Fulton Financial Reports First Quarter Net Income of $49.5 Million, or $0.28 Per Share

LANCASTER, Pa.--()--Fulton Financial Corporation (NASDAQ:FULT) (“Fulton” or the “Corporation”) reported net income of $49.5 million, or $0.28 per diluted share, for the first quarter of 2018.

"Despite a seasonally weaker first quarter in terms of growth, our financial results benefited from a favorable interest rate environment, stable credit conditions, and a reduction in non-interest expenses,” said E. Philip Wenger, Chairman and CEO. “After declining in 2017, our commercial loan pipeline increased in the first quarter, and with a continued favorable interest rate environment, we remain optimistic that we can create meaningful earnings growth in 2018.”

Net income per diluted share increased 47.4% in comparison to the $0.19 reported for the fourth quarter of 2017 and 12.0% from the first quarter of 2017. Results for the fourth quarter of 2017 included a $15.6 million, or $0.09 per diluted share, charge for the re-measurement of net deferred tax assets (“Tax Charge”) resulting from the new 21% federal corporate income tax rate established by the Tax Cuts and Jobs Act enacted in December 2017.

Balance Sheet

Total average assets for the first quarter of 2018 were $19.9 billion, a decrease of $196.5 million from the fourth quarter of 2017. Average loans, net of unearned income, increased $100.8 million, or 0.6%, in comparison to the fourth quarter of 2017. Average loans and yields, by type, for the first quarter of 2018 in comparison to the fourth quarter of 2017 are summarized in the following table:

       
Three Months Ended Increase (decrease)
March 31, 2018 December 31, 2017 in Balance
Balance   Yield (1) Balance Yield (1) $   %
(dollars in thousands)
 
Real estate - commercial mortgage $ 6,305,821 4.16 % $ 6,232,674 4.09 % $ 73,147 1.2 %
Commercial - industrial, financial and agricultural 4,288,634 4.15 % 4,263,199 4.05 % 25,435 0.6 %
Real estate - residential mortgage 1,958,505 3.85 % 1,926,067 3.83 % 32,438 1.7 %
Real estate - home equity 1,538,974 4.65 % 1,560,713 4.52 % (21,739 ) (1.4 %)
Real estate - construction 984,242 4.22 % 1,004,166 4.27 % (19,924 ) (2.0 %)
Consumer 315,927 4.67 % 312,320 4.75 % 3,607 1.2 %
Leasing 260,780 4.53 % 253,340 4.48 % 7,440 2.9 %
Other   8,149 N/A   7,706 N/A   443   5.7 %
 
Total Average Loans, net of unearned income $ 15,661,032 4.19 % $ 15,560,185 4.14 % $ 100,847   0.6 %
 

(1) Presented on a fully-taxable equivalent basis using a 21% and 35% Federal tax rate and statutory interest expense disallowances for the three months ended March 31, 2018 and December 31, 2017, respectively.

 

Total average liabilities decreased $184.1 million, or 1.0%, from the fourth quarter of 2017, while average deposits decreased $636.5 million, or 4.0%. Average deposits and interest rates, by type, for the first quarter of 2018 in comparison to the fourth quarter of 2017 are summarized in the following table:

   
Three Months Ended Decrease
March 31, 2018   December 31, 2017 in Balance
Balance   Rate Balance   Rate $   %
(dollars in thousands)
 

Average Deposits, by type:

Noninterest-bearing demand $ 4,246,168 - % $ 4,454,456 - % $ (208,288 ) (4.7 %)
Interest-bearing demand 3,958,894 0.41 % 4,037,879 0.40 % (78,985 ) (2.0 %)
Savings and money market deposits   4,494,445 0.39 %   4,752,337 0.38 %   (257,892 ) (5.4 %)

Total average demand and savings

12,699,507 0.27 % 13,244,672 0.26 % (545,165 ) (4.1 %)
Brokered deposits 74,026 1.51 % 105,135 1.27 % (31,109 ) (29.6 %)
Time deposits   2,646,779 1.20 %   2,706,982 1.18 %   (60,203 ) (2.2 %)
 
Total Average Deposits $ 15,420,312 0.43 % $ 16,056,789 0.42 % $ (636,477 ) (4.0 %)
 

Asset Quality

Non-performing assets were $145.4 million, or 0.73% of total assets, at March 31, 2018, compared to $144.6 million, or 0.72% of total assets, at December 31, 2017 and $143.4 million, or 0.75% of total assets, at March 31, 2017.

Annualized net charge-offs for the quarter ended March 31, 2018 were 0.10% of total average loans compared to 0.14% and 0.09% for the quarters ended December 31, 2017 and March 31, 2017, respectively. The allowance for credit losses as a percentage of non-performing loans was 131% at March 31, 2018, unchanged from December 31, 2017 and March 31, 2017.

During the first quarter of 2018, Fulton recorded a $4.0 million provision for credit losses, compared to $6.7 million in the fourth quarter of 2017.

Net Interest Income and Margin

Net interest income for the first quarter of 2018 was $151.3 million, an increase of $1.9 million, or 1.3%, from the fourth quarter of 2017, driven by a six basis point increase in the net interest margin, to 3.35%. The improvement in the net interest margin resulted from a ten basis point increase in the average yield on interest-earning assets outpacing the four basis point increase in the average cost of interest-bearing liabilities.

