Change S T A R T S H E R E
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Fulton Financial Corporation Master Logo Guide
Spot Color Variations
PMS 287
Process Color Variations
Dear Shareholder:
Grayscale Variations
Grayscale Variations
4 color
2021 was a very good year for Fulton Financial
Corporation. Our earnings per share for the
year were $1.62 — a record for us. Other
highlights included good loan growth, solid
performance from our commercial and
consumer fee-income businesses, and strong
returns from our efforts related to the Small
Business Association’s Paycheck Protection
Program, or PPP. In addition, we were
INKS
pleased to report that credit costs were down
Pantone Spot CMYK Formulas
287 Blue = 100-72-2-12 Blue
significantly during the year as asset quality
remained stable.
Black
Our wealth management business had an
outstanding year, producing record results. This
performance was driven by strong sales efforts,
client retention, and the cumulative effect of
several small acquisitions. Our recurring fee
business also benefited from the strength in the
equity markets throughout the year.
The company’s success was made possible
thanks to the efforts of our 3,200+ team
members who continued to fulfill Fulton’s
purpose to change lives for the better. They
did this during times that continued to be
challenging, given the lingering presence of the
pandemic. In the second half of 2021, despite
the ongoing COVID-related struggles around
the world, the markets Fulton serves, and the
overall economy, showed signs of recovery.
During the fourth quarter of 2021, we took
advantage of a dip in our stock price and
as of December 31, 2021, we had utilized
approximately 60% of our $75 million share
repurchase authorization. Also in the fourth
quarter, we declared a special cash dividend of
eight cents per share in 2021, double what we
declared the previous year.
The first quarter of 2022 brought some exciting
news: Fulton announced that we entered into
an agreement to acquire Prudential Bancorp
and its subsidiary bank, Prudential Bank.
Prudential is based in Philadelphia and has
ten financial centers and approximately 90
employees. This is our first bank acquisition
since 2006, though in recent years we
purchased several small wealth management
firms, adding to the success of Fulton Financial
Advisors which had $14.6 billion in assets
under management and administration as of
December 31, 2021.
Reverse
As you may remember, Fulton identified
Philadelphia as a strategically important market
for us. In recent years, we opened four financial
centers and a loan office throughout the city.
We have also been fortunate to attract many
talented employees with significant financial
services expertise to join our team.
In addition to organic growth, Fulton recognized
the need to identify acquisition opportunities
that meet our strategic objectives. The
acquisition of Prudential will enhance Fulton’s
presence in this highly attractive market and
enable us to introduce new customers to
our products and services and to our highly
personalized, community-oriented style of
banking. The acquisition will double Fulton’s
lending presence in Philadelphia and will
expand our Philadelphia deposit base five-fold.
We achieved another milestone in the first
quarter of 2022 by producing Fulton’s first-ever
Corporate Social Responsibility Report. We are
delighted to have the opportunity to showcase
how our team members are providing the best
banking experience for our customers and
strengthening the communities we serve. In
recent years, we have developed a more formal
and strategic approach to these activities. This
has helped us to be even more effective at
fulfilling that purpose and has enabled us to
identify opportunities to do even more.
This letter contains forward-looking statements with respect to our 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,
our future financial performance, expected levels of future expenses, anticipated growth
strategies, descriptions of new business initiatives and anticipated trends in our business or
financial results.
Forward-looking statements are neither historical facts, nor assurance of future performance.
Instead, they are based on current beliefs, expectations and assumptions regarding the
future of our business, future plans and strategies, projections, anticipated events and
trends, the economy and other future conditions, and speak only as of the date when
made. 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 our control, and actual results and financial condition may differ
materially from those indicated in the forward-looking statements. A discussion of certain
risks and uncertainties affecting us, and some of the factors that could cause our actual
results to differ materially from those described in the forward-looking statements, can be
found in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the
year ended December 31, 2021, which accompanies this letter. We undertake 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.
And lastly, in March, I announced my intent to
retire as Chairman and CEO of Fulton effective
December 31, 2022. It has been a privilege
and a pleasure to have been a part of this
company for the past 43 years, and I look
forward to continuing to serve on the board of
directors once my staff role comes to an end.
I am so pleased that the board of directors
has announced that Curt Myers will succeed
me, assuming the role of Chairman, CEO and
President effective January 1, 2023. Curt is a
very visionary leader who has guided Fulton
Bank through triumphs and challenges. With
Curt at the helm, and the talented members
of our senior management team adding their
expertise, I am confident that Fulton will be in
good hands.
Thank you for your support during my tenure as
Chairman and CEO, your investment in Fulton,
and your confidence in our team.
Very truly yours,
E. Philip Wenger
Chairman and CEO
SENIOR MANAGEMENT AND BOARD OF DIRECTORS
AS OF 12/31/2021
Fulton Financial Corporation Master Logo Guide
Fulton Financial Corporation Master Logo Guide
Spot Color Variations
Spot Color Variations
PMS 287
PMS 287
SENIOR MANAGEMENT
Process Color Variations
BOARD OF DIRECTORS
Process Color Variations
E. Philip Wenger
Chairman and Chief Executive Officer
E. Philip Wenger, Chair
Jennifer Craighead Carey
Curtis J. Myers
4 color
Grayscale Variations
Grayscale Variations
President and COO,
Fulton Financial Corporation
Chairman, President and CEO,
Fulton Bank
Mark R. McCollom
Senior Executive Vice President/
Black
Chief Financial Officer
INKS
Pantone Spot CMYK Formulas
287 Blue = 100-72-2-12 Blue
David M. Campbell
Senior Executive Vice President/
Strategic Initiatives and Operations
Beth Ann L. Chivinski
Senior Executive Vice President/
Chief Risk Officer
Natasha R. Luddington
Senior Executive Vice President/
Chief Legal Officer and Corporate
Secretary
Meg R. Mueller
Senior Executive Vice President/
Head of Commercial Business
Angela M. Sargent
Senior Executive Vice President/
Chief Information Officer
Angela M. Snyder
Senior Executive Vice President/
Chief Banking Officer
Bernadette M. Taylor
Senior Executive Vice President/
Chief Human Resources Officer
Carlos E. Graupera, Retiring May 2022
Reverse
Lisa Crutchfield
Denise L. Devine
Grayscale Variations
Grayscale Variations
4 color
Steven S. Etter
George W. Hodges
George K. Martin
Black
Reverse
James R. Moxley, III
INKS
Curtis J. Myers
Pantone Spot CMYK Formulas
287 Blue = 100-72-2-12 Blue
Scott A. Snyder
Ronald H. Spair
Mark F. Strauss
Ernest J. Waters, Retiring May 2022
BOARD OF DIRECTORS
Curtis J. Myers, Chair
Jennifer Craighead Carey
Lisa Crutchfield
Denise L. Devine
Steven S. Etter
Carlos E. Graupera, Retiring May 2022
George W. Hodges
Dolores Laputka
George K. Martin
James R. Moxley, III
Antoinette M. Pergolin
Ivy E. Silver
Scott A. Snyder
Ronald H. Spair
Mark F. Strauss
Ernest J. Waters, Retiring May 2022
E. Philip Wenger
This letter contains forward-looking statements with respect to our 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,
our future financial performance, expected levels of future expenses, anticipated growth
strategies, descriptions of new business initiatives and anticipated trends in our business or
financial results.
Forward-looking statements are neither historical facts, nor assurance of future performance.
Instead, they are based on current beliefs, expectations and assumptions regarding the
future of our business, future plans and strategies, projections, anticipated events and
trends, the economy and other future conditions, and speak only as of the date when
made. 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 our control, and actual results and financial condition may differ
materially from those indicated in the forward-looking statements. A discussion of certain
risks and uncertainties affecting us, and some of the factors that could cause our actual
results to differ materially from those described in the forward-looking statements, can be
found in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the
year ended December 31, 2021, which accompanies this letter. We undertake 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.
And lastly, in March, I announced my intent to
retire as Chairman and CEO of Fulton effective
December 31, 2022. It has been a privilege
and a pleasure to have been a part of this
company for the past 43 years, and I look
forward to continuing to serve on the board of
directors once my staff role comes to an end.
I am so pleased that the board of directors
has announced that Curt Myers will succeed
me, assuming the role of Chairman, CEO and
President effective January 1, 2023. Curt is a
very visionary leader who has guided Fulton
Bank through triumphs and challenges. With
Curt at the helm, and the talented members
of our senior management team adding their
expertise, I am confident that Fulton will be in
good hands.
Thank you for your support during my tenure as
Chairman and CEO, your investment in Fulton,
and your confidence in our team.
Very truly yours,
E. Philip Wenger
Chairman and CEO
SENIOR MANAGEMENT AND BOARD OF DIRECTORS
AS OF 12/31/2021
Fulton Financial Corporation Master Logo Guide
Fulton Financial Corporation Master Logo Guide
Spot Color Variations
Spot Color Variations
PMS 287
PMS 287
SENIOR MANAGEMENT
Process Color Variations
E. Philip Wenger
Chairman and Chief Executive Officer
4 color
Grayscale Variations
Grayscale Variations
Curtis J. Myers
President and COO,
Fulton Financial Corporation
Chairman, President and CEO,
Fulton Bank
Mark R. McCollom
Senior Executive Vice President/
Chief Financial Officer
Black
INKS
Pantone Spot CMYK Formulas
287 Blue = 100-72-2-12 Blue
David M. Campbell
Senior Executive Vice President/
Strategic Initiatives and Operations
Beth Ann L. Chivinski
Senior Executive Vice President/
Chief Risk Officer
Natasha R. Luddington
Senior Executive Vice President/
Chief Legal Officer and Corporate
Secretary
Meg R. Mueller
Senior Executive Vice President/
Head of Commercial Business
Angela M. Sargent
Senior Executive Vice President/
Chief Information Officer
Angela M. Snyder
Senior Executive Vice President/
Chief Banking Officer
Bernadette M. Taylor
Senior Executive Vice President/
Chief Human Resources Officer
4 color
Grayscale Variations
Grayscale Variations
Process Color Variations
BOARD OF DIRECTORS
E. Philip Wenger, Chair
Jennifer Craighead Carey
Lisa Crutchfield
Denise L. Devine
Steven S. Etter
Carlos E. Graupera, Retiring May 2022
George W. Hodges
George K. Martin
James R. Moxley, III
Curtis J. Myers
Scott A. Snyder
Ronald H. Spair
Mark F. Strauss
Ernest J. Waters, Retiring May 2022
Black
INKS
Pantone Spot CMYK Formulas
287 Blue = 100-72-2-12 Blue
Reverse
Reverse
BOARD OF DIRECTORS
Curtis J. Myers, Chair
Jennifer Craighead Carey
Lisa Crutchfield
Denise L. Devine
Steven S. Etter
Carlos E. Graupera, Retiring May 2022
George W. Hodges
Dolores Laputka
George K. Martin
James R. Moxley, III
Antoinette M. Pergolin
Ivy E. Silver
Scott A. Snyder
Ronald H. Spair
Mark F. Strauss
Ernest J. Waters, Retiring May 2022
E. Philip Wenger
ADVISORY BOARD MEMBERS, AS OF 12/31/2021
DELAWARE
DELAWARE/CECIL
Katherine K. Wilkinson, Chair
Kelly Albanese Bedder
Jeffrey M. Fried
Donald S. Hicks
Terry A. Megee
Nancy G. Michener
David K. Williams, Jr.
MARYLAND
HAGERSTOWN
Angel Connolly, Chair
Stephen L. Hummel
NEW JERSEY
CENTRAL NEW JERSEY
Sean Murray, Chair
Paul Gergel
Rachel Lilienthal Stark
Hetal Parikh
Allen Weiss
NORTHERN NEW JERSEY
Tammy Case, Chair
Christopher S. Bateman
Gurpreet S. Pasricha
Shelby C. Rhodes
Anthony J. Santye, Jr.
Norman L. Worth
SOUTHERN NEW JERSEY
Andrew G. Agger, Chair
Donna Buzby
James R. Donnelly, Jr.
Wanda P. Hardy
Traci H. Jordan
Edward Remster
Steven M. Swartz
VIRGINIA
CENTRAL VIRGINIA
Karen Frye, Chair
Robert H. Keiter, CPA
Laura Lafayette
J. Keith Middleton
Robert E. Porter, Jr., Retiring April 2022
HAMPTON ROADS
Jean Galliano, Chair
Joanna Brumsey
PENNSYLVANIA
BRANDYWINE
Andrew Stump, Chair
Harry DiDonato
Kenneth M. Goddu
James D. McLeod, Jr.
Michael J. O’Rourke
Kathryn V. Snyder
BUXMONT
Lou Lombardi, Chair
Elmer F. Hansen, III
Marylee Mundell, DO
Lawrence J. Stuardi
CAPITAL
Krista Darr, Chair
Amy Beth Kaunus
Justin D. McClure
Beth A. Peiffer
Dr. Aditya Sharma
H. Ralph Vartan
Steven C. Wilds, Esq.
GREATER BERKS
Ralph Richard, Chair
Eric G. Burkey
Marcelino Colon
William P. Gage
Bruce G. Smith
Diane M. Smith
LANCASTER
Philip N. Smith, Chair
Galen Eby
Dean A. Hoover
Robert A. Hostetter, CPA, ABV®
Louis G. Hurst
Cinthia M. Kettering
Tony Legenstein
Kent M. Martin
Edward W. Monborne
Lori Pickell
David W. Sweigart, III
Harold W. Weik, Jr.
John D. Yoder
J. David Young, Jr., Esq.
LEBANON
Kristi Heller, Chair
Barry E. Ansel
Jonathan R. Beers
Donald H. Dreibelbis
Robert J. Funk
Wendie DiMatteo Holsinger
Kenneth C. Sandoe
LEHIGH VALLEY
Chris Brown, Chair
Joseph A. Bubba
Nicholas C. Hindle
Murtaza Jaffer
Richard J. Principato
NORTHERN PENNSYLVANIA
Leslie Temple, Co-Chair
Heather Underkoffler, Co-Chair
Dr. Albert J. Alley, DO
Elizabeth A. Dupuis
James D. Hawkins
Kenneth A. Holdren
Jeffrey M. Krauss
Kevin M. McGarry
William D. Robinson
Daniel Rogers, Jr.
Thomas F. Songer, III
Wendy S. Tripoli
PHILADELPHIA
Reggie Fuller, Chair
Gail Ball
Pauline Markey
Stephen D. Marshall
Michael J. Mitchell
YORK
John Eyster, Chair
Vernon L. Bracey
Kevin Eisenhart
Jeffrey L. Rehmeyer, II
Gary A. Stewart, Jr.
Christine R. Wardrop
BALTIMORE/WASHINGTON
WASHINGTON DC METRO
Joe Durham, Chair
SPECIALIZED
AGRICULTURAL
Ted Bowers, Chair
Thomas M. Crutchfield
Manuel A. Ojeda
Derek Whitwer
BALTIMORE
Joe Durham, Chair
Anna Gavin
Cheryl Y. Washington
James K. Wilhelm, Jr.
James A. Angelucci Retired 12/31/21
Robert N. Barley
Phoebe R. Bitler
Andrew S. Bollinger
Dwight Hess
Charles A. Hoober
William Hostetter
Douglas S. Scipioni
Scott I. Sechler
P.O. Box 4887
One Penn Square
Lancaster, Pennsylvania 17604
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
TUESDAY, MAY 17, 2022 AT 10:00 A.M. EASTERN TIME
TO THE SHAREHOLDERS OF FULTON FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its Board of Directors (the “Board”), the 2022
Annual Meeting (the “Annual Meeting”) of the shareholders of FULTON FINANCIAL CORPORATION (“Fulton”)
will be held on Tuesday, May 17, 2022, at 10:00 A.M. Eastern Time, at the Lancaster Marriott at Penn Square, 25 South
Queen Street, Lancaster, Pennsylvania 17603, for the purpose of considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. The election of 13 director nominees to serve for a one-year term;
2.
3.
4.
5.
EXECUTIVE COMPENSATION PROPOSAL. A non-binding say on pay (“say-on-pay”) proposal
to approve the compensation of the named executive officers (the “NEOs”);
APPROVAL OF THE 2022 AMENDED AND RESTATED EQUITY AND CASH INCENTIVE
COMPENSATION PLAN. A proposal to approve Fulton’s 2022 Amended and Restated Equity and
Cash Incentive Compensation Plan (the “2022 Plan”);
RATIFICATION OF INDEPENDENT AUDITOR. The ratification of the appointment of KPMG
LLP as Fulton’s independent auditor for the fiscal year ending December 31, 2022; and
OTHER BUSINESS. Such other business as may properly be brought before the Annual Meeting and
any adjournments thereof.
Only those shareholders of record at the close of business on March 1, 2022 (the “Record Date”) shall be
entitled to be given notice of, to attend and to vote at, the Annual Meeting. Please take a moment to cast your vote over
the Internet or by telephone in accordance with the instructions set forth on the enclosed proxy card, or, alternatively,
if you received paper copies of the proxy statement (the “Proxy Statement”) and proxy card, then complete, sign and
date the proxy card and return it in the postage-paid envelope. Shareholders attending the Annual Meeting may vote
during the meeting in person or online by using the control number that appears on the Important Notice Regarding
the Availability of Proxy Materials for the Shareholder Meeting (the “Notice”) even if they previously voted by proxy.
Voting via the Internet or by telephone prior to the meeting is fast and convenient, and your vote is
immediately tabulated and confirmed. Your proxy is revocable and may be withdrawn at any time before it is voted
at the Annual Meeting. You are cordially invited to attend the Annual Meeting on May 17, 2022 at 10:00 A.M.
Eastern Time. If you plan on attending the Annual Meeting in person, please see the instructions contained in
this Proxy Statement.
A copy of Fulton’s 2021 Annual Report on Form 10-K (the “Annual Report”) accompanies this Proxy
Statement.
Sincerely,
April 1, 2022
Natasha R. Luddington
Senior Executive Vice President,
Chief Legal Officer and
Corporate Secretary
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT [This Page Intentionally Left Blank] PROXY STATEMENT
Dated and To Be Mailed on or about: April 1, 2022
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 17, 2022 AT 10:00 A.M. EASTERN TIME
TABLE OF CONTENTS
PAGE
2022 ANNUAL MEETING SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Date, Time and Place of the Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Shareholders Entitled to Vote at and Attend the Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Purpose of the Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Revocability and Voting of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
How to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Voting Shares Held in Street Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Voting of Shares and Principal Holders Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Recommendation of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Shareholder Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Contacting the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Our Current Governance Best Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Code of Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Corporate Governance Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Majority Vote Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Procedure for Shareholder Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Director Qualifications and Board Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Nasdaq Board Diversity Matrix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ELECTION OF DIRECTORS – Proposal One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2022 Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Recommendation of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Information about Nominees, Directors and Independence Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Director Nominees Biographical Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Directors Retiring from Fulton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Security Ownership of Directors, Nominees, Management and Certain Beneficial Owners . . . . . . . . . . . . . .17
INFORMATION CONCERNING THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Meetings and Committees of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
HR Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Other Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Board’s Role in Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Board’s Role in Cybersecurity Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Board’s Role in Consumer Financial Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Board’s Role in Environmental and Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Lead Director and Fulton’s Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Executive Sessions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Annual Meeting Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Shareholder Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Director Education and Board Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Related Person Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Delinquent Section 16(a) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Board and Committee Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
i
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
INFORMATION CONCERNING EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Shareholder Say-on-Pay Proposal Historical Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Compensation Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Pay for Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
HR Committee Membership and Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Role of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Use of Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Use of a Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Elements of Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Compensation Plan Risk Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Other Compensation Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
HR Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Summary Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Grants of Plan-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Outstanding Equity Awards at Fiscal Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Option Exercises and Stock Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Nonqualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Potential Payments Upon Termination and Golden Parachute Compensation Table . . . . . . . . . . . . . . . . . . . . 42
CEO Pay Ratio Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
NON-BINDING SAY-ON-PAY PROPOSAL TO APPROVE THE COMPENSATION OF
THE NAMED EXECUTIVE OFFICERS – Proposal Two . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Recommendation of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
APPROVAL OF THE 2022 AMENDED AND RESTATED EQUITY AND CASH INCENTIVE
COMPENSATION PLAN – Proposal Three . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Key Terms of the 2022 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Shares available for grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Types of Awards Available under the 2022 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Vesting – General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Clawback of Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Acceleration of Vesting in Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Amendments to the 2022 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Share Recycling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Adjustments and Extraordinary Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Term of the 2022 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2021 Equity Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Equity Compensation Plan Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Recommendation of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
RATIFICATION OF INDEPENDENT AUDITOR – Proposal Four . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Recommendation of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Householding of Proxy Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Sign Up for Electronic Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
EXHIBITS
2022 Amended and Restated Equity and Cash Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit A
Report of Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit B
ii
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
2022 ANNUAL MEETING SUMMARY
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The Annual Meeting will be held at the Lancaster Marriott at Penn Square, 25 South
Queen Street, Lancaster, Pennsylvania 17603, on Tuesday, May 17, 2022, at 10:00 A.M.
Eastern Time. To vote prior to the Annual Meeting please go to the link that can be found
at www.proxyvote.com. To vote at, or attend, the Annual Meeting, you will need the control
number included on your proxy card or voting instruction form. Please refer to the “Date,
Time and Place of the Annual Meeting” section of this Proxy Statement for more details
about attending the Annual Meeting in person and requesting an admission ticket if you wish
to attend the Annual Meeting in person.
Proposal One (Page 9)
Proposal Two (Page 46)
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The election of 13 director nominees
to serve for a one-year term.
The approval of a non-binding say-on-pay
proposal to approve the compensation of the
NEOs.
Proposal Three (Page 47)
Proposal Four (Page 56)
A proposal to approve the 2022 Plan.
The ratification of the appointment of
KPMG LLP as Fulton’s independent
auditor for the fiscal year ending
December 31, 2022.
Board Recommendations
The Board recommends that shareholders vote: (i) FOR the election of each of the
13 director nominees; (ii) FOR the approval of the non-binding say-on-pay proposal
to approve the compensation of the NEOs; (iii) FOR the approval of the 2022 Plan and
(iv) FOR the ratification of the appointment of KPMG LLP as Fulton’s independent auditor
for the fiscal year ending December 31, 2022.
You can
vote your
shares via
You can
vote
your
the Internet by
visiting www.
proxyvote.com and
entering your control
number.
shares by telephone
by calling
1-800-690-6903
and using your
control number.
If you
received a
paper
copy of the Proxy
Statement, you can
vote your shares by
signing and
returning your proxy
card by U.S. mail.
You can
vote at the
Annual
Meeting with your
control number
(See How to Vote on
Page 4 for more
information).
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If you would like to save paper and reduce the costs incurred by Fulton in printing
and mailing proxy materials, you can consent to receiving all future proxy statements,
proxy cards and Annual Reports on Form 10-K electronically via e-mail or the
Internet. To sign up for electronic delivery, please go to www.proxyvote.com and have your
proxy card and control number when you access the website, then follow the instructions at
www.proxyvote.com to obtain your records and create an electronic voting instruction form.
Follow the instructions for voting online and, when prompted, indicate that you agree to receive
or access shareholder communications electronically in future years.
1
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
The following table provides summary information about each Annual Meeting director nominee and their
current Fulton committee assignments:
Director Nominee
Age
Fulton
Director
Since
Independent
Director
Audit
Committee
Executive
Committee
Human
Resources
Committee
Nominating
& Corporate
Governance
Committee
Risk
Committee
Jennifer Craighead Carey
53
2019
-
Lisa Crutchfield
59
2014
Yes
-
-
Denise L. Devine
66
2012
Yes
Vice Chair
Steven S. Etter
68
2019
Yes
Member
George W. Hodges
71
2001
Yes
Member
George K. Martin
68
2021
Yes
James R. Moxley III
61
2015
Yes
Curtis J. Myers *
53
2019
-
Antoinette M. Pergolin
58
-
Yes
Scott A. Snyder
56
2016
Yes
-
-
-
-
-
-
-
-
Vice Chair
Member
Member
Chair
since 2017
-
-
-
Vice Chair
Member
Member
-
-
-
-
-
-
-
-
-
Member
Lead Director
and Chair
since 2018
Member
Member
-
-
-
Member
-
-
-
-
-
Member
(Ex-officio)
-
Vice Chair
Chair
since 2019
Ronald H. Spair
66
2015
Yes
Chair
since 2017
Vice Chair
Member
-
-
-
Member
Chair
since 2021
Member
Member
-
-
Member
(Ex-officio)
Mark F. Strauss
70
2016
Yes
E. Philip Wenger **
64
2009
-
-
-
* President and Chief Operating Officer
** Chairman and Chief Executive Officer
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NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT GENERAL INFORMATION
Date, Time and Place of the Annual Meeting
You are cordially invited to attend the Annual Meeting. The Annual Meeting will be held Tuesday, May 17,
2022, at 10:00 A.M. Eastern Time at the Lancaster Marriott at Penn Square, 25 South Queen Street, Lancaster,
Pennsylvania 17603. To vote at, or attend, the Annual Meeting, please go to the link at www.proxyvote.com.
Registered and beneficial shareholders must request an admission ticket on or before May 15, 2022 to attend the
Annual Meeting in person. Shareholders can RSVP and print their admission tickets by accessing “Shareholder Meeting
Registration” at www.proxyvote.com and following the instructions provided. You will need the 16-digit control number
included on your proxy card, voter instruction form or the Notice sent to you. Each person attending the Annual Meeting
must bring their printed ticket and a valid photo identification such as a driver’s license or passport. Failure to follow
these admission procedures may delay your entry into, or prevent you from being admitted to, the Annual Meeting.
If you received the Notice, or if you requested proxy materials be provided to you by email, please go
to the link that can be found at www.proxyvote.com. You will need to enter the control number that appears
on the Notice.
Shareholders Entitled to Vote at and Attend the Annual Meeting
Attendance at the Annual Meeting will be limited to shareholders of record at the close of business on
the Record Date. Only those shareholders as of the Record Date shall be entitled to receive notice of and attend the
Annual Meeting.
Purpose of the Annual Meeting
Fulton shareholders will be asked to consider and vote upon the following matters at the Annual Meeting: (i)
the election of 13 director nominees to serve for a one-year term; (ii) a non-binding say-on-pay proposal to approve
the compensation of the NEOs; (iii) the approval of the 2022 Plan; (iv) the ratification of the appointment of KPMG
LLP as Fulton’s independent auditor for the fiscal year ending December 31, 2022 and (v) such other business as may
be properly brought before the Annual Meeting and any adjournments thereof.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the solicitation of proxies. Fulton is making this
solicitation and will pay the cost of preparing, assembling, printing, mailing and distributing proxy materials and
soliciting votes for the Annual Meeting. The solicitation of proxies or votes may be made in person, by mail, telephone
or by electronic communication by Fulton’s directors, officers and employees who will not receive any compensation
for such solicitation activities. Fulton has engaged Alliance Advisors to aid in the solicitation of proxies. The fee
for such services is estimated at $7,000, plus reimbursement for reasonable research, distribution and mailing costs.
Fulton pays the cost of preparing, assembling and mailing the proxy materials and soliciting proxies for
the Annual Meeting. In addition to the solicitation of proxies by mail, solicitation may be made by certain directors,
officers and employees of Fulton or its subsidiaries telephonically, electronically or by other means of communication.
These directors, officers and employees receive no additional compensation for their services. Fulton will reimburse
brokers and other nominees for costs incurred by them in mailing proxy materials in accordance with applicable laws.
Revocability and Voting of Proxies
The execution and return of the enclosed proxy card, or voting by another method, will not affect a
shareholder’s right to attend, and vote at, the Annual Meeting. A shareholder may revoke any proxy by: (i) delivering
written notice to the Corporate Secretary; (ii) sending a new proxy card before the shares are voted at the Annual
Meeting or (iii) voting by another method before the deadline set forth on the proxy card. Unless revoked, any proxy
given pursuant to this solicitation will be voted at the Annual Meeting in accordance with the written instructions
of the shareholder.
In the absence of specific voting instructions, all proxies will be voted:
• FOR the election of 13 director nominees to serve for a one-year term
• FOR the approval of the non-binding say-on-pay proposal to approve the compensation of the NEOs
• FOR the approval of the 2022 Plan
• FOR the ratification of the appointment of KPMG LLP as Fulton’s independent auditor
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NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT The Board knows of no other business to be presented at the Annual Meeting. In the event that any other
matters are properly brought before the Annual Meeting, and for which Fulton did not receive notice at least 45 days
prior to the date of mailing of this Proxy Statement, any proxy given pursuant to this solicitation will be voted in
the discretion of the proxyholders named on the proxy card, as permitted by the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). If you are a registered shareholder of record who holds stock in certificates or
in book entry with Fulton’s transfer agent and you do not cast your vote, no votes will be cast on your behalf at the
Annual Meeting.
Shares held for the account of shareholders who participate in Fulton’s: (i) Dividend Reinvestment and Stock
Purchase Plan, and (ii) Employee Stock Purchase Plan (the “ESPP”) will be voted in accordance with the instructions
of each shareholder. If a shareholder who participates in these plans does not return a proxy, the shares held for the
shareholder’s account will not be voted.
Shares held for the account of Fulton employees and former employees who participate in the Fulton 401(k)
Retirement Plan (the “401(k) Plan”) will be voted by the plan trustee (“Plan Trustee”) in accordance with the
instructions of each 401(k) Plan participant. The voting instructions of the 401(k) Plan participants must be received
by May 12, 2022. If no direction is given, then the 401(k) Plan shares will not be voted by the Plan Trustee. The Plan
Trustee has established procedures that are designed to safeguard the confidentiality of information about each 401(k)
Plan participant’s purchase, holding, sale and voting of the common stock. If a 401(k) Plan participant has questions
about these procedures or concerns about the confidentiality of this information, please contact the Retirement Plan
Administrative Committee and direct the inquiry to Fulton Financial Corporation, Attention: RPAC – Benefits, P.O.
Box 4887, One Penn Square, Lancaster, PA 17604.
How to Vote
There are several ways for you to vote your shares:
• By mail. If you received printed proxy materials, you may submit your proxy card by completing, signing
and dating each proxy card received and returning it in the prepaid envelope. Proxy cards submitted by
mail must be received no later than May 16, 2022 to be voted at the Annual Meeting;
• By telephone. Instructions are shown on your proxy card or Notice;
• Via the Internet. Instructions are shown on your proxy card or Notice; and
• At the Annual Meeting. You may vote your shares at the Annual Meeting by casting a ballot or voting
online by following the instructions on the proxy materials sent to you.
If you are a beneficial owner of Fulton common stock, you should receive the Notice or voting instructions
from your broker or other nominee holding your shares with instructions how to vote your shares. In accordance with
the rules of the Securities and Exchange Commission (the “SEC”), Fulton is furnishing proxy materials to certain of
Fulton’s shareholders on the Internet at www.proxyvote.com in lieu of mailing paper copies of the materials unless
the shareholders elected to receive paper copies of Fulton’s proxy materials. As a result, certain shareholders will
receive the Notice and other shareholders will receive paper copies. Electronic delivery expedites the receipt of proxy
materials and significantly lowers costs to conserve natural resources.
This Proxy Statement and Fulton’s Annual Report are available in the Investor Relations section of Fulton’s
website at www.fultonbank.com. The contents of Fulton’s website are not incorporated into this Proxy Statement by
provision of this link or other links in this Proxy Statement.
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NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Voting Shares Held in Street Name
If you hold shares in “street name” or “nominee name” with a bank or broker, then you should instruct your
bank or broker how to vote your shares, and follow the voting procedures required by your bank or broker to vote
your shares.
Voting of Shares and Principal Holders Thereof
At the close of business on the Record Date, Fulton had 160,590,000 shares of common stock outstanding
and entitled to vote. There is no other class of capital stock outstanding entitled to vote at the Annual Meeting.
As of the Record Date, 3,592,800 shares of Fulton common stock were held by Fulton Financial Advisors
(“FFA”), a division of Fulton Bank, N.A. (“Fulton Bank”) as the Plan Trustee, or in a fiduciary capacity for
fiduciary accounts. The shares held in this manner, in the aggregate, represent approximately 2.24% of the total
shares outstanding. Shares held by FFA, as Plan Trustee, are voted by the beneficiaries of the 401(k) Plan. Shares
for which FFA serves as a co-fiduciary will be voted by the co-fiduciary, unless the co-fiduciary declines to accept
voting responsibility, in which case, FFA will vote to abstain on all proposals. Shares for which FFA serves as sole
trustee of a revocable trust, shares for which FFA acts as agent for an investment management account, and shares for
which FFA acts as custodian for a custodial account, are voted by the settlor of the revocable trust and the principal
of the agency or custodial account unless the governing document provides for FFA to vote the shares, in which case
FFA will vote to abstain on all proposals. Shares for which FFA is acting as sole trustee of an irrevocable trust or
as guardian of the estate of a minor or an incompetent person are voted by FFA, and in such cases, FFA will vote to
abstain on all proposals.
The holders of a majority of Fulton’s outstanding shares of common stock must be present in person, or by
proxy, at the Annual Meeting to constitute a quorum for the conduct of business. Abstentions and broker non-votes
(i.e., proxies from banks, brokers or other nominees indicating that such entities have not received instructions from
the beneficial owners or other persons entitled to vote as to a matter which such bank, broker or other nominee
does not have discretionary power to vote) will also be counted as being present for purposes of determining a
quorum if such shares have been voted on any matter other than a procedural matter. Proxies returned without voting
instructions will not be counted for purposes of determining a quorum.
Each share is entitled to one vote on all matters submitted to a vote of the shareholders. A majority of the
votes cast at a meeting at which a quorum is present is required in order to approve any matter submitted to a vote of
the shareholders, except for the election of directors, where the 13 nominees receiving the highest number of votes
shall be elected, or in cases where the vote of a greater number of shares is required by law or under Fulton’s Articles
of Incorporation or Bylaws.
In the election of directors, the 13 nominees receiving the highest number of votes cast at the Annual
Meeting shall be elected to the Board of Directors for terms of one year. However, Fulton’s Governance Guidelines
(defined below) require a director nominee who does not receive the affirmative vote of a majority of the votes cast
in an uncontested election (meaning the number of shares voted “for” a nominee must exceed the number of shares
voted “against” such nominee) to offer his or her resignation. See Page 7 “Selection of Directors” – “Majority Vote
Standard,” below.
The proposals being considered at the Annual Meeting are as follows:
Proposal
Vote Requirement
Effect of
Abstentions
Effect of Broker
Non-Votes
1.
2.
3.
4.
Election of Directors
Advisory Vote on Executive
Compensation
2022 Amended and Restated Equity
and Cash Incentive Compensation Plan
Ratification of the appointment of
Fulton’s independent auditor
Highest number of votes cast
Affirmative vote of a
majority of the votes cast
Affirmative vote of a
majority of the votes cast
Affirmative vote of a
majority of the votes cast
No effect
No effect
No effect
No effect
No effect
No effect
No effect
No effect
5
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Recommendation of the Board
The Board recommends that Fulton shareholders vote as follows:
Proposal
Vote Recommendation
1.
Election of Directors
FOR the election of each of the 13 director nominees
2. Advisory Vote on Executive Compensation
3.
4.
2022 Amended and Restated Equity and Cash
Incentive Compensation Plan
Ratification of the appointment of Fulton’s
independent auditor
FOR the approval of the non-binding say-on-pay
proposal to approve the compensation of the NEOs
FOR the approval of the 2022 Plan
FOR the ratification of the appointment of KPMG
LLP as Fulton’s independent auditor
Shareholder Proposals
Shareholder proposals intended to be considered for inclusion in Fulton’s Proxy Statement and form of proxy
for the 2023 Annual Meeting of Shareholders (the “2023 Annual Meeting”) must be received by Fulton’s Corporate
Secretary at the principal executive offices of Fulton at One Penn Square, P.O. Box 4887, Lancaster, Pennsylvania
17604 no later than December 2, 2022 and must satisfy the other requirements of Rule 14-8 under the Exchange
Act. Any shareholder proposal not received by February 15, 2023, will be considered untimely. To comply with the
universal proxy rules once effective, shareholders who intend to solicit proxies in support of director nominees other
than Fulton’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange
Act no later than March 18, 2022.
Contacting the Board
A Fulton shareholder can contact the Board by writing to: Board of Directors, Fulton Financial Corporation,
Attention: Corporate Secretary, P.O. Box 4887, One Penn Square, Lancaster, Pennsylvania 17604. The Chair of the
Executive Committee of the Board will determine further distribution of written communications based on the
communication.
Our Current Governance Best Practices
Fulton’s current governance best practices include:
• Board-designated lead director (the “Lead Director”)
• Regular executive sessions chaired by the Lead Director
• All key committees composed entirely of independent directors
• A majority of Fulton directors are independent
• Officer and director stock ownership guidelines
• Annual Board and committee self-evaluations
• Anti-hedging and pledging prohibitions
• Clawback policy
Code of Conduct
Fulton’s Code of Conduct (the “Code of Conduct”) governs the conduct of its directors, officers and
employees. A current copy of the Code of Conduct can be obtained, without cost, by writing to the Corporate Secretary
at: Fulton Financial Corporation, Attention: Corporate Secretary, P.O. Box 4887, One Penn Square, Lancaster,
Pennsylvania 17604. The current Code of Conduct is available on Fulton’s website at www.fultonbank.com.
Corporate Governance Guidelines
Fulton’s Corporate Governance Guidelines (the “Governance Guidelines”) address, among other matters,
the following: (i) the size of the Board; (ii) director qualifications; (iii) a majority vote standard; (iv) service on other
boards and director change in status; (v) meeting attendance and review of meeting materials; (vi) director access
6
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT to management and independent advisors; (vii) designation of a Lead Director; (viii) executive sessions; (ix) Chief
Executive Officer (“CEO”) evaluation and succession planning; (x) Board and committee evaluations; (xi) stock
ownership guidelines; (xii) communications by interested parties; (xiii) Board and committee minutes; (xiv) Code of
Conduct and (xv) disclosure and update of the Governance Guidelines.
The current Governance Guidelines can be obtained, without cost, by writing to the Corporate Secretary
at: Fulton Financial Corporation, Attention: Corporate Secretary, P.O. Box 4887, One Penn Square, Lancaster,
Pennsylvania 17604. The Governance Guidelines are available on Fulton’s website at www.fultonbank.com.
SELECTION OF DIRECTORS
General Information
The Board is currently comprised of 14 directors, all of whom were elected at the 2021 Annual Meeting
of Shareholders (the “2021 Annual Meeting”). A majority of the Board may increase or decrease the number of
directors. Any vacancy occurring in the Board may be filled by appointment by the remaining directors. Any director
who is appointed to fill a Board vacancy shall hold office until the next annual meeting of the shareholders and until a
successor is elected and qualified. Two directors elected at the 2021 Annual Meeting are retiring, and the Board has,
by resolution in January 2022, fixed the number of members of the Board at 13 as of the Annual Meeting.
Pursuant to Fulton’s Bylaws, no person may be nominated for election if he or she will be 72 years old on or
before the date of the annual meeting of shareholders at which they would stand for election.
Majority Vote Standard
Fulton’s Nominating and Corporate Governance Committee (the “NCG Committee”) recommended,
and the Board adopted, a majority vote standard for uncontested director elections, which is incorporated into the
Governance Guidelines and acts as a voluntary resignation policy. In an uncontested election, any nominee for
director who does not receive a majority of the votes cast is required to promptly tender his or her resignation following
certification of the shareholder vote. As further described in the Governance Guidelines, the NCG Committee shall
consider the tendered resignation and recommend to the Board of Directors whether to accept it.
Procedure for Shareholder Nominations
Shareholder nominations of director candidates must be made in writing and delivered or mailed to the
Chairman of the Board or the Corporate Secretary not less than the earlier of: (i) one hundred twenty (120) days
prior to any meeting of shareholders called for the election of directors or (ii) the deadline for submitting shareholder
proposals for inclusion in a proxy statement as calculated under Rule 14a-8(e) of the Exchange Act. For the 2023
Annual Meeting, this deadline date is December 2, 2022. The required notice of a shareholder nomination must set
forth: (i) the name and address of the shareholder who intends to make the nomination and a representation that
the shareholder is a holder of record of stock of Fulton entitled to vote at such meeting and intends to be present in
person or by proxy at such meeting to nominate the person or persons to be nominated; (ii) the name, age, business
address and residence address of each nominee proposed in such notice; (iii) the principal occupation or employment
of each such nominee; (iv) the number of shares of capital stock of Fulton that are beneficially owned by each such
nominee; (v) a statement of qualifications of the proposed nominee and a letter from the nominee affirming that he
or she will agree to serve as a director of Fulton, if elected by the shareholders; (vi) a description of all arrangements
or understandings between the shareholder submitting the notice and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder
and (vii) such other information regarding the nominee proposed by the shareholder as would be required in the proxy
statement soliciting proxies for the election of the director nominee under the rules of the SEC. Shareholder director
nominees are subject to the same standard of review as director nominees of Fulton’s Board or its NCG Committee.
Director Qualifications and Board Diversity
In considering a director nominee, Fulton considers a variety of factors, namely: (i) if the candidate is
recommended by executive management; (ii) the individual’s professional and personal qualifications, including
business experience, education and community and charitable activities; (iii) the individual’s familiarity with one or
more of the communities in which Fulton is located or is seeking to locate and (iv) the diversity the individual may
provide to the Board and its committees. Fulton does not have a separate written policy regarding how diversity is to
be considered in the director nominating process.
7
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Fulton’s Governance Guidelines provide that Fulton’s Board should be sufficient in size to achieve diversity in
business experience, community service and other qualifications among non-employee directors while still facilitating
substantive discussions in which each director can participate meaningfully. The NCG Committee is responsible for the
Governance Guidelines and for recommending director nominees to the Board. The NCG Committee also considers
nominees for director that are recommended by various persons or entities, including, but not limited to, non-management
directors, Fulton’s Chief Executive Officer, other senior officers and third parties. Information on the experience,
qualifications, attributes and skills of Fulton’s director nominees is described under “Director Nominees” below.
The NCG Committee believes there is a balance between seasoned directors with knowledge of and insight
into Fulton and Fulton Bank, and new directors who contribute fresh ideas, perspectives and viewpoints to the Board’s
deliberations. The NCG Committee members and the Board are focused on attracting and maintaining directors that
provide increasing contributions to Fulton over time and have routinely considered candidates who first served on the
board of directors of one of Fulton’s subsidiary banks. The NCG Committee reviews the composition of the Board at least
annually to ensure that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity.
The nominees for election to the Board at the Annual Meeting have a gender diversity ratio of 30.8%, a
racial diversity ratio of 23.1%, and an average tenure on the Board of seven years, with five nominees having served
five or less years, six nominees having served from six to ten years and two nominees having served eleven or more
years on the Board. The following is a summary of the gender diversity, racial diversity and average tenure of the
Annual Meeting director nominees:
Gender Diversity
30.8%
Racial Diversity
23.1%
Average Nominee Tenure
7 Years
Female
4
Diverse
3
Male
9
Non-diverse
10
0-5
Years
5
6-10
Years
6
11+
Years
2
Nasdaq Board Diversity Matrix
The following matrix, as required by Nasdaq listing rules, includes Messrs. Graupera and Waters who are
retiring in May 2022 at the Annual Meeting. It does not include the Annual Meeting director nominee who was not
on the Board as of December 31, 2021.
Board Diversity Matrix (As of December 31, 2021)
Total Number of Directors
Female
Part I: Gender Identity
Directors
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or More Races or Ethnicities
LGBTQ+
Did Not Disclose Demographic Background
3
2
0
0
0
0
1
0
Male
11
2
0
0
1
0
8
0
8
14
Non-Binary
Did Not Disclose Gender
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
ELECTION OF DIRECTORS – PROPOSAL ONE
General Information
The Board nominates the following 13 director nominees for election to the Board for a term of one year:
2022 Director Nominees
Jennifer Craighead Carey
Steven S. Etter
James R. Moxley III
Scott A. Snyder
E. Philip Wenger
Lisa Crutchfield
George W. Hodges
Curtis J. Myers
Ronald H. Spair
Denise L. Devine
George K. Martin
Antoinette M. Pergolin
Mark F. Strauss
Except for Ms. Pergolin, each of the above director nominees is presently a director of Fulton, and all director
nominee serves on the Fulton Bank Board of Directors (the “Bank Board”). The NCG Committee recommended, and
the Board approved, the nomination of the above individuals. The Board has no reason to believe that any of its director
nominees will be unable to accept nomination or to serve as a director if elected at the Annual Meeting.
Vote Required
The 13 candidates receiving the highest number of votes cast at the Annual Meeting shall be elected to the
Board. Abstentions and broker non-votes will be counted as present at the Annual Meeting if they are voted on at
least one non-procedural matter, but abstentions and broker non-votes will not be counted as votes cast in the election
of directors.
Recommendation of the Board
The Board recommends that shareholders vote FOR the election of each of the 13 director nominees.
Information about Nominees, Directors and Independence Standards
The experience, qualifications, attributes and skills of the 13 director nominees, including whether they were
determined by the Board to be independent for purposes of the Nasdaq listing standards, are set forth below.
Fulton is a Nasdaq listed company and follows the Nasdaq listing standards for Board and committee
independence. The Board determined that ten of Fulton’s 13 director nominees are independent. Specifically, the
Board determined that director nominees Crutchfield, Devine, Etter, Hodges, Martin, Moxley, Pergolin, Snyder,
Spair and Strauss met the definition of independent director in the Nasdaq listing standards. Each of these ten director
nominees is free of relationships that would be deemed under the Nasdaq listing standards to interfere with his or her
individual exercise of independent judgment.
The current members of the Audit Committee, the Human Resources Committee (the “HR Committee”)
and the NCG Committee of the Board meet the requirements for independence under the Nasdaq listing standards,
and the rules and regulations of the SEC for service on the Audit Committee, the HR Committee and the NCG
Committee. In reviewing director independence, the Board considered the relationships and other arrangements, if
any, of each director nominee. The relationships and transactions reviewed and considered are more fully described
in “Related Person Transactions” on Page 23.
9
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
Director Nominees Biographical Information
JENNIFER CRAIGHEAD CAREY - Age: 53
•
•
Fulton Director since 2019 and Fulton Bank Director since 2012
2021 – 2022 Fulton Committees: Risk – Vice Chair
Ms. Craighead Carey has been a partner at Barley Snyder LLP since 2001, and she
chaired the firm’s Employment Law group from 2005 to 2019. She concentrates her
practice in the areas of labor and employment law as well as school law. She regularly
provides advice to employers on a myriad of employment issues and has handled
numerous labor arbitrations both in the public and private sector.
She has handled cases at both the administrative level and routinely handles
litigation in the Federal District Courts in both the Eastern and Middle Districts
of Pennsylvania. Ms. Craighead Carey regularly practices before the Pennsylvania
Human Relations Commission and the Equal Employment Opportunity Commission
as well as administrative agencies throughout the country, handling all manner of
discrimination and retaliation claims. Ms. Craighead Carey is a graduate of Dickinson
School of Law, with a J.D., cum laude, a comment writer for the Dickinson Law
Review, a member of the Woolsack Honor Society recognizing superior academic achievement, and a member of
Minority Law Students Association. She has received the designation of being a “Pennsylvania Super Lawyer”
from 2010 through 2021.
Ms. Craighead Carey is active in the community, and she is currently a board member of the Lancaster City
Alliance and a member of the WellSpan Diversity, Equity and Inclusion Steering Committee. She is a former
board member of the Lancaster Chamber of Commerce & Industry and a past chair of the United Way of Lancaster
County. She has been a director of Fulton Bank since 2012, and she has over 20 years of legal, risk management,
and employment experience. In addition, she is familiar with the markets in which Fulton operates.
LISA CRUTCHFIELD - Age: 59
•
•
•
Independent
Fulton Director since 2014 and Fulton Bank Director since 2019
2021 – 2022 Fulton Committees: Executive – Member; NCG – Chair; and Human Resources – Member
Ms. Crutchfield is the managing principal of Hudson Strategic Advisers, LLC, an
economic analysis and strategic advisory firm serving the energy industry since
2016. She has served as a consultant to the energy industry since 2012. Prior to her
entrepreneurial ventures, Ms. Crutchfield served as executive vice president and chief
regulatory, risk and compliance officer for National Grid USA from 2008 to 2011. In
this role, Ms. Crutchfield also served as an executive director on the board of National
Grid USA. She also has served in executive leadership roles at Exelon Corporation
(PECO), TIAA-CREF and Duke Energy Corporation. Ms. Crutchfield led the efforts
to liberalize the electric generation and gas markets in Pennsylvania when she served
as a utility regulator. Ms. Crutchfield currently serves on the board of directors of
Unitil Corporation (NYSE: UTL) since 2012, Vistra Energy (NYSE: VST) since 2020
and on the private company board of Buckeye Partners LP since 2020.
Ms. Crutchfield brings more than 20 years of experience leading corporate teams and has extensive knowledge
of the financial services industry, and she began her career as a commercial and investment banker. Moreover,
she brings expertise in risk management, regulation and compliance. She earned the designation by the National
Association of Corporate Directors (“NACD”) as a Governance Leadership Fellow since 2019. Ms. Crutchfield
is a graduate of Yale University with a B.A. in economics and political science. She also earned an M.B.A. from
Harvard Business School, with a distinction in Finance.
10
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT DENISE L. DEVINE - Age: 66
•
•
•
Independent
Fulton Director since 2012 and Fulton Bank Director since 2019
2021 – 2022 Fulton Committees: Audit – Vice Chair and financial expert; and Human Resources –
Vice Chair
Ms. Devine is the founder and since 2014 has served as the Chief Executive Officer
of FNB Holdings, LLC, a company dedicated to initiatives in the health and wellness
space. Ms. Devine was also founder and Chief Executive Officer of Nutripharm,
Inc., a company that has generated a portfolio of composition and process patents to
create innovative natural food, beverage, pharmaceutical and nutraceutical products
that facilitate nutrition and lifelong health. Ms. Devine, a certified public accountant,
also previously served as Chief Financial Officer for Energy Solutions International
and in financial management positions for Campbell Soup Company. Ms. Devine has
served as Chair of the Pennsylvania State Board of Accountancy and on the Board of
Directors of the American Institute of Certified Public Accountants. Ms. Devine was
a member of the Board of Trustees of Villanova University from 2005 to 2015, where
she was the Chair of the Audit and Risk Committee. She has served on the Board of
Directors of Ben Franklin Technology Partners of Southeastern Pennsylvania since 2016 and was appointed to the
Board of Directors of Ben Franklin Technology Development Authority in 2018. Ms. Devine has been a director
of AgroFresh Solutions, Inc. (Nasdaq: AGFS) since 2018 and a director of SelectQuote (NYSE: SLQT) since 2020.
From 2019 to 2021 she served as a director of Cubic Corporation (NYSE: CUB).
Ms. Devine has substantial management, business and finance experience that adds valuable outside experience to
Fulton’s Board and its committees. She has completed courses and was recognized by NACD as a Board Leadership
Fellow since 2016. She received an M.B.A. from the Wharton School of the University of Pennsylvania, an M.S. in
Taxation from Villanova Law School, and a B.S. in Accounting from Villanova University, where she graduated
first in her class.
STEVEN S. ETTER - Age: 68
•
•
•
Independent
Fulton Director since 2019 and Fulton Bank Director since 2012
2021 – 2022 Fulton Committees: Audit – Member and financial expert; and Human Resources – Member
Mr. Etter retired as an executive officer of Harrisburg News Company in 2020,
after serving as the President and CEO of Harrisburg News Company, a division of
Hudson News Distributors LLC (“Hudson News”) a regional magazine, book and
newspaper wholesale distribution company since 2014. Prior to its consolidation
with Hudson News, Mr. Etter served from 1998 to 2014 as the President and CEO of
Harrisburg News Company when it was an independent company. From 1975 to 1997,
he held other management positions at Harrisburg News Company and was active in
various trade organizations, including the past President of the Council for Periodical
Distribution Association, President of the Atlantic Coast Executive Society, and past
Secretary and Treasurer of the Atlantic Coast Independent Distributors Association.
A graduate of the University of Miami with a B.A. in finance and marketing, he
is a member of its President’s Council that is comprised of a select advisory
group of prominent alumni. Mr. Etter also is an Emeritus Director of the Whitaker Center for Science and the
Arts, a nonprofit center for the arts, education, entertainment and cultural enrichment, located in Harrisburg,
Pennsylvania. Mr. Etter has been active in numerous business endeavors, professional associations, charitable and
community organizations during his career, including serving as a former board member of WITF, a public radio
and television station that broadcasts in central Pennsylvania.
As a chief executive officer and successful business owner, Mr. Etter brings extensive business skills, financial
expertise and regional market knowledge to Fulton’s Board. Mr. Etter has been a director of Fulton Bank since
2012. He was also a long-time member of Fulton Bank’s Harrisburg advisory board.
11
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT GEORGE W. HODGES - Age: 71
•
•
•
Independent
Fulton Director since 2001 and Fulton Bank Director since 2012
2021 – 2022 Fulton Committees: Audit – Member and financial expert; and Human Resources – Member
Mr. Hodges has been a director of Fulton since 2001, and he served as Fulton’s Lead
Director from 2010 until June 2018. Mr. Hodges served as a director of Fulton Bank
since 2012 and was a director of Drovers & Mechanics Bank, until it was merged into
Fulton Bank in 2001.
He has been a director of York Water Company (Nasdaq: YORW) from 2000 to
present and served as Chairman of York Water Company from 2011 until May 2021.
He was a director of The Wolf Organization, Inc., a regional distributor and sourcing
company of kitchen and bath products and specialty building products, from 2008 to
2015, and he served as non-executive Chairman from 2008 to 2009, and prior to that as
a member of the Office of the President from 1986 to 2008. Mr. Hodges was a director
of Burnham Holdings, Inc. from 2006 to 2021. Burnham Holdings, Inc., is the parent
company of 14 subsidiaries that are leading domestic manufacturers of boilers and related HVAC products and
accessories including furnaces, radiators and air conditioning systems, for residential, commercial and industrial
applications, and he served on the boards of various for profit, non-profit and community organizations.
Mr. Hodges brings considerable financial expertise and business knowledge to the Fulton Board, both through his
business experience and service on other boards. Mr. Hodges completed the requirements for the NACD Board
Leadership Fellow Program since 2011.
GEORGE K. MARTIN - Age: 68
•
•
•
Independent
Fulton Director since 2021 and Fulton Bank Director since 2016
2021 – 2022 Fulton Committees: Risk Committee – Member
Mr. Martin is a senior partner of the Richmond, Virginia office of McGuireWoods
LLP (“McGuire Woods”). From 2009 to 2021 he served as the managing partner
McGuire Woods largest office for over 12 years. He has been a partner with the firm
since 1990 and practices construction and commercial real estate law, and he was
previously involved in firm management in various capacities, including service on
the recruiting committee, advisory board and pension committees. He also served
as head of the construction transactions team. He has represented public and private
entities on numerous real estate projects, including public private partnerships.
He is a graduate of the Howard University School of Law, where he was a member and
managing editor of the Howard Law Journal. He received a B.A. from the University
of Virginia. He is an attorney with over 40 years’ experience, and he is admitted to
practice in the Virginia Supreme Court, U.S. Tax Court and the U.S. Supreme Court.
Mr. Martin is active in the Richmond, Virginia and the Washington, D.C. metro communities. He is currently an
adjunct professor at the University of Virginia School of Law. He also serves on the Jefferson Scholars Foundation
Board and Executive Committee and the Governing Council and Executive Committee at the University of Virginia’s
Miller Center. He is a member of the University of Virginia School of Architecture Foundation Board. Since 1991,
he has served on the Housing and Development Law Institute Board in Washington, D.C. He previously served as
a member of the Virginia Board of Bar Examiners, the Virginia Bar Association Board of Governors, and the 2019
Commemoration Executive Committee. He previously served as Vice-Rector then Rector at the University of Virginia.
Mr. Martin brings to the Fulton Board extensive senior leadership, legal, real estate and risk management
experience. He has been a director of Fulton Bank since 2016, and prior to joining the Fulton Bank board he was
a member of Fulton Bank’s Central Virginia Advisory Board.
12
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT JAMES R. MOXLEY III (Independent Lead Director) - Age: 61
•
•
Independent
Fulton Director since 2015, Fulton Bank Director since 2019 and The Columbia Bank Director from 1999
to 2019
2021 – 2022 Fulton Committees: Executive – Chair; NCG – Member; and Human Resources – Member
•
Mr. Moxley currently serves as Fulton’s Lead Director. Prior to joining the Fulton
Bank board in 2019, Mr. Moxley was a director of The Columbia Bank since 1999.
He is admitted and licensed to practice law in Maryland, and he is a former real
estate attorney with Venable, Baetjer and Howard, now known as Venable LLP. Since
1992, Mr. Moxley has served as a Principal of Security Development Corporation, a
Washington-Baltimore real estate land development company engaged primarily in
retail and multifamily projects.
He serves as a member of the Duke University Library Advisory Board and the Board
of Visitors of Duke Law School. Mr. Moxley is a Trustee Emeritus of the Glenelg
Country School, having served as a trustee since 1996 and as the board chair. He
has also served as a trustee of the Howard County General Hospital from 2021 to
present, as a trustee of the Howard Hospital Foundation from 2014 to present, as a Founding Director of the Real
Estate Charitable Foundation of Maryland from 2015 to present, and he is active on numerous civic boards and
committees in Maryland.
Mr. Moxley received a J.D. degree and A.B. in Economics, magna cum laude, from Duke University. Since 2017,
he completed the requirements and is recognized by the NACD as a Board Leadership Fellow. Mr. Moxley brings
banking expertise to Fulton’s Board that he gained as a director of The Columbia Bank. He also has extensive
business, tax, and legal experience related to the acquisition, financing, and development of commercial and
residential real estate. Mr. Moxley’s longstanding board service at Fulton Bank and its predecessors in Maryland
also provides Fulton’s Bord with corporate governance and supervisory skills.
CURTIS J. MYERS (President and COO of Fulton) - Age: 53
•
•
Fulton Director since 2019 and Fulton Bank Director since 2009
2021 – 2022 Fulton Committees: None
Since January 1, 2018, Mr. Myers has been the President and Chief Operating Officer
of Fulton. He became an executive officer of Fulton in July 2013 and has held a
number of executive positions with Fulton Bank since 1990.
He is also the Chairman, Chief Executive Officer, Chief Operating Officer and
President of Fulton Bank. He was promoted to Chairman and Chief Executive Officer
in May 2018 and became the President and Chief Operating Officer of Fulton Bank in
2009. He has served as a director of Fulton Bank since 2009.
Mr. Myers has participated in a number of industry organizations and has been active
in the local community for many years. He has been involved with the Pennsylvania
Bankers Association, is a past chair of the American Heart Association of Lancaster
County, a past board member of the YMCA of Lancaster County, and a past board member of the United Way
of Lancaster County. He served as the Treasurer of the Fulton Theatre Company from 2011 to 2020, a director
of TEC Centro since 2017, and he is the current chair of the Salvation Army (Lancaster) and has been a director
of this local non-profit since 1995. In 2019, Mr. Myers joined the Operation HOPE Northeast Advisory Board
and the ABA Stonier Graduate School of Banking Advisory Board. In 2021 he joined the board of the Economic
Development Company of Lancaster County.
Mr. Myers brings a depth of banking experience, knowledge, executive leadership, financial expertise and other
valuable skills to Fulton’s Board. He holds a Bachelor of Science in Business Administration from Shippensburg
University and a Master’s degree in Business Administration from Saint Joseph’s University. He is a graduate of
the Stonier Graduate School of Banking.
13
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT ANTOINETTE M. PERGOLIN - Age: 58
•
•
•
Independent
Fulton Bank Director since 2012
2021 – 2022 Fulton Committees: None
Since 2004, Ms. Pergolin has served as President and CEO of Bancroft, a New Jersey
non-profit. Bancroft is a leading regional non-profit provider of programs and services
for individuals with autism, intellectual and developmental disabilities and those in need
of neurological rehabilitation. Under her leadership, Bancroft has expanded its services.
Prior to joining Bancroft, Ms. Pergolin worked at the University of Pennsylvania
Health System for 14 years in various positions, including Chief Financial Officer for
Pennsylvania Hospital, and during this time she maintained a CPA license that is now
inactive. She received her undergraduate degree in Accounting from Pennsylvania State
University and her Master’s in Health Administration from Saint Joseph’s University.
Ms. Pergolin is actively involved in the Metro Philadelphia and New Jersey
communities and welcomes opportunities to help others with important missions. She has extensive board
experience, including serving as director of Fulton Bank since 2012, and she served on the boards of other
organizations, both for profit and nonprofit, over the past decade. She is currently the Chairwoman of the Peirce
College Board of Trustees where she has been a trustee since 2016. In April 2021, she was appointed to the Inspira
Health Network, Inc. Board of Trustees.
She brings extensive experience in senior leadership, governance, investment, human resources, accounting, and
financial expertise to Fulton’s Board.
SCOTT A. SNYDER, PhD - Age: 56
•
•
•
Independent
Fulton Director since 2016 and Fulton Bank Director since 2019
2021 – 2022 Fulton Committees: Executive – Member; NCG – Vice Chair; and Risk – Chair
Dr. Snyder is currently the Chief Digital Officer at EVERSANA, a leading provider
of global commercial services to the life sciences industry. Dr. Snyder was previously
the President of Breakthru Advisors, which is focused on helping enterprises leverage
digital and other emerging technologies to accelerate innovation and new venture
creation. Prior to that, he was the Global Head of Digital and Innovation at Heidrick
Consulting between April 2018 and September 2020 and the Senior Vice President,
Managing Director, and Chief Technology and Innovation Officer for Safeguard
Scientifics, Inc. (NYSE: SFE), a provider of capital and relevant expertise to fuel the
growth of technology-driven businesses in healthcare, financial services and digital
media from August 2016 until March 2018. From 2011 until August of 2016, he served
as the President and Chief Strategy Officer of Mobiquity, Inc., a mobile technology
company that focuses on digital strategy and engineering enhanced mobile experiences that was recently acquired
by Hexaware Technologies Ltd. Since 2016, he has served as the Chair of the Mobiquity advisory board.
Dr. Snyder is a Senior Fellow in the Management Department at the Wharton School, and an adjunct faculty
member in the School of Engineering and Applied Science at the University of Pennsylvania. Dr. Snyder has
lectured at MIT, Babson, Duke, Georgia Tech and INSEAD on digital innovation, decision-making, business
and IT strategy, emerging technologies, product design and development, and big data/analytics since 2002. He
received his B.S., M.S., and Ph.D. in Systems Engineering from the University of Pennsylvania.
Dr. Snyder brings over 30 years of business acumen, experience in the technology sector and leadership in digital
innovation to the Fulton Board. Dr. Snyder has extensive expertise in the development of digital solutions, mobile
business strategy and mobile security. In 2017, Dr. Snyder successfully completed the NACD Cyber-Risk Oversight
Program and earned a CERT Certificate in Cybersecurity Oversight issued by the Software Engineering Institute
at Carnegie Mellon University.
14
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT RONALD H. SPAIR - Age: 66
•
•
•
Independent
Fulton Director since 2015 and Fulton Bank Director since 2019
2021 – 2022 Fulton Committees: Audit – Chair and financial expert; Executive – Vice Chair; and Human
Resources – Member
Since September 2006, Mr. Spair served as the Chief Financial Officer, Chief
Operating Officer and a member of the Board of Directors of OraSure Technologies,
Inc. (Nasdaq:OSUR), a diagnostic and medical device company headquartered in
Bethlehem, Pennsylvania, and since 2001 he has served as Executive Vice President
and Chief Financial Officer. In June 2018, he retired from the Board of Directors and
as an officer of OraSure Technologies, Inc.
From 2013 to May 2018, Mr. Spair served on the board of Life Science – PA, which
was formerly known as Pennsylvania Biotechnology Association, a state trade
association for the life sciences community in the Commonwealth of Pennsylvania.
He is a certified public accountant, a chartered global management accountant, and
he holds an M.B.A. from Rider College.
Mr. Spair brings his public company executive experience and financial expertise to Fulton’s Board. Mr. Spair
also has extensive experience negotiating mergers and acquisitions, development and licensing transactions as
well as corporate financings.
MARK F. STRAUSS - Age: 70
•
•
•
Independent
Fulton Director since 2016, Fulton Bank Director since 2019 and Fulton Bank of New Jersey from 2011 to 2019
2021 – 2022 Fulton Committees: Executive – Member; Human Resources – Chair; and NCG – Member
Since 2019, Mr. Strauss has served as director of Fulton Bank, a director of Fulton
Bank of New Jersey from 2011 to 2019, and a director of Skylands Community Bank
prior to its merger with Fulton Bank of New Jersey in 2011. From October 2010 to
his retirement in December 2017, he served as Senior Vice President of Corporate
Strategy and Business Development at American Water Works Company, Inc.
(NYSE: AWK) (“American Water”), the largest and most geographically diverse
publicly-traded U.S. water and wastewater utility company, where he was responsible
for working with the senior management team to link overall strategy and major
growth efforts for American Water’s regulated and competitive operations.
From December 2006 to September 2010, Mr. Strauss served as President of
American Water Enterprises, which owns and operates several of American Water’s
market-based businesses. In this role, Mr. Strauss oversaw American Water’s non-regulated business units that
offer operations and maintenance contract services across the United States and Canada, including water and
wastewater management for military bases, service-line protection programs, design, construction and operation
of community onsite water and wastewater systems and other innovative solutions that address a variety of
challenges facing the industry.
Mr. Strauss has legal and executive skills and, prior to his retirement from American Water, he was also an
attorney licensed to practice law in New Jersey.
15
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT E. PHILIP WENGER (Chairman of the Board and CEO of Fulton) - Age: 64
•
•
Fulton Director since 2009 and Fulton Bank Director since 2019, and from 2003 to 2009
2021 – 2022 Fulton Committees: Executive – Member
Mr. Wenger became Chairman of the Board and Chief Executive Officer of Fulton on
January 1, 2013. He also served as President from 2008 to 2017, and Chief Operating
Officer of Fulton from 2008 to 2012. Mr. Wenger was a director of Fulton Bank from
2003 to 2009, Chairman of Fulton Bank from 2006 to 2009 and has been employed
by Fulton in a number of positions since 1979. He rejoined the Fulton Bank board as
a director in 2019.
Mr. Wenger currently serves on the Board of Directors of the Pennsylvania Chamber
of Commerce and is a member of the Penn State Harrisburg Board of Advisers.
Mr. Wenger is also a member of the Operation HOPE Global Board of Advisors,
a global financial dignity and economic empowerment nonprofit corporation. He
is a past chair of the Lancaster Chamber of Commerce, past chair of the Advisory
Board of Stonier Graduate School of Banking, past member of the American Bankers Association Board of
Directors, past chair of the Economic Development Company of Lancaster County, a former Board member of the
Lancaster County YMCA Foundation and Crispus Attucks Community Center. Since 2019, he has been a director
of Burnham Holdings, Inc., the parent company of 14 subsidiaries that are leading domestic manufacturers of
boilers and related HVAC products and accessories, including furnaces, radiators and air conditioning systems,
for residential, commercial and industrial applications.
Mr. Wenger possesses an extensive knowledge of banking operations through more than thirty years of experience
in the financial services industry. He has gained valuable insight through his experience in different banking
areas, including retail banking, commercial banking and bank operations and systems.
Directors Retiring from Fulton
Messrs. Graupera and Waters will not stand for re-election at the Annual Meeting and will retire from both
the Board and Bank Board as both directors have reached Fulton’s mandatory retirement age.
Fulton’s Board thanks Directors Graupera and Waters for their many years of dedicated service.
CARLOS E. GRAUPERA
ERNEST J. WATERS
Fulton Director since 2019
Fulton Bank Director since 2006
Fulton Director since 2012
Fulton Bank Director since 2011
16
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Security Ownership of Directors, Nominees, Management and Certain Beneficial Owners
Directors, Director Nominees and NEOs:
The following table sets forth the number of shares of common stock beneficially owned as of the Record
Date by: (i) each director; (ii) each director nominee; (iii) the NEOs and (iv) executive officers as a group. Unless
otherwise indicated in a footnote, shares shown as beneficially owned by each director, each director nominee and
each NEO are held individually by the person.
Director, Director
Nominee and
Management Beneficial
Owners
Title
Total Shares
Beneficially
Owned 1 2
Total Shares
and Director
Stock Units 3
% of
Class
Jennifer Craighead Carey Director and Nominee
Lisa Crutchfield
Director and Nominee
Denise L. Devine
Director and Nominee
Steven S. Etter
Director and Nominee
Carlos E. Graupera
Director
George W. Hodges
Director and Nominee
George K. Martin
Director and Nominee
James R. Moxley III
Director and Nominee
Antoinette M. Pergolin
Nominee
Scott A. Snyder
Director and Nominee
Ronald H. Spair
Director and Nominee
Mark F. Strauss
Director and Nominee
Ernest J. Waters
Director
E. Philip Wenger
Director, Nominee, Chairman of the
Board and Chief Executive Officer
Director, Nominee, President and
Chief Operating Officer
Senior Executive Vice President and
Chief Financial Officer
Senior Executive Vice President and
Chief Banking Officer
Senior Executive Vice President and
Head of Commercial Business
Directors, Director Nominees,
NEOs and executive officers as a
Group (23 Persons)
Mark R. McCollom
Angela M. Snyder
Total Ownership
Meg R. Mueller
Curtis J. Myers
4,407
11,938
21,317 4
314,232
16,524
42,922 5
9,007 6
158,194 7
2,022
6,540
19,072 8
25,859 9
31,968 10
429,162 11
152,083 12
23,135
31,018
92,282 13
13,890
25,685
35,064
323,715
26,008
56,669
15,773
161,749
8,196
20,287
32,819
39,606
45,715
429,162
152,083
23,135
31,018
92,282
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
1,610,212
1,751,386
1.00%
* Represents less than one percent of the outstanding shares of Fulton’s common stock calculated in accordance with Rule 13d-3
of the Exchange Act.
1 Beneficial ownership is determined in accordance with SEC Rule 13d-3 that provides that a person is deemed to own any stock
for which that person has or shares: (i) voting power; (ii) investment power; or (iii) the right to acquire beneficial ownership
within 60 days after the Record Date.
2 Includes 67,498 shares issuable upon the exercise of vested stock options, which have been treated, in all cases, as outstanding
shares for purposes of calculating the percentage of outstanding shares owned by each individual and as a group.
3 Includes a total of 42,068 unvested director stock units awarded in 2021 to the twelve non-employee directors that served from
2021 to 2022, including Directors Graupera and Waters. The director stock units awarded to each of the directors will vest on
June 1, 2022 unless the director has elected to defer vesting until retirement or departure from the Fulton Board.
4 Ms. Devine’s ownership includes 1,000 shares held jointly with her spouse.
5 Mr. Hodges’ ownership includes 21,430 shares held in a 401(k) plan, 300 shares held an irrevocable trust for his children and
21,192 shares held by The Hodges Family Foundation, Inc. Mr. Hodges has disclaimed beneficial ownership of the shares held
by The Hodges Family Foundation, Inc.
6 Mr. Martin’s ownership includes 4,155 shares held in an individual retirement account and 125 shares held jointly with his
spouse.
17
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 7 Mr. Moxley’s ownership includes: (i) 39,115 shares held by The Moxley Family Trust; (ii) 1,227 shares held solely by his spouse;
(iii) 18,411 shares held by Mr. Moxley as custodian for his children and (iv) 28,000 shares held in a 401(k) plan.
8 Mr. Spair’s ownership includes 10,000 shares held jointly with his spouse.
9 Mr. Strauss’ ownership includes 4,930 shares held jointly with his spouse and 6,426 shares held in an individual retirement
account.
10 Mr. Waters’ ownership includes 13,895 shares held in an individual retirement account.
11 Mr. Wenger’s ownership includes 144,297 shares held jointly with his spouse and 92,795 shares held in the 401(k) Plan. Also
includes 3,564 shares held in the 401(k) Plan by his spouse and 389 shares held by Mr. Wenger as custodian for his children.
12 Mr. Myers’ ownership includes 52,662 shares held in his 401(k) Plan, 22,140 shares which may be acquired pursuant to the
exercise of vested stock options and 14,109 shares held jointly with his spouse.
13 Ms. Mueller’s ownership includes 22,954 shares which may be acquired pursuant to the exercise of vested stock options and
10 shares held jointly with her spouse.
Owners of More Than Five Percent:
The following table sets forth the number of shares of common stock owned as of the Record Date. Other
than the beneficial owners listed below, based on public filings, no person or entity owned, of record or beneficially,
on the Record Date more than 5% of Fulton outstanding common stock.
Beneficial Owners
Holding More than 5%
BlackRock, Inc.1
55 East 52nd Street
New York, NY 10055
The Vanguard Group2
100 Vanguard Blvd.
Malvern, PA 19355
Dimensional Fund Advisors LP3
Building One
6300 Bee Cave Road
Austin, TX 78746
State Street Corporation4
State Street Financial Center
1 Lincoln Street
Boston, MA 02111
Total Shares
Beneficially Owned
% of
Class
20,589,089
12.8%
15,826,174
9.81%
10,617,622
6.6%
8,209,865
5.09%
1 This information is based solely on a Schedule 13G/A filed with the SEC January 27, 2022 by BlackRock, Inc., that reported
sole voting power as to 19,897,642 shares and sole dispositive power as to 20,589,089 shares as of December 31, 2021.
2 This information is based solely on a Schedule 13G/A filed with the SEC on February 10, 2022 by The Vanguard Group, which
reported sole voting power as to 0 shares and sole dispositive power as to 15,545,348 shares, shared voting power as to 141,766
shares and shared dispositive power as to 280,826 shares as of December 31, 2021.
3 This information is based solely on a Schedule 13G/A filed with the SEC on February 8, 2022 by Dimensional Fund
Advisors LP, which reported sole voting power as to 10,383,945 shares and sole dispositive power as to 10,617,622 shares, as of
December 31, 2021.
4 This information is based solely on a Schedule 13G/A filed with the SEC on February 11, 2022 by State Street Corporation,
which reported sole voting power as to 0 shares and sole dispositive power as to 0 shares, shared voting power as to 7,894,144
shares and shared dispositive power of 8,209,865 shares as of December 31, 2021.
18
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT INFORMATION CONCERNING THE BOARD
Meetings and Committees of the Board
In 2021, there were eight regular and six special meetings of the Board and a total of 52 meetings of the
committees of the Board during 2021. No director attended fewer than 75% of: (i) all meetings of the Board; (ii) all
of the meetings of the committees of the Board on which a director served or (iii) the aggregate number of meetings
of the Board and of the committees of the Board on which he or she served in 2021.
The Board of Fulton has the following five regular standing committees: Audit, Executive, Human
Resources, NCG and Risk. The following table represents the membership on each Fulton committee as of the date
of this Proxy Statement:
Current Directors
2021 - 2022 Fulton
Committee Members
Jennifer Craighead Carey
Lisa Crutchfield
Denise L. Devine
Steven S. Etter
Carlos E. Graupera
George W. Hodges
George K. Martin
James R. Moxley III
Curtis J. Myers
Scott A. Snyder
Ronald H. Spair
Mark F. Strauss
Ernest J. Waters
E. Philip Wenger
Vice Chair
Member
Member
Chair
Member
Audit
Executive
Member
Human
Resources
Member
Vice Chair
Member
Member
NCG
Chair
Risk
Vice Chair
Member
Member
Chair
Member
Member
Member
Vice Chair
Member
Member
Member
Chair
Vice Chair
Member
Member
Member *
Chair
Member
Member *
* Ex-officio member per bylaws.
HR Committee Interlocks and Insider Participation
HR Committee. All members of the HR Committee meet the Nasdaq independence requirements. More
information regarding the HR Committee can be found in the “Compensation Discussion and Analysis” section
of this Proxy Statement beginning on Page 26. There are no interlocking relationships involving members of the
HR Committee. The HR Committee is responsible for: (i) approving or recommending to the Board compensation
for the CEO and other NEOs; (ii) administration of Fulton’s cash and equity-based incentive compensation plans,
including the ESPP and the 401(k) Plan; (iii) approving employment agreements for the NEOs and other Fulton and
Fulton Bank officers and (iv) fulfilling other broad-based compensation, benefits and human resources duties. The
HR Committee met a total of nine times in 2021. The HR Committee is governed by a formal charter, last amended
in July 2021, that is available on Fulton’s website at www.fultonbank.com.
Other Board Committees
Audit Committee. All members of the Audit Committee meet the Nasdaq independence requirements, and
the rules and regulations of the SEC for membership on audit committees. Each of the Audit Committee members
qualifies and been designated by the Board as an Audit Committee “financial expert” as defined by SEC regulations.
The Audit Committee met 12 times during 2021.
The Audit Committee is governed by a formal charter, last amended in July 2021, that is available on Fulton’s
website at www.fultonbank.com. The Audit Committee is responsible for the following matters: (i) pre-approval of
audit and non-audit services; (ii) sole authority to appoint, evaluate, retain, or terminate the independent auditor;
(iii) direct responsibility for the compensation and oversight of the work of the independent auditor; (iv) oversight
of the overall relationship with the independent auditor; (v) meeting with the independent auditor to review the
scope of audit services; (vi) reviewing and discussing with management and the independent auditor annual and
quarterly financial statements and related disclosures; (viii) overseeing the internal audit function, including hiring
and replacing the chief audit executive; (ix) reviewing related person transactions; (x) establishing procedures and
19
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
handling complaints concerning accounting, internal accounting controls, or auditing matters and (xi) those risk
management matters outlined in the Audit Committee Charter. In addition, with respect to any bank subsidiary
that has not established its own independent audit committee, it is intended that Fulton’s Audit Committee will
satisfy the obligations imposed on such bank subsidiary relating to the establishment and duties of an independent
audit committee as set forth in Section 36 of the Federal Deposit Insurance Act and its implementing regulations.
Currently, Fulton Bank is the only such subsidiary.
NCG Committee. All members of the NCG Committee meet the Nasdaq independence requirements. The
NCG Committee met eight times during 2021. The NCG Committee is responsible for, among other things: (i)
recommending to the Board nominees for election to the Board; (ii) assisting the Board with corporate governance
matters, including the review and approval of all changes to the Code of Conduct; (iii) Governance Guidelines and
(iv) the responsibility for guidelines and creating procedures to be used by directors in completing Board evaluations
used in monitoring and evaluating the performance of the Board and committees. The NCG Committee is also
responsible for determining whether Fulton’s directors and NEOs are in compliance with Fulton’s stock ownership
guidelines.
In 2021, the Board designated the NCG Committee to be the Board level committee responsible to provide
oversight of Fulton’s environmental, social and governance strategy, and Fulton’s corporate social responsibility
reporting. The NCG Committee is governed by a formal charter, last amended in July 2021, that is available on
Fulton’s website at www.fultonbank.com.
Executive Committee. The Executive Committee did not meet during 2021. Except for the powers expressly
excluded in Section 5 of Article III of the Bylaws, the Executive Committee exercises the powers of the Board
between board meetings.
Risk Committee. Fulton’s Risk Committee met nine times during 2021. The Risk Committee is responsible
for providing oversight of Fulton’s risk management functions and practices, including assisting the Board with its
oversight of Fulton’s policies, procedures and practices relating to assessment and management of Fulton’s enterprise-
wide risks, including those risks identified in Fulton’s Enterprise Risk Management Policy, which currently include
strategic risk, reputation risk, credit risk, market risk, liquidity risk, operational risk, legal risk and compliance and
regulatory risk. The Risk Committee Chair is an independent director and was determined by Fulton’s Board to
possess the requisite experience in identifying, assessing and managing risk exposures at large, complex firms. The
Risk Committee is governed by a formal charter, last amended in July 2021, that is available on Fulton’s website at
www.fultonbank.com.
Board’s Role in Risk Oversight
While each of Fulton’s committees is responsible for overseeing the management of certain risks that
are germane to their committee responsibilities outlined in their charters, Fulton’s Risk Committee is primarily
responsible for overseeing the management of enterprise risk for Fulton, and the entire Board is regularly informed
about such risks through committee reports and review of board committee meeting minutes. The Board and
Risk Committee regularly review information regarding Fulton’s exposure to strategic risk, reputation risk, credit
risk, market risk, liquidity risk, operational risk, legal risk and compliance and regulatory risk, as well as Fulton’s
strategies to monitor, control and mitigate its exposure to these risks. In addition, the HR Committee is responsible
for overseeing the management of risks relating to all of Fulton’s compensation plans. The Audit Committee shares
with the Risk Committee a general oversight role in Fulton’s risk management process in the context of the Audit
Committee’s responsibility for financial reporting and its evaluation and assessment of the adequacy of Fulton’s
internal control structure. The NCG Committee manages risks associated with the independence of the Board,
potential conflicts of interest and governance matters.
The Board also relies upon Fulton’s Chief Risk Officer and other members of Fulton’s Enterprise Risk
Management Committee, which is Fulton’s officer-level risk management committee, to oversee existing and
emerging risks and serve as a primary review forum prior to escalation to the Risk Committee and the Board. This
officer-level risk management committee provides management-level oversight for Fulton’s risk management and
compliance programs. In addition, annually, Fulton’s Board adopts a formal Risk Appetite Statement that sets forth
both the qualitative and quantitative parameters within which Fulton executes its business strategies, and outlines
the general framework within which Fulton manages risk in the context of Fulton’s core values and its management
philosophy, which seeks to balance the risk it assumes in serving its customers and communities with the return it
earns for its shareholders.
20
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Fulton’s framework for enterprise risk management consists of three “lines of defense:” (i) lines of business,
bank operations, shared services operations and certain corporate functions (collectively known as front line units)
have primary responsibility for risk management and compliance, and they each drive process deployment, risk
identification and management, policies and procedures, training and communication and reporting; (ii) independent
risk management units (consisting of risk management, compliance, loan review, vendor risk management, fraud risk
management, Bank Secrecy Act compliance, corporate information security office and other risk management units)
have oversight responsibility and define governance requirements for risk management and compliance, and these
units educate, advise and monitor front line unit risk and compliance activities in discrete areas and (iii) Fulton’s
internal audit function independently validates the effectiveness of internal controls and risk management activities
within front line units and independent risk management units in those areas, and periodically reports results to
management and the Board.
Fulton’s risk appetite is centered on Fulton’s objective to consistently increase and enhance shareholder
value while managing risk at an acceptable level. Fulton’s Board, and the committees that monitor risk, assess
and oversee the management of risk, including the establishment, tracking and reporting of key risk indicators
within the primary risk categories of strategic, reputation, credit, market, liquidity, operational, legal, compliance
and regulatory. Fulton also engages in continuing risk assessments, capital management and stress testing to ensure
that Fulton has adequate capital to absorb potential losses under various stress scenarios.
Board’s Role in Cybersecurity Risk
Cybersecurity risk is a key consideration in the operational risk management capabilities at Fulton. Under
the direction of its Chief Information Security Officer, Fulton maintains a formal information security management
program that is subject to oversight by, and reports to, the Board’s Risk Committee. Given the nature of Fulton’s
operations and business, including Fulton’s reliance on relationships with various third-party providers in the delivery
of financial services, cybersecurity risk may manifest itself through various business activities and channels, and it is,
therefore, considered an enterprise-wide risk and subject to control and monitoring at various levels of management
throughout the business. In accordance with its charter, the Board’s Risk Committee oversees and reviews reports on
significant matters of actual, threatened or potential breaches of corporate security, including cybersecurity.
Board’s Role in Consumer Financial Protection
Fulton maintains a compliance management system with particular focus on compliance with federal consumer
financial protection laws, rules and regulations. Under the direction of Fulton’s Chief Compliance Officer, Fulton
maintains a consumer compliance program, which is subject to oversight by, and reporting to, the Risk Committee
of the Board. The compliance program includes regular risk assessments, policy updates, compliance monitoring,
compliance officer involvement in new product and significant project initiatives across the company, regulatory
change management, independent audit testing, and a compliance training program administered by Fulton’s Center for
Learning and Talent Development. Compliance courses are mandatory and assigned based upon an individual’s role in
the company, which enables Fulton to develop a compliance mindset at all levels of the company. Fulton’s compliance
management system also includes monitoring of customer feedback and complaints. By leveraging Fulton’s customer
advocacy group, Fulton is able to give timely and full resolution of customers’ expressions of dissatisfaction. Fulton’s
compliance management system is subject to review and examination by various regulatory agencies including the
Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau.
