Fulton Financial Fails to Gain on Earnings Beat


The stock price of Fulton Financial Corp. (FULT) dipped despite its third consecutive earnings beat on Tuesday. The company’s fourth-quarter 2013 earnings of 22 cents per share came in above the Zacks Consensus Estimate and the prior-year quarter figure of 20 cents, driven by an increase in interest income and lower provisions.

For the full year 2013, the company recorded earnings per share of 83 cents compared with 80 cents in 2012. Moreover, earnings beat the Zacks Consensus Estimate of 79 cents.

Results benefited from a rise in net interest income and lower provision for credit losses, partially offset by a decline in non-interest income and higher operating expenses. Loan and deposit balances reflected growth. Further, improvement in both credit quality and profitability ratios were the tailwinds for the quarter.

Net income came in at $42.1 million, up 4.6% year over year. Further, for full-year 2013, net income came in at $161.8 million, increasing 1.2% from $159.8 million in 2012.

Performance in Detail

Fulton Financial’s total revenue declined nearly 10.2% from the prior-year quarter to $193.2 million. However, revenues surpassed the Zacks Consensus Estimate of $178.0 million.

For 2013, total revenue came in at $797.4 million, down from $863.9 million in 2012. However, total revenue surpassed the Zacks Consensus Estimate of $729.0 million.

Net interest income rose nearly 1.0% year over year to $133.0 million. The rise was mainly attributable to lower interest expenses.

Net interest margin was 3.48%, down 17 basis points (bps) from the prior-year quarter figure.

Non-interest income decreased 31.6% year over year to $40.7 million.  Almost all the components of fee income marked a decrease except investment management and trust services fees that increased 10.2% year over year.

Non-interest expense rose to $116.8 million from $116.6 million in the prior-year quarter. We observe disciplined cost management on the company’s front with expenses rising 2.7% for full-year 2013 from the previous year.

The efficiency ratio for Fulton Financial deteriorated to 65.14% from 59.16% in the prior-year quarter. An increase in efficiency ratio indicates decline in profitability.

Fulton Financial Financial’s net loans as of Dec 31, 2013 were $12.6 billion, up 5.5% from the year-ago quarter. Total deposits for the quarter rose marginally year over year to $12.5 billion.

Asset Quality

Fulton Financial Financial’s asset quality showed improvement in the quarter. The ratio of net charge-offs to annualized average loans came in at 0.33%, down 58 bps from the prior-year quarter.

On the other hand, total nonperforming assets were $169.3 million, down 28.6% from the year-ago quarter. Moreover, provision for credit losses fell 85.7% year over year to $2.5 million.

Capital and Profitability Ratios

Fulton Financial’s profitability ratios improved. The return on average assets remained stable at 0.99% compared with Dec 31, 2012. As of Dec 31, 2013, return on average stockholders' equity came in at 8.14%, up from 7.70% as of Dec 31, 2012.

Other Developments

Management announced its cost containment plans during the earnings conference call. These initiatives include consolidation of 14 branches spread across Pennsylvania, New Jersey and Maryland. This will generate an annual cost savings of $8 million.

Our Viewpoint

Despite interest income growth in the said quarter, we expect the low interest rate condition to keep the company’s top line under pressure in the upcoming quarters. However, strategic cost savings as well as further improvement in credit quality will help drive earnings going forward.

At present, Fulton Financial has a Zacks Rank #3 (Hold).

Among other banks, First Interstate Bancsystem Inc. (FIBK) is slated to release earnings results on Jan 29, while Bank of Hawaii Corp. (BOH) and UMB Financial Corporation (UMBF) are scheduled to report on Jan 27 and Jan 28, respectively.

Read the Full Research Report on BOH
Read the Full Research Report on UMBF
Read the Full Research Report on FIBK
Read the Full Research Report on FULT

Zacks Investment Research

View Comments (0)