Operating earnings per share (EPS): $0.50 per diluted share.
Net operating income: $91.3 million.
Loan growth: $70 million or 1% per annum.
Deposit growth: $745 million or 12% p.a., excluding a planned reduction of $153 million in intermediary deposits.
Net interest income: Increased $16 million in the consolidated quarter.
Net interest margin: increased by 6 basis points to 3.49%.
Non-interest income: Excluding bargain purchase gain adjustments, increased $1.5 million in the trailing quarter.
Operating non-interest expense: $1.3 million or 2.7% annual increase.
Reserve expense: decreased to $11.9 million.
Loan-to-deposit ratio: 92.4%.
Net charge-off: $11 million or 18 basis points.
Non-performing loans: increased $30 million or 12 basis points to 0.84% of total loans.
Wealth Management assets under management (AUM): Approximately $16 billion.
Total deposit costs: increased by 10 basis points to 2.24% in the consolidated quarter.
2024 operating expense guidance: $750 million to $770 million.
2024 effective tax rate guidance: 16% to 18%.
Release date: October 16, 2024
For a complete record of financial statements, see Complete Record of Financial Statements.
good points
Fulton Financial Corp. (NASDAQ:FULT) demonstrated strong financial performance, reporting record operating income of $0.50 per diluted share in the third quarter.
Deposit growth exceeded expectations, driven by Republic’s deposit portfolio, which grew by 12% annually excluding brokered deposits.
Net interest income and net interest margin both exceeded expectations, with net interest income increasing $16 million and net interest margin increasing 6 basis points.
The company successfully integrated Republic Bank, achieved significant cost savings, and expects to realize full integration benefits by the end of the year.
The Fulton First initiative is well underway, with strategic realignments and leadership appointments aimed at increasing growth and efficiency.
Minus points
Loan growth was modest at $70 million or 1% annually, slightly below recent periods, due in part to withdrawals from the indirect auto financing channel.
Bad loans rose by $30 million, raising concerns about some borrowers struggling in the high interest rate environment.
Non-interest operating expenses increased $1.3 million, reflecting the full quarter of Republic expenses, despite lower Fulton organic expenses.
Despite efforts to manage deposit costs, the company expects net interest income to continue to be under pressure due to anticipated interest rate cuts.
Provision expense remains relatively high at $11.9 million, demonstrating continued challenges in credit quality management.
story continues
Q&A highlights
Q: Can you explain why net interest income (NII) is expected to be at the high end of the range despite the expected rate cut? A: Chief Financial Officer Richard Cramer explained that while September’s early rate cut will have a short-term impact, the company’s sensitivity to interest rate changes has been significantly reduced. Republic’s transactions and adjustments to its investment securities portfolio have reduced asset sensitivity by approximately 45% since the beginning of the year, moving the company closer to a neutral position.
Q: Regarding the Fulton First initiative, are the $25 million in savings through 2025 all cost savings, or do they also include revenue improvements? A: Curtis Myers, Chairman and CEO clarified that the $25 million impact in 2025 is purely due to cost savings as part of the Fulton First initiative. This initiative is both a growth and efficiency strategy, and revenue targets will be incorporated into future guidance.
Q: How should we think about the spending outlook for 2025 compared to 2024? A: Richard Kramer said that 2025 operating expenses will be 2024 total excluding core deposit intangible amortization. The company stated that it is expected to be roughly in line with operating expenses. Savings from the Fulton First initiative will be realized in phases throughout 2025.
Q: What seasonal impact do you expect on deposits in the fourth quarter? A: Curtis Myers expects to increase regional It noted that there would be a seasonal outflow of about $300 million in municipal deposits.
Q: Given the current neutral interest rate position, when do you expect net interest income (NII) to bottom? A: Governor Curtis Myers has said that the timing of NII’s bottom will depend on future rate cuts. suggested. The company has moved to a more neutral position to minimize earnings volatility, but the exact timing will depend on the pace and magnitude of interest rate changes.
For a complete record of financial statements, see Complete Record of Financial Statements.
This article first appeared on GuruFocus.
