FULT - Earnings call transcript Q2 2019 | Fulton Financial Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Fulton Financial Second Quarter 2019 Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time [Operator Instructions].

As a reminder, this conference call maybe recorded.

I would now like to introduce your host of today's conference, Mr. Weber. Jason begin. may you Sir,

Jason Weber

you, Daniel for discuss for us XXXX. morning. earnings and Financial's conference good of Fulton quarter to the Thanks call for joining second Thank and our webcast

conference host of Officer Corporation. call Your Financial today's is Wenger, Chief Fulton Chairman Phil Executive and for

Joining is Senior Mark Executive Chief President and Phil Officer. Wenger Financial McCollom, Vice

documents which Investor and found under Investor can page by yesterday included with presentation our Our will comments slide p.m. our on site. refer on today found on also Presentations clicking Relations X:XX earnings be to The we announcement, Web related afternoon. www.fult.com be at the can the slides These Relations, financial information at News. released our on site then on Web

and forward-looking to actual Slide may today's results could results financial information harbor presentation make risks, subject guarantees to Fulton's and uncertainties other uncertainties for operations in of regarding X Fulton factors. of are other earnings statements statement on with statements of respect future of and factors statements additional representative are refer release condition, forward-looking safe to and the risks, our business. call, these and These not differ materially. and Please this performance On and

those announcement financial Fulton's measures. yesterday certain than presentation and with financial supplemental Slides Fulton most earnings In revise to any Fulton measures. a to of released for discussing the comparable measures of financial non-GAAP undertakes included forward-looking Please to Fulton's no law, non-GAAP information of other by as refer the may today's XX and to GAAP reconciliation XX statements. obligation, refer required update or performance, representatives

call turn your over to host, Phil like Wenger. to I'd the Now,

Philip Wenger

share phone morning, XXXX for we few and details will the today. our everyone. line performance discuss open questions. the good have McCollom, of outlook. our before joining and concludes, When a us CFO, second our financial for you Mark Jason, quarter Thanks, prepared remarks I Thank he

second milestones quarter to the our highlight about briefly talk performance, two want important during hit we I Before I quarter.

Bank Fulton Bank. consent New And largest was second, subsidiary First, strategic banking we remaining our subsidiary our finalize September. BSA/AML terminated, Fulton paving into will to our consolidating subsidiary not going Fulton in remaining achieving into of help brand, facilitate on consolidating two Jersey, these of Together order forward. priority bank, banks but banks growth, our consolidated We plan only in Bank. unify the way our our subsidiary our also all milestones

income Overall, second driven about were Now, were I'd performance. pleased growth in quarter our business. consumer to by strong like and talk fee we which our continued our results, with

Our consumer business, we see auto strong portfolios. residential growth continued and indirect our to in mortgage

portfolio mix auto weighted a score a of residential approximately portfolio indirect Our average approximately adjustable-rate fixed XXX. of was and a of borrower grant inputs of XXX. And comprised has mortgage programs with our mortgages borrowing in footprint, balanced score credit weighted-average with -- credit

commercial lenders. Our impacted by large, extremely as and be competition we banks, And well as small landscape. seeing an are competitive lending business non-bank from continues to

remains pipeline commercial Our strong.

year. the about So prospects for of are the cautiously optimistic growth remainder we our

in to of suggestive asset is linked Overall broader modest credit. a despite We or a quarter. to stable, continues portfolio the loans not in uptick non-performing Turning macro quality non-performing uptick relatively trends. be believe loans

the was also losses during credit for recoveries provision net linked quarter. Our down we and slightly had quarter

and both quarter year-over-year spreads to Mortgage year-over-year, linked banking on efforts. and income higher Moving seasonal sales most non-interest growth We and saw Non-interest income linked income continued quarter higher originations. improving growth volumes, and reflecting fees. growth, categories. increased across was strong

activity As June. in pickup rates see moved nice during down the we a did refinance quarter, in

be management increased linked grew small of reflects in our due revenue our increase performance wealth continues XX.X% continued market asset fastest focus. a acquisition The nice and the segments income business. Our also to quarter a investment gathering year-over-year in page management business Brokerage growing of overall first and to the the one year-over-year at services and trust both quarter.

