Fulton Financial Corporation (FULT) Earnings Call Transcript
July 23, 2026
Earnings Call Speaker Segments
Hello, and welcome to Fulton Financial's Second Quarter 2026 Conference Call. [Operator Instructions] I would now like to hand the conference over to Pat Lafferty. Sir, you may begin.
Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the second quarter ending June 30, 2026. Your host for today's conference call is Curt Myers, Chairman, Chief Executive Officer and President. Joining Curt is Rick Kraemer, Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These documents can be found on our website at fult.com by clicking on Investor Relations and then on News. These slides can also be found on the Events and Presentations page under Investor Relations on our website. Today's conference call will contain forward-looking statements. These statements represent our expectations about the future and are subject to risks and uncertainty. Our actual results may differ materially from these statements. Please refer to our earnings release and related slide presentation under the heading Forward-Looking Statements for a discussion of the factors that could cause actual results to differ. In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and Slides 26 through 33 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. Now I would like to turn the call over to your host, Curt Myers.
Well, thanks, Pat, and good morning, everyone. For today's call, I'll share a few details on our second quarter performance and provide some observations on current business trends. Then Rick will review our financial results in more detail and discuss our outlook for the remainder of 2026. After our prepared remarks, we'll be happy to take any questions you may have. The second quarter represented continued strong performance for Fulton. We delivered strong financial results. We maintained focus on supporting our customers, team members and communities. We are proud of the positive impact we're making within our company and throughout our markets. We encourage you to view our recently published corporate social responsibility report, which is available on our Investor Relations website. This report highlights the many ways our company makes a positive impact. Our strong performance reflects the dedication of our team members and the disciplined execution of our strategy, which continues to guide our decisions and position the company for long-term success. We continue to focus on growing the company, delivering effectively for customers, operating with excellence so that we can continue to serve all of our stakeholders. We made meaningful progress in each of these areas during the quarter. Operating earnings improved as growth was solid, capital levels continued to grow and overall credit performance was favorable. Our teams continue to deepen customer relationships and delivered exceptional service while identifying new opportunities for growth across our footprint. We also achieved an important milestone during the quarter with the successful completion of the Blue Foundry acquisition on April 1 and the subsequent merger and integration of Blue Foundry Bank on July 11. This transaction advances our strategy by expanding our presence in Northern New Jersey, enhancing our community banking model and increasing our ability to serve customers in an attractive and growing market. We believe the combination creates meaningful opportunities for growth and long-term value creation. I want to thank our team for their efforts throughout this process. Completing this transaction in such a timely manner requires a tremendous amount of work and teamwork and collaboration and positions us for continued growth. Our results this quarter reflect strong performance across a number of key areas. Profitability was a record high for the quarter. Operating net income available to common shareholders grew to $115.9 million or $0.60 per diluted share. Operating earnings on average tangible common equity improved to 15.71%. Operating return on average assets increased to 1.39% and tangible book value per share grew 13% linked quarter annualized. Loan growth was solid during the quarter, including the positive effect from Blue Foundry. Organic growth was driven primarily by our consumer business. Overall loan activity remains broad-based and across all of our markets. Our team members continue to have productive discussions with customers regarding growth, investment and capital needs. We believe Fulton is well positioned to support those opportunities and continue to generate disciplined growth moving forward. Deposit balances increased from the prior quarter, including the benefit from the Blue Foundry transaction. Organic deposit trends were as expected on a seasonal basis. Deposit competition within our market has been consistent with recent quarters, and we continue to benefit from strong customer relationships and a diversified funding base across both our consumer, wealth management and commercial businesses. Additionally, our noninterest income business continued to generate steady fee income, further diversifying revenue sources and strengthening overall financial performance. Compared to the prior quarter, commercial fee income increased 9%. Consumer fee income increased 8% and wealth management assets under management and administration reached a record $18.4 billion at quarter end. Our capital position further strengthened during the quarter. We repurchased $11.1 million of common stock while increasing tangible book value and improving our common equity Tier 1 ratio to approximately 12.1%. Our solid capital position provides meaningful flexibility to support customer growth, execute strategic initiatives and drive long-term shareholder value. Finally, I'd like to touch on the credit environment. Our credit performance remains solid and overall asset quality metrics remain favorable. As we move through the second half of the year, we remain focused on executing on our strategy and building on the strong performance delivered this quarter. With that, I'll turn the call over to Rick to review our second quarter financial results in more detail.
