not unduly rely on any of these forward-looking statements. Any forward-looking statement is based only on information currently available and speaks only as of the date when made. The Corporation undertakes no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Many factors could affect future financial results including, without limitation:

•the impact of adverse conditions in the economy and financial markets, including increasing or elevated interest rates, on the performance of the Corporation's loan portfolio and demand for the Corporation's products and services;

•the potential impacts of recent events affecting the financial services industry on the Corporation, including increased competition for, and costs of, deposits and other funding sources, more stringent regulatory requirements relating to liquidity and interest rate risk management and capital adequacy and increased FDIC insurance expenses;

•the effects of actions by the federal government, including those of the Federal Reserve Board and other government agencies, that impact the money supply and market interest rates;

•the effects of market interest rates, and the relative balances of interest rate-sensitive assets to interest rate-sensitive liabilities, on net interest margin and net interest income;

•the effects of changes in interest rates on demand for the Corporation's products and services;

•the replacement of LIBOR as a benchmark reference rate;

•investment securities gains and losses, including other-than-temporary declines in the value of securities which may result in charges to earnings;

•the effects of changes in interest rates or disruptions in liquidity markets on the Corporation's sources of funding;

•capital and liquidity strategies, including the Corporation's ability to comply with applicable capital and liquidity requirements, and the Corporation's ability to generate capital internally or raise capital on favorable terms;

•the effects of competition on deposit rates and growth, loan rates and growth and NIM;

•possible goodwill impairment charges;

•the impact of operational risks, including the risk of human error, inadequate or failed internal processes and systems, computer and telecommunications systems failures, faulty or incomplete data and an inadequate risk management framework;

•the loss of, or failure to safeguard, confidential or proprietary information;

•the Corporation's failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks;

•the impact of failures from third-party vendors upon which the Corporation relies to perform in accordance with contractual arrangements and the effects of concerns about other financial institutions on the Corporation;

•the potential to incur losses in connection with repurchase and indemnification payments related to sold loans;

•the potential effects of climate change on the Corporation's business and results of operations;

•increases in non-performing assets, which may require the Corporation to increase the allowance for credit losses, charge-off loans and incur elevated collection and carrying costs related to such non-performing assets;

•the determination of the ACL, which depends significantly upon assumptions and judgments with respect to a variety of factors, including the performance of the loan portfolio, the weighted-average remaining lives of different classifications of loans within the loan portfolio and current and forecasted economic conditions, among other factors;

•the effects of the extensive level of regulation and supervision to which the Corporation and Fulton Bank are subject;

•changes in regulation and government policy, which could result in significant changes in banking and financial services regulation;

•the continuing impact of the Dodd-Frank Act on the Corporation's business and results of operations;

•the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to the Corporation's reputation;

•the effects of adverse outcomes in litigation and governmental or administrative proceedings;

•the effects of changes in U.S. federal, state or local tax laws;

•the effects of the significant amounts of time and expense associated with regulatory compliance and risk management;

•completed and potential acquisitions may affect costs and the Corporation may not be able to successfully integrate the acquired business or realize the anticipated benefits from such acquisitions;

•geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, including the war between Russia and Ukraine and escalating conflict in the Middle East, which could impact business and economic conditions in the United States and abroad;

•public health crises and pandemics, including COVID-19 and their effects on the economic and business environments in which the Corporation operates, including on the Corporation's credit quality and business operations, as well as the impact on general economic and financial market conditions;

•the Corporation's ability to achieve its growth plans;

•the Corporation's ability to attract and retain talented personnel;

•the effects of competition from financial service companies and other companies offering bank services;

•the Corporation's ability to keep pace with technological changes;

•the Corporation's reliance on its subsidiaries for substantially all of its revenues and its ability to pay dividends or other distributions;

•the effects of negative publicity on the Corporation's reputation; and

•other factors that may affect future results of the Corporation.