Board’s Role in Environmental and Social Responsibility
In 2021 the Board designated the NCG Committee to be the Board level committee responsible to provide
oversight of Fulton’s environmental, social and governance (“ESG”) strategy, and Fulton’s corporate social
responsibility reporting. In 2021, Fulton formed a cross-functional management committee to coordinate and
communicate with respect to Fulton’s ESG initiatives. Information on our various ESG-related activities will be
available on our website at www.fultonbank.com. The ESG and other information posted on our web site is not part
of or incorporated by reference into this Proxy Statement.
21
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Lead Director and Fulton’s Leadership Structure
Since June 2018, Director Moxley has served as Fulton’s Lead Director and independent Executive
Committee Chair. He is also a member of the NCG Committee and HR Committee. The Board has determined
that a structure that includes a Lead Director and a combined Chairman/CEO is appropriate for Fulton. Pursuant
to the Governance Guidelines, the Board designates for a term of at least one year, and discloses in Fulton’s Proxy
Statement, the independent non-employee director who will lead the non-employee directors’ executive sessions
and preside at all meetings of the Board at which the Chairman is not present. The Governance Guidelines also
require that the Lead Director shall, as appropriate: (i) serve as a liaison between the Chairman and the independent
directors; (ii) approve information sent to the Board; (iii) approve meeting schedules to assure that there is sufficient
time for discussion of all agenda items and (iv) and have the authority to call meetings of the independent directors.
The leadership structure of Fulton combines the positions of Chairman and CEO. This structure permits the
CEO to manage Fulton’s daily operations and provides a single voice for Fulton when needed. Fulton believes that
separation of these roles is not necessary because the Lead Director acts to counterbalance the combined Chairman
and CEO positions. As of December 31, 2021, approximately 79% of Fulton’s directors (11 out of 14) were determined
to be independent under applicable Nasdaq standards, which provides an appropriate level of independent oversight at
Board meetings and executive sessions. In addition, Fulton’s HR Committee, NCG Committee and Audit Committee
are all currently, and will continue to be, comprised solely of independent directors. With respect to the director
nominees for the Annual Meeting, approximately 77% of Fulton’s directors (10 out of 13) were determined to be
independent under applicable Nasdaq standards.
Executive Sessions
In 2021, the Fulton independent directors met four times in executive session. Fulton’s Lead Director
conducted these executive sessions of the independent directors.
Annual Meeting Attendance
Fulton expects directors to attend the Annual Meeting unless their absence is excused. All members of the
Board attended the 2021 Annual Meeting.
Shareholder Engagement
Fulton’s Board and management consistently engage with shareholders and hopes to meet with shareholders
that attend the Annual Meeting. Fulton seeks to engage with institutional shareholders at various investor events
during the year.
Director Education and Board Development
Fulton encourages its directors to attend seminars and educational programs as part of its corporate
governance and general board education process. These educational opportunities are in addition to the education
and development presentations that are provided during Fulton Board meetings and seminars. For example, third
parties are periodically asked to provide the Board with presentations on governance, the economy, regulatory,
compliance and a variety of other topics of interest. Each of directors Crutchfield, Devine, Hodges and Moxley has
completed the requirements for the NACD Board Leadership Fellow Program for 2021 and prior years. In order
to become NACD Board Leadership Fellows, individuals must demonstrate their knowledge of the leading trends
and practices that define exemplary corporate governance and commit to developing professional insights through
a sophisticated course of ongoing study. In 2017, Dr. Snyder also successfully completed the NACD Cyber-Risk
Oversight Program and earned a CERT Certificate in Cybersecurity Oversight issued by the Software Engineering
Institute at Carnegie Mellon University. With the oversight of the NCG Committee, Fulton will continue to promote
board development and ensure directors are kept current with respect to timely board and governance topics.
Legal Proceedings
There are no material legal proceedings in which any director, officer, nominee, affiliate or principal
shareholder, or any associate thereof, is a party adverse to Fulton, or in which any such person has a material interest
adverse to Fulton.
22
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Related Person Transactions
Financial Products and Services: In 2021, certain directors and executive officers of Fulton, including
the NEOs, their family members and the companies with which they are associated, were customers of, and/or had
banking transactions with, Fulton’s bank subsidiaries during 2021. These transactions included deposit accounts,
trust relationships, loans and other financial products and services provided in the ordinary course of business by
Fulton’s bank subsidiaries. All loans and commitments to lend made to such persons and to the companies with
which they are associated were made in the ordinary course of business, on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender,
and did not involve more than a normal risk of collectability or present other unfavorable features. It is anticipated
that similar transactions will be entered into in the future. By using Fulton’s products and services, directors and
executive officers have the opportunity to become familiar with the wide array of products and services offered by
Fulton’s bank subsidiaries to customers.
Other Transactions: Applicable SEC regulations require Fulton to disclose transactions with certain
related persons where the annual amount involved exceeds $120,000. However, a person who has a position or
relationship with a firm, corporation, or other entity that engages in a transaction with Fulton is not deemed to
have a material interest in a transaction where the interest arises only from such person’s position as a director of
the firm, corporation or other entity and/or arises only from the ownership by such person in the firm, corporation
or other entity if that ownership is under 10%, excluding partnerships. Amounts paid to entities in which a related
person does not have a material interest or that were obtained by a low bid pursuant to a formal request for proposal
to provide services are not required to be disclosed. Fulton may have engaged in various transactions on customary
terms with companies where directors, nominees or officers and immediate family members may be directors,
officers, partners, or employees, and it is possible that Fulton’s directors, nominees and executive officers may not
have knowledge of those transactions.
In 2021, the only related person transactions Fulton had which were in excess of $120,000 and require
specific disclosure were for the direct payment of fees to Barley Snyder LLP in the amount of $1.858 million, and
donations and other payments to the Spanish American Civic Association for Equality, Inc., and related entities
(“SACA”) in the amount of $205,000. Jennifer Craighead Carey is a director nominee for the Annual Meeting and
was a partner with less than a 10% interest in the law firm of Barley Snyder LLP during 2021. The payment to Barley
Snyder LLP represents the total direct amount paid for all invoices processed by Fulton and its subsidiaries during
2021. Ms. Craighead Carey was not directly engaged as counsel for any Fulton matter, nor did she bill any hours on
Fulton engagements during 2021. Fulton anticipates engaging Barley Snyder LLP for legal services in the future.
Carlos E. Graupera is retiring as a director at the Annual Meeting, and he and his spouse were officers of SACA
and its related entities during 2021. SACA is a Latino founded and managed community-based organization whose
mission is to enable the community it serves to integrate itself into the social, economic, and political mainstream
of life in Lancaster County, Pennsylvania. Amounts paid include contributions to SACA and its affiliates for the
Neighborhood Assistance Project and other activities to advance their mission in the Lancaster, Pennsylvania
community. Some of the contributions to SACA qualify as Pennsylvania tax credits for Fulton. The total payments
and contributions to SACA by Fulton were less than 5% of total revenues reported by SACA in its 2021 Annual
Report. Fulton anticipates providing future support for SACA and other community organizations in the future.
Fulton considered the transactions between Fulton and members of the Board and executive officers that
do not require specific disclosure, when it made the determinations that 10 of Fulton’s 13 director nominees, or
approximately 77% of the director nominees who are standing for election at the Annual Meeting, are independent
in accordance with the Nasdaq listing standards. See “Information about Nominees, Directors and Independence
Standards” on Page 9 for more information.
Family Relationships: SEC regulations generally require disclosure of any employment relationship or
transaction with a related person in which the amount involved exceeds $120,000. In fiscal year 2021, there were no
family relationships requiring disclosure among any of the members of the Board, board nominees and executive
officers of Fulton. Fulton employees participate in compensation, benefit and incentive plans on the same basis as
other similarly situated employees.
Related Person Transaction Policy and Procedures: Fulton does not have a separate policy specific to
related person transactions. Under the Code of Conduct, however, employees and directors are expected to recognize
and avoid those situations in which personal interest or relationships might interfere, or appear to interfere, with their
23
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT responsibilities to Fulton. The Code of Conduct also requires thoughtful attention to the problem of conflicts and the
exercise of the highest degree of good judgment. Under the Code of Conduct, directors must provide prompt notice
to Fulton of all new or changed business activities, related person relationships and board directorships as they arise.
In addition, Fulton and Fulton Bank are subject to Federal Reserve Regulation O, which governs loans by
federally regulated banks to certain insiders, including an executive officer, director or 10% controlling shareholder
of the applicable bank or bank holding company, or an entity controlled by such executive officer, director or
controlling shareholder (an “Insider”). Fulton Bank is required to follow a Regulation O policy that prohibits Fulton
Bank from making loans to an Insider unless the loan: (i) is made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender and
(ii) does not involve more than the normal risk of repayment or present other unfavorable features. Fulton and Fulton
Bank are examined periodically by bank regulators and Fulton’s Internal Audit Department for compliance with
Regulation O to ensure that internal controls exist within Fulton to monitor Fulton’s compliance with Regulation O.
In accordance with Fulton’s Audit Committee Charter and Nasdaq listing standards, the Audit Committee is
charged with the responsibility to conduct, at least annually, an appropriate review and oversight of all transactions
with related persons as defined in applicable SEC regulations. This responsibility in the Audit Committee Charter
includes reviewing an annual report regarding the related person transactions, if any, with each member of Fulton’s
Board, the NEOs and other relevant related persons during the prior year. In the event of a potentially significant
related person transaction arises, Fulton’s Chief Legal Officer will review the facts and circumstances with the
Committee at an interim date. At a meeting in February 2022, the Audit Committee reviewed and approved a report
of all potential related person transactions identified during 2021.
Delinquent Section 16(a) Reports
Based solely on Fulton’s review of: (i) Forms 3 and 4 and amendments furnished to Fulton during the 2021
fiscal year; (ii) Form 5 and amendments thereto furnished to Fulton and (iii) written representations from Fulton’s
directors, the NEOs and Fulton’s other executive officers, Fulton believes that all Section 16(a) Reports were timely
filed in 2021.
Board and Committee Evaluations
The NCG Committee reviews and recommends to the Board guidelines and procedures to be used by
directors in monitoring and evaluating the performance of the Board and its committees. The Board and its
committees, except the Executive Committee, conduct an annual self-evaluation of the performance of the Board and
committees. Anonymous board and committee evaluation questionnaires were last completed in the fourth quarter
of 2021. The results were compiled by Fulton’s in-house corporate counsel and presented to the NCG Committee in
December 2021 and the members of each committee also received a summary report of the results of that committee’s
questionnaire. The NCG Committee reported the results to the Board at its December 2021 regular meeting, and the
Board and each of the committees discussed the summary of its respective annual evaluations.
Director Compensation
Non-employee directors serving as a member of the Board currently receive a combination of a cash retainer
and equity compensation for service on the Board and its committees. Fulton directors do not receive individual meeting
fees or any third-party compensation for their Fulton board service. In 2021, Fulton granted to non-employee directors
equity awards pursuant to the Amended and Restated Directors’ Equity Participation Plan (the “2019 Director Equity
Plan”) in the form of shares of Fulton restricted stock units that fully vest one year after the grant date.
Salaried officers of Fulton do not receive additional compensation for service on the Board. Accordingly,
Messrs. Wenger and Myers did not receive director fees. The Board reviews Fulton’s non-employee director
compensation annually with the assistance of the HR Committee.
Fulton reimburses directors for Board-related expenses and provides non-employee directors with a $50,000
term life insurance policy. Certain directors have elected to participate in the Fulton Deferred Compensation
Plan, pursuant to which a director may elect to defer a portion of his or her cash director fees. The current Fulton
non-employee directors who have established accounts are Fulton directors Devine, Freer and Spair. Members of the
24
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Board serving on the Bank Board do not receive any additional compensation. The following is a summary of the
structure and amounts of compensation paid to non-employee directors for service on the Board and its committees
as of January 1, 2022:
Non-employee Director Fees
Amount
Quarterly director retainer
Additional quarterly retainer paid to the Lead Director
Additional quarterly retainer paid to committee chairs 1
Annual equity retainer 2
$17,500 in cash
$7,500 in cash
$3,125 in cash
Fulton restricted stock units equivalent to $70,000
1 A quarterly retainer is not paid to the chair of the Executive Committee.
2 Non-employee directors elected at the Annual Meeting will receive a 2022 annual equity retainer in restricted stock units
(“DSU Awards”) in the amount of $70,000. This amount was increased by $10,000 for 2022. The number of restricted stock units
comprising the DSU Awards will be based on the closing price of Fulton’s common stock on the grant date, or the prior trading
day, if the grant date is not a trading day, rounded up to the next whole share. Until the DSU Awards are fully vested, settled and
paid in Fulton common stock, the equity award will accrue “dividend equivalents”. The DSU Awards fully vest after one year of
service, or, if earlier, the date of the next annual meeting of shareholders.
The following table details the compensation paid to each Fulton non-employee director who served during 2021:
DIRECTOR COMPENSATION TABLE
Name
Jennifer Craighead Carey
Lisa Crutchfield
Denise L. Devine
Steven S. Etter
Patrick J. Freer1
Carlos E. Graupera
George W. Hodges
George K. Martin
James R. Moxley III
Scott A. Snyder
Ronald H. Spair
Mark F. Strauss
Ernest J. Waters
Fees Earned or
Paid in Cash
($)
70,000
82,500
74,688
70,000
29,167
70,000
70,000
46,667
100,000
82,500
82,500
77,813
70,000
Stock
Awards 2
($)
60,013
60,013
60,013
60,013
0
60,013
60,013
60,013
60,013
60,013
60,013
60,013
60,013
All Other
Compensation 3
($)
0
0
0
0
0
0
0
12,500 4
0
0
0
0
0
Total
($)
130,013
142,513
134,701
130,013
29,167
130,013
130,013
119,180
160,013
142,513
142,513
137,826
130,013
1 Director Freer retired at the 2021 Annual Meeting.
2 The amounts in this column consist of a $60,000 stock award granted on June 1, 2021 consisting of 3,451 stock units having
a grant date fair value of $17.39 per share (the closing price of Fulton common stock on June 1, 2021). These stock awards are
expected to vest June 1, 2022, and the amount shown does not reflect the value of any dividend equivalents accrued during 2021
on vested or unvested director awards.
3 The amount excludes perquisites and other personal benefits with an aggregate value of less than $10,000.
4 This amount represents Mr. Martin’s director fees for service on the Bank Board prior to his election to the Board at the 2021
Annual Meeting.
25
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT INFORMATION CONCERNING EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This section of the Proxy Statement explains the design and operation of Fulton’s 2021 executive compensation
program with respect to the compensation paid to Fulton’s NEOs. Below are the 2021 and 2020 base salary, cash
incentive and long-term incentive components for Fulton’s NEOs. You can find more complete information about all
elements of compensation for the NEOs in the following discussion and in the Summary Compensation Table that
appears on Page 37.
NEOs
Year
Salary 2
Annual Cash
Incentive 3
Long-Term
Incentive 4
Total Direct
Compensation 5
E. Philip Wenger
Chairman and
Chief Executive Officer
Curtis J. Myers
President and
Chief Operating Officer
Mark R. McCollom
Senior Executive Vice
President and
Chief Financial Officer
Angela M. Snyder
Senior Executive Vice
President and Head of
Consumer Banking 1
Meg R. Mueller
Senior Executive Vice
President and
Head of Commercial
Business
2021
2020
$1,048,822
$1,741,045
$1,305,528
$4,095,395
$1,048,822
$630,735
$1,292,385
$2,971,942
% Change
0.00%
176.03%
1.02%
37.80%
$ Change
$0
$1,110,310
$13,143
$1,123,453
2021
2020
$571,788
$806,793
$558,644
$1,937,225
$561,000
$277,835
$555,828
$1,394,663
% Change
1.92%
190.39%
$ Change
$10,788
$528,958
0.51%
$2,816
38.90%
$542,562
2021
2020
$444,002
$515,931
$433,784
$1,393,717
$435,625
$215,743
$431,603
$1,082,971
% Change
1.92%
139.14%
$ Change
$8,377
$300,188
0.51%
$2,181
28.69%
$310,746
2021
2020
$402,214
$333,838
$294,713
$1,030,765
$394,625
$139,599
$295,703
$829,927
% Change
1.92%
139.14%
(0.33%)
24.20%
$ Change
$7,589
$194,239
($990)
$200,838
2021
2020
$402,214
$333,838
$294,713
$1,030,765
$394,625
$139,599
$295,703
$829,927
% Change
1.92%
139.14%
(0.33%)
24.20%
$ Change
$7,589
$194,239
($990)
$200,838
(1) Ms. Snyder was promoted to Senior Executive Vice President and Chief Banking Officer effective January 1, 2022.
(2) Salary received in calendar year and reported in the Summary Compensation Table that appears on Page 37.
(3) Annual cash incentive paid for calendar year and reported in the Summary Compensation Table on Page 37 in the column
titled “Non-Equity Incentive Plan Compensation.”
(4) The grant date value of the performance stock units in the Summary Compensation Table appears on Page 37. This amount is
not necessarily the value the Executive will realize upon vesting.
(5) The amounts in this column for 2021 and 2020 exclude the amounts appearing in the Summary Compensation Table on
Page 37 in the column titled “All Other Compensation.”
26
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Executive Summary
Fulton’s HR Committee is responsible for establishing and overseeing the NEOs’ compensation program
in alignment with Fulton’s compensation philosophy. Fulton believes that the compensation of the NEOs should
reflect Fulton’s overall performance as well as the contributions of the NEOs to that performance. Annual cash
incentive compensation awards (“VCP Awards”) and long-term equity awards in the form of performance shares
(“Performance Shares”) earned by the NEOs under Fulton’s Amended and Restated Equity and Cash Incentive
Compensation Plan (the “2013 Plan”) are determined based on predetermined performance goals and the HR
Committee’s assessment, in the exercise of its discretion, of the NEOs’ attainment of those 2021 goals.
The independent directors of the Board review and approve compensation decisions for the CEO and other NEOs
after careful review and upon recommendation of the HR Committee. The HR Committee’s independent compensation
consultant, Frederick W. Cook & Co., Inc. (“FW Cook”) provides advice, information and objective opinions to the HR
Committee with respect to Fulton’s executive compensation programs, policies and practices.
Below is a summary of certain of Fulton’s executive compensation and related corporate governance
practices. The HR Committee believes the governance and compensation practices below reflect appropriate
governance and are closely aligned with shareholder interests.
Governance and Compensation Practices
• HR Committee comprised exclusively of
independent directors
• Annual say-on-pay vote
•
Independent executive compensation consultant
whose independence is reviewed annually
• Link pay to performance with a majority of
performance-based incentive compensation
awarded to NEOs
• Executive long-term incentive compensation
aligned with shareholder returns through
performance share units
• Stock ownership requirements for NEOs
• Comprehensive clawback policy
•
Insider trading policy, including anti-hedging and
anti-pledging provisions
• “Double trigger” change in control provisions
• Cap on incentive compensation payments for the
NEOs
• Annual incentive compensation risk assessment
• No springloading with respect to equity awards
Management’s Discussion and Analysis of Financial Condition and Results of Operations in Fulton’s Annual
Report includes an overview of Fulton’s 2021 performance. Key 2021 accomplishments and financial highlights are
set forth below:
•
•
•
•
•
Earnings per share of $1.62;
Continued rationalization of Fulton’s physical branch footprint by completing the consolidation of
21 branch locations and opened new locations in strategically important markets of Baltimore, Maryland
and Philadelphia, Pennsylvania;
Growth in average deposit balances of $2.3 billion, or 12.0%;
Growth in average loan balances of $357 million, or 2.0%; and
Repurchased 2.8 million shares at an average cost of $15.65 per share in the year.
27
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT The HR Committee took a number of 2021 NEO compensation actions as summarized in the table below:
Element
Salaries
VCP
Awards
Equity
Awards
HR Committee Actions
• Mr. Wenger did not receive an annual base salary increase for 2021.
• The other NEOs received a 2.5% base salary increase effective in April 2021.
• 2021 target VCP Award amounts set as a percentage of salary for Messrs. Wenger, Myers and
McCollom at 100%, 85% and 70%, respectively, and 50% for each of the other NEOs.
• Approved 2021 scorecard performance criteria used to determine VCP Award amounts.
• The threshold payout opportunity set at 50% of target and maximum payout opportunity set at
200% of target.
• VCP Awards conditioned on Fulton having a minimum return on average equity (“ROE”) of
5.952% and positive net income for 2021.
• Evaluated Fulton and the NEOs’ performance relative to the 2021 performance criteria and
determined that the NEOs should receive 2021 VCP Awards, as a percentage of base salary, and
as a percentage of target opportunity, as follows:
NEO
Mr. Wenger
Other NEOs
Actual VCP Awards
as a % of base salary
Actual VCP Awards
as a % of target
166%
Ranged from 83% to 141%
166%
166%
• Approved the 2021 Performance Shares in the form of performance-based restricted stock units
(the “2021 Performance Shares”).
• Target award opportunity set at 125% of Mr. Wenger’s base salary, 100% of the base salary for
Messrs. Myers and McCollom, and 75% of the base salary for the other NEOs.
• Actual number of shares of Fulton common stock, if any, that the NEOs may receive upon vesting on
May 1, 2024 (the “2021 Performance Period”) may be higher or lower than the target number granted.
• 2021 Performance Shares included two components, and each 2021 Performance Share component
utilized different vesting terms as detailed below:
• TSR component, representing 65% of the target dollar amount for the NEOs. The number of
shares that may be received upon vesting of the total shareholder return (“TSR”) component is based
on Fulton’s TSR for the 2021 Performance Period measured relative to Fulton’s 2021 peer group; and
• Profit Trigger component (the “Profit Trigger”), representing 35% of the target dollar
amount for the NEOs. The number of shares that may be received upon vesting of the Profit
Trigger component will not vary and is subject to the Profit Trigger requirement. The Profit
Trigger is determined based on positive Fulton net income for the 2021 Performance Period.
Shareholder Say-on-Pay Proposal Historical Results
Fulton views the results of past say-on-pay proposals as support for its historical compensation policies
and decisions. The Board and HR Committee considers the non-binding vote a barometer of shareholder support for
Fulton’s compensation programs. Fulton’s shareholders have consistently approved its say-on-pay proposal with an
average of approximately 97.51% of shares voted being cast “FOR” the say-on-pay proposals over the last 5 years as
highlighted below:
Year
% Voted FOR
Shares Voted FOR as a Percentage of total vote (excluding abstentions)
FOR Fulton’s say-on-pay Proposal
2019
97.57%
2020
97.45%
2018
97.73%
2017
97.63%
2021
97.17%
These prior votes confirm shareholder support of Fulton’s compensation philosophy and objective of linking
executive compensation to Fulton’s operating objectives and the enhancement of shareholder value.
In 2017, shareholders approved Fulton’s recommendation that the say-on-pay proposal should be submitted
to shareholders on an annual basis. Fulton’s HR Committee and Board will continue to evaluate the frequency of
the non-binding say-on-pay proposal. Fulton intends to submit a new say-when-on-pay proposal at the Fulton annual
meeting in 2023.
28
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
Compensation Philosophy
Fulton’s executive compensation philosophy and programs are intended to achieve three objectives:
Align NEOs’ interests
with shareholder
interests
Link pay to
performance
Attract, motivate and
retain talent
The interests of the NEOs should be closely aligned with its shareholders using key
financial measures that result in long-term shareholder value.
A close link should exist between the NEOs’ pay and the overall performance of Fulton
on both a short-term and long-term basis. Fulton seeks to reward the NEOs for their
contributions to Fulton’s financial and non-financial achievements and to differentiate
rewards to the NEOs based on their individual contributions.
Fulton’s success is closely tied to the attraction, motivation and retention of highly
talented employees and a strong management team.
To achieve these three objectives, Fulton provides the following elements of executive compensation:
Base Salary
Annual Cash
Incentive Awards
Equity Awards
Pay for Performance
Fulton generally targets the NEOs’ base salaries near the market median of comparable
peer companies based on individual job responsibilities, experience and individual
performance in making base salary determinations.
VCP Awards are designed to focus the NEOs’ attention on the achievement of Fulton’s
business goals. Fulton’s at-target performance awards are designed to position total
cash compensation near the market median of comparable peers. The VCP Awards
provide the NEOs with the opportunity to earn awards above the market median for
superior performance.
Long-term incentives are awarded in the form of Performance Shares to focus the
NEOs’ attention on delivering long-term performance results that increase shareholder
value.
Fulton’s compensation philosophy is to align pay to performance on both a short-term and long-term basis.
Annual VCP Awards are “at-risk” and subject to financial performance thresholds. The VCP Award funding level
is determined by scorecard performance factors, and awards can be adjusted further by the HR Committee in its
discretion using a corporate modifier. The VCP awards and Performance Shares ensure that the interests of the
NEOs, both short- and long-term, are aligned with Fulton’s shareholders.
The following charts show the compensation mix for Mr. Wenger and the other NEOs. For 2021, Mr.
Wenger’s “performance pay” was 72% of total compensation, and the average “performance pay” for the other NEOs
was 63% of total compensation.
2021 Compensation Mix– Performance Based Pay
CEO and Average for Other Executives
Other
3 %
Perfor m ance
Shares
31 %
Salary
25 %
C ash Incentive
41 %
Total
72 %
M r. W enger
Total
63 %
Performance-Based Pay at Target
29
Other
3 %
Perfor m ance
Shares
28 %
Salary
34 %
35 %
C ash Incentive
A verage for other E xecutives
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT HR Committee Membership and Role
The HR Committee is comprised of seven independent directors all of whom are appointed annually. The
HR Committee reviews and approves, or makes recommendations to the Board with respect to, the base salaries and
other compensation paid or awarded to the NEOs and administers Fulton’s equity and other compensation plans. The
HR Committee relies upon performance data, statistical information and other data regarding executive compensation
programs, including information provided by Fulton’s Human Resources department, Fulton’s officers and outside
advisors. The HR Committee has unrestricted access to individual members of management and employees and
may ask them to attend any HR Committee meeting or to meet with any member of the HR Committee. The HR
Committee has the power and discretion to retain, at Fulton’s expense, such independent counsel and other advisors
or experts as it deems necessary or appropriate to carry out its duties.
Fulton does not have an exact formula or policy with regard to the allocation of compensation between cash
and non-cash elements, and the HR Committee established a methodology and an award matrix for annual cash
incentive compensation payments, including short and long-term incentives. The HR Committee determines the
amount, and type, of the NEOs’ compensation considering: (i) publicly available executive compensation information
of peer group companies; (ii) advice from outside advisors and experts; (iii) the complexity, scope and responsibilities
of the individual’s position; (iv) the CEO’s recommendations with respect to the other NEOs; (v) possible demand by
competitors and other companies for the NEOs and (iv) compensation appropriate to attract executives to Fulton’s
headquarters in Lancaster, Pennsylvania.
Role of Management
Members of Fulton’s executive management team attend regular meetings in which executive compensation,
company performance, individual performance and competitive compensation levels and practices are discussed and
evaluated.
As part of the performance evaluation process, all the NEOs meet individually with the CEO to discuss their
respective performance. The CEO reviews the performance of the other NEOs with the HR Committee and shares
comments and recommendations with respect to the performance of the other NEOs. The HR Committee, without
the CEO present, reviews the CEO’s overall performance and regularly has executive sessions without management
present. The NEOs are not present for the HR Committee’s discussions, deliberations and decisions with respect to
their individual compensation. The Board, in executive session, with only the independent directors present, makes
all final determinations regarding the CEO’s and other NEOs’ compensation after considering recommendations
made by the HR Committee.
Use of Consultants
In 2021, the HR Committee retained FW Cook as its independent compensation consultant. FW Cook
performed a variety of assignments during 2021, including: (i) conducting a compensation market analysis with
respect to Fulton’s NEOs; (ii) compensation policy and scorecard reviews; (iii) work related to the design of Fulton’s
incentive compensation plans; (iv) a comprehensive review of Fulton’s director compensation programs and (v) general
compensation advice regarding Fulton’s NEOs. As part of the 2021 engagement, the HR Committee instructed
FW Cook to compare Fulton’s current compensation practices and executive compensation programs with those
of Fulton’s peers, evolving industry best practices and regulatory guidance. Based on that comparison, FW Cook
recommended changes in Fulton’s executive compensation practices that were consistent with Fulton’s executive
compensation philosophy and objectives, as described above. The specific instructions given to the consultant and
fees to be paid were generally outlined in engagement letters that described the scope and performance of duties
under each project. Fulton does not have a policy that limits the other services that an executive compensation
consultant may perform. FW Cook reported to the HR Committee that it and its affiliates did not provide additional
services to Fulton or its affiliates in 2021.
The HR Committee considered the independence of FW Cook for the 2021 engagement in light of the SEC
rules and Nasdaq listing standards related to compensation committee consultants. The HR Committee concluded
that the work performed by FW Cook and its consultants did not raise any conflict of interest, and it further concluded
that FW Cook satisfies the applicable rules and standards related to the independence of compensation committee
consultants.
30
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Use of a Peer Group
On an annual basis, FW Cook assists the HR Committee in reviewing the suitability of Fulton’s peer
group. The HR Committee approved the 2021 19-member peer group (the “2021 Peer Group”). The HR Committee
examined the compensation practices of the 2021 Peer Group companies and other relevant data from FW Cook
in establishing 2021 base salaries for the NEOs and the 2021 Performance Shares. Certain members of the 2021
Peer Group were dropped during the year because they announced they were being acquired or were involved in
significant merger and acquisition transactions. The 2021 Peer Group members dropped in 2021 are noted in the
table below. Evaluation and selection of the 2021 Peer Group was based on a number of factors, including asset
size, revenue composition, number of employees, market capitalization, geographic location, business model, and
ownership profile.
The 2021 Peer Group is set forth below:
2021 Peer Group
Atlantic Union Bankshares Corp
BancorpSouth Bank*
Commerce Bancshares, Inc.
First Midwest Bancorp, Inc.*
F.N.B. Corp.
Hancock Whitney Corporation
Investors Bancorp, Inc.*
Northwest Bancshares, Inc.
Old National Bancorp
Prosperity Bancshares, Inc.
Provident Financial Services, Inc.
Trustmark Corp.
UMB Financial Corp.
Umpqua Holdings Corp.*
United Bankshares, Inc.
United Community Banks, Inc.
Valley National Bancorp
Webster Financial Corp.*
Wintrust Financial Corp.
* Peer was dropped during 2021 upon the announcement of a significant merger and acquisition transaction.
Elements of Executive Compensation
Fulton’s executive compensation program currently provides for a mix of base salary, short-term cash
incentive and long-term equity-based incentives as follows:
Base Salary: Fulton sets the NEOs’ base salaries in line with market median and based upon the NEOs’
positions, experience, responsibilities and performance. Below are the 2020 and 2021 base salaries, effective April 1
of each year, for each of the NEOs:
NEO
E. Philip Wenger
Curtis J. Myers
Mark R. McCollom
Angela M. Snyder
Meg R. Mueller
2020 Base Salary
$1,048,822
$ 561,000
$ 435,625
$ 394,625
$ 394,625
2021 Base Salary
$1,048,822
$ 575,025
$ 446,516
$ 404,491
$ 404,491
2021 Base Salary
Increase
0.0%
2.5%
2.5%
2.5%
2.5%
VCP Awards: VCP Awards are designed to reward the NEOs for achieving fiscal year financial, risk
management and business goals. No VCP Award is paid unless Fulton achieves a predetermined ROE performance
threshold and a net income goal. The scorecard performance results determine overall 2021 VCP Award payouts
with potential adjustment for positive or negative performance based on factors not reflected in the scorecards.
In March 2021, the HR Committee approved the scorecard performance metrics for the 2021 VCP Awards.
The 2021 scorecard consisted of six subcategories that were allocated among Financial Results, Risk Management
and Business Objectives categories with weightings of 65%, 20% and 15% respectively. The HR Committee retains
discretion to adjust any VCP Award up or down, up to 35%, as the HR Committee may deem appropriate by applying
a corporate modifier.
The HR Committee increased the 2021 payout opportunity for Messrs. Wenger and Myers. The 2021
scorecard included scores ranging from 0 to 5.
31
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Below is the 2021 VCP Awards matrix, including threshold, target and maximum payout percentages:
2021 VCP Award Matrix
NEO
E. Philip Wenger
Curtis J. Myers
Mark R. McCollom
Angela M. Snyder
Meg R. Mueller
VCP Threshold
(50% of Target)
Scorecard Result
Payment as a % of Eligible 2021 Base Salary 1
VCP Target
(100% of Target)
Scorecard Result
100%
85%
70%
50%
50%
50.0%
42.5%
35.0%
25.0%
25.0%
200%
170%
140%
100%
100%
VCP Maximum
(200% of Target)
Scorecard Result
1 For purposes of determining VCP Awards, the eligible earnings utilized is the actual base salary paid to the NEOs during 2021.
In February 2022, the HR Committee determined that the threshold VCP Award performance criteria was
attained:
•
•
The 2021 ROE threshold of 5.952% (80% of Fulton’s 2021 budgeted ROE of 7.440%) had been achieved
as Fulton had an actual 2021 ROE of 10.64 %; and
The 2021 positive net income goal had been achieved as Fulton had 2021 actual positive net income in
excess of $265.2 million.
The HR Committee reviewed the NEOs’ overall 2021 performance and scorecard results and determined
that the NEOs qualified for a VCP Award.
The following is a summary of the 2021 NEO scorecard results:
Performance
Categories
Financial Results
Final 2021 NEO Scorecard
Performance Sub-categories 1
Score
Rating
• EPS
• ROE
• Operating
Expense/
Average
Assets
0
1
2 Threshold 3 Target
4
5 Max Weight
< = $0.981 $1.039
$1.096
$1.154
$1.212 = > $1.269
30%
< = 6.324% 6.696% 7.068% 7.440% 7.812% = >8.184% 20%
Weighted
Score
1.50
1.00
= > 2.364% 2.309% 2.254% 2.199% 2.144% < = 2.089% 15%
0.35
Risk Management
• Capital, Liquidity, Management, and Market Risk
• Asset Quality: Non-performing Assets to Total Assets
Business Objectives
• Employee Engagement Index
Weight
Weighted Score
10%
10%
0.50
0.50
Weight
Weighted Score
15%
Total Score
0.46
4.32
1 Where scorecard results fall in between the scores for threshold, target and maximum award levels, the VCP Award is
interpolated on a straight-line basis.
32
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT The final 2021 scorecard result for all the NEOs yielded a 166% VCP Award payout.
Below is the NEOs’ 2021 VCP Award target, final scorecard payout, the actual VCP Award paid for 2021
and the VCP Award as a percentage of eligible base salary:
NEO
E. Philip Wenger
Curtis J. Myers
Mark R. McCollom
Angela M. Snyder
Meg R. Mueller
Eligible 2021
Salary
VCP Award
Target for 2021
$1,048,822
$1,048,822
VCP Award
Paid for 20211
1,741,045
$571,788
$444,002
402,214
402,214
$486,020
$310,802
$201,107
$201,107
806,793
515,931
333,838
333,838
VCP Award as a %
of eligible salary
166%
141%
116%
83%
83%
1 Scorecard Payout Calculation was 166% of target based on a final scorecard result of 4.32.
Equity Awards: The number of 2021 Performance Shares awarded to each of the NEOs was based on a target
dollar amount that may be varied by the HR Committee from 0% to 125% of the target for each NEO. For 2021, the
award opportunity was 125% of base salary for Mr. Wenger, 100% of base salary for Messrs. Myers and McCollom
and 75% of base salary for the other NEOs.
The 2021 Performance Shares were granted to the NEOs on May 1, 2021. The actual number of shares of
Fulton common stock, if any, that the NEOs may receive upon vesting of the 2021 Performance Shares at the end of
the 2021 Performance Period may be higher or lower than the number of Performance Shares granted to the NEOs.
Prior awards included a return on average assets (“ROA”) component, but since the ROA component was only a
1-year performance metric, the HR Committee restructured the metrics for the 2021 Performance Period, by dividing
the 2021 Performance Shares into two components, as detailed below.
The 2021 performance goals and potential payouts for the 65% weighted TSR component are a percentage
of target and paid at 25% of target for a 25th percentile TSR result, 100% of target for a 50th percentile TSR result,
and at 150% of target for a 75th percentile TSR result during the 2021 Performance Period. The number of shares that
may be received upon vesting of the 35% weighted Profit Trigger component will not vary and is subject to the Profit
Trigger requirement. The two 2021 Performance Share components are summarized below:
2021 Equity Award Structure
2021 (Year of grant)
2022
2023
2024
TSR Component
Grant
65% Allocation
TSR Component
2021 Performance Period
Vesting
Relative TSR to Peer Group determines the number of 2021 Performance Shares
earned for the 2021 Performance Period
35% Allocation
Time-Based with
Profit Trigger
Profit Trigger
Component
Vesting
Grant
3-year Time-Based cliff vesting of 2021 Performance Shares conditioned on
achievement of the Profit Trigger during the 2021 Performance Period
Performance Shares that vest, together with dividend equivalents accrued during the 2021 Performance
Period, are settled in shares of Fulton common stock on a one-for-one basis and the satisfaction of vesting criteria
under the 2013 Plan. The dividend equivalents will not be paid unless the awards vest. Unless waived by the HR
Committee, if the NEO does not satisfy the continuous service requirement at the end of the 2021 Performance
Period, then the 2021 Performance Shares awarded are forfeited.
33
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT The grant date fair value of the 2021 Performance Shares for the NEOs, the total number of 2021 Performance
Shares at target performance, and the allocation of the 2021 Performance Shares are set forth below:
NEO
E. Philip Wenger
Curtis J. Myers
Mark R. McCollom
Angela M. Snyder
Meg R. Mueller
2021 Grant Date
Fair Value of
Performance Shares1
2021 Total
Performance
Shares Awarded2
TSR Component
Shares Awarded
Profit Trigger
Component
Shares Awarded
$1,305,528
$558,644
$433,784
$294,713
$294,713
76,893
32,903
25,549
17,358
17,358
49,981
21,387
16,607
11,283
11,283
26,912
11,516
8,942
6,075
6,075
1 Based on the May 1, 2021 grant date fair value of 2021 Performance Shares. See footnote 4 to the Summary Compensation
Table on Page 37 for additional information regarding the grant date fair value of the Performance Shares.
2 Shares listed do not include accrued dividend equivalents.
2018 Equity Award Structure: Fulton granted performance share awards to the NEOs on May 1, 2018 (the
“2018 Performance Share Award”) and the 2018 Performance Share Award vested on May 1, 2021 (the “2018
Performance Period”). The performance metric targets and results are as follows:
2018 Performance
Period Metrics
3-year TSR
1-year ROA
Profit Trigger
Weighting
Performance Period Targets
Actual Results
37.5%
37.5%
25.0%
TSR Relative to 2018 Peer Group
31.58 Percentile
ROA Goal of 1.086%
Subject to profit requirement
1.033%
100.00%
% of
Payment
26.32%
81.44%
100.00%
The amounts below include accrued dividend equivalent units. The number of shares and value of the
original award and May 1, 2021 vesting values are as follows:
NEO
E. Philip Wenger
Curtis J. Myers
Mark R. McCollom
Angela M. Snyder
Meg R. Mueller
Total Number
of 2018
Performance
Shares Awarded
73,187
29,912
24,926
16,935
16,935
Grant Date
Fair Value
of 2018
Performance
Shares Awarded
$1,134,491
$463,373
$386,381
$262,512
$262,512
Total Number
of 2018
Performance
Shares upon
Vesting
53,762
21,973
18,308
12,438
12,438
Total Value
of 2018
Performance
Shares upon
Vesting1
$916,644
$374,637
$312,156
$212,074
$212,074
1 Vesting shares valued at $17.05 per share on the May 1, 2021 vesting date.
Employment Agreements
Fulton has a policy that, in general, provides for severance benefits to be paid upon a reduction in force or
position elimination for certain employees. These severance arrangements are intended to provide the employees
with a sense of security in making the commitment to dedicate their professional careers to the success of Fulton.
With respect to the NEOs and certain other employees, the severance benefits provided reflect the fact that it may be
difficult for them to find comparable employment within a reasonable period of time. The levels of these benefits for
the NEOs in the event of a change in control of Fulton are discussed in footnote 6 in the “Potential Payments Upon
Termination and Golden Parachute Compensation Table” on Page 42 under “Termination Without Cause or for Good
Reason – Upon or After a Change in Control”.
34
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Fulton has entered into employment agreements with certain of its key employees, including each of the
NEOs. Mr. Wenger entered into an employment agreement with Fulton on June 1, 2006, as amended on November 12,
2008. Fulton entered into separate employment agreements and change in control agreements with the other NEOs,
all effective as of January 1, 2018. The employment agreements and change in control agreements with the other
NEOs (individually, an “Employment Agreement,” and collectively, the “Employment Agreements”) continue
until terminated, and the Employment Agreements provide for the following with respect to the NEOs: (i) the
receipt of base salary; (ii) the participation in Fulton’s incentive bonus programs and (iii) the participation in Fulton’s
retirement plans, welfare benefit plans and other benefit programs.
The Employment Agreements contain restrictions on the sharing of confidential information as well as
non-competition and non-solicitation covenants that continue for one year following termination of employment. The
non-competition and non-solicitation covenants will not apply if the NEO terminates employment for good reason or
if the NEO’s employment is terminated without cause as detailed below. The Employment Agreements do not contain
an excise tax gross-up for taxes applicable to termination payments as a result of an NEO’s termination, except
that the Employment Agreement executed with Mr. Wenger, provides for an excise tax gross up. The Employment
Agreements with the other NEOs provide that, in the event a payment is required to be made in connection with
their termination of employment resulting in the imposition of an excise tax under Section 4999 of the Internal
Revenue Code, as amended (the “Tax Code”), such payment would be retroactively reduced, if necessary, to the
extent required to avoid such excise tax imposition and, if any portion of the amount payable the NEO is determined
to be non-deductible pursuant to the regulations promulgated under Section 280G of the Tax Code (“Section 280G”),
Fulton is required to pay to the NEO only the amount determined to be deductible under Section 280G.
Compensation Plan Risk Review
At its January 2022 meeting, the HR Committee conducted its annual risk assessment of all Fulton incentive
compensation plans. At this meeting, the HR Committee received a summary of the incentive risk assessment report
prepared by Willis Towers Watson and concluded Fulton’s incentive compensation design and plans do not appear
to promote undue risk-taking. The HR Committee reviewed and considered the annual risk assessment conclusions
and determined that Fulton’s compensation policies and practices do not create risks that will have a material adverse
effect on Fulton.
Other Compensation Elements
Employee Stock Purchase Plan: The ESPP is designed to advance the interests of Fulton and its shareholders
by encouraging Fulton employees to acquire a stake in the future of Fulton by purchasing shares of Fulton common
stock. Fulton limits payroll deduction and annual employee participation in the ESPP to $15,000. The NEOs
participating in the ESPP are eligible to purchase shares through the ESPP at a discount, currently 15%, on the same
basis as other Fulton employees participating in the ESPP.
Defined Contribution Plan – 401(k) Plan: Fulton provides a 401(k) Plan to the NEOs and other employees
that provides for employer matching contributions equal to 100% of each dollar a participant elects to contribute to
the 401(k) Plan, up to 5% of eligible compensation.
Deferred Compensation Plan: Fulton’s nonqualified Deferred Compensation Plan (the “DCP”) permits
non-employee directors and non-employee advisory board members to elect to defer receipt of cash director fees.
The DCP also enables Fulton to credit certain senior officers, including the NEOs, with full employer matching
contributions each year equal to the contributions they would have otherwise been eligible to receive under the
401(k) Plan, notwithstanding the contribution limits imposed by the Tax Code. 2021 NEO deferred compensation
contributions are detailed in footnote 6 of the “Summary Compensation Table” on Page 37.
Death Benefits: Each of the NEOs are eligible for a payment from Fulton equal to two times base salary
(plus an amount equal to applicable individual income taxes due on such amounts) pursuant to individual Death
Benefit Agreements between Fulton and each NEO in the event an NEO dies while actively employed by Fulton.
Upon the NEO’s retirement, the post-retirement benefit payable is reduced to $5,000 for each of Messrs. Wenger and
Myers and Ms. Snyder. The other NEOs are not eligible for any post-retirement death benefit.
Health, Dental and Vision Benefits: Fulton offers a comprehensive benefits package for health, dental and vision
insurance coverage to all full-time employees, including the NEOs and their eligible spouses and children. Fulton pays a
portion of the premiums for the coverages selected, and the amount paid varies with each health, dental and vision plan.
35
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT
Other NEO Benefits: Fulton provides the NEOs with a variety of other perquisites and other personal
benefits that the HR Committee believes are necessary to facilitate Fulton’s business operations, including company-
owned automobiles or a car allowance, club memberships and other executive benefits. These benefits enable Fulton
to attract and retain talented senior officers for key positions. The 2021 amounts are included in the “All Other
Income” column of the “Summary Compensation Table” on Page 37 of this Proxy Statement.
Stock Hedging and Pledging Policy and Stock Trading Procedures: Fulton has an Insider Trading Policy
(the “ITP”) that requires all directors, officers, and employees of Fulton and its affiliates to adhere to certain rules
when trading in Fulton securities. Among other requirements, directors, officers and employees of Fulton and its
subsidiaries that know of Fulton material, non-public information may not: (i) buy or sell Fulton securities while the
information remains non-public or (ii) disclose the information to relatives, friends or any other person. In addition,
the NEOs and directors of Fulton and Fulton’s banking subsidiaries and certain other officers are prohibited from
engaging in hedging and other speculative transactions involving Fulton’s securities. This prohibition encompasses
“short sales,” “puts,” and other similar trading. Fulton’s ITP also prohibits the pledging of Fulton securities.
Stock Ownership Guidelines: Fulton’s Governance Guidelines require that each director own at least $300,000
of eligible Fulton common stock within the later of: (i) five calendar years of first becoming a director or (ii) five
calendar years after the adoption of the revised Governance Guideline. Similar stock ownership guidelines exist for the
NEOs. Ownership guideline amounts are calculated as a multiple of the NEO’s annual base salary as follows:
NEO Position
CEO
President
CFO
Fulton Common Stock Ownership Guideline
as a Multiple of Annual Base Salary
3.0
1.5
1.5
Other
NEOs
1.0
Compliance with the Governance Guidelines is determined annually. Ownership excludes stock options
and other unvested restricted stock or Performance Share awards, but includes all other shares beneficially owned
and reported on an individual’s Form 3, Form 4 or Form 5 filed with the SEC, including shares owned individually,
deferred vested stock unit awards, shares held in retirement accounts, indirect ownership and jointly held shares of
Fulton common stock. As of December 31, 2021, except for Mr. McCollom and Ms. Snyder, all of the NEOs satisfied
the stock ownership guidelines. As of December 31, 2021, except for Ms. Craighead Carey and Messrs. Martin and
Snyder, all of Fulton’s current non-employee directors satisfied the stock ownership guidelines.
Management Succession: Management succession is discussed and reviewed annually at Fulton. At the
December 2021 meeting of the Board, during an executive session of the Board of Directors, senior officers in Fulton’s
Human Resources Department discussed and reviewed the succession planning processes used by management to
identify successors for each of the NEOs.
Clawback Policies: Fulton’s Compensation Recovery Clawback Policy (the “Clawback Policy”) contains
clawback provisions for all participants, including the NEOs, with respect to VCP Awards and Performance Shares
and, subject to limited exceptions, other incentive compensation plans. The Clawback Policy identifies the events
that may give rise to a clawback, including: (i) a restatement of Fulton or any affiliate’s financial statements (other
than a restatement caused by a change in applicable accounting rules or interpretations); (ii) the discovery that a
performance metric or calculation used in determining performance-based compensation was materially inaccurate;
(iii) a violation of Fulton’s Code of Conduct, the result of which creates a significant financial or reputational impact
for Fulton and (iv) violation by a departing or departed employee of a non-competition and non-solicitation restriction
set forth in Fulton’s employment policies or an employee’s employment agreement.
HR Committee Report
The HR Committee reviewed and discussed with management the foregoing Compensation Discussion
and Analysis and, based on the review and discussions, the HR Committee recommended to the Board that the
Compensation Discussion and Analysis be incorporated in Fulton’s Annual Report and this Proxy Statement.
HR Committee
Mark F. Strauss, Chair
Denise L. Devine, Vice Chair
Lisa Crutchfield
Steven S. Etter
George W. Hodges
James R. Moxley, III
Ronald H. Spair
36
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT SUMMARY COMPENSATION TABLE
Name and Principal
Position 1
Year
Salary 3
($)
Bonus
($)
Stock
Awards 4
($)
Option
Awards
($)
E. Philip Wenger
Chairman and
Chief Executive Officer
of Fulton
Curtis J. Myers
President and
Chief Operating Officer
of Fulton
2021 1,048,822
2020 1,048,822
2019 1,042,919
2021
571,788
2020
561,000
2019
549,231
Mark R. McCollom
2021
444,002
Senior Executive Vice
President and Chief
Financial Officer of
Fulton
Angela M. Snyder
Senior Executive Vice
President and Head of
Consumer Banking2
2020
435,625
2019
433,173
2021
402,214
2020
394,625
2019
392,404
Meg R. Mueller
2021
402,214
Senior Executive Vice
President and
Head of Commercial
Business
2020
394,625
2019
392,404
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,305,528
1,292,385
1,274,798
558,644
555,828
508,305
433,784
431,603
423,585
294,713
295,703
287,788
294,713
295,703
287,788
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Non-Equity
Incentive Plan
Compensation 5
($)
1,741,045
630,735
627,185
806,793
277,835
272,006
515,931
215,743
214,529
333,838
139,599
138,813
333,838
139,599
138,813
Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings
($)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
All Other
Compensation 6
($)
Total
($)
112,499
4,207,894
112,553
3,084,495
98,654
3,043,556
67,705
2,004,930
68,725
1,463,388
61,013
1,390,555
66,112
1,459,829
65,419
1,148,390
39,710
1,110,997
33,940
1,064,705
35,183
865,110
44,495
863,500
21,589
1,052,354
12,193
842,120
11,510
830,515
1 Titles and positions listed are as of December 31, 2021.
2 Ms. Snyder was promoted to Senior Executive Vice President and Chief Banking Officer effective January 1, 2022.
3 This column represents the base salary amounts paid to and earned by each of the NEOs named in this table for the years
indicated. On February 9, 2022, the HR Committee set the 2022 annual base salaries, effective for the April 1, 2022 pay period for
Messrs. Wenger, Myers and McCollom, Ms. Snyder and Ms. Mueller of $1,080,287, $661,279, $459,911, $463,500 and $416,625,
respectively.
37
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 4 Amounts represent the grant date fair values of Performance Shares. There were no forfeitures of Performance Shares during
2021, 2020 and 2019. The following is a summary of the grant date fair values of the Performance Shares granted to the NEOs in
2021, 2020 and 2019.
Name
Grant Date
E. Philip Wenger
Curtis J. Myers
Mark R. McCollom
Angela M. Snyder
Meg R. Mueller
5/1/2021
5/1/2020
5/1/2019
5/1/2021
5/1/2020
5/1/2019
5/1/2021
5/1/2020
5/1/2019
5/1/2021
5/1/2020
5/1/2019
5/1/2021
5/1/2020
5/1/2019
Performance Share
Grant Date Fair
Value Assuming
Highest
Performance
Level Achieved
($)
1,728,867
1,761,599
1,758,687
739,791
756,605
701,240
574,445
587,513
584,367
390,280
401,624
397,026
390,280
401,624
397,026
Number of
Performance
Shares Granted
to NEO
(#)
76,893
119,610
75,327
32,903
51,433
30,035
25,549
39,938
25,029
17,358
27,355
17,005
17,358
27,355
17,005
Per Share
Grant Date
Fair Value
With
Non-Market
Conditions
($)
17.05
11.18
16.98
17.05
11.18
16.98
17.05
11.18
16.98
17.05
11.18
16.98
17.05
11.18
16.98
Per Share
Grant Date
Fair Value
With
Market
Conditions
($)
16.94
10.16
16.83
16.94
10.16
16.83
16.94
10.16
16.83
16.94
10.16
16.83
16.94
10.16
16.83
Weighted
Average Per
Share Grant
Date
Fair Value
($)
16.98
10.81
16.92
16.98
10.81
16.92
16.98
10.81
16.92
16.98
10.81
16.92
16.98
10.81
16.92
The per share grant date fair value for the Profit Trigger Performance Shares is the closing price of Fulton common stock on the
date the shares are granted. The per share grant date fair value for TSR Performance Shares is estimated based on a Monte Carlo
valuation methodology.
5 The amounts reported in this column are VCP Awards detailed under “VCP Awards” beginning on Page 31.
6 All other compensation includes: (i) qualified retirement plan company contribution to the 401(k) Plan; (ii) nonqualified
deferred compensation plan company contribution to the DCP; (iii) company paid club memberships; (iv) automobile perquisites
and (v) other benefits that individually are less than the greater of $25,000, or 10% of all perquisites.
Qualified
Retirement
Plan
Company
Contribution
($)
14,500
14,250
14,000
14,500
14,250
14,000
14,500
14,250
14,000
14,500
14,250
13,982
3,889
0
0
Nonqualified
Deferred
Compensation
Plan
Company
Contribution
($)
69,478
69,550
66,448
27,981
27,400
25,451
18,487
18,258
0
12,590
12,422
12,226
0
0
0
Year
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
Club
Memberships
($)
18,964
18,907
12,070
18,370
18,859
11,071
13,600
14,011
6,810
3,859
4,917
8,589
6,512
4,524
4,404
Automobile
Perquisites
($)
7,513
7,716
3,546
4,990
7,316
3,313
18,000
18,000
18,000
2,091
2,694
1,965
11,188
7,669
5,258
Other
Compensation
and
Perquisites
($)
2,044
2,130
2,590
1,864
900
7,178
1,525
900
900
900
900
7,733
0
0
1,848
Total All Other
Compensation
($)
112,499
112,553
98,654
67,705
68,725
61,013
66,112
65,419
39,710
33,940
35,183
44,495
21,589
12,193
11,510
Name
E. Philip Wenger
Curtis J. Myers
Mark R. McCollom
Angela M. Snyder
Meg R. Mueller
38
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT GRANTS OF PLAN-BASED AWARDS
Estimated Future or Possible
Payouts Under Non-Equity
Incentive Plan Awards 1
Target
($)
Maximum
($)
Threshold
($)
Grant
Date
Estimated Future or Possible
Payouts Under Equity
Incentive
Plan Awards 2
Target
(#)
Maximum
(#)
Threshold
(#)
Grant
Date Fair
Value of
Stock and
Option
Awards 3
($)
Closing
Price on
Grant
Date
($/Sh)
5/1/2021
-
-
-
24,990
76,893
101,883
17.05
1,305,528
-
524,411 1,048,822 2,097,644
-
-
-
-
-
5/1/2021
-
-
-
10,694
32,903
43,596
17.05
558,644
-
243,010
486,020
972,040
-
-
-
-
-
5/1/2021
-
-
-
8,304
25,549
33,853
17.05
433,784
-
155,401
310,802
621,603
-
-
-
-
-
5/1/2021
-
-
-
5,642
17,358
23,000
17.05
294,713
-
100,553
201,107
402,214
-
-
-
-
-
5/1/2021
-
-
-
5,642
17,358
23,000
17.05
294,713
-
100,553
201,107
402,214
-
-
-
-
-
Name
E. Philip Wenger
E. Philip Wenger
Curtis J. Myers
Curtis J. Myers
Mark R. McCollom
Mark R. McCollom
Angela M. Snyder
Angela M. Snyder
Meg R. Mueller
Meg R. Mueller
1 VCP Award amounts are calculated based on 2021 base salary paid.
2 Represents the number of Performance Shares granted to the NEOs on May 1, 2021 based on Fulton’s closing price of $17.05.
Performance Shares are earned and vested based on the actual performance level achieved with respect to the following
performance measures: (i) TSR component and (ii) Profit Trigger component, in each case, for the 2021 Performance Period.
With respect to the TSR component the actual number of 2021 Performance Shares earned and vested will be interpolated on a
straight-line basis.
3 See footnote 4 to the Summary Compensation Table on Page 37 for additional information regarding the grant date fair value
of the Performance Shares. The grant date fair value of each equity award is computed in accordance with FASB ASC Topic 718.
39
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
-
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
-
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
-
-
-
11,263
10,877
-
-
-
-
-
-
-
-
-
11,400
11,554
-
-
-
-
-
0
0
-
-
-
-
-
-
-
-
-
0
0
-
-
-
-
-
0
0
-
-
-
-
-
-
-
-
-
0
0
-
-
-
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
70,583
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)1
1,199,910
Option
Expiration
Date
-
-
-
131,956
104,182
2,243,247
1,771,087
Option
Exercise
Price
($)
-
-
-
10.475
11.580
3/31/2022
3/31/2023
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10.475
03/31/2022
11.580
03/31/2023
-
-
-
-
-
-
-
-
28,144
56,733
44,580
23,452
44,054
34,616
15,934
30,166
23,518
-
-
15,934
30,166
23,518
-
-
478,445
964,467
757,858
398,685
748,910
588,473
270,879
512,826
399,811
-
-
270,879
512,826
399,811
Name
E. Philip Wenger 2
E. Philip Wenger 3
E. Philip Wenger 4
Curtis J. Myers
Curtis J. Myers
Curtis J. Myers 2
Curtis J. Myers 3
Curtis J. Myers 4
Mark R. McCollom 2
Mark R. McCollom 3
Mark R. McCollom 4
Angela M. Snyder 2
Angela M. Snyder 3
Angela M. Snyder 4
Meg R. Mueller
Meg R. Mueller
Meg R. Mueller 2
Meg R. Mueller 3
Meg R. Mueller 4
1 Market value of Performance Shares shown is based on the Fulton closing price of $17.00 on December 31, 2021. The number
of Performance Shares includes dividend equivalents through December 31, 2021. As of December 31, 2021, the relative TSR
performance that determined the number of Performance Shares allocated to the TSR component of the 2019 and 2020 awards
was below the target performance levels and amounts are shown at target. As of December 31, 2021, the 2021 award was at target
performance and amounts are shown at maximum relative TSR performance.
2 Performance Shares granted on May 1, 2019. If the performance criteria are achieved, then these Performance Shares will vest
on May 1, 2022.
3 Performance Shares granted on May 1, 2020. If the performance criteria are achieved, then these Performance Shares will vest
on May 1, 2023.
4 Performance Shares granted on May 1, 2021. If the performance criteria are achieved, then these Performance Shares will vest
on May 1, 2024.
40
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT OPTION EXERCISES AND STOCK VESTED
Option Awards
Stock Awards
Number of
Shares
Acquired
on Exercise
(#)
0
12,375
0
0
11,250
Value Realized
on Exercise
($)
0
68,186
0
0
76,514
Number of
Shares
Acquired
on Vesting
(#)
53,762
21,973
18,308
12,438
12,438
Value Realized
on Vesting 2
($)
916,644
374,637
312,156
212,074
212,074
Name
E. Philip Wenger
Curtis J. Myers 1
Mark R. McCollom
Angela M. Snyder
Meg R. Mueller
1 Mr. Myers exercised options granted in 2011 by paying cash for the full amount of the exercise price.
2 Vesting shares valued at $17.05 per share on the May 1, 2021 vesting date.
NONQUALIFIED DEFERRED COMPENSATION
Name
E. Philip Wenger
Curtis J. Myers
Mark R. McCollom
Angela M. Snyder
Meg R. Mueller
NEO
Contributions in
Last FY
($)
$143,752
$ 72,016
$ 17,174
$ 76,913
0
Registrant
Contributions in
Last FY 1
($)
69,478
27,981
18,487
12,591
0
Aggregate
Earnings in
Last FY
($)
$397,727
$ 75,771
$
6,959
$ 114,048
1
$
Aggregate
Withdrawals/
Distributions
($)
0
0
0
0
0
Aggregate Balance
at Last FYE 2
($)
$3,832,446
$ 877,823
$
90,005
$ 983,516
2,714
$
1 Amounts listed as Registrant Contributions to the DCP are also included as part of the NEOs’ “Total All Other Compensation”
in the Summary Compensation Table on Page 37.
2 Balances include the 2021 DCP contributions made by Fulton and credited to the NEOs’ accounts. The aggregate balances as
of the 2021 fiscal year end include the following amounts that were previously reported in the Summary Compensation Table for
prior fiscal years for Messrs. Wenger, Myers and McCollom, Ms. Snyder and Ms. Mueller of $774,036, $115,716, $18,258, $36,599
and $0, respectively.
41
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT POTENTIAL PAYMENTS UPON TERMINATION AND GOLDEN PARACHUTE
COMPENSATION TABLE
NEO
Potential Payments as of December 31, 2021 1
Voluntary
Termination 2
or Termination
for Cause 3
Termination
Without Cause
or for Good
Reason – Before
a Change in
Control 4 5
Termination
Without Cause or
for Good Reason
– Upon or After
a Change in
Control 6 7 8
Termination
Due to
Retirement 9
Termination
Due to
Disability 10 11
Termination
Due to
Death 12 13
E. Philip Wenger
Cash ($)
Equity ($)
Pension/NQDC($)
Perquisites and Benefits($)
Tax Reimbursement($)
TOTAL ($)
Curtis J. Myers
0
0
0
0
0
0
Cash ($)
Equity ($)
Pension/NQDC($)
Perquisites and Benefits($)
Tax Reimbursement($)
TOTAL ($)
0
132,444
0
0
0
132,444
Mark R. McCollom
Cash ($)
Equity ($)
Pension/NQDC($)
Perquisites and Benefits($)
Tax Reimbursement($)
TOTAL ($)
Angela M. Snyder
Cash ($)
Equity ($)
Pension/NQDC($)
Perquisites and Benefits($)
Tax Reimbursement($)
TOTAL ($)
Meg R. Mueller
Cash ($)
Equity ($)
Pension/NQDC($)
Perquisites and Benefits($)
Tax Reimbursement($)
TOTAL ($)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,048,822
0
0
12,000
0
1,060,822
1,381,818
132,444
0
12,000
0
1,526,262
962,447
0
0
12,000
0
974,447
738,329
0
0
12,000
0
750,329
738,329
0
0
12,000
0
750,329
5,579,734
4,779,822
278,987
74,000
0
10,712,543
2,225,257
2,147,324
138,182
34,000
0
4,544,762
1,556,144
1,591,725
96,245
34,000
0
3,278,114
1,244,720
1,085,447
73,833
34,000
0
2,438,000
1,476,658
1,222,455
73,833
34,000
0
2,806,946
0
0
0
0
0
0
0
132,444
0
0
0
132,444
0
1,591,725
0
0
0
1,591,725
0
0
0
0
0
0
0
0
0
0
0
0
1,153,704
4,779,822
0
18,000
0
5,951,526
632,528
2,147,324
0
18,000
0
2,797,852
491,168
1,591,725
0
18,000
0
2,100,893
444,940
1,085,447
0
18,000
0
1,548,388
444,940
1,222,455
0
18,000
0
1,685,395
2,097,644
4,779,822
0
0
1,342,798
8,220,264
1,150,050
2,147,324
0
0
736,200
4,033,574
893,032
1,591,725
0
0
571,671
3,056,428
808,982
1,085,447
0
0
517,866
2,412,295
808,982
1,222,455
0
0
517,866
2,549,303
1 All amounts listed under Equity in this table are the value of the NEOs’: (i) Performance Shares and (ii) and vested and “in the
money” stock options valued based on the closing price of Fulton’s common stock of $17.00 on December 31, 2021.
2 Voluntary Termination: In the event an NEO’s employment is voluntarily terminated by the NEO other than for “Good
Reason,” Fulton’s obligations are limited to the payment of the NEO’s base salary, together with any applicable expense
reimbursements and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit
plans. No other payments are required and any unexercised stock options and Performance Shares are immediately forfeited by
the NEO. The amount listed under Equity is the value of the NEO’s vested and “in the money” stock options.
42
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 3 Termination for Cause: If an NEO’s employment is terminated for “Cause,” Fulton is not obligated to make any further
payments to the NEO, other than accrued amounts (including salary, expense reimbursement, etc.). Unexercised stock options
and Performance Shares are forfeited by an NEO terminated for Cause. The value listed under Equity is the value of the NEO’s
vested and “in the money” stock options.
4 Termination Without Cause or for Good Reason – Before a Change in Control: If an NEO terminates his or her employment
for “Good Reason” or the NEO’s employment is terminated by Fulton “Without Cause,” the NEO is entitled to receive the NEO’s
base salary for a period of one year and a cash bonus for the fiscal year in which the termination date occurs at the target payout
level, pro-rated to the date of termination, except that for Mr. Wenger, both the payment and the amount of the cash bonus shall
be at the discretion of the HR Committee and the Board. The NEO also would continue to participate in employee health and
other benefit plans for which the NEO is eligible during this one year period. If the NEO is not eligible to continue to participate
in any employee benefit plan, the NEO will be compensated on an annual basis in an amount equal to the cost Fulton would have
incurred had the NEO been eligible to participate in the plan plus any permitted gross-up for any applicable taxes. Unexercised
stock options are forfeited by an NEO terminated Without Cause or for Good Reason. “Good Reason” is defined as: (i) a breach
by Fulton of its material obligations without remedy; (ii) a significant change in the NEO’s authority, duties, compensation or
benefits or (iii) a relocation of the NEO outside a specified distance from where the NEO previously was based. “Without Cause”
is defined as any reason other than for Cause.
5 Cash amount listed for each NEO includes a severance payment based on the NEO’s 2021 base salary. The amounts listed under
Cash assume no discretionary bonus was paid to Mr. Wenger, but the payments to the other NEOs assume the payment of their
VCP Awards for the prior year. Equity amounts include the value of unexercised stock options. Perquisites/Benefits include a
monthly estimate of $1,000 for the value of health and other benefit expenses paid by Fulton for the one-year severance period for
each NEO.
6 Termination Without Cause or for Good Reason – Upon or After a Change in Control: A “Change in Control” with respect
to Mr. Wenger is defined as: (i) the acquisition of the beneficial ownership of more than 50% of the total fair market value or
voting power of the stock of Fulton by any one person or group of persons acting in concert; (ii) a change in the composition of the
Board during any period of 12 consecutive months such that a majority of the Board is replaced by directors whose appointment
or election was not endorsed by a majority of the Board before such appointment or election or (iii) the acquisition by any person
or group of persons acting in concert during any 12 month period of 30% or more of the total voting power of the stock of Fulton,
or of 40% or more of the total assets (on a gross fair market value basis) of Fulton.
With respect to the other NEOs, a Change in Control is defined in the Employment Agreements as: (i) during any
period of not more than 36 months, the individuals that constituted Fulton’s Board at the beginning of such period, with certain
exceptions, cease to constitute at least a majority of Fulton’s Board; (ii) beneficial ownership of more than 30% of the outstanding
voting power of the stock of Fulton is acquired by any person, with certain exceptions; (iii) a merger or consolidation involving
Fulton is consummated, unless at least 50% of the voting power of the resulting entity is represented by Fulton voting securities
outstanding prior to such merger or consolidation, no person beneficially has the power to vote 30% or more of the voting power
of the resulting entity, and at least a majority of the members of the board of directors of the resulting entity were members of
Fulton’s Board prior to the execution of the agreement which effectuated such merger or consolidation; (iv) the sale of all or
substantially all of the assets of Fulton is consummated or (v) Fulton’s shareholders approve a plan of liquidation or dissolution.
If, during the period beginning 90 days before a Change in Control and ending two years after such Change in Control,
an NEO is terminated by Fulton Without Cause or an NEO resigns for Good Reason, Fulton is required to pay the NEO two times
the sum of the NEO’s: (i) annual base salary immediately before the Change in Control and (ii) the highest annual cash bonus or
other incentive compensation awarded to the NEO over the prior three years. The NEO is also entitled to receive: (i) an amount
equal to that portion of Fulton’s retirement plan, 401(k) plan or deferred compensation plan contributions for the NEO which were
not vested, plus the amount of any federal, state or local income taxes due on such amount; (ii) an amount equal to two years of
Fulton retirement plan contributions to each tax qualified or nonqualified retirement plan in which the NEO was a participant
immediately prior to the NEO’s termination or resignation; (iii) payment of up to $10,000 for outplacement services and (iv)
continuation of other employee welfare benefits for a period of two years. With respect to Mr. Wenger, if he would not be eligible
to continue to participate in any employee welfare benefit plan, he would be compensated on an annual basis, in advance, for such
plan in an amount equal to the cost Fulton would have incurred had he been eligible to participate in such plan plus any permitted
gross-up for any taxes applicable thereto. In addition, for a period of two years after the Change in Control, Mr. Wenger would be
entitled to receive continuation of other executive perquisites, such as club memberships and an employer-provided automobile.
The other NEOs are not entitled to receive continuation of other executive perquisites, but, the other NEOs have the ability to
purchase, at book value, any employer-provided automobile used by the NEO at the time of their termination.
Mr. Wenger’s Employment Agreement provides that, in the event any payment or distribution by Fulton to or for the
benefit of Mr. Wenger is subject to excise tax, Mr. Wenger is entitled to receive an additional payment equal to the total excise tax
imposed. The agreements with the other NEOs do not contain a “gross-up provision.” Instead, each of other NEOs total payments
are reduced to the extent required to avoid a federal excise tax imposed under Section 280G of the Tax Code.
43
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT With respect to Performance Shares, in the event of a Change in Control, all incomplete performance periods with
respect of such Performance Shares in effect on the date the Change in Control occurs shall end on the date of such Change in
Control, and the HR Committee shall: (i) determine the extent to which performance goals with respect to each such performance
period have been met based upon such audited or unaudited financial information and (ii) cause such portion or all of the
Performance Shares to vest with respect to performance goals for each such performance period based upon the HR Committee’s
determination of the degree of attainment of performance goals or, if not determinable, the values assume the applicable target
levels of performance have been attained.
7 Cash amounts listed are two times 2021 base salary as of year-end and the highest VCP Awards paid for the last three years for
each NEO. Except for Messrs. Myers and McCollom, and Ms. Snyder, no cash payments have been reduced in the table to limit a
payment pursuant to the terms of the NEO’s Employment Agreement, which represents the reduction required to avoid a federal
excise tax imposition pursuant to the regulations promulgated under Section 280G of the Tax Code.
Equity amount is the value of all “in the money” stock options, unvested time-based stock unit awards and unvested
Performance Shares that would vest as described in the last paragraph of footnote 6 above as of December 31, 2021. Perquisites
and benefits include: (i) $10,000 for outplacement services; (ii) $1,000 per month during the severance period for the estimated
value of health and other benefit expenses paid by Fulton attributed to each NEO and (iii) with respect to Mr. Wenger, during his
severance period, an additional $20,000 per year for club memberships, vehicle and other expenses paid by Fulton.
8 Amount listed under Pension/NQDC represents the aggregate dollar value of Fulton’s contributions to the 401(k) Plan, the DCP
and other retirement benefits.
9 Termination Due to Retirement: In the event an NEO terminates his employment due to retirement, Fulton is obligated to pay
the NEO’s base salary through the effective date of the NEO’s retirement, together with any applicable expense reimbursements
and all accrued and unpaid benefits and vested benefits in accordance with the applicable employee benefit plans. Performance
Shares awarded in 2019 and 2020 do not automatically vest upon retirement and continuous service is required, but, subject to
review and approval by the HR Committee, performance continues to be measured and the shares may vest based on the original
vesting schedule according to the performance level actually achieved. Performance shares awarded in 2021 provide that the
continuous service requirement is waived if an NEO is retirement eligible, performance continues to be measured and the shares
may vest based on the original vesting schedule according to the performance level actually achieved. Assuming that all the
NEOs achieved the earlier of (i) age 60 with at least 10 years of service to Fulton or any affiliate or (ii) age 62 with at least five
years of service to Fulton or any affiliate and retired as of December 31, 2021, the NEOs have one or two years from the date of
retirement, but not beyond the original option expiration date, to exercise their stock options.
10 Termination Due to Disability: Following an NEO’s “Disability,” defined in the Employment Agreements to have the meaning
set forth in Fulton’s long-term disability policy applicable to the NEO, which generally is a medically determinable physical or
medical impairment that is expected to result in death or to last for at least 12 months, and that either renders the NEO unable
to engage in any substantial gainful activity or qualifies the NEO for benefits under a Fulton disability plan, the employment of
the NEO would terminate automatically, in which event Fulton is not thereafter obligated to make any further payments under
the Employment Agreement, other than amounts (including salary, expense reimbursement, etc.) accrued as of the date of such
termination, plus an amount equal to at least six months’ base salary as in effect immediately prior to the date of the Disability.
After this six month salary continuation period, for as long as the NEO continues to be disabled, the NEO will continue to
receive at least 60% of the NEO’s base salary until the earlier of the NEO’s death or December 31 of the calendar year in which
the NEO attains age 65. To the extent it does not duplicate benefits already being provided, an NEO will also receive those
benefits customarily provided by Fulton to disabled former employees, including, but not limited to, life, medical, health, accident
insurance and a survivor’s income benefit.
11 Cash amount for all the NEOs is six months at full salary, then 60% of salary for an assumed period of 12 months. Perquisites
include a monthly estimate of $1,000 for the value of health and other benefit expenses paid by Fulton for an assumed period
of 18 months. Equity amount is the value of all the “in the money” stock options and Performance Shares that would vest as
described in the last paragraph of footnote 6 above. In the event an NEO terminates employment due to disability, unvested
options, Performance Shares and time-based restricted stock units automatically vest. The NEOs have one year from the date of
disability, but not beyond the original option expiration date, to exercise stock options.
12 Termination Due to Death: In the event of a termination of employment as a result of an NEO’s death, the NEO’s dependents,
beneficiaries or estate, as the case may be, receive such survivor’s income and other benefits as they may be entitled to under the
terms of Fulton’s benefit programs, including the life insurance benefit of two times base salary amount plus a tax reimbursement
due as a result of the payment under the Death Benefits described on Page 35.
13 In the event an NEO terminates employment due to death, unvested options, Performance Shares would automatically vest,
and Performance Shares vesting as described in the last paragraph of footnote 6 above. The estate of the NEO has one year from
the date of death to, but not beyond the original option expiration date, exercise stock options.
44
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT CEO PAY RATIO DISCLOSURE
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”), and Item 402(u) of Regulation S-K, Fulton is providing the following information in connection with the ratio of the
annual total compensation paid to our “median employee” and the annual total compensation of our CEO for the year ended
December 31, 2021.
Pay Ratio Summary
• For 2021, the annual total compensation of our selected median
employee was $60,288.
• The 2021 annual total compensation of our CEO, as reported in the
Summary Compensation Table on Page 37, was $4,207,894.
• Based on this information, for 2021 we reasonably estimate that the ratio
of the annual total compensation of our CEO to our median employee
was 70 to 1.
• Our pay ratio estimate has been calculated in a manner consistent
with Item 402(u) of Regulation S-K using the data and assumptions
summarized below.
For 2021, the median employee that was used for purposes of calculating the 2021 ratio of the annual total compensation
of our CEO to the median of the annual total compensation of all employees is the same median employee that was identified
for purposes of our 2020 pay ratio disclosure, and the median employee is still employed by Fulton. As of December 31, 2020,
to identify the 2020 median employee from our employee population at that time, we compared the total compensation in Box 5
on the 2020 W-2 tax statements for our employee population. We identified our median employee using this consistently applied
compensation measure that excluded our CEO as well as any temporary employees and employees that departed our workforce
during 2020. In making this determination, we annualized the compensation of our permanent full-time employees who were
hired in 2020 and did not work for Fulton for the entire fiscal year but were still employed as of December 31, 2020. There were
no changes in 2021 that would significantly affect the pay ratio by using the same median employee.
For the 2021 pay ratio, using the same median employee as 2020, we combined all of the elements of such employee’s
compensation for 2021 consistent with the requirements of Item 402(c)(2)(x) of Regulation S-K. With respect to the annual total
compensation of our CEO, the same process and amount reported in the “Total” column of our 2021 Summary Compensation
Table included in this Proxy Statement on Page 37 was used.
The SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual
total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable
estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not
be comparable to the pay ratio reported above as other companies may have different employment and compensation practices
and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
45
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT NON-BINDING SAY-ON-PAY PROPOSAL TO APPROVE THE COMPENSATION
OF THE NAMED EXECUTIVE OFFICERS – PROPOSAL TWO
Pursuant to the Dodd-Frank Act, Fulton is providing its shareholders with the opportunity to vote on an
advisory (non-binding) proposal at the Annual Meeting to approve the compensation of Fulton’s NEOs for 2021 as
described in the Compensation Discussion and Analysis and the tabular disclosures of the NEOs’ compensation in this
Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity
to endorse or not endorse Fulton’s executive pay program. At Fulton’s 2021 Annual Meeting, Fulton presented a
similar proposal to its shareholders, and approximately 97.17% of the shareholders who cast a vote on this proposal
voted in favor of, and approved, Fulton’s say-on-pay proposal. The HR Committee considered the number of votes
cast in favor of Fulton’s prior say-on-pay proposal to be a positive endorsement of Fulton’s current pay programs and
practices. Fulton will continue to monitor the level of support for each say-on-pay proposal. Because the shareholder
vote is not binding, the outcome of this year’s vote, or any future vote, may not be construed as overruling any
decision by Fulton’s Board or the HR Committee regarding executive compensation. Fulton is providing shareholders
with this opportunity pursuant to Section 14A of the Securities Exchange Act.
As further described in the Compensation Discussion and Analysis section of this Proxy Statement, starting
on Page 26, Fulton’s executive compensation philosophy and program are intended to achieve three objectives: (i) align
the interests of the NEOs with shareholder interests; (ii) link the NEOs’ pay to performance and (iii) attract, motivate
and retain executive talent. Fulton’s executive compensation program currently includes a mix of base salary, incentive
bonus, and equity-based plans. Fulton believes that its compensation program, policies and procedures are reasonable
and appropriate and compare favorably with the compensation programs, policies and procedures of its peers.
The Board recommends that shareholders, in a non-binding proposal, vote “FOR” the following proposal:
“RESOLVED, that the compensation paid to Fulton’s Named Executive Officers, as disclosed
in this Proxy Statement pursuant to the disclosure rules of the SEC, including the Compensation
Discussion and Analysis and the Compensation Tables contained in this Proxy Statement, is hereby
APPROVED.”
Recommendation of the Board
The Board of Directors recommends that the shareholders vote FOR the non-binding proposal to
approve the compensation of the Named Executive Officers.
46
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT APPROVAL OF THE 2022 AMENDED AND RESTATED EQUITY AND
CASH INCENTIVE COMPENSATION PLAN – PROPOSAL THREE
The 2022 Plan is an important compensation tool designed to: (i) align the interests of key individuals with
Fulton’s shareholders by encouraging and creating ownership of shares of Fulton common stock; (ii) enable Fulton
to be competitive among its peers and attract and retain qualified individuals who contribute to Fulton’s success
by their efforts, service, ability and ingenuity; (iii) provide long-term equity and cash-based rewards and incentive
opportunities to key individuals who are responsible for the success of Fulton and who are in a position to make
significant contributions toward its objectives and (iv) reward individual performance.
Background
The 2022 Plan will replace the existing 2013 Plan, that expires on April 29, 2023. The 2022 Plan amends and
restates the 2013 Plan. Any awards made by Fulton under the 2013 Plan after March 1, 2022 will reduce the shares to
be awarded under the 2022 Plan. If the 2022 Plan is approved by shareholders at the Annual Meeting, Fulton will not
make any additional awards under the 2013 Plan. In the event that the 2022 Plan is not approved by shareholders at
the Annual Meeting, then the 2022 Plan shall terminate and Fulton will continue to make grants under the 2013 Plan.
The 2022 Plan, among other things: (i) reduces the shares available for new awards after May 17, 2022 from
9,575,000 to 5,806,000; (ii) provides that dividends (or dividend equivalents) will (A) be withheld by Fulton, (B) will
remain subject to vesting requirements to the same extent as the applicable award and (C) will only be paid at the time the
vesting requirements are satisfied; (iii) allows for the recycling of shares in certain cases; (iv) clarifies that all awards shall
have a minimum one year vesting and (v) expires on May 17, 2032.
As of December 31, 2021, there were 2,302,330 shares of common stock outstanding underlying outstanding
stock options, stock unit and restricted stock awards under the 2013 Plan. In addition, of such date, there were
9,634,000 shares available for future awards under the 2013 Plan. Upon approval of the 2022 Plan, the shares available
for awards will be reduced to 5,806,000.
As of December 31, 2021, there were 160,490,000 shares of Fulton common stock outstanding.
Fulton’s equity-based compensation model, including the broad-based participation of Fulton’s employees and
directors, and the portion of equity compensation paid to the NEOs, results in an annual usage of plan shares, known as the
“burn rate” as indicated in the chart below. Burn rate is the calculation for measuring the annual usage of shares.
Time-vested restricted stock units
granted (1)
Director restricted stock units granted (2)
Performance-based stock units granted
Performance-based stock units vested (3)
Shares underlying options granted (1)
Weighted-average basic shares
outstanding
Burn rate (a)+(b)+(d)+(e)/(f) (4)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
2019
2020
2021
Average
169,459
51,164
314,244
234,940
0
374,255
77,916
508,940
245,467
0
275,011
50,040
324,693
255,353
0
272,908
59,707
382,626
245,253
0
166,901,579
0.27%
162,372,183
0.43%
162,232,864
0.36%
163,835,542
0.35%
1 Reflects the gross number of shares and shares underling awards made to employees during the respective year.
2 Reflects the gross number of shares and shares underlying awards made to non-employees directors during the respective year
from the 2019 Director Equity Plan.
3 Reflects the number of shares vested upon actual performance achieved and dividend equivalents that accrued and vested with
the performance-based awards.
4 Not adjusted for forfeitures, withholding and expirations, which would reduce the burn rate if taken into account.
47
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT As commonly calculated, the total potential dilution or “overhang” resulting from the adoption of the 2022
Plan would be 5.13%. The overhang is calculated as follows as of March 1, 2022 assuming the 2022 Plan is approved:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Remaining Shares available under 2013 Plan (1)
Shares available under the 2022 Plan if approved
Shares available under the 2019 Director Equity Plan
Shares underlying outstanding awards under 2019 Director Equity Plan (2)
Shares underlying outstanding time-vested restricted stock unit awards
Shares underlying outstanding performance stock units (based on target performance)
Shares underlying outstanding stock option awards under 2013 Plan (3)
Total shares authorized for or outstanding under employee awards (b+c+d+e+f+g) (4)
Total shares outstanding
Overhang (h/i)
9,575,000
5,806,000
108,000
160,316
783,283
1,170,647
208,677
8,236,923
160,590,000
5.13%
1 The 2013 Plan will be replaced by the 2022 Plan and no new awards will be made under the 2013 Plan upon shareholder approval
of the 2022 Plan. Shares listed represent the shares available for new awards in the 2013 Plan as of March 1, 2021.
2 The outstanding shares are director stock units and time-based awards.
3 The weighted average stock option exercise price is approximately $11.66 and the weighted average remaining contractual term
is approximately 1.24 years.
4 The remaining shares available under 2013 Plan are not included.
Key Terms of the 2022 Plan
The 2022 Plan is attached to this Proxy Statement as Exhibit A. A summary of the 2022 Plan is set forth
below. Do not rely solely on this summary for information about the 2022 Plan.
Participants
The 2022 Plan is available for future equity-based and cash-based awards to the approximate 3,200 officers
and other employees of Fulton and its affiliates and to eligible consultants. The Board anticipates that 2022 Plan
awards will be made to approximately 500 officers and other employees, although awards may be made to additional
participants at the discretion of the HR Committee once the 2022 Plan is approved. No awards have been made under
the 2022 Plan, and no awards have been granted that are contingent on Fulton shareholder approval of the 2022 Plan.
