Fulton Financial Corporation (NASDAQ:FULT) ("Fulton" or the "Corporation") reported net income available to common shareholders of $77.0 million, or $0.46 per diluted share, for the second quarter of 2023, an increase of $11.3 million, or 17.2%, in comparison to the first quarter of 2023. Operating net income available to common shareholders was $77.8 million, or $0.47 per diluted share⁽¹⁾.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230718487757/en/

For the six months ended June 30, 2023, net income available to shareholders was $142.8 million, or $0.85 per diluted share, an increase of $13.6 million, or 10.6%, in comparison to the same period in 2022. Operating net income available to common shareholders was $143.9 million, or $0.86 per diluted share⁽¹⁾.

"We were pleased with our second quarter performance and results," said Curtis J. Myers, Chairman and CEO of Fulton. "We saw credit metrics remain stable and credit losses return to historically low levels, strong non-interest income in many areas of our bank, and loan growth was solid and in line with expectations. Despite the challenges around deposit growth and mix the industry is facing, we meaningfully grew both deposit accounts and deposit households during the quarter."

⁽¹⁾ Non-generally accepted accounting principles ("non-GAAP") financial measure. Refer to the calculation on the page titled "Reconciliation of Non-GAAP Measures" at the end of the press release.

Net Interest Income and Balance Sheet

Net interest income for the second quarter of 2023 was $212.9 million, a decrease of $2.7 million in comparison to the first quarter of 2023. The net interest margin for the second quarter of 2023 decreased 13 basis points, to 3.40%, in comparison to 3.53% in the first quarter of 2023.

The linked-quarter decrease in net interest income was primarily due to an increase in the rate on interest-bearing deposits and a shift in funding mix from noninterest-bearing demand deposits to interest-bearing deposits. An increase in the average balance for net loans of $403.1 million and higher loan yields in the second quarter of 2023 primarily contributed to an increase in interest income of $25.1 million to $314.9 million in comparison to $289.8 million in the first quarter of 2023. Interest expense from interest-bearing liabilities for the second quarter of 2023 increased by $27.9 million to $102.1 million in comparison to $74.2 million in the first quarter of 2023. The linked-quarter increase in interest expense in the second quarter of 2023 was primarily due to an increase in the rate on interest-bearing deposits of 63 basis points, a decline of $620.7 million in the average balance of noninterest-bearing deposits and an increase in the average balance for interest-bearing deposits of $1.3 billion in comparison to the first quarter of 2023.

For the second quarter of 2023, net interest income was $212.9 million, an increase of $34.0 million, or 19.0%, in comparison to the second quarter of 2022. Interest income for the second quarter of 2023 increased by $124.6 million to $314.9 million in comparison to $190.3 million in the second quarter of 2022 primarily driven by rising interest rates resulting in increases in interest income from net loans, investment securities and other interest-earning assets of $120.5 million, $1.2 million and $2.9 million, respectively. Increases in the average balances for net loans in the second quarter of 2023 of $2.2 billion, driven in part by the Prudential Bancorp, Inc. ("Prudential Bancorp") acquisition, contributed to the increase in interest income. Interest expense from interest-bearing liabilities for the second quarter of 2023 increased by $90.6 million to $102.1 million in comparison to $11.5 million in the second quarter of 2022 primarily driven by rising interest rates resulting in increases in interest expense from interest-bearing deposits and borrowings and other interest-bearing liabilities of $64.0 million and $26.6 million, respectively. An increase in the average balance for higher rate interest-bearing deposits and borrowings and other interest-bearing liabilities of $1.3 billion and $1.8 billion, respectively, in the second quarter of 2023 in comparison to the second quarter of 2022 also contributed to the increase in interest expense.

Total average interest-earning assets for the second quarter of 2023 were $25.6 billion, an increase of $384.0 million from the first quarter of 2023 primarily driven by the aforementioned increase in average net loans of $403.1 million and an increase in average other interest-earning assets of $36.5 million, partially offset by a decrease in average investment securities of $55.5 million.

Total average interest-earning assets for the second quarter of 2023 increased by $1.6 billion from the second quarter of 2022. Average net loans for the second quarter of 2023 were $20.9 billion, an increase of $2.2 billion from the same period in 2022. Compared to the second quarter of 2022, average other interest-earning assets decreased $421.9 million and average investment securities decreased $164.3 million in the second quarter of 2023.

