Please standby, we are about to begin. Good morning, ladies and gentlemen. Welcome to the Fulton Financial Announces Third Quarter Earnings Conference Call. This call is being recorded. I will now turn the call over to Laura Wakeley, Senior Vice President of Corporate Communications.

Thank you. Good morning, everyone. And thanks for joining us for Fulton Financial Corporation’s conference call and webcast to discuss our earnings for the third quarter. Your host for today’s conference call is Phil Wenger, Chairman, President and Chief Executive Officer of Fulton Financial. Joining Phil is Pat Barrett, Senior Executive Vice President and Chief Financial Officer. Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released at 4:30 yesterday afternoon. These documents can be found on our website at fult.com by clicking on Investor Relations and then on News. 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 forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors some of which are beyond Fulton’s control and difficult to predict and which could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Fulton undertakes no obligation, other than required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In our earnings release, we’ve included our Safe Harbor statement on forward-looking statements, and we refer you to this section, and we incorporate into today’s presentation. For a more complete discussion of certain risks and uncertainties affecting Fulton, please see the sections entitled Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Fulton’s filings with the SEC. In discussing Fulton’s performance, representatives of the company may refer to certain non-GAAP financial measures. Please refer to the supplemental information included with our earnings announcement released yesterday 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, Phil Wenger.

Thank you, Laura. Good morning, everyone, and thanks for joining us. When I conclude my remarks, Pat, will provide more financial details. Then we will be happy to respond yours questions. We also refer to our slide deck throughout our discussion. Our forward-looking statement is found on slide two. We were pleased with our third quarter performance and turning to slide three, we reported diluted earnings per share of $0.20. This EPS number included a $0.02 per share loss on trust preferred securities redeemed in July. Since quality asset growth has been a top priority, we were also pleased with the rate of growth in our loans and net interest income. This growth came from all of our markets with the largest increase is coming from Pennsylvania followed by New Jersey and Maryland. The primary drivers were C&I and commercial real estate loans. Even with our strong loan growth, our pipeline entering the fourth quarter is slightly higher than it was at the beginning of the third quarter. Along with our loan growth, all of our key asset quality metric showed further improvement, net charge-offs, non-performing loans, overall delinquencies and a provision for credit losses all decrease. Total loan delinquency reached an eight-year low. Net interest margin for the third quarter reflected improvement in our earning asset and deposit mix. We believe that our most recent balance sheet initiatives will help ease the pressure on our net interest margin going forward. Pat will discuss those details in his comments. Total non-interest income decreased after our strong second quarter, with the exception of mortgage sales gains, revenue from other business lines was stable to modestly higher. Growth in customer relationships should provide a solid base for future non-interest income growth. Looking more closely at residential mortgages, you will require -- we…

Thank you, Phil and good morning to everyone on the call. Unless I note otherwise, quarterly comparisons are with the second quarter of 2015. Starting on slide four, as Phil noted, earnings per diluted share this quarter were $0.20 on net income of $34 million, a decrease of $2.4 million or 6.6%. Earnings per diluted share were $0.01 lower than both the second quarter of 2015 and the third quarter of 2014. During the quarter, we redeemed $150 million of trust preferred securities, resulting in $5.6 million loss recognized as a component of noninterest expense. This loss reduced diluted earnings per share for the third quarter by approximately $0.02. Third quarter net income also reflected an increase in net interest income, a decrease in the provision for credit losses, decreases in securities gains, and noninterest income and slightly higher noninterest expenses, excluding the loss on the TruPS redemption. Moving to slide five, our net interest income increased $2.8 million or 2.3%, driven by growth in earning assets and an extra day in the third quarter, partially offset by the impact of the 2 basis point decrease in net interest margin. Yield on average earning assets declined 6 basis points while the cost of average interest-bearing liabilities decreased 5 basis points. Average interest-earning assets increased $314 million or 2% due mainly to $177 million increase in average loans and $104 million increase in the investment portfolio. Average interest-bearing liabilities increased $160 million or 1.4% as of $245 million increase in deposits was partially offset by a decrease in borrowings. The 6 basis point decrease in earning asset yields reflected lower yields on both investments and loans while the decline in the cost of interest-bearing liabilities reflected changes in the funding mix. In the third quarter, we executed certain transactions that provide…

Thank you. [Operator Instructions] And we'll take our first question from Frank Schiraldi with Sandler O'Neill.

Good morning.

Good morning.

Good morning.

