Fulton Financial Corporation (NASDAQ:FULT) ("Fulton" or the "Corporation") reported net income available to common shareholders of $69.5 million, or $0.42 per diluted share, for the third quarter of 2023, a decrease of $7.5 million, or 9.7%, in comparison to the second quarter of 2023. Operating net income available to common shareholders for the three months ended September 30, 2023 was $72.2 million, or $0.43 per diluted share⁽¹⁾.

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For the nine months ended September 30, 2023, net income available to common shareholders was $212.3 million, or $1.27 per diluted share, an increase of $14.9 million, or 7.5%, in comparison to the same period in 2022. Operating net income available to common shareholders for the nine months ended September 30, 2023 was $216.1 million, or $1.29 per diluted share⁽¹⁾.

"We were pleased with our third quarter results; operating earnings were solid, we generated deposit and loan growth, we maintained our net interest margin and net interest income grew," said Curtis J. Myers, Chairman and CEO of Fulton Financial Corporation. "Our results reflect solid core business trends, stable credit metrics, and modest growth in our core lines of business."

Net Interest Income and Balance Sheet

Net interest income for the third quarter of 2023 was $213.8 million, an increase of $1.0 million in comparison to the second quarter of 2023. The net interest margin for the third quarter of 2023 was 3.40%, consistent with the second quarter of 2023.

The linked-quarter increase in net interest income was primarily due to higher loan yields and an increase in the average balance of net loans, partially offset by an increase in the rate of average interest-bearing deposits and a shift in the funding mix from noninterest-bearing demand deposits to interest-bearing deposits.

⁽¹⁾

Financial measure derived by methods other than generally accepted accounting principles ("GAAP"). Refer to the calculation on the page titled "Reconciliation of Non-GAAP Measures" at the end of the press release.

A 20 basis points increase in the yield on average net loans and an increase in the average balance of net loans of $255.0 million in the third quarter of 2023 drove an increase in interest income of $15.5 million to $330.4 million in comparison to $314.9 million in the second quarter of 2023.

Interest expense on interest-bearing liabilities for the third quarter of 2023 increased by $14.5 million to $116.5 million in comparison to $102.1 million in the second quarter of 2023. The linked-quarter increase in interest expense in the third quarter of 2023 was primarily due to an increase in the rate on average interest-bearing deposits of 29 basis points, a decline of $348.7 million in the average balance of noninterest-bearing deposits and an increase in the average balance of interest-bearing deposits of $498.8 million in comparison to the second quarter of 2023.

For the third quarter of 2023, net interest income was $213.8 million, a decrease of $1.7 million, or 0.8%, in comparison to the third quarter of 2022. Interest income for the third quarter of 2023 increased by $96.7 million to $330.4 million in comparison to $233.7 million in the third quarter of 2022, primarily driven by rising interest rates resulting in increases in interest income from net loans and other interest-earning assets of $96.2 million and $1.1 million, respectively. Increases in the average balance of net loans in the third quarter of 2023 of $1.6 billion and in yields on net loans of 151 basis points each contributed to the increase in interest income. Interest expense on interest-bearing liabilities for the third quarter of 2023 increased by $98.4 million to $116.5 million in comparison to $18.1 million in the third 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 $74.1 million and $24.3 million, respectively. A decrease in the average balance of noninterest-bearing deposits of $1.9 billion, and an increase in the average balances of interest-bearing deposits and borrowings and other interest-bearing liabilities of $1.4 billion and $1.3 billion, respectively, in the third quarter of 2023 in comparison to the third quarter of 2022 also contributed to the increase in interest expense.

Total average interest-earning assets for the third quarter of 2023 were $25.6 billion, a decrease of $47.8 million from the second quarter of 2023 primarily driven by a decrease in average other interest-earning assets of $266.3 million and a decrease in average investment securities of $36.5 million, partially offset by an increase in average net loans of $255.0 million.

Total average interest-earning assets for the third quarter of 2023 increased by $886.0 million from the third quarter of 2022. Average net loans for the third quarter of 2023 were $21.1 billion, an increase of $1.6 billion from the same period in 2022. Compared to the third quarter of 2022, average other interest-earning assets decreased $368.5 million and average investment securities decreased $302.9 million in the third quarter of 2023.

Total average interest-bearing liabilities increased $399.1 million to $18.4 billion in the third quarter of 2023 in comparison to $18.0 billion in the second quarter of 2023. The increase in average interest-bearing liabilities was driven by an increase in the average balance of total interest-bearing deposits of $498.8 million, partially offset by a decrease in the average balance of borrowings and other interest-bearing liabilities of $99.8 million.

Total average interest-bearing liabilities for the third quarter of 2023 increased $2.8 billion to $18.4 billion in comparison to $15.6 billion in the third quarter of 2022, driven by increases in the average balances of total interest-bearing deposits and borrowings and other interest-bearing liabilities of $1.4 billion and $1.3 billion, respectively.

Asset Quality

In the third quarter of 2023, a provision for credit losses of $9.9 million was recorded in comparison to $9.7 million in the second quarter of 2023 and $19.0 million in the third quarter of 2022. The provision for credit losses of $9.9 million recorded in the third quarter of 2023 was primarily due to loan growth and net charge-offs recorded during the period.

