Fulton Financial Corporation (FULTP) Earnings

Management highlights

- **Strategic Execution**: 2025 was an outstanding year with strong operating earnings per share ($2.16), solid balance sheet, and disciplined expense management. Successfully executed community banking strategy, delivering value to customers, employees, and shareholders. - **Deposit Growth**: Customer deposits grew $449 million, with consumer demand deposit account openings up 25% year-over-year due to enhanced deposit initiatives and increased customer engagement. - **Loan Growth**: Organic loan growth originations delivered net loan growth, with new team members added to serve small businesses and middle-market customers. Expect loan growth to return to mid-single-digit historical rates in 2026. - **Noninterest Income**: Broad-based growth with commercial fees up 8% (led by 17% growth in cash management revenue), Fulton Financial Advisors contributing meaningfully, and wealth assets under management surpassing $17 billion in 2025. - **Expense Management**: Realized benefits from strategic initiatives, with operating expenses growing modestly (1.9% in 2025), and normalizing for Republic First expenses showing a 2.7% year-over-year decrease. - **Profitability and Capital**: Operating return on assets improved by 17 basis points to 1.28%, loan-to-deposit ratio ended the quarter at 91%, net interest margin increased 9 basis points to 3.51% (3.59% in Q4), and capital ratios were at their highest in over a decade. - **Credit Metrics**: Nonperforming assets as a percent of total assets declined 11 basis points, net charge-offs remained historically low (21 basis points of average loans), and allowance for loan losses ended at 1.51% of total loans. - **Acquisition**: Announced acquisition of Blue Foundry Bancorp to strengthen footprint and reinforce community banking model, expanding presence in attractive markets.

Guidance

- 2026 guidance assumes a 125 basis point Fed cut in March and Blue Foundry Bancorp acquisition closes early in 2Q '26. - Net interest income: $1.120 billion to $1.140 billion (assumes annual FTE adjustment of $16 million to $18 million). - Loan loss provision expense: $55 million to $75 million. - Noninterest income: $285 million to $300 million. - Operating expense: $800 million to $835 million. - Effective tax rate: 18.5% to 19.5%. - Nonoperating expenses: Approximately $60 million (includes $22 million of CDI and $36 million of merger-related costs).

Segment performance

**Net Interest Income**: Grew 2.8% annualized from the previous quarter, with net interest margin expanding by 2 basis points despite 75 basis points of Fed rate cuts from September through December. Total period-end loans increased $103 million during the quarter, with growth across most loan categories offsetting declines in construction balances. **Deposits**: Grew $257 million or 3.9%, with growth relatively balanced across categories; consumer business was a key driver, while municipal deposits and other wholesale funding declined. **Noninterest Income**: For the quarter, noninterest income was stable at $70 million, with strong linked quarter growth in Wealth, Capital Markets, and SBA businesses. **Expenses**: Operating expenses grew by 1.9% in 2025, and when normalizing for a full year of Republic First expenses in 2024, operating expenses would have been down 2.7% year-over-year.

Analyst Q&A

• Q: Maybe starting on the loan growth guide, the mid-single digits in '26. I appreciate your comments around the lenders that were hired recently and the -- some of the headwinds that were there in '25 that are no longer there in '26. Maybe you could quantify that a bit for us. Just give us a sense for what that headwind won't be? And if there's a way you can quantify the lenders? And then if there's any number you could put around what you're assuming in paydowns as well.

  A: Yes, Danny, just a little color on that overall. As we look back on last year, we had more than $800 million of headwinds around strategic actions that we took derisk the portfolio, get the portfolio where we wanted it to be. So we see those things moderating. And I think that's a big -- if you look back on last year, we feel it's about 3.5% organic growth, eliminating those headwinds. So just that really gets us back close to those long-term trends. And then as we get the increased productivity, additional people in really every area of the company from our Fulton First initiative. We're really building productivity. So we've added bankers in commercial banking, business banking, SBA. We're moving all of those teams forward just from an overall count. And we're doing that kind of each quarter. So it's not big teams that we're adding. It's a person or 2 or a small team and we just continue to build that momentum. If you look at underlying originations for each of the quarters this year, we built momentum. Originations were up each quarter. The pipeline is up year-over-year as well. So as we stand here today, we're confident getting back into that mid-single-digit range and then continuing that momentum to move it forward.

