Q2 2024 Fulton Financial Corp Earnings Call

Good day and thank you for standing by.

Operator: Special Results Call. At this time, all participants are in listen-only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.

Welcome to the second quarter Fulton Financial results call.

Speaker Change: At this time, all participants are on listen-only mode.

Speaker Change: After three speakers' presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.

Operator: To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matt Jozwiak, Director of Investment Relations. Please go ahead.

Matthew Jozwiak: To withdraw your question, please press star 1 once again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matt Jozwiak, Director of Investment 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 second quarter ending June 30th, 2024. Your host for today's conference call is Curt Myers, Chairman and Chief Executive Officer. Joining her today is Betsy Chivinski, Interim Chief Financial Officer. Our comments today will refer to financial information and related slide presentations. Included with our earnings announcement, which we released yesterday after the market close, these documents can be found on our website at F-U-L-T dot com by clicking on Investor Relations and then on Voters.

Curtis J. Myers: Good morning and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the second quarter ending June 30, 2024. Your host for today's conference call is Curt Myers, Chairman and Chief Executive Officer.

Curtis J. Myers: Joining her today is Betsy Chivinski, Interim Chief Financial Officer.

Speaker Change: Our comments today will refer to the financial information and related slide presentations.

Speaker Change: 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 News.

Matthew Jozwiak: These slides can also be found on the presentations page under Investor Relations on our website. On 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 statement.

Speaker Change: The slides can also be found on the presentations page under Investor Relations on our website.

Curtis J. Myers: On this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operations, and business.

Curtis J. Myers: These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, and actual results could differ materially.

Curtis J. Myers: 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.

Curtis J. Myers: Fulton undertakes no obligation other than as required by law to update or revise any forward-looking statements.

Curtis J. Myers: In discussing Fulton's performance, representatives of Fulton may refer to certain non-GAAP financial measures.

Curtis J. Myers: Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and slides 19-22 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures.

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 19-22 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measure. Now, I'd like to turn the call over to your host, Curtis. Thanks, Matt. And good morning, everyone.

Curtis J. Myers: Now I'd like to turn the call over to your host, Curt Myers.

Curtis J. Myers: For today's call, I'll be providing highlights on our performance, discussing several key initiatives, and I'll provide a few overall comments. Then I'll turn the call over to Beth Chivinski, Interim Chief Financial Officer, to review our financial results in more detail and walk you through our guidance for 2020. After our prepared remarks, we'll be happy to take any questions you may have. Let me start by thanking both our new Republic teammates as well as our dedicated Fulton team for an exceptional effort these last few months.

Curtis J. Myers: Thanks, Matt. And good morning, everyone. For today's call, I'll be providing highlights on our performance for the quarter. I'll discuss several key initiatives, and I'll provide a few overall comments on the company.

Beth Ann L. Chivinski: Then I'll turn the call over to Beth Chivinski, Interim Chief Financial Officer, to review our financial results in more detail and step you through our guidance for 2024.

Curtis J. Myers: After our prepared remarks, we'll be happy to take any questions you may have.

Curtis J. Myers: Let me start by thanking both our new Republic teammates as well as our dedicated Fulton team for an exceptional effort these last few months. We've had a very active quarter on a variety of fronts.

Curtis J. Myers: We've had a very active quarter on a variety of topics. We continue to drive our strategy forward. We made great progress on key initiatives, all while delivering a strong performance for our customers, communities, and employees. Our team performed well and is excited about the strategic progress we are making. Operating earnings of 47 cents per diluted share this quarter was a strong. Following a solid first quarter, our year-to-date results are outpacing our expectations. Stable core business trends supplemented by the impact of the Republic transaction are driving. We saw steady balance sheet growth as organic loans and deposits grew as expected, and we added significant growth through the Republic transaction.

Curtis J. Myers: We continue to drive our strategy forward. We made great progress on key initiatives, all while delivering a strong performance for our customers, communities, and our shareholders.

Curtis J. Myers: Our team performed well and is excited about the strategic progress we are making.

Curtis J. Myers: Operating earnings of $0.47 per diluted share this quarter was a strong performance.

Curtis J. Myers: Following a solid first quarter, our year-to-date results are outpacing our expectations.

Curtis J. Myers: Stable core business trends, supplemented by the impact of the Republic transaction, are driving these results.

Curtis J. Myers: We saw steady balance sheet growth as organic loans and deposits grew as expected, and we added significant growth through the Republic transaction.

Curtis J. Myers: We also generated meaningful margin, revenue, and net income. On a linked quarter basis, net interest margin increased 11%. Net interest income grew by $35 million. Non-interest income grew by nearly $9 million, and Operating Net Income grew by 7%.

Curtis J. Myers: We also generated meaningful margin, revenue, and net income growth.

Curtis J. Myers: On a linked quarter basis, net interest margin increased 11 basis points.

Curtis J. Myers: Net interest income grew by $35 million, non-interest income grew by nearly $9 million, and operating net income grew by $17 million.

Curtis J. Myers: Also during the quarter, we executed on a sale-leaseback transaction and corresponding investment portfolio restructuring. Improving the Profile Investment Portfolio as well as its yield, the investment portfolio restructuring adds an estimated $8.5 million in interest income annually. We also moved forward on five planned financial center consolidations and relocated one financial center in New Jersey. We issued our 2023 Corporate Social Responsibility Report, reflecting our commitment to the communities and stakeholders.

Curtis J. Myers: Also during the quarter, we executed on a sale-leaseback transaction and corresponding investment portfolio restructuring.

Curtis J. Myers: Improving the Profile Investment Portfolio as well as its yield, the Investment Portfolio Restructuring adds an estimated $8.5 million in interest income annually.

Curtis J. Myers: We also moved forward on five planned financial center consolidations and relocated one financial center in our New Jersey market.

Curtis J. Myers: We issued our 2023 Corporate Social Responsibility Report reflecting our commitment to the communities and stakeholders we serve.

Curtis J. Myers: Performance, Steady Business Trends, and the Capital Raise allowed us to maintain healthy capital, increase our tangible book value, enhance our earnings capabilities, and deliver value to our shareholders. Overall, we feel it was a strong quarter. Now, let me provide a bit more detail on growth.

Curtis J. Myers: Our performance, steady business trends, and the capital raise allowed us to maintain healthy capital levels.

Curtis J. Myers: Increase our tangible book value, enhance our earnings capabilities, and deliver value to our shareholders.

Curtis J. Myers: Second quarter deposit growth was $254 million, or 4.6% annualized, when you exclude the $191 million of high-cost broker deposits that we were able to eliminate. Overall, when including the Republic transaction, deposits grew $3.8 billion, or 17.6% on a length quarter basis. We did experience some deposit runoff from the acquired deposit portfolio as several large municipal deposit customers were already transitioning out of Republic. And we also purposely reduced certain high-cost non-re

Curtis J. Myers: Overall, we feel it was a strong quarter for the company.

Speaker Change: Now, let me provide a bit more detail on growth. Second quarter deposit growth was $254 million, or 4.6% annualized, when you exclude the $191 million of high-cost broker deposits that we were able to eliminate.

Speaker Change: Overall, when including the Republic transaction, deposits grew $3.8 billion or 17.6% on a length quarter basis.

Speaker Change: We did experience some deposit runoff from the Acquired Deposit Portfolio as several large municipal deposit customers were already transitioning out of Republic.

Speaker Change: And we also purposely reduce certain high-cost, non-relationship deposits.

Curtis J. Myers: These deposit results were as anticipated, and we remain focused on customer retention and customer service. Organic loan growth for the quarter was $124 million or 2.3% annualized, consistent with past periods. Overall loan growth was $2.7 billion or a 12.4%-length quarter on a consolidated basis, including the acquired loan. Profitable loan growth and prudent credit decisions remain our priority. Our loan-to-deposit ratio ended the quarter at 94.3%. Our current loan-to-deposit ratio is below our long-term operating target of 95% to 105% and enhances our balance sheet growth opportunities and alleviates funding pressure in the near term. This was a key outcome of the Republic transaction. Non-interest income for the quarter was strong.

Speaker Change: These deposit results were as they anticipated, and we remain focused on customer retention and customer growth.

Speaker Change: Organic loan growth for the quarter was $124 million or 2.3% annualized, consistent with past periods.

Speaker Change: Overall loan growth was $2.7 billion, or a 12.4% length quarter on a consolidated basis, including the acquired loans.

Speaker Change: Profitable loan growth and prudent credit decisions remain our focus.

Speaker Change: Our loan-to-deposit ratio ended the quarter at 94.3%.

