Q1 2024 Fulton Financial Corp Earnings Call

April 17, 2024

And thanks for joining us.

Yeah.

Speaker Change: Good day and thank you for standing by welcome to the Fulton Financial first quarter 2024 results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question you will need to press star one one on your telephone you will then hear an audit.

Speaker Change: They didn't message advising your hand is raised so withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your Speaker today, Matt Joseph <unk> Director of Investor Relations. Please go ahead.

Matthew Jozwiak: Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the first quarter ended March 31 2024.

Matthew Jozwiak: Host for today's conference call is Curt Myers, Chairman and Chief Executive Officer. Joining me here today is Betsy da Vinci interim Chief Financial Officer.

Matthew Jozwiak: Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These.

Matthew Jozwiak: These documents can be found on our website at <unk> dot com by clicking on Investor Relations and then on news.

Matthew Jozwiak: Slides can also be found on the presentations page under Investor relations on our website.

This call Representatives of Fulton May make forward looking statements with respect to fulton's financial condition results of operations and business.

Matthew Jozwiak: These statements are not guarantees of future performance and are subject to risks uncertainties and other factors and actual results could differ materially.

Matthew Jozwiak: Please refer to the Safe Harbor statement on forward looking statements in our earnings release and on slide two of todays presentation for additional information regarding these risks uncertainties and other factors.

Matthew Jozwiak: Fulton undertakes no obligation.

Matthew Jozwiak: Other than required by law to update or revise any forward looking statements.

Matthew Jozwiak: In discussing Fulton's performance Representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and slides 17 through 20 of today's presentation for a reconciliation of those non-GAAP financial measures to the <unk>.

Matthew Jozwiak: Comparable GAAP measures.

Matthew Jozwiak: Now I'd like to.

Operator: And thanks for joining us. Good day, and thank you for standing by. Welcome to the Fulton Financial First Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode.

Turn the call over to your host Curt Myers.

Curtis J. Myers: Well, thanks, Matt and good morning, everyone for today's call I'll be providing high level thoughts on our performance for the quarter and provide a few comments on the company then I will turn the call over to Betsy <unk> interim Chief Financial Officer to review, our financial results in more detail and step through our guidance for 2024 after.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Jozwiak, Director of Investor Relations. Please go ahead.

Betsy: Our prepared remarks, we will be happy to take any questions you may have.

Betsy: We were pleased with our first quarter results operating earnings of <unk> 40 per share were a solid start to the year, we saw both deposit and loan growth. The net interest margin was in line with our expectations. We continue to have stable asset quality metrics and our capital position remained strong.

Matthew Jozwiak: Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the first quarter ended March 31st, 2024. Your host for today's conference call is Kurt Myers, Chairman and Chief Executive Officer. Joining her today is Betsy Chivinski, Interim Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These documents can be found on our website at F-U-L-T dot com by clicking on Investor Relations and then on New.

Betsy: During the quarter, we also increased our committed liquidity by $1 billion.

Betsy: We repurchased one 9 million shares of Fulton stock I'd like to note that with this repurchase we've now repurchased all $6 2 million shares of common stock issued in connection with the Prudential Bancorp, Inc acquisition in 2022.

Betsy: As of March 31, $95 million remains from our $125 million 2020 for repurchase authorization.

Matthew Jozwiak: The slides can also be found on the Presentations page under Investor Relations on our website. During this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operations, and business. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, and actual results could differ materially. Please refer to the Safe Harbor Statement on Forward-Looking Statements in our earnings release and on slide 2 of today's presentation for additional information regarding these risks, uncertainties, and other factors. Fulton undertakes no obligation other than as required by law to update or revise any forward-looking statements.

Betsy: Turning to growth for the quarter first quarter deposits outpace loan growth at $204 million or 4% annualized pricing growth and mix remain our focus as we continue to position our product offering to support and grow our customer base.

Betsy: Loan growth as anticipated moderated to $93 million or 2% on an annualized basis.

Betsy: <unk> growth and prudent credit decisions remain our focus our loan to deposit ratio ended the quarter at 98, 6% a linked quarter decline and well within our long term operating target of 95% to 105%.

Matthew Jozwiak: In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures; please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday in slides 17 through 20 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP. Now I'd like to turn the call over to your host, Kurt Meyer. Well, thanks, Matt, and good morning, everyone.

Despite ongoing market pricing pressures net interest margin remained in line with our expectations drifting lower by four basis points to 332%.

Betsy: Our noninterest expense income was solid at $57 1 million.

Betsy: We delivered record results in wealth management that helped offset a decline in customer interest rate swap income this quarter.

Curtis J. Myers: For today's call, I'll be providing high-level thoughts on our performance for the quarter and providing a few comments on the company. Then I'll turn the call over to Betsy Chivinski, Interim Chief Financial Officer, to review our financial results in more detail and step through our guidance for 2025. After our prepared remarks, we will be happy to take any questions you may have. We were pleased with our first quarter results. Operating earnings of $0.40 per share were a solid start to the year. We saw both deposit and loan growth. The net interest margin was in line with our expectations. We continue to have stable asset quality metrics, and our capital position remains strong.

Betsy: Overall, we are pleased with our fee income performance and continued to benefit from the diversification of this revenue stream.

Betsy: Now let me provide some comments on credit the provision for credit losses was $10 9 million up slightly from $9 8 million last quarter and in line with our expectations. While overall credit metrics remain historically strong we saw some migration in certain credit metrics during the quarter criticized or classified.

Curtis J. Myers: During the quarter, we also increased our committed liquidity by $1 billion, and we repurchased 1.9 million shares of Fulton stock. I'd like to note that with this repurchase, we've now repurchased all 6.2 million shares of common stock issued in connection with the Prudential Bank Corp. Inc. acquisition in 2022. As of March 31, $95 million remains from our $125 million 2024 repurchase authorization.

Betsy: Loans drifted modestly higher this.

Betsy: This migration is not specific to any particular industry portfolio or region and we continue to focus on how higher interest rates and higher costs are impacting our customers. We remain cautious in our outlook for 2024.

Betsy: Now looking forward as I mentioned last quarter, our fourth and first initiative is an internal process to evaluate and improve how we operate three.

Betsy: Three key tenants of this initiative to drive our strategic transformation, our simplicity focus and productivity during the quarter. We made good progress on this initiative with more work ahead of US we anticipate sharing more details as appropriate in coming quarters.

Curtis J. Myers: Turning to growth for the quarter, first quarter deposits outpaced loan growth at $204 million, or 4% annualized. Pricing, growth, and mix remain our focus as we continue to position our product offering to support and grow our customers. Loan growth, as anticipated, moderated to $93 million, or 2% on an annualized basis.

Overall, a solid start to the new year now I'll turn the call over to Betsy to discuss our financial performance and 2024 guidance in more detail.

Betsy: Thank you Kurt and good morning, unless I note otherwise the quarterly comparisons as I mentioned are with the fourth quarter of 2024 and loan and deposit numbers I'll be referencing our annualized percentage growth on a linked quarter basis. So starting on slide eight operating earnings per diluted share. This quarter were <unk> 40.

Curtis J. Myers: Profitable growth and prudent credit decisions remain our focus. Our loan-to-deposit ratio ended the quarter at 98.6%, a linked quarter decline, and well within our long-term operating target of 95 to 105%. Despite ongoing market pricing pressures, net interest margin remained in line with our expectations, drifting lower by four basis points to 3.32%. Our non-interest expense income was solid at $57.1 million.

Betsy: On operating net income available to common shareholders of $65 4 million. This compares to 42 cents.

Betsy: Of operating EPS in the fourth quarter of 2023.

Speaker Change: As Curt noted loan growth was modest during the quarter, increasing $93 million or 2%.

Speaker Change: Commercial lending contributed $73 million of this growth or 2%. The primary contributors included commercial real estate of $124 million or 6% and construction loan growth of $24 million or 9% offset by a decline in C&I loans of $78 million.

Curtis J. Myers: We delivered record results in wealth management that helped offset a decline in customer interest rate swap income this quarter. Overall, we are pleased with our fee income performance and continue to benefit from the diversification of this revenue stream. Now, let me provide some comments on credit. The provision for credit losses was $10.9 million, up slightly from $9.8 million last quarter and in line with our expectations.

Speaker Change: Primarily due to slightly lower line utilization.

Speaker Change: Our CE, our CRE growth was not concentrated in any one category or geography, and as shown in our earnings deck remains well diversified.

Curtis J. Myers: While overall credit metrics remain historically strong, we saw some migration in certain credit metrics during the quarter. For example, criticized and classified loans drifted modestly higher. This migration is not specific to any particular industry, portfolio, or region, and we continue to focus on how higher interest rates and higher costs are impacting our customers. We remain cautious in our outlook for 2020. Now looking forward, as I mentioned last quarter, our Fulton First initiative is an internal process to evaluate and improve how we operate. Three key tenets of this initiative to drive our strategic transformation are simplicity, focus, and productivity.

Speaker Change: Sumer lending produced growth of $20 million or 1% during the quarter, an increase of $70 million in residential mortgages, primarily adjustable rate was offset by decreases in other categories, including consumer direct and indirect loans residential construction and home equity.

Speaker Change: Total deposits increased $204 million during the quarter growth in time deposits, primarily with maturities less than one year more than offset the seasonal outflows in our municipal deposits.

Speaker Change: $37 million non.

Noninterest bearing DDA balances ended the quarter at $5 1 billion or 23, 4% of total deposits in line with our expectations. Our net interest income guidance for 2024 assumes we will continue to see migration from noninterest bearing to interest bearing products throughout this.

Curtis J. Myers: During the quarter, we made good progress on this initiative, with more work ahead of us. We anticipate sharing more details, as appropriate, in coming quarters. Overall, a solid start to the new year. Now, I'll turn the call over to Betsy to discuss our financial performance and 2024 guidance in more detail. Thank you, Kurt, and good morning.

Speaker Change: Year, but at a slower pace than we saw last year.

Speaker Change: Our investment portfolio was up modestly for the quarter closing at $3 8 billion or 13, 7% of assets during the quarter, we purchased $210 million of MBS and CMO Securities.

Beth Ann L. Chivinski: Unless I note otherwise, the quarterly comparisons I mentioned are with the fourth quarter of 2024, and the loan and deposit numbers I'll be referencing are annualized percentage growth on a linked quarter basis. So starting on slide 8, operating earnings per diluted share this quarter were $0.40 on operating net income available to common shareholders of $65.4 million. This compares to $0.42 of operating EPS in the fourth quarter of 2023. As Kurt noted, loan growth was modest during the quarter, increasing $93 million, or 2%.

Speaker Change: These balance sheet trends are summarized on slide 10, you can see net interest income was $207 million or $5 million declined linked quarter, primarily driven by the modest change in the mix of our deposit portfolio and as a result, net interest margin declined four basis points to 332 versus.

Speaker Change: Three three <unk> last.

Speaker Change: Last quarter.

Speaker Change: Loan yields increased seven basis points during the period, increasing to five 9% versus 583 last quarter and cycle to date, our loan beta has been 50%.

Beth Ann L. Chivinski: Commercial lending contributed $73 million of this growth, or 2%. The primary contributors included commercial real estate of $124 million, or 6%, and construction loan growth of $24 million, or 9%, offset by a decline in C&I loans of $78 million, primarily due to Consumer lending produced growth of 20 million, or 1%, during the quarter. An increase of $70 million in residential mortgages, primarily adjustable-rate, was offset by decreases in other categories, including consumer direct and indirect loans, residential construction, and home equity. Total deposits increased $204 million during the quarter.

Speaker Change: Our cost of total deposits increased 16 basis points to 195 basis points during the quarter and cycle to date, our total deposit beta has been 36%.

Speaker Change: Turning to asset quality on slide 11, Npls increased $2 $8 million during the quarter, resulting in a slight increase in the NPL to loans ratio from 72 basis points at $12 31 to 73 basis points at quarter end.

Speaker Change: Net charge offs were $8 6 million or 16 basis points.

Speaker Change: Gross charge offs of $11 million were fairly granular with the largest being $2 5 million on a C&I loan.

Speaker Change: Our allowance for credit losses, as a percentage of loans increased slightly to 139% at quarter end.

Speaker Change: Turning to noninterest income on slide 12 wealth management revenues were $20 2 million up 766000 compared to the fourth quarter, passing the $20 million Mark for the first time in company history.

Beth Ann L. Chivinski: Growth in time deposits, primarily with maturities less than one year, more than offset the seasonal outflows in our municipal deposits of $137 million. Non-interest-bearing DDA balances ended the quarter at $5.1 billion, or 23.4% of total deposits, in line with our expectations. Our Net Interest Income Guidance for 2024 assumes we will continue to see migration from non-interest bearing to interest-bearing products throughout this year, but at a slower pace than we saw last year. Our investment portfolio was up modestly for the quarter, closing at $3.8 billion, or 13.7% of assets. During the quarter, we purchased $210 million of MBS and CMO security.

Speaker Change: Wealth management represents about a third of our fee based revenues with over 80% of those revenues recurring.

Speaker Change: Also the market value of assets under management and administration increased over $700 million to $15 5 billion at March 31.

Speaker Change: Also a new record for our company.

Speaker Change: Commercial banking fees declined $2 million to $18 8 million as customer swap revenue heavily reliant on new originations declined compared to a strong fourth quarter.

