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 June 30, 2022,2023, 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) 
Pennsylvania23-2195389
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
One Penn SquareP. O. Box 4887Lancaster,Pennsylvania17604
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $2.50FULTThe Nasdaq Stock Market, LLC
Depositary Shares, Each Representing 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series AFULTPThe 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 –167,356,767– 164,029,208 shares outstanding as of July 29, 2022.28, 2023.
1


FULTON FINANCIAL CORPORATION
FORM 10-Q FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 20222023
INDEX
 
DescriptionPage
Glossary of Terms
3
PART I. FINANCIAL INFORMATION
(a)
56
(b)
67
(c)
78
(d)
89
(e)
910
(f)
1011
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
4143
66
6869
69
69
69
Item 3. Defaults Upon Senior Securities - (not applicable)
Item 4. Mine Safety Disclosures - (not applicable)
Item 5. Other Information - (none to be reported)
70
7071
7172

Note: Some numbers contained in the document may not sum due to rounding
2


FULTON FINANCIAL CORPORATION
GLOSSARY OF DEFINED ACRONYMS AND TERMS
2023 Repurchase ProgramThe authorization to repurchase up to $100 million of the Corporation's common stock commencing January 1, 2023 and expiring December 31, 2023
ACLAllowance for credit losses
AFSAvailable for sale
ALCOAsset/Liability Management Committee
AOCIAccumulated other comprehensive (loss) income
ARCAuction rate security
ASCAccounting Standards Codification
ASUAccounting Standards Update
BHCABank Holding Company Act of 1956, as amended
bp or bpsBasis point(s)
CARES ActCapital RulesCoronavirus Aid, Relief,Regulatory capital requirements applicable to the Corporation and Economic Security ActFulton Bank
Corporation or CompanyFulton Financial Corporation
COVID-19Coronavirus
Directors' PlanAmended and Restated Directors’ Equity Participation Plan
Dodd-Frank ActDodd-Frank Wall Street Reform and Consumer Protection Act
Employee Equity Plan2022 Amended and Restated Equity and Cash Incentive Compensation Plan
ESGEnvironmental, social and governance
ETREffective tax rate
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
Fed Funds RateTarget federal funds rate
Federal Reserve BoardBoard of Governors of the Federal Reserve System
FHLBFederal Home Loan Bank
FOMCFederal Open Market Committee
Foreign Currency Nostro AccountsForeign currency with international correspondent banks
FRBFederal Reserve Bank
FTEFully taxable-equivalent
Fulton Bank or the BankFulton Bank, N.A.
GAAPU.S. Generally Accepted Accounting Principlesgenerally accepted accounting principles
HTMHeld to maturity
LIBORLondon Interbank Offered Rate
ManagementManagement's DiscussionManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MergerThe acquisition by the Corporation of Prudential whichBancorp that was completed effective as of July 1, 2022
Merger AgreementAgreement and Plan of Merger, dated as of March 1, 2022, between the Corporation and Prudential
Merger ConsiderationFor 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
MSRsMortgage servicing rights
Net loansLoansLoan and lease receivables (net of unearned income)
NIMNet interest margin
N/MNot meaningful
OBSOff-balance-sheet
OCIOther comprehensive income
OREOOther real estate owned
Pension PlanDefined Benefit Pension Plan
3


Pension PlanDefined Benefit Pension Plan
Postretirement PlanPostretirement Benefits Plan
PPPPaycheck Protection Program
Prudential BancorpPrudential Bancorp, Inc.
PSUPerformance-based restricted stock unit
RSURestricted stock unit
SBASmall Business Administration
SECUnited States Securities and Exchange Commission
SOFRSecured Overnight Financing Rate
TCITax credit investment
TDRTroubled debt restructuring
TruPSTrust Preferred Securities
Visa SharesVisa, Inc. Class B restricted shares
Note: Some numbers contained

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 documentCorporation'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;
4


•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 sum duebe able to roundingsuccessfully integrate the acquired business or realize the anticipated benefits from such acquisitions;
•geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, including the war between Russia and Ukraine, 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.

45



Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS 
(dollars in thousands, except per-share data)
June 30, 2022December 31,
2021
(unaudited)
ASSETS
Cash and due from banks$158,605 $172,276 
Interest-bearing deposits with other banks291,069 1,466,338 
        Cash and cash equivalents449,674 1,638,614 
FRB and FHLB stock62,146 57,635 
Federal funds sold30,500 — 
Loans held for sale17,528 35,768 
Investment securities:
AFS, at estimated fair value2,778,838 3,187,390 
HTM, at amortized cost1,338,963 980,384 
Net loans18,920,950 18,325,350 
Less: ACL - loans(248,564)(249,001)
Loans, net18,672,386 18,076,349 
Net premises and equipment211,639 220,357 
Accrued interest receivable64,457 57,451 
Goodwill and net intangible assets537,700 538,053 
Other assets1,088,855 1,004,397 
Total Assets$25,252,686 $25,796,398 
LIABILITIES
Deposits:
Noninterest-bearing$7,530,777 $7,370,963 
Interest-bearing13,613,089 14,202,536 
Total Deposits21,143,866 21,573,499 
Short-term borrowings:
Federal funds purchased20,000 — 
Other short-term borrowings436,185 416,764 
Short-term borrowings456,185 416,764 
Accrued interest payable6,010 7,000 
Long-term borrowings557,130 621,345 
Other liabilities618,402 465,110 
Total Liabilities22,781,593 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 June 30, 2022 and December 31, 2021, liquidation preference of $1,000 per share192,878 192,878 
Common stock, $2.50 par value, 600.0 million shares authorized, 224.5 million shares issued as of June 30, 2022 and 223.9 million issued as of December 31, 2021561,181 559,766 
Additional paid-in capital1,527,756 1,519,873 
Retained earnings1,363,344 1,282,383 
Accumulated other comprehensive (loss) gain(304,210)27,411 
Treasury stock, at cost, 63.4 million shares as of June 30, 2022 and December 31, 2021(869,856)(869,631)
Total Shareholders' Equity2,471,093 2,712,680 
Total Liabilities and Shareholders' Equity$25,252,686 $25,796,398 
See Notes to Consolidated Financial Statements
June 30, 2023December 31,
2022
(unaudited)
ASSETS
Cash and due from banks$123,779 $126,898 
Interest-bearing deposits with other banks380,923 555,023 
        Cash and cash equivalents504,702 681,921 
FRB and FHLB stock124,218 130,186 
Loans held for sale14,673 7,264 
Investment securities
AFS, at estimated fair value2,572,721 2,646,767 
HTM, at amortized cost1,294,613 1,321,256 
Net loans21,044,685 20,279,547 
Less: ACL - loans(287,442)(269,366)
Loans, net20,757,243 20,010,181 
Net premises and equipment216,322 225,141 
Accrued interest receivable96,991 91,579 
Goodwill and net intangible assets561,885 560,824 
Other assets1,259,795 1,256,583 
Total Assets$27,403,163 $26,931,702 
LIABILITIES
Deposits:
Noninterest-bearing$5,865,855 $7,006,388 
Interest-bearing15,340,685 13,643,150 
Total Deposits21,206,540 20,649,538 
Borrowings:
Federal funds purchased555,000 191,000 
Federal Home Loan Bank advances1,165,000 1,250,000 
Senior debt and subordinated debt539,994 539,634 
Other borrowings459,120 890,573 
Total borrowings2,719,114 2,871,207 
Accrued interest payable24,101 10,185 
Other liabilities811,256 821,015 
Total Liabilities$24,761,011 $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 June 30, 2023 and December 31, 2022, liquidation preference of $1,000 per share192,878 192,878 
Common stock, $2.50 par value, 600.0 million shares authorized, 225.7 million shares issued as of June 30, 2023 and 224.6 million issued as of December 31, 2022
564,137 561,511 
Additional paid-in capital1,545,706 1,541,840 
Retained earnings1,542,163 1,450,758 
Accumulated other comprehensive (loss) income(379,286)(385,476)
Treasury stock, at cost, 59.6 million shares as of June 30, 2023 and 57.0 million shares as of December 31, 2022
(823,446)(781,754)
Total Shareholders' Equity2,642,152 2,579,757 
Total Liabilities and Shareholders' Equity$27,403,163 $26,931,702 
See Notes to Consolidated Financial Statements
56


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per-share data)Three months ended June 30Six months ended June 30
 2022202120222021
Interest Income
Loans, including fees$164,171 $155,080 $313,908 $319,065 
Investment securities:24,144 19,819 46,497 39,162 
Loans held for sale260 199 501 671 
Other interest income1,724 1,575 2,394 2,711 
Total Interest Income190,299 176,673 363,300 361,609 
Interest Expense
Deposits5,796 7,982 11,401 17,584 
Short-term borrowings190 137 311 325 
Long-term borrowings5,482 6,155 11,447 16,853 
Total Interest Expense11,468 14,274 23,159 34,762 
Net Interest Income178,831 162,399 340,141 326,847 
Provision for credit losses1,500 (3,500)(5,450)(9,000)
Net Interest Income After Provision for Credit Losses177,331 165,899 345,591 335,847 
Non-Interest Income
Commercial banking20,359 17,129 36,367 33,471 
Consumer banking12,472 10,860 24,146 21,614 
Wealth management18,274 17,634 37,702 34,981 
Mortgage banking3,768 2,838 8,344 16,798 
Other3,510 3,393 7,061 6,912 
Non-Interest Income Before Investment Securities Gains58,383 51,854 113,620 113,776 
Investment securities gains, net8 36 27 33,511 
Total Non-Interest Income58,391 51,890 113,647 147,287 
Non-Interest Expense
Salaries and employee benefits85,404 78,367 169,868 160,953 
Data processing and software14,685 13,932 29,000 27,493 
Net occupancy13,587 12,494 28,109 26,476 
Other outside services8,764 8,178 16,931 16,668 
State taxes3,568 4,384 6,605 8,889 
Equipment3,422 3,424 6,845 6,852 
FDIC insurance2,961 2,282 6,170 4,906 
Professional fees2,013 2,651 3,805 5,430 
Marketing1,326 1,348 2,646 2,350 
Intangible amortization177 178 353 293 
Debt extinguishment— 412 — 32,575 
Merger-related expenses1,027 — 1,428 — 
Other12,796 13,181 23,948 26,330 
Total Non-Interest Expense149,730 140,831 295,708 319,215 
Income Before Income Taxes85,992 76,958 163,530 163,919 
Income taxes16,003 11,994 29,253 25,892 
Net Income69,989 64,964 134,277 138,027 
Preferred stock dividends(2,562)(2,562)(5,124)(5,153)
Net Income Available to Common Shareholders$67,427 $62,402 $129,153 $132,874 
PER SHARE:
Net income available to common shareholders (basic)$0.42 $0.38 $0.80 $0.81 
Net income available to common shareholders (diluted)0.42 0.38 0.80 0.81 
Cash dividends0.15 0.14 0.30 0.28 
See Notes to Consolidated Financial Statements

(dollars in thousands, except per-share data)Three months ended June 30Six months ended June 30
 2023202220232022
Interest Income
Loans, including fees$284,690 $164,171 $545,341 $313,908 
Investment securities25,362 24,144 50,883 46,497 
Other interest income4,860 1,984 8,508 2,895 
Total Interest Income314,912 190,299 604,732 363,300 
Interest Expense
Deposits69,799 5,796 111,420 11,401 
Federal funds purchased9,112 12 15,147 12 
Federal Home Loan Bank advances11,826 — 27,299 — 
Senior debt and subordinated debt5,344 5,468 10,689 11,426 
Other borrowings and interest-bearing liabilities5,979 192 11,738 320 
Total Interest Expense102,060 11,468 176,293 23,159 
Net Interest Income212,852 178,831 428,439 340,141 
Provision for credit losses9,747 1,500 34,291 (5,450)
Net Interest Income After Provision for Credit Losses203,105 177,331 394,148 345,591 
Non-Interest Income
Wealth management18,678 18,274 36,740 37,702 
Commercial banking23,145 20,359 40,658 36,367 
Consumer banking11,720 12,472 22,937 24,146 
Mortgage banking2,940 3,768 4,910 8,344 
Other4,106 3,510 7,075 7,061 
Non-Interest Income Before Investment Securities Gains60,589 58,383 112,320 113,620 
Investment securities gains, net(4)8 19 27 
Total Non-Interest Income60,585 58,391 112,339 113,647 
Non-Interest Expense
Salaries and employee benefits94,102 85,404 183,385 169,868 
Data processing and software16,776 14,685 32,571 29,000 
Net occupancy14,374 13,587 28,812 28,109 
Other outside services10,834 8,764 20,960 16,931 
FDIC insurance4,895 2,961 9,690 6,170 
State taxes3,939 3,568 7,418 6,605 
Equipment3,530 3,422 6,920 6,845 
Professional fees1,829 2,013 4,221 3,805 
Marketing1,655 1,326 3,541 2,646 
Intangible amortization1,072 177 1,746 353 
Merger-related expenses— 1,027 — 1,428 
Other15,012 12,796 28,372 23,948 
Total Non-Interest Expense168,018 149,730 327,636 295,708 
Income Before Income Taxes95,672 85,992 178,851 163,530 
Income taxes16,065 16,003 30,931 29,253 
Net Income79,607 69,989 147,920 134,277 
Preferred stock dividends(2,562)(2,562)(5,124)(5,124)
Net Income Available to Common Shareholders$77,045 $67,427 $142,796 $129,153 
PER SHARE:
Net income available to common shareholders (basic)$0.46 $0.42 $0.86 $0.80 
Net income available to common shareholders (diluted)0.46 0.42 0.85 0.80 
Cash dividends0.16 0.15 0.31 0.30 
See Notes to Consolidated Financial Statements
67


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(dollars in thousands)
 Three months ended June 30Six months ended June 30
 2022202120222021
 
Net Income$69,989 $64,964 $134,277 $138,027 
Other Comprehensive (Loss)/Income, net of tax:
Unrealized gains (losses) on AFS investment securities
Unrealized (loss)/gain on securities(88,352)19,298 (242,211)(20,701)
Reclassification adjustment for securities gains included in net income6 (28)21 349 
Amortization of net unrealized losses on AFS securities transferred to HTM(48,113)(270)(47,677)1,517 
         Net unrealized gains (losses) on AFS investment securities(136,459)19,000 (289,867)(18,835)
Unrealized (losses) gains on interest rate swaps used in cash flow hedges
         Net unrealized holding (losses) gains arising during the period(8,586)2,752 (39,962)1,158 
Reclassification adjustment for net (losses) gains realized in net income(335)(678)(1,842)(791)
 Net unrealized (losses) gains on interest rate swaps used in cash flow hedges(8,921)2,074 (41,804)367 
Defined benefit pension plan and postretirement benefits
Amortization of net unrecognized pension and postretirement items25 289 50 578 
Other Comprehensive (Loss)/Income(145,355)21,363 (331,621)(17,890)
Total Comprehensive (Loss) Income$(75,366)$86,327 $(197,344)$120,137 
See Notes to Consolidated Financial Statements
 Three months ended June 30Six months ended June 30
 2023202220232022
 
Net Income$79,607 $69,989 $147,920 $134,277 
Other Comprehensive Income/(Loss), net of tax:
Unrealized gains (losses) on AFS investment securities
Unrealized gains (losses) on securities(31,219)(88,352)1,422 (242,211)
Reclassification adjustment for securities net change included in net income(3)6 14 21 
Amortization of net unrealized gains (losses) on AFS securities transferred to HTM1,501 (48,113)2,979 (47,677)
         Net unrealized gains (losses) on AFS investment securities(29,721)(136,459)4,415 (289,867)
Unrealized gains (losses) on interest rate derivatives used in cash flow hedges
         Net unrealized holding losses arising during the period(5,586)(8,586)(12,406)(39,962)
Reclassification adjustment for net change realized in net income7,010 (335)14,153 (1,842)
 Net unrealized gains (losses) on interest rate derivatives used in cash flow hedges1,424 (8,921)1,747 (41,804)
Defined benefit pension plan and postretirement benefits
Amortization of net unrecognized pension and postretirement items3 25 28 50 
Other Comprehensive Income (Loss)(28,294)(145,355)6,190 (331,621)
Total Comprehensive Income (Loss)$51,313 $(75,366)$154,110 $(197,344)
See Notes to Consolidated Financial Statements

78


CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
(dollars in thousands, except per-share data)
Preferred StockCommon StockAdditionalRetained
Earnings		Accumulated Other Comprehensive
Income (Loss)		Treasury
Stock		Total Preferred StockCommon StockAdditionalRetained
Earnings		Accumulated Other Comprehensive
Income (Loss)		Treasury
Stock		Total
SharesAmountSharesAmountPaid-in
Capital		 SharesAmountSharesAmountPaid-in
Capital
Three months ended June 30, 2022
Balance at March 31, 2022200 $192,878 160,669 $560,045 $1,524,110 $1,320,076 $(158,855)$(868,719)$2,569,535 
Three months ended June 30, 2023Three months ended June 30, 2023
Balance at March 31, 2023Balance at March 31, 2023200 $192,878 165,396 $561,853 $1,544,758 $1,491,701 $(350,992)$(821,200)$2,618,998 
Net incomeNet income69,989 69,989 Net income79,607 79,607 
Other comprehensive lossOther comprehensive loss(145,355)(145,355)Other comprehensive loss(28,294)(28,294)
Common stock issuedCommon stock issued388 1,136 (94)(1,137)(95)Common stock issued701 2,284 (1,623)(2,246)(1,585)
Stock-based compensation awardsStock-based compensation awards3,740 3,740 Stock-based compensation awards2,571 2,571 
Preferred stock dividendPreferred stock dividend(2,562)(2,562)Preferred stock dividend(2,562)(2,562)
Common stock cash dividends - $0.15 per share(24,159)(24,159)
Balance at June 30, 2022200 $192,878 161,057 $561,181 $1,527,756 $1,363,344 $(304,210)$(869,856)$2,471,093 
Common stock dividends - $0.16 per shareCommon stock dividends - $0.16 per share(26,583)(26,583)
Balance at June 30, 2023Balance at June 30, 2023200 $192,878 166,097 $564,137 $1,545,706 $1,542,163 $(379,286)$(823,446)$2,642,152 
Three months ended June 30, 2021
Balance at March 31, 2021200 $192,878 162,517 $558,116 $1,511,101 $1,168,491 $25,838 $(826,769)$2,629,655 
Net income64,964 64,964 
Other comprehensive income21,363 21,363 
Common stock issued471 1,369 446 (1,568)247 
Stock-based compensation awards2,098 2,098 
Preferred stock dividend(2,562)(2,562)
Common stock cash dividends - $0.14 per share(22,807)(22,807)
Balance at June 30, 2021200 $192,878 162,988 $559,485 $1,513,645 $1,208,086 $47,201 $(828,337)$2,692,958 
Six months ended June 30, 2022
Balance at December 31, 2021200 $192,878 160,490 $559,766 $1,519,873 $1,282,383 $27,411 $(869,631)$2,712,680 
Net income134,277 134,277 
Other comprehensive loss(331,621)(331,621)
Common stock issued567 1,415 1,508 (225)2,698 
Stock-based compensation awards6,375 6,375 
Preferred stock dividend(5,124)(5,124)
Common stock cash dividends - $0.30 per share(48,192)(48,192)
Balance at June 30, 2022200 $192,878 161,057 $561,181 $1,527,756 $1,363,344 $(304,210)$(869,856)$2,471,093 
Six months ended June 30, 2021
Balance at December 31, 2020200 $192,878 162,350 $557,917 $1,508,117 $1,120,781 $65,091 $(827,956)$2,616,828 
Three months ended June 30, 2022Three months ended June 30, 2022
Balance at March 31, 2022Balance at March 31, 2022200 $192,878 160,669 $560,045 $1,524,110 $1,320,076 $(158,855)$(868,719)$2,569,535 
Net incomeNet income138,027 138,027 Net income69,989 69,989 
Other comprehensive lossOther comprehensive loss(17,890)(17,890)Other comprehensive loss(145,355)(145,355)
Common stock issuedCommon stock issued638 1,568 1,528 (381)2,715 Common stock issued388 1,136 (94)(1,137)(95)
Stock-based compensation awardsStock-based compensation awards4,000 4,000 Stock-based compensation awards3,740 3,740 
Preferred stock dividendPreferred stock dividend(5,153)(5,153)Preferred stock dividend(2,562)(2,562)
Common stock cash dividends - $0.28 per share(45,569)(45,569)
Balance at June 30, 2021200 $192,878 162,988 $559,485 $1,513,645 $1,208,086 $47,201 $(828,337)$2,692,958 
Common stock dividends - $0.15 per share
Common stock dividends - $0.15 per share
(24,159)(24,159)
Balance at June 30, 2022Balance at June 30, 2022200 $192,878 161,057 $561,181 $1,527,756 $1,363,344 $(304,210)$(869,856)$2,471,093 
Six months ended June 30, 2023Six months ended June 30, 2023
Balance at December 31, 2022Balance at December 31, 2022200 $192,878 167,599 $561,511 $1,541,840 $1,450,758 $(385,476)$(781,754)$2,579,757 
Net incomeNet income147,920 147,920 
Other comprehensive incomeOther comprehensive income6,190 6,190 
Common stock issuedCommon stock issued910 2,626 (374)(1,243)1,009 
Stock-based compensation awardsStock-based compensation awards4,240 4,240 
Acquisition of treasury stockAcquisition of treasury stock(2,412)(40,449)(40,449)
Preferred stock dividendPreferred stock dividend(5,124)(5,124)
Common stock dividends - $0.31 per shareCommon stock dividends - $0.31 per share(51,391)(51,391)
Balance at June 30, 2023Balance at June 30, 2023200 $192,878 166,097 $564,137 $1,545,706 $1,542,163 $(379,286)$(823,446)$2,642,152 
Six months ended June 30, 2022Six months ended June 30, 2022
Balance at December 31, 2021Balance at December 31, 2021200 $192,878 160,490 $559,766 $1,519,873 $1,282,383 $27,411 $(869,631)$2,712,680 
Net incomeNet income134,277 134,277 
Other comprehensive lossOther comprehensive loss(331,621)(331,621)
Common stock issuedCommon stock issued567 1,415 1,508 (225)2,698 
Stock-based compensation awardsStock-based compensation awards6,375 6,375 
Preferred stock dividendPreferred stock dividend(5,124)(5,124)
Common stock dividends - $0.30 per shareCommon stock dividends - $0.30 per share(48,192)(48,192)
Balance at June 30, 2022Balance at June 30, 2022200 $192,878 161,057 $561,181 $1,527,756 $1,363,344 $(304,210)$(869,856)$2,471,093 
See Notes to Consolidated Financial StatementsSee Notes to Consolidated Financial StatementsSee Notes to Consolidated Financial Statements

89


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)Six months ended June 30
(dollars in thousands)(dollars in thousands)Six months ended June 30
20222021 20232022
CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income$134,277 $138,027 
Adjustments to reconcile net income to net cash provided by operating activities:
Net incomeNet income$147,920 $134,277 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit lossesProvision for credit losses(5,450)(9,000)Provision for credit losses34,291 (5,450)
Depreciation and amortization of premises and equipmentDepreciation and amortization of premises and equipment14,963 13,775 Depreciation and amortization of premises and equipment14,675 14,963 
Net amortization of investment securities premiumsNet amortization of investment securities premiums7,027 7,546 Net amortization of investment securities premiums5,829 7,027 
Investment securities gains, netInvestment securities gains, net(27)(33,511)Investment securities gains, net(19)(27)
Gain on sales of mortgage loans held for saleGain on sales of mortgage loans held for sale(5,568)(14,094)Gain on sales of mortgage loans held for sale(2,277)(5,568)
Proceeds from sales of mortgage loans held for saleProceeds from sales of mortgage loans held for sale297,511 554,406 Proceeds from sales of mortgage loans held for sale132,609 297,511 
Originations of mortgage loans held for saleOriginations of mortgage loans held for sale(273,704)(498,350)Originations of mortgage loans held for sale(137,741)(273,704)
Intangible amortizationIntangible amortization353 293 Intangible amortization1,746 353 
Amortization of issuance costs and discounts on long-term borrowingsAmortization of issuance costs and discounts on long-term borrowings379 1,378 Amortization of issuance costs and discounts on long-term borrowings360 379 
Debt extinguishment costs— 32,575 
Stock-based compensationStock-based compensation6,375 4,000 Stock-based compensation4,240 6,375 
Change in deferred federal income tax(96,703)(4,503)
Change in accrued salaries and benefits1,274 4,746 
Change in life insurance cash surrender value(28,742)(13,736)
Net change in deferred federal income taxNet change in deferred federal income tax19,232 (96,703)
Net change in accrued salaries and benefitsNet change in accrued salaries and benefits(12,163)1,274 
Net change in life insurance cash surrender valueNet change in life insurance cash surrender value(20,433)(28,742)
Other changes, netOther changes, net(67,652)50,032 Other changes, net28,641 (67,652)
Total adjustmentsTotal adjustments(149,964)95,557 Total adjustments68,990 (149,964)
Net cash (used in) provided by operating activities(15,687)233,584 
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities216,910 (15,687)
CASH FLOWS FROM INVESTING ACTIVITIES:CASH FLOWS FROM INVESTING ACTIVITIES:CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of AFS securitiesProceeds from sales of AFS securities109,252 125,811 Proceeds from sales of AFS securities80,666 109,252 
Proceeds from principal repayments and maturities of AFS securitiesProceeds from principal repayments and maturities of AFS securities316,037 246,740 Proceeds from principal repayments and maturities of AFS securities55,102 316,037 
Proceeds from principal repayments and maturities of HTM securitiesProceeds from principal repayments and maturities of HTM securities67,230 58,470 Proceeds from principal repayments and maturities of HTM securities29,815 67,230 
Purchase of AFS securitiesPurchase of AFS securities(501,642)(766,574)Purchase of AFS securities(64,996)(501,642)
Purchase of HTM securitiesPurchase of HTM securities(9,541)(227,687)Purchase of HTM securities— (9,541)
Sale of Visa Shares— 33,962 
(Increase) decrease of FRB and FHLB stock(4,511)29,498 
(Increase) decrease of federal funds sold(30,500)— 
Net increase in loans(590,797)300,929 
Net change in FRB and FHLB stockNet change in FRB and FHLB stock5,968 (4,511)
Net change of federal funds soldNet change of federal funds sold— (30,500)
Net change in loansNet change in loans(781,310)(590,797)
Net purchases of premises and equipmentNet purchases of premises and equipment(6,245)(10,648)Net purchases of premises and equipment(11,019)(6,245)
Net cash paid for acquisition— 292 
Settlement of Bank Owned Life InsuranceSettlement of Bank Owned Life Insurance45 — 
Net change in tax credit investmentsNet change in tax credit investments(18,735)(8,065)Net change in tax credit investments(18,436)(18,735)
Net cash (used in) provided by investing activities(669,452)(217,272)
Net cash used in investing activitiesNet cash used in investing activities(704,165)(669,452)
CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand and savings deposits(253,864)1,234,732 
Net (decrease) increase in time deposits(175,769)(349,627)
Net (decrease) increase in short-term borrowings39,421 (96,317)
Proceeds from long-term borrowings546 620 
Repayments of long-term borrowings(65,140)(703,624)
Net change in demand and savings depositsNet change in demand and savings deposits(796,291)(253,864)
Net change in time deposits and broker depositsNet change in time deposits and broker deposits1,353,293 (175,769)
Net change in other borrowingsNet change in other borrowings(152,453)39,967 
Repayments of senior debt and subordinated debtRepayments of senior debt and subordinated debt— (65,140)
Net proceeds from issuance of common stockNet proceeds from issuance of common stock2,698 2,715 Net proceeds from issuance of common stock1,009 2,698 
Dividends paidDividends paid(51,693)(48,584)Dividends paid(55,073)(51,693)
Net cash (used in) provided by financing activities(503,801)39,915 
Net (decrease) increase in Cash and Cash Equivalents(1,188,940)56,227 
Acquisition of treasury stockAcquisition of treasury stock(40,449)— 
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities310,036 (503,801)
Net decrease in Cash and Cash EquivalentsNet decrease in Cash and Cash Equivalents(177,219)(1,188,940)
Cash and Cash Equivalents at Beginning of PeriodCash and Cash Equivalents at Beginning of Period1,638,614 1,847,832 Cash and Cash Equivalents at Beginning of Period681,921 1,638,614 
Cash and Cash Equivalents at End of PeriodCash and Cash Equivalents at End of Period$449,674 $1,904,059 Cash and Cash Equivalents at End of Period$504,702 $449,674 
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:
InterestInterest$24,149 $37,805 Interest$162,377 $24,149 
Income taxesIncome taxes15,692 8,127 Income taxes15,183 15,692 
Supplemental Schedule of Certain Noncash Activities:Supplemental Schedule of Certain Noncash Activities:Supplemental Schedule of Certain Noncash Activities:
Transfer of AFS securities to HTM securitiesTransfer of AFS securities to HTM securities$479,008 $376,165 Transfer of AFS securities to HTM securities$— $479,008 
See Notes to Consolidated Financial StatementsSee Notes to Consolidated Financial StatementsSee Notes to Consolidated Financial Statements
910


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 six months ended June 30, 20222023 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 20212022 Annual Report on Form 10-K. Those significant accounting policies are unchanged at June 30, 2022.2023 except for the following:

CARES ActEffective January 1, 2023, the Corporation adopted ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Consolidated Appropriations Act - 2021Vintage Disclosures ("ASU 2022-02"), which updated the guidance on modifications to financing receivables by effectively replacing the concept of troubled debt restructurings with a new concept, loan modifications to borrowers experiencing financial difficulty. See Note 5 for further detail. Below is a summary of the policy surrounding loan modifications to borrowers experiencing financial difficulty.

