Fulton Financial (FULT) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents unaudited financial statements, management's analysis, market risk disclosures, and internal controls Item 1. Financial Statements (Unaudited) This section presents unaudited consolidated financial statements and detailed notes for Q1 2024 and 2023 Consolidated Balance Sheets This section details the Corporation's financial position, including assets, liabilities, and shareholders' equity Consolidated Balance Sheet Summary | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Assets | | | | | | Cash and cash equivalents | $357,333 | $549,710 | $(192,377) | -35.0% | | Investment securities | $3,783,392 | $3,666,274 | $117,118 | 3.2% | | Loans, net | $21,146,595 | $21,057,690 | $88,905 | 0.4% | | Total Assets | $27,642,957 | $27,571,915 | $71,042 | 0.3% | | Liabilities | | | | | | Total Deposits | $21,741,950 | $21,537,623 | $204,327 | 0.9% | | Total Borrowings | $2,296,040 | $2,487,526 | $(191,486) | -7.7% | | Total Liabilities | $24,885,278 | $24,811,776 | $73,502 | 0.3% | | Shareholders' Equity | | | | | | Total Shareholders' Equity | $2,757,679 | $2,760,139 | $(2,460) | -0.1% | Consolidated Statements of Income This section presents the Corporation's revenues, expenses, and net income for the reporting periods Consolidated Income Statement Summary | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Total Interest Income | $339,666 | $289,820 | $49,846 | 17.2% | | Total Interest Expense | $132,729 | $74,233 | $58,496 | 78.8% | | Net Interest Income | $206,937 | $215,587 | $(8,650) | -4.0% | | Provision for credit losses | $10,925 | $24,544 | $(13,619) | -55.5% | | Total Non-Interest Income | $57,140 | $51,753 | $5,387 | 10.4% | | Total Non-Interest Expense | $177,600 | $159,616 | $17,984 | 11.3% | | Net Income | $61,941 | $68,314 | $(6,373) | -9.3% | | Net Income Available to Common Shareholders | $59,379 | $65,752 | $(6,373) | -9.7% | | Diluted EPS | $0.36 | $0.39 | $(0.03) | -7.7% | Consolidated Statements of Comprehensive Income This section details net income and other comprehensive income components for the reporting periods Consolidated Comprehensive Income Summary | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net Income | $61,941 | $68,314 | $(6,373) | | Other Comprehensive (Loss) Income | $(7,188) | $34,484 | $(41,672) | | Total Comprehensive Income | $54,753 | $102,798 | $(48,045) | Consolidated Statements of Shareholders' Equity This section outlines changes in the Corporation's shareholders' equity over the reporting periods Consolidated Shareholders' Equity Summary | Metric | Balance at March 31, 2024 (in thousands) | Balance at December 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :-------------------- | | Total Shareholders' Equity | $2,757,679 | $2,760,139 | $(2,460) | | Accumulated other comprehensive loss | $(319,468) | $(312,280) | $(7,188) | | Treasury stock, at cost | $(886,239) | $(857,021) | $(29,218) | Consolidated Statements of Cash Flows This section presents cash flows from operating, investing, and financing activities Consolidated Cash Flow Summary | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net cash provided by operating activities | $152,901 | $45,963 | $106,938 | | Net cash used in investing activities | $(299,888) | $(338,014) | $38,126 | | Net cash provided by (used in) financing activities | $(45,390) | $176,883 | $(222,273) | | Net decrease in Cash and Cash Equivalents | $(192,377) | $(115,168) | $(77,209) | | Cash and Cash Equivalents at End of Period | $357,333 | $566,753 | $(209,420) | NOTE 1 – Basis of Presentation This note explains the accounting principles and policies used for the financial statements - The unaudited Consolidated Financial Statements are prepared in conformity with GAAP for interim financial information and Form 10-Q instructions, not including all information required for complete annual statements. Management's estimates and assumptions affect reported amounts, and actual results may differ. All necessary adjustments for fair presentation have been included[23] - Significant accounting policies remain unchanged from the 2023 Annual Report on Form 10-K[24] - The Corporation adopted ASU 2022-03 (Fair Value Measurement) and ASU 2023-01 (Leases) on January 1, 2024, with no material impact on financial statements[25][26] - Upcoming adoptions include ASU 2023-07 (Segment Reporting) on December 15, 2024, ASU 2023-08 (Crypto Assets) on January 1, 2025, ASU 2023-09 (Income Tax Disclosures) on January 1, 2025, and ASU 2024-01 (Stock Compensation) on January 1, 2025. None are expected to have a material impact, and the Corporation does not hold crypto assets[27][28][29][30][31] NOTE 2 – Restrictions on Cash and Cash Equivalents This note details restrictions on the use of cash and cash equivalents - Cash collateral posted with counterparties for derivatives and other contracts, included in 'interest-bearing deposits with other banks', decreased from $17.4 million at December 31, 2023, to $11.0 million at March 31, 2024[33] NOTE 3 – Investment Securities This note provides details on the Corporation's investment securities portfolio Investment Securities Portfolio | Investment Category | Amortized Cost (March 31, 2024) | Estimated Fair Value (March 31, 2024) | Amortized Cost (December 31, 2023) | Estimated Fair Value (December 31, 2023) | | :---------------------------------- | :------------------------------ | :---------------------------------- | :------------------------------ | :---------------------------------- | | Available for Sale (AFS) | | | | | | U.S. Government-sponsored agency securities | $1,035 | $998 | $1,038 | $1,010 | | State and municipal securities | $1,198,180 | $1,052,259 | $1,200,571 | $1,072,013 | | Corporate debt securities | $480,803 | $444,267 | $480,714 | $440,551 | | Collateralized mortgage obligations | $199,510 | $187,428 | $122,824 | $111,434 | | Residential mortgage-backed securities | $347,116 | $316,832 | $223,273 | $196,795 | | Commercial