Fulton Financial Corporation Q1 2010 Earnings Call Transcript

Fulton Financial Corporation Q1 2010 Earnings Call Transcript
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Fulton Financial Corporation

(FULT)

Q1 2010 Earnings Call Transcript

April 21, 2010 10:00 am ET

Executives

Laura Wakeley – VP, Corporate Communications Manager

Scott Smith – Chairman and CEO

Phil Wenger – President and COO

Charlie Nugent – Senior EVP and CFO

Analysts

Craig Siegenthaler – Credit Suisse

Rick Weiss – Janney Investment

Frank Schiraldi – Sandler O’Neill

Matthew Schultheis – Boenning & Scattergood

Collyn Gilbert – Stifel Nicolaus

Erik Dybesland – Barclays Capital

Matthew Clark – KBW

Presentation

Operator

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Good day, and welcome to the Fulton Financial first quarter earnings call. As a reminder, today's call is being recorded. At this time, for opening remarks and introduction, I'd like to turn the conference over to your host, Laura Wakeley, Vice President and Corporate Communications Manager. Please go ahead, ma'am.

Laura Wakeley

Good morning, and thank you for joining us today for Fulton Financial Corporation's conference call and webcast to discuss our earnings for the first quarter of 2010. Your host for today’s conference call is Scott Smith, Chairman and Chief Executive Officer of Fulton Financial. Joining him are Phil Wenger, President and Chief operating officer; and, Charlie Nugent, Senior Executive Vice President and Chief Financial Officer.

Our comments today will refer to the financial information included with our earnings announcement, which we released around 4:30 yesterday afternoon. These documents can be found on our Web site at fult.com by clicking on Investor Information, and then on News.

Please remember that during this webcast, representatives of Fulton Financial may make certain forward-looking statements regarding future results or the future financial performance of Fulton Financial Corporation. Such forward-looking statements reflect the corporation’s current views and expectations, based largely on information currently available to its management and on its current expectations, assumptions, plan, estimates, judgments, and projections about its business and its industry; and they involve inherent risks, contingencies, uncertainties, and other factors.

Although the corporation believes that these forward-looking statements are based on reasonable estimates and assumptions, the corporation is unable to provide any assurance that its expectations will in fact occur or that its estimates or assumptions will be correct. Actual results could differ materially from those expressed or implied by such forward-looking statements, and such statements are not guarantees of future performance.

Many factors could affect Fulton Financial's results, including, without limitation, the factors listed in the Safe Harbor statement section of yesterday’s earnings news release. Fulton Financial does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made. Accordingly, investors and others are cautioned not to place undue reliance on such forward-looking statements.

Now, I’d like to turn the call over to your host, Scott Smith.

Scott Smith

Thank you, Laura, and good morning, everyone. It's nice to have you with us. Before Phil's credit review and Charlie's financial discussion, I have a few introductory remarks on the quarter. We reported diluted net income per share of $0.13, an 18.2% increase over the $0.11 reported last quarter. There are a number of factors supporting our earnings momentum. We were pleased to see a healthy increase in our net interest margin as our funding costs continued to decline. This margin expansion helped offset lower average loan balance.

Credit metrics showed further signs of stabilization. Helping us again this quarter was a $5 million decrease in the provision for loan losses. Charge-offs were down slightly, and our coverage ratio – excuse me, our coverage ratio improved. Construction loan exposure continued to decline. However, credit challenges remain. And while there's certainly more optimism about economic recovery, the pace of improvement, at least from our perspective, is slow.

The persistent low interest rate environment continues to affect some of our non-interest income categories like cash management. Actually, a portion of our deposit growth over the last several quarters came from those accounts, hedge clients sought total (inaudible) in this environment. We anticipate additional pressure on deposit accounts related – I'm sorry, we anticipate additional pressure on deposit account-related revenue for the remainder of the year.

A decrease in refinance volume caused mortgage share gains to be down as well. Other expenses were flat linked quarter. Over the last few quarters, I frequently talked about how we're positioning the company for the future, and I believe we are positioned well. Continued earnings momentum is largely contingent on two other – on two factors, further credit cost reduction and further improvement in overall economic activity.

We have a good handle on our credit issues and continue to manage them effectively. With our strong liquidity, we are eager to lend to credit-worthy, financially-sound borrowers. And we are seeing some early signs of renewed economic confidence. I think one of the biggest (inaudible) for us and for the industry right now is the pace of economic recovery and its impact on earning asset growth.

Overall, we're off to a good start in 2010, and our capital position has been and remains strong. In prior calls, you've asked about our intentions to redeem the capital purchase preferred stock held by the US Treasury. As I've said, we intend to do this when the Board and management feel that it's prudent to do so. We have ongoing discussions on this topic and we continue to look at a variety of factors, including the performance of our stock, the corporation's earnings, the condition of the overall economy, and the actions of our regulators and peers. When we believe the timing is right for our shareholders, we will take the necessary steps to obtain regulatory approval and payback the TARP funds.

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