Fulton Financial Announces Third Quarter Earnings

·17-min read

Fulton Financial Corporation (NASDAQ: FULT) ("Fulton" or the "Corporation") reported net income of $62 million, or $0.38 per diluted share, for the third quarter of 2020.

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"While it is still too early to fully assess the impact of COVID-19 on our regional economy, we were pleased that our third quarter produced stronger results than we had initially predicted in both our commercial and consumer lines of business," said E. Philip Wenger, Chairman and CEO. "In particular, our mortgage business achieved record growth in the third quarter, coming on the heels of a record second quarter. Loan growth, fee income and credit quality also exceeded our expectations. And after a strategic, company-wide review, we are taking steps to significantly reduce our annual operating expenses for the future, with the goal of prudently managing the company for the longer term."

Net Interest Income and Balance Sheet

Net interest income for the third quarter of 2020 was $154 million, consistent with the second quarter of 2020. Net interest margin for the third quarter of 2020 decreased 11 basis points, to 2.70%, from 2.81% in the second quarter of 2020.

Total average assets for the third quarter of 2020 were $25.2 billion, an increase of $1.0 billion from the second quarter of 2020. Average loans, net of unearned income, of $18.9 billion increased $0.5 billion from the second quarter of 2020. The increase was principally due to loans originated under the Paycheck Protection Program ("PPP") during the second quarter, which had an outstanding balance of $2.0 billion as of September 30, 2020.

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

Three months ended

September 30, 2020

June 30, 2020

Growth

Balance

Yield (1)

Balance

Yield (1)

$

%

(dollars in thousands)

Average Loans, net of unearned income, by type:

Real estate - commercial mortgage

$

6,986,528

3.27

%

$

6,875,872

3.47

%

$

110,656

1.6

%

Commercial and industrial(2)

5,983,872

2.53

%

5,710,145

2.83

%

273,727

4.8

%

Real estate - residential mortgage

2,975,516

3.73

%

2,769,682

3.88

%

205,834

7.4

%

Real estate - home equity

1,237,602

3.87

%

1,271,190

3.91

%

(33,588)

(2.6)

%

Real estate - construction

981,589

3.84

%

941,079

3.53

%

40,510

4.3

%

Consumer

464,851

4.07

%

465,728

4.17

%

(877)

(0.2)

%

Equipment lease financing

279,217

3.96

%

284,658

3.44

%

(5,441)

(1.9)

%

Other(3)

(28,656)

N/A

13,443

N/A

(42,099)

N/M

Total Average Loans, net of unearned income

$

18,880,519

3.38

%

$

18,331,797

3.52

%

$

548,722

3.0

%

(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 $2.0 billion and $1.3 billion for the three months ended September 30, 2020 and June 30, 2020, respectively.

(3) Consists of overdrafts and net origination fees and costs.

Total average liabilities increased $1.0 billion, from the second quarter of 2020 driven by increases in demand and savings deposits. Average deposits and interest rates, by type, for the third quarter of 2020 in comparison to the second quarter of 2020 are summarized in the following table:

Three months ended

September 30, 2020

June 30, 2020

Growth

Balance

Rate

Balance

Rate

$

%

(dollars in thousands)

Average Deposits, by type:

Noninterest-bearing demand

$

6,270,683

$

5,789,788

$

480,895

8.3

%

Interest-bearing demand

5,591,548

0.14

%

5,103,419

0.17

%

488,129

9.6

%

Savings

5,716,050

0.16

%

5,446,368

0.25

%

269,682

5.0

%

Total average demand and savings

17,578,281

0.10

%

16,339,575

0.14

%

1,238,706

7.6

%

Brokered

314,721

0.56

%

312,121

0.54

%

2,600

0.8

%

Time

2,495,445

1.58

%

2,624,962

1.71

%

(129,517)

(4.9)

%

Total Average Deposits

$

20,388,447

0.29

%

$

19,276,658

0.36

%

$

1,111,789

5.8

%

Asset Quality

The provision for credit losses for the third quarter of 2020 was $7 million, which reflects current expected credit losses based on forecasted economic and other assumptions, including the estimated impacts of COVID-19, over the remaining expected lives of financial assets and off-balance-sheet credit exposures.

Non-performing assets were $147 million, or 0.57% of total assets, at September 30, 2020, representing a decrease, when expressed as a percentage of total assets from June 30, 2020.

Annualized net recoveries for the quarter ended September 30, 2020 were 0.05% of total average loans, compared to annualized net charge-offs of 0.09% and 0.15% for the quarters ended June 30, 2020 and September 30, 2019, respectively. The third quarter of 2020 annualized net recoveries were primarily due to $5 million in real estate construction recoveries.

Non-interest Income

Non-interest income in the third quarter of 2020, excluding investment securities gains, was $63 million, an increase of $10 million, or 20%, from the second quarter of 2020, primarily driven by an increase of $7 million in mortgage banking income, although increases in nearly all non-interest income categories were experienced in the third quarter of 2020 in comparison to the second quarter of 2020.

