Executive Summary / Key Takeaways

• Fulton Financial Corporation (FULT) is executing a multi-faceted strategy focused on community banking, strategic acquisitions, and operational efficiency through its "FultonFirst" initiative, aiming to drive consistent positive operating leverage and long-term value.
• The company delivered strong Q3 2025 operating earnings of $0.55 per diluted share, with total revenue reaching an all-time high, supported by a Net Interest Margin (NIM) of 3.57% and robust fee income growth from diversified segments like wealth and commercial banking.
• FULT's balance sheet remains solid, with a healthy capital position, including a tangible common equity to tangible asset ratio of 8.3% and CET1 of 11.5% as of September 30, 2025, enabling continued share repurchases and strategic investments.
• Despite ongoing economic and geopolitical uncertainties, credit quality metrics show steady performance, with management maintaining a cautious outlook and strong allowance for credit losses.
• The company's updated 2025 guidance reflects confidence in Net Interest Income (NII) growth ($1.025B-$1.035B), improved fee income ($270M-$280M), and disciplined operating expenses ($750M-$760M), even with anticipated Federal Reserve rate cuts.

A Regional Powerhouse's Strategic Evolution

Fulton Financial Corporation, founded in 1882 and headquartered in Lancaster, Pennsylvania, operates as the bank holding company for Fulton Bank, N.A., providing a comprehensive suite of consumer and commercial financial services across Pennsylvania, Delaware, Maryland, New Jersey, and Virginia. The company's enduring strategy centers on community banking, aiming to deliver strong customer value and robust shareholder returns through a diversified portfolio of financial products and services. This foundational approach has guided FULT's expansion and strategic responses to an evolving market.

FULT's historical journey is marked by strategic growth, notably through acquisitions that have expanded its geographic footprint and market penetration. A significant milestone was the acquisition of Prudential Bancorp, effective July 1, 2022. This was followed by the transformative "Republic First Transaction" on April 26, 2024, where Fulton Bank acquired substantially all assets and assumed most liabilities of Republic First Bank from the FDIC. This acquisition injected approximately $4.80 billion in assets and $5.60 billion in liabilities, along with $0.80 billion in cash from the FDIC, significantly enhancing FULT's presence in key metropolitan areas like Philadelphia, Pennsylvania, and New Jersey. The financial settlement for this transaction concluded on April 25, 2025, contributing a $37 million gain on acquisition, net of income taxes.

Beyond acquisitions, FULT has actively optimized its financial position and operations. In May 2024, the Corporation strategically sold $345.70 million of available-for-sale (AFS) investment securities, incurring a pre-tax loss of $20.30 million, but reinvesting the proceeds into higher-yielding securities of similar type and duration. The company also executed a sale-leaseback transaction involving 40 financial center office locations, demonstrating a proactive approach to asset management. Complementing these efforts is the "FultonFirst" transformation program, a strategic initiative designed to enhance growth, improve operating effectiveness, and create sustainable positive operating leverage by simplifying its operating model, fostering relationship banking, increasing productivity, and elevating the customer experience.

Technological Differentiation and Operational Excellence

While Fulton Financial does not articulate a single, proprietary "core technology" in the manner of a specialized tech firm, its strategic focus on "leveraging leading technology to provide the best digital customer experience" forms a critical part of its competitive differentiation. This commitment is evidenced by the appointment of Kevin Gremer as Senior Executive Vice President and Chief Operations and Technology Officer on August 25, 2025, tasked with leading information technology and operations to enhance digital customer interactions.

The company's "FultonFirst" initiative, a broader strategic transformation, includes significant components related to operational simplification and reinvestment for growth, which inherently involve technological advancements. The stated goal of FultonFirst is to "enhance growth, improve operating effectiveness and create sustainability, positive operating leverage over time." This translates into tangible benefits: in Q2 2025, the initiative generated approximately $8.5 million in net realized benefits, positioning the company "well ahead of our original $25 million net save for 2025." This operational efficiency, driven by strategic initiatives that likely involve technology, directly contributes to FULT's competitive moat by reducing costs and improving profitability.

