FULT US Equity☆

Item 1A. Risk Factors

An investment in the Corporation's securities involves certain risks, including, among others, the risks described below. In addition to the other information contained in this report, you should carefully consider the following risk factors.

ECONOMIC AND CREDIT RISKS.

Difficult conditions in the economy and the financial markets may materially adversely affect the Corporation's business, results of operations and financial condition.

The Corporation's results of operations and financial condition are affected by conditions in the economy and the financial markets generally. The Corporation's financial performance is highly dependent upon the business environment in the markets where the Corporation operates and in the United States as a whole. Unfavorable or uncertain economic and market conditions can be caused by: declines in economic growth, business activity or investor or business confidence; limitations on the availability, or increases in the cost, of credit and capital; changes in the rate of inflation or in interest rates; high unemployment; governmental fiscal and monetary policies; the level of, or changes in, prices of raw materials, goods or commodities; global economic conditions; trade policies and tariffs affecting other countries as well as retaliatory policies and tariffs by such countries; geopolitical events; natural disasters; public health crises, such as epidemics and pandemics; acts of war or terrorism; or a combination of these or other factors.

Specifically, the business environment impacts the ability of borrowers to pay interest on, and repay principal of, outstanding loans and the value of collateral, if any, securing those loans, as well as demand for loans and other products and services the Corporation offers. There continues to be significant ongoing financial risk facing the U.S. economy, which could negatively impact the quality of the Corporation's loan portfolio. As a result, the Corporation may have to increase its provision for credit losses, which would negatively impact its results of operations, and could result in charge-offs of a higher percentage of its loans. Unlike large, national institutions, the Corporation is not able to spread the risks of unfavorable local economic conditions across a large number of diversified economies and geographic locations. If the communities in which the Corporation operates do not grow, or if prevailing economic conditions locally or nationally are unfavorable, its business could be adversely affected. In addition, increased market competition in a lower demand environment could adversely affect the profit potential of the Corporation.

The COVID-19 pandemic has adversely affected, and will likely continue to adversely affect, the Corporation’s business, results of operations and financial condition for an indefinite period.

Beginning in the first quarter of 2020, the COVID-19 pandemic has caused substantial disruptions in economic and social activity, both globally and in the United States. The spread of COVID-19, and related governmental actions to mandate or encourage temporary closures of businesses, quarantines, social distancing, "stay at home" orders and other restrictions on in-person operations and activities, have caused severe disruptions in the U.S. economy, which has, in turn, disrupted, and will likely continue to disrupt, the business, activities, and operations of the Corporation’s customers, as well as the Corporation’s own business and operations. The resulting impacts of the pandemic on consumers, including high levels of unemployment, have continued to cause changes in consumer and business spending, borrowing needs and saving habits, which have and will likely continue to affect the demand for loans and other products and services the Corporation offers, as well as the creditworthiness of its borrowers and guarantors. The significant decrease in commercial activity and disruptions in supply chains associated with the pandemic, both nationally and in the Corporation’s markets, may cause customers, vendors and counterparties to be unable to meet existing payment or other obligations to the Corporation. While portions of the national economy have reopened, there is still significant uncertainty concerning the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as their impact on the U.S. economy. The extent to which the pandemic impacts the Corporation’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the continuing severity of the COVID-19 pandemic, whether there are additional outbreaks of COVID-19, and the actions taken to contain it or treat its impact. Moreover, although multiple COVID-19 vaccines have received regulatory approval and are currently being distributed to certain high-risk population groups, it is too early to know how quickly these vaccines can be distributed to the general population and how effective they will be in mitigating the adverse social and economic effects of the COVID-19 pandemic. If the pandemic continues to cause significant negative impacts to economic conditions, the Corporation’s results of operations, financial condition and cash flows could be materially adversely impacted.

The Corporation’s business is dependent upon the willingness and ability of its customers to conduct banking and other financial transactions. In an effort to mitigate the spread of COVID-19, the Corporation has adjusted service models at certain of its financial center locations, including limiting some locations to drive-up and ATM services only, offering lobby access by appointment only, and encouraging the Corporation’s customers to use electronic banking platforms. The Corporation expects some of these measures may remain in place permanently. The increased use of electronic banking platforms by the

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Corporation’s customers may expose the Corporation to increased operational risks, including fraud and cybersecurity risks. In addition, the use of quarantines and social distancing methods to curtail the spread of COVID-19 – whether mandated by governmental authorities or recommended as a public health practice – may adversely affect the Corporation’s operations as key personnel, employees and customers avoid physical interaction. A significant portion of the Corporation’s employees has transitioned to working remotely as a result of the COVID-19 pandemic, which, in addition to requiring added support from the Corporation’s information technology infrastructure, increases cybersecurity risks. The continued spread of COVID-19 (or an outbreak of a similar highly contagious disease) could also negatively impact the business and operations of third-party service providers who perform critical services for the Corporation’s business. It is not yet known what impact these operational changes may have on the Corporation’s financial performance.

There continues to be broad concerns related to the potential effects of the COVID-19 pandemic. The aftereffects of the pandemic may continue to have an adverse effect on, among other things, (i) the Corporation’s ability to attract customer deposits, (ii) the ability of the Corporation’s borrowers to satisfy their obligations, (iii) the demand for the Corporation’s loans or the Corporation’s other products and services and/or (iv) unemployment rates, financial markets, real estate markets or economic growth. Further, the timing and ability of the Corporation’s customers’ businesses to re-open and ramp up to prior levels of activity will vary, depending upon geography, industry and other factors.

The outbreak of COVID-19 has significantly affected the financial markets and has resulted in a number of responses by the U.S. government, including reductions in interest rates by the FOMC. These reductions in interest rates, especially if prolonged, could adversely affect the Corporation’s net interest income and margins and the Corporation’s profitability for an uncertain period of time.

The COVID-19 pandemic and its impact on the economy heightens the risk associated with many of the risk factors described in this Annual Report on Form 10-K, including those related to economic conditions in the Corporation’s market areas, interest rates, loan losses, operational risks, the Corporation’s reliance on its executives and third party service providers and impairments of goodwill and intangible assets.

Governmental and regulatory actions to mitigate the impact of COVID-19 could increase regulatory compliance risks and result in a material decline in the Corporation’s earnings.

There have been several regulatory and legislative actions intended to help mitigate the adverse economic impact of COVID-19 on individuals, including mandates requiring financial institutions to work constructively with borrowers affected by COVID-19 and mandatory loan forbearances. Due to the unforeseen nature of the pandemic, future regulatory action is highly uncertain and cannot be predicted. Although the state-wide eviction and foreclosure moratoriums have expired in some of the states we do business, there are federal prohibitions. Further, there have been several other bank regulatory actions and legislative changes intended to help mitigate the adverse impact of COVID-19. There continues to be mounting pressure on federal and state officials to take further action. In addition, the Corporation’s administration of COVID-19 relief programs is likely to be subject to greater regulatory scrutiny. For example, the newly appointed Acting Director of the CFPB recently expressed concerns regarding some regulated companies’ administration of COVID-19 relief programs and communicated the CFPB’s intent to take aggressive action and expedite enforcement actions to ensure that regulated companies follow the law and meet their obligations to assist consumers during the COVID-19 pandemic.

The Corporation has offered, and may continue to offer, payment deferrals, forbearances, fee waivers, and other forms of assistance to commercial, small business and consumer customers that have been impacted by the COVID-19 pandemic. If these customers are unable to repay their loans in a timely manner when payment deferrals, forbearances or other forms of assistance end, delinquency levels may increase, the Corporation may be required to reverse the accrual of interest during the deferral or forbearance period, and the Corporation may need to increase its ACL through provisions for credit losses. In addition, the existence of deferrals, forbearances and other forms of assistance provided to borrowers impacted by the COVID-19 pandemic may not be considered TDRs or be required to be reflected as delinquent during the applicable deferral or forbearance period, and may make it more challenging to identify deterioration in individual borrower performance and in the loan portfolio generally. See Item 1. "Business-Supervision and Regulation-Governmental and Regulatory Actions to Mitigate the Impact of the COVID-19 Pandemic."

The Corporation originated a significant number of loans under the SBA’s Paycheck Protection Program, which may expose the Corporation to potential risks and may result in a large number of such loans remaining on the Corporation’s consolidated balance sheets.

The Corporation is a participating lender under the PPP, a loan program administered through the SBA, that was created to help eligible businesses, organizations and self-employed persons fund their operating costs during the COVID-19 pandemic. There are areas of ambiguity in the laws, regulations and guidance relating to the operation of the PPP, which exposes the Corporation to potential risks relating to non-compliance with the requirements of the PPP. For example, other lenders have been named in

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litigation related to their processes and procedures for accepting and processing applications for PPP loans and other matters related to PPP loans. In addition, the Corporation may be exposed to credit risk in connection with PPP loans if a determination is made by the SBA that a deficiency exists in the manner in which the PPP loan was originated, funded or serviced. If a deficiency is identified, the SBA may deny or limit its liability under its guaranty, or seek to recover from the Corporation amounts paid pursuant to its guaranty. Moreover, loan programs adopted by the federal government, such as the PPP and the Main Street Lending Program, while intended to lessen the impact of the pandemic on businesses, may result in a decreased demand for the Corporation’s loan products. See Item 1. "Business-Supervision and Regulation-Governmental and Regulatory Actions to Mitigate the Impact of the COVID-19 Pandemic."

The Corporation is subject to certain risks in connection with the establishment and level of its allowance for credit losses.

The ACL consists of the ACL - Loans, which is recorded as a reduction to loans on the consolidated balance sheets, and the ACL for OBS credit exposures, which is included in other liabilities on the consolidated balance sheets. While the Corporation believes that its ACL as of December 31, 2020 was sufficient to cover expected future credit losses in its financial instruments, principally the loan portfolio and OBS credit exposures, as of that date, the Corporation may need to increase its provision for credit losses in future periods due to changes in the risk characteristics of the loan portfolio or OBS credit exposures, forecasted economic conditions and growth in the loan portfolio or OBS credit exposures, among other factors, thereby negatively impacting its results of operations. The determination of the ACL depends significantly upon the Corporation's assumptions and judgments with respect to a variety of factors, including the performance of the loan portfolio, the weighted-average remaining lives of different classifications of loans within the loan portfolio and current and forecasted economic conditions, as well as changes in lending policy, the nature and volume of the portfolio, credit concentrations, specific industry risks, competition, model imprecision and legal and regulatory requirements, among other factors. If the Corporation's assumptions and judgments regarding such matters prove to be inaccurate, its ACL might not be sufficient, and additional provisions for credit losses might need to be made. Depending on the amount of such provisions for credit losses, the adverse impact on the Corporation's earnings could be material.

Furthermore, banking regulators may require the Corporation to make additional provisions for credit losses, or otherwise recognize further loan charge-offs or impairments following their periodic reviews of the Corporation's loan portfolio, underwriting procedures and the ACL. Any increase in the ACL or loan charge-offs as required by such regulatory agencies could have a material adverse effect on the Corporation's financial condition and results of operations. See "Note 1 - Summary of Significant Accounting Policies – Allowance for Credit Losses" in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data" and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition-Allowance for Credit Losses and Asset Quality."

The composition of the Corporation's loan portfolio and competition for loans subject the Corporation to credit risk.

Approximately 73%of the Corporation's loan portfolio was in commercial loans, commercial mortgage loans, and construction loans at December 31, 2020. Commercial loans, commercial mortgage loans and construction loans generally involve a greater degree of credit risk than residential mortgage loans and consumer loans because they typically have larger balances and are likely to be more sensitive to broader economic factors and conditions. Because payments on these loans often depend on the successful operation and management of businesses and properties, repayment of such loans may be affected by factors outside the borrower's control, such as adverse conditions in the real estate markets, adverse economic conditions or changes in governmental regulation.

Furthermore, intense competition among both bank and non-bank lenders could increase pressure on the Corporation to relax its credit standards and/or underwriting criteria in order to achieve the Corporation's loan growth targets. This could result in greater challenges in the repayment or collection of loans should economic conditions, or individual borrower performance, deteriorate. Additionally, competitive pressures could drive the Corporation to consider loans and customer relationships that are outside of the Corporation's established risk appetite or target customer base, posing similar repayment and collection risk. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition-Loans."

MARKET RISKS.

The Corporation is subject to interest rate risk.

The Corporation cannot predict or control changes in interest rates. The Corporation is affected by fiscal and monetary policies of the federal government, including those of the Federal Reserve Board, which regulates the national money supply and engages in other lending and investment activities in order to manage recessionary and inflationary pressures, many of which affect interest rates charged on loans and paid on deposits.

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Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income is the most significant component of the Corporation's net income, accounting for approximately 74% of total revenues in 2020. Changes in market interest rates, in the shape of the yield curve or in spreads between different market interest rates can have a material effect on the Corporation's net interest margin, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. The rates on some interest-earning assets, such as loans and investments, and interest-bearing liabilities, such as deposits and borrowings, adjust concurrently with, or within a brief period after, changes in market interest rates, while others adjust only periodically or not at all during their terms. Thus, changes in market interest rates might, for example, result in a decrease in the interest earned on interest-earning assets that is not accompanied by a corresponding decrease in the interest paid on interest-bearing liabilities, or the decrease in interest paid might be at a slower pace, or in a smaller amount, than the decrease in interest earned, reducing the Corporation's net interest income and/or net interest margin. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Net Interest Income."

