Fulton Financial - Earnings Call - Q4 2024
January 22, 2025
Executive Summary
- Q4 2024 delivered solid operating performance: Operating EPS $0.48 (vs $0.50 in Q3), GAAP EPS $0.36 (vs $0.33), with operating efficiency ratio improving to 58.4% (from 59.6%) and PPNR/Avg Assets rising to 1.63% (from 1.61%).
- Net interest margin compressed 8 bps q/q to 3.41% as 2024 rate cuts flowed through; total cost of deposits fell ~10 bps to 2.14%, cushioning NII pressure; noninterest income rose q/q to $65.9M on smaller bargain-purchase gain adjustment.
- Credit remained manageable but normalized: NCOs/avg loans up to 0.22% (from 0.18%), NPAs/assets to 0.69% (from 0.64%), and ACL/loans up to 1.58% (from 1.56%).
- 2025 operating guidance implies stable earnings power: NII $995M–$1.02B (non-FTE), operating opex $755M–$775M, provision $60M–$80M, noninterest income $265M–$280M, ETR ~18%; FultonFirst and Republic saves expected to keep expenses flat y/y on an operating basis.
- Capital actions and catalysts: Dividend increased to $0.18 in Dec. 2024 and a new 2025 repurchase authorization up to $125M; execution of FultonFirst cost saves and CD repricing tailwinds are key stock catalysts into 2025.
What Went Well and What Went Wrong
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What Went Well
- Operating profitability and efficiency improved despite NIM pressure: operating efficiency ratio 58.4% (from 59.6%); PPNR/Avg Assets 1.63% (from 1.61%).
- Deposit costs declined 10 bps to 2.14%; average NIB deposits increased $62.2M q/q, supporting funding mix resilience.
- Integration execution: Republic systems conversion completed; cost saves “in line” and contributing; FultonFirst run-rate saves ~<$5M> in Q4 with ~$25M planned in 2025 and >$50M annualized by 2026; management: “we are excited to see the full benefits impact our results in 2025”.
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What Went Wrong
- NIM contracted 8 bps q/q to 3.41% on rapid Fed easing; loan yields fell 23 bps to 5.97% even as deposit costs fell, pressuring NII (down $4.4M q/q).
- Credit normalization: NCOs/avg loans up to 0.22% (from 0.18%); NPAs/assets up to 0.69% (from 0.64%); NPLs/loans to 0.92% (from 0.84%).
- Loan balances declined $131M q/q as planned runoff (indirect auto) and acquired-loan repositioning offset originations; consumer fees modestly softer q/q.
Transcript
Operator (participant)
Please be advised that today's conference is being recorded. I will now turn the conference over to your speaker today, Matt Jozwiak, Director of Investor Relations. Please go ahead.
Matt Jozwiak (Director of Investor Relations)
Good morning and thanks for joining us for Fulton Financial's Conference Call and Webcast to discuss our earnings for the fourth quarter and year ended December 31st, 2024. Your host for today's conference call is Curt Myers, Chairman and Chief Executive Officer. Joining Curt is Rick Kraemer, Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These documents can be found on our website at fulton.com by clicking on Investor Relations and then on News. The slides can also be found on the presentations page under Investor Relations on our website. On this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operations, and business.
These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, and actual results could differ materially. Please refer to the Safe Harbor statement on forward-looking statements in our earnings release and on slide two of today's presentation for additional information on these risks, uncertainties, and other factors. Fulton undertakes no obligation other than as required by law to update or revise any forward-looking statements. In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday in slides 19 through 28 of today's presentation for reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. Now, I'd like to turn the call over to your host, Curt Myers.
Curt Myers (Chairman and CEO)
Thanks, Matt, and good morning, everyone. For today's call, I'll be providing a summary of the operating highlights for the fourth quarter and for the year. In addition, I'll provide the status of a few key strategic initiatives. Then Rick will review our financial results in more detail and step through our 2025 operating guidance. After our prepared remarks, we'll be happy to take any questions you may have. Fulton's results for the fourth quarter and for the year were driven by the extraordinary effort of our team. We worked together to deliver a very successful year, both operationally and strategically. For the year, we delivered on our strategy and focused on our corporate mission to change lives for the better. As a result, we grew to more than 750,000 customers, reached $1.2 billion in total revenue, a record for the company.