Non-interest Income

Non-interest income in the first quarter of 2018, excluding investment securities gains, was $45.9 million, a decrease of $9.2 million, or 16.7%, in comparison to the fourth quarter of 2017. During the fourth quarter of 2017, a $5.1 million net gain was recognized upon the settlement of litigation. For the first quarter of 2018, other service charges and fees decreased $2.4 million, or 17.4%, due primarily to lower commercial loan interest rate swap fees and seasonal decreases in debit card fee income. Gains on sales of Small Business Administration loans and mortgage banking revenues also experienced seasonal declines.

Gains on sales of investment securities for the first quarter of 2018 were $19 thousand, a decrease of $1.9 million in comparison to the fourth quarter of 2017.

Non-interest Expense

Non-interest expense was $136.7 million in the first quarter of 2018, a decrease of $1.8 million, or 1.3%, compared to the fourth quarter of 2017. Excluding the amortization of tax credit investments, which decreased $1.7 million, and a $3.4 million write-off of certain accumulated capital expenditures in the fourth quarter of 2017, non-interest expense increased $3.3 million, or 2.5%, in the first quarter of 2018. This increase was primarily driven by a $2.3 million increase in salaries and benefits expense largely due to seasonal increases in payroll taxes, a $1.2 million increase in professional fees, driven by additional legal fees, a $1.1 million seasonal increase in occupancy expenses resulting from snow removal and utilities costs and approximately $0.8 million related to anticipated branch closure costs, partially offset by a decrease in FDIC insurance expense.

Income Tax Expense

The effective income tax rate for the first quarter of 2018 was 12.5%, as compared to 44.4% for the fourth quarter of 2017. Excluding the impact of the Tax Charge, the effective tax rate for the fourth quarter of 2017 would have been 18.9%. Based on the new corporate income tax rate effective January 1, 2018, Fulton’s effective tax rate in 2018 and future years is expected to be substantially lower than in 2017 and in prior years.

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, 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 related 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, 2017, which has been filed with the Securities and Exchange Commission and is 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
March 31 December 31 September 30 June 30 March 31
2018 2017 2017 2017 2017

Ending Balances

Investments $ 2,592,823 $ 2,547,956 $ 2,561,516 $ 2,488,699 $ 2,506,017
Loans, net of unearned income 15,696,284 15,768,247 15,486,899 15,346,617 14,963,177
Total assets 19,948,941 20,036,905 20,062,860 19,647,435 19,178,576
Deposits 15,477,103 15,797,532 16,141,780 15,357,361 15,090,344
Shareholders' equity 2,235,493 2,229,857 2,225,786 2,191,770 2,154,683
 

Average Balances

Investments $ 2,556,986 $ 2,566,337 $ 2,523,758 $ 2,488,684 $ 2,528,061
Loans, net of unearned income 15,661,032 15,560,185 15,392,067 15,127,205 14,857,562
Total assets 19,876,093 20,072,579 19,872,726 19,300,975 19,060,857
Deposits 15,420,312 16,056,789 15,875,469 15,089,104 14,886,327
Shareholders' equity 2,224,615 2,237,031 2,215,389 2,181,189 2,140,547
 

Income Statement

Net interest income $ 151,318 $ 149,413 $ 146,809 $ 141,563 $ 137,579
Provision for credit losses 3,970 6,730 5,075 6,700 4,800
Non-interest income 45,875 56,956 51,974 52,371 46,673
Non-interest expense 136,661 138,452 132,157 132,695 122,275
Income before taxes 56,562 61,187 61,551 54,539 57,177
Net income 49,480 34,001 48,905 45,467 43,380
Pre-provision net revenue 62,150 69,361 65,532 62,954 61,869
 

Per Share

Net income (basic) $ 0.28 $ 0.19 $ 0.28 $ 0.26 $ 0.25
Net income (diluted) 0.28 0.19 0.28 0.26 0.25
Cash dividends 0.12 0.14 0.11 0.11 0.11
Tangible common equity 9.71 9.70 9.68 9.50 9.31
Weighted average shares (basic) 175,303 175,132 174,991 174,597 174,150
Weighted average shares (diluted) 176,568 176,374 176,216 175,532 175,577
 

Asset Quality

Net charge-offs to average loans (annualized) 0.10 % 0.14 % 0.14 % 0.11 % 0.09 %
Non-accrual loans to total loans 0.78 % 0.79 % 0.80 % 0.80 % 0.78 %
Non-performing loans to total loans 0.86 % 0.85 % 0.88 % 0.88 % 0.88 %

Non-performing assets to total loans and other real estate owned

0.93 % 0.92 % 0.95 % 0.96 % 0.96 %
Non-performing assets to total assets 0.73 % 0.72 % 0.73 % 0.75 % 0.75 %
Allowance for credit losses to loans outstanding 1.12 % 1.12 % 1.13 % 1.14 % 1.15 %
Allowance for credit losses to non-performing loans 130.73 % 130.67 % 128.05 % 128.92 % 131.26 %

Non-performing assets to tangible shareholders' equity and allowance for credit losses(1)

7.73 % 7.71 % 7.87 % 8.02 % 7.99 %
Total delinquency rate 1.19 % 1.24 % 1.28 % 1.20 % 1.23 %
 

