Fulton Financial Posts Record EPS, Sets Up 2026 Growth

Fulton Financial ((FULT)) has held its Q4 earnings call. Read on for the main highlights of the call.

Fulton Financial’s latest earnings call struck a confident tone, as management highlighted record operating earnings per share for 2025, healthier margins, improving capital and credit metrics, and solid deposit momentum. While they acknowledged deliberate derisking actions, some pressure on loan yields, and quarterly cost volatility, the overarching message was that these headwinds are largely temporary and manageable, setting the stage for a return to more normal loan growth and earnings power in 2026.

Record Operating EPS Signals Strong Core Performance

Fulton delivered operating earnings per diluted share of $2.16 for full-year 2025, a new company record. Management attributed the performance to a combination of improved net interest margin, continued discipline on expenses, and diversified revenue growth beyond traditional lending. This record EPS underscores that, despite a mixed macro backdrop and internal derisking decisions that weighed on loan volumes, the core franchise continues to generate stronger profitability per share.

Deposit Growth and Product Momentum Support Funding Base

Customer deposits increased $449 million year-over-year, with linked-quarter growth of $257 million, or 3.9%. Management highlighted particularly strong performance in consumer demand deposit accounts, with openings up 25% versus last year, signaling healthy new customer acquisition and engagement. On the business side, targeted banking efforts brought in more than $133 million of lower-cost operating deposits, helping to stabilize funding costs and support margin resilience in a falling-rate environment.

Net Interest Margin Expansion Despite Rate Cuts

Net interest margin (NIM) rose 9 basis points year-over-year to 3.51%, finishing the fourth quarter at 3.59%. Importantly for investors, the linked-quarter NIM increased 2 basis points even as the Federal Reserve cut rates by 75 basis points, suggesting that balance-sheet positioning and pricing discipline are offsetting some of the downward pressure from lower rates. Management framed this as evidence of a more resilient earning-asset mix and an improving deposit franchise.

Diversified Noninterest Income Strengthens Revenue Mix

Adjusted noninterest income, excluding one-off items, reached $277 million, up nearly 7% from the prior year and accounting for more than 20% of total revenue. Commercial fee income climbed 8%, with cash management fees jumping 17%, underscoring success in deepening relationships with business clients. This expanding and more stable fee base reduces reliance on spread income and gives Fulton additional levers to support earnings as interest rates and loan growth fluctuate.

Wealth Management Adds Scale and Cross-Sell

Fulton Financial Advisors’ assets under management and administration surpassed $17 billion in 2025, highlighting continued traction in wealth and investment services. Referrals from bank financial centers to advisors increased 17%, contributing roughly $50 million of additional client assets year-over-year. This cross-sell from core banking to wealth management is bolstering fee income and helping Fulton capture a greater share of clients’ financial relationships.

Tight Expense Control Drives Positive Operating Leverage

Operating expenses grew only 1.9% in 2025, and management noted that after normalizing for a full year of Republic First costs in 2024, expenses would have actually declined 2.7% year-over-year. This effective cost discipline helped generate positive operating leverage—revenue growing faster than expenses—which is critical for sustaining profitability gains. The bank’s ability to restrain underlying cost growth while still investing in growth and risk management was a recurring theme on the call.

Profitability and Capital Ratios Move Higher

Fulton’s operating return on assets improved by 17 basis points to 1.28%, reflecting stronger earnings relative to its balance sheet size. Tangible book value per share increased 15%, and key capital ratios moved higher, with CET1 reaching 11.8% and tangible common equity to tangible assets rising to 8.5%. Internal capital generation was $77 million in the quarter alone, giving the bank ample flexibility to fund growth, absorb potential credit losses, and pursue shareholder-friendly capital actions.

Credit Quality Remains a Relative Bright Spot

Credit metrics remained solid throughout 2025. Nonperforming assets to total assets fell 11 basis points to 0.58%, while full-year net charge-offs were a modest 21 basis points of average loans. The allowance for credit losses ended the year at 1.51% of loans, with coverage of nonperforming loans at a robust 198%. Management acknowledged some modest normalization in losses but stressed that overall asset quality remains strong, supporting a more confident outlook on risk-adjusted returns.

Capital Returns and Buybacks Continue

The company repurchased $59 million of common stock over the course of the year, including 1.1 million shares in the fourth quarter at an average price of $18.34. Reflecting confidence in the balance sheet and earnings trajectory, the board authorized a new $150 million share repurchase program running through early 2027. For investors, this indicates that management sees value in the stock and has sufficient capital to both grow the franchise and return cash to shareholders.

