NOTE 1 - DESCRIPTION OF PLAN
The following description of the Fulton Financial Corporation 401(k) Retirement Plan (the "Plan") provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
General: The Plan’s eligibility requirements include substantially all employees of Fulton Financial Corporation (the "Company" or the "Employer") and its subsidiaries. Eligible employees who have completed 30 days of service and who have attained age 21 may make employee contributions to the Plan. To receive an employer matching contribution, an employee must complete a year of service. The Plan provides for retirement, death, and disability benefits. The Plan is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was signed into law. The CARES Act, among other things, includes several relief provisions available to tax-qualified retirement plans and their participants. The Plan implemented the following provisions:
•Special coronavirus distributions up to $100,000;
•Increase the available loan amount as described below to the lesser of $100,000 or 100% of the participant’s vested account balance; and
•Extend the period for loan repayments, if applicable, up to one year.
Contributions: Participants may elect to contribute 1% to 75% of eligible compensation not to exceed the maximum allowed by law. Any participant who has attained age 50 by the end of the Plan year may make catch-up contributions in accordance with Code Section 414(v). Participants can elect salary deferral through payroll deduction on a pre-tax or after-tax basis, subject to certain limitations as defined by the Plan. The Plan allows participants to rollover balances from other eligible qualified plans.
The Employer shall make a matching contribution equal to 100% of the first 5% of compensation deferred. Participants direct the investment of their participant and employer contributions into various investment options offered by the Plan.
The employer profit sharing contribution is discretionary and is allocated uniformly on the basis of compensation in a Plan year. To be eligible for an employer profit sharing contribution, an employee had 1) to be hired prior to July 1, 2007 and be eligible to participate in this Plan under the eligibility requirements in effect on that date, or 2) to be an active participant in the Fulton Financial Affiliates Defined Benefit Pension Plan as of December 31, 2007. For the years ending December 31, 2020 and 2019, no profit sharing contribution was made to eligible participants.
Participant Accounts: Each participant’s account is credited with the participant’s contribution and employer matching contributions, as well as allocations of the employer's profit sharing contribution, and Plan earnings/(losses) and charged with his or her withdrawals. Allocations are based on participant earnings or account balances, as defined in the Plan. The benefit to which a participant is entitled is the vested benefit that can be provided from the participant’s account.
Retirement, Death and Disability: A participant is entitled to 100% of his or her account balance upon retirement, death or disability.
Vesting: Participants are immediately vested in their voluntary, employer matching, and rollover contributions plus actual earnings thereon. Vesting in the profit sharing account is based on years of service. Participants become 100% vested in their profit sharing accounts after completion of five years of credited service.
Payment of Benefits: Upon termination of service, death, disability or retirement, a participant may elect to receive an amount equal to the value of the participant’s vested interest in his or her account as a lump sum.
Forfeitures: Forfeitures represent the nonvested portion of the participant’s account plus earnings thereon that are not fully distributable to participants who terminate employment. Forfeitures are used to reduce expenses incurred by the Plan or to reduce employer contributions to the Plan. Forfeitures totaling $23,160 and $15,230 were used to reduce Plan expenses during 2020 and 2019, respectively. The forfeitures available to be used as of December 31, 2020 and 2019 totaled $6,987 and $23,160, respectively.
FULTON FINANCIAL CORPORATION
401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2020 and 2019
Concentration of Credit Risk: At December 31, 2020 and 2019, 4.2% and 5.8% of the Plan’s assets were invested in Fulton Financial Corporation common stock, respectively.
Expenses: Fees incurred in the administration of the Plan are paid by the Plan or the Company. Expenses that are paid by the Company are excluded from these financial statements. Fees paid by the Plan for investment management services are included as reduction of the return earned by each fund. Any rebates on investment fees received by Fulton Financial Advisors, the trustee, on behalf of the Plan are deposited into the Plan and are reflected as fees rebated by the applicable fund.
Notes Receivable: Notes receivable from participants were not permitted in 2019. Under the CARES Act enacted in 2020 the Plan allowed qualified individuals to borrow up to the lesser of $100,000 or 100% of the participant's vested balance during the period March 27, 2020 through September 22, 2020. On December 10, 2020, the Plan was amended to allow participants as of January 1, 2021, to borrow a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. The loans are secured by the balance in the participant's account.
The loans are secured by the balance in the participant's account. A commercially reasonable rate of interest for the geographical region in which the Participant lives will be applied to the loan. The term of the note receivable may not exceed 5 years with the exception of note receivables used to acquire a principal residence, which must be paid within 30 years. Principal and interest is paid ratably through payroll deductions.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method: The Plan’s financial statements have been prepared on the accrual basis of accounting in conformity with generally accepted accounting principles in the United States ("GAAP").
Use of Estimates: The preparation of financial statements in accordance with GAAP requires the plan administrator to make estimates and assumptions that affect certain reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition: The Plan’s investments are reported at fair value. Purchases and sales of securities are recorded on a trade-date basis. The Plan records interest income on the accrual basis and dividends on the ex-dividend date. Net appreciation/(depreciation) includes the Plan's gains and losses on investments bought and sold as well as held during the year. See Note 9, Fair Value Measurements, for discussion of fair value measurements.