Changes in interest rates may also affect the average life of loans and certain investment securities, most notably mortgage-backed securities. Decreases in interest rates can result in increased prepayments of loans and certain investment securities, as borrowers or issuers refinance to reduce their borrowing costs. Under those circumstances, the Corporation would be subject to reinvestment risk to the extent that it is not able to reinvest the cash received from such prepayments at rates that are comparable to the rates on the loans and investment securities which are prepaid. Conversely, increases in interest rates may extend the average life of fixed rate assets, which could restrict the Corporation's ability to reinvest in higher yielding alternatives, and may result in customers withdrawing certificates of deposit early so long as the early withdrawal penalty is less than the interest they could receive as a result of the higher interest rates.

Changes in interest rates also affect the fair value of interest-earning investment securities. Generally, the value of interest-earning investment securities moves inversely with changes in interest rates. In the event that the fair value of an investment security declines below its amortized cost, the Corporation is required to determine whether the decline constitutes an OTTI. The determination of whether a decline in fair value is other-than-temporary depends on a number of factors, including whether the Corporation has the intent and ability to retain the investment security for a period of time sufficient to allow for any anticipated recovery in fair value. If a determination is made that a decline is other-than-temporary, an OTTI charge is recorded.

The planned phasing out of LIBOR as a financial benchmark presents risks to the financial instruments originated or held by the Corporation.

LIBOR is the reference rate used for many of the Corporation's transactions, including variable and adjustable rate loans, derivative contracts, borrowings and other financial instruments. However, a reduced volume of interbank unsecured term borrowing, coupled with legal and regulatory proceedings related to rate manipulation by certain financial institutions, has led to international reconsideration of LIBOR as a financial benchmark. The United Kingdom Financial Conduct Authority ("FCA"), which regulates the process for establishing LIBOR, announced in July 2017 that the FCA intends to stop persuading, or compelling, banks to submit rates for the calculation of LIBOR after 2021. Until such time, however, FCA panel banks have agreed to continue to support LIBOR.

Regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee) have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., the Secured Overnight Financing Rate and the American Interbank Offered Rate (“Ameribor”) as the recommended alternative to U.S. Dollar LIBOR), and proposed implementation of the recommended alternatives in floating rate instruments. At this time, it is not possible to predict whether these recommendations and proposals will be broadly accepted, whether they will continue to evolve, and what the effect of their implementation may be on the markets for floating-rate financial instruments. The uncertainty surrounding potential reforms, including the use of alternative reference rates and changes to the methods and processes used to calculate rates, may have an adverse effect on the trading market for LIBOR-based securities, loan yields, and the amounts received and paid on derivative contracts and other financial instruments. In addition, the implementation of LIBOR reform proposals may result in increased compliance and operational costs.

Changes in interest rates can affect demand for the Corporation's products and services.

Movements in interest rates can cause demand for some of the Corporation's products and services to be cyclical. For example, demand for residential mortgage loans has historically tended to increase during periods when interest rates were declining and to decrease during periods when interest rates were rising. As a result, the Corporation may need to periodically increase or decrease the size of certain of its businesses, including its personnel, to match increases and decreases in demand and volume. The need to change the scale of these businesses is challenging, and there is often a lag between changes in the businesses and the Corporation's reaction to these changes.

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Price fluctuations in securities markets, as well as other market events, such as a disruption in credit and other markets and the abnormal functioning of markets for securities, could have an impact on the Corporation's results of operations.

The market value of the Corporation's securities investments, which include mortgage-backed securities, state and municipal securities, auction rate securities, and corporate debt securities, as well as the revenues the Corporation earns from its trust and investment management services business, are particularly sensitive to price fluctuations and market events. Declines in the values of the Corporation's securities holdings, combined with adverse changes in the expected cash flows from these investments, could result in OTTI charges.

The Corporation's investment management and trust services revenue, which is partially based on the value of the underlying investment portfolios, can also be impacted by fluctuations in the securities markets. If the values of those investment portfolios decrease, whether due to factors influencing U.S. or international securities markets, in general, or otherwise, the Corporation's revenue could be negatively impacted. In addition, the Corporation's ability to sell its brokerage services is dependent, in part, upon consumers' level of confidence in securities markets. See Item 7A. "Quantitative and Qualitative Disclosures About Market Risk."

LIQUIDITY RISK.

Changes in interest rates or disruption in liquidity markets may adversely affect the Corporation's sources of funding.

The Corporation must maintain sufficient sources of liquidity to meet the demands of its depositors and borrowers, support its operations and meet regulatory expectations. The Corporation's liquidity management policies and practices emphasize core deposits and repayments and maturities of loans and investments as its primary sources of liquidity. These primary sources of liquidity can be supplemented by FHLB advances, borrowings from the Federal Reserve Bank, proceeds from the sales of loans and use of liquidity resources of the Corporation, including capital markets funding. Lower-cost, core deposits may be adversely affected by changes in interest rates, and secondary sources of liquidity can be more costly to the Corporation than funding provided by deposit account balances having similar maturities. In addition, adverse changes in the Corporation's results of operations or financial condition, downgrades in the Corporation's credit ratings, regulatory actions involving the Corporation, or changes in regulatory, industry or market conditions could lead to increases in the cost of these secondary sources of liquidity, the inability to refinance or replace these secondary funding sources as they mature, or the withdrawal of unused borrowing capacity under these secondary funding sources.

The Corporation relies on customer deposits as its primary source of funding. A substantial majority of the Corporation's deposits are in non-maturing accounts, which deposit customers can withdraw on demand or upon several days' notice. Factors, many of which are outside the Corporation's control, can cause fluctuations in both the level and cost of customer deposits. These factors include competition for customer deposits from other financial institutions and non-bank competitors, changes in interest rates, the rates of return available from alternative investments or asset classes, changes in customer confidence in the Corporation or in financial institutions generally, and the liquidity needs of the Corporation's deposit customers. Further, deposits from state and municipal entities, primarily in non-maturing, interest-bearing accounts, are a significant source of deposit funding for the Corporation, representing approximately 11% of total deposits at December 31, 2020. State and municipal customers frequently maintain large deposit account balances substantially in excess of the per-depositor limit of FDIC insurance, and may be more sensitive than other depositors to changes in interest rates and the other factors discussed above. Advances in technology, such as online banking, mobile banking, digital payment platforms and the acceleration of financial technology innovation, have also made it easier to move money, potentially causing customers to switch financial institutions or switch to non-bank competitors. Movement of customer deposits into higher-yielding deposit accounts offered by the Corporation, the need to offer higher interest rates on deposit accounts to retain customer deposits, or the movement of customer deposits into alternative investments or deposits of other banks or non-bank providers could increase the Corporation's funding costs, reduce its net interest margin and/or create liquidity challenges.

Market conditions have been negatively impacted by disruptions in the liquidity markets in the past, and such disruptions or an adverse change in the Corporation's results of operations or financial condition could, in the future, have a negative impact on secondary sources of liquidity. If the Corporation is not able to continue to rely primarily on customer deposits to meet its liquidity and funding needs, continue to access secondary, non-deposit funding sources on favorable terms or otherwise fails to manage its liquidity effectively, the Corporation's ability to continue to grow may be constrained, and the Corporation's liquidity, operating margins, results of operations and financial condition may be materially adversely affected. See Item 7A. "Quantitative and Qualitative Disclosures About Market Risk-Interest Rate Risk, Asset/Liability Management and Liquidity."

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LEGAL, COMPLIANCE AND REPUTATIONAL RISKS.

The Corporation and Fulton Bank are subject to extensive regulation and supervision and may be adversely affected by changes in laws and regulations or any failure to comply with laws and regulations.

Virtually every aspect of the Corporation's and Fulton Bank's operations is subject to extensive regulation and supervision by federal and state regulatory agencies, including the Federal Reserve Board, OCC, FDIC, CFPB, DOJ, UST, SEC, HUD, state attorneys general and state banking, financial services, securities and insurance regulators. Under this regulatory framework, regulatory agencies have broad authority in carrying out their supervisory, examination and enforcement responsibilities to address compliance with applicable laws and regulations, including laws and regulations relating to capital adequacy, asset quality, liquidity, risk management and financial accounting and reporting, as well as laws and regulations governing consumer protection, fair lending, privacy, information security and cybersecurity risk management, third-party vendor risk management, and AML and anti-terrorism laws, among other aspects of the Corporation's business. Failure to comply with these regulatory requirements, including inadvertent or unintentional violations, may result in the assessment of fines and penalties, or the commencement of informal or formal regulatory enforcement actions against the Corporation or Fulton Bank. Other negative consequences can also result from such failures, including regulatory restrictions on the Corporation's activities, including restrictions on the Corporation's ability to grow through acquisition, reputational damage, restrictions on the ability of institutional investment managers to invest in the Corporation's securities and increases in the Corporation's costs of doing business.

The U.S. Congress and state legislatures and federal and state regulatory agencies continually review banking and other laws, regulations and policies for possible changes. Changes in applicable federal or state laws, regulations or governmental policies may affect the Corporation and its business. The effects of such changes are difficult to predict and may produce unintended consequences. New laws, regulations or changes in the regulatory environment could limit the types of financial services and products the Corporation may offer, alter demand for existing products and services, increase the ability of non-banks to offer competing financial services and products, increase compliance burdens, or otherwise adversely affect the Corporation's business, results of operations or financial condition. Further, unified Democratic control of the White House and both chambers of Congress will allow Democratic control of the legislative and executive agendas. The Corporation expects that Democratic-led Congressional committees will pursue greater oversight and will also pay increased attention to the banking sector’s role in providing COVID-19-related assistance. The prospects for the enactment of major banking reform legislation under the new Congress are unclear at this time.

Further, the turnover of the presidential administration has produced, and likely will continue to produce, various changes in the leadership and senior staffs of the federal regulatory agencies. The heads of many of these agencies will change in 2021 pending Senate confirmation. Also, the Board of Governors of the Federal Reserve and the FDIC Board of Directors may experience significant turnover within the next several years. Future regulatory agendas and the impact of such on the Corporation and the financial services sector generally cannot be predicted at this time.

Compliance with banking and financial services statutes and regulations is also important to the Corporation's ability to engage in new activities or to expand existing activities. Regulators continue to scrutinize banks through longer and more intensive examinations. Federal and state banking agencies possess broad powers to take supervisory actions, as they deem appropriate. These supervisory actions may result in higher capital requirements, higher deposit insurance premiums and limitations on the Corporation's operations and expansion activities that could have a material adverse effect on its business and profitability. The Corporation has dedicated significant time, effort, and expense over time to comply with regulatory and supervisory standards and requirements imposed by the Corporation's regulators, and the Corporation expects that it will continue to do so. If the Corporation fails to develop at a reasonable cost the systems and processes necessary to comply with the standards and requirements imposed by these rules, it could have a material adverse effect on the Corporation's business, financial condition, or results of operations.

Failure to comply with the BSA, the Patriot Act and related AML requirements, or with sanctions laws, could subject the Corporation to enforcement actions, fines, penalties, sanctions and other remedial actions.

Regulators have broad authority to enforce AML and sanctions laws. Failure to comply with AML and sanctions laws or to maintain an adequate compliance program can lead to significant monetary penalties and reputational damage, and federal regulators evaluate the effectiveness of an applicant in combating money laundering when considering approval of applications to acquire, merge, or consolidate with another banking institution, or to engage in other expansionary activities. There have been a number of significant enforcement actions by regulators, as well as state attorneys general and the DOJ, against banks, broker-dealers and non-bank financial institutions with respect to AML and sanctions laws and some have resulted in substantial penalties, including criminal pleas. Enforcement actions have included the Federal Reserve Board's Consent Order against the Corporation in 2014 (the "Consent Order"), which was terminated in May 2019, in connection with alleged deficiencies in the Corporation's BSA/AML compliance program. Any violation of law or regulation, possibly even inadvertent

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or unintentional violations, could result in the fines, sanctions or other penalties described above, including one or more additional consent orders against Fulton Bank or the Corporation, which could have significant reputational or other consequences and could have a material adverse effect on the Corporation’s business, financial condition and results of operations.

Additional expenses and investments have been incurred in recent years as the Corporation expanded its hiring of personnel and use of outside professionals, such as consulting and legal services, and made capital investments in operating systems to strengthen and support the Corporation's BSA/AML compliance program, as well as the Corporation's broader compliance and risk management infrastructures. The expense and capital investment associated with all of these efforts, including those undertaken in connection with the Consent Order, have had an adverse effect on the Corporation's results of operations in recent periods and could have a material adverse effect on the Corporation's results of operations in one or more future periods.

The Dodd-Frank Act continues to have a significant impact on the Corporation's business and results of operations.

The Dodd-Frank Act has had a substantial impact on many aspects of the financial services industry. The Corporation has been impacted, and will likely continue to be impacted in the future, by the so-called Durbin Amendment to the Dodd-Frank Act, which reduced debit card interchange revenue of banks, and revised FDIC deposit insurance assessments. The Corporation has also been impacted by the Dodd-Frank Act in the areas of corporate governance, capital requirements, risk management and regulation under federal consumer protection laws.