In the third quarter of 2020, a $1.5 million impairment of mortgage servicing assets was recognized, as compared to a $6.6 million impairment in the second quarter of 2020. This impairment charge is recorded as a reduction to mortgage banking income.

Compared to the third quarter of 2019, non-interest income, excluding investment securities gains, increased $8 million, or 14%, in the third quarter of 2020 due mainly to increases in mortgage banking income. There was no mortgage servicing asset impairment charge in the third quarter of 2019.

Net investment securities gains declined by $3 million in the third quarter of 2020 in comparison to the second quarter of 2020. The second quarter of 2020 included net securities gains of $3 million related to a limited balance sheet restructuring that also involved the redemption of FHLB advances that resulted in $3 million of prepayment penalties recorded in non-interest expense in the same period.

Non-interest Expense

Non-interest expense was $139 million in the third quarter of 2020, a decrease of $4 million compared to the second quarter of 2020. The second quarter of 2020 included a $3 million prepayment penalty on redemption of FHLB advances.

Compared to the third quarter of 2019, non-interest expense decreased $8 million, or 5%, due primarily to decreases in other outside services, FHLB prepayment penalties, marketing and intangible amortization, partially offset by increases in salaries and employee benefits and FDIC insurance. FDIC insurance expense was reduced in the third quarter of 2019 as a result of the receipt of $3 million of assessment credits.

As a result of a recent strategic operating expense review the Corporation is making a number of changes that are expected to result in annual expense savings of $25 million, inclusive of the previously reported financial center closure savings. Of the expected $25 million in annual expense savings, the Corporation expects to reinvest a portion to accelerate digital transformation initiatives.

It is expected that the savings will not be fully realized until mid-2021. In addition, it is expected that a pre-tax charge within the range of $17 to $19 million will be realized for this initiative for employee severance, fixed asset write-offs and lease termination charges, among others. Of this charge, $16 to $17 million is expected to be incurred in the fourth quarter of 2020, with the remaining charges of up to approximately $1 million pre-tax being recognized in the first quarter of 2021.

Income Tax Expense

The effective income tax rate for the third quarter of 2020 was 13%, as compared to 14% for both the second quarter of 2020 and third quarter of 2019.

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, 2019, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 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

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

2020

2020

2020

2019

2019

Ending Balances

Investments

$

3,097,721

$

2,974,813

$

3,141,440

$

2,867,378

$

2,705,610

Loans, net of unearned income

19,028,621

18,704,722

17,077,403

16,837,526

16,686,866

Total assets

25,543,281

24,617,863

22,929,859

21,886,040

21,703,618

Deposits

20,730,051

19,884,208

17,365,026

17,393,913

17,342,717

Shareholders' equity

2,390,261

2,340,501

2,285,748

2,342,176

2,324,016

Average Balances

Investments

$

2,977,672

$

3,096,632

$

3,071,828

$

2,830,999

$

2,829,672

Loans, net of unearned income

18,880,519

18,331,797

16,860,067

16,768,057

16,436,507

Total assets

25,169,508

24,139,116

22,252,099

21,812,438

21,457,800

Deposits

20,388,447

19,276,658

17,121,428

17,449,565

16,950,667

Shareholders' equity

2,374,091

2,309,133

2,337,016

2,341,397

2,315,585

Income Statement

Net interest income

$

154,116

$

152,754

$

160,746

$

159,270

$

161,260

Provision for credit losses

7,080

19,570

44,030

20,530

2,170

Non-interest income

63,248

55,922

54,644

55,281

59,813

Non-interest expense

139,147

143,006

142,552

138,974

146,770

Income before taxes

71,137

46,101

28,808

55,047

72,133

Net income

61,607

39,559

26,047

47,789

62,108

Per Share

Net income (basic)

$

0.38

$

0.24

$

0.16

$

0.29

$

0.38

Net income (diluted)

$

0.38

$

0.24

$

0.16

$

0.29

$

0.37

Cash dividends

$

0.13

$

0.13

$

0.13

$

0.17

$

0.13

Shareholders' equity (tangible)(1)

$

11.44

$

11.15

$

10.84

$

11.00

$

10.91

Weighted average shares (basic)

162,061

161,715

163,475

164,135

165,324

Weighted average shares (diluted)

162,579

162,267

164,417

165,039

166,126

(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

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

2020

2020

2020

2019

2019

Asset Quality(2)

Net (recoveries) charge-offs to average loans (annualized)

(0.05)

%

0.09

%

0.26

%

0.65

%

0.15

%

Non-performing loans to total loans

0.75

%

0.75

%

0.82

%

0.84

%

0.81

%

Non-performing assets to total assets

0.57

%

0.59

%

0.64

%

0.68

%

0.66

%

ACL - loans(3) to total loans

1.40

%

1.37

%

1.40

%

0.97

%

1.00

%

ACL - loans(3) to non-performing loans

188

%

183

%

170

%

116

%

122

%

Non-performing assets to shareholders' equity (tangible) and ACL - loans (1)(3)