We delivered strong operating earnings per share, which was also a record performance, and we made tremendous impact in the communities that we serve. We completed and fully integrated the Republic transaction, delivering strong financial results on an aggressive timeline. We made significant progress on our Fulton First transformation. This strategic initiative simplifies our operating model, focuses on key strengths, and enhances productivity across the bank. We strengthened our balance sheet by completing a sale leaseback transaction. We restructured our investment portfolio, and we improved our liquidity and enhanced our earnings power. Our capital position grew throughout the year as we generated solid internal capital and supplemented that position with a successful capital raise. As a result, we delivered a strong year and positioned the company for continued success in 2025 and beyond. Our 2024 financial results were strong, especially considering the backdrop of a volatile interest rate environment.
Operating earnings per share of $1.85 was driven by strong fundamentals, the impact of the Republic transaction, and the initial positive impact of our Fulton First initiative. In 2024, total deposit growth was solid. Legacy Fulton deposits grew $878 million, or 4.1%, and when including Republic deposits, total deposit growth was $4.6 billion, or 21.3%, for the year. Total loan growth was meaningful. While Legacy Fulton loans grew $316 million, or 1.5%, total loan growth for the year was $2.7 billion, or 12.6%, when including Republic. Our net interest margin was consistent with last year at 3.42%. Given the volatile interest rate environment, we feel that this was a positive outcome. Our non-interest income growth was strong. Excluding the impact of the gain on acquisition and the loss on the securities restructuring, non-interest income grew $31 million, or 13.4%, to $259 million.
All non-interest income-generating businesses grew, led by Wealth Management at $9.2 million, or 12.2% growth. Non-interest income continues to be a meaningful contributor to total revenue at over 20%. We declared dividends of $0.69 per share, a 6% increase year-over-year. And we continue to actively manage through the credit environment, working with borrowers and managing relationships for long-term performance. While we see pressure due to the ongoing impact of higher rates and higher costs, performance in 2024 was in line with our expectations. Overall, we were pleased with our performance and the results our team generated throughout the year. Now, let me turn to our quarterly results. Operating earnings for the quarter was $0.48 per share. A stable balance sheet and noticeable improvement in expenses drove the quarter. Total deposits were relatively flat, with deposit costs down 10 basis points linked quarter.
Total loans declined $131 million linked quarter. We generated a consistent level of originations. However, organic growth was offset by portfolio repositioning of selected Republic loans, as well as the planned decline in our indirect auto portfolio. Our loan-to-deposit ratio ended the year at 92%, slightly below our long-term operating target of 95%-105%. This position continues to provide balance sheet flexibility. Non-interest income for the quarter was $68.6 million, up $1.2 million linked quarter when excluding the adjustment to the bargain purchase gain. The provision for credit losses was $16.7 million, and our ratio of ACL to total loans increased to 1.58%. Overall, asset quality ended the year in line with our expectations, and we remain cautious as we enter 2025. Now, I'll provide updates on two key initiatives. First, let me comment on the status of the Republic transaction.
During the quarter, we completed the systems conversion, finalized our integration efforts, and are now realizing cost savings in line with our initial assumptions. We saw noticeable financial contributions to the fourth quarter results and are excited to see the full benefits impact our results in 2025. Finally, I'll provide you with our progress on Fulton First. As a reminder, Fulton First is an important initiative designed to enhance growth, improve operating effectiveness, and create sustainability, positive operating leverage over time. We are encouraged by the progress we've made to date, and we are looking forward to the full benefit realization over the next year and beyond. For 2025, we expect the initiative will improve our operating efficiency and allow us to keep our expenses flat on a year-over-year basis. We feel this is a significant accomplishment in the current operating environment.
Now, I'll turn the call over to Rick to discuss our financial performance and our 2025 operating guidance in more detail.
Richard Kraemer (CFO)
Thank you, Curt, and good morning. Unless I note otherwise, the quarterly comparisons I discussed are with the third quarter of 2024. Loan and deposit growth numbers I may reference are annualized percentages on a linked quarter basis. Starting on slide five, operating earnings per diluted share was $0.48, or $88.9 million of operating net income available to common shareholders. Deposit growth was relatively flat for the quarter. Growth and interest-bearing demand and savings account products were offset by a decline in time deposits. Our non-interest-bearing DDA balances were flat linked quarter at $5.5 billion and remained at 21% of total deposits. As previously mentioned, total loans declined $131 million during the quarter due to the portfolio dynamics we discussed. On-hand balance sheet liquidity remained strong at over 19% of liabilities and included an increase of securities of $261 million, offset by a decline in cash of $380 million.