Future awards under the 2022 Plan would be made at the discretion of the HR Committee. Therefore, the awards
or number of shares of common stock subject to awards that may be granted in the future to employees, including
executive officers, and other eligible participants under the 2022 Plan are not determinable at this time. The table
below on Page 53, however, sets forth the value of benefits that would have been received or allocated to each of the
following persons or groups, in each case, under the 2022 Plan with respect to the 2021 fiscal year if the 2022 Plan
had been in effect and the 2013 Plan had not been in effect, in each case, based on awards made under the 2013 Plan.
Administration
The 2022 Plan is administered by the HR Committee. The HR Committee will determine 2022 Plan
participants, vesting schedules and the expiration date of awards.
Shares Available for Grant
Subject to adjustment as described below, and excluding any awards granted prior to May 17, 2022 (the
“Effective Date”), the total number of shares available that may be granted under the 2022 Plan shall not exceed
5,806,000. During the term of the 2022 Plan, Fulton will keep reserved at all times the number of shares of common
stock required to satisfy all such awards.
Types of Awards Available under the 2022 Plan
Under the 2022 Plan, the HR Committee can make equity-based performance or time-based restricted
stock and restricted stock unit awards, stock options, stock appreciation rights (“SARs”), and cash-based incentive
compensation awards. The HR Committee can make different awards to the same participant during any calendar year.
48
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Restricted Stock Awards
The 2022 Plan authorizes the HR Committee to grant restricted stock to participants. Restricted stock
awards are subject to forfeiture. Forfeiture restrictions can be time-based and/or performance based. Restriction
periods are not less than one year.
During the restriction period, the participant is the owner of the underlying shares of common stock and is
entitled to vote the shares. The HR Committee has the discretion to award dividends associated with the restricted
stock, but the dividends are credited to the participant’s account and paid only upon the release of the restrictions.
Upon the lapse of any forfeiture restrictions, the issued shares of Fulton’s common stock are then owned by the
participant.
A participant may forego delivery of an applicable number of shares upon the vesting of a restricted stock
award to pay any withholding tax due.
Restricted Stock Units
The HR Committee has authority to grant restricted stock units to participants with such terms and
conditions as the HR Committee deems appropriate. A restricted stock unit is the right to receive a share of common
stock at some point in the future and common stock is not issued and outstanding at the time of award. Restricted
stock units are subject to forfeiture. A restriction period must be a minimum of one year and can: (i) be an established
number of years; (ii) last until the end of continuous service of the participant; (iii) be based on the performance
criteria described below or (iv) be based on a combination of time and performance criteria.
During the restriction period, the participant is not the owner of the shares of common stock, but may be
entitled to receive “dividend equivalents.” Dividend equivalents are credited to the participant’s account and paid
only upon the release of the restrictions on such restricted stock unit award.
Upon the lapse of any forfeiture restrictions, the participant will be issued shares of Fulton’s common stock.
A participant may forego delivery of an applicable number of shares upon the lapse of forfeiture restrictions
on a restricted stock units award to pay any withholding tax due.
Performance Share Awards
The HR Committee may grant performance based stock and stock unit awards (“PSU”). A performance
period cannot be less than one fiscal quarter, and is generally expected to range from one to three years. PSUs are
granted subject to a risk of forfeiture that lapses as the participant vests in the stock or units granted. Subject to the
minimum vesting limitations set forth in the 2022 Plan, the participant vests in the common stock or units underlying
such performance-based stock award, in whole or in part, if certain goals established by the HR Committee are
achieved over a designated period of time, but in no event more than 10 years after the grant date. If the performance
goals are not satisfied within the designated period of time, the performance-based stock award will automatically
be forfeited.
Dividend Equivalents on Equity Awards
If authorized by the HR Committee, upon the granting of a time-based restricted stock award and the
vesting of a performance-based restricted stock award, the participant has the rights of a stockholder with respect to
the voting of the common stock underlying such award, subject to the conditions contained in the award agreement.
The award agreement may require or permit the waiver, deferral or investment of dividends or dividend equivalents
paid on the shares of common stock underlying a restricted stock award or performance-based stock award.
As a practice, dividends are not paid on unvested performance-based stock awards or unvested time-based
restricted stock awards. Instead, dividends will be accrued and paid when the performance-based stock award or
unvested time-based restricted stock awards vests.
Stock Options
Under the 2022 Plan, the HR Committee may from time to time grant stock options, either as incentive stock
options (“ISOs”), as defined in section 422 of the Tax Code, or as non-statutory stock options, to acquire shares of
Fulton’s common stock to eligible participants. ISOs are subject to certain limitations not applicable to non-ISOs.
The exercise price of all stock options will be determined by the HR Committee but may not be less than 100% of
the fair market value of Fulton’s common stock on the date of grant. The exercise price for any ISO granted to any
49
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT eligible employee owning more than 10% of the total combined voting power of all classes of Fulton’s stock may not
be less than 110% of the fair market value of Fulton’s common stock on the date of grant and the term of such ISO
may not exceed five years from the date of grant.
The exercise price may be adjusted in the event of changes in the capitalization of Fulton. The aggregate fair
market value (determined at the date of grant) of common stock subject to all ISOs held by an employee that vest in
any single calendar year cannot exceed $100,000.
SARs
The 2022 Plan permits the HR Committee to grant SARs. The exercise price of all SARs will be determined
by the HR Committee, but the price may not be less than the fair market value of Fulton’s common stock on the date
of grant. Upon exercise of a SAR, the participant shall receive an amount equal to the amount by which the fair
market value of a share on the date of surrender exceeds the exercise price of such SAR. Fulton pays this amount in
the form of common stock, cash, or any combination thereof as determined by the HR Committee. Subject to the
minimum vesting limitations set forth in the 2022 Plan, all SARs will be exercisable and will vest at such times and
under such conditions as determined by the HR Committee and set forth in the relevant SAR agreement. Upon the
occurrence of a vesting event as described below under Treatment of Awards Upon a Change in Control, all SARs
that are outstanding on such date will become exercisable whether they are vested or not.
Cash-Based Awards
The 2022 Plan permits the HR Committee to make cash-based performance compensation awards. The
Committee shall have full discretion to select: (i) the length of such performance period; (ii) the type of performance
compensation awards to be issued; (iii) the performance criteria that will be used to establish the performance goals
and (iv) the kind and level of the performance goals that apply to the performance formula.
Unless otherwise provided in the applicable award agreement, a participant must be employed by Fulton on
the last day of a performance period to be eligible for payment in respect of a cash-based performance compensation
award. A cash-based performance compensation award will only be eligible for payment to the extent that the selected
performance goals are achieved during the performance period. The HR Committee may use its discretion to reduce
or eliminate the amount of the performance compensation award earned under the performance formula. The HR
Committee does not have the discretion to allow payment with respect to a cash-based performance compensation
award if the performance goals for such performance period have not been attained.
Vesting – General
Time-Based Awards
Subject to acceleration, stock options, SARs, restricted stock and restricted stock unit awards will vest and
become exercisable, or have lapse of forfeiture restrictions, on the third anniversary of the date of grant.
Clawback of Awards
Any awards made under the 2022 Plan are subject to clawback by Fulton as required by law, regulation or
stock exchange listing requirement or any Fulton policy.
Acceleration of Vesting in Certain Events
Certain events accelerate the vesting schedule for outstanding awards under the 2022 Plan or provide a
longer period for the participant to exercise vested stock options. Such events include:
A Change in Control of Fulton
Upon a termination of a participant’s service within 12 months following a change in control, all stock
options vest and are eligible for exercise by the participant, and the forfeiture restrictions lapse on all time-based
restricted stock and restricted stock units awards. A change in control generally means: (i) a consolidation or merger
50
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT of Fulton into another company; (ii) a sale of all the assets of Fulton; (iii) one person, group or entity acquiring at least
50% of the voting securities of Fulton or (iv) a majority of Board changing within one year (without the approval of
the then-existing directors).
The Death or Disability of a Participant
In the case of death or disability of a participant, all stock options of a participant become immediately
exercisable and, if the stock options do not otherwise expire by reaching the end of their term, a participant who dies
or becomes disabled has one year after the participant’s end of continuous service to exercise his or her stock options.
In addition, all forfeiture restrictions lapse on all outstanding restricted stock and restricted stock unit awards upon
death or disability of a participant.
The Retirement of a Participant
The 2022 Plan defines “retirement” as retirement from service to Fulton, or an affiliate of Fulton, after
attaining age 60 with at least ten years of continuous service or attaining age 62 with at least five years of continuous
service. In the case of retirement, all stock options become immediately exercisable, and the participant has the
shorter of: (i) one year or (ii) the end of the stock option term to exercise such stock options. The forfeiture restrictions
on time-based restricted stock units awards lapse upon retirement, however, if such retirement would constitute a
“separation from service” under the Tax Code then the awards are not paid until six months after retirement.
Separation from Service Resulting from Layoff or Position Elimination
In the event a participant loses his or her position resulting from a layoff or position elimination, the exercise
period for all outstanding, vested stock option awards will be extended for 90 days. All time-based equity awards that
are unvested or that remain subject to risk of forfeiture will terminate and expire.
Performance-Based Awards
The 2022 Plan contains special rules for the impact of a change in control, or the death, disability or
retirement of the participant with respect to performance-based awards.
In the event of a change in control, all incomplete performance periods in respect of such award in effect
on the date the change in control occurs shall end on the date of such change and the HR Committee will: (i)
determine the extent to which performance goals with respect to each such performance period have been met based
upon such audited or unaudited financial information then available as it deems relevant and (ii) cause to be paid
to the applicable participants partial or full awards with respect to performance goals for each such performance
period based upon the HR Committee’s determination of the degree of attainment of performance goals or, if not
determinable, assuming that the applicable “target” levels of performance have been attained. In addition, the 2022
Plan provides the HR Committee with the discretion to cancel existing awards and to pay to the participants the value
of such cancelled awards in cash or stock.
The HR Committee will determine the impact of the death or disability of the participant on stock- or cash-
based performance awards.
Upon retirement, for each performance compensation award (cash-based) and performance share award
(stock-based), the HR Committee has the ability to: (i) determine the extent to which performance goals with respect
to such performance period have been met during or with respect to the period of the participant’s active employment,
and (ii) cause to be paid to the applicable participant partial or full awards for such future performance period based
upon the HR Committee’s determination of the degree of attainment of performance goals. Alternatively, the HR
Committee may waive the continuous service requirement upon termination for retirement and allow a performance
award to vest, or lapse, in accordance with its original terms.
Adjustments
In the event of a merger, consolidation, recapitalization, stock dividend or stock split, the HR Committee
will make an appropriate proportional adjustment in connection with: (i) the number of shares available for award
under the 2022 Plan; (ii) the maximum number of shares that can be awarded to one participant in a calendar year;
(iii) the number of shares and exercise price of stock options and SAR and (iv) the number of shares underlying
restricted stock and restricted stock units awards. Fulton will recycle awards as a result of award forfeitures or vested
awards used for the payment of taxes on performance based and time-based restricted stock unit and restricted stock
awards, but Fulton does not recycle shares with respect to options or SARs.
51
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Amendments to the 2022 Plan
The Board may at any time amend, alter, suspend or discontinue the 2022 Plan in its discretion, but no
amendment, alteration, suspension or discontinuation may be made which would impair the rights of any participant
under any grants theretofore made without his or her consent. In addition, to the extent necessary and desirable to
comply with Section 422 of the Tax Code (or any other applicable law or regulation, including the requirements of
any stock exchange or national market system upon which Fulton’s common stock is then listed), Fulton will obtain
stockholder approval of any amendment to the 2022 Plan: (i) that increases the maximum number of shares to be
granted under the 2022 Plan; (ii) changes the class of participants; (iii) effects a repricing transaction; (iv) materially
increases the benefits under the 2022 Plan to a participant or (v) otherwise requires the approval of shareholders
under applicable laws or listing standards for the shares.
Federal Income Tax Consequences
The following is a brief description of the U.S. federal income tax consequences generally arising with
respect to the grant of stock options, SARs and restricted stock awards. This summary is not intended to (and does
not) constitute tax advice to participants in the 2022 Plan and is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences. Participants are advised to consult with their own
independent tax advisors with respect to the specific tax consequences that, in light of their particular circumstances,
might arise in connection with their receipt of awards under the 2022 Plan, including any state, local or foreign tax
consequences and the effect, if any, of gift, estate and inheritance taxes.
Stock Options and SARs
The grant of a stock option or SAR will generally create no tax consequences for the participant or Fulton
at the grant date. A participant will generally not recognize taxable income upon exercising an ISO except that the
alternative minimum tax may apply (depending on the participant’s individual circumstances). Upon exercising a
stock option (other than an ISO) or SAR, the participant will recognize ordinary income equal to the excess of the
fair market value of the freely transferable and nonforfeitable common stock (and cash or other property) acquired on
the date of exercise over the exercise price.
Performance-Based Restricted Stock and Time-Based Restricted Stock Awards
Generally, the recipient of an award of performance stock or restricted stock will not recognize ordinary
income at grant. Instead, the participant generally will recognize ordinary income when the performance-based
restricted stock or units or time-based restricted stock or units vest equal to the fair market value of the common
stock on the vesting date. Fulton will generally receive a tax deduction equal to the amount of ordinary income
recognized by the recipient.
Section 409A
Section 409A of the Tax Code governs the taxation of deferred compensation. Awards received under the
2022 Plan are intended to be exempt from the requirements of Section 409A where possible. However, there can be
no assurance that awards designed to be exempt from Section 409A will in fact be exempt. An award that is subject
to Section 409A and fails to satisfy its requirements will subject the holder of the award to immediate taxation, an
interest penalty and an additional 20% tax on the amount underlying the award.
Share Recycling
Shares of common stock underlying awards will be available for reissuance under the 2022 Plan in the event
that an award expires or is canceled or otherwise terminated. In addition, to the extent that shares issued under the
2022 Plan are withheld by Fulton for taxes on performance shares and time-based stock awards, such shares will
again be available for reissuance under the 2022 Plan. Shares that are withheld or tendered to Fulton to pay taxes or to
pay the exercise price of options will not become available for reissuance under the 2022 Plan, and shares subject to a
SAR that are not issued in connection with the stock settlement of that SAR will not become available for reissuance
under the 2022 Plan.
52
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Adjustments and Extraordinary Events
The 2022 Plan provides that if there is any increase or decrease in the number of issued and outstanding
shares of common stock resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination
or reclassification of Fulton’s common stock, any extraordinary cash dividend, or any other increase or decrease in
the number of issued and outstanding shares of common stock, effected without the receipt of consideration by the
Fulton, then the number of shares that pertain to each outstanding award and the exercise price of each option and
SAR will be proportionately adjusted.
Transferability
Generally, awards may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will, by the laws of descent and distribution or pursuant to a domestic relations order entered
into by a court of competent jurisdiction and may be exercised, during the lifetime of the participant, only by the
participant.
Term of the 2022 Plan
Unless previously terminated by the Board, the 2022 Plan shall terminate on, and no award shall be granted
after May 17, 2032.
2021 Equity Awards
The following table provides a summary of the 2021 equity awards granted under the 2013 Plan:
Awards Granted in 2021 Under the 2013 Plan
Name and Position
E. Philip Wenger, Chairman and Chief Executive Officer of Fulton
Curtis J. Myers, President and Chief Operating Officer of Fulton
Mark R. McCollom, SEVP and Chief Financial Officer of Fulton
Angela M. Snyder, SEVP and Head of Consumer Banking
Meg R. Mueller, SEVP and Head of Commercial Business
Executive officers as a group (includes NEOs)
Non-employee directors as a group
Employees other than executive officers as a group
Dollar Value
($)(1)
$ 1,305,528
$ 558,644
$ 433,784
$ 294,713
$ 294,713
$ 4,812,603
$
0
$ 6,199,216
Number of
Shares/Units(2)
76,893
32,903
25,549
17,358
17,358
232,200
0
367,504
1 Dollar value reflects the 2021 grant date fair value of all stock awards granted in 2021.
2 Includes performance awards and restricted stock units granted in 2021. For performance-based stock units, shares granted are
based on the target number of shares.
53
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Equity Compensation Plan Information
The following table provides information about options outstanding under all of Fulton’s equity plans, and
the number of securities remaining available for future issuance under the 2013 Plan and 2019 Director Equity Plan
as of December 31, 2021:
Number of
securities to
be issued upon
exercise of
outstanding
options,
warrants and
rights(1)
Weighted-
average
exercise
price of
outstanding
options,
warrants and
rights(2)
Number of securities
remaining available
for future issuance
under equity
compensation
Plans (excluding
securities reflected
in first column)(3)
2,302,330
$11.57
9,743,000
—
2,302,330
—
$11.57
—
9,743,000
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
1 The number of securities to be issued upon exercise of outstanding options, warrants and rights includes 1,162,030 PSUs, which
is the target number of PSUs that are payable under the 2013 Plan, though no shares will be issued until achievement of applicable
performance goals, 239,591 stock option units, 738,201 time-vested restricted stock units granted under the 2013 and 162,508
time-vested restricted stock units granted under the 2019 Director Equity Plan.
2 The weighted-average exercise price of outstanding options, warrants and rights does not take into account outstanding PSUs
and restricted stock units granted under the 2013 Plan and the 2019 Director Equity Plan.
3 Consists of 9,634,000 shares that may be awarded under the 2013 Plan and 109,000 shares that may be awarded under the 2019
Director Equity Plan. Does not include the 1,330,621 shares that may be purchased under the ESPP.
Recommendation of the Board
The Board recommends a vote FOR the approval of the 2022 Amended and Restated Equity and
Cash Incentive Compensation Plan.
54
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
For the years ended December 31, 2021 and December 31, 2020, Fulton engaged KPMG LLP (“KPMG”),
independent registered public accountants, to audit Fulton’s financial statements. The fees incurred for services
rendered by KPMG for the years ended December 31, 2021 and 2020 are summarized in the following table:
Services and Fees
Audit Fees – Annual Audit and Quarterly Reviews 1
Audit Fees – Issuance of Comfort Letters and Consents
Audit Fees – Statutory Audit
Audit Fees Subtotal
Audit Related Fees
Tax Fees 2
All Other Fees
TOTAL
2021
$2,116,000
0
54,000
2,170,000
—
58,000
—
$2,228,000
2020
$1,725,000
300,000
52,000
2,077,000
—
63,225
—
$2,140,225
1
Amounts presented for 2021 are based upon the audit engagement letter and additional fees paid. Final billings for
2021 may differ.
2
Fees paid for tax services relating to federal and state tax matters.
On February 22, 2022, Fulton’s Audit Committee approved the appointment of KPMG for the fiscal year
ended December 31, 2022. The Audit Committee carefully considered whether the provision of the 2021 and 2020
non-audit services performed by KPMG described above are incompatible with maintaining the independence of
KPMG in performing its audit services and determined that the independence of KPMG has not been compromised.
The Audit Committee pre-approved all fees paid to KPMG in 2021 and 2020. The Audit Committee pre-
approves all auditing and permitted non-auditing services, including the fees and terms thereof, to be performed by
its independent auditor, subject to the de minimus exceptions for non-auditing services permitted by the Exchange
Act. These types of services, however, are approved prior to completion of the services. The Audit Committee may
form and delegate authority to subcommittees consisting of one or more members, when appropriate, including the
authority to grant pre-approvals of audit and permitted non-audit services. Any decisions of such subcommittees to
grant pre-approvals are presented to the Audit Committee for ratification at its next scheduled meeting.
Based on its review and discussion of the audited 2021 financial statements of Fulton with management and
KPMG, the Audit Committee recommended to the Board that the financial statements be included in the Annual
Report for filing with the SEC. Attached as Exhibit B is a copy of the report of the Audit Committee findings as a
result of its financial reporting oversight responsibilities.
55
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT RATIFICATION OF INDEPENDENT AUDITOR – PROPOSAL FOUR
Fulton’s Audit Committee has selected the firm of KPMG to continue as Fulton’s independent auditor for
the fiscal year ending December 31, 2022. Although shareholder approval of the selection of KPMG is not required
by law, the Board believes that it is advisable to give shareholders an opportunity to ratify this selection as it is
consistent with sound corporate governance practices. Assuming the presence of a quorum at the Annual Meeting, the
affirmative vote of a majority of the votes cast is required to ratify the appointment of KPMG as Fulton’s independent
auditor for the fiscal year ending December 31, 2022.
If Fulton’s shareholders do not approve this proposal at the Annual Meeting, the Audit Committee will
consider the results of the shareholder vote on this proposal when selecting an independent auditor for 2023. No
determination has been made as to what other specific action, if any, the Audit Committee would take in the event
Fulton shareholders do not ratify the appointment of KPMG at the Annual Meeting.
KPMG has conducted the audit of the financial statements of Fulton and its subsidiaries for the years ended
December 31, 2002 through December 31, 2021. Representatives of KPMG are expected to be present at the Annual
Meeting, will be given an opportunity to make a statement if they so desire, and will be available to respond to
appropriate questions from shareholders.
Recommendation of the Board
The Board recommends that shareholders vote FOR ratification of the appointment of KPMG LLP as
Fulton’s independent auditor for the fiscal year ending December 31, 2022.
56
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT ADDITIONAL INFORMATION
Annual Report
A copy of Fulton’s Annual Report for the year ended December 31, 2021, as filed with the SEC, including
financial statements, is available without charge to shareholders upon written request addressed to the Corporate
Secretary: Fulton Financial Corporation, Attention Corporate Secretary, P.O. Box 4887, One Penn Square, Lancaster,
Pennsylvania 17604.
The Fulton Annual Report for the year ended December 31, 2021 and this Proxy Statement are available on
Fulton’s website at www.fultonbank.com. Copies of the current governance documents and future updates, including
but not limited to the Fulton Code of Conduct, Audit Committee Charter, HR Committee Charter, NCG Committee
Charter, Risk Committee Charter and Fulton’s Governance Guidelines are available on Fulton’s website at www.
fultonbank.com. The contents of Fulton’s website are not incorporated into this Proxy Statement.
Householding of Proxy Materials
Only one Proxy Statement is being delivered to multiple security holders sharing an address unless Fulton
has received contrary instructions from one or more of the security holders. Fulton will promptly deliver, upon
written or oral request, a separate copy of this Proxy Statement to a security holder at a shared address. If you are
eligible for householding and wish to receive only a single copy for all eligible shareholders in your household you
may request a single copy. Such requests should be made to the Corporate Secretary: Fulton Financial Corporation,
Attention Corporate Secretary, P.O. Box 4887, One Penn Square, Lancaster, Pennsylvania 17604, (717) 291-2411.
Sign Up for Electronic Delivery
If you would like to save paper and reduce the costs incurred by Fulton in printing and mailing proxy
materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please go to www.proxyvote.com and have your proxy card
and control number when you access the website, then follow the instructions at www.proxyvote.com to obtain your
records and to create an electronic voting instruction form. Follow the instructions for voting by Internet and, when
prompted, indicate that you agree to receive or access shareholder communications electronically in future years.
57
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT OTHER MATTERS
The Fulton Board knows of no matters other than those discussed in this Proxy Statement that will be
presented at the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting,
then any proxy given pursuant to this solicitation will be voted in accordance with the recommendations of the Board.
BY ORDER OF THE BOARD
Natasha R. Luddington
Senior Executive Vice President,
Chief Legal Officer and
Corporate Secretary
Lancaster, Pennsylvania
April 1, 2022
58
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT EXHIBIT A
FULTON FINANCIAL CORPORATION
2022 AMENDED AND RESTATED
EQUITY AND CASH INCENTIVE COMPENSATION PLAN
Plan Effective Date: May 17, 2022
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Article 1. Purpose of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Table of Contents
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Article 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
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2.01 “Affiliate”
2.02 “Applicable Laws”
2.03 “Award”
2.04 “Award Agreement”
2.05 “Board”
2.06 “Business Combination”
2.07 “Cause”
2.08 “Change in Control”
2.09 “Code”
2.10 “Code of Conduct”
2.11 “Committee”
2.12 “Common Stock”
2.13 “Company”
2.14 “Consultant”
2.15 “Continuous Service”
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“Date of Grant”
2.16
2.17 “Date of Exercise”
2.18 “Disability”
2.19 “Disqualifying Disposition”
2.20 “Director”
2.21 “Effective Date”
2.22 “Employee”
2.23 “Exchange Act”
2.24 “Exercise”
2.25 “Fair Market Value”
2.26 “Incentive Stock Option”
2.27 “Independent” or “Independence”
2.28 “Non-Employee Director”
2.29 “Non-Qualified Stock Option”
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2.30 “Option”
2.31 “Optionee”
2.32 “Option Exercise Price”
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2.33 “Participant”
2.34 “Performance Compensation Award”
2.35 “Performance Criteria”
2.36 “Performance Formula”
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2.37 “Performance Goals”
2�38 “Performance Period”
2.39 “Performance Share Award”
2.40 “Performance Share”
2.41 “Plan”
2.42 “Repricing”
2.43 “Restricted Award”
2.44 “Restricted Period”
2.45 “Restricted Stock”
2.46 “Restricted Stock Unit”
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2.47 “Retirement”
2.48 “Securities Act”
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2.49 “Shares”
2.50 “Stock Appreciation Right”
2.51 “Ten Percent Shareholder”
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NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT�
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Article 3. Administration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.01 Committee Composition
3.02 Delegation
3.03 Authority of Committee
Indemnification
3.04
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Article 4. Shares Subject to the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.01 Shares Subject to the Plan
4.02 Recycling of Shares
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Article 5. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
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5.01 General
5.02 Eligibility for Specific Awards
5.03 Ten Percent Shareholders
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Article 6. Option Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
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6.01 General
6.02 Termination of Continuous Service
Incentive Stock Option Limitation
6.03
Incentive Stock Option Qualifying Disposition
6.04
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Article 7. Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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7.01 General
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7.02 Term
7.03 Exercise and Payment
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7.04 Exercise Price
7.05 Stock Appreciation Right Transferability
7.06 Termination of Continuous Service
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Article 8. Restricted Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
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8.01 General
8.02 Restricted Stock
8.03 Dividend Equivalents on Restricted Stock
8.04 Restricted Stock Units
8.05 Dividend Equivalents on Restricted Stock Units
8.06 Restrictions on Awards
8�07 Delivery of Restricted Stock and Settlement of Restricted Stock Units
8�08 Stock Certificate Restrictions
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8.09 Restricted Award Transferability
8.10 Termination of Continuous Service
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Article 9. Performance Share Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
9.01 Grant of Performance Share Awards
9.02 Earning Performance Share Awards
9.03 Dividend Equivalents on Performance Share Awards
9.04 Termination of Continuous Service
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Article 10. Performance Compensation Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
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10.01 General
10.02 Eligibility
10.03 Discretion of Committee with Respect to Performance Compensation Awards
10.04 Payment of Performance Compensation Awards
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NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT�
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Article 11. Vesting and Dividend Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
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11.01 General
11.02 Time-Vested Awards and Dividend Equivalents
11.03 Performance Awards
11.04 Treatment of Dividends and Dividend Equivalents on Unvested Awards
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Article 12. Changes in Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
12.01 Adjustment Upon Changes in the Common Stock
12.02 Adjustment Binding
12.03 Adjustment to Grants
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Article 13. Effect of Change in Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
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13.01 General
13.02 Committee Discretion
13.03 Successors
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Article 14. Registration of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
14.01 General
14.02 Restrictions
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Article 15. Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Article 16. Amendment or Termination of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
16.01 Amendment of the Plan
16.02 Amendments Pertaining to Qualification
16.03 Term of the Plan
16.04 No Impairment of Rights
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Article 17. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
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17.01 Non-Uniform Treatment
17.02 Shareholders
17.03 Employment or Service
17.04 Other Compensation Arrangements
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17.05 Clawback
17.06 Recapitalizations
17.07 Delivery
17.08 Deferral of Awards
17.09 Section 409A
17.10 Section 16 Compliance
17.11 Beneficiary Designation
17.12 Unfunded Plan
17.13 Acceptance of Terms and Conditions
17.14 Liability
17.15 Choice of Law
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17.16 Severability
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17.17 Headings
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Article 18. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT�
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FULTON FINANCIAL CORPORATION
2022 AMENDED AND RESTATED
EQUITY AND CASH INCENTIVE COMPENSATION PLAN
Article 1. Purpose of the Plan.
The purposes of the 2022 Amended and Restated Equity and Cash Incentive Compensation Plan (the “Plan”)
of Fulton Financial Corporation (the “Company”) are to: (i) align the interests of key individuals with those of the
Company’s shareholders by encouraging and creating ownership of Shares of Common Stock of the Company;
(ii) enable the Company to be competitive among its peers and attract and retain qualified individuals who contribute
to the Company’s success by their efforts, service, ability and ingenuity; (iii) provide long-term equity and cash-
based rewards and incentive opportunities to key individuals who are responsible for the success of the Company
and who are in a position to make significant contributions toward its objectives; and (iv) reward individual
performance. The Plan amends and restates the Company’s 2013 Amended and Restated Equity and Cash Incentive
Compensation Plan (the “2013 Plan”). The 2022 Plan is not a new equity plan but amends and restates the 2013
Plan. Any awards made by the Company under the 2013 Plan after March 1, 2022 will reduce the shares to be
awarded under the 2022 Plan.
All outstanding awards granted under the Plan prior to its amendment and restatement shall remain subject
to the terms of the Plan; provided, that no Awards granted or awarded prior to the effectiveness of this amendment
and restatement that are materially adversely affected by the changes in the Plan shall be subject to such provisions
without the prior consent of the applicable Participant.
Article 2. Definitions.
For purposes of the Plan, the following words or phrases shall have the meanings assigned to them below:
2.01 “Affiliate” means a parent or subsidiary corporation of the Company, as defined in Section 424 (e) and
(f) of the Code.
2.02 “Applicable Laws” means the requirements related to or implicated by the administration of the
Plan under applicable state corporate law, United States federal and state securities laws, the Code, and any stock
exchange or quotation system on which the Shares of Common Stock are listed or quoted.
2.03 “Award” means an Incentive Stock Option, a Non-Qualified Stock Option, a Stock Appreciation Right,
a Restricted Award, a Performance Share Award or a Performance Compensation Award. Each Award shall be
subject to the terms and conditions of the Plan and to such other terms and conditions included by the Committee in
the Award Agreement, to the extent not inconsistent with the Plan.
2.04 “Award Agreement” means a written agreement, contract, certificate or other instrument or document
evidencing the terms and conditions of an individual Award granted under the Plan.
2.05 “Board” means the Board of Directors of the Company.
2.06 “Business Combination” has the meaning set forth in Section 2.08(c).
2.07 “Cause” means with respect to any Employee:
(a) Employee shall have committed a felony, or misdemeanor resulting or intending to result directly
or indirectly in gain or personal enrichment to the Employee;
1
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT (b) Employee’s use of alcohol or other drugs which interferes with the performance by the Employee
of Employee’s duties;
(c) Employee shall have deliberately and intentionally refused or otherwise failed (for reasons other
than incapacity due to accident or physical or mental illness) to substantially perform any of Employee’s duties to
the Company or an Affiliate, with such refusal or failure continuing for a period of at least thirty (30) consecutive
days following the receipt by Employee of written notice from the Company or Affiliate setting forth in detail the
facts upon which the Company or Affiliate relies in concluding that Employee has deliberately and intentionally
refused or failed to perform such duties;
(d) Employee’s conduct that brings public discredit on or injures the reputation of the Company and/or
its Affiliates, in the reasonable opinion of the Board or a committee of the Board; or
(e) the Company or an Affiliate is legally precluded from employing Employee for the position and
duties described in the Employee’s employment agreement with the Company or an Affiliate.
Notwithstanding the above definition, if an Employee is party to an employment agreement with the Company
or any Affiliate that has a different definition of “Cause,” then the definition in such employment agreement will
control.
The Committee may determine that a Consultant is terminated for Cause as a result of a violation of the
Company’s Code of Conduct (or similar code of conduct maintained by an Affiliate). For purposes of the Plan,
the Committee shall determine the effect of all matters and questions relating to whether an Employee has been
discharged for Cause, including but not limited to terminations pursuant to the Company’s Code of Conduct.
2.08
“Change in Control” of the Company shall be deemed to have occurred when:
(a) during any period of not more than thirty-six (36) months, individuals who constitute the Board
as of the beginning of the period (the “Incumbent Directors”) cease for any reason to constitute at least a majority
of the Board, provided that (i) any person becoming a director subsequent to the beginning of the period, whose
nomination for election or appointment was approved by a vote of at least two-thirds of the Incumbent Directors
then on the Board (either by a specific vote or by approval of the Company’s proxy statement in which such person
is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director;
and (ii) no individual initially nominated or appointed as a result of an actual or publicly threatened election
contest or pursuant to a negotiated agreement with respect to directors or as a result of any other actual or publicly
threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an
Incumbent Director;
(b) the acquisition by any person (as such term is defined in Section 3(a)(9) of the Securities Exchange
Act of 1934, as amended from time to time, or any successor thereto, and the applicable rules and regulations
thereunder (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) of beneficial
ownership (as such term is defined in Rule 13d-3 under the Exchange Act), of the Company’s capital stock entitled
to thirty percent (30%) or more of the outstanding voting power of all capital stock of the Company eligible to vote
for the election of the Board (“Voting Securities”); provided, however, that the event described in this paragraph
(b) will not be deemed to be a Change in Control by virtue of the ownership, or acquisition, of Voting Securities:
(i) by the Company or an Affiliate, including purchases pursuant to a stock repurchase plan; (ii) by any employee
benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate; (iii) by any underwriter
temporarily holding securities pursuant to an offering of such securities or (iv) pursuant to a Non-Qualifying
Transaction (as defined in paragraph (c) of this definition);
(c) the consummation of a merger, consolidation, division, statutory share exchange, or any other
transaction or a series of transactions outside the ordinary course of business involving the Company (a “Business
Combination”), unless immediately following such Business Combination: (i) more than fifty percent (50%) of
the total voting power of (x) the entity resulting from such Business Combination, or (y) if applicable, the ultimate
2
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT parent corporation that directly or indirectly has beneficial ownership of at least ninety-five percent (95%) of the
voting power of such resulting entity (either, as applicable, the “Surviving Entity”), is represented by Voting
Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented
by shares into which such Voting Securities were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same proportion as the voting power of such Voting
Securities among the holders thereof immediately prior to the Business Combination; (ii) no person (other than
any employee benefit plan (or related trust) sponsored or maintained by the Surviving Entity), is or becomes the
beneficial owner, directly or indirectly, of thirty percent (30%) or more of the total voting power of the outstanding
voting securities eligible to elect directors of the Surviving Entity and (iii) at least a majority of the members of
the board of directors of the Surviving Entity following the consummation of the Business Combination were
Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such
Business Combination (any Business Combination which satisfies all of the criteria specified in (i), (ii) and (iii) of
this paragraph (c) will be deemed to be a “Non-Qualifying Transaction”);
(d) the consummation of a sale of all or substantially all of the assets of the Company (other than to a
wholly owned subsidiary of the Company); or
(e) the Company’s shareholders approve a plan of complete liquidation or dissolution of the Company.
Actions taken by the Company to merge, consolidate, liquidate or otherwise reorganize one or more of its
subsidiaries or affiliates shall not constitute a Change in Control for purposes of this Agreement.
2.09 “Code” means the Internal Revenue Code of 1986, and any regulation, as amended from time to time.
2.10 “Code of Conduct” means the Company’s Code of Conduct approved by the Board, as amended from
time to time.
2.11 “Committee” means the Human Resources Committee of the Board, or such other committee of the
Board appointed by the Board to administer the Plan.
2.12 “Common Stock” means the common stock of the Company, par value $2.50 per share.
2.13 “Company” means Fulton Financial Corporation a Pennsylvania business corporation, and any
successor thereto.
2.14 “Consultant” means any former director, employee or advisory board member of the Company or an
Affiliate who is subsequently engaged by the Company or an Affiliate to render consulting or advisory services, or
an independent contractor pursuant to a consulting agreement.
2.15 “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether
as an Employee or Consultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which the Participant renders service to
the Company or an Affiliate as an Employee or Consultant or a change in the entity for which the Participant renders
such service, provided that there is no interruption or termination of the Participant’s Continuous Service; provided
further that if any Award is subject to Section 409A of the Code, this sentence shall only be given effect to the extent
consistent with Section 409A of the Code. For example, a change in status from an Employee of the Company to a
Director or Consultant of an Affiliate will not constitute an interruption of Continuous Service. The Committee or
its delegate, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave, military leave or any other personal or
family leave of absence.
2.16
“Date of Grant” means the date the Committee grants an Award to a Participant or, if a later date is set
forth in a resolution, the date as is set forth in such resolution.
3
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 2.17 “Date of Exercise” means, in respect of any Option granted under the Plan, the date on which the
Participant’s written notice of Exercise is received by the Company pursuant to procedures prescribed by the
Committee.
2.18 “Disability” means that the Participant is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment that can be expected to result in death or
can be expected to last for a continuous period of not less than 12 months; provided, however, for purposes of
determining the term of an Incentive Stock Option pursuant to Article 6 hereof, the term Disability shall have the
meaning ascribed to it under Section 22(e)(3) of the Code. If necessary, whether an individual has a Disability
shall be determined under procedures established by the Committee. Except in situations where the Committee
is determining Disability for purposes of the term of an Incentive Stock Option pursuant to Article 6 hereof, the
Committee may rely on any determination that a Participant is disabled for purposes of benefits under any long-term
disability plan maintained by the Company or any Affiliate in which a Participant participates. If an Employee has
an employment agreement with the Company or any Affiliate with a different definition of “Disability,” then such
employment agreement definition shall control.
2.19 “Disqualifying Disposition” has the meaning set forth in Section 6.04.
2.20 “Director” means a member of the Board.
2.21 “Effective Date” is described in Article 18.
2.22 “Employee” means any person employed by the Company or an Affiliate.
2.23
“Exchange Act” has the meaning set forth in Section 2.08(b).
2.24 “Exercise” means, in respect of an Option, the delivery by the Participant to the Secretary of the
Company of a written notice of exercise in the form specified by the Committee, accompanied by payment in full of
the Option Exercise Price.
2.25 “Fair Market Value” means, as of any date, the following value of a share of the Common Stock:
(a) if the Common Stock is listed on any national stock exchange, the Fair Market Value shall be the closing price
on the trading day of the Date of Grant (or if no sales of shares were reported on any stock exchange on that day, the
closing price on the immediately preceding trading day on which such price was reported), as reported by Nasdaq
on www.Nasdaq.com, in the Wall Street Journal or such other source as the Committee deems reliable; and (b) in the
absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by
the Committee and such determination shall be conclusive and binding on all persons.
2.26 “Incentive Stock Option” means an Option issued pursuant to the Plan that meets the requirements of
Section 422 of the Code.
2.27 “Independent” or “Independence” means, with respect to a Director who is a Committee member, the
independence requirements applicable to a Committee member under the rules and regulations of the U.S. Securities
and Exchange Commission and the national securities exchange or national interdealer quotation system on which
the Common Stock is then listed or quoted.
2.28 “Non-Employee Director” means a non-employee director of the Board within the meaning of Rule
16b-3 promulgated under the Exchange Act.
2.29 “Non-Qualified Stock Option” means an Option issued pursuant to the Plan that is not intended to be
an Incentive Stock Option.
2.30 “Option” means a right granted to a Participant to purchase Shares at a specified price during specified
time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.
4
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 2.31 “Optionee” means a Participant to whom an Option has been awarded.
2.32 “Option Exercise Price” means the price at which a Share of Common Stock may be purchased upon
the date of Exercise of an Option.
2.33 “Participant” means an eligible person to whom an Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Award.
2.34 “Performance Compensation Award” means any Award granted by the Committee pursuant to Article
10 of the Plan.
2.35 “Performance Criteria” means the criterion or criteria that the Committee shall select for purposes
of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Share Award
under the Plan. The Performance Criteria that will be used to establish the Performance Goal(s) shall be based on the
attainment of specific levels of performance of the Company (or Affiliate, division, business unit or operational unit
of the Company) and may include, either individually or in ratios or other combinations:
(a) basic earnings per share;
(b) basic cash earnings per share;
(c) diluted earnings per share;
(d) core earnings per share;
(e) diluted cash earnings per share;
(f) earnings before taxes;
(g) net income;
(h) net interest income;
(i) non-interest income;
(j) revenue;
(k) efficiency ratio;
(l) salaries and benefits efficiency ratio;
(m) return on average assets;
(n) core return on average assets;
(o) core return on equity;
(p) return on average shareholders’ equity;
(q) return on average tangible shareholders’ equity;
(r) core earnings;
(s) operating income;
(t) net interest margin;
(u) net interest rate spread;
(v) growth in assets, loans or deposits;
(w) loan production volume;
(x) sales;
(y) net charge-offs;
(z) nonperforming/classified assets;
(aa) classified loans;
(bb) cash flow;
(cc) capital level (core or risk-based);
5
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT (dd) interest rate risk exposure-net portfolio value;
(ee) interest rate risk-sensitivity;
(ff) liquidity;
(gg) strategic business objectives, cost control, business expansion goals, and goals relating to
acquisitions or divestitures, or goals relating to capital raising and capital management;
(hh) objective customer service measures or indices,
(ii) stock price (including, but not limited to, growth measures and total shareholder return);
(jj) operating expense as a percentage of average assets;
(kk) core deposits as a percentage of total deposits;
(ll) net charge-off percentage;
(mm) loan delinquency rates;
(nn) market share;
(oo) pre-provision net revenue; and
(pp) environmental, social and governance metrics.
Any one or more of the Performance Criteria may be used on an absolute or relative basis in any combination
or ratio, or year-over-year change to measure the performance of the Company and/or an Affiliate as a whole or
any division, business unit or operational unit of the Company and/or an Affiliate or any combination thereof, or as
compared to the performance of a group of comparable companies, or published or special index.
2.36 “Performance Formula” means, for a Performance Period, the one or more objective formulas applied
against the relevant Performance Goal to determine, with regard to the Performance Share Award of a particular
Participant, whether all, some portion but less than all, or none of the Performance Award has been earned for the
Performance Period.
2.37 “Performance Goals” means, for a Performance Period, the one or more goals for the Performance
Period based upon the Performance Criteria. The Committee may adjust or modify the calculation of a Performance
Goal for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants based
on corporate events beyond the control of a Participant, including the following events:
(a) asset write-downs;
(b) litigation or claim judgments or settlements;
(c) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting
reported results;
(d) any reorganization and restructuring programs;
(e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or
any successor or pronouncement thereto) and/or in management’s discussion and analysis of financial condition and
results of operations appearing in the Company’s annual report to shareholders for the applicable year;
(f) acquisitions or divestitures;
(g) environmental, social and governance metrics;
(h) any other specific unusual or nonrecurring events, or objectively determinable category thereof; and
(i) a change in the Company’s fiscal year.
2.38 “Performance Period” means the one or more periods of time not less than one fiscal quarter in
duration, over which the attainment of one or more Performance Goals will be measured for the purpose of
determining a Participant’s right to any the payment of a Performance Compensation Award.
2.39 “Performance Share Award” means any Award granted pursuant to Article 9 under the Plan.
6
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 2.40 “Performance Share” means the grant of a right to receive a number of actual shares of Common
Stock or share units based upon the performance of the Company during a Performance Period.
2.41 “Plan” means this Fulton Financial Corporation Amended and Restated Equity and Cash Incentive
Compensation Plan.
2.42 “Repricing” means any transaction performed with the intent or effect of:
(a) reducing the exercise price of any outstanding Option or Stock Appreciation Right Awards;
(b) cancelling or exchanging outstanding Options or Stock Appreciation Rights in exchange for cash,
other Awards or replacement Options and/or Stock Appreciation Rights, including through a tender offer process,
with exercise prices that are less than the exercise price of the cancelled or exchanged Options and/or Stock
Appreciation Rights; or
(c) any similar share exchange transaction involving outstanding Awards.
2.43 “Restricted Award” means any Award granted pursuant to Article 8.
2.44 “Restricted Period” has the meaning set forth in Section 8.01.
2.45 “Restricted Stock” has the meaning set forth in Section 8.01.
2.46 “Restricted Stock Unit” has the meaning set forth in Section 8.01.
2.47
“Retirement” means retirement from employment with the Company or any Affiliate at the earlier of:
(a) achieving age 60 with at least 10 years of service to the Company or any Affiliate; or
(b) achieving age 62 with at least 5 years of service to the Company or any Affiliate.
2.48 “Securities Act” has the meaning set forth in Section 14.02.
2.49 “Shares” means shares of Common Stock subject to Awards or available for future Awards under the Plan.
2.50 “Stock Appreciation Right” means a right granted under Article 7 of the Plan.
2.51 “Ten Percent Shareholder” means the owner of stock as determined by Section 424(d) of the Code,
possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any
one of its Affiliates.
Article 3. Administration of the Plan.
3.01 Committee Composition. The Plan shall be administered by the Committee, or, in the Board’s sole
discretion, by the Independent Directors on the Board. Each member of the Committee shall be Independent.
3.02 Delegation. The Committee, or if no Committee has been appointed, the Board, may delegate
administration of the Plan to a committee or committees of one or more members of the Board. The Committee
shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized
to exercise (and reference in this Plan to the Board or the Committee shall thereafter be to the committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may
be adopted from time to time by the Board. Within the scope of such authority, the Board or the Committee may
also delegate to a committee of one or more members of the Board or to senior management the authority to grant
Awards to eligible individuals who are not subject to Section 16 of the Exchange Act.
7
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 3.03 Authority of Committee. Subject to the terms of the Plan, the Committee’s charter and Applicable
Laws, and in addition to other express powers and authorization conferred by the Plan, the Committee shall be
vested with full authority:
(a) to adopt, amend and rescind such rules and regulations as it deems necessary or desirable to
administer the Plan;
(b) to construe, interpret and apply the provisions of the Plan;
(c) to authorize any person to execute, on behalf of the Company, any instrument required to carry out
the purposes of the Plan;
(d) to delegate its authority to one or more officers of the Company with respect to Awards that do not
involve “insiders” within the meaning of Section 16 of the Exchange Act;
(e) to determine when Awards are to be granted under the Plan and the applicable Date of Grant;
(f) from time to time to select, subject to the limitations set forth in the Plan, those Participants to
whom Awards shall be granted;
(g) to determine the number of Shares to be made subject to each Award;
(h) to determine whether an Option is to be an Incentive Stock Option or a Non-Qualified Stock
Option;
(i)
to prescribe the terms and conditions of each Award, including, without limitation, the exercise
price, medium of payment and vesting provisions, and to specify the provisions of the Award Agreement relating to
such grant;
(j)
to determine the target number of Performance Shares to be granted pursuant to a Performance
Share Award, the Performance Criteria that will be used to establish the Performance Goals, the Performance
Period(s) and the number of Performance Shares earned by a Participant;
(k) to designate an Award (including a cash bonus) as a Performance Compensation Award and to
select the Performance Criteria that will be used to establish the Performance Goals;
(l)
to amend any outstanding Awards, including for the purpose of modifying the time or manner
of vesting, or the term of any outstanding Award; provided, however, that if any such amendment impairs a
Participant’s rights or increases a Participant’s obligations under his or her Award or creates or increases a
Participant’s federal income tax liability with respect to an Award, such amendment shall also be subject to the
Participant’s consent;
(m) to determine the duration and purpose of leaves of absences which may be granted to a Participant
without constituting termination of their employment or service for purposes of the Plan, which periods shall be no
shorter than the periods generally applicable to Employees under the Company’s employment policies, subject to the
requirements of Section 409A of the Code;
(n) to make decisions with respect to outstanding Awards that may become necessary upon a Change
in Control or an event that triggers anti-dilution adjustments;
(o) to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any
omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; and
(p) to exercise discretion to make any and all other determinations which it determines to be necessary
or advisable for the administration of the Plan.
The Committee also may modify the purchase price or the exercise price of any outstanding Award, provided
that if the modification effects a Repricing, shareholder approval shall be required before the Repricing is effective.
Any determination, decision or action of the Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive and binding upon the Company and all
Participants and any person claiming under or through a Participant.
3.04 Indemnification. In addition to such other rights of indemnification as they may have as Directors or
members of the Committee, and to the extent allowed by Applicable Laws, no member of the Committee or of the
Board shall be liable for any determination, decision or action made in good faith with respect to the Plan or any
Award granted under the Plan.
8
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Article 4. Shares Subject to the Plan.
4.01 Shares Subject to the Plan. Subject to adjustment as provided in Article 12 and excluding any Awards
granted prior to the Effective Date, the total number of Shares available that may be granted under the Plan shall not
exceed 5,806,000 Shares as of the Effective Date. During the term of each Award, the Company shall keep reserved
at all times the number of Shares of Common Stock required to satisfy all such Awards. As the Committee may
determine from time to time, the Shares available for distribution under the Plan may consist either in whole or in
part of authorized but unissued Common Stock or Common Stock held in treasury.
4.02 Recycling of Shares. Any Shares subject to an Award that are cancelled, forfeited or expire prior to
exercise or realization, either in full or in part, shall again become available for issuance under the Plan. Shares
delivered to or withheld by the Company to satisfy any tax withholding obligation on a Performance Share Award
or a Restricted Award shall again become available for issuance under the Plan. Any Shares that are issued upon the
exercise or vesting of an Award, except for eligible shares to satisfy a tax withholding obligation, shall be deducted
from the available Shares under the Plan as one (1) Share for each Share issued under the Award. Notwithstanding
anything to the contrary contained herein, Shares subject to an Award under the Plan shall not again be made
available for issuance or delivery under the Plan if such Shares are:
(a) Shares tendered in payment of the Option Exercise Price;
(b) Shares covering an Option or a stock-settled Stock Appreciation Right;
(c) Shares withheld by the Company to satisfy a tax withholding obligation covering an Option or
stock-settled Stock Appreciation Right; or
(d) other Awards that were not issued upon the settlement of the Award.
Article 5. Eligibility.
5.01 General. All Employees and Consultants of the Company or any of its Affiliates are eligible to
participate in the Plan, whether now existing as an Affiliate or later become an Affiliate. The Committee shall
determine which such eligible persons shall be granted Awards and become Participants in the Plan.
5.02 Eligibility for Specific Awards. Incentive Stock Options may be granted only to Employees. Awards
other than Incentive Stock Options may be granted to Employees and Consultants and those individuals whom the
Committee determines are reasonably expected to become Employees and Consultants following the Date of Grant.
5.03 Ten Percent Shareholders. An Incentive Stock Option shall not be granted to a Ten Percent
Shareholder unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common Stock at the
Date of Grant and the Option is not exercisable after the expiration of five (5) years from the Date of Grant.
Article 6. Option Provisions.
6.01 General. Each Option granted under the Plan shall be evidenced by an Award Agreement. Each Option
granted shall be subject to the conditions set forth in this Article 6, and to such other conditions not inconsistent with
the Plan as may be reflected in the applicable Award Agreement. Each Option shall specify the number of Shares
that may be purchased pursuant to the Option, the Option Exercise Price, the term of the Option, vesting schedule
and such other terms, conditions and limitations established by the Committee as are consistent with the terms of
the Plan. The Award Agreement shall identify the Option as a Non-Qualified Stock Option or an Incentive Stock
Option. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other person if
an Option designated as an Incentive Stock Option fails to qualify as such at any time or if an Option is determined
to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the terms of
such Option do not satisfy the requirements of Section 409A of the Code. The provisions of separate Options need
not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:
9
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT (a) Term. Subject to the provisions of Section 5.03 regarding Ten Percent Shareholders, no Option shall
be exercisable after the expiration of ten (10) years from the Date of Grant.
(b) Option Exercise Price of an Option. Subject to Section 5.03 regarding Ten Percent Shareholders,
the Option Exercise Price of each Option shall not be less than 100% of the Fair Market Value of the Shares subject
to the Option on the Date of Grant. Notwithstanding the foregoing, an Incentive Stock Option may be granted with
an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) and 409A of
the Code, and a Non-Qualified Stock Option may be granted with an Option Exercise Price lower than that set forth
in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a
manner satisfying the provisions of Section 409A of the Code.
(c) Consideration. Each Participant who elects to Exercise an Option granted pursuant to the Plan
shall be required to give written notice to the Company of such election and of the number of Shares he or she has
elected to purchase, in such form as the Committee shall have prescribed or approved. At the time of Exercise of
the Option, the price of the Shares purchased shall become immediately due and payable: (i) in cash or by check;
(ii) by tendering to the Company Shares of the Company that have been held by the Participant for at least six
months, having a Fair Market Value as of the Date of Exercise equal to the Option Exercise Price; (iii) by any
method established by the Committee to facilitate ownership of Shares, including so-called “cashless exercise”;
(iv) by reduction in the number of Shares otherwise deliverable upon exercise of such Option with a Fair Market
Value equal to the aggregate Option Exercise Price at the time of Exercise; (v) by any combination of the methods of
payment described in (i), (ii) , (iii) or (iv), or (vi) in any other form of legal consideration that may be acceptable to
the Committee. Notwithstanding the foregoing, during any period for which the Shares are publicly traded (i.e., the
Common Stock is listed on any national stock exchange) an Exercise by a Participant that involves or may involve a
direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly,
in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any Award under
the Plan.
(d) Option Transferability. An Option shall not be transferable except by will, by the laws of descent
and distribution, or pursuant to a domestic relations order entered into by a court of competent jurisdiction, and
shall be exercisable during the lifetime of the Optionee only by the Optionee. Notwithstanding the foregoing, the
Optionee may, by delivering written notice to the Company, in a form satisfactory to the Company designate a third
party who, in the event of the death of the Optionee, shall thereafter be entitled to Exercise the Option.
6.02 Termination of Continuous Service. Unless otherwise provided in the terms of an Award Agreement,
a vested Option may be exercised and paid only: (a) while the Participant is an Employee, a Director or a Consultant
to the Company, or an Affiliate, and (b) has maintained Continuous Service as an Employee, a Director or a
Consultant since the Date of Grant of the Option, provided however, if the Continuous Service of an Optionee is
terminated:
(a) as a result of the Optionee’s Disability, such Optionee may, but only within a one (1) year period
from the date of such termination of Continuous Service (and no later than the date that the Option would otherwise
expire), Exercise the Option to the extent the Optionee was entitled to Exercise it at the date of such termination of
Continuous Service;
(b) as a result of the Optionee’s death, to the extent the Optionee was entitled to Exercise the Option
immediately prior to the Optionee’s death, such Option of the deceased Optionee may be Exercised, but only within
one (1) year from the date of the Optionee’s death (and no later than the date on which such Option would otherwise
expire), by the person or persons (including the Optionee’s estate) to whom the Optionee’s rights under such Option
shall have passed by will or by the laws of descent and distribution;
(c) as a result of the Optionee’s Retirement, the Optionee may Exercise his or her currently exercisable
Options for up to one year from the date of his or her Retirement (but not beyond the date when the Option would
10
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT otherwise expire); however, if exercisable Incentive Stock Options are not Exercised within 90 days of Retirement,
they will convert automatically to Non-Qualified Stock Options; and
(d) as a result of termination without Cause, layoff or position elimination, the Optionee may Exercise
vested Options for up to 90 days (but no later than the date the Option would expire) following the date of such
termination.
On the date of termination of Continuous Service, all unvested Options shall be cancelled.
6.03 Incentive Stock Option Limitation. To the extent that the aggregate Fair Market Value (determined at
the time of grant) of Shares with respect to which Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company and its Affiliates) exceeds the limitation imposed
by Section 422 of the Code (currently $100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Non-Qualified Stock Options.
6.04 Incentive Stock Option Qualifying Disposition. With respect to Shares acquired as a result of the
Exercise of an Incentive Stock Option, any disposition of such Shares other than by will or by the laws of descent
and distribution before the later of the expiration of the two (2) year period beginning on the Date of Grant of
such Incentive Stock Option, or the expiration of the one (1) year period beginning on the date of the transfer of
such Shares pursuant to such Exercise, will not be prohibited by the Plan, but may disqualify the disposition from
receiving favorable tax treatment under Section 421(a) of the Code. The Committee may require an Optionee to
give prompt notice (as described below) to the Company concerning any disposition of Shares received upon the
Exercise of an Incentive Stock Option within: (i) two (2) years from the date of granting such Incentive Stock
Option to such Optionee; (ii) one (1) year from the transfer of such shares of Stock to such Optionee or (iii) such
other period as the Committee may from time to time determine. The Committee may direct in the applicable Award
Agreement that an Optionee with respect to an Incentive Stock Option undertake to give such notice described in
the preceding sentence at such time and containing such information as the Committee may prescribe, and/or that
the certificates or book entry registration evidencing Shares acquired by Exercise of an Incentive Stock Option refer
to such requirement to give such notice. Notice means written notification actually received by the Company at its
executive offices on a day when the Company’s executive offices are open for business, or, if received after such
time, such notice shall be deemed received on the next such day, which notice may be delivered in such manner as
may be prescribed from time to time by the Committee.
Article 7. Stock Appreciation Rights.
7.01 General. Each Stock Appreciation Right granted under the Plan shall be evidenced by an Award
Agreement. Each Stock Appreciation Right so granted shall be subject to the conditions set forth in this Article 7,
and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.
7.02 Term. The term of a Stock Appreciation Right granted under the Plan shall be determined by the
Committee; provided, however, no Stock Appreciation Right shall be exercisable later than the tenth anniversary of
the Date of Grant.
7.03 Exercise and Payment. Upon exercise of a Stock Appreciation Right, the Participant shall be entitled
to receive from the Company in cash (unless otherwise provided) an amount equal to the number of Shares subject
to the Stock Appreciation Right that is being Exercised multiplied by the excess of: (i) the Fair Market Value of
a Share on the date the Award is exercised, over (ii) the exercise price specified in the Stock Appreciation Right.
Payment shall be made in the form of Shares (with or without restrictions as to substantial risk of forfeiture and
transferability, cash or a combination thereof, as determined by the Committee.
7.04 Exercise Price. The exercise price of a Stock Appreciation Right shall be determined by the
Committee, but shall not be less than 100% of the Fair Market Value of one Share on the Date of Grant of such
Stock Appreciation Right. A Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market
Value per Share subject to the Stock Appreciation Right exceeds the exercise price per Share thereof.
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NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 7.05 Stock Appreciation Right Transferability. A Stock Appreciation Right shall not be transferable except
by will, by the laws of descent and distribution, or pursuant to a domestic relations order entered into by a court of
competent jurisdiction, and shall be exercisable during the lifetime of the Participant.
7.06 Termination of Continuous Service. Unless otherwise provided in the terms of an Award Agreement,
a vested Stock Appreciation Right may be exercised and paid only: (a) while the Participant is an Employee,
a Director or a Consultant to the Company, or an Affiliate, and (b) has maintained Continuous Service as an
Employee, a Director or a Consultant since the Date of Grant of the Stock Appreciation Right, provided however, if
the Continuous Service of a Participant is terminated:
(a)
as a result of the Participant’s Disability, such Participant may, but only within a one
(1) year period from the date of such termination of Continuous Service (and no later than the date that the Stock
Appreciation Right would otherwise expire), Exercise the Stock Appreciation Right to the extent the Participant was
entitled to Exercise the Stock Appreciation Rightat the date of such termination of Continuous Service;
(b)
as a result of the Participant’s death, to the extent the Participant was entitled to Exercise
the Stock Appreciation Right immediately prior to the Participant’s death, such Stock Appreciation Right of the
deceased participant may be Exercised, but only within one (1) year from the date of the Participant’s death (and
no later than the date on which such Stock Appreciation Right would otherwise expire), by the person or persons
(including the Participant’s estate) to whom the Participant’s rights under such Stock Appreciation Agreement shall
have passed by will or by the laws of descent and distribution;
(c)
as a result of the Participant’s Retirement, the Participant may Exercise his or her currently
exercisable Stock Appreciation Rights for up to one year from the date of his or her Retirement (but not beyond the
date when the Stock Appreciation Rights would otherwise expire); and
(d)
as a result of termination without Cause, layoff or position elimination, the Participant may
Exercise vested Stock Appreciation Rights for up to 90 days (but no later than the date the Stock Appreciation Right
would expire) following the date of such termination.
On the date of termination of Continuous Service, all unvested Stock Appreciation Rights shall be cancelled.
Article 8. Restricted Awards.
8.01 General. A Restricted Award is an Award of actual Shares (“Restricted Stock”) or Common Stock
units (“Restricted Stock Units”) having a value equal to the Fair Market Value of an identical number of Shares
that shall provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed of,
pledged or hypothecated as collateral for a loan or as security for the performance of any obligation (the “Restricted
Period”). Each Restricted Award so granted shall be subject to the conditions set forth in this Article 8, and to such
other conditions not inconsistent with the Plan, as may be reflected in the applicable Award Agreement.
8.02 Restricted Stock. If the Committee determines that the Restricted Stock shall be held by the Company
or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee
may require the Participant to execute and deliver to the Company (A) an escrow agreement satisfactory to the
Committee, if applicable and (B) the appropriate blank stock power with respect to the Restricted Stock covered
by such agreement. If a Participant fails to execute an Award Agreement evidencing a Restricted Stock Award and,
if applicable, an escrow agreement and stock power, or such other agreements and documents, the Award shall be
null and void. Subject to the restrictions set forth in the Award, the Participant generally shall have the rights and
privileges of a shareholder as to such Restricted Stock, including the right to vote such Restricted Stock.
8.03 Dividend Equivalents on Restricted Stock. At the discretion of the Committee, a Participant may
be granted the right to receive dividends; provided that any cash dividends and stock dividends with respect to the
Restricted Stock shall be withheld by the Company for the Participant’s account, and interest may be credited on
the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Committee. The
cash dividends or stock dividends withheld shall be distributed to the Participant in cash or, at the discretion of
the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, if
12
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT applicable, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no
right to such dividends.
8.04 Restricted Stock Units. The terms and conditions of a grant of Restricted Stock Units shall be reflected
in an Award Agreement. No Shares shall be issued at the time a Restricted Stock Unit is granted, and the Company
will not be required to set aside a fund for the payment of any such Award. A Participant shall have no voting rights
with respect to any Restricted Stock Units granted hereunder.
8.05 Dividend Equivalents on Restricted Stock Units. At the discretion of the Committee, each Restricted
Stock Unit (representing one Share) may be credited with cash, Shares or other property equivalent to all or a
portion of the dividends paid with respect to the outstanding Common Stock paid by the Company in respect of
one Share (“Dividend Equivalents”). Dividend Equivalents shall be withheld by the Company for the Participant’s
account, and interest may be credited on the amount of cash Dividend Equivalents withheld at a rate and subject
to such terms as determined by the Committee. Dividend Equivalents credited to a Participant’s account and
attributable to any particular Restricted Stock Unit (and earnings thereon, if applicable) shall be distributed in cash
or, at the discretion of the Committee, in Shares having a Fair Market Value equal to the amount of such Dividend
Equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted Stock Unit and, if such
Restricted Stock Unit is forfeited, the Participant shall have no right to such Dividend Equivalents.
8.06 Restrictions on Restricted Awards.
(a)
Restricted Stock awarded to a Participant shall be subject to the following restrictions until
the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable
Award Agreement: (A) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the
stock certificate, or exercise control over a book entry account; (B) the Shares shall be subject to the restrictions on
transferability set forth in the Award Agreement or the Plan; (C) the Shares shall be subject to forfeiture to the extent
provided in the applicable Award Agreement; and (D) to the extent such Shares are forfeited, the stock certificates
shall be returned to the Company, or book entry positions cancelled, and all rights of the Participant to such Shares
and as a shareholder with respect to such Shares shall terminate without further obligation on the part of the
Company.
(b)
A Restricted Stock Units Award shall be subject to forfeiture until the expiration of the
Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided
in the applicable Award Agreement. If the Restricted Stock Units are forfeited, all rights of the Participant to such
Restricted Stock Units shall terminate without further obligation on the part of the Company.
(c)
The Committee shall have the authority to remove any or all of the restrictions on the
Restricted Stock and Restricted Stock Units whenever it may determine that, by reason of changes in Applicable
Laws or other changes in circumstances arising after the date the Restricted Stock or Restricted Stock Units are
granted, such action is appropriate.
8.07 Delivery of Shares for Restricted Stock and Settlement of Restricted Stock Units.
(a) Delivery of Shares for Restricted Stock. Upon the expiration of the Restricted Period with respect to
any Shares of Restricted Stock, the restrictions set forth in Section 8.04 and the applicable Award Agreement shall
be of no further force or effect with respect to such Shares. If an escrow arrangement is used, upon such expiration,
the Company shall cause a book entry notation to be made or deliver to the Participant, or his or her beneficiary,
without charge, the stock certificate or book entry notation evidencing the Shares of Restricted Stock that have been
released from forfeiture restrictions, plus any cash dividends or stock dividends credited to the Participant’s account
with respect to such Restricted Stock and the interest thereon, if any.
(b) Settlement of Restricted Stock Units. Upon the expiration of the Restricted Period with respect
to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his or her beneficiary,
without charge, one Share for each such outstanding Restricted Stock Unit (“Vested Unit”) and cash equal to any
Dividend Equivalents credited with respect to each such Vested Unit in accordance with Section 8.03 hereof and the
13
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT interest thereon or, at the discretion of the Committee, in Shares having a Fair Market Value equal to such Dividend
Equivalents and the interest thereon, if any; provided, however, that, if explicitly provided in the applicable Award
Agreement, the Committee may, in its sole discretion, elect to pay part cash and part Shares in lieu of delivering
only Shares for Vested Units. If a cash payment is made in lieu of delivering Shares, the amount of such payment
shall be equal to the Fair Market Value of the Shares as of the date on which the Restricted Period lapsed with
respect to each Vested Unit.
8.08 Stock Certificate Restrictions. Each certificate, or book entry account, representing Restricted Stock
awarded under the Plan shall bear a legend in such form, or be subject to transfer restrictions, as the Company deems
appropriate.
8.09 Restricted Award Transferability. A Restricted Award shall not be transferable except by will, by
the laws of descent and distribution, or pursuant to a domestic relations order entered into by a court of competent
jurisdiction.
8.10 Termination of Continuous Service. Unless otherwise provided in the terms of an Award Agreement,
a time-vested Restricted Award may vest and be paid only: (a) while the Participant is an Employee, a Director
or a Consultant to the Company, or an Affiliate, and (b) has maintained Continuous Service as an Employee, a
Director or a Consultant since the Date of Grant of the Restricted Award, unless the Participant’s Continuous Service
ceases by reason of the Participant’s termination without Cause, layoff, position elimination, death, Disability or
Retirement.
Article 9. Performance Share Awards.
9.01 Grant of Performance Share Awards. Each Performance Share Award granted under the Plan, in
Common Stock or share units based upon the performance of the Company during a Performance Period, shall be
evidenced by an Award Agreement. Each Performance Share Award so granted shall be subject to the conditions
set forth in this Article 9, and to such other conditions not inconsistent with the Plan as may be reflected in the
applicable Award Agreement.
9.02 Earning Performance Share Awards. The number of Performance Shares earned by a Participant
will depend on the extent to which the Performance Goals established by the Committee are attained within the
applicable Performance Period, as determined by the Committee.
9.03 Dividend Equivalents on Performance Share Awards. At the discretion of the Committee, each
Performance Share Award (representing one Share) may be credited with Dividend Equivalents. Dividend
Equivalents shall be withheld by the Company for the Participant’s account, and interest (for cash-settled Dividend
Equivalents) or additional Dividend Equivalents (for stock-settled Dividend Equivalents) may be credited on the
amount of Dividend Equivalents withheld at a rate and subject to such terms as determined by the Committee.
Dividend Equivalents credited to a Participant’s account and attributable to any particular Performance Share Award
(and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of the Committee, in Shares
having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the
Participant upon settlement of such Performance Share Award and, if such Performance Share Award is unearned or
is forfeited, the Participant shall have no right to such Dividend Equivalents.
9.04 Termination of Continuous Service. Unless otherwise approved by the Committee at time of grant or
in the Award Agreement, if the Continuous Service of a Participant is terminated for any reason a Performance Share
Award will not vest and will be forfeited as provided in accordance with Article 11.
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NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Article 10. Performance Compensation Awards.
10.01 General. The Committee shall have the authority, at the time of grant of any Award described in the
Plan, to designate an Award as a Performance Compensation Award in order to qualify such Award as “performance-
based compensation”. In addition, the Committee shall have the authority to make an Award of a cash bonus to any
Participant and designate such Award as a Performance Compensation Award in order to qualify such Award as
“performance-based compensation” under the Plan.
10.02 Eligibility. The Committee will, in its sole discretion, designate within the first 90 days of a
Performance Period the Participants that are eligible to receive Performance Compensation Awards in respect
of such Performance Period. However, designation of a Participant eligible to receive an Award hereunder for a
Performance Period shall not in any manner entitle the Participant to receive payment in respect of any Performance
Compensation Award for such Performance Period. The determination as to whether or not such Participant becomes
entitled to payment in respect of any Performance Compensation Award shall be decided solely in accordance with
the provisions of this Article 10.
10.03 Discretion of Committee with Respect to Performance Compensation Awards. With regard to a
particular Performance Period, the Committee shall have full discretion to select the length of such Performance
Period (provided any such Performance Period shall be not less than one fiscal quarter in duration), the type(s)
of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the
Performance Goal(s), the kind(s) and/or level(s) of the Performance Goal(s) that is (are) to apply to the Performance
Formula. Within the first 90 days of a Performance Period, the Committee shall, with regard to the Performance
Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the
matters enumerated in the immediately preceding sentence of this Section 10.03 and record the same in writing.
10.04 Payment of Performance Compensation Awards.
(a) Condition to Receipt of Payment. Unless otherwise provided in the applicable Award Agreement,
a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment
in respect of a Performance Compensation Award for such Performance Period.
(b) Limitation. A Participant shall be eligible to receive payment in respect of a Performance
Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and/or (B)
the Performance Formula, as applied against such Performance Goals indicates that all or some portion of such
Participant’s Performance Compensation Award has been earned for the Performance Period.
(c) Certification. Following the completion of a Performance Period, the Committee shall review
and approve whether, and to what extent, the Performance Goals for the Performance Period have been achieved
and, if so, calculate and approve the amount of the Performance Compensation Awards earned for the period based
upon the Performance Formula. The Committee shall then determine the amount of each Participant’s Performance
Compensation Award for the Performance Period.
(d) Use of Discretion. In determining the amount of an individual Performance Compensation Award
for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation
Award earned under the Performance Formula in the Performance Period if, in its sole judgment, such reduction or
elimination is appropriate. The Committee shall not have the discretion to grant or provide payment in respect of
Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period
have not been attained.
(e) Timing of Award Payments. Performance Compensation Awards granted for a Performance
Period shall be paid to Participants as soon as administratively practicable following completion of the certifications
required by this Article 10, but in no event earlier than the end of the Performance Period or later than June 30 of the
calendar year following the calendar year during which the Performance Period is completed. Payment of Awards to
an individual Employee may be subject to an election to defer receipt under a nonqualified deferred compensation
plan maintained by the Company.
15
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Article 11. Vesting.
11.01 General. The Committee shall specify the vesting schedule or conditions of each Award. It shall be a
condition to the vesting of any Award made under the Plan, whether or not set forth in an Award Agreement, that the
Participant render Continuous Service to the Company or an Affiliate through the applicable vesting date or dates.
Notwithstanding any other provision of the Plan, Awards granted under the Plan, other than cash-based
awards, shall vest no earlier than the first anniversary of the date on which the Award is granted (the “Minimum
Vesting Requirement”); provided, that the following Awards shall not be subject to the foregoing: (i) any substitute
Awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger,
acquisition or similar transaction entered into by the Company or any of its Affiliates; (ii) Shares delivered in lieu
of fully vested cash obligations and (iii) any additional Awards the Committee may grant, up to a maximum of five
percent (5%) of the available Share reserve authorized for issuance under the Plan pursuant to Section 4.01; and,
provided further, that the Minimum Vesting Requirement does not apply to the Committee’s discretion to provide
for accelerated exercisability or vesting of any Award in cases of Retirement, death, Disability, a Change in Control,
termination without Cause, layoff or position elimination as set forth in the Plan.
11.02 Time-Vested Awards and Dividend Equivalents.
(a)
Three Year Cliff Vesting Standard. Awards that have a time or service-based vesting
schedule and are not subject to performance vesting requirements (“Time-Vested Awards”) will vest and become
Exercisable, or have lapse of forfeiture restrictions, as applicable, (unless the Committee provides otherwise in the
Award Agreement) on the third anniversary of the Date of Grant.
(b)
Accelerated Vesting of Time-Vested Awards. All Stock Option and Stock Appreciation
Rights Time-Vested Awards shall (unless the Committee provides otherwise in the Award Agreement) automatically
vest upon termination without Cause, layoff, position elimination, death, Disability or Retirement. Forfeiture
restrictions on Restricted Stock Time-Vested Awards shall (unless the Committee provides otherwise in the Award
Agreement) automatically lapse upon termination without Cause, layoff, position elimination, death or Disability,
but shall not automatically lapse upon Retirement. Forfeiture restrictions on Restricted Stock Unit Time-Vested
Awards shall (unless the Committee provides otherwise in the Award Agreement) automatically lapse upon
termination without Cause, layoff, position elimination, death, Disability or Retirement; provided, however, if a
Restricted Stock Unit Time-Vested Award becomes payable upon Retirement (and such Retirement constitutes a
separation from service within the meaning of Code Section 409A), such Restricted Stock Unit Time-Vested Award
will not be paid until the date that is six months following such date of Retirement.
(c)
Minimum One Year Vesting for Time-Vested Awards. In no event will the Committee,
establish an initial vesting period or initial term in an Award Agreement for a Restricted Stock or Restricted Stock
Unit Time Vested Award that is less than one year after the Date of Grant and, provided further, that the foregoing
restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any
Award, including in cases of Retirement, death, Disability, a Change in Control, termination without Cause, layoff or
position elimination, in the terms of the Award Agreement or otherwise.
(d)
Retirement Vesting. In the case of Restricted Stock Units that vest pursuant to Article 11
(and subject to the six-month delay for payment of Time-Vested Restricted Stock Units payable upon Retirement),
such Awards shall be settled no later than two and a half months following the end of the year in which such Award
vests.
11.03 Performance Awards.
(a)
General. Each Performance Share Award shall be subject to the Committee determination,
based on Performance Goals for the Performance Periods to which such Award relates, as to whether the Award is
earned and the extent to which it is earned.
16
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT (b)
Minimum One Year Vesting for Performance Share Awards. In no event will the
Committee, establish an initial vesting period or initial term in an Award Agreement for a Performance Award that
is less than one year after the Date of Grant and, provided further, that the foregoing restriction does not apply to
the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of
Retirement, death, Disability, a Change in Control, termination without Cause, layoff or position elimination in the
terms of the Award Agreement or otherwise.
(c)
Retirement Vesting. Upon a Participant’s Retirement prior to the end of a Performance
Period, the Committee may (i) determine the extent to which Performance Goals with respect to such Performance
Period have been met during or with respect to the period of the Participant’s active employment, and (ii) cause
to be paid to the applicable Participant partial or full Awards for such future Performance Period based upon the
Committee’s determination of the degree of attainment of Performance Goals. Unless otherwise approved by the
Committee at time of grant or in the Award Agreement, if the Continuous Service of a Participant is terminated for
any reason a Performance Award will not vest and will be forfeited.
11.04 Treatment of Dividends and Dividend Equivalents on Unvested Awards. Notwithstanding any other
provision of the Plan to the contrary, with respect to any Award that provides for or includes a right to dividends or
dividend equivalents, if dividends are declared during the period that an Award is outstanding, such dividends (or
dividend equivalents) shall either: (i) not be paid or credited with respect to such Award or (ii) be accumulated but
remain subject to vesting requirement(s) to the same extent as the applicable Award and shall only be paid at the
time or times such vesting requirement(s) are satisfied. In no event shall dividends or dividend equivalents be paid
with respect to Options or Stock Appreciation Rights under the Plan.
Article 12. Changes in Capital Structure.
12.01 Adjustment Upon Changes in the Common Stock. In the event of any change in the Common Stock
through merger, consolidation, reorganization, recapitalization, reincorporation, stock split, stock dividend or other
change in the corporate structure of the Company, the Committee shall appropriately adjust the maximum number
of Shares subject to the Plan, all Awards then currently outstanding, and the exercise price of Options and Stock
Appreciation Rights, so that upon Exercise, the Participant shall receive the same number of Shares in exchange for
the same aggregate exercise price he or she would have received had he or she been the holder of all Shares subject
to his or her outstanding Options and Stock Appreciation Rights immediately before the effective date of such
change in the capital structure of the Company, and the benefits, rights and features relating to Shares underlying
Restricted Awards shall be appropriately adjusted consistent with such change in such manner as the Committee may
deem equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, participants
in the Plan. Any such adjustment shall not result in the issuance of fractional shares, and the Committee shall round
down the number of Shares subject to any outstanding Award unless the transaction that resulted in the capital
structure change specifically authorizes a rounding up of the shares. Each such adjustment shall be made in such
manner so as not to constitute a “modification” in the case of Incentive Stock Options as defined in Section 424 of
the Code and in the case of Non-Qualified Stock Options, in such manner so as not to constitute a “modification”
within the meaning of Section 409A of the Code. Any adjustments made under this Section 12.01 shall be made in a
manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act.
12.02 Adjustment Binding. Any adjustment by the Committee pursuant to this Article 12 in the number
of Shares subject to the Plan or to any outstanding Award, or to the exercise price stated in any Option or Stock
Appreciation Right, or to the benefits, rights and features relating to Restricted Awards, shall be final, binding and
conclusive. Notice of any adjustment shall be given by the Company to each Participant holding an Award which
shall have been so adjusted.
12.03 Adjustment to Grants. The grant of an Award pursuant to the Plan shall not affect in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations or changes in its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.
17
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Article 13. Effect of Change in Control.
13.01 General. Unless otherwise provided in an Award Agreement, notwithstanding any provision of the
Plan to the contrary, in the event of a Participant’s termination of Continuous Service without Cause during the
12-month period following a Change in Control, notwithstanding any provision of the Plan or any applicable Award
Agreement to the contrary, all Options and Stock Appreciation Rights shall become immediately exercisable with
respect to 100% of the Shares subject to such Options or Stock Appreciation Rights, and/or the Restricted Period
shall expire immediately with respect to 100% of the shares of Restricted Stock or Restricted Stock Units as of the
date of the Participant’s termination of Continuous Service.
13.02 Committee Discretion. In the event of a Change in Control, the Committee may in its discretion and
upon at least 10 days’ advance notice to the affected persons, cancel any outstanding Awards and pay to the holders
thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per Share
received or to be received by other shareholders of the Company. In the case of any Option or Stock Appreciation
Right with an exercise price that equals or exceeds the price paid for a Share in connection with the Change in
Control, the Committee may cancel the Option or Stock Appreciation Right without the payment of consideration
therefor.
13.03 Successors. The obligations of the Company under the Plan shall be binding upon any successor
corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or
upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the
Company and its Affiliates, taken as a whole.
Article 14. Registration of Stock.
14.01 General. No Option granted pursuant to the Plan shall be exercisable, nor shall Restricted Stock
vest, in whole or in part, if at any time the Committee shall determine in its discretion that the listing, registration
or qualification of the Shares subject to such Option or the Restricted Stock on any securities exchange or under
any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Option (or the issuance of Shares thereunder) or the vesting
of such Restricted Stock, unless such listing, registration, qualification, consent or approval may be effected or
obtained free of any conditions not acceptable to the Committee.
14.02 Restrictions. If a registration statement under the Securities Act of 1933 (the “Securities Act”) with
respect to the Shares issuable upon Exercise of any Option, Restricted Stock or other Award granted under the Plan
is not in effect at the time of Exercise, as a condition of the issuance of the Shares, the Committee may require the
Participant receiving Shares pursuant to an Award to give the Committee a written statement, satisfactory in form
and substance to the Committee, that he or she is acquiring the Shares for his or her own account for investment
and not with a view to its distribution. The Company may place upon any stock certificate issued in connection with
an Award the following legend or such other legend as the Committee may prescribe to prevent disposition of the
Shares in violation of the Securities Act or any other applicable securities law:
“The shares represented by this certificate have not been registered under the Securities Act of 1933 (the
“Act”) and may not be sold, pledged, hypothecated or otherwise transferred or offered for sale in the
absence of an effective registration statement covering such shares which has been filed under the Act or a
written opinion of counsel for the Company that registration is not required.”
18
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT Article 15. Tax Withholding.
To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the
Participant shall satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition
of Shares under an Award by any of the following means (in addition to the Company’s right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such means:
(a) tendering a cash payment;
(b) authorizing the Company to withhold Shares from the Shares otherwise issuable to the Participant
as a result of the Exercise or acquisition of Shares under the Award to the maximum extent permitted by law or
regulation; or
(c) delivering to the Company previously owned and unencumbered Shares of the Company.
Article 16. Amendment or Termination of the Plan.
16.01 Amendment of the Plan. The Board or the Committee may, at any time, amend, modify or suspend the
Plan or any provision thereof, or the Board may terminate the Plan; provided that, except as provided in Article 12,
the Board or Committee may not, without the consent of the shareholders of the Company, make any amendment or
modification which:
(a) increases the maximum number of Shares as to which Awards may be granted under the Plan;
(b) changes the class of eligible Participants;
(c) effects a Repricing transaction;
(d) increases materially the benefits accruing to a Participant under the Plan; or
(e) otherwise requires the approval of the shareholders of the Company under Applicable Laws
(including the requirements of Section 422 of the Code) or listing requirements relating to the Shares.
16.02 Amendments Pertaining to Qualification. Notwithstanding the provisions of Section 16.01 above,
the Board reserves the right to amend or modify the terms and provisions of the Plan and of any outstanding
Awards granted under the Plan to the extent necessary to qualify any or all Options granted under the Plan for such
favorable federal income tax treatment (including deferral of taxation upon Exercise) as may be afforded employee
stock options under Section 422 of the Code, the regulations promulgated thereunder, and any amendments or
replacements thereof.
16.03 Term of the Plan. Unless previously terminated by the Board, the Plan shall terminate on, and no
Award shall be granted after, the tenth anniversary of the Effective Date of the Plan.
16.04 No Impairment of Rights. No amendment, modification or termination of the Plan (whether by action
of the Board or by expiration of the Plan term) shall in any manner negatively affect any Award theretofore granted
under the Plan without the consent of the Participant or any person claiming under or through the Participant.
Article 17. General Provisions.
17.01 Non-Uniform Treatment. No Participant or other person shall have any claim to be granted any Award
under the Plan, and there is no obligation for uniformity of treatment of Participants.
19
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 17.02 Shareholders. No Award shall confer on any Participant any of the rights of a shareholder of the
Company unless and until Shares are duly issued or transferred to the Participant in accordance with the terms of the
Award.
17.03 Employment or Service. Nothing contained in the Plan or any applicable award agreement shall confer
upon any employee or other person any right to continue in the employ or service of the Company or any Affiliate or
to interfere in any way with the right of the Company or any Affiliate to terminate his or her employment or service
at any time or increase or decrease his or her compensation or fees from the rate in existence at the time of granting
an Award.
17.04 Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder approval if such approval is
required, and such arrangements may be either generally applicable or applicable only in specific cases.
17.05 Clawback. Notwithstanding any other provisions in the Plan or an Award Agreement, any Award which
is, or may become, subject to recovery or forfeiture under any law, regulation, Company policy, or stock exchange
listing requirement, will be subject to such recovery, forfeiture, deductions and clawback as may be required to be
made pursuant to any policy implemented by the Company, or to effect such law, regulation, Company policy or
stock exchange listing requirement, to clawback and Award under the Plan.
17.06 Recapitalizations. Each Award Agreement shall be deemed to contain provisions required to reflect the
provisions of Article 12.
