Q2 2025 Fulton Financial Corp Earnings Call

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Welcome to the Fulton Financial second quarter 2025 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 during the session. You will need to press star 1, 1 on your telephone. You will then hear an automated message. Advising your hand is raised to withdraw your question. Please press star 1 1 again.

I would now like to hand the conference over to your speaker today, Matt Jozwiak, Director of Investor Relations. Please go ahead.

Please be advised that today's conference is being recorded, I would now like to hand the conference over to your speaker today. Matt joak director of investor relations. Please go ahead.

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, 2025.

Your host for today's conference call is Kurt Myers, Chairman and Chief Executive Officer. Joining Kurt is Rick Kraemer, 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. The slides can also be found on the presentations page under Investor Relations on our website.

Speaker Change: Good morning, and thanks for joining us for full and financials conference call and webcast to discuss our earnings for the second quarter ending June 30th 2025 your host. For today's conference call is Kurt Meyers chairman and chief executive officer. Joining Kurt is Rick Kramer 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.

Speaker Change: These documents can be found on our website at fult.com by clicking on investor relations. And then on news,

Speaker Change: the slides can also be found in the 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.

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 in actual results. Could differ materially

Fulton undertakes no obligation other than as required by law to update or revise any forward-looking statement.

Speaker Change: 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.

Speaker Change: Fulton undertakes, no obligation other than as 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 please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and slide 16 through 22 of today's presentation for reconciliation of those non-GAAP financial measures to the most comparable GAAP.

Speaker Change: in discussing Fulton's performance representatives of Fulton, they refer to certain non-gaap Financial measures

8 slide 16 through 22 of today's presentation for reconciliation of those non-gaap financial measures to the most comparable gaap measures.

Now I'd like to turn the call over to your host, Curt Myers. Well, thanks, Matt. And good morning, everyone.

Kurt Meyers: Now, I'd like to turn the call over to your host Kurt Meyers.

For today's call, I'll be providing a few high level comments, as well as some operating highlights for the quarter.

Then Rick will review our financial results in more detail and discuss updates to our 2025 operating guide.

After our prepared remarks, we'll be happy to take any questions you may have. We were pleased with our strong second quarter operating earnings. Our community banking strategy continues to attract and retain valuable customers. We are delivering great customer outcomes which translate into strong results for our shareholder.

Well, thanks Matt. Good morning everyone for today's call. I'll be providing a few high-level comments as well as some operating highlights for the quarter. Then Rick will review our financial results in more detail and discuss updates to our 2025, operating guidance. After our prepared remarks, we'll be happy to take any questions you may have.

Kurt Meyers: We were pleased with our strong second quarter operating earnings.

Our community banking strategy continues to attract and retain valuable customers.

We are also proud to reinvest in our communities, making a positive impact and changing lives for the better.

Kurt Meyers: We are delivering great, customer outcomes, which translate into strong results for our shareholders.

This impact is made clear by the many stories in our Corporate Social Responsibility Report, which we released in June, and you can find on our Investor Relations website.

Kurt Meyers: We are also proud to reinvest in our communities. Making a positive impact in changing lives, for the better.

Kurt Meyers: This impact is made clear by the many stories in our corporate social responsibility report, which we released in June and you can find our on our investor relations website.

So let me turn to the numbers. Operating earnings of $100.6 million, or $0.55 per share, represents a $0.03 length quarter increase and a record for the These results demonstrate the impact of consistent positive operating leverage while maintaining a strong balance. Total Revenue Increase Link Quarter as we deliver growth in net interest income and fee income. Effective expense management continues to contribute nicely to our overall profitability as well. Combining those positive trends, our quarterly efficiency ratio was 57.1 percent, our operating return on average assets increased to 1.3 percent, and operating return on average tangible common equity increased to 16.26 percent.

Kurt Meyers: So let me turn to the numbers operating earnings of 101, 100.6 million or 555 cents per share represents a 3, Cent blinked quarter, increase and a record for the company.

These results demonstrate the impact of consistent positive, operating leverage while maintaining a strong balance sheet.

Kurt Meyers: Total revenue, increased link quarter, as we delivered growth in net, interest income, and fee income.

Kurt Meyers: Effective expense management continues to contribute nicely to our overall profitability as well.

Combining those positive Trends are quarterly. Efficiency ratio was 57.1%.

With these results, we were able to deliver our first $100 million operating net income quarter in company history. During the quarter, we were opportunistic and repurchased shares while growing tangible book value per share 9.5% on a linked quarter annualized basis.

Kurt Meyers: Our operating return on average assets increased to 1.3% and operating return on average tangible common Equity increased to 16.26%.

With these results, we were able to deliver our first hundred million dollar operating net income quarter in company history.

are strong performance, disciplined approach to balance sheet management, diversified business model, and strong liquidity and capital position the company for continued success.

Kurt Meyers: During the quarter, we were opportunistic and repurchase shares while growing tangible book. Value per share 9.5% on a linked quarter annualized basis, our strong performance disciplined approach to balance sheet management Diversified business model, and strong liquidity and capital position the company for continued success.

Now let me provide a few more comments on the quarter. Total loans grew $150 million, or 2.5%, as originations were solid. This growth was more than offset the strategic runoff of our indirect auto portfolio and managed reductions in certain commercial loans. Based on our year-to-date performance and our origination trends, we continue to expect low single-digit loan growth for the year. Turning to deposits, we remain focused on balancing long-term deposit growth with prudent interest cost management. During the quarter, we saw a modest decline in balances, largely due to seasonal trends. Based on new customer acquisition and overall customer sentiment, we continue to be positioned for long term deposit.

