Fulton Financial Corporation
Investor Presentation
November 2004
1
Forward-looking statement
The following presentation may contain forward-looking statements about Fulton Financial Corporation’s growth and acquisition strategies, new products and services, and future financial performance, including earnings and dividends per share, return on average assets, return on average equity, efficiency ratio and capital ratio. Forward-looking statements are encouraged by the Private Securities Litigation Reform Act of 1995.
Such forward-looking information is based upon certain underlying assumptions, risks and uncertainties. Because of the possibility of change in the underlying assumptions, actual results could differ materially from these forward-looking statements. Risks and uncertainties that may affect future results include: pricing pressures on loans and deposits, actions of bank and non-bank competitors, changes in local and national economic conditions, changes in regulatory requirements, actions of the Federal Reserve Board, the Corporation’s success in merger and acquisition integration, and customers’ acceptance of the Corporation’s products and services.
2
Presentation outline
Corporate profile
Strategic initiatives
Asset quality
Future direction
Financial performance
3
Fulton Financial profile
Regional financial holding company (formed in 1982)
12 community banks and 3 financial services affiliates in 5 states
Asset size: $10.6 billion
Second largest commercial bank headquartered in Third Federal Reserve District
Fulton Bank founded in 1882
4
Where are we located?
The Bank
Delaware National Bank
FNB Bank
Fulton Bank
Hagerstown Trust
Lafayette Ambassador Bank
Lebanon Valley Farmers Bank
The Peoples Bank of Elkton
Premier Bank
Resource Bankshares Corporation
Skylands Community Bank
Swineford National Bank
First Washington
State Bank (Pending)
Fulton Financial Corporation
5
Assets by affiliate (as of 9/30/04, in thousands)
Fulton Bank $ 4,020,000
Lafayette Ambassador Bank 1,191,000
Resource Bank 1,117,000
The Bank 1,064,000
Lebanon Valley Farmers Bank 766,000
Premier Bank 521,000
Hagerstown Trust Company 458,000
Skylands Community Bank 426,000
Delaware National Bank 382,000
FNB Bank, N.A. 274,000
Swineford National Bank 255,000
The Peoples Bank of Elkton 117,000
6
Possible Future Expansion
Current Markets
Pending Acquisitions
Future Expansion
Fulton Financial Corporation
Pennsylvania
Maryland
New Jersey
Delaware
Virginia
North Carolina
7
Mission statement
We will increase shareholder value and enrich the communities we serve by creating financial success together with our customers and career success together with our employees. We will conduct all of our business with honesty and integrity.
8
Corporate ethics
Longstanding written code of conduct
No “gray” areas
Expectations clearly outlined
9
8.8% compounded annual growth rate in earnings per share
22 consecutive years of record earnings
30 consecutive years of dividend increases
10.3% compounded annual growth rate in dividends per share (approximate dividend yield: 3.10%)
Proven business model
Consistent performance
What have we accomplished?
10
Five-year performance
1998 2003
Net income per share $.84 $1.22
Cash dividends per share $.35 $.59
Return on assets 1.60% 1.57%
Return on equity 15.06% 15.45%
Efficiency ratio 55.30% 53.80%
Dividend payout 41.60% 48.70%
Restated for 5% stock dividend paid in June 2004.
