FULT - Earnings call transcript Q3 2019 | Fulton Financial Corporation

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Fulton Financial Third Quarter 2019 Results. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Jason Weber. Thank you. Please go ahead, sir.

Jason Weber

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

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

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

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

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

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

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

Philip Wenger

joining morning, everyone. Thanks, Jason, us. good you Thank for and

third we few of before and open shares the concludes, the a XXXX line he McCollom outlook. our Mark our will have questions. CFO financial remarks our discusses performance phone for details When prepared quarter I

our recent performance, to third talk I accomplished in highlight Before months. milestones important quarter we about wanted I briefly two

Ambassador initiative our Bank Bank. banks into and subsidiary affiliate of in completes affiliate banks all largest consolidated consolidate banking Bank last our Lafayette Fulton multi-year our Bank to the Fulton transaction we First, remaining into our Columbia This September.

October, Justice of growth it lending milestones Achieving Together, been milestones without action in informed taking against Second would us efforts completed Department company. moving the forward. only unify possible help brand, any its Fulton employees. facilitate of not of these these hardworking early and that but the investigation without Fulton many so also have will not achieving fair our dedicated the

we pleased I'd performance talk were Now to like third financial with for the our about third performance. Overall, quarter. quarter our

on and our continued as focusing We shareholder to execute on strategic value. maximize to efficiency initiatives such profitability growth,

period-end and X.X% or quarter loan Loan during in third growth the linked-quarter balances quarter. as $XXX towards balances than million accelerated increased result, increase annualized, year's end, last period-end $XXX higher much a million

commercial into in quarter. growing in from XXXX large Growth growth translated few close second business. closed pipeline to Our loans also benefited solid the timing were throughout anticipated loan that and commercial third in quarter our the a

third Line our Delaware and footprint, slightly linked-quarter prepayments increased primarily above is our level linked-quarter. consecutive Growth and in but year-over-year, Pennsylvania linked-quarter were spread throughout declines the Commercial originations of utilization year. saw down two in while quarters of regions. and we Southeastern was after last the increased quarter

XX% Our and time higher than remains approximately commercial pipeline slightly increased year. this linked-quarter last

our and into remainder of growth about for optimistic XXXX cautiously remain prospects XXXX. we So the

on we saw remain environment in quarter, disciplined certain competitive, the the credit on situations, growth remains while this we extremely structure. and compete we Despite and price lending

during was drop-in rates, the more the originations we our of residential growth during our mortgages quarter Moving refinance we XX% with business, onto to Approximately our adjustable-rate some were footprint. see activity and continue portfolio, quarter. mortgage our strong Consumer growth in saw spread the throughout

a markets. at lesser grow and to in Delaware continues and portfolio in Jersey to our extent and growth solid a New was auto linked-quarter Pennsylvania our pace, indirect primarily markets year-over-year Our

past, As area financial quarter in the opened and represent XXXX, we of opportunities our performance, mentioned in of downtown and center in Baltimore we Baltimore. the growth Philadelphia first tremendous the third long-term

asset Turning to continues to credit, be overall quality stable. relatively

We mindful we or cycle in signs are the to continuing are economic where assess for of the loan weakness and and analyze of stress. our portfolio

it rate linked-quarter from our benefited and and fees, up swap year-over-year. to strong Moving every commercial The in was remains XXXX. quarter commercial loan and originations income has strong increased pipeline interest

overall refinance Mortgage on is year-over-year. banking spreads remained environment. year-over-year and originations, a and and The increased the rate mortgage both improving pipeline XX% income activity, in linked-quarter higher strong by pickup and driven up

wealth was Brokerage year-over-year. management in business. a seasonality the of to approximately to of fastest platform. to in brokerage to linked-quarter year-over-year XX% located increased business of of fees, segments had slightly Harrisburg adding the be wealth market down due management revenue We but one the and our overall under $XX continues million Our income approximately opportunity growing recently and our purchase small increased Pennsylvania, assets performance area

