Fulton Financial (NYSE: FULT) is a bank holding company that operates commercial banking operations in the mid-Atlantic United States. Since its operations are focused on standard commercial banking functions in a single geographical region, the company operates through a single reportable segment. In the wake of the 2008 financial crisis, FULT faces unfamiliar challenges as the credit market remains uncertain and the Dodd-Frank Act changes the financial sector.
In 2010, net income more than doubled to $112.0 million from $53.8 million in 2009. The primary driver of this increase was an improvement in the credit market that allowed the company to increase its net interest margin and earn more through its lending practices.
FULT's primary source of revenue is its lending practice - like any commercial bank, FULT pays customers interest on their deposits so that it can lend out their money at a higher rate. The net interest margin metric acts as proxy for the bank's ability to earn interest on its assets. In the midst of credit market uncertainty following the 2008 Financial crisis, FULT's ability to lend profitably may be reduced and its net interest margin may decrease.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, the government's response to the 2008 financial crisis, significantly impacts the way the financial sector operates. Its allowance for government support of institutions identified as "too big to fail" may increase the value of identified financial institutions while decreasing the prospects and equity value of smaller financial institutions like FULT. In addition, the Act increases financial regulation which may restrict FULT's operations and increase back office expenses related to compliance.
FULT competes with other commercial banks in the Mid-Atlantic including competing regional banks and national competitors:
FULT and its competitors increase revenues and income by increasing their deposit and loan volume. The industry is competitive as companies increase their deposit interest rates while decreasing their loan rates and fees to attract customers.