Just couple of questions. First, on the expense guidance, I guess I was kind of surprised given the results in the quarter to see you guide to the higher-end or slightly higher, above the higher end of that previous range given. So, just trying to figure out in terms of modeling, I mean, low single-digit growth half of last year. So the idea that we are going to be at the high end or slightly above the high end of the range, what is that -- in percentage terms, is that sort of somewhere in between 3% to 4%? Is that a good way to think about guidance year-over-year now?

For the year, I think that would be…

Yeah.

… a good four year trend.

Okay. In terms of the BSA, some BSA related expenses rolling off at some point, should we think about expense growth here as perhaps holding the line on expenses in terms of quarterly expense base as you sort of reinvest in other areas, or could we see a bit of a contraction in the expense base as those BSA related costs roll off?

So, we are still in the process of putting our budget together for next year. So, it’s really tough to say for sure what we are going to be anticipating. But I would suspect that as we are able to reduce costs in BSA for example, then we will reinvest them in other areas.

Okay. Okay. And then in terms of just a margin, I know you guys have sort of seasonal inflows generally in the third quarter on municipal deposits. Seem like you might have that again in this third quarter. So, I wonder if you can just share with us, maybe the size of that inflow and how much that extra or excess liquidity you didn’t name in the quarter.

Yeah. You are right, third quarter is a seasonally high level. We see everywhere from $200 million to $500 million come in and start to decline again. I think about $200 million would back out and then further declines are expected through the fourth quarter. So that definitely effects our margin because we got this cash that we can’t reinvest in any way other than just parking it basically. So that could affect our margin by 1 basis point for every $60 million that comes in. An interesting phenomena, we had this quarter though is that our loan growth which was higher than expected, actually was able to absorb that excess liquidity. So the dynamics get a little bit complicated with all the moving parts. So hopefully that lays out the basic idea for you.

Yeah. I mean, I guess next quarter has, you see some of this deposit flow back out. I guess the idea would be, you would look to fund some of this growth with some borrowings. Is that fair and do you latter that out?

Yeah. Potentially, I think our short-term borrowings continue to be at very low levels as they have been for a number of quarters. So, we got a fair amount of capacity there. And we are doing a lot of things to work on other core deposit growth areas across all the product types and customer types.

Okay.

So to the extent that we see a long-term trend of reversal of liquidity inflows that have been a net positive for a few years then certainly we would look to longer term more economic ways to lock that in.

Okay. And I guess just finally in terms of loan growth, there was a bit of an acceleration this quarter, a bit higher, better result than I had anticipated in my modeling. Is that acceleration something that you think is sustainable? I guess I’m sorry if I missed comments on it, but how is the pipeline here compared to where it was three months ago?

Our pipeline starting the fourth quarter was slightly higher than our pipeline starting the third quarter.

Okay. Okay. Great. Thank you.

Thank you.

And we will take our next question from Casey Haire with Jefferies.

Hi. Good morning, guys.

Good morning, Casey.

Just following up on the loan growth outlook, just curious on some of the color behind it, is it just your client base getting a bit more aggressive, or are you seeing some opportunities with all the dislocation from the M&A locally? And then that pipeline being up slightly, is it a similar mix given that C&I was pretty strong this quarter?

All right. Yeah, first off, on the third quarter growth, Casey, it was a combination, the percent of our production that was new business as compared to from existing customers was a pretty similar to what we’ve had in the past. So we saw strength in both areas. And on the new business side, we are trying to get that throughout our footprint, and I think we’re able to do that and we continue to be focused on that. And the pipeline mix are going into the fourth quarter is similar to what it was third quarter.

Got you. Okay. And then switching to fees, it sounds like to get to the guidance that you’re talking about, which is maybe a little bit more conservative now, it still requires a little bit of lift going into the fourth quarter from third quarter run rate. You mentioned that mortgage banking is typically seasonally weak in the fourth quarter. I am just curious what do you see is the driver to within fees to hit that guide?

Hey, Casey, this is Pat. Yeah, so we will have a little bit -- we anticipate to have a little bit of ground to make up on mortgage, but with the sort of across the board, either stability or solid low, I guess stable growth that we saw across every other, just about every other fee category, we would just want that to continue.

Got you. So not no one, it’s just across the board kind of modest growth?

Yeah, it’s really not a huge impact for many. And I would say that we continue to see lower than expected strength out of our asset management, investment management trust services line items of what we will see what the markets do, but I think…

Got you. Okay. And then just last one, can you just give us an update, I know it’s difficult, but on the enforcement orders and kind of where you stand and the likelihood that this do get lifted in 2016?

