10-K: Fulton Financial Reports Strong 2025 Earnings, Advances Merger

Fulton Financial Corporation reported a significant increase in net income for 2025, driven by higher net interest income and reduced non-interest expenses, while progressing with its Blue Foundry Bancorp merger.

Summary

• Net income available to common shareholders increased by $102.9 million to $381.4 million for the year ended December 31, 2025, compared to $278.5 million in 2024.
• Diluted earnings per share (EPS) rose to $2.08 in 2025, a $0.51 increase from $1.57 in 2024.
• Net Interest Margin (NIM) improved by 9 basis points to 3.51% in 2025, up from 3.42% in 2024.
• Net interest income increased by $76.0 million to $1.0 billion in 2025.
• Provision for credit losses decreased to $35.7 million in 2025 from $71.6 million in 2024.
• Non-interest expense decreased by $28.0 million to $791.8 million in 2025.
• The Corporation repurchased 3.3 million shares of common stock at a total cost of $59.7 million, or an average of $18.16 per share, under the 2025 Repurchase Program.
• Total assets increased by $46.6 million to $32.1 billion as of December 31, 2025.
• Total deposits increased by $460.0 million, or 1.8%, to $26.6 billion as of December 31, 2025.
• Total borrowings decreased by $484.7 million, or 27.2%, to $1.3 billion as of December 31, 2025.
• Total shareholders' equity increased by $293.1 million, or 9.2%, to $3.5 billion, representing 10.9% of total assets.
• Non-accrual loans as a percentage of net loans decreased to 0.64% in 2025 from 0.79% in 2024.
• The effective tax rate was 19.4% in 2025, compared to 16.2% in 2024.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, marked by significant earnings growth, improved efficiency, and strategic merger progress, despite some unrealized losses on investment securities.

Positives

• Net income available to common shareholders increased significantly by $102.9 million to $381.4 million in 2025.
• Diluted EPS rose substantially to $2.08 in 2025 from $1.57 in 2024.
• Net Interest Margin (NIM) expanded by 9 basis points to 3.51% in 2025, indicating improved profitability from core lending activities.
• Net interest income increased by $76.0 million, contributing to overall revenue growth.
• Provision for credit losses decreased by $35.9 million, suggesting improved credit quality or more favorable economic forecasts.
• Non-interest expense decreased by $28.0 million, reflecting enhanced operational efficiency.
• The Corporation's capital levels exceeded all minimum regulatory requirements, including capital conservation buffers, as of December 31, 2025.
• Fulton Bank received an 'outstanding' rating under the Community Reinvestment Act (CRA).
• The 2025 Repurchase Program successfully repurchased 3.3 million shares for $59.7 million, demonstrating commitment to shareholder returns.
• Total shareholders' equity increased by 9.2% to $3.5 billion, strengthening the balance sheet.
• Total deposits increased by $460.0 million, indicating continued customer confidence and funding stability.
• Total borrowings decreased by $484.7 million, reducing reliance on higher-cost funding sources.
• Non-accrual loans as a percentage of net loans decreased to 0.64% in 2025, indicating an improvement in asset quality.
• The Allowance for Credit Losses (ACL) to non-performing loans improved to 198% in 2025, providing robust coverage for potential loan losses.

Negatives

• Unrealized losses on Available-for-Sale (AFS) investment securities totaled approximately $206 million as of December 31, 2025, reducing total shareholders' equity.
• The yield on total loans decreased by 21 basis points to 5.87% in 2025 compared to 6.08% in 2024.
• Construction loans decreased significantly by $424.6 million, or 30.4%, in 2025.
• Noninterest-bearing demand deposits decreased by $243.7 million, or 4.4%, potentially increasing funding costs.
• Time deposits decreased by $154.8 million, or 3.7%, also impacting funding mix.
• Approximately 36% of deposits (excluding Intra-Company deposits) were uninsured at December 31, 2025, posing a potential liquidity risk in adverse market conditions.

