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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)

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

For the quarterly period ended September 30, 2023, or

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

For the transition period from to
Commission File No. 001-39680
FULTON FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Pennsylvania |  |  | 23-2195389
(State or other jurisdiction of incorporation or organization) |  |  | (I.R.S. Employer Identification No.)
One Penn Square | P. O. Box 4887 | Lancaster, | Pennsylvania |  | 17604
(Address of principal executive offices) |  | (Zip Code)

(717) 291-2411
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer |  | ☒ |  | Accelerated filer |  | ☐
Non-accelerated filer |  | ☐ |  | Smaller reporting company |  | ☐
|  |  |  | Emerging growth company |  | ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common Stock, $2.50 Par Value – 164,190,634 s hares outstanding as of October 30, 2023.
1

FULTON FINANCIAL CORPORATION
FORM 10-Q FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2023
INDEX

Description | Page
Glossary of Terms | 3
PART I. FINANCIAL INFORMATION |
Item 1. Financial Statements (Unaudited): |
(a) | Consolidated Balance Sheets - September 30, 2023 and December 31, 2022 | 6
(b) | Consolidated Statements of Income - Three months and n ine months ended September 30, 2023 and 2022 | 7
(c) | Consolidated Statements of Comprehensive Income - Three months and nine months ended September 30, 2023 and 2022 | 8
(d) | Consolidated Statements of Shareholders’ Equity - Three months and nine months ended September 30, 2023 and 2022 | 9
(e) | Consolidated Statements of Cash Flows - Nine months ended September 30, 2023 and 2022 | 10
(f) | Notes to Consolidated Financial Statements | 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 45
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 69
Item 4. Controls and Procedures | 71
PART II. OTHER INFORMATION |
Item 1. Legal Proceedings | 72
Item 1A. Risk Factors | 72
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 72
Item 3. Defaults Upon Senior Securities - (not applicable) |
Item 4. Mine Safety Disclosures - (not applicable) |
Item 5. Other Information | 70
Item 6. Exhibits | 73
Signatures | 74

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

GLOSSARY OF DEFINED ACRONYMS AND TERMS
2023 Repurchase Program |  | The authorization to repurchase up to $100 million of the Corporation's common stock commencing January 1, 2023 and expiring December 31, 2023
ACL |  | Allowance for credit losses
AFS |  | Available for sale
ALCO |  | Asset/Liability Management Committee
AOCI |  | Accumulated other comprehensive (loss) income
ASC |  | Accounting Standards Codification
ASU |  | Accounting Standards Update
BHCA |  | Bank Holding Company Act of 1956, as amended
bp or bps |  | Basis point(s)
Capital Rules |  | Regulatory capital requirements applicable to the Corporation and Fulton Bank
CECL Day 1 Provision |  | Initial provision for credit losses required on non-purchased credit deteriorated loans acquired in the Merger
Corporation or Company |  | Fulton Financial Corporation
COVID-19 |  | Coronavirus
Directors' Plan |  | Amended and Restated Directors’ Equity Participation Plan
Dodd-Frank Act |  | Dodd-Frank Wall Street Reform and Consumer Protection Act
Employee Equity Plan |  | 2022 Amended and Restated Equity and Cash Incentive Compensation Plan
ETR |  | Effective tax rate
Exchange Act |  | Securities Exchange Act of 1934, as amended
FASB |  | Financial Accounting Standards Board
FDIC |  | Federal Deposit Insurance Corporation
Fed Funds Rate |  | Target federal funds rate
Federal Reserve Board |  | Board of Governors of the Federal Reserve System
FHLB |  | Federal Home Loan Bank
FOMC |  | Federal Open Market Committee
Foreign Currency Nostro Accounts |  | Foreign currency with international correspondent banks
FRB |  | Federal Reserve Bank
FTE |  | Fully taxable-equivalent
Fulton Bank or the Bank |  | Fulton Bank, N.A.
GAAP |  | U.S. generally accepted accounting principles
HTM |  | Held to maturity
LIBOR |  | London Interbank Offered Rate
Management's Discussion |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations
Merger |  | The acquisition by the Corporation of Prudential Bancorp that was completed effective as of July 1, 2022
Merger Consideration |  | For each share of Prudential Bancorp common stock, $3.65 in cash and 0.7974 of a share of the Corporation's common stock, with cash paid in lieu of each fractional share of the Corporation's common stock that would otherwise be issued, determined by multiplying such fractional share amount by $18.25
MSRs |  | Mortgage servicing rights
Net loans |  | Loan and lease receivables (net of unearned income)
NIM |  | Net interest margin
N/M |  | Not meaningful
OBS |  | Off-balance-sheet
OCI |  | Other comprehensive income
OREO |  | Other real estate owned

3

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

FORWARD-LOOKING STATEMENTS
The Corporation has made, and may continue to make, certain forward-looking statements with respect to its financial condition, results of operations and business. Do not unduly rely on forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "will," "could," "estimates," "predicts," "potential," "continue," "anticipates," "believes," "plans," "expects," "future," "intends," "projects," the negative of these terms and other comparable terminology. These forward-looking statements may include projections of, or guidance on, the Corporation's future financial performance, expected levels of future expenses, including future credit losses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends in the Corporation's business or financial results.
Forward-looking statements are neither historical facts, nor assurance of future performance. Instead, the statements are based on current beliefs, expectations and assumptions regarding the future of the Corporation's business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Corporation's control, and actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not unduly rely on any of these forward-looking statements. Any forward-looking statement is based only on information currently available and speaks only as of the date when made. The Corporation undertakes no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Many factors could affect future financial results including, without limitation:
•the impact of adverse conditions in the economy and financial markets, including increasing or elevated interest rates, on the performance of the Corporation's loan portfolio and demand for the Corporation's products and services;
•the potential impacts of recent events affecting the financial services industry on the Corporation, including increased competition for, and costs of, deposits and other funding sources, more stringent regulatory requirements relating to liquidity and interest rate risk management and capital adequacy and increased FDIC insurance expenses;
•the effects of actions by the federal government, including those of the Federal Reserve Board and other government agencies, that impact the money supply and market interest rates;
•the effects of market interest rates, and the relative balances of interest rate-sensitive assets to interest rate-sensitive liabilities, on net interest margin and net interest income;
•the effects of changes in interest rates on demand for the Corporation's products and services;
•the replacement of LIBOR as a benchmark reference rate;
•investment securities gains and losses, including other-than-temporary declines in the value of securities which may result in charges to earnings;
•the effects of changes in interest rates or disruptions in liquidity markets on the Corporation's sources of funding;
•capital and liquidity strategies, including the Corporation's ability to comply with applicable capital and liquidity requirements, and the Corporation's ability to generate capital internally or raise capital on favorable terms;
•the effects of competition on deposit rates and growth, loan rates and growth and NIM;
•possible goodwill impairment charges;
•the impact of operational risks, including the risk of human error, inadequate or failed internal processes and systems, computer and telecommunications systems failures, faulty or incomplete data and an inadequate risk management framework;
4

•the loss of, or failure to safeguard, confidential or proprietary information;
•the Corporation's failure to identify and adequately and promptly address cybersecurity risks, including data breaches and cyberattacks;
•the impact of failures from third-party vendors upon which the Corporation relies to perform in accordance with contractual arrangements and the effects of concerns about other financial institutions on the Corporation;
•the potential to incur losses in connection with repurchase and indemnification payments related to sold loans;
•the potential effects of climate change on the Corporation's business and results of operations;
•increases in non-performing assets, which may require the Corporation to increase the allowance for credit losses, charge-off loans and incur elevated collection and carrying costs related to such non-performing assets;
•the determination of the ACL, which depends significantly upon assumptions and judgments with respect to a variety of factors, including the performance of the loan portfolio, the weighted-average remaining lives of different classifications of loans within the loan portfolio and current and forecasted economic conditions, among other factors;
•the effects of the extensive level of regulation and supervision to which the Corporation and Fulton Bank are subject;
•changes in regulation and government policy, which could result in significant changes in banking and financial services regulation;
•the continuing impact of the Dodd-Frank Act on the Corporation's business and results of operations;
•the potential for negative consequences resulting from regulatory violations, investigations and examinations, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to the Corporation's reputation;
•the effects of adverse outcomes in litigation and governmental or administrative proceedings;
•the effects of changes in U.S. federal, state or local tax laws;
•the effects of the significant amounts of time and expense associated with regulatory compliance and risk management;
•completed and potential acquisitions may affect costs and the Corporation may not be able to successfully integrate the acquired business or realize the anticipated benefits from such acquisitions;
•geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, including the war between Russia and Ukraine and escalating conflict in the Middle East, which could impact business and economic conditions in the United States and abroad;
•public health crises and pandemics, including COVID-19 and their effects on the economic and business environments in which the Corporation operates, including on the Corporation's credit quality and business operations, as well as the impact on general economic and financial market conditions;
•the Corporation's ability to achieve its growth plans;
•the Corporation's ability to attract and retain talented personnel;
•the effects of competition from financial service companies and other companies offering bank services;
•the Corporation's ability to keep pace with technological changes;
•the Corporation's reliance on its subsidiaries for substantially all of its revenues and its ability to pay dividends or other distributions;
•the effects of negative publicity on the Corporation's reputation; and
•other factors that may affect future results of the Corporation.
5

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

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

| September 30, 2023 |  | December 31, 2022
| (unaudited) |
ASSETS |  |  |
Cash and due from banks | $ | 304,042 |  |  | $ | 126,898 |
Interest-bearing deposits with other banks | 116,418 |  |  | 555,023 |
Cash and cash equivalents | 420,460 |  |  | 681,921 |
FRB and FHLB stock | 106,363 |  |  | 130,186 |
Loans held for sale | 20,368 |  |  | 7,264 |
Investment securities |  |  |
AFS, at estimated fair value | 2,418,868 |  |  | 2,646,767 |
HTM, at amortized cost | 1,279,733 |  |  | 1,321,256 |
Net loans | 21,177,508 |  |  | 20,279,547 |
Less: ACL - loans | (292,739) |  |  | (269,366) |
Loans, net | 20,884,769 |  |  | 20,010,181 |
Net premises and equipment | 215,626 |  |  | 225,141 |
Accrued interest receivable | 101,624 |  |  | 91,579 |
Goodwill and net intangible assets | 561,284 |  |  | 560,824 |
Other assets | 1,366,082 |  |  | 1,256,583 |
Total Assets | $ | 27,375,177 |  |  | $ | 26,931,702 |
LIABILITIES |  |  |
Deposits: |  |  |
Noninterest-bearing | $ | 5,575,374 |  |  | $ | 7,006,388 |
Interest-bearing | 15,846,215 |  |  | 13,643,150 |
Total Deposits | 21,421,589 |  |  | 20,649,538 |
Borrowings: |  |  |
Federal funds purchased | 544,000 |  |  | 191,000 |
Federal Home Loan Bank advances | 730,000 |  |  | 1,250,000 |
Senior debt and subordinated debt | 540,174 |  |  | 539,634 |
Other borrowings | 555,938 |  |  | 890,573 |
Total borrowings | 2,370,112 |  |  | 2,871,207 |
Accrued interest payable | 26,848 |  |  | 10,185 |
Other liabilities | 989,935 |  |  | 821,015 |
Total Liabilities | $ | 24,808,484 |  |  | $ | 24,351,945 |
SHAREHOLDERS' EQUITY |  |  |
Preferred stock, no par value, 10,000,000 shares authorized; Series A, 200,000 shares authorized and issued as of September 30, 2023 and December 31, 2022, liquidation preference of $1,000 per share | 192,878 |  |  | 192,878 |
Common stock, $2.50 par value, 600,000,000 shares authorized, 225,711,690 shares issued as of September 30, 2023 and 224,604,432 shares issued as of December 31, 2022 | 564,279 |  |  | 561,511 |
Additional paid-in capital | 1,549,279 |  |  | 1,541,840 |
Retained earnings | 1,585,452 |  |  | 1,450,758 |
Accumulated other comprehensive loss | (472,756) |  |  | (385,476) |
Treasury stock, at cost, 61,627,256 shares as of September 30, 2023 and 57,005,339 shares as of December 31, 2022 | (852,439) |  |  | (781,754) |
Total Shareholders' Equity | 2,566,693 |  |  | 2,579,757 |
Total Liabilities and Shareholders' Equity | $ | 27,375,177 |  |  | $ | 26,931,702 |
See Notes to Consolidated Financial Statements |  |  |

6

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(dollars in thousands, except per-share data) | Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Interest Income |  |  |  |  |  |  |
Loans, including fees | $ | 301,659 |  |  | $ | 205,468 |  |  | $ | 847,000 |  |  | $ | 519,375 |
Investment securities | 25,339 |  |  | 25,927 |  |  | 76,221 |  |  | 72,424 |
Other interest income | 3,373 |  |  | 2,296 |  |  | 11,882 |  |  | 5,192 |
Total Interest Income | 330,371 |  |  | 233,691 |  |  | 935,103 |  |  | 596,991 |
Interest Expense |  |  |  |  |  |  |
Deposits | 84,156 |  |  | 10,049 |  |  | 195,576 |  |  | 21,451 |
Federal funds purchased | 8,950 |  |  | 550 |  |  | 24,097 |  |  | 540 |
Federal Home Loan Bank advances | 10,324 |  |  | 1,404 |  |  | 37,623 |  |  | 1,404 |
Senior debt and subordinated debt | 5,344 |  |  | 5,494 |  |  | 16,033 |  |  | 16,921 |
Other borrowings and interest-bearing liabilities | 7,755 |  |  | 612 |  |  | 19,493 |  |  | 952 |
Total Interest Expense | 116,529 |  |  | 18,109 |  |  | 292,822 |  |  | 41,268 |
Net Interest Income | 213,842 |  |  | 215,582 |  |  | 642,281 |  |  | 555,723 |
Provision for credit losses | 9,937 |  |  | 18,958 |  |  | 44,228 |  |  | 13,508 |
Net Interest Income After Provision for Credit Losses | 203,905 |  |  | 196,624 |  |  | 598,053 |  |  | 542,215 |
Non-Interest Income |  |  |  |  |  |  |
Commercial banking | 19,722 |  |  | 20,808 |  |  | 60,380 |  |  | 57,175 |
Wealth management | 19,413 |  |  | 17,610 |  |  | 56,152 |  |  | 55,312 |
Consumer banking | 12,173 |  |  | 13,275 |  |  | 35,110 |  |  | 37,421 |
Mortgage banking | 3,190 |  |  | 3,720 |  |  | 8,100 |  |  | 12,064 |
Other | 1,463 |  |  | 3,802 |  |  | 8,539 |  |  | 10,863 |
Non-Interest Income Before Investment Securities (Losses) Gains | 55,961 |  |  | 59,215 |  |  | 168,281 |  |  | 172,835 |
Investment securities (losses) gains, net | — |  |  | (53) |  |  | 19 |  |  | (26) |
Total Non-Interest Income | 55,961 |  |  | 59,162 |  |  | 168,300 |  |  | 172,809 |
Non-Interest Expense |  |  |  |  |  |  |
Salaries and employee benefits | 96,757 |  |  | 94,283 |  |  | 280,142 |  |  | 264,151 |
Data processing and software | 16,914 |  |  | 15,807 |  |  | 49,486 |  |  | 44,807 |
Net occupancy | 14,561 |  |  | 14,025 |  |  | 43,373 |  |  | 42,134 |
Other outside services | 12,094 |  |  | 9,361 |  |  | 33,054 |  |  | 26,292 |
FDIC insurance | 4,738 |  |  | 3,158 |  |  | 14,427 |  |  | 9,328 |
Equipment | 3,475 |  |  | 3,548 |  |  | 10,395 |  |  | 10,393 |
Marketing | 1,913 |  |  | 1,859 |  |  | 5,454 |  |  | 4,505 |
Professional fees | 1,869 |  |  | 2,373 |  |  | 6,090 |  |  | 6,178 |
Intangible amortization | 601 |  |  | 690 |  |  | 2,347 |  |  | 1,043 |
Merger-related expenses | — |  |  | 7,006 |  |  | — |  |  | 8,434 |
Other | 18,098 |  |  | 17,448 |  |  | 53,888 |  |  | 48,001 |
Total Non-Interest Expense | 171,020 |  |  | 169,558 |  |  | 498,656 |  |  | 465,266 |
Income Before Income Taxes | 88,846 |  |  | 86,228 |  |  | 267,697 |  |  | 249,758 |
Income taxes | 16,749 |  |  | 15,357 |  |  | 47,680 |  |  | 44,610 |
Net Income | 72,097 |  |  | 70,871 |  |  | 220,017 |  |  | 205,148 |
Preferred stock dividends | (2,562) |  |  | (2,562) |  |  | (7,686) |  |  | (7,686) |
Net Income Available to Common Shareholders | $ | 69,535 |  |  | $ | 68,309 |  |  | $ | 212,331 |  |  | $ | 197,462 |
PER SHARE: |  |  |  |  |  |  |
Net income available to common shareholders (basic) | $ | 0.42 |  |  | $ | 0.41 |  |  | $ | 1.28 |  |  | $ | 1.21 |
Net income available to common shareholders (diluted) | 0.42 |  |  | 0.40 |  |  | 1.27 |  |  | 1.20 |
Cash dividends | 0.16 |  |  | 0.15 |  |  | 0.47 |  |  | 0.45 |
See Notes to Consolidated Financial Statements |  |  |  |  |  |  |

7

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(dollars in thousands)

| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Net Income | $ | 72,097 |  |  | $ | 70,871 |  |  | $ | 220,017 |  |  | $ | 205,148 |
Other Comprehensive Income/(Loss), net of tax: |  |  |  |  |  |  |
Unrealized gains (losses) on AFS investment securities |  |  |  |  |  |  |
Net unrealized holding (losses) | (105,050) |  |  | (120,385) |  |  | (103,628) |  |  | (362,596) |
Reclassification adjustment for securities net change realized in net income | — |  |  | (41) |  |  | 14 |  |  | (20) |
Amortization of net unrealized gains (losses) on AFS securities transferred to HTM | 1,494 |  |  | 1,653 |  |  | 4,473 |  |  | (46,024) |
Net unrealized (losses) on AFS investment securities | (103,556) |  |  | (118,773) |  |  | (99,141) |  |  | (408,640) |
Unrealized gains (losses) on interest rate derivatives used in cash flow hedges |  |  |  |  |  |  |
Net unrealized holding gains (losses) | 3,651 |  |  | (22,472) |  |  | (8,755) |  |  | (62,434) |
Reclassification adjustment for net change realized in net income | 6,420 |  |  | 2,483 |  |  | 20,573 |  |  | 641 |
Net unrealized gains (losses) on interest rate derivatives used in cash flow hedges | 10,071 |  |  | (19,989) |  |  | 11,818 |  |  | (61,793) |
Defined benefit pension plan and postretirement benefits |  |  |  |  |  |  |
Amortization of net unrecognized pension and postretirement items | 15 |  |  | 25 |  |  | 43 |  |  | 75 |
Other Comprehensive Loss | (93,470) |  |  | (138,737) |  |  | (87,280) |  |  | (470,358) |
Total Comprehensive Income (Loss) | $ | (21,373) |  |  | $ | (67,866) |  |  | $ | 132,737 |  |  | $ | (265,210) |
See Notes to Consolidated Financial Statements |  |  |  |  |  |  |

8

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(dollars in thousands, except per-share data)

| Preferred Stock |  | Common Stock |  | Additional |  | Retained Earnings |  | Accumulated Other Comprehensive Income (Loss) |  | Treasury Stock |  | Total
| Shares Outstanding |  | Amount |  | Shares Outstanding |  | Amount |  | Paid-in Capital |  |
Three months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at June 30, 2023 | 200 |  |  | $ | 192,878 |  |  | 166,097 |  |  | $ | 564,137 |  |  | $ | 1,545,706 |  |  | $ | 1,542,163 |  |  | $ | (379,286) |  |  | $ | (823,446) |  |  | $ | 2,642,152 |
Net income |  |  |  |  |  |  |  |  |  |  | 72,097 |  |  |  |  |  |  | 72,097 |
Other comprehensive loss |  |  |  |  |  |  |  |  |  |  |  |  | (93,470) |  |  |  |  | (93,470) |
Common stock issued(1) |  |  |  |  | 50 |  |  | 125 |  |  | 529 |  |  |  |  |  |  | 7 |  |  | 661 |
Dividend reinvestment activity |  |  |  |  | 109 |  |  |  |  | (154) |  |  |  |  |  |  | 1,517 |  |  | 1,363 |
Stock-based compensation awards |  |  |  |  | 4 |  |  | 17 |  |  | 3,198 |  |  |  |  |  |  | (26) |  |  | 3,189 |
Acquisition of treasury stock |  |  |  |  | (2,176) |  |  |  |  |  |  |  |  |  |  | (30,491) |  |  | (30,491) |
Preferred stock dividend |  |  |  |  |  |  |  |  |  |  | (2,562) |  |  |  |  |  |  | (2,562) |
Common stock dividends - $0.16 per share |  |  |  |  |  |  |  |  |  |  | (26,246) |  |  |  |  |  |  | (26,246) |
Balance at September 30, 2023 | 200 |  |  | $ | 192,878 |  |  | 164,084 |  |  | $ | 564,279 |  |  | $ | 1,549,279 |  |  | $ | 1,585,452 |  |  | $ | (472,756) |  |  | $ | (852,439) |  |  | $ | 2,566,693 |
Three months ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at June 30, 2022 | 200 |  |  | $ | 192,878 |  |  | 161,057 |  |  | $ | 561,181 |  |  | $ | 1,527,756 |  |  | $ | 1,363,344 |  |  | $ | (304,210) |  |  | $ | (869,856) |  |  | $ | 2,471,093 |
Net income |  |  |  |  |  |  |  |  |  |  | 70,871 |  |  |  |  |  |  | 70,871 |
Other comprehensive loss |  |  |  |  |  |  |  |  |  |  |  |  | (138,737) |  |  |  |  | (138,737) |
Common stock issued(1) |  |  |  |  | 35 |  |  | 88 |  |  | 100 |  |  |  |  |  |  | — |  |  | 188 |
Dividend reinvestment activity |  |  |  |  | 96 |  |  |  |  | 5 |  |  |  |  |  |  | 1,528 |  |  | 1,533 |
Reissuance of treasury stock pursuant to acquisition |  |  |  |  | 6,209 |  |  |  |  | 4,547 |  |  |  |  |  |  | 85,166 |  |  | 89,713 |
Stock-based compensation awards |  |  |  |  | 1 |  |  | 3 |  |  | 4,176 |  |  |  |  |  |  | (10) |  |  | 4,169 |
Preferred stock dividend |  |  |  |  |  |  |  |  |  |  | (2,562) |  |  |  |  |  |  | (2,562) |
Common stock dividends - $0.15 per share |  |  |  |  |  |  |  |  |  |  | (25,109) |  |  |  |  |  |  | (25,109) |
Balance at September 30, 2022 | 200 |  |  | $ | 192,878 |  |  | 167,398 |  |  | $ | 561,272 |  |  | $ | 1,536,584 |  |  | $ | 1,406,544 |  |  | $ | (442,947) |  |  | $ | (783,172) |  |  | $ | 2,471,159 |
Nine months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2022 | 200 |  |  | $ | 192,878 |  |  | 167,599 |  |  | $ | 561,511 |  |  | $ | 1,541,840 |  |  | $ | 1,450,758 |  |  | $ | (385,476) |  |  | $ | (781,754) |  |  | $ | 2,579,757 |
Net income |  |  |  |  |  |  |  |  |  |  | 220,017 |  |  |  |  |  |  | 220,017 |
Other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  | (87,280) |  |  |  |  | (87,280) |
Common stock issued(1) |  |  |  |  | 185 |  |  | 463 |  |  | 2,001 |  |  |  |  |  |  | 27 |  |  | 2,491 |
Dividend reinvestment activity |  |  |  |  | 298 |  |  |  |  | 18 |  |  |  |  |  |  | 4,147 |  |  | 4,165 |
Stock-based compensation awards |  |  |  |  | 589 |  |  | 2,305 |  |  | 5,420 |  |  |  |  |  |  | (3,919) |  |  | 3,806 |
Acquisition of treasury stock |  |  |  |  | (4,587) |  |  |  |  |  |  |  |  |  |  | (70,940) |  |  | (70,940) |
Preferred stock dividend |  |  |  |  |  |  |  |  |  |  | (7,686) |  |  |  |  |  |  | (7,686) |
Common stock dividends - $0.47 per share |  |  |  |  |  |  |  |  |  |  | (77,637) |  |  |  |  |  |  | (77,637) |
Balance at September 30, 2023 | 200 |  |  | $ | 192,878 |  |  | 164,084 |  |  | $ | 564,279 |  |  | $ | 1,549,279 |  |  | $ | 1,585,452 |  |  | $ | (472,756) |  |  | $ | (852,439) |  |  | $ | 2,566,693 |
Nine months ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2021 | 200 |  |  | $ | 192,878 |  |  | 160,490 |  |  | $ | 559,766 |  |  | $ | 1,519,873 |  |  | $ | 1,282,383 |  |  | $ | 27,411 |  |  | $ | (869,631) |  |  | $ | 2,712,680 |
Net income |  |  |  |  |  |  |  |  |  |  | 205,148 |  |  |  |  |  |  | 205,148 |
Other comprehensive loss |  |  |  |  |  |  |  |  |  |  |  |  | (470,358) |  |  |  |  | (470,358) |
Common stock issued(1) |  |  |  |  | 180 |  |  | 450 |  |  | 433 |  |  |  |  |  |  | — |  |  | 883 |
Dividend reinvestment activity |  |  |  |  | 253 |  |  |  |  | 5 |  |  |  |  |  |  | 3,660 |  |  | 3,665 |
Reissuance of treasury stock pursuant to acquisition |  |  |  |  | 6,209 |  |  |  |  | 4,547 |  |  |  |  |  |  | 85,166 |  |  | 89,713 |
Stock-based compensation awards |  |  |  |  | 266 |  |  | 1,056 |  |  | 11,726 |  |  |  |  |  |  | (2,367) |  |  | 10,415 |
Preferred stock dividend |  |  |  |  |  |  |  |  |  |  | (7,686) |  |  |  |  |  |  | (7,686) |
Common stock dividends - $0.45 per share |  |  |  |  |  |  |  |  |  |  | (73,301) |  |  |  |  |  |  | (73,301) |
Balance at September 30, 2022 | 200 |  |  | $ | 192,878 |  |  | 167,398 |  |  | $ | 561,272 |  |  | $ | 1,536,584 |  |  | $ | 1,406,544 |  |  | $ | (442,947) |  |  | $ | (783,172) |  |  | $ | 2,471,159 |
See Notes to Consolidated Financial Statements |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

(1) Issuance of common stock includes issuance in connection with the Corporation’s Employee Stock Purchase Plan and exercised stock options.
9

