Q3 2025 Fulton Financial Corp Earnings Call
Speaker #1: Good day and thank you for standing by . Welcome to the Fulton Financial Third Quarter 2020 results conference call . At this time , all participants are in a listen only mode .
Operator: Good day, and thank you for standing by. Welcome to the Fulton Financial Corporation Q3 2025 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Jozwiak, Director of Investor Relations. Please go ahead.
Speaker #1: After the speaker's presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one one on your telephone .
Speaker #1: You will then hear an automated message advising your hand is raised to withdraw your question . Please press star one one again . Please be advised that today's conference is being recorded .
Speaker #1: I would now like to hand the conference over to your speaker today , Matt Jones , Director of Investor Relations . Please go ahead .
Speaker #2: Good morning , and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the third quarter ending September 30th , 2025 .
Matt Jozwiak: Good morning, and thanks for joining us for Fulton Financial Corporation's conference call and webcast to discuss our earnings for the third quarter ending September 30, 2025. Your host for today's conference call is Curt Myers, Chairman and Chief Executive Officer. Joining Curt is Richard 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. The slides can also be found on the Presentations page under Investor Relations on our website. On this call, representatives of Fulton Financial Corporation may make forward-looking statements with respect to Fulton's financial condition, results of operations, and business.
Speaker #2: Your host for today's conference call is Kurt Myers , Chairman and chief Executive Officer . Joining Curt is Rick Kramer , chief financial officer .
Speaker #2: Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon.
Speaker #2: These documents can be found on our website at Fool.com by clicking on Investor Relations and then on news . The slides can also be found on the presentations page under Investor Relations on our website .
Speaker #2: On this call , representatives of Fulton may make forward looking statements with respect to FULTON FINANCIAL CORP condition . Results of operations and business .
Speaker #2: These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors; actual results could differ materially.
Matt Jozwiak: These statements are not guarantees of future performance or subject to risks, uncertainties, and other factors, and actual results could differ materially. Please refer to the Safe Harbor statement and forward-looking statements in our earnings release and on slide 2 of today's presentation for additional information regarding these risks, uncertainties, and other factors. Fulton Financial Corporation undertakes no obligation other than as required by law to update or revise any forward-looking statements. In discussing Fulton's performance, representatives of Fulton Financial Corporation may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday in slides 30 through 37 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. Now, I'd like to turn the call over to your host, Curt Myers.
Speaker #2: Please refer to the Safe Harbor statement in forward looking statements in our earnings release . And on slide two of today's presentation . For additional information regarding these risks , uncertainties and other factors , Fulton undertakes no obligation other than , as required by law , to update or revise any forward looking statements .
Speaker #2: 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 30 through 37 of today's presentation .
Speaker #2: For a reconciliation of non-GAAP financial measures to the most comparable GAAP measures . Now , I'd like to turn the call over to your host , Curt Myers .
Speaker #3: Well , thanks , Matt , and good morning , everyone . For today's call . I'll be providing a few high level comments , as well as some operating highlights for the quarter .
Curtis J. Myers: Thanks, Matt, and good morning, everyone. For today's call, I'll be providing a few high-level comments, as well as some operating highlights for the quarter. Rick will review our financial results in more detail and discuss updates to our 2025 operating guidance. After our prepared remarks, we'll be happy to take any questions you may have. We were pleased with our strong third-quarter operating results. Our community banking strategy and regional scale continue to deliver customer value and strong results for our shareholders. Operating earnings of $101.3 million or $0.55 per share demonstrate the impact of positive operating leverage, strong profitability, and a diversified balance sheet. Total revenue increased linked quarter as we grew both net interest income and fee income, while we continue to show strong expense discipline.
Speaker #3: Then Rick will review our financial results in more detail and discuss updates to our 2025 operating guidance . After our prepared remarks , we'll be happy to take any questions you may have .
Speaker #3: We were pleased with our strong third quarter operating results . Our community banking strategy and regional scale continued to deliver customer value and strong results for our shareholders .
Speaker #3: Operating earnings of $101.3 million , or $0.55 per share , demonstrate the impact of positive operating leverage . Strong profitability and a diversified balance sheet .
Speaker #3: Total revenue increased linked quarter as we grew both net interest income and fee income , while we continue to show strong expense discipline .
Speaker #3: All of these positive factors combined to generate quarterly trends that drove our efficiency ratio down to 56.5% , delivered an operating ROA of 1.29% , and resulted in an operating ROTC of 15.79% .
Curtis J. Myers: All of these positive factors combined to generate quarterly trends that drove our efficiency ratio down to 56.5%, delivered an operating ROA of 1.29%, and resulted in an operating ROTCE of 15.79%. These are all strong results for the quarter. Touching on capital, we repurchased 1.65 million shares during the quarter at a weighted average cost of $18.67 per share. We routinely evaluate all of our capital deployment options and found opportunity to repurchase shares at attractive levels. We plan to continue to use our share repurchase authorization. Even with this quarter's repurchase activity, we grew our tangible book value per share 18% on a linked quarter annualized basis. Our strong performance, disciplined approach to balance sheet management, and our diversified business model provide us financial flexibility and position the company for continued success. Now, let me provide a few operating highlights on the quarter.
Speaker #3: These are all strong results for the quarter . Touching on capital , we repurchased 1.65 million shares during the quarter at a weighted average cost of $18.67 per share .
Speaker #3: We routinely evaluate all of our capital deployment options and found opportunity to repurchase shares at attractive levels . We plan to continue to use our share repurchase authorization .
Speaker #3: Even with this quarter's repurchase activity , we grew our tangible book value per share 18% on a linked quarter annualized basis . Our strong performance , disciplined approach to balance sheet management , and our diversified business model provided us , provides US financial flexibility and positions .
Speaker #3: The company for continued success . Now , let me provide a few operating highlights on the quarter . Deposit growth outpaced loan growth at 194 million for the quarter .