On March 27, 2020A loan modified for a borrower experiencing financial difficulty includes one or more of the CARES Act was signed into law. The CARES Act includesfollowing concessions: a reduction of the stated interest rate of the loan, an option forextension of the term or amortization period of the loan, a more than insignificant payment delay or principal forgiveness of the loan.

Because the effect of most modifications made to borrowers experiencing financial institutions to suspenddifficulty is already included in the requirements of GAAP for certain loan modifications that would otherwise be categorized asACL, a TDR. Certain conditions must be met with respectchange to the ACL is generally not recorded upon modification. When principal forgiveness is provided, the amortized cost basis of the forgiven portion of the loan modification includingis written off against the ACL. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the modificationloan is related to COVID-19written off, resulting in a reduction of the amortized cost basis of the loan 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, 2020a corresponding adjustment 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.ACL.

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 adoptadopted ASU 2022-01 on January 1, 2023. The Corporation does2023 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. 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 adoptadopted ASU 2022-02 on January 1, 2023.2023 and it did not have a material impact on its consolidated financial statements.

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

In December 2022, FASB issued ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. This update extends the sunset provision date of ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of
11


Reference Rate Reform on Financial Reporting ("ASU 2020-04") to December 31, 2024. The Corporation will adopt ASU 2020-04 on January 1, 2025. The Corporation does not expect the adoption of ASU 2022-022020-04 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.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
10


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 20212022 consolidated financial statements and notes have been reclassified to conform to the 20222023 presentation.
NOTE 2 – Business Combinations

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

In accordance with the terms of the definitive merger agreement, each share of Prudential Bancorp's common stock issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive the Merger Consideration. In the aggregate, approximately eighty percent (80%) of the Merger Consideration consisted of the Corporation's common stock with the remaining approximately twenty percent (20%) paid in cash. The receipt of the Corporation’s common stock in the Merger qualified as a tax-free exchange for Prudential Bancorp shareholders.

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











12


The following table summarizes the consideration transferred and the fair values of identifiable assets acquired and liabilities assumed on July 1, 2022:
Fair Value
(dollars in thousands, except share data)
Consideration transferred:
 Common stock shares issued (6,208,516)$89,713 
Cash paid to Prudential Bancorp shareholders29,343 
     Value of consideration119,056 
Assets acquired:
     Cash and due from banks7,533 
     Investment securities287,126 
     Loans554,091 
     Premises and equipment8,574 
     Other assets73,303 
          Total assets930,627 
Liabilities assumed:
     Deposits532,170 
Borrowings(1)
284,000 
     Other liabilities14,482 
          Total liabilities830,652 
Net assets acquired:99,975 
Goodwill resulting from the Merger$19,081 
(1) Included a $30.5 million intercompany borrowing between Prudential Bank and Fulton Bank.
While the valuation of the acquired assets and liabilities is 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. Included in the above table are adjustments of $(0.5) million and $2.8 million that occurred during the three months and six months ended June 30, 2023, respectively, resulting in a change to goodwill resulting from the Merger.

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

The following table presents information with respect to the fair value and unpaid principal balance of acquired loans and leases at the date of the Merger:
July 1, 2022
Unpaid Principal BalanceFair Value
(dollars in thousands)
Real estate - commercial mortgage$224,904 $216,593 
Commercial and industrial63,560 61,873 
Real-estate - residential mortgage177,327 169,098 
Real-estate - home equity6,034 5,812 
Real-estate - construction98,963 98,546 
Consumer2,306 2,286 
     Total acquired loans$573,094 $554,208 

13


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 following table presents the change in goodwill during the six months ended June 30, 2023:
June 30
2023
(dollars in thousands)
Goodwill at December 31, 2022$550,539
Adjustments to goodwill from the Merger2,807
Goodwill at June 30, 2023$553,346
Pro Forma Income Statement (unaudited)

The table below presents the pro forma results of the operations of the combined institutions as if the Merger occurred on January 1, 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 subsequent to the merger of Prudential Bank with and into the Bank.
Six months ended June 30
20232022
(dollars in thousands)
Net interest income$428,439 $357,410 
Provision for credit losses34,291 (225)
     Net Interest Income After Provision for Credit Losses394,148 357,635 
Total noninterest income112,339 118,571 
Total noninterest expenses327,636 324,182 
     Income Before Income Taxes178,851 152,024 
Income tax expense30,931 26,468 
     Net Income$147,920 $125,556 
NOTE 23 – 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 June 30, 20222023 and December 31, 20212022 were $83.8$11.5 million and $202.8$13.9 million, respectively.













































1114


NOTE 34 – Investment Securities

The following table presents the amortized cost and estimated fair values of investment securities for the periods presented:
June 30, 2022June 30, 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 SaleAvailable for Sale(in thousands)Available for Sale(dollars in thousands)
U.S. Government securitiesU.S. Government securities$376,505 $— $(5,239)$371,266 U.S. Government securities$225,542 $— $(4,904)$220,638 
U.S. Government-sponsored agency securitiesU.S. Government-sponsored agency securities1,044 — (45)999 
State and municipal securitiesState and municipal securities1,239,591 501 (156,615)1,083,477 State and municipal securities1,206,102 252 (152,446)1,053,908 
Corporate debt securitiesCorporate debt securities413,487 186 (20,112)393,561 Corporate debt securities474,953 — (50,574)424,379 
Collateralized mortgage obligationsCollateralized mortgage obligations154,558 10 (6,465)148,103 Collateralized mortgage obligations134,234 — (13,776)120,458 
Residential mortgage-backed securitiesResidential mortgage-backed securities213,567 167 (18,375)195,359 Residential mortgage-backed securities233,807 4 (28,923)204,888 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities636,380 28 (49,336)587,072 Commercial mortgage-backed securities640,928 — (93,477)547,451 
Total Total$3,034,088 $892 $(256,142)$2,778,838  Total$2,916,610 $256 $(344,145)$2,572,721 
Held to MaturityHeld to MaturityHeld to Maturity
Residential mortgage-backed securitiesResidential mortgage-backed securities$466,076 $297 $(35,444)$430,929 Residential mortgage-backed securities$431,704 $— $(56,114)$375,590 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities872,887 12 (88,503)784,396 Commercial mortgage-backed securities862,909 — (151,807)711,102 
TotalTotal$1,338,963 $309 $(123,947)$1,215,325 Total$1,294,613 $— $(207,921)$1,086,692 

December 31, 2021December 31, 2022
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value		Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair
Value
Available for SaleAvailable for Sale(in thousands)Available for Sale(dollars in thousands)
U.S. Government securitiesU.S. Government securities$127,831 $— $(213)$127,618 U.S. Government securities$226,140 $— $(7,655)$218,485 
U.S. Government sponsored agency securitiesU.S. Government sponsored agency securities1,050 — (42)1,008 
State and municipal securitiesState and municipal securities1,139,187 50,161 (678)1,188,670 State and municipal securities1,284,245 283 (178,816)1,105,712 
Corporate debt securitiesCorporate debt securities373,482 13,009 (358)386,133 Corporate debt securities459,792 — (37,483)422,309 
Collateralized mortgage obligationsCollateralized mortgage obligations206,532 3,581 (754)209,359 Collateralized mortgage obligations147,155 — (13,122)134,033 
Residential mortgage-backed securitiesResidential mortgage-backed securities231,607 1,224 (3,036)229,795 Residential mortgage-backed securities242,527 18 (29,847)212,698 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities974,541 6,141 (9,534)971,148 Commercial mortgage-backed securities631,604 — (79,082)552,522 
Auction rate securities76,350 — (1,683)74,667 
Total Total$3,129,530 $74,116 $(16,256)$3,187,390  Total$2,992,513 $301 $(346,047)$2,646,767 
Held to MaturityHeld to MaturityHeld to Maturity
Residential mortgage-backed securitiesResidential mortgage-backed securities$404,958 $11,022 $(7,067)$408,913 Residential mortgage-backed securities$457,325 $— $(57,480)$399,845 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities575,426 — (18,472)556,954 Commercial mortgage-backed securities863,931 — (138,727)725,204 
TotalTotal$980,384 $11,022 $(25,539)$965,867 Total$1,321,256 $— $(196,207)$1,125,049 

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

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$1.8 $1.1 billion at June 30, 20222023 and $2.5 billion at December 31, 20212022 were pledged as collateral to secure public and trust deposits.

1215


The amortized cost and estimated fair values of debt securities as of June 30, 2022,2023, 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.
June 30, 2022June 30, 2023
Available for SaleHeld to MaturityAvailable for SaleHeld 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 lessDue in one year or less$160,087 $160,007 $— $— Due in one year or less$234,224 $229,237 $— $— 
Due from one year to five yearsDue from one year to five years280,399 274,819 — — Due from one year to five years90,789 87,328 — — 
Due from five years to ten yearsDue from five years to ten years447,924 427,025 — — Due from five years to ten years545,358 494,049 — — 
Due after ten yearsDue after ten years1,141,173 986,453 — — Due after ten years1,037,270 889,310 — — 
2,029,583 1,848,304 — — 1,907,641 1,699,924 — — 
Residential mortgage-backed securities(1)
Residential mortgage-backed securities(1)
213,567 195,359 466,076 430,929 
Residential mortgage-backed securities(1)
233,807 204,888 431,704 375,590 
Commercial mortgage-backed securities(1)
Commercial mortgage-backed securities(1)
636,380 587,072 872,887 784,396 
Commercial mortgage-backed securities(1)
640,928 547,451 862,909 711,102 
Collateralized mortgage obligations(1)
Collateralized mortgage obligations(1)
154,558 148,103 — — 
Collateralized mortgage obligations(1)
134,234 120,458 — — 
Total Total$3,034,088 $2,778,838 $1,338,963 $1,215,325  Total$2,916,610 $2,572,721 $1,294,613 $1,086,692 
(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 GainsGross Realized LossesNet GainsGross Realized GainsGross Realized LossesNet  Gains (Losses)
Three months endedThree months ended(in thousands)Three months ended(dollars in thousands)
June 30, 2023June 30, 2023$— $(4)$(4)
June 30, 2022June 30, 2022$8 $— $8 June 30, 20228 — 8 
June 30, 2021465 (429)36 
Six months endedSix months endedSix months ended
June 30, 2023June 30, 2023$283 $(264)$19 
June 30, 2022June 30, 2022$1,554 $(1,527)$27 June 30, 20221,554 (1,527)27 
June 30, 202134,481 (970)33,511 

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.

















1316


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:
June 30, 2022June 30, 2023
Less than 12 months12 months or longerTotalLess than 12 months12 months or longerTotal
Number of SecuritiesEstimated
Fair Value		Unrealized
Losses		Number of SecuritiesEstimated
Fair Value		Unrealized
Losses		Estimated
Fair Value		Unrealized
Losses		Number of SecuritiesEstimated
Fair Value		Unrealized
Losses		Number of SecuritiesEstimated
Fair Value		Unrealized
Losses		Estimated
Fair Value		Unrealized
Losses
Available for SaleAvailable for Sale($ in thousands)Available for Sale(dollars in thousands)
U.S. Government securitiesU.S. Government securities4$371,266 $(5,239)— $— $— $371,266 $(5,239)U.S. Government securities— $— $— 3 $220,638 $(4,904)$220,638 $(4,904)
U.S. Government-sponsored agency securitiesU.S. Government-sponsored agency securities1999 (45)— — — 999 (45)
State and municipal securitiesState and municipal securities355 989,029 (149,910)6 24,248 (6,705)1,013,277 (156,615)State and municipal securities72 156,269 (3,092)302 869,492 (149,354)1,025,761 (152,446)
Corporate debt securitiesCorporate debt securities55 363,657 (20,112)— — — 363,657 (20,112)Corporate debt securities29 132,631 (11,734)42 288,993 (38,840)421,624 (50,574)
Collateralized mortgage obligationsCollateralized mortgage obligations72 140,957 (6,465)— — — 140,957 (6,465)Collateralized mortgage obligations27 19,500 (1,543)67 100,958 (12,233)120,458 (13,776)
Residential mortgage-backed securitiesResidential mortgage-backed securities28 130,063 (9,194)4 60,469 (9,181)190,532 (18,375)Residential mortgage-backed securities66 57,495 (3,864)29 146,358 (25,059)203,853 (28,923)
Commercial mortgage-backed securitiesCommercial mortgage-backed securities75 539,431 (45,245)1 24,134 (4,091)563,565 (49,336)Commercial mortgage-backed securities61 86,631 (4,343)75 460,820 (89,134)547,451 (93,477)
Total available for saleTotal available for sale589 $2,534,403 $(236,165)11 $108,851 $(19,977)$2,643,254 $(256,142)Total available for sale256 $453,525 $(24,621)518 $2,087,259 $(319,524)$2,540,784 $(344,145)
Held to MaturityHeld to MaturityHeld to Maturity
Residential mortgage-backed securitiesResidential mortgage-backed securities58 $181,966 $(4,790)12 $152,702 $(30,654)$334,668 $(35,444)Residential mortgage-backed securities99 $221,910 $(14,592)21 $153,680 $(41,522)$375,590 $(56,114)
Commercial mortgage-backed securitiesCommercial mortgage-backed securities39 454,603 (32,031)20 301,951 (56,472)756,554 (88,503)Commercial mortgage-backed securities18 237,317 (22,707)42 473,785 (129,100)711,102 (151,807)
Total97 $636,569 $(36,821)32 $454,653 $(87,126)$1,091,222 $(123,947)
Total held to maturityTotal held to maturity117 $459,227 $(37,299)63 $627,465 $(170,622)$1,086,692 $(207,921)

December 31, 2021December 31, 2022
Less than 12 months12 months or longerTotalLess than 12 months12 months or longerTotal
Number of SecuritiesEstimated
Fair Value		Unrealized
Losses		Number of SecuritiesEstimated
Fair Value		Unrealized
Losses		Estimated
Fair Value		Unrealized
Losses		Number of SecuritiesEstimated
Fair Value		Unrealized
Losses		Number of SecuritiesEstimated
Fair Value		Unrealized
Losses		Estimated
Fair Value		Unrealized
Losses
Available for SaleAvailable for Sale($ in thousands)Available for Sale(dollars in thousands)
U.S Government Securities2 $127,618 $(213)— $— $— $127,618 $(213)
U.S. Government SecuritiesU.S. Government Securities1 $96,906 $(2,814)2 $121,579 $(4,841)$218,485 $(7,655)
U.S. Government sponsored agency securitiesU.S. Government sponsored agency securities1 1,008 (42)— — — 1,008 (42)
State and municipal securitiesState and municipal securities29 82,731 (678)— — — 82,731 (678)State and municipal securities360 995,122 (157,397)29 61,089 (21,419)1,056,211 (178,816)
Corporate debt securitiesCorporate debt securities6 43,068 (358)— — — 43,068 (358)Corporate debt securities66 376,398 (31,333)6 37,157 (6,150)413,555 (37,483)
Collateralized mortgage obligationsCollateralized mortgage obligations4 28,517 (754)— — — 28,517 (754)Collateralized mortgage obligations96 113,191 (7,650)1 20,842 (5,472)134,033 (13,122)
Residential mortgage-backed securitiesResidential mortgage-backed securities7 123,687 (2,388)1 16,669 (648)140,356 (3,036)Residential mortgage-backed securities81 154,861 (18,301)5 55,293 (11,546)210,154 (29,847)
Commercial mortgage-backed securitiesCommercial mortgage-backed securities41 512,312 (9,534)— — — 512,312 (9,534)Commercial mortgage-backed securities114 371,109 (38,845)20 181,413 (40,237)552,522 (79,082)
Auction rate securities— — — 118 74,667 (1,683)74,667 (1,683)
Total available for saleTotal available for sale89 $917,933 $(13,925)119 $91,336 $(2,331)$1,009,269 $(16,256)Total available for sale719 $2,108,595 $(256,382)63 $477,373 $(89,665)$2,585,968 $(346,047)
Held to MaturityHeld to MaturityHeld to Maturity
Residential mortgage-backed securitiesResidential mortgage-backed securities14 $205,969 $(7,067)— $— $— $205,969 $(7,067)Residential mortgage-backed securities106 $246,667 $(14,275)14 $153,178 $(43,205)$399,845 $(57,480)
Commercial mortgage-backed securitiesCommercial mortgage-backed securities36 556,954 (18,472)— — — 556,954 (18,472)Commercial mortgage-backed securities21 258,255 (24,029)39 466,949 (114,698)725,204 (138,727)
Total50 $762,923 $(25,539)— $— $— $762,923 $(25,539)
Total held to maturity Total held to maturity127 $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 Corporationdoes not have an ACL for these investments as of June 30, 20222023 and December 31, 2021.2022.

Based on management’s evaluations,
17


As of June 30, 2023 and December 31, 2022, no ACL was required for the Corporation's state and municipal securities as of June 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 thesethese securities prior to a recovery of their fair value to amortized cost, which may be at maturity.
14


As of June 30, 20222023 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 June 30, 20222023 or December 31, 2021.

2022.
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.


NOTE 45 - Loans and Allowance for Credit Losses
Loans and leases, net of unearned income

Loans and leases, net of unearned income, are summarized as follows:
June 30,
2022		December 31, 2021
 (in thousands)
Real estate - commercial mortgage$7,417,036 $7,279,080 
Commercial and industrial (1)
4,173,114 4,208,327 
Real-estate - residential mortgage4,203,827 3,846,750 
Real-estate - home equity1,108,808 1,118,248 
Real-estate - construction1,177,446 1,139,779 
Consumer538,747 464,657 
Equipment lease financing and other321,855 283,557 
Overdrafts2,346 1,988 
Gross loans18,943,179 18,342,386 
Unearned income(22,229)(17,036)
Net loans$18,920,950 $18,325,350 
(1) Includes PPP loans totaling $0.1 billion and $0.3 billion as of June 30, 2022 and December 31, 2021, respectively.
June 30,
2023		December 31, 2022
 (dollars in thousands)
Real estate - commercial mortgage$7,846,861 $7,693,835 
Commercial and industrial4,602,446 4,477,537 
Real-estate - residential mortgage5,147,262 4,737,279 
Real-estate - home equity1,061,891 1,102,838 
Real-estate - construction1,308,564 1,269,925 
Consumer763,530 699,179 
Leases and other loans346,015 328,331 
Gross loans21,076,569 20,308,924 
Unearned income(31,884)(29,377)
Net loans$21,044,685 $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 presentssummarizes the componentsACL - loans balance and the reserve for OBS credit exposures balance as of June 30, 2023 and December 31, 2022:
June 30,
2023		December 31,
2022
(dollars in thousands)
ACL - loans$287,442 $269,366 
Reserve for OBS credit exposures(1)
$16,568 $16,328 
(1) Included in other liabilities on the ACL:consolidated balance sheets.
June 30, 2022December 31, 2021
(in thousands)
ACL - loans$248,564 $249,001 
ACL - OBS credit exposure14,323 14,533 
        Total ACL$262,887 $263,534 









1518


The following table presents the activity in the ACL:ACL - loans balances:
Three months ended June 30Six months ended June 30
 2022202120222021
(in thousands)
Balance at beginning of period$257,638 $280,259 $263,534 $291,940 
Loans charged off(1,618)(9,522)(3,518)(17,724)
Recoveries of loans previously charged off5,367 2,568 8,321 4,589 
Net loans (charged-off) recovered3,749 (6,954)4,803 (13,135)
Provision for credit losses (1)
1,500 (3,500)(5,450)(9,000)
Balance at end of period$262,887 $269,805 $262,887 $269,805 
(1) Includes $0.4 million and$0.5 million related to OBS credit exposures for the three months ended June 30, 2022 and 2021, respectively, and includes
$(0.2) million and $0.4 million related to OBS credit exposure for the six months ended June 30, 2022 and 2021, respectively.

The following table presents the activity in the ACL by portfolio segment:
Real Estate 
Commercial
Mortgage		Commercial and
Industrial		Consumer and Real Estate Home
Equity		Real Estate Residential
Mortgage		Real Estate
Construction		Equipment lease financing, other
and overdrafts		Total
 (in thousands)
Three months ended June 30, 2022
Balance at March 31, 2022$79,853 $66,511 $20,213 $55,892 $13,303 $7,933 $243,705 
Loans charged off— (201)(877)(66)— (474)(1,618)
Recoveries of loans previously charged off3,536 739 762 92 12 226 5,367 
Net loans recovered (charged off)3,536 538 (115)26 12 (248)3,749 
Provision for loan losses (1)
(10,784)5,070 2,982 5,717 (2,687)812 1,110 
Balance at June 30, 2022$72,605 $72,119 $23,080 $61,635 $10,628 $8,497 $248,564 
Three months ended June 30, 2021
Balance at March 31, 2021$100,976 $71,194 $23,142 $49,995 $15,079 $5,600 $265,986 
Loans charged off(6,506)(954)(1,130)(496)— (436)(9,522)
Recoveries of loans previously charged off729 693 634 105 254 153 2,568 
Net loans recovered (charged off)(5,777)(261)(496)(391)254 (283)(6,954)
Provision for loan and lease losses (1)
182 (5,529)(652)4,584 (2,679)94 (4,000)
Balance at June 30, 2021$95,381 $65,404 $21,994 $54,188 $12,654 $5,411 $255,032 
Six months ended June 30, 2022
Balance at December 31, 2021$87,970 $67,056 $19,749 $54,236 $12,941 $7,049 $249,001 
Loans charged off(152)(428)(1,929)(66)— (943)(3,518)
Recoveries of loans previously charged off3,648 2,719 1,216 314 44 380 8,321 
Net loans recovered (charged off)3,496 2,291 (713)248 44 (563)4,803 
Provision for loan losses (1)
(18,861)2,772 4,044 7,151 (2,357)2,011 (5,240)
Balance at June 30, 2022$72,605 $72,119 $23,080 $61,635 $10,628 $8,497 $248,564 
Six months ended June 30, 2021
Balance at December 31, 2020$103,425 $74,771 $25,137 $51,995 $15,608 $6,631 $277,567 
Loans charged off(8,343)(5,273)(1,977)(688)(39)(1,404)(17,724)
Recoveries of loans previously charged off903 1,462 1,074 200 638 312 4,589 
Net loans recovered (charged off)(7,440)(3,811)(903)(488)599 (1,092)(13,135)
Provision for loan losses (1)
(604)(5,556)(2,240)2,681 (3,553)(128)(9,400)
Balance at June 30, 2021$95,381 $65,404 $21,994 $54,188 $12,654 $5,411 $255,032 
Three months ended June 30Six months ended June 30
 2023202220232022
(dollars in thousands)
Balance at beginning of period$278,695 $243,705 $269,366 $249,001 
Loans charged off(4,787)(1,618)(21,690)(3,518)
Recoveries of loans previously charged off2,816 5,367 5,715 8,321 
Net loans (charged off) recovered(1,971)3,749 (15,975)4,803 
Provision for credit losses(1)
10,718 1,110 34,051 (5,240)
Balance at end of period$287,442 $248,564 $287,442 $248,564 
Provision for OBS credit exposures$(971)$390 $240 $(210)
Reserve for OBS credit exposures$16,568 $14,323 $16,568 $14,323 
(1) Provision included in the table only includes the portion related to net loans.

The following table presents the activity in the ACL by portfolio segment:
Real Estate 
Commercial
Mortgage		Commercial and
Industrial		Real Estate Residential
Mortgage		Consumer and Home
Equity		Real Estate
Construction		Leases and other loansTotal
 (dollars in thousands)
Three months ended June 30, 2023
Balance at March 31, 2023$66,256 $77,126 $86,209 $27,303 $11,646 $10,155 $278,695 
Loans charged off(230)(2,017)(62)(1,313)— (1,165)(4,787)
Recoveries of loans previously charged off29 988 58 959 569 213 2,816 
Net loans (charged off) recovered(201)(1,029)(4)(354)569 (952)(1,971)
Provision for loan losses(1)
6,247 (908)2,644 2,033 (1,071)1,773 10,718 
Balance at June 30, 2023$72,302 $75,189 $88,849 $28,982 $11,144 $10,976 $287,442 
Three months ended June 30, 2022
Balance at March 31, 2022$79,853 $66,511 $55,892 $20,213 $13,303 $7,933 $243,705 
Loans charged off— (201)(66)(877)— (474)(1,618)
Recoveries of loans previously charged off3,536 739 92 762 12 226 5,367 
Net loans (charged off) recovered3,536 538 26 (115)12 (248)3,749 
Provision for loan and lease losses(1)
(10,784)5,070 5,717 2,982 (2,687)812 1,110 
Balance at June 30, 2022$72,605 $72,119 $61,635 $23,080 $10,628 $8,497 $248,564 
Six months ended June 30, 2023
Balance at December 31, 2022$69,456 $70,116 $83,250 $26,429 $10,743 $9,372 $269,366 
Loans charged off(13,592)(2,629)(62)(3,519)— (1,888)(21,690)
Recoveries of loans previously charged off815 2,074 106 1,620 771 329 5,715 
Net loans (charged off) recovered(12,777)(555)44 (1,899)771 (1,559)(15,975)
Provision for loan losses(1)
15,623 5,628 5,555 4,452 (370)3,163 34,051 
Balance at June 30, 2023$72,302 $75,189 $88,849 $28,982 $11,144 $10,976 $287,442 
Six months ended June 30, 2022
Balance at December 31, 2021$87,970 $67,056 $54,236 $19,749 $12,941 $7,049 $249,001 
Loans charged off(152)(428)(66)(1,929)— (943)(3,518)
Recoveries of loans previously charged off3,648 2,719 314 1,216 44 380 8,321 
Net loans (charged off) recovered3,496 2,291 248 (713)44 (563)4,803 
Provision for loan losses(1)
(18,861)2,772 7,151 4,044 (2,357)2,011 (5,240)
Balance at June 30, 2022$72,605 $72,119 $61,635 $23,080 $10,628 $8,497 $248,564 
(1)Provision included in the table only includes the portion related to net loans.

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
1619


business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting credit quality.

The provision for credit losses for the second quarter of 20222023 was recorded to increase the allowance for credit lossesACL as a result of loan growth during the quarter as well as the economic outlook.

Several factors as of the end of the second quarter of 2022 in comparisonand changes to the end of the second quarter of 2021, including a reduction in qualitative adjustments due to COVID-19-related uncertainties, reduced the level of the ACL determined to be necessary as of June 30, 2022.macroeconomic outlook.

Non-accrual Loans

All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of June 30, 20222023 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 receivablereceivables or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate.