Speaker Change: Consumer banking fees declined approximately $400000 to $11 7 million first quarter seasonality played a part in that linked quarter decline.

Beth Ann L. Chivinski: These balance sheet trends are summarized in slide 10. You can see net interest income was $207 million, a $5 million decline compared to the linked quarter, primarily driven by a modest change in the mix of our deposit portfolio. And as a result, net interest margin declined four basis points to 3.32 versus 3.36 last quarter. However, loan yields increased 7 basis points during the period, increasing to 5.9% versus 5.83% last quarter, and cycled to date, our loan beta has been 50%.

Speaker Change: Our consumer banking business continues to deliver a very consistent income stream.

Speaker Change: Mortgage banking revenues increased $802000 to $3 1 million and were driven by a seasonal increase in mortgage originations as well as gain on sales spreads that rebounded from a low last quarter.

Speaker Change: We have a number of investments that are accounted for under the equity method on which we recorded a loss of $1 $6 million reflected in the other income line.

Speaker Change: Moving to slide 13, noninterest expenses on an operating basis were $170 million in line with the prior quarter and in line with our guidance.

Beth Ann L. Chivinski: Our cost of total deposits increased 16 basis points to 195 basis points during the quarter, and cycle to date, our total deposit data has been 36,000. Turning to asset quality in slide 11, NPLs increased $2.8 million during the quarter, resulting in a slight increase in the NPL-to-loans ratio from 72 basis points at 1231 to 73 basis points at quarter end. Net charge-offs were $8.6 million, or 16 basis points

Speaker Change: The material items that we exclude from operating expenses include charges. The following charges of $1 million for special FDIC assessment $3 $6 million related to the closure of some financial centers $2 $5 million of consulting expense and $200000 of severance expense.

Speaker Change: Slide 14 shows a snapshot of our capital base and you can see as of March 31, we maintained solid cushions over the regulatory minimums.

Beth Ann L. Chivinski: Gross charge-offs of $11 million were fairly granular, with the largest being $2.5 million on a C&I loan. Charge-offs are allowed for credit losses as the percentage of loans increased slightly to 1.39% at quarter end. Turning to non-interest income on slide 12, wealth management revenues were $20.2 million, up $766,000 compared to the fourth quarter, passing the $20 million mark for the first time in company history. Wealth management represents about a third of our fee-based revenues, with over 80% of those revenues recurring.

Speaker Change: Also both bank and parent company liquidity improved during this quarter.

Speaker Change: On slide 16, we are reiterating our guidance for 2024.

Speaker Change: Our guidance assumes that a total of 75 basis points of fed funds decreases will occur in the second half of 2024.

Speaker Change: So our guidance is as follows we expect net interest income on a non FTE basis to be in the range of $790 million to $820 million.

Speaker Change: We expect the provision for credit losses to be in the range of $45 million to $65 million. We expect noninterest income excluding security gains to be in the range of $235 million to $250 million.

Beth Ann L. Chivinski: Also, the market value of assets under management and administration increased over $700 million to $15.5 billion at March 31, also a new record for our company. Commercial banking fees declined $2 million to $18.8 million as customer swap revenue, heavily reliant on new originations, declined compared to a strong fourth quarter.

Speaker Change: We expect noninterest expenses on an operating basis to be in the range of $670 million to $690 million for the year and to reinforce that estimate excludes potential non operating charges. We may incur as we move through the year.

Beth Ann L. Chivinski: Consumer banking fees declined approximately $400,000 to $11.7 million. First quarter seasonality played a part in that late quarter decline. Our consumer banking business continues to deliver a very consistent income stream. Mortgage banking revenues increased $802,000 to $3.1 million and were driven by a seasonal increase in mortgage originations as well as a gain on sales spreads that rebounded from a low last quarter.

Speaker Change: And lastly, we expect our effective tax rate to be in the range of 17% to 18% for the year.

Speaker Change: With that we'll now turn the call over to Abigail for questions.

Abigail: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait.

For your name to be announced <unk>. Your question. Please press star one again, one moment for our first question.

Beth Ann L. Chivinski: We have a number of investments that are accounted for under the equity method on which we recorded a loss of $1.6 million, reflected in the other income line. Moving to slide 13, non-interest expenses on an operating basis were $170 million, in line with the prior quarter and in line with our guidance. The material items we exclude from operating expenses include charges for the following charges: a million dollars for a special FDIC assessment, 3.6 million related to the closure of some financial centers, two and a half million dollars of consulting expenses, and 200,000 dollars of severance.

Abigail: Our first question comes from Frank Schiraldi with Piper Sandler. Please proceed with your question.

Frank Joseph Schiraldi: Good morning.

Frank Joseph Schiraldi: Good morning, Frank.

Frank Joseph Schiraldi: On the first initiative.

Frank Joseph Schiraldi: It's sort of a work in progress.

Frank Joseph Schiraldi: Youre looking for efficiencies kind of across the board but.

Frank Joseph Schiraldi: I assume that includes some expense saves as you as you close.

Frank Joseph Schiraldi: Sensors and so forth. So can you just remind us when we look at.

Frank Joseph Schiraldi: The guide.

Frank Joseph Schiraldi: No Theres no.

Frank Joseph Schiraldi: The non operating stuff.

Frank Joseph Schiraldi: But in terms of run rate expenses does that include some benefit from Fulton first is it sort of your best guess at this point and what you get from Fulton first or is that something that could as we go through the year move that expense guide lower.

Beth Ann L. Chivinski: Slide 14 shows a snapshot of our capital base, and you can see that as of March 31st, we maintained solid cushions over the regulatory minimum. Also, both bank and parent company liquidity improved during this quarter. On slide 16, we are reiterating our guidance for 2024. Our guidance assumes that a total of 75 basis points of Fed funds decreases will occur in the second half of 2024. So our guidance is as follows: we expect net interest income on a non-FTE basis to be in the range of $790 to $820 million, and we expect the provision for credit losses to be in the range of $45 to $65 million.

Speaker Change: Yes, Frank we have.

Speaker Change: Certain expense saves in the back half of the year as we begin to implement Fulton first so we really are in the analysis.

Speaker Change: Stage and building our plan.

Speaker Change: So the overall plan is really driven to accelerate growth in certain areas as we focus even more in certain areas, but we do expect to see benefits from opt.

Operator: We expect non-interest income, excluding security gains, to be in the range of $235 to $250 million. We expect non-interest expenses on an operating basis to be in the range of $670 to $690 million for the year, and to reinforce that estimate, we exclude potential non-operating charges we may incur as we move through the year. And lastly, we expect our effective tax rate to be in the range of 17 to 18% for the year.

Speaker Change: Operating efficiencies and doing doing things a little differently as well. So there are some expense components to the save.

Speaker Change: I'd like to remind everybody that the first initiative is really an 18 months to 24 month journey.

Speaker Change: And we're in that four to five months.

Speaker Change: That work so what youre really seeing right now is the investment or spend to develop the plan for implementation and will we get to the point of implementing will be able to share more details with you around expected benefits.

Operator: With that, we'll now turn the call over to Abigail for questions. Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Operator: To withdraw your question, please press star 11 again. One moment for our first question. Our first question comes from Frank Schiraldi with Piper Sandler. Please proceed with your question. Good morning.

Speaker Change: Okay and then.

Speaker Change: On the.

Speaker Change: Loan growth just just looking at your guide on NII.

Speaker Change: Is it fair to say does that just assume sort of.

Speaker Change: <unk> like loan growth spread across the year.

Speaker Change: And then as a follow up to that if you could just remind us what the on the deposit side with the <unk>.

Muni outflows.

Frank Joseph Schiraldi: Good morning, Frank. Just on the Pullman First initiative, I understand, you know, that it's a... It's sort of a work in progress, and you're looking for efficiencies kind of across the board, but I assume that includes some expense saves as you close financial centers and so forth. So can you just remind us when we look at, I know there's no, you know, you take out the non-operating stuff, but in terms of run rate expenses, does that include some benefit from Fulton First?

Speaker Change: This quarter and how that.

Speaker Change: The timeframe most of the flow back in.

Speaker Change: Yeah, Let me talk a little bit about loan growth, then I'll give it to Betsy for the municipal outflows just the seasonality to that.

Betsy: So on loan growth, we've talked about our long term organic growth targets in the 4% to 6% range.

Betsy: I think in this environment, we're going to be at the low end or maybe even under the low end of that long term.

Betsy: Range. So I think the growth in the first quarter, we may exceed that as we look forward, but it's going to be in the same ballpark.

Frank Joseph Schiraldi: Is it sort of your best guess at this point on what you get from Fulton First, or is that something that could, as we go through the year, move that expense guide lower? Yeah, Frank, we have certain expenses in the back half of the year as we begin to implement Fulton First.

Betsy: <unk>.

We are we are being prudent and.

Betsy: Disciplined on pricing and credit.

Betsy: As we originate loans moving moving forward.

Curtis J. Myers: So we really are in the analysis stage and building our plan. So the overall plan is really driven to accelerate growth in certain areas as we focus even more on certain areas, but we do expect to see benefits from operating efficiencies and doing things a little differently as well. So there are some expense components to the save. I'd just like to remind everybody that the Fulton First initiative is really an 18 month to 24 month journey, and you know we're in that, you know, four or five months of that work.

Betsy: And then the munis.

Betsy: Municipal outflows were $137 million, so with at least in certain of our areas certain taxes are paid in the second quarter, we should see a blip up not huge in the second quarter and then the third quarters, where we tend to see those spike.

Speaker Change: Got you.

Okay.

Speaker Change: Thanks for the color.

Speaker Change: Thanks, Greg.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Daniel Tamayo with Raymond James. Please proceed with your question.

Curtis J. Myers: So what you're really seeing right now is the investment or spend to develop the plan for implementation, and when we get to the point of implementation, we'll be able to share more details with you around expected benefits. Okay, and then on.

Daniel Tamayo: Thanks, Good morning, everyone.

Daniel Tamayo: Good morning, Jamie.

Daniel Tamayo: Yes.

Daniel Tamayo: Maybe first just on.

Daniel Tamayo: On the NII guidance.

Daniel Tamayo: Alright.

Daniel Tamayo: Reiterated from from last quarter and you kept.

Daniel Tamayo: The three rate cuts assumed which I understand given where we were at the end of the quarter, but.

Daniel Tamayo: Maybe if you could give us your best guess as to what.

Curtis J. Myers: Loan growth, just looking at your guide on NII, is it fair to say, does that just assume sort of, you know, one-Q-like loan growth spread across the year? And then, as a follow-up to that, if you could just remind us what the muni outflows were this quarter and how, you know, the time frame flows the flow back in. Yeah, let me talk a little bit about loan growth, then I'll give it to Betsy for the municipal outflows, just the seasonality to that.

Daniel Tamayo: That guidance might look like without the June cut and if theres any kind of other details in terms of how youre thinking about the impact of fewer rate cuts on that on that guidance that would be helpful.

Daniel Tamayo: So Dan this is Betsy.

Betsy: We've kind of modeled that out really we can tell on our loans that reprice immediately it's $25 million on an annualized basis, but the hardest thing to protect as deposits, but we've kind of modeled all of that out.

Betsy: And with no cuts where.

Betsy: We think were going to tilt towards the high end of the range, maybe a little bit higher.

Betsy: But again theyre going to occur later in the year. So the impact on the year is going to be moderated.

Speaker Change: Okay, Alright, that's with no cuts the range okay.

Curtis J. Myers: So I think the growth in the first quarter may exceed that as we look forward, but it's going to be in the same ballpark. You know, we are being prudent and disciplined on pricing and credit as we originate loans moving forward. And the municipal outflows were $137 million.

Speaker Change: Alright, and then.

Speaker Change: Switching gears here, if I can just to the office portfolio I. Appreciate all the detail you guys put in the deck on that just wanted to know if you've had within that.

Speaker Change: Group of loans.

Speaker Change: What the.

Speaker Change: The amount that's either sub standard or criticized or classified or however, you think about the early stage.

Speaker Change: For that I'm, just curious how that portfolio is trending relative to the rest of your book.

Curtis J. Myers: So, at least in certain of our areas, certain taxes are paid in the second quarter. We should see a blip up, not huge, in the second quarter. And then the third quarter is where we tend to see those spikes. Okay, thanks for the color.

Speaker Change: Yes, Danny we've seen stability.

Speaker Change: In that overall portfolio balances are stable, we've done we've moved some out or paid off.

Speaker Change: We've had.

Danny: We've had some originations that we did not much this past quarter, but we did some in the fourth quarter.

Daniel Tamayo: Thanks, Frank. One moment for our next question. Our next question comes from Daniel Tamayo with Raymond James. Please proceed with your question. Thanks. Good morning, everyone. Maybe first, just on the NII guidance reiterated from last quarter, and you kept the three rate cuts assumed, which I understand given where we were at the end of the quarter, but maybe if you could give us your best guess as to what that guidance might look like without the June cut, and if there's any kind of other details in terms of how you're thinking about the impact of fewer rate cuts on that guidance, that would be helpful. So Dan, this is Bessie.

Danny: That portfolio is.

Danny: Really stable, we're pretty direct and in sharing what we have in classified criticized there in it.

Danny: It's shown stability.