Thank you, Curt, and good morning, everyone. Fulton delivered another quarter of strong financial performance, highlighted by record operating earnings and continued balance sheet growth. For the second quarter, net income available to common shareholders was $99.9 million or $0.52 per diluted share. Operating earnings were $115.9 million or $0.60 per diluted share, up from $0.55 per diluted share in the first quarter. The improvement in operating performance was driven primarily by higher net interest income, expanded fee revenue and continued disciplined balance sheet management. Net interest income increased $22.2 million or approximately 8% linked quarter to $284.3 million. The majority of this growth was attributable to the Blue Foundry acquisition, which contributed approximately $17.5 million during the quarter. Total loan interest income increased by $32.6 million, reflecting both acquisition-related growth and higher average balances. We also benefited from $5.2 million of purchase accounting accretion from the acquired Blue Foundry loans in addition to $9.9 million of accretion associated with the Republic acquisition. Our net interest margin expanded to 3.6%, up 2 basis points from the first quarter and up 13 basis points from the year prior period. The second quarter NIM was impacted by 1 basis point due to carrying overlapping sub debt expense for a portion of the period. Overall, this performance demonstrates our ability to maintain strong earning asset yields while effectively managing funding costs. Deposit costs increased modestly during the quarter and overall funding costs remain well controlled. Ending loans totaled $25.9 billion, an increase of $1.7 billion from March 31. Approximately $1.6 billion of the increase came from the acquired Blue Foundry balances. Excluding the acquisition, organic loan growth was approximately $103 million. Within the portfolio, we continue to see strength in consumer-related lending, including residential mortgage and home equity production, while commercial loan balances declined modestly during the quarter. Deposits increased $1.5 billion during the quarter to $28.3 billion, mostly attributable to the Blue Foundry acquisition. Our deposit franchise remains a key competitive advantage and continues to support profitable balance sheet growth. Noninterest income increased to $79.3 million, up $9.5 million from the first quarter. The largest driver was a $7.3 million increase in income from equity method investments, including approximately $6.9 million of gain related to an investment sold during the quarter. Mortgage banking revenue also improved by approximately $1 million, reflecting stronger production activity. Across our fee businesses, treasury management, card services and commercial banking revenues increased and continue to provide meaningful diversification to our revenue stream. Total noninterest expense was $231 million compared with $200.3 million in the prior quarter. Operating noninterest expense was $210.6 million. Items excluded from operating results included $13.8 million of acquisition-related expenses, $5.9 million of intangible amortization and approximately $0.8 million of debt extinguishment costs associated with the redemption of subordinated debt. Notably, a $2.1 million pension plan charge was recorded during the quarter and is included in operating noninterest expense. As Curt mentioned, the Blue Foundry system conversion was completed successfully on July 11, and we remain focused on realizing anticipated cost savings and operational efficiencies going forward. Credit quality remains sound and generally consistent with our expectations. Provision expense totaled $4.9 million compared with $14.4 million in the first quarter. The allowance for credit losses on loans ended the quarter at $382.6 million, representing 1.48% of total loans. The quarter included the establishment of approximately $31 million of initial allowance for credit losses on acquired Blue Foundry loans. Annualized net charge-offs were 0.34% of average loans, up from 0.25% in the previous quarter. Nonperforming assets totaled $187.1 million or 0.54% of total assets, remaining relatively stable as a percentage of assets. Overall, portfolio performance remains healthy, reserve coverage is strong and our credit outlook remains stable. Our capital position remains a significant source of strength. Common equity Tier 1 ratio of approximately 12.1% increased from 11.9% in the prior quarter. Tangible common equity improved to 8.8%, up 26 basis points quarter-over-quarter. During