Source: Company

Fulton Financial Corporation (NASDAQ:FULT) is making a solid value proposition: The holding company has increased earnings consistently for many years even though its second quarter earnings came in a little weaker than expected, it benefits from improving asset quality trends and offers an attractive share repurchase program.

In addition, Fulton Financial trades at a reasonable price to book valuation reflecting solid underlying business trends and exhibits a nearly 3% dividend yield.

Fulton Financial is a financial holding company with a market capitalization of around $2 billion and operates six community banks in five states. The bank's offices are located in Pennsylvania, Virginia, New Jersey, Delaware and Maryland and are striving to serve local businesses and customers with loan, deposit, mortgage and wealth management services.


Source: Fulton Financial Corporation Investor Presentation February 2014

Fulton Financial has about $17 billion in assets and runs a strong regional loan franchise, which has largely underpinned Fulton Financial's earnings growth over the last couple of years.

1. Intact earnings trend
Nothing increases confidence in a company more than a reliable earnings growth record.

However, it is not realistic for investors to expect a bank to jump from one earnings record to the next. Every company will have a down quarter once in a while, which doesn't necessarily invalidate a bank's long-term earnings growth record.

Fulton Financial, for instance, has done a great job since 2009 to grow its bottom line by 100% on a per share basis.


Source: Fulton Financial Corporation Investor Presentation February 2014

In the first quarter of 2014, Fulton Financial reported continuously strong earnings with $0.22 per diluted share (a 10% year-over-year increase) and $0.21 per diluted share in the second quarter of 2014 (flat year-over-year).

The overall earnings trend at Fulton Financial is clearly intact, even if its diluted EPS decreased slightly on a sequential basis.

E. Philip Wenger, Chairman, Chief Executive Officer and President of Fulton Financial commented on second quarter results:

Loans increased in the second quarter and overall asset quality continued to improve. We also saw a significant increase in non-interest income. Noninterest-bearing deposits showed continued good growth, but lower yields on earning assets combined with higher overall funding costs put modest pressure on our net interest margin.

2. Improving asset quality
This is an ongoing theme in the industry thanks to low underwriting standards in the run up to the financial crisis and exploding delinquencies in a variety of loan categories.

However, Fulton Financial's asset quality has been steadily improving. Its provision expenses for credit losses declined materially since the fourth quarter of 2009 and are now back in normalized territory.

Provision for credit losses were reported at $2.5 million in Q1 2014 and $3.5 million in Q2 2014.


Source: Fulton Financial Corporation Investor Presentation February 2014

3. Low valuation
Though investors should expect Fulton Financial's earnings to be largely driven by continued growth in its loan and mortgage division, share repurchases certainly provide additional support for Fulton Financial's share price.

In the second quarter of 2014, Fulton Financial approved the repurchase of up to 4 million shares, representing approximately 2% of outstanding shares. Though the company elected not to repurchase any shares in the second quarter, the company is likely to do so when it sees fit.

In any case, share repurchases certainly have the potential to support Fulton Financial's share price and could provide a boost to its low valuation going forward.


The Foolish Bottom Line
Fulton Financial is a strong regional bank franchise that has historically convinced with solid earnings growth and improving asset quality.

Though the market has been disappointed by Fulton Financial's second quarter results and the stock closed down about 3% on results release day, the bank certainly has potential to recover.

In addition, the bank's share repurchase authorization and its nearly 3% dividend yield are certainly big positives for shareholders as well.

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Kingkarn Amjaroen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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