Danny: As of to date.

Okay, Alright understood Alright, I appreciate you taking my questions you bet.

Danny: Okay.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Betty Strickland with Janney Montgomery, Scott Research Division Your line is open.

Feddie Justin Strickland: Hey, good morning, everybody.

Feddie Justin Strickland: Good morning Betty.

Feddie Justin Strickland: Just wanted to continue on that last question on office I appreciate the detail on the deck, but I see that theres, a $146 million located in the central business districts is that pretty evenly distributed across geographies or is it more philly or DC or elsewhere, just trying to get a sense of where which central business district those might be.

Beth Ann L. Chivinski: We've kind of modeled that out really, you know, we can tell on our loans that they reprice immediately $25 million on an annualized basis, but the harder thing to protect is deposits. But we've kind of modeled all that out and, you know, with no cuts, we think we're going to tilt toward the high end of the range, maybe a little bit higher. But again, they're going to occur later in the year, so the impact on the year is going to be moderate.

Feddie Justin Strickland: Yes, our largest is is philadelphia and its not a lot of loans or getting in here.

Beth Ann L. Chivinski: Okay. All right. This is with no cuts.

Feddie Justin Strickland: Seven.

Feddie Justin Strickland: Loans and.

Feddie Justin Strickland: Philly is the biggest portion.

Feddie Justin Strickland: And then actually the next biggest portion as we look at the distribution is spread throughout.

Feddie Justin Strickland: In DC and Baltimore would be less than half of what we have in Philadelphia.

Beth Ann L. Chivinski: At the high end of the range. Okay. All right. And then, switching gears here, if I can, just to the office portfolio. Appreciate all the detail you guys put in the deck on that. Just wanted to know if you had within that group of loans the amount that's either substandard or criticized or classified or whatever you think about the early stage for that. I'm just curious how that portfolio is trending relative to the rest of your book. Yeah, Danny, we've seen stability in that overall portfolio. The balances are stable.

Feddie Justin Strickland: And again Theres numbers overall are pretty granular Philadelphia is 255 of that total so none of those are a significant.

Feddie Justin Strickland: Difficult portion, it's pretty diversified and spread out.

Speaker Change: Got it that's helpful.

Speaker Change: And switching gears for a second it's great to see credit relatively stable. This quarter. Your net charge offs were actually lower than what I had modeled can you talk about what youre seeing in terms of trends in criticized and classified.

Speaker Change: Yes, so criticized and classified is moving up slightly I think the numbers about 77 million.

Speaker Change: Linked quarter, so not not a significant move but it is trending up a little we are adding so theres generation, there and then Theres resolution.

Beth Ann L. Chivinski: We've moved some out or paid off. We've had some originations that we did, not much this past quarter, but we did some in the fourth quarter. So that portfolio is really stable. We're pretty direct in sharing what we have in Classified Criticized there.

Speaker Change: As well so we're watching that very closely when you look at the loans that are.

Speaker Change: Moving in to <unk>.

Criticized and classified like they are pretty diversified.

Speaker Change: And granular.

Speaker Change: Around C&I CRE. So we don't see any specific thing in the migration that gives us concern about any individual portfolio.

Beth Ann L. Chivinski: And it's shown stability as of today. Okay, all right, understood. All right, I appreciate you taking my questions. You bet, Dan.

Operator: One moment for our next question. Our next question comes from Feddie Strickland with Jannie Montgomery Scott, Research Division. Your line is open. Hey, good morning, everybody. Morning, Feddie.

Speaker Change: It's really comes down to the individual borrower being able to be being able to navigate or being in a position to handle the current.

Speaker Change: Economic environment.

Speaker Change: Got it appreciate the color one last quick one forgive me if I missed this but what was the balance of AMC this quarter.

Feddie Justin Strickland: I just wanted to continue on that last question on offices, appreciate the detail on the deck, but I see that there are 146 million located in the central business districts. Is that pretty evenly distributed across geographies, or is it more Philly or DC or elsewhere? Just trying to get a sense of where, which central business districts those might be.

Speaker Change: If we have that.

Speaker Change: Sure we do.

Speaker Change: Sure.

Curtis J. Myers: Yeah, our largest is Philadelphia, and you know, it's not a lot of loans; we're getting it handy here. It's seven loans, and Philly is the biggest portion, and then actually, the next biggest portion as we look at the distribution is spread throughout, and then DC and Baltimore would be less than half of what we have in Philadelphia. And again, those numbers overall are pretty granular. Philadelphia is 255 of that total.

Speaker Change: Okay.

Speaker Change: You don't have it handy.

Speaker Change: We'll follow up with you to give that specific number we don't have the reconciliation right here in front of us.

Speaker Change: No problem. Thanks, so much for taking my question.

Speaker Change: Sure.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Chris Mcgratty with <unk>. Please proceed with your question.

Okay.

Speaker Change: Hey, How's it going this is Andrew <unk> on for Chris Mcgratty.

Curtis J. Myers: So none of those is a significant portion. It's pretty diversified and spread out. Got it. That's helpful.

Andrew: Good morning, Andrew.

Andrew: So just on the NII guide.

Curtis J. Myers: Switching gears for a second, it's great to see credit relatively stable this quarter. Your net chargeoffs are actually lower than what I had modeled. Can you talk about what you're seeing in terms of trends and criticism in Classified? Yeah, so Classified and Criticized are moving up slightly. I think the number is about $77 million linked quarters. So not a significant move, but it is trending up a little. We are adding, so there's generation there, and then there's resolution as well.

Andrew: I'm just wondering what assumptions you are using for deposit mix and.

Andrew: Downbeat on those rate cuts to get to your low and high end of the guide.

Andrew: Yes.

Andrew: So on the deposit mix, we're assuming some continued decline in the percentage of noninterest bearing deposits, we feel like we've been.

Andrew: Conservative in those projections relative to the longer term history.

Andrew: <unk>.

Andrew: You know that.

Andrew: Data on that is probably I don't want to quote that but.

Andrew: Uh huh.

Curtis J. Myers: So we're watching that very closely. When you look at the loans that are moving in to Criticized and Classified, they're pretty diversified and granular around CNI and CRE. So we don't see any specific thing in the migration that gives us concern about any individual portfolio. It really comes down to the individual borrower being able to navigate or being in a position to handle the current economic environment. Got it. Appreciate the color

Andrew: Look we're going to see a relatively low beta on that just based on competition.

Andrew: We really see a stabilizing one of the deposit as we get to CD roles.

Andrew: As we look forward the pressure of pricing up on CD roles.

Andrew: Begins to.

Andrew: It's not not as significant began to stabilize so I think theres a lot of stabilizing forces as we kind of kind of look forward. The biggest impact is going to be mixed.

Andrew: Mix shift.

Noninterest bearing.

Andrew: Interest bearing and that is moderating but is continuing.

Curtis J. Myers: One last quick one. Forgive me if I missed this, but what was the balance of AOCI this quarter? Let me see if we have that here real quick. Sure we do, don't have any. We'll follow up with you, Feddie, to give you that specific number. We don't have the reconciliation right here in front of us.

Speaker Change: Okay, great. Thank you and Joe the amount of Cds that are maturing this year and.

Speaker Change: But those are rolling off that compare to what you're offering today.

Joe: So through.

Joe: The end of this year.

Joe: Probably about $1 9 billion.

Joe: And that weighted average rate is.

Speaker Change: I have it for the next 12 months on doing math in my head here apologies the weighted average rate is probably about a.

Speaker Change: For roughly $4 40.

Speaker Change: I will tell you on average the rate over the past couple of months.

Speaker Change: We're putting on new Cds at a weighted average rate of about $4 40, so as we get towards the end of the year again absent other changes, which we know there'll be those we're not going to really see an impact from those renewals or new Cds.

Operator: No questions. Thanks so much for taking my questions. One moment for our next question. Our next question comes from Chris McGratty with KBW. Please proceed with your question. Hey, how's it going? This is Andrew Leischner on behalf of Chris McGratty.

Speaker Change: Yeah, So we feel.

Speaker Change: We feel really good about how we've managed the duration in that book in each month as we move forward, we get again to that role being a more stabilizing in.

Andrew Steven Leischner: Morning, Andrew. Hey, how's it going? So just on the NII guide... Just wondering what assumptions you're using for deposit mix and... downgrade on those rate cuts to get to your low and high end of the guide. So on the deposit mix, we are assuming some continued decline in the percentage of non-interest bearing deposits. We feel like we've been conservative in those projections relative to the longer-term history. You know, the data on that is probably, I don't want to quote that, but, you know, I think we're going to see a relatively low beta on that just based on competition.

Speaker Change: Packed on the overall balance sheet.

Speaker Change: Got it. Thank you I appreciate the quick math, there and then just last one if I can.

Speaker Change: With that.

Speaker Change: You repurchased one 9 million shares and you have $95 million mm.

Speaker Change: Remaining on the authorization are you are you still comfortable with the operating environment in your current capital I will stick to contemplate.

Speaker Change: Further buybacks thanks.

Speaker Change: Yeah, Great question, and we continue to evaluate that our priority is to support organic growth.

Curtis J. Myers: Yeah, we really see a stabilization of the deposit as we get to CD rolls. As we look forward, the pressure of pricing up on CD rolls, you know, it's not as significant, and it begins to stabilize. So I think there are a lot of stabilizing forces as we kind of look forward. The biggest impact is going to be mid-shift from non-interest bearing to interest-bearing. And that is moderating, but it is continuing. Okay, great.

Speaker Change: One second.

Speaker Change: Second priority would be any corporate initiatives.

Speaker Change: That we have that would require.

Speaker Change: Capital and then buybacks so.

Speaker Change: So we would evaluate that environment and we feel that based on our capital levels.

Speaker Change: Could be.

Speaker Change: The active in our buyback throughout the remainder of the year, but we may not do.

Speaker Change: Depending on.

Speaker Change: The situation, we have the authorization remaining for the $95 million.

Speaker Change: And if you look back over recent history.

Curtis J. Myers: Thank you. And do you have the amount of CDs that are maturing this year? What those are rolling off as compared to what you're offering today? So.

Speaker Change: Use that almost every quarter to some degree based on the environment that we see.

But again it is the last priority in our capital utilization.

Beth Ann L. Chivinski: Through the end of this year, we'll probably have about $1.9 billion. And that weighted average rate is, I have it for the next 12 months, so I'm doing math in my head here. Apologies.

Speaker Change: Alright, Thanks for taking my questions I'll step back.

Speaker Change: Thanks, Andrew.

Speaker Change: One moment our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from David Bishop with Tata Group. Your line is open.

Beth Ann L. Chivinski: The weighted average rate is probably about a.. for roughly 440. I will tell you, on average, over the past couple months, we're putting on new CDs at a weighted average rate of about 440. So as we get toward the end of the year, again, absent other changes, which we know there'll be, we're not going to really see an impact from those renewals or new CDs. Yeah, so we feel really, really good about how we've managed the duration of that book. And each month, as we move forward, we get back to that role being a more stabilizing impact on the overall balance.

David Jason Bishop: Yes, good morning.

David Jason Bishop: Hey, David.

David Jason Bishop: Quick question circling back to the first I know you're sort of focused on the.

David Jason Bishop: Maybe the expense side of things, but are there revenue enhancements that could emanate from this.

David Jason Bishop: This project longer term.

David Jason Bishop: Yes, definitely the focus part of that initiative is really to accelerate growth.

David Jason Bishop: In areas where.

David Jason Bishop: We deliver high value for our customers.

David Jason Bishop: Have more differentiation and we feel we can we're doing well and can do even better with some of the initiatives and strategies that were we're contemplating so that is the first priority for us is how to.

Andrew Steven Leischner: Thank you. I appreciate the quick math there. And then just last one, if I can, with that.

<unk> the company effectively.

Curtis J. Myers: You repurchased 1.9 million shares, and you have 95 million. Remaining on the authorization, are you still comfortable with the operating environment and your current capital levels to continue to contemplate further buybacks? Yeah, great question, and we continue to evaluate that. Our priority is to support organic growth first.

Going forward. So we do think those accelerators exist.

David Jason Bishop: But theres also an efficiency and operating environment and tech benefit realization.

David Jason Bishop: Things like that that will enhance.

David Jason Bishop: Efficiency and productivity to but that.

David Jason Bishop: That focus part is really on the growth side.

Speaker Change: Got it.

Curtis J. Myers: The second priority would be any corporate initiatives that we have that would require capital and then buybacks. So we would evaluate that environment, and we feel that, based on our capital levels, we could be active in our buybacks throughout the remainder of the year, but we may not, depending on the situation. We have the authorization remaining for the 95 million, and you know if you look back over recent history, we've used that almost every quarter to some degree based on the environment that we see, but again, it is the last priority in our capital. Alright, thanks for taking my questions. I'll step back.

Speaker Change: I know there was some noise this quarter, but some of the branch closures and such.

Speaker Change: Did that flow through to the occupancy expense was up.

Speaker Change: A small I don't know if that was weather related or related to that initiative I thought those were another expenses, but I don't know Betsy occurred any any any guidance in terms of at the right run rate on the occupancy side of the equation.

Speaker Change: I'll, let betsy because she loves this expense item.

Im sorry were laughing here, yes, the increase in occupancy was weather related.

