Fulton Financial (FULT)

Q1 2011 Earnings Call

April 20, 2011 10:00 am ET


R. Smith - Chairman, Chief Executive Officer, Member of Executive Committee and Ex-officio Member of Risk Management Committee

Charles Nugent - Chief Financial Officer and Senior Executive Vice President

E. Wenger - President, Chief Operating Officer, Director, Member of Executive Committee and Ex-officio Member of Risk Management Committee

Laura Wakeley - Media Contact


Eric Beardsley - Barclays Capital

Craig Siegenthaler - Crédit Suisse AG

Collyn Gilbert - Stifel, Nicolaus & Co., Inc.

Frank Schiraldi - Sandler O'Neill + Partners, L.P.

Richard Weiss - Janney Montgomery Scott LLC

Mike Shafir - Sterne Agee & Leach Inc.

Matthew Clark - Keefe, Bruyette, & Woods, Inc.

Bob Ramsey - FBR Capital Markets & Co.

David Darst - Guggenheim Securities, LLC

Mac Hodgson - SunTrust Robinson Humphrey, Inc.



Good day, ladies and gentlemen, and welcome to the Fulton Financial First Quarter Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, Laura Wakeley, Senior Vice President.

Laura Wakeley

Great. Thank you, and good morning. Thank you for joining us for Fulton Financial Corporation's conference call and webcast to discuss our earnings for the first quarter of 2011. Your host for today's conference call is Scott Smith, Chairman and Chief Executive Officer of Fulton Financial Corporation. 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've 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 condition, 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've included our Safe Harbor statement on forward-looking statements. And we refer to you to the statement in the earnings release, and that statement is now incorporated into this presentation. For a more complete discussion of certain risks and uncertainties affecting Fulton, please see the section entitled Risk Factors and Management Discussion and Analysis of financial condition and results of operations set forth in Fulton's filings with the Securities and Exchange Commission.

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

R. Smith

Thanks, Laura, and good morning. It's nice to have you with us today. As has been our practice in the past, after Phil, Charlie and I conclude our prepared remarks, we will be happy to respond to your individual questions.

We're up to a good start. In 2011, we reported diluted net income per share of $0.17 for the first quarter, a 6.3% increase over the $0.16 we recorded in the fourth quarter of 2010. As you know, our performance over the last several years has been impacted by our asset quality challenges. During this period, we focused on positioning the company for the future, realizing that these headwinds would eventually subside as the economy improves.

This quarter, our credit challenges are certainly not behind us, but we were encouraged to see the reductions in four key metrics: Nonperforming loans, charge-offs, overall delinquency and in the provision. If the economy continues to expand at a reasonable pace, we believe we will continue to see reductions in our overall credit costs. We were also pleased to see the gross on an average basis in the CNI and Commercial Real Estate portfolios although those increases were offset by decreases in our Construction and Consumer portfolios, making overall loan growth difficult. Phil will provide you with details in credit in a few minutes.

Our solid performance this quarter reflects the basics of low core cost funding, improved interest margin, good expense control and improved operating efficiency. It is important to note that our $0.17 was achieved despite a significant link quarter reduction in residential mortgage activity and a generally unfriendly regulatory environment that seems intent on reducing our non-interest income, while simultaneously laying on an ever-increasing compliance cost.

The people in this company have always responded effectively to past challenges and I know they will do so in the future. As a team, we believe we can continue to improve our earnings performance as we get some help from the economy and as the overall confidence levels improve. However, since confidence levels have a tendency to fluctuate based on national and world events, we will be ready for any eventuality.

From a funding standpoint, our continued core deposit growth and strong liquidity enabled us to reduce our reliance on wholesale funding. We worked to achieve an optimal deposit mix that deemphasizes higher cost time deposits and that rewards customers as they expand their core banking relationship with us. These initiatives enabled us to expand our net interest margin this quarter, and we feel we can further reduce funding costs through certificate of deposit repricing in this rate of environment, but not at a pace we've seen over the last several quarters.

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