year-over-year volumes increased larger Our commercial linked and swap interest was loan rate up deals. quarter on income and

a approximately quarter expenses. to was which saw non-interest increase in on We million consolidation due expected $X.X expenses, linked Turning expense. charter to

XXXX. second Excluding quarter those efficiency charter since for ratio expenses, expenses, the consolidation XX.X%, lowest the would which first the been have quarter is of

during authorized On We $X.XX of common the through repurchased the current quarter. capital approximately dividend our common front, quarter. we $XX had second XX, XXXX. left of in approximately We December share share program, $XX which paid stock in is a the per second million million quarterly repurchase

this turn in performance over McCollom to the I'd discuss At call like more detail. financial Mark to point, to our

Mark McCollom

Thank good and everyone. you, morning Phil

with Turning quarterly discuss the otherwise, XXXX. first comparisons to noted our quarter of earnings, will I unless

Earnings Slide million, quarter of increase X. from and quarter on on diluted this income share XX% Starting XXXX. of $X.XX net second an quarter of from $X.XX per or were the or increase first XXXX $X.XX the of $XX.X an X.X%

recorded dive our recall, we may million deeper some with additional you into losses a related provide you fraud earnings bit a relationship. $XX.X and commercial components a credit will XXXX, second of I for the the now during large to color. As on customer provision single of

Moving Slide X.

an the our during Our funds lagged. increase assets by increases on and of basis while the seen of saw partially higher cost increases point rate million yields rate day fed X increase in the quarter, mainly of increases preceding decrease second additional in we've trends in funds our the $XXX.X in net course. cost drove the In income impact yields, accruals an of quarter, increase interest offset our $X.X was In in net in interest asset prior quarters, assets, interest margin. linked interest quarter, an our at funds earning reversing interesting of million, the we than by driven earning

deposits second the likelihood in on that increased basis we X during X point. our aware of points. In Everyone the bearing the while Loan in funds basis interest decreases And XXXX increased appears rate the of increased high at of second assets half of earning while cost the volatility is of saw the second quarter. basis yields be points. basis this yields X quarter XXXX, interest cost of X points, increased points, to rates

my annualized. linked provide for note the Average in million $XXX already and loans of during would billion net of deposits of that loans in $XXX on more at X%. an outlook tied growth reflected curve our declined average margin our I various of color $X points linked rate Growth quarter during this rates end declining second second the is increased our million was approximately to discussion our the loan results curve, are comments. impact some the will annualized quarter as quarter or LIBOR in sharply X.X% quarter. interest I of

to Turning Slide X.

overall increased as of million. in relatively Non-performing quarter of as We second $X Our the XXXX. compared million to second basis for credit Non-performing of $X.X XX to the the quarter had at a the was of loans mixed, $XXX at quarter in points total the of $X.X recoveries performance as basis compared of quarter first charge-offs percentage stable. end million million but net quarter. loans XX to loans the the points net increased first end

loans provision million, $X quarter. credit than losses second lower of XXXX the from the relationship. was a percent the of quarter commercial by allowance driven quarter. linked The second lower $XX.X aforementioned was losses for the at for X.XX% for provision increased as the The than million credit slightly last of to was which of quarter quarter X.XX% first The first end year, the

XXX% XXX% However, decreased loans last quarter. of the to coverage the from allowance to non-performing

grew a had strong X. security very gains, to We Slide non-interest linked Moving our to XX% with quarter million quarter. fees $X.X or as income, excluding respect

commercial was of XX%, income in loans, also volume card well sale are and $X.X income. income interest Some banking also well swap Increases Mortgage banking by overdraft spreads. income particularly included increased and other increases driven loan sold fees statement. the million to this in in as our merchant in as as of SBA which rate and commercial as loan income attributable seasonality, gains, were in or card increase on consumer improvements in commercial realized fees,

were benefit $XXX.X with of an of quarter. in total were activities million, totaling the million from million expenses consolidation quarter $X.X Non-interest increase this expense related charter X. non-interest Slide second expenses $X.X million to Included the $X.X in expense compares in and Moving first $X.X outside to the were million the in services quarter remainder services. This in which total other primarily outside $X.X salary categories. various and other first costs XXXX, of in of expense, consolidation million to in reported charter