Non-performing assets were $143.5 million, or 0.52% of total assets, at September 30, 2023, in comparison to $151.6 million, or 0.55% of total assets, at June 30, 2023, and $198.6 million, or 0.76% of total assets, at September 30, 2022.

Net charge-offs for the third quarter of 2023 were 0.10% of total average loans in comparison to 0.04% and 0.01% in the second quarter of 2023 and the third quarter of 2022, respectively.

Non-interest Income

Non-interest income before investment securities gains (losses) in the third quarter of 2023 was $56.0 million, a decrease of $4.6 million, or 7.6%, from the second quarter of 2023. The decrease in non-interest income was primarily due to a $3.0 million market valuation movement in our commercial customer interest rate swap program resulting from the reference rate transition from the London Inter-Bank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR") and is reflected as a reduction to other non-interest income. Additional contributors to the decrease in non-interest income were a decrease of $3.0 million in commercial customer interest rate swap fee income, reflected in capital markets, partially offset by increases in wealth management, overdraft fees and mortgage banking income of $0.7 million, $0.3 million and $0.3 million, respectively.

Compared to the third quarter of 2022, non-interest income before investment securities gains (losses) in the third quarter of 2023 decreased $3.3 million, or 5.5%, from $59.2 million. The decrease in non-interest income was primarily due to the aforementioned $3.0 million market valuation movement in our commercial customer interest rate swap program resulting from the reference rate transition from LIBOR to SOFR and is reflected as a reduction to other non-interest income.

Non-interest Expense

Non-interest expense was $171.0 million in the third quarter of 2023, an increase of $3.0 million, or 1.8%, compared to $168.0 million in the second quarter of 2023. The increase was primarily due to increases of $2.7 million in salaries and employee benefits expense and $1.3 million in other outside services related to a number of corporate initiatives, partially offset by a decrease of $0.5 million in charitable contributions and $0.5 million in gains on sales from fixed assets disposals, in each case, reflected in other expense. The $2.7 million increase in salaries and benefits expense was primarily driven by one additional calendar day in the third quarter of 2023 compared to the second quarter of 2023.

Compared to the third quarter of 2022, non-interest expense, excluding merger-related expenses of $7.0 million in the third quarter of 2022, increased $8.5 million, or 5.2%. The increase was primarily due to increases of $2.7 million in other outside services expense driven by a number of corporate initiatives, $2.5 million in salaries and employee benefits expense, $1.6 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, and $1.1 million in data processing and software expense. The $2.5 million increase in salaries and benefits expense was primarily driven by annual merit increases, lower deferred employee loan origination costs, higher employee benefits expense, due to healthcare claims experience, and higher pension costs, partially offset by lower incentive plan compensation expense.

Income Tax Expense

For the third quarter of 2023, the effective tax rate was 18.9%, 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 Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 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
	Sep 30		Jun 30		Mar 31		Dec 31		Sep 30
	2023		2023		2023		2022		2022
Ending Balances
Investment securities	$	3,698,601	$	3,867,334	$	3,950,101	$	3,968,023	$	3,936,694
Net loans		21,177,508		21,044,685		20,670,188		20,279,547		19,695,199
Total assets		27,380,836		27,403,163		27,112,176		26,931,702		26,146,042
Deposits		21,421,589		21,206,540		21,316,584		20,649,538		21,376,554
Shareholders' equity		2,566,693		2,642,152		2,618,998		2,579,757		2,471,159

Average Balances
Investment securities		3,834,824		3,916,130		3,964,615		3,936,579		4,254,216
Net loans		21,121,277		20,866,235		20,463,096		20,004,513		19,563,825
Total assets		27,377,836		27,235,567		26,900,653		26,386,355		26,357,095
Deposits		21,357,295		21,207,143		20,574,323		21,027,656		21,788,052
Shareholders' equity		2,645,977		2,647,464		2,613,316		2,489,148		2,604,057

Income Statement
Net interest income		213,842		212,852		215,587		225,911		215,582
Provision for credit losses		9,937		9,747		24,544		14,513		18,958
Non-interest income		55,961		60,585		51,753		54,321		59,162
Non-interest expense		171,020		168,018		159,616		168,462		169,558
Income before taxes		88,846		95,672		83,180		97,257		86,228
Net income available to common shareholders		69,535		77,045		65,752		79,271		68,309
Pre-provision net revenue⁽¹⁾		102,342		106,495		108,375		115,049		113,631

Per Share
Net income available to common shareholders (basic)	$	0.42	$	0.46	$	0.39	$	0.47	$	0.41
Net income available to common shareholders (diluted)	$	0.42	$	0.46	$	0.39	$	0.47	$	0.40
Operating net income available to common shareholders⁽¹⁾	$	0.43	$	0.47	$	0.39	$	0.48	$	0.48
Cash dividends	$	0.16	$	0.16	$	0.15	$	0.21	$	0.15
Common shareholders' equity	$	14.47	$	14.75	$	14.67	$	14.24	$	13.61
Common shareholders' equity (tangible)⁽¹⁾	$	11.05	$	11.36	$	11.26	$	10.90	$	10.26
Weighted average shares (basic)		164,566		165,854		166,605		167,504		167,353
Weighted average shares (diluted)		166,023		167,191		168,401		169,136		168,781

⁽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
	Sep 30		Jun 30		Mar 31		Dec 31		Sep 30
	2023		2023		2023		2022		2022
Asset Quality

Fulton Financial Corporation Announces Third Quarter 2023 Results