It exceeds analysts' expectations despite headwinds in mortgage banking
Shares of Pennsylvania-based Fulton Financial closed 3% higher on Tuesday after the regional bank disclosed second quarter earnings that beat Wall Street expectations – largely on the strength of robust loan originations.
Adjusted earnings per share for the second quarter were 42 cents, higher than the 36 cents per share analysts had anticipated. Earnings per share rose from 38 cents in the first quarter and 38 cents in the second quarter of 2021. Revenue also rose to $237.2 million – more than the $227.9 million consensus – and was up from $216.5 million in the first quarter, and $214.3 million from last year’s comparable period.
“Loan originations were strong, we began to see the positive impact of rising interest rates, and fee income was solid despite headwinds in mortgage banking and our wealth management businesses,” CEO and chairman E. Philip Wenger said.
Net interest income rose to $178.8 million in the second quarter from $161.3 million in the previous quarter and $162.4 million in the second quarter of 2021. Average loans also grew – from $18.4 billion in the first quarter to $18.6 billion in the second quarter. However, net income was down from $18.9 billion in the second quarter of last year.
Read more: US mortgage application demand continues to cool
Still, the positive earnings report was cause for celebration – particularly amid a softened housing market bogged down by inflation and other factors.
“Overall, we are pleased with Fulton’s performance and results for the second quarter. Loan originations were strong, we began to see the positive impact of rising interest rates, and fee income was solid despite headwinds in mortgage banking and our wealth management businesses,” Wegner said. “On the corporate front, we completed our acquisition of Prudential Bancorp, Inc., which was a very important milestone for us, and we published our first Corporate Social Responsibility report highlighting the positive impact our company and our team are making in the communities we serve.”
Fulton’s gains emerged in spite of a drop in mortgage applications. On Tuesday, the Mortgage Bankers Association released its Builder Application Survey for June that showed mortgage applications for new home purchases fell 12% from one year ago. Applications fell from last month by 10%, according to the survey.
“Mortgage applications declined for the third week in a row, reaching the lowest level since 2000. Similarly, with most mortgage rates more than two%age points higher than a year ago, demand for refinances continues to plummet, with MBA’s refinance index also falling to a 22-year low,” Joel Kan, MBA’s associate vice president of Economic and Industry Forecasting said. “Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation, and persistent affordability challenges are impacting buyer demand. The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs.”
Read next: Mortgage applications up amid rising rates
The Market Composite Index, a measure of mortgage loan application volume, decreased 6.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 17% compared with the previous week. The Refinance Index decreased 4% from the previous week and was 80% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 7% from one week earlier. The unadjusted Purchase Index increased 16% compared with the previous week and was 19% lower than the same week one year ago.
Fulton this month consummated its purchase of Prudential Bancorp and its subsidiary Prudential Bank, based in Philadelphia. Prudential Bancorp shareholders approved the acquisition in June, with more than 98% of votes cast in favor of the deal, Fulton officials previously announced.
By virtue of the deal’s completion, Fulton now operates two banking subsidiaries – Fulton Bank, N.A. and Prudential Bank – until such time as Prudential Bank is merged into Fulton Bank, officials noted. Fulton received approval of its application for the bank merger from the Office of the Comptroller of the Currency on June 13.
Fulton in March announced it would repurchase up to $75 million of shared of its common stock representing nearly 3% of its outstanding shares as of March 17. The repurchase program was first announced in February 2021, with an expiration set for Dec. 31, 2022.
