FULT Q3 Deep Dive: Deposit Growth and Expense Discipline Support Strong Quarter

Regional banking company Fulton Financial (NASDAQ:FULT) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 5.3% year on year to $334.6 million. Its GAAP profit of $0.53 per share was 10.9% above analysts’ consensus estimates.

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

StockStory’s Take

Fulton Financial delivered third quarter results that surpassed Wall Street’s revenue and profit expectations, with management citing the company’s community banking model and disciplined expense management as key contributors. CEO Curtis Myers highlighted that both net interest income and fee income grew, while deposit growth outpaced loan growth due to targeted sales campaigns and seasonal inflows. Management emphasized the bank’s efficiency ratio improvement and sustained profitability, with operating trends benefitting from a diversified balance sheet and ongoing focus on expense control.

Looking forward, management outlined that future performance will hinge on navigating anticipated interest rate cuts, maintaining positive operating leverage, and resuming organic loan growth. CFO Richard Kraemer pointed to expected moderation in recent strategic loan runoff actions, with an aim to return to historical growth rates. Myers noted, “We are focused on generating organic growth so that we can drive positive operating leverage,” while also emphasizing the importance of deposit pricing strategy and balance sheet flexibility as rate environments shift.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to deposit growth, expense control, and a diversified approach to both lending and fee income, while also noting improved credit trends.

• Deposit growth momentum: Targeted sales campaigns and the seasonal influx of municipal deposits led to total deposit growth outpacing loan growth, supporting funding needs and reducing reliance on higher-cost brokered deposits.
• Expense discipline: Operating expense increases were limited, driven mainly by a higher day count in the quarter and planned technology investments. The efficiency ratio improved, reflecting ongoing cost control efforts.
• Diversified fee income: Non-interest income rose, benefiting from growth in wealth management (with Fulton Financial Advisors surpassing $17 billion in assets under management) and consumer businesses. Fee income now comprises 21% of total revenue.
• Loan growth headwinds: Loan originations rose, but total balances were offset by strategic runoff actions, notably reductions in indirect auto, small ticket equipment finance, and criticized loans. Management expects these headwinds to moderate going forward.
• Improved credit quality: The company saw lower net charge-offs and a decline in non-performing assets, along with stable provision expenses. Risk ratings and classified loans trended positively, though management remains cautious given macroeconomic uncertainty.

Drivers of Future Performance

Fulton Financial’s outlook centers on managing through rate cuts, promoting organic loan growth, and maintaining margin discipline despite headwinds.

• Interest rate sensitivity: Management expects some pressure on net interest margin as rate cuts flow through, but fixed-rate asset repricing and proactive deposit pricing strategies should help cushion the impact. Kraemer explained that margin pressure is expected to moderate several months after rate cuts cease.
• Organic growth rebound: Strategic loan runoff actions are expected to diminish, allowing loan growth to trend back toward the company’s long-term average of 4% to 6%. Myers noted that pipelines are improving, though customer spending caution persists and pull-through rates are below historic norms.
• Capital and M&A optionality: The company continues to prioritize organic growth and is open to acquisitions in its core five-state footprint, focusing on $1 billion to $5 billion community banks. Ongoing share repurchases remain a lever, with $86 million of authorization outstanding, especially if organic and M&A opportunities do not materialize.

Catalysts in Upcoming Quarters

Looking ahead, our team will be monitoring (1) whether loan growth returns to historical levels as strategic runoff moderates, (2) the ability to sustain deposit growth and stable funding costs amid anticipated outflows from municipal deposits, and (3) ongoing improvements in credit quality as economic and geopolitical conditions evolve. Effective management of margin pressure and execution on organic growth will also be key indicators.

Fulton Financial currently trades at $17.59, down from $17.89 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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