As of June 30, 20222023 and December 31, 2021,2022, approximately 68% and 98%, respectively,91% 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:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
With a Related AllowanceWithout a Related AllowanceTotalWith a Related AllowanceWithout a Related AllowanceTotalWith a Related AllowanceWithout a Related AllowanceTotalWith a Related AllowanceWithout a Related AllowanceTotal
(in thousands)(dollars in thousands)
Real estate - commercial mortgageReal estate - commercial mortgage$18,035 $41,530 $59,565 $20,564 $32,251 $52,815 Real estate - commercial mortgage$19,727 $34,088 $53,815 $39,722 $30,439 $70,161 
Commercial and industrialCommercial and industrial13,593 30,098 43,691 12,571 17,570 30,141 Commercial and industrial17,420 12,068 29,488 14,804 12,312 27,116 
Real estate - residential mortgageReal estate - residential mortgage34,390 1,195 35,585 35,269 — 35,269 Real estate - residential mortgage19,675 2,025 21,700 25,315 979 26,294 
Real estate - home equityReal estate - home equity7,974 136 8,110 8,671 — 8,671 Real estate - home equity5,711 116 5,827 5,975 130 6,105 
Real estate - constructionReal estate - construction— 1,357 1,357 173 728 901 Real estate - construction707 392 1,099 866 502 1,368 
ConsumerConsumer160 — 160 229 — 229 Consumer17 — 17 92 — 92 
Equipment lease financing and other4,807 9,255 14,062 6,247 9,393 15,640 
Leases and other loansLeases and other loans9,264 2,070 11,334 4,052 9,255 13,307 
$78,959 $83,571 $162,530 $83,724 $59,942 $143,666 $72,521 $50,759 $123,280 $90,826 $53,617 $144,443 

As of June 30, 20222023 and December 31, 2021,2022, there were $83.6$50.8 million and $59.9$53.6 million, respectively,of non-accrual loans that did not have a relatedspecific valuation 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, 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 the loans.a loan.







20


The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the current period:
17

June 30, 2023
Term Loans Amortized Cost Basis by Origination YearRevolving LoansRevolving Loans converted to Term Loans
(in thousands)AmortizedAmortized
20232022202120202019PriorCost BasisCost BasisTotal
Real estate - commercial mortgage
Pass$436,213 $1,014,277 $1,079,313 $931,445 $761,840 $3,044,060 $98,737 $3,912 $7,369,797 
Special Mention— 17,541 70,283 17,725 38,372 149,434 1,012 — 294,367 
Substandard or Lower202 4,889 25,184 45,196 25,257 81,489 480 — 182,697 
Total real estate - commercial mortgage436,415 1,036,707 1,174,780 994,366 825,469 3,274,983 100,229 3,912 7,846,861 
Real estate - commercial mortgage
Current period gross charge-offs— — — — — (30)— (13,562)(13,592)
Commercial and industrial(1)
Pass461,413 652,086 425,486 365,676 292,754 706,510 1,432,210 9,051 4,345,186 
Special Mention392 16,804 11,786 5,392 3,522 16,458 60,230 748 115,332 
Substandard or Lower205 3,221 1,780 3,063 19,248 29,342 84,059 1,010 141,928 
Total commercial and industrial462,010 672,111 439,052 374,131 315,524 752,310 1,576,499 10,809 4,602,446 
Commercial and industrial(1)
Current period gross charge-offs— — — — — — (502)(2,127)(2,629)
 Real estate - construction(2)
Pass103,193 218,294 432,924 127,131 18,815 88,431 17,480 — 1,006,268 
Special Mention— 26 262 28,037 — 11,263 — — 39,588 
Substandard or Lower— 473 — — 2,202 23,259 2,408 — 28,342 
Total real estate - construction103,193 218,793 433,186 155,168 21,017 122,953 19,888 — 1,074,198 
Real estate - construction(2)
Current period gross charge-offs— — — — — — — — — 
Total
Pass$1,000,819 $1,884,657 $1,937,723 $1,424,252 $1,073,409 $3,839,001 $1,548,427 $12,963 $12,721,251 
Special Mention392 34,371 82,331 51,154 41,894 177,155 61,242 748 449,287 
Substandard or Lower407 8,583 26,964 48,259 46,707 134,090 86,947 1,010 352,967 
Total$1,001,618 $1,927,611 $2,047,018 $1,523,665 $1,162,010 $4,150,246 $1,696,616 $14,721 $13,523,505 

June 30, 2022
Term Loans Amortized Cost Basis by Origination YearRevolving LoansRevolving Loans converted to Term Loans
(dollars in thousands)AmortizedAmortized
20222021202020192018PriorCost BasisCost BasisTotal
 Real estate - construction(1)
Pass$42,940 $292,317 $287,166 $66,620 $49,664 $120,391 $29,138 $1,054 $889,290 
Special Mention— — 2,012 9,984 — 20,678 — — 32,674 
Substandard or Lower— — — — — 4,451 214 — 4,665 
Total real estate - construction42,940 292,317 289,178 76,604 49,664 145,520 29,352 1,054 926,629 
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)
Pass462,732 533,826 436,620 346,343 203,490 665,347 1,232,430 724 3,881,512 
Special Mention6,815 13,149 10,076 9,843 5,927 21,322 65,728 — 132,860 
Substandard or Lower— 5,621 9,284 28,390 14,915 33,448 67,011 73 158,742 
Total commercial and industrial469,547 552,596 455,980 384,576 224,332 720,117 1,365,169 797 4,173,114 
Commercial and industrial
Current period gross charge-offs— — (36)— (21)— (174)(197)(428)
Current period recoveries— — 30 95 379 569 545 1,101 2,719 
Total net (charge-offs) recoveries— — (6)95 358 569 371 904 2,291 
Real estate - commercial mortgage
Pass477,751 1,014,857 978,961 799,726 601,768 2,775,873 65,309 — 6,714,245 
Special Mention336 32,783 43,579 97,163 45,601 153,027 1,994 — 374,483 
Substandard or Lower— 1,510 8,335 37,106 75,075 205,826 456 — 328,308 
Total real estate - commercial mortgage478,087 1,049,150 1,030,875 933,995 722,444 3,134,726 67,759 — 7,417,036 
Real estate - commercial mortgage
Current period gross charge-offs— — — — — — — (152)(152)
Current period recoveries— — — — — 4 — 3,644 3,648 
Total net (charge-offs) recoveries— — — — — 4 — 3,492 3,496 
Total
Pass$983,423 $1,841,000 $1,702,747 $1,212,689 $854,922 $3,561,611 $1,326,877 $1,778 $11,485,047 
Special Mention7,151 45,932 55,667 116,990 51,528 195,027 67,722 — 540,017 
Substandard or Lower— 7,131 17,619 65,496 89,990 243,725 67,681 73 491,715 
Total$990,574 $1,894,063 $1,776,033 $1,395,175 $996,440 $4,000,363 $1,462,280 $1,851 $12,516,779 
(1) Excludes real estate - construction - other.
(2) Loans originated in 2021 and 2020 include $0.1 billion$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.















1821


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 YearRevolving LoansRevolving Loans converted to Term Loans
(dollars in thousands)AmortizedAmortized
20212020201920182017PriorCost BasisCost BasisTotal
 Real estate - construction(1)
Pass$190,030 $315,811 $113,245 $83,886 $17,545 $117,157 $46,409 $— $884,083 
Special Mention5,843 775 9,984 20,200 15,724 6,315 — — 58,841 
Substandard or Lower— — — — 1,912 4,185 227 — 6,324 
Total real estate - construction195,873 316,586 123,229 104,086 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)
Pass855,924 520,802 396,575 232,805 147,675 581,762 1,177,857 339 3,913,739 
Special Mention5,386 8,538 33,937 8,301 10,346 23,380 52,386 95 142,369 
Substandard or Lower1,225 9,775 19,393 24,327 11,912 34,825 49,562 1,200 152,219 
Total commercial and industrial862,535 539,115 449,905 265,433 169,933 639,967 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 recoveries6 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
Pass1,086,113 899,172 826,866 624,653 712,223 2,356,308 55,370 — 6,560,705 
Special Mention1,317 60,732 96,508 25,280 33,595 169,732 115 — 387,279 
Substandard or Lower1,537 8,516 28,810 68,818 69,793 151,450 684 1,488 331,096 
Total real estate - commercial mortgage1,088,967 968,420 952,184 718,751 815,611 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 Mention12,546 70,045 140,429 53,781 59,665 199,427 52,501 95 588,489 
Substandard or Lower2,762 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 YearRevolving LoansRevolving Loans converted to Term Loans
(dollars in thousands)AmortizedAmortized
20222021202020192018PriorCost BasisCost BasisTotal
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 Mention95 50,367 23,296 33,735 16,205 181,736 947 — 306,381 
Substandard or Lower1,032 3,039 31,042 38,378 23,112 87,168 243 — 184,014 
Total real estate - commercial mortgage1,015,702 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)
Pass907,390 449,145 397,881 315,605 185,096 604,352 1,387,961 618 4,248,048 
Special Mention11,405 24,479 3,763 8,147 5,218 24,633 56,048 250 133,943 
Substandard or Lower834 418 4,818 13,044 3,081 22,025 51,077 249 95,546 
Total commercial and industrial919,629 474,042 406,462 336,796 193,395 651,010 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)
Pass159,195 390,993 243,406 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 - construction159,195 390,993 247,258 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 Mention11,500 74,846 27,059 41,882 21,423 227,972 56,995 250 461,927 
Substandard or Lower1,866 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 $0.3 billion$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.



















1922


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:
June 30, 2022June 30, 2023
Term Loans Amortized Cost Basis by Origination YearRevolving LoansRevolving Loans converted to Term Loans
(dollars in thousands)Amortized
20222021202020192018PriorCost BasisTotal
Consumer and real estate - home equity
Performing$199,006 $126,665 $92,240 $62,883 $56,742 $103,004 $852,242 $144,223 $1,637,005 
Nonperforming22 148 108 19 112 2,341 2,088 5,712 10,550 
Total consumer and real estate - home equity199,028 126,813 92,348 62,902 56,854 105,345 854,330 149,935 1,647,555 
Consumer and real estate - home equity
Current period gross charge-offs— (587)(70)(108)(16)(355)(77)(716)(1,929)Term Loans Amortized Cost Basis by Origination YearRevolving LoansRevolving Loans converted to Term Loans
Current period recoveries— 44 88 29 16 351 144 544 1,216 (dollars in thousands)Amortized
Total net (charge-offs) recoveries— (543)18 (79)— (4)67 (172)(713)20232022202120202019PriorCost BasisTotal
Real estate - residential mortgageReal estate - residential mortgageReal estate - residential mortgage
Performing537,306 1,591,120 1,067,487 296,239 89,886 578,653 — — 4,160,691 Performing$413,908 $1,030,693 $1,715,214 $1,020,426 $276,538 $651,744 $— $— $5,108,523 
Nonperforming— 1,122 6,322 5,056 3,808 26,828 — — 43,136 Nonperforming— 658 4,680 4,650 5,239 23,512 — — 38,739 
    Total real estate - residential mortgage537,306 1,592,242 1,073,809 301,295 93,694 605,481 — — 4,203,827     Total real estate - residential mortgage413,908 1,031,351 1,719,894 1,025,076 281,777 675,256 — — 5,147,262 
Real estate - residential mortgageReal estate - residential mortgageReal estate - residential mortgage
Current period gross charge-offs— — — — — — — (66)(66)Current period gross charge-offs— — — — — — — (62)(62)
Current period recoveries— — 4 — 27 261 — 22 314 
Total net (charge-offs) recoveries— — 4 — 27 261 — (44)248 
Equipment lease financing and other
Consumer and real estate - home equityConsumer and real estate - home equity
Performing126,093 49,563 50,710 37,619 24,936 21,218 — — 310,139 Performing169,479 309,613 94,775 66,026 49,842 284,430 814,043 26,745 1,814,953 
Nonperforming— — — — — 14,062 — — 14,062 Nonperforming60 403 516 418 66 5,301 1,393 2,311 10,468 
Total leasing and other126,093 49,563 50,710 37,619 24,936 35,280 — — 324,201 Total consumer and real estate - home equity169,539 310,016 95,291 66,444 49,908 289,731 815,436 29,056 1,825,421 
Equipment lease financing and other
Consumer and real estate - home equityConsumer and real estate - home equity
Current period gross charge-offs— — — — — (374)— (3,145)(3,519)
Leases and other loansLeases and other loans
Current period gross charge-offs— — — — — (943)— — (943)Performing99,355 94,583 33,981 29,249 22,671 22,958 — — 302,797 
Current period recoveries— 1 68 13 3 227 — 68 380 Nonperforming— — — — — 11,334 — — 11,334 
Leases and other loans99,355 94,583 33,981 29,249 22,671 34,292 — — 314,131 
Leases and other loansLeases and other loans
Total net (charge-offs) recoveries— 1 68 13 3 (716)— 68 (563)Current period gross charge-offs(214)(401)(133)(72)(52)(417)— (599)(1,888)
Construction - otherConstruction - otherConstruction - other
Performing61,082 162,281 22,426 — 4,580 — — 448 250,817 Performing31,781 173,436 25,814 3,335 — — — — 234,366 
Nonperforming— — — — — — — — — Nonperforming— — — — — — — — — 
Total construction - other61,082 162,281 22,426 — 4,580 — — 448 250,817 Total construction - other31,781 173,436 25,814 3,335 — — — — 234,366 
Construction - otherConstruction - otherConstruction - other
Current period gross charge-offs— — — — — — — — — Current period gross charge-offs— — — — — — — — — 
Current period recoveries— — — — — — — — — 
Total net (charge-offs) recoveries— — — — — — — — — 
TotalTotalTotal
Performing$923,487 $1,929,629 $1,232,863 $396,741 $176,144 $702,875 $852,242 $144,671 $6,358,652 Performing$714,523 $1,608,325 $1,869,784 $1,119,036 $349,051 $959,132 $814,043 $26,745 $7,460,639 
Nonperforming22 1,270 6,430 5,075 3,920 43,231 2,088 5,712 67,748 Nonperforming60 1,061 5,196 5,068 5,305 40,147 1,393 2,311 60,541 
Total$923,509 $1,930,899 $1,239,293 $401,816 $180,064 $746,106 $854,330 $150,383 $6,426,400 Total$714,583 $1,609,386 $1,874,980 $1,124,104 $354,356 $999,279 $815,436 $29,056 $7,521,180 



2023


December 31, 2021December 31, 2022
Term Loans Amortized Cost Basis by Origination YearRevolving LoansRevolving Loans converted to Term Loans
(dollars in thousands)Amortized
20212020201920182017PriorCost BasisTotal
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 
Nonperforming122 101 60 51 314 2,348 8,512 198 11,706 
Total consumer and real estate - home equity162,563 103,019 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 YearRevolving LoansRevolving 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)20222021202020192018PriorCost BasisTotal
Real estate - residential mortgageReal estate - residential mortgageReal estate - residential mortgage
Performing1,548,174 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 Nonperforming1,199 5,104 6,597 6,466 4,587 22,556 — — 46,509 
    Total real estate - residential mortgage1,548,174 1,140,355 346,814 117,225 201,008 493,174 — — 3,846,750     Total real estate - residential mortgage935,102 1,713,807 1,060,723 292,633 92,042 642,972 — — 4,737,279 
Real estate - residential mortgageReal estate - residential mortgageReal 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 equityConsumer and Real estate - home equity
Performing97,077 65,316 49,591 34,107 22,444 1,369 — — 269,904 Performing416,631 109,724 80,422 52,384 45,642 211,127 842,226 34,061 1,792,217 
Nonperforming— — — — 15,503 138 — — 15,641 Nonperforming292 298 174 36 98 6,512 1,722 668 9,800 
Total leasing and other97,077 65,316 49,591 34,107 37,947 1,507 — — 285,545 Total consumer and real estate - home equity416,923 110,022 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 recoveries255 539 88 10 18 43 — — 953 
Consumer and Real estate - home equityConsumer 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 - otherConstruction - otherConstruction - other
Performing144,652 40,040 638 5,028 — — — — 190,358 Performing164,924 73,492 10,892 — 1,077 — — — 250,385 
Nonperforming— — — — 173 — — — 173 Nonperforming— — — — — — — — — 
Total construction - other144,652 40,040 638 5,028 173 — — — 190,531 Total construction - other164,924 73,492 10,892 — 1,077 — — — 250,385 
Construction - otherConstruction - otherConstruction - other
Current period gross charge-offs— — — — — — — — — Current period gross charge-offs— — — — — — — — — 
Leases and other loansLeases and other loans
Current period recoveries— — — — — — — — — Performing146,198 39,427 40,024 29,309 15,019 15,670 — — 285,647 
Nonperforming— — — — — 13,307 — — 13,307 
Leases and other loans146,198 39,427 40,024 29,309 15,019 28,977 — — 298,954 
Leases and other loansLeases and other loans
Total net (charge-offs) recoveries— — — — — — — — — Current period gross charge-offs(506)(167)(140)(80)(47)(1,191)— — (2,131)
TotalTotalTotal
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 
Nonperforming122 6,854 2,249 3,475 18,834 26,818 8,512 198 67,062 Nonperforming1,491 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 






















2124


The following table presents non-performing assets:
June 30,
2022		December 31,
2021		June 30,
2023		December 31,
2022
(in thousands) (dollars in thousands)
Non-accrual loansNon-accrual loans$162,530 $143,666 Non-accrual loans$123,280 $144,443 
Loans 90 days or more past due and still accruing(1)
Loans 90 days or more past due and still accruing(1)
11,016 8,453 
Loans 90 days or more past due and still accruing(1)
24,415 27,463 
Total non-performing loansTotal non-performing loans173,546 152,119 Total non-performing loans147,695 171,906 
OREO (2)
OREO (2)
4,786 1,817 
OREO(2)
3,881 5,790 
Total non-performing assetsTotal non-performing assets$178,332 $153,936 Total non-performing assets$151,576 $177,696 
(1) Excludes PPP loans which are fully guaranteed by the federal government of $0.7$1.0 million and $7.7 million as of June 30, 2022.2023 and December 31, 2022,
respectively.
(2) Excludes$3.8Excludes $8.4 million and $6.4$6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of June 30, 20222023 and
December 31, 2021,2022, respectively.

The following tables present the aging of the amortized cost basis of loans, by class segment:
30-5960-89≥ 90 Days30-5960-89≥ 90 Days
Days PastDays PastPast DueNon-Days PastDays PastPast DueNon-
DueDueand AccruingAccrualCurrentTotalDueDueand AccruingAccrualCurrentTotal
(in thousands)(dollars in thousands)
June 30, 2022
June 30, 2023June 30, 2023
Real estate – commercial mortgageReal estate – commercial mortgage$5,486 $3,219 $375 $59,565 $7,348,391 $7,417,036 Real estate – commercial mortgage$6,566 $2,671 $1,233 $53,815 $7,782,576 $7,846,861 
Commercial and industrial(1)
Commercial and industrial(1)
11,197 1,417 1,022 43,691 4,115,787 4,173,114 
Commercial and industrial(1)
3,542 1,977 1,100 29,488 4,566,339 4,602,446 
Real estate – residential mortgageReal estate – residential mortgage31,221 5,796 7,337 35,585 4,123,888 4,203,827 Real estate – residential mortgage35,456 6,017 17,457 21,700 5,066,632 5,147,262 
Real estate – home equityReal estate – home equity4,554 1,341 1,942 8,110 1,092,861 1,108,808 Real estate – home equity5,865 1,567 3,902 5,827 1,044,730 1,061,891 
Real estate – constructionReal estate – construction3,728 550 — 1,357 1,171,811 1,177,446 Real estate – construction1,719 — — 1,099 1,305,746 1,308,564 
ConsumerConsumer4,963 1,081 340 160 532,203 538,747 Consumer6,482 1,382 723 17 754,926 763,530 
Equipment lease financing and other4,472 33 — 14,062 283,405 301,972 
Leases and other loans(2)
Leases and other loans(2)
462 375 — 11,334 301,960 314,131 
TotalTotal$65,621 $13,437 $11,016 $162,530 $18,668,346 $18,920,950 Total$60,092 $13,989 $24,415 $123,280 $20,822,909 $21,044,685 
(1) DelinquentExcludes delinquent PPP loans 30-59 days past due, and 60-89 days past due and 90 days or more past due of $7.9$0.1 million, $0.0 million and $1.3$1.0 million,
respectively, which are fully guaranteed by the federal government and are classified as current.
(2) Includes unearned income.

30-59 Days Past
Due		60-89
Days Past
Due		≥ 90 Days
Past Due
and
Accruing		Non-
accrual		CurrentTotal30-59 Days Past
Due		60-89
Days Past
Due		≥ 90 Days
Past Due
and
Accruing		Non-
accrual		CurrentTotal
(in thousands)(dollars in thousands)
December 31, 2021
December 31, 2022December 31, 2022
Real estate – commercial mortgageReal estate – commercial mortgage$1,089 $1,750 $1,229 $52,815 $7,222,197 $7,279,080 Real estate – commercial mortgage$10,753 $4,644 $2,473 $70,161 $7,605,804 $7,693,835 
Commercial and industrial(1)Commercial and industrial(1)5,457 1,932 488 30,141 4,170,309 4,208,327 Commercial and industrial(1)6,067 2,289 1,172 27,116 4,440,893 4,477,537 
Real estate – residential mortgageReal estate – residential mortgage22,957 2,920 4,130 35,269 3,781,474 3,846,750 Real estate – residential mortgage57,061 8,209 20,215 26,294 4,625,500 4,737,279 
Real estate – home equityReal estate – home equity4,369 1,154 2,253 8,671 1,101,801 1,118,248 Real estate – home equity5,666 2,444 2,704 6,105 1,085,919 1,102,838 
Real estate – constructionReal estate – construction1,318 — — 901 1,137,560 1,139,779 Real estate – construction1,762 1,758 — 1,368 1,265,037 1,269,925 
ConsumerConsumer3,561 876 353 229 459,638 464,657 Consumer6,692 1,339 899 92 690,157 699,179 
Equipment lease financing and other226 27 — 15,640 252,616 268,509 
Leases and other loans(2)
Leases and other loans(2)
348 122 — 13,307 285,177 298,954 
TotalTotal$38,977 $8,659 $8,453 $143,666 $18,125,595 $18,325,350 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.



2225


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’scollateral-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 assetsloans 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 RestructuringsLoan Modifications

RestructuredOn 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 ACL. 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 someprincipal forgiveness may be granted. In certain instances a combination of these concessions.concessions may 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 forgiven portion of the asset is written off against the ACL. The restructuredamount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan modifications primarily included maturity date extensions, rate modificationsis 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, by class segment:
June 30,
2022		December 31,
2021
 (in thousands)
Real estate - commercial mortgage$3,489 $3,464 
Commercial and industrial1,871 1,857 
Real estate - residential mortgage10,279 11,948 
Real estate - home equity11,764 12,218 
Consumer2 5 
Total accruing TDRs27,405 29,492 
Non-accrual TDRs (1)
45,439 55,945 
Total TDRs$72,844 $85,437 
(1) Included in non-accrual loans in the preceding table detailing non-performing assets.

The following table presents TDRs, by class segment, for loans that were modifiedamortized cost basis during the three months and six months ended June 30, 20222023 of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and 2021:type of concession granted:
Three months ended June 30Six months ended June 30
2022202120222021
Number of LoansPost-Modification Recorded InvestmentNumber of LoansPost-Modification Recorded InvestmentNumber of LoansPost-Modification Recorded InvestmentNumber of LoansPost-Modification Recorded Investment
(dollars in thousands)
Commercial and industrial— $— — $— 1 $82 4 $1,894 
Real estate - commercial mortgage— — 3 2,729 1 150 5 6,891 
Real estate - residential mortgage— — 14 3,101 5 293 37 10,728 
Real estate - home equity— — 11 598 5 329 16 746 
Real estate - construction— — — — — — 1 154 
Consumer2 199 — — 2 199 — — 
Total2 $199 28 $6,428 14 $1,053 63 $20,413 

Term Extension
Three months ended June 30, 2023Six months ended June 30, 2023
Amortization Cost Basis% of Class of Financing ReceivableAmortization Cost Basis% of Class of Financing Receivable
(dollars in thousands)
Real estate - commercial mortgage$276 — %$1,478 0.02 %
Commercial and industrial— — 75 — 
Real estate - residential mortgage2,045 0.04 3,423 0.07 
Total$2,321 $4,976 




2326


In accordance with regulatory guidance, payment scheduleThe following table presents the financial effect of the modifications granted after March 13, 2020made to borrowers impacted byexperiencing financial difficulty for the effectsthree months and six months ended June 30, 2023:

Term Extension
Financial Effect
Three months ended June 30, 2023
Real estate - commercial mortgageAdded a weighted-average 1.25 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgageAdded a weighted-average 5.29 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Six months ended June 30, 2023
Real estate - commercial mortgageAdded a weighted-average 2.05 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Commercial and industrialAdded a weighted-average 2.88 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgageAdded a weighted-average 4.64 years to the life of loans, which reduced monthly payment amounts for the borrowers.

During the six months ended June 30, 2023, there were no loans modified due to financial difficulty where there was an interest rate reduction or principal balance forgiveness.

During the six months ended June 30, 2023, there were no loans modified due to financial difficulty that defaulted in the six months subsequent to modification.

The following table presents the performance of the COVID-19 pandemic and who were not delinquent at the time of the payment schedule modificationsloans that have been excluded from TDRs. Asmodified in the last six months as of June 30, 2022, $5.8 million in recorded investment remains in active COVID-19 deferral programs.2023.

30-8990+Total
Days PastPast DuePast
CurrentDueand AccruingDue
(dollars in thousands)
Real estate - commercial mortgage$1,478 $— $— $— 
Commercial and industrial75 — — — 
Real estate - residential mortgage3,423 — — — 
Total$4,976 $— $— $— 

There were no commitments to lend additional funds to borrowers with loan modifications as a result of financial difficulty as of June 30, 2023.
















27


NOTE 56 – 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 June 30Six months ended June 30Three months ended June 30Six months ended June 30
2022202120222021 2023202220232022
(in thousands) (dollars in thousands)
Amortized cost:Amortized cost:Amortized cost:
Balance at beginning of periodBalance at beginning of period$35,624 $37,803 $35,993 $38,745 Balance at beginning of period$33,082 $35,624 $34,217 $35,993 
Originations of MSRsOriginations of MSRs1,053 1,457 2,407 4,268 Originations of MSRs688 1,053 884 2,407 
AmortizationAmortization(1,428)(3,198)(3,151)(6,951)Amortization(1,312)(1,428)(2,643)(3,151)
Balance at end of periodBalance at end of period$35,249 $36,062 $35,249 $36,062 Balance at end of period$32,458 $35,249 $32,458 $35,249 
Valuation allowance:Valuation allowance:Valuation allowance:
Balance at beginning of periodBalance at beginning of period$— $(4,400)$(600)$(10,500)Balance at beginning of period$— $— $— $(600)
Reduction (addition) to valuation allowanceReduction (addition) to valuation allowance— (2,200)600 3,900 Reduction (addition) to valuation allowance— — — 600 
Balance at end of periodBalance at end of period$— $(6,600)$— $(6,600)Balance at end of period$— $— $— $— 
Net MSRs at end of periodNet MSRs at end of period$35,249 $29,462 $35,249 $29,462 Net MSRs at end of period$32,458 $35,249 $32,458 $35,249 
Estimated fair value of MSRs at end of periodEstimated fair value of MSRs at end of period$49,804 $29,462 $49,804 $29,462 Estimated fair value of MSRs at end of period$49,444 $49,804 $49,444 $49,804 

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$4.3 $4.1 billion and $4.2 billion as of June 30, 20222023 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 $49.8$49.4 million and $35.4$50.0 million at June 30, 20222023 and December 31, 2021,2022 respectively. Based on its fair value analysis as of June 30, 2022,2023, the Corporation determined that no valuation allowance was required as of June 30, 2022.2023.


NOTE 67 – 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 enterenters 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
24


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 SwapsDerivatives - Non-Designated Hedges

The Corporation enters into interest rate swapsderivatives with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate swapsderivatives with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate swapsderivatives is that the customer pays a fixed rate
28


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 swapsderivatives provided by external lenders as part of loan participation arrangements and, therefore, are not used to manage interest rate risk in the Corporation’sCorporation'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 swapderivative 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 swapsderivatives as part of its interest rate risk management strategy. During 2021, theThe Corporation enteredenters into interest rate swapsderivatives 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 derivativederivatives 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 $21.4$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 original 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 six months ended June 30, 2023, $12.6 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.






















