DBRS: Fulton’s 4Q13 Earnings Increase QoQ on Lower Loan Loss Provisioning

Summary

• Fulton reported 4Q13 net income of $42.1 million, compared to $39.9 million for 3Q13 as a decline in provision expense was partially offset by a decline in fee income.
• DBRS views Fulton 4Q13 results as reflecting continued asset quality improvements.
• DBRS rates the Company’s Issuer & Senior Debt rating at A (low) with a Stable trend.

DBRS, Inc. (DBRS) considers Fulton Financial Corporation’s (FULT or the Company) 4Q13 earnings as reflecting continued steady progress of returning asset quality measures to pre-crises levels. The QoQ decline in NPAs and lower NCOs allowed for a much smaller loan loss provision this quarter. For 4Q13, results equated to a 0.99% ROAA and an 11.15% return on average tangible equity, slightly better than 3Q13. However, revenues declined in the quarter stemming from a volume driven drop in mortgage banking and lower service charges on deposits QoQ. Meanwhile, expenses were relatively flat and, despite the ongoing difficult interest rate environment, spread income was stable sequentially. Fulton announced a number of initiatives, including a branch consolidation that will reduce annual expenses by approximately $8.0 million.

During 2013, the Company repurchased 8.0 million shares of its common stock and is authorized to repurchase up to 4.0 million additional shares, or approximately 2.1% of its outstanding shares, through March 31, 2014. Still, at December 31, 2013, Fulton reported solid capital ratios which included a tangible equity to tangible assets ratio of 9.33%.

DBRS sees Fulton’s financial profile as returning to its more historical levels, providing support for its ratings, as the Company’s asset quality has improved and it continues to maintain solid levels of capital and liquidity. Additionally, Fulton has seen improving profitability. The Company is keeping an eye on expenses in 2014 and has been focused on a number of efficiency initiatives to help fund a further investment in technology as well as increased regulatory costs.

DBRS rates FULT’s Issuer & Senior Debt at A (low) with a Stable trend.

Notes:
All figures are in U.S. dollars unless otherwise noted.

[Amended on December 23th, 2014 to remove unnecessary disclosures.]