The CFPB, which was established pursuant to the Dodd-Frank Act, has imposed enforcement actions against a variety of bank and non-bank market participants with respect to a number of consumer financial products and services. These actions have resulted in those participants expending significant time, money and resources to adjust to the initiatives being pursued by the CFPB. These enforcement actions may serve as precedent for how the CFPB interprets and enforces consumer protection laws, including practices or acts that are deemed to be unfair, deceptive or abusive, with respect to all supervised institutions, which may result in the imposition of higher standards of compliance with such laws. Other federal financial regulatory agencies, including the OCC, as well as state attorneys general and state banking agencies and other state financial regulators, also have been active in this area with respect to institutions over which they have jurisdiction. Federal financial regulatory agencies may be even more active in this area under the Biden Administration. See Item 1. "Business-Supervision and Regulation."

Changes in U.S. federal, state or local tax laws may negatively impact the Corporation's financial performance.

The Corporation is subject to changes in tax law that could increase the Corporation's effective tax rates. These law changes may be retroactive to previous periods and, as a result, could negatively affect the Corporation's current and future financial performance. In December 2017, the Tax Act was signed into law, which resulted in significant changes to the U.S. Internal Revenue Code of 1986, as amended (the "Code"). The Tax Act reduced the Corporation's Federal corporate income tax rate to 21% beginning in 2018. However, the Tax Act also imposed limitations on the Corporation's ability to take certain deductions, such as the deduction for FDIC deposit insurance premiums, which partially offset the increase in net income from the lower tax rate.

In addition, a number of the changes to the Code are set to expire in future years. There is substantial uncertainty concerning whether those expiring provisions will be extended, or whether future legislation will further revise the Code.

From time to time the Corporation may be the subject of litigation and governmental or administrative proceedings. Adverse outcomes of any such litigation or proceedings may have a material adverse impact on the Corporation's business and results of operations as well as its reputation.

Many aspects of the Corporation's business involve substantial risk of legal liability. From time to time, the Corporation has been named or threatened to be named as defendant in various lawsuits arising from its business activities (and in some cases from the activities of companies that were acquired). In addition, the Corporation is periodically the subject of governmental investigations and other forms of regulatory or governmental inquiry. For example, as previously disclosed, the Corporation recently consented to the entry of an administrative civil cease-and-desist order and paid a civil monetary penalty of $1.5 million to resolve an investigation by the staff of the Division of Enforcement of the SEC regarding certain accounting determinations that could have impacted the Corporation's reported earnings per share. Like other large financial institutions, the Corporation is also subject to risk from potential employee misconduct, including non-compliance with policies and improper use or disclosure of confidential information. These lawsuits, investigations, inquiries and other matters could lead to administrative, civil or criminal proceedings, or result in adverse judgments, settlements, fines, penalties, restitution, injunctions or other types of sanctions, or the need for the Corporation to undertake remedial actions, or to alter its business, financial or accounting practices. Substantial legal liability or significant regulatory actions against the Corporation could materially adversely affect the Corporation's business, financial condition or results of operations and/or cause significant reputational harm. The Corporation establishes reserves for legal claims when payments associated with the claims become probable and the

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costs can be reasonably estimated. 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. However, the Corporation may still incur potentially significant legal costs for a matter, even if a reserve has not been established.

The Corporation can provide no assurance as to the outcome or resolution of legal or administrative actions or investigations, and such actions and investigations may result in judgments against the Corporation for significant damages or the imposition of regulatory restrictions on the Corporation's operations. Resolution of these types of matters can be prolonged and costly, and the ultimate results or judgments are uncertain due to the inherent uncertainty in the outcomes of litigation and other proceedings.

STRATEGIC AND EXTERNAL RISKS.

The Corporation may not be able to achieve its growth plans.

The Corporation's business plan includes the pursuit of profitable growth. Under current economic, competitive and regulatory conditions, profitable growth may be difficult to achieve due to one or more of the following factors:

•In the current interest rate environment, it may become more difficult for the Corporation to further increase its net interest margin or its net interest margin may come under further downward pressure. As a result, income growth will likely need to come from growth in the volume of earning assets, particularly loans, and an increase in non-interest income. However, customer demand and competition could make such income growth difficult to achieve; and

•The Corporation may seek to supplement organic growth through acquisitions, but may not be able to identify suitable acquisition opportunities, obtain the required regulatory approvals or successfully integrate acquired businesses.

To achieve profitable growth, the Corporation may pursue new lines of business or offer new products or services, all of which can involve significant costs, uncertainties and risks. Any new activity the Corporation pursues may require a significant investment of time and resources, and may not generate the anticipated return on that investment. Sustainable growth requires that the Corporation manage risks by balancing loan and deposit growth at acceptable levels of risk, maintaining adequate liquidity and capital, hiring and retaining qualified employees, successfully managing the costs and implementation risks with respect to strategic projects and initiatives, and integrating acquisition targets while managing costs. In addition, the Corporation may not be able to effectively implement and manage any new activities. External factors, such as the need to comply with additional regulations, the availability, or introduction, of competitive alternatives in the market, and changes in customer preferences may also impact the successful implementation of any new activity. Any new activity could have a significant impact on the effectiveness of the Corporation's system of internal controls. If the Corporation is not able to adequately identify and manage the risks associated with new activities, the Corporation's business, results of operations and financial condition could be materially and adversely impacted.

The Corporation faces a variety of risks in connection with potential acquisitions.

The Corporation may seek to supplement organic growth through acquisitions of banks or branches, or other financial businesses or assets. Acquiring other banks, branches, financial businesses or assets involves a variety of risks commonly associated with acquisitions, including, among other things:

•The possible loss of key employees and customers of the acquired business;

•Potential disruption of the acquired business and the Corporation's business;

•Exposure to potential asset quality issues of the acquired business;

•Potential exposure to unknown or contingent liabilities of the acquired business including, without limitation, liabilities for regulatory and compliance issues;

•Potential changes in banking or tax laws or regulations that may affect the acquired business; and

•Potential difficulties in integrating the acquired business, resulting in the diversion of resources from the operation of the Corporation's existing businesses.

Acquisitions typically involve the payment of a premium over book and market values, and therefore, some dilution of the Corporation's tangible book value and net income per common share may occur in connection with any future transaction. Failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on the Corporation's business, financial condition and results of operations. In addition, the Corporation faces significant competition from other financial services institutions, some of which may have greater financial resources than the Corporation, when considering acquisition opportunities. Accordingly, attractive opportunities may not be available and there can be no assurance that the Corporation will be successful in identifying, completing or integrating future acquisitions.

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The competition the Corporation faces is significant and may reduce the Corporation's customer base and negatively impact the Corporation's results of operations.

There is significant competition among commercial banks in the market areas served by the Corporation. In addition, the Corporation also competes with other providers of financial services, such as savings and loan associations, credit unions, consumer finance companies, securities firms, insurance companies, commercial finance and leasing companies, the mutual funds industry, full service brokerage firms and discount brokerage firms, some of which are subject to less extensive regulation than the Corporation and have different cost structures. Some of the Corporation's competitors have greater resources, higher lending limits, lower cost of funds and may offer other services not offered by the Corporation. The Corporation also experiences competition from a variety of institutions outside its market areas. Some of these institutions conduct business primarily over the Internet and, as a result, may be able to realize certain cost savings and offer products and services at more favorable rates and with greater convenience to the customer. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. In addition, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as funds transfers, payment services, residential mortgage loans, consumer loans and wealth and investment management services. Competition with non-banks, including technology companies, to provide financial products and services is intensifying. In particular, the activity of financial technology companies ("Fintechs") has grown significantly over recent years and is expected to continue to grow. Fintechs have and may continue to offer bank or bank-like products. In July 2018, the OCC announced that it will begin accepting applications from Fintechs to become special purpose national banks. Although the OCC’s authority to issue special purpose bank charters to non-bank Fintechs continues to be subject to ongoing litigation, similar developments are likely to result in even greater competition within all areas of the Corporation’s operations.

Competition may adversely affect the rates the Corporation pays on deposits and charges on loans, and could result in the loss of fee income, as well as the loss of customer deposits and the income generated from those deposits, thereby potentially adversely affecting the Corporation's profitability and its ability to continue to grow. The Corporation's profitability and continued growth depends upon its continued ability to successfully compete in the market areas it serves. See Item 1. "Business-Competition."

Climate change may materially adversely affect the Corporation's business and results of operations.

The Corporation operates in areas where its business and the activities of its customers could be impacted by the effects of climate change. The effects of climate change may include increased frequency or severity of weather-related events, such as severe storms, hurricanes, flooding and droughts, and rising sea levels. These effects can disrupt business operations, damage property, devalue assets and change consumer and business preferences, which may adversely affect borrowers, increase credit risk and reduce demand for the Corporation’s products and services. In addition, increasing concerns over the long-term impacts of climate change have led and will likely continue to lead to legislative and regulatory initiatives to combat climate change and may result in increased supervisory expectations with respect to banks’ risk management practices related to climate change. Climate change, its effects and the resulting, unknown impacts could have a material adverse effect on the Corporation’s financial condition and results of operations.

If the goodwill that the Corporation has recorded or records in the future in connection with its acquisitions becomes impaired, it could have a negative impact on the Corporation's results of operations.

In the past, the Corporation supplemented its internal growth with strategic acquisitions of banks, branches and other financial services companies. In the future, the Corporation may seek to supplement organic growth through additional acquisitions. If the purchase price of an acquired company exceeds the fair value of the company's net assets, the excess is carried on the acquirer's balance sheet as goodwill. As of December 31, 2020, the Corporation had $533.4 million of goodwill recorded on its balance sheet. The Corporation is required to evaluate goodwill for impairment at least annually. Write-downs of the amount of any impairment, if necessary, are to be charged to earnings in the period in which the impairment occurs. There can be no assurance that future evaluations of goodwill will not result in impairment charges.

Changes in accounting policies, standards, and interpretations could materially affect how the Corporation reports its financial condition and results of operations.

The preparation of the Corporation's financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as revenues and expenses during the period. A summary of the accounting policies that 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, including those related to the ACL, goodwill, income taxes, and fair value measurements, is set forth in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies" and within "Note 1-

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Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."

A variety of factors could affect the ultimate values of assets, liabilities, income and expenses recognized and reported in the Corporation's financial statements, and these ultimate values may differ materially from those determined based on management's estimates and assumptions. In addition, the FASB, regulatory agencies, and other bodies that establish accounting standards from time to time change the financial accounting and reporting standards governing the preparation of the Corporation's financial statements. Further, those bodies that establish and interpret the accounting standards (such as the FASB, the Securities and Exchange Commission, and banking regulators) may change prior interpretations or positions regarding how these standards should be applied. These changes can be difficult to predict and can materially affect how the Corporation records and reports its financial condition and results of operations.

The Corporation has from time to time undertaken initiatives to reduce or manage growth in its non-interest expenses and increase the efficiency of its operations. The Corporation may not achieve the intended effect on its non-interest expenses or its operating efficiency, and those initiatives may have an adverse impact on the Corporation’s competitive position and ability to achieve its growth plans.

It is possible that initiatives from time to time undertaken by the Corporation to reduce or manage growth in its non-interest expenses and increase its operating efficiency will not achieve the effects on its non-interest expenses or create the cost efficiencies intended through those initiatives. Moreover, those initiatives could adversely impact the retention of customers and deposit balances, harm the Corporation’s relationships with its customers, weaken the Corporation’s competitive position, or make it more difficult for the Corporation to achieve its growth plans. Any of these circumstances, should they arise, could have a material adverse effect on the Corporation’s business or results of operations.

OPERATIONAL RISKS.

The Corporation is exposed to many types of operational and other risks, and the Corporation's framework for managing risks may not be effective in mitigating risk.

The Corporation is exposed to many types of operational risk, including the risk of human error or fraud by employees and other third parties, intentional and inadvertent misrepresentation by loan applicants, borrowers or guarantors, unsatisfactory performance by employees and vendors, clerical and record-keeping errors, computer and telecommunications systems malfunctions or failures and reliance on data that may be faulty or incomplete. In an environment characterized by continual, rapid technological change, as discussed below, when the Corporation introduces new products and services, or makes changes to its information technology systems and processes, these operational risks are increased. Any of these operational risks could result in the Corporation's diminished ability to operate one or more of its businesses, financial loss, potential liability to customers, inability to secure insurance, reputational damage and regulatory intervention, which could materially adversely affect the Corporation.

The Corporation's risk management framework is subject to inherent limitations, and risks may exist, or develop in the future, that the Corporation has not anticipated or identified. If the Corporation's risk management framework proves to be ineffective, the Corporation could suffer unexpected losses and could be materially adversely affected.

The Corporation's operational risks include risks associated with third-party vendors and other financial institutions.

The Corporation relies upon certain third-party vendors to provide products and services necessary to maintain its day-to-day operations, including, notably, responsibility for the core processing system that services Fulton Bank. Accordingly, the Corporation's operations are exposed to the risk that these vendors might not perform in accordance with applicable contractual arrangements or service level agreements. The failure of an external vendor to perform in accordance with applicable contractual arrangements or service level agreements could be disruptive to the Corporation's operations, which could have a material adverse effect on the Corporation's financial condition or results of operations, and damage its reputation. Further, third-party vendor risk management has become a point of regulatory emphasis recently. A failure of the Corporation to follow applicable regulatory guidance in this area could expose the Corporation to regulatory sanctions.