17.07 Delivery. Upon exercise of a right granted under the Plan, the Company shall issue Shares or pay any
amounts due within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the
Company shall issue Shares or pay any amounts due within a reasonable period of time thereafter.
17.08 Deferral of Awards. The Committee may establish one or more programs under the Plan to permit
selected Participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction
of performance criteria, or other event that absent the election would entitle the Participant to payment or receipt of
Shares or other consideration under an Award. The Committee may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares
or other consideration so deferred, and such other terms, conditions, rules and procedures that the Committee deems
advisable for the administration of any such deferral program.
17.09 Section 409A. The Plan is intended to comply with Section 409A of the Code to the extent subject
thereto, and, accordingly, to the maximum extent permitted, the Committee shall make a good faith effort to interpret
and administer the Plan in compliance therewith. Any payments described in the Plan that are due within the
“short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation
unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent
required to avoid accelerated taxation and tax penalties under Section 409A of the Code, (a) amounts that would
otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month
period immediately following the Participant’s termination of Continuous Service shall instead be paid on the
first payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s
death, if earlier), and (b) amounts payable upon the termination of a Participant’s Continuous Service shall only be
payable if such termination constitutes a “separation from service” within the meaning of Section 409A of the Code.
Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action
to prevent the assessment of any excise tax or penalty on any Participant under Section 409A of the Code and neither
the Company nor the Committee will have any liability to any Participant for such tax or penalty.
17.10 Section 16 Compliance. It is the intent of the Company that the Plan satisfy, and be interpreted in a
manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange
Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section
20
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act.
Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this Section
17.10, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.
17.11 Beneficiary Designation. Each Participant under the Plan may from time to time name any beneficiary
or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death. Each
designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by
the Committee and shall be effective only when filed by the Participant in writing with the Company during the
Participant’s lifetime.
17.12 Unfunded Plan. The Plan shall be unfunded. The Company shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure the issuance of Shares or the payment
of cash upon Exercise or payment of any Award. Proceeds from the issuance of Shares pursuant to Awards granted
under the Plan shall constitute general funds of the Company. The expenses of the Plan shall be borne by the
Company.
17.13 Acceptance of Terms and Conditions. By accepting any benefit under the Plan, each recipient of an
Award under the Plan and each person claiming under or through such recipient shall be conclusively deemed to
have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any
action taken under the Plan by the Committee, the Company or the Board, in any case in accordance with the terms
and conditions of the Plan.
17.14 Liability. Any liability of the Company or any Affiliate to any recipient of an Award under the Plan
with respect to any Award shall be based solely upon contractual obligations created by the Plan and the Award
Agreement. Neither the Company nor any Affiliate nor any member of the Committee or the Board, nor any other
person participating in any determination of any question under the Plan, or in the interpretation, administration or
application of the Plan, shall have any liability, in the absence of bad faith, to any party for any action taken or not
taken in connection with the Plan, except as may expressly be provided by statute.
17.15 Choice of Law. The Plan shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, without regard to such state’s choice of law provisions, except as superseded by
applicable federal law.
17.16 Severability. If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal
or unenforceable, whether in whole or in part, such provision shall be deemed modified to the extent, but only to the
extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby.
17.17 Headings. The words “Article,” “Section” and “paragraph” shall refer to provisions of the Plan, unless
expressly indicated otherwise. Wherever any words are used in the Plan or any Award agreement in the masculine
gender they shall be construed as though they were also used in the feminine gender in all cases where they would
so apply, and wherever any words are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
Article 18. Effective Date.
The Plan was approved by the Board on March 15, 2022, and shall be submitted to shareholders for approval
at the 2022 Annual Meeting of Shareholders of the Company. The “Effective Date” of the Plan shall be the date on
which such shareholder approval is obtained.
21
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT EXHIBIT B
REPORT OF AUDIT COMMITTEE
February 22, 2022
To the Fulton Board:
We have reviewed and discussed with management Fulton’s audited financial statements as of, and for the
year ended, December 31, 2021.
We have discussed with representatives of KPMG LLP, Fulton’s independent auditor, the matters required
to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and
the Securities and Exchange Commission.
We have received and reviewed the written disclosures and the letter from the independent auditor required by
the PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence,
as amended, by the PCAOB, and have discussed with KPMG the auditor’s independence.
Based on the reviews and discussions referred to above, we recommend to the Board that the financial
statements referred to above be included in Fulton’s Annual Report for the year ended December 31, 2021.
Ronald H. Spair, Chair
Denise L. Devine, Vice Chair
Steven S. Etter
George W. Hodges
Ernest J. Waters
NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT [This Page Intentionally Left Blank]
[This Page Intentionally Left Blank]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________________________________________
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021, or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission File Number: 001-39680
_______________________________________________________
FULTON FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania
23-2195389
(State or other jurisdiction of Incorporation or organization)
(I.R.S. Employer Identification No.)
One Penn Square
P. O. Box 4887 Lancaster,
Pennsylvania
(Address of principal executive offices)
17604
(Zip Code)
(717) 291-2411
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $2.50 par value
Depositary Shares, Each Representing 1/40th Interest in a Share of
Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A
Trading Symbol
FULT
FULTP
Name of exchange on which registered
The Nasdaq Stock Market, LLC
The Nasdaq Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically if any, 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 x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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. (Check One):
Large accelerated filer
Non-accelerated filer
x Accelerated filer
¨ Emerging growth company
☐
¨ Smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report.
☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
The aggregate market value of the voting Common Stock held by non-affiliates of the registrant, based on the average bid and asked prices on June 30, 2021,
the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $2.5 billion. The number of shares of the registrant’s
Common Stock outstanding on February 18, 2022 was 160,522,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement of the Registrant for the Annual Meeting of Shareholders to be held on May 17, 2022 are incorporated by reference
in Part III.
1
TABLE OF CONTENTS
Description
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Business ............................................................................................................................................................................
Risk Factors ......................................................................................................................................................................
Unresolved Staff Comments .............................................................................................................................................
Properties ..........................................................................................................................................................................
Legal Proceedings .............................................................................................................................................................
Mine Safety Disclosures ...................................................................................................................................................
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .......
Selected Financial Data .....................................................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operations ...........................................
Quantitative and Qualitative Disclosures About Market Risk ..........................................................................................
Financial Statements and Supplementary Data: ...............................................................................................................
Consolidated Balance Sheets ....................................................................................................................................
Consolidated Statements of Income ..........................................................................................................................
Consolidated Statements of Comprehensive Income ...............................................................................................
Consolidated Statements of Shareholders’ Equity ....................................................................................................
Consolidated Statements of Cash Flows ...................................................................................................................
Notes to Consolidated Financial Statements .............................................................................................................
Management Report On Internal Control Over Financial Reporting .......................................................................
Report of Independent Registered Public Accounting Firm .....................................................................................
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ..........................................
Controls and Procedures ...................................................................................................................................................
Other Information .............................................................................................................................................................
Directors, Executive Officers and Corporate Governance................................................................................................
Executive Compensation ..................................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .........................
Certain Relationships and Related Transactions, and Director Independence .................................................................
Principal Accounting Fees and Services ...........................................................................................................................
Exhibits, Financial Statement Schedules ..........................................................................................................................
Form 10-K Summary ........................................................................................................................................................
Signatures ..........................................................................................................................................................................
Exhibit Index .....................................................................................................................................................................
Note: Some numbers contained in this Report may not sum due to rounding
Page
6
21
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34
34
34
35
39
39
67
72
73
74
75
76
77
129
130
133
133
133
134
134
134
134
134
135
137
138
140
2
FULTON FINANCIAL CORPORATION
GLOSSARY OF DEFINED ACRONYMS AND TERMS
ACL
AFS
ALCO
AML
AOCI
APR
ARC
ARRC
ASC
ASU
ATM
bp or bps
BSA
CARES Act
CCPA
CECL
CET1
CFPB
CFTC
Charter Consolidation
Allowance for Credit Losses
Available for Sale
Asset/Liability Management Committee
Anti-Money Laundering
Accumulated Other Comprehensive Income
Annual percentage rate
Auction Rate Security
Alternative Reference Rates Committee
Accounting Standards Codification
Accounting Standards Update
Automated teller machine
Basis Point(s)
Bank Secrecy Act of 1970, as amended
Coronavirus Aid, Relief, and Economic Security Act
California Consumer Privacy Act
Current Expected Credit Losses
Common Equity Tier 1
Consumer Financial Protection Bureau
Commodity Futures Trading Commission
The 2019 consolidation of two of the Corporation's wholly owned banking
subsidiaries into Fulton Bank
Corporation, Company, we our, or us
Fulton Financial Corporation
COVID-19
CPI
CRA
DIF
Directors' Plan
Dodd-Frank Act
DOJ
DOL
DTAs
EAD
Coronavirus
Consumer Price Index
Community Reinvestment Act
Federal Deposit Insurance Fund
Amended and Restated Directors’ Equity Participation Plan
Dodd-Frank Wall Street Reform and Consumer Protection Act
U.S. Department of Justice
U.S. Department of Labor
Deferred Tax Assets
Exposure at Default
Economic Growth Act
Economic Growth, Regulatory Relief, and Consumer Protection Act
ECOA
Equal Credit Opportunity Act
Employee Equity Plan
Amended and Restated Equity and Cash Incentive Compensation Plan
ESG
ESPP
ETR
Exchange Act
FASB
FCA
FDIC
FDICIA
Environmental, social and governance
Employee Stock Purchase Plan
Effective Tax Rate
Securities Exchange Act of 1934
Financial Accounting Standards Board
United Kingdom Financial Conduct Authority
Federal Deposit Insurance Corporation
Federal Deposit Insurance Corporation Improvement Act
Fed Funds Rate
Target Federal Funds Rate
3
Federal Reserve Board
Board of Governors of the Federal Reserve System
FHLB
FinCEN
Fintechs
FOMC
Federal Home Loan Bank
Financial Crimes Enforcement Network
Financial technology companies
Federal Open Market Committee
Foreign Currency Nostro Accounts
Foreign currency with international correspondent banks
FRB
FSOC
FTE
Fulton Bank or the Bank
GAAP
GLBA
HTM
IDI
LGD
LIBOR
Management's Discussion
MSRs
NDAA
Net Loans
N/M
NMTC
Net Loans
OBS
OCC
OCI
OREO
OTTI
Parent Company
Patriot Act
PD
PPP
PSU
QM
RESPA
ROU
RSU
RWA
SBA
SEC
SOFR
Tax Act
Tax Code
TCI
TDR
TruPS
Federal Reserve Bank
Financial Stability Oversight Council
Fully Taxable-Equivalent
Fulton Bank, N.A.
U.S. Generally Accepted Accounting Principles
Gramm-Leach-Bliley Act
Held to Maturity
Insured depository institution
Loss Given Default
London Interbank Offered Rate
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Mortgage Servicing Rights
National Defense Authorization Act
Loans and Lease Receivables, (net of unearned income)
Not meaningful
New Market Tax Credits
Loans and lease receivables, (net of unearned income)
Off-Balance-Sheet
Office of the Comptroller of the Currency
Other comprehensive income
Other Real Estate Owned
Other-Than-Temporary Impairment
Fulton Financial Corporation individually
USA PATRIOT Act of 2001
Probability of Default
Paycheck Protection Program
Performance-Based Restricted Stock Unit
Qualified mortgage
Real Estate Settlement Procedures Act
Right-of-Use
Restricted Stock Unit
Risk-weighted assets
Small Business Administration
U.S. Securities and Exchange Commission
Secured Overnight Financing Rate
Tax Cuts and Jobs Act of 2017
U.S. Internal Revenue Code of 1986, as amended
Tax Credit Investment
Troubled Debt Restructuring
Trust Preferred Securities
4
TILA
Visa Shares
Volcker Rule Regulators
Truth in Lending Act
Visa, Inc. Class B restricted shares
FDIC, Federal Reserve Board, OCC, Commodity Futures Trading
Commission and U.S. Securities and Exchange Commission
5
PART I
Item 1. Business
General
Fulton Financial Corporation was incorporated under the laws of Pennsylvania on February 8, 1982 and became a bank holding
company through the acquisition of all of the outstanding stock of Fulton Bank on June 30, 1982. In 2000, the Corporation
became a financial holding company as defined in the GLBA, which gave the Corporation the ability to expand its financial
services activities under its holding company structure. See "Competition" and "Supervision and Regulation." The Corporation
directly owns 100% of the common stock of Fulton Bank and eight non-bank entities.
The Corporation's Internet address is www.fultonbank.com. Electronic copies of the Corporation's 2021 Annual Report on
Form 10-K are available free of charge by visiting "Investor Relations" at www.fultonbank.com. Electronic copies of quarterly
reports on Form 10-Q and current reports on Form 8-K are also available at this Internet address. These reports, as well as any
amendments thereto, are posted on the Corporation's website as soon as reasonably practicable after they are electronically filed
with the SEC.
Banking and Financial Services Subsidiary
The Corporation, through its banking subsidiary, Fulton Bank, delivers financial services within its five-state market area
(Pennsylvania, Delaware, Maryland, New Jersey and Virginia) in a personalized, community-oriented style that emphasizes
relationship banking.
The Corporation operates in areas that are home to a wide range of manufacturing, distribution, health care and other service
companies. The Corporation is not dependent upon one or a few customers or any one industry, and the loss of any single
customer or a few customers would not have a material adverse impact on the Corporation. However, a large portion of the
Corporation's loan portfolio is comprised of commercial loans, commercial mortgage loans and construction loans. See Item
1A. "Risk Factors - Economic and Credit Risks - The Corporation's loan portfolio composition and competition for loans
subject the Corporation to credit risk."
The Corporation offers a full range of consumer and commercial banking products and services in its market area. Consumer
banking services include various checking account and savings deposit products, certificates of deposit and individual
retirement accounts. The Corporation offers a variety of consumer lending products to customers in its market areas. Secured
consumer loan products include home equity loans and lines of credit, which are underwritten based on loan-to-value limits
specified in the Corporation's lending policy. The Corporation also offers a variety of fixed, variable and adjustable rate
products, including construction loans and jumbo residential mortgage loans. Residential mortgages are offered through Fulton
Mortgage Company, an operating division of Fulton Bank. Consumer loan products also include automobile loans, personal
lines of credit and checking account overdraft protection.
Commercial banking services are provided primarily to small and medium sized businesses (generally with sales of less than
$150 million) in the Corporation's market area. The Corporation's policies limit the maximum total lending commitment to a
single borrower to $55.0 million as of December 31, 2021, an amount that is significantly below the Corporation's regulatory
lending limit. In addition, the Corporation has established lower total lending limits based on the Corporation's internal risk
rating of the borrower and for certain types of lending commitments. Commercial lending products include commercial real
estate loans, commercial and industrial loans, construction loans and equipment lease financing loans. Variable, adjustable and
fixed rate loans are provided, with variable and adjustable rate loans generally tied to an index, such as the Prime Rate or
LIBOR, as well as interest rate swaps. See Item 1A. "Risk Factors - Market Risks - The replacement of LIBOR as a financial
benchmark presents risks to the financial instruments originated or held by the Corporation." The Corporation's commercial
lending policy encourages relationship banking and provides strict guidelines related to customer creditworthiness and
collateral requirements for secured loans. In addition, equipment lease financing, letters of credit, cash management services
and traditional deposit products are offered to commercial customers.
Wealth management services, which include investment management, trust, brokerage, insurance and investment advisory
services, are offered to consumer and commercial customers in the Corporation's market area by Fulton Financial Advisors, a
division of Fulton Bank.
The Corporation delivers products and services through traditional financial center banking, with a network of financial center
offices. Electronic delivery channels include a network of automated teller machines and telephone, mobile and online banking.
The variety of available delivery channels allows customers to access their account information and perform certain
transactions, such as depositing checks, transferring funds and paying bills, at any time of the day. As of December 31, 2021,
Fulton Bank had 205 financial centers, not including remote service facilities (mainly stand-alone automated teller machines),
6
and its main office located in Lancaster, Pennsylvania. On October 1, 2020, the Corporation announced that Fulton Bank had
approved a plan to close 21 financial center offices and consolidate the operations of those offices into nearby financial centers
operated by the Fulton Bank. The closure and consolidation of those financial center offices was completed on January 8, 2021.
Non-Bank Subsidiaries
The Corporation owns 100% of the common stock of five non-bank subsidiaries, which are consolidated for financial reporting
purposes: (i) Fulton Financial Realty Company, which holds title to or leases certain properties where Corporation financial
centers and other facilities are located; (ii) Central Pennsylvania Financial Corp., which owns limited partnership interests in
partnerships invested primarily in low- and moderate-income housing projects; (iii) FFC Management, Inc., which owns certain
passive investments; (iv) FFC Penn Square, Inc., which owns TruPS issued by a subsidiary of Fulton Bank; and (v) Fulton
Insurance Services Group, Inc., which engages in the sale of various life insurance products.
The Corporation also owns 100% of the common stock of three non-bank subsidiaries that are not consolidated for financial
reporting purposes.
The following table provides information for these non-bank subsidiaries, incorporated in the state of Delaware, whose sole
assets consist of junior subordinated deferrable interest debentures issued by the Corporation, as of December 31, 2021:
Subsidiary
Columbia Bancorp Statutory Trust ................................................................................................... $
Columbia Bancorp Statutory Trust II ...............................................................................................
Columbia Bancorp Statutory Trust III ..............................................................................................
Total Assets
(in thousands)
6,186
4,124
6,186
Competition
The banking and financial services industries are highly competitive. Within its geographic region, the Corporation faces direct
competition from other commercial banks, varying in size from local community banks to regional and national banks, credit
unions and non-bank entities. As a result of the wide availability of electronic delivery channels, the Corporation also faces
competition from financial institutions that do not have a physical presence in the Corporation's geographic markets.
The industry is also highly competitive due to the various types of entities that now compete aggressively for customers that
were traditionally served only by the banking industry. Under the current financial services regulatory framework, banks,
insurance companies and securities firms may affiliate under a financial holding company structure, allowing their expansion
into non-banking financial services activities that had previously been restricted. These activities include a full range of
banking, securities and insurance activities, including securities and insurance underwriting, issuing and selling annuities and
merchant banking activities. Moreover, the Corporation faces increased competition from certain non-bank entities, such as
Fintechs and marketplace lenders that in many cases are not subject to the same regulatory compliance requirements as the
Corporation. While the Corporation does not currently engage in many of the activities described above, entry into these
businesses may enhance the Corporation's competitive position in the future.
Supervision and Regulation
The Corporation operates in an industry that is subject to laws and regulations that are enforced by a number of federal and state
agencies. Changes in these laws and regulations, including interpretation and enforcement activities, could impact the cost of
operating in the financial services industry, limit or expand permissible activities or affect competition among banks and other
financial institutions.
The Corporation is a registered bank holding company that has elected to be treated as a financial holding company under the
BHCA. The Corporation is regulated, supervised and examined by the Federal Reserve Board. Fulton Bank is a national
banking association chartered under the laws of the United States and is primarily regulated by the OCC. In addition, the CFPB
examines Fulton Bank for compliance with most federal consumer financial protection laws, including the laws relating to fair
lending and prohibiting unfair, deceptive or abusive acts or practices in connection with the offer, sale or provision of consumer
financial products or services and for enforcing such laws with respect to Fulton Bank and its affiliates.
Federal statutes that apply to the Corporation and its subsidiaries include the GLBA, the BHCA, the Dodd-Frank Act, the
Federal Reserve Act, the National Bank Act and the Federal Deposit Insurance Act, among others. In general, these statutes,
regulations promulgated thereunder, and related interpretations establish the eligible business activities of the Corporation,
certain acquisition and merger restrictions, limitations on intercompany transactions (such as loans and dividends), cash reserve
requirements, lending limitations, compliance with unfair, deceptive and abusive acts and practices prohibitions, limitations on
7
investments, and capital adequacy requirements, among other things. Such laws and regulations are intended primarily for the
protection of depositors, customers and the DIF, as well as to minimize risk to the banking system as a whole, and, as a result,
these laws and regulations are not for the protection of the Corporation's shareholders or non-depository creditors.
The following discussion is general in nature and seeks to highlight some of the more significant regulatory requirements to
which the Corporation is subject but does not purport to be complete or to describe all applicable laws and regulations.
Governmental and Regulatory Actions to Mitigate the Impact of the COVID-19 Pandemic - The COVID-19 pandemic has
continued to cause extensive disruptions to the global economy, to businesses, and to the lives of individuals throughout the
world. On March 27, 2020, the CARES Act was signed into law. The CARES Act was a $2.2 trillion economic stimulus bill
that was intended to provide relief in the wake of the COVID-19 pandemic. There have also been several regulatory and
legislative actions intended to help mitigate the adverse economic impact of COVID-19 on individuals, including several
mandates from the federal bank regulatory agencies requiring financial institutions to work constructively with borrowers
affected by COVID-19 and mandatory loan forbearances.
The bank regulatory agencies have indicated that adequate flexibility will be given to financial institutions who work with
borrowers affected by COVID-19, and they have indicated that they will not criticize institutions who do so in a safe and sound
manner. The federal bank regulatory agencies have also encouraged financial institutions to report accurate information to
credit bureaus regarding relief provided to borrowers and have urged financial institutions to continue to assist those borrowers
impacted by COVID-19. On April 2, 2020, the bank regulatory agencies issued a joint policy statement to facilitate mortgage
servicers' ability to place consumers in short-term payment forbearance programs. This policy statement was followed by an
interim final rule, on June 23, 2020, that was intended to make it easier for consumers to transition out of financial hardship
caused by COVID-19. The rule provides that servicers do not violate Regulation X (which places restrictions and requirements
upon lenders, mortgage brokers, or servicers of home loans related to consumers when they apply for and receive mortgage
loans) by offering certain COVID-19-related loss mitigation options based on an evaluation of limited application information
collected from the borrower. A final rule issued by the federal bank regulatory agencies on June 28, 2021, permits servicers to
also offer certain COVID-19-related loan modification options based on the evaluation of an incomplete application. Federal
and state moratoria on evictions and foreclosures that were implemented during 2020 in response to COVID-19 were extended
late into 2021. Although these programs generally have expired, governmental authorities may take additional actions in the
future to limit the adverse impact of COVID-19 on borrowers and tenants.
The PPP, originally established under the CARES Act and extended under the Coronavirus Response and Relief Supplemental
Appropriations Act of 2021, authorized financial institutions to make federally-guaranteed loans to qualifying small businesses
and non-profit organizations. These loans carry an interest rate of 1% per annum and a maturity of 2 years for loans originated
prior to June 5, 2020 and 5 years for loans originated on or after that date. The PPP provides that such loans may be forgiven if
the borrowers meet certain requirements with respect to maintaining employee headcount and payroll and the use of the loan
proceeds after the loan is originated. Although the PPP program ended in accordance with its terms on May 31, 2021,
outstanding PPP loans continue to go through the process of either being forgiven by the SBA or having claims pursued under
the SBA guaranty.
The Federal Reserve Board, in cooperation with the Department of the Treasury, has established a number of financing and
liquidity programs to support the participation by banks in COVID-19-related relief programs. The Main Street Lending
Program, which terminated on January 8, 2021, was implemented with the objective of keeping credit flowing to small and
mid-sized businesses that were in sound financial condition before the coronavirus pandemic but needed financing to maintain
operations. The Paycheck Protection Liquidity Facility, which was terminated on July 30, 2021, supplied liquidity to PPP
participating financial institutions through term financing backed by PPP loans, and the Money Market Mutual Fund Liquidity
Facility, which expired on March 31, 2021, was intended to assist money market funds in meeting demands for redemptions by
households and other investors, enhancing overall market functioning and credit provision to the broader economy.
Further, the federal bank regulatory agencies issued several interim final rules throughout the course of 2020 to neutralize the
regulatory capital and liquidity effects for banks that participated in the Federal Reserve Board liquidity facilities and/or
government relief programs. The treatment of PPP loans as liquid assets, as provided by these rules, was effective until July 30,
2021.
BHCA - The Corporation is subject to regulation and examination by the Federal Reserve Board and is required to file periodic
reports and to provide additional information that the Federal Reserve Board may require. The BHCA regulates activities of
bank holding companies, including requirements and limitations relating to capital, transactions with officers, directors and
affiliates, securities issuances, dividend payments and extensions of credit, among others. The BHCA permits the Federal
Reserve Board, in certain circumstances, to issue cease and desist orders and other enforcement actions against bank holding
companies (and their non-banking affiliates) to correct or curtail unsafe or unsound banking practices. In addition, the Federal
Reserve Board must approve certain proposed changes in organizational structure or other business activities before they occur.
The BHCA imposes certain restrictions upon the Corporation regarding the acquisition of substantially all of the assets of, or
direct or indirect ownership or control of, any bank for which it is not already the majority owner.
8
Source of Strength - Federal banking law requires bank holding companies such as the Corporation to act as a source of
financial strength and to commit capital and other financial resources to each of their banking subsidiaries. This support may be
required at times when the Corporation may not be able to provide such support without adversely affecting its ability to meet
other obligations or when, absent such requirements, the Corporation might not otherwise choose to provide such support. If the
Corporation is unable to provide such support, the Federal Reserve Board could instead require the divestiture of the
Corporation's subsidiaries and impose operating restrictions pending the divestiture. If a bank holding company commits to a
federal bank regulator that it will maintain the capital of its bank subsidiary, whether in response to the Federal Reserve Board's
invoking its source of strength authority or in response to other regulatory measures, that commitment will be assumed by the
bankruptcy trustee, and the bank will be entitled to priority payment in respect of that commitment.
The Economic Growth Act - In May 2018, the Economic Growth Act became law. Among other things, the Economic Growth
Act amended certain provisions of the Dodd-Frank Act to raise the total asset threshold for mandatory applicability of enhanced
prudential standards for bank holding companies to $250 billion and to allow the Federal Reserve Board to apply enhanced
prudential standards to bank holding companies with between $100 billion and $250 billion in total assets to address financial
stability risks or safety and soundness concerns. The Economic Growth Act's increased threshold took effect immediately for
bank holding companies with total assets of less than $100 billion, including the Corporation.
The Economic Growth Act also enacted other important changes, for which the banking agencies issued certain corresponding
guidance documents and implementing regulations, including:
•
•
•
•
•
Raising the total asset threshold for Dodd-Frank Act company-run stress tests from $10 billion to $250 billion;
Prohibiting federal banking agencies from imposing higher capital requirements for High Volatility Commercial Real
Estate exposures unless such exposures meet the statutory definition for high volatility acquisition, development or
construction loans in the Economic Growth Act;
Exempting from appraisal requirements certain transactions involving real property in rural areas and valued at less
than $400,000;
Providing that reciprocal deposits are not treated as brokered deposits in the case of a "well capitalized" institution that
received an "outstanding" or "good" rating on its most recent examination to the extent the amount of such deposits
does not exceed the lesser of $5 billion or 20% of the bank's total liabilities; and
Directing the CFPB to provide guidance on the applicability of the TILA-RESPA Integrated Disclosure rule to
mortgage assumption transactions and construction-to-permanent home loans, as well the extent to which lenders can
rely on model disclosures that do not reflect recent regulatory changes.
Given Fulton Bank's size, a number of additional benefits afforded to community banks under applicable asset thresholds are
not available to Fulton Bank.
Consumer Financial Protection Laws and Enforcement - The CFPB and the federal banking agencies continue to focus attention
on consumer protection laws and regulations. The CFPB is responsible for promoting fairness and transparency for mortgages,
credit cards, deposit accounts and other consumer financial products and services and for interpreting and enforcing the federal
consumer financial laws that govern the provision of such products and services. Federal consumer financial laws enforced by
the CFPB include, but are not limited to, the ECOA, TILA, the Truth in Savings Act, Home Mortgage Disclosure Act, RESPA,
the Fair Debt Collection Practices Act, and the Fair Credit Reporting Act. The CFPB is also authorized to prevent any
institution under its authority from engaging in an unfair, deceptive, or abusive act or practice in connection with consumer
financial products and services. As a residential mortgage lender, the Corporation is subject to multiple federal consumer
protection statutes and regulations, including, but not limited to, those statutes and regulations referenced above.
In particular, fair lending laws prohibit discrimination in the provision of banking services. Fair lending laws include ECOA
and the Fair Housing Act, both of which outlaw discrimination in credit and residential real estate transactions on the basis of
prohibited factors including, among others, race, color, national origin, gender, and religion. A lender may be liable for policies
that result in a disparate treatment of, or have a disparate impact on, a protected class of applicants or borrowers. If a pattern or
practice of lending discrimination is alleged by a regulator, then that agency may refer the matter to the DOJ for investigation.
Failure to comply with these and similar statutes and regulations can result in the Corporation becoming subject to formal or
informal enforcement actions, the imposition of civil money penalties and consumer litigation.
The CFPB has exclusive examination and primary enforcement authority with respect to compliance with federal consumer
financial protection laws and regulations by institutions under its supervision and is authorized, individually or jointly with the
federal banking agencies, to conduct investigations to determine whether any person is, or has, engaged in conduct that violates
such laws or regulations. The CFPB may bring an administrative enforcement proceeding or civil action in federal district court.
In addition, in accordance with a memorandum of understanding entered into between the CFPB and the DOJ, the two agencies
have agreed to coordinate efforts related to enforcing the fair lending laws, which includes information sharing and conducting
joint investigations; however, the extent to which such coordination may actually occur is unpredictable and may change over
time as the result of a number of factors, including changes in leadership at the DOJ and CFPB, as well as changes in the
9
enforcement policies and priorities of each agency. As an independent bureau funded by the Federal Reserve Board, the CFPB
may impose requirements that are more stringent than those of the other bank regulatory agencies.
As an IDI with total assets of more than $10 billion, Fulton Bank is subject to the CFPB's supervisory and enforcement
authorities. The Dodd-Frank Act also permits states to adopt stricter consumer protection laws and authorizes state attorneys
general to enforce consumer protection rules issued by the CFPB. As a result, Fulton Bank operates in a stringent consumer
compliance environment.
Ability-to-pay rules and qualified mortgages - Under CFPB rules that implement TILA, mortgage lenders are required to make
a reasonable and good faith determination, based on verified and documented information, that a consumer applying for a
residential mortgage loan has a reasonable ability to repay the loan according to its terms. These rules prohibit creditors, such as
Fulton Bank, from extending residential mortgage loans without regard for the consumer's ability to repay and add restrictions
and requirements to residential mortgage origination and servicing practices. In addition, these rules restrict the imposition of
prepayment penalties and compensation practices relating to residential mortgage loan origination. Mortgage lenders are
required to determine consumers' ability to repay in one of two ways. The first alternative requires the mortgage lender to
consider eight underwriting factors when making the credit decision. The mortgage lender may also originate "qualified
mortgages," which are entitled to a presumption that the creditor making the loan satisfied the ability-to-repay requirements. In
general, a QM is a residential mortgage loan that does not have certain high-risk features, such as negative amortization,
interest-only payments, balloon payments, or a term exceeding 30 years. In addition, to be a QM loan, the points and fees paid
by a consumer cannot exceed 3% of the total loan amount, and the borrower's total debt-to-income ratio must be no higher than
43% (subject to certain limited exceptions for loans eligible for purchase, guarantee or insurance by a government sponsored
enterprise or a federal agency).
In December 2020, the CFPB issued two final rules related to QM loans. The first rule replaces the strict debt-to-income (DTI)
threshold for QM loans and provides that, in addition to existing requirements, a loan receives a conclusive presumption that
the consumer had the ability to repay if the APR does not exceed the average prime offer rate for a comparable transaction by
1.5 percentage points or more as of the date the interest rate is set. Further, a loan receives a rebuttable presumption that the
consumer had the ability to repay if the APR exceeds the average prime offer rate for a comparable transaction by 1.5
percentage points or more but by less than 2.25 percentage points. The second rule creates a new category of "seasoned" QM
loans for those that meet certain performance requirements. Specifically, that rule allows a non-QM loan or a "rebuttable
presumption" QM loan to receive a safe harbor from APR liability at the end of a "seasoning" period of at least 36 months as a
"seasoned QM" if it satisfies certain product restrictions, points-and-fees limits, and underwriting requirements, and the loan
meets the designated performance and portfolio requirements during the "seasoning period." The mandatory compliance date
under the first final rule was July 1, 2021, but was subsequently delayed by the CFPB to October 1, 2022. The second final rule
will apply to covered transactions for which institutions receive an application after the compliance date for the first final rule
Integrated disclosures under the RESPA and the TILA - Under CFPB rules, mortgage lenders are required to provide a loan
estimate, not later than the third business day after submission of a loan application, and a closing disclosure at least three days
prior to the loan closing. The loan estimate must detail the terms of the loan, including, among other things, expenses, projected
monthly mortgage payments and estimated closing costs. The closing disclosure must include, among other things, closing
costs and a comparison of costs reported on the loan estimate to actual charges to be applied at closing.
Volcker Rule - Provisions of the Dodd-Frank Act, commonly known as the "Volcker Rule," prohibit banks and their affiliates
from engaging in proprietary trading and investing in and sponsoring hedge funds and private equity funds and other private
funds that are, among other things, offered within specified exemptions to the Investment Company Act, known as "covered
funds," subject to certain exemptions. In October 2019, the Volcker Rule Regulators finalized amendments, effective on
January 1, 2020, but with a required compliance date of January 1, 2021, to their regulations implementing the Volcker Rule,
tailoring compliance requirements based on the size and scope of a banking entity's trading activities and clarifying and
amending certain definitions, requirements and exemptions. In June 2020, the Volcker Rule Regulators issued a final rule that
modified the Volcker Rule's prohibition on banking entities' investing in or sponsoring "covered funds." The final rule (1)
streamlined the covered funds portion of the rule; (2) addressed the extraterritorial treatment of certain foreign funds; and (3)
permitted banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker
Rule was intended to address.
The Corporation's investing and trading activities have and will continue to depend on, among other things, further rulemaking
and guidance that may be issued by the Volcker Rule Regulators and the development of market practices and standards.
Capital Requirements - The Corporation and Fulton Bank are subject to risk-based requirements and rules issued by the federal
banking agencies (the "Basel III Rules") that are based upon the final framework of the Basel Committee for strengthening
capital and liquidity regulation. Under the Basel III Rules, the Corporation and Fulton Bank apply the standardized approach in
measuring their RWA and regulatory capital.
10
Under the Basel III Rules, the Corporation and Fulton Bank are subject to the following minimum capital ratios:
•
•
•
•
A minimum CET1 capital ratio of 4.50% of RWA;
A minimum Tier 1 capital ratio of 6.00% of RWA;
A minimum Total capital ratio of 8.00% of RWA; and
A minimum Tier 1 leverage ratio (Tier 1 capital to a quarterly average of non-risk weighted total assets) of 4.00%.
The Basel III Rules also included a "capital conservation buffer" of 2.5%, composed entirely of CET1 capital, in addition to the
minimum capital to RWA ratios outlined above, resulting in effective minimum CET1, Tier 1 and total capital ratios of 7.0%,
8.5% and 10.5%, respectively. The capital conservation buffer is designed to absorb losses during periods of economic stress.
Banking institutions with a capital ratio above the minimum, but below the conservation buffer, will face restrictions on
dividends, equity repurchases, and executive compensation based on the amount of the shortfall and the institution's "eligible
retained income" (that is, four quarter trailing net income, net of distributions and tax effects not reflected in net income). If
Fulton Bank fails to maintain the required minimum capital conservation buffer, the Corporation will be subject to limits, and
possibly prohibitions, on its ability to obtain capital distributions from Fulton Bank. If the Corporation does not receive
sufficient cash dividends from Fulton Bank, it may not have sufficient funds to pay dividends on its capital stock, service its
debt obligations or repurchase its common stock. In addition, the restrictions on payments of discretionary cash bonuses to
executive officers may make it more difficult for the Corporation to retain key personnel. As of December 31, 2021, the
Corporation and Fulton Bank exceeded the minimum capital requirements, including the capital conservation buffer, as
prescribed in the Basel III Rules.
The Basel III Rules also provide that the largest banking institutions must adhere to additional countercyclical buffer and
supplementary leverage ratio requirements. The Corporation and Fulton Bank are not presently subject to these requirements.
The Basel III Rules provide for a number of required deductions from and adjustments to CET1. These deductions and
adjustments include, for example, goodwill, other intangible assets, and DTAs that arise from net operating loss and tax credit
carryforwards net of any related valuation allowance. MSRs, DTAs arising from temporary differences that could not be
realized through net operating loss carrybacks and investments in non-consolidated financial institutions must also be deducted
from CET1 to the extent that they exceed certain thresholds. Through subsequent rulemaking, the federal banking agencies
provided certain forms of relief to banking organizations, such as the Corporation and Fulton Bank, that are not subject to the
advanced approaches framework.
The Corporation and Fulton Bank, as non-advanced approaches banking organizations, made a one-time, permanent election
under the Basel III Rules to exclude the effects of certain components of AOCI included in shareholders' equity under GAAP in
determining regulatory capital ratios.
Under the Basel III Rules, certain off-balance sheet commitments and obligations are converted into RWA, that together with
on-balance sheet assets, are the base against which regulatory capital is measured. The Basel III Rules defined the risk-
weighting categories for bank holding companies and banks that follow the standardized approach, such as the Corporation and
Fulton Bank, based on a risk-sensitive analysis, depending on the nature of the exposure.
The Capital Simplifications Rules eliminated the standalone prior approval requirement in the Basel III Capital Rules for any
repurchase of common stock. In certain circumstances, the Corporation's repurchases of its common stock may be subject to a
prior approval or notice requirement under other regulations or policies of the Federal Reserve Board. Any redemption or
repurchase of preferred stock or subordinated debt remains subject to the prior approval of the Federal Reserve Board.
The Basel Committee published the last version of the Basel III accord in 2017, generally referred to as "Basel IV." Among
other things, these standards revise the Basel Committee's standardized approach for credit risk (including by recalibrating risk
weights and introducing new capital requirements for certain "unconditionally cancellable commitments," such as unused credit
card and home equity lines of credit) and provides a new standardized approach for operational risk capital. Under the Basel
framework, these standards will generally be effective on January 1, 2022, with an aggregate output floor phasing in through
January 1, 2027. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to
advanced approaches institutions, and not the Corporation or Fulton Bank. The impact of Basel IV on the Corporation and
Fulton Bank will depend on the manner in which it is implemented by the federal banking agencies. As of December 31, 2021,
the Corporation and Fulton Bank exceed all capital requirements necessary to be deemed “well-capitalized” for all regulatory
purposes under the capital rules.
Stress Testing and Capital Planning - As a result of the Economic Growth Act and implementing regulations adopted by the
Federal Reserve Board and OCC, the Corporation and Fulton Bank are no longer subject to company-run stress testing
requirements under the Dodd-Frank Act. The Federal Reserve Board continues to supervise the Corporation's capital planning
and risk management practices through its regular supervisory process.
11
CECL Transitional Provisions - In June 2016, the FASB issued an accounting standard update, "Financial Instruments-Credit
Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," which replaces the existing "incurred loss"
model for recognizing credit losses with an "expected loss" model referred to as the CECL model. Under the CECL model, the
Corporation is required to present certain financial assets carried at amortized cost, such as loans held for investment and HTM
debt securities, at the net amount expected to be collected. The measurement of expected credit losses is based on information
about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the
collectability of the reported amount. In December 2018, the federal banking agencies approved a final rule modifying their
regulatory capital rules and providing an option to phase in over a period of three years the day-one regulatory capital effects of
the CECL model. The final rule also revised the agencies' other rules to reflect the update to the accounting standards. The new
CECL standard became effective for the Corporation on January 1, 2020. On August 26, 2020, the federal bank regulatory
agencies issued a rule that allows institutions that adopted the CECL accounting standard in 2020 the option to mitigate the
estimated capital effects of CECL for two years, followed by a three-year transition period. Taken together, these measures
offer institutions a transition period of up to five years. The Corporation has elected to avail itself of the transition relief
permitted under applicable regulations.
Prompt Corrective Action - The FDICIA established a system of prompt corrective action to attempt to resolve the problems of
undercapitalized institutions. The FDICIA, among other things, establishes five capital categories for FDIC-insured banks:
"well capitalized,"
"critically
"undercapitalized,"
undercapitalized." An IDI is treated as well capitalized if its total risk-based capital ratio is 10.00% or greater, its Tier 1 risk-
based capital ratio is 8.00% or greater, its CET1 risk-based capital ratio is 6.50% or greater and its Tier 1 leverage capital ratio
is 5.00% or greater, and it is not subject to any order or directive to meet a specific capital level. As of December 31, 2021,
Fulton Bank's capital ratios were above the minimum levels required to be considered "well capitalized" by the OCC.
"significantly undercapitalized" and
"adequately capitalized,"
Under this system, the federal banking agencies are required to take certain, and authorized to take other, prompt corrective
actions against undercapitalized institutions, the severity of which increase as the capital category of an institution declines,
including restrictions on growth of assets and other forms of expansion. Generally, a capital restoration plan must be filed with
the institution's primary federal regulator within 45 days of the date an institution receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." Although prompt corrective action regulations apply only to
depository institutions and not to bank holding companies, the bank holding company must guarantee any such capital
restoration plan in certain circumstances. The liability of the bank holding company under any such guarantee is limited to the
lesser of five percent of the bank's assets at the time it became "undercapitalized" or the amount needed to comply. The bank
holding company might also be liable for civil money damages for failure to fulfill that guarantee. In the event of the
bankruptcy of the bank holding company, such guarantee would take priority over the bank holding company's general
unsecured creditors.
In addition, regulators consider both risk-based capital ratios and other factors that can affect a bank's financial condition,
including (i) concentrations of credit risk, (ii) interest rate risk, and (iii) risks from non-traditional activities, along with an
institution's ability to manage those risks, when determining capital adequacy. This evaluation is made during the institution's
safety and soundness examination. An institution may be downgraded to, or deemed to be in, a capital category that is lower
than is indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory
examination rating with respect to certain matters.
Brokered Deposits - The FDICIA and FDIC regulations limit the ability of an IDI, such as Fulton Bank, to accept, renew or roll
over brokered deposits unless the institution is well-capitalized under the prompt corrective action framework described above,
or unless it is adequately capitalized and obtains a waiver from the FDIC. In addition, less than well-capitalized banks are
subject to restrictions on the interest rates they may pay on deposits. The characterization of deposits as "brokered" may result
in the imposition of higher deposit assessments on such deposits. As mandated by the Economic Growth Act, the FDIC adopted
a final rule in February 2019 to include a limited exception for reciprocal deposits for FDIC-IDIs that are well-rated and well-
capitalized (or adequately capitalized and for which the FDIC-IDI has obtained a waiver from the FDIC as mentioned above).
Under the limited exception, qualified FDIC-IDIs, like Fulton Bank, are able to except from treatment as "brokered" deposits
the lesser of up to $5 billion, or 20% of the institution's total liabilities, in reciprocal deposits.
In December 2020, the FDIC issued a final rule amending its brokered deposits regulation. The rule sought to clarify and
modernize the FDIC's regulatory framework for brokered deposits. Notable aspects of the rule included (i) the establishment of
bright-line standards for determining whether an entity meets the statutory definition of "deposit broker"; (ii) the identification
of a number of business relationships in which the agent or nominee is automatically not deemed to be a "deposit broker'
because their primary purpose is not the placement of funds with depository institutions (the "primary purpose exception"); (iii)
the establishment of a "more transparent" application process for entities that seek to rely upon the "primary purpose
exception", but do not qualify for one of the identified business relationships to which the exception is automatically applicable;
and (iv) the clarification that third parties that have an exclusive deposit-placement arrangement with one IDI is not considered
a "deposit broker." The final rule took effect on April 1, 2021, and full compliance was required by January 1, 2022.
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Loans and Dividends from Bank Subsidiary - There are various restrictions on the extent to which Fulton Bank can make loans
and other extensions of credit (including credit exposure arising from repurchase and reverse repurchase agreements, securities
borrowing and derivative transactions) to, or enter into certain transactions with, its affiliates, which include the Corporation
and its non-bank subsidiaries. In general, these restrictions require that such transactions: (i) are limited, as to any one of the
Corporation or its non-bank subsidiaries, to 10% of Fulton Bank's regulatory capital (20% in the aggregate to all such entities);
(ii) satisfy certain qualitative limitations, including that any covered transaction be made on an arm's length basis; and (iii) in
the case of extensions of credit, be secured by designated amounts of specified collateral.
For safety and soundness reasons, banking regulations also limit the amount of cash that can be transferred from Fulton Bank to
the Parent Company in the form of dividends. Generally, dividends are limited to the lesser of the amounts calculated under an
earnings retention test and an undivided profits test. Under the earnings retention test, without the prior approval of the OCC, a
dividend may not be paid if the total of all dividends declared by a bank in any calendar year is in excess of the current year's
net income combined with the retained net income of the two preceding years. Under the undivided profits test, a dividend may
not be paid in excess of a bank's undivided profits. In addition, banks are prohibited from paying dividends when doing so
would cause them to fall below the regulatory minimum capital levels. See "Note 11 - Regulatory Matters," in the Notes to
Consolidated Financial Statements in Item 8 "Financial Statements and Supplementary Data" for additional information
regarding regulatory capital and dividend and loan limitations.
Federal Deposit Insurance - The deposits of Fulton Bank are insured up to the applicable limits by the DIF, generally up to
$250,000 per insured depositor. Fulton Bank pays deposit insurance premiums based on assessment rates established by the
FDIC. The FDIC has established a risk-based assessment system under which institutions are classified and pay premiums
according to their perceived risk to the DIF. In addition, the FDIC possesses backup enforcement authority over a depository
institution holding company, such as the Corporation, if the conduct or threatened conduct of such bank holding company poses
a risk to the DIF, although such authority may not be used if the bank holding company is generally in sound condition and
does not pose a foreseeable and material risk to the DIF.
FDIC assessment rates for large institutions that have more than $10 billion in assets, such as Fulton Bank, are calculated based
on a "scorecard" methodology that seeks to capture both the probability that an individual large institution will fail and the
magnitude of the impact on the DIF if such a failure occurs that is based primarily on the difference between the institution's
average of total assets and average tangible equity. The FDIC has the ability to make discretionary adjustments to the total
score, up or down, based upon significant risk factors that are not adequately captured in the scorecard. For large institutions,
including Fulton Bank, after accounting for potential base-rate adjustments, the total assessment rate could range from 1.5 to 40
basis points on an annualized basis. An institution's assessment is determined by multiplying its assessment rate by its
assessment base, which is asset based.
The Tax Act disallows the deduction of FDIC deposit insurance premium payments for banking organizations with total
consolidated assets of $50 billion or more. For banks with less than $50 billion in total consolidated assets, such as Fulton
Bank, the premium deduction is phased out based on the proportion of the bank's assets exceeding $10 billion.
AML Requirements and the Patriot Act - The Patriot Act amended the BSA and other AML laws and regulations and imposed
affirmative obligations on a wide range of financial institutions to maintain appropriate policies, procedures and controls to
detect, prevent and report money laundering and terrorist financing.
Among other requirements, the Patriot Act and related regulations impose the following requirements on financial institutions:
•
•
•
•
Establishment of AML programs;
Establishment of a program specifying procedures for obtaining identifying information from customers seeking to
open new accounts, including verifying the identity of customers within a reasonable period of time;
Establishment of enhanced due diligence policies, procedures and controls designed to detect and report money
laundering; and
Prohibition on correspondent accounts for foreign shell banks and compliance with recordkeeping obligations with
respect to correspondent accounts of foreign banks.
Failure to comply with the requirements of the Patriot Act and other AML laws and regulations could have serious legal,
financial, regulatory and reputational consequences. In addition, bank regulators will consider a bank holding company's
effectiveness in combating money laundering when ruling on BHCA and Bank Merger Act applications. In addition, financial
institutions are subject to customer due diligence requirements, issued by the FinCEN, to identify and verify the identity of
natural persons, known as beneficial owners, who own, control, and profit from legal entity customers when those customers
open accounts. The Corporation has adopted policies, procedures and controls to address compliance with the Patriot Act and
other AML laws and regulations, and it will continue to revise and update its policies, procedures and controls to reflect
required changes. See Item 1A. "Risk Factors - Legal, Compliance and Reputational Risks - Failure to comply with the BSA,
the Patriot Act and related AML requirements, or with sanctions laws, could subject the Corporation to enforcement actions,
fines, penalties, sanctions and other remedial actions."
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On January 1, 2021, the NDAA was signed into law, which enacted the most significant overhaul of the BSA and other AML-
related laws since the Patriot Act. Notable aspects of the NDAA include: (i) significant changes to the collection of beneficial
ownership and the establishment of a beneficial ownership registry that requires corporate entities (generally, any corporation,
limited liability company, or other similar entity with 20 or fewer employees and annual gross income of $5 million or less) to
report beneficial ownership information to FinCEN (which will be maintained by FinCEN and made available upon request to
financial institutions); (ii) enhanced whistleblower provisions that provide that one or more whistleblowers who voluntarily
provide original information leading to the successful enforcement of violations of the BSA or other AML-related laws in any
judicial or administrative action brought by the Secretary of the Treasury or the Attorney General resulting in monetary
sanctions exceeding $1 million (including disgorgement and interest but excluding forfeiture, restitution, or compensation to
victims) will receive not more than 30 percent of the monetary sanctions collected and will receive increased protections; (iii)
increased penalties for violations of the BSA; (iv) improvements to existing information sharing provisions that permit financial
institutions to share information relating to suspicious activity reports with foreign branches, subsidiaries, and affiliates (except
those located in China, Russia, or certain other jurisdictions) for the purpose of combating illicit finance risks; and (v) expanded
duties and powers of FinCEN. Many of the new provisions, including those with respect to beneficial ownership, require the
Department of Treasury and FinCEN to promulgate rules. On December 8, 2021, FinCEN issued proposed regulations that
would implement the amendments with respect to beneficial ownership.
Commercial Real Estate Guidance - Under guidance issued by the federal banking agencies, the agencies have expressed
concerns with institutions that ease commercial real estate underwriting standards and have directed financial institutions to
maintain underwriting discipline and exercise risk management practices to identify, measure and monitor lending risks. The
agencies have also issued guidance that requires a financial institution to employ enhanced risk management practices if the
institution is exposed to significant concentration risk. Under that guidance, an institution is potentially exposed to significant
concentration risk if: (i) total reported loans for construction, land development, and other land represent 100% or more of total
capital or (ii) total reported loans secured by multi-family and non-farm residential properties, loans for construction, land
development, and other land loans otherwise sensitive to the general commercial real estate market, including loans to
commercial real estate related entities, represent 300% or more of total capital, and the outstanding balance of the institution's
commercial real estate loan portfolio has increased by 50% or more during the prior 36 months.
Community Reinvestment - Under the CRA, Fulton Bank has a continuing and affirmative obligation, consistent with its safe
and sound operation, to ascertain and meet the credit needs of its entire community, including low- and moderate-income areas.
The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution's
discretion to develop the types of products and services that it believes are best suited to its particular community. The CRA
requires an institution's primary federal regulator, in connection with its examination of the institution, to assess the institution's
record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications
by such institution. The assessment focuses on three tests: (i) a lending test, to evaluate the institution's record of making loans,
including community development loans, in its designated assessment areas; (ii) an investment test, to evaluate the institution's
record of investing in community development projects, affordable housing, and programs benefiting low- or moderate-income
individuals and areas and small businesses; and (iii) a service test, to evaluate the institution's delivery of banking services
throughout its CRA assessment area, including low- and moderate-income areas. The CRA also requires all institutions to make
public disclosure of their CRA ratings. As of December 31, 2021, Fulton Bank was rated as "outstanding." Regulations require
that Fulton Bank publicly disclose certain agreements that are in fulfillment of CRA. Fulton Bank is not a party to any such
agreements at this time. The federal banking agencies have expressed interest in, and the OCC has taken certain steps toward,
reform of the CRA's implementing regulations; however, the agencies have not yet agreed upon a common framework for
reform.
Standards for Safety and Soundness - Pursuant to the requirements of FDICIA, as amended by the Riegle Community
Development and Regulatory Improvement Act of 1994, the federal bank regulatory agencies adopted guidelines establishing
general standards relating to internal controls, information systems, internal audit systems, loan documentation, credit
underwriting, interest rate risk exposure, asset growth, asset quality, earnings, compensation, fees and benefits. In general, the
guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures
specified in the guidelines. In addition, the agencies adopted regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not satisfying any of such safety and soundness standards to submit
a compliance plan. If the institution fails to submit an acceptable compliance plan or fails in any material respect to implement
an accepted compliance plan, the regulator must issue an order directing corrective actions and may issue an order directing
other actions of the types to which a significantly undercapitalized institution is subject under the "prompt corrective action"
provisions of FDICIA. If the institution fails to comply with such an order, the regulator may seek to enforce such order in
judicial proceedings and to impose civil money penalties.
The guidelines prohibit excessive compensation to any executive officer, employee, director or principal shareholder as an
unsafe and unsound practice. The guidelines provide that compensation will be considered excessive when the amounts paid
are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal
shareholder. The federal banking agencies have issued guidance that provides that, to be consistent with safety and soundness
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principles, a banking organization's incentive compensation arrangements should: (i) provide employees with incentives that
appropriately balance risk and reward; (ii) be compatible with effective controls and risk management; and (iii) be supported by
strong corporate governance, including active and effective oversight by the banking organization's board of directors.
Monitoring methods and processes used by a banking organization should be commensurate with the size and complexity of the
organization and its use of incentive compensation.
The Dodd-Frank Act requires federal banking agencies and the SEC to establish joint regulations or guidelines for specified
entities, including the Corporation and Fulton Bank, that have at least $1 billion in total assets, prohibiting incentive-based
compensation arrangements that encourage inappropriate risk-taking by an executive officer, employee, director or principal
shareholder that could lead to material financial loss to the entity. In addition, these regulations or guidelines must require
enhanced disclosure with respect to incentive-based compensation arrangements. The agencies have not yet finalized these
rules; however, on October 14, 2021, the SEC signaled a renewed interest in this rulemaking initiative by re-opening the
comment period on a proposed rule issued originally in 2015 regarding clawbacks of incentive-based executive compensation.
On January 27, 2022, the SEC extended this comment period until March 4, 2022. The scope and content of the federal banking
agencies' policies on executive compensation may continue to evolve in the near future.
Privacy Protection and Cybersecurity - Fulton Bank is subject to regulations implementing the privacy protection provisions of
the GLBA. These regulations require Fulton Bank to disclose its privacy policy, including identifying with whom it shares
"nonpublic personal information," to customers at the time of establishing the customer relationship and annually thereafter.
The regulations also require Fulton Bank to provide its customers with initial and annual notices that accurately reflect its
privacy policies and practices. In addition, to the extent its sharing of such information is not covered by an exception, Fulton
Bank is required to provide its customers with the ability to "opt-out" of having Fulton Bank share a customer's nonpublic
personal information with unaffiliated third parties.
Fulton Bank is also subject to regulatory guidelines establishing standards for safeguarding customer information. These
regulations implement certain provisions of the GLBA. The guidelines describe the federal bank regulatory agencies'
expectations for the creation, implementation and maintenance of an information security program, that includes administrative,
technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its
activities. The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records
and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against
unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any
customer. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes
related to information security and the use of third parties in the provision of financial services.
Certain states have enacted laws establishing consumer privacy protections and data security requirements in their respective
states. For example, the CCPA gives California residents new rights to receive certain disclosures regarding the collection, use,
and sharing of "Personal Information," as well as rights to access, delete, and restrict the sale of certain personal information.
The CCPA, which was amended in November 2020 by a ballot initiative titled the California Privacy Rights Act, went into
effect on January 1, 2020, and Fulton Bank is required to comply with the CCPA in serving the small number of its customers
that are residents of California. Privacy and data security legislation remained a priority issue in 2021. Attempts by state and
local governments to regulate consumer privacy have the potential to create a patchwork of differing and/or conflicting state
regulations. In addition, Congress and federal regulatory agencies are considering similar laws or regulations that could create
new individual privacy rights and impose increased obligations on companies handling personal data. For example, on
November 23, 2021, the federal financial regulatory agencies published a final rule that will impose on banking organizations
and their service providers new notification requirements for significant cybersecurity incidents. Specifically, the final rule
requires banking organizations to promptly notify their primary federal regulator as soon as possible and no later than 36 hours
after the discovery of a "computer security incident" that rises to the level of a "notification incident" within the meaning
attributed to those terms by the final rule. Banks’ services providers are required under the final rule to notify any affected bank
to or on behalf of which the service provider provides services "as soon as possible" after determining that it has experienced an
incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided
to such bank for four or more hours. The final rule will take effect on April 1, 2022, and banks and their service providers must
be in compliance with the requirements of the rule by May 1, 2022.
Federal Reserve System - Federal Reserve Board regulations require depository institutions to maintain cash reserves against
specified deposit liabilities. The dollar amount of a depository institution's reserve requirement is determined by applying the
reserve ratios specified in the Federal Reserve Board's Regulation D to an institution's reservable liabilities (primarily net
transaction accounts such as negotiable order of withdrawal and demand deposit accounts). A reserve of 3% must be
maintained against aggregate transaction account balances of between $16.9 million and $127.5 million (subject to adjustment
by the Federal Reserve Board) plus a reserve of 10% (subject to adjustment by the Federal Reserve Board within a range of
between 8% and 14%) against that portion of total transaction account balances in excess of $127.5 million. The first $16.9
million of otherwise reservable balances (subject to adjustment by the Federal Reserve Board) are exempt from the reserve
requirements. Fulton Bank is in compliance with the foregoing requirements.
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Required reserves must be maintained in the form of either vault cash, an account at a FRB or a pass-through account as
defined by the Federal Reserve Board. Pursuant to the Emergency Economic Stabilization Act of 2008, the FRB pays interest
on depository institutions' required and excess reserve balances. The interest rate paid on required reserve balances is currently
the average target federal funds rate over the reserve maintenance period. The rate on excess balances will be set equal to the
lowest target federal funds rate in effect during the reserve maintenance period.
On December 22, 2020, the Federal Reserve Board issued a final rule that amends Regulation D by lowering the reserve
requirement ratios on transaction accounts maintained at depository institutions to 0%. It is currently unclear if the reduction of
the reserve requirements on transaction accounts is permanent. Any potential impact of the rule on the Bank's lending activities
is also unclear.
Acquisitions - The BHCA requires a bank holding company to obtain the prior approval of the Federal Reserve Board before:
•
•
•
the company may acquire direct or indirect ownership or control of any voting shares of any bank or savings and loan
association, if after such acquisition the bank holding company will directly or indirectly own or control more than five
percent of any class of voting securities of the institution;
the company may acquire direct or indirect ownership or control of any voting shares of any bank or savings and loan
association, if after such acquisition the bank holding company will directly or indirectly own or control more than five
percent of any class of voting securities of the institution; or
the company may merge or consolidate with any other bank or financial holding company.
Prior regulatory approval is also generally required for mergers, acquisitions and consolidations involving other IDIs. In
reviewing acquisition and merger applications, the bank regulatory authorities will consider, among other things, the
competitive effect of the transaction, financial and managerial issues, the capital position of the combined organization,
convenience and needs factors, including the applicant's CRA record, the effectiveness of the subject organizations in
combating money laundering activities, and the transaction's effect on the stability of the U.S. banking or financial system.
On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy. Among
other initiatives, the Executive Order encouraged the federal banking agencies to review their current merger oversight practices
under the BHCA and the Bank Merger Act and adopt a plan for revitalization of such practices. There are many steps that must
be taken by the agencies before any formal changes to the framework for evaluating bank mergers can be finalized and the
prospects for such action are uncertain at this time. The adoption of more expansive or prescriptive standards may have an
impact on the Corporation's acquisition activities.
The Change in Bank Control Act prohibits a person, entity or group of persons or entities acting in concert, from acquiring
"control" of a bank holding company or bank unless the Federal Reserve Board has been given prior notice and has not objected
to the transaction. Under Federal Reserve Board regulations, the acquisition of 10% or more (but less than 25%) of the voting
stock of a corporation would, under the circumstances set forth in the regulations, create a rebuttable presumption of acquisition
of control of the corporation.
Effective September 30, 2020, the Federal Reserve finalized a rule that simplifies and increases the transparency of its rules for
determining when one company controls another company for purposes of the BHCA and, on March 31, 2021, the Federal
Reserve Board published interpretive guidance regarding the final rule and related regulatory control matters. The amended
control rule has had, and will likely continue to have, a meaningful impact on control determinations related to investments in
banks and bank holding companies and investments by bank holding companies in nonbank companies.
Permissible Activities - As a bank holding company, the Corporation may engage in the business of banking, managing or
controlling banks, performing servicing activities for subsidiaries, and engaging in activities that the Federal Reserve Board has
determined, by order or regulation, are so closely related to banking as to be a proper incident thereto. As a financial holding
company, the Corporation may also engage in or acquire and retain the shares of a company engaged in activities that are
financial in nature or incidental or complementary to activities that are financial in nature as long as the Corporation continues
to meet the eligibility requirements for financial holding companies, including that the Corporation and each of its U.S.
depository institution subsidiaries remain "well-capitalized" and "well-managed."
A depository institution is considered "well-capitalized" if it satisfies the requirements of the Prompt Corrective Action
framework described above. A depository institution is considered "well-managed" if it received a composite rating and
management rating of at least "satisfactory" in its most recent examination. If a financial holding company ceases to be well-
capitalized and well-managed, the financial holding company must enter into a non-public confidential agreement with the
Federal Reserve Board to comply with all applicable capital and management requirements. Until the financial holding
company returns to compliance, the Federal Reserve Board may impose limitations or conditions on the conduct of its
activities, and the company may not commence any new non-banking financial activities permissible for financial holding
companies or acquire a company engaged in such financial activities without prior approval of the Federal Reserve Board. If the
company does not timely return to compliance, the Federal Reserve Board may require divestiture of the financial holding
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company's banking subsidiaries. Bank holding companies and banks must also be well-capitalized and well-managed in order to
acquire banks located outside their home state. A financial holding company will also be limited in its ability to commence non-
banking financial activities or acquire a company engaged in such financial activities if any of its IDI subsidiaries fails to
maintain a "satisfactory" rating under the CRA.
Activities that are "financial in nature" include securities underwriting, dealing and market making, advising mutual funds and
investment companies, insurance underwriting and agency, merchant banking, and activities that the Federal Reserve Board, in
consultation with the Secretary of the Treasury, determines to be financial in nature or incidental to such financial activity.
"Complementary activities" are activities that the Federal Reserve Board determines upon application to be complementary to a
financial activity and that do not pose a safety and soundness issue.
Enforcement Powers of Federal Banking Regulators - The Federal Reserve Board and other U.S. banking agencies have broad
enforcement powers with respect to an IDI and its holding company, including the power to (i) impose cease and desist orders,
substantial fines and other civil penalties, (ii) terminate deposit insurance, and (iii) appoint a conservator or receiver. Failure to
comply with applicable laws or regulations could subject the Corporation or Fulton Bank, as well as their officers and directors,
to administrative sanctions and potentially substantial civil and criminal penalties.
In addition, under the BHCA, the Federal Reserve Board has the authority to require a bank holding company to terminate any
activity or to relinquish control of a non-bank subsidiary upon the Federal Reserve Board's determination that such activity or
control constitutes a serious risk to the financial soundness and stability of a depository institution subsidiary of the bank
holding company.
Federal Securities Laws - The Corporation is subject to the periodic reporting, proxy solicitation, tender offer, insider trading,
corporate governance and other requirements under the Exchange Act. Among other things, the federal securities laws require
management to issue a report on the effectiveness of its internal controls over financial reporting. In addition, the Corporation's
independent registered public accountants are required to issue an opinion on the effectiveness of the Corporation's internal
control over financial reporting. These reports can be found in Part II, Item 8, "Financial Statements and Supplementary Data."
Certifications of the Chief Executive Officer and the Chief Financial Officer as required by the Sarbanes-Oxley Act of 2002 and
the resulting SEC rules can be found in the "Signatures" and "Exhibits" sections.
Climate-Related Risk Management and Regulation
In recent years the federal banking agencies have increased their focus on climate-related risks impacting the operations of
banks, the communities they serve and the broader financial system. Accordingly, the agencies have begun to enhance their
supervisory expectations regarding the climate risk management practices of larger banking organizations, including by
encouraging such banks to: (i)ensure that management of climate-related risk exposures has been incorporated into existing
governance structures; (ii) evaluate the potential impact of climate-related risks on the bank’s financial condition, operations
and business objectives as part of its strategic planning process; (iii) account for the effects of climate change in stress testing
scenarios and systemic risk assessments; (iv) revise expectations for credit portfolio concentrations based on climate-related
factors; (v) consider investments in climate-related initiatives and lending to communities disproportionately impacted by the
effects of climate change; (vi) evaluate the impact of climate change on the bank’s borrowers and consider possible changes to
underwriting criteria to account for climate-related risks to mortgaged properties; (vii) incorporate climate-related financial risk
into the bank’s internal reporting, monitoring and escalation processes; (viii) and prepare for the transition risks associated with
the adjustment to a low-carbon economy as well as related changes in laws, regulations, governmental policies, technology, and
consumer behavior and expectations.
On October 21, 2021, the FSOC published a report identifying climate-related financial risks as an "emerging threat" to
financial stability. On December 16, 2021, the OCC issued proposed principles for climate-related financial risk management
for national banks with more than $100 billion in total assets. Although these risk management principles, if adopted as
proposed, would not apply to Fulton Bank based upon its current size, the OCC has indicated that all banks, regardless of their
size, may have material exposures to climate-related financial and other risks that require prudent management. The federal
banking agencies, either independently or on an interagency basis, are expected to adopt a more formal climate risk
management framework for larger banking organizations in the coming months. As climate-related supervisory guidance is
formalized, and relevant risk areas and corresponding control expectations are further refined, the Corporation may be required
to expend significant capital and incur compliance, operating, maintenance and remediation costs in order to conform to such
requirements.
In addition, states are considering taking similar actions on climate-related financial risks, including certain states in which the
Corporation operates. For example, the Governor of Pennsylvania has announced the Pennsylvania Climate Action Plan of
2021 that will, in part, focus on the negative impact businesses have on greenhouse gas emissions. Further, Virginia’s omnibus
Virginia Clean Economy Act enacted provisions with the goal of the Commonwealth being carbon-free by 2045; and, after the
Governor of Maryland reauthorized the Greenhouse Gas Emissions Reduction Act of 2016, the Maryland Department of
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Environment released the 2030 Greenhouse Gas Reduction Act Plan. Once fully implemented, these measures will, at least in
part, focus on the greenhouse gases impact that businesses have in the respective states in which they operate.
Human Capital
The Corporation’s workforce at December 31, 2021 consisted of approximately 3,200 full-time equivalent employees,
compared to approximately 3,300 full-time equivalent employees at December 31, 2020. Workforce numbers can fluctuate over
time, and employee attrition is a function of many factors. In 2021, the Corporation experienced slightly higher vacancy and
turnover than in 2020, similar to many companies.
Employee Engagement and Retention
The Corporation places a premium on having a highly engaged workforce because engaged employees tend to perform at a
higher level, support the Corporation’s success, and are more likely to remain with the organization. The Corporation conducts
an annual survey of its workforce to measure employee engagement, assess employee morale, and help to identify areas of the
employee experience that could be improved. The Corporation then tasks its leaders to develop and implement communication
and action plans aimed at engaging with their respective teams to gain a better understanding of the results of the assessment,
and to foster enhanced future engagement.
Leaders at the Corporation are held accountable for employee engagement scores for the teams they lead as each leader’s
engagement score is included in their annual performance review. Additionally, aggregated employee engagement assessment
results are reported to the Corporation’s Board of Directors, as a key indicator to the health and well-being of the workforce.
Culture, Diversity and Inclusion
The Corporation believes that building relationships matters. This belief includes relationships with clients and customers and
relationships among employees. In recent years, the Corporation has placed significant emphasis on developing its corporate
culture, and now considers its culture to be one of the primary components of its continuing success. The Corporation’s culture-
shaping program, The Fulton Experience, is a highly engaging program that is intended to spark new ways of thinking about
employees’ individual roles, how employees collaborate, and how employees and the Corporation grow together. The
Corporation believes that it succeeds as a company because it values the teamwork of its employees and fosters a culture around
that belief. More recently, the Corporation has been applying that same emphasis to the development of a diverse, equitable,
and inclusive workforce. The Corporation recognizes that having a diverse, equitable, and inclusive culture and workforce
encourages employees to share their opinions and different perspectives, fosters a culture of respect, and are crucial elements of
a successful organization. In 2021, the Corporation undertook many initiatives to increase diversity, equity, and inclusion
including, but not limited to, providing allyship training to leaders, conducting senior leader listening tours on diversity, equity
and inclusion topics, and supporting the launch of several employee resource groups.
Compensation and Rewards
The Corporation invests in its workforce by offering competitive salaries, incentives, and benefits that are part of the
Corporation’s pay for performance culture. This is implemented through a number of incentive programs that are tailored to
drive performance in the business units as well as at the corporate level.
Workforce Recruitment and Development
The Corporation recruits its workforce, filling both vacant and new positions, largely through the posting of such positions on
its own website, on social media platforms, and through talent recruiting efforts by internal and third- party recruiters. The
Corporation provides for professional development of new and existing employees largely through the efforts of its Center for
Learning and Talent Development that develops and administers a wide variety of training programs for professional
development. The Corporation also provides for a number of off-site, third-party offerings in which employees can further
enhance their skills, knowledge and leadership potential. One such example, afforded to employees with future leadership
potential, is through the Corporation’s participation in the Stonier School of Banking sponsored by the American Bankers
Association.
COVID-19 Response
During 2021, the Corporation continued to navigate the COVID-19 environment. From the start of the COVID-19 pandemic,
the Corporation has been committed to supporting its employees, customers, and communities. The Corporation adheres to the
Centers for Disease Control and states’ guidance in supporting the safety of employees and customers, and the Corporation
continues to encourage, and provides incentives, to employees to get vaccinated.
The safety, health and wellness of the Corporation’s employees remains a top priority. The COVID-19 pandemic continues to
be a unique challenge with regard to maintaining workforce safety while continuing successful operations, particularly at
financial center locations where employees routinely interact with the public.
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Executive Officers
The executive officers of the Corporation are as follows:
Name
Age
Office Held and Term of Office
E. Philip Wenger
64 Director of the Corporation since 2009 and Director of Fulton Bank, N.A since 2019.
Chairman of the Board and Chief Executive Officer of the Corporation since January 2013.
Mr. Wenger previously served as President of the Corporation from 2008 to 2017, Chief
Operating Officer of the Corporation from 2008 to 2012, a Director of Fulton Bank, N.A.
from 2003 to 2009, Chairman of Fulton Bank, N.A. from 2006 to 2009 and has been
employed by the Corporation in a number of positions since 1979.
Mark R. McCollom
57
Senior Executive Vice President and Chief Financial Officer of the Corporation since March
of 2018. Mr. McCollom joined the Corporation in November 2017 as Senior Executive Vice
President and Chief Financial Officer Designee. Before joining the Corporation he was a
Senior Managing Director, Chief Administrative Officer and COO of Griffin Financial
Group, LLC. Prior to his role at Griffin Financial Group, Mr. McCollom was the Chief
Financial Officer of Sovereign Bancorp, Inc. He has over 30 years of experience in the
financial services industry.
Curtis J. Myers
53 Director of the Corporation since 2019 and Director of Fulton Bank, N.A. since 2009.
President and Chief Operating Officer of the Corporation since January 1, 2018. Chairman
and Chief Executive Officer of Fulton Bank, N.A. since May 2018. Mr. Myers served as
Senior Executive Vice President of the Corporation from July 2013 to December 2017.
President and Chief Operating Officer of Fulton Bank, N.A. since February 2009. He served
as Executive Vice President of the Corporation since August 2011. Mr. Myers has been
employed by Fulton Bank, N.A. in a number of positions since 1990.
David M. Campbell
60
Senior Executive Vice President, and Director of Strategic Initiatives and Operations since
December 2014. Mr. Campbell joined the Corporation as Chief Administrative Officer of
Fulton Financial Advisors, a division of Fulton Bank, N.A. in 2009, and was promoted to
President of Fulton Financial Advisors in 2010. He has more than 30 years of experience in
financial services.
Beth Ann L. Chivinski
61
Senior Executive Vice President and Chief Risk Officer of the Corporation effective June 1,
2016. Previously, she served as the Corporation’s Chief Audit Executive April 2013 to June
2016 and was promoted to Senior Executive Vice President of the Corporation in 2014. Prior
to that, she served as the Corporation’s Executive Vice President, Controller and Chief
Accounting Officer from June 2004 to March 31, 2013. Ms. Chivinski has worked in various
positions with the Corporation since 1994.
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Name
Age
Office Held and Term of Office
Natasha R. Luddington
47
Senior Executive Vice President, Chief Legal Officer and Corporate Secretary effective
December 31, 2021. Ms. Luddington became the Senior Executive Vice President, Chief
Legal Officer and Corporate Secretary (Designee) of the Corporation in October 2021. Prior
to joining the Corporation, Ms. Luddington served as Senior Vice President, Associate
General Counsel and Interim General Counsel at Pacific Western Bank. Ms. Luddington has
more than 20 years of experience Working in financial services law beginning with work at
several law firms, including Fried, Frank, Harris, Shriver & Jacobson LLP in Washington,
D.C.
Meg R. Mueller
57
Senior Executive Vice President and Head of Commercial Business since January 1, 2018.
Ms. Mueller served as Chief Credit Officer of the Corporation from 2010 - 2017 and was
promoted to Senior Executive Vice President of the Corporation in 2013. Ms. Mueller has
been employed by the Corporation in a number of positions since 1996.
Angela M. Sargent
54
Senior Executive Vice President and Chief Information Officer of the Corporation since July
2013. Ms. Sargent served as Executive Vice President and Chief Information Officer from
2002 to 2013 and has been employed by the Corporation in a number of positions since
1992.
Angela M. Snyder
57
Senior Executive Vice President and Head of Consumer Banking since January 1, 2018. She
heads the Corporation's Consumer Banking line of business. Ms. Snyder joined the
Corporation in 2002 as President of Woodstown National Bank she then served as
Chairwoman, President and CEO of Fulton Bank of New Jersey until 2019, when the
Corporation consolidated that bank into Fulton Bank, N.A. She has more than 30 years of
experience in the financial services industry.
Daniel R. Stolzer
65
Bernadette M. Taylor
60
Senior Executive Vice President, Chief Legal Officer and Corporate Secretary from January
1, 2018 to December 31, 2021 when he retired as a member of the Corporation's senior
management team. Mr. Stolzer joined the Corporation in 2013 as Executive Vice President,
General Counsel and Corporate Secretary. Prior to joining the Corporation, Mr. Stolzer
served as Chief Counsel - Special Projects at PNC Financial Services Group in Pittsburgh,
PA and Deputy General Counsel at KeyCorp in Cleveland, OH. He has more than 30 years
of experience working in financial services law beginning with work at several law firms,
including Cadwalader, Wickersham & Taft in New York City where he was a member of the
Corporate Securities and Capital Markets practice groups.
Senior Executive Vice President, and Chief Human Resource Officer since May 2015. In
2001, she was promoted to Senior Vice President of employee services. She served as
Executive Vice President of employee services, employment, and director of human
resources before her promotion in 2015 to Chief Human Resources Officer. Dr. Taylor
joined the Corporation in 1994 as Corporate Training Director at Fulton Financial
Corporation.
(1) As of December 31, 2021
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Item 1A. Risk Factors
An investment in our securities involves certain risks, including, among others, the risks described below. In addition to the
other information contained in this Report, you should carefully consider the following risk factors.
ECONOMIC AND CREDIT RISKS.
Difficult conditions in the economy and the financial markets may materially adversely affect our business, results of
operations and financial condition.
Our results of operations and financial condition are affected by conditions in the economy and the financial markets generally.
Our financial performance is highly dependent upon the business environment in the markets where we operate and in the
United States as a whole. Unfavorable or uncertain economic and market conditions can be caused by: declines in economic
growth, business activity or investor or business confidence; limitations on the availability, or increases in the cost, of credit and
capital; changes in the rate of inflation or in interest rates; high unemployment; labor shortages; governmental fiscal and
monetary policies; the level of, or changes in, prices of raw materials, goods or commodities; supply chain issues; global
economic conditions; trade policies and tariffs affecting other countries as well as retaliatory policies and tariffs by such
countries; geopolitical events, including escalating military tension between Russia and Ukraine; natural disasters; public health
crises, such as epidemics and pandemics; acts of war or terrorism; or a combination of these or other factors.
Specifically, the business environment impacts the ability of borrowers to pay interest on, and repay principal of, outstanding
loans and the value of collateral, if any, securing those loans, as well as demand for loans and other products and services we
offer. There continues to be significant ongoing financial risk facing the U.S. economy that could negatively impact the quality
of our loan portfolio. As a result, we may have to increase our provision for credit losses, which would negatively impact our
results of operations, and could result in charge-offs of a higher percentage of our loans. Unlike large, national institutions, we
are not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies and
geographic locations. If the communities in which we operate do not grow, or if prevailing economic conditions locally or
nationally are unfavorable, our business could be adversely affected. In addition, increased market competition in a lower
demand environment could adversely affect our profit potential.
The COVID-19 pandemic has adversely affected, and will likely continue to adversely affect, our business, results of
operations and financial condition for an indefinite period.
The COVID-19 pandemic has caused substantial disruptions in economic and social activity, both globally and in the United
States. The spread of COVID-19, and related governmental actions to respond to the pandemic have caused severe disruptions
in the U.S. economy, which have, in turn, disrupted, and will likely continue to disrupt, the business, activities, and operations
of our customers as well as our own business and operations. In many locations throughout the U.S., the spread of COVID-19
decreased through much of 2021. However, due in large part to the increased spread of a new, more transmissible coronavirus
variant, the number of individuals diagnosed with COVID-19 in the U.S. increased substantially late in 2021 causing continued
governmental responses. The resulting impacts of the pandemic have continued to cause changes in consumer and business
spending, borrowing needs and saving habits that have and will likely continue to affect the demand for loans and other
products and services we offer as well as the creditworthiness of our borrowers and guarantors. The significant impact on
commercial activity and disruptions in supply chains associated with the pandemic, both nationally and in our markets, may
cause customers, vendors and counterparties to be unable to meet existing payment or other obligations to us. While
employment and the national economy are showing signs of recovery, there is still significant uncertainty concerning the
breadth and duration of the economic and social disruptions caused by the COVID-19 pandemic and their impact on the U.S.
economy. The extent to which the pandemic continues to impact our operations will depend on future developments, which are
highly uncertain and cannot be predicted, including new information which may emerge concerning the continuing progression
of the COVID-19 pandemic, whether there are additional outbreaks of COVID-19 and its variants, including vaccine-resistant
variants, and the actions taken to contain it or treat its impact.
Moreover, although multiple COVID-19 vaccines and booster vaccines have received regulatory approval and are currently
being distributed throughout the U.S. and the world, a significant portion of the population remains unvaccinated. If the
pandemic continues to cause significant negative impacts to economic conditions, our results of operations, financial condition
and cash flows could be materially adversely impacted.
Our business is dependent upon the willingness and ability of our customers to conduct banking and other financial
transactions. In an effort to mitigate the spread of COVID-19, we have has adjusted service models at certain of our financial
center locations, including limiting some locations to drive-up and ATM services only, offering lobby access by appointment
only, and encouraging our customers to use electronic banking platforms. We expect some of these measures to remain in place
permanently. The increased use of electronic banking platforms by our customers may expose us to increased operational risks,
including fraud and cybersecurity risks. A significant portion of our employees have transitioned to remote or hybrid onsite-
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remote working arrangements as a result of the COVID-19 pandemic, which, in addition to requiring added support from our
information technology infrastructure, increases cybersecurity risks. The continued spread of COVID-19 (or an outbreak of a
similar highly contagious disease) could also negatively impact the business and operations of third-party service providers who
perform critical services for our business. It is not yet known what impact these operational changes may have on our financial
performance.
There continues to be broad concerns related to the COVID-19 pandemic impact. The aftereffects of the pandemic may
continue to have an adverse effect on, among other things, (i) our ability to attract customer deposits, (ii) the ability of our
borrowers to satisfy their obligations, (iii) the demand for our loans or other products and services, and/or (iv) unemployment
rates, financial markets, real estate markets or economic growth. Further, the timing and ability of our customers' businesses to
ramp up to prior levels of activity will vary, depending upon geography, industry and other factors.
The COVID-19 pandemic and its impact on the economy heightens the risk associated with many of the risk factors described
in this Report, including those related to economic conditions in our market areas, interest rates, loan losses, operational risks,
our reliance on our executives and third-party service providers and goodwill and intangible assets impairment.
Governmental and regulatory actions to mitigate the COVID-19 impact could increase regulatory compliance risks and
result in a material decline in our earnings.
There have been several regulatory and legislative actions intended to help mitigate the adverse COVID-19 economic impact on
individuals, including mandates requiring financial institutions to work constructively with borrowers affected by COVID-19,
temporary bans on evictions and foreclosures and mandatory loan forbearances. Due to the unforeseen nature of the pandemic,
future regulatory action is uncertain and cannot be predicted. In addition, our administration of COVID-19 relief programs is
likely to be subject to greater regulatory scrutiny.
We have offered, and may continue to offer, payment deferrals, forbearances, fee waivers, and other forms of assistance to
commercial, small business and consumer customers impacted by the COVID-19 pandemic. If these customers are unable to
repay their loans in a timely manner when payment deferrals, forbearances or other forms of assistance end, delinquency levels
may increase, we may be required to reverse the accrual of interest during the deferral or forbearance period, and we may need
to increase our ACL through provisions for credit losses. In addition, the existence of deferrals, forbearances and other forms of
assistance provided to borrowers impacted by the COVID-19 pandemic may not be considered TDRs or be required to be
reflected as delinquent during the applicable deferral or forbearance period, thus potentially making it more challenging to
identify deterioration in individual borrower performance and in the loan portfolio generally. See Item 1. "Business-Supervision
and Regulation-Governmental and Regulatory Actions to Mitigate the Impact of the COVID-19 Pandemic."
We originated a significant number of loans under the PPP, which may expose us to potential risks and may result in a
large number of such loans remaining on our consolidated balance sheets.
We were a participating lender under the PPP, a loan program administered through the SBA, that was created to help eligible
businesses, organizations and self-employed persons fund their operating costs during the COVID-19 pandemic. There are
areas of ambiguity in the laws, regulations and guidance relating to the operation of the PPP that exposes us to potential risks
relating to non-compliance with the PPP requirements. For example, other lenders have been named in litigation related to their
processes and procedures for accepting and processing PPP loan applications as well as other matters related to PPP loans. In
addition, we may be exposed to credit risk in connection with PPP loans if a determination is made by the SBA that a
deficiency exists in the manner in which the PPP loan was originated, funded or serviced. If a deficiency is identified, the SBA
may deny or limit its liability under its guaranty or seek to recover from us amounts paid pursuant to its guaranty. Further, in
light of the speed at which the PPP was implemented, particularly due to the "first come, first served" nature of the program, the
loans originated under the PPP may present potential fraud risk, increasing the risk that loan forgiveness may not be obtained
by the borrowers and that the SBA guarantee may not be honored. In addition, there is risk that the borrowers may not qualify
for the loan forgiveness feature due to the conduct of the borrower after origination of the loan. These factors may result in a
significant amount of these low-yield loans remaining outstanding for a significant period of time.
Although the PPP, by its terms, ended as of May 31, 2021, we continue to face increased operational demands and pressures in
connection with monitoring and servicing PPP loans, processing applications for loan forgiveness and pursuing recourse under
the SBA guarantees and against borrowers for PPP loan defaults. See Item 1. "Business-Supervision and Regulation-
Governmental and Regulatory Actions to Mitigate the Impact of the COVID-19 Pandemic."
We are subject to certain risks in connection with the establishment and level of our ACL.