the quarter, we issued $300 million of fixed to floating rate subordinated notes due 2036 and redeemed $195 million of subordinated notes due 2030, enhancing our capital structure while maintaining balance sheet flexibility. We also continued returning capital to shareholders through share repurchases, buying back 525,000 shares during the quarter at an average price of $21.19 per share, representing approximately $11.1 million of capital. Total repurchases under the 2026 authorization reached $35.6 million through June 30. We have approximately $115 million remaining under the current program. Looking ahead to the remainder of 2026, our outlook remains positive. Given our performance during the first half of the year, we are making some minor adjustments to guidance to reflect performance through the midpoint of the year. We are narrowing our range for net interest income to $1.12 billion to $1.135 billion and adjusting our full year loan growth to low single digits. We are lowering our range for loan loss provision to $40 million to $60 million. We are raising the low end of the noninterest income range to $290 million from $285 million. And we are tightening our range for operating noninterest expense to $810 million to $830 million. There is no change to our full year tax range. And with that, I'll turn the call back to Curt.
In summary, the second quarter results reflect strong execution across the organization. We generated record operating earnings, expanded our balance sheet due to the Blue Foundry acquisition, maintained solid asset quality, increased capital levels and successfully completed a major integration effort. As we move forward into the second half of 2026, our focus will be on capturing the strategic and financial benefits of Blue Foundry, continuing disciplined organic growth, maintaining credit quality and delivering sustainable shareholder value. Thank you for your continued interest in Fulton. And, operator, I'll turn the call over to you for questions.
[Operator Instructions] Our first question comes from the line of Daniel Tamayo with Raymond James.
Yes. Maybe starting just on the balance sheet growth side, specifically on the loans. So I guess, reducing the guidance for the back half to the low single-digit range, as we think about -- well, I guess, first, what's the driver of that? And then second, as we think about kind of a more normalized growth rate for you guys in 2027 and just kind of overall, what would it take to be able to accelerate back into the mid-single-digit type range for you guys?
Yes, Danny, we're really modifying the annual guidance. So it's really just reflective of the performance in the first 6 months. So we had more modest growth in the first 6 months, and we expect the back half growth to kind of go back to previous expectations. So it's really the annual guide. We remain disciplined on credit terms and defending the margin on pricing. This can impact individual loan originations. I think the key thing is we have good customer retention. We're adding people, we're adding customers. And it's really the moderation in that target is just reflective of the first quarter. We just did the successful integration in the second quarter. So you think about it, you have a -- first quarter is typically seasonally slower. We have an integration in the second quarter. We just expect second half to go back to what our expectations were. So on an annual basis, that moderates it to low single digit. That's really all that's there.
Okay. All right. Well, thank you for that clarification then. So it sounds like expectations still in kind of that mid-single-digit range going forward, which is great. And I guess my second question was a little bit framed around potentially a slower revenue growth, but maybe that's not the case given the loan growth. But just your thoughts on being able to generate positive operating leverage going forward, assuming, and I'm sure we'll get into the margin with someone else, but assuming maybe a tighter margin path from the increase in competition that we've been seeing.
Yes. So as we look forward, we think we can continue to generate positive operating leverage. We have some things in the back half of the year as we do the full integration, get the full cost saves from Blue Foundry. We get organic growth trending up from the first half of the year. We really think we're positioned well. I mean the change in guidance is really, we have 6 months of actual and trying to give you a feel for kind of what the full year looks like from here.