The commercial soundness of many financial institutions may be closely interrelated as a result of credit, trading, execution of transactions or other relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This risk is sometimes referred to as "systemic risk" and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which the Corporation interacts on a daily basis, and therefore could adversely affect the Corporation.

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Any of these operational or other risks could result in the Corporation's diminished ability to operate one or more of its businesses, financial loss, potential liability to customers, inability to secure insurance, reputational damage and regulatory intervention, which could materially adversely affect the Corporation.

Loss of, or failure to adequately safeguard, confidential or proprietary information may adversely affect the Corporation's operations, net income or reputation.

The Corporation's business is highly dependent on information systems and technology and the ability to collect, process, transmit and store significant amounts of confidential information regarding customers, employees and others on a daily basis. While the Corporation performs some of the functions required to operate its business directly, it also relies on third parties for significant business functions, such as processing customer transactions, providing cloud-based infrastructure, software and data storage services, maintaining customer-facing websites, including its online and mobile banking functions, and developing software for new products and services, among others. These relationships require the Corporation to allow third parties to access, store, process and transmit customer information. As a result, the Corporation may be subject to cyber security risks directly, as well as indirectly, through the vendors to whom it outsources business functions and the downstream service providers of those vendors. The increased use of smartphones, tablets and other mobile devices, as well as cloud computing, may also heighten these and other operational risks. Cyber threats could result in unauthorized access, loss or destruction of confidential information or customer data, unavailability, degradation or denial of service, introduction of computer viruses or ransomware and other adverse events, causing the Corporation to incur additional costs (such as repairing systems or adding new personnel or protection technologies). Cyber threats may also subject the Corporation to regulatory investigations, litigation or enforcement actions require the payment of regulatory fines or penalties or undertaking costly remediation efforts with respect to third parties affected by a cyber security incident, all or any of which could adversely affect the Corporation's business, financial condition or results of operations and damage its reputation.

Like other financial institutions, the Corporation experiences malicious cyber activity on an ongoing basis directed at its websites, computer systems, software, networks and its users. This malicious activity includes attempts at unauthorized access, implantation of computer viruses or malware, and denial-of-service attacks. The Corporation also experiences large volumes of phishing and other forms of social engineering attempted for the purpose of perpetrating fraud against the Corporation, its employees or its customers. While, to date, malicious cyber activity, cyber attacks and other information security breaches have not had a material adverse impact on the Corporation, there can be no assurance that such events will not have a material adverse impact on the Corporation’s business, results of operations, financial condition or reputation in the future.

The Corporation uses monitoring and preventive controls to detect and respond to data breaches and cyber threats involving its own systems before they become significant. The Corporation regularly evaluates its systems and controls and implements upgrades as necessary. The Corporation also attempts to reduce its exposure to its vendors' data privacy and cyber incidents by performing initial vendor due diligence that is updated periodically for critical vendors, negotiating service level standards with vendors, negotiating for indemnification from vendors for confidentiality and data breaches, and limiting third-party access to the least privileged level necessary to perform outsourced functions, among other things. The additional cost to the Corporation of data and cyber security monitoring and protection systems and controls includes the cost of hardware and software, third party technology providers, consulting and forensic testing firms, insurance premium costs and legal fees, in addition to the incremental cost of personnel who focus a substantial portion of their responsibilities on data and cyber security.

There can be no assurance that the measures employed by the Corporation to detect and combat direct or indirect cyber threats will be effective. In addition, because the methods of cyber attacks change frequently or, in some cases, are not recognized until launched, the Corporation may be unable to implement effective preventive control measures to proactively address these methods. The Corporation's or a vendor's failure to promptly identify and counter a cyber attack may result in increased costs and other negative consequences, such as the loss of, or inability to access, data, degradation or denial of service and introduction of computer viruses. Although the Corporation maintains insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, such insurance coverage may be inapplicable or otherwise insufficient to cover any or all losses. Further, a successful cyber attack that results in a significant loss of customer data or compromises the Corporation's ability to function would have a material adverse effect on the Corporation's business, reputation, financial condition and results of operation.

Account data compromise, malware and ransomware events affecting a broad spectrum of commercial businesses and governmental entities in recent years have resulted in heightened legislative and regulatory focus on privacy, data protection and information security. New or revised laws and regulations may significantly impact the Corporation's current and planned privacy, data protection and information security-related practices, the collection, use, sharing, retention and safeguarding of consumer and employee information, and current or planned business activities. Compliance with current or future privacy, data protection and information security laws to which the Corporation is subject could result in higher compliance and technology costs and could restrict the Corporation's ability to provide certain products and services, which could materially and adversely affect the Corporation's profitability. The Corporation's failure to comply with privacy, data protection and information security

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laws could result in potentially significant regulatory and governmental investigations and/or actions, litigation, fines, sanctions and damage to the Corporation's reputation and its brand.

The Corporation is subject to a variety of risks in connection with origination and sale of loans.

The Corporation originates residential mortgage loans and other loans, such as loans guaranteed, in part, by the SBA, all or portions of which are later sold in the secondary market to government sponsored enterprises or agencies, such as the Federal National Mortgage Association (Fannie Mae), and other non-government sponsored investors. In connection with such sales, the Corporation makes certain representations and warranties with respect to matters such as the underwriting, origination, documentation or other characteristics of the loans sold. The Corporation may be required to repurchase a loan, or to reimburse the purchaser of a loan for any related losses, if it is determined that the loan sold was in violation of representations or warranties made at the time of the sale, and, in some cases, if there is evidence of borrower fraud, in the event of early payment default by the borrower on the loan, or for other reasons. The Corporation maintains reserves for potential losses on certain loans sold, however, it is possible that losses incurred in connection with loan repurchases and reimbursement payments may be in excess of any applicable reserves, and the Corporation may be required to increase reserves and may sustain additional losses associated with such loan repurchases and reimbursement payments in the future, which could have a material adverse effect on the Corporation's financial condition or results of operations.

In addition, the sale of residential mortgage loans and other loans in the secondary market serves as a source of non-interest income and liquidity for the Corporation, and can reduce its exposure to risks arising from changes in interest rates. Efforts to reform government sponsored enterprises and agencies, changes in the types of, or standards for, loans purchased by government sponsored enterprises or agencies and other investors, or the Corporation's failure to maintain its status as an eligible seller of such loans may limit the Corporation's ability to sell these loans. The inability of the Corporation to continue to sell these loans could reduce the Corporation's non-interest income, limit the Corporation's ability to originate and fund these loans in the future, and make managing interest rate risk more challenging, any of which could have a material adverse effect on the Corporation's results of operations and financial condition.

The Corporation continually encounters technological change.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Corporation's future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Corporation's operations. The costs of new technology, including personnel, can be high, in both absolute and relative terms. Many of the Corporation's financial institution competitors have substantially greater resources to invest in technological improvements. In addition, new payment, credit and investment and wealth management services developed and offered by non-bank or non-traditional competitors pose an increasing threat to the products and services traditionally provided by financial institutions like the Corporation. The Corporation may not be able to effectively implement new technology-driven products and services, be successful in marketing these products and services to its customers, or effectively deploy new technologies to improve the efficiency of its operations. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on the Corporation's business, financial condition and results of operations.

There can be no assurance, given the past pace of change and innovation, that the Corporation's technology, either purchased or developed internally, will meet or continue to meet the needs of the Corporation and the needs of its customers.

In addition, advances in technology, as well as changing customer preferences favoring access to the Corporation's products and services through digital channels, could decrease the value of the Corporation's branch network and other assets. If customers increasingly choose to access the Corporation's products and services through digital channels, the Corporation may find it necessary to consolidate, close or sell branch locations or restructure its branch network. These actions could lead to losses on assets, expenses to reconfigure branches and the loss of customers in affected markets. As a result, the Corporation's business, financial condition or results of operations may be adversely affected.

RISKS RELATED TO AN INVESTMENT IN THE CORPORATION'S SECURITIES.

Capital requirements have been adopted by U.S. banking regulators that may limit the Corporation's ability to return earnings to shareholders or operate or invest in its business.

The Corporation and Fulton Bank are subject to capital requirements under the Basel III Rules. Failure to meet the established capital requirements could result in the federal banking regulators placing limitations or conditions on the activities of the Corporation or Fulton Bank or restricting the commencement of new activities, and such failure could subject the Corporation

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or Fulton Bank to a variety of enforcement remedies, including limiting the ability of the Corporation or Fulton Bank to pay dividends, issuing a directive to increase capital and terminating FDIC deposit insurance. In addition, the failure to comply with the capital conservation buffer will result in restrictions on capital distributions and discretionary cash bonus payments to executive officers. As of December 31, 2020, the Corporation's current capital levels met the minimum capital requirements, including the capital conservation buffer, as set forth in the Basel III Rules. See Item 1. "Business-Supervision and Regulation-Capital Requirements."

In addition, the implementation of certain regulations with regard to regulatory capital could disproportionately affect the Corporation's regulatory capital position relative to that of its competitors, including those who may not be subject to the same regulatory requirements.

The Corporation is a holding company and relies on dividends and other payments from its subsidiaries for substantially all of its revenue and its ability to make dividend payments, distributions and other payments.

Fulton Financial Corporation is a separate and distinct legal entity from its bank and non-bank subsidiaries, and depends on the payment of dividends and other payments and distributions from its subsidiaries, principally Fulton Bank, for substantially all of its revenues. As a result, the Corporation's ability to make dividend payments on its common stock depends primarily on compliance with applicable federal regulatory requirements and the receipt of dividends and other distributions from its subsidiaries. There are various regulatory and prudential supervisory restrictions, which may change from time to time, that impact the ability of Fulton Bank to pay dividends or make other payments to the Corporation. There can be no assurance that Fulton Bank will be able to pay dividends at past levels, or at all, in the future. If the Corporation does not receive sufficient cash dividends or is unable to borrow from Fulton Bank, then the Corporation may not have sufficient funds to pay dividends to its shareholders, repurchase its common stock or service its debt obligations. See Item 1. "Business-Supervision and Regulation-Loans and Dividends from Bank Subsidiary."

In addition, the Corporation has pursued a strategy of capital management under which it has sought to deploy its capital, through stock repurchases, increased regular dividends and special dividends, in a manner that is beneficial to the Corporation's shareholders. This capital management strategy is subject to regulatory supervision. In July 2019, the Federal Reserve Board eliminated the standalone prior approval requirement in the capital rules for repurchase or redemption of common stock. In certain circumstances, however, the Corporation's repurchases of its common stock may be subject to a prior approval or notice requirement under the regulations or policies of the Federal Reserve Board. As a result, the Corporation may not be able to enter the market for stock repurchases on a timely basis when the Corporation's board of directors and management believe such repurchases to be most opportune, or at all.

Anti-takeover provisions could negatively impact the Corporation's shareholders.

Provisions of banking laws, Pennsylvania corporate law and of the Corporation's Amended and Restated Articles of Incorporation and Bylaws could make it more difficult for a third party to acquire control of the Corporation or have the effect of discouraging a third party from attempting to acquire control of the Corporation. To the extent that these provisions discourage such a transaction, holders of the Corporation's common stock may not have an opportunity to dispose of part or all of their stock at a higher price than that prevailing in the market. These provisions may also adversely affect the market price of the Corporation's stock. In addition, some of these provisions make it more difficult to remove, and thereby may serve to entrench, the Corporation's incumbent directors and officers, even if their removal would be regarded by some shareholders as desirable.

Certain provisions of Pennsylvania corporate law applicable to the Corporation and the Corporation's Amended and Restated Articles of Incorporation and Bylaws include provisions which may be considered to be "anti-takeover" in nature because they may have the effect of discouraging or making more difficult the acquisition of control of the Corporation by means of a hostile tender offer, exchange offer, proxy contest or similar transaction. These provisions are intended to protect the Corporation's shareholders by providing a measure of assurance that the Corporation's shareholders will be treated fairly in the event of an unsolicited takeover bid and by preventing a successful takeover bidder from exercising its voting control to the detriment of the other shareholders. However, these provisions, taken as a whole, may also discourage a hostile tender offer, exchange offer, proxy solicitation or similar transaction relating to the Corporation's common stock, even if the accomplishment of a given transaction may be favorable to the interests of shareholders.

The ability of a third party to acquire the Corporation is also limited under applicable banking regulations. The BHCA requires any "bank holding company" (as defined in that Act) to obtain the approval of the Federal Reserve Board prior to acquiring more than 5% of the Corporation's outstanding common stock. Any person other than a bank holding company is required to obtain prior approval of the Federal Reserve Board to acquire 10% or more of the Corporation's outstanding common stock under the Change in Bank Control Act of 1978 and, under certain circumstances, such approvals are required at an even lower ownership percentage. Any holder of 25% or more of the Corporation's outstanding common stock, other than an individual, is

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subject to regulation as a bank holding company under the BHCA. In addition, the delays associated with obtaining necessary regulatory approvals for acquisitions of interests in bank holding companies also tend to make more difficult certain methods of effecting acquisitions. While these provisions do not prohibit an acquisition, they would likely act as deterrents to an unsolicited takeover attempt.