Risks

• Adverse conditions in the economy and financial markets, including elevated interest rates, could negatively impact the loan portfolio and demand for products/services.
• Increased competition for deposits and funding, more stringent regulatory requirements, and higher FDIC insurance expenses could affect the financial services industry.
• Changes in monetary policy by the Federal Reserve Board, including interest rate fluctuations, could impact Net Interest Margin (NIM) and net interest income.
• The composition of the loan portfolio, with a majority in commercial, commercial mortgage, and construction loans, exposes the Corporation to increased credit risk, particularly sensitive to broader economic factors.
• Declines in the fair value of investment securities could result in charges to earnings or shareholders' equity.
• Disruptions in liquidity markets or changes in interest rates may adversely affect funding sources and increase funding costs.
• The Corporation may need to raise additional capital in the future, which may not be available on favorable terms or at all.
• Failure to meet capital adequacy standards could result in restrictions on activities, dividends, and executive compensation.
• Operational risks, including human error, system failures, and reliance on third-party vendors, could lead to financial loss, reputational damage, or regulatory intervention.
• Cybersecurity risks, including data breaches and cyberattacks, could result in unauthorized access to confidential information, financial loss, regulatory investigations, and reputational damage.
• Potential losses may be incurred in connection with repurchase and indemnification payments related to sold loans.
• The potential effects of climate change, including extreme weather conditions and policy changes, could adversely affect business and results of operations.
• Increases in non-performing assets could necessitate higher Allowance for Credit Losses (ACL) and charge-offs.
• The determination of the ACL depends significantly on subjective assumptions and judgments regarding economic conditions and loan portfolio performance.
• Extensive regulation and supervision, and changes in laws or failure to comply, could significantly impact operations and increase costs.
• Adverse outcomes in litigation and governmental or administrative proceedings could materially impact financial condition and reputation.
• Changes in U.S. federal, state, or local tax laws may negatively impact financial performance.
• Risks related to the Blue Foundry Bancorp merger, including failure to complete, higher-than-anticipated integration costs, and failure to realize expected benefits and cost savings.
• Difficulties in managing expanded operations and retaining key personnel post-merger.
• Risks associated with future acquisitions, including integration challenges, unexpected expenses, and potential dilution.
• Possible goodwill impairment charges could negatively impact results of operations.
• Inability to achieve growth plans, including new lines of business or products, could materially and adversely impact the Corporation.
• Intense competition from other financial services companies and FinTechs could adversely affect the ability to attract and retain customers.
• Failure to keep pace with technological changes could adversely affect business operations and customer service.
• Reliance on dividends and other payments from subsidiaries for substantially all revenue, subject to regulatory restrictions.
• The Board of Directors may reduce or discontinue common stock dividends or share repurchases.

Future Outlook

The Corporation expects the Blue Foundry Bancorp merger to close on or about April 1, 2026, with Blue Foundry Bank merging into Fulton Bank in the third quarter of 2026. The 2026 Repurchase Program authorizes up to $150.0 million in common stock repurchases, with $25.0 million potentially for preferred stock and subordinated notes, expiring January 31, 2027. The Corporation plans to early adopt several new FASB ASUs in 2026 and 2027, including those related to convertible debt, internal-use software, expense disaggregation, business combinations, stock compensation, derivatives, and government grants.

Management Comments

• Management assessed the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2025, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework (2013). Based on this assessment, management concluded that, as of December 31, 2025, the Corporation's internal control over financial reporting is effective based on those criteria.

Industry Context

StockSavvy.ai notes that the banking sector continues to navigate a dynamic interest rate environment, with Fulton Financial's improved NIM and reduced provision for credit losses indicating effective asset/liability management. The ongoing consolidation trend in the financial services industry is reflected in Fulton Financial's strategic acquisition of Blue Foundry Bancorp, aiming to enhance market presence. The emphasis on cybersecurity and climate risk management aligns with increasing regulatory and stakeholder scrutiny across the industry. The significant portion of uninsured deposits highlights a common liquidity concern for regional banks, especially after recent industry events.