Now, let me provide a few more comments on the quarter, total loans, grew 150 million or 2.5% as originations were solid. This growth was more than offset, the Strategic runoff of our indirect Auto portfolio and managed reductions in certain commercial loans.

Based on our year-to-date performance and our origination Trends. We continue to expect low single digit loan growth for the year.

Kurt Meyers: Turning to the deposits. We remain focused on balancing long-term deposit growth with prudent interest cost management.

During the quarter, we saw a modest decline in balances largely due to seasonal trends.

Kurt Meyers: Based on new customer acquisition and overall customer sentiment. We continue to be positioned for long-term deposit growth.

Turning to the income statement, revenue growth was driven by a strong net interest margin and a solid linked quarter increase in non-interest income. All non-interest income categories grew length quarter. Wealth management hit an all-time high in quarterly revenue. We're adding team members and continuing to grow our customer base. Commercial banking fees also hit an all-time high as customer activity continues to drive growth. Consumer Banking and our residential mortgage business delivered solid link quarter growth as well. Overall, our non-interest income businesses continue to make a consistent and meaningful contribution to overall revenue, and we have a solid strategy for continued growth.

Kurt Meyers: Turning to the income statement. Revenue growth was driven by a strong and interest margin and a solid linked quarter increase in non-interest income.

All non- In.

Kurt Meyers: Categories grew like the quarter wealth management, hit an all-time high in quarterly Revenue.

We're adding team members and continuing to grow our customer base.

Kurt Meyers: Commercial Banking fees also hit an all-time high as customer activity continues to drive growth.

Kurt Meyers: Consumer Banking and our Residential Mortgage business delivered solid link quarter growth as well.

Lastly, let me touch on credit. Overall, we remain cautious given general economic and geopolitical uncertainty. However, we continue to see steady performance in our portfolio. charge-offs and our provision expense were downlinked. We experienced an uptick in non-accrual loans. However, these balances remain in line with recent. Overall, our coverage ratio remains appropriate given our cautious outlook.

Kurt Meyers: Overall, our non-interest income businesses continue to make a consistent and meaningful contribution to overall revenue, and we have a solid strategy for continued growth.

Kurt Meyers: Lastly, let me touch on credit.

Kurt Meyers: Overall, we remain cautious, given General, economic and geopolitical uncertainty. However, we continue to see steady performance in our portfolio.

Now I'll turn the call over to Rick to discuss the details of our financial results and provide comments on our 2025 operating guidance in a little more detail. Thank you, Kurt, and good morning. Unless I note otherwise, the quarterly comparisons I discuss are with the first quarter of 2025. Loan and deposit growth numbers I reference are annualized percentages on a linked quarter basis. Starting on slide four, operating earnings per diluted share with 55 cents or 100.6 million of operating net income available to common shareholders. Revenue growth, a stable balance sheet, and an increase in net interest margin offset a modest increase in operating expenses, driving positive operating leverage when compared to the year-ago period.

Charge offs Andor provision expense were down link quarter. We experienced an uptick in AC, not a cruel loans. However, these balances remain in line with recent periods overall, our coverage ratio remains appropriate given or cautious Outlook. Now, I'll turn the call over to Rick to discuss the details of our financial results.

Rick Kramer: And provide comments on our 2025 operating guidance in a little more detail.

Speaker Change: Thank you, Kurt and good morning.

With the first quarter of 2025.

Speaker Change: Loan and deposit growth numbers, I reference our annualized percentages on a linked quarter basis.

Starting on slide 4, operating earnings per diluted, share with 55 cents or 100.6 million of operating net income, available to Common shareholders.

Speaker Change: Revenue growth, a stable balance sheet and an increase in net interest margin offset, a modest increase in operating expenses. Driving positive, operating leverage. When compared to the year ago, period.

Total end-of-period loans increased $150 million, or 2.5% during the quarter, primarily in our residential mortgage portfolio, home equity portfolio, and certain commercial categories. Deposits declined $191 million, or 2.9%. Growth of $120 million in money market balances and an increase of $89 million in wholesale channels were offset by seasonal declines in municipal balances of $135 million and non-interest bearing balances of $98 million. Our non-interest bearing balances ended the quarter at 20% of total deposits. We expect to see municipal balance inflows in line with historical trends in the third quarter. With these results, our loan-to-deposit ratio ended the quarter at 92%.

Total end of period loans increased 150 million 150 million or 2.5% during the quarter primarily in our Residential Mortgage portfolio, home equity portfolio and certain commercial categories.

Speaker Change: Deposits declined. 191 million or 2.9%.

Speaker Change: Growth of 120 million in Money Market balances and an increase of 89 million in wholesale channels or offset by seasonal declines in Municipal balances of 135 million and non-interest-bearing balances of 98 million.

Speaker Change: Our non-interest bearing balances ended the quarter at, 20% of total deposits.

Speaker Change: We expect to see Municipal balance inflows in line with historical Trends in the third quarter.

Speaker Change: With these results. Our loans deposit ratio ended. The quarter at 92%.

As part of our ongoing balance sheet management, we added $117 million of securities to offset investment portfolio cash flows and to maintain our on-balance sheet liquidity. The weighted average coupon on new purchases this quarter was approximately 5.44%. These additions carried an effective duration of approximately 3.2 years. The impact of these balance sheet trends are shown on slide five. Net interest income on a non-FTE basis was $254.9 million, a $3.7 million increase length quarter, while net interest margin increased four basis points to 3.47%. Loan yields remain steady at 5.86%. While fixed-rate asset repricing represented a tailwind during the quarter, accretion interest attributable to the acquired Republic portfolio declined $1.7 million linked quarter to $11.4 million, offsetting most of that benefit.

Speaker Change: As part of our ongoing balance sheet management, we added 117 million of Securities to offset Investment Portfolio, cash flows and to maintain our on balance sheet liquidity.