mortgage-backed securities | $621,778 | $525,185 | $627,364 | $534,388 | | Total AFS | $2,848,422 | $2,526,969 | $2,698,259 | $2,398,352 | | Held to Maturity (HTM) | | | | | | Residential mortgage-backed securities | $396,308 | $338,063 | $407,075 | $355,270 | | Commercial mortgage-backed securities | $860,115 | $708,869 | $860,847 | $716,937 | | Total HTM | $1,256,423 | $1,046,932 | $1,267,922 | $1,072,207 | - Securities pledged as collateral for public and trust deposits increased from $0.4 billion at December 31, 2023, to $0.6 billion at March 31, 2024[35] - The Corporation does not have the intent to sell and does not believe it will be required to sell AFS or HTM securities with unrealized losses prior to recovery of fair value to amortized cost, thus no ACL was required for these investments[38][39][40] NOTE 4 - Loans and Allowance for Credit Losses This note details the loan portfolio, allowance for credit losses, and non-performing assets Loan Portfolio by Type | Loan Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Real estate - commercial mortgage | $8,252,117 | $8,127,728 | $124,389 | 1.5% | | Commercial and industrial | $4,467,589 | $4,545,552 | $(77,963) | -1.7% | | Real-estate - residential mortgage | $5,395,720 | $5,325,923 | $69,797 | 1.3% | | Real-estate - home equity | $1,040,335 | $1,047,184 | $(6,849) | -0.7% | | Real-estate - construction | $1,249,199 | $1,239,075 | $10,124 | 0.8% | | Consumer | $698,421 | $729,318 | $(30,897) | -4.2% | | Leases and other loans | $341,102 | $336,314 | $4,788 | 1.4% | | Net loans | $21,444,483 | $21,351,094 | $93,389 | 0.4% | Allowance for Credit Losses and Reserve for OBS Credit Exposures | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | | ACL - loans | $297,888 | $293,404 | $4,484 | | Reserve for OBS credit exposures | $15,097 | $17,254 | $(2,157) | Allowance for Credit Losses Rollforward | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Balance at beginning of period | $293,404 | $269,366 | $24,038 | | Net loans (charged off) recovered | $(8,598) | $(14,004) | $5,406 | | Provision for credit losses | $13,082 | $23,333 | $(10,251) | | Balance at end of period | $297,888 | $278,695 | $19,193 | - The increase in ACL for Q1 2024 was primarily due to loan growth and risk migration[46] Non-accrual Loans by Class | Non-accrual Loan Class | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Real estate - commercial mortgage | $45,961 | $44,805 | $1,156 | | Commercial and industrial | $43,735 | $39,952 | $3,783 | | Real estate - residential mortgage | $23,245 | $20,824 | $2,421 | | Real estate - home equity | $5,259 | $4,753 | $506 | | Real estate - construction | $1,286 | $1,341 | $(55) | | Consumer | $51 | $52 | $(1) | | Leases and other loans | $10,091 | $9,893 | $198 | | Total Non-accrual Loans | $129,628 | $121,620 | $8,008 | - Non-accrual loans without a specific valuation allowance totaled $52.7 million at March 31, 2024 and $52.8 million at December 31, 2023, as collateral fair values exceeded carrying amounts or loans were previously charged down[50] Non-Performing Assets | Non-Performing Asset | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | | Non-accrual loans | $129,628 | $121,620 | $8,008 | | Loans 90 days or more past due and still accruing | $26,521 | $31,721 | $(5,200) | | Total non-performing loans | $156,149 | $153,341 | $2,808 | | OREO | $277 | $896 | $(619) | | Total non-performing assets | $156,426 | $154,237 | $2,189 | - Loan modifications due to financial difficulty for the three months ended March 31, 2024, primarily involved term extensions for residential mortgage ($2.7 million) and construction loans ($0.5 million), and interest rate reductions for residential mortgage loans ($0.5 million). No principal forgiveness was granted[63][64][66] NOTE 5 – Mortgage Servicing Rights This note provides information on mortgage servicing rights (MSRs) Mortgage Servicing Rights Summary | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Amortized cost at end of period | $31,057 | $33,082 | $(2,025) | | Estimated fair value of MSRs at end of period | $51,191 | $47,223 | $3,968 | | Total portfolio of mortgage loans serviced | $4.0 billion | $4.1 billion | $(0.1) billion | | Weighted average annual constant prepayment rate | 7.3% | N/A | N/A | | Weighted average discount rate | 9.5% | N/A | N/A | - No valuation allowance was required for MSRs as of March 31, 2024, based on fair value analysis[69] NOTE 6 – Derivative Financial Instruments This note describes the Corporation's use of derivative financial instruments - The Corporation uses derivatives to manage interest rate and foreign currency risks and for customer risk management, not for speculative purposes. Some derivatives are designated as hedges, while others are economic hedges without formal hedge accounting[70] - In January 2023, the Corporation terminated $1.0 billion notional amount of interest rate derivatives designated as cash flow hedges. The original unrealized loss of $70.6 million in AOCI will be recognized as a reduction to interest income in future periods, with $7.0 million reclassified in Q1 2024[71] - In Q3 2023, the Corporation transitioned commercial customer back-to-back interest rate swaps from LIBOR to SOFR, resulting in a $0.2 million increase to other non-interest income in Q1 2024[72] Derivative Financial Instruments Summary | Derivative Type | Notional Amount (March 31, 2024) | Fair Value (March 31, 2024) | Notional Amount (December 31, 2023) | Fair Value (December 31, 2023) | | :------------------------------------------ | :------------------------------- | :-------------------------- | :------------------------------- | :-------------------------- | | Interest Rate Locks with Customers (Positive) | $164,041 | $763 | $119,558 | $460 | | Interest Rate Derivatives with Customers (Positive) | $622,369 | $8,264 | $824,659 | $22,656 | | Interest Rate Derivatives with Dealer Counterparties (Positive) | $4,044,521 | $164,762 | $3,784,236 | $128,235 | | Interest Rate Derivatives