Profitability

Return on average assets 1.01 % 0.67 % 0.98 % 0.94 % 0.92 %
Return on average shareholders' equity 9.02 % 6.03 % 8.76 % 8.36 % 8.22 %
Return on average shareholders' equity (tangible)(1) 11.85 % 7.91 % 11.52 % 11.06 % 10.93 %
Net interest margin 3.35 % 3.29 % 3.27 % 3.29 % 3.26 %
Efficiency ratio(1) 67.48 % 64.24 % 64.30 % 65.33 % 64.23 %
 

Capital Ratios

Tangible common equity ratio(1) 8.78 % 8.71 % 8.67 % 8.68 % 8.70 %
Tier 1 leverage ratio(2) 9.20 % 8.93 % 8.97 % 9.06 % 9.02 %
Common equity Tier 1 capital ratio(2) 10.70 % 10.38 % 10.42 % 10.25 % 10.43 %
Tier 1 capital ratio(2) 10.70 % 10.38 % 10.42 % 10.25 % 10.43 %
Total risk-based capital ratio(2) 13.30 % 13.02 % 13.09 % 12.95 % 13.18 %
 

Financial information, as adjusted (3)

Net income $ 49,635
Net income per share, diluted $ 0.28
Return on average assets 0.98 %
Return on average shareholders' equity 8.80 %
Return on average shareholders' equity (tangible) 11.55 %
 

(1) Please refer to the calculation on the page titled “Reconciliation of Non-GAAP Measures” at the end of this document.

(2) Regulatory capital ratios as of March 31, 2018 are preliminary and remaining periods are actual.

(3) Excluding the re-measurement of net deferred tax assets of $15.6 million, which is considered a Non-GAAP based financial measure. Please refer to the calculation and management’s reasons for using this measure on the page titled “Reconciliation of Non-GAAP Measures" at the end of this document.

 
 
FULTON FINANCIAL CORPORATION
CONDENSED CONSOLIDATED ENDING BALANCE SHEETS (UNAUDITED)
dollars in thousands
            % Change from
March 31 December 31 September 30 June 30 March 31 December 31   March 31
2018   2017   2017   2017   2017   2017   2017
 

ASSETS

 
Cash and due from banks $ 100,151 $ 108,291 $ 99,803 $ 94,938 $ 93,844 -7.5 % 6.7 %
Other interest-earning assets 267,806 354,566 645,796 392,842 350,387 -24.5 % -23.6 %
Loans held for sale 23,450 31,530 23,049 62,354 24,783 -25.6 % -5.4 %
Investment securities 2,592,823 2,547,956 2,561,516 2,488,699 2,506,017 1.8 % 3.5 %
Loans, net of unearned income 15,696,284 15,768,247 15,486,899 15,346,617 14,963,177 -0.5 % 4.9 %
Allowance for loan losses   (163,217 )     (169,910 )     (172,245 )     (172,342 )     (170,076 ) -3.9 % -4.0 %
Net loans 15,533,067 15,598,337 15,314,654 15,174,275 14,793,101 -0.4 % 5.0 %
Premises and equipment 230,313 222,802 221,551 217,558 216,171 3.4 % 6.5 %
Accrued interest receivable 53,060 52,910 50,082 47,603 46,355 0.3 % 14.5 %
Goodwill and intangible assets 531,556 531,556 531,556 531,556 531,556 0.0 % 0.0 %
Other assets   616,715       588,957       614,853       637,610       616,362   4.7 % 0.1 %
 
Total Assets $ 19,948,941     $ 20,036,905     $ 20,062,860     $ 19,647,435     $ 19,178,576   -0.4 % 4.0 %
 

LIABILITIES AND SHAREHOLDERS' EQUITY

 
Deposits $ 15,477,103 $ 15,797,532 $ 16,141,780 $ 15,357,361 $ 15,090,344 -2.0 % 2.6 %
Short-term borrowings 937,852 617,524 298,751 694,859 453,317 51.9 % 106.9 %
Other liabilities 359,994 353,646 358,384 365,484 342,323 1.8 % 5.2 %
FHLB advances and long-term debt   938,499       1,038,346       1,038,159       1,037,961       1,137,909   -9.6 % -17.5 %
 
Total Liabilities 17,713,448 17,807,048 17,837,074 17,455,665 17,023,893 -0.5 % 4.1 %
 
Shareholders' equity   2,235,493       2,229,857       2,225,786       2,191,770       2,154,683   0.3 % 3.8 %
 
Total Liabilities and Shareholders' Equity $ 19,948,941     $ 20,036,905     $ 20,062,860     $ 19,647,435     $ 19,178,576   -0.4 % 4.0 %
 

LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL:

 
Loans, by type:
Real estate - commercial mortgage $ 6,332,508 $ 6,364,804 $ 6,275,140 $ 6,262,008 $ 6,118,533 -0.5 % 3.5 %
Commercial - industrial, financial and agricultural 4,299,072 4,300,297 4,223,075 4,245,849 4,167,809 0.0 % 3.1 %
Real estate - residential mortgage 1,976,524 1,954,711 1,887,907 1,784,712 1,665,142 1.1 % 18.7 %
Real estate - home equity 1,514,241 1,559,719 1,567,473 1,579,739 1,595,901 -2.9 % -5.1 %
Real estate - construction 976,131 1,006,935 973,108 938,900 882,983 -3.1 % 10.5 %
Consumer 326,766 313,783 302,448 283,156 288,826 4.1 % 13.1 %
Leasing and other   271,042       267,998       257,748       252,253       243,983   1.1 % 11.1 %
 