For investors, FULT's investment in enhancing its digital customer experience and operational efficiency is crucial. It allows the company to compete more effectively against larger, technologically advanced banks and agile fintechs by offering improved digital banking capabilities (mobile, online, telephone banking) and streamlined internal processes. This focus helps FULT maintain relevance, attract new customers, and retain existing ones in a competitive banking landscape, ultimately supporting its long-term growth strategy and financial performance. Furthermore, FULT's support for STEM education through scholarships, funded by its Women in Technology Employee Resource Group, signals a commitment to fostering future technological talent, which can underpin its long-term innovation capabilities.

Competitive Landscape and Strategic Positioning

FULT operates in a highly competitive regional banking market, contending with larger national players and agile fintechs. Its primary direct competitors include PNC Financial Services Group , Citizens Financial Group , KeyCorp , and M&T Bank Corporation (MTB), all of which have overlapping geographic footprints and offer similar banking products.

FULT's market positioning is characterized by its stability and strong foothold in the Mid-Atlantic, emphasizing traditional financial center banking and localized services. This approach fosters deep community relationships and customer loyalty, which are significant competitive advantages. For instance, FULT's extensive branch network and personalized service help it differentiate against larger rivals like PNC (PNC), which, despite its broader scale and advanced digital tools, may struggle with localized engagement. FULT's diversified service offerings, including wealth management and insurance, also build network effects, enhancing customer retention and cross-selling opportunities, thereby countering the more specialized focus of some competitors like KeyCorp (KEY).

However, FULT faces vulnerabilities, particularly in its limited geographic scale, which exposes it to regional economic downturns. While FULT is actively enhancing its digital capabilities, it may lag behind competitors like Citizens Financial Group (CFG) in the speed of digital innovation and market share capture in purely digital segments. Indirect competitors, including fintech companies and online banks, further pressure FULT's market share by offering alternative digital payment solutions, online lending, and high-yield savings accounts with potentially lower cost structures.

FULT's strategy to counter these competitive forces involves a disciplined approach to deposit pricing to balance funding growth with margin defense, and a continuous focus on organic growth across all loan categories. The company's M&A strategy targets in-market community banks in the $1 billion to $5 billion asset range, seeking cultural alignment and enhanced market penetration. Regulatory requirements and significant capital needs act as substantial barriers to entry in the banking sector, providing a degree of protection for established players like FULT.

Performance with Perspective: Financial Strength and Operational Discipline

Fulton Financial's recent financial performance underscores its strategic effectiveness and operational discipline, particularly in a dynamic interest rate environment. For the third quarter of 2025, the company reported strong operating earnings of $101.3 million, or $0.55 per diluted share, contributing to a nine-month net income available to common shareholders of $285 million, or $1.55 per diluted share. Total revenue reached an all-time high in Q3 2025, reflecting growth in both net interest income and fee income, coupled with stringent expense management.

Net Interest Income (NII), the company's primary revenue driver, demonstrated resilience. Q3 2025 FTE NII increased by 2.36% year-over-year to $268.6 million, while the nine-month FTE NII grew by 8.78% to $783.5 million. The Net Interest Margin (NIM) expanded to 3.57% in Q3 2025, an 8 basis point increase year-over-year, benefiting from a 5.93% loan yield and a tailwind from fixed-rate asset repricing. Accretion interest, primarily from the Republic portfolio, further bolstered the NIM, reaching $12.7 million in Q3 2025. The company also effectively managed its funding costs, with the average cost of total deposits decreasing by two basis points to 1.96% in Q3 2025.

FULT's diversified fee income streams continue to be a meaningful contributor to total revenue, representing 21% in Q3 2025. Total non-interest income for Q3 2025 rose 18% year-over-year to $70.4 million. Key drivers included wealth management, with Fulton Financial Advisors reaching $17 billion in assets under management and administration, and commercial banking, where cash management fee income increased by 15.7% quarter-over-quarter due to higher account analysis fees. Consumer banking and mortgage banking also delivered solid growth.

Operational efficiency is a core tenet of FULT's strategy, with the FultonFirst initiative yielding tangible benefits. Operating non-interest expense in Q3 2025 was $191.4 million, and for the nine months ended September 30, 2025, non-interest expense decreased by 4% year-over-year, or increased by 1% excluding one-off items. The efficiency ratio improved to 56.5% in Q3 2025. These operational improvements translated into strong profitability metrics, with an operating return on average assets of 1.29% and an operating return on average tangible common equity of 15.79%.