So we’re making good progress. We are not totally where we need to be, but we are taking great strides and we are working very hard to be in a position where we’re told in 2016 that we’re where we need to be and that’s why quite frankly the expenses haven’t run off quite as quick as we thought. We are going to be very conservative and we are going to spend whatever we have to, to be where we need to be. Once we’re told where we need to be, I am not exactly sure what the process is or how long that process is, the actions aren’t lifted, but we are optimistic that we can get that achieved in 2016.

Okay. Thank you.

And we will take our next question from Bob Ramsey with FBR.

Hey, good morning, guys.

Good morning, Bob.

Just a point of clarification, remind me the fee income guidance, is that off of total GAAP fee income including security gains, or does it strip that out?

I think it excludes security gains both years.

Okay. Got it. Perfect. And then on the expense fund, I know you all highlighted that this year you will achieve 4.7% and the $6.5 million in cost savings. Or mind me though in the third quarter have you largely achieved the sort of quarterly run rate of benefit or is there much more improvement from that?

It should be more than 90% baked into the third quarter run rate. We have a little bit more benefit coming from two branches that we didn’t get close until July, but it’s not meaningful. So I think we’ve got $1.5 million, $5 million in this quarter and we will get another $100,000 in the fourth quarter, but that’s our steady state run rate based on all of the initiatives that we’ve implemented.

Okay. Got it. And so I know you gave sort of four-year expense guidance, but it sounds like fourth quarter should be relatively stable give or take to the third?

That’s reasonable, yeah.

Okay. I guess last question now, I will ask sort of with the share repurchases, you guys have obviously been active, you announced the new authorization, I think it runs to the end of next year. Just kind of curious if you -- how you are thinking about timing of execution, whether it would be faster than that, I think your past authorizations you guys have run through pretty quickly?

We had gone through past authorizations a quicker than that and I think all of them had been for similar length. So there is nothing new as far as what we’re doing. How quickly we do it’s going to depend on a lot of factors, including our growth rate and any other thing that might impact it, but we will prudently repurchase the stock.

Okay. And then any other thoughts around capital, I mean I remember last year in the fourth quarter you had a modest sort of special dividend to get you where you wanted to be in terms of total capital payout. Just wondering how you are thinking about the broader capital return strategy here?

So we look at our dividend every quarter. We’ll be looking at it again in the fourth quarter. We’ve been -- I think we learnt how to pay payout ratio between 40% and 50% and we’ll continue on that pace.

All right. Thank you, guys.

We’ll take our next question from Joe Gladue with Merion Capital Group.

Yeah. Thanks for taking my call.

Thanks, Joe.

My question, I guess wanted to touch on the asset quality, maybe get a little bit more detail, particularly I guess the delinquency, 90-day delinquencies dropped pretty sharply. Just wondering if that was mostly due to one or two loans or if that was more broad-based? Any color there would be helpful.

I would say that that was a broad-based. There were not any large significant loans that came off.

Right. And I guess also I wondered if you could give us an update on what your view point is now on the opportunities from the market consolidation, the acquisition of competitors in the areas. Are you still optimistic about the opportunities for both gaining market share and maybe gaining lending teams that might be able to support more organic growth?

Yes. So Joe, we’re focused in all our markets on gaining market share and bringing in talent and that includes areas where we have market disruption and areas that we don’t have market disruption. And we want to continue on that pace as gracefully as we can.

Okay. That’s it for me. Thanks.

Thank you.

And we’ll take our next question from David Darst with Guggenheim Securities.

Hey, good morning.

Good morning, Dave.

So just as you kind of finish your work on the BSA/AML initiatives, I guess have you reached the point of the process where you’re doing the testing in sustainability?

I mean, there are a lots and lots of different factors involved in BSA/AML and I think in some areas we’ve reached that point and in some we have a little further to go.

Okay. Is there a way to kind of to give us any guidance to whether you’re expecting for the order to be lifted in first or second quarter or going to be later?

Well, it will not be lifted in the first quarter. That would be the timing of when we will get our next review and then will go from there. Our goal is to be in a position that everyone feels comfortable with what we've done. And then, as I said earlier, from that point on, I'm not exactly sure what the process is or how long it would be.

Okay. And then how quickly after that…

That’s our goal. That’s all our goal.

Got it. Sure. I understand. Yeah. And then how quickly after that would you be able to collapse the charters and then can you quantify that expense savings you had?

No. We should be able to begin the consolidation as soon as we’re in that position. And we have not thoroughly worked out that savings yet. So I would not want to give you any guidance there at this point.

Okay. Understand. And then, and I guess, this is the first time in quite a while you’ve mentioned preparing for future acquisitions. I guess through this process do you feel like you have a platform that can drive revenue synergies out of our target and kind of up-tier whatever you acquire, as well as the technology and cost saves?