11
Wall Street Journal (3/8/04) Ranking of Banks by 5-Year Average Compound Annual Total Return*
62 banks listed
43 banks had a lower total return than Fulton, including Wells Fargo, Bank of America, Marshall & Ilsley, Wilmington Trust, Mercantile, Synovus, Fifth Third, PNC, BB&T, Wachovia, J.P. Morgan Chase and Bank of New York
18 banks had a higher total return than Fulton, including Commerce, M&T, North Fork, and Valley National
*includes price changes and dividend reinvestment
12
Five-year total return Peer analysis - 12/31/03
1
INTERNATIONAL BANCSHARES CORP
220.60
2
TCF FINANCIAL CORP
142.46
3
SOUTHWEST BANCORPORATION OF TX
117.92
4
FIRST REPUBLIC BANK
115.89
5
BANK OF HAWAII CORP
102.83
6
WHITNEY HOLDING CORP
96.03
7
ASSOCIATED BANC-CORP
91.25
8
VALLEY NATIONAL
88.61
9
GREATER BAY BANCORP
85.06
10
HIBERNIA CORP
83.48
11
FULTON FINANCIAL
81.15
12
FIRST MIDWEST
79.54
13
COLONIAL BANCGROUP
74.70
14
CULLEN FROST BANKERS
68.39
15
BOK FINANCIAL CORP
68.36
16
HUDSON UNITED
67.53
17
CITY NATIONAL CORP
63.47
18
COMMERCE BANKSHARES
60.18
19
BANCORP SOUTH
54.76
20
SUSQUEHANNA BANCSHS
49.05
21
TRUSTMARK CORP
46.26
22
SKY FINANCIAL GROUP
44.24
23
FIRST CITIZENS BANCSHARES
41.98
24
UNITED BANKSHARES INC
40.65
25
WILMINGTON TRUST CORP
37.82
26
MERCANTILE BANKSHARES
37.27
27
UMB FINANCIAL CORP
32.15
28
SOUTH FINANCIAL GROUP (The)
23.55
29
FIRSTMERIT CORP
22.32
30
CITIZENS BANKING CORP
20.73
31
OLD NATIONAL CORP
-9.53
32
RIGGS NATIONAL
-13.12
AVERAGE
66.74
13
Stock highlights (as of 09/30/04)
Average daily trading volume
139,500 shares
Number of analysts
12
Number of market makers
42
Number of shares outstanding
121.0 million
Market capitalization
$2.6 billion
Annual meeting attendance
2,000 shareholders
14
Employee stock ownership
80% of our employees collectively own more than 2 million shares of Fulton Financial Corporation stock
Stock options help us to retain key high-performing employees
15
Stock performance (1982 - 2003)
WITHOUT dividend reinvestment: 15% compounded annual rate of return
WITH dividend reinvestment: 19% compounded annual rate of return
16
Employee retention
0
10
20
30
40
50
60
70
80
90
100
1999
2000
2001
2002
2003
Exempt
Non-exempt
Overall
17
Employee opinion survey
Customer service
Management team performance
Company image and mission
Team orientation
Technology and systems
Training and development
Sales orientation
Work effectiveness
Pay and benefits
Employee satisfaction
(Survey administered by BAI Survey Services)
18
Customer satisfaction
96% of our customers are Extremely or Very Satisfied with their Fulton Financial affiliate bank
86% of our commercial customers are Satisfied or Very Satisfied with us
Compared to national average of 55% of customers who are very satisfied with their financial institution*
*Source: 2003 American Banker/Gallup consumer survey
19
Funding sources as of 9/30/04
75%
10%
14%
1%
Deposits and Customer
Repurchase Agreements
Capital (GAAP)
Other Borrowings
Other Liabilities
20
Community involvement
Employees are actively involved in their own communities
The community benefits from this support
The banks receive additional business as a result of the relationships and goodwill that are developed
21
Corporate strategic initiatives
Achieving consistent earnings growth
Maintaining high asset quality
Expanding the franchise through our well-developed acquisition strategy
Diversifying revenue stream by increasing the contribution of non-interest income
Managing capital
22
Capital (At September 30, 2004)
Total Capital (GAAP): $1.1 billion
Total Regulatory Capital (Est): $945 million
Ratios:
Total Risk-based Capital (Est) 12.2%
Tier 1 Risk-based Capital (Est) 11.0%
Leverage Capital 8.4%
23
Progress of Stock Buyback
2.7 million shares repurchased since January 1, 2004
Average cost $20.58 per share
4 million share buyback
announced June 15, 2004
1.4 million shares repurchased as of October 5, 2004
24
First Washington State Bank (pending)
Resource Bank
Premier Bank
Drovers & Mechanics Bank
18 Sovereign Bank Branches
Dearden, Maguire, Weaver and Barrett, Inc.
Skylands Community Bank
Ambassador Bank of the Commonwealth
Lebanon Valley National Bank
Peoples Bank of Elkton
Woodstown National Bank
Bank of Gloucester County
Delaware National Bank
Central Pennsylvania Savings Association
Hagerstown Trust Company
Denver National Bank
Great Valley Savings Association
First National Bank of Danville
Second National Bank of Nazareth
Lafayette Trust Bank
Pen Argyl National Bank
Swineford National Bank
Farmers Trust Bank
Acquisitions
25
Resource Bankshares Corporation
Acquired on April 1, 2004
Current assets of $1.1 billion; headquartered in Virginia Beach, Virginia
The only Virginia-based bank with offices in Virginia’s three major markets
Market area accounts for over 71% of all deposits in state of Virginia
Senior lenders average 24 years of industry experience
Allows for expansion of Fulton Financial Advisors, retail and commercial banking
26
First Washington FinancialCorp
Assets of $486 million
Headquartered in Windsor, NJ
Banking subsidiary: First Washington State Bank
16 branches in Mercer, Monmouth and Ocean Counties in New Jersey
Enhances our existing northern and southern New Jersey franchise by extending our presence into the central part of the state
Transaction will be completed by April 15, 2005
FWFC has very strong asset quality and strong CAGR in EPS, deposits and loans
Market areas are robust with strong projected demographic trends
27
First Washington Branch Locations
First Washington Branches
Fulton Financial Branches
28
High growth areas
Dynamic market demographics
Strong performance
Asset quality
Talented and dedicated staff
Compatible corporate culture
What do we look for?