The balance sheet remains robust. As of September 30, 2025, total assets stood at $32.00 billion. While net loans decreased marginally by $3.4 million during the nine months ended September 30, 2025, this was primarily due to strategic actions, including the planned runoff of indirect auto loans and the repositioning of certain commercial loans, which collectively represented over a $600 million headwind year-to-date. Total deposits increased by $203.1 million over the same period, driven by growth in savings and interest-bearing demand deposits. The loan-to-deposit ratio of 91% provides ample liquidity.

FULT maintains a healthy capital position, with a tangible common equity to tangible asset ratio of 8.3% and a Common Equity Tier 1 (CET1) ratio of 11.5% as of September 30, 2025, comfortably exceeding regulatory minimums. Internal capital generation was strong at $84 million in Q3 2025, bolstered by earnings and a $44 million benefit to Accumulated Other Comprehensive Income (AOCI) from lower interest rates. The company actively manages its capital, having repurchased 1.65 million shares at an average cost of $18.67 per share in Q3 2025, with $86 million remaining under its current authorization.

Outlook and Risk Assessment

Fulton Financial's forward-looking guidance reflects a blend of strategic confidence and cautious macroeconomic awareness. The company has updated its 2025 rate forecast to include three 25 basis point Federal Reserve rate cuts (September, October, and December 2025), which will influence its Net Interest Income (NII) outlook. Management anticipates some margin pressure in Q4 2025, with each 25 basis point cut representing an approximate $2 million annualized NII headwind, though they expect a leveling out several months after the Fed ceases cutting rates. The company also projects a $6.4 million decrease to NII over the next twelve months due to cash flow hedge reclassifications.

For 2025, FULT has raised its NII guidance to a range of $1.025 billion to $1.035 billion, demonstrating confidence in its core earning power. Provision expense is tightened to $45 million to $55 million, reflecting stable credit trends. Fee income is expected to be between $270 million and $280 million, with the bottom end raised, signaling continued strength in diversified revenue streams. Operating expenses are projected to be $750 million to $760 million, with the top end lowered, underscoring the benefits of the FultonFirst initiative in driving efficiency. The effective tax rate is modestly increased to 19% to 20%, and non-operating expenses are lowered to $7 million.

Loan growth is projected to return to long-term organic trends of 4% to 6% in 2026, as strategic headwinds from portfolio repositioning moderate. While current commercial pipelines are relatively flat, management emphasizes that customer caution, rather than a lack of demand, is impacting the "pull-through rate" of projects. Deposit growth remains a priority, with a disciplined pricing strategy aimed at funding future loan growth.

Despite the positive outlook, FULT acknowledges several key risks. General economic and geopolitical uncertainties, including potential impacts from tariffs and commodity price fluctuations (particularly on its $1 billion Ag portfolio), necessitate a cautious credit outlook. While credit metrics have remained stable, the company continuously monitors for potential weaknesses. Debt security market price risk and operational risks, including cybersecurity threats and third-party vendor failures, are also ongoing concerns. The company's geographic concentration, while a source of strength, also exposes it to regional economic downturns. Uninsured deposits remain a watchpoint, and the extensive regulatory environment poses compliance challenges.

Conclusion

Fulton Financial Corporation stands as a resilient regional banking institution, strategically positioned for sustained growth and profitability. Its core investment thesis is underpinned by a disciplined community banking model, enhanced by strategic acquisitions like Republic First, and a robust operational transformation through the FultonFirst initiative. The company's recent financial performance, marked by record revenue, expanding Net Interest Margin, and strong fee income growth, demonstrates its ability to generate consistent positive operating leverage.

FULT's commitment to leveraging technology for an improved digital customer experience and operational efficiency, while not a singular product, forms a crucial competitive edge against both larger and more agile rivals. This focus, combined with its extensive branch network and deep community ties, allows FULT to maintain strong customer relationships and drive organic growth. Despite a cautious macroeconomic outlook and ongoing competitive pressures, FULT's solid capital base, proactive risk management, and clear strategic roadmap, including targeted M&A and share repurchases, position it favorably. Investors should observe the continued moderation of strategic loan headwinds and the realization of full benefits from FultonFirst, which are key to FULT's trajectory toward its long-term growth and efficiency targets.