Fulton Financial Fourth Quarter 2025 Earnings Call - Record 2025 EPS, mid-single-digit loan growth expected as strategic runoffs ease

Conference Call Operator: Good day, and thank you for standing by. Welcome to the Fulton Financial Fourth Quarter 2025 Results Conference Call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Pat Lafferty, Investor Relations Manager. Please go ahead.

Pat Lafferty, Investor Relations Manager, Fulton Financial: Good morning, and thanks for joining us for Fulton Financial’s conference call and webcast to discuss our earnings for the fourth quarter ending December 31st, 2025. Your host for today’s conference call is Curt Myers, Chairman, Chief Executive Officer, and President. Joining Curt is Rick Kramer, 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 fulton.com by clicking on Investor Relations and then on News. The slides can also be found on the Events and Presentations page under Investor Relations on our website. On this call, representatives of Fulton may make forward-looking statements with respect to Fulton’s financial condition, results of operations, and business.

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, and actual results could differ materially. Please refer to the safe harbor statement on forward-looking statements in our earnings release and on slide two of today’s presentation for additional information regarding these risks, uncertainties, and other factors. Fulton undertakes no obligation other than as required by law to update or revise any forward-looking statements. 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 28 through 38 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.

Curt Myers, Chairman, Chief Executive Officer, and President, Fulton Financial: Thanks, Pat, and good morning, everyone. For today’s call, I’ll be providing a few high-level comments as well as some operating highlights for the full year 2025. Unless I note otherwise, comparisons I discuss are with the full year of 2024 performance. Then Rick will review our quarterly financial results and provide our 2026 operating guidance. After our prepared remarks, we’ll be happy to take any questions you may have. 2025 was another outstanding year for our company. I want to start by thanking all of our team members for their dedication to advancing our mission to change lives for the better and for generating strong operating results. Last year, we once again successfully executed on our community banking strategy and delivered value for customers, career success for employees, and meaningful operating results for shareholders.

Our goal going forward remains the same: creating long-term value by growing the company, delivering effectively for customers, and operating with excellence so that we can continue to serve all of our stakeholders. Our 2025 results were strong. Operating earnings per share of $2.16 set a new record. We also maintained a solid balance sheet and demonstrated disciplined expense management. Customer deposits grew by $449 million, and we’re seeing momentum from our enhanced deposit initiatives, which have increased customer engagement and driven a 25% growth in consumer demand deposit account openings year over year. Sales productivity is strong, and CD retention remains solid. This has resulted in good deposit growth and an ability to effectively manage cost of funds over time. Our focused and expanded business banking team has generated great results, raising over $133 million in lower-cost operating deposits.

Throughout the year, we highlighted some strategic actions that have offset organic loan growth. These actions represented more than an $800 million headwind during 2025. Even with these actions, our organic loan growth originations delivered overall net loan growth on a year-over-year basis. Over the course of 2025, we consistently drove growth in quarterly originations, creating a strong foundation for 2026 and beyond. To support this ongoing loan growth, we’ve been adding new team members. This expands our ability to serve small businesses and middle-market customers throughout the footprint. Accordingly, in 2026, we expect loan growth to return to our historical growth rates in the mid-single-digit range. We’re also pleased with our non-interest income-generating performance in 2025. When excluding the bargain purchase and investment securities gains and losses, non-interest income of $277 million was up almost 7%.

Non-interest income continues to represent more than 20% of total revenue and underscores the strength of our diversified revenue model as we’ve grown both non-interest income and net interest income at a similar pace. The drivers of non-interest income growth were broad-based. Commercial fees grew overall by 8%, led by 17% growth in cash management revenue. Fulton Financial Advisors continues to be a meaningful contributor to overall fee incomes. Wealth assets under management and administration surpassed $17 billion in 2025, and referrals from financial centers to our advisors increased 17%, or almost $50 million year over year. This strong level of activity was supported by significant new opportunities from legacy Republic First financial centers. This highlights our strategy to bring new product and value to acquired customers and grow our overall revenue base. Turning to expenses, we continue to realize benefits from strategic initiatives driving positive operating leverage for the year.