Total average interest-bearing liabilities increased $1.0 billion, to $18.0 billion, in the second quarter of 2023 in comparison to $17.0 billion in the first quarter of 2023 driven by an increase in the average balance for total interest-bearing deposits of $1.3 billion, partially offset by a decrease in the average balance for borrowings and other interest-bearing liabilities of $0.3 billion.

Total average interest-bearing liabilities for the second quarter of 2023 increased $3.1 billion, to $18.0 billion, in comparison to $14.9 billion in the second quarter of 2022, driven by increases in the average balances for borrowings and other interest-bearing liabilities and total interest-bearing deposits of $1.8 billion and $1.3 billion, respectively.

Asset Quality

In the second quarter of 2023, a provision for credit losses of $9.7 million was recorded in comparison to a provision for credit losses of $24.5 million in the first quarter of 2023, and a provision for credit losses of $1.5 million in the second quarter of 2022. The provision for credit losses of $9.7 million recorded in the second quarter of 2023 was primarily due to loan growth and the macroeconomic outlook.

Non-performing assets were $151.6 million, or 0.55% of total assets, at June 30, 2023, in comparison to $167.9 million, or 0.62% of total assets, at March 31, 2023, and $178.3 million, or 0.71% of total assets, at June 30, 2022.

Net charge-offs for the second quarter of 2023 were 0.04% of total average loans in comparison to 0.27% and negative 0.08% in the first quarter of 2023 and the second quarter of 2022, respectively.

Non-interest Income

Non-interest income before investment securities gains in the second quarter of 2023 was $60.6 million, an increase of $8.9 million, or 17.1%, from the first quarter of 2023. The increase in non-interest income was primarily due to an increase in commercial banking income of $5.6 million, driven by increases in commercial customer interest rate swap fee income, reflected in capital markets, and merchant and card income of $3.6 million and $0.9 million, respectively. In addition, increases from mortgage banking, wealth management, higher income from equity method investments, reflected in other non-interest income, and consumer banking of $1.0 million, $0.6 million, $0.6 million and $0.5 million, respectively, contributed to the increase in non-interest income in the second quarter of 2023.

Compared to the second quarter of 2022, non-interest income before investment securities gains in the second quarter of 2023 increased $2.2 million, or 3.8%, from $58.4 million. The increase in non-interest income was primarily due to increases in commercial customer interest rate swap fee income, reflected in capital markets, and merchant and card income of $2.1 million and $0.3 million, respectively.

Non-interest Expense

Non-interest expense was $168.0 million in the second quarter of 2023, an increase of $8.4 million, or 5.3%, compared to $159.6 million in the first quarter of 2023. The increase was primarily due to increases of $4.8 million in salaries and employee benefits expense, $1.0 million in data processing and software expense and $0.7 million in other outside services expense. Additional contributors to the increase in non-interest expense were increases of $1.3 million in owned real estate and repossession expenses and $0.5 million in state tax expense, in each case, reflected in other expense. The $4.8 million increase in salaries and benefits expense was primarily driven by annual merit increases and one additional calendar day in the quarter.

Compared to the second quarter of 2022, non-interest expense, excluding merger-related expenses of $1.0 million in the second quarter of 2022, increased $19.3 million, or 13.0%. The increase was primarily due to increases of $8.7 million in salaries and employee benefits expense, $2.1 million in other outside services expense, $2.1 million in data processing and software expense, $1.9 million in FDIC insurance expense, primarily due to the adoption of a final rule to increase base deposit insurance assessment rates effective January 1, 2023, $0.9 million in intangible amortization expense and $0.8 million in net occupancy expense. Higher expense levels compared to the second quarter of 2022 are in part due to the Prudential Bancorp acquisition. The $8.7 million increase in salaries and benefits expense was primarily driven by annual merit increases, an increase in the number of employees, employee benefits due to higher claims experience and higher pension costs.

Income Tax Expense

For the second quarter of 2023, the effective tax rate was 16.8%, in comparison to 17.3% for the full-year of 2022.

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

Safe Harbor Statement

This press 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, the statements 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, 2022, Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and other current and periodic reports, which have been, or will be, filed with the Securities and Exchange Commission (the "SEC") and are, or will be, available in the Investor Relations section of the Corporation's website (www.fultonbank.com) and on the SEC's website (www.sec.gov).

