Fulton Financial Corporation Q1 FY2025 earnings call

• Curtis Myers highlighted being pleased with first quarter results, customer-focused approach, and progress in implementing Fulton First strategy, including talent alignment, reinvestment, and operational simplification. Customer deposits grew, loans had strategic impacts on balances, and loan growth expected in low single digits. Credit performance improved with NPL ratio decline and net charge-offs down.
• Richard Kraemer discussed financial results: operating earnings per diluted share $0.52, deposit growth $200 million, total loans declined, loan to deposit ratio 91%, net interest income $251 million, net interest margin 3.43%, non-interest income $67.2 million, non-interest expense decreased, provision expense declined, and solid capital base with CET1 ratio at 11%.

Operating earnings per share was $0.52, a $0.04 increase from the prior quarter. Revenue exceeded expectations, with PPNR increasing. The quarterly operating efficiency ratio dropped to 56.7%, operating return on assets was 1.25%, and operating return on average tangible common equity grew to 15.95%. Customer deposits grew by $200 million (3%), driven by strong growth in interest-bearing money market products. Total loans declined by $182 million due to strategic actions. Net interest income was $251 million, a $2.5 million decrease quarter over quarter, but net interest margin increased to 3.43%. Non-interest income was $67.2 million, and non-interest expense decreased by $7.8 million quarter over quarter. Provision expense declined to $13.9 million, and the allowance for credit losses to total loans ratio increased to 159%.

Original guidance incorporated Fed Funds cuts, updated rate forecast to four 25 basis point cuts in 2025 starting in June. Comfortable with current guidance ranges, but NII and non-interest income could trend to lower end given growth risks. Expected operating expenses to range between $190 million and $195 million for the remaining three quarters of 2025, with up to $14 million additional Fulton First non-operating expense in 2025.

• Impact of macroeconomic environment on loan growth conversion. Potential headwinds in fee income from market sensitivity. Impact of interest rate changes on net interest income. Credit risks related to specific portfolios like agriculture and auto dealers.

Q: Frank Schiraldi asked about loan growth, pipeline, and NII risk.

A: Curtis Myers said overall pipelines went up year over year but pull-through rate is cautious; Richard Kraemer said comfortable with NII range but rate cuts could impact, still feel comfortable at low end.

Q: Daniel Tamayo asked about credit portfolio, reserves.

A: Curtis Myers discussed credit portfolio impact, especially ag portfolio; Richard Kraemer talked about ACL factors like loan balances and economic forecasts.

Q: Chris McGratty asked about buyback, balance sheet strategy.

A: Curtis Myers said capital strategy prioritizes organic growth then buybacks; Richard Kraemer expected investment portfolio growth to slow as year goes on.

Q: Manuel Navas asked about OpEx flexibility, margin, CD renewals.

A: Richard Kraemer said some OpEx flexibility on timing; Curtis Myers talked about fee income headwinds; Richard Kraemer said retail CD renewals similar.

Q: Matthew Breese asked about NIM, loan growth risk management, government exposure.

A: Richard Kraemer said no material impact on NIM from payoffs; Curtis Myers discussed loan growth impact from strategic credit management; Curtis Myers talked about limited federal government exposure in DC.

Q: David Bishop asked about indirect auto portfolio, purchase accounting accretion.

A: Richard Kraemer said indirect auto portfolio remaining around $260 million; purchase accounting accretion to trend lower, around $12 million quarterly.