or as compared ratio million charter have to periods, been have $X.X our second efficiency quarter. quarter XX.X% XX.X% for from expenses X%. would in increased consolidation Excluding the And these costs both would the

and lower normal the health and merit X.X% due $X.X and as expense, the quarter software, the aforementioned seen partially offset expense to of in were Increases marketing benefit by claims resulting first increased experience. to Salaries charter XXXX. net processing increases compared or as during as also well increases from Professional expense. occupancy employee favorable quarter insurance were fees consolidation costs decreased data million,

decrease For XX.X%, quarter the of tax the XXXX, a quarter second from effective is of rate which first our XXXX. was

our due X. levels and capital quarters. past and income this Moving to higher equity to growth. Slide displays net Slide profitability five the Returns quarter X assets over were on

common equity ratio tangible Our strong. remained

margin, remainder last outlook. is we This guidance as for non-interest net on quarter from have provided Lastly, our of as included except what the XXXX and we've income for our XX. unchanged Slide well interest

year the than margin net were in we stronger with quarter have the to off expansion start we For margin, guided. first interest pleased

of now for margin, flatter to However, for the our year curve full balance our more are us year full points yield our tempered basis have expecting the to XXXX the outlook the net versus the X caused significantly rate net XXXX and Therefore, interest X was year. we in which margin outlook interest be increase near-term X.X%. decreases for to

single-digit for tempering to year XXXX. for We also a mid net our the rate outlook growth income interest full are

growth XXXX. year-to-date results our based for and the June our a for for rate changing outlook through Our are our non-interest of single-digit year year, non-interest income income remainder on the mid we the full for expectations

now over you turn questions. Denial, operator And could please? to call the the for with that, I'll help

Operator

Instructions]. [Operator you Thank

KBW. Chris first question McGratty Our from comes with

now Your is open. line

Chris McGratty

start I'd for that updated maybe rate forward with that the maybe margin timing of does The assuming question Is you. curve, cuts? guidance, Mark, assume? what a or

Mark McCollom

We've refresh there recall, our is one July, this beginning now that point increases. in Yes, we at September, assumed, of be decreases, revised back, had basis had revised two going in assumed assuming XX you this Chris, guidance guidance that in one that two in if we items. rate the year would we're in the

Chris McGratty

the And growth on you of optimism cautious the for comment, half back year. so the loan about talked

Or year? source more borrowers expecting your with in mortgage. and growth we half, it be speak Looking the growth the of growth should biased you the you're the will maybe the continues of to Could towards be of resi-loaded? having conversations resi to back half at of in the be more first Thanks. either source

Philip Wenger

our So, payoffs. were Chris. of increase growth million pipelines hampered criticized to second loans. that have a about to again, -- We classified did our large grow, $XX We half and was quarter continue payoffs, linked actually in was, by quarter

see to So, little was growth we be in second than going quarter. the mixed it forward, a the I think more

expect side pickup. So also we but growth we C&I do consumer expect to the on continued see to see

Chris McGratty

on question expenses. a maybe And

Just are the the clear, number starting consolidation there will for is year, and the last or any guide from year, branch charter off given excluding point? be so adjustments other the of X.XX that that that you, that of I'm the charges, reported

Mark McCollom

cost consolidation also charter reported for year year. this It and number was for excluding last then

Chris McGratty

-- the much? I cost terms have been those how have year-to-date, metrics And consolidation Mark, don't of, charter in

Mark McCollom

at we're given will expect year-to-date, guidance we number quarter last had million. X.X. that would about be Yes, I $X that

be million, there's to principally is a bit there's is that number Chris. going off upfront to savings we've a a going intangible to that write bit as And think dug due $XX.X we small closer be as think some million but little to And to I going deeper, to, very expense costs. be of going on well. to the that's require little also asset $XX

Chris McGratty

of $X year. the the the guide half additional an the of is, million X ex-middle bucks, back X.XX But okay… So in

Philip Wenger

quarter. third the in be should that of most Chris,

Mark McCollom

quarter, Third yes.