Total Loans, net of unearned income $ 15,696,284     $ 15,768,247     $ 15,486,899     $ 15,346,617     $ 14,963,177   -0.5 % 4.9 %
 
Deposits, by type:
Noninterest-bearing demand $ 4,291,821 $ 4,437,294 $ 4,363,915 $ 4,574,619 $ 4,417,733 -3.3 % -2.9 %
Interest-bearing demand 3,984,423 4,018,107 4,119,419 3,650,204 3,702,663 -0.8 % 7.6 %
Savings and money market accounts   4,487,277       4,586,746       4,790,985       4,386,128       4,251,574   -2.2 % 5.5 %
Total demand and savings 12,763,521 13,042,147 13,274,319 12,610,951 12,371,970 -2.1 % 3.2 %
Brokered deposits 64,195 90,473 109,936 - - -29.0 % 0.0 %
Time deposits   2,649,387       2,664,912       2,757,525       2,746,410       2,718,374   -0.6 % -2.5 %
 
Total Deposits $ 15,477,103     $ 15,797,532     $ 16,141,780     $ 15,357,361     $ 15,090,344   -2.0 % 2.6 %
 
Short-term borrowings, by type:
Customer repurchase agreements $ 165,186 $ 172,017 $ 185,945 $ 174,224 $ 181,170 -4.0 % -8.8 %
Customer short-term promissory notes 342,666 225,507 106,994 74,366 87,726 52.0 % N/M
Short-term FHLB advances 35,000 - - 240,000 130,000 0.0 % -73.1 %
Federal funds purchased   395,000       220,000       5,812       206,269       54,421   79.5 % N/M
 
Total Short-term Borrowings $ 937,852     $ 617,524     $ 298,751     $ 694,859     $ 453,317   51.9 % 106.9 %
 

N/M - Not meaningful

 
   
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
2018 2017 2017 2017 2017 2017 2017
 
Interest Income:
Interest income $ 177,687 $ 174,987 $ 171,511 $ 163,881 $ 158,487 1.5 % 12.1 %
Interest expense   26,369   25,574   24,702   22,318   20,908 3.1 % 26.1 %
 
Net Interest Income 151,318 149,413 146,809 141,563 137,579 1.3 % 10.0 %
Provision for credit losses   3,970   6,730   5,075   6,700   4,800 (41.0 %) (17.3 %)
 
Net Interest Income after Provision 147,348 142,683 141,734 134,863 132,779 3.3 % 11.0 %
 
Non-Interest Income:
Other service charges and fees:
Merchant fees 4,115 4,308 4,398 4,531 3,607 (4.5 %) 14.1 %
Debit card income 2,817 3,526 2,830 2,884 2,665 (20.1 %) 5.7 %
Commercial loan interest rate swap fees 1,291 2,914 1,954 3,768 3,058 (55.7 %) (57.8 %)
Letter of credit fees 992 1,037 1,056 1,109 1,200 (4.4 %) (17.3 %)
Foreign exchange income 533 510 470 446 334 4.6 % 59.7 %
Other   1,671   1,534   1,543   1,604   1,573 8.9 % 6.2 %
Total 11,419 13,829 12,251 14,342 12,437 (17.4 %) (8.2 %)
Service charges on deposit accounts:
Overdraft fees 5,145 5,609 5,844 5,648 5,469 (8.3 %) (5.9 %)
Cash management fees 4,317 3,669 3,624 3,614 3,537 17.7 % 22.1 %
Other   2,500   3,392   3,554   3,652   3,394 (26.3 %) (26.3 %)
Total 11,962 12,670 13,022 12,914 12,400 (5.6 %) (3.5 %)
Investment management and trust services 12,871 13,152 12,157 12,132 11,808 (2.1 %) 9.0 %
Mortgage banking income 4,193 4,386 4,805 6,141 4,596 (4.4 %) (8.8 %)
Other:
Credit card income 2,816 2,778 2,829 2,666 2,648 1.4 % 6.4 %
Small business administration lending income 357 1,355 565 1,163 429 (73.7 %) (16.8 %)
Other income   2,238   6,854   1,748   1,577   1,249 (67.3 %) 79.2 %
Total   5,411   10,987   5,142   5,406   4,326 (50.7 %) 25.1 %
Non-Interest Income before Investment Securities Gains 45,856 55,024 47,377 50,935 45,567 (16.7 %) 0.6 %
Investment securities gains   19   1,932   4,597   1,436   1,106 (99.0 %) (98.3 %)
 
Total Non-Interest Income 45,875 56,956 51,974 52,371 46,673 (19.5 %) (1.7 %)
 
Non-Interest Expense:

 