Non-GAAP Financial Measures

The Corporation uses certain financial measures in this press release that have been derived from methods other than GAAP. These non-GAAP financial measures are reconciled to the most comparable GAAP measures in tables at the end of this press release.

FULTON FINANCIAL CORPORATION
SUMMARY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
(dollars in thousands, except per share data)
	Three months ended
	Jun 30			Mar 31			Dec 31			Sep 30			Jun 30
	2023			2023			2022			2022			2022
Ending Balances
Investment securities	$	3,867,334		$	3,950,101		$	3,968,023		$	3,936,694		$	4,117,801
Net loans		21,044,685			20,670,188			20,279,547			19,695,199			18,920,950
Total assets		27,403,163			27,112,176			26,931,702			26,146,042			25,252,686
Deposits		21,206,540			21,316,584			20,649,538			21,376,554			21,143,866
Shareholders' equity		2,642,152			2,618,998			2,579,757			2,471,159			2,471,093

Average Balances
Investment securities		3,916,130			3,964,615			3,936,579			4,254,216			4,216,507
Net loans		20,866,235			20,463,096			20,004,513			19,563,825			18,637,175
Total assets		27,235,567			26,900,653			26,386,355			26,357,095			25,578,432
Deposits		21,207,143			20,574,323			21,027,656			21,788,052			21,523,713
Shareholders' equity		2,647,464			2,613,316			2,489,148			2,604,057			2,531,346

Income Statement
Net interest income		212,852			215,587			225,911			215,582			178,831
Provision for credit losses		9,747			24,544			14,513			18,958			1,500
Non-interest income		60,585			51,753			54,321			59,162			58,391
Non-interest expense		168,018			159,616			168,462			169,558			149,730
Income before taxes		95,672			83,180			97,257			86,228			85,992
Net income available to common shareholders		77,045			65,752			79,271			68,309			67,427
Pre-provision net revenue⁽¹⁾		106,495			108,375			115,049			113,631			89,384

Per Share
Net income available to common shareholders (basic)	$	0.46		$	0.39		$	0.47		$	0.41		$	0.42
Net income available to common shareholders (diluted)	$	0.46		$	0.39		$	0.47		$	0.40		$	0.42
Operating net income available to common shareholders⁽¹⁾	$	0.47		$	0.39		$	0.48		$	0.48		$	0.42
Cash dividends	$	0.16		$	0.15		$	0.21		$	0.15		$	0.15
Common shareholders' equity	$	14.75		$	14.67		$	14.24		$	13.61		$	14.15
Common shareholders' equity (tangible)⁽¹⁾	$	11.36		$	11.26		$	10.90		$	10.26		$	10.81
Weighted average shares (basic)		165,854			166,605			167,504			167,353			160,920
Weighted average shares (diluted)		167,191			168,401			169,136			168,781			162,075

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



	Three months ended
	Jun 30			Mar 31			Dec 31			Sep 30			Jun 30
	2023			2023			2022			2022			2022
Asset Quality
Net charge-offs (recoveries) to average loans		0.04	%		0.27	%		0.23	%		0.01	%		(0.08	)%
Non-performing loans to total net loans		0.70	%		0.80	%		0.85	%		0.98	%		0.92	%
Non-performing assets to total assets		0.55	%		0.62	%		0.66	%		0.76	%		0.71	%
ACL - loans⁽¹⁾ to total loans		1.37	%		1.35	%		1.33	%		1.35	%		1.31	%
ACL - loans⁽¹⁾ to non-performing loans		195	%		169	%		157	%		138	%		143	%

Profitability
Return on average assets		1.17	%		1.03	%		1.23	%		1.07	%		1.10	%
Operating return on average assets⁽²⁾		1.18	%		1.04	%		1.26	%		1.25	%		1.11	%
Return on average common shareholders' equity		12.59	%		11.02	%		13.70	%		11.24	%		11.57	%
Return on average common shareholders' equity (tangible)⁽²⁾		16.52	%		14.46	%		18.59	%		17.31	%		15.23	%
Net interest margin		3.40	%		3.53	%		3.69	%		3.54	%		3.04	%
Efficiency ratio⁽²⁾		60.1	%		58.5	%		58.1	%		57.8	%		61.4

Fulton Financial Corporation Announces Second Quarter 2023 Results