Speaker Change: Our current loan-to-deposit ratio is below our long-term operating target of 95 to 105 percent and enhances our balance sheet growth opportunities and alleviates funding pressure in the near term. This was a key outcome of the Republic transaction.

Curtis J. Myers: Core non-interest income was up $6 million to $63 million. When including Republic, total non-interest income grew $8.8 million lengthwise. Now, let me provide some comments on credit. Overall, core Fulton credit metrics remain stable. The provision for credit losses, excluding the Day 1 credit mark associated with the public transaction, was $8.6 million, down from $10.9 million in the first quarter; charge-offs for the quarter were 19 percent, and criticized and classified loans were relatively flat in the Fulton portfolio.

Speaker Change: Non-interest income for the quarter was strong. Core non-interest income was up $6 million to $63 million. When including Republic, total non-interest income grew $8.8 million length quarter.

Curtin: Quarter. Now it may provide some comments on credit. Overall, four Fulton Credit Remembrance Methods remain stable. The provision for credit losses, excluding the day one credit mark associated with the four public transactions, was 8.6 million, down from 10.9 million in the first quarter. Chargeoffs for the quarter were 19 basis points, and Chris size and classified loans were relatively flat in the Fulton portfolio. Turning to the acquired portfolio, we conducted a review of all loans over $3 million. After applying our risk rating methodology, non-apool loans did not significantly increase, and chargeoffs were less than $1 million for the quarter.

Speaker Change: Now let me provide some comments on credit. Overall, core Fulton credit metrics remain stable.

Speaker Change: The provision for credit losses, excluding the Day 1 credit mark associated with the public transaction, was $8.6 million, down from $10.9 million in the first quarter.

Speaker Change: Chargeoffs for the quarter were 19 basis points, and criticized and classified loans were relatively flat in the Fulton portfolio.

Curtis J. Myers: Turning to the acquired portfolio, we conducted a review of all loans over $3 million. After applying our risk rating methodology, non-equal loans did not significantly increase, and charge-offs were less than $1 million. The initial credit mark on the acquired portfolio was supported by our review, and no additional provision was needed.

Speaker Change: Turning to the acquired portfolio, we conducted a review of all loans over $3 million. After applying our risk rating methodology, non-accrual loans did not significantly increase and charge-offs were less than $1 million for the quarter.

Curtin: The initial credit mark on the acquired portfolio was supported by our review, and no additional provision was needed. We continue to be cautious in our credit outlook for 2024, and our monitoring the acquired portfolio closely. The increase in our allowance for credit losses provides additional ability to absorb future loss.

Speaker Change: The initial credit mark on the acquired portfolio was supported by our review and no additional provision was needed.

Curtis J. Myers: We continue to be cautious in our credit outlook for 2024 and are monitoring the acquired portfolio closely. The increase in our allowance for credit losses provides additional ability to absorb future losses. Now we look forward. I'll provide updates on two key corporate initiatives. First, we're focused on the timely and effective integration of Republic, and we continue to diligently follow the FDIC process. Integration of customers, teams, and systems is progressing well, with the majority of integration work anticipated to be completed by year end. Next, let me turn to Fulton first.

Speaker Change: We continue to be cautious in our credit outlook for 2024 and are monitoring the acquired portfolio closely. The increase in our allowance for credit losses provides additional ability to absorb future losses.

Curtin: Now let's look to moving forward. I provide updates on two key corporate initiatives. First, we're focused on the timely and effective integration of public, and we continue to diligently follow the FDIC process. Integration of customers, teams, and systems is progressing well. With the majority of our integration work anticipated to be completed by your end.

Speaker Change: Now let's look to moving forward. I'll provide updates on two key corporate initiatives.

Speaker Change: First, we're focused on the timely and effective integration of Republic, and we continue to diligently follow the FDIC process.

Speaker Change: Integration of customers, teams, and systems are progressing well, with a majority of integration work anticipated to be completed by year-end.

Curtin: Next, let me turn to Fulton first. During the quarter, we've completed the design phase of the process, and are now moving into the implementation phase. I want to remind you that this is a 12 to 18-month process in which we're only at about the six-month point. We look forward to providing more details on growth initiatives and operating efficiencies during the third quarter earnings call. This past quarter, you see the continued investment in the initiative. This quarter's costs are for the final program design, as well as certain employee-related changes. We continue to make good progress on the Fulton First initiative.

Curtis J. Myers: During the quarter, we've completed the design phase of the process and are now moving into the implementation phase. I want to remind you that this is a 12 to 18 month process in which we're only at about six months. We look forward to providing more details on growth initiatives and operating efficiencies during the third quarter earnings cycle. In this past quarter, you saw the continued investment in the initiative. This quarter's costs are for the final program design as well as certain employee-related costs. We continue to make good progress on Fulton First.

Speaker Change: Next, let me turn to Fulton First.

Speaker Change: During the quarter, we've completed the design phase of the process and are now moving into the implementation phase.

Speaker Change: I want to remind you that this is a 12 to 18 month process in which we're only at about the six month point.

Speaker Change: We look forward to providing more details on growth initiatives and operating efficiencies during the third quarter earnings call.

Speaker Change: This past quarter, you see the continued investment in the initiative.

Speaker Change: This quarter's costs are for the final program design, as well as certain employee-related changes.

Speaker Change: We continue to make good progress on the Fulton First Initiative.

Curtis J. Myers: Overall, a solid first half of 2020 and a transformational quarter in many respects for us. Now, I turn the call over to Betsy to discuss our financial performance in more detail and our guidance. Thank you, Curtin. Good morning, everyone.

Curtin: Overall, a solid first half of 2024, and a transformational quarter in many respects for our company.

Speaker Change: Overall, a solid first half of 2024 and a transformational quarter in many respects for our company.

FEDC: Now let me turn to call it over to FEDC to discuss our financial performance in more detail and our guidance. Thank you, Curtin. Good morning, everyone. Unless I note otherwise, the quarterly comparison I mentioned is with the first quarter of 2024, and loan into positive growth numbers are annualized percentages on a lift quarter basis. Starting on slide four, operating earnings per diluted share this quarter are 47 cents on operating income available to common shareholders of $82.5 million. This compares to 40 cents of operating EPS in the first quarter of 2024. I've heard noted excluding Republic loan growth with 124 million or 2.3% during the quarter.

Speaker Change: Now, let me turn the call over to Betsy to discuss our financial performance in more detail and our guidance.

Beth Ann L. Chivinski: Unless I note otherwise, the quarterly comparisons I mentioned are with the first quarter of 2024, and the loan and deposit growth numbers are annualized percentages on a linked quarter basis. Starting on slide four, operating earnings per diluted share this quarter were $0.47 on operating net income available to common shareholders of $82.5 million. This compares to $0.40 of operating EPS in the first quarter of 2020. As Kurt noted, excluding Republic, loan growth was $124 million or 2.3% during the quarter. Commercial lending contributed $39 million of this growth, or about 1%. Commercial construction loans grew $64 million during the quarter, but this was offset by slight declines in commercial real estate, C&I, and equipment finance.

Beth Ann L. Chivinski: Thank you, Curtis. Good morning, everyone. Unless I note otherwise, the quarterly comparisons I mentioned are with the first quarter of 2024, and loan and deposit growth numbers are annualized percentages on a linked quarter basis.

Beth Ann L. Chivinski: Starting on slide 4, operating earnings per diluted share this quarter were $0.47 on operating net income available to common shareholders of $82.5 million. This compares to $0.40 of operating EPS in the first quarter of 2024.

Beth Ann L. Chivinski: As Kurt noted, excluding Republic, loan growth was $124 million or 2.3% during the quarter.

FEDC: Commercial lending contributed $39 million of this growth throughout 1%. Commercial construction loans grew 64 million during the quarter, and was offset by slight declines in commercial real estate, CDI, and equipment scenarios. total commercial loans, including the acquired commercial portfolio of grew 1.8 billion or 13% linked quarter net of purchase account in war. Consumer lending produced growth of 87 million or 5% during the quarter, an increase of 102 million dollars in residential mortgages, primarily adjustable rates, with offset by decreases in other consumer categories. When layering in republished consumer portfolio, total consumer loans grew by 909 million or 12% linked quarter net of purchase account in war.

Kurt: Commercial lending contributed $39 million of this growth, or about 1%. Commercial construction loans grew $64 million during the quarter and was offset by slight declines in commercial real estate, C&I, and equipment finance.

Beth Ann L. Chivinski: Total commercial loads, including the acquired commercial portfolio, grew $1.8 billion, or 13% linked quarter net of purchase accounting loss. Consumer lending produced growth of 87 million, or 5% during the quarter. An increase of $102 million in residential mortgages, primarily adjustable-rate, was offset by decreases in other consumer categories.