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except shares and per-share data)


	September 30, 2023		December 31, 2022
	(unaudited)
ASSETS
Cash and due from banks	$	304,042	$	126,898
Interest-bearing deposits with other banks	116,418		555,023
Cash and cash equivalents	420,460		681,921
FRB and FHLB stock	106,363		130,186

Loans held for sale	20,368		7,264
Investment securities
AFS, at estimated fair value	2,418,868		2,646,767
HTM, at amortized cost	1,279,733		1,321,256
Net loans	21,177,508		20,279,547
Less: ACL - loans	(292,739)		(269,366)
Loans, net	20,884,769		20,010,181
Net premises and equipment	215,626		225,141
Accrued interest receivable	101,624		91,579
Goodwill and net intangible assets	561,284		560,824
Other assets	1,366,082		1,256,583
Total Assets	$	27,375,177	$	26,931,702
LIABILITIES
Deposits:
Noninterest-bearing	$	5,575,374	$	7,006,388
Interest-bearing	15,846,215		13,643,150
Total Deposits	21,421,589		20,649,538
Borrowings:
Federal funds purchased	544,000		191,000
Federal Home Loan Bank advances	730,000		1,250,000
Senior debt and subordinated debt	540,174		539,634
Other borrowings	555,938		890,573
Total borrowings	2,370,112		2,871,207
Accrued interest payable	26,848		10,185
Other liabilities	989,935		821,015
Total Liabilities	$	24,808,484	$	24,351,945
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares authorized; Series A, 200,000 shares authorized and issued as of September 30, 2023 and December 31, 2022, liquidation preference of $1,000 per share	192,878		192,878
Common stock, $2.50 par value, 600,000,000 shares authorized, 225,711,690 shares issued as of September 30, 2023 and 224,604,432 shares issued as of December 31, 2022	564,279		561,511
Additional paid-in capital	1,549,279		1,541,840
Retained earnings	1,585,452		1,450,758
Accumulated other comprehensive loss	(472,756)		(385,476)
Treasury stock, at cost, 61,627,256 shares as of September 30, 2023 and 57,005,339 shares as of December 31, 2022	(852,439)		(781,754)
Total Shareholders' Equity	2,566,693		2,579,757
Total Liabilities and Shareholders' Equity	$	27,375,177	$	26,931,702

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


(dollars in thousands, except per-share data)	Three months ended September 30				Nine months ended September 30
	2023		2022		2023		2022
Interest Income
Loans, including fees	$	301,659	$	205,468	$	847,000	$	519,375
Investment securities	25,339		25,927		76,221		72,424
Other interest income	3,373		2,296		11,882		5,192
Total Interest Income	330,371		233,691		935,103		596,991
Interest Expense
Deposits	84,156		10,049		195,576		21,451
Federal funds purchased	8,950		550		24,097		540
Federal Home Loan Bank advances	10,324		1,404		37,623		1,404
Senior debt and subordinated debt	5,344		5,494		16,033		16,921
Other borrowings and interest-bearing liabilities	7,755		612		19,493		952
Total Interest Expense	116,529		18,109		292,822		41,268
Net Interest Income	213,842		215,582		642,281		555,723
Provision for credit losses	9,937		18,958		44,228		13,508
Net Interest Income After Provision for Credit Losses	203,905		196,624		598,053		542,215
Non-Interest Income
Commercial banking	19,722		20,808		60,380		57,175
Wealth management	19,413		17,610		56,152		55,312
Consumer banking	12,173		13,275		35,110		37,421
Mortgage banking	3,190		3,720		8,100		12,064
Other	1,463		3,802		8,539		10,863
Non-Interest Income Before Investment Securities (Losses) Gains	55,961		59,215		168,281		172,835
Investment securities (losses) gains, net	—		(53)		19		(26)
Total Non-Interest Income	55,961		59,162		168,300		172,809
Non-Interest Expense
Salaries and employee benefits	96,757		94,283		280,142		264,151
Data processing and software	16,914		15,807		49,486		44,807
Net occupancy	14,561		14,025		43,373		42,134
Other outside services	12,094		9,361		33,054		26,292
FDIC insurance	4,738		3,158		14,427		9,328
Equipment	3,475		3,548		10,395		10,393
Marketing	1,913		1,859		5,454		4,505
Professional fees	1,869		2,373		6,090		6,178
Intangible amortization	601		690		2,347		1,043

