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, 2022,~~March 31, 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 ~~–167,494,361~~–165,488,951 shares outstanding as of ~~October~~April 28, ~~2022.~~2023.

FULTON FINANCIAL CORPORATION

FORM 10-Q FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2022~~MARCH 31, 2023

INDEX


Description		Page



Glossary of Terms		3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

(a)	Consolidated Balance Sheets - ~~September~~March ~~30, 2022~~3 1 , 202 3 and December 31, ~~2021~~202 2	57

(b)	Consolidated Statements of Income - Three ~~and~~ ~~nine~~months ended ~~September~~March ~~30, 2022~~3 1 , 202 3 and ~~2021~~202 2	68

(c)	Consolidated Statements of Comprehensive Income - Three ~~and~~ ~~nine~~months ended ~~September~~March ~~30, 2022~~3 1 , 202 3 and ~~2021~~2022	79

(d)	Consolidated Statements of Shareholders’ Equity - Three ~~and~~ ~~nine~~months ended ~~September~~March ~~30, 2022~~3 1 , 202 3 and ~~2021~~202 2	810

(e)	Consolidated Statements of Cash Flows - ~~Nine~~Three months ended ~~September~~March ~~30, 2022~~3 1 , 202 3 and ~~2021~~202 2	911

(f)	Notes to Consolidated Financial Statements	1012

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		4544

Item 3. Quantitative and Qualitative Disclosures about Market Risk		7159

Item 4. Controls and Procedures		7362

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		7362

Item 1A. Risk Factors		7362

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		7463

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

Item 4. Mine Safety Disclosures - (not applicable)

Item 5. Other Information - (none to be reported)

Item 6. Exhibits		7564

Signatures		7665

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


~~FULTON FINANCIAL CORPORATION~~
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
~~Annual Meeting~~						~~The annual meeting of the Corporation's shareholders held on May 17, 2022~~
AOCI						Accumulated other comprehensive (loss) income
~~ARC~~						~~Auction rate security~~
ASC						Accounting Standards Codification
ASU						Accounting Standards Update


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

~~CARES Act~~Capital Rules						~~Coronavirus Aid, Relief,~~Regulatory capital requirements applicable to the Corporation and ~~Economic Security Act~~
~~CDI~~						~~Core deposit intangible~~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
~~ESG~~						~~Environmental, social and governance~~
ETR						Effective tax rate
Exchange Act						Securities Exchange Act of 1934
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~~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 Agreement~~						~~Agreement and Plan of Merger, dated as of March 1, 2022, between the Corporation and Prudential Bancorp~~
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						~~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
SBA						Small Business Administration
SEC						United States Securities and Exchange Commission
TCI						Tax credit investment
TDR						Troubled debt restructuring
TruPS						Trust Preferred Securities
~~Visa Shares~~

~~Visa, Inc. Class B restricted shares~~

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 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;

•the possibility that the anticipated benefits of the Merger, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or challenges arising from, the integration of Prudential Bancorp into the Corporation or as a result of the strength of the economy, competitive factors in the areas where the Corporation and Prudential Bancorp do business, or as a result of other unexpected factors or events;

•potential adverse reactions or changes to business or employee relationships, including those resulting from the Merger;

•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, 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 per-share data)

September 30, 2022 December 31,
2021
(unaudited)
ASSETS
Cash and due from banks $ 143,465 $ 172,276
Interest-bearing deposits with other banks 385,250 1,466,338
Cash and cash equivalents 528,715 1,638,614
FRB and FHLB stock 81,914 57,635
Loans held for sale 14,411 35,768
Investment securities
AFS, at estimated fair value 2,597,384 3,187,390
HTM, at amortized cost 1,339,310 980,384
Net loans 19,695,199 18,325,350
Less: ACL - loans (266,838) (249,001)
Loans, net 19,428,361 18,076,349
Net premises and equipment 221,496 220,357
Accrued interest receivable 72,821 57,451
Goodwill and net intangible assets 561,495 538,053
Other assets 1,300,135 1,004,397
Total Assets $ 26,146,042 $ 25,796,398
LIABILITIES
Deposits:
Noninterest-bearing $ 7,372,896 $ 7,370,963
Interest-bearing 14,003,658 14,202,536
Total Deposits 21,376,554 21,573,499
Borrowings:
Federal funds purchased 136,000 —
Federal Home Loan Bank advances 265,500 —
Senior debt and subordinated debt 539,461 620,406
Other borrowings 483,720 417,703
Total borrowings 1,424,681 1,038,109
Accrued interest payable 5,739 7,000
Other liabilities 867,909 465,110
Total Liabilities 23,674,883 23,083,718
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 10.0 million shares authorized; Series A, 0.2 million shares authorized and issued as of September 30, 2022 and December 31, 2021, liquidation preference of $1,000 per share 192,878 192,878
Common stock, $2.50 par value, 600.0 million shares authorized, 224.5 million shares issued as of September 30, 2022 and 223.9 million issued as of December 31, 2021
561,272 559,766
Additional paid-in capital 1,536,584 1,519,873
Retained earnings 1,406,544 1,282,383
Accumulated other comprehensive (loss) income (442,947) 27,411
Treasury stock, at cost, 57.1 million as of September 30, 2022 and 63.4 million shares as of December 31, 2021 (783,172) (869,631)
Total Shareholders' Equity 2,471,159 2,712,680
Total Liabilities and Shareholders' Equity $ 26,146,042 $ 25,796,398
See Notes to Consolidated Financial Statements


	March 31, 2023		December 31, 2022
	(unaudited)
ASSETS
Cash and due from banks	$	129,003	$	126,898
Interest-bearing deposits with other banks	437,750		555,023
Cash and cash equivalents	566,753		681,921
FRB and FHLB stock	107,605		130,186

Loans held for sale	6,507		7,264
Investment securities
AFS, at estimated fair value	2,642,389		2,646,767
HTM, at amortized cost	1,307,712		1,321,256
Net loans	20,670,188		20,279,547
Less: ACL - loans	(278,695)		(269,366)
Loans, net	20,391,493		20,010,181
Net premises and equipment	216,059		225,141
Accrued interest receivable	90,267		91,579
Goodwill and net intangible assets	563,502		560,824
Other assets	1,219,889		1,256,583
Total Assets	$	27,112,176	$	26,931,702
LIABILITIES
Deposits:
Noninterest-bearing	$	6,403,484	$	7,006,388
Interest-bearing	14,913,100		13,643,150
Total Deposits	21,316,584		20,649,538
Borrowings:
Federal funds purchased	525,000		191,000
Federal Home Loan Bank advances	747,000		1,250,000
Senior debt and subordinated debt	539,814		539,634
Other borrowings	634,956		890,573
Total borrowings	2,446,770		2,871,207
Accrued interest payable	11,892		10,185
Other liabilities	717,932		821,015
Total Liabilities	$	24,493,178	$	24,351,945
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 10.0 million shares authorized; Series A, 0.2 million shares authorized and issued as of March 31, 2023 and December 31, 2022, liquidation preference of $1,000 per share	192,878		192,878
Common stock, $2.50 par value, 600.0 million shares authorized, 224.7 million shares issued as of March 31, 2023 and 224.6 million issued as of December 31, 2022	561,853		561,511
Additional paid-in capital	1,544,758		1,541,840
Retained earnings	1,491,701		1,450,758
Accumulated other comprehensive (loss) income	(350,992)		(385,476)
Treasury stock, at cost, 59.3 million shares as of March 31, 2023 and 57.0 million shares as of December 31, 2022	(821,200)		(781,754)
Total Shareholders' Equity	2,618,998		2,579,757
Total Liabilities and Shareholders' Equity	$	27,112,176	$	26,931,702

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


(in thousands, except per-share data)		Three months ended September 30				Nine months ended September 30
(dollars in thousands, except per-share data)										(dollars in thousands, except per-share data)	Three months ended March 31
		2022		2021		2022		2021			2023		2022
Interest Income	Interest Income									Interest Income
Loans, including fees	Loans, including fees	$	205,468	$	161,889	$	519,375	$	480,955	Loans, including fees	$	260,651	$	149,737
Investment securities	Investment securities	25,927		20,003		72,424		59,165		Investment securities	25,521		22,353

Loans held for sale		194		299		694		969
Other interest income	Other interest income	2,102		1,888		4,498		4,599		Other interest income	3,648		911
Total Interest Income	Total Interest Income	233,691		184,079		596,991		545,688		Total Interest Income	289,820		173,001
Interest Expense	Interest Expense									Interest Expense
Deposits	Deposits	10,049		6,525		21,451		24,108		Deposits	41,620		5,605
Federal funds purchased	Federal funds purchased	550		—		540		—		Federal funds purchased	6,035		—
Federal Home Loan Bank advances	Federal Home Loan Bank advances	1,404		—		1,404		2,286		Federal Home Loan Bank advances	15,473		—
Senior debt and subordinated debt	Senior debt and subordinated debt	5,494		6144		16,921		20,704		Senior debt and subordinated debt	5,344		5,958
Other borrowings		612		140		952		472
Other borrowings and interest-bearing liabilities										Other borrowings and interest-bearing liabilities	5,761		128
Total Interest Expense	Total Interest Expense	18,109		12,809		41,268		47,570		Total Interest Expense	74,233		11,691
Net Interest Income	Net Interest Income	215,582		171,270		555,723		498,118		Net Interest Income	215,587		161,310
Provision for credit losses	Provision for credit losses	18,958		(600)		13,508		(9,600)		Provision for credit losses	24,544		(6,950)
Net Interest Income After Provision for Credit Losses	Net Interest Income After Provision for Credit Losses	196,624		171,870		542,215		507,718		Net Interest Income After Provision for Credit Losses	191,043		168,260
Non-Interest Income	Non-Interest Income									Non-Interest Income
Wealth management										Wealth management	18,062		19,428
Commercial banking	Commercial banking	20,808		16,738		57,175		50,209		Commercial banking	17,513		16,008
Consumer banking	Consumer banking	13,275		11,801		37,421		33,415		Consumer banking	11,217		11,674
Wealth management		17,610		18,532		55,312		53,513
Mortgage banking	Mortgage banking	3,720		9,535		12,064		26,333		Mortgage banking	1,970		4,576
Other	Other	3,802		5,971		10,863		12,883		Other	2,968		3,551
Non-Interest Income Before Investment Securities Gains	Non-Interest Income Before Investment Securities Gains	59,215		62,577		172,835		176,353		Non-Interest Income Before Investment Securities Gains	51,730		55,237
Investment securities gains (losses), net		(53)		—		(26)		33,511
Investment securities gains, net										Investment securities gains, net	23		19
Total Non-Interest Income	Total Non-Interest Income	59,162		62,577		172,809		209,864		Total Non-Interest Income	51,753		55,256
Non-Interest Expense	Non-Interest Expense									Non-Interest Expense
Salaries and employee benefits	Salaries and employee benefits	94,283		82,679		264,151		243,632		Salaries and employee benefits	89,283		84,464
Data processing and software	Data processing and software	15,807		14,335		44,807		41,828		Data processing and software	15,796		14,315
Net occupancy	Net occupancy	14,025		12,957		42,134		39,433		Net occupancy	14,438		14,522
Other outside services	Other outside services	9,361		7,889		26,292		24,557		Other outside services	10,126		8,167
FDIC insurance										FDIC insurance	4,795		3,209
State taxes	State taxes	3,583		4,994		10,188		13,883		State taxes	3,479		3,037
Equipment	Equipment	3,548		3,416		10,393		10,268		Equipment	3,389		3,423
FDIC insurance		3,158		2,727		9,328		7,633
Professional fees	Professional fees	2,373		2,271		6,178		7,701		Professional fees	2,392		1,792
Marketing	Marketing	1,859		1,448		4,505		3,798		Marketing	1,886		1,320
Intangible amortization	Intangible amortization	690		150		1,043		443		Intangible amortization	674		176
Debt extinguishment		—		—		—		32,575

Merger-related expenses	Merger-related expenses	7,006		—		8,434		—		Merger-related expenses	—		401
Other	Other	13,865		11,730		37,813		38,060		Other	13,358		11,152
Total Non-Interest Expense	Total Non-Interest Expense	169,558		144,596		465,266		463,811		Total Non-Interest Expense	159,616		145,978
Income Before Income Taxes	Income Before Income Taxes	86,228		89,851		249,758		253,771		Income Before Income Taxes	83,180		77,538
Income taxes	Income taxes	15,357		14,268		44,610		40,160		Income taxes	14,866		13,250
Net Income	Net Income	70,871		75,583		205,148		213,611		Net Income	68,314		64,288
Preferred stock dividends	Preferred stock dividends	(2,562)		(2,562)		(7,686)		(7,715)		Preferred stock dividends	(2,562)		(2,562)
Net Income Available to Common Shareholders	Net Income Available to Common Shareholders	$	68,309	$	73,021	$	197,462	$	205,896	Net Income Available to Common Shareholders	$	65,752	$	61,726

PER SHARE:	PER SHARE:									PER SHARE:
Net income available to common shareholders (basic)	Net income available to common shareholders (basic)	$	0.41	$	0.45	$	1.21	$	1.27	Net income available to common shareholders (basic)	$	0.39	$	0.38
Net income available to common shareholders (diluted)	Net income available to common shareholders (diluted)	0.40		0.45		1.20		1.26		Net income available to common shareholders (diluted)	0.39		0.38
Cash dividends	Cash dividends	0.15		0.14		0.45		0.42		Cash dividends	0.15		0.15
See Notes to Consolidated Financial Statements	See Notes to Consolidated Financial Statements									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
2022 2021 2022 2021

Net Income $ 70,871 $ 75,583 $ 205,148 $ 213,611
Other Comprehensive (Loss)/Income, net of tax:
Unrealized gains (losses) on AFS investment securities
Unrealized (loss)/gain on securities (120,385) (21,622) (362,596) (16,073)
Reclassification adjustment for securities gains included in net income (41) — (20) (25,901)
Amortization of net unrealized losses on AFS securities transferred to HTM 1,653 637 (46,024) 2,154
Net unrealized gains (losses) on AFS investment securities (118,773) (20,985) (408,640) (39,820)
Unrealized (losses) gains on interest rate swaps used in cash flow hedges
Net unrealized holding (losses) gains arising during the period (22,472) (216) (62,434) 938
Reclassification adjustment for net (losses) gains realized in net income 2,483 (675) 641 (1,462)
Net unrealized (losses) gains on interest rate swaps used in cash flow hedges (19,989) (891) (61,793) (524)
Defined benefit pension plan and postretirement benefits
Amortization of net unrecognized pension and postretirement items 25 290 75 868
Other Comprehensive (Loss)/Income (138,737) (21,586) (470,358) (39,476)
Total Comprehensive (Loss) Income $ (67,866) $ 53,997 $ (265,210) $ 174,135
See Notes to Consolidated Financial Statements


	Three months ended March 31
	2023		2022

Net Income	$	68,314	$	64,288
Other Comprehensive Income/(Loss), net of tax:
Unrealized gains (losses) on AFS investment securities
Unrealized gains (losses) on securities	32,641		(153,860)
Reclassification adjustment for securities net change included in net income	18		15
Amortization of net unrealized gains on AFS securities transferred to HTM	1,477		436

Net unrealized gains (losses) on AFS investment securities	34,136		(153,409)
Unrealized gains (losses) on interest rate derivatives used in cash flow hedges
Net unrealized holding losses arising during the period	(5,213)		(31,376)
Reclassification adjustment for net change realized in net income	5,536		(1,506)
Net unrealized gains (losses) on interest rate derivatives used in cash flow hedges	323		(32,882)
Defined benefit pension plan and postretirement benefits


Amortization of net unrecognized pension and postretirement items	25		25
Other Comprehensive Income (Loss)	34,484		(186,266)
Total Comprehensive Income (Loss)	$	102,798	$	(121,978)

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			Preferred Stock				Common Stock				Additional		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
		Shares	Amount		Shares	Amount		Paid-in Capital						Shares							Amount		Shares		Amount		Paid-in Capital
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
Three months ended March 31, 2023																			Three months ended March 31, 2023
Balance at December 31, 2022																			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	Net income									70,871							70,871		Net income											68,314						68,314
Other comprehensive loss												(138,737)					(138,737)
Other comprehensive income (loss)																			Other comprehensive income (loss)													34,484				34,484
Common stock issued	Common stock issued				132	91		490							1,518		2,099		Common stock issued					209		342		1,250						1,003		2,595
Reissuance of treasury stock pursuant to acquisition					6,209			4,547							85,166		89,713

Stock-based compensation awards	Stock-based compensation awards							3,791									3,791		Stock-based compensation awards									1,668								1,668

Acquisition of treasury stock																			Acquisition of treasury stock					(2,412)										(40,449)		(40,449)
Preferred stock dividend	Preferred stock dividend									(2,562)							(2,562)		Preferred stock dividend											(2,562)						(2,562)
Common stock cash dividends - $0.15 per share	Common stock cash dividends - $0.15 per share									(25,109)							(25,109)		Common stock cash dividends - $0.15 per share											(24,809)						(24,809)
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
Balance at March 31, 2023																			Balance at March 31, 2023	200		$	192,878	165,396		$	561,853	$	1,544,758	$	1,491,701	$	(350,992)	$	(821,200)	$	2,618,998

Three months ended September 30, 2021
Balance at June 30, 2021		200	$	192,878	162,988	$	559,485	$	1,513,645	$	1,208,086	$	47,201		$	(828,337)	$	2,692,958
Three months ended March 31, 2022																			Three months ended March 31, 2022
Balance at December 31, 2021																			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	Net income									75,583							75,583		Net income											64,288						64,288
Other comprehensive income	Other comprehensive income											(21,586)					(21,586)		Other comprehensive income													(186,266)				(186,266)

Common stock issued	Common stock issued				132	137		781							1,049		1,967		Common stock issued					179		279		1,602						912		2,793
Stock-based compensation awards	Stock-based compensation awards							2,192									2,192		Stock-based compensation awards									2,635								2,635
Acquisition of treasury stock					(1,691)										(26,126)		(26,126)
Preferred stock dividend										(2,562)							(2,562)
Common stock cash dividends - $0.14 per share										(22,608)							(22,608)
Balance at September 30, 2021		200	$	192,878	161,429	$	559,622	$	1,516,618	$	1,258,499	$	25,615		$	(853,414)	$	2,699,818

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					699	1,506		1,998							1,293		4,797
Reissuance of treasury stock pursuant to acquisition					6,209			4,547							85,166		$	89,713
Stock-based compensation awards								10,166									10,166

Preferred stock dividend	Preferred stock dividend									(7,686)							(7,686)		Preferred stock dividend											(2,562)						(2,562)
Common stock cash 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
Common stock cash dividends - $0.15 per share																			Common stock cash dividends - $0.15 per share											(24,033)						(24,033)
Balance at March 31, 2022																			Balance at March 31, 2022	$	200	$	192,878	160,669		$	560,045	$	1,524,110	$	1,320,076	$	(158,855)	$	(868,719)	$	2,569,535

Nine months ended September 30, 2021
Balance at December 31, 2020		200	$	192,878	162,350	$	557,917	$	1,508,117	$	1,120,781	$	65,091		$	(827,956)	$	2,616,828
Net income										213,611							213,611
Other comprehensive loss												(39,476)					(39,476)

Common stock issued					770	1,705		2,309							668		4,682
Stock-based compensation awards								6,192									6,192
Acquisition of treasury stock					(1,691)										(26,126)		(26,126)
Preferred stock dividend										(7,715)							(7,715)
Common stock cash dividends - $0.42 per share										(68,178)							(68,178)
Balance at September 30, 2021		200	$	192,878	161,429	$	559,622	$	1,516,618	$	1,258,499	$	25,615		$	(853,414)	$	2,699,818

See Notes to Consolidated Financial Statements	See Notes to Consolidated Financial Statements																		See Notes to Consolidated Financial Statements

810

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(in thousands)		Nine months ended September 30
(dollars in thousands)						(dollars in thousands)	Three months ended March 31
		2022		2021			2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income		$	205,148	$	213,611
Net income						Net income	$	68,314	$	64,288
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	Provision for credit losses	13,508		(9,600)		Provision for credit losses	24,544		(6,950)
Depreciation and amortization of premises and equipment	Depreciation and amortization of premises and equipment	22,627		20,647		Depreciation and amortization of premises and equipment	7,319		7,510
Net amortization of investment securities premiums	Net amortization of investment securities premiums	9,823		11,816		Net amortization of investment securities premiums	2,981		3,356

Investment securities (gains) losses, net		26		(33,511)
Investment securities gains, net						Investment securities gains, net	(23)		(19)
Gain on sales of mortgage loans held for sale	Gain on sales of mortgage loans held for sale	(7,974)		(20,038)		Gain on sales of mortgage loans held for sale	(656)		(3,026)
Proceeds from sales of mortgage loans held for sale	Proceeds from sales of mortgage loans held for sale	400,797		818,432		Proceeds from sales of mortgage loans held for sale	41,928		169,010
Originations of mortgage loans held for sale	Originations of mortgage loans held for sale	(371,466)		(757,631)		Originations of mortgage loans held for sale	(40,515)		(157,891)
Intangible amortization	Intangible amortization	1,043		443		Intangible amortization	674		176
Amortization of issuance costs and discounts on long-term borrowings	Amortization of issuance costs and discounts on long-term borrowings	551		1,608		Amortization of issuance costs and discounts on long-term borrowings	180		206
Debt extinguishment costs		—		32,575

Stock-based compensation	Stock-based compensation	10,166		6,192		Stock-based compensation	1,668		2,635
Change in deferred federal income tax		(148,952)		(11,079)

Change in life insurance cash surrender value		(90,234)		(12,802)
Net change in deferred federal income tax						Net change in deferred federal income tax	28,174		(55,200)
Net change in accrued salaries and benefits						Net change in accrued salaries and benefits	(24,436)		(15,924)
Net change in life insurance cash surrender value						Net change in life insurance cash surrender value	(2,830)		(27,347)
Other changes, net	Other changes, net	474,156		61,509		Other changes, net	(61,359)		(88,605)
Total adjustments	Total adjustments	314,071		108,561		Total adjustments	(22,351)		(172,069)
Net cash (used in) provided by operating activities		519,219		322,172
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	45,963		(107,781)
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of AFS securities	Proceeds from sales of AFS securities	196,407		125,811		Proceeds from sales of AFS securities	80,362		108,961
Proceeds from principal repayments and maturities of AFS securities	Proceeds from principal repayments and maturities of AFS securities	546,770		366,788		Proceeds from principal repayments and maturities of AFS securities	28,627		92,338
Proceeds from principal repayments and maturities of HTM securities	Proceeds from principal repayments and maturities of HTM securities	90,044		89,349		Proceeds from principal repayments and maturities of HTM securities	15,103		25,688
Purchase of AFS securities	Purchase of AFS securities	(822,216)		(901,400)		Purchase of AFS securities	(64,996)		(335,199)
Purchase of HTM securities	Purchase of HTM securities	(30,959)		(310,699)		Purchase of HTM securities	—		(9,541)
Sale of Visa Shares		—		33,962
(Increase) decrease of FRB and FHLB stock		(24,279)		30,836
Net change in FRB and FHLB stock						Net change in FRB and FHLB stock	22,581		(94)

Net (increase) decrease in loans		(819,164)		620,583
Net change in loans						Net change in loans	(404,842)		(149,715)
Net purchases of premises and equipment	Net purchases of premises and equipment	(10,023)		(17,346)		Net purchases of premises and equipment	(2,437)		(5,410)
Net cash paid for acquisition		(21,796)		292

Net change in tax credit investments	Net change in tax credit investments	(33,178)		(12,439)		Net change in tax credit investments	(12,412)		(15,951)
Net cash (used in) provided by investing activities		(928,394)		25,737
Net cash used in investing activities						Net cash used in investing activities	(338,014)		(288,923)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand and savings deposits		(420,622)		1,743,512
Net (decrease) increase in time deposits		(308,503)		(508,678)

Net (decrease) increase from other borrowings		183,518		(160,479)

Net change in demand and savings deposits						Net change in demand and savings deposits	(390,376)		38,376
Net change in time deposits						Net change in time deposits	1,057,432		(70,701)
Net change in other borrowings						Net change in other borrowings	(424,617)		35,676
Repayments of senior debt and subordinated debt	Repayments of senior debt and subordinated debt	(81,496)		(703,681)		Repayments of senior debt and subordinated debt	—		(65,057)

Net proceeds from issuance of common stock	Net proceeds from issuance of common stock	4,792		4,682		Net proceeds from issuance of common stock	2,595		2,793

Dividends paid	Dividends paid	(78,413)		(73,962)		Dividends paid	(27,702)		(25,032)
Acquisition of treasury stock	Acquisition of treasury stock	—		(26,126)		Acquisition of treasury stock	(40,449)		—
Net cash (used in) provided by financing activities		(700,724)		275,268
Net (decrease) increase in Cash and Cash Equivalents		(1,109,899)		623,177
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	176,883		(83,945)
Net decrease in Cash and Cash Equivalents						Net decrease in Cash and Cash Equivalents	(115,168)		(480,649)
Cash and Cash Equivalents at Beginning of Period	Cash and Cash Equivalents at Beginning of Period	1,638,614		1,847,832		Cash and Cash Equivalents at Beginning of Period	681,921		1,638,614
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period	$	528,715	$	2,471,009	Cash and Cash Equivalents at End of Period	$	566,753	$	1,157,965
Supplemental Disclosures of Cash Flow Information:	Supplemental Disclosures of Cash Flow Information:					Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	42,529	$	52,733	Interest	$	72,526	$	13,978
Income taxes	Income taxes	22,416		8,329		Income taxes	7,308		7,926
Supplemental Schedule of Certain Noncash Activities:
Transfer of AFS securities to HTM securities		$	479,008	$	376,165

See Notes to Consolidated Financial Statements	See Notes to Consolidated Financial Statements					See Notes to Consolidated Financial Statements

911

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, ~~2021.~~2022. Operating results for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023. The Corporation evaluates subsequent events through the date of filing of this 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 ~~2021~~2022 Annual Report on Form 10-K. Those significant accounting policies are unchanged at ~~September 30, 2022.~~

~~CARES Act and Consolidated Appropriations Act - 2021~~

On March 27, 2020 the CARES Act was signed into law. The CARES Act includes an option for financial institutions to suspend the requirements of GAAP for certain loan modifications that would otherwise be categorized as a TDR. Certain conditions must be met with respect to the loan modification including that the modification is related to COVID-19 and the modified loan was not more than 30 days past due on December 31, 2019. On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law and this Act extended the relief for TDR treatment that was set to expire on December 31, 2020 to the earlier of 60 days after the national emergency termination date or January 1, 2022. The Corporation applied the option under the CARES act for all loan modifications that qualified.2023.

Recently Adopted ~~Accounting Standards~~

~~On January 1, 2022, the Corporation adopted~~ ASC Update 2021-06 Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants (SEC Update). ~~The Corporation adopted this standards update effective with its March 31, 2022 quarterly report on Form 10-Q and it did not have a material impact on the consolidated financial statements.~~

~~Recently Issued~~ 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 ~~will adopt~~adopted ASU 2022-01 on January 1, ~~2023. The Corporation does~~2023 and it did not ~~expect the adoption of ASU 2022-01 to~~ have a material impact on its consolidated financial statements.

In March 2022, FASB issued ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("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 ~~will adopt~~adopted ASU 2022-02 on January 1, ~~2023. The Corporation does~~2023 and it did not ~~expect the adoption of ASU 2022-02 to~~ have a material impact on its consolidated financial statements.

~~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 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 ~~2022-04 in its entirety~~2020-04 on January 1, ~~2023.~~2025. The Corporation does not expect the adoption of ASU ~~2022-04~~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.

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 ~~2021~~2022 consolidated financial statements and notes have been reclassified to conform to the ~~2022~~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, ~~and~~ Prudential Bancorp was merged with and into the ~~Corporation.~~Corporation, and Prudential Bancorp's ~~wholly owned~~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 ~~November 5,~~July 1, 2022. ~~The~~As a result of the Merger, the Corporation ~~expects to enhance~~enhanced its presence in Philadelphia, ~~expand~~Pennsylvania, expanded its customer base ~~leverage~~and leveraged operating costs through economies of ~~scale and positively affect the Corporation's operating results.~~scale.

In accordance with the terms of the ~~Merger Agreement,~~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%) ~~payable~~paid in cash. The receipt of the Corporation’s common stock in the Merger ~~is expected to qualify~~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 ~~$16.3~~$19.6 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 per 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	~~7,532~~7,533
Investment securities	287,126
Loans	~~554,288~~554,091
Premises and equipment	~~13,743~~9,538
Other assets	~~70,874~~71,795
Total assets	~~933,563~~930,083
Liabilities assumed:
Deposits	~~532,180~~532,170
Borrowings(1)	284,000

Other liabilities	~~14,583~~14,482
Total liabilities	~~830,763~~830,652
Net assets acquired:	~~102,800~~99,431
Goodwill resulting from ~~acquisition of Prudential Bancorp~~the Merger	$	~~16,256~~19,625

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

While the valuation of the acquired assets and liabilities is ~~substantially~~ completed, fair value estimates related to the assets and liabilities from Prudential Bancorp are subject to adjustment for up to one year after the closing date of the Merger as additional information becomes available. ~~Valuations subject~~Included in the above table are adjustments of $3.4 million that occurred during the first quarter of 2023, resulting in an increase to ~~adjustment include, but are not limited to, investments, loans and deposits as management continues to review~~goodwill resulting from the estimated fair values and evaluate the assumed tax position. When the valuation is final, any changes to the preliminary valuation of acquired assets and liabilities could result in adjustments to goodwill.Merger.

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

~~The following is a description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed.~~

~~Cash and due from banks:~~ ~~The estimated fair values of cash and due from banks approximate their stated value.~~

~~Investment securities:~~ The acquired investment portfolio had a fair value of $287.1 million, primarily consisting of mortgage-backed securities, U.S. Government securities and municipal securities. The fair value of the investment portfolio was based on quoted market prices, dealer quotes and pricing obtained from independent pricing services.

~~Loans:~~ The Company recorded $554.3 million of acquired loans that were initially recorded at their fair values as of the date of the Merger. Fair value for the loans was based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors, such as liquidity, from the perspective of a market participant. Loan cash flows were generated on an individual loan basis. The PD, LGD, exposure at default and prepayment assumptions are the key factors driving credit losses that are embedded into the estimated cash flows.

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

July 1, 2022
Unpaid Principal Balance Fair Value
(in thousands)
Real estate - commercial mortgage $ 224,904 $ 216,613
Commercial and industrial 63,560 62,050
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 $ 554,405

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	$	25,792

The Merger resulted in the addition of $9.1 million in allowance for credit losses, including the $1.1 million identified in the table above for purchased credit deteriorated loans recorded through the provision for credit losses at the date of Merger.

~~Premises and equipment:~~The fair value of land and buildings reflected in premises and equipment was determined by obtaining recent market sales for comparable properties. The difference between the fair market value and the net book value for these properties resulted in an increase of $7.1 million to the premises and equipment acquired from Prudential Bancorp.

~~Intangible assets:~~The Corporation recorded $8.2 million of CDI reflected in Other assets that is being amortized over seven years using the sum-of-the-years digits method. The fair value of the CDI was determined using the cost savings approach. The cost savings approach is defined as the difference between the cost of funds of core deposits and an alternative cost of funds for those deposits. The CDI fair value was determined by projected discounted net cash flows that included assumptions related to customer attrition rates, discount rates, deposit interest rates, deposit account maintenance costs and alternative cost of funding rates.

~~Time deposits:~~Time deposits were valued at the account level based on their remaining maturity dates and comparing the contractual cost of the portfolio to brokered deposit costs having a similar tenor. The valuation adjustment of $1.9 million will be accreted to interest expense over the remaining maturities of the individual customer deposits.

~~Borrowings:~~ ~~The estimated fair values for borrowings approximated their stated value given these were short-term advances.~~

~~The~~ following table presents the change in goodwill during the period:


	~~Nine Months Ended September 30~~March 31
	~~2022~~2023
	(dollars in thousands)
Goodwill at December 31, ~~2021~~2022	$	~~534,266~~550,539
~~Goodwill~~Adjustments to goodwill from ~~Prudential Bancorp acquisition~~the Merger	~~16,256~~3,352

Goodwill at ~~September 30, 2022~~March 31, 2023	$	~~550,522~~553,891

~~Merger-related expenses~~

The Company developed a comprehensive integration plan under which it has incurred direct costs that are expensed as incurred. These direct costs include costs primarily related to terminated contracts, consolidated facilities (including lease termination expenses), severance, marketing and professional and legal fees. Costs related to the acquisition and restructuring are included in Merger-related expenses on the unaudited Consolidated Statements of Income.

~~The following table details the costs identified and classified as Merger-related expenses:~~

Three Months Ended September 30 Nine Months Ended September 30
2022 2022
(in thousands)
Salaries and employee benefits $ 487 $ 487
Data processing and software 1,113 1,114
Net occupancy 1,552 1,554
Other outside services 216 221
Professional fees 1,250 2,444
Marketing 88 88
Charitable donation 2,000 2,000
Other 300 526
Total Merger-related expenses $ 7,006 $ 8,434

As part of the Merger, the Corporation made a $2.0 million contribution to the Fulton Forward Foundation in July 2022, designated to be used to provide impact gifts in support of nonprofit community organizations in Philadelphia that are focused on advancing economic empowerment, particularly in underserved communities.