Curtis J. Myers: Deposit growth outpaced loan growth at $194 million for the quarter. Deposit growth was primarily driven by targeted sales campaigns and seasonal net inflows of municipal deposits. During the quarter, total demand and savings balances grew $387 million, offset by declines in brokered and time deposits. We were able to drive this growth while maintaining a disciplined and targeted pricing strategy. Turning to loans, originations were up linked quarter as well as compared to the prior period. Total loan balances grew $29 million for the quarter as increased originations were offset by the impact of strategic actions we have been executing on throughout the year. Year to date, these actions represented more than a $600 million headwind to our loan balance growth. Moving forward, we expect these actions to moderate and loan growth to return to our long-term growth trends.
Speaker #3: Deposit growth was primarily driven by targeted sales campaigns and seasonal net inflows of municipal deposits . During the quarter . Total demand and savings balances grew 387 million , offset by declines in brokered and time deposits .
Speaker #3: We were able to drive this growth while maintaining a disciplined and targeted pricing strategy . Turning to loans , originations were up linked quarter as well as compared to the prior period .
Speaker #3: Total loan balances grew 29 million for the quarter as increased originations were offset by the impact of strategic actions . We have been executing on throughout the year .
Speaker #3: Year to date , these actions represented more than a $600 million headwind to our loan balance . Growth . Moving forward , we expect these actions to moderate and loan growth to return to our long term growth trends .
Speaker #3: Turning to the income statement, revenue growth was driven by a strong net interest margin and a solid linked-quarter increase in our non-interest income.
Curtis J. Myers: Turning to the income statement, revenue growth was driven by a strong net interest margin and a solid linked quarter increase in our non-interest income. As a result, total quarterly revenue hit an all-time high. Our non-interest income as a percentage of revenue ended the quarter at 21%, with our fee-generating businesses growing nicely, and we are positioned well for continued growth. Lastly, let me touch on credit. While we remain cautious on credit given general economic and geopolitical uncertainty, we continue to see steady performance in our portfolio. During the quarter, we saw improvement in non-performing loans and charge-offs. Additionally, we saw improved risk rating migration and a continued reduction in classified and criticized loans. The provision for loan losses remained favorable to expectations, and the allowance for credit losses ratio was stable compared to the prior quarter.
Speaker #3: As a result, total quarterly revenue hit an all-time high. Our non-interest income as a percentage of revenue ended the quarter at 21%.
Speaker #3: With our fee generating businesses growing nicely and we are positioned well for continued growth . Lastly , let me touch on credit . While we remain cautious on credit given general economic and geopolitical uncertainty , we continue to see steady performance in our portfolio .
Speaker #3: During the quarter , we saw improvement in nonperforming loans and charge offs . Additionally , we saw improved risk rating migration and a continued reduction in classified and criticized loans .
Speaker #3: The provision for loan losses remained favorable to expectations , and the allowance ratio was stable compared to the prior quarter . Overall , we are encouraged by the trends we're seeing , but always remain focused on identifying and managing any potential areas of weakness that may arise .
Curtis J. Myers: Overall, we are encouraged by the trends we're seeing, but always remain focused on identifying and managing any potential areas of weakness that may arise. Now, let me turn the call over to Rick Kraemer to discuss the details of our financial results and provide comments on our 2025 operating guidance in more detail.
Speaker #3: Now , let me turn the call over to Rick to discuss the details of our financial results and provide comments on our 2025 operating guidance in more detail .
Speaker #4: Thank you , Kurt , and good morning . Unless I note otherwise , the quarterly comparisons I discussed are with the second quarter of 2025 .
Richard Kraemer: Thank you, Curt, and good morning. Unless I note otherwise, the quarterly comparisons I discuss are with the second quarter of 2025. Loan and deposit growth numbers I reference are annualized percentage on a linked quarter basis. Starting on slide 5, operating earnings per diluted share was $0.55 or $101.3 million of operating net income available to common shareholders. Net interest income growth, driven by a strong NIM and a stable balance sheet, combined with increasing fee income, helped to more than offset the anticipated increase in operating expenses. We are encouraged by the improved positive operating leverage we generated when compared to the previous quarter and on a year-over-year period basis. Total end-of-period loans increased $29 million during the quarter. Residential and commercial mortgage drove growth, offset by declines in CNI, we continue to proactively work certain credits out of the portfolio that don't align to our long-term strategy.
Speaker #4: Loan and deposit growth numbers I referenced are annualized percentage on a linked quarter basis . Starting on slide five , operating earnings per diluted share was $0.55 , or $101.3 million of operating net income available to common shareholders .
Speaker #4: Net interest income growth , driven by a strong Nim and a stable balance sheet combined with increasing fee income , helped to more than offset the anticipated increase in operating expenses .
Speaker #4: We are encouraged by the improved positive operating leverage we generated when compared to the previous quarter , and on a year over year basis .
Speaker #4: Total end of period loans increased 29 million during the quarter . Residential and commercial mortgage . Drove drove growth , offset by declines in CNI .
Speaker #4: We continue to proactively work certain credits out of the portfolio that don't align with our long-term strategy. During the quarter, we saw runoff of approximately $32 million of indirect auto and sold approximately $40 million of small ticket equipment.
Richard Kraemer: During the quarter, we saw a runoff of approximately $32 million of indirect auto and sold approximately $40 million of small-ticket equipment finance loans. Additionally, we saw about $40 million in note sales and resolved an additional $139 million of CNC loans. Combined, these actions accounted for over $250 million of loan balance headwinds during the quarter. With the exception of the continued planned runoff of indirect auto, we expect the impact of these activities to moderate as we move into 2026 and expect growth to revert towards our long-term historical organic growth trends. Deposits grew $194 million or 3%. Growth of $387 million in demand and savings products offset a $192 million decline in time deposits, which included a $108 million decline in broker deposits. A primary driver of growth was a seasonal increase in municipal balances of $450 million, in line with expectations.