Our operating expenses grew by a modest 1.9% in 2025. When normalizing for a full year of Republic First expenses in 2024, our operating expenses would have been down 2.7% year over year, a meaningful contributor to profitability and efficiency. Our profitability, liquidity profile, and capital position all further improved during 2025. Our operating return on assets improved by 17 basis points to 1.28% as we continue to drive greater efficiencies across the bank. We ended the year with a loan-to-deposit ratio of 91%, allowing for continued balance sheet flexibility. Our teams worked diligently to grow balances while also managing deposit costs. Our net interest margin was strong, increasing 9 basis points to 3.51% from the prior year. Net interest margin ended the fourth quarter at an even stronger position of 3.59% despite several Fed rate cuts.

The consistent increase in net interest margin throughout the year demonstrated our relatively neutral interest rate profile. Our strong earnings also supported higher capital ratios, helping to grow tangible book value per share by 15%. Our capital ratios ended the year at the highest level seen in more than a decade, even after we increased our dividend and opportunistically repurchased $59 million of common stock. Credit metrics meaningfully improved throughout 2025. Non-performing assets as a percent of total assets declined 11 basis points, ending the year at 58 basis points. Net charge-offs for the year remained historically low at 21 basis points as a percentage of average loans. Our allowance for loan losses ended the year at 1.51% of total loans. We believe we are well-positioned moving forward.

In November, we announced the acquisition of Blue Foundry Bancorp, a strategic move that strengthens our footprint and reinforces our community banking model. We’re excited to have our new team members and customers join our organization as we expand our presence in several attractive markets. This expansion positions us to deliver even greater value to our customers and shareholders as we leverage shared strengths and deepen relationships in these communities. Looking forward, we’re excited about the opportunities ahead. We focus on making 2026 a year of continued strength, building on our momentum, driving growth, and delivering strong results for all stakeholders. Now I’ll turn the call over to Rick to discuss our quarterly financial results and provide our 2026 operating guidance.

Rick Kramer, Chief Financial Officer, Fulton Financial: Thank you, Curt, and good morning. Unless I note otherwise, the quarterly comparisons I discussed are with the third quarter of 2025. Loan and deposit growth numbers I referenced are annualized percentage on a linked quarter basis. Starting on slide five, operating earnings per diluted share were $0.55, or $99.4 million of operating net income available to common shareholders. Net interest income grew 2.8% annualized from the previous quarter, while NIM expanded by two basis points despite 75 basis points of Fed rate cuts from September through December. Modest asset growth and positive credit trends combined with prudent management of deposit costs and a relatively neutral interest rate profile drove much of the linked quarter performance. Total period-end loans increased $103 million during the quarter. Growth was driven across most loan categories and offset by declines in construction balances.

As discussed throughout 2025, we continue to proactively work certain credits out of portfolio that don’t align to our long-term strategy. During the quarter, we saw runoff of approximately $30 million of indirect auto and resolved an additional $211 million of adversely rated loans. In total, these strategic actions aggregated to a more than $800 million headwind for growth in 2025. Apart from the continued planned runoff of indirect auto, we expect the impact of these activities to moderate as we move into 2026. Accordingly, we expect to revert towards our long-term historical organic loan growth trends of mid-single digits. Total deposits grew $257 million, or 3.9%. Growth was relatively balanced across categories as interest-bearing deposit balances grew by $137 million and non-interest-bearing grew by $120 million. Our consumer business was a key driver of deposit growth. Commercial deposits and the number of commercial accounts remained stable.

However, this segment did see a rebound in non-interest-bearing balances of $40 million. Municipal deposits decreased $254 million, while other wholesale funding, including brokers, declined $29 million. Finally, our loan-to-deposit ratio was unchanged, ending the quarter at 91%. Moving to the investment portfolio, securities decreased $212 million as prepayments accelerated from previous periods. Investments as a percentage of total assets were 15%, a level that continues to provide balance sheet optionality moving forward. AOCI improved by $29 million. Net interest income on a non-FTE basis was $266 million, a $1.8 million increase linked quarter as net interest margin expanded two basis points to 3.59%. Loan yields declined 11 basis points to 5.82%. Fixed-rate asset repricing continues to provide some benefit to loan yields in the face of declining short-term rates, as illustrated on slide 22 of our earnings presentation.

