Fulton Financial Corporation (FULT) Earnings Call Transcript & Summary

Mr. Wagner, we are now ready for you to start your virtual annual meeting.

Good morning, and welcome to Fulton Financial Corporation's Annual Shareholders Meeting. I'm Phil Wenger, Chairman and Chief Executive Officer of your company. At the time, we mailed our proxy statements, given the public health guidelines surrounding COVID-19, we made the decision to have a virtual shareholders meeting rather than the in-person meeting that we have traditionally hosted. We appreciate your understanding, and we hope to host the annual meeting in person next year. If you've entered today's meeting using your 16 digit shareholder control number, you will now be able to vote your shares or type in questions to submit online during this meeting and I will be happy to answer those questions. Several documents have been posted on this meeting website, including the rules of conduct for today's meeting. The rules outline the process for asking questions and share information or other matters related to this meeting. As Chairman of this meeting, and in accordance with the provisions of the bylaws, I hereby call this virtual annual meeting to order and appoint Daniel R. Stolzer as Secretary of the meeting. The Secretary of the corporation has provided proof that proper notice of the meeting has been given and that a legal quorum is present. The meeting is therefore lawfully convened, and we're ready to transact business. The agenda for today's meeting is on the screen. Please note that if you are a shareholder and have not yet voted or wish to change your vote, you may do so at this time. The polls are open and will remain so for a few more minutes. We have asked James Raitt of American Election Services LLC to serve as judge of election and Mr. Raitt has delivered his oath to the Secretary, and it will be made part of the minutes. On screen, you can see the Fulton Financial Corporation Board of Directors, all of whom are participating virtually in today's meeting. As described in the proxy statement, these 14 individuals have been nominated for election to the Board of Directors for a 1-year term. In accordance with the bylaws, I hereby declare the nominations for directors to be closed. We also have 2 other proposals outlined in the proxy statement. The first is a nonbinding Say-on-Pay resolution to approve the compensation of the named executive officers. And the second is the ratification of the appointment of KPMG LLP as the company's independent auditor for the fiscal year ending December 31, 2020. Please be advised that the polls are now closed and the voting has ended. James Raitt, the Judge of Election has provided his preliminary report to Dan Stolzer, our Corporate Secretary, and Dan will now report on the vote results.

Thank you, Phil. I'm pleased to report the preliminary results of the voting. The final numbers will be filed on a Form 8-K with the Securities and Exchange Commission after the meeting has adjourned. We had a quorum for the meeting and approximately 83% of the shares outstanding have voted. All 14 nominees listed in the proxy statement were elected to the Board of Directors for a 2020-to-2021 term. The approximate range of the votes that were cast for the Directors' election was 99% to 96% with an average of 98%. The nonbinding Say-on-Pay resolution was approved with approximately 97% of the votes cast for the resolution to approve the compensation of the named executives. The proposal to appoint KPMG LLP as Fulton's independent auditor for this year was also approved with approximately 98% of the votes cast voting for the proposal.

