Fulton Financial Corporation

Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the second quarter of 2022. Your host for today's conference call is Phil Wenger, Chairman and Chief Executive Officer. Joining Phil are Curt Myers, President and Chief Operating Officer, and Mark McCollum, 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 fult.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 operation, and business. These statements are not guarantees of future performance and are subject to risk 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 regarding 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, Relative 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, as well as slides 10 through 12 of today's presentation for reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. And now I'd like to turn the call over to your host, Phil Wenger.

Thanks, Matt. Good morning, everyone. As usual, I'll share a brief overview of the quarter's highlights. Then Kurt will discuss our business performance, and Mark will share the details of our financial performance. And then we'll be happy to take your questions. The second quarter of 2022 was a good one for Fulton, and we were pleased with our performance. Our earnings per share of 42 cents was an increase of 4 cents. over the previous quarter. Several factors helped drive performance. We saw very strong loan growth. Our net interest income benefited from rising interest rates. Overall fee income was solid. And asset quality remained relatively stable, despite a more cautious outlook. In April, Fulton released the company's first corporate social responsibility report. This comprehensive report illustrates how our purpose-driven company provides an exceptional banking experience for our customers while strengthening the communities we serve. In June, Fulton Bank announced upcoming changes to our overdraft program and fee schedule. In the fourth quarter of 2022, Fulton Bank will eliminate non-sufficient funds fees, and extended overdraft fees for consumer customers. And as of July 1, I am pleased to report that we completed the acquisition of Prudential Bank Inc. in just under four months after our announcement. Later this year, we expect the bank conversion to occur, and Prudential Bank and its customers will be merged into Fulton Bank. Many of our team members have been working to ensure that the transition to Fulton Bank is a smooth one for Prudential Bank customers and employees. As part of this acquisition in early July, Fulton made a $2 million contribution to the Fulton Forward Foundation. And this contribution will provide impact gifts to nonprofit organizations in Philadelphia that are focused on advancing economic empowerment, particularly in underserved communities. With the Prudential Bancorp acquisition completed, we have doubled our loan portfolio and expanded our deposit base fourfold in the Philadelphia market. Looking ahead, with our $75 million share repurchase authorization in place, and the closing of the Prudential Bancorp acquisition now complete, we can consider repurchasing shares later in the year if it makes financial sense to do so. Now, Kurt will take a closer look at the details of our business results. Kurt?

Thank you, Phil, and good morning. We were very pleased with our performance for the second quarter, so let me share some additional detail on several key areas. Loan growth was very strong for the quarter. due to solid originations in both our commercial and consumer businesses. And we also experienced slower prepayments in residential mortgage lending. Total loan growth excluding PPP loans was approximately 537 million, or about 11.6% annualized, and was spread throughout most loan categories and products. As a reminder, all of the loan and deposit growth numbers I will be referencing are annualized numbers, on a linked quarter basis. Starting with commercial lending, we had another solid quarter where commercial loans grew $225 million, or 7.2%. CNI loan growth accelerated, increasing $106 million, or 10.6% versus 8.1% in the first quarter and 5.5% compared to the prior year period. Increased originations largely drove this growth. Commercial line utilization ended the quarter at 22% flat with the prior quarter and represents additional growth potential in future periods. As a reminder, commercial line utilization as of the first quarter of 2020 was 32%, representing a $530 million opportunity should line utilization revert to pre-pandemic levels at some point in the future. During the quarter, commercial mortgages rebounded from a flat quarter in the first quarter, growing $128 million or 7%, driven by strong originations and migration from construction to permanent loans. Commercial mortgage growth did impact commercial construction balances, which declined $79 million during the quarter. Even with strong originations during the quarter, the commercial pipeline grew nicely and is now at or above recent levels. Turning to our consumer and small business lending, loan balances grew $281 million, or 18.9%. Residential mortgage growth for the quarter was $257 million, or 26% length quarter. With the rise in interest rates, we saw a shift from fixed-rate saleable mortgages to on-balance sheet adjustable rate originations. In addition, we experienced a slowing in residential mortgage loan prepayment. As I mentioned in the past several quarters, our FinTech partnership for student loan refinance business continues to progress nicely, with 28 million of originations in the quarter. This portfolio now exceeds 50 million in balances and gives us access to an attractive customer segment. Lastly, our consumer indirect business grew 22 million, or 23%, from both adding new dealer customers and increased consumer spending. Overall, we were very pleased with the depth and breadth of our loan growth this quarter. Turning to deposits, on an ending balance basis, we saw a decline in total deposits for the quarter. This decline was driven by decreases in wholesale, time, and other interest-bearing deposit products. Non-interest-bearing deposits, which represent a third of our total deposit base, remained flat-linked quarters. These broad-based declines were in some cases seasonal, but were also driven in part by our disciplined pricing strategy. Recently, we have started to selectively raise deposit rates to both retain and grow our deposit customers. For the quarter, total deposit balances declined $397 million, or 7.4%. Moving to our fee income businesses, we were pleased with our overall performance. The diversification in our business lines has served us well. with certain business lines growing, offsetting the near-term challenges we face in businesses that are more sensitive to interest rates and market volatility. In our commercial line of business, total fees increased $4.4 million, up 27% versus the prior period, driven by sizable increases in capital markets, merchant activity fees, and our poor cash management business. Capital markets fees, predominantly commercial loan interest rate swaps, were up $2.2 million versus the prior quarter, driven by both volume and size of transaction. As I noted in prior periods, capital markets fees are transactional in nature and are driven by the needs of our commercial customer base. Merchant fees were up $1.1 million, or 23% linked quarter, driven by increases in gross sales volume. Cash management grew 634,000 or 11.7% linked quarter as we are starting to see increased activity and the impact of annual fee increases. In addition, we have managed earnings credit rates very effectively. Offsetting growth in the commercial business, wealth management fees declined 1.2 million or 5.9% linked quarter. Continued strong sales efforts, client retention, and our recurring fee revenue model helped buffer the impact of declines in the financial markets. At June 30, the market value of assets under management and administration declined to $12.6 billion, or 8.7%, down less than the overall market. Turning to consumer and small business banking, most consumer fee categories grew nicely, offsetting declines in mortgage banking. Consumer fees from card and transaction accounts were up 717,000, or 4.6% linked quarter, largely due to increased customer activity. Offsetting consumer fees, mortgage banking revenue declined to 808,000, driven by a quarter and 80,000 decline in gain-on-sale income. While gain-on-sale spreads widened, we saw lower loan sales due to the swing from fixed rate to adjustable rate products, which we chose to put on the balance sheet. Moving to credit, our performance this quarter was stable with net recoveries and only a modest provision for credit losses. With that being said, we are seeing modest increases in non-performing loans and delinquency. During the quarter, we had 3.7 million or eight basis points of annualized net recoveries compared to 1.1 million or two basis points of annualized net recoveries in the first quarter. Our second quarter provision for credit losses was $1.5 million versus a negative $7 million provision for the first quarter. This is the first quarter in which we recorded an increase in our allowance for credit losses out of the last five quarters and was primarily driven by strong loan growth during the quarter. At June 30, the allowance for credit losses excluding PPP balances is 1.32% of loans. As always, our allowance for credit loss trends could change in future period based on new loan origination volumes, loan mix, net charge-off activity, and longer-term economic projections. Overall, our credit performance remains stable. However, our credit outlook has turned more cautious due to macroeconomic environment. Now I'll turn the call over to Mark to discuss our financial results and outlook in a little more detail.