Over the next 12 months, we have approximately $5.7 billion of fixed and adjustable rate earning assets subject to repricing, currently at a blended yield of 5.01%. Of note, accretion interest was down $2.2 million linked quarter to $10.5 million. For the quarter, our average cost of total deposits decreased 10 basis points to 1.86%, while our total cost of funds declined 13 basis points due to quarterly wholesale repositioning aided by customer deposit growth. Through the current rate-cutting cycle, our cumulative interest-bearing deposit beta has been 30%, while our total deposit beta has been 20%. Our deposit pricing strategy continues to balance the desire to fund future balance sheet growth while defending margin. Turning to slide seven, non-interest income for the quarter was stable at $70 million. While consolidated fees were flat, we saw strong linked quarter growth within our wealth, capital markets, and FDA businesses.

Non-interest income as a percentage of total revenue equaled 21% for the fourth quarter. Moving to slide eight, non-interest expense on an operating basis was $204 million, an increase of $12.7 million linked quarter. This increase was mostly attributable to salaries and benefits driven by higher accrual expense of $7.5 million related to variable compensation due to continued strong annual performance. Other noteworthy items in the quarter amounted to $2.5 million and included unseasonably high snow removal costs and elevated healthcare claims. Absent these expenses, our quarterly and annual expenses would have been within our previously expected ranges. Of note, core salaries increased less than 1% from the prior quarter. Items excluded from operating expenses as listed on slide eight include charges of $5.4 million of core deposit and tangible amortization, $2.8 million of Fulton First implementation and asset disposals, and $802,000 of acquisition-related expense.

Turning to asset quality, provision expense of $2.9 million was lower than last quarter and below our expected range. The quarterly provision was positively impacted by a $5 million recovery from a loan acquired in the Republic First Bank acquisition. As Curt mentioned, we saw positive trends throughout the book. Net charge-offs increased slightly to 24 basis points, while non-performing assets to total assets improved 5 basis points to 0.58%. Our allowance for credit losses to total loans ratio decreased from 1.57% to 1.51%, while our ACL to non-performing loan coverage increased to 198%. Slide 10 shows a snapshot of our capital base. We maintain a healthy capital position that provides us with balance sheet flexibility. During the quarter, we repurchased 1.1 million shares at a weighted average cost of $18.34.

In December, our board approved a new repurchase authorization of $150 million, which is in effect through January of 2027. Inclusive of share repurchases, internal capital generation was roughly up to $77 million. Our tangible common equity to tangible asset ratio increased to 8.5%, while CET1 increased to 11.8%. On slide 11, we are providing operating guidance for 2026. Our guidance assumes one 25 basis points Fed cut in March and assumes our previously announced acquisition of Blue Foundry Bancorp closes early in Q1 2026. Our 2026 guidance is as follows: Net interest income of $1,120 million-$1,140 million. Our NII guide assumes an annual FTE adjustment of $16 million-$18 million. Loan loss provision expense of $55 million-$75 million. Non-interest income of $285 million-$300 million. Operating expense of $800 million-$835 million. An effective tax rate of 18.5%-19.5%.

Finally, non-operating expenses of approximately $60 million, which includes $22 million of CDI and $36 million of merger-related costs. With that, we’ll now turn the call over to the operator for any questions.

Conference Call Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Daniel Tamayo with Raymond James. Your line is now open.

Daniel Tamayo, Analyst, Raymond James: Thank you. Good morning, Curt. Good morning, Rick.

Rick Kramer, Chief Financial Officer, Fulton Financial: Good morning, Dan.

Daniel Tamayo, Analyst, Raymond James: Yeah. Maybe starting on the loan growth guide, the mid-single digits in 2026. Appreciate your comments around the lenders that were hired recently and some of the headwinds that were there in 2025 that are no longer there in 2026. Maybe you could quantify that a bit for us, just give us a sense for what that headwind won’t be and if there’s a way you can quantify the lenders, and then if there’s any number you could put around what you’re assuming in pay downs as well. Thank you very much.

Rick Kramer, Chief Financial Officer, Fulton Financial: Yeah, Danny, just a little color on that overall. We look back on last year, we had more than $800 million of headwinds around strategic actions that we took, de-risk the portfolio, get the portfolio where we wanted it to be. So we see those things moderating, and I think that’s a big if you look back on last year, we feel it was about 3.5% organic growth, eliminating those headwinds. So just that really gets us back close to those long-term trends. And then as we get the increased productivity, additional people in really every area of the company from our Fulton First initiative, we’re really building productivity. So we’ve added bankers in commercial banking, business banking, SBA. We’re moving all of those teams forward just from an overall count, and we’re doing that kind of each quarter. So it’s not big teams that we’re adding.