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands) | Nine months ended September 30
| 2023 |  | 2022
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |
Net income | $ | 220,017 |  |  | $ | 205,148 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Provision for credit losses | 44,228 |  |  | 13,508 |
Depreciation and amortization of premises and equipment | 22,212 |  |  | 22,627 |
Net amortization of investment securities premiums | 8,650 |  |  | 9,823 |
Investment securities (gains) losses, net | (19) |  |  | 26 |
Gain on sales of mortgage loans held for sale | (4,150) |  |  | (7,974) |
Proceeds from sales of mortgage loans held for sale | 260,494 |  |  | 400,797 |
Originations of mortgage loans held for sale | (269,448) |  |  | (371,466) |
Intangible amortization | 2,347 |  |  | 1,043 |
Amortization of issuance costs and discounts on long-term borrowings | 540 |  |  | 551 |
Stock-based compensation | 7,971 |  |  | 10,166 |
Net change in deferred federal income tax | (10,773) |  |  | (148,952) |
Net change in accrued salaries and benefits | (11,232) |  |  | (5,658) |
Net change in life insurance cash surrender value | (23,655) |  |  | (90,234) |
Other changes, net | 173,206 |  |  | 476,961 |
Total adjustments | 200,371 |  |  | 311,218 |
Net cash provided by operating activities | 420,388 |  |  | 516,366 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |
Proceeds from sales of AFS securities | 80,666 |  |  | 196,407 |
Proceeds from principal repayments and maturities of AFS securities | 77,905 |  |  | 546,770 |
Proceeds from principal repayments and maturities of HTM securities | 46,301 |  |  | 90,044 |
Purchase of AFS securities | (72,252) |  |  | (822,216) |
Purchase of HTM securities | — |  |  | (30,959) |
Net change in FRB and FHLB stock | 23,823 |  |  | (24,279) |
Net change in loans | (919,231) |  |  | (819,164) |
Net purchases of premises and equipment | (17,860) |  |  | (10,023) |
Settlement of bank-owned life insurance | 100 |  |  | 2,853 |
Net cash paid for acquisition | — |  |  | (21,796) |
Net change in tax credit investments | (17,945) |  |  | (33,178) |
Net cash used in investing activities | (798,493) |  |  | (925,541) |
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |
Net change in demand and savings deposits | (811,325) |  |  | (420,622) |
Net change in time deposits and brokered deposits | 1,583,376 |  |  | (308,503) |
Net change in other borrowings | (501,635) |  |  | 183,518 |
Repayments of senior debt and subordinated debt | — |  |  | (81,496) |
Net proceeds from issuance of common stock | 2,491 |  |  | 4,792 |
Dividends paid | (85,323) |  |  | (78,413) |
Acquisition of treasury stock | (70,940) |  |  | — |
Net cash provided by (used in) financing activities | 116,644 |  |  | (700,724) |
Net decrease in Cash and Cash Equivalents | (261,461) |  |  | (1,109,899) |
Cash and Cash Equivalents at Beginning of Period | 681,921 |  |  | 1,638,614 |
Cash and Cash Equivalents at End of Period | $ | 420,460 |  |  | $ | 528,715 |
Supplemental Disclosures of Cash Flow Information: |  |  |
Cash paid during the period for: |  |  |
Interest | $ | 276,159 |  |  | $ | 42,529 |
Income taxes | 23,416 |  |  | 22,416 |
Supplemental Schedule of Certain Noncash Activities: |  |  |
Transfer of AFS securities to HTM securities | $ | — |  |  | $ | 479,008 |
See Notes to Consolidated Financial Statements |  |  |

10

FULTON FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of the Corporation have been prepared in conformity with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The Corporation evaluates subsequent events through the date of filing of this Quarterly Report on Form 10-Q with the SEC.
Significant Accounting Policies
The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Corporation's 2022 Annual Report on Form 10-K. Those significant accounting policies are unchanged at September 30, 2023 except for the following:
Effective January 1, 2023, the Corporation adopted ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"), which updated the guidance on modifications to financing receivables by effectively replacing the concept of troubled debt restructurings with a new concept, loan modifications to borrowers experiencing financial difficulty. See Note 5 - "Loans and Allowance for Credit Losses" for further detail. Below is a summary of the policy surrounding loan modifications to borrowers experiencing financial difficulty.
A loan modified for a borrower experiencing financial difficulty includes one or more of the following concessions: a reduction of the stated interest rate of the loan, an extension of the term or amortization period of the loan, a more than insignificant payment delay or principal forgiveness of the loan.
Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the ACL, a change to the ACL is generally not recorded upon modification. When principal forgiveness is provided, the amortized cost basis of the forgiven portion of the loan is written off against the ACL. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis of the loan and a corresponding adjustment to the ACL.
Recently Adopted Accounting Standards
In March 2022, FASB issued ASU 2022-01 Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method ("ASU 2022-01"). This update addresses questions regarding the last-of-layer method arising from the issuance of ASU 2017-12 and permits more flexibility in hedging interest rate risk for both variable-rate and fixed-rate financial instruments and introduces the ability to hedge risk components for non-financial hedges. The Corporation adopted ASU 2022-01 on January 1, 2023 and it did not have a material impact on its consolidated financial statements.
In March 2022, FASB issued ASU 2022-02 Financial Instruments - Credit Losses (Topic 326) ("ASU 2022-02"). This update reduces the complexity of accounting for TDRs by eliminating certain accounting guidance, enhancing disclosures and improving the consistency of vintage disclosures. The Corporation adopted ASU 2022-02 on January 1, 2023 and it did not have a material impact on its consolidated financial statements.
In September 2022, FASB issued ASU 2022-04 Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations ("ASU 2022-04"). This update enhances transparency in the disclosure of supplier finance programs, which previously had no explicit requirements under GAAP. The Corporation adopted ASU 2022-04 on January 1, 2023 and it did not have a material impact on its consolidated financial statements.
11

In December 2022, FASB issued ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. This update extends the sunset provision date of ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") to December 31, 2024. The Corporation will adopt ASU 2020-04 on January 1, 2025. The Corporation does not expect the adoption of ASU 2020-04 to have a material impact on its consolidated financial statements.
In March 2023, FASB issued ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ("ASU 2023-02"). This update allows any tax credit program that meets certain criteria to use the proportional amortization method. The Corporation early adopted ASU 2023-02 using the modified retrospective method effective upon issuance, and it did not have a material impact on its consolidated financial statements.
In July 2023, FASB issued ASU 2023-03 Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC SAB No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and SAB Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock ("ASU 2023-03"). This update amends certain SEC paragraphs from the Codification in response to (1) the issuance of SEC SAB 120; (2) the SEC staff announcement at the March 24, 2022, EITF meeting; and (3) SAB Topic 6.B, "Accounting Series Release No. 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock." ASU 2023-03 does not provide any new guidance so there is no transition or effective date associated with it.
In August 2023, FASB issued ASU 2023-04 Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC SAB No. 121 ("ASU 2023-04"). This update adjusts language in FASB ASC 405-10 to align with SEC SAB No. 121 relating to accounting for obligations to safeguard crypto-assets an entity holds for its platform users. ASU 2023-24 does not provide any new guidance so there is no transition or effective date associated with it. The Corporation currently does not have obligations to safeguard crypto-assets.
Recently Issued Accounting Standards
In June 2022, FASB issued ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"). This update clarifies how the fair value of equity securities subject to contractual sale restrictions is determined and requires additional qualitative and quantitative disclosures for equity securities with contractual sale restrictions. The Corporation will adopt ASU 2022-03 on January 1, 2024. The Corporation does not expect the adoption of ASU 2022-03 to have a material impact on its consolidated financial statements.
In March 2023, FASB issued ASU 2023-01 Leases (Topic 842): Common Control Arrangements ("ASU 2023-01"). This update clarifies guidance for leases between related parties under common control. The Corporation will adopt ASU 2023-01 on January 1, 2024. The Corporation does not expect the adoption of ASU 2023-01 to have a material impact on its consolidated financial statements.
Reclassifications
Certain amounts in the 2022 consolidated financial statements and notes have been reclassified to conform to the 2023 presentation.

NOTE 2 – Business Combinations
On July 1, 2022, the Corporation completed its acquisition of Prudential Bancorp, a Pennsylvania chartered bank holding company headquartered in Philadelphia, Pennsylvania that primarily served the Greater Philadelphia region. On that date, the Corporation acquired 100% of the outstanding common stock of Prudential Bancorp, Prudential Bancorp was merged with and into the Corporation, and Prudential Bancorp's wholly owned subsidiary, Prudential Bank, became a wholly owned subsidiary of the Corporation. The Corporation merged Prudential Bank with and into Fulton Bank in the fourth quarter of 2022. Results of the operations of the acquired entity were included in the Corporation's consolidated financial statements beginning on July 1, 2022. As a result of the Merger, the Corporation enhanced its presence in Philadelphia, Pennsylvania, expanded its customer base and leveraged operating costs through economies of scale.
In accordance with the terms of the definitive merger agreement, each share of Prudential Bancorp's common stock issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive the Merger
12

Consideration. In the aggregate, approximately eighty percent (80%) of the Merger Consideration consisted of the Corporation's common stock with the remaining approximately twenty percent (20%) paid in cash. The receipt of the Corporation’s common stock in the Merger qualified as a tax-free exchange for Prudential Bancorp shareholders.
The acquisition of Prudential Bancorp was accounted for as a business combination using the acquisition method of accounting, and accordingly, the assets acquired, the liabilities assumed, and consideration transferred were recorded at their estimated fair values as of the Merger. The $19.1 million excess of the Merger Consideration over the fair value of assets acquired was recorded as goodwill and is not amortizable or deductible for tax purposes.
The following table summarizes the consideration transferred and the fair values of identifiable assets acquired and liabilities assumed on July 1, 2022:

|  | Fair Value
(dollars in thousands, except share data) |  |
Consideration transferred: |  |
Common stock shares issued (6,208,516) |  | $ | 89,713 |
Cash paid to Prudential Bancorp shareholders |  | 29,343 |
Value of consideration |  | 119,056 |
Assets acquired: |  |
Cash and due from banks |  | 7,533 |
Investment securities |  | 287,126 |
Loans |  | 554,091 |
Premises and equipment |  | 8,574 |
Other assets |  | 73,303 |
Total assets |  | 930,627 |
Liabilities assumed: |  |
Deposits |  | 532,170 |
Borrowings(1) |  | 284,000 |
Other liabilities |  | 14,482 |
Total liabilities |  | 830,652 |
Net assets acquired: |  | 99,975 |
Goodwill resulting from the Merger |  | $ | 19,081 |

(1) Included a $30.5 million intercompany borrowing between Prudential Bank and Fulton Bank.
The amount of goodwill recorded reflects the increased market share and related synergies that are expected to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired from Prudential Bancorp.
13

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

|  | July 1, 2022
|  | Unpaid Principal Balance |  | Fair Value
|  | (dollars in thousands)
Real estate - commercial mortgage |  | $ | 224,904 |  |  | $ | 216,593 |
Commercial and industrial |  | 63,560 |  |  | 61,873 |
Real-estate - residential mortgage |  | 177,327 |  |  | 169,098 |
Real-estate - home equity |  | 6,034 |  |  | 5,812 |
Real-estate - construction |  | 98,963 |  |  | 98,546 |
Consumer |  | 2,306 |  |  | 2,286 |
Total acquired loans |  | $ | 573,094 |  |  | $ | 554,208 |

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

|  | July 1, 2022
|  | (dollars in thousands)
Book balance of loans with deteriorated credit quality at acquisition |  | $ | 27,057 |
Allowance for credit losses at acquisition |  | (1,135) |
Non-credit related discount |  | (130) |
Total purchased credit deteriorated loans |  | $ | 25,792 |

The following table presents the change in goodwill during the nine months ended September 30, 2023:

| September 30,
| 2023
| (dollars in thousands)
Goodwill at December 31, 2022 | $ | 550,539 |
Adjustments to goodwill from the Merger | 2,807 |
Goodwill at September 30, 2023 | $ | 553,346 |

14

Pro Forma Income Statement (unaudited)
The table below presents the pro forma results of the operations of the combined institutions as if the Merger occurred on January 1, 2022. The pro forma income statement adjustments are limited to the effects of fair value mark amortization and accretion and intangible asset amortization and do not consider future cost savings the Corporation expects to achieve subsequent to the merger of Prudential Bank with and into the Bank.

| Nine months ended September 30 |  |
| 2023 |  | 2022 |  |  |  |
| (dollars in thousands)
Net interest income | $ | 642,281 |  |  | $ | 575,996 |  |  |  |  |
Provision for credit losses | 44,228 |  |  | 19,528 |  |  |  |  |
Net Interest Income After Provision for Credit Losses | 598,053 |  |  | 556,468 |  |  |  |  |
Total noninterest income | 168,300 |  |  | 177,733 |  |  |  |  |
Total noninterest expenses | 498,656 |  |  | 494,671 |  |  |  |  |
Income Before Income Taxes | 267,697 |  |  | 239,530 |  |  |  |  |
Income tax expense | 47,680 |  |  | 41,825 |  |  |  |  |
Net Income | $ | 220,017 |  |  | $ | 197,705 |  |  |  |  |

NOTE 3 – Restrictions on Cash and Cash Equivalents
Cash collateral is posted by the Corporation with counterparties to secure derivatives and other contracts, which is included in "interest-bearing deposits with other banks" on the consolidated balance sheets. The amounts of such collateral as of September 30, 2023 and December 31, 2022 were $12.1 million and $13.9 million, respectively.
NOTE 4 – Investment Securities
The following table presents the amortized cost and estimated fair values of investment securities for the periods presented:

| September 30, 2023
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Available for Sale | (dollars in thousands)
U.S. Government securities | $ | 225,244 |  |  | $ | — |  |  | $ | (2,798) |  |  | $ | 222,446 |
U.S. Government-sponsored agency securities | 1,041 |  |  | — |  |  | (54) |  |  | 987 |
State and municipal securities | 1,203,732 |  |  | — |  |  | (254,586) |  |  | 949,146 |
Corporate debt securities | 479,941 |  |  | 320 |  |  | (51,777) |  |  | 428,484 |
Collateralized mortgage obligations | 127,845 |  |  | — |  |  | (15,628) |  |  | 112,217 |
Residential mortgage-backed securities | 228,431 |  |  | 5 |  |  | (39,161) |  |  | 189,275 |
Commercial mortgage-backed securities | 632,334 |  |  | — |  |  | (116,021) |  |  | 516,313 |
Total | $ | 2,898,568 |  |  | $ | 325 |  |  | $ | (480,025) |  |  | $ | 2,418,868 |
Held to Maturity |  |  |  |  |  |  |
Residential mortgage-backed securities | $ | 418,362 |  |  | $ | — |  |  | $ | (73,552) |  |  | $ | 344,810 |
Commercial mortgage-backed securities | 861,371 |  |  | — |  |  | (186,337) |  |  | 675,034 |
Total | $ | 1,279,733 |  |  | $ | — |  |  | $ | (259,889) |  |  | $ | 1,019,844 |

15

| December 31, 2022
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Available for Sale | (dollars in thousands)
U.S. Government securities | $ | 226,140 |  |  | $ | — |  |  | $ | (7,655) |  |  | $ | 218,485 |
U.S. Government-sponsored agency securities | 1,050 |  |  | — |  |  | (42) |  |  | 1,008 |
State and municipal securities | 1,284,245 |  |  | 283 |  |  | (178,816) |  |  | 1,105,712 |
Corporate debt securities | 459,792 |  |  | — |  |  | (37,483) |  |  | 422,309 |
Collateralized mortgage obligations | 147,155 |  |  | — |  |  | (13,122) |  |  | 134,033 |
Residential mortgage-backed securities | 242,527 |  |  | 18 |  |  | (29,847) |  |  | 212,698 |
Commercial mortgage-backed securities | 631,604 |  |  | — |  |  | (79,082) |  |  | 552,522 |
Total | $ | 2,992,513 |  |  | $ | 301 |  |  | $ | (346,047) |  |  | $ | 2,646,767 |
Held to Maturity |  |  |  |  |  |  |
Residential mortgage-backed securities | $ | 457,325 |  |  | $ | — |  |  | $ | (57,480) |  |  | $ | 399,845 |
Commercial mortgage-backed securities | 863,931 |  |  | — |  |  | (138,727) |  |  | 725,204 |
Total | $ | 1,321,256 |  |  | $ | — |  |  | $ | (196,207) |  |  | $ | 1,125,049 |

On May 1, 2022, the Corporation transferred certain residential mortgage-backed securities and commercial mortgage-backed securities from AFS to HTM classification as permitted by ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The estimated fair value of the securities transferred was $415.2 million, and the amortized cost of the securities was $479.0 million.
Securities carried at $0.8 billion and $1.1 billion at September 30, 2023 and December 31, 2022, respectively, were pledged as collateral to secure public and trust deposits.
The amortized cost and estimated fair values of debt securities as of September 30, 2023, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without call or prepayment penalties.

|  | September 30, 2023
|  | Available for Sale |  | Held to Maturity
|  | Amortized Cost |  | Estimated Fair Value |  | Amortized Cost |  | Estimated Fair Value
| (dollars in thousands)
Due in one year or less |  | $ | 231,703 |  |  | $ | 228,876 |  |  | $ | — |  |  | $ | — |
Due from one year to five years |  | 111,296 |  |  | 106,291 |  |  | — |  |  | — |
Due from five years to ten years |  | 550,997 |  |  | 487,118 |  |  | — |  |  | — |
Due after ten years |  | 1,015,962 |  |  | 778,778 |  |  | — |  |  | — |
|  | 1,909,958 |  |  | 1,601,063 |  |  | — |  |  | — |
Residential mortgage-backed securities(1) |  | 228,431 |  |  | 189,275 |  |  | 418,362 |  |  | 344,810 |
Commercial mortgage-backed securities(1) |  | 632,334 |  |  | 516,313 |  |  | 861,371 |  |  | 675,034 |
Collateralized mortgage obligations(1) |  | 127,845 |  |  | 112,217 |  |  | — |  |  | — |
Total |  | $ | 2,898,568 |  |  | $ | 2,418,868 |  |  | $ | 1,279,733 |  |  | $ | 1,019,844 |

(1) Maturities for mortgage-backed securities and collateralized mortgage obligations are dependent upon the interest rate environment and prepayments on the
underlying loans.
16

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

| Gross Realized Gains |  | Gross Realized Losses |  |  |  | Net Gains (Losses)
Three months ended | (dollars in thousands)
September 30, 2023 | $ | — |  |  | $ | — |  |  |  |  | $ | — |
September 30, 2022 | 33 |  |  | (86) |  |  |  |  | (53) |
Nine months ended |  |  |  |  |  |  |
September 30, 2023 | $ | 283 |  |  | $ | (264) |  |  |  |  | $ | 19 |
September 30, 2022 | 1,587 |  |  | (1,613) |  |  |  |  | (26) |

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

|  |  | September 30, 2023
|  |  | Less than 12 months |  |  |  | 12 months or longer |  | Total
|  |  | Estimated Fair Value |  | Unrealized Losses |  |  |  | Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses
Available for Sale |  |  | (dollars in thousands)
U.S. Government securities |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 222,446 |  |  | $ | (2,798) |  |  | $ | 222,446 |  |  | $ | (2,798) |
U.S. Government-sponsored agency securities |  |  | 987 |  |  | (54) |  |  |  |  | — |  |  | — |  |  | 987 |  |  | (54) |
State and municipal securities |  |  | 138,638 |  |  | (13,674) |  |  |  |  | 807,811 |  |  | (240,912) |  |  | 946,449 |  |  | (254,586) |
Corporate debt securities |  |  | 118,791 |  |  | (10,241) |  |  |  |  | 300,480 |  |  | (41,536) |  |  | 419,271 |  |  | (51,777) |
Collateralized mortgage obligations |  |  | 10,292 |  |  | (1,397) |  |  |  |  | 101,925 |  |  | (14,231) |  |  | 112,217 |  |  | (15,628) |
Residential mortgage-backed securities |  |  | 32,935 |  |  | (4,272) |  |  |  |  | 155,351 |  |  | (34,889) |  |  | 188,286 |  |  | (39,161) |
Commercial mortgage-backed securities |  |  | 67,258 |  |  | (6,622) |  |  |  |  | 449,055 |  |  | (109,399) |  |  | 516,313 |  |  | (116,021) |
Total available for sale |  |  | $ | 368,901 |  |  | $ | (36,260) |  |  |  |  | $ | 2,037,068 |  |  | $ | (443,765) |  |  | $ | 2,405,969 |  |  | $ | (480,025) |
Held to Maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 344,810 |  |  | $ | (73,552) |  |  | $ | 344,810 |  |  | $ | (73,552) |
Commercial mortgage-backed securities |  |  | — |  |  | — |  |  |  |  | 675,034 |  |  | (186,337) |  |  | 675,034 |  |  | (186,337) |
Total held to maturity |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 1,019,844 |  |  | $ | (259,889) |  |  | $ | 1,019,844 |  |  | $ | (259,889) |

17

|  |  | December 31, 2022
|  |  | Less than 12 months |  |  | 12 months or longer |  | Total
|  |  | Estimated Fair Value |  | Unrealized Losses |  |  |  | Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses
Available for Sale |  |  | (dollars in thousands)
U.S. Government Securities |  |  | $ | 96,906 |  |  | $ | (2,814) |  |  |  |  | $ | 121,579 |  |  | $ | (4,841) |  |  | $ | 218,485 |  |  | $ | (7,655) |
U.S. Government sponsored agency securities |  |  | 1,008 |  |  | (42) |  |  |  |  | — |  |  | — |  |  | 1,008 |  |  | (42) |
State and municipal securities |  |  | 995,122 |  |  | (157,397) |  |  |  |  | 61,089 |  |  | (21,419) |  |  | 1,056,211 |  |  | (178,816) |
Corporate debt securities |  |  | 376,398 |  |  | (31,333) |  |  |  |  | 37,157 |  |  | (6,150) |  |  | 413,555 |  |  | (37,483) |
Collateralized mortgage obligations |  |  | 113,191 |  |  | (7,650) |  |  |  |  | 20,842 |  |  | (5,472) |  |  | 134,033 |  |  | (13,122) |
Residential mortgage-backed securities |  |  | 154,861 |  |  | (18,301) |  |  |  |  | 55,293 |  |  | (11,546) |  |  | 210,154 |  |  | (29,847) |
Commercial mortgage-backed securities |  |  | 371,109 |  |  | (38,845) |  |  |  |  | 181,413 |  |  | (40,237) |  |  | 552,522 |  |  | (79,082) |
Total available for sale |  |  | $ | 2,108,595 |  |  | $ | (256,382) |  |  |  |  | $ | 477,373 |  |  | $ | (89,665) |  |  | $ | 2,585,968 |  |  | $ | (346,047) |
Held to Maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed securities |  |  | $ | 246,667 |  |  | $ | (14,275) |  |  |  |  | $ | 153,178 |  |  | $ | (43,205) |  |  | $ | 399,845 |  |  | $ | (57,480) |
Commercial mortgage-backed securities |  |  | 258,255 |  |  | (24,029) |  |  |  |  | 466,949 |  |  | (114,698) |  |  | 725,204 |  |  | (138,727) |
Total held to maturity |  |  | $ | 504,922 |  |  | $ | (38,304) |  |  |  |  | $ | 620,127 |  |  | $ | (157,903) |  |  | $ | 1,125,049 |  |  | $ | (196,207) |

The Corporation's collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The change in fair value of these securities is attributable to changes in interest rates and not credit quality. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. Therefore, the Corporation does not have an ACL for these investments as of September 30, 2023 and December 31, 2022.
As of September 30, 2023 and December 31, 2022, no ACL was required for the Corporation's state and municipal securities. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.
As of September 30, 2023 and December 31, 2022, no ACL was required for the Corporation’s corporate debt securities. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.
18

NOTE 5 - Loans and Allowance for Credit Losses
Loans and leases, net of unearned income
Loans and leases, net of unearned income, are summarized as follows:

| September 30, 2023 |  | December 31, 2022
| (dollars in thousands)
Real estate - commercial mortgage | $ | 8,106,300 |  |  | $ | 7,693,835 |
Commercial and industrial(1) | 4,577,334 |  |  | 4,473,004 |
Real-estate - residential mortgage | 5,279,681 |  |  | 4,737,279 |
Real-estate - home equity | 1,045,438 |  |  | 1,102,838 |
Real-estate - construction | 1,078,263 |  |  | 1,269,925 |
Consumer | 743,976 |  |  | 699,179 |
Leases and other loans(2) | 346,516 |  |  | 303,487 |
Net loans | $ | 21,177,508 |  |  | $ | 20,279,547 |

(1) Includes unearned income of $1.1 million and $4.5 million at September 30, 2023 and December 31, 2022, respectively.
(2) Includes unearned income of $37.5 million and $24.8 million at September 30, 2023 and December 31, 2022, respectively.
The Corporation segments its loan portfolio by "portfolio segments," as presented in the table above. Certain portfolio segments are further disaggregated by "class segment" for the purpose of estimating credit losses.
Allowance for Credit Losses
The ACL consists of loans evaluated collectively and individually for expected credit losses. The ACL 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 is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries. The reserve for OBS credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures.
The following table summarizes the ACL - loans balance and the reserve for OBS credit exposures balance as of September 30, 2023 and December 31, 2022:

| September 30, 2023 |  | December 31, 2022
| (dollars in thousands)
ACL - loans | $ | 292,739 |  |  | $ | 269,366 |
Reserve for OBS credit exposures(1) | $ | 16,110 |  |  | $ | 16,328 |

(1) Included in other liabilities on the consolidated balance sheets.
19

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

| Three months ended September 30 | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (dollars in thousands)
Balance at beginning of period | $ | 287,442 |  |  | $ | 248,564 |  |  | $ | 269,366 |  |  | $ | 249,001 |
CECL Day 1 Provision expense | — |  |  | 7,954 |  |  | — |  |  | 7,954 |
Initial purchased credit deteriorated loans | — |  |  | 1,135 |  |  | — |  |  | 1,135 |
Loans charged off | (7,279) |  |  | (3,724) |  |  | (28,969) |  |  | (7,242) |
Recoveries of loans previously charged off | 2,181 |  |  | 3,272 |  |  | 7,896 |  |  | 11,593 |
Net loans (charged off) recovered | (5,098) |  |  | (452) |  |  | (21,073) |  |  | 4,351 |
Provision for credit losses(1) | 10,395 |  |  | 9,637 |  |  | 44,446 |  |  | 4,397 |
Balance at end of period | $ | 292,739 |  |  | $ | 266,838 |  |  | $ | 292,739 |  |  | $ | 266,838 |
Provision for OBS credit exposures | $ | (458) |  |  | $ | 1,367 |  |  | $ | (218) |  |  | $ | 1,157 |
Reserve for OBS credit exposures | $ | 16,110 |  |  | $ | 16,074 |  |  | $ | 16,110 |  |  | $ | 16,074 |

