Item 8.01 - Other Events.
As previously disclosed, Fulton Financial Corporation (the “Corporation”) has been responding to an investigation by the staff of the Division of Enforcement of the Securities and Exchange Commission (the “SEC”) regarding certain accounting determinations that could have impacted the Corporation’s reported earnings per share for certain prior quarterly periods.
On September 28, 2020, the SEC announced that it has accepted an Offer of Settlement submitted by the Corporation. Under the settlement, without admitting or denying the SEC’s findings in this matter, the Corporation has consented to the entry of an administrative civil cease-and-desist order by the SEC (the “Order”) with respect to certain violations of the federal securities laws in the fourth quarter of 2016 through the second quarter of 2017 (the “Relevant Quarters”), and the payment of a civil monetary penalty of $1.5 million.
The Order states that, during the Relevant Quarters, the Corporation made material misrepresentations and omissions in its public filings, and failed to maintain accurate books and records and sufficient internal accounting controls, in violation of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 13a-1, 13a-13 and 12b-20 thereunder. The Order states that the Corporation’s public filings during the Relevant Quarters inaccurately described the process that the Corporation used to value its mortgage servicing rights (“MSR”) asset and determine the related valuation allowance, and that the Corporation maintained inaccurate books and records that reflected an erroneous MSR valuation allowance over two quarters that was $1.3 million higher than it would have been had the Corporation followed its disclosed valuation process. Specifically, the Order states that, in the fourth quarter of 2016 and the first quarter of 2017, the Corporation departed from its stated valuation practices and maintained a $1.3 million MSR valuation allowance that was not supported by its publicly disclosed MSR valuation process, and then belatedly reversed the allowance in the second quarter of 2017, which increased the Corporation’s earnings per share by a penny in that quarter, at a time when the Corporation’s reported earnings per share otherwise would have fallen short of analyst consensus expectations.
The Order states that, in determining to accept the Corporation’s Offer of Settlement, the SEC considered the remedial actions promptly undertaken by the Corporation and its cooperation during the investigation.
The resolution of this matter does not involve a restatement of the Corporation’s previously filed financial statements.