Great. And sorry, if I can just go back to the loan growth guide quickly, and then I'll step back. But just on the -- I don't know if I saw a number of pay downs or payoffs in the second quarter. If you have what those were and what you're assuming in the back half? That would be helpful as well.
Yes, Danny. So actual payoffs in the second quarter were running around, call it, $250 million a month. So that's amortization and pay downs. And then you have another, call it, $100 million a month of prepayments. We would expect that to remain fairly constant, potentially accelerating a little bit in third quarter just because of some larger loans knowing that are maturing, but it's been pretty steady.
Our next question comes from the line of David Bishop with Hovde Group.
I was wondering if you could speak to maybe what you're seeing in terms of the funding side of the balance sheet, deposit pricing competition. Just curious where you see the direction in terms of overall funding costs moving into the second half of the year.
Yes. Just a little bit on market overall. I mean we had a pretty good quarter on deposit growth because it tends to trend down within the quarter on our municipal business. So you look on an overall basis, we were pretty pleased with funding and deposit flows in the second quarter. We're effectively competing in the marketplace and kind of our relational strategy and the diversification of our deposit base is, kind of, serving us really well. We feel it's a real strength. And it was a good quarter. As we look forward on pricing, it's a competitive market. We ticked up a little bit, a couple of basis points. That trend probably continues. I'll give it to Rick to give you a little more details on pricing and impact.
Yes, excuse me. I would say, so, ending the quarter, deposit costs were about 2 basis points higher than the average. I would expect a kind of similar trend in terms of deposit costs from what you saw in second quarter into third quarter. There are some benefits we see, obviously, there was -- second quarter tends to be a lower municipal and often the offset to that is funding with some shorter-term higher-cost wholesale. So that will reverse in third quarter, which does help a little bit on the incremental funding. But generally speaking, a similar trend to what we saw in 2Q, I think, is a reasonable expectation going forward.
Okay. Got it. Then a follow-up, maybe, Curt, in terms of M&A focus with Blue Foundry in the rearview mirror. Just curious, maybe less size or maybe inclusive of size in regions that maybe whet your appetite more than others?
Yes. I mean our strategy remains the same. We've talked about it. I think our strategy will probably always be the same. $1 billion to $5 billion community banks. Blue Foundry is a great example of that, really gives us great opportunities to expand in certain markets. And then it sets us up for accelerated growth in those markets as we add people and product and capability in those markets. We saw that happen in Philadelphia post the Republic acquisition, and we got really good momentum in all of our business lines because of that. We see the same thing with North Jersey and Blue Foundry over time. So we really like those. We've also talked about the $5 billion to $15 billion companies. We'd be interested there. There's less of them, but there's some really good banks in that space. We always just want to be ready and capable of looking at those things if they're available. And I think that strategy has worked really well for us and will continue to be our strategy.
Our next question comes from the line of David Konrad with KBW.
Just a quick one for me, just a follow-up on the back half on the loan growth. Just curious if that includes or are there any headwinds from Blue Foundry? I know they have that structured consumer book. I don't know if you guys are growing that or maybe letting that roll off. But just curious on the Blue Foundry side, if there's any headwinds in your loan growth?
Yes. So in the quarter, the first quarter operating there, I think the deposit and loan flows have been as expected as we've modeled out. There's always some headwind on any integration just with that change. But it's really been positive to date, and we would expect it to be pretty immaterial from an overall standpoint as we look at the back half of the year.
Our next question comes from the line of Manuel Navas with Piper Sandler.
Just want to have a little bit more color on the rise in net charge-offs. They picked up to 34 basis points. Is that some from Blue Foundry? What kind of drove that?
Yes. So overall, in credit, we feel really good about the numbers. Credit metrics continue to trend in the right direction, and they're all at historically strong levels. Charge-offs is really just timing on resolutions and updated information on identified accounts. I mean the key thing for us, there's no newly identified issues driving that, and it really is just timing. And we would expect charge-offs to be in our normal operating range as we look at the whole year overall and even quarter-by-quarter as we move forward.
