Fulton Financial Announces First Quarter 2021 Results

Rhea-AI Summary

Fulton Financial Corporation (NASDAQ: FULT) reported a net income of $70 million, or $0.43 per diluted share, for the first quarter of 2021. The company experienced record EPS, a strong mortgage business, and growth in wealth management. Net interest income increased to $164 million, benefiting from PPP loan forgiveness. The balance sheet restructuring announced in March is expected to enhance net interest income moving forward. Non-interest income rose 11%, while non-interest expenses were impacted by restructuring costs, totaling $178 million, a 25% increase from last year.

Positive

• Net income of $70 million for Q1 2021.
• Record earnings per share (EPS) achieved.
• Net interest income increased by $3 million from Q4 2020.
• Non-interest income rose by 11% compared to Q4 2020.

Negative

• Non-interest expense increased by $24 million from Q4 2020 due to restructuring costs.

Fulton Financial Corporation (NASDAQ: FULT) (“Fulton” or the “Corporation”) reported net income available to common shareholders of $70 million, or $0.43 per diluted share, for the first quarter of 2021.

"Fulton achieved solid financial performance during the first quarter, despite the continuing challenges brought about by COVID-19,” said E. Philip Wenger, Chairman and CEO of Fulton Financial Corporation. “We experienced record earnings per share, our mortgage business remained strong, our wealth management business grew to record highs, and asset quality remained stable. The balance sheet restructuring we announced in March had minimal net impact on our earnings in the first quarter, but it will meaningfully enhance our net interest income beginning in the second quarter and going forward.”

Net Interest Income and Balance Sheet

Net interest income for the first quarter of 2021 was $164 million, $3 million higher than the fourth quarter of 2020. Net interest margin for the first quarter of 2021 increased 4 basis points, to 2.79%, from 2.75% in the fourth quarter of 2020. The increases in net interest income and net interest margin in comparison to the fourth quarter of 2020 were primarily due to the forgiveness of Paycheck Protection Program ("PPP") loans and the acceleration of the recognition of related fee income as well as growth in average investment securities and other earning assets during the quarter.

Total average assets for the first quarter of 2021 were $26.1 billion, an increase of $333 million from the fourth quarter of 2020, driven by growth in other interest-earning assets and investment securities. Average loans, net of unearned income, were $19.0 billion, relatively unchanged compared to the fourth quarter of 2020. Average loans included loans originated under the PPP. Average PPP loans were $1.7 billion for the first quarter of 2021 compared to $1.8 billion for the fourth quarter of 2020. First quarter loan balances were impacted by the net effect of $579 million of PPP loans forgiven and $685 million of new loans originated under the third phase of the PPP in the first quarter of 2021 .

Average loans and yields, by type, for the first quarter of 2021 in comparison to the fourth quarter of 2020 are summarized in the following table:

	Three months ended
	March 31, 2021								December 31, 2020								Growth
	Balance					Yield (1)			Balance					Yield (1)			$					%
	(dollars in thousands)
Average Loans, net of unearned income, by type:
Real estate - commercial mortgage	$	7,128,997				3.15	%		$	7,101,363				3.21	%		$	27,634				0.4		%
Commercial and industrial(2)	5,722,080					2.57	%		5,855,305					2.57	%		(133,225		)			(2.3	)	%
Real estate - residential mortgage	3,183,585					3.52	%		3,087,529					3.65	%		96,056					3.1		%
Real estate - home equity	1,175,218					3.75	%		1,212,113					3.91	%		(36,895		)			(3.0	)	%
Real estate - construction	1,054,718					3.09	%		1,009,284					3.11	%		45,434					4.5		%
Consumer	459,038					4.13	%		468,678					4.07	%		(9,640		)			(2.1	)	%
Equipment lease financing	266,405					4.11	%		279,059					3.98	%		(12,654		)			(4.5	)	%
Other(3)	(9,455		)			N/A			(18,817		)			N/A			9,362					(49.8	)	%
Total Average Loans, net of unearned income	$	18,980,586				3.53	%		$	18,994,514				3.45	%		$	(13,928	)			(0.1	)	%
(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 $1.7 billion and $1.8 billion for the three months ended March 31, 2021 and December 31, 2020, respectively.
(3) Consists of overdrafts and net origination fees and costs.

