Fulton Financial Q4 2024 Earnings Report

Fulton Financial EPS Results

• Actual EPS: $0.48
• Consensus EPS: $0.42
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $0.42

Fulton Financial Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $315.73 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Fulton Financial Announcement Details

• Quarter: Q4 2024
• Date: 1/21/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, January 22, 2025
• Conference Call Time: 10:00AM ET

Fulton Financial (NASDAQ:FULT) operates as a financial holding company that provides consumer and commercial banking products and services in Pennsylvania, Delaware, Maryland, New Jersey, and Virginia. It accepts various checking accounts and savings deposit products, certificates of deposit, and individual retirement accounts. The company offers consumer loans products, including home equity loans and lines of credit, automobile loans, personal lines of credit, and checking account overdraft protection; construction and jumbo residential mortgage loans; and commercial lending products comprising commercial real estate, commercial and industrial, and construction loans, as well as equipment lease financing loans. In addition, it offers letters of credit, cash management services, and traditional deposit products; and wealth management services, including investment management, trust, brokerage, insurance, and investment advisory services. Further, the company owns trust preferred securities; and sells various life insurance products. It provides its products and services through financial center offices, as well as through a network of automated teller machines, telephone banking, mobile banking, and online banking. Fulton Financial Corporation was founded in 1882 and is headquartered in Lancaster, Pennsylvania.

Fulton Financial Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Please be advised that today's conference is being recorded.

[Operator]

I would now like to turn the conference over to your speaker today, Matt Jozwiak, Director of Investor Relations. Please go ahead.

[Matthew Jozwiak, Director of IR & Corporate Development at Fulton Financial]

Good morning and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the Q4 year ended December 31, 2024. Your host for today's conference call is Curt Meyers, Chairman and Chief Executive Officer. Joining Curt is Rick Kramer, 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 atfult.com by clicking on Investor Relations and then on News.

[Matthew Jozwiak, Director of IR & Corporate Development at Fulton Financial]

The slides can also be found on the Presentations page under Investor Relations on our website. On this call, representatives of Fulton may make forward looking statements with respect to Fulton's financial condition, results of operations and business. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, and actual results could differ materially. Please refer to the Safe Harbor statement on forward looking statements in our earnings release and on Slide 2 of today's presentation for additional information on these risks, uncertainties and other factors. Fulton undertakes no obligation other than as required by law to update or revise any forward looking statements.

[Matthew Jozwiak, Director of IR & Corporate Development at Fulton Financial]

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 in Slides 19 through 28 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 Meyers.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Thanks, Matt, and good morning, everyone. For today's call, I'll be providing a summary of the operating highlights for the Q4 and for the year. In addition, I'll provide the status of a few key strategic initiatives. Then Rick will review our financial results in more detail and step through our 2025 operating guidance. After our prepared remarks, we'll be happy to take any questions you may have.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Fulton's results for the Q4 and for the year were driven by the extraordinary effort of our team. We worked together to deliver a very successful year, both operationally and strategically. For the year, we delivered on our strategy and focused on our corporate mission to change lives for the better. As a result, we grew to more than 750,000 customers, reached $1,200,000,000 in total revenue, a record for the company. We delivered strong operating earnings per share, which was also a record performance, and we made tremendous impact in the communities that we serve.

[Curtis Myers, CEO & Chairman at Fulton Financial]

We completed and fully integrated the Republic transaction, delivering strong financial results on an aggressive timeline. We made significant progress on our Fulton First transformation. This strategic initiative simplifies our operating model, focuses on key strengths and enhances productivity across the bank. We strengthened our balance sheet by completing a sale leaseback transaction. We restructured our investment portfolio, and we improved our liquidity and enhanced our earnings power.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Our capital position grew throughout the year as we generated solid internal capital and supplemented that position with a successful capital raise. As a result, we delivered a strong year and positioned the company for continued success in 2025 beyond. Our 2024 financial results were strong, especially considering the backdrop of a volatile interest rate environment. Operating earnings per share of $1.85 was driven by strong fundamentals, the impact of the Republic transaction and the initial positive impact of our Fulton First initiative. In 2024, total deposit growth was solid.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Legacy Fulton deposits grew $878,000,000 or 4.1 percent. And when including Republic deposits, total deposit growth was $4,600,000,000 or 21.3 percent for the year. Total loan growth was meaningful. While legacy Fulton loans grew $316,000,000 or 1.5 percent, total loan growth for the year was $2,700,000,000 or 12.6 percent when including Republic. Our net interest margin was consistent with last year at 3.42%.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Given the volatile interest rate environment, we feel that this was a positive outcome. Our non interest income growth was strong. Excluding the impact of the gain on acquisition and the loss on the securities restructuring, non interest income grew $31,000,000 or 13.4 percent to $259,000,000 dollars All non interest income generating businesses grew, led by Wealth Management at $9,200,000 or 12.2 percent growth. Non interest income continues to be a meaningful contributor to total revenue at over 20%. We declared dividends of $0.69 per share, a 6% increase year over year.