Salaries and employee benefits 75,768 73,504 72,894 74,496 69,236 3.1 % 9.4 %
Net occupancy expense 13,632 12,549 12,180 12,316 12,663 8.6 % 7.7 %
Data processing and software 10,473 10,401 10,301 9,054 8,979 0.7 % 16.6 %
Other outside services 8,124 7,665 6,582 7,708 5,546 6.0 % 46.5 %
Professional fees 4,816 3,632 3,388 2,931 2,737 32.6 % 76.0 %
Equipment expense 3,534 3,244 3,298 3,034 3,359 8.9 % 5.2 %
FDIC insurance expense 2,953 3,618 3,007 2,366 2,058 (18.4 %) 43.5 %
Marketing 2,250 1,725 2,089 2,234 1,986 30.4 % 13.3 %
Amortization of tax credit investments 1,637 3,376 3,503 3,151 998 (51.5 %) 64.0 %
Other   13,474   18,738   14,915   15,405   14,713 (28.1 %) (8.4 %)
 
Total Non-Interest Expense   136,661   138,452   132,157   132,695   122,275 (1.3 %) 11.8 %
 
Income before Income Taxes 56,562 61,187 61,551 54,539 57,177 (7.6 %) (1.1 %)
Income tax expense   7,082   27,186   12,646   9,072   13,797 (73.9 %) (48.7 %)
 
Net Income $ 49,480 $ 34,001 $ 48,905 $ 45,467 $ 43,380 45.5 % 14.1 %
 
           
FULTON FINANCIAL CORPORATION
CONDENSED CONSOLIDATED AVERAGE BALANCE SHEET ANALYSIS (UNAUDITED)
dollars in thousands
Three Months Ended
March 31, 2018 December 31, 2017 March 31, 2017
Average     Yield/ Average Yield/ Average Yield/
Balance Interest (1) Rate Balance Interest (1) Rate Balance Interest (1) Rate

ASSETS

 
Interest-earning assets:
Loans, net of unearned income $ 15,661,032 $ 162,262 4.19 % $ 15,560,185 $ 162,050 4.14 % $ 14,857,562 $ 146,650 4.00 %
 
Taxable investment securities 2,198,838 13,193 2.40 % 2,177,833 12,218 2.24 % 2,145,656 11,914 2.22 %
Tax-exempt investment securities 412,830 3,753 3.64 % 411,398 4,526 4.40 % 403,856 4,383 4.34 %
Equity securities   509     5   3.93 %   2,219     33   5.91 %   11,740     176   6.08 %
 
Total Investment Securities 2,612,177 16,951 2.60 % 2,591,450 16,777 2.59 % 2,561,252 16,473 2.57 %
 
Loans held for sale 20,015 216 4.31 % 21,874 245 4.48 % 15,857 187 4.72 %
Other interest-earning assets   302,783     1,172   1.55 %   571,981     1,755   1.22 %   312,295     842   1.08 %
 
Total Interest-earning Assets 18,596,007 180,601 3.93 % 18,745,490 180,827 3.83 % 17,746,966 164,152 3.74 %
 

Noninterest-earning assets:

Cash and due from banks 105,733 112,958 116,529
Premises and equipment 230,247 223,698 217,875
Other assets 1,113,326 1,163,686 1,149,621
Less: allowance for loan losses   (169,220 )   (173,253 )   (170,134 )
 
Total Assets $ 19,876,093   $ 20,072,579   $ 19,060,857  
 
 

LIABILITIES AND SHAREHOLDERS' EQUITY

 
Interest-bearing liabilities:
Demand deposits $ 3,958,894 $ 4,004 0.41 % $ 4,037,879 $ 4,111 0.40 % $ 3,650,931 $ 2,239 0.25 %
Savings deposits 4,494,445 4,367 0.39 % 4,752,337 4,594 0.38 % 4,194,216 2,211 0.21 %
Brokered deposits 74,026 276 1.51 % 105,135 336 1.27 % - -

-

%
Time deposits   2,646,779     7,803   1.20 %   2,706,982     8,041   1.18 %   2,739,453     7,351   1.09 %
 
Total Interest-bearing Deposits 11,174,144 16,450 0.60 % 11,602,333 17,082 0.58 % 10,584,600 11,801 0.45 %
 
Short-term borrowings 896,839 2,041 0.91 % 391,284 372 0.38 % 712,497 855 0.48 %
FHLB advances and long-term debt   987,315     7,878   3.21 %   1,038,257     8,120   3.12 %   990,044     8,252   3.35 %
 

Total Interest-bearing Liabilities

13,058,298 26,369 0.82 % 13,031,874 25,574 0.78 % 12,287,141 20,908 0.69 %
 
Noninterest-bearing liabilities:
Demand deposits 4,246,168 4,454,456 4,301,727
Other   347,012     349,218     331,442  
 
Total Liabilities 17,651,478 17,835,548 16,920,310
 
Shareholders' equity   2,224,615     2,237,031     2,140,547  
 
Total Liabilities and Shareholders' Equity $ 19,876,093   $ 20,072,579   $ 19,060,857  
 
Net interest income/net interest margin (fully taxable equivalent) 154,232 3.35 % 155,253 3.29 % 143,244 3.26 %
Tax equivalent adjustment   (2,914 )   (5,840 )   (5,665 )
 
Net interest income $ 151,318   $ 149,413   $ 137,579  
 

(1) Three months ended March 31, 2018 presented on a fully taxable-equivalent basis using a 21% Federal tax rate and statutory interest expense disallowances. Prior periods are presented on a fully taxable-equivalent basis using a 35% Federal tax rate and statutory interest expense disallowances.

