Fulton Financial Q2 2024 Earnings Call Transcript

There are 10 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Second Quarter Fulton Financial Results Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

Would now like to hand the conference over to your first speaker today, Matt Chosweg, Director of Investor Relations. Please go ahead.

Speaker 1

Good morning and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the Q2 ending June 30, 2024. Your host for today's conference call is Kurt Myers, Chairman and Chief Executive Officer. Joining Kurt today is Betsy Chavinski, Interim Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These documents can be found on our website atfult.com by clicking on Investor Relations and then on News.

Speaker 1

The 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 statements.

Speaker 1

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 through 22 of today's presentation for a 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.

Speaker 2

Thanks, Matt, and good morning, everyone. For today's call, I'll be providing highlights on our performance for

Speaker 1

the quarter. I'll discuss several key initiatives

Speaker 2

and I'll provide a few overall comments on the company. Then I'll turn the call over to Betsy Chubinski, Interim Chief Financial Officer to review our financial results in more detail and step you through our guidance for 2024. 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. We've had a very active quarter on a variety of fronts.

Speaker 2

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. Our team performed well and is excited about the strategic progress we are making. Operating earnings of $0.47 per diluted share this quarter was a strong performance. Following a solid Q1, our year to date results are outpacing our expectations.

Speaker 2

Stable core business trends supplemented by the impact of the Republic transaction are driving these results. We saw steady balance sheet growth as organic loans and deposits grew as expected and we added significant growth through the Republic transaction. We also generated meaningful margin, revenue and net income growth. On a linked quarter basis, net interest margin increased 11 basis points. Net interest income grew by $35,000,000 non interest income grew by nearly $9,000,000 and operating net income grew by 17,000,000 dollars Also during the quarter, we executed on a sale leaseback transaction and corresponding investment portfolio restructuring, improving the profile of our investment portfolio as well as its yield.

Speaker 2

The investment portfolio restructuring adds an estimated 8,500,000 dollars in interest income annually. We also move forward on 5 planned financial center consolidations and relocated 1 financial center in our New Jersey market. We issued our 2023 Corporate Social Responsibility Report reflecting our commitment to the communities and stakeholders we serve. Our performance, steady business trends and the capital raise allowed us to maintain healthy capital levels, increase our tangible book value, enhance our earnings capabilities and deliver value to our shareholders. Overall, we feel it was a strong quarter for the company.

Speaker 2

Now let me provide a bit more detail on growth. 2nd quarter deposit growth was 254,000,000 dollars or 4.6 percent annualized when you exclude the $191,000,000 of high cost broker deposits that we were able to eliminate. Overall, when including the Republic transaction, deposits grew $3,800,000,000 or 17.6 percent on a linked 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 relationship deposits. These deposit results were as they anticipated and we remain focused on customer retention and customer growth.

Speaker 2

Organic loan growth for the quarter was $124,000,000 or 2.3 percent annualized consistent with past periods. Overall loan growth was $2,700,000,000 or 12.4 percent linked quarter on a consolidated basis including the acquired loans. Profitable loan growth and prudent credit decisions remain our focus. 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.

Speaker 2

This was a key outcome of the Republic transaction. Non interest income for the quarter was strong. Core non interest income was up $6,000,000 to 63,000,000 dollars when including Republic, total non interest income grew $8,800,000 linked quarter. Now let me provide some comments on credit. Overall, core Fulton credit metrics remain stable.

Speaker 2

The provision for credit losses, excluding the day 1 credit mark associated with the Republic transaction was $8,600,000 down from $10,900,000 in the first quarter. Charge offs for the quarter were 19 basis points and criticized and classified loans were relatively flat in the Fulton portfolio. Turning to the acquired portfolio, we conducted a review of all loans over $3,000,000 After applying our risk rating methodology, non accrual loans did not significantly increase and charge offs were less than $1,000,000 for the quarter. 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 are monitoring the acquired portfolio closely.