[Curtis Myers, CEO & Chairman at Fulton Financial]

And we continue to actively manage through the credit environment, working with borrowers and managing relationships for long term performance. While we see pressure due to the ongoing impact of higher rates and higher costs, performance in 2024 was in line with our expectations. Overall, we were pleased with our performance and the results our team generated throughout the year. Now let me turn to our quarterly results. Operating earnings for the quarter was $0.48 per share, a stable balance sheet and noticeable improvement in expenses drove the quarter.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Total deposits were relatively flat with deposit costs down 10 basis points linked quarter. Total loans declined $131,000,000 linked quarter. We generated a consistent level of originations. However, organic growth was offset by portfolio repositioning of selected republic loans as well as the planned decline in our indirect auto portfolio. Our loan to deposit ratio ended the year at 92%, slightly below our long term operating target of 95% to 105%.

[Curtis Myers, CEO & Chairman at Fulton Financial]

This position continues to provide balance sheet flexibility. Non interest income for the quarter was $68,600,000 up $1,200,000 linked quarter when excluding the adjustment to the bargain purchase gain. The provision for credit losses was $16,700,000 and our ratio of ACL to total loans increased to 1.58%. Overall, asset quality ended the year in line with our expectations, and we remain cautious as we enter 2025. Now I'll provide updates on 2 key initiatives.

[Curtis Myers, CEO & Chairman at Fulton Financial]

First, let me comment on the status of the Republic transaction. During the quarter, we completed the systems conversion, finalized our integration efforts, and are now realizing cost savings in line with our initial assumptions. We saw noticeable financial contributions to the 4th quarter results and are excited to see the full benefits impact our results in 2025. Finally, I'll provide you with our progress on Fulton First. As a reminder, Fulton First is an important initiative designed to enhance growth, improve operating effectiveness and create sustainability, positive operating leverage over time.

[Curtis Myers, CEO & Chairman at Fulton Financial]

We are encouraged by the progress we've made to date, and we are looking forward to the full benefit realization over the next year and beyond. For 2025, we expect the initiative will improve our operating efficiency and allow us to keep our expenses flat on a year over year basis. We feel this is significant accomplishment in the current operating environment. Now I'll turn

[Curtis Myers, CEO & Chairman at Fulton Financial]

the call over to Rick

[Curtis Myers, CEO & Chairman at Fulton Financial]

to discuss our financial performance and our 2025 operating guidance in more detail.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Thank you, Kurt,

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

and good morning. Unless I note otherwise, the quarterly comparisons I discuss are with the Q3 of 2024. Loan and deposit growth numbers I may reference are annualized percentages on a linked quarter basis. Starting on Slide 5, operating earnings per diluted share was $0.48 or $88,900,000 of operating net income available to common shareholders. Deposit growth was relatively flat for the quarter.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Growth in interest bearing demand and savings account products were offset by a decline in time deposits. Our non interest bearing DDA balances were flat linked quarter at $5,500,000,000 and remained at 21% of total deposits. As previously mentioned, total loans declined $131,000,000 during the quarter due to the portfolio dynamics we discussed. On hand balance sheet liquidity remained strong at over 19% of liabilities and included an increase of securities of $261,000,000 offset by a decline in cash of 380,000,000 dollars Some of the decline in cash balances can be attributed to the maturity and subsequent repayment of $168,000,000 of subordinated debt in the quarter. Impacts of these balance sheet trends are shown on Slide 6.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Net interest income on a non FTE basis was $254,000,000 a $4,000,000 decrease linked quarter, while net interest margin declined by 8 basis points to 3.41%. The linked quarter decline was primarily driven by the effects of 100 basis points of easing by the Fed from September through December. In addition, we added $900,000,000 of received fixed hedges to support a more neutral interest rate risk profile. Loan yield declined 23 basis points linked quarter to 5.97%. Included in the loan yield is 13,900,000 of accretion attributable to the purchase accounting marks on the acquired Republic Loan portfolio.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Our average cost of total deposits decreased 10 basis points to 2.14% linked quarter. This decline was primarily due to the deposit pricing actions taken in tandem with the Fed monetary policy. Turning to non interest income on Slide 7. Non interest income for the quarter was $65,900,000 This included a fair value adjustment to the bargain purchase gain attributable to the Republic transaction of $2,700,000 Excluding this adjustment, fee income increased $1,200,000 or 7% linked quarter. Moving to Slide 8, non interest expense on an operating basis was $190,600,000 a decrease of $5,500,000 linked quarter or 3% on a linked quarter annualized basis.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