(1) Provision included in the table only includes the portion related to net loans.
20

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

| Real Estate Commercial Mortgage |  | Commercial and Industrial |  | Real Estate Residential Mortgage |  | Consumer and Home Equity |  | Real Estate Construction |  | Leases and other loans |  | Total
| (dollars in thousands)
Three months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at June 30, 2023 | $ | 72,302 |  |  | $ | 75,189 |  |  | $ | 88,849 |  |  | $ | 28,982 |  |  | $ | 11,144 |  |  | $ | 10,976 |  |  | $ | 287,442 |
Loans charged off | (860) |  |  | (3,220) |  |  | — |  |  | (1,803) |  |  | — |  |  | (1,396) |  |  | (7,279) |
Recoveries of loans previously charged off | 101 |  |  | 620 |  |  | 37 |  |  | 1,023 |  |  | — |  |  | 400 |  |  | 2,181 |
Net loans (charged off) recovered | (759) |  |  | (2,600) |  |  | 37 |  |  | (780) |  |  | — |  |  | (996) |  |  | (5,098) |
Provision for loan losses(1) | 2,403 |  |  | 9,766 |  |  | (2,685) |  |  | 1,873 |  |  | (2,873) |  |  | 1,911 |  |  | 10,395 |
Balance at September 30, 2023 | $ | 73,946 |  |  | $ | 82,355 |  |  | $ | 86,201 |  |  | $ | 30,075 |  |  | $ | 8,271 |  |  | $ | 11,891 |  |  | $ | 292,739 |
Three months ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at June 30, 2022 | $ | 72,605 |  |  | $ | 72,119 |  |  | $ | 61,635 |  |  | $ | 23,080 |  |  | $ | 10,628 |  |  | $ | 8,497 |  |  | $ | 248,564 |
CECL Day 1 Provision expense | 4,107 |  |  | — |  |  | 3,716 |  |  | 131 |  |  | — |  |  | — |  |  | 7,954 |
Initial purchased credit deteriorated loans | 1,051 |  |  | — |  |  | 77 |  |  | 7 |  |  | — |  |  | — |  |  | 1,135 |
Loans charged off | (86) |  |  | (1,783) |  |  | — |  |  | (1,172) |  |  | — |  |  | (683) |  |  | (3,724) |
Recoveries of loans previously charged off | 29 |  |  | 2,213 |  |  | 101 |  |  | 682 |  |  | — |  |  | 247 |  |  | 3,272 |
Net loans (charged off) recovered | (57) |  |  | 430 |  |  | 101 |  |  | (490) |  |  | — |  |  | (436) |  |  | (452) |
Provision for loan and lease losses(1) | 11,144 |  |  | (6,424) |  |  | 1,880 |  |  | 1,812 |  |  | 1,045 |  |  | 180 |  |  | 9,637 |
Balance at September 30, 2022 | $ | 88,850 |  |  | $ | 66,125 |  |  | $ | 67,409 |  |  | $ | 24,540 |  |  | $ | 11,673 |  |  | $ | 8,241 |  |  | $ | 266,838 |
Nine months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2022 | $ | 69,456 |  |  | $ | 70,116 |  |  | $ | 83,250 |  |  | $ | 26,429 |  |  | $ | 10,743 |  |  | $ | 9,372 |  |  | $ | 269,366 |
Loans charged off | (14,452) |  |  | (5,849) |  |  | (62) |  |  | (5,322) |  |  | — |  |  | (3,284) |  |  | (28,969) |
Recoveries of loans previously charged off | 916 |  |  | 2,694 |  |  | 143 |  |  | 2,643 |  |  | 771 |  |  | 729 |  |  | 7,896 |
Net loans (charged off) recovered | (13,536) |  |  | (3,155) |  |  | 81 |  |  | (2,679) |  |  | 771 |  |  | (2,555) |  |  | (21,073) |
Provision for loan losses(1) | 18,026 |  |  | 15,394 |  |  | 2,870 |  |  | 6,325 |  |  | (3,243) |  |  | 5,074 |  |  | 44,446 |
Balance at September 30, 2023 | $ | 73,946 |  |  | $ | 82,355 |  |  | $ | 86,201 |  |  | $ | 30,075 |  |  | $ | 8,271 |  |  | $ | 11,891 |  |  | $ | 292,739 |
Nine months ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2021 | $ | 87,970 |  |  | $ | 67,056 |  |  | $ | 54,236 |  |  | $ | 19,749 |  |  | $ | 12,941 |  |  | $ | 7,049 |  |  | $ | 249,001 |
CECL Day 1 Provision expense | 4,107 |  |  | — |  |  | 3,716 |  |  | 131 |  |  | — |  |  | — |  |  | 7,954 |
Initial purchased credit deteriorated loans | 1,051 |  |  | — |  |  | 77 |  |  | 7 |  |  | — |  |  | — |  |  | 1,135 |
Loans charged off | (238) |  |  | (2,211) |  |  | (66) |  |  | (3,101) |  |  | — |  |  | (1,626) |  |  | (7,242) |
Recoveries of loans previously charged off | 3,677 |  |  | 4,932 |  |  | 415 |  |  | 1,898 |  |  | 44 |  |  | 627 |  |  | 11,593 |
Net loans (charged off) recovered | 3,439 |  |  | 2,721 |  |  | 349 |  |  | (1,203) |  |  | 44 |  |  | (999) |  |  | 4,351 |
Provision for loan losses(1) | (7,717) |  |  | (3,652) |  |  | 9,031 |  |  | 5,856 |  |  | (1,312) |  |  | 2,191 |  |  | 4,397 |
Balance at September 30, 2022 | $ | 88,850 |  |  | $ | 66,125 |  |  | $ | 67,409 |  |  | $ | 24,540 |  |  | $ | 11,673 |  |  | $ | 8,241 |  |  | $ | 266,838 |

(1) Provision included in the table only includes the portion related to net loans.
The ACL - loans includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. Qualitative adjustments include and consider changes in national, regional and local economic and business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting credit quality.
The provision for credit losses for the three months ended September 30, 2023 was recorded primarily as a result of net-charge offs, loan growth and an increase for specifically impaired loans.
Non-accrual Loans
All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of September 30, 2023 and December 31, 2022, substantially all of the Corporation's individually evaluated loans with total commitments greater than or equal to $1.0 million were measured based on the estimated fair value of each loan’s collateral, if any. Collateral could be in the form of real estate, in the case of commercial mortgages and construction loans, or business assets, such as accounts receivables
21

or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate.
As of September 30, 2023 and December 31, 2022, approximately 73% and 91%, respectively, of loans evaluated individually for impairment with principal balances greater than or equal to $1.0 million, whose primary collateral consisted of real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months.
The following table presents total non-accrual loans, by class segment:

| September 30, 2023 |  | December 31, 2022
| With a Related Allowance |  | Without a Related Allowance |  | Total |  | With a Related Allowance |  | Without a Related Allowance |  | Total
| (dollars in thousands)
Real estate - commercial mortgage | $ | 22,550 |  |  | $ | 20,199 |  |  | $ | 42,749 |  |  | $ | 39,722 |  |  | $ | 30,439 |  |  | $ | 70,161 |
Commercial and industrial | 17,956 |  |  | 14,239 |  |  | 32,195 |  |  | 14,804 |  |  | 12,312 |  |  | 27,116 |
Real estate - residential mortgage | 20,101 |  |  | 1,053 |  |  | 21,154 |  |  | 25,315 |  |  | 979 |  |  | 26,294 |
Real estate - home equity | 5,422 |  |  | 110 |  |  | 5,532 |  |  | 5,975 |  |  | 130 |  |  | 6,105 |
Real estate - construction | 340 |  |  | 337 |  |  | 677 |  |  | 866 |  |  | 502 |  |  | 1,368 |
Consumer | 15 |  |  | — |  |  | 15 |  |  | 92 |  |  | — |  |  | 92 |
Leases and other loans | 9,255 |  |  | 1,445 |  |  | 10,700 |  |  | 4,052 |  |  | 9,255 |  |  | 13,307 |
| $ | 75,639 |  |  | $ | 37,383 |  |  | $ | 113,022 |  |  | $ | 90,826 |  |  | $ | 53,617 |  |  | $ | 144,443 |

As of September 30, 2023 and December 31, 2022, there were $37.4 million and $53.6 million, respectively, of non-accrual loans that did not have a specific valuation allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.
Asset Quality
Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, 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, which bases the probability of default on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide a separate assessment of risk rating accuracy. Risk ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff, or if specific loan review assessments identify a deterioration or an improvement in a loan.
22

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

|  | September 30, 2023
|  | Term Loans Amortized Cost Basis by Origination Year | Revolving Loans | Revolving Loans converted to Term Loans |
|  | (in thousands) | Amortized | Amortized |
| 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Cost Basis | Cost Basis | Total
Real estate - commercial mortgage |  |  |  |  |  |  |  |
| Pass | $ | 599,679 |  | $ | 1,018,639 |  | $ | 1,307,915 |  | $ | 964,569 |  | $ | 763,273 |  | $ | 2,950,509 |  | $ | 57,549 |  | $ | 34,133 |  | $ | 7,696,266 |
| Special Mention | — |  | 24,531 |  | 48,761 |  | 6,087 |  | 28,454 |  | 107,064 |  | 2,430 |  | — |  | 217,327 |
| Substandard or Lower | 194 |  | 14,907 |  | 26,003 |  | 50,751 |  | 27,689 |  | 72,676 |  | 487 |  | — |  | 192,707 |
| Total real estate - commercial mortgage | 599,873 |  | 1,058,077 |  | 1,382,679 |  | 1,021,407 |  | 819,416 |  | 3,130,249 |  | 60,466 |  | 34,133 |  | 8,106,300 |
Real estate - commercial mortgage |  |  |  |  |  |  |  |
| Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | (30) |  | — |  | (14,422) |  | (14,452) |
Commercial and industrial(1) |  |  |  |  |  |  |  |
| Pass | 568,053 |  | 617,462 |  | 365,847 |  | 353,550 |  | 282,877 |  | 670,312 |  | 1,435,287 |  | 14,873 |  | 4,308,261 |
| Special Mention | 739 |  | 11,003 |  | 14,641 |  | 4,913 |  | 4,648 |  | 13,313 |  | 55,448 |  | 237 |  | 104,942 |
| Substandard or Lower | 205 |  | 12,136 |  | 1,974 |  | 3,921 |  | 19,693 |  | 23,766 |  | 101,529 |  | 907 |  | 164,131 |
| Total commercial and industrial | 568,997 |  | 640,601 |  | 382,462 |  | 362,384 |  | 307,218 |  | 707,391 |  | 1,592,264 |  | 16,017 |  | 4,577,334 |
Commercial and industrial(1) |  |  |  |  |  |  |  |
| Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | — |  | (682) |  | (5,167) |  | (5,849) |
Real estate - construction(2) |  |  |  |  |  |  |  |  |
| Pass | 194,777 |  | 224,814 |  | 261,417 |  | 63,984 |  | 10,264 |  | 35,247 |  | 15,083 |  | — |  | 805,586 |
| Special Mention | — |  | — |  | — |  | 28,292 |  | — |  | 7,732 |  | — |  | — |  | 36,024 |
| Substandard or Lower | — |  | 448 |  | — |  | — |  | 340 |  | 15,265 |  | 2,403 |  | — |  | 18,456 |
| Total real estate - construction | 194,777 |  | 225,262 |  | 261,417 |  | 92,276 |  | 10,604 |  | 58,244 |  | 17,486 |  | — |  | 860,066 |
Real estate - construction(2) |  |  |  |  |  |  |  |
| Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |
Total |  |  |  |  |  |  |  |
| Pass | $ | 1,362,509 |  | $ | 1,860,915 |  | $ | 1,935,179 |  | $ | 1,382,103 |  | $ | 1,056,414 |  | $ | 3,656,068 |  | $ | 1,507,919 |  | $ | 49,006 |  | $ | 12,810,113 |
| Special Mention | 739 |  | 35,534 |  | 63,402 |  | 39,292 |  | 33,102 |  | 128,109 |  | 57,878 |  | 237 |  | 358,293 |
| Substandard or Lower | 399 |  | 27,491 |  | 27,977 |  | 54,672 |  | 47,722 |  | 111,707 |  | 104,419 |  | 907 |  | 375,294 |
| Total | $ | 1,363,647 |  | $ | 1,923,940 |  | $ | 2,026,558 |  | $ | 1,476,067 |  | $ | 1,137,238 |  | $ | 3,895,884 |  | $ | 1,670,216 |  | $ | 50,150 |  | $ | 13,543,700 |

(1) Loans originated in 2021 and 2020 include $6.7 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government
guaranty through the SBA.
(2) Excludes real estate - construction - other.
23

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

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

(1) Loans originated in 2021 and 2020 include $20.4 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government
guaranty through the SBA.
(2) Excludes real estate - construction - other.
24

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 leases and other loans. For these loans, the most relevant credit quality indicator is delinquency status and the Corporation evaluates credit quality based on the aging status of the loan. The following tables present the amortized cost of these loans based on payment activity, by origination year, for the periods shown:

|  | September 30, 2023
|  | Term Loans Amortized Cost Basis by Origination Year | Revolving Loans | Revolving Loans converted to Term Loans |
|  | (dollars in thousands) | Amortized | Amortized |
|  | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Cost Basis | Cost Basis | Total
Real estate - residential mortgage |  |  |  |  |  |  |  |
| Performing | $ | 540,015 |  | $ | 1,097,965 |  | $ | 1,702,327 |  | $ | 999,666 |  | $ | 269,656 |  | $ | 629,492 |  | $ | — |  | $ | — |  | $ | 5,239,121 |
| Nonperforming | — |  | 804 |  | 3,611 |  | 5,011 |  | 5,633 |  | 25,501 |  | — |  | — |  | 40,560 |
| Total real estate - residential mortgage | 540,015 |  | 1,098,769 |  | 1,705,938 |  | 1,004,677 |  | 275,289 |  | 654,993 |  | — |  | — |  | 5,279,681 |
Real estate - residential mortgage |  |  |  |  |  |  |  |
| Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | — |  | — |  | (62) |  | (62) |
Consumer and real estate - home equity |  |  |  |  |  |  |  |
| Performing | 248,499 |  | 296,227 |  | 91,876 |  | 67,535 |  | 41,289 |  | 224,270 |  | 798,617 |  | 9,521 |  | 1,777,834 |
| Nonperforming | 20 |  | 381 |  | 906 |  | 428 |  | 262 |  | 7,267 |  | 1,463 |  | 853 |  | 11,580 |
| Total consumer and real estate - home equity | 248,519 |  | 296,608 |  | 92,782 |  | 67,963 |  | 41,551 |  | 231,537 |  | 800,080 |  | 10,374 |  | 1,789,414 |
Consumer and real estate - home equity |  |  |  |  |  |  |  |
| Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | (523) |  | (22) |  | (4,777) |  | (5,322) |
Leases and other loans |  |  |  |  |  |  |  |
| Performing | 158,933 |  | 89,264 |  | 30,908 |  | 25,186 |  | 19,150 |  | 12,331 |  | — |  | — |  | 335,772 |
| Nonperforming | — |  | 43 |  | — |  | — |  | — |  | 10,701 |  | — |  | — |  | 10,744 |
| Leases and other loans | 158,933 |  | 89,307 |  | 30,908 |  | 25,186 |  | 19,150 |  | 23,032 |  | — |  | — |  | 346,516 |
Leases and other loans |  |  |  |  |  |  |  |
| Current period gross charge-offs | (471) |  | (521) |  | (246) |  | (128) |  | (82) |  | (656) |  | — |  | (1,180) |  | (3,284) |
Construction - other |  |  |  |  |  |  |  |  |
| Performing | 81,142 |  | 121,659 |  | 14,666 |  | 730 |  | — |  | — |  | — |  | — |  | 218,197 |
| Nonperforming | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |
| Total construction - other | 81,142 |  | 121,659 |  | 14,666 |  | 730 |  | — |  | — |  | — |  | — |  | 218,197 |
Construction - other |  |  |  |  |  |  |  |  |
| Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |
Total |  |  |  |  |  |  |  |  |
| Performing | $ | 1,028,589 |  | $ | 1,605,115 |  | $ | 1,839,777 |  | $ | 1,093,117 |  | $ | 330,095 |  | $ | 866,093 |  | $ | 798,617 |  | $ | 9,521 |  | $ | 7,570,924 |
| Nonperforming | 20 |  | 1,228 |  | 4,517 |  | 5,439 |  | 5,895 |  | 43,469 |  | 1,463 |  | 853 |  | 62,884 |
| Total | $ | 1,028,609 |  | $ | 1,606,343 |  | $ | 1,844,294 |  | $ | 1,098,556 |  | $ | 335,990 |  | $ | 909,562 |  | $ | 800,080 |  | $ | 10,374 |  | $ | 7,633,808 |

25

|  | December 31, 2022
|  | Term Loans Amortized Cost Basis by Origination Year | Revolving Loans | Revolving Loans converted to Term Loans |
|  | (dollars in thousands) | Amortized | Amortized |
|  | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Cost Basis | Cost Basis | Total
Real estate - residential mortgage |  |  |  |  |  |  |  |
| Performing | $ | 933,903 |  | $ | 1,708,703 |  | $ | 1,054,126 |  | $ | 286,167 |  | $ | 87,455 |  | $ | 620,416 |  | $ | — |  | $ | — |  | $ | 4,690,770 |
| Nonperforming | 1,199 |  | 5,104 |  | 6,597 |  | 6,466 |  | 4,587 |  | 22,556 |  | — |  | — |  | 46,509 |
| Total real estate - residential mortgage | 935,102 |  | 1,713,807 |  | 1,060,723 |  | 292,633 |  | 92,042 |  | 642,972 |  | — |  | — |  | 4,737,279 |
Real estate - residential mortgage |  |  |  |  |  |  |  |
| Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | — |  | — |  | (66) |  | (66) |
Consumer and Real estate - home equity |  |  |  |  |  |  |  |
| Performing | 416,631 |  | 109,724 |  | 80,422 |  | 52,384 |  | 45,642 |  | 211,127 |  | 842,226 |  | 34,061 |  | 1,792,217 |
| Nonperforming | 292 |  | 298 |  | 174 |  | 36 |  | 98 |  | 6,512 |  | 1,722 |  | 668 |  | 9,800 |
| Total consumer and real estate - home equity | 416,923 |  | 110,022 |  | 80,596 |  | 52,420 |  | 45,740 |  | 217,639 |  | 843,948 |  | 34,729 |  | 1,802,017 |
Consumer and Real estate - home equity |  |  |  |  |  |  |  |
| Current period gross charge-offs | — |  | (587) |  | (70) |  | (108) |  | (16) |  | (442) |  | (178) |  | (3,011) |  | (4,412) |
Leases and other loans |  |  |  |  |  |  |  |
| Performing | 146,198 |  | 39,427 |  | 40,024 |  | 29,309 |  | 15,019 |  | 15,670 |  | — |  | — |  | 285,647 |
| Nonperforming | — |  | — |  | — |  | — |  | — |  | 13,307 |  | — |  | — |  | 13,307 |
| Leases and other loans | 146,198 |  | 39,427 |  | 40,024 |  | 29,309 |  | 15,019 |  | 28,977 |  | — |  | — |  | 298,954 |
Leases and other loans |  |  |  |  |  |  |  |
| Current period gross charge-offs | (506) |  | (167) |  | (140) |  | (80) |  | (47) |  | (1,191) |  | — |  | — |  | (2,131) |
Construction - other |  |  |  |  |  |  |  |  |
| Performing | 164,924 |  | 73,492 |  | 10,892 |  | — |  | 1,077 |  | — |  | — |  | — |  | 250,385 |
| Nonperforming | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |
| Total construction - other | 164,924 |  | 73,492 |  | 10,892 |  | — |  | 1,077 |  | — |  | — |  | — |  | 250,385 |
Construction - other |  |  |  |  |  |  |  |  |
| Current period gross charge-offs | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |  | — |
Total |  |  |  |  |  |  |  |  |
| Performing | $ | 1,661,656 |  | $ | 1,931,346 |  | $ | 1,185,464 |  | $ | 367,860 |  | $ | 149,193 |  | $ | 847,213 |  | $ | 842,226 |  | $ | 34,061 |  | $ | 7,019,019 |
| Nonperforming | 1,491 |  | 5,402 |  | 6,771 |  | 6,502 |  | 4,685 |  | 42,375 |  | 1,722 |  | 668 |  | 69,616 |
| Total | $ | 1,663,147 |  | $ | 1,936,748 |  | $ | 1,192,235 |  | $ | 374,362 |  | $ | 153,878 |  | $ | 889,588 |  | $ | 843,948 |  | $ | 34,729 |  | $ | 7,088,635 |

26

The following table presents non-performing assets:

| September 30, 2023 |  | December 31, 2022
| (dollars in thousands)
Non-accrual loans | $ | 113,022 |  |  | $ | 144,443 |
Loans 90 days or more past due and still accruing(1) | 27,962 |  |  | 27,463 |
Total non-performing loans | 140,984 |  |  | 171,906 |
OREO(2) | 2,549 |  |  | 5,790 |
Total non-performing assets | $ | 143,533 |  |  | $ | 177,696 |

(1) Excludes PPP loans which are fully guaranteed by the federal government of $1.2 million and $7.7 million as of September 30, 2023 and December 31,
2022, respectively.
(2) Excludes $10.1 million and $6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of September 30,
2023 and December 31, 2022, respectively.
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
| (dollars in thousands)
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate – commercial mortgage | $ | 8,976 |  |  | $ | 1,819 |  |  | $ | 1,309 |  |  |  |  | $ | 42,749 |  |  | $ | 8,051,447 |  |  | $ | 8,106,300 |
Commercial and industrial(1)(2) | 4,097 |  |  | 2,921 |  |  | 1,170 |  |  |  |  | 32,195 |  |  | 4,536,951 |  |  | 4,577,334 |
Real estate – residential mortgage | 44,563 |  |  | 10,146 |  |  | 19,406 |  |  |  |  | 21,154 |  |  | 5,184,412 |  |  | 5,279,681 |
Real estate – home equity | 6,288 |  |  | 3,544 |  |  | 4,909 |  |  |  |  | 5,532 |  |  | 1,025,165 |  |  | 1,045,438 |
Real estate – construction | 2,681 |  |  | 330 |  |  | — |  |  |  |  | 677 |  |  | 1,074,575 |  |  | 1,078,263 |
Consumer | 8,511 |  |  | 1,458 |  |  | 1,124 |  |  |  |  | 15 |  |  | 732,868 |  |  | 743,976 |
Leases and other loans(2) | 357 |  |  | 148 |  |  | 44 |  |  |  |  | 10,700 |  |  | 335,267 |  |  | 346,516 |
Total | $ | 75,473 |  |  | $ | 20,366 |  |  | $ | 27,962 |  |  |  |  | $ | 113,022 |  |  | $ | 20,940,685 |  |  | $ | 21,177,508 |

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

| 30-59 Days Past Due |  | 60-89 Days Past Due |  | ≥ 90 Days Past Due and Accruing |  | Non- accrual |  | Current |  | Total
| (dollars in thousands)
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Real estate – commercial mortgage | $ | 10,753 |  |  | $ | 4,644 |  |  | $ | 2,473 |  |  | $ | 70,161 |  |  | $ | 7,605,804 |  |  | $ | 7,693,835 |
Commercial and industrial(1)(2) | 6,067 |  |  | 2,289 |  |  | 1,172 |  |  | 27,116 |  |  | 4,436,360 |  |  | 4,473,004 |
Real estate – residential mortgage | 57,061 |  |  | 8,209 |  |  | 20,215 |  |  | 26,294 |  |  | 4,625,500 |  |  | 4,737,279 |
Real estate – home equity | 5,666 |  |  | 2,444 |  |  | 2,704 |  |  | 6,105 |  |  | 1,085,919 |  |  | 1,102,838 |
Real estate – construction | 1,762 |  |  | 1,758 |  |  | — |  |  | 1,368 |  |  | 1,265,037 |  |  | 1,269,925 |
Consumer | 6,692 |  |  | 1,339 |  |  | 899 |  |  | 92 |  |  | 690,157 |  |  | 699,179 |
Leases and other loans(2) | 348 |  |  | 122 |  |  | — |  |  | 13,307 |  |  | 289,710 |  |  | 303,487 |
Total | $ | 88,349 |  |  | $ | 20,805 |  |  | $ | 27,463 |  |  | $ | 144,443 |  |  | $ | 19,998,487 |  |  | $ | 20,279,547 |

(1) Excludes delinquent PPP loans 30-59 days past due, 60-89 days past due and 90 days or more past due of $0.1 million, $0.7 million and $7.7 million,
respectively, which are fully guaranteed by the federal government and are classified as current.
(2) Includes unearned income.
27

Collateral-Dependent Loans
A loan or a lease is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans and leases deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the collateral-dependent loan's or lease's carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent loans or leases consists of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agriculture land, and vacant land.
Loan Modifications
On January 1, 2023, the Corporation adopted ASU 2022-02. Loan modifications reported below do not include modifications with insignificant payment delays. ASU 2022-02 lists the following factors when considering if the loan modification has insignificant payment delays: (1) the amount of the restructured payments subject to the delay is insignificant relative to the unpaid principal or collateral value of the debt and will result in an insignificant shortfall in the contractual amount due, and (2) the delay in timing of the restructured payment period is insignificant relative to the frequency of payments due under the debt, the debt’s original contractual maturity or the debt’s original expected duration.
The ACL incorporates an estimate of lifetime expected credit losses and is recorded upon asset origination or acquisition. The starting point for the estimate of the ACL is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Corporation uses a probability of default/loss given default model to determine the ACL. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
The Corporation modifies loans by providing a concession when deemed appropriate. Depending on the circumstances, a term extension, interest rate reduction or principal forgiveness may be granted. In certain instances a combination of concessions may be provided to a customer.
When principal forgiveness is provided, the amortized cost basis of the forgiven portion of the asset is written off against the ACL. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the ACL.
The following table presents the amortized cost basis during the three months and nine months ended September 30, 2023 of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

| Term Extension
| Three months ended September 30, 2023 |  |  |  | Nine months ended September 30, 2023 |  |
| Amortization Cost Basis |  | % of Class of Financing Receivable |  |  |  |  |  | Amortization Cost Basis |  | % of Class of Financing Receivable |  |  |  |
| (dollars in thousands)
Real estate - commercial mortgage | $ | 1,120 |  |  | 0.01 | % |  |  |  |  |  | $ | 2,556 |  |  | 0.03 | % |  |  |  |
Commercial and industrial | 7 |  |  | — |  |  |  |  |  |  | 66 |  |  | — |  |  |  |  |
Real estate - residential mortgage | 1,933 |  |  | 0.04 |  |  |  |  |  |  | 5,343 |  |  | 0.10 |  |  |  |  |
Total | $ | 3,060 |  |  |  |  |  |  |  |  | $ | 7,965 |  |  |  |  |  |  |

28

The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty for the three months and nine months ended September 30, 2023:

| Term Extension
| Financial Effect
Three months ended September 30, 2023 |
Real estate - commercial mortgage | Added a weighted-average 0.50 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Commercial and industrial | Added a weighted-average 0.92 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgage | Added a weighted-average 4.49 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Nine months ended September 30, 2023 |
Real estate - commercial mortgage | Added a weighted-average 2.43 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Commercial and industrial | Added a weighted-average 3.76 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgage | Added a weighted-average 4.58 years to the life of loans, which reduced monthly payment amounts for the borrowers.