Total average liabilities in the first quarter of 2021 increased $241 million, to $23.4 billion, from the fourth quarter of 2020 driven by increases in demand and savings deposits, partially offset by decreases in time deposits and short-term borrowings. Average deposits and interest rates, by type, for the first quarter of 2021 in comparison to the fourth quarter of 2020 are summarized in the following table:

	Three months ended
	March 31, 2021							December 31, 2020							Growth
	Balance				Rate			Balance				Rate			$					%
	(dollars in thousands)
Average Deposits, by type:
Noninterest-bearing demand	$	6,672,832			—			$	6,477,228			—			$	195,604				3.0		%
Interest-bearing demand	5,832,174				0.08	%		5,762,150				0.10	%		70,024					1.2		%
Savings	6,137,084				0.10	%		5,905,137				0.13	%		231,947					3.9		%
Total average demand and savings	18,642,090				0.06	%		18,144,515				0.07	%		497,575					2.7		%
Brokered	324,364				0.49	%		340,451				0.53	%		(16,087		)			(4.7	)	%
Time	2,150,570				1.23	%		2,306,556				1.39	%		(155,986		)			(6.8	)	%
Total Average Deposits	$	21,117,024			0.18	%		$	20,791,522			0.23	%		$	325,502				1.6		%

Asset Quality

In the first quarter of 2021 a reversal of provision of credit losses of $6 million was recognized, as compared to provisions for credit losses of $6 million, and $44 million for the fourth quarter of 2020 and first quarter of 2020, respectively. Several factors as of the end of the first quarter of 2021 in comparison to the end of the fourth quarter of 2020, including improved economic forecasts and a decrease in specific allocations within the allowance for credit losses for loans evaluated individually, reduced the level of the allowance for credit losses determined to be necessary at the end of the first quarter of 2021, resulting in the negative provision for credit losses.

The $44 million provision for credit losses in the first quarter of 2020 was driven primarily by assessment of the initial estimated impacts of the COVID-19 pandemic, as reflected in economic forecasts as of the end of the first quarter of 2020, on the level of expected credit losses.

Non-performing assets were $156 million, or 0.60% of total assets, at March 31, 2021, compared to $151 million, or 0.58% of total assets, and $147 million, or 0.64% of total assets at December 31, 2020 and March 31, 2020, respectively.

Annualized net charge-offs for the quarter ended March 31, 2021 were 0.13% of total average loans, compared to annualized net recoveries of 0.07% and annualized net charge-offs of 0.26% for the quarters ended December 31, 2020 and March 31, 2020, respectively.

Non-interest Income

Non-interest income in the first quarter of 2021, excluding investment securities gains, was $62 million, an increase of $6 million, or 11%, from the fourth quarter of 2020, primarily driven by increases of $5 million in mortgage banking income and $2 million in wealth management fees. The increase in mortgage banking income was due to a $6 million reversal of the valuation allowance for mortgage servicing assets.

Compared to the first quarter of 2020, non-interest income, excluding investment securities gains, in the first quarter of 2021 increased $7 million, or 13%, from $55 million, primarily driven by an $8 million increase in mortgage banking income, resulting from a combination of higher mortgage sales gains and a $6 million reversal of the mortgage servicing valuation allowance, both due to lower mortgage interest rates.

In the first quarter of 2021, Fulton completed a balance sheet restructuring involving gains on sales of Visa, Inc. Class B restricted shares of $34 million, which were offset in non-interest expense by corresponding debt extinguishment costs of $32 million, other securities losses of $0.4 million and a write-off of $1 million recognized in net interest income in connection with the purchase of certain of the Corporation's outstanding senior and subordinated notes and the prepayment of certain term Federal Home Loan Bank advances.

Non-interest Expense

Non-interest expense was $178 million in the first quarter of 2021, an increase of $24 million compared to the fourth quarter of 2020, which was driven by costs recognized during the first quarter of 2021 associated with the aforementioned balance sheet restructuring. In the fourth quarter of 2020, $15 million of charges, reflected in salaries and employee benefits and other expense, were recognized in connection with the cost saving initiatives announced in October 2020.

Compared to the first quarter of 2020, non-interest expense increased $36 million, or 25% in the first quarter of 2021, due primarily to costs associated with the previously mentioned balance sheet restructuring. Other increases were recognized in salaries and employee benefits and data processing and software, partially offset by lower professional fees.