As of December 2024, we are achieving our projected annualized cost save estimate of 40% from the acquisition of Republic and are realizing the efficiency benefits of Fulton First. Material items excluded from operating expenses as listed on Slide 8 were charges of $10,000,000 of Fulton First implementation and asset disposal expense, dollars 9,600,000 of acquisition related expenses and $6,200,000 of core deposit intangible amortization. Turning your attention to Slide 9, you'll see a reminder of the expected benefits of the Fulton First Initiative and financial assumptions. Turning to asset quality, the net charge off ratio was up modestly to 22 basis points, while non performing assets to total assets increased 5 basis points to 69 basis points. Our ACL to total loans remains near historical highs at 1.58%, while the ACL to non performing loans came in at 172%.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Slide 11 shows a snapshot of our capital base. As of December 31, we maintained solid cushions over the regulatory minimums. Our tangible capital ratio was flat linked quarter despite being impacted by additional OCI reserve of 44,500,000 dollars OCI ended the year at a negative $288,000,000 On Slide 12, we are providing our operating guidance for 2025. Our guidance incorporates a projected decrease in Fed funds of 25 basis points in March and 25 basis points in June of 2025. For 2025, our operating guidance is as follows.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

We expect our net interest income on a non FTE basis to be in the range of $995,000,000 to $1,020,000,000 We expect our provision for credit losses to be in the range of $60,000,000 to $80,000,000 We expect our non interest income to be in the range of $265,000,000 to $280,000,000 And we expect our non interest expense on an operating basis to be in the range of $755,000,000 to $775,000,000 for the year. Our operating estimate excludes potential Fulton First charges of $14,000,000 and CDI amortization estimated to be $22,500,000 And lastly, we expect our effective tax rate to be approximately 18% for the year. With that, we'll now turn the call back over to Victor for questions.

[Operator]

Thank you. Our first question comes from the line of Danny Tamayo from Raymond James. Your line is open.

[Daniel Tamayo, Vice President at Raymond James Financial]

Thank you. Good morning, guys.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Good morning, Matt.

[Daniel Tamayo, Vice President at Raymond James Financial]

Maybe just to start with a clarification question, if I can. On the average earning asset guidance, the growth, the low single digits, that's off of the annual number, the $28,595 number, I'm assuming.

[Daniel Tamayo, Vice President at Raymond James Financial]

And if so, is that it's a decline from the 4th quarter number. Just curious what's driving it?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Sorry, Jamie, can you clarify that? We didn't provide guidance on average earning assets.

[Daniel Tamayo, Vice President at Raymond James Financial]

I apologize. I'm not sure if I'm looking at the wrong thing here. Well, why don't we just talk a little bit about what we are thinking in terms of balance sheet growth for the year and kind of where you may see that in terms of loans and on the deposit side as well?

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes, Danny, it's Kurt. So we're really focused on giving NII guidance, which you can see in the information. And then on asset growth, we continue in this operating environment to expect lowtomidsingledigitgrowth on both sides of the balance sheet as we move forward.

[Daniel Tamayo, Vice President at Raymond James Financial]

Okay. All right. Fair enough.

[Daniel Tamayo, Vice President at Raymond James Financial]

And then maybe you can just talk a little bit about the provision guidance. Curious how you guys are thinking about like loss rates going forward? Are we in a normalization process? Are we approaching a peak? Just curious where you guys see normal reserves given the little bit of movement we've seen there as well?