used in Cash Flow Hedges (Positive) | $2,300,000 | $1,060 | $2,500,000 | $6,189 | | Interest Rate Derivatives with Customers (Negative) | $4,044,521 | $(272,875) | $3,784,236 | $(222,530) | | Interest Rate Derivatives with Dealer Counterparties (Negative) | $622,369 | $(8,630) | $824,659 | $(23,023) | - The Corporation estimates an additional $19.7 million of unrealized losses from cash flow hedges will be reclassified as a decrease to net interest income over the next twelve months[76] NOTE 7 – Accumulated Other Comprehensive (Loss) Income This note details the components of accumulated other comprehensive (loss) income Components of Other Comprehensive (Loss) Income | Component of OCI | Three months ended March 31, 2024 (Net of Tax, in thousands) | Three months ended March 31, 2023 (Net of Tax, in thousands) | Change (in thousands) | | :---------------------------------------------------------------- | :----------------------------------------------------------- | :----------------------------------------------------------- | :-------------------- | | Net unrealized (losses) gains on AFS investment securities | $(15,278) | $34,136 | $(49,414) | | Net unrealized gains on interest rate derivatives used in cash flow hedges | $8,196 | $323 | $7,873 | | Defined benefit pension plan and postretirement benefits | $(106) | $25 | $(131) | | Total Other Comprehensive (Loss) Income | $(7,188) | $34,484 | $(41,672) | Accumulated Other Comprehensive (Loss) Income Balances | Component of AOCI | Balance at March 31, 2024 (in thousands) | Balance at December 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------------------ | :------------------------------------- | :------------------------------------- | :-------------------- | | Unrealized Gains (Losses) on Investment Securities | $(290,140) | $(274,862) | $(15,278) | | Net Unrealized Gain (Loss) on Interest Rate Derivatives | $(26,587) | $(34,783) | $8,196 | | Unrecognized Pension and Postretirement Plan Income (Costs) | $(2,741) | $(2,635) | $(106) | | Total Accumulated Other Comprehensive (Loss) Income | $(319,468) | $(312,280) | $(7,188) | NOTE 8 – Fair Value Measurements This note describes the fair value hierarchy and measurements for financial instruments - The Corporation categorizes assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable market data other than quoted prices), and Level 3 (unobservable inputs)[82][83] Fair Value Measurements by Level | Asset/Liability Category | Level 1 (March 31, 2024) | Level 2 (March 31, 2024) | Level 3 (March 31, 2024) | Total (March 31, 2024) | | :------------------------------------ | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Loans held for sale | $0 | $10,624 | $0 | $10,624 | | AFS investment securities | $0 | $2,526,969 | $0 | $2,526,969 | | Investments held in Rabbi Trust | $32,562 | $0 | $0 | $32,562 | | Derivative assets | $618 | $174,860 | $0 | $175,478 | | Deferred compensation liabilities | $32,562 | $0 | $0 | $32,562 | | Derivative liabilities | $483 | $281,581 | $0 | $282,064 | - Loans, net, OREO, and MSRs are Level 3 financial assets measured at fair value on a nonrecurring basis. Loans are individually evaluated for impairment, OREO is based on estimated selling prices less costs, and MSRs are valued using discounted cash flows by a third-party expert[94][95][96] Financial Instrument Carrying Amount and Estimated Fair Value | Financial Instrument | Carrying Amount (March 31, 2024) | Estimated Fair Value (March 31, 2024) | | :-------------------------------- | :------------------------------- | :------------------------------------ | | Cash and cash equivalents | $357,333 | $357,333 | | FRB and FHLB stock | $121,637 | $121,637 | | Loans held for sale | $10,624 | $10,624 | | AFS securities | $2,526,969 | $2,526,969 | | HTM securities | $1,256,423 | $1,046,932 | | Loans, net | $21,146,595 | $20,044,269 | | Demand and savings deposits | $17,453,569 | $17,453,569 | | Brokered deposits | $1,152,427 | $1,151,376 | | Time deposits | $3,135,954 | $3,123,531 | | Federal Home Loan Bank advances | $900,000 | $903,194 | | Senior debt and subordinated debt | $535,566 | $420,502 | | Other borrowings | $860,474 | $860,412 | NOTE 9 – Net Income Per Share This note explains the calculation of basic and diluted net income per share - Basic EPS is calculated as net income available to common shareholders divided by weighted average shares outstanding. Diluted EPS includes common stock equivalents (stock options, restricted stock, RSUs, PSUs) using the treasury stock method[102][103] Net Income Per Share Calculation | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------- | | Weighted average shares outstanding (basic) | 162,706 | 166,605 | -3,899 | | Impact of common stock equivalents | 1,814 | 1,796 | 18 | | Weighted average shares outstanding (diluted) | 164,520 | 168,401 | -3,881 | | Basic EPS | $0.36 | $0.39 | $(0.03) | | Diluted EPS | $0.36 | $0.39 | $(0.03) | NOTE 10 – Stock-Based Compensation This note describes the Corporation's stock-based compensation plans and related expenses - The Corporation grants equity awards (stock options, restricted stock, RSUs, PSUs) to employees and non-employee directors, recognizing compensation expense over the service period[105][106] - As of March 31, 2024, the Employee Equity Plan had approximately 4.5 million shares reserved, and the Directors' Plan had approximately 395,000 shares reserved for future grants[107] Stock-Based Compensation Expense | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Compensation expense | $667 | $1,668 | $(1,001) | | Tax benefit | $(144) | $(362) | $218 | | Total stock-based compensation, net of tax | $523 | $1,306 | $(783) | NOTE 11 – Employee Benefit Plans This note provides information on the Corporation's employee benefit plans Net Periodic Pension and Postretirement Benefit Costs | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net periodic pension cost | $(186) | $59 | $(245) | | Net periodic benefit (Postretirement Plan) | $(126) | $(123) | $(3) | - The