Merger-related expenses	—		7,006		—		8,434
Other	18,098		17,448		53,888		48,001
Total Non-Interest Expense	171,020		169,558		498,656		465,266
Income Before Income Taxes	88,846		86,228		267,697		249,758
Income taxes	16,749		15,357		47,680		44,610
Net Income	72,097		70,871		220,017		205,148
Preferred stock dividends	(2,562)		(2,562)		(7,686)		(7,686)
Net Income Available to Common Shareholders	$	69,535	$	68,309	$	212,331	$	197,462

PER SHARE:
Net income available to common shareholders (basic)	$	0.42	$	0.41	$	1.28	$	1.21
Net income available to common shareholders (diluted)	0.42		0.40		1.27		1.20
Cash dividends	0.16		0.15		0.47		0.45
See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(dollars in thousands)


	Three months ended September 30				Nine months ended September 30
	2023		2022		2023		2022

Net Income	$	72,097	$	70,871	$	220,017	$	205,148
Other Comprehensive Income/(Loss), net of tax:
Unrealized gains (losses) on AFS investment securities
Net unrealized holding (losses)	(105,050)		(120,385)		(103,628)		(362,596)
Reclassification adjustment for securities net change realized in net income	—		(41)		14		(20)
Amortization of net unrealized gains (losses) on AFS securities transferred to HTM	1,494		1,653		4,473		(46,024)
Net unrealized (losses) on AFS investment securities	(103,556)		(118,773)		(99,141)		(408,640)
Unrealized gains (losses) on interest rate derivatives used in cash flow hedges
Net unrealized holding gains (losses)	3,651		(22,472)		(8,755)		(62,434)
Reclassification adjustment for net change realized in net income	6,420		2,483		20,573		641
Net unrealized gains (losses) on interest rate derivatives used in cash flow hedges	10,071		(19,989)		11,818		(61,793)
Defined benefit pension plan and postretirement benefits
Amortization of net unrecognized pension and postretirement items	15		25		43		75
Other Comprehensive Loss	(93,470)		(138,737)		(87,280)		(470,358)
Total Comprehensive Income (Loss)	$	(21,373)	$	(67,866)	$	132,737	$	(265,210)

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(dollars in thousands, except per-share data)


	Preferred Stock			Common Stock			Additional		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
	Shares Outstanding	Amount		Shares Outstanding	Amount		Paid-in Capital
Three months ended September 30, 2023
Balance at June 30, 2023	200	$	192,878	166,097	$	564,137	$	1,545,706	$	1,542,163	$	(379,286)	$	(823,446)	$	2,642,152
Net income									72,097						72,097
Other comprehensive loss											(93,470)				(93,470)
Common stock issued(1)				50	125		529						7		661
Dividend reinvestment activity				109			(154)						1,517		1,363

Stock-based compensation awards				4	17		3,198						(26)		3,189
Acquisition of treasury stock				(2,176)									(30,491)		(30,491)
Preferred stock dividend									(2,562)						(2,562)
Common stock dividends - $0.16 per share									(26,246)						(26,246)
Balance at September 30, 2023	200	$	192,878	164,084	$	564,279	$	1,549,279	$	1,585,452	$	(472,756)	$	(852,439)	$	2,566,693

Three months ended September 30, 2022
Balance at June 30, 2022	200	$	192,878	161,057	$	561,181	$	1,527,756	$	1,363,344	$	(304,210)	$	(869,856)	$	2,471,093
Net income									70,871						70,871
Other comprehensive loss											(138,737)				(138,737)

Common stock issued(1)				35	88		100						—		188
Dividend reinvestment activity				96			5						1,528		1,533
Reissuance of treasury stock pursuant to acquisition				6,209			4,547						85,166		89,713
Stock-based compensation awards				1	3		4,176						(10)		4,169

Preferred stock dividend									(2,562)						(2,562)
Common stock dividends - $0.15 per share									(25,109)						(25,109)
Balance at September 30, 2022	200	$	192,878	167,398	$	561,272	$	1,536,584	$	1,406,544	$	(442,947)	$	(783,172)	$	2,471,159