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes. So for 2024, we had given guidance in $40,000,000 to $60,000,000 and the provision excluding the day 1 CECL double count was just under $50,000,000 So we're right in line with expectations last year. The guidance going forward, the balance sheet is a little bigger this year based on the acquisition. So looking at that and looking at where we're positioned right now, we expect a similar year as we did to last year and that's why we have that operating range on provision. We have a bigger reserve going into the year and that's kind of how we see things right now, pretty stable relative to what we've experienced.

[Daniel Tamayo, Vice President at Raymond James Financial]

Got you. So I was looking at the just to clarify the first question, I was looking at your comment on the operating guidance slide, low to mid single digit interest earning asset growth. So you're saying that's period end and not average?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes, that would be period end.

[Daniel Tamayo, Vice President at Raymond James Financial]

Got it. Okay. I think that answers my question then. All right. That's all I had.

[Daniel Tamayo, Vice President at Raymond James Financial]

Thanks for taking my questions.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Thanks, Danny.

[Operator]

Thank you. One moment for our next question. Next question will come from the line of Chris McGrady from KBW. Your line is open.

[Angel Eycher, Analyst at Keefe, Bruyette & Woods (KBW)]

Hey, how's it going? This is Angel Eycher on for Chris McGratty. Just on the NII guide, it looks like with the growth you gave in the guidance, it implies relatively stable margin. I ask you to be thinking about the cadence of the margin as we move throughout the year? Thanks.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes. Look, I think we're going

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

to try to stay away from specific margin guidance just given the potential for several dynamics. When we think about NII, I would tend to think cadence over the year would be starting the year slightly lower in 1Q given some growth and also day count adjustments and then gradually drifting higher over the course of the

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

year.

[Angel Eycher, Analyst at Keefe, Bruyette & Woods (KBW)]

Okay. Thank you. And I know you've said in the past that buybacks have been 3rd in line for capital use. How's the environment or your appetite changed to start thinking about buying back shares here in 2025?

[Curtis Myers, CEO & Chairman at Fulton Financial]

Our priority for capital utilization would be the same and that would remain 3rd on the list. We do have an approved authorization. So we have that corporate flexibility to do that, but our priorities remain the same.

[Angel Eycher, Analyst at Keefe, Bruyette & Woods (KBW)]

Okay, great. Thank you. I'll step back.

[Operator]

Thank you. One moment for our next question. Our next question will come from the line of David Bishop from Hoag Group. Your line is open.

[David Bishop, Director at Hovde Group]

Hey, good morning, gentlemen.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Good morning.

[David Bishop, Director at Hovde Group]

Hey, just curious in terms of the Fulton First initiative, I appreciate the guidance. Just curious, I mean, to date, I don't know if there's a way to quantify maybe realized cost saves or cost saves that are already sort of in the run rate?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes. So in Q4, we look at about just under $5,000,000 in the run rate, so on a quarterly basis.

[David Bishop, Director at Hovde Group]

Got it. And then I think the $25,000,000 is estimated to be $25,000,000 correct in terms of the whole year?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes. So I think the simplistic view is you take that obviously multiply the 5 by 4, that's $20,000,000 and you get incremental quarterly saves over the course of the year getting

[David Bishop, Director at Hovde Group]

to your 25. Got it. And then in terms of the maybe shifting gears there a bit, the retention of the Republic Bank deposits, just curious what you're seeing there in trends? And are you seeing any sort of mix shift there that's either aiding or abetting margin expansion? Thanks.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes. Overall, the deposit portfolio, the team is managing it well and it's stable. So we had initial runoff. I think we talked last quarter about it stabilizing. That continued throughout this quarter that deposit base has been pretty stable.

[Curtis Myers, CEO & Chairman at Fulton Financial]

And we continue to be ahead of our initial assumptions on potential runoff.

[David Bishop, Director at Hovde Group]

Got it. And then maybe, Rick, just a housekeeping question. I know it's sometimes tough to predict, but purchase accounting, accretion income about $13,900,000 Any sense maybe where that average is per quarter into 2025? Thanks.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes. On a quarterly basis, you should be looking somewhere in that $13,500,000 to $14,000,000

[David Bishop, Director at Hovde Group]

Perfect. Thank you.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Welcome. Thank you.

