FULT Q1 Deep Dive: Expense Controls and Deposit Growth Shape Outlook Amid Cautious Loan Environment

Regional banking company Fulton Financial (NASDAQ: FULT) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 18.6% year on year to $318.4 million. Its non-GAAP profit of $0.52 per share was 20.9% above analysts’ consensus estimates.

Is now the time to buy FULT? Find out in our full research report (it’s free).

StockStory’s Take

Fulton Financial delivered first quarter results that were above Wall Street’s revenue and non-GAAP profit expectations, with management pointing to disciplined expense control and solid deposit growth as the primary drivers. CEO Curtis Myers highlighted that operating efficiency improved meaningfully as the company achieved a reduction in operating expenses, while also growing its tangible book value per share. Fulton’s lending activity was tempered by strategic actions, such as reducing exposure in indirect auto and commercial construction loans, and a proactive approach to resolving troubled assets. These initiatives, along with careful balance sheet management, contributed to a stable net interest margin and enhanced liquidity.

Looking ahead, Fulton Financial’s guidance reflects a cautious approach to loan growth and ongoing vigilance regarding credit quality amid macroeconomic uncertainty. Management expects loan growth to remain in the low single-digit range, with deposit costs and margin pressures closely monitored. CFO Richard Kraemer noted that fee income and net interest income could trend toward the lower end of guidance if economic growth remains subdued. The company also anticipates modest headwinds from interest rate cuts and potential impacts from tariffs, especially in its agriculture portfolio, while continuing to focus on operational efficiency and risk management.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to improved expense discipline, selective portfolio management, and steady customer deposit gains, while noting that strategic lending decisions and external headwinds shaped the loan book.

• Expense discipline and efficiency: The company achieved a lower operating efficiency ratio, driven by realized savings in professional fees and delayed spend on certain initiatives. This operational discipline supported positive operating leverage, with management emphasizing that expense controls will remain a key focus in 2025.
• Deposit growth momentum: Customer deposit balances increased, led by growth in interest-bearing money market accounts. Management noted that overall deposit costs declined, aided by proactive management of both retail and brokered deposits, supporting the company’s strong liquidity position.
• Selective loan portfolio adjustments: Fulton Financial reduced exposure to indirect auto and commercial construction loans, prioritizing relationship-based lending and actively resolving nonperforming assets. These actions resulted in a net decline in total loans for the quarter, but management views them as prudent steps to maintain asset quality.
• Credit quality stability: Asset quality metrics improved as nonperforming loans declined and net charge-offs remained low. Management remains cautious, however, citing potential impacts from tariffs and commodity price volatility, particularly in the agricultural lending portfolio.
• Fee income resilience with headwinds: Non-interest income was steady, though management acknowledged that certain fee-based businesses, such as wealth management and mortgage, face market-sensitive headwinds. The company expects fee income to remain at the lower end of guidance if current trends persist.

Drivers of Future Performance

Fulton Financial’s outlook is shaped by cautious loan growth expectations, interest rate uncertainty, and a continued focus on operational efficiency.

• Loan growth moderation: Management expects loan balances to grow at a low single-digit pace, acknowledging that strategic actions taken for credit risk management and a cautious loan origination approach may limit expansion, particularly if borrower demand remains subdued amid macro uncertainty.
• Margin and interest rate sensitivity: The company anticipates net interest income and margin will face headwinds if interest rates decline more than expected, with each 25 basis point rate cut estimated to reduce annual net interest income by $1.7 million. Deposit costs are expected to stabilize, but margin pressures could persist due to market conditions and funding mix changes.
• Fee income and credit quality risks: Fee-based businesses, such as wealth management and mortgage, are subject to market volatility and rate-driven headwinds. Management is also monitoring potential impacts from tariffs and commodity price fluctuations, particularly within the agricultural loan portfolio, as well as broader credit quality trends in a slower growth environment.

Catalysts in Upcoming Quarters

The StockStory team will be monitoring (1) whether Fulton Financial can achieve consistent loan growth as macro conditions evolve, (2) the company’s ability to manage deposit costs and maintain net interest margins amid a shifting rate environment, and (3) credit quality trends, particularly in agriculture and commercial real estate. Fee income performance and expense discipline will also be important markers of execution.

Fulton Financial currently trades at $17.45, up from $16.04 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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