The weighted average coupon a new purchases is quarter was approximately 5.44%.

Speaker Change: These additions carried an effective duration of approximately 3.2 years.

Speaker Change: The impact of these balance sheet Trends are shown on slide 5.

Speaker Change: Net interest income on a non FTE basis with 254.9 million, a 3.7 million increase, linked quarter while net interest margin increased 4 basis points to 3.47%.

Speaker Change: Loan yields remained steady at 5.86%.

While fixed rate asset repricing represented, a Tailwind. During the quarter accretion interest attributable to the acquired Republic. Portfolio declined, 1.7 million linked quarter to 11.4 million

Offsetting most of that benefit.

For the quarter, our average cost of total deposits decreased five basis points to 1.98 percent. Through the cycle, our total deposit beta has been 28%. We continue to identify opportunities and manage deposit costs with discipline and to be supportive of our overall balance sheet growth. As a reminder, we had $195 million of subordinated debt reset to floating rate in late March. repricing from a fixed 3.25% to approximately 6.6%. This security is SOFR based and will float at 2.3% over three month term SOFR. Turning to slide 6, non-interest income for the quarter was $69.1 million. The linked quarter increase was broad-based.

For the quarter, our average cost of total deposits decreased 5 basis points to 1.98%.

Speaker Change: Through the cycle, our total deposit beta has been 28%.

Speaker Change: We continue to identify opportunities and manage deposit costs with discipline and to be supportive of our overall balance sheet growth.

Speaker Change: As a reminder, we had 195 million of subordinated debt. Reset to floating rate in late March.

Speaker Change: Repricing from a fixed 3.25% to approximately 6.6%.

This security is sober based, and will float at 2.3% over 3 months terms over.

Speaker Change: Starting to slide 6, non-interest income for the quarter was 69.1 Million.

When excluding the benefit from equity method investment adjustment of $2.7 million in the first quarter of 2025, fee income increased 7% linked quarter. non-interest income as a percentage of total revenue remain at 21% during the second quarter. Moving to slide seven, non-interest expense on an operating basis was $187.6 million, an increase of $4.8 million linked quarter. As we indicated last quarter, we expected operating expenses to fall in the $190 to $195 million per quarter range for the remaining three quarters of 2025. While the second quarter was below that range, we are confirming the range for both the third and fourth quarters of 2020.

Speaker Change: The linked quarter increase was broad-based.

Speaker Change: when excluding the benefit from Equity method investment, adjustment of 2.7 million, and the first quarter of 2025,

Speaker Change: Fee income increased 7%, linked quarter.

Speaker Change: Non-interest income as a percentage of total revenue remained at 21% during the second quarter.

Speaker Change: Moving to slide 7 non-interest expense on an operating basis was 187.6 Million. An increase of 4.8 million linked quarter

Speaker Change: As we indicated last quarter, we expected operating expenses to fall in the 190 to 195 million per quarter range for the remaining 3/4 of 2025.

Speaker Change: While the second quarter was below that range, we are confirming the range for both the third and fourth quarters of 2025.

When looking at our expense base, items excluded from operating expenses as listed on slide seven include $5.5 million of core deposit intangible amortization and a $270,000 benefit of other items. Turning to asset quality, provision expense declined approximately $5.3 million linked quarter to $8.6 million. As Kurt mentioned, modest long growth combined with no material changes to our outlook contributed to lower provisioning length quarters. Our allowance for credit losses to total loans ratio ended the period at 1.57%, and our ACL to non-performing loan coverage was 177%.

Speaker Change: when looking at our expense base items excluded from operating expenses at listed on slide 7 include

Speaker Change: 5.5 million of core deposit in tangible amortization and a 270,000 benefits of other items.

Speaker Change: turning to asset quality provision expense declined, approximately 5.3 million linked quarter to 8.6 million

Speaker Change: As Kurt mentioned modest, long growth combined with no material changes to our Outlook contributed to lower provisioning, linked quarter.

Our allowance for credit losses to Total loans ratio and did the period at 1.57%.

Speaker Change: To non-performing loan coverage was 177%.

Slide nine shows a snapshot of our capital base. As of June 30, we maintain a solid capital position that provides us with future balance sheet flexibility. During the quarter, we repurchased 522,000 shares at a weighted average price of $16.09. Including repurchases, internal capital generation added $55 million in total equity.

Speaker Change: Slide 9 shows a snapshot of our Capital base as of June 30th. We maintain a solid Capital position that provides us with future, balance sheet, flexibility.

During the quarter. We repurchased 522,000 shares at a weighted average price of $169.

AOCI ended the quarter flat at $272 million and our CET1 increased to 11.3%.

Speaker Change: Including repurchases, internal Capital, generation, added 55 million in total equity.

Speaker Change: Aoci and the quarter flat at 272 million and our cet1 increased to 11.3%.

On slide 10, we are updating our operating guidance for 2025. Considering more recent events and additional economic data, we have updated our rate forecast to now include two 25 basis point rate cuts in 2025. One in September and one in December. This is down from four assumed cuts previously.

Speaker Change: On slide 10. We are updating our operating guidance for 2025.

considering more recent events and additional economic data, we have updated our rate forecasts to now include 2, 25 basis point rate Cuts in 2025

Speaker Change: 1 in September and 1 in December.

In addition to this macro assumption, we have made the following adjustments to our guidance. Increasing net interest income to a range of $1.5 billion to $1.25 billion. We are lowering provision expense to a range of $50 million to $70 million. There is no change to the fee income range remaining at $265 million to $280 million. We're lowering our operating expense to a range of $750 million to $765 million. We are increasing our effective tax rate to a range of 18.5% to 19.5%. And lastly, lowering our estimate of non-operating expenses from $14 to $10 million.