Income Tax Expense

The effective income tax rate (ETR) for the first quarter of 2021 was 16%, as compared to 10% for both the fourth quarter of 2020 and first quarter of 2020. The increase was a result of higher income before income taxes.

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 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
	Mar 31					Dec 31				Sep 30				Jun 30				Mar 31
	2021					2020				2020				2020				2020
Ending Balances
Investments	$	3,612,010				$	3,340,424			$	3,097,721			$	2,974,813			$	3,141,440
Loans, net of unearned income	18,990,986					18,900,820				19,028,621				18,704,722				17,077,403
Total assets	25,892,990					25,906,733				25,543,281				24,617,863				22,929,859
Deposits	21,633,838					20,839,207				20,730,051				19,884,208				17,365,026
Shareholders' equity	2,629,655					2,616,828				2,390,261				2,340,501				2,285,748
Average Balances
Investments	$	3,448,166				$	3,221,289			$	2,977,672			$	3,096,632			$	3,071,828
Loans, net of unearned income	18,980,586					18,994,514				18,880,519				18,331,797				16,860,067
Total assets	26,082,816					25,749,405				25,169,508				24,139,116				22,252,099
Deposits	21,117,024					20,791,522				20,388,447				19,276,658				17,121,428
Shareholders' equity	2,637,098					2,544,866				2,374,091				2,309,133				2,337,016
Income Statement
Net interest income	$	164,448				$	161,591			$	154,116			$	152,754			$	160,746
Provision for credit losses	(5,500		)			6,240				7,080				19,570				44,030
Non-interest income	95,397					55,574				63,248				55,922				54,644
Non-interest expense	178,384					154,737				139,147				143,005.8				142,552
Income before taxes	86,961					56,187				71,137				46,101				28,808
Net income available to common shareholders	70,472					48,690				61,607				39,559				26,047
Pre-provision net revenue(1)	81,795					64,092				80,043				67,125				74,374
Per Share
Net income available to common shareholders (basic)	$	0.43				$	0.30			$	0.38			$	0.24			$	0.16
Net income available to common shareholders (diluted)	$	0.43				$	0.30			$	0.38			$	0.24			$	0.16
Cash dividends	$	0.14				$	0.17			$	0.13			$	0.13			$	0.13
Common shareholders' equity	$	14.99				$	14.93			$	14.74			$	14.45			$	14.16
Common shareholders' equity (tangible)(1)	$	11.69				$	11.62			$	11.44			$	11.15			$	10.84
Weighted average shares (basic)	162,441					162,242				162,061				161,715				163,475
Weighted average shares (diluted)	163,737					163,071				162,579				162,267				164,417
(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
	Mar 31			Dec 31				Sep 30				Jun 30			Mar 31
	2021			2020				2020				2020			2020
Asset Quality
Net charge-offs (recoveries) to average loans (annualized)	0.13	%		(0.07	)	%		(0.05	)	%		0.09	%		0.26	%
Non-performing loans to total loans	0.80	%		0.78		%		0.75		%		0.75	%		0.82	%
Non-performing assets to total assets	0.60	%		0.58		%		0.57		%		0.59	%		0.64	%
ACL - loans(2) to total loans	1.40	%		1.47		%		1.40		%		1.37	%		1.40	%
ACL - loans(2) to non-performing loans	174	%		189		%		188		%		183	%		170	%
Asset Quality, excluding PPP(1)(3)
Net charge-offs (recoveries) to average loans (annualized)	0.14	%		(0.08	)	%		(0.06	)	%		0.10	%		—	%
Non-performing loans to total adjusted loans	0.88	%		0.85		%		0.83		%		0.83	%		—	%
ACL - loans(2) to total adjusted loans	1.54	%		1.60		%		1.56		%		1.53	%		—	%
Profitability
Return on average assets	1.14	%		0.79		%		0.97		%		0.66	%		0.47	%
Return on average shareholders' equity	11.24	%		7.95		%		10.32		%		6.89	%		4.48	%
Return on average common shareholders' equity (tangible)(1)	15.00	%		10.32		%		13.50		%		8.99	%		5.84	%
Net interest margin	2.79	%		2.75		%		2.70		%		2.81	%		3.21	%
Efficiency ratio(1)	63.0	%		62.5		%		62.3		%		66.4	%		64.5	%
Capital Ratios
Tangible common equity ratio(1)	7.5	%		7.4		%		7.4		%		7.5	%		7.8	%
Tier 1 leverage ratio(4)	8.3	%		8.2		%		7.4		%		7.6	%		7.9	%
Common equity Tier 1 capital ratio(4)	9.8	%		9.5		%		9.5		%		9.5	%		9.4	%
Tier 1 capital ratio(4)	10.8	%		10.5		%		9.5		%		9.5	%		9.4	%
Total risk-based capital ratio(4)	14.2	%		14.4		%		13.9		%		13.8	%		13.8	%
(1) Non-GAAP financial measure. Refer to the calculation on the page titled "Reconciliation of Non-GAAP Measures" at the end of this document.
(2) "ACL - loans" relates to the allowance for credit losses ("ACL") specifically on "Loans, net of unearned income" and does not include the ACL related to off-balance-sheet ("OBS") credit exposures.
(3) Asset quality information excluding Paycheck Protection Program ("PPP") loans. Refer to the calculation on the page titled "Reconciliation of Non-GAAP Measures" at the end of this document.
(4) Regulatory capital ratios as of March 31, 2021 are preliminary and prior periods are actual.

