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Fulton Financial Reports Third Quarter Net Income of $62.1 Million, or $0.37 Per Diluted Share

LANCASTER, Pa.--(BUSINESS WIRE)--

Fulton Financial Corporation (FULT) (“Fulton” or the “Corporation”) reported net income of $62.1 million, or $0.37 per diluted share, for the third quarter of 2019, and net income of $178.6 million, or $1.06 per diluted share, for the nine months ended September 30, 2019.

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“Overall, we were pleased with our third quarter results. Our consumer and commercial businesses had strong loan growth during the quarter despite the competitive headwinds in the market. Other positives for the quarter included stable credit conditions, solid fee income growth and essentially flat operating expenses, linked quarter, excluding charter consolidation expenses, prepayment penalties on FHLB advances and FDIC insurance credits,” said E. Philip Wenger, Chairman and CEO. “On the corporate front, we consolidated our last remaining affiliate banks into Fulton Bank in September. Also, in early October the Department of Justice informed us that the Department had completed its fair lending investigation of Fulton without taking any action against the company. These are two important milestones that should help facilitate growth moving forward.”

Net income per diluted share increased 5.7% in comparison to the $0.35 reported for the second quarter of 2019 and remained unchanged from the $0.37 reported for the third quarter of 2018. The increase in net income over the second quarter of 2019 was the result of increases in non-interest income and a decrease in the provision for credit losses, partially offset by a decrease in net interest income and an increase in non-interest expense.

Net Interest Income and Balance Sheet

Net interest income for the third quarter of 2019 was $161.3 million, a $3.3 million decrease from the second quarter of 2019. The decrease resulted from the impact of a 13 basis point decrease in net interest margin, partially offset by balance sheet growth. The decline in net interest margin resulted from a 12 basis point decrease in the yield on interest-earning assets and a one basis point increase in average cost of funds. The declines in asset yields were primarily the result of the 25 basis point decreases in the federal funds target rate in July and in September 2019, which had a more pronounced impact on loan yields than overall funding costs.

Total average assets for the third quarter of 2019 were $21.5 billion, an increase of $400.8 million from the second quarter of 2019, with average loans, net of unearned income, increasing $121.0 million, average other interest-earning assets increasing $100.0 million and the remaining increase occurring mainly in non interest-earning assets.

Average loans and yields, by type, for the third quarter of 2019 in comparison to the second quarter of 2019 are summarized in the following table:

Three Months Ended

 

Increase/(Decrease)

September 30, 2019

 

June 30, 2019

 

in balance

Balance

 

Yield (1)

 

Balance

 

Yield (1)

 

$

 

%

(dollars in thousands)
Average Loans and Lease, net of unearned income, by type:
Real estate - commercial mortgage

$

6,489,456

4.57%

$

6,424,213

4.67%

$

65,243

 

1.0

%

Commercial - industrial, financial and agricultural

 

4,414,992

4.56%

 

4,440,860

4.73%

 

(25,868

)

(0.6

%)

Real estate - residential mortgage

 

2,512,899

4.06%

 

2,366,685

4.09%

 

146,214

 

6.2

%

Real estate - home equity

 

1,364,161

5.27%

 

1,404,141

5.35%

 

(39,980

)

(2.8

%)

Real estate - construction

 

905,060

4.68%

 

943,080

5.29%

 

(38,020

)

(4.0

%)

Consumer

 

457,524

4.36%

 

445,666

4.38%

 

11,858

 

2.7

%

Equipment lease financing

 

277,555

4.41%

 

279,619

4.45%

 

(2,064

)

(0.7

%)

Other

 

14,860

N/A

 

11,812

N/A

 

3,048

 

25.8

%

 
Total Average Loans and leases, net of unearned income

$

16,436,507

 

4.55%

 

$

16,316,076

 

4.69%

 

$

120,431

 

 

0.7

%

 
(1) Presented on a fully-taxable equivalent basis using a 21% Federal tax rate and statutory interest expense disallowances.
 