Chris McGratty

the last might little on Obviously, thoughts you and conversation offer you the you progress would bit one capital, on updated BSA? Could be maybe made And Thanks. given stocks strategy have out in bank But having be favor. of appreciated. acquisition. been any

Philip Wenger

also looking remaining but committed So, we acquisitions we're in interested to be that in to continue approach. disciplined at

to make We that our inside our enhances see. market want we'll footprint strategic share. So, acquisitions

active. be those disciplined. as will available, so we And opportunities we'll stay come But again,

Operator

Thank from Sandler question you. Schiraldi with Frank And comes our O'Neill. next

Your now line is open.

Frank Schiraldi

Good morning.

now NIM, guys follow-up have on a just your baked Just of cuts you the rate the on comments Mark, based expectations. into and number

the I'm think -- guys rate to about margin. fair envelope, points you every be -- in it and just to do fair? for you say XX I'm that cut, try basis the Is it? perhaps might to in -- bps to back Just point Or how basis X off to given as XX margin comes is trying quantify further? basis X quantify thinking Is point it what worth a for about that cut hoping

Mark McCollom

so because Frank, I always about talk in many hesitate there're basis to points, levers.

We tied to some loans of our seen of LIBOR are we've have some those -- obviously, decreases. where already

immediately. have $X.X We in indexed billion million, we that which throughout prime, of the -- of loans the would reset are where deposits got year, on are got depending would cycle. either billion We've so reset $XXX we and $X.X also

rate is think back going now or do now. that, we possibility big And place of I depend is the as all going starting looking increases thoughtfully question, to but much rate really is those we're I when in point, start, ultimately. decreases. now then whipsaws pull to with the end but a not can here sudden a its levers to entire at not And that where the the from us facing deposits how number and do But very we're bad is we book think right what just up your the think on industry I

Frank Schiraldi

of is to and Is in get mean depositors a that some you you thinking think try attrition. approach? And it see this the and I wait you cut point, to get that of that? more How about a of at see results when onto what terms rate pass immediately

Mark McCollom

some wait month during tied quarter, LIBOR. again -- the loans to LIBOR is it's of we've see second the guidance what's I our mean, and one I to impact. because in the for reason have And we wouldn't So, approach, the a billion say because already month some happened right? that impacts, of of one change of $X.X

impact So, we've it currently. addressing been and that looking at

Frank Schiraldi

it past, pertains And upon then about as talked In depending buybacks just you the to growth opportunities. buybacks.

significant strong And sounds competition out there's have guys you also like pipelines but there.

you as the how how about year? you're currently. wondering stand How you see half as as buybacks in there? the you were just second things the Do or So think of thinking in thinking guys given now the thinking you back be about aggressive you what's environment the are quarter, could

Philip Wenger

in believe been aggressive we that to I continue be quarter. think that as we've we'll as the second

Operator

And you. from question Nicholas Thank comes Austin next with Stephens. our

open. now is line Your

Austin Nicholas

taking looking bit on just Can opened at you quarter know closed have than trending? see the a expense, some occupancy Maybe number in it I some should the us I where provide also think look maybe for. was higher little maybe branches was few. first we guidance just a I that you

number we if look those should maybe weigh as we forward? about two how that things, So we think

Mark McCollom

sure. Yes,

maybe for expect I and quarters think and second the quarter I back four square at just prior something invoices platform. increase little just things. going items bit we to footage maybe increase for account discrete be would the of had in to going were guide. to would bit, quarters above that's timing But some the I little related across think guide, four forward, look of sorts where a a the prior those that net

Austin Nicholas

of they're not be huge with the So, since there guess that I guess that already net kind to that... from I the openings going branch saves cost happened it closures meaningful a just

Mark McCollom

we correct. branches. obviously Yes, opened Remember, four

would have not been we've five And opened. so the impacts net five, large the that

Austin Nicholas

charter? little, just rate on assets under to reevaluated that the or good that given $XX here, more FDIC be then Is the And a billion is insurance. going a run

Mark McCollom

No, for I rate now. reasonable that's a think run

Austin Nicholas

anything on the talk bit maybe positioning, quarters. for a just the positioning over several asset on your you interest you're whole book? the as sensitive how picture broader sheet you've Can a reduced just maybe balance last doing position maybe then balance rates on about sheet And securities the you're and