Speaker Change: This is down from 4:00 to Cuts previously.

Speaker Change: In addition to this macro assumption, we have made the following adjustments to our guidance.

Speaker Change: Increasing. Net interesting. Come to a range of 1 billion, 5 million to 1 billion 255 million.

Speaker Change: We are lowering provision expense to a range of 50 million to 70 million.

There is no change to the fee. Income range remaining at 265 million to 280 million.

Speaker Change: We are lowering our operating expense to a range of 750 million to 765 million.

And with that, we'll now turn the call over to our operator, Gigi, to open up for questions. Thank you.

Speaker Change: And we are increasing our effective tax rate to a range of 18.5% to 19.5%. And lastly, lowering our estimate of non-operating expenses from 14 to 10 million.

Speaker Change: And with that, we'll now turn the call over to our operator, Gigi to open up for questions.

As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Speaker Change: Thank you as a reminder, to ask a question. Please press star, 1, 1 1 on your telephone, and wait, for your name to be announced.

Speaker Change: To withdraw your question. Please press star 1 1 1 again.

Speaker Change: Please stand by while we compile the Q&A roster.

Our first question comes from the line of Daniel Tamayo from Raymond James. Thank you. Good morning, everyone. Maybe just starting on the expense guidance, you had a nice quarter and you talked about kind of keeping the back half in that $190 to $195 range. And you lowered the overall $2025 range as well. But I guess just curious how you see the pace in the back half of the year getting there. You know, it's been a You had kind of a steep decline in the first quarter, and then there's been a little bit of a ramp since then implied in the back half of the year as well.

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

Daniel Tamayo: Thank you. Good morning everyone.

Speaker Change: um,

Speaker Change: Maybe just, uh, just starting on the on the expense guidance. Um, you had a nice quarter and you you talked about kind of keeping the uh the back half in that 190 to 195 range. Um, and you you lowered the, the overall, uh, 2025 range as well. But um, I guess just curious. You know, how you, how you see the, um, the pace in the back half of the Year getting there. Um, you know, it's been a

So, just curious, kind of, if there was...

There's like some help if you give us some geography and timing of the of the increase in the expenses in the back half.

Speaker Change: A you had the you kind of a steep decline in the first quarter, and then, and it's been a little bit of a ramp since then, um, implied in the back half of the year, as well. So just curious kind of if there was

If there's like some help, you can give us on geography and and timing of the uh, of the increase in the expenses in the back half.

Yeah, thanks, Danny. Look, I think I think you're directionally right. While it's equal, I think the range of 190 and 195 should land, you know, below the midpoint of that little bit of timing, just on day count alone, obviously additional day, but recognize the magnitude of increase in 2Q had a lot to do with merit in the second quarter, which accounted for a couple million dollars of the increase.

So you don't have that kind of step up in and 3Q and 4Q. You know, I think what we're trying to do is provide a little bit of optionality for some initiatives that may start in the second half, so which could increase a little bit, but I don't expect geographically, I guess, on the expense line to see any major outlier moves for the second half. Okay, so if you end up kind of below that midpoint, then, you know, that that points us to. I guess below the midpoint of the overall range for the year, is that a fair way to think about it?

Speaker Change: Yeah, thanks Danny. Uh, it look, I think I think you're, um, directionally, right? I, you know, all our sequel, I think the the range of 190 and 195 should land, you know, below the midpoint of that. Um, little bit of timing just on Day, Count alone, obviously additional day. Um, but recognize the magnitude of increase in 2q had a lot to do with Merit in the second quarter uh which counted for a couple million dollars of of the increase. So you don't have that kind of step up and and

Speaker Change: And 3 q and 4 q. You know, I think what we're trying to do is provide a little bit of optionality for some initiatives, uh, that may start in the, you know, second half so which, which could increase a little bit. But, um,

I I don't expect geographically, I guess on the offense line to see any major outlier moves for the second half.

Speaker Change: Okay, so if you end up kind of

Below that midpoint. Then I you know that that points us to

That's a fair way to think about it, you know, with the caveat of there are obviously, we're leaving ourselves a little room to start certain projects in the second half, which could incur costs more immediately and move that up a little higher. Okay. All right. Fair enough. Appreciate that color.

Speaker Change: You know, I guess below the midpoint of the uh, of the overall range for the year is that fair way to think about it?

Speaker Change: That's a fair way to think about it. Um, you know, with the caveat of there are obviously we're leaving ourselves a little room to start certain projects in the in the second half, which could incur, uh, cost more immediately and and move that up a little higher.

And then kind of a similar question on the fee income guidance. You know, just assuming kind of a modest pace of increase in the back half gets us to kind of above the midpoint of the guidance that you guys have in there. It's been certainly a nice quarter, a nice year of growth on the wealth management side. But just want to make sure, you know, as we're working our way through the models that we're not missing any kind of You know, one-time increases that you think may back off on cash management looks like it was pretty strong in the second quarter.

Speaker Change: You know, it's been uh certainly a nice quarter, a nice year of growth on the wealth management side. Um but just want to make sure, you know, as we're working our way through the models that we're not missing any kind of

You know, card income bounced back. But just as we look through the fee income side, if there's anything that you'd point us towards in terms of moving parts in the back half of the year. Yeah, Danny, the second quarter was good across the board, as you mentioned, in in fee income. You know, as we look forward, we feel we have good strategies in place as we look forward, if we get that kind of consistent outperformance in each category, we're going to trend to the top end of that range. If we hit any headwinds in any any one of those business units, we would trend, you know, to the midpoint or low end of the range, we feel pretty good about the overall outlook there.