Betsy: So snow removal cost so that that should moderate.

Betsy: Slight in the northeast.

Betsy: Yes, so we've got to love it up here you never know what's going to hit.

Speaker Change: Also maybe a high level question purchasing.

Speaker Change: In terms of capital allocate occasions.

Speaker Change: Appetite for more M&A I know.

Speaker Change: The prominent Lakewood deal has some sort of interesting competitive just to it.

Speaker Change: No that sobers your outlook for additional M&A and maybe how comfortable you would be maybe looking at maybe some distressed.

Andrew Steven Leischner: Thanks, Andrew. One moment for our next question. Our next question comes from David Bishop with OptiGroup. Your line is open. Yeah, good morning. Good morning, David.

Speaker Change: A stress bank sales out there just curious.

Speaker Change: Appetite at this point thanks.

Speaker Change: Yes, so our M&A strategy remains the same I've talked about.

David Jason Bishop: A question, circling back to the first, I know you sort of focused on the, you know, maybe the expense side of the thing, but are there revenue enhancements that could emanate from this project longer term? Yeah, definitely. The focus part of that initiative is really to accelerate growth in areas where we deliver high value for customers, have more differentiation, and we feel we're doing well and can do even better with some of the initiatives and strategies that we're contemplating.

Speaker Change: Looking at it in two buckets, the $1 billion to $5 billion community Bank.

Speaker Change: Really additive to our organization.

Speaker Change: And we're focused on those we do think we have opportunity in that category.

Speaker Change: We also focus on the $5 to $15 billion 15, probably being being the largest we would consider.

Speaker Change: More strategic partnership.

Speaker Change: Theres a handful of those but we would consider those as well so the strategy is.

Speaker Change: Is the same the environment is we feel we have opportunities for <unk>.

Speaker Change: M&A.

Speaker Change: We evaluate those win when we have the opportunities.

David Jason Bishop: So that is the first priority for us, how to grow the company effectively going forward. So we do think those accelerators exist, but there's also an efficiency and operating environment and tech benefit realization, things like that, that will enhance efficiency and productivity too. But that focus part is really on the growth side.

Speaker Change: If we can work on something that's that.

Speaker Change: Positively impacts our shareholders over the long haul.

We certainly would would be active.

Speaker Change: Got it appreciate the color.

Speaker Change: Beth.

Speaker Change: One moment our next question.

Speaker Change: Our next question comes from Manuel Novice with D. A Davidson. Please proceed with your question.

Curtis J. Myers: And I know there's been some noise this quarter with some of the branch closures and such. Did that flow through to occupancy expense? I saw that occupancy expense was up, but I don't know if that was weather-related or related to that initiative.

Manuel Antonio Navas: Hey, good morning.

Could you just go into a little bit more detail on whats kind of driving that.

Curtis J. Myers: I thought those were in other expenses, but I don't know if that's happened. Any guidance in terms of a good run rate on the occupancy side of the equation? I'll let Betsy take this one, because she loves this expense item. Oh, I'm sorry; we're laughing here.

Manuel Antonio Navas: I guess slower end of the guide on loan growth.

Manuel Antonio Navas: Understand the pricing side.

Manuel Antonio Navas: It does borrow demand at high rates also have an impact.

Manuel Antonio Navas: Is deposit gathering also slowing it at all.

Manuel Antonio Navas: So deposit gathering we're being.

Beth Ann L. Chivinski: Yes, the increase in occupancy was weather-related, so snow removal costs should moderate. It's life in the Northeast. Yeah, we've got to love it up here. You never know what's going to hit.

Manuel Antonio Navas: We're doing a great job I think in that that is not hindering our growth at all.

Manuel Antonio Navas: If anything I think it's an opportunity to fuel our growth as we are doing it doing a good job there.

Manuel Antonio Navas: The biggest thing on load growth is our pipeline of commercial loans.

Beth Ann L. Chivinski: Also, maybe a high-level question, Kurt, in terms of capital allocation and appetite for more M&A. I know that the Providence Lakeland deal has interesting appendages to it.

Manuel Antonio Navas: <unk> is up linked quarter and up year over year.

Manuel Antonio Navas: But what we're seeing is what we call the pull through rate on that pipeline.

Manuel Antonio Navas: <unk> to be challenged customers are.

David Jason Bishop: I don't know if that sobers your outlook for additional M&A and maybe how comfortable you'd be, you know, maybe looking at maybe some distressed, distressed bank sales out there. Just curious about your M&A appetite at this point. Thanks.

Manuel Antonio Navas: Very cautious.

Manuel Antonio Navas: And projects are not happening because costs are up rates are up.

Manuel Antonio Navas: Things like that so the biggest impact is not opportunity.

Curtis J. Myers: Yeah, so our M&A strategy remains the same. I've talked about looking at it in two buckets, the $1 to $5 billion community bank, you know, really additive to our organization, and we're focused on those. We do think we have an opportunity in that category. We also focus on the $5 to $15 billion range, $15 probably being the largest we would consider. More strategic partnerships, you know, there's a handful of those, but, you know, we would consider those as well. So the strategy is the same.

Manuel Antonio Navas: Either borrowers deciding to move forward.

Manuel Antonio Navas: On a on a project or spending.

Manuel Antonio Navas: For us, making sure we get the right price and credit terms.

Speaker Change: I appreciate that does that does that mean that.

Speaker Change: Yeah.

Speaker Change: No cuts gets you to the high end of the NOI range, but perhaps there would be an increase in loan demand. If we did get fed cuts is that kind of right way to think about it and what would be.

Curtis J. Myers: The environment, you know, we feel we have opportunities for M&A. You know, we evaluate those when we have the opportunities, and, you know, if we can work on something that positively impacts our shareholders over the long haul, you know, we certainly would be active. Got it. I appreciate the color.

Speaker Change: Where you would be happier.

Speaker Change: We like stability.

Speaker Change: And so that's the easiest thing to navigate so.

Speaker Change: Just some level of stability.

Speaker Change: Would be good we really position the company.

Speaker Change: To effectively perform no Matt no matter what happens we have puts and takes on rates up or rates down.

Speaker Change: Rates up we benefit in some ways and have more pressure in some ways rates down we benefit in certain ways and have more pressure in certain ways. So.

Operator: One moment for our next question, which comes from Manuel Navas with D.A. Davidson.

Speaker Change: There are a lot of different variables and what we really focus on one is having the company in a position.

Manuel Antonio Navas: Please proceed with your question. Hey, good morning. Can you just go into a little bit more detail on what's kind of driving the bit, I guess, slower end of the guide on loan growth? I understand the pricing side. But does borrow demand at high rates also have an impact?

Speaker Change: That we perform effectively.

Speaker Change: No matter what happens to rates.

Speaker Change: I have one last kind of more specific modeling question I had that you expect that the noninterest bearing mix getting around 22% by year end does that change at all.

Curtis J. Myers: And just is deposit gathering also slowing it at all? So, deposit gathering. We're doing a great job, I think, in that that is not hindering our growth at all. If anything, I think it's an opportunity to fuel our growth as we're doing a good job there. The biggest thing about loan growth is that our commercial loan pipeline is up in length quarter and up year over year. But what we're seeing is what we call the pull-through rate on that pipeline continues to be challenged.

Speaker Change: With a little more outflows this quarter.

Speaker Change: Is that still right around the same mix.

Speaker Change: The year end.

Speaker Change: And so we ended the quarter at 23 four.

Speaker Change: Thank you.

Speaker Change: For your modeling 'twenty, 2%, certainly a reasonable if you look back over the past.

15.

Speaker Change: 15 years.

That's a good range you have to go way back to get much slower than that.

Speaker Change: Okay I appreciate that thank you very much.

Thank you Daniel.

Speaker Change: One moment for our next question.

Curtis J. Myers: Customers are very cautious, and projects are not happening because costs are up, rates are up, things like that. So, the biggest impact is not opportunity; it's either borrowers deciding to move forward on a project or spending, or us making sure we get the right price and credit. I appreciate that. Does that mean that... you know, no cuts gets you to the high end of the NII range, but perhaps there would be an increase in loan demand if we did get Fed cuts? Is that kind of the right way to think about it? And what would be... where would you be happier?

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced our next question comes from Matthew Breese with Stephens. Your line is open.

Matthew M. Breese: Good morning, everybody.

Matthew M. Breese: Good morning, Matt and I wanted to go back to Fulton first.

Matthew M. Breese: How much more in onetime costs do you expect and over what timeframe do you think the majority of those onetime costs are going to going to occur.

Matthew M. Breese: Yes, so we do expect increased onetime costs as we get into implementing the changes.

Speaker Change: That we're designing and working on.

Speaker Change: Right now so.

Speaker Change: Right now we just have the spend to develop the plan and then.

As we implement that plan there certainly would be one time costs from contracts in.

Curtis J. Myers: We like stability because that's the easiest thing to navigate. So, you know, just some level of stability would be great. Would be good. We really position the company to effectively perform no matter what happens. We have puts and takes on rates up or rates down. You know, rates up, we benefit in some ways and have more pressure in some ways. With rates down, we benefit in certain ways and have more pressure in certain ways.

Speaker Change: Other things that we would consider efficiencies overall so.

Speaker Change: We do.

Speaker Change: Do have those planned and we would be disclosing though that as we move forward.

Speaker Change: Our real goal is to get to.

Speaker Change: Showing.

Everyone they'll plan well costs, we have and what benefits we're going to drive.

Speaker Change: We're just not there yet.

Curtis J. Myers: So, there are a lot of different variables, and what we really focus on is having the company in a position that we can perform effectively no matter what happens to rates. I have one last, kind of, more specific modeling question.

Speaker Change: But we wanted to be transparent with that we're spending money and investing money.

Speaker Change: Figure that playing out.

Speaker Change: Okay, but should we expect kind of this quarter's six point.

Speaker Change: $4 million in one time cost too.

Speaker Change: Recur for at least the near term or is that an elevated figure in your view.

Curtis J. Myers: I had assumed that you expected the non-interest bearing loans to get around 22% by year end. Is that changing at all? With a little bit more outflows this quarter. Is that still right around the same mix that you end the year at?

Speaker Change: Yes, we really have those playing out again, it's a <unk>.

Speaker Change: To 24 months.

Speaker Change: Project overall, the one time cost would be concentrated more at the front end of that.

Beth Ann L. Chivinski: So we ended the quarter at 23.4%. I think, you know, for your modeling, 22% is certainly a reasonable range if you look back over the past 15 years. You have to go way back to get much slower.

Speaker Change: So thinking over the next couple of quarters.

Speaker Change: We would have more of the one time costs and then we would be getting the benefits then over the full 24 months, so that I think youre thinking about it the right way Matt.

Speaker Change: Okay.

Speaker Change: I wanted to go back to the office portfolio.

Speaker Change: You have eight office relationships over $20 million, you discussed kind of the three in the central business districts.

Beth Ann L. Chivinski: Okay, I appreciate that. Thank you very much. One moment for our next question. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker Change: But I was hoping within the eight you could talk about maybe the three or four largest relationships what are the sizes. There how are they performing maturity schedules and any sort of details on kind of LTV debt service coverage ratios for.

Operator: Our next question comes from Matthew Breese with Stevens. Your line is open. Good morning, everybody.

Speaker Change: Or just overall color on the biggest stuff.

Matthew M. Breese: Hey, morning, Matt. Hey, I wanted to go back to Fulton first. How much more in one-time costs do you expect, and over what time frame do you think the majority of those one-time costs are going to occur? Yeah, so we do expect increased one-time costs as we get into implementing the changes that we're designing and working on right now. So right now, we just have to spend to develop the plan, and then as we implement that plan, there certainly would be one-time costs from contracts and other things that we would consider, overall.

Speaker Change: Yes, so the.

Speaker Change: At the top.

Speaker Change: Five borrowers there are in the $25 million to $30 million range and balance our largest deals.

Speaker Change: About $30 million.

Imbalances.

Speaker Change: We don't have any.

Speaker Change: Maturities that are coming up that we either are comfortable with or don't have a resolution for so we feel good about the position of those largest bar.

Speaker Change: Borrowers.

Speaker Change: At this point.

Speaker Change: We were probably we are paying close attention to every office alone we have from the $400000. One we originated in the first quarter.

Curtis J. Myers: So we do have those planned, and we will be disclosing those as we move forward. You know, our real goal is to get to showing everyone the plan, what costs we have, and what benefits we're going to derive. You know, we're just not there yet, but we wanted to be transparent with that we're spending money and investing money to figure that plan out. Okay, but should we expect, you know, kind of this quarter's $1.4 million in one-time costs to recur for at least the near term, or is that an elevated figure in your view? Yeah, we really have those planned out.

Speaker Change: Our largest one of $30 million.

Speaker Change: Are they all.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: And then you had a you had a $3 1 million loss on asset disposals. This quarter what was in there.

Speaker Change: Those were five branches that we have committed to close I believe theyre closing the end of this month next week.

Speaker Change: Close.

Speaker Change: Okay and then the last one is just on.

Speaker Change: Commercial swap activity.

Curtis J. Myers: Again, it's an 18 to 24 month project overall. The one-time cost would be concentrated more at the front end of that. So, thinking over the next couple quarters, we would have more of the one-time costs, and then we would be getting the benefits then over the full 24 months. So I think you're thinking about it the right way, Matt. Okay. I wanted to go back to the office portfolio.