Speaker Change: Total commercial loads including the acquired commercial portfolio grew $1.8 billion or 13% linked quarter net of purchase accounting loss.

Speaker Change: Consumer lending produced growth of $87 million or 5% during the quarter.

Speaker Change: An increase of $102 million in residential mortgages, primarily adjustable rate, was offset by decreases in other consumer categories.

Beth Ann L. Chivinski: When layering in Republic's consumer portfolio, total consumer loans grew by $909 million, or 12% of the linked quarter, net of purchase accounting mark. For the total acquired loan portfolio, the yield to Fulton, including purchase accounting accretion, was in excess of 7.5% for the quarter. Total deposits increased $3.8 billion, or 17.6% linked quarter, attributable to the Republic transaction. Legacy Fulton deposits grew by $254 million, or 4.6% during the quarter, excluding the runoff in brokered CDs.

Speaker Change: When layering in Republic's consumer portfolio, total consumer loans grew by $909 million or 12% linked quarter net of purchase accounting marks.

FEDC: For the total acquired loan portfolio, the yield to Fulton, including purchase account in operation, was an excess of 7.5% for the quarter. Total deposits increased 3.8 billion or 17.6% linked quarter, attributable to the republished transaction. Legacy Fulton deposits grew by 254 million, or 4.6%, during the quarter, excluding the runoff and brokerage CDs. Growth in time deposits, money markets, and municipal balances more than offset the decline in non-intersparing products. Arnon-intersparing DDA balances ended the quarter at 5.6 billion or 21.9% of total deposits, which includes the deposits from republished. Our net interest income guidance for 2024 assumes that we will continue to see migration from run-intersparing to interest varying deposits throughout 2024, but at a slower pace than we saw in 2023.

Speaker Change: For the total acquired loan portfolio, the yield to Fulton, including purchase accounting accretion, was in excess of 7.5% for the quarter.

Speaker Change: Total deposits increased $3.8 billion or 17.6% linked quarter attributable to the Republic transaction.

Speaker Change: Legacy Fulton deposits grew by $254 million or 4.6% during the quarter, excluding the runoff in brokered CDs.

Beth Ann L. Chivinski: Growth in time deposits, money markets, and municipal balances more than offset a decline in non-interest-bearing products. Our non-interest-bearing DDA balances ended the quarter at $5.6 billion, or 21.9% of total deposits, which includes deposits from Republic. Our net interest income guidance for 2024 assumes that we will continue to see migration from non-interest bearing to interest-bearing deposits throughout 2024, but at a slower pace than we saw in 2023. On the balance sheet, liquidity increased to 17.6% of assets, with cash and deposits in other institutions increasing by $950 million, and our investment portfolio increasing by $400 million.

Speaker Change: Growth in time deposits, money markets, and municipal balances more than offset a decline in non-interest bearing products.

Speaker Change: Our non-interest bearing DDA balance has ended the quarter at $5.6 billion, or 21.9% of total deposits, which includes the deposits from Republic.

Speaker Change: Our Net Interest Income Guidance for 2024 assumes that we will continue to see migration from non-interest bearing to interest bearing deposits throughout 2024, but at a slower pace than we saw in 2023.

FEDC: On-balance sheet liquidity increased to 17.6% of assets, with cash and deposits in other institutions increasing by $950 million, and our investment portfolio increasing by $400 million. The impact of the positive balance sheet trends is shown on slide 6. Net interest income was $242 million, a $35 million increase, and net interest margin increased by 11 basis points to 3.43%. These meaningful increases will primarily be driven by the benefit of the Republic Transaction, as well as the impact of the investment portfolio restructure. We sold $340 million of securities yielding 3.34% and purchased $357 million of securities of similar type and duration yielding 5.74%.

Speaker Change: On balance sheet liquidity increased to 17.6% of assets, with cash and deposits in other institutions increasing by $950 million, and our investment portfolio increasing by $400 million.

Beth Ann L. Chivinski: The impact of these positive balance sheet trends is shown on slide six. Net interest income was $242 million, a $35 million increase, and the net interest margin increased by 11 basis points to 3.43%. These meaningful increases were primarily driven by the benefit of the Republic transaction as well as the impact of the investment portfolio restrictions. We sold $340 million of securities yielding 3.34% and purchased $357 million of securities of similar type and duration, yielding 5.74%. Loan yields increased 22 basis points during the period, increasing to 6.12 compared to 5.90 last quarter.

Speaker Change: The impact of these positive balance sheet trends is shown on slide 6.

Beth Ann L. Chivinski: Included in the loan yield is $9.8 million of accretion attributable to the interest rate marks on the acquired loan portfolio. Also, the accretion of the non-PCD discount was $571,000 during the quarter, and we do exclude that from our operating earnings calculation. Actual purchase accounting discount accretion going forward will be driven by the pace and magnitude of paydowns, payoffs, prepayments, and other decreases in the acquired balance. Our cost of total deposits increased 19 basis points to 2.14 during the quarter, primarily due to the higher cost of the acquired portfolio.

Speaker Change: Net interest income was $242 million, a $35 million increase, and net interest margin increased by 11 basis points to 3.43%. These meaningful increases were primarily driven by the benefit of the Republic transaction, as well as the impact of the investment portfolio restructure.

Speaker Change: We sold $340 million of securities yielding 3.34% and purchased $357 million of securities of similar type and duration yielding 5.74%.

FEDC: Low yields increase 22 basis points during the period, increasing to 6.12 compared to 5.90 last quarter. Included in the low yield is $9.8 million of accretion attributable to the interest rate marks on the acquired loan portfolio. Also, the accretion of the non-PCD discount was $571,000 during the quarter, and we do exclude that from our operating earnings calculations. Actual purchase accounting discount accretion going forward will be driven by the pace and magnitude of pay-downs, pay-offs, prepayments, and other decreases in the acquired balances. Our cost of total deposits increased 19 basis points to 2.14 during the quarter, primarily due to the higher cost of the acquired portfolio.

Speaker Change: Loan yields increased 22 basis points during the period, increasing to 6.12 compared to 5.90 last quarter. Included in the loan yield is $9.8 million of accretion attributable to the interest rate marks on the acquired loan portfolio.

Speaker Change: Also, the accretion of the non-PCD discount was $571,000 during the quarter, and we do exclude that from our operating earnings calculations.

Speaker Change: Actual purchase accounting discount accretion going forward will be driven by the pace and magnitude of paydowns, payoffs, prepayments, and other decreases in the acquired balances.

Speaker Change: Our cost of total deposits increased 19 basis points to 2.14 during the quarter, primarily due to the higher cost of the acquired portfolio.

FEDC: Turning to asset quality in slide 7, while NPL's increased 6.2 million during the quarter, the NPL's loans ratio decreased from 73 basis points and March 31st to 67 basis points at quarter end. Net Chardos were 11.3 million or 19 basis points, gross Chardos of 14 million were granular and were offset by 2.7 million of recoveries. And our ACL as a percentage of loans increased to 1.56 to quarter end, with that increase attributable to the allowance on the Republic portfolio. Excluding the impact of the Republic transaction, ACL as a percentage of loans would have been relatively flat.

Beth Ann L. Chivinski: Turning to asset quality on slide 7, while NPLs increased $6.2 million during the quarter, the NPL to loans ratio decreased from 73 basis points on March 31, 2020, to 57 basis points at quarter end. Net charge-offs were $11.3 million, or 19 basis points. Gross charge-offs of $14 million were granular and were offset by $2.7 million of recovery.

Speaker Change: Turning to asset quality on slide 7, while NPLs increased $6.2 million during the quarter, the NPL-to-loans ratio decreased from 73 basis points on March 31 to 67 basis points at quarter end.

Speaker Change: Net charge-offs were $11.3 million or 19 basis points. Gross charge-offs of $14 million were granular and were offset by $2.7 million of recoveries.

Beth Ann L. Chivinski: And our ACL as a percentage of loans increased to 1.56 at quarter end, with that increase attributable to the allowance on the Republic portfolio. Excluding the impact of the Republic transaction, ACL as a percentage of loans would have been relatively unchanged. The credit mark on the acquired portfolio was a total of $79 million, or 2.8% of loans as of the acquisition. Turning to non-interest income on slide eight, non-interest income for the quarter was 93 million.

Speaker Change: And our ACL, as a percentage of loans, increased to 1.56 at quarter end, with that increase attributable to the allowance on the Republic portfolio. Excluding the impact of the Republic transaction, ACL as a percentage of loans would have been relatively flat.