Speaker Change: You know, 1-time increases that you think May back off. I'm, you know, cash management, looks like it was pretty strong in the second quarter, um, you know, card income, bounce back. But just as we look through the fee income side, if there's anything that you'd point us towards, in terms of, um, moving Parts in, in the back, half of the year,

And again, that's one of the outlook items that we did not change. So we think we are tracking as expected. And, you know, pretty happy about the the quarter and the consistent performance.

Yeah. Danny the second quarter was uh good AC cross the board as you mentioned in in fee income. Um, you know, it's we look forward. Uh we feel we have good strategies in place as we look forward. If we get that kind of consistent outperformance, in each category, we're going to transfer to the top end of that range. Um, if we hit any headwinds in any, any 1 of those business units, we would Trend, you know, to the midpoint or, or low end of the range. We feel pretty good about um, the overall Outlook there. And again, that's 1 of the Outlook items that we did not change. So we think we are tracking, um, as expected and uh, you know, are pretty happy about the, uh, the quarter, and the consistent, uh, performance in each of the income categories.

Great. All right. Well, thanks for all the color. Appreciate it, guys. Thank you.

Great. All right, well, thanks for all the color. Appreciate it, guys.

Speaker Change: You bet.

One moment for our next question.

Speaker Change: Thank you. 1 moment for our next question.

Our next question comes from the line of David Bishop from Hovde Group. Yeah, good morning gentlemen. We did.

Speaker Change: Our next question comes from the line of David Bishop from Havi group.

Speaker Change: We did.

Hey, I'm just curious, Rick, maybe just to bring us up to speed on the status of the loan pipeline. Just curious what you're seeing and hearing from your relationship managers and your commercial clients, if we're starting to see any impact from some of the uncertainty from tariff talk starting to impact pipeline and loan demand. Thanks. Pipeline length quarter is up. So we feel that that's encouraging in this environment. But again, we still have the pull through rate being below historical norms as customers are cautious about new projects. The more certainty we get in the marketplace, whether it's taxes or tariffs or all of the many things that you could point to, we're hoping that that pull through rate increases and we get some tailwinds for loan growth length quarter.

Curious.

Bert, Rick, maybe, uh, just to bring us up to speed on the the status of the, the loan pipeline, just curious what you're seeing and hearing from, uh, your relationship managers and, and your commercial clients. If, if we're starting to see any impact on some of the uncertainty from,

Speaker Change: From Pair of talks, uh, starting to impact Pipeline and Loan demand, thanks.

We were pleased with our loan growth in the second quarter and we're hoping that continues. But pipelines are up and we're really monitoring pull through rates. It really comes down to customers deciding to spend that money and move forward with that pipeline. Got it.

Speaker Change: Uh, yeah pipeline linked quarter is up. Um, so we we uh, feel that that's encouraging, uh, in this environment. Um, but again, we still have, um, the pull through rate being below historical Norms as customers, uh, are cautious, uh, about new projects. Uh, you know, the more, uh, certainty we get in the marketplace, whether it's, it's taxes or tariffs, or all of the many things that you could point to. Um, we're hoping that that pull through rate increases and, and we get, uh, you know, some, some Tailwinds for, uh, loan growth, uh, linked quarter. We were pleased with our loan growth in the second quarter and we're hoping that continues but pipelines are up.

Uh, and we're really monitoring pull through rates. It really comes down to customers, you know, deciding to spend that money and uh and move forward with that project.

And then a follow up, you know, Kurt, maybe just remind Appetite for M&A here with the public in the rear view mirror. Just curious where any sort of M&A focus might be sort of geographically and maybe size parameters. Yes, our M&A strategy remains the same. We will we'll stick to that that strategy. As a reminder, you know, we look at, you know, community banks in the one to $5 billion range, you know, really the focal point for our strategy, they add to the company, we're predominantly focused on in market. And we think those those opportunities would be would be additive.

Speaker Change: Got it and then a follow-up, uh, you know, current maybe just remind us.

Speaker Change: Appetite for, for m&a here with uh, you know, Republic in the rearview mirror. Just curious where any sort of m&a focused might be uh sort of geographically and maybe saw the parameters. Thanks.

And then we would look at bigger deals, but they're very, you know, There's a few of them, so we monitor that. But our primary focus remains the same. I think the key message is, as usual, we will be disciplined in metrics and we'll be disciplined on strategy.

Speaker Change: Yes, or or m&a strategy Remains the Same, uh, and we, we will, we'll stick to that that strategy as a reminder. You know, we look at, um, you know, Community Banks in the 1, to 5 billion dollar range. Um, you know, are really the focal point, uh, for our strategy, they add, uh, to, uh, the company, uh, we're predominantly focused on in Market. Uh, and we think those those opportunities would be would be additive, um, and then we would look at bigger deals, but they're very, um, there's a few few of them. Uh, so we, we monitor that, but our, our primary focus Remains the Same. Uh, I think the key message is, uh, as usual, uh, we will be disciplined, uh, in metrics and we'll be disciplined on strategy.

Perfect, thanks.

Speaker Change: Perfect. Thanks.

Thank you.

One moment for our next question.

Speaker Change: Thank you. 1 moment for our next question.

Our next question comes from the line of David Conrad from KBW. Hi, good morning. I just want to talk a little bit about the deposits and the outlook there. This quarter, you saw about three BIFs increase in savings, but really good growth and able to push down really expensive broker deposits. So just wondering, as you kind of look at the NIM outlook, your ability to continue to remix the deposits.

Our next question comes from the line of David Conrad from KBW.

David Conrad: Hi, good morning.

David Conrad: Um just wanted good morning. Hey just want to talk a little bit about the deposits in the in the Outlook there. You know this quarter you saw about 3 bipin Outlook. Um, you kind of you're a bit, you know, your ability to continue to remix the uh, the deposits.

