Fulton Financial's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Fulton Financial (FULT)

Q1 2012 Earnings Call

April 18, 2012 10:00 am ET

Executives

Laura Wakeley -

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

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

Charles J. Nugent - Chief Financial Officer and Senior Executive Vice President

Analysts

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

Bob Ramsey - FBR Capital Markets & Co., Research Division

Nick Karzon

Richard D. Weiss - Janney Montgomery Scott LLC, Research Division

Collyn Bement Gilbert - Stifel, Nicolaus & Co., Inc., Research Division

Mac Hodgson - SunTrust Robinson Humphrey, Inc., Research Division

Russell Gunther - BofA Merrill Lynch, Research Division

David Darst - Guggenheim Securities, LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fulton Financial Corporation Announces First Quarter Earning Conference Call. Today's call is being recorded. I will now turn the call over to Ms. Laura J. Wakeley, Senior Vice President. Please go ahead, Ms. Wakeley.

Laura Wakeley

Great. Thank you. Good morning, everyone, and thank you for joining us for our conference call and webcast to discuss Fulton Financial Corporation's earnings for the first quarter of 2012. Your host for today's 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 which 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 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. We refer you to this section of the release and we've incorporated the statement into today's presentation. For a more complete discussion of certain risks and uncertainties affecting Fulton, please see the section entitled, Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Fulton's filings with the SEC. Now I'd like to turn the call over to your host, Scott Smith.

R. Scott Smith

Good morning, and thank you, Laura, and thank you, all for joining us. I'd like to begin with a few prepared remarks about our first quarter performance, then Phil Wenger will discuss credit and Charlie Nugent will cover the financial details. When we conclude, we'll be happy to respond to your questions.

On previous calls and investor presentations, we've discussed our corporate priorities. They include growth and earnings per share, increasing our return on assets, managing the net interest margin, leveraging market opportunities, steadily improving our asset quality, lowering our credit costs and building and deploying capital effectively. I would like to look at each one of these areas more closely in the context of our first quarter performance.

Diluted earnings per share for the first quarter came in at $0.19, up 5.6% from the $0.18 we reported last quarter and almost 12% improvement over the first quarter of 2011. These results give us a good start on 2012, a year that we hope will be marked by steadily improving business and economic conditions in all of our markets. In addition to growing earnings per share this quarter, we increased our return on assets. A key focus is the effective management of our balance sheet. We continue to work to maximize loan yields in a difficult competitive environment, while at the same time, utilizing our branch network to attract lower-cost funding. Maximizing our asset yields without assuming undue risks while controlling deposit costs enabled us to expand our net interest margins.

In the release, you saw that we had a significant increase in linked quarter noninterest income, mainly due to continued strong mortgage activity and related sales gains. Our Investment, Management and Trust Services area also contributed to our growth in other income. Thanks to our very stable core deposit base and loyal customers, we remain highly liquid. We are aggressively working to deploy deposits back into our communities to creditworthy borrowers. However, while overall credit demand has been steady, it cannot be characterized as robust. The decline in our deposit balances this quarter was confined to our more costly municipal and time deposits, contributing to the net interest margin expansion I touched on earlier.

Another factor pertaining to our margin expansion this quarter was the deceleration in the pace of premium amortization on mortgage-backed securities, although that overall level still remains elevated. We experienced good first quarter commercial and personal household account growth as a result of sector-specific marketing and promotional efforts. We just concluded a new personal checking account promotion campaign, and we will be carefully monitoring the retention and expansion of those new relationships in coming quarters. We believe our expanded base of low-cost deposits is one of our key strategic resources.

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