Speaker Change: My gut here as with slower growth that will remain kind of look.

Speaker Change: At a depressed level, but I wanted your thoughts on on weather.

Speaker Change: Get back to a kind of a north of $3 million run rate there.

Speaker Change: Yeah, It really comes down to mix of origination versus overall growth. So.

Speaker Change: Obviously, when you have higher overall growth you're.

Speaker Change: Your mix is better to yet volume in every category. So it really what drives those numbers is the larger originations.

Curtis J. Myers: You have eight office relationships, over 20 million. You discussed the three in the central business district. But I was hoping, within the eight, you could talk about maybe the three or four largest relationships. What are their sizes?

Speaker Change: So large C&I and large CRE originations are what really drive the number we have a good core kind of recurring business. So that's why you see.

Speaker Change: There's kind of a floor on that that fee income each quarter, but to get to the.

Curtis J. Myers: How are they performing on maturity schedules and any sort of details on kind of LTV debt service coverage ratios for just overall color on the biggest stuff? Yeah, so the top five borrowers there are in the $25 to $30 million range and balance. Our largest deal is about $30 million in balances. We don't have any maturities that are coming up that we either aren't comfortable with or don't have a solution for, so we feel good about the position of those largest borrowers at this point.

Three and $4 million quarters that we've seen historically.

Speaker Change: Really have to have a few larger originations that are a derivative of our swap done on those.

Speaker Change: Got it.

Speaker Change: Okay. That's all I had I appreciate you taking my questions. Thank you.

Speaker Change: Thanks, Matt.

Speaker Change: That concludes the question and answer session. At this time I would like to turn the call back to Curt Myers for closing remarks.

Curtis J. Myers: Well. Thank you again for joining US today, we hope you will be able to be with us when we discuss second quarter results in July.

Curtis J. Myers: Thanks, everyone.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Curtis J. Myers: We are paying close attention to every office loan we have, from $400,000 when we originated in the first quarter to our largest one of $30 million. [inaudible] Yeah. And then you had a 3.1 million loss on asset disposals this quarter. What was in it?

Curtis J. Myers: Those were five branches that we have committed to closing. I believe they're closing at the end of this month. Okay, and then the last one is just done on Commercial Swap Activity. My gut here is that with slower growth that'll remain kind of at a depressed level, but I wanted your thoughts on whether we can, you know, get back to kind of a north of $3 million one right there. Yeah, it really comes down to mix of origination versus overall growth. So, obviously, when you have higher overall growth, your mix is better, too. You have volume in every category.

Speaker Change: [music].

Curtis J. Myers: So, really, what drives those numbers is the larger originations. So, large CNI and large CRE originations are what really drive the numbers. We have a good core kind of recurring business. So, that's why you see there's kind of a flower in that fee income each quarter. But to get to the $3 and $4 million quarters that we've seen historically, you really have to have a few larger originations that are a derivative or a swap done on. Got it.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Matthew M. Breese: Okay, that's all I had. I appreciate you taking my questions. Thank you. Thanks, Matt. That concludes the question and answer session. At this time, I would like to turn the call back to Curt Myers for closing remarks.

Speaker Change: Yes.

Speaker Change: [music].

Curtis J. Myers: Well, thank you again for joining us today. We hope you'll be able to be with us when we discuss the second quarter results in July. Thanks, everyone.

Speaker Change: Okay.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. © The Ultimate Parody Site! ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? Good day and thank you for standing by.

Speaker Change: [music].

Speaker Change: Or an automated message advising your hand is raised to withdraw your question. Please press star one again.

Be advised that today's conference is being recorded.

I'd now like to hand, the conference over to your Speaker today, Matt Joseph <unk> Director of Investor Relations. Please go ahead.

Matthew Jozwiak: Good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the first quarter ended March 31, 2020 for your host for today's conference call is Curt Myers, Chairman and Chief Executive Officer. Joining me here today is Betsy da Vinci interim Chief Financial Officer.

Matthew Jozwiak: Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These.

Matthew Jozwiak: These documents can be found on our website at <unk> dot com by clicking on Investor Relations and then on news. The slides can also be found on the presentations page under Investor Relations on our website.

Matthew Jozwiak: On this call Representatives of Fulton May make forward looking statements with respect to fulton's financial condition results of operations and business.

Matthew Jozwiak: These statements are not guarantees of future performance and are subject to risks uncertainties and other factors and actual results could differ materially.

Please refer to the Safe Harbor statement on forward looking statements in our earnings release and on slide two of todays presentation for additional information regarding these risks uncertainties and other factors.

Matthew Jozwiak: Fulton undertakes no obligation.

Matthew Jozwiak: Other than required by law to update or revise any forward looking statements.

In discussing Fulton's performance Representatives of Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and slides 17 through 20 of today's presentation for a reconciliation of those non-GAAP financial measures to the <unk>.

Matthew Jozwiak: The comparable GAAP measures.

Operator: Welcome to the Fulton Financial First Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Jozwiak, Director of Investor Relations. Please go ahead.

Matthew Jozwiak: Now I'd like to turn the call over to your host Curt Myers.

Curtis J. Myers: Well, thanks, Matt and good morning, everyone for today's call I'll be providing high level thoughts on our performance for the quarter and provide a few comments on the company.

Curtis J. Myers: Then I will turn the call over to <unk> interim Chief Financial Officer to review, our financial results in more detail and step through our guidance for 2024.

Speaker Change: After our prepared remarks, we will be happy to take any questions you may have.

Speaker Change: We were pleased with our first quarter results operating earnings of <unk> 40 per share were a solid start to the year, we saw both deposit and loan growth. The net interest margin was in line with our expectations. We continue to have stable asset quality metrics and our capital position remained strong.

Speaker Change: During the quarter. We also increased our committed liquidity by 1 billion, we repurchased one 9 million shares of <unk> stock I'd like to note that with this repurchase we've now repurchased all $6 2 million shares of common stock issued in connection with the Prudential Bancorp, Inc acquisition.

Speaker Change: In 2022.

Speaker Change: As of March 31, $95 million remains from our $125 million 2020 for repurchase authorization.

Matthew Jozwiak: The slides can also be found on the Presentations page under Investor Relations on our website. During this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operations, and business. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, and actual results could differ materially. Please refer to the Safe Harbor Statement on forward-looking statements in our earnings release and on slide 2 of today's presentation for additional information regarding these risks, uncertainties, and other facts. Fulton undertakes no obligation, other than as required by law, to update or revise any forward-looking statements.

Speaker Change: Turning to growth for the quarter first quarter deposits outpace loan growth at $204 million or 4% annualized pricing growth and mix remain our focus as we continue to position our product offering to support and grow our customer base.

Speaker Change: Loan growth as anticipated moderated to $93 million or 2% on an annualized basis.

Speaker Change: Profitable growth and prudent credit decisions remain our focus our loan to deposit ratio ended the quarter at 98, 6% a linked quarter decline and well within our long term operating target of 95% to 105%.

Matthew Jozwiak: In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures; please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday in slides 17 through 20 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP. Now I'd like to turn the call over to your host, Kurt. Well, thanks, Matt, and good morning, everyone. On today's call, I'll be providing high-level thoughts on our performance for the quarter and making a few comments on the company.

Speaker Change: Despite ongoing market pricing pressures net interest margin remained in line with our expectations drifting lower by four basis points to 332%.

Speaker Change: Our noninterest expense income was solid at $57 1 million.

Speaker Change: We delivered record results in wealth management that helped offset a decline in customer interest rate swap income this quarter.

Matthew Jozwiak: Then I'll turn the call over to Betsy Chivinski, Interim Chief Financial Officer, to review our financial results in more detail and step through our guidance for 2024. After our prepared remarks, we will be happy to take any questions you may have. We were pleased with our first quarter results. Operating earnings of $0.40 per share were a solid start to the year.

Overall, we are pleased with our fee income performance and continued to benefit from the diversification of this revenue stream.

Speaker Change: Now let me provide some comments on credit the provision for credit losses was $10 9 million up slightly from $9 8 million last quarter and in line with our expectations. While overall credit metrics remain historically strong we saw some migration in certain credit metrics during the quarter criticized and classified.

Curtis J. Myers: We saw both deposit and loan growth. The net interest margin was in line with our expectations. We continue to have stable asset quality metrics, and our capital position remains strong.

Speaker Change: Loans drifted modestly higher.

Speaker Change: This migration is not specific to any particular industry portfolio or region and we continue to focus on how higher interest rates and higher costs are impacting our customers. We remain cautious in our outlook for 2024.

Speaker Change: Now looking forward as I mentioned last quarter, our Fulton first initiative is an internal process to evaluate and improve how we operate three.

Speaker Change: Three key tenants of this initiative to drive our strategic transformation, our simplicity focus and productivity during the quarter. We made good progress on this initiative with more work ahead of US we anticipate sharing more details as appropriate in coming quarters overall.

Speaker Change: Overall, a solid start to the new year now I'll turn the call over to Betsy to discuss our financial performance and 2024 guidance in more detail.

Betsy: On operating net income available to common shareholders of $65 4 million. This compares to 42 cents of.

Betsy: Of operating EPS in the fourth quarter of 2023.

As Curt noted loan growth was modest during the quarter, increasing $93 million or 2% commercial lending contributed $73 million of this growth at 2%. The primary contributors included commercial real estate of $124 million or 6% and construction loan growth of 24.

Betsy: <unk> million dollars or 9% offset by a decline in C&I loans of 78 million, primarily due to slightly lower line utilization.

Our CE, our CRE growth was not concentrated in any one category or geography, and as shown in our earnings deck remains well diversified.

Curtis J. Myers: While overall credit metrics remain historically strong, we saw some migration in certain credit metrics during the quarter. For example, criticized and classified loans drifted modestly higher. This migration is not specific to any particular industry, portfolio, or region, and we continue to focus on how higher interest rates and higher costs are impacting our customers. We remain cautious in our outlook for 2024. Now looking forward, as I mentioned last quarter, our Fulton First initiative is an internal process to evaluate and improve how we operate. Three key tenets of this initiative to drive our strategic transformation are simplicity, focus, and productivity.

Betsy: <unk> lending produced growth of $20 million or 1% during the quarter, an increase of $70 million in residential mortgages, primarily adjustable rate was offset by decreases in other categories, including consumer direct and indirect loans residential construction and home equity.

Total deposits increased $204 million during the quarter growth in time deposits, primarily with maturities less than one year more than offset the seasonal outflows in our municipal deposits of $137 million non.

Betsy: Noninterest bearing DDA balances ended the quarter at $5 1 billion or 23, 4% of total deposits in line with our expectations. Our net interest income guidance for 2024 assumes we will continue to see migration from noninterest bearing to interest bearing products throughout this.

Betsy: Year, but at a slower pace than we saw last year.

Betsy: Our investment portfolio was up modestly for the quarter closing at $3 8 billion or 13, 7% of assets during the quarter, we purchased $210 million of MBS and CMO Securities.

Betsy: These balance sheet trends are summarized on slide 10, you can see net interest income was $207 million or $5 million declined linked quarter, primarily driven by the modest change in the mix of our deposit portfolio and as a result, net interest margin declined four basis points to 332 versus <unk>.

Betsy: 336 last quarter.

Betsy: Loan yields increased seven basis points during the period, increasing to five 9% versus 583 last quarter and cycle to date, our loan beta has been 50%.

Betsy: Our cost of total deposits increased 16 basis points to 195 basis points during the quarter and cycle to date, our total deposit beta has been 36%.

Betsy: Turning to asset quality on slide 11, Npls increased $2 $8 million during the quarter, resulting in a slight increase in the NPL to loans ratio from 72 basis points at $12 31 to 73 basis points at quarter end.

Betsy: Net charge offs were $8 6 million or 16 basis points.

Betsy: Gross charge offs of $11 million were fairly granular with the largest being $2 5 million on a C&I loan.

Betsy: Our allowance for credit losses, as a percentage of loans increased slightly to 139% at quarter end.

Betsy: Turning to noninterest income on slide 12 wealth management revenues were $22 million up 766000 compared to the fourth quarter, passing the $20 million Mark for the first time in company history.

Betsy: Wealth management represents about a third of our fee based revenues with over 80% of those revenues recurring.

Betsy: Also the market value of assets under management and administration increased over $700 million.

Betsy: To $15 5 billion at March 31, also a new record for our company.

Betsy: Commercial banking fees declined $2 million to $18 8 million as customer swap revenue heavily reliant on new originations declined compared to a strong fourth quarter.

Betsy: Consumer banking fees declined approximately $400000 to $11 7 million first quarter seasonality played a part in that linked quarter decline.

Beth Ann L. Chivinski: These balance sheet trends are summarized in slide 10. You can see net interest income was $207 million, a $5 million decline compared to the linked quarter, primarily driven by a modest change in the mix of our deposit portfolio. And as a result, net interest margin declined four basis points to 3.32 versus 3.36 last quarter. Loan yields increased 7 basis points during the period, increasing to 5.9% versus 5.83% last quarter.

Betsy: Our consumer banking business continues to deliver a very consistent income stream.

Betsy: Banking revenues increased $802000 to $3 1 million and were driven by a seasonal increase in mortgage originations as well as gain on sales spreads that rebounded from a low last quarter.

