On July 1, 2022, the Corporation completed its acquisition of Prudential Bancorp, a Pennsylvania chartered bank holding company headquartered in Philadelphia, Pennsylvania that primarily served the Greater Philadelphia region. On that date, the Corporation acquired 100% of the outstanding common stock of Prudential Bancorp, Prudential Bancorp was merged with and into the Corporation, and Prudential Bancorp's wholly owned subsidiary, Prudential Bank, became a wholly owned subsidiary of the Corporation. The Corporation merged Prudential Bank with and into Fulton Bank in the fourth quarter of 2022. Results of the operations of the acquired entity are included in the Corporation's consolidated financial statements beginning on the acquisition date, July 1, 2022. As a result of this acquisition, the Corporation enhanced its presence in Philadelphia, expanded its customer base and leveraged operating costs through economies of scale.

In accordance with the terms of the Merger Agreement, each share of Prudential Bancorp's common stock issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive the Merger Consideration. In the aggregate, approximately eighty percent (80%) of the Merger Consideration consisted of the Corporation's common stock with the remaining approximately twenty percent (20%) payable in cash. The receipt of the Corporation’s common stock in the Merger is expected to qualify as a tax-free exchange for Prudential Bancorp shareholders.

The acquisition of Prudential Bancorp was accounted for as a business combination using the acquisition method of accounting, and accordingly, the assets acquired, the liabilities assumed, and consideration transferred were recorded at their estimated fair values as of the Merger. The $16.3 million excess of the Merger Consideration over the fair value of assets acquired was recorded as goodwill and is not amortizable or deductible for tax purposes.


	Fair Value
(in thousands, except per share data)
Consideration transferred:
Common stock shares issued (6,208,516)	$	89,713
Cash paid to Prudential Bancorp shareholders	29,343
Value of consideration	119,056
Assets acquired:
Cash and due from banks	7,532
Investment securities	287,126
Loans, net	554,288
Premises and equipment	13,738
Other assets	70,720
Total assets	933,404
Liabilities assumed:
Deposits	532,180
Borrowings(1)	284,000

Other liabilities	14,441
Total liabilities	830,621
Net assets acquired:	102,783
Goodwill resulting from acquisition of Prudential Bancorp	$	16,273

While the valuation of the acquired assets and liabilities is completed, fair value estimates related to the assets and liabilities from Prudential Bancorp are subject to adjustment for up to one year after the closing date of the Merger if additional information becomes available. Included in the above table are adjustments of $17 thousand that occurred during the fourth quarter of 2022, resulting in an increase to goodwill from the acquisition of Prudential Bancorp.

The amount of goodwill recorded reflects the increased market share and related synergies that are expected to result from the acquisition and represents the excess purchase price over the estimated fair value of the net assets acquired from Prudential Bancorp.

Investment securities: The acquired investment portfolio had a fair value of $287.1 million, primarily consisting of mortgage-backed securities, U.S. Government securities and municipal securities. The fair value of the investment portfolio was based on quoted market prices, dealer quotes and pricing obtained from independent pricing services.

Loans: The Company recorded $554.3 million of acquired loans, which were initially recorded at their fair values as of the Merger date. Fair value for the loans was based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors, such as liquidity, from the perspective of a market participant. Loan cash flows were generated on an individual loan basis. The PD, LGD, EAD and prepayment assumptions are the key factors driving credit losses that are embedded into the estimated cash flows.


	July 1, 2022
	Unpaid Principal Balance		Fair Value
	(dollars in thousands)
Real estate - commercial mortgage	$	224,904	$	216,613
Commercial and industrial	63,560		62,050
Real-estate - residential mortgage	177,327		169,098
Real-estate - home equity	6,034		5,812
Real-estate - construction	98,963		98,546
Consumer	2,306		2,286

Total acquired loans	$	573,094	$	554,405

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


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

The Merger resulted in the addition of $9.1 million in allowance for credit losses, including the $1.1 million identified in the table above for initial purchased credit deteriorated loans recorded through the provision for credit losses at the date of the Merger.

Premises and equipment: The fair value of land and buildings reflected in premises and equipment was determined by obtaining recent market sales for comparable properties. The difference between the fair market value and the net book value for these properties resulted in an increase of $7.1 million to the premises and equipment acquired from Prudential Bancorp.

Intangible assets: The Corporation recorded $8.2 million of CDI reflected in other assets that is being amortized over seven years using the sum-of-the-years digits method. The fair value of the CDI was determined using the cost savings approach. The cost savings approach is defined as the difference between the cost of funds of core deposits and an alternative cost of funds for those deposits. The CDI fair value was determined by projected discounted net cash flows, that included assumptions related to customer attrition rates, discount rates, deposit interest rates, deposit account maintenance costs and alternative cost of funding rates.

Time deposits: Time deposits were valued at the account level based on their remaining maturity dates and comparing the contractual cost of the portfolio to brokered deposit costs having a similar tenor. The valuation adjustment of $1.9 million will be accreted to interest expense over the remaining maturities of the individual customer deposits.


	Twelve Months Ended December 31
	2022
	(dollars in thousands)
Goodwill at December 31, 2021	$	534,266
Goodwill from Prudential Bancorp acquisition	16,273
Goodwill at December 31, 2022	$	550,539

The Company developed a comprehensive integration plan under which it has incurred direct costs, which are expensed as incurred. These direct costs include costs primarily related to terminated contracts, consolidated facilities (including lease termination expenses), severance, marketing and professional fees. Costs related to the acquisition and restructuring are included in Merger-related expenses on the unaudited Consolidated Statements of Income.


		Twelve Months Ended December 31
		2022
	(dollars in thousands)
Salaries and employee benefits		$	938
Data processing and software		1,412
Net occupancy		1,658
Other outside services		225

Professional fees		3,053
Marketing		95
Charitable donation		2,000
Other		947
Total Merger-related expenses		$	10,328

As part of the Merger, the Corporation made a $2.0 million contribution to the Fulton Forward Foundation in July 2022, designated to be used to provide impact gifts in support of nonprofit community organizations in Philadelphia that are focused on advancing economic empowerment, particularly in underserved communities.

During the fourth quarter of 2022, the Corporation merged Prudential Bank with and into Fulton Bank. Separate results from legacy Prudential Bancorp assets and liabilities can no longer be identified. The following table summarizes the results of operations contributed by Prudential Bancorp for the three-month period ended September 30, 2022, presented in the unaudited Consolidated Statements of Income:


	Three Months Ended September 30, 2022
	(Unaudited)
	(dollars in thousands)
Total interest income	$	10,871
Total interest expense	2,733
Net interest income	8,138
Provisions for credit losses	7,571
Net Interest Income After Provision for Credit Losses	567
Total noninterest income	197
Total noninterest expense	3,583
Income Before Income Taxes	(2,819)
Income taxes	(753)
Net Loss	$	(2,066)

The below table presents the pro forma results of the operations of the combined institutions as if the Merger occurred on January 1, 2021. The pro forma income statement adjustments are limited to the effects of fair value mark amortization and accretion and intangible asset amortization and do not consider future cost savings the Corporation expects to achieve subsequent to the merger of Prudential Bank with and into the Bank.


	Year Ended December 31
			2022		2021
		(dollars in thousands)
Net interest income			$	801,907	$	687,216
Provision for credit losses			34,041		(14,400)
Net Interest Income After Provision for Credit Losses			767,866		701,616
Total noninterest income			232,054		277,217
Total noninterest expenses			663,133		635,568
Income Before Income Taxes			336,787		343,265
Income tax expense			57,249		59,985
Net Income			$	279,538	$	283,280