FEDC: The credit mark on the acquired portfolio was a total of $79 million, or 2.8% of loans, out of the acquisition date. Turning to non-interesting income on slide 8, NPL was 93 million. This included a loss on sale of investments of $20.3 million, offset by the $47.4 million bargain purchase gain attributable to the Republic transaction. Excluding these non-operating items, the income was strong for the quarter, increasing $8.8 million, including $2.8 million impact from Republic and $6 million impact from the core business. Welp management revenues of $21 million increased 835,000 linked quarter and other record for the company.

Speaker Change: The credit mark on the acquired portfolio was a total of $79 million or 2.8% of loans as of the acquisition date.

Speaker Change: Turning to non-interest income on slide 8.

Beth Ann L. Chivinski: This included a loss on sale of investments of $20.3 million, offset by the $47.4 million bargain purchase gain attributable to the Republic transaction. Excluding these non-operating items, fee income was strong for the quarter, increasing $8.8 million, including $2.8 million impact from Republic and $6 million impact from the core business. Wealth management revenues of $21 million increased by $835,000 linked quarter, another record for the company. And as a reminder, wealth management represents almost one third of our fee-based revenues, with over 80% of those revenues recurring. Market value of assets under management and administration remained at $15.5 billion as of June 30. Commercial banking fees increased in all categories, increasing $2.6 million, which included a $383,000 contribution by Republic.

Speaker Change: Non-interest income for the quarter was $93 million. This included a loss on sale of investments of $20.3 million offset by the $47.4 million bargain purchase gain attributable to the Republic transaction.

Speaker Change: Excluding these non-operating items, fee income was strong for the quarter, increasing $8.8 million, including $2.8 million impact from Republic and $6 million impact from the core business.

Speaker Change: Wealth management revenues of $21 million, increased $835,000 linked quarter, another record for the company. And as a reminder, wealth management represents almost one-third of our fee-based revenues, with over 80% of those revenues recurring.

FEDC: And as a reminder, Welp management represents almost one third of our fee-based revenues, with over 80% of those revenues recurring. Market value of assets under management and administration remained at $5.15 million as of June 30th. Commercial banking fees increased in all categories, increasing $2.6 million, which included a $383,000 contribution by Republic. Merchant, cash management, and SBA all shared solid-linked quarter growth. Consumer banking fees increased $3 million to $14.6 million, with Republic contributing $2.3 million to that increase. Mortgage banking revenues increased $860,000 to $4 million, and was driven by a seasonal increase in mortgage and originations, as well as a stable gain on sale spread.

Speaker Change: Market value of assets under management and administration remained at $15.5 billion as of June 30th.

Speaker Change: Commercial banking fees increased in all categories, increasing $2.6 million, which included a $383,000 contribution by Republic. Merchant, cash management, and SBA all showed solidly quarter growth.

Beth Ann L. Chivinski: Merchant, Cash Management, and SBA all showed solid linked quarter growth. Consumer banking fees increased $3 million to $14.6 million, with Republic contributing $2.3 million to that increase. Mortgage banking revenues increased $860,000 to $4 million and were driven by a seasonal increase in mortgage origination as well as a stable gain on sales. Moving to slide nine, non-interest expenses on an operating basis were $195 million, an increase of $25 million compared to the linked quarter, which includes a $17 million operating impact from recovery.

Speaker Change: Consumer banking fees increased $3 million to $14.6 million, with Republic contributing $2.3 million to that increase.

Speaker Change: Mortgage banking revenues increased $860,000 to $4 million and was driven by a seasonal increase in mortgage originations as well as a stable gain on sales spread.

FEDC: Moving to slide 9, non-interest expenses on an operating basis were $195 million, an increase of $25 million went quarter, which includes a $17 million operating impact from Republic. Much of the core full-an increase was due to a 5.7 million increase in salaries and benefits, which included the impact of April 1st merit increases. Material items excluded from operating expenses as listed on slide 19 were falling. The $20.3 million gain on the sale-leaseback, which included in our statements as a negative expense. $13.8 million in acquisition-related expenses, $6.3 million in foot-referred costs, and $4.6 million in total quarter-positive intangible amortization.

Speaker Change: Moving to slide 9, non-interest expenses on an operating basis were $195 million, an increase of $25 million linked to order, which includes a $17 million operating impact from Republic.

Beth Ann L. Chivinski: Much of the core Fulton increase was due to a $5.7 million increase in salaries and benefits, which included the impact of April 1st merit increases. Material items excluded from operating expenses, as listed on slide 19, were the following.

Speaker Change: Much of the core Fulton increase was due to a $5.7 million increase in salaries and benefits, which included the impact of April 1st merit increases.

Speaker Change: Material items excluded from operating expenses, as listed on slide 19, were the following. The $20.3 million gain on the sale-leaseback, which is included in our statements as a negative expense,

Beth Ann L. Chivinski: The $20.3 million gain on the sale lease back, which is included in our statements as a negative, $13.8 million in acquisition-related expenses, $6.3 million in Fulton First costs, and $4.6 million in total core deposit intangible amortization. On slide 10, you can see a snapshot of our capital base, and as of June 30th, we maintain solid cushions over both the regulatory minimums and on a linked quarter basis. However, our capital ratios remain relatively low.

Speaker Change: $13.8 million in acquisition-related expenses, $6.3 million in Fulton First costs, and $4.6 million in total core deposit intangible amortization.

Speaker Change: On slide 10, you can see a snapshot of our capital base, and as of June 30th, we maintained solid cushions over both the regulatory minimums and on a link quarter basis. Our capital ratios remain relatively flat.

Beth Ann L. Chivinski: Moving to slide 11, we're revising our operating earnings guidance upward to reflect the impact of the acquisition, the investment restructure, as well as a change in the interest rate forecast. Our guidance now assumes a single 25 basis point decrease in Fed funds in September. Operating Earnings Guidance for 2024 is as follows. We expect net interest income on a non-fully tax-equivalent basis to be in the range of $925 to $950 million. We expect the provision for credit losses to be in the range of $40 to $60 million, which excludes the $23 million non-PCD provision here in the second quarter.

Speaker Change: Moving to slide 11, we're revising our operating earnings guidance upwards to reflect the impact of the acquisition, the investment restructure, as well as a change in the interest rate forecast.

Speaker Change: Our guidance now assumes a single 25 basis point decrease in Fed funds in September .

Speaker Change: Our Operating Earnings Guidance for 2024 is as follows.

Speaker Change: We expect net interest income on a non-fully tax-equivalent basis to be in the range of $925 to $950 million.

Speaker Change: We expect the provision for credit losses to be in the range of $40 to $60 million, which excludes the $23 million non-PCD provision here in the second quarter.

Beth Ann L. Chivinski: We expect non-interest income, excluding security gains and the bargain purchase gain, to be in the range of $240 to $260 million. We expect non-interest expense on an operating basis to be in the range of $750 million to $770 million for the year.

Speaker Change: We expect non-interest income, excluding security gains and the bargain purchase gain, to be in the range of $240 to $260 million.

Speaker Change: We expect non-interest expense on an operating basis to be in the range of $750 to $770 million for the year.

Operator: And lastly, we expect our effective tax rate to be in the range of 16 to 18 percent for the year. And I will note that our second quarter effective tax rate was considerably lower, primarily due to the bargain purchase gain and how that is taxed related to the public transaction. With that, we'll now turn the call back over to the operator for your questions. Thank you. At this time, we will conduct a question and answer session.

Speaker Change: And lastly, we expect our effective tax rate to be in the range of 16% to 18%

Speaker Change: for the year. And I will note that our second quarter effective tax rate was considerably lower, primarily due to the bargain purchase gain and how that is taxed related to the public transaction.

Speaker Change: With that, we'll now turn the call back over to the operator for your questions.

Operator: As a reminder, to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please limit yourself to one question.

Speaker Change: Thank you. At this time we will conduct the question and answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question. Please stand by while we compile the Q&A roster.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Daniel Tamayo of Raymond James. Your line is now open. Thank you. Good morning, everyone.

Speaker Change: Our first question comes from the line of Daniel Tamayo of Raymond James. Your line is now open.

Daniel Tamayo: Thank you. Good morning, everyone. Just wanted to start.

Daniel Tamayo: Yeah, good morning. I just wanted to start on some interest income guidance. I know you guys normally don't.

Daniel Tamayo: Yeah, good morning. I just wanted to start on the non-interest income guidance. I know you guys normally don't.