We do. Yes.

Okay. Great. Okay. Thanks a lot.

Thank you.

We’ll take our next question from Matthew Breese with Piper Jaffray.

Good morning, everybody.

Good morning, Matthew.

Just thinking about your commentary before on elevated outside service cost and elevated levels of temporary staff related to the BSA/AML issues. I was hoping you can quantify just the extent to which their elevated compared to necessarily costs?

So I’ll start, maybe, Pat, can help me. But we had indicated that we thought those cost would decrease by about $5 million this year and they're actually only going to decrease by $2 million. So there's an additional $3 million there and then on top of that there would be probably another $2 million to $3 million. I guess…

[Indiscernible] come off…

Well, I guess, I guess…

Not this quarter.

Yeah. Matt, this is Pat. So said another way, if you look at the breakdown between salary and benefits versus outside services and temporary staffing on the slide nine in the deck, I mean, you can think of the staff cost. Salary and benefits is being sort of steady state run rate and the remainder is being things that should come down pretty dramatically but probably won’t come down to zero once we get through the orders. I think there will probably be an expectation as there are the lot of areas today that you continue to engage third parties for assurance on your processes and programs, and lot of risk management and compliance areas.

Understood. And how quickly can those costs be rent down?

Barrett.

I mean, they all -- now that they have a long-term contractual costs, they are much more ongoing chart as work is performed.

Okay. And then just another quick one on the charter consolidation. Just thinking about your expense levels and non-interest expense versus average assets. For you is a bit more elevated versus some of your smaller regional peers. In a broader sense, could the charter consolidation meaningfully move the needle closer to peer average levels of expenses to assets?

I don’t think it will. I think what we need to do is leverage the platform that we build. I think as we said in the past, our FDIC insurance will go up when we consolidate because we don’t have any institutions over $10 billion right now. So that in itself, I think based on today’s rates would increased about $10 million. We just already consolidated a lot of our back office functions. So there will be some expense reductions, but I don’t think it will be significant from where we are today and yet put it all together.

Understood. That’s all I had. Thank you very much.

Thank you.

[Operator Instructions] We’ll take our next question from Chris McGratty with KBW.

Hi. Good morning, everyone.

Hi, Chris.

Pat, I jumped on late, so apologizes if you already addressed it. The September adjustment to the FHLB, the $200 million, that’s going to save you a hell of basis points. If I recollect, you are still quite a bit of that long-term debt over 4%. Are there chances that -- has it hit in the past that’s kind of prepaying on. But there are other chances you are looking at especially kind of, if we are in this lower for long environment?

Yeah. I think probably the last time we talked, we had $400 some odd million of that. And with all of the different actions, we will have addressed all of the longer term FHLB debt that was in the four handle range. So, $200 million, we want to have them prepaid on September 18th, incurring a penalty, which was rolled over in fixed cost of the newly issued debt $200 million, five-year term. Then we also entered into forward advance, starting term commitments for the additional $200 million. It was $197 million, I think, which does not kick in until the maturity of the existing debt. So, we are going to let that roll off and then mature. And the savings of the immediate refinance is about $750, 000 a quarter.

Okay.

The saving we would expect from the $200 million that matures at the end of next year. And then rolls into new debt, would be an incremental $800,000 per quarter. We still have …

It is another two basis point beginning in ‘17 that you are talking about?

That’s correct.

Okay. That’s helpful. Thank you. The secure yield, again, not sure if this was addressed the both taxable and the tax exempt tick down. Was there any meaningful change in the premium in the quarter? And maybe just discussed what -- why you are not buying given more rates there?

No meaningful change in the premium and that’s been really stable at around like $600,000 per quarter for a year or more. Haven’t really change the mix of what we are buying or what’s in the portfolio. It’s still very much heavily weighted to agency paper either Fannie or Freddie mortgage-backs or CMOs using penny paper. I guess, I would highlight that we try to be disciplined and not pay a huge premium on anything which means it sounds sidelines when the 10-year rates have bit down below 2. And then kind of reinvested as rates have come back up again. So that benefits the premium store that keeps us from having a whole lot of premium impact on the margin. I think our overall investment this quarter for the most part were pretty much all the same types of investments. I think we may have bought one $5 million TruPS debt issuance from bank.

Okay. That’s helpful. Thanks a lot, guys.

Thank you.

And with no other question at this time, I'd like to turn the call back over to Phil Wenger for any additional or closing remarks.

Thank you all for joining us today. And we hope you will be able to be with us when we discuss fourth quarter and year end results in January.