Fulton Financial Corp 2026 Q3 Earnings Call

Please go ahead. Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the third quarter ending September 30th, 2026.

Your host for today's conference call is Curt Myers, Chairman, Chief Executive Officer, and President. Joining Curt is Rick Kraemer, Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These documents can be found on our website at fult.com by clicking on Investor Relations and then on News. These slides can also be found on the Events and Presentations page under Investor Relations on our website. Today's conference call will contain forward-looking statements. These statements represent our expectations about the future and are subject to risk and uncertainty. Our actual results may differ materially from these statements.

Please refer to our earnings release and related slide presentation under the heading Forward-Looking Statements for a discussion of the factors that could cause actual results to differ. In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and slides 26 through 33 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. Now I would like to turn the call over to your host, Curt Myers.

Well, thanks, Pat, and good morning, everyone. For today's call, I'll share a few details on our third quarter performance and provide some observations on current business trends. Then Rick will review our financial results in more detail and discuss our outlook for the remainder of 2026. After our prepared remarks, we'd be happy to take any questions you may have. The third quarter represented another period of strong performance for Fulton. Throughout the quarter, we supported our current customers, added new customers, executed on our strategy, and delivered value for shareholders. This all resulted in record financial results. Our strategy is centered around four priorities: grow the company, deliver effectively for customers, operate with excellence, and serve all of our stakeholders. We believe these priorities provide a disciplined framework for operating the company, and we continue to perform across each of these priority areas during the quarter.

In support of our growth objectives, we continued investing in talent and capabilities across our businesses. Year to date, we increased our commercial sales force by 14%, with over two-thirds of that growth occurring during the third quarter. These hires included experienced bankers, business development professionals who are helping expand customer relationships, complementing our strategic acquisitions in Northern New Jersey and Philadelphia. These actions, combined with ongoing investments in commercial banking capabilities, including treasury management enhancements and embedded banking solutions, are helping us win new customer relationships. This is most evident this quarter in our commercial deposit growth as we added new customers at an accelerated pace and we grew commercial deposits materially. Additionally, our process improvements are helping our team serve customers more effectively and driving meaningful efficiency gains. We've expanded the use of Salesforce AI-enabled capabilities across the organization, powered by Coworker.

Our adoption has been so effective that our progress was recognized by Salesforce at Dreamforce, where Fulton was highlighted for its innovation and partnership. These investments and enhanced usage are helping improve productivity, customer engagement, and support our long-term efficiency objectives. Collectively, these efforts contributed to another quarter of strong performance. Profitability reached a record high. Operating net income available to common shareholders increased to $119.8 million or $0.62 per diluted share. Operating PPNR increased to $156 million. Operating return on average tangible common equity improved to 15.94%, and operating return on average assets increased to 1.4%. Additionally, our efficiency ratio improved to 56.8%, reflecting our continued focus on disciplined expense management. Our balance sheet also further improved during the quarter. Customer deposits grew by approximately $1 billion, reflecting both new customer acquisition and growth within existing relationships.

This further improved our funding profile as we reduced brokered deposits and other wholesale funding. We believe this is a significant strength for the company as our diversified customer deposit base continues to provide stability and support long-term balance sheet growth. While loan growth was modest during the quarter, underlying business activity remained solid. Customer engagement was high and pipelines continued to show good momentum. Total loan originations increased 23% from the prior quarter, reflecting healthy production levels. As we look forward to 2027, we believe several of the headwinds to loan growth should abate. This, coupled with increased production from the significant investments we are making in our people, capabilities, and market presence, should accelerate growth. Our diversified business model continues to be a meaningful competitive advantage. Wealth management assets under management and administration reached a record $18.6 billion, and wealth management revenue grew more than 9% linked quarter.