~~Income Statement~~

The following table summarizes the results of operations contributed by Prudential Bancorp for the three-month period ended September 30, 2022 presented in the unaudited Consolidated Statements of Income:


	~~Three Months Ended September 30~~
	~~2022~~
	~~(in thousands)~~
~~Total interest income~~	$	~~10,871~~
~~Total interest expense~~	~~2,733~~
~~Net interest income~~	~~8,138~~
~~Provisions for credit losses~~	~~7,571~~
~~Net Interest Income After Provision for Credit Losses~~	~~567~~
~~Total noninterest income~~	~~197~~
~~Total noninterest expense~~	~~3,583~~
~~Income Before Income Taxes~~	~~(2,819)~~
~~Income taxes~~	~~(753)~~
~~Net Loss~~	$	~~(2,066)~~

Pro Forma Income Statement (unaudited)

The table below ~~table~~ presents the pro forma results of the operations of the combined institutions ~~(Prudential Bancorp and the Corporation)~~ as if the Merger occurred on January 1, ~~2021.~~2022. The pro forma income statement adjustments are limited to the effects of fair value mark amortization and accretion and intangible asset amortization and do not consider future cost savings the Corporation expects to achieve ~~with~~subsequent to the ~~merging~~merger of Prudential Bank with and into the Bank. ~~No additional Merger-related expenses have been included in the pro forma results of operations.~~


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended March 31
		2022		2021		2022		2021			2023		2022
		(in thousands)									(dollars in thousands)
Net interest income	Net interest income	$	215,582	$	177,328	$	575,996	$	515,674	Net interest income	$	215,587	$	166,998
Provision for credit losses	Provision for credit losses	18,958		(400)		19,528		(9,400)		Provision for credit losses	24,544		(4,050)
Net Interest Income After Provision for Credit Losses	Net Interest Income After Provision for Credit Losses	196,624		177,728		556,468		525,074		Net Interest Income After Provision for Credit Losses	191,043		171,048
Total noninterest income	Total noninterest income	59,162		63,709		177,733		212,966		Total noninterest income	51,753		55,543
Total noninterest expenses	Total noninterest expenses	169,558		149,234		494,671		477,342		Total noninterest expenses	159,616		157,434
Income Before Income Taxes	Income Before Income Taxes	86,228		92,203		239,530		260,698		Income Before Income Taxes	83,180		69,157
Income tax expense	Income tax expense	15,357		14,629		41,825		41,143		Income tax expense	14,866		11,384
Net Income	Net Income	$	70,871	$	77,574	$	197,705	$	219,555	Net Income	$	68,314	$	57,773

NOTE 3 – Restrictions on Cash and Cash Equivalents

Cash collateral is posted by the Corporation with counterparties to secure derivatives and other contracts, which is included in "interest-bearing deposits with other banks" on the consolidated balance sheets. The amounts of such collateral as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were ~~$16.5~~$11.5 million and ~~$202.8~~$13.9 million, respectively.

NOTE 4 – Investment Securities

The following table presents the amortized cost and estimated fair values of investment securities for the periods presented:


		September 30, 2022									March 31, 2023
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale	Available for Sale	(in thousands)								Available for Sale	(dollars in thousands)
U.S. Government securities	U.S. Government securities	$	226,439	$	—	$	(8,255)	$	218,184	U.S. Government securities	$	225,844	$	—	$	(5,791)	$	220,053

U.S. Government-sponsored agency securities	U.S. Government-sponsored agency securities	1,053		—		(47)		1,006		U.S. Government-sponsored agency securities	1,047		—		(30)		1,017
State and municipal securities	State and municipal securities	1,287,140		12		(248,967)		1,038,185		State and municipal securities	1,211,841		967		(145,210)		1,067,598
Corporate debt securities	Corporate debt securities	436,443		—		(36,828)		399,615		Corporate debt securities	475,052		—		(36,018)		439,034
Collateralized mortgage obligations	Collateralized mortgage obligations	155,010		—		(12,609)		142,401		Collateralized mortgage obligations	141,587		—		(11,137)		130,450
Residential mortgage-backed securities	Residential mortgage-backed securities	246,854		6		(32,608)		214,252		Residential mortgage-backed securities	238,775		33		(26,234)		212,574
Commercial mortgage-backed securities	Commercial mortgage-backed securities	655,384		—		(71,643)		583,741		Commercial mortgage-backed securities	651,767		—		(80,104)		571,663

Total	Total	$	3,008,323	$	18	$	(410,957)	$	2,597,384	Total	$	2,945,913	$	1,000	$	(304,524)	$	2,642,389

Held to Maturity	Held to Maturity									Held to Maturity

Residential mortgage-backed securities	Residential mortgage-backed securities	$	470,879	$	—	$	(60,881)	$	409,998	Residential mortgage-backed securities	$	444,431	$	—	$	(52,078)	$	392,353
Commercial mortgage-backed securities	Commercial mortgage-backed securities	868,431		—		(136,719)		731,712		Commercial mortgage-backed securities	863,281		—		(130,607)		732,674
Total	Total	$	1,339,310	$	—	$	(197,600)	$	1,141,710	Total	$	1,307,712	$	—	$	(182,685)	$	1,125,027

December 31, 2021
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair
Value
Available for Sale (in thousands)
U.S. Government securities $ 127,831 $ — $ (213) $ 127,618
State and municipal securities 1,139,187 50,161 (678) 1,188,670
Corporate debt securities 373,482 13,009 (358) 386,133
Collateralized mortgage obligations 206,532 3,581 (754) 209,359
Residential mortgage-backed securities 231,607 1,224 (3,036) 229,795
Commercial mortgage-backed securities 974,541 6,141 (9,534) 971,148
Auction rate securities 76,350 — (1,683) 74,667
Total $ 3,129,530 $ 74,116 $ (16,256) $ 3,187,390
Held to Maturity
Residential mortgage-backed securities $ 404,958 $ 11,022 $ (7,067) $ 408,913
Commercial mortgage-backed securities 575,426 — (18,472) 556,954
Total $ 980,384 $ 11,022 $ (25,539) $ 965,867

~~During the first quarter of 2022, all ARCs were sold.~~


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale	(dollars in thousands)
U.S. Government securities	$	226,140	$	—	$	(7,655)	$	218,485
U.S. Government sponsored agency securities	1,050		—		(42)		1,008
State and municipal securities	1,284,245		283		(178,816)		1,105,712
Corporate debt securities	459,792		—		(37,483)		422,309
Collateralized mortgage obligations	147,155		—		(13,122)		134,033
Residential mortgage-backed securities	242,527		18		(29,847)		212,698
Commercial mortgage-backed securities	631,604		—		(79,082)		552,522

Total	$	2,992,513	$	301	$	(346,047)	$	2,646,767



Held to Maturity

Residential mortgage-backed securities	$	457,325	$	—	$	(57,480)	$	399,845
Commercial mortgage-backed securities	863,931		—		(138,727)		725,204
Total	$	1,321,256	$	—	$	(196,207)	$	1,125,049

On May 1, 2022, the Corporation transferred certain residential mortgage-backed securities and commercial mortgage-backed securities from AFS to HTM classification as permitted by ASU ~~2019-04.~~2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The estimated fair value of the securities transferred was $415.2 million, and the amortized cost of the securities was $479.0 million.

Securities carried at ~~$1.3~~$1.1 billion at ~~September 30, 2022~~March 31, 2023 and ~~$2.5 billion at~~ December 31, ~~2021~~2022 were pledged as collateral to secure public and trust deposits.

The amortized cost and estimated fair values of debt securities as of ~~September 30, 2022,~~March 31, 2023, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without call or prepayment penalties.


			September 30, 2022										March 31, 2023
			Available for Sale				Held to Maturity						Available for Sale				Held to Maturity
			Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value				Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
		(in thousands)										(dollars in thousands)
Due in one year or less	Due in one year or less		$	9,524	$	9,516	$	—	$	—	Due in one year or less		$	237,505	$	231,571	$	—	$	—
Due from one year to five years	Due from one year to five years		287,824		277,609		—		—		Due from one year to five years		75,121		72,835		—		—
Due from five years to ten years	Due from five years to ten years		506,946		463,474		—		—		Due from five years to ten years		544,101		509,791		—		—
Due after ten years	Due after ten years		1,146,781		906,391		—		—		Due after ten years		1,057,057		913,505		—		—
			1,951,075		1,656,990		—		—				1,913,784		1,727,702		—		—
Residential mortgage-backed securities(1)	Residential mortgage-backed securities(1)		246,854		214,252		470,879		409,998		Residential mortgage-backed securities(1)		238,775		212,574		444,431		392,353
Commercial mortgage-backed securities(1)	Commercial mortgage-backed securities(1)		655,384		583,741		868,431		731,712		Commercial mortgage-backed securities(1)		651,767		571,663		863,281		732,674
Collateralized mortgage obligations(1)	Collateralized mortgage obligations(1)		155,010		142,401		—		—		Collateralized mortgage obligations(1)		141,587		130,450		—		—
Total	Total		$	3,008,323	$	2,597,384	$	1,339,310	$	1,141,710	Total		$	2,945,913	$	2,642,389	$	1,307,712	$	1,125,027
(1) Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on the underlying loans.	(1) Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on the underlying loans.										(1) Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on the underlying loans.

The following table presents information related to gross realized gains and losses on the sales of securities for the periods presented:

Gross Realized Gains Gross Realized Losses Net (Losses) Gains
Three months ended (in thousands)
September 30, 2022 $ 33 $ (86) $ (53)
September 30, 2021 — — —
Nine months ended
September 30, 2022 $ 1,587 $ (1,613) $ (26)
September 30, 2021 34,481 (970) 33,511


	Gross Realized Gains		Gross Realized Losses		Net Gains (Losses)
Three months ended	(dollars in thousands)
March 31, 2023	$	283	$	(260)	$	23
March 31, 2022	1,546		(1,527)		19

During the first quarter of 2021, the Corporation completed a balance sheet restructuring that included a $34.0 million gain on the sale of Visa Shares, offset by losses on other securities of $0.4 million, primarily in connection with the sale of $24.6 million of ARCs.

The following tables present the gross unrealized losses and estimated fair values of investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for the periods presented:


		September 30, 2022															March 31, 2023
		Less than 12 months					12 months or longer					Total					Less than 12 months					12 months or longer					Total
		Number of Securities	Estimated Fair Value		Unrealized Losses		Number of Securities	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses			Number of Securities	Estimated Fair Value		Unrealized Losses		Number of Securities	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses

Available for Sale	Available for Sale		(dollars in thousands)													Available for Sale		(dollars in thousands)
U.S. Government securities	U.S. Government securities	3	$	218,184	$	(8,255)	—	$	—	$	—	$	218,184	$	(8,255)	U.S. Government securities	1	$	97,566	$	(2,210)	2	$	122,487	$	(3,581)	$	220,053	$	(5,791)

U.S. Government-sponsored agency securities	U.S. Government-sponsored agency securities	1	1,006		(47)		—	—		—		1,006		(47)		U.S. Government-sponsored agency securities	1	1,017		(30)			—		—		1,017		(30)
State and municipal securities	State and municipal securities	395	982,919		(228,508)		22	45,759		(20,459)		1,028,678		(248,967)		State and municipal securities	86	238,922		(6,326)		258	735,187		(138,884)		974,109		(145,210)
Corporate debt securities	Corporate debt securities	68	386,141		(35,547)		2	10,718		(1,281)		396,859		(36,828)		Corporate debt securities	45	239,873		(13,138)		27	196,406		(22,880)		436,279		(36,018)
Collateralized mortgage obligations	Collateralized mortgage obligations	100	121,120		(7,182)		1	21,281		(5,427)		142,401		(12,609)		Collateralized mortgage obligations	37	29,944		(1,499)		59	100,506		(9,638)		130,450		(11,137)
Residential mortgage-backed securities	Residential mortgage-backed securities	101	157,808		(19,901)		4	55,110		(12,707)		212,918		(32,608)		Residential mortgage-backed securities	50	80,524		(4,743)		25	129,035		(21,491)		209,559		(26,234)
Commercial mortgage-backed securities	Commercial mortgage-backed securities	122	462,988		(47,022)		12	120,753		(24,621)		583,741		(71,643)		Commercial mortgage-backed securities	75	138,365		(4,501)		61	433,298		(75,603)		571,663		(80,104)

Total available for sale	Total available for sale	790	$	2,330,166	$	(346,462)	41	$	253,621	$	(64,495)	$	2,583,787	$	(410,957)	Total available for sale	295	$	826,211	$	(32,447)	432	$	1,716,919	$	(272,077)	$	2,543,130	$	(304,524)

Held to Maturity	Held to Maturity															Held to Maturity

Residential mortgage-backed securities	Residential mortgage-backed securities	108	$	270,986	$	(20,485)	12	$	139,012	$	(40,396)	$	409,998	$	(60,881)	Residential mortgage-backed securities	106	$	238,862	$	(11,981)	14	$	153,491	$	(40,097)	$	392,353	$	(52,078)
Commercial mortgage-backed securities	Commercial mortgage-backed securities	33	376,207		(46,035)		27	355,505		(90,684)		731,712		(136,719)		Commercial mortgage-backed securities	20	257,006		(17,272)		40	475,668		(113,335)		732,674		(130,607)
Total		141	$	647,193	$	(66,520)	39	$	494,517	$	(131,080)	$	1,141,710	$	(197,600)
Total held to maturity																Total held to maturity	126	$	495,868	$	(29,253)	54	$	629,159	$	(153,432)	$	1,125,027	$	(182,685)

December 31, 2021
Less than 12 months 12 months or longer Total
Number of Securities Estimated
Fair Value Unrealized
Losses Number of Securities Estimated
Fair Value Unrealized
Losses Estimated
Fair Value Unrealized
Losses
Available for Sale (dollars in thousands)
U.S Government Securities 2 $ 127,618 $ (213) — $ — $ — $ 127,618 $ (213)
State and municipal securities 29 82,731 (678) — — — 82,731 (678)
Corporate debt securities 6 43,068 (358) — — — 43,068 (358)
Collateralized mortgage obligations 4 28,517 (754) — — — 28,517 (754)
Residential mortgage-backed securities 7 123,687 (2,388) 1 16,669 (648) 140,356 (3,036)
Commercial mortgage-backed securities 41 512,312 (9,534) — — — 512,312 (9,534)
Auction rate securities — — — 118 74,667 (1,683) 74,667 (1,683)
Total available for sale 89 $ 917,933 $ (13,925) 119 $ 91,336 $ (2,331) $ 1,009,269 $ (16,256)
Held to Maturity
Residential mortgage-backed securities 14 $ 205,969 $ (7,067) — $ — $ — $ 205,969 $ (7,067)
Commercial mortgage-backed securities 36 556,954 (18,472) — — — 556,954 (18,472)
Total 50 $ 762,923 $ (25,539) — $ — $ — $ 762,923 $ (25,539)


	December 31, 2022
	Less than 12 months					12 months or longer					Total
	Number of Securities	Estimated Fair Value		Unrealized Losses		Number of Securities	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Available for Sale	(dollars in thousands)
U.S Government Securities	1	$	96,906	$	(2,814)	2	$	121,579	$	(4,841)	$	218,485	$	(7,655)
U.S. Government sponsored agency securities	1	1,008		(42)		—	—		—		1,008		(42)
State and municipal securities	360	995,122		(157,397)		29	61,089		(21,419)		1,056,211		(178,816)
Corporate debt securities	66	376,398		(31,333)		6	37,157		(6,150)		413,555		(37,483)
Collateralized mortgage obligations	96	113,191		(7,650)		1	20,842		(5,472)		134,033		(13,122)
Residential mortgage-backed securities	81	154,861		(18,301)		5	55,293		(11,546)		210,154		(29,847)
Commercial mortgage-backed securities	114	371,109		(38,845)		20	181,413		(40,237)		552,522		(79,082)
Total available for sale	719	$	2,108,595	$	(256,382)	63	$	477,373	$	(89,665)	$	2,585,968	$	(346,047)

Held to Maturity

Residential mortgage-backed securities	106	$	246,667	$	(14,275)	14	$	153,178	$	(43,205)	$	399,845	$	(57,480)
Commercial mortgage-backed securities	21	258,255		(24,029)		39	466,949		(114,698)		725,204		(138,727)
Total held to maturity	127	$	504,922	$	(38,304)	53	$	620,127	$	(157,903)	$	1,125,049	$	(196,207)

The Corporation's collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The change in fair value of these securities is attributable to changes in interest rates and not credit quality. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. Therefore, the Corporation does not have an ACL for these investments as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

~~Based on management’s evaluations,~~As of March 31, 2023 and December 31, 2022, no ACL was required for the Corporation's state and municipal ~~securities as of September 30, 2022 or December 31, 2021.~~securities. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, all of the Corporation's corporate debt securities were rated above investment grade. Based on the payment status, rating and management's evaluation of these securities, no ACL was required for corporate debt securities as of ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~

As of December 31, 2021, all ARCs were rated above investment grade. All of the loans underlying the ARCs had principal payments that were guaranteed by the federal government. Based on the payment status, rating and management's evaluation of these securities, no ACL was required for ARCs as of December 31, 2021.2022.

NOTE 5 - Loans and Allowance for Credit Losses

Loans and leases, net of unearned income

Loans and leases, net of unearned income are summarized as follows:

September 30,
2022 December 31, 2021
(in thousands)
Real estate - commercial mortgage $ 7,554,509 $ 7,279,080
Commercial and industrial (1)
4,243,392 4,208,327
Real-estate - residential mortgage 4,574,228 3,846,750
Real-estate - home equity 1,110,103 1,118,248
Real-estate - construction 1,273,097 1,139,779
Consumer 633,666 464,657
Equipment lease financing and other 328,057 283,557
Overdrafts 2,162 1,988
Gross loans 19,719,214 18,342,386
Unearned income (24,015) (17,036)
Net loans $ 19,695,199 $ 18,325,350

~~(1)~~ ~~Includes PPP loans totaling $32.1 million and $301.3 million as of September 30, 2022 and December 31, 2021, respectively.~~


	March 31, 2023		December 31, 2022
	(dollars in thousands)
Real estate - commercial mortgage	$	7,746,920	$	7,693,835
Commercial and industrial	4,600,696		4,477,537
Real-estate - residential mortgage	4,880,919		4,737,279
Real-estate - home equity	1,074,712		1,102,838
Real-estate - construction	1,326,754		1,269,925
Consumer	730,775		699,179
Leases and other loans	340,595		328,331
Gross loans	20,701,371		20,308,924
Unearned income	(31,183)		(29,377)
Net loans	$	20,670,188	$	20,279,547

The Corporation segments its loan portfolio by "portfolio segments," as presented in the table above. Certain portfolio segments are further disaggregated by "class segment" for the purpose of estimating credit losses.

Allowance for Credit Losses

The ACL ~~related to loans~~ consists of loans evaluated collectively and individually for expected credit losses. The ACL ~~related to loans~~ represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to net loans. The ACL ~~for OBS credit exposure includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures and is recorded in other liabilities. The total ACL~~ is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries. The reserve for OBS credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures.

The following table ~~presents~~summarizes the ~~components~~ACL - loans balance and the reserve for OBS credit exposures balance as of ~~the ACL:~~March 31, 2023 and December 31, 2022:

September 30, 2022 December 31, 2021
(in thousands)
ACL - loans $ 266,838 $ 249,001
ACL - OBS credit exposure(1)
15,690 14,533
Total ACL $ 282,528 $ 263,534



	March 31, 2023		December 31, 2022
	(dollars in thousands)
ACL - loans	$	278,695	$	269,366

Reserve for OBS credit exposures(1)	$	17,539	$	16,328

(1) Included in other liabilities on the ~~Consolidated Balance Sheets.~~

~~The following table presents the activity in the ACL:~~

Three months ended September 30 Nine months ended September 30
2022 2021 2022 2021
(in thousands)
Balance at beginning of period $ 262,887 $ 269,805 $ 263,534 $ 291,940
CECL Day 1 Provision expense 7,954 — 7,954 —
Purchased credit deteriorated loans 1,135 — 1,135 —
Loans charged off (3,724) (2,234) (7,242) (19,958)
Recoveries of loans previously charged off 3,272 4,539 11,593 9,128
Net loans (charged-off) recovered (452) 2,305 4,351 (10,830)
Provision for credit losses (1)
11,004 (600) 5,554 (9,600)
Balance at end of period $ 282,528 $ 271,510 $ 282,528 $ 271,510

~~(1)~~ Includes $1.4 million and $10 thousand for the three months ended September 30, 2022 and 2021, respectively, and includes $1.2 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively, related to OBS credit exposure.

consolidated balance sheets.

2019

The following table presents the activity in the ACL - loans balances:


	Three months ended March 31
	2023		2022
	(dollars in thousands)
Balance at beginning of period	$	269,366	$	249,001


Loans charged off	(16,903)		(1,900)
Recoveries of loans previously charged off	2,899		2,954
Net loans (charged-off) recovered	(14,004)		1,054
Provision for credit losses	23,333		(6,350)
Balance at end of period	$	278,695	$	243,705
Provision for OBS credit exposures	$	1,211	$	(600)
Reserve for OBS credit exposures	$	17,539	$	13,933

The following table presents the activity in the ACL by portfolio segment:

Real Estate
Commercial
Mortgage Commercial and
Industrial Consumer and Home
Equity Real Estate Residential
Mortgage Real Estate
Construction Equipment lease financing, other
and overdrafts Total
(in thousands)
Three months ended September 30, 2022
Balance at June 30, 2022 $ 72,605 $ 72,119 $ 23,080 $ 61,635 $ 10,628 $ 8,497 $ 248,564
CECL Day 1 Provision expense 4,107 — 131 3,716 — — 7,954
Purchased credit deteriorated loans 1,051 — 7 77 — — 1,135
Loans charged off (86) (1,783) (1,172) — — (683) (3,724)
Recoveries of loans previously charged off 29 2,213 682 101 — 247 3,272
Net loans recovered (charged off) (57) 430 (490) 101 — (436) (452)
Provision for loan losses (1)
11,144 (6,424) 1,812 1,880 1,045 180 9,637
Balance at September 30, 2022 $ 88,850 $ 66,125 $ 24,540 $ 67,409 $ 11,673 $ 8,241 $ 266,838
Three months ended September 30, 2021
Balance at June 30, 2021 $ 95,381 $ 65,404 $ 21,994 $ 54,188 $ 12,654 $ 5,411 $ 255,032
Loans charged off (14) (647) (504) (602) — (467) (2,234)
Recoveries of loans previously charged off 564 2,330 504 86 697 358 4,539
Net loans recovered (charged off) 550 1,683 — (516) 697 (109) 2,305
Provision for loan and lease losses (1)
234 (4,196) (526) 2,557 (930) 2,251 (610)
Balance at September 30, 2021 $ 96,165 $ 62,891 $ 21,468 $ 56,229 $ 12,421 $ 7,553 $ 256,727
Nine months ended September 30, 2022
Balance at December 31, 2021 $ 87,970 $ 67,056 $ 19,749 $ 54,236 $ 12,941 $ 7,049 $ 249,001
CECL Day 1 Provision expense 4,107 — 131 3,716 — — 7,954
Purchased credit deteriorated loans 1,051 — 7 77 — — 1,135
Loans charged off (238) (2,211) (3,101) (66) — (1,626) (7,242)
Recoveries of loans previously charged off 3,677 4,932 1,898 415 44 627 11,593
Net loans recovered (charged off) 3,439 2,721 (1,203) 349 44 (999) 4,351
Provision for loan losses (1)
(7,717) (3,652) 5,856 9,031 (1,312) 2,191 4,397
Balance at September 30, 2022 $ 88,850 $ 66,125 $ 24,540 $ 67,409 $ 11,673 $ 8,241 $ 266,838
Nine months ended September 30, 2021
Balance at December 31, 2020 $ 103,425 $ 74,771 $ 25,137 $ 51,995 $ 15,608 $ 6,631 $ 277,567
Loans charged off (8,357) (5,920) (2,481) (1,290) (39) (1,871) (19,958)
Recoveries of loans previously charged off 1,467 3,792 1,578 286 1,335 670 9,128
Net loans recovered (charged off) (6,890) (2,128) (903) (1,004) 1,296 (1,201) (10,830)
Provision for loan losses (1)
(370) (9,752) (2,766) 5,238 (4,483) 2,123 (10,010)
Balance at September 30, 2021 $ 96,165 $ 62,891 $ 21,468 $ 56,229 $ 12,421 $ 7,553 $ 256,727


	Real Estate Commercial Mortgage		Commercial and Industrial		Real Estate Residential Mortgage		Consumer and Home Equity		Real Estate Construction		Leases and other loans		Total
	(dollars in thousands)
Three months ended March 31, 2023
Balance at December 31, 2022	$	69,456	$	70,116	$	83,250	$	26,429	$	10,743	$	9,372	$	269,366


Loans charged off	(13,362)		(612)		—		(2,206)		—		(723)		(16,903)
Recoveries of loans previously charged off	786		1,086		48		661		202		116		2,899
Net loans (charged off) recovered	(12,576)		474		48		(1,545)		202		(607)		(14,004)
Provision for loan losses(1)	9,376		6,536		2,911		2,419		701		1,390		23,333
Balance at March 31, 2023	$	66,256	$	77,126	$	86,209	$	27,303	$	11,646	$	10,155	$	278,695
Three months ended March 31, 2022
Balance at December 31, 2021	$	87,970	$	67,056	$	54,236	$	19,749	$	12,941	$	7,049	$	249,001
Loans charged off	(152)		(227)		—		(1,052)		—		(469)		(1,900)
Recoveries of loans previously charged off	112		1,980		222		454		32		154		2,954
Net loans (charged off) recovered	(40)		1,753		222		(598)		32		(315)		1,054
Provision for loan and lease losses(1)	(8,077)		(2,298)		1,434		1,062		330		1,199		(6,350)
Balance at March 31, 2022	$	79,853	$	66,511	$	55,892	$	20,213	$	13,303	$	7,933	$	243,705

(1) Provision included in the table only includes the portion related to net loans.

Included in the third quarter of 2022 provision for credit losses was a CECL Day 1 Provision of $8.0 million for the acquired Prudential Bancorp loan portfolio. The ACL also included $1.1 million for purchased credit deteriorated loans for the acquired Prudential Bancorp loan portfolio.

The ACL - loans includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. Qualitative adjustments include and consider changes in national, regional and local economic and business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting credit quality.

The provision for credit losses for the ~~third~~first quarter of ~~2022~~2023 was recorded to increase the allowance for credit losses as a result of ~~an increase in non-performing loans, as well as increases for~~loan growth and changes to the ~~office building portfolio, reflected in the commercial real estate loan portfolio, and the consumer loan, real estate construction and residential mortgage loan portfolios.~~macroeconomic outlook.

Non-accrual Loans

All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, substantially all of the Corporation's individually evaluated loans with total commitments greater than or equal to $1.0 million were measured based on the estimated fair value of each loan’s collateral, if any. Collateral could be in the form of real estate, in the case of commercial mortgages and construction loans, or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, approximately ~~89%~~85% and ~~98%~~91%, respectively, of loans evaluated individually for impairment with principal balances greater than or equal to $1.0 million, whose primary collateral consisted of real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months.

The following table presents total non-accrual loans, by class segment:


		September 30, 2022						December 31, 2021							March 31, 2023						December 31, 2022
		With a Related Allowance		Without a Related Allowance		Total		With a Related Allowance		Without a Related Allowance		Total			With a Related Allowance		Without a Related Allowance		Total		With a Related Allowance		Without a Related Allowance		Total
		(in thousands)													(dollars in thousands)
Real estate - commercial mortgage	Real estate - commercial mortgage	$	58,518	$	36,186	$	94,704	$	20,564	$	32,251	$	52,815	Real estate - commercial mortgage	$	18,878	$	39,531	$	58,409	$	39,722	$	30,439	$	70,161
Commercial and industrial	Commercial and industrial	11,171		18,633		29,804		12,571		17,570		30,141		Commercial and industrial	16,090		15,789		31,879		14,804		12,312		27,116
Real estate - residential mortgage	Real estate - residential mortgage	31,464		—		31,464		35,269		—		35,269		Real estate - residential mortgage	23,450		977		24,427		25,315		979		26,294
Real estate - home equity	Real estate - home equity	6,960		133		7,093		8,671		—		8,671		Real estate - home equity	5,912		122		6,034		5,975		130		6,105
Real estate - construction	Real estate - construction	185		1,271		1,456		173		728		901		Real estate - construction	831		447		1,278		866		502		1,368
Consumer	Consumer	101		—		101		229		—		229		Consumer	25		—		25		92		—		92
Equipment lease financing and other		4,327		9,255		13,582		6,247		9,393		15,640
Leases and other loans														Leases and other loans	2,995		9,256		12,251		4,052		9,255		13,307
		$	112,726	$	65,478	$	178,204	$	83,724	$	59,942	$	143,666		$	68,181	$	66,122	$	134,303	$	90,826	$	53,617	$	144,443

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there were ~~$65.5~~$66.1 million and ~~$59.9~~$53.6 million, respectively,of non-accrual loans that did not have a related allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

Asset Quality

Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, residential construction, commercial and industrial, and commercial real estate, an internal risk rating process is used. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk ~~rating~~ categories is a significant component of the ACL methodology for these loans, under both the CECL and incurred loss models, which bases the probability of default on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide a separate assessment of risk rating accuracy. Risk ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff, or if specific loan review assessments identify a deterioration or an improvement in a loan.

The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the ~~loans.~~current period:


		March 31, 2023
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(in thousands)												Amortized		Amortized
		2023		2022		2021		2020		2019		Prior		Cost Basis		Cost Basis		Total
Real estate - commercial mortgage
	Pass	$	173,387	$	1,015,881	$	1,077,823	$	943,188	$	799,374	$	3,170,784	$	73,033	$	305	$	7,253,775
	Special Mention	—		14,438		65,362		19,804		34,352		169,568		2,728		—		306,252
	Substandard or Lower	—		2,668		19,190		48,655		24,531		91,606		243		—		186,893
	Total real estate - commercial mortgage	173,387		1,032,987		1,162,375		1,011,647		858,257		3,431,958		76,004		305		7,746,920
Real estate - commercial mortgage
	Current period gross charge-offs	—		—		—		—		—		(30)		—		(13,332)		(13,362)
Commercial and industrial(1)
	Pass	379,383		689,276		444,738		379,630		301,392		748,118		1,394,101		6,517		4,343,155
	Special Mention	150		17,426		16,457		4,958		9,500		31,125		65,596		243		145,455
	Substandard or Lower	206		1,259		754		4,001		13,042		22,863		69,675		286		112,086
	Total commercial and industrial	379,739		707,961		461,949		388,589		323,934		802,106		1,529,372		7,046		4,600,696
Commercial and industrial(1)
	Current period gross charge-offs	—		—		—		—		—		—		(53)		(559)		(612)
Real estate - construction(2)
	Pass	49,829		165,351		425,549		218,594		23,387		103,958		39,917		—		1,026,585
	Special Mention	—		1,218		—		—		—		29,283		—		—		30,501
	Substandard or Lower	—		305		2,079		—		2,238		4,148		2,284		—		11,054
	Total real estate - construction	49,829		166,874		427,628		218,594		25,625		137,389		42,201		—		1,068,140
Real estate - construction(2)
	Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Total
	Pass	$	602,599	$	1,870,508	$	1,948,110	$	1,541,412	$	1,124,153	$	4,022,860	$	1,507,051	$	6,822	$	12,623,515
	Special Mention	150		33,082		81,819		24,762		43,852		229,976		68,324		243		482,208
	Substandard or Lower	206		4,232		22,023		52,656		39,811		118,617		72,202		286		310,033
	Total	$	602,955	$	1,907,822	$	2,051,952	$	1,618,830	$	1,207,816	$	4,371,453	$	1,647,577	$	7,351	$	13,415,756

(1) Loans originated in 2021 and 2020 include $9.8 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government guaranty through the SBA.

(2) Excludes real estate - construction - other.