Strategic Derisking Weighs on Loan Growth

Fulton’s loan growth in 2025 was held back by significant strategic credit actions and portfolio derisking decisions totaling more than $800 million of headwinds. These included $211 million of resolved adversely rated loans and about $30 million of planned runoff in indirect auto. While these choices suppressed reported loan growth, management stressed that they were deliberate, aimed at improving long-term risk-adjusted returns and cleaning up the portfolio ahead of the next phase of growth.

Mixed Trends Across Deposit Categories

While core customer deposits rose, certain segments declined. Municipal deposits fell by $254 million and other wholesale funding, including brokered deposits, decreased by $29 million. These outflows partially offset gains in retail and commercial deposit relationships. Management presented this as part of a broader strategy to shift the funding mix toward more stable and lower-cost deposits, even if headline totals in specific categories move lower.

Quarterly Expense Volatility and One-Time Costs

Operating noninterest expense rose $12.7 million sequentially to $204 million, largely due to higher variable compensation accruals of $7.5 million tied to strong performance, as well as about $2.5 million of unusual items like snow removal and elevated healthcare claims. Looking ahead to 2026, management flagged roughly $60 million of non-operating costs, including $36 million in merger-related expenses, which investors should treat as temporary and not representative of the bank’s underlying expense run rate.

Allowance and Net Charge-Off Trends Normalize

The allowance for credit losses declined from 1.57% to 1.51% of loans over the past year, reflecting stable asset quality and cumulative derisking efforts. Net charge-offs rose slightly to 24 basis points in the fourth quarter, compared with a full-year level of 21 basis points, consistent with a gradual normalization from historically low credit losses. Management framed these movements as manageable and within expectations, rather than signaling broad deterioration in the loan book.

Loan Yield Pressure and Lower Accretion

Loan yields slipped 11 basis points sequentially to 5.82%, and accretion income declined $2.2 million quarter-over-quarter to $10.5 million. These trends highlight some pressure on yield from competition and rate cuts, as older, higher-yielding assets roll off and are replaced at lower rates. Investors should expect some continued drag from lower accretion going forward, though management indicated that margin discipline and funding improvements should help offset part of the impact.

Securities Portfolio Shrinks, Reducing Reinvestment Cushion

The securities portfolio decreased by $212 million during the quarter amid faster prepayments, leaving investments at about 15% of total assets. While this frees up some balance sheet capacity, it also reduces the “ballast” that securities can provide for income and liquidity. Management noted that this shift introduces new considerations for how and when to reposition the balance sheet as rates move and loan growth reaccelerates.

Fee Income Volatility in Swaps and Equity Investments

Certain fee categories showed notable quarter-to-quarter swings. Swap-related income and equity-method investment income were weaker, with the latter down about $1.7 million in the fourth quarter, contributing to uneven “other” fee income. Management reminded investors that swap fees are closely tied to large loan originations and can be lumpy by nature, so they should be viewed over a longer time frame rather than on a single-quarter basis.

Guidance Assumptions and Execution Risk

Management’s 2026 outlook leans on several key assumptions: a 125-basis-point Fed rate cut in March and the timely closing of the Blue Foundry acquisition early in the second quarter of 2026. Any delays in the transaction or deviations in the rate path could affect realized results versus guidance. Fulton acknowledged these macro and execution risks but expressed confidence in its ability to adapt and manage through different scenarios.

Forward-Looking Guidance and Growth Outlook

Looking ahead to 2026, Fulton’s operating guidance calls for net interest income between $1.120 billion and $1.140 billion, loan loss provisions of $55 million to $75 million, noninterest income of $285 million to $300 million, and operating expenses in the $800 million to $835 million range, with an effective tax rate of about 18.5% to 19.5%. Management also expects roughly $60 million of non-operating costs, including core deposit intangible amortization and merger-related expenses. Crucially for growth-oriented investors, the bank anticipates loan growth returning to the mid-single-digit range as the more than $800 million of 2025 runoffs and derisking actions fade. About $5.7 billion of earning assets are set to reprice over the next 12 months at a blended yield of 5.01%, giving Fulton room to manage spreads as rates move, provided the assumed rate cuts and the Blue Foundry deal unfold as expected.

In closing, Fulton Financial’s earnings call painted a picture of a bank that used 2025 to strengthen its foundations: record per-share earnings, better margins, a cleaner balance sheet, and a more diversified revenue mix. While deliberate derisking, modest yield compression, and one-off expenses created some noise in the near term, management’s guidance points to a return to healthier loan growth and sustained profitability in 2026. For investors, the story is one of solid core performance today with a clearer path to growth and capital returns in the years ahead.