Betsy: We have a number of investments that are accounted for under the equity method on which we recorded a loss of $1 6 million reflected in the other income line.

Beth Ann L. Chivinski: And cycle to date, our loan beta has been 50%. Our cost of total deposits increased 16 basis points to 195 basis points during the quarter, and cycle to date, our total deposit data has been $36,000. Turning to asset quality on slide 11, NPLs increased $2.8 million during the quarter, resulting in a slight increase in the NPL to loans ratio from 72 basis points at 1231 to 73 basis points at quarter end.

Moving to slide 13, noninterest expenses on an operating basis were $170 million in line with the prior quarter and in line with our guidance.

Betsy: The material items that we exclude from operating expenses include charges. The following charges $1 million for special FDIC assessment $3 $6 million related to the closure of some financial centers $2 $5 million of consulting expense and $200000 of severance expense.

Slide 14 shows a snapshot of our capital base and you can see as of March 31, we maintained solid cushions over the regulatory minimum.

Beth Ann L. Chivinski: Net charge-offs were $8.6 million, or 16 basis points. Gross charge-offs of $11 million were fairly granular, with the largest being $2.5 million on a C&I loan, are allowed for credit losses as the percentage of loans increased slightly to 1.39% at quarter end. Turning to non-interest income on slide 12, wealth management revenues were $20.2 million, up $766,000 compared to the fourth quarter, passing the $20 million mark for the first time in company history.

Betsy: Also both bank and parent company liquidity improved during this quarter.

Betsy: On slide 16, we are reiterating our guidance for 2024.

Betsy: Our guidance assumes that a total of 75 basis points of fed funds decreases will occur in the second half of 2024.

Betsy: So our guidance is as follows we expect net interest income on a non FTE basis to be in the range of $790 million to $820 million.

Beth Ann L. Chivinski: Wealth management represents about a third of our fee-based revenues, with over 80% of those revenues recurring. Also, the market value of assets under management and administration increased over $700 million to $15.5 billion at March 31, also a new record for our company. Commercial banking fees declined $2 million to $18.8 million as customer swap revenue, heavily reliant on new originations, declined compared to a strong fourth quarter.

Betsy: We expect the provision for credit losses today in the range of $45 million to $65 million.

Betsy: We expect noninterest income excluding security gains to be in the range of $235 million to $250 million.

Betsy: We expect noninterest expenses on an operating basis to be in the range of $670 million to $690 million for the year and to reinforce that estimate excludes potential non operating charges. We may incur as we move through the year and.

Beth Ann L. Chivinski: Consumer banking fees declined approximately $400,000 to $11.7 million. First quarter seasonality played a part in that linked quarter decline. Our consumer banking business continues to deliver a very consistent income stream. Mortgage banking revenues increased $802,000 to $3.1 million and were driven by a seasonal increase in mortgage origination as well as a gain on sales spreads that rebounded from a low last quarter.

Betsy: And lastly, we expect our effective tax rate to be in the range of 17% to 18% for the year.

Betsy: With that we'll now turn the call over to Abigail for questions.

Abigail: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait.

Abigail: For your name to be announced to withdraw your question. Please press star one again, one moment for our first question.

Abigail: Okay.

Abigail: Our first question comes from Frank Schiraldi with Piper Sandler. Please proceed with your question.

Frank Joseph Schiraldi: Good morning.

Frank Joseph Schiraldi: Good morning, Frank.

Frank Joseph Schiraldi: On a full charge initiative.

It's sort of a work in progress.

Youre looking for efficiencies kind of across the board but.

Speaker Change: I assume that includes some expense saves as you as you close.

Speaker Change: Sensors and so forth. So can you just remind us when we look at.

Speaker Change: The guide.

Speaker Change: No Theres no.

The non operating stuff.

Speaker Change: But in terms of run rate expenses does that include some benefit from Fulton furnished as it sort of your best guess at this point and what you get from Fulton first or is that something that could as we go through the year move that expense guide lower.

Beth Ann L. Chivinski: Slide 14 shows a snapshot of our capital base, and you can see that as of March 31st, we maintained solid cushions over the regulatory minimum. Also, both bank and parent company liquidity improved during this quarter. On slide 16, we are reiterating our guidance for 2024. Our guidance assumes that a total of 75 basis points of Fed funds decreases will occur in the second half of 2024. So our guidance is as follows; we expect net interest income on a non-FTE basis to be in the range of $790 to $820 million.

Speaker Change: Yes, Frank we have.

Speaker Change: Certain expense saves in the back half of the year as we begin to implement Fulton first so we really are in the analysis.

Speaker Change: The stage and building our plan.

Speaker Change: So the overall plan is really driven to accelerate growth in certain areas as we focus even more in certain areas, but we do expect to see benefits from opt.

Speaker Change: Operating efficiencies and doing doing things a little differently as well. So there are some expense components to the save.

Beth Ann L. Chivinski: We expect the provision for credit losses to be in the range of $45 to $65 million. We expect non-interest income excluding security gains to be in the range of $235 to $250 million. We expect non-interest expenses on an operating basis to be in the range of $670 to $690 million for the year.

Speaker Change: I'd like to remind everybody that the first initiative is really an 18 month to 24 month journey and we're in that four or five months.

Speaker Change: Of that work.

Speaker Change: So what youre really seeing right now is the investment or spend to develop the plan for implementation and will we get to the point of implementing we will be able to share more details with you around expected benefits.

Beth Ann L. Chivinski: And to reinforce that estimate, it excludes potential non-operating charges we may incur as we move through the year. And lastly, we expect our effective tax rate to be in the range of 17 to 18% for the year. With that, we'll now turn the call over to Abigail for questions. Thank you. At this time, we'll conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker Change: Okay and then.

Speaker Change: On the.

Speaker Change: Loan growth just just looking at your guide on NII.

Is it fair to say that just assume sort of.

Speaker Change: <unk> like loan growth spread across the year.

And then as a follow up to that if you could just remind us what the on the deposit side.

Speaker Change: Muni outflows.

Frank Joseph Schiraldi: Just on the Pullman First initiative, I let you know that... It's sort of a work in progress and... You're looking for efficiencies kind of across the board, but I assume that includes some expense saves as you close financial centers and so forth. So you can just remind us when we look at the guide. I know there's no, you know, you take out the non-operating stuff, but in terms of run rate expenses, does that include some benefit from Fulton First?

Speaker Change: Were this quarter and how that.

Timeframe most of the flow back in.

Speaker Change: Yes, let me talk a little bit about loan growth, then I'll give it to Betsy for the municipal outflows just the seasonality to that.

Betsy: So on loan growth, we've talked about our long term organic growth targets in the 4% to 6% range.

Betsy: I think in this environment, we're going to be at the low end or maybe even under the low end of that long term.

Frank Joseph Schiraldi: Is it sort of your best guess at this point about what you get from Fulton First, or is that something that could, as we go through the year, move that expense guide lower? Yeah, Frank, we have certain expenses in the back half of the year as we begin to implement Fulton First. So we really are in the analysis stage and building our plan. So the overall plan is really driven to accelerate growth in certain areas as we focus even more on certain areas, but we do expect to see benefits from operating efficiencies and doing things a little differently as well.

Betsy: Range. So I think the growth in the first quarter, we may exceed that as we look forward, but it's going to be in the same ballpark.

Betsy: We are we are being prudent and.

Betsy: Disciplined on pricing and credit.

Betsy: As we originate loans moving moving forward.

Betsy: And then.

Betsy: <unk> outflows were $137 million, so with at least in certain of our areas certain taxes are paid in the second quarter, we should see a blip up not huge in the second quarter and then the third quarters, where we tend to see those.

Betsy: <unk>.

Speaker Change: Got you.

Speaker Change: Okay.

Speaker Change: Thanks for the color.

Frank Joseph Schiraldi: So there are some expense components to the savings. I'd just like to remind everybody that the Fulton First initiative is really an 18 month to 24 month journey, and you know we're in that, you know, four or five months of that work. So what you're really seeing right now is the investment or spend to develop the plan for implementation, and when we get to the point of implementation, we'll be able to share more details with you around expected benefits. Okay, and then on.

Speaker Change: Thanks, Greg.

Speaker Change: One moment for our next question.

Our next question comes from Daniel Tamayo with Raymond James. Please proceed with your question.

Daniel Tamayo: Thanks, Good morning, everyone.

Daniel Tamayo: Good morning, Jamie.

Daniel Tamayo: Yes.

Daniel Tamayo: Maybe first just on.

Daniel Tamayo: On the NII guidance.

Daniel Tamayo: Alright.

Daniel Tamayo: Reiterated from from last quarter and you kept.

Daniel Tamayo: The three rate cuts assumed which I understand given where we were at the end of the quarter, but.

Daniel Tamayo: Maybe if you could give us your best guess as to what.

Curtis J. Myers: The loan growth, just looking at your guide on NII, is it fair to say, does that just assume sort of, you know, one-Q-like loan growth spread across the year? And then, as a follow-up to that, if you could just remind us what the muni outflows were this quarter and how the, you know, the time frame for those to flow back in. Yeah, let me talk a little bit about loan growth, then I'll give it to Betsy for the municipal outflows, just the seasonality to that.

That guidance might look like without the June cut and if theres any kind of other details in terms of how youre thinking about the.

Daniel Tamayo: The impact of fewer rate cuts on that on that guidance that would be helpful.

Daniel Tamayo: So Dan this is Betsy.

Betsy: And with no cuts.

Curtis J. Myers: So on loan growth, you know, we've talked about our long-term organic growth targets in the four to six percent range. I think in this environment, we're going to be at the low end or maybe even under the low end of that long-term range. So I think the growth in the first quarter may exceed that as we look forward, but it's going to be in the same ballpark. You know, we are being prudent and disciplined on pricing and credit as we originate loans moving forward. And the municipal outflows were $137 million.

Betsy: Sure.

Betsy: We think were going to tilt towards the high end of the range, maybe a little bit higher.

Betsy: But again theyre going to occur later in the year. So the impact on the year is going to be moderated.

Speaker Change: Okay, Alright, that's with no cuts the ranch okay.

Speaker Change: Alright, and then.

Speaker Change: Switching gears here, if I can just to the office portfolio I. Appreciate all the detail you guys put in the deck on that just wanted to know if you've had within that.

Speaker Change: Group of loans.

Speaker Change: What the.

Speaker Change: The amount, that's either substandard or criticized or classified or however, you think about the early stage.

Speaker Change: And for that I'm, just curious how that portfolio is trending relative to the rest of your book.

Speaker Change: Yeah, Danny we've seen stability.

Speaker Change: Sure.

Speaker Change: In that overall portfolio balances are stable, we've done we've moved some out or paid off.

Speaker Change: <unk> had.

Speaker Change: We've had some originations that we did not much this past quarter, but we did some in the fourth quarter.

Daniel Tamayo: Thanks, Frank. One moment for our next question. Our next question comes from Daniel Tamayo with Raymond James. Please proceed with your question. Thanks, good morning everyone. Maybe first, just on the NII guidance reiterated from last quarter, and you kept the three rate cuts assumed, which I understand given where we were at the end of the quarter, but maybe if you could give us your best guess as to what that guidance might look like without the June cut and if there's any kind of other details in terms of how you're thinking about the impact of fewer rate cuts on that guidance, that So, David, this is Bethany.

Speaker Change: That portfolios.

Speaker Change: Really stable, we're pretty direct and in sharing what we have in classified criticized there in.

Speaker Change: It has shown stability.

Speaker Change: As of to date.

Speaker Change: Okay, Alright understood Alright, I appreciate you taking my questions you bet.

Speaker Change: Okay.

Speaker Change: One moment for our next question.

Our next question comes from Freddie Strickland with Janney Montgomery, Scott Research Division Your line is open.

Feddie Justin Strickland: Hey, good morning, everybody.

Feddie Justin Strickland: Good morning Patty.

Feddie Justin Strickland: Just wanted to continue on that last question on office I appreciate the detail on the deck, but I see that there is a $146 million located in the central business district is that pretty evenly distributed across geographies or is it more philly or DC or elsewhere, just trying to get a sense of where which central business district of those might be.

Beth Ann L. Chivinski: We've kind of modeled that out really, you know; we can tell on our loans that they reprice immediately $25 million on an annualized basis, but the harder thing to protect is deposits. But we've kind of modeled all that out. And, you know, with no cuts, we think we're going to tilt toward the high end of the range, maybe a little bit higher. But again, they're going to occur later in the year, so the impact on the year is going to be moderated.

Speaker Change: Yes, our largest is in Philadelphia, and it's not a lot of loans or getting in handy here.

Beth Ann L. Chivinski: Okay. All right. This is with no cuts.

Speaker Change: Seven.

Speaker Change: Loans and.

Speaker Change: Philly is the biggest portion.

Speaker Change: And then actually the next biggest portion as we look at the distribution is spread throughout.

Speaker Change: Then DC and Baltimore would be less than half of what we have in Philadelphia.

Beth Ann L. Chivinski: At the high end of the range. Okay. All right. And then, switching gears here, if I can, just to the office portfolio. Appreciate all the detail you guys put on the deck on that. Just wanted to know if you had within that group of loans the amount that's either substandard or criticized or classified or whatever you think about the early stage for that. I'm just curious how that portfolio is trending relative to the rest of your book. Yeah, Danny, we've seen stability in that overall portfolio. The balances are stable.