We administration have million platform, added management our of to now to $XXX which this has year, brokerage grow our wealth assets business. we continue inorganic and wealth to organic completed look two under acquisitions at opportunities to approximately small and management and

expenses, XX.X% was ratio to to the quarter XX.X% the quarter. in compared for efficiency Turning second third the

opportunities upgrade to to look continue the we fourth into efficient and delivery our origination become and our platforms. we optimize servicing as channels more we see As XXXX, quarter and

share $X.XX $XXX share announced approximately paid front, quarterly common third capital Directors of completing XXXX. million share On our is year. million dividend a of repurchase through stock in repurchased authorized We which this Recently, quarter. Board program, repurchase of $XX the the approved program the per $XXX we third new XX, common December during March of our in million a quarter,

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

Mark McCollom

morning, Thank you, good everyone. Phil, and

Starting $X.XX were on of bit Slide income Earnings Turning components will our of a and deeper share X.X% quarter with XXXX an of additional quarter I second our quarterly some comparisons million, of the per earnings noted the unless X, the or $XX.X increase XXXX. to on earnings, quarter with net dive quarter are XXXX. $X.XX diluted consistent give color. discuss second now the into third and otherwise from will of our you I of this

earning net impact net during Slide additional primarily interest was to $X.X XX-basis X, and a on point day increase by offset driven the margin, of Moving of million, in a $XXX.X interest our by our partially an the linked-quarter, income decrease decrease of in quarter. an accruals interest assets million interest

million seasonal accounts. increases million mainly linked-quarter, X%. X.X% to in of growth Growth loan on annualized in Average due was loans municipal average rate an $XXX increased linked-quarter $XXX deposits or

linked-quarter year. $XXX and loan was deposits growth million prior or X.X% Ending Period-end September, in the $X.X X.X% $XXX year-over-year. higher Our million or more or and rates billion growth to period-to-period. $XXX deposit million X.X% and compared pronounced in which grew grew or X.X% linked-quarter loans resulted

The net to funds margin dropped of interest variable loan our two occurred loan portfolio, XX nature more fed costs. quarter driven the third by decrease quarter. our basis our was Due than point which the deposit rate during decreases, quickly yields

rate to quarter. deposits third costs as our to well planned decreases taking would fourth deposit we that due the levels, quarter from expect in of municipal are place run-off forward, deposit our decline as Going

basis result XX earning yields basis assets average XX on the the points rate declined a Mainly interest as XXXX decreases, in and down were points. third loan of average yields of quarter

increased of point higher by the cost to cost Our due basis large municipal the during funds inflows part X in deposits of quarter.

$XXX XX million end stable. decreased to quarter. to of the at to was loans to the quarter Slide third X, our relatively as in points credit Non-performing the decreased second of basis XX performance Turning as loans end overall million. loans the $XX.X at quarter points a of percentage the third Non-performing compared basis total

third Net million to were X.XX% X.XX% net to second to the quarter second losses percent credit million loans the compared losses million. The as decreased from credit for allowance for of $X.X for second $X.X million charge-offs quarter. decreased quarter. $X.X by of The the at quarter for of provision a recoveries end from in $X.X as the the quarter the

non-performing The of increased XXX% our loans. non-performing allowance to in improvement coverage XXX% the from to the due to quarter. last However, loans

our another grew fees approximately gains solid increased banking prior Moving million X.X% primarily in Consumer linked-quarter. X, the quarter as income securities $X excluding with or from income, we to million quarter, saw card non-interest Slide $X.X respect to income.

Mortgage a quarter. rights, by offset Gain for in banking sales quarter higher were rates row. during the largely servicing than last and decreased second strong revenue on increased remained on the as mortgage mortgage but were higher quarter amortization

are were prepayment fees FHLB completed $XXX we linked-quarter, third of securities approximately down And certain advances. sale the the restructuring a during management balance but million and up X.X% sheet investment of involving corresponding quarter slightly of XXXX, of Wealth a year-over-year.

on of will approximately expected with $X.X expense by transactions non-interest It securities FHLB those impacted being is income advances. year. million coming contribute million of both and interest penalties offset restructuring this $X.X gains income net over These the million to investment prepayment $X that

was were Other charter expenses Slide were to expenses. included FHLB to consolidation expenses million, is non-interest activities quarter. from prepayment the Moving an the in million, advance quarter, $XXX.X to recorded the previously X, $X.X quarter. in third Total related impacting increase mentioned of second comparable expenses the second which $X.X notable million penalty which other items

third specified occupancy also fund $X.X resulting largely quarter, as expenses property decreased million quarter from Net in insurance earned during a deposit the result also insurance credit during management the We FDIC the recognized a the of improvements reaching level. costs.

