Release Date: July 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fulton Financial Corp (FULT, Financial) reported strong operating earnings of $0.47 per diluted share, exceeding expectations.
- The company experienced significant balance sheet growth, with organic loans and deposits increasing as anticipated.
- Net interest margin improved by 11 basis points, contributing to a $35 million increase in net interest income.
- The Republic transaction added substantial growth, with deposits growing by $3.8 billion or 17.6% on a linked quarter basis.
- Fulton Financial Corp (FULT) successfully executed a sale-leaseback transaction and investment portfolio restructuring, enhancing its investment portfolio yield and adding an estimated $8.5 million in annual interest income.
Negative Points
- There was some deposit runoff from the acquired Republic deposit portfolio, as several large municipal deposit customers transitioned out.
- The cost of total deposits increased by 19 basis points to 2.14%, primarily due to the higher cost of the acquired portfolio.
- Non-performing loans (NPLs) increased by $6.2 million during the quarter, although the NPL to loans ratio decreased.
- The company is cautious about its credit outlook for 2024, monitoring the acquired portfolio closely.
- Fulton Financial Corp (FULT) anticipates continued migration from non-interest-bearing to interest-bearing deposits, which may pressure net interest margin.
Q & A Highlights
Q: Can you provide more detail on the net interest income guidance, especially with the acquisition and restructurings?
A: Curtis Myers, CEO, explained that while they don't provide forward guidance on net interest margin, factors like the continued trend of non-interest-bearing deposits moving to interest-bearing and their asset sensitivity will put pressure on the margin. They focus on net interest income guidance and feel comfortable with the updated targets.
Q: What should we expect regarding deposit runoff from the Republic transaction?
A: Curtis Myers, CEO, stated that they had modeled $600 million of deposit runoff over time, and the runoff is diminishing. They are comfortable with their original estimates.
Q: How are you managing expenses and cost savings from the Republic acquisition?
A: Curtis Myers, CEO, mentioned they aim to implement cost savings by January 1, 2025, with integration targeted for the fourth quarter. They are working to bring costs down while retaining customers and talent, aiming for 40% cost savings as initially planned.
Q: Are there any surprises, positive or negative, following the Republic deal?
A: Beth Chivinski, Interim CFO, noted that purchase accounting marks came in line with projections, and there were no significant surprises. They are working diligently through the integration process.
Q: What is the outlook for loan growth, and how are you approaching credit decisions?
A: Curtis Myers, CEO, stated that they expect low single-digit organic loan growth, being prudent with credit decisions, especially in real estate lending. They are cautious about borrower demand and are focused on maintaining a conservative growth rate.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