Speaker #4: Finance loans . Additionally , we saw about 40 million in net sales and resolved an additional 139 million of Cnq loans . Combined , these actions accounted for over 250 million of loan balance headwinds during the quarter .
Speaker #4: With the exception of the continued planned runoff of indirect auto . We expect the impact of these activities to moderate as we move into 2026 and expect growth to revert toward our long term historical organic growth trends .
Speaker #4: Deposits grew 194 million , or 3% , growth of 387 million in demand and savings products offset a 192 million decline in time deposits , which included a 108 million decline in brokered deposits , a primary driver of growth was a seasonal increase in municipal balances of 450 million , in line with expectations .
Speaker #4: We anticipate outflows in municipal balances in the fourth quarter , similar to historical trends . Our noninterest bearing balances trended lower , ending the quarter at 19.5% of total deposits .
Richard Kraemer: We anticipate outflows in municipal balances in the fourth quarter similar to historical trends. Our non-interest-bearing balances trended lower, ending the quarter at 19.5% of total deposits. The decline in balances appears to be driven by normal corporate customer activity as our number of commercial accounts remains stable. As a result, our loan-to-deposit ratio ended the quarter at 91%. Moving to investments, security purchases lagged cash flows by about $100 million, partially offset by an improvement in AOCI. Investments as a percentage of total assets were 15.8%, a level that provides balance sheet optionality moving forward. Net interest income on a non-FTE basis was $264.2 million, a $9.3 million increase linked quarter, while net interest margin increased 10 basis points to 3.57%. Loan yield increased 7 basis points to 5.93%. Fixed-rate asset repricing represented a tailwind during the quarter.
Speaker #4: The decline of balances appears to be driven by normal corporate customer activity . As our number of number of commercial accounts remain stable .
Speaker #4: As a result , our loan to deposit ratio ended the quarter at 91% . Moving to Investments . Securities purchases lagged cash flows by about $100 million , partially offset by an improvement in Aoci investments as a percentage of total assets were 15.8% .
Speaker #4: A level that provides balance sheet optionality . Moving forward , net interest income on a non FTE basis was 264.2 million . A 9.3 million increase linked quarter , while net interest margin increased ten basis points to 3.57% .
Speaker #4: Loan yields increased seven basis points to 5.93% . Fixed rate asset repricing represented a tailwind during the quarter . We believe this will continue to provide some cushion for margin in the face of declining short term rates , as illustrated on slide 21 of our earnings presentation .
Richard Kraemer: We believe this will continue to provide some cushion for margin in the face of declining short-term rates, as illustrated on slide 21 of our earnings presentation. Over the next 12 months, we have approximately $5.4 billion of fixed and adjustable-rate earning assets subject to repricing, currently at a blended yield of 5.08%. Our net interest margin further benefited from a modestly higher level of accretion interest, which was up $1.3 million linked quarter to $12.7 million. For the quarter, our average cost of total deposits decreased 2 basis points to 1.96%, while our total cost of funds declined 4 basis points due to quarterly wholesale repositioning aided by municipal inflows. Through the current rate-cutting cycle, our cumulative interest-bearing deposit beta has been 33%, while our total deposit beta has been 22%. Our deposit pricing strategy continues to balance the desire to fund future balance sheet growth while defending margin.
Speaker #4: Over the next 12 months , we have approximately 5.4 billion of fixed and adjustable rate earning assets subject to repricing , currently at a blended yield of 5.08% .
Speaker #4: Our net interest margin further benefited from a modestly higher level of accretion interest , which was up 1.3 million linked 11:45 point 7 million for the quarter .
Speaker #4: Our average cost of total deposits decreased two basis points to 1.96% , while our total cost of funds declined four basis points due to quarterly wholesale repositioning .
Speaker #4: Aided by municipal inflows through the current rate cutting cycle , our cumulative interest bearing deposit beta has been 33% , while our total deposit beta has been 22% .
Speaker #4: Our deposit pricing strategy continues to balance the desire to fund future balance sheet growth while defending margin. Turning to slide seven, noninterest income for the quarter was $70.4 million.
Richard Kraemer: Turning to slide 7, non-interest income for the quarter was $70.4 million. The linked quarter increase was driven by our wealth and consumer businesses and aided by modest gains from asset sales. Non-interest income as a percentage of total revenue equaled 21% for the third quarter. Notably, our wealth management business, Fulton Financial Advisors, reached $17 billion in assets under management and administration and continues to be a material driver of fee income growth. Moving to slide 8, non-interest expense on an operating basis was $191.4 million, an increase of $3.8 million linked quarter. This was mostly attributable to an increase in salaries and benefits driven by one extra day in the quarter, a lower level of deferred loan origination cost, and outside service spend related to planned internal projects.
Speaker #4: The linked quarter increase was driven by our wealth and consumer businesses and aided by modest gains from asset sales , non-interest income as a percentage of total revenue equaled 21% for the third quarter .
Speaker #4: Notably , our wealth management business , Fulton Financial Advisors , reached $17 billion in assets under management and administration and continues to be a material driver of fee income growth .
Speaker #4: Moving to slide eight , noninterest expense on an operating basis was 191.4 million . An increase of 3.8 million linked quarter . This was mostly attributable to an increase in salaries and benefits , driven by one extra day in the quarter .
Speaker #4: A lower level of deferred loan origination costs and outside service spend related to planned internal projects. Items excluded from operating expenses, as listed on slide eight, include charges of $5.4 million for core deposit intangible amortization and $207,000 for the benefit of other items.