6.91

%

7.04

%

7.37

%

7.51

%

7.35

%

Asset Quality, excluding PPP(1)(4)

Net (recoveries) charge-offs to average adjusted loans (annualized)

(0.06)

%

0.10

%

%

%

%

Non-performing loans to total adjusted loans

0.83

%

0.83

%

%

%

%

ACL - loans(3) to total adjusted loans

1.56

%

1.53

%

%

%

%

Profitability

Return on average assets

0.97

%

0.66

%

0.47

%

0.87

%

1.15

%

Return on average shareholders' equity

10.32

%

6.89

%

4.48

%

8.10

%

10.64

%

Return on average shareholders' equity (tangible)(1)

13.50

%

8.99

%

5.84

%

10.52

%

14.03

%

Net interest margin

2.70

%

2.81

%

3.21

%

3.22

%

3.31

%

Efficiency ratio(1)

62.3

%

66.4

%

64.5

%

63.1

%

63.6

%

Capital Ratios

Tangible common equity ratio(1)

7.4

%

7.5

%

7.8

%

8.5

%

8.5

%

Tier 1 leverage ratio(5)

7.4

%

7.6

%

7.9

%

8.4

%

8.5

%

Common equity Tier 1 capital ratio(5)

9.5

%

9.5

%

9.4

%

9.7

%

9.6

%

Tier 1 capital ratio(5)

9.5

%

9.5

%

9.4

%

9.7

%

9.6

%

Total risk-based capital ratio(5)

13.9

%

13.8

%

13.8

%

11.8

%

12.0

%

(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) Effective January 1, 2020, Fulton adopted Accounting Standards Update 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," referred to as the current expected credit loss model ("CECL"). This accounting standard requires that credit losses for financial assets and off-balance-sheet ("OBS") credit exposures be measured based on expected credit losses, rather than on incurred credit losses as in prior periods.

(3) "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 OBS credit exposures.

(4) 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.

(5) Regulatory capital ratios as of September 30, 2020 are preliminary and prior periods are actual.

FULTON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED ENDING BALANCE SHEETS (UNAUDITED)

dollars in thousands

% Change from

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

Jun 30

Sep 30

2020

2020

2020

2019

2019

2020

2019

ASSETS

Cash and due from banks

$

139,304

$

141,702

$

181,777

$

132,283

$

120,671

(1.7)

%

15.4

%

Other interest-earning assets

1,489,550

1,007,939

793,572

482,930

572,499

47.8

%

160.2

%

Loans held for sale

93,621

77,415

40,645

37,828

33,945

20.9

%

175.8

%

Investment securities

3,097,721

2,974,813

3,141,440

2,867,378

2,705,610

4.1

%

14.5

%

Loans, net of unearned income

19,028,621

18,704,722

17,077,403

16,837,526

16,686,866

1.7

%

14.0

%

Less: ACL - loans(1)

(266,825)

(256,537)

(238,508)

(163,622)

(166,135)

4.0

%

60.6

%

Net loans

18,761,796

18,448,185

16,838,895

16,673,904

16,520,731

1.7

%

13.6

%

Premises and equipment

236,943

239,596

236,908

240,046

237,344

(1.1)

%

(0.2)

%

Accrued interest receivable

70,766

73,720

59,365

60,898

60,447

(4.0)

%

17.1

%

Goodwill and intangible assets

534,907

535,039

535,171

535,303

534,178

%

0.1

%

Other assets

1,118,673

1,119,454

1,102,086

855,470

918,193

(0.1)

%

21.8

%

Total Assets

$

25,543,281

$

24,617,863

$

22,929,859

$

21,886,040

$

21,703,618

3.8

%

17.7

%

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits

$

20,730,051

$

19,884,208

$

17,365,026

$

17,393,913

$

17,342,717

4.3

%

19.5

%

Short-term borrowings

611,727

572,551

1,386,808

883,241

832,860

6.8

%

(26.6)

%

Other liabilities

515,230

525,407

513,811

384,941

477,311

(1.9)

%

7.9

%

FHLB advances and long-term debt

1,296,012

1,295,196

1,378,466

881,769

726,714

0.1

%

78.3

%

Total Liabilities

23,153,020

22,277,362

20,644,111

19,543,864

19,379,602

3.9

%

19.5

%

Shareholders' equity

2,390,261

2,340,501

2,285,748

2,342,176

2,324,016

2.1

%

2.9

%

Total Liabilities and Shareholders' Equity

$

25,543,281

$

24,617,863

$

22,929,859

$

21,886,040

$

21,703,618

3.8

%

17.7

%

LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL:

Loans, by type:

Real estate - commercial mortgage

$

7,046,330

$

6,934,936

$

6,895,069

$

6,700,776

$

6,604,634

1.6

%

6.7

%

Commercial and industrial

4,007,278

4,033,439

4,450,557

4,445,634

4,493,379

(0.6)

%

(10.8)

%

Real estate - residential mortgage

3,061,835

2,862,226

2,718,290

2,641,465

2,570,793

7.0

%

19.1

%

Real estate - home equity

1,222,709

1,251,455

1,292,677

1,314,944

1,346,115

(2.3)

%

(9.2)

%

Real estate - construction

1,007,534

972,909

947,768

971,079

913,644

3.6

%

10.3

%

Consumer

469,551

465,610

468,172

463,164

464,213

0.8

%

1.1

%

Equipment lease financing

280,286

281,897

289,726

284,537

280,649

(0.6)

%

(0.1)

%

PPP

1,960,165

1,937,034

1.2

%

N/M

Other(2)

(27,067)

(34,784)

15,144

15,927

13,439

(22.2)

%

N/M

Total Loans, net of unearned income

$

19,028,621

$

18,704,722

$

17,077,403

$

16,837,526

$

16,686,866

1.7

%

14.0

%

Deposits, by type:

Noninterest-bearing demand

$

6,378,077

$

6,239,055

$

4,531,872

$

4,453,324

$

4,240,478

2.2

%

50.4

%

Interest-bearing demand

5,813,935

5,099,405

4,724,520

4,720,188

4,771,109

14.0

%

21.9

%

Savings

5,805,431

5,667,893

5,092,865

5,153,941

5,094,387

2.4

%

14.0

%

Total demand and savings

17,997,443

17,006,353

14,349,257

14,327,453

14,105,974

5.8

%

27.6

%

Brokered

317,588

310,689

313,337

264,531

256,870

2.2

%

23.6

%

Time

2,415,020

2,567,166

2,702,432

2,801,929

2,979,873

(5.9)

%

(19.0)

%

Total Deposits

$

20,730,051

$

19,884,208

$

17,365,026

$

17,393,913

$

17,342,717

4.3

...

%

19.5

%

Short-term borrowings, by type:

Customer funding

$

611,727

$

572,551

$

461,808

$

383,241

$

337,860

6.8

%

81.1

%

Federal funds purchased

200,000

20,000

N/M

N/M

Short-term FHLB advances

725,000

500,000

475,000

N/M

N/M

Total Short-term Borrowings

$

611,727

$

572,551

$

1,386,808

$

883,241

$

832,860

6.8

%

(26.6)

%

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

Nine months ended

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

Jun 30

Sep 30

Sep 30

2020

2020

2020

2019

2019

2020

2019

2020

2019

% Change

Interest Income:

Interest income

$

179,159

$

180,696

$

199,378

$

202,159

$

208,413

(0.9)

%

(14.0)

%

$

559,233

$

623,147

(10.3)

%

Interest expense

25,043

27,942

38,632

42,889

47,153

(10.4)

%

(46.9)

%

91,617

134,028

(31.6)

%

Net Interest Income

154,116

152,754

160,746

159,270

161,260

0.9

%

(4.4)

%

467,616

489,119

(4.4)

%

Provision for credit losses

7,080

19,570

44,030

20,530

2,170

(63.8)

%

N/M

70,680

12,295

N/M

Net Interest Income after Provision

147,036

133,184

116,716

138,740

159,090

10.4

%

(7.6)

%

396,936

476,824

(16.8)

%

Non-Interest Income:

Wealth management

14,943

13,407

15,055

14,419

13,867

11.5

%

7.8

%

43,405

41,259

5.2

%

Mortgage banking

16,801

9,964

6,234

5,076

6,658

68.6

%

152.3

%

32,998

18,023

83.1

%

Consumer banking:

Card

5,002

4,966

4,685

4,991

5,791

0.7

%

(13.6)

%

14,653

15,524

(5.6)

%

Overdraft

3,015

2,107

4,058

4,750

4,682

43.1

%

(35.6)

%

9,180

13,199

(30.4)

%

Other consumer banking

2,406

2,065

2,496

2,688

2,860

16.5

%

(15.9)

%

6,967

8,354

(16.6)

%

Total consumer banking

10,423

9,138

11,239

12,429

13,333

14.1

%

(21.8)

%

30,800

37,077

(16.9)

%

Commercial banking:

Merchant and card

6,237

5,326

5,624

5,841

6,166

17.1

%

1.2

%

17,187

18,236

(5.8)

%

Cash management

4,742

4,503

4,742

4,697

4,696

5.3

%

1.0

%

13,987

13,695

2.1

%

Capital markets

4,696

5,004

5,075

5,939

4,448

(6.2)

%

5.6

%

14,775

11,015

34.1

%

Other commercial banking

2,636

1,914

2,978

3,664

3,478

37.7

%

(24.2)