Nine months ended September 30, 2023
Balance at December 31, 2022	200	$	192,878	167,599	$	561,511	$	1,541,840	$	1,450,758	$	(385,476)	$	(781,754)	$	2,579,757
Net income									220,017						220,017
Other comprehensive income											(87,280)				(87,280)
Common stock issued(1)				185	463		2,001						27		2,491
Dividend reinvestment activity				298			18						4,147		4,165

Stock-based compensation awards				589	2,305		5,420						(3,919)		3,806
Acquisition of treasury stock				(4,587)									(70,940)		(70,940)
Preferred stock dividend									(7,686)						(7,686)
Common stock dividends - $0.47 per share									(77,637)						(77,637)
Balance at September 30, 2023	200	$	192,878	164,084	$	564,279	$	1,549,279	$	1,585,452	$	(472,756)	$	(852,439)	$	2,566,693

Nine months ended September 30, 2022
Balance at December 31, 2021	200	$	192,878	160,490	$	559,766	$	1,519,873	$	1,282,383	$	27,411	$	(869,631)	$	2,712,680
Net income									205,148						205,148
Other comprehensive loss											(470,358)				(470,358)

Common stock issued(1)				180	450		433						—		883
Dividend reinvestment activity				253			5						3,660		3,665
Reissuance of treasury stock pursuant to acquisition				6,209			4,547						85,166		89,713
Stock-based compensation awards				266	1,056		11,726						(2,367)		10,415

Preferred stock dividend									(7,686)						(7,686)
Common stock dividends - $0.45 per share									(73,301)						(73,301)
Balance at September 30, 2022	200	$	192,878	167,398	$	561,272	$	1,536,584	$	1,406,544	$	(442,947)	$	(783,172)	$	2,471,159

See Notes to Consolidated Financial Statements

(1) Issuance of common stock includes issuance in connection with the Corporation’s Employee Stock Purchase Plan and exercised stock options.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(dollars in thousands)	Nine months ended September 30
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	220,017	$	205,148
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	44,228		13,508
Depreciation and amortization of premises and equipment	22,212		22,627
Net amortization of investment securities premiums	8,650		9,823
Investment securities (gains) losses, net	(19)		26
Gain on sales of mortgage loans held for sale	(4,150)		(7,974)
Proceeds from sales of mortgage loans held for sale	260,494		400,797
Originations of mortgage loans held for sale	(269,448)		(371,466)
Intangible amortization	2,347		1,043
Amortization of issuance costs and discounts on long-term borrowings	540		551

Stock-based compensation	7,971		10,166
Net change in deferred federal income tax	(10,773)		(148,952)
Net change in accrued salaries and benefits	(11,232)		(5,658)
Net change in life insurance cash surrender value	(23,655)		(90,234)
Other changes, net	173,206		476,961
Total adjustments	200,371		311,218
Net cash provided by operating activities	420,388		516,366
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of AFS securities	80,666		196,407
Proceeds from principal repayments and maturities of AFS securities	77,905		546,770
Proceeds from principal repayments and maturities of HTM securities	46,301		90,044
Purchase of AFS securities	(72,252)		(822,216)
Purchase of HTM securities	—		(30,959)
Net change in FRB and FHLB stock	23,823		(24,279)

Net change in loans	(919,231)		(819,164)
Net purchases of premises and equipment	(17,860)		(10,023)
Settlement of bank-owned life insurance	100		2,853
Net cash paid for acquisition	—		(21,796)
Net change in tax credit investments	(17,945)		(33,178)
Net cash used in investing activities	(798,493)		(925,541)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in demand and savings deposits	(811,325)		(420,622)
Net change in time deposits and brokered deposits	1,583,376		(308,503)
Net change in other borrowings	(501,635)		183,518
Repayments of senior debt and subordinated debt	—		(81,496)

Net proceeds from issuance of common stock	2,491		4,792
Dividends paid	(85,323)		(78,413)
Acquisition of treasury stock	(70,940)		—
Net cash provided by (used in) financing activities	116,644		(700,724)
Net decrease in Cash and Cash Equivalents	(261,461)		(1,109,899)
Cash and Cash Equivalents at Beginning of Period	681,921		1,638,614
Cash and Cash Equivalents at End of Period	$	420,460	$	528,715
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	276,159	$	42,529
Income taxes	23,416		22,416
Supplemental Schedule of Certain Noncash Activities:
Transfer of AFS securities to HTM securities	$	—	$	479,008


See Notes to Consolidated Financial Statements

FULTON FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of the Corporation have been prepared in conformity with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The Corporation evaluates subsequent events through the date of filing of this Quarterly Report on Form 10-Q with the SEC.