Total average liabilities increased $386.4 million, or 2.1%, from the second quarter of 2019, with a $575.2 million, or 3.5%, increase in average deposits being partially offset by a $209.2 million, or 19.9%, decrease in average Federal Home Loan Bank (FHLB) advances and long-term debt. Average deposits and interest rates, by type, for the third quarter of 2019 in comparison to the second quarter of 2019 are summarized in the following table:

Three Months Ended

 

Increase/(Decrease)

September 30, 2019

 

June 30, 2019

 

in balance

Balance

 

Rate

 

Balance

 

Rate

 

$

 

%

(dollars in thousands)
Average Deposits, by type:
Noninterest-bearing demand

$

4,247,820

- %

$

4,200,810

- %

$

47,010

1.1%

Interest-bearing demand

 

4,448,112

0.82%

 

4,186,280

0.78%

 

261,832

6.3%

Savings and money market deposits

 

5,026,316

0.87%

 

4,925,788

0.86%

 

100,528

2.0%

Total average demand and savings

 

13,722,248

0.58%

 

13,312,878

0.56%

 

409,370

3.1%

Brokered deposits

 

253,426

2.40%

 

246,154

2.58%

 

7,272

3.0%

Time deposits

 

2,974,993

1.86%

 

2,816,424

1.74%

 

158,569

5.6%

 
Total Average Deposits

$

16,950,667

0.84%

$

16,375,456

0.80%

$

575,211

3.5%

 

Asset Quality

The provision for credit losses for the third quarter of 2019 was $2.2 million, down from $5.0 million for the second quarter of 2019.

Non-performing assets were $143.7 million, or 0.66% of total assets, at September 30, 2019, compared to $155.0 million, or 0.73% of total assets, at June 30, 2019 and $130.8 million, or 0.64% of total assets, at September 30, 2018.

Annualized net charge-offs for the quarter ended September 30, 2019 were 0.15% of total average loans, compared to net recoveries of 0.04% for the quarter ended June 30, 2019. The allowance for credit losses as a percentage of non-performing loans was 127% at September 30, 2019, compared to 120% at June 30, 2019.

Non-interest Income

Non-interest income in the third quarter of 2019, excluding investment securities gains, was $55.3 million, an increase of $1.2 million, or 2.2%, in comparison to the second quarter of 2019 and an increase of $4.3 million, or 8.4%, compared to the third quarter of 2018.

Consumer banking income increased, driven by growth in card income. Commercial banking income decreased slightly as higher commercial loan interest rate swap fees were offset by declines in merchant and card income and Small Business Administration (SBA) loan sale gains. Other income increased $595,000 mainly due to earnings on additional investments in bank-owned life insurance.

During the third quarter of 2019, Fulton completed a balance sheet restructuring involving the sale of approximately $400 million of investment securities and a corresponding prepayment of FHLB advances. As a result of these transactions, $4.5 million of investment securities gains were realized during the quarter.

Non-interest Expense

Non-interest expense was $146.8 million in the third quarter of 2019, an increase of $2.6 million, or 1.8%, compared to the second quarter of 2019 and an increase of $11.4 million, or 8.4%, compared to the third quarter of 2018.

Expenses incurred in the third quarter of 2019 related to the consolidation of the remaining subsidiary banks were comparable to the prior quarter, totaling approximately $5.2 million, primarily in outside services and other expenses. Increases were realized in other expenses, including approximately $4.3 million of penalties related to the prepayment of certain FHLB advances in conjunction with the previously mentioned balance sheet restructuring. These increases were partially offset by decreases in occupancy costs and FDIC insurance due to the recognition of assessment credits of $2.6 million in the third quarter of 2019.

Income Tax Expense

The effective income tax rate for the third quarter of 2019 was 13.9%, as compared to 14.2% for the second quarter of 2019.

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

Safe Harbor Statement

This news 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, 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, they 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, 2018 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, which have been filed with the Securities and Exchange Commission and are available in the Investor Relations section of the Corporation's website (www.fult.com) and on the Securities and Exchange Commission's website (www.sec.gov).