GENERAL RISK FACTORS.

Negative publicity could damage the Corporation's reputation and business.

Reputation risk, or the risk to the Corporation's earnings and capital from negative public opinion, is inherent in the Corporation's business. Negative public opinion could result from the Corporation's actual, alleged or perceived conduct in any number of activities, including lending practices, litigation, regulatory compliance, mergers and acquisitions, disclosure, sharing or inadequate protection of customer information, environmental, social and governance practices and disclosures, and from actions taken by government agencies and community organizations in response to that conduct. In addition, unfavorable public opinion regarding the broader financial services industry, or arising from the actions of individual financial institutions, can have an adverse effect on the Corporation's reputation. Because the Corporation conducts its businesses under the "Fulton" brand, negative public opinion about one line of business could affect the Corporation's other lines of businesses. Further, the increased use of social media platforms facilitates the rapid and widespread dissemination of information, including inaccurate, misleading, or false information, which could magnify the potential harm to the Corporation's reputation. Any of these or other events that impair the Corporation's reputation can affect the Corporation's ability to attract and retain customers and employees, and access sources of funding and capital, any of which could have materially adverse effect on the Corporation's results of operations and financial condition.

The Corporation's internal controls may be ineffective.

One critical component of the Corporation's risk management framework is its system of internal controls. Management regularly reviews and updates the Corporation's internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide reasonable, but not absolute, assurances that the objectives of the controls are met. Any failure or circumvention of the Corporation's controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Corporation's business, results of operations, financial condition and reputation. See Item 9A. "Controls and Procedures."

The Corporation may not be able to attract and retain skilled people.

The Corporation's success depends, in large part, on its ability to attract and retain skilled people. Competition for talented personnel in most activities engaged in by the Corporation can be intense, and the Corporation may not be able to hire sufficiently skilled people or to retain them. The unexpected loss of services of one or more of the Corporation's key personnel could have a material adverse impact on the Corporation's business because of their skills, knowledge of the Corporation's markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel.

A downgrade in the credit ratings of the Corporation or Fulton Bank could have a material adverse impact on the Corporation.

Moody's Investors Service, Inc. and DBRS, Inc. continuously evaluate the Corporation and Fulton Bank, and their ratings of the Corporation's and Fulton Bank's long-term and short-term debt and preferred stock are based on a number of factors, including financial strength, as well as factors not entirely within the Corporation's and Fulton Bank's control, such as conditions affecting the financial services industry generally. In light of these reviews and the continued focus on the financial services industry generally, the Corporation and Fulton Bank may not be able to maintain their current respective ratings. Ratings downgrades by any of these credit rating agencies could have a significant and immediate impact on the Corporation's funding and liquidity through cash obligations, reduced funding capacity and collateral triggers. A reduction in the Corporation's or Fulton Bank's credit ratings could also increase the Corporation's and Fulton Bank's borrowing costs and limit their access to the capital markets.

Downgrades in the credit or financial strength ratings assigned to the counterparties with whom the Corporation transacts could create the perception that the Corporation's financial condition will be adversely impacted as a result of potential future defaults by such counterparties. Additionally, the Corporation could be adversely affected by a general, negative perception of financial institutions caused by the downgrade of other financial institutions. Accordingly, ratings downgrades for other financial institutions could affect the market price of the Corporation's stock and could limit the Corporation's access to or increase its cost of capital.

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The Corporation's future growth may require the Corporation to raise additional capital in the future, but that capital may not be available when it is needed or may be available only at an excessive cost.

The Corporation is required by regulatory agencies to maintain adequate levels of capital to support its operations. The Corporation anticipates that current capital levels will satisfy regulatory requirements for the foreseeable future. The Corporation, however, may at some point choose to raise additional capital to support future growth. The Corporation's ability to raise additional capital will depend, in part, on conditions in the financial markets at that time, which are outside of the Corporation's control. Accordingly, the Corporation may be unable to raise additional capital, if and when needed, on terms acceptable to the Corporation, or at all.

If the Corporation cannot raise additional capital when needed, its ability to expand operations through internal growth and acquisitions could be materially impacted. In the event of a material decrease in the Corporation's stock price, future issuances of equity securities could result in dilution of existing shareholder interests.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The Corporation's financial center properties as of December 31, 2020 totaled 223 financial centers. Of those financial centers, 89 were owned and 134 were leased. On January 8, 2021, the Corporation closed 21 financial centers (5 were owned and 16 were leased) and consolidated operations of those financial centers into other nearby financial centers operated by the Corporation. Remote service facilities (mainly stand-alone ATMs) are excluded from these totals. The Corporate headquarters is located in Lancaster, Pennsylvania. The Corporation owns two dedicated operations centers, located in East Petersburg, Pennsylvania and Mantua, New Jersey.

Item 3. Legal Proceedings

The information presented in the "Legal Proceedings" section of "Note 18 - Commitments and Contingencies" in the Notes to Consolidated Financial Statements is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock

As of December 31, 2020, the Corporation had 162.3 million shares of $2.50 par value common stock outstanding held byapproximately 30,500 holders of record. The closing price per share of the Corporation’s common stock on February 18, 2021 was $14.88. The common stock of the Corporation is traded on the Global Select Market of The Nasdaq Stock Market under the symbol FULT.

The following table presents the quarterly high and low prices of the Corporation’s stock and per share cash dividends declared for each of the quarterly periods in 2020 and 2019:

Price Range PerShare Dividend

High Low

Restrictions on the Payments of Dividends

The Corporation is a separate and distinct legal entity from its banking and nonbanking subsidiaries, and depends on the payment of dividends from its subsidiaries, principally its banking subsidiary, for substantially all of its revenues. As a result, the Corporation's ability to make dividend payments on its common stock depends primarily on compliance with applicable federal regulatory requirements and the receipt of dividends and other distributions from its subsidiaries. There are various regulatory and prudential supervisory restrictions, which may change from time to time, that impact the ability of its banking subsidiaries to pay dividends or make other payments to the Corporation. In addition, dividends on the Corporation’s common stock may not be declared, paid or set aside for payment, unless the full dividends for the immediately preceding dividend payment period for the Corporation’s Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A have been declared and paid or declared and a sum sufficient for the payment thereof has been set aside. For additional information regarding the regulatory restrictions applicable to the Corporation and its subsidiaries, see "Supervision and Regulation," in Item 1. "Business;" Item 1A. "Risk Factors - The Corporation is a holding company and relies on dividends and other payments from its subsidiaries for substantially all of its revenue and its ability to make dividend payments, distributions and other payments," under "Risks Related to an Investment in the Corporation’s Securities;" and "Note 11 - Regulatory Matters," in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."

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Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information about options outstanding under the Corporation’s Employee Equity Plan and the number of securities remaining available for future issuance under the Employee Equity Plan, Directors' Plan and the ESPP as of December 31, 2020:

Equity compensation plans not approved by security holders — — —

(1) The number of securities to be issued upon exercise of outstanding options, warrants and rights includes 1,101,418 PSUs, which is the target number of PSUs that are payable under the Employee Equity Plan, though no shares will be issued until achievement of applicable performance goals, and includes 683,264 time-vested RSUs granted under the Employee Equity Plan and 112,698 time-vested RSUs granted under the Directors' Plan.

(2) The weighted-average exercise price of outstanding options, warrants and rights does not take into account outstanding PSUs and RSUs granted under the Employee Equity and the Directors' Plan.

(3) Consists of 9,307,000 shares that may be awarded under the Employee Equity Plan, 180,000 shares that may be awarded under the Directors' Plan and 1,430,000 shares that may be purchased under the ESPP. Excludes accrued purchase rights under the ESPP as of December 31, 2020 as the number of shares to be purchased is indeterminable until the shares are issued.

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Performance Graph

The following graph shows cumulative total shareholder return (i.e., price change, plus reinvestment of dividends) on the common stock of Fulton Financial Corporation during the five-year period ended December 31, 2020, compared with (1) the Nasdaq Bank Index and (2) the Standard and Poor's 500 index ("S&P 500"). The graph is not indicative of future price performance.

The graph below is furnished under this Part II, Item 5 of this Form 10-K and shall not be deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.

Year Ending December 31

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Item 6. Selected Financial Data

5-YEAR CONSOLIDATED SUMMARY OF FINANCIAL RESULTS

(dollars in thousands, except per-share data)

SUMMARY OF INCOME

Prepayment penalty on FHLB advances 2,878 4,326 — — —

Preferred stock dividends (2,135) — — — —

PER SHARE

RATIOS

PERIOD-END BALANCES

AVERAGE BALANCES

(1)Beginning January 1, 2020, provision is determined under CECL methodology. Prior to January 1, 2020, provision was determined based on incurred loss methodology.

(2)Excluding prepayment penalty on FHLB advances.

(3)Ratio represents a financial measure derived by methods other than GAAP. See reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure under the following heading, "Supplemental Reporting of Non-GAAP Based Financial Measures" below.

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Supplemental Reporting of Non-GAAP Based Financial Measures

This Annual Report on Form 10-K contains supplemental financial information, as detailed below, which has been derived by methods other than GAAP. The Corporation has presented these non-GAAP financial measures because it believes that these measures provide useful and comparative information to assess trends in the Corporation's results of operations and financial condition. Presentation of these non-GAAP financial measures is consistent with how the Corporation evaluates its performance internally, and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Corporation's industry. Management believes that these non-GAAP financial measures, in addition to GAAP measures, are also useful to investors to evaluate the Corporation's results. Investors should recognize that the Corporation's presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures, and the Corporation strongly encourages a review of its consolidated financial statements in their entirety. Following are reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure as of and for the year ended December 31:

(in thousands, except per share data and percentages)

Return on average common shareholders' equity (tangible)

Plus: Intangible amortization, net of tax 417 1,127 — — —

Less: Average preferred stock (32,084) — — — —

Efficiency ratio

Less: Intangible amortization (529) (1,427) — — —

Less: Prepayment penalty on FHLB advances (2,878) (4,326) — — —

Non-performing assets to common shareholders' equity (tangible) and ACL - loans

(1) Presented on a fully taxable equivalent basis, using a 21% federal tax rate for 2018 through 2020 and 35% for 2016 and 2017.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("Management’s Discussion") relates to Fulton Financial Corporation (the "Corporation"), a financial holding company registered under the Bank Holding Company Act and incorporated under the laws of the Commonwealth of Pennsylvania in 1982, and its wholly owned subsidiaries. Management’s Discussion should be read in conjunction with the consolidated financial statements and other financial information presented in this report.

FORWARD-LOOKING STATEMENTS

The Corporation has made, and may continue to make, certain forward-looking statements with respect to its financial condition, results of operations and business. Do not unduly rely on forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "will," "could," "estimates," "predicts," "potential," "continue," "anticipates," "believes," "plans," "expects," "future," "intends," "projects," the negative of these terms and other comparable terminology. These forward-looking statements may include projections of, or guidance on, the Corporation's future financial performance, expected levels of future expenses, including future credit losses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends in the Corporation's business or financial results.

Forward-looking statements are neither historical facts, nor assurance of future performance. Instead, they are based on current beliefs, expectations and assumptions regarding the future of the Corporation's business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Corporation's control, and actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not unduly rely on any of these forward-looking statements. Any forward-looking statement is based only on information currently available and speaks only as of the date when made. The Corporation undertakes no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Many factors could affect future financial results including, without limitation:

•the impact of adverse conditions in the economy and financial markets on the performance of the Corporation’s loan portfolio and demand for the Corporation’s products and services;

•the scope and duration of the COVID-19 pandemic, actions taken by governmental authorities in response to the pandemic, the Corporation’s participation in the PPP and other COVID-19 relief programs, and the direct and indirect impacts of the pandemic on the Corporation, its customers and third parties;

•the determination of the ACL, which depends significantly upon assumptions and judgments with respect to a variety of factors, including the performance of the loan portfolio, the weighted-average remaining lives of different classifications of loans within the loan portfolio and current and forecasted economic conditions, among other factors;

•increases in non-performing assets, which may require the Corporation to increase the allowance for credit losses, charge off loans and incur elevated collection and carrying costs related to such non-performing assets;

•investment securities gains and losses, including other-than-temporary declines in the value of securities which may result in charges to earnings;

•the effects of market interest rates, and the relative balances of interest rate-sensitive assets to interest rate-sensitive liabilities, on net interest margin and net interest income;

•the planned phasing out of LIBOR as a benchmark reference rate;

•the effects of changes in interest rates on demand for the Corporation’s products and services;

•the effects of changes in interest rates or disruptions in liquidity markets on the Corporation’s sources of funding;

•the effects of the extensive level of regulation and supervision to which the Corporation and Fulton Bank, N.A. are subject;

•the effects of the significant amounts of time and expense associated with regulatory compliance and risk management;

•the potential for negative consequences resulting from regulatory violations, investigations and examinations, or failure to comply with the BSA, the Patriot Act and related AML requirements, including potential supervisory actions, the assessment of fines and penalties, the imposition of sanctions, the need to undertake remedial actions and possible damage to the Corporation’s reputation;

•the continuing impact of the Dodd-Frank Act on the Corporation’s business and results of operations;