Note: The weighted average interest rate on total average interest-bearing liabilities and average non-interest bearing demand deposits (“cost of funds”) was 0.62%, 0.58% and 0.51% for the three months ended March 31, 2018, December 31, 2017 and March 31, 2017, respectively.

AVERAGE LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL:

             
Three Months Ended   % Change from
March 31 December 31 September 30

June 30

March 31 December 31 March 31
2018 2017 2017 2017 2017 2017 2017
 
Loans, by type:
Real estate - commercial mortgage $ 6,305,821 $ 6,232,674 $ 6,208,630 $ 6,163,844 $ 6,039,140 1.2 % 4.4 %
Commercial - industrial, financial and agricultural 4,288,634 4,263,199 4,257,075 4,221,025 4,205,072 0.6 % 2.0 %
Real estate - residential mortgage 1,958,505 1,926,067 1,841,559 1,707,929 1,637,669 1.7 % 19.6 %
Real estate - home equity 1,538,974 1,560,713 1,569,898 1,587,680 1,613,249 (1.4 %) (4.6 %)
Real estate - construction 984,242 1,004,166 943,029 897,321 840,966 (2.0 %) 17.0 %
Consumer 315,927 312,320 318,546 300,967 284,352 1.2 % 11.1 %
Leasing and other   268,930   261,046   253,330   248,439   237,114 3.0 % 13.4 %
 
Total Loans, net of unearned income $ 15,661,032 $ 15,560,185 $ 15,392,067 $ 15,127,205 $ 14,857,562 0.6 % 5.4 %
 
Deposits, by type:
Noninterest-bearing demand $ 4,246,168 $ 4,454,456 $ 4,494,897 $ 4,387,517 $ 4,301,727 (4.7 %) (1.3 %)
Interest-bearing demand 3,958,894 4,037,879 3,943,118 3,690,059 3,650,931 (2.0 %) 8.4 %
Savings and money market accounts   4,494,445   4,752,337   4,603,155   4,315,495   4,194,216 (5.4 %) 7.2 %
Total demand and savings 12,699,507 13,244,672 13,041,170 12,393,071 12,146,874 (4.1 %) 4.5 %
Brokered deposits 74,026 105,135 89,767

-

- (29.6 %) 100.0 %
Time deposits   2,646,779   2,706,982   2,744,532   2,696,033   2,739,453 (2.2 %) (3.4 %)
 
Total Deposits $ 15,420,312 $ 16,056,789 $ 15,875,469 $ 15,089,104 $ 14,886,327 (4.0 %) 3.6 %
 
Short-term borrowings, by type:
Customer repurchase agreements $

175,292

$ 179,948 $ 176,415 $ 199,657 $ 199,403

(2.6

%)

(12.1

%)
Customer short-term promissory notes 308,725 195,951 80,147 77,554 79,985 57.6 % N/M
Federal funds purchased 379,822 15,374 90,453 242,375 308,220 N/M 23.2 %
Short-term FHLB advances and other borrowings  

33,000

  11   55,326   113,516   124,889 N/M

(73.6

%)

 
Total Short-term Borrowings $ 896,839 $ 391,284 $ 402,341 $ 633,102 $ 712,497 129.2 % 25.9 %
 
N/M - Not meaningful
 
FULTON FINANCIAL CORPORATION
ASSET QUALITY INFORMATION (UNAUDITED)
dollars in thousands
         
Three Months Ended
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
2018 2017 2017 2017 2017

ALLOWANCE FOR CREDIT LOSSES:

 
Balance at beginning of period $ 176,084 $ 174,749 $ 174,998 $ 172,647 $ 171,325
 
Loans charged off:
Commercial - industrial, financial and agricultural (4,005 ) (5,473 ) (2,714 ) (5,353 ) (5,527 )
Consumer and home equity (1,300 ) (1,071 ) (920 ) (1,022 ) (1,554 )
Real estate - commercial mortgage (267 ) (220 ) (483 ) (242 ) (1,224 )
Real estate - residential mortgage (162 ) (152 ) (195 ) (124 ) (216 )
Real estate - construction (158 )

-

(2,744 ) (774 ) (247 )
Leasing and other   (505 )   (457 )   (739 )   (1,200 )   (639 )
Total loans charged off (6,397 ) (7,373 ) (7,795 ) (8,715 ) (9,407 )
Recoveries of loans previously charged off:
Commercial - industrial, financial and agricultural 1,075 941 665 1,974 4,191
Consumer and home equity 385 466 445 685 373
Real estate - commercial mortgage 279 178 106 934 450
Real estate - residential mortgage 107 186 219 151 230
Real estate - construction 306 32 629 373 548
Leasing and other   210     175     407     249     137  
Recoveries of loans previously charged off   2,362     1,978     2,471     4,366     5,929  
Net loans charged off (4,035 ) (5,395 ) (5,324 ) (4,349 ) (3,478 )
Provision for credit losses 3,970 6,730 5,075 6,700 4,800
         
Balance at end of period $ 176,019   $ 176,084   $ 174,749   $ 174,998   $ 172,647  
 
Net charge-offs to average loans (annualized)   0.10 %   0.14 %   0.14 %   0.11 %   0.09 %
 

NON-PERFORMING ASSETS:

