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Fulton Financial Corporation Announces Second Quarter 2022 Results

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LANCASTER, Pa., July 19, 2022--(BUSINESS WIRE)--Fulton Financial Corporation (NASDAQ:FULT) ("Fulton" or the "Corporation") reported net income available to common shareholders of $67.4 million, or $0.42 per diluted share, for the second quarter of 2022, an increase of $5.7 million, or 9.2%, in comparison to the first quarter of 2022. The Corporation reported net income available to common shareholders of $129.2 million, or $0.80 per diluted share, for the six months ended June 30, 2022, a decrease of $3.7 million or 2.8%, in comparison to the six months ended June 30, 2021.

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"Overall, we are pleased with Fulton's performance and results for the second quarter. Loan originations were strong, we began to see the positive impact of rising interest rates, and fee income was solid despite headwinds in mortgage banking and our wealth management businesses," said E. Philip Wenger, Chairman and CEO. "On the corporate front, we completed our acquisition of Prudential Bancorp, Inc., which was a very important milestone for us, and we published our first Corporate Social Responsibility report highlighting the positive impact our company and our team are making in the communities we serve."

Net Interest Income and Balance Sheet

Net interest income for the second quarter of 2022 was $178.8 million, an increase of $17.5 million in comparison to the first quarter of 2022. The net interest margin for the second quarter of 2022 increased 26 basis points, to 3.04%, from 2.78% in the first quarter of 2022.

The linked-quarter increase in net interest income was primarily due to rising interest rates resulting in increases in interest income from net loans, investment securities and other interest-earning assets of $14.6 million, $1.8 million and $1.1 million, respectively. An increase in the average balances for net loans and investment securities of $254.1 million and $172.1 million, respectively, also contributed to the increase in interest income. Interest expense from interest-bearing liabilities for the second quarter of 2022 declined by $0.2 million compared to the first quarter of 2022.

For the second quarter of 2022, net interest income was $178.8 million, an increase of $16.4 million, or 10.1%, in comparison to the second quarter of 2021 primarily driven by higher interest rates resulting in an increase in interest income from net loans of $9.2 million. Additionally, the year-over-year increase of $807.2 million in average investment securities resulted in an increase of $4.7 million in interest income for the second quarter of 2022 compared to the second quarter of 2021.

Total average interest-earning assets for the second quarter of 2022 were $24.0 billion, an increase of $90.9 million from the first quarter of 2022, primarily driven by the aforementioned increases in average net loans of $254.1 and average investment securities of $172.1 million, partially offset by a decrease in other interest-earning assets of $319.9 million.

Total average interest-earning assets for the second quarter of 2022 decreased by $295.2 million from the second quarter of 2021. Average net loans for the second quarter of 2022 were $18.6 billion , a decrease of $269.4 million from the same period in 2021. Included in average net loans for the second quarter of 2022 were Paycheck Protection Program ("PPP") loans with an average balance of $114.8 million, a decrease of $1.4 billion from the second quarter of 2021. The decrease in average PPP loans for the second quarter of 2022 was partially offset by increases in average residential mortgage loans, average commercial mortgage loans, average real estate construction loans and average commercial and industrial loans of $656.0 million, $162.8 million, $134.5 million and $119.8 million, respectively. Average investment securities increased $807.2 million, for the second quarter of 2022 compared to the second quarter of 2021.

Total average interest-bearing liabilities decreased $202.8 million, to $14.9 billion, in the second quarter of 2022 compared to the first quarter of 2022, driven by decreases of $88.8 million, $67.0 million and $52.9 million in average time deposits, average demand deposits and average long-term borrowings, respectively.

Total average interest-bearing liabilities for the second quarter of 2022 decreased $822.8 million from the second quarter of 2021, driven by decreases in average balances of $685.8 million, $69.8 million and $67.2 million in total interest-bearing deposits, long-term borrowings and short-term borrowings, respectively.

Asset Quality

In the second quarter of 2022, a provision for credit losses of $1.5 million was recorded, as compared to a negative provision for credit losses of $7.0 million in the first quarter of 2022, and a negative provision for credit losses of $3.5 million in the second quarter of 2021. The provision for credit losses for the second quarter of 2022 was recorded to adjust the allowance for credit losses as a result of strong loan growth during the quarter as well as the economic outlook.

Non-performing assets were $178.3 million, or 0.71% of total assets, at June 30, 2022, compared to $163.0 million, or 0.64% of total assets at March 31, 2022, and $156.5 million, or 0.60% of total assets, at June 30, 2021.

Annualized net charge-offs (recoveries) for the quarter ended June 30, 2022, were (0.08)% of total average loans, compared to (0.02%) and 0.15% for the quarters ended March 31, 2022 and June 30, 2021, respectively.