Speaker Change: And again Theres numbers overall are pretty granular Philadelphia is 255 of that total so none of those are.

Speaker Change: Significant portion of its pretty diversified spread out.

Speaker Change: Got it that's helpful.

Speaker Change: Switching gears for a second it's great to see credit relatively stable. This quarter. Your net charge offs were actually lower than what I had modeled can you talk about what youre seeing in terms of trends in criticized and classified.

Speaker Change: Yes, so criticized and classified is moving up slightly I think the number is about 77 million.

Speaker Change: Linked quarter, so not not a significant move but it is trending up a little.

Beth Ann L. Chivinski: We've moved some out or paid off. We've had some originations that we didn't do much of this past quarter, but we did some in the fourth quarter. So that portfolio is really stable. We're pretty direct in sharing what we have in Classified Criticized there.

Speaker Change: Our adding so theres generation, there and then Theres resolution.

Speaker Change: As well so we're watching that very closely.

Speaker Change: You look at the loans that are.

Speaker Change: Moving in to <unk>.

Speaker Change: Criticized and classified like they are pretty diversified.

Beth Ann L. Chivinski: And it's shown stability as of today. Okay, all right, understood. All right, I appreciate you taking my questions. You bet, Dan.

Speaker Change: And granular.

Speaker Change: Around C&I CRE. So we don't see any specific thing in the migration that gives us concern about any individual portfolio.

Operator: One moment for our next question. Our next question comes from Feddie Strickland with Janie Montgomery Scott, Research Division. Your line is open. Hey, good morning, everybody. Morning, Feddie.

Speaker Change: It's really comes down to the individual borrower being able to be being able to navigate or being in a position to handle the current.

Speaker Change: Economic environment.

Speaker Change #100: Got it appreciate the color one last quick one forgive me if I missed this but what was the balance of AMC this quarter.

Speaker Change #101: If we have that.

Speaker Change #102: Sure we do.

Speaker Change #102: Yes.

Curtis J. Myers: Yeah, our largest is Philadelphia. And you know, it's not a lot of loans. We're getting in handy here. It's seven loans, and Philly is the biggest portion, and then actually, the next biggest portion as we look at the distribution is spread throughout, and then DC and Baltimore would be less than half of what we have in Philadelphia. And again, those numbers overall are pretty granular. Philadelphia is 255 of that total.

Speaker Change #102: Okay.

Speaker Change #103: You don't have it handy.

Speaker Change #103: We'll follow up with the fed <unk> to give that specific number we don't have the reconciliation right here in front of us.

Speaker Change #104: No problem. Thanks, so much for taking my question.

Speaker Change #104: Sure.

Speaker Change #105: One moment for our next question.

Speaker Change #105: Our next question comes from Chris Mcgratty with <unk>. Please proceed with your question.

Hey, How's it going this is Andrew <unk> on for Chris Mcgratty.

Good morning, Andrew.

Andrew: So just on the NII guide.

Curtis J. Myers: So none of those are a significant portion. It's pretty diversified and spread out. Got it. That's helpful. Switching gears for a second, it's great to see credit relatively stable this quarter. Your net chargeoffs are actually lower than what I had modeled.

Andrew: I'm, just wondering what assumptions you're using for deposit mix and.

Andrew: Downbeat on those rate cuts to get to your low and high end of the guide.

Curtis J. Myers: Can you talk about what you're seeing in terms of trends and criticize and classified? Yeah, so Criticized and Classified is moving up slightly. I think the number is about $77 million linked quarters. So not a significant move, but it is trending up a little. We are adding, so there's generation there, and then there's resolution as well. So we're watching that very closely. When you look at the loans that are moving in to Criticized and Classified, they're pretty diversified and granular around CNI and CRE.

Andrew: Yes.

Andrew: So on the deposit mix, we are assuming some continued decline in the percentage of noninterest bearing deposits, we feel like we've been.

Andrew: Conservative in those projections relative to the longer term history.

Andrew: <unk>.

Andrew: You know that.

Andrew: Data on that is probably I don't want to quote that but.

Andrew: I think we're going to see a relatively low beta on that just based on competition.

Andrew: We really see a stabilizing one of the deposit as we get to CD roles.

Andrew: As we look forward the pressure.

Andrew: Pricing up on CD roles.

Andrew: It begins to stable, it's not not as significant begin to stabilize so I think theres a lot of stabilizing forces as we kind of kind of look forward. The biggest impact is going to be mixed.

Curtis J. Myers: So we don't see any specific thing in the migration that gives us concern about any individual portfolio. It really comes down to the individual borrower being able to navigate or being in a position to handle the current economic environment. Got it. I appreciate the color.

Andrew: Mix shift noninterest bearing.

Interest bearing and that is moderating but is continuing.

Curtis J. Myers: One last quick one. Forgive me if I missed this, but what was the balance of AFCI this quarter? Let me see if we have that here real quick. Sure we do, but I don't have it handy.

Speaker Change #106: Okay, great. Thank you and Joe the amount of Cds that are maturing this year and.

Speaker Change #106: But those are rolling off that compare to what you're offering today.

Joe: So through.

Joe: The end of this year.

Joe: Probably about $1 9 billion.

Joe: And that weighted average rate is.

Speaker Change #107: I have it for the next 12 months on doing math in my head here apologies the weighted average rate is probably about a.

Speaker Change #107: For roughly $4 40.

Operator: We'll follow up with you, Feddie, to give you that specific number. We don't have the reconciliation right here in front of us. No problem. Thanks so much for taking the time to answer my question. One moment for our next question. The next question comes from Chris McGratty with KBW. Please proceed with your question. Hey, how's it going? This is Andrew Leischner on for Chris McGratty.

Speaker Change #107: I will tell you on average the rate over the past couple of months.

Speaker Change #107: We're putting on new Cds at a weighted average rate of about $4 40, so as we get towards the end of the year again absent other changes, which we know they will be those we're not going to really see an impact from those renewals.

Speaker Change #107: New Cds.

Speaker Change #108: Yes, so we feel good.

Speaker Change #108: We feel really good about how we've managed the duration in that book in each month as we move forward, we get again to that role being a more stabilizing.

Andrew Steven Leischner: Good morning, Andrew. Hey, how's it going? So just on the NII guide... Just wondering what assumptions you're using for deposit mix and downbeat on those rate cuts to get to your low and high ends of the guide. So on the deposit mix, we are assuming some continued decline in the percentage of non-interest bearing deposits. We feel like we've been conservative in those projections relative to the longer-term history. You know, the data on that is probably, I don't want to quote that.

Speaker Change #108: <unk> on the overall balance sheet.

Speaker Change #109: Got it. Thank you I appreciate the quick math, there and then just just last one if I can.

Speaker Change #110: With that.

Speaker Change #110: You repurchased one 9 million shares and you have $95 million.

Speaker Change #110: Remaining on the authorization are you are you still comfortable with the operating environment in your current capital I will stick to contemplate.

Curtis J. Myers: But, um, you know, I think we're going to see a relatively low beta on that just based on competition. We really see a stabilization of the deposit as we get to CD rolls. As we look forward, the pressure of pricing up on CD rolls begins to, you know, it's not as significant, and it begins to stabilize. So I think there are a lot of stabilizing forces as we kind of look forward.

Speaker Change #110: Further buybacks thanks.

Speaker Change #111: Yeah, Great question, and we continue to evaluate that our priority is to support organic growth.

Speaker Change #112: One second.

Speaker Change #113: Second priority would be any corporate initiatives.

Speaker Change #114: That we have that would require.

Speaker Change #114: Capital and then buybacks.

Speaker Change #114: So we would evaluate that environment and we feel that based on our capital levels, we could be.

Speaker Change #114: The active in our buyback throughout the remainder of the year, but we may not do.

Curtis J. Myers: The biggest impact is going to be the mixed shift from non-interest bearing to interest bearing. And that is moderating, but is continuing. Okay, great. Thank you. And do you have the number of CDs that are maturing this year?

Speaker Change #114: Depending on.

Speaker Change #114: The situation, we have the authorization remaining for the $95 million.

Speaker Change #114: And if you look back over recent history, we have.

Speaker Change #114: Use that almost every quarter to some degree based on the environment that we see.

Beth Ann L. Chivinski: What those are rolling off at compared to what you're offering today. So, through the end of this year, there's probably about $1.9 billion. And that weighted average rate is, I have it for the next 12 months. I'm doing math in my head here, apologies. The weighted average rate is probably about a 440.

Speaker Change #114: But again it is the last priority in our capital utilization.

Speaker Change #115: Alright, Thanks for taking my questions I'll step back.

Speaker Change #116: Thanks, Andrew.

One moment our next question.

Speaker Change #116: Okay.

Speaker Change #116: Our next question comes from David Bishop with half the group your line is open.

David Jason Bishop: Yes, good morning.

Beth Ann L. Chivinski: I will tell you, on average, over the past couple months, we've been putting on new CDs at a weighted average rate of about 440. So as we get toward the end of the year, again, absent other changes, which we know there'll be, we're not going to really see an impact from those renewals or new CDs. Yeah, so we feel really, really good about how we've managed the duration of that book.

David Jason Bishop: Hey, David.

David Jason Bishop: Take care.

David Jason Bishop: Circling back to the first I know you're sort of focused on the.

David Jason Bishop: Maybe the expense side of things, but are there revenue enhancements that could emanate from this.

David Jason Bishop: This project longer term.

David Jason Bishop: Yeah definitely.

David Jason Bishop: Focus part.

David Jason Bishop: Of that initiative is really to accelerate growth in areas where.

Beth Ann L. Chivinski: And each month, as we move forward, we get back to that role being a more stabilizing impact on the overall balance. Got it. Thank you. Appreciate the quick math there. And then just last one, if I can.

David Jason Bishop: We deliver high value for our customers.

David Jason Bishop: Grow the company effectively.

Andrew Steven Leischner: With that, you repurchase 1.9 million shares, and you have 95 million. Remaining on the authorization, are you still comfortable with the operating environment and your current capital levels to continue to contemplate further buybacks? Yeah, great question, and we continue to evaluate that. Our priority is to support organic growth first.

David Jason Bishop: Going forward. So we do think those accelerators exist.

David Jason Bishop: But theres also an efficiency and operating environment.

David Jason Bishop: Tech benefit realization and things like that that will enhance.

David Jason Bishop: Efficiency and productivity too but.

David Jason Bishop: That focus part is really on the growth side.

Speaker Change #117: Got it.

Speaker Change #117: I know there was some noise this quarter with some of the branch closures and such.

Speaker Change #117: Did that flow through to the I saw occupancy expense was up.

Speaker Change #117: A small I don't know if that was weather related or related to that initiative I thought those were another expenses, but I don't know Betsy occurred any any any guidance in terms of good run rate on the occupancy side of the equation.

Speaker Change #117: I'll, let Betsy takes us only because she loves this expense item.

I'm sorry, we're laughing here, yes, the increase in occupancy was weather related.

Speaker Change #118: So no removal cost so that's that.

Betsy: It should moderate.

Betsy: Slight in the northeast.

Betsy: So we've got to love it up here you never know what's going to hit.

Speaker Change #119: Also maybe a high level question purchasing.

Speaker Change #119: In terms of capital allocate occasion.

Appetite for more M&A.

Speaker Change #119: Prominent Lakewood deal had some.

Speaker Change #119: Some interesting competitive just to it.

Speaker Change #119: Don't know if that sobers your outlook for additional M&A and maybe how comfortable you would be maybe looking at maybe some distressed.

Andrew Steven Leischner: Thanks, Andrew. One moment for our next question. Our next question comes from David Bishop with Hafta Group. Your line is open. Yeah, good morning. Good morning, David.

Speaker Change #119: Distressed sales out there just curious your M&A appetite at this point thanks.

Speaker Change #120: Yes, so our M&A strategy remains the same I've talked about the <unk>.

David Jason Bishop: A question, circling back to the first, I know you sort of focused on the, you know, maybe the expense side of things, but are there revenue enhancements that could emanate from this project longer term? Yeah, definitely. The focus part of that initiative is really to accelerate growth in areas where we deliver high value for customers, have more differentiation, and we feel we're doing well and can do even better with some of the initiatives and strategies that we're contemplating.

Speaker Change #120: Looking at it in two buckets, the $1 billion to $5 billion community Bank.

Speaker Change #120: Really additive to our organization.

Speaker Change #120: And we're focused on those we do think we have opportunity in that category.

Speaker Change #120: We also focus on the $5 to $15 billion 15, probably being being the largest we would consider.

Speaker Change #120: More strategic partnership.

Speaker Change #120: Theres a handful of those but we would consider those as well. So the strategy is the same the environment is we feel we have opportunities for.

Speaker Change #120: M&A.

Speaker Change #120: We evaluate those win win we have the opportunities.

David Jason Bishop: So that is the first priority for us, how to grow the company effectively going forward. So we do think those accelerators exist, but there's also an efficiency and operating environment and tech benefit realization, things like that that will enhance efficiency and productivity too. But that focus part is really on the growth side.

Speaker Change #120: If we can work on something that's that.

Speaker Change #120: Positively impacts our shareholders over the long haul.