Corporation assumed Prudential Bancorp's multiemployer defined benefit pension plan obligations during the Merger[109] - The funded status of the Pension Plan and Postretirement Plan is recognized on the consolidated balance sheets, with changes recognized through OCI[110] NOTE 12 – Commitments and Contingencies This note details off-balance sheet commitments, contingencies, and legal proceedings - The Corporation uses OBS financial instruments to meet borrower financing needs, including commitments to extend credit and letters of credit, which carry credit risk similar to loans[111][112][113] Off-Balance Sheet Commitments | Commitment Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Commitments to extend credit | $8,778,133 | $8,790,511 | $(12,378) | | Standby letters of credit | $249,594 | $264,440 | $(14,846) | | Commercial letters of credit | $64,078 | $67,396 | $(3,318) | - The Corporation maintains a reserve for estimated losses on residential mortgage loans sold to investors, totaling $2.0 million at March 31, 2024 (up from $1.8 million at Dec 31, 2023), covering representation and warranty and credit loss exposures[116][117] - The Corporation is involved in various legal proceedings and regulatory inquiries, for which loss reserves are established when probable and estimable. Management believes current liabilities will not have a material adverse effect on financial condition, though ultimate resolution could be material to future operating results[118][119][120] NOTE 13 – Subsequent Events This note describes significant events occurring after the reporting period - On April 26, 2024, Fulton Bank acquired substantially all assets ($5.2 billion) and assumed substantially all deposits and certain liabilities ($5.6 billion) of Republic First Bank from the FDIC. This included $0.2 billion cash, $2.0 billion investments, $2.9 billion loans, and $0.1 billion other assets, plus $0.8 billion cash from the FDIC. No loss sharing arrangement was entered with the FDIC[122] - Post-acquisition, Fulton Bank sold all acquired investment securities, using $1.4 billion of proceeds to repay assumed borrowings and $250.0 million of its wholesale funding. The acquisition enhances Fulton's presence in Philadelphia and New Jersey[122][124] - On May 1, 2024, the Corporation completed a public offering of 19,166,667 common shares at $15.00/share, generating approximately $273.5 million in net proceeds. These proceeds are intended for general corporate purposes, including supporting opportunities from the Republic First Transaction[125][126] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial condition and results of operations, including recent acquisition impacts - Fulton Financial Corporation is a financial holding company providing retail and commercial financial services in Pennsylvania, Delaware, Maryland, New Jersey, and Virginia[129] - The Corporation generates most revenue from net interest income (interest on loans/investments minus interest on deposits/borrowings) and fees, offset by credit loss provisions, non-interest expenses, and income taxes[130] Key Financial Highlights | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | :------- | | Net income available to common shareholders (diluted) | $0.36 | $0.39 | $(0.03) | | Operating net income available to common shareholders per share | $0.40 | $0.39 | $0.01 | | Return on average assets, annualized | 0.91% | 1.03% | -0.12% | | Operating return on average assets, annualized | 1.00% | 1.04% | -0.04% | | Return on average common shareholders' equity, annualized | 9.28% | 11.02% | -1.74% | | Operating return on average common shareholders' equity (tangible), annualized | 13.08% | 14.46% | -1.38% | | Net interest margin | 3.32% | 3.53% | -0.21% | | Efficiency ratio | 63.2% | 58.5% | 4.7% | | Non-performing assets to total assets | 0.57% | 0.62% | -0.05% | | Net charge-offs (recoveries) to average loans | 0.16% | 0.27% | -0.11% | OVERVIEW This section provides a general introduction to the Corporation's business and revenue sources - Fulton Financial Corporation is a financial holding company operating through its wholly-owned banking subsidiary, providing a full range of retail and commercial financial services across Pennsylvania, Delaware, Maryland, New Jersey, and Virginia[129] - The majority of the Corporation's revenue is generated from net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Revenue is also generated through fees and gains on asset sales[130] Acquisition of Substantially all of the Assets and Assumption of Substantially all of the Deposits and Certain Liabilities of Republic First Bank from the FDIC This section details the acquisition of Republic First Bank's assets and liabilities from the FDIC - On April 26, 2024, Fulton Bank acquired approximately $5.2 billion in assets and assumed $5.6 billion in liabilities from Republic First Bank via an FDIC-assisted transaction, receiving $0.8 billion cash from the FDIC[132] - The financial statements in this report do not reflect the impact of the Republic First Transaction, as it occurred after the reporting period[134] Common Stock Offering This section describes the Corporation's recent public offering of common shares - On May 1, 2024, the Corporation completed a public offering of 19,166,667 common shares at $15.00 per share, generating approximately $273.5 million in net proceeds[135] - Proceeds from the offering will be used for general corporate purposes, including supporting new opportunities related to the Republic First Transaction[136] Financial Highlights This section summarizes key financial performance indicators for the period - Net income available to common shareholders decreased by $6.4 million (9.7%) to $59.4 million, and diluted EPS decreased by $0.03 to $0.36 for Q1 2024 compared to Q1 2023[137] - Net interest income decreased by $8.7 million (4.0%) to $206.9 million, primarily due to rising interest expense on deposits, partially offset by increased interest income on loans[137] - Net