It’s a person or two or a small team, and we just continue to build that momentum. If you look at underlying originations for each of the quarters this year, we built momentum. Originations were up each quarter. The pipeline is up year over year as well. So as we stand here today, we’re confident getting back into that mid-single digit range and then continuing that momentum to move it forward.

Daniel Tamayo, Analyst, Raymond James: Thanks, Curt. And any commentary on the pay downs assumptions relative to where you’ve been?

Rick Kramer, Chief Financial Officer, Fulton Financial: Yeah. So as we look forward, obviously, we roll the maturities forward. We make assumptions on just business happening. So we really don’t see just the normal portfolio pay downs and prepayments really any different year over year. Again, in 2025, it was really those strategic actions that we took that were the headwinds. So we really don’t see underlying changes in those prepayment activities. We feel pretty good about the ability to forecast those.

Daniel Tamayo, Analyst, Raymond James: Okay. Terrific. And then maybe just a clarification on the loss provision guidance as to how you’re getting there. Quick math for me as I’m working through my model, it looks like either the net charge-offs would need to come down off the fourth quarter level or the reserves would need to come down. Maybe just a little color on how you’re thinking about the provision next year.

Rick Kramer, Chief Financial Officer, Fulton Financial: Yeah, Danny, it’s Rick. Yeah, look, I think all else equal, obviously, thinking about mid-single digits growth, and you’re kind of backing into it, in a stable environment, you’d consider continue to see allowance kind of drift a little bit lower, like I said, assuming a stable credit environment and a stable economic environment. So you’re right. I think from a charge-off perspective, relatively flat with what we’ve seen this year is what we’re expecting.

Daniel Tamayo, Analyst, Raymond James: Okay. Very helpful. Thanks for all the color, guys. Appreciate it.

Rick Kramer, Chief Financial Officer, Fulton Financial: Thanks, Dan.

Conference Call Operator: Our next question comes from the line of David Bishop with Hovde Group LLC. He’ll let us know open.

David Bishop, Analyst, Hovde Group LLC: Yeah. Good morning, gentlemen.

Rick Kramer, Chief Financial Officer, Fulton Financial: Good morning.

David Bishop, Analyst, Hovde Group LLC: Curious, as you talk about or think about the mid-single digit growth rate next year, just curious, do you think the distribution of the loan mix changes materially in terms of the new hire? Do you think that’s going to come more out of the C&I book versus CRE? Just curious how you’re thinking about production next year.

Rick Kramer, Chief Financial Officer, Fulton Financial: Yeah. So overall, what served us really well over the long term is having a diversified loan book. So our strategy is to grow each of those segments. They do grow at different paces over time. We think we have opportunity in CRE, C&I, business banking, all of those categories. We feel that that could be drivers to the accelerated organic growth. And we have a balance sheet mix that we can really lean in and grow any of those at normal pace or even accelerated pace. You look at our CRE concentration. It’s below 200%. We’re selective, but it’s a good position to be in, and we really want to grow all categories. But we think specifically in those three, we can do a little outsized growth year over year.

David Bishop, Analyst, Hovde Group LLC: Got it. Then in terms of the OpEx guide, you mentioned some of the hiring you’ve done here. Sort of excluding the Blue Foundry deal, do you think you’re going to be more aggressive maybe in some of the new New Jersey markets in terms of looking to add bankers up in that market relative to maybe some of the legacy Pennsylvania footprint?

Rick Kramer, Chief Financial Officer, Fulton Financial: Well, specifically on the guide on expenses, we’re always active in recruiting talented people to join the team. So there’s really nothing specific in the guide other than normal opportunistic hires in the marketplace. That’s an ongoing effort really in all years. So we have that baked into the normal run rate around continuing to be able to add to the team. So there’s nothing in the guide that’s outsized in expenses for new hires.

David Bishop, Analyst, Hovde Group LLC: Got it. Appreciate the color.

Conference Call Operator: Thank you. As a reminder, to ask a question at this time, please press star 11 on your touch-tone telephone. Our next question comes from the line of Matthew Breece with Stephens Inc. Please go ahead.