Speaker Change #120: We certainly would would be active.

Speaker Change #121: Got it I appreciate the color.

Speaker Change #121: Debt.

Speaker Change #122: One moment our next question.

Our next question comes from Manuel Novice with D. A Davidson. Please proceed with your question.

Curtis J. Myers: And I know there was some noise this quarter with some of the branch closures and such. Did that flow through to occupancy expenses? I saw Occupancy Expense was up. I don't know if that was weather-related or related to that initiative; I thought those were other expenses, but I don't know if that happened. Any guidance in terms of a good run rate on the occupancy side of the equation? I'll let Betsy take this one because she loves this expense item. I'm sorry; we're laughing here.

Manuel Antonio Navas: Hey, good morning.

Manuel Antonio Navas: Could you just go into a little bit more detail on whats kind of driving that.

I guess slower end of the guide on loan growth.

Manuel Antonio Navas: Yes, I understand the pricing side.

Manuel Antonio Navas: Does borrow demand at high rates also have an impact.

Manuel Antonio Navas: As deposit gathering also slowing at all.

Manuel Antonio Navas: So deposit gathering we are being.

Beth Ann L. Chivinski: Yes, the increase in occupancy was weather-related, so snow removal costs should moderate. Life in the Northeast. Yeah, you've got to love it up here.

We're doing a great job I think in that that is not hindering our growth at all.

Manuel Antonio Navas: If anything I think it's an opportunity to fuel our growth as we are doing it doing a good job there.

David Jason Bishop: You never know what's going to hit. Also, maybe a high-level question, Kurt, in terms of capital allocation. Appetite for more M&A, I know that the Providence-Lakeland deal has some interesting appendages to it.

Manuel Antonio Navas: Biggest thing on low growth is our pipeline.

Manuel Antonio Navas: Commercial loans.

Manuel Antonio Navas: Pipeline is up linked quarter and up year over year.

Manuel Antonio Navas: But what we're seeing is what we call the pull through rate on that pipeline.

Curtis J. Myers: I don't know if that sobers your outlook for additional M&A and maybe how comfortable you'd be, you know, maybe looking at maybe some distressed, distressed bank sales out there. Just curious about your M&A appetite at this point. Thanks.

Manuel Antonio Navas: Continues to be challenged customers are.

Speaker Change #123: Very cautious.

Speaker Change #123: And projects are not happening because costs are up rates are up.

Speaker Change #123: Things like that so the biggest impact is not opportunity.

Curtis J. Myers: Yeah, so our M&A strategy remains the same. I've talked about looking at it in two buckets, the $1 to $5 billion community bank, you know, really additive to our organization. And we're focused on those. We do think we have an opportunity in that category. We also focus on the $5 to $15 billion, $15 probably being the largest we would consider. More strategic partnerships, you know; there's a handful of those. But, you know, we would consider those as well. So the strategy is the same.

Speaker Change #123: It's either borrowers deciding to move forward.

Speaker Change #123: On a on a project or spending or us, making sure we get the right pricing credit terms.

I appreciate that does that does that mean that.

Speaker Change #123: Yeah.

Speaker Change #124: No cuts can see to the high end of the NOI range, but perhaps there would be an increase in loan demand. If we did get fed cuts is that kind of right way to think about it and what would be.

Speaker Change #124: Where you would be happier.

Speaker Change #124: Yeah.

Speaker Change #125: We like stability.

Curtis J. Myers: The environment is we feel we have opportunities for M&A. And, you know, we evaluate those when we have the opportunities. And, you know, if we can work on something that positively impacts our shareholders over the long haul, you know, we certainly would be active. Got it. I appreciate the color. One moment for our next question. Our next question comes from Manuel Navas with D.A. Davidson.

Speaker Change #125: The ability.

Speaker Change #125: And so that's the easiest thing to navigate so.

Speaker Change #125: Just saw some level of stability.

Speaker Change #125: It would be good we really position the company.

Speaker Change #125: To effectively perform no Matt no matter what happens we have puts and takes on rates up or rates down.

Speaker Change #125: Rates up we benefit in some ways and have more pressure in some ways rates down we benefit in certain ways and have more pressure in certain ways. So.

Speaker Change #125: There are a lot of different variables and what we really focus on is having the company in a position.

Speaker Change #125: That we perform effectively.

Speaker Change #125: No matter what happens to rates.

Speaker Change #126: I had one last kind of more specific modeling question I had that you expect that the noninterest bearing makes getting around 22% by year end is that change at all.

Speaker Change #126: With a little bit more outflows this quarter.

Speaker Change #126: Is that still right around the same mix.

Speaker Change #126: The year end.

Speaker Change #126: So we ended the quarter at 23 four.

Speaker Change #127: Thank you.

Speaker Change #127: For your modeling 'twenty, 2%, certainly a reasonable if you look back over the past.

Speaker Change #127: 15 years.

Speaker Change #127: That's a good range you have to go way back to get much slower than that.

Speaker Change #128: Okay I appreciate that thank you very much.

Speaker Change #129: Thank you Daniel.

Speaker Change #130: One moment for our next question.

Speaker Change #130: As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced our next question comes from Matthew Breese with Stephens. Your line is open.

Curtis J. Myers: So, the biggest impact is not opportunity; it's either borrowers deciding to move forward on a project or spending, or us making sure we get the right price of credit. I appreciate that. Does that mean that... You know, no cuts gets you to the high end of the NII range, but perhaps there would be an increase in loan demand if we did get Fed cuts? Is that kind of a right way to think about it? And what would it be? Where you would be happier?

Matthew M. Breese: Good morning, everybody.

Matthew M. Breese: Good morning, Matt and I wanted to go back to <unk>.

Matthew M. Breese: How much more in onetime costs do you expect and over what timeframe do you think the majority of those onetime costs are going to going to occur.

Matthew M. Breese: Yes, so we do expect increased onetime costs as we get into implementing the changes.

Speaker Change #131: That we're designing and working on.

Speaker Change #132: Right now so.

Right now we just have the spend to develop the plan and then.

Speaker Change #133: As we implement that plan there certainly would be one time costs from contracts in.

Speaker Change #133: Other things that we would consider efficiencies overall, so we do.

Speaker Change #133: Do have those planned and we would be disclosing though that as we move forward.

Speaker Change #133: Our real goal is to get to.

Speaker Change #133: Showing.

Speaker Change #133: One the plan well costs, we have and what benefits we're going to drive.

Speaker Change #133: We're just not there yet.

Curtis J. Myers: So there are a lot of different variables, and what we really focus on is having the company in a position that we can perform effectively no matter what happens to rates. I have one last kind of more specific modeling question.

Speaker Change #133: But we wanted to be transparent with that we're spending money and investing money to figure that playing out.

Speaker Change #134: Okay, but should we expect kind of this quarter's six point.

Speaker Change #134: $4 million in one time cost too.

Speaker Change #134: Recur for at least the near term or is that an elevated figure in your view.

Curtis J. Myers: I had thought that you expected the non-interest bearing mix to get around 22% by year end. Does that change at all? With a little bit more outflows this quarter, is that still right around the same mix that you end the year at? And so we ended the quarter at 23.4%. I think, you know, for your modeling, 22% is certainly a reasonable number if you look back over the past, um, 15 years, you know, that that's a good range. You have to go way back to get much lower than that.

Speaker Change #134: Yes, we really have those playing out again, it's a.

Speaker Change #134: 18 to 24 months.

Speaker Change #134: Project overall, the one time cost would be concentrated more at the front end of that.

Speaker Change #134: So thinking over the next couple of quarters.

Speaker Change #134: Would have more of the one time costs and then we would be getting the benefits then over the full 24 months, so that I think youre thinking about it the right way Matt.

Speaker Change #134: Okay.

Speaker Change #135: I wanted to go back to the office portfolio.

Speaker Change #135: You have eight office relationships over $20 million, you discuss kind of the three in the central business districts.

Beth Ann L. Chivinski: Okay, I appreciate that. Thank you very much. Thank you, Manuel. One moment for our next question. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Speaker Change #135: But I was hoping within the eight you could talk about maybe the three or four largest relationships what are the sizes. There how are they performing maturity schedules and any sort of details on kind of LTE.

Operator: Our next question comes from Matthew Breese with Stevens. Your line is open. Good morning, everybody. Hey, morning, Matt.

Speaker Change #135: LTV debt service coverage ratios for for.

Speaker Change #136: Or just overall color on the biggest stuff.

Matthew M. Breese: Hey, I wanted to go back to Fulton first. How much more in one-time costs do you expect, and over what time frame do you think the majority of those one-time costs are going to occur? Yeah, so we do expect increased one-time costs as we get into implementing the changes that we're designing and working on right now. So right now, we just have the spend to develop the plan, and then as we implement that plan, there certainly will be one-time costs from contracts and other things that we would consider, overall.

Speaker Change #137: Yeah. So the.

Speaker Change #137: The top.

Speaker Change #137: Five borrowers there are in the $25 million to $30 million range and balance our largest deals.

Speaker Change #137: $30 million.

Speaker Change #137: In balances.

Speaker Change #138: We don't have any.

Speaker Change #138: Charities that are coming up that we either are.

Speaker Change #138: Comfortable with or don't have a resolution for so we feel good about the position of those largest bar.

Speaker Change #138: Borrowers.

Speaker Change #138: At this point.

Speaker Change #138: We were paying we are paying close attention to every office alone we have from the $400000. One we originated in the first quarter.

Speaker Change #138: Our largest one of $30 million.

Speaker Change #138: Are they all in.

Speaker Change #138: Yes.

Speaker Change #138: Okay.

Speaker Change #138: And then you had a you had a $3 1 million loss on asset disposals. This quarter what was in there.

Speaker Change #138: Those were five branches that we have committed to close I believe theyre closing the end of this month next week they were closed.

Okay and then.

Speaker Change #138: Last one is just on <unk>.

Speaker Change #138: Commercial swap activity.

Curtis J. Myers: Again, it's an 18 to 24-month project overall. The one-time cost would be concentrated more at the front end of that. So, thinking over the next couple quarters, we would have more of the one-time costs, and then we would be getting the benefits then over the full 24 months. So I think you're thinking about it the right way, Matt. Okay. I wanted to go back to the office portfolio.

Speaker Change #138: My gut here's with slower growth that will remain kind of look.

Speaker Change #138: At a depressed level, but I wanted your thoughts on on weather.

Speaker Change #138: Get back to a kind of a north of $3 million run rate there.

Speaker Change #138: Yes.

It really comes down to mix of origination versus overall growth. So.

Speaker Change #139: Obviously, when you have higher overall growth year.

Your mix is better to you have volume in every category. So it really what drives those numbers is the larger originations.

Speaker Change #139: So large C&I and large CRE originations are what really drive the number we have a good core kind of recurring business. So that's why you see.

Speaker Change #139: There's kind of a floor on that that fee income each quarter, but to get to the.

Curtis J. Myers: How are they performing on maturity schedules and any sort of details on kind of LTV debt service coverage ratios for just overall color on the biggest stuff? Yeah, so the top five borrowers there are in the $25 to $30 million range. Our largest deal is about $30 million in balances. We don't have any maturities that are coming up that we either aren't comfortable with or don't have a solution for, so we feel good about the position of those largest borrowers at this point. And we are paying close attention to every office loan we have, from $400,000 when we originated it in the first quarter to our largest one of $30 million. Are they all in?

Speaker Change #139: Three and $4 million quarters that we've seen historically.

Speaker Change #139: Really have to have a few larger originations that are a derivative of our swap done on those.

Got it.

Speaker Change #140: Okay. That's all I had I appreciate taking my questions. Thank you.

Speaker Change #141: Thanks, Matt.

Speaker Change #141: That concludes the question and answer session. At this time I would like to turn the call back to Curt Myers for closing remarks.

Curtis J. Myers: Well. Thank you again for joining us today, we hope youll be able to be with us when we discuss second quarter results in July.

Speaker Change #142: Thanks, everyone.

Speaker Change #143: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Curtis J. Myers: Yeah. And then you had a 3.1 million loss on asset disposals this quarter. What was in it?

Curtis J. Myers: Those were five branches that we have committed to closing. I believe they're closing at the end of this month. Okay, and then the last one is just done on commercial swap activity. My gut here is that with slower growth, that'll remain kind of at a depressed level, but I wanted your thoughts on whether we can get back to kind of the north of three million dollar level right there. Yeah, it really comes down to the mix of origination versus overall growth.

Curtis J. Myers: So obviously, when you have higher overall growth, your mix is better, too. You have volume in every category. So really, what drives those numbers is the larger originations. So large CNI and large CRE originations are what really drive the numbers. We have a good core kind of recurring business. So that's why you see that there's kind of a floor on that fee income each quarter. But to get to the $3 and $4 million quarters that we've seen historically, you really have to have a few larger originations that are a derivative or a swap done on.

Matthew M. Breese: Okay, that's all I had. I appreciate you taking the time to answer my questions. Thank you. Thanks, Ben. That concludes the question and answer session. At this time, I would like to turn the call back to Curt Myers for closing remarks. Well, thank you again for joining us today. We hope you'll be able to be with us when we discuss the second quarter results in July. Thanks, everyone. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Q1 2024 Fulton Financial Corp Earnings Call

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