Speaker 2

The increase in our allowance for credit losses provides additional ability to absorb future losses. Now let's look to moving forward. I'll provide updates on 2 key corporate initiatives. First, we are focused on the timely and effective integration of Republic and we continue to diligently follow the FDIC process. Integration of customers, teams and systems are progressing well with the majority of our integration work anticipated to be completed by year end.

Speaker 2

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 6 month point. We look forward to providing more details on growth initiatives and operating efficiencies during the Q3 earnings call. This past quarter, you see the continued investment in the initiative.

Speaker 2

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. Overall, a solid first half of twenty twenty four and a transformational quarter in many respects for our company. Now let me turn the call over to Betsy to discuss our financial performance in more detail and our guidance.

Speaker 3

Thank you, Kurt, and good morning, everyone. Unless I note otherwise, the quarterly comparisons I mentioned are with the Q1 of 2024 and loan and deposit growth numbers are annualized percentages on a list quarter basis. Starting on Slide 4, operating earnings per diluted share this quarter were $0.47 on operating net income available to common shareholders of $82,500,000 This compares to $0.40 of operating EPS in the Q1 of 2024. As Curt noted, excluding Republic, loan growth was $124,000,000 or 2.3 percent during the quarter. Commercial lending contributed $39,000,000 of this growth or about 1%.

Speaker 3

Commercial construction loans grew $64,000,000 during the quarter and was offset by slight declines in commercial real estate, C and I and equipment finance. Total commercial loans including the acquired commercial portfolio grew $1,800,000,000 or 13% linked quarter net of purchase accounting marks. Consumer lending produced growth of $87,000,000 or 5% during the quarter, an increase of $102,000,000 in residential mortgages, primarily adjustable rate was offset by decreases in other consumer categories. When layering in Republic's consumer portfolio, total consumer loans grew by $909,000,000 or 12% 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.

Speaker 3

Total deposits increased $3,800,000,000 or 17.6 percent linked quarter attributable to the Republic transaction. Legacy Fulton deposits grew by $254,000,000 or 4.6 percent during the quarter, excluding the runoff in brokered CDs. Growth in time deposits, money market and municipal balances more than offset the decline in non interest bearing products. Our non interest bearing DDA balances ended the quarter at $5,600,000,000 or 21.9 percent of total deposits, which includes the 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.

Speaker 3

On balance sheet liquidity increased to 17.6 percent of assets with cash and deposits in other institutions increasing by $950,000,000 and our investment portfolio increasing by $400,000,000 The impact of these positive balance sheet trends is shown on Slide 6. Net interest income was $242,000,000 and $35,000,000 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. We sold $340,000,000 of securities yielding 3.34 percent and purchased $357,000,000 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 3

Included in the loan yield is $9,800,000 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 paydowns, payoffs, 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. Turning to asset quality on Slide 7, while NPLs increased $6,200,000 during the quarter, the NPLs loans ratio decreased from 73 basis points in March 31 to 67 basis points at quarter end.

Speaker 3

Net charge offs were 11 points. Gross charge offs of $14,000,000 were granular and were offset by $2,700,000 of recoveries. And our ACL as a percentage of loans increased to 1.56 atquarterend 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. The credit mark on the acquired portfolio was a total of $79,000,000 or 2.8% of loans as of the acquisition date.

Speaker 3

Turning to non interest income on Slide 8, our non interest income for the quarter was $93,000,000 This included a loss on sale of investments of $20,300,000 offset by the $47,400,000 bargain purchase gain attributable to the Republic transaction. Excluding these non operating items, fee income was strong for the quarter, increasing $8,800,000 including $2,800,000 impact from Republic and $6,000,000 impact from the core business. Wealth Management revenues of $21,000,000 increased $835,000 linked quarter and other record for the company. And as a reminder, Wealth Management represents almost 1 third of our fee based revenues with over 80% of those revenues recurring. Market value of assets under management and administration remained at $15,500,000,000 as of June 30.