Commercial, consumer, and mortgage banking fees also increased from the prior quarter, highlighting broad-based growth across our fee businesses. As a result, non-interest income remained a meaningful contributor to overall performance, representing approximately 21% of total revenue. Our capital position remained strong during the quarter. We repurchased $56.1 million of common stock, returning capital to shareholders while still maintaining capital levels that provide flexibility to support customer needs, invest in the business, and pursue strategic opportunities. Tangible common equity ended the quarter at 8.4%, primarily reflecting the impact of AOCI, while our CET1 capital ratio remains stable at 12.2%. Credit quality remained favorable during the quarter, demonstrating the strength of our underwriting and risk management practices. Asset quality metrics improved, reserve levels remained solid, and we continue to view the overall credit environment as stable. Looking ahead, we are optimistic about the opportunities in front of us.

Our diverse business mix, loyal customer base, solid balance sheet, and experienced team provide a strong foundation for continued success. Overall, we are pleased with our third quarter performance, and we believe the company is well-positioned. With that, I'll turn the call over to Rick to review our third quarter financial results in more detail.

Thank you, Curt, and good morning, everyone. Fulton delivered another quarter of solid financial performance, highlighted by continued earnings growth, healthy deposit generation, favorable credit results, and momentum across our fee-based businesses. For the third quarter, net income available to common shareholders was approximately $114.1 million or $0.59 per diluted share. Operating earnings were $119.8 million or $0.62 per diluted share, compared to $115.9 million or $0.60 per diluted share in the second quarter. The improvement in operating performance was driven primarily by higher net interest income and non-interest income and lower provision expense. Net interest income increased $5.8 million, or approximately 2% linked quarter to $290 million. Total purchase accounting accretion income was $12.9 million, consisting of $8.3 million related to the Republic acquisition and $4.6 million related to the Blue Foundry acquisition. This compares with $15.1 million in the prior quarter.

Our net interest margin was 3.58%, compared to 3.6% in the second quarter. Margin reflected lower purchase accounting accretion and the impact of carrying higher average cash balances during the quarter, which reduced margin by approximately 2 basis points. Average cash balances were approximately $1.1 billion, compared to $842 million in the second quarter. Ending loans were relatively consistent during the quarter. Total loans grew by $44 million. Consumer-related portfolios grew $107 million, while commercial balances declined by $63 million, driven primarily by declining levels of commercial construction. Deposits totaled $28.8 billion at quarter end, an increase of $571 million compared to June 30. Growth was driven by strong customer deposit inflows across our commercial and public funds businesses. Demand and savings deposits increased $879 million during the quarter, including growth of $601 million in savings deposits and $324 million in interest-bearing demand deposits.

As customer deposit balances increased almost $1 billion during the quarter, we continued to optimize the funding profile of the balance sheet. Brokered deposits declined by $428 million during the quarter, ending at $547 million, while federal home loan bank advances were reduced by $553 million and fully paid off during the quarter. Non-interest income totaled $77.2 million during the quarter. While total non-interest income declined modestly from the second quarter, the prior quarter included approximately $6.9 million of income recognized from an equity method investment that was sold in the prior quarter. Wealth management delivered another strong quarter, with revenue increasing $2.1 million linked quarter. Our commercial, consumer, and mortgage banking businesses continued to generate consistent growth. When combined with wealth, these four businesses grew at a 4% rate linked quarter or 16% annualized. Operating non-interest expense was $211.2 million, compared to $210.6 million in the prior quarter.

Items excluded from operating results included $5.6 million of intangible amortization and $1.7 million of acquisition-related expenses. Salaries and employee benefits increased during the quarter by approximately $5.6 million, primarily driven by higher incentive accruals, recruiting expense, and one additional day in the third quarter. Overall operating expenses remain within our expected range, and Blue Foundry targeted cost base remained favorable to original estimates. We continue to invest in talent across the franchise to support future growth while maintaining disciplined expense management. Credit quality remained sound during the quarter, with asset quality metrics improving linked quarter. Net charge-offs were 0.14% of average loans, compared to 0.34% in the prior quarter. While non-performing assets improved to 0.52% of total assets from 0.54%. The allowance for credit losses was 1.45% of loans, compared to 1.48% last quarter. Provision expense totaled $4.1 million, down from $4.9 million in the second quarter.