Mark McCollom

we're book mean, I asset we sensitive expand more taking posture. us when been overall that obviously mild neutral have very duration, Yes, back to to bring helps steps to a which

it have, that you opportunities that's and also balance negative measured small creates curve are of the at ways your wholesale in might opportunities evaluating portion actually you or zero sheet it where, have your way where, to does, We of flattening pockets again carry. small the close when

So, the and those to in be opportunistic where on at in just we'll takes small wholesale spread. higher take book a off off cases some shrink exists that amount either very or replace then and

Austin Nicholas

-- loans curve. the then I on just I LIBOR that billion day? maybe tied to the $X XX the on you on, to XX deposits level to of provide what maybe mentioned deposit then percentage you us just short-term of And can tied one that core last more, But guess for is side, maybe indexed rates? the specifically, day maybe just somewhere And one know are of

Mark McCollom

to have So billion about LIBOR. month one we tied $X.X

commercial tied thing But reset next We year million we And reset do. the to next indexed And with actually $X.X billion, which have billion five it's the throughout will that going have and same liability LIBOR, then one again, as $X.X to tied municipal on be really side, fluctuate days year we deposit have but the resetting. LIBOR. million year $X.X another is what municipal our $XXX our $XXX book, are during it's billion between those will date those over come reset loans rates. to aren't but reset are going year to the that the --

Operator

next securities. And from Thank Joe you. Alden question with comes our Gladue

is now line open. Your

Joe Gladue

interest more side. more on question, the on deposit one net Just margin guess, I

the shift and of CDs. As deposits non-interest deposits and brokered interest rates have gone into from up, a we've other mix core seen in

that now, at cuts all, Just any to you guidance, and in your with is rates, any wondering rate assumed? that or see interest any back deposits in of change move Fed if trend assume core you

Mark McCollom

previously the we've did term long that We given holds rates, assume intact. our that guidance No.

our to We overall have a the bit tweaked expect on growth how remain we the mix but rate little same. deposits

Operator

Thank you [Operator Instructions].

Davidson. Russell from comes question D.A. with next Our Gunther

Your open. now line is

Russell Gunther

the up follow on quick margin. A

the fed embedded So ability assuming in funds. to an guidance funding deposit costs? tied reduce beyond to that's Are you the guys

Mark McCollom

Yes.

that, are again, rates be that going there learning we are So going as that. to But of we an that book about we're decline certainly is assuming be existing that assumption testing, opportunistic to some adjusting.

Russell Gunther

switching then the expenses. And to

on a I hear update looking charter the XX.X. on you now for consolidation. XX We're So total of the to

saves. though mentioned some also You related cost

be? us from what would for could saves? would So upfront, What quantify net So, related it the XX.X? the be out net impact you XX, gross

Mark McCollom

said of I quarter, I operating we'd a Russell, our time think as prior we've in long been costs, that back for most the one mean, within bank office.

while So mean I cost and savings charter less. consolidations or so very be total our savings the advisory there part I to small But $X will of be would some there. our from million put board consolidation, savings

Russell Gunther

forward. quality onto hear then could just But asset on we side, us And the going as provision, your ag portfolio in you on think the you that outlook? guidance unchanged quality I asset there what's stable and an update give about the embedded

Philip Wenger

I that stabilized. ag has our portfolio say would So,

And going quality, don't so major forward. our having on it asset a really we see impact

Russell Gunther

for then me. one And last just

regional in On of there. loan growth, Could the or better pipeline us sense give just commercial half you for guys geographic with pipeline? the back pockets the of feeling a strength about that year the you mentioned

Philip Wenger

strongest Virginia and the followed then to area and Jersey. in by that Pennsylvania, regards pipeline be now right is Maryland. New So, And probably our

Operator

Piper from question next Matthew Breese comes Jaffray. our And with you. Thank

line now Your open. is

Matthew Breese

fees the which I noted hone that this quarter. seasonal. your lot of moved you a in A way, items increase in was there wanted of non-interesting different income, First, lot on all to just

quarterly $X.X the And million so, thinking increase. about

what's subject and would If you volatility much on was should basis? How was a that how rate or gauge you much run say be included seasonal reduction. had to therefore versus to

Philip Wenger

to first to talking that applies quarter. clear, just the Well, seasonality that about we're be really

on much based So, I the don't there is effect remaining seasonality. think for two quarters

Matthew Breese

fees. income, at were a And commercial fees, $X.X such we Are through this terms $X.X more near-term the we hone card, in figures swap just least or those the year-end? quarter, that million can some of higher then on the in the ramp merchant as from maybe million merchant from like of run in rate, expect items swap card should profitable

Philip Wenger

now, The Yes, side. on they'll volatile little feel our can the comfortable side definitely merchant but that be backlog given swap on a we based right volumes hold.