Okay. I appreciate that. With growth potentially accelerating in the back half being better than the first half, does that change the pace of buybacks at all? And what should be the kind of the right pace for buybacks?
Yes. I mean I would really just kind of point to the capital position that we have. Right now, we have strong capital levels. We're generating strong capital on a quarterly basis. It really gives us the opportunity, we think, to support any level of organic growth that we get and continue executing on our $115 million buyback. At our current stock price, buybacks remain a real good use of capital.
I appreciate that. You talked a little bit about the funding side of the NIM. What are you seeing on new loan yields? What are kind of some expectations on the asset side going forward in terms of back book repricing, ways that the direction of asset yields can go from here?
Yes. Hi, Manuel. It's Rick. Yes, so a positive trend there. We've got, over the next 12 months, just on the loan side, $5 billion in assets roughly that will reprice. If current origination levels hold, those would have approximately 70 basis points of improvement, right? So new loan originations in the low 6s overall, and those are kind of in that sub 5.5% level right now. So there's some positive tailwind there. And then I would say on the other assets component, there's still another between security cash and opportunity to put some things to work. Our securities portfolio maturing over the next year has a yield of sub-4%, so call it like 3.85% level, and that's got upwards of more than 100 basis points of repricing opportunity as well. So there's a good tailwind there. Overall, when we look at it, I think that, that would imply a stable to slightly higher margin over the next couple of quarters. So feel good about that trend.
Our next question comes from the line of Matthew Breese with Stephens.
A few from me. Rick, maybe just on deposit costs and mix. Blue Foundry was obviously a little heavier on brokered money and CDs, not as strong as you on the deposit front. Could you just talk a little bit about what you expect to work off on their end versus retain? And then I noticed some more aggressive promotional deposit offerings from Fulton this quarter. I think there were a couple of high-yield promo rates. Is that kind of working towards remixing some of the Blue Foundry stuff? And maybe talk a little bit about that.
Yes. I think over -- to the initial question, yes, obviously, they were a little bit more reliant on wholesale, I would kind of target the overall, Matt. We actually were able to, on a combined basis, bring brokerage down a little bit quarter-over-quarter, continued to, since have worked and paid off pretty much a majority of their wholesale as well. And mind you, on a quarter-over-quarter basis, like our municipal deposits in the second quarter were down $240 million. So customer deposits growth was actually very strong. You are correct, yes, we have had some promos in more targeted markets, one of those being Northern New Jersey at more of an entry rate. So yes, there's an opportunity to pick up customers there. When you think about an all-in cost of acquisition, it's far more attractive to do it that way. But ultimately, as we focus on direct originations on the commercial side in that market, which candidly Blue Foundry did not have a lot of. There's an opportunity to improve mix as well as we pick up customers. So kind of tackling it from a lot of different directions, but feel really good about the underlying customer growth that we saw during the quarter.
Got it. Okay. And then, Curt, you had mentioned the Blue Foundry, North Jersey markets allow for stronger growth through team hires and client acquisition and maybe a well-positioned balance sheet for those markets. Maybe talk about that and how it sets you up for 2027 and beyond from a loan growth perspective? Historically, Fulton has been kind of low to mid-single-digit growth all in organically. Do these new markets kind of make it firmly mid-single digits? Or might we see something better given the footprint there?
Yes. We really look at it across the board. So loans, deposits and fees. And just using that market as an example, we had 4 financial centers and a couple of bankers, business bankers or commercial bankers, no investment advisers really in that market. Now we have 20-plus financial centers, and because of that, we can hire more commercial bankers. We can hire more investment bankers because we had that base of customers of certain products that they did not have available. So when we do this, we see broad-based growth, wealth fees overall loans and deposits. And we have good proof points around that in Philadelphia with Republic. It's really driving wealth transactional fees, deposits and loans. We expect the same in a little different scale in Northern New Jersey. We think we can really be a strong player in that market.