%

7,528

10,109

(25.5)

%

Total commercial banking

18,311

16,748

18,419

20,141

18,788

9.3

%

(2.5)

%

53,477

53,055

0.8

%

Other

2,769

3,660

3,651

3,216

2,675

(24.3)

%

3.5

%

10,080

6,733

49.7

%

Non-interest income before investment securities gains

63,246

52,917

54,598

55,281

55,321

19.5

%

14.3

%

170,761

156,147

9.4

%

Investment securities gains, net

2

3,005

46

4,492

N/M

N/M

3,053

4,733

(35.5)

%

Total Non-Interest Income

63,248

55,922

54,644

55,281

59,813

13.1

%

5.7

%

173,814

160,880

8.0

%

Non-Interest Expense:

Salaries and employee benefits

79,227

81,012

80,228

76,975

78,211

(2.2)

%

1.3

%

240,467

234,959

2.3

%

Net occupancy

13,221

13,144

13,486

13,080

12,368

0.6

%

6.9

%

39,851

39,746

0.3

%

Data processing and software

12,285

12,193

11,645

11,468

11,590

0.8

%

6.0

%

36,123

33,211

8.8

%

Other outside services

7,617

7,600

7,881

8,215

12,163

0.2

%

(37.4)

%

23,098

31,774

(27.3)

%

Equipment

3,711

3,193

3,418

3,475

3,459

16.2

%

7.3

%

10,322

10,100

2.2

%

Professional fees

2,879

3,331

4,202

2,873

3,331

(13.6)

%

(13.6)

%

10,412

10,261

1.5

%

Marketing

1,147

1,303

1,579

1,503

3,322

(12.0)

%

(65.5)

%

4,029

8,345

(51.7)

%

Amortization of tax credit investments

1,694

1,450

1,450

1,505

1,533

16.8

%

10.5

%

4,594

4,516

1.7

%

FDIC insurance

1,578

2,133

2,808

2,177

239

(26.0)

%

N/M

6,519

5,603

16.3

%

Intangible amortization

132

132

132

142

1,071

%

(87.7)

%

397

1,285

(69.1)

%

Prepayment penalty on FHLB advances

2,878

4,326

N/M

N/M

2,878

4,326

(33.5)

%

Other

15,654

14,637

15,723

17,561

15,157

6.9

%

3.3

%

46,014

44,636

3.1

%

Total Non-Interest Expense

139,147

143,006

142,552

138,974

146,770

(2.7)

%

(5.2)

%

424,705

428,762

(0.9)

%

Income Before Income Taxes

71,137

46,100

28,808

55,047

72,133

54.3

%

(1.4)

%

146,045

208,942

(30.1)

%

Income tax expense

9,529

6,542

2,761

7,258

10,025

45.7

%

(4.9)

%

18,832

30,391

(38.0)

%

Net Income

$

61,607

$

39,559

$

26,047

$

47,789

$

62,108

55.7

%

(0.8)

%

$

127,213

$

178,551

(28.8)

%

PER SHARE:

Net income:

Basic

$

0.38

$

0.24

$

0.16

$

0.29

$

0.38

58.3

%

%

$

0.78

$

1.06

(26.4)

%

Diluted

0.38

0.24

0.16

0.29

0.37

58.3

%

2.7

%

0.78

1.06

(26.4)

%

Cash dividends

0.13

0.13

0.13

0.17

0.13

%

%

$

0.39

$

0.39

%

Weighted average shares (basic)

162,061

161,715

163,475

164,135

165,324

0.2

%

(2.0)

%

162,416

167,834

(3.2)

%

Weighted average shares (diluted)

162,579

162,267

164,417

165,039

166,126

0.2

%

(2.1)

%

163,083

168,722

(3.3)

%

FULTON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED AVERAGE BALANCE SHEET ANALYSIS (UNAUDITED)

dollars in thousands

Three months ended

September 30, 2020

June 30, 2020

September 30, 2019

Average

Interest

Yield/

Average

Interest

Yield/

Average

Interest

Yield/

Balance

(1)

Rate

Balance

(1)

Rate

Balance

(1)

Rate

ASSETS

Interest-earning assets:

Loans, net of unearned income

$

18,880,519

$

160,344

3.38

%

$

18,331,797

$

160,613

3.52

%

$

16,436,507

$

188,280

4.55

%

Taxable investment securities

2,011,893

13,150

2.61

%

2,200,870

15,171

2.76

%

2,282,292

15,565

2.73

%

Tax-exempt investment securities

861,764

6,899

3.19

%

830,836

6,737

3.23

%

516,907

4,650

3.57

%

Total Investment Securities

2,873,657

20,049

2.79

%

3,031,706

21,908

2.89

%

2,799,199

20,215

2.88

%

Loans held for sale

79,999

728

3.64

%

55,608

509

3.66

%

31,898

466

5.83

%

Other interest-earning assets

1,387,327

1,028

0.30

%

815,910

766

0.38

%

509,579

2,709

2.12

%

Total Interest-earning Assets

23,221,502

182,149

3.13

%

22,235,021

183,796

3.32

%

19,777,183

211,670

4.25

%

Noninterest-earning assets:

Cash and due from banks

138,567

153,728

120,967

Premises and equipment

239,183

240,417

240,383

Other assets

1,835,190

1,761,038

1,491,115

Less: ACL - loans(2)

(264,934)

(251,088)

(171,848)

Total Assets

$

25,169,508

$

24,139,116

$

21,457,800

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Demand deposits

$

5,591,548

$

1,913

0.14

%

$

5,103,419

$

2,219

0.17

%

$

4,448,112

$

9,163

0.82

%

Savings deposits

5,716,050

2,347

0.16

%

5,446,368

3,331

0.25

%

5,026,316

11,059

0.87

%

Brokered deposits

314,721

440

0.56

%

312,121

422

0.54

%

253,426

1,536

2.40

%

Time deposits

2,495,445

9,931

1.58

%

2,624,962

11,145

1.71

%

2,974,993

13,979

1.86

%

Total Interest-bearing Deposits

14,117,764

14,631

0.41

%

13,486,870

17,118

0.51

%

12,702,847

35,737

1.12

%

Short-term borrowings

613,127

370

0.24

%

707,771

517

0.29

%

919,697

4156

1.78

%

FHLB advances and long-term debt

1,295,515

10,042

3.10

%

1,361,421

10,307

3.03

%

842,706

7,260

3.44

%

Total Interest-bearing Liabilities

16,026,406

25,043

0.62

%

15,556,062

27,942

0.72

%

14,465,250

47,153

1.29

%

Noninterest-bearing liabilities:

Demand deposits

6,270,683

5,789,788

4,247,820

Total Deposits/Cost of Deposits

20,388,447

0.29

%

19,276,658

0.36

%

16,950,667

0.84

%

Other

498,328

484,133

429,145

Total Liabilities

22,795,417

$

21,829,983

19,142,215

Total Interest-bearing liabilities and non-interest bearing deposits ("Cost of Funds")

22,297,089

0.45

%

21,345,850

0.53

%

18,713,070

1.00

%

Shareholders' equity

2,374,091

2,309,133

2,315,585

Total Liabilities and Shareholders' Equity

$

25,169,508

$

24,139,116

$

21,457,800

Net interest income/net interest margin (fully taxable equivalent)

157,106

2.70

%

155,854

2.81

%

164,517

3.31

%

Tax equivalent adjustment

(2,990)

(3,100)

(3,257)

Net interest income

$

154,116

$

152,754

$

161,260

(1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.

(2) "ACL - loans" relates to the ACL specifically on "Loans, net of unearned income" and does not include the ACL related to OBS credit exposures.

FULTON FINANCIAL CORPORATION

AVERAGE LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL (UNAUDITED):

dollars in thousands

Three months ended

% Change from

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

Jun 30

Sep 30

2020

2020

2020

2019

2019

2020

2019

Loans, by type:

Real estate - commercial mortgage

$

6,986,528

$

6,875,872

$

6,746,766

$

6,561,029

$

6,489,456

1.6

%

7.7

%

Commercial and industrial

4,030,750

4,451,228

4,446,750

4,574,047

4,414,992

(9.4)

%

(8.7)

%

Real estate - residential mortgage

2,975,516

2,769,682

2,670,019

2,606,136

2,512,899

7.4

%

18.4

%

Real estate - home equity

1,237,602

1,271,190

1,300,132

1,331,088

1,364,161

(2.6)

%

(9.3)

%

Real estate - construction

981,589

941,079

929,529

934,556

905,060

4.3

%

8.5

%

Consumer

464,851

465,728

466,415

464,606

457,524

(0.2)

%

1.6

%

Equipment lease financing

279,217

284,658

284,566

281,451

277,555

(1.9)

%

0.6

%

PPP

1,953,122

1,258,917

55.1

%

N/M

Other(1)

(28,656)

13,443

15,890

14,058

14,860

N/M

N/M

Total Loans, net of unearned income

$

18,880,519

$

18,331,797

$

16,860,067

$

16,766,971

$

16,436,507

3.0

%

14.9

%

Deposits, by type:

Noninterest-bearing demand

$

6,270,683

$

5,789,788

$

4,307,027

$

4,324,568

$

4,247,820

8.3

%

47.6

%

Interest-bearing demand

5,591,548

5,103,419

4,649,905

4,699,040

4,448,112

9.6

%

25.7

%

Savings

5,716,050

5,446,368

5,127,662

5,205,260

5,026,316

5.0

%

13.7

%

Total demand and savings

17,578,281

16,339,575

14,084,594

14,228,868

13,722,248

7.6

%

28.1

%

Brokered

314,721

312,121

275,359

261,689

253,426

0.8

%

24.2

%

Time

2,495,445

2,624,962

2,761,474

2,959,008

2,974,993

(4.9)