Some of the decline in cash balances can be attributed to the maturity and subsequent repayment of $168 million of subordinated debt in the quarter. Impacts of these balance sheet trends are shown on slide six. Net interest income on a non-FTE basis was $254 million, a $4 million decrease linked quarter, while net interest margin declined by eight basis points to 3.41%. The linked quarter decline was primarily driven by the effects of 100 basis points of easing by the Fed from September through December. In addition, we added $900 million of receive-fixed hedges to support a more neutral interest rate risk profile. Loan yields declined 23 basis points linked quarter to 5.97%. Included in the loan yield is $13.9 million of accretion attributable to the purchase accounting marks on the acquired Republic loan portfolio.
Our average cost of total deposits decreased 10 basis points to 2.14% linked quarter. This decline was primarily due to the deposit pricing actions taken in tandem with the Fed monetary policy. Turning to non-interest income on slide seven, non-interest income for the quarter was $65.9 million. This included a fair value adjustment to the bargain purchase gain attributable to the Republic transaction of $2.7 million. Excluding this adjustment, the income increased $1.2 million, or 7%, linked quarter. Moving to slide eight, non-interest expense on an operating basis was $190.6 million, a decrease of $5.5 million linked quarter, or 3% on a linked quarter annualized basis. As of December 2024, we are achieving our projected annualized cost savings estimate of 40% from the acquisition of Republic and are realizing the efficiency benefits of Fulton First.
Material items excluded from operating expenses, as listed on slide eight, were charges of $10 million of Fulton First implementation and asset disposal expense, $9.6 million of acquisition-related expenses, and $6.2 million of core deposit intangible amortization. Turning your attention to slide nine, you'll see a reminder of the expected benefits of the Fulton First initiative and financial assumptions. Turning to asset quality, the net charge-off ratio was up modestly to 22 basis points, while non-performing assets to total assets increased 5 basis points to 69 basis points. Our ACL to total loans remains near historical highs at 1.58%, while the ACL to non-performing loans came in at 172%. Slide 11 shows a snapshot of our capital base. As of December 31, we maintained solid cushions over the regulatory minimums. Our tangible capital ratio was flat linked quarter, despite being impacted by additional OCI reserve of $44.5 million.
OCI ended the year at a negative $288 million. On slide 12, we are providing our operating guidance for 2025. Our guidance incorporates a projected decrease in Fed funds of 25 basis points in March and 25 basis points in June of 2025. For 2025, our operating guidance is as follows. We expect our net interest income on a non-FTE basis to be in the range of $995 million-$1.02 billion. We expect our provision for credit losses to be in the range of $60 million-$80 million. We expect our non-interest income to be in the range of $265 million-$280 million, and we expect our non-interest expense on an operating basis to be in the range of $755 million-$775 million for the year. Our operating estimate excludes potential Fulton First charges of $14 million and CDI amortization estimated to be $22.5 million.
Lastly, we expect our effective tax rate to be approximately 18% for the year. With that, we'll now turn the call back over to Victor for questions.
Operator (participant)
Thank you. And as a reminder, to ask a question, you will need to press star one-one on your telephone and wait for a name to be announced. To withdraw your question, please press star one-one again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Danny Tamayo from Raymond James. Your line is open.
Daniel Tamayo (Director)
Thank you. Good morning, guys.
Curt Myers (Chairman and CEO)
Morning, Danny.
Daniel Tamayo (Director)
Maybe just start with a clarification question, if I can. On the average earning asset guidance, the growth, the low single digits, that's off of the annual number, the 28,595 number, I'm assuming. And if so, is that what it is, a decline from the fourth quarter number. Just curious what's driving it.
Curt Myers (Chairman and CEO)
Sorry, Danny, can you clarify? We didn't provide guidance on average earning assets.
Daniel Tamayo (Director)
I apologize. I'm not sure if I'm looking at the wrong thing here. Well, why don't we just talk a little bit about what you're thinking in terms of balance sheet growth for the year and kind of where you may see that in terms of loans and on the deposit side as well.
Curt Myers (Chairman and CEO)
Yeah, Danny, it's Curt, so we really focused on giving NII guidance, which you can see in the information, and then on asset growth, we continue in this operating environment to expect low to mid single digit growth on both sides of the balance sheet as we move forward.
