Fulton Financial (US:FULT)2023-01-18 17:58Financial Data and Key Metrics Changes - Net interest income increased to $226 million, a $10 million increase linked quarter, with loan yields expanding 59 basis points to 4.8% from 4.21% last quarter [1] - Net interest margin for the third quarter improved to 3.69% from 3.54% last quarter, primarily due to higher loan betas compared to deposit betas [8] - Operating earnings per diluted share remained consistent at $0.48, with operating net income available to common shareholders at $81.2 million [74] Business Line Data and Key Metrics Changes - Total loan growth was strong at $584 million or 12% annualized, with commercial lending contributing $349 million of this growth [7][49] - Non-interest expenses, excluding merger-related charges, were approximately $167 million, up $4 million linked quarter [9] - Commercial banking fees declined by $2.2 million to $18.6 million, while consumer banking fees decreased by $1.2 million to $12.1 million [67] Market Data and Key Metrics Changes - Total deposits, excluding customer repo accounts, declined by $727 million during the quarter, with one-third of this decline attributed to anticipated outflows in the municipal deposit portfolio [66] - The provision for credit losses increased to $14.5 million from $11 million last quarter, driven by loan growth and changes in the macroeconomic outlook [5] - Non-performing assets (NPAs) declined by $21 million, improving the NPA to assets ratio from 76 basis points to 66 basis points [80] Company Strategy and Development Direction - The company plans to open four new financial center locations in 2023 while consolidating five existing centers, focusing on how customers connect with the company [6] - The company aims for balanced growth between loans and deposits, returning to more normal trends after a year of excess liquidity [85] - The M&A strategy remains focused on opportunities in the $1 billion to $3 billion range, with a consistent approach to integration as demonstrated with the Prudential Bancorp acquisition [110] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a cumulative through-the-cycle total deposit beta of approximately 30% [8] - The outlook for 2023 includes expectations of net interest income in the range of $895 million to $915 million and non-interest income between $220 million and $235 million [82] - Management noted that while credit trends are stable, they are closely monitoring the commercial real estate portfolio, particularly the office segment [130] Other Important Information - The company declared a special dividend of $0.06, supplementing the quarterly common dividend of $0.65 per share for the year [47] - The tangible common equity ratio improved to 6.9% from 6.7% last quarter, with a new $100 million share repurchase authorization approved [98] Q&A Session Summary Question: What are the expectations for loan growth and deposit flows in 2023? - Management expects loan growth to be in the long-term average range of 4% to 6% and deposit growth to be lower than historical averages due to industry-wide challenges [71] Question: Can you provide more details on the office portfolio and credit concerns? - Management confirmed that the office portfolio is being closely monitored, with a focus on understanding current values and trends [130] Question: What is the outlook for non-interest income given the headwinds in mortgage banking? - Management anticipates stable non-interest income, with diversification across different fee income business lines expected to help offset headwinds [91]