•the effects of, and uncertainty surrounding, new legislation, changes in regulation and government policy, which could result in significant changes in banking and financial services regulation;

•the effects of actions by the federal government, including those of the Federal Reserve Board and other government agencies, that impact money supply and market interest rates;

•the effects of changes in U.S. federal, state or local tax laws;

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•the effects of negative publicity on the Corporation’s reputation;

•the effects of adverse outcomes in litigation and governmental or administrative proceedings;

•the potential to incur losses in connection with repurchase and indemnification payments related to sold loans;

•the Corporation’s ability to achieve its growth plans;

•completed and potential acquisitions may affect costs and the Corporation may not be able to successfully integrate the acquired business or realize the anticipated benefits from such acquisitions;

•the potential effects of climate change on the Corporation’s business and results of operations;

•the Corporation’s ability to implement from time to time measures intended to manage growth in non-interest expenses and improve the efficiency of its operations and realize the intended effects of those initiatives;

•the effects of competition on deposit rates and growth, loan rates and growth and net interest margin;

•the Corporation’s ability to manage the level of non-interest expenses, including salaries and employee benefits expenses, operating risk losses and goodwill impairment;

•the effects of changes in accounting policies, standards, and interpretations on the Corporation’s reporting of its financial condition and results of operations, including the Corporation’s adoption of ASU 2016-13, Financial Instruments – Credit Losses (CECL);

•the impact of operational risks, including the risk of human error, inadequate or failed internal processes and systems, computer and telecommunications systems failures, faulty or incomplete data and an inadequate risk management framework;

•the impact of failures of third parties upon which the Corporation relies to perform in accordance with contractual arrangements;

•the failure or circumvention of the Corporation’s system of internal controls;

•the loss of, or failure to safeguard, confidential or proprietary information;

•the Corporation’s failure to identify and to address cyber-security risks, including data breaches and cyber-attacks;

•the Corporation’s ability to keep pace with technological changes;

•the Corporation’s ability to attract and retain talented personnel;

•capital and liquidity strategies, including the Corporation’s ability to comply with applicable capital and liquidity requirements, and the Corporation’s ability to generate capital internally or raise capital on favorable terms;

•the Corporation’s reliance on its subsidiaries for substantially all of its revenues and its ability to pay dividends or other distributions; and

•the effects of any downgrade in the Corporation’s or Fulton Bank’s credit ratings on their borrowing costs or access to capital markets.

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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. In 2018, the Corporation had three banking subsidiaries. During 2019, the Corporation consolidated two of its wholly owned banking subsidiaries into Fulton Bank ("Charter Consolidation").

The Corporation generates the majority of its revenue through net interest income, or the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is FTE net interest income as a percentage of average interest-earning assets. The Corporation also generates revenue through fees earned on the various services and products offered to its customers and through gains on sales of assets, such as loans, investments and properties. Offsetting these revenue sources are provisions for credit losses on loans and OBS credit risks, non-interest expenses and income taxes.

The following table presents a summary of the Corporation’s earnings and selected performance ratios:

Net income available to common shareholders (in thousands) $ 175,905 $ 226,339

Diluted net income per share $ 1.08 $ 1.35

Return on average assets 0.73 % 1.06 %

Return on average equity 7.44 % 9.81 %

Return on average common shareholders' equity (tangible) (1) 9.66 % 12.84 %

Net interest margin (2) 2.86 % 3.36 %

Non-performing assets to total assets 0.58 % 0.68 %

Annualized net charge-offs to average loans 0.05 % 0.22 %

(1)Ratio represents a financial measure derived by methods other than GAAP. See reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure under the heading, "Supplemental Reporting of Non-GAAP Based Financial Measures," in Item 6. Selected Financial Data.

(2)Presented on an FTE basis, using a 21% Federal tax rate and statutory interest expense disallowances. See also the "Net Interest Income" section of Management’s Discussion.

COVID-19 Pandemic

The COVID-19 pandemic has caused substantial disruptions in economic and social activity, both globally and in the United States. The spread of COVID-19, and related governmental actions to mandate or encourage temporary closures of businesses, quarantines, social distancing, "stay at home" orders and other restrictions on in-person operations and activities, have caused severe disruptions in the U.S. economy, which has, in turn, disrupted, and will likely continue to disrupt, the business, activities, and operations of the Corporation’s customers, as well as the Corporation’s own business and operations. The resulting impacts of the pandemic on consumers, including high levels of unemployment, have continued to cause changes in consumer and business spending, borrowing needs and saving habits, which have and will likely continue to affect the demand for loans and other products and services the Corporation offers, as well as the creditworthiness of its borrowers. The significant decrease in commercial activity and disruptions in supply chains associated with the pandemic, both nationally and in the Corporation’s markets, may cause customers, vendors and counterparties to be unable to meet existing payment or other obligations to the Corporation.

While portions of the national economy have reopened, there is still significant uncertainty concerning the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as their impact on the U.S. economy. The extent to which the pandemic impacts the Corporation’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the continuing severity of the COVID-19 pandemic, whether there are additional outbreaks of COVID-19, and the actions taken to contain it or treat its impact. Moreover, although multiple COVID-19 vaccines have received regulatory approval and are currently being distributed to certain high-risk population groups, it is too early to know how quickly these vaccines can be distributed to the general population and how effective they will be in mitigating the adverse social and economic effects of the COVID-19 pandemic.

The Corporation’s business is dependent upon the willingness and ability of its customers to conduct banking and other financial transactions. In an effort to mitigate the spread of COVID-19, the Corporation has adjusted service models at certain of its financial center locations, including limiting some locations to drive-up and ATM services only, offering lobby access by

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appointment only, and encouraging the Corporation’s customers to use electronic banking platforms. Approximately 25% of the Corporation’s locations are expected to provide lobby access by appointment only on a long-term basis.

A significant portion of the Corporation’s employees have transitioned to working remotely as a result of the COVID-19 pandemic, which, in addition to requiring added support from the Corporation’s information technology infrastructure, increases cybersecurity risks. The continued spread of COVID-19 (or an outbreak of a similar highly contagious disease) could also negatively impact the business and operations of third-party service providers who perform critical services for the Corporation’s business.

COVID-19 has significantly affected the financial markets and has resulted in a number of responses by the U.S. government, including reductions in interest rates by the FOMC. These reductions in interest rates, especially if prolonged, could adversely affect the Corporation’s net interest income and margins and the Corporation’s profitability.

The CARES Act was enacted in March 2020 and, among other provisions, authorized the SBA to guarantee loans under the PPP for small businesses who meet the necessary eligibility requirements in order to keep their workers on the payroll. During 2020, the Corporation funded approximately $2.0 billion loans under the PPP.

Stimulus payments to eligible consumers, enhanced unemployment benefits provided by the federal government and traditional, state-provided unemployment compensation, as well as other forms of relief provided to consumers and businesses, have helped to limit some of the adverse impacts of COVID-19. The reduction, expiration or discontinuation of these measures may adversely impact the recovery of economic activity and the ability of borrowers to meet their payment and other obligations to the Corporation, either of which could require the Corporation to increase the ACL through provisions for credit losses.

The impact of COVID-19 on the Corporation’s financial results is evolving and uncertain. The Corporation has limited exposure to some of the industries that were initially most significantly impacted by COVID-19, such as hospitality and food services, energy and entertainment, and most of these loans are secured by real estate and other forms of collateral. While many areas of the economy began to exhibit signs of recovery during the second half of 2020, the lingering effects of the pandemic, particularly in certain sectors of the economy, or a resurgence in COVID-19 infections that prompts the continuation or imposition of governmental restrictions on activities, may result in decreased demand for the Corporation’s loan products. In addition, the decline in economic activity occurring due to COVID-19 and the actions by the FOMC with respect to interest rates are likely to affect the Corporation’s net interest income, non-interest income and credit-related losses for an uncertain period of time. As a result, the Corporation took steps to maintain liquidity and conserve capital during this period of uncertainty. The Corporation has been holding excess cash reserves since the end of the first quarter of 2020, has additional liquidity available through borrowing arrangements and other sources, and plans to maintain its excess cash and these arrangements until there is more clarity surrounding economic conditions. See additional discussion in "Results of Operations" and "Financial Condition" of Management's Discussion.

Adoption of CECL

On January 1, 2020, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology, and is referred to as CECL. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loans and HTM debt securities. It also applies to OBS credit exposures, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments, and net investments in leases recognized by a lessor in accordance with ASC Topic 842. Refer to "Note 1 - Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data" for additional information on the adoption of CECL.

The Corporation adopted CECL using the modified retrospective method for all financial assets measured at amortized cost, and OBS credit exposures. Results for 2020 are presented under CECL, while prior years' results are reported in accordance with the previously applicable incurred loss methodology. The Corporation recorded an increase of $58.3 million to the ACL on January 1, 2020, primarily as a result of the adoption of CECL. Retained earnings decreased $43.8 million and deferred tax assets increased by $12.4 million on January 1, 2020, representing the cumulative effect of adoption.

Financial Highlights

Following is a summary of the financial highlights for the year ended December 31, 2020:

•Net Income Per Share - Diluted net income per share decreased $0.27, or 20.0%, to $1.08 in 2020 compared to $1.35 in 2019. The decline in net income per share was due to a $50.4 million, or 22.3%, decrease in net income available to common shareholders partially offset by a decrease in weighted average diluted shares outstanding.

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•Net Interest Income- The $19.2 million, or 3.0%, decrease in net interest income resulted from lower yields on interest-earning assets, partially offset by balance sheet growth and the impact of lower funding costs.

◦Net Interest Margin- For the year ended December 31, 2020, the net interest margin decreased to 2.86%, or 50 bp compared to 2019, driven by a 90 bp decrease in yields on interest-earning assets, partially offset by a 42 bp decrease in the cost of funds.

◦Loan Growth- Average Net Loans grew by $1.8 billion, or 11.2%, in comparison to 2019. The increase was driven largely by the issuance of PPP loans, included in commercial and industrial loans, and growth in the real estate commercial and residential mortgage portfolios.

◦Deposit Growth - Average deposits increased $2.6 billion, or 15.7%, in comparison to 2019. The increase was the result of growth in all deposit types except time deposits. At December 31, 2020, the loan-to-deposit ratio was 94.2%, as compared to 98.0% at December 31, 2019.

•Asset Quality - Non-performing assets increased $3.3 million, or 2.2%, as of December 31, 2020 compared to December 31, 2019. Net charge-offs to average loans outstanding were 0.05% for the year ended December 31, 2020 compared to 0.22% for the year ended December 31, 2019. The provisions for credit losses increased $44.1 million, to $76.9 million, for the year ended December 31, 2020 compared to $32.8 million for thesame period in 2019. The higher provision in 2020 was largely driven by the adoption of CECL, which, as a result of an overall downturn in economic forecasts due to COVID-19, resulted in increases in the ACL due to higher expected future credit losses under CECL.

•Non-Interest Income - Non-interest income, excluding investment securities gains, increased $14.9 million, or 7.1%, in comparison to 2019. Increases were experienced in mortgage banking and wealth management, partially offset by decreases in commercial and consumer banking.

•Investment Securities Gains/Balance Sheet Restructurings - During both 2020 and 2019, the Corporation completed limited balance sheet restructurings which included sales of investment securities and corresponding prepayment of FHLB advances. As a result, investment securities gains totaled $3.1 million in 2020, as compared to $4.7 million in 2019, a $1.7 million, or 35.5%, decrease. In addition, included in non-interest expense were prepayment penalties on FHLB advances of $2.9 million and $4.3 million incurred during 2020 and 2019, respectively.

•Non-Interest Expense- Non-interest expense increased $11.7 million, or 2.1%, in comparison to 2019, driven largely by higher salaries and employee benefits expense, state taxes and data processing and software expenses. Partially offsetting these increases were reductions in other outside services and marketing.

In 2020, the Corporation completed a strategic operating expense review, which resulted in a number of cost-saving initiatives that are expected to result in annual expense savings of $25 million, which is not expected to be fully realized until mid-2021. The Corporation expects to reinvest a portion of the cost savings to accelerate digital transformation initiatives. In 2020, $16.2 million of expenses were recognized related to the cost-savings initiatives in the following categories: $5.6 million of severance expense (included in salaries and employee benefits) and $4.8 million of write-offs of fixed assets and $5.8 million of lease termination charges (both included in other expense).

•Income Taxes - Income tax expense for 2020 resulted in an ETR of 12.0%, as compared to 14.3% for 2019. The ETR was lower mainly due to lower income before income taxes. The ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities and TCIs.

•Long-term Borrowings- In March 2020, the Corporation issued a total of $375.0 million of subordinated notes, with $200.0 million of subordinated notes due in 2030 having a fixed-to-floating rate of 3.25% and an effective rate of 3.35% and $175.0 million of subordinated notes due in 2035 having a fixed-to-floating rate of 3.75% and an effective rate of 3.85%.

•Preferred Stock - In October 2020, the Corporation issued 8.0 million depositary shares ("Depositary Shares"), each representing a 1/40th interest in a share of Fulton’s 5.125% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, with a liquidation preference of $1,000 per share (equivalent to $25.00 per Depositary Share), for an aggregate offering amount of $200.0 million. The Corporation received net proceeds from the offering of $192.9 million, after deducting issuance costs.

