FULTON FINANCIAL CORP

Three months ended March 31, 2024 compared to the three months ended March 31, 2023

Net Interest Income

FTE net interest income was $211.5 million for the three months ended March 31, 2024, a decrease of $8.5 million, compared to $220.0 million for the same period in 2023. For the three months ended March 31, 2024, NIM decreased to 3.32%, or 21 bps, compared to the same period in 2023. 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.

(1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.

(2)Average balance includes non-performing loans.

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

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

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volume) and changes in yields and rates for the three months ended March 31, 2024 in comparison to the same period in 2023:

(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 first quarter of 2023, FTE total interest income for the first quarter of 2024 increased $50.0 million, or 17.0%, primarily due to an increase of $41.4 million attributable to changes in yield, of which $38.1 million related to net loans. The yield on average interest-earning assets increased 67 bps in the first quarter of 2024 compared to the same period in 2023. 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 average investment securities.

In the first quarter of 2024, interest expense increased $58.5 million compared to the first quarter of 2023, primarily driven by an increase in the rate on interest-bearing liabilities resulting in a $45.0 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, time deposits and demand deposits. The increase in interest expense attributable to volume was primarily due to increases in average brokered deposits and average time deposits, partially offset by a decrease in average borrowings and other interest-bearing liabilities.

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

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

During the first quarter of 2024, average loans increased $906.9 million, or 4.4%, compared to the same period in 2023. The increase in average loans was largely driven by increases in average residential mortgage loans and average commercial mortgage loans of $563.0 million and $445.0 million, respectively. The yield on total loans increased 69 bps to 5.90% for the first quarter of 2024, compared to 5.21% for the same period in 2023, primarily due to rising interest rates.

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

The cost of deposits increased 113 bps, to 1.95%, for the first quarter of 2024 compared to 0.82% for the same period in 2023, primarily due to an increase in rates and a change in the mix of deposits. Average deposits increased $804.4 million during the first quarter of 2024 compared to the same period in 2023, primarily due to increases in average time deposits and average brokered deposits of $1.3 billion and $643.7 million, respectively, partially offset by a decrease in average noninterest-bearing demand deposits of $1.6 billion.

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

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

Average borrowings and other interest-bearing liabilities decreased $450.3 million in the first quarter of 2024 compared to the same period in 2023, primarily as a result of an increase in average total deposits. The decrease in average borrowings and other interest-bearing liabilities in the first quarter of 2024 compared to the first quarter of 2023 was primarily due to decreases in average FHLB advances and average Federal funds purchased of $358.7 million and $331.5 million, respectively, partially offset by an increase in average other borrowings and other interest-bearing liabilities of $244.1 million.

Provision for Credit Losses

The provision for credit losses was $10.9 million for the first quarter of 2024 compared to a provision of $24.5 million for the same period in 2023. The provision for credit losses of $10.9 million recorded in the first quarter of 2024 was primarily due to net charge-offs of $8.6 million and loan growth.

Non-Interest Income

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

Compared to the three months ended March 31, 2023, non-interest income before investment securities gains (losses) increased $5.4 million, or 10.5%, from $51.7 million. The increase in non-interest income was primarily due to increases of $2.1 million in wealth management revenues due to an increase in assets under management, $1.3 million in commercial banking income, $1.1 million in mortgage banking income and $0.5 million in consumer banking income. The increase in commercial banking income was primarily due to increases of $0.8 million in cash management fee income and $0.3 million in gains on sale from SBA loans, reflected in other commercial banking income. The increase in mortgage banking income was driven by higher loan sale volumes and higher spreads.

Non-Interest Expense

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

Non-interest expense increased $18.0 million, or 11.3%, for the three months ended March 31, 2024 compared to the same period in 2023. Excluding FultonFirst implementation costs and loss on asset disposals of $6.3 million, non-interest expense increased $11.7 million, or 7.3%, compared to the same period in 2023. The increase was primarily due to increases of $6.0 million in salaries and employee benefits expense, $1.9 million in data processing and software expense primarily due to technology investments made in 2023, $1.7 million in net occupancy expense driven by snow removal costs, $1.3 million in FDIC insurance expense, which includes a $1.0 million special assessment charge to recover the loss to the Deposit Insurance Fund in connection with certain bank closures in 2023, and $0.7 million in other outside services expense. The $6.0 million increase in salaries and benefits expense was primarily due to merit increases and healthcare costs.

FultonFirst initiative expenses of $6.3 million for the three months ended March 31, 2024 included $0.2 million in severance expense (reflected in salaries and employee benefits on the Consolidated Statement of Income), $2.5 million in consulting services expense (reflected in other outside services on the Consolidated Statement of Income) and loss on disposals of assets of $3.6 million (reflected in other non-interest expense on the Consolidated Statement of Income).

Income Taxes

Income tax expense for the three months ended March 31, 2024 was $13.6 million, a $1.3 million decrease from $14.9 million for the same period in 2023. The Corporation's ETR was 18.0% for the three months ended March 31, 2024 compared to 18.5% for the full year in 2023.