Richard Kraemer: Items excluded from operating expenses as listed on slide 8 include charges of $5.4 million of core deposit and tangible amortization and $207,000 benefit of other items. Turning to asset quality, provision expense of $10.2 million was slightly higher than last quarter, however well within the guidance we provided last call. As Curt mentioned, we saw positive trends throughout the book. Net charge-offs declined to 18 basis points, while non-performing assets to total assets improved 4 basis points to 0.63%. Our allowance for credit losses to total loans ratio remained at 1.57%, while our ACL to non-performing loan coverage increased to 189%. Slide 10 shows a snapshot of our capital base. We maintain a healthy capital position that provides us with balance sheet flexibility. During the quarter, we repurchased 1.65 million shares at a weighted average cost of $18.67.
Speaker #4: Turning to asset quality provision , expense of 10.2 million was slightly higher than last quarter . However , well within the guidance we provided , last call .
Speaker #4: As Curt mentioned , we saw positive trends throughout the book . Net charge offs declined to 18 basis points , while non-performing assets to total assets improved four basis points to 0.63% .
Speaker #4: Our allowance for credit losses to total loans ratio remained at 1.57% , while our ACL to non-performing loan coverage increased to 189% . Slide ten shows a snapshot of our capital base .
Speaker #4: We maintain a healthy capital position that provides us with balance sheet flexibility . During the quarter , we repurchased 1.65 million shares at a weighted average cost of $18.67 .
Speaker #4: As of September 30th , we had remaining buyback authorization of 86 million . Under the current plan . Inclusive of the share repurchases , internal capital generation was robust at 84 million .
Richard Kraemer: As of September 30, we had remaining buyback authorization of $86 million under the current plan. Inclusive of the share repurchases, internal capital generation was robust at $84 million. This was driven by a combination of strong earnings and a $44 million benefit to AOCI from the impact of lower interest rates. Our tangible common equity to tangible asset ratio increased to 8.3%, while CET1 increased to 11.5%. On slide 11, we are updating our operating guidance for 2025. Considering the recent Federal Reserve action and associated dot plot, we have updated our rate forecast to include the recent 25 basis point cut in September, one 25 basis point cut in October, and an additional 25 basis point cut in December. Given these macro assumptions and our strong year-to-date performance, we have made the following adjustments to our guidance with emphasis on the midpoint of the ranges.
Speaker #4: This was driven by a combination of strong earnings and a $44 million benefit to AOCI from the impact of lower interest rates. Our tangible common equity to tangible asset ratio increased to 8.3%, while CET1 increased to 11.5%.
Speaker #4: On slide 11 , we are updating our operating guidance for 2025 . Considering the recent fed action and associated Dot plot , we have updated our rate forecast to include the recent 25 basis point cut in September .
Speaker #4: 125 basis point cut in October and an additional 25 basis point cut in December . Given these macro assumptions and our strong year to date performance , we have made the following adjustments to our guidance with emphasis on the midpoint of the ranges .
Speaker #4: We are increasing net interest income to a range of 1,000,000,025 million to 1,000,000,035 million . We are lowering and tightening provision expense to a range of 45 million to 55 million .
Richard Kraemer: We are increasing net interest income to a range of $1,025,000,000 to $1,035,000,000. We are lowering and tightening provision expense to a range of $45,000,000 to $55,000,000. We are raising the bottom end of fee income, tightening to a range of $270,000,000 to $280,000,000. We are lowering the top end of operating expense to a range of $750,000,000 to $760,000,000. We are modestly increasing our effective tax rate to a range of 19% to 20%, and last, lowering our estimate of non-operating expenses from $10,000,000 to $7,000,000. With that, we'll now turn the call over to the operator for some questions.
Speaker #4: We are raising the bottom end of fee income tightening to a range of 270 million to 280 million . We are lowering the top end of operating expense to a range of 750 million to 760 million .
Speaker #4: We are modestly increasing our effective tax rate to a range of 19% to 20%. Lastly, we are lowering our estimate of non-operating expenses from $10 million to $7 million.
Speaker #4: And with that , we'll now turn the call over to the operator for some questions .
Speaker #1: Thank you . As a reminder to ask a question at this time , please press star one . One on your telephone and wait for your name to be announced .
Operator: Thank you. As a reminder, to ask a question at this time, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Daniel Tamayo with Raymond James & Associates. Your line is now open.
Speaker #1: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster . Our first question comes from the line of Daniel Tamayo with Raymond .
Speaker #1: James . Line is now open .
Speaker #5: Thank you . Good morning guys . Morning , Kurt . Morning , Rick . Maybe first on the on the net interest income guidance being revised higher .
[Analyst 1]: Thank you. Good morning, guys. Morning, Curt. Morning, Rick. Maybe first on the net interest income guidance being revised higher, it looks like it implies some margin compression, if that's correct, in the fourth quarter, presumably related to the rate cut. Just curious for your thoughts around the impact, if that's correct, the impact of this first cut that we had last quarter relative to future cuts, if there's kind of a rebound or less impact after, you know, with future cuts going forward. Thanks.
Speaker #5: It looks like it implies some margin compression . If that's correct , in the fourth quarter , presumably related to the rate cut .
Speaker #5: Just curious for your thoughts around the impact . If that's correct , the impact of of this first cut that we had last quarter relative to to future cuts , if there's kind of a rebound or less impact .
Speaker #5: After , you know , with future cuts going forward . Thanks .
Speaker #4: Yeah , thanks for the question , Danny . Yeah . No , you're you're right . Interpretation is right . I mean , that would imply a little bit of margin pressure in for Q look , I'll say this for every 25 basis points on an annualized basis .
Richard Kraemer: Yeah, thanks for the question, Danny. Yeah, no, you're right, and interpretation is right. I mean, that would imply a little bit of margin pressure in Q4. Look, I'll say this. For every 25 basis points on an annualized basis, it's about $2 million of annualized NII headwind. That said, as we continue to manage the deposit side of this and try to reach for higher betas, that does offset some of that over time. There is a lag to that, right? For every 25 bps that happens, you really don't catch up on the cost of the interest expense side for probably about three months, all in. There will be some kind of near-term pressure. You're right. If the Federal Reserve stops or when the Federal Reserve stops cutting, you will start to level out several months after that.