During the nine months ended September 30, 2023, there were no loans modified due to financial difficulty where there was an interest rate reduction or principal balance forgiveness.
During the nine months ended September 30, 2023, there were no loans modified due to financial difficulty that defaulted in the nine months subsequent to modification.
The following table presents the performance of loans that have been modified in the last nine months as of September 30, 2023.

|  |  | 30-89 |  | 90+ |  | Total
|  |  | Days Past |  | Past Due |  | Past
| Current |  | Due |  | and Accruing |  | Due
| (dollars in thousands)
Real estate - commercial mortgage | $ | 2,556 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial and industrial | 66 |  |  | — |  |  | — |  |  | — |
Real estate - residential mortgage | 5,343 |  |  | — |  |  | — |  |  | — |
Total | $ | 7,965 |  |  | $ | — |  |  | $ | — |  |  | $ | — |

There were no commitments to lend additional funds to borrowers with loan modifications as a result of financial difficulty as of September 30, 2023.
29

NOTE 6 – Mortgage Servicing Rights
The following table summarizes the changes in MSRs, which are included in other assets on the consolidated balance sheets, with adjustments to the carrying value included in mortgage banking income on the consolidated statements of income:

| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (dollars in thousands)
Amortized cost: |  |  |  |  |  |  |
Balance at beginning of period | $ | 32,458 |  |  | $ | 35,249 |  |  | $ | 34,217 |  |  | $ | 35,993 |
Originations of MSRs | 1,083 |  |  | 1,051 |  |  | 1,967 |  |  | 3,459 |
Amortization | (1,193) |  |  | (1,360) |  |  | (3,836) |  |  | (4,512) |
Balance at end of period | $ | 32,348 |  |  | $ | 34,940 |  |  | $ | 32,348 |  |  | $ | 34,940 |
Valuation allowance: |  |  |  |  |  |  |
Balance at beginning of period | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (600) |
Reduction (addition) to valuation allowance | — |  |  | — |  |  | — |  |  | 600 |
Balance at end of period | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Net MSRs at end of period | $ | 32,348 |  |  | $ | 34,940 |  |  | $ | 32,348 |  |  | $ | 34,940 |
Estimated fair value of MSRs at end of period | $ | 51,523 |  |  | $ | 51,072 |  |  | $ | 51,523 |  |  | $ | 51,072 |

MSRs represent the economic value of contractual rights to service mortgage loans that have been sold. The total portfolio of mortgage loans serviced by the Corporation for unrelated third parties was $4.1 billion and $4.2 billion as of September 30, 2023 and December 31, 2022, respectively. Actual and expected prepayments of the underlying mortgage loans can impact the fair values of the MSRs. The Corporation accounts for MSRs at the lower of amortized cost or fair value.
The fair value of MSRs is estimated by discounting the estimated cash flows from servicing income, net of expense, over the expected life of the underlying loans at a discount rate commensurate with the risk associated with these assets. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The fair values of MSRs were $51.5 million and $50.0 million at September 30, 2023 and December 31, 2022, respectively. Based on its fair value analysis as of September 30, 2023, the Corporation determined that no valuation allowance was required as of September 30, 2023.
NOTE 7 – Derivative Financial Instruments
The Corporation manages its exposure to certain interest rate and foreign currency risks through the use of derivatives. Certain of the Corporation's outstanding derivative contracts are designated as hedges, and none are entered into for speculative purposes. The Corporation enters into derivative contracts that are intended to economically hedge certain of its risks, even if hedge accounting does not apply or the Corporation elects not to apply hedge accounting.
Mortgage Banking Derivatives
In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed-rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation enters into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured.
Interest Rate Derivatives - Non-Designated Hedges
The Corporation enters into interest rate derivatives with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate derivatives with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate derivatives is that the customer pays a fixed rate
30

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.
In the third quarter of 2023, the Corporation recorded a $3.0 million reduction to other non-interest income to reflect market valuation movement in certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions resulting from the transition from LIBOR to SOFR.
The Corporation's existing credit derivatives result from participation in interest rate derivatives provided by external lenders as part of loan participation arrangements and, therefore, are not used to manage interest rate risk in the Corporation's assets or liabilities.
The Corporation is required to clear all eligible interest rate derivative contracts with a clearing agent and is subject to the regulations of the Commodity Futures Trading Commission.
Cash Flow Hedges of Interest Rate Risk
The Corporation's objectives in using interest rate derivatives are to reduce volatility in interest income and interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate derivatives as part of its interest rate risk management strategy. The Corporation enters into interest rate derivatives designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans and borrowings.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivatives is recorded in AOCI and subsequently reclassified into interest income or interest expense 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 loans and borrowings. During the next twelve months, the Corporation estimates that an additional $22.7 million of unrealized losses will be reclassified as a decrease to net interest income.
In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $1.0 billion. As the hedged transaction continues to be probable, the original unrealized loss of $70.6 million included in AOCI will be recognized as a reduction to interest income when the previously forecasted hedged item affects earnings in future periods. During the nine months ended September 30, 2023, $17.3 million of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the Corporation's consolidated statements of income.
Foreign Exchange Contracts
The Corporation enters into foreign exchange contracts to accommodate the needs of its customers. Foreign exchange contracts are commitments to buy or sell foreign currency on a specific date at a contractual price. The Corporation limits its foreign exchange exposure with customers by entering into contracts with institutional counterparties to mitigate its foreign exchange risk. The Corporation also holds certain amounts of Foreign Currency Nostro Accounts. The Corporation limits the total overnight net foreign currency open positions, which is defined as an aggregate of all outstanding contracts, to $0.5 million.
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The following table presents a summary of the notional amounts and fair values of derivative financial instruments:

| September 30, 2023 |  | December 31, 2022
| Notional Amount |  | Asset (Liability) Fair Value |  | Notional Amount |  | Asset (Liability) Fair Value
| (dollars in thousands)
Interest Rate Locks with Customers |  |  |  |  |  |  |
Positive fair values | $ | 126,886 |  |  | $ | 373 |  |  | $ | 70,836 |  |  | $ | 182 |
Negative fair values | 4,359 |  |  | (39) |  |  | 4,939 |  |  | (51) |
Forward Commitments |  |  |  |  |  |  |
Positive fair values | 53,000 |  |  | 653 |  |  | — |  |  | — |
Negative fair values | — |  |  | — |  |  | 10,000 |  |  | (147) |
Interest Rate Derivatives with Customers |  |  |  |  |  |  |
Positive fair values | 121,589 |  |  | 635 |  |  | 171,317 |  |  | 3,337 |
Negative fair values | 4,254,247 |  |  | (367,905) |  |  | 3,802,480 |  |  | (280,401) |
Interest Rate Derivatives with Dealer Counterparties |  |  |  |  |  |  |
Positive fair values | 4,254,247 |  |  | 226,882 |  |  | 3,802,480 |  |  | 161,956 |
Negative fair values | 121,589 |  |  | (1,001) |  |  | 171,317 |  |  | (3,703) |
Interest Rate Derivatives used in Cash Flow Hedges |  |  |  |  |  |  |
Positive fair values | 700,000 |  |  | 239 |  |  | 600,000 |  |  | 1,321 |
Negative fair values | 2,300,000 |  |  | (3,584) |  |  | 1,000,000 |  |  | (12,163) |
Foreign Exchange Contracts with Customers |  |  |  |  |  |  |
Positive fair values | 30,841 |  |  | 980 |  |  | 11,123 |  |  | 571 |
Negative fair values | 13,994 |  |  | (400) |  |  | 3,672 |  |  | (85) |
Foreign Exchange Contracts with Correspondent Banks |  |  |  |  |  |  |
Positive fair values | 10,984 |  |  | 315 |  |  | 4,887 |  |  | 101 |
Negative fair values | 23,610 |  |  | (680) |  |  | 8,280 |  |  | (499) |

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

| Amount of Gain (Loss) Recognized in OCI on Derivative |  | Amount of Gain (Loss) Recognized in OCI Included Component |  | Amount of Gain (Loss) Recognized in OCI Excluded Component |  | Location of Gain (Loss) Recognized from AOCI into Income |  | Amount of Gain (Loss) Reclassified from AOCI into Income |  | Amount of Gain (Loss) Reclassified from AOCI into Income Included Component |  | Amount of Gain (Loss) Reclassified from AOCI into Income Excluded Component
| (dollars in thousands)
Derivatives in Cash Flow Hedging Relationships: |  |  |  |  |  |  |  |  |  |
Three months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |
Interest Rate Products | $ | 4,691 |  |  | $ | 4,691 |  |  | $ | — |  |  | Net Interest Income |  | $ | (6,248) |  |  | $ | (6,248) |  |  | $ | — |
Three months ended September 30, 2022 |  |  |  |  |  |  |  |  |  |
Interest Rate Products | (29,053) |  |  | (29,053) |  |  | — |  |  | Net Interest Income |  | (3,210) |  |  | (3,210) |  |  | — |
Nine months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |
Interest Rate Products | 9,975 |  |  | 9,975 |  |  | — |  |  | Net Interest Income |  | (20,437) |  |  | (20,437) |  |  | — |
Nine months ended September 30, 2022 |  |  |  |  |  |  |  |  |  |
Interest Rate Products | (80,716) |  |  | (80,716) |  |  | — |  |  | Net Interest Income |  | (828) |  |  | (828) |  |  | — |

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

| Consolidated Statements of Income Classification
| Net Interest Income
| Three months ended September 30 |  |  | Nine months ended September 30
| 2023 |  | 2022 |  |  | 2023 |  | 2022
| (dollars in thousands)
Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded | $ | (6,248) |  |  | $ | (3,210) |  |  |  | $ | (20,437) |  |  | $ | (828) |
Interest contracts: |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from AOCI into income | (6,248) |  |  | (3,210) |  |  |  | (20,437) |  |  | (828) |
Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring | — |  |  | — |  |  |  | — |  |  | — |
Amount of gain (loss) reclassified from AOCI into income - included component | (6,248) |  |  | (3,210) |  |  |  | (20,437) |  |  | (828) |
Amount of gain (loss) reclassified from AOCI into income - excluded component | — |  |  | — |  |  |  | — |  |  | — |

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

| Consolidated Statements of Income Classification |  | Three months ended September 30 |  | Nine months ended September 30
|  |  | 2023 |  | 2022 |  | 2023 |  | 2022
|  |  | (dollars in thousands)
Mortgage banking derivatives(1) | Mortgage banking income |  | $ | 134 |  |  | $ | 1,403 |  |  | $ | 1,003 |  |  | $ | (307) |
Interest rate derivatives | Other income |  | (2,958) |  |  | — |  |  | (2,958) |  |  | — |
Foreign exchange contracts | Other income |  | (57) |  |  | (27) |  |  | 127 |  |  | 14 |
Net fair value gains/(losses) on derivative financial instruments |  | $ | (2,881) |  |  | $ | 1,376 |  |  | $ | (1,828) |  |  | $ | (293) |

(1) Includes interest rate locks with customers and forward commitments.
Fair Value Option
The Corporation has elected to measure mortgage loans held for sale at fair value. The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements as of the periods shown:

| September 30, 2023 |  | December 31, 2022
| (dollars in thousands)
Amortized cost(1) | $ | 20,206 |  |  | $ | 7,180 |
Fair value | 20,368 |  |  | 7,264 |

(1) Cost basis of mortgage loans held for sale represents the unpaid principal balance.
There were no gains related to changes in fair values of mortgage loans held for sale for the three months ended September 30, 2023 compared to losses of $0.5 million for the three months ended September 30, 2022. Gains related to changes in fair values of mortgage loans held for sale were $0.1 million for the nine months ended September 30, 2023 compared to losses of $1.1 million for the nine months ended September 30, 2022.
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Balance Sheet Offsetting
The fair values of interest rate derivative agreements and foreign exchange contracts the Corporation enters into with customers and dealer counterparties may be eligible for offset on the consolidated balance sheets if they are subject to master netting arrangements or similar agreements. The Corporation has elected to net its financial assets and liabilities designated as cash flow hedges when offsetting is permitted. The following table presents the Corporation's financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets:

| Gross Amounts |  | Gross Amounts Not Offset |  |
| Recognized |  | on the Consolidated |  |
| on the |  | Balance Sheets |  |
| Consolidated |  | Financial |  | Cash |  | Net
| Balance Sheets |  | Instruments(1) |  | Collateral(2) |  | Amount
| (dollars in thousands)
September 30, 2023 |  |  |  |  |  |  |
Interest rate derivative assets | $ | 227,756 |  |  | $ | (4,636) |  |  | $ | — |  |  | $ | 223,120 |
Foreign exchange derivative assets with correspondent banks | 315 |  |  | (315) |  |  | — |  |  | — |
Total | $ | 228,071 |  |  | $ | (4,951) |  |  | $ | — |  |  | $ | 223,120 |
Interest rate derivative liabilities | $ | 372,490 |  |  | $ | (1,291) |  |  | $ | (141,485) |  |  | $ | 229,714 |
Foreign exchange derivative liabilities with correspondent banks | 680 |  |  | (315) |  |  | — |  |  | 365 |
Total | $ | 373,170 |  |  | $ | (1,606) |  |  | $ | (141,485) |  |  | $ | 230,079 |
December 31, 2022 |  |  |  |  |  |  |
Interest rate derivative assets | $ | 166,614 |  |  | $ | (8,071) |  |  | $ | — |  |  | $ | 158,543 |
Foreign exchange derivative assets with correspondent banks | 101 |  |  | (101) |  |  | — |  |  | — |
Total | $ | 166,715 |  |  | $ | (8,172) |  |  | $ | — |  |  | $ | 158,543 |
Interest rate derivative liabilities | $ | 296,267 |  |  | $ | (2,771) |  |  | $ | (127,638) |  |  | $ | 165,858 |
Foreign exchange derivative liabilities with correspondent banks | 499 |  |  | (101) |  |  | — |  |  | 398 |
Total | $ | 296,766 |  |  | $ | (2,872) |  |  | $ | (127,638) |  |  | $ | 166,256 |

(1) For interest rate derivative assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default.
For interest rate derivative liabilities, amounts represent any derivative asset fair values that could be offset in the event of counterparty or customer default.
(2) Amounts represent cash collateral received from the counterparty or posted by the Corporation on interest rate derivative transactions and foreign exchange
contracts with financial institution counterparties. Interest rate derivatives with customers are collateralized by the same collateral securing the underlying
loans to those borrowers. Cash and securities collateral amounts are included in the table only to the extent of the net derivative fair values.
34

NOTE 8 – Accumulated Other Comprehensive (Loss) Income
The following table presents the components of other comprehensive income (loss):

| Before-Tax Amount |  | Tax Effect |  | Net of Tax Amount
| (dollars in thousands)
Three months ended September 30, 2023 |  |  |  |  |
Net unrealized losses on securities | $ | (135,811) |  |  | $ | 30,761 |  |  | $ | (105,050) |
Amortization of net unrealized gains on AFS securities transferred to HTM(1) | 1,932 |  |  | (438) |  |  | 1,494 |
Net unrealized holding gains arising during the period on interest rate derivatives used in cash flow hedges | 4,691 |  |  | (1,040) |  |  | 3,651 |
Reclassification adjustment for net change realized in net income on interest rate derivatives used in cash flow hedges | 6,248 |  |  | 172 |  |  | 6,420 |
Amortization of net unrecognized pension and postretirement items(2) | 18 |  |  | (3) |  |  | 15 |
Total Other Comprehensive Loss | $ | (122,922) |  |  | $ | 29,452 |  |  | $ | (93,470) |
Three months ended September 30, 2022 |  |  |  |  |
Net unrealized losses on securities | $ | (155,758) |  |  | $ | 35,373 |  |  | $ | (120,385) |
Reclassification adjustment for securities net change included in net income(3) | (53) |  |  | 12 |  |  | (41) |
Amortization of net unrealized gains on AFS securities transferred to HTM(1) | 2,139 |  |  | (486) |  |  | 1,653 |
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges | (29,053) |  |  | 6,581 |  |  | (22,472) |
Reclassification adjustment for net change realized in net income on interest rate derivatives used in cash flow hedges | 3,210 |  |  | (727) |  |  | 2,483 |
Amortization of net unrecognized pension and postretirement items(2) | 33 |  |  | (8) |  |  | 25 |
Total Other Comprehensive Loss | $ | (179,482) |  |  | $ | 40,745 |  |  | $ | (138,737) |
Nine months ended September 30, 2023 |  |  |  |  |
Unrealized loss on securities | $ | (133,973) |  |  | $ | 30,345 |  |  | $ | (103,628) |
Reclassification adjustment for securities net change included in net income(3) | 19 |  |  | (5) |  |  | 14 |
Amortization of net unrealized gains on AFS securities transferred to HTM(1) | 5,783 |  |  | (1,310) |  |  | 4,473 |
Net unrealized holding gains (losses) arising during the period on interest rate derivatives used in cash flow hedges | 9,975 |  | (18,730) |  |  | (8,755) |
Reclassification adjustment for net change realized in net income on interest rate swaps used in cash flow hedges | 20,437 |  |  | 136 |  |  | 20,573 |
Amortization of net unrecognized pension and postretirement item(2) | 55 |  |  | (12) |  |  | 43 |
Total Other Comprehensive Loss | $ | (97,704) |  |  | $ | 10,424 |  |  | $ | (87,280) |
Nine months ended September 30, 2022 |  |  |  |  |
Unrealized loss on securities | $ | (469,137) |  |  | $ | 106,541 |  |  | $ | (362,596) |
Reclassification adjustment for securities net change included in net income(3) | (26) |  |  | 6 |  |  | (20) |
Amortization of net unrealized losses on AFS securities transferred to HTM(1) | (59,547) |  |  | 13,523 |  |  | (46,024) |
Net unrealized holding losses arising during the period on interest rate derivatives used in cash flow hedges | (80,716) |  |  | 18,282 |  |  | (62,434) |
Reclassification adjustment for change realized in net income on interest rate swaps used in cash flow hedges | 828 |  |  | (187) |  |  | 641 |
Amortization of net unrecognized pension and postretirement items(2) | 96 |  |  | (21) |  |  | 75 |
Total Other Comprehensive Loss | $ | (608,502) |  |  | $ | 138,144 |  |  | $ | (470,358) |

(1) Amounts reclassified out of AOCI. Before-tax amounts included as a reduction to "Interest Income" on the Consolidated Statements of Income.
(2) Amounts reclassified out of AOCI. Before-tax amounts included in "Salaries and employee benefits" on the Consolidated Statements of Income. See "Note
12 - Employee Benefit Plans," for additional details.
(3) Amounts reclassified out of AOCI. Before-tax amounts included in "Investment securities gains, net" on the Consolidated Statements of Income. See "Note 4
- Investment Securities," for additional details.
35

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

| Unrealized Gains (Losses) on Investment Securities |  | Net Unrealized Gain (Loss) on Interest Rate Derivatives used in Cash Flow Hedges |  |  |  | Unrecognized Pension and Postretirement Plan Income (Costs) |  | Total
| (dollars in thousands)
Three months ended September 30, 2023 |  |  |  |  |  |  |  |  |
Balance at June 30, 2023 | $ | (311,816) |  |  | $ | (60,029) |  |  |  |  | $ | (7,441) |  |  | $ | (379,286) |
OCI before reclassifications | (105,050) |  |  | 3,651 |  |  |  |  | — |  |  | (101,399) |
Amounts reclassified from AOCI | — |  |  | 6,420 |  |  |  |  | 15 |  |  | 6,435 |
Amortization of net unrealized gains on AFS securities transferred to HTM | 1,494 |  |  | — |  |  |  |  | — |  |  | 1,494 |
Balance at September 30, 2023 | $ | (415,372) |  |  | $ | (49,958) |  |  |  |  | $ | (7,426) |  |  | $ | (472,756) |
Three months ended September 30, 2022 |  |  |  |  |  |  |  |  |
Balance at June 30, 2022 | $ | (249,427) |  |  | $ | (46,620) |  |  |  |  | $ | (8,163) |  |  | $ | (304,210) |
OCI before reclassifications | (120,385) |  |  | (22,472) |  |  |  |  | — |  |  | (142,857) |
Amounts reclassified from AOCI | (41) |  |  | 2,483 |  |  |  |  | 25 |  |  | 2,467 |
Amortization of net unrealized losses on AFS securities transferred to HTM | 1,653 |  |  | — |  |  |  |  | — |  |  | 1,653 |
Balance at September 30, 2022 | $ | (368,200) |  |  | $ | (66,609) |  |  |  |  | $ | (8,138) |  |  | $ | (442,947) |
Nine months ended September 30, 2023 |  |  |  |  |  |  |  |  |
Balance at December 31, 2022 | $ | (316,231) |  |  | $ | (61,776) |  |  |  |  | $ | (7,469) |  |  | $ | (385,476) |
OCI before reclassifications | (103,628) |  |  | (8,755) |  |  |  |  | — |  |  | (112,383) |
Amounts reclassified from AOCI | 14 |  |  | 20,573 |  |  |  |  | 43 |  |  | 20,630 |
Amortization of net unrealized gains on AFS securities transferred to HTM | 4,473 |  |  | — |  |  |  |  | — |  |  | 4,473 |
Balance at September 30, 2023 | $ | (415,372) |  |  | $ | (49,958) |  |  |  |  | $ | (7,426) |  |  | $ | (472,756) |
Nine months ended September 30, 2022 |  |  |  |  |  |  |  |  |
Balance at December 31, 2021 | $ | 40,440 |  |  | $ | (4,816) |  |  |  |  | $ | (8,213) |  |  | $ | 27,411 |
OCI before reclassifications | (362,596) |  |  | (62,434) |  |  |  |  | — |  |  | (425,030) |
Amounts reclassified from AOCI | (20) |  |  | 641 |  |  |  |  | 75 |  |  | 696 |
Amortization of net unrealized losses on AFS securities transferred to HTM | (46,024) |  |  | — |  |  |  |  | — |  |  | (46,024) |
Balance at September 30, 2022 | $ | (368,200) |  |  | $ | (66,609) |  |  |  |  | $ | (8,138) |  |  | $ | (442,947) |

NOTE 9 – Fair Value Measurements
FASB ASC Topic 820 establishes a fair value hierarchy for the inputs to valuation techniques used to measure assets and liabilities at fair value using the following three categories (from highest to lowest priority):
•Level 1 – Inputs that represent quoted prices for identical instruments in active markets.
•Level 2 – Inputs that represent quoted prices for similar instruments in active markets or quoted prices for identical instruments in non-active markets. Also includes valuation techniques whose inputs are derived principally from observable market data other than quoted prices, such as interest rates or other market-corroborated means.
•Level 3 – Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.
36

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

| September 30, 2023
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (dollars in thousands)
Loans held for sale | $ | — |  |  | $ | 20,368 |  |  | $ | — |  |  | $ | 20,368 |
Available for sale investment securities: |  |  |  |  |  |  |
U.S. Government securities | 222,446 |  |  | — |  |  | — |  |  | 222,446 |
U.S. Government-sponsored agency securities | — |  |  | 987 |  |  | — |  |  | 987 |
State and municipal securities | — |  |  | 949,146 |  |  | — |  |  | 949,146 |
Corporate debt securities | — |  |  | 428,484 |  |  | — |  |  | 428,484 |
Collateralized mortgage obligations | — |  |  | 112,217 |  |  | — |  |  | 112,217 |
Residential mortgage-backed securities | — |  |  | 189,275 |  |  | — |  |  | 189,275 |
Commercial mortgage-backed securities | — |  |  | 516,313 |  |  | — |  |  | 516,313 |
Total available for sale investment securities | 222,446 |  |  | 2,196,422 |  |  | — |  |  | 2,418,868 |
Other assets: |  |  |  |  |  |  |
Investments held in Rabbi Trust | 27,116 |  |  | — |  |  | — |  |  | 27,116 |
Derivative assets | 1,295 |  |  | 228,782 |  |  | — |  |  | 230,077 |
Total assets | $ | 250,857 |  |  | $ | 2,445,572 |  |  | $ | — |  |  | $ | 2,696,429 |
Other liabilities: |  |  |  |  |  |  |
Deferred compensation liabilities | $ | 27,116 |  |  | $ | — |  |  | $ | — |  |  | $ | 27,116 |
Derivative liabilities | 1,080 |  |  | 372,529 |  |  | — |  |  | 373,609 |
Total liabilities | $ | 28,196 |  |  | $ | 372,529 |  |  | $ | — |  |  | $ | 400,725 |

| December 31, 2022
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (dollars in thousands)
Loans held for sale | $ | — |  |  | $ | 7,264 |  |  | $ | — |  |  | $ | 7,264 |
Available for sale investment securities: |  |  |  |  |  |  |
U.S. Government securities | 218,485 |  |  | — |  |  | — |  |  | 218,485 |
U.S. Government sponsored agency securities | — |  |  | 1,008 |  |  | — |  |  | 1,008 |
State and municipal securities | — |  |  | 1,105,712 |  |  | — |  |  | 1,105,712 |
Corporate debt securities | — |  |  | 422,309 |  |  | — |  |  | 422,309 |
Collateralized mortgage obligations | — |  |  | 134,033 |  |  | — |  |  | 134,033 |
Residential mortgage-backed securities | — |  |  | 212,698 |  |  | — |  |  | 212,698 |
Commercial mortgage-backed securities | — |  |  | 552,522 |  |  | — |  |  | 552,522 |
Total available for sale investment securities | 218,485 |  |  | 2,428,282 |  |  | — |  |  | 2,646,767 |
Other assets: |  |  |  |  |  |  |
Investments held in Rabbi Trust | 23,435 |  |  | — |  |  | — |  |  | 23,435 |
Derivative assets | 672 |  |  | 166,796 |  |  | — |  |  | 167,468 |
Total assets | $ | 242,592 |  |  | $ | 2,602,342 |  |  | $ | — |  |  | $ | 2,844,934 |
Other liabilities: |  |  |  |  |  |  |
Deferred compensation liabilities | $ | 23,435 |  |  | $ | — |  |  | $ | — |  |  | $ | 23,435 |
Derivative liabilities | 584 |  |  | 296,465 |  |  | — |  |  | 297,049 |
Total liabilities | $ | 24,019 |  |  | $ | 296,465 |  |  | $ | — |  |  | $ | 320,484 |