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

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

Our ratio remained strong. tangible equity common

XXXX XX. the of were we on our some by updating for underlying shown items points as outlook Slide Lastly,

were guided. the expansion was pleased interest start our we stronger with off For margin than that had we net margin, to year

us the the caused the shape change has of and However, year. our rate for decreases balance yield to the recent the curve of outlook

interest basis X.X%. which expecting basis now our decrease X full net We margin, X points interest net margin to XXXX to year are full versus year was XXXX points our

interest occur more assumes XX a October December in single-digit grow this We decreases revised expect income basis our This at to rate. of low and year. to net rate guidance point growth two

year our For expectations to based on a non-interest single-digit year-to-date rate full XXXX. are increasing year, the for income we outlook our of the and our the for results growth of high remainder

to over for we'll the now call With the questions. turn operator that,

Justin please. go ahead,

Operator

comes first Instructions] Frank from Sandler Schiraldi [Operator question Our O'Neill. from

is now line open. Your

Frank Schiraldi

of, do to the in NIM XQ points like wanted guidance just off start compression XX basis another anticipating I seems with you're it in the Just terms math, if linked-quarter.

- rate just could a that that December somewhat in kind cuts. October still basis cut would talked of - normalized thought obviously little than reasonable factors Thanks. I if talk rate bit And less X past the I I rate what you've guess wanted two just talked though the be compression, - December exactly know given to you think NIM. basis? in if sort can then so point be that's cut. I would to cut XX of about when would be the there, rate so if due mentioned you've - the you you've recall just, of you you to see again, the on And X And don't about that bps a would but impactful offered

Mark McCollom

there to We X you think A thoughts that I'll couple more for directly. that. contributing of is answer basis, to points three we then When that try this at basis we are quarter that of decline on basis the points look Frank. XX linked-quarter and X your think Sure, like and margin a number on points had. initial question basis to core factors

the First non-accrual income second had see. decline we net than is, of more we from about instead recoveries the was so as what income quarter, had typically interest we second the in That that - you to just interest XQ may charge-offs, recall, as was in in million. recorded a XQ $X.X non-accrual result, net quarter decline

So an that had impact.

class linked-quarter, beginning life and We fee also that the margin, of going We on we improve and will $XX third had grow forward. that is insurance in obviously an non-interest some which assets were but impact the earning underweighted saw principally by purchased bank our asset quarter. income during to million due

We And then municipal as actually high influx. deposits watermark month in an which the know, of lastly, to we in municipal saw the always you deposits is our the August. tend see

still that under of of billion month September, $X.X and have the we about billion just $X.X is index. of As

are to we historically, now, but we're right XX% closer index. about So index, XX%

a be money. to So that tends higher cost little bit

if take of we about that So three factors, on those or a we're X kind - think so you core more basis again, points. X basis

able clearly I most depend how able think on We guidance. on and into our to down occurred of have. that on to that in also guidance, the promotional in fast-forward fourth won both - react deposit it's it fourth cut through historical the back then that has rate July, to Now significant impact takes going but book in couple a the be quarter, first move weeks to get to really much on cycling looking quarter the we were deposits it the and rates that you at the rates

rate of basis we if don't the X October. think see if basis two would here to Frank, if decreases, early don't have number. pretty still and one in do not at points is less clearly, X So see December get think I a impact - we I But one, end the X think that good we I news

shy interest earning just of we that cut think on is our about is think a to XX-basis between are and we assets, an basis billion million. million that way $X another to mean point $X interest rate annualized $XX net in I income

X be to basis So that would kind points basis X of points.