Non-interest Income

Non-interest income before investment securities gains in the second quarter of 2022 was $58.4 million, an increase of $3.1 million, or 5.7%, from the first quarter of 2022. The increase in non-interest income was driven by increases of $2.1 million in fee income from commercial customer interest rate swaps, $1.3 million in commercial banking merchant and card revenues and $0.8 million in consumer banking fees, partially offset a decrease of $1.2 million in wealth management revenues.

Compared to the second quarter of 2021, non-interest income before investment securities gains in the second quarter of 2022 increased $6.5 million, or 12.6%, from $51.9 million. The increase in non-interest income was primarily due to increases of $2.2 million in fee income from commercial customer interest rate swaps, $1.6 million in consumer banking fees, $0.9 million in mortgage banking income, $0.7 million in cash management fees, $0.6 million in wealth management revenues and $0.6 million in commercial banking merchant and card revenues.

Non-interest Expense

Non-interest expense, excluding merger-related expenses, was $148.7 million in the second quarter of 2022, an increase of $3.1 million, or 2.1%, compared to the first quarter of 2022. The increase was primarily due to a $1.0 million decrease in net gains on the sale of owned-fixed assets and an increase of $0.5 million in state taxes, both reflected in other expense, and a $0.9 million increase in salaries and employee benefits primarily due to merit increases and one additional day in the quarter. Included in non-interest expense for the second quarter of 2022 was $1.0 million of merger-related expenses associated with the acquisition of Prudential Bancorp, Inc., compared to $0.4 million in the first quarter of 2022.

Compared to the second quarter of 2021, non-interest expense, excluding merger-related expenses of $1.0 million, increased $7.9 million, or 5.6%, in the second quarter of 2022, primarily due to increases of $7.0 million in salaries and employee benefits and $1.1 million in net occupancy expense.

Income Tax Expense

For the second quarter of 2022, the effective tax rate was 18.6%, compared to 17.6% for the full-year of 2021.

Additional information on Fulton is available on the Internet at www.fultonbank.com.

Safe Harbor Statement

This press release may contain forward-looking statements with respect to the Corporation’s financial condition, results of operations and business. Do not unduly rely on forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "will," "could," "estimates," "predicts," "potential," "continue," "anticipates," "believes," "plans," "expects," "future," "intends," "projects," the negative of these terms and other comparable terminology. These forward-looking statements may include projections of, or guidance on, the Corporation’s future financial performance, expected levels of future expenses, including future credit losses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends in the Corporation’s business or financial results.

Forward-looking statements are neither historical facts, nor assurance of future performance. Instead, the statements are based on current beliefs, expectations and assumptions regarding the future of the Corporation’s business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Corporation’s control, and actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not unduly rely on any of these forward-looking statements. Any forward-looking statement is based only on information currently available and speaks only as of the date when made. The Corporation undertakes no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

A discussion of certain risks and uncertainties affecting the Corporation, and some of the factors that could cause the Corporation's actual results to differ materially from those described in the forward-looking statements, can be found in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021, Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and other current and periodic reports, which have been or will be filed with the Securities and Exchange Commission (the "SEC") and are or will be available in the Investor Relations section of the Corporation's website (www.fultonbank.com) and on the SEC's website (www.sec.gov).

Non-GAAP Financial Measures

The Corporation uses certain financial measures in this press release that have been derived from methods other than Generally Accepted Accounting Principles ("GAAP"). These non-GAAP financial measures are reconciled to the most comparable GAAP measures in tables at the end of this press release.

FULTON FINANCIAL CORPORATION

SUMMARY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

in thousands, except per-share data and percentages

Three months ended

June 30

Mar 31

Dec 31

Sep 30

Jun 30

2022

2022

2021

2021

2021

Ending Balances

Investments

$

4,117,801

$

4,288,674

$

4,167,774

$

4,000,760

$

3,921,658

Net loans

18,920,950

18,476,119

18,325,350

18,269,407

18,586,756

Total assets

25,252,686

25,598,310

25,796,398

26,390,832

26,079,774

Deposits

21,143,866

21,541,174

21,573,499

22,074,041

21,724,312

Shareholders' equity

2,471,093

2,569,535

2,712,680

2,699,818

2,692,958

Average Balances

Investments

$

4,216,507

$

4,228,827

$

3,980,045

$

3,914,627

$

3,670,333

Net loans

18,637,175

18,383,118

18,220,550

18,414,153

18,906,556

Total assets

25,578,432

25,622,462

26,136,536

26,440,876

26,017,542

Deposits

21,523,713

21,480,183

21,876,938

22,123,480

21,765,601

Shareholders' equity

2,531,346

2,688,834

2,713,198

2,722,833

2,669,413

Income Statement

Net interest income

$

178,831

$

161,310

$

165,613

$

171,270

$

162,399

Provision for credit losses

1,500

(6,950

)

(5,000

)

(600

)

(3,500

)

Non-interest income

58,391

55,256

63,881

62,577

51,890

Non-interest expense

149,730

145,978

154,019

144,596

140,831

Income before taxes

85,992

77,538

80,475

89,851

76,958

Net income available to common shareholders

67,427

61,726

59,325

73,021

62,402

Pre-provision net revenue(1)