~~The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the current period:~~

September 30, 2022
Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans
(in thousands) Amortized Amortized
2022 2021 2020 2019 2018 Prior Cost Basis Cost Basis Total
Real estate - construction(1)
Pass $ 102,525 $ 355,433 $ 299,312 $ 48,953 $ 49,473 $ 113,662 $ 37,564 $ — $ 1,006,922
Special Mention — — 2,789 — — 5,463 — — 8,252
Substandard or Lower — — — 2,310 — 4,633 208 — 7,151
Total real estate - construction 102,525 355,433 302,101 51,263 49,473 123,758 37,772 — 1,022,325
Real estate - construction(1)
Current period gross charge-offs — — — — — — — — —
Current period recoveries — — — — — — — 44 44
Total net (charge-offs) recoveries — — — — — — — 44 44
Commercial and industrial(2)
Pass 635,272 497,464 419,171 337,009 191,715 641,262 1,306,921 962 4,029,776
Special Mention 7,762 10,941 8,550 8,819 4,957 21,754 41,119 — 103,902
Substandard or Lower 791 4,887 3,893 14,400 6,316 23,992 55,435 — 109,714
Total commercial and industrial 643,825 513,292 431,614 360,228 202,988 687,008 1,403,475 962 4,243,392
Commercial and industrial
Current period gross charge-offs — — (36) — (21) (365) (1,192) (597) (2,211)
Current period recoveries — — 30 95 379 1,618 747 2,063 4,932
Total net (charge-offs) recoveries — — (6) 95 358 1,253 (445) 1,466 2,721
Real estate - commercial mortgage
Pass 730,581 1,147,950 955,537 808,474 613,888 2,680,340 65,607 — 7,002,377
Special Mention 96 29,528 38,858 35,957 18,060 155,437 1,200 — 279,136
Substandard or Lower 94 1,496 7,563 68,248 28,686 166,666 243 — 272,996
Total real estate - commercial mortgage 730,771 1,178,974 1,001,958 912,679 660,634 3,002,443 67,050 — 7,554,509
Real estate - commercial mortgage
Current period gross charge-offs — — — — — — — (238) (238)
Current period recoveries — — — — — 4 — 3,673 3,677
Total net (charge-offs) recoveries — — — — — 4 — 3,435 3,439
Total
Pass $ 1,468,378 $ 2,000,847 $ 1,674,020 $ 1,194,436 $ 855,076 $ 3,435,264 $ 1,410,092 $ 962 $ 12,039,075
Special Mention 7,858 40,469 50,197 44,776 23,017 182,654 42,319 — 391,290
Substandard or Lower 885 6,383 11,456 84,958 35,002 195,291 55,886 — 389,861
Total $ 1,477,121 $ 2,047,699 $ 1,735,673 $ 1,324,170 $ 913,095 $ 3,813,209 $ 1,508,297 $ 962 $ 12,820,226

~~(1)~~ ~~Excludes real estate - construction - other.~~

~~(2)~~ ~~Loans originated in 2021 and 2020 include $32.1 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government guaranty through the SBA.~~

The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the prior period:

December 31, 2021
Term Loans Amortized Cost Basis by Origination Year Revolving Loans Revolving Loans converted to Term Loans
( in thousands) Amortized Amortized
2021 2020 2019 2018 2017 Prior Cost Basis Cost Basis Total
Real estate - construction(1)
Pass $ 190,030 $ 315,811 $ 113,245 $ 83,886 $ 17,545 $ 117,157 $ 46,409 $ — $ 884,083
Special Mention 5,843 775 9,984 20,200 15,724 6,315 — — 58,841
Substandard or Lower — — — — 1,912 4,185 227 — 6,324
Total real estate - construction 195,873 316,586 123,229 104,086 35,181 127,657 46,636 — 949,248
Real estate - construction(1)
Current period gross charge-offs — — (39) — — — — — (39)
Current period recoveries — — 39 — — 1,373 — — 1,412
Total net (charge-offs) recoveries — — — — — 1,373 — — 1,373
Commercial and industrial(2)
Pass 855,924 520,802 396,575 232,805 147,675 581,762 1,177,857 339 3,913,739
Special Mention 5,386 8,538 33,937 8,301 10,346 23,380 52,386 95 142,369
Substandard or Lower 1,225 9,775 19,393 24,327 11,912 34,825 49,562 1,200 152,219
Total commercial and industrial 862,535 539,115 449,905 265,433 169,933 639,967 1,279,805 1,634 4,208,327
Commercial and industrial
Current period gross charge-offs (2,977) (406) (4,966) (208) (286) (800) (5,694) — (15,337)
Current period recoveries 6 39 4,691 841 457 2,342 1,211 — 9,587
Total net (charge-offs) recoveries (2,971) (367) (275) 633 171 1,542 (4,483) — (5,750)
Real estate - commercial mortgage
Pass 1,086,113 899,172 826,866 624,653 712,223 2,356,308 55,370 — 6,560,705
Special Mention 1,317 60,732 96,508 25,280 33,595 169,732 115 — 387,279
Substandard or Lower 1,537 8,516 28,810 68,818 69,793 151,450 684 1,488 331,096
Total real estate - commercial mortgage 1,088,967 968,420 952,184 718,751 815,611 2,677,490 56,169 1,488 7,279,080
Real estate - commercial mortgage
Current period gross charge-offs — — (14) (25) (6,972) (1,517) (198) — (8,726)
Current period recoveries — — — — 983 1,491 — — 2,474
Total net (charge-offs) recoveries — — (14) (25) (5,989) (26) (198) — (6,252)
Total
Pass $ 2,132,067 $ 1,735,785 $ 1,336,686 $ 941,344 $ 877,443 $ 3,055,227 $ 1,279,636 $ 339 $ 11,358,527
Special Mention 12,546 70,045 140,429 53,781 59,665 199,427 52,501 95 588,489
Substandard or Lower 2,762 18,291 48,203 93,145 83,617 190,460 50,473 2,688 489,639
Total $ 2,147,375 $ 1,824,121 $ 1,525,318 $ 1,088,270 $ 1,020,725 $ 3,445,114 $ 1,382,610 $ 3,122 $ 12,436,655


		December 31, 2022
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(dollars in thousands)												Amortized		Amortized
		2022		2021		2020		2019		2018		Prior		Cost Basis		Cost Basis		Total
Real estate - commercial mortgage
	Pass	$	1,014,575	$	1,095,725	$	969,118	$	810,850	$	621,689	$	2,610,511	$	80,665	$	307	$	7,203,440
	Special Mention	95		50,367		23,296		33,735		16,205		181,736		947		—		306,381
	Substandard or Lower	1,032		3,039		31,042		38,378		23,112		87,168		243		—		184,014
	Total real estate - commercial mortgage	1,015,702		1,149,131		1,023,456		882,963		661,006		2,879,415		81,855		307		7,693,835
Real estate - commercial mortgage
	Current period gross charge-offs	—		—		—		—		—		(53)		—		(12,420)		(12,473)
Commercial and industrial(1)
	Pass	907,390		449,145		397,881		315,605		185,096		604,352		1,387,961		618		4,248,048
	Special Mention	11,405		24,479		3,763		8,147		5,218		24,633		56,048		250		133,943
	Substandard or Lower	834		418		4,818		13,044		3,081		22,025		51,077		249		95,546
	Total commercial and industrial	919,629		474,042		406,462		336,796		193,395		651,010		1,495,086		1,117		4,477,537
Commercial and industrial(1)
	Current period gross charge-offs	—		—		(36)		—		(21)		(365)		(1,192)		(776)		(2,390)
Real estate - construction(2)
	Pass	159,195		390,993		243,406		28,539		24,421		93,511		47,271		—		987,336
	Special Mention	—		—		—		—		—		21,603		—		—		21,603
	Substandard or Lower	—		—		3,852		2,274		—		4,272		203		—		10,601
	Total real estate - construction	159,195		390,993		247,258		30,813		24,421		119,386		47,474		—		1,019,540
Real estate - construction(2)
	Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Total
	Pass	$	2,081,160	$	1,935,863	$	1,610,405	$	1,154,994	$	831,206	$	3,308,374	$	1,515,897	$	925	$	12,438,824
	Special Mention	11,500		74,846		27,059		41,882		21,423		227,972		56,995		250		461,927
	Substandard or Lower	1,866		3,457		39,712		53,696		26,193		113,465		51,523		249		290,161
	Total	$	2,094,526	$	2,014,166	$	1,677,176	$	1,250,572	$	878,822	$	3,649,811	$	1,624,415	$	1,424	$	13,190,912

(1) ~~Excludes real estate - construction - other.~~

~~(2)~~ Loans originated in 2021 and 2020 include ~~$301.3~~$20.4 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government guaranty through the SBA.

(2) Excludes real estate - construction - other.

2423

The Corporation considers the performance of the loan portfolio and its impact on the ACL. The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and ~~equipment lease financing.~~leases and other loans. For these loans, the most relevant credit quality indicator is delinquency status and the Corporation evaluates credit quality based on the aging status of the loan. The following tables present the amortized cost of these loans based on payment activity, by origination year, for the periods shown:


			September 30, 2022																				March 31, 2023
			Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
			(in thousands)												Amortized
			2022		2021		2020		2019		2018		Prior		Cost Basis				Total
Consumer and real estate - home equity
		Performing	$	323,238	$	121,500	$	89,432	$	59,199	$	51,895	$	98,043	$	847,612	$	142,704	$	1,733,623
		Nonperforming	152		209		32		167		112		2,071		1,739		5,664		10,146
		Total consumer and real estate - home equity	323,390		121,709		89,464		59,366		52,007		100,114		849,351		148,368		1,743,769
Consumer and real estate - home equity
		Current period gross charge-offs	—		(587)		(70)		(108)		(16)		(355)		(178)		(1,787)		(3,101)				Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		Current period recoveries	—		44		88		29		16		516		248		957		1,898				(dollars in thousands)												Amortized
		Total net (charge-offs) recoveries	—		(543)		18		(79)		—		161		70		(830)		(1,203)				2023		2022		2021		2020		2019		Prior		Cost Basis				Total
Real estate - residential mortgage	Real estate - residential mortgage																				Real estate - residential mortgage
		Performing	763,300		1,672,528		1,077,559		296,437		87,861		634,295		—		—		4,531,980			Performing	$	139,551	$	961,137	$	1,732,158	$	1,041,054	$	282,030	$	678,413	$	—	$	—	$	4,834,343
		Nonperforming	—		2,610		5,222		4,696		3,983		25,737		—		—		42,248			Nonperforming	—		706		6,089		7,630		5,335		26,816		—		—		46,576
		Total real estate - residential mortgage	763,300		1,675,138		1,082,781		301,133		91,844		660,032		—		—		4,574,228			Total real estate - residential mortgage	139,551		961,843		1,738,247		1,048,684		287,365		705,229		—		—		4,880,919
Real estate - residential mortgage	Real estate - residential mortgage																				Real estate - residential mortgage
		Current period gross charge-offs	—		—		—		—		—		—		—		(66)		(66)			Current period gross charge-offs	—		—		—		—		—		—		—		—		—
		Current period recoveries	—		—		4		—		27		261		—		123		415
		Total net (charge-offs) recoveries	—		—		4		—		27		261		—		57		349
Equipment lease financing and other
Consumer and real estate - home equity																					Consumer and real estate - home equity
		Performing	134,364		45,541		44,928		33,309		17,173		17,307		—		—		292,622			Performing	148,247		309,812		95,136		66,377		49,877		162,289		947,347		17,419		1,796,504
		Nonperforming	—		—		—		—		—		13,582		—		—		13,582			Nonperforming	—		204		155		67		31		2,013		6,460		53		8,983
		Total leasing and other	134,364		45,541		44,928		33,309		17,173		30,889		—		—		306,204			Total consumer and real estate - home equity	148,247		310,016		95,291		66,444		49,908		164,302		953,807		17,472		1,805,487
Equipment lease financing and other
Consumer and real estate - home equity																					Consumer and real estate - home equity
																						Current period gross charge-offs	—		—		—		—		—		(325)		—		(1,881)		(2,206)
Leases and other loans																					Leases and other loans
		Current period gross charge-offs	(304)		(108)		(72)		(50)		(21)		(1,071)		—		—		(1,626)			Performing	75,403		99,125		36,559		32,785		25,955		26,891		—		—		296,718
		Current period recoveries	33		12		74		20		6		253		—		229		627			Nonperforming	—		443		—		—		—		12,251		—		—		12,694
																						Leases and other loans	75,403		99,568		36,559		32,785		25,955		39,142		—		—		309,412
Leases and other loans																					Leases and other loans
		Total net (charge-offs) recoveries	(271)		(96)		2		(30)		(15)		(818)		—		229		(999)			Current period gross charge-offs	(59)		(251)		(60)		(45)		(21)		(287)		—		—		(723)
Construction - other	Construction - other																				Construction - other
		Performing	113,328		118,987		13,429		—		4,568		—		—		460		250,772			Performing	8,997		202,286		38,473		8,858		—		—		—		—		258,614
		Nonperforming	—		—		—		—		—		—		—		—		—			Nonperforming	—		—		—		—		—		—		—		—		—
		Total construction - other	113,328		118,987		13,429		—		4,568		—		—		460		250,772			Total construction - other	8,997		202,286		38,473		8,858		—		—		—		—		258,614
Construction - other	Construction - other																				Construction - other
		Current period gross charge-offs	—		—		—		—		—		—		—		—		—			Current period gross charge-offs	—		—		—		—		—		—		—		—		—
		Current period recoveries	—		—		—		—		—		—		—		—		—
		Total net (charge-offs) recoveries	—		—		—		—		—		—		—		—		—
Total	Total																				Total
		Performing	$	1,334,230	$	1,958,556	$	1,225,348	$	388,945	$	161,497	$	749,645	$	847,612	$	143,164	$	6,808,997		Performing	$	372,198	$	1,572,360	$	1,902,326	$	1,149,074	$	357,862	$	867,593	$	947,347	$	17,419	$	7,186,179
		Nonperforming	152		2,819		5,254		4,863		4,095		41,390		1,739		5,664		65,976			Nonperforming	—		1,353		6,244		7,697		5,366		41,080		6,460		53		68,253
		Total	$	1,334,382	$	1,961,375	$	1,230,602	$	393,808	$	165,592	$	791,035	$	849,351	$	148,828	$	6,874,973		Total	$	372,198	$	1,573,713	$	1,908,570	$	1,156,771	$	363,228	$	908,673	$	953,807	$	17,472	$	7,254,432

2524


			December 31, 2021																				December 31, 2022
			Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
			(in thousands)												Amortized
			2021		2020		2019		2018		2017		Prior		Cost Basis				Total
Consumer and Real estate - home equity
		Performing	$	162,441	$	102,918	$	73,769	$	68,564	$	33,254	$	135,412	$	990,842	$	3,999	$	1,571,199
		Nonperforming	122		101		60		51		314		2,348		8,512		198		11,706
		Total consumer and real estate - home equity	162,563		103,019		73,829		68,615		33,568		137,760		999,354		4,197		1,582,905
Consumer and Real estate - home equity
		Current period gross charge-offs	(175)		(491)		(496)		(238)		(224)		(411)		(1,274)		—		(3,309)				Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		Current period recoveries	—		223		131		131		167		1,048		645		—		2,345				(dollars in thousands)												Amortized
		Total net (charge-offs) recoveries	(175)		(268)		(365)		(107)		(57)		637		(629)		—		(964)				2022		2021		2020		2019		2018		Prior		Cost Basis				Total
Real estate - residential mortgage	Real estate - residential mortgage																				Real estate - residential mortgage
		Performing	1,548,174		1,133,602		344,625		113,801		198,164		468,842		—		—		3,807,208			Performing	$	933,903	$	1,708,703	$	1,054,126	$	286,167	$	87,455	$	620,416	$	—	$	—	$	4,690,770
		Nonperforming	—		6,753		2,189		3,424		2,844		24,332		—		—		39,542			Nonperforming	1,199		5,104		6,597		6,466		4,587		22,556		—		—		46,509
		Total real estate - residential mortgage	1,548,174		1,140,355		346,814		117,225		201,008		493,174		—		—		3,846,750			Total real estate - residential mortgage	935,102		1,713,807		1,060,723		292,633		92,042		642,972		—		—		4,737,279
Real estate - residential mortgage	Real estate - residential mortgage																				Real estate - residential mortgage
		Current period gross charge-offs	—		(626)		(148)		(125)		(4)		(387)		—		—		(1,290)			Current period gross charge-offs	—		—		—		—		—		—		—		(66)		(66)
		Current period recoveries	—		—		1		18		—		264		92		—		375
		Total net (charge-offs) recoveries	—		(626)		(147)		(107)		(4)		(123)		92		—		(915)
Equipment lease financing and other
Consumer and Real estate - home equity																					Consumer and Real estate - home equity
		Performing	97,077		65,316		49,591		34,107		22,444		1,369		—		—		269,904			Performing	416,631		109,724		80,422		52,384		45,642		211,127		842,226		34,061		1,792,217
		Nonperforming	—		—		—		—		15,503		138		—		—		15,641			Nonperforming	292		298		174		36		98		6,512		1,722		668		9,800
		Total leasing and other	97,077		65,316		49,591		34,107		37,947		1,507		—		—		285,545			Total consumer and real estate - home equity	416,923		110,022		80,596		52,420		45,740		217,639		843,948		34,729		1,802,017
Equipment lease financing and other
		Current period gross charge-offs	(975)		(1,276)		—		—		—		—		—		—		(2,251)
		Current period recoveries	255		539		88		10		18		43		—		—		953
Consumer and Real estate - home equity																					Consumer and Real estate - home equity
		Total net (charge-offs) recoveries	(720)		(737)		88		10		18		43		—		—		(1,298)			Current period gross charge-offs	—		(587)		(70)		(108)		(16)		(442)		(178)		(3,011)		(4,412)
Construction - other	Construction - other																				Construction - other
		Performing	144,652		40,040		638		5,028		—		—		—		—		190,358			Performing	164,924		73,492		10,892		—		1,077		—		—		—		250,385
		Nonperforming	—		—		—		—		173		—		—		—		173			Nonperforming	—		—		—		—		—		—		—		—		—
		Total construction - other	144,652		40,040		638		5,028		173		—		—		—		190,531			Total construction - other	164,924		73,492		10,892		—		1,077		—		—		—		250,385
Construction - other	Construction - other																				Construction - other
		Current period gross charge-offs	—		—		—		—		—		—		—		—		—			Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Leases and other loans																					Leases and other loans
		Current period recoveries	—		—		—		—		—		—		—		—		—			Performing	146,198		39,427		40,024		29,309		15,019		15,670		—		—		285,647
																						Nonperforming	—		—		—		—		—		13,307		—		—		13,307
																						Leases and other loans	146,198		39,427		40,024		29,309		15,019		28,977		—		—		298,954
Leases and other loans																					Leases and other loans
		Total net (charge-offs) recoveries	—		—		—		—		—		—		—		—		—			Current period gross charge-offs	(506)		(167)		(140)		(80)		(47)		(1,191)		—		—		(2,131)
Total	Total																				Total
		Performing	$	1,952,344	$	1,341,876	$	468,623	$	221,500	$	253,862	$	605,623	$	990,842	$	3,999	$	5,838,669		Performing	$	1,661,656	$	1,931,346	$	1,185,464	$	367,860	$	149,193	$	847,213	$	842,226	$	34,061	$	7,019,019
		Nonperforming	122		6,854		2,249		3,475		18,834		26,818		8,512		198		67,062			Nonperforming	1,491		5,402		6,771		6,502		4,685		42,375		1,722		668		69,616
		Total	$	1,952,466	$	1,348,730	$	470,872	$	224,975	$	272,696	$	632,441	$	999,354	$	4,197	$	5,905,731		Total	$	1,663,147	$	1,936,748	$	1,192,235	$	374,362	$	153,878	$	889,588	$	843,948	$	34,729	$	7,088,635

2625

The following table presents non-performing assets:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(dollars in thousands)
Non-accrual loans	Non-accrual loans	$	178,204	$	143,666	Non-accrual loans	$	134,303	$	144,443
Loans 90 days or more past due and still accruing(1)	Loans 90 days or more past due and still accruing(1)	14,559		8,453		Loans 90 days or more past due and still accruing(1)	30,336		27,463
Total non-performing loans	Total non-performing loans	192,763		152,119		Total non-performing loans	164,639		171,906
OREO (2)	OREO (2)	5,877		1,817		OREO(2)	3,304		5,790
Total non-performing assets	Total non-performing assets	$	198,640	$	153,936	Total non-performing assets	$	167,943	$	177,696

(1) Excludes PPP loans which are fully guaranteed by the federal government of ~~$10.4~~$1.6 million and $7.7 million as of ~~September 30, 2022.~~March 31, 2023 and December 31, 2022, respectively.

(2) Excludes~~$3.4~~ $9.6 million and ~~$6.4~~$6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

The following tables present the aging of the amortized cost basis of loans, by class segment:


		30-59		60-89		≥ 90 Days										30-59		60-89		≥ 90 Days
		Days Past		Days Past		Past Due		Non-								Days Past		Days Past		Past Due		Non-
		Due		Due		and Accruing		Accrual		Current			Total			Due		Due		and Accruing		Accrual		Current		Total
		(in thousands)										(dollars in thousands)
September 30, 2022
March 31, 2023															March 31, 2023
Real estate – commercial mortgage	Real estate – commercial mortgage	$	9,428	$	1,884	$	1,577	$	94,704	$	7,446,916		$	7,554,509	Real estate – commercial mortgage	$	19,251	$	1,887	$	2,913	$	58,409	$	7,664,460	$	7,746,920
Commercial and industrial(1)	Commercial and industrial(1)	4,705		228		27		29,804		4,208,628			4,243,392		Commercial and industrial(1)	6,428		1,279		1,676		31,879		4,559,434		4,600,696
Real estate – residential mortgage	Real estate – residential mortgage	45,625		9,825		10,133		31,464		4,477,181			4,574,228		Real estate – residential mortgage	34,483		5,779		22,149		24,427		4,794,081		4,880,919
Real estate – home equity	Real estate – home equity	4,976		815		2,087		7,093		1,095,132			1,110,103		Real estate – home equity	6,442		2,441		2,316		6,034		1,057,479		1,074,712
Real estate – construction	Real estate – construction	17,181		2,106		—		1,456		1,252,354			1,273,097		Real estate – construction	13,074		751		231		1,278		1,311,420		1,326,754
Consumer	Consumer	6,308		1,384		735		101		625,138			633,666		Consumer	5,840		1,400		608		25		722,902		730,775
Equipment lease financing and other		70		—		—		13,582		292,552			306,204
Leases and other loans(2)															Leases and other loans(2)	871		64		443		12,251		295,783		309,412
Total	Total	$	88,293	$	16,242	$	14,559	$	178,204	$	19,397,901		$	19,695,199	Total	$	86,389	$	13,601	$	30,336	$	134,303	$	20,405,559	$	20,670,188

(1) ~~Delinquent~~Excludes delinquent PPP loans 30-59 days past due, ~~and~~ 60-89 days past due and 90 days or more past due of ~~$2.2~~$1.2 million, $0.1 million and ~~$3.4~~$1.6 million, respectively, which are fully guaranteed by the federal government and are classified as current.

(2)

30-59 Days Past
Due 60-89
Days Past
Due ≥ 90 Days
Past Due
and
Accruing Non-
accrual Current Total
(in thousands)
December 31, 2021
Real estate – commercial mortgage $ 1,089 $ 1,750 $ 1,229 $ 52,815 $ 7,222,197 $ 7,279,080
Commercial and industrial 5,457 1,932 488 30,141 4,170,309 4,208,327
Real estate – residential mortgage 22,957 2,920 4,130 35,269 3,781,474 3,846,750
Real estate – home equity 4,369 1,154 2,253 8,671 1,101,801 1,118,248
Real estate – construction 1,318 — — 901 1,137,560 1,139,779
Consumer 3,561 876 353 229 459,638 464,657
Equipment lease financing and other 226 27 — 15,640 252,616 268,509
Total $ 38,977 $ 8,659 $ 8,453 $ 143,666 $ 18,125,595 $ 18,325,350

Includes unearned income.


	30-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Current		Total
	(dollars in thousands)
December 31, 2022
Real estate – commercial mortgage	$	10,753	$	4,644	$	2,473	$	70,161	$	7,605,804	$	7,693,835
Commercial and industrial(1)	6,067		2,289		1,172		27,116		4,440,893		4,477,537
Real estate – residential mortgage	57,061		8,209		20,215		26,294		4,625,500		4,737,279
Real estate – home equity	5,666		2,444		2,704		6,105		1,085,919		1,102,838
Real estate – construction	1,762		1,758		—		1,368		1,265,037		1,269,925
Consumer	6,692		1,339		899		92		690,157		699,179
Leases and other loans(2)	348		122		—		13,307		285,177		298,954
Total	$	88,349	$	20,805	$	27,463	$	144,443	$	19,998,487	$	20,279,547

(1) Excludes delinquent PPP loans 30-59 days past due, 60-89 days past due and 90 days or more past due of $0.1 million, $0.7 million and $7.7 million, respectively, which are fully guaranteed by the federal government and are classified as current.

(2) Includes unearned income.

2726

Collateral-Dependent Loans

A loan or a lease, is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans and leases deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the ~~loan’s~~collateral-dependent loan's or lease's carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent ~~financial assets~~loans or leases consists of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agriculture land, and vacant land.

~~Troubled Debt Restructurings~~Loan Modifications

~~Restructured~~On January 1, 2023, the Corporation adopted ASU 2022-02. Loan modifications reported below do not include modifications with insignificant payment delays. ASU 2022-02 lists the following factors when considering if the loan modification has insignificant payment delays: (1) the amount of the restructured payments subject to the delay is insignificant relative to the unpaid principal or collateral value of the debt and will result in an insignificant shortfall in the contractual amount due, and (2) the delay in timing of the restructured payment period is insignificant relative to the frequency of payments due under the debt, the debt’s original contractual maturity or the debt’s original expected duration.

The ACL incorporates an estimate of lifetime expected credit losses and is recorded upon asset origination or acquisition. The starting point for the estimate of the ACL is historical loss information, which includes losses from modifications ~~may include payment schedule modifications,~~of receivables to borrowers experiencing financial difficulty. The Corporation uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

The Corporation modifies loans by providing a concession when deemed appropriate. Depending on the circumstances, a term extension, interest rate ~~concessions, bankruptcies, principal~~ reduction or ~~some~~principal forgiveness may be granted. In certain instances a combination of ~~these concessions.~~concessions maybe be provided to a customer.

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 asset is written off against the ACL. The ~~restructured~~amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan ~~modifications primarily included maturity date extensions, rate modifications~~is written off, resulting in a reduction of the amortized cost basis and ~~payment schedule modifications.~~a corresponding adjustment to the ACL.

The following table presents ~~TDRs,~~the amortized cost basis during the three months ended March 31, 2023 of the loans modified to borrowers experiencing financial difficulty, disaggregated by class ~~segment:~~

September 30,
2022 December 31,
2021
(in thousands)
Real estate - commercial mortgage $ 3,448 $ 3,464
Commercial and industrial 1,837 1,857
Real estate - residential mortgage 12,101 11,948
Real estate - home equity 11,719 12,218
Consumer 2 5
Total accruing TDRs 29,107 29,492
Non-accrual TDRs (1)
40,401 55,945
Total TDRs $ 69,508 $ 85,437
of financing receivable and type of concession granted:

~~(1)~~


	Term Extension
	Three months ended March 31, 2023
	Amortization Cost Basis		% of Class of Financing Receivable
	(dollars in thousands)
Real estate - commercial mortgage	$	1,426	0.02	%
Commercial and industrial	6,227		0.14
Real estate - residential mortgage	1,182		0.02




Total	$	8,835

~~Included in non-accrual~~

The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty as of March 31, 2023.


			Term Extension
			Financial Effect
Real estate - commercial mortgage			Added a weighted-average 1.91 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Commercial and industrial			Added a weighted-average 0.77 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgage			Added a weighted-average 3.51 years to the life of loans, which reduced monthly payment amounts for the borrowers.

During the first quarter of 2023, there were no loans modified due to financial difficulty where there was an interest rate reduction or principal balance forgiveness.

During the first quarter of 2023, there were no loans modified due to financial difficulty that defaulted in the ~~preceding table detailing non-performing assets.~~three months subsequent to modification.

The following table presents ~~TDRs, by class segment, for~~the performance of loans that have been modified in the last three months as of March 31, 2023.


			30-89		90+		Total
			Days Past		Past Due		Past
	Current		Due		and Accruing		Due
	(dollars in thousands)
Real estate - commercial mortgage	$	1,426	$	—	$	—	$	—
Commercial and industrial	6,227		—		—		—
Real estate - residential mortgage	1,182		—		—		—




Total	$	8,835	$	—	$	—	$	—

There were ~~modified during the three and nine months ended September 30, 2022 and 2021:~~no commitments to lend additional funds to borrowers with loan modifications as a result of financial difficulty as of March 31, 2023.

Three months ended September 30 Nine months ended September 30
2022 2021 2022 2021
Number of Loans Post-Modification Recorded Investment Number of Loans Post-Modification Recorded Investment Number of Loans Post-Modification Recorded Investment Number of Loans Post-Modification Recorded Investment
(dollars in thousands)
Commercial and industrial — $ — 5 $ 852 1 $ 82 9 $ 2,745
Real estate - commercial mortgage — — 4 9,129 1 150 9 16,020
Real estate - residential mortgage — — 5 1,703 5 293 42 12,431
Real estate - home equity — — 6 123 5 329 22 870
Real estate - construction — — — — — — 1 154
Consumer 4 155 — — 6 354 — —
Total 4 $ 155 20 $ 11,807 18 $ 1,208 83 $ 32,220

In accordance with regulatory guidance, payment schedule modifications granted after March 13, 2020 to borrowers impacted by the effects of the COVID-19 pandemic and who were not delinquent at the time of the payment schedule modifications have been excluded from TDRs. As of September 30, 2022, $9.0 million~~in recorded investment remains in active COVID-19 deferral programs.~~

NOTE 6 – Mortgage Servicing Rights

The following table summarizes the changes in MSRs, which are included in other assets on the consolidated balance sheets, with adjustments to the carrying value included in mortgage banking income on the consolidated statements of income:


		Three months ended September 30				Nine months ended September 30					Three months ended March 31
		2022		2021		2022		2021			2023		2022
		(in thousands)									(dollars in thousands)
Amortized cost:	Amortized cost:									Amortized cost:
Balance at beginning of period	Balance at beginning of period	$	35,249	$	36,062	$	35,993	$	38,745	Balance at beginning of period	$	34,217	$	35,993
Originations of MSRs	Originations of MSRs	1,051		2,637		3,459		6,905		Originations of MSRs	196		1,355
Amortization	Amortization	(1,360)		(2,661)		(4,512)		(9,612)		Amortization	(1,331)		(1,724)
Balance at end of period	Balance at end of period	$	34,940	$	36,038	$	34,940	$	36,038	Balance at end of period	$	33,082	$	35,624

Valuation allowance:	Valuation allowance:									Valuation allowance:
Balance at beginning of period	Balance at beginning of period	$	—	$	(6,600)	$	(600)	$	(10,500)	Balance at beginning of period	$	—	$	(600)
Reduction (addition) to valuation allowance	Reduction (addition) to valuation allowance	—		3,500		600		7,400		Reduction (addition) to valuation allowance	—		600
Balance at end of period	Balance at end of period	$	—	$	(3,100)	$	—	$	(3,100)	Balance at end of period	$	—	$	—

Net MSRs at end of period	Net MSRs at end of period	$	34,940	$	32,938	$	34,940	$	32,938	Net MSRs at end of period	$	33,082	$	35,624
Estimated fair value of MSRs at end of period	Estimated fair value of MSRs at end of period	$	51,072	$	32,938	$	51,072	$	32,938	Estimated fair value of MSRs at end of period	$	47,223	$	47,609

MSRs represent the economic value of contractual rights to service mortgage loans that have been sold. The total portfolio of mortgage loans serviced by the Corporation for unrelated third parties was ~~$4.2~~$4.1 billion and ~~$4.3~~$4.2 billion as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Actual and expected prepayments of the underlying mortgage loans can impact the fair values of the MSRs. The Corporation accounts for MSRs at the lower of amortized cost or fair value.

The fair value of MSRs is estimated by discounting the estimated cash flows from servicing income, net of expense, over the expected life of the underlying loans at a discount rate commensurate with the risk associated with these assets. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The fair values of MSRs were ~~$51.1~~$47.2 million and ~~$35.4~~$50.0 million at ~~September 30, 2022~~March 31, 2023 and December ~~30, 2021,~~31, 2022 respectively. Based on its fair value analysis as of ~~September 30, 2022,~~March 31, 2023, the Corporation determined that no valuation allowance was required as of ~~September 30, 2022.~~

March 31, 2023.

NOTE 7 – Derivative Financial Instruments

The Corporation manages its exposure to certain interest rate and foreign currency risks through the use of derivatives. Certain of the Corporation's outstanding derivative contracts are designated as hedges, and none are entered into for speculative purposes. The Corporation ~~does enter~~enters into derivative contracts that are intended to economically hedge certain of its risks, even if hedge accounting does not apply or the Corporation elects not to apply hedge accounting.

Mortgage Banking Derivatives

In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed-rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation enters into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured.

Interest Rate ~~Swaps~~Derivatives - Non-Designated Hedges

of interest and the Corporation receives a floating rate. As the interest rate derivatives associated with this program do not meet ~~the strict~~ hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

The Corporation's existing credit derivatives result from participation in interest rate ~~swaps~~derivatives provided by external lenders as part of loan participation arrangements and, therefore, are not used to manage interest rate risk in the ~~Corporation’s~~Corporation's assets or liabilities. ~~Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain lenders which participate in loans.~~

The Corporation is required to clear all eligible interest rate ~~swap~~derivative contracts with a clearing agent and is subject to the regulations of the Commodity Futures Trading Commission.