Non-GAAP Financial Measures

The Corporation uses certain non-GAAP financial measures in this earnings release. These non-GAAP financial measures are reconciled to the most comparable GAAP measures in tables at the end of this release.

FULTON FINANCIAL CORPORATION
SUMMARY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
in thousands, except per-share data and percentages

Three Months Ended

Sep 30

 

Jun 30

 

Mar 31

 

Dec 31

 

Sep 30

2019

 

2019

 

2019

 

2018

 

2018

Ending Balances
Investments

$

2,705,610

$

2,853,358

$

2,748,249

$

2,686,973

$

2,635,413

Loans, net of unearned income

 

16,686,866

 

16,368,458

 

16,262,633

 

16,165,800

 

15,925,093

Total assets

 

21,703,618

 

21,308,670

 

20,974,649

 

20,682,152

 

20,364,810

Deposits

 

17,342,717

 

16,388,895

 

16,377,978

 

16,376,159

 

16,249,014

Shareholders' equity

 

2,324,016

 

2,308,798

 

2,301,019

 

2,247,573

 

2,283,014

 
Average Balances
Investments

$

2,829,672

$

2,790,392

$

2,699,130

$

2,646,266

$

2,596,414

Loans, net of unearned income

 

16,436,507

 

16,316,076

 

16,194,375

 

15,965,637

 

15,862,143

Total assets

 

21,457,800

 

21,057,030

 

20,690,365

 

20,512,130

 

20,273,232

Deposits

 

16,950,667

 

16,375,456

 

16,275,633

 

16,413,066

 

15,967,234

Shareholders' equity

 

2,315,585

 

2,301,258

 

2,265,097

 

2,281,669

 

2,269,093

 
Income Statement
Net interest income

$

161,260

$

164,544

$

163,315

$

162,944

$

160,127

Provision for credit losses

 

2,170

 

5,025

 

5,100

 

8,200

 

1,620

Non-interest income

 

59,813

 

54,315

 

46,751

 

49,523

 

51,033

Non-interest expense

 

146,770

 

144,168

 

137,824

 

140,685

 

135,413

Income before taxes

 

72,133

 

69,666

 

67,142

 

63,582

 

74,127

Net income

 

62,108

 

59,779

 

56,663

 

58,083

 

65,633

Pre-provision net revenue(1)

 

76,741

 

76,114

 

73,775

 

78,320

 

77,370

 
Per Share
Net income (basic)

$

0.38

$

0.36

$

0.33

$

0.33

$

0.37

Net income (diluted)

$

0.37

$

0.35

$

0.33

$

0.33

$

0.37

Cash dividends

$

0.13

$

0.13

$

0.13

$

0.16

$

0.12

Tangible common equity(1)

 

10.91

 

10.63

 

10.39

 

10.08

 

9.95

Weighted average shares (basic)

 

165,324

 

168,343

 

169,884

 

174,571

 

175,942

Weighted average shares (diluted)

 

166,126

 

169,168

 

170,909

 

175,473

 

177,128

 
Asset Quality
Net charge-offs (recoveries) to average loans (annualized)

 

0.15%

 

-0.04%

 

0.10%

 

0.17%

 

0.08%

Non-performing loans to total loans

 

0.81%

 

0.90%

 

0.85%

 

0.86%

 

0.75%

Non-performing assets to total assets

 

0.66%

 

0.73%

 

0.70%

 

0.73%

 

0.64%

Allowance for credit losses to loans outstanding

 

1.04%

 

1.08%

 

1.05%

 

1.05%

 

1.05%

Allowance for loan losses to loans outstanding

 

1.00%

 

1.04%

 

1.00%

 

0.99%

 

0.99%

Allowance for credit losses to non-performing loans

 

127%

 

120%

 

123%

 

121%

 

140%

Allowance for loan losses to non-performing loans

 

122%

 

115%

 

117%

 

115%

 