Speaker #4: It's about $2 million of annualized NII headwind . That said , you know , as we continue to manage the deposit side of this , you know , and try to reach for a higher betas that that does offset some of that over time .
Speaker #4: But there's a lag to that, right? So for every 25 bips that happens, you really don't catch up on the cost of the interest expense side for probably about three months.
Speaker #4: All in . So there will be some kind of near-term pressure . But you're right . If the fed stops or when the fed stops cutting , you will start to level out several months after that .
Speaker #5: Got it . Okay . Helpful . And then maybe one more high level for for you , Kurt . Just curious if your thoughts on positive operating leverage in 2026 .
[Analyst 1]: Got it. Okay, helpful. Maybe one more high level for you, Curt. Just curious of your thoughts on positive operating leverage in 2026. It sounds like the rate cuts could certainly have an impact on that, but just curious how you're thinking about it, if that's a possibility for the company, if it's likely, and if there is some kind of break-even point in terms of cuts, how you're thinking through that. Thanks.
Speaker #5: You know , it sounds like that rate cuts could certainly have an impact on that . But just curious how you're thinking about if that's possibility for the for the company , if it's likely and if there is some kind of break even point in terms of cuts , how you're thinking through that .
Speaker #5: Thanks .
Speaker #3: Yeah . So I mean , we're we're focused on continuing to generate organic growth . So that we can drive positive operating leverage .
Richard Kraemer: Yeah, so I mean, we're focused on continuing to generate organic growth so that we can drive positive operating leverage. There's a lot of components, expense levels, revenue levels, some things within our control and some things that are not. We're going to manage to a point that we are, our goal is to generate positive operating leverage on a consistent basis. To Rick's point in your prior question around the impact of rate cuts, we are more neutral on our balance sheet than we have been in prior periods, and we think that will help. We will manage the other components of that operating leverage calculation to focus on generating them.
Speaker #3: You know , there's a lot of components expense , expense levels . You know , revenue levels . Some things within our control and some things that are not , you know , but we're going to manage to a point that we are our goal is to generate positive operating leverage on a consistent basis .
Speaker #3: To Rick's point in your prior question around the impact of rate cuts, I mean, we are more neutral on our balance sheet than we have been in prior periods.
Speaker #3: And we think that will help. And then we will manage the other components of that operating leverage calculation to focus on generating that.
Speaker #5: Okay . Helpful . All right . Well I appreciate the color , guys . I'll step back .
[Analyst 1]: Okay, helpful. All right. I appreciate the call, you guys. I'll step back.
Speaker #3: Okay .
Richard Kraemer: Thanks, Danny.
Speaker #1: Thank you . Our next question comes from the line of Casey Hare with autonomous . Your line is now open .
Operator: Thank you. Our next question comes from the line of Casey Hare with Autonomous. Your line is now open.
Speaker #6: Yeah . Great . Thanks . Good morning guys . I guess one more follow up on sort of the Nim outlook . Rick .
[Analyst 2]: Yeah, great. Thanks. Good morning, guys. I guess one more follow-up on sort of the NIM outlook, Rick. The cumulative interest-bearing deposit beta, I think you mentioned, was 33%. Just where do you expect that to trend as the Fed cuts?
Speaker #6: The the come cumulative interest bearing deposit beta . I think you mentioned was 33% . Just where do you expect that to trend as the fed cuts .
Speaker #4: Yeah I think that's a level we aim to maintain . If not , try to get a little bit more . Obviously , you know , as we as we start to revert to more normalized loan growth that that could see some pressure .
Richard Kraemer: Yeah, I think that's a level we aim to maintain, and if not, try to get a little bit more. Obviously, as we start to revert to more normalized loan growth, that could see some pressure. I think around that 30% level is really the target.
Speaker #4: But I think around that 30% level is really the target .
Speaker #6: Okay . Very good . And on the asset side of things , fixed rate asset repricing was a nice tailwind . You know , can you got any color on where new money yields are versus I think you mentioned that 508 coupon on on what's coming what's maturing in the next year .
[Analyst 2]: Okay, very good. On the asset side of things, fixed-rate asset repricing was a nice tailwind. Can you add any color on where new money yields are versus, I think you mentioned that 5.08% coupon on what's coming, what's maturing in the next year?
Speaker #4: Yeah . Newer new originations during the quarter were right around 6.5% . Just I think a of dips below that . 648 .
Richard Kraemer: Yeah, new originations during the quarter were right around 6.5%, just I think a couple of bps below that, like 6.48%.
Speaker #6: Okay , great . And just just lastly on on capital management . So you guys have been one of the one of the banks that have has , has been openly , you know , kind of looking for , for deals .
[Analyst 2]: Okay, great. Just lastly, on capital management, you guys have been one of the banks that has been openly, you know, kind of looking for deals. Just wondering, it feels like it is active in that part of the market, that $1 to $5 billion asset bank crowd. Just wondering, what is, why we haven't seen a deal from you? Is it a bid ask, lack of targets, just some color there?
Speaker #6: Just wondering it feels like it is active in , in that part of the market . That 1 to 5 billion asset bank crowd .
Speaker #6: Just wondering what is what why we haven't seen a deal from you . Is it bid ask lack of targets . Just some color .
Speaker #6: There .
Speaker #3: Yeah . So our strategy remains the same . And that as you referenced and I've previously referenced that 1 to $5 billion community bank .
Richard Kraemer: Our strategy remains the same, and as you referenced and I've previously referenced, that $1 to $5 billion community bank that would be an infill to give us greater market penetration in our five-state market is the focus. We feel we continue to have opportunities there, and we want to be positioned to always be able to move forward with the things that we want to move forward with. It is an active strategy for us.