[Operator]

Thank you. One moment for our next question. Our next question will come from the line of Matthew Breese from Stephens. Your line is open.

[Matthew Breese, Managing Director at Stephens Inc]

Hey, good morning.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Good morning.

[Matthew Breese, Managing Director at Stephens Inc]

First off, I was just hoping for maybe a reminder on the breakout between floating adjustable and fixed rate loans and kind of what drove loan yields this quarter. I'm assuming it was just all floating. And then the other thing I was hoping for along the same lines, given some of your Fed outlook expectations, where do you expect loan yields to bottom during the year? Yields were down 23 bps this quarter. I was thinking you have another quarter or 2 of down yields, but to a lesser extent, I was hoping you could walk me through that a little bit.

[Matthew Breese, Managing Director at Stephens Inc]

Thanks.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes, sure, Matt. Hey, Matt. So just to put your attention on Slide 14 of our earnings supplement, we did put a little bit more detail in there on the bottom left corner in terms of the actual dollar breakout of variable versus fixed versus adjustable. And then did provide some the weighted average contractual repricing date in terms of periods of years. So that will give you a little bit of a look in terms of obviously the variable component just under $10,000,000,000 is relatively short, call it sub 1 month in terms of repricing.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

But the adjustable piece of 5,700,000,000 dollars reprices on average at 4.48 years. So, it certainly acts more fixed in the short term. I would also lead you to the coupons on that book ex purchase accounting are closer to 5%. So you do get a tailwind in the current environment of those repricing over the call it the next at least the foreseeable future with where rates are.

[Matthew Breese, Managing Director at Stephens Inc]

Great. I appreciate that. And then the second part of the question was just given your Fed rate outlook expectations, walk me through kind of loan yield expectations and where do you expect to hit the bottom on loan yields with 2 cuts this year? It feels like the NIM is going to be down and to the right or NII is going to be down and to the right beginning of the year, but up and to the right as we kind of get past the Fed cuts?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes, I think that's right. I mean, I'm a little hesitant to give a number on loan yields, but directionally in the cadence, you're right. Assuming we get the Fed to pause, you should start to see a fairly nice rebound because of that repricing dynamic I mentioned on the adjustable piece, right? So, a little bit probably similar type of we've got 100 basis points effectively September through December. So, I wouldn't expect quite the same amount of pressure on loan yields, but directionally and timing wise, I think you're right.

[Matthew Breese, Managing Director at Stephens Inc]

Appreciate that. And then, Rick, last quarter, we talked a little bit about the deposit rate environment. I think

[Matthew Breese, Managing Director at Stephens Inc]

you had said something to

[Matthew Breese, Managing Director at Stephens Inc]

the effect of near term around the 10% beta longer term 30%. Just give us some color on the deposit competitive environment and how you're faring relative to those goals and when do you think you can hit kind of that 30% beta goal?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes. I think, Matt, if we look at as I look at at least on spot rates, we are approaching on NMDs cycle, which is obviously a short cycle, call it 20% plus mid-20s. So, I think we're probably going to get close there hopefully in the next couple of quarters. Certainly, the pricing dynamics have been beneficial. I would also point on the total deposits on that same page, Slide 14, you'll recognize that we have a substantial amount of time deposits that mature over the course of 2025 and some of the pricing on those, at least on average, is call it 4.36.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Retail CDs make up about 85% of that. And those have seen fairly substantial downward repricing. So similar rate, call it 4.35%, I would expect to see 50 basis points, 80 basis points potentially more of benefit over the course of the year, assuming a stable competitive market. Great. And then last one before I hop back in the queue.

[Matthew Breese, Managing Director at Stephens Inc]

Low to mid single digit loan growth for the year, Was hoping for some clarity on where you expect to grow and where you do not expect to grow. In the last couple of quarters, C and I has been weak, but it's been other areas have kind of helped out. And I'm curious if we continue to see that trend in 2025?

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes, Matt. We're in a position to really focus on growth in all categories. So we feel good about where our CRE position is. C and I is always a focus. Consumer is always a focus for us.

[Curtis Myers, CEO & Chairman at Fulton Financial]

So we're going to continue to be focused on the diversification of balance sheet and trying to grow in all categories. We do have the headwind that we had in this past quarter around the consumer indirect auto runoff and some repositioning of acquired loans. So we might continue to have some of those headwinds and that's why we're looking at low to mid single digit loan growth.