Notes Receivable: Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Interest income is recorded on the accrual basis. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2020.
Payment of Benefits: Benefits are recorded when paid.
Recently Adopted Accounting Pronouncements: Effective January 1, 2020, the Plan adopted Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. While the adoption of this guidance required adjustments to the fair value disclosures, it did not have a material impact on the Plan's disclosures within the notes to financial statements.
NOTE 3 - RIGHTS UPON PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their accounts.
FULTON FINANCIAL CORPORATION
401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 4 - INVESTMENTS
During 2020 and 2019, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated/(depreciated) in value as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Mutual Funds
|
$
|
49,955,249
|
|
|
$
|
63,368,416
|
|
Fulton Financial Corporation Common Stock
|
(6,643,615)
|
|
|
3,811,306
|
|
Net appreciation (depreciation) in fair value of investments
|
$
|
43,311,634
|
|
|
$
|
67,179,722
|
|
NOTE 5 - PARTIES-IN-INTEREST
Parties-in-interest are defined under Department of Labor Regulations as any fiduciary of the Plan, any party rendering service to the Plan, the employer, and certain others. Certain professional fees for the administration of the Plan were paid by the Company.
Fees paid by the Plan to Conrad Siegel for administrative services totaled $1,500 and $1,100 for 2020 and 2019, respectively. Fees paid to Fulton Financial Advisors related to benefits paid to participants and record keeping services totaled $94,049 and $93,701 for 2020 and 2019, respectively.
Fees paid to Groom Law Group related to legal fees totaled $12,431 and $3,941 for 2020 and 2019, respectively. Fees paid to BDO for auditing services totaled $31,376 and $13,860 for 2020 and 2019, respectively. Fees paid to KPMG for auditing services totaled $25,000 for 2019.
At December 31, 2020 and 2019, the Plan had investments of $19,689,364 and $23,688,841, respectively, in Fulton Financial Corporation common stock. Approximately $825,849 and $787,473 of cash dividends were paid to the Plan by Fulton Financial Corporation during 2020 and 2019, respectively.
NOTE 6 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Net assets available for benefits
|
|
$
|
473,669,338
|
|
|
$
|
411,918,831
|
|
Amounts allocated to withdrawing participants
|
|
—
|
|
|
(10,005)
|
|
Net assets available for benefits per Form 5500
|
|
$
|
473,669,338
|
|
|
$
|
411,908,826
|
|
|
|
|
|
|
The following is a reconciliation of benefits paid to participants per the financial statements for the years ended December 31, 2020 and 2019, to Form 5500:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Benefits paid to participants
|
|
$
|
26,670,753
|
|
|
$
|
34,035,377
|
|
Change in amounts allocated to withdrawing participants
|
|
(10,005)
|
|
|
(2,418)
|
|
Benefits paid to participants per Form 5500
|
|
$
|
26,660,748
|
|
|
$
|
34,032,959
|
|
|
|
|
|
|
NOTE 7 - RISK AND UNCERTAINTIES
The Plan provides for various investment options including any combination of certain mutual funds, common stock of the Company, or collective trust funds. The underlying investment securities are exposed to various risks, such as interest rate, market, liquidity, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in the values
FULTON FINANCIAL CORPORATION
401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2020 and 2019
of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits and participants’ individual account balances.
NOTE 8 - TAX STATUS
The Internal Revenue Service ("IRS") has determined and informed the Company by a letter dated March 22, 2016, that the Plan and related trust are designed in accordance with applicable requirements of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the plan administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC.
GAAP requires plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
NOTE 9 - FAIR VALUE MEASUREMENTS
Fair value is the price that would be received by the Plan for an asset or paid by the Plan to transfer a liability in an orderly transaction between market participants on the measurement date in the Plan’s principal or most advantageous market for the asset or liability. Fair value measurements are determined by maximizing the use of observable inputs and minimizing the use of unobservable inputs. The hierarchy places the highest priority on unadjusted quoted market prices in active markets for identical assets or liabilities (level 1) and gives the lowest priority to unobservable inputs (level 3). The three levels of inputs within the fair value hierarchy are defined as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Plan has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect the Plan’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
In some cases, a valuation technique used to measure fair value may include inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.
The fair values of mutual fund investments and publicly traded common stocks are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs).
Investments measured at fair value on a recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Investments:
|
|
|
|
|
Mutual Funds
|
|
$
|
452,900,845
|
|
|
$
|
387,929,179
|
|
Fulton Financial Corporation Common Stock
|
|
19,689,364
|
|
|
23,688,841
|
|
Total
|
|
$
|
472,590,209
|
|
|
$
|
411,618,020
|
|
|
|
|
|
|
There are no Level 2 or Level 3 investments as of December 31, 2020 and 2019.
FULTON FINANCIAL CORPORATION
401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 10 - SUBSEQUENT EVENTS
The Plan has evaluated subsequent events through June 14, 2021, the date the financial statements were available to be issued and there have been no material events that would require recognition in the financial statements or disclosures to the financial statements.