Daniel Tamayo (Director)
Okay. All right. Fair enough. And then maybe you can just talk a little bit about the provision guidance. Curious how you guys are thinking about loss rates going forward. Are we in a normalization process? Are we approaching a peak? Just curious where you guys see normal reserves, given the little bit of movement we've seen there as well.
Curt Myers (Chairman and CEO)
Yeah. So for 2024, we had given guidance in $40 million-$60 million, and the provision, excluding the day one CECL double count, was just under $50 million. So we're right in line with expectations last year. The guidance going forward, the balance sheet's a little bigger this year based on the acquisition. So looking at that and looking at where we're positioned right now, we expect a similar year as we did to last year, and that's why we have that operating range on provision. We have a bigger reserve going into the year, and that's kind of how we see things right now. Pretty stable relative to what we've experienced.
Daniel Tamayo (Director)
Gotcha. So I was looking at it just to clarify the first question, your comment on the operating guidance slide, low- to mid-single-digit interest-earning asset growth. So you're saying that's period-end and not average?
Curt Myers (Chairman and CEO)
Yeah, that would be period end.
Daniel Tamayo (Director)
Got it. Okay. I think that answers my question then. All right. That's all I had. Thanks for taking my questions.
Curt Myers (Chairman and CEO)
Thanks, Danny.
Operator (participant)
Thank you. One moment for our next question. Next question will come from the line of Chris McGratty from KBW. Your line is open.
Angel Rodriguez (Investment Banking Associate)
Hey, how's it going? This is Angel on for Chris McGratty.
Curt Myers (Chairman and CEO)
Morning.
Angel Rodriguez (Investment Banking Associate)
Morning. Just on the NII guide, it looks like with the growth you gave in the guidance, it implies a relatively stable margin. Can I ask if you're thinking about the cadence of the margin as we move throughout the year? Thanks.
Curt Myers (Chairman and CEO)
Yeah. Look, I think we're going to try to stay away from specific margin guidance, just given the potential for several dynamics. When we think about NII, I would tend to think cadence over the year would be starting the year slightly lower in 1Q, given some growth and also day count adjustments, and then gradually drifting higher over the course of the year.
Angel Rodriguez (Investment Banking Associate)
Okay. Thank you. And I know you've said in the past that buybacks have been third in line for capital use. Has the environment or your appetite changed to start thinking about buying back shares here in 2025?
Curt Myers (Chairman and CEO)
Our priority for capital utilization would be the same, and that would remain third on the list. We do have an approved authorization, so we have that corporate flexibility to do that, but our priorities remain the same.
Angel Rodriguez (Investment Banking Associate)
Okay. Great. Thank you. I'll step back.
Operator (participant)
Thank you. One moment for our next question. Our next question will come from the line of David Bishop from Hovde Group. Your line is open.
David Bishop (Director)
Hey, good morning, gentlemen.
Curt Myers (Chairman and CEO)
Morning.
David Bishop (Director)
Hey, just curious in terms of the Fulton First initiative. I appreciate the guidance. Just curious, maybe to date, I don't know if there's a way to quantify maybe realized cost saves or cost saves that are already sort of in the run rate?
Curt Myers (Chairman and CEO)
Yeah. So in fourth quarter, we look at about just under $5 million in the run rate. So on a quarterly basis.
David Bishop (Director)
Got it. And then I think the 25 is estimated to be $25 million, correct, in terms of the whole year?
Curt Myers (Chairman and CEO)
Yeah. So I think the simplistic view is you take that, obviously, multiply the five by four, that's 20, and you get incremental quarterly saves over the course of the year, getting to your 25.
David Bishop (Director)
Got it. Got it. And then in terms of the maybe shifting gears there, but the retention of the Republic Bank deposits, just curious what you're seeing there in trends, and are you seeing any sort of makeshift there that's either aiding or abetting margin expansion? Thanks.
Curt Myers (Chairman and CEO)
Yeah. Overall, the deposit portfolio, the team's managing it well, and it's stable. So we had initial runoff. I think we talked last quarter about it stabilizing. That continued throughout this quarter. That deposit base has been pretty stable, and we continue to be ahead of our initial assumptions on potential runoff.
David Bishop (Director)
Got it. And then maybe, Rick, just a housekeeping question. I know sometimes it's tough to predict, but purchase accounting, accretion income about $13.9 million. Any sense maybe where that averages per quarter into 2025? Thanks.