131%

Non-performing assets to tangible shareholders' equity and allowance for credit losses(1)

 

7.32%

 

7.94%

 

7.63%

 

7.97%

 

6.81%

 
 
Profitability
Return on average assets

 

1.15%

 

1.14%

 

1.11%

 

1.12%

 

1.28%

Return on average shareholders' equity

 

10.64%

 

10.42%

 

10.15%

 

10.10%

 

11.48%

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

 

14.03%

 

13.60%

 

13.28%

 

13.17%

 

14.99%

Net interest margin

 

3.31%

 

3.44%

 

3.49%

 

3.44%

 

3.42%

Efficiency ratio(1)

 

63.6%

 

64.2%

 

63.9%

 

62.2%

 

62.5%

 
Capital Ratios
Tangible common equity ratio(1)

 

8.45%

 

8.54%

 

8.64%

 

8.52%

 

8.83%

Tier 1 leverage ratio(2)

 

8.47%

 

8.68%

 

8.92%

 

9.01%

 

9.34%

Common equity Tier 1 capital ratio(2)

 

9.64%

 

9.96%

 

10.16%

 

10.22%

 

10.80%

Tier 1 capital ratio(2)

 

9.64%

 

9.96%

 

10.16%

 

10.22%

 

10.80%

Total risk-based capital ratio(2)

 

12.02%

 

12.44%

 

12.63%

 

12.75%

 

13.34%

 
 
(1) Please refer to the calculation on the page titled “Reconciliation of Non-GAAP Measures” at the end of this document.
(2) Regulatory capital ratios as of September 30, 2019 are preliminary and prior periods are actual.
 
FULTON FINANCIAL CORPORATION
CONDENSED CONSOLIDATED ENDING BALANCE SHEETS (UNAUDITED)
dollars in thousands

 

 

 

 

 

 

 

 

 

 

% Change from

Sep 30

 

Jun 30

 

Mar 31

 

Dec 31

 

Sep 30

 

Jun 30

 

Sep 30

2019

 

2019

 

2019

 

2018

 

2018

 

2019

 

2018

 
ASSETS
 
Cash and due from banks

$

120,671

 

$

107,091

 

$

115,884

 

$

103,436

 

$

90,361

 

12.7

%

33.5

%

Other interest-earning assets

 

572,499

 

 

488,968

 

 

411,037

 

 

421,534

 

 

388,256

 

17.1

%

47.5

%

Loans held for sale

 

33,945

 

 

45,754

 

 

27,768

 

 

27,099

 

 

27,525

 

(25.8

%)

23.3

%

Investment securities

 

2,705,610

 

 

2,853,358

 

 

2,748,249

 

 

2,686,973

 

 

2,635,413

 

(5.2

%)

2.7

%

Loans, net of unearned income

 

16,686,866

 

 

16,368,458

 

 

16,262,633

 

 

16,165,800

 

 

15,925,093

 

1.9

%

4.8

%

Allowance for loan losses

 

(166,135

)

 

(170,233

)

 

(162,109

)

 

(160,537

)

 

(157,810

)

(2.4

%)

5.3

%

Net loans

 

16,520,731

 

 

16,198,225

 

 

16,100,524

 

 

16,005,263

 

 

15,767,283

 

2.0

%

4.8

%

Premises and equipment

 

237,344

 

 

243,300

 

 

239,004

 

 

234,529

 

 

231,236

 

(2.4

%)

2.6

%

Accrued interest receivable

 

60,447

 

 

62,984

 

 

62,207

 

 

58,879

 

 

58,584

 

(4.0

%)

3.2

%

Goodwill and intangible assets

 

534,178

 

 

535,249

 

 

535,356

 

 

531,556

 

 

531,556

 

(0.2

%)

0.5

%

Other assets

 

918,193

 

 

773,741

 

 

734,620

 

 

612,883

 

 

634,596

 

18.7

%

44.7

%

 
Total Assets

$

21,703,618

 

$

21,308,670

 

$

20,974,649

 