Speaker 3

Commercial banking fees increased in all categories, increasing $2,600,000 which included a $383,000 contribution by Republic. Merchant, cash management and SBA all showed solidly to quarter growth. Consumer banking fees increased $3,000,000 to $14,600,000 with Republic contributing $2,300,000 to that increase. Mortgage banking revenues increased $860,000 to $4,000,000 and was driven by a seasonal increase in mortgage origination as well as a stable gain on sales spread. Moving to Slide 9, non interest expenses on an operating basis were $195,000,000 an increase of $25,000,000 linked quarter, which includes a $17,000,000 operating impact from Republic.

Speaker 3

Much of the core Fulton increase was due to a 5,700,000 dollars increase in salaries and benefits, which included the impact of April 1 merit increases. Material items excluded from operating expenses as listed on Slide 19 were the following: the $20,300,000 gain on the sale leaseback, which is included in our statements as a negative expense, dollars 13,800,000 in acquisition related expenses, $6,300,000 in Fulton First costs and $4,600,000 in total core deposit intangible amortization. On Slide 10, you can see a snapshot of our capital base. And as of June 30, we maintained solid cushions over both the regulatory minimums and on a linked quarter basis. Our capital ratios remained relatively flat.

Speaker 3

Moving to Slide 11, we are 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. Our operating guidance 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 $925,000,000 to $950,000,000 We expect the provision for credit losses to be in the range of $40,000,000 to $60,000,000 which excludes the 23,000,000 dollars non PCD provision here in the 2nd quarter. We expect non interest income excluding security gains and the bargain purchase gain to be in the range of $240,000,000 to $260,000,000 We expect non interest expense on an operating basis to be in the range of $750,000,000 to $770,000,000 for the year.

Speaker 3

And lastly, we expect our effective tax rate to be in the range of 16% to 18% for the year. And I will note that our 2nd quarter effective tax rate was considerably lower, primarily due to the bargain purchase gain and how that is taxed related to the Republic transaction. With that, we'll now turn the call back over to the operator for your questions.

Operator

Thank you. At this time, we will conduct a question and answer session. Our first question comes from the line of Daniel Tamayo of Raymond James. Your line is now

Speaker 4

open. Thank you. Good morning, everyone. Just wanted to start yes, good morning. Just wanted to start on the net interest income guidance.

Speaker 4

I know you guys normally don't break that out into margin and balance sheet, but hoping you could give us a little more detail given all the puts and takes happening with the acquisition and the restructurings. It appears that the margin would be coming down given your guidance in the Q3. Obviously, you've got accretion built into that number as well. But just curious if you could give us any more detail on how we should be thinking about the margin and the balance sheet in the back half of the year?

Speaker 2

Yes, 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. However, the continued trend of non interest bearing flowing in to interest bearing, we expect to continue and we have one rate cut in the forecast and we continue to be asset sensitive.

Speaker 2

We're less asset sensitive as we stand right now, but we are asset sensitive. So those two factors would put pressure 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.

Speaker 4

Okay. Well, maybe just zooming 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, how much impact is left from those restructurings?

Speaker 2

And you're talking about the sale leaseback and investment portfolio restructure. So we have fully reinvested those funds. And then that net interest positive net interest income impact is in the guide.

Speaker 3

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

Operator

And then

Speaker 2

what their yields would be good.

Speaker 5

Okay. All right.

Speaker 4

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 2

Well, we had in the investment deck for the transaction, we had modeled in 6 $100,000,000 of deposit runoff over a period of time. The deposit runoff is coming down. That was very much initial days when right after the assumption. So the runoff continues to diminish and we feel comfortable with our original estimates.

Speaker 6

Okay. All

Speaker 4

right. Well, thank you for taking my questions. I appreciate it.

Speaker 5

Thanks, Dan.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Frank Scchiarotti of Piper Sandler. Your line is now open.

Speaker 6

Good morning.

Speaker 7

Hey, Frank.

Speaker 3

Just

Speaker 6

on the expense guide and as we think about cost saves coming through from FRBK, I think initially you talked about that franchise ultimately the expense load from that franchise looking like maybe a $60,000,000 run rate, which I assume you get to sometime next year. 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 where you anticipate exiting the year on that with Fulton First and acquisition cost saves baked in?