interest margin (NIM) decreased by 21 bps to 3.32%, driven by a 95 bps increase in the cost of interest-bearing liabilities and noninterest-bearing deposits, partially offset by higher yields on loans and investment securities[137] - Average net loans increased by $906.9 million (4.4%), mainly from residential and commercial mortgage loans. Average deposits increased by $804.4 million (3.9%), primarily due to time and brokered deposits, despite a decrease in noninterest-bearing demand deposits[137] - Average borrowings and other interest-bearing liabilities decreased by $450.3 million (14.7%), largely due to decreases in FHLB advances and Federal funds purchased[137] - Non-performing assets increased by $2.2 million (1.4%) to $156.4 million, representing 0.57% of total assets. Annualized net charge-offs to average loans decreased to 0.16% from 0.27% YoY, and the provision for credit losses decreased to $10.9 million from $24.5 million[137] Critical Accounting Policies This section highlights accounting policies requiring significant management judgment and estimates - Critical accounting policies, which involve significant management judgments and estimates, are essential for understanding the Corporation's financial condition and results of operations. These policies are detailed in the Corporation's 2023 Annual Report on Form 10-K[138][139] Supplemental Reporting of Non-GAAP Based Financial Measures This section presents non-GAAP financial measures used for performance evaluation and trend assessment - The Corporation presents non-GAAP financial measures to provide useful comparative information and assess trends, consistent with internal performance evaluation and industry practices. These measures are not substitutes for GAAP and should be reviewed with consolidated financial statements[140] Non-GAAP Financial Measures Reconciliation | Non-GAAP Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Operating net income available to common shareholders (numerator) | $65,363 | $66,158 | | Operating net income available to common shareholders, per share (diluted) | $0.40 | $0.39 | | Operating net income (numerator) | $67,925 | $68,720 | | Operating return on average assets | 1.00% | 1.04% | | Adjusted net income available to common shareholders (numerator) | $65,468 | $66,284 | | Operating return on average common shareholders' equity (tangible) | 13.08% | 14.46% | | Non-interest expense (numerator for efficiency ratio) | $169,742 | $158,942 | | Total revenue (denominator for efficiency ratio) | $268,518 | $271,731 | | Efficiency ratio | 63.2% | 58.5% | RESULTS OF OPERATIONS This section provides a detailed analysis of the Corporation's financial performance Net Interest Income This section analyzes the components and drivers of net interest income and margin - FTE net interest income decreased by $8.5 million (3.9%) to $211.5 million for Q1 2024 compared to Q1 2023. NIM decreased by 21 bps to 3.32%[146] - Total interest income increased by $50.0 million (17.0%), primarily driven by a $41.4 million increase due to higher yields, with $38.1 million from net loans. The yield on average interest-earning assets increased by 67 bps[149] - Interest expense increased by $58.5 million, mainly due to a $45.0 million increase from higher rates on interest-bearing liabilities (savings, money market, time, and demand deposits). Volume increases in brokered and time deposits also contributed[150] - Average loans increased by $906.9 million (4.4%), driven by residential and commercial mortgage loans. The yield on total loans increased by 69 bps to 5.90%[151][152] - The cost of deposits increased by 113 bps to 1.95%, due to higher rates and a shift in deposit mix. Average deposits increased by $804.4 million (3.9%), with significant increases in time and brokered deposits, partially offset by a $1.6 billion decrease in noninterest-bearing demand deposits[154] - Average borrowings and other interest-bearing liabilities decreased by $450.3 million (14.7%), primarily due to decreases in FHLB advances and Federal funds purchased, partially offset by an increase in other borrowings[155] Provision for Credit Losses This section discusses the provision for credit losses and its drivers - The provision for credit losses decreased to $10.9 million for Q1 2024, down from $24.5 million in Q1 2023. This Q1 2024 provision was primarily driven by net charge-offs of $8.6 million and loan growth[156] Non-Interest Income This section analyzes the various components of non-interest income Non-Interest Income by Category | Non-Interest Income Category | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Wealth management | $20,155 | $18,062 | $2,093 | 11.6% | | Commercial banking | $18,829 | $17,513 | $1,316 | 7.5% | | Consumer banking | $11,668 | $11,217 | $451 | 4.0% | | Mortgage banking | $3,090 | $1,970 | $1,120 | 56.9% | | Other | $3,398 | $2,968 | $430 | 14.5% | | Total Non-Interest Income (before investment securities gains) | $57,140 | $51,730 | $5,410 | 10.5% | - The increase in commercial banking income was mainly due to an $0.8 million rise in cash management fees and a $0.3 million increase in gains on SBA loan sales. Mortgage banking income grew due to higher loan sale volumes and spreads[157] Non-Interest Expense This section details the components and changes in non-interest expense Non-Interest Expense by Category | Non-Interest Expense Category | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Salaries and employee benefits | $95,240 | $89,283 | $5,957 | 6.7% | | Data processing and software | $17,661 | $15,796 | $1,865 | 11.8% | | Net occupancy | $16,149 | $14,438 | $1,711 | 11.9% | | Other outside services | $10,809 | $10,126 | $683 | 6.7% | | FDIC insurance | $6,104 | $4,795 | $1,309 | 27.3% | | Equipment | $4,040 | $3,389 | $651 | 19.2% | | Professional fees | $2,088 | $2,392 | $(304) | -12.7% | | Marketing | $1,912 | $1,886 | $26 | 1.4% | | Intangible amortization | $573 | $674 | $(101) | -15.0% | | Other | $16,695 | $16,837 | $(142) | -0.8% | | FultonFirst