FINANCIAL CONDITION

The table below presents condensed consolidated ending balance sheets:

Investment Securities

The following table presents the carrying amount of investment securities:

Compared to December 31, 2023, total AFS securities at March 31, 2024 increased $128.6 million, or 5.4%, primarily due to increases in residential mortgage-backed securities and collateralized mortgage obligations of $120.0 million and $76.0 million, respectively, partially offset by decreases in U.S. Government securities and state and municipal securities of $42.2 million and $19.8 million, respectively. The increases in residential mortgage-backed securities and collateralized mortgage obligations were driven by purchases of these securities.

At March 31, 2024, total HTM securities decreased $11.5 million compared to December 31, 2023, primarily driven by a decrease of $10.8 million in residential mortgage-backed securities due to payments.

Loans

The following table presents ending net loans outstanding by type:

(1) Includes no unearned income for March 31, 2024 and $41.0 thousand for December 31, 2023.

(2) Includes unearned income of $38.0 million for March 31, 2024 and December 31, 2023.

During the three months ended March 31, 2024, net loans increased $93.4 million, or 0.4%, compared to December 31, 2023, primarily due to increases in commercial mortgage loans and residential mortgage loans of $124.4 million and $69.8 million, respectively, partially offset by decreases in commercial and industrial loans and consumer loans of $78.0 million and $30.9 million, respectively.

The Corporation does not have a significant concentration of credit risk with any single borrower. As of March 31, 2024, approximately $9.5 billion, or 44.3%, of the loan portfolio was comprised of commercial mortgage loans and construction loans. 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:

(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. Real estate commercial office represents 3% of total loans.

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

The following table presents the changes in non-accrual loans for the three months ended March 31, 2024:

During the first quarter of 2024, non-accrual loans increased approximately $8.0 million, or 6.6%, largely due to additions to non-accrual loans, partially offset by payments and charge-offs. During the three months ended March 31, 2024, non-accrual loans as a percentage of total loans increased to 0.60%, compared to 0.57% as of December 31, 2023.

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

(1) Excludes $19.0 million and $10.9 million of residential mortgage properties for which formal foreclosure proceedings were in process as of March 31, 2024

and December 31, 2023, respectively.

Non-performing loans at March 31, 2024 increased $2.8 million, or 1.8%, compared to $153.3 million as of December 31, 2023. Non-performing loans as a percentage of total loans were 0.73% at March 31, 2024 and 0.72% at December 31, 2023. See "Note 4 - 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 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 $13.7 billion as of March 31, 2024 and December 31, 2023, respectively, of which $1.0 billion and $0.9 billion were criticized and classified, respectively. For a description of the Corporation's risk ratings, see "Note 1 - Summary of Significant Accounting Policies - 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, 2023.

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:

(1) Considered "criticized" loans by banking regulators.

(2) Considered "classified" loans by banking regulators.

(3) Excludes construction - other.

The Corporation accounts for the credit risk associated with lending activities through the ACL and the provision for credit losses.

The following table presents the activity in the ACL:

(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 March 31, 2024 was $13.1 million, compared to a provision of $23.3 million recorded for the same period in 2023. The ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. See "Note 4 - Loans and Allowance for Credit Losses," in the Notes to Consolidated Financial Statements for further details on the provision for credit losses.

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

(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:

During the three months ended March 31, 2024, total deposits increased by $204.3 million, or 0.9%, compared to December 31, 2023. The increase in total deposits was primarily due to increases in time deposits and savings and money market deposits of $396.7 million and $229.1 million, respectively, partially offset by decreases in noninterest-bearing demand deposits and interest-bearing demand deposits of $227.6 million and $201.7 million, respectively.

Total uninsured deposits were estimated to be $7.1 billion and $7.2 billion at March 31, 2024 and December 31, 2023, respectively.

Time deposits of $250 thousand or more were $698.2 million and $551.2 million at March 31, 2024 and December 31, 2023, respectively.

The following table presents ending borrowings by type:

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

During the three months ended March 31, 2024, total borrowings decreased $191.5 million, or 7.7%, compared to December 31, 2023. The decrease in total borrowings was due to decreases in Federal funds purchased and FHLB advances of $240.0 million and $200.0 million, respectively, partially offset by an increase in other borrowings of $248.3 million.

Shareholders' Equity

On December 19, 2023, the Corporation announced that its Board of Directors approved the 2024 Repurchase Program. The 2024 Repurchase Program will expire on December 31, 2024. Under the 2024 Repurchase Program, the Corporation is authorized to repurchase up to $125.0 million of shares of its common stock through December 31, 2024. Under this authorization, up to $25.0 million of the $125 million authorization may be used to repurchase shares of the Corporation's preferred stock and outstanding subordinated notes.

During the three months ended March 31, 2024, 1,934,297 shares were repurchased under the 2024 Repurchase Program at a total cost of $30.3 million, or $15.69 per share.

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.

As of March 31, 2024, the Corporation's capital levels met the minimum capital requirements, including the capital conservation buffers, as prescribed in the Capital Rules.

As of March 31, 2024, 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 March 31, 2024 that management believes have changed the Corporation's capital categories.

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