Fulton Financial Corporation

Good day and thank you for standing by. Welcome to the Fulton Financial first quarter 2023 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Joswak, Director of Investor Relations. Please go ahead.

Good morning, and thanks for joining us for Fulton Financial Corporation's conference call and webcast to discuss our earnings for the first quarter, which ended March 31, 2023. Your host for today's conference call is Kurt Myers, Chairman and Chief Executive Officer. Joining Kurt is 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 the Investor Relations tab 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 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, 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 15 through 19 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, Kurt Myers.

Well, thanks, Matt, and good morning, everyone. Today, I'll provide some high-level thoughts on the banking industry and our business strategy. I'll also give you some perspectives on our balance sheet, liquidity, credit quality, and the impact of these items on our first quarter earnings. Then Mark will share more details on our financial results and step through our revised outlook for the remainder of 2023. After our prepared remarks, we'll be happy to take any questions you may have. Fulton's business strategy is built upon a community banking model, which focuses on taking local deposits, lending locally, and banking all segments of our community. The events of the past few weeks have brought into sharp focus the benefits of our model and the value that can be created through cultivating lasting customer relationships. On that point, I want to thank our team for the remarkable way that they've performed this past quarter. The team went above and beyond to truly make banking personal. These past few weeks, we reached out to and talked with many of our customers. We talked to them about our financial position and our stability, and our customer base continued to expand. We now serve more than 507,000 households. Our industry is built on trust, and the Fulton Bank team has been earning the trust of our customers for 141 years. With a long-term strategy, at times it is necessary to make decisions which may impact near-term results in order to strengthen the balance sheet, improve our liquidity, support our customers, and position our company for future success. So let me talk first about our funding and the balance sheet. You can see on slide 13 that we expanded the disclosures on our deposit basis. We have approximately 734,000 accounts with an average life of 12 years on a balanced weighted basis. This highlights the loyalty, longevity, and value created by our stable customer base. You will also notice on this slide that we bolster our deposit funding by approving the utilization of broker deposits in the quarter. This was done prior to the market disruption as we focused on slowing the increase in our loan to deposit ratio to maintain our internal target of 95 to 105% and to make sure we can continue to meet our customers borrowing needs. Our balance sheet was also strengthened during the quarter as our tangible common equity ratio improved and our liquidity position increased to over 8.4 billion in committed funds. Early in the quarter, we were buying back shares and utilized 40 million of our 100 million repurchase authorization In total, we repurchased about 2.4 million shares during the quarter. We paused that program in early March. Turning to credit, we have provided more detail on our loan portfolio and specifically on our office portfolio on slides six and seven. As noted last quarter, we performed a comprehensive review of all real estate loans, casting a wide net to include any loans with an office component. Under this approach, last quarter we reported balances of $1.05 billion. On slides 6 and 7, we isolated our discrete office-only portfolio, which includes all loans with a primary revenue stream from office rents. As you can see, this segment is a diversified and granular portfolio, originated consistently over time, spread throughout the footprint, and with very limited large exposures. As we discussed last quarter, we have a large office loan on non-accrual status, which was charged down in the fourth quarter. Given the challenged office environment, we have further charged down this loan. Here are a few more details on this credit. The loan was originated in 2019 in the DC suburbs. The original loan balance was 42 million with a loan to value at origination of 72%. COVID impacted the rent roll And an underlying ground lease further impacts the marketability of this property. We have decided to further charge down this loan to enable a flexible workout strategy to maximize value. The remaining book balance of this loan is $8 million. Looking at our overall credit, net charge-offs of $14 million were driven by the $13.3 million write-down on the loan that I just discussed. Our remaining loan portfolio credit performance has been in line with our expectations. NPAs, NPLs, and loan delinquency have all declined for the past two quarters. Our higher provision for credit losses this quarter is due to changes in macroeconomic factors and our loan growth. Moving to our quarterly results, our first quarter earnings were 39 cents per share. Pre-provision net revenue, or PPNR, for the first quarter was approximately 108 million, an increase of 51% year-over-year. This was a result of asset growth and net interest margin expansion. During the first quarter, we saw deposit growth of $667 million and loan growth of $391 million. Fee income declined length quarter and year-over-year as interest rates and seasonal declines impacted several of our business units. We managed expenses prudently during the period as expenses declined $9 million from the fourth quarter. While our first quarter earnings did not meet our overall expectations, we took the necessary steps to strengthen the balance sheet, improve our liquidity, support our customers, and position the company for future success. Now I'll turn the call over to Mark to discuss our first quarter financial performance and our 2023 outlook in more detail.