Fulton Financial Corp. ( FULT)

Q3 2010 Earnings Call

October 20, 2010 10:00 am ET


Laura Wakeley - SVP & Corporate Communications Manager

Scott Smith - Chairman & Chief Executive Officer

Phil Wenger - President & COO

Charlie Nugent - Senior EVP & CFO


Frank Schiraldi - Sandler O'Neill

Matthew Clark - KBW

Rick Weiss - G&E

Matt Schultheis - Boenning & Scattergood

David Darst - Guggenheim Securities

Bruce Harting - Barclays Capital

David West - Davenport & Company

Travis Lan - Stifel Nicolaus



Good day and welcome to the Fulton Financial third quarter 2010 earnings teleconference. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Laura Wakeley, Senior Vice President and Corporate Communications Manager. Please go ahead

Laura Wakeley

Thank you. Good morning. Thank you for joining us for Fulton Financial Corporation conference call and webcast to discuss our earnings for the third 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 website at fult.com by clicking on Investor Relations and then on News.

On this call representatives of Fulton may make forward-looking statements with respect to Fulton's financial conditions, results of operations and business. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond Fulton's control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Fulton undertakes no obligation other than required by law to update or revise any forward-looking statements whether as a result of new information future events or otherwise. In our earnings release we have included our Safe Harbor statement and forward-looking statements. We refer you to this statement in the earnings release and the statement is incorporated into this presentation.

For a more complete discussion of certain risks and uncertainties affecting Fulton, please see the sections entitled risk factors and management discussion and analysis of financial condition and results of operations set forth in Fulton's filings with the SEC.

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 you being with us. Phil Wenger, Charlie Nugent and I each have some prepared remarks, and then we will respond to your specific questions. Our comments will focus on linked quarter results unless we specify otherwise.

We reported diluted net income per share of $0.16 for the third quarter, up $0.02 over the previous quarter and a 10% improvement over the same period last year. We continue this earnings momentum despite the absence of stronger economic activity.

During the quarter we saw an increase in residential mortgage lending activity along with an increase of mortgage sale gain income. Our net interest margin also improved.

There were a number of significant events that occurred during the quarter. On July 14, we redeemed our $376.5 million Treasury, deferred stock in full. Then on September 8 we repurchased the associated warrant from the Treasury. We are pleased to have both of these transactions behind us.

Two weeks ago we announced the merger of our Delaware National Bank affiliate into our largest affiliate Fulton Bank. And as we have mentioned in the previous calls, we consider merging affiliates and we believe it makes sense to do so. After the systems conversion in early December we will be operating with seven affiliates, down from a high of 15 several years ago.

During the quarter preliminary lawful capital guidelines were released. Of course there will be further definition and clarification of these requirements from the US regulatory authorities. However, our current capital appears to be well in excess of the preliminary guidelines.

Regulation E overdraft opt-in opt-out guidelines became effective on August 15. We've been experiencing this event since beginning of the year and as we expected the payment of overdraft, it does create value for our customers across all channels.

We expect to see additional opt-in and customers who did not respond initially to our opt-in notices to do so after having a point of sale or ATM transaction declined for the first time. Nevertheless, as we expected, this quarter we began to see the impact of new regulations on our non-interest income. Charlie will provide additional information in his comments.

The Dodd-Frank Act became small on July 21, in response we have established a committee of senior people who study the applicable titles under the act as well as the many rules and regulations that we will be required to implement.

Dodd-Frank could create some potential opportunity for us in the marketplace. With careful planning and strategizing as we believe we are in a better position to absorb the increase compliance cost in many smaller banks.

On a balance sheet standpoint, the third quarter saw a continuation of our strong core deposit growth particularly in the small business sector and of our very high priority market segments. We were able to reduce our cost of funds during the quarter and believe that we will be able to further reduce then as certificates of deposit mature and reprice in the fourth quarter.

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