2529


The following table presents a summary of the notional amounts and fair values of derivative financial instruments:
June 30, 2022December 31, 2021 June 30, 2023December 31, 2022
Notional
Amount		Asset
(Liability)
Fair Value		Notional
Amount		Asset
(Liability)
Fair Value		 Notional
Amount		Asset
(Liability)
Fair Value		Notional
Amount		Asset
(Liability)
Fair Value
(in thousands) (dollars in thousands)
Interest Rate Locks with CustomersInterest Rate Locks with CustomersInterest Rate Locks with Customers
Positive fair valuesPositive fair values$128,465 $811 $261,428 $2,326 Positive fair values$136,789 $465 $70,836 $182 
Negative fair valuesNegative fair values19,948 (616)2,549 (23)Negative fair values3,405 (11)4,939 (51)
Forward CommitmentsForward CommitmentsForward Commitments
Positive fair valuesPositive fair values35,000 439 51,000 41 Positive fair values36,500 399 — — 
Negative fair valuesNegative fair values— — — — Negative fair values— — 10,000 (147)
Interest Rate Swaps with Customers
Interest Rate Derivatives with CustomersInterest Rate Derivatives with Customers
Positive fair valuesPositive fair values790,286 7,598 3,213,924 153,752 Positive fair values410,749 5,655 171,317 3,337 
Negative fair valuesNegative fair values3,134,128 (152,409)752,462 (4,766)Negative fair values3,925,331 (283,189)3,802,480 (280,401)
Interest Rate Swaps with Dealer Counterparties
Interest Rate Derivatives with Dealer CounterpartiesInterest Rate Derivatives with Dealer Counterparties
Positive fair valuesPositive fair values3,134,128 84,197 752,462 4,766 Positive fair values3,925,331 167,164 3,802,480 161,956 
Negative fair valuesNegative fair values790,286 (7,891)3,213,924 (79,889)Negative fair values410,749 (6,022)171,317 (3,703)
Interest Rate Swaps used in Cash Flow Hedges
Interest Rate Derivatives used in Cash Flow HedgesInterest Rate Derivatives used in Cash Flow Hedges
Positive fair valuesPositive fair values900,000 — 500,000 60 Positive fair values200,000 396 600,000 1,321 
Negative fair valuesNegative fair values100,000 (7,356)500,000 (1,432)Negative fair values1,300,000 (2,002)1,000,000 (12,163)
Foreign Exchange Contracts with CustomersForeign Exchange Contracts with CustomersForeign Exchange Contracts with Customers
Positive fair valuesPositive fair values13,995 737 7,629 229 Positive fair values21,527 234 11,123 571 
Negative fair valuesNegative fair values1,550 (69)3,388 (51)Negative fair values20,839 (238)3,672 (85)
Foreign Exchange Contracts with Correspondent BanksForeign Exchange Contracts with Correspondent BanksForeign Exchange Contracts with Correspondent Banks
Positive fair valuesPositive fair values2,074 76 3,656 69 Positive fair values20,166 313 4,887 101 
Negative fair valuesNegative fair values13,781 (696)9,364 (240)Negative fair values5,397 (37)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 DerivativeAmount of Gain (Loss) Recognized in OCI Included ComponentAmount of Gain or (Loss) Recognized in OCI Excluded ComponentLocation of Gain or (Loss) Recognized from AOCI into IncomeAmount of Gain Reclassified from AOCI into IncomeAmount of Gain Reclassified from AOCI into Income Included ComponentAmount of Gain or (Loss) Reclassified from AOCI into Income Excluded Component
(in thousands)
Derivatives in Cash Flow Hedging Relationships: 
Three months ended June 30, 2022
Interest Rate Products$(11,100)$(11,100)$— Interest income$434 $434 $— 
Three months ended June 30, 2021
Interest Rate Products3,560 3,560 — Interest income877 877 — 
Six months ended June 30, 2022
Interest Rate Products(51,663)(51,663)— Interest income2,382 2,382 — 
Six months ended June 30, 2021
Interest Rate Products1,495 1,495 — Interest Income1,021 1,021 — 

Amount of Gain (Loss) Recognized in OCI on DerivativeAmount of Gain (Loss) Recognized in OCI Included ComponentAmount of Gain (Loss) Recognized in OCI Excluded ComponentLocation of Gain (Loss) Recognized from AOCI into IncomeAmount of Gain (Loss) Reclassified from AOCI into IncomeAmount of Gain (Loss) Reclassified from AOCI into Income Included ComponentAmount of Gain (Loss) Reclassified from AOCI into Income Excluded Component
(dollars in thousands)
Derivatives in Cash Flow Hedging Relationships: 
Three months ended June 30, 2023
Interest Rate Products$(7,251)$(7,251)$— Interest Income$(7,032)$(7,032)$— 
Three months ended June 30, 2022
Interest Rate Products(11,100)(11,100)— Interest Income434 434 — 
Six months ended June 30, 2023
Interest Rate Products5,284 5,284 — Interest Income(14,189)(14,189)— 
Six months ended June 30, 2022
Interest Rate Products(51,663)(51,663)— Interest Income2,382 2,382 — 




2630


The following table presents the effect of fair value and cash flow hedge accounting on the income statement:
Consolidated Statements of Income Classification
Interest Income
Three months ended June 30Six months ended June 30
2022202120222021
(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$434 $877 $2,382 $1,021 
Interest contracts:
Amount of gain reclassified from AOCI into income434 877 2,382 1,021 
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 Component434 877 2,382 1,021 
Amount of Gain or (Loss) Reclassified from AOCI into Income - Excluded Component— — — — 

Consolidated Statements of Income Classification
Interest Income
Three months ended June 30Six months ended June 30
2023202220232022
(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$(7,032)$434 $(14,189)$2,382 
Interest contracts:
Amount of gain (loss) reclassified from AOCI into income(7,032)434 (14,189)2,382 
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 (loss) reclassified from AOCI into income - included component(7,032)434 (14,189)2,382 
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 ClassificationThree months ended June 30Six months ended June 30Consolidated Statements of Income ClassificationThree months ended June 30Six months ended June 30
2022202120222021 2023202220232022
        (in thousands)(dollars in thousands)
Mortgage banking derivatives (1)
Mortgage banking derivatives (1)
Mortgage banking income$(2,095)$(3,158)$(1,710)$(2,362)
Mortgage banking derivatives(1)
Mortgage banking income$475 $(2,095)$869 $(1,710)
Interest rate swapsOther expense— (104)— (208)
Interest rate derivativesInterest rate derivativesOther expense— — — — 
Foreign exchange contractsForeign exchange contractsOther income(6)(12)41 (4)Foreign exchange contractsOther income93 (6)184 41 
Net fair value gains/(losses) on derivative financial instrumentsNet fair value gains/(losses) on derivative financial instruments$(2,101)$(3,274)$(1,669)$(2,574)Net fair value gains/(losses) on derivative financial instruments$568 $(2,101)$1,053 $(1,669)
(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:
June 30,
2022		December 31,
2021		June 30,
2023		December 31,
2022
(in thousands) (dollars in thousands)
Amortized cost (1)
Amortized cost (1)
$17,440 $35,050 
Amortized cost(1)
$14,531 $7,180 
Fair valueFair value17,528 35,768 Fair value14,673 7,264 
(1) Cost basis of mortgage loans held for sale represents the unpaid principal balance.

Losses related to changes in fair values of mortgage loans held for sale were nominal for the three months ended June 30, 2023 compared to gains of $0.5 million for the three months ended June 30, 2022. Gains related to changes in fair values of mortgage loans held for sale were $0.5 millionand $0.7$0.1 million for the threesix months ended June 30, 2022 and June 30, 2021, respectively. Losses related2023 compared to changes in fair valueslosses of mortgage loans held for sale were $0.6 million for the six months ended June 30, 2022 compared to losses of $2.2 million for the six months ended June 30, 2021.2022.






31


Balance Sheet Offsetting

The fair values of interest rate swapderivative 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:
27


Gross AmountsGross Amounts Not OffsetGross AmountsGross Amounts Not Offset
Recognized on the ConsolidatedRecognized on the Consolidated
on theBalance Sheetson theBalance Sheets
ConsolidatedFinancialCashNetConsolidatedFinancialCashNet
Balance Sheets
Instruments(1)
Collateral (2)
AmountBalance Sheets
Instruments(1)
Collateral(2)
Amount
(in thousands)(dollars in thousands)
June 30, 2022
Interest rate swap derivative assets$91,795 $(17,495)$— $74,300 
June 30, 2023June 30, 2023
Interest rate derivative assetsInterest rate derivative assets$173,215 $(9,022)$— $164,193 
Foreign exchange derivative assets with correspondent banksForeign exchange derivative assets with correspondent banks76 (76)— — Foreign exchange derivative assets with correspondent banks313 (313)— — 
TotalTotal$91,871 $(17,571)$— $74,300 Total$173,528 $(9,335)$— $164,193 
Interest rate swap derivative liabilities$167,656 $(10,139)$(67,888)$89,629 
Interest rate derivative liabilitiesInterest rate derivative liabilities$291,213 $(7,416)$(118,789)$165,008 
Foreign exchange derivative liabilities with correspondent banksForeign exchange derivative liabilities with correspondent banks696 (76)— 620 Foreign exchange derivative liabilities with correspondent banks37 (313)— (276)
TotalTotal$168,352 $(10,215)$(67,888)$90,249 Total$291,250 $(7,729)$(118,789)$164,732 
December 31, 2021
Interest rate swap derivative assets$158,578 $(8,028)$— $150,550 
December 31, 2022December 31, 2022
Interest rate derivative assetsInterest rate derivative assets$166,614 $(8,071)$— $158,543 
Foreign exchange derivative assets with correspondent banksForeign exchange derivative assets with correspondent banks69 (69)— — Foreign exchange derivative assets with correspondent banks101 (101)— — 
TotalTotal$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 liabilitiesInterest rate derivative liabilities$296,267 $(2,771)$(127,638)$165,858 
Foreign exchange derivative liabilities with correspondent banksForeign exchange derivative liabilities with correspondent banks240 (69)— 171 Foreign exchange derivative liabilities with correspondent banks499 (101)— 398 
TotalTotal$86,327 $(6,725)$(74,359)$5,243 Total$296,766 $(2,872)$(127,638)$166,256 

(1)For interest rate swapderivative assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default.
For interest rate swapderivative 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 swapderivative transactions and foreign exchange
contracts with financial institution counterparties. Interest rate swapsderivatives 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 7 – Tax Credit Investments

TCIs are primarily for investments promoting qualified affordable housing projects and investments in community development entities. Investments in these projects generate a return primarily through the realization of federal income tax credits and deductions for operating losses over a specified time period.

The TCIs are included in other assets, with any unfunded equity commitments recorded in other liabilities on the consolidated balance sheets. Certain TCIs qualify for the proportional amortization method and are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the consolidated statements of income. Other TCIs are accounted for under the equity method of accounting, with amortization included within non-interest expense on the consolidated statements of income. All of the TCIs are evaluated for impairment at the end of each reporting period.

The following table presents the balances of the Corporation's TCIs and related unfunded commitments:
June 30,December 31,
20222021
Included in other assets:(in thousands)
Affordable housing tax credit investments$168,500 $161,052 
Other tax credit investments62,043 42,987 
Total TCIs$230,543 $204,039 
Included in other liabilities:
Unfunded affordable housing tax credit commitments$56,630 $49,364 
Other tax credit liabilities48,113 33,941 
Total unfunded tax credit commitments and liabilities$104,743 $83,305 

28


The following table presents other information relating to the Corporation's TCIs:
Three months ended June 30Six months ended June 30
2022202120222021
Components of income taxes:(in thousands)
Affordable housing tax credits and other tax benefits$(6,209)$(6,543)$(12,417)$(13,031)
Other tax credit investment credits and tax benefits(845)(722)(1,690)(1,445)
Amortization of affordable housing investments, net of tax benefit4,824 4,323 9,649 8,689 
Deferred tax expense192 160 383 320 
Total net reduction in income tax expense$(2,038)$(2,782)$(4,075)$(5,467)
Amortization of TCIs:
Total amortization of TCIs$695 $1,563 $1,391 $3,094 











































2932


NOTE 8 – Accumulated Other Comprehensive (Loss) Income

The following table presents the components of other comprehensive income (loss) income::
Before-Tax AmountTax EffectNet of Tax Amount
Three months ended June 30, 2022(in thousands)
Unrealized loss on securities$(114,312)$25,960 $(88,352)
Reclassification adjustment for securities gains included in net income (1)
8 (2)6 
Amortization of net unrealized losses on AFS securities transferred to HTM (2)
(62,250)14,137 (48,113)
Net unrealized holding loss arising during the period on interest rate swaps used in cash flow hedges(11,100)2,514 (8,586)
Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash flow hedges(434)99 (335)
Amortization of net unrecognized pension and postretirement items (3)
33 (8)25 
Total Other Comprehensive Loss$(188,055)$42,700 $(145,355)
Three months ended June 30, 2021
Unrealized gain on securities$24,968 $(5,670)$19,298 
Reclassification adjustment for securities gains included in net income (1)
(36)8 (28)
Amortization of net unrealized gains on AFS securities transferred to HTM (2)
(349)79 (270)
Net unrealized holding gain arising during the period on interest rate swaps used in cash flow hedges3,560 (808)2,752 
Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash flow hedges(877)199 (678)
Amortization of net unrecognized pension and postretirement items (3)
370 (81)289 
Total Other Comprehensive Loss$27,636 $(6,273)$21,363 
Six months ended June 30, 2022
Unrealized loss on securities$(313,379)$71,168 $(242,211)
Reclassification adjustment for securities loss included in net income (1)
27 (6)21 
Amortization of net unrealized losses on AFS securities transferred to HTM (2)
(61,686)14,009 (47,677)
Net unrealized loss on interest rate swaps used in cash flow hedges(51,663)11,701 (39,962)
Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash flow hedges(2,382)540 (1,842)
Amortization of net unrecognized pension and postretirement items (3)
65 (15)50 
Total Other Comprehensive Loss$(429,018)$97,397 $(331,621)
Six months ended June 30, 2021
Unrealized loss on securities$(26,783)$6,082 $(20,701)
Reclassification adjustment for securities gains included in net income (1)
451 (102)349 
Amortization of net unrealized losses on AFS securities transferred to HTM (2)
1,963 (446)1,517 
Net unrealized gain on interest rate swaps used in cash flow hedges1,495 (337)1,158 
Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash flow hedges(1,021)230 (791)
Amortization of net unrecognized pension and postretirement items (3)
740 (162)578 
Total Other Comprehensive Loss$(23,155)$5,265 $(17,890)
Before-Tax AmountTax EffectNet of Tax Amount
Three months ended June 30, 2023(dollars in thousands)
Net unrealized losses on securities$(40,361)$9,142 $(31,219)
Reclassification adjustment for securities net change included in net income(1)
(4)1 (3)
Amortization of net unrealized gains on AFS securities transferred to HTM(2)
1,941 (440)1,501 
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges(3)
(7,251)1,665 (5,586)
Reclassification adjustment for net change realized in net income on interest rate derivatives used in cash flow hedges(3)
7,032 (22)7,010 
Amortization of net unrecognized pension and postretirement items(4)
4 (1)3 
Total Other Comprehensive Loss$(38,639)$10,345 $(28,294)
Three months ended June 30, 2022
Net unrealized losses on securities$(114,312)$25,960 $(88,352)
Reclassification adjustment for securities net change included in net income(1)
8 (2)6 
Amortization of net unrealized gains on AFS securities transferred to HTM(2)
(62,250)14,137 (48,113)
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges(3)
(11,100)2,514 (8,586)
Reclassification adjustment for net change realized in net income on interest rate derivatives used in cash flow hedges(3)
(434)99 (335)
Amortization of net unrecognized pension and postretirement items(4)
33 (8)25 
Total Other Comprehensive Loss$(188,055)$42,700 $(145,355)
Six months ended June 30, 2023
Unrealized gain on securities$1,838 $(416)$1,422 
Reclassification adjustment for securities net change included in net income(1)
18 (4)14 
Amortization of net unrealized gains on AFS securities transferred to HTM(2)
3,851 (872)2,979 
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges(3)
5,284(17,690)(12,406)
Reclassification adjustment for net change realized in net income on interest rate swaps used in cash flow hedges(3)
14,189 (36)14,153 
Amortization of net unrecognized pension and postretirement items(4)
36 (8)28 
Total Other Comprehensive Income$25,216 $(19,026)$6,190 
Six months ended June 30, 2022
Unrealized loss on securities$(313,379)$71,168 $(242,211)
Reclassification adjustment for securities net change included in net income(1)
27 (6)21 
Amortization of net unrealized losses on AFS securities transferred to HTM(2)
(61,686)14,009 (47,677)
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges(3)
(51,663)11,701 (39,962)
Reclassification adjustment for change realized in net income on interest rate swaps used in cash flow hedges(3)
(2,382)540 (1,842)
Amortization of net unrecognized pension and postretirement items(4)
65 (15)50 
Total Other Comprehensive Loss$(429,018)$97,397 $(331,621)

(1)Amounts reclassified out of AOCI. Before-tax amounts included in "Investment securities gains, net" on the Consolidated Statements of Income. See Note 3, "Investment"Note 4
- Investment Securities," for additional details.
(2) Amounts reclassified out of AOCI. Before-tax amounts included as a reduction to "Interest Income" on the Consolidated Statements of Income.
(3) Tax effect includes reversal of interest rate derivatives used in cash flow hedges 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.



3033


The following table presents changes in each component of accumulated other comprehensive income (loss), net of tax:
Unrealized Gains (Losses) on Investment SecuritiesNet Unrealized (Loss) Gain on Interest Rate Swaps used in Cash Flow HedgesUnrecognized Pension and Postretirement Plan Income (Costs)TotalUnrealized Gains (Losses) on Investment SecuritiesNet Unrealized Gain (Loss) on Interest Rate Derivatives used in Cash Flow HedgesUnrecognized Pension and Postretirement Plan Income (Costs)Total
(in thousands)(dollars in thousands)
Three months ended June 30, 2023Three months ended June 30, 2023
Balance at March 31, 2023Balance at March 31, 2023$(282,095)$(61,453)$(7,444)$(350,992)
OCI before reclassificationsOCI before reclassifications(31,219)(5,586)— (36,805)
Amounts reclassified from AOCIAmounts reclassified from AOCI(3)7,010 3 7,010 
Amortization of net unrealized gains on AFS securities transferred to HTMAmortization of net unrealized gains on AFS securities transferred to HTM1,501 — — 1,501 
Balance at June 30, 2023Balance at June 30, 2023$(311,816)$(60,029)$(7,441)$(379,286)
Three months ended June 30, 2022Three months ended June 30, 2022Three months ended June 30, 2022
Balance at March 31, 2022Balance at March 31, 2022$(112,968)$(37,699)$(8,188)$(158,855)Balance at March 31, 2022$(112,968)$(37,699)$(8,188)$(158,855)
OCI before reclassificationsOCI before reclassifications(88,352)— — (88,352)OCI before reclassifications(88,352)(8,586)— (96,938)
Amounts reclassified from AOCIAmounts reclassified from AOCI6 (8,921)25 (8,890)Amounts reclassified from AOCI6 (335)25 (304)
Amortization of net unrealized losses on AFS securities transferred to HTMAmortization of net unrealized losses on AFS securities transferred to HTM(48,113)— — (48,113)Amortization of net unrealized losses on AFS securities transferred to HTM(48,113)— — (48,113)
Balance at June 30, 2022Balance at June 30, 2022$(249,427)$(46,620)$(8,163)$(304,210)Balance at June 30, 2022$(249,427)$(46,620)$(8,163)$(304,210)
Three months ended June 30, 2021
Balance at March 31, 2021$43,769 $(1,707)$(16,224)$25,838 
Six months ended June 30, 2023Six months ended June 30, 2023
Balance at December 31, 2022Balance at December 31, 2022$(316,231)$(61,776)$(7,469)$(385,476)
OCI before reclassificationsOCI before reclassifications19,298 — — 19,298 OCI before reclassifications1,422 (12,406)— (10,984)
Amounts reclassified from AOCIAmounts reclassified from AOCI(28)2,074 289 2,335 Amounts reclassified from AOCI14 14,153 28 14,195 
Amortization of net unrealized losses on AFS securities transferred to HTM(270)— — (270)
Amortization of net unrealized gains on AFS securities transferred to HTMAmortization of net unrealized gains on AFS securities transferred to HTM2,979 — — 2,979 
Balance at June 30, 2021$62,769 $367 $(15,935)$47,201 
Balance at June 30, 2023Balance at June 30, 2023$(311,816)$(60,029)$(7,441)$(379,286)
Six months ended June 30, 2022Six months ended June 30, 2022Six months ended June 30, 2022
Balance at December 31, 2021Balance at December 31, 2021$40,440 $(4,816)$(8,213)$27,411 Balance at December 31, 2021$40,440 $(4,816)$(8,213)$27,411 
OCI before reclassificationsOCI before reclassifications(242,211)— — (242,211)OCI before reclassifications(242,211)(39,962)— (282,173)
Amounts reclassified from AOCIAmounts reclassified from AOCI21 (41,804)50 (41,733)Amounts reclassified from AOCI21 (1,842)50 (1,771)
Amortization of net unrealized losses on AFS securities transferred to HTMAmortization of net unrealized losses on AFS securities transferred to HTM(47,677)— — (47,677)Amortization of net unrealized losses on AFS securities transferred to HTM(47,677)— — (47,677)
Balance at June 30, 2022Balance at June 30, 2022$(249,427)$(46,620)$(8,163)$(304,210)Balance at June 30, 2022$(249,427)$(46,620)$(8,163)$(304,210)
Six months ended June 30, 2021
Balance at December 31, 2020$81,604 $— $(16,513)$65,091 
OCI before reclassifications(20,701)— — (20,701)
Amounts reclassified from AOCI349 367 578 1,294 
Amortization of net unrealized losses on AFS securities transferred to HTM1,517 — — 1,517 
Balance at June 30, 2021$62,769 $367 $(15,935)$47,201 


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.







31


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:
 June 30, 2022
 Level 1Level 2Level 3Total
 (in thousands)
Loans held for sale$— $17,528 $— $17,528 
Available for sale investment securities:
Equity securities— — — — 
U.S. Government securities371,266 — — 371,266 
State and municipal securities— 1,083,477 — 1,083,477 
Corporate debt securities— 393,561 — 393,561 
Collateralized mortgage obligations— 148,103 — 148,103 
Residential mortgage-backed securities— 195,359 — 195,359 
Commercial mortgage-backed securities— 587,072 — 587,072 
Total available for sale investment securities371,266 2,407,572 — 2,778,838 
Other assets:
Investments held in Rabbi Trust23,669 — — 23,669 
Derivative assets813 93,045 — 93,858 
Total assets$395,748 $2,518,145 $— $2,913,893 
Other liabilities:
Deferred compensation liabilities$23,669 $— $— $23,669 
Derivative liabilities765 168,272 — 169,037 
Total liabilities$24,434 $168,272 $— $192,706 
34

 December 31, 2021
 Level 1Level 2Level 3Total
 (in thousands)
Loans held for sale$— $35,768 $— $35,768 
Available for sale investment securities:
U.S. Government securities127,618 — — 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 securities127,618 2,985,105 74,667 3,187,390 
Other assets:
Investments held in Rabbi Trust28,619 — — 28,619 
Derivative assets298 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 liabilities291 86,110 — 86,401 
Total liabilities$28,910 $86,110 $— $115,020 

 June 30, 2023
 Level 1Level 2Level 3Total
 (dollars in thousands)
Loans held for sale$— $14,673 $— $14,673 
Available for sale investment securities:
U.S. Government securities220,638 — — 220,638 
U.S. Government-sponsored agency securities— 999 — 999 
State and municipal securities— 1,053,908 — 1,053,908 
Corporate debt securities— 424,379 — 424,379 
Collateralized mortgage obligations— 120,458 — 120,458 
Residential mortgage-backed securities— 204,888 — 204,888 
Commercial mortgage-backed securities— 547,451 — 547,451 
Total available for sale investment securities220,638 2,352,083 — 2,572,721 
Other assets:
Investments held in Rabbi Trust28,046 — — 28,046 
Derivative assets547 174,079 — 174,626 
Total assets$249,231 $2,540,835 $— $2,790,066 
Other liabilities:
Deferred compensation liabilities$28,046 $— $— $28,046 
Derivative liabilities275 291,224 — 291,499 
Total liabilities$28,321 $291,224 $— $319,545 

 December 31, 2022
 Level 1Level 2Level 3Total
 (dollars in thousands)
Loans held for sale$— $7,264 $— $7,264 
Available for sale investment securities:
U.S. Government securities218,485 — — 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 securities218,485 2,428,282 — 2,646,767 
Other assets:
Investments held in Rabbi Trust23,435 — — 23,435 
Derivative assets672 166,796 — 167,468 
Total assets$242,592 $2,602,342 $— $2,844,934 
Other liabilities:
Deferred compensation liabilities$23,435 $— $— $23,435 
Derivative liabilities584 296,465 — 297,049 
Total liabilities$24,019 $296,465 $— $320,484 




3235


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 June 30, 20222023 and December 31, 20212022 were based onmeasured 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 ($390.8417.4 million at June 30, 20222023 and $383.4$415.4 million at December 31, 2021)2022) and other corporate debt issued by non-financial institutions ($2.87.0 million at June 30, 20222023 and $6.9 million at December 31, 2021)2022).

Level 2 investments include subordinated debt and senior debt, and other corporate debt issued by non-financial institutions at June 30, 20222023 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 ($0.80.5 million at June 30, 20222023 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 ($1.30.9 million at June 30, 20222023 and $2.4$0.2 million at December 31, 2021)2022) and the fair value of interest rate swapsderivatives ($91.8173.2 million at June 30, 20222023 and $158.6$166.6 million at December 31, 2021)2022). The fair values of the interest rate locks, forward commitments and interest rate swapsderivatives represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See "Note 67 - 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 ($0.80.3 million at June 30, 20222023 and $0.3$0.6 million at December 31, 2021)2022).

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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 ($0.6 million(nominal at June 30, 20222023 and NaN$0.2 million at December 31, 2021)2022) and the fair value of interest rate swapsderivatives ($167.7291.2 million at June 30, 20222023 and $86.1$296.3 million at December 31, 2021)2022).

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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 June 30, 2022(in thousands)
Balance at March 31, 2022$—
Sales—
Unrealized adjustment to fair value (1)
—
Balance at June 30, 2022$—
Three months ended June 30, 2021
Balance at March 31, 2021$76,204 
Unrealized adjustment to fair value (1)
(1,370)
Balance at June 30, 2021$74,834 
Six months ended June 30, 2022
Balance at December 31, 2021$74,667
Sales(74,823)
Unrealized adjustment to fair value (1)
156
Balance at June 30, 2022$—
Six months ended June 30, 2021
Balance at December 31, 2020$98,206 
Sales(24,619)
Unrealized adjustment to fair value (1)
1,247 
Balance at June 30, 2021$74,834 
(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:
June 30, 2022December 31, 2021 June 30,
2023		December 31,
2022
(in thousands) (dollars in thousands)
Loans, netLoans, net$137,267 $118,458 Loans, net$103,567 $121,115 
OREOOREO4,786 1,817 OREO3,881 5,790 
MSRs (1)
MSRs (1)
49,804 35,393 
MSRs(1)
49,444 50,044 
Total assetsTotal assets$191,857 $155,668 Total assets$156,892 $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 56 - Mortgage Servicing Rights" for additional information.

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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 45 - 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 June 30, 20222023 valuation were 7.9%7.8% and 7.2%9.0%, respectively. Management reviews the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See "Note 56 - Mortgage Servicing Rights," for additional information.





