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The valuation techniques used to measure fair value for the items in the preceding tables are as follows:
Loans held for sale – This category includes mortgage loans held for sale that are measured at fair value. Fair values as of September 30, 2023 and December 31, 2022 were measured at the price that secondary market investors were offering for loans with similar characteristics.
Available for sale investment securities – Included in this asset category are debt securities. Level 2 investment securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing.
Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable.
•U.S. Government securities – These securities are classified as Level 1. Fair values are based on quoted prices with active markets.
•State and municipal securities/Collateralized mortgage obligations/Residential mortgage-backed securities/Commercial mortgage-backed securities – These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.
•Corporate debt securities – This category consists of subordinated debt and senior debt issued by financial institutions ($421.5 million at September 30, 2023 and $415.4 million at December 31, 2022) and other corporate debt issued by non-financial institutions ($7.0 million at September 30, 2023 and $6.9 million at December 31, 2022).
Level 2 investments include subordinated debt and senior debt, and other corporate debt issued by non-financial institutions at September 30, 2023 and December 31, 2022. The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.
Investments held in Rabbi Trust – This category consists of mutual funds that are held in trust for employee deferred compensation plans that the Corporation has elected to measure at fair value. Shares of mutual funds are valued based on net asset value, which represent quoted market prices for the underlying shares held in the mutual funds, and as such, are classified as Level 1.
Derivative assets – Fair value of foreign currency exchange contracts are classified as Level 1 assets ($1.3 million at September 30, 2023 and $0.7 million at December 31, 2022). The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.
Level 2 assets, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($1.0 million at September 30, 2023 and $0.2 million at December 31, 2022) and the fair value of interest rate derivatives ($227.8 million at September 30, 2023 and $166.6 million at December 31, 2022). The fair values of the interest rate locks, forward commitments and interest rate derivatives represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See "Note 7 - Derivative Financial Instruments," for additional information.
Deferred compensation liabilities – Fair value of amounts due to employees under deferred compensation plans, classified as Level 1 liabilities and are included in other liabilities on the consolidated balance sheets. The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Investments held in Rabbi Trust" above.
Derivative liabilities – Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($1.1 million at September 30, 2023 and $0.6 million at December 31, 2022).
Level 2 liabilities, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors (nominal at September 30, 2023 and $0.2 million at December 31, 2022) and the fair value of interest rate derivatives ($372.5 million at September 30, 2023 and $296.3 million at December 31, 2022).
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The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Derivative assets" above.
Certain financial instruments are not measured at fair value on an ongoing basis but are subject to fair value measurement in certain circumstances, such as upon their acquisition or when there is evidence of impairment. The following table presents Level 3 financial assets measured at fair value on a nonrecurring basis:

| September 30, 2023 |  | December 31, 2022
| (dollars in thousands)
Loans, net | $ | 90,359 |  |  | $ | 121,115 |
OREO | 2,549 |  |  | 5,790 |
MSRs(1) | 51,523 |  |  | 50,044 |
Total assets | $ | 144,431 |  |  | $ | 176,949 |

(1) Amounts shown are estimated fair value. MSRs are recorded on the Corporation's consolidated balance sheets at the lower of amortized cost or fair value.
See "Note 6 - Mortgage Servicing Rights" for additional information.
The valuation techniques used to measure fair value for the items in the table above are as follows:
•Loans, net – This category consists of loans that were individually evaluated for impairment and have been classified as Level 3 assets. The amount shown is the balance of non-accrual loans, net of related ACL. See "Note 5 - Loans and Allowance for Credit Losses," for additional details.
•OREO – This category consists of OREO classified as Level 3 assets, for which the fair values were based on estimated selling prices less estimated selling costs for similar assets in active markets.
•MSRs – This category consists of MSRs, which were initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors, and subsequently carried at the lower of amortized cost or fair value. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified by product type and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the September 30, 2023 valuation were 7.6% and 9.0%, respectively. Management reviews the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See "Note 6 - Mortgage Servicing Rights," for additional information.
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The following tables detail the book values and the estimated fair values of the Corporation's financial instruments as of September 30, 2023 and December 31, 2022:

| September 30, 2023
|  | Estimated Fair Value
| Carrying Amount | Level 1 | Level 2 | Level 3 | Total
| (dollars in thousands)
FINANCIAL ASSETS |  |  |  |  |
Cash and cash equivalents | $ | 420,460 |  | $ | 420,460 |  | $ | — |  | $ | — |  | $ | 420,460 |
FRB and FHLB stock | 106,363 |  | — |  | 106,363 |  | — |  | 106,363 |
Loans held for sale | 20,368 |  | — |  | 20,368 |  | — |  | 20,368 |
AFS securities | 2,418,868 |  | 222,446 |  | 2,196,422 |  | — |  | 2,418,868 |
HTM securities | 1,279,733 |  | — |  | 1,019,844 |  | — |  | 1,019,844 |
Loans, net | 20,884,769 |  | — |  | — |  | 19,508,510 |  | 19,508,510 |
Accrued interest receivable | 101,624 |  | 101,624 |  | — |  | — |  | 101,624 |
Other assets | 734,736 |  | 451,882 |  | 228,782 |  | 54,072 |  | 734,736 |
FINANCIAL LIABILITIES |  |  |  |  |
Demand and savings deposits | $ | 18,040,590 |  | $ | 18,040,590 |  | $ | — |  | $ | — |  | $ | 18,040,590 |
Brokered deposits | 941,059 |  | 143,238 |  | 795,500 |  | — |  | 938,738 |
Time deposits | 2,439,940 |  | — |  | 2,421,009 |  | — |  | 2,421,009 |
Accrued interest payable | 26,848 |  | 26,848 |  | — |  | — |  | 26,848 |
Federal funds purchased | 544,000 |  | 543,995 |  | — |  | — |  | 543,995 |
Federal Home Loan Bank advances | 730,000 |  | 736,030 |  | — |  | — |  | 736,030 |
Senior debt and subordinated debt | 540,174 |  | — |  | 449,078 |  | — |  | 449,078 |
Other borrowings | 555,938 |  | 554,986 |  | 924 |  | — |  | 555,910 |
Other liabilities | 560,431 |  | 171,792 |  | 372,529 |  | 16,110 |  | 560,431 |

| December 31, 2022
|  | Estimated Fair Value
| Carrying Amount | Level 1 | Level 2 | Level 3 | Total
| (dollars in thousands)
FINANCIAL ASSETS |  |  |  |  |
Cash and cash equivalents | $ | 681,921 |  | $ | 681,921 |  | $ | — |  | $ | — |  | $ | 681,921 |
FRB and FHLB stock | 130,186 |  | — |  | 130,186 |  | — |  | 130,186 |
Loans held for sale | 7,264 |  | — |  | 7,264 |  | — |  | 7,264 |
AFS securities | 2,646,767 |  | 218,485 |  | 2,428,282 |  | — |  | 2,646,767 |
HTM securities | 1,321,256 |  | — |  | 1,125,049 |  | — |  | 1,125,049 |
Loans, net | 20,010,181 |  | — |  | — |  | 18,862,701 |  | 18,862,701 |
Accrued interest receivable | 91,579 |  | 91,579 |  | — |  | — |  | 91,579 |
Other assets | 642,049 |  | 419,419 |  | 166,796 |  | 55,834 |  | 642,049 |
FINANCIAL LIABILITIES |  |  |  |  |
Demand and savings deposits | $ | 18,851,912 |  | $ | 18,851,912 |  | $ | — |  | $ | — |  | $ | 18,851,912 |
Brokered deposits | 208,416 |  | 188,416 |  | 25,085 |  | — |  | 213,501 |
Time deposits | 1,589,210 |  | — |  | 1,574,747 |  | — |  | 1,574,747 |
Accrued interest payable | 10,185 |  | 10,185 |  | — |  | — |  | 10,185 |
Federal funds purchased | 191,000 |  | 190,998 |  | — |  | — |  | 190,998 |
Federal Home Loan Bank advances | 1,250,000 |  | 1,249,629 |  | — |  | — |  | 1,249,629 |
Senior debt and subordinated debt | 539,634 |  | — |  | 456,867 |  | — |  | 456,867 |
Other borrowings | 890,573 |  | 889,393 |  | 1,180 |  | — |  | 890,573 |
Other liabilities | 467,705 |  | 154,912 |  | 296,465 |  | 16,328 |  | 467,705 |

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Fair values of financial instruments are significantly affected by the assumptions used, principally the timing of future cash flows and discount rates. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument. The aggregate fair value amounts presented do not necessarily represent management’s estimate of the underlying value of the Corporation.
For short-term financial instruments, defined as those with remaining maturities of 90 days or less, and excluding those recorded at fair value on the Corporation's consolidated balance sheets, book value was considered to be a reasonable estimate of fair value.
The following instruments are predominantly short-term:

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

FRB and FHLB stock represent restricted investments and are carried at cost on the consolidated balance sheets, which is a reasonable estimate of fair value.
As of September 30, 2023, fair values for loans and time deposits were estimated by discounting future cash flows using the current rates, as adjusted for liquidity considerations, at which similar loans would be made to borrowers and similar deposits would be issued to customers for the same remaining maturities. Fair values of loans also include estimated credit losses that would be assumed in a market transaction, which represents estimated exit prices.
Brokered deposits consist of demand and saving deposits, which are classified as Level 1, and time deposits, which are classified as Level 2. The fair value of these deposits is determined in a manner consistent with the respective type of deposits discussed above.
NOTE 10 – Net Income Per Share
Basic net income per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding.
Diluted net income per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding plus the incremental number of shares added as a result of converting common stock equivalents, calculated using the treasury stock method. The Corporation's common stock equivalents consist of outstanding stock options, restricted stock, RSUs, and PSUs. PSUs are required to be included in weighted average diluted shares outstanding if performance measures, as defined in each PSU award agreement, are met as of the end of the period.
A reconciliation of weighted average shares outstanding used to calculate basic and diluted net income per share follows (in thousands, except per share data):

| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
Weighted average shares outstanding (basic) | 164,566 |  |  | 167,353 |  |  | 165,667 |  |  | 162,979 |
Impact of common stock equivalents | 1,457 |  |  | 1,428 |  |  | 1,514 |  |  | 1,275 |
Weighted average shares outstanding (diluted) | 166,023 |  |  | 168,781 |  |  | 167,181 |  |  | 164,254 |
Per share: |  |  |  |  |  |  |
Basic | $ | 0.42 |  |  | $ | 0.41 |  |  | $ | 1.28 |  |  | $ | 1.21 |
Diluted | 0.42 |  |  | 0.40 |  |  | 1.27 |  |  | 1.20 |

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NOTE 11 – Stock-Based Compensation
The Corporation grants equity awards to employees in the form of stock options, restricted stock, RSUs or PSUs under its Employee Equity Plan. In addition, employees may purchase stock under the Corporation's Employee Stock Purchase Plan. The fair value of equity awards granted to employees is recognized as compensation expense over the period during which employees are required to provide service in exchange for such awards. Compensation expense for PSUs is also recognized over the period during which employees are required to provide service in exchange for such awards, however, compensation expense may vary based on the expectations for actual performance relative to defined performance measures.
The Corporation also grants equity awards to non-employee members of its board of directors and the Bank board of directors under the Directors’ Plan. Under the Directors’ Plan, the Corporation can grant equity awards to non-employee Corporation and Bank directors in the form of restricted stock, RSUs or common stock. Recent grants of equity awards under the Directors’ Plan have been limited to RSUs.
Equity awards under the Employee Equity Plan are generally granted annually and generally become fully vested over or after a three-year vesting period. The vesting period for non-performance-based awards represents the period during which employees are required to provide service in exchange for such awards. Equity awards under the Directors' Plan are generally granted annually and become fully vested after a one-year vesting period. Certain events, as defined in the Employee Equity Plan and the Directors' Plan, result in the acceleration of the vesting of equity awards.
Fair values for RSUs and a majority of PSUs are based on the trading price of the Corporation's stock on the date of grant and earn dividend equivalents during the vesting period, which are forfeitable if the awards do not vest. The fair value of certain PSUs is estimated through the use of the Monte Carlo valuation methodology as of the date of grant.
As of September 30, 2023, the Employee Equity Plan had approximately 4.4 million shares reserved for future grants through 2032, and the Directors’ Plan had approximately 402,000 shares reserved for future grants through 2033.
The following table presents compensation expense and the related tax benefits for equity awards recognized in the consolidated statements of income:

| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (dollars in thousands)
Compensation expense | $ | 3,048 |  |  | $ | 3,791 |  |  | $ | 7,288 |  |  | $ | 10,377 |
Tax benefit | (673) |  |  | (840) |  |  | (1,600) |  |  | (2,201) |
Total stock-based compensation, net of tax | $ | 2,375 |  |  | $ | 2,951 |  |  | $ | 5,688 |  |  | $ | 8,176 |

NOTE 12 – Employee Benefit Plans
The net periodic pension cost for the Pension Plan consisted of the following components:

| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (dollars in thousands)
Interest cost | $ | 856 |  |  | $ | 599 |  |  | $ | 2,567 |  |  | $ | 1,795 |
Expected return on plan assets | (878) |  |  | (1,098) |  |  | (2,632) |  |  | (3,295) |
Net amortization and deferral | 81 |  |  | 163 |  |  | 242 |  |  | 490 |
Net periodic pension cost | $ | 59 |  |  | $ | (336) |  |  | $ | 177 |  |  | $ | (1,010) |

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The components of the net benefit for the Postretirement Plan consisted of the following components:

| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (dollars in thousands)
Interest cost | $ | 12 |  |  | $ | 8 |  |  | $ | 38 |  |  | $ | 25 |
Net accretion and deferral | (137) |  |  | (132) |  |  | (409) |  |  | (394) |
Net periodic benefit | $ | (125) |  |  | $ | (124) |  |  | $ | (371) |  |  | $ | (369) |

In connection with the Merger, the Corporation assumed the obligations of Prudential Bancorp under a multiemployer defined benefit pension plan that had previously been closed to new Prudential Bancorp participants.
The Corporation recognizes the funded status of its Pension Plan and Postretirement Plan on the consolidated balance sheets and recognizes the change in that funded status through other comprehensive income.
NOTE 13 – Commitments and Contingencies
Commitments
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its borrowers or obligors.
Commitments to extend credit are agreements to lend to a borrower or obligor as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the 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 borrower's or obligor's creditworthiness on a case-by-case basis. The amount of collateral, if any, obtained upon an extension of credit is based on management's credit evaluation of the borrower or obligor. Collateral held varies but may include accounts receivable, inventory, property, equipment and income-producing commercial properties.
Standby letters of credit are conditional commitments issued to guarantee the financial or performance obligation of a borrower or obligor to a third party. Commercial letters of credit are conditional commitments issued to facilitate foreign and domestic trade transactions for borrowers or obligors. The credit risk involved in issuing letters of credit is similar to that involved in extending loan facilities. These obligations are underwritten consistent with commercial lending standards. The maximum exposure to loss for standby and commercial letters of credit is equal to the contractual (or notional) amount of the instruments.
The following table presents the Corporation's commitments to extend credit and letters of credit:

| September 30, 2023 |  | December 31, 2022
| (dollars in thousands)
Commitments to extend credit | $ | 8,857,675 |  |  | $ | 8,695,621 |
Standby letters of credit | 269,935 |  |  | 260,829 |
Commercial letters of credit | 51,864 |  |  | 49,288 |

Residential Lending
The Corporation originates and sells residential mortgages to secondary market investors. The Corporation provides customary representations and warranties to secondary market investors that specify, among other things, that the loans have been underwritten to the standards of the secondary market investor. The Corporation may be required to repurchase specific loans or reimburse the investor for a credit loss incurred on a sold loan if it is determined that the representations and warranties have not been met. Under some agreements with secondary market investors, the Corporation may have additional credit exposure beyond customary representations and warranties, based on the specific terms of those agreements.
The Corporation maintains a reserve for estimated losses related to loans sold to investors. As of September 30, 2023 and December 31, 2022, the total reserve for losses on residential mortgage loans sold was $1.8 million and $1.4 million,
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respectively, including reserves for both representation and warranty and credit loss exposures. In addition, a component of ACL - OBS credit exposures of $4.2 million and $6.0 million, as of September 30, 2023 and December 31, 2022, respectively, related to additional credit exposures for potential loan repurchases.
Legal Proceedings
The Corporation is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business activities. The Corporation evaluates the possible impact of these matters, taking into consideration the most recent information available. A loss reserve is established for those matters for which the Corporation believes a loss is both probable and reasonably estimable. Once established, the reserve is adjusted as appropriate to reflect any subsequent developments. 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.
NOTE 14 – Borrowings
On March 16, 2022, $65.0 million of senior notes with a fixed rate of 3.60% were repaid upon their maturity.
The Corporation owned all of the common stock of the Columbia Bancorp Statutory Trust, Columbia Bancorp Statutory Trust II and Columbia Bancorp Statutory Trust III, each of which issued TruPS in conjunction with the Corporation issuing junior subordinated deferrable interest debentures to these trusts. In September 2022, the Corporation redeemed all of the outstanding junior subordinated deferrable interest debentures issued to these trusts, totaling approximately $17.2 million, and these trusts redeemed all of the outstanding TruPS in a like amount, after which the subsidiary trusts were canceled.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion relates to the Corporation, a financial holding company registered under the BHCA and corporation incorporated under the laws of the Commonwealth of Pennsylvania, and its wholly owned subsidiaries. Management's Discussion should be read in conjunction with the consolidated financial statements and other financial information presented in this report.
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 NIM, which is FTE net interest income as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses on loans and OBS credit risks, non-interest expenses and income taxes.
The following table presents a summary of the Corporation's earnings and selected performance ratios:

| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (dollars in thousands, except per share data)
Net income | $ | 72,097 |  | $ | 70,871 |  | $ | 220,017 |  | $ | 205,148
Net income available to common shareholders | $ | 69,535 |  | $ | 68,309 |  | $ | 212,331 |  | $ | 197,462
Net income available to common shareholders (diluted) | $ | 0.42 |  | $ | 0.40 |  | $ | 1.27 |  | $ | 1.20
Operating net income available to common shareholders per share(1) | $ | 0.43 |  | $ | 0.48 |  | $ | 1.29 |  | $ | 1.28
Return on average assets, annualized | 1.04 | % |  | 1.07 | % |  | 1.08 | % |  | 1.06 | %
Operating return on average assets, annualized(1) | 1.08 | % |  | 1.25 | % |  | 1.10 | % |  | 1.13 | %
Return on average common shareholders' equity | 11.25 | % |  | 11.24 | % |  | 11.62 | % |  | 10.93 | %
Return on average common shareholders' equity (tangible), annualized(1) | 15.17 | % |  | 17.31 | % |  | 15.39 | % |  | 15.11 | %
Net interest margin(2) | 3.40 | % |  | 3.54 | % |  | 3.44 | % |  | 3.13 | %
Efficiency ratio(1) | 61.5 | % |  | 57.8 | % |  | 60.0 | % |  | 61.4 | %
Non-performing assets to total assets | 0.52 | % |  | 0.76 | % |  | 0.52 | % |  | 0.76 | %
Net charge-offs (recoveries) to average loans | 0.10 | % |  | 0.01 | % |  | 0.13 | % |  | (0.03) | %

(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 "Supplemental Reporting of Non-GAAP Based Financial Measures" section of Management's Discussion.
(2) Presented on a FTE basis, using a 21% federal tax rate and statutory interest expense disallowances.
Fed Funds Rate
Since March 16, 2022, the FOMC increased the target range for the Fed Funds Rate eleven times to address elevated levels of inflation, placing the target range for the Fed Funds Rate at 5.25% - 5.50% as of November 9, 2023.
LIBOR Transition
As disclosed in Item 1A. Risk Factors of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022, U.S. dollar LIBOR ceased as of June 30, 2023. The Corporation has successfully transitioned substantially all of its products away from LIBOR as of June 30, 2023. For most financial products, the most common alternative reference rates have been SOFR-based benchmarks. This is true for both new originations and legacy LIBOR contracts that were subject to amendment or a transition by their terms.
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Financial Highlights
Following is a summary of the financial highlights for the three months and nine months ended September 30, 2023:
•Net Income Available to Common Shareholders and Net Income Per Share - Net income available to common shareholders was $69.5 million for the three months ended September 30, 2023, a $1.2 million increase compared to $68.3 million for the same period in 2022. Diluted net income available to common shareholders, per share was $0.42 for the three months ended September 30, 2023, a $0.02 increase compared to the same period in 2022. Net income available to common shareholders was $212.3 million for the nine months ended September 30, 2023, a $14.9 million increase compared to $197.5 million for the same period in 2022. Diluted net income available to common shareholders, per share was $1.27 for the nine months ended September 30, 2023, a $0.07 increase compared to the same period in 2022.
•Net Interest Income - Net interest income was $213.8 million for the three months ended September 30, 2023, a decrease of $1.7 million, or 0.8%, compared to $215.6 million for the same period in 2022. The decrease was primarily driven by rising interest rates resulting in an increase in interest expense from interest-bearing deposits and borrowings and other interest-bearing liabilities of $74.1 million and $24.3 million, respectively. A decrease of the average balance of noninterest-bearing deposits of $1.9 billion, and increases in the average balances of interest-bearing deposits and borrowings and other interest-bearing liabilities of $1.4 billion and $1.3 billion, respectively, in the third quarter of 2023 compared to the third quarter of 2022 also contributed to the increase in interest expense. The increase in interest expense was partially offset by an increase in interest income for the third quarter of 2023 compared to the third quarter of 2022, driven primarily by rising interest rates and an increase in the average balance of net loans of $1.6 billion compared to the same period in 2022. Net interest income was $642.3 million for the nine months ended September 30, 2023, an increase of $86.6 million, or 15.6%, compared to $555.7 million for the same period in 2022. The increase was driven by higher interest rates and an increase in average balances of net loans, partially offset by higher interest rates and an increase in the average balance of higher-cost borrowings and other interest-bearing liabilities and interest-bearing deposits.
•Net Interest Margin - For the three months ended September 30, 2023, NIM decreased to 3.40%, or 14 bps, compared to the same period in 2022, driven by a 161 bps increase in the cost of funds, partially offset by a 151 bps increase in the yield on net loans, a 10 bps increase in the yield on investment securities and a 366 bps increase in the yield on other interest-earning assets. For the nine months ended September 30, 2023, NIM increased to 3.44%, or 31 bps, compared to the same period in 2022, driven by a 178 bps increase in the yield on net loans, a 19 bps increase in the yield on investment securities and a 298 bps increase in the yield on other interest-earning assets, partially offset by a 139 bps increase in the cost of funds.
•Net Loans - Average net loans increased $1.6 billion, or 8.0%, for the three months ended September 30, 2023 compared to the same period in 2022. The increase in average net loans was largely driven by increases in average residential mortgage loans, average commercial and industrial loans, average commercial mortgage loans and average consumer loans of $723.5 million, $360.8 million, $346.5 million and $156.6 million, respectively. Average net loans increased $2.0 billion, or 10.4%, for the nine months ended September 30, 2023 compared to the same period in 2022. The increase in average net loans was largely driven by increases in average residential mortgage loans, average commercial mortgage loans, average commercial and industrial loans, average consumer loans and average real estate construction loans of $860.4 million, $402.7 million, $397.3 million, $216.4 million and $81.0 million, respectively.
•Deposits - Average deposits decreased $430.8 million, or 2.0%, for the three months ended September 30, 2023 compared to the same period in 2022. The decrease in average deposits was largely due to a decrease in average noninterest-bearing demand deposits of $1.9 billion, partially offset by increases in average time deposits of $714.8 million and average brokered deposits of $690.6 million. Average deposits decreased $549.3 million, 2.5%, for the nine months ended September 30, 2023 compared to the same period in 2022. The decrease in average deposits was due to decreases in average noninterest-bearing demand deposits of $1.4 billion and average interest-bearing demand deposits of $121.5 million, partially offset by increases in average brokered deposits of $525.1 million and average time deposits of $399.3 million.
•Borrowings and Other Interest-Bearing Liabilities - Average borrowings and other interest-bearing liabilities increased $1.3 billion, for the three months ended September 30, 2023 compared to the same period in 2022.
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The increase in borrowings and other interest-bearing liabilities was primarily due to increases in average FHLB advances and Federal funds purchased of $586.9 million and $537.2 million, respectively. Average borrowings and other interest-bearing liabilities increased $1.7 billion for the nine months ended September 30, 2023 compared to the same period in 2022. The increase in borrowings and other interest-bearing liabilities was primarily due to increases in average FHLB advances and Federal funds purchased of $907.3 million and $573.1 million, respectively.
•Asset Quality - Non-performing assets decreased $34.2 million, or 19.2%, as of September 30, 2023 compared to December 31, 2022, and were 0.52% and 0.66% of total assets as of those dates, respectively. Annualized net charge-offs to average loans outstanding was 0.10% for the three months ended September 30, 2023, compared to annualized net charge-offs to average loans outstanding of 0.01% for the same period in 2022. Net charge-offs of $21.1 million during the nine months ended September 30, 2023 were primarily due to a charge-off of $13.3 million during the first quarter of 2023 for a commercial office loan. The provision for credit losses was $9.9 million for the three months ended September 30, 2023, compared to a provision for credit losses of $19.0 million for the same period in 2022. The provision for credit losses was $44.2 million for the nine months ended September 30, 2023, compared to a provision of $13.5 million for the same period in 2022.
•Non-interest Income - Non-interest income, excluding investment securities gains, for the three months ended September 30, 2023, decreased $3.3 million, or 5.5%, compared to the same period in 2022. The decrease in non-interest income was primarily due to a $3.0 million reduction to other non-interest income to reflect market valuation movement in certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions resulting from the transition from LIBOR to SOFR. Non-interest income, excluding investment securities gains, for the nine months ended September 30, 2023, decreased $4.6 million, or 2.6%, compared to the same period in 2022. The decrease in non-interest income was primarily due to the aforementioned $3.0 reduction to other non-interest income.
•Non-interest Expense - Non-interest expense, excluding merger-related expenses of $7.0 million in the third quarter of 2022, increased $8.5 million, or 5.2%, for the three months ended September 30, 2023 compared to the same period in 2022. The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $2.7 million in other outside services expense driven by a number of corporate initiatives, $2.5 million in salaries and employee benefits expense, $1.6 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023, and $1.1 million in data processing and software expense. The $2.5 million increase in salaries and benefits expense was primarily driven by annual merit increases, lower deferred employee loan origination costs, higher employee benefits expense, due to healthcare claims experience, and higher pension expense, partially offset by lower incentive plan compensation. Non-interest expense, excluding merger-related expenses of $8.4 million in the nine months ended September 30, 2022, increased $41.8 million, or 9.2%, for the nine months ended September 30, 2023. The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $16.0 million in salaries and employee benefits expense, $6.8 million in other outside services expense, $5.1 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023, and $4.7 million in data processing and software expense. Higher expense levels compared to the same period in 2022 are in part due to the Prudential Bancorp acquisition. Additional drivers of the increase in non-interest expense were operational risk losses, including fraud-related costs, a lower gain on sales of fixed assets and state tax expenses each reflected in other non-interest expense. The $16.0 million increase in salaries and benefits expense was primarily driven by annual merit increases, an increase in the number of employees, higher healthcare claims expenses and higher pension expense.
•Income Taxes - The Corporation's ETR was 18.9% for the three months ended September 30, 2023 and 17.8% for the nine months ended September 30, 2023 compared to 17.3% for the full-year of 2022. The ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities and investments in community development projects that generate tax credits under various programs.
Critical Accounting Policies
The Corporation's accounting policies are fundamental to understanding Management’s Discussion. Critical policies are those that the Corporation considers to be most important to the presentation of its financial condition and results of operations, because they require management's most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain.
47