Yeah, thanks, David. I think there's a couple things to consider. when it comes to the cost. Obviously, you know, we do have some seasonality in our portfolio driven by the municipal inflows and outflows. At times to offset that we we do utilize some more wholesale methods and more more costly methods in short term. So that obviously has a mitigating I think we still kind of, you know, there's this still as rates stay higher, this drift that is occurring and not interest bearing. So that's a trend on mix you're kind of consistently fighting. But, you know, we are seeing, I think, increased competition across the board for for deposits more recently.

Yeah, I think they, I, I think there's a couple things to consider. Um,

At times too offset that we we do utilize some more wholesale methods and more more costly methods in short term So that obviously hasn't mitigating. Um,

David Conrad: Effect on lower cost.

And, you know, candidly, our desire is to fund all of our future loan growth with customer deposits. So that that may amplify a little bit. So, you know, our betas are slowing. I don't it may be too early to say there's a trough in deposit costs, but I think we're closer to the bottom barring any future rate cuts. Got it, thanks.

David Conrad: Um, I, you know, I I think we still kind of, you know, there's there's still as rates, stay higher, this drift, that is occurring, and non-interest bearing. So, that's a a trend on mix. You're kind of, um, consistently fighting but, um, you know, we are seeing I think increased competition across the board for for deposits. Uh, more recently.

David Conrad: And, you know, candidly our desire is to fund all of our future loan growth with customer deposits. So um, that that may amplify a little bit. So, you know, our our betas are slowing. Um, I don't, it may be too early to say there's a trough in deposit cost, but I I think we're, you know, closer to the bottom, uh, barring any future rate cuts.

And then on the NII guide, I guess it feels like if you held things flat here for a couple quarters, you'd be, you know, kind of the midpoint, you know, above the midpoint towards the higher end. So just maybe some comments on, you know, the exit rate of this year. And, you know, I think, you know, you have two cuts in, but the December cut probably doesn't matter too much. So maybe just some thoughts on the exit rate of NII. Yeah, look, I think I think obviously, what I just mentioned on the on the funding side are is a little bit of a headwind.

Speaker Change: Got it. Thanks. And then on the, on the knee guide, I guess it feels like if you help things flat here for a couple quarters, you'd be, you know, kind of the midpoint, you know, above the midpoint and towards the higher end. So just maybe some comments on, you know, the the exit rate of this year and you know, I think you know, you have 2 Cuts in but but the December cut probably doesn't matter too much so maybe just just some thoughts on the exit rate of knee.

I think we fully recognize the tailwind from the fixed rate asset repricing. What I would say there is, though, you know, there are also competitive pressures that haven't flow at any given time, which can impact yields and spread. So, you know, it's, it's a 0 It's a tough business and spreads are not always expanding. So I think you'll see a natural, assuming no Fed moves, you'll see this kind of steady state, modest growth in NAI from here on out. But obviously, there's lots of things from the macro that can happen. Okay, thank you. Thank you.

Speaker Change: Yeah, I look, I think I think obviously, um, what I just mentioned on the, on the funding side are, uh, is a, is a little bit of a, a headwind. Um, I think we fully recognize the, the Tailwind from the fixed rate asset repricing. Uh, what I would say there is though, you know, there are also competitive pressures that have and flow in any given time, which can impact, uh, yields and spreads. So, um, you know, it's, it's, uh, it's a tough. It's a tough business. And, and spreads are, um, not always expanding. So, I think,

I think you're you'll see you know a natural assuming no fed moves. You see this kind of steady state modest growth?

Uh knee from from here on out. But obviously, you know, the the there's lots of things from the macro that can change that.

Speaker Change: Okay, thank you.

One moment for our next question. Our next question comes from the line of Matthew Breese from Stephen Zink. Good morning.

Speaker Change: Thank you.

Speaker Change: 1 moment for our next question.

Our next question comes from the line of Matthew Breeze from Steven zinc,

I was hoping we could go back to the pipeline for just a second, you know, maybe discuss, you know, the components. More recently, we've seen growth in the form of commercial real estate and resi. Historically, I know, you know, Fulton has been more of a C&I focused type bank. So I wanted to get a sense for what we might see in terms of near term loan growth. And then secondly, you know, Rick, you had mentioned spreads are not always constant. What are you seeing for new loan spreads? Are you seeing competition kind of erode spreads in the hunt for growth?

Matthew Breeze: Good morning.

Matthew Breeze: I was hoping we could go back to the pipeline for just a second, you know, maybe discuss the components. You're more recently. We've seen growth in the form of commercial real estate and resi.

Speaker Change: Historically, I know you know Colton has has been more of a cni focused type bank. So I wanted to get a sense for what we might see in terms of near-term long growth and then secondly you know, Rick you had mentioned, spreads are not always constant. What are you seeing for for new loan spreads? Are you seeing competition? Kind of a road uh uh spreads in the hunt for growth.

Matt, I'll first respond just on growth and strategy. We're very committed to diversified loan book. I think it's served us well over time. So we're looking to grow each category as appropriate from a risk standpoint, quarter to quarter that ebbs and flows based on where loan originations are and opportunities are. You mentioned C&I loan growth. We are focused on C&I loan growth. It's a good business for us and drive to treasury and a lot of our other business lines. So strategically, C&I is really important. C&I customers, it's very competitive right now. And it also is where they're dealing most with tariffs and costs and uncertainty.

So we're looking at each segment, trying to grow that prudently and responsibly. And we think we have opportunities in each. We have market disruption. We've got good pipelines. So I think we can grow each category, but you're going to see quarter to quarter, maybe even year to year, our ability to grow certain segments more than others. But again, the strategic focus is to grow each segment appropriately.