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CRITICAL ACCOUNTING POLICIES

The following is a summary of those accounting policies that the Corporation considers to be most important to the presentation of its financial condition and results of operations, because they require management’s most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain. See additional information regarding these critical accounting policies in "Note 1 - Summary of Significant Accounting Policies," in the Notes to the Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."

Allowance for Credit Losses - The Corporation adopted new accounting guidance for estimating credit losses, known as CECL, in the first quarter of 2020. In accordance with CECL, the ACL, which includes both the ACL - loans and the ACL - OBS credit exposures, is based on estimated losses over the remaining expected life of loans and OBS exposures. Management's determination of the appropriateness of the reserve is based on periodic evaluations of the loan portfolio, lending-related commitments, current and forecasted economic factors and other relevant factors.

In determining the ACL, the Corporation uses three inputs in to the model estimate. These inputs are PD, which estimates the likelihood that a borrower will be unable to meet its debt obligations; LGD, which estimates the share of an asset that is lost if a borrower defaults; and EAD which estimates the gross exposure under a facility upon default. The PD models were developed based on historical default data. Both internal and external variables are evaluated in the process. The main internal variables are risk rating or delinquency history and the external variables are economic variables obtained from third-party provided forecasts. Management applies risk rating transition matrices to pools of loans and lending-related commitments with similar risk characteristics to determine default probabilities, utilizes economic forecasts, applies modeled LGD results to associated EAD and incorporates modeled overlays and qualitative adjustments to estimate ACL. As such, the calculation of the ACL is inherently subjective and requires management to exercise significant judgment.

The ACL is estimated over a reasonable and supportable forecast period based on the projected performance of specific economic variables that statistically correlate with PD rates. As economic variables revert to long-term averages through the forecast process, externally developed long-term economic forecasts are used to establish the impacts of the economic scenario, reversion, and long-term averages in the development of losses over the expected life of the assets being modeled. The ACL reserve is highly sensitive to the economic forecasts used to develop the reserve. Due to the high level of uncertainty regarding significant assumptions, such as the ultimate impact of COVID-19 and effectiveness of the related governmental responses, since the beginning of 2020, the Corporation has evaluated a range of economic scenarios, including more and less severe economic deteriorations, with varying speeds of recovery.

The ACL includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. Qualitative adjustments include and consider changes in national, regional and local economic and business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting credit quality. Qualitative adjustments have increased compared to those at the time of the adoption of CECL on January 1, 2020 primarily as a result of uncertainties related to the economic impact of COVID-19, including consideration for the future performance of loans that received deferrals or forbearances as a result of COVID-19 and the impact COVID-19 had on certain industries where the quantitative models was not fully capturing the appropriate level of risk.

For further discussion of the methodology used in the determination of the ACL, refer to Note 1, "Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."

Goodwill - Goodwill recorded in connection with acquisitions is not amortized to expense, but is tested at least annually for impairment. A quantitative annual impairment test is not required if, based on a qualitative analysis, the Corporation determines that the existence of events and circumstances indicate that it is more likely than not that goodwill is not impaired. The Corporation completes its annual goodwill impairment test in October of each year.

Goodwill valuation is inherently subjective, with a number of factors based on assumptions and management judgments. Among these are selection of comparable market transactions, discount rates and earnings capitalization rates. Changes in assumptions and results due to economic conditions, industry factors and reporting unit performance could result in different assessments of the fair values of reporting units and could result in impairment charges.

For additional details related to the annual goodwill impairment test, see "Note 1 - Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."

Income Taxes – The provision for income taxes is based upon income before income taxes, adjusted for the effect of certain tax-exempt income, non-deductible expenses and credits. In addition, certain items of income and expense are reported in

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different periods for financial reporting and tax return purposes. The tax effects of these temporary differences are recognized currently in the deferred income tax provision or benefit. DTAs or deferred tax liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the applicable enacted marginal tax rate.

The Corporation must also evaluate the likelihood that DTAs will be recovered through future taxable income. If any such assets are determined to be more likely than not unrecoverable, a valuation allowance must be recognized. The assessment of the carrying value of DTAs is based on certain assumptions, changes in which could have a material impact on the Corporation’s consolidated financial statements.

On a periodic basis, the Corporation evaluates its income tax positions based on tax laws, regulations and financial reporting considerations, and records adjustments as appropriate. Recognition and measurement of tax positions is based upon management’s evaluations of current taxing authorities’ examinations of the Corporation’s tax returns, recent positions taken by the taxing authorities on similar transactions and the overall tax environment.

Fair Value Measurements – Assets and liabilities are categorized in a fair value hierarchy for the inputs to valuation techniques used to measure at fair value based on the following categories (from highest to lowest priority):

•Level 1 – Inputs that represent quoted prices for identical instruments in active markets.

•Level 2 – Inputs that represent quoted prices for similar instruments in active markets, or quoted prices for identical instruments in non-active markets. Also included are valuation techniques whose inputs are derived principally from observable market data other than quoted prices, such as interest rates or other market-corroborated means.

•Level 3 – Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.

The determination of fair value for assets categorized as Level 3 items involves significant subjectivity due to the use of unobservable inputs. In addition, determining when a market is no longer active and placing little or no reliance on distressed market prices requires the use of management’s judgment. The Corporation's Level 3 assets include AFS securities in the form of pooled trust preferred securities, certain single-issuer trust preferred securities issued by financial institutions and ARCs. The Corporation also categorizes net loans individually evaluated for impairment, OREO and MSRs as Level 3 assets measured at fair value on a nonrecurring basis.

The Corporation engages third-party valuation experts to assist in valuing interest rate swap derivatives and most AFS investment securities, both measured at fair value on a recurring basis, and MSRs, which are measured at fair value on a non-recurring basis. The pricing data and market quotes the Corporation obtains from outside sources are reviewed internally for reasonableness.

For additional details see "Note 19 - Fair Value Measurements," in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."

Recently Issued Accounting Standards

For a description of accounting standards recently issued, but not yet adopted by the Corporation, see "Recently Issued Accounting Standards," in "Note 1 - Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements in Item 8. "Financial Statements and Supplementary Data."

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RESULTS OF OPERATIONS

Net Interest Income

Net interest income is the most significant component of the Corporation’s net income. The Corporation manages the risk associated with changes in interest rates through the techniques described within Item 7A, "Quantitative and Qualitative Disclosures About Market Risk." The following table provides a comparative average balance sheet and net interest income analysis for 2020 compared to 2019 and 2018. Interest income and yields are presented on an FTE basis, using a 21% federal tax rate, as well as statutory interest expense disallowances. The discussion following this table is based on these tax-equivalent amounts.

(dollars in thousands)

ASSETS

Interest-earning assets:

Noninterest-earning assets:

LIABILITIES AND EQUITY

Interest-bearing liabilities:

Noninterest-bearing liabilities:

(1)Average balances include non-performing loans.

(2) Average balances include amortized historical cost for AFS securities; 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.

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Comparison of 2020 to 2019

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volumes) and changes in rates:

2020 vs. 2019 Increase (decrease) due to change in

Volume Rate Net

(in thousands)

Interest income on:

Interest expense on:

(1) Average balance includes non-performing loans.

In March 2020, the FOMC decreased the Fed Funds Rate by a total of 150 bp in response to COVID-19. These changes in the Fed Funds Rate resulted in corresponding decreases to the index rates for the Corporation's variable and adjustable rate loans, primarily the prime rate and LIBOR as well as for certain interest-bearing liabilities.

FTE net interest income decreased $19.8 million, or 3.0%, to $641.5 million in 2020.Net interest margin decreased 50 bp to 2.86% in 2020 from 3.36% in 2019. As summarized above, FTE interest income decreased $176.2 million as the result of a 90 bp decrease in the yield on interest-earning assets, and increased $93.1 million as the result of a $2.8 billion, or 14.1%, increase in average interest-earning assets, primarily loans. The average yield on the loan portfolio decreased 92 bp, to 3.63%, largely due to the aforementioned decreases in the Fed Funds Rate in 2020 and corresponding decreases to loan index rates. All variable and certain adjustable rate loans repriced to lower rates as a result of these interest rate decreases, and yields on new loan originations were lower than the average yield on the loan portfolio. Adjustable rate loans reprice on dates specified in the loan agreements, which may be later than the date the Fed Funds Rate and related loan index rates increase or decrease. Therefore, the benefit of increases or the reverse effect of decreases in index rates on adjustable rate loans may not be fully realized until future periods. In addition, 2020 interest income included $6.5 million of unamortized origination fees and direct origination costs recognized as interest income at the time of PPP loan forgiveness, which is in addition to the normal amortization of those items of approximately $22.5 million recognized in 2020.

Interest expense decreased $63.2 million, with a 52 bp decrease in the rate on average interest-bearing liabilities contributing $76.7 million to this decrease, partially offset by a $13.4 million increase in expense as a result of a $1.4 billion, or 10.1%, increase in interest-bearing liabilities, primarily demand deposits and long-term borrowings.The rates on average interest-bearing demand and savings accounts decreased 54 and 57 bp, respectively, which contributed $26.8 million and $31.2 million to the decrease in interest expense, respectively. In addition, the 106 bp decrease in the cost of short-term borrowings contributed $8.7 million to the decrease in interest expense.

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

Increase (Decrease) in Balance

Balance Yield Balance Yield $ %

(dollars in thousands)

(1) Includes average PPP loans of $1.3 billion for the year ended December 31, 2020.

(2) Consists of overdrafts and net origination fees and costs.

Average loans increased $1.8 billion, or 11.2%, which contributed $77.7 million to the increase in FTE interest income. The increase was driven largely by growth in the commercial and industrial portfolio as a result of loans originated under the PPP. Excluding loans originated under the PPP, commercial and industrial loan balances declined $2.4 million. Commercial and residential mortgage loan portfolios, as well as the construction, consumer and equipment lease financing portfolios, experienced growth, partially offset by decreases in the home equity loan portfolio.

Average investment securities increased $228.6 million, or 8.2%, in comparison to 2019, which contributed a $7.3 million increase in FTE interest income. This was partially offset by a 7 bp decrease in average yields, resulting in a $3.0 million decrease in FTE interest income. Other interest-earning assets increased $675.7 million, primarily the result of an increase in cash pledged with counterparties for interest rate swap contracts, contributing $6.9 million to FTE interest income. The yield on other interest-earning assets decreased 159 bp in comparison to 2019, as a result of the Fed Funds Rate decreases during 2020, resulting in a $10.7 million decrease in FTE interest income.

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

Increase (Decrease) in Balance

Balance Rate Balance Rate $ %

(dollars in thousands)

The average cost of interest-bearing deposits decreased 54 bp to 0.51% from 1.05% in 2019 and contributed $66.2 million to the decrease in interest expense compared to 2019. These rates do not include the impact of non-interest bearing deposits, which lower the cost of total deposits to 0.36% and 0.79% in 2020 and 2019, respectively. The decrease in the cost is mainly as a result of reductions in deposit rates in response to the FOMC reductions to the Fed Funds Rate as well as deposit rate decreases implemented after the Fed Funds Rate cuts during the second half of 2019. The majority of deposit rates are discretionary, with the exception of indexed municipal balances. The average balance of interest-bearing deposits increased $1.2 billion, or 9.3%, partially offsetting the decrease in interest expense by $4.4 million in comparison to 2019.

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

Increase (Decrease) inBalance

Balance Rate Balance Rate $ %

(dollars in thousands)

Short-term borrowings:

Long-term borrowings:

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

(2) Represents FHLB advances with an original maturity term of less than one year.

Total average borrowings increased $272.6 million, or 15.2%, while the total average cost of these funds decreased 40 bp, to 2.11% compared to 2019. Total average short-term borrowings decreased $39.1 million, or 4.6%, due to a decrease in short-term FHLB advances and other borrowings and federal funds purchased, partially offset by increases in average customer funding. The cost of average short-term borrowings decreased 106 bp to 0.64% in 2020, largely due to the net impact of changes in the Fed Funds Rate.

Average long-term borrowings increased $311.7 million, or 33.1%, and the average rate decreased 19 bp compared to 2019, as a result of the issuance of $375.0 million of subordinated notes in March of 2020.

Comparison of 2019 to 2018

The following table summarizes the changes in FTE interest income and interest expense resulting from changes in average balances (volumes) and changes in rates:

2019 vs. 2018 Increase (decrease) due to change in

Volume Rate Net

(in thousands)

Interest income on:

Interest expense on:

(1) Average balance includes non-performing loans.

Note: Changes which are partially attributable to both volume and rate are allocated to the volume and rate components presented above based on the percentage of the direct changes that are attributable to each component.

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The FOMC increased the Fed Funds Rate by 25 bp in each of March, June, September and December of 2018. During 2019, the FOMC decreased the Fed Funds Rate by 25 bp in each of August, September and October. These changes in the Fed Funds Rate resulted in corresponding increases or decreases to the index rates for the Corporation's variable and adjustable rate loans, primarily the prime rate and the LIBOR, as well as for certain interest-bearing liabilities.