Comparison to Industry Standards

• Fulton Bank's 'outstanding' CRA rating indicates strong community engagement, positioning it favorably against competitors in its five-state market area (Pennsylvania, Delaware, Maryland, New Jersey, and Virginia).
• The efficiency ratio of 57.6% in 2025 is an improvement from 60.8% in 2024, suggesting better cost management compared to previous periods, and is generally competitive within the regional banking sector, where ratios often range from 50-60% for well-managed institutions.
• The non-performing assets to total assets ratio of 0.58% in 2025 is relatively low, indicating strong asset quality compared to many regional banks, which often see this ratio fluctuate between 0.5% and 1.5% depending on economic cycles.
• The ACL to non-performing loans ratio of 198% in 2025 demonstrates robust coverage of potential loan losses, exceeding typical industry benchmarks which often aim for 100-150% coverage.

Management Changes

Corporate Governance

Legal Proceedings

• The Corporation is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business activities.
• The Corporation is periodically the subject of governmental investigations and other forms of regulatory or governmental inquiry.
• Management believes that any liabilities, individually or in the aggregate, from these matters will not have a material adverse effect on the financial condition of the Corporation, but ultimate resolution could be material to results of operations in any future period.

Related Party Transactions

• The Corporation extended credit to officers and directors and their associates totaling $169.9 million as of December 31, 2025, and $166.2 million as of December 31, 2024. These loans were made on substantially the same terms as comparable transactions with unrelated persons and do not involve more than the normal risk of collection.

Stakeholder Impact

• Shareholders: Benefit from increased net income, EPS, and ongoing share repurchase programs. Potential for future growth and synergies from the Blue Foundry merger. Subject to risk from unrealized losses on AFS securities.
• Employees: The Corporation emphasizes employee engagement, retention, culture, inclusion, competitive compensation, and professional development for its approximately 3,400 employees. The Blue Foundry merger may lead to integration challenges and potential changes in personnel.
• Customers: Will benefit from a diversified suite of consumer and commercial banking products, wealth management services, and electronic delivery channels. The Blue Foundry merger is expected to expand market presence and potentially enhance service offerings.
• Communities: Fulton Bank maintains an 'outstanding' CRA rating, demonstrating its commitment to meeting credit needs in lowand moderate-income areas. Participation in the New Market Tax Credits (NMTC) program supports community and economic development projects.
• Creditors: The Corporation's strong capital ratios and reduced borrowings indicate a healthy financial position, which is favorable for creditors. However, the concentration of uninsured deposits presents a potential liquidity risk.

Next Steps

• Expected closing of Blue Foundry Bancorp merger on or about April 1, 2026.
• Blue Foundry Bank expected to merge into Fulton Bank in the third quarter of 2026.
• Implementation of the 2026 Repurchase Program, authorizing up to $150.0 million in common stock repurchases, with up to $25.0 million for preferred stock and subordinated notes.
• Annual Meeting of Shareholders to be held on May 28, 2026.
• Early adoption of ASU 2024-04 (Convertible Debt) and ASU 2025-06 (Internal-Use Software) on January 1, 2026.
• Adoption of ASU 2024-03 (Expense Disaggregation), ASU 2025-01 (Clarifying Effective Date), ASU 2025-03 (Business Combination), ASU 2025-04 (Stock Compensation), ASU 2025-07 (Derivatives and Hedging), ASU 2025-09 (Hedge Accounting Improvements) on January 1, 2027.
• Adoption of ASU 2025-11 (Interim Reporting) on January 1, 2028.
• Adoption of ASU 2025-10 (Government Grants) on January 1, 2029.

Key Dates

Recommendation

The filing indicates strong financial performance with significant increases in net income and EPS, coupled with an improved net interest margin and reduced non-interest expenses. The strategic acquisition of Blue Foundry Bancorp, with all regulatory approvals obtained, positions the company for expanded market presence and potential synergies. While unrealized losses on AFS securities are noted, the overall asset quality remains strong with a low non-performing assets ratio and robust ACL coverage. The ongoing share repurchase program further signals management's confidence and commitment to shareholder returns. These factors suggest a positive outlook for future growth and profitability, making it an attractive investment.

Keywords

Fulton Financial, FULT, Banking, Financial Services, Annual Report, Net Income, EPS, Net Interest Margin, Loan Portfolio, Deposits, Capital Adequacy, Acquisitions, Mergers, Blue Foundry Bancorp, Risk Management, Cybersecurity, Credit Risk, Interest Rate Risk, Share Repurchase, SEC Filing