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The following tables detail the book values and the estimated fair values of the Corporation's financial instruments as of June 30, 20222023 and December 31, 2021.2022.
June 30, 2022 June 30, 2023
Estimated Fair ValueEstimated Fair Value
Carrying AmountLevel 1Level 2Level 3TotalCarrying AmountLevel 1Level 2Level 3Total
(in thousands)(dollars in thousands)
FINANCIAL ASSETSFINANCIAL ASSETSFINANCIAL ASSETS
Cash and cash equivalentsCash and cash equivalents$449,674 $449,674 $— $— $449,674 Cash and cash equivalents$504,702 $504,702 $— $— $504,702 
FRB and FHLB stockFRB and FHLB stock62,146 — 62,146 — 62,146 FRB and FHLB stock124,218 — 124,218 — 124,218 
Federal funds sold30,500 30,500 — — 30,500 
Loans held for saleLoans held for sale17,528 — 17,528 — 17,528 Loans held for sale14,673 — 14,673 — 14,673 
AFS securitiesAFS securities2,778,838 371,266 2,407,572 — 2,778,838 AFS securities2,572,721 220,638 2,352,083 — 2,572,721 
HTM securitiesHTM securities1,338,963 — 1,215,325 — 1,215,325 HTM securities1,294,613 — 1,086,692 — 1,086,692 
Loans, netLoans, net18,672,386 — — 17,993,585 17,993,585 Loans, net20,757,243 — — 19,233,430 19,233,430 
Accrued interest receivableAccrued interest receivable64,457 64,457 — — 64,457 Accrued interest receivable96,991 96,991 — — 96,991 
Other assetsOther assets505,136 357,501 93,045 54,590 505,136 Other assets675,328 447,924 174,079 53,325 675,328 
FINANCIAL LIABILITIESFINANCIAL LIABILITIES  FINANCIAL LIABILITIES  
Demand and savings depositsDemand and savings deposits$19,340,633 $19,340,633 $— $— $19,340,633 Demand and savings deposits$18,055,623 $18,055,623 $— $— $18,055,623 
Brokered depositsBrokered deposits243,172 223,172 20,167 — 243,339 Brokered deposits949,259 150,222 797,177 — 947,399 
Time depositsTime deposits1,560,061 — 1,552,555 — 1,552,555 Time deposits2,201,658 — 2,182,337 — 2,182,337 
Accrued interest payableAccrued interest payable6,010 6,010 — — 6,010 Accrued interest payable24,101 24,101 — — 24,101 
Short-term borrowings456,185 456,185 — — 456,185 
Long-term borrowings557,130 — 490,331 — 490,331 
Federal funds purchasedFederal funds purchased555,000 555,003 — — 555,003 
Federal Home Loan Bank advancesFederal Home Loan Bank advances1,165,000 1,164,991 — — 1,164,991 
Senior debt and subordinated debtSenior debt and subordinated debt539,994 — 461,365 — 461,365 
Other borrowingsOther borrowings459,120 458,087 1,010 — 459,097 
Other liabilitiesOther liabilities343,794 161,198 168,272 14,324 343,794 Other liabilities454,641 146,849 291,224 16,568 454,641 

December 31, 2022
Estimated Fair Value
Carrying AmountLevel 1Level 2Level 3Total
(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents$681,921 $681,921 $— $— $681,921 
FRB and FHLB stock130,186 — 130,186 — 130,186 
Loans held for sale7,264 — 7,264 — 7,264 
AFS securities2,646,767 218,485 2,428,282 — 2,646,767 
HTM securities1,321,256 — 1,125,049 — 1,125,049 
Loans, net20,010,181 — — 18,862,701 18,862,701 
Accrued interest receivable91,579 91,579 — — 91,579 
Other assets642,049 419,419 166,796 55,834 642,049 
FINANCIAL LIABILITIES
Demand and savings deposits$18,851,912 $18,851,912 $— $— $18,851,912 
Brokered deposits208,416 188,416 25,085 — 213,501 
Time deposits1,589,210 — 1,574,747 — 1,574,747 
Accrued interest payable10,185 10,185 — — 10,185 
Federal funds purchased191,000 190,998 — — 190,998 
Federal Home Loan Bank advances1,250,000 1,249,629 — — 1,249,629 
Senior debt and subordinated debt539,634 — 456,867 — 456,867 
Other borrowings890,573 889,393 1,180 — 890,573 
Other liabilities467,705 154,912 296,465 16,328 467,705 

3538


December 31, 2021
Estimated Fair Value
Carrying AmountLevel 1Level 2Level 3Total
(in thousands)
FINANCIAL ASSETS
Cash and cash equivalents$1,638,614 $1,638,614 $— $— $1,638,614 
FRB and FHLB stock57,635 — 57,635 — 57,635 
Loans held for sale35,768 — 35,768 — 35,768 
AFS securities3,187,390 127,618 2,985,105 74,667 3,187,390 
HTM securities980,384 — 965,867 — 965,867 
Loans, net18,076,349 — — 17,519,497 17,519,497 
Accrued interest receivable57,451 57,451 — — 57,451 
Other assets565,491 367,336 160,945 37,210 565,491 
FINANCIAL LIABILITIES
Demand and savings deposits$19,594,497 $19,594,497 $— $— $19,594,497 
Brokered deposits251,526 231,526 20,603 — 252,129 
Time deposits1,727,476 — 1,730,673 — 1,730,673 
Accrued interest payable7,000 7,000 — — 7,000 
Short-term borrowings416,764 416,764 — — 416,764 
Long-term borrowings621,345 — 605,719 — 605,719 
Other liabilities288,862 188,219 86,110 14,533 288,862 

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  Short-termOther 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 June 30, 2022,2023, 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 areis determined in a manner consistent with the respective type of deposits discussed above.





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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 June 30Six months ended June 30Three months ended June 30Six months ended June 30
2022202120222021 2023202220232022
Weighted average shares outstanding (basic)Weighted average shares outstanding (basic)160,920 162,785 160,755 162,614 Weighted average shares outstanding (basic)165,854 160,920 166,227 160,755 
Impact of common stock equivalentsImpact of common stock equivalents1,155 1,073 1,260 1,124 Impact of common stock equivalents1,337 1,155 1,582 1,260 
Weighted average shares outstanding (diluted)Weighted average shares outstanding (diluted)162,075 163,858 162,015 163,738 Weighted average shares outstanding (diluted)167,191 162,075 167,809 162,015 
Per share:Per share:Per share:
BasicBasic$0.42 $0.38 $0.80 $0.81 Basic$0.46 $0.42 $0.86 $0.80 
DilutedDiluted0.42 0.38 0.80 0.81 Diluted0.46 0.42 0.85 0.80 





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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 subsidiary bank boardsthe Bank board of directors under the Directors’ Plan. Under the Directors’ Plan, the Corporation can grant equity awards to non-employee holding companyCorporation and subsidiary bankBank 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 generally 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 areis estimated through the use of the Monte Carlo valuation methodology as of the date of grant.

On May 17, 2022, upon approval at the Corporation’s annual meeting of Shareholders (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 June 30, 2022,2023, the Employee Equity Plan had approximately 5.14.4 million shares reserved for future grants through 2032, and the Directors’ Plan had approximately 51,000406,000 shares reserved for future grants through 2029.2033.


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The following table presents compensation expense and the related tax benefits for equity awards recognized in the consolidated statements of income:
Three months ended June 30Six months ended June 30Three months ended June 30Six months ended June 30
2022202120222021 2023202220232022
        (in thousands) (dollars in thousands)
Compensation expenseCompensation expense$3,846 $2,098 $6,586 $4,000 Compensation expense$2,571 $3,846 $4,240 $6,586 
Tax benefitTax benefit(758)(457)(1,361)(870)Tax benefit(565)(758)(927)(1,361)
Total stock-based compensation, net of taxTotal stock-based compensation, net of tax$3,088 $1,641 $5,225 $3,130 Total stock-based compensation, net of tax$2,006 $3,088 $3,313 $5,225 


NOTE 12 – Employee Benefit Plans

The net periodic pension cost for the Corporation's Pension Plan consisted of the following components:
Three months ended June 30Six months ended June 30Three months ended June 30Six months ended June 30
2022202120222021 2023202220232022
        (in thousands) (dollars in thousands)
Interest costInterest cost$598 $561 $1,196 $1,122 Interest cost$855 $598 $1,711 $1,196 
Expected return on plan assetsExpected return on plan assets(1,099)(1,011)(2,197)(2,022)Expected return on plan assets(877)(1,099)(1,754)(2,197)
Net amortization and deferralNet amortization and deferral164 504 327 1,008 Net amortization and deferral80 164 161 327 
Net periodic pension costNet periodic pension cost$(337)$54 $(674)$108 Net periodic pension cost$58 $(337)$118 $(674)







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The components of the net benefit for the Corporation's Postretirement Plan consisted of the following components:
Three months ended June 30Six months ended June 30Three months ended June 30Six months ended June 30
2022202120222021 2023202220232022
        (in thousands) (dollars in thousands)
Interest costInterest cost$9 $8 $17 $16 Interest cost$13 $9 $26 $17 
Net accretion and deferralNet accretion and deferral(131)(134)(262)(268)Net accretion and deferral(136)(131)(272)(262)
Net periodic benefitNet periodic benefit$(122)$(126)$(245)$(252)Net periodic benefit$(123)$(122)$(246)$(245)

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 customerborrower 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 customerborrower or obligor. Since somea portion of the commitments areis expected to expire without being drawn upon, the total commitments to extend creditcommitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer'sborrower'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 customerborrower 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
38


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 June 30, 2022 and December 31, 2021, the ACL - OBS credit exposures for unfunded lending commitments was $8.8 millionand $9.1 million, respectively. See "Note 4 - Loans and Allowance for Credit Losses," for additional details.

The following table presents the Corporation's commitments to extend credit and letters of credit:
June 30, 2022December 31, 2021June 30,
2023		December 31, 2022
(in thousands) (dollars in thousands)
Commitments to extend creditCommitments to extend credit$8,474,459 $8,731,168 Commitments to extend credit$8,963,903 $8,695,621 
Standby letters of creditStandby letters of credit282,227 298,275 Standby letters of credit259,063 260,829 
Commercial letters of creditCommercial letters of credit50,802 54,196 Commercial letters of credit53,816 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 June 30, 20222023 and December 31, 2021,2022, the total reserve for losses on residential mortgage loans sold was $1.2$1.4 million, and $1.1 million, respectively, including reserves for both
41


representation and warranty and credit loss exposures. In addition, a component of ACL - OBS credit exposures of $4.2$5.0 million and $3.8$6.0 million, as of June 30, 20222023 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.

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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. Subject to final approval by the Court, the Settlement Agreement will be administered according to its terms. The financial terms of the Settlement Agreement are not expected to be 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 – Long-Term 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 owned all of the common stock of 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 purchased $75.0issuing junior subordinated deferrable interest debentures to these trusts. In September 2022, the Corporation redeemed all of the outstanding junior subordinated deferrable interest debentures issued to these trusts, totaling approximately $17.2 million, and $60.0 millionthese trusts redeemed all of its subordinated notesthe outstanding TruPS in a like amount, after 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 long-term FHLB advances and incurred $20.9 million in prepayment penalties.subsidiary trusts were canceled.



NOTE 15 – Subsequent Events

On July 1, 2022, the Corporation completed its previously announced merger with Prudential, pursuant to the Merger Agreement.

As a result of this acquisition, the Corporation expects to enhance its presence in Philadelphia, Pennsylvania, expand its customer base, leverage operating costs through economies of scale, and positively affect the Corporation's long-term operating results.

As part of the acquisition, the Corporation made a $2 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.

The Corporation will complete the acquisition accounting for the transaction during the third quarter of 2022.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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


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 scope and duration of the COVID-19 pandemic, actions taken by governmental authorities in response to the pandemic, the Corporation's participation in the PPP and other COVID-19 relief programs, 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;
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◦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 into the Corporation or as a result of the strength of the economy, competitive factors in the areas where the Corporation and Prudential 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’s business into the Corporation's business and or the conversion of Prudential’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.

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OVERVIEW

The Corporation is a financial holding company, which, through its wholly-ownedwholly owned banking 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 June 30Six months ended June 30Three months ended June 30Six months ended June 30
2022202120222021 2023202220232022
Net income (in thousands)$69,989$64,964$134,277$138,027
Net income available to common shareholders (in thousands)$67,427$62,402$129,153$132,874
(dollars in thousands, except per share data)
Net incomeNet income$79,607$69,989$147,920$134,277
Net income available to common shareholdersNet income available to common shareholders$77,045$67,427$142,796$129,153
Diluted net income available to common shareholders per shareDiluted net income available to common shareholders per share$0.42$0.38$0.80$0.81Diluted net income available to common shareholders per share$0.46$0.42$0.85$0.80
Diluted operating net income available to common shareholders per share, annualized(1)
Diluted operating net income available to common shareholders per share, annualized(1)
$0.47$0.42$0.86$0.80
Return on average assets, annualizedReturn on average assets, annualized1.10 %1.00 %1.06 %1.07 %Return on average assets, annualized1.17 %1.10 %1.10 %1.06 %
Return on average assets, annualized, excluding merger-related expenses(1)
1.11 %1.00 %1.07 %1.07 %
Return on average common shareholders' equity, annualized11.57 %10.11 %10.78 %10.10 %
Operating return on average assets, annualized(1)
Operating return on average assets, annualized(1)
1.18 %1.11 %1.11 %1.07 %
Return on average common shareholders' equityReturn on average common shareholders' equity12.59 %11.57 %11.81 %10.78 %
Return on average common shareholders' equity (tangible), annualized(1)
Return on average common shareholders' equity (tangible), annualized(1)
15.23 %12.93 %14.01 %13.95 %
Return on average common shareholders' equity (tangible), annualized(1)
16.52 %15.23 %15.50 %14.01 %
Net interest margin(2)
Net interest margin(2)
3.04 %2.73 %2.91 %2.76 %
Net interest margin(2)
3.40 %3.04 %3.46 %2.91 %
Efficiency ratio(1)
Efficiency ratio(1)
61.4 %63.8 %63.5 %63.4 %
Efficiency ratio(1)
60.1 %61.4 %59.3 %63.5 %
Non-performing assets to total assetsNon-performing assets to total assets0.71 %0.60 %0.71 %0.60 %Non-performing assets to total assets0.55 %0.71 %0.55 %0.71 %
Annualized net charge-offs to average loans(0.08)%0.15 %(0.05)%0.14 %
Net charge-offs (recoveries) to average loansNet charge-offs (recoveries) to average loans0.04 %(0.08)%0.15 %(0.05)%
(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

TheSince March 16, 2022, the FOMC raisedincreased the target range for the Feds Fund Rate eleven times to address elevated levels of inflation, placing the target range for the Fed Funds Rate by 25 bps to 0.25%-0.50% at its March 2022 meeting, by 50 bps to 0.75%-1.00% at its May 2022 meeting and by 75 bps to 1.50%-1.75% at its June 2022 meeting.5.25% - 5.50% as of August 8, 2023.

Business CombinationsLIBOR Transition

On July 1, 2022, the Corporation completed the acquisition of Prudential. Prudential was merged with and into the Corporation, and Prudential's wholly owned subsidiary, Prudential Bank, became a wholly owned subsidiaryAs disclosed in Item 1A. Risk Factors of the Corporation.Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, U.S. dollar LIBOR ceased as of June 30, 2023. The Corporation planshas successfully transitioned substantially all of its products away from LIBOR as of June 30, 2023. For most financial products, the most common alternative reference rates have been SOFR-based benchmarks. This is true for both new originations and legacy LIBOR contracts that were subject to merge Prudential Bank with and into Fulton Bank during the fourth quarter of 2022. The consolidated financial statements contained in this report do not include the results of Prudential for the periods presented.amendment or a transition by their terms.
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Prudential merger-related expenses included in non-interest expense for the three months and six months ended June 30, 2022, were $1.0 million and $1.4 million, respectively.

Financial Highlights

Following is a summary of the financial highlights for the three months and six months ended June 30, 2022:2023:

•Net Income Available to Common Shareholders and Net Income Per Share - Net income available to common shareholders was $67.4$77.0 million for the three months ended June 30, 2022,2023, a $5.0$9.6 million increase compared to $62.4$67.4 million for the same period in 2021.2022. Diluted net income available to common shareholders, per share was $0.46 for the three months ended June 30, 2023, a $0.04 increase compared to the same period in 2022. Net income available to common shareholders was $129.2$142.8 million for the six months ended June 30, 2022,2023, a $3.7$13.6 million decreaseincrease compared to $132.9$129.2 million for the same period in 2021.2022. Diluted net income available to common shareholders, per share was $0.42 for the three months ended June 30, 2022, a $0.04 increase compared to the same
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period in 2021, and $0.80$0.85 for the six months ended June 30, 2022,2023, a $0.01 decrease$0.05 increase compared to the same period in 2021.2022.

•Net Interest Income -FTE netNet interest income increased $16.8was $212.9 million or 10.2%, for the three months ended June 30, 20222023, an increase of $34.0 million, or 19.0%, compared to $178.8 million for the same period in 2021.2022. The increase was driven by higher interest rates which resulted in a $9.2 million increase in interest income on average net loans, as well as the $807.2 millionand an increase in average investment securities, which contributed $4.7 million to thebalances for net loans, partially offset by higher interest rates and an increase in interest income. FTE netthe average balance of higher-cost borrowings and other interest-bearing liabilities and interest-bearing deposits. Net interest income increased $14.0was $428.4 million or 4.2%, for the six months ended June 30, 20222023, an increase of $88.3 million, or 26.0%, compared to $340.1 million for the same period in 2021.2022. The increase in netwas driven by higher interest income was primarily fromrates and an increase in interest income of $8.1 million from investments, a decrease of $6.2 million in interest expense from interest-bearing deposits and a decrease of $5.4 million in interest expense from long-term borrowings,average balances for net loans, partially offset by a decreasehigher interest rates and an increase in interest incomethe average balance of $5.2 million on net loans, primarily due to a decline in PPP loans.higher-cost borrowings and other interest-bearing liabilities and interest-bearing deposits.

•Net Interest Margin - Overall, net interest margin increased 31 bps forFor the three months ended June 30, 20222023, NIM increased to 3.40%, or 36 bps, compared to the same period in 2021. Net interest margin increased 152022, driven by a 196 bps forincrease in the yield on net loans, a 20 bps increase in the yield on investment securities and a 285 bps increase in the yield on other interest-earning assets, partially offset by a 150 bps increase in the cost of funds. For the six months ended June 30, 20222023, NIM increased to 3.46%, or 55 bps, compared to the same period in 2021. The increases in net interest margin were2022, driven by higher yieldsa 192 bps increase in the yield on averagenet loans, a 24 bps increase in the yield on investment securities and a 282 bps increase in the yield on other interest-earning assets, and funds moving to higher yielding investment securities from lower yielding other interest-earning assets.partially offset by a 128 bps increase in the cost of funds.

•Loan Growth - Average net loans decreased by $269.4 million,increased $2.2 billion, or 1.4%12.0%, for the three months ended June 30, 20222023 compared to the same period in 2021.2022. The decreaseincrease in average net loans was largely driven by a $1.4increases in average residential mortgage loans, average commercial and industrial loans, average commercial mortgage loans, average consumer loans and average real estate construction loans of $955.6 million, $474.5 million, $435.0 million, $278.3 million and $117.4 million, respectively. Average net loans increased $2.2 billion, decline in PPP loans dueor 11.6%, for the six months ended June 30, 2023 compared to the repayment of thesesame period in 2022. The increase in average net loans upon forgiveness by the SBA, partially offsetwas largely driven by increases in average residential mortgage loans, average commercial mortgage loans, average real estate construction loans and average commercial and industrial loans, of $656.0 million, $162.8 million, $134.5 million and $119.8 million, respectively. Average net loans decreased $432.5 million, or 2.3%, for the six months ended June 30, 2022 compared to the same period in 2021. The decrease was primarily driven by a $1.4 billion decline in PPP loans, partially offset by increases in average residential mortgage loans, average commercial mortgageconsumer loans and average real estate construction loans of $680.2$929.3 million, $165.0$429.9 million, $412.2 million, $281.3 million and $110.2$126.5 million, respectively.

•Deposit GrowthDecrease - Average deposits decreased $241.9$316.6 million, or 1.1%1.5%, for the three months ended June 30, 20222023 compared to the same period in 2021.2022. The decrease in average deposits was largely due to decreasesa decrease in average noninterest-bearing demand deposits of $1.6 billion, partially offset by increases in average brokered deposits of $710.6 million, average time deposits and average interest-bearing demand deposits of $395.3$454.8 million and $381.9 million, respectively, partially offset by growth in average non-interest bearing demand deposits and average savings and money market deposits of $443.9 million and $145.0 million, respectively.$206.9 million. Average deposits increased $59.0decreased $609.6 million, or 0.3%2.8%, for the six months ended June 30, 2022,2023 compared to the same period in 2021.2022. The decrease in average deposits was due to decreases in average noninterest-bearing demand deposits of $1.2 billion and average interest-bearing demand deposits of $199.6 million, partially offset by increases in average brokered deposits of $451.4 million and average time deposits of $228.5 million.

•Borrowings and Other Interest-Bearing Liabilities Increase - Average borrowings and other interest-bearing liabilities increased $1.8 billion, for the three months ended June 30, 2023 compared to the same period in 2022. The increase in borrowings and other interest-bearing liabilities was primarily due to increases in average noninterest-bearing demand depositsFHLB advances and average savings and money market depositsFederal funds purchased of $600.2$880.8 million and $221.8$676.5 million, respectively, partially offset by decreasesrespectively. Average borrowings and other interest-bearing liabilities increased $1.9 billion for the six months ended June 30, 2023 compared to the same period in 2022. The increase in borrowings and other interest-bearing
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liabilities was primarily due to increases in average time depositsFHLB advances and average interest-bearing demand depositsFederal funds purchased of $424.3$1.1 billion and $591.3 million, and $275.1 million, respectively.

•Asset Quality - Non-performing assets increased $24.4decreased $26.1 million, or 15.8%14.7%, as of June 30, 20222023 compared to December 31, 2021,2022, and were 0.71%0.55% and 0.60%0.66% of total assets as of those dates, respectively. ForAnnualized net charge-offs to average loans outstanding was 0.04% for the three months ended June 30, 2023, compared to annualized recoveries to average loans outstanding of (0.08)% for the same period in 2022. Net charge-offs of $16.0 million during the six months ended June 30, 2022 and 2021, annualized net charge-offs2023 were primarily due to average loans outstanding were (0.05)% and 0.14%, respectively.a charge-off of $13.3 million during the first quarter of 2023 for a commercial office loan. The provision for credit losses was $9.7 million for the three months ended June 30, 2023, compared to a negative $5.5provision for credit losses of $1.5 million for the same period in 2022. The provision for credit losses was $34.3 million for the six months ended June 30, 2022,2023, compared to a negative provision of $9.0$5.5 million for the same period of 2021.in 2022. The increases in provision for credit losses for the three and six months ended June 30, 2023 were primarily driven by loan growth and changes to the macroeconomic outlook.

•Non-interest Income - ForNon-interest income, excluding investment securities gains, for the three months ended June 30, 2022, non-interest income, excluding net investment securities gains,2023, increased $6.5$2.2 million, or 12.6%3.8%, compared to the same period in 2021.2022. The increase in non-interest income was primarily due to increases of $2.2 million in fee income from commercial customer interest rate swaps, $1.6 millionswap fee income, reflected in consumer banking fees, $0.9 million in mortgage banking income, $0.7 million in cash management fees, $0.6 million in wealth management revenues and $0.6 million in commercial banking merchant and card revenues.capital markets, of $2.1 million. Non-interest income, excluding net investment securities gains, decreased $0.2 million, or 0.1% for the six months ended June 30, 20222023, decreased $1.3 million, or 1.2%, compared to the same period in 2021.2022. The decrease in non-interest income was primarily due to decreases of $3.4 million in mortgage banking income, $2.2 million in overdraft fees and $1.0 million in wealth management revenues, partially offset by increases of $4.3 million in commercial banking income and $1.0 million in consumer card fee income.

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•Non-interest Expense - Non-interest expense, excluding merger-related expenses of $1.0 million in the second quarter of 2022, increased $7.9$19.3 million, or 5.6%13.0%, for the three months ended June 30, 20222023 compared to the same period in 2021. This2022. The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $7.0$8.7 million in salaries and employee benefits $1.1expense, $2.1 million in net occupancyother outside services expense, and $0.8$2.1 million in data processing and software partially offset byexpense, $1.9 million in FDIC insurance expense, primarily due to the adoption of a decrease offinal rule to increase base deposit insurance assessment rates effective January 1, 2023, $0.9 million in intangible amortization expense and $0.8 million in state taxes.net occupancy expense. Higher expense levels compared to the second quarter of 2022 are in part due to the Prudential Bancorp acquisition. The $8.7 million increase in salaries and benefits expense was primarily driven by annual merit increases, an increase in the number of employees, higher healthcare claims expenses and higher pension costs. Non-interest expense, excluding merger-related expenses of $1.4 million decreased $24.9 million, or 7.8%, forin the six-monthssix months ended June 30, 2022, increased $33.4 million, or 11.3%, for the six months ended June 30, 2023. The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $13.5 million in salaries and employee benefits expense, $4.0 million in other outside services expense, $3.6 million in data processing and software expense, $3.5 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, $1.4 million in intangible amortization expense, $0.9 million in marketing expenses and $0.8 million in state taxes. Higher expense levels compared to the same period in 2021. The decrease was largely driven by debt extinguishment2022 are in part due to the Prudential Bancorp acquisition. Additional drivers of the increase in non-interest expense were an unfavorable change of $1.8 million due to higher gains on sales of owned assets in 2022, $1.0 million in fraud-related losses and $0.9 million in travel and entertainment expenses, in 2021 of $32.6each case, reflected in "other" expense. The $13.5 million partially offset by an increase of $8.9 million in salaries and employee benefits.benefits expense was primarily driven by annual merit increases, an increase in the number of employees, higher healthcare claims expenses and higher pension costs.

•Income Taxes -Income tax expense The Corporation's ETR was 16.8% for the three months ended June 30, 2022 was $16.0 million, a $4.0 million increase from $12.0 million from the same period in 2021. Income tax expense2023 and 17.3% for the six months ended June 30, 2022 was $29.3 million, a $3.4 million increase from the same period in 2021. The Corporation's ETR was 18.6%2023 compared to 17.3% for the three months ended June 30, 2022 compared to 15.6% for the same period in 2021.full-year of 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.

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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, whichthat 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 and financial condition.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 the Corporation and 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 atof 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 June 30Six months ended June 30
2023202220232022
(dollars in thousands, except per share data)
Operating net income available to common shareholders
Net income available to common shareholders$77,045 $67,427 $142,796 $129,153 
Plus: Core deposit intangible amortization912 — 1,426 — 
Plus: Merger-related expenses— 1,027 — 1,428 
Less: Tax impact of adjustments(192)(216)(299)(300)
Operating net income available to common shareholders (numerator)$77,765 $68,238 $143,923 $130,281 
Weighted average shares (diluted) (denominator)167,191 162,075 167,809 162,015 
Operating net income available to common shareholders, per share (diluted)$0.47 $0.42 $0.86 $0.80 
Operating return on average assets, annualized
Net income$79,607$69,989 $147,920$134,277
Plus: Core deposit intangible amortization912—1,426—
Plus: Merger-related expenses—1,027—1,428
Less: Tax impact of adjustments(192)(216)(299)(300)
Operating net income (numerator)$80,327$70,800$149,047$135,405
Total average assets (denominator)$27,235,567$25,578,432$27,069,036$25,600,325
Operating return on average assets1.18 %1.11 %1.11 %1.07 %
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Three months ended June 30Six months ended June 30
2023202220232022
Return on average common shareholders' equity (tangible)
Net income available to common shareholders$77,045$67,427$142,796$129,153
Plus: Intangible amortization1,072177 1,746353
Plus: Merger-related expenses—1,027 —1,428
Less: Tax impact of adjustments(225)(253)(367)(374)
Operating net income available to common shareholders (numerator)$77,892$68,378$144,175$130,560
Average shareholders' equity$2,647,464$2,531,346$2,630,484$2,609,655
Less: Average goodwill and intangible assets(563,146)(537,786)(562,449)(537,881)
Less: Average preferred stock(192,878)(192,878)(192,878)(192,878)
Average tangible common shareholders' equity (denominator)$1,891,440$1,800,682$1,875,157$1,878,896
Return on average common shareholders' equity (tangible)16.52 %15.23 %15.50 %14.01 %
Efficiency ratio
Non-interest expense$168,018$149,730$327,636$295,708
Less: Amortization of tax credit investments—(696)—(1,391)
Less: Merger-related expenses—(1,027)—(1,428)
Less: Intangible amortization(1,072)(177)(1,746)(353)
Non-interest expense (numerator)$166,946$147,830$325,890$292,536
Net interest income$212,852$178,831$428,439$340,141
Tax equivalent adjustment4,4053,4278,8196,716
Plus: Total non-interest income60,58558,391112,339113,647
Less: Investment securities (gains) losses, net4(8)(19)(27)
Total revenue (denominator)$277,846$240,641$549,578$460,477
Efficiency ratio60.1 %61.4 %59.3 %63.5 %



47


RESULTS OF OPERATIONS

Three months ended June 30, 2023 compared to the three months ended June 30, 2022

Net Interest Income

Net interest income was $212.9 million for the three months ended June 30, 2023, an increase of $34.0 million, or 19.0%, compared to the same period in 2022. For the three months ended June 30, 2023, net interest margin increased 36 bps to 3.40% compared to the same period in 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" in this Quarterly Report on Form 10-Q. 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 June 30
 20232022
Average
Balance		InterestYield/
Rate		Average
Balance		InterestYield/
Rate
ASSETS(dollars in thousands)
Interest-earning assets:
Net loans(1)
$20,866,235 $287,154 5.52 %$18,637,175 $165,682 3.56 %
   Investment securities(2)
4,234,096 27,303 2.57 4,398,424 26,061 2.37 
Other interest-earning assets529,582 4,860 3.68 951,504 1,983 0.83 
Total interest-earning assets25,629,913 319,317 4.99 23,987,103 193,726 3.24 
Noninterest-earning assets:
Cash and due from banks129,682 160,240 
Premises and equipment216,847 216,798 
Other assets1,541,657 1,463,332 
Less: ACL - loans(3)
(282,532)(249,041)
Total Assets$27,235,567 $25,578,432 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits$5,535,669 $14,612 1.06 %$5,597,975 $797 0.06 %
Savings and money market deposits6,632,572 29,289 1.77 6,425,634 1,125 0.07 
Brokered deposits954,773 12,135 5.10 244,200 619 1.02 
Time deposits2,063,038 13,763 2.68 1,608,286 3,255 0.81 
Total interest-bearing deposits15,186,052 69,799 1.84 13,876,095 5,796 0.17 
Borrowings and other interest-bearing liabilities2,790,860 32,261 4.60 1,003,830 5,672 2.27 
Total interest-bearing liabilities17,976,912 102,060 2.27 14,879,925 11,468 0.31 
Noninterest-bearing liabilities:
Demand deposits6,021,091 7,647,618 
Other noninterest-bearing liabilities590,100 519,543 
Total Liabilities24,588,103 23,047,086 
Total Deposits/Cost of deposits21,207,143 1.32 21,523,713 0.11 
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds23,998,003 1.70 22,527,543 0.20 
Shareholders’ equity2,647,464 2,531,346 
Total Liabilities and Shareholders’ Equity$27,235,567 $25,578,432 
Net interest income/FTE NIM217,257 3.40 %182,258 3.04 %
Tax equivalent adjustment(4,405)(3,427)
Net interest income$212,852 $178,831 
(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.