implementation and asset disposals | $6,329 | $0 | $6,329 | N/M | | Total Non-Interest Expense | $177,600 | $159,616 | $17,984 | 11.3% | - Excluding FultonFirst implementation costs and asset disposals ($6.3 million), non-interest expense increased by $11.7 million (7.3%). Key drivers were increases in salaries and employee benefits ($6.0 million due to merit and healthcare), data processing and software ($1.9 million from technology investments), net occupancy ($1.7 million from snow removal), and FDIC insurance ($1.3 million, including a $1.0 million special assessment)[159] - FultonFirst initiative expenses for Q1 2024 included $0.2 million in severance, $2.5 million in consulting services, and $3.6 million in loss on asset disposals[160] Income Taxes This section discusses income tax expense and the effective tax rate - Income tax expense decreased by $1.3 million to $13.6 million for Q1 2024 compared to Q1 2023. The effective tax rate (ETR) was 18.0% for Q1 2024, down from 18.5% for full-year 2023[161] - The ETR is generally lower than the 21% federal statutory rate due to tax-exempt interest income from loans, municipal securities, and tax credits from community development projects[161] FINANCIAL CONDITION This section analyzes the Corporation's balance sheet components Investment Securities This section details the composition and changes in the investment securities portfolio Investment Securities Balances | Investment Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Total available for sale securities | $2,526,969 | $2,398,352 | $128,617 | 5.4% | | Total held to maturity securities | $1,256,423 | $1,267,922 | $(11,499) | -0.9% | | Total Investment Securities | $3,783,392 | $3,666,274 | $117,118 | 3.2% | - AFS securities increased by $128.6 million, primarily due to purchases of residential mortgage-backed securities ($120.0 million) and collateralized mortgage obligations ($76.0 million), partially offset by decreases in U.S. Government and state/municipal securities[164] - HTM securities decreased by $11.5 million, mainly due to payments on residential mortgage-backed securities[165] Loans This section provides an in-depth analysis of the loan portfolio and credit quality Loan Portfolio by Type | Loan Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Real estate - commercial mortgage | $8,252,117 | $8,127,728 | $124,389 | 1.5% | | Commercial and industrial | $4,467,589 | $4,545,552 | $(77,963) | -1.7% | | Real estate - residential mortgage | $5,395,720 | $5,325,923 | $69,797 | 1.3% | | Real estate - home equity | $1,040,335 | $1,047,184 | $(6,849) | -0.7% | | Real estate - construction | $1,249,199 | $1,239,075 | $10,124 | 0.8% | | Consumer | $698,421 | $729,318 | $(30,897) | -4.2% | | Leases and other loans | $341,102 | $336,314 | $4,788 | 1.4% | | Net loans | $21,444,483 | $21,351,094 | $93,389 | 0.4% | - Net loans increased by $93.4 million (0.4%), driven by commercial mortgage and residential mortgage loans, partially offset by decreases in commercial and industrial and consumer loans[166] - Commercial mortgage and construction loans constitute 44.3% ($9.5 billion) of the loan portfolio as of March 31, 2024. The Corporation manages credit risk through internal risk ratings and lending limits[167] Loan Portfolio Industry Concentration | Industry Concentration | March 31, 2024 | December 31, 2023 | | :------------------------------------ | :------------- | :---------------- | | Real estate | 48.7% | 46.6% | | Health care | 7.0% | 6.6% | | Manufacturing | 6.2% | 6.1% | | Agriculture | 5.5% | 5.6% | | Other services | 4.5% | 4.5% | | Construction | 4.4% | 4.1% | | Hospitality and food services | 3.5% | 3.6% | | Retail | 3.3% | 3.3% | | Wholesale trade | 3.1% | 3.2% | | Educational services | 2.9% | 2.9% | | Professional, scientific and technical services | 2.4% | 2.2% | | Arts, entertainment and recreation | 1.9% | 1.9% | | Transportation and warehousing | 1.7% | 1.7% | | Finance and Insurance | 1.3% | 1.3% | | Administrative and Support | 1.1% | 1.1% | | Public administration | 1.0% | 1.0% | | Other | 1.5% | 4.3% | | Total | 100.0% | 100.0% | - Non-accrual loans increased by approximately $8.0 million (6.6%) to $129.6 million in Q1 2024, primarily due to additions, partially offset by payments and charge-offs. Non-accrual loans as a percentage of total loans increased to 0.60% from 0.57%[169] Non-Performing Assets and Ratios | Non-Performing Asset | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | | Non-accrual loans | $129,628 | $121,620 | $8,008 | | Loans 90 days or more past due and still accruing | $26,521 | $31,721 | $(5,200) | | Total non-performing loans | $156,149 | $153,341 | $2,808 | | OREO | $277 | $896 | $(619) | | Total non-performing assets | $156,426 | $154,237 | $2,189 | | Non-accrual loans to total loans | 0.60% | 0.57% | 0.03% | | Non-performing loans to total loans | 0.73% | 0.72% | 0.01% | | Non-performing assets to total assets | 0.57% | 0.56% | 0.01% | | ACL - loans to non-performing loans | 191% | 191% | 0% | - Total internally risk-rated loans were $13.7 billion at March 31, 2024, with $1.0 billion classified as criticized and classified (special mention or substandard/lower)[173][174] Criticized and Classified Loans by Class | Loan Class | Special Mention (March 31, 2024) | Substandard or Lower (March 31, 2024) | Total Criticized and Classified (March 31, 2024) | | :------------------------------------ | :------------------------------- | :------------------------------------ | :--------------------------------------------- | | Real estate - commercial mortgage | $340,848 | $248,325 | $589,173 | | Commercial and industrial | $122,170 | $243,219 | $365,389 | | Real estate - construction | $22,273 | $24,404 | $46,677 | | Total Criticized and Classified Loans | $485,291 | $515,948 | $1,001,239 | | % of total risk rated loans (Special Mention) | 3.5% | N/A | N/A | | % of total risk rated loans (Substandard or Lower) | N/A | 3.8% | N/A | | % of total risk rated loans (Total