Speaker #3: That would be an infill to give us greater market penetration in our , in our five state market is to focus . We feel we continue to have opportunities there and we want to be positioned to always be able to move forward with the things that we want to move forward with .
Speaker #3: And it is an active strategy for us .
Speaker #1: Thank you . Our next question comes from the line of Christopher Marinac with Janney Montgomery Scott . Your line is now open .
Operator: Thank you. Our next question comes from the line of Christopher Marinac with Janney Montgomery Scott. Your line is now open.
Speaker #6: Yes. Good morning. Kurt, I wanted to extend on that, on your answer there and.
Matt Jozwiak: Yes, good morning. Curt, I wanted to extend on that, on your answer there, and just look further at sort of your organic opportunities in Virginia, Maryland, and even Philadelphia, and how much more opportunity do you see there in the next several quarters?
Speaker #7: Just look further at sort of your organic opportunities in Virginia, Maryland, and even Philadelphia, and how much more opportunity do you see there in the next several quarters?
Speaker #3: Yeah , we definitely have opportunity for organic growth . So , you know , primarily we drive that by winning customers each and every day .
Richard Kraemer: Yeah, we definitely have opportunity for organic growth. Primarily, we drive that by winning customers each and every day. We also drive that by adding to our commercial banking team, our wealth team, and we're always focused on talent recruitment on strategy. We have Fulton First strategies around small business to enhance growth there. We have a lot of levers for organic growth. I think what you've seen this year is we have decent originations, and we've had some strategic headwinds that have offset balances this year. Underlying, we're really focused on those organic originations really throughout the company, but in those areas where we have a lot more growth potential with more limited market share.
Speaker #3: We also drive that by adding to our commercial banking team , our wealth team . And we're always focused on talent recruitment strategy .
Speaker #3: And then , you know , we have Fulton first strategies around small business to enhance growth . There . And and you know , we're really we have a lot of levers for organic growth .
Speaker #3: And I think what you've seen this year is we have, you know, decent originations. And we've had some strategic headwinds that have offset balances this year.
Speaker #3: So, underlying, we're really focused on those organic originations throughout the company. But in those areas where we have a lot more growth potential with more limited market share.
Speaker #7: Good . Thank you for that . And then just a follow up on on the commercial , see and come line from your commercial deposits .
Matt Jozwiak: Thank you for that. Just to follow up on the commercial fee income line from your commercial deposits, does that track typically with the growth of those deposits, or do you see other opportunities, even if those balances were to be flat, to grow the fee income side?
Speaker #7: Does that track typically with the growth of those deposits? Or do you see other opportunities, even if those balances were to be flat, to grow the fee income side?
Speaker #3: Yeah . So there's there's a lot of components to that . So on the account level cash management and account level fees , they track with account growth .
Richard Kraemer: Yeah, so there's a lot of components to that. On the account level, cash management and account level fees track with account growth and then activity expansion, you know, within or contraction within those accounts, like the activity volume. We also have our swap fees in that that are tied to originations as well. It's a real mix of transactional account level growth and then things that are more tied to originations. We've had steady performance overall and feel good about the overall fee income or commercial fee income trajectory.
Speaker #3: And then activity expansion . You know within or contracting within those accounts like the activity volume , you know , we also have our swap fees are in that that are tied to originations as well .
Speaker #3: So it's a real mix of transactional account level . Growth . Then things that are more tied to originations . And , you know , we've had steady performance overall and feel good about the overall fee income or commercial fee income trajectory .
Speaker #7: Great . Thank you for taking my questions this morning .
Matt Jozwiak: Great. Thank you for taking my questions this morning.
Speaker #3: Welcome .
Richard Kraemer: You're welcome.
Speaker #1: Thank you . Our next question comes from the line of Matthew Breese with Stephens Inc. . Your line is now open .
Operator: Thank you. Our next question comes from the line of Matthew M. Breese with Stephens Inc. Your line is now open.
Speaker #5: Hey . Good morning .
Matt Jozwiak: Hey, good morning.
Speaker #4: Good morning . Matt .
Richard Kraemer: Morning, Matt.
Speaker #8: Rick , in your in your opening remarks , I thought you had mentioned a little bit of a mismatch in securities purchases versus maturities .
Matt Jozwiak: Rick, in your opening remarks, I thought you had mentioned a little bit of a mismatch in securities purchases versus maturities, and maybe there's some optionality there going forward. Could you just talk a little bit about to what extent we might see securities purchases and maybe some framing for where you want cash and securities as a percentage of total assets?
Speaker #8: And maybe there's some optionality there going forward . Could you just talk a little bit about to what extent we might see securities purchases and maybe some framing for where you want cash and securities as a percentage of total assets ?
Speaker #4: I think we've you know , we kind of positioned in the past , we'd probably coming into the year , we're a little light from a liquidity perspective on securities .
Richard Kraemer: Yeah, I think we've kind of positioned in the past. We probably coming into the year were a little light from a liquidity perspective on securities, so we've moved that higher. I think managing around that 16% to 17% level of assets is about right for investments to where we are. We've been fairly opportunistic and kind of pick our points when we want to invest and when we have additional liquidity. I think there's the expectation, obviously, we mentioned earlier, was that you'll get some municipal headwinds in the fourth quarter, so deposits will, those deposit balances will be down a little bit. I think just managing for those balances really depends on when we buy. Like I said, 16% to 17% long-term is probably the right target.
Speaker #4: So we've moved that higher . I think managing around that 16 to 17% level of assets is about right for for investments where we are .
Speaker #4: We've been fairly opportunistic and kind of pick our points when we when we want to invest and when we have additional liquidity . I think there's , you know , the expectation obviously we mentioned earlier is that you'll get some municipal headwinds in the fourth quarter .
Speaker #4: So deposits will those deposit balances will be will be down a little bit . So I think just managing kind of for those , you know , for those balances really Yeah , depends on when we buy .
Speaker #4: But like I said 16 to 17% long term is probably the right target .
