Please stand by. Good morning, ladies and gentlemen, and welcome to the Fulton Financial Second Quarter Results Conference Call. This call is being recorded. And I would now like to turn it over to Jason Weber. Please go ahead.

Thank you, Kayla. Good morning. Thanks for joining us for the Fulton Financial's conference call and webcast to discuss our earnings for the second quarter of 2016. Your host for today's conference call is Phil Wenger, Chairman, President and Chief Executive Officer of Fulton Financial Corporation. 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 announcements, which we released at 4:30 pm yesterday afternoon. These documents can be found on our Web site at fulton.com by clicking on the Investor Relations tab and on News. The slides can also be found on the Presentations page under Investor Relations on our Web site. 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 as 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 and forward-looking statements, 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 Fulton may refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday for a reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. Unless otherwise noted, quarterly comparisons are with the first quarter of 2015. Now I'd like to turn the call over to your host, Phil Wenger.

Thanks, Jason, and good morning everyone. Thank you for joining us. I have a few prepared remarks before our CFO, Pat Barrett share the details of our second quarter financial performance and discusses our 2016 outlook. When he concludes, we will open the phone line for questions. Overall, we were pleased with the second quarter results. Our loan growth accelerated towards quarter end with continuing favorable credit conditions. Non-interest income grew across most categories, and expense management was disciplined. In all, we were able to generate positive operating leverage, a goal we set at the beginning of the year. Loan growth continues to be driven by our commercial portfolio. Our growth was spread across a broad range of industries, and was primarily concentrated geographically in Pennsylvania, and to a lesser extent in our New Jersey market. Our residential mortgage portfolio increased over 5% linked quarter and year-over-year driven by new portfolio product offerings that we introduced in 2015. Our commercial pipeline remains strong, and is up approximately 6.4% compared to this time last year. So we remain optimistic that loan growth will continue as the year progresses. A concentrated in-house calling effort combined with our increased focus on adding revenue generating talent and market disruption has aided our loan growth of late and bodes well for future growth and market share gains. We will continue to look for opportunities to add higher performing talent throughout all of our revenue-producing areas. Similar to commercial loan growth, market disruption continues to create opportunities to generate consumer accounts in disrupted markets. As consumers begin to see changes, for example, our own branches are re-branded, our systems converted. We have experienced meaningfully higher rates of new consumer checking accounts in our branches located near those of affected institutions as compared to our broader branch…

Thank you, Phil, and good morning to everyone on the call. Starting on slide four, earnings per diluted share this quarter were $0.23 on net income of $40 million, up from $38 million in the first quarter. Earnings per diluted share increased 4.5% from the first quarter and 9.5% from the second quarter of 2015, due to higher net income and to a lesser degree the net impact of share repurchases. Second quarter earnings reflected improvements in non-interest income and lower income taxes, partially offset by an increase in the provision for credit losses and a modest increase in non-interest expense. Moving to slide five, our net interest income remain relatively flat from last quarter, driven by a lower net interest margin offset by the impact of earning asset growth. Net interest margin declined three basis points driven by lower yields on interest-earning assets, while the cost of average interest bearing liabilities was unchanged. The yield on interest-earning assets declined by three basis points from the first quarter. This decrease was due to a two basis point decline in loan yields reflecting the impact of the lower rate environment, combined with a seven basis point decline in yields on investment securities, reflecting higher premium amortization. Turning to credit on slide six, we recorded a $2.5 million provision for credit for losses, $1 million higher than the provision in the first quarter. The allowance for loan and leased losses declined slightly as a percentage of loans, from 1.20% to 1.17%, while coverage of non-performing loans improved to 129%. Net charge-offs decreased linked quarter and year-over-year, to $3.5 million resulting in an annualized net charge-off rate of 10 basis points, half of the 20 basis point rate in the first quarter. Non-performing loans declined $9.4 million from the first quarter, to $127…

Thank you. [Operator Instructions] We will take our first from Frank Schiraldi with Sandler O'Neill.

Good morning guys.

Good morning.

Good morning, Frank.

Just a couple of questions; first, on the BSA expense, Pat, I think you mentioned that while it ticked up linked quarter and I think you mentioned that they've been a little higher than you had anticipated, what is the expectation as we sit today for that BSA expense through the end of 2016? Should consulting expense stay around these levels?

Frank, it's Phil, and I would say until we are out of the orders the expenses will stay at the levels -- close to the levels that they're at.

Okay. And I don't know if I missed it, but I think you indicated, Phil, that some of these orders will likely remain into 2017, but that would make it sound like you anticipate some coming off before the end of the year?

I think we said it's possible.

Okay.

So, that's the best I can tell you, it's possible that they will still all be on into '17. It's possible some will be off. At the end of the day we don't make the decisions.

Sure.

And it all revolves around timing of exams from different regulators.

Right, I thought you had one earlier this year in April, call it, and you were hopeful that the results would be to see -- to get a better sense of when one or more of those orders was going to come off. Is that accurate or…

Well, we are still in the process of establishing sustainability, and we are working hard to do that, and we will continue to spend the levels that we are spending to get there as quick as we can.

Okay. And then just the only other question I had was on the securities book, the premium amortization ticking up in the second quarter. Is that based off of actual prepayment speeds, or on expectations? I'm just trying to get a sense of if much of it, the higher premium amortization would be expected to be baked in already into 2Q, or that could be partially a 3Q event.

Well, to the extent that we continue investing at pretty high premium rates that balance could grow. It did tick up in the [ph] capitalized premium that gets amortized, ticked up by that 10% during the quarter, but a bigger part of the increase in amortization that we saw, probably two-thirds of it was from prepayments.

That's from prepayment fees? Okay.

Correct.

