FULTON FINANCIAL CORP Q3 FY2024 earnings call

• Operating earnings per diluted share of $0.50 this quarter was a record. Loan growth was in line with expectations, and deposit growth exceeded expectations driven by the Republic deposit portfolio. - Net interest income and margin exceeded expectations due to the full quarter impact of the Republic transaction, balance sheet restructurings, and organic growth. - Non-interest income grew $1.5 million linked-quarter excluding the bargain purchase gain adjustment. - Consolidated 16 financial centers as part of Republic integration and the Fulton First initiative. - Announced leadership appointments in commercial banking, business banking, credit, and market leadership to focus on core business areas. - Increased capital levels, grew tangible book value, and reinvested in the business.

Loan Growth: Loan growth was $70 million or 1% annualized. It was split between commercial ($29 million) and consumer lending ($41 million), with a $41 million runoff in the indirect auto portfolio. Deposit Growth: Third quarter deposit growth was $745 million or 12% annualized when excluding $153 million planned reduction in brokered deposits. Non-interest-bearing DDA balances ended the quarter at $5.5 billion (21% of total deposits). Net Interest Income: Net interest income was $258 million, a $16 million increase linked-quarter, with net interest margin increasing 6 basis points to 3.49%. Non-Interest Income: Non-interest income was $59.7 million, with wealth management revenues up, commercial banking fees up, consumer banking fees modest, and mortgage banking revenues down. Operating Non-Interest Expense: Operating non-interest expense increased $1.3 million or 2.7% on an annualized basis, with a full quarter of Republic expenses offset by a decline in Fulton organic expenses. Provision Expense: Provision expense declined to $11.9 million, relatively in line with recent quarters.

• 2024 net interest income is expected to be in the range of $925 million to $950 million, with the high end of the range anticipated. - Provision for credit losses is expected to be in the range of $40 million to $60 million (excluding the $23 million CECL Day 1 provision in the second quarter). - Non-interest income (excluding securities gains and bargain purchase gains) is expected to be in the range of $240 million to $260 million. - Non-interest expense on an operating basis is expected to be in the range of $750 million to $770 million for the year. - Effective tax rate is expected to be in the range of 16% to 18% for the year, excluding the impact of the bargain purchase. - Interest rate forecast updated with a 50 basis point decrease in September and two additional 25 basis point cuts in November and December.

• Interest rate cuts could impact net interest income, with near-term pressure from rate cuts. - Deposit cost management, as deposit costs increased due to growth in interest-bearing categories. - Credit risks with non-performing loans increasing due to the higher interest rate and cost environment, with non-accruals being diverse in nature with no specific industry themes. - Integration risks related to the Republic transaction and Fulton First initiative, including timing and implementation challenges.

Q: About NII sensitivity to rate cuts, A: Rick Kraemer discussed sensitivity to rate shocks and asset sensitivity reduction, noting a decline in asset sensitivity year-to-date.

Q: About Fulton First expense saves, A: Curt Myers and Rick Kraemer talked about implementation timing and reinvestment, with $25 million in expected saves in 2025 net of reinvestment.

Q: About deposit growth and loan growth outlook, A: Curtis Myers and Richard Kraemer discussed modest loan growth and deposit flows, expecting low single-digit loan growth and consistent deposit flows.

Q: About non-accruals and credit risks, A: Curtis Myers mentioned diverse nature of non-accruals with no specific industry themes.

Q: About capital deployment and M&A, A: Curtis Myers and Richard Kraemer discussed M&A strategy focusing on $1 billion to $5 billion Community Banks and $5 billion to $15 billion banks.

Q: About interest rate neutrality and loan beta, A: Richard Kraemer and Curtis Myers talked about loan beta and interest rate neutrality, with asset sensitivity reduction.

Q: About expenses and CDI, A: Richard Kraemer clarified expense guidance excluding core deposit intangible amortization.