Speaker #8: And looking at securities yields 3.70 today, I'm guessing what you're putting on the books has either a high four, maybe low five handle on it.
Matt Jozwiak: Looking at securities yields, $3.70 today, I'm guessing what you're putting on the books has either a high 4, maybe low 5 handle on it.
Speaker #4: That's right . Yeah .
Richard Kraemer: That's right, yeah.
Speaker #8: I . When might we see a more pronounced acceleration in securities yields is like is there a cash flow year that's better than others .
Matt Jozwiak: When might we see a more pronounced acceleration in securities yields? Is there a cash flow year that's better than others and work towards that 4% and 5% level? Sorry to interrupt you. Thank you.
Speaker #8: And work towards that 4% and 5% level? Sorry to interrupt you. Thank you.
Speaker #4: No , no sorry . Yeah I think you're right on the yield . I mean , more recently it's been in the high fours , but no , there really isn't a pronounced cash flow .
Richard Kraemer: Yeah, I think you're right on the yield. I mean, more recently, it's been in the high 4s. There really isn't a pronounced cash flow. It's a pretty steady stream, barring any acceleration in prepayments. I think that's kind of the wildcard, which we haven't really seen a material pickup yet. It's pretty steady, Matt. We gave a little bit of additional color. I think it's on slide 21 of our deck on some of that fixed repricing, fixed and adjustable repricing schedule. When you go out beyond 12 months, basically everything right at that left column, the weighted average yields on those segments combined are around 4.5%. That just gives you some idea of upside in the outer years as well, assuming elevated rates.
Speaker #4: It's pretty steady stream , barring any acceleration in prepayments . So I think that's kind of the wild card , which we haven't really seen a material pickup yet , but now it's pretty steady .
Speaker #4: Matt . And we kind of we gave a little bit of additional color . I think it's on slide 21 of our deck on some of that fixed repricing , fixed and adjustable repricing schedule .
Speaker #4: So when you go out beyond 12 months , so I basically everything right at that left column , the weighted average yields on those on those segments combined are around 4.5% .
Speaker #4: So it just gives you some some idea of upside in the outer years as well . Assuming elevated rates .
Speaker #8: Okay . And then also in both your opening remarks and Curt's , you made reference to loan growth headwinds dissipating . You talked about reverting to kind of longer term , you know , levels of loan growth .
Matt Jozwiak: Okay. In both your opening remarks and Curt's, you made reference to loan growth headwinds dissipating. You talked about reverting to kind of longer-term levels of loan growth. Could you just talk a little bit about the pipeline, the strength of the pipeline, where you're expecting to see growth over the next few quarters? Is it fair to say that the longer-term average is kind of low to mid-single digits? If you had to pick a side, low or mid, where would you lean over the next few quarters? Thank you.
Speaker #8: Could you just talk a little bit about the pipeline , how the strength of pipeline , where you're expecting to see growth over the next few quarters , and is it fair to say that that longer term average is kind of low to mid single digits ?
Speaker #8: And if you had to pick a side, low or mid, where would you lean over the next few quarters? Thank you.
Speaker #3: Yeah . So long term trends have been 4 to 6% . You know . And I think we're trying to climb back to that 4% .
Richard Kraemer: Yeah, so the long-term trends have been 4% to 6%. You know, and I think we're trying to climb back to that 4%. We've been below that given the headwinds and the strategic actions we've taken. We want to first get to the low end of that and see where we go from there. You know, the pipelines are up a little bit year over year, and we've had an increasing trend. The pull-through rate is still lower than historical norms. Customers still remain cautious in spending. We do see improvement, but it's modest at this point. Overall, where we want the growth, you know, having a very diversified balance sheet has served us really well over time, and we want to grow in all categories. We feel like we're positioned that we can grow in all categories.
Speaker #3: We've been below that given given the headwinds and the strategic actions we've taken . So we want to first get to the low end of that and see where we go from there .
Speaker #3: You know , the pipelines are up a little bit year over year , and we've had a increasing trend . But the pull through rate is still lower than historical norms .
Speaker #3: Customers still remain cautious . Spending , you know , so so we do see improvement . But it's modest at this point overall where we want the growth .
Speaker #3: You know, having a very diversified balance sheet has served us really well over time. And we want to grow in all categories.
Speaker #3: And we feel like we're a position that we can grow in all categories . You know , even CRE , you know , our position relative to the market is good .
Richard Kraemer: You know, even CRE, you know, our position relative to the market is good, so we can, you know, really attract high-quality borrowers, high-quality projects there. Really across the board, you know, we're trying to get organic growth because we want to win customers. That really is the engine behind the growth over the long haul.
Speaker #3: So we can , you know , really attract high quality borrowers , high quality projects . There . So really across the board , you know , we're we're trying to get organic growth because we want to win customers .
Speaker #3: And that, that really is the engine behind the growth over the long haul.
Speaker #8: Great . And then just last one for me , as Kurt , as you climb back to that 4% loan growth threshold , you know , does that leave room in kind of the capital stack for continued repurchases or what are your capital priorities as you get to a 4% loan growth ?
Matt Jozwiak: Great. Just last one for me. Curt, as you climb back to that 4% loan growth threshold, does that leave room in the capital stack for continued repurchases? What are your capital priorities as you get to a 4% loan growth rate? That's all I had. Thank you.
Speaker #8: Loan growth rate ? That's all I had . Thank you .
Speaker #3: Yeah . So thanks , Matt . The the priorities are the same organic growth than corporate activities , whether it be M&A or asset purchases or , you know , uses of capital .
Richard Kraemer: Yeah, thanks, Matt. The priorities are the same: organic growth, then corporate activities, whether it be M&A or asset purchases or uses of capital, and then buybacks. I think you saw us in this last quarter that in the absence of those first two things and really strong capital generation, we leaned more into the buyback. If those things persist like we think over the next couple of quarters, we'll probably be more in that buyback focus. We have $86 million, I believe, left in the authorization. We typically look at that each year, but we still have $86 million remaining on the buyback that we have in place.