Curt Myers (Chairman and CEO)
Yeah. On a quarterly basis, you should be looking somewhere in that $13.5 million-$14 million.
David Bishop (Director)
Perfect. Thank you.
Curt Myers (Chairman and CEO)
You're welcome. Thank you.
Operator (participant)
Thank you. One moment for our next question. Our next question will come from the line of Matthew Breese from Stephens. Your line is open.
Matthew Breese (Managing Director)
Hey, good morning.
Curt Myers (Chairman and CEO)
Morning.
Matthew Breese (Managing Director)
First off, I was just hoping for maybe a reminder on the breakout between floating, adjustable, and fixed-rate loans and kind of what drove loan yields this quarter. I'm assuming it was just all floating. And then the other thing I was hoping for along the same lines, given some of your Fed outlook expectations, where do you expect loan yields to bottom during the year? Yields were down 23 basis points this quarter. I was thinking you have another quarter or two of down yields, but to a lesser extent. I was hoping you could walk me through that a little bit. Thanks.
Curt Myers (Chairman and CEO)
Yeah. Sure, Matt. Hey, Matt. So just to put your attention on slide 14 of our earnings supplement, we did put a little bit more detail in there on the bottom left corner in terms of the actual dollar breakout of variable versus fixed versus adjustable, and then did provide some the weighted average contractual repricing date in terms of period of years. So that'll give you a little bit of a look in terms of, obviously, the variable component just under $10 billion is relatively short, call it sub one month in terms of repricing, but the adjustable piece at $5.7 billion reprices on average at 4.48 years. All right. So it certainly acts more fixed in the short term. I would also lead you to the coupons on that book, ex-purchase accounting, are closer to 5%.
So you do get a tailwind in the current environment of those repricing over, call it the next, at least the foreseeable future with where rates are.
Matthew Breese (Managing Director)
Great. I appreciate that. And then the second part of the question was just given your Fed rate outlook expectations, walk me through kind of loan yield expectations and where do you expect to hit the bottom on loan yields with two cuts this year? It feels like the NIM is going to be down and to the right, or NII is going to be down and to the right, beginning of the year, but up and to the right as we kind of get past the Fed cuts.
Curt Myers (Chairman and CEO)
Yeah. I think that's right. I mean, I'm a little hesitant to give a number on loan yields, but directionally in the cadence, you're right. Assuming we get the Fed to pause, you should start to see a fairly nice rebound because of that repricing dynamic I mentioned on the adjustable piece, right? So a little bit probably similar type of maybe we got 100 basis points effectively September through December. So I wouldn't expect quite the same amount of pressure on loan yields, but directionally and timing-wise, I think you're right.
Matthew Breese (Managing Director)
Appreciate that. And then, Rick, last quarter, we talked a little bit about the deposit rate environment. I think you had said something to the effect of near-term around the 10% beta, longer-term 30%. Just give us some color on the deposit competitive environment and how you're faring relative to those goals, and when do you think you can hit kind of that 30% beta goal?
Curt Myers (Chairman and CEO)
Yeah. I think, Matt, if we look at, as I look at, at least on spot rates, we're approaching on NMDs cycle, which is obviously a short cycle, call it 20%+, mid-20s. So I think we're probably going to get close there, hopefully in the next couple of quarters. Certainly, the pricing dynamics have been beneficial. I would also point out on the total deposits, on that same page, slide 14, you'll recognize that we have a substantial amount of time deposits that mature over the course of 2025, and some of the pricing on those, at least on average, is call it 3.6%. Retail CDs make up about 85% of that, and those have seen fairly substantial downward repricing.
So similar rate, call it 4.35, I would expect to see 50-80 basis points, potentially more of benefit over the course of the year, assuming a stable competitive market.
Matthew Breese (Managing Director)
Great, and then last one before I hop back into the queue. Low to mid single digit loan growth for the year. I was hoping for some clarity on where you expect to grow and where you do not expect to grow. The last couple of quarters, C&I has been weak, but it's been other areas have kind of helped out. I'm curious if we continue to see that trend in 2025?
Curt Myers (Chairman and CEO)
Yeah, Matt. We're in a position to really focus on growth in all categories. So we feel good about where our CRE position is. C&I is always a focus. Consumer is always a focus for us. So we're going to continue to be focused on the diversification of balance sheet and trying to grow in all categories. We do have the headwind that we had in this past quarter around the consumer indirect auto runoff and some repositioning of acquired loans. So we might continue to have some of those headwinds, and that's why we're looking at the low to mid single digit loan growth.