Cash Flow Hedges of Interest Rate Risk

The Corporation's objectives in using interest rate derivatives are to reduce volatility in net interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate ~~swaps~~derivatives as part of its interest rate risk management strategy. ~~During 2021, the~~The Corporation ~~entered~~enters into interest rate ~~swaps~~derivatives designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans. These hedge contracts involve the receipt of fixed-rate amounts from a counterparty in exchange for the Corporation making floating-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the ~~derivative~~derivatives is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings. 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.~~loans. During the next twelve months, the Corporation estimates that an additional ~~$33.2~~$28.3 million of unrealized losses will be reclassified as a decrease to interest income.

In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $1.0 billion. As the hedged transaction continues to be probable, the unrealized loss of $70.6 million included in AOCI will be recognized as a reduction to interest income when the previously forecasted hedged item affects earnings in future periods. During the first quarter of 2023, $5.5 million of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the Corporation's consolidated statements of income.

Foreign Exchange Contracts

The Corporation enters into foreign exchange contracts to accommodate the needs of its customers. Foreign exchange contracts are commitments to buy or sell foreign currency on a specific date at a contractual price. The Corporation limits its foreign exchange exposure with customers by entering into contracts with institutional counterparties to mitigate its foreign exchange risk. The Corporation also holds certain amounts of ~~foreign currency in~~ Foreign Currency Nostro Accounts. The Corporation limits the total overnight net foreign currency open positions, which is defined as an aggregate of all outstanding contracts, ~~and Foreign Currency Nostro Account balances,~~ to ~~$500,000.~~$0.5 million.

The following table presents a summary of the notional amounts and fair values of derivative financial instruments:

September 30, 2022 December 31, 2021
Notional
Amount Asset
(Liability)
Fair Value Notional
Amount Asset
(Liability)
Fair Value
(in thousands)
Interest Rate Locks with Customers
Positive fair values $ 73,375 $ 127 $ 261,428 $ 2,326
Negative fair values 32,398 (736) 2,549 (23)
Forward Commitments
Positive fair values 75,000 2,646 51,000 41
Negative fair values — — — —
Interest Rate Swaps with Customers
Positive fair values — — 3,213,924 153,752
Negative fair values 3,980,850 (303,249) 752,462 (4,766)
Interest Rate Swaps with Dealer Counterparties
Positive fair values 3,980,850 176,276 752,462 4,766
Negative fair values — — 3,213,924 (79,889)
Interest Rate Swaps used in Cash Flow Hedges
Positive fair values — — 500,000 60
Negative fair values 1,000,000 (10,453) 500,000 (1,432)
Foreign Exchange Contracts with Customers
Positive fair values 12,965 941 7,629 229
Negative fair values 2,810 (75) 3,388 (51)
Foreign Exchange Contracts with Correspondent Banks
Positive fair values 3,212 86 3,656 69
Negative fair values 13,372 (931) 9,364 (240)


	March 31, 2023				December 31, 2022
	Notional Amount		Asset (Liability) Fair Value		Notional Amount		Asset (Liability) Fair Value
	(dollars in thousands)
Interest Rate Locks with Customers
Positive fair values	$	95,469	$	420	$	70,836	$	182
Negative fair values	1,622		(11)		4,939		(51)

Forward Commitments
Positive fair values	—		—		—		—
Negative fair values	8,500		(31)		10,000		(147)

Interest Rate Derivatives with Customers
Positive fair values	422,891		10,324		171,317		3,337
Negative fair values	3,628,451		(220,342)		3,802,480		(280,401)

Interest Rate Derivatives with Dealer Counterparties
Positive fair values	3,628,451		125,932		3,802,480		161,956
Negative fair values	422,891		(10,690)		171,317		(3,703)

Interest Rate Derivatives used in Cash Flow Hedges
Positive fair values	1,500,000		5,646		600,000		1,321
Negative fair values	—		—		1,000,000		(12,163)
Foreign Exchange Contracts with Customers
Positive fair values	19,026		180		11,123		571
Negative fair values	10,290		(380)		3,672		(85)

Foreign Exchange Contracts with Correspondent Banks
Positive fair values	12,725		435		4,887		101
Negative fair values	7,836		(56)		8,280		(499)

The following table presents the effect of fair value and cash flow hedge accounting on AOCI:


		Amount of Gain (Loss) Recognized in OCI on Derivative		Amount of Gain (Loss) Recognized in OCI Included Component		Amount of Gain (Loss) Recognized in OCI Excluded Component		Location of Gain (Loss) Recognized from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income		Amount of Gain (Loss) Reclassified from AOCI into Income Included Component		Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component			Amount of Gain (Loss) Recognized in OCI on Derivative		Amount of Gain (Loss) Recognized in OCI Included Component		Amount of Gain (Loss) Recognized in OCI Excluded Component		Location of Gain (Loss) Recognized from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income		Amount of Gain (Loss) Reclassified from AOCI into Income Included Component		Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component
		(in thousands)														(dollars in thousands)
Derivatives in Cash Flow Hedging Relationships:	Derivatives in Cash Flow Hedging Relationships:														Derivatives in Cash Flow Hedging Relationships:
Three months ended September 30, 2022
Three months ended March 31, 2023															Three months ended March 31, 2023
Interest Rate Products	Interest Rate Products	$	(29,053)	$	(29,053)	$	—	Interest income	$	(3,210)	$	(3,210)	$	—	Interest Rate Products	$	12,535	$	12,535	$	—	Interest Income	$	(7,157)	$	(7,157)	$	—
Three months ended September 30, 2021
Three months ended March 31, 2022															Three months ended March 31, 2022
Interest Rate Products	Interest Rate Products	(280)		(280)		—		Interest income	873		873		—		Interest Rate Products	(40,563)		(40,563)		—		Interest Income	1,948		1,948		—
Nine months ended September 30, 2022
Interest Rate Products		(80,716)		(80,716)		—		Interest income	(828)		(828)		—
Nine months ended September 30, 2021
Interest Rate Products		1,215		1,215		—		Interest Income	1,894		1,894		—

The following table presents the effect of fair value and cash flow hedge accounting on the income statement:


		Consolidated Statements of Income Classification								Consolidated Statements of Income Classification
		Interest Income									Interest Income
		Three months ended September 30				Nine months ended September 30					Three months ended March 31
		2022		2021		2022		2021					2023		2022
		(in thousands)								(dollars in thousands)
Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded	Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded	$	(3,210)	$	873	$	(828)	$	1,894			Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded	$	(7,157)	$	1,948

Interest contracts:	Interest contracts:											Interest contracts:
Amount of gain reclassified from AOCI into income		(3,210)		873		(828)		1,894
Amount of gain (loss) reclassified from AOCI into income												Amount of gain (loss) reclassified from AOCI into income	(7,157)		1,948
Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring	Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring	—		—		—		—				Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring	—		—
Amount of Gain Reclassified from AOCI into Income - Included Component		(3,210)		873		(828)		1,894
Amount of Gain or (Loss) Reclassified from AOCI into Income - Excluded Component		—		—		—		—
Amount of gain (loss) reclassified from AOCI into income - included component												Amount of gain (loss) reclassified from AOCI into income - included component	(7,157)		1,948
Amount of gain (loss) reclassified from AOCI into income - excluded component												Amount of gain (loss) reclassified from AOCI into income - excluded component	—		—

The following table presents a summary of the net fair value gains (losses) on derivative financial instruments:


		Consolidated Statements of Income Classification	Three months ended September 30				Nine months ended September 30					Consolidated Statements of Income Classification	Three months ended March 31
			2022		2021		2022		2021				2023		2022
			(in thousands)										(dollars in thousands)
Mortgage banking derivatives (1)	Mortgage banking derivatives (1)	Mortgage banking income	$	1,403	$	228	$	(307)	$	(2,134)	Mortgage banking derivatives (1)	Mortgage banking income	$	394	$	385

Interest rate swaps		Other expense	—		1,069		—		861
Interest rate derivatives											Interest rate derivatives	Other expense	—		—

Foreign exchange contracts	Foreign exchange contracts	Other income	(27)		(17)		14		(21)		Foreign exchange contracts	Other income	91		47

Net fair value gains/(losses) on derivative financial instruments	Net fair value gains/(losses) on derivative financial instruments		$	1,376	$	1,280	$	(293)	$	(1,294)	Net fair value gains/(losses) on derivative financial instruments		$	485	$	432

(1) Includes interest rate locks with customers and forward commitments.

Fair Value Option

The Corporation has elected to measure mortgage loans held for sale at fair value. The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements as of the periods shown:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(dollars in thousands)
Amortized cost (1)	Amortized cost (1)	$	14,813	$	35,050	Amortized cost (1)	$	6,362	$	7,180
Fair value	Fair value	14,411		35,768		Fair value	6,507		7,264

(1) Cost basis of mortgage loans held for sale represents the unpaid principal balance.

~~Losses~~Gains related to changes in fair values of mortgage loans held for sale were ~~$0.5~~$0.1 million for the three months ended ~~September 30, 2022~~March 31, 2023 compared to losses of ~~$0.2~~$1.1 million for the three months ended September 30, 2021. Losses related to changes in fair values of mortgage loans held for sale were $1.1 million and $2.5 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.March 31, 2022.

Balance Sheet Offsetting

The fair values of interest rate ~~swap~~derivative agreements and foreign exchange contracts the Corporation enters into with customers and dealer counterparties may be eligible for offset on the consolidated balance sheets if they are subject to master netting arrangements or similar agreements. The Corporation has elected to net its financial assets and liabilities designated as cash

flow hedges when offsetting is permitted. The following table presents the Corporation's financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets:


		Gross Amounts		Gross Amounts Not Offset							Gross Amounts		Gross Amounts Not Offset
		Recognized		on the Consolidated							Recognized		on the Consolidated
		on the		Balance Sheets							on the		Balance Sheets
		Consolidated		Financial		Cash		Net			Consolidated		Financial		Cash		Net
		Balance Sheets		Instruments(1)		Collateral (2)		Amount			Balance Sheets		Instruments(1)		Collateral(2)		Amount
		(in thousands)									(dollars in thousands)
September 30, 2022
Interest rate swap derivative assets		$	176,276	$	(10,453)	$	—	$	165,823
March 31, 2023										March 31, 2023
Interest rate derivative assets										Interest rate derivative assets	$	141,902	$	—	$	—	$	141,902

Foreign exchange derivative assets with correspondent banks	Foreign exchange derivative assets with correspondent banks	86		(86)		—		—		Foreign exchange derivative assets with correspondent banks	435		(435)		—		—
Total	Total	$	176,362	$	(10,539)	$	—	$	165,823	Total	$	142,337	$	(435)	$	—	$	141,902

Interest rate swap derivative liabilities		$	313,702	$	—	$	(144,847)	$	168,855
Interest rate derivative liabilities										Interest rate derivative liabilities	$	231,032	$	(5,641)	$	(96,102)	$	129,289

Foreign exchange derivative liabilities with correspondent banks	Foreign exchange derivative liabilities with correspondent banks	931		(86)		—		845		Foreign exchange derivative liabilities with correspondent banks	56		(435)		—		(379)
Total	Total	$	314,633	$	(86)	$	(144,847)	$	169,700	Total	$	231,088	$	(6,076)	$	(96,102)	$	128,910

December 31, 2021
Interest rate swap derivative assets		$	158,578	$	(8,028)	$	—	$	150,550
December 31, 2022										December 31, 2022
Interest rate derivative assets										Interest rate derivative assets	$	166,614	$	(8,071)	$	—	$	158,543
Foreign exchange derivative assets with correspondent banks	Foreign exchange derivative assets with correspondent banks	69		(69)		—		—		Foreign exchange derivative assets with correspondent banks	101		(101)		—		—
Total	Total	$	158,647	$	(8,097)	$	—	$	150,550	Total	$	166,715	$	(8,172)	$	—	$	158,543

Interest rate swap derivative liabilities		$	86,087	$	(6,656)	$	(74,359)	$	5,072
Interest rate derivative liabilities										Interest rate derivative liabilities	$	296,267	$	(2,771)	$	(127,638)	$	165,858
Foreign exchange derivative liabilities with correspondent banks	Foreign exchange derivative liabilities with correspondent banks	240		(69)		—		171		Foreign exchange derivative liabilities with correspondent banks	499		(101)		—		398
Total	Total	$	86,327	$	(6,725)	$	(74,359)	$	5,243	Total	$	296,766	$	(2,872)	$	(127,638)	$	166,256

(1) For interest rate ~~swap~~derivative assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default. For interest rate ~~swap~~derivative liabilities, amounts represent any derivative asset fair values that could be offset in the event of counterparty or customer default.

(2) Amounts represent cash collateral received from the counterparty or posted by the Corporation on interest rate ~~swap~~derivative transactions and foreign exchange contracts with financial institution counterparties. Interest rate ~~swaps~~derivatives with customers are collateralized by the same collateral securing the underlying loans to those borrowers. Cash and securities collateral amounts are included in the table only to the extent of the net derivative fair values.

NOTE 8 – Accumulated Other Comprehensive (Loss) Income

The following table presents the components of other comprehensive income (loss) ~~income:~~:

Before-Tax Amount Tax Effect Net of Tax Amount
Three months ended September 30, 2022 (in thousands)
Unrealized loss on securities $ (155,758) $ 35,373 $ (120,385)
Reclassification adjustment for securities gains included in net income (1)
(53) 12 (41)
Amortization of net unrealized losses on AFS securities transferred to HTM (2)
2,139 (486) 1,653
Net unrealized holding loss arising during the period on interest rate swaps used in cash flow hedges (29,053) 6,581 (22,472)
Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash flow hedges 3,210 (727) 2,483
Amortization of net unrecognized pension and postretirement items (3)
33 (8) 25
Total Other Comprehensive Loss $ (179,482) $ 40,745 $ (138,737)
Three months ended September 30, 2021
Unrealized loss on securities $ (27,975) $ 6,353 $ (21,622)
Amortization of net unrealized gains on AFS securities transferred to HTM (2)
824 (187) 637
Net unrealized holding gain arising during the period on interest rate swaps used in cash flow hedges (280) 64 (216)
Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash flow hedges (873) 198 (675)
Amortization of net unrecognized pension and postretirement items (3)
370 (80) 290
Total Other Comprehensive Loss $ (27,934) $ 6,348 $ (21,586)
Nine months ended September 30, 2022
Unrealized loss on securities $ (469,137) $ 106,541 $ (362,596)
Reclassification adjustment for securities loss included in net income (1)
(26) 6 (20)
Amortization of net unrealized losses on AFS securities transferred to HTM (2)
(59,547) 13,523 (46,024)
Net unrealized loss on interest rate swaps used in cash flow hedges (80,716) 18,282 (62,434)
Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash flow hedges 828 (187) 641
Amortization of net unrecognized pension and postretirement items (3)
96 (21) 75
Total Other Comprehensive Loss $ (608,502) $ 138,144 $ (470,358)
Nine months ended September 30, 2021
Unrealized loss on securities $ (20,796) $ 4,723 $ (16,073)
Reclassification adjustment for securities gains included in net income (1)
(33,511) 7,610 (25,901)
Amortization of net unrealized losses on AFS securities transferred to HTM (2)
2,787 (633) 2,154
Net unrealized gain on interest rate swaps used in cash flow hedges 1,215 (277) 938
Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash flow hedges (1,894) 432 (1,462)
Amortization of net unrecognized pension and postretirement items (3)
1,111 (243) 868
Total Other Comprehensive Loss $ (51,088) $ 11,612 $ (39,476)


	Before-Tax Amount		Tax Effect		Net of Tax Amount
Three months ended March 31, 2023	(dollars in thousands)
Net unrealized income on securities	$	42,199	$	(9,558)	$	32,641

Reclassification adjustment for securities net change included in net income (1)	23		(5)		18
Amortization of net unrealized gains on AFS securities transferred to HTM (2)	1,910		(433)		1,477
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges(3)	12,535		(17,748)		(5,213)
Reclassification adjustment for net change realized in net income on interest rate derivatives used in cash flow hedges(3)	7,157		(1,621)		5,536
Amortization of net unrecognized pension and postretirement items (4)	32		(7)		25
Total Other Comprehensive Income	$	63,856	$	(29,372)	$	34,484
Three months ended March 31, 2022
Net unrealized losses on securities	$	(199,068)	$	45,208	$	(153,860)

Reclassification adjustment for securities net change included in net income (1)	19		(4)		15
Amortization of net unrealized gains on AFS securities transferred to HTM (2)	564		(128)		436
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges	(40,563)		9,187		(31,376)

Reclassification adjustment for net change realized in net income on interest rate derivatives used in cash flow hedges	(1,948)		442		(1,506)
Amortization of net unrecognized pension and postretirement items (4)	32		(7)		25
Total Other Comprehensive Loss	$	(240,964)	$	54,698	$	(186,266)

(1) Amounts reclassified out of AOCI. Before-tax amounts included in "Investment securities gains, net" on the Consolidated Statements of Income. See ~~Note~~"Note 4 ~~"Investment~~-Investment Securities," for additional details.

(2) Amounts reclassified out of AOCI. Before-tax amounts included as a reduction to "Interest Income" on the Consolidated Statements of Income.

(3) Tax effect includes reversal of swap deferred tax benefit upon termination.

(4)Amounts reclassified out of AOCI. Before-tax amounts included in "Salaries and employee benefits" on the Consolidated Statements of Income. See ~~Note~~"Note 12 ~~"Employee~~- Employee Benefit Plans," for additional details.

The following table presents changes in each component of accumulated other comprehensive income (loss), net of tax:


		Unrealized Gains (Losses) on Investment Securities		Net Unrealized (Loss) Gain on Interest Rate Swaps used in Cash Flow Hedges		Unrecognized Pension and Postretirement Plan Income (Costs)			Total			Unrealized Gains (Losses) on Investment Securities		Net Unrealized Gain (Loss) on Interest Rate Derivatives used in Cash Flow Hedges		Unrecognized Pension and Postretirement Plan Income (Costs)		Total
		(in thousands)						(dollars in thousands)
Three months ended September 30, 2022
Balance at June 30, 2022		$	(249,427)	$	(46,620)	$	(8,163)		$	(304,210)
Three months ended March 31, 2023											Three months ended March 31, 2023
Balance at December 31, 2022											Balance at December 31, 2022	$	(316,231)	$	(61,776)	$	(7,469)	$	(385,476)
OCI before reclassifications	OCI before reclassifications	(120,385)		—		—			(120,385)		OCI before reclassifications	32,641		—		—		32,641
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(41)		(19,989)		25			(20,005)		Amounts reclassified from AOCI	18		323		25		366
Amortization of net unrealized losses on AFS securities transferred to HTM	Amortization of net unrealized losses on AFS securities transferred to HTM	1,653		—		—			1,653		Amortization of net unrealized losses on AFS securities transferred to HTM	1,477		—		—		1,477

Balance at September 30, 2022		$	(368,200)	$	(66,609)	$	(8,138)		$	(442,947)
Three months ended September 30, 2021
Balance at June 30, 2021		$	62,769	$	367	$	(15,935)		$	47,201
OCI before reclassifications		(21,622)		—		—			(21,622)
Amounts reclassified from AOCI		—		(891)		290			(601)
Amortization of net unrealized losses on AFS securities transferred to HTM		637		—		—			637

Balance at September 30, 2021		$	41,784	$	(524)	$	(15,645)		$	25,615

Nine months ended September 30, 2022
Balance at March 31, 2023											Balance at March 31, 2023	$	(282,095)	$	(61,453)	$	(7,444)	$	(350,992)
Three months ended March 31, 2022											Three months ended March 31, 2022
Balance at December 31, 2021	Balance at December 31, 2021	$	40,440	$	(4,816)	$	(8,213)		$	27,411	Balance at December 31, 2021	$	40,441	$	(4,817)	$	(8,213)	$	27,411
OCI before reclassifications	OCI before reclassifications	(362,596)		—		—			(362,596)		OCI before reclassifications	(153,860)		—		—		(153,860)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(20)		(61,793)		75			(61,738)		Amounts reclassified from AOCI	15		(32,882)		25		(32,842)
Amortization of net unrealized losses on AFS securities transferred to HTM	Amortization of net unrealized losses on AFS securities transferred to HTM	(46,024)		—		—			(46,024)		Amortization of net unrealized losses on AFS securities transferred to HTM	436		—		—		436

Balance at September 30, 2022		$	(368,200)	$	(66,609)	$	(8,138)		$	(442,947)
Nine months ended September 30, 2021
Balance at December 31, 2020		$	81,604	$	—	$	(16,513)		$	65,091
OCI before reclassifications		(16,073)		—		—			(16,073)
Amounts reclassified from AOCI		(25,901)		(524)		868			(25,557)
Amortization of net unrealized losses on AFS securities transferred to HTM		2,154		—		—			2,154
Balance at March 31, 2022											Balance at March 31, 2022	$	(112,968)	$	(37,699)	$	(8,188)	$	(158,855)

Balance at September 30, 2021		$	41,784	$	(524)	$	(15,645)		$	25,615

NOTE 9 – Fair Value Measurements

FASB ASC Topic 820 establishes a fair value hierarchy for the inputs to valuation techniques used to measure assets and liabilities at fair value using the following three categories (from highest to lowest priority):

•Level 1 – Inputs that represent quoted prices for identical instruments in active markets.

•Level 2 – Inputs that represent quoted prices for similar instruments in active markets, or quoted prices for identical instruments in non-active markets. Also includes valuation techniques whose inputs are derived principally from observable market data other than quoted prices, such as interest rates or other market-corroborated means.

•Level 3 – Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.

All assets and liabilities measured at fair value on both a recurring and nonrecurring basis have been categorized into the above three levels. The following tables present assets and liabilities measured at fair value on a recurring basis and reported on the consolidated balance sheets:


		September 30, 2022									March 31, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(in thousands)									(dollars in thousands)
Loans held for sale	Loans held for sale	$	—	$	14,411	$	—	$	14,411	Loans held for sale	$	—	$	6,507	$	—	$	6,507
Available for sale investment securities:	Available for sale investment securities:									Available for sale investment securities:
Equity securities		—		—		—		—

U.S. Government securities	U.S. Government securities	218,184		—		—		218,184		U.S. Government securities	220,053		—		—		220,053
U.S. Government-sponsored agency securities	U.S. Government-sponsored agency securities	—		1,006		—		1,006		U.S. Government-sponsored agency securities	—		1,017		—		1,017
State and municipal securities	State and municipal securities	—		1,038,185		—		1,038,185		State and municipal securities	—		1,067,598		—		1,067,598
Corporate debt securities	Corporate debt securities	—		399,615		—		399,615		Corporate debt securities	—		439,034		—		439,034
Collateralized mortgage obligations	Collateralized mortgage obligations	—		142,401		—		142,401		Collateralized mortgage obligations	—		130,450		—		130,450
Residential mortgage-backed securities	Residential mortgage-backed securities	—		214,252		—		214,252		Residential mortgage-backed securities	—		212,574		—		212,574
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		583,741		—		583,741		Commercial mortgage-backed securities	—		571,663		—		571,663

Total available for sale investment securities	Total available for sale investment securities	218,184		2,379,200		—		2,597,384		Total available for sale investment securities	220,053		2,422,336		—		2,642,389
Other assets:	Other assets:									Other assets:
Investments held in Rabbi Trust	Investments held in Rabbi Trust	22,933		—		—		22,933		Investments held in Rabbi Trust	26,211		—		—		26,211
Derivative assets	Derivative assets	1,027		179,049		—		180,076		Derivative assets	615		142,322		—		142,937
Total assets	Total assets	$	242,144	$	2,572,660	$	—	$	2,814,804	Total assets	$	246,879	$	2,571,165	$	—	$	2,818,044
Other liabilities:	Other liabilities:									Other liabilities:
Deferred compensation liabilities	Deferred compensation liabilities	$	22,933	$	—	$	—	$	22,933	Deferred compensation liabilities	$	26,211	$	—	$	—	$	26,211
Derivative liabilities	Derivative liabilities	1,006		314,438		—		315,444		Derivative liabilities	436		231,074		—		231,510
Total liabilities	Total liabilities	$	23,939	$	314,438	$	—	$	338,377	Total liabilities	$	26,647	$	231,074	$	—	$	257,721

December 31, 2021
Level 1 Level 2 Level 3 Total
(in thousands)
Loans held for sale $ — $ 35,768 $ — $ 35,768
Available for sale investment securities:
U.S. Government securities 127,618 — — 127,618
State and municipal securities — 1,188,670 — 1,188,670
Corporate debt securities — 386,133 — 386,133
Collateralized mortgage obligations — 209,359 — 209,359
Residential mortgage-backed securities — 229,795 — 229,795
Commercial mortgage-backed securities — 971,148 — 971,148
Auction rate securities — — 74,667 74,667
Total available for sale investment securities 127,618 2,985,105 74,667 3,187,390
Other assets:
Investments held in Rabbi Trust 28,619 — — 28,619
Derivative assets 298 160,945 — 161,243
Total assets $ 156,535 $ 3,181,818 $ 74,667 $ 3,413,020
Other liabilities:
Deferred compensation liabilities $ 28,619 $ — $ — $ 28,619
Derivative liabilities 291 86,110 — 86,401
Total liabilities $ 28,910 $ 86,110 $ — $ 115,020

3635


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Loans held for sale	$	—	$	7,264	$	—	$	7,264
Available for sale investment securities:

U.S. Government securities	218,485		—		—		218,485
U.S. Government sponsored agency securities	—		1,008		—		1,008
State and municipal securities	—		1,105,712		—		1,105,712
Corporate debt securities	—		422,309		—		422,309
Collateralized mortgage obligations	—		134,033		—		134,033
Residential mortgage-backed securities	—		212,698		—		212,698
Commercial mortgage-backed securities	—		552,522		—		552,522

Total available for sale investment securities	218,485		2,428,282		—		2,646,767
Other assets:
Investments held in Rabbi Trust	23,435		—		—		23,435
Derivative assets	672		166,796		—		167,468
Total assets	$	242,592	$	2,602,342	$	—	$	2,844,934
Other liabilities:
Deferred compensation liabilities	$	23,435	$	—	$	—	$	23,435
Derivative liabilities	584		296,465		—		297,049
Total liabilities	$	24,019	$	296,465	$	—	$	320,484

The valuation techniques used to measure fair value for the items in the preceding tables are as follows:

Loans held for sale – This category includes mortgage loans held for sale that are measured at fair value. Fair values as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were ~~based on~~measured at the price that secondary market investors were offering for loans with similar characteristics.

Available for sale investment securities – Included in this asset category are debt securities. Level 2 investment securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing.

Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable.

•U.S. Government securities – These securities are classified as Level 1. Fair values are based on quoted prices with active markets.

•State and municipal securities/Collateralized mortgage obligations/Residential mortgage-backed securities/Commercial mortgage-backed securities – These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.

•Corporate debt securities – This category consists of subordinated debt and senior debt issued by financial institutions ($~~396.9~~432.0 million at ~~September 30, 2022~~March 31, 2023 and ~~$383.4~~$415.4 million at December 31, ~~2021)~~2022) and other corporate debt issued by non-financial institutions ($~~2.8~~7.0 million at ~~September 30, 2022~~March 31, 2023 and $6.9 million December 31, ~~2021)~~2022).

•Level 2 investments include subordinated debt and senior debt, and other corporate debt issued by non-financial institutions at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.

•~~Auction rate securities~~ – Due to their illiquidity, ARCs are classified as Level 3 investment securities and are valued through the use of an expected cash flows model prepared by a third-party valuation expert. The assumptions used in preparing the expected cash flows model include estimates for coupon rates, time to maturity and market rates of return. In the first quarter of 2022, the Corporation sold all of its investment in ARCs.

Investments held in Rabbi Trust – This category consists of mutual funds that are held in trust for employee deferred compensation plans that the Corporation has elected to measure at fair value. Shares of mutual funds are valued based on net asset value, which represent quoted market prices for the underlying shares held in the mutual funds, and as such, are classified as Level 1.

Derivative assets – Fair value of foreign currency exchange contracts are classified as Level 1 assets ($~~1.0~~0.6 million at ~~September 30, 2022~~March 31, 2023 and ~~$0.3~~$0.7 million at December 31, ~~2021)~~2022). The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.

Level 2 assets, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($~~2.8~~0.4 million at ~~September 30, 2022~~March 31, 2023 and ~~$2.4~~$0.2 million at December 31, ~~2021)~~2022) and the fair value of interest rate ~~swaps~~derivatives ($~~176.3~~141.9 million at ~~September 30, 2022~~March 31, 2023 and ~~$158.6~~$166.6 million at December 31, ~~2021)~~2022). The fair values of the interest rate locks, forward commitments and interest rate ~~swaps~~derivatives represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See "Note 7 - Derivative Financial Instruments," for additional information.

Deferred compensation liabilities – Fair value of amounts due to employees under deferred compensation plans, classified as Level 1 liabilities and are included in other liabilities on the consolidated balance sheets. The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Investments held in Rabbi Trust" above.

Derivative liabilities – Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($~~1.0~~0.4 million at ~~September 30, 2022~~March 31, 2023 and ~~$0.3~~$0.6 million at December 31, ~~2021)~~2022).

Level 2 liabilities, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ~~($0.7 million~~(nominal at ~~September 30, 2022~~March 31, 2023 and ~~$0.0~~$0.2 million at December 31, ~~2021)~~2022) and the fair value of interest rate ~~swaps~~derivatives ($~~313.7~~231.0 million at ~~September 30, 2022~~March 31, 2023 and ~~$86.1~~$296.3 million at December 31, ~~2021)~~2022).

The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Derivative assets" above.

~~The following table presents the changes in the Corporation's available for sale investment securities measured at fair value on a recurring basis using unobservable inputs (Level 3):~~


		~~ARCs~~
~~Three months ended September 30, 2022~~	~~(in thousands)~~
~~Balance at June 30, 2022~~		$	—
~~Sales~~		—
~~Unrealized adjustment to fair value~~ ~~(1)~~		—

~~Balance at September 30, 2022~~		$	—

~~Three months ended September 30, 2021~~
~~Balance at June 30, 2021~~		$	~~74,834~~

~~Unrealized adjustment to fair value~~ ~~(1)~~		~~299~~

~~Balance at September 30, 2021~~		$	~~75,133~~

~~Nine months ended September 30, 2022~~
~~Balance at December 31, 2021~~		$	~~74,667~~
~~Sales~~		~~(74,823)~~
~~Unrealized adjustment to fair value~~ ~~(1)~~		~~156~~

~~Balance at September 30, 2022~~		$	—

~~Nine months ended September 30, 2021~~
~~Balance at December 31, 2020~~		$	~~98,206~~
~~Sales~~		~~(24,619)~~
~~Unrealized adjustment to fair value~~ ~~(1)~~		~~1,546~~

~~Balance at September 30, 2021~~		$	~~75,133~~

~~(1)~~ ARCs are classified as available for sale investment securities. As such, the unrealized adjustment to fair value was recorded as an unrealized holding gain (loss) and included as a component of "AFS at estimated fair value" on the consolidated balance sheets.

Certain financial instruments are not measured at fair value on an ongoing basis, but are subject to fair value measurement in certain circumstances, such as upon their acquisition or when there is evidence of impairment. The following table presents Level 3 financial assets measured at fair value on a nonrecurring basis:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(dollars in thousands)
Loans, net	Loans, net	$	140,763	$	118,458	Loans, net	$	113,799	$	121,115
OREO	OREO	5,877		1,817		OREO	3,304		5,790
MSRs (1)	MSRs (1)	51,072		35,393		MSRs(1)	47,223		50,044
Total assets	Total assets	$	197,712	$	155,668	Total assets	$	164,326	$	176,949

(1) Amounts shown are estimated fair value. MSRs are recorded on the Corporation's consolidated balance sheets at the lower of amortized cost or fair value. See "Note 6 - Mortgage Servicing Rights" for additional information.

The valuation techniques used to measure fair value for the items in the table above are as follows:

•Loans, net – This category consists of loans that were individually evaluated for impairment and have been classified as Level 3 assets. The amount shown is the balance of non-accrual loans, net of related ACL. See "Note 5 - Loans and Allowance for Credit Losses," for additional details.

•OREO – This category consists of OREO classified as Level 3 assets, for which the fair values were based on estimated selling prices less estimated selling costs for similar assets in active markets.

•MSRs - This category consists of MSRs, which were initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors, and subsequently carried at the lower of amortized cost or fair value. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified by product type and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the ~~September 30, 2022~~March 31, 2023 valuation were ~~7.8%~~8.2% and 9.0%, respectively. Management reviews the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See "Note 6 - Mortgage Servicing Rights," for additional information.

