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Fulton Financial Announces Third Quarter 2021 Results

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LANCASTER, Pa., October 19, 2021--(BUSINESS WIRE)--Fulton Financial Corporation (NASDAQ:FULT) ("Fulton" or the "Corporation") reported net income available to common shareholders of $73 million, or $0.45 per diluted share, for the third quarter of 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211019006245/en/

"Fulton achieved strong financial performance during the quarter, including continued record earnings per share," said E. Philip Wenger, Chairman and CEO of Fulton Financial Corporation. "We were pleased to see areas of loan growth that we haven’t seen in previous quarters. Our core commercial and consumer businesses were solid, asset quality remained stable, and our pipelines are improving. In addition, mortgage banking delivered strong earnings and wealth management grew to record highs in income and assets under management and administration."

Net Interest Income and Balance Sheet

Net interest income for the third quarter of 2021 was $171 million, $9 million higher than the second quarter of 2021. Net interest margin for the third quarter of 2021 increased 9 basis points, to 2.82%, from 2.73% in the second quarter of 2021. The increases in net interest income and net interest margin in comparison to the second quarter of 2021, were primarily due to higher fee income recognized related to the Paycheck Protection Program ("PPP") loans, which was $18 million in the third quarter of 2021 compared to $12 million for the second quarter of 2021, as well as lower rates on deposits and solid earning asset growth.

Total average interest-earning assets for the third quarter of 2021 were $25 billion, an increase of $291 million from the second quarter of 2021, driven by growth in the residential mortgage loan portfolio, investment securities and other interest-earning assets, partially offset by a decline in PPP loans. Average Net Loans(1), which include loans originated under the PPP, were $18.4 billion, a decrease of $492 million compared to the second quarter of 2021. Average PPP loans were $0.9 billion for the third quarter of 2021 compared to $1.5 billion for the second quarter of 2021. Third quarter loan balances were impacted by $526 million of PPP loans forgiven in the third quarter of 2021.

Average loans and yields, by type, for the third quarter of 2021 in comparison to the second quarter of 2021 are summarized in the following table:

Three months ended

September 30, 2021

June 30, 2021

Growth

Balance

Yield (1)

Balance

Yield (1)

$

%

(dollars in thousands)

Average Net Loans by type:

Real estate - commercial mortgage

$

7,134,177

3.11

%

$

7,177,622

3.16

%

$

(43,445)

(0.6)

%

Commercial and industrial(2)

4,729,385

2.79

%

5,445,160

2.58

%

(715,775)

(13.1)

%

Real estate - residential mortgage

3,642,822

3.39

%

3,396,690

3.39

%

246,132

7.2

%

Real estate - home equity

1,128,076

3.68

%

1,139,558

3.71

%

(11,482)

(1.0)

%

Real estate - construction

1,085,846

3.13

%

1,054,469

3.05

%

31,377

3.0

%

Consumer

452,844

4.00

%

451,486

3.89

%

1,358

0.3

%

Equipment lease financing

247,776

3.88

%

256,248

3.74

%

(8,472)

(3.3)

%

Other(3)

(6,773)

N/A

(14,677)

N/A

7,904

53.9

%

Total Average Net Loans

$

18,414,153

3.53

%

$

18,906,556

3.32

%

$

(492,403)

(2.6)

%

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

(2) Includes average PPP loans of $0.9 billion and $1.5 billion for the three months ended September 30, 2021 and June 30, 2021, respectively.

(3) Consists of overdrafts and net origination fees and costs.