Criticized and Classified) | N/A | N/A | 7.3% | - The provision for credit losses, specific to loans, was $13.1 million for Q1 2024, compared to $23.3 million for Q1 2023. The ACL includes qualitative adjustments for uncertainties not reflected in quantitative models[176] Deposits and Borrowings This section analyzes the Corporation's funding sources, including deposits and various borrowings Deposits by Type | Deposit Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Noninterest-bearing demand | $5,086,514 | $5,314,094 | $(227,580) | -4.3% | | Interest-bearing demand | $5,521,017 | $5,722,695 | $(201,678) | -3.5% | | Savings and money market deposits | $6,846,038 | $6,616,901 | $229,137 | 3.5% | | Brokered deposits | $1,152,427 | $1,144,692 | $7,735 | 0.7% | | Time deposits | $3,135,954 | $2,739,241 | $396,713 | 14.5% | | Total deposits | $21,741,950 | $21,537,623 | $204,327 | 0.9% | - Total deposits increased by $204.3 million (0.9%), driven by increases in time deposits and savings/money market deposits, partially offset by decreases in noninterest-bearing and interest-bearing demand deposits[179] - Uninsured deposits were estimated at $7.1 billion at March 31, 2024, and time deposits of $250 thousand or more increased to $698.2 million from $551.2 million[180] Borrowings by Type | Borrowing Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Federal funds purchased | $0 | $240,000 | $(240,000) | N/M | | Federal Home Loan Bank advances | $900,000 | $1,100,000 | $(200,000) | -18.2% | | Senior debt and subordinated debt | $535,566 | $535,384 | $182 | 0.0% | | Other borrowings | $860,474 | $612,142 | $248,332 | 40.6% | | Total borrowings | $2,296,040 | $2,487,526 | $(191,486) | -7.7% | - Total borrowings decreased by $191.5 million (7.7%), primarily due to decreases in Federal funds purchased and FHLB advances, partially offset by an increase in other borrowings[182] Shareholders' Equity This section discusses changes in shareholders' equity and share repurchase programs - The Board approved a 2024 Repurchase Program authorizing up to $125.0 million for common stock repurchases, with up to $25.0 million also available for preferred stock and subordinated notes, expiring December 31, 2024[183] - During Q1 2024, 1,934,297 shares were repurchased under the program at a total cost of $30.3 million, averaging $15.69 per share[184] Regulatory Capital This section outlines the Corporation's regulatory capital ratios and compliance - The Corporation and Fulton Bank are subject to Capital Rules requiring minimum Common Equity Tier 1 (4.50%), Tier 1 Leverage (4.00%), Total Capital (8.00%), and Tier 1 Capital (6.00%) ratios, plus a 2.50% capital conservation buffer[185][187] - As of March 31, 2024, the Corporation's capital levels met all minimum regulatory requirements, including capital conservation buffers[186] - Fulton Bank met the 'well-capitalized' requirements under the regulatory framework for prompt corrective action as of March 31, 2024[187] Regulatory Capital Ratios | Capital Ratio | March 31, 2024 | December 31, 2023 | Regulatory Minimum | Fully Phased-in, with Capital Conservation Buffers | | :------------------------------------------ | :------------- | :---------------- | :----------------- | :----------------------------------------------- | | Total Risk-Based Capital (to Risk-Weighted Assets) | 14.0% | 14.0% | 8.0% | 10.5% | | Tier I Risk-Based Capital (to Risk-Weighted Assets) | 11.1% | 11.2% | 6.0% | 8.5% | | Common Equity Tier I (to Risk-Weighted Assets) | 10.3% | 10.3% | 4.5% | 7.0% | | Tier I Leverage Capital (to Average Assets) | 9.3% | 9.5% | 4.0% | 4.0% | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the Corporation's exposure to market risks, primarily interest rate risk, and its management strategies - Market risk includes interest rate risk, equity market price risk, and debt security market price risk. Foreign currency and commodity price risks are not significant[189] - Interest rate risk impacts liquidity and can cause fluctuations in net interest income and economic value of equity. The Asset/Liability Management Committee (ALCO) manages this risk using net interest income simulations and economic value of equity estimates[190][191][192] - Net interest income simulation measures short-term earnings exposure, with policy limits for instantaneous interest rate shocks (e.g., 10% for 100 bps shock). Economic value of equity evaluates longer-term repricing risks, with policy limits (e.g., 10% for 100 bps shock), which the Corporation met as of March 31, 2024[193][196] Simulated Annual Change in Net Interest Income | Rate Shock | Annual change in net interest income (in millions) | % change in net interest income | | :--------- | :----------------------------------------------- | :------------------------------ | | +400 bp | +$52.6 | +5.8% | | +300 bp | +$40.6 | +4.5% | | +200 bp | +$28.8 | +3.2% | | +100 bp | +$17.7 | +2.0% | | –100 bp | -$39.4 | -4.4% | | –200 bp | -$79.5 | -8.8% | | –300 bp | -$111.1 | -12.3% | | –400 bp | -$131.9 | -14.6% | Interest Rate Risk, Asset/Liability Management and Liquidity This section discusses interest rate risk, asset/liability management, and liquidity strategies - Interest rate risk affects the Corporation's liquidity and can cause fluctuations in net interest income and the economic value of equity[190] - The Asset/Liability Management Committee (ALCO) is responsible for reviewing interest rate sensitivity and liquidity, approving policies, and overseeing balance sheet strategies[191] - The Corporation uses net interest income simulation (for short-term earnings exposure) and economic value of equity estimates (for longer-term repricing risks) to measure and manage interest rate risk[192][193][196] Interest Rate Derivatives This section explains the use of interest rate derivatives for risk management - The Corporation uses interest rate derivatives with commercial loan customers and simultaneously with dealer counterparties to manage interest rate risk, resulting in customers