The following tables detail the book values and the estimated fair values of the Corporation's financial instruments as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


		September 30, 2022											March 31, 2023
				Estimated Fair Value											Estimated Fair Value
		Carrying Amount		Level 1		Level 2		Level 3		Total			Carrying Amount		Level 1		Level 2		Level 3		Total
		(in thousands)											(dollars in thousands)
FINANCIAL ASSETS	FINANCIAL ASSETS											FINANCIAL ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	528,715	$	528,715	$	—	$	—	$	528,715	Cash and cash equivalents	$	566,753	$	566,753	$	—	$	—	$	566,753
FRB and FHLB stock	FRB and FHLB stock	81,914		—		81,914		—		81,914		FRB and FHLB stock	107,605		—		107,605		—		107,605

Loans held for sale	Loans held for sale	14,411		—		14,411		—		14,411		Loans held for sale	6,507		—		6,507		—		6,507
AFS securities	AFS securities	2,597,384		218,184		2,379,200		—		2,597,384		AFS securities	2,642,389		220,053		2,422,336		—		2,642,389
HTM securities	HTM securities	1,339,310		—		1,141,710		—		1,141,710		HTM securities	1,307,712		—		1,125,027		—		1,125,027
Loans, net	Loans, net	19,428,361		—		—		18,817,452		18,817,452		Loans, net	20,391,493		—		—		19,132,951		19,132,951
Accrued interest receivable	Accrued interest receivable	72,821		72,821		—		—		72,821		Accrued interest receivable	90,267		90,267		—		—		90,267
Other assets	Other assets	653,358		417,360		179,049		56,949		653,358		Other assets	619,022		426,173		142,322		50,527		619,022
FINANCIAL LIABILITIES	FINANCIAL LIABILITIES											FINANCIAL LIABILITIES
Demand and savings deposits	Demand and savings deposits	$	19,612,499	$	19,612,499	$	—	$	—	$	19,612,499	Demand and savings deposits	$	18,461,527	$	18,461,527	$	—	$	—	$	18,461,527
Brokered deposits	Brokered deposits	226,883		206,883		26,216		—		233,099		Brokered deposits	960,919		161,395		798,376		—		959,771
Time deposits	Time deposits	1,537,172		—		1,521,484		—		1,521,484		Time deposits	1,894,138		—		1,858,982		—		1,858,982
Accrued interest payable	Accrued interest payable	5,739		5,739		—		—		5,739		Accrued interest payable	11,892		11,892		—		—		11,892
Federal funds purchased	Federal funds purchased	136,000		136,000		—		—		136,000		Federal funds purchased	525,000		525,000		—		—		525,000
Federal Home Loan Bank advances	Federal Home Loan Bank advances	265,500		265,500		—		—		265,500		Federal Home Loan Bank advances	747,000		747,000		—		—		747,000
Senior debt and subordinated debt	Senior debt and subordinated debt	539,461		—		455,833		—		455,833		Senior debt and subordinated debt	539,814		—		468,896		—		468,896
Other borrowings	Other borrowings	483,720		482,449		1,263		—		483,712		Other borrowings	634,956		633,815		1,095		—		634,910

Other liabilities	Other liabilities	500,827		170,315		314,438		16,074		500,827		Other liabilities	409,353		160,740		231,074		17,539		409,353

3938


		December 31, 2021											December 31, 2022
				Estimated Fair Value											Estimated Fair Value
		Carrying Amount		Level 1		Level 2		Level 3		Total			Carrying Amount		Level 1		Level 2		Level 3		Total
		(in thousands)											(dollars in thousands)
FINANCIAL ASSETS	FINANCIAL ASSETS											FINANCIAL ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	1,638,614	$	1,638,614	$	—	$	—	$	1,638,614	Cash and cash equivalents	$	681,921	$	681,921	$	—	$	—	$	681,921
FRB and FHLB stock	FRB and FHLB stock	57,635		—		57,635		—		57,635		FRB and FHLB stock	130,186		—		130,186		—		130,186
Loans held for sale	Loans held for sale	35,768		—		35,768		—		35,768		Loans held for sale	7,264		—		7,264		—		7,264
AFS securities	AFS securities	3,187,390		127,618		2,985,105		74,667		3,187,390		AFS securities	2,646,767		218,485		2,428,282		—		2,646,767
HTM securities	HTM securities	980,384		—		965,867		—		965,867		HTM securities	1,321,256		—		1,125,049		—		1,125,049
Loans, net	Loans, net	18,076,349		—		—		17,519,497		17,519,497		Loans, net	20,010,181		—		—		18,862,701		18,862,701
Accrued interest receivable	Accrued interest receivable	57,451		57,451		—		—		57,451		Accrued interest receivable	91,579		91,579		—		—		91,579
Other assets	Other assets	565,491		367,336		160,945		37,210		565,491		Other assets	642,049		419,419		166,796		55,834		642,049
FINANCIAL LIABILITIES	FINANCIAL LIABILITIES											FINANCIAL LIABILITIES
Demand and savings deposits	Demand and savings deposits	$	19,594,497	$	19,594,497	$	—	$	—	$	19,594,497	Demand and savings deposits	$	18,851,912	$	18,851,912	$	—	$	—	$	18,851,912
Brokered deposits	Brokered deposits	251,526		231,526		20,603		—		252,129		Brokered deposits	208,416		188,416		25,085		—		213,501
Time deposits	Time deposits	1,727,476		—		1,730,673		—		1,730,673		Time deposits	1,589,210		—		1,574,747		—		1,574,747
Accrued interest payable	Accrued interest payable	7,000		7,000		—		—		7,000		Accrued interest payable	10,185		10,185		—		—		10,185

Federal funds purchased												Federal funds purchased	191,000		190,998		—		—		190,998
Federal Home Loan Bank advances												Federal Home Loan Bank advances	1,250,000		1,249,629		—		—		1,249,629
Senior debt and subordinated debt	Senior debt and subordinated debt	620,406		—		604,780		—		604,780		Senior debt and subordinated debt	539,634		—		456,867		—		456,867
Other borrowings	Other borrowings	417,703		416,764		939		—		417,703		Other borrowings	890,573		889,393		1,180		—		890,573
Other liabilities	Other liabilities	288,862		188,219		86,110		14,533		288,862		Other liabilities	467,705		154,912		296,465		16,328		467,705

Fair values of financial instruments are significantly affected by the assumptions used, principally the timing of future cash flows and discount rates. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument. The aggregate fair value amounts presented do not necessarily represent management’s estimate of the underlying value of the Corporation.

For short-term financial instruments, defined as those with remaining maturities of 90 days or less, and excluding those recorded at fair value on the Corporation's consolidated balance sheets, book value was considered to be a reasonable estimate of fair value.

The following instruments are predominantly short-term:


Assets						Liabilities
Cash and cash equivalents						Demand and savings deposits
Accrued interest receivable						Other borrowings
						Accrued interest payable

FRB and FHLB stock represent restricted investments and are carried at cost on the consolidated balance sheets, which is a reasonable estimate of fair value.

As of ~~September 30, 2022,~~March 31, 2023, fair values for loans and time deposits were estimated by discounting future cash flows using the current rates, as adjusted for liquidity considerations, at which similar loans would be made to borrowers and similar deposits would be issued to customers for the same remaining maturities. Fair values of loans also include estimated credit losses that would be assumed in a market transaction, which represents estimated exit prices.

Brokered deposits consist of demand and saving deposits, which are classified as Level 1, and time deposits, which are classified as Level 2. The fair value of these deposits are determined in a manner consistent with the respective type of deposits discussed above.

4039

NOTE 10 – Net Income Per Share

Basic net income per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding.

Diluted net income per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding plus the incremental number of shares added as a result of converting common stock equivalents, calculated using the treasury stock method. The Corporation's common stock equivalents consist of outstanding stock options, restricted stock, RSUs, and PSUs. PSUs are required to be included in weighted average diluted shares outstanding if performance measures, as defined in each PSU award agreement, are met as of the end of the period.

A reconciliation of weighted average shares outstanding used to calculate basic and diluted net income per share follows (in thousands, except per share data):


		Three months ended September 30				Nine months ended September 30					Three months ended March 31
		2022		2021		2022		2021			2023		2022
Weighted average shares outstanding (basic)	Weighted average shares outstanding (basic)	167,353		162,506		162,979		162,577		Weighted average shares outstanding (basic)	166,605		160,588
Impact of common stock equivalents	Impact of common stock equivalents	1,428		950		1,275		1,057		Impact of common stock equivalents	1,796		1,323
Weighted average shares outstanding (diluted)	Weighted average shares outstanding (diluted)	168,781		163,456		164,254		163,634		Weighted average shares outstanding (diluted)	168,401		161,911
Per share:	Per share:									Per share:
Basic	Basic	$	0.41	$	0.45	$	1.21	$	1.27	Basic	$	0.39	$	0.38
Diluted	Diluted	0.40		0.45		1.20		1.26		Diluted	0.39		0.38

NOTE 11 – Stock-Based Compensation

The Corporation grants equity awards to employees in the form of stock options, restricted stock, RSUs or PSUs under its Employee Equity Plan. In addition, employees may purchase stock under the Corporation's Employee Stock Purchase Plan. The fair value of equity awards granted to employees is recognized as compensation expense over the period during which employees are required to provide service in exchange for such awards. Compensation expense for PSUs is also recognized over the period during which employees are required to provide service in exchange for such awards, however, compensation expense may vary based on the expectations for actual performance relative to defined performance measures.

The Corporation also grants equity awards to non-employee members of its board of directors and the ~~subsidiary bank~~Bank board of directors under the Directors’ Plan. Under the Directors’ Plan, the Corporation can grant equity awards to non-employee ~~holding company~~Corporation and ~~subsidiary bank~~Bank directors in the form of stock options, restricted stock, RSUs or common stock.Recent grants of equity awards under the Directors’ Plan have been limited to RSUs.

Equity awards under the Employee Equity Plan are generally granted annually and become fully vested over or after a three-year vesting period. The vesting period for non-performance-based awards represents the period during which employees are required to provide service in exchange for such awards. Equity awards under the Directors' Plan are generally granted annually and become fully vested after a one-year vesting period. Certain events, as defined in the Employee Equity Plan and the Directors' Plan, result in the acceleration of the vesting of equity awards.

Fair values for RSUs and a majority of PSUs are based on the trading price of the Corporation's stock on the date of grant and earn dividend equivalents during the vesting period, which are forfeitable if the awards do not vest. The fair value of certain PSUs are estimated through the use of the Monte Carlo valuation methodology as of the date of grant.

Upon approval at the Annual Meeting, the Employee Equity Plan was amended and restated. Subject to adjustments provided for in the Employee Equity Plan, the total number of equity awards that may be awarded under the Employee Equity Plan was reduced to 5,806,000 shares as of the date of the Annual Meeting.

As of ~~September 30, 2022,~~March 31, 2023, the Employee Equity Plan had approximately 5.0 million shares reserved for future grants through 2032, and the Directors’ Plan had approximately ~~49,000~~44,000 shares reserved for future grants through 2029.

The following table presents compensation expense and the related tax benefits for equity awards recognized in the consolidated statements of income:


		Three months ended September 30				Nine months ended September 30					Three months ended March 31
		2022		2021		2022		2021			2023		2022
		(in thousands)									(dollars in thousands)
Compensation expense	Compensation expense	$	3,791	$	2,192	$	10,377	$	6,192	Compensation expense	$	1,668	$	2,955
Tax benefit	Tax benefit	(840)		(481)		(2,201)		(1,352)		Tax benefit	(362)		(603)
Total stock-based compensation, net of tax	Total stock-based compensation, net of tax	$	2,951	$	1,711	$	8,176	$	4,840	Total stock-based compensation, net of tax	$	1,306	$	2,352

NOTE 12 – Employee Benefit Plans

The net periodic pension cost for the ~~Corporation's~~ Pension Plan consisted of the following components:


		Three months ended September 30				Nine months ended September 30					Three months ended March 31
		2022		2021		2022		2021			2023		2022
		(in thousands)									(dollars in thousands)

Interest cost	Interest cost	$	599	$	561	$	1,795	$	1,683	Interest cost	$	856	$	598
Expected return on plan assets	Expected return on plan assets	(1,098)		(1,011)		(3,295)		(3,033)		Expected return on plan assets	(877)		(1,098)
Net amortization and deferral	Net amortization and deferral	163		504		490		1,513		Net amortization and deferral	80		163
Net periodic pension cost	Net periodic pension cost	$	(336)	$	54	$	(1,010)	$	163	Net periodic pension cost	$	59	$	(337)

The components of the net benefit for the ~~Corporation's~~ Postretirement Plan consisted of the following components:


		Three months ended September 30				Nine months ended September 30					Three months ended March 31
		2022		2021		2022		2021			2023		2022
		(in thousands)									(dollars in thousands)
Interest cost	Interest cost	$	8	$	8	$	25	$	24	Interest cost	$	13	$	8

Net accretion and deferral	Net accretion and deferral	(132)		(134)		(394)		(402)		Net accretion and deferral	(136)		(131)
Net periodic benefit	Net periodic benefit	$	(124)	$	(126)	$	(369)	$	(378)	Net periodic benefit	$	(123)	$	(123)

In connection with the Merger, the Corporation assumed the obligations of Prudential Bancorp under a multiemployer defined benefit pension plan that had previously been closed to new Prudential Bancorp participants.

The Corporation recognizes the funded status of its Pension Plan and Postretirement Plan on the consolidated balance sheets and recognizes the change in that funded status through other comprehensive income.

NOTE 13 – Commitments and Contingencies

Commitments

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its ~~customers.~~borrowers or obligors.

Commitments to extend credit are agreements to lend to a ~~customer~~borrower or obligor as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the ~~customer~~borrower or obligor. Since ~~some~~a portion of the commitments ~~are~~is expected to expire without being drawn upon, the total ~~commitments to extend credit~~commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each ~~customer's~~borrower's or obligor's creditworthiness on a case-by-case basis. The amount of collateral, if any, obtained upon an extension of credit is based on management's credit evaluation of the ~~customer.~~borrower or obligor. Collateral held varies but may include accounts receivable, inventory, property, equipment and income-producing commercial properties.

Standby letters of credit are conditional commitments issued to guarantee the financial or performance obligation of a ~~customer~~borrower or obligor to a third party. Commercial letters of credit are conditional commitments issued to facilitate foreign and domestic trade transactions for ~~customers.~~borrowers or obligors. The credit risk involved in issuing letters of credit is similar to that involved in extending loan facilities. These obligations are underwritten consistent with commercial lending standards. The maximum exposure to loss for standby and commercial letters of credit is equal to the contractual (or notional) amount of the instruments.

The Corporation records a reserve for unfunded lending commitments, included in ACL - OBS credit exposures, which represents management’s estimate of credit losses associated with unused commitments to extend credit and letters of credit. As of September 30, 2022 and December 31, 2021, the ACL - OBS credit exposures for unfunded lending commitments was $11.0 million and $9.1 million, respectively. See "Note 5 - Loans and Allowance for Credit Losses," for additional details.

~~The~~ following table presents the Corporation's commitments to extend credit and letters of credit:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(dollars in thousands)
Commitments to extend credit	Commitments to extend credit	$	8,552,736	$	8,731,168	Commitments to extend credit	$	8,902,212	$	8,695,621
Standby letters of credit	Standby letters of credit	267,247		298,275		Standby letters of credit	258,922		260,829
Commercial letters of credit	Commercial letters of credit	51,852		54,196		Commercial letters of credit	57,912		49,288

Residential Lending

The Corporation originates and sells residential mortgages to secondary market investors. The Corporation provides customary representations and warranties to secondary market investors that specify, among other things, that the loans have been underwritten to the standards of the secondary market investor. The Corporation may be required to repurchase specific loans, or reimburse the investor for a credit loss incurred on a sold loan if it is determined that the representations and warranties have not been met. Under some agreements with secondary market investors, the Corporation may have additional credit exposure beyond customary representations and warranties, based on the specific terms of those agreements.

The Corporation maintains a reserve for estimated losses related to loans sold to investors. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the total reserve for losses on residential mortgage loans sold was ~~$1.3~~$1.4 millionand ~~$1.1~~$1.4 million, respectively, including reserves for both representation and warranty and credit loss exposures. In addition, a component of ACL - OBS credit exposures of ~~$6.3~~$6.0 million and ~~$3.8~~$6.0 million, as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, related to additional credit exposures for potential loan repurchases.

Legal Proceedings

The Corporation is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business activities. The Corporation evaluates the possible impact of these matters, taking into consideration the most recent information available. A loss reserve is established for those matters for which the Corporation believes a loss is both probable and reasonably estimable. Once established, the reserve is adjusted as appropriate to reflect any subsequent developments. Actuallosses with respect to any such matter may be more or less than the amount estimated by the Corporation. For matters where a loss is not probable, or the amount of the loss cannot be reasonably estimated by the Corporation, no loss reserve is established.

In addition, from time to time, the Corporation is involved in investigations or other forms of regulatory or governmental inquiry covering a range of possible issues and, in some cases, these may be part of similar reviews of the specified activities of other companies. These inquiries or investigations could lead to administrative, civil or criminal proceedings involving the Corporation, and could result in fines, penalties, restitution, other types of sanctions, or the need for the Corporation to undertake remedial actions, or to alter its business, financial or accounting practices. The Corporation's practice is to cooperate fully with regulatory and governmental inquiries and investigations.

As of the date of this report, the Corporation believes that any liabilities, individually or in the aggregate, that may result from the final outcomes of pending legal proceedings, or regulatory or governmental inquiries or investigations, will not have a material adverse effect on the financial condition of the Corporation. However, legal proceedings, inquiries and investigations are often unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to the Corporation's results of operations in any future period, depending, in part, upon the size of the loss or liability imposed and the

operating results for the period, and could have a material adverse effect on the Corporation's business. In addition, regardless of the ultimate outcome of any such legal proceeding, inquiry or investigation, any such matter could cause the Corporation to incur additional expenses, which could be significant, and possibly material, to the Corporation's results of operations in any future period.

~~Kress v. Fulton Bank, N.A.~~

On October 15, 2019, a former Fulton Bank teller supervisor, D. Kress, filed a putative collective and class action lawsuit on behalf of herself and other teller supervisors, tellers, and other similar non-exempt employees in the U.S. District Court for the District of New Jersey, ~~D. Kress v. Fulton Bank, N.A.~~, Case No. 1:19-cv-18985. Fulton Bank accepted summons without a formal service of process on January 20, 2020. The lawsuit alleges that Fulton Bank did not record or otherwise account for the amount of time D. Kress and putative collective and class members spent conducting branch opening security procedures. The allegation is that, as a result, Fulton Bank did not properly compensate those employees for their regular and overtime wages. The lawsuit alleges that by doing so, Fulton violated: (i) the federal Fair Labor Standards Act and seeks back overtime wages for a period of three years, liquidated damages and attorney fees and costs; (ii) the New Jersey State Wage and Hour Law and seeks back overtime wages for a period of six years, treble damages and attorney fees and costs; and (iii) the New Jersey Wage Payment Law and seeks back wages for a period of six years, treble damages and attorney fees and costs. The lawsuit also asserts New Jersey common law claims seeking compensatory damages and interest. The Corporation and counsel representing plaintiffs ("Plaintiffs' Counsel") reached and executed a formal Settlement Agreement to resolve this lawsuit. Plaintiffs' Counsel filed a Motion for Preliminary Approval of Class and Collective Settlement and Provisional Certification of Settlement Class and Collective ("the Motion") with the U.S. District Court for the District of New Jersey ("the Court"). On June 30, 2022, the Court granted the Motion and scheduled a hearing for final approval of the Settlement Agreement and matters related thereto for November 2, 2022. On November 2, 2022, the Court granted final approval of the Settlement Agreement and matters related thereto and dismissed the lawsuit with prejudice. The financial terms of the Settlement Agreement are not material to the Corporation. The Corporation established an accrued liability during the third quarter of 2020 for the costs expected to be incurred in connection with the Settlement Agreement. The accrued liability is included in "other liabilities" on the consolidated balance sheets.

NOTE 14 – Borrowings

On March 16, 2022, $65.0 million of senior notes with a fixed rate of 3.60% were repaid upon their maturity.

On March 30, 2021, pursuant to a cash tender offer, the Corporation purchased $75.0 million and $60.0 million of its subordinated notes which are scheduled to mature on November 15, 2024 and its senior notes which matured on March 16, 2022, respectively. The Corporation incurred $11.3 million in debt extinguishment costs and expensed $0.8 million of unamortized discount costs. In addition, during the first quarter of 2021, the Corporation prepaid $536.0 million of FHLB advances and incurred $20.9 million in prepayment penalties.

~~In connection with the Merger, the Corporation assumed $253.5 million of Prudential Bancorp FHLB advances.~~

The Corporation owned all of the common ~~securities~~stock of ~~three unconsolidated subsidiary trusts that~~the Columbia Bancorp Statutory Trust, Columbia Bancorp Statutory Trust II and Columbia Bancorp Statutory Trust III, each of which issued TruPS in conjunction with the Corporation issuing junior subordinated deferrable interest debentures to ~~the~~these trusts. In September 2022, the Corporation redeemed all of the outstanding junior subordinated deferrable interest debentures issued to ~~the~~these trusts, totaling approximately~~$17.0~~ $17.2 million, and ~~the~~these trusts redeemed all of the outstanding TruPS in a like amount, after which the subsidiary trusts were ~~terminated.~~canceled.

4443

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

This ~~Management~~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. ~~Management’s~~Management's Discussion should be read in conjunction with the consolidated financial statements and other financial information presented in this report.

~~FORWARD-LOOKING STATEMENTS~~

◦~~the impact of adverse conditions in the economy and financial markets on the performance of the Corporation's loan portfolio and demand for the Corporation's products and services;~~

◦~~the scope and duration of the COVID-19 pandemic and the direct and indirect impacts of the pandemic on the Corporation, its customers and third parties;~~

◦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;

◦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;

◦~~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 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 replacement of LIBOR as a benchmark reference rate;~~

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

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

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

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

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

◦~~the effects of, and uncertainty surrounding, new legislation, changes in regulation and government policy, which could result in significant changes in banking and financial services regulation;~~

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

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

◦~~the effects of negative publicity on the Corporation's reputation;~~

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

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

◦~~the Corporation's ability to achieve its growth plans;~~

◦~~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;~~

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

◦~~the effects of concerns relating to the Corporation's ESG posture, including potential adverse impacts on the Corporation's reputation and the market value of its securities;~~

◦~~the effects of competition on deposit rates and growth, loan rates and growth and net interest margin;~~

◦~~the Corporation's ability to manage the level of non-interest expenses, including salaries and employee benefits expenses, operating risk losses and goodwill impairment;~~

◦~~the effects of changes in accounting policies, standards, and interpretations on the Corporation's reporting of its financial condition and results of operations;~~

◦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 impact of failures of third parties upon which the Corporation relies to perform in accordance with contractual arrangements;~~

◦~~the failure or circumvention of the Corporation's system of internal controls;~~

◦~~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 cyber-attacks;~~

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

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

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

◦~~the effects of any downgrade in the Corporation or Fulton Bank's credit ratings on each of their borrowing costs or access to capital markets;~~

◦the possibility that the anticipated benefits of the Merger, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or challenges arising from, the integration of Prudential Bancorp into the Corporation or as a result of the strength of the economy, competitive factors in the areas where the Corporation and Prudential Bancorp do business, or as a result of other unexpected factors or events;

◦~~potential adverse reactions or changes to business or employee relationships, including those resulting from the Merger;~~

◦unanticipated challenges or delays in the integration of Prudential Bancorp’s business into the Corporation's business and or the conversion of Prudential Bancorp’s operating systems and customer data onto the Corporation's may significantly increase the expense associated with the Merger; and

◦~~other factors that may affect future results of the Corporation.~~

Additional information regarding these as well as other factors that could affect future financial results can be found in the sections entitled "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2021, Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and elsewhere in this report, including in Note 13 "Commitments and Contingencies" of the Notes to Consolidated Financial Statements.

OVERVIEW

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

The Corporation generates the majority of its revenue through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is FTE net interest income as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on ~~the~~ various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses on loans and OBS credit risks, non-interest expenses and income taxes.

The following table presents a summary of the Corporation's earnings and selected performance ratios:


		Three months ended September 30						Nine months ended September 30							Three months ended March 31
		2022			2021			2022			2021				2023			2022

		(dollars in thousands, except per share and percentages)													(dollars in thousands, except per share data)
Net income (in thousands)		$	70,871		$	75,583		$	205,148		$	213,611
Net income available to common shareholders (in thousands)		$	68,309		$	73,021		$	197,462		$	205,896
Net income														Net income	$	68,314		$	64,288
Net income available to common shareholders														Net income available to common shareholders	$	65,752		$	61,726
Diluted net income available to common shareholders per share	Diluted net income available to common shareholders per share	$	0.40		$	0.45		$	1.20		$	1.26		Diluted net income available to common shareholders per share	$	0.39		$	0.38
Diluted operating net income available to common shareholders per share, annualized(1)		$	0.48		$	0.45		$	1.28		$	1.26

Return on average assets, annualized	Return on average assets, annualized	1.07		%	1.13		%	1.06		%	1.09		%	Return on average assets, annualized	1.03		%	1.02		%
Operating return on average assets, annualized(1)		1.25		%	1.13		%	1.13		%	1.09		%
Return on average common shareholders' equity, annualized		11.24		%	11.45		%	10.93		%	10.28		%

Return on average common shareholders' equity														Return on average common shareholders' equity	11.02		%	10.03		%

Return on average common shareholders' equity (tangible), annualized(1)	Return on average common shareholders' equity (tangible), annualized(1)	17.31		%	14.56		%	15.11		%	14.16		%	Return on average common shareholders' equity (tangible), annualized(1)	14.46		%	12.88		%
Net interest margin(2)	Net interest margin(2)	3.54		%	2.82		%	3.13		%	2.78		%	Net interest margin(2)	3.53		%	2.78		%
Efficiency ratio(1)	Efficiency ratio(1)	57.8		%	60.3		%	61.4		%	62.3		%	Efficiency ratio(1)	58.5		%	65.8		%
Non-performing assets to total assets	Non-performing assets to total assets	0.76		%	0.58		%	0.76		%	0.58		%	Non-performing assets to total assets	0.62		%	0.64		%
Net charge-offs (recoveries) to average loans, annualized		0.01		%	(0.05)		%	(0.05)		%	0.08		%
Net charge-offs (recoveries) to average loans														Net charge-offs (recoveries) to average loans	0.27		%	(0.02)		%

(1) Ratio represents a financial measure derived by methods other than GAAP. See reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure under the ~~heading,~~ "Supplemental Reporting of Non-GAAP Based Financial ~~Measures~~"Measures" section of Management's Discussion.

(2) Presented on a FTE basis, using a 21% federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income" section of the Management's Discussion.

Federal Funds Rate

After maintaining the target range for the Fed Funds Rate at 0.00% to 0.25% from March 16, 2020, as ~~the~~ COVID-19 ~~pandemic began to weigh~~weighed on global economic activity, through March 16, 2022, the FOMC ~~has~~ increased the target range ~~six~~for the Feds Fund Rate ten times to address elevated levels of inflation, placing the target range for the Fed Funds Rate at ~~3.75%~~5.00% - ~~4.00%~~5.25% as of ~~November 2, 2022.~~May 9, 2023.

~~Business Combinations~~

On July 1, 2022, the Corporation completed the acquisition 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 on November 5, 2022.

~~The total consideration paid of $119.1 million for the fair value of Prudential Bancorp's net assets acquired of $102.8 million resulted in $16.3 million of goodwill recognized as of July 1, 2022.~~

~~Merger-related expenses included in non-interest expense for the three months and nine months ended September 30, 2022, were $7.0 million and $8.4 million, respectively.~~

Financial Highlights

Following is a summary of the financial highlights for the three ~~and nine~~ months ended ~~September 30, 2022:~~March 31, 2023:

•Net Income Available to Common Shareholders and Net Income Per Share - Net income available to common shareholders was ~~$68.3~~$65.8 million for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~$4.7~~$4.1 million ~~decrease~~increase compared to ~~$73.0~~$61.7 million for the same period in ~~2021. Net income available to common shareholders was $197.5 million for the nine months ended September 30, 2022, a $8.4 million decrease compared to $205.9 million for the same period in 2021.~~2022. Diluted net income available to common shareholders, per share was~~$0.40~~ $0.39 for the three months ended ~~September 30, 2022,~~March 31, 2023, a ~~$0.05 decrease~~$0.01 increase compared to the same period in ~~2021, and $1.20 for the nine months ended September 30, 2022, a $0.06 decrease compared to the same period in 2021.~~2022.

•Net Interest Income - ~~FTE net~~Net interest income ~~increased $45.2~~was $215.6 million ~~or 25.9%,~~ for the three months ended ~~September 30, 2022~~March 31, 2023, an increase of $54.3 million, or 33.6%, compared to the same period in ~~2021.~~2022. The increase was driven by higher interest rates ~~which resulted in a $44.0 million increase in interest income on average net loans, as well as a $678.9 million~~and an increase in average balances for net loans and investment securities, which contributed $6.4 million to the increase in interest income. FTE net interest income increased $59.2 million, or 11.7%, for the nine months ended September 30, 2022 compared to the same period in 2021.~~The increase in net interest income was primarily from~~partially offset by an increase in ~~interest income~~the average balance of ~~$38.8 million from average net loans~~higher-cost borrowings and ~~$14.4 from average investment securities.~~other interest-bearing liabilities and deposits.

•Net Interest Margin - ~~Net interest margin increased 72 bps for~~For the three months ended ~~September 30, 2022~~March 31, 2023, NIM increased to 3.53%, or 75 bps, compared to the same period in ~~2021. Net interest margin increased 35~~2022, driven by a 189 bps ~~for~~increase in the ~~nine months ended September 30, 2022 compared to~~yield on net loans, a 31 bps increase in the ~~same period~~yield on investment securities and a 271 increase in ~~2021. The increases in net interest margin were driven primarily by higher yields~~the yield on ~~average~~other interest-earning assets, ~~and funds moving to higher yielding interest-earning assets.~~partially offset by a 106 bps increase in the cost of funds.

•Loan Growth - Average net loans increased ~~by $1.1~~$2.1 billion, or ~~6.2%~~11.3%, for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021.~~2022. The increase in average net loans was largely driven by increases in average residential mortgage loans, average commercial mortgage loans, average commercial and industrial loans, ~~excluding PPP~~average consumer loans and average real estate construction loans ~~and average consumer loans~~ of ~~$842.8~~$903.4 million, ~~$432.1~~$426.1 million, ~~$322.6~~$352.9 million, ~~$182.7~~$250.1 million and ~~$151.8~~$138.5 million, respectively, partially offset by a $801.4 million decline in PPP loans due to the repayment of these loans upon forgiveness by the SBA. Average net loans increased $100.6 million, or 0.5%, for the nine months ended September 30, 2022 compared to the same period in 2021. The increase was primarily driven by increases in average residential mortgage loans, average commercial mortgage loans, average real estate construction loans, average commercial and industrial loans, excluding PPP loans, and average consumer loans of $734.5 million, $254.1 million, $132.8 million, $132.1 million and $78.0 million, respectively, partially offset by a $1.2 billion decline in PPP loans.respectively.

•Deposit ~~Growth~~Decrease - Average deposits decreased ~~$335.4~~$905.9 million, or ~~1.5%~~4.2%, for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021.~~2022. The decrease in average deposits was largely due to decreases in average ~~interest-bearing demand deposits and average time deposits of $460.8 million and $236.8 million, respectively, partially offset by growth in average savings and money market deposits and average~~ noninterest-bearing demand deposits of ~~$289.2~~$789.5 million and ~~$96.1~~average interest-bearing demand deposits of $338.4 million, ~~respectively.~~partially offset by an increase in average brokered deposits of $189.3 million.

•Borrowings and Other Interest-Bearing Liabilities Increase - Average ~~deposits decreased $73.9 million, or 0.3%,~~borrowings and other interest-bearing liabilities increased $2.0 billion, for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to the same period in ~~2021.~~2022. The ~~decrease~~increase in borrowings and other interest-bearing liabilities was primarily due to ~~decreases in average time deposits and average interest-bearing demand deposits of $368.0 million and $337.7 million, respectively, partially offset by~~ increases in average ~~noninterest-bearing demand deposits~~Federal Home Loan Bank advances and ~~average savings and money market deposits~~Federal funds purchased of ~~$430.4~~$1,262 million and ~~$244.5~~$505.1 million, respectively.

•Asset Quality - Non-performing assets ~~increased $44.7~~decreased $9.8 million, or ~~29.0%~~5.5%, as of ~~September 30, 2022~~March 31, 2023 compared to December 31, ~~2021,~~2022, and were ~~0.76%~~0.62% and ~~0.60%~~0.66% of total assets as of those dates, respectively. ~~For the nine months ended September 30, 2022 and 2021, annualized~~Annualized net charge-offs to average loans outstanding ~~were (0.05)~~was 0.27% for the three months ended March 31, 2023, compared to annualized recoveries of (0.02)% ~~and 0.08%, respectively.~~for the same period in 2022. The provision for credit losses was ~~$13.5~~$24.5 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to a negative provision of ~~$9.6~~$7.0 million for the same period ~~of 2021. Included~~ in ~~the third quarter of 2022~~

2022. The increase in provision for credit losses was ~~a CECL Day 1 Provision of $8.0 million for~~primarily driven by loan growth and changes to the ~~acquired Prudential Bancorp loan portfolio.~~macroeconomic outlook.