FTE net interest income increased $18.8 million, or 2.9%, to $661.4 million in 2019. Net interest margin decreased 4 bp to 3.36% in 2019 from 3.40% in 2018. As summarized above, FTE interest income increased $35.4 million as the result of an 18 basis point increase in the yield on interest-earning assets, and increased $32.3 million as the result of a $796.4 million, or 4.2%, increase in average interest-earning assets, primarily loans. The average yield on the loan portfolio increased 17 bp, to 4.55%, largely due to the aforementioned increases in the Fed Funds Rate in 2018 and corresponding increases to loan index rates. All variable and certain adjustable rate loans repriced to higher rates as a result of these interest rate increases, and yields on new loan originations exceeded the average yield on the loan portfolio. Adjustable rate loans reprice on dates specified in the loan agreements, which may be later than the date the Fed Funds Rate and related loan index rates increase or decrease. Therefore, the benefit of increases or the reverse effect of decreases in index rates on adjustable rate loans may not be fully realized until future periods.

Interest expense increased $48.9 million, with a 28 basis point increase in the rate on average interest-bearing liabilities contributing $39.7 million to this increase.The rates on average interest-bearing time, savings accounts and demand deposits increased 45, 25 and 20 bp, respectively. These rate increases contributed $12.9 million, $12.5 million and $8.6 million, respectively, to the increase in interest expense. In addition, the 63 basis point increase in the rates on short-term borrowings contributed $5.3 million to the increase in interest expense.

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

Increase (Decrease) in Balance

Balance Yield Balance Yield $ %

(dollars in thousands)

(1) Consists of overdrafts and net origination fees and costs.

Average loans increased $615.1 million, or 3.9%, which contributed $27.5 million to the increase in FTE interest income. In addition, the average yield on the loan portfolio increased 17 bp, contributing $27.7 million to the increase in FTE interest income. As mentioned above, the increase in average yields on loans was driven by the repricing of existing variable and adjustable rate loans as a result of increases in the prime rate and LIBOR during 2018 that were only partially offset by decreases in those same rates that occurred in the second half of 2019.

Average investment securities increased $116.0 million, or 4.4%, in comparison to 2018, which contributed $9.2 million to the increase in FTE interest income. The average yield on investment securities increased 21 bp, contributing $5.7 million to the increase in FTE interest income. Other interest-earning assets increased $62.4 million, or 16.3%, primarily the result of an increase in cash pledged with counterparties for interest rate swap contracts. The yield on other interest-earning assets increased 46 bp in comparison to 2018, as a result of the Fed Funds Rate increases during 2018 that were only partially offset by the decreases during 2019, resulting in a $1.9 million increase in FTE interest income.

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

Increase (Decrease) in Balance

Balance Rate Balance Rate $ %

(dollars in thousands)

Average interest-bearing deposits contributed $44.1 million to the increase in interest expense, increasing $971.8 million, or 8.4%, in comparison to 2018.The average cost of interest-bearing deposits increased 29 bp to 1.05% in 2019 from 0.76% in 2018, due to increases in the rates on all types of interest-bearing deposits as a result of the Fed Funds Rate increases and related market competition that occurred in 2018, and was only partially impacted by decreases to the Fed Funds Rate that occurred in 2019.

Average brokered deposits increased $123.6 million, to $245.5 million, as a result of continued growth of brokered deposit programs introduced in 2018.

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

Balance Rate Balance Rate $ %

(dollars in thousands)

Short-term borrowings:

Long-term borrowings:

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

(2) Represents FHLB advances with an original maturity term of less than one year.

Total average borrowings increased $28.8 million, or 1.6%, while the total average cost of these funds increased 22 bp, to 2.51%. Total average short-term borrowings increased $63.8 million, or 8.1%, due to an increase in short-term FHLB advances and other borrowings, partially offset by decreases in average short-term customer funding and federal funds purchased. The cost of average short-term borrowings increased 63 bp to 1.70% in 2019, largely due to the annual average impact of Fed Funds Rate increases.

Average long-term FHLB advances decreased $35.7 million, or 6.0%, and the average rate decreased 8 bp as higher rate advances were paid off or matured and replaced with advances at lower average rates.

Provision for Credit Losses

The provision for credit losses increased $44.1 million, to $76.9 million, for the year ended December 31, 2020. The increase was the result of several factors, most notably, the overall uncertainty in economic forecasts due to COVID-19. See additional details under "Allowance for Credit Losses and Asset Quality" in the "Financial Condition" section below.

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Non-Interest Income and Expense

Comparison of 2020 to 2019

Non-Interest Income

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

Increase (Decrease)

(dollars in thousands)

Commercial banking:

Consumer banking:

Mortgage banking:

Excluding net investment securities gains, non-interest income increased $14.9 million, or 7.1%, in 2020, as compared to 2019.

Total commercial banking income decreased $831,000, compared to 2019, driven mainly by a decrease in other commercial banking income (SBA lending income and other service charges as a result of COVID-19). This decrease was somewhat offset by an increase in capital markets revenue.

Total consumer banking decreased $7.9 million, or 16.0%, compared to 2019, driven primarily by lower overdraft fees. Other consumer banking income decreased largely due to lower ATM fees.

Wealth management revenues increased $3.4 million, or 6.1%, resulting primarily from growth in brokerage income due to an increase in client asset levels and improved overall market performance.

Mortgage banking income increased $19.2 million, or 83.2%, mainly due to gains on sales of mortgage loans, partially offset by a decrease in mortgage servicing income. Gains increased as a result of both higher volumes of loans sold and higher spreads on sales. The decrease in mortgage servicing income was driven by $10.5 million of MSR impairment charges and higher MSR amortization due to higher prepayments as a result of the lower rate environment. There were no MSR impairment charges in 2019.

Investment securities gains decreased $1.7 million, or 35.5%, mainly attributed to the difference in scope of the limited balance sheet restructures in 2020 and 2019. See Note 3, "Investment Securities," in the Notes to Consolidated Financial Statements for additional details.

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Non-Interest Expense

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

Increase (Decrease)

(dollars in thousands)

In the third quarter of 2020, the Corporation announced cost-savings initiatives which will result in approximately $25 million in annual expense savings, not to be fully realized until mid-2021. In 2020, $16.2 million of expenses were recognized related to the cost-savings initiatives in the following categories: $5.6 million of severance expense (included in salaries and employee benefits) and $4.8 million of write-offs of fixed assets and $5.8 million of lease termination charges (both included in other expense).

In 2019, the Corporation recognized $10.9 million of expenses related to the Charter Consolidation, primarily in the following categories: $1.9 million of severance expense (included in salaries and employee benefits), $6.6 million of other outside services, $1.0 million of an intangible write-off (included in intangible amortization) and $600,000 in marketing expense.

The more significant fluctuations in expense levels, excluding the cost-savings initiatives in 2020 and the charter consolidation costs in 2019, by category are explained below:

•Salaries and employee benefits increased $9.0 million mainly due to increases in employee salaries (annual merit increases), overtime and incentive compensation (primarily COVID-19 related for front-line employees).

•Other outside services decreased $2.0 million, or 5.9%, primarily due to more in-house development and less reliance on third-party service providers.

•Data processing and software increased $3.4 million reflecting higher transaction volumes and costs related to growth and technology initiatives.

•Marketing decreased $4.1 million, or 44.3%, as a result of reduced marketing campaigns.

•State taxes increased $3.7 million, or 41.8%, as a result higher Pennsylvania Bank Shares tax due to the Bank's increased equity as well as higher sales taxes.

•Other expenses decreased $4.3 million compared to 2019, primarily driven by a decrease in travel and entertainment, influenced by the restrictions due to COVID-19.

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Comparison of 2019 to 2018

Non-Interest Income

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

Increase (Decrease)

(dollars in thousands)

Commercial banking:

Consumer banking:

Mortgage banking income:

Investment securities gains, net 4,733 37 4,696 N/M

Excluding net investment securities gains, non-interest income increased $15.9 million, or 8.2%, for the year ended December 31, 2019, as compared to the same period in 2018, with increases across all major categories

Wealth management fees increased $3.5 million, or 6.8%, resulting primarily from growth in brokerage income due to an increase in client asset levels and improved overall market performance, as well as the acquisitions of two small wealth management firms in 2019.

Total commercial banking income increased $7.2 million, or 11.2%, compared to 2018, driven mainly by an increase in capital markets revenue along with increases in merchant and card income and cash management fees.

Total consumer banking increased $1.1 million, or 2.2%, compared to 2018, driven primarily by card income.

Mortgage banking income increased $4.1 million, or 21.4%, mainly due to gains on sales of mortgage loans. The increase in gains resulted from both higher volumes of loans sold and higher spreads on sales.

Investment securities gains increased $4.7 million compared to 2018, mainly attributed to the sale of approximately $400 million of investment securities and a corresponding prepayment of FHLB advances. This balance sheet restructuring occurred in the third quarter of 2019. See Note 3, "Investment Securities," in the Notes to Consolidated Financial Statements for additional details.

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Non-Interest Expense

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

Increase (Decrease)

(dollars in thousands)

Prepayment penalty on FHLB advances 4,326 — 4,326 N/M

Intangible amortization 1,427 — 1,427 N/M

In 2019, $10.9 million of expenses were incurred related to Charter Consolidation, as compared to $3.6 million in 2018, a $7.3 million increase. The 2019 expenses were primarily in salaries and benefits ($1.9 million of severance expense), other outside services ($6.6 million), intangible amortization ($1.0 million write-off) and marketing ($650,000).

The more significant fluctuations in expense levels, excluding charter consolidation costs, by category are explained below:

•Salaries and employee benefits increased $6.8 million mainly due to an increase in employee salaries (annual merit increases). Healthcare and 401(k) plan matching expense also increased, but were partially offset by lower defined benefit pension expense driven by changes in the discount rate compared to 2018.

•Net occupancy expense increased $1.1 million, or 2.2%, due mainly to the addition of new properties.

•Data processing and software increased $3.4 million, or 8.2%, reflecting higher transaction volumes and costs related to growth and technology initiatives.

•Marketing increased $1.0 million, or 11.2%, due to additional promotions, primarily related to deposits.

•FDIC insurance expense decreased $3.2 million, or 29.2%, due to the recognition of assessment credits in 2019.

•Amortization of tax credit investments decreased $5.4 million as 2018 included amortization for one significant investment which generated a corresponding credit to income taxes.

•2019 includes approximately $4.3 million of penalties related to the prepayment of certain FHLB advances in conjunction with the previously mentioned balance sheet restructuring.

•Other expenses increased $5.4 million due to losses on sale of fixed assets, telecommunications expense and operating risk losses.

Income Taxes

Income tax expense for 2020 was $24.2 million, a $13.5 million, or 35.7%, decrease from $37.6 million in 2019. The ETR was 12.0% in 2020, as compared to 14.3% in 2019. The decrease in income tax expense and the ETR primarily resulted from lower income before income taxes. The ETR is generally lower than the federal statutory rate of 21% due to tax-exempt interest income earned on loans, investments in tax-free municipal securities and TCIs that generate tax credits under various federal programs.

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FINANCIAL CONDITION

The table below presents condensed consolidated ending balance sheets.

December 31 Increase (Decrease)

(dollars in thousands)

Assets

Liabilities and Shareholders’ Equity

Cash and Cash Equivalents

The $1.3 billion increase in cash and cash equivalents mainly resulted from additional cash maintained at the FRB due to deposit growth as well as additional collateral required to be posted with counterparties for derivative contracts.

Loans Held for Sale

Loans held for sale increased $46.1 million, or 121.8%, primarily as the result of an increase in the volume of residential mortgage originations due to higher refinancing activity.

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Investment Securities

The following table presents the carrying amount of investment securities as of December 31:

(in thousands)

Available for Sale

Held to Maturity

Total AFS securities increased $564.6 million, or 22.6%, to $3.1 billion at December 31, 2020 primarily due to the investment of a portion of the proceeds from the issuance of $375.0 million of subordinated notes and investment of excess funding, partially offset by the sale of investment securities, with an estimated fair value of $82.0 million, completed during the second quarter of 2020 as part of a limited balance sheet restructuring that included the redemption of FHLB advances. See Note 9, "Short-term and Long-Term Borrowings," in the Notes to Consolidated Financial Statements for additional detail on the subordinated notes issuance. Total HTM securities decreased $91.6 million, or 24.8%, primarily as a result of principal repayments and premium amortization. There were no purchases of or transfers into HTM securities during 2020.

Loans

The following table presents ending loans outstanding, by type, as of the dates shown, and the changes in balances for the most recent year:

December 31

(dollars in thousands)

(1) Includes PPP loans totaling $1.6 billion as of December 31, 2020.

Net Loans increased $2.1 billion, or 12.3%, as of December 31, 2020 compared to December 31, 2019, primarily due to growth in commercial and industrial loans and commercial and residential mortgage loans, partially offset by decreases in home equity loans and equipment lease financing. The increase in commercial and industrial loans was impacted by approximately $1.6 billion of PPP loans.

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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 December 31, 2020, approximately $8.2 billion, or 43.1%, of the loan portfolio was comprised of commercial mortgage and construction loans. The Corporation's policies limit the maximum total lending commitment to an individual borrower to $55.0 million as of December 31, 2020. 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 (including PPP loans) as of December 31:

Manufacturing 6.3 6.0

Other services (3) 5.1 4.7

Hospitality and food services 4.2 4.1

Professional, scientific and technical services 3.6 2.9