Matthew Breese (Managing Director)
Great. Thank you. I appreciate that.
Operator (participant)
Thank you. One moment for our next question. We have a follow-up from the line of Danny Tamayo from Raymond James. Your line is open.
Daniel Tamayo (Director)
Oh, great. Hello again. Just a couple of quick ones here. First, I know you guys aren't talking about margin, but just curious if you have an expectation or how you're thinking about the accretion income expected this year.
Curt Myers (Chairman and CEO)
Yeah. It should be fairly stable kind of in that $13.5 million-$14 million dollars a quarter. So you're looking at $4.5 million-$4.6 million or $4.7 million a month. It tends to drift slightly lower as the year goes on, but that's a good range.
Daniel Tamayo (Director)
Okay. And hearing you say that, I think you've said that already, so I apologize for the second question. Hopefully, this one is also not a repeat, but just curious on the guidance where you talked about the line items impacted by lower rates. I'm sorry, by rates in terms of fee income. Curious specifically where those might show up and then your thoughts on mortgage banking within the fee income guidance overall.
Curt Myers (Chairman and CEO)
Yeah. Look, I think on rates, depending on what happens, the more volatile business lines or the more exposed business lines to rates are going to be mortgage banking, as you mentioned, commercial swaps, certainly, and then also wealth management. I think, look, depending on where rates move, equity market movement obviously correlates to the revenues of that business. So those are the primary pieces.
Daniel Tamayo (Director)
You think some of those line items could actually be down in 2025 versus 2024 or just a slower growth rate?
Curt Myers (Chairman and CEO)
We're coming off of historic or record growth in our wealth management. You've had two years consecutive of 20%+ returns on the S&P, so I think we're being appropriately conservative in some of the forecasts there, and then again, commercial swaps, if we're expecting low to mid single loan growth, it likely won't be a huge year there.
Daniel Tamayo (Director)
Okay. All right. Thanks for taking my follow-ups. I appreciate it.
Curt Myers (Chairman and CEO)
Sure.
Operator (participant)
Thank you. One moment for our next question. Our next question will come from the line of Frank Schiraldi from Piper Sandler. Your line is open.
Frank Schiraldi (Managing Director)
Hey, good morning.
Curt Myers (Chairman and CEO)
Hey, Frank.
Frank Schiraldi (Managing Director)
Just wanted to ask about you got the systems conversion on FRBK completed, and you obviously still have work you're going through with the Fulton First initiative, but just curious where potential M&A fits in terms of priorities. Is that something more likely to be looked at after Fulton First? Is that something that you could do incrementally in the nearer term? Just curious your thoughts and maybe guideposts around what you would be looking for in potential deals.
Curt Myers (Chairman and CEO)
Yeah, Frank, it's good. Our strategy is the same on M&A. We look at $1 billion-$5 billion community banks in market, really have a consistent culture and operating model and provide and accelerate our growth, and then more strategic larger ones. We look at them really in two different buckets. That strategy is the same to your question of being in position to look at M&A. We feel we are back in position to look at M&A right now, and we would weigh the various corporate initiatives that we have going on to make sure that it's the appropriate thing for us to do and that we can handle all the different activities. So we are engaged, as we always are, in that activity, and it's a possibility, but again, we will make sure we have the operating capability to make sure we execute effectively.
Frank Schiraldi (Managing Director)
Okay, and then, sorry, you've probably clarified this in the past, but just in the Fulton First initiative, the $50 million kind of run rate through 2026, is that fully on the expense side? Is there any additional pickup there on the revenue side anticipated from the initiative?
Curt Myers (Chairman and CEO)
Yeah. All that guidance, Frank, is expense-based.
Frank Schiraldi (Managing Director)
Okay. So is that.
Curt Myers (Chairman and CEO)
Yeah.
Frank Schiraldi (Managing Director)
Sorry, go ahead.
Curt Myers (Chairman and CEO)
Yeah. Frank, just to add, there are growth initiatives as well, pretty significant growth initiatives, but we aren't building those into the numbers, and they're going to be in our run rate as we execute going forward there to drive corporate growth, but we won't line item them. We're just going to generate and execute on those strategies.