29
Acquisitions in new markets
What changes?
Loan review
Investments
Asset/liability management
Compliance
Common operating platform
Audit
30
What stays the same?
Bank name
Board of Directors
Management team
Employees
Acquisitions in new markets
31
Increased non-interest income due to introduction of new products and services
Additional capital
Increased lending capacity
Reduced expenses
Proven merger/conversion expertise
Continued local autonomy and decision-making
Benefits to new affiliates
32
Investment management
Brokerage services
Insurance (whole life, term life, long-term care through advisors)
Cash management
On-line banking
Debit/credit cards
Residential mortgages
Specialized lending (leasing and indirect)
International services
Correspondent banking
Product availability
33
Includes Dearden Maguire Weaver and Barrett, LLC and Fulton Insurance Services Group
As of September 30, 2004:
$5.3 billion; $3.9 billion in assets under management
Products and Services
Personal trust
Asset management
Retirement services
Brokerage
Insurance
Corporate trust
Cash management
Private banking
Named Community-Based Bank Brokerage Program of the Year in 2003 by Bank Insurance and Securities Association (BISA)
Fulton Financial Advisors, N.A.
34
Fulton Mortgage Company
Coordinates residential mortgage lending throughout 11 affiliates
Expanded, competitive product line to customers of all affiliates
In partnership with each affiliate, focused management team on residential mortgages
Entry into new markets for FFC
Record originations in 2003
Residential lending at Resource Bank provided through Resource Mortgage
35
Other Income As a Percent of Total Income
24.9%
27.0%
25.0%
22.9%
19.4%
17.9%
16.0%
16.2%
16.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
96
97
98
99
00
01
02
03
9/04
36
Moody’s Investor Service
Short-term rating P-1
Long-term rating: Issuer A-2 Lead Bank Deposits A-1
Outlook:
Positive
Fitch Ratings
Short-term rating F-1
Long-term rating A
Outlook:
Stable
37
Loan diversification (9/30/04)
11%
30%
8%
15%
36%
Consumer and Other
Residential Mortgage
Commercial Loans
Home Equity
Commercial Mortgage
38
26 relationships with commitments to lend
of $20 million or more
Maximum individual commitment of $30 million
Average commercial loan commitment is $550,000
Loans and corresponding relationships are within Fulton’s geographical market area
Summary of larger loans
39
Commercial loan concentration by industry (as of 9/30/04)
Industry
%
R/E - Rental
18.4
Construction
15.6
Services
13.4
Manufacturing
9.6
Health Care
8.3
Retail
8.1
Agriculture
8.1
Wholesale
5.4
Other
4.3
Arts and Entertainment
3.6
Financial Services
2.7
Transportation
2.5
40
Nine months ended Sept. 30, 2004
$0.94 Net income per share (3.3% increase over 2003)
$0.482 Cash dividends per share (9.3% increase over 2003)
1.47% Return on assets
14.34% Return on equity
18.38% Return on equity (tangible)
55.50% Efficiency ratio
41
Average Loan Growth (YTD Sept)
2004
2003
$
%
Commercial
$2,070
$1,700
$370
22%
Comm’l Mort
2,460
1,870
590
32%
Resid Mort
680
560
120
21%
Consumer
1,560
1,340
220
16%
Total Loans
$6,770
$5,470
1,300
24%
(dollars in millions)
42
Average Deposit Growth (YTD Sept)
2004
2003
$
%
Nonint DDA
$1,360
$1,170
$190
16%
Int DDA
1,340
1,120
220
20%
Savings/MMDA
1,830
1,610
220
14%
CD’s
2,680
2,500
180
7%
Cash Mgt
400
330
70
21%
Total Deposits
$7,610
$6,730
$880
13%
(dollars in millions)
43
Loan-to-Deposit Ratio (avg)
74
79
84
89
94
99
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
YTD04
FFC
Peer
Top 50
44
Deposit composition trends As of September 30
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000
2001
2002
2003
2004
Non Int Bearing Demand
NOW, MMDA, Savings
Time Deposits
Customer Repos
45
Associated Banc-Corp
BancorpSouth, Inc.