Total average liabilities increased $370 million, to $23.7 billion, in the third quarter of 2021 compared to the second quarter of 2021 driven by increases in average deposits, partially offset by a decrease in short-term borrowings. Average deposits and interest rates, by type, for the third quarter of 2021 in comparison to the second quarter of 2021 are summarized in the following table:

______________________________

(1)Loans and lease receivables, (net of unearned income)

Three months ended

September 30, 2021

June 30, 2021

Growth

Balance

Rate

Balance

Rate

$

%

(dollars in thousands)

Average Deposits, by type:

Noninterest-bearing demand

$

7,439,644

$

7,203,696

$

235,948

3.3

%

Interest-bearing demand

6,168,908

0.05

%

5,979,855

0.06

%

189,053

3.2

%

Savings

6,392,537

0.07

%

6,280,629

0.09

%

111,908

1.8

%

Total average demand and savings

20,001,089

0.04

%

19,464,180

0.05

%

536,909

2.8

%

Brokered

270,168

0.34

%

297,815

0.34

%

(27,647)

(9.3)

%

Time

1,852,223

0.95

%

2,003,606

1.09

%

(151,383)

(7.6)

%

Total Average Deposits

$

22,123,480

0.12

%

$

21,765,601

0.15

%

$

357,879

1.6

%

Asset Quality

In the third quarter of 2021, a negative provision for credit losses of $600 thousand was recognized, as compared to a negative provision for credit losses of $3.5 million recognized in the second quarter of 2021. A $7.1 million provision for credit losses was recognized in the third quarter of 2020. The negative provision for credit losses for the third quarter of 2021 was impacted by a decrease in the allowance for credit losses determined to be necessary as of the end of the third quarter of 2021, due to improvements in the economic conditions, partially offset by an increase in specific allocations within the allowance for credit losses for loans evaluated individually.

The $7.1 million provision for credit losses in the third quarter of 2020 reflected expected credit losses based on economic conditions as of the end of the third quarter of 2020, and the assessment of the estimated impacts of the COVID-19 pandemic at that time.

Non-performing assets were $152 million, or 0.58% of total assets, at September 30, 2021, compared to $157 million, or 0.60% of total assets, and $147 million, or 0.57% of total assets, at June 30, 2021 and September 30, 2020, respectively.

Annualized net charge-offs (recoveries) for the quarter ended September 30, 2021, were (0.05)% of total average loans, compared to 0.15% and (0.05)% for the quarters ended June 30, 2021 and September 30, 2020, respectively.

Non-interest Income

Non-interest income in the third quarter of 2021, excluding investment securities gains, was $63 million, an increase of $11 million, or 21%, from the second quarter of 2021, primarily resulting from increases of $6.7 million in mortgage banking income, $2.6 million in other income, and $0.9 million in wealth management income. The increase in mortgage banking income was primarily due to a $3.5 million decrease to the valuation allowance for mortgage servicing rights in the third quarter of 2021, compared to an increase of $2.2 million to the valuation allowance in the second quarter of 2021. The increase in other income was primarily due to $2.1 million of income from equity method investments.

Compared to the third quarter of 2020, non-interest income, excluding investment securities gains, in the third quarter of 2021, decreased $0.7 million, or 1%, from $63 million, primarily resulting from a $7.3 million decrease in mortgage banking income primarily due to lower loan sales, and a $2.6 million decrease in capital markets income. These decreases were partially offset by a $3.6 million increase in wealth management income and a $1.4 million increase in consumer banking income.

Non-interest Expense

Non-interest expense was $145 million in the third quarter of 2021, an increase of $3.8 million, or 3%, compared to the second quarter of 2021. The increase is due to an increase of $4.3 million in salaries and benefits during the third quarter of 2021, as compared to the second quarter of 2021.

Compared to the third quarter of 2020, non-interest expense increased $5.5 million, or 4%, in the third quarter of 2021, due to an increase of $3.5 million in salaries and employee benefits and $2.1 million in data processing and software.

Income Tax Expense

The effective income tax rate was 16% for both the third and second quarters of 2021 as compared to 13% for third quarter of 2020. The increase was a result of higher income before income taxes, while net favorable permanent differences were relatively the same compared to the third quarter of 2020.