 
Non-accrual loans $ 122,966 $ 124,749 $ 123,345 $ 122,600 $ 117,264
Loans 90 days past due and accruing   11,676     10,010     13,124     13,143     14,268  
Total non-performing loans 134,642 134,759 136,469 135,743 131,532
Other real estate owned   10,744     9,823     10,542     11,432     11,906  
 
Total non-performing assets $ 145,386   $ 144,582   $ 147,011   $ 147,175   $ 143,438  
 

NON-PERFORMING LOANS, BY TYPE:

 
Commercial - industrial, financial and agricultural $ 54,915 $ 54,309 $ 54,209 $ 51,320 $ 43,826
Real estate - commercial mortgage 36,183 35,446 34,650 32,576 36,713
Real estate - residential mortgage 20,169 20,972 21,643 21,846 23,597
Real estate - construction 10,931 12,197 13,415 16,564 13,550
Consumer and home equity 12,272 11,803 12,472 13,156 13,408
Leasing   172     32     80     281     438  
 
Total non-performing loans $ 134,642   $ 134,759   $ 136,469   $ 135,743   $ 131,532  
 
 

TROUBLED DEBT RESTRUCTURINGS (TDRs), BY TYPE:

 
Real-estate - residential mortgage $ 25,602 $ 26,016 $ 26,193 $ 26,368 $ 27,033
Real-estate - commercial mortgage 18,181 13,959 14,439 13,772 15,237
Consumer and home equity 16,091 15,584 14,822 12,064 9,638
Commercial - industrial, financial and agricultural 11,740 10,820 7,512 8,086 7,441
Real estate - construction   -    

-

    169     1,475     273  
Total accruing TDRs 71,614 66,379 63,135 61,765 59,622
Non-accrual TDRs(1)   24,897     29,051     28,742     29,373     27,220  
Total TDRs $ 96,511   $ 95,430   $ 91,877   $ 91,138   $ 86,842  
 
(1) Included within non-accrual loans above.
Total Delinquency %

DELINQUENCY RATES, BY TYPE:

Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
2018 2017 2017 2017 2017
 
 
Real estate - commercial mortgage 0.77 % 0.77 % 0.75 % 0.66 % 0.78 %
Commercial - industrial, financial and agricultural 1.48 % 1.50 % 1.54 % 1.43 % 1.25 %
Real estate - construction 1.12 % 1.32 % 1.50 % 1.82 % 1.99 %
Real estate - residential mortgage 1.91 % 2.04 % 2.25 % 2.08 % 2.44 %
Consumer, home equity, leasing and other 1.20 % 1.37 % 1.38 % 1.34 % 1.22 %
         
Total   1.19 %   1.24 %   1.28 %   1.20 %   1.23 %
 
FULTON FINANCIAL CORPORATION
RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED)
in thousands, except per share data and percentages
   

Explanatory note:

This press release contains supplemental financial information, as detailed below, which has been derived by methods other than Generally Accepted Accounting Principles ("GAAP"). The Corporation has presented these non-GAAP financial measures because it believes that these measures provide useful and comparative information to assess trends in the Corporation's results of operations. Presentation of these non-GAAP financial measures is consistent with how the Corporation evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Corporation's industry. Management believes that these non-GAAP financial measures, in addition to GAAP measures, are also useful to investors to evaluate the Corporation's results. Investors should recognize that the Corporation's presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures, and the Corporation strongly encourages a review of its condensed consolidated financial statements in their entirety. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measure follow:
 
           
Three Months Ended
March 31 December 31 September 30 June 30 March 31
2018 2017 2017 2017 2017

Shareholders' equity (tangible), per share

Shareholders' equity $ 2,235,493 $ 2,229,857 $ 2,225,786 $ 2,191,770 $ 2,154,683
Less: Goodwill and intangible assets   (531,556 )   (531,556 )   (531,556 )   (531,556 )   (531,556 )
Tangible shareholders' equity (numerator) $ 1,703,937   $ 1,698,301   $ 1,694,230   $ 1,660,214   $ 1,623,127  
 
Shares outstanding, end of period (denominator)   175,404     175,170     175,057     174,740     174,343  
 
Shareholders' equity (tangible), per share $ 9.71   $ 9.70   $ 9.68   $ 9.50   $ 9.31  
 

Return on average shareholders' equity (tangible)

Net Income (numerator)

$ 49,480   $ 34,001   $ 48,905   $ 45,467   $ 43,380  
 
Average shareholders' equity $ 2,224,615 $ 2,237,031 $ 2,215,389 $ 2,181,189 $ 2,140,547
Less: Average goodwill and intangible assets   (531,556 )   (531,556 )   (531,556 )   (531,556 )   (531,556 )
Average tangible shareholders' equity (denominator) $ 1,693,059   $ 1,705,475   $ 1,683,833   $ 1,649,633   $ 1,608,991  
 
Return on average shareholders' equity (tangible), annualized   11.85 %   7.91 %   11.52 %   11.06 %   10.93 %
 

Tangible Common Equity to Tangible Assets (TCE Ratio)

Shareholders' equity $ 2,235,493 $ 2,229,857 $ 2,225,786 $ 2,191,770 $ 2,154,683
Less: Intangible assets   (531,556 )   (531,556 )   (531,556 )   (531,556 )   (531,556 )
Tangible shareholders' equity (numerator) $ 1,703,937   $ 1,698,301   $ 1,694,230   $ 1,660,214   $ 1,623,127  
 