The ACL consists of the ACL – Loans that is recorded as a reduction to loans on the consolidated balance sheets, and the ACL
for OBS credit exposures that is included in other liabilities on the consolidated balance sheets. While we believe that our ACL
as of December 31, 2021 was sufficient to cover expected future credit losses in our financial instruments, principally the loan
portfolio and OBS credit exposures, as of that date, we may need to increase our provision for credit losses in future periods due
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to changes in the risk characteristics of the loan portfolio or OBS credit exposures, forecasted economic conditions and growth
in the loan portfolio or OBS credit exposures, among other factors, thereby negatively impacting our results of operations. The
determination of the ACL depends significantly upon our 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, as well as changes in lending policy, the nature and volume
of the portfolio, credit concentrations, specific industry risks, competition, model imprecision and legal and regulatory
requirements. If our assumptions and judgments prove to be inaccurate, our ACL might not be sufficient and additional
provisions for credit losses might need to be made. Depending on the amount of such provisions for credit losses, the adverse
impact on our earnings could be material.
Furthermore, banking regulators may require us to make additional provisions for credit losses or otherwise recognize further
loan charge-offs or impairments following their periodic reviews of our loan portfolio, underwriting procedures and the ACL.
Any increase in the ACL or loan charge-offs required by such regulatory agencies could have a material adverse effect on our
financial condition and results of operations. See "Note 1 - Summary of Significant Accounting Policies – Allowance for Credit
Losses" in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data" and Item
7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition-Allowance
for Credit Losses and Asset Quality."
Our loan portfolio composition and competition for loans subject us to credit risk.
At December 31, 2021, approximately 69% of our loan portfolio was in commercial loans, including PPP loans, commercial
mortgage loans, and residential and commercial construction loans. Commercial loans, commercial mortgage loans and
construction loans generally involve a greater degree of credit risk than residential mortgage loans and consumer loans because
these loans are likely to be more sensitive to broader economic factors and conditions. Because payments on these loans often
depend on the successful operation and management of borrowers' businesses and properties, repayment of such loans may be
affected by factors outside the borrower's control, including adverse conditions in the real estate markets, adverse economic
conditions or changes in governmental regulation. In addition, these loans typically have relatively large balances and the
deterioration of one or a few of these loans could cause a significant increase in the percentage of non-performing loans. An
increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for loan losses
and an increase in charge-offs, all of which could have a material adverse effect on our financial condition and results of
operations.
Furthermore, intense competition among both bank and non-bank lenders could increase pressure on us to relax our credit
standards and/or underwriting criteria in order to achieve our loan growth targets potentially resulting in greater challenges in
the repayment or collection of loans if economic conditions, or individual borrower performance, deteriorate. Additionally,
competitive pressures could drive us to consider loans and customer relationships that are outside of our established risk
appetite or target customer base, posing similar repayment and collection risk. See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Financial Condition-Loans."
MARKET RISKS.
We are subject to interest rate risk.
We cannot predict or control changes in interest rates. We are affected by fiscal and monetary policies of the federal
government, including those of the Federal Reserve Board that regulates the national money supply and engages in other
lending and investment activities in order to manage recessionary and inflationary pressures, many of which affect interest rates
charged on loans and paid on deposits.
In response to the economic conditions resulting from the COVID-19 pandemic, the Federal Reserve Board's target federal
funds rate has been reduced to nearly 0%. However, in the midst of rising inflation and pressure to raise interest rates, in its
FOMC policy statement issued on January 26, 2022, the Federal Reserve Board strongly signaled that it will soon be time to
raise the target range for the Fed Funds Rate. We cannot predict the nature or timing of any future changes in monetary, fiscal,
tax and other policies; however, as discussed below, such changes are likely to affect our activities and financial results.
Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing
liabilities. Net interest income is the most significant component of our net income, accounting for approximately 73% of total
revenues in 2021. Changes in market interest rates, in the shape of the yield curve or in spreads between different market
interest rates can have a material effect on our net interest margin. The rates on some interest-earning assets, such as loans and
investments, and interest-bearing liabilities, such as deposits and borrowings, adjust concurrently with, or within a brief period
after, changes in market interest rates, while others adjust only periodically or not at all during their terms. Thus, changes in
market interest rates might, for example, result in an increase in the interest paid on interest-bearing liabilities that is not
accompanied by a corresponding increase in the interest earned on interest-earning assets, or the increase in interest earned
23
might be at a slower pace, or in a smaller amount, than the increase in interest paid, reducing our net interest income and/or net
interest margin. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Net
Interest Income."
Changes in interest rates may also affect the average life of loans and certain investment securities, including mortgage-backed
securities. Increases in interest rates may extend the average life of fixed rate assets potentially restricting our ability to reinvest
in higher yielding alternatives, reduce demand for loans and may result in customers withdrawing certificates of deposit early.
Conversely, decreases in interest rates can result in increased prepayments of loans and certain investment securities, as
borrowers or issuers refinance to reduce their borrowing costs. Under those circumstances, we would be subject to reinvestment
risk to the extent that we are not able to reinvest the money received from such prepayments at rates that are comparable to the
rates on the loans and investment securities that are prepaid.
Changes in interest rates also affect the fair value of interest-earning investment securities. Generally, the value of interest-
earning investment securities moves inversely with changes in interest rates. In the event that the fair value of an investment
security declines below its amortized cost, we are required to determine whether the decline constitutes an OTTI. The
determination of whether a decline in fair value is other-than-temporary depends on a number of factors, including whether we
have the intent and ability to retain the investment security for a period of time sufficient to allow for any anticipated recovery
in fair value. If a determination is made that a decline is other-than-temporary, an OTTI charge is recorded.
The replacement of LIBOR as a financial benchmark presents risks to the financial instruments we originated or hold.
LIBOR is the reference rate used for many our transactions, including variable and adjustable rate loans, derivative contracts,
borrowings and other financial instruments. A reduced volume of interbank unsecured term borrowing, coupled with legal and
regulatory proceedings related to rate manipulation by certain financial institutions, led to international reconsideration of
LIBOR as a financial benchmark. The FCA announced in July 2017 that the sustainability of LIBOR cannot be guaranteed.
Accordingly, although the FCA confirmed the extension of overnight and 1-, 3-, 6- and 12-month LIBOR through June 30,
2023 in order to provide financial institutions greater time to manage the transition from LIBOR, the FCA is no longer
persuading, or compelling, banks to submit rates for the calculation of LIBOR. The federal banking regulatory agencies,
including the OCC, previously determined that banks must cease entering into any new contract that uses LIBOR as a reference
rate by no later than December 31, 2021. In addition, banks have been encouraged to identify contracts that extend beyond June
30, 2023 and implement plans to identify and address insufficient contingency provisions in those contracts.
While there is no consensus on what rate or rates may become accepted alternatives to LIBOR, the OCC has opined that
national banks may use any reference rate for loans that a bank determines to be appropriate for its funding model and customer
needs. Industry groups and certain committees (e.g., the ARRC) have, among other things, published recommended fallback
language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., the SOFR
as the recommended alternative to U.S. Dollar LIBOR), and proposed implementation of the recommended alternatives in
floating rate instruments. At this time, it is not possible to predict whether these recommendations and proposals will be broadly
accepted, whether they will continue to evolve, and what the effect of their implementation may be on the markets for floating-
rate financial instruments. The uncertainty surrounding potential reforms, including the use of alternative reference rates and
changes to the methods and processes used to calculate rates, may have an adverse effect on the trading market for LIBOR-
based securities, loan yields, and the amounts received and paid on derivative contracts and other financial instruments. In
addition, the implementation of LIBOR reform proposals has and will continue to result in increased compliance and
operational costs.
Changes in interest rates can affect demand for our products and services.
Movements in interest rates can cause demand for some of our products and services to be cyclical. For example, demand for
residential mortgage loans has historically tended to increase during periods when interest rates were declining and to decrease
during periods when interest rates were rising. As a result, we may need to periodically increase or decrease the size of certain
of our businesses, including our personnel, to match increases and decreases in demand and volume. The need to change the
scale of these businesses is challenging, and there is often a lag between changes in the businesses and our reaction to these
changes.
Price fluctuations in securities markets, as well as other market events, such as a disruption in credit and other markets and
the abnormal functioning of markets for securities, could have an impact on our results of operations.
The market value of our securities investments, which include mortgage-backed securities, state and municipal securities,
auction rate securities, and corporate debt securities are particularly sensitive to price fluctuations and market events. Declines
in the values of our securities holdings, combined with adverse changes in the expected cash flows from these investments,
could result in OTTI charges.
24
Our investment management and trust services revenue, which is partially based on the value of the underlying investment
portfolios, can also be impacted by fluctuations in the securities markets. If the values of those investment portfolios decrease,
whether due to factors influencing U.S. or international securities markets, in general, or otherwise, our revenue could be
negatively impacted. In addition, our ability to sell our securities brokerage services is dependent, in part, upon consumers' level
of confidence in securities markets. See Item 7A. "Quantitative and Qualitative Disclosures About Market Risk."
LIQUIDITY RISK.
Changes in interest rates or disruption in liquidity markets may adversely affect our sources of funding.
We must maintain sufficient sources of liquidity to meet the demands of our depositors and borrowers, support our operations
and meet regulatory expectations. Our liquidity management policies and practices emphasize core deposits and repayments
and maturities of loans and investments as our primary sources of liquidity. These primary sources of liquidity can be
supplemented by FHLB advances, borrowings from the FRB, proceeds from the sales of loans and use of our liquidity
resources, including capital markets funding. Lower-cost, core deposits may be adversely affected by changes in interest rates,
and secondary sources of liquidity can be more costly to us than funding provided by deposit account balances having similar
maturities. In addition, adverse changes in our results of operations or financial condition, downgrades in our credit ratings,
regulatory actions involving us, or changes in regulatory, industry or market conditions could lead to increases in the cost of
these secondary sources of liquidity, the inability to refinance or replace these secondary funding sources as they mature, or the
withdrawal of unused borrowing capacity under these secondary funding sources.
We rely on customer deposits as our primary source of funding. A substantial majority of our deposits are in non-maturing
accounts that customers can withdraw on demand or upon several days' notice. Factors, many of which are outside our control,
can cause fluctuations in both the level and cost of customer deposits. These factors include competition for customer deposits
from other financial institutions and non-bank competitors, changes in interest rates, the rates of return available from
alternative investments or asset classes, changes in customer confidence in us or in financial institutions generally, and the
liquidity needs of our deposit customers. Further, deposits from state and municipal entities, primarily in non-maturing, interest-
bearing accounts, are a significant source of deposit funding for us, representing approximately 11% of total deposits at
December 31, 2021. State and municipal customers frequently maintain large deposit account balances substantially in excess
of the FDIC insurance limit, and these depositors may be more sensitive than other depositors to changes in interest rates.
Advances in technology, such as online banking, mobile banking, digital payment platforms and the acceleration of financial
technology innovation, have also made it easier to move money, potentially causing customers to switch financial institutions or
switch to non-bank competitors. Movement of customer deposits into higher-yielding deposit accounts we offer, the need to
offer higher interest rates on deposit accounts to retain customer deposits, or the movement of customer deposits into alternative
investments or deposits of other banks or non-bank providers could increase our funding costs, reduce our net interest margin
and/or create liquidity challenges.
Market conditions have been negatively impacted by disruptions in the liquidity markets in the past, and such disruptions or an
adverse change in our results of operations or financial condition could, in the future, have a negative impact on secondary
sources of liquidity. If we are not able to continue to rely primarily on customer deposits to meet our liquidity and funding
needs, access secondary, non-deposit funding sources on favorable terms or otherwise fail to manage our liquidity effectively,
our ability to continue to grow may be constrained, and our liquidity, operating margins, results of operations and financial
condition may be materially adversely affected. See Item 7A. "Quantitative and Qualitative Disclosures About Market Risk-
Interest Rate Risk, Asset/Liability Management and Liquidity."
LEGAL, COMPLIANCE AND REPUTATIONAL RISKS.
We are subject to extensive regulation and supervision and may be adversely affected by changes in laws and regulations or
any failure to comply with laws and regulations.
Virtually every aspect of our operations is subject to extensive regulation and supervision by federal and state regulatory
agencies, including the Federal Reserve Board, OCC, FDIC, CFPB, DOJ, UST, SEC, HUD, DOL, state attorneys general and
state banking, financial services, securities and insurance regulators. Under this regulatory framework, regulatory agencies have
broad authority in carrying out their supervisory, examination and enforcement responsibilities to address compliance with
applicable laws and regulations, including laws and regulations relating to capital adequacy, asset quality, earnings, liquidity,
risk management and financial accounting and reporting as well as laws and regulations governing consumer protection, fair
lending, privacy, information security and cybersecurity risk management, third-party vendor risk management, AML and
sanctions and anti-terrorism laws. Failure to comply with these regulatory requirements, including inadvertent or unintentional
violations, may result in the assessment of fines and penalties, or the commencement of informal or formal regulatory
enforcement actions against us. Other negative consequences can also result from such failures, including regulatory restrictions
on our activities, restrictions on our ability to grow through acquisition, reputational damage, restrictions on the ability of
institutional investment managers to invest in our securities and increases in our costs of doing business.
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The U.S. Congress and state legislatures and federal and state regulatory agencies continually review banking and other laws,
regulations and policies for possible changes. Changes in applicable federal or state laws, regulations or governmental policies
may affect us and our business. The effects of such changes are difficult to predict and may produce unintended consequences.
New laws, regulations or changes in the regulatory environment could limit the types of financial services and products we may
offer, alter demand for existing products and services, increase the ability of non-banks to offer competing financial services
and products, increase compliance burdens, or otherwise adversely affect our business, results of operations or financial
condition. For example, in December 2021, the CFPB published a report providing data on banks' overdraft and non-sufficient
funds fee revenues as well as observations regarding customer protection issues relating to participation in such programs. The
CFPB has indicated that it intends to pursue enforcement actions against banking organizations, and their executives, that
oversee overdraft practices that are deemed unlawful. In addition, the Comptroller of the Currency has identified potential
options for reform of national bank overdraft protection practices, including providing a grace period before the imposition of a
fee, refraining from charging multiple fees in a single day and eliminating fees altogether. In 2021, we recognized $12.8
million in consumer overdraft fees. The adoption of new rules or supervisory guidance or more aggressive examination and
enforcement policies with respect to overdraft protection practices could cause us to modify overdraft programs and practices in
ways that may have a negative impact on our revenues that, in turn, could negatively impact our results of operations and
financial condition.
Compliance with banking and financial services statutes and regulations is also important to our ability to engage in new
activities or to expand existing activities. Regulators continue to scrutinize banks through longer and more intensive
examinations. Federal and state banking agencies possess broad powers to take supervisory actions, as they deem appropriate.
These supervisory actions may result in higher capital requirements, higher deposit insurance premiums and limitations on our
operations and expansion activities that could have a material adverse effect on our business and profitability. We have
dedicated significant time, effort, and expense over time to comply with regulatory and supervisory standards and requirements
imposed by our regulators, and we expect that we will continue to do so. If we fail to develop at a reasonable cost the systems
and processes necessary to comply with the standards and requirements imposed by these rules, it could have a material adverse
effect on our business, financial condition, or results of operations.
The Dodd-Frank Act continues to have a significant impact on our business and results of operations.
The Dodd-Frank Act continues to have a substantial impact on many aspects of the financial services industry. We will likely
continue to be impacted by the Dodd-Frank Act in the future, including the Durbin Amendment to the Dodd-Frank Act that
reduced debit card interchange revenue of banks and revised FDIC deposit insurance assessments. We have also been impacted
by the Dodd-Frank Act in the areas of corporate governance, capital requirements, risk management and regulation under
federal consumer protection laws.
The CFPB, established pursuant to the Dodd-Frank Act, has imposed enforcement actions against a variety of bank and non-
bank market participants with respect to a number of consumer financial products and services. These enforcement actions have
resulted in those participants expending significant time, money and resources to adjust to the initiatives being pursued by the
CFPB. These enforcement actions may also serve as precedent for how the CFPB interprets and enforces consumer protection
laws, including practices or acts that are deemed to be unfair, deceptive or abusive, with respect to supervised institutions and
may result in the imposition of higher standards of compliance with such laws. Other federal financial regulatory agencies,
including the OCC, as well as state attorneys general and state banking agencies and other state financial regulators have also
been active in this area with respect to institutions over which they have jurisdiction. See Item 1. "Business-Supervision and
Regulation."
Changes in U.S. federal, state or local tax laws may negatively impact our financial performance.
We are subject to changes in tax laws that could increase our effective tax rate. These law changes may be retroactive to
previous periods and, as a result, could negatively affect our current and future financial performance. In December 2017, the
Tax Act was signed into law resulting in significant changes to the Tax Code. The Tax Act reduced our federal corporate
income tax rate to 21% beginning in 2018. However, the Tax Act also imposed limitations on our ability to take certain
deductions, such as the deduction for FDIC deposit insurance premiums, which partially offset the increase in net income from
the lower tax rate. During 2021, Congress debated various proposals for increases in the corporate tax rate and possible
surcharges on corporate share repurchases as part of the funding for various spending initiatives. Any such increase in the
corporate tax rate or surcharges would adversely affect our results of operations in future periods.
In addition, a number of the changes to the Tax Code are set to expire in future years. There is substantial uncertainty
concerning whether those expiring provisions will be extended, or whether future legislation will further revise the Tax Code.
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Capital requirements have been adopted by U.S. banking regulators that may limit our ability to return earnings to
shareholders or operate or invest in our business.
We are subject to capital requirements under the BASEL III Rules. Failure to meet the established capital requirements could
result in the federal banking regulators placing limitations or conditions on our activities or restricting the commencement of
new activities, and such failure could subject us to a variety of enforcement remedies, including limiting our ability to pay
dividends, the issuance of a directive to increase capital, and/or the termination of FDIC deposit insurance. In addition, the
failure to comply with the capital conservation buffer would result in restrictions on capital distributions and discretionary cash
bonus payments to executive officers. As of December 31, 2021, our current capital levels exceeded the minimum capital
requirements, including the capital conservation buffer, as set forth in the BASEL III Rules. See Item 1. "Business-Supervision
and Regulation-Capital Requirements."
The implementation of certain regulations with regard to regulatory capital could disproportionately affect our regulatory
capital position relative to that of our competitors, including those who may not be subject to the same regulatory requirements.
From time to time we may be the subject of litigation and governmental or administrative proceedings. Adverse outcomes of
any such litigation or proceedings may have a material adverse impact on our business and results of operations as well as
our reputation.
Many aspects of our business involve substantial risk of legal liability. From time to time, we have been named or threatened to
be named as defendant in various lawsuits arising from our business activities (and in some cases from the activities of
companies that we or our subsidiaries acquired). In addition, we are periodically the subject of governmental investigations and
other forms of regulatory or governmental inquiry. For example, in 2020, we consented to the entry of an administrative civil
cease-and-desist order and paid a civil monetary penalty of $1.5 million to resolve an investigation by the staff of the SEC
Division of Enforcement regarding certain accounting determinations that could have impacted our reported earnings per share.
Like other large financial institutions, we are also subject to risk from potential employee misconduct, including non-
compliance with policies and improper use or disclosure of confidential information. These lawsuits, investigations, inquiries
and other matters could lead to administrative, civil or criminal proceedings, result in adverse judgments, settlements, fines,
penalties, restitution, injunctions or other types of sanctions, the need for us to undertake remedial actions, or otherwise alter
our business, financial or accounting practices. Substantial legal liability or significant regulatory actions against us could
materially adversely affect our business, financial condition or results of operations and/or cause significant reputational harm.
We establish reserves for legal claims when payments associated with the claims become probable and we can reasonably
estimate the amount of loss. For matters where a loss is not probable, or we cannot reasonably estimate the amount of loss, no
loss reserve is established. However, we may still incur potentially significant legal costs for a matter even if a reserve has not
been established.
We can provide no assurance as to the outcome or resolution of legal or administrative actions or investigations, and such
actions and investigations may result in judgments against us for significant damages or the imposition of regulatory restrictions
on our operations. Resolution of these types of matters can be prolonged and costly, and the ultimate results or judgments are
uncertain due to the inherent uncertainty in the outcomes of litigation and other proceedings.
STRATEGIC AND EXTERNAL RISKS.
We may not be able to achieve our growth plans.
Our business plan includes the pursuit of profitable growth. To achieve profitable growth, we may pursue new lines of business
or offer new products or services, all of which can involve significant costs, uncertainties and risks. Any new activity we pursue
may require a significant investment of time and resources and may not generate the anticipated return on that investment. In
addition, we may not be able to effectively implement and manage any new activities. External factors, such as the need to
comply with additional regulations, the availability, or introduction, of competitive alternatives in the market, and changes in
customer preferences may also impact the successful implementation of any new activity. Any new activity could have a
significant impact on the effectiveness of our system of internal controls. Sustainable growth requires that we manage risks by
balancing loan and deposit growth at acceptable levels of risk, maintaining adequate liquidity and capital, hiring and retaining
qualified employees, and successfully managing the costs and implementation risks with respect to strategic projects and
initiatives. If we are not able to adequately identify and manage the risks associated with new activities, our business, results of
operations and financial condition could be materially and adversely impacted.
We face a variety of risks in connection with potential acquisitions.
We may from time to time seek to supplement organic growth through acquisitions of banks, branches or other financial
businesses or assets. Potential acquisitions are typically subject to regulatory or other approvals and there can be no assurance
that we would be able to obtain any such approvals in a timely manner, without restrictive conditions or at all. Even if required
approvals are obtained, acquisitions involve numerous risks, including lower than expected performance or higher than
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expected costs, difficulties related to integration, diversion of management's attention from other business activities, the
potential loss of key employees, changes in relationships with customers, disruption of the operations of the acquired business
and our business, exposure to potential asset quality issues and unknown or contingent liabilities of the acquired business and
changes in banking or tax laws or regulations that may affect the acquired business.
Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of our
tangible book value and net income per common share may occur in connection with any future transaction. Failure to realize
the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from
an acquisition could have a material adverse effect on our business, financial condition and results of operations. In addition, we
face significant competition from other financial services institutions, some of which may have greater financial resources than
us, when considering acquisition opportunities. Accordingly, attractive opportunities may not be available and there can be no
assurance that we will be successful in identifying, completing or integrating future acquisitions.
On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy. Among
other initiatives, the Executive Order encouraged the federal banking agencies to review their current merger oversight practices
under the BHCA and the Bank Merger Act and adopt a plan for revitalization of such practices. There are many steps that must
be taken by the agencies before any formal changes to the framework for evaluating bank mergers can be finalized and the
prospects for such action are uncertain at this time; however, the adoption of more expansive or prescriptive standards may
have an impact on our acquisition activities.
The competition we face is significant and may reduce our customer base and negatively impact our results of operations.
There is significant competition among commercial banks in the market areas we serve. In addition, we also compete with other
providers of financial services, including savings and loan associations, credit unions, consumer finance companies, securities
firms, insurance companies, commercial finance and leasing companies, the mutual funds industry, full-service brokerage firms
and discount brokerage firms, some of which are subject to less extensive regulation than we are. Some of our competitors have
greater resources, higher lending limits, lower cost of funds and may offer other services we do not offer. We also experience
competition from a variety of institutions outside our market areas. Some of these institutions conduct business primarily over
the Internet and, as a result, may be able to realize certain cost savings and offer products and services at more favorable rates
and with greater convenience to the customer. The financial services industry could become even more competitive as a result
of legislative, regulatory and technological changes and continued consolidation. In addition, technology has lowered barriers to
entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as funds transfers,
payment services, residential mortgage loans, consumer loans and wealth and investment management services. Competition
with non-banks, including technology companies, to provide financial products and services is intensifying. In particular, the
activity of Fintechs has grown significantly over recent years and is expected to continue to grow. Fintechs have and may
continue to offer bank or bank-like products. In July 2018, the OCC announced that it would begin accepting applications from
Fintechs to become special purpose national banks. More recently, the OCC conditionally approved the application of a
nonbank Fintech for a full-service national bank charter. Similar developments are likely to result in even greater competition
within all areas of our operations.
Transactions utilizing digital assets, including cryptocurrencies, stablecoins and other similar assets, has increased substantially.
Certain characteristics of digital asset transactions, such as the speed with which such transactions can be conducted, the ability
to transact without the involvement of regulated intermediaries, the ability to engage in transactions across multiple
jurisdictions, and the anonymous nature of the transactions, are appealing to certain consumers, notwithstanding the various
risks posed by such transactions. Accordingly, digital asset service providers, which at present, are not subject to the extensive
regulations imposed upon banking organizations and other financial institutions, have become active competitors for our
customers' banking business.
Competition may adversely affect the rates we pay on deposits and charge on loans, and could result in the loss of fee income,
as well as the loss of customer deposits and the income generated from those deposits, thereby potentially adversely affecting
our profitability and our ability to continue to grow. Our profitability and continued growth depend upon our continued ability
to successfully compete in the market areas we serve. See Item 1. "Business-Competition."
Climate change may materially adversely affect our business and results of operations.
We operate in areas where our business and the activities of our customers could be impacted by the effects of climate change.
The effects of climate change may include increased frequency or severity of weather-related events, such as severe storms,
hurricanes, flooding and droughts, and rising sea levels. These effects can disrupt business operations, damage property,
devalue assets and change consumer and business preferences, which may adversely affect borrowers, increase credit risk and
reduce demand for our products and services. In addition, increasing concerns over the long-term impacts of climate change
have led, and will likely continue to lead, to legislative and regulatory initiatives to combat climate change and may result in
increased supervisory expectations with respect to banks’ risk management practices related to climate change. For instance, the
FSOC, of which the OCC is a member, published a report in October 2021 identifying climate-related financial risk as an
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"emerging threat" to financial stability. The leadership of the federal banking agencies, including the Comptroller of the
Currency, have emphasized that climate-related risks are faced by banking organizations of all types and sizes, specifically
including physical and transition risks, and are in the process of enhancing supervisory expectations regarding banks' risk
management practices. The OCC also has appointed its first ever Climate Change Risk Officer and established an internal
climate risk implementation committee in order to assist with these initiatives and to support the agency's efforts to enhance its
supervision of climate change risk management. To the extent that these initiatives lead to the promulgation of new regulations
or supervisory guidance applicable to us, compliance costs and other compliance-related risks would be expected to increase.
Climate change, its effects and the resulting, unknown impacts could have a material adverse effect on our financial condition
and results of operations.
We are subject to ESG risks that could adversely affect our reputation and the market price of our securities.
We are subject to a variety of risks arising from ESG matters. ESG matters include climate risk, hiring practices, the diversity
of our work force, and racial and social justice issues involving our personnel, customers and third parties with whom we
otherwise do business. Risks arising from ESG matters may adversely affect, among other things, our reputation and the market
price of our securities.
Further, we may be exposed to negative publicity based on the identity and activities of those to whom we lend and with which
we otherwise do business. Any such negative publicity could arise from adverse news coverage in traditional media and could
also spread through the use of social media platforms. Our relationships and reputation with our existing and prospective
customers and third parties we do business with could be damaged if we were to become the subject of any such negative
publicity. Such damage could, in turn, have an adverse effect on our ability to attract and retain customers and employees and
could have a negative impact on the market price of our securities.
Certain investors have begun to consider the steps taken and resources allocated by financial institutions and other commercial
organizations to address ESG matters when making investment and operational decisions. Certain investors are beginning to
incorporate the business risks of climate change and the adequacy of companies' responses to the risks posed by climate change
and other ESG matters into their investment considerations. These shifts in investing priorities may result in adverse effects on
the market price of our securities to the extent that investors determine that we have not made sufficient progress on ESG
matters.
If the goodwill that we have recorded or record in the future in connection with our acquisitions becomes impaired, it could
have a negative impact on our results of operations.
We have supplemented our internal growth with strategic acquisitions of banks, branches and other financial services
companies. In the future, we may seek to supplement organic growth through additional acquisitions. If the purchase price of an
acquired company exceeds the fair value of the company's net assets, the excess is carried on the acquirer's balance sheet as
goodwill. As of December 31, 2021, we had $534.3 million of goodwill recorded on our balance sheet. We are required to
evaluate goodwill for impairment at least annually. Write-downs of the amount of any impairment, if necessary, are to be
charged to earnings in the period in which the impairment occurs. There can be no assurance that future evaluations of goodwill
will not result in impairment charges.
Changes in accounting policies, standards, and interpretations could materially affect how we report our financial condition
and results of operations.
The preparation of our financial statements in accordance with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as revenues and
expenses during the period. A summary of the accounting policies that we consider to be most important to the presentation of
our 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, including those related to the ACL, goodwill,
income taxes, and fair value measurements, is set forth in Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Critical Accounting Policies" and within "Note 1- Summary of Significant Accounting
Policies," in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."
A variety of factors could affect the ultimate values of assets, liabilities, income and expenses recognized and reported in our
financial statements, and these ultimate values may differ materially from those determined based on management's estimates
and assumptions. In addition, the FASB, regulatory agencies, and other bodies that establish accounting standards from time to
time change the financial accounting and reporting standards governing the preparation of our financial statements. Further, the
bodies that establish and interpret the accounting standards (such as the FASB, the SEC, and banking regulators) may change
prior interpretations or positions regarding how these standards should be applied. These changes can be difficult to predict and
can materially affect how we record and report our financial condition and results of operations.
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OPERATIONAL RISKS.
We are exposed to many types of operational and other risks, and our framework for managing risks may not be effective in
mitigating risk.
We are exposed to many types of operational risk, including the risk of human error or fraud by employees and other third
parties, intentional and inadvertent misrepresentation by loan applicants, borrowers or guarantors, unsatisfactory performance
by employees and vendors, clerical and record-keeping errors, computer and telecommunications systems malfunctions or
failures and reliance on data that may be faulty or incomplete. In an environment characterized by continual, rapid
technological change, when we introduce new products and services, or make changes to our information technology systems
and processes, these operational risks are increased. Any of these operational risks could result in the diminished ability to
operate one or more of our businesses, financial loss, potential liability to customers, inability to secure insurance, reputational
damage and regulatory intervention, any or all of which could materially adversely affect us.
Our risk management framework is subject to inherent limitations, and risks may exist, or develop in the future, that we have
not anticipated or identified. If our risk management framework proves to be ineffective, we could suffer unexpected losses and
could be materially adversely affected.
Our operational risks include risks associated with third-party vendors and other financial institutions.
We rely upon certain third-party vendors to provide products and services necessary to maintain our day-to-day operations,
including, notably, responsibility for the core processing system that services Fulton Bank. Accordingly, our operations are
exposed to the risk that these vendors might not perform in accordance with applicable contractual arrangements or service
level agreements. The failure of an external vendor to perform in accordance with applicable contractual arrangements or
service level agreements could be disruptive to our operations and could have a material adverse effect on our financial
condition or results of operations and/or damage our reputation. Further, third-party vendor risk management continues to be a
point of regulatory emphasis recently. A failure to follow applicable regulatory guidance in this area could expose us to
regulatory sanctions.
The commercial soundness of many financial institutions may be closely interrelated as a result of credit, trading, execution of
transactions or other relationships between the institutions. As a result, concerns about, or a default or threatened default by,
one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This
risk is sometimes referred to as "systemic risk" and may adversely affect financial intermediaries, such as clearing agencies,
clearing houses, banks, securities firms and exchanges with which we interact on a daily basis, and, therefore, could adversely
affect us.
Any of these operational or other risks could result in our diminished ability to operate one or more of our businesses, financial
loss, potential liability to customers, inability to secure insurance, reputational damage and regulatory intervention and could
materially adversely affect us.
Loss of, or failure to adequately safeguard, confidential or proprietary information may adversely affect our operations, net
income or reputation.
Our business is highly dependent on information systems and technology and the ability to collect, process, transmit and store
significant amounts of confidential information regarding customers, employees and others on a daily basis. While we perform
some of the functions required to operate our business directly, we also rely on third parties for significant business functions,
such as processing customer transactions, providing cloud-based infrastructure, software and data storage services, maintaining
customer-facing websites, including our online and mobile banking functions, and developing software for new products and
services. These relationships require us to allow third parties to access, store, process and transmit customer information. As a
result, we may be subject to cybersecurity risks directly, as well as indirectly, through the vendors to whom we outsource
business functions and the downstream service providers of those vendors. Cyber threats could result in unauthorized access,
loss or destruction of confidential information or customer data, unavailability, degradation or denial of service, introduction of
computer viruses or ransomware and other adverse events causing us to incur additional costs repairing systems, restoring data
or adding new personnel or protection technologies. Cyber threats may also subject us to regulatory investigations, litigation or
enforcement actions, require the payment of regulatory fines or penalties or undertaking costly remediation efforts with respect
to third parties affected by a cybersecurity incident, all or any of which could adversely affect our business, financial condition
or results of operations and/or damage our reputation.
Critical infrastructure sectors, including the financial services sector, increasingly have been the targets of cyber-attacks,
including attacks emanating from foreign countries such as the attack on the information technology company SolarWinds,
which affected many Fortune 500 companies as well as U.S. government agencies. Cyber-attacks involving large financial
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institutions, including denial of service attacks designed to disrupt external customer-facing services, nation-state cyber-attacks
and ransomware attacks designed to deny organizations access to key internal resources or systems, as well as targeted social
engineering and email attacks designed to allow unauthorized persons to obtain access to an institution's information systems
and data or that of its customers, are becoming more common and increasingly sophisticated. Further, threat actors are
increasingly seeking to target vulnerabilities in software systems used by large numbers of banking organizations in order to
conduct malicious cyber activities.
Like other financial institutions, we experience malicious cyber activity on an ongoing basis directed at our websites, computer
systems, software, networks and our users. This malicious activity includes attempts at unauthorized access, implantation of
computer viruses or malware, and denial-of-service attacks. We also experience large volumes of phishing and other forms of
social engineering attempted for the purpose of perpetrating fraud against us, our employees or our customers. While, to date,
malicious cyber activity, cyber-attacks and other information security breaches have not had a material adverse impact on us,
there can be no assurance that such events will not have a material adverse impact on our business, results of operations,
financial condition or reputation in the future.
Cybersecurity risks for financial institutions also have evolved as a result of the use of cloud computing and new technologies,
devices and delivery channels to transmit and store data and conduct financial transactions. The adoption of new products,
services and delivery channels contribute to a more complex operating environment, which enhances operational risk and
presents the potential for additional structural vulnerabilities. In addition, the ongoing and widespread remote work
environment necessitated by the COVID-19 pandemic has subjected institutions to additional cybersecurity vulnerabilities and
risks.
We use monitoring and preventive controls to detect and respond to data breaches and cyber threats involving our systems
before they become significant. We regularly evaluate our systems and controls and implement upgrades as necessary. We also
attempt to reduce our exposure to our vendors' data privacy and cyber incidents by performing initial vendor due diligence that
is updated periodically for critical vendors, negotiating service level standards with vendors, negotiating for indemnification
from vendors for confidentiality and data breaches, and limiting third-party access to the least privileged level necessary to
perform outsourced functions. The additional cost to us of data and cybersecurity monitoring and protection systems and
controls includes the cost of hardware and software, third party technology providers, consulting and forensic testing firms,
insurance premium costs and legal fees and the incremental cost of personnel who focus a substantial portion of their
responsibilities on data and cybersecurity.
There can be no assurance that the measures we employ to detect and combat direct or indirect cyber threats will be effective. In
addition, because the methods of cyber-attacks change frequently or, in some cases, are not recognized until launched, we may
be unable to implement effective preventive control measures to proactively address these methods. Our or a vendor's failure to
promptly identify and counter a cyber-attack may result in increased costs and other negative consequences, including the loss
of, or inability to access, data, degradation or denial of service and introduction of computer viruses. Although we maintain
insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, such insurance
coverage may be inapplicable or otherwise insufficient to cover any or all losses. Further, a successful cyber-attack that results
in a significant loss of customer data or compromises our ability to function could have a material adverse effect on our
business, reputation, financial condition and results of operations.
Account data compromise, malware and ransomware events affecting a broad spectrum of commercial businesses and
governmental entities in recent years have resulted in heightened legislative and regulatory focus on privacy, data protection
and information security. New or revised laws and regulations may significantly impact our current and planned privacy, data
protection and information security-related practices, the collection, use, sharing, retention and safeguarding of consumer and
employee information, and current or planned business activities. Compliance with current or future privacy, data protection
and information security laws to which we are subject could result in higher compliance and technology costs and could restrict
our ability to provide certain products and services that could materially and adversely affect our profitability. Our failure to
comply with privacy, data protection and information security laws could result in potentially significant regulatory and
governmental investigations and/or actions, litigation, fines, sanctions and damage to our reputation and our brand.
We are subject to a variety of risks in connection with the origination and sale of loans.
We originate residential mortgage loans and other loans, such as loans guaranteed, in part, by the SBA, all or portions of which
are later sold in the secondary market to government sponsored enterprises or agencies, such as the Federal National Mortgage
Association (Fannie Mae) and other non-government sponsored investors. In connection with such sales, we make certain
representations and warranties with respect to matters such as the underwriting, origination, documentation or other
characteristics of the loans sold. We may be required to repurchase a loan, or to reimburse the purchaser of a loan for any
related losses, if it is determined that the loan sold was in violation of representations or warranties made at the time of the sale,
and, in some cases, if there is evidence of borrower fraud, in the event of early payment default by the borrower on the loan, or
for other reasons. We maintain reserves for potential losses on certain loans sold, however, it is possible that losses incurred in
connection with loan repurchases and reimbursement payments may be in excess of any applicable reserves, and we may be
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required to increase reserves and may sustain additional losses associated with such loan repurchases and reimbursement
payments in the future, all of which could have a material adverse effect on our financial condition or results of operations.
In addition, the sale of residential mortgage loans and other loans in the secondary market serves as a source of non-interest
income and liquidity for us and can reduce our exposure to interest rate risk. Efforts to reform government sponsored
enterprises and agencies, changes in the types of, or standards for, loans purchased by government sponsored enterprises or
agencies and other investors, or our failure to maintain our status as an eligible seller of such loans may limit our ability to sell
these loans. Our inability to continue to sell these loans could reduce our non-interest income, limit our ability to originate and
fund these loans in the future, and make managing interest rate risk more challenging, any of which could have a material
adverse effect on our results of operations and financial condition.
We continually encounter technological change.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new
technology-driven products and services, including the potential utilization of blockchain technology to provide alternative
high-speed payment systems. The effective use of technology increases efficiency and enables financial institutions to better
serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers
by using technology to provide products and services that will satisfy customer demands, as well as to create additional
efficiencies in our operations. The costs of implementing new technology, including personnel, can be high, in both absolute
and relative terms, and we may not achieve intended benefits of new technology initiatives. Moreover, the implementation of
new technology can expose us to new or increased operational risks. Many of our financial institution competitors have
substantially greater resources to invest in technological improvements. In addition, new payment, credit and investment and
wealth management services developed and offered by non-bank or non-traditional competitors pose an increasing threat to the
products and services traditionally provided by financial institutions like us. We may not be able to effectively implement new
technology-driven products and services, be successful in marketing these products and services to our customers, or effectively
deploy new technologies to improve the efficiency of our operations. Failure to successfully keep pace with technological
change affecting the financial services industry could have a material adverse impact on our business, financial condition and
results of operations.
There can be no assurance, given the past pace of change and innovation, that our technology, either purchased or developed
internally, will meet or continue to meet our needs and the needs of our customers.
In addition, advances in technology, as well as changing customer preferences favoring access to our products and services
through digital channels, could decrease the value of our branch network and other assets. If customers increasingly choose to
access our products and services through digital channels, we may find it necessary to consolidate, close or sell branch locations
or restructure our branch network. These actions could lead to losses on assets, expenses to reconfigure branches and the loss of
customers in affected markets. As a result, our business, financial condition or results of operations may be adversely affected.
RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES.
We are a bank holding company and rely on dividends and other payments from our subsidiaries for substantially all of our
revenue and our ability to make dividend payments, distributions and other payments.
We are a bank holding company, a separate and distinct legal entity from our bank and non-bank subsidiaries, and we depend
on the payment of dividends and other payments and distributions from our subsidiaries, principally Fulton Bank, for
substantially all of our revenues. As a result, our ability to make dividend payments on our common and preferred stock
depends primarily on compliance with applicable federal regulatory requirements and the receipt of dividends and other
distributions from our subsidiaries. There are various regulatory and prudential supervisory restrictions, which may change
from time to time, that impact the ability of Fulton Bank to pay dividends or make other payments to us. There can be no
assurance that Fulton Bank will be able to pay dividends at past levels, or at all, in the future. If we do not receive sufficient
cash dividends or are unable to borrow from Fulton Bank, then we may not have sufficient funds to pay dividends to our
shareholders, repurchase our common stock or service our debt obligations. See Item 1. "Business-Supervision and Regulation-
Loans and Dividends from Bank Subsidiary."
In addition, we have pursued a strategy of capital management under which we have sought to deploy capital through stock
repurchases and increased regular dividends and special dividends on our common stock, in a manner that is beneficial to our
shareholders. This capital management strategy is subject to regulatory supervision. In July 2019, the Federal Reserve Board
eliminated the standalone prior approval requirement in the capital rules for repurchase or redemption of common stock. In
certain circumstances, however, our repurchases of common stock may be subject to a prior approval or notice requirement
under Federal Reserve Board regulations or policies. As a result, we may not be able to enter the market for stock repurchases
on a timely basis when our board of directors and management believe such repurchases to be most opportune, or at all.
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Anti-takeover provisions could negatively impact our shareholders.
Provisions of banking laws, Pennsylvania corporate law and of our Amended and Restated Articles of Incorporation and
Bylaws could make it more difficult for a third party to acquire control of us or have the effect of discouraging a third party
from attempting to acquire control of us. To the extent that these provisions discourage such a transaction, holders of our
common stock may not have an opportunity to dispose of part or all of their stock at a higher price than that prevailing in the
market. These provisions may also adversely affect the market price of our common stock. In addition, some of these provisions
make it more difficult to remove, and thereby may serve to entrench, our incumbent directors and officers, even if their removal
would be regarded by some shareholders as desirable.
Certain provisions of Pennsylvania corporate law applicable to us and our Amended and Restated Articles of Incorporation and
Bylaws include provisions that may be considered to be "anti-takeover" in nature because they may have the effect of
discouraging or making more difficult the acquisition of control of us by means of a hostile tender offer, exchange offer, proxy
contest or similar transaction. These provisions are intended to protect our shareholders by providing a measure of assurance
that our shareholders will be treated fairly in the event of an unsolicited takeover bid and by preventing a successful takeover
bidder from exercising its voting control to the detriment of other shareholders. However, these provisions, taken as a whole,
may also discourage a hostile tender offer, exchange offer, proxy solicitation or similar transaction relating to the our common
stock, even if the accomplishment of a given transaction may be favorable to the interests of shareholders.
The ability of a third party to acquire us is also limited under applicable banking regulations. The BHCA requires any "bank
holding company" (as defined in the BHCA) to obtain Federal Reserve Board approval prior to acquiring more than 5% of our
outstanding common stock. Any person other than a bank holding company is required to obtain prior Federal Reserve Board
approval to acquire 10% or more of our outstanding common stock under the Change in Bank Control Act of 1978 and, under
certain circumstances, such approvals are required at an even lower ownership percentage. Any holder of 25% or more of our
outstanding common stock, other than an individual, is subject to regulation as a bank holding company under the BHCA.
While these provisions do not prohibit an acquisition, they would likely act as deterrents to an unsolicited takeover attempt.
GENERAL RISK FACTORS.
Negative publicity could damage our reputation and business.
Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public
opinion could result from our actual, alleged or perceived conduct in any number of activities, including lending practices,
litigation, regulatory compliance, mergers and acquisitions, disclosure, sharing or inadequate protection of customer
information, ESG practices and disclosures as well as from actions taken by government agencies and community organizations
in response to that conduct. In addition, unfavorable public opinion regarding the broader financial services industry, or arising
from the actions of individual financial institutions, can have an adverse effect on our reputation. Because we conduct our
businesses under the "Fulton" brand, negative public opinion about one line of business could affect our other lines of
businesses. Further, the increased use of social media platforms facilitates the rapid and widespread dissemination of
information, including inaccurate, misleading, or false information that could magnify the potential harm to our reputation. Any
of these or other events that impair our reputation could affect our ability to attract and retain customers and employees and
access sources of funding and capital that could have a materially adverse effect on our results of operations and financial
condition.
Our internal controls may be ineffective.
One critical component of our risk management framework is our system of internal controls. Management regularly reviews
and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any
system of controls, however well designed and operated, is based in part on certain assumptions and can provide reasonable, but
not absolute, assurances that the objectives of the controls are met. Any failure or circumvention of our controls and procedures
or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business,
results of operations, financial condition and reputation. See Item 9A. "Controls and Procedures."
We may not be able to attract and retain skilled people.
Our success depends, in large part, on our ability to attract and retain skilled people. Competition for talented personnel in most
activities we engage in can be intense, and we may not be able to hire sufficiently skilled people or to retain them. The
unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because
of their skills, knowledge of our markets, years of industry experience and the difficulty of promptly finding qualified
replacement personnel.
33
A downgrade in our credit ratings could have a material adverse impact on us.
Moody's Investors Service, Inc. and DBRS, Inc. continuously evaluate us, and their ratings of our long-term and short-term debt
and preferred stock are based on a number of factors, including financial strength as well as factors not entirely within our
control, such as conditions affecting the financial services industry generally. In light of these reviews and the continued focus
on the financial services industry generally, we may not be able to maintain our current ratings. Ratings downgrades by any of
these credit rating agencies could have a significant and immediate impact our funding and liquidity through cash obligations,
reduced funding capacity and collateral triggers. A reduction in our credit ratings could also increase our borrowing costs and
limit their access to the capital markets.
Downgrades in the credit or financial strength ratings assigned to the counterparties with whom we transact could create the
perception that our financial condition will be adversely impacted as a result of potential future defaults by such counterparties.
Additionally, we could be adversely affected by a general, negative perception of financial institutions caused by the downgrade
of other financial institutions. Accordingly, ratings downgrades of other financial institutions could affect the market price of
our common and preferred stock and could limit our access to capital or increase our cost of capital.
Our future growth may require us to raise additional capital in the future, but that capital may not be available when it is
needed or may be available only at an excessive cost.
We are required by regulatory agencies to maintain adequate levels of capital to support our operations. We anticipate that
current capital levels will satisfy regulatory requirements for the foreseeable future. We, however, may at some point choose to
raise additional capital to support future growth. Our ability to raise additional capital will depend, in part, on conditions in the
financial markets at that time that are outside of our control. Accordingly, we may be unable to raise additional capital, if and
when needed, on terms acceptable to us, or at all.
If the we cannot raise additional capital when needed, our ability to expand operations through internal growth and acquisitions
could be materially impacted.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Corporation's financial center properties as of December 31, 2021 totaled 205 financial centers. Of those financial centers,
88 were owned and 117 were leased. Remote service facilities (mainly stand-alone ATMs) are excluded from these totals. The
Corporation's headquarters is located in Lancaster, Pennsylvania. The Corporation owns two dedicated operations centers,
located in East Petersburg, Pennsylvania and Mantua, New Jersey.
Item 3. Legal Proceedings
The information presented in the "Legal Proceedings" section of "Note 18 - Commitments and Contingencies" in the Notes to
Consolidated Financial Statements is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
34
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Common Stock
As of December 31, 2021, the Corporation had 160.5 million shares of $2.50 par value common stock outstanding held by
approximately 35,200 holders of record. The closing price per share of the Corporation’s common stock on February 18, 2022
was $18.33. The common stock of the Corporation is traded on the Global Select Market of The Nasdaq Stock Market under
the symbol FULT.
The following table presents the quarterly high and low prices of the Corporation’s stock and per share cash dividends declared
for each of the quarterly periods in 2021 and 2020:
Price Range
High
Low
Per
Share
Dividend
2021
First Quarter ............................................................................................................... $
Second Quarter ...........................................................................................................
Third Quarter .............................................................................................................
Fourth Quarter ............................................................................................................
2020
First Quarter ............................................................................................................... $
Second Quarter ...........................................................................................................
Third Quarter .............................................................................................................
Fourth Quarter ............................................................................................................
18.41 $
12.41 $
18.34
16.27
17.39
15.46
14.16
15.28
17.62 $
10.07 $
12.97
10.88
13.67
8.91
8.89
9.15
0.14
0.14
0.14
0.22
0.13
0.13
0.13
0.17
Restrictions on the Payments of Dividends
The Corporation is a separate and distinct legal entity from its banking and nonbanking subsidiaries and depends on the
payment of dividends from its subsidiaries, principally its banking subsidiary, for substantially all of its revenues. As a result,
the Corporation's ability to make dividend payments on its common stock depends primarily on compliance with applicable
federal regulatory requirements and the receipt of dividends and other distributions from its subsidiaries. There are various
regulatory and prudential supervisory restrictions, which may change from time to time, that impact the ability of its banking
subsidiaries to pay dividends or make other payments to the Corporation. In addition, dividends on the Corporation’s common
stock may not be declared, paid or set aside for payment, unless the full dividends for the immediately preceding dividend
payment period for the Corporation’s Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A have been declared and
paid or declared and a sum sufficient for the payment thereof has been set aside. For additional information regarding the
regulatory restrictions applicable to the Corporation and its subsidiaries, see "Supervision and Regulation," in Item 1.
"Business;" Item 1A. "Risk Factors - The Corporation is a holding company and relies on dividends and other payments from
its subsidiaries for substantially all of its revenue and its ability to make dividend payments, distributions and other payments,"
under "Risks Related to an Investment in the Corporation’s Securities;" and "Note 11 - Regulatory Matters," in the Notes to
Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."
35
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information about options outstanding under the Corporation’s Employee Equity Plan and the
number of securities remaining available for future issuance under the Employee Equity Plan, Directors' Plan and the ESPP as
of December 31, 2021:
Plan Category
Equity compensation plans approved by security holders .........
Equity compensation plans not approved by security holders ...
Total ......................................................................................
2,302,330 $
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights (1)
Weighted-average exercise
price of outstanding options,
warrants and rights (2)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in first column) (3)
2,302,330 $
—
11.57
—
11.57
11,073,621
—
11,073,621
(1) The number of securities to be issued upon exercise of outstanding options, warrants and rights includes 1,162,030 PSUs, which is the target number of
PSUs that are payable under the Employee Equity Plan, though no shares will be issued until achievement of applicable performance goals, 239,591 stock
option units, 738,201 time-vested RSUs granted under the Employee Equity Plan and 162,508 time-vested RSUs granted under the Directors' Plan.
(2) The weighted-average exercise price of outstanding options, warrants and rights does not take into account outstanding PSUs and RSUs granted under the
Employee Equity and the Directors' Plan.
(3) Consists of 9,634,000 shares that may be awarded under the Employee Equity Plan, 109,000 shares that may be awarded under the Directors' Plan and
1,330,621 shares that may be purchased under the ESPP. Excludes accrued purchase rights under the ESPP as of December 31, 2021 as the number of
shares to be purchased is indeterminable until the shares are issued.
36
Performance Graph
The following graph shows cumulative total shareholder return (i.e., price change, plus reinvestment of dividends) on the
common stock of the Corporation during the five-year period ended December 31, 2021, compared with (1) the Nasdaq Bank
Index and (2) the Standard and Poor's 500 index ("S&P 500"). The graph is not indicative of future price performance.
The graph below is furnished under this Part II, Item 5 of this Form 10-K and shall not be deemed to be "soliciting material" or
to be "filed" with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act
of 1934, as amended.
240
220
200
180
160
140
120
100
80
e
u
l
a
V
x
e
d
n
I
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
12/31/21
Fulton Financial Corporation
S&P 500
Nasdaq Bank Index
Year Ending December 31
Index
Fulton Financial Corporation .......................... $ 100.00 $
77.24 $ 106.80
S&P 500 .......................................................... $ 100.00 $ 121.83 $ 116.49 $ 153.17 $ 181.35 $ 233.41
Nasdaq Bank Index ......................................... $ 100.00 $ 104.14 $
90.82 $ 129.20
86.09 $ 102.99 $
86.99 $ 101.10 $
97.62 $
2016
2017
2019
2018
2020
2021
37
Issuer Purchases of Equity Securities
The following table presents the Corporation's monthly repurchases of our common stock during the fourth quarter of 2021:
Total Number
of Shares
Purchased1
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs2
Period
October 1, 2021 to October 31, 2021
200,430 $
15.74
200,430 $
45,754,230
November 1, 2021 to November 30, 2021
54,773
December 1, 2021 to December 31, 2021
856,290
15.75
16.05
54,773
44,891,823
856,290
31,147,473
1 Excludes immaterial shares repurchased to settle employee tax withholding related to the vesting of stock awards.
2 On February 9, 2021, the Corporation announced that its board of directors approved the repurchase of up to $75.0 million of the Corporation's outstanding common stock
through December 31, 2021. On November 19, 2021, the Corporation announced that its board of directors had approved the extension of this program through March 31, 2022.
38
Item 6. Selected Financial Data
The information previously required by Item 6 of this 10-K has been intentionally omitted, as permitted by the SEC in
connection with its adoption of its final rules regarding the amendment to modernize, simplify, and enhance financial disclosure
requirements of registrants.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to the Corporation, a
financial holding company registered under the BHCA and incorporated under the laws of the Commonwealth of Pennsylvania
in 1982, and its wholly owned subsidiaries. Management’s Discussion should be read in conjunction with the consolidated
financial statements and other financial information presented in this report.
FORWARD-LOOKING STATEMENTS
The 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;
39
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the effects of actions by the federal government, including those of the Federal Reserve Board and other government
agencies, that impact money supply and market interest rates;
the effects of changes in U.S. federal, state or local tax laws;
the effects of negative publicity on the Corporation's reputation;
the effects of adverse outcomes in litigation and governmental or administrative proceedings;
the potential to incur losses in connection with repurchase and indemnification payments related to sold loans;
the Corporation’s ability to achieve its growth plans;
completed and potential acquisitions may affect costs and the Corporation may not be able to successfully integrate the
acquired business or realize the anticipated benefits from such acquisitions;
the potential effects of climate change on the Corporation's business and results of operations;
the effects of concerns relating to the Corporation's ESG posture, including potential adverse impacts on the
Corporation's reputation and the market value of its securities;
the effects of competition on deposit rates and growth, loan rates and growth and net interest margin;
the Corporation's ability to manage the level of non-interest expenses, including salaries and employee benefits
expenses, operating risk losses and goodwill impairment;
the effects of changes in accounting policies, standards, and interpretations on the Corporation's reporting of its
financial condition and results of operations;
the impact of operational risks, including the risk of human error, inadequate or failed internal processes and systems,
computer and telecommunications systems failures, faulty or incomplete data and an inadequate risk management
framework;
the impact of failures of third parties upon which the Corporation relies to perform in accordance with contractual
arrangements;
the failure or circumvention of the Corporation's system of internal controls;
the loss of, or failure to safeguard, confidential or proprietary information;
the Corporation's failure to identify and adequately and promptly address cybersecurity risks, including data breaches
and cyber-attacks;
the Corporation's ability to keep pace with technological changes;
the Corporation's ability to attract and retain talented personnel;
capital and liquidity strategies, including the Corporation's ability to comply with applicable capital and liquidity
requirements, and the Corporation's ability to generate capital internally or raise capital on favorable terms;
the Corporation's reliance on its subsidiaries for substantially all of its revenues and its ability to pay dividends or other
distributions; and
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.
OVERVIEW
The Corporation is a financial holding company, which, through its wholly owned banking subsidiary, provides a full range of
retail and commercial financial services in Pennsylvania, Delaware, Maryland, New Jersey and Virginia.
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.
40
The following table presents a summary of the Corporation’s earnings and selected performance ratios:
Net income (in thousands) .............................................................................................................. $
Net income available to common shareholders (in thousands) ...................................................... $
Diluted net income available to common shareholders per share ................................................... $
Return on average assets, annualized ..............................................................................................
Return on average equity ................................................................................................................
Return on average common shareholders' equity (tangible) (1)
Net interest margin (2)
Efficiency ratio (1)
............................................................................................................................
Non-performing assets to total assets .............................................................................................
Annualized net charge-offs to average loans ..................................................................................
......................................................................................................................
.......................................................
$
$
$
2021
275,497
265,220
1.62
1.05 %
10.64 %
13.58 %
2.78 %
63.1 %
0.60 %
0.07 %
2020
178,040
175,905
1.08
0.73 %
7.45 %
9.66 %
2.86 %
65.7 %
0.58 %
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,".
(2) Presented on an FTE basis, using a 21% Federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income" section of
Management’s Discussion.
Supplemental Reporting of Non-GAAP Based Financial Measures
This Annual Report on Form 10-K contains supplemental financial information, as detailed below, which 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. Presentation of these non-GAAP financial measures is consistent with how the Corporation evaluates its performance
internally, and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested
parties in the evaluation of companies in the Corporation's industry. Management believes that these non-GAAP financial
measures, in addition to GAAP measures, are also useful to investors to evaluate the Corporation's results. Investors should
recognize that the Corporation's presentation of these non-GAAP financial measures might not be comparable to similarly-titled
measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis
measures, and the Corporation strongly encourages a review of its consolidated financial statements in their entirety.
41
Following are reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure as of and
for the year ended December 31:
2019
2020
2021
(in thousands, except per share data and
percentages)
Return on average common shareholders' equity (tangible)
Net income available to common shareholders .................................................................... $
265,220
$
175,905
$
226,339
Plus: Intangible amortization, net of tax ...............................................................................
462
417
1,127
Numerator ........................................................................................................................ $
265,682
$
176,322
$
227,466
Average common shareholders' equity ................................................................................. $ 2,685,946
$ 2,391,649
$ 2,306,070
Less: Average goodwill and intangible assets ......................................................................
(536,621)
(535,196)
(534,120)
Less: Average preferred stock ..............................................................................................
Average tangible common shareholders' equity (denominator) ......................................
Return on average common shareholders' equity (tangible) ....................................
(192,878)
(32,084)
—
$ 1,956,447
$ 1,824,369
$ 1,771,950
13.58 %
9.66 %
12.84 %
Efficiency ratio
Non-interest expense ............................................................................................................. $
Less: Amortization of tax credit investments .......................................................................
Less: Intangible amortization ................................................................................................
Less: Prepayment penalty on FHLB advances .....................................................................
617,830
$
579,440
$
567,736
(6,187)
(589)
(33,249)
(6,126)
(529)
(2,878)
(6,021)
(1,427)
(4,326)
Numerator ......................................................................................................................... $
577,805
$
569,907
$
555,962
Net interest income ............................................................................................................... $
Tax equivalent adjustment ....................................................................................................
Plus: Total non-interest income .............................................................................................
Less: Investment securities gains, net ....................................................................................
Denominator ..................................................................................................................... $
663,730
$
629,207
$
648,389
12,296
273,745
(33,516)
12,303
229,388
(3,053)
12,967
216,159
(4,733)
916,255
$
867,845
$
872,782
Efficiency ratio ............................................................................................................
63.1 %
65.7 %
63.7 %
Non-performing assets to common shareholders' equity (tangible) and ACL - loans
Non-performing assets (numerator) ................................................................................. $
153,936
$
151,305
$
147,986
Shareholders' equity ............................................................................................................... $ 2,712,680
Less: Preferred Stock .............................................................................................................
(192,878)
Less: Goodwill and intangible assets .....................................................................................
Tangible common shareholders' equity .................................................................................
Plus: ACL - loans
1,981,749
(538,053)
249,001
$ 2,616,828
$ 2,342,176
(192,878)
(536,659)
1,887,291
277,567
—
(535,303)
1,806,873
166,209
Tangible common shareholders' equity and ACL - loans (denominator) ........................
Non-performing assets to tangible common shareholders' equity and ACL - loans ....
$ 2,230,750
$ 2,164,858
$ 1,973,082
6.90 %
6.99 %
7.50 %
(1) Presented on a fully taxable equivalent basis, using a 21% federal tax rate for 2019 through 2021.
COVID-19 Pandemic
The COVID-19 pandemic has caused substantial disruptions in economic and social activity, both globally and in the United
States. The spread of COVID-19, and related governmental actions to respond to the pandemic have caused severe disruptions
in the U.S. economy, which have, in turn, disrupted, and will likely continue to disrupt, the business, activities, and operations
of the Corporation’s customers as well as the Corporation’s own business and operations. In many locations throughout the
U.S., the spread of COVID-19 decreased through much of 2021. However, due in large part to the increased spread of a new,
more transmissible coronavirus variant, the number of individuals diagnosed with COVID-19 in the U.S. increased substantially
42
late in 2021 causing continued governmental responses. The resulting impacts of the pandemic have continued to cause changes
in consumer and business spending, borrowing needs and saving habits that have and will likely continue to affect the demand
for loans and other products and services the Corporation offers, as well as the creditworthiness of its borrowers. The
significant impact on commercial activity and disruptions in supply chains associated with the pandemic, both nationally and in
the Corporation’s markets, may cause customers, vendors and counterparties to be unable to meet existing payment or other
obligations to the Corporation.
While employment and the national economy are showing signs of recovery, there is still significant uncertainty concerning the
breadth and duration of the economic and social disruptions caused by the COVID-19 pandemic and their impact on the U.S.
economy. The extent to which the pandemic continues to impact the Corporation’s operations will depend on future
developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning
the continuing progression of the COVID-19 pandemic, whether there are additional outbreaks of COVID-19 and its variants,
including vaccine-resistant variants, and the actions taken to contain it or treat its impact. Moreover, although multiple
COVID-19 vaccines and booster vaccines have received regulatory approval and are currently being distributed throughout the
U.S. and the world, a significant portion of the population remains unvaccinated. If the pandemic continues to cause significant
negative impacts to economic conditions, the Corporation’s results of operations, financial condition and cash flows could be
materially adversely impacted.
The Corporation’s business is dependent upon the willingness and ability of its customers to conduct banking and other
financial transactions. In an effort to mitigate the spread of COVID-19, the Corporation adjusted service models at certain of its
financial center locations, including limiting some locations to drive-up and ATM services only, offering lobby access by
appointment only, and encouraging the Corporation’s customers to use electronic banking platforms. A significant portion of
the Corporation’s employees has transitioned to remote or hybrid onsite-remote working arrangements as a result of the
COVID-19 pandemic, which, in addition to requiring added support from the Corporation’s information technology
infrastructure, increases cybersecurity risks.
COVID-19 has significantly affected the financial markets and has resulted in a number of responses by the U.S. government,
including reductions in interest rates by the FOMC. These reductions in interest rates, especially if prolonged, could adversely
affect the Corporation’s net interest income and margins and the Corporation’s profitability.
The CARES Act was enacted in March 2020 and, among other provisions, authorized the SBA to guarantee loans under the
PPP for small businesses that meet eligibility requirements in order to keep their workers on the payroll and fund specified
operating expenses. Subsequent legislation extended the authority of the SBA to guaranty loans under the PPP through August
8, 2020. In December 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act reauthorized the
SBA to guarantee loans under the PPP through March 31, 2021, and the PPP Extension Act of 2021 extended that authorization
through June 30, 2021 for applications received by the SBA prior to June 1, 2021. From the inception of the PPP through
December 31, 2021, the Corporation funded a total of approximately $2.7 billion of loans under the PPP. Through December
31, 2021, a total of $2.2 billion of those PPP loans have qualified for loan forgiveness and have been repaid by the SBA.
A series of stimulus payments to eligible consumers, enhanced unemployment benefits provided by the federal government and
traditional, state-provided unemployment compensation, as well as other forms of relief provided to consumers and businesses,
have helped to limit some of the adverse impacts of COVID-19 and, together with other factors, have contributed to significant
growth in the Corporation’s customer deposit balances since the onset of the pandemic. The reduction, expiration or
discontinuation of these measures may adversely impact the recovery of economic activity and the ability of borrowers to meet
their payment and other obligations to the Corporation, either of which could require the Corporation to increase the ACL
through provisions for credit losses. Further, if economic activity continues to recover, and consumer spending and business
investment increase, customers may be less likely to maintain deposit balances with the Corporation at recent levels and may
require the Corporation to increase its reliance on alternative or higher-cost sources of funding.
The impact of COVID-19 on the Corporation’s financial results is evolving and uncertain. The Corporation has limited
exposure to some of the industries that were initially most significantly impacted by COVID-19, such as hospitality and food
services, energy and entertainment, and most of these loans are secured by real estate and other forms of collateral. While many
areas of the economy continue to show signs of recovery, the lingering effects of the pandemic, particularly in certain sectors of
the economy, or a resurgence in COVID-19 infections that prompts the continuation or imposition of governmental restrictions
on activities, may result in decreased demand for the Corporation’s loan products. In addition, the decline in economic activity
occurring due to COVID-19 and the actions by the FOMC with respect to interest rates are likely to affect the Corporation’s net
interest income, non-interest income and credit-related losses for an uncertain period of time. See additional discussion in
"Results of Operations" and "Financial Condition" of Management's Discussion.
43
Adoption of CECL
On January 1, 2020, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326):
Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology, and is referred to as
CECL. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost,
including loans and HTM debt securities. It also applies to OBS credit exposures, such as loan commitments, standby letters of
credit, financial guarantees, and other similar instruments, and net investments in leases recognized by a lessor in accordance
with ASC Topic 842. Refer to "Note 1 - Summary of Significant Accounting Policies" in the Notes to Consolidated Financial
Statements in Item 8. "Financial Statements and Supplementary Data" for additional information on the adoption of CECL.
The Corporation adopted CECL using the modified retrospective method for all financial assets measured at amortized cost,
and OBS credit exposures. Results for 2020 are presented under CECL, and prior years' results are reported in accordance with
the previously applicable incurred loss methodology. The Corporation recorded an increase of $58.3 million to the ACL on
January 1, 2020, primarily as a result of the adoption of CECL. Retained earnings decreased $43.8 million and DTAs increased
by $12.4 million on January 1, 2020, representing the cumulative effect of adoption.
Financial Highlights
Following is a summary of the financial highlights for the year ended December 31, 2021:
•
•
•
•
Net Income Per Share - Diluted net income per share increased $0.54, or 50.0%, to $1.62 in 2021 compared to $1.08 in
2020. The increase in net income per share was due to a $89.3 million, or 50.8%, increase in net income available to
common shareholders.
Net Interest Income - The $34.5 million, or 5.5%, increase in net interest income before provision for credit losses
primarily resulted from $59.0 million in PPP loan fees.
◦
◦
◦
Net Interest Margin - For the year ended December 31, 2021, net interest margin decreased to 2.78%, or
8 bps compared to 2020, driven by a 34 bps decrease in the yield on interest-earning assets, partially offset by
a 27 bps decrease on cost of funds.
Loan Growth - Average Net Loans grew by $0.4 billion, or 2.0%, in comparison to 2020. Included in average
Net Loans were PPP loans that had an average balance of $1.1 billion, a decrease of $0.1 billion from 2020.
The increase in average Net Loans was mainly driven by a $0.6 billion increase in the residential mortgage
loan portfolio.
Deposit Growth - Average deposits increased $2.3 billion, or 12.0%, in comparison to 2020. The increase was
the result of growth in total demand and savings. At December 31, 2021, the loan-to-deposit ratio was 84.9%,
as compared to 90.7% at December 31, 2020.
Asset Quality - Non-performing assets increased $2.6 million, or 1.7%, as of December 31, 2021 compared to
December 31, 2020. Net charge-offs to average loans outstanding were 0.07% for the year ended December 31, 2021
compared to 0.05% for the year ended December 31, 2020. The provision for credit losses decreased $91.5 million, to
$(14.6) million, for the year ended December 31, 2021 compared to $76.9 million for the same period in 2020. The
higher provision in 2020 was largely driven by the adoption of CECL, which, as a result of an overall downturn in
economic forecasts due to COVID-19, resulted in increases in the ACL due to higher expected future credit losses
under CECL. The reduction of provision in 2021 is largely driven by improved economic conditions in comparison to
2020.
Non-Interest Income - Non-interest income, excluding investment securities gains, increased $13.9 million, or 6.1%, in
comparison to 2020. The increase was primarily due to increases of $12.7 million in wealth management, $7.1 million
in income from equity method investments and $3.9 million in consumer banking income, offset by declines of $8.7
million in mortgage banking income, due to a $29.2 million decline in income from loan sales, partially offset by a net
favorable pre-tax income change attributable to the mortgage servicing rights valuation allowance as compared to 2020
of $20.4 million. Specifically, Fulton increased the mortgage servicing valuation allowance by $10.5 million in 2020.
The Corporation reduced the valuation allowance by $9.9 million in 2021. As of December 31, 2021, the mortgage
servicing rights valuation allowance remaining was $0.6 million.
•
Investment Securities Gains/Balance Sheet Restructurings - During both 2021 and 2020 the Corporation completed
limited balance sheet restructurings which included sales of investment securities, corresponding prepayments of
44
FHLB advances and in 2021, the cash tender offer for certain of its outstanding senior and subordinated notes. As a
result, investment securities gains totaled $33.5 million in 2021, as compared to $3.1 million in 2020, a $30.4 million
increase. In addition, included in non-interest expense were debt extinguishment costs on FHLB advances of $33.2
million and $2.9 million incurred during 2021 and 2020, respectively.
Non-Interest Expense - Total non-interest expense increased $38.4 million, or 6.6%, to $617.8 million in 2021 in
comparison to 2020. Non-interest expense, excluding debt extinguishment costs of $33.2 million, was $584.6 million,
an increase of $21.3 million, or 3.8%, compared to non-interest expenses of $563.2 million in 2020, which excludes
expenses associated with cost savings initiatives of $16.2 million. Excluding the net decrease in severance costs of
$5.9 million, the increase in non-interest expense over 2020 was primarily due to increases in salaries and employee
benefits of $10.6 million, attributable to a $12.7 million increase in incentive compensation and bonuses. Also
contributing to the increase in non-interest expense were $8.4 million in data processing and software and $2.8 million
in other outside services expense, partially offset by a $3.2 million decrease in professional fees.
Income Taxes - Income tax expense for 2021 resulted in an ETR of 17.6%, as compared to 12.0% for 2020. The ETR
was higher mainly due to higher income before income taxes. The ETR is generally lower than the federal statutory
rate of 21% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities and TCIs.
Long-term Borrowings - During 2021, the Corporation prepaid FHLB advances reducing the long-term balance to zero
from $536.0 million. Also, in the first quarter of 2021, the Corporation completed a cash tender offer for $75.0 million
of 4.50% subordinated debt due in 2024 and $60 million of 3.60% senior notes due in 2022. In March 2020, the
Corporation issued a total of $375.0 million of subordinated notes, with $200.0 million of subordinated notes due in
2030 having a fixed-to-floating rate of 3.25% and an effective rate of 3.35% and $175.0 million of subordinated notes
due in 2035 having a fixed-to-floating rate of 3.75% and an effective rate of 3.85%.
Preferred Stock - In October 2020, the Corporation issued 8.0 million depositary shares ("Depositary Shares"), each
representing a 1/40th interest in a share of Fulton’s 5.125% Fixed Rate Non-Cumulative Perpetual Preferred Stock,
Series A, with a liquidation preference of $1,000 per share (equivalent to $25.00 per Depositary Share), for an
aggregate offering amount of $200.0 million. The Corporation received net proceeds from the offering of $192.9
million, after deducting issuance costs.
•
•
•
•
CRITICAL ACCOUNTING POLICIES
The following is a summary of those accounting policies that the Corporation considers to be most important to the presentation
of its financial condition and results of operations, because they require management’s most difficult judgments as a result of
the need to make estimates about the effects of matters that are inherently uncertain. See additional information regarding these
critical accounting policies in "Note 1 - Summary of Significant Accounting Policies," in the Notes to the Consolidated
Financial Statements in Item 8. "Financial Statements and Supplementary Data."
Allowance for Credit Losses - The Corporation adopted CECL in the first quarter of 2020. In accordance with CECL, the ACL,
which includes both the ACL - loans and the ACL - OBS credit exposures, is based on estimated losses over the remaining
expected life of loans and OBS exposures. Management's determination of the appropriateness of the reserve is based on
periodic evaluations of the loan portfolio, lending-related commitments, current and forecasted economic factors and other
relevant factors.
In determining the ACL, the Corporation uses three inputs in the model estimate. These inputs are PD, which estimates the
likelihood that a borrower will be unable to meet its debt obligations; LGD, which estimates the share of an asset that is lost if a
borrower defaults; and EAD, which estimates the gross exposure under a facility upon default. The PD models were developed
based on historical default data. Both internal and external variables are evaluated in the process. The main internal variables
are risk rating or delinquency history, and the external variables are economic variables obtained from third-party provided
forecasts. Management applies risk-rating transition matrices to pools of loans and lending-related commitments with similar
risk characteristics to determine default probabilities, utilizes economic forecasts, applies modeled LGD results to associated
EAD and incorporates modeled overlays and qualitative adjustments to estimate ACL. As such, the calculation of the ACL is
inherently subjective and requires management to exercise significant judgment.
The ACL is estimated over a reasonable and supportable forecast period based on the projected performance of specific
economic variables that statistically correlate with PD rates. As economic variables revert to long-term averages through the
forecast process, externally developed long-term economic forecasts are used to establish the impacts of the economic scenario,
reversion, and long-term averages in the development of losses over the expected life of the assets being modeled. The ACL
45
reserve is highly sensitive to the economic forecasts used to develop the reserve. Due to the high level of uncertainty regarding
significant assumptions, such as the ultimate impact of COVID-19 and effectiveness of the related governmental responses,
since the beginning of 2020, the Corporation has evaluated a range of economic scenarios, including more and less severe
economic deteriorations, with varying speeds of recovery.
The ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the
quantitative models. Qualitative adjustments include and consider changes in national, regional and local economic and
business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting
credit quality. Qualitative adjustments have increased compared to those at the time of the adoption of CECL on January 1,
2020 primarily as a result of uncertainties related to the economic impact of COVID-19, including consideration for the future
performance of loans that received deferrals or forbearances as a result of COVID-19 and the impact COVID-19 had on certain
industries where the quantitative models were not fully capturing the appropriate level of risk. The impact from qualitative
adjustments on the ACL decreased in 2021 with the improvement in economic conditions.
The ACL was $249.0 million and $277.6 million on December 31, 2021 and December 31, 2020, respectively. The decrease of
$28.6 million was primarily a result of improved economic conditions.
The Corporation performs loan loss sensitivity analysis on a quarterly basis to determine the impact of varying economic
conditions based on Moody's model projections. Our sensitivity analysis does not represent management's view of expected
credit losses at the balance sheet date. One scenario identified below the base case projection includes a slowdown in near-term
economic growth. This scenario resulted in a hypothetical increase to the ACL of approximately $13.8 million.
For further discussion of the methodology used in the determination of the ACL, refer to Note 1, "Summary of Significant
Accounting Policies" in the Notes to the Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary
Data."
Income Taxes – The provision for income taxes is based upon income before taxes, adjusted for the effect of certain tax-exempt
income, non-deductible expenses and credits. In addition, certain items of income and expense are reported in different periods
for financial reporting and tax return purposes. The tax effects of these temporary differences are recognized currently in the
deferred income tax provision or benefit. DTAs or deferred tax liabilities are computed based on the difference between the
financial statement and income tax bases of assets and liabilities using the applicable enacted marginal tax rate.
The Corporation must also evaluate the likelihood that DTAs will be recovered through future taxable income. If any such
assets are determined to be more likely than not unrecoverable, then a valuation allowance must be recognized. The assessment
of the carrying value of DTAs is based on certain assumptions, the changes of which could have a material impact on the
Corporation's consolidated financial statements.
On a periodic basis, the Corporation evaluates its income tax provision based on tax laws, regulations and financial reporting
considerations and records adjustments as appropriate. Recognition and measurement of tax positions is based upon
management's evaluations of current taxing authorities' examinations of the Corporation's tax returns, recent positions taken by
the taxing authorities on similar transactions and the overall tax environment.
The provision for income taxes was $58.7 million and $24.2 million on December 31, 2021 and December 31, 2020,
respectively.
Recently Issued Accounting Standards
For a description of accounting standards recently issued, but not yet adopted by the Corporation, see "Recently Issued
Accounting Standards," in "Note 1 - Summary of Significant Accounting Policies" in the Notes to Consolidated Financial
Statements in Item 8. "Financial Statements and Supplementary Data."
46
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is the most significant component of the Corporation’s net income. The Corporation manages the risk
associated with changes in interest rates through the techniques described within Item 7A, "Quantitative and Qualitative
Disclosures About Market Risk." The following table provides a comparative average balance sheet and net interest income
analysis for 2021 compared to 2020 and 2019. Interest income and yields are presented on an FTE basis, using a 21% federal
tax rate, as well as statutory interest expense disallowances. The discussion following this table is based on these tax-equivalent
amounts.
2021
2020
2019
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
(dollars in thousands)
ASSETS
Interest-earning assets:
Net Loans (1)
.......................................... $ 18,627,787 $ 644,387
Taxable investment securities
(2)
Tax-exempt investment securities
.........
(2)
..
2,665,416
1,007,834
Total investment securities ....................
3,673,250
Loans held for sale ................................
39,211
Other interest-earning assets .................
2,014,954
55,351
30,974
86,325
1,302
3,694
Total interest-earning assets ..................
Noninterest-earning assets:
Cash and due from banks ......................
Premises and equipment ........................
24,355,202
735,708
165,942
228,708
Other assets ...........................................
Less: ACL - loans (3)
..............................
1,686,053
(265,572)
Total Assets .................................. $ 26,170,333
LIABILITIES AND EQUITY
Interest-bearing liabilities:
Demand deposits ................................ $ 5,979,479 $
Savings and money market deposits ..
6,306,967
Brokered deposits ...............................
Time deposits .....................................
Total interest-bearing deposits ..............
Short-term borrowings ..........................
Long-term borrowings ..........................
286,901
1,939,446
14,512,793
513,092
784,871
Total interest-bearing liabilities ............
15,810,756
Noninterest-bearing liabilities:
Demand deposits ................................
7,211,153
Other liabilities ...................................
Total Liabilities .....................................
Total deposits/Cost of deposits ..........
Total Interest-bearing liabilities and
non-interest bearing deposits/Cost of
funds .....................................................
Shareholders’ equity ..............................
462,478
23,484,387
21,723,946
23,021,909
2,685,946
Total Liabilities and
Shareholders’ Equity ................... $ 26,170,333
Net interest income/net interest margin
(FTE) .....................................................
Tax equivalent adjustment ....................
3.46 % $ 18,270,390 $ 662,785
3.63 % $ 16,430,347 $ 747,119
4.55 %
1.88
3.07
2.35
3.32
0.18
3.02
2,182,410
825,057
3,007,467
60,015
1,120,727
58,173
26,641
84,814
2,077
5,504
22,458,599
755,180
2.66
3.22
2.82
3.46
0.49
3.36
2,278,448
500,398
2,778,846
25,795
445,008
62,556
17,998
80,554
1,351
9,249
19,679,996
838,273
2.74
3.57
2.89
5.24
2.08
4.26
139,146
238,864
1,746,956
(249,848)
$ 24,333,717
119,144
239,376
1,385,689
(166,165)
$ 21,258,040
3,662
0.06 % $ 5,278,941 $ 11,390
0.22 % $ 4,384,059 $ 33,348
0.76 %
4,936
1,096
20,311
30,005
583
29,094
59,682
0.08
0.38
1.05
0.21
0.11
3.71
0.38
5,550,234
310,763
2,546,305
13,686,243
810,583
14,654
2,387
41,615
70,046
5,227
1,254,300
38,398
15,751,126
113,671
0.26
0.77
1.63
0.51
0.64
3.06
0.72
5,018,381
245,501
2,869,326
41,823
5,779
50,825
12,517,267
131,775
849,679
14,543
942,600
30,599
14,309,546
176,917
5,714,803
476,139
21,942,068
4,249,294
393,130
18,951,970
0.14
19,401,046
0.36
16,766,561
0.26
21,465,929
0.53
18,558,840
2,391,649
$ 24,333,717
2,306,070
$ 21,258,040
0.83
2.35
1.77
1.05
1.70
3.25
1.24
0.79
0.95
676,026
(12,296)
2.78 %
2.86 %
641,509
(12,302)
$ 629,207
3.36 %
661,356
(12,967)
$ 648,389
Net interest income ................................
$ 663,730
Average balances include non-performing loans.
(1)
(2)
(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
Average balances include amortized historical cost for AFS securities; the related unrealized holding gains (losses) are included in other assets.
liabilities.
47
Comparison of 2021 to 2020
The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average
balances (volumes) and changes in yields and rates:
2021 vs. 2020
Increase (decrease) due to change in
Yield/Rate
Volume
(in thousands)
Net
..................................................................................................... $
Interest income on:
Net loans (1)
Taxable investment securities .........................................................................
Tax-exempt investment securities ..................................................................
Loans held for sale ..........................................................................................
Other interest-earning assets ...........................................................................
Total interest income ............................................................................... $
Interest expense on:
Demand deposits ............................................................................................. $
Savings deposits ..............................................................................................
Brokered deposits ...........................................................................................
Time deposits ..................................................................................................
Short-term borrowings ....................................................................................
Long-term borrowings ....................................................................................
12,882 $
13,430
5,625
(694)
2,866
34,109 $
1,414 $
1,689
(170)
(8,545)
(1,426)
(16,337)
(31,280) $
(16,252)
(1,292)
(81)
(4,676)
(53,581) $
(9,142) $
(11,407)
(1,121)
(12,759)
(3,218)
7,033
(18,398)
(2,822)
4,333
(775)
(1,810)
(19,472)
(7,728)
(9,718)
(1,291)
(21,304)
(4,644)
(9,304)
Total interest expense .............................................................................. $
(23,375) $
(30,614) $
(53,989)
(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 the direct changes that are attributable to each component.
FTE net interest income increased $34.5 million, or 5.4%, to $676.0 million in 2021. Net interest margin decreased 8 bps to
2.78% in 2021 from 2.86% in 2020. As summarized above, FTE interest income decreased $53.6 million as the result of a
34 bps decrease in the yield on interest-earning assets, and increased $34.1 million as the result of a $1.9 billion, or 8.4%,
increase in average interest-earning assets, primarily in investments and loans. The yield on the loan portfolio decreased 17 bps,
to 3.46%, largely due to decreases in the Fed Funds Rate in 2020 and corresponding decreases in loan index rates. At that time,
all variable and certain adjustable rate loans repriced to lower rates as a result of these interest rate decreases, and yields on new
loan originations were lower than the average yield on the loan portfolio. Adjustable rate loans reprice on dates specified in loan
agreements, which may be later than the date the Fed Funds Rate and related loan index rates increase or decrease. Therefore,
the benefit of increases or the reverse effect of decreases in index rates on adjustable rate loans may not be fully realized until
future periods.
Interest expense decreased $54.0 million, with a 34 bps decrease in the rate on average interest-bearing liabilities contributing
$30.6 million to this decrease. In addition, a shift into lower-cost demand deposits and savings and money market deposits,
which increased $1.5 billion collectively, combined with a decrease in higher-cost time deposits, short-term borrowings and
long-term borrowings of $1.4 billion, were the primary drivers for $23.4 million of the reduction in interest expense.
48
Average loans and average FTE yields, by type, are summarized in the following table:
2021
2020
Balance
Yield
Balance
Yield
(dollars in thousands)
Increase (Decrease) in
Balance
$
%
Real estate – commercial mortgage .......................... $ 7,149,712
Commercial and industrial (1)
....................................
5,052,856
Real estate – residential mortgage ............................
3,501,072
Real estate – home equity .........................................
1,141,042
Real estate – construction .........................................
1,078,350
Consumer ..................................................................
456,427
Equipment lease financing ........................................
252,104
Other (2)
.....................................................................
3.14 % $ 6,928,269
5,501,317
2.64
2,876,538
3.40
1,255,094
3.85
965,534
3.08
466,419
3.99
281,859
3.89
Total loans ......................................................... $ 18,627,787
3.46 % $ 18,270,390
3.53 % $ 221,443
(448,461)
3.10
624,534
3.80
(114,052)
4.11
112,816
3.64
(9,992)
4.16
(29,755)
3.93
864
3.63 % $ 357,397
3.2 %
(8.2)
21.7
(9.1)
11.7
(2.1)
(10.6)
18.6
2.0 %
(3,776) —
(4,640) —
(1) Includes average PPP loans of $1.1 billion and $1.3 billion for the years ended December 31, 2021 and 2020, respectively.