Speaker 2

Yes, Frank. We are shooting for having the cost saves implemented by January 1 of 20 25. There's obviously a process to that. We are targeting to integrate in the 4th quarter. The expense guide, we really looked at that as confirming our run rate and expenses and then incorporating the current run rate of Republic.

Speaker 2

The way the numbers were finalized in the deal deck, we had $112,000,000 of annual expenses and that was pretty close to the target. So we're factoring in our 8 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. But we have integration to work through. We have financial centers to work through.

Speaker 2

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 saves this year, but we really want to be at that point and we feel comfortable being at that 40% cost saves that we had laid out originally.

Speaker 6

Okay. And then that's so that's still around $60,000,000 is that still somewhat $60,000,000 a year in run rate?

Speaker 3

Is that what

Speaker 6

it would be?

Speaker 2

Yes, it would be plus or minus $60,000,000

Speaker 5

Okay.

Speaker 6

And then just on the 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? And anything else that maybe has surprised you either positively or negatively, obviously early days here, but following the deal?

Speaker 3

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 real almost right online with where we had been where we had projected. So that's great news. We are happy to see that 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 changes in balances during the quarter.

Speaker 3

But again, that can change every quarter that will change based on prepayment experience. But again, it was in line with our what we were projecting.

Speaker 6

Okay. And then anything else that surprised positively or negatively in the early days here following the deal?

Speaker 2

Yes, we're working through it diligently. I don't think we've had any big surprises. We conducted the credit review overall in the portfolio. So that went as anticipated and we continue to work diligently through the process.

Speaker 3

Okay.

Speaker 5

All

Speaker 6

right. Thank you.

Speaker 5

Thanks, Frank.

Operator

Thank you. One moment for next question. Our next question comes from the line of Chris McGratty of KBW. Your line is now open.

Speaker 7

Great. Thanks. Chris, 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?

Speaker 3

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

Speaker 3

We monitor that month in month out based on our liquidity position and everything else with the balance sheet.

Operator

Okay.

Speaker 7

Thank you for that. And just going back to the accretion income, just 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 the deal was in for roughly 2 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?

Speaker 7

Is that kind of what's in your guide?

Speaker 3

So it's too early to tell. I think annualizing the 2 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. So it may very well come in a little bit less compared to annualizing 2 months.

Speaker 3

I'd be cautious doing that.

Speaker 7

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

Speaker 2

Yes, 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, but capital liquidity and effective integration are really what our focus is right now.

Speaker 7

All right. Awesome. Thank you. Yes.

Operator

Thank you. One moment for our next question. Our next question comes from the line of David Bishop of Hovde Group. Your line is now open.

Speaker 8

Hey, good morning. Good

Speaker 2

morning, David.

Speaker 8

Kurt and Betsy maybe 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 Andrew, but your borrower base.

Speaker 2

Yes. The pipeline is steady. I mean, we've had pretty modest growth organically. We expect that to continue. Customers are being conservative and we are being diligent on what we add to the portfolio right now.

Speaker 2

So the low single digit organic growth rate is what we would expect from the legacy Fulton portfolio. And then we're 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 and our pipelines and customer activities seem to support us being able to do that.

Speaker 8

Got it. Appreciate that. And then, sort of harkening back to the earlier question about liquidity. I know that's the as expected liquidity cash built pretty materially here. How should we think about that balance, that $1,000,000,000 or so over the course

Speaker 4

of the rest of the year?

Speaker 3

So we talked about in the acquisition that we were planning on letting our broker CD portfolio roll off, which is at Fulton, there we have an additional $800,000,000 in brokered CDs, most of that rolls off 3rd, Q4. Again, our initial intention was to that let that roll off, but 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 migrate a little bit. So depending upon how all that flows together, but if we we would not use that liquidity for we've not let that go down more than letting those broker maturities roll off, which again is about $750,000,000 before the end of the year.

Speaker 8

Got it. Do you know the weighted average rate on those brokered CDs?

Speaker 3

I sure do, about 5.28.

Speaker 5

5.28. Great. Appreciate that color.

Operator

Sure. Thank you. One moment for our next question. Our next question comes from the line of Manuel Nolas of D. A.

