FULTON FINANCIAL CORPFULT

FULTON FINANCIAL CORP Stock Compensation Disclosure

10-KFiled Feb 27, 20263 min read
NOTE 16 - STOCK-BASED COMPENSATION PLANS
The following table presents compensation expense and related tax benefits for all equity awards recognized in the Consolidated Statements of Income for the years ended December 31:
202520242023
 (dollars in thousands)
Compensation expense$13,684 $10,907 $11,265 
Tax benefit(3,110)(2,466)(2,484)
Total stock-based compensation, net of tax $10,574 $8,441 $8,781 

The tax benefits as a percentage of compensation expense, as shown in the preceding table, were 22.7%, 22.6% and 22.1% in 2025, 2024 and 2023, respectively. These percentages differ from the Corporation's federal statutory tax rate of 21%. Tax benefits are only recognized over the vesting period for awards that ordinarily will generate a tax deduction when exercised, in the case of non-qualified stock options, or upon vesting, in the case of RSUs, and PSUs. Tax benefits in excess of the tax rate resulted from incentive stock option exercises that triggered a tax deduction when they were exercised and excess tax benefits realized on vesting RSUs and PSUs during the period.

The following table presents information about stock options exercised for the years ended December 31:
202520242023
 (dollars in thousands)
Number of options exercised— 39,310 68,134 
Total intrinsic value of options exercised$— $116 $249 
Cash received from options exercised$— $496 $805 
Tax benefit from options exercised$— $23 $47 

Upon exercise, the Corporation issued shares from its authorized, but unissued, common stock to satisfy the stock options. As of December 31, 2024, there were no outstanding stock options. The Corporation did not issue any stock options during the years ended December 31, 2025, 2024 and 2023.

The following table provides information about nonvested RSUs and PSUs granted under the Employee Equity Plan and Directors' Plan for the year ended December 31, 2025:
 RSUs/PSUs
 SharesWeighted
Average
Grant Date
Fair Value
Nonvested as of December 31, 20242,702,997 $14.57 
Granted1,057,072 17.03 
Vested(796,124)15.38 
Forfeited(87,395)15.42 
Nonvested as of December 31, 20252,876,550 $15.22 

As of December 31, 2025, there was $14.2 million of total unrecognized compensation cost (pre-tax) related to RSUs and PSUs that will be recognized as compensation expense over a weighted average period of 1.95 years. As of December 31, 2025, the Employee Equity Plan had 3.2 million shares reserved for future grants through 2032, and the Directors' Plan had 256.2 thousand shares reserved for future grants through 2033.

The fair value of certain PSUs with market-based performance conditions granted under the Employee Equity Plan was estimated on the grant date using the Monte Carlo valuation methodology performed by a third-party valuation expert. This valuation is dependent upon certain assumptions, as summarized in the following table:
202520242023
Risk-free interest rate3.66 %4.75 %3.84 %
Volatility of Corporation’s stock32.92 %30.54 %35.63 %
Expected life of PSUs3 years3 years3 years
The expected life of the PSUs with fair values measured using the Monte Carlo valuation methodology was based on the defined performance period of three years. Volatility of the Corporation's stock was based on historical volatility for the period commensurate with the expected life of the PSUs. The risk-free interest rate is the zero-coupon U.S. Treasury rate commensurate with the expected life of the PSUs on the grant date. Based on the assumptions above, the Corporation calculated an estimated fair value per PSU with market-based performance conditions granted in 2025, 2024 and 2023 of $16.73, $19.59 and $10.63, respectively.

Under the ESPP, eligible employees can purchase stock of the Corporation at 85% of the fair market value of the stock on the date of purchase. The ESPP is considered to be a compensatory plan and, as such, compensation expense is recognized for the 15% discount on shares purchased. The following table summarizes activity under the ESPP:
202520242023
ESPP shares purchased131,062 133,019 162,667 
Average purchase price per share (85% of market value)$15.44 $14.55 $11.68 
Compensation expense recognized (in thousands)$357 $342 $348 
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About Stock Compensation Disclosures

Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.

Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.

Other Available Disclosures

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