48


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 June 30, 2023 in comparison to the same period in 2022:
 2023 vs. 2022
Increase (Decrease) due
to change in
 VolumeYield/RateNet
 (dollars in thousands)
FTE Interest income on:
Net loans(1)
$21,679 $99,793 $121,472 
Investment securities(965)2,207 1,242 
Other interest-earning assets(1,217)4,094 2,877 
Total interest income$19,497 $106,094 $125,591 
Interest expense on:
Demand deposits$(9)$13,824 $13,815 
Savings and money market deposits37 28,127 28,164 
Brokered deposits4,850 6,666 11,516 
Time deposits1,147 9,361 10,508 
Borrowings and other interest-bearing liabilities16,865 9,724 26,589 
Total interest expense$22,890 $67,702 $90,592 
(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 second quarter of 2022, FTE total interest income for the second quarter of 2023 increased $125.6 million, or 64.8%, primarily due to an increase of $106.1 million attributable to changes in yield, of which $99.8 million related to net loans. The yield on average interest-earning assets increased 175 bps in the second quarter of 2023 compared to the same period in 2022.

In the second quarter of 2023, interest expense increased $90.6 million compared to the second quarter of 2022, primarily driven by the increase in rate on interest-bearing liabilities resulting in a $67.7 million increase in interest expense. The increase in interest expense attributable to rate was driven by increases in the rates on savings and money market deposits, demand deposits, borrowings and other interest-bearing liabilities, time deposits and brokered deposits. The increase in volume of borrowings and other interest-bearing liabilities contributed an increase of $22.9 million in interest expense, primarily due to an increase in average borrowings and other interest-bearing liabilities and brokered deposits.

Average loans and average FTE yields, by type, are summarized in the following table:
Three months ended June 30
 20232022Increase (Decrease)
 BalanceYieldBalanceYield$%
 (dollars in thousands)
Real estate – commercial mortgage$7,775,436 5.93 %$7,340,417 3.46 %$435,019 5.9 %
Commercial and industrial4,629,919 6.16 4,155,436 3.57 474,483 11.4 
Real estate – residential mortgage5,008,295 3.70 4,052,666 3.31 955,629 23.6 
Real estate – home equity1,066,615 6.93 1,118,494 4.09 (51,879)(4.6)
Real estate – construction1,306,286 6.68 1,188,932 3.44 117,354 9.9 
Consumer763,407 5.85 485,095 5.30 278,312 57.4 
Leases and other loans(1)
316,277 4.48 296,135 4.66 20,142 6.8 
Total loans$20,866,235 5.52 %$18,637,175 3.56 %$2,229,060 12.0 %
(1) Consists of equipment lease financing, overdrafts and net origination fees and costs.

49


During the second quarter of 2023, average loans increased $2.2 billion, or 12.0%, compared to the same period in 2022. The increase in average loans was largely driven by increases in average residential mortgage loans, average commercial and industrial loans, average commercial mortgage loans and average consumer loans of $955.6 million, $474.5 million, $435.0 million and $278.3 million, respectively. The yield on total loans increased 196 bps to 5.52% for the second quarter of 2023, compared to 3.56% for the same period in 2022, primarily due to rising interest rates.

Average deposits and average interest rates, by type, are summarized in the following table:
Three months ended June 30
 20232022Increase (Decrease)
 BalanceRateBalanceRate$%
 (dollars in thousands)
Noninterest-bearing demand$6,021,091 — %$7,647,618 — %$(1,626,527)(21.3)%
Interest-bearing demand5,535,669 1.06 5,597,975 0.06 (62,306)(1.1)
Savings and money market deposits6,632,572 1.77 6,425,634 0.07 206,938 3.2 
Total demand deposits and savings and money market deposits18,189,332 0.97 19,671,227 0.04 (1,481,895)(7.5)
Brokered deposits954,773 5.10 244,200 1.02 710,573 291.0 
Time deposits2,063,038 2.68 1,608,286 0.81 454,752 28.3 
Total deposits$21,207,143 1.32 %$21,523,713 0.11 %$(316,570)(1.5)%

The cost of total deposits increased 121 bps, to 1.32%, for the second quarter of 2023 compared to 0.11% for the same period in 2022, due to an increase in rates and a change in the mix of deposits. The rate on total demand deposits and savings and money market deposits increased to 0.97% for the second quarter of 2023 compared to 0.04% for the same period in 2022. Average noninterest-bearing demand deposits decreased $1.6 billion for the second quarter of 2023 compared to the same period in 2022.Average brokered deposits and average time deposits increased $710.6 million and $454.8 million, respectively, during the second 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 June 30
 20232022Increase (Decrease)
 BalanceRateBalanceRate$%
Borrowings and other interest-bearing liabilities:(dollars in thousands)
Federal funds purchased$679,401 5.31 %$2,857 N/M$676,544 N/M
Federal Home Loan Bank advances880,811 5.34 11 N/M880,800 N/M
Senior debt and subordinated debt539,906 3.96 555,701 3.94 (15,795)(2.8)
Other borrowings and other interest-bearing liabilities(1)
690,742 3.47 445,261 0.19 245,481 55.1 
Total borrowings and other interest-bearing liabilities$2,790,860 4.60 %$1,003,830 2.27 %$1,787,030 N/M
(1) Includes repurchase agreements, short-term promissory notes, capital leases and collateral liabilities.

Average total borrowings and other interest-bearing liabilities increased $1.8 billion in the second quarter of 2023 compared to the same period in 2022. Average total borrowings and other interest-bearing liabilities increased primarily as a result of a decrease in average total deposits and an increase in the average net loan balance. Average FHLB advances, average Federal funds purchased and average other borrowings and other interest-bearing liabilities increased $880.8 million, $676.5 million and $245.5 million, respectively.

Provision for Credit Losses

The provision for credit losses was $9.7 million for the second quarter of 2023 compared to a provision of $1.5 million for the same period in 2022. The increase in provision for credit losses was primarily driven by loan growth and changes to the macroeconomic outlook.

50


Non-Interest Income

The following table presents the components of non-interest income:
 Three months ended June 30Increase (Decrease)
 20232022$%
 (dollars in thousands)
Wealth management$18,678 $18,274 $404 2.2 %
Commercial banking:
   Merchant and card7,700 7,355 345 4.7 
   Cash management5,835 6,062 (227)(3.7)
   Capital markets6,092 3,893 2,199 56.5 
   Other commercial banking3,518 3,049 469 15.4 
Total commercial banking23,145 20,359 2,786 13.7 
Consumer banking:
  Card6,592 6,067 525 8.7 
  Overdraft2,696 3,881 (1,185)(30.5)
  Other consumer banking2,432 2,524 (92)(3.6)
Total consumer banking11,720 12,472 (752)(6.0)
Mortgage banking:
Gains on sales of mortgage loans1,621 2,542 (921)(36.2)
Mortgage servicing income1,319 1,226 93 7.6 
Total mortgage banking2,940 3,768 (828)(22.0)
Other4,106 3,510 596 17.0 
Non-interest income before investment securities gains60,589 58,383 2,206 3.8 
Investment securities gains (losses), net(4)8 (12)(150.0)
Total Non-Interest Income$60,585 $58,391 $2,194 3.8 %

Excluding net investment securities gains, non-interest income increased $2.2 million, or 3.8%, in the second quarter of 2023 compared to the same period in 2022. The increase in non-interest income was primarily due to increases in commercial customer interest rate swap fee income, reflected in capital markets, of $2.1 million.






















4551


Following are reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure:
Three months ended June 30Six months ended June 30
2022202120222021
(dollars in thousands)
Return on average assets, excluding merger-related expenses
Net income$69,989$64,964$134,277$138,027
Plus: Merger-related expenses, net of tax811—1,128—
Net income (numerator)$70,800$64,964$135,405$138,027
Total average assets (denominator)$25,578,432$26,017,542$25,600,325$26,049,999
Return on average assets, excluding merger-related expenses, annualized1.11 %1.00 %1.07 %1.07 %
Return on average common shareholders' equity (tangible)
Net income available to common shareholders$67,427$62,402$129,153$132,874
Plus: Merger-related expenses, net of tax811—1,128—
Plus: Intangible amortization, net of tax140140279230
Numerator$68,378$62,542$130,560$133,104
Average shareholders' equity$2,531,346$2,669,413$2,609,655$2,653,345
Less: Average goodwill and intangible assets(537,786)(536,470)(537,881)(536,536)
Less: Average preferred stock(192,878)(192,878)(192,878)(192,878)
Average tangible common shareholders' equity (denominator)$1,800,682$1,940,065$1,878,896$1,923,931
Return on average common shareholders' equity (tangible), annualized15.23 %12.93 %14.01 %13.95 %
Efficiency ratio
Non-interest expense$149,730$140,831$295,708$319,215
Less: Amortization of tax credit investments(696)(1,563)(1,391)(3,094)
Less: Merger-related expenses(1,027)—(1,428)—
Less: Intangible amortization(177)(178)(353)(293)
Less: Debt extinguishment cost—(412)—(32,575)
Numerator$147,830$138,678$292,536$283,253
Net interest income$178,831$162,399$340,141$326,847
Tax equivalent adjustment3,4273,0186,7165,998
Plus: Total non-interest income58,39151,890113,647147,287
Less: Investment securities gains, net(8)(36)(27)(33,511)
Denominator$240,641$217,271$460,477$446,621
Efficiency ratio61.4 %63.8 %63.5 %63.4 %
Non-Interest Expense

Presented onThe following table presents the components of non-interest expense:
 Three months ended June 30Increase (Decrease)
 20232022$%
 (dollars in thousands)
Salaries and employee benefits$94,102 $85,404 $8,698 10.2 %
Data processing and software16,776 14,685 2,091 14.2 
Net occupancy14,374 13,587 787 5.8 
Other outside services10,834 8,764 2,070 23.6 
FDIC insurance4,895 2,961 1,934 65.3 
State taxes3,939 3,568 371 10.4 
Equipment3,530 3,422 108 3.2 
Professional fees1,829 2,013 (184)(9.1)
Marketing1,655 1,326 329 24.8 
Intangible amortization1,072 177 895 N/M
Merger-related expenses— 1,027 (1,027)N/M
Other15,012 12,796 2,216 17.3 
Total non-interest expense$168,018 $149,730 $18,288 12.2 %

Non-interest expense, excluding merger-related expenses of $1.0 million in the second quarter of 2022, increased $19.3 million, or 13.0%, for the three months ended June 30, 2023 compared to the same period in 2022. The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $8.7 million in salaries and employee benefits expense, $2.1 million in other outside services expense, $2.1 million in data processing and software expense, $1.9 million in FDIC insurance expense, primarily due to the adoption of a FTE basis, usingfinal rule to increase base deposit insurance assessment rates effective January 1, 2023, $0.9 million in intangible amortization expense and $0.8 million in net occupancy expense. Higher expense levels compared to the second quarter of 2022 are in part due to the Prudential Bancorp acquisition. The $8.7 million increase in salaries and benefits expense was primarily driven by annual merit increases, an increase in the number of employees, higher healthcare claims expenses and higher pension costs.

Income Taxes

Income tax expense for the three months ended June 30, 2023 was $16.1 million, a 21% federal tax rate.$0.1 million increase from $16.0 million for the same period in 2022. The Corporation's ETR was 16.8% for the three months ended June 30, 2023 compared to 17.3% for the full year in 2022.


















4652


RESULTS OF OPERATIONS

ThreeSix months ended June 30, 20222023 compared to the threesix months ended June 30, 20212022

Net Interest Income

FTE net interest income increased $16.8$90.4 million to $182.3$437.3 millionfor the threesix months ended June 30, 2022,2023, from $165.4$346.9 million for the same period in 2021.2022. NIM increased 3155 bps to 3.04%3.46%, compared to 2.73%2.91% for the same period in 2021.2022. 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 June 30
 20222021
Average
Balance		InterestYield/
Rate		Average
Balance		InterestYield/
Rate
ASSETS(dollars in thousands)
Interest-earning assets:
Net loans (1)
$18,637,175 $165,682 3.56 %$18,906,556 $156,525 3.32 %
   Investment securities (2)
4,398,424 26,061 2.37 3,591,231 21,392 2.38 
Loans held for sale13,260 260 7.84 31,948 199 2.49 
Other interest-earning assets938,244 1,723 0.74 1,752,549 1,575 0.36 
Total interest-earning assets23,987,103 193,726 3.24 24,282,284 179,691 2.97 
Noninterest-earning assets:
Cash and due from banks160,240 129,927 
Premises and equipment216,798 229,047 
Other assets1,463,332 1,643,410 
Less: ACL - loans (3)
(249,041)(267,126)
Total Assets$25,578,432 $26,017,542 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits$5,597,975 $797 0.06 %$5,979,855 $932 0.06 %
Savings and money market deposits6,425,634 1,125 0.07 6,280,629 1,363 0.09 
Brokered deposits244,200 619 1.02 297,815 253 0.34 
Time deposits1,608,286 3,255 0.81 2,003,606 5,434 1.09 
Total interest-bearing deposits13,876,095 5,796 0.17 14,561,905 7,982 0.22 
Short-term borrowings446,838 190 0.17 514,025 137 0.11 
 Long-term borrowings556,992 5,482 3.94 626,795 6,155 3.93 
Total interest-bearing liabilities14,879,925 11,468 0.31 15,702,725 14,274 0.36 
Noninterest-bearing liabilities:
Demand deposits7,647,618 7,203,696 
Other liabilities519,543 441,708 
Total Liabilities23,047,086 23,348,129 
Total Deposits/Cost of deposits21,523,713 0.11 21,765,601 0.15 
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds22,527,543 0.20 22,906,421 0.25 
Shareholders’ equity2,531,346 2,669,413 
Total Liabilities and Shareholders’ Equity$25,578,432 $26,017,542 
Net interest income/FTE NIM182,258 3.04 %165,417 2.73 %
Tax equivalent adjustment(3,427)(3,018)
Net interest income$178,831 $162,399 
(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.

47


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 June 30, 2022 in comparison to the same period in 2021:
 2022 vs. 2021
Increase (Decrease) due
to change in
 VolumeYield/RateNet
 (in thousands)
FTE Interest income on:
Net loans (1)
$(2,218)$11,375 $9,157 
Investment securities4,759 (90)4,669 
Loans held for sale(169)230 61 
Other interest-earning assets(970)1,118 148 
Total interest income$1,402 $12,633 $14,035 
Interest expense on:
Demand deposits$(135)$— $(135)
Savings and money market deposits37 (275)(238)
Brokered deposits(53)419 366 
Time deposits(947)(1,232)(2,179)
Short-term borrowings(19)72 53 
Long-term borrowings(689)16 (673)
Total interest expense$(1,806)$(1,000)$(2,806)
(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 second quarter of 2021, FTE total interest income for the second quarter of 2022 increased $14.0 million, or 7.8%, primarily due to an increase of $12.6 millionattributable to changes in yield of which $11.4 millionrelated to net loans.The yield on average interest-earning assets increased 27 bps in the second quarter of 2022 compared to the same period in 2021.

In the second quarter of 2022, interest expense decreased $2.8 million compared to the second quarter of 2021, primarily driven by the decrease in average interest-bearing liabilities resulting in a $1.8 million decline in interest expense. The decrease in interest expense attributable to volume was primarily driven by the decreases in average time deposits and average long-term borrowings.

Average loans and average FTE yields, by type, are summarized in the following table:
Three months ended June 30Increase (Decrease)
 20222021 in Balance
 BalanceYieldBalanceYield$%
 (dollars in thousands)
Real estate – commercial mortgage$7,340,417 3.46 %$7,177,622 3.16 %$162,795 2.3 %
Commercial and industrial (1)
4,155,436 3.57 5,445,160 2.58 (1,289,724)(23.7)
Real estate – residential mortgage4,052,666 3.31 3,396,690 3.39 655,976 19.3 
Real estate – home equity1,118,494 4.09 1,139,558 3.71 (21,064)(1.8)
Real estate – construction1,188,932 3.44 1,054,469 3.05 134,463 12.8 
Consumer485,095 5.30 451,486 3.89 33,609 7.4 
Equipment lease financing253,659 3.89 256,248 3.74 (2,589)(1.0)
Other (2)
42,476 — (14,677)— 57,153 N/M
Total loans$18,637,175 3.56 %$18,906,556 3.32 %$(269,381)(1.4)%
(1) Includes average PPP loans of $0.1 billion and $1.5 billion for the three months ended June 30, 2022 and 2021, respectively.
(2) Consists of overdrafts and net origination fees and costs.
48


During the second quarter of 2022, average loans decreased $269.4 million, or 1.4%, compared to the same period in 2021. The decrease was largely driven by a $1.4 billion decline in average PPP loans due to the repayment of these loans upon forgiveness by the SBA, partially offset by increases in average residential mortgage loans, average commercial mortgage loans and average construction loans of $656.0 million, $162.8 million and $134.5 million, respectively. The increases in yields on commercial mortgage loans, commercial and industrial loans, home equity loans and construction loans were primarily due to rising interest rates.

Average deposits and average interest rates, by type, are summarized in the following table:
Three months ended June 30Increase (Decrease)
 in Balance
 20222021
 BalanceRateBalanceRate$%
 (dollars in thousands)
Noninterest-bearing demand$7,647,618 — %$7,203,696 — %$443,922 6.2 %
Interest-bearing demand5,597,975 0.06 5,979,855 0.06 (381,880)(6.4)
Savings and money market deposits6,425,634 0.07 6,280,629 0.09 145,005 2.3 
Total demand and savings19,671,227 0.04 19,464,180 0.05 207,047 1.1 
Brokered deposits244,200 1.02 297,815 0.34 (53,615)(18.0)
Time deposits1,608,286 0.81 2,003,606 1.09 (395,320)(19.7)
Total deposits$21,523,713 0.11 %$21,765,601 0.15 %$(241,888)(1.1)%

The cost of total deposits decreased 4 bps, to 0.11%, for the second quarter of 2022, compared to 0.15% for the same period in 2021, due to the change in mix of deposits and a decline in rates on time deposits of 28 bps and savings and money market deposits of 2 bps. Average noninterest-bearing demand deposits and average savings and money market deposits increased $443.9 million and $145.0 million, respectively, and time deposits and interest-bearing demand deposits decreased $395.3 million and $381.9 million, respectively, during the second quarter of 2022 compared to the same period in 2021.

Average borrowings and interest rates, by type, are summarized in the following table:
Three months ended June 30Increase (Decrease)
 20222021in Balance
 BalanceRateBalanceRate$%
Short-term borrowings:(dollars in thousands)
Customer funding(1)
$443,970 0.18 %$514,025 0.11 %$(70,055)(13.6)%
Federal funds purchased2,857 1.48 — — 2,857 N/M
FHLB advances and other borrowings (2)
11 — — — 11 N/M
Total short-term borrowings446,838 0.17 514,025 0.11 (67,187)(13.1)
Long-term borrowings:
Other long-term debt556,992 3.94 626,795 3.93 (69,803)(11.1)
Total borrowings$1,003,830 2.26 %$1,140,820 2.21 %$(136,990)(12.0)%
(1) Includes repurchase agreements and short-term promissory notes.
(2) Consists of FHLB advances and other borrowings with original terms of less than one year.

Average total short-term borrowings decreased $67.2 million, or 13.1%, in the second quarter of 2022, compared to the same period in 2021.

Average total long-term borrowings decreased $69.8 million, or 11.1%, in the second quarter of 2022, compared to the same period in 2021, primarily as a result of the $65 million repayment of senior notes on March 16, 2022. See Note 14 "Long-Term Borrowings" of the Notes to Consolidated Financial Statements for additional details.






49


Provision for Credit Losses

The provision for credit losses was $1.5 million for the second quarter of 2022, an increase of $5.0 million from the same period in 2021. The provision for credit losses for the second quarter of 2022 was recorded to adjust the allowance for credit losses as a result of loan growth during the quarter as well as the economic outlook.

Non-Interest Income

The following table presents the components of non-interest income:
 Three months ended June 30Increase (Decrease)
 20222021$%
 (dollars in thousands)
Commercial banking:
   Merchant and card$7,355 $6,786 $569 8.4 %
   Cash management6,062 5,341 721 13.5 
   Capital markets3,893 1,536 2,357 N/M
   Other commercial banking3,049 3,466 (417)(12.0)
Total commercial banking20,359 17,129 3,230 18.9 
Consumer banking:
  Card6,067 5,733 334 5.8 
  Overdraft3,881 2,750 1,131 41.1 
  Other consumer banking2,524 2,377 147 6.2 
Total consumer banking12,472 10,860 1,612 14.8 
Wealth management revenues18,274 17,634 640 3.6 
Mortgage banking:
Gains on sales of mortgage loans2,542 5,438 (2,896)(53.3)
Mortgage servicing income1,226 (2,600)3,826 (147.2)
Total mortgage banking3,768 2,838 930 32.8 
Other3,510 3,393 117 3.4 
Non-interest income before investment securities gains58,383 51,854 6,529 12.6 
Investment securities gains, net8 36 (28)(77.8)
Total Non-Interest Income$58,391 $51,890 $6,501 12.5 %

Excluding net investment securities gains, non-interest income increased $6.5 million, or 12.6%, in the second quarter of 2022 compared to the same period in 2021.

Compared to the second quarter of 2021, commercial banking income in the second quarter of 2022 increased $3.2 million, or 18.9%, driven by a $2.2 million increase in fee income from commercial customer interest rate swaps reflected in capital markets income. Mortgage servicing income in the second quarter of 2022 compared to the same period in 2021 increased $3.8 million, partially offset by a decrease of $2.9 million in gains of sales of mortgage loans.













50


Non-Interest Expense

The following table presents the components of non-interest expense:
 Three months ended June 30Increase (Decrease)
 20222021$%
 (dollars in thousands)
Salaries and employee benefits$85,404 $78,367 $7,037 9.0 %
Data processing and software14,685 13,932 753 5.4 
Net occupancy13,587 12,494 1,093 8.7 
Other outside services8,764 8,178 586 7.2 
State taxes3,568 4,384 (816)(18.6)
Equipment3,422 3,424 (2)(0.1)
FDIC insurance2,961 2,282 679 29.8 
Professional fees2,013 2,651 (638)(24.1)
Marketing1,326 1,348 (22)(1.6)
Intangible amortization177 178 (1)(0.6)
Debt extinguishment— 412 (412)(100.0)
Merger-related expenses1,027 — 1,027 N/M
Other12,796 13,181 (385)(2.9)
Total non-interest expense$149,730 $140,831 $8,899 6.3 %

Compared to the second quarter of 2021, non-interest expense, excluding merger-related expenses of $1.0 million, in the second quarter of 2022 increased $7.9 million, or 5.6%, primarily due to increases of $7.0 million in salaries and employee benefits and $1.1 million in net occupancy expense, partially offset by a decrease in state taxes of $0.8 million.

Income Taxes

Income tax expense for the three months ended June 30, 2022 was $16.0 million, a $4.0 million increase from $12.0 million for the same period in 2021. The Corporation's ETR was 18.6% for the three months ended June 30, 2022, compared to 15.6% for the same period in 2021.





















51


Six months ended June 30, 2022 compared to the six months ended June 30, 2021

Net Interest Income

FTE net interest income increased $14.0 million to $346.9 million for the six months ended June 30, 2022,from $332.8 million for the same period in 2021. NIM increased 15 bps, to 2.91%,compared to 2.76%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.
Six months ended June 30 Six months ended June 30
20222021 20232022
Average
Balance		Interest Yield/
Rate		Average
Balance		InterestYield/
Rate		Average
Balance		Interest Yield/
Rate		Average
Balance		InterestYield/
Rate
ASSETSASSETS(dollars in thousands)ASSETS(dollars in thousands)
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Net loans(1)
Net loans(1)
$18,510,845 $316,809 3.44 %$18,943,367 $321,987 3.42 %
Net loans(1)
$20,665,779 $550,219 5.36 %$18,510,845 $316,809 3.44 %
Investment securities (2)
Investment securities (2)
4,312,867 50,312 2.33 3,471,352 42,239 2.43 
Investment securities (2)
4,261,718 54,824 2.57 4,312,867 50,312 2.33 
Loans held for sale20,862 501 4.80 42,647 671 3.14 
Other interest-earning assetsOther interest-earning assets1,097,326 2,394 0.44 1,825,966 2,711 0.30 Other interest-earning assets511,456 8,508 3.34 1,118,188 2,895 0.52 
Total interest-earning assetsTotal interest-earning assets23,941,900 370,016 3.11 24,283,332 367,607 3.05 Total interest-earning assets25,438,953 613,551 4.85 23,941,900 370,016 3.11 
Noninterest-earning assets:Noninterest-earning assets:Noninterest-earning assets:
Cash and due from banksCash and due from banks161,274 125,081 Cash and due from banks135,436 161,274 
Premises and equipmentPremises and equipment218,357 229,843 Premises and equipment219,920 218,357 
Other assetsOther assets1,528,820 1,685,708 Other assets1,552,669 1,528,820 
Less: ACL - loans(3)
Less: ACL - loans(3)
(250,026)(273,965)
Less: ACL - loans(3)
(277,942)(250,026)
Total AssetsTotal Assets$25,600,325 $26,049,999 Total Assets$27,069,036 $25,600,325 
LIABILITIES AND SHAREHOLDERS' EQUITYLIABILITIES AND SHAREHOLDERS' EQUITYLIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
Demand depositsDemand deposits$5,631,296 $1,525 0.06 %$5,906,423 $2,092 0.07 %Demand deposits$5,431,696 $23,067 0.86 %$5,631,296 $1,525 0.06 %
Savings and money market depositsSavings and money market deposits6,431,060 2,146 0.07 6,209,253 2,890 0.09 Savings and money market deposits6,551,470 49,824 1.53 6,431,060 2,146 0.07 
Brokered depositsBrokered deposits247,258 835 0.68 311,016 647 0.42 Brokered deposits698,644 17,308 5.00 247,258 835 0.68 
Time depositsTime deposits1,652,430 6,895 0.84 2,076,681 11,955 1.16 Time deposits1,880,970 21,221 2.28 1,652,430 6,895 0.84 
Total interest-bearing depositsTotal interest-bearing deposits13,962,044 11,401 0.16 14,503,373 17,584 0.24 Total interest-bearing deposits14,562,780 111,420 1.54 13,962,044 11,401 0.16 
Short-term borrowings435,457 311 0.14 542,243 325 0.12 
Long-term borrowings583,283 11,447 3.92 947,203 16,853 3.56 
Borrowings and other interest-bearing liabilitiesBorrowings and other interest-bearing liabilities2,928,819 64,873 4.43 1,018,740 11,758 2.31 
Total interest-bearing liabilitiesTotal interest-bearing liabilities14,980,784 23,159 0.31 15,992,819 34,762 0.44 Total interest-bearing liabilities17,491,599 176,293 2.03 14,980,784 23,159 0.31 
Noninterest-bearing liabilities:Noninterest-bearing liabilities:Noninterest-bearing liabilities:
Demand depositsDemand deposits7,540,025 6,939,731 Demand deposits6,329,701 7,540,025 
Other liabilities469,861 464,104 
Other noninterest-bearing liabilitiesOther noninterest-bearing liabilities617,252 469,861 
Total LiabilitiesTotal Liabilities22,990,670 23,396,654 Total Liabilities24,438,552 22,990,670 
Total Deposits/Cost of depositsTotal Deposits/Cost of deposits21,502,069 0.11 21,443,104 0.17 Total Deposits/Cost of deposits20,892,481 1.08 21,502,069 0.11 
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds22,520,809 0.21 22,932,550 0.30 
Total Interest-bearing liabilities and noninterest-bearing deposits/Cost of fundsTotal Interest-bearing liabilities and noninterest-bearing deposits/Cost of funds23,821,300 1.49 22,520,809 0.21 
Shareholders’ equityShareholders’ equity2,609,655 2,653,345 Shareholders’ equity2,630,484 2,609,655 
Total Liabilities and Shareholders’ EquityTotal Liabilities and Shareholders’ Equity$25,600,325 $26,049,999 Total Liabilities and Shareholders’ Equity$27,069,036 $25,600,325 
Net interest income/FTE NIMNet interest income/FTE NIM346,857 2.91 %332,845 2.76 %Net interest income/FTE NIM437,258 3.46 %346,857 2.91 %
Tax equivalent adjustmentTax equivalent adjustment(6,716)(5,998)Tax equivalent adjustment(8,819)(6,716)
Net interest incomeNet interest income$340,141 $326,847 Net interest income$428,439 $340,141 
 
(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"net loans and does not include the ACL for OBS credit exposures, which is included in other liabilities.