Thank you, Dan. And there being no other business that may properly be brought before this meeting, the business portion of today's meeting is now concluded. As I begin my formal remarks, I would like to remind you that we have filed this presentation with United States Securities and Exchange Commission. I encourage you to view our cautionary language regarding forward-looking statements that is seen on screen in more detail. I'd like to start by doing a virtual introduction of the members of Fulton Financial Senior Management. Their names and photos appear on this slide. The members of senior management have been instrumental in guiding our company, and I value their leadership and their diverse perspectives. Overall, 2019 was a good year for Fulton Financial Corporation and for Fulton Bank. Our net income for 2019 was a record $226 million or $1.35 per diluted share. Earnings per share increased 14% over that of 2018. We had a few major milestones in 2019. The regulators terminated our final consent order, which led to the successful completion of the consolidation of all our subsidiary banks into our flagship bank, Fulton Bank. Operating as a single bank with a unified brand is helping us to build stronger recognition for our company. As you know, we have been very focused on growing our presence in 2 urban markets, Philadelphia and Baltimore, to take advantage of what we view as tremendous long-term growth opportunities. In 2019, we celebrated the grand opening of 3 full-service financial centers in Philadelphia. And earlier this year, we announced plans to open a fourth Philadelphia location in 2021. In 2019, we also opened a financial center and a loan production office in Baltimore. We plan to open a second financial center there later this year and a third Baltimore office in 2021. We also grew by acquisition, purchasing 2 wealth management businesses in 2019, which together have about $320 million in assets under management or administration. Switching to 2020, as you know, the world changed very quickly. COVID-19 has had a massive negative impact on the economy and on most companies' operational results. Fulton is no exception. In the first quarter, we had net income of $26 million or $0.16 per diluted share. Net income decreased by nearly 40% -- 46% from the fourth quarter of 2019. Our provision for credit losses increased by 115% during the first quarter. On January 1, 2020, we implemented CECL, a new accounting standard that requires us to look not only at actual losses, but also at expected losses over the life of our loans. As you can imagine, given the severe economic stress of COVID-19, our expected losses have increased, significantly affecting our first quarter net income. However, there were bright spots to our first quarter. On the consumer side, we saw increases in mortgage banking revenues as customers took advantage of low interest rates to purchase or refinance a home. And in our commercial line of business, we saw solid loan growth from both line utilization and volumes from new commercial customers. These were offset by decreases in consumer card, merchant and commercial card income as well as capital market revenues. I'd like to end my formal presentation by addressing the topic of COVID-19. Our company's brand, It's Personal, it's not just about words, it's about actions. As we face the effects of COVID-19 together, Fulton is continuing to support affected individuals, families and businesses by offering special programs to help ease the financial and economic impact in the communities we serve. As the world began to understand the severity of this public health crisis, our team worked together to redesign our service delivery model, so we could strike an appropriate balance between continuing to meet customers' needs and providing a safe environment for our employees. We quickly implemented sanitation protocols in our offices and put guidelines in place to practice social distancing. We also provided additional paid time-off programs to help our employees and their families. We have instituted several programs to provide relief and support to our consumer, commercial and small business customers. These assistance programs provide payment relief, fee relief and access to credit to help customers with the challenges they face through these difficult times. In addition, we issued nearly $2 billion in guaranteed loans to more than 9,400 small businesses, nonprofit and commercial clients through the small business administration's Paycheck Protection Plan. Through our participation in the PPP, we estimate that Fulton Bank has helped our business customers to positively impact the lives of 100,000 of their employees. And looking ahead, as we carefully plan how we will operate in a new normal environment, we will ensure that public health, along with the safety of our employees remain critical priorities. From a financial perspective, we want to assure you that your company remains well capitalized and has ample liquidity to support our employees, customers and the communities that we serve. We continue to focus on our primary mission of serving the communities in which we operate. So they, in turn, can help to push the economy and our country forward. To help with this effort, early in the second quarter, we made a $500,000 contribution to the Fulton Forward foundation, which will be used to help our communities in the fight against COVID-19. As I conclude my remarks, I encourage you to view the press releases and SEC filings we have shared over the past few months for more detail on the items I have discussed today. And on behalf of our entire company, I thank you for your investment in Fulton Financial, your support of the team and your participation in today's meeting. At this time, the window for submitting questions has closed. I would now be happy to respond to questions that were properly submitted today. Laura Wakeley, Senior Vice President and Corporate Communications Manager, will manage the question queue if needed. Laura, do we have any questions?

Thank you, Phil. We have 2. The first one deals with COVID-19, which you just spoke of, but the shareholder would like to know what has been the worst effect on the company due to the COVID-19 pandemic?

Well, that's a great question. First, I'll talk a little about how it's impacted our workforce, which is really a primary concern. We have had 19 probable and confirmed cases of employees, who had the virus. 13 of the 19 are back to work as they have finished their quarantine period and ultimately tested positive. We still have 6 employees not working. 2 of those are in Pennsylvania, 2 are in New Jersey and 2 are in Maryland. And I believe, as of today, we have 3 branches that are closed for a period of time until they are safe to be opened again. So that's had an impact on all of us. We have 40% of our workforce is working remotely. And that's been a challenge, but one that we've worked through and is working very well right now. And then finally, we've had a lot of impacts on our operations in general. So the biggest one, as I mentioned in my talk has been the amount of money that we have to set aside for future loan losses. And that amount has had a big impact on our earnings. We earned $0.16 in the first quarter. If we would have had -- if our provision would have been what we had budgeted for the quarter, we would have made $0.36. So it's had quite an impact. Over time, we'll see how large that impact continues to be.

Great. Thank you, Phil. We have one more question. And that question is from another shareholder, with financials being a lower-performing market sector, is the dividend safe?

So a primary goal of mine is to not have to reduce the dividend. We are well capitalized. At this point in time, we believe that the dividend is not in jeopardy. But we do review it every quarter. And at the end of the day, it's going to depend on how long this all lasts and what the impact is on individuals and businesses throughout our market area. But we know how much our shareholders value the dividend. And it is certainly a goal of ours to maintain it.

That's great. Thank you, Phil. There are no further questions.

Well, thank you, Laura. I will now adjourn the meeting. Thank you all for joining Fulton Financial's Virtual Annual Meeting, and we hope to see you in person next year.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.