FULTON FINANCIAL CORPORATION
CONDENSED CONSOLIDATED ENDING BALANCE SHEETS (UNAUDITED)
dollars in thousands
																											% Change from
		Mar 31					Dec 31					Sep 30					Jun 30					Mar 31					Dec 31				Mar 31
		2021					2020					2020					2020					2020					2020				2020
ASSETS
	Cash and due from banks	$	102,570				$	120,462				$	139,304				$	141,702				$	181,777				(14.9	)	%		(43.6	)	%
	Other interest-earning assets	1,625,515					1,819,499					1,489,550					1,007,939					793,572					(10.7	)	%		104.8		%
	Loans held for sale	34,092					83,886					93,621					77,415					40,645					(59.4	)	%		(16.1	)	%
	Investment securities	3,612,010					3,340,424					3,097,721					2,974,813					3,141,440					8.1		%		15.0		%
	Net Loans	18,990,986					18,900,820					19,028,621					18,704,722					17,077,403					0.5		%		11.2		%
	Less: ACL - loans(1)	(265,986		)			(277,567		)			(266,825		)			(256,537		)			(238,508		)			(4.2	)	%		11.5		%
	Loans, net	18,725,000					18,623,253					18,761,796					18,448,185					16,838,895					0.5		%		11.2		%
	Net, premises and equipment	229,035					231,480					236,943					239,596					236,908					(1.1	)	%		(3.3	)	%
	Accrued interest receivable	65,649					72,942					70,766					73,720					59,365					(10.0	)	%		10.6		%
	Goodwill and intangible assets	536,544					536,659					534,907					535,039					535,171					—		%		0.3		%
	Other assets	962,575					1,078,128					1,118,673					1,119,454					1,102,086					(10.7	)	%		(12.7	)	%
	Total Assets	$	25,892,990				$	25,906,733				$	25,543,281				$	24,617,863				$	22,929,859				(0.1	)	%		12.9		%
LIABILITIES AND SHAREHOLDERS' EQUITY
	Deposits	$	21,633,838				$	20,839,207				$	20,730,051				$	19,884,208				$	17,365,026				3.8		%		24.6		%
	Short-term borrowings	520,989					630,066					611,727					572,551					1,386,808					(17.3	)	%		(62.4	)	%
	Other liabilities	482,101					524,369					515,230					525,407					513,811					(8.1	)	%		(6.2	)	%
	FHLB advances and long-term debt	626,407					1,296,263					1,296,012					1,295,196					1,378,466					(51.7	)	%		(54.6	)	%
	Total Liabilities	23,263,335					23,289,905					23,153,020					22,277,362					20,644,111					(0.1	)	%		12.7		%
	Shareholders' equity	2,629,655					2,616,828					2,390,261					2,340,501					2,285,748					0.5		%		15.0		%
	Total Liabilities and Shareholders' Equity	$	25,892,990				$	25,906,733				$	25,543,281				$	24,617,863				$	22,929,859				(0.1	)	%		12.9		%
LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL:
Loans, by type:
	Real estate - commercial mortgage	$	7,142,137				$	7,105,092				$	7,046,330				$	6,934,936				$	6,895,069				0.5		%		3.6		%
	Commercial and industrial	3,986,858					4,088,561					4,007,278					4,033,439					4,450,557					(2.5	)	%		(10.4	)	%
	Real estate - residential mortgage	3,254,058					3,141,915					3,061,835					2,862,226					2,718,290					3.6		%		19.7		%
	Real estate - home equity	1,149,958					1,202,913					1,222,709					1,251,455					1,292,677					(4.4	)	%		(11.0	)	%
	Real estate - construction	1,083,494					1,047,218					1,007,534					972,909					947,768					3.5		%		14.3		%
	Consumer	451,857					466,772					469,551					465,610					468,172					(3.2	)	%		(3.5	)	%
	Equipment lease financing	260,907					279,118					280,286					281,897					289,726					(6.5	)	%		(9.9	)	%