5253


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 six months ended June 30, 20222023 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
VolumeYield/RateNetVolumeYield/RateNet
(in thousands)(dollars in thousands)
FTE interest income on:FTE interest income on:FTE interest income on:
Net loans (1)
Net loans (1)
$(7,114)$1,936 $(5,178)
Net loans (1)
$40,282 $193,128 $233,410 
Investment securitiesInvestment securities9,845 (1,772)8,073 Investment securities(594)5,106 4,512 
Loans held for sale(428)259 (169)
Other interest-earning assetsOther interest-earning assets(1,315)998 (317)Other interest-earning assets(2,334)7,947 5,613 
Total interest incomeTotal interest income$988 $1,421 $2,409 Total interest income$37,354 $206,181 $243,535 
Interest expense on:Interest expense on:Interest expense on:
Demand depositsDemand deposits$(139)$(428)$(567)Demand deposits$(61)$21,603 $21,542 
Savings and money market depositsSavings and money market deposits68 (812)(744)Savings and money market deposits43 47,635 47,678 
Brokered depositsBrokered deposits(153)341 188 Brokered deposits3,677 12,796 16,473 
Time depositsTime deposits(2,153)(2,907)(5,060)Time deposits1,070 13,256 14,326 
Short-term borrowings(66)52 (14)
Long-term borrowings(6,957)1,551 (5,406)
Borrowings and other interest-bearing liabilitiesBorrowings and other interest-bearing liabilities35,660 17,455 53,115 
Total interest expenseTotal interest expense$(9,400)$(2,203)$(11,603)Total interest expense$40,389 $112,745 $153,134 
(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 same period in 2021,2022, FTE total interest income for the six months ended June 30, 20222023 increased $2.4$243.5 million due to increases of $1.4$206.2 million attributable to changes in yield and $1.0$37.4 million attributable to changes in volume. The increase due to changes in rateyield was primarily driven by net loans and other interest-earning assets, partially offset by a decrease in yield on investment securities.loans. The increase due to changes in volume was primarily due to an increase in average investment securities,net loans, partially offset by decreases in average net loans and average other interest-earning assets.

The yield on average interest-earning assets increased 6174 bps in thesix months ended June 30, 20222023 compared to the same period in 2021.2022.

For the six months ended June 30, 2022,2023, interest expense decreased $11.6increased $153.1 million compared to the same period in 2021,2022, primarily due to the decreasedriven by an increase in averagerate on interest-bearing liabilities resulting in a $9.4$112.7 million declineincrease in interest expense. The decreaseincrease in interest expense attributable to rate was driven by the increases in the rates on savings and money market deposits, demand deposits and borrowings and other interest-bearing liabilities. The increase in interest expense attributable to volume was $40.4 million primarily driven by the $7.0 million impact from the decreasean increase in average long-term borrowings. In addition,borrowings and other interest-bearing liabilities, which resulted in an increase of $35.7 million in interest expense on average time deposits decreased $5.1 million, of which $2.2 million was attributable to volume and $2.9 million was attributable to rate.expense.















5354


Average loans and average FTE yields, by type, are summarized in the following table:
Six months ended June 30Increase (Decrease) in BalanceSix months ended June 30
20222021 20232022Increase (Decrease)
BalanceYieldBalanceYield$% BalanceYieldBalanceYield$%
(dollars in thousands) (dollars in thousands)
Real estate – commercial mortgageReal estate – commercial mortgage$7,318,422 3.30 %$7,153,444 3.16 %$164,978 2.3 %Real estate – commercial mortgage$7,748,356 5.74 %$7,318,422 3.30 %$429,934 5.9 %
Commercial and industrial (1)
Commercial and industrial (1)
4,185,883 3.31 5,582,855 3.73 (1,396,972)(25.0)
Commercial and industrial (1)
4,598,097 5.97 4,185,883 3.31 412,214 9.8 
Real estate – residential mortgageReal estate – residential mortgage3,970,877 3.30 3,290,726 3.46 680,151 20.7 Real estate – residential mortgage4,900,182 3.64 3,970,877 3.30 929,305 23.4 
Real estate – home equityReal estate – home equity1,125,257 3.85 1,157,289 3.73 (32,032)(2.8)Real estate – home equity1,076,270 6.65 1,125,257 3.85 (48,987)(4.4)
Real estate – constructionReal estate – construction1,164,785 3.23 1,054,593 3.07 110,192 10.4 Real estate – construction1,291,299 6.49 1,164,785 3.23 126,514 10.9 
ConsumerConsumer461,159 5.38 455,241 4.01 5,918 1.3 Consumer742,445 5.62 461,159 5.38 281,286 61.0 
Equipment lease financing245,071 3.84 261,300 3.93 (16,229)(6.2)
Other (2)
39,391 — (12,081)— 51,472 N/M
Leases and other loans (1)
Leases and other loans (1)
309,130 4.29 284,462 5.92 24,668 8.7 
Total loansTotal loans$18,510,845 3.44 %$18,943,367 3.42 %$(432,522)(2.3)%Total loans$20,665,779 5.36 %$18,510,845 3.44 %$2,154,934 11.6 %
(1) Includes average PPP loans of $0.2 billion and $1.6 billion for the six months ended June 30, 2022 and 2021, respectively.
(2) Consists of equipment lease financing, overdrafts and net origination fees and costs.

During the six months ended June 30, 2022,2023, average loans decreased $432.5 million,increased $2.2 billion, or 2.3%11.6%,compared to the same period in 2021.2022. The decreaseincrease was largely driven by a declineincreases in PPP loans due to the repayment of these loans upon forgiveness by the SBA, partially offset by increases inaverage residential mortgage loans, average commercial mortgage loans, average commercial and constructionindustrial loans and average consumer loans of $680.2$929.3 million, $165.0$429.9 million, $412.2 million and $110.2$281.3 million, respectively.

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

Six months ended June 30Increase (Decrease) in
 Balance		Six months ended June 30
2022202120232022Increase (Decrease)
BalanceRateBalanceRate$%BalanceRateBalanceRate$%
(dollars in thousands)(dollars in thousands)
Noninterest-bearing demandNoninterest-bearing demand$7,540,025 — %$6,939,731 — %$600,294 8.7 %Noninterest-bearing demand$6,329,701 — %$7,540,025 — %$(1,210,324)(16.1)%
Interest-bearing demandInterest-bearing demand5,631,296 0.06 5,906,423 0.07 (275,127)(4.7)Interest-bearing demand5,431,696 0.86 5,631,296 0.06 (199,600)(3.5)
Savings and money market depositsSavings and money market deposits6,431,060 0.07 6,209,253 0.09 221,807 3.6 Savings and money market deposits6,551,470 1.53 6,431,060 0.07 120,410 1.9 
Total demand and savings19,602,381 0.04 19,055,407 0.05 546,974 2.9 
Total demand deposits and savings and money market depositsTotal demand deposits and savings and money market deposits18,312,867 0.80 19,602,381 0.04 (1,289,514)(6.6)
Brokered depositsBrokered deposits247,258 0.68 311,016 0.42 (63,758)(20.5)Brokered deposits698,644 5.00 247,258 0.68 451,386 N/M
Time depositsTime deposits1,652,430 0.84 2,076,681 1.16 (424,251)(20.4)Time deposits1,880,970 2.28 1,652,430 0.84 228,540 13.8 
Total depositsTotal deposits$21,502,069 0.11 %$21,443,104 0.17 %$58,965 0.3 %Total deposits$20,892,481 1.08 %$21,502,069 0.11 %$(609,588)(2.8)%

The cost of total deposits decreased 6increased 97 bps to 0.11%1.08% for the first six months of 20222023 compared to 0.17%0.11% for the same period of 2021,2022, primarily due to therising interest rates and a change in the mix of deposits. Average deposits with increasesdecreased $609.6 million driven by a $1.2 billion decrease in average noninterest-bearing demand deposits, andpartially offset by increases in average savingsbrokered deposits and money market deposits of $600.3 million and $221.8 million, respectively, and decreases of $424.3 million in average time deposits of $451.4 million and $275.1$228.5 million, in average interest-bearing demand deposits. Additionally, the decline in the rate on average time deposits resulted in a $2.9 million decrease in interest expense during the first six months of 2022 compared to the same period in 2021.respectively.












5455


Average borrowings and interest rates, by type, are summarized in the following table:
Six months ended June 30Increase (Decrease) in
Balance
 20222021
 BalanceRateBalanceRate$%
Short-term borrowings:(dollars in thousands)
Customer funding(1)
$434,015 0.15 %$542,243 0.12 %$(108,228)(20.0)%
Federal funds purchased1,436 1.48 — — 1,436 N/M
FHLB advances and other borrowings(2)
6 — — — 6 N/M
Total short-term borrowings435,457 0.14 542,243 0.12 (106,786)(19.7)
Long-term borrowings:
FHLB advances— — 255,453 1.80 (255,453)(100.0)
Other long-term debt583,283 3.92 691,750 4.21 (108,467)(15.7)
Total long-term borrowings583,283 3.92 947,203 3.56 (363,920)(38.4)
Total borrowings$1,018,740 2.31 %$1,489,446 2.31 %$(470,706)(31.6)%
Six months ended June 30
 20232022Increase (Decrease)
 BalanceRateBalanceRate$%
(dollars in thousands)
Federal funds purchased$592,753 5.08 %$1,436 N/M$591,317 N/M
Federal Home Loan Bank advances1,070,148 5.11 6 N/M1,070,142 N/M
Senior debt and subordinated debt539,817 3.96 582,184 3.93 (42,367)(7.3)
Other borrowings and other interest-bearing liabilities(1)
726,101 3.26 435,114 0.16 290,987 66.9 
Total borrowings$2,928,819 4.43 %$1,018,740 2.31 %$1,910,079 N/M
(1) Includes repurchase agreements, and short-term promissory notes.
(2) Consists of FHLB borrowings with original term of less than one year.notes and capital leases.

Average total short-term borrowings decreased $106.8 million, or 19.7%,increased $1.9 billion during the first six months of 2022,2023 compared to the same period in 2021.

Average total long-term borrowings decreased $363.9 million, or 38.4%, in the first six months of 2022, compared to the same period of 2021 primarily as a result of a decrease in average total deposits and an increase in the reduction ofaverage net loan balance. Average FHLB advances, during 2021average Federal funds purchased and the $65average other borrowings and other interest-bearing liabilities increased $1.1 billion, $591.3 million repayment of senior notes on March 16, 2022. See Note 14 "Long-Term Borrowings" of the Notes to Consolidated Financial Statements for additional details.and $291.0 million, respectively.

Provision for Credit Losses

The provision for credit losses was a negative $5.5$34.3 million for the first six months of 2022,2023 compared to a negative provision of $9.0$5.5 million for the same period of 2021.2022.The increase in provision for credit losses was primarily driven by loan growth and changes to the macroeconomic outlook. Net charge-offs of $16.0 million during the six months ended June 30, 2023 were primarily due to a charge-off of $13.3 million during the first quarter of 2023 for a commercial office loan.
































5556


Non-Interest Income

The following table presents the components of non-interest income:
Six months ended June 30Increase (Decrease) Six months ended June 30Increase (Decrease)
20222021$% 20232022$%
(dollars in thousands) (dollars in thousands)
Wealth managementWealth management$36,740 $37,702 $(962)(2.6)%
Commercial banking:Commercial banking:Commercial banking:
Merchant and card Merchant and card$13,452 $12,554 $898 7.2 % Merchant and card14,534 13,452 1,082 8.0 
Cash management Cash management11,490 10,262 1,228 12.0  Cash management11,350 11,490 (140)(1.2)
Capital markets Capital markets5,569 4,336 1,233 28.4  Capital markets8,436 5,569 2,867 51.5 
Other commercial banking Other commercial banking5,856 6,319 (463)(7.3) Other commercial banking6,338 5,856 482 8.2 
Total commercial banking Total commercial banking36,367 33,471 2,896 8.7 Total commercial banking40,658 36,367 4,291 11.8 
Consumer banking:Consumer banking:Consumer banking:
Card Card11,863 11,611 252 2.2  Card12,835 11,863 972 8.2 
Overdraft Overdraft7,653 5,474 2,179 39.8  Overdraft5,429 7,653 (2,224)(29.1)
Other consumer banking Other consumer banking4,630 4,529 101 2.2  Other consumer banking4,673 4,630 43 0.9 
Total consumer banking Total consumer banking24,146 21,614 2,532 11.7  Total consumer banking22,937 24,146 (1,209)(5.0)
Wealth management revenues37,702 34,981 2,721 7.8 
Mortgage banking:Mortgage banking:Mortgage banking:
Gains on sales of mortgage loansGains on sales of mortgage loans5,568 14,094 (8,526)(60.5)Gains on sales of mortgage loans2,277 5,568 (3,291)(59.1)
Mortgage servicing incomeMortgage servicing income2,776 2,704 72 2.7 Mortgage servicing income2,633 2,776 (143)(5.2)
Total mortgage banking Total mortgage banking8,344 16,798 (8,454)(50.3) Total mortgage banking4,910 8,344 (3,434)(41.2)
OtherOther7,061 6,912 149 2.2 Other7,075 7,061 14 0.2 
Non-interest income before investment securities gainsNon-interest income before investment securities gains113,620 113,776 (156)(0.1)Non-interest income before investment securities gains112,320 113,620 (1,300)(1.1)
Investment securities gains, net27 33,511 (33,484)N/M
Investment securities gains (losses), netInvestment securities gains (losses), net19 27 (8)N/M
Total Non-Interest IncomeTotal Non-Interest Income$113,647 $147,287 $(33,640)(22.8)%Total Non-Interest Income$112,339 $113,647 $(1,308)(1.2)%

Excluding net investment securities gains, non-interest income decreased $0.2$1.3 million, or 0.1%1.1%, during the six months ended June 30, 20222023 as compared to the same period in 2021.

Investment securities gains recognized2022. The decrease in the first six monthsnon-interest income was primarily due to decreases of 2021 were the result$3.4 million in mortgage banking income, $2.2 million in overdraft fees and $1.0 million in wealth management revenues, partially offset by increases of the sale of Visa Shares as part of the balance sheet restructuring completed during the first six months of 2021.$4.3 million in commercial banking income and $1.0 million in consumer card fee income.




















56


Non-Interest Expense

The following table presents the components of non-interest expense:
Six months ended June 30Increase (Decrease)
20222021$%
(dollars in thousands)
Salaries and employee benefits$169,868 $160,953 $8,915 5.5 %
Data processing and software29,000 27,493 1,507 5.5 
Net occupancy28,109 26,476 1,633 6.2 
Other outside services16,931 16,668 263 1.6 
Equipment6,845 6,852 (7)(0.1)
State taxes6,605 8,889 (2,284)(25.7)
FDIC insurance6,170 4,906 1,264 25.8 
Professional fees3,805 5,430 (1,625)(29.9)
Marketing2,646 2,350 296 12.6 
Intangible amortization353 293 60 20.5 
Debt extinguishment— 32,575 (32,575)(100.0)
Merger-related expenses1,428 — 1,428 N/M
Other23,948 26,330 (2,382)(9.0)
Total non-interest expense$295,708 $319,215 $(23,507)(7.4)%

Compared to the first six months of 2021, non-interest expense in the first six months of 2022, excluding $1.4 million of merger-related expenses, decreased $24.9 million, or 7.8%, primarily as a result of debt extinguishment expenses related to the prepayment of FHLB advances, subordinated debt and senior notes in 2021, partially offset by an $8.9 million increase and salaries and employee benefits expenses.
Income Taxes

Income tax expense for the six months ended June 30, 2022 was $29.3 million, a $3.4 million increase from $25.9 million for the same period in 2021. The Corporation's ETR was 17.9% for the six months ended June 30, 2022, as compared to 15.8% in the same period of 2021.






















57


FINANCIAL CONDITIONNon-Interest Expense

The following table below presents condensed consolidated ending balance sheets.the components of non-interest expense:
June 30, 2022December 31, 2021Increase (Decrease)
 $%
Assets(dollars in thousands)
Cash and cash equivalents$449,674 $1,638,614 $(1,188,940)(72.6)%
FRB and FHLB Stock62,146 57,635 4,511 7.8 
       Federal funds sold30,500 — 30,500 N/M
Loans held for sale17,528 35,768 (18,240)(51.0)
Investment securities4,117,801 4,167,774 (49,973)(1.2)
Net loans, less ACL - loans18,672,386 18,076,349 596,037 3.3 
Net premises and equipment211,639 220,357 (8,718)(4.0)
Goodwill and intangibles537,700 538,053 (353)(0.1)
Other assets1,153,312 1,061,848 91,464 8.6 
Total Assets$25,252,686 $25,796,398 $(543,712)(2.1)%
Liabilities and Shareholders' Equity
Deposits$21,143,866 $21,573,499 $(429,633)(2.0)%
Short-term borrowings456,185 416,764 39,421 9.5 
Long-term borrowings557,130 621,345 (64,215)(10.3)
Other liabilities624,412 472,110 152,302 32.3 
Total Liabilities22,781,593 23,083,718 (302,125)(1.3)
Total Shareholders' Equity2,471,093 2,712,680 (241,587)(8.9)
Total Liabilities and Shareholders' Equity$25,252,686 $25,796,398 $(543,712)(2.1)%

Cash and Cash Equivalents
Six months ended June 30Increase (Decrease)
20232022$%
(dollars in thousands)
Salaries and employee benefits$183,385 $169,868 $13,517 8.0 %
Data processing and software32,571 29,000 3,571 12.3 
Net occupancy28,812 28,109 703 2.5 
Other outside services20,960 16,931 4,029 23.8 
FDIC insurance9,690 6,170 3,520 57.1 
State taxes7,418 6,605 813 12.3 
Equipment6,920 6,845 75 1.1 
Professional fees4,221 3,805 416 10.9 
Marketing3,541 2,646 895 33.8 
Intangible amortization1,746 353 1,393 N/M
Merger-related expenses— 1,428 (1,428) N/M
Other28,372 23,948 4,424 18.5 
Total non-interest expense$327,636 $295,708 $31,928 10.8 %

Compared to December 31, 2021, cash and cash equivalents at June 30,the first six months of 2022, decreased $1.2 billion,total non-interest expense in the first six months of 2023, excluding $1.4 million of merger-related expenses, increased $33.4 million, or 72.6%, 11.3%. The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $13.5 million in salaries and employee benefits expense, $4.0 million in other outside services expense, $3.6 million in data processing and software expense, $3.5 million in FDIC insurance expense, primarily due to the adoption of a $596.0final rule to increase base deposit insurance assessment rates effective January 1, 2023, $1.4 million in intangible amortization expense, $0.9 million in marketing expenses and $0.8 million in state tax expense. Higher expense levels compared to the same period in 2022 are in part due to the Prudential Bancorp acquisition. Additional drivers of the increase in non-interest expense were an unfavorable change of $1.8 million due to higher gains on sales of owned assets in 2022, $1.0 million in fraud-related losses and $0.9 million in travel and entertainment expenses, in each case, reflected in "other" expense. The $13.5 million increase in net loans,salaries and a $429.6 million decreasebenefits expense was primarily driven by annual merit increases, an increase in deposits.the number of employees, higher healthcare claims experience and higher pension costs.

Other AssetsIncome Taxes

ComparedIncome tax expense for the six months ended June 30, 2023 was $30.9 million, a $1.6 million increase from $29.3 million for the same period in 2022. The Corporation's ETR was 17.3% for the six months ended June 30, 2023, compared to December 31, 2021, other assets increased $91.5 million17.9% in the second quartersame period of 2022, primarily due to the increase in deferred federal income tax of $92.6 million.2022.

Shareholders' Equity

Compared to December 31, 2021, shareholders' equity at June 30, 2022 decreased $241.6 million, primarily due to a $331.6 million loss in OCI primarily attributable to unrealized losses on investment securities and derivative instruments. See Note 8 "Accumulated Other Comprehensive (Loss) Income" of the Notes to Consolidated Financial Statements for additional details.













58


FINANCIAL CONDITION

The table below presents condensed consolidated ending balance sheets.
June 30,
2023		December 31,
2022		Increase (Decrease)
 $%
Assets(dollars in thousands)
Cash and cash equivalents$504,702 $681,921 $(177,219)(26.0)%
FRB and FHLB Stock124,218 130,186 (5,968)(4.6)
Loans held for sale14,673 7,264 7,409 102.0 
Investment securities3,867,334 3,968,023 (100,689)(2.5)
Net loans, less ACL - loans20,757,243 20,010,181 747,062 3.7 
Net premises and equipment216,322 225,141 (8,819)(3.9)
Goodwill and intangibles561,885 560,824 1,061 0.2 
Other assets1,356,786 1,348,162 8,624 0.6 
Total Assets$27,403,163 $26,931,702 $471,461 1.8 %
Liabilities and Shareholders' Equity
Deposits$21,206,540 $20,649,538 $557,002 2.7 %
Borrowings2,719,114 2,871,207 (152,093)(5.3)
Other liabilities835,357 831,200 4,157 0.5 
Total Liabilities24,761,011 24,351,945 409,066 1.7 
Total Shareholders' Equity2,642,152 2,579,757 62,395 2.4 
Total Liabilities and Shareholders' Equity$27,403,163 $26,931,702 $471,461 1.8 %

Cash and Cash Equivalents

Compared to December 31, 2022, cash and cash equivalents at June 30, 2023 decreased $177.2 million, or 26.0%, primarily due to a $747.1 million increase in net loans.

Shareholders' Equity

Compared to December 31, 2022, shareholders' equity at June 30, 2023 increased $62.4 million, primarily due to a $91.4 million increase in retained earnings from net income of $147.9 million, partially offset by common stock dividends of $51.4 million and preferred stock dividends of $5.1 million. The increase in retained earnings was partially offset by an increase in treasury stock of $41.7 million primarily due to the repurchase of 2.4 million shares of the Corporation's common stock for $40.4 million during the first quarter of 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 up to $100.0 million of its common stock through December 31, 2023. During the three months ended June 30, 2023, no 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" in this Quarterly Report on Form 10-Q for further details on the repurchase program and activity.

In July 2023, the Corporation resumed repurchasing shares of its common stock under the 2023 Repurchase Program, as permitted by securities laws and other legal requirements and subject to market conditions and other factors.








59


Investment Securities

The following table presents the carrying amount of investment securities:
June 30,
2022		December 31,
2021		Increase (Decrease)June 30,
2023		December 31,
2022		Increase (Decrease)
$% $%
Available for SaleAvailable for Sale(dollars in thousands)Available for Sale(dollars in thousands)
U.S. Government securitiesU.S. Government securities$371,266 $127,618 $243,648 N/MU.S. Government securities$220,638 $218,485 $2,153 1.0 %
U.S. Government-sponsored agency securitiesU.S. Government-sponsored agency securities999 1,008 (9)(0.9)
State and municipal securitiesState and municipal securities1,083,477 1,188,670 (105,193)(8.8)%State and municipal securities1,053,908 1,105,712 (51,804)(4.7)
Corporate debt securitiesCorporate debt securities393,561 386,133 7,428 1.9 Corporate debt securities424,379 422,309 2,070 0.5 
Collateralized mortgage obligationsCollateralized mortgage obligations148,103 209,359 (61,256)(29.3)Collateralized mortgage obligations120,458 134,033 (13,575)(10.1)
Residential mortgage-backed securitiesResidential mortgage-backed securities195,359 229,795 (34,436)(15.0)Residential mortgage-backed securities204,888 212,698 (7,810)(3.7)
Commercial mortgage-backed securitiesCommercial mortgage-backed securities587,072 971,148 (384,076)(39.5)Commercial mortgage-backed securities547,451 552,522 (5,071)(0.9)
Auction rate securities— 74,667 (74,667)(100.0)
Total available for sale securities Total available for sale securities$2,778,838 $3,187,390 $(408,552)(12.8)% Total available for sale securities$2,572,721 $2,646,767 $(74,046)(2.8)%
Held to MaturityHeld to MaturityHeld to Maturity
Residential mortgage-backed securitiesResidential mortgage-backed securities$466,076 $404,958 $61,118 15.1 %Residential mortgage-backed securities$431,704 $457,325 $(25,621)(5.6)%
Commercial mortgage-backed securitiesCommercial mortgage-backed securities872,887 575,426 297,461 51.7 Commercial mortgage-backed securities862,909 863,931 (1,022)(0.1)
Total held to maturity securitiesTotal held to maturity securities$1,338,963 $980,384 $358,579 36.6 %Total held to maturity securities$1,294,613 $1,321,256 $(26,643)(2.0)%
Total Investment SecuritiesTotal Investment Securities$4,117,801 $4,167,774 $(49,973)(1.2)%Total Investment Securities$3,867,334 $3,968,023 $(100,689)(2.5)%

Compared to December 31, 2021,2022, total AFS securities at June 30, 20222023 decreased $408.6$74.0 million, or 12.8%2.8%, primarily due to decreases of $384.1 million in commercial mortgage-backed securities and $105.2 million in state and municipal securities, partially offset by an increasecollateralized mortgage obligations and residential mortgage-backed securities of $243.6$51.8 million, in U.S government securities.$13.6 million and $7.8 million, respectively.

At June 30, 2022,2023, total HTM securities increased $358.6decreased $26.6 million compared to December 31, 2021,2022, primarily driven by an increasea decrease of $297.5$25.6 million in commercialresidential mortgage-backed securities.securities due to paydowns.

Loans

The following table presents ending loans outstanding by type:
June 30,
2022		December 31, 20212022 vs. 2021 Increase (Decrease)
$%
(dollars in thousands)
Real estate – commercial mortgage$7,417,036 $7,279,080 $137,956 1.9 %
Commercial and industrial (1)
4,173,114 4,208,327 (35,213)(0.8)
Real estate – residential mortgage4,203,827 3,846,750 357,077 9.3 
Real estate – home equity1,108,808 1,118,248 (9,440)(0.8)
Real estate – construction1,177,446 1,139,779 37,667 3.3 
Consumer538,747 464,657 74,090 15.9 
Equipment lease financing and other321,855 283,557 38,298 13.5 
Overdrafts2,346 1,988 358 18.0 
Gross loans18,943,179 18,342,386 600,793 3.3 
Unearned income(22,229)(17,036)(5,193)(30.5)%
Net loans$18,920,950 $18,325,350 $595,600 3.3 %
(1) Includes PPP loans totaling $0.1 billion and $0.3 billion as of June 30, 2022 and December 31, 2021, respectively.
June 30,
2023		December 31,
2022		Increase (Decrease)
$%
(dollars in thousands)
Real estate – commercial mortgage$7,846,861 $7,693,835 $153,026 2.0 %
Commercial and industrial4,602,446 4,477,537 124,909 2.8 
Real estate – residential mortgage5,147,262 4,737,279 409,983 8.7 
Real estate – home equity1,061,891 1,102,838 (40,947)(3.7)
Real estate – construction1,308,564 1,269,925 38,639 3.0 
Consumer763,530 699,179 64,351 9.2 
Leases and other loans346,015 328,331 17,684 5.4 
Gross loans21,076,569 20,308,924 767,645 3.8 
Unearned income(31,884)(29,377)(2,507)(8.5)
Net loans$21,044,685 $20,279,547 $765,138 3.8 %

During the six months ended June 30, 2022,2023, net loans increased $595.6$765.1 million, or 3.3%3.8%, compared to the level at December 31, 2021,2022, primarily due to increases in residential mortgage loans, commercial mortgagesmortgage loans, commercial and industrial loans and consumer loans of $357.1$410.0 million, $138.0$153.0 million, $124.9 million and $74.1$64.4 million, respectively.