Significant Accounting Policies

The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Corporation's 2022 Annual Report on Form 10-K. Those significant accounting policies are unchanged at September 30, 2023 except for the following:

Effective January 1, 2023, the Corporation adopted ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"), which updated the guidance on modifications to financing receivables by effectively replacing the concept of troubled debt restructurings with a new concept, loan modifications to borrowers experiencing financial difficulty. See Note 5 - "Loans and Allowance for Credit Losses" for further detail. Below is a summary of the policy surrounding loan modifications to borrowers experiencing financial difficulty.

A loan modified for a borrower experiencing financial difficulty includes one or more of the following concessions: a reduction of the stated interest rate of the loan, an extension of the term or amortization period of the loan, a more than insignificant payment delay or principal forgiveness of the loan.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the ACL, a change to the ACL is generally not recorded upon modification. When principal forgiveness is provided, the amortized cost basis of the forgiven portion of the loan is written off against the ACL. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis of the loan and a corresponding adjustment to the ACL.

Recently Adopted Accounting Standards

In March 2022, FASB issued ASU 2022-01 Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method ("ASU 2022-01"). This update addresses questions regarding the last-of-layer method arising from the issuance of ASU 2017-12 and permits more flexibility in hedging interest rate risk for both variable-rate and fixed-rate financial instruments and introduces the ability to hedge risk components for non-financial hedges. The Corporation adopted ASU 2022-01 on January 1, 2023 and it did not have a material impact on its consolidated financial statements.

In March 2022, FASB issued ASU 2022-02 Financial Instruments - Credit Losses (Topic 326) ("ASU 2022-02"). This update reduces the complexity of accounting for TDRs by eliminating certain accounting guidance, enhancing disclosures and improving the consistency of vintage disclosures. The Corporation adopted ASU 2022-02 on January 1, 2023 and it did not have a material impact on its consolidated financial statements.

In September 2022, FASB issued ASU 2022-04 Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations ("ASU 2022-04"). This update enhances transparency in the disclosure of supplier finance programs, which previously had no explicit requirements under GAAP. The Corporation adopted ASU 2022-04 on January 1, 2023 and it did not have a material impact on its consolidated financial statements.

In December 2022, FASB issued ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. This update extends the sunset provision date of ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") to December 31, 2024. The Corporation will adopt ASU 2020-04 on January 1, 2025. The Corporation does not expect the adoption of ASU 2020-04 to have a material impact on its consolidated financial statements.

In March 2023, FASB issued ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ("ASU 2023-02"). This update allows any tax credit program that meets certain criteria to use the proportional amortization method. The Corporation early adopted ASU 2023-02 using the modified retrospective method effective upon issuance, and it did not have a material impact on its consolidated financial statements.

In July 2023, FASB issued ASU 2023-03 Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC SAB No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and SAB Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock ("ASU 2023-03"). This update amends certain SEC paragraphs from the Codification in response to (1) the issuance of SEC SAB 120; (2) the SEC staff announcement at the March 24, 2022, EITF meeting; and (3) SAB Topic 6.B, "Accounting Series Release No. 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock." ASU 2023-03 does not provide any new guidance so there is no transition or effective date associated with it.

In August 2023, FASB issued ASU 2023-04 Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC SAB No. 121 ("ASU 2023-04"). This update adjusts language in FASB ASC 405-10 to align with SEC SAB No. 121 relating to accounting for obligations to safeguard crypto-assets an entity holds for its platform users. ASU 2023-24 does not provide any new guidance so there is no transition or effective date associated with it. The Corporation currently does not have obligations to safeguard crypto-assets.

Recently Issued Accounting Standards

In June 2022, FASB issued ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"). This update clarifies how the fair value of equity securities subject to contractual sale restrictions is determined and requires additional qualitative and quantitative disclosures for equity securities with contractual sale restrictions. The Corporation will adopt ASU 2022-03 on January 1, 2024. The Corporation does not expect the adoption of ASU 2022-03 to have a material impact on its consolidated financial statements.