%

(16.1)

%

Total Deposits

$

20,388,447

$

19,276,658

$

17,121,427

$

17,449,565

$

16,950,667

5.8

%

20.3

%

Short-term borrowings, by type:

Customer funding

$

613,127

$

546,716

$

428,240

$

377,529

$

332,893

12.1

%

84.2

%

Federal funds purchased

74,231

186,868

91,467

101,022

N/M

N/M

Short-term FHLB advances and other borrowings

86,824

687,937

248,815

485,782

N/M

N/M

Total Short-term borrowings

$

613,127

$

707,771

$

1,303,045

$

717,811

$

919,697

(13.4)

%

(33.3)

%

(1) Consists of overdrafts and net origination fees and costs.

FULTON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED AVERAGE BALANCE SHEET ANALYSIS (UNAUDITED)

dollars in thousands

Nine months ended September 30

2020

2019

Average

Interest

Yield/

Average

Interest

Yield/

Balance

(1)

Rate

Balance

(1)

Rate

ASSETS

Interest-earning assets:

Loans, net of unearned income

$

18,027,253

$

498,455

3.69

%

$

16,316,540

$

565,095

4.63

%

Taxable investment securities

2,165,180

44,615

2.75

%

2,305,472

46,935

2.71

%

Tax-exempt investment securities

804,484

19,596

3.24

%

468,689

12,940

3.66

%

Total Investment Securities

2,969,664

64,211

2.88

%

2,774,161

59,875

2.87

%

Loans held for sale

54,355

1,557

3.82

%

24,357

1,056

5.78

%

Other interest-earning assets

936,819

4,325

0.62

%

428,982

6,879

2.14

%

Total Interest-earning Assets

21,988,091

568,548

3.45

%

19,544,040

632,905

4.33

%

Noninterest-earning assets:

Cash and due from banks

143,496

116,019

Premises and equipment

239,739

239,402

Other assets

1,729,351

1,337,482

Less: ACL - loans(2)

(242,300)

(165,733)

Total Assets

$

23,858,377

$

21,071,210

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:

Demand deposits

$

5,116,696

$

9,933

0.26

%

$

4,263,869

$

24,854

0.78

%

Savings deposits

5,431,071

12,788

0.31

%

4,955,403

31,570

0.85

%

Brokered deposits

300,795

1,935

0.86

%

240,045

4,500

2.51

%

Time deposits

2,626,802

33,533

1.71

%

2,853,147

37,050

1.74

%

Total Interest-bearing Deposits

13,475,364

58,189

0.58

%

12,312,464

97,974

1.06

%

Short-term borrowings

873,694

4,960

0.76

%

894,116

12,200

1.81

%

FHLB advances and long-term debt

1,240,253

28,468

3.06

%

965,111

23,854

3.30

%

Total Interest-bearing Liabilities

15,589,311

91,617

0.78

%

14,171,691

134,028

1.26

%

Noninterest-bearing liabilities:

Demand deposits

5,458,807

4,223,927

Total Deposits/Cost of Deposits

18,934,171

0.41

%

16,536,391

0.79

%

Other

470,055

381,427

Total Liabilities

21,518,173

18,777,045

Total Interest-bearing liabilities and non-interest bearing deposits ("Cost of Funds")

21,048,118

0.58

%

18,395,618

0.97

%

Shareholders' equity

2,340,204

2,294,165

Total Liabilities and Shareholders' Equity

$

23,858,377

$

21,071,210

Net interest income/net interest margin (fully taxable equivalent)

476,931

2.90

%

498,877

3.41

%

Tax equivalent adjustment

(9,315)

(9,758)

Net interest income

$

467,616

$

489,119

(1) Presented on a fully taxable-equivalent basis using a 21% federal tax rate and statutory interest expense disallowances.

(2) "ACL - loans" relates to the ACL specifically on "Loans, net of unearned income" and does not include the ACL related to OBS credit exposures.

FULTON FINANCIAL CORPORATION

AVERAGE LOANS, DEPOSITS AND SHORT-TERM BORROWINGS DETAIL (UNAUDITED):

dollars in thousands

Nine months ended September 30

2020

2019

% Change

Loans, by type:

Real estate - commercial mortgage

$

6,870,148

$

6,431,012

6.8

%

Commercial and industrial

4,308,559

4,438,894

(2.9)

%

Real estate - residential mortgage

2,805,694

2,386,264

17.6

%

Real estate - home equity

1,269,525

1,400,371

(9.3)

%

Real estate - construction

950,845

926,036

2.7

%

Consumer

465,661

442,678

5.2

%

Equipment lease financing

282,800

278,463

1.6

%

PPP

1,073,900

N/M

Other(1)

121

12,822

(99.1)