89,384

71,842

77,837

90,947

75,575

Per Share

Net income available to common shareholders (basic)

$

0.42

$

0.38

$

0.37

$

0.45

$

0.38

Net income available to common shareholders (diluted)

$

0.42

$

0.38

$

0.37

$

0.45

$

0.38

Cash dividends

$

0.15

$

0.15

$

0.22

$

0.14

$

0.14

Common shareholders' equity

$

14.15

$

14.79

$

15.70

$

15.53

$

15.34

Common shareholders' equity (tangible)(1)

$

10.81

$

11.44

$

12.35

$

12.21

$

12.05

Weighted average shares (basic)

160,920

160,588

161,210

162,506

162,785

Weighted average shares (diluted)

162,075

161,911

162,355

163,456

163,858

(1) Non-GAAP financial measure. Refer to the calculation on the page titled "Reconciliation of Non-GAAP Measures" at the end of this press release.

Three months ended

June 30

Mar 31

Dec 31

Sep 30

Jun 30

2022

2022

2021

2021

2021

Asset Quality

Net (recoveries) charge offs to average loans (annualized)

(0.08

)%

(0.02

)%

0.07

%

(0.05

)%

0.15

%

Non-performing loans to total loans

0.92

%

0.87

%

0.83

%

0.82

%

0.83

%

Non-performing assets to total assets

0.71

%

0.64

%

0.60

%

0.58

%

0.60

%

ACL - loans(2) to total loans

1.31

%

1.32

%

1.36

%

1.41

%

1.37

%

ACL - loans(2) to non-performing loans

143

%

151

%

164

%

171

%

166

%

Asset Quality, excluding PPP(1)(3)

Net (recoveries) charge offs to adjusted average loans (annualized)

(0.08

) %

(0.02

) %

0.07

%

(0.05

) %

0.16

%

Non-performing loans to total adjusted loans

0.92

%

0.88

%

0.84

%

0.85

%

0.88

%

ACL - loans(2) to total adjusted loans

1.32

%

1.33

%

1.38

%

1.45

%

1.46

%

Profitability

Return on average assets

1.10

%

1.02

%

0.94

%

1.13

%

1.00

%

Return on average assets, excluding merger-related expenses(1)

1.11

%

1.02

%

0.94

%

1.13

%

1.00

%

Return on average common shareholders' equity

11.57

%

10.03

%

9.34

%

11.45

%

10.11

%

Return on average common shareholders' equity (tangible)(1)

15.23

%

12.88

%

11.89

%

14.56

%

12.93

%

Net interest margin

3.04

%

2.78

%

2.77

%

2.82

%

2.73

%

Efficiency ratio(1)

61.4

%

65.8

%

65.2

%

60.3

%

63.8

%

Non-interest expenses to total average assets

2.35

%

2.31

%

2.34

%

2.17

%

2.17

%

Non-interest expenses to total average assets(1)

2.32

%

2.29

%

2.30

%

2.14

%

2.14

%

Capital Ratios

Tangible common equity ratio ("TCE")(1)

7.0

%

7.3

%

7.8

%

7.6

%

7.7

%

TCE ratio, (excluding AOCI)(1)(5)

8.2

%

7.9

%

7.8

%

7.5

%

7.5

%

Tier 1 leverage ratio(4)

9.1

%

8.9

%

8.6

%

8.4

%

8.5

%

Common equity Tier 1 capital ratio(4)

10.0

%

10.0

%

9.9

%

10.1

%

10.0

%

Tier 1 risk-based capital ratio(4)

10.9

%

10.9

%

10.9

%

11.1

%

11.0

%

Total risk-based capital ratio(4)

13.8

%

13.8

%

14.1

%

14.4

%

14.5

%

(1) Non-GAAP financial measure. Refer to the calculation on the page titled "Reconciliation of Non-GAAP Measures" at the end of this press release.

(2) "ACL - loans" relates to the allowance for credit losses ("ACL") specifically on "Net Loans" and does not include the ACL related to off-balance-sheet ("OBS") credit exposures.

(3) Asset quality information excluding PPP loans.

(4) Regulatory capital ratios as of June 30, 2022 are preliminary and prior periods are actual.

(5) Tangible common equity ("TCE") ratio, excluding accumulated other comprehensive income ("AOCI")

FULTON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED ENDING BALANCE SHEETS (UNAUDITED)

dollars in thousands

% Change from

June 30

Mar 31

Dec 31

Sep 30

June 30

Mar 31

Jun 30

2022

2022

2021

2021

2021

2022

2021

ASSETS

Cash and due from banks

$

158,605

$

161,462

$

172,276

$

260,564

$

143,002

(1.8

)%

10.9

%

Other interest-earning assets

383,715

1,054,232

1,523,973

2,271,738

1,823,688

(63.6

)%

(79.0

)%

Loans held for sale

17,528

27,675

35,768