You had mentioned wealth. Investment management fees for the quarter were down a little bit, which I was surprised at considering equity markets were pretty strong. Is that just a function of timing? Did you waive some stuff for Blue Foundry folks, not that they had a big investment management presence? I'm just trying to make heads or tails of that.
Yes. And glad you pointed that out because it doesn't, kind of, hang together. It's really timing. Certain fees hit in the first quarter. And then the market, the brokerage business, which is a big, big part of our business, is quarterly fees at quarter end. And if you remember back at quarter end last year, balances were down. So we saw AUM from fourth quarter to first quarter went down, and then first quarter to now second quarter increased $1.3 billion up to $18.4 billion. So it's really just timing and market dynamics in how a certain part of that business gets billed. But we feel really good about where we're at, our momentum there, and you would see consistent performance in that business.
Got it. Okay. And then, Rick, one for you, just longer term on that NIM, it sounds like stable to up near term. As we think about longer term, '27, maybe even '28, thinking about those repricing dynamics for the industry, we saw loan yields kind of peak out in '23. As that stuff kind of rolls off, do we start to see the NIM more in the stable to down? Or do you think you can maintain kind of up into the right '27 to '28?
Yes. I think, Matt, you're really challenging my crystal ball going out to '28. But I do think, look, I think steady to up in the near term is very reasonable. A lot is going to depend, honestly, on what happens in just broader market dynamics, whether whatever happens with the Fed and/or deposit pricing. But I do think through '27, at least, in current environment, a stable-ish margin is very reasonable. So you could have some very minor repricing lower over the, call it, 18 months, but I would say it would be within the range we've been in over the last several quarters.
I know it's far out. I'm just thinking big picture.
Our next question comes from the line of Casey Haire with Autonomous Research.
I want to touch on expenses. So if we use the midpoint of the guide, it basically assumes the run rate kind of holds this level, maybe a little bit of pressure in the back half. But the high point and the bookends, if you will, imply some decent leverage if you're at the low end and a little bit of pressure if you're at the high end. Just wondering what are the swing factors that deliver those extremes?
Yes. Casey, it's Rick. I mean, I think your initial thought is more spot on. Like, the go-forward third quarter, fourth quarter would imply something pretty constant. And I think that's where we're at. If you look at that $210 million, call it, $210.6 million operating number, there's $2.1 million of the pension merger charge in there. That's a nonrecurring item. So call it $208 million. We'll have a little bit of just kind of on a stand-alone basis, call it, we'd have a little bit of upward pressure, but then you have the offsetting feature of Blue Foundry cost saves as we kind of roll throughout the year. We were at $10.5 million for Blue Foundry on a stand-alone basis this quarter. I would say by fourth quarter, that will get below $7 million. And so we're at roughly 24% cost saves today, and we'll be above the 50% run rate by fourth quarter. So yes, I think that's a good run rate. The extremes would be the top end is that we are in the process of hiring more teams and bringing on more talent. And on the low end would be that we can get greater cost saves and some, probably, more timing of some spend gets pushed out into '27. But I think the midpoint is really where we're trying to suggest.
Okay. Great. And then just last one for me on the ACL came down a little bit. It's still pretty strong relative to your risk profile and peer group. Just, I guess, some updated thoughts on can we get some more leverage? Can that ratio drive lower?
Yes. I think some of that's going to depend on growth going forward. But in current trends and even call it, predicted a little bit higher loan growth. Directionally, yes. I think, I mean, there's a limit and a level. But with what we see right now in terms of delinquency trends and on a multi-quarter basis and what some of the economic data would suggest that there's probably a little room there.
Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Curt Myers for closing remarks.
Well, thank you again for joining us today. We hope you'll be able to be with us to discuss third quarter results in October. Thank you all.
That concludes today's conference call. Thank you for your participation. You may now disconnect.
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