Speaker #3: And then buybacks . And I think you saw us in this last quarter that in the absence of those first two things and and really strong capital generation , we leaned more into the buyback .
Speaker #3: I think if those things persist , like we think over the next couple quarters , then , you know , we'll probably be more in that buyback focus .
Speaker #3: We have 86 million , I believe , left in the authorization . And then we we typically , you know , look at that each year .
Speaker #3: But we still have $86 million remaining on the buyback that we have in place.
Speaker #4: Yeah . Hey , Matt . And maybe just to just to add , I made reference to climbing back to to 4% . I want to just reiterate that strategic actions we took this year , as Kurt said earlier , were over 600 million .
Matt Jozwiak: Matt, maybe just to add, you made reference to climbing back to 4%. I want to just reiterate that the strategic actions we took this year, as Curt said earlier, were over $600 million. It's about 3.5% annualized growth if you added that back in. I think moving from 3.5% to 4% is not that big of a lift here. We are seeing the growth. You're obviously masking that with some very strategic runoff.
Speaker #4: It's about 3.5% annualized growth . You know , if you if you added that back in . So I think moving from three and a half to four is not that big of a of a lift here .
Speaker #4: So we are we are seeing the growth . It's just you know , you're obviously we're masking that with some , some very strategic runoff .
Speaker #1: Thank you . Our next question comes from the line of David Bishop with Harvey Group . Your line is now open .
Operator: Thank you. Our next question comes from the line of David Bishop with Hovde Group. Your line is now open.
Speaker #9: Hey guys . Good morning . This is actually Kyle Gierman asking questions on behalf of Dave . So with the recent with the recent scrutiny around loans to Nfis , could you update us on your current exposure levels and how you think about the sector ?
[Analyst 1]: Good morning. This is actually Kyle Gareman asking questions on behalf of Dave.
Richard Kraemer: Morning, Kyle.
[Analyst 1]: With the recent scrutiny around loans to NDFIs, could you update us on your current exposure levels and how you think about the sector?
Speaker #3: Yeah , so we have very low levels , pretty minimal levels of NFI overall . And the primary in that is loans to bank holding companies , community bank holding companies in our market .
Richard Kraemer: Yeah, we have very low levels, pretty de minimis levels of NDFI overall. The primary in that is loans to bank holding companies, community bank holding companies in our market. We put them in that bucket if they're non-rated debt issuances. That's the primary. We really are not heavily engaged in that activity.
Speaker #3: We we put them in that bucket . If there non rated debt issuances . So that's the primary . So we really you know are not heavily engaged in that activity .
Speaker #4: Yeah . It's tier two sub debt structured as notes because they're non-rated non Cusip institutions .
[Analyst 1]: Yeah, it's tier two sub-debt structured as notes because they're non-rated, non-CUSIP institutions.
Speaker #3: And that's the primary thing in our NFI disclosures, as you would see in the call report.
Richard Kraemer: That is the primary thing in our NDFI disclosures, as you would see in the call report.
Speaker #9: Thank you . That was helpful .
[Analyst 1]: Thank you. That was helpful.
Speaker #1: Thank you. Our next question comes from the line of David Conrad with CCB. Your line is now open.
Operator: Thank you. Our next question comes from the line of David Conrad with Keefe, Bruyette & Woods. Your line is now open.
Speaker #5: Real quick follow up for me , and I think I think Ricky already answered this one a little bit , but you know , deposit .
[Analyst 1]: Real quick follow-up for me, and I think Rick, you already answered this one a little bit, but you know, deposit costs came down 4 bps quarter over quarter as you paid off the broker CDs. With the municipality seasonality in the fourth quarter, is the $245 million a good jumping-off point, or will you increase your broker CDs, or will it just be a reduction in cash and a smaller balance sheet? Thanks.
Speaker #10: Costs came down for Bips quarter over quarter as you paid off the the brokered CDs with the municipality seasonality in the fourth quarter is the 245 a good jumping off point or will you increase your brokerage CDs or will it just be a reduction in cash in a smaller balance sheet ?
Speaker #10: Thanks .
Speaker #4: Yeah . So we did we ran off some broker during the quarter . Obviously we also had some declines in in Fhlb as well .
Richard Kraemer: Yeah, we did, we ran off some broker during the quarter, obviously. We also had some declines in FHLB as well. I think, as we look towards fourth quarter and run out, typically, we saw about $450 million come in in municipal during third quarter. We usually see 40% to 50% of that move out. We'll look towards the most cost-effective way to manage that. It could also be customer deposits and specials on that end too. We're going to continue to manage our loan deposit ratio appropriately. Any of those alternatives work for us.
Speaker #4: So, I think, as we look towards the fourth quarter and run out, typically we saw about $450 million come in in municipal during the third quarter.
Speaker #4: We usually see 40 to 50% of that move out . So we'll look we'll look towards the the most cost effective way to manage that .
Speaker #4: And it could also be customer deposits and specials on that end too . So you know we're going to continue to manage our loan deposit ratio appropriately .
Speaker #4: But any of those alternatives work for us okay .
Speaker #10: Perfect . Thank you .
[Analyst 1]: Okay, perfect. Thank you.
Speaker #1: Thank you. I currently have no further questions at this time. I would like to turn the call back over to Kurt Meyers for closing remarks.
Operator: Thank you. I'm currently showing no further questions at this time. I'd like to turn the call back over to Curt Myers for closing remarks.
Speaker #3: Well, thank you again for joining us today. We hope you'll be able to be with us when we discuss fourth quarter results.
Richard Kraemer: Thank you again for joining us today. We hope you'll be able to be with us when we discuss fourth quarter results and year-end results in January. Thank you.
Speaker #3: And year-end results in January. Thank you.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.