The Corporation's critical accounting policies are described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022.
Supplemental Reporting of Non-GAAP Based Financial Measures
This Quarterly Report on Form 10-Q contains supplemental financial information, as detailed below, that has been derived by methods other than GAAP. The Corporation has presented these non-GAAP financial measures because it believes that these measures provide useful and comparative information to assess trends in the Corporation's results of operations. Presentation of these non-GAAP financial measures is consistent with how the Corporation evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Corporation's industry. Management believes that these non-GAAP financial measures, in addition to GAAP measures, are also useful to investors to evaluate the Corporation's results. Investors should recognize that the Corporation's presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures, and the Corporation strongly encourages a review of its consolidated financial statements in their entirety.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure follow:

| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (dollars in thousands, except per share data)
Operating net income available to common shareholders
Net income available to common shareholders | $ | 69,535 |  | $ | 68,309 |  | $ | 212,331 |  | $ | 197,462
Plus: Core deposit intangible amortization | 441 |  | 514 |  | 1,867 |  | 514
Plus: Merger-related expenses | — |  | 7,006 |  | — |  | 8,434
Plus: CECL Day 1 Provision expense | — |  | 7,954 |  | — |  | 7,954
Plus: Interest rate derivative transition valuation(1) | 2,958 |  | — |  | 2,958 |  | —
Less: Tax impact of adjustments | (714) |  | (3,250) |  | (1,013) |  | (3,550)
Operating net income available to common shareholders (numerator) | $ | 72,220 |  | $ | 80,533 |  | $ | 216,143 |  | $ | 210,814
Weighted average shares (diluted) (denominator) | 166,023 |  | 168,781 |  | 167,181 |  | 164,254
Operating net income available to common shareholders, per share (diluted) | $ | 0.43 |  | $ | 0.48 |  | $ | 1.29 |  | $ | 1.28
Operating return on average assets, annualized |  |  |  |  |  |  |
Net income | $ | 72,097 |  | $ | 70,871 |  |  | $ | 220,017 |  | $ | 205,148
Plus: Core deposit intangible amortization | 441 |  | 514 |  | 1,867 |  | 514
Plus: Merger-related expenses | — |  | 7,006 |  | — |  | 8,434
Plus: CECL Day 1 Provision expense | — |  | 7,954 |  | — |  | 7,954
Plus: Interest rate derivative transition valuation(1) | 2,958 |  | — |  | 2,958 |  | —
Less: Tax impact of adjustments | (714) |  | (3,250) |  | (1,013) |  | (3,550)
Operating net income (numerator) | $ | 74,782 |  | $ | 83,095 |  | $ | 223,829 |  | $ | 218,500
Total average assets | 27,377,836 |  | 26,357,095 |  | 27,173,100 |  | 25,855,097
Less: Average net core deposit intangible | (5,548) |  | (8,053) |  | (6,296) |  | (2,714)
Total operating average assets | $ | 27,372,288 |  | $ | 26,349,042 |  | $ | 27,166,804 |  | $ | 25,852,383
Operating return on average assets | 1.08 | % |  | 1.25 | % |  | 1.10 | % |  | 1.13 | %

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| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (dollars in thousands, except per share data)
Return on average common shareholders' equity (tangible)
Net income available to common shareholders | $ | 69,535 |  | $ | 68,309 |  | $ | 212,331 |  | $ | 197,462
Plus: Intangible amortization | 601 |  | 690 |  |  | 2,347 |  | 1,043
Plus: Merger-related expenses | — |  | 7,006 |  |  | — |  | 8,434
Plus: CECL Day 1 Provision expense | — |  | 7,954 |  | — |  | 7,954
Plus: Interest rate derivative transition valuation(1) | 2,958 |  | — |  | 2,958 |  | —
Less: Tax impact of adjustments | (747) |  | (3,287) |  | (1,114) |  | (3,661)
Operating net income available to common shareholders (numerator) | $ | 72,347 |  | $ | 80,672 |  | $ | 216,522 |  | $ | 211,232
Average shareholders' equity | $ | 2,645,977 |  | $ | 2,604,057 |  | $ | 2,635,705 |  | $ | 2,607,514
Less: Average preferred stock | (192,878) |  | (192,878) |  | (192,878) |  | (192,878)
Less: Average goodwill and intangible assets | (561,578) |  | (562,285) |  | (562,155) |  | (545,846)
Average tangible common shareholders' equity (denominator) | $ | 1,891,521 |  | $ | 1,848,894 |  | $ | 1,880,672 |  | $ | 1,868,790
Return on average common shareholders' equity (tangible) | 15.17 | % |  | 17.31 | % |  | 15.39 | % |  | 15.11 | %
Efficiency ratio |  |  |  |  |  |  |
Non-interest expense | $ | 171,020 |  | $ | 169,558 |  | $ | 498,656 |  | $ | 465,266
Less: Amortization of tax credit investments | — |  | (696) |  | — |  | (2,088)
Less: Merger-related expenses | — |  | (7,006) |  | — |  | (8,434)
Less: Intangible amortization | (601) |  | (690) |  | (2,347) |  | (1,043)
Non-interest expense (numerator) | $ | 170,419 |  | $ | 161,166 |  | $ | 496,309 |  | $ | 453,701
Net interest income | $ | 213,842 |  | $ | 215,582 |  | $ | 642,281 |  | $ | 555,723
Tax equivalent adjustment | 4,442 |  | 3,970 |  | 13,261 |  | 10,685
Plus: Total non-interest income | 55,961 |  | 59,162 |  | 168,300 |  | 172,809
Plus: Interest rate derivative transition valuation(1) | 2,958 |  | — |  | 2,958 |  | —
Less: Investment securities (gains) losses, net | — |  | 53 |  | (19) |  | 26
Total revenue (denominator) | $ | 277,203 |  | $ | 278,767 |  | $ | 826,781 |  | $ | 739,243
Efficiency ratio | 61.5 | % |  | 57.8 | % |  | 60.0 | % |  | 61.4 | %
(1) Resulting from the reference rate transition from LIBOR to SOFR in the Corporation's commercial customer interest rate swap program.

49

RESULTS OF OPERATIONS
Three months ended September 30, 2023 compared to the three months ended September 30, 2022
Net Interest Income
FTE net interest income was $218.3 million for the three months ended September 30, 2023, a decrease of $1.3 million, compared to $219.6 million for the same period in 2022. For the three months ended September 30, 2023, NIM decreased to 3.40%, or 14 bps, compared to the same period in 2022. The Corporation manages the risk associated with changes in interest rates through the techniques described within Item 3, "Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report on Form 10-Q. The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a 21% federal tax rate, and statutory interest expense disallowances. The discussion following this table is based on these taxable-equivalent amounts.

| Three months ended September 30
| 2023 |  | 2022
| Average Balance |  | Interest |  | Yield/ Rate |  | Average Balance |  | Interest |  | Yield/ Rate
ASSETS | (dollars in thousands)
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |
Net loans(1) | $ | 21,121,277 |  |  | $ | 304,167 |  |  | 5.72 | % |  | $ | 19,563,825 |  |  | $ | 207,343 |  |  | 4.21 | %
Investment securities(2) | 4,197,550 |  |  | 27,274 |  |  | 2.59 |  |  | 4,500,461 |  |  | 28,022 |  |  | 2.49 |
Other interest-earning assets | 263,244 |  |  | 3,372 |  |  | 5.11 |  |  | 631,771 |  |  | 2,297 |  |  | 1.45 |
Total interest-earning assets | 25,582,071 |  |  | 334,813 |  |  | 5.20 |  |  | 24,696,057 |  |  | 237,662 |  |  | 3.83 |
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks | 306,496 |  |  |  |  |  |  | 152,349 |  |  |  |  |
Premises and equipment | 217,447 |  |  |  |  |  |  | 223,880 |  |  |  |  |
Other assets | 1,562,233 |  |  |  |  |  |  | 1,545,812 |  |  |  |  |
Less: ACL - loans(3) | (290,411) |  |  |  |  |  |  | (261,003) |  |  |  |  |
Total Assets | $ | 27,377,836 |  |  |  |  |  |  | $ | 26,357,095 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |
Demand deposits | $ | 5,740,229 |  |  | $ | 18,690 |  |  | 1.29 | % |  | $ | 5,708,059 |  |  | $ | 1,886 |  |  | 0.13 | %
Savings and money market deposits | 6,676,792 |  |  | 34,277 |  |  | 2.04 |  |  | 6,681,713 |  |  | 3,414 |  |  | 0.20 |
Brokered deposits | 937,657 |  |  | 12,250 |  |  | 5.18 |  |  | 247,105 |  |  | 1,346 |  |  | 2.16 |
Time deposits | 2,330,206 |  |  | 18,939 |  |  | 3.22 |  |  | 1,615,384 |  |  | 3,404 |  |  | 0.84 |
Total interest-bearing deposits | 15,684,884 |  |  | 84,156 |  |  | 2.13 |  |  | 14,252,261 |  |  | 10,050 |  |  | 0.28 |
Borrowings and other interest-bearing liabilities | 2,691,087 |  |  | 32,373 |  |  | 4.74 |  |  | 1,359,348 |  |  | 8,060 |  |  | 2.35 |
Total interest-bearing liabilities | 18,375,971 |  |  | 116,529 |  |  | 2.51 |  |  | 15,611,609 |  |  | 18,110 |  |  | 0.47 |
Noninterest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |
Demand deposits | 5,672,411 |  |  |  |  |  |  | 7,535,791 |  |  |  |  |
Other noninterest-bearing liabilities | 683,477 |  |  |  |  |  |  | 605,638 |  |  |  |  |
Total Liabilities | 24,731,859 |  |  |  |  |  |  | 23,753,038 |  |  |  |  |
Total Deposits/Cost of deposits | 21,357,295 |  |  |  |  | 1.56 |  |  | 21,788,052 |  |  |  |  | 0.18 |
Total Interest-bearing liabilities and non-interest bearing deposits/Cost of funds | 24,048,382 |  |  |  |  | 1.92 |  |  | 23,147,400 |  |  |  |  | 0.31 |
Shareholders’ equity | 2,645,977 |  |  |  |  |  |  | 2,604,057 |  |  |  |  |
Total Liabilities and Shareholders’ Equity | $ | 27,377,836 |  |  |  |  |  |  | $ | 26,357,095 |  |  |  |  |
Net interest income/FTE NIM |  |  | 218,284 |  |  | 3.40 | % |  |  |  | 219,552 |  |  | 3.54 | %
Tax equivalent adjustment |  |  | (4,442) |  |  |  |  |  |  | (3,970) |  |  |
Net interest income |  |  | $ | 213,842 |  |  |  |  |  |  | $ | 215,582 |  |  |

(1) Average balance includes non-performing loans.
(2) Balances include amortized historical cost for AFS. The related unrealized holding gains (losses) are included in other assets.
(3) ACL - loans relates to the ACL specifically for net loans and does not include the ACL for OBS credit exposures, which is included in other liabilities.
50

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

| 2023 vs. 2022 Increase (Decrease) due to change in
| Volume |  | Yield/Rate |  | Net
| (dollars in thousands)
FTE Interest income on: |  |  |  |  |
Net loans(1) | $ | 17,583 |  |  | $ | 79,241 |  |  | $ | 96,824 |
Investment securities | (1,915) |  |  | 1,167 |  |  | (748) |
Other interest-earning assets | (1,984) |  |  | 3,059 |  |  | 1,075 |
Total interest income | $ | 13,684 |  |  | $ | 83,467 |  |  | $ | 97,151 |
Interest expense on: |  |  |  |  |
Demand deposits | $ | 11 |  |  | $ | 16,793 |  |  | $ | 16,804 |
Savings and money market deposits | (2) |  |  | 30,865 |  |  | 30,863 |
Brokered deposits | 7,265 |  |  | 3,639 |  |  | 10,904 |
Time deposits | 2,095 |  |  | 13,440 |  |  | 15,535 |
Borrowings and other interest-bearing liabilities | 11,919 |  |  | 12,394 |  |  | 24,313 |
Total interest expense | $ | 21,288 |  |  | $ | 77,131 |  |  | $ | 98,419 |

(1) Average balance includes non-performing loans.
Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of direct changes that are attributable to each component.
Compared to the third quarter of 2022, FTE total interest income for the third quarter of 2023 increased $97.2 million, or 40.9%, primarily due to an increase of $83.5 million attributable to changes in yield, of which $79.2 million related to net loans. The yield on average interest-earning assets increased 137 bps in the third quarter of 2023 compared to the same period in 2022.
In the third quarter of 2023, interest expense increased $98.4 million compared to the third quarter of 2022, primarily driven by an increase in the rate on interest-bearing liabilities resulting in a $77.1 million increase in interest expense. The increase in interest expense attributable to rate was driven by increases in the rates on savings and money market deposits, demand deposits, borrowings and other interest-bearing liabilities, time deposits and brokered deposits. The increase in interest expense attributable to volume was primarily due to borrowings and other interest-bearing liabilities and brokered deposits.
Average loans and average FTE yields, by type, are summarized in the following table:

| Three months ended September 30 |  |  |  |
| 2023 |  | 2022 |  |  |  | Increase (Decrease)
| Balance |  | Yield |  | Balance |  | Yield |  | $ |  | %
| (dollars in thousands) |  |  |  |
Real estate – commercial mortgage | $ | 7,912,801 |  |  | 6.14 | % |  | $ | 7,757,210 |  |  | 4.24 | % |  | $ | 155,591 |  |  | 2.0 | %
Commercial and industrial | 4,611,376 |  |  | 6.45 |  |  | 4,181,651 |  |  | 4.52 |  |  | 429,725 |  |  | 10.3 |
Real estate – residential mortgage | 5,209,105 |  |  | 3.84 |  |  | 4,452,587 |  |  | 3.41 |  |  | 756,518 |  |  | 17.0 |
Real estate – home equity | 1,045,806 |  |  | 7.21 |  |  | 1,099,737 |  |  | 4.82 |  |  | (53,931) |  |  | (4.9) |
Real estate – construction | 1,254,577 |  |  | 7.00 |  |  | 1,179,584 |  |  | 4.41 |  |  | 74,993 |  |  | 6.4 |
Consumer | 761,273 |  |  | 6.22 |  |  | 604,352 |  |  | 5.10 |  |  | 156,921 |  |  | 26.0 |
Leases and other loans(1) | 326,339 |  |  | 4.78 |  |  | 288,704 |  |  | 6.29 |  |  | 37,635 |  |  | 13.0 |
Total loans | $ | 21,121,277 |  |  | 5.72 | % |  | $ | 19,563,825 |  |  | 4.21 | % |  | $ | 1,557,452 |  |  | 8.0 | %

(1) Consists of equipment lease financing, overdrafts and net origination fees and costs.
During the third quarter of 2023, average loans increased $1.6 billion, or 8.0%, compared to the same period in 2022. The increase in average loans was largely driven by increases in average residential mortgage loans, average commercial and industrial loans, average consumer loans and average commercial mortgage loans of $756.5 million, $429.7 million, $156.9
51

million and $155.6 million, respectively. The yield on total loans increased 151 bps to 5.72% for the third quarter of 2023, compared to 4.21% for the same period in 2022, primarily due to rising interest rates.
Average deposits and average interest rates, by type, are summarized in the following table:

| Three months ended September 30 |  |  |  |
| 2023 |  | 2022 |  | Increase (Decrease)
| Balance |  | Rate |  | Balance |  | Rate |  | $ |  | %
| (dollars in thousands)
Noninterest-bearing demand | $ | 5,672,411 |  |  | — | % |  | $ | 7,535,791 |  |  | — | % |  | $ | (1,863,380) |  |  | (24.7) | %
Interest-bearing demand | 5,740,229 |  |  | 1.29 |  |  | 5,708,059 |  |  | 0.13 |  |  | 32,170 |  |  | 0.6 |
Savings and money market deposits | 6,676,792 |  |  | 2.04 |  |  | 6,681,713 |  |  | 0.20 |  |  | (4,921) |  |  | (0.1) |
Total demand deposits and savings and money market deposits | 18,089,432 |  |  | 1.16 |  |  | 19,925,563 |  |  | 0.11 |  |  | (1,836,131) |  |  | (9.2) |
Brokered deposits | 937,657 |  |  | 5.18 |  |  | 247,105 |  |  | 2.16 |  |  | 690,552 |  |  | N/M
Time deposits | 2,330,206 |  |  | 3.22 |  |  | 1,615,384 |  |  | 0.84 |  |  | 714,822 |  |  | 44.3 |
Total deposits | $ | 21,357,295 |  |  | 1.56 | % |  | $ | 21,788,052 |  |  | 0.18 | % |  | $ | (430,757) |  |  | (2.0) | %

The cost of total deposits increased 138 bps, to 1.56%, for the third quarter of 2023 compared to 0.18% for the same period in 2022, due to an increase in rates and a change in the mix of deposits. The rate on total demand deposits and savings and money market deposits increased to 1.16% for the third quarter of 2023 compared to 0.11% for the same period in 2022. Average noninterest-bearing demand deposits decreased $1.9 billion for the third quarter of 2023 compared to the same period in 2022. Average time deposits and average brokered deposits increased $714.8 million and $690.6 million, respectively, during the third quarter of 2023 compared to the same period in 2022.
Average borrowings and interest rates, by type, are summarized in the following table:

| Three months ended September 30 |  |  |  |
| 2023 |  | 2022 |  | Increase (Decrease)
| Balance |  | Rate |  | Balance |  | Rate |  | $ |  | %
Borrowings and other interest-bearing liabilities: | (dollars in thousands)
Federal funds purchased | $ | 634,163 |  |  | 5.52 | % |  | $ | 96,965 |  |  | 2.22 | % |  | $ | 537,198 |  |  | N/M
Federal Home Loan Bank advances | 793,098 |  |  | 5.11 |  |  | 206,152 |  |  | 2.70 |  |  | 586,946 |  |  | N/M
Senior debt and subordinated debt | 540,086 |  |  | 3.96 |  |  | 554,735 |  |  | 3.97 |  |  | (14,649) |  |  | (2.6) |
Other borrowings and other interest-bearing liabilities(1) | 723,740 |  |  | 4.25 |  |  | 501,496 |  |  | 0.48 |  |  | 222,244 |  |  | 44.3 |
Total borrowings and other interest-bearing liabilities | $ | 2,691,087 |  |  | 4.74 | % |  | $ | 1,359,348 |  |  | 2.35 | % |  | $ | 1,331,739 |  |  | 98.0 | %

(1) Includes repurchase agreements, short-term promissory notes, capital leases and collateral liabilities.
Average total borrowings and other interest-bearing liabilities increased $1.3 billion in the third quarter of 2023 compared to the same period in 2022. Average total borrowings and other interest-bearing liabilities increased primarily as a result of a decrease in average total deposits and an increase in the average net loan balance. Average FHLB advances, average Federal funds purchased and average other borrowings and other interest-bearing liabilities increased $586.9 million, $537.2 million and $222.2 million, respectively, in the third quarter of 2023 compared to the same period in 2022.
Provision for Credit Losses
The provision for credit losses was $9.9 million for the third quarter of 2023 compared to a provision of $19.0 million for the same period in 2022. The decline in the provision for credit losses was primarily due to an $8.0 million CECL Day 1 Provision in the third quarter of 2022.
52

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

| Three months ended September 30 |  | Increase (Decrease)
| 2023 |  | 2022 |  | $ |  | %
| (dollars in thousands)
Commercial banking: |  |  |  |  |  |  |
Merchant and card | $ | 7,626 |  |  | $ | 7,601 |  |  | $ | 25 |  |  | N/M
Cash management | 5,960 |  |  | 6,483 |  |  | (523) |  |  | (8.1) |
Capital markets | 2,960 |  |  | 4,060 |  |  | (1,100) |  |  | (27.1) |
Other commercial banking | 3,176 |  |  | 2,664 |  |  | 512 |  |  | 19.2 |
Total commercial banking | 19,722 |  |  | 20,808 |  |  | (1,086) |  |  | (5.2) |
Wealth management | 19,413 |  |  | 17,610 |  |  | 1,803 |  |  | 10.2 | %
Consumer banking: |  |  |  |  |  |  |
Card | 6,770 |  |  | 6,278 |  |  | 492 |  |  | 7.8 |
Overdraft | 2,996 |  |  | 4,463 |  |  | (1,467) |  |  | (32.9) |
Other consumer banking | 2,407 |  |  | 2,534 |  |  | (127) |  |  | (5.0) |
Total consumer banking | 12,173 |  |  | 13,275 |  |  | (1,102) |  |  | (8.3) |
Mortgage banking | 3,190 |  |  | 3,720 |  |  | (530) |  |  | (14.2) |
Other | 1,463 |  |  | 3,802 |  |  | (2,339) |  |  | (61.5) |
Non-interest income before investment securities gains | 55,961 |  |  | 59,215 |  |  | (3,254) |  |  | (5.5) |
Investment securities gains (losses), net | — |  |  | (53) |  |  | 53 |  |  | N/M
Total Non-Interest Income | $ | 55,961 |  |  | $ | 59,162 |  |  | $ | (3,201) |  |  | (5.4) | %

Excluding net investment securities gains, non-interest income decreased $3.3 million, or 5.5%, in the third quarter of 2023 compared to the same period in 2022. The decrease in non-interest income was primarily due to a $3.0 million reduction to other non-interest income to reflect market valuation movement in certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions resulting from the transition from LIBOR to SOFR.
Expense
The following table presents the components of non-interest expense:

| Three months ended September 30 |  | Increase (Decrease)
| 2023 |  | 2022 |  | $ |  | %
| (dollars in thousands)
Salaries and employee benefits | $ | 96,757 |  |  | $ | 94,283 |  |  | $ | 2,474 |  |  | 2.6 | %
Data processing and software | 16,914 |  |  | 15,807 |  |  | 1,107 |  |  | 7.0 |
Net occupancy | 14,561 |  |  | 14,025 |  |  | 536 |  |  | 3.8 |
Other outside services | 12,094 |  |  | 9,361 |  |  | 2,733 |  |  | 29.2 |
FDIC insurance | 4,738 |  |  | 3,158 |  |  | 1,580 |  |  | 50.0 |
Equipment | 3,475 |  |  | 3,548 |  |  | (73) |  |  | (2.1) |
Marketing | 1,913 |  |  | 1,859 |  |  | 54 |  |  | 2.9 |
Professional fees | 1,869 |  |  | 2,373 |  |  | (504) |  |  | (21.2) |
Intangible amortization | 601 |  |  | 690 |  |  | (89) |  |  | (12.9) |
Merger-related expenses | — |  |  | 7,006 |  |  | (7,006) |  |  | N/M
Other | 18,098 |  |  | 17,448 |  |  | 650 |  |  | 3.7 |
Total non-interest expense | $ | 171,020 |  |  | $ | 169,558 |  |  | $ | 1,462 |  |  | 0.9 | %

53

Non-interest expense, excluding merger-related expenses of $7.0 million in the third quarter of 2022, increased $8.5 million, or 5.2%, for the three months ended September 30, 2023 compared to the same period in 2022. The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $2.7 million in other outside services expense driven by a number of corporate initiatives, $2.5 million in salaries and employee benefits expense, $1.6 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023, and $1.1 million in data processing and software expense. The $2.5 million increase in salaries and benefits expense was primarily driven by annual merit increases, lower deferred employee loan origination costs, higher employee benefits expense, due to healthcare claims experience, and higher pension expense, partially offset by lower incentive plan compensation.
Income Taxes
Income tax expense for the three months ended September 30, 2023 was $16.7 million, a $1.4 million increase from $15.4 million for the same period in 2022. The Corporation's ETR was 18.9% for the three months ended September 30, 2023 compared to 17.3% for the full year in 2022.
54

Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022
Net Interest Income
FTE net interest income increased $89.1 million to $655.5 million for the nine months ended September 30, 2023, from $566.4 million for the same period in 2022. NIM increased 31 bps to 3.44%, compared to 3.13% for the same period in 2022. The following table provides a comparative average balance sheet and net interest income analysis for those periods. Interest income and yields are presented on an FTE basis, using a 21% federal tax rate, and statutory interest expense disallowances. The discussion following this table is based on these taxable-equivalent amounts.