•Non-interest Income - ~~For~~Non-interest income, excluding investment securities gains, for the three months ended ~~September 30, 2022, non-interest income, excluding net investment securities gains,~~March 31, 2023, decreased ~~$3.4~~$3.5 million, or ~~5.4%~~6.3%, compared to the same period in ~~2021.~~2022. The decrease in non-interest income was primarily due to decreases of ~~$5.8~~$2.6 million in mortgage banking income ~~$2.2 million in other income, primarily~~mainly due to ~~equity method investments,~~lower loan sale volumes and ~~$0.9~~lower spreads, $1.4 million in wealth management ~~revenues,~~primarily due to market performance and $1.1 million from lower income from equity method investments, reflected in other income, partially offset by ~~increases~~an increase of ~~$4.1~~$1.5 million in commercial banking ~~revenues and $1.5 million in consumer banking fees.~~Non-interest income, excluding net investment securities gains, decreased $3.5 million, or 2.0%, for the nine months ended September 30, 2022 compared to the same period in 2021. The decrease in non-interest income was driven by a decrease of $14.3 million in mortgage banking income, partially offset by increases of $7.0 million in commercial banking revenues and $4.0 million in consumer banking fees.income.

•Non-interest Expense - Non-interest expense, excluding ~~Merger-related~~merger-related expenses of ~~$7.0~~$0.4 million in the first quarter of 2022, increased ~~$18.0~~$14.0 million, or ~~12.4%, for the three months ended September 30, 2022 compared to the same period~~9.6%. The increase in ~~2021. Thisincrease~~non-interest expense, excluding merger-related expenses, was primarily due to increases of ~~$11.6~~$4.8 million in salaries and employee benefits expense, $2.0 million in other outside services expense, $1.6 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, $1.5 million in data processing and software expense, $0.6 million in professional fees, $0.6 million in marketing expense and $0.5 million in intangible amortization expense due to the acquisition of Prudential Bancorp. Additional drivers of the increase in non-interest expense were an unfavorable change in owned asset expense due to a $1.5 million gain on sale recorded on owned assets in the first quarter of 2022 and a $0.8 million contingent liability recorded in the first quarter of 2023, in each case, reflected in other outside services and $1.1 million in net occupancy expense. Non-interest expense, excluding Merger-related expenses of $8.4 million, decreased $7.0 million, or 1.5%, for the nine-months ended September 30, 2022, compared to the same period in 2021. The decrease was largely driven by debt extinguishment expenses in 2021 of $32.6 million, partially offset by increases of $20.5 million in salaries and employee benefits expense, $3.0 million in data processing and software expense and $2.7 million in net occupancy expense.

•Income Taxes -~~Income tax expense~~ The Corporation's ETR was 17.9% for the three months ended September 30, 2022 was $15.4 million, a $1.1 million increase from $14.3 million from the same period in 2021. Income tax expense for the nine months ended September 30, 2022 was $44.6 million, a $4.5 million increase from the same period in 2021. The Corporation's ETR was 17.8% for the three months ended September 30, 2022March 31, 2023, compared to ~~17.6%~~17.3% for the full-year of ~~2021.~~2022. The ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest

income earned on loans, investments in tax-free municipal securities and investments in community development projects that generate tax credits under various ~~federal~~ programs.

Critical Accounting Policies

The Corporation's accounting policies are fundamental to understanding Management’s Discussion. Critical policies are those 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.

The Corporation's critical accounting policies are described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022.

Supplemental Reporting of Non-GAAP Based Financial Measures

This Quarterly Report on Form 10-Q contains supplemental financial information, as detailed below, that has been derived by methods other than GAAP. The Corporation has presented these non-GAAP financial measures because it believes that these measures provide useful and comparative information to assess trends in the Corporation's results of operations. Presentation of these non-GAAP financial measures is consistent with how the Corporation evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Corporation's industry. Management believes that these non-GAAP financial measures, in addition to GAAP measures, are also useful to investors to evaluate the Corporation's results. Investors should recognize that the Corporation's presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures, and the Corporation strongly encourages a review of its consolidated financial statements in their entirety.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure follow:

Three months ended September 30 Nine months ended September 30
2022 2021 2022 2021
(in thousands, except per share data)
Operating net income available to common shareholders
Net income available to common shareholders $ 68,309 $ 73,021 $ 197,462 $ 205,896
Plus: Core deposit intangible amortization, net of tax 406 — 406 —
Plus: Merger-related expenses, net of tax 5,535 — 6,663 —
Plus: CECL Day 1 Provision expense, net of tax 6,283 — 6,283 —
Operating net income available to common shareholders (numerator) $ 80,533 $ 73,021 $ 210,814 $ 205,896
Weighted average shares (diluted) (denominator) 168,781 163,456 164,254 163,634
Operating net income available to common shareholders, per share (diluted) $ 0.48 $ 0.45 $ 1.28 $ 1.26
Operating return on average assets
Net income $ 70,871 $ 75,583 $ 205,148 $ 213,611
Plus: Core deposit intangible amortization, net of tax 406 — 406 —
Plus: Merger-related expenses, net of tax 5,535 — 6,663 —
Plus: CECL Day 1 Provision expense, net of tax 6,283 — 6,283 —
Operating net income (numerator) $ 83,095 $ 75,583 $ 218,500 $ 213,611
Total average assets (denominator) $ 26,357,095 $ 26,440,876 $ 25,855,097 $ 26,181,723
Operating return on average assets, annualized 1.25 % 1.13 % 1.13 % 1.09 %
Return on average common shareholders' equity (tangible)
Net income available to common shareholders $ 68,309 $ 73,021 $ 197,462 $ 205,896
Plus: Merger-related expenses, net of tax 5,535 — 6,663 —
Plus: CECL Day 1 Provision expense, net of tax 6,283 — 6,283 —
Plus: Intangible amortization, net of tax 545 118 824 350
Operating net income available to common shareholders (numerator) $ 80,672 $ 73,139 $ 211,232 $ 206,246
Average shareholders' equity $ 2,604,057 $ 2,722,833 $ 2,607,514 $ 2,676,762
Less: Average goodwill and intangible assets (562,285) (536,772) (545,846) (536,615)
Less: Average preferred stock (192,878) (192,878) (192,878) (192,878)
Average tangible common shareholders' equity (denominator) $ 1,848,894 $ 1,993,183 $ 1,868,790 $ 1,947,269
Return on average common shareholders' equity (tangible), annualized 17.31 % 14.56 % 15.11 % 14.16 %


	Three months ended March 31
	2023			2022
	(dollars in thousands, except per share data)





































Return on average common shareholders' equity (tangible)
Net income available to common shareholders	$	65,752		$	61,726
Plus: Intangible amortization	674			176
Plus: Merger-related expenses	—			401

Less: Tax impact of adjustments	(142)			(122)
Operating net income available to common shareholders (numerator)	$	66,284		$	62,181

Average shareholders' equity	$	2,613,316		$	2,688,834
Less: Average goodwill and intangible assets	(561,744)			(537,976)
Less: Average preferred stock	(192,878)			(192,878)
Average tangible common shareholders' equity (denominator)	$	1,858,694		$	1,957,980
Return on average common shareholders' equity (tangible)	14.46		%	12.88		%





Efficiency ratio
Non-interest expense	$	159,616		$	145,978
Less: Amortization of tax credit investments	—			(696)
Less: Merger-related expenses	—			(401)
Less: Intangible amortization	(674)			(176)

Non-interest expense (numerator)	$	158,942		$	144,705

Net interest income	$	215,587		$	161,310
Tax equivalent adjustment	4,414			3,288
Plus: Total non-interest income	51,753			55,256
Less: Investment securities (gains) losses, net	(23)			(19)
Total revenue (denominator)	$	271,731		$	219,835
Efficiency ratio	58.5		%	65.8		%

5047

Three months ended September 30 Nine months ended September 30
2022 2021 2022 2021
(in thousands)
Efficiency ratio
Non-interest expense $ 169,558 $ 144,596 $ 465,266 $ 463,811
Less: Amortization of tax credit investments (696) (1,546) (2,088) (4,640)
Less: Merger-related expenses (7,006) — (8,434) —
Less: Intangible amortization (690) (150) (1,043) (443)
Less: Debt extinguishment costs — — — (32,575)
Non-interest expense (numerator) $ 161,166 $ 142,900 $ 453,701 $ 426,153
Net interest income $ 215,582 $ 171,270 $ 555,723 $ 498,118
Tax equivalent adjustment 3,970 3,114 10,685 9,111
Plus: Total non-interest income 59,162 62,577 172,809 209,864
Less: Investment securities (gains) losses, net 53 — 26 (33,511)
Total revenue (denominator) $ 278,767 $ 236,961 $ 739,243 $ 683,582
Efficiency ratio 57.8 % 60.3 % 61.4 % 62.3 %

~~Presented on a FTE basis, using a 21% federal tax rate.~~

RESULTS OF OPERATIONS

Three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022.

Net Interest Income

~~FTE net~~Net interest income ~~increased $45.2 million to $219.6~~was $215.6 million for the three months ended ~~September 30, 2022, from $174.4~~March 31, 2023, an increase of $54.3 million ~~for~~or 33.6%, compared to the same period in ~~2021. NIM~~2022. For the three months ended March 31, 2023, net interest margin increased 72to 3.53%, or 75 bps, ~~to 3.54%,~~ compared to ~~2.82% for~~ the same period in ~~2021.~~2022. The Corporation manages the risk associated with changes in interest rates through the techniques described within Item 3, "Quantitative and Qualitative Disclosures About Market Risk." The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a 21% federal tax rate, and statutory interest expense disallowances. The discussion following this table is based on these taxable-equivalent amounts.

Three months ended September 30
2022 2021
Average
Balance Interest Yield/
Rate Average
Balance Interest Yield/
Rate
ASSETS (dollars in thousands)
Interest-earning assets:
Net loans (1)
$ 19,563,825 $ 207,343 4.21 % $ 18,414,153 $ 163,343 3.53 %
Investment securities (2)
4,500,461 28,022 2.49 3,821,513 21,663 2.27
Loans held for sale 9,098 194 8.51 36,427 299 3.28
Other interest-earning assets 622,673 2,103 1.34 2,301,326 1,888 0.18
Total interest-earning assets 24,696,057 237,662 3.83 24,573,419 187,193 3.03
Noninterest-earning assets:
Cash and due from banks 152,349 200,315
Premises and equipment 223,880 228,861
Other assets 1,545,812 1,695,767
Less: ACL - loans (3)
(261,003) (257,486)
Total Assets $ 26,357,095 $ 26,440,876
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 5,708,059 $ 1,886 0.13 % $ 6,168,908 $ 814 0.05 %
Savings and money market deposits 6,681,713 3,414 0.20 6,392,537 1,054 0.07
Brokered deposits 247,105 1,346 2.16 270,168 229 0.34
Time deposits 1,615,384 3,404 0.84 1,852,223 4,428 0.95
Total interest-bearing deposits 14,252,261 10,050 0.28 14,683,836 6,525 0.18
Borrowings 1,359,348 8,060 2.35 % 1,122,111 6,284 2.22
Total interest-bearing liabilities 15,611,609 18,110 0.47 15,805,947 12,809 0.32
Noninterest-bearing liabilities:
Demand deposits 7,535,791 7,439,644
Other liabilities 605,638 472,452
Total Liabilities 23,753,038 23,718,043
Total Deposits/Cost of deposits 21,788,052 0.18 22,123,480 0.12
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds 23,147,400 0.31 23,245,591 0.22
Shareholders’ equity 2,604,057 2,722,833
Total Liabilities and Shareholders’ Equity $ 26,357,095 $ 26,440,876
Net interest income/FTE NIM 219,552 3.54 % 174,384 2.82 %
Tax equivalent adjustment (3,970) (3,114)
Net interest income $ 215,582 $ 171,270


	Three months ended March 31
	2023						2022
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
ASSETS	(dollars in thousands)
Interest-earning assets:
Net loans (1)	$	20,463,096	$	263,065	5.21	%	$	18,383,118	$	151,127	3.32	%
Investment securities (2)	4,289,643		27,522		2.60		4,226,352		24,251		2.29

Other interest-earning assets	493,130		3,648		3.00		1,286,723		912		0.29
Total interest-earning assets	25,245,869		294,235		4.73		23,896,193		176,290		2.98
Noninterest-earning assets:
Cash and due from banks	141,254						162,320
Premises and equipment	223,025						219,932
Other assets	1,563,806						1,595,039
Less: ACL - loans (3)	(273,301)						(251,022)
Total Assets	$	26,900,653					$	25,622,462
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits	$	5,326,566	$	8,455	0.64	%	$	5,664,987	$	728	0.05	%
Savings and money market deposits	6,469,468		20,535		1.29		6,436,548		1,021		0.06
Brokered deposits	439,670		5,173		4.77		250,350		216		0.35
Time deposits	1,696,878		7,458		1.78		1,697,063		3,640		0.87
Total interest-bearing deposits	13,932,582		41,621		1.21		14,048,948		5,605		0.16
Borrowings and other interest-bearing liabilities	3,058,684		32,613		4.32	%	1,033,815		6,087		2.39
Total interest-bearing liabilities	16,991,266		74,234		1.78		15,082,763		11,692		0.31
Noninterest-bearing liabilities:
Demand deposits	6,641,741						7,431,235
Other liabilities	654,330						419,630
Total Liabilities	24,287,337						22,933,628
Total Deposits/Cost of deposits	20,574,323				0.82		21,480,183				0.11
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds	23,633,007				1.27		22,513,998				0.21
Shareholders’ equity	2,613,316						2,688,834
Total Liabilities and Shareholders’ Equity	$	26,900,653					$	25,622,462
Net interest income/FTE NIM			220,001		3.53	%			164,598		2.78	%
Tax equivalent adjustment			(4,414)						(3,288)
Net interest income			$	215,587					$	161,310

(1) Average balance includes non-performing loans.

(2) Balances include amortized historical cost for AFS. The related unrealized holding gains (losses) are included in other assets.

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

5248

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volume) and changes in yields and rates for the three months ended ~~September 30, 2022~~March 31, 2023 in comparison to the same period in ~~2021:~~2022:


		2022 vs. 2021 Increase (Decrease) due to change in							2023 vs. 2022 Increase (Decrease) due to change in
		Volume		Yield/Rate		Net			Volume		Yield/Rate		Net
		(in thousands)							(dollars in thousands)
FTE Interest income on:	FTE Interest income on:							FTE Interest income on:
Net loans (1)	Net loans (1)	$	10,770	$	33,230	$	44,000	Net loans (1)	$	18,559	$	93,379	$	111,938
Investment securities	Investment securities	4,115		2,244		6,359		Investment securities	326		2,945		3,271

Loans held for sale		(338)		233		(105)
Other interest-earning assets	Other interest-earning assets	(1,332)		1,547		215		Other interest-earning assets	(895)		3,631		2,736
Total interest income	Total interest income	$	13,215	$	37,254	$	50,469	Total interest income	$	17,990	$	99,955	$	117,945
Interest expense on:	Interest expense on:							Interest expense on:
Demand deposits	Demand deposits	$	(62)	$	1,134	$	1,072	Demand deposits	$	(44)	$	7,771	$	7,727
Savings and money market deposits	Savings and money market deposits	56		2,304		2,360		Savings and money market deposits	5		19,509		19,514
Brokered deposits	Brokered deposits	(21)		1,138		1,117		Brokered deposits	280		4,677		4,957
Time deposits	Time deposits	(537)		(487)		(1,024)		Time deposits	—		3,818		3,818
Borrowings		1,284		492		1,776
Borrowings and other interest-bearing liabilities								Borrowings and other interest-bearing liabilities	18,782		7,744		26,526
Total interest expense	Total interest expense	$	720	$	4,581	$	5,301	Total interest expense	$	19,023	$	43,519	$	62,542

(1) Average balance includes non-performing loans.

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

Compared to the ~~third~~first quarter of ~~2021,~~2022, FTE total interest income for the ~~third~~first quarter of ~~2022~~2023 increased ~~$50.5~~$117.9 million, or ~~27.0%~~66.9%, primarily due to an increase of ~~$37.3~~$100.0 million attributable to changes in yield, of which ~~$33.2~~$93.4 million related to net loans. The yield on average interest-earning assets increased 80175 bps in the ~~third~~first quarter of ~~2022~~2023 compared to the same period in ~~2021.~~2022.

In the ~~third~~first quarter of ~~2022,~~2023, interest expense increased ~~$5.3~~$62.5 million compared to the ~~third~~first quarter of ~~2021,~~2022, primarily driven by the increase in rate on interest-bearing liabilities resulting in a ~~$4.6 million~~$43.5 increase in interest expense. The increase in interest expense attributable to rate was ~~primarily~~ driven by the increases in the rates on savings and money market deposits, demand deposits and ~~brokered~~borrowings and other interest-bearing liabilities. The increase in volume of borrowings and other interest-bearing liabilities contributed an increase of $18.8 million in interest expense, primarily due to a decrease in average noninterest-bearing deposits.

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

Three months ended September 30 Increase (Decrease)
2022 2021 in Balance
Balance Yield Balance Yield $ %
(dollars in thousands)
Real estate – commercial mortgage $ 7,566,259 4.21 % $ 7,134,177 3.11 % $ 432,082 6.1 %
Commercial and industrial (1)
4,250,573 4.58 4,729,385 2.79 (478,812) (10.1)
Real estate – residential mortgage 4,485,649 3.59 3,642,822 3.39 842,827 23.1
Real estate – home equity 1,099,487 4.87 1,128,076 3.68 (28,589) (2.5)
Real estate – construction 1,268,590 4.67 1,085,846 3.13 182,744 16.8
Consumer 604,634 5.14 452,844 4.00 151,790 33.5
Equipment lease financing 252,810 4.45 247,776 3.88 5,034 2.0
Other (2)
35,823 — (6,773) — 42,596 N/M
Total loans $ 19,563,825 4.21 % $ 18,414,153 3.53 % $ 1,149,672 6.2 %


	Three months ended March 31								Increase (Decrease)
	2023				2022				in Balance
	Balance		Yield		Balance		Yield		$		%
	(dollars in thousands)
Real estate – commercial mortgage	$	7,720,975	5.55	%	$	7,294,914	3.19	%	$	426,061	5.8	%
Commercial and industrial	4,565,923		5.75		4,213,014		3.06		352,909		8.4
Real estate – residential mortgage	4,790,868		3.58		3,887,428		3.30		903,440		23.2
Real estate – home equity	1,086,032		6.37		1,106,319		3.74		(20,287)		(1.8)
Real estate – construction	1,276,145		6.29		1,137,649		3.05		138,496		12.2
Consumer	721,248		5.38		471,129		5.15		250,119		53.1
Leases and other loans(1)	301,905		4.09		272,665		3.79		29,240		10.7
Total loans	$	20,463,096	5.21	%	$	18,383,118	3.32	%	$	2,079,978	11.3	%

(1) ~~Includes average PPP loans~~Consists of ~~$49.2 million and $0.9 billion for the three months ended September 30, 2022 and 2021, respectively.~~

~~(2)~~ ~~Consists of~~equipment lease financing, overdrafts and net origination fees and costs.

During the ~~third~~first quarter of ~~2022,~~2023, average loans increased ~~$1.1~~$2.1 billion, or ~~6.2%~~11.3%, compared to the same period in ~~2021.~~2022. The increase in average loans was largely driven by increases in average residential mortgage loans, average commercial mortgage

loans, ~~and average construction loans of $842.8 million, $432.1 million and $182.7 million, respectively, partially offset by decreases in~~ average commercial and industrial loans and average consumer loans of ~~$478.8~~$903.4 million, ~~primarily~~$426.1 million, $352.9 million and $250.1 million, respectively. The yield on total loans increased 189 bps to 5.21% for the first quarter of 2023, compared to 3.32% for the same period in 2022, due to ~~the repayment of PPP loans upon forgiveness by the SBA.~~rising market interest rates.

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


		Three months ended September 30								Increase (Decrease) in Balance					Three months ended March 31								Increase (Decrease) in Balance
		2022				2021									2023				2022
		Balance		Rate		Balance		Rate		$		%			Balance		Rate		Balance		Rate		$		%
		(dollars in thousands)													(dollars in thousands)
Noninterest-bearing demand	Noninterest-bearing demand	$	7,535,791	—	%	$	7,439,644	—	%	$	96,147	1.3	%	Noninterest-bearing demand	$	6,641,741	—	%	$	7,431,235	—	%	$	(789,494)	(10.6)	%
Interest-bearing demand	Interest-bearing demand	5,708,059		0.13		6,168,908		0.05		(460,849)		(7.5)		Interest-bearing demand	5,326,566		0.64		5,664,987		0.05		(338,421)		(6.0)
Savings and money market deposits	Savings and money market deposits	6,681,713		0.20		6,392,537		0.07		289,176		4.5		Savings and money market deposits	6,469,468		1.29		6,436,548		0.06		32,920		0.5
Total demand deposits and savings and money market deposits	Total demand deposits and savings and money market deposits	19,925,563		0.11		20,001,089		0.04		(75,526)		(0.4)		Total demand deposits and savings and money market deposits	18,437,775		0.64		19,532,770		0.04		(1,094,995)		(5.6)
Brokered deposits	Brokered deposits	247,105		2.16		270,168		0.34		(23,063)		(8.5)		Brokered deposits	439,670		4.77		250,350		0.35		189,320		75.6
Time deposits	Time deposits	1,615,384		0.84		1,852,223		0.95		(236,839)		(12.8)		Time deposits	1,696,878		1.78		1,697,063		0.87		(185)		—
Total deposits	Total deposits	$	21,788,052	0.18	%	$	22,123,480	0.12	%	$	(335,428)	(1.5)	%	Total deposits	$	20,574,323	0.82	%	$	21,480,183	0.11	%	$	(905,860)	(4.2)	%

The cost of total deposits increased 671 bps, to ~~0.18%~~0.82%, for the ~~third~~first quarter of ~~2022,~~2023 compared to ~~0.12%~~0.11% for the same period in ~~2021,~~2022, due to an increase in rates and the change in mix of deposits. The rate on total demand deposits and savings and money market deposits increased to ~~0.11%~~0.64 bps for the ~~third~~first quarter of ~~2022,~~2023 compared to 0.04% for the same period in ~~2021.~~2022. Average ~~interest-bearing~~noninterest-bearing demand deposits and average ~~time~~interest-bearing demand deposits decreased ~~$460.8~~$789.5 million and ~~$236.8~~$338.4 million, respectively, ~~during~~for the ~~third~~first quarter of ~~2022. Average savings and money market deposits and average noninterest-bearing demand deposits increased $289.2 million and $96.1 million, respectively, during the third quarter of 2022~~2023 compared to the same period in ~~2021.~~2022. Average brokered deposits increased $189.3 million during the first quarter of 2023 compared to the same period in 2022.

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


		Three months ended September 30								Increase (Decrease)					Three months ended March 31								Increase (Decrease)
		2022				2021				in Balance					2023				2022				in Balance
		Balance		Rate		Balance		Rate		$		%			Balance		Rate		Balance		Rate		$		%
Borrowings:		(dollars in thousands)
Borrowings and other interest-bearing liabilities:														Borrowings and other interest-bearing liabilities:	(dollars in thousands)
Federal funds purchased	Federal funds purchased	$	96,965	2.22	%	$	—	—	%	$	96,965	N/M		Federal funds purchased	$	505,142	4.85	%	$	—	—	%	$	505,142	N/M
Federal Home Loan Bank advances	Federal Home Loan Bank advances	206,152		2.70		—		—		206,152		N/M		Federal Home Loan Bank advances	1,261,589		4.97		—		—		1,261,589		N/M
Senior debt and subordinated debt	Senior debt and subordinated debt	554,735		3.97		626,278		3.92		(71,543)		(11.4)		Senior debt and subordinated debt	539,726		4.02		608,961		3.97		(69,235)		(11.4)
Other borrowings(1)		501,496		0.48		495,833		0.11		5,663		1.1
Other borrowings and other interest bearing liabilities(1)														Other borrowings and other interest bearing liabilities(1)	752,227		3.11		424,854		0.12		327,373		77.1

Total borrowings		$	1,359,348	2.35	%	$	1,122,111	2.22	%	$	237,237	21.1	%
Total borrowings and other interest-bearing liabilities														Total borrowings and other interest-bearing liabilities	$	3,058,684	4.32	%	$	1,033,815	2.39	%	$	2,024,869	N/M

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

Average total borrowings and other interest-bearing liabilities increased ~~$237.7 million, or 21.1%,~~$2.0 billion in the ~~third~~first quarter of ~~2022,~~2023 compared to the same period in ~~2021~~2022. Average total borrowings and other interest-bearing liabilities increased primarily as a result of decrease in average total deposits and an increase ~~of $206.2 million~~ in the average ~~FHLB advances. See Note 14 "Borrowings" of the Notes to Consolidated Financial Statements for additional details.~~net loan balance. Average Federal Home Loan Bank advances, average Federal funds purchased and average other borrowings and other interest-bearing liabilities increased $1.3 billion, $0.5 billion and $0.3 billion, respectively.

Provision for Credit Losses

The provision for credit losses was ~~$19.0~~$24.5 million for the ~~third~~first quarter of ~~2022, an increase~~2023 compared to a negative provision of ~~$19.6~~$7.0 million ~~from~~for the same period in ~~2021. Included~~2022. The increase in ~~the third quarter of 2022~~ provision for credit losses was ~~a CECL Day 1 Provision of $8.0 million for~~primarily driven by loan growth and changes to the acquired Prudential Bancorp loan portfolio. Excluding the CECL Day 1 Provision, the provision for credit losses was $11.0 million and was primarily due to an increase in non-performing loans, as well as increases for the office building portfolio, reflected in the commercial real estate loan portfolio, and the consumer loan, real estate construction and residential mortgage loan portfolios.macroeconomic outlook.

5450

Non-Interest Income

The following table presents the components of non-interest income:


		Three months ended September 30				Increase (Decrease)					Three months ended March 31				Increase (Decrease)
		2022		2021		$		%			2023		2022		$		%
		(in thousands)									(dollars in thousands)
Wealth management										Wealth management	$	18,062	$	19,428	$	(1,366)	(7.0)	%
Commercial banking:	Commercial banking:									Commercial banking:
Merchant and card	Merchant and card	$	7,601	$	6,979	$	622	8.9	%	Merchant and card	6,834		6,097		737		12.1
Cash management	Cash management	6,483		5,285		1,198		22.7		Cash management	5,515		5,428		87		1.6
Capital markets	Capital markets	4,060		2,063		1,997		96.8		Capital markets	2,344		1,676		668		39.9
Other commercial banking	Other commercial banking	2,664		2,411		253		10.5		Other commercial banking	2,820		2,807		13		0.5
Total commercial banking	Total commercial banking	20,808		16,738		4,070		24.3		Total commercial banking	17,513		16,008		1,505		9.4
Consumer banking:	Consumer banking:									Consumer banking:
Card	Card	6,278		5,941		337		5.7		Card	6,243		5,796		447		7.7
Overdraft	Overdraft	4,463		3,474		989		28.5		Overdraft	2,733		3,772		(1,039)		(27.5)
Other consumer banking	Other consumer banking	2,534		2,386		148		6.2		Other consumer banking	2,241		2,106		135		6.4
Total consumer banking	Total consumer banking	13,275		11,801		1,474		12.5		Total consumer banking	11,217		11,674		(457)		(3.9)
Wealth management revenues		17,610		18,532		(922)		(5.0)
Mortgage banking:	Mortgage banking:									Mortgage banking:
Gains on sales of mortgage loans	Gains on sales of mortgage loans	2,410		5,944		(3,534)		(59.5)		Gains on sales of mortgage loans	656		3,026		(2,370)		(78.3)
Mortgage servicing income	Mortgage servicing income	1,310		3,591		(2,281)		(63.5)		Mortgage servicing income	1,314		1,550		(236)		(15.2)
Total mortgage banking	Total mortgage banking	3,720		9,535		(5,815)		(61.0)		Total mortgage banking	1,970		4,576		(2,606)		(56.9)
Other	Other	3,802		5,971		(2,169)		(36.3)		Other	2,968		3,551		(583)		(16.4)
Non-interest income before investment securities gains	Non-interest income before investment securities gains	59,215		62,577		(3,362)		(5.4)		Non-interest income before investment securities gains	51,730		55,237		(3,507)		(6.3)
Investment securities gains (losses), net	Investment securities gains (losses), net	(53)		—		(53)		N/M		Investment securities gains (losses), net	23		19		4		21.1
Total Non-Interest Income	Total Non-Interest Income	$	59,162	$	62,577	$	(3,415)	(5.5)	%	Total Non-Interest Income	$	51,753	$	55,256	$	(3,503)	(6.3)	%

Excluding net investment securities gains, non-interest income decreased ~~$3.4~~$3.5 million, or ~~5.4%~~6.3%, in the ~~third~~first quarter of ~~2022~~2023 compared to the same period in ~~2021.~~

~~Compared to the third quarter of 2021, the~~2022. The decrease in non-interest income was primarily due to decreases of ~~$5.8~~$2.6 million in mortgage banking income ~~$2.2 million in other income, primarily~~mainly due to ~~equity method investments,~~lower loan sale volumes and ~~$0.9~~lower spreads, $1.4 million in wealth management ~~revenues,~~primarily due to market performance and $1.1 million from lower income from equity method investments, reflected in other income, partially offset by ~~increases~~an increase of ~~$4.1~~$1.5 million in commercial banking ~~revenues and $1.5 million in consumer banking fees.~~

~~Non-Interest Expense~~

~~The following table presents the components of non-interest expense:~~

Three months ended September 30 Increase (Decrease)
2022 2021 $ %
(in thousands)
Salaries and employee benefits $ 94,283 $ 82,679 $ 11,604 14.0 %
Data processing and software 15,807 14,335 1,472 10.3
Net occupancy 14,025 12,957 1,068 8.2
Other outside services 9,361 7,889 1,472 18.7
State taxes 3,583 4,994 (1,411) (28.3)
Equipment 3,548 3,416 132 3.9
FDIC insurance 3,158 2,727 431 15.8
Professional fees 2,373 2,271 102 4.5
Marketing 1,859 1,448 411 28.4
Intangible amortization 690 150 540 N/M
Debt extinguishment — — — N/M
Merger-related expenses 7,006 — 7,006 N/M
Other 13,865 11,730 2,135 18.2
Total non-interest expense $ 169,558 $ 144,596 $ 24,962 17.3 %

Compared to the third quarter of 2021, non-interest expense, excluding Merger-related expenses of $7.0 million, increased $18.0 million in the third quarter of 2022, primarily due to increases of $11.6 million in salaries and employee benefits expense, $2.1 million in other non-interest expense, $1.5 million in data processing and software expense, $1.5 million in other outside services and $1.1 million in net occupancy expense, partially offset by a decrease in state taxes of $1.4 million.

~~Income Taxes~~

Income tax expense for the three months ended September 30, 2022 was $15.4 million, a $1.1 million increase from $14.3 million for the same period in 2021. The Corporation's ETR was 17.8% for the three months ended September 30, 2022, compared to 15.9% for the same period in 2021.income.

Non-Interest Expense

The following table presents the components of non-interest expense:


	Three months ended March 31				Increase (Decrease)
	2023		2022		$		%
	(dollars in thousands)
Salaries and employee benefits	$	89,283	$	84,464	$	4,819	5.7	%
Data processing and software	15,796		14,315		1,481		10.3
Net occupancy	14,438		14,522		(84)		(0.6)
Other outside services	10,126		8,167		1,959		24.0
FDIC insurance	4,795		3,209		1,586		49.4
State taxes	3,479		3,037		442		14.6
Equipment	3,389		3,423		(34)		(1.0)
Professional fees	2,392		1,792		600		33.5
Marketing	1,886		1,320		566		42.9
Intangible amortization	674		176		498		N/M

Merger-related expenses	—		401		(401)		N/M
Other	13,358		11,152		2,206		19.8
Total non-interest expense	$	159,616	$	145,978	$	13,638	9.3	%

Non-interest expense, excluding merger-related expenses of $0.4 million in the first quarter of 2022, increased $14.0 million, or 9.6%. The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $4.8 million in salaries and employee benefits expense primarily due to merit increases and an increase in wages experienced in the banking industry, $2.0 million in other outside services expense, $1.6 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, $1.5 million in data processing and software expense due to a continued focus on technology initiatives and development, $0.6 million in professional fees, $0.6 million in marketing expense and $0.5 million in intangible amortization expense due to the acquisition of Prudential Bancorp. Additional drivers of the increase in non-interest expense were an unfavorable change in owned asset expense due to a $1.5 million gain on sale recorded on owned assets in the first quarter of 2022 and a $0.8 million contingent liability recorded in the first quarter of 2023, in each case, reflected in other expense.

Income Taxes

Income tax expense for the three months ended March 31, 2023 was $14.9 million, a $1.6 million increase from $13.3 million for the same period in 2022. The Corporation's ETR was 17.9% for the three months ended March 31, 2023 compared to 17.3% for the full-year in 2022.