In March 2023, FASB issued ASU 2023-01 Leases (Topic 842): Common Control Arrangements ("ASU 2023-01"). This update clarifies guidance for leases between related parties under common control. The Corporation will adopt ASU 2023-01 on January 1, 2024. The Corporation does not expect the adoption of ASU 2023-01 to have a material impact on its consolidated financial statements.

Reclassifications

Certain amounts in the 2022 consolidated financial statements and notes have been reclassified to conform to the 2023 presentation.

NOTE 2 – Business Combinations

On July 1, 2022, the Corporation completed its acquisition of Prudential Bancorp, a Pennsylvania chartered bank holding company headquartered in Philadelphia, Pennsylvania that primarily served the Greater Philadelphia region. On that date, the Corporation acquired 100% of the outstanding common stock of Prudential Bancorp, Prudential Bancorp was merged with and into the Corporation, and Prudential Bancorp's wholly owned subsidiary, Prudential Bank, became a wholly owned subsidiary of the Corporation. The Corporation merged Prudential Bank with and into Fulton Bank in the fourth quarter of 2022. Results of the operations of the acquired entity were included in the Corporation's consolidated financial statements beginning on July 1, 2022. As a result of the Merger, the Corporation enhanced its presence in Philadelphia, Pennsylvania, expanded its customer base and leveraged operating costs through economies of scale.

In accordance with the terms of the definitive merger agreement, each share of Prudential Bancorp's common stock issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive the Merger

Consideration. In the aggregate, approximately eighty percent (80%) of the Merger Consideration consisted of the Corporation's common stock with the remaining approximately twenty percent (20%) paid in cash. The receipt of the Corporation’s common stock in the Merger qualified as a tax-free exchange for Prudential Bancorp shareholders.

The acquisition of Prudential Bancorp was accounted for as a business combination using the acquisition method of accounting, and accordingly, the assets acquired, the liabilities assumed, and consideration transferred were recorded at their estimated fair values as of the Merger. The $19.1 million excess of the Merger Consideration over the fair value of assets acquired was recorded as goodwill and is not amortizable or deductible for tax purposes.

The following table summarizes the consideration transferred and the fair values of identifiable assets acquired and liabilities assumed on July 1, 2022:


	Fair Value
(dollars in thousands, except share data)
Consideration transferred:
Common stock shares issued (6,208,516)	$	89,713
Cash paid to Prudential Bancorp shareholders	29,343
Value of consideration	119,056
Assets acquired:
Cash and due from banks	7,533
Investment securities	287,126
Loans	554,091
Premises and equipment	8,574
Other assets	73,303
Total assets	930,627
Liabilities assumed:
Deposits	532,170
Borrowings(1)	284,000

Other liabilities	14,482
Total liabilities	830,652
Net assets acquired:	99,975
Goodwill resulting from the Merger	$	19,081

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

The amount of goodwill recorded reflects the increased market share and related synergies that are expected to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired from Prudential Bancorp.

The following table presents information with respect to the fair value and unpaid principal balance of acquired loans and leases at the date of the Merger:


	July 1, 2022
	Unpaid Principal Balance		Fair Value
	(dollars in thousands)
Real estate - commercial mortgage	$	224,904	$	216,593
Commercial and industrial	63,560		61,873
Real-estate - residential mortgage	177,327		169,098
Real-estate - home equity	6,034		5,812
Real-estate - construction	98,963		98,546
Consumer	2,306		2,286

Total acquired loans	$	573,094	$	554,208

The following table presents the carrying amount of loans for which, at the date of Merger, there was evidence of more than insignificant deterioration of credit quality since origination:


	July 1, 2022
	(dollars in thousands)
Book balance of loans with deteriorated credit quality at acquisition	$	27,057
Allowance for credit losses at acquisition	(1,135)
Non-credit related discount	(130)
Total purchased credit deteriorated loans	$

FULTON FINANCIAL CORP [FULT] Filings

FULTON FINANCIAL CORP [FULTP] Filings