	Other(2)	(26,677		)			(12,481		)			(27,067		)			(34,784		)			15,144					113.7		%		N/M
	Loans, net of unearned income before PPP	17,302,592					17,319,108					17,068,456					16,767,688					17,077,403					(0.1	)	%		1.3		%
	PPP	1,688,394					1,581,712					1,960,165					1,937,034					—					6.7		%		N/M
	Total Loans, net of unearned income	$	18,990,986				$	18,900,820				$	19,028,621				$	18,704,722				$	17,077,403				0.5		%		11.2		%
Deposits, by type:
	Noninterest-bearing demand	$	7,046,116				$	6,531,002				$	6,378,077				$	6,239,055				$	4,531,872				7.9		%		55.5		%
	Interest-bearing demand	5,959,909					5,818,564					5,813,935					5,099,405					4,724,520					2.4		%		26.1		%
	Savings	6,244,513					5,929,792					5,805,431					5,667,893					5,092,865					5.3		%		22.6		%
	Total demand and savings	19,250,538					18,279,358					17,997,443					17,006,353					14,349,257					5.3		%		34.2		%
	Brokered	309,873					335,185					317,588					310,689					313,337					(7.6	)	%		(1.1	)	%
	Time	2,073,427					2,224,664					2,415,020					2,567,166					2,702,432					(6.8	)	%		(23.3	)	%
	Total Deposits	$	21,633,838				$	20,839,207				$	20,730,051				$	19,884,208				$	17,365,026				3.8		%		24.6		%
Short-term borrowings, by type:
	Customer funding	$	520,989				$	630,066				$	611,727				$	572,551				$	461,808				(17.3	)	%		12.8		%
	Federal funds purchased	—					—					—					—					200,000					N/M				(100.0	)	%
	Short-term FHLB advances	—					—					—					—					725,000					N/M				(100.0	)	%
	Total Short-term Borrowings	$	520,989				$	630,066				$	611,727				$	572,551				$	1,386,808				(17.3	)	%		(62.4	)	%
N/M - Not meaningful
(1) "ACL - loans" relates to the ACL specifically on "Loans, net of unearned income" and does not include the ACL related to OBS credit exposures.
(2) Consists of overdrafts and net origination fees and costs.

FULTON FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
dollars in thousands
				Three Months Ended																						% Change from
				Mar 31					Dec 31					Sep 30				Jun 30				Mar 31				Dec 31				Mar 31
				2021					2020					2020				2020				2020				2020				2020
Interest Income:
	Interest income			$	184,936				$	183,645				$	179,159			$	180,696			$	199,378			0.7		%		(7.2	)	%
	Interest expense			20,488					22,054					25,043				27,942				38,632

FAQ

What is the net income reported by Fulton Financial Corporation for Q1 2021?

Fulton Financial Corporation reported a net income of $70 million for the first quarter of 2021.

How much was the earnings per share (EPS) for FULT in the first quarter of 2021?

The earnings per share (EPS) for Fulton Financial Corporation in Q1 2021 was $0.43 per diluted share.

What factors contributed to the increase in net interest income for FULT?

The increase in net interest income for Fulton was primarily due to the forgiveness of PPP loans and growth in average investment securities.

What was Fulton Financial's non-interest expense for the first quarter of 2021?

The non-interest expense for Fulton in Q1 2021 was $178 million.

How did Fulton Financial's non-interest income perform compared to Q4 2020?

Fulton Financial's non-interest income increased by 11% compared to the fourth quarter of 2020.