Operator

Davidson and Co. Your line is now open.

Speaker 9

Hey, good morning. What would it take to drive a pickup in loan growth? You have strengthened resi 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?

Speaker 2

Well, we are being very prudent in this market specifically on real estate lending and being very diligent about 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. 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 9

I appreciate that. With the attrition target on the deposit side, was roughly modeled at $600,000,000 Do you expect to get to that? Or is the $400,000,000 that you've already seen kind of the most that you're going to have?

Speaker 2

Yes. So the attrition has flattened out for sure. There were big chunks and early on, but we're continuing to work through integration. We will get to the point, we're going to grow the portfolio and customer base. But we're still very early on in the acquisition.

Speaker 2

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 has done 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. 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.

Speaker 2

We're just trying to get our footing and it's certainly the runoff is certainly diminishing. And again, it was a handful of customers and proactive measures from our standpoint to as we got in and really knew the portfolio to get rid of non relational broker wholesale 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 form a for the deal. Okay.

Speaker 9

Can I shift over a question on credit? There's a little bit of 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?

Speaker 2

Yes. So charge offs in the quarter, it's really just timing, one that we've been allocated whether we take the charge off or not. So those things are just timing. We look at the provision, run the model, look

Speaker 3

at the

Speaker 2

provision and we've had pretty stable credit metrics in the core portfolio. And we don't see anything right now that would change those. I mean, we'll see we move forward. I mean, it is the biggest variable in this market, but we've been pretty consistent around that $10,000,000 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 2.

Speaker 2

So we feel we're moving forward in provisioning for changes in either economic conditions or individual borrowers is how the provision will change going forward. But that we have no reason to not continue to commit to our guidance, initial guidance in credit.

Speaker 9

I appreciate that. Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of David Maranek of Stephens. Your line is now open.

Speaker 5

Good morning, guys. This is David Meronck on for Matt Breeze.

Speaker 3

Good morning. Good morning.

Speaker 5

I was wondering if you 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?

Speaker 2

Certainly, they're grabbing the overall. I know when the Republic, 85% of the Republic book is fixed. So that would move the that's what I said in my earlier comment around taking a little asset sensitivity off the table for us. But the overall Betsy can give you the overall real quick.

Speaker 3

Yes. Just as of June 30, about 68% of the portfolio is tied to the short end of the curve 1 year or less and 30% is fixed

Speaker 2

rate. And again, that's overall, so that wouldn't include the Republic portfolio, which I've mentioned before.

Speaker 5

Great. And then by chance, do you have the yield that's on the floating book and the fixed rate book?

Speaker 3

We do not have that handy.

Speaker 5

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?

Speaker 3

We do not have those handy.

Speaker 2

You mean on the loans or

Speaker 5

roll off

Speaker 2

CDs loans? We typically have not talked at that spot rate basis and we do not have that handy.

Speaker 3

Yes. 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

Speaker 2

off. Right.

Speaker 5

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 guys' expectation on where you think deposit costs are going to speak and at what level?

Speaker 2

Yes, we had we continue to drift down. The length

Speaker 8

quarter reduction

Speaker 2

was pretty muted and we just expect to drift down from here. I think we ended the quarter at 21.9 percent and the underlying customer trends seem to continue that we'll have that migration, but we have not seen significant. We look we provide in the 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. We expect to be in this range 20% to 22%.

Speaker 2

But 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.

Speaker 5

Great. And are you thinking the cost of those deposits will kind of peak out by the end of the year?

Speaker 2

Yes. There's a lot of noise in this quarter because we added the Republic deposits. But if you look at the underlying core Fulton, the deposit delta and betas are moderating.

Speaker 5

Got it. Awesome. Appreciate the time.

Speaker 2

Thank you.

Operator

Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Kurt Myers for closing remarks.

Speaker 2

Well, thank you again for joining us today. We hope you'll be able to be with us when we discuss Q3 results in October. Thanks, everyone.

Operator

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Earnings Conference Call
Fulton Financial Q2 2024
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