Total assets $ 19,948,941 $ 20,036,905 $ 20,062,860 $ 19,647,435 $ 19,178,576
Less: Intangible assets   (531,556 )   (531,556 )   (531,556 )   (531,556 )   (531,556 )
Total tangible assets (denominator) $ 19,417,385   $ 19,505,349   $ 19,531,304   $ 19,115,879   $ 18,647,020  
 
Tangible Common Equity to Tangible Assets   8.78 %   8.71 %   8.67 %   8.68 %   8.70 %
 

Efficiency ratio

Non-interest expense $ 136,661 $ 138,452 $ 132,157 $ 132,695 $ 122,275
Less: Amortization of tax credit investments   (1,637 )   (3,376 )   (3,503 )   (3,151 )   (998 )
Non-interest expense (numerator) $ 135,024   $ 135,076   $ 128,654   $ 129,544   $ 121,277  
 
Net interest income (fully taxable equivalent) $ 154,232 $ 155,253 $ 152,721 $ 147,349 $ 143,243
Plus: Total Non-interest income 45,875 56,956 51,974 52,371 46,673
Less: Investment securities gains   (19 )   (1,932 )   (4,597 )   (1,436 )   (1,106 )
Net interest income (denominator) $ 200,088   $ 210,277   $ 200,098   $ 198,284   $ 188,810  
 
Efficiency ratio   67.48 %   64.24 %   64.30 %   65.33 %   64.23 %
 

Non-performing assets to tangible shareholders' equity and allowance for credit losses

Non-performing assets (numerator) $ 145,386   $ 144,582   $ 147,011   $ 147,175   $ 143,438  
 
Tangible shareholders' equity $ 1,703,937 $ 1,698,301 $ 1,694,230 $ 1,660,214 $ 1,623,127
Plus: Allowance for credit losses   176,019     176,084     174,749     174,998     172,647  
Tangible shareholders' equity and allowance for credit losses (denominator) $ 1,879,956   $ 1,874,385   $ 1,868,979   $ 1,835,212   $ 1,795,774  
 
Non-performing assets to tangible shareholders' equity and allowance for credit losses   7.73 %   7.71 %   7.87 %   8.02 %   7.99 %
 

Pre-provision net revenue

Net interest income $ 151,318 $ 149,413 $ 146,809 $ 141,563 $ 137,579
Non-interest income 45,875 56,956 51,974 52,371 46,673
Less: Investment securities gains   (19 )   (1,932 )   (4,597 )   (1,436 )   (1,106 )
Total revenue $ 197,174   $ 204,437   $ 194,186   $ 192,498   $ 183,146  
 
Non-interest expense $ 136,661 $ 138,452 $ 132,157 $ 132,695 $ 122,275
Less: Amortization of tax credit investments   (1,637 )   (3,376 )   (3,503 )   (3,151 )   (998 )
Total non-interest expense $ 135,024   $ 135,076   $ 128,654   $ 129,544   $ 121,277  
 
Pre-provision net revenue $ 62,150   $ 69,361   $ 65,532   $ 62,954   $ 61,869  
 
 

FULTON FINANCIAL CORPORATION

RECONCILIATION OF NON-GAAP MEASURES CONTINUED (UNAUDITED)

in thousands, except per share data and percentages

 

Reconciliation of Net Income; Net Income per share, diluted; and Selected Financial Ratios, adjusted to exclude the Tax Charge recognized in the fourth quarter of 2017 related to the re-measurement of net deferred tax assets:

                       

Three Months Ended

December 31
2017

Net income and Net income per share, diluted

Net income $ 34,001
Plus: Re-measurement of net deferred tax assets   15,634  
Net Income, adjusted (numerator) $ 49,635  
 
Weighted average shares (diluted) (denominator)   176,374  
 
Net income per share, diluted $ 0.28  
 

Return on average assets

Net income $ 34,001
Plus: Re-measurement of net deferred tax assets   15,634  
Net Income, adjusted (numerator) $ 49,635  
 
Average assets (denominator) $ 20,072,579  
 
Return on average assets, annualized   0.98 %
 

Return on average shareholders' equity

Net income $ 34,001
Plus: Re-measurement of net deferred tax assets   15,634  
Net Income, adjusted (numerator) $ 49,635  
 
Average shareholders' equity (denominator) $ 2,237,031  
 
Return on average shareholders' equity, annualized   8.80 %
 
 

Return on average shareholders' equity (tangible)

Net Income, as reported $ 34,001
Plus: Re-measurement of net deferred tax assets   15,634  
Net Income, adjusted (numerator) $ 49,635  
 
Average shareholders' equity $ 2,237,031
Less: Average goodwill and intangible assets   (531,556 )
Average tangible shareholders' equity (denominator) $ 1,705,475  
 
Return on average shareholders' equity (tangible), annualized   11.55 %
 

Contacts

Fulton Financial Corporation
Media Contact:
Laura Wakeley, 717-291-2616
or
Investor Contact:
Jason Weber, 717-327-2394

Contacts

Fulton Financial Corporation
Media Contact:
Laura Wakeley, 717-291-2616
or
Investor Contact:
Jason Weber, 717-327-2394