Speaker Change: And that offers, uh, respond just on on growth and and strategy. Um, you know, we're very committed to um, Diversified loans. I think that's served us well over time. So we're looking to grow each category um as appropriate from a from a risk standpoint, you know, quarter to quarter that es and flows based on where uh loan originations are and and and the opportunities are um, you you mentioned C and I uh, loan growth, you know, we we are focused on cni loan growth. We it's a good business for us and drives Treasury and a lot of our other business lines. So strategically cni is really important. Um, cni customers. Uh, it's very competitive, um, right now. And um, and it also is, is where, um, they're dealing most with tariffs and costs and uncertainty. So, um, you know, we're looking at each segment, uh, trying to grow that, uh, uh, prudently and respond resp

Speaker Change: Responsibly. Um, and we think we have opportunities in each. Um, you know, we have Market disruption, we've got good pipelines um you know so I think we can grow each category but you're really you're going to see quarter to quarter maybe even year to year. Uh, our ability to grow certain segments of more than others. But again, the Strategic focus is to grow each segment uh appropriately.

Maybe Matt, I'll just comment quickly on spreads. I think, you know, what I would say is spreads are still healthy and overall yields are still healthy. But when we go back maybe to the third, fourth quarter of last year, you probably were seeing new origination spreads and we were in the, you know, seven plus. And so over time, that was probably unsustainable in certain categories. So you're, you know, you're seeing, I think, quarter over quarter compression on new origination yields of around an eighth to a quarter, depending on. What portfolios you're looking at. Now that that is a little bit choppy.

And this is probably more normalized. But, you know, recognizing that just industry pressure and competitive pressure puts overall pressure on that for everybody Okay.

Speaker Change: An eighth to a quarter depending on um what portfolios you're looking at. Um now that that is a little bit choppy and this is probably more normalized. But you know, recognizing that just industry pressure and competitive pressure puts overall pressure on that for everybody.

And Rick, you'd also mentioned, and it's in the release too, but accretable yield stepped down. Should we use this $11.4 million as a new starting point? And maybe you could just help us out for the new trend. Is it, you know, down and to the right? What does accretable yield look like, you know, three, four quarters from now? Yeah, I think I think 11 to 12 million is a reasonable range, assuming some level of prepayments. Obviously, we are, you know, there is an estimate in there in terms of prepayment speeds. If you had no prepayments, that number would be closer to, you know, 10 and a half to high 10.

Rick Kramer: Okay, and and Rick you'd also mentioned and it's in the release too but acrely yield step down.

Rick Kramer: Should we use this 11.4 million as a new starting point and and maybe you could just help us out for the new trend is it you know, down into the right. What is the yield look like? You know, 3 4 quarters from now?

Rick Kramer: Yeah, I think, uh, I think 11 to 12 million is a reasonable range, assuming some level of prepayments. Obviously, we are, you know, there is an estimate there, in terms of of prepayment speeds, um, if you had, uh, no prepayments. That number would be closer to, you know, 10 and a half to high 10 million.

And then last one for me, you bought back some stock this quarter. You still have, I think, around 100, 125 million repurchase authorization. But I noticed that that authorization also includes preferred and subdebt. You've mentioned stuff that is now floating or a portion is now floating. Curious if there's an appetite, one for additional common repurchases or alternative forms of capital repurchase, including net sub debt. What circumstances would you kind of execute on those? Yeah, so the overall capital planning strategy is the same, we want to support organic growth, you know, we'd really like organic growth to continue to, to growth rates continue to improve.

Rick Kramer: um and then last 1 for me, um, you bought back some stock this quarter, you still have, I think around a hundred or 125 million repurchase authorization but

Speaker Change: I, I noticed that that authorization also includes preferreds and sub debts, you had mentioned, uh, sub that is now floating or a portion is now floating

Speaker Change: curious if there's an appetite 1 for additional common repurchases or Alternative forms of capital repurchase including that subject, what circumstances would you kind of

Speaker Change: Uh, execute on those.

So that's always the, you know, first use capital, and then any corporate initiatives that we would would want to invest in, and then we would get to buybacks. And we look at those opportunistically, we had some opportunity in the second quarter. You know, we use about $10 million of that we have 115 million remaining for for stock buybacks or for other uses. So we are evaluating that. Yeah, as we move forward, it really depends on outlook, and overall capital and balance sheet strategy.

Yeah. So the overall Capital planning, um, strategy is saying we want to support organic growth. Um, you know, we'd really like, uh, organic growth to continue to, uh, to growth rates continue to improve. So that's always the, uh, you know, first use capital. And then any corporate initiative, uh, that we would would want to invest in and then we would get to buy backs. Um, and we look at those opportunistically. Um, we had some opportunity in the second quarter, um, you know, we use, it's about 10 million dollars of that. So we have 115 million remaining, uh, for, for stock BuyBacks or or other uses. So we are evaluating that, um, yeah. As we move forward, it really depends on Outlook and overall capital and balance sheet strategy.

Great, that's all I had. Thanks for taking my questions. Thank you.

Speaker Change: Great. That's all I had. Thanks for taking my questions.

Speaker Change: Thanks B.

One moment for our next question. Our next question comes from the line of Manuel Navas from D.A. Davidson. Hey, how would how would you describe like kind of the consumer pipelines that was pretty strong this quarter? Is that still going to have some seasonality or kind of carry over to the third quarter?

Speaker Change: Thank you. 1 moment for our next question.

Speaker Change: Our next question comes from the line of manual. Novice from da Davidson

Speaker Change: Hey.