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, 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, 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, 2020, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021 and other current and periodic reports, which have been or will be filed with the Securities and Exchange Commission and are or will be 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

2021

2021

2021

2020

2020

Ending Balances

Investments

$

4,000,760

$

3,921,658

$

3,612,010

$

3,340,424

$

3,097,721

Net Loans

18,269,407

18,586,756

18,990,986

18,900,820

19,028,621

Total assets

26,390,832

26,079,774

25,892,990

25,906,733

25,543,281

Deposits

22,074,041

21,724,312

21,633,838

20,839,207

20,730,051

Shareholders' equity

2,699,818

2,692,958

2,629,655

2,616,828

2,390,261

Average Balances

Investments

$

3,914,627

$

3,670,333

$

3,448,166

$

3,221,289

$

2,977,672

Net Loans

18,414,153

18,906,556

18,980,586

18,994,514

18,880,519

Total assets

26,440,876

26,017,542

26,082,816

25,749,405

25,169,508

Deposits

22,123,480

21,765,601

21,117,024

20,791,522

20,388,447

Shareholders' equity

2,722,833

2,669,413

2,637,098

2,544,866

2,374,091

Income Statement

Net interest income

$

171,270

$

162,399

$

164,448

$

161,591

$

154,116

Provision for credit losses

(600

)

(3,500

)

(5,500

)

6,240

7,080

Non-interest income

62,577

51,890

95,397

55,574

63,249

Non-interest expense

144,596

140,831

178,384

154,737

139,145

Income before taxes

89,851

76,958

86,961

56,187

71,140

Net income available to common shareholders

73,021

62,402

70,472

48,690

61,611

Pre-provision net revenue(1)

90,947

75,575

81,795

64,092

80,044

Per Share

Net income available to common shareholders (basic)

$

0.45

$

0.38

$

0.43

$

0.30

$

0.38

Net income available to common shareholders (diluted)

$

0.45

$

0.38

$

0.43

$

0.30

$

0.38

Cash dividends

$

0.14

$

0.14

$

0.14

$

0.17

$

0.13

Common shareholders' equity

$

15.53

$

15.34

$

14.99

$

14.93

$

14.74

Common shareholders' equity (tangible)(1)

$

12.21

$

12.05

$

11.69

$

11.62

$

11.44

Weighted average shares (basic)

162,506

162,785

162,441

162,242

162,061

Weighted average shares (diluted)

163,456

163,858

163,737

163,071

162,579

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

Three months ended

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

2021

2021

2021

2020

2020

Asset Quality

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

(0.05

)%

0.15

%

0.13

%

(0.07

)%

(0.05

)%

Non-performing loans to total loans

0.82

%

0.83

%

0.80

%

0.78

%

0.75

%

Non-performing assets to total assets

0.58

%

0.60

%

0.60

%

0.58

%

0.57

%

ACL - loans(2) to total loans

1.41

%

1.37

%

1.40

%

1.47

%

1.40

%

ACL - loans(2) to non-performing loans

171

%

166

%

174

%

189

%

188

%

Asset Quality, excluding PPP(1)(3)

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

(0.05

)%

0.16

%

0.14

%

(0.08

)%

(0.06

)%

Non-performing loans to total adjusted loans

0.85

%

0.88

%

0.88

%

0.85

%

0.83

%

ACL - loans(2) to total adjusted loans

1.45

%

1.46

%

1.54

%

1.60

%

1.56

%

Profitability

Return on average assets

1.13

%

1.00

%

1.14

%

0.79

%

0.97

%

Return on average common shareholders' equity

10.64

%

9.38

%

10.84

%

7.61

%

10.32

%

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

14.56

%

12.93

%

15.00

%

10.32

%

13.35

%

Net interest margin

2.82

%

2.73

%

2.79

2.75

%

2.70

%

Efficiency ratio(1)

60.3

%

63.8

%

63.0

%

62.5

%

62.3

%

Non-interest expenses to total average assets(1)

2.14

%

2.14

%

2.25

%

2.13

%

...

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