Curtis J. Myers: Break that out into a margin and balance sheet, but I'm hoping you could give us a little more detail, given all the puts and takes happening with the acquisition restructurings, you know, it appears that the margin would be coming down, given your guidance in the third quarter. Obviously, you've got accretion built into that number as well. But, you know, I'd be curious if you could give us any more detail on how we should be thinking about the margin and the balance sheet and the back half of the year. Yeah, Danny, it's Kurt.

Daniel Tamayo: break that out into a margin and balance sheet. But I was hoping you could give us a little more detail given all the puts and takes happening with the acquisition restructurings.

Speaker Change: You know, it appears that the

Speaker Change: The margin would be coming down, given your guidance, in the third quarter, obviously, you've got...

Speaker Change: Accretion built into that number as well but you know I just curious if you give us any more detail on how we should be thinking about the margin and the balance sheet and back half of the year

Curtis J. Myers: Good question. We do have a lot of different factors this quarter. So we do not give forward guidance on net interest margin. However, the continued trend of non-interest bearing flowing into interest bearing, we expect to continue. And we have one rate cut in the forecast, and we continue to be asset sensitive. We're less asset sensitive as we stand right now, but we are asset sensitive. So those two factors will put pressure on the margin as we move forward. And that's why we really focus on the NII guide.

Kurt: Yeah, Danny, it's Kurt. Good question. We do have a lot of different factors this quarter. So we do not give forward guidance on net interest margin.

Kurt: However, the continued trend of non-interest bearing flowing into interest bearing, we expect

Speaker Change: to continue, and we have one rate cut.

Speaker Change: in the forecast and we continue to be asset sensitive, we're less asset sensitive.

Speaker Change: as we stand right now, but we are asset sensitive. So those two factors would put pressure.

Speaker Change: on the margin as we move forward. And that's why we really focus on the NII guide. We feel comfortable with the update there and target those NII levels.

Unknown Executive: at Levels. Okay. Well, maybe just zoom in on the balance sheet. I think you guys are done with the restructurings. Maybe you just kind of make sure we're clear on, from an average balance sheet perspective, you know, how much impact is left from those restructurings. And you're talking about the list, fill these back and investment portfolio restructurings. So we have Fulton and Beth, those funds, and then that net interest positive net interest income impact is in the guy. Then you start to really look at our investments on an ending balance base to see where we ended up.

Curtis J. Myers: We feel comfortable with the update there and target those NII guidelines. Okay, well, maybe just zoom in on the balance sheet. I think you guys are done with the restructurings. But if you could just kind of, make sure we're clear on, from an average balance sheet perspective, you know, how much impact is left from those restructurings. And you're talking about the sale, lease back, and investment portfolio restructure. So we have fully reinvested those funds.

Speaker Change: Okay, well, maybe just zoom in on the balance sheet. I think you guys are done with the restructurings, but if you could just kind of...

Speaker Change: Make sure we're clear on, from an average balance sheet perspective, you know, how much impact is left from those restructurings.

Speaker Change: And you're talking about the sale lease back and investment portfolio restructure. So we have fully reinvested those funds.

Curtis J. Myers: And then that net interest, positive net interest income impact, is in the guide, and you can really look at our investments on an ending balance basis to see where we ended up and then what their views would be going forward. All right, well, thank you for all that. I guess just lastly, from a perspective of deposits, just curious, you mentioned some runoff from Republic related to municipal relationships that sounded like those were expected. Should we expect any other, any incremental runoff from Republic relationships?

Speaker Change: And then that net interest, positive net interest income impact is in the guide.

Speaker Change: And you could really look at our investments on an ending balance basis to see where we ended up.

Unknown Executive: And then what they're using to be the ones. Okay. All right. Well, thank you for all that. I guess just lastly, from a perspective of deposits, just curious. You mentioned some runoff from Republic related to municipal relationships that sounded like those were expected. Should we expect any other incremental runoff from from republic republic relationships? Well, we had in the investment deck for the transaction, we had modeled in $600 million. The deposit runoff over a period of time. The deposit runoff is coming down. That was, you know, very much initial days when right after the assumption.

Speaker Change: Okay, and then what their views would be, but let's go.

Speaker Change: Okay.

Speaker Change: All right. Well, thank you for all that. I guess just lastly, from a perspective of deposits, I'm just curious.

Speaker Change: You mentioned some runoff from Republic related to municipal relationships that sounded like those were expected. Should we expect any other, any incremental runoff from Republic relationships?

Curtis J. Myers: What we had in the investment deck for the transaction, we had modeled $600 million of deposit runoff over a period of, The deposit runoff is coming down. That was very much the initial days right after the assumption. You know, so the runoff continues to diminish, and we'll feel comfortable with our original. Alright, well, thank you for taking my questions. I appreciate it.

Speaker Change: What we had in the investment deck for the transaction, we had modeled in $600 million of deposit runoff over a period of time.

Speaker Change: The deposit runoff is coming down. That was, you know, very much initial days when, right after the assumption, you know, so the runoff continues to diminish and we'll feel comfortable with our original estimates.

Unknown Executive: So the runoff continues to diminish, and we'll feel comfortable with our original estimates. Okay. All right. Well, thank you for taking my questions. I appreciate it. Thanks in. Thank you. One moment for our next question.

Speaker Change: Alright, well thank you for taking my questions, I appreciate it.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Frank Schiraldi on Piper Sandler. Your line is now open. Morning. Hey, Brian.

Dan: Thanks, Dan.

Speaker Change: Thank you one moment for our next question.

Unknown Executive: Our next question comes from a line of Frank Skorati of type of family.

Speaker Change: Our next question comes from the line of Frank Schiraldi of Piper Sandler. Your line is now open.

Frank Schiraldi: Your line is not open. Morning. Great. Just on the, on the expense guide. And, you know, as we think about hot saves coming through from FRBK, I think initially you talked about that franchise, you know, ultimately the expense load from that franchise, looking like maybe a $60 million run rate, which I assume you get to sometime next year. You know, you obviously give the full year range for 2024 for the combined organization. But just wondering if you can give any thoughts around how that steps down through the back half of the year and maybe, you know, where you anticipate actually exiting the year on that with Fulton first and, and, you know, acquisition costs saved them.

Frank Joseph Schiraldi: Morning.

Frank Joseph Schiraldi: Hey, on the expense guide. And, you know, as we think about cost saves coming through from FRBK, I think initially you talked about that franchise, you know, ultimately the expense load from that franchise looking like maybe a $60 million run rate, which I assume you get to sometime next year. You know, you obviously give the full year range for 2024 for the combined organization, but I was wondering if you could give any thoughts around how that steps down through the back half of the year and maybe, you know, where you anticipate exiting the year on that with Fulton First and, you know, acquisition cost saves baked in. We are shooting for having the cost saves implemented by January 1st, 2025. There's obviously a process to that.

Frank Joseph Schiraldi: Just on the

Speaker Change: on the expense guide. And, you know, as we think about cost saves coming through from FRBK, I think.

Speaker Change: Initially, you talked about that franchise, you know, ultimately, the expense load from that franchise looking like maybe a $60 million run rate, which

Speaker Change: I assume you get to sometime next year. You know, you obviously give the full year range for 2024.

Speaker Change: for the combined organization. But just wondering if you can give any thoughts around how that steps down.

Speaker Change: through the back half of the year, and maybe, you know, where you anticipate exiting the year on that with Fulton First and, you know, acquisition cost saves baked in.

Frank Schiraldi: We are shooting for having the cost saved implemented by January 1st of 25. There's something to integrate in the fourth quarter. The expense guide. We really looked at that as confirming our run rate and expenses, and then incorporating the current run rate of Repulse. The way the numbers were finalized in the deal that we had 112 million dollars of annual expenses, and that was pretty close to the target. So we're factoring in our eight months of those expenses into the guide. We are working as diligently as we can to bring the cost down over the period of time.

Speaker Change: We are shooting for having the cost saves implemented by January 1st of 25. There's obviously a process to that we are

Curtis J. Myers: We are... Targeting to integrate in the fourth quarter. The expense guide, we really looked at that as confirming our run rate for expenses and then incorporating the current run rate of Republic. The way the numbers were finalized, in the deal deck, we had $112 million in annual expenses, and that was pretty close to the target. So we're factoring in our eight months of those expenses into the guide. We are working as diligently as we can to bring the cost down over the course of time.

Speaker Change: Targeting to integrate in the fourth quarter. The expense guide, we really looked at that as confirming our run rate in expenses and then incorporating the current run rate of Republic.

Speaker Change: The way the numbers were finalized in the deal deck, we had $112 million of annual expenses, and that was pretty close.

Speaker Change: to the target, so we're factoring in our eight months.

Speaker Change: of those expenses into the guide.