%

Total Loans, net of unearned income

$

18,027,253

$

16,316,540

10.5

%

Deposits, by type:

Noninterest-bearing demand

$

5,458,807

$

4,223,927

29.2

%

Interest-bearing demand

5,116,696

4,263,869

20.0

%

Savings

5,431,071

4,955,403

9.6

%

Total demand and savings

16,006,574

13,443,199

19.1

%

Brokered

300,795

240,045

25.3

%

Time

2,626,802

2,853,147

(7.9)

%

Total Deposits

$

18,934,171

$

16,536,391

14.5

%

Short-term borrowings, by type:

Customer funding

$

529,667

$

348,721

51.9

%

Federal funds purchased

86,715

146,432

(40.8)

%

Short-term FHLB advances and other borrowings

257,312

398,963

(35.5)

%

Total Short-term Borrowings

$

873,694

$

894,116

(2.3)

%

(1) Consists of overdrafts and net origination fees and costs.

FULTON FINANCIAL CORPORATION

ASSET QUALITY INFORMATION (UNAUDITED)

dollars in thousands

Three months ended

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

2020

2020

2020

2019

2019

Allowance for credit losses related to Loans, net of unearned income:

Balance at beginning of period

$

256,537

$

238,508

$

163,620

$

166,135

$

170,233

Impact of adopting CECL

45,724

Loans charged off:

Commercial and industrial

(2,969)

(3,480)

(10,899)

(30,547)

(7,181)

Real estate - commercial mortgage

(746)

(2,324)

(855)

(68)

(394)

Consumer and home equity

(1,093)

(1,303)

(1,529)

(1,416)

(1,375)

Real estate - residential mortgage

(198)

(235)

(187)

(223)

(533)

Real estate - construction

(17)

(45)

Equipment lease financing and other

(483)

(688)

(533)

(727)

(600)

Total loans charged off

(5,489)

(8,047)

(14,003)

(32,981)

(10,128)

Recoveries of loans previously charged off:

Commercial and industrial

2,103

2,978

1,734

2,487

2,311

Real estate - commercial mortgage

100

95

244

1,453

444

Consumer and home equity

491

649

646

437

348

Real estate - residential mortgage

95

112

85

206

440

Real estate - construction

4,873

70

1,098

164

Equipment lease financing and other

185

92

108

182

107

Recoveries of loans previously charged off

7,847

3,926

2,887

5,863

3,814

Net loans recovered (charged off)

2,358

(4,121)

(11,116)

(27,118)

(6,314)

Provision for credit losses

7,930

22,150

40,280

24,603

2,216

Balance at end of period

$

266,825

$

256,537

$

238,508

$

163,620

$

166,135

Net (recoveries) charge-offs to average loans (annualized)

(0.05)

%

0.09

%

0.26

%

0.65

%

0.15

%

Allowance credit losses related to OBS Credit Exposures(1)

Balance at beginning of period

$

16,383

$

18,963

$

2,588

$

6,662

$

6,708

Impact of adopting CECL

12,625

Provision for credit losses

(850)

(2,580)

3,750

(4,074)

(46)

Balance at end of period

$

15,533

$

16,383

$

18,963

$

2,588

$

6,662

NON-PERFORMING ASSETS:

Non-accrual loans

$

128,321

$

125,037

$

120,345

$

125,098

$

124,287

Loans 90 days past due and accruing

13,761

14,767

19,593

16,057

11,689

Total non-performing loans

142,082

139,804

139,938

141,155

135,976

Other real estate owned

4,565

5,418

6,593

6,831

7,706

Total non-performing assets

$

146,647

$

145,222

$

146,531

$

147,986

$

143,682

NON-PERFORMING LOANS, BY TYPE:

Commercial and industrial

$

37,224

$

39,730

$

41,318

$

49,491

$

37,126

Real estate - commercial mortgage

43,426

42,374

36,538

37,279

45,710

Real estate - residential mortgage

28,287

22,887

25,832

22,411

20,150

Consumer and home equity

12,292

11,911

11,226

11,026

11,012

Real estate - construction

4,051

4,525

4,379

4,306

4,312

Equipment lease financing and other

16,802

18,377

20,645

16,642

17,666

Total non-performing loans

$

142,082

$

139,804

$

139,938

$

141,155

$

135,976

(1) The allowance for credit losses related to OBS Credit Exposures is presented in "other liabilities" on the consolidated balance sheets.

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

Sep 30

Jun 30

Mar 31

Dec 31

Sep 30

2020

2020

2020

2019

2019

Shareholders' equity (tangible), per share

Shareholders' equity

$

2,390,261

$

2,340,501

$

2,285,748

$

2,342,176

$

2,324,016

Less: Goodwill and intangible assets

(534,907)

(535,039)

(535,171)

(535,303)

(534,178)

Tangible shareholders' equity (numerator)

$

1,855,354

$

1,805,462

$

1,750,577

$

1,806,873