Okay. I guess, I don't know, would you be able to say if, based on where rates were at sort of a low at the end of the quarter and early in the third quarter, do you think that prepayment speed, that change in prepayment speed, has already been baked into numbers, or could we see another tick up in premium amortization based on prepayments in 3Q?

If everything stays the same as where we were when we ended the second quarter including our reinvestment profile and prepayments, you could see another basis point of margin compression due to the securities book in the third quarter.

Okay, great. That's all I had. Thank you.

Thank you.

We will take our next question from Bob Ramsey with FBR.

Hey guys, good morning. This is actually Kyle Peterson speaking for Bob today.

Good morning, Kyle.

I was wondering if you guys could share a little bit more on your thoughts kind of on share repurchases and capital management in general. I think if I heard that right in the prepared remarks, you guys repurchased was at a little over $5 million in stock is quarter? I guess just if you guys could talk a little bit more about the outlook for that moving forward.

So we have a $50 million program in place. We currently used about $17 million to $18 million of it. So as we move forward we will be in the market when we feel it's appropriate.

Okay. All right, great. I think that's just -- my only other question would be I guess just what are your guys' thoughts on ways to grow net interest income, especially with the kind of rates, where they're at now? I know, obviously you guys said there would be a little bit of NIM pressure without any rate hikes. I guess is it just mainly coming from loan growth? I know you guys said the pipeline was looking pretty good right now.

Yes, so if our margin declines three basis points in a quarter, we need $170 million approximately of average loan growth to offset that. And we think that's doable.

All right, great. That's very helpful. I think that's all for me.

We'll go next to Chris McGratty with KBW.

Hi. This is actually Kelly Motta on for Chris McGratty. Thank you for taking my question.

Hi, Kelly.

Thanks. In terms of the mortgages you booked this quarter, you had a lot of growth there on the resi mortgage side of things. I'm assuming these are ARMs that you're putting on the balance sheet, but can you give a bit more color on what you're adding and what your appetite is for putting these on balance sheet going forward?

So, Kelly, strategically we made a decision that we could put some fixed rate loans into our portfolio. And so they are predominantly jumbos, and a program we call our Homebuyer program, which is for first-time home buyers and would be more CRA-related.

Okay. And do you see that growth going forward in future quarters?

I see it going forward in the third quarter. I would not commit beyond that, but I do see it in the third.

Okay, thanks. And then in terms of your revised NIM guidance, I apologize if I missed this, but was the change there just taking rates out of your forward guidance?

Yes, that's basically it. Yes.

Okay, thank you so much.

Thank you.

We'll take our next question from Brody Preston with Piper Jaffray.

Hi guys, this is Brody Preston filling in for Matt Breese. How are you this morning?

Good, Brody. How are you?

Great, thanks. So most my questions have been answered so far, but you guys touched on market disruption that you were seeing earlier in terms of consumer checking accounts coming on. I was hoping that maybe you could give me an update on any hires you've made from the market disruption that you alluded to earlier.

Yes, I don't know that I have a number in front of me, but we continue to hire our folks from disrupted organizations and also other organizations. And we will continue to look for those revenue-producing people.

Okay. Great, thanks. And then in terms of the loan growth for the second half of the year, you touched on the pipeline being pretty robust. You sort of broke down what you expect for residential. I was hoping you might be able to touch on what the pipeline looks like for commercial loan growth back half of the year.

Sure. Actually I think I mentioned in the script, but our pipeline going into the third quarter was 6.4% higher, and then it was a year ago, which -- and I think that's pretty much the same linked quarter. So it's what we would consider to still be a strong pipeline.

Okay, great. And then, it was $5 million of stock repurchases for this quarter?

Yes, approximately.

It was 393,000 shares, $5.1 million.

Great, thank you very much guys.

You bet.

We will take our next question from Matt Schultheis with Boenning.

Good morning.

Good morning, Matt.

Good morning.

So, quick questions, what percentage of your loan growth, I mean even if it's just ballpark, do you estimate is from market share grab and gain? And how much is from GDP growth, your clients who are optimistic want to expand their business [technical difficulty] their investments.

Well, we've been I think consistently running close to 50-50 over the past, I'd say, year.

Okay. And then can you talk about sort of lumpiness in deposit growth? I think, last quarter, you had a very strong quarter in deposit growth. This quarter was not quite as strong. And I don't think there were any municipal inflows last quarter. So can you just address that?

Yes. Part of the dynamic and deposits underlying usually is municipals, we -- the thing is in the last couple of years we haven't really seen the outflows as much as we would normally expect.

Okay.

So, a bigger part of our quarter-on-quarter growth was more from personal deposit side, while CDs and munis did go down as we would expect third quarter is typically when we see the biggest inflow from munis as the property and school tax payments are made. You got a house you have to write a check in the third quarter. And so, we would expect some recovery in that space in the third quarter.

Okay. And related -- and final question, does the Commonwealth of Pennsylvania coming close to passing a finalized budget cost of funding, does that actually do anything for your business, or is it sort of a shoulder shrug for you guys at this point?

Yes, at this point it's a shoulder shrug.

Okay. Thank you very much.

[Operator Instructions] We will take our next from Joe Glaude with Merion Capital Group.

Good morning.

Good morning, Joe.

Just a quick question, I'm just wondering if you could I guess give us some color on where the ramp up of the SBA platform stands with some of the additions you've made over the last year or so.

So, it's a great question, Joe, and I would say that the ramp up occurred a little slower than we thought, but the backlog we have there right now is pretty strong, and we anticipate the second half of the year to be substantially stronger than the first half.

All right, that's it for me. Thanks.

Okay.

And we have no further questions at this time. I would like to turn it back to our speakers for additional remarks.

Well, thank you everyone for joining us today. We hope you will be able to be with us when we discuss third quarter results in October.