[Matthew Breese, Managing Director at Stephens Inc]

Great. Thank you. I appreciate that.

[Operator]

Thank you. One moment for our next question. We have a follow-up from the line of Danny Tamayo from Raymond James. Your line is open.

[Daniel Tamayo, Vice President at Raymond James Financial]

Great. Hello again. Just a couple of quick ones here. First, I know you guys aren't talking about margin, but just curious if you have an expectation or how you're thinking about the accretion income expected this year?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes. It should be fairly stable kind of in the $13,500,000 to $14,000,000 a quarter. So you're looking at $4,500,000 to $4,500,000 to $4,600,000 or $4,700,000 a month. It tends to it will drip slightly lower as the year goes on, but that's a good range.

[Daniel Tamayo, Vice President at Raymond James Financial]

Okay.

[Daniel Tamayo, Vice President at Raymond James Financial]

And hearing you say that, I think you've said that already. So I apologize for the second question. Hopefully, this one is also not a repeat. But just curious on the guidance where you talked about the line items impacted by lower rates I'm sorry, by rates in terms of fee income. Curious specifically where those might show up and then your thoughts on mortgage banking within the fee income guidance overall?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes. Look, I think on rates, depending on what happens, like the more volatile business lines or the more exposed business lines to rates are going to be mortgage banking, as you mentioned, commercial swaps, certainly. And then also wealth management, I think, look, depending on where rates move, equity market movement obviously correlates to the revenues of that business. So those are the primary pieces.

[Daniel Tamayo, Vice President at Raymond James Financial]

You think some of those line items could actually be down in 2025 versus 2024 or just a slower growth rate?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

We're coming off of historic or record growth in our wealth management. You had 2 years consecutive of 20% plus returns on the S and P. So I think we're being appropriately conservative in some of the forecast there. And then again, commercial swaps, if we're expecting low to mid single loan growth, it likely won't be a huge year there.

[Daniel Tamayo, Vice President at Raymond James Financial]

Okay.

[Daniel Tamayo, Vice President at Raymond James Financial]

All

[Daniel Tamayo, Vice President at Raymond James Financial]

right. Thanks for taking my follow ups. I appreciate it.

[Operator]

Thank

[Operator]

you. One moment for our next question. Our next question will come from the line of Frank Schiraldi from Piper Sandler. Your line is open.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Hey, good morning.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Hey, Frank.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Just wanted to ask about, you got the systems conversion on FRBK completed and you obviously still have work you're going through with the Fulton First initiative. But just curious where potential M and A fits in, in terms of priorities. Is that something more likely to be looked at after Fulton First? Is that something that you could do incrementally in the near term? Just curious your thoughts and maybe guideposts around what you would be looking for in potential deals?

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes, Frank, it's Kurt. Our strategy is the same on M and A. We look at $1,000,000,000 to $5,000,000,000 community banks in market, really have a consistent culture and operating model and provide and accelerate our growth. And then more strategic larger ones, we look at them really in 2 different buckets. That strategy is the same.

[Curtis Myers, CEO & Chairman at Fulton Financial]

To your question of being in position to look at M and A, we feel we are back in position to look at M and A right now. And we would weigh the various corporate initiatives that we have going on to make sure that it's appropriate thing for us to do and that we can handle all the different activities. So we are engaged as we always are in that activity and it's a possibility. But again, we will make sure we have the operating capability to make sure we execute effectively.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Okay. And then sorry if I'm you've probably clarified this in the past, but just in the Fulton First initiative, the $50,000,000 kind of run rate through 2026, is that on the fully on the expense side? Is there any additional pickup there on the revenue side anticipated from the initiative?

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes. All that guidance, Frank, is expense based.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Okay. So is that

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

yes, sorry, go ahead.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Frank, just to add, there are growth initiatives as well, pretty significant growth initiatives, but we aren't building those into the numbers. And they're going to be in our run rate as we execute going forward there to drive corporate growth, but we won't line item them. We're just going to generate and execute on those strategies.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Got you. Okay. Do you think the timeline is sort of the same in terms of fully integrated by 2026, not to put too fine a point on it?