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The increase in residential mortgage loans was the result of continued growth in loan originations and 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 commercial mortgages was due to increased loan origination volumes and the increase in consumer loans was primarily driven by growth in student loans and indirect auto 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 June 30, 2023, approximately $9.2 billion, or 43.5%, of the loan portfolio was comprised of
60


commercial mortgage loans and construction loans. TheCorporation's policies limit the maximum total lending commitment to an individual borrower to $70.0$100.0 million as of June 30, 2022.2023. 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 summarizedsummarizes the industry concentrations within the commercial mortgage and the commercial and industrial loan portfolios (excluding PPP loans):portfolios:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
Real estate (1)
Real estate (1)
44.9 %44.3 %
Real estate(1)
46.7 %43.9 %
Health careHealth care6.5 6.7 Health care6.8 6.5 
ManufacturingManufacturing6.5 6.8 
AgricultureAgriculture5.8 6.1 Agriculture5.3 5.4 
Manufacturing5.6 5.1 
Other services (2)
Other services (2)
4.8 5.0 
Other services (2)
4.5 4.7 
Construction (3)(2)
Construction (3)(2)
4.5 3.9 
Construction (3)(2)
4.1 4.7 
Hospitality and food servicesHospitality and food services3.5 3.7 Hospitality and food services3.6 3.6 
RetailRetail3.4 3.1 
Wholesale tradeWholesale trade3.2 2.8 Wholesale trade3.0 3.1 
Retail2.9 3.0 
Educational servicesEducational services2.4 2.7 Educational services3.0 2.8 
Professional, scientific and technical servicesProfessional, scientific and technical services2.2 1.8 
Arts, entertainment and recreationArts, entertainment and recreation2.2 2.3 Arts, entertainment and recreation2.0 2.0 
Professional, scientific and technical services1.8 1.8 
Transportation and warehousingTransportation and warehousing1.5 1.3 
Public administrationPublic administration1.3 1.5 Public administration1.1 1.2 
Transportation and warehousing1.2 1.3 
Finance and Insurance1.1 1.4 
Administrative and SupportAdministrative and Support1.0 1.1 
Other (4)
Other (4)
8.3 8.4 
Other (4)
5.3 8.0 
TotalTotal100.0 %100.0 %Total100.0 %100.0 %

(1)
(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.

























6061


The following table presents the changes in non-accrual loans for the three months and six months ended June 30, 2022:2023:
Commercial 
and
Industrial		Real Estate -
Commercial
Mortgage		Real Estate -
Construction		Real Estate -
Residential
Mortgage		Consumer and Real Estate -
Home
Equity		Equipment Lease FinancingTotalCommercial 
and
Industrial		Real Estate -
Commercial
Mortgage		Real Estate -
Construction		Real Estate -
Residential
Mortgage		Consumer and Real Estate -
Home
Equity		Leases and other loansTotal
(in thousands)(dollars in thousands)
Three months ended June 30, 2022
Balance at March 31, 2022$28,490 $50,400 $672 $33,920 $8,320 $14,997 $136,799 
Three months ended June 30, 2023Three months ended June 30, 2023
Balance at March 31, 2023Balance at March 31, 2023$31,879 $58,409 $1,278 $24,427 $6,059 $12,251 $134,303 
AdditionsAdditions21,845 18,349 739 2,397 1,719 — 45,049 Additions11,043 5,270 — 711 1,807 606 19,437 
PaymentsPayments(6,443)(6,353)(54)(666)(413)(461)(14,390)Payments(11,417)(9,430)(179)(525)(660)(358)(22,569)
Charge-offsCharge-offs(201)— — (66)(877)(474)(1,618)Charge-offs(2,017)(230)— (62)(1,313)(1,165)(4,787)
Transfers to accrual statusTransfers to accrual status— — — — (429)— (429)Transfers to accrual status— (204)— (2,179)(49)— (2,432)
Transfers to OREOTransfers to OREO— (2,831)— — (50)— (2,881)Transfers to OREO— — — (672)— — (672)
Balance at June 30, 2022$43,691 $59,565 $1,357 $35,585 $8,270 $14,062 $162,530 
Balance at June 30, 2023Balance at June 30, 2023$29,488 $53,815 $1,099 $21,700 $5,844 $11,334 $123,280 
Six months ended June 30, 2022
Balance at December 31, 2021$30,141 $52,815 $901 $35,269 $8,900 $15,640 $143,666 
Six months ended June 30, 2023Six months ended June 30, 2023
Balance at December 31, 2022Balance at December 31, 2022$27,116 $70,161 $1,368 $26,294 $6,197 $13,307 $144,443 
AdditionsAdditions23,242 20,747 739 2,716 3,377 — 50,821 Additions18,758 12,376 — 787 4,360 606 36,887 
PaymentsPayments(8,893)(8,146)(283)(2,334)(1,441)(635)(21,732)Payments(13,757)(15,154)(269)(1,119)(1,145)(691)(32,135)
Charge-offsCharge-offs(428)(152)— (66)(1,929)(943)(3,518)Charge-offs(2,629)(13,592)— (62)(3,519)(1,888)(21,690)
Transfers to accrual statusTransfers to accrual status(349)(2,238)— — (429)— (3,016)Transfers to accrual status— 24 — (2,407)(49)— (2,432)
Transfers to OREOTransfers to OREO(22)(3,461)— — (208)— (3,691)Transfers to OREO— — — (1,793)— — (1,793)
Balance at June 30, 2022$43,691 $59,565 $1,357 $35,585 $8,270 $14,062 $162,530 
Balance at June 30, 2023Balance at June 30, 2023$29,488 $53,815 $1,099 $21,700 $5,844 $11,334 $123,280 

During the second quarter of 2022,six months ended June 30, 2023, non-accrual loans increaseddecreased approximately $25.7$21.2 million, or 18.8%14.7%, 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 OREO and to accrual status, during the period.loans.

The following table summarizes non-performing assets as of the indicated dates:periods shown below:
June 30, 2022December 31, 2021June 30, 2023December 31, 2022
(dollars in thousands) (dollars in thousands)
Non-accrual loansNon-accrual loans$162,530 $143,666 Non-accrual loans$123,280 $144,443 
Loans 90 days or more past due and still accruing(1)Loans 90 days or more past due and still accruing(1)11,016 8,453 Loans 90 days or more past due and still accruing(1)24,415 27,463 
Total non-performing loans(1)
Total non-performing loans(1)
173,546 152,119 
Total non-performing loans(1)
147,695 171,906 
OREO (2)
OREO (2)
4,786 1,817 
OREO(2)
3,881 5,790 
Total non-performing assetsTotal non-performing assets$178,332 $153,936 Total non-performing assets$151,576 $177,696 
Non-accrual loans to total loansNon-accrual loans to total loans0.86 %0.78 %Non-accrual loans to total loans0.59 %0.71 %
Non-performing loans to total loansNon-performing loans to total loans0.92 %0.83 %Non-performing loans to total loans0.70 %0.85 %
Non-performing assets to total assetsNon-performing assets to total assets0.71 %0.60 %Non-performing assets to total assets0.55 %0.66 %
ACL - loans to non-performing loansACL - loans to non-performing loans143 %164 %ACL - loans to non-performing loans195 %157 %
(1) Excludes PPP loans which are fully guaranteed by the federal government of $0.7$1.0 million and $7.7 million as of June 30, 2022.2023 and December 31, 2022,
respectively.
(2) Excludes $3.8$8.4 million and $6.4$6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of June 30, 20222023 and
December 31, 2021,2022, respectively.

Non-performing loans at June 30, 2022 increased $21.42023 decreased $24.2 million, or 14.1%, compared to the level at$171.9 million as of December 31, 2021.2022. Non-performing loans as a percentage of total loans were 0.92%0.70% at June 30, 20222023 and 0.83%0.85% at December 31, 2021.2022. See Note 4, "Loans"Note 5 - Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements for further details on non-performing loans.




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The following table presents TDRs as of the dates shown:
June 30, 2022December 31, 2021
(in thousands)
Real estate - commercial mortgage$3,489 $3,464 
Commercial and industrial1,871 1,857 
Real estate - residential mortgage10,279 11,948 
Real estate - home equity11,764 12,218 
Consumer2 5 
Total accruing TDRs27,405 29,492 
Non-accrual TDRs(1)
45,439 55,945 
Total TDRs$72,844 $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 and industrial loans, commercial mortgages and commercial 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
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loans, construction loans to individuals, consumer loans and equipment lease financingleases and other loans is based on payment history, through the monitoring of delinquency levels and trends.

Total internally risk-rated loans were $12.5$13.5 billion, of which $1.0$0.8 billion were criticized and classified, as of June 30, 2022,2023, and $12.4$13.2 billion, of which $1.1$0.8 billion were criticized and classified, as of December 31, 2021.2022. For a description of the Corporation's risk ratings, see "Allowance for Credit Losses" in the Notes to Consolidated Financial Statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022. The following table presents criticized and classified loans, or those with internal risk ratings of special mention or substandard or lower for commercial mortgages, commercial and industrial loans and construction loans to commercial borrowers, by class segment:
Special Mention (1)
Increase (Decrease)
Substandard or Lower (2)
Increase (Decrease)Total Criticized and Classified Loans
Special Mention(1)
Increase (Decrease)
Substandard or Lower(2)
Increase (Decrease)Total Criticized and Classified Loans
June 30, 2022December 31, 2021$%June 30, 2022December 31, 2021$%June 30, 2022December 31, 2021June 30, 2023December 31, 2022$%June 30, 2023December 31, 2022$%June 30, 2023December 31, 2022
(dollars in thousands)(dollars in thousands)
Real estate - commercial mortgageReal estate - commercial mortgage$374,483$387,279$(12,796)(3.3)%$328,308$331,096$(2,788)(0.8)%$702,791$718,375Real estate - commercial mortgage$294,367$306,381$(12,014)(3.9)%$182,697$184,014$(1,317)(0.7)%$477,064$490,395
Commercial and industrialCommercial and industrial132,860142,369(9,509)(6.7)158,742152,2196,523 4.3291,602294,588Commercial and industrial115,332133,943(18,611)(13.9)141,92895,54646,382 48.5257,260229,489
Real estate - construction (3)
Real estate - construction (3)
32,67458,841(26,167)(44.5)4,6656,324(1,659)(26.2)37,33965,165
Real estate - construction (3)
39,58821,60317,985 83.328,34210,60117,741 N/M67,93032,204
TotalTotal$540,017$588,489$(48,472)(8.2)%$491,715$489,639$2,0760.4%$1,031,732$1,078,128Total$449,287$461,927$(12,640)(2.7)%$352,967$290,161$62,80621.6%$802,254$752,088
% of total risk rated loans% of total risk rated loans4.3 %4.7 %3.9 %3.9 %8.2 %8.6 %% of total risk rated loans3.3 %3.5 %2.6 %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
June 30, 2023December 31, 2022
 (dollars in thousands)
ACL - loans$287,442 $269,366 
ACL - OBS credit exposure(1)
$16,568 $16,328 
(1) Included in "other liabilities" on the consolidated balance sheet.





















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Provision and Allowance for Credit Losses

The following table presents the components of the ACL:
June 30, 2022December 31, 2021
 (dollars in thousands)
ACL - loans$248,564 $249,001 
ACL - OBS credit exposure (1)
14,323 14,533 
        Total ACL$262,887 $263,534 

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

The following table presents the activity in the ACL:
 Three months ended June 30Six months ended June 30
 2022202120222021
 (dollars in thousands)
Average balance of Net loans$18,637,175 $18,906,556 $18,510,845 $18,943,367 
Balance of ACL at beginning of period$243,705 $265,986 $249,001 $277,567 
Loans charged off:
Commercial and industrial(201)(954)(428)(5,273)
Real estate – commercial mortgage— (6,506)(152)(8,343)
Consumer and real estate – home equity(877)(1,130)(1,929)(1,977)
Equipment lease financing and other(474)(436)(943)(1,404)
Real estate – residential mortgage(66)(496)(66)(688)
Real estate – construction— — — (39)
Total loans charged off(1,618)(9,522)(3,518)(17,724)
Recoveries of loans previously charged off:
Commercial and industrial739 693 2,719 1,462 
Real estate – commercial mortgage3,536 729 3,648 903 
Consumer and real estate – home equity762 634 1,216 1,074 
Equipment lease financing and other226 153 380 312 
Real estate – residential mortgage92 105 314 200 
Real estate – construction12 254 44 638 
Total recoveries5,367 2,568 8,321 4,589 
Net loans charged off/(recoveries)3,749 (6,954)4,803 (13,135)
Provision for credit losses (1)
1,110 (4,000)(5,240)(9,400)
Balance of ACL at end of period$248,564 $255,032 $248,564 $255,032 
Net charge-offs to average loans (annualized)(0.08)%0.15 %(0.05)%0.14 %

 Three months ended June 30Six months ended June 30
 2023202220232022
 (dollars in thousands)
Average balance of net loans$20,866,235 $18,637,175 $20,665,779 $18,510,845 
Balance of ACL at beginning of period$278,695 $243,705 $269,366 $249,001 
Loans charged off:
Real estate – commercial mortgage(230)— (13,592)(152)
Commercial and industrial(2,017)(201)(2,629)(428)
Real estate – residential mortgage(62)(66)(62)(66)
Consumer and real estate - home equity(1,313)(877)(3,519)(1,929)
Real estate – construction— — — — 
Leases and other loans(1,165)(474)(1,888)(943)
Total loans charged off(4,787)(1,618)(21,690)(3,518)
Recoveries of loans previously charged off:
Real estate – commercial mortgage29 3,536 815 3,648 
Commercial and industrial988 739 2,074 2,719 
Real estate – residential mortgage58 92 106 314 
Consumer and real estate - home equity959 762 1,620 1,216 
Real estate – construction569 12 771 44 
Leases and other loans213 226 329 380 
Total recoveries2,816 5,367 5,715 8,321 
Net loans charged off/(recoveries)(1,971)3,749 (15,975)4,803 
Provision for credit losses(1)
10,718 1,110 34,051 (5,240)
Balance of ACL at end of period$287,442 $248,564 $287,442 $248,564 
Provision for OBS credit exposures$(971)$390 $240 $(210)
Reserve for OBS credit exposures(2)
$16,568 $14,323 $16,568 $14,323 
Net charge-offs to average loans (annualized)0.04 %(0.08)%0.15 %(0.05)%
(1)Provision for credit losses included in the table only includes the portion related to net loans.
(2) Reserve for OBS credit exposures is recorded with other liabilities on the consolidated balance sheets.

The provision for credit losses, specific to loans, for the three months ended June 30, 20222023 was$1.1 $10.7 million, compared to a negative provision of $4.0$1.1 million recorded for the same period in 2021.2022. The ACL includes qualitative loan adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. See Note 4, "Loans"Note 5 - Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements for further details on the provision for credit losseslosses.
.





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The following table summarizes the allocation of the ACL - loans:
June 30, 2022December 31, 2021
ACL - loans
% In Each Loan
Category (1)
ACL - loans
% In Each Loan Category (1)
(dollars in thousands)
Real estate - commercial mortgage$72,605 39.2 %$87,970 39.7 %
Commercial and industrial72,119 22.0 67,056 22.9 
Real estate - residential mortgage61,635 22.2 54,236 21.0 
Consumer, home equity, equipment lease financing31,577 10.4 26,798 10.2 
Real estate - construction10,628 6.2 12,941 6.2 
Total ACL - loans$248,564 100.0 %$249,001 100.0 %
(1) Ending loan balances as a % of total loans for the periods presented.
Deposits and Borrowings

The following table presents ending deposits by type:
June 30, 2022December 31, 2021Increase (Decrease)
$%
(dollars in thousands)
Noninterest-bearing demand$7,530,777 $7,370,963 $159,814 2.2 %
Interest-bearing demand5,403,805 5,819,539 (415,734)(7.1)
Savings and money market deposits6,406,051 6,403,995 2,056 — 
Total demand and savings19,340,633 19,594,497 (253,864)(1.3)
Brokered deposits243,172 251,526 (8,354)(3.3)
Time deposits1,560,061 1,727,476 (167,415)(9.7)
Total deposits$21,143,866 $21,573,499 $(429,633)(2.0)%

During the six months ended June 30, 2022, total deposits decreased by $429.6 million, or 2.0%, primarily due to a $415.7 million decrease in interest-bearing demand deposits.

The following table presents ending borrowings by type:
 June 30, 2022December 31, 2021Increase (Decrease)
 $%
 (dollars in thousands)
Short-term borrowings:
Customer funding (1)
$436,185 $416,764 $19,421 4.7 %
Federal funds purchased20,000 — 20,000 N/M
Total short-term borrowings456,185 416,764 39,421 9.5 
Long-term borrowings:
Other long-term borrowings557,130 621,345 (64,215)(10.3)
Total borrowings$1,013,315 $1,038,109 $(24,794)(2.4)%
(1) Includes repurchase agreements and short-term promissory notes.

During the six months ended June 30, 2022, short-term borrowings increased $39.4 million, or 9.5%. In addition, as compared to December 31, 2021, total long-term borrowings decreased $64.2 million due to the maturity of $65.0 million of senior notes with a fixed rate of 3.60%.




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Shareholders' EquityThe following table summarizes the allocation of the ACL - loans:
June 30, 2023December 31, 2022
ACL - loans
% to Total ACL - loans(1)
% to Total Net Loans(2)
ACL - loans
% to Total ACL - loans(1)
% to Total Net Loans(2)
(dollars in thousands)
Real estate - commercial mortgage$72,302 25.2 %37.3 %$69,456 25.8 %37.9 %
Commercial and industrial75,189 26.2 21.9 70,116 26.0 22.0 
Real estate - residential mortgage88,849 30.9 24.5 83,250 30.9 23.3 
Consumer, home equity and leases and other loans39,958 13.9 10.2 35,801 13.3 10.5 
Real estate - construction11,144 3.9 6.2 10,743 4.0 6.3 
Total ACL - loans$287,442 100.0 %100.0 %$269,366 100.0 %100.0 %
(1) Ending ACL - loans balance as a % of total ACL - loans.
(2) Ending loan balances as a % of total net loans for the periods presented.

Total shareholders’ equity decreased $241.6 million duringDeposits and Borrowings

The following table presents ending deposits by type:
June 30,
2023		December 31,
2022		Increase (Decrease)
$%
(dollars in thousands)
Noninterest-bearing demand$5,865,855 $7,006,388 $(1,140,533)(16.3)%
Interest-bearing demand5,543,320 5,410,903 132,417 2.4 
Savings and money market deposits6,646,448 6,434,621 211,827 3.3 
Total demand and savings18,055,623 18,851,912 (796,289)(4.2)
Brokered deposits949,259 208,416 740,843 N/M
Time deposits2,201,658 1,589,210 612,448 38.5 
Total deposits$21,206,540 $20,649,538 $557,002 2.7 %

During the six months ended June 30, 2023, total deposits increased by $557.0 million, or 2.7%, compared to December 31, 2022. The decreaseincrease in total deposits was due primarily to a $331.6 million decrease in AOCI, mainly due to unrealized lossesincreases in investment securitiesbrokered deposits, time deposits and derivatives. The decrease in AOCI wassavings and money market deposits of $740.8 million, $612.4 million and $211.8 million, respectively, partially offset by net incomea decrease in noninterest-bearing demand deposits of $134.3 million reflected in retained earnings.$1.1 billion.

The following table presents ending borrowings by type:
 June 30,
2023		December 31,
2022		Increase (Decrease)
 $%
 (dollars in thousands)
Federal funds purchased$555,000 $191,000 $364,000 N/M
Federal Home Loan Bank advances1,165,000 1,250,000 (85,000)(6.8)
Senior debt and subordinated debt539,994 539,634 360 0.1 
Other borrowings(1)
459,120 890,573 (431,453)(48.4)
Total borrowings$2,719,114 $2,871,207 $(152,093)(5.3)%
On March 21, 2022, the Corporation announced that its board of directors approved the(1) Includes repurchase of up to $75 million of shares ofagreements, short-term promissory notes and capital leases.

During 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 six months ended June 30, 2023, total borrowings decreased $152.1 million, or 5.3%, compared to December 31, 2022. The decrease in total borrowings was due to decreases in other borrowings and FHLB advances of $431.5 million and $85.0 million, respectively, partially offset by an increase in Federal funds purchased of $364.0 million.


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Regulatory Capital

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

The Capital Rules require the Corporation and Fulton Bank to:

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

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

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

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

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

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 June 30, 2022,2023, 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 June 30, 2022,2023, Fulton Bank met the well capitalizedwell-capitalized requirements under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bankwell-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 June 30, 20222023 that management believes have changed the Corporation's capital categories.










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The following table summarizes the Corporation's capital ratios in comparison to regulatory requirements:
June 30, 2022December 31, 2021Regulatory
Minimum
for Capital
Adequacy		Fully Phased-in, with Capital Conservation BuffersJune 30,
2023		December 31, 2022Regulatory
Minimum
for Capital
Adequacy		Fully Phased-in, with Capital Conservation Buffers
Total Risk-Based Capital (to Risk-Weighted Assets)Total Risk-Based Capital (to Risk-Weighted Assets)13.7 %14.1 %8.0 %10.5 %Total Risk-Based Capital (to Risk-Weighted Assets)13.8 %13.6 %8.0 %10.5 %
Tier I Risk-Based Capital (to Risk-Weighted Assets)Tier I Risk-Based Capital (to Risk-Weighted Assets)10.8 %10.9 %6.0 %8.5 %Tier I Risk-Based Capital (to Risk-Weighted Assets)11.0 %10.9 %6.0 %8.5 %
Common Equity Tier I (to Risk-Weighted Assets)Common Equity Tier I (to Risk-Weighted Assets)9.9 %9.9 %4.5 %7.0 %Common Equity Tier I (to Risk-Weighted Assets)10.1 %10.0 %4.5 %7.0 %
Tier I Leverage Capital (to Average Assets)Tier I Leverage Capital (to Average Assets)9.1 %8.6 %4.0 %4.0 %Tier I Leverage Capital (to Average Assets)9.3 %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.
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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 a simulation of net interest income and estimates of economic value of equity. Using these measurements in tandem provides a reasonably comprehensive summary of the magnitude of the Corporation's interest rate risk, level of risk as time evolves, and exposure to changes in interest rates.

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.







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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 June 30, 2022 (due to the current level of interest rates, the downward shock scenarios are not shown):2023:
Rate Shock(1)
Annual change
in net interest income		% change in net interest income
+400 bp+ $142.3$58.9 million17.6%+6.5%
+300 bp+ $107.3$45.9 million13.3%+5.1%
+200 bp+ $72.4$33.3 million8.9%+3.7%
+100 bp+ $36.4$20.4 million4.5%+2.2%
–100 bp– $34.2 million– 3.8%
–200 bp– $69.6 million– 7.7%
–300 bp  – $101.0 million– 11.1%
–400 bp  – $137.7 million– 15.2%

(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 June 30, 2023, the Corporation was within economic value of equity policy limits for every 100 bps shock.

Interest Rate SwapsDerivatives

The Corporation enters into interest rate swapsderivatives with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate swapsderivatives with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate swapsderivatives is that the customer pays a fixed rate
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of interest and the Corporation receives a floating rate. These interest rate swapsderivatives 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 swapsderivatives as part of its interest rate risk management strategy. The Corporation usesenters into interest rate swapsderivatives 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.

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 original unrealized loss of $70.6 million included in AOCI as of June 30, 2023, will be recognized as a reduction to interest income when the previously forecasted hedged item affects earnings in future periods. During the six months ended June 30, 2023, $12.6 million of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the consolidated statements of income.

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 is a member of the FHLB and has access to FHLB overnight and term credit facilities.As of June 30, 2022,2023, the CorporationBank had no short- or long-term advances outstanding with the FHLB. As of June 30, 2022, the Corporation hastotal borrowing capacity of approximately$5.9 $8.1 billion with $2.7 billion of advances and letters of credit outstanding, for a remaining available borrowing capacity of approximately $5.3 billion under these facilities. Advances from the FHLB when utilized, are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets.

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As of June 30, 2022,2023, the Corporation had aggregate federal funds lines borrowing capacity of $2.1 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 $0.6 billion outstanding against that amount. As of June 30, 2022,2023, 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 June 30, 2023.

Securities carried at $1.1 billion at June 30, 2023 and December 31, 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.
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The consolidated statements of cash flows provide additional information. The Corporation's operating activities during the first six months of 2022 used $15.7ended June 30, 2023 provided $216.9 million of cash. Cash used by investing activities was $669.5$704.2 million and was mainly due to the net increase in loans of $590.8 million.loans. Cash usedprovided by financing activities was $503.8$310.0 million, and was primarily due a decreaseto an increase in time deposits, of $429.6 million.partially offset by decreases in demand and savings deposits and other borrowings.

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 sponsoredgovernment-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 sponsoredgovernment-sponsored agencies.

State and Municipal Securities

As of June 30, 2022,2023, the Corporation owned securities issued by various states and municipalities with a total a fair value of $1.1 billion. Uncertainty with respect to the financial strength of state and municipal bond insurers places emphasis on the underlying strength of issuers. 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 June 30, 2022,2023, approximately 100% of state and municipal securities were supported by the general obligation of corresponding states or municipalities. Approximately 71%77% 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.

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.






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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, 20212022 and Part II, Item 1A1A. Risk Factors of the Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.2023.

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

(a)  None.
(b)  None.
(c) On March 21,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'sits 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
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may be made from time to time in open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase transactions. This repurchase programThe 2023 Repurchase Program may be discontinued at any time. In March 2023, the Corporation paused repurchasing shares under the 2023 Repurchase Program. During the three months ended June 30, 2022,2023, no shares were repurchased under this program.the 2023 Repurchase Program.

In July 2023, the Corporation resumed repurchasing shares of its common stock under the 2023 Repurchase Program, as permitted by securities laws and other legal requirements and subject to market conditions and other factors.

Item 5c. Other Information

Except as disclosed below, none of the Corporation's directors or "officers" (as defined in Rule 16a-1(f) (17 C.F.R. § 240.16a-1(f))) adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (as those terms are defined in Item 408 of Regulation S-K (17 C.F.R. § 229.408)) during the fiscal quarter ended June 30, 2023.

Curtis J. Myers, Chairman of the Board, Chief Executive Officer and President of the Corporation, terminated a Rule 10b5-1 trading arrangement for the sale of 14,951 shares of the Corporation's common stock on April 27, 2023. Mr. Myers adopted the trading arrangement on November 8, 2022 and the trading arrangement was scheduled to expire on May 3, 2023.

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Item 6. Exhibits
2.1 
Agreement and Plan of Merger with Prudential Bancorp, Inc. dated March 1, 2022 - Incorporated(Incorporated by reference to Exhibit 2.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on March 1, 2022.2, 2022).
3.1 
Articles of Incorporation, as amended and restated, of Fulton Financial Corporation– IncorporatedCorporation 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 
3.3 
4.1 
4.2 
4.3 
4.4 
Stock Certificate - Incorporated(Incorporated by reference as Exhibit 4.1 of Fulton Financial Corporation Registration Statement on Form S-4 filed on April 21, 2022.2022).
10.1 
Form of Non-Employee Director Stock Unit Award Agreement
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.
101Interactive 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)

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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:August 8, 20222023/s/ E. Philip WengerCurtis J. Myers
E. Philip WengerCurtis J. Myers
Chairman and Chief Executive Officer
Date:August 8, 20222023/s/ Mark R. McCollom
Mark R. McCollom
Senior Executive Vice President and Chief Financial Officer

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