• Q: I'm curious, as you talk about or think about the mid-single-digit growth rate next year, just curious, do you think the distribution of the loan mix changes materially in terms of the new hire? Or do you think that's going to come more out of the C&I book versus CRE. Just curious how you're thinking about production next year.

  A: Yes. So overall, what served us really well over the long term is having a diversified loan book. So our strategy is to grow each of those segments. They do grow at different paces over time. We think we have opportunity in CRE, C&I, business banking, all of those categories, we feel that, that could be drivers to the accelerated organic growth and we have a balance sheet mix that we can really lean in and grow any of those at normal pace or even accelerated pace. You look at our CRE concentration, it's below 200%. We're selective but it's a good position to be in, and we really want to grow all categories. But we think specifically in those 3, we can do a little outsized growth year-over-year.

• Q: I was hoping you could help us out with deposits. We'd love your thoughts around deposit growth for this year, including some composition thoughts? And then, Rick, if you have it either at the period end or most recent cost of deposits, just to give us some sense of trajectory on the overall cost of funds.

  A: Yes, Matt, just a little bit on deposit growth. We feel we do have some good momentum. We referenced some of the account opening and customer engagement things that we've been doing that are driving momentum. Again, it's consumer, small business are really outsized there. We referenced the treasury performance. We referenced it in a fee income basis, 17%, but that's a really good generator of low-cost operating deposits. So really, in all those categories, consume -- just core consumer, kind of always building that, really good momentum in business banking. And then on treasury and cash management on the corporate side, we have some outpaced momentum there as well. So those are the categories that we feel really good about the teams driving growth.

• Q: I heard you on the pipeline sounds strong. I would love any sort of percentage comparison. I know I think you said it was up year-over-year. And then I heard you talk a little bit about kind of more diversified loan growth as you integrate Blue Foundry. Curious, geography-wise, given their geography in Northern New Jersey, what are your thoughts on kind of inching into the Metro New York City market for commercial real estate? And I just love your thoughts around that.

  A: Yes. So first, on the pipeline. So I was specifically referencing the commercial pipeline, and that's up more than 10% year-over-year. So it's a marked improvement. We've seen a little improvement in the pull-through rate too. You've heard me talk about that before, not just things in the pipeline, but customers actually spending the money and moving forward with the project or purchase. We see a little positive momentum there as well. So a couple of those factors, I think, really help us be confident in that momentum as we move forward. Then on geography, we really like the Northern New Jersey market. We're in that market. This acquisition fills out gives us a good franchise there, crossing the state lines there is not within our strategy.

• Q: Could you help me out with, first of all, your thoughts around commercial interest rate swap income. It's a bit all over the place, but the fourth quarter was stronger than I was anticipating. What's a good run rate there? Or what are you expecting there? And then the other one is just other fee income dropped quite a bit this quarter, and I'm curious what you're expecting for run rate there as well?

  A: Well, Matt, first, on the swap income, that really tracks with originations, and it's typically the larger deals that would have a swap versus a fixed rate, so that you're right, that does bounce from quarter-to-quarter and it really ties and correlates to originations and some larger originations. So it's natural as you seeing growth and origination accelerate in the fourth quarter. That's pretty in line with what we would expect from the derivatives too. A: And Matt, on the other component, I would say it's a little bit in that other really driving, call it, that quarterly volatility is income from equity method investments. So over the course of the year, we had a couple of that improved in valuation. And then in the fourth quarter, we had one that declined about -- well, the net of it was around $1.7 million. So probably $2.5 million is a reasonable level for that on a normalized basis.