(2) Consists of overdrafts and net origination fees and costs.
Average loans increased $357.4 million, or 2.0%, which contributed $12.9 million to FTE interest income. The increase was
driven largely by growth in residential and commercial mortgage loans, partially offset by a decrease in commercial and
industrial loans, primarily due to the decrease in PPP loans. The yield on average loans decreased 17 bps resulting in a decrease
in FTE interest income of $31.2 million.
Average investment securities increased $665.8 million, or 22.1%, in comparison to 2020, which contributed a $19.1 million
increase in FTE interest income, offset by a decrease of 47 bps in investment yield, resulting in a $17.5 million decrease in FTE
interest income. Other interest-earning assets increased $894.2 million, contributing $2.9 million to FTE interest income. The
yield on other interest-earning assets decreased 31 bps in comparison to 2020, as a result of the Fed Funds Rate decreases
during 2020, resulting in a $4.7 million decrease in FTE interest income.
Average deposits and interest rates, by type, are summarized in the following table:
2021
Balance
Rate
2020
Balance
(dollars in thousands)
Rate
Increase (Decrease) in
Balance
$
%
Noninterest-bearing demand ............................. $ 7,211,153
Interest-bearing demand ....................................
5,979,479
Savings ..............................................................
6,306,967
Total demand and savings ..........................
19,497,599
Brokered deposits ..............................................
286,901
Time deposits .....................................................
1,939,446
Total deposits ............................................. $ 21,723,946
— % $ 5,714,803
5,278,941
0.06
5,550,234
0.08
16,543,978
0.04
310,763
0.38
1.05
2,546,305
0.14 % $ 19,401,046
— % $ 1,496,350
700,538
0.22
756,733
0.26
2,953,621
0.16
(23,862)
0.77
1.63
(606,859)
0.36 % $ 2,322,900
26.2 %
13.3
13.6
17.9
(7.7)
(23.8)
12.0 %
The cost of interest-bearing deposits decreased 30 bps, to 0.21%, from 0.51% in 2020, resulting in a $34.4 million decrease in
interest expense compared to 2020. These rates do not include the impact of non-interest bearing deposits, which lowered the
cost of total deposits to 0.14% and 0.36% in 2021 and 2020, respectively. The decrease in deposit costs was primarily the result
of reductions in deposit rates resulting from decreases in the Fed Funds Rate. The majority of deposit rates are discretionary,
with the exception of indexed municipal deposit balances. The average balance of interest-bearing deposits increased
$0.8 billion, or 6.0%, in comparison to 2020.
49
Average borrowings and interest rates, by type, are summarized in the following table:
Short-term borrowings:
2021
2020
Balance
Rate
Balance
Rate
(dollars in thousands)
Increase (Decrease) in
Balance
$
%
.................................. $
Customer funding (1)
Federal funds purchased ............................
FHLB advances and other borrowings (2)
..
Total short-term borrowings ..............
513,092
—
—
513,092
0.11 % $
—
—
0.11
553,033
64,918
192,632
810,583
0.28 % $ (39,941)
0.82
(64,918)
(192,632)
1.61
(297,491)
0.64
Long-term borrowings:
FHLB advances .........................................
Other long-term borrowings ......................
Total long-term borrowings ...............
126,677
658,194
784,871
Total borrowings ......................... $ 1,297,963
1.80
557,596
4.07
696,704
1,254,300
3.71
2.29 % $ 2,064,883
1.86
(430,919)
4.02
(38,510)
(469,429)
3.06
2.11 % $ (766,920)
(1) Includes short-term promissory notes.
(2) Represents FHLB advances with an original maturity term of less than one year.
(7.2) %
N/M
N/M
(36.7)
(77.3)
(5.5)
(37.4)
(37.1) %
Total average borrowings decreased $766.9 million, or 37.1%, while the total borrowings rate increased 18 bps, to 2.29%
compared to 2020. Total average short-term borrowings decreased $297.5 million, or 36.7%, due to the corporate restructuring.
The cost of average short-term borrowings decreased 53 bps to 0.11% in 2021, largely due to the restructuring and partial year
2020 net impact of changes in the Fed Funds Rate versus a full year in 2021.
Average long-term borrowings decreased $469.4 million, or 37.4%, and the long-term borrowings rate increased 65 bps
compared to 2020, primarily due to a decrease in FHLB advances.
Comparison of 2020 to 2019
The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average
balances (volumes) and changes in yields and rates:
2020 vs. 2019
Increase (decrease) due to change in
Yield/
Rate
(in thousands)
Volume
Net
Interest income on:
Net loans (1)
Taxable investment securities ......................................................................................
Tax-exempt investment securities ...............................................................................
Loans held for sale .......................................................................................................
Other interest-earning assets ........................................................................................
.................................................................................................................. $ 77,662 $ (161,996) $ (84,334)
(4,382)
8,643
726
(3,745)
Total interest income ............................................................................................ $ 93,132 $ (176,224) $ (83,092)
(1,059)
(1,933)
(582)
(10,654)
(3,323)
10,576
1,308
6,909
Interest expense on:
Demand deposits .......................................................................................................... $
Savings deposits ...........................................................................................................
Brokered deposits ........................................................................................................
Time deposits ...............................................................................................................
Short-term borrowings .................................................................................................
Long-term borrowings .................................................................................................
4,863 $ (26,821) $ (21,958)
(27,169)
(31,194)
4,025
(3,392)
(4,351)
959
(9,210)
(3,801)
(5,409)
(9,316)
(8,675)
(641)
7,799
(1,828)
9,627
Total interest expense ........................................................................................... $ 13,424 $ (76,670) $ (63,246)
(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 the direct changes that are attributable to each component.
50
In March 2020, the FOMC decreased the Fed Funds Rate by a total of 150 bps in response to COVID-19. These changes in the
Fed Funds Rate resulted in corresponding decreases to the index rates for the Corporation's variable and adjustable rate loans,
primarily the prime rate and LIBOR, as well as for certain interest-bearing liabilities.
FTE net interest income decreased $19.8 million, or 3.0%, to $641.5 million in 2020. Net interest margin decreased 50 bps to
2.86% in 2020 from 3.36% in 2019. As summarized above, FTE interest income decreased $176.2 million as the result of a 90
basis point decrease in the yield on interest-earning assets, and increased $93.1 million as the result of a $2.8 billion, or 14.1%,
increase in average interest-earning assets, primarily loans. The yield on the loan portfolio decreased 92 bps, to 3.63%, largely
due to the aforementioned decreases in the Fed Funds Rate in 2020 and corresponding decreases to loan index rates. All
variable and certain adjustable rate loans repriced to lower rates as a result of these interest rate decreases, and yields on new
loan originations were lower than the yield on the loan portfolio. Adjustable rate loans reprice on dates specified in the loan
agreements, which may be later than the date the Fed Funds Rate and related loan index rates increase or decrease. Therefore,
the benefit of increases or the reverse effect of decreases in index rates on adjustable rate loans may not be fully realized until
future periods. In addition, 2020 interest income included $6.5 million of unamortized origination fees and direct origination
costs recognized as interest income at the time of PPP loan forgiveness, which was in addition to the normal amortization of
those items of approximately $22.5 million recognized in 2020.
Interest expense decreased $63.2 million, with a 52 bps decrease in the rate on average interest-bearing liabilities contributing
$76.7 million to this decrease, partially offset by a $13.4 million increase in expense as a result of a $1.4 billion, or 10.1%
increase in interest-bearing liabilities, primarily demand deposits and long-term borrowings. The rates on average interest-
bearing demand and savings accounts decreased 54 and 57 bps, respectively, which contributed $26.8 million and $31.2 million
to the decrease in interest expense, respectively. In addition, the 106 bps decrease in the cost of short-term borrowings
contributed $8.7 million to the decrease in interest expense.
Average loans and average FTE yields, by type, are summarized in the following table:
2020
Balance
Yield
2019
Balance
Yield
(dollars in thousands)
Increase (Decrease) in
Balance
$
%
...................................
Real estate - commercial mortgage .......................... $ 6,928,269
Commercial and industrial(1)
5,501,317
Real estate - residential mortgage ............................. 2,876,538
Real estate - home equity .......................................... 1,255,094
Real estate - construction ..........................................
965,534
Consumer ..................................................................
466,419
Equipment lease financing ........................................
281,859
Other (2)
....................................................................
3.53 % $ 6,463,783
4,473,549
3.10
2,441,684
3.80
1,382,908
4.11
928,183
3.64
448,205
4.16
279,489
3.93
12,546 —
4.56 % $ 464,486
1,027,768
4.52
434,854
4.05
(127,814)
5.23
37,351
4.79
18,214
4.42
2,370
4.40
(17,186)
4.55 % $ 1,840,043
7.2 %
23.0
17.8
(9.2)
4.0
4.1
0.8
(137.0)
11.2 %
Total loans ......................................................... $ 18,270,390
3.63 % $ 16,430,347
(1)
Includes average PPP loans of $1.3 billion for the year ended December 31, 2020..
(2)
Consists of overdrafts and net origination fees and costs.
(4,640) —
Average loans increased $1.8 billion, or 11.2%, which contributed $77.7 million to the increase in FTE interest income. The
increase was driven largely by growth in the commercial and industrial portfolio as a result of loans originated under the PPP.
Excluding loans originated under the PPP, commercial and industrial loan balances declined $2.4 million. Commercial and
residential mortgage loan portfolios, as well as the construction, consumer and equipment lease financing portfolios,
experienced growth, partially offset by decreases in the home equity loan portfolio.
Average investment securities increased $228.6 million, or 8.2%, in comparison to 2019, which contributed a $7.3 million
increase in FTE interest income. This increase was partially offset by a 7 bps decrease in yields, resulting in a $3.0 million
decrease in FTE interest income. Other interest-earning assets increased $675.7 million, primarily the result of an increase in
cash pledged with counterparties for interest rate swap contracts, contributing $6.9 million to FTE interest income. The yield
on other interest-earning assets decreased 159 bps in comparison to 2019, as a result of the Fed Funds Rate decreases during
2020, resulting in a $10.7 million decrease in FTE interest income.
51
Average deposits and interest rates, by type, are summarized in the following table:
2020
2019
Increase (Decrease) in
Balance
Balance
Rate
Balance
Rate
$
%
(dollars in thousands)
Noninterest-bearing demand ................................. $ 5,714,803
Interest-bearing demand ....................................... 5,278,941
Savings .................................................................. 5,550,234
Total demand and savings ............................. 16,543,978
310,763
2,546,305
Total deposits ................................................. $ 19,401,046
Brokered deposits .................................................
Time deposits
— % $ 4,249,294
4,384,059
0.22
5,018,381
0.26
13,651,734
0.16
245,483
0.77
1.63
2,869,344
0.36 % $ 16,766,561
— % $ 1,465,509
894,882
0.76
531,853
0.83
2,892,244
0.44
65,280
2.35
1.77
(323,039)
0.79 % $ 2,634,485
34.5 %
20.4
10.6
21.2
26.6
(11.3)
15.7 %
The cost of interest-bearing deposits decreased 54 bps to 0.51% from 1.05% in 2019 and contributed $66.2 million to the
decrease in interest expense compared to 2019. These rates do not include the impact of non-interest bearing deposits, which
lowered cost of total deposits to 0.36% and 0.79% in 2020 and 2019, respectively. The decrease in the cost was mainly as a
result of reductions in deposit rates in response to the FOMC reductions to the Fed Funds Rate as well as deposit rate decreases
implemented after the Fed Funds Rate cuts during the second half of 2019. The majority of deposit rates are discretionary, with
the exception of indexed municipal balances. The average balance of interest-bearing deposits increased $1.2 billion, or 9.3%,
partially offsetting the decrease in interest expense by $4.4 million in comparison to 2019.
Average borrowings and interest rates, by type, are summarized in the following table:
2020
Balance
Rate
2019
Balance
Rate
(dollars in thousands)
Increase (Decrease) in
Balance
$
%
Short-term borrowings:
.................................. $
Customer funding (1)
Federal funds purchased ............................
FHLB advances and other borrowings (2)
..
Total short-term borrowings ..............
553,033
64,918
192,632
810,583
0.28 % $
0.82
1.61
0.64
355,983
132,578
361,118
849,679
0.77 % $ 197,050
(67,660)
2.20
(168,486)
2.43
(39,096)
1.70
Long-term borrowings:
FHLB advances .........................................
Other long-term borrowings ......................
Total long-term borrowings ...............
557,596
696,704
1,254,300
Total borrowings ......................... $ 2,064,883
555,229
1.86
387,371
4.02
3.06
942,600
2.11 % $ 1,792,279
2,367
2.38
309,333
4.48
3.25
311,700
2.51 % $ 272,604
55.4 %
(51.0)
(46.7)
(4.6)
0.4
79.85
33.1
15.2 %
(1) Includes short-term promissory notes.
(2) Represents FHLB advances with an original maturity term of less than one year.
Total average borrowings increased $272.6 million, or 15.2%, while the total cost of borrowings decreased 40 bps, to 2.11%
compared to 2019. Total average short-term borrowings decreased $39.1 million, or 4.6%, due to a decrease in short-term
FHLB advances and other borrowings and federal funds purchased, partially offset by increases in average customer funding.
The cost of short-term borrowings decreased 106 bps to 0.64% in 2020, largely due to the net impact of the changes in the Fed
Funds Rate.
Average long-term borrowings increased $311.7 million, or 33.1%, and the rate decreased 19 bps compared to 2019, as a result
of the issuance of $375.0 million of subordinated notes in March of 2020.
Provision for Credit Losses
The provision for credit losses decreased $91.5 million, to $(14.6) million, for the year ended December 31, 2021. The
decrease was primarily the result of an improvement in economic conditions. See additional details under "Loans and
Allowance for Credit Losses" in the "Financial Condition" section below.
52
Non-Interest Income and Expense
Comparison of 2021 to 2020
Non-Interest Income
The following table presents the components of non-interest income:
Increase (Decrease)
2021
2020
$
%
(dollars in thousands)
Commercial banking:
Merchant and card ..................................................................... $
Cash management .....................................................................
Capital markets .........................................................................
Other commercial banking ........................................................
Total commercial banking ..................................................
26,121 $
20,865
9,381
12,322
68,689
23,139 $
18,725
18,288
10,134
70,286
Consumer banking:
Card ............................................................................................
Overdraft ....................................................................................
Other consumer banking ............................................................
Total consumer banking .....................................................
Wealth management fees ..................................................................
Mortgage banking:
Gains on sales of mortgage loans .................................................
Mortgage servicing income ..........................................................
Total mortgage banking .................................................
Other .................................................................................................
Non-interest income before
investment securities gains .................................................
Investment securities gains, net ........................................................
Total Non-Interest Income ............................................. $
23,505
12,844
9,195
45,544
71,798
24,380
9,196
33,576
20,622
53,599
(11,290)
42,309
13,084
(29,219)
20,486
(8,733)
7,538
240,229
33,516
273,745 $
226,335
3,053
229,388 $
13,894
30,463
44,357
2,982
2,140
(8,907)
2,188
(1,597)
3,728
288
(70)
3,946
12,740
19,777
12,556
9,265
41,598
59,058
12.9 %
11.4
(48.7)
21.6
(2.3)
18.9
2.3
(0.8)
9.5
21.6
(54.5)
N/M
(20.6)
57.6
6.1
N/M
19.3 %
Excluding net investment securities gains, non-interest income increased $13.9 million, or 6.1%, in 2021, as compared to 2020.
Total commercial banking income decreased $1.6 million, or 2.3% compared to 2020, driven mainly by a decrease in capital
market revenues.
Total consumer banking increased $3.9 million, or 9.5%, compared to 2020, driven primarily by higher card income.
Wealth management revenues increased $12.7 million, or 21.6%, resulting primarily from an increase in client asset levels and
improved overall market performance.
Mortgage banking income decreased $8.7 million, or 20.6%, mainly due to reduced gains on sales of mortgage loans, partially
offset by an increase in mortgage servicing income.
Investment securities gains increased $30.5 million, primarily due to the sale of Visa Class B restricted shares, as part of the
balance sheet restructuring undertaken in 2021.
53
Non-Interest Expense
The following table presents the components of non-interest expense:
Salaries and employee benefits ..................................................... $
Data processing and software ........................................................
Net occupancy ...............................................................................
Other outside services ...................................................................
Debt extinguishment .....................................................................
State taxes ......................................................................................
Equipment .....................................................................................
FDIC insurance .............................................................................
Professional fees ............................................................................
Amortization of TCI ......................................................................
Marketing ......................................................................................
Intangible amortization .................................................................
Other ..............................................................................................
Total Non-Interest Expense .................................................... $
2021
329,138 $
56,440
53,799
34,194
33,249
18,793
13,807
10,665
9,647
6,187
5,275
589
46,047
617,830 $
Increase (Decrease)
%
$
2020
(dollars in thousands)
324,395 $
48,073
53,013
31,432
2,878
12,613
13,885
8,865
12,835
6,126
5,127
529
59,669
579,440 $
4,743
8,367
786
2,762
30,371
6,180
(78)
1,800
(3,188)
61
148
60
(13,622)
38,390
1.5 %
17.4
1.5
8.8
N/M
49.0
(0.6)
20.3
(24.8)
1.0
2.9
11.3
(22.8)
6.6 %
Non-interest expense increased $38.4 million, or 6.6%. Non-interest expense, excluding debt extinguishment costs of $33.2
million, was $584.6 million, an increase of $21.3 million, or 3.8%, compared to non-interest expenses of $563.2 million in
2020, which excludes expenses associated with cost savings initiatives of $16.2 million. Excluding the net decrease in
severance costs of $5.9 million, the increase in non-interest expense over 2020 was primarily due to increases in salaries and
benefits of $10.6 million, attributable to a $12.7 million increase in incentive compensation and bonuses. Also contributing to
the increase in non-interest expense were $8.4 million in data processing and software and $2.8 million in other outside services
expense, partially offset by a $3.2 million decrease in professional fees.
Income Taxes
Income tax expense for 2021 was $58.7 million, a $34.6 million increase compared to 2020. The ETR was 17.6% in 2021, as
compared to 12.0% in 2020. The increase in income tax expense and the ETR resulted primarily from higher income before
income taxes. The ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest income earned on
loans, investments in tax-free municipal securities and TCIs that generate tax credits under various federal programs.
54
Comparison of 2020 to 2019
Non-Interest Income
The following table presents the components of non-interest income:
2020
2019
(dollars in thousands)
$
%
Increase (Decrease)
Commercial banking:
Merchant and card ..................................................................... $
Cash management .....................................................................
Capital markets .........................................................................
Other commercial banking ........................................................
Total commercial banking ..............................................
23,139 $
18,725
18,288
10,134
70,286
24,077 $
18,392
14,875
13,773
71,117
Consumer banking:
Card ............................................................................................
Overdraft ....................................................................................
Other consumer banking ............................................................
Total consumer banking ..................................................
Wealth management fees ..................................................................
Mortgage banking:
Gains on sales of mortgage loans .................................................
Mortgage servicing income ..........................................................
Total mortgage banking ...............................................
Other .................................................................................................
Non-interest income before
investment securities gains ..............................................
Investment securities gains, net ........................................................
Total Non-Interest Income .............................................. $
19,777
12,556
9,265
41,598
59,058
53,599
(11,290)
42,309
13,084
20,515
17,949
11,039
49,503
55,678
17,881
5,218
23,099
12,030
226,335
3,053
229,388 $
211,427
4,733
216,160 $
14,908
(1,680)
13,228
(938)
333
3,413
(3,639)
(831)
(738)
(5,393)
(1,774)
(7,905)
3,380
35,718
(16,508)
19,210
1,054
(3.9) %
1.8
22.9
(26.4)
(1.2)
(3.6)
(30.0)
(16.1)
(16.0)
6.1
N/M
N/M
83.2
8.8
7.1
(35.5)
6.1 %
Excluding net investment securities gains, non-interest income increased $14.9 million, or 7.1%, in 2020, as compared to 2019.
Total commercial banking income decreased $0.8 million, compared to 2019, driven mainly by a decrease in other commercial
banking income (SBA lending income and other service charges as a result of COVID-19). This decrease was somewhat offset
by an increase in capital markets revenue.
Total consumer banking decreased $7.9 million, or 16.0%, compared to 2019, driven primarily by lower overdraft fees. Other
consumer banking income decreased largely due to lower ATM fees.
Wealth management revenues increased $3.4 million, or 6.1%, resulting primarily from growth in brokerage income due to an
increase in client asset levels and improved overall market performance.
Mortgage banking income increased $19.2 million, or 83.2%, mainly due to gains on sales of mortgage loans, partially offset by
a decrease in mortgage servicing income. Gains increased as a result of both higher volumes of loans sold and higher spreads on
sales. The decrease in mortgage servicing income was driven by $10.5 million of MSR impairment charges and higher MSR
amortization due to higher prepayments as a result of the lower rate environment. There were no MSR impairment charges in
2019.
Investment securities gains decreased $1.7 million, or 35.5%, mainly attributed to the difference in scope of the limited balance
sheet restructures in 2020 and 2019.
55
Non-Interest Expense
The following table presents the components of non-interest expense:
Salaries and employee benefits ...................................................... $
Net occupancy ................................................................................
Data processing and software ........................................................
Other outside services ....................................................................
Equipment ......................................................................................
Professional fees ............................................................................
State taxes ......................................................................................
FDIC insurance .............................................................................
Amortization of TCI ......................................................................
Marketing .......................................................................................
Debt extinguishment ......................................................................
Intangible amortization ..................................................................
Other ..............................................................................................
Total non-interest expense ...................................................... $
2020
324,395 $
53,013
48,073
31,432
13,885
12,835
12,613
8,865
6,126
5,127
2,878
529
59,669
579,440 $
Increase (Decrease)
%
$
2019
(dollars in thousands)
311,934 $
52,826
44,679
39,989
13,575
13,134
8,894
7,780
6,021
9,848
4,326
1,427
53,303
567,736 $
12,461
187
3,394
(8,557)
310
(299)
3,719
1,085
105
(4,721)
(1,448)
(898)
6,366
11,704
4.0 %
0.4
7.6
(21.4)
2.3
(2.3)
41.8
13.9
1.7
(47.9)
(33.5)
(62.9)
11.9
2.1 %
In the third quarter of 2020, the Corporation announced cost-savings initiatives which resulted in annual expense savings, not to
be fully realized until mid-2021. In 2020, $16.2 million of expenses were recognized related to the cost-savings initiatives in the
following categories: $5.6 million of severance expense (included in salaries and employee benefits) and $4.8 million of write-
offs of fixed assets and $5.8 million of lease termination charges (both included in other expense). The Corporation has been
reinvesting a portion of the cost savings to accelerate digital transformation initiatives.
In 2019, the Corporation recognized $10.9 million of expenses related to the Charter Consolidation, primarily in the following
categories: $1.9 million of severance expense (included in salaries and employee benefits), $6.6 million of other outside
services, $1.0 million of an intangible write-off (included in intangible amortization) and $0.6 million in marketing expense.
The more significant fluctuations in expense levels, excluding the cost-savings initiatives in 2020 and the Charter Consolidation
costs in 2019, by category are explained below:
•
•
•
•
•
•
Salaries and employee benefits increased $9.0 million mainly due to increases in employee salaries (annual merit
increases), overtime and incentive compensation (primarily COVID-19 related for front-line employees).
Other outside services decreased $2.0 million, or 5.9%, primarily due to more in-house development and less reliance
on third-party service providers.
Data processing and software increased $3.4 million, reflecting higher transaction volumes and costs related to growth
and technology initiatives.
Marketing decreased $4.1 million, or 44.3 %, as a result of reduced marketing campaigns.
State taxes increased $3.7 million, or 41.8%, as a result of higher Pennsylvania Bank Shares tax due to the Bank's
increased equity as well as higher sales taxes.
Other expenses decreased $4.3 million compared to 2019, primarily driven by a decrease in travel and entertainment,
influenced by the restrictions due to COVID-19.
56
FINANCIAL CONDITION
The table below presents condensed consolidated ending balance sheets.
December 31
Assets
2021
Increase (Decrease)
%
$
2020
(dollars in thousands)
Cash and cash equivalents ...................................................... $ 1,638,614 $ 1,847,832 $
FRB and FHLB Stock ............................................................
Loans held for sale ..................................................................
57,635
92,129
35,768
83,886
Investment securities ..............................................................
4,167,774
3,340,424
(209,218)
(34,494)
(48,118)
827,350
Loans, net ...............................................................................
18,076,349
18,623,253
(546,904)
Net premises and equipment ..................................................
Goodwill and intangibles ........................................................
220,357
538,053
231,480
536,659
(11,123)
1,394
Other assets .............................................................................
1,061,848
1,151,070
(89,222)
(11.3) %
(37.4) %
(57.4)
24.8
(2.9)
(4.8)
0.3
(7.8)
Total Assets ..................................................................... $ 25,796,398 $ 25,906,733 $
(110,335)
(0.4) %
Liabilities and Shareholders’ Equity
Deposits .................................................................................. $ 21,573,499 $ 20,839,207 $
Short-term borrowings ............................................................
416,764
630,066
Long-term borrowings ............................................................
Other liabilities .......................................................................
Total Liabilities ....................................................................
Total Shareholders’ Equity ..................................................
621,345
1,296,263
472,110
23,083,718
524,369
23,289,905
2,712,680
2,616,828
734,292
(213,302)
(674,918)
(52,259)
(206,187)
95,852
3.5 %
(33.9)
(52.1)
(10.0)
(0.9)
3.7
Total Liabilities and Shareholders’ Equity ..................... $ 25,796,398 $ 25,906,733 $
(110,335)
(0.4) %
Investment Securities
The following table presents the carrying amount of investment securities as of December 31:
2021
2020
(in thousands)
Available for Sale
U.S. Government securities
State and municipal securities ............................................................................................................
Corporate debt securities ....................................................................................................................
Collateralized mortgage obligations ..................................................................................................
Residential Mortgage-backed securities ............................................................................................
Commercial mortgage backed securities ...........................................................................................
Auction rate securities ........................................................................................................................
Held to Maturity
127,618 $
$
1,188,670
386,133
209,359
229,795
971,148
74,667
3,187,390
—
952,613
367,145
503,766
377,998
762,415
98,206
3,062,143
Residential mortgage-backed securities .............................................................................................
Commercial mortgage-backed securities
278,281
—
278,281
Total investment securities ............................................................................................................ $ 4,167,774 $ 3,340,424
404,958
575,426
980,384
Total AFS securities increased $125.2 million, or 4.1%, to $3,187.4 million at December 31, 2021, primarily due to an increase
in state and municipal securities and commercial mortgage backed securities, partially offset by a decrease in collateralized
mortgage obligations.
57
Total HTM securities increased $702.1 million, primarily due to the addition of commercial mortgage-backed securities and an
increase in residential mortgage-backed securities.
Loans
The following table presents ending loans outstanding, by type, as of the dates shown, and the changes in balances for the most
recent year:
2021
December 31
2020
(dollars in thousands)
2019
Real estate – commercial mortgage ........................................................................... $ 7,279,080 $ 7,105,092 $ 6,700,776
Commercial and industrial (1)
4,446,701
.....................................................................................
2,641,465
Real estate – residential mortgage .............................................................................
1,314,944
Real estate – home equity
971,079
Real estate – construction ..........................................................................................
463,164
Consumer ...................................................................................................................
322,625
Equipment lease financing and other .........................................................................
3,582
Overdrafts ..................................................................................................................
16,864,336
Gross loans ...........................................................................................................
(26,810)
Unearned income .......................................................................................................
Net Loans .............................................................................................................. $ 18,325,350 $ 18,900,820 $ 16,837,526
4,208,327
3,846,750
1,118,248
1,139,779
464,657
283,557
1,988
18,342,386
5,670,828
3,141,915
1,202,913
1,047,218
466,772
284,377
4,806
18,923,921
(23,101)
(17,036)
(1) Includes PPP loans totaling $0.3 billion and $1.6 billion as of December 31, 2021 and 2020, respectively.
Net Loans decreased $575.5 million, or 3.0%, as of December 31, 2021 compared to December 31, 2020, primarily due to a
$1,462.5 million decrease in commercial and industrial loans due to the decrease in PPP loans, partially offset by a $704.8
million increase in residential mortgage 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 December 31, 2021, approximately $8,418.9 million, or 45.9%, of the loan portfolio was
comprised of commercial mortgage and construction loans. The Corporation's policies limit the maximum total lending
commitment to an individual borrower to $55.0 million as of December 31, 2021. 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.
58
The following table summarizes the industry concentrations within the commercial mortgage and the commercial and industrial
loan portfolios (excluding PPP loans) as of December 31:
Real estate (1)
Health care ......................................................................................................................................
...................................................................................................................................
Agriculture ......................................................................................................................................
Manufacturing .................................................................................................................................
Other services (2)
Construction (3)
Hospitality and food services ..........................................................................................................
................................................................................................................................
.............................................................................................................................
Retail ...............................................................................................................................................
Wholesale trade ...............................................................................................................................
Educational services ........................................................................................................................
Arts, entertainment and recreation ..................................................................................................
Professional, scientific and technical services ................................................................................
Public administration ......................................................................................................................
Finance and Insurance .....................................................................................................................
Transportation and warehousing .....................................................................................................
Other (4)
...........................................................................................................................................
2021
2020
44.3 %
43.1 %
6.7
6.1
5.1
5.0
3.9
3.7
3.0
2.8
2.7
2.3
1.8
1.5
1.4
1.3
8.4
7.2
6.5
5.0
4.9
4.7
4.0
3.5
2.7
3.0
2.4
2.2
1.7
1.4
1.4
6.3
Total .........................................................................................................................................
100.0 %
100.0 %
(1) Includes commercial loans to borrowers engaged in the business of: renting, leasing or managing real estate for others; selling and/or buying real estate for
others; and appraising real estate.
(2) Excludes public administration.
(3)
(4)
Includes commercial loans to borrowers engaged in the construction industry.
Includes energy sector.
The following table presents the changes in non-accrual loans for the years ended December 31:
Commercial
and
Industrial
Real Estate -
Commercial
Mortgage
Real Estate -
Construction
Real Estate -
Residential
Mortgage
Real Estate -
Home
Equity
Consumer
Equipment
Lease
Financing
Total
(in thousands)
Balance at December 31, 2019 ..... $
48,106 $
33,166 $
3,618 $
16,676 $
7,004 $
— $
16,528 $ 125,098
Additions ................................
Payments ................................
Charge-offs ............................
Transfers to OREO .................
Transfers to accrual status ......
Balance at December 31, 2020 .....
Additions ..................................
Payments .................................
Charge-offs .............................
Transfers to OREO .................
Transfers to accrual status ......
Balance of non-accrual loans at
December 31, 2021 ...................... $
37,208
(34,405)
(18,915)
—
(1)
31,993
40,722
(27,175)
(15,337)
—
(62)
37,538
(14,077)
(4,225)
(31)
(901)
51,470
36,664
(25,668)
(8,726)
—
(925)
153
(2,358)
(17)
—
(1)
1,395
404
(859)
(39)
—
—
12,994
(1,848)
(620)
(237)
(858)
26,107
12,498
(1,823)
(1,290)
—
(223)
5,621
(1,617)
(1,193)
(227)
—
9,588
1,972
(1,785)
(676)
(274)
(154)
3,742
(10)
(3,400)
—
—
332
2,628
(98)
3,177
100,433
(1,205)
(2,187)
—
—
(55,520)
(30,557)
(495)
(1,761)
16,313
1,919
137,198
96,807
(341)
(57,749)
(2,633)
(2,251)
(30,952)
—
—
—
—
(274)
(1,364)
30,141 $
52,815 $
901 $
35,269 $
8,671 $
229 $
15,640 $ 143,666
Non-accrual loans increased $6.5 million, or 4.7%, in 2021. Non-accrual loans as a percentage of Net Loans increased to 0.78%
at December 31, 2021, compared to 0.72% at December 31, 2020.
59
The following table presents non-performing assets as of the dates shown:
Non-accrual loans (1) (2) (3)
Loans 90 days or more past due and still accruing (2)
........................................................................................... $
................................................
Total non-performing loans and leases ...............................................................
OREO (4)
....................................................................................................................
Total non-performing assets ................................................................................ $
2021
December 31,
2020
(in thousands)
2019
143,666 $
8,453
152,119
1,817
153,936 $
137,198 $
9,929
147,127
4,178
151,305 $
125,098
16,057
141,155
6,831
147,986
The amount of interest income on non-accrual loans that was recognized in 2021 was approximately $1.3 million.
(1)
(2) Accrual of interest is generally discontinued when a loan becomes 90 days past due. In certain cases a loan may be placed on non-accrual status prior to
being 90 days delinquent if there is an indication that the borrower is having difficulty making payments or the Corporation believes it is probable that all
amounts will not be collected according to the contractual terms of the agreement. When interest accruals are discontinued, unpaid interest previously
credited to income is reversed. Non-accrual loans may be restored to accrual status when all delinquent principal and interest has been paid currently for six
consecutive months or the loan is considered to be adequately secured and in the process of collection. Certain loans, primarily adequately collateralized
residential mortgage loans, may continue to accrue interest after reaching 90 days past due.
(3) Excluded from non-performing assets as of December 31, 2021, were $29.5 million of loans modified under TDRs. These loans continue to accrue interest
and are, therefore, not included in non-accrual loans.
(4) Excludes $6.4 million of residential mortgage properties for which formal foreclosure proceedings were in process as of December 31, 2021.
The following table presents non-performing loans, by type, as of the dates shown:
Commercial and industrial ......................................................................................... $ 30,629
54,044
Real estate – commercial mortgage ............................................................................
Real estate – residential mortgage ..............................................................................
39,399
10,924
Real estate – home equity ...........................................................................................
Real estate – construction ...........................................................................................
901
Consumer ....................................................................................................................
582
Equipment lease financing .........................................................................................
15,640
Total non-performing loans ................................................................................... $ 152,119
Non-performing loans to total loans ......................................................................
2021
2019
December 31,
2020
(dollars in thousands)
$ 32,609
52,647
30,794
1,550
12,341
749
16,437
$ 147,127
$ 49,491
37,279
22,411
10,568
4,306
458
16,642
$ 141,155
0.83 %
0.78 %
0.84 %
The following table presents TDRs as of the dates shown:
2021
December 31,
2020
(in thousands)
2019
Real estate – commercial mortgage ........................................................................... $
Commercial and industrial
Real estate – residential mortgage .............................................................................
Real estate – home equity ..........................................................................................
Consumer ..................................................................................................................
Total accruing TDRs .............................................................................................
.................................................................................................
Non-accrual TDRs (1)
Total TDRs ............................................................................................................ $
3,464 $
1,857
11,948
12,218
5
29,492
55,945
85,437 $
28,451 $
6,982
18,602
14,391
—
68,426
35,755
104,181 $
13,330
5,193
21,551
15,068
8
55,150
20,825
75,975
(1) Included within non-accrual loans in the preceding table.
The decrease in TDRs in 2021 compared to 2020 is primarily due to a decrease in commercial mortgage, residential mortgage
and commercial and industrial loans, partially offset by an increase in non-accrual TDRs.
Total TDRs modified during 2021 and still outstanding as of December 31, 2021, were $33.5 million. Of these loans, $15.5
million, or 46.4%, had a payment default during 2021, which the Corporation defines as a single missed scheduled payment,
60
subsequent to modification. TDRs modified during 2020 and still outstanding as of December 31, 2020, totaled $45.3 million. Of
these loans, $15.5 million, or 34.3%, had a payment default during 2020, which the Corporation defines as a single missed
scheduled payment, subsequent to modification.
The following table summarizes OREO, by property type, as of December 31:
2021
2020
(in thousands)
Commercial properties ..................................................................................................................... $
Residential properties .......................................................................................................................
Undeveloped land .............................................................................................................................
Total OREO .............................................................................................................................. $
943 $
669
205
1,817 $
1,730
1,496
952
4,178
As noted under the heading "Critical Accounting Policies" within Management's Discussion, the Corporation's ability to identify
potential problem loans in a timely manner is key to maintaining an adequate ACL. For commercial loans, commercial
mortgages and construction loans to commercial borrowers, an internal risk rating process is used to monitor credit quality. For a
complete description of the Corporation's risk ratings, refer to the "Allowance for Credit Losses" section within "Note 1 -
Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements in Item 8. "Financial
Statements and Supplementary Data." The evaluation of credit risk for residential mortgages, home equity loans, construction
loans to individuals, consumer loans and equipment lease financing is based on aggregate payment history through the
monitoring of delinquency levels and trends.
Total internally risk rated loans were $12.4 billion and $13.7 billion as of December 31, 2021 and 2020, respectively. The
following table presents criticized and classified loans, or those with internal risk ratings of special mention (1) or substandard or
lower (2) for commercial mortgages, commercial and industrial loans and construction loans to commercial borrowers, by class
segment, as of December 31:
Special Mention (1)
Increase (Decrease)
Substandard or
Lower (2)
Increase
(Decrease)
Total Criticized and
Classified Loans
2021
2020
$
%
2021
2020
$
%
2021
2020
(dollars in thousands)
Real estate - commercial
mortgage ................................. $ 387,279 $ 478,165 $ (90,886)
(19.0) % $ 331,096 $ 181,970 $ 149,126
82.0 % $ 718,375
$ 660,135
Commercial and industrial .......
Real estate - construction (3)
....
142,369
154,039
(11,670)
(7.6)
152,219
128,175
24,044
18.8
294,588
282,214
58,841
13,259
45,582
N/M 6,324
5,469
855
15.6
65,165
18,728
Total ..................................... $ 588,489 $ 645,463 $ (56,974)
(8.8) % $ 489,639 $ 315,614 $ 174,025
55.1 % $ 1,078,128 $ 961,077
% of total risk rated loans ....
4.7 %
4.7 %
3.9 %
2.3 %
8.6 %
7.0 %
(1) Considered "criticized" loans by banking regulators
(2) Considered "classified" loans by banking regulators
(3) Excludes construction - other
As of December 31, 2021, total loans with risk ratings of special mention decreased by $57.0 million, or 8.8%, and total loans
with a risk rating of substandard or lower increased by $174.0 million, or 55.1%, resulting in an overall increase in total
criticized loans of $117.1 million, 12.2% higher than 2020. The largest drivers of the migration into these risk rating categories
was within the arts, recreation and entertainment industry, education industry and hospitality industry, which is included in the
real estate - commercial mortgage category.
61
The following table presents, by class segment, a summary of delinquency status and rates, as a percentage of total
loans that do not have internal risk ratings as of December 31:
Delinquent (1)
Non-performing (2)
Total
2021
2020
2021
2020
2021
2020
$
%
$
%
$
%
$
%
$
%
$
%
(dollars in thousands)
5,523
0.49 % $
7,276
0.55 % $ 11,123
0.99 % $ 12,340
0.94 % $ 16,646
1.49 % $ 19,616
1.49 %
25,877
0.67
29,956
0.95
39,542
1.03
30,665
0.98
65,419
1.70
60,621
1.93
Real estate - home
equity ................ $
Real estate -
residential
mortgage ...........
Real estate -
construction -
other ..................
Consumer ..............
4,437
0.95
1,318
0.11
1,938
0.20
3,537
0.76
173
0.02
583
0.13
178
750
0.02
0.16
1,491
0.13
5,020
1.08
2,116
0.22
4,287
0.93
Equipment lease
financing ..........
253
0.09
988
0.33
15,641
5.83
16,437
5.49
15,894
5.92
17,425
5.82
Total ...................... $ 37,408
0.56 % $ 43,695
0.92 % $ 67,062
0.98 % $ 60,370
1.25 % $ 104,470
1.54 % $ 104,065
2.17 %
(1) Includes all accruing loans 30 days to 89 days past due.
(2) Includes all accruing loans 90 days or more past due and all non-accrual loans and leases.
62
Loans and Allowance for Credit Losses
The Corporation accounts for the credit risk associated with lending activities through the ACL and the provision for credit
losses.
A summary of the Corporation’s activity in the ACL, including loans and OBS credit exposures:
2021
2020
2019
(dollars in thousands)
Net Loans ..................................................................................................................................................... $ 18,325,350
$ 18,900,820
$ 16,837,526
Average balance of Net Loans .................................................................................................................... $ 18,627,787
$ 18,270,390
$ 16,430,347
Balance of ACL at beginning of period ...................................................................................................... $
291,940
$
166,209
$
169,410
Impact of adopting CECL on January 1, 2020
Loans charged off:
—
58,348
—
Commercial and industrial .................................................................................................................
(15,337)
(18,915)
(42,410)
Real estate – commercial mortgage ....................................................................................................
(8,726)
Real estate – home equity ...................................................................................................................
Consumer ............................................................................................................................................
Equipment lease financing and other .................................................................................................
Real estate – residential mortgage ......................................................................................................
Real estate – construction ...................................................................................................................
(676)
(2,633)
(2,251)
(1,290)
(39)
(4,225)
(1,193)
(3,400)
(2,187)
(620)
(17)
(1,837)
(1,291)
(3,403)
(2,560)
(1,545)
(143)
Total loans charged off ...................................................................................................................
(30,952)
(30,557)
(53,189)
Recoveries of loans previously charged off:
Commercial and industrial .................................................................................................................
Real estate – construction ...................................................................................................................
Real estate – home equity ...................................................................................................................
Consumer ............................................................................................................................................
Real estate – commercial mortgage ....................................................................................................
Equipment lease financing and other .................................................................................................
Real estate – residential mortgage ......................................................................................................
9,587
1,412
248
2,097
2,474
953
375
Total recoveries ...............................................................................................................................
17,146
Net loans charged off ...................................................................................................................................
(13,806)
Provision for credit losses ...........................................................................................................................
(14,600)
11,396
5,122
504
1,875
1,027
605
491
21,020
(9,537)
76,920
8,721
2,591
688
1,306
2,202
666
989
17,163
(36,026)
32,825
Balance of ACL at end of period ................................................................................................................. $
263,534
$
291,940
$
166,209
Components of the ACL:
ACL - Loans ................................................................................................................................................ $
ACL - OBS credit exposures (1)
Balance of ACL at end of period ................................................................................................................. $
..................................................................................................................
249,001
$
277,567
$
163,622
14,533
14,373
2,587
263,534
$
291,940
$
166,209
Selected Asset Quality Ratios:
Net charge-offs to average loans .................................................................................................................
0.07 %
0.05 %
0.22 %
ACL - loans to total Net Loans ....................................................................................................................
ACL to total Net Loans ...............................................................................................................................
Non-performing assets (2) to total assets .....................................................................................................
Non-performing assets (2) to total loans and OREO ...................................................................................
Non-accrual loans to total Net Loans ..........................................................................................................
ACL - loans(3) to non-performing loans .....................................................................................................
Non-performing assets (2) to tangible common shareholders' equity and ACL - loans (3)
........................
1.36
1.44
0.60
0.83
0.78
163.69
6.90
1.47
1.54
0.58
0.83
0.72
188.66
6.99
0.97
0.99
0.68
0.88
0.74
117.75
7.50
(1) Reserve for OBS credit exposures is recorded within other liabilities on the consolidated balance sheets. Prior to 2020, it was referred to as "reserve for
unfunded lending commitments". See "Note 4 - Loans and Allowance for Credit Losses" in the Notes to Consolidated Financial Statements in Item 8.
"Financial Statements and Supplementary Data." for further details.
(2) Includes accruing loans past due 90 days or more.
(3) 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," in the Overview of Item 7.
"Management Discussion & Analysis of Financial Condition and Results of Operations."
63
The provision for credit losses decreased $91.5 million in comparison to 2020. The amounts recorded in 2021 were primarily
driven by economic assumptions. Periods prior to 2020 did not incorporate "life of loan" losses under CECL and applied an
incurred loss model, which would not have considered economic forecasts or forward-looking considerations over the remaining
expected lives of loans. See "Note 1 - Summary of Significant Accounting Policies" in the Notes to Consolidated Financial
Statements in Item 8. "Financial Statements and Supplementary Data." for further details.
The following table summarizes the allocation of the ACL - loans:
2021
2020
2019
%
In Each
Loan
Category
(1)
ACL - loans
ACL - loans
ACL - loans
%
In Each
Loan
Category
(1)
(dollars in thousands)
103,425
74,771
51,995
30.0
16.6
37.6 % $
45,610
68,602
19,771
39.7 % $
22.9
21.0
10.2
6.2
100.0 % $
31,770
15,608
277,567
10.3
5.5
100.0 % $
25,196
4,443
163,622
Real estate - commercial mortgage .... $
Commercial and industrial ..................
Real estate - residential mortgage ......
Consumer, home equity, equipment
lease financing ...................................
Real estate - construction ....................
Total .................................................. $
(1)
87,970
67,056
54,236
26,798
12,941
249,001
Ending loan balances as a % of total loans for the years presented.
%
In Each
Loan
Category
(1)
39.6 %
26.4
15.7
12.5
5.8
100.0 %
Management believes that the $249.0 million ACL - loans as of December 31, 2021, was sufficient to cover expected losses in
the loan portfolio. See additional disclosures in "Note 1 - Summary of Significant Accounting Policies," and "Note 4 - Loans and
Allowance for Credit Losses," in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and
Supplementary Data;" and "Critical Accounting Policies" above.
Other Assets
Other assets decreased $73.7 million, or 6.8%, to $1.0 billion as of December 31, 2021, primarily due to the decrease in fair
values of derivatives related to the Bank's customer back-to-back interest rate swap program of $177.2 million, partially offset by
an increase on bank-owned life insurance of $90.1 million driven by purchases of new policies of $75.0 million during 2021.
Deposits and Borrowings
The following table presents ending deposits, by type, as of December 31:
2021
Increase (Decrease)
%
$
2020
(dollars in thousands)
Noninterest-bearing demand ........................................................... $ 7,370,963 $ 6,531,002 $
Interest-bearing demand .................................................................. 5,819,539
Savings ............................................................................................ 6,403,995
Total demand and savings ....................................................... 19,594,497
Brokered deposits ............................................................................
251,526
Time deposits .................................................................................. 1,727,476
5,818,564
5,929,792
18,279,358
335,185
2,224,664
Total deposits ........................................................................ $ 21,573,499 $ 20,839,207 $
839,961
975
474,203
1,315,139
(83,659)
(497,188)
734,292
12.9 %
—
8.0
7.2
(25.0)
(22.3)
3.5 %
Compared to 2021, total demand and savings deposits increased by $1.3 billion, or 7.2%, partially offset by a decrease in
brokered deposits of $83.7 million and time deposits of $497.2 million. This shift from higher-cost to lower-cost deposits
favorably impacted the Corporation's net interest margin and profitability.
64
The following table presents ending borrowings, by type, as of December 31:
2021
Increase (Decrease)
%
2020
$
(dollars in thousands)
Short-term borrowings:
Customer funding (1)
Long-term borrowings:
................................................................... $
416,764 $
630,066 $
(213,302)
(33.9) %
FHLB advances ..........................................................................
Other long-term borrowings .......................................................
Total long-term borrowings ...........................................
—
621,345
621,345
535,973
760,290
1,296,263
Total borrowings ....................................................... $ 1,038,109 $ 1,926,329 $
(535,973)
(138,945)
(674,918)
(888,220)
(100.0)
(18.3)
(52.1)
(46.1) %
(1)
Includes short-term promissory notes.
Total short-term borrowings decreased $213.3 million, or 33.9%, compared to 2020, as a result of lower balances of customer
short-term promissory notes. Long-term borrowings decreased $674.9 million, or 52.1%, compared to 2020, primarily due to the
prepayment of FHLB advances as part of the balance sheet restructuring. Also, in the first quarter of 2021, the Corporation
completed a cash tender offer for $75 million of 4.50% subordinated debt due in 2024 and $60 million of 3.60% senior notes due
in 2022.
Other Liabilities
Other liabilities decreased $48.9 million, or 9.5%, to $465.1 million as of December 31, 2021, primarily as the result of a
decrease in the fair values of derivatives related to the Bank's customer back-to-back interest rate swap program.
Shareholders’ Equity
Total shareholders’ equity increased $95.9 million, or 3.7%, to $2.7 billion, or 10.5% of total assets, as of December 31, 2021.
The increase was due primarily to an increase in retained earnings reflecting the net income available to common shareholders of
$265.2 million for 2021, partially offset by a $41.7 million increase in treasury stock primarily driven by the Corporation's share
repurchase program. The Corporation repurchased 2.8 million shares of its common stock during 2021 at a cost of $43.9 million.
As of December 31, 2021, up to an additional $31.1 million of common stock may be purchased through March 31, 2022 under
the $75 million share repurchase program originally announced in February 2021. Shareholders' equity also decreased in 2021
due to a $37.7 million decrease in AOCI primarily from unrealized losses on and reclassification of securities. See "Note 14 -
Shareholders' Equity" in the Notes to the Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary
Data" for details of share repurchases.
The Corporation and its wholly owned subsidiary bank, Fulton Bank, are subject to regulatory capital requirements administered
by the FRB and OCC. Failure to meet minimum capital requirements can trigger certain actions by these regulators that could
have a material effect on the Corporation’s financial statements. The regulations require that banks and bank holding companies
maintain minimum amounts and ratios of total, Tier I and Common Equity Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined in the regulations), and Tier I capital to average assets (as defined in the regulations).
The following table summarizes the Corporation’s capital ratios in comparison to regulatory requirements at December 31:
Total Risk-Based Capital (to Risk-Weighted Assets) .
Tier I Risk-Based Capital (to Risk-Weighted Assets)
Common Equity Tier I (to Risk-Weighted Assets) .....
Tier I Leverage Capital (to Average Assets) ...............
2021
14.1%
10.9%
9.9%
8.6%
2020
14.4%
10.5%
9.5%
8.2%
Regulatory
Minimum
for Capital
Adequacy
8.0%
6.0%
4.5%
4.0%
Fully Phased-in, with
Capital Conservation
Buffers
10.5%
8.5%
7.0%
4.0%
In July 2013, the FRB approved the Basel III Rules establishing a new comprehensive capital framework for U.S. banking
organizations and implementing the Basel Committee on Banking Supervision's December 2010 framework for strengthening
international capital standards. The Basel III Rules substantially revised the risk-based capital requirements applicable to bank
holding companies and depository institutions.
65
The Basel III Rules require the Corporation and Fulton Bank to:
• Meet a minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets and a Tier 1 capital ratio of
6.00% of risk-weighted assets;
• Continue to require a minimum Total capital ratio of 8.00% of risk-weighted assets and a Tier 1 leverage capital ratio of
4.00% of average assets; and
• Comply with a revised definition of capital to improve the ability of regulatory capital instruments to absorb losses as a
result of which certain non-qualifying capital instruments, including cumulative preferred stock and TruPS, will be
excluded as a component of Tier 1 capital for institutions of the Corporation's size.
As of January 1, 2019, the Corporation and Fulton Bank were also required to 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.
The Basel III Rules use a standardized approach for risk weightings that expand 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, resulting in higher risk weights for a variety of
asset categories.
As of December 31, 2021, Fulton Bank was well capitalized under the regulatory framework for prompt corrective action based
on its capital ratio calculations. To be categorized as well capitalized, Fulton 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 table above. There are no conditions
or events since December 31, 2021 that management believes have changed Fulton Bank's categories. See "Note 11 - Regulatory
Matters," in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."
Contractual Obligations and Off-Balance Sheet Arrangements
The Corporation has various financial obligations that require future cash payments. These obligations include payments for
liabilities recorded on the Corporation’s consolidated balance sheets as well as contractual obligations for purchased services.
Contractual purchase obligations to third parties that were fixed and determinable of $96 million and $75 million at December
31, 2021 and 2020, respectively, include information technology, telecommunication and data processing outsourcing contracts.
The increase is primarily driven by a contract extension with the Bank's core information system provider.
The Corporation is a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to extend credit and standby and commercial letters of credit,
which involve, to varying degrees, elements of credit and interest rate risk that are not recognized on the consolidated balance
sheets. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Standby letters of credit are conditional commitments issued to guarantee the financial or
performance obligation of a customer to a third party. Commercial letters of credit are conditional commitments issued to
facilitate foreign or domestic trade transactions for customers. Commitments and standby and commercial letters of credit do not
necessarily represent future cash needs, as they may expire without being drawn.
The following table presents the Corporation’s commitments to extend credit and letters of credit as of December 31, 2021 (in
thousands):
Commercial and industrial ....................................................................................................................... $
Real estate - commercial mortgage and real estate - construction ...........................................................
Real estate - home equity .........................................................................................................................
Total commitments to extend credit ................................................................................................... $
Standby letters of credit ............................................................................................................................ $
Commercial letters of credit .....................................................................................................................
Total letters of credit ......................................................................................................................... $
5,072,008
1,914,238
1,744,922
8,731,168
298,275
54,196
352,471
66
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the exposure to economic loss that arises from changes in the values of certain financial instruments. The types of
market risk exposures generally faced by financial institutions include interest rate risk, equity market price risk, debt security
market price risk, foreign currency price risk and commodity price risk. Due to the nature of its operations, foreign currency
price risk and commodity price risk are not significant to the Corporation.
Interest Rate Risk, Asset/Liability Management and Liquidity
Interest rate risk creates exposure in two primary areas. First, changes in rates have an impact on the Corporation’s liquidity
position and could affect its ability to meet obligations and continue to grow. Second, movements in interest rates can create
fluctuations in the Corporation’s net interest income and changes in the economic value of its equity.
The Corporation employs various management techniques to minimize its exposure to interest rate risk. The Corporation's
ALCO is responsible for reviewing the interest rate sensitivity and liquidity positions of the Corporation, approving asset and
liability management policies, and overseeing the formulation and implementation of strategies regarding balance sheet
positions.
The Corporation uses two complementary methods to measure and manage interest rate risk. They are simulation of net interest
income and estimates of economic value of equity. Using these measurements in tandem provides a reasonably comprehensive
summary of the magnitude of the Corporation's interest rate risk, level of risk as time evolves, and exposure to changes in
interest rates.
Simulation of net interest income is performed for the next 12-month period. A variety of interest rate scenarios are used to
measure the effects of sudden and gradual movements upward and downward in the yield curve. These results are compared to
the results obtained in a flat or unchanged interest rate scenario. Simulation of net interest income is used primarily to measure
the Corporation’s short-term earnings exposure to rate movements. The Corporation’s policy limits the potential exposure of
net interest income, in a non-parallel instantaneous shock, to 10% of the base case net interest income for a 100 bps shock in
interest rates, 15% for a 200 bps shock, 20% for a 300 bps shock and 25% for a 400 bps shock. A "shock" is an immediate
upward or downward movement of interest rates. The shocks do not take into account changes in customer behavior that could
result in changes to mix and/or volumes in the balance sheet, nor does it take into account the potential effects of competition
on the pricing of deposits and loans over the forward 12-month period.
Contractual maturities and repricing opportunities of loans are incorporated in the simulation model as are prepayment
assumptions, maturity data and call options within the investment portfolio. Assumptions based on past experience are
incorporated into the model for non-maturity deposit accounts. The assumptions used are inherently uncertain and, as a result,
the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest
rates on net interest income. Actual results will differ from the model's simulated results due to timing, amount and frequency
of interest rate changes as well as changes in market conditions and the application and timing of various management
strategies.
The following table summarizes the expected impact of abrupt interest rate changes, i.e. a non-parallel instantaneous shock, on
net interest income as of December 31, 2021 (due to the current level of interest rates, the downward shock scenarios are not
shown):
Rate Shock (1)
+400 bps .......................................................................................................
+300 bps .......................................................................................................
+200 bps .......................................................................................................
+100 bps .......................................................................................................
Annual change
in net interest income
+ $173.1 million
+ $129.6 million
+ $85.6 million
+ $41.3 million
% Change in net
interest income
+ 25.3%
+ 19.0%
+ 12.5%
+ 6.0%
(1) These results include the effect of implicit and explicit interest rate floors that limit further reduction in interest rates.
Economic value of equity estimates the discounted present value of asset and liability cash flows. Discount rates are based upon
market prices for like assets and liabilities. Abrupt changes or "shocks" in interest rates, both upward and downward, are used
to determine the comparative effect of such interest rate movements relative to the unchanged environment. This measurement
tool is used primarily to evaluate the longer-term repricing risks and options in the Corporation’s balance sheet. The
Corporation's policy limits the economic value of equity that may be at risk, in a non-parallel instantaneous shock, to 10% of
67
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 December 31, 2021, the Corporation was within economic value of equity policy limits for
every 100 bps shock.
Interest Rate Swaps
The Corporation enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk
management needs. The Corporation simultaneously enters into interest rate swaps with dealer counterparties, with identical
notional amounts and terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the
Corporation receives a floating rate. These interest rate swaps are derivative financial instruments, and the gross fair values are
recorded in other assets and liabilities on the consolidated balance sheets, with changes in fair value during the period recorded
in other non-interest expense on the consolidated statements of income.
Cash Flow Hedges
The Corporation’s objectives in using interest rate derivatives are to reduce volatility in net interest income and to manage its
exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate swaps as part of
its interest rate risk management strategy. During 2021, the Corporation entered into interest rate swaps designated as cash flow
hedges to hedge the variable cash flows associated with existing floating rate loans. These hedge contracts involve the receipt of
fixed-rate amounts from a counterparty in exchange for the Corporation making floating-rate payments over the life of the
agreements without exchange of the underlying notional amount.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative
is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction
affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments
are made on the Corporation’s variable-rate liabilities.
Liquidity
The Corporation must maintain a sufficient level of liquid assets to meet the cash needs of its customers, who, as depositors,
may want to withdraw funds or who, as borrowers, need credit availability. Liquidity is provided on a continuous basis through
scheduled and unscheduled principal and interest payments on investments and outstanding loans and through the availability of
deposits and borrowings. The Corporation also maintains secondary sources that provide liquidity on a secured and unsecured
basis to meet short- and long-term needs.
The Corporation maintains liquidity sources in the form of interest-bearing deposits and customer funding (short-term
promissory notes). The Corporation can access additional liquidity from these sources, if necessary, by increasing the rates of
interest paid on those instruments. The positive impact to liquidity resulting from paying higher interest rates could have a
detrimental impact on the net interest margin and net interest income if rates on interest-earning assets do not experience a
proportionate increase. Borrowing availability with the FHLB and the FRB, along with federal funds lines at various
correspondent banks, provides the Corporation with additional liquidity.
Fulton Bank is a member of the FHLB and has access to FHLB overnight and term credit facilities. As of December 31, 2021,
the Corporation had no short- or long-term advances outstanding with the FHLB. As of December 31, 2021, the Corporation
has borrowing capacity of approximately $5.8 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.
As of December 31, 2021, the Corporation had aggregate availability under federal funds lines of $2.1 billion, with no
outstanding borrowings against that amount. 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. As of December 31, 2021, the
Corporation had $0.9 billion of collateralized borrowing availability at the discount window, and no outstanding borrowings.
The Corporation records a reserve for unfunded commitments, included in other liabilities on the consolidated balance sheets,
which represents management’s estimate of losses inherent in commitments to extend credit and letters of credit. As of
December 31, 2021, the balance of these commitments was $352.5 million.
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. See
68
"Note 11 - Regulatory Matters - Dividend and Loan Limitations" in the Notes to Consolidated Financial Statements in Item 8.
"Financial Statements and Supplementary Data" for additional information concerning limitations on the dividends that may be
paid to the Corporation, and loans that may be granted to the Corporation. Management continues to monitor the liquidity and
capital needs of the parent company and will implement appropriate strategies, as necessary, to remain adequately capitalized
and to meet its cash needs.
The Corporation’s sources and uses of funds were discussed in general terms in the "Net Interest Income" section of
Management’s Discussion and Analysis. The consolidated statements of cash flows provide additional information. The
Corporation’s operating activities during 2021 generated $342.3 million of cash, mainly due to net income of $275.5 million.
Cash used in investing activities was $214.0 million, primarily due to net cash flows from purchases of AFS and HTM
securities, offset by an increase in cash flows from loans, primarily related to the decrease in PPP loans. Net cash used in
financing activities was $337.5 million, due primarily to the repayment of long-term borrowings, decreases in time deposits and
short-term borrowings, and dividends paid, offset by cash flows provided by an increase in demand and savings deposits.
The following table presents the expected maturities of AFS investment securities, at estimated fair value, as of December 31,
2021 and the weighted average yields on such securities (calculated based on historical cost):
Available for sale
U.S. Government securities ............................ $
State and municipal (1)
Corporate debt securities ................................
Auction rate securities (2)
....................................
................................
Maturing
Within One Year
After One But
Within Five Years
After Five But
Within Ten Years
After Ten Years
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
(dollars in thousands)
—
— % $ 127,618
0.65 % $
—
— % $
—
— %
8,147
1,028
—
5.36
5.36
—
10,561
25,745
—
5.16
3.36
—
46,422
359,360
—
4.05
3.79
—
1,123,540
3.77
—
—
74,667
1.60
Total ........................................................ $
9,175
5.36 % $ 163,924
1.35 % $ 405,782
3.82 % $ 1,198,207
3.63 %
(1) Weighted average yields on tax-exempt securities have been computed on a fully taxable-equivalent basis assuming a federal tax rate of 21% and
statutory interest expense disallowances.
(2) Maturities of ARCs are based on contractual maturities.
The Corporation’s investment portfolio consists mainly of state and municipal securities, mortgage-backed securities and
collateralized mortgage obligations. Mortgage-backed securities and collateralized mortgage obligations have stated maturities
that may differ from actual maturities due to borrowers’ ability to prepay obligations. Cash flows from such investments are
dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. As
rates increase, cash flows generally decrease as prepayments on the underlying mortgage loans decrease. As rates decrease,
cash flows generally increase as prepayments increase.
The following table presents AFS mortgage-backed investment securities, at estimated fair value, and HTM mortgage-backed
investment securities, at amortized cost, as of December 31, 2021, without stated maturities, including the weighted average
yields and estimated weighted average lives based on prepayment speeds on such securities:
Amount
Yield
(dollars in thousands)
Weighted
Average Life
(in years)
Available for sale
Residential mortgage-backed securities ....................................................................................... $
229,795
1.48 %
Commercial mortgage-backed securities ......................................................................................
Collateralized mortgage obligations .............................................................................................
Held to maturity
Residential mortgage-backed securities .......................................................................................
Commercial mortgage-backed securities ...................................................................................... $
971,148
209,359
2.03
2.57
404,958
575,426
1.71
1.42 %
6.9
5.4
1.8
5.3
6.9
69
The following table presents the contractual maturities of fixed rate loans and loan types subject to changes in interest rates as
of December 31, 2021:
One Year
or Less
One
Through
Five Years
More Than
Five Years
Total
(in thousands)
Commercial and industrial:
Adjustable and floating rate ........................................ $
Fixed rate ....................................................................
Total commercial and industrial ........................... $
878,779 $
377,774
1,256,553 $
1,870,312 $
580,231
2,450,543 $
407,888 $
93,343
501,231 $
3,156,979
1,051,348
4,208,327
Real estate – mortgage (1):
Adjustable and floating rate ........................................ $
Fixed rate ....................................................................
Total real estate - mortgage (1)
.............................. $
1,610,832 $
896,030
2,506,862 $
4,773,542 $
1,817,004
6,590,546 $
2,178,207 $
968,463
8,562,581
3,681,497
3,146,670 $ 12,244,078
Real estate – construction:
Adjustable and floating rate ........................................ $
Fixed rate ....................................................................
Total real estate – construction ............................. $
341,075 $
201,834
542,909 $
409,924 $
22,132
432,056 $
160,422 $
4,392
164,814 $
911,421
228,358
1,139,779
Consumer, lease financing and other:
Adjustable and floating rate ........................................ $
Fixed rate ....................................................................
Total consumer, lease financing and other ............ $
Unearned income
12,765 $
206,605
219,370 $
—
Total .................................................................... $
4,525,694 $
47,116 $
403,315
450,431 $
(17,039)
9,906,537 $
(1) Includes commercial and residential mortgages and home equity loans.
— $
59,881
690,324
750,205
(17,039)
3,893,119 $ 18,325,350
80,404
80,404 $
—
Contractual maturities of time deposits as of December 31, 2021 were as follows (in thousands):
Year
2022 .......................................................................................................................................................................... $ 1,315,785
2023 ..........................................................................................................................................................................
232,748
2024 ..........................................................................................................................................................................
71,064
2025 ..........................................................................................................................................................................
29,367
2026 ..........................................................................................................................................................................
14,810
Thereafter ..................................................................................................................................................................
63,702
Total ........................................................................................................................................................... $ 1,727,476
Contractual maturities of time deposits of $100,000 or more outstanding, included in the table above, as of December 31, 2021
were as follows (in thousands):
Three months or less ................................................................................................................................................. $
Over three through six months .................................................................................................................................
Over six through twelve months ...............................................................................................................................
Over twelve months ..................................................................................................................................................
Total ........................................................................................................................................................... $
132,545
127,783
323,164
162,053
745,545
Debt Security Market Price Risk
Debt security market price risk is the risk that changes in the values of debt securities, unrelated to interest rate changes, could
have a material impact on the financial position or results of operations of the Corporation. The Corporation’s debt security
investments consist primarily of U.S. government sponsored agency issued mortgage-backed securities and collateralized
mortgage obligations, state and municipal securities, auction rate securities and corporate debt securities. All of the
Corporation's investments in mortgage-backed securities and collateralized mortgage obligations have principal payments that
are guaranteed by U.S. government sponsored agencies.
70
State and Municipal Securities
As of December 31, 2021, the Corporation owned securities issued by various states and municipalities with a total fair value of
$1.2 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 December 31, 2021,
approximately 100% of state and municipal securities were supported by the general obligation of corresponding states or
municipalities. Approximately 68% of these securities were school district issuances, which are also supported by the states of
the issuing municipalities.
Auction Rate Securities
As of December 31, 2021, the Corporation’s investments in ARCs had a cost basis of $76.4 million and an estimated fair value
of $74.7 million. The fair values of the ARCs currently in the portfolio were derived using significant unobservable inputs
based on an expected cash flows model which produced fair values that may not represent those that could be expected from
settlement of these investments in the current market. The expected cash flows model produced fair values which assumed a
return to market liquidity sometime within the next five years. The Corporation believes that the trusts underlying the ARCs
will self-liquidate as student loans are repaid.
The credit quality of the underlying debt associated with the ARCs is also a factor in the determination of their estimated fair
value. As of December 31, 2021, all of the ARCs were rated above investment grade. All of the loans underlying the ARCs
have principal payments which are guaranteed by the federal government. At December 31, 2021, all of the Corporation's
ARCs were current and making scheduled interest payments.
71
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per-share data)
ASSETS
Cash and due from banks ...................................................................................................... $
Interest-bearing deposits with other banks ............................................................................
Cash and cash equivalents .......................................................................................
FRB and FHLB stock ............................................................................................................
Loans held for sale ................................................................................................................
Investment securities:
December 31,
2021
2020
172,276 $
1,466,338
1,638,614
57,635
35,768
120,462
1,727,370
1,847,832
92,129
83,886
AFS, at estimated fair value ...........................................................................................
HTM, at amortized cost ..................................................................................................
Net Loans ..............................................................................................................................
Less: ACL - loans ...........................................................................................................
Loans, net ...................................................................................................................
Net premises and equipment .................................................................................................
Accrued interest receivable ...................................................................................................
Goodwill and net intangible assets ........................................................................................
Other assets ...........................................................................................................................
3,062,143
278,281
18,900,820
(277,567)
18,623,253
231,480
72,942
536,659
1,078,128
Total Assets ................................................................................................................ $ 25,796,398 $ 25,906,733
18,076,349
220,357
57,451
538,053
1,004,397
3,187,390
980,384
18,325,350
(249,001)
LIABILITIES
Deposits:
Noninterest-bearing ........................................................................................................ $
Interest-bearing ..............................................................................................................
Total Deposits ............................................................................................................
Short-term borrowings ..........................................................................................................
Accrued interest payable .......................................................................................................
Long-term borrowings ...........................................................................................................
Other liabilities ......................................................................................................................
Total Liabilities ..........................................................................................................
7,370,963 $
14,202,536
21,573,499
416,764
7,000
621,345
465,110
23,083,718
6,531,002
14,308,205
20,839,207
630,066
10,365
1,296,263
514,004
23,289,905
SHAREHOLDERS’ EQUITY
Preferred stock, no par value, 10.0 million shares authorized, Series A, 0.2 million shares
authorized and issued in 2021 and 2020, liquidation preference of $1,000 per share ..........
Common stock, 2.50 par value, 600.0 million shares authorized, 223.9 million shares
issued in 2021 and 223.2 million issued in 2020 ..................................................................
Additional paid-in capital ......................................................................................................
Retained earnings ..................................................................................................................
Accumulated other comprehensive gain ...............................................................................
Treasury stock, at cost, 63.4 million shares in 2021 and 60.8 million shares in 2020 ..........
559,766
1,519,873
1,282,383
27,411
192,878
192,878
557,917
1,508,117
1,120,781
65,091
(827,956)
2,616,828
Total Shareholders’ Equity ........................................................................................
Total Liabilities and Shareholders’ Equity ............................................................... $ 25,796,398 $ 25,906,733
(869,631)
2,712,680
See Notes to Consolidated Financial Statements
72
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per-share data)
Interest Income
Loans, including fees ...................................................................................................................... $
Investment securities:
Taxable ...................................................................................................................................
Tax-exempt .............................................................................................................................
Loans held for sale .........................................................................................................................
Other interest income .....................................................................................................................
Total Interest Income ..........................................................................................
Interest Expense
Deposits ..........................................................................................................................................
Short-term borrowings ...................................................................................................................
Long-term borrowings ....................................................................................................................
Total Interest Expense .........................................................................................
Net Interest Income .............................................................................................
Provision for credit losses ..............................................................................................................
Net Interest Income After Provision for Credit Losses .......................................
Non-Interest Income
Commercial banking ......................................................................................................................
Consumer banking ..........................................................................................................................
Wealth management ......................................................................................................................
Mortgage banking .........................................................................................................................
Other ...............................................................................................................................................
Non-Interest Income Before Investment Securities Gains, Net ..............................................
Investment securities gains, net ......................................................................................................
Total Non-Interest Income ..................................................................................
Non-Interest Expense
Salaries and employee benefits ......................................................................................................
Data processing and software .........................................................................................................
Net occupancy ................................................................................................................................
Other outside services ....................................................................................................................
Debt extinguishment ......................................................................................................................
State taxes .......................................................................................................................................
Equipment .....................................................................................................................................
FDIC insurance ..............................................................................................................................
Professional fees .............................................................................................................................
Amortization of TCI .......................................................................................................................
Marketing .......................................................................................................................................
Intangible amortization ..................................................................................................................
Other ...............................................................................................................................................
Total Non-Interest Expense .................................................................................
Income Before Income Taxes ..............................................................................
Income taxes ...................................................................................................................................
Net Income ...........................................................................................................
Preferred stock dividends
Net Income Available to Common Shareholders ...................................................... $
2021
2020
2019
638,595 $
656,077 $
737,932
55,351
24,470
1,302
3,694
723,412
30,005
583
29,094
59,682
663,730
(14,600)
678,330
68,689
45,544
71,798
33,576
20,622
240,229
33,516
273,745
58,173
21,047
2,077
5,504
742,878
70,046
5,227
38,398
113,671
629,207
76,920
552,287
70,286
41,598
59,058
42,309
13,084
226,335
3,053
229,388
329,138
56,440
53,799
34,194
33,249
18,793
13,807
10,665
9,647
6,187
5,275
589
46,047
617,830
334,245
58,748
275,497
(10,277)
265,220 $
324,395
48,073
53,013
31,432
2,878
12,613
13,885
8,865
12,835
6,126
5,127
529
59,669
579,440
202,235
24,195
178,040
(2,135)
175,905 $
62,556
14,218
1,351
9,249
825,306
131,775
14,543
30,599
176,917
648,389
32,825
615,564
71,117
49,503
55,678
23,099
12,030
211,427
4,733
216,160
311,934
44,679
52,826
39,989
4,326
8,894
13,575
7,780
13,134
6,021
9,848
1,427
53,303
567,736
263,988
37,649
226,339
—
226,339
PER SHARE:
Net income available to common shareholders (basic) .................................................................. $
Net income available to common shareholders (diluted) ...............................................................
Cash dividends ...............................................................................................................................
1.63 $
1.62
0.64
1.08 $
1.08
0.56
1.36
1.35
0.56
See Notes to Consolidated Financial Statements
73
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net Income ..............................................................................................................................................
$ 275,497 $ 178,040
226,339
2021
2020
2019
Other Comprehensive (Loss)/Income, net of tax:
Unrealized gains (losses) on AFS investment securities:
Unrealized (loss)/gain on securities ...................................................................................................
(17,948)
65,651
56,919
Reclassification adjustment for securities gains included in net income ...........................................
(25,905)
(2,359)
(3,686)
Amortization of net unrealized losses on AFS securities transferred to HTM ..................................
Non-credit related unrealized (loss) gain on other-than-temporarily impaired debt securities .........
2,690
—
3,448
—
6,285
(680)
Net unrealized gains (losses) on AFS investment securities ...........................................................
(41,163)
66,740
58,838
Unrealized (losses) gains on interest rate swaps used in cash flow hedges:
Net unrealized holding (losses) gains arising during the period
Less: reclassification adjustment for net losses (gains) realized in net income
Net unrealized (losses) gains on interest rate swaps used in cash flow hedges
Defined benefit pension plan and postretirement benefits:
Unrecognized pension and postretirement (cost) income ..................................................................
Amortization of net unrecognized pension and postretirement income .............................................
Net unrealized (losses) gains on defined benefit pension and postretirement plans ......................
(2,147)
2,670
(4,817)
7,144
1,156
8,300
—
—
—
—
—
—
(2,532)
1,020
(1,512)
(937)
1,025
88
Other Comprehensive (Loss)/Income ...........................................................................................
(37,680)
65,228
58,926
Total Comprehensive Income .......................................................................................................
$ 237,817 $ 243,268 $ 285,265
See Notes to Consolidated Financial Statements
74
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except per share data)
Preferred Stock
Common Stock
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Treasury
Stock
Total
Balance at December 31, 2018 .....................
Net income ..............................................
Other comprehensive income ..................
Common stock issued .............................
Stock-based compensation awards ..........
Acquisition of treasury stock ..................
Common stock cash dividends - $0.56
per share ..................................................
Balance at December 31, 2019 .....................
Net income ..............................................
Other comprehensive income ..................
— $ —
170,184 $ 554,377 $ 1,489,703 $ 946,032 $
883
1,733
2,565
7,413
(6,849)
226,339
(92,980)
— $ —
164,218 $ 556,110 $ 1,499,681 $ 1,079,391 $
178,040
Preferred stock issued .............................
200
192,878
Common stock issued .............................
Stock-based compensation awards ..........
Acquisition of treasury stock ..................
Adjustment for CECL(1)
Preferred stock dividend
Common stock cash dividends - $0.56
per share ..................................................
Balance at December 31, 2020 .....................
Net income ..............................................
Other comprehensive loss .......................
Common stock issued .............................
Stock-based compensation awards ..........
Acquisition of treasury stock ..................
Preferred stock dividend .........................
Common stock cash dividends - $0.64
per share ..................................................
1,040
1,807
907
7,529
(2,908)
(43,807)
(2,135)
(90,708)
200 $ 192,878
162,350 $ 557,917 $ 1,508,117 $ 1,120,781 $
943
1,849
3,354
8,402
(2,803)
275,497
(10,277)
(103,618)
Balance at December 31, 2021 .....................
200 $ 192,878
160,490 $ 559,766 $ 1,519,873 $ 1,282,383 $
(59,063) $ (683,476) $ 2,247,573
226,339
58,926
2,064
58,926
6,362
7,413
(111,457)
(111,457)
(92,980)
(137) $ (792,869) $ 2,342,176
178,040
65,228
4,661
(39,748)
65,228
192,878
7,375
7,529
(39,748)
(43,807)
(2,135)
(90,708)
65,091 $ (827,956) $ 2,616,828
275,497
(37,680)
2,234
(43,909)
(37,680)
7,437
8,402
(43,909)
(10,277)
(103,618)
27,411 $ (869,631) $ 2,712,680
See Notes to Consolidated Financial Statements
(1) The Corporation adopted ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments on January 1, 2020. See Note 1 to the
Consolidated Financial Statements for further details.
75
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ................................................................................................................................. $
Adjustments to reconcile net income to net cash provided by operating activities:
275,497 $
178,040 $
226,339
2021
2020
2019
Provision for credit losses .......................................................................................................
Depreciation and amortization of premises and equipment ....................................................
Amortization of TCI ................................................................................................................
Net amortization of investment securities premiums ..............................................................
Deferred income tax benefit ....................................................................................................
Investment securities gains, net ...............................................................................................
Gain on sales of mortgage loans held for sale .........................................................................
Proceeds from sales of mortgage loans held for sale ..............................................................
Originations of mortgage loans held for sale ..........................................................................
Intangible amortization ...........................................................................................................
Amortization of issuance costs and discounts on long-term borrowings ................................
Debt extinguishment costs ......................................................................................................
Stock-based compensation ......................................................................................................
Other changes, net ...................................................................................................................
Total adjustments ...............................................................................................................
Net cash provided by operating activities ..............................................................
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of AFS securities ...................................................................................
Proceeds from principal repayments and maturities of AFS securities .................................
Proceeds from principal repayments and maturities of HTM securities .................................
Purchase of AFS securities ......................................................................................................
Purchase of HTM securities ...................................................................................................
Sale of Visa Shares ..................................................................................................................
Sale (purchase) of FRB and FHLB stock ...............................................................................
Net decrease (increase) in loans ..............................................................................................
Net purchases of premises and equipment ..............................................................................
Net cash paid for acquisition ...................................................................................................
Net change in tax credit investments ......................................................................................
Net cash used in investing activities .......................................................................
CASH FLOWS FROM FINANCING ACTIVITIES:
(14,600)
28,802
28,003
16,031
12,410
(33,516)
(24,379)
1,050,943
(978,446)
589
1,846
33,249
8,402
(62,559)
66,775
342,272
359,137
469,393
117,958
(1,309,470)
(443,081)
33,962
34,494
561,664
(17,679)
(1,982)
(18,363)
(213,967)
76,920
28,803
30,800
12,222
(21,591)
(3,053)
(53,599)
1,536,174
(1,528,633)
529
1,128
2,877
7,529
(110,781)
(20,675)
157,365
215,150
430,845
93,823
(1,134,380)
—
—
5,293
(2,072,831)
(20,237)
(1,884)
(15,259)
(2,499,480)
Net increase in demand and savings deposits ........................................................................
Net (decrease) increase in time deposits ................................................................................
Net (decrease) increase in short-term borrowings ..................................................................
Proceeds from long-term borrowings ......................................................................................
Repayments of long-term borrowings .....................................................................................
Net proceeds from issuance of preferred stock .......................................................................
Net proceeds from issuance of common stock ........................................................................
Dividends paid .........................................................................................................................
Acquisition of treasury stock ..................................................................................................
Net cash (used in) provided by financing activities ...............................................
Net (decrease) increase in Cash and Cash Equivalents .............................................................
Cash and Cash Equivalents at Beginning of Period ...................................................................
Cash and Cash Equivalents at End of Period ............................................................................. $
1,315,139
(580,847)
(213,302)
620
(710,633)
—
7,437
(112,028)
(43,909)
(337,523)
(209,218)
1,847,832
1,638,614 $ 1,847,832 $
3,951,905
(506,611)
(253,175)
495,898
(85,410)
192,878
7,375
(90,956)
(39,748)
3,672,156
1,330,041
517,791
32,825
28,200
32,810
9,387
(165)
(4,733)
(17,882)
916,725
(909,572)
1,427
842
—
7,413
(195,903)
(98,626)
127,713
710,739
234,702
83,121
(1,138,070)
—
—
(18,139)
(708,048)
(33,717)
(5,174)
(18,760)
(893,346)
849,437
168,317
128,464
485,000
(596,056)
—
6,362
(92,330)
(111,457)
837,737
72,104
445,687
517,791
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest ................................................................................................................................ $
Income taxes ......................................................................................................................
63,047 $
27,870
112,140 $
16,190
178,612
9,193
Supplemental Schedule of Certain Noncash Activities:
Transfer of AFS securities to HTM securities
Transfer of HTM securities to AFS securities
See Notes to Consolidated Financial Statements
$
376,165 $
—
— $
—
—
158,898
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business: The Corporation is a financial holding company that provides a full range of banking and financial services to
businesses and consumers through its wholly owned banking subsidiary, Fulton Bank. In addition, the Parent Company owns
the following non-bank subsidiaries: Fulton Financial Realty Company, Central Pennsylvania Financial Corp., FFC
Management, Inc., FFC Penn Square, Inc. and Fulton Insurance Services Group, Inc. Collectively, the Parent Company and its
subsidiaries are referred to as the Corporation.
The Corporation’s primary sources of revenue are interest income on loans, investment securities and other interest-earning
assets and fee income earned on its products and services. Its expenses consist of interest expense on deposits and borrowed
funds, provision for credit losses, other operating expenses and income taxes. The Corporation’s primary competition is other
financial services providers operating in its region. Competitors also include financial services providers located outside the
Corporation’s geographic market as a result of the growth in electronic delivery channels. The Corporation is subject to the
regulations of certain federal and state agencies and undergoes periodic examinations by such regulatory agencies.
The Corporation offers, through its banking subsidiary, a full range of retail and commercial banking services in Pennsylvania,
Delaware, Maryland, New Jersey and Virginia. Industry diversity is the key to the economic well-being of these markets, and
the Corporation is not dependent upon any single customer or industry.
Basis of Financial Statement Presentation: The consolidated financial statements have been prepared in conformity with
GAAP and include the accounts of the Parent Company and all wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosed amount
of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates. The Corporation evaluates subsequent events through the
date of the filing of this report with the SEC.
Cash and Cash Equivalents and Restricted Cash: Cash and cash equivalents consists of cash and due from banks and
interest bearing deposits with other banks, which includes restricted cash. Restricted cash comprises cash balances required to
be maintained with the FRB, based on customer transaction deposit account levels, and cash balances provided as collateral on
derivative contracts and other contracts. See Note 2, "Restrictions on Cash and Cash Equivalents" for additional information.
FRB and FHLB Stock: The Bank is a member of the FRB and FHLB and is required by federal law to hold stock in these
institutions according to predetermined formulas. These restricted investments are carried at cost on the consolidated balance
sheets and are periodically evaluated for impairment.
Investments: Debt securities are classified as HTM at the time of purchase when the Corporation has both the intent and ability
to hold these investments until they mature. Such debt securities are carried at cost, adjusted for amortization of premiums and
accretion of discounts using the effective yield method. The Corporation does not engage in trading activities; however, since
the investment portfolio serves as a source of liquidity, most debt securities are classified as AFS. AFS securities are carried at
estimated fair value with the related unrealized holding gains and losses reported in shareholders’ equity as a component of
OCI, net of tax. Realized securities gains and losses are computed using the specific identification method and are recorded on a
trade date basis.
The Corporation early adopted ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses,
Topic 815, Derivative and Hedging, and Topic 825, Financial Instruments," in the third quarter of 2019, which permitted the
one-time reclassification of certain HTM securities to AFS under Topic 815, specific to the transition guidance of ASU update
2017-12, which the Corporation adopted on January 1, 2019. See “Note 3 - Investment Securities” for additional information on
this reclassification. The portion of this standards update related to codification improvements specific to Topic 326 was
implemented with the Corporation’s adoption of ASU 2016-13 in the first quarter of 2020.
HTM Debt Securities: Expected credit losses on HTM debt securities would be recorded in the ACL on HTM debt securities.
As of December 31, 2021, no HTM debt securities required an ACL as these investments consist solely of government
guaranteed residential mortgage-backed securities.