way term, stages going longer just cycle into getting the of as think natural basis in back on deposit back latter decrease the deposit the catch on and our points in range the as up, is up. lag I it betas we're could to on a our down early will point the there be maybe down rate lag part be ourselves But X-basis in in that well. cost here the way even, X way a down like down decreases

Frank Schiraldi

last if you the be if see buyback, be just which announced program, pretty connected as on quite quarters, I measured down aggressive, that could wondering, aggressive been and you and to this in guys just flat several tailwind, more in continue one a just been And bit nice that little that as dip the expect here? could you would transact if you to you order a one been ratio other then have just And sort to program you has has wondering to TCE see just even of you another or Thanks. mentioned, over - buyback? could

Philip Wenger

Yes.

lot the pace Frank, a may a said and anticipate are is third contingent the the that upon of buyback, of we've past rate. quarter of did and things see higher in So our that continue. the main things in We as growth one growth

year. of could pace that just So factor the one slow down the buyback this

Frank Schiraldi

the - on the to then X.X% I in pretty guys-- mean a been of And is good kind past, you X.X% I know assume I you've where capital the you capital, accreting buyback. is and for level offset has been mean

Mark McCollom

I X.X%. think X% and we're comfortable between

Operator

And next Haire from Jefferies. Casey from question comes our

is now line Your open.

Casey Haire

on Couple the more NIM. follow-ups

bps quarter Could to third as get XX where the Just costs side. funding deposit versus that give to of sense on you a any idea the exited sort in us quarter? the

Mark McCollom

what do by Where they on exited, help me you that? mean

Casey Haire

sense average the XX get of Just a peaked? so, deposit number? if for as that is to the was want bps have What X/XX. as Like quarter costs

Mark McCollom

again, the deposits, got is Right. were you pretty the high the municipal the still influx quarterly of that because average got influx, watermark close you've they In August. in to September, again,

that's outflows more You end but September, start spending their to a those up little going to pronounced as bit see in municipalities tax be rules. then

So obviously, were similar. both September August pretty and

fourth the that thing some higher Now for is promotional of did CD's I in the than July. month what is we that the offering we think see be we quarter see, gives confidence did us third our the that expect we quarter were one which of to

putting of CDs new and money is - back what We've significantly what have result, rolling a what's money new seen in been, rate on as our significant off. that versus a those terms what we've pulled we're rates flip this

Casey Haire

sheet I borrowings balance the that guys were appreciate then late then was there? are color the $X the sort the was And per million you quarter? the the annum. What on on the repositioning, And securities rate that off? And What sold prepaid? in what yield the that of

Mark McCollom

Yes.

of investments It we occurred So if $XXX in of pulled the between took points X do later terms and the about smaller what the occurred late did of piece it carry quarter. a that $XXX off, it in $XXX pulled quarter, we was about the million, And million in later we of most million, early off. but we in that that the of actually XX and a basis pulled off basis you negative borrowings points. quarter

then liquidity purposes. leverage. And portfolio run we need it we mean don't investment an wholesale for for this I

obviously, that positive So to-date. a what was we carry, XXX points on basis a put there back the for about guidance

Casey Haire

that just landscape? thoughts that lot you management - M&A a lastly just footprint? the front, active And or capital some see within updated us of give is opportunities the your can you is do on And on

Mark McCollom

It's somewhat active.

Philip Wenger

I footprint. know but lot and say to a I appropriate. the think look going a that we we're there see I it's opportunities now, see don't we right some are opportunities within would take when

Operator

question next from from our And McGratty comes Chris KBW.

open. now is line Your

Chris McGratty

Mark, think could might question. if accretion and just said on for follow past in at? remind up Could just fill-in us might can I metrics the I the maybe be of you be M&A markets the I kind - size that that boundaries looking you've you scale

Mark McCollom

Yes.

every those with we that Chris. state the we're So exist for in fill-in scale. to And continue in, strategy places

to a say, I X far with and billion, be start think between off one. XXX as I size, it'd range would smaller As million a would and like we

Chris McGratty

- and you kind terms deal. yourself? that hurdles in backs the since it's accretion, a And been parameters a guys done of you What's how judge while would earn of kind have of

Mark McCollom

Yes.