~~Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021~~

~~Net Interest Income~~

FTE net interest income increased $59.2 million to $566.4 million for the nine months ended September 30, 2022, from $507.2 million for the same period in 2021. NIM increased 35 bps, to 3.13%, compared to 2.78% for the same period in 2021. The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a 21% federal tax rate, and statutory interest expense disallowances. The discussion following this table is based on these taxable-equivalent amounts.

Nine months ended September 30
2022 2021
Average
Balance Interest Yield/
Rate Average
Balance Interest Yield/
Rate
ASSETS (dollars in thousands)
Interest-earning assets:
Net loans(1)
$ 18,865,672 $ 524,150 3.71 % $ 18,765,024 $ 485,330 3.46 %
Investment securities (2)
4,376,084 78,334 2.39 3,589,357 63,902 2.37
Loans held for sale 16,898 694 5.48 40,551 969 3.19
Other interest-earning assets 937,369 4,498 0.64 1,986,161 4,599 0.18
Total interest-earning assets 24,196,023 607,676 3.35 24,381,093 554,799 3.04
Noninterest-earning assets:
Cash and due from banks 158,267 150,435
Premises and equipment 220,218 229,513
Other assets 1,534,314 1,689,094
Less: ACL - loans(3)
(253,725) (268,412)
Total Assets $ 25,855,097 $ 26,181,723
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 5,657,165 $ 3,411 0.08 % $ 5,994,878 $ 2,905 0.06 %
Savings and money market deposits 6,515,529 5,561 0.11 6,271,019 3,944 0.08
Brokered deposits 254,100 2,181 1.14 297,250 876 0.39
Time deposits 1,633,053 10,299 0.84 2,001,043 16,383 1.09
Total interest-bearing deposits 14,059,847 21,452 0.20 14,564,190 24,108 0.22
Borrowings 1,133,524 19,816 2.34 1,365,655 23,462 2.30
Total interest-bearing liabilities 15,193,371 41,268 0.36 15,929,845 47,570 0.40
Noninterest-bearing liabilities:
Demand deposits 7,538,597 7,108,199
Other liabilities 515,615 466,917
Total Liabilities 23,247,583 23,504,961
Total Deposits/Cost of deposits 21,598,444 0.13 21,672,389 0.15
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds 22,731,968 0.24 23,038,044 0.28
Shareholders’ equity 2,607,514 2,676,762
Total Liabilities and Shareholders’ Equity $ 25,855,097 $ 26,181,723
Net interest income/FTE NIM 566,408 3.13 % 507,229 2.78 %
Tax equivalent adjustment (10,685) (9,111)
Net interest income $ 555,723 $ 498,118

~~(1)~~ ~~Average balance includes non-performing loans.~~

~~(2)~~ ~~Balances include amortized historical cost for AFS. The related unrealized holding gains (losses) are included in other assets.~~

~~(3)~~ ~~ACL - loans relates to the ACL specifically for "Net loans" and does not include the ACL for OBS credit exposures, which is included in other liabilities.~~

~~The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average~~

~~balances (volume) and changes in rates for the nine months ended September 30, 2022 in comparison to the same period in 2021:~~

2022 vs. 2021
Increase (Decrease) due
to change in
Volume Yield/Rate Net
(in thousands)
FTE interest income on:
Net loans (1)
$ 2,683 $ 36,138 $ 38,821
Investment securities 13,897 535 14,432
Loans held for sale (746) 471 (275)
Other interest-earning assets (2,358) 2,257 (101)
Total interest income $ 13,476 $ 39,401 $ 52,877
Interest expense on:
Demand deposits $ (186) $ 692 $ 506
Savings and money market deposits 152 1,465 1,617
Brokered deposits (142) 1,447 1,305
Time deposits (2,707) (3,377) (6,084)
Borrowings (5,591) 1,945 (3,646)
Total interest expense $ (8,474) $ 2,172 $ (6,302)

~~(1)~~ ~~Average balance includes non-performing loans.~~

Compared to the same period in 2021, FTE total interest income for the nine months ended September 30, 2022 increased $52.9 million due to increases of $39.4 million attributable to changes in yield and $13.5 million attributable to changes in volume. The increase due to changes in yield was primarily driven by net loans and other interest-earning assets. The increase due to changes in volume was primarily due to an increase in average investment securities and average net loans, partially offset by decreases in average other interest-earning assets.

~~The yield on average interest-earning assets increased 31 bps in the nine months ended September 30, 2022 compared to the same period in 2021.~~

For the nine months ended September 30, 2022, interest expense decreased $6.3 million compared to the same period in 2021, primarily due to the decrease in average interest-bearing liabilities resulting in a $8.5 million decline in interest expense. The decrease in interest expense attributable to volume was primarily driven by a $5.6 million impact from the decrease in average borrowings and a $2.7 million impact from the decrease in average time deposits.

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

Nine months ended September 30 Increase (Decrease) in Balance
2022 2021
Balance Yield Balance Yield $ %
(dollars in thousands)
Real estate – commercial mortgage $ 7,401,094 3.53 % $ 7,146,951 3.14 % $ 254,143 3.6 %
Commercial and industrial (1)
4,205,236 3.70 5,295,240 2.64 (1,090,004) (20.6)
Real estate – residential mortgage 4,143,850 3.27 3,409,381 3.43 734,469 21.5
Real estate – home equity 1,099,310 4.25 1,147,444 3.71 (48,134) (4.2)
Real estate – construction 1,197,947 3.53 1,065,125 3.09 132,822 12.5
Consumer 532,396 4.45 454,434 4.00 77,962 17.2
Equipment lease financing 247,674 3.81 256,741 3.92 (9,067) (3.5)
Other (2)
38,165 — (10,292) — 48,457 N/M
Total loans $ 18,865,672 3.71 % $ 18,765,024 3.46 % $ 100,648 0.5 %

~~(1)~~ ~~Includes average PPP loans of $129.4 million and $1.4 billion for the nine months ended September 30, 2022 and 2021, respectively.~~

~~(2)~~ ~~Consists of overdrafts and net origination fees and costs.~~

During the nine months ended September 30, 2022, average loans increased $100.6 million, or 0.5%, compared to the same period in 2021. The increase was largely driven by increases in average residential mortgage loans, average commercial mortgage loans and average construction loans of $734.5 million, $254.1 million and $132.8 million, respectively, partially offset by a $1.1 billion decline in commercial and industrial loans, due primarily to the decline in PPP loans as a result of the repayment of these loans upon forgiveness by the SBA.

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

Nine months ended September 30 Increase (Decrease) in
Balance
2022 2021
Balance Rate Balance Rate $ %
(dollars in thousands)
Noninterest-bearing demand $ 7,538,597 — % $ 7,108,199 — % $ 430,398 6.1 %
Interest-bearing demand 5,657,165 0.08 5,994,878 0.06 (337,713) (5.6)
Savings and money market deposits 6,515,529 0.11 6,271,019 0.08 244,510 3.9
Total demand deposits and savings and money market deposits 19,711,291 0.06 19,374,096 0.05 337,195 1.7
Brokered deposits 254,100 1.14 297,250 0.39 (43,150) (14.5)
Time deposits 1,633,053 0.84 2,001,043 1.09 (367,990) (18.4)
Total deposits $ 21,598,444 0.13 % $ 21,672,389 0.15 % $ (73,945) (0.3) %

The cost of total deposits decreased 2 bps to 0.13% for the first nine months of 2022 compared to 0.15% for the same period of 2021, primarily due to the change in mix of deposits with increases in average noninterest-bearing demand deposits and average savings and money market deposits of $430.4 million and $244.5 million, respectively, and decreases of $368.0 million in average time deposits and $337.7 million in average interest-bearing demand deposits.

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

Nine months ended September 30 Increase (Decrease) in
Balance
2022 2021
Balance Rate Balance Rate $ %
(dollars in thousands)
Federal funds purchased $ 33,629 2.12 % $ — — % $ 33,629 N/M
Federal Home Loan Bank advances 69,473 2.70 169,366 1.80 (99,893) (59.0)
Senior debt and subordinated debt 572,690 3.95 669,275 4.14 (96,585) (14.4)
Other borrowings(1)
457,732 0.28 527,014 0.12 (69,282) (13.1)
Total borrowings $ 1,133,524 2.34 % $ 1,365,655 2.30 % $ (232,131) (17.0) %

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

Average total borrowings decreased $232.1 million, or 17%, during the first nine months of 2022, compared to the same period in 2021 primarily as a result of the reduction of FHLB advances, the $65 million repayment of senior notes on March 16, 2022 and the redemption of $17.0 million of TruPS in September 2022. See Note 14 "Borrowings" of the Notes to Consolidated Financial Statements for additional details.

~~Provision for Credit Losses~~

The provision for credit losses was $13.5 million for the first nine months of 2022, compared to a negative provision of $9.6 million for the same period of 2021. Included in the third quarter of 2022 provision for credit losses was a CECL Day 1 Provision of $8.0 million for the acquired Prudential Bancorp loan portfolio.

~~Non-Interest Income~~

~~The following table presents the components of non-interest income:~~

Nine months ended September 30 Increase (Decrease)
2022 2021 $ %
(in thousands)
Commercial banking:
   Merchant and card $ 21,053 $ 19,533 $ 1,520 7.8 %
   Cash management 17,973 15,547 2,426 15.6
   Capital markets 9,629 6,399 3,230 50.5
   Other commercial banking 8,520 8,730 (210) (2.4)
     Total commercial banking 57,175 50,209 6,966 13.9
Consumer banking:
  Card 18,141 17,552 589 3.4
  Overdraft 12,116 8,948 3,168 35.4
  Other consumer banking 7,164 6,915 249 3.6
       Total consumer banking 37,421 33,415 4,006 12.0
Wealth management revenues 55,312 53,513 1,799 3.4
Mortgage banking:
Gains on sales of mortgage loans 7,978 20,038 (12,060) (60.2)
Mortgage servicing income 4,086 6,295 (2,209) (35.1)
       Total mortgage banking 12,064 26,333 (14,269) (54.2)
Other 10,863 12,883 (2,020) (15.7)
Non-interest income before investment securities gains 172,835 176,353 (3,518) (2.0)
Investment securities gains (losses), net (26) 33,511 (33,537) N/M
Total Non-Interest Income $ 172,809 $ 209,864 $ (37,055) (17.7) %

~~Excluding net investment securities gains, non-interest incomedecreased $3.5 million, or 2.0%, during the nine months ended September 30, 2022 as compared to the same period in 2021.~~

Compared to the first nine months of 2021, excluding net investment securities gains, the decrease in non-interest income was primarily due to a decrease of $14.3 million in mortgage banking income, partially offset by increases of $6.9 million in commercial banking revenues and $4.0 million in consumer banking fees.

Investment securities gains recognized in the first nine months of 2021 were the result of the sale of Visa Shares as part of the balance sheet restructuring completed during the first nine months of 2021.

~~Non-Interest Expense~~

~~The following table presents the components of non-interest expense:~~

Nine months ended September 30 Increase (Decrease)
2022 2021 $ %
(in thousands)
Salaries and employee benefits $ 264,151 $ 243,632 $ 20,519 8.4 %
Data processing and software 44,807 41,828 2,979 7.1
Net occupancy 42,134 39,433 2,701 6.8
Other outside services 26,292 24,557 1,735 7.1
Equipment 10,393 10,268 125 1.2
State taxes 10,188 13,883 (3,695) (26.6)
FDIC insurance 9,328 7,633 1,695 22.2
Professional fees 6,178 7,701 (1,523) (19.8)
Marketing 4,505 3,798 707 18.6
Intangible amortization 1,043 443 600 135.4
Debt extinguishment — 32,575 (32,575) (100.0)
Merger-related expenses 8,434 — 8,434 N/M
Other 37,813 38,060 (247) (0.6)
Total non-interest expense $ 465,266 $ 463,811 $ 1,455 0.3 %

Compared to the first nine months of 2021, non-interest expense in the first nine months of 2022, excluding $8.4 million of Merger-related expenses, decreased $7.0 million, or 1.5%, primarily as a result of debt extinguishment expenses of $32.6 million related to the prepayment of FHLB advances, subordinated debt and senior notes in 2021, partially offset by a $20.5 million increase in salaries and employee benefits expenses and a $3.0 million increase in data processing and software expenses.

~~Income Taxes~~

Income tax expense for the nine months ended September 30, 2022 was $44.6 million, a $4.4 million increase from $40.2 million for the same period in 2021. The Corporation's ETR was 17.9% for the nine months ended September 30, 2022, compared to 15.8% in the same period of 2021.

FINANCIAL CONDITION

The table below presents condensed consolidated ending balance sheets.


		September 30, 2022		December 31, 2021				Increase (Decrease)							March 31, 2023				December 31, 2022				Increase (Decrease)
						$				%							$						%
Assets	Assets	(in thousands)												Assets			(dollars in thousands)
Cash and cash equivalents	Cash and cash equivalents	$	528,715			$	1,638,614			$	(1,109,899)			(67.7)	%	Cash and cash equivalents	$	566,753			$	681,921			$	(115,168)			(16.9)	%
FRB and FHLB Stock	FRB and FHLB Stock	81,914		57,635				24,279				42.1		FRB and FHLB Stock	107,605				130,186				(22,581)				(17.3)

Loans held for sale	Loans held for sale	14,411		35,768				(21,357)				(59.7)		Loans held for sale	6,507				7,264				(757)				(10.4)
Investment securities	Investment securities	3,936,694		4,167,774				(231,080)				(5.5)		Investment securities	3,950,101				3,968,023				(17,922)				(0.5)
Net loans, less ACL - loans	Net loans, less ACL - loans	19,428,361		18,076,349				1,352,012				7.5		Net loans, less ACL - loans	20,391,493				20,010,181				381,312				1.9
Net premises and equipment	Net premises and equipment	221,496		220,357				1,139				0.5		Net premises and equipment	216,059				225,141				(9,082)				(4.0)
Goodwill and intangibles	Goodwill and intangibles	561,495		538,053				23,442				4.4		Goodwill and intangibles	563,502				560,824				2,678				0.5
Other assets	Other assets	1,372,956		1,061,848				311,108				29.3		Other assets	1,310,156				1,348,162				(38,006)				(2.8)
Total Assets	Total Assets	$	26,146,042	$	25,796,398			$	349,644			1.4	%	Total Assets	$	27,112,176			$	26,931,702			$	180,474			0.7	%
Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity													Liabilities and Shareholders' Equity
Deposits	Deposits	$	21,376,554	$	21,573,499			$	(196,945)			(0.9)	%	Deposits	$	21,316,584			$	20,649,538			$	667,046			3.2	%
Borrowings	Borrowings	1,424,681		1,038,109				386,572				37.2		Borrowings	2,446,770				2,871,207				(424,437)				(14.8)
Other liabilities	Other liabilities	873,648		472,110				401,538				85.1		Other liabilities	729,824				831,200				(101,376)				(12.2)
Total Liabilities	Total Liabilities	23,674,883		23,083,718				591,165				2.6		Total Liabilities	24,493,178				24,351,945				141,233				0.6
Total Shareholders' Equity	Total Shareholders' Equity	2,471,159		2,712,680				(241,521)				(8.9)		Total Shareholders' Equity	2,618,998				2,579,757				39,241				1.5
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	26,146,042	$	25,796,398			$	349,644			1.4	%	Total Liabilities and Shareholders' Equity	$	27,112,176			$	26,931,702			$	180,474			0.7	%

Cash and Cash Equivalents

Compared to December 31, ~~2021,~~2022, cash and cash equivalents at ~~September 30, 2022~~March 31, 2023 decreased ~~$1.1 billion,~~$115.2 million, or ~~67.7%~~16.9%, primarily due to a ~~$1.4 billion~~$381.3 million increase in net ~~loans and a $196.9 million decrease in deposits.~~

~~Other Assets~~

Compared to December 31, 2021, other assets increased $311.1 million at September 30, 2022, primarily due to increases in deferred federal income tax of $149.0 million and the cash surrender value of life insurance policies of $90.2 million.loans.

Other Liabilities

Compared to December 31, ~~2021,~~2022, other liabilities ~~increased $401.5~~decreased $101.4 million at ~~September 30, 2022,~~March 31, 2023, primarily due to ~~increases~~a decrease in the value of interest rate ~~swaps and interest rate swap collateral of $377.0 million.~~derivatives.

Shareholders' Equity

Compared to December 31, ~~2021,~~2022, shareholders' equity at ~~September 30, 2022 decreased $241.5~~March 31, 2023 increased $39.2 million, primarily due to a ~~$470.4 million increase in the loss for AOCI largely attributable to unrealized losses on investment securities and derivative instruments, partially offset by a $124.2~~$40.9 million increase in retained earnings from net income of $68.3 million, partially offset by common stock dividends of $24.8 million and the ~~$89.7~~preferred stock dividend of $2.6 million. In addition, compared to December 31, 2022, accumulated other comprehensive loss decreased by $34.5 million, ~~issuance~~partially offset by an increase in treasury stock of ~~treasury~~$39.4 million primarily due to the repurchase of 2.4 million shares ~~in connection with~~of the ~~Merger.~~ Corporation's common stock for $40.4 million.

See ~~Note~~"Note 8 ~~"Accumulated~~- Accumulated Other Comprehensive (Loss) Income" of the Notes to Consolidated Financial Statements for additional details.

On December 20, 2022, the Corporation announced that its board of directors approved the 2023 Repurchase Program. Under the 2023 Repurchase Program, the Corporation is authorized to repurchase up to $100.0 million of its common stock through December 31, 2023. During the three months ended March 31, 2023, 2.4 million shares of the Corporation's common stock were repurchased under this program. In March 2023, the Corporation paused its share repurchase program. See Item 2, "Unregistered Sales of Equity Securities and Use of Proceeds" for further details on the repurchase program and activity.

6353

Investment Securities

The following table presents the carrying amount of investment securities:


		September 30, 2022		December 31, 2021		Increase (Decrease)					March 31, 2023		December 31, 2022				Increase (Decrease)
						$		%							$				%
Available for Sale	Available for Sale	(in thousands)								Available for Sale	(dollars in thousands)
U.S. Government securities	U.S. Government securities	$	218,184	$	127,618	$	90,566	71.0		U.S. Government securities	$	220,053			$	218,485			$	1,568			0.7	%
U.S. Government-sponsored agency securities	U.S. Government-sponsored agency securities	1,006		—		1,006		N/M		U.S. Government-sponsored agency securities	1,017		1,008				9				0.9
State and municipal securities	State and municipal securities	1,038,185		1,188,670		(150,485)		(12.7)	%	State and municipal securities	1,067,598		1,105,712				(38,114)				(3.4)
Corporate debt securities	Corporate debt securities	399,615		386,133		13,482		3.5		Corporate debt securities	439,034		422,309				16,725				4.0
Collateralized mortgage obligations	Collateralized mortgage obligations	142,401		209,359		(66,958)		(32.0)		Collateralized mortgage obligations	130,450		134,033				(3,583)				(2.7)
Residential mortgage-backed securities	Residential mortgage-backed securities	214,252		229,795		(15,543)		(6.8)		Residential mortgage-backed securities	212,574		212,698				(124)				(0.1)
Commercial mortgage-backed securities	Commercial mortgage-backed securities	583,741		971,148		(387,407)		(39.9)		Commercial mortgage-backed securities	571,663		552,522				19,141				3.5
Auction rate securities		—		74,667		(74,667)		(100.0)

Total available for sale securities	Total available for sale securities	$	2,597,384	$	3,187,390	$	(590,006)	(18.5)	%	Total available for sale securities	$	2,642,389	$	2,646,767			$	(4,378)			(0.2)	%
Held to Maturity	Held to Maturity									Held to Maturity

Residential mortgage-backed securities	Residential mortgage-backed securities	$	470,879	$	404,958	$	65,921	16.3	%	Residential mortgage-backed securities	$	444,431	$	457,325			$	(12,894)			(2.8)	%
Commercial mortgage-backed securities	Commercial mortgage-backed securities	868,431		575,426		293,005		50.9		Commercial mortgage-backed securities	863,281		863,931				(650)				(0.1)
Total held to maturity securities	Total held to maturity securities	$	1,339,310	$	980,384	$	358,926	36.6	%	Total held to maturity securities	$	1,307,712	$	1,321,256			$	(13,544)			(1.0)	%

Total Investment Securities	Total Investment Securities	$	3,936,694	$	4,167,774	$	(231,080)	(5.5)	%	Total Investment Securities	$	3,950,101	$	3,968,023			$	(17,922)			(0.5)	%

Compared to December 31, ~~2021,~~2022, total AFS securities at ~~September 30, 2022~~March 31, 2023 decreased ~~$590.0~~$4.4 million, or ~~18.5%~~0.2%, primarily due to ~~decreases~~a decrease of ~~$387.4 million in commercial mortgage-backed securities and $150.5~~$38.1 million in state and municipal securities, partially offset by ~~an increase~~increases in commercial mortgage-backed securities and corporate debt securities of ~~$90.6~~$19.1 million ~~in U.S government securities.~~and $16.7 million, respectively.

At ~~September 30, 2022,~~March 31, 2023, total HTM securities ~~increased $358.9~~decreased $13.5 million compared to December 31, ~~2021,~~2022, primarily driven by ~~an increase~~a decrease of ~~$293.0~~$12.9 million in ~~commercial~~residential mortgage-backed ~~securities.~~securities due to paydowns.

Loans

The following table presents ending loans outstanding by type:

September 30, 2022 December 31, 2021 2022 vs. 2021 Increase (Decrease)
$ %
(in thousands)
Real estate – commercial mortgage $ 7,554,509 $ 7,279,080 $ 275,429 3.8 %
Commercial and industrial (1)
4,243,392 4,208,327 35,065 0.8
Real estate – residential mortgage 4,574,228 3,846,750 727,478 18.9
Real estate – home equity 1,110,103 1,118,248 (8,145) (0.7)
Real estate – construction 1,273,097 1,139,779 133,318 11.7
Consumer 633,666 464,657 169,009 36.4
Equipment lease financing and other 328,057 283,557 44,500 15.7
Overdrafts 2,162 1,988 174 8.8
Gross loans 19,719,214 18,342,386 1,376,828 7.5
Unearned income (24,015) (17,036) (6,979) (41.0)
Net loans $ 19,695,199 $ 18,325,350 $ 1,369,849 7.5 %

~~(1)~~ ~~Includes PPP loans totaling $32.1 million and $301.3 million as of September 30, 2022 and December 31, 2021, respectively.~~


	March 31, 2023		December 31, 2022		Increase (Decrease)
					$		%
	(dollars in thousands)
Real estate – commercial mortgage	$	7,746,920	$	7,693,835	$	53,085	0.7	%
Commercial and industrial	4,600,696		4,477,537		123,159		2.8
Real estate – residential mortgage	4,880,919		4,737,279		143,640		3.0
Real estate – home equity	1,074,712		1,102,838		(28,126)		(2.6)
Real estate – construction	1,326,754		1,269,925		56,829		4.5
Consumer	730,775		699,179		31,596		4.5
Leases and other loans	340,595		328,331		12,264		3.7
Gross loans	20,701,371		20,308,924		392,447		1.9
Unearned income	(31,183)		(29,377)		(1,806)		(6.1)
Net loans	$	20,670,188	$	20,279,547	$	390,641	1.9	%

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net loans increased ~~$1.4 billion,~~$390.6 million, or ~~7.5%~~1.9%, compared to ~~the level at~~ December 31, ~~2021,~~2022, primarily due to increases in residential mortgage loans, commercial and industrial loans, construction loans and commercial mortgage loans ~~and consumer loans~~ of ~~$727.5~~$143.6 million, ~~$275.4~~$123.2 million, $56.8 million and ~~$169.0~~$53.1 million, respectively. Net loans of $554.3 million were acquired in the Merger. Additionally, residential mortgage loans increased due to the strategic decision by the Corporation to hold a greater proportion of the loan originations from adjustable rate mortgage products on its balance sheet. The increase in consumer loans was primarily driven by growth in indirect auto loans and student loans.

The Corporation does not have a significant concentration of credit risk with any single borrower, industry or geographic location within its footprint. As of March 31, 2023, approximately $9.1 billion, or 43.9%, of the loan portfolio was comprised of commercial mortgage loans and construction loans. TheCorporation's policies limit the maximum total lending commitment to an individual borrower to $100.0 million as of ~~September 30, 2022.~~March 31, 2023. In addition, 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, geographic location of customer or collateral and asset class.~~approved.

The following table summarizes the industry concentrations within the commercial mortgage and the commercial and industrial loan ~~portfolios (excluding PPP loans):~~portfolios:

September 30, 2022 December 31, 2021
Real estate (1)
45.2 % 44.3 %
Manufacturing 7.0 5.1
Health care 6.7 6.7
Agriculture 5.6 6.1
Other services (2)
4.8 5.0
Construction (3)
4.8 3.9
Hospitality and food services 3.7 3.7
Retail 3.2 3.0
Wholesale trade 3.2 2.8
Educational services 2.9 2.7
Arts, entertainment and recreation 2.1 2.3
Professional, scientific and technical services 1.9 1.8
Public administration 1.3 1.5
Transportation and warehousing 1.3 1.3
Administrative and Support 1.1 0.6
Finance and Insurance 1.0 1.4
Other (4)
4.2 7.8
Total 100.0 % 100.0 %


	March 31, 2023		December 31, 2022
Real estate(1)	46.3	%	43.9	%
Health care	6.6		6.5
Manufacturing	6.2		6.8
Agriculture	5.3		5.4
Other services	4.6		4.7
Construction(2)	4.3		4.7
Hospitality and food services	3.5		3.6
Wholesale trade	3.2		3.1
Retail	3.1		3.1
Educational services	2.8		2.8
Professional, scientific and technical services	2.2		1.8
Arts, entertainment and recreation	2.1		2.0
Transportation and warehousing	1.3		1.3
Public administration	1.1		1.2
Administrative and Support	1.0		1.1
Other	6.4		8.0
Total	100.0	%	100.0	%

(1) Includes commercial loans to borrowers engaged in the business of: renting, leasing or managing real estate for others; selling and/or buying real estate for others; and appraising real estate.

(2) ~~Excludes public administration.~~

~~(3)~~Includes commercial loans to borrowers engaged in the construction industry.

~~(4)~~ ~~Includes the energy sector and at September 30, 2022, commercial loans acquired in the Merger.~~

The following table presents the changes in non-accrual loans for the three ~~and nine~~ months ended ~~September 30, 2022:~~March 31, 2023:


		Commercial and Industrial		Real Estate - Commercial Mortgage		Real Estate - Construction		Real Estate - Residential Mortgage		Consumer and Real Estate - Home Equity		Equipment Lease Financing		Total			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
		(in thousands)															(dollars in thousands)
Three months ended September 30, 2022
Balance at June 30, 2022		$	43,691	$	59,565	$	1,357	$	35,585	$	8,270	$	14,062	$	162,530
Additions		2,271		41,350		185		2,265		1,714		683		48,468
Payments		(13,744)		(3,805)		(86)		(603)		(788)		(480)		(19,506)
Charge-offs		(1,783)		(86)		—		—		(1,172)		(683)		(3,724)
Transfers to accrual status		(631)		(2,320)		—		(5,783)		(830)		—		(9,564)

Balance at September 30, 2022		$	29,804	$	94,704	$	1,456	$	31,464	$	7,194	$	13,582	$	178,204

Nine months ended September 30, 2022
Balance at December 31, 2021		$	30,141	$	52,815	$	901	$	35,269	$	8,900	$	15,640	$	143,666
Three months ended March 31, 2023																Three months ended March 31, 2023
Balance at December 31, 2022																Balance at December 31, 2022	$	27,116	$	70,161	$	1,368	$	26,294	$	6,197	$	13,307	$	144,443
Additions	Additions	25,513		62,097		924		4,981		5,091		683		99,289		Additions	7,715		7,106		—		76		2,553		—		17,450
Payments	Payments	(22,637)		(11,951)		(369)		(2,937)		(2,229)		(1,115)		(41,238)		Payments	(2,340)		(5,724)		(90)		(594)		(485)		(333)		(9,566)
Charge-offs	Charge-offs	(2,211)		(238)		—		(66)		(3,101)		(1,626)		(7,242)		Charge-offs	(612)		(13,362)		—		—		(2,206)		(723)		(16,903)
Transfers to accrual status	Transfers to accrual status	(980)		(4,558)		—		(5,783)		(1,259)		—		(12,580)		Transfers to accrual status	—		228		—		(228)		—		—		—
Transfers to OREO	Transfers to OREO	(22)		(3,461)		—		—		(208)		—		(3,691)		Transfers to OREO	—		—		—		(1,121)		—		—		(1,121)
Balance at September 30, 2022		$	29,804	$	94,704	$	1,456	$	31,464	$	7,194	$	13,582	$	178,204
Balance at March 31, 2023																Balance at March 31, 2023	$	31,879	$	58,409	$	1,278	$	24,427	$	6,059	$	12,251	$	134,303

During the ~~third~~first quarter of ~~2022,~~2023, non-accrual loans ~~increased~~decreased approximately ~~$15.7~~$10.1 million, or ~~9.6%~~7.0%, as a result of higher charge-offs and payments, partially offset by the additions to non-accrual ~~loans, partially offset by payments, and to a lesser extent, transfers to accrual status, during the period.~~loans.

The following table summarizes non-performing assets as of the periods shown below:


		September 30, 2022			December 31, 2021					March 31, 2023			December 31, 2022
		(dollars in thousands)						(dollars in thousands)
Non-accrual loans	Non-accrual loans	$	178,204		$	143,666			Non-accrual loans	$	134,303		$	144,443
Loans 90 days or more past due and still accruing(1)	Loans 90 days or more past due and still accruing(1)	14,559			8,453				Loans 90 days or more past due and still accruing(1)	30,336			27,463
Total non-performing loans~~(1)~~	Total non-performing loans~~(1)~~	192,763			152,119				Total non-performing loans~~(1)~~	164,639			171,906
OREO (2)	OREO (2)	5,877			1,817				OREO (2)	3,304			5,790
Total non-performing assets	Total non-performing assets	$	198,640		$	153,936			Total non-performing assets	$	167,943		$	177,696
Non-accrual loans to total loans	Non-accrual loans to total loans	0.90		%	0.78		%		Non-accrual loans to total loans	0.65		%	0.71		%
Non-performing loans to total loans	Non-performing loans to total loans	0.98		%	0.83		%		Non-performing loans to total loans	0.80		%	0.85		%
Non-performing assets to total assets	Non-performing assets to total assets	0.76		%	0.60		%		Non-performing assets to total assets	0.62		%	0.66		%

ACL - loans to non-performing loans	ACL - loans to non-performing loans	138		%	164		%		ACL - loans to non-performing loans	169		%	157		%

(1) Excludes PPP loans which are fully guaranteed by the federal government of ~~$10.4~~$1.6 million and $7.7 million as of ~~September 30, 2022.~~March 31, 2023 and December 31, 2022, respectively.

(2) Excludes ~~$3.4~~$9.6 million and ~~$6.4~~$6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Non-performing loans at ~~September 30, 2022 increased $40.6~~March 31, 2023 decreased $7.3 million, or ~~26.7%~~4.2%, compared to ~~$152.1~~$171.9 million as of December 31, ~~2021.~~2022. Non-performing loans as a percentage of total loans were ~~0.98%~~0.80% at ~~September 30, 2022~~March 31, 2023 and ~~0.83%~~0.85% at December 31, ~~2021.~~2022. See ~~Note~~"Note 5 ~~"Loans~~- Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements for further details on non-performing loans.

~~The following table presents TDRs as of the periods shown below:~~

September 30, 2022 December 31, 2021
(in thousands)
Real estate - commercial mortgage $ 3,448 $ 3,464
Commercial and industrial 1,837 1,857
Real estate - residential mortgage 12,101 11,948
Real estate - home equity 11,719 12,218
Consumer 2 5
Total accruing TDRs 29,107 29,492
Non-accrual TDRs(1)
40,401 55,945
Total TDRs $ 69,508 $ 85,437

~~(1)~~ ~~Included with non-accrual loans in the preceding table.~~

The ability to identify potential problem loans in a timely manner is important to maintaining an adequate ACL. For commercial loans, commercial mortgages 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 ~~equipment lease financing~~leases and other loans is based on payment history, through the monitoring of delinquency levels and trends.