77
AFS Debt Securities: The ACL approach for AFS debt securities differs from the approach used for HTM debt securities as
AFS debt securities are carried at fair value rather than amortized cost. In evaluating credit losses on AFS debt securities,
management considers factors such as delinquency, guarantees and whether the securities are rated higher than investment
grade. As of December 31, 2021, no AFS debt securities required an ACL.
Fair Value Option: The Corporation has elected to measure mortgage loans held for sale at fair value. Derivative financial
instruments related to mortgage banking activities are also recorded at fair value, as detailed under the heading "Derivative
Financial Instruments," below. The Corporation determines fair value for its mortgage loans held for sale 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. Changes in fair values during the period are recorded as components of mortgage banking income on the
consolidated statements of income. Interest income earned on mortgage loans held for sale is classified in interest income on the
consolidated statements of income.
Loans: Loans are stated at their principal amount outstanding, except for mortgage loans held for sale, which are carried at fair
value. Interest income on loans is accrued as earned.
In general, loans are placed on non-accrual status once they become 90 days delinquent as to principal or interest. In certain
cases a loan may be placed on non-accrual status prior to being 90 days delinquent if there is an indication that the borrower is
having difficulty making payments, or the Corporation believes it is probable that all amounts will not be collected according to
the contractual terms of the loan agreement. When interest accruals are discontinued, unpaid interest previously credited to
income is reversed. Non-accrual loans may be restored to accrual status when all delinquent principal and interest has been paid
currently for six consecutive months or the loan is considered secured and in the process of collection. The Corporation
generally applies payments received on non-accruing loans to principal until such time as the principal is paid off, after which
time any payments received are recognized as interest income. If the Corporation believes that all amounts outstanding on a
non-accrual loan will ultimately be collected, payments received subsequent to its classification as a non-accrual loan are
allocated between interest income and principal.
A loan that is 90 days delinquent may continue to accrue interest if the loan is both adequately secured and is in the process of
collection. Past due status is determined based on contractual due dates for loan payments. An adequately secured loan is one
that has collateral with a supported fair value that is sufficient to discharge the debt, and/or has an enforceable guarantee from a
financially responsible party. A loan is considered to be in the process of collection if collection is proceeding through legal
action or through other activities that are reasonably expected to result in repayment of the debt or restoration to current status
in the near future.
Loans deemed to be a loss are written off through a charge against the ACL. Closed-end consumer loans are generally charged-
off when they become 120 days past due (180 days for open-end consumer loans) if they are not adequately secured by real
estate. All other loans are evaluated for possible charge-off when it is probable that the balance will not be collected, based on
the ability of the borrower to pay and the value of the underlying collateral, if any. Principal recoveries of loans previously
charged-off are recorded as increases to the ACL.
Loan Origination Fees and Costs: Loan origination fees and the related direct origination costs are deferred and amortized
over the life of the loan as an adjustment to interest income using the effective yield method. For mortgage loans sold, net loan
origination fees and costs are included in the gain or loss on sale of the related loan, as components of mortgage banking.
Loan origination fees and the related direct origination costs for loans originated under the PPP loan program are amortized on
a straight-line basis over the repayment period of the loan. To the extent that a PPP loan is forgiven, the unamortized fees and
costs will be recognized as interest income at the time of forgiveness.
Troubled Debt Restructurings: Loans are accounted for and reported as TDRs when, for economic or legal reasons, the
Corporation grants a concession to a borrower experiencing financial difficulty that it would not otherwise consider.
Concessions, whether negotiated or imposed by bankruptcy, granted under a TDR typically involve a temporary deferral of
scheduled loan payments, an extension of a loan’s stated maturity date or a reduction in the interest rate. Non-accrual TDRs can
be restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months
after modification.
On March 27, 2020 the CARES Act was signed into law. The CARES Act includes an option for financial institutions to
suspend the requirements of GAAP for certain loan modifications that would otherwise be categorized as a TDR. Certain
conditions must be met with respect to the loan modification including that the modification is related to COVID-19 and the
modified loan was not more than 30 days past due on December 31, 2019. On December 27, 2020, the 2021 Consolidated
Appropriations Act was signed into law and this Act extended the relief for TDR treatment until January 1, 2022, when it
expired. The Corporation is applying the option under the CARES act for all loan modifications that qualify.
78
In November 2021, the FASB issued a proposed ASU as part of its Post-Implementation Review process. As part of that
process, the proposed ASU would eliminate the accounting guidance for TDRs, effective in 2022.
Allowance for Credit Losses:
CECL Adoption
On January 1, 2020, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326):
Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology, and is referred to as
CECL. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost,
including loans and HTM debt securities. It also applies to OBS credit exposures, such as loan commitments, standby letters of
credit, financial guarantees, and other similar instruments, and net investments in leases recognized by a lessor in accordance
with ASC Topic 842.
The Corporation adopted CECL using the modified retrospective method for all financial assets measured at amortized cost, net
investments in leases and OBS credit exposures. Results for reporting periods beginning after January 1, 2020 are presented
under CECL, while prior period results are reported in accordance with the previously applicable incurred loss methodology,
ASC 310-10 and ASC 450-20. The Corporation recorded an increase of $58.3 million to the ACL on January 1, 2020 as a result
of the adoption of CECL. Retained earnings decreased $43.8 million, and DTAs increased by $12.4 million. Included in the
$58.3 million increase to the ACL was $2.1 million for certain OBS credit exposures that was previously recognized in other
liabilities before the adoption of CECL.
The Corporation has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on
non-accrual status, any outstanding accrued interest is reversed against interest income.
Loans: The ACL for loans is an estimate of the expected losses to be realized over the life of the loans in the portfolio. The
ACL is determined for two distinct categories of loans: 1) loans evaluated collectively for expected credit losses and 2) loans
evaluated individually for expected credit losses.
Loans Evaluated Collectively: Loans evaluated collectively for expected credit losses include loans on accrual status, excluding
accruing TDRs, and loans initially evaluated individually, but determined not to have enhanced credit risk characteristics. This
category includes loans on non-accrual status and TDRs where the total commitment amount is less than $1 million. The ACL
is estimated by applying a PD and LGD to the EAD at the loan level. In order to determine the PD, LGD, and EAD calculation
inputs:
•
•
•
•
•
•
•
•
Loans are aggregated into pools based on similar risk characteristics.
The PD and LGD rates are determined by historical credit loss experience for each pool of loans.
The loan segment PD rates are estimated using six econometric regression models that use the Corporation’s
historical credit loss experience and incorporate reasonable and supportable economic forecasts for various
macroeconomic variables that are statistically correlated with expected loss behavior in the loan segment.
The reasonable and supportable forecast for each macroeconomic variable is sourced from an external third
party and is applied over the contractual term of the Corporation’s loan portfolio. The Corporation’s
economic forecast considers the general health of the economy, the interest rate environment, real estate
pricing and market risk.
A single baseline forecast scenario is used for each macroeconomic variable.
The loan segment lifetime LGD rates are estimated using a loss rate approach based on the Corporation’s
historical charge-off experience and the balance at the time of loan default.
The LGD rates are adjusted for the Corporation’s recovery experience.
To calculate the EAD, the corporation estimates contractual cash flows over the remaining life of each loan.
Certain cash flow assumptions are established for each loan using maturity date, amortization schedule and
interest rate. In addition, a prepayment rate is used in determining the EAD estimate.
Loans Evaluated Individually: Loans evaluated individually for expected credit losses include loans on non-accrual status and
TDRs where the commitment amount equals or exceeds $1.0 million. The required ACL for such loans is determined using
either the present value of expected future cash flows, observable market price or the fair value of collateral.
Loans evaluated individually may have specific allocations of the ACL assigned if the measured value of the loan using one of
the noted techniques is less than its current carrying value. For loans measured using the fair value of collateral, if the analysis
determines that sufficient collateral value would be available for repayment of the debt, then no allocations would be assigned
to those loans. Collateral could be in the form of real estate or business assets, such as accounts receivable or inventory, in the
case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate.
79
For loans secured by real estate, estimated fair values are determined primarily through appraisals performed by third-party
appraisers, discounted to arrive at expected net sale proceeds. For collateral dependent loans, estimated real estate fair values
are also net of estimated selling costs. When a real estate secured loan is impaired, a decision is made regarding whether an
updated appraisal of the real estate is necessary. This decision is based on various considerations, including: the age of the most
recent appraisal; the loan-to-value ratio based on the original appraisal; the condition of the property; the Corporation’s
experience and knowledge of the real estate market; the purpose of the loan; market factors; payment status; the strength of any
guarantors; and the existence and age of other indications of value such as broker price opinions, among others. The
Corporation generally obtains updated appraisals performed by third-party appraisers for impaired loans secured predominantly
by real estate every 12 months.
When updated appraisals are not obtained for loans secured by real estate, fair values are estimated based on the original
appraisal values, as long as the original appraisal indicated an acceptable loan-to-value position and there has not been a
significant deterioration in the collateral value since the original appraisal was performed.
For loans with principal balances greater than or equal to $1.0 million secured by non-real estate collateral, such as accounts
receivable or inventory, estimated fair values are determined based on borrower financial statements, inventory listings,
accounts receivable agings or borrowing base certificates. Indications of value from these sources are generally discounted
based on the age of the financial information or the quality of the assets. Liquidation or collection discounts are applied to these
assets based upon existing loan evaluation policies.
Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan
classification. For commercial loans, commercial mortgages and construction loans to commercial borrowers, 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 PD on this migration. Assigning risk ratings involves judgment. Risk ratings may
be changed based on ongoing monitoring procedures, or if specific loan review assessments identify a deterioration or an
improvement in the loan.
The following is a summary of the Corporation's internal risk rating categories:
•
•
•
Pass: These loans do not currently pose undue credit risk and can range from the highest to average quality, depending
on the degree of potential risk.
Special Mention: These loans have a heightened credit risk, but not to the point of justifying a classification of
Substandard. Loans in this category are currently acceptable but, are nevertheless potentially weak.
Substandard or Lower: These loans are inadequately protected by current sound worth and paying capacity of the
borrower. There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt.
The allocation of the ACL is reviewed to evaluate its appropriateness in relation to the overall risk profile of the loan portfolio.
The Corporation considers risk factors such as: local and national economic conditions; trends in delinquencies and non-accrual
loans; the diversity of borrower industry types; and the composition of the portfolio by loan type.
Qualitative and Other Adjustments to ACL: In addition to the quantitative credit loss estimates for loans evaluated collectively,
qualitative factors that may not be fully captured in the quantitative results are also evaluated. These qualitative factors include
changes in lending policy, the nature and volume of the portfolio, overall business conditions in the economy, credit
concentrations, specific industry risks, model imprecision and legal and regulatory requirements. Qualitative adjustments are
judgmental and are based on management’s knowledge of the portfolio and the markets in which the Corporation operates.
Qualitative adjustments are evaluated and approved on a quarterly basis. Additionally, the ACL includes other allowance
categories that are not directly incorporated in the quantitative results. These categories include but are not limited to loans-in-
process, trade acceptances and overdrafts.
OBS Credit Exposures: The ACL for OBS credit exposures is recorded in other liabilities on the consolidated balance sheets.
This portion of the ACL represents management’s estimate of expected losses in its unfunded loan commitments and other OBS
credit exposures. The ACL specific to unfunded commitments is determined by estimating future draws and applying the
expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of
draws taken). The ACL for OBS credit exposures is increased or decreased by charges or reductions to expense, through the
provision for credit losses.
ACL Methodology Before CECL Adoption
For the years ended December 31, 2019 and prior, the ACL consists of the ACL for loans and unfunded commitments. The
ACL represents management’s estimate of incurred losses in the loan portfolio as of the balance sheet date and is recorded as a
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reduction to loans. The ACL for unfunded commitments represents management’s estimate of incurred losses in its unfunded
loan commitments and other off-balance sheet credit exposures, such as letters of credit, and is recorded in other liabilities on
the consolidated balance sheets. The ACL is increased by charges to expense, through the provision for credit losses, and
decreased by charge-offs, net of recoveries.
The Corporation’s ACL for loans includes: 1) specific allowances allocated to loans evaluated for impairment under the ASC
Section 310-10-35; and 2) allowances calculated for pools of loans evaluated for impairment under ASC Subtopic 450-20.
A loan is considered to be impaired if it is probable that all amounts will not be collected according to the contractual terms of
the loan agreement. An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated
fair value.
All loans not evaluated for impairment under ASC Section 310-10-35 are evaluated for impairment under ASC Subtopic
450-20, using a pooled loss evaluation approach. Loans are segmented into pools with similar characteristics and a consistently
developed loss factor is then applied to all loans in these pools. The Corporation calculates allowance for loan loss allocation
needs for loans evaluated under ASC Subtopic 450-20 through the following procedures:
The loans are segmented into pools with similar characteristics, as noted above. Commercial loans, commercial mortgages and
construction loans to commercial borrowers are further segmented into separate pools based on internally assigned risk ratings.
Residential mortgages, home equity loans, consumer loans, and equipment lease financing are further segmented into separate
pools based on delinquency status;
•
•
•
A loss rate is calculated for each pool through an analysis of historical losses as loans migrate through the various risk
rating or delinquency categories. Estimated loss rates are based on a probability of default and a loss rate forecast;
The loss rate is adjusted to consider qualitative factors, such as economic conditions and trends; and
The resulting adjusted loss rate is applied to the balance of the loans in the pool to arrive at the allowance allocation
for the pool.
The allocation of the ACL for loans is reviewed to evaluate its appropriateness in relation to the overall risk profile of the loan
portfolio. The Corporation considers risk factors such as: local and national economic conditions; trends in delinquencies and
non-accrual loans; the diversity of borrower industry types; and the composition of the portfolio by loan type.
Premises and Equipment: Premises and equipment are stated at cost, less accumulated depreciation and amortization. The
provision for depreciation and amortization is generally computed using the straight-line method over the estimated useful lives
of the related assets, which are a maximum of 50 years for buildings and improvements, 8 years for furniture and 5 years for
equipment. Leasehold improvements are amortized over the shorter of the useful life or the non-cancelable lease term. See Note
5, "Premises and Equipment" for additional information.
OREO: Assets acquired in settlement of mortgage loan indebtedness are recorded as OREO and are included in other assets on
the consolidated balance sheets, initially at the lower of the estimated fair value of the asset, less estimated selling costs, or the
carrying amount of the loan. Costs to maintain the assets and subsequent gains and losses on sales are included in other non-
interest expense on the consolidated statements of income.
MSRs: The estimated fair value of MSRs related to residential mortgage loans sold and serviced by the Corporation is recorded
as an asset upon the sale of such loans. MSRs are amortized as a reduction to mortgage servicing income, included as a
component of mortgage banking income on the consolidated statements of income, over the estimated lives of the underlying
loans.
MSRs are stratified and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair
values are determined through a discounted cash flows valuation completed by a third-party valuation expert. Significant inputs
to the valuation include expected net servicing income, the discount rate and the expected lives of the underlying loans.
Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. To the extent the amortized
cost of the MSRs exceeds their estimated fair value, a valuation allowance is established through a charge against servicing
income. If subsequent valuations indicate that impairment no longer exists, the valuation allowance is reduced through an
increase to servicing income. See Note 7, "Mortgage Servicing Rights" for additional information.
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 enters into derivative contracts that are intended to economically
hedge certain of its risks, even if hedge accounting does not apply or the Corporation elects not to apply hedge accounting.
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The Corporation records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of
derivatives depends on the intended use of the derivative, whether the Corporation has elected to designate a derivative in a
hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to
apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an
asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges.
The Corporation does not have any derivative instruments designated as fair value hedges. Derivatives designated and
qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are
considered cash flow hedges. For derivatives designated as cash flow hedges where hedge accounting is applied, changes in fair
value are recognized in other comprehensive income. For derivatives where hedge accounting does not apply, changes in fair
value are recognized in earnings as components of non-interest income or non-interest expense on the consolidated statements
of income.
Derivative contracts create counterparty credit risk with both the Corporation's customers and with institutional derivative
counterparties. The Corporation manages counterparty credit risk through its credit approval processes, monitoring procedures
and obtaining adequate collateral, when the Corporation determines it is appropriate to do so and in accordance with
counterparty contracts.
For each of the derivatives, gross derivative assets and liabilities are recorded in other assets and other liabilities, respectively,
on the consolidated balance sheets. Related gains and losses on these derivative instruments are recorded in other changes, net
on the consolidated statement of cash flows.
Mortgage Banking Derivatives
In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed-rate
residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation enters into forward
commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the
effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales
commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price at a future date. The
amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with
similar characteristics, including interest rate and term, as of the date fair value is measured.
Interest Rate Swaps - Non-Designated Hedges
The Corporation enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk
management needs. The Corporation simultaneously enters into interest rate swaps with dealer counterparties, with identical
notional amounts and terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the
Corporation receives a floating rate. As the interest rate derivatives associated with this program do not meet hedge accounting
requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in
earnings.
The Corporation’s existing credit derivatives result from participation in interest rate swaps provided by external lenders as part
of loan participation arrangements and, therefore, are not used to manage interest rate risk in the Corporation’s assets or
liabilities. Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain
lenders participating in loans.
The Corporation is required to clear all eligible interest rate swap contracts with a clearing agent and is subject to the
regulations of the Commodity Futures Trading Commission.
Cash Flow Hedges of Interest Rate Risk
The Corporation’s objectives in using interest rate derivatives are to reduce volatility in net interest income and to manage its
exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate swaps as part of
its interest rate risk management strategy. During the first quarter of 2021, the Corporation entered into interest rate swaps
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
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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 loans.
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 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. See "Note 10 - Derivative Financial Instruments" for additional information.
Balance Sheet Offsetting: Certain financial assets and liabilities may be eligible for offset on the consolidated balance sheets
because 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 Corporation has elected not to offset the
remaining assets and liabilities subject to such arrangements on the consolidated financial statements.
The Corporation is a party to interest rate swaps with financial institution counterparties and customers. Under these
agreements, the Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on,
or termination of, any one contract. Cash collateral is posted by the party with a net liability position in accordance with
contract thresholds and can be used to settle the fair value of the interest rate swaps in the event of default. A daily settlement
occurs through a clearing agent for changes in the fair value of centrally cleared derivatives. Not all of the derivatives are
required to be cleared through a daily clearing agent. As a result, the total fair values of interest rate swap derivative assets and
derivative liabilities recognized on the consolidated balance sheets are not equal and offsetting.
The Corporation is also a party to foreign exchange contracts with financial institution counterparties under which the
Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on, or termination of,
any one contract. As with interest rate swaps, cash collateral is posted by the party with a net liability position in accordance
with contract thresholds and can be used to settle the fair value of the foreign exchange contracts in the event of default.
For additional details on balance sheet offsetting, see "Note 10 - Derivative Financial Instruments."
Income Taxes: The Corporation utilizes the asset and liability method in accounting for income taxes. Under this method,
DTAs and deferred tax liabilities are determined based upon the difference between the values of the assets and liabilities as
reflected in the financial statements and their related tax basis using enacted tax rates in effect for the year in which the
differences are expected to be recovered or settled. As changes in tax law or rates are enacted, DTAs and deferred tax liabilities
are adjusted through the provision for income taxes. In assessing the realizability of DTAs, management considers whether it is
more likely than not that some portion or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent
upon the generation of future taxable income and tax planning strategies which will create taxable income during the periods in
which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities,
the amount of taxes paid in available carryback years, projected future taxable income, and, if necessary, tax planning strategies
in making this assessment. A valuation allowance is provided against DTAs unless it is more likely than not that such DTAs
will be realized.
ASC Topic 740, "Income Taxes" creates a single model to address uncertainty in tax positions, and clarifies the accounting for
uncertainty in income taxes recognized in an enterprise's financial statements by prescribing the minimum recognition threshold
a tax position is required to meet before being recognized in an enterprise's financial statements. It also provides guidance on
derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The
liability for unrecognized tax benefits is included in other liabilities within the consolidated balance sheets.
See Note 12, "Income Taxes" for additional information.
Stock-Based Compensation: The Corporation grants equity awards to employees, consisting of stock options, restricted stock,
RSUs and PSUs under its Employee Equity Plan. In addition, employees may purchase stock under the Corporation’s ESPP.
The Corporation also grants equity awards to non-employee members of its board of directors and subsidiary bank board of
directors under the Directors' Plan. Under the Directors’ Plan, the Corporation can grant equity awards to non-employee
holding company and subsidiary bank directors in the form of stock options, restricted stock, RSUs or common stock. Recent
grants of equity awards under the Directors’ Plan have been limited to RSUs.
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Equity awards issued under the Employee Equity Plan are generally granted annually and become fully vested over or after a
three-year vesting period. The vesting period for non-performance-based awards represents the period during which employees
are required to provide service in exchange for such awards. Equity awards under the Directors' Plan are generally granted
annually and become fully vested after a one-year vesting period. Certain events, as defined in the Employee Equity Plan and
the Directors' Plan, result in the acceleration of the vesting of equity awards. Restricted stock, RSUs and PSUs earn dividends
during the vesting period, which are forfeitable if the awards do not vest.
The fair value of stock options, restricted stock and RSUs granted to employees or directors is recognized as compensation
expense over the vesting period for such awards. Compensation expense for PSUs is also recognized over the vesting period,
however, compensation expense for PSUs may vary based on the expectations for actual performance relative to defined
performance measures.
The fair value of restricted stock, RSUs and a majority of PSUs are based on the trading price of the Corporation's stock on the
date of grant. The fair value of certain PSUs are estimated through the use of the Monte Carlo valuation methodology as of the
date of grant. See Note 15, "Stock-Based Compensation Plans" for additional information. The Corporation has not issued stock
options since 2014 and accordingly, there is no compensation expense for this instrument.
Disclosures about Segments of an Enterprise and Related Information: The Corporation does not have any operating
segments which require disclosure of additional information.
Financial Guarantees: Financial guarantees, which consist primarily of standby and commercial letters of credit, are accounted
for by recognizing a liability equal to the fair value of the guarantees and crediting the liability to income over the term of the
guarantee. Fair value is estimated based on the fees currently charged to enter into similar agreements with similar terms.
Goodwill and Intangible Assets: The Corporation accounts for its acquisitions using the purchase accounting method.
Purchase accounting requires that all assets acquired and liabilities assumed, including certain intangible assets that must be
recognized, be recorded at their estimated fair values as of the acquisition date. Any purchase price exceeding the fair value of
net assets acquired is recorded as goodwill.
Goodwill is not amortized to expense, but is evaluated for impairment at least annually. Write-downs of the balance, if
necessary as a result of the impairment test, are charged to expense in the period in which goodwill is determined to be
impaired. The Corporation performs its annual assessment of goodwill impairment in the fourth quarter of each year. If certain
events occur which indicate goodwill might be impaired between annual assessments, goodwill would be evaluated when such
events occur.
Intangible assets are amortized over their estimated lives. Some intangible assets have indefinite lives and are, therefore, not
amortized. All intangible assets must be evaluated for impairment if certain events occur. Any impairment write-downs are
recognized as non-interest expense on the consolidated statements of income. See "Note 6 - Goodwill and Intangible Assets,"
for additional details.
Variable Interest Entities ("VIEs"): ASC Topic 810 provides guidance on when to consolidate certain VIEs in the financial
statements of the Corporation. VIEs are entities in which equity investors do not have a controlling financial interest or do not
have sufficient equity at risk for the entity to finance activities without additional financial support from other parties. VIEs are
assessed for consolidation under ASC Topic 810 when the Corporation holds variable interests in these entities. The
Corporation consolidates VIEs when it is deemed to be the primary beneficiary. The primary beneficiary of a VIE is determined
to be the party that has the power to make decisions that most significantly affect the economic performance of the VIE and has
the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE.
Subsidiary Trusts
The Parent Company owns all of the common stock of three subsidiary trusts, which have issued securities (TruPS) in
conjunction with the Parent Company issuing junior subordinated deferrable interest debentures to the trusts. The terms of the
junior subordinated deferrable interest debentures are the same as the terms of the TruPS. The Parent Company’s obligations
under the debentures constitute a full and unconditional guarantee by the Parent Company of the obligations of the trusts. The
provisions of ASC Topic 810 related to subsidiary trusts, as interpreted by the SEC, disallow consolidation of subsidiary trusts
in the financial statements of the Corporation. As a result, TruPS are not included on the Corporation’s consolidated balance
sheets. The junior subordinated debentures issued by the Parent Company to the subsidiary trusts, which have the same total
balance and rate as the combined equity securities and TruPS issued by the subsidiary trusts, remain in long-term borrowings.
See "Note 9 - Short-Term and Long-Term Borrowings" for additional information.
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Tax Credit Investments
The Corporation makes investments in certain community development projects, the majority of which generate tax credits
under various federal programs, including qualified affordable housing projects, NMTC projects and historic rehabilitation
projects (collectively, TCIs). These investments are made throughout the Corporation's market area as a means of supporting
the communities it serves. The Corporation typically acts as a limited partner or member of a limited liability company in its
TCIs and does not exert control over the operating or financial policies of the partnership or limited liability company. Tax
credits earned are subject to recapture by federal taxing authorities based upon compliance requirements to be met at the project
level.
Because the Corporation owns 100% of the equity interests in its NMTC, these investments were consolidated based on ASC
Topic 810 as of December 31, 2021 and 2020. Investments in affordable housing projects were not consolidated based on
management's assessment of the provisions of ASC Topic 810.
TCIs are tested for impairment when events or changes in circumstances indicate that it is more likely than not that the carrying
amount of the investment will not be realized. An impairment loss is measured as the amount by which the current carrying
value exceeds its aggregated remaining value of the tax benefits of the investment. There were no impairment losses recognized
for the Corporation’s TCIs in 2021, 2020 or 2019. For additional details, see "Note 12 - Income Taxes."
Fair Value Measurements: Assets and liabilities are categorized in 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 included are 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.
The Corporation has categorized all assets and liabilities required to be measured at fair value on both a recurring and
nonrecurring basis into the above three levels. See "Note 19 - Fair Value Measurements" for additional details.
Revenue Recognition: The sources of revenue for the Corporation are interest income from loans, leases and investments and
non-interest income. Non-interest income is earned from various banking and financial services that the Corporation offers
through its subsidiaries. Revenue is recognized as earned based on contractual terms, as transactions occur, or as services are
provided. Following is further detail of the various types of revenue the Corporation earns and when it is recognized:
Interest income: Interest income is recognized on an accrual basis according to loan and lease agreements, investment
securities contracts or other such written contracts.
Wealth management services: Consists of income from trust commissions, brokerage, money market and insurance
commissions. Trust commissions consists of advisory fees that are based on market values of clients' managed portfolios
and transaction fees for fiduciary services performed, both of which are recognized when earned. Brokerage includes
advisory fees which are recognized when earned on a monthly basis and transaction fees that are recognized when
transactions occur. Money market is based on the balances held in trust accounts and is recognized monthly. Insurance
commissions are earned and recognized when policies are originated. Currently, no investment management and trust
service income is based on performance or investment results.
Commercial and consumer banking income: Consists of cash management, overdraft, non-sufficient fund fees and other
service charges on deposit accounts as well as branch fees, automated teller machine fees, debit and credit card income and
merchant services fees. Also included are letter of credit fees, foreign exchange income and interest rate swap fees. Revenue
is primarily transactional and recognized when earned, at the time the transactions occur.
Mortgage banking income: Consists of gains or losses on the sale of residential mortgage loans and mortgage loan servicing
income.
Other Income: Includes gains on sales of SBA loans, cash surrender value of life insurance, and other miscellaneous
income.
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Leases: All leases with an initial term greater than twelve months recognize: (1) a ROU asset, which is an asset that represents
the lessee’s right to use, or control the use of, a specified asset for the lease term; and (2) a lease liability, which is a lessee’s
obligation to make lease payments arising from a lease, each measured on a discounted basis. The Corporation elected to not
separate lease and non-lease components.
As a lessee, the majority of the operating lease portfolio consists of real estate leases for the Corporation's financial centers,
land and office space. The operating leases have remaining lease terms of 1 year to 20 years, some of which include options to
extend the leases for 5 years or more. ROU assets and lease liabilities are not recognized for leases with an initial term of 12
months or less.
Certain real estate leases have lease payments that adjust based on annual changes in the CPI. The leases that are dependent
upon CPI are initially measured using the index or rate at the commencement date and are included in the measurement of the
lease liability.
Operating lease expense represents fixed lease payments for operating leases recognized on a straight-line basis over the
applicable lease term. Variable lease expense represents expenses such as the payment of real estate taxes, insurance and
common area maintenance based on the Corporation's pro-rata share.
Sublease income consists mostly of operating leases for space within the Corporation's offices and financial centers and is
recorded as a reduction to net occupancy expense on the consolidated statements of income. See "Note 17 - Leases" for
additional information.
Defined Benefit Pension Plan: Net periodic pension costs are funded based on the requirements of federal laws and
regulations. The determination of net periodic pension costs is based on assumptions about future events that will affect the
amount and timing of required benefit payments under the plan. These assumptions include demographic assumptions such as
retirement age and mortality, a discount rate used to determine the current benefit obligation, form of payment election and a
long-term expected rate of return on plan assets. Net periodic pension expense includes interest cost, based on the assumed
discount rate, an expected return on plan assets, amortization of prior service cost or credit and amortization of net actuarial
gains or losses. For the Corporation, there is no service cost as the plan was curtailed in 2008, with no additional benefits
accruing. Net periodic pension cost is recognized in salaries and employee benefits on the consolidated statements of income.
For additional details, see "Note 16 - Employee Benefit Plans."
Other Recently Adopted Accounting Standards
On January 1, 2021, the Corporation adopted ASC Update 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes. The Corporation adopted this standards update effective with its March 31, 2021 quarterly report on Form 10-Q
and it did not have a material impact on the consolidated financial statements.
On January 1, 2021, the Corporation adopted ASC Update 2021-01 Reference Rate Reform (Topic 848). This update permits
entities to apply optional expedients in Topic 848 to derivative instruments modified because of LIBOR transition affected by
changes to the interest rates used for discounting, margining or contract price alignment due to reference rate reform. This
update was effective upon issuance, and entities may elect to apply the guidance to modifications either retrospectively, as of
any date from the beginning of any interim period that includes or is subsequent to March 12, 2020, or prospectively to new
modifications from any date in an interim period that includes or is subsequent to January 7, 2021. The Corporation adopted
this standards update retrospectively effective with its March 31, 2021 quarterly report on Form 10-Q and such adoption did not
have a material impact on the consolidated financial statements.
On March 1, 2021, the Corporation adopted ASC Update 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans
- General (Subtopic 715-20). The Corporation adopted this standards update effective with its March 31, 2021 quarterly report
on Form 10-Q and such adoption did not have a material impact on the consolidated financial statements.
Reclassifications
Certain amounts in the 2020 consolidated financial statements and notes have been reclassified to conform to the 2021
presentation.
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NOTE 2 – RESTRICTIONS ON CASH AND CASH EQUIVALENTS
The Bank is required to maintain reserves against its deposit liabilities. Prior to March 2020, reserves were in the form of cash
and balances with the FRB. The FRB suspended cash reserve requirements effective March 26, 2020.
In addition, collateral is posted by the Corporation with counterparties to secure derivative 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 December 31, 2021 and 2020 were $202.8 million and $408.1 million, respectively.
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NOTE 3 – INVESTMENT SECURITIES
The following tables present the amortized cost and estimated fair values of investment securities, as of December 31:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
(in thousands)
2021
Available for Sale
U.S. Government securities .......................................................... $
State and municipal securities ......................................................
Corporate debt securities ..............................................................
Collateralized mortgage obligations .............................................
Residential mortgage-backed securities .......................................
Commercial mortgage-backed securities ......................................
Auction rate securities ..................................................................
1,139,187
373,482
206,532
231,607
974,541
76,350
Total ........................................................................................... $ 3,129,530 $
127,831 $
— $
50,161
13,009
3,581
1,224
6,141
—
74,116 $
127,618
(213) $
1,188,670
(678)
386,133
(358)
209,359
(754)
229,795
(3,036)
971,148
(9,534)
(1,683)
74,667
(16,256) $ 3,187,390
Held to Maturity
Residential mortgage-backed securities ....................................... $
Commercial mortgage-backed securities
Total .......................................................................................... $
404,958 $
575,426
980,384 $
11,022 $
—
11,022 $
(7,067) $
(18,472)
(25,539) $
408,913
556,954
965,867
2020
Available for Sale
State and municipal securities ...................................................... $
Corporate debt securities ..............................................................
Collateralized mortgage obligations .............................................
Residential mortgage-backed securities .......................................
Commercial mortgage-backed securities ......................................
Auction rate securities ..................................................................
891,327 $
348,391
491,321
373,779
741,172
101,510
Total ........................................................................................... $ 2,947,500 $
61,286 $
19,445
12,560
4,246
22,384
—
119,921 $
952,613
— $
367,145
(691)
503,766
(115)
377,998
(27)
762,415
(1,141)
(3,304)
98,206
(5,278) $ 3,062,143
Held to Maturity
Residential mortgage-backed securities ....................................... $
278,281 $
18,576 $
— $
296,857
On July 1, 2019, the Corporation transferred state and municipal securities from the HTM classification to the AFS
classification as permitted through the early adoption of ASU 2019-04, as disclosed in "Note 1 - Summary of Significant
Accounting Policies." The amortized cost of the securities transferred was $158.9 million, and the estimated fair value was
$168.5 million. The Corporation has the positive intent and ability to hold the remainder of the HTM portfolio, consisting of
residential mortgage-backed securities, to maturity.
Securities carried at $2,502.1 million at December 31, 2021 and $520.5 million at December 31, 2020, were pledged as
collateral to secure public and trust deposits.
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The amortized cost and estimated fair values of debt securities as of December 31, 2021, 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 obligations with or without call or prepayment penalties.
Available for Sale
Held to Maturity
Amortized
Cost
Estimated
Fair Value
Amortized
Cost
Estimated
Fair Value
(in thousands)
9,175 $
9,053 $
Due in one year or less ....................................................................... $
Due from one year to five years .........................................................
Due from five years to ten years ........................................................
Due after ten years ..............................................................................
—
—
—
—
—
408,913
556,954
—
Total ............................................................................................ $ 3,129,530 $ 3,187,390 $ 980,384 $ 965,867
(1) Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on
Residential mortgage-backed securities (1)
Commercial mortgage-backed securities (1)
Collateralized mortgage obligations (1)
— $
—
—
—
—
404,958
575,426
—
163,924
405,782
1,198,207
1,777,088
229,795
971,148
209,359
163,249
391,040
1,153,508
1,716,850
231,607
974,541
206,532
.........................................
.......................................
...............................................
the underlying loans.
The following table presents information related to gross gains and losses on the sales of securities:
Gross
Realized
Gains
Gross
Realized
Losses
(in thousands)
Net Gains
2021 ....................................................................................................................... $
2020 .......................................................................................................................
2019 .......................................................................................................................
35,593 $
6,545
11,554
(2,077) $
(3,492)
(6,821)
33,516
3,053
4,733
During 2021, the Corporation completed a balance sheet restructuring that included a $34.0 million gain on the sale of Visa
Shares, offset by net losses on other securities of $0.4 million, primarily in connection with the sale of $24.6 million of ARCs.
During 2020, the Corporation completed a balance sheet restructuring that included the sale of investment securities, with an
amortized cost of $79.0 million and an estimated fair value of $82.0 million, resulting in net investment securities gains of
$3.0 million. Offsetting these gains were $2.9 million of prepayment penalties recorded in non-interest expense for the
redemption of FHLB advances.
89
The following tables present the gross unrealized losses and estimated fair values of investments, aggregated by investment
category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31:
2021
Available for Sale
U.S. Government securities
State and municipal securities ...............
Corporate debt securities .......................
Collateralized mortgage obligations ......
Residential mortgage-backed securities
Commercial mortgage-backed
securities ................................................
Auction rate securities ...........................
Less Than 12 months
12 Months or Longer
Total
Number of
Securities
Estimated
Fair Value
Unrealized
Losses
Number of
Securities
Estimated
Fair Value
Unrealized
Losses
Estimated
Fair Value
Unrealized
Losses
(dollars in thousands)
2 $ 127,618 $
— $
— $
— $ 127,618 $
82,731
43,068
28,517
(213)
(678)
(358)
(754)
123,687
(2,388)
512,312
(9,534)
—
—
29
6
4
7
41
—
—
—
—
—
—
—
82,731
43,068
28,517
(213)
(678)
(358)
(754)
16,669
(648)
140,356
(3,036)
—
—
512,312
74,667
(1,683)
74,667
(9,534)
(1,683)
—
—
—
1
—
118
Total available for sale ..................
89 $ 917,933 $
(13,925)
119 $
91,336 $
(2,331) $ 1,009,269 $
(16,256)
Held to Maturity
Residential mortgage-backed securities
14
$ 205,969 $
(7,067)
— $
— $
— $ 205,969 $
(7,067)
Commercial mortgage-backed
securities
36
556,954
(18,472)
—
—
—
556,954
(18,472)
Total
50 $ 762,923 $
(25,539)
— $
— $
— $ 762,923 $
(25,539)
Less Than 12 months
12 Months or Longer
Total
Number of
Securities
Estimated
Fair Value
Unrealized
Losses
Number of
Securities
Estimated
Fair Value
Unrealized
Losses
Estimated
Fair Value
Unrealized
Losses
2020
Available for Sale
Corporate debt securities .......................
Collateralized mortgage obligations ....
Residential mortgage-backed securities
Commercial mortgage-backed
securities ................................................
Auction rate securities ...........................
Total available for sale ..................
9 $
44,528 $
57,601
20,124
(377)
(115)
(27)
144,383
(1,141)
—
—
3
1
9
—
1 $
6,871 $
(314) $
51,399 $
—
—
—
162
—
—
—
—
—
—
57,601
20,124
144,383
98,206
(3,304)
98,206
(691)
(115)
(27)
(1,141)
(3,304)
22 $ 266,636 $
(1,660)
163 $ 105,077 $
(3,618) $ 371,713 $
(5,278)
No held to maturity securities were in an unrealized loss position as of December 31, 2020.
The Corporation’s collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do
not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The change in fair value of
these securities is attributable to changes in interest rates and not credit quality. The Corporation does not have the intent to sell
and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value
to amortized cost. Therefore, the Corporation does not have an ACL for these investments as of December 31, 2021 and 2020.
As of December 31, 2021 and 2020, all ARCs and corporate debt securities were rated above investment grade. All of the loans
underlying the ARCs have principal payments which are guaranteed by the federal government. Based on the payment status,
rating and management’s evaluation of these securities, no ACL was required for ARCs or corporate debt securities as of
December 31, 2021 and 2020.
90
NOTE 4 – Loans and Allowance for Credit Losses
Loans and leases, net of unearned income
Loans and leases, net of unearned income are summarized as follows as of December 31:
2021
2020
(in thousands)
Real estate - commercial mortgage ................................................................................................. $ 7,279,080 $ 7,105,092
Commercial and industrial (1)
..........................................................................................................
5,670,828
Real-estate - residential mortgage ..................................................................................................
3,141,915
Real-estate - home equity ...............................................................................................................
1,202,913
Real-estate - construction ...............................................................................................................
1,047,218
Consumer ........................................................................................................................................
466,772
Equipment lease financing and other ..............................................................................................
284,377
Overdrafts .......................................................................................................................................
4,806
Gross loans ..............................................................................................................................
18,923,921
Unearned income ............................................................................................................................
(23,101)
Net Loans ................................................................................................................................ $ 18,325,350 $ 18,900,820
4,208,327
3,846,750
1,118,248
1,139,779
464,657
283,557
1,988
18,342,386
(17,036)
(1) Includes PPP loans totaling $0.3 billion and $1.6 billion as of December 31, 2021 and 2020 respectively.
The Corporation has extended credit to officers and directors of the Corporation and to their associates. These related-party
loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and do not involve more than the normal risk of collection or present other
unfavorable features. The aggregate dollar amount of these loans, including unadvanced commitments, was $129.6 million and
$162.5 million as of December 31, 2021 and 2020, respectively. During 2021, additions totaled $52.8 million and repayments
totaled $85.7 million for related-party loans.
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 exposures includes estimated losses on unfunded loan
commitments, letters of credit and other OBS credit exposures. The total ACL is increased by charges to expense, through the
provision for credit losses, and decreased by charge-offs, net of recoveries.
The following table presents the components of the ACL:
ACL - loans ........................................................................................................................ $
ACL - OBS credit exposure ................................................................................................
Total ACL ................................................................................................................... $
249,001 $
14,533
263,534 $
277,567
14,373
291,940
2021
2020
(in thousands)
91
The following table presents the activity in the ACL for the years ended December 31:
Balance at beginning of period ........................................................................ $
Impact of adopting CECL on January 1, 2020 (1)
Loans charged off ............................................................................................
.............................................
Recoveries of loans previously charged off .....................................................
Net loans charged off ................................................................................
2021
2020
2019
(in thousands)
291,940 $
166,209 $
169,410
—
58,348
—
(30,952)
(30,557)
(53,189)
17,146
21,020
17,163
(13,806)
(9,537)
(36,026)
............................................................................
Provision for credit losses (2)
Balance at the end of the period (3)
(1) Includes $12.6 million of reserves for OBS credit exposures as of January 1, 2020.
(2) Includes $0.2 million, $(0.8) million and $(6.3) million related to OBS credit exposures for the years ended December 31, 2021, 2020 and 2019,
respectively.
(3) Includes $14.5 million, $14.4 million and $2.6 million of reserves for OBS credit exposures as of December 31, 2021, 2020 and 2019, respectively.
.................................................................. $
263,534 $
291,940 $
(14,600)
76,920
32,825
166,209
The following tables present the activity in the allowance for loan losses by portfolio segment for the years ended December 31,
2021 and 2020, by portfolio segment:
Balance at December 31, 2019 ............................................... $
45,610
$
68,602
$ 17,744
$
19,771
$
4,443
$
3,762
$
3,690
$
163,622
Real Estate -
Commercial
Mortgage
Commercial
and Industrial
Real Estate -
Home
Equity
Real Estate -
Residential
Mortgage
Real Estate -
Construction
Consumer
Equipment
Finance
Leasing and
Other
Total
(in thousands)
Impact of adopting CECL on January 1, 2020 .......................
29,361
Loans charged off ...................................................................
(4,225)
Recoveries of loans previously charged off ............................
1,027
Net loans recovered (charged off) ..........................................
Provision for loan losses (1)
.....................................................
(3,198)
31,652
Balance at December 31, 2020 ...............................................
103,425
(18,576)
(18,915)
11,396
(7,519)
32,264
74,771
Loans charged off ...................................................................
(8,726)
(15,337)
Recoveries of loans previously charged off ............................
Net loans recovered (charged off) ..........................................
Provision for loan losses(1)
......................................................
2,474
(6,252)
(9,203)
9,587
(5,750)
(1,965)
Balance at December 31, 2021 ............................................... $
67,056
(1) Provision included in the table only includes the portion related to Net Loans
87,970
$
(65)
21,235
4,015
5,969
3,784
45,723
(1,193)
504
(689)
(2,758)
14,232
(676)
248
(428)
(620)
491
(129)
11,118
51,995
(1,290)
375
(915)
(17)
(3,400)
(2,187)
(30,557)
5,122
5,105
2,045
15,608
1,875
605
(1,525)
(1,582)
2,699
10,905
739
6,631
21,020
(9,537)
77,759
277,567
(39)
(2,633)
(2,251)
(30,952)
1,412
1,373
2,097
953
(536)
(1,298)
17,146
(13,806)
(14,760)
(2,595)
3,156
(4,040)
(1,829)
1,716
$ 11,209
$
54,236
$
12,941
$
8,540
$
7,049
$
249,001
The ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the
quantitative models. Qualitative adjustments include and consider changes in national, regional and local economic and
business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting
credit quality. Qualitative adjustments increased during 2020, primarily as a result of uncertainties related to the economic
impact of COVID-19, including consideration for the future performance of loans that received deferrals or forbearances as a
result of COVID-19 and the impact COVID-19 had on certain industries where the quantitative models were not fully capturing
the appropriate level of risk. The impact from qualitative adjustments on the ACL decreased in 2021 with the improvement in
economic conditions.
Non-accrual Loans
All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of December 31, 2021 and
2020, substantially all of the Corporation’s individually evaluated loans with total commitments greater than or equal to $1.0
million were measured based on the estimated fair value of each loan’s collateral, if any. Collateral could be in the form of real
estate, in the case of commercial mortgages and construction loans, or business assets, such as accounts receivable or inventory,
in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate.
As of December 31, 2021 and 2020, approximately 98% and 83%, respectively, of loans evaluated individually for impairment
with principal balances greater than or equal to $1.0 million, whose primary collateral is 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.
92
The following table presents total non-accrual loans, by class segment:
2021
Without a
Related
Allowance
With a Related
Allowance
2020
Without a
Related
Allowance
Total
With a Related
Allowance
(in thousands)
Real estate - commercial mortgage .. $
20,564 $
32,251 $
52,815 $
19,909 $
31,561 $
Commercial and industrial ...............
Real estate - residential mortgage ....
Real estate - home equity .................
Real estate - construction .................
Consumer .........................................
Equipment lease financing and
other .................................................
12,571
35,269
8,671
173
229
17,570
—
—
728
—
30,141
35,269
8,671
901
229
13,937
24,590
9,398
437
332
18,056
1,517
190
958
—
Total ...................................... $
83,724 $
59,942 $
143,666 $
6,247
9,393
15,640
—
68,603 $
16,313
68,595 $
16,313
137,198
Total
51,470
31,993
26,107
9,588
1,395
332
As of December 31, 2021, there were $59.9 million of non-accrual loans that did not have a related allowance for credit losses.
The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously
charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary. The
amount of interest income on non-accrual loans that was recognized was approximately $1.3 million in 2021 and $0.3 million
in 2020.
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 categories is a significant component
of the ACL methodology for these loans, under both the CECL and incurred loss models, which bases the probability of default
on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide a separate
assessment of risk rating accuracy. Risk ratings may be changed based on the ongoing monitoring procedures performed by
loan officers or credit administration staff, or if specific loan review assessments identify a deterioration or an improvement in
the loans.
93
The following table summarizes designated internal risk categories by portfolio segment and loan class, by origination year, in
the current period:
December 31, 2021
Real estate - construction (1)
2021
Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)
2019
2020
2017
2018
Revolving
Loans
converted
to Term
Loans
Revolving
Loans
Prior
Amortized Amortized
Cost Basis Cost Basis
Total
Pass ........................................ $ 190,030 $ 315,811 $ 113,245 $
83,886 $
17,545 $ 117,157 $
46,409 $
— $
884,083
Special Mention ....................
5,843
Substandard or Lower ...........
—
775
—
9,984
20,200
—
—
15,724
1,912
6,315
4,185
—
227
Total real estate -
construction
Real estate - construction (1)
Current period gross charge-
offs .........................................
Current period recoveries ......
Total net (charge-offs)
recoveries ..............................
Commercial and industrial (2)
Pass ........................................
195,873
316,586
123,229
104,086
35,181
127,657
46,636
—
—
—
—
—
—
(39)
39
—
—
—
—
—
—
—
—
1,373
1,373
—
—
—
855,924
520,802
396,575
232,805
147,675
581,762
1,177,857
Special Mention ....................
Substandard or Lower ...........
5,386
1,225
8,538
9,775
33,937
19,393
8,301
24,327
10,346
11,912
23,380
34,825
52,386
49,562
—
—
—
—
—
—
58,841
6,324
949,248
(39)
1,412
1,373
339
95
1,200
3,913,739
142,369
152,219
862,535
539,115
449,905
265,433
169,933
639,967
1,279,805
1,634
4,208,327
Total commercial and
industrial ................................
Commercial and industrial
Current period gross charge-
offs .........................................
Current period recoveries ......
Total net (charge-offs)
recoveries ..............................
—
—
—
—
—
1,488
(15,337)
9,587
(5,750)
6,560,705
387,279
331,096
(2,977)
6
(406)
39
(4,966)
4,691
(208)
841
(286)
457
(800)
2,342
(5,694)
1,211
(2,971)
(367)
(275)
633
171
1,542
(4,483)
Real estate - commercial mortgage
Pass ........................................
1,086,113
899,172
826,866
624,653
712,223
2,356,308
55,370
Special Mention ....................
Substandard or Lower ...........
1,317
1,537
60,732
8,516
96,508
28,810
25,280
68,818
33,595
69,793
169,732
151,450
115
684
Total real estate -
commercial mortgage ............
1,088,967
968,420
952,184
718,751
815,611
2,677,490
56,169
1,488
7,279,080
Real estate - commercial mortgage
Current period gross charge-
offs .........................................
Current period recoveries ......
Total net (charge-offs)
recoveries ..............................
Total
—
—
—
—
—
—
(14)
—
(25)
(6,972)
(1,517)
(198)
—
983
1,491
—
(14)
(25)
(5,989)
(26)
(198)
—
—
—
(8,726)
2,474
(6,252)
Pass ........................................ $ 2,132,067 $ 1,735,785 $ 1,336,686 $ 941,344 $ 877,443 $ 3,055,227 $ 1,279,636 $
339 $ 11,358,527
Special Mention ....................
12,546
Substandard or Lower ...........
2,762
70,045
18,291
140,429
48,203
53,781
93,145
59,665
83,617
199,427
190,460
52,501
50,473
95
2,688
588,489
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
(1) Excludes real estate - construction - other.
(2) Loans originated in 2021 include $0.3 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government guaranty
through the SBA.
94
The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination
year, in the prior period:
December 31, 2020
Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)
Revolving
Loans
converted to
Term Loans
Revolving
Loans
Amortized
Amortized
2020
2019
2018
2017
2016
Prior
Cost Basis
Cost Basis
Total
185,883 $
229,097 $
217,604 $
81,086 $
37,976 $
110,470 $
38,026 $
— $
900,142
—
—
—
447
—
—
—
2,000
7,047
753
6,212
1,637
—
632
185,883
229,544
217,604
83,086
45,776
118,319
38,658
—
—
—
—
—
—
—
—
—
—
—
—
—
68
68
(17)
5,054
5,037
—
—
—
—
—
—
—
—
—
13,259
5,469
918,870
(17)
5,122
5,105
Real estate - construction (1)
Pass .............................. $
Special Mention ...........
Substandard or Lower .
Total real estate -
construction
Real estate - construction (1)
Current period gross
charge-offs ...................
Current period
recoveries .....................
Total net (charge-offs)
recoveries .....................
Commercial and industrial (2)
Pass ..............................
Special Mention ...........
Substandard or Lower .
Total real estate -
commercial mortgage ..
2,283,533
508,541
298,567
214,089
208,549
596,646
1,278,689
—
5,388,614
Special Mention ...........
Substandard or Lower .
6,633
3,221
23,834
5,947
29,167
8,434
10,945
11,251
11,506
11,192
25,960
23,852
45,994
64,278
—
—
154,039
128,175
Total commercial and
industrial ......................
Commercial and industrial
2,293,387
Current period gross
charge-offs ...................
Current period
recoveries .....................
Total net (charge-offs)
recoveries .....................
—
—
—
Real estate - commercial mortgage
538,322
336,168
236,285
231,247
646,458
1,388,961
—
5,670,828
(114)
(30)
(488)
(393)
(520)
(17,370)
43
(71)
486
456
216
162
4,531
5,958
(272)
(231)
4,011
(11,412)
—
—
—
(18,915)
11,396
(7,519)
Pass ..............................
973,664
917,510
708,946
794,955
783,094
2,213,343
13,639
1,238
40,874
6,681
84,047
6,247
80,705
39,027
89,112
22,605
167,424
103,007
53,041
2,364
2,225
404
6,444,957
—
940
478,165
181,970
988,541
965,065
799,240
914,687
894,811
2,483,774
57,630
1,344
7,105,092
Real estate - commercial mortgage
Current period gross
charge-offs ...................
Current period
recoveries .....................
Total net (charge-offs)
recoveries .....................
Total
(60)
(21)
(36)
(2,515)
(29)
(1,547)
(17)
—
6
—
—
1
1,020
—
(60)
(15)
(36)
(2,515)
(28)
(527)
(17)
—
—
—
(4,225)
1,027
(3,198)
Pass .............................. $ 3,443,080 $ 1,655,148 $ 1,225,117 $ 1,090,130 $ 1,029,619 $ 2,920,459 $ 1,369,756 $
404 $ 12,733,713
Special Mention ...........
Substandard or Lower .
20,272
4,459
64,708
13,075
113,214
14,681
91,650
52,278
107,665
34,550
199,596
128,496
48,358
67,135
—
940
645,463
315,614
Total ............................. $ 3,467,811 $ 1,732,931 $ 1,353,012 $ 1,234,058 $ 1,171,834 $ 3,248,551 $ 1,485,249 $
1,344 $ 13,694,790
(1) Excludes real estate - construction - other.
(2) Loans originated in 2020 include $1.6 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government guaranty
through the SBA.
95
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. 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 table presents the
amortized cost of these loans based on payment activity, by origination year, for the current period:
December 31, 2021
Term Loans Amortized Cost Basis by Origination Year
Revolving
Loans
Revolving
Loans
converted to
Term Loans
2021
2020
2019
2018
2017
Prior
Cost Basis
Cost Basis
Total
(dollars in thousands)
Amortized
Amortized
Real estate - home equity
Performing ........................................... $
32,682 $
23,478 $
7,024 $
9,255 $
7,415 $
92,983 $
930,289 $
3,999 $ 1,107,125
Non-performing ...................................
—
—
Total real estate - home equity ..........
32,682
23,478
—
7,024
15
9,270
282
7,697
2,145
8,483
198
11,123
95,128
938,772
4,197
1,118,248
Real estate - home equity
Current period gross charge-offs .........
Current period recoveries .....................
Total net (charge-offs) recoveries .......
—
—
—
—
—
—
(41)
—
(41)
—
—
—
—
—
—
(171)
(464)
96
(75)
152
(312)
Real estate - residential mortgage
Performing ........................................... 1,548,174
1,133,602
344,625
113,801
198,164
468,842
Non-performing ...................................
—
6,753
2,189
3,424
2,844
24,332
Total real estate - residential
mortgage ..............................................
Real estate - residential mortgage
1,548,174
1,140,355
346,814
117,225
201,008
493,174
Current period gross charge-offs .........
Current period recoveries .....................
Total net (charge-offs) recoveries .......
—
—
—
(626)
(148)
(125)
—
1
18
(626)
(147)
(107)
(4)
—
(4)
(387)
264
(123)
Consumer
—
—
—
—
92
92
Performing ...........................................
129,759
79,440
66,745
59,309
25,839
42,429
60,553
Non-performing ...................................
122
101
60
36
32
203
29
Total consumer .................................
129,881
79,541
66,805
59,345
25,871
42,632
60,582
Consumer
Current period gross charge-offs .........
(175)
(491)
(455)
(238)
Current period recoveries .....................
—
223
131
131
Total net (charge-offs) recoveries .......
(175)
(268)
(324)
(107)
Equipment lease financing and other
Performing ...........................................
97,077
65,316
49,591
34,107
Non-performing ...................................
—
—
—
—
Total leasing and other ......................
97,077
65,316
49,591
34,107
Equipment lease financing and other
Current period gross charge-offs .........
(975)
(1,276)
Current period recoveries .....................
Total net (charge-offs) recoveries .......
255
(720)
539
(737)
Construction - other
Performing ...........................................
144,652
40,040
Non-performing ...................................
—
—
Total construction - other ..................
144,652
40,040
Construction - other
Current period gross charge-offs .........
Current period recoveries .....................
Total net (charge-offs) recoveries .......
—
—
—
—
—
—
Total
—
88
88
638
—
638
—
—
—
—
10
10
5,028
—
5,028
—
—
—
(224)
167
(57)
22,444
15,503
37,947
—
18
18
—
173
173
—
—
—
(240)
(810)
952
712
1,369
138
1,507
—
43
43
—
—
—
—
—
—
493
(317)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(676)
248
(428)
3,807,208
39,542
3,846,750
(1,290)
375
(915)
464,074
583
464,657
(2,633)
2,097
(536)
269,904
15,641
285,545
(2,251)
953
(1,298)
190,358
173
190,531
—
—
—
Performing ........................................... $ 1,952,344 $ 1,341,876 $
468,623 $
221,500 $
253,862 $
605,623 $
990,842 $
3,999 $ 5,838,669
Non-performing ...................................
122
6,854
2,249
3,475
18,834
26,818
8,512
198
67,062
Total ..................................................... $ 1,952,466 $ 1,348,730 $
470,872 $
224,975 $
272,696 $
632,441 $
999,354 $
4,197 $ 5,905,731
96
December 31, 2020
Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)
Revolving
Loans
converted to
Term Loans
Revolving
Loans
Amortized
Amortized
2020
2019
2018
2017
2016
Prior
Cost Basis
Cost Basis
Total
Real estate - home equity
Performing ........................................... $
31,445 $
8,176 $
13,906 $
11,024 $
11,667 $
126,749 $
982,285 $
5,321 $ 1,190,573
Non-performing ...................................
—
Total real estate - home equity ..........
31,445
88
8,264
23
13,929
233
11,257
221
2,290
9,485
—
12,340
11,888
129,039
991,770
5,321
1,202,913
Real estate - home equity
Current period gross charge-offs .........
Current period recoveries .....................
Total net (charge-offs) recoveries .......
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(34)
(1,159)
138
104
366
(793)
Real estate - residential mortgage
Performing ...........................................
1,255,532
585,878
228,398
341,563
264,990
Non-performing ...................................
217
2,483
3,177
2,483
722
434,889
21,583
Total real estate - residential
mortgage ..............................................
Real estate - residential mortgage
1,255,749
588,361
231,575
344,046
265,712
456,472
Current period gross charge-offs .........
Current period recoveries .....................
Total net (charge-offs) recoveries .......
—
—
—
(68)
68
—
(101)
16
(85)
(190)
1
(189)
(7)
1
(6)
(254)
405
151
Consumer
—
—
—
—
—
—
Performing ...........................................
114,399
98,587
Non-performing ...................................
168
19
Total consumer .................................
114,567
98,606
95,072
124
95,196
43,334
141
43,475
25,804
114
25,918
36,086
150
36,236
52,698
34
52,732
Consumer
Current period gross charge-offs .........
(134)
(542)
Current period recoveries .....................
—
64
Total net (charge-offs) recoveries .......
(134)
(478)
(524)
165
(359)
(444)
159
(285)
(489)
94
(395)
(769)
101
(668)
(498)
1,292
794
Equipment lease financing and other
Performing ...........................................
102,324
65,303
49,453
Non-performing ...................................
—
—
30
Total leasing and other ......................
102,324
65,303
49,483
34,995
15,983
50,978
15,631
142
15,773
5,040
282
5,322
Equipment lease financing and other
Current period gross charge-offs .........
(606)
(1,581)
Current period recoveries .....................
185
349
Total net (charge-offs) recoveries .......
(421)
(1,232)
Construction - other
Performing ...........................................
96,444
24,888
Non-performing ...................................
—
—
Total construction - other ..................
96,444
24,888
Construction - other
Current period gross charge-offs .........
Current period recoveries .....................
Total net (charge-offs) recoveries .......
—
—
—
—
—
—
Total
—
21
21
6,822
—
6,822
—
—
—
—
18
18
—
178
178
—
—
—
—
11
11
16
—
16
—
—
—
—
21
21
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,193)
504
(689)
3,111,250
30,665
—
3,141,915
—
—
—
42
—
42
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(620)
491
(129)
466,022
750
466,772
(3,400)
1,875
(1,525)
272,746
16,437
289,183
(2,187)
605
(1,582)
128,170
178
128,348
—
—
—
Performing ........................................... $ 1,600,144 $
782,832 $
393,651 $
430,916 $
318,108 $
602,764 $ 1,034,983 $
5,363 $ 5,168,761
Non-performing ...................................
385
2,590
3,354
19,018
1,199
24,305
9,519
—
60,370
Total ..................................................... $ 1,600,529 $
785,422 $
397,005 $
449,934 $
319,307 $
627,069 $ 1,044,502 $
5,363 $ 5,229,131
97
The following table presents non-performing assets:
December 31,
2021
December 31,
2020
(in thousands)
Non-accrual loans .................................................................................................................... $
Loans 90 days or more past due and still accruing ..................................................................
Total non-performing loans .....................................................................................................
OREO (1)
..................................................................................................................................
Total non-performing assets .................................................................................................... $
(1) Excludes $6.4 million of residential mortgage properties for which formal foreclosure proceedings were in process as of December 31, 2021.
143,666 $
8,453
152,119
1,817
153,936 $
137,198
9,929
147,127
4,178
151,305
The following tables present the aging of the amortized cost basis of loans, by class segment:
30-59
60-89
≥ 90 Days
Days Past Days Past
Past Due
Non-
Due
Due
and Accruing
Accrual
Current
Total
(in thousands)
December 31, 2021
Real estate – commercial mortgage ............ $
1,089 $
1,750 $
1,229 $ 52,815 $ 7,222,197 $ 7,279,080
Commercial and industrial ..........................
5,457
Real estate – residential mortgage ..............
22,957
Real estate – home equity ...........................
Real estate – construction ...........................
Consumer ....................................................
Equipment lease financing and other ..........
4,369
1,318
3,561
226
1,932
2,920
1,154
—
876
27
488
30,141
4,170,309
4,208,327
4,130
35,269
3,781,474
3,846,750
2,253
8,671
1,101,801
1,118,248
—
353
901
1,137,560
1,139,779
229
—
15,640
459,638
252,616
464,657
268,509
Total ............................................................ $ 38,977 $
8,659 $
8,453 $ 143,666 $ 18,125,595 $ 18,325,350
30-59 Days
Past
Due
60-89
Days Past
Due
≥ 90 Days
Past Due
and
Accruing
Non-
accrual
(in thousands)
Current
Total
December 31, 2020
Real estate – commercial mortgage ...... $
14,999 $
9,273 $
1,177 $ 51,470 $ 7,028,173 $ 7,105,092
Commercial and industrial ....................
Real estate – residential mortgage ........
Real estate – home equity .....................
Real estate – construction .....................
Consumer ..............................................
Equipment lease financing and other ....
11,285
22,281
5,622
1,938
3,036
838
1,068
7,675
1,654
—
501
150
616
4,687
2,753
155
417
124
31,993
26,107
9,588
1,395
332
16,313
5,625,866
3,081,165
1,183,296
1,043,730
462,486
248,657
5,670,828
3,141,915
1,202,913
1,047,218
466,772
266,082
Total ...................................................... $
59,999 $ 20,321 $
9,929 $ 137,198 $ 18,673,373 $ 18,900,820
Collateral-Dependent Loans
A financial asset 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 financial assets deemed
collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s
fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the loan’s carrying value to the
collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent financial assets 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.
98
Troubled Debt Restructurings
The following table presents TDRs, by class segment for the years ended December 31:
Real estate - commercial mortgage ................................................................................................. $
Commercial and industrial ..............................................................................................................
Real estate - residential mortgage ...................................................................................................
Real estate - home equity ................................................................................................................
Consumer ........................................................................................................................................
Total accruing TDRs ......................................................................................................................
Non-accrual TDRs (1)
......................................................................................................................
Total TDRs ..................................................................................................................................... $
(1) Included within non-accrual loans in the preceding table.
2021
2020
(in thousands)
3,464 $
1,857
11,948
12,218
5
29,492
55,945
28,451
6,982
18,602
14,391
—
68,426
35,755
85,437 $
104,181
The following table presents TDRs, by class segment, for loans that were modified during the years ended December 31:
2021
2020
2019
Post-
Modification
Recorded
Investment
Number
of Loans
Post-
Modification
Recorded
Investment
Number
of Loans
Post-
Modification
Recorded
Investment
Number
of Loans
(dollars in thousands)
Real estate - commercial mortgage ..........................
9 $
16,020
12 $
24,868
2 $
Commercial and industrial .......................................
Real estate - residential mortgage ............................
Real estate - home equity
Real estate - construction .........................................
Consumer .................................................................
10
46
30
1
—
2,823
13,256
1,226
154
—
20
48
48
—
14
5,218
10,493
4,359
—
345
16
6
59
—
—
263
5,378
2,252
2,706
—
—
Total .........................................................................
96 $
33,479
142 $
45,283
83 $
10,599
Restructured loan modifications may include payment schedule modifications, interest rate concessions, bankruptcies, principal
reduction or some combination of these concessions. The restructured loan modifications primarily included maturity date
extensions, rate modifications and payment schedule modifications.
In accordance with regulatory guidance, payment schedule modifications granted after March 13, 2020, to borrowers impacted
by the effects of COVID-19 pandemic and who are not delinquent at the time of the payment schedule modifications, have been
excluded from TDRs. As of December 31, 2021, $38.2 million in recorded investment remain in an active COVID-19 deferral
program.
NOTE 5 – PREMISES AND EQUIPMENT
The following is a summary of premises and equipment as of December 31:
Land ................................................................................................................................................. $
Buildings and improvements ...........................................................................................................
Furniture and equipment ..................................................................................................................
Construction in progress ..................................................................................................................
Total premises and equipment ................................................................................................
Less: Accumulated depreciation and amortization ..........................................................................
Net premises and equipment .................................................................................................. $
2021
2020
(in thousands)
38,494 $
346,098
145,627
8,644
538,863
(318,506)
220,357 $
38,654
343,604
165,572
5,423
553,253
(321,773)
231,480
99
NOTE 6 – GOODWILL AND INTANGIBLE ASSETS
Goodwill totaled $534.3 million and $533.4 million as of December 31, 2021 and 2020, respectively. The increase of
$0.9 million was the result of certain acquisitions in 2021. There were no goodwill impairment charges in 2021 based on the
annual assessment.
The estimated fair values of the Corporation’s reporting units are subject to uncertainty, including future changes in fair values
of banks in general and future operating results of reporting units, which could differ significantly from the assumptions used in
the current valuation of reporting units.
The follow table summarizes intangible assets, which are included in Goodwill and intangible assets on the consolidated
balance sheets:
Intangible assets
Amortizing intangible assets ............................................................................................... $
Accumulated amortization ...................................................................................................
Net intangibles ..................................................................................................................... $
5.4 $
(1.6)
3.8 $
4.3
(1.0)
3.3
Amortization expense was $589 thousand and $529 thousand for the years ending December 31, 2021 and 2020, respectively.
2021
2020
(in millions)
NOTE 7 – 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 fair value included in mortgage banking income on the consolidated statements of income:
2021
2020
(in thousands)
2019
Amortized cost:
Balance at beginning of period ................................................................... $
Originations of MSRs .................................................................................
Amortization ...............................................................................................
Balance at end of period ............................................................................. $
38,745 $
9,216
(11,968)
35,993 $
39,267 $
12,173
(12,695)
38,745 $
38,573
7,546
(6,852)
39,267
Valuation allowance: ..................................................................................
Balance at beginning of period ................................................................... $
Reduction (addition) to valuation allowance ..............................................
Balance at end of period ............................................................................. $
(10,500) $
9,900
(600) $
— $
(10,500)
(10,500) $
—
—
—
Net MSRs at end of period ......................................................................... $
Estimated fair value of MSRs at end of period........................................... $
35,393 $
35,393 $
28,245 $
28,245 $
39,267
45,193
MSRs represent the economic value of existing 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 billion and $4.7 billion as of
December 31, 2021 and 2020, respectively. Actual and expected prepayments of the underlying mortgage loans can impact the
value of 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 $35.4 million
and $28.2 million as of December 31, 2021 and 2020, respectively. Based on its fair value analysis as of December 31, 2021,
100
the Corporation determined that a $0.6 million valuation allowance was required for the year ended December 31, 2021. The
valuation allowance was $10,500 and $0 at December 31, 2020 and 2019, respectively.
Total servicing income, recognized as an increase to mortgage banking income in the consolidated statements of income, was
$11.2 million, $11.9 million and $12.0 million as of December 31, 2021, 2020 and 2019, respectively.
Total MSR amortization expense, recognized as a reduction to mortgage banking income in the consolidated statements of
income, was $12.0 million, $12.7 million and $6.9 million in 2021, 2020 and 2019, respectively. Estimated future MSR
amortization expense, based on balances as of December 31, 2021, and the estimated remaining lives of the underlying loans,
follows (in thousands):
Year
2022 .......................................................................................................................................................................... $
2023 ..........................................................................................................................................................................
2024 ..........................................................................................................................................................................
2025 ..........................................................................................................................................................................
2026 ..........................................................................................................................................................................
Thereafter ..................................................................................................................................................................
Total estimated amortization expense ....................................................................................................................... $
6,104
5,665
5,186
4,663
4,095
10,280
35,993
NOTE 8 – DEPOSITS
Deposits consisted of the following as of December 31:
2021
2020
(in thousands)
Noninterest-bearing demand ........................................................................................................... $ 7,370,963 $ 6,531,002
Interest-bearing demand ..................................................................................................................
5,818,564
Savings and money market accounts ..............................................................................................
5,929,792
18,279,358
335,185
2,224,664
Total Deposits ............................................................................................................................. $ 21,573,499 $ 20,839,207
Total demand and savings ...........................................................................................................
Brokered deposits ............................................................................................................................
Time deposits ..................................................................................................................................
5,819,539
6,403,995
19,594,497
251,526
1,727,476
The scheduled maturities of time deposits as of December 31, 2021 were as follows (in thousands):
Year
2022 .......................................................................................................................................................................... $ 1,315,785
2023 ..........................................................................................................................................................................
232,748
2024 ..........................................................................................................................................................................
71,064
2025 ..........................................................................................................................................................................
29,367
2026 ..........................................................................................................................................................................
14,810
Thereafter ..................................................................................................................................................................
63,702
$ 1,727,476
Included in time deposits were certificates of deposit equal to or greater than $100,000 of $0.7 billion and $1.0 billion as of
December 31, 2021 and 2020, respectively. Time deposits of $250,000 or more were $219.0 million and $330.4 million as of
December 31, 2021 and 2020, respectively.
101
NOTE 9 – SHORT-TERM AND LONG-TERM BORROWINGS
Short-term borrowings as of December 31, 2021 and 2020 and the related maximum amounts outstanding at the end of any
month in each of the three years then ended are presented below.
December 31
Maximum Outstanding
2021
2020
2021
2020
Federal funds purchased ......................................................................... $
Short-term FHLB advances (1)
Customer funding (2)
(in thousands)
— $
—
630,066
Total short-term borrowings ............................................................ $ 416,764 $ 630,066
................................................................
...............................................................................
— $
—
416,764
— $ 200,000
980,000
—
630,066
552,547
(1) Represents FHLB advances with an original maturity term of less than one year.
(2) Includes short-term promissory notes.
As of December 31, 2021, the Corporation had aggregate availability under federal funds lines of $2.1 billion. A combination
of commercial real estate loans, commercial loans, consumer loans and investment securities were pledged to the FRB to
provide access to FRB discount window borrowings. As of December 31, 2021 and 2020, the Corporation had $0.9 billion and
$0.3 billion, respectively, of collateralized borrowing availability at the FRB discount window, and no outstanding borrowings.
FHLB advances with an original maturity of one year or more and long-term borrowings included the following as of
December 31:
2021
2020
FHLB advances ............................................................................................................................... $
Subordinated debt ...........................................................................................................................
Senior notes .....................................................................................................................................
Junior subordinated deferrable interest debentures .........................................................................
Other long-term debt
Unamortized discounts and issuance costs .....................................................................................
Total long-term borrowings ....................................................................................................... $
(in thousands)
— $
535,973
625,000
125,000
16,496
507
(6,713)
621,345 $ 1,296,263
543,778
65,000
16,496
939
(4,868)
As of December 31, 2021, the Corporation had additional borrowing capacity of approximately $5.8 billion with the FHLB.
Advances from the FHLB are secured by FHLB stock, qualifying residential mortgages, investment securities and other assets.
The following table summarizes the scheduled maturities with an original maturity of one year or more and long-term
borrowings as of December 31, 2021 (in thousands):
Year
2022 ................................................................................................................................................................. $
2023 .................................................................................................................................................................
2024 .................................................................................................................................................................
2025 .................................................................................................................................................................
2026 .................................................................................................................................................................
Thereafter ........................................................................................................................................................
Unamortized discounts and issuance costs
$
65,313
313
169,091
—
—
391,496
(4,868)
621,345
In March 2020, the Corporation issued $200.0 million and $175.0 million of subordinated notes due in 2030 and 2035,
respectively. The subordinated notes maturing in 2030 were issued with a fixed-to-floating rate of 3.25% and an effective rate
of 3.35%, due to issuance costs, and the subordinated notes maturing in 2035 were issued with a fixed-to-floating rate of 3.75%
and an effective rate of 3.85%, due to issuance costs.
102
In March 2017, the Corporation issued $125.0 million of senior notes, with a fixed rate of 3.60% and an effective rate of 3.95%,
as a result of discounts and issuance costs, which mature on March 16, 2022. Interest is paid semi-annually in September and
March. In June 2015, the Corporation issued $150.0 million of subordinated notes, which mature on November 15, 2024 and
carry a fixed rate of 4.50% and an effective rate of 4.69% as a result of discounts and issuance costs. Interest is paid semi-
annually in May and November. In November 2014, the Corporation issued $100.0 million of subordinated notes, which mature
on November 15, 2024 and carry a fixed rate of 4.50% and an effective rate of 4.87% as a result of discounts and issuance
costs. Interest is paid semi-annually in May and November.
As of December 31, 2021, the Parent Company owned all of the common stock of three subsidiary trusts, which have issued
TruPS in conjunction with the Parent Company issuing junior subordinated deferrable interest debentures to the trusts. The
TruPS are redeemable on specified dates, or earlier if certain events arise.
The following table provides details of the debentures as of December 31, 2021 (dollars in thousands):
Debentures Issued to
Fixed/
Variable
Interest
Rate
Amount
Maturity
Callable
Call Price
Columbia Bancorp Statutory Trust ....... Variable
Columbia Bancorp Statutory Trust II ... Variable
Columbia Bancorp Statutory Trust III .. Variable
2.78 % $
2.09 %
1.97 %
$
6,186
4,124
6,186
16,496
06/30/34
03/15/35
06/15/35
03/31/22
03/15/22
03/15/22
100.0
100.0
100.0
NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS
The following table presents the notional amounts and fair values of derivative financial instruments as of December 31:
2021
2020
Notional
Amount
Asset
(Liability)
Fair Value
Notional
Amount
Asset
(Liability)
Fair Value
(in thousands)
Interest Rate Locks with Customers
Positive fair values ....................................................................... $
Negative fair values .....................................................................
Forward Commitments
Positive fair values .......................................................................
Negative fair values .....................................................................
Interest Rate Swaps with Customers
Positive fair values .......................................................................
Negative fair values .....................................................................
Interest Rate Swaps with Dealer Counterparties
Positive fair values .......................................................................
Negative fair values .....................................................................
Interest Rate Swaps used in Cash Flow Hedges
Positive fair values
Negative fair values
Foreign Exchange Contracts with Customers
Positive fair values .......................................................................
Negative fair values .....................................................................
Foreign Exchange Contracts with Correspondent Banks
Positive fair values .......................................................................
Negative fair values .....................................................................
261,428 $
2,549
2,326 $
(23)
382,903 $
3,154
8,034
(35)
51,000
—
41
—
—
292,262
—
(2,263)
3,213,924
752,462
153,752
(4,766)
3,834,062
45,640
330,951
(2)
752,462
3,213,924
4,766
(79,889)
45,640
3,834,062
2
(165,205)
500,000
500,000
60
(1,432)
7,629
3,388
3,656
9,364
229
(51)
69
(240)
—
—
1,121
5,963
6,372
1,422
—
—
5
(275)
318
(5)
103
The following table presents the effect of fair value and cash flow hedge accounting on accumulated OCI for the year ended
December 31, 2021:
Amount of
Gain (Loss)
Recognized
in OCI on
Derivative
Amount of
Gain (Loss)
Recognized
in OCI
Included
Component
Amount of
Gain or
(Loss)
Recognized
in OCI
Excluded
Component
Location of
Gain or
(Loss)
Recognized
from AOCI
into Income
Amount of
Gain
Reclassified
from AOCI
into Income
Amount of
Gain
Reclassified
from AOCI
into Income
Included
Component
Amount of
Gain or
(Loss)
Reclassified
from AOCI
into Income
Excluded
Component
Derivatives in Cash Flow
Hedging Relationships:
Interest Rate Products ........
(3,452,060) (3,452,060)
—
Interest
income
2,775,589
2,775,589
—
The following table presents the effect of fair value and cash flow hedge accounting on the consolidated statements of income
for the year ended December 31, 2021:
Consolidated Statements of Income
Classification
Interest Income
Interest
Expense
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 ............ $
The effects of fair value and cash flow hedging:
Amount of gain or (loss) on cash flow hedging relationships ..............................
Interest contracts:
Amount of gain reclassified from AOCI into income ..........................................
Amount of gain or (loss) reclassified from AOCI into income as a result that a
forecasted transaction is no longer probable of occurring ...................................
Amount of Gain Reclassified from AOCI into Income - Included Component ..
Amount of Gain or (Loss) Reclassified from AOCI into Income - Excluded
Component ...........................................................................................................
2,776 $
—
2,776
—
2,776
—
—
—
—
—
—
—
During the next twelve months, the Corporation estimates that an additional $4.9 million will be reclassified as an increase to
interest income.
The following table presents the fair value gains (losses) on derivative financial instruments for the years ended December 31:
Consolidated Statements
of Income Classification
2021
2020
2019
(in thousands)
Mortgage banking derivatives (1)
.....................................................
Mortgage banking
$ (3,392) $ 4,974 $
689
Interest rate swaps ...........................................................................
Other expense
1,050
Foreign exchange contracts .............................................................
Other income
(36)
70
12
122
20
Net fair value gains (losses) on derivative financial instruments ..
(1) Includes interest rate locks with customers and forward commitments.
$ (2,378) $ 5,056 $
831
104
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
December 31:
Amortized cost (1)
.............................................................................................................. $
Fair value ...........................................................................................................................
(1) Cost basis of mortgage loans held for sale represents the unpaid principal balance.
2021
2020
(in thousands)
35,050 $
35,768
80,662
83,886
Losses related to changes in fair values of mortgage loans held for sale were $2.5 million for the year ended December 31,
2021. Gains related to changes in fair values of mortgage loans held for sale were $2.8 million for the year ended
December 31, 2020, and losses related to changes in fair values of mortgage loans held for sale were $0.3 million for the year
ended December 31, 2019. The gains and losses are recorded on the consolidated income statements as an adjustment to
mortgage banking income.
Balance Sheet Offsetting
The fair values of interest rate swap 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 financial instruments that are eligible for offset, and
the effects of offsetting, on the consolidated balance sheets as of December 31:
Gross Amounts
Recognized
on the
Consolidated
Balance Sheets
Gross Amounts Not Offset
on the Consolidated
Balance Sheets
Financial
Instruments (1)
Cash
Collateral (2)
Net
Amount
(in thousands)
2021
Interest rate swap derivative assets .................................................. $
Foreign exchange derivative assets with correspondent banks ........
Total .............................................................................................. $
158,578 $
69
158,647 $
(8,028) $
(69)
(8,097) $
— $ 150,550
—
—
— $ 150,550
Interest rate swap derivative liabilities ............................................ $
Foreign exchange derivative liabilities with correspondent banks ..
Total ............................................................................................... $
86,087 $
240
86,327 $
(6,656) $
(69)
(6,725) $
(74,359) $ 5,072
171
(74,359) $ 5,243
—
2020
Interest rate swap derivative assets .................................................. $
Foreign exchange derivative assets with correspondent banks ........
Total .............................................................................................. $
330,951 $
318
331,269 $
Interest rate swap derivative liabilities ............................................ $
Foreign exchange derivative liabilities with correspondent banks ..
165,205 $
5
Total ............................................................................................... $
165,210 $
(2) $
(5)
(7) $
(2) $
(5)
(7) $
— $ 330,949
313
—
— $ 331,262
(165,203) $
—
(165,203) $
—
—
—
(1) For interest rate swap assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default.
For interest rate swap 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 (pledged by the Corporation) or received from the counterparty on interest rate swap transactions and foreign exchange
contracts with financial institution counterparties. Interest rate swaps with customers are collateralized by the same collateral securing the underlying
loans to those borrowers. Cash collateral amounts are included in the table only to the extent of the net derivative fair values.
105
NOTE 11 – REGULATORY MATTERS
Regulatory Capital Requirements
The Corporation and the Bank are subject to regulatory capital requirements administered by banking regulators. Failure to
meet minimum capital requirements can trigger certain mandatory – and possibly additional discretionary – actions by
regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines
that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Basel III Rules
In July 2013, the FRB approved Basel III Rules establishing a new comprehensive capital framework for U.S. banking
organizations and implementing the Basel Committee on Banking Supervision's December 2010 framework for strengthening
international capital standards. The Basel III Rules substantially revised the risk-based capital requirements applicable to bank
holding companies and depository institutions.
The minimum regulatory capital requirements established by the Basel III Rules became effective on January 1, 2015, and
became fully phased in on January 1, 2019. The Basel III Rules require the Corporation and the Bank to:
• Meet a minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets and a minimum Tier 1 capital
of 6.00% of risk-weighted assets;
• Meet a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 leverage capital ratio of
4.00% of average 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 Basel III Rules use a standardized approach for risk weightings that expand 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, resulting in higher risk weights for a variety
of asset categories.
The Corporation and the Bank are required to maintain a "capital conservation buffer" of 2.50% above the minimum risk-based
capital requirements. The rules provide that the failure to maintain the "capital conservation buffer" results in restrictions on
capital distributions and discretionary cash bonus payments to executive officers. As a result, under the Basel III Rules, if the
Bank fails to maintain the required minimum capital conservation buffer, the Corporation will be subject to limits, and possibly
prohibitions, on its ability to obtain capital distributions from such subsidiaries. If the Corporation does not receive sufficient
cash dividends from the Bank, it may not have sufficient funds to pay dividends on its common stock, service its debt
obligations or repurchase its common stock.
As of December 31, 2021 and 2020, the Corporation's capital levels met the fully phased-in minimum capital requirements,
including the new capital conservation buffers, as prescribed in the Basel III Rules.
As of December 31, 2021 and 2020, the Bank was well capitalized under the regulatory framework for prompt corrective action
based on its capital ratio calculation. To be categorized as well capitalized, the bank was required to 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 table below.
There are no conditions or events since December 31, 2021, that management believes have changed the institution's categories.
106
The following tables present the Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage
requirements under the Basel III Rules, as of December 31:
2021
For Capital
Adequacy Purposes
Actual
Well Capitalized
Amount
Ratio
Amount
Ratio
Amount
Ratio
(dollars in thousands)
Total Capital (to Risk-Weighted Assets):
Corporation .................................................................... $ 2,841,529
Fulton Bank, N.A. ..........................................................
2,591,332
14.1 % $ 1,610,429
8.0 %
N/A
N/A
12.9
1,602,597
8.0
$ 2,003,246
10.0 %
Tier I Capital (to Risk-Weighted Assets):
Corporation .................................................................... $ 2,195,647
Fulton Bank, N.A ...........................................................
2,395,890
10.9 % $ 1,207,822
6.0 %
N/A
N/A
12.0
1,201,948
6.0
$ 1,602,597
8.0 %
Common Equity Tier I Capital (to Risk-Weighted Assets):
Corporation .................................................................... $ 2,002,769
Fulton Bank, N.A ...........................................................
2,351,890
9.9 % $
905,866
4.5 %
N/A
N/A
11.7
901,461
4.5
$ 1,302,110
6.5 %
Tier I Leverage Capital (to Average Assets):
Corporation .................................................................... $ 2,195,647
Fulton Bank, N.A ...........................................................
2,395,890
8.6 % $ 1,023,787
4.0 %
N/A
N/A
9.4
1,017,083
4.0
$ 1,271,354
5.0 %
N/A – Not applicable as "well capitalized" applies to banks only.