| Nine months ended September 30
| 2023 |  | 2022
| Average Balance |  | Interest |  | Yield/ Rate |  | Average Balance |  | Interest |  | Yield/ Rate
ASSETS | (dollars in thousands)
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |
Net loans(1) | $ | 20,819,280 |  |  | $ | 854,384 |  |  | 5.49 | % |  | $ | 18,865,672 |  |  | $ | 524,150 |  |  | 3.71 | %
Investment securities (2) | 4,240,093 |  |  | 82,098 |  |  | 2.58 |  |  | 4,376,084 |  |  | 78,334 |  |  | 2.39 |
Other interest-earning assets | 427,810 |  |  | 11,882 |  |  | 3.71 |  |  | 954,267 |  |  | 5,192 |  |  | 0.73 |
Total interest-earning assets | 25,487,183 |  |  | 948,364 |  |  | 4.97 |  |  | 24,196,023 |  |  | 607,676 |  |  | 3.35 |
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks | 193,083 |  |  |  |  |  |  | 158,267 |  |  |  |  |
Premises and equipment | 219,087 |  |  |  |  |  |  | 220,218 |  |  |  |  |
Other assets | 1,555,891 |  |  |  |  |  |  | 1,534,314 |  |  |  |  |
Less: ACL - loans(3) | (282,144) |  |  |  |  |  |  | (253,725) |  |  |  |  |
Total Assets | $ | 27,173,100 |  |  |  |  |  |  | $ | 25,855,097 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |
Demand deposits | $ | 5,535,671 |  |  | $ | 41,756 |  |  | 1.01 | % |  | $ | 5,657,165 |  |  | $ | 3,411 |  |  | 0.08 | %
Savings and money market deposits | 6,593,703 |  |  | 84,102 |  |  | 1.71 |  |  | 6,515,529 |  |  | 5,561 |  |  | 0.11 |
Brokered deposits | 779,191 |  |  | 29,557 |  |  | 5.07 |  |  | 254,100 |  |  | 2,181 |  |  | 1.14 |
Time deposits | 2,032,360 |  |  | 40,160 |  |  | 2.64 |  |  | 1,633,053 |  |  | 10,299 |  |  | 0.84 |
Total interest-bearing deposits | 14,940,925 |  |  | 195,575 |  |  | 1.75 |  |  | 14,059,847 |  |  | 21,452 |  |  | 0.20 |
Borrowings and other interest-bearing liabilities | 2,848,704 |  |  | 97,247 |  |  | 4.53 |  |  | 1,133,524 |  |  | 19,816 |  |  | 2.34 |
Total interest-bearing liabilities | 17,789,629 |  |  | 292,822 |  |  | 2.20 |  |  | 15,193,371 |  |  | 41,268 |  |  | 0.36 |
Noninterest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |
Demand deposits | 6,108,197 |  |  |  |  |  |  | 7,538,597 |  |  |  |  |
Other noninterest-bearing liabilities | 639,569 |  |  |  |  |  |  | 515,615 |  |  |  |  |
Total Liabilities | 24,537,395 |  |  |  |  |  |  | 23,247,583 |  |  |  |  |
Total Deposits/Cost of deposits | 21,049,122 |  |  |  |  | 1.24 |  |  | 21,598,444 |  |  |  |  | 0.13 |
Total Interest-bearing liabilities and noninterest-bearing deposits/Cost of funds | 23,897,826 |  |  |  |  | 1.63 |  |  | 22,731,968 |  |  |  |  | 0.24 |
Shareholders’ equity | 2,635,705 |  |  |  |  |  |  | 2,607,514 |  |  |  |  |
Total Liabilities and Shareholders’ Equity | $ | 27,173,100 |  |  |  |  |  |  | $ | 25,855,097 |  |  |  |  |
Net interest income/FTE NIM |  |  | 655,542 |  |  | 3.44 | % |  |  |  | 566,408 |  |  | 3.13 | %
Tax equivalent adjustment |  |  | (13,261) |  |  |  |  |  |  | (10,685) |  |  |
Net interest income |  |  | $ | 642,281 |  |  |  |  |  |  | $ | 555,723 |  |  |

(1) Average balance includes non-performing loans.
(2) Balances include amortized historical cost for AFS. The related unrealized holding gains (losses) are included in other assets.
(3) ACL - loans relates to the ACL specifically for net loans and does not include the ACL for OBS credit exposures, which is included in other liabilities.
55

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

| 2023 vs. 2022 Increase (Decrease) due to change in
| Volume |  | Yield/Rate |  | Net
| (dollars in thousands)
FTE interest income on: |  |  |  |  |
Net loans (1) | $ | 58,623 |  |  | $ | 271,611 |  |  | $ | 330,234 |
Investment securities | (2,438) |  |  | 6,202 |  |  | 3,764 |
Other interest-earning assets | (4,268) |  |  | 10,958 |  |  | 6,690 |
Total interest income | $ | 51,917 |  |  | $ | 288,771 |  |  | $ | 340,688 |
Interest expense on: |  |  |  |  |
Demand deposits | $ | (74) |  |  | $ | 38,419 |  |  | $ | 38,345 |
Savings and money market deposits | 65 |  |  | 78,476 |  |  | 78,541 |
Brokered deposits | 10,260 |  |  | 17,116 |  |  | 27,376 |
Time deposits | 3,058 |  |  | 26,803 |  |  | 29,861 |
Borrowings and other interest-bearing liabilities | 47,841 |  |  | 29,590 |  |  | 77,431 |
Total interest expense | $ | 61,150 |  |  | $ | 190,404 |  |  | $ | 251,554 |

(1) Average balance includes non-performing loans.
Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of direct changes that are attributable to each component.
Compared to the same period in 2022, FTE total interest income for the nine months ended September 30, 2023 increased $340.7 million due to increases of $288.8 million attributable to changes in yield and $51.9 million attributable to changes in volume. The increase due to changes in yield was primarily driven by net loans. The increase due to changes in volume was due to an increase in average net loans, partially offset by decreases in average other interest-earning assets and investment securities.
The yield on average interest-earning assets increased 162 bps in the nine months ended September 30, 2023 compared to the same period in 2022.
For the nine months ended September 30, 2023, interest expense increased $251.6 million compared to the same period in 2022, primarily driven by an increase in rate on interest-bearing liabilities resulting in a $190.4 million increase in interest expense. The increase in interest expense attributable to rate was driven by the increases in the rates on savings and money market deposits, demand deposits, borrowings and other interest-bearing liabilities and time deposits. The increase in interest expense attributable to volume was $61.2 million primarily driven by an increase in average borrowings and other interest-bearing liabilities, which resulted in an increase of $47.8 million in interest expense.
56

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

| Nine months ended September 30 |  |  |  |
| 2023 |  | 2022 |  | Increase (Decrease)
| Balance |  | Yield |  | Balance |  | Yield |  | $ |  | %
| (dollars in thousands)
Real estate – commercial mortgage | $ | 7,803,775 |  |  | 5.88 | % |  | $ | 7,465,443 |  |  | 3.65 | % |  | $ | 338,332 |  |  | 4.5 | %
Commercial and industrial | 4,602,573 |  |  | 6.13 |  |  | 4,182,010 |  |  | 3.74 |  |  | 420,563 |  |  | 10.1 |
Real estate – residential mortgage | 5,004,289 |  |  | 3.71 |  |  | 4,132,708 |  |  | 3.34 |  |  | 871,581 |  |  | 21.1 |
Real estate – home equity | 1,066,003 |  |  | 6.84 |  |  | 1,099,395 |  |  | 4.26 |  |  | (33,392) |  |  | (3.0) |
Real estate – construction | 1,278,923 |  |  | 6.66 |  |  | 1,167,952 |  |  | 3.65 |  |  | 110,971 |  |  | 9.5 |
Consumer | 748,788 |  |  | 5.82 |  |  | 532,301 |  |  | 5.07 |  |  | 216,487 |  |  | 40.7 |
Leases and other loans (1) | 314,929 |  |  | 4.46 |  |  | 285,863 |  |  | 6.05 |  |  | 29,066 |  |  | 10.2 |
Total loans | $ | 20,819,280 |  |  | 5.49 | % |  | $ | 18,865,672 |  |  | 3.71 | % |  | $ | 1,953,608 |  |  | 10.4 | %

(1) Consists of equipment lease financing, overdrafts and net origination fees and costs.
During the nine months ended September 30, 2023, average loans increased $2.0 billion, or 10.4%, compared to the same period in 2022. The increase was largely driven by increases in average residential mortgage loans, average commercial and industrial loans, average commercial mortgage loans, and average consumer loans of $871.6 million, $420.6 million, $338.3 million, and $216.5 million, respectively.
Average deposits and average interest rates, by type, are summarized in the following table:

| Nine months ended September 30 |  |  |  |
| 2023 |  | 2022 |  | Increase (Decrease)
| Balance |  | Rate |  | Balance |  | Rate |  | $ |  | %
| (dollars in thousands)
Noninterest-bearing demand | $ | 6,108,197 |  |  | — | % |  | $ | 7,538,597 |  |  | — | % |  | $ | (1,430,400) |  |  | (19.0) | %
Interest-bearing demand | 5,535,671 |  |  | 1.01 |  |  | 5,657,165 |  |  | 0.08 |  |  | (121,494) |  |  | (2.1) |
Savings and money market deposits | 6,593,703 |  |  | 1.71 |  |  | 6,515,529 |  |  | 0.11 |  |  | 78,174 |  |  | 1.2 |
Total demand deposits and savings and money market deposits | 18,237,571 |  |  | 0.92 |  |  | 19,711,291 |  |  | 0.06 |  |  | (1,473,720) |  |  | (7.5) |
Brokered deposits | 779,191 |  |  | 5.07 |  |  | 254,100 |  |  | 1.14 |  |  | 525,091 |  |  | N/M
Time deposits | 2,032,360 |  |  | 2.64 |  |  | 1,633,053 |  |  | 0.84 |  |  | 399,307 |  |  | 24.5 |
Total deposits | $ | 21,049,122 |  |  | 1.24 | % |  | $ | 21,598,444 |  |  | 0.13 | % |  | $ | (549,322) |  |  | (2.5) | %

The cost of total deposits increased 111 bps to 1.24% for the first nine months of 2023 compared to 0.13% for the same period of 2022, primarily due to rising interest rates and a change in the mix of deposits. Average deposits decreased $549.3 million driven by a $1.4 billion decrease in average noninterest-bearing demand deposits, partially offset by increases in average brokered deposits and average time deposits of $525.1 million and $399.3 million, respectively.
57

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

| Nine months ended September 30 |  |  |  |
| 2023 |  | 2022 |  | Increase (Decrease)
| Balance |  | Rate |  | Balance |  | Rate |  | $ |  | %
| (dollars in thousands)
Federal funds purchased | $ | 606,708 |  |  | 5.24 | % |  | $ | 33,629 |  |  | 2.12 | % |  | $ | 573,079 |  |  | N/M
Federal Home Loan Bank advances | 976,783 |  |  | 5.11 |  |  | 69,473 |  |  | 2.70 |  |  | 907,310 |  |  | N/M
Senior debt and subordinated debt | 539,907 |  |  | 3.96 |  |  | 572,690 |  |  | 3.95 |  |  | (32,783) |  |  | (5.7) |
Other borrowings and other interest-bearing liabilities(1) | 725,306 |  |  | 3.59 |  |  | 457,732 |  |  | 0.28 |  |  | 267,574 |  |  | 58.5 |
Total borrowings and other interest-bearing liabilities | $ | 2,848,704 |  |  | 4.53 | % |  | $ | 1,133,524 |  |  | 2.34 | % |  | $ | 1,715,180 |  |  | N/M

(1) Includes repurchase agreements, short-term promissory notes and capital leases.
Average total borrowings and other interest-bearing liabilities increased $1.7 billion during the first nine months of 2023 compared to the same period in 2022, primarily as a result of a decrease in average total deposits and an increase in average net loans. Average FHLB advances, average Federal funds purchased and average other borrowings and other interest-bearing liabilities increased $907.3 million, $573.1 million and $267.6 million, respectively.
Provision for Credit Losses
The provision for credit losses was $44.2 million for the first nine months of 2023 compared to $13.5 million for the same period of 2022. The increase in provision for credit losses was primarily driven by loan growth and changes to the macroeconomic outlook. Net charge-offs of $21.1 million during the nine months ended September 30, 2023 were primarily due to a charge-off of $13.3 million during the first quarter of 2023 for a commercial office loan.
58

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

| Nine months ended September 30 |  | Increase (Decrease)
| 2023 |  | 2022 |  | $ |  | %
| (dollars in thousands)
Commercial banking: |  |  |  |  |  |  |
Merchant and card | $ | 22,160 |  |  | $ | 21,053 |  |  | $ | 1,107 |  |  | 5.3 | %
Cash management | 17,310 |  |  | 17,973 |  |  | (663) |  |  | (3.7) |
Capital markets | 11,396 |  |  | 9,629 |  |  | 1,767 |  |  | 18.4 |
Other commercial banking | 9,514 |  |  | 8,520 |  |  | 994 |  |  | 11.7 |
Total commercial banking | 60,380 |  |  | 57,175 |  |  | 3,205 |  |  | 5.6 |
Wealth management | 56,152 |  |  | 55,312 |  |  | 840 |  |  | 1.5 |
Consumer banking: |  |  |  |  |  |  |
Card | 19,604 |  |  | 18,141 |  |  | 1,463 |  |  | 8.1 |
Overdraft | 8,425 |  |  | 12,116 |  |  | (3,691) |  |  | (30.5) |
Other consumer banking | 7,081 |  |  | 7,164 |  |  | (83) |  |  | (1.2) |
Total consumer banking | 35,110 |  |  | 37,421 |  |  | (2,311) |  |  | (6.2) |
Mortgage banking | 8,100 |  |  | 12,064 |  |  | (3,964) |  |  | (32.9) |
Other | 8,539 |  |  | 10,863 |  |  | (2,324) |  |  | (21.4) |
Non-interest income before investment securities gains | 168,281 |  |  | 172,835 |  |  | (4,554) |  |  | (2.6) |
Investment securities gains (losses), net | 19 |  |  | (26) |  |  | 45 |  |  | N/M
Total Non-Interest Income | $ | 168,300 |  |  | $ | 172,809 |  |  | $ | (4,509) |  |  | (2.6) | %

Excluding net investment securities gains, non-interest income decreased $4.6 million, or 2.6%, during the nine months ended September 30, 2023 compared to the same period in 2022. The decrease in non-interest income was primarily due to a $4.0 million decrease in mortgage banking income due to lower sales volumes and lower gains on sales margins, a $3.7 million decrease in overdraft fees and a $3.0 million reduction to other non-interest income to reflect market valuation movement in certain of the Corporation's legacy commercial customer back-to-back interest rate swap transactions resulting from the transition from LIBOR to SOFR, partially offset by increases in commercial banking revenues, consumer banking card fee income and wealth management of $3.2 million, $1.5 million and $0.8 million, respectively.
59

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

| Nine months ended September 30 |  | Increase (Decrease)
| 2023 |  | 2022 |  | $ |  | %
| (dollars in thousands)
Salaries and employee benefits | $ | 280,142 |  |  | $ | 264,151 |  |  | $ | 15,991 |  |  | 6.1 | %
Data processing and software | 49,486 |  |  | 44,807 |  |  | 4,679 |  |  | 10.4 |
Net occupancy | 43,373 |  |  | 42,134 |  |  | 1,239 |  |  | 2.9 |
Other outside services | 33,054 |  |  | 26,292 |  |  | 6,762 |  |  | 25.7 |
FDIC insurance | 14,427 |  |  | 9,328 |  |  | 5,099 |  |  | 54.7 |
Equipment | 10,395 |  |  | 10,393 |  |  | 2 |  |  | N/M
Professional fees | 6,090 |  |  | 6,178 |  |  | (88) |  |  | (1.4) |
Marketing | 5,454 |  |  | 4,505 |  |  | 949 |  |  | 21.1 |
Intangible amortization | 2,347 |  |  | 1,043 |  |  | 1,304 |  |  | 125.0 |
Merger-related expenses | — |  |  | 8,434 |  |  | (8,434) |  |  | N/M
Other | 53,888 |  |  | 48,001 |  |  | 5,887 |  |  | 12.3 |
Total non-interest expense | $ | 498,656 |  |  | $ | 465,266 |  |  | $ | 33,390 |  |  | 7.2 | %

Compared to the first nine months of 2022, total non-interest expense in the first nine months of 2023, excluding $8.4 million of merger-related expenses, increased $41.8 million, or 9.2%. The increase in non-interest expense, excluding merger-related expenses, was primarily due to increases of $16.0 million in salaries and employee benefits expense, $6.8 million in other outside services expense, $5.1 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023, $4.7 million in data processing and software expense, $1.3 million in intangible amortization expense and $0.9 million in marketing expense. Higher expense levels compared to the same period in 2022 are in part due to the Prudential Bancorp acquisition. Additional drivers of the increase in non-interest expense were $3.6 million in operational risk losses, including fraud-related costs, $1.4 million of lower gain on sales of fixed assets and increases of $1.2 million in travel and entertainment expense and $1.1 million in state tax expense, in each case, reflected in "other" non-interest expense. The $16.0 million increase in salaries and benefits expense was primarily driven by annual merit increases, an increase in the number of employees, higher healthcare claims expenses and higher pension expense.
Income Taxes
Income tax expense for the nine months ended September 30, 2023 was $47.7 million, a $3.1 million increase from $44.6 million for the same period in 2022. The Corporation's ETR was 17.8% for the nine months ended September 30, 2023, compared to 17.9% in the same period of 2022.
60

FINANCIAL CONDITION
The table below presents condensed consolidated ending balance sheets:

| September 30, 2023 |  | December 31, 2022 |  | Increase (Decrease)
|  |  | $ |  | %
Assets | (dollars in thousands)
Cash and cash equivalents | $ | 420,460 |  |  | $ | 681,921 |  |  | $ | (261,461) |  |  | (38.3) | %
FRB and FHLB Stock | 106,363 |  |  | 130,186 |  |  | (23,823) |  |  | (18.3) |
Loans held for sale | 20,368 |  |  | 7,264 |  |  | 13,104 |  |  | N/M
Investment securities | 3,698,601 |  |  | 3,968,023 |  |  | (269,422) |  |  | (6.8) |
Net loans, less ACL - loans | 20,884,769 |  |  | 20,010,181 |  |  | 874,588 |  |  | 4.4 |
Net premises and equipment | 215,626 |  |  | 225,141 |  |  | (9,515) |  |  | (4.2) |
Goodwill and intangibles | 561,284 |  |  | 560,824 |  |  | 460 |  |  | 0.1 |
Other assets | 1,467,706 |  |  | 1,348,162 |  |  | 119,544 |  |  | 8.9 |
Total Assets | $ | 27,375,177 |  |  | $ | 26,931,702 |  |  | $ | 443,475 |  |  | 1.6 | %
Liabilities and Shareholders' Equity |  |  |  |  |  |  |
Deposits | $ | 21,421,589 |  |  | $ | 20,649,538 |  |  | $ | 772,051 |  |  | 3.7 | %
Borrowings | 2,370,112 |  |  | 2,871,207 |  |  | (501,095) |  |  | (17.5) |
Other liabilities | 1,016,783 |  |  | 831,200 |  |  | 185,583 |  |  | 22.3 |
Total Liabilities | 24,808,484 |  |  | 24,351,945 |  |  | 456,539 |  |  | 1.9 |
Total Shareholders' Equity | 2,566,693 |  |  | 2,579,757 |  |  | (13,064) |  |  | (0.5) |
Total Liabilities and Shareholders' Equity | $ | 27,375,177 |  |  | $ | 26,931,702 |  |  | $ | 443,475 |  |  | 1.6 | %

Cash and Cash Equivalents
Compared to December 31, 2022, cash and cash equivalents at September 30, 2023 decreased $261.5 million, or 38.3%, primarily due to a $874.6 million increase in net loans.
Shareholders' Equity
Compared to December 31, 2022, shareholders' equity at September 30, 2023 decreased $13.1 million, primarily due to a change in AOCI of $87.3 million primarily attributable to an increase in unrealized loss in AFS securities of $103.6 million, and an increase in treasury stock of $70.7 million. The increase in treasury stock was primarily due to the repurchase of shares of the Corporation's common stock for $70.9 million during 2023. The aforementioned changes in shareholders' equity were partially offset by an increase in retained earnings of $134.7 million.
On December 20, 2022, the Corporation announced that its board of directors approved the 2023 Repurchase Program. Under the 2023 Repurchase Program, the Corporation is authorized to repurchase up to $100.0 million of its common stock through December 31, 2023. The Corporation repurchased common stock during the three months and nine months ended September 30, 2023 of $30.5 million and $70.9 million, respectively, under this program. See Item 2, "Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities" in this Quarterly Report on Form 10-Q for further details on the 2023 Repurchase Program and activity.
61

Investment Securities
The following table presents the carrying amount of investment securities:

| September 30, 2023 |  | December 31, 2022 |  | Increase (Decrease)
|  |  | $ |  | %
Available for Sale | (dollars in thousands)
U.S. Government securities | $ | 222,446 |  |  | $ | 218,485 |  |  | $ | 3,961 |  |  | 1.8 | %
U.S. Government-sponsored agency securities | 987 |  |  | 1,008 |  |  | (21) |  |  | (2.1) |
State and municipal securities | 949,146 |  |  | 1,105,712 |  |  | (156,566) |  |  | (14.2) |
Corporate debt securities | 428,484 |  |  | 422,309 |  |  | 6,175 |  |  | 1.5 |
Collateralized mortgage obligations | 112,217 |  |  | 134,033 |  |  | (21,816) |  |  | (16.3) |
Residential mortgage-backed securities | 189,275 |  |  | 212,698 |  |  | (23,423) |  |  | (11.0) |
Commercial mortgage-backed securities | 516,313 |  |  | 552,522 |  |  | (36,209) |  |  | (6.6) |
Total available for sale securities | $ | 2,418,868 |  |  | $ | 2,646,767 |  |  | $ | (227,899) |  |  | (8.6) | %
Held to Maturity |  |  |  |  |  |  |
Residential mortgage-backed securities | $ | 418,362 |  |  | $ | 457,325 |  |  | $ | (38,963) |  |  | (8.5) | %
Commercial mortgage-backed securities | 861,371 |  |  | 863,931 |  |  | (2,560) |  |  | (0.3) |
Total held to maturity securities | $ | 1,279,733 |  |  | $ | 1,321,256 |  |  | $ | (41,523) |  |  | (3.1) | %
Total Investment Securities | $ | 3,698,601 |  |  | $ | 3,968,023 |  |  | $ | (269,422) |  |  | (6.8) | %

Compared to December 31, 2022, total AFS securities at September 30, 2023 decreased $227.9 million, or 8.6%, primarily due to decreases in state and municipal securities, commercial mortgage-backed securities, residential mortgage-backed securities and collateralized mortgage obligations of $156.6 million, $36.2 million, $23.4 million and $21.8 million, respectively.
At September 30, 2023, total HTM securities decreased $41.5 million compared to December 31, 2022, primarily driven by a decrease of $39.0 million in residential mortgage-backed securities due to payments.
Loans
The following table presents ending net loans outstanding by type:

| September 30, 2023 |  | December 31, 2022 |  | Increase (Decrease)
|  |  | $ |  | %
| (dollars in thousands)
Real estate – commercial mortgage | $ | 8,106,300 |  |  | $ | 7,693,835 |  |  | $ | 412,465 |  |  | 5.4 | %
Commercial and industrial(1) | 4,577,334 |  |  | 4,473,004 |  |  | 104,330 |  |  | 2.3 |
Real estate – residential mortgage | 5,279,681 |  |  | 4,737,279 |  |  | 542,402 |  |  | 11.4 |
Real estate – home equity | 1,045,438 |  |  | 1,102,838 |  |  | (57,400) |  |  | (5.2) |
Real estate – construction | 1,078,263 |  |  | 1,269,925 |  |  | (191,662) |  |  | (15.1) |
Consumer | 743,976 |  |  | 699,179 |  |  | 44,797 |  |  | 6.4 |
Leases and other loans(2) | 346,516 |  |  | 303,487 |  |  | 43,029 |  |  | 14.2 |
Net loans | $ | 21,177,508 |  |  | $ | 20,279,547 |  |  | $ | 897,961 |  |  | 4.4 | %

(1) Includes unearned income of $1.1 million and $4.5 million for September 30, 2023 and December 31, 2022, respectively.
(2) Includes unearned income of $37.5 million and $24.8 million for September 30, 2023 and December 31, 2022, respectively.
During the nine months ended September 30, 2023, net loans increased $898.0 million, or 4.4%, compared to December 31, 2022, primarily due to increases in residential mortgage loans, commercial mortgage loans, commercial and industrial loans and consumer loans of $542.4 million, $412.5 million, $104.3 million and $44.8 million, respectively, partially offset by a decrease in construction loans of $191.7 million.
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The Corporation does not have a significant concentration of credit risk with any single borrower, industry or geographic location within its footprint. As of September 30, 2023, approximately $9.2 billion, or 43.4%, of the loan portfolio was comprised of commercial mortgage loans and construction loans. The Corporation's policies limit the maximum total lending commitment to an individual borrower to $100 million as of September 30, 2023. In addition, the Corporation has established lower total lending limits for certain types of lending commitments and lower total lending limits based on the Corporation's internal risk rating of an individual borrower at the time the lending commitment is approved.
The following table summarizes the industry concentrations within the commercial mortgage and the commercial and industrial loan portfolios:

| September 30, 2023 |  | December 31, 2022
Real estate(1) | 46.5 | % |  | 43.9 | %
Health care | 6.5 |  |  | 6.5 |
Manufacturing | 6.4 |  |  | 6.8 |
Agriculture | 5.5 |  |  | 5.4 |
Other services | 4.5 |  |  | 4.7 |
Construction(2) | 4.0 |  |  | 4.7 |
Hospitality and food services | 3.6 |  |  | 3.6 |
Retail | 3.3 |  |  | 3.1 |
Wholesale trade | 3.2 |  |  | 3.1 |
Educational services | 2.9 |  |  | 2.8 |
Professional, scientific and technical services | 2.1 |  |  | 1.8 |
Arts, entertainment and recreation | 2.0 |  |  | 2.0 |
Transportation and warehousing | 1.6 |  |  | 1.3 |
Finance and Insurance | 1.2 |  |  | 0.9 |
Public administration | 1.0 |  |  | 1.2 |
Administrative and Support | 1.0 |  |  | 1.1 |
Other | 4.7 |  |  | 7.1 |
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) Includes commercial loans to borrowers engaged in the construction industry.
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The following table presents the changes in non-accrual loans for the three months and nine months ended September 30, 2023:

| Commercial and Industrial |  | Real Estate - Commercial Mortgage |  | Real Estate - Construction |  | Real Estate - Residential Mortgage |  | Consumer and Real Estate - Home Equity |  | Leases and other loans |  | Total
| (dollars in thousands)
Three months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Balance at June 30, 2023 | $ | 29,488 |  |  | $ | 53,815 |  |  | $ | 1,099 |  |  | $ | 21,700 |  |  | $ | 5,844 |  |  | $ | 11,334 |  |  | $ | 123,280 |
Additions | 10,849 |  |  | 4,846 |  |  | 341 |  |  | 6 |  |  | 1,692 |  |  | 2,686 |  |  | 20,420 |
Payments | (4,922) |  |  | (14,963) |  |  | (763) |  |  | (552) |  |  | (186) |  |  | (1,924) |  |  | (23,310) |
Charge-offs | (3,220) |  |  | (860) |  |  | — |  |  | — |  |  | (1,803) |  |  | (1,396) |  |  | (7,279) |
Transfers to accrual status | — |  |  | (89) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (89) |
Transfers to OREO | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Balance at September 30, 2023 | $ | 32,195 |  |  | $ | 42,749 |  |  | $ | 677 |  |  | $ | 21,154 |  |  | $ | 5,547 |  |  | $ | 10,700 |  |  | $ | 113,022 |
Nine months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2022 | $ | 27,116 |  |  | $ | 70,161 |  |  | $ | 1,368 |  |  | $ | 26,294 |  |  | $ | 6,197 |  |  | $ | 13,307 |  |  | $ | 144,443 |
Additions | 29,607 |  |  | 17,222 |  |  | 341 |  |  | 793 |  |  | 6,052 |  |  | 3,292 |  |  | 57,307 |
Payments | (18,679) |  |  | (30,117) |  |  | (1,032) |  |  | (1,671) |  |  | (1,331) |  |  | (2,615) |  |  | (55,445) |
Charge-offs | (5,849) |  |  | (14,452) |  |  | — |  |  | (62) |  |  | (5,322) |  |  | (3,284) |  |  | (28,969) |
Transfers to accrual status | — |  |  | (65) |  |  | — |  |  | (2,407) |  |  | (49) |  |  | — |  |  | (2,521) |
Transfers to OREO | — |  |  | — |  |  | — |  |  | (1,793) |  |  | — |  |  | — |  |  | (1,793) |
Balance at September 30, 2023 | $ | 32,195 |  |  | $ | 42,749 |  |  | $ | 677 |  |  | $ | 21,154 |  |  | $ | 5,547 |  |  | $ | 10,700 |  |  | $ | 113,022 |