paying a fixed rate and the Corporation receiving a floating rate[197] Cash Flow Hedges This section describes the application of cash flow hedges to mitigate interest rate volatility - Interest rate derivatives are used as cash flow hedges to reduce volatility in interest income and expense by hedging variable cash flows from floating rate loans and borrowings[198] - Unrealized gains or losses on cash flow hedges are recorded in AOCI and reclassified into interest income or expense when the hedged transaction affects earnings[199] - Following the termination of $1.0 billion in cash flow hedges in January 2023, $7.0 million of unrealized losses were reclassified as a reduction of interest income in Q1 2024[200] Liquidity This section outlines the Corporation's liquidity management strategies and sources - The Corporation maintains liquidity through scheduled principal/interest payments, deposits, and borrowings, supplemented by secondary sources like FHLB and FRB credit facilities, and federal funds lines[201][202][203] - As of March 31, 2024, Fulton Bank had $6.1 billion in available borrowing capacity with the FHLB and $2.6 billion in federal funds lines (with $0 outstanding). It also had $1.2 billion in collateralized borrowing capacity at the FRB discount window[204][205] - Operating activities provided $152.9 million in cash in Q1 2024, while investing activities used $299.9 million (mainly for AFS securities purchases and loan increases), and financing activities used $45.4 million (due to treasury stock acquisition and dividends, partially offset by deposit/borrowing increases)[208] Debt Security Market Price Risk This section addresses the risk of economic loss from changes in debt security values - Debt security market price risk is the exposure to economic loss from changes in debt security values unrelated to interest rates. The Corporation's investments are primarily U.S. government-sponsored agency mortgage-backed securities, collateralized mortgage obligations, state and municipal securities, and corporate debt securities[209] - All mortgage-backed securities and collateralized mortgage obligations are guaranteed by U.S. government-sponsored agencies[209] State and Municipal Securities This section provides details on the Corporation's holdings of state and municipal securities - As of March 31, 2024, the Corporation held $1.1 billion in state and municipal securities. These holdings are evaluated based on the underlying creditworthiness of the issuer[210] - Approximately 100% of these securities are supported by the general obligation of corresponding states or municipalities, with about 74% being school district issuances[210] Item 4. Controls and Procedures This section confirms the effectiveness of the Corporation's disclosure controls and procedures as of March 31, 2024 - The Corporation's disclosure controls and procedures were evaluated by management, including the CEO and Interim CFO, and concluded to be effective as of March 31, 2024[211] - Disclosure controls and procedures are designed to ensure that information required for SEC reports is recorded, processed, summarized, and reported within specified timeframes[211] PART II. OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section incorporates legal proceedings information by reference from Note 12 - Information on legal proceedings is incorporated by reference from Note 12, 'Commitments and Contingencies,' in the Notes to Consolidated Financial Statements[212] Item 1A. Risk Factors This section updates risk factors, focusing on new risks from the Republic First Transaction and its integration challenges - The success of the Republic First Transaction depends on the Corporation's ability to integrate acquired assets and liabilities, manage customer relationships, control expenses, and realize anticipated benefits. Failure to do so could materially and adversely affect the business[215][216] - The expedited nature of the FDIC-assisted transaction limited due diligence, potentially leading to unforeseen liabilities or inaccurate fair value assumptions for Republic First Assets and Liabilities, which could significantly impact financial condition and results of operations[215][218][219] - The Corporation is validating the fair value of Republic First Assets and Liabilities, and changes in assumptions or additional information could lead to decreases in estimated fair value[220] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Corporation's common stock repurchase activities under the 2024 Repurchase Program - The 2024 Repurchase Program, approved on December 19, 2023, authorizes the repurchase of up to $125.0 million of common stock (with up to $25.0 million for preferred stock and subordinated notes) through December 31, 2024[221] Common Stock Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share (1) | | :---------------------------------- | :------------------------------- | :------------------------------- | | January 1, 2024 to January 31, 2024 | 514,004 | $16.08 | | February 1, 2024 to February 29, 2024 | 1,420,293 | $15.55 | | March 1, 2024 to March 31, 2024 | — | — | | Total for Q1 2024 | 1,934,297 | $15.69 | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (as of March 31, 2024) | N/A | $94,651,692 | - Purchases can be made in open market or privately negotiated transactions and the program may be discontinued at any time[222] Item 5. Other Information This section confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended March 31, 2024[225] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including agreements and certifications - Exhibits include the Underwriting Agreement for the common stock offering, the Purchase and Assumption Agreement for the Republic First Bank acquisition, Articles of Incorporation, Bylaws, and various equity award agreements[227] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included[227] - Interactive data files (XBRL) for the unaudited consolidated financial statements and notes are provided[227]