Fulton Financial (US:FULT)2024-07-17 21:59Financial Data and Key Metrics Changes - Operating earnings per diluted share for the quarter were $0.47, an increase from $0.40 in the first quarter of 2024 [61] - Net interest income was $242 million, a $35 million increase from the previous quarter, with net interest margin increasing by 11 basis points to 3.43% [63] - Total deposits increased by $3.8 billion, or 17.6% linked quarter, primarily due to the Republic transaction [62] Business Line Data and Key Metrics Changes - Non-interest income for the quarter was $93 million, which included a loss on sale of investments of $20.3 million and a bargain purchase gain of $47.4 million from the Republic transaction [15] - Wealth management revenues increased to $21 million, representing almost one-third of fee-based revenues, with over 80% recurring [16] - Commercial banking fees increased by $2.6 million, with solid growth in merchant cash management and SBA [17] Market Data and Key Metrics Changes - The provision for credit losses was $8.6 million, down from $10.9 million in the first quarter, indicating stable credit metrics [31] - The allowance for credit losses as a percentage of loans increased to 1.56% at quarter end, primarily due to the Republic portfolio [14] - Non-performing loans (NPLs) increased by $6.2 million, but the NPL to loans ratio decreased from 73 basis points to 67 basis points [36] Company Strategy and Development Direction - The company is focused on the integration of the Republic transaction, with most integration work expected to be completed by year-end [44] - The company is also working on the Fulton First initiative, aimed at improving operational efficiencies over a 12 to 18 month period [32] - The loan-to-deposit ratio ended the quarter at 94.3%, below the long-term target of 95% to 105%, providing growth opportunities [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the updated net interest income guidance for 2024, which is projected to be between $925 million and $950 million [3] - The company anticipates a single 25 basis point decrease in Fed funds in September, which may impact net interest margin [20] - Management noted that customer demand remains conservative, with expectations of low single-digit organic loan growth going forward [80] Other Important Information - The company executed a sale-leaseback transaction and investment portfolio restructuring, which is expected to add an estimated $8.5 million in annual interest income [57] - The effective tax rate for the year is expected to be in the range of 16% to 18% [4] - The company maintained solid capital ratios, with capital levels remaining healthy [42] Q&A Session Summary Question: Can you provide more detail on net interest income guidance? - Management indicated that they do not provide forward guidance on net interest margin but expect continued migration from non-interest-bearing to interest-bearing deposits [10] Question: What is the impact of the Republic transaction on the balance sheet? - Management confirmed that they have fully reinvested funds from the Republic transaction, which positively impacts net interest income [13] Question: What are the expectations for deposit runoff from Republic? - Management expects some runoff from municipal relationships but indicated that the initial estimates of $600 million in deposit runoff are being adjusted as the situation stabilizes [65][86] Question: How is the company managing costs post-acquisition? - Management is focused on retaining customers and talent while working through integration, aiming for cost savings to be realized by January 1, 2025 [70] Question: What is the outlook for loan growth? - Management expects modest organic loan growth, with a focus on prudent credit decisions in the current market environment [124]