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes. So the

[Curtis Myers, CEO & Chairman at Fulton Financial]

strategy implementation will be on the same timeline. But with any revenue growth, it takes time to build customer base and build that revenue. So that is over time and again will be included in our overall growth forecast and expectations.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Got it. Okay, makes sense. Thank you.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Manon Nivas from D. A. Davidson.

[Operator]

Your line is open.

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Maybe just a follow-up on that. Can you go into more detail about some of those revenue initiatives? I guess some of them are definitely year out, but we're another quarter along the process. Just seeing if you could give any more update on that kind of commercial growth initiatives?

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes. Just some overall comments. A lot of the initiatives are to focus on our core strengths. So where we are currently performing well, add value to clients, have a strong strategy to further enhance that growth and focus on that. And then specifically on the business banking, small business, we've done well.

[Curtis Myers, CEO & Chairman at Fulton Financial]

And in our marketplace, it is a significant opportunity around number of customers and revenue growth. So that is the specific line item or customer segment that we'll focus on even more than we already do. We have a significant customer base now, but we think we can have transformative growth in the small business category.

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Should we expect kind of more updates as the year goes on or maybe a year from now would be the update? How should we think about that revenue generating opportunity?

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes. Over time, we're going to talk about those business segments and growth over time. So you will hear more about it. We probably through this year, you'll hear it in the construct of Fulton First. But long term, you'll hear about that just as we operate and drive value and growth.

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Great, great. Just shifting over loan growth for a second. Could you give an update on commercial loan pipelines? I apologize if I missed that. And I just wanted to hear if there's is that loan repositioning on FRBK side, is that kind of done?

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Is there any more headwinds from that and the indirect auto anticipated? Just kind of thoughts on near term loan growth with those in mind.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

Yes. Specifically to the headwinds. So on the indirect side, we the portfolio is around $390,000,000 in balances remaining and it's got an average duration of about 2.6 years. So I think you can all people, you'd expect to see a similar type of runoff per quarter, call it, in that $40,000,000 range. But in terms of the Republic repositioning, I think, we've integrated in the Q4, so that was probably the largest actions you'll see.

[Richard Kraemer, Senior Executive VP & CFO at Fulton Financial]

But I'll let Kurt kind of elaborate more on some other details.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes. I just want to go back to the first part of your question. So those are the headwinds in indirect auto. And then as you work through an acquisition, you're going to have some of that that will moderate as we move forward. And again, on Republic, we want to get to stability and deposits, stability and loans and then grow from there.

[Curtis Myers, CEO & Chairman at Fulton Financial]

So the team is really focused on growing that strategic marketplace in the Greater Philadelphia Metro area. So we think we have a really strong base to grow from. I think you'll see that pivot throughout this year as we work through those transitions. And did we get the first part of your question?

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

Commercial pipelines, I don't believe so, unless I missed it somewhere else.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Yes. So on commercial pipeline, the pipeline is relatively flat, so pretty consistent. And we've really been focused on the pull through rate. So our borrowers moving forward, are they expanding, are they buying that equipment? And we really haven't seen much of a change there, but we're hoping that the environment improves and that our underlying business customers become more confident to move forward on projects.

[Curtis Myers, CEO & Chairman at Fulton Financial]

So we really don't think we have to grow the pipeline as much as have borrowers be confident in this environment to move forward with projects.

[Manuel Navas, Senior Research Analyst at D.A. Davidson]

I appreciate that commentary. And that kind of matches what many have said. So maybe Lumbergh kind of grows across the year as folks become more certain on the economy and on policy? Is that kind of the main thought process?

[Operator]

Correct. Thank you. And I'm not showing any further questions at this moment. I would now like to turn it back over to Kirk Myers for closing remarks.

[Curtis Myers, CEO & Chairman at Fulton Financial]

Well, thank you again for joining us today. We hope you'll be able to be with us when we discuss Q1 results in April. Thank you.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Participants

Executives

• Matthew Jozwiak, Director of IR & Corporate Development
• Curtis Myers, CEO & Chairman
• Richard Kraemer, Senior Executive VP & CFO

Analysts

• Daniel Tamayo, Vice President at Raymond James Financial
• Angel Eycher, Analyst at Keefe, Bruyette & Woods (KBW)
• David Bishop, Director at Hovde Group
• Matthew Breese, Managing Director at Stephens Inc
• Frank Schiraldi, Managing Director at Piper Sandler Companies
• Manuel Navas, Senior Research Analyst at D.A. Davidson