How are you? How are you describe like kind of the consumer pipelines? Uh that was pretty strong, this quarter. Um, is that

And With the pipelines building on commercial, you're going to kind of see a handoff in better growth there in the back half of the year, just kind of talk about those dynamics. Yes, there's definitely some some seasonal effect on the consumer business. The second quarter is good home buying opportunity projects, consumer projects for the driving the home equity. We referenced both of those categories growing nicely in the second quarter. So there is some seasonality to the business. But, you know, all of those underlying businesses were focused on attracting customers, adding new customers, and driving business organically.

Speaker Change: still going to have some seasonality or kind of carryover to the third quarter and, um,

Uh with the pipelines building on Commercial, you can kind of see a handoff in better growth there in the back half of the year, just kind of talk about those Dynamics please.

So I think there's a base level of growth in each of those businesses. And then it'll be either more significant or lower quarter to quarter based on seasonality, we really didn't see anything specific in the second quarter, that would be an anomaly.

You know, that was a good solid second quarter is kind of shifting over to pretty strong performance in fees and OPEX.

Speaker Change: Yeah, so, there's definitely some some seasonal, uh, effect on the consumer business. The second quarter is good, home buying, uh, opportunity projects consumer projects for the driving. The home equity reference, both of those, uh, categories growing nicely in the second quarter. So, uh, there is some seasonality of the business, but, um, you know, all of those underlying businesses were focused on attracting customers, adding new customers and driving business, uh, organically. So I think there's base level of growth, um, in each of those businesses, and then it'll be either more significant or lower, uh, quarter to quarter, based on seasonality, we really didn't see anything specific in the second quarter. That would be an anomaly. Um, you know, that was a good solid second quarter consumer growth.

Could you kind of map out if any of that our performance has been kind of driven by the Fulton First initiative? On the fee side, we talked about it a little bit before, it was a good quarter for us. We grew in each category. We feel we have just good underlying strategies there. There are some Fulton First initiatives that were focused on accelerating growth over time. It's hard to separate those from core business. As we move forward, the growth-related initiatives for Fulton First will show up in accelerating growth rates in certain categories. There's really not anything specific Fulton First to that growth rate that we would call out.

Speaker Change: Is um kind of Shifting over uh to pretty strong performance and fees and Opex could kind of map out if any of that our performance has been kind of driven by The Fulton first initiative.

Speaker Change: Uh on on the seaside we talked about a little bit before it was a good quarter for us, we grew in each category.

It's just really managing those businesses in a way that our long-term growth trajectory is higher than ever.

Speaker Change: Really managing those businesses in a way that are long-term growth trajectory is is higher than expected.

on the expense side. Yeah, on the expense side, it was about, you know, we're about eight and a half million dollars in net realized benefit from Fulton First in 2Q. So, you know, still remain well on track, obviously, just annualizing that number well ahead of our original $25 million net save for 2025. So You know, I don't I wouldn't necessarily say that the program in total has grown. I think a lot of that is just getting pulled forward in 2025.

Speaker Change: On the expense side.

Speaker Change: Yeah, on the expense side, uh, it was about, you know, but we're about 8 and a half million dollars of net realized benefit from Folton first, uh, into Q. So, um, you know, still still remain well on track obviously, just annualizing that number, well, ahead of our original 25 million, uh, net, save for 2025. So, um, you know, I, I don't, I wouldn't necessarily say that the program in total has grown. I think a lot of that is just getting pulled forward in 2025 versus 26.

That's helpful. Any, you talked about credit trends being very solid. There was a little bit of tick up in NPLs, I think in construction. Any color there? Just kind of, and any broader comments? Yeah, most of that increase in commercial construction, most of that was one project. It's a mixed use project, predominantly multifamily, but mixed use project. We feel we have it appropriately reserved. It's an identified issue that we've been working on. So we already have a reserve for and are working towards resolution. But what you see there is just that migration. classified criticized to non-accrual for the quarter.

Speaker Change: That's helpful. Uh,

Speaker Change: Any, you you talked about credit Trends being very solid. There was a little bit of tick up in npls. I think in construction any color there. Just kind of uh, um, and any broader comments on credit.

So to identify the issue we're working through to And then the second part of your question, just more broadly in credit, you know, Metrics have remained stable. We feel good about the credit performance, but we remain cautious. There's just a lot of moving parts in the marketplace, a lot of factors that consumers and businesses are dealing with. But at this point, the portfolio has been very resilient and the credit metrics are holding strong, but we still do have a cautious outlook just based on the overall.

Speaker Change: Yeah, most of that increase in uh commercial construction. Most of that was uh 1 Project. It's a mixed-use project predominantly multi-family. Uh but mixed juice uh project. Um we feel we have it appropriately, reserved. It's an identified issue that we've been working on. Um, so we already have it, reserved for and uh, are working towards resolution, but it's what you see. There is just that migration from classified criticized to to uh, non-accrual for the quarter. So uh, to identify the issue or or work.

Through uh, to resolution.

Speaker Change: Um, then the second part of your question, just more broadly in credit. Um, you know, uh,

Metrics have have remained stable. Um, we feel good about the credit performance. Uh but we remain cautious. Uh there's just a lot of moving Parts in the marketplace. Uh a lot of factors that consumers and businesses are are dealing with but at this point the portfolio has been very resilient and the credit metrics are are are holding strong, but we still. Um, do have a cost here, cautious Outlook, just based on the overall environment.

Thank you very much. I appreciate the comments.

Speaker Change: Thank you very much. I appreciate the comments.

Thank you.

Speaker Change: You're welcome.

At this time, I would now like to turn the conference back over to Kurt Myers for closing remarks. We'll 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. Thank you.

Thank you at this time. I would now like to turn the conference back over to Kurt Meyers for closing remarks.

Uh 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. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect. [music]

this concludes

Speaker Change: This conference call, thank you for participating. You may now. Disconnect