Fulton Financial Corporation ( FULT )

Q2 2010 Earnings Call Transcript

July 21, 2010 10:00 am ET


Laura Wakeley – VP, Corporate Communications Manager

Scott Smith – Chairman and CEO

Phil Wenger – President and COO

Charlie Nugent – Senior EVP and CFO


Matthew Clark – KBW Investment

Craig Siegenthaler – Credit Suisse

Frank Schiraldi – Sandler O'Neill

Rick Weiss – Janney Montgomery Scott

Bruce Harting – Barclays Capital

Travis Brown – Stifel Nicolaus

Gerard Cassidy – RBC Capital Markets

David Darst – Guggenheim Partners

David West – Davenport & Company

Kyle Kavanaugh – Palisade Capital

Matt Schultheis – Boenning & Scattergood



Good day, and welcome to the Fulton Financial second quarter earnings call. Today’s call is being recorded. At this time, I would like to turn the call over to Ms Laura Wakeley. Please go ahead.

Laura Wakeley

Good morning, and thank you for joining us for Fulton Financial Corporation's conference call and webcast to discuss our earnings for the second 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 at 4:30 yesterday afternoon. These documents can be found on our Web site at fult.com by clicking on Investor Relations 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, plans, 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 future financial results, including, without limitation, the factors listed in the Safe Harbor 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 would like to turn the call over to your host, Scott Smith.

Scott Smith

Thank you, Laura, and good morning everyone, we appreciate your continued interest in our company. Phil Wenger, Charlie Nugent and I each have a few prepared remarks, and then we will be happy to respond to your questions. Our comments will focus on linked quarter results unless we specify otherwise.

We reported diluted net income per share of $0.14 for the second quarter, up $0.01 over the previous quarter. While we were pleased with this continued upward momentum, our results were tempered somewhat by a rather slow economic recovery. In the absence of a stronger economic activity, we are finding it a challenge to grow our earning assets. Consumers and businesses appear to have adjusted to lower levels of debt or have not yet reached a level of content [ph] that is conducive to increased spending and borrowing.

As you know, we redeemed our $376.5 million of treasury preferred stock in total last Wednesday July 14. The cost to carry the TARP funds from the day of our capital rate until the end of June decreased our second quarter earnings per share by approximately $0.015. Because the economy is rebounding more slowly than anticipated, we did not see the credit quality improvement we hoped for this quarter, and actually saw some deterioration in our nonperforming assets coverage ratio. However, we were somewhat encouraged by a reduction in overall delinquency that we have not seen in over two years.

Given the continued economic uncertainty, we did not feel it prudent to reduce the provision. In short, while we still see some signs of economic rebound on the horizon, the phase of that recovery is not progressing at the speed we had anticipated. As a result, we think that credit costs will remain elevated in the near term. Phil will provide a more in-depth look at credit in a few minutes.

Since business and individuals are not spending or borrowing, they continue to deleverage and save. While these practices put pressure on our net interest income and in our net interest margin, in the long run it would be healthy for everyone including the banking industry in our economy. Deposits showed good growth particularly core deposits as a result of our emphasis on building customer relationships. Our new and existing branches continued to attract funding at a very reasonable cost, which has helped our margin and enhanced our liquidity. The item that negatively impacted our margin more significantly this quarter was the overnight investment of the TARP funds awaiting repayment to the Treasury that I mentioned earlier.

As we look at our overall investment portfolio, our strategy is to stay relatively sourced in order to protect us against a significant increase in rates and to enable us to redeploy funds from the investments till our loan demand picks up. Incidentally, while we are hearing a great deal about the pressure on municipality and their debt instruments, we feel we have managed that segment of our portfolio very well and we have not experienced significant drop there.

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