Speaker Change: We are working as diligently as we can to bring the cost down over the period of time. But we have integration to work through. We have financial centers to work through.

Curtis J. Myers: But we have integration to work through. We have financial centers to work through. And again, our focus is to retain customers and retain talent and work through that diligently. So we're really shooting for that January 1st to have it in the run rate. We will be able to get some cost savings this year, but we really want to be at that point, and we feel comfortable being at that 40% cost savings that we had laid out. Okay, and then that's so that's still around 60. Is that still about 60 million a year in run rate? Yeah, plus or minus 60 million.

Frank Schiraldi: But we have integration to work through. We have financial centers to work through. And again, our focus is to retain customers and retain talent and work through that diligently. So diligently. So we're really shooting for that January 1st that happened in the run rate. We will be able to get some cost days this year. But we really want to be at that point, and we feel comfortable being at that 40% cost days that we had laid out a rejoin. Okay, and then that's still around 60, that's still about 60 million a year in run rate.

Speaker Change: and work through that diligently, so we're really shooting for that January 1st to have it in the run rate. We will be able to get some cost saves this year, but we really want to be at that point and we feel comfortable being at that 40% cost save that we had laid out originally.

Speaker Change: Okay and then that's so that's still around 60 that's still some what 60 million a year in run rate? Yeah plus or minus 60 million.

Frank Joseph Schiraldi: So it would be plus or minus 60 million. Okay. And then just on the, you know, purchase accounting accretion in the quarter did come a little bit ahead of my expectations. I don't necessarily recall what you guys were were if you were guys gave specifics during the deal. But one year maybe, if you could, you could give any color there around a person's accounting accretion. Was it any different than your expectation? And anything else that maybe has surprised you either positively or negatively. You know, obviously, early days here, but following the deal. So seeing to the first accounting kind of compare to what we projected in the mid-process in the acquisition.

Frank Joseph Schiraldi: Okay. And then just on the, you know, purchase accounting accretion in the quarter did come a little bit ahead of my expectations. I don't necessarily recall what you guys were, if you guys gave specifics during the deal, but wondered maybe if you could give any color there around purchase accounting accretion. Was it any different than your expectations?

Speaker Change: Okay.

Speaker Change: and then.

Speaker Change: Just on the, you know, purchase accounting accretion in the quarter did come a little bit.

Speaker Change: ahead of my expectations. I don't necessarily recall what you guys were, if you guys gave specifics during the deal, but wondered maybe if you could give any color there around Perks County accretion. Was it any different than your expectations? And anything else that maybe has surprised you either positively or negatively, you know, obviously early days here, but following the deal?

Curtis J. Myers: And anything else that maybe has surprised you, either positively or negatively, you know, obviously, early days here, but following the deal? So speaking to the purchase accounting kind of compared to what we projected in the bid process and the acquisition, all the marks came in almost right on line with where we had projected.

Speaker Change: So speaking to the purchase accounting, kind of compared to what we projected in the bid process and the acquisition,

Curtis J. Myers: So that's great news. We are happy to see both the interest rate mark, the CDI, as well as the credit marks. And then we have a pretty granular process to calculate that accretion, which really is done on a loan-by-loan basis. So it's based on how those loans repay, change, and balance during the quarter. But again, that can change; every quarter that'll change based on prepayment experience. But again, it was in line with what we were projecting, and then yeah, and then anything else that surprised you, positively or negatively, in the early days here following the deal?

Frank Schiraldi: All the marks came in real, almost right online with where we had been, where we had projected. So, so that's great news. We're happy to see that both the interest rate mark, the CDI, as well as the credit mark. And then, you know, we have a pretty granular process to calculate that accretion, which really is done on a loan by loan basis. So it's based on how those loans repay changes in balance is during the quarter. But again, that that can change every quarter; that will change based on prepayment experience. That's, again, it was in line with our, but we, what we were projecting.

Speaker Change: All the marks came in.

Speaker Change: We're almost right on line with where we had projected.

Speaker Change: So that's great news. We are happy to see that, both the interest rate mark, the CDI, as well as the credit marks.

Speaker Change: And then, you know, we have a pretty granular process to calculate that accretion, which really is done on a loan by loan basis. So it's based on

Speaker Change: How those loans repay, changes and balances during the quarter. But again, that can change, every quarter that will change based on prepayment experience.

Speaker Change: But again, it was in line with what we were projecting.

Frank Schiraldi: Okay. And then, yeah, and then anything else that's surprised, you know, positively or negatively in early days here following the deal. Yeah, we're working through it diligently. I don't think we've had any big surprises. You know, we, we conducted the credit review. Overall on the portfolio. So that that went as, as anticipated. And we continue to work diligently through the process.

Speaker Change: Okay.

Speaker Change: And then, yeah, and then anything else that surprised, you know, positively or negatively in the early days here following the deal?

Curtis J. Myers: Yeah, we're working through it diligently. I don't think we've had any big surprises yet. We conducted the credit review overhaul on the portfolio. So that went as they anticipated.

Speaker Change: Yeah, we're working through it diligently. I don't think we've had any big surprises.

Speaker Change: conducted the credit review overhaul on the portfolio. So that went as anticipated, and we continue to work diligently.

Curtis J. Myers: And we continue to work diligently. All right. Thank you. Thank you, one moment, for the next question. Our next question comes from the line of Chris McGratty of KBW. The line is now open.

Speaker Change: through the process.

Unknown Executive: All right. Thank you.

Speaker Change: All right. Thank you.

Unknown Executive: We'll move for next question.

Frank Joseph Schiraldi: Thanks Frank.

Speaker Change: Thank you, one moment for the next question.

Christopher McGratty: Our next question, because I've Chris McGraddy of KBW. The line is now open.

Speaker Change: Our next question comes from the line of Chris McGratty of KBW. The line is now open.

Christopher Edward McGratty: Oh, great. Thanks. Curtis, I just want to go back for a second on the balance sheet repositioning. Beyond the communicated restructuring, are you actively adding to the bond portfolio? Is that something we should be thinking about or shrinking it either way?

Christopher Edward McGratty: I just wanted to go back for a second on the balance sheet repositioning. Beyond the communicated restructuring, are you actively adding?

Christopher Edward McGratty: To the bond portfolio. Is that something we should be thinking about or shrinking it either way?

Curtis J. Myers: So I don't want to say we're actively adding to the bond portfolio, you know, so clearly liquidity is on everyone's mind at this point where we feel really comfortable where we are with liquidity, but we'll make those decisions, you know, monthly based on ALCO. Overall, our long-term target for investments is 15% of total assets. We're not quite there.

Speaker Change: So I don't want to say we're actively adding to the bond portfolio, you know, so clearly liquidity is on everyone's mind at this point, where we feel really comfortable where we are with liquidity, but we'll make those decisions.

Speaker Change: You know, monthly based on ALCO. You know, overall, our long-term target for investments is 15% of total assets. We're not quite there, but...

Curtis J. Myers: But, you know, we don't have definitive plans. We monitor that month in, month out based on our liquidity position and everything else with the balance sheet. Okay, thank you for that. And just, just going back to the accretion income, just sorry for the follow-up here. I think at the time of the merger, roughly 20% of the 20% accretion goes through accretion.

Speaker Change: We don't have definitive plans. We monitor that month in, month out based on our liquidity position and everything else with the balance sheet.

Speaker Change: Okay, thank you for that. And just to go back to the accretion income, sorry for the follow-up here, I think at the time of the merger it was roughly 20% of the 20% accretion goes through accretion. I believe...

Curtis J. Myers: I believe the deal was in for roughly two months, so is it a simple near-term, I know it usually comes in a little higher, to think about this quarter's accretion? on a full quarter basis, at least in the back half of the year, is that kind of what's in your guide? So it's too early to tell. I think annualizing... The two months for the rest of the year might be a little bit rich, but I mean, that's obviously just a starting point.

Speaker Change: The deal was in for roughly two months, so is it a simple, near-term, I know it usually comes in a little higher, to think about this quarter's accretion on a full quarter's basis, at least in the back half of the year? Is that kind of what's in your guide?

Speaker Change: So it's too early to tell. I think annualizing...

Speaker Change: The two months for the rest of the year might be a little bit rich, but I mean, that's obviously a starting point. But I think, and again, it depends what rates do and what prepayments do on the portfolio.

Curtis J. Myers: But I think, and again, it depends on what rates do and what prepayments do on the portfolio. So it may very well come in a little bit less compared to annualizing two months. I'd be cautious doing this.

Speaker Change: So, it may very well come in a little bit less compared to annualizing two months. I'd be cautious doing that.