Matthew Breese

to then if loans, sounds structure, loans Phil, like then, how wanted the your at profits? and they actually if of looks, just or that I comments, losing a competitors growth putting, them just or books? initial point in super levels credit taking do you it like I going competition And the you on Or just rate environment And losing get you're terms for this are mean, of risk your to competitive. you're sense back is feel remains losing loan are it cycle, are lower in duration. the And

Philip Wenger

one to answer of I those think is every yes. the

duration. So, rate, terms, which would include

and I think also more profit taking on are folks less they're think taking I risk.

Matthew Breese

potential idea of are? showing getting costs. thinking are you Are point about shoots give opportunities are lower just duration you then outlook rates so, or front? short for an costs products? CDs, markets rate your to And reduce money there us they can where the green duration Are And forward and longer the the you what seeing deposit those you and up could to lower on products if the that yet

Mark McCollom

lower there, One, now to mortar in market think online do first of fronts their to follow to so. to And allow other -- rates. opportunities rates. competitors of Matt. first the a the really I'll the money to see started two look promotional banks signs really And when started was that changing, it we it are seeing when lot and on comment was rates that you you really suit. I brick And

them. rates. of to rates if new categories and lower or attrition rates go deposit it And changes again, On looking a that was evaluating testing at we basis, selectively, forward all are acquisition

to So, yes. question your the answer is

do seeing to opportunities the across We board are so.

Matthew Breese

outlook. balancing the NIM And versus just then that

interest up that cutting it this circle bps quarter the we can year-over-year. First for NIM fed pretty is this into mark, was But a a environment, understand do down is likely high quarter. it were peaked be if I rate still NIM cycle? X X.XX,

Mark McCollom

decrease. the first cuts around That's -- change see acquisition yet, hard say. right? need the we that to about doesn't of and seeing So see rate whether need that rate new talking customer what we're a our to as materially cut rate Again, to do rates how all able is We're rate psychology many. actual testing our then and We some do we those be rates able deposits, we're change initial to attrition more. on might to

I it's question, So on. but that early answer think to it's something we're very focused

Matthew Breese

close, my any last love is CECL would Just I updated one. very point. there. And commentary at this

I the hear forma there? think provision, and anxious provide you updated to look. will how and allowance those we're all where thoughts commentary any pro go forward Can items

Mark McCollom

any providing are and terms be. yet what for financial forecast in of that disclosure number will any We commentary

have gone for that, they far pieces people us the a past of We and with consultants help this long had had to really of on this. signed hard and third-party are And are year team at very plus have working we point. some

to you things. of expect once finalizing So, so. over the position we're in something we a date, our just in internal ready is we'll team that months And adoption six advance the get announce do can next

Matthew Breese

the to be CECL Just Should the it? consultants better than we had the versus what industry initial expectations. or going thought are expect to curious worse out

Mark McCollom

the to surface books banks largest a business, very relatively I've variance similar there be is appear seen I on that even still that is wide reported the think right. for what have from what of would Well,

with that of share in folks. being we So, any cautious numbers we are terms

levers There have there make those before our testing sure a to around aware, are, you sufficient I'm what we be. ample had And done that put well we to of that to in so stress And of time out really position in lot it. we're are want would we've a stress levers just each sure as standard. estimate

Operator

any like any Thank for call not questions, time. you. back to this showing the And now I closing remarks. I'd over to Phil turn at further am Wenger

Philip Wenger

October. Well, up when thank you results third today. you for us us quarter we discuss hope will in with We all joining be

Operator

you participating This all thank program and gentleman, Ladies in and day. today's wonderful today's have you conference. for disconnect. concludes a Everyone, may

Fulton Financial (FULT) 17 Jul 192019 Q2 Earnings call transcript