Bank of Hawaii Corporation
BOK Financial Corporation
Citizens Banking Corporation
City National Corporation
Colonial BancGroup, Inc.
Commerce Bancshares, Inc.
Cullen/Frost Bankers, Inc.
First Citizens BancShares, Inc.
First Midwest Bancorp, Inc.
First Republic Bank
FirstMerit Corporation
Greater Bay Bancorp
Hibernia Corporation
Hudson United Bancorp
Peer group
International Bancshares Corporation
Mercantile Bankshares Corporation
Old National Bancorp
Riggs National Corporation
Sky Financial Group Inc.
South Financial Group, Inc. (The)
Southwest Bancorporation of Texas, Inc.
Susquehanna Bancshares, Inc.
TCF Financial Corporation
Trustmark Corporation
UMB Financial Corporation
United Bankshares, Inc.
Valley National Bancorp
Whitney Holding Corporation
Wilmington Trust Corporation
46
Source: SNL Financial Datasource
Net charge-offs to average loans
0.26
0.20
0.05
-
0.30
0.60
0.90
90
91
92
93
94
95
96
97
98
99
00
01
02
03
6/04
9/04
Top 50
Peer
FFC
47
Source: SNL Financial Datasource
Non-performing assets to total assets
0.41
0.40
0.34
0.20
0.60
1.00
1.40
1.80
90
91
92
93
94
95
96
97
98
99
00
01
02
03
6/04
9/04
Top 50
Peer
FFC
48
Source: SNL Financial Datasource
Net interest margin
3.65
3.77
3.80
3.50
4.00
4.50
5.00
5.50
90
91
92
93
94
95
96
97
98
99
00
01
02
03
6/04
9/04
Top 50
Peer
FFC
49
Net interest margin
3rd quarter 2003: 3.62%
2nd quarter 2004: 3.73%
3rd quarter 2004: 3.88%
50
Investments/Total Assets (avg.)
8
13
18
23
28
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
YTD04
FFC
Peer
Top 50
51
Asset/Liability Management
Interest rate “shocks” (as of 09/30/04)
Rate Change NII Change (Annual) % Change
+300 bp + $22.0 million + 6.2%
+200 bp + $15.3 million + 4.3%
+100 bp + $9.6 million + 2.7%
- 100 bp - $19.2 million - 5.4%
Source: FFC Asset/Liability Modeling
52
Investment portfolio
Portfolio Components
Ending Bal.
Average
Credit
Mortgage-backed securities
$1,754.8
3.4
AAA - agency issued
U.S. treasuries and agencies
85.1
1.3
AAA
Municipals bonds
258.4
3.5
AAA—insured
Corp & bank issued trust pfd
75.1
21.5
various — 5 yrs call
Bank stocks
66.2
NA
not rated
Other/short-term Inv.
49.3
NA
AAA
FHLB stock
56.2
NA
AAA
Unrealized gain—bank stock
5.4
Unrealized gain—bonds
-8.8
TOTAL INVESTMENTS
$2,341.7
3.6
NOTE : DOES NOT INCLUDE RESOURCE BANK
53
Loan Mix (9/30/04)
Fixed rate loans = 34%
Adjustable rate loans = 66%
54
Bank stock gains (percent contribution to EPS)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
91
92
93
94
95
96
97
98
99
00
01
02
03
9/04
55
Source: SNL Financial Datasource
Efficiency ratio
55.5
57.0
57.7
45.0
50.0
55.0
60.0
65.0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
6/04
9/04
Top 50
Peer
FFC
56
Corporate Governance
Internal controls over financial reporting process
SOX and NASDAQ listing standards
Financial expert designated
Independent directors determined
Executive sessions
Executive compensation and nominating committees
SOX compliant written Code of Conduct
Corporate disclosure committee and Audit committee—formal review process for relevant financial filings
57
Looking ahead
Continued focus on:
Strong asset quality
Growth in non-interest income, particularly from Advisors
Expansion of franchise geographically
Increased loan activity
Core deposit growth
58
Overview
Shareholders
maximize shareholder value
Customers
create financial success
Employees
create career success
Communities
create prosperity
59
Fulton Financial Corporation
One Penn Square
Lancaster, PA 17602
www.fult.com
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