Curtis J. Myers: And then maybe last one, Kurt, on the buyback, you know, I think it's fair to assume you're kind of on hold for the rest of the year as you go through the integration and kind of figure out where you're at.

Speaker Change: Understood. Thank you. And then maybe last one, Kurt, on the buyback. You know, I think, is it fair to assume you're kind of on hold for the rest of the year as you go through the integration and kind of figure out where you're at?

Curtis J. Myers: Yeah, definitely. Our team's focused on integration right now.

Speaker Change: Yeah, definitely. Our team is focused on integration right now. We had said previously that we probably wouldn't look at buybacks until next year. We do have an authorization in place.

Curtis J. Myers: We had said previously that, you know, we probably wouldn't look at buybacks until next year; we do have an authorization in place. But capital liquidity and effective integration are really what our focus is right now. All right, awesome.

Speaker Change: But capital, liquidity, and effective integration are really what our focus is right now.

Christopher Edward McGratty: Thank you. Thank you. One moment for our next question. Our next question comes from the line of David Bishop of Hufty Group. Your line is now open. Hey, good morning.

Speaker Change: Alright, awesome. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of David Bishop of Hufty Group. Your line is now open.

David Jason Bishop: Curious, you know, Kurt and Betsy, maybe there hasn't been a lot of focus on the loan pipeline and sort of legacy loan demand, just curious what you're seeing and hearing from your commercial, not only relationship managers, but your borrowers. Yeah, the pipeline is steady. We've had pretty, you know, modest growth.

David Jason Bishop: Hey, good morning.

Speaker Change: Karen, you know, Kurt and Betsy, maybe...

David Jason Bishop: You know, it hasn't been a lot of focus, but the loan pipeline and sort of legacy loan demand, just curious what you're seeing and hearing from your commercial, not only relationship Andrews, but your borrowing base.

Karen: Yeah, the pipeline is steady. I mean, we've had pretty

Curtis J. Myers: Organically, we expect that to continue. Customers are being conservative, and we are being diligent on, you know, what we add to the portfolio right now. You know, so the low single-digit organic growth rate is what we would expect from the legacy Fulton portfolio. And then we're, you know, working through the Republic portfolio, getting to know those customers, and then growing from that point forward. So we would expect limited or single-digit organic loan growth going forward.

Speaker Change: you know, modest growth.

Karen: Organically, we expect that to continue. Customers are being conservative, and we are being diligent on what we add to the portfolio right now.

Karen: you know, so that the, you know, low single-digit

Karen: Organic Growth Rate.

Karen: is what we would expect from the legacy Fulton portfolio. And then we're working through the Republic portfolio.

Karen: getting to know those customers and then growing from that point forward. So we would expect limited.

Karen: are single-digit organic loan growth going forward, and our pipelines and customer activities seem to support us being able to do that.

Curtis J. Myers: And our pipelines and customer activities seem, Got it, appreciate that. And then sort of hearkening back to the earlier question about liquidity. I know Betsy, you know, as expected, liquidity cash built, you know, pretty materially here. How should we think about that, that balance, that billion dollars or so over the course of the rest of the year? So we talked about in the acquisition that we were planning on letting our brokered CD portfolio roll off, which is at Fulton. We have an additional $800 million in brokered CDs. Most of that rolls off in the third and fourth quarters.

Karen: Got it, appreciate that. And then sort of harkening back to the earlier question about liquidity, I know Betsy, you know, as expected, liquidity cash built, you know, pretty materially here. How can we think about that, that balance, that billion dollars or so over the course of the rest of the year?

Speaker Change: So we talked about in the acquisition that we were planning on letting our brokers

Speaker Change: C.D. portfolio rolled off, which is at Fulton. We have an additional $800 million in brokered C.D.s. Most of that rolled off third and fourth quarter. Again, our initial intention was to let that roll off. But

Beth Ann L. Chivinski: Again, our initial intention was to let that roll off, but, you know, there is just incredible, as you know, incredible discussion around liquidity and what we need to maintain, and we're working through that, and those expectations continue to move a little bit. So depending upon how all that flows together, but if we would not use that liquidity, we would not let that go down more than letting those brokered maturities roll off, which again is about $750 million before the end of the year. I got it. Do you know the way to average the rate on those broker TDs? I sure do, about 528. 5.2.

Speaker Change: You know, there is just incredible, as you know, incredible discussion around liquidity and

Speaker Change: What we need to maintain and we're working through that and those expectations.

Speaker Change: continue to migrate a little bit. So depending upon how all that flows together, but if we left, we would, we would not use that liquidity for more, we would not let that go down more than letting those broken maturities roll off.

Speaker Change: which again is about $750 million before the end of the year.

Speaker Change: Got it. Do you know the weighted average rate on those broker TDs?

Speaker Change: I sure do, about 528.

Beth Ann L. Chivinski: Great. I appreciate that, Kelly. Thank you. One moment for our next question. Our next question comes from the line of Manuel Navas of DA Davidson & Co. Your line is now open. Hey, good morning.

Speaker Change: 5.28

Keller: Great, appreciate that, fellas.

Keller: Sure.

Speaker Change: Thank you. One moment for our next question.

Speaker Change: Our next question comes from the line of Manuel Navas of DAA Davidson & Co. Your line is now open.

Manuel Antonio Navas: What would it take to drive a pickup in loan growth? You have strength in real estate and construction this quarter, but that could fall off and be based on prior pipelines. Do you need rate cuts to drive broader loan growth, or do you have less?

Manuel Antonio Navas: Hey, good morning. What would it take?

Manuel Antonio Navas: to drive a pickup in loan growth. You have strength in real estate and construction this quarter, but that could fall off and be based on prior pipelines. Like do you need rate cuts to drive broader loan growth or do you have like less, do you have a limited appetite at the moment as you integrate?

Curtis J. Myers: Do you have a limited appetite at the moment as you enter the market? Well, we are being very prudent in this market, specifically in real estate lending, and we are being very diligent about credit decisions right now. It's a combination of borrower demand and us navigating prudently on what we put on the portfolio. So it's a combination of those two things.

Speaker Change: Well, we are being very prudent in this market, you know, specifically on real estate lending.

Speaker Change: and being very diligent about credit decisions right now. It's a combination of...

Speaker Change: Borrower Demand, and us navigating prudently on what we put on the portfolio. So it's a combination of those two things.

Manuel Antonio Navas: But we really think, given our position and the market right now, that low single-digit loan demand is an appropriate growth rate to make sure we're not putting on undue risk in a market. I appreciate that. The attrition target on the deposit side was roughly modeled at 600 million. Do you expect to get to that? Or is the 400 that you've already seen kind of the most that you're going to have?

Speaker Change: But we really think, given our position and the market right now, that low single digit loan demand is an appropriate growth rate to make sure we're not putting on undue risk in a market like this.

Speaker Change: I appreciate that.

Speaker Change: With the attrition target on the deposit side was roughly modeled at $600 million. Do you expect to get to that or is the $400 million that you've already seen kind of the most that you're going to have?

Curtis J. Myers: Yeah, so the attrition, you know, has flattened out for sure. You know, there were big and early on, you know, but we're continuing to work through integration. We will get to the point where we're going to grow the portfolio and customer base, you know, but we're still very early on in the acquisition. And again, this was an FDIC-assisted deal. Customers had a lot of concerns going into it; we alleviated a lot of those concerns. But there were a lot of moving parts, and our team did just an outstanding job.

Speaker Change: Yeah, so the attrition, you know, has flattened out for sure, you know, there were big jumps and early on, you know, but we're going to work through integration, you know, we will get to the point we're going to grow the portfolio and customer base.

Speaker Change: But we're still very early on in the acquisition. And again, this was an FDIC-assisted deal. Customers had a lot of concern going into it. We alleviated a lot of those concerns, but there was a lot of moving parts that our team's done.

Curtis J. Myers: And when I say our team, I mean, the Fulton team and the Republic have done an outstanding job taking care of customers, staying close to customers. And we feel really good moving forward that we'll reach a base, and then we'll be able to grow as we grow the overall franchise from that point. We're just trying to get our footing, and the runoff is certainly diminishing, and again, and a handful of customers and proactive measures, from our standpoint, which, as we got in and really knew the portfolio, to get rid of non-relational, brokered, wholesale, you know, internet-driven, kind of thing.

Speaker Change: just an outstanding job, and when I say our team, I mean the Fulton team and the Republic team has done an outstanding job taking care of customers, staying close to customers.

Speaker Change: and we feel really good moving forward that we'll reach a base.

Speaker Change: and then we'll be able to grow as we grow the overall franchise from that point. We're just trying to get our footing and the runoff is certainly diminishing. And again, it was a handful of customers and proactive measures.

