Fulton Financial Corporation

Good day, and thank you for standing by. Welcome to the second quarter Fulton Financial results call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 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'd like to hand the conference over to your first speaker today, Matt Joswag, Director of Investment Relations. Please go ahead.

Good morning, and thanks for joining us for Fulton Financial's conference call on webcast to discuss our earnings for the second quarter ending June 30, 2024. Your host for today's conference call is Kurt Myers, Chairman and Chief Executive Officer. Joining Kurt today is Betsy Stravinsky, Interim 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 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 and slides 19 through 22 of today's presentation for a 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.

Thanks, Matt, and good morning, everyone. For today's call, I'll be providing highlights on our performance for the quarter. I'll discuss several key initiatives, and I'll provide a few overall comments on the company. Then I'll turn the call over to Betsy Chubinsky, Interim Chief Financial Officer, to review our financial results in more detail and step you through our guidance for 2024. After our prepared remarks, we'll be happy to take any questions you may have. Let me start by thanking both our new Republic teammates as well as our dedicated Fulton team for an exceptional effort these last few months. We've had a very active quarter on a variety of fronts. We continue to drive our strategy forward. We made great progress on key initiatives, all while delivering a strong performance for our customers, communities, and our shareholders. Our team performed well and is excited about the strategic progress we are making. Operating earnings of 47 cents per diluted share this quarter was a strong performance. Following a solid first quarter, our year-to-date results are outpacing our expectations. Stable core business trends, supplemented by the impact of the Republic transaction, are driving these results. We saw steady balance sheet growth as organic loans and deposits grew as expected, and we added significant growth through the Republic transaction. We also generated meaningful margin, revenue, and net income growth. On a linked quarter basis, net interest margin increased 11 basis points. Net interest income grew by $35 million, non-interest income grew by nearly $9 million, and operating net income grew by $17 million. Also during the quarter, we executed on a sale-leaseback transaction and corresponding investment portfolio restructuring. improving the profile of an investment portfolio as well as its yield. The investment portfolio restructuring adds an estimated $8.5 million in interest income annually. We also moved forward on five planned financial center consolidations and relocated one financial center in our New Jersey market. We issued our 2023 Corporate Social Responsibility Report, reflecting our commitment to the communities and stakeholders we serve. Our performance, steady business trends, and the capital raise allowed us to maintain healthy capital levels, increase our tangible book value, enhance our earnings capabilities, and deliver value to our shareholders. Overall, we feel it was a strong quarter for the company. Now let me provide a bit more detail on growth. Second quarter deposit growth was $254 million, or 4.6% annualized, when you exclude the 191 million of high cost broker deposits that we were able to eliminate. Overall, when including the Republic transaction, deposits grew 3.8 billion or 17.6% on a length quarter basis. We did experience some deposit runoff from the acquired deposit portfolio as several large municipal deposit customers were already transitioning out of Republic. And we also purposely reduced certain high costs non-relationship deposits. These deposit results were as anticipated and we remain focused on customer retention and customer growth. Organic loan growth for the quarter was $124 million or 2.3% annualized, consistent with past periods. Overall loan growth was $2.7 billion or 12.4% length quarter on a consolidated basis, including the acquired loan. Profitable loan growth and prudent credit decisions remain our focus. Our loan-to-deposit ratio ended the quarter at 94.3%. Our current loan-to-deposit ratio is below our long-term operating target of 95 to 105% and enhances our balance sheet growth opportunities and alleviates funding pressure in the near term. This was a key outcome of the Republic transaction. Non-interest income for the quarter was strong. Core non-interest income was up $6 million to $63 million. When including Republic, total non-interest income grew $8.8 million length quarter. Now let me provide some comments on credit. Overall, core Fulton credit metrics remain stable. The provision for credit losses, excluding the day one credit mark associated with the Republic transaction, was $8.6 million. down from $10.9 million in the first quarter. Charge-offs for the quarter were 19 basis points, and criticized and classified loans were relatively flat in the Fulton portfolio. Turning to the acquired portfolio, we conducted a review of all loans over $3 million. After applying our risk rating methodology, non-accrual loans did not significantly increase, and charge-offs were less than $1 million for the quarter. The initial credit mark on the acquired portfolio was supported by our review, and no additional provision was needed. We continue to be cautious in our credit outlook for 2024 and are monitoring the acquired portfolio closely. The increase in our allowance for credit losses provides additional ability to absorb future losses. Now let's look to moving forward. I'll provide updates on two key corporate initiatives. First, we're focused on the timely and effective integration of Republic, and we continue to diligently follow the FDIC process. Integration of customers, teams, and systems are progressing well, with the majority of our integration work anticipated to be completed by year end. Next, let me turn to Fulton First. During the quarter, we've completed the design phase of the process and are now moving into the implementation phase. I want to remind you that this is a 12 to 18 month process in which we're only at about the six month point. We look forward to providing more details on growth initiatives and operating efficiencies during the third quarter earnings call. This past quarter, you see the continued investment in the initiative. This quarter's costs are for the final program design as well as certain employee related changes. We continue to make good progress on the Fulton First initiative. Overall, a solid first half of 2024 and a transformational quarter in many respects for our company. Now let me turn the call over to Betsy to discuss our financial performance in more detail and our guidance.