Matthew Breece, Analyst, Stephens Inc: Hey, good morning.

Rick Kramer, Chief Financial Officer, Fulton Financial: Morning, Matt.

Matthew Breece, Analyst, Stephens Inc: Morning, Matt. I was hoping you could help us out with deposits. We’d love your thoughts around deposit growth for this year, including some composition thoughts. And then, Rick, if you have it, either the period end or most recent cost of deposits just to give us some sense of trajectory on the overall cost of funds.

Rick Kramer, Chief Financial Officer, Fulton Financial: Yeah, Matt. Just a little bit on deposit growth. We feel we do have some good momentum. We reference some of the account opening and customer engagement things that we’ve been doing that are driving momentum. Again, it’s consumer, small business are really outsized there. We referenced the Treasury performance. We referenced it in a fee income basis, 17%, but that’s a really good generator of low-cost operating deposits. So really, in all those categories, consumer, just core consumer, kind of always building that. Really good momentum in business banking. And then on Treasury and cash management on the corporate side, we have some outpaced momentum there as well. So those are the categories that we feel really good about the team’s driving growth.

Matthew Breece, Analyst, Stephens Inc: Yeah, Matt. And then just on your spot question, we finished December at 1.80%, so about six basis points lower than the quarterly average.

David Bishop, Analyst, Hovde Group LLC: Got it. Okay. And then, Curt, I heard you on the pipeline sound strong. I would love any sort of percentage comparison. I think you said it was up year over year. And then I heard you talk a little bit about kind of more diversified loan growth as you integrate Blue Foundry. Curious geography-wise, given their geography in northern New Jersey, what are your thoughts on kind of inching into the metro New York City market for commercial real estate and just some of your thoughts around that?

Rick Kramer, Chief Financial Officer, Fulton Financial: Yeah. So first, on the pipeline, so I was specifically referencing the commercial pipeline, and that’s up more than 10% year over year. So it’s a marked improvement. We’ve seen a little improvement in the pull-through rate too. You’ve heard me talk about that before, not just things in the pipeline, but customers actually spending the money and moving forward with the project or purchase. We see a little positive momentum there as well. So a couple of those factors, I think, really help us be confident in that momentum as we move forward. Then on geography, we really like the northern New Jersey market. We’re in that market. This acquisition fills out, gives us a good franchise there. Crossing the state lines there is not within our strategy.

David Bishop, Analyst, Hovde Group LLC: Great. And then last one, I guess for Rick or Curt, just a couple of nitpicky questions on fee income. Could you help me out with, first of all, your thoughts around commercial interest rate swap income? It’s a bit all over the place, but the fourth quarter was stronger than I was anticipating. What’s a good run rate there, or what are you expecting there? And then the other one is just other fee income dropped quite a bit this quarter, and I’m curious what you’re expecting for run rate there as well.

Rick Kramer, Chief Financial Officer, Fulton Financial: Matt, first on the swap income, that really tracks with originations, and it’s typically the larger deals that would have a swap versus a fixed rate. So that you’re right, that does bounce from quarter to quarter, and it really ties and correlates to originations and some larger originations. So it’s natural, as you’ve seen, growth and origination accelerating the fourth quarter. That’s pretty in line with what we would expect from the derivatives too.

Matthew Breece, Analyst, Stephens Inc: Yeah. And Matt, on the other component, I would say it’s a little bit in that other really driving, call it that, quarterly volatility is income from equity method investments. So over the course of the year, we had a couple that improved in valuation, and then the fourth quarter, we had one that declined about, well, the net of it was around $1.7 million. So probably $2.5 million is a reasonable level for that on a normalized basis.

David Bishop, Analyst, Hovde Group LLC: Great. I’ll leave it there. Thank you.

Rick Kramer, Chief Financial Officer, Fulton Financial: Thank you. That’s it.

Conference Call Operator: Thank you. And I’m currently showing no further questions at this time. I now would like to hand the call back over to Curt Myers for closing remarks.

Rick Kramer, Chief Financial Officer, Fulton Financial: Great. Thank you, everyone, for joining us today. Hopefully, you’ll be able to be with us when we discuss first quarter results in April. Thank you.

Conference Call Operator: This concludes today’s conference. Thank you for your participation. You may now disconnect.