Frank Schiraldi (Managing Director)
Gotcha. Okay. Do you think the timeline is sort of the same in terms of fully integrated by 2026, not to put too fine a point on it?
Curt Myers (Chairman and CEO)
Yeah. So the strategy implementation will be on the same timeline, but with any revenue growth, it takes time to build customer base and build that revenue. So that is over time and again, will be included in our overall growth forecast and expectations.
Frank Schiraldi (Managing Director)
Got it. Okay. Makes sense. Thank you.
Operator (participant)
Thank you. One moment for our next question. Our next question will come from Manuel Navas from DA Davidson. Your line is open.
Manuel Navas (SVP and Senior Research Analyst)
Maybe just to follow up on that, can you go into more detail about some of those revenue initiatives? I guess some of them are definitely year-out. For another quarter along the process, just seeing if you could give any more update on that kind of commercial growth initiatives.
Curt Myers (Chairman and CEO)
Yeah. Just some overall comments. A lot of the initiatives are to focus on our core strengths. So where we are currently performing well, add value to clients, have a strong strategy to further enhance that growth and focus on that. And then specifically on the business banking, small business, we've done well. And in our marketplace, it is a significant opportunity around number of customers and revenue growth. So that is the specific line item or customer segment that we'll focus on even more than we already do. We have a significant customer base now, but we think we can have transformative growth in the small business category.
Manuel Navas (SVP and Senior Research Analyst)
Should we expect kind of more updates as the year goes on or maybe a year from now would be the update? How should we think about that revenue-generating opportunity?
Curt Myers (Chairman and CEO)
Yeah. Over time, we're going to talk about those business segments and growth over time. So you will hear more about it. Through this year, you'll hear it in the construct of Fulton First, but long-term, you'll hear about it just as we operate and drive value and growth.
Manuel Navas (SVP and Senior Research Analyst)
Great. Great. Just shifting over to loan growth for a second. Could you give an update on commercial loan pipelines? I apologize if I missed that, and I just wanted to hear if there's that loan repositioning on FRBK side, is that kind of done? Is there any more headwinds from that and the indirect auto anticipated? Just kind of thoughts on near-term loan growth with those in mind.
Curt Myers (Chairman and CEO)
Yeah. Specifically to the headwinds, so on the indirect side, the portfolio is around $390 million in balances remaining, and it's got an average duration of about 2.6 years. So I think you can all appreciate, you'd expect to see a similar type of runoff for a quarter, call it in that $40 million range. But in terms of the Republic repositioning, I think we've integrated in the fourth quarter, so that was probably the largest action you'll see, but I'll let Curt kind of elaborate more on some other details. Yeah. I just want to go back to the first part of your question. So those are the headwinds, the indirect auto, and then as you work through an acquisition, you're going to have some of that that will moderate as we move forward.
And again, on Republic, we want to get to stability in deposits, stability in loans, and then grow from there. So the team is really focused on growing that strategic marketplace in the greater Philadelphia metro area. So we think we have a really strong base to grow from. I think you'll see that pivot throughout this year as we work through those transitions. And did we get the first part of your question?
Manuel Navas (SVP and Senior Research Analyst)
Commercial pipelines. I don't believe so. Unless I missed it somewhere else.
Curt Myers (Chairman and CEO)
Yeah. So on commercial pipeline, the pipeline is relatively flat, so pretty consistent. And we've really been focused on the pull-through rate. So are borrowers moving forward? Are they expanding? Are they buying that equipment? And we really haven't seen much of a change there, but we're hoping that the environment improves and that our underlying business customers become more confident to move forward on projects. So we really don't think we have to grow the pipeline as much as have borrowers be confident in this environment to move forward with projects.
Manuel Navas (SVP and Senior Research Analyst)
I appreciate that commentary. And that kind of matches what many have said. So maybe loan growth kind of grows across the year as folks become more certain on the economy and on policy. Is that kind of the main thought process?
Curt Myers (Chairman and CEO)
Correct.
Manuel Navas (SVP and Senior Research Analyst)
Okay. I appreciate it. Thank you.
Operator (participant)
Thank you. I'm not showing any further questions at this moment. I would now like to turn it back over to Curt Myers for closing remarks.
Curt Myers (Chairman and CEO)
Thank you again for joining us today. We hope you'll be able to be with us when we discuss first quarter results in April. Thank you.
Operator (participant)
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.