Speaker Change: from our standpoint, who, as we got in and really knew the portfolio,

Speaker Change: to get rid of non-relational, brokered, wholesale, you know, internet-driven kind of things to clean that up. So we feel good about where we're headed and we still are confident in the original pro forma for the deal.

Curtis J. Myers: So, we feel good about where we're headed, and we still are confident in where we're headed. The original pro, Can I shift over to a question on credit? There's a little bit of a, just a modest step up in net charge-offs, mainly on the commercial side. Can you just talk through that a little bit?

Speaker Change: Can I shift over to a question on credit?

Speaker Change: There's a little bit of a...

Speaker Change: Just a modest step up in net charge-offs, mainly on the commercial side. Can you just talk through that a little bit? And it seems like you're guiding to provision costs much lower than consensus heading into the quarter. Just kind of talk about that thought process overall.

Curtis J. Myers: And it seems like you're guiding to provision costs much lower than consensus heading into the quarter. Just kind of talk about that thought process overall. Yeah, so charge off to the quarter, it's really just timing on how we've been allocated, whether we take the charge off or not. So those things are just timing.

Curtis J. Myers: You know, we look at the provision, run a model, look at the provision. And, you know, we've had pretty stable credit metrics in the core portfolio. And, you know, we don't see anything right now that would change those.

Speaker Change: Yeah, so charge off to the court, it's really just timing on whether we take the charge off or not. So those things are just timing.

Speaker Change: We look at the provision, run a model, look at the provision, and we've had pretty stable credit metrics in the core portfolio.

Speaker Change: and we don't see anything right now that would change those. I mean, we'll see how we move forward. I mean, it is the biggest variable in this market, but we've been pretty consistent around that $10 million a quarter in provision need given our growth rates.

Curtis J. Myers: I mean, we'll see how we move forward. I mean, it is the biggest variable in this market, but we've been pretty consistent around that $10 million a quarter in provision need given our growth rates. And given the credit portfolio, we feel good about the credit mark that we have on the Republic portfolio as we integrate those two. So, you know, we feel we're moving forward in provisioning for changes in either economic conditions or individual borrowers. That is, how the provision will change. That's, you know, we have no reason to not continue to commit to our guidance, initial guidance in credit. I appreciate that.

Speaker Change: and given the credit portfolio, we feel good about the credit mark that we have on the Republic portfolio. Do we integrate those?

Speaker Change: Those two. So, you know, we feel we're moving forward in provisioning for

Speaker Change: changes.

Speaker Change: in either economic conditions or individual borrowers is how the provision will change going forward.

Speaker Change: We have no reason to not continue to commit to our initial guidance in credit.

Speaker Change: I appreciate that. Thank you.

Operator: One moment for our next question. Again, as a reminder, to ask a question, you will need to press star 1-1 on your telephone. Our next question comes from the line of David Merenik of Stevens. Your line is now open. Good morning, guys. This is David Marochnik on behalf of MetBreeze.

Speaker Change: Thank you. One moment for our next question.

Speaker Change: Again, as a reminder, to ask a question, you will need to press star 1-1 on your telephone.

Speaker Change: Our next question comes from the line of David Maronick of Stevens. Your line is now open.

Speaker Change: Good morning, guys. This is David Marochnik on for MetBreeze.

David Jason Bishop: Morning. I was wondering if we could start on the loan side, if you guys could give us an update on what percent of the book is floating rate, and then if you have the yield for the floating rate book versus the fixed rate book. Certainly, they're grabbing the overall. I know one of the Republic Banks, 85% of the Republic Bank book is fixed.

Speaker Change: Morning. Morning.

David Jason Bishop: I was wondering if we could start on the loan side, if you guys could give us an update on what percent of the book is floating rate and then if you have the yield for the floating rate book versus the fixed rate book.

Curtis J. Myers: So that would move the, you know, that's what I said in my earlier comment around taking a little asset sensitivity off the table for us, that overall. Yeah, just as of June 30th, about 68% of the portfolios tied to the short end of the curve, one year or less, and 30% are fixed rates. And again, that's overall for that wooded area.

Speaker Change #101: Yeah, just as of June 30th, about 68% of the portfolio is tied to the short end of the curve, one year or less, and 30% is fixed rates.

Curtis J. Myers: It includes the Republic portfolio, which I had mentioned. Great. And then, by chance, do you have the yield on the floating book and the fixed rate book? We do not have that handy.

Speaker Change: And again, that's overall, so that would include the Republic portfolio, which I had mentioned.

Speaker Change: Before.

Speaker Change: Great and then by chance do you have the yield that on the floating book and the fixed rate book?

Speaker Change: We do not have that handy.

Curtis J. Myers: No worries. And I guess kind of touching on the same thing as well, is there any chance you have the yield on the roll-on versus roll-off yields for this quarter? We do not have those on hand.

Speaker Change: No worries. And I guess kind of touching on the same thing as well, is there any chance you have to yield on the roll-on versus roll-off yields for this quarter?

Curtis J. Myers: You may know on the loans or, Oh, yeah. We typically have not talked at that spot rate basis, and we do not have it. We don't have the details, but I think we're comfortable that what's coming on is at a higher rate than what we're rolling off. Got it.

Speaker Change: We do not have those handy.

Speaker Change: Oh yeah.

Speaker Change #104: Thank you.

Speaker Change: [inaudible]

Speaker Change #100: We typically have not talked at that spot rate basis, and we do not have that handy.

Speaker Change: Yeah, we don't have the detail, but I think we're comfortable that what's coming on is at a higher rate than what we're rolling off.

David Jason Bishop: And then you talked a little bit on the deposit side of expecting non-interest-bearing deposits to kind of shift out throughout the end of the year. What's your expectation on where you think deposit costs are going to go and at what level? Yeah, we had, we continue to drift down. The length of quarter reduction was, you know, pretty muted.

Speaker Change #103: Got it. And then you talked a little bit on the deposit side of expecting non-interest bearing deposits to kind of shift out throughout the end of the year. What's your expectation on where you think deposit costs are going to speak and at what level?

Curtis J. Myers: And we just expect to drift down from here; I think we ended the quarter at 21.9%. And, you know, the underlying customer trends seem to continue to suggest that we'll have that migration. But we have not seen significant results. We look at the overall earnings deck and things that the long-term trend shows. And you can see that that lands us if you look at that over the long term, 30 plus years, we should land in the low 20%. We're there right now. You know, we expect to be in this range of 20 to 20%. But we'll see. Higher rates for longer. We have not had that for a long time.

Speaker Change #102: Yeah, we had, we continued to drift down, you know, the length quarter reduction was

Speaker Change #107: you know, pretty muted. And we just expect to drift down from here. I think we end at the quarter 21.9.

Speaker Change #106: The underlying customer trends seem to continue that we'll have that migration, but we have not seen significant growth.

Speaker Change #106: We look, we provide in the

Speaker Change #102: Overall earnings deck and things, the long-term trend, and you can see that, that lands us, if you look at that over the long term, 30 plus years, we should land in the low 20 percent. We're there right now, you know, we expect to be in this range 20 to 22 percent.

Speaker Change #105: But, you know, we'll see. Higher for longer rates, we have not had that for a long time, so customers will continue to seek yield and we'll see how that plays out if rates stay higher for longer.

Curtis J. Myers: So customers will continue to see yield, and we'll see how that plays out if rates stay higher. Great. And are you thinking the cost of those deposits will kind of peak out by the end of the year? Yeah, you know, there's a lot of noise in this quarter because we added the Republic deposits. But if you look at the underlying core Fulton, you know, the deposit Delta and betas, you know, are moderating.

Speaker Change #109: Great, and are you thinking the cost of those deposits will kind of peak out by the end of the year?

Speaker Change #112: Yeah, you know, there's a lot of noise in this quarter because we added the Republic deposits. But if you look at the underlying core Fulton, you know, the deposit delta and betas, you know, are moderating.

David Jason Bishop: Awesome. Appreciate the time. Thank you. Thank you. I'm showing no further questions at this time. I'd like to turn it back to Kurt 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 third quarter results in October. Thanks, everyone. Thank you for your participation in today's conference. This concludes the program. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ??

Speaker Change #110: Got it.

Speaker Change #111: Awesome. Appreciate the time.

Speaker Change #108: Thank you.

Speaker Change #108: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Curt Myers for closing remarks.

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

Speaker Change #113: Thank you for participation in today's conference. This concludes the program. You may now disconnect.

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Speaker Change #114: www.thevenusproject.com

Unknown Executive: Thank you very much for watching, and I'll see you in the next video. Thanks for watching.

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