earnings accretive operations. the So combined first IRR in excess of year capital, cost within of to

transaction, I would two In on of earn-back kind dilution a becomes larger it in the our say to a for tangible on earn that for transaction. size terms would want deal. and bit little of book smaller three-year range a back we to be value the of contingent

willing We go something the be would would of at five, range, be had Phil articulated. top that will to but be to pretty end that up the

the end sort for in earn in of of back us, range. transactions be that So smaller most typically the two to range would four-year

Chris McGratty

on high the Any whether on all. ask or at charges kind could little But And type on any of a previously not if were on I was or this currently industry quarter color credit, Thanks. just up. little higher the color portfolio? one non-accrual looking a bit

Philip Wenger

that charge-offs biggest the non-accrual. were on were loans already Well, on

Chris McGratty

Phil. was And commonality, industry there an

Philip Wenger

the in past talked that, the was we've manufacturing Well, was in and non-accrual, food industry, the I about company, biggest that credit charge-off think we a large put in that had Chris. on on

Operator

Our Gunther Russell comes Instructions] [Operator next from question D.A. from Davidson.

Your line open. is now

Russell Gunther

all in opportunities how appreciate on strength the color push ability and even digits mid-single the hiring and to to about really that wanted growth guided with in us the get could humming in Baltimore. for back your that does ability Maybe attract just of your to your loan to going market, I talent circle to there higher? Philadelphia is rate low- and quarter. in share growth you the is if contribution it I kind prior the up there, comments

Philip Wenger

growth economy, branches. the to folks what on with but that we the in depend have in happens lot in a Philadelphia a So rate to people our addition is going the now XX in we have

just two about out in various are XX we So probably Baltimore three side, a of have on the XX, and just commercial of folks. in are other specifically C&I, have - Baltimore, we folks. And of them team then CRE

Russell Gunther

what to any your or geography yellow in warning occurred particular back us and of signs portfolio? period. the you circling sense Is going to you your ag portfolio just could thoughts the even for there quality concern in that then But outlook forward. question. just on appreciate is asset give particular, flashing update if on any a anything, And the I

Philip Wenger

- with increases And portfolio, most which it's in those I'll the some start think I we've Well, stabilized. milk prices, helping are ag had folks.

feel did we better ago. about So I portfolio actually a think the months than we probably ag little today XX

a specific we industry can't of any look I then that really negative we're And lot seeing - at trends other on. can't

it's one always and have pop So I credits type two any tied think of to we're the watching just you in everything industry. don't quarter, up closely or but new

Russell Gunther

quarter base And last million the would of then guys, Or that step-up back revert will detail me, Is for bit amortize that that that there but a ticky-tacky kind Phil. lower? in first levels? Thank amortization. the one, to occurred - why a you, about $X expense anything quarter, in on is intangible second

Philip Wenger

the of of costs $XXX,XXX our write-off NIM, in our about of consolidation Maryland. the was bank So trade

is-- So that

Russell Gunther

think one then you okay, should I for that. - thank

Mark McCollom

off I of think soon. asset. that'll back correct, come That's receivable trade one-time write a a

Operator

[Operator Tamayo from Instructions] Next Daniel question from James. Raymond comes

Your now open. line is

Daniel Tamayo

accelerated or in uptick think have So mentioned that driving anything September. there growth I you Is you demand? loan in that seen unusual an

Philip Wenger

explain had is had good We've really timing the backlogs just it's good settlements way I and can of And we've best demand. it.

Daniel Tamayo

And is really you now. right being then talked I credit with just think about comfortable where

So I of assuming nothing I enough terms in there's standards causing how that's I'm to any to nothing is, out concern change you there say clear am guess the you're lending?

Philip Wenger

would I no. say,

Operator

And the am like CEO. to you. no further Chairman turn Thank would questions. to Wenger, now I call Phil I showing and over

Philip Wenger

today, and be quarter discuss January. for Thank us, everyone, we us when joining to able with be in we hope fourth you, results you'll

Operator

conference Ladies this concludes you gentlemen, call. Thank participating. for and today's

may now all You disconnect.

Fulton Financial (FULT) 23 Oct 192019 Q3 Earnings call transcript