2020
For Capital
Adequacy Purposes
Actual
Well Capitalized
Amount
Ratio
Amount
Ratio
Amount
Ratio
(dollars in thousands)
Total Capital (to Risk-Weighted Assets):
Corporation ............................................................................ $ 2,837,801
2,758,963
Fulton Bank, N.A. .................................................................
14.4 % $ 1,571,876
1,562,322
14.1
8.0 %
8.0
N/A
$ 1,952,903
N/A
10.0 %
Tier I Capital (to Risk-Weighted Assets):
Corporation ............................................................................ $ 2,067,640
2,529,802
Fulton Bank, N.A ..................................................................
10.5 % $ 1,178,907
1,171,742
13.0
6.0 %
6.0
N/A
$ 1,562,322
N/A
8.0 %
Common Equity Tier I Capital (to Risk-Weighted Assets):
Corporation ............................................................................ $ 1,874,762
9.5 % $
884,181
4.5 %
N/A
N/A
Fulton Bank, N.A ..................................................................
2,485,802
12.7
878,806
4.5
$ 1,269,387
6.5 %
Tier I Leverage Capital (to Average Assets):
Corporation ............................................................................ $ 2,067,640
2,529,802
Fulton Bank, N.A ..................................................................
8.2 % $ 1,009,469
1,001,313
10.1
4.0 %
4.0
N/A
$ 1,251,641
N/A
5.0 %
N/A – Not applicable as "well capitalized" applies to banks only.
Dividend and Loan Limitations
The dividends that may be paid by the Bank to the Parent Company are subject to certain legal and regulatory limitations. The
total amount available for payment of dividends by the Bank to the Parent Company was approximately $73.7 million as of
December 31, 2021, based on the Bank maintaining enough capital to be considered well capitalized under the Basel III Rules.
Under current regulations, the Bank is limited in the amount it may loan to its affiliates, including the Parent Company. Loans
to a single affiliate may not exceed 10%, and the aggregate of loans to all affiliates may not exceed 20% of the Bank's
regulatory capital.
107
NOTE 12 – INCOME TAXES
The components of the provision for income taxes are as follows:
Current tax expense:
Federal ........................................................................................................... $
State ...............................................................................................................
Deferred tax (benefit) expense:
Federal ...........................................................................................................
State ...............................................................................................................
Total income tax expense ..................................................................................... $
2021
2020
(in thousands)
2019
35,692 $
10,646
46,338
38,397 $
7,389
45,786
32,610
5,204
37,814
11,081
1,329
12,410
58,748 $
(18,131)
(3,460)
(21,591)
24,195 $
(1,271)
1,106
(165)
37,649
The differences between the effective income tax rate and the federal statutory income tax rate are as follows:
2021
2020
2019
Statutory tax rate ...................................................................................................
Tax credit investments ...........................................................................................
Tax-exempt income ...............................................................................................
Bank owned life insurance ....................................................................................
State income taxes, net of federal benefit ..............................................................
Change in valuation allowance ..............................................................................
Executive compensation ........................................................................................
FDIC Premium ......................................................................................................
Penalties .................................................................................................................
Other, net ...............................................................................................................
Effective income tax rate .......................................................................................
21.0 %
(3.0)
(3.0)
(0.5)
2.6
—
0.1
0.3
—
0.1
17.6 %
21.0 %
(5.7)
(4.9)
(0.7)
1.1
—
—
0.3
0.2
0.7
12.0 %
21.0 %
(4.6)
(3.9)
(0.4)
0.2
1.8
—
—
—
0.2
14.3 %
108
The net DTA recorded by the Corporation is included in other assets and consists of the following tax effects of temporary
differences as of December 31:
Deferred tax assets:
Allowance for credit losses ...................................................................................................... $
Tax credit carryforwards ..........................................................................................................
State loss carryforwards ...........................................................................................................
Lease Liability ........................................................................................................................
Tax credit investments .............................................................................................................
Other accrued expenses ...........................................................................................................
Deferred compensation ............................................................................................................
Stock-based compensation .......................................................................................................
Postretirement and defined benefit plans .................................................................................
Other ........................................................................................................................................
Total gross deferred tax assets .......................................................................................... $
Deferred tax liabilities:
Equipment lease financing ....................................................................................................... $
Right-of-use-asset
Unrealized holding gains on AFS securities ............................................................................
Premises and equipment ..........................................................................................................
MSRs .......................................................................................................................................
Acquisition premiums/discounts .............................................................................................
Intangible assets .......................................................................................................................
Postretirement and defined benefit plans
Other ........................................................................................................................................
Total gross deferred tax liabilities ....................................................................................
Net deferred tax asset, before valuation allowance ..........................................................
Valuation allowance .........................................................................................................
Net deferred tax asset ....................................................................................................... $
2021
2020
(in thousands)
62,465 $
27,192
23,996
21,034
11,203
10,633
9,190
3,499
—
7,348
176,560 $
41,049 $
18,671
10,432
9,151
8,016
5,466
1,272
1,243
13,492
108,792
67,768
(23,996)
43,772 $
67,059
39,294
20,401
—
10,159
9,801
8,486
3,289
1,553
12,107
172,149
44,216
—
23,978
8,876
6,414
5,466
1,205
—
15,811
105,966
66,183
(20,401)
45,782
In assessing the realizability of DTAs, management considers whether it is more likely than not that some or all of the DTAs
will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income and/or capital
gain income during periods in which those temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax planning strategies, such as those that may be
implemented to generate capital gains, in making this assessment.
The valuation allowance relates to state net operating loss carryforwards for which realizability is uncertain. As of
December 31, 2021 and 2020, the Corporation had state net operating loss carryforwards of approximately $306.9 million and
$263.6 million, respectively, which are available to offset future state taxable income, and expire at various dates through 2041.
As of December 31, 2021, based on the level of historical taxable income and projections for future taxable income over the
periods in which the DTAs are deductible, management believes it is more likely than not that the Corporation will realize the
benefits of its DTAs, net of the valuation allowance.
As of December 31, 2021, the Corporation had tax credit carryforwards related to TCIs of approximately $27.2 million. The
Corporation recorded a DTA of $27.2 million, reflecting the benefit of these tax credit carryforwards. Such DTA will begin to
expire in 2041 if not yet utilized.
109
Uncertain Tax Positions
The following table summarizes the changes in unrecognized tax benefits for the years ended December 31:
2021
2020
(in thousands)
2019
Balance at beginning of year .............................................................................................. $
Current period tax positions ...............................................................................................
Lapse of statute of limitations ............................................................................................
Balance at end of year ........................................................................................................ $
2,151 $
120
(598)
1,673 $
2,517 $
95
(461)
2,151 $
2,726
292
(501)
2,517
Virtually all of the Corporation’s unrecognized tax benefits are for positions that are taken on an annual basis on state tax
returns. Increases to unrecognized tax benefits will occur as a result of accruing for the nonrecognition of the position for the
current year.
Decreases will occur as a result of the lapsing of the statute of limitations for the oldest outstanding year which includes the
position. These offsetting increases and decreases are likely to continue in the future, including over the next twelve months.
While the net effect on total unrecognized tax benefits during this period cannot be reasonably estimated, approximately
$0.6 million is expected to reverse in 2022 due to lapsing of the statute of limitations. Decreases can also occur throughout the
settlement of positions with taxing authorities.
As of December 31, 2021, if recognized, all of the Corporation’s unrecognized tax benefits would impact the effective tax rate.
Not included in the table above is $0.4 million of federal income tax benefit on unrecognized state tax benefits which, if
recognized, would also impact the effective tax rate. Interest accrued related to unrecognized tax benefits is recorded as a
component of income tax expense. Penalties, if incurred, would also be recognized in income tax expense. The Corporation
recognized approximately $(75,000) and $(17,000) in 2021 and 2020, respectively, for interest and penalties in income tax
expense related to unrecognized tax positions. As of December 31, 2021 and 2020, total accrued interest and penalties related to
unrecognized tax positions were approximately $0.6 million and $0.7 million, respectively.
The Corporation files income tax returns in the federal and various state jurisdictions. In most cases, unrecognized tax benefits
are related to tax years that remain subject to examination by the relevant taxing authorities. With few exceptions, the
Corporation is no longer subject to federal, state and local examinations by tax authorities for years before 2018.
Tax Credit Investments
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. This amortization includes equity in partnership losses and the systematic
write-down of investments over the period in which income tax credits are earned. 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 as of December 31:
Included in other assets:
2021
2020
( in thousands)
Affordable housing tax credit investments, net ....................................................................... $
161,052 $
152,203
Other tax credit investments, net .............................................................................................
42,987
59,224
Total TCIs, net ............................................................................................................... $
204,039 $
211,427
Included in other liabilities:
Unfunded affordable housing tax credit commitments ........................................................... $
49,364 $
Other tax credit liabilities ........................................................................................................
33,941
Total unfunded tax credit commitments and liabilities ................................................. $
83,305 $
31,562
49,491
81,053
110
The following table presents other information relating to the Corporation's TCIs for the years ended December 31:
2021
2020
2019
( in thousands)
Components of income taxes:
Tax credits and benefits .....................................................................................................
(28,141)
(32,940)
(35,184)
Amortization of tax credits and benefits, net of tax benefits .............................................
17,378
20,429
22,184
Deferred tax expense .........................................................................................................
639
921
954
Total reduction in income tax expense ......................................................................... $ (10,124) $ (11,590) $ (12,046)
Amortization of TCIs:
Total amortization of TCIs ............................................................................................ $
6,187 $
6,126 $
6,021
NOTE 13 – NET INCOME PER COMMON SHARE
Basic net income per common share is calculated as net income available to common shareholders divided by the weighted
average number of shares outstanding.
Diluted net income per common 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 common shares outstanding used to calculate basic and diluted net income per share
follows:
Weighted average common shares outstanding (basic) .........................................
Impact of common stock equivalents ....................................................................
Weighted average common shares outstanding (diluted) ......................................
2021
162,233
1,074
163,307
2020
(in thousands)
162,372
718
163,090
2019
166,902
890
167,792
111
NOTE 14 – SHAREHOLDERS’ EQUITY
Preferred Stock
On October 29, 2020, the Corporation issued 8.0 million depositary shares ("Depositary Shares"), each representing a 1/40th
interest in a share of Fulton’s 5.125% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, of which 200,000 are
authorized and issued, with a liquidation preference of $1,000 per share (equivalent to $25.00 per Depositary Share), for an
aggregate offering amount of $200 million. The preferred stock is redeemable, at the Corporation’s option, in whole or in part,
on and after January 15, 2026, and redeemable in whole, but not in part, prior to January 15, 2026 within 90 days following the
occurrence of a regulatory capital treatment event. The Corporation received net proceeds from the offering of $192.9 million,
after deducting underwriting discounts and commissions and before deducting transaction expenses payable by the Corporation.
Accumulated Other Comprehensive Income (Loss)
The following table presents the components of other comprehensive income (loss) for the years ended December 31:
Before-Tax
Amount
Tax Effect
(in thousands)
Net of Tax
Amount
2021
Unrealized loss on securities ................................................................................................................ $
(23,222)
$
5,274
$
(17,948)
Reclassification adjustment for securities gains included in net income (1)
.........................................
Amortization of net unrealized losses on AFS transferred to HTM (2)
Net unrealized holding loss arising during the period on interest rate swaps used in cash flow
hedges ...................................................................................................................................................
................................................
Reclassification adjustment for net loss realized in net income on interest rate swaps used in cash
flow hedges ..........................................................................................................................................
Unrecognized pension and postretirement income ..............................................................................
Amortization of net unrecognized pension and postretirement items (3)
..............................................
(33,516)
3,485
(2,776)
(3,452)
9,147
1,480
7,611
(795)
629
782
(2,003)
(324)
(25,905)
2,690
(2,147)
(2,670)
7,144
1,156
Total Other Comprehensive Loss ................................................................................................... $
(48,854)
$
11,174
$
(37,680)
2020
Unrealized gain on securities ............................................................................................................... $
85,188
$
(19,537)
$
65,651
Reclassification adjustment for securities gains included in net income (1)
.........................................
Amortization of net unrealized losses on AFS transferred to HTM (2) (4)
.............................................
Unrecognized pension and postretirement income ..............................................................................
Amortization of net unrecognized pension and postretirement items (3)
..............................................
(3,053)
4,360
(3,242)
1,311
694
(912)
710
(291)
Total Other Comprehensive Income............................................................................................... $
84,564
$
(19,336)
$
(2,359)
3,448
(2,532)
1,020
65,228
2019
Unrealized gain on securities ............................................................................................................... $
73,085
$
(16,166)
$
56,919
Reclassification adjustment for securities gains included in net income (1)
.........................................
Amortization of net unrealized losses on AFS transferred to HTM (2)
................................................
Non-credit related unrealized losses on other-than-temporarily impaired debt securities ...................
Unrecognized pension and postretirement income ..............................................................................
Amortization of net unrecognized pension and postretirement items (3)
..............................................
(4,733)
8,070
(873)
(1,203)
1,316
1,047
(1,785)
193
266
(291)
Total Other Comprehensive Income............................................................................................... $
75,662
$
(16,736)
$
(3,686)
6,285
(680)
(937)
1,025
58,926
(1) Amounts reclassified out of AOCI/(loss). Before-tax amounts included in "Investment securities gains, net" on the consolidated statements of income. See
"Note 3 - Investment Securities," for additional details.
(2) Amounts reclassified out of AOCI/(loss). Before-tax amounts included as a reduction to "Interest Income" on the consolidated statements of income. See
"Note 3, - Investment Securities," for additional details.
(3) Amounts reclassified out of AOCI/(loss). Before-tax amounts included in "Salaries and employee benefits" on the consolidated statements of income. See
"Note 13 - Employee Benefit Plans," for additional details.
112
(4) Before-Tax amount includes a $3.7 million reclassification of unrealized loss related to the early adoption of ASU 2019-04, as disclosed in "Note 1 -
Summary of Significant Accounting Policies" from "Amortization of net unrealized losses on AFS securities transferred to HTM" to "Unrealized gain on
securities."
The following table presents changes in each component of accumulated other comprehensive income (loss), net of tax, for the
years ended December 31:
Unrealized
Gains (Losses)
on Investment
Securities
Net Unrealized
(Loss) Gain on
Interest Rate
Swaps used in
Cash Flow
Hedges
Unrecognized
Pension and
Postretirement
Plan Income
(Costs)
(in thousands)
Total
Balance at December 31, 2018 .............................................................................. $
(43,974) $
— $
(15,089) $
(59,063)
Other comprehensive loss before reclassifications ................................................
Amounts reclassified from AOCI (loss) ................................................................
Amortization of net unrealized losses on AFS securities transferred to HTM ......
Balance at December 31, 2019 ..............................................................................
OCI before reclassifications ...................................................................................
Amounts reclassified from AOCI ..........................................................................
Amortization of net unrealized losses on AFS securities transferred to HTM ......
Balance at December 31, 2020 ..............................................................................
OCI before reclassifications ...................................................................................
Amounts reclassified from AOCI ..........................................................................
Amortization of net unrealized losses on AFS securities transferred to HTM ......
56,239
(3,686)
6,285
14,864
65,651
(2,359)
3,448
81,604
(17,948)
(25,905)
2,690
—
—
—
—
—
—
—
—
—
(4,817)
—
(937)
1,025
—
(15,001)
(2,532)
1,020
—
(16,513)
7,144
1,156
—
Balance at December 31, 2021 .............................................................................. $
40,441 $
(4,817) $
(8,213) $
55,302
(2,661)
6,285
(137)
63,119
(1,339)
3,448
65,091
(10,804)
(29,566)
2,690
27,411
Common Stock Repurchase Plans
In February 2021, the Corporation's board of directors approved a share repurchase program pursuant to which the Corporation
is authorized to repurchase up to $75.0 million of its outstanding shares of common stock, or approximately 3.2% of its
outstanding shares, through December 31, 2021. In November 2021, the Corporation's board of directors approved the
extension of this program through March 31, 2022. During 2021, 2.8 million shares were repurchased at a total cost of $43.9
million, or $15.65 per share, under this program. As of December 31, 2021, there was $31.1 million of share repurchase
authorization that may be utilized to repurchase common shares through March 31, 2022 under this program.
In October 2019, the Corporation's board of directors approved a share repurchase program pursuant to which the Corporation
was authorized to repurchase up to $100.0 million of its outstanding shares of common stock, or approximately 3.9% of its
outstanding shares, through December 31, 2020. During the first quarter of 2020, 2.9 million shares were repurchased at a total
cost of $39.7 million, or $13.65 per share, under this program. The repurchase program was suspended in mid-March of 2020 in
order to preserve liquidity in response to potential unknown economic impacts of the COVID-19 pandemic at that time.
In March 2019, the Corporation's board of directors approved a share repurchase program pursuant to which the Corporation
was authorized to repurchase up to $100.0 million of its outstanding shares of common stock, or approximately 3.5% of its
outstanding shares, through December 31, 2019. During 2019, the Corporation repurchased approximately 6.1 million shares
under this program for a total cost of $100.0 million, or $16.28 per share, completing this program.
In November 2018, the Corporation's board of directors approved a share repurchase program pursuant to which the
Corporation was authorized to repurchase up to $75.0 million of its outstanding shares of common stock, or approximately
2.7% of its outstanding shares, through December 31, 2019. During 2019 and 2018, the Corporation repurchased approximately
706,000 and 4.1 million shares, respectively, under this program for a total cost of $75.0 million, or $15.57 per share,
completing this program.
Under these repurchase programs, 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.
113
NOTE 15 – STOCK-BASED COMPENSATION PLANS
The following table presents compensation expense and related tax benefits for all equity awards recognized in the consolidated
statements of income:
2021
2020
(in thousands)
2019
Compensation expense ........................................................................................... $
Tax benefit .............................................................................................................
Total stock-based compensation, net of tax ...................................................... $
9,264 $
(2,027)
7,237 $
8,381 $
(1,790)
6,591 $
7,413
(1,610)
5,803
The tax benefits as a percentage of compensation expense, as shown in the preceding table, were 21.9%, 21.4% and 21.7% in
2021, 2020 and 2019, respectively. These percentages differ from the Corporation’s federal statutory tax rate of 21%. Tax
benefits are only recognized over the vesting period for awards that ordinarily will generate a tax deduction when exercised, in
the case of non-qualified stock options, or upon vesting, in the case of restricted stock, RSUs, and PSUs. Tax benefits in excess
of the tax rate resulted from incentive stock option exercises that triggered a tax deduction when they were exercised, and
excess tax benefits realized on vesting RSUs and PSUs during the period.
The following table provides information about stock option activity for the year ended December 31, 2021:
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(in millions)
Stock
Options
Outstanding and exercisable as of December 31, 2020 ................
Exercised ...............................................................................
Forfeited ................................................................................
Expired ..................................................................................
Outstanding and exercisable as of December 31, 2021 ................
398,307 $
(148,670)
(1,676)
(8,370)
239,591 $
11.39
11.10
11.33
11.24
11.57
1.6 years $
1.3
The following table presents information about stock options exercised:
2021
2020
(dollars in thousands)
2019
Number of options exercised .................................................................................
Total intrinsic value of options exercised .............................................................. $
Cash received from options exercised .................................................................... $
Tax benefit from options exercised ........................................................................ $
148,670
89,725
801 $
1,651 $
155 $
192 $
880 $
37 $
150,296
1,028
1,446
188
Upon exercise, the Corporation issues shares from its authorized, but unissued, common stock to satisfy the options.
The following table provides information about nonvested restricted stock, RSUs and PSUs granted under the Employee Equity
Plan and Directors' Plan for the year ended December 31, 2021:
Restricted Stock/RSUs/PSUs (1)
Shares
1,897,380 $
665,749
(379,193)
(121,197)
2,062,739 $
Weighted
Average
Grant Date
Fair Value
14.07
16.83
16.37
15.78
14.26
Nonvested as of December 31, 2020 ........................................................................................
Granted ..............................................................................................................................
Vested ...............................................................................................................................
Forfeited ............................................................................................................................
Nonvested as of December 31, 2021 ........................................................................................
(1) There were no nonvested stock options at December 31, 2021 or 2020.
114
As of December 31, 2021, there was $12.7 million of total unrecognized compensation cost (pre-tax) related to restricted stock,
RSUs and PSUs that will be recognized as compensation expense over a weighted average period of 1.85 years. As of
December 31, 2021, the Employee Equity Plan had 9.6 million shares reserved for future grants through 2023, and the
Directors’ Plan had 109,000 shares reserved for future grants through 2029.
The fair value of certain PSUs with market-based performance conditions granted under the Employee Equity Plan was
estimated on the grant date using the Monte Carlo valuation methodology performed by a third-party valuation expert. This
valuation is dependent upon certain assumptions, as summarized in the following table:
Risk-free interest rate .............................................................................................
Volatility of Corporation’s stock ...........................................................................
Expected life of PSUs ............................................................................................
2021
0.25 %
42.55 %
3 years
2020
0.25 %
33.10 %
3 years
2019
2.27 %
23.00 %
3 years
The expected life of the PSUs with fair values measured using the Monte Carlo valuation methodology was based on the
defined performance period of three years. Volatility of the Corporation’s stock was based on historical volatility for the period
commensurate with the expected life of the PSUs. The risk-free interest rate is the zero-coupon U.S. Treasury rate
commensurate with the expected life of the PSUs on the date of the grant. Based on the assumptions above, the Corporation
calculated an estimated fair value per PSU with market-based performance conditions granted in 2021, 2020 and 2019 of
$16.94, $10.16 and $16.83, respectively.
Under the ESPP, eligible employees can purchase stock of the Corporation at 85% of the fair market value of the stock on the
date of purchase. The ESPP is considered to be a compensatory plan and, as such, compensation expense is recognized for the
15% discount on shares purchased. The following table summarizes activity under the ESPP:
ESPP shares purchased ..........................................................................................
Average purchase price per share (85% of market value) ..................................... $
Compensation expense recognized (in thousands) ................................................ $
134,156
194,485
13.92 $
329 $
10.02 $
344 $
136,576
14.03
338
2021
2020
2019
NOTE 16 – EMPLOYEE BENEFIT PLANS
The following summarizes retirement plan expense for the years ended December 31:
401(k) Retirement Plan ......................................................................................... $
Pension Plan ..........................................................................................................
Total ................................................................................................................... $
2021
2020
(in thousands)
2019
10,338 $
217
10,555 $
9,853 $
660
10,513 $
8,976
2,484
11,460
The 401(k) Retirement Plan is a defined contribution plan under which eligible employees may defer a portion of their pre-tax
covered compensation on an annual basis, with employer matches of up to 5% of employee compensation. Employee and
employer contributions under these features are 100% vested.
Contributions to the Defined Benefit Pension Plan ("Pension Plan") are actuarially determined and funded annually, if
necessary. The Corporation recognizes the funded status of its Pension Plan on the consolidated balance sheets and recognizes
the changes in that funded status through OCI. The Pension Plan has been curtailed, with no additional benefits accruing to
participants.
115
Pension Plan
The net periodic pension cost for the Pension Plan, as determined by consulting actuaries, consisted of the following
components for the years ended December 31:
Interest cost ............................................................................................................ $
Expected return on assets ......................................................................................
Net amortization and deferral ................................................................................
Net periodic pension cost .................................................................................. $
2,244 $
(4,044)
2,017
217 $
2,726 $
(3,925)
1,859
660 $
3,257
(2,754)
1,981
2,484
2021
2020
(in thousands)
2019
The following table summarizes the changes in the projected benefit obligation and fair value of plan assets for the plan years
ended December 31:
2021
2020
Projected benefit obligation at beginning of year ........................................................................... $
Interest cost .....................................................................................................................................
Benefit payments ............................................................................................................................
Change in assumptions ...................................................................................................................
Experience gain ...............................................................................................................................
Projected benefit obligation at end of year ................................................................................... $
(in thousands)
92,292 $
2,244
(4,272)
(2,613)
(121)
87,530 $
Fair value of plan assets at beginning of year ................................................................................. $
Actual return on plan assets ............................................................................................................
Benefit payments ............................................................................................................................
Fair value of plan assets at end of year ........................................................................................ $
87,177 $
11,210
(4,272)
94,115 $
86,204
2,726
(4,104)
7,532
(66)
92,292
83,676
7,605
(4,104)
87,177
The following table presents the funded status of the Pension Plan, included in other assets and other liabilities on the
consolidated balance sheets, as of December 31:
2021
2020
(in thousands)
Projected benefit obligation ............................................................................................................ $
Fair value of plan assets ..................................................................................................................
Funded status .................................................................................................................................. $
(87,530) $
94,115
6,585 $
(92,292)
87,177
(5,115)
The following table summarizes the changes in the unrecognized net loss included as a component of accumulated other
comprehensive income (loss):
Unrecognized Net Loss
Net of tax
Before tax
Balance as of December 31, 2019 ................................................................................................... $
Recognized as a component of 2020 periodic pension cost ...........................................................
Unrecognized gains arising in 2020 ................................................................................................
Balance as of December 31, 2020 ...................................................................................................
Recognized as a component of 2021 periodic pension cost ...........................................................
Unrecognized losses arising in 2021 ...............................................................................................
Balance as of December 31, 2021 ................................................................................................... $
(in thousands)
23,546 $
(1,859)
3,787
25,474
(2,017)
(9,899)
13,558 $
18,337
(1,452)
2,958
19,843
(1,574)
(7,724)
10,545
116
The following rates were used to calculate the net periodic pension cost and the present value of benefit obligations as of
December 31:
Discount rate-projected benefit obligation ............................................................
Expected long-term rate of return on plan assets ..................................................
2021
2020
2019
2.80 %
5.00 %
2.50 %
5.00 %
3.25 %
5.00 %
The discount rates used were determined using the Citigroup Average Life discount rate table, as adjusted based on the Pension
Plan's expected benefit payments.
The 5.00% long-term rate of return on plan assets used to calculate the net periodic pension cost was based on historical returns,
adjusted for expectations of long-term asset returns based on the December 31, 2021 weighted average asset allocations. The
expected long-term return is considered to be appropriate based on the asset mix and the historical returns realized.
The following table presents a summary of the fair values of the Pension Plan’s assets as of December 31:
2021
2020
Estimated
Fair Value
% of Total
Assets
(dollars in thousands)
Estimated
Fair Value
% of Total
Assets
Equity mutual funds ..................................................................... $
Equity common trust funds ..........................................................
Equity securities ....................................................................
Cash and money market funds .....................................................
Fixed income mutual funds ..........................................................
Corporate debt securities ..............................................................
U.S. Government agency securities .............................................
Fixed income securities and cash .........................................
Other alternative investment funds ..............................................
Total ......................................................................................... $
35,752
19,824
55,576
8,447
15,566
2,733
9,524
36,270
2,269
94,115
$
59.1 %
38.5 %
2.4 %
100.0 % $
37,847
12,450
50,297
9,444
16,134
3,319
6,257
35,154
1,726
87,177
57.7 %
40.3 %
2.0 %
100.0 %
Investment allocation decisions are made by a retirement plan committee. The goal of the investment allocation strategy is to
match certain benefit obligations with maturities of fixed income securities. Alternative investments may include managed
futures, commodities, real estate investment trusts, master limited partnerships, and long-short strategies with traditional stocks
and bonds. All alternative investments are in the form of mutual funds, not individual contracts, to enable daily liquidity.
The fair values for assets held by the Pension Plan are based on quoted prices for identical instruments and would be
categorized as Level 1 assets under the fair value hierarchy.
Estimated future benefit payments are as follows (in thousands):
Year
2022 .......................................................................................................................................................................... $
2023 ..........................................................................................................................................................................
2024 ..........................................................................................................................................................................
2025 ..........................................................................................................................................................................
2026 ..........................................................................................................................................................................
Thereafter ..................................................................................................................................................................
Total ...................................................................................................................................................................... $
4,505
4,595
4,663
4,745
4,839
24,505
47,852
Postretirement Benefits
The Corporation provides medical benefits and life insurance benefits under a postretirement benefits plan ("Postretirement
Plan") to certain retired full-time employees who were employees of the Corporation prior to January 1, 1998. Prior to
February 1, 2014, certain full-time employees became eligible for these discretionary benefits if they reached retirement age
while working for the Corporation. The Corporation recognizes the funded status of the postretirement plan on the consolidated
balance sheets and recognizes the changes in that funded status through OCI.
117
The components of the net benefit for Postretirement Plan other than pensions are as follows:
Interest cost ............................................................................................................ $
Net amortization and deferral ................................................................................
Net postretirement benefit .................................................................................. $
32 $
(536)
(504) $
43 $
(548)
(505) $
61
(556)
(495)
2021
2020
(in thousands)
2019
This table summarizes the changes in the accumulated postretirement benefit obligation for the years ended December 31:
Accumulated postretirement benefit obligation at beginning of year ............................................. $
Interest cost .....................................................................................................................................
Benefit payments ............................................................................................................................
Change in experience ......................................................................................................................
Change in assumptions ...................................................................................................................
Accumulated postretirement benefit obligation at end of year .................................................... $
2021
2020
(in thousands)
1,322 $
32
(167)
71
(14)
1,244 $
1,450
43
(177)
(32)
38
1,322
The fair values of the plan assets were $0 as of both December 31, 2021 and 2020. The funded status of the Postretirement Plan,
included in other liabilities on the consolidated balance sheets as of December 31, 2021 and 2020 was $1.2 million and $1.3
million, respectively. The following table summarizes the changes in items recognized as a component of accumulated other
comprehensive income (loss):
Balance as of December 31, 2019 ....................................................... $
Recognized as a component of 2020 postretirement cost ...................
Unrecognized gains arising in 2020 ....................................................
Balance as of December 31, 2020 .......................................................
Recognized as a component of 2021 postretirement cost ...................
Unrecognized gains arising in 2021 ....................................................
Balance as of December 31, 2021 ....................................................... $
Unrecognized
Prior Service
Cost
Before tax
Unrecognized
Net Loss
(Gain)
(in thousands)
(948) $
84
6
(858)
72
57
(729) $
(3,476) $
464
—
(3,012)
464
—
(2,548) $
Total
Net of tax
(4,424) $
548
6
(3,870)
536
57
(3,277) $
(3,451)
428
5
(3,018)
418
44
(2,556)
The following rates were used to calculate net periodic postretirement benefit cost and the present value of benefit obligations
as of December 31:
Discount rate-projected benefit obligation ............................................................
Expected long-term rate of return on plan assets ..................................................
2021
2020
2019
2.80 %
3.00 %
2.50 %
3.00 %
3.25 %
3.00 %
The discount rates used to calculate the accumulated postretirement benefit obligation were determined using the Citigroup
Average Life discount rate table, as adjusted based on the Postretirement Plan's expected benefit payments.
118
Estimated future benefit payments under the Postretirement Plan are as follows (in thousands):
Year
2022 .......................................................................................................................................................................... $
2023 ..........................................................................................................................................................................
2024 ..........................................................................................................................................................................
2025 ..........................................................................................................................................................................
2026 ..........................................................................................................................................................................
Thereafter ..................................................................................................................................................................
Total ..................................................................................................................................................................... $
160
147
134
123
111
403
1,078
NOTE 17 – LEASES
The Corporation has operating leases for certain financial centers, corporate offices and land.
The following table presents the components of lease expense, which is included in net occupancy expense on the consolidated
statements of income (in thousands):
Operating lease expense ............................................. $
Variable lease expense ...............................................
Sublease income .........................................................
Total lease expense .................................................. $
2021
2020
2019
16,345 $
1,384
(860)
16,869 $
18,481 $
2,830
(749)
20,562 $
18,852
2,924
(791)
20,985
Supplemental consolidated balance sheet information related to leases was as follows as of December 31 (dollars in thousands):
Operating Leases
Balance Sheet Classification
2021
2020
ROU assets ...........................................................
Other assets
Lease liabilities ....................................................
Other liabilities
$
$
Weighted average remaining lease term ..............
Weighted average discount rate ...........................
82,431
92,864
$
$
7.0 years
2.73 %
84,227
96,812
7.5 years
2.96 %
The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which
corresponded with the remaining lease term, as of January 1, 2019, for leases that existed at adoption and as of the lease
commencement or modification date for leases subsequently entered into.
Supplemental cash flow information related to operating leases was as follows (in thousands):
Cash paid for amounts included in the measurement of lease liabilities ................. $
ROU assets obtained in exchange for lease obligations ..........................................
2021
2020
19,611 $
12,588
18,973
2,931
119
Lease payment obligations for each of the next five years and thereafter, with a reconciliation to the Corporation's lease liability
were as follows (in thousands):
Year
Operating Leases
2022 ........................................................................................................................................................... $
2023 ...........................................................................................................................................................
2024 ...........................................................................................................................................................
2025 ...........................................................................................................................................................
2026 ...........................................................................................................................................................
Thereafter ..................................................................................................................................................
Total lease payments ..............................................................................................................................
Less: imputed interest ...............................................................................................................................
Present value of lease liabilities ............................................................................................................ $
19,310
18,086
15,974
14,099
11,648
35,858
114,975
(22,111)
92,864
As of December 31, 2021, the Corporation had not entered into any material leases that have not yet commenced.
NOTE 18 – 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.
Commitments to extend credit are agreements to lend to a customer 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 borrower or obligor. Since a portion of the commitments is expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral, if any, obtained upon extension of credit is based on
management's credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory,
property, equipment and income-producing commercial properties.
Standby letters of credit are conditional commitments issued to guarantee the financial or performance obligation of a customer
to a third party. Commercial letters of credit are conditional commitments issued to facilitate foreign and domestic trade
transactions for customers. The credit risk involved in issuing letters of credit is similar to that involved in extending loan
facilities. These obligations are underwritten consistently 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 commitments, included in other liabilities on the consolidated balance sheets,
which represents management's estimate of losses inherent in commitments to extend credit and letters of credit. See "Note 4 -
Loans and Allowance for Credit Losses," for additional information.
The following table presents the Corporation’s commitments to extend credit and letters of credit:
2021
2020
(in thousands)
Commercial and industrial .............................................................................................................. $ 5,072,008 $ 5,245,041
Real estate - commercial mortgage and real estate - construction ..................................................
1,787,963
Real estate - home equity ................................................................................................................
1,618,051
Total commitments to extend credit ......................................................................................... $ 8,731,168 $ 8,651,055
1,914,238
1,744,922
Standby letters of credit .................................................................................................................. $
Commercial letters of credit ............................................................................................................
Total letters of credit ............................................................................................................... $
298,275 $
54,196
352,471 $
308,168
56,229
364,397
120
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 credit losses related to loans sold to investors. As of December 31, 2021 and
2020, the total reserve for losses on residential mortgage loans sold was $1.1 million, for each period, including reserves for
both representation and warranty and credit loss exposures. With the adoption of CECL on January 1, 2020, the reserve for
estimated losses on certain residential mortgage loans sold to investors was reclassified to ACL - OBS credit exposures. In
addition, a component of ACL - OBS credit exposures of $3.8 million and $5.3 million as of December 31, 2021 and
December 31, 2020, respectively, related to additional credit exposure 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.
Actual losses with respect to any such matter may be more or less than the amount estimated by the Corporation. For matters
where a loss is not probable, or the amount of the loss cannot be reasonably estimated by the Corporation, no loss reserve is
established.
In addition, from time to time, the Corporation is involved in investigations or other forms of regulatory or governmental
inquiry covering a range of possible issues and, in some cases, these may be part of similar reviews of the specified activities of
other companies. These inquiries or investigations could lead to administrative, civil or criminal proceedings involving the
Corporation, and could result in fines, penalties, restitution, other types of sanctions, or the need for the Corporation to
undertake remedial actions, or to alter its business, financial or accounting practices. The Corporation's practice is to cooperate
fully with regulatory and governmental inquiries and investigations.
As of the date of this Report, the Corporation believes that any liabilities, individually or in the aggregate, that may result from
the final outcomes of pending legal proceedings, or regulatory or governmental inquiries or investigations, will not have a
material adverse effect on the financial condition of the Corporation. However, legal proceedings, inquiries and investigations
are often unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to the
Corporation's results of operations in any future period, depending, in part, upon the size of the loss or liability imposed and the
operating results for the period, and could have a material adverse effect on the Corporation's business. In addition, regardless
of the ultimate outcome of any such legal proceeding, inquiry or investigation, any such matter could cause the Corporation to
incur additional expenses, which could be significant, and possibly material, to the Corporation's results of operations in any
future period.
Kress v. Fulton Bank, N.A.
On October 15, 2019, a former Fulton Bank teller supervisor, D. Kress, filed a putative collective and class action lawsuit on
behalf of herself and other teller supervisors, tellers, and other similar non-exempt employees in the U.S. District Court for the
District of New Jersey, D. Kress v. Fulton Bank, N.A., Case No. 1:19-cv-18985. Fulton Bank accepted summons without a
formal service of process on January 20, 2020. The lawsuit alleges that Fulton Bank did not record or otherwise account for the
amount of time D. Kress and putative collective and class members spent conducting branch opening security procedures. The
allegation is that, as a result, Fulton Bank did not properly compensate those employees for their regular and overtime wages.
The lawsuit alleges that by doing so, Fulton violated: (i) the federal Fair Labor Standards Act and seeks back overtime wages
for a period of three years, liquidated damages and attorney fees and costs; (ii) the New Jersey State Wage and Hour Law and
seeks back overtime wages for a period of six years, treble damages and attorney fees and costs; and (iii) the New Jersey Wage
Payment Law and seeks back wages for a period of six years, treble damages and attorney fees and costs. The lawsuit also
asserts New Jersey common law claims seeking compensatory damages and interest. The Corporation and counsel representing
plaintiffs ("Plaintiffs' Counsel") reached and executed a formal Settlement Agreement to resolve this lawsuit. Plaintiffs' Counsel
filed a Motion for Preliminary Approval of Class and Collective Settlement and Provisional Certification of Settlement Class
and Collective ("the Motion") with the U.S. District Court for the District of New Jersey ("the Court"). The Corporation is not
able to provide any assurance that the Court will grant the Motion. If the Court grants the Motion, subject to final approval by
121
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 19 – FAIR VALUE MEASUREMENTS
The following tables present assets and liabilities measured at fair value on a recurring basis and reported on the consolidated
balance sheets:
Loans held for sale ............................................................................................................. $
Available for sale investment securities:
2021
Level 1
Level 2
Level 3
Total
(in thousands)
— $
35,768 $
— $
35,768
U.S. Government securities ......................................................................................
127,618
State and municipal securities ...................................................................................
Corporate debt securities ..........................................................................................
Collateralized mortgage obligations .........................................................................
Residential mortgage-backed securities ....................................................................
Commercial mortgage-backed securities ..................................................................
Auction rate securities ..............................................................................................
—
—
—
—
—
—
—
1,188,670
386,133
209,359
229,795
971,148
—
Total available for sale investment securities ......................................................
127,618
2,985,105
Other assets: .......................................................................................................................
—
—
—
—
—
—
74,667
74,667
127,618
1,188,670
386,133
209,359
229,795
971,148
74,667
3,187,390
Investments held in Rabbi Trust ...............................................................................
Derivative assets ................................................................................................................
28,619
298
—
160,945
—
—
28,619
161,243
Total assets ....................................................................................................... $
156,535 $
3,181,818 $
74,667 $
3,413,020
Other liabilities: .................................................................................................................
Deferred compensation liabilities ...................................................................................... $
28,619 $
— $
Derivative liabilities ..................................................................................................
291
86,110
— $
—
28,619
86,401
Total liabilities ................................................................................................................... $
28,910 $
86,110 $
— $
115,020
Loans held for sale ............................................................................................................. $
Available for sale investment securities:
State and municipal securities ...................................................................................
Corporate debt securities ..........................................................................................
Collateralized mortgage obligations .........................................................................
Residential mortgage-backed securities ....................................................................
Commercial mortgage-backed securities ..................................................................
Auction rate securities ..............................................................................................
Total available for sale investment securities ......................................................
Other assets: .......................................................................................................................
2020
Level 1
Level 2
Level 3
Total
(in thousands)
— $
83,886 $
— $
83,886
—
—
—
—
—
—
—
952,613
367,145
503,766
377,998
762,415
—
2,963,937
—
—
—
—
—
98,206
98,206
952,613
367,145
503,766
377,998
762,415
98,206
3,062,143
Investments held in Rabbi Trust ................................................................................
24,383
—
Derivative assets ................................................................................................................
323
338,987
—
—
24,383
339,310
Total assets ....................................................................................................... $
24,706 $
3,386,810 $
98,206 $
3,509,722
Other liabilities: .................................................................................................................
Deferred compensation liabilities ...................................................................................... $
24,383 $
— $
— $
24,383
Derivative liabilities ..................................................................................................
280
167,505
—
167,785
Total liabilities ................................................................................................................... $
24,663 $
167,505 $
— $
192,168
122
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
December 31, 2021 and 2020, were measured as the price that secondary market investors were offering for loans with similar
characteristics. See "Note 1 - Summary of Significant Accounting Policies" for details related to the Corporation’s election to
measure assets and liabilities at fair value.
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.
U.S. Government sponsored agency securities – These debt securities are classified as Level 2. Fair values are
determined by a third-party pricing service, as detailed above.
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 and senior debt issued by financial
institutions ($383.4 million at December 31, 2021 and $362.8 million at December 31, 2020), single-issuer
trust preferred securities issued by financial institutions (none at December 31, 2021 and at 2020), and other
corporate debt issued by non-financial institutions ($2.8 million at December 31, 2021 and $4.4 million at
December 31, 2020). As noted in "Note 3 - Investment Securities", several corporate debt securities were sold
during 2020. Refer to the specific note for further information.
Level 2 investments include subordinated debt and senior debt, and other corporate debt issued by non-
financial institutions at December 31, 2021 and 2020. The fair values for these corporate debt securities are
determined by a third-party pricing service, as detailed above.
Level 3 investments include ARCs. Due to their illiquidity, ARCs are classified as Level 3 investments 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. The most significant unobservable input to the expected cash flows model
is an assumed return to market liquidity sometime within the next 5 years. If the assumed return to market
liquidity was lengthened beyond the next 5 years, this would result in a decrease in the fair value of these
ARCs. The Corporation believes that the trusts underlying the ARCs will self-liquidate as student loans are
repaid. Level 3 values are tested by management through the performance of a trend analysis of the market
price and discount rate. Changes in the price and discount rates are compared to changes in market data,
including bond ratings, parity ratios, balances and delinquency levels.
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 represents 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 classified as Level 1 assets ($298,000 at December 31,
2021 and $323,000 at December 31, 2020). The mutual funds and foreign exchange prices used to measure these items at fair
value are based on quoted prices for identical instruments in active markets.
Level 2 assets, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward
commitments with secondary market investors ($2.4 million at December 31, 2021 and $8.0 million at December 31, 2020) and
the fair value of interest rate swaps ($158.6 million at December 31, 2021 and $331.0 million at December 31, 2020). The fair
values of the interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to
settle the derivative financial instruments at the balance sheet date. See "Note 10 - Derivative Financial Instruments," for
additional information.
123
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 ($0.3 million at
December 31, 2021 and 2020).
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 ($0.0 million at December 31, 2021 and $2.3 million at December 31, 2020) and
the fair value of interest rate swaps ($86.1 million at December 31, 2021 and $165.2 million at December 31, 2020).
The fair values of these liabilities are determined in the same manner as the related assets, which are described under the
heading "Derivative assets" above.
The following table presents the changes in AFS investment securities measured at fair value on a recurring basis using
unobservable inputs (Level 3) for the years ended December 31:
Single-issuer
Trust Preferred
Securities
ARCs
Balance at December 31, 2019 ................................................................................................ $
Sales ........................................................................................................................................
Unrealized adjustment to fair value (1)
....................................................................................
Discount accretion (2)
...............................................................................................................
Balance at December 31, 2020 ................................................................................................ $
Sales ........................................................................................................................................
Unrealized adjustment to fair value (1)
Discount accretion (2)
Balance at December 31, 2021 ................................................................................................ $
...............................................................................................................
....................................................................................
(in thousands)
2,400 $
(2,160)
(242)
2
— $
—
—
—
— $
101,926
—
(3,720)
—
98,206
(24,619)
1,080
—
74,667
(1) Single-issuer trust preferred securities and ARCs are classified as AFS 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.
Included as a component of "net interest income" on the consolidated statements of income.
(2)
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 instruments measured at fair value on a nonrecurring basis:
Loans, net ..................................................................................................................................... $
OREO ...........................................................................................................................................
MSRs (1)
........................................................................................................................................
Total assets .............................................................................................................................. $
2021
2020
(in thousands)
118,458 $ 116,584
4,178
1,817
35,393
28,245
155,668 $ 149,007
(1) Amounts shown are estimated fair value. MSRs are recorded on the Corporation's consolidated balance sheets at lower of amortized cost or fair value. See
"Note 7 - Mortgage Servicing Rights" for additional information.
The valuation techniques used to measure fair value for the items in the table above are as follows:
•
•
Loans, net – This category consists of loans that were individually evaluated for impairment and have been classified
as Level 3 assets. In 2021, the amount shown is the balance of nonaccrual loans, net of the related ACL. In 2020, the
amount shown is the balance of impaired loans, net of the related ACL See "Note 4 - 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
124
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 December 31, 2021, valuation were 14.6% and 9.0%, respectively. Management
reviews the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See
"Note 7 - Mortgage Servicing Rights," for additional information. Changes in any of those inputs, in isolation, could
result in a significantly different fair value measurement, as depicted in the table below:
Significant Input
Prepayment Rate
Prepayment Rate
Discount Rate
Discount Rate
Scenario Shock
% Change in Valuation
+ 30%
- 30%
- 200 bps
+ 200 bps
(16)%
15%
7%
(7)%
125
The following table details the book values and the estimated fair values of the Corporation’s financial instruments as of
December 31, 2021 and 2020. A general description of the methods and assumptions used to estimate such fair values is also
provided.
2021
Estimated Fair Value
Carrying
Amount
Level 1
57,635
35,768
980,384
3,187,390
18,076,349
57,451
565,491
FINANCIAL ASSETS
Cash and cash equivalents .................................. $ 1,638,614 $ 1,638,614 $
FRB and FHLB stock .........................................
Loans held for sale ............................................
HTM securities ...................................................
AFS securities ...................................................
Net Loans ..........................................................
Accrued interest receivable ................................
Other assets .......................................................
FINANCIAL LIABILITIES
Demand and savings deposits ............................ $ 19,594,497 $ 19,594,497 $
Brokered deposits ...............................................
Time deposits .....................................................
Accrued interest payable ....................................
Short-term borrowings .......................................
Long-term borrowings .......................................
Other liabilities ..................................................
251,526
1,727,476
7,000
416,764
621,345
288,862
—
—
—
127,618
—
57,451
367,336
231,526
—
7,000
416,764
—
188,219
Level 2
(in thousands)
— $
Level 3
Total
57,635
35,768
965,867
2,985,105
—
—
160,945
— $ 1,638,614
57,635
—
35,768
—
965,867
—
3,187,390
74,667
17,519,497
17,519,497
57,451
—
565,491
37,210
— $
20,603
1,730,673
—
—
605,719
86,110
— $ 19,594,497
252,129
—
1,730,673
—
7,000
—
416,764
—
605,719
—
288,862
14,533
2020
Estimated Fair Value
Carrying
Amount
Level 1
92,129
83,886
278,281
3,062,143
18,623,253
72,942
650,425
FINANCIAL ASSETS
Cash and cash equivalents .................................. $ 1,847,832 $ 1,847,832 $
FRB and FHLB stock .........................................
Loans held for sale .............................................
HTM securities ...................................................
AFS securities ....................................................
Net Loans ...........................................................
Accrued interest receivable ................................
Other assets ........................................................
FINANCIAL LIABILITIES
Demand and savings deposits ............................ $ 18,279,358 $ 18,279,358 $
Brokered deposits ...............................................
Time deposits .....................................................
Accrued interest payable ....................................
Short-term borrowings .......................................
Long-term borrowings .......................................
Other liabilities ...................................................
335,185
2,224,664
10,365
630,066
1,296,263
338,747
—
—
—
—
—
72,942
279,015
295,185
—
10,365
630,066
—
156,869
Level 2
(in thousands)
— $
Level 3
Total
92,129
83,886
296,857
2,963,937
—
—
338,987
— $ 1,847,832
92,129
—
83,886
—
296,857
—
3,062,143
98,206
18,354,532
18,354,532
72,942
—
650,425
32,423
— $
41,206
2,246,457
—
—
1,332,041
167,505
— $ 18,279,358
336,391
—
2,246,457
—
10,365
—
630,066
—
1,332,041
—
338,747
14,373
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.
126
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
Cash and cash equivalents
Accrued interest receivable
Liabilities
Demand and savings deposits
Short-term 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 December 31, 2021, 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 consists of demand and saving deposits, which are classified as Level 1, and time deposits, which are
classified as Level 2. The fair value of these deposits are determined in a manner consistent with the respective type of deposits
discussed above.
NOTE 20 – CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY
CONDENSED BALANCE SHEETS
ASSETS
Cash and cash equivalents ................................................................................................................ $
Other assets .......................................................................................................................................
Receivable from subsidiaries ............................................................................................................
Investments in:
December 31,
2021
2020
(in thousands)
352,715 $
25,888
50,822
10,063
28,940
53,438
Bank subsidiary .........................................................................................................................
Non-bank subsidiaries ...............................................................................................................
2,872,274
3,045,529
188,171
313,003
Total Assets ............................................................................................................................. $ 3,489,870 $ 3,450,973
LIABILITIES AND EQUITY
Long-term borrowings ...................................................................................................................... $
620,406 $
759,782
Payable to non-bank subsidiaries ......................................................................................................
Other liabilities .................................................................................................................................
78,793
77,991
Total Liabilities .......................................................................................................................
777,190
—
74,363
834,145
Shareholders’ equity .........................................................................................................................
2,712,680
2,616,828
Total Liabilities and Shareholders’ Equity ............................................................................. $ 3,489,870 $ 3,450,973
127
CONDENSED STATEMENTS OF INCOME
Income:
2021
2020
(in thousands)
2019
Dividends from subsidiaries ........................................................................................ $ 469,339 $ 161,000 $ 209,000
Other (1)
191,978
........................................................................................................................
100
258
Expenses .............................................................................................................................
Income before income taxes and equity in undistributed net income of subsidiaries .
Income tax benefit ..............................................................................................................
469,597
161,100
400,978
58,527
48,634
218,837
411,070
112,466
182,141
(12,516)
(9,679)
(5,798)
423,586
122,145
187,939
Equity in undistributed net income (loss) of:
Bank subsidiary ...........................................................................................................
(133,157) 162,037
44,926
Non-bank subsidiaries .................................................................................................
(14,932) (106,142)
(6,526)
Net Income ...................................................................................................................
Preferred stock dividends ..................................................................................................
226,339
—
Net Income Available to Common Shareholders ......................................................... $ 265,220 $ 175,905 $ 226,339
275,497
178,040
(10,277)
(2,135)
(1) Consists primarily of management fees received from subsidiary banks in 2019 and 2018.
CONDENSED STATEMENTS OF CASH FLOWS
2021
2020
(in thousands)
2019
Cash Flows From Operating Activities:
Net Income ......................................................................................................................... $ 275,497 $ 178,040 $ 226,339
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of issuance costs and discount of long-term debt ....................................
Stock-based compensation .............................................................................................
(Increase) decrease in other assets .................................................................................
Equity in undistributed net income of subsidiaries ........................................................
Write-off of unamortized costs on trust preferred securities .........................................
(Decrease) increase in other liabilities and payable to non-bank subsidiaries ...............
Total adjustments ....................................................................................................
Net cash provided by operating activities ...............................................................
Cash Flows From Investing Activities
Cash Flows From Financing Activities:
1,846
1,128
842
8,402
119,822
7,529
(307,976)
7,413
(20,449)
148,091
(55,895)
(38,400)
12,390
—
—
78,716
(244,598)
1,580
369,267
(599,812)
(49,014)
644,764
—
(421,772) 177,325
—
—
Repayments of long-term borrowings ...........................................................................
Additions to long-term borrowings ................................................................................
Net proceeds from issuance of preferred stock ..............................................................
Net proceeds from issuance of common stock ..............................................................
Dividends paid ...............................................................................................................
Acquisition of treasury stock .........................................................................................
Net cash used in financing activities ......................................................................
Net (Decrease) Increase in Cash and Cash Equivalents ................................................
(153,612) (19,453)
—
—
370,898
192,878
—
—
—
7,437
7,375
6,362
(112,028) (90,956)
(92,330)
(43,909) (39,748) (111,457)
(302,112) 420,994
(197,425)
342,652
(778)
(20,100)
Cash and Cash Equivalents at Beginning of Year .........................................................
30,941
Cash and Cash Equivalents at End of Year ................................................................... $ 352,715 $ 10,063 $ 10,841
10,841
10,063
128
Management Report on Internal Control Over Financial Reporting
The management of Fulton Financial Corporation is responsible for establishing and maintaining adequate internal control over
financial reporting. Fulton Financial Corporation’s internal control system is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2021,
using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control – Integrated Framework (2013). Based on this assessment, management concluded that, as of December 31, 2021, the
Corporation’s internal control over financial reporting is effective based on those criteria.
/s/ E. PHILIP WENGER
E. Philip Wenger
Chairman and Chief Executive Officer
/s/ MARK R. MCCOLLOM
Mark R. McCollom
Senior Executive Vice President
and Chief Financial Officer
129
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Fulton Financial Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Fulton Financial Corporation and subsidiaries (the
Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income,
shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related
notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial
reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the
recognition and measurement of credit losses as of January 1, 2020 due to the adoption of ASU 2016-13, Financial Instruments
– Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
130
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of the allowance for credit losses related to loans evaluated collectively for expected credit losses
As discussed in Notes 1 and 4 to the consolidated financial statements, the Company’s allowance for credit losses
related to loans evaluated collectively for expected credit losses (collective ACL) was $234.9 million, of a total
allowance for credit losses of $249.0 million as of December 31, 2021. The collective ACL includes the measure of
expected credit losses on a collective (pooled) basis for those loans and leases that share similar risk characteristics and
uses an undiscounted approach. The Company estimates the collective ACL by applying a probability of default (PD)
and loss given default (LGD) to the exposure at default (EAD) at the loan level. The PD models are econometric
regression models that utilize the Company’s historical credit loss experience and incorporate a reasonable and
supportable economic forecast through the use of externally developed macroeconomic scenarios. After a reasonable
and supportable forecast period, the forecast of future economic conditions reverts to long-run historical economic
trends. The LGD model calculates a lifetime LGD estimate for each loan pool utilizing a loss rate approach that is
based on the Company’s historical charge-off experience. The EAD calculation incorporates pre-payment rates, and
inputs related to loan level cash flows, maturity dates, and interest rates. The pre-payment rates utilized in the EAD
calculation are sourced from a prepayment model that utilizes the Company’s historical loan prepayment history to
develop prepayment speeds. The collective ACL also includes qualitative reserve adjustments for factors that are not
fully captured in the quantitative models.
We identified the assessment of the valuation of the collective ACL as a critical audit matter. Such assessment
involved significant measurement uncertainty requiring especially complex auditor judgment, and specialized skills
and knowledge of the industry. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence
obtained. The assessment of the collective ACL encompassed the evaluation of the overall ACL methodology, which
includes the methods and models used to estimate PD, LGD, and EAD and their key assumptions and inputs. Key
assumptions and inputs used in the estimation of the PD rate include the historical observation period, loan pool
segmentation including the use of credit risk ratings for commercial and industrial loans, commercial mortgages and
construction loans, and a reasonable and supportable economic forecast which includes reversion to a long run
historical economic trends. Key assumptions and inputs used in the estimation of the LGD rate include the loan pool
segmentation and historical observation period. Key assumptions and inputs used in the estimation of the EAD include
a constant prepayment rate and loan level cash flow adjustments. Key assumptions and inputs used in the estimation of
the constant prepayment rate include interest rates, the historical observation period and loan pool segmentation. The
assessment also included an evaluation of the qualitative adjustments including an evaluation of the methods used by
management in estimating this reserve. The collective ACL estimate is sensitive to changes in the assumption
discussed above such that changes in these assumptions can cause significant changes to the estimate.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the
collective ACL estimate, including controls over the:
•
development of the collective ACL methodology
131
•
•
•
•
development of the PD, LGD, and prepayment models and of the methods used to calculate the EAD
identification and determination of the key inputs and assumptions used in the PD and LGD models, and
EAD calculation which included key inputs and assumptions within the pre-payment model
performance monitoring of the PD, LGD, and prepayment models
development of the qualitative adjustments
• measurement and on-going monitoring of the overall ACL estimate.
We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data,
factors, and assumptions that the Company used, and considered the relevance and reliability of such data,
factors, assumptions, and related methodologies. In addition, we involved credit risk professionals with specialized
skills and knowledge who assisted in:
•
•
•
•
evaluating the Company’s collective ACL methodology for compliance with U.S. generally accepted
accounting principles
evaluating the assumptions and methodologies used in developing the PD rates, LGD rates, and EAD estimate
and judgments made by the Company relative to performance monitoring by inspecting management’s
model and methodology documentation and through comparisons against Company specific metrics, the
Company’s business environment, and applicable industry and regulatory practices
determining whether loans are pooled by similar risk characteristics by comparing to the Company’s business
environment and relevant industry practices
testing individual credit ratings for a selection of borrowers by evaluating the financial performance of the
borrower, sources of repayment, and any relevant guarantees and underlying collateral evaluating the
methodology used to develop the qualitative adjustments by inspecting management’s methodology and
development documentation and assessing the effects of these factors on the collective ACL estimate
compared with relevant industry practices and Company specific metrics.
We also assessed the sufficiency of the audit evidence obtained related to the collective ACL estimate by evaluating
the cumulative results of the audit procedures, qualitative aspects of the Company’s accounting practices, and potential
bias in the accounting estimates.
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
Philadelphia, Pennsylvania
February 28, 2022
132
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure 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 its disclosure controls
and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Corporation’s Chief
Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, 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 the Corporation’s reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and
forms.
The "Management Report on Internal Control over Financial Reporting" and the "Report of Independent Registered Public
Accounting Firm" may be found in Item 8, "Financial Statements and Supplementary Data" of this document.
Changes in Internal Control over Financial Reporting
On April 30, 2021 Michael J. DePorter announced a leave of absence as Controller effective immediately. Mark R. McCollom,
the Senior Executive Vice President and Chief Financial Officer, served as the Interim Principal Accounting Officer upon his
leave. On and effective September 21, 2021, Anthony L. Cossetti was appointed to the position of Executive Vice President,
Chief Accounting Officer and Controller, at which time he assumed the role and responsibilities of Principal Accounting
Officer for SEC reporting purposes.
There were no changes in internal control during the fourth quarter of 2021.
Item 9B. Other Information
Not applicable.
133
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Incorporated by reference herein is the information appearing under the headings "Information about Nominees, Directors and
Independence Standards," "Related Person Transactions," "Section 16(a) Beneficial Ownership Reporting Compliance," "Code
of Conduct," "Procedure for Shareholder Nominations," and "Other Board Committees" within the Corporation’s 2022 Proxy
Statement. The information concerning executive officers required by this Item is provided under the caption "Executive
Officers" within Item 1, Part I, "Business" in this Annual Report.
The Corporation has adopted a code of ethics (Code of Conduct) that applies to all directors, officers and employees, including
the Chief Executive Officer, the Chief Financial Officer and the Corporate Controller. A copy of the Code of Conduct may be
obtained free of charge by writing to the Corporate Secretary at Fulton Financial Corporation, P.O. Box 4887, Lancaster,
Pennsylvania 17604-4887, and is also available via the Internet at www.fultonbank.com.
Item 11. Executive Compensation
Incorporated by reference herein is the information appearing under the headings "Information Concerning Executive
Compensation" and "Human Resources Committee Interlocks and Insider Participation" within the Corporation’s 2022 Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Incorporated by reference herein is the information appearing under the heading "Security Ownership of Directors, Nominees,
Management and Certain Beneficial Owners" within the Corporation’s 2022 Proxy Statement, and information appearing under
the heading "Securities Authorized for Issuance under Equity Compensation Plans" within Item 5, "Market for Registrant’s
Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities" in this Annual Report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Incorporated by reference herein is the information appearing under the headings "Related Person Transactions" and
"Information about Nominees, Directors and Independence Standards" within the Corporation’s 2022 Proxy Statement, and the
information appearing in "Note 4 - Loans and Allowance for Credit Losses," of the Notes to Consolidated Financial Statements
in Item 8, "Financial Statements and Supplementary Data" in this Annual Report.
Item 14. Principal Accounting Fees and Services
Our independent registered accounting firm is KPMG LLP, Philadelphia, PA, Auditor Firm ID: 185.
Incorporated by reference herein is the information appearing under the heading "Relationship With Independent Public
Accountants" within the Corporation’s 2022 Proxy Statement.
134
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this report:
1. Financial Statements — The following consolidated financial statements of Fulton Financial Corporation and
subsidiaries are incorporated herein by reference in response to Item 8 above:
(i) Consolidated Balance Sheets - December 31, 2021 and 2020.
(ii) Consolidated Statements of Income - Years ended December 31, 2021, 2020 and 2019.
(iii) Consolidated Statements of Comprehensive Income - Years ended December 31, 2021, 2020 and 2019.
(iii) Consolidated Statements of Shareholders’ Equity - Years ended December 31, 2021, 2020 and 2019.
(iv) Consolidated Statements of Cash Flows - Years ended December 31, 2021, 2020 and 2019.
(v) Notes to Consolidated Financial Statements.
(vi) Report of Independent Registered Public Accounting Firm.
2. Financial Statement Schedules — All financial statement schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not required under the related instructions or
are inapplicable and have therefore been omitted.
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
Articles of Incorporation, as amended and restated, of Fulton Financial Corporation as amended – Incorporated
by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report Form 8-K filed June 24, 2011.
Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton
Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State - Incorporated
by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29,
2020.
Bylaws of Fulton Financial Corporation as amended – Incorporated by reference to Exhibit 3.1 of the Fulton
Financial Corporation Current Report on a Form 8-K filed May 14, 2021.
An Indenture entered into on November 17, 2014 between Fulton Financial Corporation and Wilmington Trust,
National Association as trustee, relating to the issuance by Fulton Financial Corporation of $250 million
aggregate principal amount of 4.50% subordinated notes due November 15, 2024 – Incorporated by reference to
Exhibit 4.1 of the Fulton Financial Corporation Current Report on Form 8-K filed November 17, 2014.
First Supplemental Indenture entered into on November 17, 2014 between Fulton Financial Corporation and
Wilmington Trust, National Association as trustee, relating to the issuance by Fulton Financial Corporation of
$250 million aggregate principal amount of 4.50% subordinated notes due November 15, 2024 - Incorporated by
reference to Exhibit 4.2 of the Fulton Financial Corporation Current Report on Form 8-K filed November 17,
2014.
Form of 4.50% Subordinated Notes due 2024 (Included in Exhibit 4.2).
Second Supplemental Indenture entered into March 3, 2020, between Fulton Financial Corporation and
Wilmington Trust, National Association, as trustee, relating to the issuance by Fulton Financial Corporation of
$200 million aggregate principal amount of 3.25% subordinated notes due March 15, 2030 - Incorporated by
reference to Exhibit 4.2 of the Fulton Financial Corporation Current Report on Form 8-K filed March 3, 2020.
Form of 3.250% Fixed-to-Floating Rate Subordinated Notes due 2030 (Included in Exhibit 4.4).
Third Supplemental Indenture entered into March 3, 2020, between Fulton Financial Corporation and
Wilmington Trust, National Association, as trustee, relating to the issuance by Fulton Financial Corporation of
$175 million aggregate principal amount of 3.75% subordinated notes due March 15, 2035 - Incorporated by
reference to Exhibit 4.3 of the Fulton Financial Corporation Current Report on Form 8-K filed March 3, 2020.
Form of 3.750% Fixed-to-Floating Rate Subordinated Notes due 2035 (Included in Exhibit 4.6).
An Indenture entered into on March 16, 2017 between Fulton Financial Corporation and Wilmington Trust,
National Association as trustee, relating to the issuance by Fulton Financial Corporation of $125 million
aggregate principal amount of 3.60% senior notes due March 16, 2022 - Incorporated by reference to Exhibit 4.1
of the Fulton Financial Corporation Current Report on Form 8-K filed March 16, 2017.
First Supplemental Indenture entered into on March 16, 2017 between Fulton Financial Corporation and
Wilmington Trust Company as trustee, relating to the issuance by Fulton Financial Corporation of $125 million
aggregate principal amount of 3.60% senior notes due March 16, 2022 - Incorporated by reference to Exhibit 4.2
of the Fulton Financial Corporation Current Report on Form 8-K filed March 16, 2017.
Form of 3.60% Senior Notes due Form of 3.60% Senior Notes due 2022 (Included in Exhibit 4.9).
135
4.11
4.12
4.13
4.14
10.1
10.2
10.2.1
10.3
10.3.1
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton
Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State - Incorporated
by reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29,
2020.
Deposit Agreement, dated October 29, 2020, among Fulton Financial Corporation, Equiniti Trust Company, as
depositary, and the holders from time to time of the depositary receipts described therein - Incorporated by
reference to Exhibit 4.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29,
2020.
Form of depositary receipt representing the Depositary Shares (Included in Exhibit 4.12).
Description of Fulton Financial Corporation Securities - Incorporated by reference to Exhibit 4.7 of the Fulton
Financial Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
Amended Employment Agreement between Fulton Financial Corporation and E. Philip Wenger dated
November 12, 2008 – Incorporated by reference to Exhibit 10.5 of the Fulton Financial Corporation Current
Report on Form 8-K filed November 14, 2008.
Form of Executive Employment Agreement between Fulton Financial Corporation and certain Executive
Officers of Fulton Financial Corporation - Incorporated by reference to Exhibit 10.1 of the Fulton Financial
Corporation Current Report on Form 8-K filed January 4, 2018.
Schedule of Executive Employment Agreements between Fulton Financial Corporation and certain Executive
Officers of Fulton Financial Corporation - Filed herewith.
Form of Key Employee Change in Control Agreement between Fulton Financial Corporation and certain
Executive Officers of Fulton Financial Corporation, Incorporated by reference to Exhibit 10.2 of the Fulton
Financial Corporation Current Report on Form 8-K filed January 4, 2018.
Schedule of Key Employee Change in Control Agreements between Fulton Financial Corporation and certain
Executive Officers of Fulton Financial Corporation - Filed herewith.
Form of Death Benefit Only Agreement to Senior Management - Incorporated by reference to Exhibit 10.9 of the
Fulton Financial Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2006.
Fulton Financial Corporation Amended and Restated Equity and Cash Incentive Compensation Plan –
Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation Current Report on Form 8-K filed
May 3, 2013.
Amendment No. 1 to Fulton Financial Corporation Amended and Restated Equity and Cash Incentive
Compensation Plan - Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2016.
Amendment No. 2 to Fulton Financial Corporation Amended and Restated Equity and Cash Incentive
Compensation Plan - Incorporated by reference to Exhibit 10.9 of the Fulton Financial Corporation Annual
Report on Form 10-K for the fiscal year ended December 31, 2017.
Form of Option Award and Form of Restricted Stock Award under the Fulton Financial Corporation Amended
and Restated Equity and Cash Incentive Compensation Plan between Fulton Financial Corporation and Officers
of the Corporation – Incorporated by reference to Exhibits 10.1 and 10.2, respectively, of the Fulton Financial
Corporation Current Report on Form 8-K filed June 19, 2013.
Amended and Restated Fulton Financial Corporation Employee Stock Purchase Plan – Incorporated by reference
to Exhibit A to Fulton Financial Corporation’s definitive proxy statement, filed March 26, 2014.
Amendment No. 1 to the Amended and Restated Fulton Financial Corporation Employee Stock Purchase Plan -
Incorporated by reference to Exhibit 10.10 of the Fulton Financial Corporation Annual Report on Form 10-K for
the fiscal year ended December 31, 2019.
Fulton Financial Corporation Deferred Compensation Plan, as amended and restated effective December 1, 2015
– Incorporated by reference to Exhibit 10.12 of the Fulton Financial Corporation Annual Report on Form 10-K
for the fiscal year ended December 31, 2015.
First Amendment effective January 1, 2019 to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2019.
Second Amendment effective January 1, 2021 to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.13 of the Fulton Financial Corporation Annual Report on Form 10-K for
the fiscal year ended December 31, 2020.
Third Amendment effective March 11, 2021 to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2021.
Fourth Amendment effective July 20, 2021 to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.2 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2021.
136
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
21
23
24
31.1
31.2
32.1
32.2
101
104
Fifth Amendment, effective January 1, 2022, to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2021.
Forms of Time-Vested Restricted Stock Unit Award Agreement and Performance Share Restricted Stock Unit
Award Agreement between Fulton Financial Corporation and Certain Employees of the Corporation as of March
18, 2014 – Incorporated by reference to Exhibits 10.1 and 10.2, respectively, of the Fulton Financial Corporation
Current Report on Form 8-K filed March 24, 2014.
Fulton Financial Corporation Non-Employee Director Compensation - filed herewith.
Form of Director Stock Unit Award Agreement under the Directors' Equity Participation Plan, as amended -
Incorporated by reference to Exhibit 10.15 of the Fulton Financial Corporation Annual Report on Form 10-K for
the fiscal year ended December 31, 2018.
Fulton Financial Corporation Amended and Restated Directors' Equity Participation Plan – Incorporated by
reference to Exhibit 10.1 of Fulton Financial Corporation’s Current Report on Form 8-K filed May 23, 2019.
Form of Master Confirmation between Fulton Financial Corporation and Goldman, Sachs & Co. - Incorporated
by reference to Exhibit 10.1 of the Fulton Financial Corporation Current Report on Form 8-K filed November 17,
2014.
Agreement between Fulton Financial Corporation and Fiserv Solutions, LLC dated July 11, 2016 - Incorporated
by reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2016. Portions of this exhibit have been redacted and are subject to a confidential
treatment request filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended. The redacted material was filed separately with the Securities and
Exchange Commission.
Amendment to Agreement between Fulton Financial Corporation and Fiserv Solutions, LLC dated December 20,
2021. Portions of this exhibit have been omitted in accordance with Item 601(b)(10) of Regulation S-K. Filed
herewith.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Interactive data files pursuant to Rule 405 of Regulation S-T (i) Consolidated Balance Sheets, (ii) Consolidated
Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of
Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial
Statements.
Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101)
Item 16. Form 10-K Summary
Not applicable.
137
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Dated: February 28, 2022
FULTON FINANCIAL CORPORATION
(Registrant)
By:
/S/ E. PHILIP WENGER
E. Philip Wenger,
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been executed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Capacity
Date
/S/ JENNIFER CRAIGHEAD CAREY
Jennifer Craighead Carey
/S/ LISA CRUTCHFIELD
Lisa Crutchfield
/S/ ANTHONY L. COSSETTI
Anthony L. Cossetti
/S/ DENISE L. DEVINE
Denise L. Devine
/S/ STEVEN S. ETTER
Steven S. Etter
/S/ CARLOS E. GRAUPERA
Carlos E. Graupera
/S/ GEORGE W. HODGES
George W. Hodges
/S/ MARK R. MCCOLLOM
Mark R. McCollom
*
*
*
*
*
*
Director
Director
Executive Vice President, Chief
Accounting Officer and Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Senior Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
138
Signature
Capacity
Date
/S/GEORGE K. MARTIN
George K. Martin
/S/ JAMES R. MOXLEY, III
James R. Moxley, III
/S/ CURTIS J. MYERS
Curtis J. Myers
/S/ SCOTT A. SNYDER
Scott A. Snyder
/S/ RONALD H. SPAIR
Ronald H. Spair
/S/ MARK F. STRAUSS
Mark F. Strauss
/S/ ERNEST J. WATERS
Ernest J. Waters
/S/ E. PHILIP WENGER
E. Philip Wenger
*
*
*
*
*
*
Director
Director
Director, President and Chief
Operating Officer
Director
Director
Director
Director
Chairman and Chief Executive
Officer (Principal Executive
Officer)
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
*By /S/ NATASHA R. LUDDINGTON
February 28, 2022
Natasha R. Luddington
Attorney-in-Fact
139
EXHIBIT INDEX
Exhibits Required Pursuant to Item 601 of Regulation S-K
3.1 Articles of Incorporation, as amended and restated, of Fulton Financial Corporation as amended – Incorporated by
reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report Form 8-K filed June 24, 2011.
3.2
Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton
Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State - Incorporated by
reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020.
3.3 Bylaws of Fulton Financial Corporation as amended – Incorporated by reference to Exhibit 3.1 of the Fulton
Financial Corporation Current Report on a Form 8-K filed May 14, 2021.
4.1 An Indenture entered into on November 17, 2014, between Fulton Financial Corporation and Wilmington Trust,
National Association as trustee, relating to the issuance by Fulton Financial Corporation of $250 million aggregate
principal amount of 4.50% subordinated notes due November 15, 2024 – Incorporated by reference to Exhibit 4.1 of
the Fulton Financial Corporation Current Report on Form 8-K filed November 17, 2014.
4.2
First Supplemental Indenture entered into on November 17, 2014, between Fulton Financial Corporation and
Wilmington Trust, National Association as trustee, relating to the issuance by Fulton Financial Corporation of $250
million aggregate principal amount of 4.50% subordinated notes due November 15, 2024 - Incorporated by reference
to Exhibit 4.2 of the Fulton Financial Corporation Current Report on Form 8-K filed November 17, 2014.
4.3 Form of 4.50% Subordinated Notes due 2024 (Included in Exhibit 4.2).
4.4 Second Supplemental Indenture entered into March 3, 2020, between Fulton Financial Corporation and Wilmington
Trust, National Association, as trustee, relating to the issuance by Fulton Financial Corporation of $200 million
aggregate principal amount of 3.25% subordinated notes due March 15, 2030 - Incorporated by reference to Exhibit
4.2 of the Fulton Financial Corporation Current Report on Form 8-K filed March 3, 2020.
4.5 Form of 3.250% Fixed-to-Floating Rate Subordinated Notes due 2030 (Included in Exhibit 4.4).
4.6 Third Supplemental Indenture entered into March 3, 2020, between Fulton Financial Corporation and Wilmington
Trust, National Association, as trustee, relating to the issuance by Fulton Financial Corporation of $175 million
aggregate principal amount of 3.75% subordinated notes due March 15, 2035 - Incorporated by reference to Exhibit
4.3 of the Fulton Financial Corporation Current Report on Form 8-K filed March 3, 2020.
4.7 Form of 3.750% Fixed-to-Floating Rate Subordinated Notes due 2035 (Included in Exhibit 4.6).
4.8 An Indenture entered into on March 16, 2017, between Fulton Financial Corporation and Wilmington Trust,
National Association as trustee, relating to the issuance by Fulton Financial Corporation of $125 million aggregate
principal amount of 3.60% senior notes due March 16, 2022 - Incorporated by reference to Exhibit 4.1 of the Fulton
Financial Corporation Current Report on Form 8-K filed March 16, 2017.
4.9 First Supplemental Indenture entered into on March 16, 2017, between Fulton Financial Corporation and
Wilmington Trust Company as trustee, relating to the issuance by Fulton Financial Corporation of $125 million
aggregate principal amount of 3.60% senior notes due March 16, 2022 - Incorporated by reference to Exhibit 4.2 of
the Fulton Financial Corporation Current Report on Form 8-K filed March 16, 2017.
4.10 Form of 3.60% Senior Notes due Form of 3.60% Senior Notes due 2022 (Included in Exhibit 4.9).
4.11 Statement with Respect to Shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A of Fulton
Financial Corporation, dated October 23, 2020, filed with the Pennsylvania Department of State - Incorporated by
reference to Exhibit 3.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020.
4.12 Deposit Agreement, dated October 29, 2020, among Fulton Financial Corporation, Equiniti Trust Company, as
depositary, and the holders from time to time of the depositary receipts described therein - Incorporated by reference
to Exhibit 4.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020.
4.13 Form of depositary receipt representing the Depositary Shares (Included in Exhibit 4.12).
4.14 Description of Fulton Financial Corporation Securities - Incorporated by reference to Exhibit 4.7 of the Fulton
Financial Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
10.1 Amended Employment Agreement between Fulton Financial Corporation and E. Philip Wenger dated November 12,
2008 – Incorporated by reference to Exhibit 10.5 of the Fulton Financial Corporation Current Report on Form 8-K
filed November 14, 2008.
10.2 Form of Executive Employment Agreement between Fulton Financial Corporation and certain Executive Officers of
Fulton Financial Corporation - Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation Current
Report on Form 8-K filed January 4, 2018.
10.2.1 Schedule of Executive Employment Agreements between Fulton Financial Corporation and certain Executive
Officers of Fulton Financial Corporation - Filed herewith.
140
10.3 Form of Key Employee Change in Control Agreement between Fulton Financial Corporation and certain Executive
Officers of Fulton Financial Corporation, Incorporated by reference to Exhibit 10.2 of the Fulton Financial
Corporation Current Report on Form 8-K filed January 4, 2018.
10.3.1 Schedule of Key Employee Change in Control Agreements between Fulton Financial Corporation and certain
Executive Officers of Fulton Financial Corporation - Filed herewith.
10.4 Form of Death Benefit Only Agreement to Senior Management - Incorporated by reference to Exhibit 10.9 of the
Fulton Financial Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2006.
10.5 Fulton Financial Corporation Amended and Restated Equity and Cash Incentive Compensation Plan – Incorporated
by reference to Exhibit 10.1 of the Fulton Financial Corporation Current Report on Form 8-K filed May 3, 2013.
10.6 Amendment No. 1 to Fulton Financial Corporation Amended and Restated Equity and Cash Incentive Compensation
Plan - Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2016.
10.7 Amendment No. 2 to Fulton Financial Corporation Amended and Restated Equity and Cash Incentive Compensation
Plan - Incorporated by reference to Exhibit 10.9 of the Fulton Financial Corporation Annual Report on Form 10-K
for the fiscal year ended December 31, 2017.
10.8 Form of Option Award and Form of Restricted Stock Award under the Fulton Financial Corporation Amended and
Restated Equity and Cash Incentive Compensation Plan between Fulton Financial Corporation and Officers of the
Corporation – Incorporated by reference to Exhibits 10.1 and 10.2, respectively, of the Fulton Financial Corporation
Current Report on Form 8-K filed June 19, 2013.
10.9 Amended and Restated Fulton Financial Corporation Employee Stock Purchase Plan – Incorporated by reference to
Exhibit A to Fulton Financial Corporation’s definitive proxy statement, filed March 26, 2014.
10.10 Amendment No. 1 to the Amended and Restated Fulton Financial Corporation Employee Stock Purchase Plan -
Incorporated by reference to Exhibit 10.10 of the Fulton Financial Corporation Annual Report on Form 10-K for the
fiscal year ended December 31, 2019.
10.11 Fulton Financial Corporation Deferred Compensation Plan, as amended and restated effective December 1, 2015 –
Incorporated by reference to Exhibit 10.12 of the Fulton Financial Corporation Annual Report on Form 10-K for the
fiscal year ended December 31, 2015.
10.12 First Amendment effective January 1, 2019 to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2019.
10.13 Second Amendment effective January 1, 2021 to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.13 of the Fulton Financial Corporation Annual Report on Form 10-K for the
fiscal year ended December 31, 2020.
10.14 Third Amendment effective March 11, 2021 to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2021.
10.15 Fourth Amendment effective July 20, 2021 to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.2 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2021.
10.16 Fifth Amendment effective January 1, 2022 to the Fulton Financial Corporation Deferred Compensation Plan -
Incorporated by reference to Exhibit 10.2 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2021.
10.17 Forms of Time-Vested Restricted Stock Unit Award Agreement and Performance Share Restricted Stock Unit Award
Agreement between Fulton Financial Corporation and Certain Employees of the Corporation as of March 18, 2014 –
Incorporated by reference to Exhibits 10.1 and 10.2, respectively, of the Fulton Financial Corporation Current Report
on Form 8-K filed March 24, 2014.
10.18 Fulton Financial Corporation Non-Employee Director Compensation - filed herewith.
10.19 Form of Director Stock Unit Award Agreement under the Directors' Equity Participation Plan, as amended -
Incorporated by reference to Exhibit 10.15 of the Fulton Financial Corporation Annual Report on Form 10-K for the
fiscal year ended December 31, 2018.
10.20 Fulton Financial Corporation Amended and Restated Directors' Equity Participation Plan – Incorporated by reference
to Exhibit 10.1 of Fulton Financial Corporation’s Current Report on Form 8-K filed May 23, 2019.
10.21 Form of Master Confirmation between Fulton Financial Corporation and Goldman, Sachs & Co. - Incorporated by
reference to Exhibit 10.1 of the Fulton Financial Corporation Current Report on Form 8-K filed November 17, 2014.
10.22 Agreement between Fulton Financial Corporation and Fiserv Solutions, LLC dated July 11, 2016 - Incorporated by
reference to Exhibit 10.1 of the Fulton Financial Corporation Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2016. Portions of this exhibit have been redacted and are subject to a confidential treatment
request filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934, as amended. The redacted material was filed separately with the Securities and Exchange Commission.
141
10.23 Amendment to Agreement between Fulton Financial Corporation and Fiserv Solutions, LLC dated December 20,
2021. Portions of this exhibit have been omitted in accordance with Item 601(b)(10) of Regulation S-K. Filed
herewith.
21 Subsidiaries of the Registrant.
23 Consent of Independent Registered Public Accounting Firm.
24 Power of Attorney
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
Interactive data files pursuant to Rule 405 of Regulation S-T (i) Consolidated Balance Sheets, (ii) Consolidated
Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) 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)
142
INVESTOR INFORMATION
Investor Information
Stock Listing
Common shares of Fulton Financial Corporation are
traded under the symbol “FULT” and are listed in the
NASDAQ Global Select Market.
Cash Dividends
The Fulton Financial Corporation Board of Directors
decides whether to declare a quarterly cash
dividend in the third month of each quarter (i.e.,
March, June, September and December).
Dividend Reinvestment Plan
and Direct Deposit of Cash Dividends
Fulton Financial Corporation offers its shareholders
the convenience of a Dividend Reinvestment and
Stock Purchase Plan and direct deposit of cash
dividends.
Holders of stock may have their quarterly dividends
automatically reinvested in additional shares of
the Corporation’s common stock by utilizing the
Dividend Reinvestment Plan.
Shareholders participating in the Plan may also
make voluntary cash contributions not to exceed
$25,000 per month.
In addition, shareholders have the option of having
their cash dividends sent directly to their financial
institution for deposit into their checking or savings
account.
Shareholders may receive information on either the
Dividend Reinvestment Plan and Stock Purchase Plan,
including a plan prospectus, or direct deposit of cash
dividends by writing to:
Stock Transfer Department
Fulton Financial Advisors
P.O. Box 3215
Lancaster, PA 17604-3215
or by calling: 717-291-2546 or
toll-free: 1-800-626-0255.
GO GREEN!
Would you like to help your company manage
expenses? Vote your shares online or by phone as
outlined on the voter instruction form enclosed in
this proxy packet.
Would you like to receive your proxy materials
sooner? Sign up to receive your materials
electronically when you vote your shares online at
www.proxyvote.com.
Investor Information and Documents
A copy of the Corporation’s Annual Report, Form
10-K, Proxy Statement and other documents filed
with the Securities and Exchange Commision can be
viewed on the Corporation’s website at
www.fult.com. In addition, copies of the Form 10-K and
Proxy Statement may be obtained without charge to
shareholders by writing to:
Corporate Secretary
Fulton Financial Corporation
P.O. Box 4887
Lancaster, PA 17604-4887
News, stock information, Corporate presentations
and other information can be found on the
Corporation’s website at www.fultonbank.com.
The Annual Meeting of Shareholders of
Fulton Financial Corporation will be held on
Tuesday, May 17, 2022 at 10:00 a.m. Meeting details
are outlined in the Proxy Statement.
(NASDAQ: FULT)
Customer Service
1.800.FULTON.4
(1.800.385.8664)
Consumer & Business Banking
fultonbank.com
Investor Relations
fultonbank.com
P.O. Box 4887 • One Penn Square • Lancaster, PA 17064-4887