Total internally risk-rated loans were ~~$12.8~~$13.4 billion, of which $0.8 billion were criticized and classified, as of ~~September 30, 2022,~~March 31, 2023, and ~~$12.4~~$13.2 billion, of which ~~$1.1~~$0.8 billion were criticized and classified, as of December 31, ~~2021.~~2022. For a description of the Corporation's risk ratings, see "Allowance for Credit Losses" in the Notes to Consolidated Financial Statements in ~~Item 8 of~~ the Corporation's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. 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							Special Mention (1)						Increase (Decrease)			Substandard or Lower (2)						Increase (Decrease)				Total Criticized and Classified Loans
		September 30, 2022			December 31, 2021			$		%	September 30, 2022			December 31, 2021			$		%		September 30, 2022			December 31, 2021				March 31, 2023			December 31, 2022			$		%	March 31, 2023			December 31, 2022			$		%		March 31, 2023			December 31, 2022
		(in thousands)																										(dollars in thousands)
Real estate - commercial mortgage	Real estate - commercial mortgage	$	279,136		$	387,279		$	(108,143)	(27.9)%	$	272,996		$	331,096		$	(58,100)	(17.5)	%	$	552,132		$	718,375		Real estate - commercial mortgage	$	306,252		$	306,381		$	(129)	—%	$	186,893		$	184,014		$	2,879	1.6	%	$	493,145		$	490,395
Commercial and industrial	Commercial and industrial	103,902			142,369			(38,467)		(27.0)	109,714			152,219			(42,505)		(27.9)		213,616			294,588			Commercial and industrial	145,455			133,943			11,512		8.6	112,086			95,546			16,540		17.3		257,541			229,489
Real estate - construction (3)	Real estate - construction (3)	8,252			58,841			(50,589)		(86.0)	7,151			6,324			827		13.1		15,403			65,165			Real estate - construction (3)	30,501			21,603			8,898		41.2	11,054			10,601			453		4.3		41,555			32,204
Total	Total	$	391,290		$	588,489		$	(197,199)	(33.5)%	$	389,861		$	489,639		$	(99,778)	(20.4)%		$	781,151		$	1,078,128		Total	$	482,208		$	461,927		$	20,281	4.4%	$	310,033		$	290,161		$	19,872	6.8%		$	792,241		$	752,088

% of total risk rated loans	% of total risk rated loans	3.1		%	4.7		%				3.0		%	3.9		%					6.1		%	8.6		%	% of total risk rated loans	3.6		%	3.5		%				2.3		%	2.2		%					5.9		%	5.7		%

(1) Considered "criticized" loans by banking regulators

(2) Considered "classified" loans by banking regulators

(3) Excludes construction - other

Allowance for Credit Losses and Reserve for Off-Balance Sheet Credit Exposures

~~Provision and Allowance for Credit Losses~~

~~The following table presents the components of the ACL:~~


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(dollars in thousands)
ACL - loans	ACL - loans	$	266,838	$	249,001	ACL - loans	$	278,695	$	269,366

ACL - OBS credit exposure (1)	ACL - OBS credit exposure (1)	15,690		14,533		ACL - OBS credit exposure (1)	$	17,539	$	16,328
Total ACL		$	282,528	$	263,534

(1) Included in "other liabilities" on the consolidated balance sheet.

The following table presents the activity in the ACL:


		Three months ended September 30						Nine months ended September 30							Three months ended March 31
		2022			2021			2022			2021				2023			2022
		(in thousands)													(dollars in thousands)
Average balance of Net loans		$	19,563,825		$	18,414,153		$	18,865,672		$	18,765,024
Average balance of net loans														Average balance of net loans	$	20,463,096		$	18,383,118

Balance of ACL at beginning of period	Balance of ACL at beginning of period	$	248,564		$	255,032		$	249,001		$	277,567		Balance of ACL at beginning of period	$	269,366		$	249,001

CECL Day 1 Provision expense		7,954			—			7,954			—
Purchased credit deteriorated loans		1,135			—			1,135			—

Loans charged off:	Loans charged off:													Loans charged off:
Real estate – commercial mortgage														Real estate – commercial mortgage	(13,362)			(152)
Commercial and industrial	Commercial and industrial	(1,783)			(647)			(2,211)			(5,920)			Commercial and industrial	(612)			(227)
Real estate – commercial mortgage		(86)			(14)			(238)			(8,357)
Consumer and home equity		(1,172)			(504)			(3,101)			(2,481)
Equipment lease financing and other		(683)			(467)			(1,626)			(1,871)
Real estate – residential mortgage	Real estate – residential mortgage	—			(602)			(66)			(1,290)			Real estate – residential mortgage	—			—
Consumer and real estate - home equity														Consumer and real estate - home equity	(2,206)			(1,052)
Real estate – construction	Real estate – construction	—			—			—			(39)			Real estate – construction	—			—
Leases and other loans														Leases and other loans	(723)			(469)
Total loans charged off	Total loans charged off	(3,724)			(2,234)			(7,242)			(19,958)			Total loans charged off	(16,903)			(1,900)
Recoveries of loans previously charged off:	Recoveries of loans previously charged off:													Recoveries of loans previously charged off:
Real estate – commercial mortgage														Real estate – commercial mortgage	786			112
Commercial and industrial	Commercial and industrial	2,213			2,330			4,932			3,792			Commercial and industrial	1,086			1,980
Real estate – commercial mortgage		29			564			3,677			1,467
Consumer and home equity		682			504			1,898			1,578
Equipment lease financing and other		247			358			627			670
Real estate – residential mortgage	Real estate – residential mortgage	101			86			415			286			Real estate – residential mortgage	48			222
Consumer and real estate - home equity														Consumer and real estate - home equity	661			454
Real estate – construction	Real estate – construction	—			697			44			1,335			Real estate – construction	202			32
Leases and other loans														Leases and other loans	116			154
Total recoveries	Total recoveries	3,272			4,539			11,593			9,128			Total recoveries	2,899			2,954
Net loans charged off/(recoveries)	Net loans charged off/(recoveries)	(452)			2,305			4,351			(10,830)			Net loans charged off/(recoveries)	(14,004)			1,054
Provision for credit losses ~~(1)~~	Provision for credit losses ~~(1)~~	9,637			(610)			4,397			(10,010)			Provision for credit losses ~~(1)~~	23,333			(6,350)
Balance of ACL at end of period	Balance of ACL at end of period	$	266,838		$	256,727		$	266,838		$	256,727		Balance of ACL at end of period	$	278,695		$	243,705
Provision for OBS credit exposures														Provision for OBS credit exposures	$	1,211		$	(600)
Reserve for OBS credit exposures(1)														Reserve for OBS credit exposures(1)	$	17,539		$	13,933
Net charge-offs to average loans (annualized)	Net charge-offs to average loans (annualized)	0.01		%	(0.05)		%	(0.05)		%	0.08		%	Net charge-offs to average loans (annualized)	0.27		%	(0.02)		%

(1) ~~Provision~~Reserve for OBS credit ~~losses included in~~exposures is recorded with other liabilities on the ~~table only includes the portion related to loans.~~consolidated balance sheets..

The provision for credit losses, specific to loans, for the three months ended ~~September 30, 2022~~March 31, 2023 was~~$19.0~~ $23.3 million, compared to a negative provision of ~~$0.6~~$6.4 million recorded for the same period in ~~2021. Included in the third quarter of 2022 provision for credit losses was a CECL Day 1 Provision of $8.0 million for the acquired Prudential Bancorp loan portfolio.~~2022. The ~~ACL also included $1.1 million for purchased credit deteriorated loans for the acquired Prudential Bancorp loan portfolio. In addition, the~~ ACL includes qualitative loan adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in

the quantitative models. See ~~Note~~"Note 5 ~~"Loans~~- Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements for further details on the provision for credit ~~losses~~losses.

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


		September 30, 2022				December 31, 2021						March 31, 2023				December 31, 2022
		ACL - loans		% In Each Loan Category (1)		ACL - loans		% In Each Loan Category (1)				ACL - loans		% to Total Net Loans (1)		ACL - loans		% to Total Net Loans (1)
		(in thousands)								(dollars in thousands)
Real estate - commercial mortgage	Real estate - commercial mortgage	$	88,850	38.3	%	$	87,970	39.7	%		Real estate - commercial mortgage	$	66,256	37.5	%	$	69,456	37.9	%
Commercial and industrial	Commercial and industrial	66,125		21.5		67,056		22.9			Commercial and industrial	77,126		22.3		70,116		22.0
Real estate - residential mortgage	Real estate - residential mortgage	67,409		23.2		54,236		21.0			Real estate - residential mortgage	86,209		23.6		83,250		23.3
Consumer, home equity, equipment lease financing		32,781		10.5		26,798		10.2
Consumer, home equity and leases and other loans											Consumer, home equity and leases and other loans	37,458		10.2		35,801		10.5
Real estate - construction	Real estate - construction	11,673		6.5		12,941		6.2			Real estate - construction	11,646		6.4		10,743		6.3

Total ACL - loans	Total ACL - loans	$	266,838	100.0	%	$	249,001	100.0	%		Total ACL - loans	$	278,695	100.0	%	$	269,366	100.0	%

(1) Ending loan balances as a % of total net loans for the periods presented.

Deposits and Borrowings

The following table presents ending deposits by type:


		September 30, 2022			December 31, 2021			Increase (Decrease)						March 31, 2023					December 31, 2022			Increase (Decrease)
							$			%							$					%
				(in thousands)														(dollars in thousands)
Noninterest-bearing demand	Noninterest-bearing demand	$	7,372,896		$	7,370,963		$	1,933		—	%	Noninterest-bearing demand		$	6,403,484				$	7,006,388		$	(602,904)		(8.6)		%
Interest-bearing demand	Interest-bearing demand	5,676,600			5,819,539			(142,939)			(2.5)		Interest-bearing demand	5,478,237					5,410,903			67,334			1.2
Savings and money market deposits	Savings and money market deposits	6,563,003			6,403,995			159,008			2.5		Savings and money market deposits	6,579,806					6,434,621			145,185			2.3
Total demand and savings	Total demand and savings	19,612,499			19,594,497			18,002			0.1		Total demand and savings	18,461,527					18,851,912			(390,385)			(2.1)
Brokered deposits	Brokered deposits	226,883			251,526			(24,643)			(9.8)		Brokered deposits	960,919					208,416			752,503			N/M
Time deposits	Time deposits	1,537,172			1,727,476			(190,304)			(11.0)		Time deposits	1,894,138					1,589,210			304,928			19.2
Total deposits	Total deposits	$	21,376,554		$	21,573,499		$	(196,945)		(0.9)	%	Total deposits	$	21,316,584				$	20,649,538		$	667,046		3.2		%

During the ~~nine months ended September 30, 2022,~~first quarter of 2023, total deposits ~~decreased~~increased by ~~$196.9~~$667.0 million, or ~~0.9%~~3.2%, compared to year-end 2022. The increase in total deposits was primarily due to ~~a $190.3 million decrease~~increases in brokered deposits, time deposits and ~~a $142.9~~savings and money market deposits of $752.5 million, ~~decrease in interest-bearing demand deposits,~~$304.9 million and $145.2 million, respectively, partially offset by a ~~$159.0 million increase~~decrease in ~~savings and money market deposits.~~noninterest-bearing demand deposits of $602.9 million.

The following table presents ending borrowings by type:


		September 30, 2022		December 31, 2021				Increase (Decrease)						March 31, 2023				December 31, 2022				Increase (Decrease)
						$				%						$						%
		(in thousands)														(dollars in thousands)
Federal funds purchased	Federal funds purchased	$	136,000			$	—			136,000			N/M		Federal funds purchased	$	525,000			$	191,000			$	334,000			N/M

Federal Home Loan Bank advances	Federal Home Loan Bank advances	265,500		—				265,500			N/M		Federal Home Loan Bank advances	747,000				1,250,000				(503,000)				(40.2)
Senior debt and subordinated debt	Senior debt and subordinated debt	539,461		620,406				(80,945)			(13.0)		Senior debt and subordinated debt	539,814				539,634				180				—
Other borrowings(1)	Other borrowings(1)	483,720		417,703				66,017			15.8		Other borrowings(1)	634,956				890,573				(255,617)				(28.7)
Total borrowings	Total borrowings	$	1,424,681	$	1,038,109			$	386,572		37.2	%	Total borrowings	$	2,446,770			$	2,871,207			$	(424,437)			(14.8)	%

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

During the ~~nine months ended September 30, 2022,~~first quarter of 2023, total borrowings ~~increased $386.2~~decreased $424.4 million, or ~~37.2%~~14.8%, compared to year-end 2022. The decrease in total borrowings was primarily due to decreases in Federal Home Loan Bank advances and other borrowings ~~assumed~~of $503.0 million and $255.6 million, respectively, partially offset by an increase in ~~the Merger.~~Federal funds purchased of $334.0 million.

~~Shareholders' Equity~~

6958

Compared to December 31, 2021, shareholders' equity at September 30, 2022 decreased $241.5 million, primarily due to a $470.4 million increase in the loss for AOCI largely attributable to unrealized losses on investment securities and derivative instruments, partially offset by a $124.2 million increase in retained earnings and the $89.7 million issuance of treasury shares in connection with the Merger.

On March 21, 2022, the Corporation announced that its board of directors approved the repurchase of up to $75 million of shares of the Corporation's common stock, or approximately 2.7% of the Corporation's outstanding shares, based on the closing price of the Corporation's common stock and the number of shares outstanding on March 17, 2022. Under the repurchase program, repurchased shares are added to treasury stock at cost. As permitted by securities laws and other legal requirements, and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase transactions. The repurchase program may be discontinued at any time and will expire on December 31, 2022. No shares of the Corporation's common stock were repurchased under this program during the three and nine months ended September 30, 2022.

Regulatory Capital

The Corporation and its wholly owned subsidiary ~~banks,~~bank, Fulton ~~Bank and Prudential~~ Bank, are subject to ~~regulatory capital requirements ("~~the Capital ~~Rules")~~Rules administered by banking regulators. Failure to meet minimum capital requirements ~~could result in~~can trigger certain actions by regulators that could have a material effect on the Corporation's financial statements.

The Capital Rules require the Corporation ~~Fulton Bank~~ and ~~Prudential~~Fulton Bank to:

•Meet a minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets;

•Meet a minimum Tier 1 Leverage capital ratio of 4.00% of average assets;

•Meet a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 capital ratio of 6.00% of risk-weighted assets;

•Maintain a "capital conservation buffer" of 2.50% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonus payments; and

•Comply with a revised definition of capital to improve the ability of regulatory capital instruments to absorb losses. Certain non-qualifying capital instruments, including cumulative preferred stock and TruPS, are excluded as a component of Tier 1 capital for institutions of the Corporation's size.

The Capital Rules use a standardized approach for risk weightings that expands the risk-weightings for assets and off-balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures, ~~and~~ resulting in higher risk weightings for a variety of asset categories.

As of ~~September 30, 2022,~~March 31, 2023, the Corporation's capital levels met the ~~fully phased-in~~ minimum capital requirements, including the capital conservation buffers, as prescribed in the Capital Rules.

As of ~~September 30, 2022,~~March 31, 2023, Fulton ~~Bank and Prudential~~ Bank met the ~~well capitalized~~well-capitalized requirements under the regulatory framework for prompt corrective action. To be categorized as ~~well capitalized,~~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 ~~regulation.~~Capital Rules. There were no other conditions or events since ~~September 30, 2022~~March 31, 2023 that management believes have changed the Corporation's capital categories.

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

September 30, 2022 December 31, 2021 Regulatory
Minimum
for Capital
Adequacy Fully Phased-in, with Capital Conservation Buffers
Total Risk-Based Capital (to Risk-Weighted Assets) 13.6 % 14.1 % 8.0 % 10.5 %
Tier I Risk-Based Capital (to Risk-Weighted Assets) 10.9 % 10.9 % 6.0 % 8.5 %
Common Equity Tier I (to Risk-Weighted Assets) 10.0 % 9.9 % 4.5 % 7.0 %
Tier I Leverage Capital (to Average Assets) 9.2 % 8.6 % 4.0 % 4.0 %


	March 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)	13.4	%	13.6	%	8.0	%	10.5	%
Tier I Risk-Based Capital (to Risk-Weighted Assets)	10.6	%	10.9	%	6.0	%	8.5	%
Common Equity Tier I (to Risk-Weighted Assets)	9.8	%	10.0	%	4.5	%	7.0	%
Tier I Leverage Capital (to Average Assets)	9.2	%	9.5	%	4.0	%	4.0	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the exposure to economic loss that arises from changes in the values of certain financial instruments. The types of market risk exposures generally faced by financial institutions include interest rate risk, equity market price risk, debt security market price risk, foreign currency price risk and commodity price risk. Due to the nature of its operations, foreign currency price risk and commodity price risk are not significant to the Corporation.

Interest Rate Risk, Asset/Liability Management and Liquidity

Interest rate risk creates exposure in two primary areas. First, changes in rates have an impact on the Corporation's liquidity position and could affect its ability to meet obligations and continue to grow. Second, movements in interest rates can create fluctuations in the Corporation's net interest income and changes in the economic value of its equity.

The Corporation employs various management techniques to minimize its exposure to interest rate risk. The Corporation's ALCO is responsible for reviewing the interest rate sensitivity and liquidity positions of the Corporation, approving asset and liability management policies, and overseeing the formulation and implementation of strategies regarding balance sheet positions.

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.

Simulation of net interest income is performed for the next 12-month period. A variety of interest rate scenarios are used to measure the effects of sudden and gradual movements upward and downward in the yield curve. These results are compared to the results obtained in a flat or unchanged interest rate scenario. Simulation of net interest income is used primarily to measure the Corporation's short-term earnings exposure to rate movements. The Corporation's policy limits the potential exposure of net interest income, in a non-parallel instantaneous shock, to 10% of the base case net interest income for a 100 bps shock in interest rates, 15% for a 200 bps shock, 20% for a 300 bps shock and 25% for a 400 bps shock. A "shock" is an immediate upward or downward movement of interest rates. The shocks do not take into account changes in customer behavior that could result in changes to mix and/or volumes in the balance sheet, nor does it take into account the potential effects of competition on the pricing of deposits and loans over the forward 12-month period.

Contractual maturities and repricing opportunities of loans are incorporated in the simulation model as are prepayment assumptions, maturity data and call options within the investment portfolio. Assumptions based on past experience are incorporated into the model for non-maturity deposit accounts. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model's simulated results due to timing, amount and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

The following table summarizes the expected impact of abrupt interest rate changes, that is, a non-parallel instantaneous shock, on net interest income as of ~~September 30, 2022~~March 31, 2023 :


Rate Shock(1)	Annual change in net interest income	% change in net interest income
+400 bp	+ ~~$133.0~~$94.3 million	~~14.3%~~+10.4%
+300 bp	+ ~~$100.3~~$73.8 million	~~10.8%~~+8.1%
+200 bp	+ ~~$68.2~~$54.0 million	~~7.3%~~+6.0%
+100 bp	+ ~~$34.7~~$32.5 million	~~3.7%~~+3.6%
–100 bp	– ~~$60.4~~$42.8 million	– ~~6.5%~~4.7%
–200 bp	– ~~$144.7~~$85.0 million	– ~~15.6%~~9.4%
–300 bp	– $126.3 million	– 13.9%
–400 bp	– $172.1 million	– 19.0%

(1) These results include the effect of implicit and explicit interest rate floors that limit further reduction in interest rates.

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. This measurement tool is used primarily to evaluate the longer-term repricing risks and options in the Corporation's balance sheet. The Corporation's policy limits the economic value of equity that may be at risk, in a non-parallel instantaneous shock, to 10% of the base case economic value of equity for a 100 bps shock in interest rates, 20% for a 200 bps shock, 30% for a 300 bps shock and 40% for a 400 bps shock. As of March 31, 2023, the Corporation was within economic value of equity policy limits for

every 100 bps shock.

Interest Rate ~~Swaps~~Derivatives

The Corporation enters into interest rate ~~swaps~~derivatives with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate ~~swaps~~derivatives with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate ~~swaps~~derivatives is that the customer pays a fixed rate of interest and the Corporation receives a floating rate. These interest rate ~~swaps~~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 expense on the consolidated statements of income.

Cash Flow Hedges

The Corporation's objectives in using interest rate derivatives are to reduce volatility in net interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate ~~swaps~~derivatives as part of its interest rate risk management strategy. The Corporation ~~uses~~enters into interest rate ~~swaps~~derivatives designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans. These hedge contracts involve the receipt of fixed-rate amounts from a counterparty in exchange for the Corporation making floating-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings. 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.

Liquidity

The Corporation must maintain a sufficient level of liquid assets to meet the cash needs of its customers, who, as depositors, may want to withdraw funds or who, as borrowers, need credit availability. Liquidity is provided on a continuous basis through scheduled and unscheduled principal and interest payments on investments and outstanding loans and through the availability of deposits and borrowings. The Corporation also maintains secondary sources that provide liquidity on a secured and unsecured basis to meet short- and long-term needs.

The Corporation maintains liquidity sources in the form of interest-bearing deposits and customer funding (short-term promissory notes). The Corporation can access additional liquidity from these sources, if necessary, by increasing the rates of interest paid on those instruments. The positive impact to liquidity resulting from paying higher interest rates could have a detrimental impact on the net interest margin and net interest income if rates on interest-earning assets do not experience a proportionate increase. Borrowing availability with the FHLB and the FRB, along with federal funds lines at various correspondent banks, provides the Corporation with additional liquidity.

Fulton Bank ~~and Prudential Bank are members~~is a member of the FHLB and ~~have~~has access to FHLB overnight and term credit facilities.As of ~~September 30, 2022,~~March 31, 2023, the ~~Corporation~~Bank had ~~$265.5 million in advances outstanding with the FHLB. As of September 30, 2022, the Corporation has~~total borrowing capacity of approximately ~~$5.7~~$7.8 billion with $2.3 billion of advances and letters of credit outstanding, for a remaining available borrowing capacity of approximately $5.5 billion under these facilities. Advances from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets.

As of ~~September 30, 2022,~~March 31, 2023, the Corporation had aggregate federal funds lines borrowing capacity of ~~$2.2 billion. A combination of commercial real estate loans, commercial loans and securities are pledged to the FRB of Philadelphia to provide access to FRB discount window borrowings.~~$2.5 billion with $0.5 billion outstanding against that amount. As of ~~September 30, 2022,~~March 31, 2023, the Corporation had ~~$1.2~~$1.3 billion of collateralized borrowing capacity at the discount ~~window.~~window and $1.6 billion of borrowing capacity at the Bank Term Funding Program facility with no amounts outstanding under these programs as of March 31, 2023.

Securities carried at ~~$1.3~~$1.1 billion at ~~September 30, 2022~~March 31, 2023 and ~~$2.5 billion at~~ December 31, ~~2021~~2022 were pledged as collateral to secure public and trust deposits.

Liquidity must also be managed at the Corporation's parent company level. For safety and soundness reasons, banking regulations limit the amount of cash that can be transferred from subsidiary banks to the parent company in the form of loans

and dividends. Generally, these limitations are based on the subsidiary banks’ regulatory capital levels and their net income. Management continues to monitor the liquidity and capital needs of the parent company including monitoring the granularity of the deposit portfolio and level of uninsured deposits. Management will implement appropriate strategies, as necessary, to remain adequately capitalized and to meet its cash needs.

The consolidated statements of cash flows provide additional information. The Corporation's operating activities during the ~~first nine~~three months ~~of 2022~~ended March 31, 2023 provided ~~$519.2~~$46.0 million of cash. Cash used by investing activities was ~~$0.9~~$0.3 billion and was mainly due to the net increase in loans. Cash ~~used~~provided by financing activities was ~~$700.7~~$176.9 million, and was primarily due an ~~decrease~~increase in ~~deposits. Changes resulting from assets acquired~~time deposits, partially offset by decreases in borrowings and ~~liabilities assumed in the Merger are not reflected in the Consolidated Statement of Cash Flows.~~

demand and savings deposits.

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. 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, ~~auction rate 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 ~~September 30, 2022,~~March 31, 2023, the Corporation owned securities issued by various states and municipalities with a total fair value of ~~$1.0~~$1.1 billion. Uncertainty with respect to the financial strength of state and municipal bond insurers places emphasis on the underlying strength of issuers. Pressure on local tax revenues of issuers due to adverse economic conditions could have an adverse impact on the underlying credit quality of issuers. The Corporation evaluates existing and potential holdings primarily based on the underlying creditworthiness of the issuing state or municipality and then, to a lesser extent, on any credit enhancement. 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 ~~September 30, 2022,~~March 31, 2023, approximately 100% of state and municipal securities were supported by the general obligation of corresponding states or municipalities. Approximately ~~76%~~78% of these securities were school district issuances, which are also supported by the states of the issuing municipalities.

Item 4. Controls and Procedures

The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation's management, including the Corporation's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures pursuant to Rule 13a-15, promulgated under the Exchange Act. Based upon that evaluation, the Corporation's Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, the Corporation's disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in Corporation reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

Prudential Bancorp was acquired on July 1, 2022. The Corporation has extended oversight and monitoring processes that support internal control over financial reporting to include the acquired operations. Other than these processes, there have been no changes in the Corporation's internal control over financial reporting during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information presented in the "Legal Proceedings" section of Note 13 "Commitments and Contingencies" of the Notes to Consolidated Financial Statements is incorporated herein by reference.

Item 1A. Risk Factors

~~There have been no material changes to the risk factors previously disclosed in Part I,~~ Item 1A1A. Risk Factors of the Corporation's Annual Report on Form 10-K for the year ended December 31, ~~2021 and Part II, Item 1A~~2022 includes a discussion of the material risks and uncertainties that could adversely affect the Corporation's ~~Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.~~

business, results of operations and financial condition.

The information presented below provides an update to, and should be read in conjunction with, the risk factors and other information contained in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022.

Recent events impacting the financial services industry could adversely affect the Corporation's business.

Recent events affecting the financial services industry, including several recent bank failures, have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks like the Corporation. These events have negatively impacted customer confidence in the safety and soundness of regional banks. As a result, customers may choose to transfer deposits to larger financial institutions or higher-yielding alternative investments, which could materially adversely impact the Corporation's liquidity, funding costs and NIM. Potentially adverse changes to laws or regulations governing the Corporation in response to these events may, among other things, result in increased regulatory scrutiny and new regulations focused on areas believed to have contributed to these events, including liquidity and interest rate risk management, deposit composition and concentrations and capital adequacy. In addition, the cost of resolving recent bank failures may prompt the FDIC to increase deposit insurance premiums above the recently increased levels or to impose additional special assessments. Any of the foregoing could, among other things, subject the Corporation to additional costs, limit the types of financial services and products the Corporation may offer, and limit the Corporation’s future growth, any of which could have a material adverse effect the Corporation's business, results of operations and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

(b) None.


(c) 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
January 1, 2023 to January 31, 2023	652,821	$	16.190	652,821	$	89,432,435
February 1, 2023 to February 28, 2023	969,203	17.390		969,203	72,582,765
March 1, 2023 to March 31, 2023	789,529	16.510		789,529	59,551,298

~~(c)~~(1)Includes 1% excise tax.

(2) On ~~March 21,~~December 20, 2022, the Corporation announced the 2023 Repurchase Program which authorizes the Corporation to repurchase up to $100.0 million of its common stock through December 31, 2023.

On December 20, 2022, the Corporation announced that its board of directors approved the 2023 Repurchase Program. Under the 2023 Repurchase Program, the Corporation is authorized to repurchase of up to ~~$75~~$100.0 million of ~~shares of the Corporation's~~its common stock ~~or approximately 2.7% of the Corporation's outstanding shares,~~ through December 31, ~~2022.~~ 2023. Under ~~this repurchase program,~~the 2023 Repurchase Program, repurchased shares are added to treasury stock at cost. As permitted by securities laws and other legal requirements, and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase transactions. ~~This repurchase program~~The 2023 Repurchase Program may be discontinued at any time.

During the three months ended ~~September 30, 2022, no~~March 31, 2023, 2.4 million shares were repurchased under this program. In March 2023, the Corporation paused its share repurchase program.

7463

Item 6. Exhibits



3.1						Articles of Incorporation, as amended and restated, of Fulton Financial ~~Corporation– Incorporated~~Corporation as amended (Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on June 24, ~~2011. (File No. 0-10587)~~2011).

3.2						Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State ~~- Incorporated~~(Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, ~~2020.~~2020).

3.3						Bylaws of Fulton Financial Corporation as amended ~~– Incorporated~~(Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on a Form 8-K filed on May 14, ~~2021.~~2021).

4.1						Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State ~~- Incorporated~~(Incorporated by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, ~~2020.~~2020).

4.2						Deposit Agreement, dated October 29, 2020, among Fulton Financial Corporation, Equiniti Trust Company, as depositary, and the holders from time to time of the depositary receipts described therein ~~- Incorporated~~(Incorporated by reference to Exhibit 4.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, ~~2020.~~2020).

4.3						Form of depositary receipt representing the Depositary Shares ~~(included as~~(Included in Exhibit ~~A to Exhibit 4.2 of this report)~~4.2).

4.4						Stock Certificate - (Incorporated by reference as Exhibit ~~4.1~~4.1 of Fulton Financial Corporation Registration Statement on Form S-4 filed on April 21, ~~2022.~~2022 ).
10.1						Form of Time-Vested Restricted Stock Unit Award Agreement - Filed h erewith.
10.2						Form of Performance Restricted Stock Unit Award Agreement Total Shareholder Return ("TSR") Component - Filed h erewith.
10.3						Form of Performance Restricted Stock Unit Award Agreement Profit Trigger Component - Filed h erewith.
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Income, (iii) Unaudited Consolidated Statements of Comprehensive Income, (iv) Unaudited Consolidated Statements of Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

104						Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101)

7564

FULTON FINANCIAL CORPORATION AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FULTON FINANCIAL CORPORATION

Date:

~~November~~May 9, ~~2022~~2023

/s/ ~~E. Philip Wenger~~Curtis J. Myers

~~E. Philip Wenger~~Curtis J. Myers

Chairman and Chief Executive Officer

Date:

~~November~~May 9, ~~2022~~2023

/s/ Mark R. McCollom

Mark R. McCollom

Senior Executive Vice President and Chief Financial Officer

7665


	Gross Realized Gains		Gross Realized Losses		Net (Losses) Gains
Three months ended	(in thousands)
September 30, 2022	$	33	$	(86)	$	(53)
September 30, 2021	—		—		—

Nine months ended
September 30, 2022	$	1,587	$	(1,613)	$	(26)
September 30, 2021	34,481		(970)		33,511


	Nine months ended September 30								Increase (Decrease) in Balance
	2022				2021
	Balance		Yield		Balance		Yield		$		%
	(dollars in thousands)
Real estate – commercial mortgage	$	7,401,094	3.53	%	$	7,146,951	3.14	%	$	254,143	3.6	%
Commercial and industrial (1)	4,205,236		3.70		5,295,240		2.64		(1,090,004)		(20.6)
Real estate – residential mortgage	4,143,850		3.27		3,409,381		3.43		734,469		21.5
Real estate – home equity	1,099,310		4.25		1,147,444		3.71		(48,134)		(4.2)
Real estate – construction	1,197,947		3.53		1,065,125		3.09		132,822		12.5
Consumer	532,396		4.45		454,434		4.00		77,962		17.2
Equipment lease financing	247,674		3.81		256,741		3.92		(9,067)		(3.5)
Other (2)	38,165		—		(10,292)		—		48,457		N/M
Total loans	$	18,865,672	3.71	%	$	18,765,024	3.46	%	$	100,648	0.5	%


	Nine months ended September 30								Increase (Decrease) in Balance
	2022				2021
	Balance		Rate		Balance		Rate		$		%
	(dollars in thousands)
Noninterest-bearing demand	$	7,538,597	—	%	$	7,108,199	—	%	$	430,398	6.1	%
Interest-bearing demand	5,657,165		0.08		5,994,878		0.06		(337,713)		(5.6)
Savings and money market deposits	6,515,529		0.11		6,271,019		0.08		244,510		3.9
Total demand deposits and savings and money market deposits	19,711,291		0.06		19,374,096		0.05		337,195		1.7
Brokered deposits	254,100		1.14		297,250		0.39		(43,150)		(14.5)
Time deposits	1,633,053		0.84		2,001,043		1.09		(367,990)		(18.4)
Total deposits	$	21,598,444	0.13	%	$	21,672,389	0.15	%	$	(73,945)	(0.3)	%


	September 30, 2022		December 31, 2021		2022 vs. 2021 Increase (Decrease)
					$		%
	(in thousands)
Real estate – commercial mortgage	$	7,554,509	$	7,279,080	$	275,429	3.8	%
Commercial and industrial (1)	4,243,392		4,208,327		35,065		0.8
Real estate – residential mortgage	4,574,228		3,846,750		727,478		18.9
Real estate – home equity	1,110,103		1,118,248		(8,145)		(0.7)
Real estate – construction	1,273,097		1,139,779		133,318		11.7
Consumer	633,666		464,657		169,009		36.4
Equipment lease financing and other	328,057		283,557		44,500		15.7
Overdrafts	2,162		1,988		174		8.8
Gross loans	19,719,214		18,342,386		1,376,828		7.5
Unearned income	(24,015)		(17,036)		(6,979)		(41.0)
Net loans	$	19,695,199	$	18,325,350	$	1,369,849	7.5	%


	September 30, 2022		December 31, 2021
Real estate (1)	45.2	%	44.3	%
Manufacturing	7.0		5.1
Health care	6.7		6.7
Agriculture	5.6		6.1
Other services (2)	4.8		5.0
Construction (3)	4.8		3.9
Hospitality and food services	3.7		3.7
Retail	3.2		3.0
Wholesale trade	3.2		2.8
Educational services	2.9		2.7
Arts, entertainment and recreation	2.1		2.3
Professional, scientific and technical services	1.9		1.8
Public administration	1.3		1.5
Transportation and warehousing	1.3		1.3
Administrative and Support	1.1		0.6
Finance and Insurance	1.0		1.4
Other (4)	4.2		7.8
Total	100.0	%	100.0	%