FULTON FINANCIAL CORP Q1 FY2025 earnings call

Key Points

• Executed on strategic initiatives like Fulton First, making progress in talent alignment, reinvestment, and operational simplification.
• Customer-focused, with solid operating performance, revenue exceeding expectations and total operating expenses reduced.
• Strong balance sheet management with historically strong liquidity and growth in equity base; tangible book value per share grew 13.8% annualized.
• Loan growth: total loans declined due to strategic actions (e.g., $38M indirect auto, $231M commercial construction), but originations were consistent; pipeline up but cautious on pull-through.
• Credit performance: asset quality metrics improved, NPL to total loan ratio declined, net charge-offs down, but outlook remains cautious.

Operating earnings per share was $0.52, a $0.04 increase linked quarter. Revenue exceeded expectations, PPNR increased. Quarterly operating efficiency ratio dropped to 56.7%, operating return on assets was 1.25%, and operating return on average tangible common equity was 15.95%. Customer deposit growth was solid with a $200 million (3%) increase, driven by interest-bearing money market products. Total loans declined $182 million due to strategic actions, with loan to deposit ratio at 91%. Net interest income was $251 million, down $2.5 million, net interest margin 3.43%. Non-interest income was $67.2 million. Non-interest expense was $182.9 million, down $7.8 million. Provision expense was $13.9 million. Capital base was solid with CET1 ratio at 11%.

Guidance

• Original guidance incorporated Fed Funds cuts, updated to four 25 basis point cuts in 2025 starting June. Comfortable with current guidance ranges, but net interest income and non-interest income could trend to lower half of ranges due to slower growth.
• Expect operating expenses to range between $190 million and $195 million for the remaining three quarters of 2025. Up to $14 million of additional Fulton First non-operating expense expected in 2025.

Risks

• Macro uncertainty affecting loan pull-through rates.
• Potential impact of prolonged slower growth on net interest income and non-interest income.
• Credit risks related to economic downturn, particularly in sectors like ag and auto dealers.
• Sensitivity of fee income to market conditions, e.g., wealth business and mortgage business.

Q: Frank Schiraldi on loan growth, strategic offsets, loan demand A: Curtis Myers mentioned overall pipelines went up year over year but cautious on pull-through; Richard Kraemer said NII could trend to lower end due to growth risk Q: Daniel Tamayo on credit, reserves A: Curtis Myers discussed ag portfolio, auto dealers; Richard Kraemer talked about ACL factors including loan balance definition and economic scenarios Q: Chris McGratty on buyback, balance sheet A: Curtis Myers on capital strategy and buyback timing; Richard Kraemer on investment portfolio growth being market dependent Q: Manuel Navas on OpEx, fee income, margin A: Richard Kraemer on OpEx flexibility and fee income headwinds; Curtis Myers on margin factors like deposit betas and sub debt impact Q: Matthew Breese on loan growth, government exposure A: Curtis Myers on risk management impact on loan growth and limited federal government exposure in DC Q: David Bishop on indirect auto, purchase accounting accretion A: Richard Kraemer on indirect auto size and accretion trend being lower in remainder of year