$

20,682,152

 

$

20,364,810

 

1.9

%

6.6

%

 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Deposits

$

17,342,717

 

$

16,388,895

 

$

16,377,978

 

$

16,376,159

 

$

16,249,014

 

5.8

%

6.7

%

Short-term borrowings

 

832,860

 

 

1,188,390

 

 

829,016

 

 

754,777

 

 

485,565

 

(29.9

%)

71.5

%

Other liabilities

 

477,311

 

 

435,171

 

 

401,324

 

 

311,364

 

 

355,102

 

9.7

%

34.4

%

FHLB advances and long-term debt

 

726,714

 

 

987,416

 

 

1,065,312

 

 

992,279

 

 

992,115

 

(26.4

%)

(26.8

%)

 
Total Liabilities

 

19,379,602

 

 

18,999,872

 

 

18,673,630

 

 

18,434,579

 

 

18,081,796

 

2.0

%

7.2

%

 
Shareholders' equity

 

2,324,016

 

 

2,308,798

 

 

2,301,019

 

 

2,247,573

 

 

2,283,014

 

0.7

%

1.8

%

 
Total Liabilities and Shareholders' Equity

$

21,703,618

 

$

21,308,670

 

$

20,974,649

 

$

20,682,152

 

$

20,364,810

 

1.9

%

6.6

%

 
LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL:
 

Loans, by type:

Real estate - commercial mortgage

$

6,604,634

 

$

6,497,973

 

$

6,428,688

 

$

6,434,285

 

$

6,337,984

 

1.6

%

4.2

%

Commercial - industrial, financial and agricultural

 

4,494,496

 

 

4,365,248

 

 

4,429,538

 

 

4,404,548

 

 

4,288,823

 

3.0

%

4.8

%

Real estate - residential mortgage

 

2,570,793

 

 

2,451,966

 

 

2,313,908

 

 

2,251,044

 

 

2,173,548

 

4.8

%

18.3

%

Real estate - home equity

 

1,346,115

 

 

1,386,974

 

 

1,413,500

 

 

1,452,137

 

 

1,469,152

 

(2.9

%)

(8.4

%)

Real estate - construction

 

913,644

 

 

922,547

 

 

953,087

 

 

916,599

 

 

979,857

 

(1.0

%)

(6.8

%)

Consumer

 

464,213

 

 

452,874

 

 

433,545

 

 

419,186

 

 

390,708

 

2.5

%

18.8

%

Leasing and other

 

292,971

 

 

290,876

 

 

290,367

 

 

288,001

 

 

285,021

 

0.7

%

2.8

%

 
Total Loans, net of unearned income

$

16,686,866

 

$

16,368,458

 

$

16,262,633

 

$

16,165,800

 

$

15,925,093

 

1.9

%

4.8

%

 

Deposits, by type:

Noninterest-bearing demand

$

4,240,478

 

$

4,226,404

 

$

4,255,043

 

$

4,310,105

 

$

4,216,064

 

0.3

%

0.6

%

Interest-bearing demand

 

4,771,109

 

 

4,083,615

 

 

4,207,442

 

 

4,240,974

 

 

4,289,181

 

16.8

%

11.2

%

Savings and money market accounts

 

5,094,387

 

 

4,938,998

 

 

4,907,346

 

 

4,926,937

 

 

4,878,982

 

3.1

%

4.4

%

Total demand and savings

 

14,105,974

 

 

13,249,017

 

 

13,369,831

 

 

13,478,016

 

 

13,384,227

 

6.5

%

5.4

%

Brokered deposits

 

256,870

 

 

246,116

 

 

251,395

 

 

176,239

 

 

164,601

 

4.4

%

56.1

%

Time deposits

 

2,979,873

 

 

2,893,762

 

 

2,756,752

 

 

2,721,904

 

 

2,700,186

 

3.0

%

10.4

%

 
Total Deposits

$

17,342,717

 

$

16,388,895

 

$

16,377,978

 

$

16,376,159 ...