During the nine months ended September 30, 2023, non-accrual loans decreased approximately $31.4 million, or 21.8%, primarily driven by payments and charge-offs, partially offset by additions to non-accrual loans.
The following table summarizes non-performing assets as of the periods shown below:

| September 30, 2023 |  | December 31, 2022 |  |
| (dollars in thousands)
Non-accrual loans | $ | 113,022 |  | $ | 144,443 |  |
Loans 90 days or more past due and still accruing(1) | 27,962 |  | 27,463 |  |
Total non-performing loans | 140,984 |  | 171,906 |  |
OREO(2) | 2,549 |  | 5,790 |  |
Total non-performing assets | $ | 143,533 |  | $ | 177,696 |  |
Non-accrual loans to total loans | 0.53 | % |  | 0.71 | % |  |
Non-performing loans to total loans | 0.67 | % |  | 0.85 | % |  |
Non-performing assets to total assets | 0.52 | % |  | 0.66 | % |  |
ACL - loans to non-performing loans | 208 | % |  | 157 | % |  |

(1) Excludes PPP loans which are fully guaranteed by the federal government of $1.2 million and $7.7 million as of September 30, 2023 and December 31,
2022, respectively.
(2) Excludes $10.1 million and $6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of September 30,
2023 and December 31, 2022, respectively.
Non-performing loans at September 30, 2023 decreased $30.9 million, or 18.0%, compared to $171.9 million as of December 31, 2022. Non-performing loans as a percentage of total loans were 0.67% at September 30, 2023 and 0.85% at December 31, 2022. See "Note 5 - Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements for further details on non-performing loans.
The ability to identify potential problem loans in a timely manner is important to maintaining an adequate ACL. For commercial and industrial loans, commercial mortgages and commercial construction loans to commercial borrowers, an internal risk rating process is used to monitor credit quality. The evaluation of credit risk for residential mortgages, home equity
64

loans, construction loans to individuals, consumer loans and leases and other loans is based on payment history, through the monitoring of delinquency levels and trends.
Total internally risk-rated loans were $13.5 billion and $13.2 billion as of September 30, 2023 and December 31, 2022, respectively, of which $0.7 billion and $0.8 billion were criticized and classified, respectively. For a description of the Corporation's risk ratings, see "Allowance for Credit Losses" in the Notes to Consolidated Financial Statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022. The following table presents criticized and classified loans, or those with internal risk ratings of special mention or substandard or lower for commercial mortgages, commercial and industrial loans and construction loans to commercial borrowers, by class segment:

| Special Mention(1) |  | Increase (Decrease) |  | Substandard or Lower(2) |  | Increase (Decrease) |  | Total Criticized and Classified Loans
| September 30, 2023 |  | December 31, 2022 |  | $ |  | % |  | September 30, 2023 |  | December 31, 2022 |  | $ |  | % |  | September 30, 2023 |  | December 31, 2022
| (dollars in thousands)
Real estate - commercial mortgage | $ | 217,327 |  | $ | 306,381 |  | $ | (89,054) |  |  | (29.1)% |  | $ | 192,707 |  | $ | 184,014 |  | $ | 8,693 |  |  | 4.7 | % |  | $ | 410,034 |  | $ | 490,395
Commercial and industrial | 104,942 |  | 133,943 |  | (29,001) |  |  | (21.7) |  | 164,131 |  | 95,546 |  | 68,585 |  |  | 71.8 |  | 269,073 |  | 229,489
Real estate - construction (3) | 36,024 |  | 21,603 |  | 14,421 |  |  | 66.8 |  | 18,456 |  | 10,601 |  | 7,855 |  |  | 74.1 |  | 54,480 |  | 32,204
Total | $ | 358,293 |  | $ | 461,927 |  | $ | (103,634) |  | (22.4)% |  | $ | 375,294 |  | $ | 290,161 |  | $ | 85,133 |  | 29.3% |  | $ | 733,587 |  | $ | 752,088
% of total risk rated loans | 2.6 | % |  | 3.5 | % |  |  |  |  |  | 2.8 | % |  | 2.2 | % |  |  |  |  |  | 5.4 | % |  | 5.7 | %

(1) Considered "criticized" loans by banking regulators.
(2) Considered "classified" loans by banking regulators.
(3) Excludes construction - other.
Allowance for Credit Losses and Reserve for Off-Balance Sheet Credit Exposures

| September 30, 2023 |  | December 31, 2022
| (dollars in thousands)
ACL - loans | $ | 292,739 |  |  | $ | 269,366 |
ACL - OBS credit exposure(1) | $ | 16,110 |  |  | $ | 16,328 |

(1) Included in "other liabilities" on the consolidated balance sheet.
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The following table presents the activity in the ACL:

| Three months ended September 30 |  | Nine months ended September 30
| 2023 |  | 2022 |  | 2023 |  | 2022
| (dollars in thousands)
Average balance of net loans | $ | 21,121,277 |  | $ | 19,563,825 |  | $ | 20,819,280 |  | $ | 18,865,672
Balance of ACL at beginning of period | $ | 287,442 |  | $ | 248,564 |  | $ | 269,366 |  | $ | 249,001
CECL Day 1 Provision expense | — |  | 7,954 |  | — |  | 7,954
Purchased credit deteriorated loans | — |  | 1,135 |  | — |  | 1,135
Loans charged off: |  |  |  |  |  |  |
Real estate – commercial mortgage | (860) |  | (86) |  | (14,452) |  | (238)
Commercial and industrial | (3,220) |  | (1,783) |  | (5,849) |  | (2,211)
Real estate – residential mortgage | — |  | — |  | (62) |  | (66)
Consumer and real estate – home equity | (1,803) |  | (1,172) |  | (5,322) |  | (3,101)
Leases and other loans | (1,396) |  | (683) |  | (3,284) |  | (1,626)
Total loans charged off | (7,279) |  | (3,724) |  | (28,969) |  | (7,242)
Recoveries of loans previously charged off: |  |  |  |  |  |  |
Real estate – commercial mortgage | 101 |  | 29 |  | 916 |  | 3,677
Commercial and industrial | 620 |  | 2,213 |  | 2,694 |  | 4,932
Real estate – residential mortgage | 37 |  | 101 |  | 143 |  | 415
Consumer and real estate - home equity | 1,023 |  | 682 |  | 2,643 |  | 1,898
Real estate – construction | — |  | — |  | 771 |  | 44
Leases and other loans | 400 |  | 247 |  | 729 |  | 627
Total recoveries | 2,181 |  | 3,272 |  | 7,896 |  | 11,593
Net loans charged off/(recoveries) | (5,098) |  | (452) |  | (21,073) |  | 4,351
Provision for credit losses(1) | 10,395 |  | 9,637 |  | 44,446 |  | 4,397
Balance of ACL at end of period | $ | 292,739 |  | $ | 266,838 |  | $ | 292,739 |  | $ | 266,838
Provision for OBS credit exposures | $ | (458) |  | $ | 1,367 |  | $ | (218) |  | $ | 1,157
Reserve for OBS credit exposures(2) | $ | 16,110 |  | $ | 16,074 |  | $ | 16,110 |  | $ | 16,074
Net charge-offs to average loans (annualized) | 0.10 | % |  | 0.01 | % |  | 0.13 | % |  | (0.03) | %

(1) Provision included in the table only includes the portion related to net loans.
(2) Reserve for OBS credit exposures is recorded with other liabilities on the consolidated balance sheets.
The provision for credit losses, specific to loans, for the three months ended September 30, 2023 was $10.4 million, compared to a provision of $9.6 million recorded for the same period in 2022. The ACL includes qualitative loan adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. See "Note 5 - Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements for further details on the provision for credit losses.
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The following table summarizes the allocation of the ACL - loans:

| September 30, 2023 |  | December 31, 2022 |  |
| ACL - loans |  | % to Total ACL - loans(1) |  | % to Total Net Loans(2) |  | ACL - loans |  | % to Total ACL - loans(1) |  | % to Total Net Loans(2) |  |
| (dollars in thousands)
Real estate - commercial mortgage | $ | 73,946 |  |  | 25.3 | % |  | 38.3 | % |  | $ | 69,456 |  |  | 25.8 | % |  | 37.9 | % |  |
Commercial and industrial | 82,355 |  |  | 28.1 |  |  | 21.6 |  |  | 70,116 |  |  | 26.0 |  |  | 22.0 |  |  |
Real estate - residential mortgage | 86,201 |  |  | 29.5 |  |  | 24.9 |  |  | 83,250 |  |  | 30.9 |  |  | 23.3 |  |  |
Consumer, home equity and leases and other loans | 41,966 |  |  | 14.3 |  |  | 10.1 |  |  | 35,801 |  |  | 13.3 |  |  | 10.5 |  |  |
Real estate - construction | 8,271 |  |  | 2.8 |  |  | 5.1 |  |  | 10,743 |  |  | 4.0 |  |  | 6.3 |  |  |
Total ACL - loans | $ | 292,739 |  |  | 100.0 | % |  | 100.0 | % |  | $ | 269,366 |  |  | 100.0 | % |  | 100.0 | % |  |

(1) Ending ACL - loan portfolio segment balance as a % of total ACL - loans.
(2) Ending loan portfolio segment balances as a % of total net loans for the periods presented.
Deposits and Borrowings
The following table presents ending deposits by type:

| September 30, 2023 |  | December 31, 2022 |  | Increase (Decrease)
|  |  | $ |  | %
| (dollars in thousands)
Noninterest-bearing demand | $ | 5,575,374 |  |  | $ | 7,006,388 |  |  | $ | (1,431,014) |  |  | (20.4) | %
Interest-bearing demand | 5,757,487 |  |  | 5,410,903 |  |  | 346,584 |  |  | 6.4 |
Savings and money market deposits | 6,707,729 |  |  | 6,434,621 |  |  | 273,108 |  |  | 4.2 |
Total demand and savings | 18,040,590 |  |  | 18,851,912 |  |  | (811,322) |  |  | (4.3) |
Brokered deposits | 941,059 |  |  | 208,416 |  |  | 732,643 |  |  | N/M
Time deposits | 2,439,940 |  |  | 1,589,210 |  |  | 850,730 |  |  | 53.5 |
Total deposits | $ | 21,421,589 |  |  | $ | 20,649,538 |  |  | $ | 772,051 |  |  | 3.7 | %

During the nine months ended September 30, 2023, total deposits increased by $772.1 million, or 3.7%, compared to December 31, 2022. The increase in total deposits was primarily due to increases in time deposits, brokered deposits, interest-bearing demand deposits and savings and money market deposits of $850.7 million, $732.6 million, $346.6 million and $273.1 million, respectively, partially offset by a decrease in noninterest-bearing demand deposits of $1.4 billion.
Total uninsured deposits were estimated to be $7.6 billion and $7.0 billion at September 30, 2023 and December 31, 2022, respectively.
Time deposits of $250 thousand or more were $483.2 million and $214.8 million at September 30, 2023 and December 31, 2022, respectively.
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The following table presents ending borrowings by type:

| September 30, 2023 |  | December 31, 2022 |  | Increase (Decrease)
|  |  | $ |  | %
| (dollars in thousands)
Federal funds purchased | $ | 544,000 |  |  | $ | 191,000 |  |  | $ | 353,000 |  |  | N/M
Federal Home Loan Bank advances | 730,000 |  |  | 1,250,000 |  |  | (520,000) |  |  | (41.6)
Senior debt and subordinated debt | 540,174 |  |  | 539,634 |  |  | 540 |  |  | 0.1 |
Other borrowings(1) | 555,938 |  |  | 890,573 |  |  | (334,635) |  |  | (37.6) |
Total borrowings | $ | 2,370,112 |  |  | $ | 2,871,207 |  |  | $ | (501,095) |  |  | (17.5) | %

(1) Includes repurchase agreements, short-term promissory notes and capital leases.
During the nine months ended September 30, 2023, total borrowings decreased $501.1 million, or 17.5%, compared to December 31, 2022. The decrease in total borrowings was due to decreases in FHLB advances and other borrowings of $520.0 million and $334.6 million, respectively, partially offset by an increase in Federal funds purchased of $353.0 million.
Regulatory Capital
The Corporation and its wholly owned subsidiary bank, Fulton Bank, are subject to the Capital Rules administered by banking regulators. Failure to meet minimum capital requirements can trigger certain actions by regulators that could have a material effect on the Corporation's financial statements.
The Capital Rules require the Corporation and Fulton Bank to:
•Meet a minimum Common Equity Tier 1 capital ratio of 4.50% of risk-weighted assets;
•Meet a minimum Tier 1 Leverage capital ratio of 4.00% of average assets;
•Meet a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 capital ratio of 6.00% of risk-weighted assets;
•Maintain a "capital conservation buffer" of 2.50% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonus payments; and
•Comply with a revised definition of capital to improve the ability of regulatory capital instruments to absorb losses. Certain non-qualifying capital instruments, including cumulative preferred stock and TruPS, are excluded as a component of Tier 1 capital for institutions of the Corporation's size.
The Capital Rules use a standardized approach for risk weightings that expands the risk-weightings for assets and off-balance sheet exposures from the previous 0%, 20%, 50% and 100% categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets and off-balance sheet exposures, resulting in higher risk weightings for a variety of asset categories.
As of September 30, 2023, the Corporation's capital levels met the minimum capital requirements, including the capital conservation buffers, as prescribed in the Capital Rules.
As of September 30, 2023, Fulton Bank met the well-capitalized requirements under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, a bank must maintain minimum Total risk-based, Tier I risk-based, Common Equity Tier I risk-based and Tier I leverage ratios as set forth in the Capital Rules. There were no other conditions or events since September 30, 2023 that management believes have changed the Corporation's capital categories.
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The following table summarizes the Corporation's capital ratios in comparison to regulatory requirements:

| September 30, 2023 |  | December 31, 2022 |  | Regulatory Minimum for Capital Adequacy |  | Fully Phased-in, with Capital Conservation Buffers
Total Risk-Based Capital (to Risk-Weighted Assets) | 14.0 | % |  | 13.6 | % |  | 8.0 | % |  | 10.5 | %
Tier I Risk-Based Capital (to Risk-Weighted Assets) | 11.1 | % |  | 10.9 | % |  | 6.0 | % |  | 8.5 | %
Common Equity Tier I (to Risk-Weighted Assets) | 10.3 | % |  | 10.0 | % |  | 4.5 | % |  | 7.0 | %
Tier I Leverage Capital (to Average Assets) | 9.4 | % |  | 9.5 | % |  | 4.0 | % |  | 4.0 | %

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the exposure to economic loss that arises from changes in the values of certain financial instruments. The types of market risk exposures generally faced by financial institutions include interest rate risk, equity market price risk, debt security market price risk, foreign currency price risk and commodity price risk. Due to the nature of its operations, foreign currency price risk and commodity price risk are not significant to the Corporation.
Interest Rate Risk, Asset/Liability Management and Liquidity
Interest rate risk creates exposure in two primary areas. First, changes in rates have an impact on the Corporation's liquidity position and could affect its ability to meet obligations and continue to grow. Second, movements in interest rates can create fluctuations in the Corporation's net interest income and changes in the economic value of its equity.
The Corporation employs various management techniques to minimize its exposure to interest rate risk. The Corporation's ALCO is responsible for reviewing the interest rate sensitivity and liquidity positions of the Corporation, approving asset and liability management policies, and overseeing the formulation and implementation of strategies regarding balance sheet positions.
The Corporation uses two complementary methods to measure and manage interest rate risk. They are a simulation of net interest income and estimates of economic value of equity. Using these measurements in tandem provides a reasonably comprehensive summary of the magnitude of the Corporation's interest rate risk, level of risk as time evolves, and exposure to changes in interest rates.
Simulation of net interest income is performed for the next 12-month period. A variety of interest rate scenarios are used to measure the effects of sudden and gradual movements upward and downward in the yield curve. These results are compared to the results obtained in a flat or unchanged interest rate scenario. Simulation of net interest income is used primarily to measure the Corporation's short-term earnings exposure to rate movements. The Corporation's policy limits the potential exposure of net interest income, in a non-parallel instantaneous shock, to 10% of the base case net interest income for a 100 bps shock in interest rates, 15% for a 200 bps shock, 20% for a 300 bps shock and 25% for a 400 bps shock. A "shock" is an immediate upward or downward movement of interest rates. The shocks do not take into account changes in customer behavior that could result in changes to mix and/or volumes in the balance sheet, nor does it take into account the potential effects of competition on the pricing of deposits and loans over the forward 12-month period.
Contractual maturities and repricing opportunities of loans are incorporated in the simulation model as are prepayment assumptions, maturity data and call options within the investment portfolio. Assumptions based on past experience are incorporated into the model for non-maturity deposit accounts. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model's simulated results due to timing, amount and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.
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The following table summarizes the expected impact of abrupt interest rate changes, that is, a non-parallel instantaneous shock, on net interest income as of September 30, 2023:

Rate Shock(1) | Annual change in net interest income |  | % change in net interest income
+400 bp | + $35.4 million |  | +3.9%
+300 bp | + $28.3 million |  | +3.1%
+200 bp | + $21.4 million |  | +2.4%
+100 bp | + $14.1 million |  | +1.6%
–100 bp | - $36.8 million |  | -4.1%
–200 bp | - $75.2 million |  | -8.3%
–300 bp | - $103.2 million |  | -11.4%
–400 bp | - $127.7 million |  | -14.1%

(1) These results include the effect of implicit and explicit interest rate floors that limit further reduction in interest rates.
Economic value of equity estimates the discounted present value of asset and liability cash flows. Discount rates are based upon market prices for like assets and liabilities. Abrupt changes or "shocks" in interest rates, both upward and downward, are used to determine the comparative effect of such interest rate movements relative to the unchanged environment. This measurement tool is used primarily to evaluate the longer-term repricing risks and options in the Corporation's balance sheet. The Corporation's policy limits the economic value of equity that may be at risk, in a non-parallel instantaneous shock, to 10% of the base case economic value of equity for a 100 bps shock in interest rates, 20% for a 200 bps shock, 30% for a 300 bps shock and 40% for a 400 bps shock. As of September 30, 2023, the Corporation was within economic value of equity policy limits for every 100 bps shock.
Interest Rate Derivatives
The Corporation enters into interest rate derivatives with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate derivatives with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate derivatives is that the customer pays a fixed rate of interest and the Corporation receives a floating rate. These interest rate derivatives are derivative financial instruments, and the gross fair values are recorded in other assets and liabilities on the consolidated balance sheets, with changes in fair value during the period recorded in other non-interest expense on the consolidated statements of income.
Cash Flow Hedges
The Corporation's objectives in using interest rate derivatives are to reduce volatility in interest income and interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate derivatives as part of its interest rate risk management strategy. The Corporation enters into interest rate derivatives designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans and borrowings.
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 or interest expense in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are made on the Corporation's variable-rate liabilities.
In January 2023, the Corporation terminated interest rate derivatives designated as cash flow hedges with a combined notional amount of $1.0 billion. As the hedged transaction continues to be probable, the original unrealized loss of $70.6 million included in AOCI as of September 30, 2023, will be recognized as a reduction to interest income when the previously forecasted hedged item affects earnings in future periods. During the nine months ended September 30, 2023, $17.3 million of these unrealized losses have been reclassified as a reduction of interest income on loans, including fees, on the consolidated statements of income.
Liquidity
The Corporation must maintain a sufficient level of liquid assets to meet the cash needs of its customers, who, as depositors, may want to withdraw funds or who, as borrowers, need credit availability. Liquidity is provided on a continuous basis through scheduled and unscheduled principal and interest payments on investments and outstanding loans and through the availability of
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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 NIM 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 September 30, 2023, the Bank had total borrowing capacity of approximately $8.1 billion with $2.6 billion of advances and letters of credit outstanding, for a remaining available borrowing capacity of approximately $5.5 billion under these facilities. Advances from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets.
As of September 30, 2023, the Corporation had aggregate federal funds lines borrowing capacity of $2.5 billion with $0.5 billion outstanding against that amount. As of September 30, 2023, the Corporation had $1.3 billion of collateralized borrowing capacity at the discount window and $1.7 billion of borrowing capacity at the Bank Term Funding Program facility with no amounts outstanding under these programs as of September 30, 2023.
Securities carried at $0.8 billion at September 30, 2023 and $1.1 billion at December 31, 2022 were pledged as collateral to secure public and trust deposits.
Liquidity must also be managed at the Corporation's parent company level. For safety and soundness reasons, banking regulations limit the amount of cash that can be transferred from subsidiary banks to the parent company in the form of loans and dividends. Generally, these limitations are based on the subsidiary banks’ regulatory capital levels and their net income. Management continues to monitor the liquidity and capital needs of the parent company including monitoring the granularity of the deposit portfolio and level of uninsured deposits. Management will implement appropriate strategies, as necessary, to remain adequately capitalized and to meet its cash needs.
The consolidated statements of cash flows provide additional information. The Corporation's operating activities during the nine months ended September 30, 2023 provided $420.4 million of cash. Cash used by investing activities was $798.5 million and was mainly due to the net increase in loans. Cash provided by financing activities was $116.6 million, and was primarily due to an increase in time deposits and brokered deposits, partially offset by decreases in demand and savings deposits and other borrowings.
Debt Security Market Price Risk
Debt security market price risk is the risk that changes in the values of debt securities, unrelated to interest rate changes, could have a material impact on the financial position or results of operations of the Corporation. The Corporation's debt security investments consist primarily of U.S. government-sponsored agency issued mortgage-backed securities and collateralized mortgage obligations, state and municipal securities, and corporate debt securities. All of the Corporation's investments in mortgage-backed securities and collateralized mortgage obligations have principal payments that are guaranteed by U.S. government-sponsored agencies.
State and Municipal Securities
As of September 30, 2023, the Corporation owned securities issued by various states and municipalities with a total fair value of $0.9 billion. Uncertainty with respect to the financial strength of state and municipal bond insurers places emphasis on the underlying strength of issuers. Pressure on local tax revenues of issuers due to adverse economic conditions could have an adverse impact on the underlying credit quality of issuers. The Corporation evaluates existing and potential holdings primarily based on the underlying creditworthiness of the issuing state or municipality and then, to a lesser extent, on any credit enhancement. State and municipal securities can be supported by the general obligation of the issuing state or municipality, allowing the securities to be repaid by any means available to the issuing state or municipality. As of September 30, 2023, approximately 100% of state and municipal securities were supported by the general obligation of corresponding states or municipalities. Approximately 77% of these securities were school district issuances, which are also supported by the states of the issuing municipalities.
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Item 4. Controls and Procedures
The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation's management, including the Corporation's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures pursuant to Rule 13a-15, promulgated under the Exchange Act. Based upon that evaluation, the Corporation's Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, the Corporation's disclosure controls and procedures are effective. Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in Corporation reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
The information presented in the "Legal Proceedings" section of Note 13 "Commitments and Contingencies" of the Notes to Consolidated Financial Statements is incorporated herein by reference.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in Part I, Item 1A. Risk Factors of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022 and Part II, Item 1A. Risk Factors of the Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
(a) None.
(b) None.

(c) Period |  | Total Number of Shares Purchased |  | Average Price Paid per Share(1) |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2023 to July 31, 2023 |  | 2,175,600 |  |  | $ | 14.02 |  |  | 2,175,600 |  |  | $ | 29,050,386 |
August 1, 2023 to August 31, 2023 |  | — |  |  | — |  |  | — |  |  | 29,050,386 |
September 1, 2023 to September 30, 2023 |  | — |  |  | — |  |  | — |  |  | 29,050,386 |

(1) Includes 1% excise tax
On December 20, 2022, the Corporation announced that its board of directors approved the 2023 Repurchase Program. Under the 2023 Repurchase Program, the Corporation is authorized to repurchase up to $100.0 million of its common stock through December 31, 2023. Under the 2023 Repurchase Program, repurchased shares are added to treasury stock at cost. As permitted by securities laws and other legal requirements, and subject to market conditions and other factors, purchases may be made from time to time in open market or privately negotiated transactions, including, without limitation, through accelerated share repurchase transactions. The 2023 Repurchase Program may be discontinued at any time. During the three months ended September 30, 2023, 2,175,600 shares were repurchased under the 2023 Repurchase Program at a total cost of $30.5 million, or $14.02 per share.
Item 5. Other Information
(c) None of the Corporation's directors or "officers" (as defined in Rule 16a-1(f) (17 C.F.R. § 240.16a-1(f))) adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (as those terms are defined in Item 408 of Regulation S-K (17 C.F.R. § 229.408)) during the fiscal quarter ended September 30, 2023.
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Item 6. Exhibits

2.1 |  |  | Agreement and Plan of Merger with Prudential Bancorp, Inc. dated March 1, 2022 (Incorporated by reference to Exhibit 2.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on March 2, 2022). |
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 |  |  | 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). |
4.2 |  |  | Deposit Agreement, dated October 29, 2020, among Fulton Financial Corporation, Equiniti Trust Company, as depositary, and the holders from time to time of the depositary receipts described therein (Incorporated by reference to Exhibit 4.1 of the Fulton Financial Corporation Current Report on Form 8-K filed on October 29, 2020). |
4.3 |  |  | Form of depositary receipt representing the Depositary Shares (Included in Exhibit 4.2). |
4.4 |  |  | Stock Certificate (Incorporated by reference as Exhibit 4.1 of Fulton Financial Corporation Registration Statement on Form S-4 filed on April 21, 2022). |
31.1 |  |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 |  |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 |  |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 |  |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101 |  | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Income, (iii) Unaudited Consolidated Statements of Comprehensive Income, (iv) Unaudited Consolidated Statements of Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements. |
104 |  |  | Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101) |

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

FULTON FINANCIAL CORPORATION |  |
Date: |  | November 9, 2023 |  | /s/ Curtis J. Myers
|  |  |  | Curtis J. Myers
|  |  |  | Chairman and Chief Executive Officer
Date: |  | November 9, 2023 |  | /s/ Mark R. McCollom
|  |  |  | Mark R. McCollom
|  |  |  | Senior Executive Vice President and Chief Financial Officer

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